As filed with the Securities and Exchange Commission on April 16, 1996
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
Form S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------
CONSECO, INC.
(Exact name of Registrant as specified in its charter)
Indiana 6719
(State or other jurisdiction of (Primary Standard Industrial
incorporation or organization) Classification Code Number)
35-1468632
(I.R.S. Employer
Identification No.)
11825 N. Pennsylvania St., Carmel, Indiana 46032, (317) 817-6100
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
Lawrence W. Inlow
Conseco, Inc.
11825 N. Pennsylvania St.
Carmel, Indiana 46032
(317) 817-6163
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
------------------------
Copies to:
Don Campbell R. Scott Cohen
Life Partners Group, Inc. Weil, Gotshal & Manges LLP
7887 East Belleview Avenue 100 Crescent Court, Suite 1300
Englewood, Colorado 80111 Dallas, Texas 75201-6950
(303) 779-1111 (214) 746-7700
Approximate date of commencement of proposed sale of the securities to
the public: As soon as practicable after the Registration Statement becomes
effective and all other conditions to the merger (the "Merger") of a
wholly-owned subsidiary of Conseco, Inc. ("Conseco") with and into Life Partners
Group, Inc. ("LPG") pursuant to an Agreement and Plan of Merger described in the
enclosed Joint Proxy Statement/Prospectus have been satisfied or waived.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. |_|
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CALCULATION OF REGISTRATION FEE
===============================================================================================================================
Title of Each Class Amount Proposed Maximum Proposed Maximum
of Securities to to be Offering Price Per Aggregate Offering Amount of
be Registered Registered(1) Unit Price Registration Fee(2)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, without 19,876,712 Not Applicable Not Applicable $205,622
par value...............
===============================================================================================================================
<FN>
(1) Based on the maximum number of shares of Conseco common stock, without par
value ("Conseco Common Stock"), issuable to holders of common stock of LPG,
par value $.001 per share ("LPG Common Stock"), other than Conseco, and
upon the exercise or conversion of securities exercisable for or
convertible into shares of LPG Common Stock in the Merger.
(2) Pursuant to Rule 457(f), the registration fee was computed on the basis of
the market value of the LPG Common Stock to be
exchanged in the Merger, computed in accordance with Rule 457(c) on the
basis of the average of the high and low prices per share of such stock on
the New York Stock Exchange Composite Transactions Tape on April 15, 1996.
</FN>
</TABLE>
---------------------
Conseco hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until Conseco shall file a
further amendment which specifically states that this 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 Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
EXPLANATORY NOTE
This Registration Statement contains two forms of joint proxy
statement/prospectus: one to be used in connection with the solicitation of
proxies pursuant to the Merger (the "Joint Proxy Statement/Prospectus"), and one
to be used in connection with the resale of Conseco Common Stock by affiliates
of LPG (the "Resale Prospectus"). Each of the pages included herein for use in
the Resale Prospectus is labeled "Alternate Page for Resale Prospectus."
1
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CONSECO, INC.
Cross-Reference Sheet Pursuant to Item 501(b) of Regulation S-K
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Location in Joint
Form S-4 Item Proxy Statement/Prospectus
A. INFORMATION ABOUT THE TRANSACTION
<S> <C>
1. Forepart of Registration Statement and Outside
Front Cover Page of Prospectus........................... Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of Available Information; Incorporation of
Prospectus............................................... Certain Documents by Reference; Table
of Contents
3. Risk Factors, Ratio of Earnings to Fixed Summary; Shareholder Meetings;
Charges and Other Information............................ Information Concerning Conseco and
Merger Sub; Information Concerning
LPG; The Merger; The Merger
Agreement; Other Matters
4. Terms of the Transaction................................. Summary; Shareholder Meetings; The
Merger; The Merger Agreement;
Management of the Surviving
Corporation upon Consummation of the
Merger; Comparison of Shareholders'
Rights
5. Pro Forma Financial Information.......................... Summary; Conseco, Inc. and
Subsidiaries Unaudited Pro Forma
Consolidated Financial Statements
6. Material Contracts with the Company Being
Acquired................................................. Summary; The Merger
7. Additional Information Required for Reoffering
by Persons and Parties Deemed To Be
Underwriters............................................. Alternate Pages
8. Interests of Named Experts and Counsel................... Legal Matters
9. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities........... Inapplicable
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3 Registrants.............. Available Information; Incorporation of
Certain Documents by Reference
11. Incorporation of Certain Information by Incorporation of Certain Documents by
Reference................................................ Reference
1
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12. Information with Respect to S-2 or S-3
Registrants.............................................. Inapplicable
13. Incorporation of Certain Information by
Reference................................................ Inapplicable
14. Information with Respect to Registrants Other
Than S-2 or S-3 Registrants.............................. Inapplicable
C. INFORMATION ABOUT THE COMPANY
BEING ACQUIRED
15. Information with Respect to S-3 Companies................ Available Information; Incorporation of
Certain Documents by Reference
16. Information with Respect to S-2 or S-3
Companies................................................ Inapplicable
17. Information with Respect to Companies Other
Than S-2 or S-3 Companies................................ Inapplicable
D. VOTING AND MANAGEMENT
INFORMATION
18. Information if Proxies, Consents or Incorporation of Certain Documents by
Authorizations Are To Be Solicited....................... Reference; Summary; Shareholder
Meetings; The Merger; Other Matters
19. Information if Proxies, Consents or
Authorizations Are Not to be Solicited, or in an
Exchange Offer........................................... Inapplicable
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LIFE PARTNERS GROUP, INC.
7887 East Belleview Avenue
Englewood, Colorado 80111
Dear Fellow Shareholder:
You are cordially invited to attend a Special Meeting of shareholders
of Life Partners Group, Inc. ("LPG"), to be held on __________,
_________________, 1996 at ______________, Dallas, Texas, at 10:00 a.m., local
time (the "LPG Special Meeting").
At the LPG Special Meeting, shareholders of record of LPG at the close
of business on _____, 1996 will be asked to consider and vote upon a proposal to
approve and adopt an Agreement and Plan of Merger, dated as of March 11, 1996
(the "Merger Agreement"), by and among LPG, Conseco, Inc., an Indiana
corporation ("Conseco"), and LPG Acquisition Company, a Delaware corporation and
a wholly-owned subsidiary of Conseco ("Merger Sub"), and the transactions
contemplated thereby. Pursuant to the terms of the Merger Agreement, among other
things, (i) Merger Sub will be merged with and into LPG, with LPG being the
surviving corporation (the "Merger"), and (ii) each outstanding share of the
common stock, par value $.001 per share ("LPG Common Stock"), of LPG (other than
shares of LPG Common Stock held by LPG as treasury stock immediately prior to
the Effective Time (as defined in the Merger Agreement)) will be cancelled and
converted into the right to receive the Merger Consideration (as defined in the
Merger Agreement).
Your Board of Directors has determined that the terms of the Merger
are fair to, and in the best interests of, LPG and the shareholders of LPG, has
approved and adopted the Merger Agreement and the transactions contemplated
thereby, and recommends that the shareholders of LPG vote FOR the approval and
adoption of the Merger Agreement and the transactions contemplated thereby.
The Board of Directors has received a written opinion of Donaldson,
Lufkin & Jenrette Securities Corporation, which has acted as financial advisor
to LPG in connection with the Merger, as to the fairness to LPG's shareholders,
from a financial point of view, of the Merger Consideration to be received by
LPG's shareholders pursuant to the Merger Agreement.
Whether or not you plan to attend the LPG Special Meeting, please
complete, sign and date the accompanying proxy and return it in the enclosed
postage prepaid envelope as soon as possible so that your shares will be
represented at the LPG Special Meeting. If you attend the LPG Special Meeting,
you may vote in person even if you have previously returned your proxy. If you
have any questions regarding the proposed transaction, please call Georgeson &
Company, Inc., our proxy solicitation agent, toll free at (800) ____________ or
collect at (212) _____________.
Sincerely,
John H. Massey
Chairman of the Board and
Chief Executive Officer
__________, 1996
1
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[CONSECO LOGO]
Dear Shareholder:
You are cordially invited to attend a special meeting of shareholders
of Conseco, Inc. ("Conseco") to be held on ______________, 1996 at 10:00 a.m.,
local time, at ________________________________________ (including any
adjournment or postponement thereof, the "Conseco Special Meeting").
At the Conseco Special Meeting, holders of shares of common stock, no
par value per share, of Conseco ("Conseco Common Stock") and holders of shares
of Preferred Redeemable Increased Dividend Equity Securities, 7% PRIDES,
Convertible Preferred Stock, no par value per share, of Conseco ("Conseco
PRIDES") will be asked to consider and vote upon a proposal to approve the
issuance of Conseco Common Stock pursuant to an Agreement and Plan of Merger,
dated as of March 11, 1996 (the "Merger Agreement"), by and among Conseco, LPG
Acquisition Company, a Delaware corporation and a wholly-owned subsidiary of
Conseco ("Merger Sub"), and Life Partners Group, Inc. ("LPG"). Pursuant to the
terms of the Merger Agreement, among other things, (i) Merger Sub will be merged
with and into LPG, with LPG being the surviving corporation (the "Merger"), and
(ii) each outstanding share of the common stock, par value $.001 per share ("LPG
Common Stock"), of LPG (other than shares of LPG Common Stock held by LPG as
treasury stock immediately prior to the Effective Time (as defined in the Merger
Agreement)) will be cancelled and converted into the right to receive the Merger
Consideration (as defined in the Merger Agreement).
Details of the proposed Merger and other important information
concerning LPG and Conseco appear in the accompanying Joint Proxy
Statement/Prospectus. Please give this material your careful attention. Details
regarding the background of and reasons for the proposed Merger, among other
things, may be found in the section of the Joint Proxy Statement/Prospectus
entitled "The Merger."
Your Board of Directors believes that the terms of the proposed Merger
are fair to, and in the best interests of, the holders of Conseco Common Stock
and Conseco PRIDES and has unanimously approved the Merger Agreement and the
transactions contemplated thereby. The Board of Directors of Conseco unanimously
recommend that shareholders vote FOR approval of the issuance of Conseco Common
Stock pursuant to the Merger Agreement and the transactions contemplated
thereby.
Only holders of record of shares of Conseco Common Stock and Conseco
PRIDES as of the close of business on ____________________, 1996 are entitled to
notice of, and to vote at, the Conseco Special Meeting.
YOUR VOTE IS IMPORTANT. Whether or not you are able to attend the
Conseco Special Meeting, please complete, sign, date and return the enclosed
proxy card as soon as possible. A postage-paid envelope is enclosed for your
convenience. If you attend the Conseco Special Meeting, you may revoke your
proxy and, if you wish, vote your shares of Conseco Common Stock and Conseco
PRIDES in person.
Sincerely,
Stephen C. Hilbert
Chairman of the Board
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LIFE PARTNERS GROUP, INC.
7887 East Belleview Avenue
Englewood, Colorado 80111
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To the Shareholders of Life Partners Group, Inc.:
Notice is hereby given that a special meeting (the "LPG Special
Meeting") of the shareholders of Life Partners Group, Inc. ("LPG") will be held
on ______________, ______________, 1996 at ___________, Dallas, Texas, at 10:00
a.m., local time, for the following purposes:
1. To consider and vote upon a proposal to approve and adopt
the Agreement and Plan of Merger, dated as of March 11, 1996 (the
"Merger Agreement"), by and among LPG, Conseco, Inc., an Indiana
corporation ("Conseco"), and LPG Acquisition Company, a Delaware
corporation and wholly-owned subsidiary of Conseco ("Merger Sub"), and
the transactions contemplated thereby, pursuant to which, among other
things, (i) Merger Sub will be merged with and into LPG, with LPG
being the surviving corporation (the "Merger"), and (ii) each
outstanding share of the common stock par value $.001 per share (the
"LPG Common Stock"), of LPG (other than shares of LPG Common Stock
held by LPG as treasury stock immediately prior to the Effective Time
(as defined in the Merger Agreement)) will be cancelled and converted
into the right to receive the Merger Consideration (as defined in the
Merger Agreement).
2. To transact such other business as may properly come before
the meeting or any adjournment or postponement thereof.
