As filed with the Securities and Exchange Commission on April 11, 1994
Registration No. 33-
============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------
FORM S-3
Registration Statement
Under
The Securities Act of 1993
----------
CONSECO L.L.C. CONSECO, INC.
(exact name of Registrant (exact name of Registrant as specified
as specified in its charter) in its charter)
Delaware Indiana
(State or other jurisdiction of (State or other jurisdiction of
incorporation or organization) incorporation or organization)
51-0353763 35-1468632
(I.R.S Employer Identification No.) (I.R.S. Employer Identification No.)
c/o Lawrence W. Inlow Lawrence W. Inlow
Executive Vice President, Executive Vice President,
General Counsel and Secretary General Counsel and Secretary
Conseco, Inc. Conseco, Inc.
11825 N. Pennsylvania Street 11825 N. Pennsylvania Street
Carmel, IN 46032 Carmel, IN 46032
(317) 573-6100 (317) 573-6100
(Address, including zip code, and (Address, including zip code, and
telephone number, including area telephone number, including area
code, of code, of
Registrant's principal executive Registrant's principal executive
offices and agent for service) offices and agent for service)
-------------------
Copies to:
Paul R. Wysocki Michael Groll
Sidley & Austin John M. Schwolsky
875 Third Avenue LeBoeuf, Lamb, Greene & MacRae
New York, New York 10022 125 West 55th Street
New York, New York 10019
Approximate date of commencement of the proposed sale of the
securities to the public: From time to time as determined by market
conditions after this Registration Statement becomes effective.
-------------------
If the only securities being registered on this Form are being
offered pursuant to dividend or interest reinvestment plans, please check
the following box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [ x ]
-------------------
CALCULATION OF REGISTRATION FEE
============================================================================
<TABLE>
<CAPTION>
Proposed Proposed
Maximum Maximum
Title of Each Class of Amount to be Offering Price Aggregate Amount of
Securities to be registered Registered per Unit (1) Offering Price(1) Registration Fee
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Conseco, Inc. Debt Securities (2):
Conseco, Inc. Preferred Stock; Conseco L.L.C. (3) (3) $200,000,000 $68,966(3)
Cumulative Preferred Shares; Conseco, Inc. Guarantee
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) In United States dollars or the equivalent thereof (based on the
applicable exchange rate at the time of sale), if Conseco, Inc. Debt
Securities are issued with principal amounts denominated in one or more
foreign or composite currencies as shall be designated by Conseco, Inc.
Such amount represents the maximum aggregate offering price to the public
of the securities offered hereby. No separate consideration will be
received for any Conseco, Inc. Guarantee.
(2) Includes subordinated debentures which may be issued by Conseco, Inc. to
evidence the loan by Conseco L.L.C. to Conseco, Inc. of any proceeds from
(i) the offer and sale of the Conseco L.L.C. Cumulative Preferred Shares
and
(ii) other capital contributions to Conseco, L.L.C. No separate
consideration will be received for the subordinated debentures.
(3) The aggregate amount to be registered and the aggregate offering price per
unit have been omitted pursuant to Securities Act Release No. 6964. The
Registration Fee has been calculated in accordance with Rule 457(o) under
the Securities Act of 1933, as amended.
</TABLE>
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THE REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
============================================================================
<PAGE>
<PAGE> S-1
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SUPPLEMENT SHALL NOT CONSTITUTE AN OFFER TO SELL
OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY SUCH STATE.
SUBJECT TO COMPLETION DATED APRIL 11, 1994
PROSPECTUS SUPPLEMENT
(To Prospectus dated ________, 1994)
__________ Shares
Conseco L.L.C.
% Series A Cumulative Preferred Shares
(liquidation preference $25 per Series A Preferred Share)
guaranteed to the extent set forth herein by
Conseco, Inc.
The ___% Series A Cumulative Preferred Shares (the "Series A Preferred
Shares"), representing the preferred limited liability company interests
offered hereby are being issued by Conseco L.L.C., a limited liability company
formed under the laws of the State of Delaware (the "Company"). The Company,
a wholly owned subsidiary of Conseco, Inc., an Indiana corporation ("Conseco"),
was formed by Conseco solely to issue Preferred Shares and Common Shares (each
as defined herein) and to loan the proceeds thereof to Conseco. Accordingly,
the proceeds from the sale of Series A Preferred Shares, together with capital
contributions made in respect of Common Shares, will be loaned by the Company
to Conseco in exchange for subordinated debentures of Conseco (the "Series A
Subordinated Debentures") having the terms described herein. Interest and
principal payments on the Series A Subordinated Debentures are intended to fund
the payment of periodic distributions ("dividends") and redemption and
liquidation distributions on the Series A Preferred Shares and the Common
Shares. See "Description of Series A Subordinated Debentures."
The payment of dividends, if and to the extent declared out of moneys held
by the Company and legally available therefor, and payments on liquidation or
redemption with respect to the Series A Preferred Shares, are guaranteed to the
limited extent described herein by a guarantee (the "Guarantee") of Conseco.
See "Description of the Guarantee."
The Series A Preferred Shares will entitle holders to receive cumulative
preferential cash dividends, at an annual rate of ____% of the liquidation
preference of $25 per share, accumulating from the date of original issuance
and payable monthly in arrears on the last day of each calendar month of each
year, commencing ____________, 1994. No dividends received by a holder of
Series A Preferred Shares will be eligible for the dividends received deduction
for U.S. federal income tax purposes.
The Series A Preferred Shares are redeemable, at the option of the Company
(with Conseco's consent as borrower under the Series A Subordinated
Debentures), in whole or in part, at any time on or after __________, 1999 and
will be redeemed, under certain circumstances, from the proceeds of any cash
repayment or permitted prepayment by Conseco of the Series A Subordinated
Debentures, in each case at a cash redemption price of $25 per Series A
Preferred Share, plus accumulated and unpaid dividends
<PAGE>
<PAGE> S-2
(whether or not declared) to the redemption date (the "Redemption Price"). See
"Terms of the Series A Preferred Shares - Mandatory Redemption Upon Repayment
of Series A Subordinated Debentures at Maturity." In addition, at the option
of the Company, following the occurrence of a Tax Event (as defined herein),
the Series A Preferred Shares are exchangeable in whole (but not in part), for
Series A Subordinated Debentures having an aggregate principal amount equal to
$25 per Series A Preferred Share so exchanged and accrued and unpaid interest
equal to accumulated and unpaid dividends (whether or not declared) on the
Series A Preferred Shares so exchanged and, in certain circumstances, the
Series A Preferred Shares are redeemable in whole (but not in part) for cash
at the Redemption Price. If the Series A Preferred Shares are exchanged for
Series A Subordinated Debentures, Conseco has agreed to use its best efforts
to have the Series A Subordinated Debentures listed on the same exchange, if
any, on which the Series A Preferred Shares are listed. See "Terms of the
Series A Preferred Shares - Optional Redemption."
In the event of the liquidation of the Company, holders of Series A
Preferred Shares will be entitled to receive for each Series A Preferred Share
a liquidation preference of $25 plus accumulated and unpaid dividends
(whether or not declared) to the date of payment, subject to certain
limitations. See "Terms of the Series A Preferred Shares - Liquidation
Distribution."
Application will be made to list the Series A Preferred Shares on the New
York Stock Exchange.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Price to Underwriting Proceeds to
Public (1) Discount (2) Company (1)(3)(4)
<S> <C> <C> <C>
Per Share . . . . . . . . $25.00 (3) $25.00
Total (5) . . . . . . . . (3)
<FN>
(1) Plus accumulated dividends, if any, from the date of issue.
(2) The Company and Conseco have agreed to indemnify the several Underwriters
against certain liabilities, including liabilities under the Securities
Act of 1933, as amended. See "Underwriting."
(3) In view of the fact that the proceeds of the sale of the Series A
Preferred Shares will ultimately be loaned to Conseco, Conseco has agreed
to pay the Underwriters as compensation ("Underwriters' Compensation")
for their services under the Purchase Agreement $___ per Series A
Preferred Share (or $____ in the aggregate); provided that such
compensation will be $____ per Series A Preferred Share sold to
certain institutions. Therefore, to the extent that Series A Preferred
Shares are sold to such institutions, the actual amount of Underwriters'
Compensation will be less than the amount specified in the preceding
sentence. See "Underwriting."
(4) Expenses related to the Offering, estimated at $____, will be paid
by Conseco.
(5) The Company has granted to the several Underwriters an option exercisable
within 30 days after the date of this Prospectus Supplement to purchase
up to _______ additional Series A Preferred Shares, on the same terms
as set forth above, to cover over-allotments, if any. If such option is
exercised in full, the total Price to Public, Underwriting Discount
(payable by Conseco) and Proceeds to Company will each be $_________,
$___________ and $_____________, respectively. See "Underwriting."
</TABLE>
The Series A Preferred Shares are being offered by the several
Underwriters, subject to prior sale, when, as and if issued to and accepted by
them, and subject to the approval of certain legal matters by counsel for the
Underwriters and certain other conditions. The Underwriters reserve the right
to withdraw, cancel or modify such offer and to reject orders, in whole or in
part. Delivery of the Series A Preferred Shares will be made only in book-
entry form through the facilities of The Depository Trust Company on or about
_______________, 1994.
Merrill Lynch & Co. Dean Witter Reynolds Inc.
The date of this Prospectus Supplement is ______________, 1994.<PAGE>
<PAGE> S-3
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
SERIES A PREFERRED SHARES OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT
OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED
ON THE NEW YORK STOCK EXCHANGE, THE OVER-THE-COUNTER MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
FOR NORTH CAROLINA PURCHASERS: THESE SECURITIES HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE COMMISSIONER OF INSURANCE FOR THE STATE OF
NORTH CAROLINA, NOR HAS THE COMMISSIONER OF INSURANCE RULED UPON THE
ACCURACY OR ADEQUACY OF THIS DOCUMENT.
<PAGE>
<PAGE> S-4
PROSPECTUS SUPPLEMENT SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and consolidated financial
statements, including notes thereto, included elsewhere in this Prospectus
Supplement or the Prospectus or incorporated herein by reference. Except as
otherwise indicated, the information in this Prospectus Supplement assumes that
the Underwriters do not exercise their over-allotment option. All information
in this Prospectus Supplement is presented in accordance with generally
accepted accounting principles ("GAAP"), unless otherwise specified.
The Company and Conseco
The Company, a wholly owned special purpose subsidiary of Conseco, was
formed by Conseco solely to issue Preferred Shares and Common Shares and to
loan the proceeds thereof to Conseco.
Conseco is a specialized financial services holding company which
primarily makes controlling strategic investments in insurance companies and
related businesses, manages the operations of those businesses to increase
their value, provides services to acquired companies and other businesses, and
seeks to realize the increase in value that its management brings to such
companies through sale or restructuring. The insurance companies in which
Conseco has made investments develop, market, issue and administer primarily
annuity, individual health insurance and life insurance products. Conseco
provides administrative, data processing and investment management services to
affiliated and nonaffiliated companies. Conseco's operating strategy is to
consolidate and streamline the administrative functions of the acquired
companies, to improve their investment yields through active asset management
by a centralized investment operation and to eliminate their unprofitable
products and distribution channels.
The Offering
Shares Offered. . . . . _____________ shares of ___________% Series A
Cumulative Preferred Shares.
Issuer. . . . . . . . . Conseco L.L.C., a special purpose limited liability
company formed under the laws of the State of
Delaware and a wholly owned subsidiary of Conseco.
Guarantor . . . . . . . Conseco, Inc.
Liquidation Preference. $25 per Series A Preferred Share, plus accumulated and
unpaid dividends.
Dividends . . . . . . . Cumulative at the annual rate of ______% of the stated
liquidation preference per Series A Preferred
Share, payable monthly in arrears on the last day
of each calendar month, commencing ______, 1994.
<PAGE>
<PAGE> S-5
Listing . . . . . . . . Application will be made to list the Series A Preferred
Shares on the New York Stock Exchange.
Voting Rights . . . . . Except under certain limited circumstances described
herein, the holders of the Series A Preferred
Shares will not be entitled to vote.
Redemption. . . . . . . Not redeemable prior to __________, 1999 (except under
certain limited circumstances described herein
under the description "Terms of the Series A
Preferred Shares - Optional Redemption").
Thereafter, redeemable at the option of the Company
at any time, or mandatorily in the event of a
prepayment by Conseco of the Series A Subordinated
Debentures, and in any event, upon maturity of the
Series A Subordinated Debentures on ___________,
2034, at $25 per share plus accumulated and unpaid
dividends (whether or not declared). See "Terms
of the Series A Preferred Shares."
Exchange for Series A
Subordinated
Debentures. . . . . . Upon the occurrence of a Tax Event (as defined herein)
and upon not less than thirty nor more than sixty
days' notice, Conseco may cause the Company to
redeem the Series A Preferred Shares in exchange
for Series A Subordinated Debentures. See "Terms
of the Series A Preferred Shares - Optional
Redemption" and "Description of the Series A
Subordinated Debentures."
Use of Proceeds . . . . All proceeds will be loaned by the Company to Conseco
in exchange for Series A Subordinated Debentures
to finance the business operations of Conseco. See
"Use of Proceeds."
Payment and Guarantee
Agreement Obligations. Under the Guarantee, Conseco irrevocably and
unconditionally guarantees the Company's payment
of: (i) all legally declared and unpaid dividends,
(ii) all redemption payments to the extent of funds
legally available therefor and (iii) in the event
of liquidation, the lesser of (a) the liquidation
preference plus accumulated and unpaid dividends
and (b) assets of the Company legally available in
liquidation to holders of Series A Preferred
Shares. The Guarantee will rank pari passu with
the Series A Subordinated Debentures
and, accordingly, will be subordinate and junior
in right of payment to all Senior Indebtedness (as
defined herein). Conseco's obligations under the
Guarantee may be satisfied by direct payment of the
required amounts by Conseco to the holders of
Series A Preferred Shares or by causing the Company
to pay such amounts to holders. See "Description
of the Guarantee."
<PAGE>
<PAGE> S-6
Series A Subordinated
Debentures . . . . . . Under the Series A Subordinated Debentures, Conseco is
obligated to pay (i) interest at ____% per annum,
which will be in an amount and at times sufficient
to permit timely and full payment of all dividends
on Series A Preferred Shares (subject to certain
rights of extension described under "Description
of the Series A Subordinated Debentures -
Interest"), and (ii) principal in amounts and at
times sufficient to permit timely and full payment
of all amounts payable by the Company to holders
of Series A Preferred Shares on account of
mandatory or optional redemptions of Series A
Preferred Shares or dissolution, wind-up or
liquidation of the Company. The Series A
Subordinated Debentures are subordinate to and
junior in right of payment to all Senior
Indebtedness. See "Description of the Series A
Subordinated Debentures."
Related Guarantee and
Subordinated Indenture
Covenants. . . . . . . Under the Payment and Guarantee Agreement and the
Subordinated Indenture, Conseco covenants, among
other things, (i) to maintain ownership, directly
or indirectly, of all of the Common Shares and
Preferred Shares of the Company other than the
Series A Preferred Shares, (ii) not to voluntarily
dissolve, wind-up or liquidate the Company
so long as the Series A Subordinated Debentures
(and any Series A Preferred Shares) are outstanding
and (iii) to remain as Managing Member (as defined
below) of the Company and timely perform its duties
as Managing Member. See "Description of Series A
Subordinated Debentures - Covenants" and
"Description of the Guarantee - Certain Covenants
of Conseco."
Certain Investment
Considerations. . . . Prospective purchasers of Series A Preferred Shares
should carefully review the information contained
elsewhere in this Prospectus Supplement and should
particularly consider the following matters:
Conseco's obligations under the Guarantee are pari
passu with the Series A Subordinated Debentures,
and the Series A Subordinated Debentures are
subordinate and junior in right of payment to
Senior Indebtedness. See "Description of the
Guarantee."
Conseco has the right under the Subordinated
Indenture to extend interest payment periods for
up to 60 months, and, as a consequence, monthly
dividends on the Series A <PAGE>
<PAGE> S-7
Preferred Shares can be deferred (but will
continue to accumulate) by the Company during any
such extended interest payment period. In the
event that Conseco exercises this right, Conseco
may not declare dividends on any share of its
preferred or common stock, and therefore, the
Company and Conseco believe the extension of a
payment period is unlikely. See "Description of
the Series A Subordinated Debentures - Interest."
Should an extended interest payment period occur,
the Company will continue to accrue income for U.S.
federal income tax purposes, a portion of which
will be allocated to record holders of Series A
Preferred Shares. As a result, such holders will
include interest in gross income for U.S. federal
income tax purposes in advance of the receipt of
cash, and any such holders who dispose of
Series A Preferred Shares prior to the record date
for payment of dividends following such period will
also include interest in gross income but will not
receive cash related thereto. See "Certain Tax
Matters - Potential Extension of Interest Payment
Period."
Conseco has become aware that the Department of
Treasury is studying the federal income tax
treatment of certain long-term corporate
obligations, including long-term corporate
obligations issued to limited liability companies.
While the outcome of this review is uncertain, in
the event of any change in U.S. law or regulation,
or interpretation thereof, and if, as a result of
such change, there exists more than an
insubstantial risk that (i) Conseco will be
precluded from deducting the interest on the Series
A Subordinated Debentures for federal income tax
purposes or (ii) the Company will be subject to
federal income tax with respect to the interest
received on the Series A Subordinated Debentures
or more than a de minimis amount of other taxes,
duties or other governmental charges, the Series
A Preferred Shares would be subject to redemption
or exchange at the option of the Company. See
"Terms of the Series A Preferred Shares - Optional
Redemption."
<PAGE>
<PAGE> S-8
CONSECO L.L.C.
The Company is a limited liability company formed under the laws of the
State of Delaware. Conseco owns, directly and indirectly, all of the
outstanding common limited liability interests ("Common Shares") of the
Company, which Common Shares are nontransferable. The Company was formed by
Conseco solely to issue preferred limited liability company interests
("Preferred Shares") and Common Shares (the Preferred Shares together with the
Common Shares, the "Membership Shares") and to loan the proceeds thereof to
Conseco in exchange for subordinated debentures (the "Subordinated
Debentures"). Interest and principal on the Subordinated Debentures are
intended to fund the payment of dividends and redemption and liquidation
distributions on the Membership Shares. Accordingly, the Company's sole source
of cash flow is Conseco and the Company's ability to make dividend and other
payments in respect of the Series A Preferred Shares will be dependent on
interest and principal payments by Conseco on the Series A Subordinated
Debentures. The Company will be managed by Conseco (in such capacity, the
"Managing Member"). The Company's registered office is located at 1209 Orange
Street, Wilmington, Delaware 19801. Its telephone number is (302) 658-7581.
The Company is a separate legal entity under the laws of the State of
Delaware and is distinct from its owners, who are known as "members." A
Delaware limited liability company is similar to a Delaware corporation in
providing limited liability to its members in a manner similar to that provided
to stockholders of a Delaware corporation. Therefore, unless expressly
provided in a limited liability company agreement or otherwise agreed, under
Delaware law no general liability exists for members or managers of a Delaware
limited liability company. The limited liability company agreement of the
Company (the "L.L.C. Agreement") provides that members who hold Common Shares
will have general liability for the debts and obligations of the Company in the
same manner as a general partner of a Delaware limited partnership. Under
Delaware law, members who hold Series A Preferred Shares will not be liable for
the debts, obligations and liabilities of the Company, whether arising in
contract, tort or otherwise, solely by reason of being a member of the Company.
A Delaware limited liability company may be managed by its members or by
a manager. The Company is managed by Conseco in its capacity as a holder of
Common Shares and exists for the sole purpose of issuing its limited liability
company interests and loaning the proceeds thereof to Conseco and/or its
subsidiaries. Conseco and one of its wholly owned subsidiaries are the holders
of the Common Shares. The rights of holders of the Series A Preferred Shares,
including economic rights, rights to information and voting rights, are set
forth in the L.L.C. Agreement and the Delaware Limited Liability Company Act.
See "Terms of the Series A Preferred Shares."
USE OF PROCEEDS
All of the proceeds from the sale of the Series A Preferred Shares offered
hereby as set forth on the cover page of this Prospectus Supplement will be
loaned by the Company to Conseco in exchange for Series A Subordinated
Debentures to finance the business operations of Conseco. Conseco will use the
proceeds from the loan for general corporate purposes other than to make
investments in, or to satisfy any funding commitment of Conseco or any of its
affiliates with respect to, Conseco Capital Partners II, L.P.
<PAGE>
<PAGE> S-9
CAPITALIZATION
The following table sets forth the capitalization of Conseco as of
December 31, 1993 and as adjusted to reflect the sale by the Company of the
Series A Preferred Shares offered hereby and the application of the proceeds
therefrom as described under "Use of Proceeds" herein.
<TABLE>
<CAPTION>
Actual Pro Forma(1) As Adjusted(2)
------ ----------- --------------
(Dollars in millions)
<S> <C> <C>
Long-Term Debt (3):
Notes payable..................................................... $413.0 $214.9
Notes payable of Bankers Life Holding Corporation ("BLHC"),
not direct obligations of Conseco............................... 290.3 290.3
Minority interests.................................................. 223.8 223.8
Shareholders' Equity:
Preferred stock................................................... 287.5 287.5
Common stock, no par value, and additional paid-in capital
(500,000,000 shares authorized, 25,311,773 shares
outstanding)...................................................... 102.8 102.8
Unrealized appreciation of securities (net of applicable de-
ferred income taxes: Actual - $41.8; Pro Forma and As
Adjusted - $22.6).............................................. 97.5 73.8
Retained earnings................................................. 654.8 703.3
-------- --------
Total Shareholders' Equity...................................... 1,142.6 1,167.4
------- --------
Total Capitalization............................................ $2,069.7 $1,896.4
======== ========
<FN>
- --------------
(1) Presented on a pro forma basis as if the Western National Corporation
initial public offering and related transactions had occurred as of
December 31, 1993.
(2) Adjusted to reflect the sale of _______ Series A Preferred Shares
pursuant to the offering made hereby, net of estimated Underwriters'
Compensation and offering expenses, and application of the net proceeds
from such sale.
(3) For information concerning the terms and maturities of the long-term debt,
see Note 8 to the Consolidated Financial Statements of Conseco included in
its Annual Report on Form 10-K for the fiscal year ended December 31, 1993,
which is incorporated herein by reference.
/TABLE
<PAGE>
<PAGE> S-10
SELECTED CONSOLIDATED FINANCIAL INFORMATION
Reference is made to Conseco's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993, which is incorporated by reference in the
Prospectus and which contains Conseco's audited consolidated financial
statements, including the consolidated statement of income for the three fiscal
years in the period ended December 31, 1993, consolidated balance sheets as of
December 31, 1992 and 1993, and the related notes.
