AGREEMENT
Dated as of September 16, 1997
between
GENERAL ACCEPTANCE CORPORATION
and
CONSECO, INC.
TABLE OF CONTENTS
Section Page
------- ----
1. Definitions 1
2. Closing Transactions
2.1. Issuance of Guaranty............................................................9
2.2. Issuance of Note and Warrant and
Payment of Fee..................................................................9
2.3 Execution and Delivery of Supplemental
Documents.......................................................................9
3. Conditions Precedent
3.1. Conditions to the Purchase......................................................9
4. Representations and Warranties of the Purchaser
4.1. Organization....................................................................12
4.2. Due Execution, Delivery and Performance
of the Agreement................................................................12
4.3. Investment Representation.......................................................12
5. Representations and Warranties of the Company
5.1. Corporate Existence; Compliance with Law........................................14
5.2. Subsidiaries....................................................................14
5.3. Corporate Power; Authorization;
Enforceable Obligations.........................................................14
5.4. SEC Documents...................................................................15
5.5. Absence of Certain Changes or Events............................................16
5.6. Interim Financial Statements; Absence
of Undisclosed Liabilities......................................................17
5.7. Projections...........................................................................17
5.8. No Default......................................................................18
5.9. No Litigation...................................................................18
5.10. Capital Structure of the Company................................................18
5.11. Broker's or Finder's Fee.......................................................19
5.12. Other Representations and Warranties............................................19
5.13. Disclosure......................................................................19
6. Financial Statements and Information.........................................................20
Section Page
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7. Affirmative Covenants........................................................................20
8. Negative Covenants...........................................................................21
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9. Events of Default; Rights and Remedies
9.1. Events of Default...............................................................32
9.2. Remedies........................................................................35
10. Triggering Events
10.1. Events..........................................................................24
10.2. Redemption......................................................................24
10.3. Funds Unavailable...............................................................25
10.4. Notice..........................................................................26
11. Right of First Refusal.......................................................................26
12. Securities Law Matters.......................................................................27
13. Miscellaneous
13.1. Press Releases..................................................................27
13.2. Expenses..............................................................................27
13.3. Indemnification.......................................................................27
13.4. Assignment......................................................................28
13.5. Remedies........................................................................28
13.6. Waiver of Jury Trial............................................................28
13.7. Arbitration.....................................................................28
13.8. Severability....................................................................29
13.9. Parties.........................................................................29
13.10. Conflict of Terms...............................................................29
13.11. Governing Law...................................................................29
13.12. Notices.........................................................................30
13.13. Survival........................................................................30
13.14. Section Titles..................................................................31
13.15. Counterparts....................................................................31
EXHIBIT A - FORM OF GUARANTY
EXHIBIT B - 12% SUBORDINATED CONVERTIBLE NOTE
EXHIBIT C - WARRANT
ii
AGREEMENT
AGREEMENT, dated as of September 16, 1997, by and among GENERAL
ACCEPTANCE CORPORATION, an Indiana corporation (the "Company"), and CONSECO,
INC., an Indiana corporation(the "Purchaser").
W I T N E S S E T H:
WHEREAS, upon the terms and conditions hereinafter provided, the (x)the
Purchaser has agreed to guarantee certain of the obligations of the Company to
General Electric Capital Corporation ("GE Capital") pursuant to that certain
Limited Continuing Guaranty, of even date herewith, issued by the Purchaser in
favor of GE Capital (the "Guaranty"), and (y) in consideration therefor the
Company has agreed to pay to the Purchaser a fee of $300,000 and to issue to the
Purchaser (1) the Company's 12% Subordinated Convertible Note, of even date
herewith, in the principal amount of $10,000,000 and all other amounts payable
by, or on behalf of, the Purchaser pursuant to the Guaranty and convertible into
shares of the Company's common stock, no par value ("Common Stock") and (2) a
Warrant to purchase an aggregate of 500,000 shares of Common Stock for a
purchase price of $1.00 per share (as adjusted therein) (the "Warrant") (the
Note, the Warrant and the Common Stock subject to conversion or exercise
thereunder are together herein referred to as the "Securities").
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, it is agreed as follows:
I. DEFINITIONS
In addition to the defined terms appearing above, capitalized terms
used in this Agreement shall have (unless otherwise provided elsewhere in this
Agreement) the following respective meanings when used herein:
"Affiliate" shall mean, with respect to any Person, (i) each Person
that, directly or indirectly, owns or controls, whether of record or
beneficially, or as a trustee, guardian or other fiduciary, 5 percent or more of
the Stock having ordinary voting power in the election of directors of such
Person, (ii) each Person that controls, is controlled by or is under common
control with such Person or any Affiliate of such Person, or (iii) each of such
Person's officers, directors and general partners. For the purpose of this
definition, "control" of a Person shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of its management or
policies, whether through the ownership of voting securities, by contract or
otherwise. For purposes of this definition the Purchaser shall not be deemed to
be an Affiliate of the Company or any of the Affiliates of the Company by reason
of the purchase of the Note or the Warrant.
1
"Agreement" shall mean this Agreement, including all amendments,
modifications and supplements hereto and any appendices, exhibits or schedules
to any of the foregoing, and shall refer to this Agreement as the same may be in
effect at the time such reference becomes operative.
"Xxxxxx Debentures" shall collectively mean those 12% Subordinated
Convertible Notes, of even date herewith, in the aggregate principal amount of
$1,500,000 issued to X.X. Xxxxxx, X.X. Xxxxxx and R.E. Xxxxxx (collectively, the
"Algoods") in exchange for their loans to the Company for working capital
purposes of an aggregate of $1,500,000.
"Xxxxxx Subordination Agreement" shall mean the Xxxxxx Subordination
Agreement of even date herewith among Capitol American, the Algoods and the
Company for the benefit of the Algoods.
"Ancillary Agreements" shall have the meaning ascribed to such term in
the Capitol American Purchase Agreement.
"Board" shall mean the Company's Board of Directors.
"Business Day" shall mean any day that is not a Saturday, a Sunday or a
day on which banks are required or permitted to be closed in the State of
Indiana.
"Capitol American Registration Rights Agreement" shall mean that
certain Registration Rights Agreement, dated as of April 11, 1997, by and
between the Company and Capitol American Life Insurance Company ("Capitol
American").
"Closing Date" shall mean the date hereof and "Closing" shall mean that
time on the Closing Date at which this Agreement is executed and delivered and
the Transactions contemplated herein are consumated.
"Company's Stock Option Plan" shall mean the General Acceptance
Corporation Employee Stock Option Plan and the General Acceptance Corporation
Outside Directors' Stock Option Plan, collectively.
"Conseco Directors" shall mean the individuals designated by Conseco,
Inc. pursuant to the Stockholders' Agreement to be elected to the Board.
"Conseco Subordination Agreement" shall mean that Conseco Subordination
Agreement of even date herewith among Capitol American, the Algoods and the
Company for the benefit of Conseco.
2
"Default" shall mean any event which, with the passage of time or
notice or both, would, unless cured or waived, become an Event of Default.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974
(or any successor legislation thereto), as amended from time to time.
"ERISA Affiliate" shall mean, with respect to the Company, any trade or
business (whether or not incorporated) under common control with the Company and
which, together with the Company, are treated as a single employer under Section
414(b), (c), (m) or (o) of the Internal Revenue Code of 1996, as amended (the
"IRC").
