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Partnership Interest Purchase Agreement

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Sectors: Services
Governing Law: Indiana, View Indiana State Laws
Effective Date: December 20, 1995
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PARTNERSHIP INTEREST PURCHASE AGREEMENT


BY AND AMONG


ANDERSON PARK, INC.,


CONSECO HPLP, L.L.C.


PEGASUS GROUP, INC. AND


HOOSIER PARK, L.P.


DECEMBER 20, 1995


January 31, 1996


TABLE OF CONTENTS


PAGE


ARTICLE I. DEFINITION AND CONSTRUCTION................................... 1


Section 1.01. Definitions.......................................... 1
Section 1.02. Headings............................................. 4
Section 1.03. Construction......................................... 4


ARTICLE II. TERMS OF PURCHASE OF PARTNERSHIP INTEREST..................... 4


Section 2.01. Purchase of Partnership Interest..................... 4
Section 2.02. Purchase Price....................................... 5
Section 2.03. Transfer Taxes and Costs ............................ 5
Section 2.04. Conseco Option ...................................... 5


ARTICLE III. REPRESENTATIONS AND WARRANTIES OF API......................... 6


Section 3.01. Organization and Power of HPLP....................... 7
Section 3.02. Ownership Interest................................... 7
Section 3.03. Corporate Organization............................... 7
Section 3.04. Authorization........................................ 7
Section 3.05. No Conflict or Violation............................. 7
Section 3.06. Approvals and Consents............................... 8
Section 3.07. Financial Statements................................. 8
Section 3.08. Brokers' or Finders' Fees............................ 8
Section 3.09. Absence of Undisclosed Liabilities .................. 8
Section 3.10. Tax Matters.......................................... 8
Section 3.11. Compliance; Governmental Authorization .............. 9
Section 3.12. Title to Property.................................... 9
Section 3.13. Contracts, Agreements, and Commitments............... 10


ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PEGASUS..................... 10


Section 4.01. Ownership Interest................................... 10
Section 4.02. Corporate Organization............................... 10
Section 4.03. Authorization........................................ 10
Section 4.04. No Conflict or Violation............................. 11
Section 4.05. Approvals and Consents............................... 11
Section 4.06. Brokers' or Finders' Fees............................ 11


ARTICLE V. REPRESENTATIONS AND WARRANTIES OF CONSECO..................... 11


Section 5.01. Corporate Organization............................... 11
Section 5.02. Authorization........................................ 11
Section 5.03. No Conflict or Violation............................. 12
Section 5.04. Approvals and Consents............................... 12
Section 5.05. Brokers' or Finders' Fees............................ 12
Section 5.06. Investment Intent.................................... 12


(i)


January 31, 1996


PAGE


ARTICLE VI. COVENANTS OF HPLP............................................. 13


Section 6.01. Actions Before the Closing Date...................... 13
Section 6.02. Actions at the Closing............................... 13


ARTICLE VII. COVENANTS OF API.............................................. 13


Section 7.01. Actions Before the Closing........................... 13
Section 7.02. Actions at the Closing............................... 14
Section 7.03. Confidentiality...................................... 14


ARTICLE VIII. COVENANTS OF PEGASUS.......................................... 15


Section 8.01. Actions Before the Closing........................... 15
Section 8.02. Waiver and Consent................................... 15
Section 8.03. Actions at the Closing............................... 15
Section 8.04. Confidentiality.......................................16


ARTICLE IX. COVENANTS OF CONSECO.......................................... 16


Section 9.01. Actions Before the Closing........................... 16
Section 9.02. Actions at the Closing............................... 17
Section 9.03. Consents............................................. 17
Section 9.04. Confidentiality...................................... 17


ARTICLE X. CONDITIONS TO OBLIGATIONS..................................... 17


Section 10.01. Conseco.............................................. 17
Section 10.02. API.................................................. 18


ARTICLE XI. CLOSING....................................................... 18


Section 11.01. Closing.............................................. 18
Section 11.02. Documents to be Delivered by API..................... 18
Section 11.03. Documents to be Delivered by Conseco................. 19
Section 11.04. Documents to be Delivered by Pegasus................. 20


ARTICLE XII. TERMINATION................................................... 20


Section 12.01. Conditions of Termination............................ 20
Section 12.02. Effect of Termination................................ 21