The Merger is more completely described in the accompanying Joint
Proxy Statement/Prospectus and a copy of the Merger Agreement is attached as
Annex A thereto.
Your Board of Directors has determined that the terms of the Merger
are fair to, and in the best interests of, LPG and the shareholders of LPG, has
approved and adopted the Merger Agreement and the transactions contemplated
thereby and recommends that the shareholders of LPG vote FOR the approval and
adoption of the Merger Agreement and the transactions contemplated thereby.
The Board of Directors of LPG has fixed the close of business on
___________, 1996, as the record date (the "LPG Record Date") for determination
of shareholders entitled to notice of, and to vote at, the LPG Special Meeting
and any adjournments and postponements thereof.
By order of the Board of Directors
Don Campbell
Secretary
_______________, 1996
YOU ARE CORDIALLY INVITED TO ATTEND THE LPG SPECIAL MEETING IN PERSON.
HOWEVER, WHETHER OR NOT YOU PLAN TO ATTEND WE URGE YOU TO COMPLETE, SIGN, DATE
AND RETURN THE ACCOMPANYING PROXY AS PROMPTLY AS POSSIBLE IN THE ENCLOSED
POSTAGE PREPAID ENVELOPE IN ORDER TO ASSURE THAT YOUR SHARES OF COMMON STOCK
WILL BE REPRESENTED. IF YOU ATTEND THE LPG SPECIAL MEETING YOU MAY VOTE IN
PERSON EVEN IF YOU HAVE PREVIOUSLY RETURNED YOUR PROXY.
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<PAGE>
IMPORTANT
PLEASE DO NOT SEND YOUR STOCK CERTIFICATES REPRESENTING LPG COMMON
STOCK AT THIS TIME. IF THE MERGER IS CONSUMMATED, YOU WILL BE SENT INSTRUCTIONS
REGARDING THE SURRENDER OF YOUR STOCK CERTIFICATES.
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<PAGE>
[CONSECO LOGO]
11825 North Pennsylvania Street
Carmel, Indiana 46032
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held ___________, 1996
NOTICE IS HEREBY GIVEN THAT a Special Meeting of the shareholders of
Conseco, Inc. ("Conseco"), will be held at
________________________________________________________ at 10:00 a.m., local
time, on ______________, 1996 (the "Conseco Special Meeting"), for the following
purposes:
1. To consider and vote upon a proposal to approve the issuance of common
stock, no par value per share, of Conseco ("Conseco Common Stock") pursuant
to the Agreement and Plan of Merger, dated as of March 11, 1996 (the
"Merger Agreement"), by and among Life Partners Group, Inc., a Delaware
corporation ("LPG"), Conseco and LPG Acquisition Company, a Delaware
corporation and wholly-owned subsidiary of Conseco ("Merger Sub"), pursuant
to which, among other things, (i) Merger Sub will be merged with and into
LPG, with LPG being the surviving corporation (the "Merger"), and (ii) each
outstanding share of the common stock, par value $.001 per share (the "LPG
Common Stock"), of LPG (other than shares of LPG Common Stock held by LPG
as treasury stock immediately prior to the Effective Time (as defined in
the Merger Agreement)) will be cancelled and converted into the right to
receive the Merger Consideration (as defined in the Merger Agreement); and
2. To consider such other matters as may properly come before the meeting.
Holders of record of outstanding shares of Conseco Common Stock and
Preferred Redeemable Increased Dividend Equity Securities, 7% PRIDES,
Convertible Preferred Stock, no par value per share, of Conseco ("Conseco
PRIDES") as of the close of business on ___________, 1996, are entitled to
notice of and to vote at the meeting. Holders of Conseco Common Stock and
Conseco PRIDES will vote together as a single class at the Conseco Special
Meeting. Holders of shares of Conseco Common Stock have one vote for each share
held of record, and holders of shares of Conseco PRIDES have 4/5 vote for each
share held of record.
Whether or not you plan to be present at the meeting, please complete,
sign and return the enclosed form of proxy. No postage is required to return the
form of proxy in the enclosed envelope. The proxies of shareholders who attend
the meeting in person may be withdrawn and such shareholders may vote personally
at the meeting.
By Order of The Board of Directors
[SIG]
Lawrence W. Inlow, Secretary
__________, 1996
Carmel, Indiana
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<PAGE>
SUBJECT TO COMPLETION
Dated April 16, 1996
CONSECO, INC.
and
LIFE PARTNERS GROUP, INC.
------------------
JOINT PROXY STATEMENT
------------------
CONSECO, INC. PROSPECTUS
This Joint Proxy Statement/Prospectus is being furnished to holders of
shares of Common Stock, no par value per share ("Conseco Common Stock"), and to
holders of shares of Preferred Redeemable Increased Dividend Equity Securities,
7% PRIDES, Convertible Preferred Stock, no par value per share ("Conseco PRIDES"
and, together with the Conseco Common Stock, the "Conseco Stock") of Conseco,
Inc., an Indiana corporation ("Conseco"), in connection with the solicitation of
proxies by the Conseco Board of Directors for use at a Special Meeting of
Conseco shareholders to be held on _________, 1996, at
____________________________, commencing at 10:00 a.m., local time, and at any
adjournment or postponement thereof (the "Conseco Special Meeting").
This Joint Proxy Statement/Prospectus is also being furnished to
holders of shares of Common Stock, par value $.001 per share ("LPG Common
Stock"), of Life Partners Group, Inc., a Delaware corporation ("LPG"), in
connection with the solicitation of proxies by the LPG Board of Directors for
use at a Special Meeting of LPG shareholders to be held on __________, 1996 at
______________ _____________________________, commencing at 10:00 a.m., local
time, and at any adjournment or postponement thereof (the "LPG Special
Meeting").
This Joint Proxy Statement/Prospectus also constitutes the Prospectus
of Conseco, filed as part of a Registration Statement on Form S-4 (together with
all amendments, supplements, exhibits and schedules thereto, the "Registration
Statement") with the Securities and Exchange Commission (the "Commission") under
the Securities Act of 1933, as amended (the "Securities Act"), relating to the
shares of Conseco Common Stock issuable in connection with the Merger (as
defined herein). All information concerning Conseco contained in this Joint
Proxy Statement/Prospectus has been furnished by Conseco, and all information
concerning LPG contained in this Joint Proxy Statement/Prospectus has been
furnished by LPG.
The Conseco Common Stock is quoted on the New York Stock Exchange,
Inc. (the "NYSE") under the symbol "CNC". On _____________, 1996, the closing
price of the Conseco Common Stock as reported on the NYSE was $_________.
The LPG Common Stock is quoted on the NYSE under the symbol "LPG". On
_______, 1996, the closing price of the LPG Common Stock as reported on the NYSE
was $___________.
This Joint Proxy Statement/Prospectus and the related forms of proxy
are first being mailed to shareholders of Conseco and LPG on or about
______________, 1996.
-------------------------
THE SHARES OF CONSECO COMMON STOCK ISSUABLE IN THE MERGER 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 JOINT PROXY STATEMENT/
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
-------------------------
The date of this Joint Proxy Statement/Prospectus is
______________, 1996.
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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.
<PAGE>
AVAILABLE INFORMATION
Conseco and LPG are each subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith file periodic reports, proxy statements and other
information with the Commission. The periodic reports, proxy statements and
other information filed by Conseco and LPG with the Commission may be inspected
and copied at the public reference facilities maintained by the Commission at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional
offices of the Commission at 75 Park Place, Room 1228, New York, New York 10007
and Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60601-2511. Copies of such material also can be obtained, at prescribed
rates, from the Public Reference Section of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549. The Conseco Common Stock and the LPG Common Stock
are listed on the NYSE and such reports and other information may also be
inspected at the offices of the New York Stock Exchange, Inc., 20 Broad Street,
New York, New York 10005.
Conseco has filed the Registration Statement with the Commission with
respect to the Conseco Common Stock to be issued pursuant to or as contemplated
by the Merger Agreement (as hereinafter defined). This Joint Proxy
Statement/Prospectus does not contain all the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. The Registration Statement and any
amendments thereto, including exhibits filed as a part thereof, are available
for inspection and copying as set forth above.
-------------------------
THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY
REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF ANY
SUCH DOCUMENTS, OTHER THAN EXHIBITS TO SUCH DOCUMENTS WHICH ARE NOT SPECIFICALLY
INCORPORATED BY REFERENCE THEREIN, ARE AVAILABLE WITHOUT CHARGE TO ANY PERSON,
INCLUDING ANY BENEFICIAL OWNER, TO WHOM THIS JOINT PROXY STATEMENT/PROSPECTUS IS
DELIVERED, UPON WRITTEN OR ORAL REQUEST. WRITTEN REQUESTS FOR SUCH DOCUMENTS
RELATING TO CONSECO SHOULD BE DIRECTED TO JAMES W. ROSENSTEELE, VICE PRESIDENT,
INVESTOR RELATIONS, CONSECO, INC., 11825 NORTH PENNSYLVANIA STREET, CARMEL,
INDIANA 46032, AND TELEPHONE REQUESTS MAY BE DIRECTED TO MR. ROSENSTEELE AT
(317) 817-2893. WRITTEN REQUESTS FOR SUCH DOCUMENTS RELATING TO LPG SHOULD BE
DIRECTED TO BERNARD M. KOCH, LIFE PARTNERS GROUP, INC., 7887 EAST BELLEVIEW
AVENUE, ENGLEWOOD, COLORADO 80111, AND TELEPHONE REQUESTS MAY BE DIRECTED TO MR.
KOCH AT (303) 779-1111. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY
REQUEST SHOULD BE MADE BEFORE _______________, 1996.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by Conseco and LPG,
respectively, with the Commission pursuant to the Exchange Act are incorporated
herein by this reference:
1. Conseco's Annual Report on Form 10-K for the fiscal year ended December 31,
1995 ("Conseco's Annual Report"); Conseco's Current Reports on Form 8-K
dated June 30, 1995,
ii
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<PAGE>
January 17, 1996, March 11, 1996 and April 10, 1996; and the description of
Conseco Common Stock in Conseco's Registration Statements filed pursuant to
Section 12 of the Exchange Act, and any amendment or report filed for the
purpose of updating any such description.
2. LPG's Annual Report on Form 10-K for the fiscal year ended December
31, 1995 ("LPG's Annual Report"); LPG's Current Reports on Form 8-K dated
March 11, 1996 and April 10, 1996; and the description of LPG's Common Stock in
LPG's Registration Statement on Form S-1 (Registration No. 33-47621) which was
declared effective on March 24, 1993.
In addition, the Merger Agreement (as hereinafter defined), a copy of
which is attached hereto as Annex A, is incorporated herein by reference.
All documents filed by Conseco and LPG pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date hereof and prior
to the date of the Conseco Special Meeting or the LPG Special Meeting, as the
case may be, shall be deemed to be incorporated by reference herein and to be a
part hereof from the date any such document is filed.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes hereof to the extent that a statement contained herein (or in any
other subsequently filed document that also is incorporated by reference herein)
modifies or supersedes such statement. Any statement so modified or superseded
shall be deemed, except as so modified or superseded, to constitute a part
hereof. All information appearing in this Joint Proxy Statement/Prospectus is
qualified in its entirety by the information and financial statements (including
notes thereto) appearing in the documents incorporated herein by reference,
except to the extent set forth in the immediately preceding statement.
State insurance holding company laws and regulations applicable to
Conseco and LPG generally provide that no person may acquire control of Conseco
or LPG, and thus indirect control of their respective insurance subsidiaries,
unless such person has provided certain required information to, and such
acquisition is approved (or not disapproved) by, the appropriate insurance
regulatory authorities. Generally, any person acquiring beneficial ownership of
10% or more of the Conseco Common Stock or LPG Common Stock, as the case may be,
would be presumed to have acquired such control, unless the appropriate
insurance regulatory authorities upon advance application determine otherwise.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS WITH RESPECT TO THE MATTERS DESCRIBED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS OTHER THAN THOSE CONTAINED HEREIN OR IN THE DOCUMENTS
INCORPORATED BY REFERENCE HEREIN. ANY INFORMATION OR REPRESENTATIONS WITH
RESPECT TO SUCH MATTERS NOT CONTAINED HEREIN OR THEREIN MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY CONSECO OR LPG. THIS JOINT PROXY
STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE
DELIVERY OF THIS JOINT PROXY STATEMENT/PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
iii
<PAGE>
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF CONSECO OR LPG SINCE THE DATE
HEREOF OR THAT THE INFORMATION IN THIS JOINT PROXY STATEMENT/PROSPECTUS OR IN
THE DOCUMENTS INCORPORATED BY REFERENCE HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF OR THEREOF.
