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EXHIBIT 10.43
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AMENDED AND RESTATED
SECURITIES PURCHASE AGREEMENT
AMONG
CONSECO, INC.,
▇▇▇▇▇▇ ▇. ▇▇▇ EQUITY FUND IV, L.P.,
THE MONITOR PURCHASERS
AND
THE AFFILIATE PURCHASERS NAMED HEREIN
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December 15, 1999
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AMENDED AND RESTATED SECURITIES PURCHASE AGREEMENT
AMENDED AND RESTATED SECURITIES PURCHASE AGREEMENT made and entered
into as of the 15th day of December, 1999, among CONSECO, INC., an Indiana
corporation (the "Company"), ▇▇▇▇▇▇ ▇. ▇▇▇ EQUITY FUND IV, L.P., a Delaware
limited partnership (the "Investor"), the Monitor Purchasers listed on Schedule
I hereto (the "Monitor Purchasers") and the Affiliate Purchasers listed on
Schedule I hereto ("Affiliate Purchasers", and collectively with the Investor
and the Monitor Purchasers, the "Purchasers").
WITNESSETH
WHEREAS, the Company and the Investor are parties to that certain
Securities Purchase Agreement, dated as of November 29, 1999 (the "Prior
Agreement");
WHEREAS, the Company and the Investor desire to hereby amend and
restate the Prior Agreement in its entirety;
WHEREAS, the Company desires to sell to the Purchasers, and the
Purchasers desire to purchase from the Company, shares of the Company's Series F
Common-Linked Convertible Preferred Stock, no par value per share (the
"Securities"), each such share to be convertible in accordance with the
Designations, Rights and Preferences of Series F Common-Linked Convertible
Preferred Stock in the form of Exhibit A-1 set forth in the Company's Amended
Articles of Incorporation into shares of the Company's common stock, no par
value per share ("Common Stock"); and
WHEREAS, the Company and the Purchasers are entering into this
Agreement to provide for said purchase and sale of Securities and to establish
various rights and obligations in connection therewith, upon the terms and
subject to the conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual premises and covenants
contained herein, and of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, hereby agree as follows:
ARTICLE I
AUTHORIZATION OF ISSUANCE OF THE SECURITIES
Section 1.01 Authorization of Securities. Prior to the Closing, the
Company shall have duly authorized and taken all such corporate and other action
which is necessary in accordance with the terms of this Agreement to effect the
valid issuance, sale and delivery to the Purchasers of the Securities to be
purchased by each Purchaser hereunder and the shares of Common Stock issuable
upon the conversion thereof.
Section 1.02 Registration of Securities. The Company has filed with the
Securities and Exchange Commission (the "Commission") a registration statement
for the registration of up to $3,700,000,000 of debt securities, preferred
stock, common stock, stock purchase contracts, stock purchase units and warrants
to purchase the foregoing, under the Securities Act of 1933, as amended (the
"1933 Act"), and the offering thereof from time to time by the Company in
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accordance with Rule 415 of the rules and regulations of the Commission under
the 1933 Act (the "1933 Act Regulations"). The Company will file such amendments
and post-effective amendments thereto as may be required to register thereon the
Securities and the shares of Common Stock issuable upon conversion of the
Securities (together with any such shares issuable upon conversion of the PIK
Dividends, the "Conversion Securities") prior to the Closing Date. Such
registration statement, as so amended, is referred to herein as the
"Registration Statement." The final prospectus, in the form in which it is filed
with the Commission under Rule 424 or (if no such filing is required) first
furnished to the Purchasers by the Company for use in connection with the
offering of the Securities, and all applicable amendments or supplements
thereto, are collectively referred to herein as the "Prospectus." A "Preliminary
Prospectus" shall mean any preliminary prospectus included in the Registration
Statement prior to the time the Registration Statement was declared effective.
All references to the "Registration Statement," the "Prospectus" or any
"Preliminary Prospectus" shall be deemed to include all documents incorporated
therein by reference pursuant to the Securities Exchange Act of 1934, as amended
(the "1934 Act"), which were filed with the Commission under the 1934 Act on or
before the date that the Registration Statement was declared effective or the
issue date of the Prospectus or Preliminary Prospectus, as the case may be, and
all references in this Agreement to financial statements and schedules and other
information which is "contained," "included," "stated" or "described" in the
Registration Statement, the Prospectus, or any Preliminary Prospectus (or other
references of like import) shall be deemed to mean and include all such
financial statements and schedules and other information which is incorporated
by reference in the Registration Statement, the Prospectus, or any Preliminary
Prospectus, as the case may be. Any reference herein to the terms "amend,"
"amendment," or "supplement" shall be deemed to refer to and include the filing
of any document under the 1934 Act after the date on which the Registration
Statement was declared effective or the issue date of the Prospectus, as the
case may be, that is deemed incorporated therein by reference. For purposes of
this Agreement, all references to the Registration Statement, the Prospectus,
any Preliminary Prospectus, or any amendment or supplement to any of the
foregoing shall be deemed to include the copy filed with the Commission pursuant
to its Electronic Data Gathering, Analysis and Retrieval system ("▇▇▇▇▇").
ARTICLE II
PURCHASE AND SALE OF SECURITIES; CLOSING
Section 2.01. Purchase and Sale. Upon the terms and subject to the
conditions hereinafter set forth, on the Closing Date, the Company shall issue,
sell and deliver to each Purchaser, and each Purchaser shall purchase from the
Company, the Securities set forth opposite the name of such Purchaser on
Schedule I hereto, for the purchase price of $192.50 per share. Payment for the
Securities shall be made by wire transfer of immediately available funds to the
account of the Company designated by notice to the Purchasers (or in such other
manner as may be agreed by the Purchasers and the Company), and shall be wired
against the issuance and delivery by the Company on the Closing Date to the
respective Purchasers of certificates in definitive and fully registered form
representing the aggregate number of Securities being purchased by each
Purchaser.
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Section 2.02. Closing. Subject to the terms and conditions of this
Agreement, the closing of the transactions contemplated by this Agreement (the
"Closing") shall take place at the headquarters of the Company, at 10:00 a.m.,
Eastern time, on December 15, 1999 (or, if the waiting period under the HSR Act
has not then expired, the second business day after the Company and the
Purchasers have been informed that such period has expired), or at such other
later date or such other place as the parties shall mutually agree. The date of
the Closing is referred to in this Agreement as the "Closing Date."
Section 2.03 Deliveries. At or prior to the Closing, the parties shall
deliver all documents, instruments, certificates and writings required to be
executed and delivered by them at or prior to the Closing pursuant to this
Agreement.
Section 2.04 Affiliate Purchasers' Representative. Each Affiliate
Purchaser hereby designates and appoints each of ▇▇▇▇▇▇ ▇. ▇▇▇ Equity Fund IV,
L.P., ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, as its attorney-in-fact with full
power of substitution for each of them (the "Representatives"), each acting
singly, to serve as the representative of each such Affiliate Purchaser to
perform all such acts and execute and deliver any and all documents as are
required, authorized or contemplated by the Agreements to be performed by any
such person and each Affiliate Purchaser hereby acknowledges that the
Representatives shall be authorized to take any action so required, authorized
or contemplated by the Agreements (including, without limitation, any consent,
waiver, amendment, designation or directive) by each such Affiliate Purchaser.
The other parties hereto are and will be entitled to rely on any action so taken
or any notice given by the Representative and are and will be entitled and
authorized to give notices to the Representative for any notice contemplated by
the Agreements to be given to any Affiliate Purchaser. A successor to the
Representative may be chosen by a majority in interest of the Affiliate
Purchasers, provided that notice thereof is given by the new Representative to
the Company, to the Investor and to each of the Affiliate Purchasers.
Section 2.05 Use of Proceeds. The proceeds from the purchase and sale
of the Securities hereunder will be used for general corporate purposes.
Section 2.06 Definitions. Terms used as defined terms herein and not
otherwise defined shall have the meanings set forth in Article IX.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to each Purchaser as
follows:
Section 3.01 Organization and Good Standing.
(i) The Company has been duly incorporated, is validly existing as a
corporation and its status is active under the laws of the State of Indiana,
with corporate power and authority to own, lease and operate its properties and
to conduct its business as presently conducted and as described in the
Prospectus and to enter into and perform its obligations under, or as
contemplated under, this Agreement. The Company is qualified as a foreign
corporation to
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transact business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure to so qualify or
be in good standing would not have a Material Adverse Effect.
(ii) Each significant subsidiary (as such term is defined in Rule 1-02
of Regulation S-X promulgated under the ▇▇▇▇ ▇▇▇) (each, a "Significant
Subsidiary") of the Company is set forth on Schedule 3.01 hereto and has been
duly incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation, has the corporate power
and authority to own, lease and operate its properties and to conduct its
business as presently conducted and as described in the Prospectus, and is
qualified as a foreign corporation to transact business and is in good standing
in each jurisdiction in which such qualification is required, whether by reason
of the ownership or leasing of property or the conduct of business, except where
the failure to so qualify or be in good standing would not have a Material
Adverse Effect. Except as otherwise stated in the Registration Statement and the
Prospectus, all of the issued and outstanding shares of capital stock of each
Significant Subsidiary of the Company have been duly authorized and validly
issued, are fully paid and non-assessable and all such shares are owned by the
Company, directly or through its subsidiaries, free and clear of any material
security interest, mortgage, pledge, lien, encumbrance, claim or equity.
Section 3.02 Capitalization.
(i) The authorized, issued and outstanding capital stock of the Company
is as set forth in the Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1999 as filed with the Commission under the 1934 Act (the
"Latest Quarterly Report") or as otherwise set forth in the Prospectus; since
the date indicated in the Latest Quarterly Report there has been no change in
the consolidated capitalization of the Company and its Significant Subsidiaries
(other than changes in outstanding Common Stock resulting from (a) incentive
compensation plan, employee or agent benefit plan or dividend reinvestment and
stock purchase plan transactions, including, without limitation, the purchase of
shares of Common Stock or cancellation of options in connection therewith, (b)
the exercise of conversion or exchange rights with respect to securities
outstanding as of the date of the Prospectus, or (c) shares of Common Stock
issuable in connection with the forward contract with UBS AG dated June 29,
1999). As of November 19, 1999, there were outstanding 327,160,129 shares of
Common Stock (exclusive of shares held by subsidiaries). All of the issued and
outstanding shares of capital stock of the Company have been duly authorized and
are validly issued, fully paid and non-assessable; and none of the outstanding
shares of capital stock of the Company were issued in violation of preemptive or
other similar rights of any securityholder of the Company; each of the
Securities, when issued and delivered in accordance with the provisions of this
Agreement, and the shares of Common Stock issuable upon the conversion of the
Securities, when issued and delivered in accordance with the Amended Articles of
Incorporation, will be duly authorized, validly issued and fully paid and
non-assessable and will conform in all material respects to the description
thereof contained in the Prospectus; and the issuance of the Securities will not
be subject to preemptive or other similar rights.
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(ii) There are no holders of securities of the Company with currently
exercisable registration rights to have any securities included in the offering
contemplated by this Agreement.
Section 3.03 Due Authorization; Execution and Delivery. This Agreement
has been duly authorized, executed and delivered by the Company and constitutes
a valid and legally binding agreement of the Company, enforceable against the
Company in accordance with its terms except to the extent that enforcement
thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting creditors' rights generally or by general
principles of equity (regardless of whether enforcement is considered in a
proceeding at law or in equity) (the "Bankruptcy Exceptions").
Section 3.04 Absence of Breach; No Conflict.
(i) Neither the Company nor any of its Significant Subsidiaries is in
violation of its charter or by-laws. None of the Company or any of its
Significant Subsidiaries is in default in the performance or observance of any
obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, note, lease, loan or credit agreement, reinsurance
agreement or treaty or any other agreement or instrument (the "Agreements and
Instruments") to which the Company or any of its Significant Subsidiaries is a
party or by which any of them may be bound, or to which any of the property or
assets of the Company or any of its Significant Subsidiaries is subject, or in
violation of any applicable law, rule or regulation or any judgment, order or
decree of any government, governmental instrumentality or court, domestic or
foreign, having jurisdiction over the Company or any of its Significant
Subsidiaries or any of their respective properties or assets, which violation or
default would, singly or in the aggregate, have a Material Adverse Effect or
materially and adversely affect the Company's performance of its obligations
under this Agreement.
(ii) The offer of the Securities as contemplated herein and in the
Prospectus, the execution, delivery and performance of this Agreement, and the
consummation of the transactions contemplated herein, therein and in the
Registration Statement (including the issuance and sale of the Securities, the
issuance of the Conversion Securities pursuant to the Amended Articles of
Incorporation, and the use of proceeds from the sale of the Securities as
described in the Prospectus under the caption "Use of Proceeds") and compliance
by the Company with its obligations hereunder and thereunder do not and will
not, whether with or without the giving of notice or passage of time or both,
conflict with or constitute a breach of any of the terms or provisions of, or
constitute a default or Repayment Event (as defined below) under, or result in
the creation or imposition of any lien, charge or encumbrance upon any property
or assets of the Company or any subsidiary pursuant to, the Agreements and
Instruments (except for such conflicts, breaches or defaults or liens, charges
or encumbrances that would not result in a Material Adverse Effect or materially
and adversely affect the Company's performance of its obligations under this
Agreement), nor will such action result in any violation by the Company or any
subsidiary of any applicable law, statute, rule, regulation, judgment, order,
writ or decree of any government, governmental instrumentality or court,
domestic or foreign, having jurisdiction over the Company or any of its
Significant Subsidiaries, or any of their assets, properties or operations
(except for such violations that would not result in
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a Material Adverse Effect or materially and adversely affect the Company's
performance of its obligations under this Agreement), nor will such action
result in any violation of the provisions of the charter or by-laws of the
Company or any Significant Subsidiary. As used herein, a "Repayment Event" means
any event or condition which gives the holder of any note, debenture or other
evidence of indebtedness of the Company or any Significant Subsidiary (or any
person acting on such holder's behalf) the right to require the repurchase,
redemption or repayment of all or a portion of such indebtedness by the Company
or any Significant Subsidiary.
Section 3.05 Securities Law Compliance.
(i) The Company meets the requirements for use of Form S-3 under the
▇▇▇▇ ▇▇▇. The Company has prepared and filed the Registration Statement with the
Commission, and the Registration Statement has become effective under the 1933
Act; as of the Closing Date, no stop order suspending the effectiveness of the
Registration Statement will have been issued under the 1933 Act and no
proceedings for that purpose will have been instituted or will be pending or, to
the knowledge of the Company, contemplated by the Commission, and any request on
the part of the Commission for additional information will have been complied
with; as of the Closing Date, the Registration Statement and any amendments
thereto will comply in all material respects with the requirements of the 1933
Act and the 1933 Act Regulations and will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; each Preliminary
Prospectus and Prospectus filed as part of the Registration Statement as
originally filed or as part of any amendment thereto, or filed pursuant to Rule
424 under the 1933 Act, complied or will comply when so filed in all material
respects with the 1933 Act; each Preliminary Prospectus and the Prospectus
delivered to the Purchaser for use in connection with the offering of the
Securities are or will be identical to any electronically transmitted copies
thereof filed with the Commission pursuant to ▇▇▇▇▇, except to the extent
permitted by Regulation S-T; and neither the Prospectus nor any amendment or
supplement thereto includes or will include an untrue statement of a material
fact or omits or will omit to state a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that the representations and warranties
in this subsection shall not apply to statements in or omissions from the
Registration Statement or the Prospectus made in reliance upon and in conformity
with information furnished to the Company in writing by any Purchaser expressly
for use in the Registration Statement or the Prospectus.