<TABLE>
<CAPTION>
Years Ended December 31, December 31, 1993
----------------------------------------- --------------------------
1989 1990 1991 1992 As Reported Proforma (5)
---- ---- ---- ---- ----------- ------------
(Amounts in millions, except per share amounts and ratios)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA (1)
Revenues:
Insurance policy income $ 198.9 $ 152.8 $ 280.8 $ 378.7 $ 1,293.8 $1,273.0
Investment activity:
Net investment income 417.7 581.7 921.4 888.6 896.2 289.9
Net trading income 14.3 6.0 50.7 35.9 93.1 43.7
Net realized gains 22.9 4.5 123.3 124.3 149.5 59.1
Total revenues 662.7 753.3 1,391.8 1,523.9 2,636.9 1,803.0
Income before income taxes 70.2 65.3 223.2 330.0 610.2 344.1
Income from continuing operations, before
extraordinary charge 47.2 41.7 121.0 174.8 308.9 172.6
Earnings excluding realized investment
gains and extraordinary charge (2) 32.1 39.0 84.0 162.7 301.9
Net income 47.2 41.7 116.0 169.5 297.0
Preferred dividends 8.3 5.6 6.8 5.5 20.6
Earnings applicable to common stock 38.9 36.1 109.2 164.0 276.4
PER SHARE DATA
Net income, primary $1.75 $1.37 $4.10 $5.43 $9.45
Net income, fully diluted 1.26 1.36 4.02 5.40 8.77
Income from continuing operations, before
extraordinary charge, fully diluted 1.26 1.36 4.22 5.56 9.12
Earnings excluding realized investment
gains and extraordinary charge, fully diluted (2) 0.81 1.25 2.89 5.18 8.92
Dividends declared per common share 0.05 0.055 0.07 0.085 0.30
Shares outstanding 25.2 20.6 24.7 24.9 25.3
Average fully diluted shares outstanding 33.1 25.4 25.4 29.6 33.5
BALANCE SHEET DATA (1)
Invested assets $4,700.7 $7,339.8 $10,426.9 $9,450.0 $11,689.1 $4,317.7
Total assets 5,267.1 8,371.1 11,832.4 11,772.7 13,749.3 6,020.1
Long-term debt for which Conseco is
directly liable 300.3 268.9 177.6 163.2 413.0 214.9
Notes payable of the CCP Companies, not
direct obligations of Conseco -- 258.1 319.3 -- -- --
Notes payable of BLHC, not direct
obligations of Conseco -- -- -- 392.0 290.3 290.3
Minority interest -- 17.1 79.5 24.0 223.8 223.8
Shareholders' equity 158.3 180.2 431.6 594.3 1,142.6 1,167.4
Fixed charge coverage ratio on debt and
preferred stock (3) 1.94x 1.74x 2.95x 4.80x 4.72x 3.44x
Fixed charge coverage ratio on debt and
preferred stock for which Conseco is
directly liable (4) 1.94X 1.79x 3.04x 5.66x 4.25x 1.43x
<FN>
(1) For periods prior to July 1, 1992 the financial statements of Great
American Reserve Insurance Company, Jefferson National Life Insurance
Company and Beneficial Standard Life Insurance Company (the "CCP
Companies") were consolidated with the financial statements of Conseco.
With the completion of the initial public offering by CCP Insurance, Inc.
("CCP"), Conseco no longer has the unilateral ability to control all of
CCP's activities, and therefore, the financial statements of the CCP
Companies, subsequent to the initial public offering, are no longer
consolidated with the financial statements of Conseco. Comparison of
consolidated financial information in the above table is largely affected
by the acquisitions of the CCP Companies, which are consolidated in
Conseco's statements in 1990, 1991, and the first six months of 1992
and are included on the equity method in all periods subsequent to June
30, 1992.
(2) Represents net income excluding net realized gains from investment
securities and extraordinary charge, less applicable expenses, taxes and
minority interest.
(3) Represents ratio of earnings to fixed charges on debt and preferred stock,
including (i) interest on notes payable which are not direct obligations
of Conseco and (ii) interest on short-term borrowings by consolidated
subsidiaries for investment purposes. The fixed charge coverage ratio
excludes interest credited to insurance and annuity policy reserves of
$213.6 million, $314.7 million, $576.7 million, $506.8 million, $408.5
million and $75.4 million for the years ended 1989, 1990, 1991, 1992, 1993
- as reported and 1993 - proforma, respectively.
<PAGE>
<PAGE> S-11
(4) Represents ratio of earnings to fixed charges on debt and preferred stock
for which Conseco is directly liable, excluding the undistributed
earnings and fixed charges of less than wholly-owned subsidiaries and
interest credited to insurance and annuity policy reserves of wholly-
owned subsidiaries of $213.6 million, $283.2 million, $359.6 million,
$377.0 million, $372.0 million and $38.9 million for the years ended 1989,
1990, 1991, 1992, 1993 - as reported and 1993 - proforma, respectively.
(5) The unaudited proforma consolidated income statement data are presented
as if the following transactions had all occurred on December 31,
1992: (i) the initial public offering and related transactions of Western
National Corporation ("Western") (ii) the initial public offering of BLHC,
the purchase of additional shares of common stock of BLHC by Conseco and
the incentive earnings allocation of Conseco Capital Partners, L.P.
and (iii) the purchase of additional shares of common stock of CCP. The
data further assumes the net proceeds to Conseco from the initial public
offering of Western were invested to earn 3 percent per annum before
income taxes. The unaudited proforma consolidated balance sheet data are
presented as if the initial public offering of Western had occurred on
December 31, 1993.
/TABLE
<PAGE>
<PAGE> S-12
TERMS OF THE SERIES A PREFERRED SHARES
General
Preferred Shares of the Company may be issued from time to time in one or
more series with such dividend rights, liquidation preferences, redemption
provisions, voting rights and other rights, powers and duties as are
established by the L.L.C. Agreement and a written action (the "Action") taken,
or to be taken, by the Managing Member to amend and supplement the L.L.C.
Agreement (which Actions, when taken, constitute an amendment and supplement
to, and become a part of, the L.L.C. Agreement). The Series A Preferred Shares
constitute one such series of Preferred Shares of the Company. The summary of
certain terms of the Series A Preferred Shares set forth below does not
purport to be complete and is subject to, and qualified in its entirety by
reference to, the L.L.C. Agreement (including the Action establishing the
rights, powers and duties relating to the Series A Preferred Shares, a copy of
which Action will have been filed with the Securities and Exchange Commission
(the "Commission") at or prior to the time of the sales of the Series A
Preferred Shares).
Dividends
Cumulative dividends on the Series A Preferred Shares will accrue at a rate
per annum of ____ % on the liquidation preference thereof (or $___ per Series
A Preferred Share per annum) from the date of original issuance thereof and
will be payable monthly in arrears on the last day of each calendar month of
each year, commencing __________, 1994, when, as and if declared by the
Managing Member to holders of record on the record date therefor. Payment of
dividends is limited to the amount of funds held by the Company and legally
available therefor. See "Description of the Series A Subordinated Debentures"
and "Description of the Guarantee - General." Dividends will be computed on
the basis of twelve 30-day months and a 360-day year and, for any dividend
period shorter than a full calendar month, will be computed on the basis of the
actual number of calendar days elapsed in such period.
Dividends declared on the Series A Preferred Shares will be payable to the
record holders thereof as they appear on the register for the Series A
Preferred Shares on the relevant record dates, which will be one Business Day
prior to the relevant payment dates. Subject to any applicable fiscal or other
laws and regulations, each such payment will be made as described under
"Book-Entry-Only Issuance; The Depository Trust Company" below. In the event
that any date on which dividends are payable on the Series A Preferred Shares
is not a day on which banks in The City of New York are open for business
(a "Business Day"), then payment of the dividend payable on such date will be
made on the next succeeding Business Day (and without any interest or other
payment in respect of any such delay) except that, if such Business Day is in
the next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on such date.
Under the L.L.C. Agreement, dividends on the Series A Preferred Shares must
be declared by the Managing Member in any calendar year or portion thereof to
the extent that the Company reasonably anticipates that at the time of payment
it will have, and must be paid by the Company to the extent that at the time
of proposed payment it has, (x) funds legally available for the payment of such
dividends and (y) cash on hand sufficient to permit such payment. It is
anticipated that such funds will be derived from payments by Conseco of
interest on the Series A Subordinated Debentures. Under the terms of the
Series A Subordinated Debentures, so long as Conseco is not in default in the
payment of interest on the Series A Subordinated Debentures, Conseco shall have
the right at any time to extend the interest payment period to the next
interest payment date by a period (not to exceed 60 months from the last date
on which interest was paid in full) at the end of which Conseco shall pay all
interest then accrued and unpaid (together with interest thereon at the rate
specified for the Series A Subordinated Debentures to the extent permitted by
applicable law). During any such extended interest <PAGE>
<PAGE> S-13
period, or at any time during which there is an uncured Default or Event of
Default (each as hereinafter defined) under the Series A Subordinated
Debentures, Conseco shall not pay any dividends on, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of its shares of
capital stock or make any guarantee payments with respect to the foregoing
(other than payments under any guarantee of the Series A Preferred Shares or
other Preferred Shares ranking pari passu with the Series A Preferred Shares
which payments shall be made on a pro rata basis). Conseco is required to give
the Company not less than five Business Days' prior notice of its selection of
such longer interest payment period. See "Description of the Series A
Subordinated Debentures."
If dividends can be paid only in part on the Series A Preferred Shares in any
calendar year or portion thereof as a result of the lack of sufficient funds
legally available for the payment of dividends, then such partial dividends
shall be paid on the respective dividend payment dates on a pro rata basis to
holders of such Series A Preferred Shares. If any dividends on the Series A
Preferred Shares are not paid in full on any dividend payment date, additional
dividends will accrue on any accumulated and unpaid dividends at the dividend
rate for the Series A Preferred Shares specified above.
Except as described herein, holders of the Series A Preferred Shares will
have no other right to participate or share in the profits or assets of the
Company.
Certain Restrictions on the Company
If dividends have not been paid in full on the Series A Preferred Shares, the
Company shall not:
(i) pay, or declare and set aside for payment, any dividends on any other
preferred or preference limited liability company interest in the Company
ranking pari passu with the Series A Preferred Shares as regards participation
in profits of the Company ("Dividend Parity Shares"), unless such dividends are
paid, declared or set aside for payment on the Dividend Parity Shares and the
Series A Preferred Shares on a pro rata basis on the date such dividends are
paid, so that
(x) (A) The aggregate amount of dividends paid on the Series A Preferred
Shares bears to (B) the aggregate amount of dividends paid on such Dividend
Parity Shares the same ratio as
(y) (A) the aggregate of all accrued and unpaid dividends in respect of
the Series A Preferred Shares bears to (B) the aggregate of all accrued and
unpaid dividends in respect of such Dividend Parity Shares;
(ii) pay, or declare and set aside for payment, any dividends on any
Common Shares or limited liability company interests of the Company ranking
junior to the Series A Preferred Shares as to dividends ("Dividend Junior
Shares"); or
(iii) redeem, purchase or otherwise acquire any Dividend Parity Shares or
Dividend Junior Shares; or
(iv) redeem Series A Preferred Shares, except in whole, <PAGE>
<PAGE> S-14
until, in each case, such time as all accumulated and unpaid dividends on the
Series A Preferred Shares shall have been paid in full for all dividend periods
terminating on or prior to, in the case of clauses (i) and (ii), such payment,
and in the case of clause (iii), the date of such redemption, purchase or
acquisition. As of the date of this Prospectus Supplement, there are no
Dividend Parity Shares outstanding.
The Company may not engage in any business or activity other than issuing its
Common Shares, the Series A Preferred Shares and other series of Preferred
Shares having terms generally consistent with those of the Series A Preferred
Shares (other than dividend rate, and other than changes that would not
materially adversely affect the ability of the Company to make full and timely
dividend payments or payments upon liquidation to the holders of the Series A
Preferred Shares), loaning the proceeds thereof to Conseco in return for
Subordinated Debentures in an aggregate principal amount equal to the amount
of such loan, bearing interest at a rate at least equal to the dividend rate
on such Preferred Shares and otherwise having terms generally consistent with
those of the Series A Preferred Shares (other than changes that would not
materially adversely affect the ability of the Company to make full and timely
dividend payments or payments upon liquidation to the holders of the Series A
Preferred Shares) and engaging in activities incidental or conducive to the
foregoing. The Company may not consolidate or merge with, or convey, transfer
or lease its properties and assets substantially as an entirety to, any
corporation or other body.
Notwithstanding the foregoing, the Company may, for purposes of changing its
state of domicile, without the consent of the holders of any series of
Preferred Shares, consolidate or merge with or into a limited liability company
formed under the laws of any state of the United States; provided that (i)
such successor limited liability company expressly assumes all of the
obligations of the Company under each series of Preferred Shares then
outstanding, (ii) Conseco expressly acknowledges such successor as the holder
of the Subordinated Debentures pertaining to each series of Preferred Shares
then outstanding, (iii) such merger or consolidation does not cause any series
of Preferred Shares then outstanding to be delisted by any national securities
exchange or other organization on which such Preferred Shares are then listed,
(iv) holders of then outstanding Preferred Shares will not recognize any gain
or loss for federal income tax purposes as a result of such merger or
consolidation and (v) following such merger or consolidation Conseco and such
successor limited liability company are and will remain in compliance with the
Investment Company Act of 1940, as amended (the "1940 Act").
The Managing Member is authorized to conduct its affairs and to operate the
Company in such a way that the Company would not be deemed to be an "investment
company" required to be registered under the 1940 Act or taxed as a corporation
for federal income tax purposes and so that any loans made by the Company to
Conseco will be treated as indebtedness for federal income tax purposes. In
this connection the Managing Member is authorized and currently intends to take
any action that (i) is not inconsistent with applicable law, the Certificate
of Formation of the Company and the L.L.C. Agreement, (ii) does not materially
adversely affect the holders of Series A Preferred Shares and (iii) the
Managing Member determines in its sole discretion to be necessary or desirable
for such purposes.
Mandatory Redemption upon Repayment of Series A
Subordinated Debentures at Maturity
The proceeds from any repayment at maturity of any Series A Subordinated
Debentures shall be applied to redeem Series A Preferred Shares for cash at the
Redemption Price.
Optional Redemption
The Series A Preferred Shares are redeemable for cash, at the option of the
Company (with the prior consent of Conseco as borrower under the Series A
Subordinated Debentures), in whole or in part, at any time and from time to
time, on or after April ___, 1999, upon not less than 30 nor more than 60
days' notice to the holders of the Series A Preferred Shares, at the Redemption
Price. In the event that fewer than all the outstanding Series A Preferred
Shares are to be so redeemed, the Series A Preferred Shares to be redeemed will
be selected as described under "Book-Entry-Only Issuance; The Depository Trust
Company" below. The Company will not redeem fewer than all the outstanding
Series A Preferred Shares unless all accumulated and unpaid dividends have been
paid on all Series A Preferred Shares for <PAGE>
<PAGE> S-15
all monthly dividend periods terminating on or prior to the date of redemption.
In addition, if a partial redemption would result in a delisting of the Series
A Preferred Shares, the Company may only redeem the Series A Preferred Shares
in whole.
At any time after the issuance of the Series A Preferred Shares upon not less
than 30 nor more than 60 days' notice, Conseco may cause the Company to redeem
the Series A Preferred Shares in exchange for Series A Subordinated Debentures
having, at the time of exchange, (a) an aggregate principal amount equal to $25
per Series A Preferred Share so exchanged and (b) accrued and unpaid interest
equal to accumulated and unpaid dividends (whether or not declared) at the date
fixed for exchange on the Series A Preferred Shares so exchanged if Conseco and
the Company have received an opinion (an "Exchange Tax Opinion") of nationally
recognized independent tax counsel experienced in such matters to the effect
that, as a result of any change on or after the day before the date of this
Prospectus Supplement in U.S. law or regulation, or a written change in
interpretation or application of U.S. law or regulation, by any legislative
body, court or governmental agency or regulatory authority (including the
enactment or imminent enactment of any legislation and the publication of any
judicial decisions or regulatory determinations), there exists more than an
insubstantial risk that (i) Conseco will be precluded from deducting the
interest on the Series A Subordinated Debentures for federal income tax
purposes or (ii) the Company will be subject to federal income tax with respect
to the interest received on the Series A Subordinated Debentures or more than
a de minimis amount of other taxes, duties or other governmental charges;
provided, however, Conseco and the Company shall not be permitted to effect
such an exchange unless each of them shall have received an opinion from
nationally recognized independent tax counsel experienced in such matters that
holders of the Series A Preferred Shares will not recognize gain or loss for
federal income tax purposes as a result of such exchange. Furthermore, Conseco
shall have the right, upon not less than 30 nor more than 60 days' notice, to
cause the Company to redeem the Series A Preferred Shares for cash at the
Redemption Price if Conseco (i) has received an opinion (a "Redemption Tax
Opinion") of nationally recognized independent tax counsel experienced in such
matters that, as a result of a change in U.S. law as described above, there
exists more than an insubstantial risk that Conseco would be precluded from
deducting the interest on the Series A Subordinated Debentures for federal
income tax purposes even if the Series A Preferred Shares were exchanged for
the Series A Subordinated Debentures as described above or (ii) after its
receipt of an Exchange Tax Opinion shall not have received the opinion referred
to in the proviso to the preceding sentence. The receipt by Conseco and/or the
Company of an Exchange Tax Opinion or a Redemption Tax Opinion is referred to
herein as a "Tax Event."
After the date fixed for any such exchange, (i) the Series A Preferred Shares
will no longer be deemed to be outstanding, (ii) The Depository Trust Company
("DTC") or its nominee, as the record holder of the Series A Preferred Shares,
will exchange the global certificate or certificates representing the Series
A Preferred Shares for a registered global certificate or certificates
representing the Series A Subordinated Debentures to be delivered upon such
exchange, (iii) any certificates representing Series A Preferred Shares not
held by DTC or its nominee will be deemed to represent Series A Subordinated
Debentures having a principal amount equal to the stated liquidated preference
of such Series A Preferred Shares until such certificates are presented to the
Company or its agent for exchange and (iv) all rights of the holders of Series
A Preferred Shares so exchanged will cease, except the right of such holders
to receive Series A Subordinated Debentures.
If the Series A Preferred Shares are exchanged for Series A Subordinated
Debentures, Conseco has agreed to use its best efforts to have the Series A
Subordinated Debentures listed on the same exchange, if any, on which the
Series A Preferred Shares are listed.
If the Company gives a notice of redemption for cash in respect of the Series
A Preferred Shares, then, by 12:00 noon, New York time, on the redemption date,
the Company will irrevocably deposit with DTC funds sufficient to pay the
Redemption Price, and will give DTC irrevocable instructions and <PAGE>
<PAGE> S-16
authority to pay the Redemption Price to the holders thereof. See
"Book-Entry-Only Issuance; The Depository Trust Company." If such notice of
redemption shall have been given and funds deposited as required, then upon the
date of such deposit, all rights of holders of such Series A Preferred Shares
so called for redemption will cease, except the right of such holders of such
securities to receive the Redemption Price, but without interest, and such
securities will cease to be outstanding. In the event that any date on which
any payment in respect of the redemption of Series A Preferred Shares is not
a Business Day, then payment of the redemption price payable on such date will
be made on the next succeeding Business Day (and without any interest or other
payment in respect of any such delay), except that, if such Business Day falls
in the next calendar year, such payment will be made on the immediately
preceding Business Day. In the event that payment of the redemption price in
respect of Series A Preferred Shares is improperly withheld or refused and not
paid either by the Company or by Conseco pursuant to the Guarantee, dividends
on such securities will continue to accumulate, at the then applicable rate,
from the original redemption date to the date of payment, in which case the
actual payment date will be considered the date fixed for redemption for
purposes of calculating the Redemption Price.
Subject to the foregoing and applicable law (including, without limitation,
U.S. federal securities laws), Conseco or its subsidiaries may at any time and
from time to time purchase outstanding Series A Preferred Shares of any series
by tender, in the open market or by private agreement.
Liquidation Distribution
In the event of any voluntary or involuntary liquidation, dissolution or
winding-up of the Company, before any payment or distribution of the assets of
the Company shall be made to or set apart for the holders of any class or
classes of Membership Shares or any series of Preferred Shares ranking junior
to the Series A Preferred Shares upon liquidation, dissolution or winding-up,
the holders of the Series A Preferred Shares shall be entitled to receive,
together with the holders of every other series of Preferred Shares
outstanding, if any, ranking pari passu with the Series A Preferred Shares as
to distribution of assets on liquidation, dissolution or winding-up of the
Company ("Liquidation Parity Shares"), an amount equal, in the case of the
holders of the Series A Preferred Shares, to the aggregate of the liquidation
preference of $25 per Series A Preferred Share and all accumulated and unpaid
dividends (whether or not declared) to the date of payment (the "Liquidation
Distribution"), payable in cash. If, upon any such liquidation, dissolution
or winding up, the Liquidation Distribution can be paid only in part because
the Company has insufficient assets available to pay in full the aggregate
Liquidation Distribution and the aggregate maximum liquidation distributions
on the Liquidation Parity Shares, then the amounts payable directly by the
Company on the Series A Preferred Shares and on such Liquidation Parity Shares
shall be paid on a pro rata basis, so that
(i) (x) the aggregate amount paid as the liquidation distribution on
the Series A Preferred Shares bears to (y) the aggregate amount paid as the
liquidation distribution on the Liquidation Parity Shares the same ratio as
(ii) (x) the aggregate Liquidation Distribution on all Series A Preferred
Shares bears to (y) the aggregate maximum liquidation distributions on the
Liquidation Parity Shares.
Pursuant to the L.L.C. Agreement, the Company will automatically dissolve and
be liquidated (i) when the period fixed for the duration of the Company
expires, (ii) if the Managing Member takes action requiring the Company to be
wound-up and dissolved, (iii) upon the death, retirement, resignation,
expulsion, bankruptcy (as defined in Section 18-304 of the Delaware Limited
Liability Company Act) or dissolution of a holder of Common Shares or the
occurrence of any other event which terminates the continued membership of a
holder of Common Shares in the Company, unless, if there is more than one
holder of Common Shares remaining, the business of the Company is continued by
the consent of all
<PAGE>
<PAGE> S-17
the remaining holders of Common Shares within ninety days following the
occurrence of any such event; (iv) upon the unanimous written consent of the
holders of Common Shares; (v) upon the entry of a judicial decree of
dissolution under Section 18-802 of the Delaware Limited Liability Company Act;
or (vi) upon the transfer or redemption (other than a partial redemption) of
any of the Common Shares. Under the Guarantee, Conseco will covenant that it
will not voluntarily dissolve, wind up or liquidate the Company so long as any
Preferred Shares are outstanding (unless the Company shall be treated as a
corporation for U.S. federal income tax purposes or be subject to more than a
de minimis amount of other taxes, duties or other governmental charges). See
"Description of the Guarantee - Certain Covenants of the Guarantor." Pursuant
to Section 18-802 of the Delaware Limited Liability Company Act, if a limited
liability company organized under the laws of the State of Delaware has any
publicly traded limited liability company interests and is treated as a
corporation for U.S. federal income tax purposes, then, on application by or
for a member or the manager of such limited liability company, the Delaware
Court of Chancery shall (x) grant such relief as may be appropriate to cause
the limited liability company not to have any publicly traded limited liability
company interests or (y) decree the dissolution of the limited liability
company.
