Exhibit 10.8.37
FORBEARANCE AGREEMENT RELATING TO
1997 D&O LOANS
FORBEARANCE AGREEMENT, dated as of October 16, 2002 (this
"Agreement"), among Conseco, Inc., an Indiana corporation ("Conseco"), CIHC,
Incorporated, a Delaware corporation ("CIHC" and, together with Conseco, the
"Obligors"), the financial institutions named on the signature pages hereto (the
"Participant Banks") and Bank of America, N.A., individually and as agent for
the Banks referred to below (the "Agent").
WITNESSETH:
A. WHEREAS, Conseco and the Agent are parties to a Guaranty dated as
of November 22, 2000 (as heretofore amended, the "Conseco Guaranty"), and
Conseco, various financial institutions party thereto (the "Banks") and the
Agent are parties to the Agreement dated as of September 22, 2000, Re 1997 D&O
Loans (the "Refinancing Agreement"), each entered into in connection with the
Credit Agreement dated as of November 22, 2000 (as heretofore amended, the
"Credit Agreement") among the borrowers party thereto (the "Borrowers"), the
Banks and the Agent relating to the refinancing of certain loans under an
Amended and Restated Credit Agreement dated as of August 26, 1997 among the
Borrowers, certain other borrowers, the Banks and the Agent;
B. WHEREAS, Conseco has advised the Agent and the Banks that, as of
the date hereof, certain defaults (as referred to below, the "Specified
Defaults") have occurred and are continuing or are expected to occur under the
Conseco Guaranty and the Refinancing Agreement; and
C. WHEREAS, Conseco has asked the Agent and the Banks, and the Agent
and the Participant Banks are willing, to forbear from exercising certain
default-related remedies against the Obligors under the Refinancing Agreement,
the Conseco Guaranty and the CIHC Guaranty (together, the "Guaranty Documents")
on account of the Specified Defaults for a limited period of time and upon the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing, the covenants and
conditions contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. Defined Terms; References. Unless otherwise specifically
defined herein, each term used herein which is defined in the Conseco Guaranty
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has the meaning assigned to such term in the Conseco Guaranty (including by
reference to the Credit Agreement).
SECTION 2. Obligor Acknowledgements and Undertakings.
(a) Each Obligor acknowledges and agrees that the aggregate principal
amount of the outstanding Loans under the Credit Agreement as of October 17,
2002 and the aggregate accrued and unpaid interest on the Loans through October
17, 2002 will be as follows:
Principal amount of the Loans
as of October 17, 2002: $200,054,937.84
Accrued and unpaid interest on
the Loans through October 17, 2002: $2,013,155.10
The foregoing amounts do not include unpaid interest, fees, expenses and other
amounts (other than accrued and unpaid interest on the Loans through October 17,
2002) that are chargeable or otherwise reimbursable under the Loan Documents.
(b) Each Obligor acknowledges and agrees that the aggregate accrued
and unpaid Waiver Consideration (as defined in Waiver No. 2 dated as of
September 8, 2002 to the Conseco Guaranty and the Refinancing Agreement) through
October 17, 2002 is equal to $661,081.28.
The foregoing amount does not include any Waiver Consideration (other than
Waiver Consideration accrued and unpaid through October 17, 2002) that is
chargeable under the above referenced Waiver No. 2.
(c) Each Obligor agrees and acknowledges that events of default under
clauses (a), (c) and (e) of Article 5 of the Appendix (incorporated by reference
into the Conseco Guaranty and the Refinancing Agreement), including, without
limitation, (i) the failure by the Obligors (as guarantors) to pay interest on
the Loans under the Credit Agreement on October 31, 2002 pursuant to the
applicable Guaranty Documents or within the applicable grace period, (ii) the
failure by Conseco to comply with the financial covenants set forth in Section
4.13 of the Appendix as of June 30, 2002 and September 30, 2002, (iii) the
failure by Conseco and CIHC (as guarantor of Conseco's obligations with respect
to the New Notes (as defined in Schedule I) and the Revolving Credit Agreement)
to make the interest payment (and, in the case of the October 2002 Notes (as
defined in Schedule 1), to repay the principal amount) in respect of any
Indebtedness set forth on Schedule I hereto on the payment date set forth with
respect to such Indebtedness on such Schedule or within any applicable grace or
notice period, (iv) the failure by the Obligors (as guarantors) to make the
interest payment in respect of the 1998 D&O Credit Agreement and the New Credit
Agreements Re D&O Loans (other than the Credit Agreement) on the applicable
interest payment dates in October 2002 or within any applicable grace periods,
and (v) any event of
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default under clause (e) of the Appendix solely as a result of any of the
foregoing constituting a default under any other Indebtedness (collectively, the
"Specified Defaults") constitute material events of default that have occurred
and are continuing or are expected to occur on or before October 31, 2002.