ARTICLE XIII. INDEMNIFICATION................................................21


Section 13.01. Indemnification by API................................21
Section 13.02. Indemnification by Conseco............................21
Section 13.03. Indemnification by Pegasus............................21
Section 13.04. Indemnification by HPLP...............................21
Section 13.05. Procedure.............................................22
Section 13.06. Limitations on Indemnification........................22


(ii)


January 31, 1996


PAGE


ARTICLE XIV. MISCELLANEOUS..................................................23


Section 14.01. Public Announcements..................................23
Section 14.02. Expenses..............................................23
Section 14.03. Survival of Representations...........................23
Section 14.04. Notices...............................................23
Section 14.05. Severability..........................................25
Section 14.06. Entire Agreement......................................25
Section 14.07. Amendments; Waivers...................................25
Section 14.08. Parties in Interest...................................25
Section 14.09. Successors and Assigns................................25
Section 14.10. Governing Law; Jurisdiction...........................25
Section 14.11. Counterparts..........................................26
Section 14.12. Schedule Update.......................................26


(iii)


January 31, 1996


PARTNERSHIP INTEREST PURCHASE AGREEMENT


THIS PARTNERSHIP INTEREST PURCHASE AGREEMENT (this "Agreement") is made and entered into as of this 20th day of December, 1995, by and among Anderson Park, Inc., an Indiana corporation ("API") in its corporate capacity and in its capacity as general partner of Hoosier Park, L.P., Conseco HPLP, L.L.C., an Indiana limited liability company ("Conseco"), Pegasus Group, Inc., an Indiana corporation ("Pegasus") and Hoosier Park, L.P., an Indiana limited partnership ("HPLP").


W I T N E S S E T H :


WHEREAS, API and Pegasus are the only partners in HPLP;


WHEREAS, Conseco desires to purchase a portion of API's partnership interest in HPLP and API desires to sell to Conseco a portion of its partnership interest in HPLP; and


WHEREAS, Pegasus desires to consent to waive and waive certain rights it has in connection with the consummation of the sale of the portion of partnership interest by API to Conseco.


NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:


ARTICLE I.


DEFINITION AND CONSTRUCTION


SECTION 1.01. DEFINITIONS. As used in this Agreement, the following terms shall have the meanings indicated below (the definitions to be applicable to both the singular and the plural form of the terms defined, where either such form is used in this Agreement):


"Additional HPLP Debt Interest" has the meaning set forth in SECTION 2.04 of this Agreement.


"Additional Partnership Interest" has the meaning set forth in SECTION 2.04 of this Agreement.


"Amended and Restated HPLP Limited Partnership Agreement" means the Amended and Restated HPLP Agreement of Limited Partnership by and among API, Conseco and Pegasus dated as of the Closing Date substantially in the form of EXHIBIT B.


"Amended and Restated Management Agreement" means the Amended and Restated Management Agreement by and between CDMC and HPLP dated as of the Closing Date substantially in the form of EXHIBIT D.


January 31, 1996
1


"Amended Trademark License Agreement" means the Amended Trademark License Agreement by and between CDI and the Partnership dated as of the Closing Date substantially in the form of Exhibit F.


"API" means Anderson Park, Inc., an Indiana corporation.


"API Pledge Agreement" means the API Pledge Agreement by and between API and CDMC dated August 30, 1994.


"Bill of Sale and Assignment" means the Bill of Sale and Assignment Agreement by and between API and Conseco dated as of the Closing Date substantially in the form of EXHIBIT A.


"Board" means the City of Anderson, Indiana, Park and Recreation Board.


"CDI" means Churchill Downs Incorporated, a Kentucky corporation.


"CDMC" means Churchill Downs Management Company, a Kentucky corporation.


"Claims" has the meaning set forth in SECTION 13.01 of this Agreement.


"Closing" has the meaning set forth in SECTION 11.01 of this Agreement.


"Closing Date" has the meaning set forth in SECTION 11.01 of this Agreement.


"Conseco" shall mean Conseco HPLP, L.L.C., an Indiana limited liability company.


"Conseco, Inc." means Conseco, Inc., an Indiana corporation.


"Conseco Option" has the meaning set forth in SECTION 2.04 of this Agreement.