Personal Liability of Holders of Common Shares
The holders of Common Shares will be liable for, and will pay (as an
additional capital contribution to the Company) the debts of and claims against
the Company (other than the obligations to holders of Series A Preferred
Shares).
Voting Rights
Except as provided below and under "Description of the Guarantee - Amendments
and Assignment" and "Description of the Series A Subordinated Debentures -
Miscellaneous," the holders of the Series A Preferred Shares will have no
voting rights.
If (i) the Company fails to pay dividends in full on the Series A Preferred
Shares (whether or not funds are legally available therefor) for any period and
as a result dividends on the Series A Preferred Shares shall be in arrears in
an aggregate amount equal to at least 18 full monthly dividend payments or (ii)
Conseco breaches any of its obligations under the Series A Subordinated
Debentures or any of its obligations under the Guarantee (as defined in
"Description of the Guarantee"), then the holders of the outstanding Series A
Preferred Shares, together with the holders of any other series of Preferred
Shares having the right to vote for the appointment of a trustee in such event,
acting as a single class, will be entitled, by ordinary resolution passed by
the holders of a majority in liquidation preference (plus all accumulated and
unpaid dividends) of such Preferred Shares present in person or by proxy at a
separate general meeting of such holders convened for such purpose (or by
written consent), to appoint and authorize a trustee to enforce the Company's
rights as a creditor in respect of the Series A Subordinated Debentures, to
enforce the obligations undertaken by Conseco under the Guarantee and to
declare and pay dividends to the extent that funds are held by the Company and
legally available therefor. For a description of rights and obligations under
the Series A Subordinated Debentures, including the right of Conseco to extend
the period to the next interest payment date to up to 60 months, see
"Description of the Series A Subordinated Debentures." Not later than 30 days
after such entitlement arises, the Managing Member will convene a separate
general meeting for the above purpose. If the Managing Member fails to convene
such meeting within such 30-day period, the holders of 10% in aggregate
liquidation preference (plus all accumulated and unpaid dividends) of the
outstanding Series A Preferred Shares and such other Preferred Shares will be
entitled to convene such separate general meeting. The provisions of the
L.L.C. Agreement relating to the convening and conduct of the general meetings
of Members (as defined in the L.L.C. Agreement) will apply with respect to any
such separate general meeting. Any trustee so appointed shall vacate office,
subject to the terms of such other Preferred Shares, if the Company (or Conseco
pursuant to the Guarantee) <PAGE>
<PAGE> S-18
shall have paid in full all accumulated and unpaid dividends on the Series A
Preferred Shares (if the event that gave rise to such appointment was clause
(i) of this paragraph) or such breach by Conseco shall have been cured (if the
event that gave rise to such appointment was clause (ii) of this paragraph).
If any resolution is proposed for adoption by the holders of Preferred Shares
and Common Shares of the Company providing for, or the Managing Member proposes
to take, any action that will (w) amend, alter or repeal the provisions of the
L.L.C. Agreement (including the Actions creating the Series A Preferred Shares)
so as to adversely affect any rights or powers of the Series A Preferred Shares
or the holders thereof or result in the authorization or issuance of any
limited liability company interest in the Company ranking, as to dividends or
upon liquidation, dissolution or winding-up, senior to the Series A Preferred
Shares, (x) result in the liquidation, dissolution or winding-up of the
Company, (y) waive any rights of the Company under the Series A Subordinated
Debentures or allow the Series A Subordinated Debentures to be repurchased or
prepaid prior to __________, 1999 other than in accordance with the terms of
the L.L.C. Agreement or the terms of the Series A Subordinated Debentures
(unless there is an Event of Default thereunder and except in connection with
a redemption occurring as a result of a Tax Event) or (z) modify (i) Section
2.6 of the L.L.C. Agreement which limits the business and activity in which the
Company may engage, (ii) Section 7.1 of the L.L.C. Agreement which absolutely
prohibits transfers of Common Shares, (iii) Section 3.3 of the L.L.C. Agreement
which requires the holders of the Common Shares to contribute amounts to the
Company such that the Common Shares represent at all times not less than 21%
of all interests in the capital, income, gain, loss, deduction or credit of the
Company or (iv) Section 6.2 of the L.L.C. Agreement pursuant to which the
holders of the Common Shares agree to be personally liable for all debts of and
claims against the Company (other than payment of dividends on the Preferred
Shares), then the holders of outstanding Series A Preferred Shares (and, in the
case of a resolution described in clause (w) above that would, to a like
extent, adversely affect the rights or powers of any Dividend Parity Shares or
any Liquidation Parity Shares, the holders of such Dividend Parity Shares or
such Liquidation Parity Shares, as the case may be, or, in the case of any
resolution described in clause (x) or (z) above, all Liquidation Parity Shares)
will be entitled to vote together as a class on such resolution (but not on any
other resolution) (i) at a separate meeting of such holders, (ii) at the
general meeting of Members called for the purpose of adopting such resolution
or (iii) without a meeting but in writing, and such resolution shall not be
effective except with the approval, in the case of clauses (i) and (ii), of the
holders of 66 2/3% in aggregate liquidation preference (plus all accumulated
and unpaid dividends) of such outstanding securities present in person or by
proxy at a meeting at which 66 2/3% in aggregate liquidation preference (plus
all accumulated and unpaid dividends) of such securities are so present or, in
the case of clause (iii), by the holders of 66 2/3% in aggregate liquidation
preference (plus all accumulated and unpaid dividends) of such securities;
provided, however, that no such approval shall be required under clauses (w)
and (x) if the liquidation, dissolution and winding up of the Company is
proposed or initiated upon the initiation of proceedings, or after proceedings
have been initiated, for the liquidation, dissolution or winding-up of Conseco.
The rights attached to the Series A Preferred Shares will be deemed not to
be varied by the creation or issue of, and no vote will be required for the
creation of, any further series of Preferred Shares or any limited liability
company interests in the Company ranking as to dividends or upon liquidation
pari passu with or junior to the Series A Preferred Shares.
The Company will cause a notice of any meeting at which holders of the Series
A Preferred Shares are entitled to vote to be mailed to each holder of record
of the Series A Preferred Shares. Each such notice will include a statement
setting forth (i) the date of such meeting, (ii) a description of any
resolution proposed for adoption at such meeting on which such holders are
entitled to vote and (iii) instructions for the delivery of proxies.
<PAGE>
<PAGE> S-19
Notwithstanding that holders of Series A Preferred Shares are entitled to
vote under any of the circumstances described above, any of the Series A
Preferred Shares and such other Preferred Shares entitled to vote with such
Series A Preferred Shares as a single class outstanding at such time that are
owned by Conseco or any entity owned 20% or more by Conseco, either directly
or indirectly, shall not be entitled to vote and shall, for the purposes of
such vote, be treated as if they were not outstanding.
No vote of the holders of the Series A Preferred Shares will be required for
the Company to redeem and cancel Series A Preferred Shares in accordance with
the L.L.C. Agreement (including the Actions).
Book-Entry-Only Issuance; The Depository Trust Company
DTC, New York, New York will act as securities depository for the Series A
Preferred Shares. The Series A Preferred Shares will be issued as
fully-registered securities registered in the name of Cede & Co. (DTC's
partnership nominee). One or more fully-registered Series A Preferred Share
certificates will be issued, representing in the aggregate the total number of
Series A Preferred Shares, and will be deposited with DTC.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants ("Participants") deposit with DTC. DTC
also facilitates the settlement among Participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations ("Direct Participants"). DTC is
owned by a number of its Direct Participants and by the New York Stock
Exchange, Inc., the American Stock Exchange, Inc., and the National Association
of Securities Dealers, Inc. Access to the DTC system is also available to
others such as securities brokers and dealers, banks, and trust companies that
clear through or maintain a custodial relationship with a Direct Participant,
either directly or indirectly ("Indirect Participants"). The Rules applicable
to DTC and its participants are on file with the Commission.
Purchases of Series A Preferred Shares under the DTC system must be made by
or through Direct Participants, who will receive a credit for the Series A
Preferred Shares on DTC's records. The ownership interest of each actual
purchaser of each Series A Preferred Share (a "Beneficial Owner") is in turn
to be recorded on the Direct and Indirect Participants' records. Beneficial
Owners will not receive written confirmation from DTC of their purchase, but
Beneficial Owners are expected to receive written confirmations providing
details of the transactions, as well as periodic statements of their holdings,
from the Direct or Indirect Participant through which the Beneficial Owner
purchased Series A Preferred Shares. Transfers of ownership interests in the
Series A Preferred Shares are to be accomplished by entries made on the books
of Participants acting on behalf of Beneficial Owners. Beneficial Owners will
not receive certificates representing their ownership interests in Series A
Preferred Shares, except in the event that use of the book-entry system for the
Series A Preferred Shares is discontinued.
To facilitate subsequent transfers, all Series A Preferred Shares deposited
by Participants with DTC are registered in the name of DTC's nominee, Cede &
Co. The deposit of Series A Preferred Shares with DTC and their registration
in the name of Cede & Co. effect no change in beneficial ownership. DTC has
no knowledge of the actual Beneficial Owners of the Series A Preferred Shares;
DTC's records reflect only the identity of the Direct Participants to whose
accounts such Series A Preferred Shares <PAGE>
<PAGE> S-20
are credited, which may or may not be the Beneficial Owners. The Participants
will remain responsible for keeping account of their holdings on behalf of
their customers.
Conveyance of notices and other communications by DTC to Direct Participants,
by Direct Participants to Indirect Participants, and by Direct Participants and
Indirect Participants to Beneficial Owners will be governed by arrangements
among them, subject to any statutory or regulatory requirements as may be in
effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the
Series A Preferred Shares are being redeemed, DTC's practice is to determine
by lot the amount of the interest of each Direct Participant in such series to
be redeemed.
Although voting with respect to the Series A Preferred Shares is limited, in
those cases where a vote is required, neither DTC nor Cede & Co. will consent
or vote with respect to Series A Preferred Shares. Under its usual procedures,
DTC mails an Omnibus Proxy to the Company as soon as possible after the record
date. The Omnibus Proxy assigns Cede & Co.'s consent or voting rights to those
Direct Participants to whose accounts the Series A Preferred Shares are
credited on the record date (identified in a listing attached to the Omnibus
Proxy).
Dividend payments on the Series A Preferred Shares will be made to DTC.
DTC's practice is to credit Direct Participants' accounts on the relevant
payable date in accordance with their respective holdings shown on DTC's
records unless DTC has reason to believe that it will not receive payments
on such payable date. Payments by Participants to Beneficial Owners will be
governed by standing instructions and customary practices and will be the
responsibility of such Participant and not of DTC or the Company, subject to
any statutory regulatory requirements as may be in effect from time to time.
Payment of dividends to DTC is the responsibility of the Company, disbursement
of such payments to Direct Participants shall be the responsibility of DTC, and
disbursement of such payments to the Beneficial Owners shall be the
responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as securities depository with
respect to the Series A Preferred Shares at any time by giving reasonable
notice to the Company. Under such circumstances, in the event that a successor
securities depository is not obtained, Series A Preferred Share Certificates
are required to be printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Company believes to be reliable, but
the Company takes no responsibility for the accuracy thereof.
Registrar, Transfer Agent And Paying Agent
____________________ will act as registrar, transfer agent and paying agent
for the Series A Preferred Shares (the "Paying Agent").
Registration of transfers of Series A Preferred Shares will be effected
without charge by or on behalf of the Company, but upon payment (with the
giving of such indemnity as the Company or Conseco may require) in respect of
any tax or other governmental charges which may be imposed in relation to it.
The Company will not be required to register or cause to be registered the
transfer of Series A Preferred Shares after such Series A Preferred Shares have
been called for redemption.
<PAGE>
<PAGE> S-21
Miscellaneous
Except as described in this Prospectus Supplement, the Company is not subject
to any mandatory redemption or sinking fund provisions with respect to the
Series A Preferred Shares. Holders of Series A Preferred Shares have no
preemptive rights.
The Common Shares in the Company are owned by Conseco and one of its wholly
owned subsidiaries. The Common Shares are not transferable. The holders of
the Common Shares are required, pursuant to the terms of the L.L.C. Agreement,
to contribute to the Company amounts such that the Common Shares at all times
represent at least 21% of all interests in the capital, income, gain,
loss, deduction and credit of the Company.
DESCRIPTION OF THE GUARANTEE
Set forth below is condensed information concerning the Guarantee which will
be executed and delivered by Conseco for the benefit of the holders from time
to time of Preferred Shares. The summary contains all material information
concerning the Guarantee but does not purport to be complete. Reference to
provisions of the Guarantee are qualified in their entirety by reference to the
text of the Guarantee, a copy of which has been filed as an exhibit to the
Registration Statement of which this Prospectus Supplement is part.
General
Conseco will irrevocably and unconditionally agree, to the extent set forth
herein, to pay the Guarantee Payments (defined below) (except to the extent
paid by the Company), as and when due, regardless of any defense, right of
set-off or counterclaim which the Company may have or assert. The following
payments to the extent not paid by the Company (the "Guarantee Payments") will
be subject to the Guarantee (without duplication); (i) any accumulated and
unpaid dividends that have been theretofore declared on the Series A Preferred
Shares out of funds held by the Company and legally available therefor; (ii)
the redemption price (including all accumulated and unpaid dividends whether
or not declared) payable out of funds held by the Company and legally available
therefor with respect to Series A Preferred Shares called for redemption by the
Company; and (iii) in the event of any liquidation, dissolution or winding-up
of the Company, the lesser of (a) the aggregate of the liquidation preference
and all accumulated and unpaid dividends (whether or not declared) to the date
of payment and (b) the amount of remaining assets of the Company legally
available to holders of Series A Preferred Shares. In addition, Conseco will
unconditionally and irrevocably guarantee, in the event of any exchange by
the Company of Series A Preferred Shares for Series A Subordinated Debentures
as described herein, the delivery of a registered global certificate or
certificates representing the proper amount of Series A Subordinated Debentures
to DTC, New York, New York or such other entity or person as shall at the
date of exchange be acting as securities depository for the Series A Preferred
Shares. Conseco's obligation to make a Guarantee Payment may be satisfied by
direct payment of the required amounts by Conseco to the holders of Series A
Preferred Shares or by causing the Company to pay such amounts to such holders.
Certain Covenants Of Conseco
In the Guarantee, Conseco will covenant that, so long as any Series A
Preferred Shares remain outstanding, neither Conseco, nor any majority-owned
subsidiary of Conseco, shall declare or pay any dividend on, or redeem,
purchase, acquire or make a liquidation payment with respect to, any of its
capital stock or make any guarantee payments with respect to the foregoing
(other than (i) payments under the Guarantee or (ii) dividends or guarantee
payments to Conseco) if at such time Conseco shall be in default with respect
to its payment or other obligations under the Guarantee or there shall have
occurred any event that, with the giving of notice or the lapse of time or
both, would constitute an Event of Default under the Series A Subordinated
Debentures.
<PAGE>
<PAGE> S-22
Pursuant to the Guarantee, Conseco will agree that, so long as any Series A
Preferred Shares are outstanding, (i) it shall maintain ownership, directly or
indirectly, of 100% of the Common Shares; (ii) in its capacity as direct and
indirect holder of Common Shares, it shall make (or cause to be made) such
contributions to the Company, either in connection with the purchase of Common
Shares or otherwise, so as to cause at least 21% of all interests in the
capital, income, gain, loss, deductions and credit of the Company to be
represented by the Common Shares, (iii) it shall not voluntarily dissolve,
wind-up or liquidate the Company (unless the Company shall be treated as a
corporation for purposes of U.S. federal income tax purposes or be subject to
more than a de minimis amount of other taxes, duties or other governmental
charges); (iv) it shall timely perform all of its respective duties under the
L.L.C. Agreement; and (v) it shall use its reasonable efforts to cause the
Company to remain a limited liability company or limited partnership and
otherwise continue to be treated as a partnership for U.S. federal
income tax purposes.
Amendments and Assignment
Except with respect to any changes which do not adversely affect the rights
of holders (in which case no vote will be required), the Guarantee may be
changed only with the prior approval of the holders of not less than 66 2/3%
in liquidation preference of the Series A Preferred Shares by agreement in
writing or present in person or by proxy at a separate general meeting and
voting as a single class. All guarantees and agreements contained in the
Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of Conseco and shall inure to the benefit of the holders
of the Series A Preferred Shares. The quorum for any such meeting and the
determination of the Series A Preferred Shares entitled to vote are set forth
under "Description of the Series A Preferred Shares - Voting Rights" above.
Termination of the Guarantee
The Guarantee will terminate and be of no further force and effect with
respect to the Series A Preferred Shares upon full payment of the Redemption
Price (including all accumulated and unpaid dividends) of all Series A
Preferred Shares, upon full payment of the amounts payable upon liquidation
of the Company or upon exchange of all Series A Preferred Shares for Series A
Subordinated Debentures as described above. The Guarantee will continue to be
effective or will be reinstated, as the case may be, if at any time any holder
of the Series A Preferred Shares must restore payment of any sums paid under
the Series A Preferred Shares or the Guarantee.
Status of the Guarantee
The Guarantee will rank pari passu with the Subordinated Debentures and,
accordingly, will be subordinate and junior in right of payment to all Senior
Indebtedness as such term is defined in the Subordinated Indenture. See
"Description of Debt Securities of Conseco - Subordination under the
Subordinated Indenture" in the accompanying Prospectus.
The Guarantee will constitute a guarantee of payment and not of collection.
A holder of Series A Preferred Shares may enforce the Guarantee directly
against Conseco, and Conseco will waive any right or remedy to require that any
action be brought against the Company or any other person or entity before
proceeding against Conseco. The Guarantee will not be discharged except by
payment of the Guarantee Payments in full to the extent not paid by the Company
and by complete performance of all obligations under the Guarantee.
<PAGE>
<PAGE> S-23
Governing Law
The Guarantee will be governed and construed in accordance with the laws of
the State of New York.
DESCRIPTION OF THE SERIES A SUBORDINATED DEBENTURES
Set forth below is condensed information concerning the Series A Subordinated
Debentures that will evidence the loans to be made by the Company to Conseco
of the proceeds of (i) the Series A Preferred Shares and (ii) the Common Shares
and related capital contributions ("Common Shares Payments"). Series A
Subordinated Debentures will be issued under the subordinated indenture, dated
___________, 1994, between Conseco and __________, as Trustee (the
"Subordinated Indenture"). See "Description of Debt Securities of Conseco" in
the accompanying Prospectus and the description below for a summary of the
material terms of the Subordinated Indenture. References to provisions of the
Subordinated Indenture are qualified in their entirety by reference to the text
of the Subordinated Indenture, a form of which has been filed as an exhibit to
the Registration Statement of which this Prospectus Supplement forms a part.
General
Pursuant to the Subordinated Indenture, Conseco will issue Series A
Subordinated Debentures to the Company in an aggregate principal amount of $
________, such amount being the sum of (i) the aggregate stated liquidation
preference of the Series A Preferred Shares issued and sold by the Company and
(ii) the Common Shares Payments. In the event that the Underwriters'
over-allotment option is exercised, Conseco will agree to issue additional
Series A Subordinated Debentures to the Company equal to the aggregate stated
liquidation preference of the Series A Preferred Shares so sold upon such
exercise plus the related aggregate additional cash contributions to the
Company by the holders of the Common Shares. If the over-allotment option is
exercised in full, the aggregate principal amount of such additional Series A
Subordinated Debentures will equal $___________.
The entire principal amount of the Series A Subordinated Debentures shall
become due and payable (together with any accrued and unpaid interest thereon)
including Additional Interest (as hereinafter defined), if any on __________,
2034 (the "Maturity Date"). Upon exchange of the Series A Preferred Shares for
Series A Subordinated Debentures, (i) the Series A Subordinated Debentures
will no longer be subject to mandatory prepayment upon the dissolution, winding
up or liquidation of the Company, (ii) the Series A Subordinated Debentures
will not be subject to an election by Conseco to exchange Series A Subordinated
Debentures for new debentures, (iii) Conseco will use its best efforts to have
the Series A Subordinated Debentures listed on the same exchange on which the
Series A Preferred Shares are listed, (iv) the Subordinated Indenture or Series
A Subordinated Debentures may, thereafter, be modified or amended with the
consent of not less than 66 2/3% in principal amount of the Series A
Subordinated Debentures at the time outstanding, provided, however, that no
such modification or amendment may, without the consent of the holder of each
Series A Subordinated Debenture affected thereby, (a) extend the stated
maturity of the principal of any Series A Subordinated Debenture, or reduce the
principal amount thereof or reduce the rate or extend the time of payment of
interest thereon, or reduce any amount payable on redemption thereof or change
the currency in which the principal thereof or interest thereon is payable or
impair the right to institute suit for the enforcement of any payment on any
Series A Subordinated Debenture when due or (b) reduce the aforesaid principal
amount of Series A Subordinated Debentures of any series the consent of the
holders of which is required for any such modification and (v) Conseco's
obligation to pay Additional Interest (other than Additional Interest, if any,
accrued and unpaid to such date of exchange) shall cease.
<PAGE>
<PAGE> S-24
Mandatory Prepayment
If the Company redeems Series A Preferred Shares in cash for the Redemption
Price in accordance with the terms thereof, the Series A Subordinated
Debentures will become due and payable in a principal amount equal to the
aggregate stated liquidation preference of the Series A Preferred Shares
so redeemed (together with accrued interest on such principal amount to the
date of redemption). Any payment pursuant to this provision shall be made
prior to 12:00 noon, New York time, on the date of such redemption or at such
other time on such earlier date as the Company and Conseco shall agree.
Optional Prepayment
Conseco shall have the right to prepay the Series A Subordinated Debentures,
without premium or penalty, in whole or in part (together with any accrued but
unpaid interest, including Additional Interest, if any, on the portion being
prepaid) at any time on or after _______________, 1999.
