EXECUTION COPY
PLEDGE AGREEMENT dated as of June 24, 1997, among ARM
FINANCIAL GROUP, INC., a Delaware corporation (the "BORROWER");
INTEGRITY HOLDINGS, INC., a Delaware corporation ("Holdings";
the Borrower and Holdings being collectively called the "PLEDGORS");
and THE CHASE MANHATTAN BANK, a New York banking corporation
("CHASE MANHATTAN"), as representative for the Secured Parties
(as defined herein) (in such capacity, the "REPRESENTATIVE").
Reference is made to the Credit Agreement dated as of June 24, 1997
(as amended, supplemented or otherwise modified from time to time, the
"CREDIT AGREEMENT"), among the Borrower, the financial institutions
party thereto as lenders (the "LENDERS") and Chase Manhattan, as
administrative agent (in such capacity, the "ADMINISTRATIVE AGENT"). The
Lenders have agreed to extend credit to the Borrower pursuant to, and
subject to the terms and conditions specified in, the Credit Agreement.
The obligations of the Lenders to extend credit under the Credit
Agreement are conditioned upon, among other things, the execution and
delivery by the Pledgors of a pledge agreement in the form hereof to secure
(a) the due and punctual payment by the Borrower of (i) the principal of
and interest on the Loans, when and as due, whether at maturity, by
acceleration, upon one or more dates set for prepayment or otherwise and
(ii) all other monetary obligations of the Borrower to the Secured
Parties under the Credit Agreement and the other Loan Documents to which
the Borrower is or is to be a party, (b) the due and punctual
performance of all other obligations of the Borrower under the Credit
Agreement and the other Loan Documents to which the Borrower is or is to
be a party, (c) the due and punctual payment of all obligations in
respect of all Permitted Swaps that provide, in the respective
instruments creating such Permitted Swaps, that such Permitted Swaps are to
be secured pursuant hereto (each such Permitted Swap being referred to
herein as a "PERMITTED SECURED SWAP") and (d) the due and punctual
performance or all Obligations under the Guarantee Agreement (all the
foregoing obligations being collectively called the "OBLIGATIONS").
Accordingly, the Pledgors and the Representative hereby agree as
follows:
ARTICLE I. DEFINITIONS
SECTION 1.01. TERMS DEFINED IN THE CREDIT AGREEMENT. Terms used
herein and not otherwise defined herein shall have the meanings set forth in the
Credit Agreement.
SECTION 1.02. DEFINITION OF CERTAIN TERMS USED HEREIN. As used
herein, the following terms shall have the following meanings:
"COLLATERAL" shall have the meaning assigned to such term in Section
2.01.
"CREDIT AGREEMENT" shall have the meaning assigned to such term
in the preliminary statement of this Agreement.
"FEDERAL SECURITIES LAWS" shall have the meaning assigned to such
term in Section 4.03.
"OBLIGATIONS" shall have the meaning assigned to such term in the
preliminary statement of this Agreement.
"PLEDGED SECURITIES" shall mean the Pledged Stock, all other shares of
capital stock, debt securities and other securities (including warrants, options
and similar rights to acquire securities) now or hereafter included in the
Collateral and all stock certificates and other instruments evidencing any such
securities.
"PLEDGED STOCK" shall have the meaning assigned to such term in
Section 2.01.
"SECURED PARTIES" shall mean (a) the Lenders party to the Credit
Agreement, (b) the Administrative Agent in such capacity under each Loan
Document, the Representative in such capacity under each Loan Document, (d) the
beneficiaries of each indemnification obligation undertaken by any Pledgor under
any Loan Document, (e) the successors and assigns of the foregoing and (f) the
Lenders in their respective capacities as counterparties in respect of any
Permitted Secured Swap.
SECTION 1.03. RULES OF INTERPRETATION. The rules of interpretation
specified in Section 1.02 of the Credit Agreement shall be applicable to this
Agreement.
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ARTICLE II. PLEDGE
SECTION 2.01. PLEDGE. As security for the payment or
performance, as the case may be, of its respective Obligations, each
Pledgor hereby bargains, sells, conveys, assigns, sets over, mortgages,
pledges, hypothecates and transfers to the Representative its successors
and its assigns (for the benefit of the Secured Parties) and hereby
grants to the Representative, its successors and assigns (for the
benefit of the Secured Parties) a security interest in, all of such
Pledgor's right, title and interest in, to and under (a) the securities
consisting of the shares of capital stock listed opposite the name of such
Pledgor on Schedule I and all shares of the capital stock of any United
States Subsidiary currently existing (other than ARM Capital Advisors,
LLC, which was created to effectuate the sale of substantially all of
the assets of ARM Capital Advisors, Inc. as permitted by Section 6.05 of
the Credit Agreement) or hereafter acquired by such Pledgor other than
subsidiaries of Insurance Subsidiaries (the "PLEDGED STOCK") and the
certificates representing the Pledged Stock, (b) all other property that
may be delivered to and held by the Representative pursuant to the terms
of Section 2.04(a)(iii), (c) subject to Section 2.04, all rights and
privileges of such Pledgor with respect to the securities and other
property referred to in clauses (a) and (b) above and (d) all proceeds
of any of the items referred to in clauses (a) through (c) above and in
this clause (d) (the items referred to in clauses (a) through (d) being
collectively called the "COLLATERAL").
