EXHIBIT 7.17
BANK BOSTON, N.A.
February 24, 1999
Imagine Investments, Inc.
0000 Xxxxx Xxxxxxx Xxxxxxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attn: Xxxx Xxxxx, General Counsel
Xxxxxx Financial Corporation
0000 Xxxxxxx Xxxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000
Attn: J. Xxxxxx Xxxxxx, President
Re: Release of Collateral for Loan from Bank Boston, NA. to Xxxxxx
Financial Corporation
Gentlemen:
The purpose of this letter is to confirm the understanding and agreement
of Bank Boston, N.A. (the "Bank"), concerning (i) the release of certain stock
pledged as collateral for payment of the indebtedness owed by Xxxxxx Financial
Corporation, a Florida corporation (the "Borrower") to the Bank, and (ii) the
grant by the Borrower to Imagine Investments, Inc., a Delaware corporation
("Imagine"), of a second lien on, and security interest in, the "Stock," as
hereinafter defined.
As of the date hereof, the Bank represents to Imagine that the Borrower
has pledged a total of 2,224,961 shares of stock (the "Stock") of Riverside
Group, Inc., a Florida corporation, owed by the Borrower to the Bank, as
collateral for payment of the indebtedness owed by the Borrower to the Bank (the
"Bank Boston Indebtedness"), the current outstanding principal balance of which
is $3,000,000 as of the date hereof. The Bank agrees not to increase the
outstanding principal balance of the Bank Boston Indebtedness and not to make
any other loan to Borrower or to J. Xxxxxx Xxxxxx ("Xxxxxx") and not to accept
any guaranty from either of them that would be secured by a pledge of or lien on
the Stock.
The Borrower has advised the Bank that it intends to obtain a loan from
Imagine in the amount of $6,000,000 (the "Imagine Loan"), which Loan will enable
the Borrower to make its regularly scheduled payments of principal and interest
on the Bank Boston Indebtedness, as well as to pay other obligations of the
Borrower. The Borrower and Imagine have further advised the Bank that Imagine is
not willing to make the Imagine Loan unless Imagine obtains a lien on and
security interest in all of the Stock and other stock owned by the Borrower, and
unless the Bank agrees to the pledge by the Borrower of all the stock of the
Corporation owned by Borrower (of which the Stock is a part) and agrees to
release portions of the Stock on a pro-rata basis, as principal reductions in
the Bank Boston Indebtedness are made by the Borrower.
The Bank hereby irrevocably consents to (i) the grant by Borrower and
Xxxxxx of an option in favor of Imagine for Imagine to purchase 785,173 shares
of the Stock (and/or other
Imagine Investments, Inc.
Xxxxxx Financial Corporation
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Page 2
shares of stock of the Corporation) and (ii) also the exercise of such option by
Imagine, so long as $1,430,977.70 (785,173 shares x $1.35) of the purchase
proceeds are applied to the Bank Boston Indebtedness, if it has not already then
been paid off, at which time the Bank shall release its lien on the subject
shares.
The Bank hereby irrevocably consents to the making of the Imagine Loan to
Borrower and the grant by the Borrower in favor of Imagine of a lien on, and
security interest in, all of the Stock to secure the Imagine Loan (it being
agreed and understood, that such lien on and security interest in the Stock in
favor of Imagine shall be junior to the lien of the Bank on the Stock until such
Stock is released by the Bank). The Bank further irrevocably agrees that upon
its receipt of any payment of the principal of the Bank Boston Indebtedness
(from whatever source), the Bank shall release portions of the Stock from the
lien and security interest of the Bank thereon, based on the release of one (1)
share of the Stock for each $1.35 of payment of principal of the Bank Boston
Indebtedness; however, upon the final payment of principal of the Bank Boston
Indebtedness, the Bank shall only release the remaining shares of Stock that it
holds, upon the payment of the principal balance, plus accrued interest and the
Bank's out of pocket costs.
The Bank irrevocably agrees that upon its release of portions of the
Stock from time to time as contemplated above, the Bank will obtain and deliver
directly to Imagine at its address listed above, or to such other address as
Imagine may notify the Bank in writing from time to time hereafter, original
certificates representing such released shares of the Stock. Borrower and
Imagine recognize that at the time the Bank is to release shares of the Stock to
Imagine, the Bank may not be in possession of original certificates representing
the exact number of shares to be released. If that is the case, the Bank agrees
to promptly send to the transfer agent one or more certificates, representing
shares aggregating not less than the number the Bank is to release to Imagine,
and request that the certificates be divided into two or more certificates, one
of which will be for the number of shares the Bank is to release to Imagine. The
Bank will request of the transfer agent that it send the released shares
directly to Imagine; however, if the transfer agent sends the certificate for
the released shares back to the Bank, the Bank will immediately upon receipt
forward same to Imagine. At the time the Bank sends shares to Imagine or to the
transfer agent, the Bank will, under separate cover, send Imagine an executed
blank stock power, if after doing so, the Bank will still have adequate powers
for its own needs.
Notwithstanding anything herein to the contrary, the Bank shall at all
times, prior to the termination of the Agreement for Additional Compensation
between the Bank and the Borrower, dated November 30, 1994, a copy of which is
attached hereto as Exhibit A and incorporated herein for reference (the
"Agreement"), hold at least 150,000 shares of the Stock, adjusted for dilution
as provided in the Agreement (the "Base Shares"). Despite the Bank's option to
purchase all or any portion of the Base Shares, as set forth in the Agreement,
Imagine shall retain its lien in the Base Shares. If the Bank exercises its
option to purchase the Base Stock, Imagine's lien thereon shall terminate and
the Bank Shall forward such portion of the purchase proceeds, if any, as would
otherwise go to the Borrower, to Imagine.