Interest
The Series A Subordinated Debentures shall bear interest at an annual rate
of ____% from _______________, 1994 until maturity. Such interest shall be
payable on the last day of each calendar month of each year, commencing
____________, 1994. Interest will be computed on the basis of twelve 30-day
months and a 360-day year and, for any interest period that is shorter than a
full calendar month, will be calculated on the basis of the actual number of
days elapsed in such period. If any date on which interest is payable on the
Series A Subordinated Debentures is not a Business Day, then payment of the
interest due on such date will be made on the next succeeding Business Day (and
without any interest or other payment in respect of any such delay), except
that, if such Business Day is in the next succeeding calendar year, such
payment shall be made on the immediately preceding Business Day, in
each case with the same force and effect as if made on such date; provided,
however, that Conseco shall have the right at any time or times during the term
of the Series A Subordinated Debentures, so long as Conseco is not in default
in the payment of interest on the Series A Subordinated Debentures, to extend
the interest payment period to the next interest payment date by a period (not
to exceed 60 months from the last date on which interest was paid in full) at
the end of which Conseco shall pay all interest then accrued and unpaid
(together with interest thereon at the rate specified for the Series A
Subordinated Debentures to the extent permitted by applicable law); and
provided further that, during any such extended interest period, or at any time
during which there is an uncured Default or Event of Default under the Series
A Subordinated Debentures, Conseco shall not pay any dividends on, or redeem,
purchase, acquire or make a liquidation payment with respect to, any of its
shares of capital stock or make any guarantee payments with respect to the
foregoing (other than payments under any guarantee of the Series A Preferred
Shares or any other series of Preferred Shares ranking pari passu with the
Series A Preferred Shares which payments shall be made on a pro rata basis).
Conseco shall give the Company not less than five Business Days' prior notice
of its selection of such longer interest payment period. The term "Business
Day" shall mean each day on which banks in The City of New York are open for
business.
Additional Interest
If at any time following the issuance of the Series A Subordinated
Debentures, the Company shall be required to pay, with respect to its income
derived from the interest payments on the Series A Subordinated Debentures, any
amounts, for or on account of any taxes, duties or governmental charges of
whatever nature imposed by the State of Delaware or any other taxing authority,
then, in any such case, Conseco will pay as interest such additional amounts
("Additional Interest") as may be necessary in order that the net amounts
received and retained by the Company after the payment of such taxes, duties
or governmental charges shall result in the Company's having such funds as it
would have had in the absence of the payment of such taxes, duties or
governmental charges.
<PAGE> S-25
Method and Date of Payment
Each payment by Conseco of principal and interest (including Additional
Interest, if any) on the Series A Subordinated Debentures shall be made to the
Company in United States dollars at such place and to such account as may be
designated by the Company.
Set-off
Notwithstanding anything to the contrary in the Subordinated Indenture or the
Series A Subordinated Debentures, Conseco shall have the right to set-off any
payment it is otherwise required to make thereunder with and to the extent
Conseco has theretofore made, or is concurrently on the date of such payment
making, a payment under the Guarantee.
Subordination
The Subordinated Indenture will provide that Conseco and the Company covenant
and agree that each of the Series A Subordinated Debentures is subordinate and
junior in right of payment to all Senior Indebtedness as provided in the
Subordinated Indenture. The Subordinated Indenture defines the term "Senior
Indebtedness" as the principal, premium, if any, and interest on (i) all
indebtedness of Conseco, whether outstanding on the date of the Series A
Subordinated Debentures or thereafter created, incurred or assumed, which is
for money borrowed, or evidenced by a note or similar instrument given in
connection with the acquisition of any business, properties or assets,
including securities, (ii) any indebtedness of others of the kinds described
in the preceding clause (i) for the payment of which Conseco is responsible or
liable as guarantor or otherwise and (iii) amendments, renewals, extensions
and refundings of any such indebtedness, unless in any instrument or
instruments evidencing or securing such indebtedness or pursuant to which the
same is outstanding, or in any such amendment, renewal, extension or refunding,
it is expressly provided that such indebtedness is not superior in right of
payment to the Series A Subordinated Debentures. The Senior Indebtedness shall
continue to be Senior Indebtedness and entitled to the benefits of the
subordination provisions irrespective of any amendment, modification or waiver
of any term of the Senior Indebtedness or extension or renewal of the Senior
Indebtedness. For a more detailed description of the subordination provisions
set forth in the Subordinated Indenture, see "Description of Debt Securities
of Conseco - Subordination under the Subordinated Indenture" in the
accompanying Prospectus.
Covenants
In the Series A Subordinated Debentures, Conseco will agree that, so long as
the Series A Preferred Shares are outstanding, (i) it shall not declare or pay
any dividend on, or redeem, purchase, acquire or make a liquidation payment
with respect to, any of its capital stock, or make any guarantee payments
with respect to the foregoing (other than payments pursuant to any guarantee
of the Series A Preferred Shares or any other series of Preferred Shares
ranking pari passu with the Series A Preferred Shares) if at such time (x)
there shall have occurred any Event of Default or event (a "Default") that,
with the giving of notice or the lapse of time or both, would constitute an
Event of Default or (y) Conseco shall be in default with respect to its payment
or other obligations under any guarantee of the Series A Preferred Shares, (ii)
it shall maintain ownership, directly or indirectly, of all of the Common
Shares, (iii) in its capacity as a direct and indirect holder of Common Shares,
it shall make (or cause to be made) such contributions to the Company so as to
cause at least 21% of all interests in the capital, income, gain, loss,
deduction and credit of the Company to be represented by the Common Shares,
(iv) it shall timely perform all of its duties as Managing Member of the
Company, and (v) it shall use its reasonable efforts to cause the Company to
remain a limited liability company and otherwise continue to be treated
as a partnership for U.S. federal income tax purposes.
<PAGE> S-26
Conseco also will agree (i) that its obligations under the Series A
Subordinated Debentures will also be for the benefit of the holders from time
to time of the Series A Preferred Shares and that such holders will be entitled
to enforce the Series A Subordinated Debentures directly against Conseco, and
(ii) not to consolidate with or merge with another entity or permit another
entity to consolidate with or merge into it unless (a) at such time no Event
of Default has occurred and is continuing, or would occur as a result of such
merger and (b) Conseco is the survivor of such merger or the entity formed by
or resulting from such merger shall expressly assume payment of the principal
of and premium, if any, and interest on the Series A Subordinated Debentures.
Events of Default
If one or more of the following events (each an "Event of Default") shall
occur and be continuing:
(a) default in the payment of interest on the Series A Subordinated
Debentures, including any Additional Interest in respect thereof, when due
that continues for 30 days (whether by virtue of the subordination provisions
of the Series A Subordinated Debentures or otherwise); provided, however, that
a valid extension of the interest payment period by Conseco shall not
constitute a default in the payment of interest for this purpose (see
"Interest" above),
(b) default in the payment of principal on the Series A Subordinated
Debentures when due (whether by virtue of the subordination provisions of the
Series A Subordinated Debentures or otherwise);
(c) the bankruptcy, insolvency or liquidation of Conseco; or
(d) the breach by Conseco of any of its covenants contained in the Series
A Subordinated Debentures continued for 90 days after notice to Conseco from
any holder of the Series A Preferred Shares; then (i) in the case of clauses
(a), (b) and (d), and at any time thereafter during the continuance of such
event, the Company will have the right to declare the principal of and the
interest on the Series A Subordinated Debentures (including any interest
subject to an extension of the interest payment period) and any other amounts
payable on the Series A Subordinated Debentures to be forthwith due and
payable, and (ii) in the case of clause (c), the principal of and interest on
the Series A Subordinated Debentures (including any interest subject to an
extension of the interest payment period) and any other amounts payable on the
Series A Subordinated Debentures shall automatically become due and payable,
whereupon in either case the Series A Subordinated Debentures and any other
amounts payable in respect of the Series A Subordinated Debentures under the
Series A Subordinated Debentures or the Subordinated Indenture shall be
forthwith due and payable without presentment, demand, protest or other notice
of any kind, all of which will be waived by Conseco, and the Company will have
the right to enforce its other rights as a defaulted creditor with respect to
the Series A Subordinated Debentures. Under the terms of the Series A
Preferred Shares, the holders of outstanding Series A Preferred Shares will
have the rights referred to under "Terms of the Series A Preferred Shares -
Voting Rights", including the right to appoint a trustee, which trustee shall
be authorized to exercise the Company's rights to accelerate the principal
amount of the Series A Subordinated Debentures and to enforce the Company's
other rights under the Series A Subordinated Debentures.
<PAGE> S-27
Miscellaneous
Conseco shall have the right at all times to assign any of its rights or
obligations under the Series A Subordinated Debentures to a direct or indirect
wholly owned subsidiary of Conseco, provided, however, that, in the event of
any such assignment, Conseco shall remain jointly and severally liable
for all such obligations. The Company may not assign any of its rights under
the Series A Subordinated Debentures without the prior written consent of
Conseco. Subject to the foregoing, the Series A Subordinated Debentures shall
be binding upon and inure to the benefit of Conseco and the Company and their
respective successors and assigns. Any assignment by Conseco or the Company
in contravention of such provisions will be null and void.
The Series A Subordinated Debentures and the Subordinated Indenture will be
governed by and construed in accordance with the internal laws of the State of
New York.
The Series A Subordinated Debentures may be amended by mutual consent of the
parties in the manner the parties shall agree; provided, however, that, so long
as any of the Series A Preferred Shares remain outstanding, no such amendment
shall be made that adversely affects the rights of the holders of the Series
A Preferred Shares, no termination of the Series A Subordinated Debentures
shall occur, and no Event of Default or compliance with any covenant under the
Series A Subordinated Debentures may be waived by the Company, without the
prior approval of the holders of at least 66 2/3% in liquidation preference of
all Series A Preferred Shares then outstanding, in writing or at a duly
constituted meeting of such holders.
<PAGE>
<PAGE> S-28
CERTAIN TAX MATTERS
The following discussion is a summary of certain U.S. federal income tax
consequences of the purchase, ownership and disposition of Series A Preferred
Shares and is based upon the advice of Sidley & Austin. It deals only with
Series A Preferred Shares held as capital assets by initial purchasers, and
not with special classes of holders, such as dealers in securities or
currencies, life insurance companies, persons holding Series A Preferred Shares
as a hedge or hedges against currency risks or as part of a straddle or a
conversion transaction, or persons whose functional currency is not the U.S.
dollar. This summary is based on tax laws in effect in the United States, and
administrative and judicial interpretations thereof, as of the date hereof, all
of which are subject to change (possibly on a retroactive basis).
PROSPECTIVE PURCHASERS OF SERIES A PREFERRED SHARES ARE ADVISED TO CONSULT
THEIR OWN TAX ADVISORS AS TO THE TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP
AND DISPOSITION OF SERIES A PREFERRED SHARES, INCLUDING THE EFFECT OF ANY STATE
OR OTHER TAX LAWS.
Income from Series A Preferred Shares
In the opinion of Sidley & Austin, special tax counsel to Conseco, the
Company will be treated as a partnership and the Series A Subordinated
Debentures will be treated as indebtedness for federal income tax purposes.
Each holder of Series A Preferred Shares will be required to include in gross
income the holder's distributive share of the Company's net income. Such
income should not exceed dividends received on a Series A Preferred Share,
except in the limited circumstances described below under "Potential Extension
of Interest Payment Period." Any amount so included in a holder's gross income
will increase the tax basis in such holder's Series A Preferred Shares, and the
amount of cash dividends to a holder will reduce the tax basis in such holder's
Series A Preferred Shares. No portion of such income will be eligible for the
dividends received deduction.
Sale or Redemption of Series A Preferred Shares
A holder of Series A Preferred Shares will recognize capital gain or loss on
a sale of Series A Preferred Shares (including a distribution of cash in
redemption of all of a holder's Series A Preferred Shares) equal to the
difference between the amount realized and the holder's tax basis for the
Series A Preferred Shares sold or redeemed. In the case of a cash distribution
in partial redemption of a holder's Series A Preferred Shares, no loss will be
recognized, the holder's tax basis in the Series A Preferred Shares will be
reduced by the amount of the distribution, and the holder will recognize gain
to the extent, if any, that the amount of the distribution exceeds such
holder's tax basis in the Series A Preferred Shares. Gain or loss recognized
by a holder on the sale or exchange of a Series A Preferred Share held for more
than one year will be taxable as long-term capital gain or loss.
Exchange of Series A Preferred Shares for Series A Subordinated Debentures
Upon a distribution by the Company of the Series A Subordinated Debentures
in exchange for the Series A Preferred Shares as described under the caption
"Terms of the Series A Preferred Shares -- Optional Redemption," such an
exchange will be treated as a non-taxable exchange to each holder of Series A
Preferred Shares and will result in the holder of Series A Preferred Shares
receiving an aggregate tax basis in the Series A Subordinated Debentures equal
to such holder's aggregate tax basis in such holder's Series A Preferred
Shares. A holder's holding period in the Series A Subordinated <PAGE>
<PAGE> S-29
Debentures so received in exchange for Series A Preferred Shares will include
the period for which the Series A Preferred Shares were held by such holder.
Potential Extension of Interest Payment Period
Under the terms of the Series A Subordinated Debentures, Conseco may be
permitted to extend the interest payment period on the Series A Subordinated
Debentures up to 60 months. In the event that the interest payment period is
extended, the Company will continue to accrue income, equal to the amount of
the interest payment due at the end of the extended interest payment period,
over the length of the extended interest payment period.
A portion of such accrued income will be allocated, but not distributed, to
holders of record of the Series A Preferred Shares on the last day of each
calendar month. As a result, holders of record during an extended interest
payment period will include interest in gross income in advance of the receipt
of cash and any such holders who dispose of Series A Preferred Shares prior to
the record date for the payment of dividends following such extended interest
payment period will include interest in gross income but will not receive from
the Company any cash related thereto. The tax basis of a Series A Preferred
Share will be increased by the amount of any interest that is included in
income without a receipt of cash, and will be decreased when and if such cash
is subsequently received from the Company.
Use of Convention
The Company will adopt a convention under which all of the net income accrued
by the Company in any calendar month will be allocated to holders of record on
the record date for dividends in respect of such month. It is unclear whether
this convention will be respected for U.S. federal income tax purposes. If it
is not respected, the distributive share of the Company's net income allocable
to Series A Preferred Shares in respect of a month in which such Series A
Preferred Shares are sold may be allocated between the seller and the purchaser
on some other basis. Any amount so allocated to the holder, whether as seller
or purchaser, would be includible in the holder's income and would increase
such holder's tax basis in the Series A Preferred Shares.
Company Information Returns
Conseco, as Managing Member of the Company, will furnish each holder of
Series A Preferred Shares with a Schedule K-1 setting forth each holder's
allocable share of income within 90 days after the close of the Company's
taxable year.
Any person who holds Series A Preferred Shares as a nominee for another
person is required to furnish to the Company (a) the name, address and taxpayer
identification number of the beneficial owner and the nominee; (b) whether the
beneficial owner is (i) a person that is not a United States person, (ii) a
foreign government, an international organization or any wholly owned agency
or instrumentality of either of the foregoing, or (iii) a tax-exempt entity;
(c) the amount and description of the Series A Preferred Shares held, acquired
or transferred for the beneficial owner; and (d) certain information including
the dates of acquisitions and transfers, means of acquisitions and transfers,
and acquisition cost for purchases, as well as the amount of net proceeds from
sales. Brokers and financial institutions are required to furnish additional
information, including whether they are United States persons and certain
information on the Series A Preferred Shares they acquire, hold or transfer for
their own accounts. A penalty of $50 per failure (up to a maximum of $100,000
per calendar year) is imposed for failure to report such information to the
Company.
<PAGE>
<PAGE> S-30
Non-United States Holders
For purposes of this discussion, a "Non-United States Holder" is any holder
who or which is (a) a nonresident alien individual or (b) a foreign
corporation, partnership, estate or trust, in either case not subject to U.S.
federal income tax on a net income basis in respect of a Series A Preferred
Share.
Under present U.S. federal income tax law, income allocable to any holder of
Series A Preferred Shares who or which is a Non-United States Holder will not
be subject to U.S. federal withholding tax; provided that (a) the beneficial
owner of the Series A Preferred Shares does not actually or constructively own
10% or more of the total combined voting power of all classes of stock of
Conseco entitled to vote; (b) the beneficial owner of the Series A Preferred
Shares is not a controlled foreign corporation that is related to Conseco
through stock ownership; and (c) either (i) the beneficial owner of the Series
A Preferred Shares certifies to the Company or its agent, under penalties of
perjury, that it is not a United States holder and provides its name and
address or (ii) a securities clearing organization, bank or other financial
institution that holds customers' securities in the ordinary course of its
trade or business (a "financial institution") and holds the Series A Preferred
Shares certifies to the Company or its agent, under penalties of perjury, that
such statement has been received from the beneficial owner by it or by a
financial institution between it and the beneficial owner and furnishes the
payor with a copy thereof.
A Non-United States Holder of a Series A Preferred Share will generally not
be subject to U.S. federal income or withholding tax in respect of any gain
recognized on the sale or exchange of a Series A Preferred Share unless, in the
case of an individual, such Non-United States Holder is present in the United
States for 183 or more days in the taxable year of the sale and either has a
"tax home" in the United States or certain other requirements are met.
<PAGE>
<PAGE> S-31
UNDERWRITING
Merrill Lynch, Pierce, Fenner & Smith Incorporated and Dean Witter Reynolds
Inc. (the "Underwriters") have severally agreed, subject to the terms and
conditions of the Purchase Agreement, to purchase from the Company the number
of Series A Preferred Shares set forth below opposite their respective names.
Under certain circumstances, the commitments of non-defaulting Underwriters may
be increased as set forth in the Purchase Agreement.
Number of Series A
Underwriter Preferred Shares
----------- ----------------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated . . . . . . . . . . . .
Dean Witter Reynolds Inc.. . . . . . . . . . . . . ----------
Total . . . . . . . . . . . . . ==========
The Underwriters have advised the Company that they propose to offer the
Series A Preferred Shares to the public at the offering price set forth on the
cover page of this Prospectus Supplement, and to certain dealers at such price
less a concession not in excess of $________ per share. The Underwriters may
allow, and such dealers may reallow, a discount not in excess of $________ per
share to certain other dealers. After the initial public offering, the public
offering price, concession and discount may be changed. The Series A Preferred
Shares are offered subject to receipt and acceptance by the Underwriters and
to certain other conditions, including the right to reject orders in whole or
in part. The Underwriters are committed to purchase all of the shares of the
Series A Preferred Shares if any are purchased.
The Company has granted the Underwriters an option for 30 days after the
date hereof to purchase up to an additional _________ Series A Preferred Shares
to cover over-allotments, if any, at the initial public offering price plus
accumulated dividends, if any (with additional Underwriters' Compensation).
If the Underwriters exercise this option, each of the Underwriters will have
a firm commitment, subject to certain conditions, to purchase approximately the
same percentage thereof which the numbers of Series A Preferred Shares to be
purchased by it shown in the foregoing table is of the __________________
Series A Preferred Shares initially offered hereby.
In view of the fact that the proceeds of the sale of the Series A
Preferred Shares will be loaned to Conseco, under the Purchase Agreement
Conseco has agreed to pay to such Underwriters an amount in New York Clearing
House (next day) funds of $_______ per Series A Preferred Share ($________ per
Series A Preferred Share sold to certain institutions) for the accounts of the
several Underwriters, as compensation for the services of the Underwriters
under the Purchase Agreement.
Prior to this offering, there has been no public market for the Series A
Preferred Shares. Application will be made to list the Series A Preferred
Shares on the New York Stock Exchange. In order to meet one of the
requirements for listing the Series A Preferred Shares on the New York Stock
Exchange, the Underwriters will undertake to sell lots of 100 or more Series
A Preferred Shares to a minimum of 400 beneficial holders.
The Underwriters receive customary fees for ordinary brokerage
transactions with Conseco and its affiliates. The Underwriters have performed
investment banking services for Conseco and its affiliates in the past, for
which they have received customary compensation.
<PAGE>
<PAGE> S-32
The Company and Conseco have agreed to indemnify the several Underwriters
against certain liabilities, including liabilities under the Securities Act of
1933, as amended, or contribute to payments the Underwriters may be required
to make in respect thereof.
LEGAL OPINIONS
The legal validity of the Series A Preferred Shares will be passed upon
for the Company by Richards, Layton & Finger, P.A., special Delaware counsel
to Conseco. The legal validity of the Guarantee and the Subordinated
Debentures relating to the Preferred Shares of the Company offered hereby will
be passed upon for the Company and Conseco by Lawrence W. Inlow, Executive Vice
President, Secretary and General Counsel of Conseco. Sidley & Austin, New
York, New York, will pass upon the United States federal income tax matters
described under "Certain Tax Matters" in this Prospectus. Certain legal
matters will be passed upon for the Underwriters by LeBoeuf, Lamb, Greene
& MacRae, a partnership including professional corporations, New York, New
York, who will rely on the opinion of Mr. Inlow as to matters of Indiana law.
In rendering their opinions, Mr. Inlow, Sidley & Austin and LeBoeuf, Lamb,
Greene & MacRae will rely on the opinion of Richards, Layton & Finger, P.A.
as to certain matters of Delaware law. Mr. Inlow is a full-time employee and
an officer of Conseco and owns 247,576 shares and holds options to purchase
662,000 shares of Conseco common stock. LeBoeuf, Lamb, Greene & MacRae has
from time to time performed legal services for Conseco.
EXPERTS
The consolidated financial statements of Conseco as of December 31, 1993
and 1992, and for each of the three years in the period ended December 31, 1993
incorporated by reference in this Prospectus, have been audited by Coopers &
Lybrand, independent accountants, as set forth in their report thereon included
therein and incorporated herein by reference. Such consolidated financial
statements are incorporated herein by reference in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
<PAGE>
<PAGE>
<TABLE>
<S> <S>
================================================= =========================================
No dealer, salesperson or other individual __________ Shares
has been authorized to give any information or to
make any representations other than those
contained or incorporated by reference in this
Prospectus Supplement or the Prospectus in Conseco, L.L.C.
connection with the offering covered by this
Prospectus Supplement and the Prospectus and, if guaranteed to the extent set forth
given or made, such information or representations herein by
must not be relied upon as having been authorized
by Conseco, Inc., Conseco L.L.C. or the Conseco, Inc.
Underwriters. This Prospectus Supplement and
the Prospectus do not constitute an offer or
solicitation by anyone in any state in which such
offer or solicitation is not authorized or in which % Series A Cumulative
the person making such offer or solicitation is not Preferred Stock
qualified to do so or to anyone to whom it is
unlawful to make such offer or solicitation.