(ii) The documents incorporated or deemed to be incorporated by
reference in the Registration Statement or the Prospectus, at the time they were
or hereafter are filed with the Commission, complied and will comply in all
material respects with the requirements of the 1934 Act and the rules and
regulations of the Commission under the 1934 Act (the "1934 Act Regulations"),
and at the time of filing or as of the time of any subsequent amendment, did not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were or are made, not
misleading; and any additional documents deemed to be incorporated by reference
in the Registration Statement (insofar as it relates to the Securities) or the
Prospectus will, if and when such documents are filed with the Commission, or
when amended, as appropriate, comply in all material respects with the
requirements of the 1934 Act and the
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1934 Act Regulations and will not contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading; provided, however, that this
representation and warranty shall not apply to any statements or omissions made
in reliance upon and in conformity with information furnished in writing to the
Company by any Purchaser expressly for use in the Registration Statement or the
Prospectus.
(iii) No authorization, approval, consent, order, registration or
qualification of or with any court or governmental authority or agency
(including, without limitation, any insurance regulatory agency or body) is
required in connection with the issuance and sale of the Securities hereunder,
the issuance of the Conversion Securities pursuant to the Amended Articles of
Incorporation, or the consummation by the Company of any other transactions
contemplated hereby, except (a) such as have been obtained and made under the
federal securities laws or insurance laws, (b) such as may be required under the
HSR Act, state or foreign securities or Blue Sky laws, (c) the filing of the
Amended Articles of Incorporation, and (d) filings which may be required with
various insurance departments, banking authorities or similar governmental
authorities if, by virtue of the issuance of PIK Dividends, the Purchasers and
their Affiliates become owners of stock of the Company in excess of amounts
specified by such departments or authorities, generally ten percent (10%) of the
shares of Common Stock outstanding or deemed to be outstanding upon conversion
of the Securities.
(iv) No "forward looking statement" (as defined in Rule 175 under the
▇▇▇▇ ▇▇▇) contained in the Registration Statement or the Prospectus was made or
reaffirmed without a reasonable basis or was disclosed other than in good faith.
Section 3.06 Financial Statements.
(i) PricewaterhouseCoopers LLP and KPMG LLP, which certified the
financial statements and supporting schedules of the Company and Conseco Finance
Corp. (formerly Green Tree Financial Corporation) respectively, included or
incorporated by reference in the Registration Statement and the Prospectus, each
are (or in the case of KPMG LLP was during the period during which it served as
the auditor for Conseco Finance Corp.) independent public accountants as
required by the 1933 Act and the 1933 Act Regulations with respect to the
Company and Conseco Finance Corp., respectively.
(ii) The financial statements of the Company and of Conseco Finance
Corp. included or incorporated by reference in the Registration Statement and
the Prospectus, including, without limitation, the financial statements included
in the Latest Quarterly Report, together with the related schedules and notes,
present fairly the financial position of the Company and its subsidiaries as of
the dates indicated and the results of their operations for the periods
specified. Except as otherwise stated therein, said financial statements have
been prepared in conformity with generally accepted accounting principles
applied on a consistent basis throughout the periods involved. The supporting
schedules, if any, included or incorporated by reference in the Registration
Statement and the Prospectus present fairly the information required to be
stated therein. Any selected financial data and summary financial information
included in the Prospectus present fairly the information shown therein and have
been compiled on a basis
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consistent with that of the audited financial statements included in the
Registration Statement and the Prospectus. Any pro forma financial statements
and the related notes thereto included in the Registration Statement and the
Prospectus present fairly the information shown therein, have been prepared in
accordance with the Commission's rules and guidelines with respect to pro forma
financial statements and have been properly compiled on the bases described
therein, and the assumptions used in the preparation thereof are reasonable and
the adjustments used therein are appropriate to give effect to the transactions
and circumstances referred to therein.
(iii) The statutory financial statements of each of the Company's
licensed insurance subsidiaries (each an "Insurance Company Subsidiary", and
collectively the "Insurance Company Subsidiaries"), from which certain ratios
and other statistical data contained in the Registration Statement from time to
time have been derived, have for each relevant period been prepared in
accordance with accounting practices prescribed or permitted by the National
Association of Insurance Commissioners, and with respect to each Insurance
Company Subsidiary, the appropriate insurance department of the state of
domicile of such Insurance Company Subsidiary, and such accounting practices
have been applied on a consistent basis throughout the periods involved, except
as disclosed therein.
Section 3.07 Licenses and Authorizations.
The Company and its subsidiaries possess such permits, licenses,
approvals, consents and other authorizations issued by the appropriate federal,
state, local or foreign regulatory agencies or bodies (including, without
limitation, insurance licenses from the insurance departments of the various
states where the subsidiaries write insurance business and licenses from the
appropriate departments of the various states where the subsidiaries extend
credit or otherwise engage in finance activities (collectively, the "Licenses"))
that are material to the Company and its subsidiaries taken as a whole and are
necessary to conduct the business now conducted by them; the Company and its
subsidiaries are in compliance with the terms and conditions of all such
Licenses, except where the failure to comply would not, singly or in the
aggregate, result in a Material Adverse Effect; all of such Licenses are valid
and in full force and effect, except where the invalidity of such Licenses or
the failure of such Licenses to be in full force and effect would not result in
a Material Adverse Effect; and neither the Company nor any of its subsidiaries
has received any notice of proceedings relating to the revocation or
modification of any such Licenses which, singly or in the aggregate, may
reasonably be expected to result in a Material Adverse Effect.
Section 3.08 Litigation. There is no action, suit, proceeding, inquiry
or investigation before or by any court or governmental agency or body, domestic
or foreign (including, without limitation, any proceeding to revoke or deny
renewal of any Insurance Licenses), now pending, or, to the knowledge of the
Company, threatened, against or affecting the Company or any of its Significant
Subsidiaries which is required to be disclosed in the Registration Statement and
the Prospectus (other than as stated therein), or which is likely to result in a
Material Adverse Effect or to materially and adversely affect the Company's
performance of its obligations under this Agreement. The aggregation of all
pending legal or governmental proceedings to which the Company or any of its
subsidiaries is a party or of which any of their respective properties or assets
is the subject which are not described in the Registration Statement or the
Prospectus,
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including ordinary routine litigation incidental to the business of the Company
or any of its subsidiaries, is not likely to result in a Material Adverse
Effect; and there are no contracts or documents of the Company or any of its
subsidiaries which are required to be filed as exhibits to the Registration
Statement, or to be incorporated by reference therein, by the 1933 Act, the 1933
Act Regulations, the 1934 Act or the 1934 Act Regulations, which have not been
so filed or incorporated by reference.
Section 3.09 Compliance with Law.
(i) The Company and each of its subsidiaries have been and are in
compliance with all applicable regulations, orders, writs, decrees, injunctions
and other requirements of any court or governmental authorities applicable to
it, its properties and assets and its conduct of business (including, without
limitation, (a) the rules, regulations and requirements of any applicable
regulatory agency and (b) any applicable local, state or federal law or
ordinance, and any regulations or orders issued thereunder), except as would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(ii) The Company and each of its subsidiaries, have timely filed, or will have
timely filed by the Closing Date, all reports required to be filed by any
regulatory agency or by any federal, state or municipal law, regulation or
ordinance, except as would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
(iii) Each Insurance Company Subsidiary owns assets that qualify as admitted
assets under applicable insurance laws in an amount at least equal to its
minimum statutory capital and surplus (after taking into account reserves and
liabilities), as required under applicable insurance laws. No state insurance
department currently prohibits, or is, to the knowledge of the Company,
threatening to prohibit, any Insurance Company Subsidiary from paying scheduled
interest or principal on surplus notes or paying ordinary dividends, except
where the failure or inability to make such payments would not reasonably be
expected to have a Material Adverse Effect.
Section 3.10 Investment Company; Regulation M.
(i) Neither the Company nor any of its Significant Subsidiaries is, or
upon the issuance and sale of the Securities as herein contemplated and the
application of the net proceeds therefrom as described in the Prospectus will
be, an "investment company" or an entity "controlled" by an "investment company"
as such terms are defined in the Investment Company Act of 1940, as amended (the
"1940 Act").
(ii) None of the Company, its Significant Subsidiaries or any of their
respective directors, officers or controlling persons, has taken, directly or
indirectly, any action resulting in a violation of Regulation M under the 1934
Act, or designed to cause or result in, or that has constituted or that
reasonably might be expected to constitute, the stabilization or manipulation of
the price of any security of the Company to facilitate the sale or resale of the
Common Stock, in each case in violation of applicable law.
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Section 3.11 Absence of Certain Events; No Material Adverse Change.
Since the respective dates as of which information is given in the Registration
Statement and the Prospectus, and except as otherwise stated therein, (a) there
has been no Material Adverse Effect, (b) there have been no transactions entered
into by the Company or any of its subsidiaries, other than those arising in the
ordinary course of business, which are material with respect to the Company and
its subsidiaries, considered as one enterprise, or (c) except for regular
dividends on the Common Stock or on the preferred stock of the Company in
amounts per share that are consistent with past practice (which includes
periodic dividend increases) or the applicable charter document or supplement
thereto, respectively, there has been no dividend or distribution of any kind
declared, paid or made by the Company on any class of its capital stock.
Section 3.12 Company Certificates. Any certificate signed by any
officer of the Company and delivered to the Purchasers or to counsel for the
Purchasers shall be deemed a representation and warranty by the Company to the
Purchasers as to the matters covered thereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser hereby severally as to itself (but not jointly)
represents and warrants and covenants to the Company as follows:
Section 4.01 Organization and Standing. Such Purchaser, if it is an
entity, is duly organized, validly existing and in good standing under the laws
of the jurisdiction of its formation.
Section 4.02 Due Authorization; Execution and Delivery. Such Purchaser
has the requisite right, power and authority to enter into this Agreement, and
to consummate the transactions contemplated hereby, and that the execution,
delivery and performance of this Agreement, and the consummation of the
transactions contemplated hereby, have been duly authorized by all necessary
action on its behalf, and this Agreement constitutes the valid and legally
binding obligation of it, enforceable against it in accordance with the terms
hereof, except to the extent that such enforcement is limited by Bankruptcy
Exceptions.
Section 4.03 Absence of Breach; No Conflict. The purchase of the
Securities as contemplated herein by such Purchaser, the execution, delivery and
performance of this Agreement by such Purchaser, and the consummation of the
transactions contemplated herein by such Purchaser, and compliance by such
Purchaser with its obligations hereunder do not and will not, whether with or
without the giving of notice or passage of time or both, conflict with or
constitute a breach of any of the terms or provisions of, or constitute a
default under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of such Purchaser pursuant to contracts,
indentures, mortgages, notes, leases, loans or credit agreements to which such
Purchaser is a party (except for such conflicts, breaches or defaults or
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liens, charges or encumbrances that would not materially and adversely affect
such Purchaser's performance of its obligations under this Agreement), nor will
such action result in any violation of any applicable law, statute, rule,
regulation, judgment, order, writ or decree of any government, governmental
instrumentality or court, domestic or foreign, having jurisdiction over such
Purchaser or any of its assets, properties or operations (except for such
violations that would not materially and adversely affect such Purchaser's
performance of its obligations under this Agreement), nor will such action
result in any violation of the provisions of the charter or by-laws, limited
partnership agreement or other organizational document of such Purchaser, if it
is an entity.
Section 4.04 No Consents. No consent, authorization or approval of, or
filing with, any person or any federal, state or local government department,
commission, board, agency or instrumentality is required to be made or obtained
by such Purchaser in connection with its execution and performance of this
Agreement except as may be required under the HSR Act, and except for such
consents, authorizations, approvals and filings the absence of which would not
prevent, impair, hinder or delay the consummation of the transactions
contemplated by this Agreement.
Section 4.05 Investment Company. Such Purchaser is not (and immediately
after consummation of the transactions contemplated by this Agreement will not
be) an investment company, a company controlled by an investment company, or
otherwise subject to any provisions of the Investment Company Act of 1940, as
amended, and/or the rules and regulations of the Commission promulgated
thereunder.
Section 4.06 Receipt of Prospectus. Such Purchaser has received a copy
of the Prospectus (including the prospectus supplement and accompanying base
prospectus contained therein) relating to the Securities, and if such Prospectus
was delivered by electronic mail, such Purchaser was able to access, download
and print the same.
ARTICLE V
COVENANTS
Section 5.01 Covenants of the Company.
(i) The Company shall use its best efforts to keep the Registration
Statement effective through the Closing Date and shall make any required filing
of the Prospectus pursuant to Rule 424(b) in the manner and within the time
period required by Rule 424(b).
(ii) The Company shall provide prompt notice, confirmed in writing, to
the Purchasers of (a) the discovery of any information or the happening of any
event known to the Company prior to the Closing Date which, in the judgment of
the Company, would require the making of any change in the Prospectus then being
used, or in the information incorporated therein by reference, so that the
Prospectus would not include an untrue statement of material fact or omit to
state a material fact necessary to make the statements therein, in the light of
the
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circumstances under which they are made, not misleading, (b) the Company's
determination, for any reason, that it is necessary to amend or supplement the
Prospectus, or (c) the Company's election, for any business reason that the
Company reasonably deems sufficient, to delay filing an amendment or amendment
to the Registration Statement or Prospectus.
(iii) The Company shall pay all costs, expenses, fees and taxes in
connection with (a) the preparation and filing of the Registration Statement,
the Prospectus, and any amendments or supplements thereto, and the printing and
furnishing of copies of each thereof to the Purchasers (including costs of
mailing and shipment), (b) the registration, issue, sale and delivery of the
Securities and Conversion Securities and PIK Dividends to the Purchasers, (c)
the producing and/or printing of this Agreement, any powers of attorney and any
closing documents (including compilations thereof) and the reproduction and/or
printing and furnishing of copies of each thereof to the Purchasers (including
costs of mailing and shipment), (d) the qualification of the Securities for
offering and sale under state securities laws, (e) the listing of the Conversion
Securities on the NYSE, and (f) the performance of the Company's other
obligations hereunder.
