EXHIBIT 7.12
STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT is entered into and effective as of February
24, 1999, by and between: (i) XXXXXX FINANCIAL CORPORATION, a Florida
corporation having its principal office in Jacksonville, Florida ("Xxxxxx"),
(ii) J. XXXXXX XXXXXX, an individual of Jacksonville, Florida ("Xxxxxx") (Xxxxxx
and Xxxxxx are sometimes collectively referred to herein as "Borrower," and the
term "Borrower" also means each of Xxxxxx and/or Xxxxxx), and (iii) IMAGINE
INVESTMENTS, INC., a Delaware corporation having its principal office in Dallas,
Texas ("Lender").
RECITALS:
A. Pursuant to the terms of that certain Loan Agreement of even date
herewith among Xxxxxx, Lender and Xxxxxx, and that certain Term Promissory Note
of even date herewith, executed by Xxxxxx in favor of Lender in the face
principal amount of Six Million Dollars ($6,000,000.00) (the "Note"), and that
has been guaranteed by Xxxxxx, as the same may hereafter be amended or otherwise
modified from time to time in writing by the parties thereto, Lender has agreed
to extend a term loan to Xxxxxx in the amount of Six Million Dollars
($6,000,000) (the "Term Loan").
B. In order to induce Lender to make the Term Loan, without which
inducement Lender would be unwilling to do so, Borrower has agreed to pledge all
of the shares of the issued and outstanding common capital stock of Riverside
Group, Inc. (the "Corporation") owned by Borrower to Lender, to secure the
payment of the Term Loan and all other obligations of Borrower to Lender,
including without limitation, the In-Kind Note referred to in Section 12 of the
Loan Agreement.
AGREEMENT:
NOW, THEREFORE, the parties hereby agree as follows:
1. PLEDGE AND DEPOSIT OF SHARES. Borrower hereby pledges, assigns and
grants a security interest to Lender in 2,617,243 shares of the stock of
Riverside Group, Inc., a Florida corporation (the "Stock"), as represented by
the Certificates now listed on Exhibit A attached hereto and made a part hereof,
now standing in Borrower's name and constituting approximately forty-eight
percent (48%) of the issued and outstanding capital stock of the Corporation,
all as collateral security for the full and punctual payment and due performance
by Borrower of (i) the Note, and (ii) all other liabilities, obligations and
indebtedness of whatever kind of Borrower to Lender, whether created directly or
acquired by Lender by assignment or otherwise, whether now existing or hereafter
created, arising or acquired, absolute or contingent, joint or several, due or
to become due, and including, but not limited to, future advances by Lender to
Borrower. All of the foregoing are referred to collectively herein as the
"Secured Obligations."
2. CERTIFICATES AND PRIOR PLEDGE. The Certificates listed on Exhibit B
attached hereto and made a part hereof, representing 392,282 shares of the Stock
in the aggregate (the "First Priority Stock"), have been delivered herewith by
Borrower to Lender, together with duly executed blank stock powers attached
thereto. The Certificates listed on Exhibit C attached hereto and made a part
hereof, representing 2,224,961 shares of the Stock (the "Second Priority
Stock"), is currently in the possession of Bank Boston, N.A. (the "Prior
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Lender"), and such 2,224,961 shares of the Stock have been previously pledged by
Borrower to Prior Lender, to secure payment of Borrower's obligations to Prior
Lender (the "Prior Lender's Loan"). Borrower agrees and acknowledges that Lender
has a first lien on and security interest in the First Priority Stock and, at
present, a second lien on and security interest in the Second Priority Stock,
which will automatically become a first lien on and security interest when the
Prior Lender releases such Stock. Notwithstanding any provision herein, the
Lender's rights with respect to the Second Priority Stock shall be subject to
the Prior Lender's rights in the Second Priority Stock.
Borrower agrees to cause Prior Lender to release portions of the
2,224,961 shares of the Second Priority Stock referred to above from the lien
and security interest in favor of Prior Lender, as and when Borrower makes
principal payments on the Prior Lender Loan, on a pro rata basis, such that the
ratio of the number of shares of Second Priority Stock pledged to the Prior
Lender to the outstanding principal loan balance of the Prior Lender Loan shall
remain constant. As of the date hereof, the outstanding principal balance of the
Prior Lender Loan is Three Million Dollars ($3,000,000.00), so the ratio is
1.3483 (3,000,000 / 2,224,961 = 1.3483). In other words, Borrower shall cause
Prior Lender to release one (1) share of the Second Priority Stock pledged to
Prior Lender for each $1.35 of reduction of principal in the Prior Lender Loan.
