Form 8-K Report - Exhibit 2.2
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SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of February
26, 2001, between GAINSCO, INC., a Texas corporation ("GNA"), and Xxxxxx X.
Xxxxxxxxx ("Buyer").
WHEREAS, GNA desires to sell to Buyer, and Buyer desires to purchase from
GNA, shares of Series B Convertible Redeemable Preferred Stock of GNA and a
warrant to purchase shares of Common Stock of GNA;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby, GNA
and Buyer hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. As used in this Agreement, the following terms have the
following meanings:
"Affiliate" means, with respect to any Person, any other Person that
directly, or indirectly, through one or more intermediaries controls, is
controlled by or is under common control with such specified Person. For this
purpose the term "control" (including the terms "controlling", "controlled by"
and "under common control with") shall mean the possession, direct or indirect,
of the power to direct or cause the direction of the management and policies of
a Person whether through the ownership of voting securities, by contract, or
otherwise; provided, however, that for purposes of this Agreement, GNA, on the
one hand, and Buyer or any member of the Buyer Group, on the other hand, shall
not be considered Affiliates.
"Agreement" has the meaning set forth in the first paragraph hereof.
"Applicable Law" means any statute, law, rule, policy, guideline or
regulation or any judgment, order, writ, injunction, or decree of any
Governmental Authority to which a specified Person or property is subject.
"Associate" means (i) any corporation or entity (other than GNA or a
Subsidiary of GNA) of which such Person is an officer or partner or is, directly
or indirectly, the beneficial owner of 10 percent or more of any class of equity
securities, (ii) any trust or other estate in which such person has a
substantial beneficial interest or as to which such Person serves as trustee or
in a similar fiduciary capacity, and (iii) any relative or spouse of such
Person, or any relative of such spouse, who has the same home as such Person or
who is a director or officer of GNA or any of its Subsidiaries.
"Bank One Consent" means (i) the approval by Bank One, N.A. of the
Transactions and the transactions contemplated in the GMSP Agreement for all
purposes under the Credit Agreement and (ii) the waiver by Bank One, N.A. of any
and all noncompliance with the covenants and other provisions of the Credit
Agreement.
"Beneficial Owner" and "Beneficially Own" mean, with respect to any Person,
any securities:
Securities Purchase Agreement - Page 1
(i) which such Person or any of such Person's Affiliates or Associates
beneficially owns, directly or indirectly; or
(ii) which such Person or any of such Person's Affiliates or Associates,
directly or indirectly, has
(A) the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding (whether or not in
writing), or upon the exercise of conversion rights, exchange
rights, rights (other than GNA Rights), warrants or options, or
otherwise; provided, however, that a Person shall not be deemed
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the Beneficial Owner of, or to beneficially own, securities
tendered pursuant to a tender or exchange offer made by or on
behalf of such Person or any of such Person's Affiliates or
Associates until such tendered securities are accepted for
purchase or exchange; or
(B) the right to vote pursuant to any agreement, arrangement or
understanding (whether or not in writing), provided, however,
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that a Person shall not be deemed the Beneficial Owner of, or
to beneficially own, any security if the agreement, arrangement
or understanding to vote such security (1) arises solely from
an immediately revocable proxy or consent given to such Persons
in response to a public proxy or consent solicitation made
pursuant to, and in accordance with, the applicable rules and
regulations of the Exchange Act and (2) is not also then
reportable on Schedule 13D under the Exchange Act (or any
comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by any other
Person (or any Affiliate or Associate thereof) with which such
Person (or any of such Person's Affiliates or Associates) has any
agreement, arrangement or understanding (whether or not in writing)
for the purpose of acquiring, holding, voting (except to the extent
permitted by subparagraph (ii)(B) of this definition) or disposing
of any voting securities of the same issuer.
"Board" means the board of directors of GNA.
"Breach" means any violation or breach of, any misrepresentation or
inaccuracy in, any default under, or any failure to perform or comply with any
representation, warranty, covenant, obligation, or other provision of this
Agreement.
"Business Day" means any day other than a Saturday or Sunday on which
national banks are open for business in Fort Worth, Texas and New York, New
York.
"Buyer" has the meaning set forth in the introductory paragraph of this
Agreement.
"Buyer Group" means Buyer together with his Affiliates, Associates and
employees, if any.
"Buyer Material Adverse Effect" means any condition, circumstance or
development having an adverse effect on the ability to conduct business, the
financial condition or the results of operations of Buyer that is material to
Buyer and the ability of Buyer to consummate the Transactions, excluding any
such
Securities Purchase Agreement - Page 2
condition, circumstance or development which adversely affects the U.S. economy
or financial markets generally.
"Buyer Representative" has the meaning set forth in Section 6.3(b).
"Capitalization Date" has the meaning set forth in Section 4.2.
"Closing" has the meaning set forth in Article III.
"Closing Date" has the meaning set forth in Article III.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" means the common stock, par value $.10 per share, of GNA
and, except where the context otherwise requires, the accompanying GNA Rights.
"Common Stock Equivalents" means (without duplication with any other
Common Stock or Common Stock Equivalents) rights (other than GNA Rights),
warrants, options, convertible securities or convertible indebtedness,
exchangeable securities or exchangeable indebtedness, or other rights
exercisable for or convertible or exchangeable into, directly or indirectly,
Common Stock (at the time or upon the passage of time or the occurrence of
future events), including all Common Stock issuable upon conversion of the
Series B Shares or issuable upon exercise of the Warrant.
"Confidential Information" means information received at any time by Buyer
from GNA that is not generally known or which would logically be considered
confidential or proprietary, or which would do GNA harm if divulged, or which is
marked "Confidential Information."
"Conversion Price" means the initial Series B Conversion Price (as such
term is determined and defined in the Statement of Resolution to be filed with
the Secretary of State of the State of Texas to establish and designate the
Series B Convertible Redeemable Preferred Stock of GNA). An example of the
calculation of tangible book value per share of Common Stock is set forth as
Exhibit "C" attached hereto.
"Credit Agreement" means the Revolving Credit Agreement dated November 13,
1998 among GNA, Bank One, N.A. and other parties, as amended and supplemented,
and related documents.
"Damages" has the meaning set forth in Section 10.2.
"Demand Registration" has the meaning set forth in Section 6.3(b).
"Encumbrances" means liens, charges, pledges, options, mortgages, deeds of
trust, security interests, claims, restrictions (whether on voting, sale,
transfer, disposition, or otherwise), easements, and other encumbrances of every
type and description, whether imposed by law, agreement, understanding, or
otherwise, other than restrictions imposed under applicable securities laws.
"Environmental Law" means any law, regulation, decree, judgment, permit or
authorization relating to the environment, including, without limitation,
pollution, contamination, cleanup and protection of the environment.
Securities Purchase Agreement - Page 3
"Environmental Liabilities and Costs" means all damages, penalties or
cleanup costs assessed or levied pursuant to any Environmental Law.
"Equity Securities" means any capital stock of GNA, any securities
directly or indirectly convertible into, or exercisable or exchangeable for any
capital stock of GNA, or any right, option, warrant or other security which,
with the payment of additional consideration, the expiration of time or the
occurrence of any event shall give the holder thereof the right to acquire any
capital stock of GNA or any security convertible into or exercisable or
exchangeable for, any capital stock of GNA.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and all of the rules and regulations promulgated thereunder.
"ERISA Affiliate" means any trade or business, whether or not
incorporated, which together with a Person and its Subsidiaries would be deemed
a "single-employer" within the meaning of Section 4001 of ERISA.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Final Date" means March 15, 2001.
"Fully-Diluted Common Stock" means, at any time, the then outstanding
shares of Common Stock plus (without duplication) all shares of Common Stock
issuable (at the time or upon passage of time or the occurrence of future
events), upon the exercise, conversion or exchange of all then-outstanding
Common Stock Equivalents. The percentage of the Fully-Diluted Common Stock held
by a Person at any time shall be determined so that a Person is deemed the
Beneficial Owner of the then outstanding shares of Common Stock attributable to
such Person plus (without duplication) all shares of Common Stock issuable
(whether at the time or upon passage of time or the occurrence of future
events), upon the exercise, conversion or exchange of all then-outstanding
Common Stock Equivalents attributable to such Person but not any other
outstanding Common Stock Equivalents other than the outstanding shares of GNA's
Series A Convertible Preferred Stock.
"GAAP" means generally accepted accounting principles for financial
reporting in the U.S., consistently applied.
"GMSP" means Xxxx Xxxxx Strategic Partners, L.P., a Texas limited
partnership.
"GMSP Agreement" means the Securities Purchase Agreement of even date
herewith between GNA and GMSP.
"GNA" has the meaning set forth in the introductory paragraph of this
Agreement.
"GNA Annual Statements" has the meaning set forth in Section 4.9.
"GNA Applicable Insurance Department" means as to (i) GNA's Insurance
Subsidiaries located in Oklahoma, the Oklahoma Department of Insurance, (ii)
GNA's Insurance Subsidiaries located in Texas, the Texas Department of Insurance
and (iii) GNA's Insurance Subsidiary located in North Dakota, the North Dakota
Department of Insurance.
"GNA Authorizations" has the meaning set forth in Section 4.7.
Securities Purchase Agreement - Page 4
"GNA Business" means the business conducted by GNA and GNA Subsidiaries
taken as a whole.
"GNA Disclosure Letter" means the disclosure letter delivered by GNA to
Buyer concurrently with the execution and delivery of this Agreement.
"GNA Employee Benefit Plans" has the meaning set forth in Section 4.20(a).
"GNA 1999 Form 10-K Report" means the Form 10-K Report filed by GNA with
the SEC for GNA's fiscal year ended December 31, 1999.
"GNA Financial Statements" has the meaning set forth in Section 4.10.
"GNA Insurance Subsidiaries" means MGA Insurance Company, Inc., a Texas
corporation; GAINSCO County Mutual Insurance Company, a Texas mutual insurance
company; General Agents Insurance Company of America, Inc., an Oklahoma
corporation; and Midwest Casualty Insurance Company, a North Dakota insurance
corporation.
"GNA Material Adverse Effect" means any condition, circumstance or
development having an adverse effect on (i) the ability to conduct business, the
financial condition or the results of operations of GNA and its Subsidiaries
that is material to GNA and its Subsidiaries taken as a whole or (ii) the
ability of GNA to consummate the Transactions, in each case excluding any such
condition, circumstance or development which adversely affects the U.S. economy,
financial markets or insurance industry generally, provided that no change in
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the prices at which the Common Stock is quoted or traded in and of itself shall
be a GNA Material Adverse Effect.
"GNA Options" means (i) all options granted and outstanding under any of
the GNA Stock Plans and related option agreements and (ii) the option to
purchase 579,710 shares of Common Stock evidenced by the Replacement
Nonqualified Stock Option Agreement dated July 24, 1998 between GNA and Xxxxx X.
Xxxxxxxx.
"GNA Pension Plan" has the meaning set forth in Section 4.20(d).
"GNA Quarterly Statement" has the meaning set forth in Section 4.9.
"GNA Required Consents" has the meaning set forth in Section 4.6(c).
"GNA Rights" means rights to purchase Common Stock issued pursuant to the
GNA Rights Agreement.
"GNA Rights Agreement" means the Rights Agreement dated as of March 3,
1988, as amended, between GNA and Continental Stock Transfer & Trust Company.
"GNA SEC Documents" has the meaning set forth in Section 4.10.
"GNA Significant Subsidiaries" means the GNA Insurance Subsidiaries;
National Specialty Lines, Inc., a Florida corporation; DLT Insurance Adjusters,
Inc., a Florida corporation; GAINSCO Service Corp., a Texas corporation; and
Tri-State, Ltd., a North Dakota corporation.
Securities Purchase Agreement - Page 5
"GNA Stock Plans" means GNA's 1990 and 1995 Stock Option Plans and GNA's
1998 Long-Term Incentive Plan.
"GNA Subsidiaries" means the Subsidiaries of GNA.
"GNA Subsidiary Securities" has the meaning set forth in Section 4.4.
"good faith", when used in respect of any action, means that the action
was taken with (i) honesty of intention, (ii) freedom from knowledge of
circumstances which ought to put the Person taking such action on inquiry or
negligence, and (iii) intention to abstain from taking any unconscientious
advantage of another.
"Governmental Authority" means any U.S. federal, state, local, foreign,
supernational or supranational court or tribunal, governmental, regulatory or
administrative agency, department, bureau, authority, commission or arbitral
panel.
"IRS" means the Internal Revenue Service.
"KBW" means Xxxxx, Xxxxxxxx & Xxxxx, Inc.
"Material Activity" has the meaning set forth in Section 6.3(f).
"NYSE" means the New York Stock Exchange.
"Permitted Assignee" has the meaning set forth in Section 11.3.
"Permitted Encumbrances" means (i) liens for Taxes not yet due and
payable; (ii) mechanics', carriers', workers', repairers' and other similar
liens arising or incurred in the ordinary course of business relating to
obligations as to which there is no default on the part of the obligor; (iii)
liens arising in the ordinary course of business incident to the purchase and
sale of securities and other investments or the holding thereof by banks,
brokerage firms, custodians and intermediaries for the benefit of GNA or its
Subsidiaries; (iv) exceptions which do not materially affect the use or
occupancy of the real property covered thereby; and (v) such other recorded
liens, imperfections in title, charges, easements, restrictions and encumbrances
which do not materially affect the use or occupancy of the property.
"Person" means any individual, corporation, partnership, limited liability
company, association, trust or other entity or organization, including any
Governmental Authority.
"Piggyback Registration" has the meaning set forth in Section 6.3(c).
"Preemptive Notice" has the meaning set forth in Section 6.10.
"Preemptive Right" has the meaning set forth in Section 6.10.
"Preferred Stock" means the authorized Preferred Stock, par value $100.00
per share, of GNA.
"Proceedings" means all complaints, claims, prosecutions, indictments,
proceedings, actions, suits, investigations, and inquiries by or before any
arbitrator or Governmental Authority, whether civil, criminal, administrative,
arbitrative or investigative.
Securities Purchase Agreement - Page 6
"Purchase Price" has the meaning set forth in Section 2.2.
"Registration Expenses" has the meaning set forth in Section 6.3(h).
"Registration Statement" has the meaning set forth in Section 6.3(d).
"SAP" means the insurance accounting practices required or permitted by
the GNA Applicable Insurance Department applicable to the specified Person(s)
consistently applied by such Person(s).
"SEC" means the Securities and Exchange Commission.
"Securities" has the meaning set forth in Section 2.1.
"Securities Act" means the Securities Act of 1933, as amended.
"Series B Shares" means shares of the series of Preferred Stock of GNA to
be designated "Series B Convertible Redeemable Preferred Stock" and to have the
rights, powers, preferences, qualifications, limitations and restrictions set
forth in the Statement of Resolution.
"Shelf Registration" has the meaning set forth in Section 6.3(a).
"Statement of Resolution" means a Statement of Resolution to be filed with
the Secretary of State of the State of Texas substantially in the form of
Exhibit "A" attached hereto to establish and designate the Series B Shares.
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"Subsidiary" means, with respect to any Person, any corporation or other
entity (including partnerships and other business associations) in which the
Person directly or indirectly owns at least a majority of the outstanding voting
securities or other equity interests having the power, under ordinary
circumstances, to elect a majority of the directors, or otherwise to direct the
management and policies, of such corporation or other entity.
"Survival Date" has the meaning set forth in Section 10.1.
"Taxes" means all federal, state, local and foreign income, franchise,
property, sales, use, excise and other taxes, including without limitation
obligations for withholding taxes from payments due or made to any other Person
and any interest, penalties or additions to taxes.
"Tax Returns" means all original and amended returns, declarations,
certifications, statements, notices, elections, estimates, reports, claims for
refund and information returns relating to or required to be filed or maintained
in connection with any Tax, together with all schedules and attachments thereto.
"Transactions" means the purchase and sale of securities contemplated by
this Agreement.
"Underlying Shares" means, at any time, all shares of Common Stock which
may be acquired upon exercise of the Warrant or upon the conversion of Series B
Shares and any other Equity Securities issued with respect thereto by way of
stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or otherwise.
"U.S." means the United States of America.
Securities Purchase Agreement - Page 7
"Warrant" has the meaning set forth in Section 8.10.
ARTICLE II
TERMS OF THE TRANSACTION
2.1 Agreement to Sell and to Purchase Series B Shares and Warrant. At the
Closing and on the terms and subject to the conditions set forth in this
Agreement, GNA shall sell and deliver to Buyer, and Buyer shall purchase and
accept from GNA, 3,000 Series B Shares and the Warrant (together referred to
herein as the "Securities").
2.2 Purchase Price and Payment. The aggregate purchase price to be paid by
Buyer pursuant to this Agreement for the Securities is $3,000,000 (the "Purchase
Price"). The Purchase Price shall be paid by Buyer on or before the Closing Date
in immediately available funds by confirmed wire transfer to a bank account to
be designated by GNA no later than the third Business Day prior to the Closing
Date.
ARTICLE III
CLOSING AND CLOSING DATE
The closing of the Transactions (the "Closing") shall take place (i) at the
offices of Xxxxxxx Xxxxxx, L.L.P., 000 Xxxxxxxx Xxxxxx, Xxxxx 0000, Xxxx Xxxxx,
Xxxxx at 10:00 a.m., local time, no later than the third Business Day following
the satisfaction or waiver (subject to Applicable Law) of each of the conditions
to the obligations of the parties set forth in Articles VII and VIII hereof, or
(ii) at such other time or place or on such other date as the parties hereto
shall agree. The date on which the Closing takes place is herein referred to as
the "Closing Date". All Closing transactions shall be deemed to have occurred
simultaneously.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF GNA
GNA represents and warrants to Buyer the following:
4.1 Organization and Qualification. Each of GNA and the GNA Significant
Subsidiaries is a corporation or other entity duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation or
organization, and has corporate or other power and authority to own all of its
properties and assets and to carry on its business as now being conducted. Each
of GNA and the GNA Significant Subsidiaries is duly qualified and in good
standing to transact business in each jurisdiction in which the property owned,
leased or operated by it or the nature of the business conducted by it makes
such qualification necessary, except where the failure to be in good standing or
to be duly qualified would not, individually or in the aggregate, have or
reasonably be expected to have a GNA Material Adverse Effect.