"ERISA Event" shall mean, with respect to the Company or any ERISA
Affiliate, (i) a Reportable Event with respect to a Title IV Plan or a
Multiemployer Plan; (ii) the withdrawal of the Company, any of its Subsidiaries
or any ERISA Affiliate from a Title IV Plan subject to Section 4063 of ERISA
during a plan year in which it was a substantial employer, as defined in Section
4001(a)(2) of ERISA; (iii) the complete or partial withdrawal of the Company,
any of its Subsidiaries or any ERISA Affiliate from any Multiemployer Plan; (iv)
the filing of a notice of intent to terminate a Title IV Plan or the treatment
of a plan amendment as a termination under Section 4041 of ERISA; (v) the
institution of proceedings to terminate a Title IV Plan or Multiemployer Plan by
the PBGC; (vi) the failure to make required contributions to a Qualified Plan;
or (vii) any other event or condition which might reasonably be expected to
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Title IV Plan or Multiemployer Plan
or the imposition of any liability under Title IV of ERISA, other than PBGC
premiums due but not delinquent under Section 4007 of ERISA.
"Event of Default" shall have the meaning assigned to it in Section 9.1
hereof.
"Financing Agreements" shall mean the following agreements, together
with the related documents thereto, in each case as such agreements may be
amended (including any amendment and restatement thereof), supplemented or
otherwise modified from time to time, including any agreement extending the
maturity of, refinancing, refunding, replacing or otherwise restructuring all or
any portion of the indebtedness under such agreement or any successor or
replacement agreement: Amended and Restated Motor Vehicle Installment Contract
Loan and Security Agreement by and between the Company and GE Capital, dated as
of April 11, 1997, as amended by the First Amendment thereto (the "GE Capital
Amendment")of even date herewith; and Revolving Loan and Security Agreement by
and between the Company and Fifth Third Bank of Central Indiana dated as of
August 27, 1996 (the "Bank Agreement").
3
"GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time.
"Governmental Authority" shall mean any nation or government, any state
or other political subdivision thereof, and any agency, department or other
entity exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Guaranty Obligations" shall mean the Obligations (as that term is
defined in the Guaranty).
"Indebtedness" of any Person shall mean (i) all indebtedness of such
Person for borrowed money (including, without limitation, reimbursement and all
other obligations with respect to surety bonds, letters of credit and bankers'
acceptances, whether or not matured), but not including accounts payable and
other obligations to trade creditors and normal operating expenses characterized
as liabilities incurred in the ordinary course of business, (ii) all obligations
evidenced by notes, bonds, debentures or similar instruments (except where such
instruments evidence repayment of amounts referred to in subparagraph (i)),
(iii) all capital lease Obligations, (iv) in the case of the Company, the
Debentures (as defined in the Securities Purchase Agreement), the Note, the
Xxxxxx Notes, and (v) in the case of the Purchaser, the Guaranty.
"Lien" shall mean any mortgage or deed of trust, pledge, hypothecation,
assignment, deposit arrangement, lien, Charge, claim, security interest,
easement or encumbrance, preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including, without
limitation, any Capital Lease or title retention agreement, any financing lease
having substantially the same economic effect as any of the foregoing, and the
filing of, or agreement to give, any financing statement perfecting a security
interest under the Uniform Commercial Code or comparable law of any
jurisdiction).
"Material Adverse Effect" shall mean any material adverse effect on the
business, assets, operations, or financial or other condition or prospects of
the Company or any of its Subsidiaries.
"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA, and to which the Company, any of its Subsidiaries
or any ERISA Affiliate is obligated to make, or has made or been obligated to
make, contributions on behalf of participants who are employed by any of them.
"Obligations" shall mean any principal, interest, premium, penalties,
fees and other liabilities and obligations due under the documentation governing
any Indebtedness (including interest after the commencement of any bankruptcy,
insolvency, rehabilitation, liquidation, conservation, supervision or similar
proceedings).
4
"Person" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association, corporation,
limited liability company, institution, public benefit corporation, entity or
government (whether Federal, state, county, city, municipal or otherwise,
including, without limitation, any instrumentality, division, agency, body or
department thereof).
"Plan" shall mean an employee benefit plan, as defined in Section 3(3)
of ERISA, which the Company or any of its Subsidiaries maintains or makes or is
obligated to make contributions to on behalf of participants who are or were
employed by any of them.
"Qualified Plan" shall mean an employee pension benefit plan, as
defined in Section 3(2) of ERISA, which is intended to be tax-qualified under
Section 401(a) of the IRC, and which the Company, any of its Subsidiaries or any
ERISA Affiliate maintains or makes or is obligated to make contributions to on
behalf of participants who are or were employed by any of them.
"Registration Rights Agreement" shall mean the Registration Rights
Agreement by and among the Company and the Purchaser dated as of the date
hereof.
"SEC" shall mean the Securities and Exchange Commission.
"SEC Documents" shall mean all reports, schedules, forms, statements
and other documents required to be filed with the SEC.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Senior Indebtedness" shall mean all Indebtedness under the Financing
Agreements whether or not existing or hereinafter incurred and whether fixed or
contingent.
"Stock" shall mean all shares, options, warrants, general or limited
partnership interests, participations or other equivalents (regardless of how
designated) of or in a corporation, partnership or equivalent entity whether
voting or nonvoting, including, without limitation, common stock, preferred
stock, or any other "equity security" (as such term is defined in Rule 3a11-1 of
the General Rules and Regulations promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended).
"Stockholders" shall mean, with respect to any Person, all of the
holders of Stock of such Person immediately following the Closing Date.
"Stockholders' Agreement" shall mean that certain
5
Stockholders' Agreement, dated as of April 11, 1997, as amended by Amendment No.
1 of even date herewith, by and among the Company, certain Stockholders of the
Company, the Purchaser and Conseco, Inc.
"Subsidiary" shall mean, with respect to any Person, (a) any
corporation of which an aggregate of 50 percent or more of the outstanding Stock
(irrespective of whether, at the time, Stock of any other class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time, directly or indirectly, owned
legally or beneficially by such Person and/or one or more Subsidiaries of such
Person, and (b) any partnership in which such Person and/or one or more
Subsidiaries of such Person shall have an interest (whether in the form of
voting or participation in profits or capital contribution) of 50 percent or
more.
"Supplemental Agreements" shall mean any supplemental agreement,
undertaking, instrument, document or other writing executed by the Company or
any of its Subsidiaries or by any of their Stockholders as a condition to the
consumation of the transactions contemplated by this Agreement or otherwise in
connection herewith or therewith, including, without limitation, the Note, the
Warrant, the Xxxxxx Notes, the Xxxxxx Subordination Agreement, the Conseco
Subordination Agreement, Amendment No. 1 to the Stockholders' Agreement,
Amendment No. 1 to the Capitol American Purchase Agreement, the Registration
Rights Agreement and the GE Capital Amendment.
"Title IV Plan" shall mean a Pension Plan, other than a Multiemployer
Plan, which is covered by Title IV of ERISA.
"Transactions" shall mean the transactions described in the recitals to
this Agreement, and all transactions related or incidental thereto.
"Withdrawal Liability" shall mean, at any time, the aggregate amount of
the liabilities, if any, pursuant to Section 4201 of ERISA, and any increase in
contributions pursuant to Section 4243 of ERISA with respect to all
Multiemployer Plans.