For example, upon a principal reduction in the amount of $500,000, Borrower
shall cause Prior Lender to release 370,370 shares of Second Priority Stock
(500,000 / 1.35 = 370,370) and shall cause the Prior Lender to deliver original
Certificates representing such released shares directly to Lender, and Borrower
acknowledges and agrees that immediately upon release of such shares by Prior
Lender, Lender shall have a first lien on and security interest in such shares,
and such shares shall automatically then be deemed to be First Priority Stock.
3. FURTHER PLEDGE AND DELIVERIES. The certificates or other instruments
evidencing all new shares of capital stock and all other securities, rights,
warrants, options and the like hereafter created in respect of the Stock,
whether by stock split, stock dividend, merger, consolidation or otherwise,
shall be delivered by Borrower to, and shall be held by, Lender under the terms
and conditions of this Stock Pledge Agreement and subject to the pledge and
security interest herein granted (subject, however, to the rights of the Prior
Lender with respect to the Second Priority Stock), and the term, "Stock," as
used herein, shall be deemed to include all such new shares, securities, rights,
warrants, options and the like. At its sole option, Lender may transfer the
shares of Stock into its own name.
4. COVENANTS. During the period the Stock is being held as security
hereunder, Borrower shall not, without the prior written consent of Lender,
allow the Corporation to (i) issue any additional capital stock or other equity
securities of any kind or options, subscription rights, warrants or other
instruments with respect thereto or any other instruments convertible into
shares of its capital stock, or sell or issue any treasury stock, (ii) merge
into or with or consolidate with any other corporation or business or otherwise
participate in any reorganization or sell or lease to others all or
substantially all of its assets, (iii) amend its Articles of Incorporation or
By-Laws in any manner that would have a material adverse effect on Lender's
rights with respect to the Stock, or liquidate or dissolve or take any steps to
effect same, or (iv) effect a recapitalization or alter its capital structure.
5. VOTING RIGHTS; DIVIDENDS, ETC. So long as no Event of Default shall
have occurred, Borrower shall be entitled to exercise any and all voting and/or
consensual rights and powers relating or pertaining to the Stock or any part
thereof for any purpose not inconsistent with the terms of this Stock Pledge
Agreement. All dividends and distributions, regardless whether in cash, stock,
rights, options or other property, and all stock splits, stock dividends and
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the like and the proceeds of all redemptions and liquidations that are made,
paid or declared with respect to the Stock shall be paid directly to Lender, and
shall, at Lender's sole election, either be applied as a payment on the Secured
Obligations or held by Lender as additional security for the Secured Obligations
(and Borrower shall execute all instruments in connection therewith as are
requested by Lender).
6. STATUS OF THE STOCK. Borrower hereby represents and warrants to Lender
that (a) the Stock is validly issued and outstanding, fully paid and
non-assessable, and constitutes approximately forty-eight percent (48%) of the
issued and outstanding capital stock of the Corporation; (b) Borrower is the
registered and absolute beneficial owner of approximately forty-eight percent
(48%) of the issued and outstanding capital stock of the Corporation; (c) except
for the prior pledge of 2,224,961 shares of the Stock to Prior Lender as
described in Section 2, all the Stock is free and clear of liens, charges and
encumbrances in favor of persons other than Lender; (d) subject to the rights of
the Prior Lender, Borrower has the full power and authority to pledge the Stock
to Lender pursuant to this Stock Pledge Agreement; and (e) the Corporation is a
corporation validly existing under the law of the State of Florida. No part of
the Stock shall be sold, transferred or further assigned by Borrower without the
prior written consent of Lender, which consent may be arbitrarily withheld so
long as this Stock Pledge Agreement is in effect.
7. MAINTENANCE OF PRIORITY OF PLEDGE. Borrower shall be liable for and
shall from time to time pay and discharge all taxes, assessments and
governmental charges imposed upon the Stock by any federal, state or local
authority, the liens of which would or might be held prior to the right of
Lender in and to the Stock or which are imposed on the holders and/or registered
owners of the Stock. Borrower shall not, at any time while this Stock Pledge
Agreement is in effect, do or suffer any act or thing whereby the rights of
Lender in the Stock would or might be materially impaired or diminished.
Borrower shall execute and deliver such further documents and take such further
actions as may be required to confirm the rights of Lender in and to the Stock
or otherwise to effectuate the intention of this Stock Pledge Agreement.
Borrower shall perform all terms of its indebtedness and obligations to Prior
Lender, and shall pay all of such indebtedness and related obligations according
to their terms.
8. EVENTS OF DEFAULT. Each of the following shall be deemed an "Event of
Default" hereunder:
8.1 Cross Default. The occurrence of any Event of Default under the
Note or any "Security Document," as such term is defined in the Note, or under
any other related instrument or agreement; or
8.2 Default Hereunder. The occurrence of any default of any kind
whatsoever under the terms, covenants and conditions of this Stock Pledge
Agreement; or
8.3 Breach of Covenants. If any covenant, representation or warranty
made in this Stock Pledge Agreement or in any other Security Document or related
instruments or agreements executed by Borrower in connection with the Term Loan
shall prove to be untrue and misleading in any respect; or
8.4 Default Under Other Financing. If Borrower is in default or
breach of its obligations to Prior Lender beyond any applicable period of grace
for cure of such default or breach.