(iv) If the original Purchasers and their Affiliates continue to own at
least fifty percent (50%) of the original number of Securities (or the
Conversion Securities, taken together on an as-converted basis), then the
Company and each Purchaser or Affiliate shall use all reasonable commercial
efforts to cause to be nominated and elected to the Board of Directors of the
Company one designee of the Purchasers who shall be a Qualified Designee. The
initial designee shall be ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇. Any future designation shall be made
by Purchasers and Affiliates holding a majority of the Securities and Conversion
Securities (considered together with the Securities being treated on an
as-converted basis for this purpose). Such reasonable commercial efforts with
respect to the Company shall include, without limitation, inclusion of the
Purchasers' designee in any proxy statement or comparable material distributed
in connection with any meeting of the shareholders of the Company at which
directors are to be elected, accompanied by a recommendation that the
shareholders vote in favor of such designee. Such reasonable efforts with
respect to the Purchasers and their Affiliates shall mean designating a
Qualified Designee, voting all Securities and Conversion Securities in favor of
the election of such designee, refraining from encouraging other stockholders of
the Company to refrain from electing such designee and reasonably cooperating
with the Company to facilitate the election of such designee. For the purposes
of this Section 5.01(iv), a Purchaser or Affiliate shall not be deemed to own
any security if, by virtue of having created a hedge, entered into a derivative
transaction or entered into another financial transaction with respect to
securities of the Company (whether or not the particular securities which are
the subject of such transaction are owned by such Purchaser or its Affiliate)
(collectively, a "Hedge Transaction"), such Purchaser or Affiliate shall no
longer have all material benefits and risks of ownership of such security. If a
director so designated and elected to the Board of Directors is no longer
serving (whether by reason of death, resignation, retirement, disqualification,
removal from office or otherwise), the Purchasers and Affiliates shall have the
right to designate a replacement director for nomination so long as the
Purchasers and Affiliates continue to meet the ownership requirements set forth
in the first sentence of this Section 5.01(iv).
(v) The Company agrees that until the first to occur of (a) expiration
of the Standstill Period (as herein defined) or (b) the first date on which the
Purchasers or their Affiliates no
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longer have the right to designate a nominee for election as a member of the
Board of Directors of the Company, the Company shall take no action to expand
the number of members of the Board of Directors of the Company beyond 14.
(vi) The Company covenants that it will deliver to each Purchaser who
owns any Securities those items set forth in paragraphs (a), (b) and (c), and
that it will deliver to the Investor, so long as it owns any Securities or
Conversion Securities, the items set forth in paragraph (d):
(a) As soon as practicable and in any event within 45 days after
the end of each quarterly period (other than the last quarterly period) in each
fiscal year, a consolidated statement of income and consolidated statements of
changes in financial position and cash flows of the Company and its subsidiaries
for such quarterly period and for the period from the beginning of the current
fiscal year to the end of such quarterly period, and a consolidated balance
sheet of the Company and its subsidiaries as at the end of such quarterly
period, setting forth in each case in comparative form figures for the
corresponding periods in the preceding fiscal year, all in reasonable detail and
certified by an authorized financial officer of the Company, subject to changes
resulting from year-end adjustments; provided, however, that filing of the
Quarterly Report on Form 10-Q of the Company for such quarterly period with the
Commission shall be deemed to satisfy the requirements of this clause (a);
(b) As soon as practicable and in any event within 120 days
after the end of each fiscal year, a consolidated statement of income and
consolidated statements of changes in financial position and cash flows of the
Company and its subsidiaries for such year, and a consolidated balance sheet of
the Company and its subsidiaries as of the end of such year, setting forth in
each case in comparative form corresponding consolidated figures from the
preceding annual audit, all in reasonable detail together with an opinion
directed to the Company of independent public accountants of recognized standing
selected by the Company; provided, however, that filing of the Annual Report on
Form 10-K of the Company for such fiscal year with the Commission shall be
deemed to satisfy the requirements of this clause (b);
(c) Promptly upon transmission thereof, copies of all such
financial statements, proxy statements, notices and reports as it shall send to
it public stockholders generally; and
(d) With reasonable promptness, such other financial data as the
Investor may reasonably request.
(vii) The Company shall permit the Investor (and its designated
representatives) to visit and inspect any of the properties of the Company and
its Significant Subsidiaries, including the books and records of the Company and
its Significant Subsidiaries (and to make extracts and copies therefrom), and to
consult with respect to and discuss the affairs, businesses, finances,
operations and accounts of the Company and its Significant Subsidiaries with the
officers, directors and employees of such entities, all at such reasonable times
and as often as the Investor may reasonably request.
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(viii) Each Purchaser agrees, except as otherwise required by law, to
keep any confidential information obtained pursuant to subsections (vi) and
(vii) of this Section 5.01 confidential.
Section 5.02. Covenants of the Purchasers.
(i) For a period of eighteen (18) months after the Closing Date, no
Purchaser shall (a) transfer or offer or agree to transfer any of the
Securities; provided that nothing in this Section 5.02 or in Article VI shall be
deemed to prohibit any transfer of Securities or PIK Dividends from a Monitor
Purchaser to any Investor or Purchaser or (b) enter into a Hedge Transaction.
(ii) During the Standstill Period, no Purchaser shall transfer any of
the Securities or Conversion Securities, other than transfers to another
Purchaser, to any Person or 13D Group (as defined in Article VI hereof) which
(a) prior to such transfer has filed a Schedule 13D under Section 13(d) of the
1934 Act with respect to the Common Stock, or (b) to the knowledge of such
Purchaser, based on inquiry of such Person or 13D Group, is required or intends
to file such a Schedule 13D after consummation of the transfer of such
Securities or Conversion Securities from such Purchaser, or (c) to the knowledge
of such Purchaser, based on inquiry of such Person or 13D Group, would be the
beneficial owner, as such term is used in Rule 13d-3 of the 1934 Act
Regulations, of more than 10% of the Common Stock after consummation of the
transfer of such Securities or Conversion Securities from such Purchaser.
(iii) So long as the restrictions on transfer set forth in
subparagraphs (i) and (ii) of this Section 5.02 shall remain in effect, no
Purchaser shall transfer any Securities without giving the Company written
notice of such transfer at least five Business Days before the date of such
proposed transfer.
(iv) The Purchasers agree that any certificate evidencing Securities
shall bear the following legend:
"The Shares of Series F Common-Linked Convertible Preferred Stock
evidenced by this stock certificate are subject to certain restrictions on
transfer pursuant to the terms of a certain Amended and Restated Securities
Purchase Agreement dated as of December 15, 1999, a copy of which is available
from the Secretary of the issuer."
Such legend shall be removed at such time as the Securities are
transferred to a Person who is no longer bound by this Section 5.02.
Notwithstanding the foregoing, Purchasers may transfer Securities to
any of their Affiliates at any time and from time to time, in each case subject
to Section 10.05.
Each Purchaser agrees that, if such Purchaser transfers any Security or
Conversion Security, or any other transaction occurs (including, without
limitation, a Hedge Transaction) that results in such Purchaser not being deemed
to be the owner of such Security or Conversion Security for purposes of Section
5.01(iv) hereof, it shall give notice thereof to the Company not later than five
Business Days after the happening of such transfer, transaction or event.
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(v) Notwithstanding anything to the contrary contained herein, in
the event that any nominee designated by the Purchasers or the Affiliates for
election as a member of the Board of Directors pursuant to Section 5.01(iv)
hereof is not, for any reason, elected as a member of the Board of Directors,
the covenants of the Purchasers contained in Section 5.02 and the covenants of
the Purchasers contained in Article VI shall terminate and the Purchasers shall
not be subject to any obligations or restrictions thereunder; provided, however,
that such termination will not occur if (i) within 30 days after a failure of
the stockholders to elect the designee of the Purchasers or the Affiliates as a
member of the Board of Directors, such designee (or a replacement designee named
pursuant to such Section 5.01(iv)) shall be elected to the Board of Directors or
(ii) the Purchasers or the Affiliates no longer shall have the right to
designate a nominee pursuant to Section 5.01(iv).
Section 5.03 Covenants of the Company and the Purchasers.
(i) Upon the terms and subject to the conditions hereof, each of the
parties hereto shall use commercially reasonable efforts to take, or cause to be
taken, all appropriate action, and to do or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement as
soon as practicable, including but not limited to cooperation in the preparation
and filing of any required filings under the HSR Act and any amendments to any
thereof.
(ii) Each party each shall keep the other apprised of the status of
matters relating to completion of the transactions contemplated hereby,
including promptly furnishing the other with copies of notices or other
communications received by the Purchasers or the Company, as the case may be, or
any of their subsidiaries, from any governmental authority with respect to the
transactions contemplated by this Agreement. The parties hereto will consult and
cooperate with one another, and consider in good faith the views of one another
in connection with any analyses, appearances, presentations, memoranda, briefs,
arguments, opinions and proposals made or submitted by or on behalf of any party
hereto in connection with proceedings under or relating to the HSR Act or any
other antitrust law.
(iii) Each party shall timely and promptly make all filings which are
required under the HSR Act. Each party will furnish to the other such necessary
information and reasonable assistance as it may request in connection with its
preparation of such filings. Each party will supply the other with copies of all
correspondence, filings or communications between such party or its
representatives and the Federal Trade Commission, the Antitrust Division of the
United States Department of Justice or any other governmental agency or
authority or members of their respective staffs with respect to this Agreement
or the transactions contemplated hereby.
ARTICLE VI
PROXY MATTERS; STANDSTILL
Section 6.01 Proxy Matters; Standstill.
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(i) Each of the Purchasers hereby agrees that during the Standstill
Period (hereinafter defined) it will not, nor will it permit any of its
Affiliates (any such Purchaser together with its Affiliates being hereinafter
referred to as a "Purchaser Group") to, directly or indirectly, alone or in
concert with any other Person, unless in any such case specifically requested in
advance to do so by the Board of Directors of the Company:
(a) acquire, offer to acquire, seek to acquire or agree to
acquire, including, by joining a partnership, limited partnership, syndicate or
other "group" (as such term is used in Section 13(d)(3) of the 1934 Act,
hereinafter referred to as "13D Group"), (i) any material portion of the assets
or business of the Company and its subsidiaries or (ii) any securities of the
Company entitled to vote generally in the election of directors, or securities
convertible into or exercisable or exchangeable for such securities
(collectively, "Restricted Securities") if and to the extent that following such
acquisition of Restricted Securities, the Purchasers and their Affiliates would,
collectively, hold in excess of 9% of the outstanding securities of the Company
entitled to vote generally on the election of Directors (which shall include the
Securities and the shares of Common Stock into which it is convertible and which
shall assume the exercise, conversion or exchange of any Restricted Securities
held by the Purchasers and their Affiliates); provided, however, that nothing
contained herein shall prohibit any member of a Purchaser Group from acquiring
any Restricted Securities (1) upon conversion of the Securities or PIK Dividends
acquired pursuant to this Agreement or otherwise contemplated hereby, (2) as a
result of a stock split, stock dividend or similar recapitalization by the
Company, (3) as a result of the receipt of the PIK Dividends, or (4) upon the
execution of unsolicited buy orders by any member of a Purchaser Group which is
a registered broker-dealer for the bona fide accounts of its brokerage customers
unaffiliated and not acting in concert with any of the Purchasers or any
Affiliates other than such broker-dealer;
(b) participate in, or encourage, the formation of any 13D Group
which owns or seeks to acquire beneficial ownership of, or otherwise acts in
respect of, Restricted Securities, other than any 13D Group which is comprised
exclusively of the Purchaser or a Purchaser Group;
(c) make, or in any way participate in, directly or indirectly,
any "solicitation" of "Proxies" (as such terms are defined or used in Regulation
14A under the ▇▇▇▇ ▇▇▇) or become a "participant" in any "election contest" (as
such terms are defined or used in Rule 14a-11 under the 1934 Act, but whether or
not such solicitation is exempt under Rule 14a-2 under the ▇▇▇▇ ▇▇▇) with
respect to the Company, or initiate, propose or otherwise solicit stockholders
for the approval of one or more stockholder proposals with respect to the
Company or induce or attempt to induce any other person to initiate or propose
any stockholder proposal, or seek to advise, encourage or influence any Person
with respect to the voting of any securities of the Company , or make any
communication exempted from the definition of solicitation by Rule
14a-1(l)(2)(iv) under the 1934 Act; provided, however, that the limitation
contained in this clause (c) shall not apply to (i) the election of any director
to be elected solely by the holders of Securities pursuant to the Amended
Articles of Incorporation, or (ii) efforts by the holders of Conversion
Securities to cause the election of the Director representative contemplated by
Section 5.01(iv) of this Agreement;
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(d) call or seek to have called any meeting of the stockholders
of the Company, other than any such action taken by the Purchasers'
representative on the Board of Directors of the Company taken in his or her
capacity as a director;
(e) (i) initiate, solicit, seek or offer to effect, (ii)
negotiate with or provide any information to any party with respect to, (iii)
make any statement or proposal, whether written or oral, either alone or in
concert with others, to the Board, or to any director (other than actions taken
by the Purchasers' representative on the Board of Directors of the Company,
acting in his or her capacity as such, and other than actions taken with respect
to a matter approved by the Board of Directors) or to any other legal or
beneficial owner of Restricted Securities of the Company with respect to, or
(iv) otherwise make any public announcement, proposal, offer or filing under the
1934 Act, any similar statute or otherwise, or take action to cause the Company
to make any such announcement, proposal, offer or filing with respect to any of
the following matters which has not been approved by the Board of Directors of
the Company: (A) any tender or exchange offer for the Restricted Securities of
the Company or its Subsidiaries, (B) any form of business combination or similar
transaction involving the Company or any Subsidiary thereof, including, without
limitation, a merger, tender or exchange offer or liquidation of the Company's
assets, (C) any form of restructuring, recapitalization or similar transaction
with respect to the Company or any Subsidiary thereof, including, without
limitation, a merger, tender or exchange offer involving the Company or any
Subsidiary thereof or liquidation of the Company's assets, (D) any disposition
of all or substantially all of the assets of the Company, (E) any request to
amend, waive or terminate any of the provisions of this Section 6 or (F) any
proposal or other statement inconsistent with the terms of this Agreement;
(f) take any action challenging the validity or enforceability
of any covenant or agreement contained in this Section 5.02 or Section 6.01; or
(g) instigate, advise, assist, encourage or finance (or assist
or arrange financing to or for) any Person in connection with any of the
foregoing.
(ii) Except as otherwise expressly prohibited by this Section 6.01,
the Purchasers and their Affiliates shall have the full right to exercise the
voting and other rights, (a) granted to the Purchasers pursuant to this
Agreement and the Amended Articles of Incorporation or (b) in connection with
any proposed merger, sale of assets or similar transaction, or tender or
exchange offer proposed by any Person who is not part of, and who is not acting
in concert with, any Purchaser Group or any of its Affiliates.