Any accounting term used in this Agreement shall have, unless otherwise
specifically provided herein, the meaning customarily given such term in
accordance with GAAP and all financial computations hereunder shall be computed,
unless otherwise specifically provided herein, in accordance with GAAP
consistently applied and consistent with the Financials. That certain terms or
computations are explicitly modified by the phrase "in accordance with GAAP"
shall in no way be construed to limit the foregoing.
The words "herein," "hereof" and "hereunder" and other words of similar
import refer to this Agreement as a whole, including the
6
Exhibits and Schedules hereto, as the same may from time to time be amended,
modified or supplemented and not to any particular section, subsection or clause
contained in this Agreement. As used herein, the word "or" is not exclusive.
"The knowledge of the Company" shall mean the knowledge of the chairman
of the Board, the president of the Company or the chief financial officer of the
Company.
Wherever from the context it appears appropriate, each term stated in
either the singular or plural shall include the singular and the plural, and
pronouns stated in the masculine, feminine or neuter gender shall include the
masculine, the feminine and the neuter.
II. CLOSING TRANSACTIONS
2.1. Issuance of Guaranty. Subject to the terms and conditions herein,
at the Closing, the Purchaser shall issue the Guaranty.
2.2 Issuance of Note and Warrant and Payment of Fee. Subject to the
terms and conditions herein, at the Closing the Company shall issue the Note and
the Warrant to the Purchaser and on the day following the Closing Date, the
Company shall pay $300,000 to the Purchaser by the wire transfer of such amount
in immediately available funds to an account designated by the Purchaser.
2.3 Execution and Delivery of Supplemental Documents. Subject to the
terms and conditions herein, at the Closing, the parties hereto shall execute
and deliver such Supplemental Documents to which they are intended to be parties
which are contemplated to be executed and delivered at Closing.
III. CONDITIONS PRECEDENT
3.1. Conditions to the Purchase. Notwithstanding any other provision of
this Agreement and without affecting in any manner the rights of the Purchaser
hereunder, the Company shall have no rights under this Agreement, and the
Purchaser shall not be obligated to issue the Guaranty or to otherwise satisfy
its obligations hereunder, unless and until each of the following conditions
precedent shall have been fulfilled or waived by the Purchaser, and the Company
shall have delivered, where applicable, in form and substance satisfactory to
the Purchaser, and (unless otherwise indicated) each dated the Closing Date:
(a) The Company shall have issued to the Purchaser the Note and the
Warrant.
(b) The Purchaser shall have received a written certificate from the
chief financial officer of the Company to the effect that all of the
representations and warranties of the Company contained
7
in this Agreement or in any of the Supplemental Agreements are true and correct
in all material respects. Except to the extent that any such representation or
warranty expressly relates to an earlier date.
(c) The Purchaser shall have received a favorable opinion or opinions
of counsel for the Company in form and substance satisfacory to the Purchaser,
it being understood that, to the extent that such opinion of counsel shall rely
upon any other opinion of counsel, each such other opinion shall also be in form
and substance satisfactory to the Purchaser and shall provide that the Purchaser
may rely thereon.
(d) The Purchaser shall have received resolutions of the Board
certified by the Secretary or Assistant Secretary of the Company, to be dated,
duly adopted and in full force and effect as of the Closing Date, authorizing
(i) the consummation of the Transactions, (ii) specific officers to execute and
deliver this Agreement and the Supplemental Ancillary Agreements to which the
Company is intended to be a party and (iii) the meeting of the stockholders of
the Company referred to in Section 7 below.
(e) Certificates of the secretary or an assistant secretary of the
Company, dated the Closing Date, as to the incumbency and signatures of the
officers or representatives of such entity executing this Agreement and the
Supplemental Agreements and any other certificates or other documents to be
delivered pursuant hereto or thereto, together with evidence of the incumbency
of such secretary or assistant secretary.
(f) Certificate of Existence from the Indiana Secretary of State, dated
the most recent practicable date prior to the Closing Date, showing that the
Company is organized and in good standing in the State of Indiana.
(g) A copy of the certificate of incorporation and all amendments
thereto of each of the Company, General Acceptance Corporation Reinsurance,
Limited and copies of their respective by-laws all of which shall be certified
by the secretary or assistant secretary of each respective corporation as true
and correct as of the Closing Date.
(h) The Purchaser shall have received such financial statements,
projections and such other financial and other information regarding the Company
and its Subsidiaries as the Purchaser deems appropriate.
(i) A certificate of the Chief Executive Officer of the Company,
satisfactory in form and substance to the Purchaser, stating that, as of the
Closing Date, no change has occurred in the business, assets, operating
properties, operations, prospects, financial or other condition of the Company
or any of its
8
Subsidiaries since April 11, 1997 which would result in a Material Adverse
Effect, except such changes as have been disclosed to the Conseco Directors.
(j) Amendment No. 1 to the Stockholders' Agreement, the Registration
Rights Agreement, Amendment No. 1 to the Capitol American Purchase Agreement,
the Conseco Subordination Agreement and the Xxxxxx Subordination Agreement shall
have been executed and delivered by the intended parties thereto.
(k) The Algod Loans shall have been made and the Purchaser shall have
received evidence thereof satisfactory to it.
(l) The GE Capital Amendment shall have been executed and delivered by
the parties thereto and all documents relating thereto shall be in form and
substance satisfactory to the Purchaser.
(m) The Company shall have paid all outstanding Indebtedness under the
Bank Agreement and all documents relating thereto shall have been executed and
delivered in form and substance satisfactory to the Purchaser.
(n) The Purchaser shall have received copies of such additional
information and materials as the Purchaser may have reasonably requested.
IV. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser makes the following representations and warranties to the
Company, each and all of which shall survive the execution and delivery of this
Agreement and the Closing until the Securities are no longer held by the
Purchaser, its successors or assigns:
4.1 Organization. The Purchaser is a corporation duly organized,
validly existing, and in good standing under the laws of the state of Indiana
and it has full corporate power and authority to enter into this Agreement, to
issue the Guaranty and to perform its obligations under the Guaranty and
hereunder.
4.2 Due Execution, Delivery and Performance of the Agreement. The
execution, delivery, and performance of the Guaranty and this Agreement (i) have
been duly authorized by all requisite corporate action by the Purchaser, and
(ii) will not violate the Certificate or Articles of Incorporation or Bylaws of
the Purchaser or any provision of any material indenture, mortgage, agreement,
contract, or other instrument to which it is a party or by which it or any of
its material properties or assets are bound, or be in conflict with, result in a
breach of or constitute (upon notice or lapse of time or both) a default under
any such indenture, mortgage, agreement, contract, or other instrument. This
Agreement and the
9
Guaranty are legal, valid, and binding obligations of the Purchaser enforceable
against the Purchaser in accordance with their respective terms, except to the
extent that (a) enforcement may be limited by or subject to the principles of
public policy and any bankruptcy and insolvency, reorganization, moratorium or
similar laws now or hereafter in effect relating to or limited to creditors'
rights generally and (b) the remedy of specific performance and injunctive and
other forms of equitable relief are subject to certain equitable defenses and to
the discretion of the court or other similar entity before which any proceeding
thereafter may be brought.
4.3 Investment Representation. The Purchaser represents and warrants
that it is purchasing the Securities for its own account, for investment
purposes and not with a view to the distribution thereof. The Purchaser agrees
that it will not, directly or indirectly, offer, transfer, sell, assign, pledge,
hypothecate or otherwise dispose of any of the Securities (or solicit any offers
to buy, purchase, or otherwise acquire or take a pledge of any of the
Securities), except in compliance with the Securities Act of 1933, as amended
(the "Act"), the rules and regulations thereunder and any applicable state
securities laws.