TO HAVE AND TO HOLD the Collateral, together with all right,
title, interest, powers, privileges and preferences pertaining or
incidental thereto, unto the Representative, its successors and its
assigns, for the benefit of the Secured Parties, forever; SUBJECT,
HOWEVER, to the terms, covenants and conditions hereinafter set forth.
SECTION 2.02. DELIVERY OF THE COLLATERAL; INTERCOMPANY
OBLIGATIONS. (a) Upon delivery to the Representative (i) the Pledged
Securities shall be accompanied by stock powers duly executed in blank
or other instruments of transfer satisfactory to the Representative and
by such other instruments and documents as the Representative may
reasonably request and (ii) all other property comprising part of the
Collateral shall be accompanied by proper instruments of assignment duly
executed by the applicable Pledgor and such other instruments or
documents as the Representative may reasonably request. Each delivery of
Pledged Securities shall be accompanied by a schedule describing the
securities theretofore and then being pledged hereunder, which schedule shall
be attached hereto as Schedule I and made a part hereof. Each schedule
so delivered shall supersede any prior schedules so delivered.
(b) Each of the Pledgors agrees to promptly deliver or cause to
be delivered to the Representative any and all Pledged Securities, and
any and all certificates or other instruments or documents representing
the Collateral.
(c) Each Pledgor will cause any obligations in respect of
borrowed money or similar advances owed to such Pledgor by the Borrower
or any Subsidiary to be evidenced by a duly executed promissory note
that is pledged and delivered to the Representative pursuant to the
terms hereof. Any such promissory notes may be in the form of a demand
note for any and all moneys advanced.
SECTION 2.03. REGISTRATION IN NOMINEE NAME; DENOMINATIONS. The
Representative shall have the right (in its sole and absolute discretion)
to hold the Pledged Securities in its own name as pledgee, the name of
its nominee or the name of the applicable Pledgor, endorsed or assigned
in blank or in favor of the Representative. Each of the Pledgors will
promptly give to the Representative copies of any notices or other
communications received by it with respect to Pledged Securities
registered in the name of such Pledgor. The Representative shall at all
times have the right to exchange the certificates representing Pledged
Securities for certificates of smaller or larger denominations for any
purpose consistent with this Agreement.
SECTION 2.04. VOTING RIGHTS; DIVIDENDS AND INTEREST; ETC. (a)
Unless and until an Event of Default shall have occurred and be
continuing and the Representative shall have notified the Pledgors that
their rights under this Section 2.04 are being suspended:
(i) Each Pledgor shall be entitled to exercise any and all voting
and/or other consensual rights and powers accruing to an owner of Pledged
Securities or any part thereof for any purpose not inconsistent with the
terms of this Agreement, the Credit Agreement and the other Loan Documents.
(ii) The Representative shall execute and deliver to each Pledgor, or
cause to be executed and delivered to such Pledgor, all such proxies,
powers of attorney and other instruments as such Pledgor may reasonably
request for the purpose of enabling such Pledgor to exercise the voting
and/or consensual rights and powers that it is entitled to exercise
pursuant to subparagraph (i) above.
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(iii) Each Pledgor shall be entitled to receive and retain (A) any
and all dividends paid in cash on the Pledged Securities pledged by it and
(B) any and all principal and interest paid in cash in respect of the
Pledged Securities pledged by it, in each case to the extent and only to
the extent that such cash dividends or principal and interest payments are
permitted by the terms and conditions of the Credit Agreement and
applicable laws. Other than pursuant to the first sentence of this
paragraph (a)(iii), all noncash dividends and all dividends paid or payable
in cash or otherwise in connection with a partial or total liquidation or
dissolution, return of capital, capital surplus or paid-in surplus, and all
other distributions made on or in respect of Pledged Securities, whether
paid or payable in cash or otherwise, whether resulting from a subdivision,
combination or reclassification of the outstanding capital stock of the
issuer of any Pledged Securities or received in exchange for Pledged
Securities or any part thereof, or in redemption thereof, or as a result of
any merger, consolidation, acquisition or other exchange of assets to which
such issuer may be a party or otherwise, shall be and become part of the
Collateral, and, if received by a Pledgor, shall not be commingled by such
Pledgor with any of its other funds or property but shall be held separate
and apart therefrom, shall be held in trust for the benefit of the
Representative and shall be forthwith delivered to the Representative in
the same form as so received (with any necessary endorsement).