(iii) As used herein, the term "Standstill Period" shall mean the
period from the date of this Agreement until the earlier to occur of:
(a) the date which is the fifth anniversary of the Closing Date;
or
(b) the designation of any date as the termination date of the
Standstill Period by a majority of the directors of the Company at a duly
convened meeting thereof or by all of the directors of the Company by written
consent; or
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(c) the Company's material breach of any of its covenants
contained in this Agreement or the Amended Articles of Incorporation; or
(d) the Company or any of its Significant Subsidiaries shall
commence a voluntary case concerning itself under Title 11 of the United States
Code entitled "Bankruptcy" as now or hereafter in effect, or any successor
thereto (the "Bankruptcy Code"), which, in the case of a Significant Subsidiary
of the Company, has had or would have a Material Adverse Effect; or an
involuntary case is commenced against the Company or any of its Subsidiaries and
the petition not controverted within 10 days, or is not dismissed within 60 days
after commencement of the case, which, in the case of a Significant Subsidiary
of the Company, has had or would have a Material Adverse Effect; or a custodian
(as defined in the Bankruptcy Code) is appointed for, or takes charge of, all or
any substantial part of the property of the Company or any of its Subsidiaries,
which, in the case of a Significant Subsidiary of the Company, has had or would
have a Material Adverse Effect; or the Company or any of its Subsidiaries
commences any other proceeding under any reorganization, arrangement, adjustment
of debt, relief of debtors, rehabilitation, dissolution, insolvency or
liquidation or similar law of any jurisdiction, whether now or hereafter in
effect, relating to the Company or such Significant Subsidiary, or there is
commenced against the Company or any of its Subsidiaries any such proceeding
which remains undismissed for a period of 60 days, which, in the case of a
Significant Subsidiary of the Company, has had or would have a Material Adverse
Effect; or the Company or any of its Subsidiaries is adjudicated insolvent or
bankrupt, which, in the case of a Significant Subsidiary of the Company, has had
or would have a Material Adverse Effect; or any order of relief or other order
approving any such case or proceeding is entered, which, in the case of a
Significant Subsidiary of the Company, has had or would have a Material Adverse
Effect; or the Company or any of the Subsidiaries suffers any appointment of any
custodian or the like for it or any substantial part of its property to continue
undischarged or unstayed for a period of 60 days, which, in the case of a
Significant Subsidiary of the Company, has had or would have a Material Adverse
Effect; or the Company or any of its Subsidiaries makes a general assignment for
the benefit of creditors, which, in the case of a Significant Subsidiary of the
Company, has had or would have a Material Adverse Effect; or the Company shall
fail to pay, or shall state that it is unable to pay, or shall be unable to pay,
its material debts, generally as they become due, which, in the case of a
Significant Subsidiary of the Company, has had or would have a Material Adverse
Effect; or the Company or any of its Subsidiaries shall call a meeting of its
creditors with a view to arranging a composition or adjustment of its debts
generally, which, in the case of a Significant Subsidiary of the Company, has
had or would have a Material Adverse Effect; or the Company or any of its
Subsidiaries shall by any act or failure to act indicate its consent to,
approval of or acquiescence in any of the foregoing, which, in the case of a
Significant Subsidiary of the Company, has had or would have a Material Adverse
Effect; or any corporate action is taken by the Company or any of its
Subsidiaries for the purpose of effecting any of the foregoing, which, in the
case of a Significant Subsidiary of the Company, has had or would have a
Material Adverse Effect; or
(e) without any breach by the Purchasers of their covenants
contained in Article VI or their covenants contained in Section 5.02, the
acquisition by any person or 13D Group (other than members of a Purchaser Group
or Affiliates thereof) of Restricted Securities which, if added to the
Restricted Securities (if any) already owned by such person or 13D Group,
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would represent twenty-five percent (25%) or more of the total voting power
(including rights to acquire voting power) of the Company's Restricted
Securities, or the receipt by such person or 13D Group of the Company's
agreement or consent to make such acquisition; or
(f) without any breach by the Purchasers of their covenants in
Article VI or their covenants contained in Section 5.02, the commencement of a
tender offer for Restricted Securities of the Company by any Person or 13D Group
(other than members of a Purchaser Group or Affiliates thereof), which tender
offer, if consummated and added to the Restricted Securities (if any) already
owned by such Person or 13D Group, would represent twenty-five percent (25%) or
more of the total voting power (including rights to acquire voting power) of the
Company's Restricted Securities; provided, however, that pursuant to Rule 14d-9
the Board of Directors of the Company has recommended that the holders tender
into such tender offer, and provided, further, that Section 6.01 will remain in
full force and effect if any such tender offer is withdrawn or terminated or
expires without extension; or
(g) the date this Agreement is terminated in accordance with its
terms, provided the Purchasers have not purchased the Securities.
(iv) Nothing herein shall be deemed to require the Purchasers or
their Affiliates to divest themselves of any Restricted Securities if they own
in excess of 9% of the outstanding securities of the Company entitled generally
to vote on the election of directors as a result of the Company's repurchase of
outstanding Restricted Securities or comparable program which reduces the number
of shares outstanding.
(v) The provisions of this Article VI shall terminate upon
consummation of a Change of Control Transaction if the Purchasers and their
Affiliates are then in compliance with the terms of this Article VI.
ARTICLE VII
CONDITIONS OF PURCHASERS' OBLIGATIONS
Section 7.01 Conditions of Purchasers' Obligations. The obligations of
the Purchasers to purchase and pay for the Securities shall be subject to the
accuracy, in all material respects, as of the date of this Agreement and the
Closing Date, of the representations and warranties of the Company contained
herein and in the certificates of any officer of the Company or any of its
subsidiaries pursuant to the provisions hereof, to the performance by the
Company of its obligations hereunder, and to the following additional
conditions:
(i) The Registration Statement shall be effective on the Closing
Date, no stop order suspending the effectiveness of the Registration Statement
or any part thereof shall have been issued under the 1933 Act or proceedings
therefor instituted or threatened by the Commission, and any request on the part
of the Commission for additional information shall have been complied with to
the satisfaction of counsel to the Purchasers. If the filing of a Prospectus, or
any supplement thereto, is required pursuant to Rule 424(b), such Prospectus
shall have been filed within the manner and within the time period required by
the 1933 Act and the 1933 Act Regulations.
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(ii) The Conversion Securities shall have been approved for listing
on the NYSE, subject to official notice of issuance.
(iii) The Purchasers shall have received the favorable opinion of ▇▇▇▇
▇. ▇▇▇▇, Executive Vice President, General Counsel and Secretary of the Company,
dated the Closing Date, in form and substance reasonably satisfactory to counsel
for the Purchasers, to the effect that:
(a) The Company has been duly incorporated and is validly
existing as a corporation under the laws of the State of
Indiana.
(b) The Company has corporate power and authority to own, lease,
and operate its properties and to conduct its business as
described in the Prospectus.
(c) The Company is qualified as a foreign corporation to
transact business and is in good standing in each
jurisdiction in which such qualification is required, except
where the failure to so qualify or be in good standing would
not result in a Material Adverse Effect.
(d) All of the issued and outstanding shares of capital stock of
the Company have been duly authorized and are validly
issued, fully paid and non-assessable.
(e) Each Significant Subsidiary has been duly incorporated and
is validly existing as a corporation in good standing under
the laws of the jurisdiction of its incorporation, has the
corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the
Prospectus, and is qualified as a foreign corporation to
transact business and is in good standing in each
jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or
the conduct of business, except where the failure to so
qualify or be in good standing would not have a Material
Adverse Effect; all of the issued and outstanding capital
stock of each Significant Subsidiary has been duly
authorized and validly issued, is fully paid and
nonassessable, and, except as set forth in the Prospectus,
all such shares are owned by the Company, directly or
through its subsidiaries, free and clear of any material
security interest, mortgage, pledge, lien, encumbrance,
claim or equity.
(f) All legally required proceedings in connection with the
authorization and valid issuance of the Securities in
accordance with this Agreement and the sale of the
Securities in accordance with this Agreement and the
Prospectus (other than the filing of post-issuance reports,
the non-filing of which would not render the Securities
invalid) have been taken, and all legally required orders,
consents or other authorizations or approvals of any other
public boards or bodies required to be obtained by the
Company or any Significant
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Subsidiary (including, without limitation, any insurance
regulatory agency or body) in connection with the
authorization and valid issuance of the Securities in
accordance with this Agreement and the sale of the
Securities in accordance with this Agreement and the
Prospectus (other than in connection with or in compliance
with the provisions of the securities or Blue Sky laws of
any jurisdictions, as to which no opinion need be expressed)
have been obtained and are in full force and effect, except
filings which may be required with various insurance
departments, banking authorities or similar governmental
authorities, if, by virtue of the issuance of PIK Dividends,
the Purchasers and their Affiliates become owners of stock
of the Company in excess of amounts specified by such
departments or authorities, generally ten percent (10%) of
the shares of Common Stock outstanding or deemed to be
outstanding upon conversion of the Securities.
(g) The Registration Statement is effective under the 1933 Act;
any required filing of the Prospectus pursuant to Rule
424(b) has been made in the manner and within the time
period required by Rule 424(b); and, to the knowledge of
counsel, no stop order suspending the effectiveness of the
Registration Statement has been issued under the 1933 Act,
and no proceedings therefor have been initiated or
threatened by the Commission.
(h) The Registration Statement, as of its effective date, and
the Prospectus and each amendment or supplement thereto, as
of its issue date (in each case, other than the financial
statements and the notes thereto, the financial schedules,
and any other financial data included or incorporated by
reference therein, as to which such counsel need express no
opinion) complied as to form in all material respects with
the requirements of the 1933 Act and the 1933 Act
Regulations.
(i) Each of the documents incorporated by reference in the
Registration Statement or Prospectus, at the time they were
filed or last amended (other than the financial statements
and the notes thereto, the financial schedules, and any
other financial data included or incorporated by reference
therein, as to which such counsel need express no opinion)
complied as to form in all material respects with the
requirements of the 1934 Act and the 1934 Act Regulations,
as applicable.
(j) The Common Stock and the Securities conform in all material
respects to the descriptions thereof contained in the
Prospectus and the Registration Statement.
(k) This Agreement has been duly authorized, executed and
delivered by the Company and constitutes a valid and legally
binding obligation of the Company, enforceable against the
Company in accordance with its terms, except to the extent
that enforcement thereof may be limited by the Bankruptcy
Exceptions.
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(l) The issuance and sale of the Securities, in accordance with
the provisions of this Agreement, and the issuance of the
PIK Dividends and the Conversion Securities pursuant to the
Amended Articles of Incorporation, have been duly authorized
by the Company, and the Securities, when issued and
delivered in accordance with the provisions of this
Agreement, and the PIK Dividends and Conversion Securities,
when issued pursuant to the Amended Articles of
Incorporation, will be validly issued and fully paid and
non-assessable and will conform in all material respects to
the description thereof contained in the Prospectus; the
issuance of the Securities is not subject to preemptive or
other similar rights; the Conversion Securities have been
approved for listing on the NYSE, upon official notice of
issuance.
(m) The offer of the Securities as contemplated herein and in
the Prospectus, the execution, delivery and performance of
this Agreement, and the consummation of the transactions
contemplated herein and in the Registration Statement
(including the issuance and sale of the Securities and the
use of the proceeds from the sale of the Securities as
described in the Prospectus under the caption "Use of
Proceeds") and compliance by the Company with its
obligations hereunder and thereunder have been authorized by
all necessary corporate action and do not and will not,
whether with or without the giving of notice or passage of
time or both, conflict with or constitute a breach of any of
the terms or provisions of, or constitute a default or
Repayment Event under, or result in the creation or
imposition of any lien, charge or encumbrance upon any
property or assets of the Company or any Significant
Subsidiary pursuant to, the Agreements and Instruments
(except for such conflicts, breaches, defaults, or liens,
charges or encumbrances that would not result in a Material
Adverse Effect or materially and adversely affect the
Company's performance of its obligations under this
Agreement) nor will such action result in any violation of
any applicable law, statute, rule, regulation, judgment,
order, writ or decree of any government, government
instrumentality or court, domestic or foreign, having
jurisdiction over the Company or any Significant Subsidiary
or any of their assets, properties, or operations (except
for such violations that would not result in a Material
Adverse Effect or materially and adversely affect the
Company's performance of its obligations under this
Agreement), nor will such action result in any violation of
the provisions of the charter or by-laws of the Company or
any Significant Subsidiary.
(n) To such counsel's knowledge, there are no statutes required
to be described or incorporated by reference in the
Registration Statement which are not described or
incorporated by reference, and there are no legal or
governmental proceedings pending or, to such counsel's
knowledge, threatened which are required to be disclosed or
incorporated by reference in
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the Registration Statement, other than those disclosed or
incorporated by reference therein.
(o) To such counsel's knowledge, there are no contracts,
indentures, mortgages, agreements, notes, leases or other
instruments required to be described or referred to or
incorporated by reference in the Registration Statement or
to be filed as exhibits thereto other than those described
or referred to or incorporated by reference therein or filed
as exhibits thereto; the descriptions thereof or references
thereto are true and correct in all material respects.
(p) The Company and its subsidiaries possess such permits,
licenses, approvals, consents and other authorizations
issued by the appropriate federal, state, local or foreign
regulatory agencies or bodies (including, without
limitation, the Insurance Licenses) that are material to the
Company and its subsidiaries taken as a whole and are
necessary to conduct the business now conducted by them; the
Company and its subsidiaries are in compliance with the
terms and conditions of all such Insurance Licenses, except
where the failure to so comply would not, singly or in the
aggregate, result in a Material Adverse Effect; all of the
Insurance Licenses are valid and in full force and effect,
except where the invalidity of such Insurance Licenses or
the failure of such Insurance Licenses to be in full force
and effect would not result in a Material Adverse Effect or
materially and adversely affect the Company's performance of
its obligations under this Agreement; and neither the
Company nor any of its subsidiaries has received any notice
of proceedings relating to the revocation or modification of
any such Insurance Licenses which, singly or in the
aggregate, may reasonably be expected to result in a
Material Adverse Effect or to materially and adversely
affect the Company's performance of its obligations under
this Agreement.
(q) Neither the Company nor any of its subsidiaries is, and upon
the consummation of the transactions contemplated in this
Agreement and the application of the net proceeds from the
Securities as described in the Prospectus will be, an
"investment company" or an entity "controlled" by an
"investment company," as such terms are defined in the 1940
Act.
Moreover, such counsel shall confirm that nothing has come to such
counsel's attention that causes such counsel to believe that the Registration
Statement (except for financial statements and the notes thereto, the financial
schedules and any other financial data included or incorporated by reference
therein as to which such counsel need express no opinion), at the time it became
effective or at the Closing Date, contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or that the Prospectus
(except for financial statements and the notes thereto, the financial schedules
and any other financial data included or incorporated by reference therein as to
which such counsel need express no opinion), on the date of issue or the Closing
Date, included or includes an untrue statement of a material fact or omitted or
omits to
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state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(iv) On the Closing Date, the Purchasers shall have received a
certificate of the President or a Vice-President of the Company and of the Chief
Financial Officer or Chief Accounting Officer of the Company, dated the Closing
Date, to the effect that:
(a) The Registration Statement has been declared effective, and
no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings
for that purpose have been initiated or, to the knowledge of
such officers, threatened by the Commission;
(b) the representations and warranties of the Company in Article
III of this Agreement are true and correct as though
expressly made at and as of the Closing Date;
(c) the Company has complied with all agreements and satisfied
all conditions on its part to be performed or satisfied at
or prior to the Closing Date; and
(d) since the date of the most recent financial statements
included in the Prospectus (exclusive of any supplement
thereto), there has been no material adverse change in the
condition, financial or otherwise, or in the earnings,
business affairs or business prospects of the Company and
its subsidiaries considered as one enterprise, whether or
not in the ordinary course of business, except as set forth
in the Prospectus (exclusive of any supplement thereto).
(v) On the Closing Date, PricewaterhouseCoopers LLP shall have
furnished to the Investor, ▇▇▇▇▇▇ ▇. ▇▇▇ Foreign Fund IV, L.P. and ▇▇▇▇▇▇ ▇. ▇▇▇
Foreign Fund IV-B, L.P. a letter, dated the Closing Date, in form and substance
satisfactory to the Investor, to the effect set forth in Exhibit A-2.
(vi) Since the execution of this Agreement or, if earlier, the dates
as of which information is given in the Registration Statement (exclusive of any
amendment thereof) and the Prospectus (exclusive of any supplement thereto), no
material adverse change shall have occurred in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects of the
Company and its subsidiaries, considered as one enterprise, whether or not in
the ordinary course of business.