The Purchaser recognizes that investing in the Securities involves a
high degree of risk, and the Purchaser is in a financial position to hold the
Securities indefinitely and is able to bear the economic risk and withstand a
complete loss of its investment in the Securities. The Purchaser is a
sophisticated investor and is capable of evaluating the merits and risks of
investing in the Company. The Purchaser has had an opportunity to discuss the
Company's business, management and financial affairs with the Company's
management, has been given full and complete access to information concerning
the Company, and has utilized such access to its satisfaction for the purpose of
obtaining information or verifying information and has had the opportunity to
inspect the Company's operation. The Purchaser has had the opportunity to ask
questions of, and receive answers from the management of the Company concerning
the Securities and the terms and conditions of this Agreement and the agreements
and transactions contemplated hereby, and to obtain any additional information
as the Purchaser may have requested in making its investment decision. The
Purchaser is an "accredited investor", as defined by Regulation D promulgated
under the Act. The Purchaser understands that the Securities have not been, and
will not be registered under the Securities Act by reason of their issuance by
the Company in a transaction exempt from the registration requirements of the
Act; and that the Securities must be held by the Purchaser indefinitely unless a
subsequent disposition thereof is registered under the Act or is exempt from
registration.
Notwithstanding anything to the contrary in this Agreement, no
investigation by the Purchaser shall affect the representations and warranties
of the Company under this Agreement or contained in any document, certificate or
other writing furnished or to be furnished
10
to the Purchaser in connection with the transactions contemplated hereby.
V. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
To induce the Purchaser to issue the Guaranty and to purchase the
Securities as herein provided, the Company makes the following representations
and warranties to the Purchaser, each and all of which shall survive the
execution and delivery of this Agreement and the Closing:
5.1. Corporate Existence; Compliance with Law. Each of the Company and
its Subsidiaries (i) is a corporation duly organized, validly existing and in
good standing under the laws of its state or country of incorporation; (ii) is
duly qualified to do business and is in good standing under the laws of each
jurisdiction where its ownership or lease of property or the conduct of its
business requires such qualification (except for jurisdictions in which such
failure to so qualify or to be in good standing would not have a Material
Adverse Effect); (iii) has the requisite corporate power and authority and the
legal right to own, pledge, mortgage or otherwise encumber and operate its
properties, to lease the property it operates under lease, and to conduct its
business as now, heretofore and proposed to be conducted; (iv) has all material
licenses, permits, consents or approvals from or by, and has made all material
filings with, and given all material notices to, all Governmental Authorities
having jurisdiction, to the extent required for such ownership, operation and
conduct (including, without limitation, the consummation of the Transactions)
(v) is in compliance with its certificate or articles of incorporation, as
applicable, and by-laws; and (vi) is in compliance with all applicable
provisions of law where the failure to comply would have a Material Adverse
Effect.
5.2. Subsidiaries. There currently exist, and upon consummation of the
Transactions there shall exist, no Subsidiaries of the Company other than as set
forth on Schedule 5.3 to the Capitol American Purchase Agreement, which sets
forth such Subsidiaries, together with their respective jurisdictions of
organization, and the authorized and outstanding capital Stock of each such
Subsidiary, by class and number and percentage of each class legally owned by
the Company or a Subsidiary of the Company or any other Person, or to be owned
on the Closing Date. There are no options, warrants, rights to purchase or
similar rights covering capital Stock of any such Subsidiary.
5.3. Corporate Power; Authorization; Enforceable Obligations. The
execution, delivery and performance by the Company of this Agreement and the
Supplemental Agreements and all instruments and documents to be delivered by the
Company (subject to amendment of the Articles of Incorporation of the Company to
the extent required to increase the number of its authorized shares): (i) are
within
11
the Company's corporate power; (ii) have been duly authorized by all necessary
or proper corporate action; (iii) are not in contravention of any provision of
the Company's articles of incorporation or by-laws; (iv) will not violate any
law or regulation, including any and all Federal and state securities laws, or
any order or decree of any court or governmental instrumentality; (v) will not,
in any material respect, conflict with or result in the breach or termination
of, constitute a default under or accelerate any performance required by, any
indenture, mortgage, deed of trust, lease, agreement or other instrument to
which the Company or any of its Subsidiaries is a party or by which the Company
or any of its Subsidiaries or any of their property is bound (including, but not
limited to, the Financing Documents); and (vi) will not result in the creation
or imposition of any Lien upon any of the property of the Company or any of its
Subsidiaries. No consent, waiver or authorization of, or filing with, any Person
(including, without limitation, any Governmental Authority), which has not been
obtained as of the Closing Date is required in connection with the execution,
delivery, performance by, or validity of this Agreement or the Supplemental
Agreements. All such consents, waivers, authorizations and filings have been
obtained or made. Except as provided above, each of this Agreement and the
Supplemental Agreements to which the Company is intended to be a party has been
duly executed and delivered of the Company and constitutes a legal, valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except to the extent that (a) enforcement may be limited by or
subject to the principles of public policy and any bankruptcy and insolvency,
reorganization, moratorium or similar laws now or hereafter in effect relating
to or limited to creditors' rights generally and (b) the remedy of specific
performance and injunctive and other forms of equitable relief are subject to
certain equitable defenses and to the discretion of the court or other similar
entity before which any proceeding thereafter may be brought.
5.4. SEC Documents. (i) The Company has filed all required reports,
schedules, forms, statements and other documents with the SEC (such reports,
schedules, forms, statements and other documents are hereinafter referred to as
the "SEC Documents") or has filed adequate extensions therefor; (ii) as of their
respective dates, the SEC Documents complied with the requirements of the
Securities Act or the Securities Exchange Actof 1934, as amended, as the case
may be, and the rules and regulations of the SEC promulgated thereunder
applicable to such SEC Documents, and none of the SEC Documents as of such dates
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading; and (iii) the consolidated financial statements of the Company
included in the SEC Documents comply with applicable accounting requirements and
the published rules and regulations of
12
the SEC with respect thereto, have been prepared in accordance with GAAP applied
on a consistent basis during the periods involved and fairly present the
consolidated financial position of the Company and its consolidated subsidiaries
as of the dates thereof and the consolidated results of their operations and
cash flows for the periods then ended (subject, in the case of unaudited
quarterly statements, to normal year-end audit adjustments).
5.5. Absence of Certain Changes or Events. Except as disclosed to the
Conseco Directors or in the SEC Documents filed and publicly available prior to
the date of this Agreement (the "Filed SEC Documents"), since the date of the
most recent audited financial statements included in the Filed SEC Documents,
the Company and its subsidiaries have conducted their business only in the
ordinary course, and there has not been (i) any change which would have a
Material Adverse Effect, (ii) any declaration, setting aside or payment of any
dividend or other distribution (whether in cash, stock or property) with respect
to any of the Company's outstanding capital stock, (iii) any split, combination
or reclassification of any of its outstanding capital stock or any issuance or
the authorization of any issuance of any other securities in respect of, in lieu
of or in substitution for shares of its outstanding capital stock, (iv) any
granting by the Company or any of its Subsidiaries to any executive officer or
other employee of the Company or any of its Subsidiaries of any increase in
compensation, except in the ordinary course of business consistent with prior
practice or as was required under employment agreements in effect as of the date
of the most recent audited financial statements included in the Filed SEC
Documents, (v) any granting by the Company or any of its Subsidiaries to any
such executive officer or other employee of any increase in severance or
termination pay, except in the ordinary course of business consistent with prior
practice or as was required under any employment, severance or termination
agreements in effect as of the date of the most recent audited financial
statements included in the Filed SEC Documents or (vi) any entry by the Company
or any of its Subsidiaries into any employment, severance or termination
agreement with any such executive officer or other employee or (vii) any change
in accounting methods, principles or practices by the Company or any of its
Scubsidiaries materially affecting its assets, liability or business, except
insofar as may have been required by a change in generally accepted accounting
principles.