(b) Upon the occurrence and during the continuance of an Event
of Default and upon written notice from the Representative to any
Pledgor of such Event of Default, all rights of any Pledgor to
dividends, interest and principal payments that such Pledgor is
authorized to receive pursuant to paragraph (a)(iii) above shall cease,
and all such rights shall thereupon become vested in the Representative
(as representative for the Secured Parties), which shall have the sole
and exclusive right and authority to receive and retain such dividend,
interest and principal payments during the continuance of such Event of
Default. All dividends, interest and principal that are received by any
Pledgor contrary to the provisions of this Section 2.04 shall be received in
trust for the benefit of the Representative shall be segregated from
other property or funds of such Pledgor and shall be forthwith delivered
to the Representative in the same form as so received (with any
necessary endorsement). Any and all money and other property paid over
to or received by the Representative pursuant to the provisions of this
paragraph (b) shall be retained by the Representative in an account to
be established by the Representative upon receipt of such money or other
property and shall be applied in accordance with the provisions of
Section 4.02; PROVIDED, HOWEVER, that the rights of the Representative
hereunder shall be subject (i) to any restrictions, limitations or
approvals imposed by securities laws generally, (ii) to any
restrictions, limitations or approvals imposed pursuant to the Investment
Company Act of 1940 or the Investment Advisers Act of 1940, as each is in
effect from time to time, together with the rules and regulations
thereunder and interpretations thereof, and (iii) to any approvals that
may be required on any date from and including the date on which the
1997 Equity Contribution is consummated, any Applicable Insurance
Regulatory Authority.
(c) Upon the occurrence and during the continuance of an Event
of Default and upon written notice from the Representative to any
Pledgor of such Event of Default, all rights of the Pledgors to exercise
the voting and consensual rights and powers that they are entitled to
exercise pursuant to paragraph (a)(i) of this Section 2.04, and the
obligations of the Representative under paragraph (a)(ii) of this
Section 2.04, shall cease, and all such rights shall thereupon become
vested in the Representative (as representative for the Secured
Parties), which shall have the sole and exclusive right and authority to
exercise such voting and consensual rights and powers, subject only to the
approval of the Administrative Agent, during the continuance of such Event
of Default; PROVIDED, HOWEVER, that the rights of the Representative
hereunder shall be subject (i) to any restrictions, limitations or
approvals imposed by securities laws generally, (ii) to any
restrictions, limitations or approvals imposed pursuant to the
Investment Company Act of 1940 or the Investment Advisers Act of 1940,
as each is in effect from time to time, together with the rules and
regulations thereunder and interpretations thereof, and (iii) to any
approvals that may be required on any date from and including the date on
which the 1997 Equity Contribution is consummated, any Applicable
Insurance Regulatory Authority.
(d) Any notice given by the Representative to the Pledgors
suspending their rights under paragraph (a) above (i) may be given by
telephone if promptly confirmed in writing, (ii) may be given to one or
more of the Pledgors at the same or different times and (iii) may
suspend the rights of the Pledgors under paragraph (a)(i) or paragraph
(a)(iii) in part without suspending all such rights (as specified by the
Representative in its sole and absolute discretion) and without waiving
or otherwise affecting the Representative's rights, as holder of the
Collateral for the Secured Parties, to give additional notices from time
to time suspending other rights so long as an Event of Default has
occurred and is continuing.
ARTICLE III. REPRESENTATIONS, WARRANTIES AND COVENANTS
The Pledgors jointly and severally represent, warrant and covenant to
and with the Representative and the Lenders that:
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(a) the Pledged Stock represents all the outstanding capital stock of
Holdings and each United States Subsidiary directly owned by Holdings and
all the outstanding capital stock of each other United States Subsidiary
directly owned by the Borrower, other than subsidiaries of Insurance
Subsidiaries and ARM Capital Advisors, LLC;
(b) the Pledged Securities have been duly and validly authorized and
issued by the issuers thereof and are fully paid and nonassessable;
(c) except for the security interest granted hereunder, each of the
Pledgors (i) is and will at all times continue to be the direct owner,
beneficially and of record, of the Pledged Securities indicated on
Schedule I to be owned by such Pledgor, (ii) holds the same free and clear
of all Liens (subject to the Liens permitted by Section 6.02 of the Credit
Agreement), (iii) will make no assignment, pledge, hypothecation or
transfer of, or create any security interest in, the Collateral, other than
pursuant hereto, and (iv) to the extent required by Section 2.04, will
cause any and all Collateral, whether for value paid by any Pledgor or
otherwise, to be forthwith deposited with the Representative and pledged or
assigned hereunder;
(d) except for restrictions and limitations imposed by securities laws
generally and except as otherwise provided in Section 2.04, the Collateral
pledged hereunder is and will be freely transferable and assignable, and
no portion of such Collateral is or will be subject to any option, right
of first refusal, shareholders agreement, charter or by-law provision or
contractual restriction of any nature that prohibit, impair, delay or
otherwise affect the pledge of such Collateral hereunder, the sale or
disposition of the Collateral pursuant hereto after the occurrence and
continuance of an Event of Default or the exercise by the Representative of
its rights and remedies hereunder;
(e) each of the Pledgors (i) has the power and authority to pledge the
Collateral pledged by it pursuant to this Agreement in the manner hereby
done or contemplated and (ii) will defend its title or interest thereto or
therein against any and all Liens (other than the Lien of this Agreement),
however arising, of all persons whomsoever;
(f) no consent or approval of any Governmental Authority or any
securities exchange was or is necessary to the validity of the
pledge effected hereby;
(g) following the execution and delivery by the Pledgors of this
Agreement, when the Pledged Securities, certificates, instruments or other
documents representing or evidencing the Collateral are delivered to the
Representative in accordance with this Agreement, the Representative will
obtain a valid and perfected first priority security interest in the
Pledged Securities as security for the payment and performance of the
Obligations; and
(h) the pledge effected hereby is effective to vest in the
Representative the rights of the Representative in the Collateral as set
forth herein.