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.
iv
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TABLE OF CONTENTS
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AVAILABLE INFORMATION........................................................................................... ii
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE................................................................. ii
TABLE OF CONTENTS................................................................................................ v
SUMMARY ....................................................................................................... 1
SELECTED HISTORICAL FINANCIAL INFORMATION OF CONSECO................................................... 13
SELECTED HISTORICAL FINANCIAL INFORMATION OF LPG....................................................... 16
SUMMARY UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL
INFORMATION................................................................................... 18
COMPARATIVE UNAUDITED PER SHARE INFORMATION OF CONSECO
AND LPG....................................................................................... 20
MARKET PRICE INFORMATION............................................................................... 21
INFORMATION CONCERNING CONSECO AND THE MERGER SUB............................................................... 23
INFORMATION CONCERNING LPG...................................................................................... 26
SHAREHOLDER MEETINGS............................................................................................ 27
THE MERGER...................................................................................................... 32
THE MERGER AGREEMENT............................................................................................ 50
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS........................................................... 58
COMPARISON OF SHAREHOLDERS' RIGHTS.............................................................................. 65
MANAGEMENT OF THE SURVIVING CORPORATION UPON CONSUMMATION OF
THE MERGER............................................................................................. 70
LEGAL MATTERS................................................................................................... 70
EXPERTS ....................................................................................................... 70
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS....................................................................... 70
OTHER MATTERS................................................................................................... 70
v
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<PAGE>
Annex A - Agreement and Plan of Merger
Annex B - Opinion of Donaldson, Lufkin & Jenrette Securities Corporation
vi
<PAGE>
SUMMARY
The following is a summary of certain information contained elsewhere
in this Joint Proxy Statement/Prospectus. This summary is not intended to be
complete and is qualified in its entirety by reference to the more detailed
information and financial statements, including the notes thereto, contained
elsewhere, or incorporated by reference, in this Joint Proxy
Statement/Prospectus and the Annexes hereto. All share and per share information
in this Joint Proxy Statement/Prospectus concerning Conseco has been adjusted to
reflect a two-for-one stock split of the Conseco Common Stock effected April 1,
1996, unless otherwise stated. Except as otherwise indicated, all financial
information in this Joint Proxy Statement/Prospectus is presented in accordance
with generally accepted accounting principles ("GAAP"). Shareholders are urged
to read this Joint Proxy Statement/Prospectus, the Annexes hereto and the
documents incorporated herein by reference in their entirety. Unless otherwise
defined herein, capitalized terms used in this summary have the respective
meanings ascribed to them elsewhere in this Joint Proxy Statement/Prospectus.
The Companies
Conseco, Inc............................Conseco is a financial services holding
company engaged primarily in the development, marketing and administration
of annuity, supplemental health and individual life insurance products.
Conseco's earnings result primarily from: (i) operating life insurance
companies; and (ii) providing investment management, administrative and
other fee-based services to affiliated and non-affiliated businesses.
Conseco's operating strategy is to grow the insurance business within its
subsidiaries by focusing its resources on the development and expansion of
profitable products and strong distribution channels. Conseco has
supplemented such growth by acquisition of companies that have profitable
niche products, strong distribution systems and progressive management
teams who can work with Conseco to implement Conseco's operating and growth
strategies.
Conseco's insurance operations collected an aggregate of
approximately $3.1 billion of total premiums in 1995 from a diverse
portfolio of products. Conseco's total assets and shareholders' equity at
December 31, 1995 were approximately $17.3 billion and $1.1 billion,
respectively. See "Information Concerning Conseco and the Merger Sub."
LPG Acquisition Company............... The Merger Sub, a wholly-owned
subsidiary of Conseco, was formed for the purposes of effecting the Merger.
To date, the Merger Sub has not engaged in any activities other than those
incident to its organization and the consummation of the Merger. See
"Information Concerning Conseco and the Merger Sub."
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Life Partners Group, Inc.............. LPG is an insurance holding company that,
through its subsidiaries, sells a diverse portfolio of universal life
insurance and, to a lesser extent, annuity products to individuals. LPG has
a substantial face amount of traditional and universal life insurance in
force, amounting to $58.7 billion at December 31, 1995. See "Information
Concerning LPG."
Meetings of Shareholders
Time,Date and Place.................. Conseco. The Conseco Special Meeting will
be held at 10:00 a.m., local time, on _________, 1996, at _______________
and at any adjournment or postponement thereof.
LPG. The LPG Special Meeting will be held at 10:00 a.m.,
local time, on __________, 1996, at ___________________ and at any
adjournment or postponement thereof.
Purposes of the Meetings.............. Conseco. The purpose of the Conseco
Special Meeting is to consider and vote upon (i) a proposal to approve the
Merger Consideration Stock Issuance (as hereinafter defined) and (ii) such
other business as may properly come before the Conseco Special Meeting or
any adjournments or postponements thereof. See "Shareholder Meetings -
Matters to be Considered at the Meetings-- Conseco."
LPG. The purpose of the LPG Special Meeting is to consider and vote upon
(i) a proposal to approve and adopt the Merger Agreement and the
transactions contemplated thereby and (ii) such other business as may
properly come before the LPG Special Meeting or any adjournments or
postponements thereof. See "Shareholder Meetings -- Matters to be
Considered at the Meetings -- LPG."
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<PAGE>
Record Date, Shares Entitled
to Vote, Quorum................... Conseco. Holders of record of Conseco
Common Stock and Conseco PRIDES at the close of business on ____________,
1996 (the "Conseco Record Date"), are entitled to notice of and to vote,
together as a single class, at the Conseco Special Meeting. As of the
Conseco Record Date, there were ________ shares of Conseco Common Stock
outstanding and entitled to vote which were held by approximately _________
holders of record, and _________ shares of Conseco PRIDES outstanding and
entitled to vote which were held by approximately ____________ holders of
record. Each holder of record of shares of Conseco Common Stock on the
Conseco Record Date is entitled to cast, either in person or by properly
executed proxy, one vote per share of Conseco Common Stock on the Merger
Consideration Stock Issuance and such other matters, if any, properly
submitted for the vote of the Conseco shareholders at the Conseco Special
Meeting. Each holder of record of shares of Conseco PRIDES on the Conseco
Record Date is entitled to cast, either in person or by properly executed
proxy, four-fifths (4/5) of a vote per share of Conseco PRIDES on the
Merger Consideration Stock Issuance and such other matters, if any,
properly submitted for the vote of the Conseco shareholders at the Conseco
Special Meeting. See "Shareholder Meetings."
The presence, in person or by properly executed proxy, of the holders of
Conseco Common Stock and Conseco PRIDES representing a majority of the
voting power of all outstanding Conseco Stock at the Conseco Special
Meeting is necessary to constitute a quorum at the Conseco Special
Meeting. See "Shareholder Meetings."
LPG. Holders of record of shares of LPG Common Stock at the close of
business on _______, 1996 (the "LPG Record Date"), are entitled to notice
of and to vote at the LPG Special Meeting. As of the LPG Record Date, there
were _______ shares of LPG Common Stock outstanding and entitled to vote
which were held by approximately _______ holders of record. Each holder of
record of shares of LPG Common Stock on the LPG Record Date is entitled to
cast, either in person or by properly executed proxy, one vote per share on
the Merger Agreement and the other matters, if any, properly submitted for
the vote of the LPG shareholders at the LPG Special Meeting. See
"Shareholder Meetings."
The presence, in person or by properly executed proxy, of the holders of
stock representing a majority of the voting power of all outstanding
shares of the LPG Common Stock at the LPG Special Meeting is necessary
to constitute a quorum at the LPG Special Meeting.
See "Shareholder Meetings."
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Vote Required......................... Conseco. Although Conseco shareholder
approval of the Merger and the Merger Agreement is not required under
Indiana law because Conseco is not a constituent corporation to the Merger,
under the rules of the NYSE, on which the Conseco Common Stock is listed,
the affirmative vote of a majority of the voting power of the outstanding
shares of voting stock present and voting thereon (in person or by proxy)
is required for approval of the issuance by a corporation of shares of its
common stock in connection with the acquisition of stock or assets of
another company if the common stock so issued will be equal to or in excess
of twenty percent (20%) of the number of shares of common stock of such
corporation outstanding before the issuance of such shares. Accordingly,
because the shares of Conseco Common Stock to be issued pursuant to the
Merger will exceed twenty percent (20%) of the number of shares of Conseco
Common Stock outstanding immediately prior to the Merger, approval of the
Merger Consideration Stock Issuance is required pursuant to the rules of
NYSE. See "Shareholder Meetings - Voting at the Meetings; Record Date;
Quorum - Conseco."
LPG. The approval and adoption by LPG of the Merger
Agreement will require the affirmative vote of the holders of a majority of
the voting power of the outstanding shares of LPG Common Stock entitled to
vote thereon. See "Shareholder Meetings -- Voting at the Meetings; Record
Date; Quorum -- LPG."
The Merger
Effect of Merger...................... Upon consummation of the Merger, (i)
Merger Sub will be merged with and into LPG, with LPG being the
surviving corporation (the "Surviving Corporation"); (ii) each
outstanding share of LPG Common Stock will be cancelled, and each
holder of a certificate representing shares of LPG Common Stock will
cease to have any rights with respect thereto, except the right to
receive, upon the surrender of such certificate, the Merger
Consideration (as defined below); and (iii) each outstanding share of
common stock of the Merger Sub will be converted into one share of the
common stock of the Surviving Corporation. Fractional shares of
Conseco Common Stock will not be issuable in connection with the
Merger. LPG shareholders otherwise entitled to fractional shares of
Conseco Common Stock will receive the value of such fractional shares
in cash, determined as described herein under "The Merger Agreement--
Conversion of Shares; Exchange of Stock Certificates; No Fractional
Amounts."
A copy of the Merger Agreement is attached as Annex A to
this Joint Proxy Statement/Prospectus and is incorporated by reference
herein. See "The Merger Agreement."
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Merger Consideration.................. Upon the consummation of the Merger,
each outstanding share of LPG Common Stock (other than shares of LPG
Common Stock held by LPG as treasury stock) will be cancelled and
converted into the right to receive the fraction (rounded to the
nearest ten-thousandth of a share) of a share of Conseco Common Stock
determined by dividing $21.00 by the Conseco Share Price. The "Conseco
Share Price" is equal to the Trading Average (as defined below);
provided, however, that if the Trading Average is less than $30.00,
then the Conseco Share Price shall be $30.00, and if the Trading
Average is greater than $36.00, then the Conseco Share Price shall be
$36.00. The "Trading Average" shall be equal to the average of the
closing prices of the Conseco Common Stock on the NYSE Composite
Transactions Reporting System for the 20 trading days immediately
preceding the second trading day prior to the Effective Time. The
Conseco Common Stock to be issued to holders of shares of LPG Common
Stock in accordance with the Merger and any cash to be paid in lieu of
fractional shares of Conseco Common Stock are referred to collectively
as the "Merger Consideration." The issuance of Conseco Common Stock in
the Merger is referred to as the "Merger Consideration Stock
Issuance." Conseco will apply to have the additional shares of Conseco
Common Stock issued pursuant to the Merger listed on the NYSE. See
"The Merger Agreement-- Conversion of Shares; Exchange of Stock
Certificates; No Fractional Amounts."
No fractional shares of Conseco Common Stock will be issued in the
Merger. Each LPG shareholder who otherwise would have been entitled
to a fraction of a share of Conseco Common Stock will receive in lieu
thereof cash in accordance with the terms of the Merger Agreement.
See "The Merger Agreement -- Conversion of Shares; Exchange of Stock
Certificates; No Fractional Amounts."
