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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.2)
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)
February 29, March 9, 2000 and March 17, 2000
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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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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 BENEFICIALLY 7 SOLE VOTING POWER
OWNED BY EACH REPORTING
PERSON WITH 11,414,264
-----------------------------------------
8 SHARED VOTING POWER
N/A
-----------------------------------------
9 SOLE DISPOSITIVE POWER
11,414,264
-----------------------------------------
10 SHARED DISPOSITIVE POWER
N/A
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11,414,264 *
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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)
56.2% *
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14 TYPE OF REPORTING PERSON*
PN
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* But see Item 5.
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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 BENEFICIALLY 7 SOLE VOTING POWER
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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* But see Item 5.
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1 NAMES OF REPORTING PERSONS
S.S. or I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (Not Required To Be
Reported)
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
-----------------------------------------
10 SHARED DISPOSITIVE POWER
N/A*
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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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* But see Item 5.
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AMENDMENT NO. 2 TO SCHEDULE 13D
This Amendment No. 2 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 Subordinated Notes") of the
Company or a combination thereof for any and all outstanding 12 1/2% Senior
Subordinated Notes Due 2001 (the "Original Subordinated Notes") of the Company,
Value Partners exchanged all $26,000,000 of its Original Subordinated Notes for
$4,000,000 in New Subordinated 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.
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 amount, which
Value Partners funded from its working capital and the concurrent sale of a
participation interest in $2,000,000 principal amount of the Notes to T. Rowe
Price Recovery Fund, II, L.P. ("T. Rowe Price"), an unaffiliated third party.
Between December 13, 1999 and February 11, 2000, Value Partners purchased from
Issuer an additional $3,000,000 aggregate principal
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amount of Notes, which was funded from the working capital of Value Partners and
the concurrent sale of a participation interest in $1,500,000 aggregate
principal amount of Notes to T. Rowe Price.
Pursuant to an Amended and Restated Purchase Agreement, dated as of
February 29, 2000, between Issuer and Value Partners, on February 29, 2000,
Issuer issued and sold to Value Partners, and Value Partners purchased from
Issuer, $14,000,000 aggregate principal amount of Amended and Restated 12%
Secured Convertible Senior Notes due 2006 (the "Restated Notes"). Value Partners
paid for the Restated Notes by paying Issuer $4,000,000 and surrendering the
$10,000,000 aggregate principal amount of Notes previously acquired by it from
Issuer. Value Partners funded this payment from its working capital and the
concurrent sale of a participation interest in $5,500,000 aggregate principal
amount of the Restated Notes to T. Rowe Price, which paid for such participation
interest by paying Value Partners $2,000,000 and surrendering to it the
participation interests in the Notes which it had previously purchased from
Value Partners.
As a result of the approval of the issuance of Common Stock upon
conversion of the Restated Notes by the stockholders of the Company at an
annual meeting of stockholders held on March 9, 2000 (the "Annual Meeting")
and the results of the Subordinated Notes Exchange Offer (as defined below),
the holder of any Restated Note has the right, at the holder's option, at any
time before the maturity of the Restated Notes on August 15, 2006, to convert
the principal amount of any such Restated 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 $0.99 (subject to adjustment as provided in the Restated Notes,
the "Conversion Price").
In light of the foregoing, pursuant to Rule 13d-3(d)(1) under the
Exchange Act, Value Partners currently beneficially owns 8,585,858 shares of
Common Stock which currently may be acquired by it upon conversion of the
principal amount of the Restated Notes beneficially owned by it, which is
calculated by dividing $8,500,000 (the principal amount of Restated Notes
beneficially owned by Value Partners) by the current Conversion Price of $0.99.
Value Partners disclaims beneficial interest in the shares of Common Stock which
may be acquired by T. Rowe Price upon conversion of the $5,500,000 principal
amount of Restated Notes in which it has purchased a participation interest.