Neither the delivery of this Prospectus Supplement
and the Prospectus nor any sale made hereunder ----------------
and thereunder shall, under any circumstances,
create an implication that there has been no
change in the affairs of Conseco, Inc. or Conseco PROSPECTUS SUPPLEMENT
L.L.C. since the date hereof.
-----------------
TABLE OF CONTENTS
Page
----
Prospectus Supplement Summary. S-4
Conseco L.L.C.. . . . . . . . S-8
Use of Proceeds . . . . . . . S-8 Merrill Lynch & Co.
Capitalization. . . . . . . . S-9
Selected Consolidated Financial Dean Witter Reynolds Inc.
Information . . . . . . . . S-10
Terms of Series A Preferred Shares S-12
Description of the Guarantee. S-21
Description of the Series A Subordinated
Debentures. . . . . . . . . S-23
Certain Tax Matters . . . . . S-28 ___________, 1994
Underwriting. . . . . . . . . S-31
Legal Opinions. . . . . . . . S-32
Experts . . . . . . . . . . . S-32
</TABLE>
<PAGE>
<PAGE> 1
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED APRIL 11, 1994
PROSPECTUS
- ----------
U.S. $200,000,000
CONSECO, INC.
DEBT SECURITIES
PREFERRED STOCK
CONSECO L.L.C.
CUMULATIVE PREFERRED SHARES
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY
CONSECO, INC.
------------------
Conseco, Inc., an Indiana corporation ("Conseco"), may offer
from time to time (a) its debt securities, consisting of debentures,
notes and/or other evidences of indebtedness representing unsecured
obligations of Conseco (the "Debt Securities") and (b) shares of its
preferred stock, par value --- per share ("Preferred Stock"), in each
case in one or more series and in amounts, at prices and on terms to
be determined at the time of offering.
Conseco L.L.C., a limited liability company formed under the
laws of the State of Delaware (the "Company"), may offer from time
to time, in one or more series, its Cumulative Preferred Shares (the
"Preferred Shares") representing preferred limited liability company
interests in the Company. The Company was formed by Conseco solely
to issue Preferred Shares and common limited liability company
interests ("Common Shares") and loan the proceeds thereof to Conseco.
Accordingly, the proceeds of an offering of Preferred Shares,
together with all capital contributions made in respect of Common
Shares, will be loaned to Conseco in exchange for subordinated Debt
Securities of Conseco ("Subordinated Debentures") having the terms
described herein. Interest and principal payments on the
Subordinated Debentures are intended to fund the payment of periodic
distributions ("dividends") and redemption and liquidation
distributions on the Preferred Shares and the Common Shares. The
payment of dividends, if and to the extent declared out of moneys
held by the Company and lawfully available therefor, and payments on
liquidation (to the extent of the remaining assets of the Company)
or redemption with respect to the Preferred Shares will be guaranteed
by a subordinated guarantee (the "Guarantee") of Conseco to
the limited extent set forth herein. See "Conseco L.L.C." and
"Description of Certain Contractual Back-Up Obligations of Conseco"
for a description of the various contractual backup obligations of
Conseco.
<PAGE>
<PAGE> 2
Certain specific terms of the particular Debt Securities,
Preferred Stock and Preferred Shares in respect of which this
Prospectus is being delivered (the "Offered Securities") will be set
forth in an accompanying Prospectus Supplement (the "Prospectus
Supplement"), which will describe, without limitation and where
applicable, the following: (x) in the case of Debt Securities, the
specific designation, aggregate principal amount, denomination,
maturity, premium, if any, interest rate (which may be fixed or
variable), time and method of calculating payment of interest, if
any, place or places where principal of, premium, if any, and
interest, if any, on such Debt Securities will be payable, currency
in which principal of, premium, if any, and interest, if any, on such
Debt Securities will be payable, any terms of redemption at the
option of Conseco or the holder, any sinking fund provisions, initial
public offering price, any listing on a securities exchange and other
special terms, and (y) in the case of Preferred Stock and Preferred
Shares, the specific designation, stated value and liquidation
preference per share or security and number of shares or securities
offered, initial public offering price, dividend rate (which may be
fixed or variable), method of calculating payment of dividends, place
or places where dividends on such Preferred Stock or Preferred Shares
will be payable, any terms of redemption, dates on which dividends
shall be payable and dates from which dividends shall accrue, any
listing on a securities exchange and other special terms.
The offering price to the public of the Offered Securities will
be limited to U.S. $200,000,000 in the aggregate (or its equivalent
(based on the applicable exchange rate at the time of issue), if
Offered Securities are offered for consideration denominated in one
or more foreign currencies or currency units as shall be designated
by Conseco). The Debt Securities may be denominated in United States
dollars or, at the option of Conseco if so specified in the
applicable Prospectus Supplement, in one or more foreign currencies
or currency units. The Debt Securities may be issued in registered
form or bearer form, or both. If so specified in the applicable
Prospectus Supplement, Debt Securities of a series may be issued in
whole or in part in the form of one or more temporary or permanent
global securities.
The Offered Securities may be sold to or through underwriters,
through dealers or agents or directly to purchasers. See "Plan of
Distribution." The names of any underwriters, dealers or agents
involved in the sale of the Offered Securities in respect of which
this Prospectus is being delivered any applicable fee, commission or
discount arrangements with them will be set forth in a Prospectus
Supplement.
This Prospectus may not be used to consummate sales of Offered
Securities unless accompanied by a Prospectus Supplement.
-----------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is _____________, 1994.
<PAGE>
<PAGE> 3
AVAILABLE INFORMATION
Conseco is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
in accordance therewith files reports, proxy statements and other
information with the Securities and Exchange Commission (the
"Commission"). Such reports, proxy statements and other information
filed by Conseco can be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549, and at the following regional
offices of the Commission: New York Regional Office, 7 World Trade
Center, 13th Floor, New York, New York 10048; and Chicago Regional
Office, 500 West Madison Street, 14th Floor, Chicago, Illinois 60661.
Copies of such material can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, upon payment of the prescribed rates. Copies of such reports,
proxy statements and other information may also be inspected at the
offices of the New York Stock Exchange, 20 Broad Street, New York,
New York 10005.
The Company and Conseco have filed with the Commission a joint
Registration Statement under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the securities offered
hereby. This Prospectus does not contain all of the information set
forth in the Registration Statement and the exhibits thereto. For
further information with respect to the Company, Conseco and the
securities, reference is hereby made to such Registration Statement,
including the exhibits thereto, which may be examined at the
Commission's principal office, 450 Fifth Street, N.W., Washington,
D.C. 20549, or copies of which may be obtained from the Commission
at such office upon payment of the fees prescribed by the Commission.
No separate financial statements of the Company have been
included herein. The Company and Conseco do not consider that such
financial statements would be material to holders of the Preferred
Shares because the Company is a newly organized special purpose
entity, has no operating history and no independent operations and
is not engaged in any activity other than the issuance of the
Preferred Shares and the Common Shares, and the lending of the
proceeds thereof to Conseco pursuant to loans to be evidenced by
Subordinated Debentures. See "Conseco L.L.C." The Company
is a limited liability company formed under the laws of the State of
Delaware and will be managed by Conseco, which directly or indirectly
owns all of the Common Shares, which are non-transferable.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Conseco's Annual Report on Form 10-K for the year ended
December 31, 1993 is incorporated herein by reference. Any documents
filed by Conseco pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act after the date of this Prospectus and prior to the
termination of the offering made hereby shall be deemed to be
incorporated by reference in this Prospectus and to be part hereof
from the date of filing of such documents.
Any statement contained herein, or in a document incorporated
or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently
filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed except
as so modified or superseded, to constitute a part of this
Prospectus.
To the extent that any proxy statement is incorporated by
reference herein, such incorporation shall not include any
information contained in such proxy statement that is not, pursuant
to the Commission's rules, deemed to be "filed" with the Commission
or subject to the liabilities of Section 18 of the Exchange Act.
<PAGE> 4
Conseco will provide without charge to each person to whom this
Prospectus is delivered, upon the written or oral request of such
person, a copy of any or all of the documents incorporated herein
by reference (other than exhibits to such documents unless such
exhibits are specifically incorporated by reference into such
documents). Any such request should be directed to James W.
Rosensteele, Vice President, Investor Relations, Conseco, Inc., 11825
N. Pennsylvania Street, Carmel, Indiana 46032 (telephone number:
(317) 573-2893).
CONSECO L.L.C.
The Company, a wholly owned subsidiary of Conseco, is a limited
liability company formed under the laws of the State of Delaware.
The Company's registered office in the State of Delaware is c/o The
Corporation Trust Company, Corporation Trust Center, 1209 Orange
Street, Wilmington, Delaware 19801. Its telephone number is (302)
658-7581. Conseco owns directly and indirectly all of the Common
Shares of the Company, which Common Shares are nontransferable. The
Company was formed by Conseco solely to issue Preferred Shares and
Common Shares (collectively, the "Membership Shares") and to loan the
net proceeds thereof to Conseco in exchange for Subordinated
Debentures to finance Conseco's business operations. Interest and
principal on the Subordinated Debentures are intended to fund the
payment of dividends and redemption and liquidation distributions
on the Membership Shares. Accordingly, the Company's sole source of
cash flow is Conseco and the Company's ability to make dividend and
other payments in respect of the Preferred Shares will be dependent
on interest and principal payments by Conseco on the Subordinated
Debentures. See "Conseco, Inc." The Company will be managed by
Conseco (in such capacity, the "Managing Member").
CONSECO, INC.
Conseco is a specialized financial services holding company
which primarily makes controlling strategic investments in insurance
companies and related businesses, manages the operations of those
businesses to increase their value, provides services to acquired
companies and other businesses, and seeks to realize the increase in
value that its management brings to such companies through sale or
restructuring. The insurance companies in which Conseco has made
investments develop, market, issue and administer primarily annuity,
individual health insurance and life insurance products. Conseco
provides administrative, data processing and investment management
services to affiliated and nonaffiliated companies. Conseco's
operating strategy is to consolidate and streamline the
administrative functions of the acquired companies, to improve their
investment yields through active asset management by a centralized
investment operation and to eliminate their unprofitable products
and distribution channels.
Conseco's earnings result from three different activities: (i)
the operations of life insurance companies; (ii) services provided
to affiliates and nonaffiliates for fees; and (iii) the acquisition
and restructuring of life insurance companies, currently through
Conseco Capital Partners II, L.P. ("CCP II"). Major ownership
interests of insurance companies include: (i) Bankers Life Holding
Corporation and its subsidiaries ("Bankers"), in which Conseco has
a 56 percent ownership interest; (ii) Western National Corporation
and its subsidiary ("Western"), in which Conseco has a 40 percent
ownership interest; (iii) CCP Insurance, Inc. and its subsidiaries
("CCP"), in which Conseco has a 40 percent ownership interest and
(iv) wholly owned life insurance subsidiaries, Bankers National Life
Insurance Company, National Fidelity Life Insurance Company and
Lincoln American Life Insurance Company.
During 1990, Conseco formed Conseco Capital Partners, L.P. (the
"Partnership"), which raised and invested $99.5 million of capital.
Of this amount, approximately half was provided by Conseco and the
balance by other investors. A wholly owned subsidiary of Conseco was
the sole general partner of the Partnership. The Partnership was
Conseco's vehicle for effecting acquisitions of the following
insurance companies: Great American Reserve Insurance Company in June
1990, Jefferson <PAGE>
<PAGE> 5
National Life Insurance Company in November 1990, Beneficial Standard
Life Insurance Company in March 1991 and Bankers Life and Casualty
Company in November 1992. In July 1992, CCP, a holding company
organized for the Partnership's first three acquisitions, completed
an initial public offering of 8.0 million common shares, generating
net proceeds to CCP of $111.2 million. In March 1993, Bankers
completed an initial public offering of 19.6 million common shares,
generating net proceeds to Bankers of $405.3 million.
On February 15, 1994, Western completed an initial public
offering reducing Conseco's ownership interest to 40 percent of the
outstanding common stock of Western. Effective January 1, 1994,
Western is included in Conseco's financial statements on the equity
method.
On February 2, 1994, Conseco announced the closing of the
formation of CCP II, a partnership which will invest in acquisitions
of specialized annuity, life and accident and health insurance
companies and related businesses. As of January 31, 1994, 36
investors had committed a total of $624 million of capital to the new
partnership in a private placement.
Bankers, which had total assets of approximately $4 billion at
December 31, 1993, markets health and life insurance and annuity
products primarily to senior citizens through over 200 branch
offices and approximately 3,300 career agents. Most of Bankers'
agents sell only Bankers' policies. Bankers believes that its
success in the individual health insurance market is attributable in
large part to its career agency force, which permits one-on-one
contacts with potential policyholders and builds loyalty to Bankers
among existing policyholders. Its efficient and highly automated
claims processing system is designed to complement its personalized
marketing strategy by stressing prompt payment of claims and rapid
responses to policyholder inquiries.
Western, which had total assets of approximately $8.4 billion
at December 31, 1993, develops, markets and issues annuity products
through niche distribution channels. Western markets single premium
deferred annuities ("SPDAs") to the savings and retirement markets
through financial institutions (principally banks and thrifts),
flexible premium deferred annuities to the tax-qualified retirement
market and single premium immediate annuities primarily to the
structured settlement market. Western was a wholly owned subsidiary
of Conseco from its acquisition in 1987 until the completion of its
initial public offering on February 15, 1994.
CCP, which had approximately $5.3 billion of assets at December
31, 1993, markets, issues and administers annuity, life and employee
benefit-related insurance products through diversified cost-
effective distribution channels. These channels consist of educator
market specialists who sell tax-qualified annuities and certain
employee benefit-related insurance products primarily to school
teachers and administrators, professional independent producers who
sell various annuity and life insurance products aimed primarily at
the retirement market and financial institutions that sell SPDAs to
their depositors through employee agents.
Conseco's wholly owned insurance subsidiaries (excluding Western
which is no longer wholly owned by Conseco) had total assets of
approximately $1.0 billion at December 31, 1993. They have
profitable in-force blocks of many different annuity and life
products, but do not currently actively market their products.
Conseco provides to its affiliated companies and to unaffiliated
clients various combinations of services, including investment
management, mortgage origination and servicing, policy
administration, data processing, product marketing and executive
management services. In addition, subsidiaries of Conseco earn fees
by: (i) providing marketing services to financial institutions
related to the distribution of insurance and investment products and
(ii) distributing property and casualty insurance products through
independent agencies. Growth in this activity results from new
clients <PAGE>
<PAGE> 6
(both affiliated and others) and from increases in the fee-producing
activities conducted for such clients.
Conseco reduces operating expenses by centralizing,
standardizing and more efficiently performing many functions common
to most life insurance companies, such as underwriting and policy
administration, accounting and financial reporting, marketing,
regulatory compliance, actuarial services and asset management.
Conseco's centralized management techniques resulted in significant
employee reductions and expense savings in the nine insurance
companies acquired between 1985 and 1992. The ratio of aggregate
operating expenses (excluding commissions) to premiums collected for
these nine companies was reduced from 11 percent for the last year
prior to acquisition to 7.4 percent for the second full year (or in
Bankers' case, the first full year) following acquisition. The
ratio of such expenses to total assets of these companies decreased
from 3.4 percent to 1.9 percent in the same periods.
Conseco Capital Management, Inc. ("CCM"), a registered
investment adviser wholly owned by Conseco, manages the investment
portfolios of Conseco's wholly owned subsidiaries, Western, CCP,
Bankers and other nonaffiliated clients. CCM had approximately $19
billion of assets at fair value under management at December 31,
1993, of which $15.9 billion were assets of affiliated companies
and $3.1 billion were assets of nonaffiliated companies. CCM's
investment philosophy is to maintain a largely investment grade
fixed-income portfolio, provide adequate liquidity for expected
liability durations and other requirements and maximize total return
through active investment management.
Conseco believes that the consolidation of the U.S. life
insurance industry will continue, and Conseco intends to participate
in this process. Conseco believes that, under appropriate
circumstances, it is more advantageous to acquire companies with
large books of in-force life and health insurance and annuities than
to produce new business because initial underwriting costs have
already been incurred and mature business is generally less likely
to terminate, making more predictable profit analysis possible.
Conseco was organized in 1979 as an Indiana corporation and
commenced operations in 1982. Its executive offices are located at
11825 N. Pennsylvania Street, Carmel, Indiana 46032, and its
telephone number is (317) 573-6100.
USE OF PROCEEDS
Unless otherwise specified in the Prospectus Supplement, the
proceeds from the sale of any Preferred Shares (together with any
capital contributed in respect of Common Shares) will be loaned
by the Company to Conseco in exchange for Subordinated Debentures to
finance the business operations of Conseco. The net proceeds from
any sale of Debt Securities or Preferred Stock will be
used by Conseco for general corporate purposes.
<PAGE>
<PAGE> 7
RATIOS OF EARNINGS TO FIXED CHARGES AND EARNINGS TO FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
The following table sets forth Conseco's ratios of earnings to
fixed charges and earnings to fixed charges and preferred stock
dividends for each of the five years in the period ended December
31, 1993:
<TABLE>
<CAPTION> Year Ended
Years Ended December 31, December 31, 1993
------------------------ -----------------
As Pro
1989 1990 1991 1992 Reported Forma **
---- ---- ---- ---- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges for
which Conseco is Directly Liable* 2.49 2.08 3.67 7.21 8.35 3.42
Ratio of Earnings to Fixed Charges and
Preferred Stock Dividends for which
Conseco is Directly Liable* 1.94 1.79 3.04 5.66 4.25 1.43
<FN>
* The fixed charges also include interest on short-term borrowings by
consolidated subsidiaries for investment purposes. The fixed charges excludes
(i) the undistributed earnings and fixed charges of less than wholly owned
subsidiaries and (ii) interest credited to insurance and annuity policy
reserves of $213.6 million, $314.7 million, $576.7 million, $506.8 million and
$408.5 million for the years ended December 31, 1989, 1990, 1991, 1992 and
1993, respectively, and $38.9 million for the pro forma year ended December 31,
1993.
**The unaudited pro forma ratios are presented as if the following transactions
had all occurred on December 31, 1992: (i) the initial public offering and
related transactions of Western National Corporation ("Western"), (ii) the
initial public offering of BLHC, the purchase of additional shares of common
stock of BLHC by Conseco and the incentive earnings allocation from Conseco
Capital Partners, L.P. and (iii) the purchase of additional shares of common
stock of CCP. The ratios further assume the net proceeds to Conseco from the
initial public offering of Western were invested to earn 3 percent per annum
before income taxes.
</TABLE>
DESCRIPTION OF DEBT SECURITIES OF CONSECO
The Debt Securities offered hereby are to be issued in one or more series
under either (i) the Indenture, dated as of ____________, 1994 (the "Senior
Indenture"), between Conseco and _________________, as Trustee (the "Trustee")
or (ii) the Subordinated Indenture, dated as of _________________, 1994 (the
"Subordinated Indenture" and, together with the Senior Indenture, the
"Indentures"), between Conseco and _________________, as trustee (also, the
"Trustee"), copies of which will be filed as exhibits to the Registration
Statement of which this Prospectus forms a part. The offering price to the
public of the Debt Securities, Preferred Stock and Preferred Shares (the
"Offered Securities") offered pursuant to this Prospectus will be limited to
U.S. $200,000,000 aggregate principal amount (or its equivalent (based
on the applicable exchange rate at the time of issue) if Offered Securities are
issued with principal amounts denominated in one or more foreign currencies or
currency units as shall be designated by Conseco).
The statements herein relating to the Debt Securities and the following
summaries of certain provisions of the Indentures do not purport to be complete
and are subject to, and are qualified in their entirety by reference to, all
the provisions of the Indentures, including the definitions therein of certain
terms capitalized in this Prospectus. Whenever particular Sections or defined
terms of the Indentures are referred to herein or in a Prospectus Supplement,
such Sections or defined terms are incorporated herein or therein by reference.
<PAGE>
GENERAL
The Debt Securities will be unsecured obligations of Conseco. The Debt
Securities issued under the Senior Indenture will be unsecured and will rank
pari passu with all other unsecured and unsubordinated obligations of Conseco.
The Debt Securities issued under the Subordinated Indenture <PAGE>
<PAGE> 8
will be subordinate and junior in right of payment to the extent and in the
manner set forth in the Subordinated Indenture to all Senior Indebtedness of
Conseco. See "- Subordination under the Subordinated Indenture." The
Indentures do not limit the aggregate amount of Debt Securities which may be
issued thereunder, nor do they limit the incurrence or issuance of other
secured or unsecured debt of Conseco.
Reference is made to the applicable Prospectus Supplement which will
accompany this Prospectus for a description of the specific series of Debt
Securities being offered thereby, including:
(1) the title of such Debt Securities; (2) any limit upon the aggregate
principal amount of such Debt Securities; (3) the date or dates on which the
principal of and premium, if any, on such Debt Securities will mature or the
method of determining such date or dates; (4) the rate or rates (which may be
fixed or variable) at which such Debt Securities will bear interest, if any,
or the method of calculating such rate or rates; (5) the date or dates from
which interest, if any, will accrue or the method by which such date or dates
will be determined; (6) the date or dates on which interest, if any, will be
payable and the record date or dates therefor; (7) the place or places where
principal of, premium, if any, and interest, if any, on such Debt Securities
will be payable; (8) the period or periods within which, the price or prices
at which, the currency or currencies (including currency unit or units) in
which, and the terms and conditions upon which, such Debt Securities may be
redeemed, in whole or in part, at the option of Conseco; (9) the obligation,
if any, of Conseco to redeem or purchase such Debt Securities pursuant to any
sinking fund or analogous provisions or upon the happening of a specified event
and the period or periods within which, the price or prices at which and the
other terms and conditions upon which, such Debt Securities shall be redeemed
or purchased, in whole or in part, pursuant to such obligations; (10) the
denominations in which such Debt Securities are authorized to be issued;
(11) the currency or currency unit for which Debt Securities may be purchased
or in which Debt Securities may be denominated and/or the currency or
currencies (including currency unit or units) in which principal of, premium,
if any, and interest, if any, on such Debt Securities will be payable and
whether Conseco or the holders of any such Debt Securities may elect to receive
payments in respect of such Debt Securities in a currency or currency unit
other than that in which such Debt Securities are stated to be payable; (12)
if other than the principal amount thereof, the portion of the principal
amount of such Debt Securities which will be payable upon declaration of the
acceleration of the maturity thereof or the method by which such portion shall
be determined; (13) the person to whom any interest on any such Debt Security
shall be payable if other than the person in whose name such Debt Security is
registered on the applicable record date; (14) any addition to, or modification
or deletion of, any Event of Default or any covenant of Conseco specified in
the Indenture with respect to such Debt Securities; (15) the application, if
any, of such means of defeasance or covenant defeasance as may be specified for
such Debt Securities; (16) whether such Debt Securities are to be issued in
whole or in part in the form of one or more temporary or permanent global
securities and, if so, the identity of the depository for such global security
or securities; and (17) any other special terms pertaining to such Debt
Securities. Unless otherwise specified in the applicable Prospectus
Supplement, the Debt Securities will not be listed on any securities exchange.