As soon as reasonably practicable after consummation of the Merger, a
letter of transmittal (including instructions setting forth the
procedures for exchanging such holder's certificates representing LPG
Common Stock ("Certificates") for the Merger Consideration payable to
such holder pursuant to the Merger Agreement) will be sent to each
holder of record, as of the Effective Time, of shares of LPG Common
Stock. Upon surrender of such Certificates to the Paying Agent
together with a duly completed and executed letter of transmittal,
such holder will promptly receive the Merger Consideration for each
share of LPG Common Stock previously represented by the Certificates
so surrendered.
5
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<PAGE>
Treatment of Options.................. LPG has agreed to use its best
efforts to give effect to the following with respect to options to
purchase LPG Common Stock granted pursuant to either LPG's 1992
Incentive and Nonstatutory Stock Option Plan or pursuant to any other
agreement ("LPG Stock Options") which remain outstanding immediately
prior to the Effective Time: (a) LPG Stock Options held by persons who
are officers or employees of LPG at the Effective Time shall become
options to purchase, for the same aggregate consideration payable to
exercise such LPG Stock Options, the number of shares of Conseco
Common Stock which the holder would have been entitled to receive at
the Effective Time if such LPG Stock Options had been exercised for
shares of LPG Common Stock prior to the Effective Time; (b) LPG Stock
Options held by persons who are not currently officers or employees of
LPG shall be required to be exercised prior to the Effective Time or
forfeited; (c) LPG Stock Options held by certain officers of LPG
identified in the Disclosure Schedule to the Merger Agreement may be
repriced as provided for therein; (d) LPG Stock Options held by an
officer or employee of LPG shall expire and be forfeited if not
exercised within three (3) months after the date such person ceases to
be an officer or employee of LPG, the Surviving Corporation, Conseco,
or any other subsidiary of Conseco; and (e) LPG Stock Options held by
an officer subject to Section 16 of the Exchange Act who would incur
liability under Section 16(b) if such LPG Stock Options were to be
exercised on the date on which such options would otherwise expire
under the Merger Agreement, shall otherwise remain exercisable for
five (5) business days from the date after which no such liability
would be incurred. See "The Merger Agreement-- Treatment of LPG Stock
Options."
Reasons for the Merger;
Board Recommendations
Regarding the Merger.............. Conseco. The Board of Directors of
Conseco approved the Merger Agreement and the Merger Consideration
Stock Issuance based on a number of factors including its belief that
(i) the addition of LPG's universal life insurance business would
enable Conseco to offer a complete portfolio of insurance products to
its customers; (ii) the addition of LPG's 25,000 independent agents
and its client company structure consisting of 30 marketing
organizations would further diversify Conseco's current distribution
system; (iii) LPG's distribution system would provide Conseco
additional opportunities to cross-sell its current products; (iv) the
Merger offers Conseco and LPG the opportunity to improve their
profitability through the achievements of economies of scale, the
elimination of redundancies and the enhancement of market position;
(v)the issuance of additional
6
<PAGE>
shares of Conseco Common Stock in the Merger would result in a
substantial increase in Conseco's equity and further reduce its
debt-to-capital ratio; and (vi) the Merger would further Conseco's
efforts to strengthen its debt ratings and the claims-paying
ability ratings of its insurance subsidiaries.
The Board of Directors of Conseco recommends that the
shareholders of Conseco approve the Merger Consideration Stock
Issuance. In evaluating the recommendation of the Conseco Board of
Directors, shareholders of Conseco should carefully consider the
matters described under "The Merger -- Conseco's Reasons for the
Merger; Recommendation of the Conseco Board of Directors."
LPG.The LPG Board of Directors determined to pursue the Merger based
upon many different factors, including but not limited to, (i) the
substantial premium over the then current market price of the LPG
Common Stock offered by Conseco, (ii) the financial condition and
results of operations of Conseco and the LPG Board of Directors'
perceptions of the more favorable overall business prospects of
Conseco and LPG on a combined basis as compared to such prospects
as separate entities, (iii) the tax-deferred nature of the
transaction to the extent that the LPG shareholders receive
shares of Conseco Common Stock in exchange for their shares of
LPG Common Stock, (iv) the potential future performance of
Conseco and the Conseco Common Stock after the Merger and
Conseco's strength and position in the insurance industry, and
(v) the written opinion rendered to the LPG Board of Directors by
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") with
regard to the fairness to the LPG shareholders, from a financial
point of view, of the Merger Consideration to be received by the
shareholders of LPG pursuant to the Merger Agreement.
The Board of Directors of LPG recommends the shareholders of LPG approve
the Merger and the Merger Agreement. In evaluating the recommendation
of the LPG Board of Directors, shareholders of LPG should carefully
consider the matters described under "The Merger -- LPG's Reasons for
the Merger; Recommendation of the LPG Board of Directors."
Opinion of LPG's Financial
Advisor........................... DLJ has delivered its written opinion to
the Board of Directors of LPG that, as of March 11, 1996, the
Merger Consideration to be received by the shareholders of
LPG pursuant to the Merger Agreement is fair, from a financial
point of view, to such shareholders.
7
<PAGE>
The full text of the written opinion of DLJ, which sets forth
assumptions made, procedures followed, other matters considered and
limits of the review undertaken in connection with the opinion, is
attached hereto as Annex B and is incorporated herein
by reference. Holders of LPG Common Stock are urged to, and should,
read such opinion in its entirety. See "The Merger -- Opinion of LPG's
Financial Advisor."
Certain Consequences of the
Merger............................ Upon consummation of the Merger, the LPG
shareholders will become shareholders of Conseco, and each share of
LPG Common Stock issued and outstanding immediately prior to the
consummation of the Merger (other than shares held as treasury shares
of LPG) shall be converted into the right to receive the Merger
Consideration. See "- Merger Consideration." In addition, holders of
LPG Stock Options will be entitled to receive, upon the exercise of
their respective LPG Stock Options, a number of shares of Conseco
Common Stock determined as described under "The Merger Agreement --
Conversion of Shares; Exchange of Stock Certificates; No Fractional
Amounts;" and " -- Treatment of LPG Stock Options."
After consummation of the Merger, the current Conseco shareholders will
own between approximately _% and _% of the shares of Conseco Common
Stock to be outstanding after consummation of the Merger, and the
current LPG shareholders will own between approximately ___% and ___%
of such shares.
See "The Merger -- Certain Consequences of the Merger."
Conduct of the Business of
Conseco and LPG After
the Merger........................ Conseco plans to consolidate the
operations of LPG into Conseco's operations in Carmel, Indiana
concurrently with or as soon as practicable after consummation of the
Merger. Marketing and certain other operations of LPG are expected to
remain in Englewood, Colorado for some period of time in order to
maintain and promote LPG's marketing strategy. See "The Merger -
Conduct of the Business of Conseco and LPG After the Merger."
Pursuant to the Merger Agreement, (i) the members of the Board of
Directors of the Merger Sub immediately prior to the consummation of
the Merger shall become the directors of the Surviving Corporation
following the consummation of the Merger, and (ii) the officers of
the Merger Sub immediately prior to the consummation of the Merger
shall become the officers of the Surviving Corporation following
the consummation of the Merger. Conseco's Board of Directors and
management will not be affected by the Merger. See "Management of the
Surviving Corporation Upon Consummation of the Merger."
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<PAGE>
Interests of Certain Persons
in the Merger..................... Pursuant to the Merger Agreement,
the Certificate of Incorporation and By-laws of the Surviving
Corporation and each of its subsidiaries shall contain the
provisions with respect to indemnification set forth in the
Certificate of Incorporation and By-Laws of LPG on the date of
the Merger Agreement, and such provisions shall not be amended,
repealed or otherwise modified for a period of six years after
the Effective Time in any manner that would adversely affect the
rights thereunder of individuals who at any time prior to the
Effective Time were directors or officers of LPG or any of its
subsidiaries (the "Indemnified Parties") in respect of actions or
omissions occurring at or prior to the Effective Time (including,
without limitation, the transactions contemplated by the Merger
Agreement), unless such modification is required by law. Conseco
has agreed to be jointly and severally liable for the
indemnification obligations of the Surviving Corporation to the
Indemnified Parties, as set forth above. See "The Merger --
Interests of Certain Persons in the Merger -- Indemnification of
Officers and Directors."
Conseco has agreed to maintain the effectiveness of the Registration
Statement subsequent to the consummation of the Merger for the
purpose of resales of Conseco Common Stock by persons who, at
the time the Merger is submitted to the shareholders of LPG for
approval, were "affiliates" of LPG for purposes of Rule 145 under
the Securities Act, but shall not thereafter be required to file
any post-effective amendment thereto. See "The Merger --
Interests of Certain Persons in the Merger -- LPG Affiliate
Registration Rights."
In connection with the evaluation, investigation,structuring,
negotiation, and completion of the Merger, LPG engaged Hicks,
Muse, Tate & Furst Incorporated ("Hicks Muse") to act as a
financial advisor to LPG and to furnish financial advisory
services. As compensation for the services performed by Hicks
Muse, LPG is obligated to pay, in cash on the date of the closing
of the Merger, an advisory fee to Hicks Muse of $4,000,000 (the
"Transaction Fee"). Hicks Muse, directly and indirectly,
beneficially owned approximately 12.8% of the outstanding shares
of LPG Common Stock on December 31, 1995. See "The Merger --
Interests of Certain Persons in the Merger -- Financial Advisory
Fees."
Effective Time of the
Merger............................ The Merger will become effective
upon the date a Certificate of Merger is filed with the Secretary
of State of Delaware or at such time thereafter as is provided in
the Certificate of Merger (the "Effective Time"). See "The Merger
Agreement -- Effective Time."
9
<PAGE>
Conditions to the Merger;
Termination of the
Merger Agreement.................. The obligations of Conseco and LPG
to consummate the Merger are subject to the satisfaction of
certain conditions, including obtaining requisite Conseco and LPG
shareholder approvals, delivery to LPG of a tax opinion and the
receipt of certain governmental consents and approvals including,
without limitation, certain consents and approvals required under
applicable insurance laws and the expiration (or earlier
termination) of the relevant waiting period under the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"). Such waiting period was terminated on ________, 1996.
See "The Merger -- Regulatory Approvals" and "The Merger
Agreement -- Conditions to the Merger."
The Merger Agreement is subject to termination by Conseco or LPG
(provided that such party is not in breach of the Merger
Agreement) if the Merger is not consummated by September 30,
1996, and prior to such time upon the occurrence of certain
events. See "The Merger Agreement-- Termination."
Right of LPG Board of
Directors to Withdraw its
Recommendation; Fees.............. Under the Merger Agreement, the
Board of Directors of LPG shall not (i) withdraw or modify, in a
manner materially adverse to Conseco, the approval or
recommendation by the Board of Directors of the Merger Agreement
or the Merger, (ii) approve or recommend an Acquisition Proposal
(as defined in the Merger Agreement) or (iii) enter into any
agreement with respect to any Acquisition Proposal, unless LPG
receives an Acquisition Proposal and the Board of Directors of
LPG determines in good faith, following consultation with outside
counsel, that in order to comply with its fiduciary duties to
shareholders under applicable law it is necessary for the Board
of Directors to withdraw or modify, in a manner materially
adverse to Conseco, its approval or recommendation of the Merger
Agreement or the Merger, approve or recommend such Acquisition
Proposal, enter into an agreement with respect to such
Acquisition Proposal or terminate the Merger Agreement. In the
event the Board of Directors of LPG takes any of the foregoing
actions, LPG shall, concurrently with the taking of any such
action, pay to Conseco upon demand $20 million, payable in
same-day funds.
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In the absence of an Acquisition Proposal, unless Conseco is
materially in breach of the Merger Agreement or is unable to
satisfy certain closing conditions in the Merger Agreement,
LPG has agreed to pay to Conseco upon demand $20 million,
payable in same day funds, if the requisite approval of LPG's
shareholders for the Merger is not obtained and all other closing
conditions contained in the Merger Agreement have been satisfied
or waived or, with respect to any condition not then satisfied,
it is substantially likely that such condition will be satisfied
on or before September 30, 1996, through the exercise of best
efforts to procure the satisfaction thereof; provided, however,
in the event that the average of the closing prices of the
Conseco Common Stock on the New York Stock Exchange Composite
Transactions Reporting System for the 20 trading days immediately
preceding the second trading day prior to the date on which this
Joint Proxy Statement/ Prospectus is first mailed to shareholders
of LPG (the "Mailing Date Trading Average") is less than $26.40,
then in lieu of the $20 million fee described above, Conseco
shall receive reimbursement of its out-of-pocket fees and
expenses incurred or paid by or on behalf of Conseco to third
parties in connection with the Merger or the consummation of any
of the transactions contemplated by the Merger Agreement, not to
exceed $2 million.