On March 17, 2000, the Company consummated an exchange offer (the
"Subordinated Notes Exchange Offer") pursuant to which the Company exchanged
$12,546,000 aggregate principal amount of new 12% Secured Convertible Senior
Notes due 2006 (the "New Senior Notes") and an aggregate of 6,225,534 shares
of Common Stock for $29,520,000 aggregate principal amount of New
Subordinated Notes (plus all accrued but unpaid interest thereon). Value
Partners exchanged all $6,457,000 aggregate principal
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amount of New Subordinated Notes beneficially owned by it (which included New
Subordinated Notes purchased in the open market subsequent to the Issuance
Date), plus all accrued but unpaid interest thereon, for $2,744,255 aggregate
principal amount of New Senior Notes and 1,361,732 shares of Common Stock.
The terms of the Restated Notes and the New Senior Notes are
substantially the same.
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.
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
Restated Notes (and, beneficially, the underlying shares of Common Stock
which may be acquired upon conversion of such securities) and the New Senior
Notes and the shares of Common Stock acquired upon the closing of the
Subordinated Notes Exchange Offer beneficially owned by it solely for
investment purposes. As of the date hereof, Value Partners does not intend to
convert its shares of Preferred Stock or Restated 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 Restated Notes or New Senior Notes in the open market, in
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private transactions or otherwise, or may convert the shares of Preferred Stock
and/or Restated Notes beneficially owned by it 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 Restated
Notes or New Senior Notes beneficially owned by it.
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.
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, (ii) 8,585,858 shares of Common Stock which
currently may be acquired by Value Partners upon conversion of the $8,500,000
principal amount of Restated Notes beneficially owned by it, based on the
current Conversion Price, and (iii) 1,361,732 shares of Common Stock acquired
by Value Partners on March 17, 2000 upon consummation of the Subordinated
Notes Exchange Offer. Assuming conversion of such shares of Preferred Stock
(but no other outstanding shares of Preferred Stock) and the Restated Notes
beneficially owned by Value Partners (but no other Restated Notes) and that
there were 10,251,745 shares of Common Stock outstanding as of the close of
business on March 17, 2000, as represented and warranted by Issuer to Value
Partners, Value Partners would beneficially own 56.2% 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.
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 shares
of Preferred Stock and the Restated Notes (and the shares of Common Stock
underlying such securities which may be acquired by it upon conversion of such
securities), Common Stock and New Senior Notes beneficially
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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 Restated Notes (and the Common Stock underlying such
securities which may be acquired by it upon conversion of such securities),
Common Stock and New Senior Notes 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
shares of Preferred Stock and the Restated Notes (and the shares of Common
Stock underlying such securities which may be acquired by it upon conversion
of such securities), Common Stock and New Senior Notes 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
shares of Preferred Stock and the Restated Notes (and the shares of Common
Stock underlying such securities which may be acquired by it upon conversion
of such securities), Common Stock and New Senior Notes 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 shares
of Preferred Stock or Restated Notes or (shares of Common Stock which may be
acquired by Value Partners upon conversion of such securities), Common Stock or
New Senior Notes beneficially owned by Value Partners. 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 Restated Notes (and the shares of Common Stock underlying such
securities which may be acquired by it upon conversion of such securities),
Common Stock and New Senior Notes beneficially owned by Value Partners.
(e) Not applicable.
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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) Amended and Restated Secured Convertible Senior Note Purchase
Agreement between Issuer and Value Partners, dated as of February
29, 2000.
(c) Amended and Restated 12% Secured Convertible Senior Note due 2006
issued and sold by Issuer to, and purchased by, Value Partners.
(d) Amended and Restated Pledge and Security Agreement, dated as of
February 29, 2000, between Issuer and Value Partners.
(e) Intercreditor and Collateral Sharing Agreement, dated as of
February 29, 2000, among Issuer, Value Partners, as the initial
holder of the Restated Notes, the holders of the Exchange Notes
and United States Trust Company of New York, in its capacity as
collateral agent for the holders of the Restated Notes and the
Exchange Notes.
(f) Amended and Restated Registration Rights Agreement, dated as of
February 29, 2000, between Issuer and Value Partners.
(g) Amended and Restated Participation Agreement, dated as of
February 29, 2000, between Value Partners and T. Rowe Price.