(d) Conseco shall, on or prior to October 18, 2002 (or, in the case of
the Milliman Information (as defined in Schedule IV hereto) October 22, 2002),
deliver or cause to be delivered to Ernst & Young Corporate Finance ("EYCF") the
information listed on Part 1 of Schedule IV hereto, such information to be in
form and substance satisfactory to EYCF. Conseco shall, on an ongoing basis,
promptly upon the preparation or receipt thereof, deliver or cause to be
delivered to EYCF the information listed on Part 2 of Schedule IV hereto, such
information to be in form and substance satisfactory to EYCF.
(e) Conseco shall, promptly upon obtaining knowledge thereof, notify
the Agent and the Banks in writing of the occurrence of any event or condition
described in clauses (ii), (iv) or (v) of Section 3(b) below.
SECTION 3. Forbearance.
(a) The Agent and the Participant Banks agree that until the
expiration of the Forbearance Period (as defined below), the Agent and the
Participant Banks will temporarily forbear from the exercise of their
default-related remedies against the Obligors solely to the extent the
availability of such remedies arises exclusively from the Specified Defaults;
provided that Conseco shall comply during the Forbearance Period with all
provisions, limitations, restrictions or prohibitions that would otherwise be
effective or applicable under any of the Loan Documents during the continuance
of any default.
(b) As used herein, "Forbearance Period" means the period beginning on
the date hereof and ending on the earliest to occur of (any such occurrence
being a "Termination Event"):
(i) 12:01 A.M. (New York time) on November 27, 2002;
(ii) the occurrence of any default or event of default under
any Guaranty Document other than a Specified Default;
(iii) the failure of Conseco to perform the covenants and
agreements contained in this Agreement in accordance with their terms;
(iv) the commencement by any holder of Indebtedness or other
obligations (including, without limitation, any Indebtedness or other
obligations pursuant to any agreement or instrument listed on Schedule
I, II or III hereto or any guaranty thereof) of Conseco, any of its
Subsidiaries or any special purpose entity established in connection
with the transactions contemplated by any of the agreements referred
to in
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Schedule II hereto (each, an "SPE") (or any indenture trustee or agent
therefor) of the exercise of any remedy (including, without
limitation, acceleration or the making of a demand in respect of such
Indebtedness or obligation or under any guaranty entered into in
connection therewith) or the taking of any other action in furtherance
of collection or enforcement of any claim or Lien against Conseco, any
of its Subsidiaries or any SPE or any of their respective assets;
provided that, (A) solely in the case of agreements or instruments
listed in Schedule II, the foregoing shall constitute a Termination
Event only if Conseco fails to receive by the close of business on the
second Business Day after occurrence of such event a written
notification from the Required Banks stating that the forbearance
granted in this Agreement will not be rescinded as a result of such
event and (B) in the case of Indebtedness or other obligations arising
under agreements or instruments not listed on Schedule I, II or III
hereto, the foregoing shall constitute a Termination Event only if the
aggregate principal amount of Indebtedness or other obligations
outstanding under such agreements or instruments (including committed
or available amounts thereunder) exceeds $10,000,000;
(v) the making by Conseco or any of its Subsidiaries (other
than Conseco Finance Corp. ("Conseco Finance") or any of its
Subsidiaries), directly or indirectly, of any Investment (as defined
in the Revolving Credit Agreement) in Conseco Finance or any of its
Subsidiaries after the date hereof (other than Investments in an
aggregate amount not exceeding $6,000,000 in respect of products and
services provided in the ordinary course of business and consistent
with past practices), unless, at least five Business Days prior to
making such Investment, Conseco shall have delivered written
notification thereof to the Agent setting forth the name of the entity
making such Investment, the date on which such Investment is to be
made, the amount and form of such Investment and, in reasonable
detail, the reasons for making such Investment; and
(vi) receipt by Conseco of a written notice from the
Required Banks (regardless of whether party hereto) advising Conseco
(in their sole discretion) that the forbearance granted in this
Agreement is terminated.