In the absence of an Acquisition Proposal, unless LPG is
materially in breach of the Merger Agreement or is unable to
satisfy certain closing conditions in the Merger Agreement,
Conseco has agreed to pay to LPG upon demand $20 million, payable
in same-day funds, if the requisite approval of holders of
Conseco Stock of the Merger Consideration Stock Issuance is not
obtained and all other closing conditions contained in the Merger
Agreement have been satisfied or waived or, with respect to any
condition not then satisfied, it is substantially likely that
such condition will be satisfied on or before September 30, 1996,
through the exercise of best efforts to procure the satisfaction
thereof. See "The Merger Agreement -- Right of LPG Board of
Directors to Withdraw its Recommendation" and "-- Fees."
Absence of Appraisal
Rights............................ Holders of Conseco Stock will not
be entitled to appraisal rights under the Indiana Business
Corporation Law (the "Indiana Corporation Law"). Holders of LPG
Common Stock will not be entitled to appraisal rights under the
Delaware General Corporation Law (the "DGCL"). See "The Merger --
Absence of Appraisal Rights."
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<PAGE>
Certain Federal Income Tax
Consequences...................... The Merger is expected to qualify
as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"). The
obligation of LPG to consummate the Merger is subject to the
condition that it shall have received an opinion of counsel to
the effect that the Merger will be treated for tax purposes as a
reorganization with the meaning of Section 368(a) of the Code. No
gain or loss will be recognized by LPG shareholders upon their
exchange of LPG Common Stock for Conseco Common Stock, except
that any LPG shareholder who receives cash proceeds in lieu of a
fractional share interest in Conseco Common Stock will recognize
gain or loss equal to the difference between such proceeds and
the tax basis allocated to the fractional share interest and such
gain or loss will constitute capital gain or loss if such
shareholder's LPG Common Stock is held as a capital asset at the
Effective Time. See "The Merger -- Certain Federal Income Tax
Consequences."
Accounting Treatment.................. The Merger will be accounted for as a
"purchase" under GAAP. See "The Merger -- Accounting Treatment."
Comparison of Shareholders'
rights............................ Upon consummation of the Merger,
the LPG shareholders will become shareholders of Conseco. See
"Comparison of Shareholders' Rights" for a summary of the
material differences between the rights of holders of Conseco
Common Stock and LPG Common Stock. These differences arise from
the distinctions between the laws of the jurisdictions in which
Conseco and LPG are incorporated (Indiana and Delaware,
respectively) and the distinctions between the respective
charters and bylaws of Conseco and LPG.
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<PAGE>
SELECTED HISTORICAL FINANCIAL INFORMATION OF CONSECO(a)
The selected historical financial information set forth below was derived
from the audited consolidated financial statements of Conseco. Conseco's
consolidated balance sheets at December 31, 1994 and 1995, and the consolidated
statements of operations, shareholders' equity and cash flows for the years
ended December 31, 1993, 1994 and 1995 and notes thereto were audited by Coopers
& Lybrand L.L.P., independent accountants, and are included in Conseco's Annual
Report which is incorporated by reference herein. The consolidated financial
information should be read in conjunction with Conseco's Annual Report.
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------------------------------------
1991 1992 1993 1994 1995
---- ---- ---- ---- ----
(Amounts in millions, except per share amounts)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Insurance policy income..................................... $280.8 $378.7 $1,293.8 $1,285.6 $1,465.0
Investment activity:
Net investment income..................................... 921.4 888.6 896.2 385.7 1,142.6
Net trading income (losses) .............................. 50.7 35.9 93.1 (4.9) 2.5
Net realized gains (losses) .............................. 123.3 124.3 149.5 (25.6) 186.4
Total revenues.............................................. 1,391.8 1,523.9 2,636.0 1,862.0 2,855.3
Interest expense on notes payable........................... 69.9 46.2 58.0 59.3 119.4
Total benefits and expenses................................. 1,168.6 1,193.9 2,025.8 1,537.6 2,436.8
Income before income taxes, minority interest and
extraordinary charge...................................... 223.2 330.0 610.2 324.4 418.5
Extraordinary charge on extinguishment of debt, net of tax.. 5.0 5.3 11.9 4.0 2.1
Net income.................................................. 116.0 169.5 297.0 150.4 220.4
Preferred dividends......................................... 6.8 5.5 20.6 18.6 18.4
Net income applicable to common stock....................... 109.2 164.0 276.4 131.8 202.0
PER SHARE DATA (b)
Income before extraordinary charge, primary................. $ 2.15 $ 2.79 $ 4.93 $ 2.58 $ 4.74
Net income, primary......................................... 2.05 2.71 4.73 2.50 4.69
Income before extraordinary charge, fully diluted........... 2.11 2.78 4.57 2.50 4.26
Net income, fully diluted................................... 2.01 2.70 4.39 2.44 4.22
Dividends declared per common share......................... .035 .043 .15 .25 .093
Book value per common share outstanding at year end......... 7.73 10.93 16.89 10.45 20.44
Shares outstanding at year end.............................. 49.4 49.8 50.6 44.4 40.5
Average fully diluted shares outstanding.................... 50.8 59.2 67.0 61.7 52.2
BALANCE SHEET DATA - PERIOD END
Total assets................................................ $11,832.4 $11,772.7 $13,749.3 $10,811.9 $17,297.5
Notes payable for which Conseco is directly liable.......... 177.6 163.2 413.0 191.8 871.4
Notes payable of BLH, not direct
obligations of Conseco................................... - 392.0 290.3 280.0 301.5
Notes payable of Partnership entities, not
direct obligations of Conseco............................. 319.3 - - 331.1 283.2
Total liabilities........................................... 11,321.3 11,154.4 12,382.9 9,743.2 15,782.5
Minority interest........................................... 79.5 24.0 223.8 321.7 403.3
Shareholders' equity ....................................... 431.6 594.3 1,142.6 747.0 1,111.7
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------------------------------------
1991 1992 1993 1994 1995
---- ---- ---- ---- ----
(Amounts in millions, except per share amounts)
<S> <C> <C> <C> <C> <C>
OTHER FINANCIAL DATA(c)
Premiums collected(d)....................................... $1,648.7 $1,464.9 $2,140.1 $1,879.1 $3,129.2
Operating earnings(e)....................................... 61.5 114.8 162.0 151.7 131.3
Operating earnings per fully diluted common share(b)(e)..... 1.05 1.80 2.39 2.46 2.52
Shareholders' equity excluding unrealized appreciation
(depreciation) of fixed maturity securities(f)............ 431.6 560.3 1,055.2 884.7 999.1
Book value per common share outstanding, excluding
unrealized appreciation (depreciation) of fixed
maturity securities (b)(f)................................ 7.73 10.24 15.16 13.55 17.66
Ratio of debt (including debt of CCP guaranteed by
Conseco until its retirement in 1993) for which Conseco
is directly liable to total capital of Conseco only:
As reported............................................ .29X .22X .27X .20X .44X
Excluding unrealized appreciation (depreciation)(f).... .29X .23X .28X .18X .47X
Adjusted statutory capital (at period end)(g)............... $617.1 $603.1 $1,135.5 $509.0 $1,021.0
Adjusted statutory earnings(h).............................. 90.0 153.4 273.8 248.6 321.7
Ratio of adjusted statutory earnings to cash interest (i)... 2.62X 5.75X 4.94X 5.06X 3.79X
<FN>
(a) Comparison of consolidated financial information in the above table is
significantly affected by the Conseco Capital Partners, L.P.
("Partnership I") and Conseco Capital Partners II, L.P.
("Partnership II") acquisitions, the sale of Western National Corporation
("WNC") and the transactions affecting Conseco's ownership interest in
Bankers Life Holding Corporation ("BLH") and CCP Insurance, Inc.("CCP").
For periods beginning with their acquisitions and ending June 30, 1992,
Partnership I and its subsidiaries were consolidated with the financial
statements of Conseco. Following the completion of the initial public
offering by CCP in July 1992, the Company did not have unilateral control
to direct all of CCP's activities and, therefore, did not consolidate the
financial statements of CCP with the financial statements of Conseco.
As a result of the purchase by Conseco of all the shares of common stock
of CCP it did not already own on August 31, 1995 (the "CCP Merger"), the
financial statements of CCP's subsidiaries are consolidated with the
financial statements of Conseco, effective January 1, 1995. Conseco has
included BLH in its financial statements since November 1, 1992. Through
December 31, 1993, the financial statements of WNC were consolidated with
the financial statements of Conseco. Following the completion of the
initial public offering of WNC (and subsequent disposition of Conseco's
remaining equity interest in WNC), the financial statements of WNC were
no longer consolidated with the financial statements of Conseco. As of
September 29, 1994, Conseco began to include in its financial statements
the newly acquired Partnership II subsidiary, American Life Group, Inc.
("AGP"). Refer to the notes to the consolidated financial statements
included in Conseco's Annual Report, incorporated by reference herein,
for a description of business combinations.
(b) All share and per share amounts have been restated to reflect the
two-for-one stock split paid April 1, 1996.
(c) Amounts under this heading are included to assist the reader in analyzing
Conseco's financial position and results of operations. Such amounts are
not intended to, and do not, represent insurance policy income, net
income, net income per share, shareholders' equity or book value per
share prepared in accordance with GAAP.
(d) Includes premiums received from annuities and universal life policies,
which are not reported as revenues under GAAP.
(e) Represents income before extraordinary charge, excluding net trading
income (losses) (net of income taxes), net realized gains (losses) (less
that portion of change in future policy benefits, amortization of cost of
policies purchased and the cost of policies produced and income taxes
relating to such gains (losses)) and restructuring activities (net of
income taxes).
(f) Excludes the effect of reporting fixed maturities at fair value and
recording the unrealized gain or loss on such securities as a component
of shareholders' equity, net of tax and other adjustments, which Conseco
began to do in 1992. Such adjustments are in accordance with Statement of
Financial Accounting Standards No. 115 "Accounting for Certain
Investments in Debt and Equity Securities" ("SFAS 115"), as described in
the notes to the consolidated financial statements included in Conseco's
Annual Report which is incorporated herein by reference.
14
<PAGE>
(g) Includes: (i) statutory capital and surplus; (ii) mandatory securities
valuation reserve ("MSVR") at periods ended prior to December 31, 1992;
(iii) asset valuation reserve ("AVR") and interest maintenance reserve
("IMR") at periods ended on or after December 31, 1992; and (iv) the
portion of surplus debentures carried by the life companies as a
liability to Conseco. Such statutory data reflect the combined data
derived from the annual statements of Conseco's and BLH's wholly owned
life insurance companies as filed with insurance regulatory agencies and
prepared in accordance with statutory accounting practices.
(h) Represents gains from operations before interest expense (except interest
on annuities and financial products) and income taxes of Conseco's and
BLH's wholly owned life insurance companies as reported for statutory
accounting purposes plus income before interest expense and income taxes
of all non-life companies.
(i) Represents the ratio of adjusted statutory earnings to cash interest.
Cash interest includes interest, except interest on annuities and
financial products, of Conseco's and BLH's wholly owned subsidiaries
that is required to be paid in cash.
</FN>
</TABLE>
15
<PAGE>
SELECTED HISTORICAL FINANCIAL INFORMATION OF LPG(a)
The selected historical financial information set forth below was derived
from the audited consolidated financial statements of LPG. LPG's consolidated
balance sheets at December 31, 1994 and 1995, and the consolidated statements of
operations, shareholders' equity and cash flows for the years ended December 31,
1993, 1994 and 1995 and notes thereto were audited by Coopers & Lybrand L.L.P.,
independent accountants, and are included in LPG's Annual Report which is
incorporated by reference herein. The consolidated financial information should
be read in conjunction with LPG's Annual Report.
