CONSECO
SUBORDINATION AGREEMENT
THIS AGREEMENT is entered into this 16 day of September, 1997, among
CAPITOL AMERICAN LIFE INSURANCE COMPANY, an Arizona Corporation, ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, and ▇▇▇▇ ▇. ▇▇▇▇▇▇ (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 incorporated herein by this reference.
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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 Agreement; (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 ▇▇▇▇▇▇ 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.
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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 payment 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. Until 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 discharged, and subject to the ▇▇▇▇▇▇ 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 issuance 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% 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 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
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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: ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel
(b) If to Creditors: At the address set forth
opposite their signature below
(c) If to the Company: ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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,
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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 ▇▇▇▇▇▇ Notes. It is acknowledged that the Junior Debt of ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ Notes") given by the Company, which Notes
are superior to the Junior Debt pursuant to the provisions of the ▇▇▇▇▇▇
Subordination Agreement of even date herewith.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed and delivered, this 16th day of September, 1997.
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"Company"
GENERAL ACCEPTANCE CORPORATION
By /s/ ▇▇▇▇▇▇ ▇. BOZARON
Printed:▇▇▇▇▇▇ ▇. BOZARON
Title:CFO
"Creditors"
CAPITOL AMERICAN LIFE INSURANCE COMPANY
Address for Notices:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Printed:▇▇▇▇▇▇ ▇. ▇▇▇▇
Attention: General Counsel Title:Executive Vice President
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ Chief Financial Officer
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ /s/▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ __________________________________
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇. /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Bloomington, IN 47401 ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ __________________________________
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇. ▇▇▇▇▇▇
The foregoing SUBORDINATION AGREEMENT is accepted by the Guarantor this
16th day of September, 1997.
CONSECO, INC.
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
Printed:▇▇▇▇▇▇ ▇. ▇▇▇▇
Title:Executive Vice President
Chief Financial Officer
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