(c) Upon a Termination Event, the agreement of the Agent and the
Participant Banks hereunder to forbear from exercising their default-related
remedies shall immediately terminate without the requirement of any demand,
presentment, protest or notice of any kind, all of which each Obligor waives.
Each Obligor agrees that the Agent and the Banks may at any time thereafter
proceed to exercise any and all of their respective rights and remedies under
any or all of the Loan Documents and/or applicable law, including, without
limitation, their respective rights and remedies in connection with any or all
of the defaults, including, without limitation, the Specified Defaults. For the
avoidance of doubt, nothing herein limits the right of the Agent or the Banks,
including during the
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Forbearance Period, to make a demand upon or exercise other remedies against any
Borrower under the Refinancing Agreement, Credit Agreement or otherwise, or to
take any action to preserve or exercise rights or remedies against parties other
than the Obligors ("Third Party Rights"). For purposes of the foregoing, the
Obligors acknowledge and agree that execution and delivery of this Agreement
shall constitute the making of any necessary demand against or the giving of any
necessary notice to the Borrowers or any other Person (other than the Obligors)
for purposes of preserving and/or permitting the exercise of any such Third
Party Rights of the Agent and the Banks.
(d) Execution of this Agreement constitutes a direction by the
Participant Banks that the Agent act in accordance with its terms.
(e) Each Obligor acknowledges and agrees that the agreement of the
Agent and the Participant Banks hereunder to forbear from exercising their
default-related remedies with respect to the Specified Defaults shall not
constitute a waiver of such Specified Defaults and that the Agent and the Banks
expressly reserve all rights and remedies that the Agent and the Banks now or
may in the future have under any or all of the Loan Documents and/or applicable
law in connection with all defaults (including without limitation the Specified
Defaults).
SECTION 4. Reference to and Effect upon the Guaranty Documents.
(a) Except as expressly set forth herein, all terms, conditions,
covenants, representations and warranties contained in the Guaranty Documents
and each other Loan Document, and all rights of the Agent and the Banks and all
obligations of the Obligors thereunder, shall remain in full force and effect.
Each Obligor hereby confirms that the Guaranty Documents and the other Loan
Documents are in full force and effect.
(b) Except as expressly provided herein, nothing contained in this
Agreement and no action by, or inaction on the part of, any Bank or the Agent
shall, or shall be deemed to, directly or indirectly (i) constitute a consent to
or waiver of any past, present or future violations of any provisions of the
Guaranty Documents or any other Loan Document, (ii) amend, modify or operate as
a waiver of any provision of the Guaranty Documents or any other Loan Document
or, except as expressly set forth herein, of any right, power or remedy of the
Agent or any Bank thereunder or (iii) constitute a course of dealing or other
basis for altering any obligations of any Obligor under the Guaranty Documents
or any other contract or instrument.
(c) This Agreement shall constitute a Loan Document.
Section 5. Representations and Warranties. To induce the Agent and
the Participant Banks to execute and deliver this Agreement, each Obligor
represents and warrants that:
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(a) The execution, delivery and performance by each Obligor of this
Agreement have been duly authorized by all necessary corporate action, and do
not and will not (i) contravene the terms of the articles of incorporation,
bylaws or other organizational documents of such Obligor, (ii) conflict with or
result in any breach or contravention of, or the creation of any Lien under, any
document evidencing any contractual obligation to which such Obligor is a party
or any order, injunction, writ or decree of any Governmental Authority to which
such Obligor or its property is subject or (iii) violate any provision of any
law, statute, rule or regulation. This Agreement constitutes the legal, valid
and binding obligations of each Obligor, enforceable against such Obligor in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, or similar laws affecting the enforcement of creditors'
rights generally or by equitable principles relating to enforceability.
(b) No approval, consent, exemption, authorization, or other action
by, or notice to, or filing with, any Governmental Authority is necessary or
required in connection with the execution, delivery or performance by, or
enforcement against, any Obligor of this Agreement.