ARTICLE IV. REMEDIES
SECTION 4.01. REMEDIES UPON DEFAULT. If an Event of Default
shall have occurred and be continuing, the Representative may exercise,
to the extent permitted by law, all the rights of a secured party under
the Uniform Commercial Code of the State of New York (whether or not the
Code is in effect in the jurisdiction where such rights are exercised)
and, in addition, the Representative may, with the consent of the
Required Lenders, sell the Collateral, or any part thereof, at public or
private sale or at any broker's board or on any securities exchange, for
cash, upon credit or for future delivery as the Administrative Agent
shall deem appropriate and that shall be commercially reasonable;
PROVIDED, HOWEVER, that the rights of the Representative hereunder shall
be subject (i) to any restrictions, limitations or approvals imposed by
securities laws generally, (ii) to any restrictions,limitations or
approvals imposed pursuant to the Investment Company Act of 1940 or the
Investment Advisers Act of 1940, as each is in effect from time to time,
together with the rules and regulations thereunder and interpretations
thereof, and (iii) to any approvals that may be required on any date
from and including the date on which the 1997 Equity Contribution is
consummated, by any Applicable Insurance Regulatory Authority. The
Representative shall be authorized at any such sale (if it deems it
advisable to do so and to the extent permitted by law) to restrict the
prospective bidders or purchasers to persons who will represent and
agree that they are purchasing the Collateral for their own account for
investment and not with a view to the distribution or sale thereof, and upon
consummation of any such sale the Representative shall have the right to
assign, transfer and deliver to the purchaser or purchasers thereof the
Collateral so sold. To the extent permitted by law, each such purchaser
at any such sale shall hold the property sold absolutely free from any
claim or right on the part of any Pledgor, and each Pledgor hereby
waives (to the extent permitted by law) all rights of
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redemption, stay, valuation and appraisal that such Pledgor now has or
may at any time in the future have under any rule of law or statute now
existing or hereafter enacted.
The Representative shall give each Pledgor at least 10 days'
prior written notice (which each Pledgor agrees is reasonable notice
within the meaning of Section 9-504(3) of the Uniform Commercial Code as
in effect in the State of New York or its equivalent in other
jurisdictions) of the Representative's intention, as holder of the
Collateral for the Secured Parties, to make any sale of Collateral owned
by such Pledgor. Such notice, in the case of a public sale, shall state
the time and place for such sale and, in the case of a sale at a
broker's board or on a securities exchange, shall state the board or
exchange at which such sale is to be made and the day on which the
Collateral, or portion thereof, will first be offered for sale at such board
or exchange and, in the case of a private sale, shall state the time
after which any such sale is to be made. Any such public sale shall be
held at such time or times within ordinary business hours and at such
place or places as the Representative may fix and state in the notice of
such sale. At any such sale, the Collateral, or portion thereof, to be
sold may be sold in one lot as an entirety or in separate parcels, as
the Representative may (in its sole and absolute discretion) determine.
