Form 8-K Report - Exhibit 2.1
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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 Xxxx Xxxxx
Strategic Partners, L.P., a Texas limited partnership ("Buyer").
WHEREAS, GNA desires to sell to Buyer, and Buyer desires to purchase from
GNA, shares of Series C Redeemable Preferred 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 Xxxxxxxxx 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 its Affiliates, Associates and
employees, and expressly includes Buyer's partners and the partners of the
general partner of Buyer. In the interest of clarity, the parties recognize
that Xxxxxxxxx is not a member of the Buyer Group.
"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
Securities Purchase Agreement - Page 2
that is material to Buyer and the ability of Buyer to consummate the
Transactions, excluding any such condition, circumstance or development which
adversely affects the U.S. economy or financial markets generally.
"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).
"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 the tangible book value per share of Common Stock is set forth as
Exhibit "C" attached hereto.
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"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.
"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.
"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.
Securities Purchase Agreement - Page 3
"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 Series B Shares.
"GAAP" means generally accepted accounting principles for financial
reporting in the U.S., consistently applied.
"GMSP Warrants" means the Series A Common Stock Purchase Warrant dated
October 4, 1999 and the Series B Common Stock Purchase Warrant dated October 4,
1999 issued to Buyer.
"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.
"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.
Securities Purchase Agreement - Page 4
"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.
"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.
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"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.
"Illiquid Investments" has the meaning set forth in Section 6.9.
"IRS" means the Internal Revenue Service.
"KBW" means Xxxxx, Xxxxxxxx & Xxxxx, Inc.
"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.
"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.
"Purchase Price" has the meaning set forth in Section 2.2.
"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 Act" means the Securities Act of 1933, as amended.
"Series A Shares" means shares of the Series A Convertible Preferred Stock
of GNA.
"Series B Shares" means shares of the Series B Convertible Redeemable
Preferred Stock of GNA issued to Xxxxxxxxx pursuant to the Xxxxxxxxx Agreement.
"Series C Shares" means shares of the series of Preferred Stock of GNA to
be designated "Series C Redeemable Preferred Stock" and to have the rights,
powers, preferences, qualifications, limitations and restrictions set forth in
the Statement of Resolution.
"Xxxxxxxxx" means Xxxxxx Xxxxxxxxx.
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"Xxxxxxxxx Agreement" means the Securities Purchase Agreement of even date
herewith between GNA and Xxxxxxxxx.
"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 C 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, including the amendment of the GMSP Warrants.
"U.S." means the United States of America.
ARTICLE II
TERMS OF THE TRANSACTION
2.1 Agreement to Sell and to Purchase Series C Shares. 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 C Shares.
2.2 Purchase Price and Payment. The aggregate purchase price to be paid
by Buyer pursuant to this Agreement 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
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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 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.
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(b) When issued and delivered pursuant to this Agreement against
payment therefor, the Series C Shares and the amendments to the GMSP Warrants
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 C Shares will be fully paid and nonassessable. Neither the
issuance of the Series C Shares nor the amendment of the GMSP Warrants is
subject to any preemptive or similar rights except those that have 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 (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;
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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 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
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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 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,
Securities Purchase Agreement - Page 11
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 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.
Securities Purchase Agreement - Page 12
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 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
Securities Purchase Agreement - Page 13
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.
(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
Securities Purchase Agreement - Page 14
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.
(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
Securities Purchase Agreement - Page 15
(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 Series C Shares. GNA has not offered, and
will not offer, the Series C Shares, the Series B Shares 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 Series C Shares 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 limited partnership duly
organized, validly existing and in good standing under the Texas Revised Limited
Partnership Act, as amended, and has the power and authority to own all of its
properties and assets and to carry on its business as now being conducted.
Buyer 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 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 its properties or assets; or
Securities Purchase Agreement - Page 16
(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 it or any of
its properties or assets may be bound or affected;
excluding from the foregoing clauses (ii) and (iii) such violations as could
---------
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, as of the date hereof, the Buyer Group does not Beneficially
Own, directly or indirectly, any Common Stock or Common Stock Equivalents other
than (i) Series A Shares; (ii) the GMSP Warrants; (iii) 1,064,000 shares of
Common Stock purchased in open market purchases; and (iv) options granted under
GNA Stock Plans to Xxxx X. Xxxx or J. Xxxxxxx Xxxxxxx.