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 Amended and Restated Secured Convertible Senior Note
Purchase Agreement between Issuer and Value Partners,
dated as of February 29, 2000.**
Exhibit 3 Amended and Restated 12% Secured Convertible Senior
Note due 2006 issued and sold by Issuer to, and purchased
by, Value Partners.**
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Exhibit 4 Amended and Restated Pledge and Security Agreement,
dated as of February 29, 2000, between Issuer and Value
Partners.**
Exhibit 5 Intercreditor and Collateral Sharing Agreement, dated as
of February 29, 2000, among Issuer, Value Partners, as
the initial holder of the Restated Notes, the holders of
the Exchange Notes and United States Trust Company of New
York, in its capacity as collateral agent for the holders
of the Restated Notes and the Exchange Notes.**
Exhibit 6 Amended and Restated Registration Rights Agreement, dated
as of February 29, 2000, between Issuer and Value
Partners.**
Exhibit 7 Amended and Restated Participation Agreement, dated as of
February 29, 2000, between Value Partners and T. Rowe
Price (without exhibits).
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* Previously filed.
** Incorporated by reference from the exhibits to the Current Report on
Form 8-K, dated as of March 3, 2000, of Altiva Financial Corporation
(File No. 0-21689).
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the set forth in this statement is true, complete and correct.
DATED: April 6, 2000
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
By: /s/ Timothy G. Ewing
---------------------------
Timothy G. Ewing
7
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EXHIBIT INDEX
Exhibit 1 Joint Filing Agreement, dated as of October 23, 1998.*
Exhibit 2 Amended and Restated Secured Convertible Senior Note Purchase
Agreement between Issuer and Value Partners, dated as of February
29, 2000.**
Exhibit 3 Amended and Restated 12% Secured Convertible Senior Note due 2006
issued and sold by Issuer to, and purchased by, Value
Partners.**
Exhibit 4 Amended and Restated Pledge and Security Agreement, dated as of
February 29, 2000, between Issuer and Value Partners.**
Exhibit 5 Intercreditor and Collateral Sharing Agreement, dated as of
February 29, 2000, among Issuer, Value Partners, as the initial
holder of the Restated Notes, the holders of the Exchange Notes
and United States Trust Company of New York, in its capacity as
collateral agent for the holders of the Restated Notes and the
Exchange Notes.**
Exhibit 6 Amended and Restated Registration Rights Agreement, dated as of
February 29, 2000, between Issuer and Value Partners.**
Exhibit 7 Amended and Restated Participation Agreement, dated as of
February 29, 2000, between Value Partners and T. Rowe Price
(without exhibits).
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* Previously filed.
** Incorporated by reference from the exhibits to the Current Report on Form
8-K, dated as of March 3, 2000, of Altiva Financial Corporation (File No.
0-21689).
<PAGE>
Exhibit 7
AMENDED AND RESTATED
PARTICIPATION AGREEMENT
THIS AMENDED AND RESTATED PARTICIPATION AGREEMENT (this "Agreement") is
made and entered into as of February 29, 2000, by and between Value Partners,
LTD, a Texas limited partnership (the "Lead"), and T. Rowe Price Recovery Fund
II, L.P., a Maryland limited partnership (the "Participant").
PRELIMINARY STATEMENTS
Altiva Financial Corporation, a Delaware corporation (the
"Borrower") and the Lead have entered into an Amended and Restated Secured
Convertible Senior Note Purchase Agreement of even date herewith (the "Note
Purchase Agreement") whereby the Lead has purchased from Borrower 12% Secured
Convertible Senior Notes due 2006 (the "Notes") in the aggregate principal
amount of $14,000,000.
Previously, the Participant has purchased an undivided participation
interest in the Notes in the aggregate amount of $3,500,000 pursuant to the
terms of a Participation Agreement between the Lead and the Participant dated
August 31, 1999, as amended by Amendment No. 1 to the Participation Agreement,
dated as of December 13, 1999, Amendment No. 2 to the Participation Agreement,
dated as of December 30, 1999, Amendment No. 3 to the Participation Agreement,
dated as of February 2, 2000, and Amendment No. 4 to the Participation
Agreement, dated as of February 11, 2000 (collectively, the "Existing
Agreement"). The Participant desires to purchase, and the Lead desires to sell,
an additional undivided participation interest in the Notes in the amount of
$2,000,000 such that the Participant's interest in the Notes will be increased
to $5,500,000.