4.2 Capitalization. The authorized capital stock of GNA consists of
250,000,000 shares of Common Stock and 10,000,000 shares of Preferred Stock. As
of the close of business on January 31, 2001 (the "Capitalization Date") and
excluding shares of Common Stock subject to the GNA Rights Agreement: 21,169,736
shares of Common Stock were issued and outstanding; no shares of Preferred Stock
were outstanding, other than 31,620 Series A Shares; 844,094 shares of Common
Stock were held in GNA's
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treasury; and there were outstanding GNA Options with respect to 1,772,620
shares of Common Stock. Since the Capitalization Date, except as disclosed in
Section 4.2 of the GNA Disclosure Letter or in the GNA SEC Documents, GNA (i)
has not issued any shares of Common Stock other than upon the exercise or
vesting of GNA Options outstanding on such date; (ii) has not granted any
options or rights to purchase or acquire shares of Common Stock under the GNA
Stock Plans or otherwise; and (iii) has not split, combined or reclassified any
of its shares of capital stock. All of the outstanding shares of Common Stock
have been duly authorized and validly issued and are fully paid and
nonassessable and are free of preemptive rights. Except as disclosed in this
Section or in Section 4.2 of the GNA Disclosure Letter or the GNA SEC Documents
and other than the GNA Rights, there are no outstanding Equity Securities.
Except as disclosed in Section 4.2 of the GNA Disclosure Letter, there are no
outstanding obligations of GNA or any Subsidiary to repurchase, redeem or
otherwise acquire any Equity Securities.
4.3 Authority Relative to This Agreement.
(a) GNA has all requisite power and authority to enter into this
Agreement and, subject to the GNA Required Consents, to consummate the
Transactions. The execution and delivery of this Agreement and the consummation
by GNA of the Transactions have been duly authorized by all necessary corporate
action on the part of GNA. This Agreement has been duly and validly executed and
delivered by GNA and, assuming the due authorization, execution and delivery
hereof by Buyer, constitutes the valid and binding obligation of GNA,
enforceable against GNA in accordance with its terms, except as would be limited
by applicable bankruptcy, insolvency, reorganization, fraudulent conveyance or
other similar laws affecting the enforcement of creditors' rights generally and
except that the availability of equitable remedies, including specific
performance, may be subject to the discretion of any court before which any
proceeding therefor may be brought.
(b) When issued and delivered pursuant to this Agreement against
payment therefor, the Securities will have been duly authorized, issued and
delivered and will constitute valid and legally binding obligations of GNA
entitled to the benefits provided therein. When issued and delivered pursuant to
the Agreement against payment therefor, the Series B Shares will be fully paid
and nonassessable. During the period within which the Series B Shares may be
converted into Common Stock or the Warrant may be exercised, GNA will at all
times have a sufficient number of shares of Common Stock authorized and reserved
for the purpose of issue upon conversion of the Series B Shares or exercise of
the Warrant. All of the Underlying Shares will, when issued, be validly issued,
fully paid and nonassessable. The issuance of the Series B Shares is not, and
upon conversion of the Series B Shares or exercise of the Warrant, the issuance
of the Underlying Shares will not be, subject to any preemptive or similar
rights except those that have not been waived.
4.4 Subsidiaries. Except as disclosed in Section 4.4 of the GNA Disclosure
Letter or in the GNA SEC Documents, GNA Beneficially Owns, directly or
indirectly, of record all the outstanding shares of capital stock of each of its
Subsidiaries, free and clear of any Encumbrance of any kind, and there are no
irrevocable proxies with respect to any such shares. Except as disclosed in this
Section or in Section 4.4 of the GNA Disclosure Letter or the GNA SEC Documents,
there are no outstanding (i) shares of capital stock or other voting securities
of any Subsidiary of GNA; (ii) securities of GNA or any of its Subsidiaries
convertible into or exchangeable for shares of capital stock or other voting
securities or ownership interests in any such Subsidiary; or (iii) options or
other rights to acquire from GNA or any of its Subsidiaries, or other
obligations of GNA or any of its Subsidiaries to issue, any capital stock,
voting securities or other ownership interests in, or any securities convertible
into or exchangeable for any capital stock, voting securities or ownership
interests in, any of the Subsidiaries of GNA, or to grant, extend or enter into
any subscription, warrant, right, convertible or exchangeable security or other
similar agreement or commitment
Securities Purchase Agreement - Page 9
(the items in clauses (i), (ii) and (iii) being referred to collectively as "GNA
Subsidiary Securities"). There are no outstanding obligations of GNA or any of
its Subsidiaries to repurchase, redeem or otherwise acquire any outstanding GNA
Subsidiary Securities. Except to the extent that any of the GNA Significant
Subsidiaries is a "significant subsidiary" as such term is used in Rule 1-02(w)
of Regulation S-X as promulgated under the Securities Act, GNA does not have a
"significant subsidiary" as such term is used in Rule 1-02(w) of Regulation S-X
as promulgated under the Securities Act.
4.5 Statutory Approvals. Except as disclosed in Section 4.5 of the GNA
Disclosure Letter, no declaration, filing or registration with, or notice to or
authorization, consent or approval of any Governmental Authority is necessary
for the execution and delivery of this Agreement by GNA or the consummation by
GNA of the Transactions, the failure to obtain, make or give which could
reasonably be expected to have a GNA Material Adverse Effect.
4.6 Non-Contravention. The execution and delivery of this Agreement by GNA
do not, and the consummation of the Transactions will not, result in any
violation by GNA or any of its Subsidiaries under any provisions of:
(a) the Articles of Incorporation, Bylaws or similar governing
documents of GNA or any of its Subsidiaries;
(b) any statute, law, ordinance, rule, regulation, judgment, decree,
order, injunction, writ, permit or license of any Governmental Authority
applicable to GNA or any of its Subsidiaries or any of their respective
properties or assets; or
(c) subject to obtaining the Bank One Consent and any third-party
consents or other approvals set forth in Section 4.6 of the GNA Disclosure
Letter (the "GNA Required Consents"), any note, bond, mortgage, indenture, deed
of trust, license, franchise, permit, concession, contract, lease or other
instrument, obligation or agreement of any kind to which GNA or any of its
Subsidiaries is now a party or by which it or any of its properties or assets
may be bound or affected;
excluding from the foregoing clauses (b) and (c) such violations as could not,
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in the aggregate, reasonably be expected to have a GNA Material Adverse Effect.
4.7 Authorizations. Except as described in the GNA SEC Documents or
Section 4.7 of the GNA Disclosure Letter, GNA and each of the GNA Insurance
Subsidiaries have obtained all licenses, certificates of authority, permits,
authorizations, orders and approvals of, and have made all registrations or
filings with, all Governmental Authorities as required in connection with the
conduct of its business as currently conducted, and with respect to which a
failure to so obtain would have a GNA Material Adverse Effect (collectively, the
"GNA Authorizations"). All material GNA Authorizations are valid and in full
force and effect. Except as would not cause a GNA Material Adverse Effect, no
notice that GNA or any of the GNA Insurance Subsidiaries is in material
violation of any such GNA Authorization has been received by GNA or any of the
GNA Insurance Subsidiaries, or to the knowledge of GNA, recorded or published,
and no Proceeding is pending or, to the knowledge of GNA threatened, to revoke
or limit any of them such as reasonably would be expected to cause a GNA
Material Adverse Effect.
4.8 Compliance with Laws. Except as set forth in the GNA Disclosure Letter
or in the GNA SEC Documents or GNA Financial Statements, and in addition to the
representations and warranties contained in Section 4.7 relating to GNA
Authorizations, to the knowledge of GNA, GNA and its Subsidiaries are in
compliance with all Applicable Laws applicable to GNA and its Subsidiaries the
failure
Securities Purchase Agreement - Page 10
to comply with which, individually or in the aggregate, could reasonably be
expected to have a GNA Material Adverse Effect. Furthermore, except as is
disclosed in the GNA Disclosure Letter or in the GNA SEC Documents or GNA
Financial Statements or as would not cause a GNA Material Adverse Effect, to the
knowledge of GNA neither GNA nor any of its Subsidiaries has received any notice
alleging material non-compliance with any of the aforementioned Applicable Laws.
4.9 Statutory Financial Statements. GNA has heretofore made (or will make
prior to Closing) available to Buyer copies of the annual statements of the GNA
Insurance Subsidiaries as filed with the GNA Applicable Insurance Department
(the "GNA Annual Statements") for the years ended December 31, 1997, 1998 and
1999 and copies of the quarterly statements of the GNA Insurance Subsidiaries to
the GNA Applicable Insurance Department for the quarters ended March 31, June 30
and September 30, 2000 (the "GNA Quarterly Statements"). The balance sheets of
each of the GNA Insurance Subsidiaries as of December 31, 1999, and the related
statements of income and cash flow for the year then ended, included in the GNA
Annual Statement for the year ended December 31, 1999, were prepared in
conformity with SAP, except as otherwise noted therein, for the period covered
thereby and fairly present the statutory financial position of such GNA
Insurance Subsidiary as at the date thereof and the results of operations and
cash flow of such GNA Insurance Subsidiary for the period then ended. The
balance sheets of the GNA Insurance Subsidiaries and the related statements of
income and cash flow included in the GNA Quarterly Statements were prepared in
conformity with SAP applicable to interim financial statements consistently
applied during the period involved, except as otherwise noted therein, subject
to normal year-end adjustments, and fairly present the statutory financial
position of such GNA Insurance Subsidiary as at the dates thereof and the
results of operations and cash flow of such GNA Insurance Subsidiary for the
periods then ended. Without limiting the generality of the foregoing and
subject to the cautionary statements regarding reserves contained under "Item 1.
BUSINESS--Unpaid Claims and Claim Adjustment Expenses" and elsewhere in the GNA
1999 Form 10-K Report, the reserves carried on the GNA Annual Statement for the
year ended December 31, 1999 and the GNA Quarterly Statement for the payment of
estimated claims and claim adjustment expenses for both reported and unreported
claims were (i) reported in accordance with SAP and (ii) believed by GNA to be
adequate to cover the amounts GNA expected the GNA Insurance Subsidiaries to pay
on incurred claims based on facts and circumstances then known. The admitted
assets of each GNA Insurance Subsidiary as determined under Applicable Laws are
in an amount at least equal to the minimum amounts required by Applicable Laws.
4.10 GNA SEC Documents and GNA Financial Statements. Except as set forth
in Section 4.10 of the GNA Disclosure Letter or as could not reasonably be
expected to have a GNA Material Adverse Effect, GNA and the GNA Insurance
Subsidiaries have timely filed all reports, registrations, statements and other
filings, together with any amendments required to be made with respect thereto,
that were required to be filed since December 31, 1996 with the SEC. GNA has or
will have made available to Buyer prior to the Closing copies of each
registration statement, offering circular, report, definitive proxy statement or
information statement filed by it with the SEC with respect to periods since
January 1, 1998 through the date of this Agreement and will promptly provide
each such registration statement, offering circular, report, definitive proxy
statement or information statement filed or circulated after the date hereof
(collectively, the "GNA SEC Documents"), each in the form (including exhibits
and any amendments thereto) filed with the SEC.
As of their respective dates (and without giving effect to any amendments
or modifications filed after the date of this Agreement), and except as set
forth in Section 4.10 of the GNA Disclosure Letter, each of the GNA SEC
Documents, including the financial statements, exhibits and schedules thereto,
filed or circulated prior to the date hereof complied (and each of the GNA SEC
Documents filed after the date of this Agreement, will comply) in all material
respects as to form with applicable federal securities laws and did
Securities Purchase Agreement - Page 11
not (or in the case of reports, statements, or circulars filed after the date of
this Agreement, will not) contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements made therein, in the light of the circumstances under which they
were made, not misleading.
Each of GNA's consolidated statements of condition or balance sheets
included in or incorporated by reference into the GNA SEC Documents, including
the related notes and schedules, fairly presented in accordance with GAAP the
consolidated financial position of GNA and its Subsidiaries as of the date of
such statement of condition or balance sheet and each of the consolidated
statements of income, cash flows and shareholders' equity included in or
incorporated by reference into GNA SEC Documents, including any related notes
and schedules (collectively, the foregoing financial statements and related
notes and schedules are referred to as the "GNA Financial Statements"), fairly
presented the consolidated results of operations, cash flows and shareholders'
equity, as the case may be, of GNA and its Subsidiaries for the periods set
forth therein (subject, in the case of unaudited interim statements, to normal
year-end audit adjustments and the absence of certain notes), in each case in
accordance with GAAP except as may be noted therein or in Section 4.10 of the
GNA Disclosure Letter.
4.11 Investments. Except as disclosed in Section 4.11 of the GNA
Disclosure Letter or in the GNA SEC Documents, GNA and each of its Subsidiaries
has good and marketable title, free and clear of all Encumbrances other than
Permitted Encumbrances, to all of its investment assets reflected in the GNA
Quarterly Statement for September 30, 2000, or acquired after September 30,
2000, other than investment assets that (i) have been sold or disposed of in the
normal course of business or (ii) have been pledged for the benefit of
policyholders in accordance with the requirements of state Governmental
Authorities. All such investments of the GNA Insurance Subsidiaries are properly
treated and valued as admitted assets in accordance with the regulations of the
GNA Applicable Insurance Department and the National Association of Insurance
Commissioners.
4.12 Absence of Changes. Except as contemplated by this Agreement or as
set forth in the GNA Disclosure Letter, the GNA SEC Documents or the GNA
Financial Statements, since September 30, 2000, the GNA Business has been
operated in the ordinary and usual course and neither GNA nor any of any of its
Subsidiaries has entered into any agreement that would require GNA or any of its
Subsidiaries to operate the GNA Business other than in the ordinary and usual
course.
4.13 No Undisclosed Liabilities. To the knowledge of GNA, none of GNA or
any of its Subsidiaries has any liabilities or obligations except (i) as and to
the extent set forth or contemplated in the GNA SEC Documents or GNA Financial
Statements, (ii) liabilities and obligations incurred in the ordinary course of
business, (iii) as would not have a GNA Material Adverse Effect or (iv) as set
forth in the GNA Disclosure Letter.
4.14 Litigation. Except as set forth in the GNA SEC Documents, GNA
Financial Statements, or Section 4.14 of the GNA Disclosure Letter, there are no
Proceedings pending or, to the knowledge of GNA, threatened, against GNA or any
of its Subsidiaries, which (i) have, or, if adversely determined, could
reasonably be expected to have a GNA Material Adverse Effect or (ii) seek
specifically to prevent, restrict or delay consummation of the Transactions or
fulfillment of any of the conditions of this Agreement. Except as set forth in
the GNA SEC Documents or GNA Financial Statements or Section 4.14 of the GNA
Disclosure Letter, there are no orders, writs, injunctions, judgments, and
decrees of any Governmental Authority outstanding against GNA or any of its
Subsidiaries, except for such orders, writs, injunctions, judgments and decrees
as could not individually or in the aggregate reasonably be expected to have a
GNA Material Adverse Effect. Except for regular periodic assessments in the
ordinary course of business or
Securities Purchase Agreement - Page 12
assessments based on developments which are publicly known within the insurance
industry, to the knowledge of GNA, no claim or assessment is pending or
threatened against any GNA Insurance Subsidiary by (i) any state insurance
guaranty associations in connection with such association's fund relating to
insolvent insurers or (ii) any assigned risk plan or other involuntary market
plan which if determined adversely could, individually or in the aggregate, be
reasonably expected to result in a cost to GNA or any of its Subsidiaries of an
amount in excess of $500,000, which in either case individually or in the
aggregate could reasonably be expected to have a GNA Material Adverse Effect.
4.15 Insurance Business. All policies of insurance issued by the GNA
Insurance Subsidiaries and in force on the date hereof are, and on the Closing
Date will be, to the extent required by applicable law, in all material respects
on forms approved by applicable insurance regulatory authorities or which have
been filed with and not objected to by such authorities within the period
provided for such objection, except as could not reasonably be expected to have
a GNA Material Adverse Effect. Any premium rates required to be filed with or
approved by insurance regulatory authorities have been so filed or approved and
the premiums charged conform thereto in all material respects, except as could
not reasonably be expected to have a GNA Material Adverse Effect.
4.16 Regulatory Filings. GNA has heretofore made (or will make prior to
Closing) available to Buyer all material registrations, filings or submissions
(other than policy filings or rate filings) made by or on behalf of GNA or any
of the GNA Insurance Subsidiaries with or to any insurance regulatory authority
and all reports of examination issued by any insurance regulatory authority
since January 1, 1998. Except as disclosed in Section 4.16 of the GNA
Disclosure Letter, GNA and the GNA Insurance Subsidiaries have filed all
reports, statements, documents, registrations, filings or submissions required
to be filed with any Governmental Authority, except with respect to which the
failure to file individually or in the aggregate does not adversely affect their
respective licenses or authority as an insurance company in any jurisdiction or
does not otherwise have a GNA Material Adverse Effect. All such registrations,
filings and submissions were in material compliance with applicable law when
filed, and no material deficiencies have been asserted with respect thereto.
4.17 Reinsurance, Coinsurance and Underwriting Management.
(a) Section 4.17 of the GNA Disclosure Letter contains a list of all
material coinsurance, reinsurance, excess insurance, ceding of insurance,
assumption of insurance or indemnification with respect to insurance treaties or
agreements to which GNA or any GNA Subsidiary is a party or beneficiary and
which are or were in force at any time after December 31, 1999. All such
treaties or agreements are in full force and effect and, except as set forth in
Section 4.17 of the GNA Disclosure Letter or in the GNA SEC Documents or the GNA
Financial Statements, GNA has no knowledge that any such treaties will not be
renewed on acceptable terms that are at least as favorable to GNA as the terms
as they exist on the date of this Agreement. None of the GNA Insurance
Subsidiaries, nor to the knowledge of GNA, any other party thereto, is in
default as to any provision thereof, and no such treaty or agreement contains
any provision to the effect that the other party thereto may terminate the
treaty or agreement by reason of the Transactions. To the knowledge of GNA,
except as set forth in Section 4.17 of the GNA Disclosure Letter, there is no
reason to believe that the financial condition of any other party to any such
treaty or agreement is impaired such that a default thereunder may reasonably be
anticipated.
(b) Section 4.17 of the GNA Disclosure Letter contains a list of all
material agreements to which GNA or any of its Subsidiaries is or was a party
pursuant to which GNA or any of its Subsidiaries served or serves as, or
received or receives services from, a managing general agent or underwriting
manager or pursuant to which any of them continues to be obligated to provide
any services. All such material
Securities Purchase Agreement - Page 13
agreements are in full force and effect and except as set forth in Section 4.17
of the GNA Disclosure Letter or in the GNA SEC Documents or GNA Financial
Statements, GNA has no knowledge that any other party to any such agreements
intends to terminate or does not intend to renew such agreements on
substantially the same terms as presently exist, except those agreements which
have terminated but for which GNA or any of its Subsidiaries maintains servicing
obligations. Neither GNA nor any of its Subsidiaries, nor to the knowledge of
GNA, any other party thereto, is in default as to any provision thereof, and no
such agreement contains any provision to the effect that the other party thereto
may terminate the agreement by reason of the Transactions. To the knowledge of
GNA, except as set forth in Section 4.17 of the GNA Disclosure Letter, there is
no reason to believe that the financial condition of any other party to any such
agreement is impaired such that a default thereunder may reasonably be
anticipated.