(Section ________ of each Indenture.)
Unless otherwise specified in the applicable Prospectus Supplement, Debt
Securities will be issued in fully-registered form without coupons. Where Debt
Securities of any series are issued in bearer form, the special restrictions
and considerations, including special offering restrictions and special Federal
income tax considerations, applicable to any such Debt Securities and to
payment on and transfer and exchange of such Debt Securities will be described
in the applicable Prospectus Supplement. Bearer Debt Securities will be
transferable by delivery. (Section ____ of each Indenture.)
Debt Securities may be sold at a substantial discount below their stated
principal amount, bearing no interest or interest at a rate which at the time
of issuance is below market rates. Certain <PAGE>
<PAGE> 9
Federal income tax consequences and special considerations applicable to any
such Debt Securities will be described in the applicable Prospectus Supplement.
If the purchase price of any of the Debt Securities is payable in one or
more foreign currencies or currency units or if any Debt Securities are
denominated in one or more foreign currencies or currency units or if the
principal of, premium, if any, or interest, if any, on any Debt Securities is
payable in one or more foreign currencies or currency units, the restrictions,
elections, certain Federal income tax considerations, specific terms and other
information with respect to such issue of Debt Securities and such foreign
currency or currency units will be set forth in the applicable Prospectus
Supplement.
The general provisions of the Indentures do not afford holders of the Debt
Securities protection in the event of a highly leveraged or other transaction
involving Conseco that may adversely affect holders of the Debt Securities.
PAYMENT, REGISTRATION, TRANSFER AND EXCHANGE
Unless otherwise provided in the applicable Prospectus Supplement,
payments in respect of the Debt Securities will be made in the designated
currency at the office or agency of Conseco maintained for that purpose as
Conseco may designate from time to time, except that, at the option of Conseco,
interest payments, if any, on Debt Securities in registered form may be made
(i) by checks mailed to the holders of Debt Securities entitled thereto at
their registered addresses or (ii) by wire transfer to an account maintained
by the person entitled thereto as specified in the Register. (Sections _____
and _____ of each Indenture.) Unless otherwise indicated in an applicable
Prospectus Supplement, payment of any installment of interest on Debt
Securities in registered form will be made to the person in whose name such
Debt Security is registered at the close of business on the regular record date
for such interest. (Section ______ of each Indenture.)
Payment in respect of Debt Securities in bearer form will be made in the
currency and in the manner designated in the Prospectus Supplement, subject to
any applicable laws and regulations, at such paying agencies outside the United
States as Conseco may appoint from time to time. The paying agents outside the
United States initially appointed by Conseco for a series of Debt Securities
will be named in the Prospectus Supplement. Conseco may at any time designate
additional paying agents or rescind the designation of any paying agents,
except that, if Debt Securities of a series are issuable as Registered
Securities, Conseco will be required to maintain at least one paying agent in
each Place of Payment for such series and, if Debt Securities of a series are
issuable as Bearer Securities, Conseco will be required to maintain a paying
agent in a Place of Payment outside the United States where Debt Securities of
such series and any coupons appertaining thereto may be presented and
surrendered for payment. (Section ______ of each Indenture.)
Unless otherwise provided in the applicable Prospectus Supplement, Debt
Securities in registered form will be transferable or exchangeable at the
agency of Conseco maintained for such purpose as designated by Conseco from
time to time. (Sections ______ and _______ of each Indenture.) Debt Securities
may be transferred or exchanged without service charge, other than any tax or
other governmental charge imposed in connection therewith. (Section _______
of each Indenture.)
GLOBAL DEBT SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more fully registered global securities (a "Registered Global
Security") that will be deposited with a depository (the "Depository") or with
a nominee for the Depository identified in the applicable Prospectus
Supplement. In such a case, one or more Registered Global Securities will be
issued in a <PAGE>
<PAGE> 10
denomination or aggregate denominations equal to the portion of the aggregate
principal amount of outstanding Debt Securities of the series to be represented
by such Registered Global Security or Securities. (Section ______ of each
Indenture.) Unless and until it is exchanged in whole or in part for Debt
Securities in definitive certificated form, a Registered Global Security may
not be registered for transfer or exchange except as a whole by the Depository
for such Registered Global Security to a nominee of such Depository or by a
nominee of such Depository to such Depository or another nominee of such
Depository or by such Depository or any such nominee to a successor Depository
for such series or a nominee of such successor Depository and except in the
circumstances described in the applicable Prospectus Supplement. (Section ____
of each Indenture.)
The specific terms of the depository arrangement with respect to any
portion of a series of Debt Securities to be represented by a Registered Global
Security will be described in the applicable Prospectus Supplement. Conseco
expects that the following provisions will apply to depository arrangements.
Upon the issuance of any Registered Global Security, and the deposit of
such Registered Global Security with or on behalf of the Depository for such
Registered Global Security, the Depository will credit, on its book-entry
registration and transfer system, the respective principal amounts of the Debt
Securities represented by such Registered Global Security to the accounts of
institutions ("participants") that have accounts with the Depository or its
nominee. The accounts to be credited will be designated by the underwriters
or agents engaging in the distribution of such Debt Securities or by Conseco,
if such Debt Securities are offered and sold directly by Conseco. Ownership
of beneficial interests in a Registered Global Security will be limited to
participants or persons that may hold interests through participants.
Ownership of beneficial interests by participants in such Registered Global
Security will be shown on, and the transfer of such beneficial interests will
be effected only through, records maintained by the Depository for such
Registered Global Security or by its nominee. Ownership of beneficial
interests in such Registered Global Security by persons that hold through
participants will be shown on, and the transfer of such beneficial interests
within such participants will be effected only through, records maintained by
such participants. The laws of some jurisdictions require that certain
purchasers of securities take physical delivery of such securities in
certificated form. The foregoing limitations and such laws may impair the
ability to transfer beneficial interests in such Registered Global Securities.
So long as the Depository for a Registered Global Security, or its
nominee, is the registered owner of such Registered Global Security, such
Depository or such nominee, as the case may be, will be considered the sole
owner or holder of the Debt Securities represented by such Registered Global
Security for all purposes under each Indenture. Unless otherwise specified in
the applicable Prospectus Supplement and except as specified below, owners of
beneficial interests in such Registered Global Security will not be entitled
to have Debt Securities of the series represented by such Registered Global
Security registered in their names, will not receive or be entitled to receive
physical delivery of Debt Securities of such series in certificated form and
will not be considered the holders thereof for any purposes under the relevant
Indenture. (Section ____ of each Indenture.) Accordingly, each person owning
a beneficial interest in such Registered Global Security must rely on the
procedures of the Depository and, if such person is not a participant, on the
procedures of the participant through which such person owns its interest, to
exercise any rights of a holder under the relevant Indenture. The Depository
may grant proxies and otherwise authorize participants to give or take any
request, demand, authorization, direction, notice, consent, waiver or other
action which a holder is entitled to give or take under the relevant Indenture.
Conseco understands that, under existing industry practices, if Conseco
requests any action of holders or any owner of a beneficial interest in such
Registered Global Security desires to give any notice or take any action a
holder is entitled to give or take under the relevant Indenture, the Depository
would authorize the participants to give such notice or take such action, and
participants would authorize beneficial owners owning through such participants
to give <PAGE>
<PAGE> 11
such notice or take such action or would otherwise act upon the instructions
of beneficial owners owning through them.
Unless otherwise specified in the applicable Prospectus Supplement,
payments with respect to principal, premium, if any, and interest, if any, on
Debt Securities represented by a Registered Global Security registered in the
name of a Depository or its nominee will be made to such Depository or its
nominee, as the case may be, as the registered owner of such Registered Global
Security.
Conseco expects that the Depository for any Debt Securities represented
by a Registered Global Security, upon receipt of any payment of principal,
premium or interest, will immediately credit participants' accounts with
payments in amounts proportionate to their respective beneficial interests
in the principal amount of such Registered Global Security as shown on the
records of such Depository. Conseco also expects that payments by participants
to owners of beneficial interests in such Registered Global Security held
through such participants will be governed by standing instructions and
customary practices, as is now the case with the securities held for the
accounts of customers registered in "street names", and will be the
responsibility of such participants. None of Conseco, the respective Trustees
or any agent of Conseco or the respective Trustees shall have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial interests of a Registered Global
Security, or for maintaining, supervising or reviewing any records relating to
such beneficial interests. (Section _______ of each Indenture.)
Unless otherwise specified in the applicable Prospectus Supplement, if the
Depository for any Debt Securities represented by a Registered Global Security
is at any time unwilling or unable to continue as Depository and a successor
Depository is not appointed by Conseco within 90 days, Conseco will issue such
Debt Securities in definitive certificated form in exchange for such Registered
Global Security. In addition, Conseco may at any time and in its sole
discretion determine not to have any of the Debt Securities of a series
represented by one or more Registered Global Securities and, in such event,
will issue Debt Securities of such series in definitive certificated form in
exchange for all of the Registered Global Security or Securities representing
such Debt Securities. (Section ______ of each Indenture.)
The Debt Securities of a series may also be issued in whole or in part in
the form of one or more bearer global securities (a "Bearer Global Security")
that will be deposited with a depository, or with a nominee for such
depository, identified in the applicable Prospectus Supplement. Any such
Bearer Global Securities may be issued in temporary or permanent form.
(Section ______ of each Indenture.) The specific terms and procedures,
including the specific terms of the depository arrangement, with respect to any
portion of a series of Debt Securities to be represented by one or more Bearer
Global Securities will be described in the applicable Prospectus Supplement.
CONSOLIDATION, MERGER OR SALE BY CONSECO
Conseco shall not consolidate with or merge into any other corporation or
sell its assets substantially as an entirety, unless (i) the corporation formed
by such consolidation or into which Conseco is merged or the corporation which
acquires its assets is organized in the United States and expressly assumes all
of the obligations of Conseco under each Indenture, and (ii) immediately after
giving effect to such transaction, no Default or Event of Default shall have
happened and be continuing. Upon any such consolidation, merger or sale, the
successor corporation formed by such consolidation, or into which Conseco is
merged or to which such sale is made, shall succeed to, and be substituted for
Conseco under each Indenture. (Section ______ of each Indenture.)
<PAGE>
<PAGE> 12
EVENTS OF DEFAULT, NOTICE AND CERTAIN RIGHTS ON DEFAULT
Each Indenture provides that, if an Event of Default specified therein
occurs with respect to the Debt Securities of any series and is continuing, the
Trustee for such series or the holders of 25% in aggregate principal amount of
all of the outstanding Debt Securities of that series, by written notice
to Conseco (and to the Trustee for such series, if notice is given by such
holders of Debt Securities), may declare the principal of (or, if the Debt
Securities of that series are Original Issue Discount Securities or Indexed
Securities, such portion of the principal amount specified in the Prospectus
Supplement) and accrued interest on all the Debt Securities of that series to
be due and payable (provided, with respect to any Debt Securities (including
Subordinated Debentures) issued under the Subordinated Indenture, that the
payment of principal and interest on such Debt Securities shall remain
subordinated to the extent provided in Article ____ of the Subordinated
Indenture). (Section _____ of each Indenture.)
Events of Default with respect to Debt Securities of any series are
defined in each Indenture as being: (a) default for 30 days in payment of any
interest on any Debt Security of that series or any coupon appertaining thereto
or any additional amount payable with respect to Debt Securities of such series
as specified in the applicable Prospectus Supplement when due; (b) default in
payment of principal, or premium, if any, at maturity or on redemption or
otherwise, or in the making of a mandatory sinking fund payment of any Debt
Securities of that series when due; (c) default for 60 days after notice to
Conseco by the Trustee for such series, or by the holders of 25% in aggregate
principal amount of the Debt Securities of such series then outstanding, in the
performance of any other agreement in the Debt Securities of that series, in
the Indenture or in any supplemental indenture or board resolution referred to
therein under which the Debt Securities of that series may have been issued;
(d) default resulting in acceleration of other indebtedness of Conseco for
borrowed money where the aggregate principal amount so accelerated exceeds
[$25] million and such acceleration is not rescinded or annulled within 30 days
after the written notice thereof to Conseco by the Trustee or to Conseco and
the Trustee by the holders of 25% in aggregate principal amount of the Debt
Securities of such series then outstanding, provided that such Event of Default
will be remedied, cured or waived if the default that resulted in the
acceleration of such other indebtedness is remedied, cured or waived; and (e)
certain events of bankruptcy, insolvency or reorganization of Conseco.
(Section ____ of each Indenture.) Events of Default with respect to a specified
series of Debt Securities may be added to the Indenture and, if so added, will
be described in the applicable Prospectus Supplement. (Sections ____ and ____
of each Indenture.)
Each Indenture provides that the Trustee will, within 90 days after the
occurrence of a Default with respect to the Debt Securities of any series, give
to the holders of the Debt Securities of that series notice of all Defaults
known to it unless such Default shall have been cured or waived; provided
that except in the case of a Default in payment on the Debt Securities of that
series, the Trustee may withhold the notice if and so long as a committee of
its Responsible Officers in good faith determines that withholding such notice
is in the interests of the holders of the Debt Securities of that series.
(Section ____ of each Indenture.) "Default" means any event which is, or after
notice or passage of time or both, would be, an Event of Default. (Section
____ each Indenture.)
Each Indenture provides that the holders of a majority in aggregate
principal amount of the Debt Securities of each series affected (with each such
series voting as a class) may, subject to certain limited conditions, direct
the time, method and place of conducting any proceeding for any remedy
available to the Trustee for such series, or exercising any trust or power
conferred on such Trustee. (Section ____ of each Indenture.)
Each Indenture includes a covenant that Conseco will file annually with
the Trustee a certificate as to Conseco's compliance with all conditions and
covenants of such Indenture. (Section ____ of each Indenture.)
<PAGE> 13
The holders of a majority in aggregate principal amount of any series of
Debt Securities by notice to the Trustee for such series may waive, on behalf
of the holders of all Debt Securities of such series, any past Default or Event
of Default with respect to that series and its consequences except a Default
or Event of Default in the payment of the principal of, premium, if any, or
interest, if any, on any Debt Security. (Section ____ of each Indenture.)
MODIFICATION OF THE INDENTURES
Each Indenture contains provisions permitting Conseco and the Trustee to
enter into one or more supplemental indentures without the consent of the
holders of any of the Debt Securities in order (i) to evidence the succession
of another corporation to Conseco and the assumption of the covenants of
Conseco by a successor to Conseco; (ii) to add to the covenants of Conseco or
surrender any right or power of Conseco; (iii) to add additional Events of
Default with respect to any series of Debt Securities; (iv) to add or change
any provisions to such extent as necessary to permit or facilitate the issuance
of Debt Securities in bearer form; (v) to change or eliminate any provision
affecting only Debt Securities not yet issued; (vi) to secure the Debt
Securities; (vii) to establish the form or terms of Debt Securities; (viii) to
<PAGE> 12
evidence and provide for successor Trustees; (ix) if allowed without penalty
under applicable laws and regulations, to permit payment in respect of Debt
Securities in bearer form in the United States; (x) to correct any defect or
supplement any inconsistent provisions or to make any other provisions with
respect to matters or questions arising under such Indenture, provided that
such action does not adversely affect the interests of any holder of Debt
Securities of any series; or (xi) to cure any ambiguity or correct any mistake.
(Section ____ of each Indenture.)
Each Indenture also contains provisions permitting Conseco and the
Trustee, with the consent of the holders of a majority in aggregate principal
amount of the outstanding Debt Securities affected by such supplemental
indenture (with the Debt Securities of each series voting as a class), to
execute supplemental indentures adding any provisions to or changing or
eliminating any of the provisions of such Indenture or any supplemental
indenture or modifying the rights of the holders of Debt Securities of such
series, except that, without the consent of the holder of each Debt Security
so affected, no such supplemental indenture may: (i) change the time for
payment of principal or premium, if any, or interest on any Debt Security; (ii)
reduce the principal of, or any installment of principal of, or premium,
if any, or interest on any Debt Security, or change the manner in which the
amount of any of the foregoing is determined; (iii) reduce the amount of
premium, if any, payable upon the redemption of any Debt Security; (iv) reduce
the amount of principal payable upon acceleration of the maturity of any
Original Issue Discount or Index Security; (v) change the currency or currency
unit in which any Debt Security or any premium or interest thereon is payable;
(vi) impair the right to institute suit for the enforcement of any payment on
or with respect to any Debt Security; (vii) reduce the percentage in principal
amount of the outstanding Debt Securities affected thereby the consent of whose
holders is required for modification or amendment of such Indenture or for
waiver of compliance with certain provisions of the Indenture or for waiver of
certain defaults; (viii) change the obligation of Conseco to maintain an office
or agency in the places and for the purposes specified in such Indenture; or
(ix) modify the provisions relating to waiver of certain defaults or any of the
foregoing provisions. (Section ____ of each Indenture.)
SUBORDINATION UNDER THE SUBORDINATED INDENTURE
In the Subordinated Indenture, Conseco will covenant and agree that any
Debt Securities (including Subordinated Debentures) issued thereunder
("Subordinated Debt Securities") are subordinate and junior in right of payment
to all Senior Indebtedness to the extent provided in the Subordinated
Indenture. The Subordinated Indenture defines the term "Senior Indebtedness"
as the principal, premium, if any, and interest on (i) all indebtedness of
Conseco, whether outstanding on the date of the issuance of Subordinated Debt
Securities or thereafter created, incurred or assumed, which <PAGE>
<PAGE> 14
is for money borrowed, or evidenced by a note or similar instrument given in
connection with the acquisition of any business, properties or assets,
including securities, (ii) any indebtedness of others of the kinds described
in the preceding clause (i) for the payment of which Conseco is responsible or
liable as guarantor or otherwise and (iii) amendments, renewals, extensions and
refundings of any such indebtedness, unless in any instrument or instruments
evidencing or securing such indebtedness or pursuant to which the same is
outstanding, or in any such amendment, renewal, extension or refunding, it is
expressly provided that such indebtedness is not superior in right of payment
to Subordinated Debt Securities. The Senior Indebtedness shall continue to be
Senior Indebtedness and entitled to the benefits of the subordination
provisions irrespective of any amendment, modification or waiver of any term
of the Senior Indebtedness or extension or renewal of the Senior Indebtedness.
If (i) Conseco defaults in the payment of any principal, or premium, if
any, or interest on any Senior Indebtedness when the same becomes due and
payable, whether at maturity or at a date fixed for prepayment or declaration
or otherwise or (ii) an event of default occurs with respect to any Senior
Indebtedness permitting the holders thereof to accelerate the maturity thereof
and written notice of such event of default is given to Conseco by the holders
of Senior Indebtedness, then unless and until such default in payment or event
of default shall have been cured or waived or shall have ceased to exist, no
direct or indirect payment (in cash, property or securities, by set-off or
otherwise) shall be made or agreed to be made on account of the Subordinated
Debt Securities or interest thereon or in respect of any repayment, redemption,
retirement, purchase or other acquisition of Subordinated Debt Securities.
In the event of (i) any insolvency, bankruptcy, receivership, liquidation,
reorganization, readjustment, composition or other similar proceeding relating
to Conseco, its creditors or its property, (ii) any proceeding for the
liquidation, dissolution or other winding-up of Conseco, voluntary or
involuntary, whether or not involving insolvency or bankruptcy proceedings,
(iii) any assignment by Conseco for the benefit of creditors or (iv) any other
marshalling of the assets of Conseco, all Senior Indebtedness (including,
without limitation, interest accruing after the commencement of any such
proceeding, assignment or marshalling of assets) shall first be paid in full
before any payment or distribution, whether in cash, securities or other
property, shall be made by Conseco on account of Subordinated Debt Securities.
In any such event, any payment or distribution, whether in cash, securities or
other property (other than securities of Conseco or any other corporation
provided for by a plan of reorganization or readjustment, the payment of which
is subordinate, at least to the extent provided in the subordination provisions
of the Subordinated Indenture with respect to the indebtedness evidenced by
Subordinated Debt Securities, to the payment of all Senior Indebtedness
at the time outstanding and to any securities issued in respect thereof under
any such plan of reorganization or readjustment), which would otherwise (but
for the subordination provisions) be payable or deliverable in respect of
Subordinated Debt Securities (including any such payment or distribution which
may be payable or deliverable by reason of the payment of any other
indebtedness of Conseco being subordinated to the payment of Subordinated Debt
Securities) shall be paid or delivered directly to the holders of Senior
Indebtedness, or to their representative or trustee, in accordance with the
priorities then existing among such holders until all Senior Indebtedness shall
have been paid in full. No present or future holder of any Senior Indebtedness
shall be prejudiced in the right to enforce subordination of the indebtedness
evidenced by Subordinated Debt Securities by any act or failure to act on the
part of Conseco.
Senior Indebtedness shall not be deemed to have been paid in full unless
the holders thereof shall have received cash, securities or other property
equal to the amount of such Senior Indebtedness then outstanding. Upon the
payment in full of all Senior Indebtedness, the holders of Subordinated
Debt Securities shall be subrogated to all the rights of any holders of Senior
Indebtedness to receive any further payments or distributions applicable to the
Senior Indebtedness until all Subordinated Debt Securities shall have been paid
in full, and such payments or distributions received by any holder of <PAGE>
<PAGE> 15
Subordinated Debt Securities, by reason of such subrogation, of cash,
securities or other property which otherwise would be paid or distributed to
the holders of Senior Indebtedness, shall, as between Conseco and its creditors
other than the holders of Senior Indebtedness, on the one hand, and the holders
of Subordinated Debt Securities, on the other, be deemed to be a payment by
Conseco on account of Senior Indebtedness, and not on account of Subordinated
Debt Securities.
The Subordinated Indenture provides that the foregoing subordination
provisions, insofar as they relate to any particular issue of Subordinated Debt
Securities, may be changed prior to such issuance. Any such change would be
described in the Prospectus Supplement relating to such Subordinated Debt
Securities.