"Conseco Pledge Agreement" means the Conseco Pledge Agreement by and between Conseco and CDMC dated as of the Closing Date substantially in the form of EXHIBIT G.


"Financial Advisory Agreement" means the Financial Advisory Agreement by and between CDMC and Conseco substantially in the form of Exhibit E.


"Financial Statements" has the meaning set forth in SECTION 3.07 of this Agreement.


"Financing Document" shall mean the Financing Document by and between API and Conseco dated as of the Closing Date substantially in the form of EXHIBIT C.


January 31, 1996
2


"HPLP" means Hoosier Park, L.P., an Indiana limited partnership.


"HPLP Debt" means the total principal amount of the debt outstanding owed from HPLP to CDMC as of the Closing Date and thereafter owed to CDMC and Conseco, including accrued but unpaid interest, but excluding working capital debt, and including management fees which are accrued and unpaid as of the Closing Date for the purchase of the Initial Partnership Interest, but excluding management fees which accrue thereafter.


"HPLP Debt Interest" has the meaning set forth in SECTION 2.01 of this Agreement.


"HPLP Limited Partnership Agreement" means the Hoosier Park, L.P. Agreement of Limited Partnership by and between API and Pegasus dated August 30, 1994.


"Income Taxes" shall mean any income, gross receipts, gains, net worth, surplus, franchise or withholding taxes (including interest, penalties or other additions to Tax) imposed by a Tax Authority.


"Indemnified Party" has the meaning set forth in SECTION 13.05 of this Agreement.


"Indemnifying Party" has the meaning set forth in SECTION 13.05 of this Agreement.


"Initial HPLP Debt Interest" has the meaning set forth in SECTION 2.01 of this Agreement.


"Initial Partnership Interest" has the meaning set forth in SECTION 2.01 of this Agreement.


"Material Adverse Effect" when used in reference to a Person or Persons, shall mean a material adverse effect on the business, assets, liabilities, operations, results of operations or financial condition of the Person or Persons.


"Omnibus Agreement" means the Omnibus Agreement by and among CDMC, API, Pegasus and Roderick J. Ratcliff dated August 30, 1994.


"Option Closing" has the meaning set forth in SECTION 2.04 of this Agreement.


"Option Price" has the meaning set forth in SECTION 2.04 of this Agreement.


"Partnership Interest" has the meaning set forth in SECTION 2.01 of this Agreement.


"Pegasus" means Pegasus Group, Inc., an Indiana corporation, and includes Roderick J. Ratcliff, the sole shareholder of Pegasus Group, Inc.


January 31, 1996
3


"Pegasus Pledge Agreement" means the Pegasus Pledge Agreement by and between Pegasus and CDMC dated August 30, 1994.


"Person" means any individual, corporation, partnership, limited liability company, association, trust, organization or other entity.


"Purchase Price" has the meaning set forth in SECTION 2.02 of this Agreement.


"Tax Authority" shall mean a foreign or United States federal, state or local government authority having jurisdiction over the assessment, determination, collection or imposition of any Tax, as the context requires.


"Tax and Taxes" shall mean all taxes, charges, fees, levies or other assessments, including without limitation, all net income, gross income, gross receipts, sales, use, value added, ad valorem, transfer, franchise, profits, license, withholding, payroll, employment, windfall profit, alternative or add on minimum, excise, estimated, severance, stamp, occupation, property or other taxes, customs, duties, fees, assessments, or charges of any kind whatsoever, all pari-mutuel wagering, satellite facility and attendance and similar taxes, together with any interest and any penalties, additions to tax or additional amounts imposed by any Tax Authority with respect thereto.


SECTION 1.02. HEADINGS. The subject headings of the sections and articles of this Agreement are included for purposes of convenience only, and shall not affect the construction or interpretation of any of its provisions.


SECTION 1.03. CONSTRUCTION. The parties have participated jointly in the negotiation and drafting of this Agreement, and, in the event of an ambiguity or a question of intent or a need for interpretation arises, this Agreement shall be construed as if drafted jointly by the parties and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement.


ARTICLE II.