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 its Affiliates in such manner as to give rise to any valid
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 Series C Shares 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 it is capable of evaluating the merits and risks of purchasing
the Series C Shares and (ii) is able to bear the economic risk of an investment
in the Series C Shares for an indefinite period of time, including the risk of a
complete loss of any such investment.
(d) Buyer is acquiring the Series C Shares for its 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 Series C Shares are being sold
in a transaction not involving any public offering within the meaning of the
Securities Act, and that the Series C Shares 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 its own behalf and on
behalf of any accounts for which Buyer is acting, that if Buyer should sell or
otherwise transfer any Series C Shares, it 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
Securities Purchase Agreement - Page 17
further agrees to provide to any Person purchasing any of the Series C Shares
from it a notice advising such purchaser that resales of the Series C Shares are
restricted as stated herein.
(f) Buyer understands that the certificates for the Series C Shares
purchased pursuant to this Agreement will bear a legend substantially to the
following effect:
THE SERIES C SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN PURCHASED
PURSUANT TO A SECURITIES PURCHASE AGREEMENT DATED AS OF FEBRUARY 26, 2001,
BETWEEN GAINSCO, INC. AND XXXX XXXXX STRATEGIC PARTNERS, L.P. SUCH SERIES
C SHARES 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 it, 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.
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 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.
6.3 Restrictions on Transfers.
(a) Restrictions on Transfer of Series C Shares. Subject to the provisions
of subsection (b), and without having obtained the prior written consent of GNA,
prior to October 4, 2002, Buyer shall not sell or transfer any of the Series C
Shares to any other Person other than a member of the Buyer Group.
(b) Exceptions to Transfer Restrictions. Notwithstanding subsection (a),
Buyer may sell or transfer any of the Series C Shares to any Person (regardless
of whether such Person is a member of the Buyer Group) prior to October 4, 2002
pursuant to, as a result of, or in connection with (i) a tender offer or an
Securities Purchase Agreement - Page 18
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.
6.4 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
-------- -------
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.
6.5 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.
6.6 Private Offering of the Series C Shares. GNA agrees that neither GNA
nor anyone acting on its behalf has offered or will offer the Series C Shares 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 Series C Shares within the provisions
of Section 5 of the Securities Act.
6.7 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.
6.8 Amendment of Warrants. Within a reasonably practicable time
following such time as the Conversion Price has ultimately been determined, GNA
shall issue to Buyer replacement GMSP Warrants in order to reflect the ultimate
determination of the Conversion Price (or 115% of the Conversion Price, as the
case may be).
6.9 Illiquid Investments. GNA may, at its option and upon thirty days
prior written notice to Buyer, require Buyer to purchase from GNA as of November
30, 2002 GNA's holding company investments described in Section 6.9 of the GNA
Disclosure Letter (the "Illiquid Investments") at a purchase price equal to the
difference between (i) 50% of the cost of such Illiquid Investments minus (ii)
the amount of any cash received by GNA from the Illiquid Investments during the
period commencing on the Closing Date and ending on the date of the closing of
the purchase of the Illiquid Investments. Buyer may, at its option and upon
thirty days prior written notice to GNA at any time prior to November 30, 2002,
require GNA to sell
Securities Purchase Agreement - Page 19
the Illiquid Investments to Buyer at a purchase price equal to the difference
between (a) 100% of the cost of such Illiquid Investments minus (b) the amount
of any cash received by GNA from the Illiquid Investments during the period
commencing on the Closing Date and ending on the date of the closing of the
purchase of the Illiquid Investments. In either case: (1) the written notice
must be received by Buyer or GNA, as applicable, on or before November 30, 2002;
and (2) the purchase of the Illiquid Investments shall be consummated no later
than December 30, 2002, provided that in the event that the transfer of any
Illiquid Investment is subject to the consent of any Person other than a member
of the Buyer Group, Buyer and GNA shall cooperate to obtain the consent to the
transfer of such Illiquid Investment, and the transfer of such Illiquid
Investment shall be consummated on such later date upon which such consent is
obtained. As of the date of this Agreement, GNA's aggregate cost of the Illiquid
Investments is as set forth in Section 6.9 of the GNA Disclosure Letter.