The Representative shall not be obligated to make any sale of any
Collateral if it shall determine not to do so, regardless of the fact
that notice of sale of such Collateral shall have been given. The
Representative may, without notice or publication, adjourn any public or
private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for sale, and such sale may,
without further notice, be made at the time and place to which the same
was so adjourned. In case any sale of all or any part of the Collateral
is made on credit or for future delivery, the Collateral so sold may be
retained by the Representative until the sale price is paid in full by
the purchaser or purchasers thereof, but the Representative shall not
incur any liability in case any such purchaser or purchasers shall fail
to take up and pay for the Collateral so sold and, in case of any such
failure, such Collateral may be sold again upon like notice. At any
public sale made pursuant to this Section, any Secured Party may bid for or
purchase, free (to the extent permitted by law) from any right of
redemption, stay, valuation or appraisal on the part of any Pledgor (all
said rights being also hereby waived and released to the extent
permitted by law), the Collateral or any part thereof offered for sale
and may make payment on account thereof by using any claim then due and
payable to it from any Pledgor as a credit against the purchase price,
and the Representative may, upon compliance with the terms of sale,
hold, retain and dispose of such property without further accountability
to any Pledgor therefor. For purposes hereof, a written agreement to
purchase the Collateral or any portion thereof shall be treated as a sale
thereof; the Representative shall be free to carry out such sale pursuant to
such agreement, and, to the extent permitted by law, none of the
Pledgors shall be entitled to the return of the Collateral or any
portion thereof subject thereto, notwithstanding the fact that after the
Representative shall have entered into such an agreement all Events of
Default shall have been remedied and the Obligations paid in full;
PROVIDED, HOWEVER, that in the event the Obligations shall have been
paid in full, the relevant Pledgor shall be entitled to the return of
the proceeds of the sale of any such Collateral to the extent not
applied to payment of the Obligations. As an alternative to exercising the
power of sale herein conferred upon it, the Representative may proceed by a
suit or suits at law or in equity to foreclose this Agreement and to
sell the Collateral or any portion thereof pursuant to a judgment or
decree of a court or courts having competent jurisdiction or pursuant to
a proceeding by a court-appointed receiver.
SECTION 4.02. APPLICATION OF PROCEEDS OF SALE. After and during the
continuance of an Event of Default, any cash held by the Representative as
Collateral and all cash Proceeds received by the Representative in respect of
any sale of, collection from, or other realization upon all or any part of the
Collateral pursuant to the exercise by the Representative of its remedies as a
secured creditor as provided in Section 4.01 of this Agreement shall be applied
promptly from time to time as follows:
FIRST, to the payment of all costs and expenses incurred by the
Administrative Agent or the Representative (in its capacity hereunder), in
connection with such sale or otherwise in connection with this Agreement or
any of the Obligations, including all court costs and the fees and expenses
of its agents and legal counsel, the repayment of all cost and expenses
incurred by the Representative hereunder on behalf of any of the Pledgors
and any other costs or expenses incurred in connection with the exercise of
any right or remedy hereunder;
SECOND, to the payment in full of the Obligations or, in the case of
Permitted Secured Swaps that have not been terminated, to the cash
collateralization of the estimated amounts to be paid in respect of such
Permitted Secured Swaps (the amounts so applied to be distributed among the
Secured Parties pro rata in accordance with the amounts of the Obligations
owed to them on the date of any such distribution or in the case of
Permitted Secured Swaps, in accordance with the termination value in
respect of such Permitted Secured Swaps); and
THIRD, to the Pledgors, their successors or assigns, or as a court
of competent jurisdiction may otherwise direct.
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The Administrative Agent shall have absolute discretion as to the time of
application of any such proceeds, moneys or balances in accordance with
this Agreement. Upon any sale of the Collateral by the Representative
(including pursuant to a power of sale granted by statute or under a
judicial proceeding),the receipt of the Representative or of the
officer making the sale shall be a sufficient discharge to the purchaser
or purchasers of the Collateral so sold and such purchaser or purchasers
shall not be obligated to see to the application of any part of the
purchase money paid over to the Representative or such officer or be
answerable in any way for the misapplication thereof.
SECTION 4.03. SECURITIES ACT, ETC. In view of the position
of the Pledgors in relation to the Pledged Securities, or because of
other present or future circumstances, a question may arise under the
Securities Act of 1933, as now or hereafter in effect, or any similar
statute hereafter enacted analogous in purpose or effect (such Act and
any such similar statute as from time to time in effect being called the
"FEDERAL SECURITIES LAWS") with respect to any disposition of the
Pledged Securities permitted hereunder. The Pledgors understand that
compliance with the Federal Securities Laws might very strictly limit
the course of conduct of the Representative if the Representative were to
attempt to dispose of all or any part of the Pledged Securities, and might
also limit the extent to which or the manner in which any subsequent
transferee of any Pledged Securities could dispose of the same.
Similarly, there may be other legal restrictions or limitations
affecting the Representative in any attempt to dispose of all or part of
the Pledged Securities under applicable Blue Sky or other state
securities laws or similar laws analogous in purpose or effect. Under
applicable law, in the absence of an agreement to the contrary, the
Representative might be held to have certain general duties and obligations
to each of the Pledgors to make some effort toward obtaining a fair
price even though the Obligations may be discharged or reduced by the
proceeds of a sale at a lesser price. Each of the Pledgors clearly
understands that to the extent it would require action inconsistent with
applicable securities laws, (a) the Representative is not to have any
such general duty or obligation to such Pledgor and (b) such Pledgor
will not attempt to hold the Representative responsible for selling all
or any part of the Pledged Securities at an inadequate price even if the
Representative shall accept the first offer received or does not
approach more than one possible purchaser. Without limiting the
generality of the foregoing, the provisions of this Section 4.03 would apply
if, for example, the Representative were to place all or any part of the
Pledged Securities for private placement by an investment banking firm,
or if such investment banking firm purchased all or any part of the
Pledged Securities for its own account, or if the Representative placed
all or any part of the Pledged Securities privately with a purchaser or
purchasers. The provisions of this Section will apply notwithstanding
the existence of a public or private market upon which the quotations or
sales prices may exceed substantially the price at which the
Representative sells.