4.18 Labor Matters.
(a) There are no labor unions or other organizations representing,
purporting to represent or attempting to represent any employees
of GNA or its Subsidiaries.
(b) Except as set forth in Section 4.18 of the GNA Disclosure Letter
or in the GNA SEC Documents or GNA Financial Statements, there
are no controversies pending or, to the knowledge of GNA,
threatened between GNA or any of its Subsidiaries and any of its
employees, except as could not be reasonably be expected to have
a GNA Material Adverse Effect.
4.19 Environmental Compliance. Except as disclosed in Section 4.19 of the
GNA Disclosure Letter or in the GNA SEC Documents, to the knowledge of GNA, (i)
the assets, properties, businesses and operations of GNA and its Subsidiaries
are in compliance with applicable Environmental Laws, except for such instances
of non-compliance as would not individually or in the aggregate have a GNA
Material Adverse Effect; (ii) GNA and its Subsidiaries have obtained and, as
currently operating are in compliance with, all permits necessary for any
Environmental Law for the conduct of the business and operations of GNA and its
Subsidiaries in the manner now conducted, except for such instances of non-
compliance as would not individually or in the aggregate have a GNA Material
Adverse Effect; and (iii) neither GNA nor any of its Subsidiaries nor any of
their respective assets, properties, businesses or operations has received or is
subject to any outstanding order, decree, judgment, complaint, agreement, claim,
citation, notice, or proceeding indicating that GNA or any of its Subsidiaries
is or may be liable for (A) a violation of any Environmental Law or (B) any
Environmental Liabilities and Costs, except, in each case, for such liabilities
as would not individually or in the aggregate have a GNA Material Adverse
Effect.
4.20 Employee Benefit Plans.
(a) Section 4.20(a) of the GNA Disclosure Letter includes a complete
list of all material employee benefit plans, programs, policies, practices, and
other arrangements providing benefits to any employee or former employee or
beneficiary or dependent thereof, sponsored or maintained by GNA or its
Subsidiaries or to which GNA or its Subsidiaries contribute or are obligated to
contribute (collectively, "GNA Employee Benefit Plans"). "GNA Employee Benefit
Plans" includes all employee welfare benefit plans within the meaning of Section
3(1) of ERISA and all employee pension benefit plans within the meaning of
Section 3(2) of ERISA. Except as set forth in Section 4.20(a) of the GNA
Disclosure Letter, GNA or its Subsidiaries may amend or terminate any GNA
Employee Benefit Plan without incurring any material liability thereunder.
Securities Purchase Agreement - Page 14
(b) With respect to each GNA Employee Benefit Plan, there has been
made (or will be made prior to the Closing) available to Buyer a true, correct
and complete copy of: (i) all plan documents, trust agreements, and insurance
contracts and other agreements relating to funding vehicles; (ii) the three most
recent annual reports on Form 5500 and accompanying schedules, if any, filed
with the IRS; (iii) the current summary plan description, if any; (iv) the most
recent annual financial report, if any, filed with the IRS; and (v) the most
recent determination letter, if any, issued by the IRS. All financial statements
for each GNA Employee Benefit Plan have been prepared in all material respects
in compliance with applicable regulations under ERISA.
(c) All GNA Employee Benefit Plans which are "employee benefit
plans," as defined in Section 3(3) of ERISA, in all material respects are in
compliance with and have been administered in compliance with all applicable
requirements of law, including the Code and ERISA, and all unpaid contributions
required to be made to each such plan under the terms of such plan, ERISA or the
Code as of the date hereof have been fully reflected in the appropriate GNA
Financial Statements except where the failure to do so could not reasonably be
expected to have a GNA Material Adverse Effect. There is no lien arising under
ERISA against any of the assets of GNA or any of its Subsidiaries. There are no
threatened or pending claims by or on behalf of the GNA Employee Benefit Plans,
or by any participant therein, alleging a breach or breaches of fiduciary duties
or violations of Applicable Laws which could result in liability on the part of
GNA, its officers or directors, or such GNA Employee Benefit Plans under ERISA
or any other Applicable Law, and to the knowledge of GNA, there is no basis for
any such claim.
(d) Section 4.20(d) of the GNA Disclosure Letter identifies each GNA
Employee Benefit Plan that is intended to be a "qualified plan" satisfying the
requirements of Section 401(a) of the Code (a "GNA Pension Plan"). A favorable
IRS determination letter as to the qualification of each GNA Pension Plan under
Section 401(a) of the Code has been issued and remains in effect and the related
trust has been determined to be exempt from taxation under Section 501(a) of the
Code and any amendment made or event relating to such GNA Pension Plan
subsequent to the date of such determination letter has not adversely affected
the qualified status of such GNA Pension Plan. No issue concerning qualification
of any GNA Pension Plan is pending before or, to the knowledge of GNA,
threatened by, the IRS. Each GNA Pension Plan has been administered in
accordance with its terms, except for those terms which are inconsistent with
the changes required by the Code and any regulations and rulings promulgated
thereunder for which changes are not yet required to be made, in which case each
GNA Pension Plan has been administered in accordance with the provisions of the
Code and such regulations and rulings, and neither GNA and its Subsidiaries, nor
any fiduciary of any GNA Pension Plan has done anything which would adversely
affect the qualified status of any GNA Pension Plan or related trust. GNA and
its Subsidiaries have performed all obligations required to be performed by them
under, and are not in default under or in violation of, the terms of any of the
GNA Employee Benefit Plans in any manner that could reasonably be expected to
have a GNA Material Adverse Effect. None of GNA or its Subsidiaries or any other
"disqualified person" (as defined in Section 4975 of the Code) or "party-in-
interest" (as defined in Section 3(14) of ERISA) has engaged in any "prohibited
transaction" (as such term is defined in Section 4975 of the Code or Section 406
of ERISA), which could subject any GNA Employee Benefit Plan (or its related
trust), GNA or its Subsidiaries or any officer, director or employee of GNA or
its Subsidiaries to the tax or penalty imposed under Section 4975 of the Code or
Section 502(i) of ERISA; and, to the knowledge of GNA, all "fiduciaries," as
defined in Section 3(21) of ERISA, with respect to the GNA Employee Benefit
Plans have complied in all material respects with the requirements of Section
404 of ERISA.
(e) None of the GNA Employee Benefit Plans is subject to Section 412
of the Code. None of GNA, its Subsidiaries or ERISA Affiliates maintains, or has
any liability with respect to, a GNA Pension Plan that is subject to Title IV of
ERISA.
Securities Purchase Agreement - Page 15
(f) GNA and its Subsidiaries have no liability for life, health,
medical or other welfare benefits to former employees or beneficiaries or
dependents thereof, except for health continuation coverage as required by
Section 4980B of the Code or Part 6 of Title I of ERISA, and at no expense to
GNA or its Subsidiaries.
4.21 Tax Matters. GNA and each of its Subsidiaries has filed all Tax
Returns required to be filed by it, or requests for extensions to file such Tax
Returns have been timely filed and granted and have not expired, except for such
failures to file as would not individually or in the aggregate have a GNA
Material Adverse Effect. GNA and each of its Subsidiaries has paid (or GNA has
paid on its behalf) or made provision for all Taxes shown as due on such Tax
Returns. The most recent financial statements contained in the GNA SEC Documents
reflect adequate reserves for all Taxes payable by GNA and its Subsidiaries for
all taxable periods and portions thereof accrued through the date of such
financial statements. To the knowledge of GNA, no material deficiencies or
adjustments exist or have been asserted with respect to Taxes of GNA or any of
its Subsidiaries and neither GNA nor any of its Subsidiaries has received notice
that it has not filed a Tax Return or paid any Taxes required to be filed or
paid which could reasonably be expected to have a GNA Material Adverse Effect.
No audit, examination, investigation, action, suit, claim or proceeding relating
to the determination, assessment or collection of any Tax of GNA or any of its
Subsidiaries is currently in process or pending, except as disclosed in Section
4.21 of the GNA Disclosure Letter. No waiver or extension of any statute of
limitations relating to the assessment or collection of any Tax of GNA or any of
its Subsidiaries is in effect.
4.22 Brokers. Except for KBW (the expenses of which shall be borne by
GNA), no broker, finder, or other investment banker or other Person is or will
be entitled to receive any brokerage, finder's or other fee or commission in
connection with this Agreement or the Transactions based upon agreements made by
or on behalf of GNA or any of its Subsidiaries.
4.23 Prior Private Offerings. Since December 31, 1996: (i) all securities
offered or sold by GNA which were not registered pursuant to the Securities Act
and applicable state securities laws, were offered or sold pursuant to valid
exemptions from the Securities Act and applicable state securities laws and (ii)
no private offering memorandum or other information furnished (whether in
writing or orally) to any offeree or purchaser of such securities, at the time
of delivery of such private offering memorandum or other information, contained
any untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary in order to make the statements
contained therein, in light of the circumstances under which they were made, not
misleading.
4.24 Private Offering of the Securities. GNA has not offered, and will not
offer, the Securities or any part thereof or any similar securities for issue or
sale to, or has solicited or will solicit any offer to acquire any of the same
from, any person so as to bring the issuance and sale of the Securities within
the provisions of Section 5 of the Securities Act.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to GNA that:
5.1 Organization and Qualification. Buyer is a resident of the State of
Texas and has the power and authority to own all of his properties and assets
and to carry on his business as now being
Securities Purchase Agreement - Page 16
conducted. Buyer is duly qualified and in good standing to transact business in
each jurisdiction in which the property owned, leased or operated by him or the
nature of the business conducted by him makes such qualification necessary,
except where the failure to be in good standing or to be duly qualified would
not, individually or in the aggregate, have or reasonably be expected to have a
Buyer Material Adverse Effect.
5.2 Authority Relative to This Agreement. Buyer has all requisite power
and authority to enter into this Agreement and to consummate the Transactions.
The execution and delivery of this Agreement and the consummation by Buyer of
the Transactions have been duly authorized by all necessary action on the part
of Buyer. This Agreement has been duly and validly executed and delivered by
Buyer and, assuming the due authorization, execution and delivery hereof by GNA,
constitutes the valid and binding obligation of Buyer, enforceable against Buyer
in accordance with its terms, except as would be limited by applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance or other similar
laws affecting the enforcement of creditors' rights generally and except that
the availability of equitable remedies, including specific performance, may be
subject to the discretion of any court before which any proceeding therefor may
be brought.
5.3 Statutory Approvals. Except for filings with the GNA Applicable
Insurance Departments, no declaration, filing or registration with, or notice to
or authorization, consent or approval of any Governmental Authority is necessary
for the execution and delivery of this Agreement by Buyer or the consummation by
Buyer of the Transactions, the failure to obtain, make or give which could
reasonably be expected to have a Buyer Material Adverse Effect.
5.4 Non-Contravention. The execution and delivery of this Agreement by
Buyer does not, and the consummation of the Transactions will not, result in any
violation by Buyer under any provisions of:
(i) the partnership agreement or similar governing documents of
Buyer;
(ii) any statute, law, ordinance, rule, regulation, judgment,
decree, order, injunction, writ, permit or license of any
Governmental Authority applicable to Buyer or any of his
properties or assets; or
(iii) any note, bond, mortgage, indenture, deed of trust, license,
franchise, permit, concession, contract, lease or other
instrument, obligation or agreement of any kind to which Buyer
is now a party or by which he or any of his properties or
assets may be bound or affected;
excluding from the foregoing clauses (ii) and (iii) such violations as could
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not, in the aggregate, reasonably be expected to have a Buyer Material Adverse
Effect.
5.5 No Other Shares. Except for such rights as may be conferred on Buyer
by this Agreement and the Warrant, as of the date hereof, the Buyer Group does
not Beneficially Own, directly or indirectly, any Common Stock or Common Stock
Equivalents.
5.6 Litigation. There is no Proceeding pending, or to the knowledge of
Buyer, threatened against Buyer that questions the validity of this Agreement or
any action to be taken by Buyer in connection with this Agreement.
5.7 Brokers. Except for KBW (the expenses of which will be borne by GNA),
all negotiations relative to this Agreement and the Transactions have been
carried out by Buyer directly with GNA, without the intervention of any Person
on behalf of Buyer or his Affiliates in such manner as to give rise to any valid
Securities Purchase Agreement - Page 17
claim by any Person against Buyer, GNA, any Subsidiary, or any of their
Affiliates for a finder's fee, brokerage commission, or similar payment.
5.8 Securities Matters.
(a) Buyer understands and acknowledges that the Securities have not been
registered under the Securities Act, or the securities laws of any state or
foreign jurisdiction and, unless so registered, may not be offered, sold,
transferred, or otherwise disposed of except pursuant to an exemption from, or
in a transaction not subject to, the registration requirements of the Securities
Act and any applicable securities laws of any state or foreign jurisdiction.
(b) Buyer is an "accredited investor" (as defined in Rule 501(a) of the
Regulation D under the Securities Act).
(c) Buyer (i) has knowledge and experience in financial and business
matters such that he is capable of evaluating the merits and risks of purchasing
the Securities and (ii) is able to bear the economic risk of an investment in
the Securities for an indefinite period of time, including the risk of a
complete loss of any such investment.
(d) Buyer is acquiring the Securities for his own account for investment
purposes and not with a view to, or for offer or sale for GNA in connection
with, the distribution or resale thereof.
(e) Buyer understands and agrees that the Securities are being sold in a
transaction not involving any public offering within the meaning of the
Securities Act, and that the Securities may not be offered, sold, or otherwise
transferred to, or for the account or benefit of, any Person except as permitted
in the following sentence. Buyer agrees, on his own behalf and on behalf of any
accounts for which Buyer is acting, that if Buyer should sell or otherwise
transfer any Securities, he will do so only (i) pursuant to an exemption from
the registration requirements of the Securities Act (if available) or if the
Securities Act does not apply or (ii) pursuant to an effective registration
statement under the Securities Act, and Buyer further agrees to provide to any
Person purchasing any of the Securities from him a notice advising such
purchaser that resales of the Securities are restricted as stated herein.
(f) Buyer understands that the certificates for the Securities purchased
pursuant to this Agreement will bear a legend substantially to the following
effect:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN PURCHASED PURSUANT
TO A SECURITIES PURCHASE AGREEMENT DATED AS OF FEBRUARY 26, 2001, BETWEEN
GAINSCO, INC. AND XXXXXX X. XXXXXXXXX. SUCH SECURITIES HAVE NOT BEEN
REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAW, AND SUCH SECURITIES MAY NOT
BE OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED, OR OTHERWISE DISPOSED
OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS.
5.9 Financing. Buyer has available to him, and on the Closing Date will
have, all financial resources necessary to consummate the Transactions,
including, without limitation, the payment of the Purchase Price to GNA.
Securities Purchase Agreement - Page 18
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Public Announcements. Except as may be required by Applicable Law or
by the rules of any national securities exchange, neither Buyer, on the one
hand, nor GNA, on the other, shall issue any press release or make any public
announcement with respect to this Agreement or the Transactions without the
prior consent of the other party (which consent shall not be unreasonably
withheld under the circumstances). Any such press release or public
announcement required by Applicable Law or by the rules of any national
securities exchange shall only be made after reasonable notice to the other
party.
6.2 NYSE Listing. In the event that GNA shall not have complied with the
condition set forth in Section 8.6 prior to the Closing Date, GNA shall use its
reasonable best efforts to cause the Underlying Shares to be approved for
listing on the NYSE, subject to official notice of issuance by, or as soon as
practicable after, the Closing Date.
6.3 Registration Rights.
(a) Shelf Registration. On or as soon as practicable after the first
anniversary of the date of this Agreement, GNA shall file a shelf registration
under the Securities Act with respect to the public distribution of the
Underlying Shares (the "Shelf Registration") and cause such registration
statement to become effective as promptly as possible and remain continually
effective; provided that Buyer shall have the right to waive or postpone the
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requirement that such Shelf Registration be effected or continued. The
obligation to file or maintain the effectiveness of such Shelf Registration
shall expire at such time as members of the Buyer Group do not Beneficially Own
in the aggregate more than 5% of the Fully-Diluted Common Stock and none of them
is an Affiliate of GNA. It is specifically agreed that the Shelf Registration
rights set forth in this subsection (a) shall be assignable to any transferee of
Underlying Shares who is a member of the Buyer Group, but not otherwise.
(b) Demand Registration. Commencing on the first anniversary of the date
of this Agreement and continuing until Buyer or members of the Buyer Group do
not Beneficially Own more than 5% of the Fully-Diluted Common Stock and none of
them is an Affiliate of GNA, Buyer shall have the right to require GNA, through
written notice delivered to GNA, to prepare and file one registration statement
under the Securities Act with respect to an underwritten public offering of the
Underlying Shares (the "Demand Registration") and cause such registration
statement to become effective as promptly as possible. It is specifically
agreed that the Demand Registration rights set forth in this subsection (b)
shall be assignable to any transferee of Underlying Shares who is a member of
the Buyer Group, but not otherwise; provided, however, that only Buyer, or such
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Person duly designated by Buyer by written notice to GNA as Buyer's agent or
successor (the "Buyer Representative") for the purposes of the giving and
receipt of demands, requests and other communications pursuant to Section 6.3,
shall be entitled to request GNA to effect the Demand Registration.
(c) Piggyback Registrations. Commencing on the first anniversary of the
date of this Agreement and continuing until members of the Buyer Group do not
Beneficially Own more than 5% of the Fully-Diluted Common Stock and no member of
the Buyer Group is an Affiliate of GNA, whenever GNA proposes to register an
offering of any of its Common Stock under the Securities Act other than (i)
under employee compensation or benefit programs or otherwise on Form S-8 or an
equivalent form, (ii) an
Securities Purchase Agreement - Page 19
exchange offer or an offering of securities solely to the existing shareholders
or employees of GNA or to the existing shareholders of another company in
connection with a merger or acquisition or otherwise on Form S-4 or an
equivalent form or (iii) a secondary registration solely on behalf of holders of
securities of GNA, and the registration form to be used may be used for the
registration of the Underlying Shares, GNA will give prompt notice to Buyer of
its intention to effect such a registration and will include in such
registration and offering all Underlying Shares which are then owned by Buyer
and with respect to which GNA has received written requests for inclusion
therein within 20 days after the receipt of GNA's notice (a "Piggyback
Registration"). GNA shall use reasonable efforts to cause the managing
underwriters of a proposed underwritten offering to permit the Underlying Shares
then owned by Buyer which have been requested to be included in the registration
statement (or registration statements) for such offering to be included therein
and in the prospectus used in connection therewith on the same terms and
conditions as are provided for therein for Persons other than Buyer.