AGREEMENTS
NOW, THEREFORE, for and in consideration of the premises and the mutual
promises hereinafter set forth, the Lead and the Participant agree as follows:
1. Terms which are not otherwise defined herein shall have the
respective meanings ascribed to such terms in the Note Purchase Agreement and/or
the Notes.
2. The Participant hereby agrees to purchase, and the Lead hereby
agrees to sell, without recourse on or warranty by the Lead and upon the
terms and conditions herein set forth, an undivided participation interest in
the Notes in the amount of $2,000,000 which when aggregated with
Participant's previously purchased participation interest in the Notes
pursuant to the Existing Agreement will result in the Participant having an
aggregate $5,500,000 or 39.29% undivided participation interest in the
aggregate outstanding principal amount of the Notes as of the date hereof.
Such percentage, as adjusted pursuant to the terms hereof, shall be the
Participant's "Percentage of Participation." As of the date hereof, the Lead
shall be deemed to have a 60.71% interest in the
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aggregate outstanding principal amount of the Notes, which percentage shall
be adjusted to reflect any exercise of conversion or repurchase rights
pursuant to the Notes (the "Lead Interest"). The Participant's Percentage of
Participation in the Notes shall be evidenced by a Participation Certificate
in the form of Exhibit A, attached hereto. In the event of any conflict
between this Agreement and such certificate, the provisions of this Agreement
shall control.
3. The Lead shall allocate a portion of all principal and interest
payments it receives on the Notes and in an amount equal to the Participant's
Percentage of Participation multiplied by the amount of such payment and shall
remit the same to the Participant, via wiring instructions provided by the
Participant to the Lead, on the Business Day that such payment is received by
the Lead, provided that, if such payment is not received prior to 2:00 p.m. on a
Business Day, such remittance shall be made by the Lead on the following
Business Day. With respect to interest paid on the Notes for periods prior to
the date hereof, the parties hereto will allocate such interest payments to
properly reflect their respective interests during the periods as set forth on
Exhibit B, attached hereto. In addition, following application of such proceeds
to the costs or fees incurred by the Lead incident to collection thereof, the
Lead shall allocate and remit to the Participant its Percentage of Participation
of any recoveries or liquidation proceeds obtained by the Lead incident to the
liquidation of any Collateral, as defined in the Security Agreement, securing
the Notes or other collection efforts undertaken by or on behalf of the Lead.
Alternatively, at the request of Participant by notice to the Lead, the Lead
shall request the Borrower to remit Participant's Percentage of Participation in
payments of principal and interest on the Notes directly to the Participant. In
the event the Participant requests that payments of its Percentage of
Participation be made directly to Participant, then the Lead may assume that
such Percentage of Participation payments are actually received by the
Participant unless the Participant provides the Lead with notice to the
contrary. The Lead's records and allocations of payments against the
Participant's Percentage of Participation shall be controlling absent manifest
error.
4. The Participant acknowledges that copies of the Note Purchase
Agreement and the Related Agreements have been provided to the Participant. The
purchase by the Participant and the sale by the Lead of an interest in the Notes
is not intended to be, and shall not be construed as, a loan by the Participant
to the Lead or as an investment in any business enterprise.
5. Without the prior written consent of the Participant, the Lead shall
not:
(a) Renew or extend the Maturity Date of the Notes;
(b) Consent to any release, substitution or exchange of any of the
Collateral other than as permitted in the Security Agreement;
(c) Consent to any release or substitution of the Borrower, or any
guarantor, accommodation party or other obligor under the Note Purchase
Agreement or any of the Related Agreements;
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(d) Decrease the stated rate of interest, the Redemption Price or the
Repurchase Price, or reduce, defer or eliminate any payment obligations under
the Notes;
(e) Impair the right the convert the Notes into Common Stock in any
material respect; or
(f) Increase the principal amount of the Notes.