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------------------------------------
1991 1992 1993 1994 1995
---- ---- ---- ---- ----
(Amounts in millions, except per share amounts)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Insurance policy income..................................... $187.1 $187.3 $210.8 $217.9 $280.1
Investment activity:
Net investment income..................................... 207.5 218.6 221.1 225.4 277.1
Net realized gains (losses) .............................. 18.6 23.1 18.4 (19.7) 15.8
Total revenues.............................................. 420.6 436.5 455.7 428.2 576.1
Interest expense............................................ 43.4 35.3 26.0 20.7 27.9
Total benefits and expenses................................. 376.6 374.9 373.9 369.8 592.8
Income (loss) before income taxes, minority interest and
extraordinary charge...................................... 44.1 61.7 81.9 58.5 (16.7)
Extraordinary charge, net of tax............................ - 5.6 4.8 2.6 -
Net income (loss)........................................... 22.8 32.1 47.2 34.6 (13.4)
Dividends in kind on preferred stock........................ 13.4 15.4 4.0 - -
Net income (loss) applicable to common stock................ 9.4 16.7 43.2 34.6 (13.4)
PER SHARE DATA
Income (loss) before extraordinary charge, primary
and fully diluted.......... .............................. $(0.61) $ 1.08 $ 2.05 $ 1.43 $(0.49)
Net income (loss), primary and fully diluted................ (0.61) 0.62 1.85 1.33 (0.49)
Dividends declared per common share......................... - - 0.0375 .08 .11
Book value per common share outstanding at year end......... 13.92 15.98 12.25 11.50 14.35
Shares outstanding at year-end.............................. 8.0 14.4 25.4 25.5 27.9
Average fully diluted shares outstanding.................... 9.0 12.1 23.4 26.1 27.1
BALANCE SHEET DATA - PERIOD END
Total assets................................................ $2,976.9 $3,292.7 $3,589.4 $3,748.8 $4,980.9
Notes payable............................................... 335.5 314.3 210.1 210.5 246.1
Total liabilities........................................... 2,819.3 3,062.8 3,278.2 3,455.2 4,580.4
Minority interest........................................... 24.1 - - - -
Shareholders' equity ....................................... 111.6 229.9 311.2 293.6 400.5
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------------------------------------
1991 1992 1993 1994 1995
---- ---- ---- ---- ----
(Amounts in millions, except per share amounts)
<S> <C> <C> <C> <C> <C>
OTHER FINANCIAL DATA(b)
Premiums collected(c)....................................... $508.2 $465.5 $470.2 $411.8 $497.3
Operating earnings (loss)(d)................................ 15.5 31.9 44.1 50.0 (28.9)
Operating earnings (loss) per fully diluted common share(d). 1.72 2.63 1.88 1.91 (1.06)
Shareholders' equity excluding unrealized appreciation
(depreciation) of fixed maturity securities(e)............ 111.6 229.9 291.7 325.0 344.3
Book value per common share outstanding, excluding
unrealized appreciation (depreciation) of fixed
maturity securities(e).................................... 13.92 15.98 11.48 12.73 12.34
Ratio of debt to total capital:
As reported............................................... .75X .58X 40X .42X .38X
Excluding unrealized appreciation (depreciation)(e)....... .75X .58X 42X .39X .42X
Adjusted statutory capital (at period end)(f)............... $149.4 $191.3 $169.8 $174.3 $209.8
Adjusted statutory earnings(g).............................. 75.7 76.4 83.4 75.8 78.1
Ratio of adjusted statutory earnings to cash interest(h).... 1.83X 2.25X 3.46X 3.78X 3.46X
<FN>
(a) Comparison of consolidated financial information in the above table is
significantly affected by the acquisition of Lamar Financial Group, Inc.
("Lamar") on April 28, 1995. Such acquisition was accounted for using the
purchase method, and the results of operations at Lamar are included in
the consolidated financial data from the date of acquisition. Refer to
the notes to the consolidated financial statements included in LPG's
Annual Report incorporated by reference herein for a description of the
acquisition.
(b) Amounts under this heading are included to assist the reader in analyzing
LPG's financial position and results of operations. Such amounts are not
intended to, and do not, represent insurance policy income, net income,
net income per share, shareholders' equity or book value per share
prepared in accordance with GAAP.
(c) Includes premiums received from annuities and universal life policies,
which are not reported as revenues under GAAP.
(d) Represents income before extraordinary charge, excluding net realized
gains (losses) (less that portion of amortization of cost of policies
purchased and the cost of policies produced and income taxes relating to
such gains (losses)).
(e) Excludes the effects of reporting fixed maturities at fair value and
recording the unrealized gain or loss on such securities as a component
of shareholders' equity, net of tax and other adjustments, which LPG
began to do effective December 31, 1993. Such adjustments are in
accordance with SFAS 115, as described in the notes to the consolidated
financial statements included in LPG's Annual Report which is
incorporated herein by reference.
(f) Includes: (i) statutory capital and surplus; (ii) MSVR at periods ended
prior to December 31, 1992; and (iii) AVR and IMR at periods ended on or
after December 31, 1992. Such statutory data reflect the combined data
derived from the annual statements of LPG's consolidated insurance
subsidiaries as filed with insurance regulatory agencies and prepared in
accordance with statutory accounting practices.
(g) Represents gains from operations before interest expense (except interest
on annuities and financial products) and income taxes of LPG's
consolidated insurance subsidiaries as reported for statutory accounting
purposes plus income before interest expense and income taxes of all
non-life companies.
(h) Represents the ratio of adjusted statutory earnings to cash interest.
Cash includes interest, except interest on annuities and financial
products, of LPG and its consolidated subsidiaries that is required to be
paid in cash.
</FN>
</TABLE>
17
<PAGE>
SUMMARY UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
(Amounts in millions, except per share amounts)
The summary unaudited pro forma consolidated financial information set
forth below was derived from the unaudited pro forma consolidated financial
statements of Conseco included elsewhere in this Joint Proxy
Statement/Prospectus. See "Unaudited Pro Forma Consolidated Financial
Statements." The summary unaudited pro forma consolidated financial information
is based upon the historical and pro forma consolidated financial statements and
related notes thereto of Conseco and LPG incorporated by reference in this Joint
Proxy Statement/Prospectus. This information should be read in conjunction with
such materials and the unaudited pro forma consolidated financial statements
appearing elsewhere in this Joint Proxy Statement/Prospectus.
The summary unaudited pro forma consolidated financial information for
the year ended December 31, 1995, reflects the consolidated operating results
for Conseco as if the following transactions had occurred on January 1, 1995:
(i) the Merger; (ii) the acquisition of Lamar by LPG; (iii) the acquisition of
all of the outstanding common stock of CCP not owned by Conseco and related
transactions (including the repayment of the existing $250.0 million revolving
credit agreement); (iv) the increase of Conseco's ownership in BLH to 90.5
percent, as a result of purchases of common shares of BLH by Conseco and BLH
during 1995 and the first three months of 1996; (v) the issuance of 4.37 million
shares of Conseco PRIDES in January 1996; (vi) the BLH tender offer for its 13
percent senior subordinated notes due 2002 and related financing transactions
completed in March 1996; and (vii) the debt restructuring of AGP in the fourth
quarter of 1995.
The summary unaudited pro forma consolidated financial information at
December 31, 1995, reflects the financial position of Conseco as if the
following 1996 transactions had occurred on December 31, 1995: (i) the Merger;
(ii) the issuance of Conseco PRIDES; (iii) the repurchase of BLH common stock by
BLH; and (iv) the BLH tender offer and related financing transactions.
The summary unaudited pro forma financial information as of and for the
year ended December 31, 1995, is provided for informational purposes only and is
not necessarily indicative of the results of operations or financial condition
that would have been achieved had the transactions set forth above actually
occurred as of the dates indicated or of future results of operations or
financial condition of Conseco. The Merger will be accounted for under the
purchase method of accounting (amounts in millions, except per share amounts).
<TABLE>
<S> <C>
STATEMENT OF OPERATIONS DATA
Insurance policy income.................................................................... $1,752.8
Investment activity:
Net investment income.................................................................... 1,455.6
Net trading income ...................................................................... 2.5
Net realized gains ..................................................................... 203.9
Total revenues............................................................................. 3,476.5
Interest expense on notes payable.......................................................... 133.9
Total benefits and expenses................................................................ 2,973.0
Income before income taxes, minority interest and extraordinary charge..................... 503.5
Income before extraordinary charge......................................................... 234.8
PER SHARE DATA
Income before extraordinary charge, primary................................................ $ 3.24
Income before extraordinary charge, fully diluted.......................................... 3.09 .
Book value per common share outstanding at year end........................................ 24.60
Shares outstanding at year-end............................................................. 56.8
BALANCE SHEET DATA - PERIOD END
Total assets............................................................................... $22,610.8
Notes payable for which Conseco is directly liable......................................... 885.8
Notes payable of BLH, not direct obligations of Conseco.................................... 340.0
Notes payable of Partnership entities, not direct obligations of Conseco................... 283.2
Total liabilities.......................................................................... 20,274.7
Minority interest.......................................................................... 388.5
Shareholders' equity ...................................................................... 1,947.6
</TABLE>
18
<PAGE>
<TABLE>
<S> <C>
OTHER FINANCIAL DATA(a)
Premiums collected(b)...................................................................... $3,671.8
Operating earnings (c)..................................................................... 207.2
Operating earnings per fully diluted common share(c)....................................... 2.73
Shareholders' equity excluding unrealized appreciation (depreciation) of
fixed maturity securities(d)............................................................. 1,835.0
Book value per common share outstanding, excluding unrealized appreciation
(depreciation) of fixed maturity securities(d)........................................... 22.61
Ratio of debt for which Conseco is directly liable to total capital of Conseco only:
As reported........................................................................... .31
Excluding unrealized appreciation (depreciation)(d)................................... .33
Adjusted statutory capital (at period end)(e).............................................. 1,230.8
Adjusted statutory earnings(f)............................................................. 401.9
Ratio of adjusted statutory earnings to cash interest (g).................................. 3.94
<FN>
(a) Amounts under this heading are included to assist the reader in analyzing
Conseco's pro forma financial position and pro forma results of
operations. Such amounts are not intended to, and do not, represent pro
forma insurance policy income, pro forma net income, pro forma net income
per share, pro forma shareholders' equity or pro forma book value per
share prepared in accordance with GAAP.
(b) Includes premiums received from annuities and universal life policies,
which are not reported as revenues under GAAP.
(c) Represents pro forma income before extraordinary charge, excluding net
trading income (net of income taxes), net realized gains (less that
portion of change in future policy benefits, amortization of cost of
policies purchased and the cost of policies produced and income taxes
relating to such gains) and restructuring activities (net of income
taxes).
(d) Excludes the effect of reporting fixed maturities at fair value and
recording the unrealized gain or loss on such securities as a component
of shareholders' equity, net of tax and other adjustments, which Conseco
began to do in 1992. Such adjustments are in accordance with SFAS 115, as
described in the notes to the consolidated financial statements included
in Conseco's Annual Report which is incorporated herein by reference.
(e) Includes: (i) statutory capital and surplus; (ii) MSVR at periods ended
prior to December 31, 1992; (iii) AVR and IMR at periods ended on or
after December 31, 1992; and (iv) the portion of surplus debentures
carried by the life companies as a liability to Conseco. Such statutory
data reflect the combined data derived from the annual statements of
Conseco's wholly owned life insurance companies, Bankers Life and
Casualty Insurance Company and LPG's wholly owned life insurance
companies as filed with insurance regulatory agencies and prepared in
accordance with statutory accounting practices.
(f) Represents gains from operations before interest expense (except interest
on annuities and financial products) and income taxes of Conseco's and
BLH's wholly owned life insurance companies and LPG's wholly owned life
insurance companies as reported for statutory accounting purposes plus
income before interest expense and income taxes of Conseco's and LPG's
non-life companies.
(g) Represents the pro forma ratio of adjusted statutory earnings to cash
interest. Cash interest includes interest, except interest on annuities
and financial products, of Conseco's wholly owned subsidiaries, BLH and
LPG that is required to be paid in cash.