TERMS OF PURCHASE OF PARTNERSHIP INTEREST


SECTION 2.01. PURCHASE OF PARTNERSHIP INTEREST. Upon and subject to the terms and conditions set forth in this Agreement, at the Closing Conseco shall purchase from API, and API shall transfer, assign, set over and deliver to Conseco ten percent (10%) of the total outstanding ownership interests in HPLP, including the liabilities associated therewith, (the "Initial Partnership Interest", and together with the Additional Partnership Interest, the "Partnership Interest"), and in connection therewith to also acquire from CDMC a ten percent (10%) interest in the HPLP Debt (the "Initial HPLP Debt Interest").


January 31, 1996
4


SECTION 2.02. PURCHASE PRICE. The purchase price for the Initial Partnership Interest shall be Two Hundred Eighteen Thousand Dollars ($218,000) and the purchase price for the Initial HPLP Debt Interest shall be an amount equal to ten percent (10%) of the HPLP Debt at the Closing (collectively, the "Purchase Price"). Conseco shall pay the Purchase Price at the Closing to API either by a certified or bank cashier's check or by a wire transfer of immediately available funds. The exact amount of the Purchase Price shall be determined provisionally by the parties at the Closing, subject to such adjustments as are mutually agreed to by the parties within thirty (30) days after the Closing.


SECTION 2.03. TRANSFER TAXES AND COSTS. All Taxes (other than Income Taxes and taxes on, relating to or measured by income or gains), stamp duties, notarial, registration and recording fees and similar Taxes resulting from or relating to the sale and transfer of the Partnership Interest to Conseco shall be borne by Conseco.


SECTION 2.04. CONSECO OPTION. For the period from the Closing Date to and including December 31, 1998, API hereby grants to Conseco and Conseco shall have the non-assignable option (the "Conseco Option") to acquire from API forty-seven percent (47%) of the total outstanding ownership interests in HPLP, including the liabilities associated therewith (the "Additional Partnership Interest"), to become the sole general partner of HPLP in place of API, and in connection therewith, to also acquire from CDMC an additional interest in the HPLP Debt (the "Additional HPLP Debt Interest"). The purchase price for the Additional Partnership Interest and the Additional HPLP Debt Interest (collectively, the "Option Price") shall be Twenty-Two Million One Hundred Fifty-Six Thousand Dollars ($22,156,000). The Conseco Option may be exercised by written notice from Conseco to API at any time on or before December 31, 1998. Conseco shall pay the Option Price to API and CDMC at the closing of such transaction (the "Option Closing") either by certified or bankers cashier check or by wire transfer of immediately available funds. At the Option Closing, API shall provide to Conseco a certificate executed by the President of API certifying that (i) the representations and warranties of API set forth in this Agreement are true and correct as of the date of such closing, except that the representations and warranties set forth in SECTIONS 3.07 AND 3.09 AND SECTION 3.02 of this Agreement shall be remade with respect to the most recent audited financial statements of HPLP and ownership interests in the Partnership, respectively,, (ii) the Schedules to this Agreement have been updated to the date of such closing and delivered to Conseco and (iii) all of the covenants, conditions and obligations required by this Agreement to be performed by API and HPLP shall have been and will be performed and complied with as of the date of the Option Closing and thereafter, as the case may be. At the Option Closing, API shall execute and deliver to Conseco (i) a duly executed Bill of Sale and Assignment, substantially in the form of Exhibit A hereto, for the Additional Partnership Interest, (ii) appropriate documentation for Conseco to replace API as the sole general partner of the Partnership and otherwise effectuate the transactions, (iii) updated Schedules to this Agreement and (iv) copies of all consents and approvals required to be obtained to effectuate the transactions. At the Option Closing, Conseco shall provide to API a Certificate executed by the managing member of Conseco, certifying that (i) the representations and warranties of Conseco set forth in this Agreement are true and correct as of the


January 31, 1996
5


date of such closing, (ii) all of the covenants, conditions and obligations required by this Agreement to be performed by Conseco shall have been and will be performed and complied with as of the date of the Option Closing and, thereafter, as the case may be, and (iii) execute and deliver to API a Financing Document, substantially in the form of Exhibit C hereto, for the Additional HPLP Debt Interest.