ln the event the Lead requests in writing that Participant consent to
any action which requires Participant's consent hereunder, Participant shall not
unreasonably withhold such consent. If Participant fails to respond to Lead's
request within two Business Days after such request is given to Participant,
then Participant's consent shall be deemed to have been granted. If Participant
is unwilling to consent to any amendment, modification, release, waiver or other
action, the Lead shall have the right, but not the obligation, to repurchase,
Participant's Percentage of Participation in the Notes and, in the event of such
a repurchase, Participant shall thereafter have no further rights to participate
in any funds received from Borrower pursuant to the Notes. In the event the Lead
chooses to exercise its right to repurchase the Participant's Percentage of
Participation in the Notes, the repurchase price therefore shall be the amount
equal to the Percentage of Participation multiplied by the unpaid principal
amount outstanding on the Notes plus accrued interest. Nothing herein shall
affect Participant's ability to convert its Percentage of Participation in the
Notes or to have the Borrower repurchase some or all of its Percentage of
Participation as described in paragraph 14, below.
6. All funds received by the Lead under the Credit Agreement shall
first be used to pay all expenses of the Lead as provided for in the Note
Purchase Agreement or any of the Related Agreements, then paid to the
Participant on a pro rata basis in accordance with Participant's Percentage of
Participation.
7. Except as specifically provided for herein, all losses and expenses
in connection with the Note Purchase Agreement and the Related Agreements shall
be borne by the Participant on a pro rata basis in accordance with its
Percentage of Participation.
8. Upon the occurrence of an Event of Default under the Notes, the Lead
shall give to the Participant prompt notice of such default (the "Borrower's
Default"). The Lead shall reasonably attempt to consult with the Participant
before taking any action on account of said Borrower's Default. The Lead shall
continue to provide Participant with copies of all modifications, amendments and
revisions to the Notes, the Note Purchase Agreement and any of the Related
Agreements, and copies of all legal proceedings commenced to enforce the rights
of the Lead under the Notes, the Note Purchase Agreement and any of the Related
Agreements.
9. Should the Lead fail to perform any obligation imposed upon it under
this Agreement, or should the Lead become insolvent, dissolve or terminate its
existence, or should there be appointed for the Lead a receiver, conservator or
trustee, or should there be any assignment of all
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or substantially all of the assets of the Lead (other than in its usual course
of business), or should any bankruptcy or insolvency proceeding be taken by or
against the Lead under federal or state law, then the Participant shall have the
right to an accounting for all money and other property received by the Lead
pursuant to the Notes or any of the other Related Agreements. In addition, upon
the occurence of any event referenced in the immediately preceding sentence, the
Participant shall have the right, but not the obligation, to repurchase the Lead
Interest in the Notes and, in the event of such repurchase, the Lead shall
thereafter have no further rights to participate in any funds received from
Borrower pursuant to the Notes. In the event the Participant chooses to exercise
its right to repurchase the Lead Interest in the Notes, the repurchase price
therefore shall be the amount equal to the Lead Interest multiplied by the
unpaid principal amount on the Notes plus accrued interest. Nothing herein shall
affect the Lead's ability to exercise its conversion or repurchase rights
pursuant to the terms of Articles VII and VIII, respectively, of the Notes.
Notwithstanding anything to the contrary herein, the Participant's ability to
exercise its repurchase rights hereunder shall be subject to th e Participant's
ability to satisfy all requirements to be a pledgee in all of the collateral
which is subject to the Security Agreement.
10. The Lead shall provide to the Participant all available information
concerning the Borrower contained in its files as may reasonably be requested by
the Participant and as required by all applicable law. The Participant
acknowledges that it has, independently and without reliance upon the Lead and
based on the financial and other information supplied by the Borrower and such
other documents and information as the Participant has deemed appropriate, made
its own credit analysis and decision to enter into this Agreement. The
Participant also acknowledges that it will, independently and without reliance
upon the Lead and based on such financial statements and such other documents
and information as the Participant has deemed appropriate, perform and will
continue to perform its own analysis of the credit quality of and documentation
for the Notes, the Note Purchase Agreement and the Related Agreements and
related information on the Borrowers during the term hereof.
11. The Participant represents that it has acquired its interest in the
Notes for its own account and not with a view toward the sale or further
participation thereof.