</FN>
</TABLE>
19
<PAGE>
COMPARATIVE UNAUDITED PER SHARE DATA OF CONSECO AND LPG
The following table sets forth selected historical per share data of
Conseco and LPG and corresponding pro forma and pro forma equivalent per share
amounts as of and for the year ended December 31, 1995, giving effect to the
proposed Merger. Pro forma equivalent amounts are presented assuming a trading
average of $36 per share so that each share of LPG Common Stock is exchanged for
.5833 shares of Conseco Common Stock. The information presented is derived from
the consolidated financial statements and related notes thereto included in
Conseco's Annual Report, LPG's Annual Report (both of which are incorporated by
reference herein) and the unaudited pro forma consolidated financial statements
of Conseco included elsewhere in this Joint Proxy Statement/Prospectus. The
information should be read in conjunction with such materials. See "Unaudited
Pro Forma Consolidated Financial Statements." The pro forma financial
information is provided for informational purposes only and is not necessarily
indicative of the actual results that would have been achieved had the Merger
been consummated at the beginning of the period presented, or of future results.
<TABLE>
<S> <C>
Net income (loss) before extraordinary charge per fully diluted common share:
Historical Conseco..................................................................... $4.26
Historical LPG......................................................................... (.49)
Pro forma combined..................................................................... 3.09
Pro forma equivalent for one share of LPG common stock................................. 1.80
Dividends per common share:
Historical Conseco..................................................................... $.093
Historical LPG......................................................................... .110
Pro forma combined..................................................................... .093
Pro forma equivalent for one share of LPG common stock................................. .054
Book value per common share:
Historical Conseco..................................................................... $20.44
Historical LPG......................................................................... 14.35
Pro forma combined..................................................................... 24.60
Pro forma equivalent for one share of LPG common stock................................. 14.35
</TABLE>
20
<PAGE>
MARKET PRICE INFORMATION
Market prices for the shares of Conseco Common Stock and LPG Common
Stock are reported on the NYSE. The table below sets forth for the periods
indicated the high and low sale prices per share of Conseco Common Stock and LPG
Common Stock. For current price information with respect to the Conseco Common
Stock and LPG Common Stock, stockholders are urged to consult publicly available
sources.
<TABLE>
<CAPTION>
Conseco Common Stock LPG Common Stock
--------------------------------------- --------------------------------------
High Low Dividends High Low Dividends
----------- -------- ------------ --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
1994
First Quarter........................... $ 32 1/8 $26 9/16 $0.0625 $19 7/8 $17 1/8 $0.02
Second Quarter.......................... 29 1/16 23 3/16 0.0625 19 3/4 15 7/8 0.02
Third Quarter........................... 26 3/16 21 5/8 0.0625 20 3/8 17 1/8 0.02
Fourth Quarter.......................... 23 1/8 17 15/16 0.0625 22 18 1/4 0.02
1995
First Quarter........................... 24 5/16 16 1/4 0.0625 23 1/4 19 5/8 0.02
Second Quarter.......................... 23 5/16 19 9/16 0.0625 20 3/4 18 0.03
Third Quarter........................... 26 5/8 22 3/4 0.01 21 1/8 15 7/8 0.03
Fourth Quarter.......................... 31 9/16 25 7/16 0.01 18 5/8 12 3/8 0.03
1996
First Quarter........................... 36 5/16 29 7/8 0.01 20 3/4 12 3/4 0.03
Second Quarter (through April 15,
1996)................................... 39 7/8 36 1/2 0.02 21 7/8 20 5/8 -
</TABLE>
The information set forth in the table below presents: (a) the closing
price for shares of Conseco Common Stock and LPG Common Stock on the NYSE on
March 11, 1996, the last day on which trading occurred prior to the public
announcement of the Merger Agreement and on ________________, 1996, the last
full trading day for which information was available prior to the mailing of the
Joint Proxy Statement/Prospectus and (b) the "Equivalent Per Share Price" (as
hereinafter defined) of LPG Common Stock on March 11, 1996 and _____________,
1996. The "Equivalent Per Share Price" of LPG Common Stock represents the
closing price per share of Conseco Common Stock reported on the NYSE, multiplied
by $21.00 per share of LPG Common Stock divided by the Trading Average ($33.44
and $_______ assuming consummation of the Merger had occurred on March 11, 1996
and _________, 1996, respectively) (resulting in a ratio of one (1) share of LPG
Common Stock for each .6280 and ______ shares of Conseco Common Stock at March
11, 1996 and _____________, respectively). The Equivalent Per Share Price is not
the same as the Merger Consideration. The amount and value of the Merger
Consideration to be received by holders of the LPG Common Stock can be
determined only at the date the Merger is consummated.
See "- Merger Consideration."
<TABLE>
<CAPTION>
LPG
Conseco LPG Common Stock
Common Common Equivalent Per
Per Share Price Stock Stock Share Price
--------------- ----- ----- -----------
<S> <C> <C> <C>
March 11, 1996.................................. $31.50 $15.75 $19.78
___________, 1996...............................
</TABLE>
21
<PAGE>
Conseco and LPG shareholders are urged to obtain a current market
quotation for the Conseco Common Stock and the LPG Common Stock. No assurance
can be given as to the future prices of, or markets for, Conseco Common Stock or
LPG Common Stock.
22
DAFS02...:\50\59450\0012\1686\NOT3026S.28G
<PAGE>
INFORMATION CONCERNING CONSECO AND THE MERGER SUB
Background
Conseco is a financial services holding company engaged primarily in
the development, marketing and administration of annuity, supplemental health
and individual life products. Conseco's earnings result primarily from operating
life insurance companies and other financial services businesses and providing
investment management, administrative and other fee-based services to affiliated
businesses as well as non-affiliates. Conseco's operating strategy is to grow
the insurance business within its subsidiaries by focusing resources on the
development and expansion of profitable products and strong distribution
channels. Conseco has also grown through acquisitions of companies that have
profitable niche products, strong distribution systems and progressive
management teams who can work with Conseco to implement Conseco's operating and
growth strategies.
Conseco was organized in 1979 an as Indiana corporation and commenced
operations in 1982. Since Conseco commenced operations in 1982, it has completed
12 acquisitions of insurance companies and related businesses; the first seven
as wholly-owned subsidiaries and the last five through its acquisition
partnerships, Partnership I and Partnership II. Conseco believes the
consolidation of the U.S. life insurance industry will continue, and Conseco
intends to participate in this process. In March 1996, Conseco announced it is
terminating its current partnership activity because the current regulatory and
rating agency environment have made it extremely difficult to structure
leveraged acquisitions of life insurance companies.
Conseco currently holds major ownership interests in the following life
insurance businesses: (i) BLH, an NYSE-listed company in which Conseco currently
holds a 90 percent ownership interest (and which is the parent company of
Bankers Life and Casualty Company ("Bankers Life")); (ii) AGP, formerly The
Statesman Group, Inc. prior to its name change in August 1995, an acquisition by
Partnership II in September 1994, in which Conseco holds a 36 percent ownership
interest; (iii) Great American Reserve Insurance Company ("Great American
Reserve") and Beneficial Standard Life Insurance Company ("Beneficial
Standard"), in which Conseco has had an ownership interest since their
acquisition by Partnership I and which became wholly-owned subsidiaries in
August 1995; and (iv) Bankers National Life Insurance Company ("Bankers
National"), National Fidelity Life Insurance Company ("National Fidelity") and
Lincoln American Life Insurance Company ("Lincoln American"), all of which are
wholly owned by Conseco and which have profitable blocks of in-force business,
although new product sales are currently not being pursued. BLH and its
subsidiaries are collectively referred to hereinafter as BLH.
Life Insurance Operations
Conseco's insurance operations are conducted through three segments:
(i) senior market operations, consisting of the activities of BLH; (ii) annuity
operations, consisting of the activities of Great American Reserve and
Beneficial Standard; and (iii) other life insurance operations, consisting of
the activities of National Fidelity, Bankers National and Lincoln American.
Senior Market Operations. BLH, with total assets of approximately $4.8
billion at December 31, 1995, markets health and life insurance and annuity
products primarily to senior citizens through approximately 200 branch offices
and approximately 3,300 career agents. Most of BLH's agents sell only BLH
policies. Approximately 56 percent of the $1,513.8 million of direct
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premiums collected by BLH in 1995 was from the sale of individual health
insurance products, principally Medicare supplement and long-term care policies.
BLH 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 BLH 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 response to policyholder inquiries.
Annuity Operations. The annuity companies, with total assets of $5.4
billion at December 31, 1995, market, issue and administer annuity, life and
employee benefit-related insurance products through two cost-effective
distribution channels: (i) approximately 3,000 educator market specialists, who
sell tax-qualified annuities and certain employee benefit-related insurance
products primarily to school teachers and administrators; and (ii) approximately
9,000 professional independent producers, who sell various annuity and life
insurance products aimed primarily at the retirement market. Approximately 87
percent of the $709.8 million of total premiums collected by the annuity
companies in 1995 was from the sale of annuity products.
Other Life Insurance Operations. Conseco's other insurance subsidiaries
had total assets of approximately $.8 billion at December 31, 1995. These
subsidiaries have profitable in-force blocks of annuity and life products, but
do not currently market their products to new customers. Premiums collected
totaled $80.0 million in 1995, including $6.6 million of premiums from deposit
funds maintained by employee benefit plans of Conseco.
Partnership Operations. Partnership II completed the acquisition of 80
percent of the common stock of AGP in September 1994. Conseco holds a 36 percent
ownership interest in AGP pursuant to Conseco's investment in Partnership II and
direct investment in AGP. AGP, with total assets of approximately $6.2 billion
at December 31, 1995, is a financial services holding company engaged primarily
in the development, marketing, underwriting, issuance and administration of
annuity and life insurance products. AGP collected $825.6 million of insurance
premiums and annuity deposits in 1995. Approximately 91 percent of such premiums
collected in 1995 were from the sale of deferred annuities.
Fee-Based Operations
Conseco's subsidiaries provide various services to affiliated and
unaffiliated clients. Conseco Capital Management, Inc. managed $24.7 billion of
invested assets at December 31, 1995, including $13.7 billion of assets of
affiliated companies. Marketing Distribution Systems Consulting Group, Inc.
provides marketing services to financial institutions related to the
distribution of insurance and investment products. Conseco Risk Management, Inc.
distributes property and casualty insurance products as an independent agency.
Conseco Mortgage Capital, Inc. originates and services mortgages. Total fees
from affiliates and nonaffiliates were $69.2 million, $71.0 million and $49.0
million for the years ended 1995, 1994 and 1993, respectively. To the extent
that these services are provided to entities that are included in the financial
statements on a consolidated basis, the intercompany fees are eliminated in
consolidation. Earnings in this segment increase when Conseco adds new clients
(either affiliated or unaffiliated) and when Conseco increases the fee-producing
activities conducted for clients.
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For a more detailed description of the business of Conseco, see the
description set forth in Conseco's Annual Report, which is incorporated herein
by reference.
The Merger Sub, a wholly-owned subsidiary of Conseco, was formed for
the purposes of effecting the Merger. To date, the Merger Sub has not engaged in
any activities other than those incident to its organization and the
consummation of the Merger.
Conseco's and the Merger Sub's executive offices are located at 11825
North Pennsylvania Street, Carmel, Indiana 46032 and the telephone number for
Conseco and the Merger Sub is (317) 817-6100.
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INFORMATION CONCERNING LPG
LPG is an insurance holding company that, through its three principal
insurance subsidiaries, Massachusetts General Life Insurance Company
("Massachusetts General"), Philadelphia Life Insurance Company ("Philadelphia
Life"), and Lamar Life Insurance Company ("Lamar Life"), sells a diverse
portfolio of universal life insurance and, to a lesser extent, annuity products
to individuals. LPG did not have any significant operations before the
acquisition of its initial life insurance subsidiaries, which was completed on
March 30, 1990. On April 28, 1995, LPG acquired Lamar Financial Group, Inc.,
together with all its subsidiaries, including Lamar Life of Jackson,
Mississippi, for a purchase price of $77 million. The acquisition added $1.2
billion of assets to LPG. The acquisition of Lamar Life provided an additional
distribution system in universal life insurance, annuity and group health
products, as well as providing for consolidation efficiencies at the Englewood,
Colorado main administrative center. LPG has a substantial face amount of
traditional and universal life insurance in force, amounting to $58.7 billion at
December 31, 1995.