Notwithstanding anything herein to the contrary, in the event of a
default of the Bank Boston Indebtedness, the Bank may exercise all remedies
available to it under the various instruments and agreements evidencing and
governing the Bank Boston Indebtedness,
Imagine Investments, Inc.
Xxxxxx Financial Corporation
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Page 3
provided, the Bank first gives five (5) business days notice (the "Notice") to
Imagine and Borrower of its intent to exercise such remedies. The Bank shall
give Notice in writing and have it (1) personally delivered against a written
receipt, (2) sent by confirmed telephonic facsimile, or (3) delivered to a
reputable express messenger service (such as Federal Express, DHL Courier and
United Parcel Service) for overnight delivery, addressed as follows:
To Borrower: Xxxxxx Financial Corporation
0000 Xxxxxxx Xxxxxxx
Xxxxxxxxxxxx, XX 00000
Attn: J. Xxxxxx Xxxxxx
Telephone: (000) 000-0000
Fax: (000) 000-0000
To Imagine: Imagine Investments, Inc.
0000 Xxxxx Xxxxxxx Xxxxxxxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attn: Xxxx Xxxxx, General Counsel
Telephone: (000) 000-0000
Fax: (000) 000-0000
cc: Xxxxxxx X. Xxxxxxxxx, Esq.
Xxxxxxxxxx Xxxx & XxXxxxxx PLLC
0000 Xxxxxxxx Xxxx Xxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
With respect to any payments received by the Bank during the five (5)
business day Notice period, the release provision set forth above shall remain
in full force and effect, and therefore, subject to our rights to retain shares
for purposes of the Agreement, with respect of any payment received by the Bank
during that period, the Bank shall release one (1) share of the Stock for each
$1.35 of payment of principal that the Bank Boston Indebtedness received.
Without including any amounts due as a result of the acceleration of the Bank
Boston Indebtedness, if the payment referenced in this paragraph is sufficient
to cure the default of the Bank Boston Indebtedness, the default shall be deemed
cured. If the Bank Boston lndebtedness was accelerated, it shall be restored to
the same position as if there had been no acceleration.
If the Borrower defaults on the Bank Boston Indebtedness, the Bank hereby
grants Imagine the right to purchase, in its entirety, but not in part, the Bank
Boston Indebtedness at par plus accrued interest and the Bank's out of pocket
costs, in which event, all of the loan documents, notes, collateral (including,
but not limited to the Stock and associated stock powers) and other instruments
or documents evidencing or securing the indebtedness then held by the Bank will
be assigned to Imagine without recourse and without representations and
warranties of any kind, except as to the amounts, including accrued interest,
due and payable to the Bank. Following such assignment, all documents assigned
shall be promptly delivered to
Imagine Investments, Inc.
Xxxxxx Financial Corporation
----------------------------
Page 4
Imagine. The original certificates of stock shall be accompanied by whatever
stock powers Bank Boston now holds.
Further, the Bank agrees that it is holding all of the Stock as agent for
Imagine to perfect Imagine's lien on and security interest in the Stock, and
that it will not increase the amount of the Bank Boston Indebtedness. The Bank
has no affirmative duties as agent other than the duty to hold the Stock for
Imagine and to perform its other obligations set forth in this letter agreement.
The Bank shall not be held liable to imagine or Borrower, their successors
and/or assigns, for actions taken in its capacity as agent which result in
damages, losses or expenses relating to the Stock, unless the same shall be
caused by the gross negligence or willful misconduct of the Bank.
The Bank agrees that all of its agreements under this letter are and
shall be irrevocable, even if the Bank Boston Indebtedness is in default and
even if the Borrower becomes insolvent and/or is involved as the debtor in a
bankruptcy proceeding. Notwithstanding the foregoing, with respect to any shares
of the Stock that the Bank is entitled to retain following the five (5) business
day Notice period, the Bank shall have the absolute right, to exercise all
remedies provided for in, and to sell such shares in accordance with, the
governing loan documents. The sale of the shares shall be free and clear of
Imagine's interests in the Stock, except that Imagine shall be entitled to
receive net proceeds from the sale, if any, after payment of the Bank Boston
Indebtedness at par, accrued interest thereon and the Bank's out of pocket
costs. Imagine is not hereby waiving the Bank's duty and obligation to sell the
Stock in a commercially reasonable manner.
Imagine agrees that if the Borrower defaults on the loan made by Imagine
to Borrower, Imagine shall not foreclose on its second lien without first paying
off the Bank Boston Indebtedness.
The Bank acknowledges that Imagine is relying upon this letter in
agreeing to make the Imagine Loan, without which it would not agree to make the
Imagine Loan. Borrower and Imagine acknowledge that the Bank is relying upon
this letter in consenting to a second lien being placed on, and a security
interest in, the Stock, without which it would not agree to such additional
encumbrances.
Sincerely,
BANK BOSTON, N.A.
By: illegible
-------------------------------
Title: Managing Director
----------------------------
Imagine Investments, Inc.
Xxxxxx Financial Corporation
----------------------------
Page 5
Agreed to:
Xxxxxx Financial Corporation
By: /s/ J. Xxxxxx Xxxxxx
----------------------------------
Title: President
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Date: February 24, 1999
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Agreed to:
Imagine Investments, Inc.
By: /s/ Xxxxxxx X. Xxxxxxx
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Title: Vice President
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Date: February 24, 1999
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