(vii) The Company and the Purchasers shall have obtained all material
authorizations, approvals, consents, registrations or qualifications of or with
any court or governmental authority or agency (including, without limitation,
any insurance regulatory agency or body) required for the issuance and sale of
the Securities by the Company to the Purchasers and the performance by the
Company of its obligations under this Agreement, except such as may be required
under state or foreign securities or Blue Sky laws.
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(viii) Any waiting periods under the HSR Act applicable to the
transaction contemplated hereby shall have expired or been terminated.
(ix) Counsel for the Purchasers shall have been furnished with such
documents and opinions as they may require for the purpose of enabling them to
pass upon the issuance and sale of the Securities under this Agreement, as
herein contemplated, and related proceedings, or in order to evidence the
accuracy of any of the representations or warranties, or the fulfillment of any
of the conditions herein contained; and all proceedings taken by the Company in
connection with the issuance and sale of the Securities under this Agreement as
herein contemplated shall be satisfactory in form and substance to the
Purchasers and counsel for the Purchasers.
(x) The Board of Directors of the Company shall have voted to
increase the size of the Board of Directors to 12 members, and shall have
elected ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ to fill the vacancy so created, to serve for a term
scheduled to expire upon the Company's annual meeting of stockholders for 2001.
Section 7.02 Condition of Company's Obligations. The obligations of the
Company to sell and deliver the Securities shall be subject to the accuracy, in
all material respects, as of the date of this Agreement and the Closing Date, of
the representations and warranties of the Purchasers contained herein, to the
performance by the Purchasers of their obligations hereunder, and to the
following additional conditions:
(i) The Registration Statement shall be effective on the Closing
Date, and no stop order suspending the effectiveness of that Registration
Statement or any part thereof shall have been issued under the 1933 Act or
proceedings therefore instituted or threatened by the Commission.
(ii) The Company and the Purchasers shall have obtained all material
authorizations, approvals, consents, registrations or qualifications of or with
any court or governmental authority or agency (including, without limitation,
any insurance regulatory agency or body) required for the issuance and sale of
the Securities by the Company to the Purchasers and the performance by the
Company of its obligations under this Agreement, except such as may be required
under state or foreign securities or Blue Sky laws.
(iii) Any waiting periods under the HSR Act applicable to the
transaction contemplated hereby shall have expired or been terminated.
(iv) Counsel for the Company shall have been furnished with such
documents as they may require in order to evidence the accuracy of any of the
representations or warranties of the Purchasers, or the fulfillment of any of
the conditions herein contained; and all proceedings by any Purchaser which is
an entity in connection with the purchase of Securities under this Agreement as
herein contemplated shall be satisfactory in form and substance to the Company
and counsel for the Company.
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ARTICLE VIII
TERMINATION
Section 8.01 Termination by the Purchasers. The Purchasers may
terminate this Agreement in their absolute discretion at any time prior to the
purchase of the Securities, if (i) since the time of execution of this
Agreement, there has been any material adverse change, financial or otherwise
(other than as disclosed in the Registration Statement and Prospectus), in the
operations, business, condition or prospects of the Company and its
subsidiaries, considered as one enterprise, (ii) at the time of such
termination, (x) trading in securities on the NYSE, the American Stock Exchange
or the Nasdaq National Market shall have been suspended or limitations or
minimum prices shall have been established on any such exchange or market, (y) a
banking moratorium shall have been declared either by the United States or New
York State authorities, or (z) the United States shall have declared war in
accordance with its constitutional processes or there shall have occurred any
material outbreak or escalation of hostilities or other national or
international calamity or crisis of such magnitude in its effect on the
financial markets of the United States as, in the Purchaser's judgment, to make
it impracticable to market the Securities in the manner contemplated by this
Agreement, or (iii) the Common Stock shall have ceased to be registered under
the 1934 Act or listed on the NYSE, or the Commission, the NYSE or the Company
shall have initiated proceedings for such deregistration or delisting. Either
the Company or the Purchasers may terminate this Agreement if the Closing shall
not have occurred by January 31, 2000; provided that no party may terminate
under this sentence if the Closing has not occurred because of a material breach
by such party of its obligations under this Agreement.
Section 8.02 Notice of Termination. If the Purchasers elect to
terminate this Agreement as provided in Section 8.01, the Purchasers shall
notify the Company promptly of such termination. Such termination shall be
effective upon the Company's receipt of such notice. Upon such termination, the
Purchasers shall not be under any obligation or liability to the Company under
this Agreement, and Company shall not be under any obligation or liability under
this Agreement (except to the extent provided in Sections5.01(iii) and 10.02).
ARTICLE IX
DEFINITIONS
"Affiliate" shall have the meaning set forth in Rule 12b-2 promulgated
by the Commission under the Exchange Act; provided that in no event shall ▇▇▇▇▇▇
Investments, Inc., Freedom Securities Corporation or any entity controlled by
either of them be deemed to be Affiliates of the Purchasers; and further
provided that in no event shall any of Monitor Company, Inc., Monitor Advisory
for Strategic Transactions, First Street Global Investors, any entity controlled
by any of them or any entity which succeeds to substantially all of the
business, operations or assets of any of such named entities be deemed to be an
Affiliate of the Monitor Purchasers, so long as such entity is not controlled by
a Monitor Purchaser.
"Amended Articles of Incorporation" shall mean the Company's Articles
of Incorporation, as amended to include the Designations, Rights and Preferences
of Series F Convertible Preferred Stock (the "Designation"), in the form
attached hereto as Exhibit A-1.
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"Authorities" shall mean approvals, consents, rights, certificates,
orders, franchises, determinations, permissions, licenses, authorities or grants
issued, declared, designated or adopted by any nation or government, any
federal, state, municipal or other political subdivision thereof or any
department, commission, board, bureau, agency or instrumentality exercising
executive, legislative, judicial, regulatory or administrative functions
pertaining to government.
"Business Day" shall mean any day except a Saturday, Sunday or other
day on which commercial banks in the City of New York are not open for the
transaction of business.
"Change of Control Transaction" shall mean the acquisition of the
Company by another entity by means of any transaction or series of related
transactions (including, without limitation, any reorganization, merger or
consolidation) that results in the transfer of fifty percent (50%) or more of
the outstanding voting power of the Company, or the sale, transfer or other
disposition of all or substantially all of the Company's assets; provided the
transaction shall not constitute a Change of Control Transaction if its sole
purpose is to change the jurisdiction of the Company's incorporation or create a
holding company that would be owned substantially in the same proportions by the
persons who held the Company's securities immediately before such transaction.
"Closing" shall have the meaning set forth in section 2.02 of this
Agreement.
"Closing Date" shall have the meaning set forth in Section 2.02 of this
Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commission" shall mean the Securities and Exchange Commission.
"Company" shall mean Conseco, Inc., an Indiana corporation.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"HSR Act" shall mean the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act
of 1976, as amended.
"Liens" shall mean any lien, claim, charge, pledge, mortgage, security
interest or other encumbrance.
"Material Adverse Effect" shall mean a material adverse change or
development which could reasonably be expected to result in a material adverse
change in the condition, financial or otherwise, or results of operations of the
Company and its subsidiaries, taken as a whole.
"Person" shall mean any individual, firm, corporation, partnership,
limited liability company or partnership, trust, incorporated or unincorporated
association, joint venture, government (or any agency or political subdivision
thereof) or other entity of any kind.
"PIK Dividends" shall mean securities paid in kind as dividends on
securities in accordance with the Company's Amended Articles of Incorporation.
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"Qualified Designee" shall mean a person who, as of the date hereof, is
a managing director of the ▇▇▇▇▇▇ ▇. ▇▇▇ Company (or any person who holds a
comparable position in any organization which succeeds to substantially all of
the assets or business of the ▇▇▇▇▇▇ ▇. ▇▇▇ Company), or any other person
designated by the Purchasers in accordance with 5.01(iv) and acceptable to the
Company.
"Securities" shall mean the Company's Series F Common-Linked
Convertible Preferred Stock, no par value per share.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Taxes" shall mean all taxes, charges, fees, levies or other
assessments, including, without limitation, all net income, gross receipts,
capital, sales, use, ad valorem, value added, transfer, franchise, profits,
inventory, capital stock, license, withholding, payroll, employment, social
security, unemployment, excise, severance, stamp, occupation, property and
estimated taxes, customs, duties, fees, assessments and charges of any kind
whatsoever, together with any interest and any penalties, fines, additions to
tax or additional amounts imposed by any public or governmental taxing authority
(domestic or foreign) and shall include any transferee liability in respect of
Taxes.
ARTICLE X
MISCELLANEOUS
Section 10.01. 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 any other party, or whenever any of the parties desires to
give or serve upon any other 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 sent by registered or certified-mail, return receipt
requested, postage prepaid, or by overnight mail or courier, or delivery service
or by telecopy and confirmed by telecopy answer back, addressed as follows:
(a) If to the Company to:
Conseco, Inc.
11825 ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Chairman, President & CEO
Attn: ▇▇▇▇ ▇. ▇▇▇▇, Esquire, General Counsel
(b) If to the Investor or the Affiliate Purchasers to:
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c/o ▇▇▇▇▇▇ ▇. ▇▇▇ Company
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Senior Managing Director
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Managing Director
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇, Esquire
(c) If to the Monitor Purchasers to:
c/o Monitor Clipper Partners
▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇, Director
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Ropes & ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esquire
or at such other address as may be substituted by notice given as herein
provided. The furnishing 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 (a) the date on which personally
delivered, with receipt acknowledged, (b) the date on which telecopied and
confirmed by telecopy answer back, (c) the next Business Day if delivered by
overnight or express mail, courier or delivery service, or (d) three Business
Days after the same shall have been deposited in the United States mail, as the
case may be. 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.
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Section 10.02. Fee and Expenses. The Company shall pay all reasonable
out-of-pocket expenses (including reasonable fees and disbursements of counsel)
incurred by the Purchasers and by the Company in connection with the
transactions contemplated by this Agreement; provided, however, that in the
event of a termination of this Agreement, each party shall be responsible for
its own fees and expenses. At the Closing, the Company shall pay to one or more
designees of the Purchasers, in cash, an amount equal to 4% of the aggregate
purchase price for the Securities set forth on Schedule I hereto, less the
amount paid by the Company on behalf of the Purchasers pursuant to the first
sentence of this Section 10.02. At least one full business day prior to the
Closing Date the Purchasers shall give notice to the Company specifying an
amount (not greater than 2.0% of the purchase price for the Securities set forth
in Schedule I hereto) of their expenses that are payable by the Company pursuant
to the first sentence of this Section 10.02, and the Company's obligations under
such sentence shall be fully satisfied by paying such amount.
Section 10.03. Survival of Representations and Warranties. All
representations and warranties contained herein or made in writing by the
Company or the Purchasers in connection herewith shall survive the execution and
delivery of this Agreement, the sale and purchase of the Securities and any
disposition thereof for a period ending thirty days following the filing with
the Commission of the Company's Annual Report on Form 10-K covering the fiscal
year ending December 31, 1999.
Section 10.04. Entire Agreement. This Agreement, together with the
schedules and exhibits hereto which are incorporated by reference herein,
represent the entire agreement and understanding among the parties hereto with
respect to the subject matter hereof and supersedes any and all prior oral and
written agreements, arrangements and understandings among the parties hereto
with respect to such subject matter, and can be amended, supplemented or
changed, and any provision hereof can be waived, only by a written instrument
making specific reference to this Agreement signed by the Company and the
Purchasers and Affiliates holding at least a majority of the Securities and the
Conversion Securities (considered together with the Securities being treated on
an as-converted basis for this purpose). Notwithstanding the foregoing, any
document which is contemplated to be executed or delivered at Closing in the
form attached as an Exhibit hereto may be delivered in substantially the form
attached, together with any changes thereto reasonably acceptable to the parties
hereto.
f Section 10.05. Successors and Assigns. This Agreement shall be binding
upon the parties hereto and their respective successors and assigns, including
any person to whom the Purchaser may assign its right and obligations to
purchase Securities and shall inure to the benefit of the parties hereto and,
their respective successors and assigns. Notwithstanding the foregoing, (i) no
assignee of Securities or Conversion Securities (other than Affiliates of the
Purchasers) shall be entitled to the benefits of this Agreement or shall be
bound by the provisions of Section 5.01(iv) or Section 5.02 or Article VI;
provided that an assignee in a transaction made in violation of Section 5.02
shall also be bound by the provisions of Section 5.01(iv), Section 5.02 and
Article VI, and (ii) no assignee of Securities or Conversion Securities (other
than an Affiliate of the Investor which succeeds to substantially all of the
business or assets of the Investor) shall be entitled to the benefits of Section
5.01(vi)(d) or Section 5.01(vii). Any Affiliate of a Purchaser to whom
Securities or Conversion Securities are transferred shall first sign a joinder
agreement, in form
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reasonably acceptable to the Company, by which such Affiliate agrees to be bound
by the provisions of this Agreement.
Section 10.06. Paragraph Headings. The paragraph headings contained in
this Agreement are for general reference purposes only and shall not affect in
any manner the meaning or interpretation of the terms or other provisions of
this Agreement.
Section 10.07. Applicable Law. This Agreement shall be governed by,
construed and enforced in accordance with the laws of the State of Delaware,
applicable to contracts to be made, executed, delivered and performed wholly
within such state, and in any case, without regard to the conflicts of law
principles of such state.
Section 10.08. Severability. If at any time subsequent to the date
hereof, any provision of this Agreement shall be held by any court of competent
jurisdiction to be illegal, void or unenforceable, such provision shall be of no
force and effect, but the illegality or unenforceability of such provision shall
have no effect upon and shall not impair the enforceability of any other
provision of this Agreement.
Section 10.09. Equitable Remedies. The parties hereto agree that
irreparable harm would occur in the event that any of the covenants contained in
this Agreement were not performed in all material respects by the parties hereto
in accordance with their specific terms or conditions or were otherwise
breached, and that money damages are an inadequate remedy for breach thereof
because of the difficulty of ascertaining and quantifying the amount of damage
that will be suffered by the parties hereto in the event that such covenants are
not performed in accordance with their terms or are otherwise breached. It is
accordingly hereby agreed that the parties hereto shall be entitled to seek an
injunction or injunctions to restrain, enjoin and prevent breaches and
violations of any of the covenants, contained in this Agreement by the other
parties and to enforce specifically the terms and provisions hereof in any court
of the United States or any state having competent jurisdiction, such remedy
being in addition to and not in lieu of, any other rights and remedies to which
the other parties are entitled to at law or in equity.
Section 10.10. No Waiver. The failure of any party at any time or times
to require performance of any provision hereof shall not affect the right at a
later time to enforce the same. No waiver by any party of any condition, and no
breach of any provision, term, covenant, representation or warranty contained in
this Agreement, whether by conduct or otherwise, in any one or more instances,
shall be deemed to be construed as a further or continuing waiver of any such
condition or of the breach of any other provision, term, covenant,
representation or warranty of this Agreement.
Section 10.11. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute but one and the same original instrument.
Section 10.12. Adjustments to Capitalization. All share and per share
figures shall be subject to appropriate adjustment reasonably acceptable to the
Company and the Purchasers in the event of any stock split, stock dividend or
other form of recapitalization affecting the Securities or the Common Stock and
effected prior to the Closing Date.