Notwithstanding the foregoing, if GNA gives notice of such a proposed
registration, the total number of Underlying Shares which shall be included in
such registration shall be reduced pro rata to such number, if any, as in the
reasonable opinion of the managing underwriters of such offering would not
adversely affect the marketability or offering price of all of the securities
proposed to be offered by GNA in such offering; provided, however, that to the
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extent not prohibited by any registration rights agreements existing as of the
date hereof, the securities to be included in the registration statement (or
registration statements) for any Person other than Buyer, GMSP and GNA shall be
first reduced prior to any such pro rata reduction. It is specifically agreed
that the Piggyback Registration rights set forth in this subsection (c) shall
not be assignable to any transferee of Underlying Shares other than members of
the Buyer Group who own more than 3% of the Underlying Shares; provided,
--------
however, that no member of the Buyer Group (other than Buyer or the Buyer
-------
Representative) shall be entitled to receive or make notices under this Section
6.3(c); provided, further, that, for purposes of this Section 6.3(c) only, all
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notices delivered to Buyer or the Buyer Representative shall be deemed to have
been given to all members of the Buyer Group and all notices delivered to GNA by
Buyer or the Buyer Representative shall be deemed to have been given by the
members of the Buyer Group, to the extent explicitly specified in such notice.
(d) Registration Procedures. With respect to each registration statement
filed in accordance with this Section 6.3 (the "Registration Statement"), GNA
shall:
(i) cause the Registration Statement and the related prospectus and
any amendment or supplement (A) to comply in all material respects with the
applicable requirements of the Securities Act and under the rules and
regulations promulgated thereunder and (B) not to contain any untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading;
(ii) prepare and file with the SEC such amendments and supplements to
the Registration Statement and the prospectus used in connection therewith
as may be necessary to keep the Registration Statement effective on a
continual basis for so long as Buyer Beneficially Owns more than 5% of the
Fully-Diluted Common Stock or is an Affiliate of GNA (or until the earlier
distribution of all the Underlying Shares of Buyer included in the
Registration Statement); provided that, GNA shall not be required to
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maintain the effectiveness of any Registration Statement filed for a
Piggyback Registration for more than 90 days;
(iii) furnish, upon written request, to Buyer a copy of any amendment
or supplement to the Registration Statement or prospectus prior to filing
it after effectiveness and not file any such amendment or supplement to
which Buyer shall have reasonably objected on the grounds that such
amendment or supplement does not comply in all material respects with the
requirements of the Securities Act or of the rules or regulations
promulgated thereunder;
Securities Purchase Agreement - Page 20
(iv) furnish to Buyer such number of copies of the Registration
Statement, each amendment and supplement thereto, the prospectus used in
connection therewith (including, without limitation, each preliminary
prospectus and final prospectus) and such other document as Buyer may
reasonably request in order to facilitate the disposition of the Underlying
Shares owned by Buyer;
(v) use its best efforts to register or qualify all Underlying Shares
covered by the Registration Statement under such other securities or blue
sky laws of the states of the United States as may be required for the
issuance and sale of the Underlying Shares, to keep such registration or
qualification in effect for so long as the Registration Statement remains
in effect, except that GNA shall not for any such purpose be required to
qualify generally to do business as a foreign corporation in any
jurisdiction in which it is not and would not, but for the requirements of
this Section 6.3, be obligated to be so qualified, or to subject itself to
taxation in any such jurisdiction, or to consent to general service of
process in any such jurisdiction;
(vi) prior to any sale of the Underlying Shares effected on the NYSE,
deliver to the NYSE copies of the prospectus to be used in connection with
the offering to be conducted pursuant to the Registration Statement;
(vii) upon discovery that, or upon the happening of any event as a
result of which, the prospectus included in the Registration Statement, as
then in effect, includes or in the judgment of GNA may include an untrue
statement of a material fact or omits or may omit to state any material
fact required to be stated in such prospectus or necessary to make the
statements in such prospectus not misleading in the light of the
circumstances in which they were made, which circumstance requires
amendment of the Registration Statement or supplementation of the
prospectus, prepare and file as promptly as reasonably possible a
supplement to or an amendment of such prospectus as may be necessary so
that, as when delivered (if required by the Securities Act) to a purchaser
of Underlying Shares, such prospectus shall not include an untrue statement
of a material fact or omit to state a material fact required to be stated
in such prospectus or necessary to make the statements in such prospectus
not misleading in the light of the circumstances in which they were made;
(viii) otherwise use its best efforts to comply with all applicable
rules and regulations under the Securities Act and, in its discretion, to
make available to its securities holders, as soon as reasonably
practicable, an earnings statement covering the period of at least twelve
months, but not more than eighteen months, beginning with the first month
of the first fiscal quarter after the effective date of the Registration
Statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Securities Act;
(ix) provide and cause to be maintained a transfer agent and registrar
for all Underlying Shares covered by the Registration Statement from and
after a date not later than the effective date of the Registration
Statement;
(x) after any sale of the Underlying Shares pursuant to this Section
6.3 to the extent not needed to comply with Applicable Law, cause any
restrictive legends to be removed and any transfer restrictions to be
rescinded with respect to the Underlying Shares;
(xi) enter into such customary agreements (including, without
limitation, underwriting agreements in customary form, substance, and
scope) and take all such other actions as Buyer or the underwriters, if
any, reasonably request in order to expedite or facilitate the disposition
of such Series B Shares;
Securities Purchase Agreement - Page 21
(xii) in the event of the issuance of any stop order suspending the
effectiveness of the Registration Statement, or of any order suspending or
preventing the use of any related prospectus or suspending the
qualification of any Common Stock included in the Registration Statement
for sale in any jurisdiction, GNA will use its best efforts promptly to
obtain the withdrawal of such order; and
(xiii) use its best efforts to cause such Underlying Shares covered by
the Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable the
disposition of such Series B Shares.
(e) Obligations of Buyer. Buyer shall furnish to GNA such information
regarding Buyer as GNA may from time to time reasonably request in writing (and
will notify GNA of any changes in such information) and as shall be required by
the Securities Act in connection with such registration. Buyer shall enter into
such customary agreements (including, without limitation, underwriting
agreements, custody agreements and powers of attorney in customary form,
substance and scope) and take all such other actions as GNA or the underwriters,
if any, reasonably request in order to expedite or facilitate the disposition of
the Underlying Shares.
(f) Delay of Sales. During any period in which GNA is required to file or
maintain the effectiveness of a Registration Statement for the Underlying Shares
pursuant to this Section 6.3, GNA shall have the right exercisable on no more
than one occasion during any twelve month period), upon giving notice to Buyer
of the exercise of such right, to postpone the filing or suspend the
availability of the Registration Statement, or require Buyer not to sell any
Underlying Shares pursuant to the Registration Statement, for a period of time
GNA deems reasonably necessary, which time shall be specified in such notice but
in no event longer than a period of 90 days, if (i) GNA is engaged in an
offering of shares by GNA for its own account or is engaged in or proposes to
engage in discussions or negotiations with respect to, or has proposed or taken
a substantial step to commence, or there otherwise is pending, any merger,
acquisition, other form of business combination, divestiture, tender offer,
financing or other transaction, or there is an event or state of facts relating
to GNA, in each case which is material to GNA (any such negotiation, step, event
or state of facts being herein called a "Material Activity"), (ii) such Material
Activity would, in the opinion of counsel for GNA, require disclosure so as to
permit the Underlying Shares to be sold in compliance with Applicable Law, and
(iii) such disclosure would, in the reasonable judgment of GNA, be adverse to
its interests. GNA shall have no obligation to include in any notice
contemplated by this subsection (e) any reference to or description of the facts
based upon which GNA is delivering such notice.
(g) Indemnification.
(i) GNA shall indemnify and hold harmless Buyer, members of the Buyer
Group and each other Person, if any, who controls Buyer within the meaning
of the Securities Act against any losses, claims, damages, liabilities or
expenses (including reasonable fees and expenses of counsel), joint or
several, to which Buyer or any such Affiliate or controlling Person may
become subject under the Securities Act or otherwise in connection with or
as a result of a sale by Buyer of the Underlying Shares, insofar as such
losses, claims, damages, liabilities or expenses (or related actions or
proceedings) arise out of or are based upon (i) any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement, any preliminary prospectus, final prospectus or summary
prospectus contained in the Registration Statement, or any amendment or
supplement to the Registration Statement, or any document incorporated by
reference in the Registration Statement, or (ii) any omission or alleged
omission to state in any such document a material fact required to be
stated in any such document or necessary to make the statements in any
Securities Purchase Agreement - Page 22
such document not misleading, and GNA will reimburse such member and each
such Affiliate and controlling Person for any legal or any other expenses
reasonably incurred by them in connection with investigating or defending
any such loss, claim, damage, liability or expense (or action or proceeding
in respect of any such loss, claim, damage, liability or expense) which
arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in the Registration
Statement, any such preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement other than in reliance upon and in
conformity with written information furnished to GNA by Buyer or any such
Affiliate or controlling Person for use in the preparation of the
Registration Statement. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of Buyer or any
such Affiliate or controlling Person.
(ii) Buyer shall indemnify and hold harmless (in the same manner and
to the same extent as set forth in clause (i) of this subsection (f)) GNA,
each director of GNA, each officer of GNA who shall sign the Registration
Statement and each other Person, if any, who controls GNA within the
meaning of the Securities Act, with respect to any untrue statement in or
omission from the Registration Statement, any preliminary prospectus, final
prospectus or summary prospectus included in the Registration Statement, or
any amendment or supplement to the Registration Statement, but only to the
extent that such statement or omission was made in direct reliance upon and
in conformity with written information furnished to GNA by any member of
the Buyer Group for use in the preparation of the Registration Statement,
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of GNA or any such
director, officer or controlling Person.
(iii) Indemnification under this Section 6.3 shall be made as set
forth in Article X hereof.
(h) Registration Expenses. All expenses incident to GNA's registration of
the Underlying Shares pursuant to the provisions of this Section 6.3, including,
without limitation, all registration and filing fees, fees and expenses of
compliance with securities or blue sky laws, printing and engraving expenses,
messenger and delivery expenses and fees and disbursements of counsel for GNA
and all independent certified public accountants, underwriters (excluding
underwriting discounts and any selling commissions) and any Persons retained by
GNA (all such expenses being herein called "Registration Expenses") will be paid
by GNA, provided, that all expenses incurred by Buyer to retain any counsel,
--------
accountant or other advisor, will not be deemed to be Registration Expenses and
will be paid by Buyer. The underwriting discounts or commissions and any
selling commissions together with any stock transfer or similar taxes
attributable to sales of the Underlying Shares will be paid by Buyer.
6.4 Board Representation.
(a) Upon the Closing, the current Board shall elect Buyer to the Board as
Non-Executive Vice Chairman of the Board.
(b) As long as members of the Buyer Group continue to Beneficially Own not
less than 50% of the Securities (or the Underlying Shares) purchased by Buyer
pursuant to this Agreement, GNA will continue to nominate Buyer on each
subsequent date for re-nomination of Buyer and will use its reasonable best
efforts to cause Buyer to be elected to the Board.
Securities Purchase Agreement - Page 23
(c) In the event that the conditions of Section 6.4(b) are no longer
satisfied, GNA will cease to have any obligation to nominate Buyer for election
to the Board or to take any action to cause Buyer to be elected to the Board.
6.5 Fees and Expenses at Closing. At the Closing and subject to the
consummation of the Transactions, GNA shall pay Buyer (i) a financing fee equal
to two percent (2%) of the Purchase Price plus (ii) an amount (not to exceed
$40,000) equal to the reasonable documented fees and expenses (including fees
and expenses of counsel, accountants and other third party consultants) incurred
by Buyer in connection with the negotiation and execution of this Agreement and
the consummation of the Transaction.
6.6 Restrictions on Transfers.
(a) Restrictions on Transfer of Series B Shares or Warrant. Subject to the
provisions of subsection (b), and without having obtained the prior written
consent of GNA, Buyer shall not:
(i) sell or transfer any of the Series B Shares or Warrant to any
other Person at any time (except that Buyer may sell or transfer the Series
B Shares or the Warrant for tax reasons after the first anniversary of the
Closing Date); and
(ii) following the first anniversary of the Closing Date, sell or
transfer Underlying Shares to any Person who is not a member of the Buyer
Group other than pursuant to a registered public distribution or Rule 144
promulgated under the Securities Act, provided, that, to Buyer's knowledge
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and as a result of any transaction(s), (x) no more than 3.5% of the Fully-
Diluted Common Stock is sold to any Person (other than an underwriter in a
firm commitment underwriting) or its Affiliates or Associates, or any
"group" as such term is defined in Rule 13d-5(b)(1) under the Exchange Act,
and (y) neither the purchaser of the Securities or any of its Affiliates or
Associates has filed, or after the transaction will be obligated to file, a
Schedule 13D or G in respect of the Common Stock.
(b) Exceptions to Transfer Restrictions. Notwithstanding subsection (a),
Buyer may sell or transfer (x) any of the Series B Shares, Warrant or Underlying
Shares to any Person pursuant to, as a result of, or in connection with (i) a
tender offer or an exchange offer approved by the Board or (ii) the consummation
of a merger or other business combination transaction with a previously
unaffiliated entity in which GNA is not the surviving or acquiring entity, and
(y) any of the Underlying Shares to members of the Buyer Group, provided that no
such sale or transfer to or among members of the Buyer Group shall be effective
unless and until any transferee who is not already a party to this Agreement
(and such transferee's spouse, if applicable) shall execute and deliver to Buyer
an agreement in which such transferee (and such transferee's spouse, if
applicable) agrees to be bound by this Agreement and to observe and comply with
this Agreement and with all of the obligations and restrictions imposed on Buyer
hereby.
6.7 Delivery of Information. GNA will deliver to Buyer promptly upon the
filing thereof, copies of all registration statements (other than the exhibits
thereto and any registration statements on Form S-8 or its equivalent) and
reports on Forms 10-K or 10-Q (or their equivalents) which GNA shall have filed
with the SEC or any similar reports filed with any state securities commission
or office.
6.8 Rule 144 and Rule 144A Information. With a view to making available
to Buyer the benefits of Rule 144 and Rule 144A promulgated under the
Securities Act and any other rule or regulation of the SEC that may at any time
permit Buyer to sell Common Stock of GNA to the public without registration, GNA
agrees to:
Securities Purchase Agreement - Page 24
(i) make and keep adequate current public information available, as
those terms are understood and defined in Rule 144;
(ii) file with the SEC in a timely manner all reports and other
documents required of GNA under the Securities Act and the Exchange Act;
(iii) furnish to Buyer forthwith upon request (A) a written statement
by GNA that it has complied with the reporting requirements of Rule 144,
the Securities Act and the Exchange Act, (B) a copy of the most recent
annual or quarterly report of GNA and such other reports and documents so
filed by GNA under the Securities Act and the Exchange Act and (C) such
other information as may be reasonably requested by Buyer in availing
itself of any rule or regulation of the SEC which permits the selling of
any such securities without registration;
(iv) comply with all rules and regulations of the SEC applicable to
GNA in connection with use of Rule 144A (or any successor thereto); and
(v) within five business days of GNA's receipt of a request made by,
or on behalf of, any prospective transferee of who is a Qualified
Institutional Buyer (as defined in Rule 144A) and would be purchasing
Common Stock of GNA in reliance upon Rule 144A), provide to such
prospective transferee copies of annual audited and quarterly unaudited
financial statements of GNA for it to comply with Rule 144A.
6.9 Standstill.
(a) General. Buyer agrees that it will not, and it will cause the other
members of the Buyer Group not to, purchase or otherwise acquire additional
shares of Common Stock if thereafter the Buyer Group would collectively
Beneficially Own more than 8% of the Fully-Diluted Common Stock, based on the
amount of Fully-Diluted Common Stock set forth in the most recent report
containing such information filed by GNA with the SEC at the time such
measurement takes place; provided, however, that the Buyer Group shall not be
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deemed to own more than 8% of the Fully-Diluted Common Stock solely by reason of
(i) GNA's purchase of any Common Stock unless thereafter members of the Buyer
Group purchase any additional shares of Common Stock (excluding any acquisition
of Underlying Shares upon conversion of the Series B Shares or exercise of the
Warrant, which shall not be restricted hereunder, or the exercise of Buyer's
Preemptive Right pursuant to Section 6.10) or (ii) the acquisition after the
date of this Agreement of Common Stock by Buyer pursuant to any of the GNA Stock
Plans.
(b) Additional Standstill Obligations. Buyer further agrees that it will
not, and it will cause the other members of the Buyer Group (excluding Buyer
acting in his capacity as a member of the Board in the deliberations of, or
pursuant to the authorization of, the Board) not to, without the prior written
consent of the Board, (i) effect or cause to be effected any (A) "solicitation"
of "proxies" (as such terms are used in the proxy rules of the SEC) with respect
to GNA or any action resulting in such Person becoming a "participant" in any
"election contest" (as such terms are used in the proxy rules of the SEC) with
respect to GNA, or (B) any tender or exchange offer or offer for a merger,
consolidation, share exchange or business combination involving GNA or
substantially all of its assets, or (ii) propose any matter for submission to a
vote of the shareholders of GNA.
(c) Expanded Buyer Group. For purposes of this Section 6.9 only, the term
"Buyer Group" shall be deemed to include all Persons that, together with Buyer
or one or more of any Affiliate, Associate or employee of Buyer, would
constitute a "group" within the meaning of Section 13(d) of the Exchange Act
Securities Purchase Agreement - Page 25
that would be required to file a Schedule 13D or 13G with respect to its
Beneficial Ownership of Common Stock.
6.10 Participation in Subsequent Private Placements. Until such time as
Buyer and its Affiliates no longer beneficially own in the aggregate not less
than 50% of the Securities (or the Underlying Shares) purchased by Buyer
pursuant to this Agreement, in the event that GNA desires to issue any Equity
Securities for cash in a private placement transaction (other than in connection
with a business combination transaction or pursuant to employee or director
stock option agreements or any other employee benefit plan approved by GNA's
shareholders), GNA shall, prior to such issuance, provide written notice to
Buyer describing the Equity Securities to be issued, the potential purchasers
thereof, if specifically known, and the consideration to be received therefrom
(a "Preemptive Notice"). Buyer shall have the right, during the 10 Business
Days following receipt of the Preemptive Notice, to elect to subscribe for and
purchase (the "Preemptive Right") at the same price, and on such other terms and
conditions as are set forth in the Preemptive Notice, such number of shares of
Equity Securities (in GNA's sole discretion either as a portion of or in
addition to the Equity Securities covered by the Preemptive Notice) as may be
required to cause Buyer to Beneficially Own the same percentage of the Fully-
Diluted Common Stock immediately following such issuance as Buyer Beneficially
owned on the date of the Preemptive Notice.