6.10 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 35% 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
-------- -------
deemed to own more than 35% 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 shares of Common Stock upon conversion of the Series A Shares or exercise of
the GMSP Warrants, which shall not be restricted hereunder, or the exercise of
any preemptive rights that Buyer may have to acquire additional securities of
GNA) or (ii) the acquisition of Common Stock by any members of the Buyer Group
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 any
members of the Buyer Group 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 6.10 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
that would be required to file a Schedule 13D or 13G with respect to its
Beneficial Ownership of Common Stock.
(d) Amendment of Prior Agreement. This Section 6.10 amends and replaces in
its entirety Section 6.9 of the Securities Purchase Agreement dated June 29,
1999 by and between GNA and Buyer.
6.11 Allocation of Purchase Price. Prior to Closing, GNA and Buyer shall
agree, based on the advice of KBW and Buyer's advisors, on the allocation of the
Purchase Price among the Series C Shares, the respective amendments to the GMSP
Warrants and the issuance of the redemption notice in respect of the Series A
Shares as described in Section 8.9.
Securities Purchase Agreement - Page 20
6.12 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;
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 Xxxxxxxxx Agreement. The transactions contemplated in the Xxxxxxxxx
Agreement shall be consummated contemporaneously with the consummation of the
Transactions.
7.4 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.
7.5 Consents. All GNA Required Consents shall have been obtained or
waived.
7.6 Bank One Consent. The Bank One Consent shall have been obtained.
7.7 Certificate. GNA shall have received a certificate executed by a duly
authorized individual on behalf of 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 VII
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:
Securities Purchase Agreement - Page 21
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;
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 Xxxxxxxxx Agreement. The transactions contemplated in the Xxxxxxxxx
Agreement shall be consummated contemporaneously with the consummation of the
Transactions.
8.4 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.
8.5 Certificates. Buyer shall have received a certificate or
certificates representing the Series C Shares in definitive form representing
the Series C Shares purchased by it, registered in the name of Buyer and duly
executed by GNA.
8.6 Consents. All GNA Required Consents shall have been obtained or
waived.
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 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.
8.9 Redemption Notice. GNA shall have delivered to Buyer a redemption
notice in respect of the Series A Shares substantially in the form of Exhibit
"B" attached hereto.
8.10 Amendment of Warrants. GNA shall have (i) amended (a) the Exercise
Price (as defined therein) of the Series A Common Stock Purchase Warrant dated
October 4, 1999 issued by GNA to Buyer to an amount equal to the Conversion
Price, and (b) the Exercise Price (as defined therein) of the Series B Common
Stock Purchase Warrant dated October 4, 1999 issued by GNA to Buyer to an amount
equal to 115% of the Conversion Price, and (ii) amended the Exercise Period of
each of the GMSP Warrants to provide that such GMSP Warrants will not be
exercisable until July 1, 2001, and shall issue a replacement Series A Common
Stock Purchase Warrant and Series B Common Stock Purchase Warrant incorporating
the new Exercise Prices and Exercise Periods in exchange for the existing
Series A Common Stock Purchase Warrant and Series B Common Stock Purchase
Warrant.
8.11 Bank One Consent. The Bank One Consent shall have been obtained.
Securities Purchase Agreement - Page 22
8.12 Waiver Under Xxxxxxxx Agreements. Xxxxx X. Xxxxxxxx shall have
executed a written waiver that provides that the Transactions (including the
Xxxxxxxxx Agreement) 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 its sole discretion with
the results of its 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:
---------
(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.
Securities Purchase Agreement - Page 23
(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) 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 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.
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 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.
Securities Purchase Agreement - Page 24
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,
-------- -------
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 or 2.2).