-31-
33
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement, as of the day and year first above written.
CONSECO, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chairman, President and Chief
Executive Officer
INVESTOR: ▇▇▇▇▇▇ ▇. ▇▇▇ EQUITY FUND IV, L.P.
By: THL EQUITY ADVISORS IV, LLC, its
General Partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Managing Director
MONITOR PURCHASERS: MONITOR CLIPPER EQUITY PARTNERS, L.P.
By: MONITOR CLIPPER PARTNERS, L.P., its
General Partner
By: MCP GP, INC., its General Partner
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
------------------------------
Authorized Signatory
MONITOR CLIPPER EQUITY PARTNERS
(FOREIGN), L.P.
By: MONITOR CLIPPER PARTNERS, L.P., its
General Partner
By: MCP GP, INC., its General Partner
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
------------------------------
Authorized Signatory
S-1
34
AFFILIATE PURCHASERS: ▇▇▇▇▇▇ ▇. ▇▇▇ FOREIGN FUND IV, L.P.
By: THL EQUITY ADVISORS IV, LLC, its
General Partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Managing Director
▇▇▇▇▇▇ ▇. ▇▇▇ FOREIGN FUND IV-B, L.P.
By: THL EQUITY ADVISORS IV, LLC, its
General Partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Managing Director
1997 ▇▇▇▇▇▇ ▇. ▇▇▇ NOMINEE TRUST
By: STATE STREET BANK AND TRUST
COMPANY OF CONNECTICUT, N.A.,
not individually but solely as successor
trustee under a Trust Agreement dated as
of August 18, 1997, and know as the 1997
▇▇▇▇▇▇ ▇. ▇▇▇ Nominee Trust
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
▇▇▇▇▇▇ INVESTMENTS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: Authorized Signatory
S-2
35
THL INVESTMENT MANAGEMENT CORP.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Authorized Signatory
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
THE 1995 HARKINS GIFT TRUST
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Trustee
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇. ▇▇▇▇▇▇ ▇▇▇▇
------------------------------------
▇. ▇▇▇▇▇▇ ▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
S-3
36
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇
------------------------------------
▇▇▇▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇
------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ as Custodian for
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ under the
S-4
37
Massachusetts Uniform Transfers
to Minors Act
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ as Custodian for
▇▇▇▇▇▇ ▇▇▇ under the
Massachusetts Uniform Transfers
to Minors Act
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇ CHARITABLE
INVESTMENT, L.P.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇
------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇
Title: Authorized Signatory
RSL TRUST
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ as Trustee,
as aforesaid and not individually,
of the RSL Trust
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇
S-5
38
/s/ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇
------------------------------------
▇. ▇▇▇▇▇▇ Spaht
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
/s/ ▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
S-6
39
AMENDED AND RESTATED SECURITIES PURCHASE AGREEMENT
SCHEDULE I
Purchasers Investment ($) No. of Securities
---------- -------------- -----------------
I. INVESTOR:
▇▇▇▇▇▇ ▇. ▇▇▇ Equity Fund IV, L.P. 392,611,642.00 2,039,541
II. MONITOR PURCHASERS:
Monitor Clipper Equity Partners, L.P. 25,230,782.50 131,069
Monitor Clipper Equity Partners (Foreign), 4,769,187.50 24,775
L.P.
III. AFFILIATE PURCHASERS:
▇▇▇▇▇▇ ▇. ▇▇▇ Foreign Fund IV, L.P. 13,449,782.50 69,869
▇▇▇▇▇▇ ▇. ▇▇▇ Foreign Fund IV-B, L.P. 38,131,747.50 198,087
1997 ▇▇▇▇▇▇ ▇. ▇▇▇ Nominee Trust 6,297,445.50 32,714
▇▇▇▇▇▇ Investments, Inc. 6,451,830.00 33,516
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 1,381,957.50 7,179
The 1995 Harkins Gift Trust 154,770.00 804
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 1,152,690.00 5,988
▇. ▇▇▇▇▇▇ ▇▇▇▇ 1,152,690.00 5,988
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 1,152,690.00 5,988
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 1,152,690.00 5,988
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 1,152,690.00 5,988
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. 1,152,690.00 5,988
▇▇▇▇ ▇. ▇▇▇▇▇ 480,287.50 2,495
▇▇▇▇ ▇. ▇▇▇▇▇▇ 320,897.50 1,667
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 255,447.50 1,327
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 255,447.50 1,327
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 192,115.00 998
▇▇▇▇▇ ▇▇▇▇▇▇▇ 72,572.50 377
▇▇▇▇▇ ▇▇▇▇▇ 72,572.50 377
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 134,365.00 698
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 20,020.00 104
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 20,020.00 104
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇ 50,050.00 ▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ as Custodian for ▇▇▇▇▇ 25,025.00 130
▇▇▇▇▇▇ ▇▇▇
40
Purchasers Investment ($) No. of Securities
---------- -------------- -----------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ as Custodian for ▇▇▇▇▇▇ 25,025.00 ▇▇▇
▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 20,020.00 ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ 20,020.00 104
▇▇▇▇▇▇ ▇. ▇▇▇ Charitable Investment, L.P. 2,552,935.00 13,262
RSL Trust 50,050.00 260
THL Investment Management Corp. 385.00 2
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 5,967.50 31
▇▇▇▇▇ ▇▇▇▇▇▇ 12,512.50 65
▇. ▇▇▇▇▇▇ Spaht 12,127.50 63
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 1,540.00 8
▇▇▇ ▇. ▇▇▇▇▇▇ 962.50 5
▇▇▇▇▇ ▇▇▇▇▇▇ 2,502.50 13
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 1,925.00 10
===========================================
41
AMENDED AND RESTATED SECURITIES PURCHASE AGREEMENT
SCHEDULE 3.01
Conseco, Inc.
Significant Subsidiaries
CIHC, Incorporated
Conseco Life Insurance Company of Texas
Bankers Life Insurance Company of Illinois
Bankers Life and Casualty Company
Conseco Annuity Assurance Company
Wabash Life Insurance Company
Conseco Life Insurance Company
Pioneer Life Insurance Company
Conseco Finance Corp.
42
Exhibit A-1
Designations, Rights and Preferences of
Series F Common-Linked Convertible Preferred Stock
The designations, rights, preferences, limitations and restrictions of
the shares of Preferred Stock, without par value, to be designated as Series F
Common-Linked Convertible Preferred Stock (in addition to those set forth
elsewhere in the Corporation's Articles of Incorporation) are hereby fixed as
follows.
Section 1. Designation; Number of Shares; Stated Value. Three Million
One Hundred Twenty Thousand (3,120,000) shares of Preferred Stock shall be
designated Series F Common-Linked Convertible Preferred Stock (hereinafter
referred to as the "Series F Preferred Stock"). Shares of the Series F Preferred
Stock shall have a stated value of One Hundred Ninety Two Dollars and Fifty
Cents ($192.50) per share.
Section 2. Dividends.
(a) The holders of the shares of Series F Preferred Stock shall be
entitled to receive per share cumulative cash dividends, at the time and in an
amount not less than the amount declared payable by the Board of Directors per
share of Common Stock multiplied by the applicable Conversion Rate, prior to, or
at the same time as, any dividend or distribution in cash on shares of Common
Stock shall be declared or paid or set apart for payment. The holders of the
shares of Series F Preferred Stock also shall be entitled to receive per share
dividends and distributions prior to, or at the same time as, any non-cash
dividend or distribution (other than a dividend or distribution payable solely
in shares of Common Stock) shall be declared or paid on shares of Common Stock,
such per share dividend or distribution on each share of Series F Preferred
Stock being equal to the dividend or distribution payable per share on Common
Stock multiplied by the number of shares of Common Stock into which a share of
Series F Preferred Stock is then convertible and payable in the same type of
property paid to holders of Common Stock.
(b) In the event that the per share cash dividends paid to the holders
of the shares of Series F Preferred Stock pursuant to Section 2(a) above in any
fiscal quarter are less than $1.925, then the holders of the shares of Series F
Preferred Stock shall be entitled to receive an additional dividend per share,
payable in shares of Series F Preferred Stock, in a number of shares equal to
(A) the difference between (i) $1.925 and (ii) the cash dividend paid in such
fiscal quarter pursuant to Section 2(a) above, divided by (B) $192.50, subject
to adjustment as provided in the last sentence of Section 2(c) below.
(c) In-kind dividends on the Series F Preferred Stock shall be declared
by the Board of Directors on or prior to the last business day of each fiscal
quarter (the term "business day" as used herein shall mean any day other than a
Saturday, Sunday or legal holiday) and payable on the first day of the next
fiscal quarter, commencing January 3, 2000 (each such date being hereinafter
individually a "Dividend Payment Date" and
43
collectively the "Dividend Payment Dates"), except that if any such Dividend
Payment Date is not a business day, then such dividend shall be payable on the
first immediately succeeding calendar day which is a business day to holders of
record as they appear on the books of the Corporation on the last business day
of the fiscal quarter immediately preceding such Dividend Payment Date or such
other date as may be determined by the Board of Directors. In-kind dividend
payments shall be rounded to the nearest 1/100th of a share of Series F
Preferred Stock or if there is no nearest 1/100th to the next highest 1/100th of
a share. Dividends in arrears may be declared and paid at any time, without
reference to any regular Dividend Payment Date, to holders of record on such
date as may be fixed by the Board of Directors of the Corporation. Dividends
payable on the Series F Preferred Stock for the initial dividend period and for
any period less than a full fiscal quarter shall be prorated based on the number
of days such Series F Preferred Stock is outstanding during such quarter, and
computed on the basis of a 90 day quarter; provided that any share of Series F
Preferred Stock issued as part of an in-kind dividend on the first business day
of a fiscal quarter shall be deemed for purposes of calculating dividends to be
outstanding for the full fiscal quarter whether or not such day of issuance was
the first day of such fiscal quarter.
(d) Dividends on the Series F Preferred Stock shall be cumulative and
shall accrue from and after the date of issuance, whether or not declared by the
Board of Directors.
(e) No dividend may be declared on any other class or series of stock
ranking on a parity with the Series F Preferred Stock as to dividends in respect
of any dividend period unless there shall also be or have been declared on the
Series F Preferred Stock like dividends ratably in proportion to the respective
annual dividend rates fixed therefor.
Section 3. Conversion.
(a) Each issued and outstanding share of Series F Preferred Stock shall
be convertible, at the option of the holder thereof, at any time after the date
of issuance and without the payment of any additional consideration therefor,
into fully paid and nonassessable shares of Common Stock at a rate of ten (10)
shares of Common Stock for each share of Series F Preferred Stock (the
"Conversion Rate"), subject to adjustment as set forth below.
(b) In order for a holder to convert shares of Series F Preferred Stock
into shares of Common Stock, such holder shall surrender the certificate or
certificates for such shares of Series F Preferred Stock, at the office of the
transfer agent for the Series F Preferred Stock (or at the principal office of
the Corporation if the Corporation serves as its own transfer agent), together
with written notice that such holder elects to convert all or any number of the
shares of the Series F Preferred Stock represented by such certificate or
certificates. Such notice shall state such holder's name or the names of the
nominees in which such holder wishes the certificate or certificates for shares
of Common Stock to be issued and the number of shares of Series F Preferred
Stock to be converted. If required
2
44
by the Corporation, certificates surrendered for conversion shall be endorsed or
accompanied by a written instrument or instruments of transfer, in form
satisfactory to the Corporation, duly executed by the registered holder or such
holder's attorney duly authorized in writing accompanied by the payment of any
applicable transfer taxes. The date of receipt of such certificates and notice
by the transfer agent (or by the Corporation if the Corporation serves as its
own transfer agent) shall be the conversion date (the "Conversion Date") and the
conversion shall be deemed effective as of the close of business on the
Conversion Date. The Corporation shall, as soon as practicable after the
Conversion Date, issue and deliver at such office to such holder of Series F
Preferred Stock, or to his or its nominees, a certificate or certificates for
the number of shares of Common Stock to which such holder shall be entitled,
together with cash in lieu of any fraction of a share.
(c) The Corporation may require that shares of Series F Preferred Stock
be converted (a "Mandatory Conversion Event") as follows:
(i) On or after June 15, 2001 and prior to December 15, 2002,
any holder wishing to transfer shares of Series F Preferred
Stock shall give the Secretary of the Corporation prior
written notice of such proposed transfer at least five
business days before the date of such proposed transfer, and
upon receipt of a notice of proposed transfer from a holder
of shares of Series F Preferred Stock, if the Closing Price
per share of the Corporation's Common Stock is $55.00 or
greater for any period of 20 consecutive trading days within
the 45 trading days preceding the receipt of such notice,
the Corporation may, within 15 business days following
receipt of such notice, convert any or all of the
outstanding shares of Series F Preferred Stock covered by
such notice into fully paid and nonassessable shares of
Common Stock at the Conversion Rate;
(ii) On or after December 15, 2002, if the Closing Price per
share of the Corporation's Common Stock is $55.00 or greater
for 20 consecutive trading days, the Corporation may, within
15 business days following such 20th consecutive trading
day, convert any or all of the outstanding shares of Series
F Preferred Stock into fully paid and nonassessable shares
of Common Stock at the Conversion Rate;
(iii) The term "Closing Price" on any day shall mean the last
reported sales price on such day or, in case no such sale
takes place on such day, the average of the reported closing
high and low quotations, in each case on the New York Stock
Exchange or, if the Common Stock is not listed on the New
York Stock Exchange, on the principal national securities
market or quotation system on which the Common Stock is then
traded or quoted, or, if the Common Stock is then not so
traded or quoted, on the Nasdaq National
3
45
Market, or, if the Common Stock is not listed on the Nasdaq
National Market, the average of the high bid and low-asked
quotations of the Common Stock in the over-the-counter
market on the day in question as reported by the National
Quotation Bureau Incorporated, or a similarly generally
accepted reporting service, or, if no such quotations are
available, the fair market value of the Common Stock as
determined by any New York Stock Exchange member firm
selected from time to time by the Board of Directors for
such purpose.
(d) In the event the Corporation elects to exercise its conversion
rights pursuant to Section 3(c) above, then the Corporation shall notify by mail
all applicable holders of the Series F Preferred Stock of such election, who
shall in turn within ten days after receipt of such notice, surrender such
holder's certificates evidencing such shares being converted at the principal
office of the Corporation or at such other place as the Corporation shall
designate, and shall thereupon be entitled to receive certificates evidencing
the number of shares of Common Stock into which such shares of Series F
Preferred Stock are converted, together with cash in lieu of any fraction of a
share. On the date of mailing by the Corporation of the notice of the Mandatory
Conversion Event, each holder of record of shares of Series F Preferred Stock
being converted shall be deemed to be the holder of record of the Common Stock
issuable upon such conversion, notwithstanding that the certificates
representing such shares of Series F Preferred Stock shall not have been
surrendered at the office of the Corporation, that notice from the Corporation
shall not have been received by any holder of record of shares of Series F
Preferred Stock, or that the certificates evidencing such shares of Common Stock
shall not then be actually delivered to such holder.
(e) The Conversion Rate shall be subject to adjustment from time to
time as provided below in this section (e).