5.6. Interim Financial Statements; Absence of Undisclosed Liabilities.
(a) The Company has delivered to Purchaser a true and complete copy of the
unaudited balance sheet of the Company on July 31, 1997 and related statement of
income for the period then ended (the "Interim Financial Statement"). The
Interim Financial Statement has been prepared in accordance with GAAP
consistently applied throughout the period involved, except for the disclosure
of footnotes. The balance sheet included in the Interim Financial Statement
fairly presents the financial position, assets and
13
liabilities (whether accrued, absolute, contingent or otherwise) of the Company
at the date indicated, and the statement of income fairly presents the results
of operations of the Company for the period indicated. The Interim Financial
Statement contains all adjustments, which are solely of a normal recurring
nature, necessary to present fairly the financial position and results of
operations for the period then ended. To the best knowledge of the Company, the
draft unaudited consolidated balance sheet and income statement of the Company
for the month ending July 31, 1997 delivered by the Company at Closing pursuant
to the Agreement present fairly in accordance with GAAP (subject to normal
quarterly adjustments), the consolidated financial position, the consolidated
quarterly results of operations of the Company as at the end of such periods and
for the period then ended based upon management's review and analysis to date.
(b) Except for those Obligations disclosed on the Interim Financial
Statement, the Company has no Obligations, fixed or contingent, xxxxxx or
inchoate, in the individual amount of $25,000 or more.
5.7. Projections. The Company has delivered certain financial
projections to the Purchaser. No facts to the best knowledge of the Company
exist which would result in any change in any of such projections. The
projections are based upon good faith estimates derived from reasonable
expectations at the time such projections were made, all of which were fair in
light of current conditions at the time they were made, reflect the assumptions
stated therein, and reflect the reasonable estimate of the Company of the
results of operations and other information projected therein on a GAAP basis.
5.08. No Default. Except as disclosed to the Conseco Directors, neither
the Company nor any of its Subsidiaries is in default, nor to the best knowledge
of any of the Company or any of its Subsidiaries is any third party in default,
under or with respect to any contract, agreement, lease or other instrument,
including, but not limited to, the Financing Agreements, to which any of the
Company or its Subsidiaries is a party, except for any default which (either
individually or collectively with other defaults arising out of the same event
or events) would not have a Material Adverse Effect or which has been waived.
Except as disclosed to the Conseco Directos, no Default or Event of Default
exists on the date hereof.
5.09. No Litigation. Except as set forth on Schedule 5.15 to the
Capitol American Purchase Agreement or as disclosed to the Conseco Directors, no
material action, claim or proceeding is now pending or, to the knowledge of the
Company or any of its Subsidiaries, individually or in the aggregate result in
or will result in a Material Adverse Effect.
14
5.10. Capital Structure of the Company. The entire authorized capital
stock of the Company consists solely of 25,000,000 shares of common stock, no
par value, of which 6,022,000 shares are issued and outstanding, and 5,000,000
shares of preferred stock, no par value, none of which are outstanding. All of
the issued and outstanding shares of capital stock of the Company have been duly
authorized, are not subject to preemptive rights and were issued in full
compliance with all federal, state and local laws, rules and regulations. Except
for options to purchase Common Stock and warrants to purchase Common Stock as
set forth on Schedule 5.20 to the Capitol American Purchase Agreement hereto and
shares issuable pursuant to the Debentures (as defined in the Capitol American
Purchase Agreement), the options issuable under the Company's Stock Option Plan
to purchase 600,000 shares of Common Stock and shares issuable pursuant to the
Debentures (as defined in the Capitol American Purchase Agreement), there are no
outstanding or authorized subscriptions, options, warrants, calls, commitments,
agreements or arrangements of any kind relating to the issuance, transfer,
delivery or sale of any additional shares of capital stock or other securities
of the Company, including, but not limited to, any right of conversion or
exchange under any outstanding security, agreement or other instrument. None of
the options and warrants to purchase Common Stock will have their vesting period
accelerated as a result of this Agreement, the Supplemental Agreements and the
transactions contemplated hereby and thereby (other than any subsequent tender
offer by Conseco, Inc.). Except as set forth on said Section 5.20 and except for
the Stockholders Agreement, there are no authorized or outstanding voting
agreements, voting trusts, proxies, stockholder agreements, rights to purchase,
transfer restrictions, or other similar arrangements with respect to any of the
capital stock of the Company of which the Company has knowledge. There are no
outstanding or authorized stock appreciation, phantom stock or similar rights
with respect to the capital stock of the Company. The Company has no
indebtedness for dividends, interest or other distributions declared or
accumulated but unpaid with respect to any securities of the Company. No Person
has a claim arising out of a violation of any preemptive rights of a stockholder
of the Company, nor any claim based upon ownership, repurchase or redemption of
any shares of the Company's capital stock.
5.11. Broker's or Finder's Fee. No agent, broker, investment banker,
person or firm acting on behalf of or under the authority of the Company is or
will be entitled to any broker's or finder's fee or any other commission or
similar fee directly or indirectly from the Company in connection with any of
the transactions contemplated by this Agreement.
5.12. Other Representations and Warranties. Except as disclosed to the
Conseco Directors on or after April 11, 1997, the representations and warranties
made by the Company in Sections 5.2, 5.9,5.11, 5.12, 5.13, 5.14, 5.16, 5.17,
5.18, 5.19, 5.21 and 5.22 of the Capitol American Purchase Agreement are true
and correct on the date hereof as if made on and as of the date hereof.
15
5.13. Disclosure. The Company has not withheld from the Purchaser any
material facts relating to the assets, properties, operations, financial
condition, or prospects of the Company. No representation or warranty of the
Company in this Agreement or the Supplemental Agreements, and no statement
contained in any certificate or other instrument delivered by the Company in
connection with the transactions contemplated by this Agreement or the
Supplemental Agreements contains or will contain any untrue statement of a
material fact, or omits or will omit to state a material fact necessary in order
to make the statements contained herein or therein not misleading.
VI. FINANCIAL STATEMENTS AND INFORMATION
The Company covenants and agrees that, regardless of whether amounts
are owing under the Debentures, unless the Purchaser shall otherwse consent in
writing, from and after the date hereof and until the Purchaser, its sucessors
or assigns have no right, obligation or liability under the Guaranty or the
Note, the Company shall deliver to the Purchaser, at the times for delivery
provided therein, the financial statements, reports, certificates, documents and
other information referred to in Section VI of the Capitol American Purchase
Agreement.
VII. AFFIRMATIVE COVENANTS
The Company covenants and agrees that:
(a) Regardless of whether amounts are owing under the Debentures,
unless the Purchaser shall otherwise consent in writing, from and after the date
hereof and until the Purchaser, its successors or assigns have no right,
obligation or liability under the Guaranty or the Note, the Company shall comply
fully and in a timely mannerwith its obligations under, and shall take all
actions required to be taken or not taken under, Section VII of the Capitol
American Purchase Agreement.