SECTION 4.04. REGISTRATION, ETC. Each of the Pledgors agrees
that, upon the occurrence and during the continuance of an Event of
Default, if for any reason the Representative desires to sell any of the
Pledged Securities at a public sale, it will, at any time and from time
to time, upon the written request of the Representative take or cause
the issuer of such Pledged Securities to take such action and prepare,
distribute and/or file such documents, as are required or advisable in
the reasonable opinion of counsel for the Representative to permit the
public sale of such Pledged Securities. Each of the Pledgors jointly and
severally agrees to indemnify, defend and hold harmless the Representative,
the other Secured Parties, any underwriter and their respective officers,
directors, affiliates and controlling persons from and against all losses,
liabilities, expenses, costs (including the reasonable fees and expenses
of legal counsel to the Representative and the Administrative Agent) and
claims (including the costs of investigation) which they may incur insofar
as any such loss, liability, expense, cost or claim arises out of or is
based upon any alleged untrue statement of a material fact contained in
any prospectus, offering circular or similar document (or any amendment or
supplement thereto), or arises out of or is based upon any alleged omission
to state a material fact required to be stated therein or necessary to make
the statements in any thereof not misleading, except insofar as the same may
have been caused by any untrue statement or omission based upon information
furnished in writing to any Pledgor or the issuer of such Pledged Securities
by the Representative or any other Secured Party or the underwriter expressly
for use therein. Each of the Pledgors further agrees to use all reasonable
efforts to qualify, file or register, or cause the issuer of such
Pledged Securities to qualify, file or register, any of the Pledged
Securities under the Blue Sky or other securities laws of such states as
may be requested by the Representative and keep effective, or cause to
be kept effective, all such qualifications, filings or registrations.
The Pledgors will jointly and severally bear all costs and expenses of
carrying out their obligations under this Section. The Pledgors
acknowledge that there is no adequate remedy at law for failure by them to
comply with the provisions of this Section and that such failure would not
be adequately compensable in damages, and therefore agree that their
agreements contained in this Section may be specifically enforced.
ARTICLE V. MISCELLANEOUS
SECTION 5.01. NOTICES. All communications and notices hereunder shall
be in writing and given as provided in Section 9.01 of the Credit Agreement.
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SECTION 5.02. SECURITY INTEREST ABSOLUTE. All rights of the
Representative hereunder, the security interests granted hereunder and all
obligations of the Pledgors hereunder shall be absolute and unconditional
irrespective of (a) any lack of validity or enforceability of the Credit
Agreement or any other Loan Document (other than this Agreement), any
agreement with respect to any of the Obligations or any other agreement or
instrument relating to any of the foregoing, (b) any change in the time,
manner or place of payment of, or in any other term of, all or any of
the Obligations, or any other amendment or waiver of or any consent to
any departure from the Credit Agreement, any other Loan Document or any
other agreement or instrument relating to any of the foregoing, (c) any
exchange, release or non-perfection of any Lien on other collateral, or
any release or amendment or waiver of or consent under or departure from
any guarantee, securing or guaranteeing all or any of the Obligations,
or (d) any other circumstance that might otherwise constitute a defense
available to, or a discharge of, any Pledgor in respect of the
Obligations or this Agreement (other than the indefeasible payment in full of
the Obligations).
SECTION 5.03. SURVIVAL OF AGREEMENT. All covenants, agreements,
representations and warranties made by any Pledgor herein and in the
certificates or other instruments prepared or delivered in connection with or
pursuant to this Agreement shall be considered to have been relied upon by
the Lenders and shall survive the making by the Lenders of the Loans, and the
execution and delivery to the Lenders of the Notes evidencing such Loans,
regardless of any investigation made by the Lenders or on their behalf, and
shall continue in full force and effect until this Agreement shall
terminate.
SECTION 5.04. BINDING EFFECT; SEVERAL AGREEMENT. This Agreement
shall become effective as to any Pledgor when a counterpart hereof
executed on behalf of such Pledgor shall have been delivered to the
Representative and a counterpart hereof shall have been executed on
behalf of the Representative and thereafter shall be binding upon such
Pledgor and the Representative and their respective successors and
assigns, and shall inure to the benefit of such Pledgor, the
Representative and the other Secured Parties and their respective
successors and assigns, except that no Pledgor shall have the right to assign
its rights hereunder or any interest herein or in the Collateral except
as expressly contemplated by this Agreement or the Credit Agreement.
This Agreement shall be construed as a separate agreement with respect
to each Pledgor and may be amended, modified, supplemented, waived or
released with respect to any Pledgor without the approval of any other
Pledgor and without affecting the obligations of any other Pledgor
hereunder.