(i) If the Corporation shall, after the first date any shares of
Series F Preferred Stock are issued:
(A) pay a stock dividend or make a distribution with
respect to its Common Stock in shares of such Common
Stock,
(B) subdivide or split its outstanding Common Stock into a
greater number of shares,
(C) combine its outstanding shares of Common Stock into a
smaller number of shares, or
(D) issue by reclassification of its shares of Common Stock
any shares of common stock of the Corporation,
then, in any such event, the Conversion Rate in effect
immediately prior to such event shall be adjusted so that
the holder of any
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46
shares of Series F Preferred Stock shall thereafter be
entitled to receive, upon conversion, the number of shares
of Common Stock of the Corporation which such holder would
have owned or been entitled to receive immediately following
any event described above had such shares of Series F
Preferred Stock been converted immediately prior to such
event or any record date with respect thereto. Such
adjustment shall become effective at the opening of business
on the business day next following the record date for
determination of stockholders entitled to receive such
dividend or distribution, in the case of a dividend or
distribution, and shall become effective immediately after
the effective date, in the case of a subdivision, split,
combination or reclassification. Such adjustment shall be
made successively.
(ii) The Corporation shall also be entitled to make upward
adjustments in the Conversion Rate, as it in its sole
discretion shall determine to be advisable, in order that
any stock dividends, subdivisions of shares, distribution of
rights to purchase stock or securities, or distribution of
securities convertible into or exchangeable for stock (or
any transaction which could be treated as any of the
foregoing transactions pursuant to Section 305 of the
Internal Revenue Code of 1986, as amended) made by the
Corporation to its stockholders after the first date any
shares of Series F Preferred Stock are issued shall not be
taxable.
(iii) In any case in which subsection 3(e) shall require that an
adjustment become effective at the opening of business on
the business day next following a record date and the date
fixed for conversion pursuant to subsection 3(a) occurs
after such record date, but before the occurrence of such
event, the Corporation may, in its sole discretion, elect to
defer the following until after the occurrence of such
event: (A) issuing to the holder of any converted shares of
Series F Preferred Stock the additional shares of Common
Stock issuable upon such conversion over the shares of
Common Stock issuable before giving effect to such
adjustments and (B) paying to such holder any amount in cash
in lieu of a fractional share of Common Stock pursuant to
subsection 3(h).
(iv) All adjustments to the Conversion Rate shall be calculated
to the nearest 1/100th of a share of Common Stock. No
adjustment in the Conversion Rate shall be required unless
such adjustment would require an increase or decrease of at
least one percent therein; provided, however, that any
adjustment which by reason of this subsection (iv) is not
required to be made shall be carried forward and taken into
account in any subsequent adjustment.
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47
(f) Adjustment for Consolidation or Merger. In case of any
consolidation or merger to which the Corporation is a party (other than a merger
or consolidation in which the Corporation is the surviving or continuing
corporation and in which the Common Stock outstanding immediately prior to the
merger or consolidation remains unchanged), or in case of any sale or transfer
to another entity of the property of the Corporation as an entirety or
substantially as an entirety, or in case of any statutory exchange of securities
with another entity (other than in connection with a merger or acquisition),
proper provision shall be made so that each share of Series F Preferred Stock
shall, after consummation of such transaction, be subject to (i) conversion at
the option of the holder into the kind and amount of securities, cash or other
property receivable upon consummation of such transaction by a holder of the
number of shares of Common Stock into which such share of Series F Preferred
Stock might have been converted immediately prior to consummation of such
transaction, and (ii) conversion on a Mandatory Conversion Event into the kind
and amount of securities, cash or other property receivable upon consummation of
such transaction by a holder of the number of shares of Common Stock into which
such share of Series F Preferred Stock would have converted if the conversion on
a Mandatory Conversion Event had occurred immediately prior to the date of
consummation of such transaction, plus the right to receive cash in an amount
equal to all accrued and unpaid dividends on such shares of Series F Preferred
Stock (other than previously declared dividends payable to a holder of record as
of a prior date). The kind and amount of securities into or for which the shares
of Series F Preferred Stock shall be convertible after consummation of such
transaction shall be subject to adjustment as described in the immediately
preceding paragraph following the date of consummation of such transaction.
For purposes of the immediately preceding paragraph and subsection 3(h)
(iii), any sale or transfer to another corporation of property of the
Corporation which did not account for at least 50% of the consolidated net
income of the Corporation for its most recent fiscal year ending prior to the
consummation of such transaction shall not in any event be deemed to be a sale
or transfer of the property of this Corporation as an entirety or substantially
as an entirety.
(g) Notice of Adjustments. Whenever the Conversion Rate is adjusted as
herein provided, the Corporation shall:
(i) forthwith compute the adjusted Conversion Rate in accordance
herewith and prepare a certificate signed by an officer of the Corporation
setting forth the adjusted Conversion Rate, the method of calculation thereof in
reasonable detail and the facts requiring such adjustment and upon which such
adjustment is based, which certificate shall be conclusive, final and binding
evidence of the correctness of the adjustment, and file such certificate
forthwith with the transfer agent for the shares of Series F Preferred Stock and
the Common Stock; and
(ii) mail a notice to the holders of the outstanding shares of
Series F Preferred Stock stating that the Conversion Rate had been adjusted, the
facts requiring such adjustment and upon which such adjustment is based and
setting forth the adjusted
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Conversion Rate, such notice to be mailed within 45 days of the end of the
fiscal quarter during which the facts requiring such adjustment occurred.
(h) Notices. In case, at any time while any of the shares of Series F
Preferred Stock are outstanding,
(i) the Corporation shall declare a dividend (or any other
distribution) on its Common Stock, excluding any cash
dividends; or
(ii) the Corporation shall authorize the issuance to all holders
of its Common Stock of rights or warrants to subscribe for
or purchase shares of its Common Stock or of any other
subscription rights or warrants; or
(iii) the Corporation shall authorize any reclassification of its
Common Stock (other than a subdivision or combination
thereof) or any consolidation or merger to which the
Corporation is a party and for which approval of any
stockholders of the Corporation is required (except for a
merger of the Corporation into one of its subsidiaries
solely for the purpose of changing the corporate domicile of
the Corporation to another state of the United States and in
connection with which there is no substantive change in the
rights or privileges of any securities of the Corporation
other than changes resulting from differences in the
corporate statutes of the then existing and the new state of
domicile), or the sale or transfer to another corporation of
the property of the Corporation as an entirety or
substantially as an entirety; or
(iv) the Corporation shall authorize the voluntary or involuntary
dissolution, liquidation or winding up of the Corporation;
then the Corporation shall cause to be filed at each office or agency
maintained for the purpose of conversion of the shares of Series F
Preferred Stock, and shall cause to be mailed to the holders of shares
of Series F Preferred Stock at their last addresses as they shall
appear on the stock register, at least 10 days before the date
hereinafter specified (or the earlier of the dates hereinafter
specified, in the event that more than one date is specified), a notice
stating (A) the date on which a record is to be taken for the purpose
of such dividend, distribution, rights or warrants, or, if a record is
not to be taken, the date as of which the holders of Common Stock of
record to be entitled to such dividend, distribution, rights or
warrants are to be determined, or (B) the date on which any such
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up is expected to become effective, and the date
as of which it is expected that holders of Common Stock of record shall
be entitled to exchange their Common Stock for securities or other
property (including cash), if any, deliverable upon such
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or
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49
winding up. The failure to give or receive the notice required by this
subsection (h) or any defect therein shall not affect the legality or
validity of such dividend, distribution, right or warrant or other
action.
(i) All certificates evidencing shares of Series F Preferred Stock that
are required to be surrendered for conversion in accordance with the provisions
hereof, from and after the date such certificates are so required to be
surrendered shall represent the shares of Common Stock into which the shares of
Series F Preferred Stock previously represented thereby shall have been
converted for all purposes, notwithstanding the failure of the holder or holders
thereof to surrender such certificates on or prior to such date. The Corporation
from time to time thereafter shall take appropriate action to reduce the
authorized Series F Preferred Stock accordingly.
(j) No fractional shares of Common Stock shall be issued upon
conversion of the Series F Preferred Stock. In lieu of any fractional shares to
which the holder would otherwise be entitled, the Corporation shall pay cash
equal to the product of such fraction multiplied by the Closing Price of the
Common Stock on the date of conversion.
(k) The Corporation shall at all times when the Series F Preferred
Stock shall be outstanding, reserve and keep available out of its authorized but
unissued stock, for the purpose of effecting the conversion of the Series F
Preferred Stock, such number of its duly authorized shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding Series F Preferred Stock.
(l) All shares of Series F Preferred Stock surrendered for conversion
as herein provided shall no longer be deemed to be outstanding and all rights
with respect to such shares, including the rights, if any, to receive notices,
to vote and to accrual of dividends shall immediately cease and terminate at the
close of business on the conversion date (except only the right of the holders
thereof to receive shares of Common Stock in exchange therefor), and any shares
of Series F Preferred Stock so converted shall be retired and canceled by the
Corporation.
(m) All dollar amounts set forth herein shall be subject to equitable
adjustment whenever there shall occur a stock split, subdivision, combination,
reclassification, dividend (other than regular cash dividend), issuance of
rights or warrants to holders of stock to purchase shares of stock,
consolidation, merger, or sale or transfer of the property of the Corporation as
an entirety or substantially as an entirety or other similar event. Any such
adjustment shall be made by the Board of Directors of the Corporation (whose
determination shall be conclusive, final and binding). Promptly after the making
of any such adjustment, the Corporation shall send notice thereof to the holders
of Series F Preferred Stock and to the transfer agent for the Series F Preferred
Stock.
Section 4. Voting.
(a) The shares of the Series F Preferred Stock shall have the right to
vote on an as-converted basis together with all other classes entitled to vote
thereon, on all
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50
matters which from time to time may be brought for action by the common
shareholders of the Corporation.
(b) For as long as any shares of Series F Preferred Stock remain
outstanding, the affirmative consent of the holders of at least a majority
thereof (voting separately as a class but excluding from any calculation any
shares of Series F Preferred Stock held by the Corporation or any subsidiary
thereof) given in person or by proxy, at any annual meeting or special meeting
of the shareholders called for such purpose, shall be necessary to amend, alter
or repeal any of the provisions of the Articles of Incorporation of the
Corporation which would adversely affect the powers, preferences or rights of
the holders of the shares of Series F Preferred Stock then outstanding
(including, without limitation, by any merger, consolidation or reorganization),
except as otherwise provided by the Articles of Incorporation, as amended.
Section 5. Liquidation Rights.
(a) Upon the dissolution, liquidation or winding-up of the Corporation,
whether voluntary or involuntary, the holders of the shares of the Series F
Preferred Stock shall be entitled to receive, before any payment or distribution
of the assets of the Corporation or proceeds thereof (whether capital or
surplus) shall be made to or set apart for the holders of the Series E Preferred
Stock, the Common Stock or any other class or series of stock ranking junior to
the Series F Preferred Stock upon liquidation, dissolution or winding-up, the
greater amount of (i) $192.50 per share, plus a sum equal to all dividends on
such shares (whether or not earned or declared) accrued and unpaid thereon to
the date of final distribution, and (ii) the amount the holder would have
received upon such final distribution, if the shares of Series F Preferred Stock
had been converted into shares of Common Stock pursuant to Section 3 of this
Article. If, upon any liquidation, dissolution or winding-up of the Corporation,
the assets of the Corporation, or proceeds thereof, distributable among the
holders of shares of the Series F Preferred Stock and any other class or series
of Preferred Stock ranking on a parity with the Series F Preferred Stock as to
payments upon liquidation, dissolution or winding-up shall be insufficient to
pay in full the preferential amount aforesaid, then such assets or the proceeds
thereof shall be distributed among such holders ratably in accordance with the
respective amounts which would be payable on such shares if all amounts payable
thereon were paid in full.
(b) For the purposes of this ▇▇▇▇▇▇▇ ▇, ▇▇▇▇ of the following shall be
deemed to be a voluntary or involuntary liquidation, dissolution or winding up
of the Corporation:
(i) the sale, lease, transfer or exchange of all or
substantially all of the assets of the Corporation; or
(ii) the consolidation or merger of the Corporation with one or
more other corporations (whether or not the Corporation is
the corporation surviving such consolidation or merger).
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51
Section 6. No Purchase, Retirement or Sinking Fund. The shares of the
Series F Preferred Stock shall not be subject to the operation of any purchase,
retirement or sinking fund.
Section 7. Status. Shares of the Series F Preferred Stock which have
been issued and reacquired in any manner by the Corporation (excluding, until
the Corporation elects to retire them, shares which are held as treasury shares,
but including shares redeemed and shares purchased and retired) shall, upon
compliance with any applicable provisions of the Indiana Business Corporation
Law, have the status of authorized and unissued shares of Preferred Stock and
may be reissued as a part of a new series of Preferred Stock to be established
by the Board of Directors or as part of any other series of Preferred Stock the
terms of which do not prohibit such reissue.
Section 8. Priority. The Common Stock and the Series E Preferred Stock
of the Corporation shall each rank junior to the Series F Preferred Stock as to
dividends and distribution of assets upon liquidation, dissolution or
winding-up.
Section 9. Relative Rights of Series F Preferred Stock. So long as any
of the Series F Preferred Stock is outstanding, the Corporation will not
declare, or pay, or set apart for payment, any dividends (other than dividends
or distributions payable in stock ranking junior to the Series F Preferred Stock
as to dividends or upon liquidation, dissolution or winding-up) or make any
distribution in cash or other property on any other class or series of stock of
the Corporation ranking junior to the Series F Preferred Stock either as to
dividends or upon liquidation, dissolution or winding-up, and will not redeem,
purchase or otherwise acquire any shares of any such junior class or series of
stock if at the time of making such declaration, payment or setting apart for
payment, distribution, redemption, purchase or acquisition the Corporation
shall be in default with respect to any dividend payable on any shares of Series
F Preferred Stock.
Section 10. Issuance of Additional Shares. Notwithstanding the
foregoing, the Board of Directors of the Corporation may authorize additional
shares of the Series F Preferred Stock and amend the Articles of Incorporation
without approval of the holders of the Series F Preferred Stock or any other
class of stock then outstanding, at any time and from time to time, solely for
the purpose of issuing such shares as in-kind dividends to the holders of shares
of Series F Preferred Stock pursuant to Section 2(b) hereof.
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Exhibit A-2
Form of Independent Accountant's Report
on Applying Agreed Upon Procedures
[Closing Date]
▇▇▇▇▇▇ ▇. ▇▇▇ Equity Fund IV, L.P.
c/o ▇▇▇▇▇▇ ▇. ▇▇▇ Company
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Dear Sirs:
We have audited the following financial statements of Conseco, Inc. and
subsidiaries (the "Company") which are incorporated by reference in the
registration statement (No. 333-83465) on Form S-3, as amended on September 30,
1999, and as supplemented by the prospectus supplement dated November xx, 1999
filed by the Company under the Securities Act of 1933, as amended (the "Act")
(our reports with respect thereto are also incorporated by reference in that
registration statement): the consolidated balance sheets of the Company as of
December 31, 1998 and 1997, and the related consolidated statements of
operations, shareholders' equity and cash flows for each of the three years in
the period ended December 31, 1998, and the related financial statement
schedules, all included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1998 except we did not audit the consolidated financial
statements of Conseco Finance Corp. ("Conseco Finance", formerly Green Tree
Financial Corporation prior to its name change in November 1999) and
subsidiaries as of and for the years ended December 31, 1997 and 1996, which
statements reflect total assets of 11 percent as of December 31, 1997 and total
revenues of 16 percent and 19 percent for the years ended December 31, 1997 and
1996, respectively, of the related consolidated financial statement totals
(those statements were audited by other auditors whose report has been furnished
to us, and our opinion, insofar as it relates to data included for Conseco
Finance, is based solely on the report of the other auditors). The prospectus
contained in such registration statement constitutes a combined prospectus that
also relates to $545,000,000 of unsold securities previously registered in the
Company's registration statement (No. 333-56611). The registration statement
including such combined prospectus, supplemented by the prospectus supplement
dated November xx, 1999, is herein referred to as the "Registration Statement."