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
Securities Purchase Agreement - Page 25
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 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: 000 Xxxx Xxxxxx, Xxxxx 0000
Xxxx Xxxxx, Xxxxx 00000
Attention J. Xxxxxxx Xxxxxxx
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
Securities Purchase Agreement - Page 26
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 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 a
limited partnership of which Buyer is the general partner and holds a majority
of the economic interest therein (a "Permitted Assignee") provided that (i) such
Permitted Assignee shall assume in writing all of Buyer's obligations to GNA,
and (ii) notwithstanding such assumption, Buyer shall not be released from any
liabilities or obligations hereunder. Except as provided in Section 6.8 and
Article X, nothing in this Agreement, express or implied, is intended to or
shall confer upon any Person other than the parties hereto, 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.
Securities Purchase Agreement - Page 27
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 Waiver of Preemptive Rights; Consent. Buyer hereby waives any
preemptive rights it may have (whether under the Securities Purchase Agreement
dated June 29, 1999 between GNA and Buyer or otherwise) with respect to (i) the
issuance of securities to Xxxxxxxxx as contemplated in the Xxxxxxxxx Agreement
(including with out limitation to the issuance of shares of Common Stock upon
the exercise or conversion of such securities) and (ii) the issuance of
securities to Buyer as contemplated in this Agreement. Buyer hereby consents
for all purposes (including without limitation in its capacity as the holder of
the Series A Shares) to the Transactions and the transactions contemplated in
the Xxxxxxxxx Agreement.
11.8 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.
11.9 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.
11.10 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.
11.11 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 28
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.
GAINSCO, INC.
By: /s/ Xxxxx X. Xxxxxxxx
-------------------------------------
Xxxxx X. Xxxxxxxx
President and Chief Executive Officer
XXXX XXXXX STRATEGIC PARTNERS, L.P.,
a Texas limited partnership
By: GMSP Operating Partners, L.P., its general
partner
By: GMSP, L.L.C., its general partner
By: /s/ J. Xxxxxxx Xxxxxxx
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J. Xxxxxxx Xxxxxxx, Principal
-i-
Exhibit "A"
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STATEMENT OF RESOLUTION
ESTABLISHING AND DESIGNATING A SERIES OF SHARES
OF
GAINSCO, INC.
Series C 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 third 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
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be designated "Series C Redeemable Preferred Stock" (hereinafter called "Series
C Preferred Stock"). The Series C 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 B Convertible
Redeemable Preferred Stock of the Company (the "Series B Preferred Stock"). As
used herein and subject to the provisions hereof, the "Series C Stated Value"
per share of the Series C 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 C Preferred Stock.
STATEMENT OF RESOLUTION -SERIES C PREFERRED - Page 1
SECTION 2. Number of Shares. The number of shares of Series C Preferred
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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 C Preferred Stock shall rank senior in
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preference to the Common Stock, and to any other capital stock of the Company
ranking junior to the Series C Preferred Stock, with respect to dividends.
Subject to the provisions below, the holders of shares of the Series C 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 C Stated
Value in effect at the relevant time (as applicable, "Series C 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 C Preferred Stock are
originally issued (the "Original Issue Date"), and twenty percent (20%)
thereafter. Such dividends on shares of Series C 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 C
Dividend Payment Date"), cash dividends on the Series C Preferred Stock may be
payable in full or in part at the discretion of the Company (on each Series C
Dividend Payment Date on or prior to the third anniversary of the Original Issue
Date). On each Series C Dividend Payment Date after the third anniversary of
the Original Issue Date, cash dividends on the Series C 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 C Preferred Stock (including, without limitation, a Series C Dividend
Payment Date), the Company does not also fully pay all then-accrued and unpaid
dividends on the Series B Preferred Stock, then the total amount of cash to be
paid to the holders of Series C Preferred Stock and Series B 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 C Dividend Rate and shall accrue from and
including the date of issuance of such shares to and including a Series C
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 C Preferred Stock have
accrued but remain unpaid, absent the affirmative vote of the holders of a
majority of the shares of Series C 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 C Preferred Stock. The holders of shares of Series
C 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 C 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 C 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 C Dividend Payment Date or on any final distribution
date relating to conversion or redemption of Series C Preferred Stock or to a
dissolution, liquidation or winding up of the Company. Dividends payable on the
shares of Series C 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 C Dividend Payment Date,
all dividends that shall have accrued on each share of Series C Preferred Stock
outstanding as of such Series C Dividend Payment Date shall, only for purposes
of calculating dividends thereon, be added to the Series C Stated Value of such
share of Series C Preferred Stock and shall remain a part thereof until paid,
and dividends shall accrue at the applicable Series C Dividend Rate and be paid
on such share of Series C Preferred Stock on the basis of the Series C Stated
Value, as so adjusted.