(b) The Company shall take all necessary or desirable actions within
its control (including calling special board or stockholder meetings) so that
the issuance of the Warrant and the Note to Conseco, including but not limited
to the conversion features of the Note, all corporate action which is necessary
or desirable in connection with the authorization and issuance of the shares of
Common Stock issuable pursuant to the Note or the Warrant, is authorized,
approved and ratified by the stockholders of the Company as soon as practicable
after the date hereof, but in no event more than 90 days after the date hereof
(unless Conseco shall otherwise agree).
16
VIII. NEGATIVE COVENANTS
The Company covenants and agrees that, regardless of whether amounts
are owing under the Debentures, unless the Purchaser shall otherwise consent in
writing, from and after the date hereof and until the Purchaser, its successors
or assigns have no further right, obligation or liability under the Guaranty or
the Note.
(a) The Company shall comply fully with its obligations under, and
shall not, and shall not permit any Subsidiary, to take any action prohibited by
Section VIII of the Capitol American Purchase Agreement;
(b) The Company shall not, without the prior written consent of
Conseco, its successors or assigns, incur additional Guaranty Obligations,
amend, modify or otherwise change the terms of the Guaranty Obligations, GE
Capital's obligations, responsibilities or liabilities with respect to the
Guaranty Obligations or the terms of provisions of any document relating to the
Guaranty Obligations or make any waiver or release or permit the release of any
collateral (other than in the ordinary course of business) relating to the
foregoing.
IX. EVENTS OF DEFAULT; RIGHTS AND REMEDIES
9.1. Events of Default. The occurrence of any one or more of the
following events (regardless of the reason therefor) shall constitute an "Event
of Default" hereunder until no amounts are owing under the Debentures:
(a) The Company shall fail or neglect to perform, keep or observe any
of the provisions of Sections 6, 7 or 8 of this Agreement and the same shall
remain unremedied for a period ending on the first to occur of ten (10) days
after the Company shall receive written notice of any such failure from the
Purchaser or fifteen (15) days after the Company shall have knowledge thereof.
(b) The Company shall fail or neglect to perform, keep or observe any
other provision of this Agreement or of any of the other Supplemental Agreements
and the same shall remain unremedied for a period ending on the first to occur
of thirty (30) days after the Company shall receive written notice of any such
failure from the Purchaser or thirty (30) days after the Company shall have
knowledge thereof.
(c) A default shall occur under any other agreement, document or
instrument to which the Company or any Subsidiary thereof is a party or by which
the Company or such Subsidiary or any of the Company's or such Subsidiary's
property is bound, and such default (i) involves the failure to make any payment
(whether of principal, interest or otherwise) due (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise) in respect of
any Indebtedness of the Company or such Subsidiary in an aggregate amount
exceeding $100,000, or (ii) causes (or permits any holder of
17
such Indebtedness of a trustee to cause) such Indebtedness or a portion thereof
in an aggregate amount exceeding $100,000, to become due prior to its stated
maturity or prior to its regularly scheduled dates of payment.
(d) Any representation or warranty herein or in this Agreement or any
Supplemental Agreement or in any written statement pursuant thereto or hereto,
report, financial statement or certificate made or delivered to the Purchaser by
the Company or any of its Subsidiaries shall be untrue or incorrect in any
material respects, as of the date when made or deemed made, and the same shall
remain unremedied for a period ending on the first to occur of ten (10) days
after the Company shall receive written notice of any such failure from the
Purchaser or fifteen (15) days after the Company shall have knowledge thereof.
(e) The Company shall fail to make any principal or interest payment
with respect to any Senior Indebtedness when the same shall be due and payable
(including any applicable grace period), or any maturity date under the Senior
Indebtedness is accelerated.
(f) Any of the material assets of the Company or any of its
Subsidiaries thereof shall be attached, seized, levied upon or subject to a writ
or distress warrant, or come within the possession of any receiver, trustee,
custodian or assignee for the benefit of creditors of the Company or any of its
Subsidiaries and shall remain unstayed or undismissed for thirty (30)
consecutive days; or any Person other than the Company or such Subsidiary shall
apply for the appointment of a receiver, trustee or custodian for any of the
assets of the Company or such Subsidiary and such application shall remain
unstayed or undismissed for thirty (30) consecutive days; or the Company or such
Subsidiary shall have concealed, removed or permitted to be concealed or
removed, any part of its property, with intent to hinder, delay or defraud its
creditors or any of them or made or suffered a transfer of any of its property
or the incurring of an obligation which may be fraudulent under any bankruptcy,
fraudulent conveyance or other similar law.
(g) A case or proceeding shall have been commenced against the Company
or any of its Subsidiaries in a court having competent jurisdiction seeking a
decree or order in respect of the Company or such Subsidiary (i) under title 11
of the United States Code, as now constituted or hereafter amended, or any other
applicable federal, state or foreign bankruptcy or other similar law; (ii)
appointing a custodian, receiver, liquidator, assignee, trustee or sequestrator
(or similar official) of the Company or such Subsidiary or of any substantial
part of its or their properties; or (iii) ordering the winding-up or liquidation
of the affairs of the Company or such Subsidiary and such case or proceeding
shall remain undismissed or unstayed for sixty (60) consecutive days or such
court shall enter a decree or order granting the relief sought
18
in such case or proceeding.
(h) The Company or any of its Subsidiaries shall (i) file a petition
seeking relief under title 11 of the United States Code, as now constituted or
hereafter amended, or any other applicable federal, state or foreign bankruptcy
or other similar law; (ii) consent to the institution of proceedings thereunder
or to the filing of any such petition or to the appointment of or taking
possession by a custodian, receiver, liquidator, assignee, trustee or
sequestrator (or similar official) of the Company or such Subsidiary or of any
substantial part of its properties; (iii) fail generally to pay its debts as
such debts become due; or (iv) take any corporate action in furtherance of any
such action.
(i) Final judgment or judgments (after the expiration of all times to
appeal therefrom) for the payment of money in excess of $100,000 in the
aggregate shall be rendered against the Company or any of its Subsidiaries and
the same shall not be (i) fully covered by insurance, or (ii) vacated, stayed,
bonded, paid or discharged for a period of thirty (30) days.
(j) Any other event shall have occurred and be continuing, including
the revocation of any authorization, license, permit or other material
suspension of the authority of the Company to conduct its business, which would
have a Material Adverse Effect and remains uncured the Purchaser shall have
given the Company at least thirty (30) days' notice thereof.
(k) With respect to any Plan, (i) a prohibited transaction within the
meaning of Section 4975 of the IRC or Section 406 of ERISA occurs which in the
reasonable determination of the Purchaser could result in direct or indirect
liability to the Company or any of its Subsidiaries, (ii) with respect to any
Title IV Plan, the filing of a notice to voluntarily terminate any such plan in
a distress termination, (iii) with respect to any Multiemployer Plan, the
Company, any of its Subsidiaries or any ERISA Affiliate shall incur any
Withdrawal Liability, (iv) with respect to any Qualified Plan, the Company, any
of its Subsidiaries or any ERISA Affiliate shall incur an accumulated funding
deficiency or request a funding waiver from the Internal Revenue Service, or (v)
with respect to any Title IV Plan or Multiemployer Plan which has an ERISA Event
not described in clauses (ii) - (iv) hereof, in the reasonable determination of
the Purchaser there is a reasonable likelihood for termination of any such plan
by the PBGC; provided, however, that the events listed in clauses (i) - (v)
hereof shall constitute Events of Default only if the liability, deficiency or
waiver request of the Company, any of its Subsidiaries or any ERISA Affiliate,
whether or not assessed, exceeds $50,000, in any case set forth in (i) through
(v) above, or exceeds $100,000, in the aggregate for all such cases.