DEFEASANCE AND COVENANT DEFEASANCE
If indicated in the applicable Prospectus Supplement, Conseco may elect
either (i) to defease and be discharged from any and all obligations with
respect to the Debt Securities of or within any series (except as otherwise
provided in the relevant Indenture) ("defeasance") or (ii) to be released from
its obligations with respect to certain covenants applicable to the Debt
Securities of or within any series ("covenant defeasance"), upon the deposit
with the relevant Trustee (or other qualifying trustee), in trust for such
purpose, of money and/or Government Obligations which through the payment of
principal and interest in accordance with their terms will provide money in an
amount sufficient, without reinvestment, to pay the principal of and any
premium or interest on such Debt Securities to Maturity or redemption, as the
case may be, and any mandatory sinking fund or analogous payments thereon. As
a condition to defeasance or covenant defeasance, Conseco must deliver to the
Trustee an Opinion of Counsel to the effect that the Holders of such Debt
Securities will not recognize income, gain or loss for Federal income tax
purposes as a result of such defeasance or covenant defeasance and will be
subject to Federal income tax on the same amounts and in the same manner and
at the same times as would have been the case if such defeasance or covenant
defeasance had not occurred. Such Opinion of Counsel, in the case of
defeasance under clause (i) above, must refer to and be based upon a ruling of
the Internal Revenue Service or a change in applicable Federal income tax law
occurring after the date of the relevant Indenture. (Article ____ of each
Indenture.) If indicated in the applicable Prospectus Supplement, in addition
to obligations of the United States or an agency or instrumentality thereof,
Government Obligations may include obligations of the government or an agency
or instrumentality of the government issuing the currency or currency unit
in which Debt Securities of such series are payable. (Section ____ of each
Indenture.)
In addition, with respect to the Subordinated Indenture, in order to be
discharged (i) no event or condition shall exist that, pursuant to certain
provisions described under "- Subordination under the Subordinated Indenture"
above, would prevent Conseco from making payments of principal of (and premium,
if any) and interest on Subordinated Debt Securities at the date of the
irrevocable deposit referred to above or at any time during the period ending
on the 121st day after such deposit date, and (ii) Conseco shall deliver to the
Trustee under the Subordinated Indenture an opinion of counsel to the effect
that (a) the trust funds will not be subject to any rights of holders of Senior
Indebtedness, and (b) after the 121st day following the deposit, the trust
funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally except that if a court were to rule under any such law in any case
or proceeding that the trust refunds remained the property of Conseco, then the
Trustee under the Subordinated Indenture and the holders of Subordinated Debt
Securities would be entitled to certain rights as secured creditors in such
trust funds.
Conseco may exercise its defeasance option with respect to such Debt
Securities notwithstanding its prior exercise of its covenant defeasance
option. If Conseco exercises its defeasance option, payment of such Debt
Securities may not be accelerated because of a Default or <PAGE>
<PAGE> 16
an Event of Default. If Conseco exercises its covenant defeasance option,
payment of such Debt Securities may not be accelerated by reason of a Default
or an Event of Default with respect to the covenants to which such covenant
defeasance is applicable. However, if such acceleration were to occur by
reason of another Event of Default, the realizable value at the acceleration
date of the money and Government Obligations in the defeasance trust could be
less than the principal and interest then due on such Debt Securities, in that
the required deposit in the defeasance trust is based upon scheduled cash flow
rather than market value, which will vary depending upon interest rates and
other factors.
THE TRUSTEES
_________________ is the Trustee under the Senior Indenture.
______________ is the Trustee under the Subordinated Indenture. Conseco may
also maintain banking and other commercial relationships with each of the
Trustees and their affiliates in the ordinary course of business.
DESCRIPTION OF CAPITAL STOCK OF CONSECO
AUTHORIZED AND OUTSTANDING CAPITAL STOCK
At December 31, 1993, the authorized capital stock of Conseco was
520,000,000 shares, consisting of:
(a) 20,000,000 shares of preferred stock, no par value (the
"Preferred Stock") of which 5,749,726 shares were outstanding and designated
as Series D Cumulative Convertible Preferred Stock; and
(b) 500,000,000 shares of common stock, no par value (the "Common
Stock"), of which 25,311,773 shares were outstanding.
In general, the classes of authorized capital stock are afforded
preferences with respect to dividends and liquidation rights in the order
listed above. The Board of Directors of Conseco is empowered, without approval
of the stockholders, to cause the Preferred Stock to be issued in one
or more series, with the numbers of shares of each series and the rights,
preferences and limitations of each series to be determined by it. The
specific matters that may be determined by the Board of Directors include the
dividend rights, conversion rights, redemption rights and liquidation
preferences, if any, of any wholly unissued series of Preferred Stock (or of
the entire class of Preferred Stock if none of such shares have been issued),
the number of shares constituting such series and the terms and conditions of
the issue thereof. The descriptions set forth below do not purport to be
complete and are qualified in their entirety by reference to the Amended and
Restated Articles of Incorporation of Conseco, as amended (the "Articles of
Incorporation").
No holders of any class of Conseco's capital stock are entitled to
pre-emptive rights.
SERIES D PREFERRED STOCK
In January 1993, Conseco issued 5,750,000 shares of Series D Cumulative
Convertible Preferred Stock ("Series D Preferred Stock") pursuant to a public
offering. The Series D Preferred Stock trades on the New York Stock Exchange.
The Series D Preferred Stock provides for a dividend of $3.25 per share per
annum payable quarterly. The Series D Preferred Stock has a liquidation
preference of $50.00 per share (plus all accrued and unpaid dividends). Such
shares are convertible at the option of the holder into shares of Common Stock,
at a conversion price of $63.75 per share <PAGE>
<PAGE> 17
(equivalent to a ratio of approximately .7843 shares of Common Stock for each
share of Series D
Preferred Stock), subject to adjustment in certain events. Conseco may redeem
the Series D Preferred Stock at any time on or after January 22, 1996, in whole
or in part, at its option, at prices declining to $50.00 per share of Series
D Preferred Stock on and after January 15, 2003, plus accrued and unpaid
dividends. Except if Conseco fails to pay an aggregate of six quarterly
dividends, the holders of the Series D Preferred Stock have no voting rights.
The holders of Series D Preferred Stock are entitled to elect two persons to
the Board of Directors of Conseco in the event Conseco fails to pay an
aggregate of six quarterly dividends. Conseco may issue additional series of
Preferred Stock ranking on a parity with that of the Series D Preferred Stock.
PREFERRED STOCK
The particular terms of any series of Preferred Stock offered hereby
("Offered Preferred Stock") will be set forth in the Prospectus Supplement
relating thereto. The rights, preferences, privileges and restrictions,
including dividend rights, voting rights, terms of redemption and liquidation
preferences, of the Offered Preferred Stock of each series will be fixed or
designated pursuant to a certificate of designation adopted by the Board of
Directors or a duly authorized committee thereof. The description
of the terms of a particular series of Offered Preferred Stock that will be set
forth in a Prospectus Supplement does not purport to be complete and is
qualified in its entirety by reference to the certificate of designation
relating to such series.
CERTAIN PROVISIONS OF THE ARTICLES OF INCORPORATION AND BY-LAWS OF CONSECO
Certain provisions of the Articles of Incorporation and the Code of
By-laws of Conseco (the "By-laws") may make it more difficult to effect a
change in control of Conseco if the Board of Directors determines that it would
not be in the best interests of the stockholders. It could be argued, contrary
to the belief of the Board of Directors, that such provisions are not in the
best interests of the stockholders to the extent that they will have the effect
of tending to discourage possible takeover bids, which might be at prices
involving a premium over then recent market quotations for the Common Stock.
The most important of those provisions are described below.
The Articles of Incorporation authorize the establishment of a classified
Board of Directors pursuant to the By-laws. The By-laws, in turn, provide that
the Directors serve staggered three-year terms, with the members of one class
being elected in any year.
A classified Board of Directors may increase the difficulty of removing
incumbent directors, providing such directors with enhanced ability to retain
their positions. A classified Board of Directors may also make the acquisition
of control of Conseco by a third party by means of a proxy context more
difficult. In addition, the classification may make it more difficult to
change the majority of directors for business reasons unrelated to a change in
control.
The Articles of Incorporation provide that holders of Conseco's voting
stock shall not be entitled to vote on certain business transactions, (defined
to include, among other things, certain mergers, consolidations, sales, leases,
transfers or other dispositions of a substantial part of Conseco's assets)
with certain related persons (which includes persons beneficially owning more
than 10% of Conseco's outstanding voting stock), nor may such business
combination transactions be effected, unless (i) such business combination
shall have been approved by two-thirds of the continuing directors or (ii) the
aggregate amount of the cash and the fair value of any consideration other than
cash to be received per share by the holders of the Common Stock or the
Preferred Stock in the business combination shall be at least equal to the
highest per share price paid in order to acquire any shares of common stock
or preferred stock, as the case may be, beneficially owned, by the related
person. As discussed above, Preferred Stock may be issued from time to time
in one or more series with such rights, preferences, <PAGE>
<PAGE> 18
limitations and restrictions as may be determined by the Board of Directors.
The issuance of Preferred Stock could be used, under certain circumstances, as
a method of delaying or preventing a control of Conseco and could have a
detrimental effect on the rights of holders of Common Stock, including loss of
voting control.
The provisions of the Articles of Incorporation regarding the classified
Board of Directors and certain business combination transactions may not be
amended without the affirmative approval of holders of not less than 80% of the
outstanding voting stock of Conseco.
The By-laws may be amended by majority vote of the whole Board of
Directors.
CERTAIN PROVISIONS OF CORPORATE AND INSURANCE LAWS
In addition to the Articles of Incorporation and By-laws, certain
provisions of Indiana law may delay, deter or prevent a merger, tender offer
or other takeover attempt of Conseco.
Under Indiana law, a director may, in considering the best interests of
a corporation, consider the effects of any action on stockholders, employees,
suppliers and customers of the corporation, and communities in which offices
or other facilities of the corporation are located, and any other factors
the director considers pertinent.
Under Indiana law, no business combination (defined to include certain
mergers, sales of assets, sales of 5% or more of outstanding stock, loans,
recapitalizations or liquidations or dissolutions) involving Conseco and an
interested stockholder (defined to include any holder of 10% or more of the
corporation's voting stock) may be entered into unless (1) approved by the
Board of Directors of Conseco or (2) (a) five years have expired since the
acquisition of shares of the corporation by the interested stockholder, (b) all
requirements of the Articles of Incorporation relating to business combinations
are satisfied and (c) either (i) a majority of stockholders of Conseco
(excluding the interested stockholder) approve the business combination or (ii)
all stockholders are paid fair value (as defined in the statute) for their
stock. However, such law does not restrict any offer to purchase all
of Conseco's shares.
Under Indiana law, when a target corporation (such as Conseco),
incorporated in Indiana and having its principal place of business, principal
office or substantial assets in Indiana, has a certain threshold of ownership
by Indiana residents, any acquisition which, along with previous holdings,
gives the acquiror at least 20% of the target's voting stock triggers a
stockholder approval mechanism. If the acquiror files a statutorily required
disclosure statement, the target's management has 50 days within which to hold
a special meeting of stockholders at which all disinterested stockholders of
the target (those not affiliated with the acquiror or any officer or inside
director of the target) consider and vote upon whether the acquiror shall have
voting rights with respect to the shares of the target held by it. Without
stockholder approval, the shares acquired by the acquiror have no voting
rights. If the acquiror fails to file the statutorily required disclosure
statement, the target can redeem the acquiror's shares at a price to be
determined according to procedures devised by the target.
In addition, the insurance laws and regulations of the jurisdictions in
which Conseco's subsidiaries do business may impede or delay a business
combination involving Conseco.
DESCRIPTION OF PREFERRED SHARES OF CONSECO L.L.C.
The Company is authorized to issue from time to time Preferred Shares in
one or more series, with such dividend rights, liquidation preferences,
redemption provisions, voting rights and other rights, <PAGE>
<PAGE> 19
powers and duties as shall be established by the L.L.C. Agreement and written
actions (the "Actions") taken, or to be taken, by the Managing Member
establishing such rights, powers and duties (which Actions, when taken, are
deemed to amend and supplement and be a part of the L.L.C. Agreement). The
L.L.C. Agreement has been filed as an exhibit to the Registration Statement of
which this Prospectus forms a part, and a copy of the Action relating to
Preferred Shares of any series will be filed with the Commission at or prior
to the time of the sale of the Preferred Shares of such series. The Preferred
Shares of such series will be issued in registered form only.
The Managing Member is authorized, subject to the provisions of the L.L.C.
Agreement, to establish by Actions for each series of Preferred Shares, and the
applicable Prospectus Supplement shall set forth with respect to such series:
(i) the number of Preferred Shares to constitute such series and the
distinctive designation thereof; (ii) the dividend rate, the conditions and
dates upon which such dividends shall be payable, the preference or relation
which such dividends shall bear to the dividends payable on any other class of
Membership Shares or on any other series of Preferred Shares, and whether such
dividends shall be cumulative or noncumulative; (iii) whether the Preferred
Shares of such series shall be subject to redemption, and, if so, the times,
prices and other terms and conditions thereof; (iv) the rights of the holders
of Preferred Shares of such series upon the liquidation, dissolution or
winding-up of the Company; (v) whether the Preferred Shares of such series
shall be subject to a retirement or sinking fund, and, if so, the extent, terms
and provisions relative to the operation thereof; (vi) whether the Preferred
Shares of any series shall be convertible into, or exchangeable for, Membership
Shares of any other class or series or securities of any other kind, including
securities issued by Conseco or any of its affiliates, and, if so, the price
or rate of conversion or exchange and any method of adjusting the same; (vii)
the limitations and restrictions, if any, to be applicable while any Preferred
Shares of such series are outstanding upon the payment of dividends or making
of other distributions on, and upon the purchase, redemption or other
acquisition by the Company of, Common Shares or any other class of Membership
Shares or any other series of Preferred Shares ranking junior to the Preferred
Shares of such series either as to dividends or upon liquidation; (viii) the
conditions or restrictions, if any, upon the creation of indebtedness of the
Company or upon the issue of any additional Membership Shares (including
additional Preferred Shares of such series or of any other series) ranking on
a parity with or prior to the Preferred Shares of such series as to dividends
or distributions of assets upon liquidation; (ix) the voting rights, if any,
of Preferred Shares of such series; and (x) any other relative rights, powers
and duties as shall not be inconsistent with the L.L.C. Agreement. In
connection with the foregoing the Managing Member is authorized to take any
action, including amendment of the L.L.C. Agreement, without the vote or
approval of any holder of Preferred Shares (other than the requisite vote or
approval, if any, of holders of any outstanding series of Preferred Shares to
the extent provided in the Action relating to such series), including any
Action to create under the provisions of the L.L.C. Agreement a class (or
series of a class) or group of Membership Shares that was not previously
outstanding.
All Preferred Shares of any one series shall be identical with each other
in all respects, except that Preferred Shares of any one series issued at
different times may differ as to the dates from which dividends, if any,
thereon shall be cumulative. All series of Preferred Shares shall rank equally
and be identical in all respects, except as permitted by the L.L.C. Agreement
provisions summarized in the preceding paragraph, and all Preferred Shares
shall rank senior to the Common Shares both as to dividends and upon
liquidation. The Common Shares are also subject to all the rights, powers and
duties of the Preferred Shares as are established in the L.L.C. Agreement and
as shall be established in any Actions of the Managing Member pursuant to the
authority summarized in the preceding paragraph.
All Preferred Shares offered hereby will be guaranteed by Conseco to the
limited extent set forth below under "Description of Certain Contractual
Back-up Obligations of Conseco - The Guarantee" and will also be exchangeable,
at the option of the Company and Conseco, for <PAGE>
<PAGE> 20
Subordinated Debentures under certain limited circumstances. Certain Federal
income tax considerations applicable to any offering of Preferred Shares will
be described in the Prospectus Supplement relating thereto.
DESCRIPTION OF CERTAIN CONTRACTUAL BACK-UP OBLIGATIONS OF CONSECO
THE GUARANTEE
Conseco, by an irrevocable and unconditional agreement (the "Guarantee"),
will agree, to the limited extent set forth herein and in the related
Prospectus Supplement, to pay in full, to the holders of Preferred Shares of
any series, the Guarantee Payments (as defined below), as and when due,
regardless of any defense, right of set-off or counterclaim which the Company
may have or assert. The Guarantee will constitute a guarantee of payment and
may be enforced by holders of Preferred Shares directly against Conseco. The
following payments to the extent not made by the Company (the "Guarantee
Payments") will be subject to the Guarantee (without duplication): (i) any
accumulated and unpaid dividends which have theretofore been declared on the
Preferred Shares of such series out of funds held by the Company and legally
available therefor; (ii) the redemption price (including all accumulated and
unpaid dividends whether or not declared) payable, out of funds held by the
Company and legally available therefor, with respect to any Preferred Shares
of such series called for redemption; and (iii) in the event of any
liquidation, dissolution or winding-up of the Company, the lesser of (a) the
aggregate of the liquidation preference of the Preferred Shares of such series
and all accumulated and unpaid dividends (whether or not declared) to the date
of payment and (b) the amount of remaining assets of the Company legally
available to holders of Preferred Shares of such series. In addition, Conseco
will unconditionally and irrevocably guarantee, in the event of any exchange
by the Company of Preferred Shares for Subordinated Debentures (to the extent
permitted by the Actions for such Preferred Shares), delivery of certificates
representing the proper amount of such Subordinated Debentures in conformity
with the Actions for such series. Conseco's obligation to make a Guarantee
Payment may be satisfied by direct payment of the required amounts by Conseco
to the holders of Preferred Shares of such series or by causing the Company to
pay such amounts to such holders. The Prospectus Supplement relating to a
series of Preferred Shares will describe any additional covenants or other
terms of the Guarantee with respect to such series. The Guarantee will rank
pari passu with Subordinated Debentures and, accordingly, will be subordinate
and junior in right of payment to all Senior Indebtedness in a manner identical
to that described under "Description of Debt Securities Of Conseco -
Subordination under the Subordinated Indenture." A copy of the Payment and
Guarantee Agreement pursuant to which the Guarantee will be made will be filed
as an exhibit to the Registration Statement of which this Prospectus forms a
part.
SUBORDINATED DEBENTURES
Conseco will issue Subordinated Debentures to the Company to evidence the
loans to be made by the Company of the proceeds of (i) Preferred Shares of each
series and (ii) Common Shares and related capital contributions ("Common Shares
Payments"). See "Description of Debt Securities of Conseco" for a summary of
the material provisions of the Subordinated Indenture, under which the
Subordinated Debentures will be issued. References to provisions of the
Subordinated Indenture in this Prospectus and in the relevant Prospectus
Supplement are qualified in their entirety by reference to the text of the
Subordinated Indenture, a form of which will be filed as an exhibit to the
Registration Statement of which this Prospectus forms a part. The aggregate
dollar amount of the Subordinated Debentures relating to Preferred Shares of
any series will be set forth in the Prospectus Supplement for such series and
will equal the aggregate liquidation preference of the Preferred Shares of such
series, together with the related Common Shares Payments.
<PAGE>
<PAGE> 21
PLAN OF DISTRIBUTION
Conseco may sell any of the Debt Securities and Preferred Stock, and the
Company may sell any of the Preferred Shares, being offered hereby in any one
or more of the following ways from time to time: (i) through agents; (ii) to
or through underwriters; (iii) through dealers; and (iv) directly by Conseco
or the Company, as the case may be, to purchasers.
The distribution of the Offered Securities may be effected from time to
time in one or more transactions at a fixed price or prices, which may be
changed, at market prices prevailing at the time of sale, at prices related to
such prevailing market prices or at negotiated prices.
Offers to purchase Offered Securities may be solicited by agents
designated by Conseco or the Company, as the case may be, from time to time.
Any such agent involved in the offer or sale of the Offered Securities in
respect of which this Prospectus is delivered will be named, and any
commissions payable by Conseco or the Company to such agent will be set forth,
in the applicable Prospectus Supplement. Unless otherwise indicated in such
Prospectus Supplement, any such agent will be acting on a reasonable best
efforts basis for the period of its appointment. Any such agent may be deemed
to be an underwriter, as that term is defined in the Shares Act, of the Offered
Securities so offered and sold.
If Offered Securities are sold by means of an underwritten offering,
Conseco and/or the Company will execute an underwriting agreement with an
underwriter or underwriters at the time an agreement for such sale is reached,
and the names of the specific managing underwriter or underwriters, as well as
any other underwriters, and the terms of the transaction, including
commissions, discounts and any other compensation of the underwriters and
dealers, if any, will be set forth in the Prospectus Supplement which will be
used by the underwriters to make resales of the Offered Securities in respect
of which this Prospectus is delivered to the public. If underwriters are
utilized in the sale of the Offered Securities in respect of which this
Prospectus is delivered, the Offered Securities will be acquired by the
underwriters for their own account and may be resold from time to time in one
or more transactions, including negotiated transactions, at fixed public
offering prices or at varying prices determined by the underwriter at the time
of sale. Offered Securities may be offered to the public either through
underwriting syndicates represented by managing underwriters or directly by the
managing underwriters. If any underwriter or underwriters are utilized in the
sale of the Offered Securities, unless otherwise indicated in the Prospectus
Supplement, the underwriting agreement will provide that the obligations of the
underwriters are subject to certain conditions precedent and that the
underwriters with respect to a sale of Offered Securities will be obligated to
purchase all such Offered Securities if any are purchased.
If a dealer is utilized in the sales of the Offered Securities in respect
of which this Prospectus is delivered, Conseco or the Company, as the case may
be, will sell such Offered Securities to the dealer as principal. The dealer
may then resell such Offered Securities to the public at varying prices
to be determined by such dealer at the time of resale. Any such dealer may be
deemed to be an underwriter, as such term is defined in the Securities Act, of
the Offered Securities so offered and sold. The name of the dealer and the
terms of the transaction will be set forth in the Prospectus Supplement
relating thereto.
Offers to purchase Offered Securities may be solicited directly by Conseco
or the Company, as the case may be, and the sale thereof may be made by Conseco
of the Company, as the case may be, directly to institutional investors or
others, who may be deemed to be underwriters within the meaning of the
Securities Act with respect to any resale thereof. The terms of any such sales
will be described in the Prospectus Supplement relating thereto.
<PAGE>
<PAGE> 22
Agents, underwriters and dealers may be entitled under relevant agreements
to indemnification or contribution by Conseco and/or the Company against
certain liabilities, including liabilities under the Securities Act.
Agents, underwriters and dealers may be customers of, engage in
transactions with, or perform services for, Conseco and its subsidiaries
(including the Company) in the ordinary course of business.
Offered Securities may also be offered and sold, if so indicated in the
Prospectus Supplement, in connection with a remarketing upon their purchase,
in accordance with a redemption or repayment pursuant to their terms, or
otherwise, by one or more firms ("remarketing firms"), acting as principals
for their own accounts or as agents for Conseco or the Company, as the case may
be. Any remarketing firm will be identified and the terms of its agreement,
if any, with Conseco or the Company and its compensation will be described in
the Prospectus Supplement. Remarketing firms may be deemed to be underwriters,
as such term is defined in the Securities Act, in connection with the Offered
Securities remarketed thereby. Remarketing firms may be entitled under
agreements which may be entered into with Conseco to indemnification or
contribution by Conseco and/or the Company against certain civil liabilities,
including liabilities under the Securities Act, and may be customers of,
engage in transactions with or perform services for Conseco and its
subsidiaries (including the Company) in the ordinary course of business.