(c) On and as of the Forbearance Effective Date (as defined below) and
after giving effect to this Agreement, (i) the representations and warranties of
each Obligor set forth in the Guaranty Documents are true and correct as though
made on and as of the Forbearance Effective Date (except to the extent a
representation or warranty references a specific date, in which case, such
representation or warranty is true and correct as of such date) and (ii) other
than the Specified Defaults, no default under any Guaranty Document has occurred
and is continuing.
SECTION 6. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of Illinois.
SECTION 7. Counterparts. This Agreement may be signed in any number
of counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
SECTION 8. Severability. The invalidity, illegality or
unenforceability of any provision in or obligation under this Agreement in any
jurisdiction shall not affect or impair the validity, legality or enforceability
of the remaining provisions or obligations under this Agreement or of such
provision or obligation in any other jurisdiction.
SECTION 9. Further Assurances. Each Obligor agrees to take all
further actions and execute all further documents as the Agent may from time to
time reasonably request to carry out the transactions contemplated by this
Agreement.
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SECTION 10. Notices. All notices, requests and demands to or upon the
respective parties hereto shall be given in accordance with Section 7.3 of the
Conseco Guaranty or Section 5.2 of the CIHC Guaranty.
SECTION 11. Effectiveness. This Agreement shall become effective on
the date (the "Forbearance Effective Date") when the following conditions are
satisfied:
(i) the Agent shall have received from each of the Obligors and the
Required Banks a counterpart hereof signed by such party or facsimile or other
written confirmation (in form satisfactory to the Agent) that such party has
signed a counterpart hereof;
(ii) a certificate of the chief operating officer of Conseco
certifying that the representations and warranties made by Conseco pursuant to
Section 5 of this Agreement are true and correct on and as of the date of this
Agreement; and
(iii) the requisite lenders under each of (a) the Revolving Credit
Agreement, (b) the Agreement dated September 22, 2000, Re: 1998 D&O Loans, and
(c) the Agreement dated September 22, 2000, Re: 1999 D&O Loans, shall have
entered into forbearance agreements thereunder on terms substantially similar to
those contained herein.
SECTION 12 . Waiver of Jury Trial. EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER
THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN
INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS
AND CERTIFICATIONS IN THIS SECTION.
SECTION 13 . No Third Party Beneficiaries. This Agreement shall be
binding upon and inure to the benefit of each Obligor, the Agent and the Banks
and their respective successors and assigns; provided that the Banks (other than
the Participant Banks) shall not be bound by the forbearance granted hereunder.
No Person other than the parties hereto and any other Bank shall have any rights
hereunder or be entitled to rely on this Agreement, and all third-party
beneficiary rights (other than the rights of any other Bank) are hereby
expressly disclaimed.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.
CONSECO, INC.
By: /s/ David K. Herzog
---------------------------------------------
Name: David K. Herzog
Title: Executive Vice President,
General Counsel and Secretary
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CIHC, INCORPORATED
By: /s/ William T. Devanney, Jr.
---------------------------------------------
Name: William T. Devanney, Jr.
Title: Senior Vice President
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BANK OF AMERICA, N.A., as
Administrative Agent and as a Bank
By: /s/ Bridget Garavalia
---------------------------------------------
Name: Bridget Garavalia
Title: Managing Director
DEUTSCHE BANK AG, New York
and/or Cayman Island Branches
By: /s/ Roberta Woods
--------------------------------------------
Name: Roberta Woods
Title:
By: /s/ Mark B. Cohen
--------------------------------------------
Name: Mark B. Cohen
Title: Managing Director
Head of Workout
WACHOVIA BANK, NATIONAL ASSOCIATION
By:
--------------------------------------------
Name:
Title:
FLEET NATIONAL BANK
By:
--------------------------------------------
Name:
Title:
SUN TRUST BANK
By: /s/ Byron P. Kurtgis
--------------------------------------------
Name: Byron P. Kurtgis
Title: Director
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ W. Jerome McDermott
--------------------------------------------
Name: W. Jerome McDermott
Title: Duly Authorized Signatory
SCHEDULE I
Indebtedness
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Indebtedness Payment Date
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"Old" 8.75% Senior Notes due February 2004 issued pursuant to the Senior Indenture August 9, 2002