6.11 Amendment of GNA Disclosure Letter. GNA agrees that, with respect to
the representations and warranties of GNA contained in this Agreement, GNA shall
have the continuing right until the Closing to supplement or amend promptly the
GNA Disclosure Letter with respect to any matter hereafter arising or discovered
which, if existing or known at the date of this Agreement, would have been
required to be set forth or described in the GNA Disclosure Letter. For all
purposes of this Agreement, including without limitation for purposes of
determining whether the conditions set forth in Sections 7.1 and 8.1 have been
fulfilled, the GNA Disclosure Letter shall be deemed to include only that
information contained therein on the date of this Agreement and shall be deemed
to exclude all information contained in any supplement or amendment thereto;
provided, however, that if the Closing shall occur, then all matters disclosed
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pursuant to any such supplement or amendment at or prior to the Closing shall be
waived and Buyer shall not be entitled to make a claim thereon pursuant to the
terms of this Agreement.
6.12 Access to Information. Between the date hereof and the Closing, GNA
(i) shall give Buyer and its authorized representatives reasonable access to
GNA's employees, offices and other facilities, and all books and records of GNA
and the Subsidiaries, (ii) shall permit Buyer and its authorized representatives
to make such inspections as they may reasonably require to verify the accuracy
of any representation or warranty contained in Article IV, and (iii) shall cause
GNA's officers to furnish Buyer and its authorized representatives with such
financial and operating data and other information with respect to GNA and the
Subsidiaries as Buyer may from time to time reasonably request; provided,
however, that no investigation pursuant to this Section shall affect any
representation or warranty of GNA contained in this Agreement or in any
agreement, instrument, or document delivered pursuant hereto or in connection
herewith; and provided further that GNA shall have the right to have a
representative present at all times.
6.13 Private Offering of the Securities. GNA agrees that neither GNA nor
anyone acting on its behalf has offered or will offer the Securities or any part
thereof or any similar securities for issuance or sale to, or has solicited or
will solicit any offer to acquire any of the same from, anyone so as to bring
the issuance and sale of the Securities within the provisions of Section 5 of
the Securities Act.
6.14 Confidentiality. Buyer shall keep all Confidential Information in
confidence, and shall not disclose said information to any other party other
than Buyer's advisors, attorneys and accountants, who will be advised of the
confidential nature of information. Buyer shall protect the Confidential
Information with
Securities Purchase Agreement - Page 26
the same degree of care as Buyer normally uses in the protection of its
confidential and proprietary information. Buyer further agrees not to use
Confidential Information for any purpose except in connection with this
Agreement. The restrictions set forth herein shall not apply with respect to
Confidential Information which (i) is already generally available to the public
when received by Buyer; (ii) becomes available to the public through no fault of
any member of the Buyer Group; or (iii) is required to be disclosed by
Applicable Law or a Governmental Authority.
6.15 Warrant. Within a reasonably practicable time following such time as
the Conversion Price has ultimately been determined, GNA shall issue to Buyer a
replacement Warrant in order to reflect the ultimate determination of the
Conversion Price.
6.16 Reasonable Best Efforts. Each party hereto agrees that it will not
voluntarily undertake any course of action inconsistent with the provisions or
intent of this Agreement and will use its reasonable best efforts to take, or
cause to be taken, all action and to do, or cause to be done, all things
reasonably necessary, proper, or advisable under Applicable Laws to consummate
the Transaction, including obtaining all GNA Required Consents.
6.17 Allocation of Purchase Price. Prior to the Closing, GNA and Buyer
shall agree, based on the advice of KBW and Buyer's advisors, on an allocation
of the Purchase Price between the Series B Shares and the Warrant.
6.18 Survival of Covenants. Except for any covenant or agreement which
by its terms expressly terminates as of a specific date, the covenants and
agreements of the parties hereto contained in this Agreement shall survive the
Closing without contractual limitation.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF GNA
The obligations of GNA to consummate the Transactions shall be subject to
the fulfillment on or prior to the Closing Date of each of the following
conditions:
7.1 Representations and Warranties True. All the representations and
warranties of Buyer contained in this Agreement shall be true and correct on and
as of the Closing Date, except to the extent contemplated by this Agreement or
the Warrant; provided, however, that (i) to the extent that any such
representation or warranty is made as of a specified date, such representation
or warranty shall have been true and correct in all material respects as of such
specified date, and (ii) with respect to each representation and warranty that
is not otherwise qualified by its terms by a materiality standard (such as a
qualification that a future condition not have a Buyer Material Adverse Effect),
this condition shall be satisfied if such representation or warranty shall be
true and correct in all material respects.
7.2 Covenants and Agreements Performed. Buyer shall have performed and
complied with in all material respects all covenants and agreements required by
this Agreement, if any, to be performed or complied with by it or prior to the
Closing Date.
7.3 Legal Proceedings. No court of competent jurisdiction in the U.S. or
other Governmental Authority shall have issued an order, decree or ruling, or
taken any other action restraining, enjoining or
Securities Purchase Agreement - Page 27
otherwise prohibiting the Transactions, and such order, decree, ruling or other
action shall have become final and non-appealable.
7.4 Consents. All GNA Required Consents shall have been obtained or
waived.
7.5 GMSP Agreement. The transactions contemplated in the GMSP Agreement
shall be consummated contemporaneously with the consummation of the
Transactions.
7.6 Bank One Consent. The Bank One Consent shall have been obtained.
7.7 Certificate. GNA shall have received a certificate executed by Buyer
dated the Closing Date, representing and certifying, in such detail as GNA may
reasonably request, that the conditions set forth in Sections 7.1 and 7.2 have
been fulfilled.
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF BUYER
The obligations of Buyer to consummate the Transactions shall be subject to
the fulfillment on or prior to the Closing Date of each of the following
conditions:
8.1 Representations and Warranties True. All the representations and
warranties of GNA contained in this Agreement shall be true and correct on and
as of the Closing Date, except to the extent contemplated by this Agreement or
the Warrant; provided, however, that (i) to the extent that any such
representation or warranty is made as of a specified date, such representation
or warranty shall have been true and correct in all material respects as of
such specified date , and (ii) with respect to each representation and warranty
that is not otherwise qualified by its terms by a materiality standard (such as
a qualification that a future condition have a GNA Material Adverse Effect),
this condition shall be satisfied if such representation or warranty shall be
true and correct in all material respects.
8.2 Covenants and Agreements Performed. GNA shall have performed and
complied in all material respects with all covenants and agreements required by
this Agreement to be performed or complied with by it on or prior to the Closing
Date.
8.3 Legal Proceedings. No court of competent jurisdiction in the U.S. or
other Governmental Authority shall have issued an order, decree or ruling, or
taken any other action restraining, enjoining or otherwise prohibiting the
Transactions, and such order, decree, ruling or other action shall have become
final and non-appealable.
8.4 Certificates. Buyer shall have received a certificate or certificates
representing the Series B Shares and the Warrant, as applicable, in definitive
form representing the Series B Shares and Warrant purchased by it, registered in
the name of Buyer and duly executed by GNA.
8.5 Consents. All GNA Required Consents shall have been obtained or
waived.
8.6 NYSE Listing. To the extent it is permissible to do so prior to the
ultimate determination of the Conversion Price, GNA shall have caused the
Underlying Shares to be approved for listing on the NYSE, subject to official
notice of issuance by the Closing Date.
Securities Purchase Agreement - Page 28
8.7 Statement of Resolution. The Statement of Resolution shall have been
accepted for filing by the Secretary of State of the State of Texas.
8.8 GMSP Agreement. The transactions contemplated in the GMSP Agreement
shall be consummated contemporaneously with the consummation of the
Transactions.
8.9 Officer Certificate. Buyer shall have received a certificate executed
on behalf of GNA by the chief executive officer or the chief financial officer
of GNA, dated the Closing Date, representing and certifying, in such detail as
the Buyer may reasonably request, that the conditions set forth in Sections 8.1
and 8.2 have been fulfilled.
8.10 Issuance of Warrant. GNA shall issue and deliver to Buyer a Common
Stock Purchase Warrant expiring on the fifth anniversary of the Closing Date and
entitling Buyer to purchase 1,050,000 shares of Common Stock at an exercise
price equal to the Conversion Price and otherwise in substantially the form of
Exhibit "B" attached hereto (the "Warrant").
-----------
8.11 Bank One Consent. The Bank One Consent shall have been obtained.
8.12 Waiver Under Xxxxxxxx Agreements. Xxxxx X. Xxxxxxxx shall have
executed a written waiver that provides that the Transactions per se do not
trigger any payments pursuant to his change of control agreement with GNA or his
Employment Agreement dated as of April 17, 1998 with GNA.
8.13 Due Diligence. Buyer shall be satisfied in his sole discretion with
the results of his legal, financial and accounting due diligence investigation
of GNA.
ARTICLE IX
TERMINATION, AMENDMENT, AND WAIVER
9.1 Termination. This Agreement may be terminated and the Transactions
may be abandoned at any time prior to the Closing:
(a) by GNA or Buyer if
------------------
(i) the Closing does not occur prior to the Final Date;
(ii) any court of competent jurisdiction in the U.S. or other
Governmental Authority shall have issued an order, decree or ruling, or taken
any other action restraining, enjoining or otherwise prohibiting the
Transactions, and such order, decree, ruling or other action shall have become
final and non-appealable; or
(iii) GNA and Buyer agree in writing to terminate this Agreement.
provided that the right to terminate this Agreement under this subsection (a)
--------
shall not be available to any party whose failure to fulfill any obligation
under this Agreement has been the cause of or resulted in the failure of the
Closing to occur on or before such date.
(b) by GNA if:
---------
Securities Purchase Agreement - Page 29
(i) there has been a Breach (which Breach is not cured or not capable
of being cured prior to the earlier of (A) 10 days following notice to Buyer by
GNA of such Breach or (B) two Business Days prior to the Final Date) of any
representation or warranty on the part of Buyer (1) in any material respect such
that such representation or warranty is not true and correct, or if such
representation or warranty is not otherwise qualified by its terms by a
materiality standard (such as a qualification that a future condition have a
Buyer Material Adverse Effect), such representation or warranty is not true and
correct in all material respects, or (2) such that closing would put GNA in
conflict with the federal securities laws; or
(ii) there has been a Breach (which Breach is not cured or not capable
of being cured prior to the earlier of (A) 10 days following notice to Buyer by
GNA of such Breach or (B) two Business Days prior to the Final Date) of any
covenant or agreement on the part of Buyer (1) resulting in a Buyer Material
Adverse Effect or a material diminution of benefits to be received by GNA under
this Agreement or (2) such that closing would put GNA in conflict with
applicable federal securities laws.
(c) by Buyer, if:
------------
(i) there has been a Breach (which Breach is not cured or not capable
of being cured prior to the earlier of (A) 10 days following notice to GNA by
Buyer of such Breach or (B) two Business Days prior to the Final Date) of any
representation or warranty on the part of GNA (1) (i) such that such
representation or warranty is not true and correct, or if such representation or
warranty is not otherwise qualified by its terms by a materiality standard (such
as a qualification that a future condition have a GNA Material Adverse Effect),
such representation or warranty is not true and correct in all material
respects, or (2) such that closing would put Buyer in conflict with applicable
federal securities laws;
(ii) there has been a Breach (which Breach is not cured or not capable
of being cured prior to the earlier of (A) 10 days following notice to GNA by
Buyer of such Breach or (B) two Business Days prior to the Final Date) of any
covenant or agreement on the part of GNA (1) resulting in a GNA Material Adverse
Effect or a material diminution of the benefits to be received by Buyer under
this Agreement or (2) such that closing would put Buyer in conflict with
applicable federal securities laws; or
(iii) the Board withdraws or modifies in a manner adverse to Buyer
its approval or recommendation of the Transactions or this Agreement, or has
adopted any resolution to effect any of the foregoing.
9.2 Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 9.1, this Agreement will
become void and have no effect, without any liability on the part of any party
to this Agreement or its affiliates, directors, officers, or shareholders, other
than the provisions of this Section 9.2 and Article X. Nothing contained in
this Section 9.2 will relieve any party from liability for any Breach of this
Agreement. Notwithstanding anything to the contrary contained in this
Agreement, in the event of the termination and abandonment of this Agreement,
the provisions of the Section 6.14 of this Agreement shall survive in their
entirety.
9.3 Amendment. This Agreement may not be amended except by an instrument
in writing signed by or on behalf of all the parties hereto.
9.4 Waiver. No failure or delay by a party hereto in exercising any
right, power, or privilege hereunder shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power, or privilege. The provisions
of this
Securities Purchase Agreement - Page 30
Agreement may not be waived except by an instrument in writing signed by
or on behalf of the party against whom such waiver is sought to be enforced.
ARTICLE X
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
10.1 Survival. The representations and warranties of the parties hereto
contained in this Agreement or in any certificate, instrument or document
delivered pursuant hereto shall survive the Closing, regardless of any
investigation made by or on behalf of any party, until the second anniversary of
the Closing Date (the "Survival Date"). No action may be brought with respect
to a Breach of any representation after the Survival Date unless, prior to such
time, the party seeking to bring such an action has notified the other parties
of such claim, specifying in reasonable detail the nature of the loss suffered.
The provisions of this Section 10.1 shall have no effect upon any of the
covenants or agreements of the parties set forth in Article VI or any of the
other obligations of the parties hereto under the Agreement, whether to be
performed later, at or after the Closing.
10.2 Indemnification by GNA. To the maximum extent permitted by Applicable
Law, GNA shall indemnify, defend, and hold harmless Buyer and the members of the
Buyer Group from and against any and all claims, actions, causes of action,
demands, losses, damages, liabilities, costs and expenses (including reasonable
attorneys' fees and expenses) (collectively, "Damages"), asserted against,
resulting to, imposed upon, or incurred by any of them, directly or indirectly,
by reason of or resulting from (i) any Breach by GNA of any of its
representations, warranties, covenants or agreements contained in this Agreement
or in any certificate, instrument or document delivered pursuant hereto, (ii)
any Proceeding brought against any of them by a Person other than GNA or any of
its Affiliates, Associates or shareholders arising out of or relating to the
Transactions or the actual or proposed execution, delivery, enforcement or
performance of this Agreement or any certificate, instrument or document
delivered pursuant hereto, or (iii) any Proceeding brought against any of them
by GNA or any of its Affiliates, Associates or shareholders arising out of or
relating to the Transactions or the actual or proposed execution, delivery,
enforcement or performance of this Agreement or any certificate, instrument or
document delivered pursuant hereto; provided, that (a) GNA shall not be
obligated to make any indemnification pursuant to this Section 10.2 to the
extent it is ultimately determined by a final non-appealable judgment of a court
of competent jurisdiction that such Damages were caused by the gross negligence,
willful misconduct or material breach of this Agreement by Buyer or the members
of the Buyer Group; (b) GNA's obligation to indemnify, defend and hold harmless
as provided in Section 10.2(i) shall not apply to the first $30,000 in the
aggregate of claims hereunder (other than claims based on Sections 2.1, 2.2 or
6.2); and (c) GNA's obligation to indemnify, defend and hold harmless any member
of the Buyer Group who is also a director of GNA as provided in Section
10.2(iii) shall only apply with respect to the advancement of such director's
reasonable expenses incurred in connection with defending any such Proceeding,
provided that such director shall be required to repay any such expenses so
advanced by GNA hereunder in the event that it is ultimately determined by a
final non-appealable judgment of a court of competent jurisdiction that such
director has not met the appropriate standard of care required of such director
pursuant to the Bylaws of GNA.
10.3 Indemnification by Buyer. To the maximum extent permitted by
Applicable Law, Buyer shall indemnify, defend, and hold harmless GNA and its
Affiliates, Associates, directors, officers and employees from and against any
and all Damages asserted against, resulting to, imposed upon, or incurred by any
of them, directly or indirectly, by reason of or resulting from any Breach by
Buyer of any of its representations, warranties, covenants, or agreements
contained in this Agreement or in any certificate, instrument, or document
delivered pursuant hereto, provided, however, that such obligation to indemnify,
-------- -------
Securities Purchase Agreement - Page 31
defend and hold harmless shall not apply to the first $30,000 in the aggregate
of claims hereunder (other than claims based on Sections 2.1, 2.2 or 6.3(g)).
10.4 Procedure for Indemnification. Promptly after receipt by an
indemnified party under Section 10.2 or 10.3 of notice of the commencement of
any action, such indemnified party shall, if a claim in respect thereof is to be
made against an indemnifying party under such Section, give written notice to
the indemnifying party of the commencement thereof, but the failure so to notify
the indemnifying party shall not relieve it of any liability that it may have to
any indemnified party except to the extent the indemnifying party demonstrates
that the defense of such action is prejudiced thereby. In case any such action
shall be brought against an indemnified party and it shall give written notice
to the indemnifying party of the commencement thereof, the indemnifying party
shall be entitled to participate therein and, to the extent that it may wish, to
assume the defense thereof with counsel reasonably satisfactory to such
indemnified party. If the indemnifying party elects to assume the defense of
such action, the indemnified party shall have the right to employ separate
counsel at its own expense and to participate in the defense thereof. If the
indemnifying party elects not to assume (or fails to assume) the defense of such
action, the indemnified party shall be entitled to assume the defense of such
action with counsel of its own choice, at the expense of the indemnifying party.
If the action is asserted against both the indemnifying party and the
indemnified party and there is a conflict of interests which renders it
inappropriate for the same counsel to represent both the indemnifying party and
the indemnified party, the indemnifying party shall be responsible for paying
for separate counsel for the indemnified party; provided, however, that if there
is more than one indemnified party, the indemnifying party shall not be
responsible for paying for more than one separate firm of attorneys to represent
the indemnified parties, regardless of the number of indemnified parties. The
indemnifying party shall have no liability with respect to any compromise or
settlement of any action effected without its written consent (which shall not
be unreasonably withheld).
10.5 Indemnification in Case of Strict Liability or Indemnitee Negligence.
THE INDEMNIFICATION PROVISIONS IN THIS SECTION 10 SHALL BE ENFORCEABLE
REGARDLESS OF WHETHER THE LIABILITY IS BASED ON PAST, PRESENT OR FUTURE ACTS,
CLAIMS OR APPLICABLE LAWS (INCLUDING ANY PAST, PRESENT OR FUTURE ENVIRONMENTAL
LAW, FRAUDULENT TRANSFER ACT, OCCUPATIONAL SAFETY AND HEALTH LAW, OR PRODUCTS
LIABILITY, SECURITIES OR OTHER APPLICABLE LAWS), AND REGARDLESS OF WHETHER ANY
PERSON (INCLUDING THE PERSON FROM WHOM INDEMNIFICATION IS SOUGHT) ALLEGES OR
PROVES THE SOLE, CONCURRENT, CONTRIBUTORY OR COMPARATIVE NEGLIGENCE OF THE
PERSON SEEKING INDEMNIFICATION, OR THE SOLE OR CONCURRENT STRICT LIABILITY
IMPOSED ON THE PERSON SEEKING INDEMNIFICATION.