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9. REMEDIES UPON DEFAULT. Upon the occurrence of any Event of Default
referred to in Section 8 above, Lender shall have all rights and remedies in and
against the Stock and otherwise of a secured party under the Uniform Commercial
Code as enacted in the Commonwealth of Kentucky and the State of Florida (the
"UCC") and all other applicable laws, and shall also have all of the rights
provided herein, in the Note and in all other Security Documents, all of which
rights and remedies shall be cumulative to the fullest extent permitted by law.
In connection with the foregoing, Lender shall have the right:
9.1 Voting Rights. To exercise all voting rights and privileges
whatsoever with respect to the Stock, and to that end Borrower hereby
constitutes Lender as its proxy and attorney-in-fact for all purposes of voting
the Stock, and this appointment shall be deemed coupled with an interest and is
and shall be irrevocable until the Secured Obligations have been fully paid and
this Stock Pledge Agreement terminated, and all persons whatsoever shall be
conclusively entitled to rely upon Lender's verbal or written certification that
it is entitled to vote the Stock hereunder. Borrower shall execute and deliver
to Lender any and all additional proxies and powers of attorney that Lender may
desire in order to vote more effectively the Stock in its own name. Upon any
Event of Default hereunder, Lender may vote the Stock to remove the directors
and officers of the Corporation and to elect new such officers and directors who
shall thereafter manage the affairs of the Corporation, operate any of its
properties, carry on any business, and otherwise take any action with respect
thereto as they shall deem necessary and appropriate, and may also liquidate the
Corporation and its business, and may authorize the borrowing of money in the
name of the Corporation and the pledge of its assets to secure such borrowing.
9.2 Right of Sale. To declare the Note and the other Secured
Obligations immediately due and payable in full, and to sell the Stock in one or
more lots, and from time to time, upon ten (10) business days prior to written
notice to Borrower of the time and place of sale (which notice Borrower hereby
conclusively agrees is commercially reasonable), for cash or upon credit or for
future delivery, Borrower hereby waiving all rights, if any, of marshaling the
Stock and any other security for the payment of the Note and other Secured
Obligations, and at the option and in the sole discretion of Lender, to either:
(i) Sell the Stock at a public sale or sales, including a sale
at or on any broker's board or stock exchange; or
(ii) Sell the Stock at a private sale or sales.
Lender may bid for and acquire the Stock or any portion thereof at any
public sale, free from any redemption rights of Borrower, and in lieu of paying
cash therefor, may make settlement for the selling price of the Stock or any
part thereof by crediting the net selling price of the Stock against the Note
and other Secured Obligations, after deducting all of Lender's costs and
expenses of every kind and nature therefrom, including Lender's attorneys' fees
incurred in connection with realizing upon the Stock and enforcing the Security
Documents and the Note, provided the same is not prohibited by the laws of the
Commonwealth of Kentucky.
From time to time Lender may, but shall not be obligated to, postpone
the time of any proposed sale of any of the Stock which has been the subject of
a notice as provided above, and also, upon ten (10) days' prior written notice
to Borrower (which notice Borrower conclusively agrees is commercially
reasonable), may change the time and/or place of such sale.
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In the case of any sale by Lender of the Stock or any portion
thereof on credit or for future delivery, which may be elected at the option and
in the sole discretion of Lender, the Stock so sold may, at the sole option of
Lender, either be delivered to the purchaser or retained by Lender until the
selling price is paid by the purchaser, but in either event Lender shall incur
no liability, to Borrower or otherwise, in case of failure of the purchaser to
take up and pay for the Stock so sold. In case of any such failure, such Stock
may be sold again by Lender in the manner provided in this Section 9.
Borrower covenants and agrees that, during any period of sale or
liquidation of the Stock by Lender, Borrower shall not sell any other stock of
the Corporation if such sale would restrict or limit Lender's sale of the Stock
under Rule 144 or other Rule of the Securities and Exchange Commission or if
such sale by Borrower would cause or contribute to a decline in the share price
of the Stock. Borrower further agrees in the event of any such sale or
liquidation by Lender, to execute any and all forms, including, but not limited
to, Forms 144 and customary broker's and seller's representation letters, to
enable Lender to effect the sale of the Stock. Borrower shall further take and
shall cause the Corporation to take all necessary actions to remove any
restrictive legend affecting the Stock, and to assist in the effectuation of the
sale of the Stock including, at Borrower's expense, the supplying of opinions of
counsel customarily required to effect such sales.