SECTION 4. No Sinking Fund. The Series C Preferred Stock shall not be
---------------
entitled to the benefits of any retirement or sinking fund.
SECTION 5. Liquidation. Each holder of the Series C 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 C Preferred Stock, an amount per share of Series C
Preferred Stock as follows (the "Series C Liquidation Value"): (i) the Series C
Stated Value, plus (ii) only to the extent, if any, not already included in the
Series C Stated Value, an amount equal to all accrued dividends then unpaid on
each such share of Series C Preferred Stock. After payment to the holders of
the Series C 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 C 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 C Preferred Stock and
any other stock ranking as to any such distribution on a parity with the Series
C Preferred Stock (including, without limitation, the Series B Preferred Stock)
are not paid in full, the holders of the Series C 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 C 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 C PREFERRED - Page 3
of Series C 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 C 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 C 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 Series C Preferred Stock is not
-----------------
convertible into Common Stock or any other security of the Company.
SECTION 7. Voting Rights.
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(a) Generally. The holders of shares of the Series C Preferred Stock
---------
shall not be entitled to vote, except as a class on any matter as required by
law or provided herein.
(b) Amendments. So long as any shares of the Series C 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 C
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 C
Preferred Stock, (ii) change any of the rights or preferences of the then
outstanding Series C Preferred Stock or (iii) authorize any class or series of
Preferred Stock (other than the Series B Convertible Preferred Stock) or other
class of capital stock of the Company ranking senior to, or pari passu with, the
Series C Preferred Stock.
(c) Fundamental Change Transaction. So long as a majority of the shares
------------------------------
of the Series C Preferred Stock initially issued are outstanding, the Company
shall not, without the affirmative vote of the holders of shares representing at
least a majority of the Series C Preferred Stock then outstanding, voluntarily
consummate a Fundamental Change Transaction. As used herein, "Fundamental Change
Transaction" means any (i) transaction (including without
STATEMENT OF RESOLUTION -SERIES C PREFERRED - Page 4
limitation, a merger, consolidation, statutory share exchange, sale, lease,
exchange or transfer 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 C Preferred Stock) shall be converted to the right to receive stock,
securities or other property (including cash or any combination thereof), (ii)
payment of dividend or other distribution on any security other than Common
Stock ranking junior to the Series C Preferred Stock, (iii) incurrence of
indebtedness for money borrowed that would cause the principal amount of the
Company's then-outstanding total indebtedness for money borrowed to exceed
$15,500,000 at any time, or (iv) Change of Control.
SECTION 8. Action by Consent. Any action required or permitted to be
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taken at any meeting of the holders of the Series C 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 C Preferred Stock.
SECTION 9. Preemptive Rights. The holders of the Series C 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 C Preferred Stock.
SECTION 10. Redemption Rights.
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(a) Optional Redemption.
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(i) The Series C 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 C 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 C 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 C Preferred Stock then
outstanding, each holder of the Series C Preferred Stock may
cause the Company to redeem, in whole at any time or from time
to time in part, such holder's Series C Preferred Stock at a
per-share redemption price equal to the Series C Liquidation
Value.