12. The Participant's interest in the Notes may not be assigned,
participated, subdivided or transferred without the Lead's prior written consent
which shall not be unreasonably withheld. All notices hereunder need only be
sent to Participant even if its interest is assigned or otherwise transferred.
13. The Lead shall not be required to take any action hereunder or to
prosecute or defend any suit in respect of this Agreement, the Note Purchase
Agreement or any of the Related Agreements unless indemnified to the Lead's
satisfaction by the Participant, on a pro rata basis consistent with its
Percentage of Participation, against loss, cost, liability and expense. If any
indemnity furnished to the Lead shall, in the Lead's reasonable opinion, become
impaired, it may call for additional indemnity and cease to do the acts
indemnified against until such additional indemnity is given. In addition, the
Participant agrees to indemnify the Lead, on a pro rata basis consistent with
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its Percentage of Participation, (to the extent not reimbursed by the Borrower)
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever which may be imposed on, incurred by, or asserted
against the Lead in any way relating to or arising out of this Agreement, the
Note Purchase Agreement or any of the Related Agreements for any action taken or
omitted by the Lead under this Agreement, the Note Purchase Agreement or any of
the Related Agreements, excluding claims arising out of or resulting from the
Lead's gross negligence, bad faith or willful misconduct. Without limitation of
the foregoing, the Participant agrees to reimburse the Lead promptly upon demand
for any reasonable and necessary out-of-pocket expenses, on a pro rata basis
consistent with its Percentage of Participation (including reasonable counsel
fees and expenses) incurred by the Lead in connection with the preparation,
execution, administration or enforcement of, or legal advice in respect of
rights or responsibilities under this Agreement, the Note Purchase Agreement or
any of the Related Agreements, to the extent that the Lead is not reimbursed for
such expenses by the Borrower. The provisions of this Section shall survive the
termination of this Agreement and/or the payment or assignment of any interest
in the Notes, the Note Purchase Agreement or any of the Related Agreements.
Notwithstanding anything herein to the contrary, the Participant's
indemnification obligations hereunder shall be limited to liabilities arising,
or as a result of events occurring, during the time that Participant owns a
Percentage of Participation in the Notes.
14. The Participant shall be entitled to convert some or all of its
Percentage of Participation in the Notes to shares of Common Stock in accordance
with Article VII of the Notes and/or have some or all of the Participant's
Percentage of Participation in the Notes repurchased in accordance with Article
VIII of the Notes. The Lead agrees to provide promptly to the Participant a copy
of all notices received by the Lead from the Borrower pursuant to the Notes, the
Note Purchase Agreement and any Related Agreement. In the event the Participant
wishes to exercise its conversion or repurchase privilege, it shall provide
written notice to the Lead in the form of Exhibit C hereto. As promptly as
practicable upon receipt of such notice from Participant, the Lead shall take
all necessary and appropriate action to exercise such conversion or repurchase,
as the case may be, substantially in accordance with the terms of Article VII or
Article VIII of the Notes and the Participant's notice hereunder. In the event
of any conversion or repurchase, the Participant's Percentage of Participation
shall be adjusted to reflect the Participant's ownership interest in the then
outstanding aggregate principal amount of the Notes in a manner consistent with
Section 2 hereof.
15. Neither the Lead nor any of its officers, directors, employees,
agents, shareholders or attorneys (hereinafter called "Associates") shall be
liable for any mistakes or error of judgment or for any action taken or omitted
to be taken by the Lead or any of them except for gross negligence, bad faith or
willful misconduct. The Lead does not and shall not under any circumstances have
any fiduciary relationship of any kind with the Participant, under this
Agreement or with respect to the Note Purchase Agreement, any of the Related
Agreements or otherwise. Without limiting the generality of the foregoing,
neither the Lead nor any Associate shall be liable for any action taken or
omitted to be taken by it under this Agreement, the Note Purchase Agreement or
any of the Related Agreements in good faith and reasonably believed by it to be
within the discretion or power
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conferred upon it by this Agreement, the Note Purchase Agreement or any of the
Related Agreements.