At the Option Closing the Option Price shall be allocated between the Additional Partnership Interest and the Additional HPLP Debt Interest as follows:


(a) if the principal amount of the HPLP Debt on the date of the
Option Closing is equal to or more than Twenty-Eight Million Seven
Hundred Thousand Dollars ($28,700,000), Six Million Two Hundred
Twenty-Two Thousand Dollars ($6,222,000) of the Option Price shall be
allocated as the purchase price of the Additional Partnership Interest
and Fifteen Million Nine Hundred Thirty-Four Thousand Dollars
($15,934,000) of the Option Price shall be allocated to the purchase of
an equivalent principal amount of the HPLP Debt then owed to CDMC; or


(b) if the principal amount of the HPLP Debt on the date of the
Option Closing is less than Twenty-Eight Million Seven Hundred Thousand
Dollars ($28,700,000), an amount of the Option Price equal to Fifty-Five
and Fifty-Two One Hundredths Percent (55.52%) of the HPLP Debt shall
first be allocated to the purchase of an equivalent principal amount of
the HPLP Debt then owed to CDMC, and the balance of the Option Price
shall be allocated to the purchase of the Additional Partnership
Interest.


The Conseco Option shall terminate and shall not be exercisable upon the (i) Bankruptcy (as such term is defined in the Amended and Restated HPLP Partnership Agreement) of Conseco or, (ii) transfer of interest in Conseco which would cause the ownership of more than 50% of all the ownership interest and voting rights of Conseco to change to another Person, other than a direct or indirect wholly-owned subsidiary of Conseco, Inc.


ARTICLE III.


REPRESENTATIONS AND WARRANTIES OF API


As a material inducement to Conseco and Pegasus to enter into this Agreement and to consummate the transactions contemplated hereby, API, both in its capacity as the General Partner of HPLP and in its corporate capacity, represents and warrants to Conseco that:


January 31, 1996
6


SECTION 3.01. ORGANIZATION AND POWER OF HPLP. HPLP is a limited partnership duly organized, validly existing, and in existence under the laws of the State of Indiana, for which all reports required to be filed with the Indiana Secretary of State have been filed, and for which no articles of dissolution have been filed with the Indiana Secretary of State. HPLP has all requisite power and authority to carry on its business as it is now being conducted.


SECTION 3.02. OWNERSHIP INTEREST. HPLP is owned eighty-seven percent (87%) by API and thirteen percent (13%) by Pegasus. There are no other holders of any ownership interest in HPLP. There are no outstanding subscriptions, options, warrants, contracts, commitments, convertible securities or other agreements or arrangements of any character or nature whatsoever under which API or HPLP is or may become obligated to issue, assign or transfer any ownership interest in HPLP, except as provided in the API Pledge Agreement and the HPLP Limited Partnership Agreement.


SECTION 3.03. CORPORATE ORGANIZATION. API is a corporation validly existing under the laws of the State of Indiana, for which all reports required to be filed with the Indiana Secretary of State have been filed, and for which no articles of dissolution have been filed with the Indiana Secretary of State, and has all requisite corporate power and authority to own its properties and assets and to conduct its business as now conducted.


SECTION 3.04. AUTHORIZATION. As of the Closing Date, API has all requisite corporate power and authority to enter into this Agreement and to carry out its obligations hereunder. The execution and delivery of this Agreement and the performance of API's obligations hereunder have been duly authorized by all necessary action on the part of API, subject to obtaining approval of the Board of Directors of CDMC and CDI which will be obtained prior to Closing, and no other corporate proceedings on the part of API are necessary to authorize the execution, delivery and performance. This Agreement has been duly executed and delivered by API and constitutes API's valid and binding obligation, enforceable against API in accordance with its terms.


SECTION 3.05. NO CONFLICT OR VIOLATION. The sale of the Partnership Interest from API to Conseco will not (a) conflict or breach any provision of the HPLP Limited Partnership Agreement or the Amended and Restated HPLP Limited Partnership Agreement, except for such conflict or breach as to which requisite waivers or consents have been obtained prior to Closing; (b) conflict or breach with any provision of the articles of incorporation, bylaws or other governing documents of API; (c) conflict, breach or result in a default (or give rise to any right of termination, cancellation or acceleration) under any of the terms, conditions or provisions of any note, lien, bond, mortgage, indenture, license, lease, agreement, consent order, or other instrument or obligation to which HPLP or API is a party, or by which HPLP or API or any of their assets or properties may be
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