(b) Procedure. If less than all of the outstanding shares of Series C
---------
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
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of the Series C Preferred Stock of any holder who after the redemption of part
of his Series C Preferred Stock would hold less than 100 shares of Series C
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
STATEMENT OF RESOLUTION -SERIES C PREFERRED - Page 5
C 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 C Liquidation
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Value for all shares of Series C 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 C 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 C Preferred Stock so called for redemption shall cease to
accrue, such shares shall no longer be transferrable on the books of the
Company, 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 C Liquidation Value upon surrender of their certificates.
(d) Notice. Notice of the redemption of any shares of Series C Preferred
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Stock shall be mailed by first-class mail to each holder of record of shares of
Series C 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 C Preferred Stock,
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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 C Preferred
Stock.
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 C PREFERRED - Page 6
Exhibit "B"
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GAINSCO, INC.
000 XXXXXXXX XXXXXX
XXXX XXXXX, XXXXX 00000
[Closing Date]
Xxxx Xxxxx Strategic Partners, L.P.
000 Xxxx Xxxxxx, Xxxxx 0000
Xxxx Xxxxx, Xxxxx 00000
Re: GAINSCO, INC. Series A Convertible Preferred Stock
Gentlemen:
Reference is hereby made to the Statement of Resolution filed in the Office of
the Secretary of State of the State of Texas on October 1, 1999 establishing and
designating Series A Convertible Preferred Stock, par value $100.00 per share
(the "Series A Preferred Stock"), of GAINSCO, INC., a Texas corporation (the
"Company"), of which 31,620 shares have been issued and are outstanding on the
date hereof. Terms defined in such Statement of Resolution are used herein with
the same meaning unless otherwise defined herein.
Pursuant to Section 10(a)(ii) of the Statement of Resolution, the Company
advises you of its election to redeem on January 1, 2006 (the "Redemption Date")
all of the then outstanding shares of the Series A Preferred Stock for an amount
equal to the Liquidation Value per share on the Redemption Date; provided that
--------
the Company's election to redeem shares of Series A Preferred Stock is
conditioned upon all of the following:
(a) the redemption not contravening (i) Article 2.38 of the Texas
Business Corporation Act, as amended (and the comparable provisions of any
amended or successor law), or any other applicable federal and state laws; or
(ii) any agreement to which the Company is now a party or hereafter becomes a
party in a transaction approved by the Board (including at least one director
nominated by holders of Series A Preferred Stock);
(b) the holders of the Series A Preferred Stock not having received a
bona fide and unconditional offer to purchase shares of the Series A Preferred
Stock prior to the Redemption Date from a party (including, without limitation,
any securities underwriter or financial institution) with the demonstrated
financial capacity to consummate such purchase at a purchase price greater than
or equal to the Liquidation Value per share; and
(c) the Current Market Price of the Common Stock having not been equal
to or greater than the Conversion Price for a period of not less than thirty
(30) consecutive days after the date hereof; and
provided, further that the Company's election to redeem is further conditioned
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upon the Board having determined within thirty (30) days prior to the Redemption
Date that all of the foregoing conditions have been satisfied to that time and
will be satisfied on the Redemption Date.
The Company's election to redeem is irrevocable, unless the holders of not less
than a majority of the number of shares of the Series A Preferred Stock then
outstanding otherwise agree, and will be binding on the Company and any
successor to the Company as a consequence of a Fundamental Change Transaction.
In the event that the Company has not redeemed all of the outstanding shares of
Series A Preferred Stock on or prior to the Redemption Date, the Company will
pay an amount with respect to each such share that has not been redeemed equal
to interest on the Liquidation Value of the unredeemed shares at a rate equal to
8% per annum, compounded annually based on a year of 365 days from January 1,
2006 until the date of redemption. Accrued interest will be payable on the last
day of each March, June, September and December and on the date of redemption of
the shares.
This letter is issued for the consideration set forth in that certain Securities
Purchase Agreement dated as of February ___, 2001 between the Company and Xxxx
Xxxxx Strategic Partners, L.P.
Sincerely,
GAINSCO, INC.
By:____________________
Exhibit "C"
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TANGIBLE BOOK VALUE PER SHARE OF COMMON STOCK COMPUTATION:
12/31/00
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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
============