10.6 Indemnification Obligations Non-Exclusive. The rights of
indemnification pursuant to this Article X shall not be deemed exclusive of any
rights that to which a party or its Affiliates may be entitled under applicable
law, applicable agreements or the governing documents or GNA or its
Subsidiaries.
ARTICLE XI
MISCELLANEOUS
11.1 Notices. All notices required to be given in writing hereunder shall
be deemed to have been given if (i) delivered personally or by documented
courier or delivery service, (ii) transmitted by facsimile
Securities Purchase Agreement - Page 32
or (iii) mailed by registered or certified mail (return receipt requested and
postage prepaid) to the following listed persons at the addresses and facsimile
numbers specified below, or to such other persons, addresses or facsimile
numbers as a party entitled to notice shall give, in the manner hereinabove
described, to the others entitled to notice:
If Buyer: 0000 Xxxxxxx Xxxxx
Xxxxxx, Xxxxx 00000
Fax: (000) 000-0000
with a copy to: Xxxxxxxx & Knight L.L.P.
0000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
Fax: (000) 000-0000
If to GNA, to: 000 Xxxxxxxx Xxxxxx
Xxxx Xxxxx, Xxxxx 00000-0000
Attention: Chief Executive Officer
Fax: (000) 000-0000
with a copy to: Xxxxxxx Xxxxxx L.L.P.
000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxxx X. Xxxx
Fax: (000) 000-0000
If given personally or by documented courier or delivery service, a notice shall
be deemed to have been given when it is received. If transmitted by facsimile,
a notice shall be deemed to have been given on the date received, if electronic
confirmation of receipt occurs during normal business hours, and otherwise, on
the first Business Day following electronic confirmation of receipt. If given
by mail, it shall be deemed to have been given on the third Business Day
following the day on which it was posted.
11.2 Entire Agreement. This Agreement, together with the Warrant,
constitutes the entire agreement between the parties hereto with respect to the
subject matter hereof and supersedes all prior agreements and understandings,
both written and oral, between the parties with respect to the subject matter
hereof.
11.3 Binding Effect; Assignment; No Third Party Benefit. This Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective heirs, legal representatives, successors, and permitted assigns.
Except as otherwise expressly provided in this Agreement, neither this Agreement
nor any of the rights, interests, or obligations hereunder may be assigned by
either of the parties hereto without the prior written consent of the other
party; provided, however, that upon written notice to GNA, Buyer may assign all
--------
or any portion of Buyer's rights and obligations under this Agreement to either
(i) a limited partnership of which Buyer is the general partner and holds a
majority of the economic interest therein or (ii) ING Pilgrim Capital
Corporation for the benefit of Xxxxxx X. Xxxxxxxxx (a "Permitted Assignee")
provided that notwithstanding such assumption, Buyer shall not be released from
--------
any liabilities or obligations hereunder. Except as provided in Section 6.3(g),
Section 6.14 and Article X, nothing in this Agreement, express or implied, is
intended to or shall confer upon any Person other than the parties hereto,
Securities Purchase Agreement - Page 33
and their respective heirs, legal representatives, successors, and permitted
assigns, any rights, benefits, or remedies of any nature whatsoever under or by
reason of this Agreement.
11.4 Interpretation. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement. For purposes of this Agreement, the words
"includes" and "including" shall mean "including without limitation" and, where
the context so requires, the word "or" is used in the inclusive sense. All
accounting terms not defined in this Agreement shall have the meaning determined
by GAAP. All capitalized terms defined herein are equally applicable to both the
singular and plural forms.
11.5 Severability. In the event that this Agreement, or any of its
provisions, or the performance of any provision, is found to be illegal or
unenforceable under applicable law now or hereafter in effect, the parties shall
be excused from performance of such portions of this Agreement as shall be found
to be illegal or unenforceable under the applicable laws or regulations without
affecting the validity of the remaining provisions of the Agreement, provided
--------
that the remaining provisions of the Agreement shall in their totality
constitute a commercially reasonable agreement. Nothing herein shall be
construed as a waiver of any party's right to challenge the validity of such
law.
11.6 Time of Essence. With regard to all dates and time periods set forth
in this Agreement, time is of the essence.
11.7 No Waiver of Privilege. Neither GNA, Buyer nor any of their
respective Subsidiaries, Affiliates or Associates waives any attorney-client,
work product or other privilege with respect to any information furnished
pursuant to this Agreement.
11.8 GNA Disclosure Letter. Any disclosure under any Section of the GNA
Disclosure Letter shall be deemed disclosure under all Sections of the GNA
Disclosure Letter and this Agreement. To the extent that any representation or
warranty set forth in this Agreement is qualified by the materiality of the
matter(s) to which the representation or warranty relates, the inclusion of any
matter in the GNA Disclosure Letter does not constitute a determination by GNA
that any such matter is material or required to be disclosed for purposes of
this Agreement. The disclosure of any information concerning a matter in the
GNA Disclosure Letter does not imply that any other or undisclosed matter which
has a greater significance or value is material.
11.9 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO
THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF.
11.0 Counterparts. This Agreement may be executed by the parties hereto in
any number of counterparts, each of which shall be deemed an original, but all
of which shall constitute one and the same agreement. Each counterpart may
consist of a number of copies hereof each signed by less than all, but together
signed by all, the parties hereto.
Securities Purchase Agreement - Page 34
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized representatives all as of the day and year first above
written.
GNA:
GAINSCO, INC.
By: /s/ Xxxxx X. Xxxxxxxx
-------------------------------------------
Xxxxx X. Xxxxxxxx
President and Chief Executive Officer
BUYER:
/s/ Xxxxxx X. Xxxxxxxxx
------------------------
Xxxxxx X. Xxxxxxxxx
Securities Purchase Agreement - Page 35
Exhibit "A"
-----------
STATEMENT OF RESOLUTION
ESTABLISHING AND DESIGNATING A SERIES OF SHARES
OF
GAINSCO, INC.
Series B Convertible Redeemable Preferred Stock, par value $100.00 per share
Pursuant to the provisions of Article 2.13 of the Texas Business Corporation
Act, and pursuant to Article 4 of its Articles of Incorporation, as amended, the
undersigned, GAINSCO, INC. (the "Company"), hereby submits the following
statement for the purposes of establishing and designating a series of shares
and fixing and determining the relative rights and preferences thereof:
I. The name of the Company is GAINSCO, INC.
II. The following resolution establishing and designating a series of
shares and fixing and determining the relative rights and preferences thereof
was duly adopted by the Board of Directors of the Company on _______, 2001:
RESOLVED, by the Board of Directors (the "Board") of the Company, that
pursuant to authority expressly granted to and vested in the Board by the
provisions of the Articles of Incorporation of the Company (the "Articles of
Incorporation"), the Board hereby creates a second series of the class of
authorized Preferred Stock, par value $100.00 per share (the "Preferred Stock"),
of the Company, and authorizes the issuance thereof, and hereby fixes the
designation and amount thereof and the voting powers, preferences and relative,
participating, optional and other special rights of the shares of such series,
and the qualifications, limitations or restrictions thereof, as follows:
SECTION 1. Designation of Series; Rank. The shares of such series shall be
---------------------------
designated "Series B Convertible Redeemable Preferred Stock" (hereinafter called
"Series B Preferred Stock"). The Series B Preferred Stock shall for all purposes
be senior to the Series A Convertible Preferred Stock and the common stock of
the Company ("Common Stock"), and pari passu with the Series C Redeemable
Preferred Stock of the Company (the "Series C Preferred Stock"). As used herein
and subject to the provisions hereof, the "Series B Stated Value" per share of
the Series B Preferred Stock shall initially be equal to One Thousand Dollars
($1,000.00), as proportionately adjusted to reflect any combination (including
by reverse stock split) of, subdivision (including by stock split or stock
dividend) of, or other fundamental change (without the Company receiving
consideration therefor) in, the outstanding number of shares of Series B
Preferred Stock.
STATEMENT OF RESOLUTION-SERIES B PREFERRED - Page 1
SECTION 2. Number of Shares. The number of shares of Series B Preferred
----------------
Stock shall be 3,000, which number the Board may decrease (but not below the
number of shares of the series then outstanding).
SECTION 3. Dividends. The Series B Preferred Stock shall rank senior in
---------
preference to the Common Stock, and to any other capital stock of the Company
ranking junior to the Series B Preferred Stock, with respect to dividends.
Subject to the provisions below, the holders of shares of the Series B Preferred
Stock shall be entitled to receive, when, as and if declared by the Board of
Directors, as legally available, cumulative cash dividends. The rate of
dividends per share shall be expressed as a percentage of the Series B Stated
Value in effect at the relevant time (as applicable, "Series B Dividend Rate")
and shall be an annual rate equal to ten percent (10%) until the third
anniversary of the date on which the shares of Series B Preferred Stock are
originally issued (the "Original Issue Date"), and twenty percent (20%)
thereafter. Such dividends on shares of Series B Preferred Stock shall be
cumulative from the date such shares are issued, whether or not in any period
the Company shall be legally permitted to make the payment of such dividends and
whether or not such dividends are declared. On each April 1, July 1, October 1,
and January 1 after the Original Issue Date (as applicable, each a "Series B
Dividend Payment Date"), cash dividends on the Series B Preferred Stock may be
payable in full or in part at the discretion of the Company (on each Series B
Dividend Payment Date on or prior to the third anniversary of the Original Issue
Date). On each Series B Dividend Payment Date after the third anniversary of the
Original Issue Date, cash dividends on the Series B Preferred Stock shall be
payable in an amount equal to at least half of the dividend that accrues during
each calendar quarter then-ended. If on any date of payment of dividends on the
Series B Preferred Stock (including, without limitation, a Series B Dividend
Payment Date), the Company does not also fully pay all then-accrued and unpaid
dividends on the Series C Preferred Stock, then the total amount of cash to be
paid to the holders of Series B Preferred Stock and Series C Preferred Stock
shall be allocated between such series, pro-rata according to the relative
amounts of then-accrued and unpaid dividends on each such series, and then
payment among the holders of each series shall be made pro-rata according to the
ownership of outstanding shares within such series.
Cumulative dividends shall at all times accrue at a compounded rate equal
to the then-applicable Series B Dividend Rate and shall accrue from and
including the date of issuance of such shares to and including a Series B
Dividend Payment Date. Such dividends shall accrue whether or not there shall
be (at the time such dividend becomes payable or at any other time) profits,
surplus or other funds of the Company legally available for the payment of
dividends. At all times prior to the third anniversary of the Original Issue
Date, and at all times on or after the third anniversary of the Original Issue
Date at which any dividends with respect to the Series B Preferred Stock have
accrued but remain unpaid, absent the affirmative vote of the holders of a
majority of the shares of Series B Preferred Stock then outstanding, the Company
shall not declare, pay or set apart for payment or make any distribution with
respect to shares of the Common Stock or any other capital stock of the Company
ranking junior to the Series B Preferred Stock. The holders of shares of Series
B Preferred Stock shall not be entitled to share in any dividend or distribution
that is properly declared, paid or set apart for payment on or in respect of the
Common Stock or any other class of securities of the Company, including any
STATEMENT OF RESOLUTION-SERIES B PREFERRED - Page 2
dividends or other distributions payable in Common Stock or other securities of
the Company, or warrants or rights to purchase Common Stock or other securities
of the Company.
Dividends on the Series B Preferred Stock shall be calculated on the basis
of the time elapsed from and including the date of issuance of such shares to
and including the Series B Dividend Payment Date or on any final distribution
date relating to conversion or redemption of Series B Preferred Stock or to a
dissolution, liquidation or winding up of the Company. Dividends payable on the
shares of Series B Preferred for any period of less than a full calendar quarter
shall be prorated for the partial quarter on the basis of a 90-day quarter.
To the extent dividends are not paid on a Series B Dividend Payment Date,
all dividends that shall have accrued on each share of Series B Preferred Stock
outstanding as of such Series B Dividend Payment Date shall, only for purposes
of calculating dividends thereon, be added to the Series B Stated Value of such
share of Series B Preferred Stock and shall remain a part thereof until paid,
and dividends shall accrue at the applicable Series B Dividend Rate and be paid
on such share of Series B Preferred Stock on the basis of the Series B Stated
Value, as so adjusted.
SECTION 4. No Sinking Fund. The Series B Preferred Stock shall not be
---------------
entitled to the benefits of any retirement or sinking fund.
SECTION 5. Liquidation. Each holder of the Series B Preferred Stock shall,
-----------
in case of voluntary or involuntary liquidation, dissolution or winding up of
the affairs of the Company, be entitled to receive in full out of the assets of
the Company, including its capital, in preference to the holders of shares of
the Common Stock and of any other capital stock of the Company ranking junior to
the Series B Preferred Stock, an amount per share of Series B Preferred Stock as
follows (the "Series B Liquidation Value"): (i) the Series B Stated Value, plus
(ii) only to the extent, if any, not already included in the Series B Stated
Value, an amount equal to all accrued dividends then unpaid on each such share
of Series B Preferred Stock. After payment to the holders of the Series B
Preferred Stock of the amount set forth in the preceding sentence and any
amounts due to the holders of any other stock ranking as to any such
distribution on a parity with the Series B Preferred Stock, the remaining assets
of the Company shall be distributed to the holders of the Company's stock
(including the Company's Series A Preferred Stock) in the priority established
by, and otherwise in accordance with, the Articles of Incorporation and
applicable law. If upon any liquidation, dissolution or winding up of the
Company, the amounts payable with respect to the Series B Preferred Stock and
any other stock ranking as to any such distribution on a parity with the Series
B Preferred Stock (including, without limitation, the Series C Preferred Stock)
are not paid in full, the holders of the Series B Preferred Stock and of such
other stock will share ratably in any such distribution of assets in proportion
to the full respective preferential amounts to which they are entitled.
The Company agrees to provide written notice, at least ten days prior to
such event, to all holders of Series B Preferred Stock (at their most recent
addresses then reflected in the Company's records) of any of the following
events, and for purposes of this Section 5, the occurrence of any of the
following may, at the election of the holders of a majority of the shares
STATEMENT OF RESOLUTION-SERIES B PREFERRED - Page 3
of Series B Preferred Stock then outstanding, be deemed to be a liquidation,
dissolution or winding-up of the Company, whether voluntary or involuntary, that
shall entitle such Series B Preferred Stock holder to receive (within the
twenty-day period following the occurrence of such event, with such twenty-day
period being tolled during any time that the Corporation fails to provide notice
as required above in this paragraph), on account of its Series B Preferred
Stock, the consideration (whether in the form of cash, securities or other
property) of the preferential amounts as specified above in this Section 5: (a)
any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934), other than a "beneficial owner" (as
defined below) of Preferred Stock as of the date immediately following the
Original Issue Date, is or becomes the "beneficial owner" (as defined in Rules
13d-3 and 13d-5 under the Securities Exchange Act of 1934, except that for
purposes of this clause (a) such person shall be deemed to have "beneficial
ownership" of all shares that any such person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time),
directly or indirectly, of more than 50% of the total voting power of the
Company's capital stock (a "Change of Control"); (b) a consolidation,
reorganization or merger of the Company with one or more entities; or (c) the
sale, lease, exchange or transfer of all or substantially all the assets of the
Company, provided that in the case of clauses (b) and (c), the other party to
such transaction is not a beneficial owner of Preferred Stock as of the date
immediately following the Original Issue Date or a person of which more than 80%
of the total voting power and outstanding securities are owned prior to the date
of such transaction by the Company.
SECTION 6. Conversion Rights. The holders of shares of Series B Preferred
-----------------
Stock shall have the right, at their option, to convert all or any part of such
shares into Common Stock at any time on or after July 1, 2001, on and subject to
the following terms and conditions:
(a) Series B Conversion Price. The number of shares of Common Stock issued
-------------------------
upon conversion of each share of the Series B Preferred Stock shall be equal to
the Stated Value divided by the Series B Conversion Price (as hereinafter
defined) then in effect. The price at which Common Stock shall be delivered
upon conversion (herein called the "Series B Conversion Price") initially shall
be the lesser of (i) the tangible book value per share of Common Stock as of
June 30, 2001 computed by the Company in accordance with generally accepted
accounting principles, consistently applied, or (ii) a per share amount equal to
110% of the average closing price per share of the Common Stock for the 30
trading days immediately prior to April 30, 2001 as reported on the New York
Stock Exchange Composite Tape; provided however, that at no time and under no
-------- -------
circumstances shall the Series B Conversion Price be less than $2.25. The
Series B Conversion Price shall be subject to adjustments from time to time as
hereinafter provided.
(b) Procedure. Each holder of Series B Preferred Stock may exercise such
---------
conversion privilege by delivering to the Company the certificate for the shares
of Series B Preferred Stock to be converted into Common Stock and written notice
that the holder elects to convert such shares. Conversion shall be deemed to
have been effected immediately prior to the close of business on the date when
such delivery is made. On the conversion date or as promptly thereafter as
practicable, the Company shall deliver to the holder of the Series B Preferred
Stock
STATEMENT OF RESOLUTION-SERIES B PREFERRED - Page 4
surrendered for conversion, or as otherwise directed by such holder in writing,
a certificate for the number of shares of Common Stock deliverable upon the
conversion of such Series B Preferred Stock. No adjustment shall be made for any
dividends on shares of Series B Preferred Stock surrendered for conversion or
for dividends on the Common Stock delivered on conversion. No fractional shares
of Common Stock will be issued upon conversion; any fractional interest which
would result from conversion shall be rounded up or down to the nearest whole
share and there shall be no cash due by or to the Company in respect of such
fractional interest.
(c) Adjustments to Series B Conversion Price. The Series B Conversion Price
----------------------------------------
in effect at any time shall be subject to adjustment as follows:
(i) Adjustment for Change in Capital Stock. If the Company:
--------------------------------------
(A) subdivides its outstanding shares of Common Stock into a greater
number of shares;
(B) combines its outstanding shares of Common Stock into a smaller
number of shares; or
(C) issues by reclassification of its Common Stock any shares of its
capital stock;
then the conversion privilege and the Series B Conversion Price in effect
immediately prior to such action shall be adjusted so that the holder of shares
of Series B Preferred Stock thereafter converted may receive the number of
shares of capital stock of the Company which he would have owned immediately
following such action if the holder had converted the Series B Preferred Stock
immediately prior to such action.
The adjustment shall become effective immediately after the record date in
the case of a dividend or distribution and immediately after the effective date
in the case of a subdivision, combination or reclassification.
If, after an adjustment, a holder of shares of Series B Preferred Stock upon
conversion of such shares may receive shares of two or more classes of capital
stock of the Company, the Company shall determine the allocation of the adjusted
Series B Conversion Price between the classes of capital stock. After such
allocation the conversion privilege and the Series B Conversion Price of each
class of capital stock thereafter shall be subject to adjustment on terms
comparable to those applicable to Common Stock in this Section.