16. Except as may be deemed appropriate by Participant in the
reasonable exercise of its fiduciary duties or other obligations to its clients
or except as may be required by applicable legal requirements or proceedings or
upon request of any governmental authority having jurisdiction over Participant,
Participant will not, without the express prior written consent of the Lead,
disclose any term of the Note Purchase Agreement or any of the Related
Agreements or this Agreement to any Person.
17. Participant represents and warrants to the Lead that (i)
Participant does not consider the acquisition of Participant's Percentage of
Participation in the Notes to constitute the "purchase" or "sale" of a
"security" of, or issued by, the Lead within the meaning of the Securities Act
of 1933, as amended, the Securities Exchange Act of 1934, as amended, or Rule
l0b-5 promulgated thereunder, the Trust Indenture Act of 1939, the Securities
Act of the State of Texas, any other applicable securities statute or law, or
any rule or regulation under any of the foregoing; (ii) Participant has no
expectation that it will derive profits from the efforts of the Lead or any
third party in respect of the acquisition of the Participant's Percentage of
Participation; (iii) the purchase of Participant's Percentage of Participation
merely constitutes a commercial transaction by the Participant with the Lead
regarding the Participant's Percentage of Participation in the Notes and does
not represent an "investment" (as that term is commonly understood) in the Lead;
(iv) Participant is purchasing the Participant's Percentage of Participation for
its own account in respect of a commercial transaction made in the ordinary
course of its commercial business; (v) Participant is engaged in the business of
entering into commercial transactions (including transactions of the nature
contemplated herein), can bear the economic risk related to the purchase of the
same, and has had access to all information described by it in making its
decision whether or not to purchase the same; and (vi) Participant has the full
and complete authority and ability to enter into and perform its obligations
under this Agreement and has obtained any and all necessary consents for the
same.
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18. Notices and other communications provided for herein shall be given
in writing and either delivered by messenger against receipt therefor, mailed by
registered or certified mail, return receipt requested and postage paid, or by
facsimile transmission with confirmation, in each case addressed,
if to the Lead, to:
Value Partners, LTD
4514 Cole Avenue, Suite 808
Dallas, Texas 75205
Attention: Timothy G. Ewing
Facsimile: (214) 522-2176
Telephone: (214) 522-2100
and if to the Participant, to:
T. Rowe Price Recovery Fund II, L.P.
100 E. Pratt Street
Baltimore, Maryland 21202
Attention: Hubert M. Stiles, Jr.
Facsimile: (410) 345-2304
Telephone: (410) 345-6840
or to such other address as either party may direct in writing. All notices and
other communications shall be deemed to have been effectively given upon
receipted acceptance, if given via registered or certified U.S. mail, upon
receipted delivery, if given via overnight delivery or messenger service, or
upon facsimile confirmation of transmission if sent via facsimile.
19. This Agreement may be executed in any number of counterparts. All
of the separate counterparts of this Agreement shall constitute but one and the
same instrument. This Agreement shall be binding upon the parties hereto and
their respective successors and assigns.
20. This Agreement shall be governed by and construed in accordance
with the laws of the State of Texas applicable to agreements made and entirely
to be performed within such jurisdiction.
21. Neither this Agreement nor any term hereof may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against which enforcement of the change, waiver, discharge or
termination is sought.
22. Neither the execution of this Agreement, nor the sale of the
participation interest in the Notes thereunder, nor any agreement to share in
profits or losses arising as a result of this
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transaction is intended to be, nor shall it be construed to be, or to create,
any partnership, joint venture or other joint enterprise between the Lead and
the Participant.
23. This Agreement shall remain in full force and effect until the
final repayment in full of all of the Notes. As of the date hereof, the Notes
are due as of June 30, 2006, unless earlier redeemed.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
VALUE PARTNERS, LTD
By: EWING & PARTNERS,
General Partner
By: /s/ Timothy G. Ewing
-----------------------------------
Name: Timothy G. Ewing
Title: Managing Partner
T. ROWE PRICE RECOVERY FUND II, L.P.
By: T. Rowe Price Recovery Fund II Associates, L.L.C.
By: /s/ Hubert M. Stiles, Jr.
-----------------------------------
Name: Hubert M. Stiles, Jr.
Title: President
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