9.3 Costs and Expenses. After deducting all of Lender's costs and
expenses of every kind, including, but not limited to, legal fees and
registration (Securities and Exchange Commission and other) fees and expenses,
if any, incurred in connection with the sale of the Stock, Lender shall apply
the residue of the proceeds of any sale or sales of the Stock against the Note
and the other Secured Obligations, in the order of priority elected by Lender.
Lender shall not incur any liability to Borrower or otherwise as a result of the
sale of the Stock at any private sale or sales, and Borrower hereby waives any
claim arising by reason of (i) the fact that the price or prices for which the
Stock or any portion thereof is sold at such private sale or sales is less than
the price which would have been obtained at a public sale or sales or is less
than the amount due under the Note and other obligations secured hereby, even if
Lender accepts the first offer received and does not offer the Stock or any
portion thereof to more than one offeree, (ii) any delay by Lender in selling
the Stock following an Event of Default hereunder, even if the price of the
Stock thereafter declines, or (iii) the immediate sale of the Stock upon the
occurrence of an Event of Default hereunder, even if the price of the Stock
should thereafter increase. Borrower shall remain liable for any deficiency
remaining due under the Note, this Stock Pledge Agreement, any of the other
Security Documents or any related documents or instruments.
10. NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed to have been duly given (i) upon being delivered
personally (or by confirmed telefax or other electronic delivery method; or (ii)
four (4) days after being mailed by certified mail, return receipt requested,
postage prepaid, or (iii) one (1) day after being sent by Federal Express or
other reputable overnight delivery service providing delivery confirmation, for
next day delivery, in each case to the parties at the following address (or at
such other address for a party as shall be specified by like notice):
If to Borrower: Xxxxxx Financial Corporation
0000 Xxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxxxxxxx, Xxxxxxx 00000
Attention: J. Xxxxxx Xxxxxx
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Mr. J. Xxxxxx Xxxxxx
0000 Xxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxxxxxxx, Xxxxxxx 00000
With a copy to: Xxxxxxx & Xxxxxx
Xxx Xxxxxxxxxxx Xxxxx, Xxxxx 0000
Post Office Box 1559
Jacksonville, Florida 32201-1559
(32202 for street address)
Attention: Xxxxxxx Xxxxxx, Esq.
If to Lender, to: Imagine Investments, Inc.
0000 Xx. Xxxxxxx Xxxxxxxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxx Xxxxx. General Counsel
With a copy to: Xxxxxxx X. Xxxxxxxxx, Esq.
Greenebaurn Doll &. McDonald PLLC
0000 Xxxxxxxx Xxxx Xxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
11. MISCELLANEOUS.
11.1 Future Advances. This Stock Pledge Agreement also secures all
additional loans and/or future advances that may be made hereafter at any time
by Lender to Borrower.
11.2 Governing Law. The laws of the Commonwealth of Kentucky shall
govern the construction of this Stock Pledge Agreement and the rights, remedies
and duties of the parties hereunder.
11.3 Successors and Assigns. This Stock Pledge Agreement shall
bind Borrower and its successors and assigns, and shall inure to the benefit of
Lender and its successors and assigns.
11.4 Time of Essence. Time shall be of the essence in the
performance of Borrower's obligations hereunder.
11.5 Captions. The several captions, headings, sections and
subsections of this Stock Pledge Agreement are inserted for convenience only and
shall be ignored in interpreting the provisions of this Stock Pledge Agreement.
11.6 Modifications. This Stock Pledge Agreement may be modified or
amended only by written agreement executed by all of the parties hereto.
12. TERMINATION. This Pledge Agreement shall terminate when the Note
and all the other Secured Obligations have been paid in full, at which time
Lender shall reassign and redeliver, without recourse upon or warranty by Lender
and at the expense of Borrower (or cause to be so reassigned and redelivered to
Borrower or to such person or persons as Borrower shall designate), against
receipt, such of the Stock (if any) as shall not have been sold
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or otherwise applied by Lender pursuant to the terms hereof and shall still be
held by it hereunder, together with appropriate instruments of reassignment and
release.
IN WITNESS WHEREOF, the parties have entered into this Stock Pledge
Agreement as of the date first written above.
XXXXXX FINANCIAL CORPORATION
illegible /s/ J. Xxxxxx Xxxxxx
_________________________________ By: _______________________________
Witness
President
Title: ____________________________
("Xxxxxx")
/s/ Xxxxxxxxx X. Xxxx /s/ J. Xxxxxx Xxxxxx
_________________________________ ____________________________________
Witness J. XXXXXX XXXXXX
("Xxxxxx")
(collectively, "Borrower")
IMAGINE INVESTMENTS, INC.
illegible /s/ Xxxxxxx X. Xxxxxxx
_________________________________ By: ________________________________
Witness
Vice President
Title: _____________________________
("Lender")
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