(ii) When Adjustment May Be Deferred. No adjustment in the Series B
-------------------------------
Conversion Price need be made unless the adjustment would require an increase or
decrease of at least one percent (1%) in the Series B Conversion Price. Any
adjustments that are not made shall be carried forward and taken into account in
any subsequent adjustment.
STATEMENT OF RESOLUTION-SERIES B PREFERRED - Page 5
All calculations under this Section shall be made to the nearest cent or to
the nearest 1/100th of a share, as the case may be.
(iii) When No Adjustment Required. No adjustment need be made for a change
---------------------------
in the par value or no par value of the Common Stock. To the extent the shares
of Series B Preferred Stock become convertible into cash, no adjustment need be
made thereafter as to the cash. Interest will not accrue on the cash.
(iv) Notice of Adjustment. Whenever the Series B Conversion Price is
--------------------
adjusted, the Company shall promptly mail to all holders of shares of Series B
Preferred Stock a notice and description of the adjustment.
(v) Notice of Certain Transactions. If there is a liquidation or
------------------------------
dissolution of the Company or any distribution or dividend declared or paid on
the Common Stock, or any subdivision, combination or reclassification of the
Company's capital stock, then the Company shall mail to all holders of the
Series B Preferred Stock a notice thereof stating the proposed record date for
the taking of any action with respect thereto and otherwise the proposed
effective date of such transaction. The Company shall mail the notice at least
15 days before such date. Failure to mail the notice or any defect in it shall
not affect the validity of the transaction.
(vi) Fundamental Conversion Transaction. In case at any time after the
----------------------------------
issuance of the Series B Preferred Stock, the Company shall be a party to any
transaction (including without limitation, a merger, consolidation, statutory
share exchange, sale of all or substantially all of the Company's assets or
capitalization of the Common Stock), as a result of which shares of Common Stock
(or any other securities of the Company then issuable upon conversion of the
Series B Preferred Stock) shall be converted to the right to receive stock,
securities or other property (including cash or any combination thereof) (each
of the foregoing transactions being referred to as a "Fundamental Conversion
Transaction"), then the shares of Series B Preferred Stock remaining outstanding
(including after the observance of and exercise of all holders' rights under
Section 5 hereof) will thereafter no longer be subject to conversion into Common
Stock (or such other securities) pursuant to this Section 6, but instead each
share shall be convertible into the kind and amount of stock and other
securities and property receivable (including cash) upon the consummation of
such Fundamental Conversion Transaction by a holder of that number of shares or
fraction thereof of Common Stock (or such other securities) into which one share
of Series B Preferred Stock was convertible immediately prior to such
Fundamental Conversion Transaction assuming such holder of Common Stock failed
to exercise any right of election as to the kind of consideration to be received
in such Fundamental Conversion Transaction. In the event that at any time, as a
result of an adjustment made pursuant to this Section 6, the Series B Preferred
Stock shall become subject to conversion into any securities other than shares
of Common Stock, thereafter the number of such other securities so issuable upon
conversion of the shares of Series B Preferred Stock shall be subject to
adjustment from time to time in a manner and on terms nearly equivalent as
practicable to the provisions with respect to the shares of Series B Preferred
Stock contained in this Section 6. The provisions of this Section 6(c)(vi) shall
similarly apply to successive Fundamental Conversion Transactions.
STATEMENT OF RESOLUTION-SERIES B PREFERRED - Page 6
(vii) Par Value. Before taking any action which would cause an adjustment
---------
reducing the Series B Conversion Price below the then par value (if any) of the
Common Stock deliverable upon conversion of the Series B Preferred Stock, the
Company will take any corporate action which may, in the opinion of its counsel
be necessary in order that the Company may validly and legally issue fully paid
and nonassessable Common Stock at such adjusted Series B Conversion Price.
(d) Reservation of Shares. The Company shall at all times reserve and
---------------------
keep available, free from preemptive rights, out of the aggregate of its
authorized but unissued Common Stock and issued Common Stock held in its
treasury, solely for the purpose of effecting the conversion of the shares of
Series B Preferred Stock, the full number of shares of Common Stock then
issuable upon the conversion of all outstanding shares of Series B Preferred
Stock. For the purpose of this paragraph (d), the full number of shares of
Common Stock issuable upon the conversion of all outstanding shares of Series B
Preferred Stock shall be computed as if at the time of computation of such
number of shares of Common Stock, all outstanding shares of Series B Preferred
Stock were held by a single holder. The Company shall, from time to time, in
accordance with the laws of the State of Texas, increase the authorized number
of shares of its Common Stock if at any time the aggregate of the authorized
number of shares of its Common Stock remaining unissued and its issued Common
Stock held in its treasury (other than any such shares reserved for issuance in
any other connection) shall not be sufficient to permit the conversion of all
shares of Series B Preferred Stock at the time outstanding.
(e) Taxes. The Company will pay any and all documentary, stamp or similar
-----
issue or transfer taxes that may be payable in respect of the issue or delivery
of Common Stock on conversion of shares of Series B Preferred Stock pursuant
hereto. The Company shall not, however, be required to pay any such tax which
may be payable in respect of any transfer involved in the issue or transfer and
delivery of Common Stock in a name other than that in which the shares of Series
B Preferred Stock so converted were registered, and no such issue or delivery
shall be made unless and until the person requesting such issue has paid to the
Company the amount of any such tax or has established to the satisfaction of the
Company that such tax has been paid.
(f) Issuance of Shares. The Company covenants and agrees that all shares
------------------
of Common Stock that may be issued upon exercise of the conversion rights of
shares of Series B Preferred Stock will, upon issuance, be fully-paid and
nonassessable.
(g) Listing. The Company will endeavor to make the shares of stock that
-------
may be issued upon exercise of the conversion rights of shares of Series B
Preferred Stock eligible for trading upon any national securities exchange, or
any automated quotation system of a registered securities association, upon and
through which the Common Stock shall then be traded prior to such delivery.
(h) Board Determination. Any determination that the Company or the Board
-------------------
makes pursuant to this Section 6 is conclusive.
STATEMENT OF RESOLUTION-SERIES B PREFERRED - Page 7
SECTION 7. Voting Rights.
-------------
(a) Generally. Except as otherwise provided herein and by applicable law,
---------
on all matters submitted to the holders of the Common Stock, the holders of the
shares of Series B Preferred Stock shall vote together with the shares of Common
Stock as a single class at any annual or special meeting of shareholders of the
Company, and each holder of shares of Series B Preferred Stock shall be entitled
to one (1) vote for each share of Common Stock into which such holder's shares
of Series B Preferred are then convertible on the record date fixed for such
meeting. The holders of shares of the Series B Preferred Stock shall not be
entitled to vote as a class on any matters except as required by law or provided
herein.
(b) Amendments. So long as any shares of the Series B Preferred Stock are
----------
outstanding, the Company shall not, without the affirmative vote of the holders
of shares representing at least a majority of the number of shares of Series B
Preferred Stock outstanding on the record date for such meeting and present in
person or by proxy, adopt any amendment to its Articles of Incorporation if such
amendment would (i) increase the authorized number of shares of Series B
Preferred Stock, (ii) change any of the rights or preferences of the then
outstanding Series B Preferred Stock, or (iii) authorize any class or series of
Preferred Stock (other than the Series C Convertible Preferred Stock) or other
class of capital stock of the Company ranking senior to, or pari passu with, the
Series B Preferred Stock.
SECTION 8. Action by Consent. Any action required or permitted to be taken
-----------------
at any meeting of the holders of the Series B Preferred Stock may be taken
without such a meeting if a consent or consents in writing, setting forth the
actions so taken, is signed by the holders of at least sixty percent (60%) of
the outstanding shares of Series B Preferred Stock.
SECTION 9. Preemptive Rights. The holders of the Series B Preferred Stock
-----------------
will have no preemptive rights whatsoever except as may be set forth in a
separate written instrument executed by the Company and one or more holders of
the Series B Preferred Stock.
SECTION 10. Redemption Rights.
-----------------
(a) Optional Redemption.
-------------------
(i) The Series B Preferred Stock is not redeemable prior to the
fifth anniversary of the Original Issue Date.
(ii) At all times on and after the fifth anniversary of the Original
Issue Date, each share of the Series B Preferred Stock is
redeemable, in whole at any time or from time to time in part,
at the option of the Company at a redemption price equal to the
Series B Liquidation Value.
(iii) At all times on and after the sixth anniversary of the Original
Issue Date, upon the consent of the holders of at least a
majority of the shares of Series B Preferred Stock then
outstanding, each holder of the Series B
STATEMENT OF RESOLUTION-SERIES B PREFERRED - Page 8
Preferred Stock may cause the Company to redeem, in whole at any
time or from time to time in part, such holder's Series B
Preferred Stock at a per-share redemption price equal to the
Series B Liquidation Value.
(b) Procedure. If less than all of the outstanding shares of Series B
---------
Preferred Stock are to be redeemed, the shares to be so redeemed shall be chosen
pro rata or by lot; provided, however, that the Company may elect to redeem all
-------- -------
of the Series B Preferred Stock of any holder who after the redemption of part
of his Series B Preferred Stock would hold less than 100 shares of Series B
Preferred Stock. The Board may cause the stock transfer books of the Company to
be closed as to the shares so called for redemption. If the holder of shares of
Series B Preferred Stock which have been called for redemption shall not, within
two years after the redemption date, claim the redemption funds, then such funds
will be paid over to the Company.
(c) Effects. The Company may deposit the aggregate Series B Liquidation
-------
Value for all shares of Series B Preferred Stock called for redemption prior to
the date fixed for redemption in a trust with any commercial bank in Fort Worth
or Dallas, Texas having a capital and surplus of more than $100,000,000. If
such deposit is made, then from and after the date so fixed for redemption
holders of Series B Preferred Stock called for redemption shall cease to be
shareholders in respect of the shares so called for redemption, all dividends on
the shares of Series B Preferred Stock so called for redemption shall cease to
accrue, such shares shall no longer be transferrable on the books of the Company
or convertible into Common Stock, and such holders shall have no interest in or
claim against the Company with respect to such shares except the right to
receive payment of the applicable Series B Liquidation Value upon surrender of
their certificates.
(d) Notice. Notice of the redemption of any shares of Series B Preferred
------
Stock shall be mailed by first-class mail to each holder of record of shares of
Series B Preferred Stock to be redeemed at the address of each such holder shown
on the Company's stock transfer books, not less than 60 days prior to the date
fixed for redemption (but no failure to mail such notice or any defect therein
or in the mailing thereof shall affect the validity of the proceedings for such
redemption except as to any holder to whom the Company has failed to mail such
notice and who has no knowledge of such redemption or except as to the holder
whose notice was defective and who had no knowledge of such redemption). If
less than all the shares owned by a holder are to be redeemed, the notice shall
specify the number of shares and the certificate numbers thereof which are to be
redeemed. Upon mailing any such notice of redemption, the Company shall become
obligated to redeem at the time of redemption specified therein all shares
called for redemption. In case less than all the shares represented by any
certificate are redeemed pursuant to this Section, a new certificate to the
Company or any person designated by the Board to serve as its agent for such
purpose, be issued to the holder thereof representing the unredeemed shares
without cost to such holder.
(e) Restoration. Upon redemption of shares of Series B Preferred Stock,
-----------
the shares so redeemed shall have the status of authorized but unissued shares
of Preferred Stock but shall not be reissued as shares of Series B Preferred
Stock.
STATEMENT OF RESOLUTION-SERIES B PREFERRED - Page 9
IN WITNESS WHEREOF, this Statement of Resolution is executed on behalf of
the Company by its President and attested by its Secretary this ___ day of
_____, 2001.
GAINSCO, INC.
By: _____________________________________
Xxxxx X. Xxxxxxxx,
President and Chief Executive Officer
STATEMENT OF RESOLUTION-SERIES B PREFERRED - Page 10
Exhibit "B"
-----------
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS AND MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, OR OTHERWISE
DISPOSED OF UNLESS REGISTERED PURSUANT TO THE PROVISIONS OF THAT ACT OR UNLESS
AN OPINION OF COUNSEL TO THE COMPANY OR OTHER COUNSEL REASONABLY SATISFACTORY TO
THE COMPANY IS OBTAINED STATING THAT SUCH DISPOSITION IS IN COMPLIANCE WITH AN
AVAILABLE EXEMPTION FROM SUCH REGISTRATION.
THE RIGHT TO SELL OR OTHERWISE TRANSFER THIS WARRANT IS SUBJECT TO CERTAIN
RESTRICTIONS SET FORTH IN A SECURITIES PURCHASE AGREEMENT DATED FEBRUARY ___,
2001, BETWEEN THE COMPANY AND THE INITIAL BUYER OF THE WARRANT, A COPY OF WHICH
AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICES OF THE COMPANY. THIS WARRANT MAY
NOT BE SOLD OR TRANSFERRED EXCEPT UPON THE CONDITIONS SPECIFIED IN THE
SECURITIES PURCHASE AGREEMENT AND IN THIS WARRANT, AND NO SALE OR TRANSFER OF
THIS WARRANT SHALL BE VALID OR EFFECTIVE UNLESS AND UNTIL SUCH CONDITIONS SHALL
HAVE BEEN COMPLIED WITH.
-----------------------------------------------
GAINSCO, INC.
(Incorporated under the laws of the State of Texas)
Void after 5:00 p.m., Fort Worth, Texas time,
on _____, 2006
No. A-1 Right to Purchase
1,050,000 Shares
COMMON STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, Xxxxxx Xxxxxxxxx (the "Holder"),
or his registered assigns, is entitled to purchase from GAINSCO, INC., a Texas
corporation (the "Company"), at any time or from time to time during the period
specified in Paragraph 2 hereof, one million fifty thousand (1,050,000) fully
paid and nonassessable shares of the Company's Common Stock, par value $0.10 per
share (the "Common Stock"), at an exercise price per share (the "Exercise
Price") equal to the Series B Conversion Price (as such term is defined in the
Statement of Resolution filed with the Secretary of State of the State of Texas
establishing and designating the Series B Convertible Redeemable Preferred Stock
of the Company). The term "Warrant Shares", as used herein, refers to the
shares of Common Stock purchasable hereunder. The Warrant Shares and the
Exercise Price are subject to adjustment as provided in Paragraph 4 hereof.
This Warrant is issued pursuant to, and is subject to all terms,
provisions, and conditions contained in, that certain Securities Purchase
Agreement dated February 26, 2001 (the "Purchase Agreement"), by and between the
Company and the Holder. This Warrant is subject to the following additional
terms, provisions, and conditions:
WARRANT - Page 1
1. Manner of Exercise; Issuance of Certificates; Payment for Shares.
Subject to the provisions hereof, this Warrant may be exercised by the holder
hereof, in whole or in part, by the surrender of this Warrant, together with a
completed Exercise Agreement in the form attached hereto, to the Company during
normal business hours on any business day at the Company's principal office in
Fort Worth, Texas (or such other office or agency of the Company as it may
designate by notice to the holder hereof), during the Exercise Period (as
defined in Paragraph 2), and upon payment to the Company of the Exercise Price
for the Warrant Shares specified in said Exercise Agreement, which such payment
shall be made (i) in cash or by certified or official bank check, or (ii) by
surrender of shares of Common Stock owned by the holder hereof (the "Payment
Shares"), the aggregate Current Market Price of which shall be credited against
the Exercise Price; provided, however, that in lieu of actually tendering the
-------- -------
Payment Shares, the holder hereof may make a constructive exchange by
relinquishing a number of Warrant Shares ("Constructive Exchange") represented
by the then exercisable portion of this Warrant. The holder hereof shall notify
the Company in writing of any election to pay all or a portion of the Exercise
Price using a Constructive Exchange. Such notice shall specify the number of
Payment Shares to be used in the Constructive Exchange. Upon receipt of such
notice and the required information referred to herein, the Company shall
confirm ownership of the Payment Shares by reference to Company records. Upon
such confirmation, the Company shall treat the Payment Shares as being
constructively exchanged, and accordingly, the Company shall issue to the holder
hereof a net number of shares of Common Stock equal to (i) the number of shares
subject to the exercise for which the Constructive Exchange is being exercised,
less (ii) the number of Payment Shares. The holder hereof may elect to exercise
using a Constructive Exchange any number of times in succession, subject to
compliance with the procedures set forth herein. The Company shall not be
required to issue fractional Warrant Shares upon any exercise of the Warrant,
but instead shall pay to the holder of this Warrant the cash value of any such
fractional Warrant Shares. The Warrant Shares so purchased shall be deemed to
be issued to the holder hereof or its designee as the record owner of such
shares as of the close of business on the date on which this Warrant shall have
been surrendered, the completed Exercise Agreement delivered, and payment made
for such shares as aforesaid. Certificates for the Warrant Shares so purchased,
representing the aggregate number of shares specified in said Exercise
Agreement, shall be delivered to the holder hereof within a reasonable time, not
exceeding ten business days, after this Warrant shall have been so exercised.
The certificates so delivered shall be in such denominations as may be
reasonably requested by the holder hereof, shall, unless the Warrant Shares
evidenced by such certificate have previously been registered under the
Securities Act of 1933, as amended (the "Securities Act") be imprinted with a
restrictive legend substantially similar to the legend appearing on the face of
this Warrant, and shall be registered in the name of said holder or such other
name as shall be designated by said holder. If this Warrant shall have been
exercised only in part, then, unless this Warrant has expired, the Company
shall, at its expense, at the time of delivery of said certificates, deliver to
said holder a new Warrant representing the number of shares with respect to
which this Warrant shall not then have been exercised, which Warrant shall be
imprinted on its face with the same legend appearing on the face of this
Warrant. The Company shall pay all taxes and other expenses and charges payable
in connection with the preparation, execution, and delivery of stock
certificates (and any new Warrants) pursuant to this Paragraph 1 except that, in
case such stock certificates shall be registered in a name or names other than
the holder of this Warrant, funds sufficient to pay all stock transfer taxes
which shall be payable in connection with the execution and delivery of such
stock certificates shall be paid by the holder hereof to the Company at the time
of the delivery of such stock certificates by the Company as mentioned above.
2. Period of Exercise. This Warrant is exercisable at any time or from
time to time during the period commencing on July 1, 2001 and ending at 5:00
p.m. Fort Worth, Texas time, on February ___, 2006 (the "Exercise Period").
WARRANT - Page 2
3. Certain Actions Prohibited. The Company will not, by amendment of
articles of incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities, or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed by it hereunder, but will at all times in
good faith assist in the carrying out of all the provisions of this Warrant and
in the taking of all such action as may reasonably be requested by the holder of
this Warrant in order to protect the exercise privilege of the holder of this
Warrant against dilution or other impairment, consistent with the tenor and
purpose of this Warrant.