If so indicated in the applicable Prospectus Supplement, Conseco or the
Company, as the case may be, may authorize agents, underwriters or dealers to
solicit offers by certain institutions to purchase Offered Securities from
Conseco or the Company, as the case may be, at the public offering prices set
forth in the applicable Prospectus Supplement pursuant to delayed delivery
contracts ("Contracts") providing for payment and delivery on a specified date
or dates. A commission indicated in the applicable Prospectus Supplement will
be paid to underwriters, dealers and agents soliciting purchases of Offered
Securities pursuant to Contracts accepted by Conseco.
LEGAL OPINIONS
The legal validity of the Preferred Shares of the Company offered hereby
will be passed upon by Richards, Layton & Finger, P.A., special Delaware
counsel to Conseco. Unless otherwise indicated in the applicable Prospectus
Supplement, the legal validity of any Debt Securities and Preferred Stock
of Conseco offered hereby and of the Guarantee and the Subordinated Debentures
relating to any Preferred Shares of the Company offered hereby will be passed
upon for Conseco by Lawrence W. Inlow, Executive Vice President, Secretary and
General Counsel of Conseco, and certain legal matters will be passed upon for
any underwriters or agents by LeBoeuf, Lamb, Greene & MacRae, a partnership
including professional corporations, New York, New York, who will rely on the
opinion of Mr. Inlow as to matters of Indiana law. In rendering their
opinions, Mr. Inlow and LeBoeuf, Lamb, Greene & MacRae will rely upon the
opinion of Richards, Layton & Finger, P.A. as to certain matters of Delaware
law. Mr. Inlow is a full-time employee and an officer of Conseco and owns
247,576 shares and holds options to purchase 662,000 shares of Conseco common
stock. LeBoeuf, Lamb, Greene & MacRae has from time to time performed legal
services for Conseco.
<PAGE>
<PAGE> 23
EXPERTS
The consolidated financial statements of Conseco as of December 31, 1993
and 1992, and for each of the three years in the period ended December 31, 1993
incorporated by reference in this Prospectus, have been audited by Coopers &
Lybrand, independent accountants, as set forth in their report thereon included
therein and incorporated herein by reference. Such consolidated financial
statements are incorporated herein by reference in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
<PAGE>
<PAGE> II-1
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The expenses in connection with the issuance and distribution of the
securities being registered, other than underwriting compensation, are:
<TABLE>
<CAPTION>
<S> <C>
SEC Registration Fee . . . . . . . . . . $ 68,966
NASD Filing Fee. . . . . . . . . . . . . *
Accounting Fees and Expenses . . . . . . *
Blue Sky Fees and Expenses . . . . . . . *
Legal Fees and Expenses. . . . . . . . . *
Printing and Engraving Fees. . . . . . . *
Rating Agency Fees . . . . . . . . . . . *
Miscellaneous. . . . . . . . . . . . . . *
---------
TOTAL. . . . . . . . . . . . . $ *
=========
</TABLE>
* To be supplied by amendment.
All expenses except SEC registration fee are estimated.
Item 15. Indemnification of Directors and Officers.
The Indiana Business Corporation Law grants authorization to Indiana
corporations to indemnify officers and directors for their conduct if such
conduct was in good faith and was in the corporation's best interests or, in
the case of directors, was not opposed to such best interests, and permits the
purchase of insurance in this regard. In addition, the shareholders of a
corporation may approve the inclusion of other or additional indemnification
provisions in the articles of incorporation and by-laws.
The Code of By-laws of Conseco provided for the indemnification of any
person made a party to any action, suit or proceeding by reason of the fact
that he is a director, officer or employee of the Registrant, unless it is
adjudged in such action, suit or proceeding that such person is liable for
negligence or misconduct in the performance of his duties. Such
indemnification shall be against the reasonable expenses, including attorneys'
fees, incurred by such person in connection with the defense of such action,
suit or proceeding. In some circumstances, Conseco may reimburse any such
person for the reasonable costs of settlement of any such action, suit or
proceeding if a majority of the members of the Board of Directors not involved
in the controversy shall determine that it was in the interests of Conseco that
such settlement be made and that such person was not guilty of negligence
or misconduct.
Reference is made to the proposed forms of Purchase Agreement to be filed
as Exhibits 1.1, 1.2 and 1.3 hereto, which contain certain indemnification
provisions.
<PAGE>
<PAGE> II-2
Item 16. Exhibits.
*1.1 Form of Purchase Agreement - Debt Securities of Conseco, Inc.
*1.2 Form of Purchase Agreement - Preferred Stock of Conseco, Inc.
*1.3 Form of Purchase Agreement - Preferred Shares of Conseco, L.L.C.
3.1 Certificate of Formation of Conseco L.L.C.
*3.2 Limited Liability Company Agreement of Conseco L.L.C.
3.3 Amended and Restated Articles of Incorporation of Conseco, Inc. were filed
with the Commission as Exhibit 3.1 to the Registration Statement on Form
S-2, No. 33-8498; Articles of Amendment thereto, as filed September 9,
1988 with the Indiana Secretary of State, were filed with the Commission
as Exhibit 3.1.1 to Conseco's Annual Report on Form 10-K for 1988;
Articles of Amendment thereto, as filed June 13, 1989 with the Indiana
Secretary of State, were filed with the Commission as Exhibit 3.1.2 to
Conseco's Report on Form 10-Q for the quarter ended June 30, 1989; and
Articles of Amendment thereto, as filed June 29, 1993 with the Indiana
Secretary of State, were filed with the Commission as Exhibit 3.1.3 to
Conseco's Report on Form 10-Q for the quarter ended June 30, 1993, and are
incorporated herein by this reference.
3.4 Amended and Restated By-Laws of Conseco effective February 10, 1986 were
filed with the Commission as Exhibit 3.2 to its Registration Statement on
Form S-1, No. 33-4367, and an Amendment thereto was filed with the
Commission as Exhibit 3.2.1 to Amendment No. 2 to its Registration
Statement on Form S-1, No. 33-4367; and are incorporated herein by this
reference.
*4.1 Form of Payment and Guarantee Agreement with respect to the Preferred
Shares.
*4.2 Form of Indenture, dated as of _________________, 1994, between Conseco,
Inc. and ________________________, as Trustee.
*4.3 Form of Subordinated Indenture, dated as of _________________, 1994,
between Conseco, Inc. and ____________________, as Trustee.
*5.1 Opinion of Lawrence W. Inlow with respect to legality of the Debt
Securities, the Preferred Stock and the Guarantee.
*5.2 Opinion of Richards, Layton & Finger, special Delaware counsel, with
respect to legality of the Preferred Shares.
*8.1 Opinion of Sidley & Austin with respect to certain tax matters.
12.1 Computation of Ratio of Earnings to Fixed Charges and Dividends.
12.2 Computation of Ratio of Earnings to Fixed Charges and Preferred Dividends
for which Conseco is Directly Liable.
<PAGE>
<PAGE> II-3
23.1 Consent of Coopers & Lybrand.
*23.2 Consent of Lawrence W. Inlow (included in Exhibit 5.1).
*23.3 Consent of Richards, Layton & Finger (included in Exhibit 5.2).
*23.4 Consent of Sidley & Austin (included in Exhibit 8.1).
24.1.1 Power of Attorney.
24.1.2 Power of Attorney.
*To be supplied by amendment.
<PAGE>
<PAGE> II-4
Item 17. Undertakings.
(a) Rule 415 Offering
The undersigned registrants hereby undertake:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply
if the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by Conseco pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) Filings Incorporating Subsequent Exchange Act Documents by Reference.
The undersigned registrants hereby undertake that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
Conseco's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
<PAGE>
<PAGE> II-5
(c) Rule 430A Offering.
Each of the undersigned registrants hereby undertakes:
(1) That, for purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrants pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall be deemed to
be part of this Registration Statement as of the time it was declared
effective.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(d) Acceleration of Effectiveness
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers or persons controlling the
registrants pursuant to the foregoing provisions or otherwise the registrants
have been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrants of expenses incurred or paid by a director, officer or controlling
person of the registrants in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, each registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
<PAGE>
<PAGE> II-6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Conseco, Inc.
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Carmel, State of Indiana, on the 11th day of April,
1994.
CONSECO, INC.
By: /s/ROLLIN M. DICK
---------------------------
Rollin M. Dick, Executive
Vice President
Pursuant to the requirements of the Securities Act of 1933, Conseco L.L.C.
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Carmel, State of Indiana, on the 11th day of April,
1994.
CONSECO L.L.C.
By: CONSECO, INC., as Managing Member
-----------------------------------
By: /s/ROLLIN M. DICK
-----------------------------------
Rollin M. Dick, Executive
Vice President
<PAGE>
<PAGE> II-7
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities with Conseco, Inc. and the Managing Member indicated on April 11th,
1994.
Signature Title (Capacity)
--------- ----------------
/s/STEPHEN C. HILBERT
- --------------------- Chairman of the Board, President and Chief
Stephen C. Hilbert Executive Officer (Principal Executive
Officer)
/s/ROLLIN M. DICK Executive Vice President and Chief Financial
- ----------------- Officer and
Rollin M. Dick Director (Principal Financial Officer and
Principal Accounting Officer)
* Director
- ----------------------
Michael G. Browning
- ------------------- Director
Louis P. Ferrero
- ------------------- Director
Arthur M. Gerber
* Director
- ----------------------
Donald F. Gongaware
- ------------------- Director
M. Phil Hathaway
*By: /s/KARL W. KINDIG
--------------------------------
Karl W. Kindig, Attorney-in-Fact
<PAGE>
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
* 1.1 Form of Purchase Agreement - Debt Securities of Conseco, Inc.
* 1.2 Form of Purchase Agreement - Preferred Stock of Conseco, Inc.
* 1.3 Form of Purchase Agreement - Preferred Shares of Conseco L.L.C.
3.1 Certificate of Formation of Conseco L.L.C.
* 3.2 Limited Liability Company Agreement of Conseco L.L.C.
3.3 Amended and Restated Articles of Incorporation of Conseco, Inc. were
filed with the Commission as Exhibit 3.1 to the Registration
Statement on Form S-2, No. 33-8498; Articles of Amendment thereto,
as filed September 9, 1988 with the Indiana Secretary of State, were
filed with the Commission as Exhibit 3.1.1 to Conseco's Annual
Report on Form 10-K for 1988; Articles of Amendment thereto, as
filed June 13, 1989 with the Indiana Secretary of State, were filed
with the Commission as Exhibit 3.1.2 to Conseco's Report on Form
10-Q for the quarter ended June 30, 1989; and Articles of Amendment
thereto, as filed June 29, 1993 with the Indiana Secretary of State,
were filed with the Commission as Exhibit 3.1.3 to Conseco's Report
on Form 10-Q for the quarter ended June 30, 1993, and are
incorporated herein by this reference.
3.4 Amended and Restated By-Laws of Conseco effective February 10, 1986
were filed with the Commission as Exhibit 3.2 to its Registration
Statement on Form S-1, No. 33-4367, and an Amendment thereto was
filed with the Commission as Exhibit 3.2.1 to Amendment No. 2 to its
Registration Statement on Form S-1, No. 33-4367; and are
incorporated herein by this reference.
* 4.1 Form of Payment and Guarantee Agreement with respect to the
Preferred Shares.
* 4.2 Form of Indenture, dated as of ___________________, 1994, between
Conseco, Inc. and ________________________, as Trustee.
* 4.3 Form of Subordinated Indenture, dated as of _______________, 1994,
between Conseco, Inc. and ____________________, as Trustee.
* 5.1 Opinion of Lawrence W. Inlow with respect to legality of the Debt
Securities, the Preferred Stock and the Guarantee.
* 5.2 Opinion of Richards, Layton & Finger, special Delaware counsel, with
respect to legality of the Preferred Shares.
<PAGE>
<PAGE>
* 8.1 Opinion of Sidley & Austin with respect to certain tax matters.
12.1 Computation of Ratio of Earnings to Fixed Charges and Dividends.
12.2 Computation of Ratio of Earnings to Fixed Charges and Preferred
23.1 Consent of Coopers & Lybrand.
* 23.2 Consent of Lawrence W. Inlow (included in Exhibit 5.1).
* 23.3 Consent of Richards, Layton & Finger (included in Exhibit 5.2).
* 23.4 Consent of Sidley & Austin (included in Exhibit 8.1).
24.1.1 Powers of Attorney.
24.1.2 Powers of Attorney.
* To be supplied by amendment.
EXHIBIT 3.1
CERTIFICATE OF FORMATION
OF
CONSECO L.L.C.
This Certificate of Formation of Conseco L.L.C. (the
"Company"), dated as of April 8, 1994, is being duly executed and
filed by Conseco Investment Holding Company, as an authorized
person, to form a limited liability company under the Delaware
Limited Liability Company Act (Del. Code Ann. tit. 6 18-101, et
seq.).
1. The name of the limited liability company formed hereby
is Conseco L.L.C.
2. The address of the Company's registered office the State
of Delaware is c/o The Corporation Trust Company, Corporation Trust
Center, 1209 Orange Street in the City of Wilmington, County of New
Castle, Delaware 19801. The name of the Company's registered agent
for service of process in the State of Delaware at such address is
The Corporation Trust Company.
3. The latest date on which the Company is to dissolve is
December 31, 2094.
IN WITNESS WHEREOF, the undersigned has executed this
Certificate of Formation of Conseco L.L.C. as of the date first
above written.
CONSECO INVESTMENT HOLDING COMPANY
By:/s/MARK A. FERRUCCI
Name: Mark A. Ferrucci
-----------------------
Title: President
<TABLE>
CONSECO, INC. AND SUBSIDIARIES Exhibit 12.1
Computation of Ratio of Earnings to Fixed Charges
and Preferred Dividends
for the years ended December 31, 1993, 1992 and 1991
(Dollars in millions)
<CAPTION> For the Year Ended
----------------------------------------------------------------------
December 31, December 31, 1993
------------------------------ -------------------------------
As Pro
1989 1990 1991 1992 Reported Forma(2)
---- ---- ---- ---- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Pre-tax income from operations:
Income from continuing operations,
before extraordinary charge $ 47.2 $ 41.7 $121.0 $174.8 $308.9 $172.6
Add income tax expense 23.0 22.2 78.2 124.6 223.1 107.8
Add minority interest - 1.4 24.0 30.6 78.2 63.7
Less equity in undistributed earnings of
unconsolidated affiliates (4.2) (2.7) (9.3) (27.1) (36.6) (86.7)
Less gain on sale of stock by subsidiaries - - - (11.1) (101.5) -
Less incentive earnings allocation
from the Partnership - - - (9.3) (36.6) -
------ ------- ------ ------ ------ -----
Pre-tax income 66.0 62.6 213.9 282.5 435.5 257.4
Add fixed charges:
Interest expense on annuities and
financial products 213.6 314.7 576.7 506.8 408.5 75.4
Interest expense on long-term debt
for which Conseco is directly
liable, including amortization 41.3 51.6 69.9 46.2 58.0 54.2
Interest expense on investment borrowings 2.1 11.0 17.1 8.8 10.6 4.4
Other - 0.7 0.4 0.8 0.6 0.6
Portion of rental(1) 0.9 1.2 1.2 2.0 3.9 3.9
------ ------- ------ ------ ------ -----
Fixed charges 257.9 379.2 665.3 564.6 481.6 138.5
------ ------- ------ ------ ------ -----
Adjusted earnings $323.9 $441.8 $879.2 $847.1 $917.1 $395.9
====== ====== ====== ====== ====== ======
Ratios of earnings to fixed charges 1.26X 1.17X 1.32X 1.50X 1.90X 2.86X
====== ====== ====== ====== ====== ======
Ratio of earnings to fixed charges,
excluding interest on annuities
and financial products 2.49X 1.97X 3.41X 5.89X 6.96X 5.08X
====== ====== ====== ====== ====== ======
Fixed charges 257.9 379.2 665.3 564.6 481.6 138.5
Add dividends on preferred stock (multiplied by
the rate of pretax income to net income) 12.6 8.6 13.9 13.1 34.6 30.0
------ ------- ------ ------ ------ -----
Adjusted fixed charges $270.5 $387.8 $679.2 $577.7 $516.2 $168.5
====== ====== ====== ====== ====== ======
Ratio of earnings to adjusted fixed charges 1.20X 1.14X 1.29X 1.47X 1.78X 2.35X
====== ====== ====== ====== ====== ======
Ratios of earnings to adjusted fixed charges,
excluding interest on annuities and
financial products 1.94X 1.74X 2.95X 4.80X 4.72X 3.44X
====== ====== ====== ====== ====== ======
__________
<FN>
(1) Interest portion of rental is assumed to be 33 percent.
(2) The unaudited pro forma information is presented as if the following
transactions had all occurred on December 31, 1992: (i) the initial
public offering and related transactions of Western, (ii) the initial
public offering of Bankers, the purchase of additional shares of common
stock of Bankers by Conseco and the incentive earnings allocation from the
Partnership and (iii) the purchase of additional shares of common stock
of CCP. The data further assumes the net proceeds to Conseco from the
initial public offering of Western were invested to earn 3 percent per
annum before income taxes.
</TABLE>
<TABLE>
CONSECO, INC. AND SUBSIDIARIES Exhibit 12.2
Computation of Ratio of Earnings
to Fixed Charges and Preferred Dividends
for which Conseco is Directly Liable
<CAPTION>
For the Year Ended
----------------------------------------------------------------------
December 31, December 31, 1993
------------------------------------------- --------------------
As Pro
1989 1990 1991 1992 Reported Forma(2)
---- ---- ---- ---- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Pre-tax income from operations:
Income from continuing operations, before
extraordinary charge $47.2 $41.7 $121.0 $174.8 $308.9 $172.6
Add income tax expense 23.0 19.9 48.1 93.0 146.6 31.3
Less equity in undistributed earnings of
unconsolidated affiliates (4.2) (4.8) (35.9) (46.9) (86.0) (151.8)
Less gain on sale of stock by subsidiaries -- -- -- (11.1) (101.5) --
Less incentive earnings allocation
from the Partnership -- -- -- (9.3) (36.6) --
----- ----- ------ ------ ------ -----
Pre-tax income 66.0 56.8 133.2 200.5 231.4 52.1
Add fixed charges:
Interest expense on annuities and
financial products 213.6 283.2 359.6 377.0 372.0 38.9
Interest expense on long-term debt for
which Conseco is directly liable,
including amortization 41.3 40.3 36.2 22.8 22.3 18.5
Interest expense on investment borrowings 2.1 10.3 11.2 7.0 6.6 0.4
Other -- 0.7 1.2 0.5 0.6 0.6
Portion of rental (1) 0.9 1.2 1.2 2.0 2.0 2.0
------ ------ ------ ------ ------ ------
Fixed charges 257.9 335.7 409.4 409.3 403.5 60.4
Adjusted earnings $323.9 $392.5 $542.6 $609.8 $634.9 $112.5
====== ====== ====== ====== ====== ======
Ratio of earnings to fixed charges 1.26X 1.17X 1.33X 1.49X 1.57X 1.86X
====== ====== ====== ====== ====== ======
Ratio of earnings to fixed charges,
excluding interest on annuities
and financial products 2.49X 2.08X 3.67X 7.21X 8.35X 3.42X
====== ====== ====== ====== ====== ======
Fixed charges 257.9 335.7 409.4 409.3 403.5 60.4
Add dividends on preferred stock (multiplied
by the rate of pretax income to net income) 12.6 8.6 10.3 8.8 30.3 30.0
------ ------ ------ ------ ------ ------
Adjusted fixed charges 270.5 344.3 419.7 418.1 433.8 90.4
Ratio of earnings to adjusted fixed charges 1.20X 1.14X 1.29X 1.46X 1.46X 1.24X
====== ====== ====== ====== ====== ======
Ratio of earnigns to adjusted fixed charges,
excluding interest on annuities and
financial products 1.94X 1.79X 3.04X 5.66X 4.25X 1.43X
====== ====== ====== ====== ====== ======
<FN>
(1) Interest portion of rental is assumed to be 33 percent.
(2) The unaudited pro forma information is presented as if the following
transactions had all occurred on December 31, 1992: (i) the initial
public offering and related transactions of Western, (ii) the initial
public offering of Bankers, the purchase of additional shares of common
stock of Bankers by Conseco and the incentive earnings allocation from the
Partnership and (iii) the purchase of additional shares of common stock
of CCP. The data further assumes the net proceeds to Conseco from the
initial public offering of Western were invested to earn 3 percent per
annum before income taxes.
</TABLE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement of
Conseco, Inc. on Form S-3 of our reports dated March 24, 1994, on our audits
of the consolidated financial statements and financial statement schedules of
Conseco, Inc. and subsidiaries as of December 31, 1993 and 1992 and for the
years ended December 31, 1993, 1992 and 1991. We also consent to the reference
to our firm under the caption "Experts".
/s/COOPERS & LYBRAND
--------------------
COOPERS & LYBRAND
Indianapolis, Indiana
April 11, 1994
EXHBIT 24.1.1
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Lawrence W.
Inlow, James S. Adams and Karl W. Kindig, jointly and severally, as
his true and lawful attorney-in-fact and agent, each with full
power of substitution and resubstitution for him and in his name,
place and stead, in any and all capacities, to sign the
Registration Statement on Form S-3 of Conseco L.L.C. and Conseco,
Inc., and any and all amendments (including post-effective
amendments) thereto and to file the same, with all exhibits thereto
and other documents in connection therewith, with the Securities
and Exchange Commission, hereby ratifying and confirming all that
each said attorney-in-fact or agent or substitute lawfully does or
causes to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney on the 11th day of April, 1994.
/s/MICHAEL G. BROWNING
----------------------
Michael G. Browning
EXHBIT 24.1.2
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Lawrence W.
Inlow, James S. Adams and Karl W. Kindig, jointly and severally, as
his true and lawful attorney-in-fact and agent, each with full
power of substitution and resubstitution for him and in his name,
place and stead, in any and all capacities, to sign the
Registration Statement on Form S-3 of Conseco L.L.C. and Conseco,
Inc., and any and all amendments (including post-effective
amendments) thereto and to file the same, with all exhibits thereto
and other documents in connection therewith, with the Securities
and Exchange Commission, hereby ratifying and confirming all that
each said attorney-in-fact or agent or substitute lawfully does or
causes to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney on the 11th day of April, 1994.
/s/DONALD F. GONGAWARE
----------------------
Donald F. Gongaware
