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 X. Xxxx 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
0000 Xxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxx
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
and if to the Participant, to:
X. Xxxx Price Recovery Fund II, L.P.
000 X. Xxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx, Xx.
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
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: XXXXX & PARTNERS,
General Partner
By: /s/ Xxxxxxx X. Xxxxx
-----------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Managing Partner
X. XXXX PRICE RECOVERY FUND II, L.P.
By: X. Xxxx Price Recovery Fund II Associates, L.L.C.
By: /s/ Xxxxxx X. Xxxxxx, Xx.
-----------------------------------
Name: Xxxxxx X. Xxxxxx, Xx.
Title: President
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