SECTION 5.05. SUCCESSORS AND ASSIGNS. Whenever in this Agreement
any of the parties hereto is referred to, such reference shall be deemed
to include the successors and assigns of such party; and all covenants,
promises and agreements by or on behalf of any Pledgor or the
Representative that are contained in this Agreement shall bind and inure
to the benefit of their respective successors and assigns.
SECTION 5.06. THE REPRESENTATIVE APPOINTED ATTORNEY-IN-FACT. Each
of the Pledgors hereby appoints the Representative the attorney-in-fact
of such Pledgor for the purpose of carrying out the provisions of this
Agreement and taking any action and executing any instrument which the
Representative may deem necessary or advisable to accomplish the
purposes hereof, which appointment is irrevocable and coupled with an
interest. Without limiting the generality of the foregoing, the
Representative shall have the right, upon the occurrence and during the
continuance of an Event of Default, with full power of substitution
either in the Representative's name or in the name of any Pledgor, to ask
for,demand, xxx for, collect, receive and give acquittance for any and
all moneys due or to become due under and by virtue of any Collateral,
to endorse checks, drafts, orders and other instruments for the payment
of money payable to such Pledgor representing any interest or dividend
or other distribution payable in respect of the Collateral or any part
thereof or on account thereof and to give full discharge for the same,
to settle, compromise, prosecute or defend any action, claim or
proceeding with respect thereto, and to sell, assign, endorse, pledge,
transfer and make any agreement respecting, or otherwise deal with, the
same; PROVIDED, HOWEVER, that nothing herein contained shall be construed as
requiring or obligating the Representative to make any commitment or to
make any inquiry as to the nature or sufficiency of any payment received
by the Representative or to present or file any claim or notice, or to
take any action with respect to the Collateral or any part thereof or
the moneys due or to become due in respect thereof or any property
covered thereby, and no action taken by the Representative or omitted to
be taken with respect to the Collateral or any part thereof shall give
rise to any defense, counterclaim or offset in favor of any Pledgor or
to any claim or action against the Representative or any other Secured
Party.
SECTION 5.07. THE REPRESENTATIVE'S FEES AND EXPENSES;
INDEMNIFICATION. (a) Each of the Pledgors jointly and severally agrees
to pay upon demand to the Representative the amount of any and all
reasonable expenses, including the reasonable fees and expenses of its
counsel and of any experts or agents, which the Representative may incur
in connection with (i) the administration of this Agreement, (ii) the
custody or preservation of, or the sale of, collection from or other
realization upon any of the Collateral, (iii) the exercise or
enforcement of any of the rights of the Representative hereunder or (iv) the
failure of the Pledgors to perform or observe any of the provisions hereof.
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(b) Without limitation of their indemnification obligations
under the other Loan Documents, each of the Pledgors jointly and
severally agrees to indemnify the Representative and the other
Indemnitees against, and hold each of them harmless from, any and all
losses, claims, damages, liabilities and related expenses, including
reasonable counsel fees and expenses, incurred by or asserted against
any of them arising out of, in any way connected with, or as a result
of, the execution, delivery or performance of this Agreement or any
claim, litigation, investigation or proceeding relating hereto or to the
Collateral, whether or not any Indemnitee is a party thereto, provided that
such indemnity shall not, as to any Indemnitee, be available to the
extent that such losses, claims, damages, liabilities or related
expenses are determined by a court of competent jurisdiction by final
and nonappealable judgment to have resulted from the gross negligence or
wilful misconduct of such Indemnitee.
(c) Any such amounts payable as provided hereunder shall be
additional Obligations secured hereby and by the other Security Documents.
The provisions of this Section shall remain operative and in full force
and effect regardless of the termination of this Agreement, the
consummation of the transactions contemplated hereby, the repayment of
any of the Loans, the invalidity or unenforceability of any term or
provision of this Agreement or any other Loan Document, or any
investigation made by or on behalf of the Representative or any Lender.
All amounts due under this Section shall be payable on written demand
therefor.
SECTION 5.08. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 5.09. WAIVERS; AMENDMENT. (a) No failure or delay of the
Representative in exercising any power or right hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of any
such right or power, or any abandonment or discontinuance of steps to
enforce such a right or power, preclude any other or further exercise
thereof or the exercise of any other right or power. The rights and
remedies of the Representative hereunder and of the Representative, the
Administrative Agent and the Lenders under the other Loan Documents are
cumulative and are not exclusive of any rights or remedies which they
would otherwise have. No waiver of any provisions of this Agreement or
consent to any departure by any Pledgor therefrom shall in any event be
effective unless the same shall be permitted by paragraph (b) below, and
then such waiver or consent shall be effective only in the specific instance
and for the purpose for which given. No notice or demand on any Pledgor
in any case shall entitle such Pledgor or any other Pledgor to any other
or further notice or demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be
waived, amended or modified except pursuant to an agreement or agreements in
writing entered into by the Representative and the Pledgor or Pledgors with
respect to which such waiver, amendment or modification is to apply, subject to
any consent required in accordance with Section 9.08 of the Credit Agreement.