dated November 13, 1997
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"New" 8.75% Guaranteed Senior Notes due August 2006 issued pursuant to the First August 9, 2002
Senior Indenture dated April 24, 2002 (the "New 8.75% Notes")
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"Old" 6.4% Senior Notes due February 2003 issued pursuant to the Senior Indenture August 12, 2002
dated November 13, 1997
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"New" 6.4% Guaranteed Senior Notes due February 2004 issued pursuant to the First August 12, 2002
Senior Indenture dated April 24, 2002 (the "New 6.4% Notes")
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8.125% Senior Notes due February 2003 issued pursuant to the Senior Indenture dated August 15, 2002
February 18, 1993
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6.75% FELINE PRIDES due February 2003 August 16, 2002
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"Old" 8.5% Senior Notes due October 2002 issued pursuant to the Senior Indenture October 15, 2002
dated November 13, 1997 (the "October 2002 Notes")
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"New" 8.5% Guaranteed Senior Notes due October 2003 issued pursuant to the First October 15, 2002
Senior Indenture dated April 24, 2002 (the "New 8.5% Notes")
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"Old" 9.0% Senior Notes due October 2006 issued pursuant to the Senior Indenture October 15, 2002
dated November 13, 1997
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"New" 9.0% Guaranteed Senior Notes due April 2008 issued pursuant to the First October 15, 2002
Senior Indenture dated April 24, 2002 (the "New 9.0% Notes",
and together with the New 8.75% Notes, the New 6.4% Notes and the New 8.5%
Notes, the "New Notes")
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Loans outstanding under the Revolving Credit Agreement October 17, 2002 and October
31, 2002
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SCHEDULE II
CFC Facilities
1. Third Amended and Restated Master Repurchase Agreement between
Merrill Lynch Mortgage Capital Inc. and Green Tree Finance Corp.
- Three dated April 5, 2001, and related documents entered into
in connection therewith.
2. Second Amended and Restated Master Repurchase Agreement between
Lehman Commercial Paper Inc. and Green Tree Finance Corp. - Five
dated January 30, 2002, and related documents entered into in
connection therewith.
3. Asset Assignment Agreement by and between Lehman Commercial Paper
Inc. and Green Tree Residual Finance Corp. I dated February 13,
1998, and related documents entered into in connection therewith.
4. Master Repurchase Agreement between Green Tree Residual Finance
Corp I and Lehman Brothers Inc., and related documents entered
into in connection therewith.
5. Master Repurchase Agreement between Credit Suisse First Boston
Mortgage Capital LLC and Green Tree Financial Corp. dated March
26, 1999, and related documents entered into in connection
therewith.
6. Credit Agreement between Conseco Finance Corp. and U.S. Bank
National Association dated as of December 27, 2000, and related
documents entered into in connection therewith.
SCHEDULE III
Indebtedness (with cross-defaults)
1. 10.5% Senior Notes due December 2004 issued pursuant to the First
Supplemental Indenture dated August 31, 1995 (to the Indenture
dated December 15, 1994).
2. "Old" 10.75% Senior Notes due June 2008 issued pursuant to the
First Senior Supplemental Indenture dated June 29, 2001 (to the
Senior Indenture dated November 13, 1997).
3. "New" 10.75% Guaranteed Notes due June 2009 issued pursuant to
the First Senior Supplemental Indenture dated April 24, 2002 (to
the Second Senior Indenture dated April 24, 2002).
SCHEDULE IV
Information to be delivered to EYCF
Part 1:
1. Milliman valuation and details underlying assumptions, along with
the statutory model underlying Milliman valuation (together, the
"Milliman Information")
2. Documents regarding 60-day forbearance agreement between Lehman
and CFC
3. Current cash balance update (as of October 18, 2002) with respect
to each of the following entities:
i. Conseco, Inc.,
ii. CCM, Services,
iii. other non-CIHC and non-insurance entities,
iv. CIHC (stand alone), and
v. CIHC (consolidated but excluding insurance entities)
4. Conseco and CIHC cash flow sensitivity analysis
Part 2:
1. Business plan / strategic plan for Conseco Finance
2. Daily and weekly cash balance updates with respect to each of the
following entities:
i. Conseco, Inc.,
ii. CCM, Services,
iii. other non-CIHC and non-insurance entities,
iv. CIHC (stand alone), and
v. CIHC (consolidated but excluding insurance entities)
3. Daily and weekly liquidity schedules for Conseco Finance
4. Weekly NAP/Surrender trends
5. Any additional information reasonably requested by EYCF regarding
the business, financial or corporate affairs of Conseco or any
Subsidiary