(xi) An Event of Default or a Trigger Event under the Capitol
19
American Purchase Agreement shall occur.
(xii) The Purchaser shall have to make payment pursuant to the
Guaranty.
(xiii) A Trigger Event shall occur.
9.2. Remedies. If any Event of Default specified in Section 9.1 shall
have occurred and be continuing, the Purchaser shall have the right to require
full payment of the principal amount of the Debentures together with all accrued
and unpaid interest.
X. TRIGGERING EVENT
10.1. Events. The following events shall be considered triggering
events under this Agreement ("Triggering Events"): if (x) upon the earlier of a
request for conversion or exercise under the Debentures, the Note or the Warrant
or the maturity date of the Debentures or the Warrant, the Company fails or
refuses to register shares of Common Stock issued or issuable to the Purchaser
pursuant to the terms and provisions of the Registration Rights Agreement, or
(y) at any time a holder of Common Stock obtained through conversion under the
Debentures or the Note or upon exercise under the Warrant requests registration
of such securities pursuant to an existing registration rights agreement with
the Company, the Company fails or refuses to register such shares of Common
Stock pursuant to the terms and provisions of such registration agreement.
10.2. Redemption. From and after the occurrence of a Triggering Event,
the Purchaser shall be entitled to cause the Company to (x) redeem or
repurchase, as the case may be, the Debentures, the Note or the Warrant, as the
case may be, in such amount as may be specified by the Purchaser in a request
delivered to the Company by the Purchaser, and the Company shall redeem or
repurchase the Debentures or the Note and the Warrant, by paying to the holder
thereof an amount equal to the market value of the greatest number of shares of
Common Stock into which the Note is convertible and which may be exercised under
the Warrant, and/or as the case may be (y) repurchase all Common Stock obtained
through conversion under the Debentures or the Note or exercise under the
Warrant for a purchase price equal to the market value thereof determined as
provided below. The market value and the maximum number of shares of Common
Stock into which the Note is convertible and the Warrant is excersiable shall be
determined using the higher of the average of the closing prices of a share of
Common Stock, as reported by the principal stock exchange upon which shares of
Common Stock are traded, for the 20 trading days prior to (i) the day of the
public announcement of a Triggering Event or (ii) the day of the event giving
rise to the to the Triggering Event. If the Common Stock is not listed for
trading on a nationally recognized stock exchange or on the NASDAQ System on the
day before
20
the Triggering Event, for purposes of determining the number of shares of Common
Stock issuable upon conversion of the Debentures and the redemption price
provided for in this Section 10.2, the market value of a share of Common Stock
shall be determined by a recognized appraisal or investment banking firm
selected by the Board.
10.3. Funds Unavailable. If sufficient funds are not legally available
for payment of the redemption amount under Section 10.2 hereof following the
occurrence of a Triggering Event, the Company and its Subsidiaries will take all
lawful action necessary to enable the Company to make such payment to the
fullest extent possible, including without limitation, (i) the sale of
additional equity securities, (ii) any necessary action under applicable law to
reduce the Company's surplus or other funds legally available, (iii) additional
borrowing by, or a refinancing of, the Company, (iv) asset sales and (v) a sale
of the Company or Subsidiaries to a third party. The Company will retain, at the
Company's expense and with the consent of the Purchaser, an investment banking
firm to assist the Company in taking the action referred to in the preceding
sentence; such investment banking firm shall provide its service to the Company
under the direction of a committee which will have two members, one of whom will
be a representative of the Company and the other will be a representative of the
Purchaser. Except as provided in the following paragraph, the foregoing shall
not preclude the holders of the Note or the Warrant from availing themselves of
any other remedy available at law or equity at any time to collect amounts due
and payable to them by the Company.
10.4. Notice. When a Triggering Event has occurred, the Company shall
immediately give written notice thereof to the Purchaser. The Company shall also
promptly notify the Purchaser of any event which could reasonably become a
Triggering Event with the lapse of time or otherwise promptly after obtaining
knowledge thereof.
XI. RIGHT OF FIRST REFUSAL
Until such time as the Purchaser has no right, obligation or liability
under the Warrant, the Guaranty or the Note, upon any offer, sale or issuance,
for cash or other property, of subordinated indebtedness of the Company, then
the Purchaser shall have the right to subscribe to and purchase such notes and
evidences of subordinated indebtedness (the "New Indebtedness") at a price and
on such other terms and conditions as are no less favorable to the Purchaser
than those on which the New Indebtedness will be offered, sold or issued to
other persons. The Purchaser shall have the option to purchase up to such
portion of the New Indebtedness as shall be equal to the Purchaser's pro rata
investment in the Company of the entire amount of investments made in the
Company by the Purchaser at such date. The Company shall give written notice to
the Purchaser of any and each opportunity
21
for exercise of its rights under this Article XI, setting forth the price of
such New Indebtedness and the amount of such New Indebtedness that the Purchaser
is entitled to purchase. Such notice shall be delivered to the Purchaser at the
address then shown in the records of the Company, and the Purchaser may exercise
its rights to purchase such New Indebtedness by written notice thereof delivered
to the Company at its principal office not later than 10 business days following
the date on which notice of such rights was received by the Purchaser. In the
event the Purchaser does not elect to purchase the offered New Indebtedness, any
other Affiliate of the Purchaser that is a wholly owned subsidiary of Conseco,
Inc. shall be given notice thereof and shall have five business days thereafter
to elect to purchase such unpurchased allotment.
XII. SECURITIES LAW MATTERS
Each certificate or instrument representing the Securities shall bear a
legend substantially in the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED BY
THE HOLDER PURSUANT TO AN AGREEMENT DATED SEPTEMBER 16, 1997 BY AND
BETWEEN GENERAL ACCEPTANCE CORPORATION AND CONSECO, INC. AND HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("THE
ACT"), OR ANY APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES MAY
NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF
REGISTRATION, UNDER THE ACT, BASED ON AN OPINION LETTER OF COUNSEL
REASONABLE SATISFACTORY TO THE COMPANY OR A NO-ACTION LETTER FROM THE
SECURITIES AND EXCHANGE COMMISSION."
XIII. MISCELLANEOUS
13.1. Press Releases. Except as required by applicable law, the
Purchaser and the Company will not give notice to third parties or otherwise
make any public statement or releases concerning this Agreement or the
transactions contemplated hereby except for such written information as shall
have been approved in writing as to form and content by the other party, which
approval shall not be unreasonably withheld.
13.2. Expenses. The Company will pay its own costs and expenses and
the costs and expenses of the Purchaser incident to preparing for, entering into
and carrying out this Agreement and the consummation of the transactions
contemplated hereby.
13.3. Indemnification. (a) The Company shall indemnify and hold
harmless the Purchaser against and from any losses, claims, damages, liabilities
or expenses ("Losses") insofar as the Losses (or actions in respect thereof)
arise out of or are based
22
upon (i) the falsity or incorrectness as of the Closing Date of any
representation or warranty of the Company contained in or made pursuant to this
Agreement or any of the Ancillary Agreements, or (ii) the existence of any
condition, event or fact constituting, or which with notice or passage of time,
or both, would constitute a default in the observance of any of the Company's
undertakings or covenants under or pursuant to the Articles of Incorporation.