SECTION 5.10. WAIVER OF JURY TRIAL. Each party hereto hereby
waives, to the fullest extent permitted by applicable law, any right it
may have to a trial by jury in respect of any litigation directly or
indirectly arising out of, under or in connection with this Agreement.
Each party hereto (a) certifies that no representative, agent or
attorney of any other party has represented, expressly or otherwise,
that such other party would not, in the event of litigation, seek to
enforce the foregoing waiver and (b) acknowledges that it and the other
parties hereto have been induced to enter into this Agreement and the
other Loan Documents, as applicable, by, among other things, the mutual
waivers and certifications in this Section.
SECTION 5.11. SEVERABILITY. In the event any one or more of the
provisions contained in this Agreement or in any other Loan Document
should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions
contained herein and therein shall not in any way be affected or
impaired thereby. The parties shall endeavor in good-faith negotiations
to replace the invalid, illegal or unenforceable provisions with valid
provisions the economic effect of which comes as close as possible to
that of the invalid, illegal or unenforceable provisions.
SECTION 5.12. COUNTERPARTS. This Agreement and any amendments,
waivers, consents or supplements may be executed in two or more
counterparts, each of which shall constitute an original but all of
which when taken together shall constitute but one contract (subject to
Section 5.04), and shall become effective as provided in Section 5.04.
Delivery of an executed counterpart of a signature page of this
Agreement by telecopier shall be effective as delivery of a manually
executed counterpart of this Agreement.
SECTION 5.13. HEADINGS. Article and Section headings used herein are
for convenience of reference only, are not part of this Agreement and are not to
affect the construction of, or to be taken into consideration in interpreting,
this Agreement.
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SECTION 5.14. JURISDICTION; CONSENT TO SERVICE OF PROCESS. (a)
Each party to this Agreement hereby irrevocably and unconditionally
submits, for itself and its property, to the nonexclusive jurisdiction
of any New York State court or, to the extent permitted by applicable
law, Federal court of the United States of America sitting in New York
City, and any appellate court from any thereof, in any action or
proceeding arising out of or relating to this Agreement, or for
recognition or enforcement of any judgment, and each of the parties
hereto hereby irrevocably and unconditionally agrees that all claims in
respect of any such action or proceeding may be heard and determined in such
New York State or, to the extent permitted by law, in such Federal
court. Each of the parties hereto agrees that a final judgment in any
such action or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement shall affect any right that
the Representative or any Lender may otherwise have to bring any action
or proceeding relating to this Agreement or the other Loan Documents
against any Pledgor or its properties in the courts of any jurisdiction.
(b) Each party to this Agreement hereby irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively
do so, any objection which it may now or hereafter have to the laying of
venue of any suit, action or proceeding arising out of or relating to
this Agreement in any New York State or Federal court. Each of the
parties hereto hereby irrevocably waives, to the fullest extent
permitted by law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service
of process in the manner provided for notices in Section 5.01. Nothing
in this Agreement will affect the right of any party to this Agreement
to serve process in any other manner permitted by law.
SECTION 5.15. TERMINATION. This Agreement and the security
interests granted hereby shall terminate when the principal of and
interest on all the Loans shall have been indefeasibly paid in full, the
Commitments shall have been terminated and (if due and payable on the
first date that the principal of and interest on all the Loans shall
have been paid in full and the Commitments shall have been terminated)
all Fees, expenses and other amounts payable under any Loan Document
shall have been paid, at which time the Representative shall reassign
and deliver to the Pledgors, or to such Person or Persons as such
Pledgor shall designate, at the Pledgors' expense and against receipt, such
of the Collateral as shall not have been sold or otherwise applied
hereunder and shall remain held by the Representative hereunder,
together with such documents as the Pledgors shall reasonably request to
evidence such termination and reassignment. Any such reassignment and
any execution and delivery of documents pursuant to this Section shall
be without recourse to or warranty by the Representative.
SECTION 5.16. EXERCISE OF CARE. The Representative agrees to
exercise reasonable care in the custody and preservation of the Pledged
Securities in its possession and shall be deemed to have exercised
reasonable care if it accords the Collateral the same degree of care
that the Representative accords its own property, it being understood
that the Representative shall not have any responsibility or liability
(a) for ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relative to
the Pledged Securities, whether or not the Representative is deemed to have
knowledge of such matters, (b) for taking any necessary steps to preserve
rights against any parties with respect to any Collateral or (c) for the
collection of any proceeds of the Pledged Securities or by reason of any
invalidity, lack of value or uncollectibility of any proceeds to be
received by it.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
ARM FINANCIAL GROUP, INC.,
by
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Name:
Title:
by
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Name:
Title:
INTEGRITY HOLDINGS, INC.,
by
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Name:
Title:
THE CHASE MANHATTAN BANK, as representative
for the Secured Parties,
by
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Name:
Title:
