5
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of The Securities Act of 1934
Date of Report (Date of Earliest Event Reported) September 16, 1997
GENERAL ACCEPTANCE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Commission File Number: 0-25760
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Indiana 35-1739977
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
1025 Acuff Road
Bloomington, Indiana 47404
(Address of Principal Executive Offices) (Zip Code)
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Registrant's telephone number: (812) 337-6000
<PAGE>
ITEM 5. OTHER EVENTS
The press release dated September 17, 1997, attached hereto as Exhibit
99.2, is incorporated herein by reference.
The sale of the convertible notes described in the press release attached
hereto as Exhibit 99.2 involved, subject to shareholder approval, the granting
of conversion rights and the issuance of warrants at per share conversion and
exercise prices which were below the market value of the Company's common
stock. Accordingly, as prescribed by generally accepted accounting
principles, the Company expects to record a "prepaid guarantee fee" of
approximately $24.1 million, with an offsetting increase to additional paid-in
capital. This represents the number of shares issuable at a conversion or
exercise price of $1.00 per share times the per share discount from market
value. The prepaid guarantee fee will be charged to operations ratably over
the term of the guarantee which runs from September 16, 1997 to January 1,
1999. The quarterly charge to operations associated with the guarantee fee
will be approximately $776,000 for the third quarter of 1997, and
approximately $4.7 million for the fourth quarter of 1997 and for each quarter
of 1998. On a per share basis, the charge will be approximately $(0.13) for
the third quarter of 1997 and $(0.78) for the fourth quarter of 1997.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
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4.4 Warrant to Purchase 500,000 shares of Common Stock of General Acceptance
Corporation, dated September 16, 1997, issued to Conseco, Inc.
4.5 Registration Rights Agreement, dated September 16, 1997, between Conseco, Inc.
and General Acceptance Corporation
9.2 Amendment No. 1 to Stockholders' Agreement, dated September 16, 1997,
between Capitol American Life Insurance Company and General Acceptance
Corporation
10.83 Agreement, dated September 16, 1997, between Conseco, Inc. and General
Acceptance Corporation
10.84 12% Convertible Subordinated Note, dated September 16, 1997, issued by General
Acceptance Corporation to Conseco, Inc.
10.86 Amendment No. 1 to Securities Purchase Agreement, dated September 16, 1997,
between Capitol American Life Insurance Company and General Acceptance
Corporation
10.87 Subordination Agreement, dated September 16, 1997, between Capitol American
Life Insurance Company, Malvin L. Algood, Janet Algood, Russell E. Algood,
John G. Algood and General Acceptance Corporation for the benefit of
Conseco, Inc.
10.88 Subordination Agreement, dated September 16, 1997, between Capitol American
Life Insurance Company, Malvin L. Algood, Janet Algood, Russell E. Algood,
John G. Algood and General Acceptance Corporation for the benefit of the
Algoods
10.89 Amendment of Subordination Agreement, dated September 16, 1997, between
General Electric Capital Corporation, Malvin L. Algood and General
Acceptance Corporation
10.90 Amendment of Subordination Agreement, dated September 16, 1997, between
General Electric Capital Corporation, Russell E. Algood and General
Acceptance Corporation
10.91 Amendment of Subordination Agreement, dated September 16, 1997, between
General Electric Capital Corporation, John G. Algood and General Acceptance
Corporation
10.92 12% Subordinated Convertible Note, dated September 16, 1997 issued by General
Acceptance Corporation to Malvin L. Algood
10.93 12% Subordinated Convertible Note, dated September 16, 1997 issued by General
Acceptance Corporation to Russell E. Algood
10.94 12% Subordinated Convertible Note, dated September 16, 1997 issued by General
Acceptance Corporation to John G. Algood
10.95 First Amendment to Amended and Restated Motor Vehicle Installment Contract
Loan and Security Agreement, dated September 16, 1997, between General
Electric Capital Corporation and General Acceptance Corporation
99.2 General Acceptance Corporation Press Release, dated September 17, 1997
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<PAGE>
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized on October 24, 1997.
GENERAL ACCEPTANCE CORPORATION
By /s/ Martin C. Bozarth
Martin C. Bozarth
Chief Financial Officer
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EXHIBIT INDEX
ITEM 1. INDEX TO EXHIBITS
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4.4 Warrant to Purchase 500,000 shares of Common Stock of General Acceptance
Corporation, dated September 16, 1997, issued to Conseco, Inc.
4.5 Registration Rights Agreement, dated September 16, 1997, between Conseco, Inc.
and General Acceptance Corporation
9.2 Amendment No. 1 to Stockholders' Agreement, dated September 16, 1997,
between Capitol American Life Insurance Company and General Acceptance
Corporation
10.83 Agreement, dated September 16, 1997, between Conseco, Inc. and General
Acceptance Corporation
10.84 12% Convertible Subordinated Note, dated September 16, 1997, issued by General
Acceptance Corporation to Conseco, Inc.
10.86 Amendment No. 1 to Securities Purchase Agreement, dated September 16, 1997,
between Capitol American Life Insurance Company and General Acceptance
Corporation
10.87 Subordination Agreement, dated September 16, 1997, between Capitol American
Life Insurance Company, Malvin L. Algood, Janet Algood, Russell E. Algood,
John G. Algood and General Acceptance Corporation for the benefit of
Conseco, Inc.
10.88 Subordination Agreement, dated September 16, 1997, between Capitol American
Life Insurance Company, Malvin L. Algood, Janet Algood, Russell E. Algood,
John G. Algood and General Acceptance Corporation for the benefit of the
Algoods
10.89 Amendment of Subordination Agreement, dated September 16, 1997, between
General Electric Capital Corporation, Malvin L. Algood and General
Acceptance Corporation
10.90 Amendment of Subordination Agreement, dated September 16, 1997, between
General Electric Capital Corporation, Russell E. Algood and General
Acceptance Corporation
10.91 Amendment of Subordination Agreement, dated September 16, 1997, between
General Electric Capital Corporation, John G. Algood and General Acceptance
Corporation
10.92 12% Subordinated Convertible Note, dated September 16, 1997 issued by General
Acceptance Corporation to Malvin L. Algood
10.93 12% Subordinated Convertible Note, dated September 16, 1997 issued by General
Acceptance Corporation to Russell E. Algood
10.94 12% Subordinated Convertible Note, dated September 16, 1997 issued by General
Acceptance Corporation to John G. Algood
10.95 First Amendment to Amended and Restated Motor Vehicle Installment Contract
Loan and Security Agreement, dated September 16, 1997, between General
Electric Capital Corporation and General Acceptance Corporation
99.2 General Acceptance Corporation Press Release, dated September 17, 1997
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Exhibit 4.4
14
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE OR OTHER SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD,
TRANSFERRED OR ASSIGNED EXCEPT (i) PURSUANT TO REGISTRATIONS THEREOF UNDER
SUCH LAWS, OR (ii) IF, IN THE OPINION OF COUNSEL REASONABLY SATISFACTORY TO
GENERAL ACCEPTANCE CORPORATION, THE PROPOSED TRANSFER MAY BE EFFECTED IN
COMPLIANCE WITH APPLICABLE SECURITIES LAWS WITHOUT SUCH REGISTRATIONS.
WARRANT TO PURCHASE 500,000 SHARES
OF COMMON STOCK OF
GENERAL ACCEPTANCE CORPORATION
ISSUED TO
CONSECO, INC.
DATED: September 16, 1997
NO. 1
(INCORPORATED UNDER THE LAWS OF THE STATE OF INDIANA)
THIS IS TO CERTIFY THAT Conseco, Inc., an Indiana corporation ("Conseco"), (or
its registered assigns, herein referred to as the "Holder") is entitled, upon
the due exercise hereof and subject to the terms and conditions hereof, at any
time and from time to time commencing on the date hereof, and ending on the
date (the ATermination Date") which is the later to occur of December 31, 1998
or the 10th day after the date upon which Conseco, its successors or assigns
has no further obligation or liability under the Guaranty (as defined in the
September Agreement as hereinafter defined), to purchase from General
Acceptance Corporation, an Indiana corporation (the "Company"), and the
Company shall issue and sell to the Holder, the number of shares of common
stock, no par value (the "Common Stock"), of the Company (said number of
shares as adjusted as provided herein being hereinafter referred to as the
"Shares") set forth above upon surrender hereof, with the form of election to
purchase included herein completed and duly executed, at the office of the
Company, and upon simultaneous payment therefor at an exercise price per Share
equal to $1.00 (said amount as adjusted herein being hereinafter referred to
as the "Purchase Price") in cash and/or check payable to the order of the
Company. The number and Purchase Price of the Shares are subject to
adjustment as provided herein. This Warrant is issued pursuant to that
certain Agreement of even date herewith by and between the Company and Conseco
(the "September Agreement").
1. (a) Subject to the restrictions set forth in Section 2 hereof,
upon surrender of this Warrant, and payment of the Purchase Price as
aforesaid, the Company shall issue and deliver with all reasonable dispatch
the certificate(s) for the Shares to or upon the written order of the Holder
of this Warrant and in such name or names as such Holder may designate. Such
certificate(s) shall represent the number of Shares issuable upon the exercise
of the Warrants embodied herein, together with a cash amount (if the holder
has so elected in accordance with the provisions of Section 7 hereof) in
respect of any fraction of a Share otherwise issuable upon such surrender.
Certificate(s) representing the Shares shall be deemed to have been
issued and the person so designated to be named therein shall be deemed to
have become a holder of record of such Shares as of the date of the surrender
of this Warrant and payment of the Purchase Price as aforesaid; provided,
however, that if, at the date of surrender of this Warrant and payment of such
Purchase Price, the transfer books for the Shares or other classes of stock
purchasable upon the exercise of this Warrant shall be closed, the
certificate(s) for the Shares in respect of which this Warrant is then
exercised shall be issuable as of the date on which such books shall next be
opened, and until such date the Company shall be under no duty to deliver any
certificate(s) for such Shares. Prior to the Termination Date, this Warrant
shall be exercisable, at the election of the registered holder hereof, either
as an entirety or from time to time for part of the number of Shares specified
herein, but in no event shall fractional Shares be issued with regard to the
exercise of this Warrant. In the event that this Warrant is exercised at any
time for less than the aggregate number of Shares then subject to exercise
hereunder, a new Warrant shall be issued to such Holder for the remaining
number of Shares purchasable pursuant hereto. The Company shall cancel this
Warrant when it is surrendered upon exercise.
Prior to due presentment for registration of transfer of this Warrant,
the Company shall deem and treat the Holder in whose name this Warrant shall
be issued as the absolute owner of this Warrant (notwithstanding any notation
of ownership or other writing on this Warrant made by anyone other than the
Company) for the purpose of any exercise hereof, of any distribution to the
holder hereof, and for all other purposes, and the Company shall not be
affected by any notice to the contrary.
(b) The Holder hereby represents to the Company that the Holder is
taking the Warrants for investment and not with a view to a distribution of
the Warrants or the underlying Common Stock. Nevertheless, the Company and
the Holder acknowledge and agree that Holder may sell, transfer, assign,
hypothecate or otherwise dispose of this Warrant after the date hereof,
provided such sale, transfer, assignment, hypothecation or other disposition
is in accordance with applicable federal and state securities laws.
2. The Company shall pay all documentary stamp taxes, if any,
attributable to the initial issuance of the Shares issuable upon the exercise
of this Warrant; provided, however, that the Company shall not be required to
pay any tax or taxes which may be payable in respect of any transfer involved
in the issue or delivery of any certificates for Shares in a name other than
that of the Holder upon the exercise of this Warrant, and in such case the
Company shall not be required to issue or deliver any certificates for Shares
until or unless the person or persons requesting the issuance have paid to the
Company the amount of such tax or have established to the Company's
satisfaction that such tax has been paid.
3. In case this Warrant shall be mutilated, lost, stolen or
destroyed, the Company shall issue and deliver, in exchange and substitution
for and upon cancellation of the mutilated Warrant, or in lieu of and
substitution for the Warrant lost, stolen or destroyed, a new Warrant of like
tenor and representing an equivalent number of Shares purchasable upon
exercise, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction of such Warrant.
4. (a) At all times prior to the Termination Date, the Company
shall at all times reserve and keep available and free of preemptive rights
out of its authorized but unissued Common Stock, solely for the purpose of
issuance upon exercise of this Warrant, the number of shares of Common Stock
as shall from time to time be sufficient to effect the exercise of the
Warrant, and if at any time the number of authorized but unissued shares of
Common Stock shall not be sufficient to effect the exercise of this Warrant,
the Company shall take the corporate action necessary to increase the number
of its authorized Common Stock to a number sufficient for this purpose. The
Company further covenants that all shares that may be issued upon the exercise
of this Warrant and payment of the Purchase Price, all as set forth herein,
will be free from all taxes, liens and charges in respect of the issue
thereof. The Company agrees that its issuance of this Warrant shall
constitute full authority to its officers who are charged with the duty of
executing stock certificates to execute and issue the necessary certificates
for the shares upon the exercise of this Warrant.
(b) Before taking any action which would cause an adjustment pursuant
to the terms set forth herein reducing the portion of the Purchase Price
attributable to the Shares below the then par value (if any) of such Shares,
the Company shall take any corporate action which may, in the opinion of its
counsel (which may be counsel regularly engaged by the Company), be necessary
in order that the Company may validly and legally issue fully paid and
nonassessable Shares at the Purchase Price as so adjusted.
(c) The Company covenants that all Shares issued upon exercise of the
Warrants shall, upon issuance in accordance with the terms hereof, be fully
paid and nonassessable and free from all preemptive rights and taxes, liens,
charges and security interests created by the Company with respect to the
issuance and holding thereof.
(d) Notwithstanding any other provisions of this Section 4 to the
contrary, the exercise rights of the Holder shall be subject to compliance
with all applicable federal and state securities laws, and the Holder agrees
to execute all required agreements and documents required by the Company to
establish compliance with such laws.
5. Subject to the provisions of Section 1 above, this Warrant may be
exchanged for a number of Warrants of the same tenor as this Warrant for the
purchase in the aggregate of the same number of Shares of the Company as are
purchasable upon exercise of this Warrant, upon surrender hereof at the office
of the Company with written instructions as to the denominations of the
Warrants to be issued in exchange.
6. Adjustments.
(a) Reorganization, Merger or Sale of Assets
If at any time while this Warrant, or any portion thereof, is outstanding
there shall be (i) a reorganization (other than a combination,
reclassification, exchange or subdivision of shares otherwise provided for
herein), (ii) a merger or consolidation with or into another corporation in
which the Company is not the surviving entity, or a reverse triangular merger
in which the Company is the surviving entity but the shares of the Company's
capital stock outstanding immediately prior to the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise, or (iii) a sale or transfer of the Company's properties and
assets as, or substantially as, an entirety to any other person, then, as a
part of such reorganization, merger, consolidation, sale or transfer, lawful
provision shall be made so that the holder of this Warrant shall thereafter be
entitled to receive upon the exercise of the Warrant the number of shares of
stock or other securities or property of the successor corporation resulting
from such reorganization, merger, consolidation, sale or transfer that a
holder of the shares deliverable upon the exercise of this Warrant would have
been entitled to receive in such reorganization, consolidation, merger, sale
or transfer if this Warrant had been exercised immediately before such
reorganization, merger, consolidation, sale or transfer, all subject to
further adjustment as provided in this Section 6. The foregoing provisions of
this Section 6(a) shall similarly apply to successive reorganizations,
consolidations, mergers, sales and transfers and to the stock or securities of
any other corporation that are at the time receivable upon the exercise of
this Warrant. If the per-share consideration payable to the Holder for shares
in connection with any such transaction is in a form other than cash or
marketable securities, then the value of such consideration shall be
determined in good faith by the Company's Board of Directors. In all events,
appropriate adjustment (as determined in good faith by the Company's Board of
Directors) shall be made in the application of the provisions of this Warrant
with respect to the rights and interests of the Holder after the transaction,
to the end that the provisions of this Warrant shall be applicable after that
event, as near as reasonably may be, in relation to any shares or other
property deliverable after that event upon exercise of this Warrant.
<PAGE>
(b) Reclassification.
If the Company, at any time while this Warrant, or any portion thereof,
remains outstanding, by reclassification of securities or otherwise, shall
change any of the securities as to which exercise rights under this Warrant
exist into the same or a different number of securities of any other class or
classes, this Warrant shall thereafter represent the right to acquire such
number and kind of securities as would have been issuable as the result of
such change with respect to the securities that were subject to the exercise
rights under this Warrant immediately prior to such reclassification or other
change and the Purchase Price or number of shares received upon such exercise
shall be appropriately adjusted, all subject to further adjustment as provided
in this Section 6.
(c) Split, Subdivision or Combination of Shares.
If the Company at any time while this Warrant, or any portion thereof,
remains outstanding shall split, subdivide or combine the securities as to
which exercise rights under this Warrant exist, into a different number of
securities of the same class, the number of shares issuable upon exercise
shall be proportionately decreased in the case of a split or subdivision or
proportionately increased in the case of a combination.
(d) Adjustments for Dividends in Stock or Other Securities or Property.
If while this Warrant, or any portion hereof, remains outstanding and
unexpired the holders of the securities as to which exercise rights under this
Warrant exist at the time shall have received, or, on or after the record date
fixed for the determination of eligible stockholders, shall have become
entitled to receive, without payment therefor, other or additional stock or
other securities or property (other than cash) of the Company by way of
dividend, then and in each case, this Warrant shall represent the right to
acquire upon exercise, in addition to the number of shares of the security
receivable upon exercise of this Warrant, and without payment of any
additional consideration therefor, the amount of such other or additional
stock or other securities or property (other than cash) of the Company that
such Holder would hold on the date of such exercise had it been the Holder of
record of the security receivable upon exercise of this Warrant on the date
hereof and had thereafter, during the period from the date hereof to and
including the date of such exercise, retained such shares and/all other
additional stock, other securities or property available by this Warrant as
aforesaid during such period, giving effect to all adjustments called for
during such period by the provisions of this Section 6.
(e) Issuance of Shares Below Purchase Price.
(1) If while this Warrant, or any portion hereof, remains
outstanding, the Company shall offer and sell Additional Shares of Common
Stock (as hereinafter defined) for consideration per share less than the
Purchase Price in effect immediately prior to the issuance of such Additional
Shares of Common Stock (except upon the exercise of stock options granted
pursuant to the Company's Stock Option Plan approved by the Board), the
Purchase Price in effect immediately prior to each such issuance shall
forthwith be adjusted upon such issuance to a price equal to the price paid
per share for such Additional Shares of Common Stock.
(2) For the purpose of the calculations provided in this Section
6(e), if at any time or from time to time after the date hereof the Company
shall issue any rights or options for the purchase of, or stock or other
securities convertible into, Additional Shares of Common Stock (such Common
Stock or securities being hereinafter referred to as "Convertible
Securities"), then, and in each case, if the Effective Price (as hereinafter
defined) of such rights, options or Convertible Securities shall be less than
the Purchase Price, the Company shall be deemed to have issued at the time of
the issuance of such rights or options or Convertible Securities the maximum
number of Additional Shares of Common Stock issuable upon exercise or
conversion thereof and to have received as consideration for the issuance of
such shares an amount equal to the total amount of the consideration, if any,
payable to the Company upon exercise or conversion of such options or rights.
"Effective Price" shall mean the quotient determined by dividing the total of
all of such consideration by such maximum number of Additional Shares of
Common Stock. No further adjustment shall be made as a result of the actual
issuance of Additional Shares of Common Stock on the exercise of any such
rights or options or the conversion of any such Convertible Securities. In
the case of Convertible Securities which have a conversion price which is
based, in whole or in part, upon a discount to the market price or value of
the Common Stock, then for the purposes of calculating the Effective Price,
the consideration shall be deemed to include the minimum conversion price
payable to the Company.
If any such rights or options or the conversion privilege represented by
any such Convertible Securities shall expire without having been exercised,
the adjustment to the number of shares available hereunder upon the issuance
of such rights, options or Convertible Securities shall be readjusted to the
number of shares that would have been in effect had an adjustment been made on
the basis that the only Additional Shares of Common Stock so issued were the
Additional Shares of Common Stock, if any, actually issued or sold on the
exercise of such rights or options or rights of conversion of such Convertible
Securities, and such Additional Shares of Common Stock, if any, were issued or
sold for the consideration actually received by the Company for the granting
of all such rights or options, whether or not exercised, plus the
consideration received for issuing or selling the Convertible Securities
actually converted plus the consideration, if any, actually received by the
Company on the conversion of such Convertible Securities.
(3) For the purpose of the calculations provided for in this Section 6(e),
if at any time or from time to time after the date hereof the Company shall
issue any rights or options for the purchase of Convertible Securities, then,
in each such case, if the Effective Price thereof is less than the then
Purchase Price, the Company shall be deemed to have issued at the time of the
issuance of such rights or options the maximum number of Additional Shares of
Common Stock issuable upon conversion of the total amount of Convertible
Securities covered by such rights or options and to have received as
consideration for the issuance of such Additional Shares of Common Stock an
amount equal to the amount of consideration, if any, received by the Company
for the issuance of such rights or options, plus the consideration, if any,
payable to the Company upon the conversion of such Convertible Securities.
AEffective Price" shall mean the quotient determined by dividing the total
amount of such consideration by such maximum number of Additional Shares of
Common Stock. No further adjustment of such Conversion Price adjusted upon
the issuance of such rights or options shall be made as a result of the actual
issuance of the Convertible Securities upon the exercise of such rights or
options or upon the actual issuance of Additional Shares of Common Stock upon
the conversion of such Convertible Securities.
(4) The term AAdditional Shares of Common Stock" as used herein shall mean
all shares of Common Stock issued or deemed issued by the Company after the
date hereof, other than (i) securities issued pursuant to or in connection
with the terms of the September Purchase Agreement; (ii) shares of Common
Stock issued upon conversion of convertible securities or the exercise of
common stock purchase warrants outstanding as of the date hereof; (iii) shares
of Common Stock issuable to employees, officers or directors pursuant to the
Company's stock option plan; (iv) shares of Common Stock issued or issuable to
directors in connection with their service as directors; (v) shares of Common
Stock issued or issuable to directors, officers or employees for services
rendered or to be rendered pursuant to arrangements approved by the Board of
Directors; and (vii) shares of Common Stock issued in connection with a
business combination, merger, consolidation, asset acquisition or the
acquisition of the business of another corporation (through the purchase of
stock or assets) approved by the Board of Directors and all of the Conseco
Directors (as defined in the September Agreement).
(f) No Impairment.
The Company will not, by any voluntary action, avoid or seek to avoid the
observance or performance or any of the terms to be observed or performed
hereunder by the Company, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 6 and in the taking of all
such action as may be necessary or appropriate in order to protect the rights
of the Holder against impairment.
7. Upon exercise the Company shall not be required to issue fractions
of Shares. In lieu of such fractional Shares, the holders of Warrants shall
receive an amount in cash equal to the same fraction of the current market
value of one whole Share. For purposes of this Section 7, the current market
value of one whole Share shall be determined pursuant to Section 6(c) hereof.
All calculations under this section 7 shall be made to the nearest cent.
8. (a) The holder of a Warrant shall not be entitled to any
rights of a shareholder of the Company with respect to any Shares purchasable
upon the exercise thereof, including voting, dividend or dissolution rights,
until such Shares have been paid for in full and issued to such holder. As
soon as practicable after such exercise, the Company shall deliver a
certificate or certificates for the securities issuable upon such exercise,
all of which shall be fully paid and nonassessable, to the person or persons
entitled to receive the same; provided, however, that such certificate or
certificates delivered to the holder of the surrendered Warrant shall bear a
legend reading substantially in the following form (in addition to any legend
required by state securities laws)
(b) THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 193, AS
AMENDED. SUCH SECURITIES AND ANY SECURITIES OR SHARES ISSUED UPON CONVERSION
THEREOF MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR
AN EXEMPTION THEREFROM UNDER SAID ACT.
The Holder shall be entitled to the redemption rights set forth in the
September Agreement and to the registration rights set forth in that certain
Registration Rights Agreement of even date herewith by and between the Company
and the Holder.
9. (a) Upon any adjustment of the Purchase Price pursuant to
Section 6 hereof, the Company within ninety (90) calendar days thereafter
shall have on file for inspection by the holder hereof a certificate of the
Board of Directors of the Company setting forth the Purchase Price after such
adjustment and setting forth in reasonable detail the method of calculation
and the facts upon which such calculations are based and setting forth the
number of Shares purchasable upon exercise of a Warrant after such adjustment
in the Purchase Price, which certificate shall, absent manifest error, be
conclusive evidence of the correctness of the matters set forth therein.
(b) In case at any time prior to the Termination Date:
(1) the Company shall authorize the issuance to all holders of Common
Stock of rights, options or warrants to subscribe for or purchase capital
stock of the Company or of any other subscription rights, options or warrants;
or
(2) the Company shall authorize the distribution to all holders of
Common Stock of evidences of its indebtedness or assets (other than cash
dividends or cash distributions payable out of earnings (or combined or
consolidated earnings if the Company shall have one or more subsidiaries) or
earned surplus or dividends payable in Common Stock or distributions of
scrip); or
(3) of any consolidation or merger to which the Company is a party
and for which approval of any stockholders of the Company is required, or of
the conveyance or transfer of the properties and assets of the Company
substantially as an entirety, or of any capital reorganization of any
reclassification of the Common Stock (other than a change in par value, or
from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination); or
(4) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company; or
(5) the Company proposes to take any other action which would require
an adjustment of the Purchase Price pursuant to Section 6 hereof;
then the Company shall give to the holder of a Warrant at his or its address
appearing below at least ten (10) calendar days prior to the applicable record
date hereinafter specified in (i) or (ii) below, by first-class mail, postage
prepaid, a written notice stating (i) the date as of which the holders of
record of shares of Common Stock to be entitled to receive any such rights,
options, warrants or distribution are to be determined or (ii) the date on
which any such consolidation, merger, conveyance, transfer, reorganization,
reclassification, dissolution, liquidation or winding up is expected to become
effective, and the date as of which it is expected that holders of record of
shares of Common Stock shall be entitled to exchange such shares for
securities or other property, if any, deliverable upon such consolidation,
merger, conveyance, transfer, reorganization, reclassification, dissolution,
liquidation or winding up. The failure to give the notice required by this
Section 9 (b) or any defect herein shall not affect the legality or validity
of any distribution right, option, warrant, consolidation, merger, conveyance,
transfer, reorganization, reclassification, dissolution, liquidation or
winding up or the vote upon any action.
(c) Nothing contained herein shall be construed as conferring upon
the holder of a Warrant with respect to the Shares the right to vote or to
consent or to receive notice as a stockholder in respect of the meetings of
stockholders or the election of directors of the Company or any other matter,
or any rights whatsoever as a stockholder of the Company.
10. Except as otherwise provided herein, any notice, request, demand
or other communication that are required or may be given pursuant to the terms
of this Warrant shall be in writing and delivery shall be deemed sufficient
and to have been duly given on the date of service if delivered personally or
by facsimile transmission if receipt is confirmed to the party to whom notice
is to be given or on the third day after mailing if mailed by first-class
mail, return receipt requested, postage prepaid, if to the Company addressed
to:
General Acceptance Corporation
1025 Acuff Road
Bloomington, Indiana 47404
Attention: Chief Financial Officer
Fax (812) 337-6029
Copies to:
Mr. Russell Algood
2800 South Olcott Boulevard
Bloomington, Indiana 47401
and
Hackman McClarnon Hulett & Cracraft
Suite 2400 One Indiana Square
Indianapolis, Indiana 46204
Attention: Marvin L. Hackman
Fax: (317) 686-3288
or to such other address as the Company may designate by written notice to the
holder of a Warrant, and if to the Holder of a Warrant at his or its
registered address and/or facsimile number on the records of the Company with
a copy to:
Conseco, Inc.
11825 North Pennsylvania Street
Carmel, IN 46032
Attn: John Sabl
Fax: (317) 817-6327
11. All the covenants and provisions herein by or for the benefit of
the Company hereof shall bind and inure to the benefit of its respective
successors and assigns to the extent permitted hereunder and all of the
covenants and provisions herein by or for the benefit of the holder hereof
shall inure to the benefit of such holder's successors, legal representatives,
heirs or assigns as permitted herein.
12. Indiana law shall govern this interpretation, construction, and
enforcement of this Warrant and all transactions contemplated hereby,
notwithstanding any state's choice of law rules to the contrary. Any
litigation related to this Warrant may be maintained only in the federal
district court for the Southern District of Indiana, Indianapolis Division (or
any successor jurisdiction) or in an Indiana state court in Hamilton County or
one of the counties immediately contiguous to Hamilton County, and each party
hereby irrevocably consents and submits to the jurisdiction of that federal or
state court and irrevocably waives any objection the party may have based upon
improper venue, forum non conveniens, or other similar doctrines or rules.
13. Nothing in the Warrant shall be construed to give to any person
or corporation other than the Company and the holder of this Warrant any legal
or equitable right, remedy or claim under this Warrant; but this Warrant shall
be for the sole and exclusive benefit of the Company and the holder of this
Warrant.
<PAGE>
IN WITNESS WHEREOF, an authorized officer of the Company has signed this
Warrant.
GENERAL ACCEPTANCE CORPORATION
By:___/s/ R. E. Algood___________________________
President
<PAGE>
ELECTION TO PURCHASE
(To be executed by the holder only if it desires to exercise Warrants
evidenced by the within Warrant)
TO: GENERAL ACCEPTANCE CORPORATION
1025 Acuff Road
Bloomington, Indiana 47404
Attention: Chief Financial Officer
The undersigned hereby (1) irrevocably elects to exercise _______________
Warrants, evidenced by the within Warrant for, and to purchase thereunder
____________________ Shares issuable upon exercise of said Warrants, (2) makes
payment in full of the Purchase Price of such Shares, (3) requests that
certificates for the Shares be issued in the name of:
Please print Social Security or Tax Identification Number
_______________________________
____________________________________________________________________________
(Please print name and address)
____________________________________________________________________________
____________________________________________________________________________
and (4) if said number of Warrants shall not be all the Warrants evidenced by
the within Warrant, requests that a new Warrant evidencing Warrants not so
exercised be issued in the name of and delivered to:
____________________________________________________________________________
(Please print name and address)
____________________________________________________________________________
____________________________________________________________________________
In lieu of receipt of a fractional Share the undersigned hereby elects (check
the appropriate line):
_______ (i) to receive a cash payment, and the check representing
payment thereof should be made payable to
______________________________________
____________________________________________________________
(Please print name and address)
and should be delivered to
__________________________________________________________
_________________________________________________________; or
_______ (ii) to credit the amount of such payment against the Purchase
Price payable for the Shares issuable upon the exercise of said
Warrants.
DATED: _____________________, 199___
Signature: _______________________________
NOTICE:
The above signature must correspond with the name as written upon the face of
the within Warrant in every particular, without alteration or enlargement or
any change whatsoever, or if signed by any other person the Form of Assignment
herein must be duly executed.
Exhibit 4.5
G:\ACW\CONSECO\GAC\REGAG.913
REGISTRATION RIGHTS AGREEMENT
DATED AS OF SEPTEMBER 16, 1997
BY AND AMONG
GENERAL ACCEPTANCE CORPORATION
AND
CONSECO, INC.
10
G:\ACW\CONSECO\GAC\REGAG.913
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made as of
September 16, 1997 by and between GENERAL ACCEPTANCE CORPORATION, an Indiana
corporation (the "Company"), and CONSECO, INC., an Indiana corporation
("Conseco") (Conseco, its successors and assigns and each holder of the Note,
Warrant or any Shares are herewith referred to as Holders).
WHEREAS, the Company and Conseco, entered into that certain Agreement (the
"September Agreement"), dated as of the date hereof, pursuant to which the
Holder agreed to guarantee (the "Guaranty") certain obligations of the Company
in consideration, among other things, for (x) the issuance to the Holder the
Company's 12% Subordinated Convertible Note in the aggregate principal amount
of the amounts paid by, or on behalf of the Holder pursuant to the Guaranty
(the "Note"), and (y) a warrant (the "Warrant") to purchase shares of common
stock of the Company,
WHEREAS, the Note is convertible, and the Warrant is exercisable, at the
option of the Holders into shares of common stock of the Company in either
case (the "Shares"); and
WHEREAS, it is a condition precedent to the Holder purchasing the Note
(pursuant to the September Agreement) that this Agreement be entered into; and
WHEREAS, certain capitalized terms used herein are used as defined in the
September Agreement.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and intending to be legally bound hereby, the parties hereto agree
as follows:
1. DEMAND REGISTRATION
1.1. Requests for Registration. At any time, a Holder of the
Note, the Warrant or Shares may demand registration under the Securities Act
of all or any portion of the Registrable Securities owned by such Holder. In
order to accomplish such demand, a Holder shall send written notice of the
demand to the Company, and such notice shall specify the number of Registrable
Securities sought to be registered. The Company shall proceed with any demand
registration requested by a Holder of the Note, the Warrant or Shares if the
number of Registrable Securities which the Holder shall have elected to
include in such Demand Registration pursuant to this Section 1.1 shall be at
least 51% of the Shares issued or issuable upon conversion of the Note or the
exercise of the Warrant. The minimum share amounts specified in this Section
1.1 shall be appropriately adjusted to account for any stock dividend, stock
split, recapitalization, merger, consolidation, reorganization or other action
as a result of which additional shares of common stock of the Company are
issued on account of, in conversion of or in exchange for shares of
outstanding common stock.
1.2. Maximum Number of Demand Registrations. In no event shall the
total number of Demand Registrations exceed two.
1.3. Procedure. Within 10 days after receipt of a demand pursuant
to Section 1.1 hereof, the Company shall give written notice of such requested
registration to all other Persons who have registration rights and will
include in such registration, subject to the allocation provisions below, all
other Registrable Securities with respect to which the Company has received
written requests for inclusion within 20 days after the Company's mailing of
such notice, plus any securities of the Company that the Company chooses to
include on its own behalf.
1.4. Expenses. The Company will pay the Registration Expenses of
any demand registration, but the Underwriting Commissions, if such demand
registration is underwritten, will be paid by the Holder in proportion to any
Registrable Securities to be included on their behalf.
1.5. Priority on Demand Registrations. If a demand registration is
underwritten and the managing underwriters advise the Company in writing that
in their opinion the number of Registrable Securities requested to be included
exceeds the number that can be sold in such offering, at a price reasonably
related to the fair value, the Company will allocate the Registrable
Securities to be included in such demand registration, first, to the Holder of
Registrable Securities pro rata on the basis of the number of Registrable
Securities (collectively, the "Selling Stockholders") for which the Company
has received written requests for inclusion, and, second, to the Company.
1.6. Selection of Underwriters. Any demand registration may be
underwritten, at the election of the Selling Stockholders, and the selection
of investment banker(s) and manager(s) and the other decisions regarding the
underwriting arrangements for any such offering will be made by the Selling
Stockholders; provided, however, that the selection of investment banker(s)
and manager(s) shall be subject to the consent of the Company, such consent
not to be unreasonably withheld.
2. PIGGYBACK REGISTRATIONS
2.1. Right to Piggyback. Whenever the Company proposes to register
the offer, sale or offer and sale of any of its securities for its own behalf
under the Securities Act (other than a demand registration), and the
registration form to be used may be used for the registrations of Registrable
Securities to be sold in the manner proposed by the Holder ("Piggyback
Registration"), the Company will give prompt written notice to each Holder
and will include in such Piggyback Registration, subject to the allocation
provisions below, all Registrable Securities with respect to which the Company
has received written requests for inclusion within 20 days after the Company's
mailing of such notice. The Company shall not select a Restricted Form that
would preclude registration of the Registrable Securities that the Company has
been requested to include in such registration if the Company could use
another available form of registration statement which is not a Restricted
Form and the use of which would not give rise to added Registration Expenses.
2.2. PiggybackExpenses. In all Piggyback Registrations, the
Company will pay the Registration Expenses related to the Registrable
Securities of the Holders, but the Underwriting Commissions will be paid by
the Selling Stockholders in proportion to any Registrable Securities included
on their behalf.
2.3. Priority on Primary Registrations. If a Piggyback
Registration is an underwritten registration on behalf of the Company, and the
managing underwriters advise the Company in writing that in their opinion the
number of securities requested to be included in such registration exceeds the
number that can be sold in such offering, at a price reasonable related to
fair value, the Company will allocate the securities to be included as
follows: first, the securities the Company proposes to sell on its own
behalf; and, second, Registrable Securities requested to be included in such
registration, pro rata on the basis of the number of Registrable Securities
owned, among the Selling Stockholders.
2.4. Withdrawal or Abandonment. Nothing contained in this Section 2
shall be construed as limiting or otherwise interfering with the right of the
Company to withdraw or abandon in its sole discretion any registration
statement filed by it in connection with a Piggyback Registration
notwithstanding the inclusion therein of Registrable Securities.
3. HOLDBACK AGREEMENTS
The Holders and the Company agree not to effect any public sale or public
distribution of equity securities of the Company of any securities convertible
into or exchangeable or exercisable for such securities during the 7 days
prior to and the 180 days after any underwritten registration of equity
securities of the Company becomes effective (except as part of such
underwritten registration or except in connection with obligations of the
Company existing on the effective date of the registration statement relating
to such underwritten offering).
4. REGISTRATION PROCEDURES
Whenever a Holder has requested that any Registrable Securities be
registered pursuant to Section 1 of this Agreement, the Company will, as
expeditiously as possible, or whenever the Holder has requested that any
Registrable Securities be registered pursuant to Section 2 of this Agreement,
the Company will, to the extent applicable:
(a) Preparation and Filing of Registration Statement. Prepare and
file with the Securities and Exchange Commission a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective (provided that before filing a
registration statement or prospectus or any amendments or supplements thereto,
the Company will furnish the Holder with copies of all such documents proposed
to be filed).
(b) Preparation and Filing of Amendments and Supplements. Prepare
and file with the Securities and Exchange Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective for the greater of (x) a period of not less than 120 days or (y)
until the Registrable Securities included therein have been sold.
(c) Copies of Documents. Furnish to the Holder such number of
copies of such registration statement, each amendment and supplement thereto
and the prospectus included in such registration statement (including each
preliminary prospectus), and such other documents as the Holder may reasonably
request in order to facilitate the disposition of the Registrable Securities
included therein owned by the Holder.
(d) Blue Sky Qualifications. Use its best efforts to register or
quality such Registrable Securities under such other securities or blue sky
laws of such jurisdictions as the Holder or managing underwriters may
reasonably request; provided, however, that in connection with any such
registration or qualification the Company shall not be obligated to file a
general consent to service of process, or to qualify to do business as a
foreign corporation, or otherwise subject itself to taxation in connection
with such qualification or compliance.
(e) Notification of Effectiveness; Amendments. Notify the Holder at
any time when a prospectus relating to the Registrable Securities included
therein is required to be delivered under the Securities Act within the period
that the Company is required to keep the registration statement effective of
the happening of any event as a result of which the prospectus included in
such registration statement as theretofore amended or supplemented contains an
untrue statement of a material fact or omits any material fact necessary to
make the statements therein not misleading, and, at the request of the Holder,
the Company will prepare a supplement or amendment to such prospectus so that,
as thereafter delivered to the purchasers of such Registrable Securities, such
prospectus will not contain an untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein not
misleading.
(f) Listing. Cause all such Registrable Securities to be listed or
included on securities exchanges on which similar securities issued by the
Company are then listed or included.
(g) Transfer Agent and Registrar. Provide a transfer agent and
registrar for all such Registrable Securities not later than the effective
date of such registration statement.
(h) Other Agreements. Enter into such customary agreement
(including an underwriting agreement containing customary terms and
conditions, including usual and customary indemnification provisions, in form
reasonably acceptable to the Company) and take such other customary actions as
may be reasonable necessary to expedite or facilitate the disposition of such
Registrable Securities.
(i) Letters from Independent Accountants. Obtain a "cold comfort"
letter addressed to the Company from its independent accountants in such form
and covering such matters of the type customarily covered by "cold comfort"
letters delivered by such public accountants.
(j) Inspection of Records. Make available for inspection by the
Holder, and, upon execution of a confidentiality agreement mutually acceptable
to all parties, by any underwriter participating in any disposition pursuant
to such registration statement and any attorney, accountant or other agent
retained by the Holder or any underwriter, all financial and other records,
pertinent corporate documents and properties of the Company, and cause the
Company's officers, directors and employees to supply all information
reasonably requested by the Holder or any underwriter, attorney, accountant or
agent in connection with such registration statement.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Holders:
5.1. Due Organization and Good Standing. The Company is a
corporation duly organized and validly existing under the laws of its
jurisdiction of incorporation and is duly qualified as a foreign corporation
in each jurisdiction in which the failure to be so qualified could reasonably
be expected to have a material adverse effect on the Company.
5.2. Due Authorization; Binding Effect. The execution and delivery
of this Agreement by the Company has been duly authorized by all necessary
corporate action and this Agreement constitutes the legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms.
5.3. No Violation or Default. The execution and delivery by the
Company of this Agreement does not, and the performance by the Company of its
obligations hereunder will not, violate any provisions of its charter or
by-laws or constitute a default under any other agreement to which the Company
is a party or by which it or its assets may be bound.
6. REPRESENTATIONS AND WARRANTIES OF CONSECO
Conseco represents and warrants to the Company:
6.1. Due Organization and Good Standing. Conseco is a corporation
duly organized and validly existing under the laws of the state of its
incorporation and is duly qualified as a foreign corporation in each
jurisdiction in which the failure to be so qualified could reasonably be
expected to have a material adverse effect on the Holder.
6.2. Due Authorization; Binding Effect. The execution and delivery
of this Agreement by the Holder has been duly authorized by all necessary
action and this Agreement constitutes the legal, valid and binding obligation
of the Holder enforceable against each of the Holder in accordance with its
terms.
6.3. No Violation. The execution and delivery of this Agreement by
the Holder does not, and the performance by the Holder of its obligations
hereunder will not, violate any provision of the organizational documents of
the Holder.
6.4. No Default. The execution and delivery of this Agreement by
the Holder does not, and the performance by the Holder of its obligations
hereunder will not, violate any other agreement to which the Holder is a party
or by which any of its assets may be bound.
7. INFORMATION REGARDING HOLDER
The Holder shall provide to the Company such information as may be
reasonably requested by the Company for use in the preparation and filing of
any registration statement covering Registrable Securities owned by the
Holder, and the obligation of the Company to include Registrable Securities in
any registration statement on behalf of the Holder shall be subject to the
Holder's providing such information as promptly as practicable.
8. INDEMNIFICATION
8.1. Indemnification by the Company. The Company hereby indemnifies,
to the extent permitted by law, the Holder, its officers and directors, and
each person who controls such Holder (within the meaning of the Securities
Act), against all losses, claims, damages, liabilities and expenses arising
out of or resulting from any untrue or alleged untrue statement of material
fact contained in any registration statement, prospectus or preliminary
prospectus or any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading except insofar as the same occurs in reliance upon and in
conformity with any information furnished in writing to the Company by the
Holder expressly for use therein or is caused by the Holder's failure to
deliver a copy of the registration statement or prospectus or any amendments
or supplements thereto after the Company has furnished the Holder with copies
of the same.
8.2. Indemnification by the Holder. In connection with any
registration statement in which the Holder is participating, the participating
Holder will furnish to the Company in writing such information as is
reasonably requested by the Company for use in such registration statement or
prospectus and will indemnify, to the extent permitted by law, the Company,
its directors and officers and each person who controls the Company (within
the meaning of the Securities Act) against any losses, claims, damages,
liabilities and expenses arising out of or resulting from any untrue or
alleged untrue statement of material fact or any omission or alleged omission
of a material fact required to be stated in the registration statement or
prospectus or any amendment thereof or supplement thereto or necessary to make
the statements therein not misleading, but only to the extent that such untrue
statement or omission or such alleged untrue statement or alleged omission
occurs in reliance upon and in conformity with information so furnished in
writing by the Holder specifically for use in the registration statement.
8.3. Procedures as to Indemnification. Any person entitled to
indemnification hereunder shall (i) give prompt notice to the indemnifying
party of any claim with respect to which it may seek indemnification and (ii)
unless in such indemnified party's reasonable judgment a conflict of interest
between such indemnified and indemnifying parties may exist with respect to
such claim, permit such indemnifying party to assume the defense of such claim
with counsel reasonable satisfactory to the indemnified party. If such
defense is assumed, the indemnifying party will not be subject to any
liability for any settlement made without its consent (but such consent will
not be unreasonably withheld). An indemnifying party who is not entitled to,
or elects not to, assume the defense of a claim will not be obligated to pay
the fees and expenses of more than one counsel for all parties indemnified by
such indemnifying party with respect to such claim, unless in the reasonable
judgment of any indemnified party a conflict of interest may exist between
such indemnified party and any other of such indemnified parties with respect
to such claim.
8.4. Contribution. If the indemnification provided for in this
Section 8 is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any loss, liability, claim, damage, or
expense referred to therein, then the indemnifying party, in lieu of
indemnifying such indemnified party hereunder, shall contribute to the amount
paid or payable by such indemnified party as a result of such loss, liability,
claim, damage, or expense in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the
indemnified party on the other in connection with the statements or omissions
that resulted in such loss, liability, claim, damage, or expense (including
legal fees or expenses) as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative
intent, knowledge, access to information, and opportunity to correct or
prevent such statement or omission. The Company and each holder of
Registrable Securities agree that it would not be just and equitable if
contribution pursuant to this Section 8.4 were determined by pro rata
allocation or by any other method of allocation which does not take into
account the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 8, an indemnified
holder shall not be required to contribute any amount in excess of the net
proceeds received by the indemnified holder from the sale of the Registrable
Securities. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation.
<PAGE>
9. CONDITION TO THE COMPANY'S OBLIGATIONS
In connection with an underwritten offering, it shall be a condition to
the Company's obligations to include Registrable Securities on behalf of the
Holder that the underwriters agree to indemnify the Company, its directors and
officers and each person who controls the Company (within the meaning of the
Securities Act) against any losses, claims, damages, liabilities and expenses
arising out of or resulting from any untrue or alleged untrue statement of
material fact or any omission or alleged omission of a material fact required
to be stated in the registration statement or prospectus or any amendment
thereof or supplement thereto or necessary to make the statements therein not
misleading, but only to the extent that such untrue statement or omission or
such alleged untrue statement or alleged omission is contained in information
furnished in writing by such underwriters on their own behalf specifically for
use in preparing the registration statement.
10. DEFINITIONS
10.1. Registrable Securities. The term "Registrable
Securities" means any common stock of the Company issued or issuable upon
exercise of any convertible notes, warrant, or similar instruments and any
securities issued or to be issued with respect to such securities by way of a
stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization. As to any
particular Registrable Securities, such securities will cease to be
Registrable Securities when they have been (i) effectively registered under
the Securities Act or disposed of in accordance with the registration
statement covering them or (ii) transferred pursuant to Rule 144 under the
Securities Act (or any similar rule then in force).
10.2. Registration Expenses. The term "Registration Expenses"
means all expenses incident to the Company's performance of or compliance with
this Agreement, including without limitation all registration and filing fees,
fees and expenses of compliance with securities or blue sky laws, printing
expenses, messenger and delivery expenses, expenses and fees for listing the
securities to be registered on exchanges or trading system on which similar
securities issued by the Company are then listed or included, and fees and
disbursements of counsel for the Company.
10.3. Restricted Form. The term "Restricted Form" shall mean a
form of registration statement under the Securities Act which imposes for its
use a limitation on the maximum value or number of securities to be included
therein.
10.4. Securities Act. The term "Securities Act" shall mean the
Securities Act of 1933, as amended.
10.5 Shares. The term "Shares" shall mean any common stock of the
Company issued upon conversion of the Notes or upon the exercise of the
Warrant.
10.6. Underwriting Commissions. The term "Underwriting
Commissions" means all underwriting discounts or commissions relating to the
sale of securities of the Company, but excludes any expenses reimbursed to
underwriters.
11. MISCELLANEOUS
11.1. Notices. Any notices required hereunder shall be sent by
certified or registered mail or telecopied and confirmed by telecopy answer
back and, until changed by notice to the Holder, to the Company at 1025 Acuff
Road, Bloomington, Indiana 47404, Attention Chief Financial Officer, Facsimile
(812) 337-6029, and until changed by notice to the Company, to the Holder at
11825 North Pennsylvania Street, Carmel, Indiana 46032, Attention John Sabl,
Facsimile (317) 817-6327.
11.2. Amendments and Waivers. The provisions of this Agreement may
be amended and the Company may take any action herein prohibited, or omit to
perform any act herein required to be performed by it, if the Company has
obtained the prior written consent of the Holder.
11.3. Successors and Assigns. All covenants and agreements in this
Agreement by or on behalf of any of the parties hereto will bind and inure to
the benefit of their respective transferees and successors. The rights to
cause the Company to register Registrable Securities pursuant to this
Agreement shall follow the Note, the Warrant or the Shares, and shall be
exercisable by Holder of the Note or any Warrant or Shares including any
transferees of the Note, the Warrant or the Shares.
11.4. Governing Law. All questions concerning the construction,
validity and interpretation of this Agreement will be governed by the law of
the State of Indiana.
11.5. Jurisdiction. The parties hereto agree to submit to personal
jurisdiction and to waive any objection as to venue in the federal or state
courts in the County of Hamilton or Marion, State of Indiana. Service of
process on any party hereto in any action arising out of or relating to this
Agreement shall be effective if mailed to such party at the address listed in
Section 11.1 hereof.
11.6. 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 Holder, and one by the two other
arbitrators. 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.
11.7. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be considered to be an original
instrument and to be effective as of the date first written above.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
GENERAL ACCEPTANCE CORPORATION
By ___/s/ R. E. Algood_____
Name: R. E. Algood
Title: Pres.
CONSECO, INC.
By ____Rollin M. Dick________
Name: Rollin M. Dick
Title: Executive Vice President,
Chief Financial Officer
Exhibit 9.2
16
G:\ACW\CONSECO\GAC\REGAG.913
AMENDMENT NO. 1
To
Stockholders' Agreement
This Amendment No. 1 (this "Amendment") to Stockholders' Agreement (the
"Underlying Agreement"), dated as of April 11, 1997, among General Acceptance
Corporation, an Indiana Corporation (the "Company"), Conseco, Inc., an Indiana
corporation ("Conseco"), Capitol American Life Insurance Company, an Arizona
life insurance company (the "Purchaser"), and each of the undersigned
"Stockholders" listed on the signature page hereof, is made as of September
16, 1997.
W I T N E S S T H:
Whereas, simultaneously with the execution and delivery of this
Amendment, the Company and Conseco are entering into an Agreement, of even
date herewith (the "September Agreement"), which provides among other things
for the guarantee by Conseco of certain obligations of the Company to General
Electric Capital Corporation ("GECC") pursuant to that certain Limited
Continuing Guaranty, of even date herewith, issued by Conseco for the benefit
of GECC (the "Guaranty") in consideration, among other things, for the
issuance to Conseco of (x) the Company's 12% Subordinated Convertible Note, of
even date herewith (the "Note"), in an aggregate principal amount of
$10,000,000 and all other amounts paid by, or on behalf of, Conseco pursuant
to the Guaranty which is convertible into shares of common stock, no par
value, of the Company ("Common Stock"), and (y) a Warrant, of even date
herewith (the "Warrant"), to purchase 500,000 shares of Common Stock, in each
case adjustable as provided therein; and
Whereas, the parties desire to amend the Underlying Agreement as provided
by this Amendment.
NOW, THEREFORE, in order to induce the parties hereto to enter into the
September Agreement and the Supplemental Agreements referred to therein and to
consummate the transactions contemplated thereby, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Underlying Agreement is hereby amended as of the date hereof
as follows:
1. Terms defined herein shall have the meanings ascribed to them in this
Amendment. Unless otherwise defined herein or unless the context otherwise
requires, capitalized terms used herein shall have the meanings set forth in
the Underlying Agreement.
2. All references in the Underlying Agreement to the Agreement shall mean
the Underlying Agreement as amended by this Amendment.
3. The first sentence of Section 1(a) of the Underlying Agreement is
hereby amended by (x) inserting immediately after the first use of the term
"outstanding" therein the following: "and neither Conseco, its successors and
assigns nor any holder of the Note or a Warrant has any further right,
obligation or liability under the Guaranty, the Note or the Warrant", and (y)
by inserting immediately after the term "control" in the sixth line thereof
before the parenthetical the following, "including but not limited to the
voluntary resignation of such Stockholders and the Stockholders' Designee
hereinafter defined."
4. Section 1(a) of the Underlying Agreement is hereby amended by adding
a new subsection immediately after subsection (iv) thereof to be and read as
follows:
A(v) in the event that (x) 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, (y) Conseco becomes obligated to make payment
pursuant to the Guaranty, or (z) without the consent of Conseco, after the
date hereof, the Company incurs additional Obligations (as defined in the
Guaranty), amends, modifies or otherwise changes the terms of the Obligations,
GECC's obligations, responsibilities or liabilities with respect to the
Obligations or the terms or provisions of any document relating to the
Obligations or makes any waiver relating to the foregoing, the Board shall (so
long as the Debentures are outstanding or Conseco, its successors or assigns
or any holder of the Note or a Warrant has any right, obligation or liability
under the Guaranty, the Note or the Warrant) consist of eight (8) members,
six (6) of which shall be Conseco Designees."
5. Section 4 of the Underlying Agreement is hereby amended to be and
read in its entirety as follows:
A4. Action by Stockholders and the Company.
Each Stockholder shall vote all of his or her Securities which are voting
shares and any other voting securities of the Company over which such
Stockholder has voting control and shall take all other necessary action
(whether in his or her capacity as a stockholder, director, member of a board
committee or officer of the Company or otherwise, and including attendance at
meetings in person or by proxy for purposes of obtaining a quorum and
execution of written consents in lieu of meetings), and the Company shall
take all necessary or desirable actions within its control (including calling
special board or stockholder meetings) so that (x) the issuance of the
Debentures to the Purchaser, including but not limited to, the conversion
features of the Debentures, is approved and ratified at the next meeting of
the stockholders of the Company held after April 11, 1997, and (y) 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)."
6. Section 7(a) of the Underlying Agreement is hereby amended by
inserting at thereof the following:
A(iv) as of September 16, 1997 such Stockholder is the record or
beneficial owner of the Securities set forth opposite his, her or its name on
the signature page hereof."
Except as otherwise provided herein, the terms and provisions of the
Underlying Agreement shall remain unchanged and continue in full force and
effect.
This Agreement may be executed in any number of counterparts, each of
which shall, collectively and separately, constitute one agreement.
IN WITNESS WHEREOF, this Amendment has been duly executed as of the date
first written above.
GENERAL ACCEPTANCE CORPORATION
By ____/s/ R. E. Algood, President_____
CONSECO, INC.
By ___/s/ Rollin M. Dick___________
CAPITOL AMERICAN LIFE INSURANCE
COMPANY
By ____/s/ Rollin M. Dick_____________
<PAGE>
"STOCKHOLDERS"
STOCKHOLDER SHARES
_/s/ Malvin L. Algood__ _1,100,000
Malvin L. Algood
_/s/ Russell E. Algood____ _1,041,000
Russell E. Algood
_/s/ John G. Algood_____ _956,000___
John G. Algood
_/s/ Janet Algood __ _____0___
Janet Algood
_/s/ Shirley Cook______ __966,000__
Shirley Cook
Exhibit 10.83
A:\AGMNT913.WPD
AGREEMENT
Dated as of September 16, 1997
between
GENERAL ACCEPTANCE CORPORATION
and
CONSECO, INC.
27
A:\AGMNT913.WPD
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
7. Affirmative Covenants 20
8. Negative Covenants 21
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
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.
"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.
"Algood Debentures" shall collectively mean those 12% Subordinated
Convertible Notes, of even date herewith, in the aggregate principal amount of
$1,500,000 issued to J.G. Algood, M.L. Algood and R.E. Algood (collectively,
the "Algoods") in exchange for their loans to the Company for working capital
purposes of an aggregate of $1,500,000.
"Algood Subordination Agreement" shall mean the Algood 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.
"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 AGE
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").
"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 Algood 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).
"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 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 Algood Notes, the Algood 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 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 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 satisfactory 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 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 Algood Subordination Agreement
shall have been executed and delivered by the intended parties thereto.
(k) The Algood 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 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 to the Purchaser ij 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:
4.1. 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) (w) 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 no
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 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 Act of 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 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 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 Subsidiaries 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 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, choate 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 Directors, 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.
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.
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 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 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 manner with 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).
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 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 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 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.
<PAGE>
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 excercisable 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 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 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.
<PAGE>
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 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.
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 MARION, 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
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.
11825 North Pennsylvania Street
Carmel, Indiana 46032
Attention: John Sabl
Facsimile: (317) 817-6327
(b) If to the Company at:
General Acceptance Corporation
1025 Acuff Road
Bloomington, Indiana 47404
Attention: Chief Financial Officer
Facsimile: (812) 337-6029
With copies to:
Mr. Russell Algood
2800 South Olcott Boulevard
Bloomington, Indiana 47401
and
Hackman McClarnon Hulett & Cracraft
Suite 2400 One Indiana Square
Indianapolis, Indiana 46204
Attention: Marvin L. Hackman
Facsimile: (317) 686-3288
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 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.
IN WITNESS WHEREOF, this Agreement has been duly executed as of the date
first written above.
CONSECO, INC.
As the Purchaser
By: /s/ Rollin M. Dick Rollin M.
Dick
Executive Vice President,
Chief Financial Officer
GENERAL ACCEPTANCE CORPORATION
As the Company
By: /s/ R. E. Algood, Pres.
Exhibit 10.84
A:\NOTE913.WPD
THIS SUBORDINATED CONVERTIBLE NOTE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE OR OTHER SECURITIES LAWS AND
MAY NOT BE OFFERED, SOLD, TRANSFERRED OR ASSIGNED EXCEPT (I) PURSUANT TO
REGISTRATIONS THEREOF UNDER SUCH LAWS, OR (II) IF, IN THE OPINION OF COUNSEL
REASONABLY SATISFACTORY TO GENERAL ACCEPTANCE CORPORATION, THE PROPOSED
TRANSFER MAY BE EFFECTED IN COMPLIANCE WITH APPLICABLE SECURITIES LAWS WITHOUT
SUCH REGISTRATIONS.
12% SUBORDINATED CONVERTIBLE NOTE
Dated: September 16, 1997
For value received, General Acceptance Corporation, an Indiana
corporation with its principal offices at 1025 Acuff Road, Bloomington,
Indiana 47404 (the "Maker"), hereby promises to pay to the order of Conseco,
Inc. ("Conseco"), an Indiana corporation with its principal offices at 11825
North Pennsylvania Street, Carmel, Indiana 46032, or its assigns
(collectively, the "Holder"), at its principal office or at such other place
as the Holder may direct in writing to the Maker, in lawful money of the
United States of America, the aggregate unpaid principal amount (the
"Principal Amount") from time to time paid, by or on behalf of, Conseco,
pursuant to that certain Limited Continuing Guarantee of even date herewith
pursuant to which Conseco guarantees (the "Guaranty") certain obligations of
Maker to General Electric Capital Corporation ("GE Capital"), and interest, as
provided herein, all without relief from valuation or appraisement laws. This
Note is being delivered in connection with that certain Agreement by and among
the Maker and Conseco, of even date herewith (the "September Agreement").
The terms and provisions of the September Agreement shall govern the terms and
provisions of this Note and any conflict between this Note and the September
Agreement shall be resolved by the September Agreement.
1. Payment of Principal. Subject to acceleration as provided for
elsewhere in this 12% Subordinated Convertible Note (the "Note"), the Maker
shall pay to the Holder the principal balance from time to time outstanding
under this Note immediately upon written demand therefor from the Holder, plus
all accrued and unpaid interest on such principal balance of this Note as of
the date of such payment.
2. Calculation of Principal. The Maker is hereby authorized to
endorse the date and amount of each payment paid, by or on behalf of Conseco,
pursuant to the Guaranty, and each repayment made by the Maker pursuant to
this Note, on the schedule which is attached to and constitutes a part of this
Note, which shall constitute prima facie evidence, absent manifest error, of
the accuracy of the information contained herein; provided, however, that the
failure of the Holder to endorse or record any such payment made pursuant to
the Guaranty or any payments or repayments made by the Maker hereunder shall
not affect the obligations of the Maker hereunder.
43
A:\NOTE913.WPD
3. Interest. Interest on the unpaid principal balance hereof
existing from time to time shall accrue at the rate of 12% per annum;
provided, however, interest shall accrue at the rate of 15% per annum so long
as an "Event of Default," as specified in Section 4(a), exists hereunder,
provided, however, that in the event of an Event of Default under Section
4(a)(i) herein, such 15% interest shall not begin to accrue until 30 days
after the earlier of (x) the date payment in full is made of all Senior
Indebtedness; or (y) payment hereunder or the release of collateral is
permitted by the Senior Lender. Interest shall be calculated on the basis of
actual daily balances of outstanding principal for the exact number of days
the principal remains outstanding and shall be computed on the basis of a
360-day year. Interest shall be due and payable on the date each payment of
principal becomes due and payable hereunder as provided above.
4. Default and Remedy.
(a) An "Event of Default" under this Note shall mean the occurrence of any
of the following events: (i) the Maker defaults in the payment of principal of
or interest on this Note when due and the Maker does not cure that default
within 5 days after the due date; (ii) the Maker defaults in the performance
of any obligation under this Note (other than the payment described in the
immediately preceding clause) and the does not cure that default within 30
days after receipt by the Maker of written notice from the Holder; (iii) an
"Event of Default" or a "Triggering Event", both as defined in the September
Agreement, shall occur; or (iv) the Maker commences proceedings in any court
under the United States Bankruptcy Code, or any other debtors' relief or
insolvency act, whether state or federal (the "Bankruptcy Laws"), or any other
person commences proceedings under the Bankruptcy Laws against the Maker and
those proceedings are not stayed or dismissed within 60 days.
(b) If any Event of Default occurs and is continuing, then the Holder
shall have the right and option to declare, by notice in writing sent by
registered or certified mail to the Maker, the full unpaid principal balance
hereof, together with all accrued and unpaid interest thereon, immediately due
and payable without further demand, notice, or presentment for payment.
Alternatively, if a Triggering Event occurs, the Holder shall have the right
and option to cause the Maker to redeem this Note pursuant to the procedure
set forth in Section 10.2 of the September Agreement.
(c) If this Note is collected or attempted to be collected by the
initiation or prosecution of any suit or through any bankruptcy court, or by
any judicial proceeding, or is placed in the hands of attorneys for
collection, then the Maker shall pay, in addition to all other amounts owing
hereunder, all court costs and reasonable attorney's fees incurred by the
Holder.
5. Subordination.
(a) Subordination to Senior Debt. Notwithstanding anything to the
contrary contained in this Note, the Maker covenants and agrees, and the
Holder by acceptance of this Note likewise covenants and agrees, that the
Maker's indebtedness under this Note shall be junior and subordinate to the
Senior Indebtedness (as hereafter defined) to the extent and in the manner set
forth in this Section 5, except to the extent otherwise agreed to in writing
by the Holder and any Senior Lender (as hereinafter defined) with respect to
the Senior Indebtedness held by or payable to that Senior Lender. Each
subsection of this Section 5 shall be given independent effect so that if a
particular payment or action is prohibited by any one of these subsections, it
shall be prohibited although it otherwise would not be prohibited by another
subsection.
(b) Payment Default on Senior Indebtedness. If at any time a default
occurs in the payment when due (whether at maturity or upon acceleration or
mandatory prepayment, or on any principal installment payment date or interest
payment date, or otherwise) ("Payment Default") of any Senior Indebtedness,
then at all times thereafter until (i) the Payment Default has been cured,
(ii) the Payment Default or the benefits of this sentence have been waived in
writing by or on behalf of the Senior Lenders holding that Senior
Indebtedness, or (iii) payment in full of all affected Senior Indebtedness,
the Maker shall not, directly or indirectly, make any Distribution of Assets
(as hereinafter defined) or Payment (as hereinafter defined) with respect to
this Note.
(c) Dissolution, Liquidation or Reorganization of Maker. In the event
of any insolvency, bankruptcy or receivership case or proceeding or any
dissolution, winding up, liquidation, reorganization or other similar
proceeding relating to the Maker, its property or its operations (whether
voluntary or involuntary and whether in bankruptcy, insolvency or receivership
proceedings or otherwise), upon an assignment for the benefit of creditors, or
any other marshaling of the assets of the Maker, then payment in full of all
Senior Indebtedness then or thereafter to become due shall occur before the
Holder shall be entitled to receive or retain any Distribution of Assets or
Payment with respect to this Note. In any such proceedings, any Distribution
of Assets or Payment to which the Holder would be entitled if this Note were
not subordinated to the Senior Indebtedness shall be paid by the Maker or the
agent or other person making such payment or distribution, or by the Holder if
received by the Holder, directly to each Senior Lender, pro forma, to the
extent necessary to make payment in full of all Senior Indebtedness, after
giving effect to any concurrent payment or distribution to or for the benefit
of the Senior Lenders.
(d) Subrogation. No Distribution of Assets or Payment to which the
Holder would have been entitled except for the provisions of this Section 5
and which are received by or paid over to the Senior Lenders or their
Representative (as hereinafter defined) shall, as between the Maker and its
creditors other than the Senior Lenders and the Holder, be deemed to be a
payment by the Maker to the Senior Lenders or on account of the Senior
Indebtedness, and the Holder shall be subrogated (without any duty on the part
of the Senior Lenders to warrant, create, effectuate, preserve or protect such
subrogation) to the then or thereafter existing rights of the Senior Lenders
to receive Distributions of Assets or payments made on the Senior Indebtedness
until this Note shall be paid in full.
(e) Payments Held in Trust. If the Holder receives any Distribution of
Assets or Payment which the Holder is not entitled to retain under the
provisions of this Section 5, any such Distribution of Assets or Payment so
received shall be held in trust for the Senior Lenders, shall not be
commingled with any other assets of the Holder, and shall be paid to the
Senior Lenders, pro rata, to the extent necessary to make payment in full,
after giving effect to any concurrent payment or distribution to or for the
benefit of the Senior Lenders.
(f) Changes in Senior Indebtedness. Except as otherwise provided in the
Guaranty, any Senior Lender may at any time and from time to time with notice
to the Holder: (i) extend, renew, modify, waive or amend the terms of the
Senior Indebtedness; (ii) sell, exchange, release or otherwise deal with any
property pledged, mortgaged or otherwise securing the Senior Indebtedness;
(iii) release any guarantor or any other person liable in any manner for the
Senior Indebtedness or amend or waive the terms of the Senior Indebtedness;
(iv) exercise or refrain from exercising any rights against the Maker or any
other persons; (v) apply in any order any sums by whomever paid or however to
the Senior Indebtedness; and (vi) take any other action which otherwise might
be deemed to impair the Holder's rights. Except a otherwise provided in the
Guaranty, and all of such actions may be taken by the Senior Lenders without
incurring responsibility to the Holder and without impairing or releasing the
Holder's obligations to the Senior Lenders.
(g) Third-Party Beneficiary, Etc.. The foregoing provisions regarding
subordination are solely for the purpose of defining the relative rights of
the Senior Lenders on the one hand and the Holder on the other hand. Such
provisions are for the benefit of the Senior Lenders (and their successors and
assigns) and shall be enforceable by them directly against the Holder except
to the extent otherwise agreed to in writing by the Holder and any other
Senior Lender.
(h) Definitions. As used in this Section 5 (or as elsewhere used in
this Note) the following terms shall have the meanings indicated:
"Distribution of Assets" means any distribution of assets of the Maker or any
of its subsidiaries of any kind or character, whether a payment, purchase or
other acquisition or retirement for cash, property, or securities, with
respect to the Maker's obligations under this Note.
"Payment" means payment of any obligation now or hereafter existing under this
Note (as it may hereafter be amended, supplemented, or otherwise modified from
time to time), whether created directly or acquired by assignment or
otherwise, and interest and premiums, if any, thereon and all other amounts
payable in respect thereof or in connection therewith.
"Representative" means, with respect to any Senior Indebtedness, the trustee,
agent, or other representative for one or more of the Senior Lenders, if any,
designated in the indenture, agreement or document creating, evidencing or
governing such Senior Indebtedness or pursuant to which it was issued, or
otherwise designated by the holders of such Senior Indebtedness.
"Senior Indebtedness" shall have the meaning specified in the September
Agreement.
"Senior Lender" or "Senior Lenders" means one or more of the holders of Senior
Indebtedness.
6. Conversion.
(a) The Holder may, at the Holder's option, at any time, and from time to
time, prior to payment in full of outstanding indebtedness under this Note,
convert the outstanding Principal Amount of this Note (but not to exceed
$10,000,000) and any accrued but unpaid interest due pursuant to Section 1
above (the "Conversion Amount"), in whole or in part (but only into full
shares), into fully paid and non-assessable shares of the common stock, no par
value of the Maker (the "Common Shares"), at a rate equal to the higher of (x)
the book value per Common Share of the Maker determined in accordance with
generally accepted accounting principles consistently applied as of the time
of such request for conversion, or (y) $0.25 per Common Share (in either case
subject to adjustment as set forth in Section 7) (the "Conversion Rate").
In order to exercise this conversion right, the Holder must send written
notice of the request for conversion to the Maker at least 10 days prior to
the specified conversion date. On the conversion date (or as soon thereafter
as is reasonably practicable), the Maker shall issue to the Holder a share
certificate for the Common Shares acquired upon conversion.
(c) Notwithstanding any other provisions of this Section 6 to the
contrary, the conversion rights of the Holder shall be subject to compliance
with all applicable federal and state securities laws, and the Holder agrees
to execute all required agreements and documents required by the Maker to
establish compliance with such laws.
(d) The Maker shall at all times reserve and keep available and free of
preemptive rights out of its authorized but unissued Common Shares, solely for
the purpose of issuance upon conversion of the Note, the number of Common
Shares as shall from time to time be sufficient to effect the conversion of
the Note, and if at any time the number of authorized but unissued Common
Shares shall not be sufficient to effect the conversion of the Note, the Maker
shall take the corporate action necessary to increase the number of its
authorized Common Shares to a number sufficient for this purpose. The Maker
further covenants that all shares that may be issued upon the conversion of
this Note and payment of the Conversion Price, all as set forth herein, will
be free from all taxes, liens and charges in respect of the issue thereof.
The Maker agrees that its issuance of this Note shall constitute full
authority to its officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for the shares
upon the conversion of this Note.
7. Adjustments.
(a) Reorganization, Merger or Sale of Assets
If at any time while this Note, or any portion thereof, is outstanding
there shall be (i) a reorganization (other than a combination,
reclassification, exchange or subdivision of shares otherwise provided for
herein), (ii) a merger or consolidation with or into another corporation in
which the Maker is not the surviving entity, or a reverse triangular merger in
which the Maker is the surviving entity but the shares of the Maker's capital
stock outstanding immediately prior to the merger are converted by virtue of
the merger into other property, whether in the form of securities, cash or
otherwise, or (iii) a sale or transfer of the Maker's properties and assets
as, or substantially as, an entirety to any other person, then, as a part of
such reorganization, merger, consolidation, sale or transfer, lawful provision
shall be made so that the holder of this Note shall thereafter be entitled to
receive upon conversion of the Notes the number of shares of stock or other
securities or property of the successor corporation resulting from such
reorganization, merger, consolidation, sale or transfer that a holder of the
shares deliverable upon conversion of this Note would have been entitled to
receive in such reorganization, consolidation, merger, sale or transfer if
this Note had been converted immediately before such reorganization, merger,
consolidation, sale or transfer, all subject to further adjustment as provided
in this Section 7. The foregoing provisions of this Section 7(a) shall
similarly apply to successive reorganizations, consolidations, mergers, sales
and transfers and to the stock or securities of any other corporation that are
at the time receivable upon the conversion of this Note. If the per-share
consideration payable to Holder for shares in connection with any such
transaction is in a form other than cash or marketable securities, then the
value of such consideration shall be determined in good faith by the Maker's
Board of Directors. In all events, appropriate adjustment (as determined in
good faith by the Maker's Board of Directors) shall be made in the application
of the provisions of this Note with respect to the rights and interests of
Holder after the transaction, to the end that the provisions of this Note
shall be applicable after that event, as near as reasonably may be, in
relation to any shares or other property deliverable after that event upon
conversion of this Note.
(b) Reclassification.
If the Maker, at any time while this Note, or any portion thereof,
remains outstanding, by reclassification of securities or otherwise, shall
change any of the securities as to which conversion rights under this Note
exist into the same or a different number of securities of any other class or
classes, this Note shall thereafter represent the right to acquire such number
and kind of securities as would have been issuable as the result of such
change with respect to the securities that were subject to the conversion
rights under this Note immediately prior to such reclassification or other
change and the Conversion Price or number of shares received upon such
conversion shall be appropriately adjusted, all subject to further adjustment
as provided in this Section 7.
(c) Split, Subdivision or Combination of Shares.
If the Maker at any time while this Note, or any portion thereof, remains
outstanding shall split, subdivide or combine the securities as to which
conversion rights under this Note exist, into a different number of securities
of the same class, the number of shares issuable upon conversion shall be
proportionately decreased in the case of a split or subdivision or
proportionately increased in the case of a combination.
(d) Adjustments for Dividends in Stock or Other Securities or Property.
If while this Note, or any portion hereof, remains outstanding and
unexpired the holders of the securities as to which conversion rights under
this Note exist at the time shall have received, or, on or after the record
date fixed for the determination of eligible stockholders, shall have become
entitled to receive, without payment therefor, other or additional stock or
other securities or property (other than cash) of the Maker by way of
dividend, then and in each case, this Note shall represent the right to
acquire upon conversion, in addition to the number of shares of the security
receivable upon conversion of this Note, and without payment of any additional
consideration therefor, the amount of such other or additional stock or other
securities or property (other than cash) of the Maker that such holder would
hold on the date of such conversion had it been the holder of record of the
security receivable upon conversion of this Note on the date hereof and had
thereafter, during the period from the date hereof to and including the date
of such conversion, retained such shares and/all other additional stock, other
securities or property available by this Note as aforesaid during such period,
giving effect to all adjustments called for during such period by the
provisions of this Section 7.
(e) Issuance of Shares Below Conversion Price.
(1) If while this Note, or any portion hereof, remains outstanding,
the Maker shall offer and sell Additional Shares of Common Stock (as
hereinafter defined) for consideration per share less than the Conversion
Price in effect immediately prior to the issuance of such Additional Shares of
Common Stock (except upon the exercise of stock options granted pursuant to
the Company's Stock Option Plan approved by the Board), the Conversion Price
in effect immediately prior to each such issuance shall forthwith be adjusted
upon such issuance to a price equal to the price paid per share for such
Additional Shares of Common Stock.
(2) For the purpose of the calculations provided in this Section
7(e), if at any time or from time to time after the date hereof the Maker
shall issue any rights or options for the purchase of, or stock or other
securities convertible into, Additional Shares of Common Stock (such Common
Stock or securities being hereinafter referred to as "Convertible
Securities"), then, and in each case, if the Effective Price (as hereinafter
defined) of such rights, options or Convertible Securities shall be less than
the Conversion Price, the Maker shall be deemed to have issued at the time of
the issuance of such rights or options or Convertible Securities the maximum
number of Additional Shares of Common Stock issuable upon exercise or
conversion thereof and to have received as consideration for the issuance of
such shares an amount equal to the total amount of the consideration, if any,
payable to the Maker upon exercise or conversion of such options or rights.
"Effective Price" shall mean the quotient determined by dividing the total of
all of such consideration by such maximum number of Additional Shares of
Common Stock. No further adjustment shall be made as a result of the actual
issuance of Additional Shares of Common Stock on the exercise of any such
rights or options or the conversion of any such Convertible Securities. In
the case of Convertible Securities which have a conversion price which is
based, in whole or in part, upon a discount to the market price or value of
the Common Stock, then for the purposes of calculating the Effective Price,
the consideration shall be deemed to include the minimum conversion price
payable to the Maker.
If any such rights or options or the conversion privilege represented by
any such Convertible Securities shall expire prior to the Maturity hereof
without having been exercised, the adjustment to the number of shares
available hereunder upon the issuance of such rights, options or Convertible
Securities shall be readjusted to the number of shares that would have been in
effect had an adjustment been made on the basis that the only Additional
Shares of Common Stock so issued were the Additional Shares of Common Stock,
if any, actually issued or sold on the exercise of such rights or options or
rights of conversion of such Convertible Securities, and such Additional
Shares of Common Stock, if any, were issued or sold for the consideration
actually received by the Maker for the granting of all such rights or options,
whether or not exercised, plus the consideration received for issuing or
selling the Convertible Securities actually converted plus the consideration,
if any, actually received by the Maker on the conversion of such Convertible
Securities.
(3) For the purpose of the calculations provided for in this Section
7(e), if at any time or from time to time after the date hereof the Maker
shall issue any rights or options for the purchase of Convertible Securities,
then, in each such case, if the Effective Price thereof is less than the then
Conversion Price, the Maker shall be deemed to have issued at the time of the
issuance of such rights or options the maximum number of Additional Shares of
Common Stock issuable upon conversion of the total amount of Convertible
Securities covered by such rights or options and to have received as
consideration for the issuance of such Additional Shares of Common Stock an
amount equal to the amount of consideration, if any, received by the Maker for
the issuance of such rights or options, plus the consideration, if any,
payable to the Maker upon the conversion of such Convertible Securities.
"Effective Price" shall mean the quotient determined by dividing the total
amount of such consideration by such maximum number of Additional Shares of
Common Stock. No further adjustment of such Conversion Price adjusted upon
the issuance of such rights or options shall be made as a result of the actual
issuance of the Convertible Securities upon the exercise of such rights or
options or upon the actual issuance of Additional Shares of Common Stock upon
the conversion of such Convertible Securities.
(4) The term "Additional Shares of Common Stock" as used herein shall
mean all shares of Common Stock issued or deemed issued by the Maker after the
date hereof, other than (i) securities issued pursuant to or in connection
with the terms of the September Agreement; (ii) shares of Common Stock issued
upon conversion of convertible securities or the exercise of common stock
purchase warrants outstanding as of the date hereof; (iii) shares of Common
Stock issuable to employees, officers or directors pursuant to the Maker's
stock option plan; (iv) shares of Common Stock issued or issuable to directors
in connection with their service as directors; (v) shares of Common Stock
issued or issuable to directors, officers or employees for services rendered
or to be rendered pursuant to arrangements approved by the Board of Directors;
and (vii) shares of Common Stock issued in connection with a business
combination, merger, consolidation, asset acquisition or the acquisition of
the business of another corporation (through the purchase of stock or assets)
approved by the Board of Directors and all of the Conseco Directors (as
defined in the September Agreement).
(f) No Impairment.
Maker will not, by any voluntary action, avoid or seek to avoid the
observance or performance or any of the terms to be observed or performed
hereunder by Maker, but will at all times in good faith assist in the carrying
out of all the provisions of this Section 7 and in the taking of all such
action as may be necessary or appropriate in order to protect the rights of
Holder against impairment.
8. Notices. (a) Whenever the number of shares issuable or the
Conversion Price hereunder shall be adjusted pursuant to Section 7 hereof,
the Maker shall issue a certificate signed by its Chief Financial Officer
setting forth, in reasonable detail, the event requiring the adjustment, the
amount of the adjustment, the method by which such adjustment was calculated,
and the Conversion Price and number of shares purchasable hereunder after
giving effect to such adjustment, and shall cause a copy of such certificate
to be mailed (by first-class mail, postage prepaid) to Holder.
(b) All notices, requests, demands, or other communications that are
required or may be given pursuant to the terms of this Note shall be in
writing and delivery shall be deemed sufficient and to have been duly given on
the date of service if delivered personally or by facsimile transmission if
receipt is confirmed to the party to whom notice is to be given or on the
third day after mailing if mailed by first-class mail, return receipt
requested, postage prepaid, and properly addressed as follows:
If to the Maker, to:
General Acceptance Corporation
1025 Acuff Road
Bloomington, Indiana 47404
Attention: Chief Financial Officer
Fax: (812) 337-6029
Copies to:
Mr. Russell Algood
2800 South Olcott Boulevard
Bloomington, Indiana 47401
and
Hackman McClarnon Hulett & Cracraft
Suite 2400 One Indiana Square
Indianapolis, Indiana 46204
Attention: Marvin L. Hackman
Fax: (317) 686-3288
If to the Holder, to:
Conseco, Inc.
11825 North Pennsylvania Street
Carmel, Indiana 46032
Attention: John Sabl
Fax: (317) 817-6327
or to such other address as may be specified in writing by any of the above.
9. Remedies. The remedies provided by this Note shall be
cumulative, and shall be in addition to and not exclusive of other remedies
available under or pursuant to the September Agreement, at law, or in equity.
The exercise or waiver by the Holder of any right or remedy available under
this Note shall not be deemed to be a waiver of any other right or remedy
available under this Note, the September Agreement or any other agreement
between the Maker and the Holder or any affiliate of the Holder, at law, or in
equity.
10. Miscellaneous.
(a) Whenever used herein, the singular includes the plural and the plural
includes the singular. The term "Maker" means the corporation named in the
opening paragraph hereof and its successors and assigns.
(b) Indiana law shall govern this interpretation, construction, and
enforcement of this Note and all transactions contemplated hereby,
notwithstanding any state's choice of law rules to the contrary. Any
litigation related to this Note may be maintained only in the federal district
court for the Southern District of Indiana, Indianapolis Division (or any
successor jurisdiction) or in an Indiana state court in Hamilton County or one
of the counties immediately contiguous to Hamilton County, and each party
hereby irrevocably consents and submits to the jurisdiction of that federal or
state court and irrevocably waives any objection the party may have based upon
improper venue, forum non conveniens, or other similar doctrines or rules.
(c) The Maker and any other party now or hereafter liable for the payment
of this Note in whole or in part, hereby severally (i) waive demand,
presentment for payment, notice of nonpayment, protest, notice of protest,
notice of intent to accelerate, notice of acceleration and all other notice,
filing of suit and diligence in collecting this Note, (ii) agree to the
release of any party primarily or secondarily liable hereon, (iii) agree that
the Holder shall not be required first to institute suit or exhaust its
remedies hereon against the Maker or others liable or to become liable hereon
or to enforce its rights against them, and (iv) consent to any extension or
postponement of time of payment of this Note and to any other indulgence with
respect hereto without notice thereof to any of them.
(d) The Holder, by acceptance hereof, acknowledges that this Note and the
shares to be issued upon conversion hereof are being acquired solely for the
Holder's own account and not as a nominee for any other party, and for
investment, and that the Holder will not offer, sell or otherwise dispose of
this Note or any shares to be issued upon conversion hereof except under
circumstances that will not result in a violation of applicable federal and
state securities laws. Upon exercise of this Note, the Holder shall, if
requested by the Maker, confirm in writing, in a form satisfactory to the
Maker, that the shares so purchased are being acquired solely for the Holder's
own account and not as a nominee for any other party, for investment, and not
with a view toward distribution or resale.
All shares issued upon exercise hereof shall be stamped or imprinted with
a legend in substantially the following form (in addition to any legend
required by state securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED SUCH
SECURITIES AND ANY SECURITIES OR SHARES ISSUED UPON CONVERSION THEREOF MAY NOT
BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SAID ACT.
The Holder shall be entitled to the registration rights set forth in that
certain Registration Rights Agreement of even date herewith by and between the
Maker and the Holder.
(e) The captions of the sections of this Note are solely for convenient
reference and shall not be deemed to affect the meaning or interpretation of
any provision of this Note.
49
IN WITNESS WHEREOF, the Maker has executed, acknowledged, and delivered
this Note as of the day and year first above written.
GENERAL ACCEPTANCE CORPORATION
By:_____/s/ R. E. Algood, President___
Accepted and agreed to this 16th day of September, 1997:
CONSECO, INC.
By:___/s/ Rollin M. Dick__________________
Rollin M. Dick
Executive Vice President,
Chief Financial Officer
Schedule Attached to 12% Subordinated Convertible Note dated September 16,
1997 of GENERAL ACCEPTANCE CORPORATION, payable to the order of CONSECO, INC.
<TABLE>
<CAPTION>
PAYMENTS AND REPAYMENTS
<S> <C> <C> <C> <C>
Date Amount of Payment Made Pursuant to Guaranty Amount Repaid Unpaid Principal Balance Notation Made By
- ---- ------------------------------------------- ------------- ------------------------ ----------------
</TABLE>
Exhibit 10.86
AMENDMENT NO. 1
To
Securities Purchase Agreement
This Amendment No. 1 (this "Amendment") to Securities Purchase Agreement
(the "Underlying Agreement"), dated as of April 11, 1997, between General
Acceptance Corporation, an Indiana corporation (the "Company"), and Capitol
American Life Insurance Company, an Arizona life insurance company (the
"Purchaser"), is made as of September 16, 1997 between the Company and the
Purchaser.
W I T N E S S T H:
Whereas, simultaneously with the execution and delivery of this
Amendment, the Company and Conseco, Inc., an Indiana corporation ("Conseco"),
are entering into an Agreement, of even date herewith (the "September
Agreement"), which provides, among other things, for the guarantee by Conseco
of certain obligations of the Company to General Electric Capital Corporation
("GECC") pursuant to that certain Limited Continuing Guaranty, of even date
herewith, issued by Conseco for the benefit of GECC (the "Guaranty") in
consideration, among other things, for the issuance to Conseco of (x) the
Company's 12% Subordinated Convertible Note, of even date herewith (the
"Note"), in an aggregate principal amount of $10,000,000 and all other amounts
paid by, or on behalf of, Conseco pursuant to the Guaranty which is
convertible into shares of common stock, no par value, of the Company ("Common
Stock"), and (y) a Warrant, of even date herewith (the "Warrant"), to purchase
500,000 shares of Common Stock, in each case adjustable as provided therein;
and
Whereas, the parties desire to amend the Underlying Agreement as provided
by this Amendment.
NOW, THEREFORE, in order to induce the parties hereto to enter into the
September Agreement and the Supplemental Agreements referred to therein and to
consummate the transactions contemplated thereby, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Underlying Agreement is hereby amended as of the date hereof
as follows:
1. Terms defined herein shall have the meanings ascribed to them in this
Amendment. Unless otherwise defined herein or unless the context otherwise
requires, capitalized terms used herein shall have the meanings set forth in
the Underlying Agreement.
2. All references in the Underlying Agreement to the Agreement shall mean
the Underlying Agreement as amended by this Amendment.
3. Section 9.1 of the Underlying Agreement is hereby amended by
inserting at the end thereof the following: A(l) An Event of Default (as
defined in the September Agreement) shall occur."
4. Section 10.1 of the Underlying Agreement is hereby amended to be and
read in its entirety as follows:
A10.1. 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."
5. Section 10.2 of the Underlying Agreement is hereby amended to insert
in lieu of the term "to redeem the Debentures" in the third line thereof the
following: "to redeem or repurchase, as the case may be, the Debentures, the
Note or the Warrant, as the case may be,".
Except as otherwise provided herein, the terms and provisions of the
Underlying Agreement shall remain unchanged and continue in full force and
effect.
IN WITNESS WHEREOF, this Amendment has been duly executed as of the date
first written above.
CAPITOL AMERICAN LIFE
INSURANCE COMPANY
By ____/s/ Rollin M. Dick_____
Rollin M. Dick
Executive Vice President,
Chief Financial Officer
GENERAL ACCEPTANCE
CORPORATION
By __/s/ R. E. Algood, Pres._
Exhibit 10.87
6
CONSECO
SUBORDINATION AGREEMENT
THIS AGREEMENT is entered into this _16th_ day of _September, among
CAPITOL AMERICAN LIFE INSURANCE COMPANY, an Arizona Corporation, MALVIN L.
ALGOOD, JANET ALGOOD, RUSSELL E. ALGOOD, and JOHN G. ALGOOD (hereinafter
jointly and severally referred to as the "Creditors"), and GENERAL ACCEPTANCE
CORPORATION, an Indiana corporation (the "Company") for the benefit of
CONSECO, INC., an Indiana corporation (the "Guarantor").
RECITALS
A. The Company is presently indebted to Creditors in the aggregate
principal amount of Thirteen Million Two Hundred Fifty Thousand Dollars
($13,250,000.00), which indebtedness is evidenced by 12% Subordinated
Convertible Notes of the Company dated April 11, 1997, in such aggregate
principal amount. The indebtedness evidenced by such Notes is hereinafter
referred to as the "Junior Debt".
B. The Company desires to obtain from the Guarantor a Limited Continuing
Guaranty in the principal amount of Ten Million Dollars ($10,000,000.00) (the
"Guaranty") of certain debt owing and to be owing by the Company pursuant to a
Loan and Security Agreement with General Electric Capital Corporation ("GE
Capital"), and concurrently herewith is executing and delivering to the
Guarantor a 12% Subordinated Convertible Note in such principal amount to
evidence the Company's obligation to repay all amounts advanced by Guarantor
pursuant to the Guaranty. The indebtedness evidenced by such Note from time
to time is hereinafter referred to as the "Superior Debt."
C. Guarantor is unwilling to provide the Guaranty for the benefit of the
Company unless the Creditors and the Company enter into this Subordination
Agreement for the benefit of Guarantor.
D. Creditors acknowledge that Creditors have a substantial interest in
the Company and will benefit, directly or indirectly, from the Guaranty and
other extensions of credit and financial accommodations by Guarantor and GE
Capital to the Company.
AGREEMENT
NOW, THEREFORE, in consideration of the Recitals, and to induce Guarantor
to provide the Guaranty and other financial accommodations to the Company, the
parties hereto, intending to be legally bound, agree as follows:
1. RECITALS. The foregoing Recitals, and the definitions contained
therein, are incor-por-ated herein by this reference.
2. SUBORDINATION. Creditors hereby subordinate, to the extent and in
the manner provided in this Agreement, all of the Junior Debt, including
principal and interest thereon, and all rights of the Creditors pursuant
thereto, to the prior payment of all of the Superior Debt, including principal
and interest thereon, costs of collection, including reasonable attorneys'
fees, and the exercise of all rights thereunder by the holder or holders of
the Superior Debt. Each instrument and document evidencing the Junior Debt
shall bear a conspicuous legend that it is subordinated to the Superior Debt.
The Company's and Creditors' books shall be marked to evidence the
subordination of all of the Junior Debt to the Superior Debt. The Guarantor
is authorized to examine such books from time to time and to make any
notations required by this Agreement.
3. WARRANTIES AND REPRESENTATIONS OF THE COMPANY AND CREDITORS. The
Company and the Creditors each hereby represent and warrant to and for the
benefit of the Guarantor that: (a) they have not relied and will not rely on
any representation or information of any nature made by or received from
Guarantor relative to the Company in deciding to execute this Agree-ment; (b)
as of the date hereof, the total principal amount of the Junior Debt is
$13,250,000.00; (c) no part of the Junior Debt is evidenced by any instrument,
security or other writing which has not previously been or is not concurrently
herewith being marked to evidence the within subordination or being deposited
with Guarantor; (d) Creditors are the lawful owners of the Junior Debt and no
part thereof is subject to any defense, offset or counterclaim; (e) Creditors
have not heretofore assigned or transferred any of the Junior Debt, any
interest therein or any collateral or security pertaining thereto; and (f)
Creditors have not heretofore given any subordination in respect of the Junior
Debt, except as set forth in the Notes evidencing the Junior Debt.
4. NEGATIVE COVENANTS. So long as Guarantor has any liability under
the Guaranty, and until all of the Superior Debt has been fully and finally
paid, the Company and, as applicable, the Creditors shall not, without the
prior written consent of the holder or holders of the Superior Debt: (a)
directly or indirectly, make any principal payment on account of or grant a
security interest in, mortgage, pledge, assign or transfer any properties to
secure or satisfy all or any part of the Junior Debt; or (b) demand or accept
from the Company or any other person any such payment or collateral.
5. PERMITTED PAYMENTS AND LIENS. Notwithstanding the provisions of
paragraph 4 hereof, for so long as the Guarantor has not made any payment
pursuant to the Guaranty, and no material event of default has occurred or
exists under any instrument or agreement evidencing or securing the Superior
Debt, the indebtedness to GE Capital, or the New Algood Notes (as defined in
paragraph 22 hereof), the Company may make and Creditors may demand and
receive regularly scheduled payments of interest, but not of principal, on the
Junior Debt.
6. TURNOVER OF PROHIBITED TRANSFERS. If any payment on account of or
any collateral for any part of the Junior Debt is received by Creditors other
than as permitted in paragraph 5 hereof, or as approved by the Guarantor in
writing prior to such payment or transfer, such pay-ment or collateral shall
be delivered forthwith by Creditors to Guarantor for application to, or as
additional security for, the Superior Debt, in the form received except for
the addition of any endorsement or assignment necessary to effect a transfer
of all rights therein to Guarantor. Un-til so delivered any such payment or
collateral shall be held by Creditors in trust for Guarantor and shall not be
commingled with other funds or property of Creditors.
7. OBLIGATIONS OF GUARANTOR. In no event shall Guarantor be liable to
Creditors for any failure to prove the Junior Debt, to exercise any right with
respect thereto or to collect any sums payable thereon.
8. SUBROGATION. Provided that the Superior Debt has been fully and
finally paid and dis-charged, and subject to the Algood Subordination
Agreement of even date herewith, Creditors shall be subrogated to the rights
of Guarantor to receive payments or distributions of cash, property or
securities payable or distributable on account of the Superior Debt to the
extent of all payments and distributions paid over to or for the benefit of
Guarantor pursuant to this Agreement.
9. NO EFFECT ON CONVERSION RATE OF JUNIOR DEBT. The Creditors agree
that the issu-ance by the Company of the 12% Subordinated Convertible Note
representing the Superior Debt at a Conversion Rate which may be less than the
Conversion Rate contained in the 12% Subordi-nated Convertible Notes which
represent the Junior Debt shall not constitute the issuance of rights and
options for the purchase of, or stock and other securities convertible into,
Additional Shares of Common Stock as defined in Section 7(e) of the Notes
evidencing the Junior Debt. No-thing contained in the Note evidencing the
Superior Debt, or herein, shall affect the Conversion Rate contained in the
Notes evidencing the Junior Debt.
10. DURATION AND TERMINATION. This Agreement shall constitute a
continuing agreement of subordination, and shall remain in effect until all
Superior Debt, and any extensions or renewals of the Superior Debt, have been
fully and finally discharged with interest and other applicable charges,
including cost of collection and reasonable attorneys' fees.
11. DEFAULT. If any representation or warranty in this Agreement or
in any instrument evidencing or securing the Superior Debt proves to have been
materially false when made, or, in the event of a breach by either the Company
or Creditors in the performance of any of the terms of this Agreement or any
instrument or agreement evidencing or securing the Superior Debt, all of the
Superior Debt shall, at the option of Guarantor, become immediately due and
payable without presentment, demand, protest, or notice of any kind,
notwithstanding any time or credit otherwise allowed. At any time Creditors
fail to comply with any provision of this Agreement that is applicable to
Creditors, Guarantor may demand specific performance of this Agreement,
whether or not the Company has complied with this Agreement, and may exercise
any other remedy available at law or equity.
12. NOTICES. All notices, requests, demands and other communications
required or permitted under this Agreement or by law shall be in writing and
shall be deemed to have been duly given, made and received only when delivered
against receipt or when deposited in the United States mail, certified or
registered mail, return receipt requested, postage prepaid, addressed as set
forth below, and actually presented at the address of the noticed party.
(a) If to Guarantor: 11825 North Pennsylvania
Carmel, IN 46032
Attention: General Counsel
(b) If to Creditors: At the address set forth
opposite their signature below
(c) If to the Company: 1025 Acuff Road
Bloomington, IN 47404
Attention: Chief Financial Officer
Any addressee may change the address to which communications are to be sent by
giving notice of such change of address in conformity with the provisions of
this paragraph for the giving of notice.
13. GUARANTOR'S DUTIES LIMITED. The rights granted to Guarantor in
this Agreement are solely for its protection and nothing herein contained
imposes on Guarantor any duties with respect to any property either of the
Company or of Creditors heretofore or hereafter received by Guarantor beyond
reasonable care in the custody and preservation of such property while in
Guarantor's possession. Guarantor has no duty to preserve rights against
prior parties on any instrument or chattel paper received from the Company or
Creditors as collateral security for the Superior Debt or any portion thereof.
14. AUTHORITY. The Company and Creditors represent and warrant that
they have authority to enter into this Agreement and that the persons signing
for each party are authorized and directed to do so.
15. ENTIRE AGREEMENT. This Agreement constitutes and expresses the
entire understanding between the parties hereto with respect to the subject
matter hereof, and supersedes all prior and contempor-aneous agreements and
understandings, inducements or conditions, whether express or implied, oral or
written. Neither this Agreement nor any portion or provision hereof may be
changed, waived or amended orally or in any manner other than by an agreement
in writing signed by the Company and Creditors, and approved in writing by
Guarantor.
16. ADDITIONAL DOCUMENTATION. The Company and Creditors shall execute
and deliver to Guarantor such further instruments and shall take such further
action as Guarantor may at any time or times reasonably request in order to
carry out the provisions and intent of this Agreement.
17. EXPENSES. The Company and the Creditors, as the case may be, agree
to pay to Guarantor on demand all reasonable expenses of every kind, including
reasonable attorneys' fees, that Guarantor may incur in enforcing any of its
rights under this Agreement.
18. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of Guarantor, its successors and assigns, and shall be binding upon the
Company and Creditors and their respective heirs, legatees, personal
representatives, successors and assigns.
19. GOVERNING LAW. The validity, construction and enforcement of this
Agreement shall be governed by the internal laws of the State of Indiana.
20. SEVERABILITY. The provisions of this Agreement are independent of
and separable from each other. If any provision hereof shall for any reason
be held invalid or unenforceable, it is the intent of the parties that such
invalidity or unenforceability shall not affect the validity or enforceability
of any other provi-sion hereof, and that this Agreement shall be construed as
if such invalid or unenforceable provision had never been contained herein.
21. COUNTERPARTS. This Agreement may be executed in counterparts which
together shall constitute this agreement, although all parties have not signed
the same counterpart.
22. NEW ALGOOD NOTES. It is acknowledged that the Junior Debt of MALVIN
L. ALGOOD, RUSSELL E. ALGOOD and JOHN G. ALGOOD does not include the
indebtedness evidenced by the 12% Subordinated Convertible Notes in the
aggregate amount of One Million Five Hundred Thousand Dollars ($1,500,000.00)
of even date herewith (the "New Algood Notes") given by the Company, which
Notes are superior to the Junior Debt pursuant to the provisions of the Algood
Subordination Agreement of even date herewith.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed and delivered, this _16th__ day of September, 1997.
"COMPANY"
GENERAL ACCEPTANCE CORPORATION
By_______/s/ Martin C. Bozarth_____________
Printed:______Martin C. Bozarth_____________
Title:________CFO__________________________
"CREDITORS"
CAPITOL AMERICAN LIFE INSURANCE COMPANY
Address for Notices:
11825 N. Pennsylvania Street By_______/s/ Rollin M.
Dick________________
Carmel, IN 46032 Printed:______Rollin M.
Dick__________________
Attention: General Counsel Title:________Executive Vice President, Chief
Financial Officer
3810 Easy Street __/S/Malvin L. Algood___________________
Bloomington, IN 47404 MALVIN L. ALGOOD
3810 Easy Street ___/s/ Janet
Algood___________________________
Bloomington, IN 47204 JANET ALGOOD
2800 South Olcott Blvd. __/s/ Russell E. Algood______________________
Bloomington, IN 47401 RUSSELL E. ALGOOD
1805 Isleworth Court __/s/ John G. Algood_________________________
Oldsmar, FL 34677 JOHN G. ALGOOD
The foregoing SUBORDINATION AGREEMENT is accepted by the Guarantor this
_16thday of September, 1997.
CONSECO, INC.
By______/s/ Rollin M. Dick ___________
Printed:__Rollin M. Dick_____________
Title:____Executive Vice President, Chief Financial
Officer
Exhibit 10.88
2
ALGOOD
SUBORDINATION AGREEMENT
THIS AGREEMENT is entered into this 16th day of _ September____,
1997, among CAPITOL AMERICAN LIFE INSURANCE COMPANY, an Arizona Corporation,
MALVIN L. ALGOOD, JANET ALGOOD, RUSSELL E. ALGOOD, and JOHN G. ALGOOD
(hereinafter jointly and severally referred to as the "Creditors"), and
GENERAL ACCEPTANCE CORPORATION, an Indiana corporation (the "Company") for the
benefit of MALVIN L. ALGOOD, RUSSELL E. ALGOOD and JOHN G. ALGOOD (hereinafter
jointly and severally referred to as the "Algoods").
RECITALS
A. The Company is presently indebted to the Creditors in the aggregate
principal amount of Thirteen Million Two Hundred Fifty Thousand Dollars
($13,250,000.00), which indebt-edness is evidenced by 12% Subordinated
Convertible Notes of the Company dated April 11, 1997, and payable April 11,
2000. The indebtedness evidenced by such Note(s) is here-in-after referred to
as the "Junior Debt".
B. The Company desires to borrow from the Algoods for working capital
purposes an additional aggregate principal amount of One Million Five Hundred
Thousand Dollars ($1,500,000.00) (the "New Algood Loans") to be evidenced by
12% Subordinated Convertible Notes of even date herewith in such aggregate
principal amount due and payable on June 30, 1999. The New Algood Loans,
evidenced by such Notes, are hereinafter referred to as the "Superior Debt."
C. The Algoods are unwilling to provide the New Algood Loans for the
benefit of the Company unless the Creditors and the Company enter into this
Subordination Agreement for the benefit of the Algoods.
D. Creditors acknowledge that Creditors have a substantial interest in
the Company and will benefit, directly or indirectly, from the New Algood
Loans to be made by the Algoods to the Company.
AGREEMENT
NOW, THEREFORE, in consideration of the Recitals, and to induce the
Algoods to provide the New Algood Loans to the Company, the parties hereto,
intending to be legally bound, agree as follows:
23. RECITALS. The foregoing Recitals, and the definitions contained
therein, are incorpor-ated herein by this reference.
24. SUBORDINATION. The Creditors hereby subordinate, to the extent
and in the manner provided in this Agreement, all of the Junior Debt,
including principal and interest thereon, and all rights of the Creditors
pursuant thereto, to the prior payment of all of the Superior Debt, including
principal and interest thereon, costs of collection, including reasonable
attorneys' fees, and the exercise of all rights thereunder by the holders of
the Superior Debt. Each instrument and document evidencing the Junior Debt
shall bear a conspicuous legend that it is subordinated to the Superior Debt.
The Company's and Creditors' books shall be marked to evidence the
subordination of all of the Junior Debt to the Superior Debt. The Algoods are
authorized to examine such books from time to time and to make any notations
required by this Agreement.
25. WARRANTIES AND REPRESENTATIONS OF THE COMPANY AND CREDITORS. The
Company and the Creditors each hereby represent and warrant to and for the
benefit of the Algoods that: (a) as of the date hereof, the total principal
amount of the Junior Debt is $13,250,000.00; (b) no part of the Junior Debt is
evidenced by any instrument, security or other writing which has not
previously been or is not concurrently herewith being marked to evidence the
within subordination or being deposited with the Algoods; (c) Creditors are
the lawful owners of the Junior Debt and no part thereof is subject to any
defense, offset or counterclaim; (d) Creditors have not heretofore assigned or
transferred any of the Junior Debt, any interest therein or any collateral or
security pertaining thereto; and (e) Creditors have not heretofore given any
subordination in respect of the Junior Debt, except as set forth in the Notes
evidencing the Junior Debt.
26. NEGATIVE COVENANTS. Until all of the Superior Debt has been fully
and finally paid, the Company and, as applicable, the Creditors shall not,
without the prior written consent of the holders of the Superior Debt: (a)
directly or indirectly, make any principal payment on account of or grant a
security interest in, mortgage, pledge, assign or transfer any properties to
secure or satisfy all or any part of the Junior Debt; and (b) demand or accept
from the Company or any other person any such payment or collateral.
27. PERMITTED PAYMENTS AND LIENS. Notwithstanding the provisions of
paragraph 4 here-of, for so long as no material event of default has occurred
or exists under any instrument or agree-ment evidencing or securing the
Superior Debt, the indebtedness to General Electric Capital Corporation ("GE
Capital"), or the New Conseco Note (as defined in paragraph 22 hereof), the
Company may make and Creditors may demand and receive regularly scheduled
payments of interest, but not of principal, on the Junior Debt.
28. TURNOVER OF PROHIBITED TRANSFERS. If any payment on account of or
any collateral for any part of the Junior Debt is received by Creditors other
than as permitted in paragraph 5 hereof, or as approved by the Algoods in
writing prior to such payment or transfer, such payment or collateral shall be
delivered forthwith by Creditors to the Algoods for application to, or as
additional security for, the Superior Debt, in the form received except for
the addition of any endorsement or assignment necessary to effect a transfer
of all rights therein to Algoods. Until so delivered any such payment or
collateral shall be held by Creditors in trust for the Algoods and shall not
be commingled with other funds or property of Creditors.
29. OBLIGATIONS OF ALGOODS. In no event shall the Algoods be liable
to Creditors for any failure to prove the Junior Debt, to exercise any right
with respect thereto or to collect any sums payable thereon.
30. SUBROGATION. Provided that the Superior Debt has been fully and
finally paid and discharged, Creditors shall be subrogated to the rights of
Algoods to receive payments or distributions of cash, property or securities
payable or distributable on account of the Superior Debt to the extent of all
payments and distributions paid over to or for the benefit of the Algoods
pursuant to this Agreement.
31. NO EFFECT ON CONVERSION RATE OF JUNIOR DEBT. The Creditors agree
that the issuance by the Company of the 12% Subordinated Convertible Notes
representing the Superior Debt at a Conversion Rate which may be less than the
Conversion Rate contained in the 12% Subordinated Convertible Notes which
represent the Junior Debt shall not constitute the issuance of rights and
options for the purchase of, or stock and other securities convertible into,
Additional Shares of Common Stock as defined in Section 7(e) of the Notes
evidencing the Junior Debt. Nothing contained in the Notes evidencing the
Superior Debt, or herein, shall affect the Conversion Rate contained in the
Notes evidencing the Junior Debt.
32. DURATION AND TERMINATION. This Agreement shall constitute a
continuing agreement of subordination, and shall remain in effect until all
Superior Debt, and any extensions or renewals of the Superior Debt have been
fully and finally discharged with interest and other applicable charges,
including cost of collection and reasonable attorneys' fees.
33. DEFAULT. If any representation or warranty in this Agreement or in
any instrument evidencing or securing the Superior Debt proves to have been
materially false when made, or, in the event of a breach by either the Company
or Creditors in the performance of any of the terms of this Agreement or any
instrument or agreement evidencing or securing the Superior Debt, all of the
Superior Debt shall, at the option of the Algoods, become immediately due and
payable without presentment, demand, protest, or notice of any kind,
notwithstanding any time or credit otherwise allowed. At any time Creditors
fail to comply with any provision of this Agreement that is applicable to
Creditors, the Algoods may demand specific performance of this Agreement,
whether or not the Company has complied with this Agreement, and may exercise
any other remedy available at law or equity.
34. NOTICES. All notices, requests, demands and other communications
required or permitted under this Agreement or by law shall be in writing and
shall be deemed to have been duly given, made and received only when delivered
against receipt or when deposited in the United States mail, certified or
registered mail, return receipt requested, postage prepaid, addressed as set
forth below, and actually presented at the address of the noticed party.
(a) If to the Algoods: c/o Russell E. Algood
2800 South Olcott Blvd.
Bloomington, IN 47401
(b) If to Creditors: At the addresses set forth
opposite their signatures below
(c) If to the Company: 1025 Acuff Road
Bloomington, IN 47404
Attention: Chief Financial Officer
Any addressee may change the address to which communications are to be sent by
giving notice of such change of address in conformity with the provisions of
this paragraph for the giving of notice.
35. ALGOODS' DUTIES LIMITED. The rights granted to the Algoods in this
Agreement are solely for their protection and nothing herein contained imposes
on the Algoods any duties with respect to any property either of the Company
or of Creditor heretofore or hereafter received by the Algoods beyond
reasonable care in the custody and preservation of such property while in
their possession. The Algoods have no duty to preserve rights against prior
parties on any instrument or chattel paper received from the Company or
Creditors as collateral security for the Superior Debt or any portion thereof.
36. AUTHORITY. The Company and Creditors represent and warrant that
they have authority to enter into this Agreement and that the persons signing
for each party are authorized and directed to do so.
37. ENTIRE AGREEMENT. This Agreement constitutes and expresses the
entire understanding between the parties hereto with respect to the subject
matter hereof, and supersedes all prior and contempor-aneous agreements and
understandings, inducements or conditions, whether express or implied, oral or
written. Neither this Agreement nor any portion or provision hereof may be
changed, waived or amended orally or in any manner other than by an agreement
in writing signed by the Company and Creditors, and approved in writing by the
Algoods.
38. ADDITIONAL DOCUMENTATION. The Company and Creditors shall execute
and deliver to the Algoods such further instruments and shall take such
further action as the Algoods may at any time or times reasonably request in
order to carry out the provisions and intent of this Agreement.
39. EXPENSES. The Company and the Creditors, as the case may be, agree
to pay the Algoods on demand all reasonable expenses of every kind, including
reasonable attorneys' fees, that the Algoods may incur in enforcing any of
their rights under this Agreement.
40. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of the Algoods, their heirs, legatees, personal representatives, successors
and assigns, and shall be binding upon the Company and Creditors and their
respective heirs, legatees, personal representatives, successors and assigns.
41. GOVERNING LAW. The validity, construction and enforcement of this
Agreement shall be governed by the internal laws of the State of Indiana.
42. SEVERABILITY. The provisions of this Agreement are independent of
and separable from each other. If any provision hereof shall for any reason
be held invalid or unenforceable, it is the intent of the parties that such
invalidity or unenforceability shall not affect the validity or enforceability
of any other provi-sion hereof, and that this Agreement shall be construed as
if such invalid or unenforceable provision had never been contained herein.
43. COUNTERPARTS. This Agreement may be executed in counterparts which
together shall constitute this agreement, although all parties have not signed
the same counterpart.
44. NEW CONSECO NOTE. It is acknowledged that concurrently herewith the
Company is issuing its 12% Subordinated Convertible Note in the principal
amount of $10,000,000 to Conseco, Inc. (the "New Conseco Note") to evidence
its obligation to repay all amounts paid by Conseco, Inc. to GE Capital
pursuant to a Limited Continuing Guaranty of even date herewith. The
indebtedness evidenced by the New Conseco Note is superior to the Junior Debt
pursuant to the Conseco Subordination Agreement, and to the New Algood Loans
pursuant to the provisions of the 12% Subordinated Convertible Notes given to
the Algoods, each of even date herewith.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed and delivered, this _16th__ day of September, 1997.
GENERAL ACCEPTANCE CORPORATION
By________/s/ Martin C. Bozarth____________
Printed:_______Martin C. Bozarth______________
Title:_________CFO____________________________
"COMPANY"
CAPITOL AMERICAN LIFE INSURANCE COMPANY
Address for Notices:
11825 N. Pennsylvania Street By_______/s/ Rollin M.
Dick________________
Carmel, IN 46032 Printed:______Rollin M.
Dick_________________
Attention: General Counsel Title:___ Executive Vice President,
Chief Financial Officer
3810 Easy Street __/S/Malvin L. Algood_______________
Bloomington, IN 47404 MALVIN L. ALGOOD
3810 Easy Street __/s/ Janet
Algood___________________________
Bloomington, IN 47204 JANET ALGOOD
2800 South Olcott Blvd. __/s/ Russell E. Algood______________________
Bloomington, IN 47401 RUSSELL E. ALGOOD
1805 Isleworth Court __/s/ John G. Algood_________________________
Oldsmar, FL 34677 JOHN G. ALGOOD
"CREDITORS"
The foregoing SUBORDINATION AGREEMENT is accepted by the Algoods this
_16th day of September, 1997.
__/s/ Malvin L. Algood_______________________
MALVIN L. ALGOOD
___/s/ Russell E. Algood_____________________
RUSSELL E. ALGOOD
___/s/ John G. Algood________________________
JOHN G. ALGOOD
"ALGOODS"
Exhibit 10.89
AMENDMENT OF SUBORDINATION AGREEMENT
This Amendment of Subordination Agreement is entered into this
_16thday of September, 1997 by and among General Acceptance Corporation
(the "Company"), General Electric Capital Corporation (the "Lender") and
Malvin L. Algood (the "Junior Creditor") as follows:
RECITALS
WHEREAS, the Company, the Lender and the Junior Creditor are parties to a
certain Subordination Agreement dated April 11, 1997, whereby the Junior
Creditor agreed to subordinate certain obligations owed to the Junior Creditor
by the Company to the payment of the Senior Obligations (as defined in the
Subordination Agreement) owed by the Company to the Lender under a certain
Loan Agreement (as defined in the Subordination Agreement); and
WHEREAS, the Company and the Lender have agreed to enter into a First
Amendment to the Loan Agreement dated as of September 16th, 1997 (the "First
Amendment") to extend the term of the Senior Obligations and make certain
changes to other terms and conditions of the Loan Agreement; and
WHEREAS, the Junior Creditor has agreed to provide additional loans to
the Company and, pursuant to the terms of the Loan Agreement and First
Amendment, any such loans are required to be subordinated to the Senior
Obligations.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. AMENDMENT. Paragraph 1.b. of the Subordination Agreement is
hereby amended to add additional indebtedness in the amount of $1,000,000
which is represented by a promissory note from the Company to the Junior
Creditor dated September 16th, 1997, which note shall now be included in the
definition of "Subordinated Note" and which indebtedness shall now be included
in the definition of "Junior Obligations." The Junior Creditor agrees to mark
such promissory note with the legend required under Paragraph 7 of the
Subordination Agreement.
2. EFFECT OF AMENDMENT. Except as amended herein, the Subordination
Agreement remains unchanged and in full force and effect.
<PAGE>
IN WITNESS WHEREOF, the Company, the Junior Creditor and the Lender have
executed this Amendment to Subordination Agreement as of the date first
written above.
GENERAL ACCEPTANCE CORPORATION
By____/s/ Martin C. Bozarth __
_____Martin C. Bozarth, CFO____
Printed Name and Title
GENERAL ELECTRIC CAPITAL CORPORATION
By___/s/ W. Jerome McDermott______
_____W. Jerome McDermott, Account Executive
Printed Name and Title
_____/s/ Malvin L. Algood___________
Malvin L. Algood
Exhibit 10.90
AMENDMENT OF SUBORDINATION AGREEMENT
This Amendment of Subordination Agreement is entered into this
_16thday of September, 1997 by and among General Acceptance Corporation
(the "Company"), General Electric Capital Corporation (the "Lender") and
Russell E. Algood (the "Junior Creditor") as follows:
RECITALS
WHEREAS, the Company, the Lender and the Junior Creditor are parties to a
certain Subordination Agreement dated April 11, 1997, whereby the Junior
Creditor agreed to subordinate certain obligations owed to the Junior Creditor
by the Company to the payment of the Senior Obligations (as defined in the
Subordination Agreement) owed by the Company to the Lender under a certain
Loan Agreement (as defined in the Subordination Agreement); and
WHEREAS, the Company and the Lender have agreed to enter into a First
Amendment to the Loan Agreement dated as of September 16th, 1997 (the "First
Amendment") to extend the term of the Senior Obligations and make certain
changes to other terms and conditions of the Loan Agreement; and
WHEREAS, the Junior Creditor has agreed to provide additional loans to
the Company and, pursuant to the terms of the Loan Agreement and First
Amendment, any such loans are required to be subordinated to the Senior
Obligations.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. AMENDMENT. Paragraph 1.b. of the Subordination Agreement is
hereby amended to add additional indebtedness in the amount of $250,000 which
is represented by a promissory note from the Company to the Junior Creditor
dated September 16th, 1997, which note shall now be included in the
definition of "Subordinated Note" and which indebtedness shall now be included
in the definition of "Junior Obligations." The Junior Creditor agrees to mark
such promissory note with the legend required under Paragraph 7 of the
Subordination Agreement.
2. EFFECT OF AMENDMENT. Except as amended herein, the
Subordination Agreement remains unchanged and in full force and effect.
<PAGE>
IN WITNESS WHEREOF, the Company, the Junior Creditor and the Lender have
executed this Amendment to Subordination Agreement as of the date first
written above.
GENERAL ACCEPTANCE CORPORATION
By___/s/ Martin C. Bozarth________
_____Martin C. Bozarth, CFO_________
Printed Name and Title
GENERAL ELECTRIC CAPITAL CORPORATION
By___/s/ W. Jerome McDermott_
____W/ Jerome McDermott, Account Executive
Printed Name and Title
___/s/ Russell E. Algood____________
Russell E. Algood
<PAGE>
STATE OF INDIANA )
) SS:
COUNTY OF _Hamilton__ )
Before me the undersigned, a Notary Public for __Marion______ County,
State of Indiana, personally appeared __Martin C. Bozarth______ who
acknowledged the execution of the foregoing on behalf of General Acceptance
Corporation, and who, having been duly sworn, stated that any representation
therein contained are true.
Signed and sealed this _16thday of _September______________, 1997.
__/s/ Dawn C. Stanley____________
Signature
_Dawn C. Stanley__________________
Printed
My Commission Expires: My County of Residence:
___11/18/2000______ __Marion_________
Exhibit 10.91
AMENDMENT OF SUBORDINATION AGREEMENT
This Amendment of Subordination Agreement is entered into this 16th
September, 1997 by and among General Acceptance Corporation (the "Company"),
General Electric Capital Corporation (the "Lender") and John G. Algood (the
"Junior Creditor") as follows:
RECITALS
WHEREAS, the Company, the Lender and the Junior Creditor are parties to a
certain Subordination Agreement dated April 11, 1997, whereby the Junior
Creditor agreed to subordinate certain obligations owed to the Junior Creditor
by the Company to the payment of the Senior Obligations (as defined in the
Subordination Agreement) owed by the Company to the Lender under a certain
Loan Agreement (as defined in the Subordination Agreement); and
WHEREAS, the Company and the Lender have agreed to enter into a First
Amendment to the Loan Agreement dated as of September _16th1997 (the
"First Amendment") to extend the term of the Senior Obligations and make
certain changes to other terms and conditions of the Loan Agreement; and
WHEREAS, the Junior Creditor has agreed to provide additional loans to
the Company and, pursuant to the terms of the Loan Agreement and First
Amendment, any such loans are required to be subordinated to the Senior
Obligations.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. AMENDMENT. Paragraph 1.b. of the Subordination Agreement is
hereby amended to add additional indebtedness in the amount of $250,000 which
is represented by a promissory note from the Company to the Junior Creditor
dated September 16th, 1997, which note shall now be included in the
definition of "Subordinated Note" and which indebtedness shall now be included
in the definition of "Junior Obligations." The Junior Creditor agrees to mark
such promissory note with the legend required under Paragraph 7 of the
Subordination Agreement.
2. EFFECT OF AMENDMENT. Except as amended herein, the
Subordination Agreement remains unchanged and in full force and effect.
<PAGE>
IN WITNESS WHEREOF, the Company, the Junior Creditor and the Lender have
executed this Amendment to Subordination Agreement as of the date first
written above.
GENERAL ACCEPTANCE CORPORATION
By___/s/ Martin C. Bozarth________
_____Martin C. Bozarth, CFO_________
Printed Name and Title
GENERAL ELECTRIC CAPITAL CORPORATION
By___/s/ W. Jerome McDermott______
_____W. Jerome McDermott, Account Executive
Printed Name and Title
_____/s/ John G. Algood____________
John G. Algood
<PAGE>
STATE OF INDIANA )
) SS:
COUNTY OF Hamilton__ )
Before me the undersigned, a Notary Public for __Marion______ County,
State of Indiana, personally appeared ___Martin C. Bozarth_______ who
acknowledged the execution of the foregoing on behalf of General Acceptance
Corporation, and who, having been duly sworn, stated that any representation
therein contained are true.
Signed and sealed this _16thday of _September_____, 1997.
__/s/ Dawn C. Stanley____________
Signature
_Dawn C. Stanley__________________
Printed
My Commission Expires: My County of Residence:
__11-18-2000______ __Marion____________
<PAGE>
Illinois
STATE OF INDIANA )
) SS:
COUNTY OF _McHenry___ )
Illinois
Before me the undersigned, a Notary Public for _McHenry County, State
of Indiana, personally appeared __W. Jerome McDermott___ who acknowledged
the execution of the foregoing on behalf of General Electric Capital
Corporation, and who, having been duly sworn, stated that any representation
therein contained are true.
Signed and sealed this _16thday of _September_______, 1997.
__/s/ Pamela A. Lange____________
Signature
__/s/ Pamela A. Lange____________
Printed
My Commission Expires: My County of Residence:
__05-08-01__________ ____McHenry_________
<PAGE>
STATE OF FLORIDA
) SS:
COUNTY OF _Pinellas__ )
Before me the undersigned, a Notary Public for Pinellas______ County,
State of Indiana, personally appeared John G. Algood who acknowledged the
execution of the foregoing and who, having been duly sworn, stated that any
representation therein contained are true.
Signed and sealed this 19th of _September_____, 1997.
___/s/ John G. Algood____________
Signature
__John G. Algood__________________
Printed
/s/ Joseph McIntyre
My Commission Expires: My County of Residence:
__1-24-99___________ __Pinellas__________
This instrument prepared by: Mary M. Kleiman, Attorney at Law
Krieg DeVault Alexander & Capehart
One Indiana Square, Suite 2800
Indianapolis, IN 46204
(317) 636-4341
SS-133301-1
Exhibit 10.92
THIS SUBORDINATED CONVERTIBLE NOTE HAS NOT BEEN REGIS-TERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE OR OTHER SECURITIES LAWS AND
MAY NOT BE OFFERED, SOLD, TRANSFERRED OR ASSIGNED EXCEPT (I) PURSUANT TO
REGISTRATIONS THEREOF UNDER SUCH LAWS, OR (II) IF, IN THE OPINION OF COUNSEL
REASONABLY SATISFACTORY TO GENERAL ACCEPTANCE CORPORATION THE PROPOSED
TRANS-FER MAY BE EFFECTED IN COMPLIANCE WITH APPLICABLE SECUR-ITIES LAWS
WITHOUT SUCH REGISTRATIONS.
THIS SUBORDINATED CONVERTIBLE NOTE IS SUBJECT TO A SUBORDINATION
AGREEMENT DATED APRIL 11, 1997, IN FAVOR OF GENERAL ELECTRIC CAPITAL
CORPORATION, AS AMENDED BY AMENDMENT OF SUBORDINATION AGREEMENT OF EVEN DATE
HEREWITH..
12% SUBORDINATED CONVERTIBLE NOTE
$1,000,000 Dated: _Sept. 16_____, 1997
For value received, General Acceptance Corporation, an Indiana
corporation with its principal offices at 1025 Acuff Road, Bloomington,
Indiana 47404 ("Maker"), hereby promises to pay to the order of MALVIN L.
ALGOOD, residing at 3810 Easy Street, Bloomington, Indiana 47404, or assigns
(collectively, the "Holder"), at its principal office or at such other place
as the Holder may direct in writing to the Maker, in lawful money of the
United States of America, the principal amount of One Million Dollars
($1,000,000) and interest, as provided herein, all without relief from
valuation or appraisement laws.
This Note is one of a series of 12% Subordinated Convertible Notes in the
aggregate principal amount of $1,500,000 being issued to the Holder and other
stockholders of the Maker in exchange for the surrender of certain promissory
notes payable to them by the Maker. Holder acknowledges and agrees that the
rights of the Holder under this Note and the other Notes of the series are
without priority or distinction, and that no payments of principal or interest
on this Note shall be made by the Company unless a pro rata payment of
principal and interest is paid to the holders of all Notes of the series
outstanding from time to time.
1. Payment of Principal. Subject to acceleration as provided for
elsewhere in this 12% Subordinated Convertible Note ("Note"), the Maker shall
pay to the Holder the principal balance of this Note on June 30, 1999, plus
all accrued and unpaid interest on the full principal balance of this Note as
of that date.
2. Interest. Interest on the unpaid principal balance hereof
existing from time to time shall accrue at the rate of 12% per annum;
provided, however, interest shall accrue at the rate of 15% per annum so long
as an "Event of Default," as specified in Section 4(a), exists hereunder.
Interest shall be calculated on the basis of actual daily balances of
outstanding principal for the exact number of days the principal remains
outstanding and shall be computed on the basis of a 360-day year. Interest
shall be due and payable on a quarterly basis, on March 31, June 30, September
30 and December 31.
3. Prepayment. The Maker may not prepay all or any portion of the
unpaid principal balance hereof or accrued interest without the consent of
Holder.
4. Default and Remedy.
(a) An "Event of Default" under this Note shall mean the occurrence
of any of the following events: (i) the Maker defaults in the payment of
principal of or interest on this Note when due and the Maker does not cure
that default within 5 days after the due date; (ii) the Maker defaults in the
performance of any obligation under this Note (other than the payment
described in the immediately preceding clause) and the Maker does not cure
that default within 30 days after receipt by the Maker of written notice from
the Holder; (iii) an "Event of Default" or a "Triggering Event", both as
defined in a certain Securities Purchase Agreement between the Maker and
Capitol American Life Insurance Company dated as of April 11, 1997, as amended
("Securities Purchase Agreement"), shall occur; or (iv) the Maker commences
proceedings in any court under the United States Bankruptcy Code, or any other
debtors' relief or insolvency act, whether state or federal (the "Bankruptcy
Laws"), or any other person commences proceedings under the Bankruptcy Laws
against the Maker and those proceedings are not stayed or dismissed within
sixty (60) days.
(b) If any Event of Default occurs and is continuing, then the Holder
shall have the right and option to declare, by notice in writing sent by
registered or certified mail to the Maker, the full unpaid principal balance
hereof, together with all accrued and unpaid interest thereon, immediately due
and payable without further demand, notice, or presentment for payment.
Alternatively, if a Triggering Event occurs, the Holder shall have the right
and option to cause the Maker to redeem this Note pursuant to the procedure
set forth in Section 10.3 of the Securities Purchase Agreement.
(c) If this Note is collected or attempted to be collected by the
initiation or prosecution of any suit or through any bankruptcy court, or by
any judicial proceeding, or is placed in the hands of attorneys for
collection, then the Maker shall pay, in addition to all other amounts owing
hereunder, all court costs and reasonable attorney's fees incurred by the
Holder.
5. Subordination.
(a) Subordination to Senior Debt. Notwithstanding anything to the
contrary contained in this Note, the Maker covenants and agrees, and the
Holder by acceptance of this Note likewise covenants and agrees, that the
Maker's indebtedness under this Note shall be junior and subordinate to the
Senior Indebtedness (as hereafter defined) to the extent and in the manner set
forth in this Section 5, except to the extent otherwise agreed to in writing
by the Holder and any Senior Lender (as hereinafter defined) with respect to
the Senior Indebtedness held by or payable to that Senior Lender. Each
subsection of this Section 5 shall be given independent effect so that if a
particular payment or action is prohibited by any one of these subsections, it
shall be prohibited although it otherwise would not be prohibited by another
subsection.
(b) Payment Default on Senior Indebtedness. If at any time a
default occurs in the payment when due (whether at maturity or upon
acceleration or mandatory prepayment, or on any principal installment payment
date or interest payment date, or otherwise) ("Payment Default") of any Senior
Indebtedness, then at all times thereafter until (i) the Payment Default has
been cured, (ii) the Payment Default or the benefits of this sentence have
been waived in writing by or on behalf of the Senior Lenders holding that
Senior Indebtedness, or (iii) payment in full of all affected Senior
Indebtedness, the Maker shall not, directly or indirectly, make any
Distribution of Assets (as hereinafter defined) or Payment (as hereinafter
defined) with respect to this Note.
(c) Dissolution, Liquidation or Reorganization of Maker. In the
event of any insolvency, bankruptcy or receivership case or proceeding or any
dissolution, winding up, liquidation, reorganization or other similar
proceeding relating to the Maker, its property or its operations (whether
voluntary or involuntary and whether in bankruptcy, insolvency or receivership
proceedings or otherwise), upon an assignment for the benefit of creditors, or
any other marshaling of the assets of the Maker, then payment in full of all
Senior Indebtedness then or thereafter to become due shall occur before the
Holder shall be entitled to receive or retain any Distribution of Assets or
Payment with respect to this Note. In any such proceedings, any Distribution
of Assets or Payment to which the Holder would be entitled if this Note were
not subordinated to the Senior Indebtedness shall be paid by the Maker or the
agent or other person making such payment or distribution, or by the Holder if
received by the Holder, directly to each Senior Lender, pro forma, to the
extent necessary to make payment in full of all Senior Indebtedness, after
giving effect to any concurrent payment or distribution to or for the benefit
of the Senior Lenders.
(d) Subrogation. No Distribution of Assets or Payment to which the
Holder would have been entitled except for the provisions of this Section 5
and which are received by or paid over to the Senior Lenders or their
Representative (as hereinafter defined) shall, as between the Maker and its
creditors other than the Senior Lenders and the Holder, be deemed to be a
payment by the Maker to the Senior Lenders or on account of the Senior
Indebtedness, and the Holder shall be subrogated (without any duty on the part
of the Senior Lenders to warrant, create, effectuate, preserve or protect such
subrogation) to the then or thereafter existing rights of the Senior Lenders
to receive Distributions of Assets or payments made on the Senior Indebtedness
until this Note shall be paid in full.
(e) Payments Held in Trust. If the Holder receives any
Distribution of Assets or Payment which the Holder is not entitled to retain
under the provisions of this Section 5, any such Distribution of Assets or
Payment so received shall be held in trust for the Senior Lenders, shall not
be commingled with any other assets of the Holder, and shall be paid to the
Senior Lenders, pro rata, to the extent necessary to make payment in full,
after giving effect to any concurrent payment or distribution to or for the
benefit of the Senior Lenders.
(f) Changes in Senior Indebtedness. Any Senior Lender may at any
time and from time to time with notice to the Holder: (i) extend, renew,
modify, waive or amend the terms of the Senior Indebtedness; (ii) sell,
exchange, release or otherwise deal with any property pledged, mortgaged or
otherwise securing the Senior Indebtedness; (iii) release any guarantor or any
other person liable in any manner for the Senior Indebtedness or amend or
waive the terms of the Senior Indebtedness; (iv) exercise or refrain from
exercising any rights against the Maker or any other persons; (v) apply in any
order any sums by whomever paid or however to the Senior Indebtedness; and
(vi) take any other action which otherwise might be deemed to impair the
Holder's rights. Any and all of such actions may be taken by the Senior
Lenders without incurring responsibility to the Holder and without impairing
or releasing the Holder's obligations to the Senior Lenders.
(g) Third-Party Beneficiary, Etc.. The foregoing provisions
regarding subordination are solely for the purpose of defining the relative
rights of the Senior Lenders on the one hand and the Holder on the other hand.
Such provisions are for the benefit of the Senior Lenders (and their
successors and assigns) and shall be enforceable by them directly against the
Holder except to the extent otherwise agreed to in writing by the Holder and
any other Senior Lender.
(h) Definitions. As used in this Section 5 (or as elsewhere used
in this Note) the following terms shall have the meanings indicated:
"Distribution of Assets" means any distribution of assets of the
Maker or any of its subsidiaries of any kind or character, whether a payment,
purchase or other acquisition or retirement for cash, property, or securities,
with respect to the Maker's obligations under this Note.
"Payment" means payment of any obligation now or hereafter existing
under this Note (as it may hereafter be amended, supplemented, or otherwise
modified from time to time), whether created directly or acquired by
assignment or otherwise, and interest and premiums, if any, thereon and all
other amounts payable in respect thereof or in connection therewith.
"Representative" means, with respect to any Senior Indebtedness, the
trustee, agent, or other representative for one or more of the Senior Lenders,
if any, designated in the indenture, agreement or document creating,
evidencing or governing such Senior Indebtedness or pursuant to which it was
issued, or otherwise designated by the holders of such Senior Indebtedness.
"Senior Indebtedness" shall have the meaning specified in the
Securities Purchase Agreement. In addition "Senior Indebtedness" shall mean
any or all indebtedness, including principal, interest, and costs of
collections, including reasonable attorneys' fees, from time to time owing by
Maker to the holder or holders of a 12% Subordinated Convertible Note in the
principal amount of Ten Million Dollars ($10,000,000) of even date herewith
given by the Maker to Conseco, Inc. ("Guarantor") pursuant to certain
agreements of even date herewith (the "Conseco Guaranty Note").
"Senior Lender" or "Senior Lenders" means one or more of the holders
of Senior Indebtedness.
6. Conversion
(a) The Holder may, at the Holder's option, at any time, and from
time to time, prior to payment in full of this Note, convert the outstanding
Principal Amount of this Note and any accrued but unpaid interest due pursuant
to Section 2 above (the "Conversion Amount"), in whole or in part (but only
into full shares), into fully paid and non-assessable shares of the common
stock, no par value of the Maker (the "Common Shares"), at a rate equal to the
amount of the greater of (x) book value computed in accordance with generally
accepted accounting principles consistently applied at the time the Common
Shares are issued, or (y) $0.25 per Common Share (subject to adjustment as set
forth in Section 7) (the "Conversion Rate"); provided, however, that such
conversion right is subject to the approval of the shareholders of Maker and
may be exercised only on a pro rata basis con-cur-rent-ly with or following
the exercise of conversion rights by the holder or holders of the Conseco
Guaranty Note. Maker agrees to hold a meeting of shareholders to obtain
shareholder approval of the conversion rights as soon as practical after the
date hereof, but in no event more than sixty (60) days after the date hereof,
unless Guarantor shall otherwise agree. In order to exercise this conversion
right, the Holder must send written notice of the conversion of a permitted
Conversion Amount to the Maker at least 10 days prior to the permitted
specified conversion date. On the conversion date (or as soon thereafter as
is reasonably practicable), the Maker shall issue to the Holder a share
certificate for the Common Shares acquired upon conversion.
(b) Notwithstanding any other provisions of this Section 6 to the
con-trary, the conversion rights of the Holder shall be subject to com-pliance
with all applicable federal and state securities laws, and the Holder agrees
to execute all required agreements and docu-ments required by the Maker to
establish compliance with such laws.
(c) The Maker shall at all times reserve and keep available and free
of preemptive rights out of its authorized but unissued Common Shares, solely
for the purpose of issuance upon conversion of the Note, the number of Common
Shares as shall from time to time be suf-ficient to effect the conversion of
the Note, and if at any time the number of authorized but unissued Common
Shares shall not be sufficient to effect the conversion of the Note, the Maker
shall take the corporate action necessary to increase the number of its
authorized Common Shares to a number sufficient for this purpose. Maker
further covenants that all shares that may be issued upon the conversion of
this Note and payment of the Conversion Price, all as set forth herein, will
be free from all taxes, liens and charges in respect of the issue thereof.
Maker agrees that its issuance of this Note shall constitute full authority to
its officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for the shares upon the
conversion of this Note.
7. Adjustments.
(a) Reorganization, Merger or Sale of Assets
If at any time while this Note, or any portion thereof, is
out-standing there shall be (i) a reorganization (other than a combi-nation,
reclassification, exchange or subdivision of shares other-wise provided for
herein), (ii) a merger or consolidation with or into another corporation in
which the Maker is not the surviving entity, or a reverse triangular merger in
which the Maker is the surviving entity but the shares of the Maker's capital
stock out-standing immediately prior to the merger are converted by virtue of
the merger into other property, whether in the form of securi-ties, cash or
otherwise, or (iii) a sale or transfer of the Maker's properties and assets
as, or substantially as, an entirety to any other person, then, as a part of
such reorganization, merger, con-sol-idation, sale or transfer, lawful
provision shall be made so that the holder of this Note shall thereafter be
entitled to receive upon conversion of the Notes the number of shares of stock
or other secur-ities or property of the successor corporation resulting from
such reorganization, merger, consolidation, sale or transfer that a holder of
the shares deliverable upon conversion of this Note would have been entitled
to receive in such reorganization, con-sol-i-dation, merger, sale or transfer
if this Note had been converted immediately before such reorganization,
merger, consolidation, sale or transfer, all subject to further adjustment as
provided in this Section 7. The foregoing provisions of this Section 7(a)
shall similarly apply to successive reorganizations, consolidations, mer-gers,
sales and transfers and to the stock or securities of any other corporation
that are at the time receivable upon the conversion of this Note. If the
per-share consideration payable to Holder for shares in connection with any
such transaction is in a form other than cash or marketable securities, then
the value of such consid-er-a-tion shall be determined in good faith by the
Maker's Board of Directors. In all events, appropriate adjustment (as
determined in good faith by the Maker's Board of Directors) shall be made in
the application of the provisions of this Note with respect to the rights and
interests of Holder after the transaction, to the end that the provisions of
this Note shall be applicable after that event, as near as reasonably may be,
in relation to any shares or other property deliverable after that event upon
conversion of this Note.
(b) Reclassification.
If the Maker, at any time while this Note, or any portion thereof,
remains outstanding, by reclassification of securities or otherwise, shall
change any of the securities as to which conversion rights under this Note
exist into the same or a different number of securities of any other class or
classes, this Note shall thereafter represent the right to acquire such number
and kind of securities as would have been issuable as the result of such
change with respect to the securities that were subject to the conversion
rights under this Note immediately prior to such reclassification or other
change and the Conversion Price or number of shares received upon such
conversion shall be appropriately adjusted, all subject to further adjustment
as provided in this Section 7.
(c) Split, Subdivision or Combination of Shares.
If the Maker at any time while this Note, or any portion thereof,
remains outstanding shall split, subdivide or combine the securities as to
which conversion rights under this Note exist, into a different number of
securities of the same class, the number of shares issuable upon conversion
shall be proportionately decreased in the case of a split or subdivision or
proportionately increased in the case of a combination.
(d) Adjustments for Dividends in Stock or Other Securities or
Property.
If while this Note, or any portion hereof, remains outstanding and
unexpired the holders of the securities as to which conversion rights under
this Note exist at the time shall have received, or, on or after the record
date fixed for the determination of eligible stockholders, shall have become
entitled to receive, without payment therefor, other or additional stock or
other securities or property (other than cash) of the Maker by way of
dividend, then and in each case, this Note shall represent the right to
acquire upon conversion, in addition to the number of shares of the security
receivable upon conversion of this Note, and without payment of any additional
consideration therefor, the amount of such other or additional stock or other
securities or property (other than cash) of the Maker that such holder would
hold on the date of such conversion had it been the holder of record of the
security receivable upon conversion of this Note on the date hereof and had
thereafter, during the period from the date hereof to and including the date
of such conversion, retained such shares and/all other additional stock, other
securities or property available by this Note as aforesaid during such period,
giving effect to all adjustments called for during such period by the
provisions of this Section 7.
(e) Issuance of Shares Below Conversion Price.
(1) If while this Note, or any portion hereof, remains
outstanding, the Maker shall offer and sell Additional Shares of Common Stock
(as hereinafter defined) for consideration per share less than the Conversion
Price in effect immediately prior to the issuance of such Additional Shares of
Common Stock, except pursuant to the Maker's Stock Option Plan approved by the
Board of Directors, the Conversion Price in effect immediately prior to each
such issuance shall forthwith be adjusted upon such issuance to a price equal
to the price paid per share for such Additional Shares of Common Stock.
(2) For the purpose of the calculations provided in this
Section 7(e), if at any time or from time to time after the date hereof the
Maker shall issue any rights or options for the purchase of, or stock or other
securities convertible into, Additional Shares of Common Stock (such Common
Stock or securi-ties being hereinafter referred to as "Convertible
Securities"), then, and in each case, if the Effective Price (as hereinafter
defined) of such rights, options or Convertible Securities shall be less than
the Conversion Price, the Maker shall be deemed to have issued at the time of
the issuance of such rights or options or Convertible Securities the maximum
number of Additional Shares of Common Stock issuable upon exercise or
conversion thereof and to have received as consideration for the issuance of
such shares an amount equal to the total amount of the consideration, if any,
payable to the Maker upon exercise or conversion of such options or rights.
"Effective Price" shall mean the quotient determined by dividing the total of
all of such consideration by such maximum number of Addi-tion-al Shares of
Common Stock. No further adjust-ment shall be made as a result of the actual
issuance of Additional Shares of Common Stock on the exer-cise of any such
rights or options or the conversion of any such Convertible Securities. In
the case of Convertible Securities which have a conversion price which is
based, in whole or in part, upon a discount to the market price or value of
the Common Stock, then for the purposes of calculating the Effective Price,
the consideration shall be deemed to include the minimum conversion price
payable to the Maker.
If any such rights or options or the conversion privilege
represented by any such Convertible Securities shall expire prior to the
Maturity hereof without having been exercised, the adjustment to the number of
shares available hereunder upon the issuance of such rights, options or
Convertible Securities shall be readjusted to the number of shares that would
have been in effect had an adjust-ment been made on the basis that the only
Addition-al Shares of Common Stock so issued were the Addi-tional Shares of
Common Stock, if any, actual-ly issued or sold on the exercise of such rights
or options or rights of conversion of such Convertible Securities, and such
Additional Shares of Common Stock, if any, were issued or sold for the
con-sid-er-ation actually received by the Maker for the grant-ing of all such
rights or options, whether or not exercised, plus the consideration received
for issu-ing or selling the Convertible Securities actually converted plus the
consideration, if any, actually received by the Maker on the conversion of
such Con-vertible Securities.
(3) For the purpose of the calculations provided for in this
Section 7(e), if at any time or from time to time after the date hereof the
Maker shall issue any rights or options for the purchase of Convertible
Securities, then, in each such case, if the Effective Price thereof is less
than the then Conversion Price, the Maker shall be deemed to have issued at
the time of the issuance of such rights or options the maximum number of
Additional Shares of Common Stock issuable upon conversion of the total amount
of Convertible Securities covered by such rights or options and to have
received as consideration for the issuance of such Additional Shares of Common
Stock an amount equal to the amount of considera-tion, if any, received by the
Maker for the issuance of such rights or options, plus the consideration, if
any, payable to the Maker upon the conversion of such Convertible Securities.
"Effective Price" shall mean the quotient determined by dividing the total
amount of such consideration by such maximum num-ber of Additional Shares of
Common Stock. No further adjustment of such Conversion Price adjusted upon
the issuance of such rights or options shall be made as a result of the actual
issuance of the Convertible Securities upon the exercise of such rights or
options or upon the actual issuance of Additional Shares of Common Stock upon
the conversion of such Convertible Securities.
(4) The term "Additional Shares of Common Stock" as used herein
shall mean all shares of Common Stock issued or deemed issued by the Maker
after the date hereof, other than (i) securities issued pursuant to or in
connection with the terms of the Securities Purchase Agreement; (ii) shares of
Common Stock issued upon conversion of convertible securities or the exercise
of common stock purchase warrants outstanding as of the date hereof; (iii)
shares of Common Stock issuable to employees, officers or directors pursuant
to the Maker's stock option plan; (iv) shares of Common Stock issued or
issuable to directors in connection with their service as directors; (v)
shares of Common Stock issued or issuable to directors, officers or employees
for services rendered or to be rendered pursuant to arrangements approved by
the Board of Directors; and (vii) shares of Common Stock issued in con-nection
with a business combination, merger, con-sol-idation, asset acquisition or the
acquisition of the business of another corporation (through the pur-chase of
stock or assets) approved by the Board of Directors and all of the Conseco
Directors (as defined in the Securities Purchase Agreement).
(f) No Impairment.
Maker will not, by any voluntary action, avoid or seek to avoid the
observance or performance or any of the terms to be observed or performed
hereunder by Maker, but will at all times in good faith assist in the carrying
out of all the provisions of this Section 7 and in the taking of all such
action as may be necessary or appropriate in order to protect the rights of
Holder against impairment.
8. Notices.
(a) Whenever the number of shares issuable or the Con-version
Price hereunder shall be adjusted pursuant to Section 7 hereof, the Maker
shall issue a certificate signed by its Chief Financial Officer setting forth,
in reasonable detail, the event re-quiring the adjustment, the amount of the
adjust-ment, the method by which such adjustment was cal-culated, and the
Conversion Price and number of shares purchasable hereunder after giving
effect to such adjustment, and shall cause a copy of such certificate to be
mailed (by first-class mail, postage prepaid) to Holder.
(b) All notices, requests, demands, or other commun-i-cations
that are required or may be given pursuant to the terms of this Note shall be
in writing and delivery shall be deemed sufficient and to have been duly given
on the date of service if delivered per-sonally or by facsimile transmission
if receipt is confirmed to the party to whom notice is to be given or on the
third day after mailing if mailed by first-class mail, return receipt
requested, and properly addressed as follows:
If to the Maker, to: 1025 Acuff Road
Bloomington, Indiana 47404
Attention: Chief Financial Officer
Fax: (812) 337-6029
If to the Holder, to: c/o Russell E. Algood
2800 South Olcott Boulevard
Bloomington, Indiana 47401
or to such other address as may be specified in writing by any of the above.
9. Remedies. The remedies provided by this Note shall be cumulative,
and shall be in addition to and not exclusive of other remedies available at
law, or in equity. The exercise or waiver by the Holder of any right or
remedy available under this Note shall not be deemed to be a waiver of any
other right or remedy available under this Note, at law, or in equity.
10. Miscellaneous.
(a) Whenever used herein, the singular includes the plural and the
plural includes the singular. The term "Maker" means the Corporation named in
the opening paragraph hereof and its successors and assigns.
(b) Indiana law shall govern this interpretation, construction, and
enforcement of this Note and all transactions contemplated hereby,
notwithstanding any state's choice of law rules to the contrary. Any
litigation related to this Note may be maintained only in the federal district
court for the Southern District of Indiana, Indianapolis Division (or any
successor jurisdiction) or in an Indiana state court in Hamilton County or one
of the counties immediately contiguous to Hamilton County, and each party
hereby irrevocably consents and submits to the jurisdiction of that federal or
state court and irrevocably waives any objection the party may have based upon
improper venue, forum non conveniens, or other similar doctrines or rules.
(c) Maker and any other party now or hereafter liable for the payment
of this Note in whole or in part, hereby severally (i) waive demand,
presentment for payment, notice of nonpayment, protest, notice of protest,
notice of intent to accelerate, notice of acceleration and all other notice,
filing of suit and diligence in collecting this Note, (ii) agree to the
release of any party primarily or secondarily liable hereon, (iii) agree that
the Holder shall not be required first to institute suit or exhaust its
remedies hereon against Maker or others liable or to become liable hereon or
to enforce its rights against them, and (iv) consent to any extension or
postponement of time of payment of this Note and to any other indulgence with
respect hereto without notice thereof to any of them.
(d) Holder, by acceptance hereof, acknowledges that this Note and the
shares to be issued upon conversion hereof are being acquired solely for
Holder's own account and not as a nominee for any other party, and for
investment, and that Holder will not offer, sell or otherwise dispose of this
Note or any shares to be issued upon conversion hereof except under
circumstances that will not result in a violation of applicable federal and
state securities laws. Upon exercise of this Note, Holder shall, if requested
by Maker, confirm in writing, in a form satisfactory to Maker, that the shares
so purchased are being acquired solely for Holder's own account and not as a
nominee for any other party, for investment, and not with a view toward
distribution or resale.
All shares issued upon exercise hereof shall be stamped or imprinted
with a legend in substantially the following form (in addition to any legend
required by state securities laws):
<PAGE>
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH
SECURITIES AND ANY SECURITIES OR SHARES ISSUED UPON CONVERSION THEREOF MAY NOT
BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SAID ACT.
(e) The captions of the sections of this Note are solely for
convenient reference and shall not be deemed to affect the meaning or
interpretation of any provision of this Note.
IN WITNESS WHEREOF, the Maker has executed, acknowledged, and delivered
this Note as of the day and year first-above written.
GENERAL ACCEPTANCE CORPORATION
By_______/s/ Martin C. Bozarth____
Printed:___Martin C. Bozarth____________
Title:_____CFO__________________________
Exhibit 10.93
THIS SUBORDINATED CONVERTIBLE NOTE HAS NOT BEEN REGIS-TERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE OR OTHER SECURITIES LAWS AND
MAY NOT BE OFFERED, SOLD, TRANSFERRED OR ASSIGNED EXCEPT (I) PURSUANT TO
REGISTRATIONS THEREOF UNDER SUCH LAWS, OR (II) IF, IN THE OPINION OF COUNSEL
REASONABLY SATISFACTORY TO GENERAL ACCEPTANCE CORPORATION THE PROPOSED
TRANS-FER MAY BE EFFECTED IN COMPLIANCE WITH APPLICABLE SECUR-ITIES LAWS
WITHOUT SUCH REGISTRATIONS.
THIS SUBORDINATED CONVERTIBLE NOTE IS SUBJECT TO A SUBORDINATION
AGREEMENT DATED APRIL 11, 1997, IN FAVOR OF GENERAL ELECTRIC CAPITAL
CORPORATION, AS AMENDED BY AMENDMENT OF SUBORDINATION AGREEMENT OF EVEN DATE
HEREWITH..
12% SUBORDINATED CONVERTIBLE NOTE
$250,000 Dated: __Sept. 16____, 1997
For value received, General Acceptance Corporation, an Indiana
corporation with its principal offices at 1025 Acuff Road, Bloomington,
Indiana 47404 ("Maker"), hereby promises to pay to the order of RUSSELL E.
ALGOOD, residing at 2800 South Olcott Boulevard, Bloomington, Indiana 47404,
or assigns (collectively, the "Holder"), at its principal office or at such
other place as the Holder may direct in writing to the Maker, in lawful money
of the United States of America, the principal amount of Two Hundred Fifty
Thousand Dollars ($250,000) and interest, as provided herein, all without
relief from valuation or appraisement laws.
This Note is one of a series of 12% Subordinated Convertible Notes in the
aggregate principal amount of $1,500,000 being issued to the Holder and other
stockholders of the Maker in exchange for the surrender of certain promissory
notes payable to them by the Maker. Holder acknowledges and agrees that the
rights of the Holder under this Note and the other Notes of the series are
without priority or distinction, and that no payments of principal or interest
on this Note shall be made by the Company unless a pro rata payment of
principal and interest is paid to the holders of all Notes of the series
outstanding from time to time.
1. Payment of Principal. Subject to acceleration as provided for
elsewhere in this 12% Subordinated Convertible Note ("Note"), the Maker shall
pay to the Holder the principal balance of this Note on June 30, 1999, plus
all accrued and unpaid interest on the full principal balance of this Note as
of that date.
2. Interest. Interest on the unpaid principal balance hereof
existing from time to time shall accrue at the rate of 12% per annum;
provided, however, interest shall accrue at the rate of 15% per annum so long
as an "Event of Default," as specified in Section 4(a), exists hereunder.
Interest shall be calculated on the basis of actual daily balances of
outstanding principal for the exact number of days the principal remains
outstanding and shall be computed on the basis of a 360-day year. Interest
shall be due and payable on a quarterly basis, on March 31, June 30, September
30 and December 31.
3. Prepayment. The Maker may not prepay all or any portion of the
unpaid principal balance hereof or accrued interest without the consent of
Holder.
4. Default and Remedy.
(a) An "Event of Default" under this Note shall mean the occurrence
of any of the following events: (i) the Maker defaults in the payment of
principal of or interest on this Note when due and the Maker does not cure
that default within 5 days after the due date; (ii) the Maker defaults in the
performance of any obligation under this Note (other than the payment
described in the immediately preceding clause) and the Maker does not cure
that default within 30 days after receipt by the Maker of written notice from
the Holder; (iii) an "Event of Default" or a "Triggering Event", both as
defined in a certain Securities Purchase Agreement between the Maker and
Capitol American Life Insurance Company dated as of April 11, 1997, as amended
("Securities Purchase Agreement"), shall occur; or (iv) the Maker commences
proceedings in any court under the United States Bankruptcy Code, or any other
debtors' relief or insolvency act, whether state or federal (the "Bankruptcy
Laws"), or any other person commences proceedings under the Bankruptcy Laws
against the Maker and those proceedings are not stayed or dismissed within
sixty (60) days.
(b) If any Event of Default occurs and is continuing, then the Holder
shall have the right and option to declare, by notice in writing sent by
registered or certified mail to the Maker, the full unpaid principal balance
hereof, together with all accrued and unpaid interest thereon, immediately due
and payable without further demand, notice, or presentment for payment.
Alternatively, if a Triggering Event occurs, the Holder shall have the right
and option to cause the Maker to redeem this Note pursuant to the procedure
set forth in Section 10.3 of the Securities Purchase Agreement.
(c) If this Note is collected or attempted to be collected by the
initiation or prosecution of any suit or through any bankruptcy court, or by
any judicial proceeding, or is placed in the hands of attorneys for
collection, then the Maker shall pay, in addition to all other amounts owing
hereunder, all court costs and reasonable attorney's fees incurred by the
Holder.
5. Subordination.
(a) Subordination to Senior Debt. Notwithstanding anything to the
contrary contained in this Note, the Maker covenants and agrees, and the
Holder by acceptance of this Note likewise covenants and agrees, that the
Maker's indebtedness under this Note shall be junior and subordinate to the
Senior Indebtedness (as hereafter defined) to the extent and in the manner set
forth in this Section 5, except to the extent otherwise agreed to in writing
by the Holder and any Senior Lender (as hereinafter defined) with respect to
the Senior Indebtedness held by or payable to that Senior Lender. Each
subsection of this Section 5 shall be given independent effect so that if a
particular payment or action is prohibited by any one of these subsections, it
shall be prohibited although it otherwise would not be prohibited by another
subsection.
(b) Payment Default on Senior Indebtedness. If at any time a
default occurs in the payment when due (whether at maturity or upon
acceleration or mandatory prepayment, or on any principal installment payment
date or interest payment date, or otherwise) ("Payment Default") of any Senior
Indebtedness, then at all times thereafter until (i) the Payment Default has
been cured, (ii) the Payment Default or the benefits of this sentence have
been waived in writing by or on behalf of the Senior Lenders holding that
Senior Indebtedness, or (iii) payment in full of all affected Senior
Indebtedness, the Maker shall not, directly or indirectly, make any
Distribution of Assets (as hereinafter defined) or Payment (as hereinafter
defined) with respect to this Note.
(c) Dissolution, Liquidation or Reorganization of Maker. In the
event of any insolvency, bankruptcy or receivership case or proceeding or any
dissolution, winding up, liquidation, reorganization or other similar
proceeding relating to the Maker, its property or its operations (whether
voluntary or involuntary and whether in bankruptcy, insolvency or receivership
proceedings or otherwise), upon an assignment for the benefit of creditors, or
any other marshaling of the assets of the Maker, then payment in full of all
Senior Indebtedness then or thereafter to become due shall occur before the
Holder shall be entitled to receive or retain any Distribution of Assets or
Payment with respect to this Note. In any such proceedings, any Distribution
of Assets or Payment to which the Holder would be entitled if this Note were
not subordinated to the Senior Indebtedness shall be paid by the Maker or the
agent or other person making such payment or distribution, or by the Holder if
received by the Holder, directly to each Senior Lender, pro forma, to the
extent necessary to make payment in full of all Senior Indebtedness, after
giving effect to any concurrent payment or distribution to or for the benefit
of the Senior Lenders.
(d) Subrogation. No Distribution of Assets or Payment to which the
Holder would have been entitled except for the provisions of this Section 5
and which are received by or paid over to the Senior Lenders or their
Representative (as hereinafter defined) shall, as between the Maker and its
creditors other than the Senior Lenders and the Holder, be deemed to be a
payment by the Maker to the Senior Lenders or on account of the Senior
Indebtedness, and the Holder shall be subrogated (without any duty on the part
of the Senior Lenders to warrant, create, effectuate, preserve or protect such
subrogation) to the then or thereafter existing rights of the Senior Lenders
to receive Distributions of Assets or payments made on the Senior Indebtedness
until this Note shall be paid in full.
(e) Payments Held in Trust. If the Holder receives any
Distribution of Assets or Payment which the Holder is not entitled to retain
under the provisions of this Section 5, any such Distribution of Assets or
Payment so received shall be held in trust for the Senior Lenders, shall not
be commingled with any other assets of the Holder, and shall be paid to the
Senior Lenders, pro rata, to the extent necessary to make payment in full,
after giving effect to any concurrent payment or distribution to or for the
benefit of the Senior Lenders.
(f) Changes in Senior Indebtedness. Any Senior Lender may at any
time and from time to time with notice to the Holder: (i) extend, renew,
modify, waive or amend the terms of the Senior Indebtedness; (ii) sell,
exchange, release or otherwise deal with any property pledged, mortgaged or
otherwise securing the Senior Indebtedness; (iii) release any guarantor or any
other person liable in any manner for the Senior Indebtedness or amend or
waive the terms of the Senior Indebtedness; (iv) exercise or refrain from
exercising any rights against the Maker or any other persons; (v) apply in any
order any sums by whomever paid or however to the Senior Indebtedness; and
(vi) take any other action which otherwise might be deemed to impair the
Holder's rights. Any and all of such actions may be taken by the Senior
Lenders without incurring responsibility to the Holder and without impairing
or releasing the Holder's obligations to the Senior Lenders.
(g) Third-Party Beneficiary, Etc.. The foregoing provisions
regarding subordination are solely for the purpose of defining the relative
rights of the Senior Lenders on the one hand and the Holder on the other hand.
Such provisions are for the benefit of the Senior Lenders (and their
successors and assigns) and shall be enforceable by them directly against the
Holder except to the extent otherwise agreed to in writing by the Holder and
any other Senior Lender.
(h) Definitions. As used in this Section 5 (or as elsewhere used
in this Note) the following terms shall have the meanings indicated:
"Distribution of Assets" means any distribution of assets of the
Maker or any of its subsidiaries of any kind or character, whether a payment,
purchase or other acquisition or retirement for cash, property, or securities,
with respect to the Maker's obligations under this Note.
"Payment" means payment of any obligation now or hereafter existing
under this Note (as it may hereafter be amended, supplemented, or otherwise
modified from time to time), whether created directly or acquired by
assignment or otherwise, and interest and premiums, if any, thereon and all
other amounts payable in respect thereof or in connection therewith.
"Representative" means, with respect to any Senior Indebtedness, the
trustee, agent, or other representative for one or more of the Senior Lenders,
if any, designated in the indenture, agreement or document creating,
evidencing or governing such Senior Indebtedness or pursuant to which it was
issued, or otherwise designated by the holders of such Senior Indebtedness.
"Senior Indebtedness" shall have the meaning specified in the
Securities Purchase Agreement. In addition "Senior Indebtedness" shall mean
any or all indebtedness, including principal, interest, and costs of
collections, including reasonable attorneys' fees, from time to time owing by
Maker to the holder or holders of a 12% Subordinated Convertible Note in the
principal amount of Ten Million Dollars ($10,000,000) of even date herewith
given by the Maker to Conseco, Inc. ("Guarantor") pursuant to certain
agreements of even date herewith (the "Conseco Guaranty Note").
"Senior Lender" or "Senior Lenders" means one or more of the holders
of Senior Indebtedness.
6. Conversion.
(a) The Holder may, at the Holder's option, at any time, and from
time to time, prior to payment in full of this Note, convert the outstanding
Principal Amount of this Note and any accrued but unpaid interest due pursuant
to Section 2 above (the "Conversion Amount"), in whole or in part (but only
into full shares), into fully paid and non-assessable shares of the common
stock, no par value of the Maker (the "Common Shares"), at a rate equal to the
amount of the greater of (x) book value computed in accordance with generally
accepted accounting principles consistently applied at the time the Common
Shares are issued, or (y) $0.25 per Common Share (subject to adjustment as set
forth in Section 7) (the "Conversion Rate"); provided, however, that such
conversion right is subject to the approval of the shareholders of Maker and
may be exercised only on a pro rata basis con-cur-rent-ly with or following
the exercise of conversion rights by the holder or holders of the Conseco
Guaranty Note. Maker agrees to hold a meeting of shareholders to obtain
shareholder approval of the conversion rights as soon as practical after the
date hereof, but in no event more than sixty (60) days after the date hereof,
unless Guarantor shall otherwise agree. In order to exercise this conversion
right, the Holder must send written notice of the conversion of a permitted
Conversion Amount to the Maker at least 10 days prior to the permitted
specified conversion date. On the conversion date (or as soon thereafter as
is reasonably practicable), the Maker shall issue to the Holder a share
certificate for the Common Shares acquired upon conversion.
(b) Notwithstanding any other provisions of this Section 6 to the
con-trary, the conversion rights of the Holder shall be subject to com-pliance
with all applicable federal and state securities laws, and the Holder agrees
to execute all required agreements and docu-ments required by the Maker to
establish compliance with such laws.
(c) The Maker shall at all times reserve and keep available and free
of preemptive rights out of its authorized but unissued Common Shares, solely
for the purpose of issuance upon conversion of the Note, the number of Common
Shares as shall from time to time be suf-ficient to effect the conversion of
the Note, and if at any time the number of authorized but unissued Common
Shares shall not be sufficient to effect the conversion of the Note, the Maker
shall take the corporate action necessary to increase the number of its
authorized Common Shares to a number sufficient for this purpose. Maker
further covenants that all shares that may be issued upon the conversion of
this Note and payment of the Conversion Price, all as set forth herein, will
be free from all taxes, liens and charges in respect of the issue thereof.
Maker agrees that its issuance of this Note shall constitute full authority to
its officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for the shares upon the
conversion of this Note.
7. Adjustments.
(a) Reorganization, Merger or Sale of Assets
If at any time while this Note, or any portion thereof, is
out-standing there shall be (i) a reorganization (other than a combi-nation,
reclassification, exchange or subdivision of shares other-wise provided for
herein), (ii) a merger or consolidation with or into another corporation in
which the Maker is not the surviving entity, or a reverse triangular merger in
which the Maker is the surviving entity but the shares of the Maker's capital
stock out-standing immediately prior to the merger are converted by virtue of
the merger into other property, whether in the form of securi-ties, cash or
otherwise, or (iii) a sale or transfer of the Maker's properties and assets
as, or substantially as, an entirety to any other person, then, as a part of
such reorganization, merger, con-sol-idation, sale or transfer, lawful
provision shall be made so that the holder of this Note shall thereafter be
entitled to receive upon conversion of the Notes the number of shares of stock
or other secur-ities or property of the successor corporation resulting from
such reorganization, merger, consolidation, sale or transfer that a holder of
the shares deliverable upon conversion of this Note would have been entitled
to receive in such reorganization, con-sol-i-dation, merger, sale or transfer
if this Note had been converted immediately before such reorganization,
merger, consolidation, sale or transfer, all subject to further adjustment as
provided in this Section 7. The foregoing provisions of this Section 7(a)
shall similarly apply to successive reorganizations, consolidations, mer-gers,
sales and transfers and to the stock or securities of any other corporation
that are at the time receivable upon the conversion of this Note. If the
per-share consideration payable to Holder for shares in connection with any
such transaction is in a form other than cash or marketable securities, then
the value of such consid-er-a-tion shall be determined in good faith by the
Maker's Board of Directors. In all events, appropriate adjustment (as
determined in good faith by the Maker's Board of Directors) shall be made in
the application of the provisions of this Note with respect to the rights and
interests of Holder after the transaction, to the end that the provisions of
this Note shall be applicable after that event, as near as reasonably may be,
in relation to any shares or other property deliverable after that event upon
conversion of this Note.
(b) Reclassification.
If the Maker, at any time while this Note, or any portion thereof,
remains outstanding, by reclassification of securities or otherwise, shall
change any of the securities as to which conversion rights under this Note
exist into the same or a different number of securities of any other class or
classes, this Note shall thereafter represent the right to acquire such number
and kind of securities as would have been issuable as the result of such
change with respect to the securities that were subject to the conversion
rights under this Note immediately prior to such reclassification or other
change and the Conversion Price or number of shares received upon such
conversion shall be appropriately adjusted, all subject to further adjustment
as provided in this Section 7.
<PAGE>
(c) Split, Subdivision or Combination of Shares.
If the Maker at any time while this Note, or any portion thereof,
remains outstanding shall split, subdivide or combine the securities as to
which conversion rights under this Note exist, into a different number of
securities of the same class, the number of shares issuable upon conversion
shall be proportionately decreased in the case of a split or subdivision or
proportionately increased in the case of a combination.
(d) Adjustments for Dividends in Stock or Other Securities or
Property.
If while this Note, or any portion hereof, remains outstanding and
unexpired the holders of the securities as to which conversion rights under
this Note exist at the time shall have received, or, on or after the record
date fixed for the determination of eligible stockholders, shall have become
entitled to receive, without payment therefor, other or additional stock or
other securities or property (other than cash) of the Maker by way of
dividend, then and in each case, this Note shall represent the right to
acquire upon conversion, in addition to the number of shares of the security
receivable upon conversion of this Note, and without payment of any additional
consideration therefor, the amount of such other or additional stock or other
securities or property (other than cash) of the Maker that such holder would
hold on the date of such conversion had it been the holder of record of the
security receivable upon conversion of this Note on the date hereof and had
thereafter, during the period from the date hereof to and including the date
of such conversion, retained such shares and/all other additional stock, other
securities or property available by this Note as aforesaid during such period,
giving effect to all adjustments called for during such period by the
provisions of this Section 7.
(e) Issuance of Shares Below Conversion Price.
(1) If while this Note, or any portion hereof, remains
outstanding, the Maker shall offer and sell Additional Shares of Common Stock
(as hereinafter defined) for consideration per share less than the Conversion
Price in effect immediately prior to the issuance of such Additional Shares of
Common Stock, except pursuant to the Maker's Stock Option Plan approved by the
Board of Directors, the Conversion Price in effect immediately prior to each
such issuance shall forthwith be adjusted upon such issuance to a price equal
to the price paid per share for such Additional Shares of Common Stock.
(2) For the purpose of the calculations provided in this
Section 7(e), if at any time or from time to time after the date hereof the
Maker shall issue any rights or options for the purchase of, or stock or other
securities convertible into, Additional Shares of Common Stock (such Common
Stock or securi-ties being hereinafter referred to as "Convertible
Securities"), then, and in each case, if the Effective Price (as hereinafter
defined) of such rights, options or Convertible Securities shall be less than
the Conversion Price, the Maker shall be deemed to have issued at the time of
the issuance of such rights or options or Convertible Securities the maximum
number of Additional Shares of Common Stock issuable upon exercise or
conversion thereof and to have received as consideration for the issuance of
such shares an amount equal to the total amount of the consideration, if any,
payable to the Maker upon exercise or conversion of such options or rights.
"Effective Price" shall mean the quotient determined by dividing the total of
all of such consideration by such maximum number of Addi-tion-al Shares of
Common Stock. No further adjust-ment shall be made as a result of the actual
issuance of Additional Shares of Common Stock on the exer-cise of any such
rights or options or the conversion of any such Convertible Securities. In
the case of Convertible Securities which have a conversion price which is
based, in whole or in part, upon a discount to the market price or value of
the Common Stock, then for the purposes of calculating the Effective Price,
the consideration shall be deemed to include the minimum conversion price
payable to the Maker.
If any such rights or options or the conversion privilege
represented by any such Convertible Securities shall expire prior to the
Maturity hereof without having been exercised, the adjustment to the number of
shares available hereunder upon the issuance of such rights, options or
Convertible Securities shall be readjusted to the number of shares that would
have been in effect had an adjust-ment been made on the basis that the only
Addition-al Shares of Common Stock so issued were the Addi-tional Shares of
Common Stock, if any, actual-ly issued or sold on the exercise of such rights
or options or rights of conversion of such Convertible Securities, and such
Additional Shares of Common Stock, if any, were issued or sold for the
con-sid-er-ation actually received by the Maker for the grant-ing of all such
rights or options, whether or not exercised, plus the consideration received
for issu-ing or selling the Convertible Securities actually converted plus the
consideration, if any, actually received by the Maker on the conversion of
such Con-vertible Securities.
(3) For the purpose of the calculations provided for in this
Section 7(e), if at any time or from time to time after the date hereof the
Maker shall issue any rights or options for the purchase of Convertible
Securities, then, in each such case, if the Effective Price thereof is less
than the then Conversion Price, the Maker shall be deemed to have issued at
the time of the issuance of such rights or options the maximum number of
Additional Shares of Common Stock issuable upon conversion of the total amount
of Convertible Securities covered by such rights or options and to have
received as consideration for the issuance of such Additional Shares of Common
Stock an amount equal to the amount of considera-tion, if any, received by the
Maker for the issuance of such rights or options, plus the consideration, if
any, payable to the Maker upon the conversion of such Convertible Securities.
"Effective Price" shall mean the quotient determined by dividing the total
amount of such consideration by such maximum num-ber of Additional Shares of
Common Stock. No further adjustment of such Conversion Price adjusted upon
the issuance of such rights or options shall be made as a result of the actual
issuance of the Convertible Securities upon the exercise of such rights or
options or upon the actual issuance of Additional Shares of Common Stock upon
the conversion of such Convertible Securities.
(4) The term "Additional Shares of Common Stock" as used herein
shall mean all shares of Common Stock issued or deemed issued by the Maker
after the date hereof, other than (i) securities issued pursuant to or in
connection with the terms of the Securities Purchase Agreement; (ii) shares of
Common Stock issued upon conversion of convertible securities or the exercise
of common stock purchase warrants outstanding as of the date hereof; (iii)
shares of Common Stock issuable to employees, officers or directors pursuant
to the Maker's stock option plan; (iv) shares of Common Stock issued or
issuable to directors in connection with their service as directors; (v)
shares of Common Stock issued or issuable to directors, officers or employees
for services rendered or to be rendered pursuant to arrangements approved by
the Board of Directors; and (vii) shares of Common Stock issued in con-nection
with a business combination, merger, con-sol-idation, asset acquisition or the
acquisition of the business of another corporation (through the pur-chase of
stock or assets) approved by the Board of Directors and all of the Conseco
Directors (as defined in the Securities Purchase Agreement).
(f) No Impairment.
Maker will not, by any voluntary action, avoid or seek to avoid the
observance or performance or any of the terms to be observed or performed
hereunder by Maker, but will at all times in good faith assist in the carrying
out of all the provisions of this Section 7 and in the taking of all such
action as may be necessary or appropriate in order to protect the rights of
Holder against impairment.
8. Notices.
(a) Whenever the number of shares issuable or the Con-version
Price hereunder shall be adjusted pursuant to Section 7 hereof, the Maker
shall issue a certificate signed by its Chief Financial Officer setting forth,
in reasonable detail, the event re-quiring the adjustment, the amount of the
adjust-ment, the method by which such adjustment was cal-culated, and the
Conversion Price and number of shares purchasable hereunder after giving
effect to such adjustment, and shall cause a copy of such certificate to be
mailed (by first-class mail, postage prepaid) to Holder.
(b) All notices, requests, demands, or other commun-i-cations
that are required or may be given pursuant to the terms of this Note shall be
in writing and delivery shall be deemed sufficient and to have been duly given
on the date of service if delivered per-sonally or by facsimile transmission
if receipt is confirmed to the party to whom notice is to be given or on the
third day after mailing if mailed by first-class mail, return receipt
requested, and properly addressed as follows:
If to the Maker, to: 1025 Acuff Road
Bloomington, Indiana 47404
Attention: Chief Financial Officer
Fax: (812) 337-6029
If to the Holder, to: c/o Russell E. Algood
2800 South Olcott Boulevard
Bloomington, Indiana 47401
or to such other address as may be specified in writing by any of the above.
9. Remedies. The remedies provided by this Note shall be cumulative,
and shall be in addition to and not exclusive of other remedies available at
law, or in equity. The exercise or waiver by the Holder of any right or
remedy available under this Note shall not be deemed to be a waiver of any
other right or remedy available under this Note, at law, or in equity.
10. Miscellaneous.
(a) Whenever used herein, the singular includes the plural and the
plural includes the singular. The term "Maker" means the Corporation named in
the opening paragraph hereof and its successors and assigns.
(b) Indiana law shall govern this interpretation, construction, and
enforcement of this Note and all transactions contemplated hereby,
notwithstanding any state's choice of law rules to the contrary. Any
litigation related to this Note may be maintained only in the federal district
court for the Southern District of Indiana, Indianapolis Division (or any
successor jurisdiction) or in an Indiana state court in Hamilton County or one
of the counties immediately contiguous to Hamilton County, and each party
hereby irrevocably consents and submits to the jurisdiction of that federal or
state court and irrevocably waives any objection the party may have based upon
improper venue, forum non conveniens, or other similar doctrines or rules.
(c) Maker and any other party now or hereafter liable for the payment
of this Note in whole or in part, hereby severally (i) waive demand,
presentment for payment, notice of nonpayment, protest, notice of protest,
notice of intent to accelerate, notice of acceleration and all other notice,
filing of suit and diligence in collecting this Note, (ii) agree to the
release of any party primarily or secondarily liable hereon, (iii) agree that
the Holder shall not be required first to institute suit or exhaust its
remedies hereon against Maker or others liable or to become liable hereon or
to enforce its rights against them, and (iv) consent to any extension or
postponement of time of payment of this Note and to any other indulgence with
respect hereto without notice thereof to any of them.
(d) Holder, by acceptance hereof, acknowledges that this Note and the
shares to be issued upon conversion hereof are being acquired solely for
Holder's own account and not as a nominee for any other party, and for
investment, and that Holder will not offer, sell or otherwise dispose of this
Note or any shares to be issued upon conversion hereof except under
circumstances that will not result in a violation of applicable federal and
state securities laws. Upon exercise of this Note, Holder shall, if requested
by Maker, confirm in writing, in a form satisfactory to Maker, that the shares
so purchased are being acquired solely for Holder's own account and not as a
nominee for any other party, for investment, and not with a view toward
distribution or resale.
<PAGE>
All shares issued upon exercise hereof shall be stamped or imprinted
with a legend in substantially the following form (in addition to any legend
required by state securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH
SECURITIES AND ANY SECURITIES OR SHARES ISSUED UPON CONVERSION THEREOF MAY NOT
BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SAID ACT.
(e) The captions of the sections of this Note are solely for
convenient reference and shall not be deemed to affect the meaning or
interpretation of any provision of this Note.
IN WITNESS WHEREOF, the Maker has executed, acknowledged, and delivered
this Note as of the day and year first-above written.
GENERAL ACCEPTANCE CORPORATION
By_______/s/ Martin C. Bozarth_____
Printed:____Martin C. Bozarth_________
Title:______CFO_________________________
Exhibit 10.94
THIS SUBORDINATED CONVERTIBLE NOTE HAS NOT BEEN REGIS-TERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE OR OTHER SECURITIES LAWS AND
MAY NOT BE OFFERED, SOLD, TRANSFERRED OR ASSIGNED EXCEPT (I) PURSUANT TO
REGISTRATIONS THEREOF UNDER SUCH LAWS, OR (II) IF, IN THE OPINION OF COUNSEL
REASONABLY SATISFACTORY TO GENERAL ACCEPTANCE CORPORATION THE PROPOSED
TRANS-FER MAY BE EFFECTED IN COMPLIANCE WITH APPLICABLE SECUR-ITIES LAWS
WITHOUT SUCH REGISTRATIONS.
THIS SUBORDINATED CONVERTIBLE NOTE IS SUBJECT TO A SUBORDINATION
AGREEMENT DATED APRIL 11, 1997, IN FAVOR OF GENERAL ELECTRIC CAPITAL
CORPORATION, AS AMENDED BY AMENDMENT OF SUBORDINATION AGREEMENT OF EVEN DATE
HEREWITH..
12% SUBORDINATED CONVERTIBLE NOTE
$250,000 Dated: __Sept. 16____, 1997
For value received, General Acceptance Corporation, an Indiana
corporation with its principal offices at 1025 Acuff Road, Bloomington,
Indiana 47404 ("Maker"), hereby promises to pay to the order of JOHN G.
ALGOOD, residing at 1805 Isleworth Court, Oldsmar, Florida 34677, or assigns
(collectively, the "Holder"), at its principal office or at such other place
as the Holder may direct in writing to the Maker, in lawful money of the
United States of America, the principal amount of Two Hundred Fifty Thousand
Dollars ($250,000) and interest, as provided herein, all without relief from
valuation or appraisement laws.
This Note is one of a series of 12% Subordinated Convertible Notes in the
aggregate principal amount of $1,500,000 being issued to the Holder and other
stockholders of the Maker in exchange for the surrender of certain promissory
notes payable to them by the Maker. Holder acknowledges and agrees that the
rights of the Holder under this Note and the other Notes of the series are
without priority or distinction, and that no payments of principal or interest
on this Note shall be made by the Company unless a pro rata payment of
principal and interest is paid to the holders of all Notes of the series
outstanding from time to time.
1. Payment of Principal. Subject to acceleration as provided for
elsewhere in this 12% Subordinated Convertible Note ("Note"), the Maker shall
pay to the Holder the principal balance of this Note on June 30, 1999, plus
all accrued and unpaid interest on the full principal balance of this Note as
of that date.
2. Interest. Interest on the unpaid principal balance hereof
existing from time to time shall accrue at the rate of 12% per annum;
provided, however, interest shall accrue at the rate of 15% per annum so long
as an "Event of Default," as specified in Section 4(a), exists hereunder.
Interest shall be calculated on the basis of actual daily balances of
outstanding principal for the exact number of days the principal remains
outstanding and shall be computed on the basis of a 360-day year. Interest
shall be due and payable on a quarterly basis, on March 31, June 30, September
30 and December 31.
3. Prepayment. The Maker may not prepay all or any portion of the
unpaid principal balance hereof or accrued interest without the consent of
Holder.
4. Default and Remedy.
(a) An "Event of Default" under this Note shall mean the occurrence
of any of the following events: (i) the Maker defaults in the payment of
principal of or interest on this Note when due and the Maker does not cure
that default within 5 days after the due date; (ii) the Maker defaults in the
performance of any obligation under this Note (other than the payment
described in the immediately preceding clause) and the Maker does not cure
that default within 30 days after receipt by the Maker of written notice from
the Holder; (iii) an "Event of Default" or a "Triggering Event", both as
defined in a certain Securities Purchase Agreement between the Maker and
Capitol American Life Insurance Company dated as of April 11, 1997, as amended
("Securities Purchase Agreement"), shall occur; or (iv) the Maker commences
proceedings in any court under the United States Bankruptcy Code, or any other
debtors' relief or insolvency act, whether state or federal (the "Bankruptcy
Laws"), or any other person commences proceedings under the Bankruptcy Laws
against the Maker and those proceedings are not stayed or dismissed within
sixty (60) days.