We are independent certified public accountants with respect to the Company
within the meaning of the Act and the applicable published rules and regulations
thereunder adopted by the Securities and Exchange Commission (the "SEC").
53
We have not audited any consolidated financial statements of the Company as of
any date or for any period subsequent to December 31, 1998; although we have
conducted audits as of December 31, 1998 and 1997 and for each of the three
years in the period ended December 31, 1998, the purpose (and therefore the
scope) of the audits was to enable us to express our opinion on the consolidated
financial statements as of and for the periods indicated, but not on the
consolidated financial statements for any interim period within the periods
indicated. Therefore, we are unable to and do not express any opinion on: (i)
the unaudited consolidated balance sheet as of March 31, 1999, and the unaudited
consolidated statements of operations, shareholders' equity and cash flows for
the three-month periods ended March 31, 1999 and 1998, included in the Company's
quarterly report on Form 10-Q for the quarter ended March 31, 1999, incorporated
by reference in the Registration Statement; (ii) the unaudited consolidated
balance sheet as of June 30, 1999, and the unaudited consolidated statements of
operations, shareholders' equity and cash flows for the three and six-month
periods ended June 30, 1999 and 1998, included in the Company's quarterly report
on Form 10-Q for the quarter ended June 30, 1999, incorporated by reference in
the Registration Statement; (iii) the unaudited consolidated balance sheet as of
September 30, 1999, and the unaudited consolidated statements of operations,
shareholders' equity and cash flows for the three and nine-month periods ended
September 30, 1999 and 1998, included in the Company's quarterly report on Form
10-Q for the quarter ended September 30, 1999, incorporated by reference in the
Registration Statement; or (iv) the financial position, results of operations or
cash flows as of any date or for any period subsequent to December 31, 1998.
1. At your request, we have read the 1999 minutes of the meetings of the
shareholders, Board of Directors, Executive Committee, Investment
Committee, and Audit Committee of the Company as set forth in the
minute books through November xx, 1999, officials of the Company having
advised us that the minutes of all such meetings through that date were
set forth therein. We also have carried out the following procedures:
a. With respect to the three-month periods ended March 31, 1999 and
1998; the three and six-month periods ended June 30, 1999 and
1998; and the three and nine-month periods ended September 30,
1999 and 1998; we have -
(i) Performed the procedures (completed November 14, 1999
with respect to the September 30, 1999 periods;
completed August 13, 1999 with respect to the June 30,
1999 periods; completed May 14, 1999 with respect to
the March 31, 1999 periods) specified by the American
Institute of Certified Public Accountants for a review
of interim financial information as described in SAS
No. 71, Interim Financial Information, on the unaudited
consolidated financial statements included in the
Company's quarterly reports on Form 10-Q for the
quarters ended March 31, 1999, June 30, 1999, and
September 30, 1999.
(ii) Inquired of certain officials of the Company who have
responsibility for financial and accounting matters
whether the unaudited consolidated financial statements
referred to in 1.a.(I) comply as to form in all
material respects with the applicable accounting
requirements of the Act and the Exchange Act as it
applies to the Form 10-Q and the related rules and
regulations, adopted by the SEC, thereunder. Those
officials stated that the unaudited
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consolidated financial statements referred to in
1.a.(I) comply as to form in all material respects with
the applicable accounting requirements of the Act and
the Exchange Act as it applies to the Form 10-Q and the
related rules and regulations, adopted by the SEC,
thereunder.
b. With respect to the period from October 1, 1999 to November xx,
1999, we have not read any unaudited consolidated financial
statements of the Company, as officials of the Company have
advised us that no such consolidated financial statements as of
any date or for any period subsequent to September 30, 1999 were
available.
2. As mentioned in 1.b., Company officials have advised us that no
consolidated financial statements of the Company as of any date or for
any period subsequent to September 30, 1999, are available;
accordingly, the procedures carried out by us with respect to changes
in consolidated financial statement items after September 30, 1999
have, of necessity, been even more limited than those with respect to
the periods referred to in 1.a. We have inquired of certain Company
officials who have responsibility for financial and accounting matters
whether (a) at November xx, 1999, there was any increase in
consolidated long- term debt, or any decrease in consolidated total
assets or shareholders' equity as compared with amounts shown on the
Company's September 30, 1999 unaudited consolidated balance sheet
incorporated by reference in the Registration Statement, or (b) for the
period from October 1, 1999 to November xx, 1999, there was any
decrease, as compared with the corresponding period in the preceding
year, in the total amounts of consolidated revenues excluding net
investment gains, net income, earnings applicable to common stock or
net income per diluted common share. On the basis of these inquiries
and our reading of the minutes, as described in 1. above, the items
summarized in the following three paragraphs were noted.
In October 1999, the Company issued $450.0 million of 8.5 percent notes
due 2002 and $550.0 million of 9.0 percent notes due 2006. The
officials referred to above stated that the net proceeds from the sale
of the notes were used to repay other outstanding consolidated notes
payable.
On September 8, 1999, the Company announced that they would no longer
structure the securitizations of loans that they originate in a manner
that results in gain-on-sale revenues. As disclosed in the Company's
September 30, 1999 unaudited consolidated financial statements, and as
stated by the Company officials referred to above, the Company's
reported earnings and revenues under the portfolio method used for
future securitizations will be lower in the period each loan is
securitized compared to the method previously used. Accordingly, the
officials referred to above stated that for the period from October 1,
1999 to November xx, 1999, there was a decrease, as compared with the
corresponding period in the preceding year, in the total amounts of
consolidated revenues excluding net investment gains, net income,
earnings applicable to common stock and net income per diluted common
share.
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The officials referred to the above stated that at November xx, 1999,
there was no decrease in consolidated total assets or shareholders'
equity as compared with amounts shown on the Company's September 30,
1999 unaudited consolidated balance sheet.
3. Our audits of the consolidated financial statements for the periods
referred to in the introductory paragraph of this letter comprised
audit tests and procedures deemed necessary for the purpose of
expressing an opinion on such financial statements taken as a whole.
For none of the periods referred to therein, or any other period, did
we perform audit tests for the purpose of expressing an opinion on
individual balances of accounts or summaries of selected transactions
such as those items marked on the attached copies of the documents
incorporated by reference in the Registration Statement, and
accordingly, we express no opinion thereon.
4. However, at your request, we have also read the items identified by you
on the attached documents incorporated by reference in the Registration
Statement, and have performed the following procedures, which were
applied as indicated with respect to the letters and symbols explained
below:
(A) We compared the amount (or percentage, as applicable) to a
schedule or report prepared by Company management utilizing
data obtained or derived from the Company's accounting records
and found the amount, as rounded, to be in agreement. With
respect to the data included in the schedule or report which
was obtained or derived from the underlying accounting
records, we compared the data to such records and found such
data to be in agreement. Where applicable, we recomputed the
amount (or percentage, as applicable) and found such amount
(or percentage, as applicable) to be mathematically correct.
(B) We compared the amount, as rounded, to a schedule prepared by
Company management utilizing amounts obtained or derived from
the unaudited statutory- basis financial statements or
Convention Blank Statements of the Company's life insurance
subsidiaries and found such amount to be in agreement. We
compared the amounts included in the schedule (as appropriate)
to the unaudited statutory- basis financial statements or
Convention Blank Statements and found them to be in agreement.
(C) We compared the amount, as rounded, to the unaudited
consolidated financial statements included in the Company's
Form 10-Q for the quarters ended September 30, 1999 and 1998,
June 30, 1999 and 1998, and March 31, 1999 and 1998, and found
such amount to be in agreement, as rounded.
(D) We compared the amount (or percentage, as applicable), as
rounded, to the corresponding amount included in the Company's
audited consolidated financial statements (including
accompanying notes) or audited financial statement schedules
for the periods indicated and found such amount to be in
agreement. Certain share and per-share amounts from prior
periods were restated to reflect the two-for-one stock splits
on February 11, 1997 and April 1, 1996.
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56
(E) We compared operating earnings and operating earnings per
diluted common share to corresponding amounts shown on a
schedule prepared by Company management utilizing data
obtained or derived from the Company's accounting records and
found them to be in agreement after giving effect to rounding
and derived in a manner consistent with the descriptions
summarized in the paragraph which follows. In the case of
Conseco Finance, we agreed amounts used in the calculation to
the Form 10-K of Conseco Finance for the year ended December
31, 1997.
The Company computes operating earnings as income before
extraordinary charge, excluding net investment gains (losses)
(less that portion of change in future policy benefits,
amortization of cost of policies purchased and cost of
policies produced and income taxes relating to such gains
(losses)) and nonrecurring and impairment charges (net of
income taxes). The Company computed operating earnings per
diluted common share by dividing operating earnings by average
diluted shares outstanding. We make no comments regarding the
Company's method of computation.
(F) We compared book value per common share outstanding, book
value per common share outstanding excluding unrealized
appreciation (depreciation) of fixed maturity securities, and
book value per common share outstanding excluding accumulated
other comprehensive income (loss) to a schedule prepared by
Company management utilizing amounts obtained or derived from
accounting records of the Company and found such amount to be
derived in a manner consistent with the descriptions
summarized in the paragraph which follows. In the case of
Conseco Finance, we agreed amounts used in the calculation to
the Form 10-K of Conseco Finance for the year ended December
31, 1997.
The Company computed book value per common share outstanding
at period end by dividing common shareholders' equity by
shares outstanding at period end. The Company computed book
value per common share outstanding, excluding unrealized
appreciation (depreciation) of fixed maturity securities by
dividing common shareholders' equity excluding unrealized
appreciation (depreciation) of fixed maturity securities by
shares outstanding at period end. The Company computed book
value per common share outstanding, excluding accumulated
other comprehensive income (loss) by dividing common
shareholders' equity excluding accumulated other comprehensive
income (loss) by shares outstanding at period end. We make no
comments regarding the Company's method of computation.
(G) With respect to the rating agency ratios, we compared the
ratio of debt to total capital and the ratio of debt and
Company-obligated mandatorily redeemable preferred securities
of subsidiary trusts to total capital to a schedule prepared
by Company management utilizing amounts obtained or derived
from accounting records of the Company and found such amount
to be derived in a manner consistent with the descriptions
summarized in the paragraph which follows. In the case of
Conseco Finance, we agreed amounts used in the calculation to
the Form 10-K of Conseco Finance for the year ended December
31, 1997.
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57
The Company computed the ratio of debt to total capital by
dividing the sum of notes payable and commercial paper (which
are reduced by cash and investments held by non-life companies
other than finance companies and which exclude debt of the
finance segment used to fund finance receivables) by the sum
of notes payable and commercial paper (which are reduced by
cash and investments held by non-life companies other than
finance companies and which exclude debt of the finance
segment used to fund finance receivables), Company-obligated
mandatorily redeemable preferred securities of subsidiary
trusts, minority interest in the common and preferred stock of
consolidated subsidiaries and shareholders' equity excluding
accumulated other comprehensive income (loss). The Company
computed the ratio of debt and Company-obligated mandatorily
redeemable preferred securities of subsidiary trusts to total
capital by dividing the sum of the par value of notes payable
and commercial paper (which are reduced by cash and
investments held by non-life companies other than finance
companies and which exclude debt of the finance segment used
to fund finance receivables) and the liquidation value of
Company-obligated mandatorily redeemable preferred securities
of subsidiary trusts (which is reduced by the assumed purchase
of common stock under purchase contracts and amounts related
to Redeemable Hybrid Income Overnight Shares ("RHINOS")), by
the sum of the par value of notes payable and commercial paper
(which are reduced by cash and investments held by non-life
companies other than finance companies and which exclude debt
of the finance segment used to fund finance receivables), the
liquidation value of Company-obligated mandatorily redeemable
preferred securities of subsidiary trusts (which is reduced by
the assumed purchase of common stock under purchase contracts
and amounts related to RHINOS), minority interest in the
common and preferred stock of consolidated subsidiaries, the
value associated with the assumed purchase of common stock
under purchase contracts, the value associated with the
assumed issuance of $250 million of common stock (beginning
September 30, 1999) and shareholders' equity excluding
accumulated other comprehensive income (loss). We make no
comments regarding the Company's method of computation.
(H) We compared the amount (or percentage, as applicable) to a
schedule or report prepared by Company management utilizing
data obtained or derived from a combination of the Company's
accounting records and the Form 10-K of Conseco Finance for
the year ended December 31, 1997 or the Form 10-Q of Conseco
Finance for the quarterly period ended March 31, 1998. With
respect to the data included in the schedule or report which
was obtained or derived from the underlying accounting records
of the Company, we compared the data to such records and found
such data to be in agreement. Where applicable, we recomputed
the amount (or percentage, as applicable) and found such
amount (or percentage, as applicable) to be mathematically
correct.
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R/C Recomputed from information provided in the documents
incorporated by reference in the Registration Statement and
found such amount or percentage, as applicable, to be
mathematically correct (with rounding).
T/B We compared the amount to or derived the amount from a trial
balance prepared by the Company management and found it to be
in agreement (with rounding).
ff We summarized the appropriate items into sub-totals and totals
or cross-footed amounts and found them to be mathematically
correct.
5. It should be understood that we have no responsibility for establishing
(and did not establish) the scope and nature of the procedures
enumerated in paragraphs 1 through 4 above; rather, the procedures
enumerated therein are those the requesting party asked us to perform.
Accordingly we make no representations regarding questions of legal
interpretation or regarding the sufficiency for your purposes of the
procedures enumerated in paragraph 4. above; also, such procedures
would not necessarily reveal any material misstatement of the amounts
or percentages addressed in paragraph 4. above. Further, we have
addressed ourselves solely to the foregoing data as set forth in the
Registration Statement and documents incorporated by reference therein
and make no representations regarding the adequacy of disclosure or
regarding whether any material facts have been omitted. This letter
relates only to the financial statement items specified above and does
not extend to any financial statements of the Company taken as a whole.
6. The foregoing procedures do not constitute an audit conducted in
accordance with generally accepted auditing standards. Had we performed
additional procedures other matters might have come to our attention
that would have been reported to you.
7. These procedures should not be taken to supplant any additional
inquires or procedures that you would undertake in your consideration
of the proposed offering.
8. This letter is solely for your information, and to assist you in
conducting and documenting your investigation of the affairs of the
Company, and it is not to be used, circulated, quoted, or otherwise
referred to for any other purpose, including but not limited to the
registration, purchase, or sale of securities, nor is it to be filed
with or referred to in whole or in part in the Registration Statement
or any other document, except that reference may be made to it in any
list of closing documents pertaining to the offering of the securities
covered by the Registration Statement.
9. We have no responsibility to update this letter for events and
circumstances occurring after November xx, 1999.
Very truly yours,
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