The Company shall also pay all reasonable attorneys' and accountants' fees and
costs and court costs incurred by the Purchaser in enforcing the indemnification
provided for in this Section 13.3(a). Notwithstanding the foregoing, the Company
expressly agrees and acknowledges that the right of indemnification granted
herein to the Purchaser shall not be deemed to be the exclusive remedy available
to the Purchaser for any of the matters described in this Section 13.3(a).
(b) The Purchaser shall indemnify and hold harmless the Company against
and from any Losses insofar as the Losses (or actions in respect thereof) arise
out of or are based upon the falsity or incorrectness as of the Closing Date of
any representation or warranty of the Purchaser contained in or made pursuant to
this Agreement or any of the Ancillary Agreements. The Purchaser shall also pay
all reasonable attorneys' and accountants' fees and costs and court costs
incurred by the Company in enforcing the indemnification provided for in this
Section 13.3(b).13.4. Notwithstanding the foregoing, the Purchaser expressly
agrees and acknowledges that the right of indemnification granted herein to the
Company shall not be deemed to be the exclusive remedy available to the Company
for any of the matters described in this Section 13.3(b).
13.4. Assignment. Neither party may assign any of its rights, title,
interest, remedies, powers and duties hereunder without prior written consent of
the other parties hereto. However, the Company hereby consents to the
Purchaser's assignments, at any time or times, of any of the Purchaser's rights,
title, interests, remedies, powers and duties hereunder, whether evidenced by a
writing or not, to any of the Subsidiaries of the Purchaser. The Company agrees
that it will use its best efforts to assist and cooperate with the Purchaser in
any manner reasonably requested by the Purchaser to effect such assignments.
13.5. Remedies. Trial. The Purchaser' rights and remedies under this
Agreement shall be cumulative and nonexclusive of any other rights and remedies
which the Purchaser may have under any other agreement, including without
limitation, the Ancillary Agreements, by operation of law or otherwise.
13.6. Waiver of Jury Trial. The parties hereto waive all right to
trial by jury in any action or proceeding to enforce or defend any rights under
this Agreement or the Ancillary Agreements.
23
13.7. Arbitration. If a dispute arises as to interpretation of this
Agreement, it shall be decided finally by three arbitrators in an arbitration
proceeding conforming to the Rules of the American Arbitration Association
applicable to commercial arbitration. The arbitrators shall be appointed as
follows: one by the Company, one by the Purchaser and the third by the said two
arbitrators, or, if they cannot agree, then the third arbitrator shall be
appointed by the American Arbitration Association. The third arbitrator shall be
chairman of the panel and shall be impartial. The arbitration shall take place
in Carmel, Indiana. The decision of a majority of the Arbitrators shall be
conclusively binding upon the parties and final, and such decision shall be
enforceable as a judgment in any court of competent jurisdiction. Each party
shall pay the fees and expenses of the arbitrator appointed by it, its counsel
and its witnesses. The parties shall share equally the fees and expenses of the
impartial arbitrator.
13.8. Severability. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
13.9. Parties. This Agreement and the other Ancillary Agreements
shall be binding upon, and inure to the benefit of, the successors of the
Company, and the successors and assigns of the Purchaser.
13.10. Conflict of Terms. Except as otherwise provided in this
Agreement or any of the Ancillary Agreements by specific reference to the
applicable provisions of this Agreement, if any provision contained in this
Agreement is in conflict with, or inconsistent with, any provision in any of the
Ancillary Agreements, the provision contained in this Agreement shall govern and
control.
13.11. GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS
AGREEMENT OR IN ANY OF THE ANCILLARY AGREEMENTS, IN ALL RESPECTS, INCLUDING ALL
MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT AND THE
OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF INDIANA APPLICABLE TO CONTRACTS
MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES THEREOF
REGARDING CONFLICT OF LAWS, AND ANY APPLICABLE LAWS OF THE UNITED STATES OF
AMERICA. THE PURCHASER AND THE COMPANY AGREE TO SUBMIT TO PERSONAL JURISDICTION
AND TO WAIVE ANY OBJECTION AS TO VENUE IN THE FEDERAL OR STATE COURTS IN THE
COUNTY OF XXXXXX, STATE OF INDIANA. SERVICE OF PROCESS ON THE COMPANY OR THE
PURCHASER IN ANY ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF
THE ANCILLARY AGREEMENTS SHALL BE EFFECTIVE IF MAILED TO SUCH PARTY AT THE
ADDRESS LISTED IN SECTION 13.9 HEREOF. NOTHING HEREIN SHALL
24
PRECLUDE THE PURCHASER OR THE COMPANY FROM BRINGING SUIT OR TAKING OTHER LEGAL
ACTION IN ANY OTHER JURISDICTION.
13.12. Notices. Except as otherwise provided herein, whenever it is
provided herein that any notice, demand, request, consent, approval, declaration
or other communication shall or may be given to or served upon any of the
parties by another, or whenever any of the parties desires to give or serve upon
another any communication with respect to this Agreement, each such notice,
demand, request, consent, approval, declaration or other communication shall be
in writing and either shall be delivered in person with receipt acknowledged or
by registered or certified mail, return receipt requested, postage prepaid, or
telecopied and confirmed by telecopy answer back, addressed as follows:
(a) If to the Purchaser at:
Conseco, Inc.
00000 Xxxxx Xxxxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxx 00000
Attention: Xxxx Xxxx
Facsimile: (000) 000-0000
(b) If to the Company at:
General Acceptance Corporation
0000 Xxxxx Xxxx
Xxxxxxxxxxx, Xxxxxxx 00000
Attention: Chief Financial Officer
Facsimile: (000) 000-0000
With copies to:
Xx. Xxxxxxx Xxxxxx
0000 Xxxxx Xxxxxx Xxxxxxxxx
Xxxxxxxxxxx, Xxxxxxx 00000
and
Xxxxxxx XxXxxxxxx Xxxxxx & Xxxxxxxx
Suite 0000 Xxx Xxxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been duly given or served on the date on which personally delivered,
with receipt acknowledged, or upon receipt if the same shall have been
25
telecopied and confirmed by telecopy answer back or three (3) Business Days
after the same shall have been deposited in the United States mail. Failure or
delay in delivering copies of any notice, demand, request, consent, approval,
declaration or other communication to the persons designated above to receive
copies shall in no way adversely affect the effectiveness of such notice,
demand, request, consent, approval, declaration or other communication.
13.13. Survival. The representations and warranties of the Company in
this Agreement shall survive the execution, delivery and acceptance hereof by
the parties hereto and the Closing for a period ending on the date the Purchaser
has no further right, obligation or liability under the Guaranty, the Note or
the Warrant.
13.14. Section Titles. The Section titles and Table of Contents
contained in this Agreement are and shall be without substantive meaning or
content of any kind whatsoever and are not a part of the agreement between the
parties hereto.
13.15. Counterparts. This Agreement may be executed in any number of
separate counterparts, each of which shall, collectively and separately,
constitute one agreement.
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IN WITNESS WHEREOF, this Agreement has been duly executed as of the
date first written above.
CONSECO, INC.
As the Purchaser
By /s/ XXXXXX X. XXXX
XXXXXX X. XXXX
Executive Vice President
Chief Financial Officer
GENERAL ACCEPTANCE CORPORATION
As the Company
By:/s/ XXXXXXX X. XXXXXX, President