Without limiting the generality of the foregoing,
(i) the Company will not increase the par value of the shares of
Common Stock receivable upon the exercise of this Warrant above the
Exercise Price then in effect;
(ii) before taking any action which would cause an adjustment
reducing the Exercise Price below the then par value of the shares of
Common Stock so receivable, the Company will take all such corporate action
as may be necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable shares of Common Stock at
such adjusted Exercise Price upon the exercise of this Warrant; and
(iii) the Company will not take any action which results in any
adjustment of the Exercise Price if the total number of shares of Common
Stock issuable after the action upon the exercise of this Warrant would
exceed the total number of shares of Common Stock then authorized by the
Company's charter and available for issuance upon such exercise.
4. Adjustments to Exercise Price. The Exercise Price in effect at any
time shall be subject to adjustment as follows:
(a) Adjustment for Change in Capital Stock. If the Company:
--------------------------------------
(i) pays a dividend or makes a distribution on its Common Stock in
shares of its Common Stock;
(ii) subdivides its outstanding shares of Common Stock into a
greater number of shares;
(iii) combines its outstanding shares of Common Stock into a smaller
number of shares;
(iv) makes a distribution on its Common Stock in shares of its
capital stock other than Common Stock; or
(v) issues by reclassification of its Common Stock any shares of
its capital stock;
then the Exercise Price in effect immediately prior to such action shall be
adjusted so that the holder of this Warrant may receive the number of shares of
capital stock of the Company upon the exercise hereof which the holder would
have owned immediately following such action if the holder had executed the
Warrant immediately prior to such action.
The adjustment shall become effective immediately after the record date in
the case of a dividend or distribution and immediately after the effective date
in the case of a subdivision, combination or reclassification.
WARRANT - Page 3
If, after an adjustment, the holder of this Warrant upon exercise hereof
may receive shares of two or more classes of capital stock of the Company, the
Company shall determine the allocation of the adjusted Exercise Price between
the classes of capital stock. After such allocation the Exercise Price of each
class of capital stock thereafter shall be subject to adjustment on terms
comparable to those applicable to Common Stock in this Paragraph.
(b) Adjustment for Rights Issue. If the Company distributes any rights or
---------------------------
warrants to all holders of its Common Stock entitling them for a period expiring
within 90 days after the record date for the determination of shareholders
entitled to receive the rights or warrants to purchase shares of Common Stock at
a price per share less than the Current Market Price per share on that record
date, the Exercise Price shall be adjusted in accordance with the following
formula:
N x P
-------
C x O + M
---------
C/1/ = O + N
where:
C/1/ = the adjusted Exercise Price.
C = the current Exercise Price.
O = the number of shares of Common Stock
outstanding on the record date.
N = the number of additional shares of Common
Stock offered.
P = the offering price per share of the
additional shares.
M = the Current Market Price per share of Common
Stock on the record date.
The adjustment shall be made successively whenever any such rights or
warrants are issued and shall become effective immediately after the record date
for the determination of shareholders entitled to receive the rights or
warrants. If at the end of the period during which such warrants or rights are
exercisable not all warrants or rights shall have been exercised, the Exercise
Price shall be immediately readjusted to what it would have been if "N" in the
above formula had been the number of shares actually issued.
This subsection does not apply to any rights or other securities issued
under or in respect of any rights plan or poison pill adopted by the Company.
(c) Adjustment for Other Distributions. In case the Company at any time
----------------------------------
after the date hereof during the course of a calendar year shall declare, order,
pay or make any dividend(s) or other distribution(s) payable in cash to all
holders of the Common Stock exceeding (in the aggregate) $.14 per share of
outstanding Common Stock (proportionately adjusted to reflect any stock
dividends, splits or combinations), the Exercise Price shall be adjusted in
accordance with the formula:
C/1/ = C - D
where:
C/1/ = the adjusted Exercise Price.
WARRANT - Page 4
C = the current Exercise Price.
D = the amount by which the cash dividend(s) or distribution(s) for
the given calendar year exceeds (in the aggregate) $.14 per
share of outstanding Common Stock (proportionately adjusted to
reflect any stock dividends, splits or combinations)
The adjustment shall be made successively whenever any such distribution is
made and shall become effective immediately after the record date for the
determination of shareholders entitled to receive the distribution.
(d) Current Market Price. In Paragraphs 4(b) and 4(c), the "Current
--------------------
Market Price" per share of Common Stock on any date is the average of Quoted
Prices of the Common Stock during the two trading weeks before the date in
question. In the absence of one or more such quotations the Company shall
determine the current market price on the basis of such quotations as it
considers appropriate. As used herein, the "Quoted Price" of the Common Stock
is the last reported sales price regular way or, in case no such reported sale
takes place on such day, the average of the closing bid and asked prices regular
way for such day, in each case on the principal national securities exchange on
which the shares of Common Stock are listed or admitted to trading or, if not
listed or admitted to trading, the last sale price regular way for the Common
Stock as published by NASDAQ or if such last price is not so published by NASDAQ
or if no such sale takes place on such day, the mean between the closing bid and
asked prices for the Common Stock as published by NASDAQ or in the absence of
any of the foregoing, the fair market value as determined by the Board of
Directors.
(e) When Adjustment May Be Deferred. No adjustment in the Exercise Price
-------------------------------
need be made unless the adjustment would require an increase or decrease of at
least one percent (1%) in the Exercise Price. Any adjustments that are not made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations under this Paragraph shall be made to the nearest cent or
to the nearest 1/100th of a share, as the case may be.
(f) When No Adjustment Required. No adjustment need be made for rights to
---------------------------
purchase Common Stock pursuant to a Company plan for reinvestment of dividends.
No adjustment need be made for a change in the par value or no par value of the
Common Stock. To the extent the Warrant becomes exercisable for cash, no
adjustment need be made thereafter as to the cash. Interest will not accrue on
the cash.
(g) Notice of Adjustment. Whenever the Exercise Price is adjusted, the
--------------------
Company shall promptly mail to the holder of this Warrant a notice and
description of the adjustment.
(h) Notice of Certain Transactions. If there is a liquidation or
------------------------------
dissolution of the Company, or in the event of any Fundamental Change
Transaction (as defined in paragraph 4(i) below), or in the event of the
declaration of any dividend or distribution, the Company shall mail to the
holder of this Warrant a notice thereof stating the proposed effective date of
such event. The Company shall mail the notice at least 15 days before such
date. Failure to mail the notice or any defect in it shall not affect the
validity of the transaction.
(i) Fundamental Change Transaction. In case at any time after the date
------------------------------
hereof a purchase, tender, or exchange offer shall have been made to and
accepted by the holders of more than 50% of the outstanding shares of Common
Stock, or the Company is otherwise a party to any transaction (including,
WARRANT - Page 5
without limitation, a merger, consolidation, sale of all or substantially all of
the Company's assets, liquidation, or recapitalization of the Common Stock)
which is to be effected in such a way that as a result of such transaction or
offer (x) the holders of Common Stock (or any other securities of the Company
then issuable upon the exercise of this Warrant) shall be entitled to receive
stock or other securities or property (including cash) with respect to or in
exchange for Common Stock (or such other securities), or (y) the Common Stock
ceases to be a publicly traded security either listed on the New York Stock
Exchange, the NASDAQ National Market System or the American Stock Exchange or
any successor thereto or comparable system (each such transaction being herein
called a "Fundamental Change Transaction"), then, as a condition of such
Fundamental Change Transaction, lawful and adequate provision shall be made
whereby the holder of this Warrant shall thereafter have the right to purchase
and receive upon the basis and upon the terms and conditions specified in this
Warrant, and in lieu of the shares of Common Stock (or such other securities)
purchasable immediately before such transaction upon the exercise hereof, such
stock or other securities or property (including cash) as may be issuable or
payable with respect to or in exchange for a number of outstanding shares of
Common Stock (or such other securities) purchasable immediately before such
transaction upon the exercise hereof, had such Fundamental Change Transaction
not taken place. In any such case appropriate provision shall be made with
respect to the rights and interests of the holder of this Warrant to the end
that the provisions hereof (including, without limitation, the provisions for
adjustments of the Exercise Price and of the number of Warrant Shares
purchasable upon exercise hereof) shall thereafter be applicable, as nearly as
reasonably may be, in relation to the stock or other securities or property
thereafter deliverable upon the exercise hereof (including an immediate
adjustment of the Exercise Price if by reason of or in connection with such
Fundamental Change Transaction any securities are issued or event occurs which
would, under the terms hereof, require an adjustment of the Exercise Price). In
the event of a consolidation or merger of the Company with or into another
corporation or entity as a result of which a greater or lesser number of shares
of common stock of the surviving corporation or entity are issuable to holders
of Common Stock in respect of the number of shares of Common Stock outstanding
immediately prior to such consolidation or merger, then the Exercise Price in
effect immediately prior to such consolidation or merger shall be adjusted in
the same manner as though there were a subdivision or combination of the
outstanding shares of Common Stock. The Company shall not effect any such
Fundamental Change Transaction unless prior to or simultaneously with the
consummation thereof the successor corporation or entity (if other than the
Company) resulting from such consolidation or merger or the corporation or
entity purchasing such assets and any other corporation or entity the shares of
stock or other securities or property of which are receivable thereupon by the
holder of this Warrant shall expressly assume, by written instrument executed
and delivered (and satisfactory in form) to the holder of this Warrant, (i) the
obligation to deliver to such holder such stock or other securities or property
as, in accordance with the foregoing provisions, such holder may be entitled to
purchase and (ii) all other obligations of the Company hereunder.
(j) Par Value. Before taking any action which would cause an adjustment
---------
reducing the Exercise Price below the then par value (if any) of the Common
Stock deliverable upon exercise of this Warrant, the Company will take any
corporate action which may, in the opinion of its counsel be necessary in order
that the Company may validly and legally issue fully paid and nonassessable
Common Stock at such adjusted Exercise Price.
(k) Certain Events. If any event occurs as to which, in the good faith
--------------
judgment of the Board, the other provisions of this Paragraph 4 are not strictly
applicable or if strictly applicable would not fairly protect the exercise
rights of the holder of this Warrant in accordance with the essential intent and
principles of such provisions, then the Board shall make such adjustment, if
any, on a basis consistent with such essential intent and principles, necessary
to preserve, without dilution, the rights of the holder of this
WARRANT - Page 6
Warrant; provided, that no such adjustment shall have the effect of increasing
the Exercise Price as otherwise determined pursuant to this Paragraph 4.
5. Issue Tax. The issuance of certificates for Warrant Shares upon the
exercise of this Warrant shall be made without charge to the holder of this
Warrant or such shares for any issuance tax in respect thereof, provided that
the Company shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of any warrant or
certificate in a name other than the holder of this Warrant.
6. No Rights or Liabilities as a Shareholder. This Warrant shall not
entitle the holder hereof to any voting rights or other rights as a shareholder
of the Company. No provision of this Warrant, in the absence of affirmative
action by the holder hereof to purchase Warrant Shares, and no mere enumeration
herein of the rights or privileges of the holder hereof, shall give rise to any
liability of such holder for the Exercise Price or as a shareholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
7. Transfer, Exchange, and Replacement of Warrant; Registration Rights.
(a) Warrant Transferable. This Warrant may not be transferred or assigned
--------------------
except in accordance with the provisions of the Purchase Agreement. The
transfer of this Warrant and all rights hereunder, in whole or in part, is
registrable at the office or agency of the Company referred to in Paragraph 7(e)
hereof by the holder hereof in person or by his duly authorized attorney, upon
surrender of this Warrant properly endorsed. Upon any transfer of this Warrant
to any person, the Company shall have the right to require the holder and the
transferee to make customary representations to the extent reasonably necessary
to assure that the transfer will comply with the Securities Act and any
applicable state securities laws. Each holder of this Warrant, by taking or
holding the same, consents and agrees that this Warrant, when endorsed in blank,
shall be deemed negotiable, and that the holder hereof, when this Warrant shall
have been so endorsed, may be treated by the Company and all other persons
dealing with this Warrant as the absolute owner and holder hereof for any
purpose and as the person entitled to exercise the rights represented by this
Warrant and to the registration of transfer hereof on the books of the Company;
but until due presentment for registration of transfer on such books the Company
may treat the registered holder hereof as the owner and holder hereof for all
purposes, and the Company shall not be affected by any notice to the contrary.
(b) Warrant Exchangeable for Different Denominations. This Warrant is
------------------------------------------------
exchangeable, upon the surrender hereof by the holder hereof at the office or
agency of the Company referred to in Paragraph 7(e) hereof, for new Warrants of
like tenor representing in the aggregate the right to purchase the number of
shares of Common Stock which may be purchased hereunder, each of such new
Warrants to be imprinted with the same legend appearing on the face of this
Warrant and to represent the right to purchase such number of shares as shall be
designated by said holder hereof at the time of such surrender. For purposes
hereof, the term "Warrant" shall be deemed to include any and all such
replacement Warrants, whether issued pursuant to this subparagraph (b) or any
other Paragraph hereof.
(c) Replacement of Warrant. Upon receipt of evidence reasonably
----------------------
satisfactory to the Company of the loss, theft, destruction, or mutilation of
this Warrant and, in the case of any such loss, theft, or destruction, upon
delivery of an indemnity agreement reasonably satisfactory in form and amount to
the Company, or, in the case of any such mutilation, upon surrender and
cancellation of this Warrant, the Company, at its expense, will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
WARRANT - Page 7
(d) Cancellation; Payment of Expenses. Upon the surrender of this Warrant
---------------------------------
in connection with any transfer, exchange, or replacement as provided in this
Paragraph 7, this Warrant shall be promptly cancelled by the Company. The
Company shall pay all taxes (other than securities transfer taxes) and all other
expenses and charges payable in connection with the preparation, execution, and
delivery of Warrants pursuant to this Paragraph 7.
(e) Register. The Company shall maintain, at its principal office in Fort
--------
Worth, Texas (or such other office or agency of the Company as it may designate
by notice to the holder hereof), a register for this Warrant, in which the
Company shall record the name and address of the person in whose name this
Warrant has been issued, as well as the name and address of each transferee and
each prior owner of this Warrant.
(f) Registration Rights. The issuance of any Warrant Shares required to
-------------------
be reserved for purposes of exercise of this Warrant and the public distribution
of such Warrant Shares are entitled to the benefits of the registration rights
set forth in the Purchase Agreement.
8. Notices. All notices, requests, and other communications required or
permitted to be given or delivered hereunder to the holder of this Warrant shall
be in writing, and shall be personally delivered, or shall be sent by certified
or registered mail, postage prepaid and addressed, to such holder at the address
shown for such holder on the books of the Company, or at such other address as
shall have been furnished to the Company by notice from such holder. All
notices, requests, and other communications required or permitted to be given or
delivered hereunder to the Company shall be in writing, and shall be personally
delivered, or shall be sent by certified or registered mail, postage prepaid and
addressed, to the office of the Company at 000 Xxxxxxxx Xxxxxx, Xxxx Xxxxx,
Xxxxx, 00000-0000, Attention: Chief Executive Officer, or at such other address
as shall have been furnished to the holder of this Warrant by notice from the
Company. Any such notice, request, or other communication may be sent by
telegram or telex, but shall in such case be subsequently confirmed by a writing
personally delivered or sent by certified or registered mail as provided above.
All notices, requests, and other communications shall be deemed to have been
given either at the time of the delivery thereof to (or the receipt by, in the
case of a telegram or telex) the person entitled to receive such notice at the
address of such person for purposes of this Paragraph 8, or, if mailed, at the
completion of the third full day following the time of such mailing thereof to
such address, as the case may be.
9. GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF TEXAS, WITHOUT REGARD TO ANY CHOICE OF
LAW PRINCIPLES OF SUCH STATE.
10. Remedies. The Company stipulates that the remedies at law of the
holder of this Warrant in the event of any default or threatened default by the
Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate, and that such terms may be
specifically enforced by a decree for the specific enforcement of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.
11. Miscellaneous.
(a) Amendments. This Warrant and any provision hereof may not be changed,
----------
waived, discharged, or terminated orally, but only by an instrument in writing
signed by the party (or any predecessor in interest thereof) against which
enforcement of the same is sought.
WARRANT - Page 8
(b) Descriptive Headings. The descriptive headings of the several
--------------------
paragraphs of this Warrant are inserted for purposes of reference only, and
shall not affect the meaning or construction of any of the provisions hereof.
(c) Successors and Assigns. This Warrant shall, to the extent provided in
----------------------
Section 4(e), be binding upon any entity succeeding to the Company by merger,
consolidation, or acquisition of all or substantially all the Company's assets.
WARRANT - Page 9
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer under its corporate seal, attested by its duly
authorized officer, on this ____ day of February, 2001.
GAINSCO, INC.
By:
---------------------------------------
Xxxxx X. Xxxxxxxx,
President and Chief Executive Officer
WARRANT - Page 10
FORM OF EXERCISE AGREEMENT
Dated: _____________, _______
To:
Attention:
The undersigned, pursuant to the provisions set forth in the attached
Warrant, hereby agrees to purchase ______ shares of Common Stock covered by such
Warrant, and makes payment herewith in full therefor at the price per share
provided by such Warrant (in cash or by certified or official bank check in the
amount of $____________) held by the undersigned and any applicable taxes
payable by undersigned. Please issue a certificate or certificates for such
shares of Common Stock in the name of and pay any cash for any fractional share
to:
Name:
Signature:
Title of Signing Officer or Agent (if any):
Note: The above signature should correspond exactly with the name on
the face of the attached Warrant or with the name of the assignee
appearing in the assignment form.
and, if said number of shares of Common Stock shall not be all the shares
purchasable under the within Warrant, a new Warrant is to be issued in the name
of said undersigned covering the balance of the shares purchasable thereunder
less any fraction of a share paid in cash.
WARRANT - Page 11
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers
all the rights represented by and under the attached Warrant, with respect to
the number of shares of Common Stock covered thereby set forth hereinbelow, to:
Name of Assignee Address No. of Shares
---------------- ------- -------------
, and hereby irrevocably constitutes and appoints _______________________ as
agent and attorney-in-fact to transfer said Warrant on the books of the within-
named corporation, with full power of substitution in the premises.
Dated: _______________, _______
Name:
Signature:
Title of Signing Officer or Agent
(if any):
Address:
Note: The above signature should correspond
exactly with the name on the face of the
within Warrant.
WARRANT - Page 12
Exhibit "C"
-----------
TANGIBLE BOOK VALUE PER SHARE OF COMMON STOCK COMPUTATION:
12/31/00
--------
Consolidated GAAP Shareholders' Equity $123,104,279
Less: Unamortized Goodwill 22,797,358
Original Basis of Preferred Stock and Warrants 31,620,000
------------
Tangible Book Value without Preferred Stock $ 68,686,921
------------
Outstanding Common Shares 21,169,736
------------
Tangible Book Value Per Share of Common Stock $ 3.24
============