(b) If any Event of Default occurs and is continuing, then the Holder
shall have the right and option to declare, by notice in writing sent by
registered or certified mail to the Maker, the full unpaid principal balance
hereof, together with all accrued and unpaid interest thereon, immediately due
and payable without further demand, notice, or presentment for payment.
Alternatively, if a Triggering Event occurs, the Holder shall have the right
and option to cause the Maker to redeem this Note pursuant to the procedure
set forth in Section 10.3 of the Securities Purchase Agreement.
(c) If this Note is collected or attempted to be collected by the
initiation or prosecution of any suit or through any bankruptcy court, or by
any judicial proceeding, or is placed in the hands of attorneys for
collection, then the Maker shall pay, in addition to all other amounts owing
hereunder, all court costs and reasonable attorney's fees incurred by the
Holder.
5. Subordination.
(a) Subordination to Senior Debt. Notwithstanding anything to the
contrary contained in this Note, the Maker covenants and agrees, and the
Holder by acceptance of this Note likewise covenants and agrees, that the
Maker's indebtedness under this Note shall be junior and subordinate to the
Senior Indebtedness (as hereafter defined) to the extent and in the manner set
forth in this Section 5, except to the extent otherwise agreed to in writing
by the Holder and any Senior Lender (as hereinafter defined) with respect to
the Senior Indebtedness held by or payable to that Senior Lender. Each
subsection of this Section 5 shall be given independent effect so that if a
particular payment or action is prohibited by any one of these subsections, it
shall be prohibited although it otherwise would not be prohibited by another
subsection.
(b) Payment Default on Senior Indebtedness. If at any time a
default occurs in the payment when due (whether at maturity or upon
acceleration or mandatory prepayment, or on any principal installment payment
date or interest payment date, or otherwise) ("Payment Default") of any Senior
Indebtedness, then at all times thereafter until (i) the Payment Default has
been cured, (ii) the Payment Default or the benefits of this sentence have
been waived in writing by or on behalf of the Senior Lenders holding that
Senior Indebtedness, or (iii) payment in full of all affected Senior
Indebtedness, the Maker shall not, directly or indirectly, make any
Distribution of Assets (as hereinafter defined) or Payment (as hereinafter
defined) with respect to this Note.
(c) Dissolution, Liquidation or Reorganization of Maker. In the
event of any insolvency, bankruptcy or receivership case or proceeding or any
dissolution, winding up, liquidation, reorganization or other similar
proceeding relating to the Maker, its property or its operations (whether
voluntary or involuntary and whether in bankruptcy, insolvency or receivership
proceedings or otherwise), upon an assignment for the benefit of creditors, or
any other marshaling of the assets of the Maker, then payment in full of all
Senior Indebtedness then or thereafter to become due shall occur before the
Holder shall be entitled to receive or retain any Distribution of Assets or
Payment with respect to this Note. In any such proceedings, any Distribution
of Assets or Payment to which the Holder would be entitled if this Note were
not subordinated to the Senior Indebtedness shall be paid by the Maker or the
agent or other person making such payment or distribution, or by the Holder if
received by the Holder, directly to each Senior Lender, pro forma, to the
extent necessary to make payment in full of all Senior Indebtedness, after
giving effect to any concurrent payment or distribution to or for the benefit
of the Senior Lenders.
(d) Subrogation. No Distribution of Assets or Payment to which the
Holder would have been entitled except for the provisions of this Section 5
and which are received by or paid over to the Senior Lenders or their
Representative (as hereinafter defined) shall, as between the Maker and its
creditors other than the Senior Lenders and the Holder, be deemed to be a
payment by the Maker to the Senior Lenders or on account of the Senior
Indebtedness, and the Holder shall be subrogated (without any duty on the part
of the Senior Lenders to warrant, create, effectuate, preserve or protect such
subrogation) to the then or thereafter existing rights of the Senior Lenders
to receive Distributions of Assets or payments made on the Senior Indebtedness
until this Note shall be paid in full.
(e) Payments Held in Trust. If the Holder receives any
Distribution of Assets or Payment which the Holder is not entitled to retain
under the provisions of this Section 5, any such Distribution of Assets or
Payment so received shall be held in trust for the Senior Lenders, shall not
be commingled with any other assets of the Holder, and shall be paid to the
Senior Lenders, pro rata, to the extent necessary to make payment in full,
after giving effect to any concurrent payment or distribution to or for the
benefit of the Senior Lenders.
(f) Changes in Senior Indebtedness. Any Senior Lender may at any
time and from time to time with notice to the Holder: (i) extend, renew,
modify, waive or amend the terms of the Senior Indebtedness; (ii) sell,
exchange, release or otherwise deal with any property pledged, mortgaged or
otherwise securing the Senior Indebtedness; (iii) release any guarantor or any
other person liable in any manner for the Senior Indebtedness or amend or
waive the terms of the Senior Indebtedness; (iv) exercise or refrain from
exercising any rights against the Maker or any other persons; (v) apply in any
order any sums by whomever paid or however to the Senior Indebtedness; and
(vi) take any other action which otherwise might be deemed to impair the
Holder's rights. Any and all of such actions may be taken by the Senior
Lenders without incurring responsibility to the Holder and without impairing
or releasing the Holder's obligations to the Senior Lenders.
(g) Third-Party Beneficiary, Etc.. The foregoing provisions
regarding subordination are solely for the purpose of defining the relative
rights of the Senior Lenders on the one hand and the Holder on the other hand.
Such provisions are for the benefit of the Senior Lenders (and their
successors and assigns) and shall be enforceable by them directly against the
Holder except to the extent otherwise agreed to in writing by the Holder and
any other Senior Lender.
(h) Definitions. As used in this Section 5 (or as elsewhere used
in this Note) the following terms shall have the meanings indicated:
"Distribution of Assets" means any distribution of assets of the
Maker or any of its subsidiaries of any kind or character, whether a payment,
purchase or other acquisition or retirement for cash, property, or securities,
with respect to the Maker's obligations under this Note.
"Payment" means payment of any obligation now or hereafter existing
under this Note (as it may hereafter be amended, supplemented, or otherwise
modified from time to time), whether created directly or acquired by
assignment or otherwise, and interest and premiums, if any, thereon and all
other amounts payable in respect thereof or in connection therewith.
"Representative" means, with respect to any Senior Indebtedness, the
trustee, agent, or other representative for one or more of the Senior Lenders,
if any, designated in the indenture, agreement or document creating,
evidencing or governing such Senior Indebtedness or pursuant to which it was
issued, or otherwise designated by the holders of such Senior Indebtedness.
"Senior Indebtedness" shall have the meaning specified in the
Securities Purchase Agreement. In addition "Senior Indebtedness" shall mean
any or all indebtedness, including principal, interest, and costs of
collections, including reasonable attorneys' fees, from time to time owing by
Maker to the holder or holders of a 12% Subordinated Convertible Note in the
principal amount of Ten Million Dollars ($10,000,000) of even date herewith
given by the Maker to Conseco, Inc. ("Guarantor") pursuant to certain
agreements of even date herewith (the "Conseco Guaranty Note").
"Senior Lender" or "Senior Lenders" means one or more of the holders
of Senior Indebtedness.
6. Conversion.
(a) The Holder may, at the Holder's option, at any time, and from
time to time, prior to payment in full of this Note, convert the outstanding
Principal Amount of this Note and any accrued but unpaid interest due pursuant
to Section 2 above (the "Conversion Amount"), in whole or in part (but only
into full shares), into fully paid and non-assessable shares of the common
stock, no par value of the Maker (the "Common Shares"), at a rate equal to the
amount of the greater of (x) book value computed in accordance with generally
accepted accounting principles consistently applied at the time the Common
Shares are issued, or (y) $0.25 per Common Share (subject to adjustment as set
forth in Section 7) (the "Conversion Rate"); provided, however, that such
conversion right is subject to the approval of the shareholders of Maker and
may be exercised only on a pro rata basis con-cur-rent-ly with or following
the exercise of conversion rights by the holder or holders of the Conseco
Guaranty Note. Maker agrees to hold a meeting of shareholders to obtain
shareholder approval of the conversion rights as soon as practical after the
date hereof, but in no event more than sixty (60) days after the date hereof,
unless Guarantor shall otherwise agree. In order to exercise this conversion
right, the Holder must send written notice of the conversion of a permitted
Conversion Amount to the Maker at least 10 days prior to the permitted
specified conversion date. On the conversion date (or as soon thereafter as
is reasonably practicable), the Maker shall issue to the Holder a share
certificate for the Common Shares acquired upon conversion.
(b) Notwithstanding any other provisions of this Section 6 to the
con-trary, the conversion rights of the Holder shall be subject to com-pliance
with all applicable federal and state securities laws, and the Holder agrees
to execute all required agreements and docu-ments required by the Maker to
establish compliance with such laws.
(c) The Maker shall at all times reserve and keep available and free
of preemptive rights out of its authorized but unissued Common Shares, solely
for the purpose of issuance upon conversion of the Note, the number of Common
Shares as shall from time to time be suf-ficient to effect the conversion of
the Note, and if at any time the number of authorized but unissued Common
Shares shall not be sufficient to effect the conversion of the Note, the Maker
shall take the corporate action necessary to increase the number of its
authorized Common Shares to a number sufficient for this purpose. Maker
further covenants that all shares that may be issued upon the conversion of
this Note and payment of the Conversion Price, all as set forth herein, will
be free from all taxes, liens and charges in respect of the issue thereof.
Maker agrees that its issuance of this Note shall constitute full authority to
its officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for the shares upon the
conversion of this Note.
7. Adjustments.
(a) Reorganization, Merger or Sale of Assets
If at any time while this Note, or any portion thereof, is
out-standing there shall be (i) a reorganization (other than a combi-nation,
reclassification, exchange or subdivision of shares other-wise provided for
herein), (ii) a merger or consolidation with or into another corporation in
which the Maker is not the surviving entity, or a reverse triangular merger in
which the Maker is the surviving entity but the shares of the Maker's capital
stock out-standing immediately prior to the merger are converted by virtue of
the merger into other property, whether in the form of securi-ties, cash or
otherwise, or (iii) a sale or transfer of the Maker's properties and assets
as, or substantially as, an entirety to any other person, then, as a part of
such reorganization, merger, con-sol-idation, sale or transfer, lawful
provision shall be made so that the holder of this Note shall thereafter be
entitled to receive upon conversion of the Notes the number of shares of stock
or other secur-ities or property of the successor corporation resulting from
such reorganization, merger, consolidation, sale or transfer that a holder of
the shares deliverable upon conversion of this Note would have been entitled
to receive in such reorganization, con-sol-i-dation, merger, sale or transfer
if this Note had been converted immediately before such reorganization,
merger, consolidation, sale or transfer, all subject to further adjustment as
provided in this Section 7. The foregoing provisions of this Section 7(a)
shall similarly apply to successive reorganizations, consolidations, mer-gers,
sales and transfers and to the stock or securities of any other corporation
that are at the time receivable upon the conversion of this Note. If the
per-share consideration payable to Holder for shares in connection with any
such transaction is in a form other than cash or marketable securities, then
the value of such consid-er-a-tion shall be determined in good faith by the
Maker's Board of Directors. In all events, appropriate adjustment (as
determined in good faith by the Maker's Board of Directors) shall be made in
the application of the provisions of this Note with respect to the rights and
interests of Holder after the transaction, to the end that the provisions of
this Note shall be applicable after that event, as near as reasonably may be,
in relation to any shares or other property deliverable after that event upon
conversion of this Note.
(b) Reclassification.
If the Maker, at any time while this Note, or any portion thereof,
remains outstanding, by reclassification of securities or otherwise, shall
change any of the securities as to which conversion rights under this Note
exist into the same or a different number of securities of any other class or
classes, this Note shall thereafter represent the right to acquire such number
and kind of securities as would have been issuable as the result of such
change with respect to the securities that were subject to the conversion
rights under this Note immediately prior to such reclassification or other
change and the Conversion Price or number of shares received upon such
conversion shall be appropriately adjusted, all subject to further adjustment
as provided in this Section 7.
<PAGE>
(c) Split, Subdivision or Combination of Shares.
If the Maker at any time while this Note, or any portion thereof,
remains outstanding shall split, subdivide or combine the securities as to
which conversion rights under this Note exist, into a different number of
securities of the same class, the number of shares issuable upon conversion
shall be proportionately decreased in the case of a split or subdivision or
proportionately increased in the case of a combination.
(d) Adjustments for Dividends in Stock or Other Securities or
Property.
If while this Note, or any portion hereof, remains outstanding and
unexpired the holders of the securities as to which conversion rights under
this Note exist at the time shall have received, or, on or after the record
date fixed for the determination of eligible stockholders, shall have become
entitled to receive, without payment therefor, other or additional stock or
other securities or property (other than cash) of the Maker by way of
dividend, then and in each case, this Note shall represent the right to
acquire upon conversion, in addition to the number of shares of the security
receivable upon conversion of this Note, and without payment of any additional
consideration therefor, the amount of such other or additional stock or other
securities or property (other than cash) of the Maker that such holder would
hold on the date of such conversion had it been the holder of record of the
security receivable upon conversion of this Note on the date hereof and had
thereafter, during the period from the date hereof to and including the date
of such conversion, retained such shares and/all other additional stock, other
securities or property available by this Note as aforesaid during such period,
giving effect to all adjustments called for during such period by the
provisions of this Section 7.
(e) Issuance of Shares Below Conversion Price.
(1) If while this Note, or any portion hereof, remains
outstanding, the Maker shall offer and sell Additional Shares of Common Stock
(as hereinafter defined) for consideration per share less than the Conversion
Price in effect immediately prior to the issuance of such Additional Shares of
Common Stock, except pursuant to the Maker's Stock Option Plan approved by the
Board of Directors, the Conversion Price in effect immediately prior to each
such issuance shall forthwith be adjusted upon such issuance to a price equal
to the price paid per share for such Additional Shares of Common Stock.
(2) For the purpose of the calculations provided in this
Section 7(e), if at any time or from time to time after the date hereof the
Maker shall issue any rights or options for the purchase of, or stock or other
securities convertible into, Additional Shares of Common Stock (such Common
Stock or securi-ties being hereinafter referred to as "Convertible
Securities"), then, and in each case, if the Effective Price (as hereinafter
defined) of such rights, options or Convertible Securities shall be less than
the Conversion Price, the Maker shall be deemed to have issued at the time of
the issuance of such rights or options or Convertible Securities the maximum
number of Additional Shares of Common Stock issuable upon exercise or
conversion thereof and to have received as consideration for the issuance of
such shares an amount equal to the total amount of the consideration, if any,
payable to the Maker upon exercise or conversion of such options or rights.
"Effective Price" shall mean the quotient determined by dividing the total of
all of such consideration by such maximum number of Addi-tion-al Shares of
Common Stock. No further adjust-ment shall be made as a result of the actual
issuance of Additional Shares of Common Stock on the exer-cise of any such
rights or options or the conversion of any such Convertible Securities. In
the case of Convertible Securities which have a conversion price which is
based, in whole or in part, upon a discount to the market price or value of
the Common Stock, then for the purposes of calculating the Effective Price,
the consideration shall be deemed to include the minimum conversion price
payable to the Maker.
If any such rights or options or the conversion privilege
represented by any such Convertible Securities shall expire prior to the
Maturity hereof without having been exercised, the adjustment to the number of
shares available hereunder upon the issuance of such rights, options or
Convertible Securities shall be readjusted to the number of shares that would
have been in effect had an adjust-ment been made on the basis that the only
Addition-al Shares of Common Stock so issued were the Addi-tional Shares of
Common Stock, if any, actual-ly issued or sold on the exercise of such rights
or options or rights of conversion of such Convertible Securities, and such
Additional Shares of Common Stock, if any, were issued or sold for the
con-sid-er-ation actually received by the Maker for the grant-ing of all such
rights or options, whether or not exercised, plus the consideration received
for issu-ing or selling the Convertible Securities actually converted plus the
consideration, if any, actually received by the Maker on the conversion of
such Con-vertible Securities.
(3) For the purpose of the calculations provided for in this
Section 7(e), if at any time or from time to time after the date hereof the
Maker shall issue any rights or options for the purchase of Convertible
Securities, then, in each such case, if the Effective Price thereof is less
than the then Conversion Price, the Maker shall be deemed to have issued at
the time of the issuance of such rights or options the maximum number of
Additional Shares of Common Stock issuable upon conversion of the total amount
of Convertible Securities covered by such rights or options and to have
received as consideration for the issuance of such Additional Shares of Common
Stock an amount equal to the amount of considera-tion, if any, received by the
Maker for the issuance of such rights or options, plus the consideration, if
any, payable to the Maker upon the conversion of such Convertible Securities.
"Effective Price" shall mean the quotient determined by dividing the total
amount of such consideration by such maximum num-ber of Additional Shares of
Common Stock. No further adjustment of such Conversion Price adjusted upon
the issuance of such rights or options shall be made as a result of the actual
issuance of the Convertible Securities upon the exercise of such rights or
options or upon the actual issuance of Additional Shares of Common Stock upon
the conversion of such Convertible Securities.
(4) The term "Additional Shares of Common Stock" as used herein
shall mean all shares of Common Stock issued or deemed issued by the Maker
after the date hereof, other than (i) securities issued pursuant to or in
connection with the terms of the Securities Purchase Agreement; (ii) shares of
Common Stock issued upon conversion of convertible securities or the exercise
of common stock purchase warrants outstanding as of the date hereof; (iii)
shares of Common Stock issuable to employees, officers or directors pursuant
to the Maker's stock option plan; (iv) shares of Common Stock issued or
issuable to directors in connection with their service as directors; (v)
shares of Common Stock issued or issuable to directors, officers or employees
for services rendered or to be rendered pursuant to arrangements approved by
the Board of Directors; and (vii) shares of Common Stock issued in con-nection
with a business combination, merger, con-sol-idation, asset acquisition or the
acquisition of the business of another corporation (through the pur-chase of
stock or assets) approved by the Board of Directors and all of the Conseco
Directors (as defined in the Securities Purchase Agreement).
(f) No Impairment.
Maker will not, by any voluntary action, avoid or seek to avoid the
observance or performance or any of the terms to be observed or performed
hereunder by Maker, but will at all times in good faith assist in the carrying
out of all the provisions of this Section 7 and in the taking of all such
action as may be necessary or appropriate in order to protect the rights of
Holder against impairment.
8. Notices.
(a) Whenever the number of shares issuable or the Con-version
Price hereunder shall be adjusted pursuant to Section 7 hereof, the Maker
shall issue a certificate signed by its Chief Financial Officer setting forth,
in reasonable detail, the event re-quiring the adjustment, the amount of the
adjust-ment, the method by which such adjustment was cal-culated, and the
Conversion Price and number of shares purchasable hereunder after giving
effect to such adjustment, and shall cause a copy of such certificate to be
mailed (by first-class mail, postage prepaid) to Holder.
(b) All notices, requests, demands, or other commun-i-cations
that are required or may be given pursuant to the terms of this Note shall be
in writing and delivery shall be deemed sufficient and to have been duly given
on the date of service if delivered per-sonally or by facsimile transmission
if receipt is confirmed to the party to whom notice is to be given or on the
third day after mailing if mailed by first-class mail, return receipt
requested, and properly addressed as follows:
If to the Maker, to: 1025 Acuff Road
Bloomington, Indiana 47404
Attention: Chief Financial Officer
Fax: (812) 337-6029
If to the Holder, to: c/o Russell E. Algood
2800 South Olcott Boulevard
Bloomington, Indiana 47401
or to such other address as may be specified in writing by any of the above.
9. Remedies. The remedies provided by this Note shall be cumulative,
and shall be in addition to and not exclusive of other remedies available at
law, or in equity. The exercise or waiver by the Holder of any right or
remedy available under this Note shall not be deemed to be a waiver of any
other right or remedy available under this Note, at law, or in equity.
10. Miscellaneous.
(a) Whenever used herein, the singular includes the plural and the
plural includes the singular. The term "Maker" means the Corporation named in
the opening paragraph hereof and its successors and assigns.
(b) Indiana law shall govern this interpretation, construction, and
enforcement of this Note and all transactions contemplated hereby,
notwithstanding any state's choice of law rules to the contrary. Any
litigation related to this Note may be maintained only in the federal district
court for the Southern District of Indiana, Indianapolis Division (or any
successor jurisdiction) or in an Indiana state court in Hamilton County or one
of the counties immediately contiguous to Hamilton County, and each party
hereby irrevocably consents and submits to the jurisdiction of that federal or
state court and irrevocably waives any objection the party may have based upon
improper venue, forum non conveniens, or other similar doctrines or rules.
(c) Maker and any other party now or hereafter liable for the payment
of this Note in whole or in part, hereby severally (i) waive demand,
presentment for payment, notice of nonpayment, protest, notice of protest,
notice of intent to accelerate, notice of acceleration and all other notice,
filing of suit and diligence in collecting this Note, (ii) agree to the
release of any party primarily or secondarily liable hereon, (iii) agree that
the Holder shall not be required first to institute suit or exhaust its
remedies hereon against Maker or others liable or to become liable hereon or
to enforce its rights against them, and (iv) consent to any extension or
postponement of time of payment of this Note and to any other indulgence with
respect hereto without notice thereof to any of them.
(d) Holder, by acceptance hereof, acknowledges that this Note and the
shares to be issued upon conversion hereof are being acquired solely for
Holder's own account and not as a nominee for any other party, and for
investment, and that Holder will not offer, sell or otherwise dispose of this
Note or any shares to be issued upon conversion hereof except under
circumstances that will not result in a violation of applicable federal and
state securities laws. Upon exercise of this Note, Holder shall, if requested
by Maker, confirm in writing, in a form satisfactory to Maker, that the shares
so purchased are being acquired solely for Holder's own account and not as a
nominee for any other party, for investment, and not with a view toward
distribution or resale.
<PAGE>
All shares issued upon exercise hereof shall be stamped or imprinted
with a legend in substantially the following form (in addition to any legend
required by state securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH
SECURITIES AND ANY SECURITIES OR SHARES ISSUED UPON CONVERSION THEREOF MAY NOT
BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SAID ACT.
(e) The captions of the sections of this Note are solely for
convenient reference and shall not be deemed to affect the meaning or
interpretation of any provision of this Note.
IN WITNESS WHEREOF, the Maker has executed, acknowledged, and delivered
this Note as of the day and year first-above written.
GENERAL ACCEPTANCE CORPORATION
By_______/s/ Martin C. Bozarth________
Printed:__Martin C. Bozarth____________
Title:____CFO___________________________
Exhibit 99.2
For Release At 8:00 A.M. EST On September 17, 1997
General Acceptance Corporation
Contact: Martin C. Bozarth, Chief Financial Officer
812-337-6023
Bloomington, Indiana (September 17, 1997) GAC ANNOUNCES INCREASED AND
EXTENDED CREDIT LINE AND INTEREST RATE REDUCTION
General Acceptance Corporation today announced that it has reached an
agreement with its primary lender to extend and increase its credit line, to
reduce the interest rate thereunder and to waive all existing events of
default under the line. The credit line, which was due to expire at the end
of 1997, has been extended to January 1, 1999. As of January 1, 1998, the
amount of the credit line will increase to $100.0 million from its current
level of $70.0 million. Effective immediately, the interest rate has been
reduced by 1.25%, from LIBOR plus 4.50% to LIBOR plus 3.25%.
This agreement gives the Company access to sufficient funding, at a
competitive interest rate, to finance its contract acquisition and origination
objectives through the end of 1998.
As part of the transaction, Conseco, Inc. has agreed to guarantee up to $10.0
million of the Company's indebtedness to its primary lender. The guarantee
can be called by the lender only upon the occurrence of certain events of
default. Any amounts funded by Conseco under the guarantee would trigger the
issuance by the Company of a like amount of 12.00% convertible subordinated
debt to Conseco. Any newly issued convertible subordinated debt would be
convertible into common stock of the Company at a conversion price of the then
current book value per share, but not less than $0.25. In connection with the
guarantee, the Company issued to Conseco warrants to purchase 500,000 shares
of common stock at an exercise price of $1.00 per share. As a result of the
issuance of the warrants, the conversion price on the previously issued $13.25
million of convertible subordinated debt is reduced to $1.00 per share.
If the holders (Conseco and certain principal stockholders and their
relatives) of the $13.25 million of convertible subordinated debt each
converted their notes to common stock of the Company, and Conseco exercised
its 500,000 warrants, Conseco would own approximately 53% of the total
outstanding common stock of the Company.
The Company also agreed to issue $1.5 million of 12.00% convertible
subordinated debt in exchange for a like amount of 12.00% unsecured debt
currently held by certain principal stockholders. This convertible
subordinated debt has terms identical to the debt issuable to Conseco in
connection with any amounts funded under the guarantee, except that this debt
is not convertible until conversion by Conseco.
--More--
The effectiveness of the warrants and the conversion feature of the $10.0
million of convertible subordinated debt issuable to Conseco and the $1.5
million of convertible subordinated debt issued to certain principal
stockholders are each subject to approval by shareholders at an upcoming
special shareholders' meeting. Subject to such approval, each would be
exercisable or convertible as described above, and the conversion price on the
existing $13.25 million of convertible subordinated debt would be reduced as
described above.
General Acceptance Corporation is a specialized consumer finance company
principally engaged in purchasing and servicing installment sale contracts
relating to the sale of used automobiles to consumers with limited access to
traditional financing sources. The Company acquires these contracts from used
vehicle dealerships operated by the Company as well as from unaffiliated
dealers. The Company is headquartered in Bloomington, Indiana, and has
regional offices in Indiana, Ohio and Florida and company-owned used vehicle
dealerships in Indiana, Ohio, Florida, Missouri and Illinois.
The Company's stock is traded on NASDAQ under the symbol "GACC."
--End--