For a more detailed description of the business of LPG, see the
description set forth in LPG's Annual Report, which is incorporated herein by
reference.
LPG's executive offices are located at 7887 East Belleview Avenue,
Englewood, Colorado 80111 and its telephone number is (303) 779-1111.
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SHAREHOLDER MEETINGS
General
This Joint Proxy Statement/Prospectus is being furnished to holders of
shares of Conseco Stock in connection with the solicitation of proxies by the
Conseco Board of Directors for use at the Conseco Special Meeting to be held on
__________, 1996, at ________________________________ _____________________,
commencing at 10:00 a.m., local time, and at any adjournment or postponement
thereof.
This Joint Proxy Statement/Prospectus is also being furnished to
holders of LPG Common Stock in connection with the solicitation of proxies by
the LPG Board of Directors for use at the LPG Special Meeting to be held on
___________, 1996 at _______________________________________, commencing at
10:00 a.m., local time, and at any adjournment or postponement thereof.
This Joint Proxy Statement/Prospectus also constitutes the Prospectus
of Conseco filed with the Commission as part of the Registration Statement under
the Securities Act relating to the shares of Conseco Common Stock issuable in
connection with the Merger. This Joint Proxy Statement/Prospectus and
accompanying forms of proxy are first being mailed to shareholders of Conseco
and LPG on or about _____________, 1996.
Matters to be Considered at the Meetings
Conseco. At the Conseco Special Meeting, holders of shares of Conseco
Stock will consider and vote upon (i) a proposal to approve the Merger
Consideration Stock Issuance, and (ii) such other business as may properly come
before the Conseco Special Meeting or any adjournments or postponements thereof.
The Conseco Board of Directors has unanimously approved the Merger
Agreement and recommends that Conseco shareholders vote FOR approval of the
Merger Consideration Stock Issuance. See "The Merger -- Background of the
Merger" and "- Conseco's Reasons for the Merger; Recommendation of the Conseco
Board of Directors."
Holders of shares of Conseco Stock will not be entitled to appraisal
rights as a result of the Merger. See "The Merger -- Absence of Appraisal
Rights."
LPG. At the LPG Special Meeting, holders of shares of LPG Common Stock
will consider and vote upon (i) a proposal to approve and adopt the Merger
Agreement and the transactions contemplated thereby and (ii) such other business
as may properly come before the LPG Special Meeting or any adjournments or
postponements thereof.
The LPG Board of Directors has unanimously approved the Merger
Agreement and recommends that LPG shareholders vote FOR approval and adoption of
the Merger Agreement. See "The Merger -- Background of the Merger" and "- LPG's
Reasons for the Merger; Recommendation of the LPG Board of Directors."
Holders of shares of LPG Common Stock will not be entitled to appraisal
rights under the DGCL as a result of the Merger. See "The Merger -- Absence
of Appraisal Rights."
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Voting at the Meetings; Record Date; Quorum
Conseco. The Conseco Board of Directors has fixed ___________, 1996 as
the Conseco Record Date. Accordingly, only holders of record of shares of
Conseco Common Stock and Conseco PRIDES on the Conseco Record Date will be
entitled to notice of and to vote, together as a single class, at the Conseco
Special Meeting. As of the Conseco Record Date, there were ___________ shares of
Conseco Common Stock outstanding and entitled to vote which were held by
approximately _________ holders of record, and ______________ shares of Conseco
PRIDES outstanding and entitled to vote which were held by approximately ______
holders of record. Each holder of record of shares of Conseco Common Stock on
the Conseco Record Date is entitled to cast, either in person or by properly
executed proxy, one vote per share of Conseco Common Stock on the Merger
Consideration Stock Issuance and such other matters, properly submitted for the
vote of the Conseco shareholders at the Conseco Special Meeting. Each holder of
record of shares of Conseco PRIDES on the Conseco Record Date is entitled to
cast, either in person or by properly executed proxy, four- fifths (4/5) of a
vote per share of Conseco PRIDES on the Merger Consideration Stock Issuance and
such other matters, properly submitted for the vote of the Conseco shareholders
at the Conseco Special Meeting. The presence, in person or by properly executed
proxy, of the holders of Conseco Common Stock and Conseco PRIDES representing a
majority of the voting power of all outstanding Conseco Stock at the Conseco
Special Meeting is necessary to constitute a quorum at the Conseco Special
Meeting.
Although Conseco shareholder approval of the Merger and the Merger
Agreement is not required under Indiana law because Conseco is not a constituent
corporation to the Merger, under the rules of the NYSE, on which the Conseco
Common Stock is listed, the approval by a majority of the votes cast, provided
that the total vote cast represents over 50% interest of all securities entitled
to vote on the proposal, is required for approval of the issuance by a
corporation of shares of its common stock in connection with the acquisition of
stock or assets of another company if the common stock so issued will be equal
to or in excess of twenty percent (20%) of the number of shares of common stock
of such corporation outstanding before the issuance of such shares. Accordingly,
because the shares of Conseco Common Stock to be issued pursuant to the Merger
will exceed twenty percent (20%) of the number of shares of Conseco Common Stock
outstanding immediately prior to the Merger, approval of the Merger
Consideration Stock Issuance is required pursuant to the rules of the NYSE.
Shares subject to abstentions will be treated as shares that are
present at the Conseco Special Meeting for purposes of determining the presence
of a quorum but as unvoted for purposes of determining the number of shares
voting on a particular proposal. If a broker or other nominee holder indicates
on the proxy card that it does not have discretionary authority to vote the
shares for which it is the holder of record on a particular proposal, those
shares will not be considered as votes cast for purposes of determining the
number of Conseco shareholders that have voted for or against the proposal.
Accordingly, abstentions and broker non-votes will have no effect as to the
approval of the Merger Consideration Stock Issuance or any other matter
submitted to the Conseco shareholders which requires approval by a majority of
the votes cast, assuming the total votes cast represents over 50% interest of
all securities entitled to vote on the proposal.
As of the Conseco Record Date, the executive officers and directors of
Conseco (as a group, 10 persons) were entitled to vote ______ shares of Conseco
Common Stock and ______ shares of Conseco PRIDES representing approximately
____% of the outstanding votes of Conseco Stock
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entitled to be cast as of such date. All such persons are obligated pursuant to
written agreements with LPG to vote such shares in favor of the Merger.
LPG. The LPG Board of Directors has fixed ___________, 1996 as the LPG
Record Date. Accordingly, only holders of record of shares of LPG Common Stock
on the LPG Record Date will be entitled to notice of and to vote at the LPG
Special Meeting. As of the LPG Record Date, there were __________ shares of LPG
Common Stock outstanding and entitled to vote which were held by approximately
___________ holders of record. Each holder of record of shares of LPG Common
Stock on the LPG Record Date is entitled to cast, either in person or by
properly executed proxy, one vote per share on the Merger Agreement and the
other matters, if any, properly submitted for the vote of the LPG shareholders
at the LPG Special Meeting. The presence, in person or by properly executed
proxy, of the holders of stock representing a majority of the voting power of
all outstanding shares of the LPG Common Stock at the LPG Special Meeting is
necessary to constitute a quorum at the LPG Special Meeting.
The approval and adoption by LPG of the Merger Agreement will require
the affirmative vote of the holders of at least a majority of the voting power
of the outstanding shares of LPG Common Stock. Shares subject to abstentions
will be treated as shares that are present at the LPG Special Meeting for
purposes of determining the presence of a quorum but as unvoted for purposes of
determining the number of shares voting on a particular proposal. If a broker or
other nominee holder indicates on the proxy card that it does not have
discretionary authority to vote the shares for which it is the holder of record
on a particular proposal, those shares will not be considered as voted for
purposes of determining the number of LPG shareholders that have voted for or
against the proposal. Accordingly, abstentions and brokers non-votes will have
the same practical effect as a vote against the approval and adoption of the
Merger Agreement or on any other matter submitted to the LPG shareholders which
requires a percentage of the total number of outstanding shares for approval.
As of the LPG Record Date, the executive officers and directors of LPG
(as a group, 31 persons) were entitled to vote _____ shares of LPG Common Stock,
or approximately ____% of the number of shares of LPG Common Stock outstanding
and entitled to vote as of such date. All such persons are obligated, pursuant
to written agreements with Conseco, to vote their shares in favor of adoption of
the Merger Agreement at the LPG Special Meeting, provided, however, that if the
Mailing Date Trading Average is less than $26.40, then such persons, in lieu of
voting in favor of adoption of the Merger Agreement, have the right to vote for
or against the Merger Agreement in proportion to other holders of LPG Common
Stock.
As of the LPG Record Date, Conseco owned 603,400 shares of LPG Common
Stock, approximately ___% of the number of shares of LPG Common Stock
outstanding and entitled to vote as of such date. Conseco intends to vote its
shares in favor of adoption of the Merger Agreement at the LPG Special Meeting.
Proxies
This Joint Proxy Statement/Prospectus is being furnished to holders of
Conseco Stock and LPG Common Stock in connection with the solicitation of
proxies by and on behalf of the respective Boards of Directors of Conseco and
LPG for use at the Conseco Special Meeting and the LPG Special Meeting, as the
case may be.
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Conseco. Conseco Stock represented by properly executed proxies
received at or prior to the Conseco Special Meeting that have not been revoked
will be voted at the Conseco Special Meeting in accordance with the instructions
contained therein. Conseco Stock represented by properly executed proxies for
which no instruction is given will be voted FOR approval of the Merger
Consideration Stock Issuance. Conseco shareholders are requested to complete,
sign, date and return promptly the enclosed proxy card in the postage-prepaid
envelope provided for this purpose to ensure that their shares are voted. A
shareholder may revoke a proxy at any time prior to the vote on the Merger
Consideration Stock Issuance by submitting a later-dated proxy with respect to
the same Conseco Stock, delivering written notice of revocation to the Secretary
of Conseco at any time prior to such vote or attending the Conseco Special
Meeting and voting in person. Mere attendance at the Conseco Special Meeting
will not in and of itself revoke a proxy.
If the Conseco Special Meeting is postponed or adjourned for any
reason, at any subsequent reconvening of the Conseco Special Meeting all proxies
will be voted in the same manner as such proxies would have been voted at the
original convening of the Conseco Special Meeting (except for any proxies that
have theretofore effectively been revoked or withdrawn), notwithstanding that
they may have been effectively voted on the same or any other matter at a
previous meeting.
If any other matters are properly presented at the Conseco Special
Meeting for consideration, including among other things, consideration of a
motion to adjourn the meeting to another time and/or place (including, without
limitation, for the purpose of soliciting additional proxies), the persons named
in the enclosed form of proxy and acting thereunder will have discretion to vote
on such matters in accordance with their best judgment.
LPG. Shares of LPG Common Stock represented by properly executed
proxies received at or prior to the LPG Special Meeting that have not been
revoked will be voted at the LPG Special Meeting in accordance with the
instructions contained therein. Shares of LPG Common Stock represented by
properly executed proxies for which no instruction is given will be voted FOR
approval and adoption of the Merger Agreement. LPG shareholders are requested to
complete, sign, date and return promptly the enclosed proxy card in the
postage-prepaid envelope provided for this purpose to ensure that their shares
are voted. A shareholder may revoke a proxy at any time prior to the vote on the
Merger Agreement by submitting a later-dated proxy with respect to the same
shares, delivering written notice of revocation to the Secretary of LPG at any
time prior to such vote or attending the LPG Special Meeting and voting in
person. Mere attendance at the LPG Special Meeting will not in and of itself
revoke a proxy.
If the LPG Special Meeting is postponed or adjourned for any reason, at
any subsequent reconvening of the LPG Special Meeting all proxies will be voted
in the same manner as such proxies would have been voted at the original
convening of the LPG Special Meeting (except for any proxies that have
theretofore effectively been revoked or withdrawn), notwithstanding that they
may have been effectively voted on the same or any other matter at a previous
meeting.
If any other matters are properly presented at the LPG Special Meeting
for consideration, including among other things, consideration of a motion to
adjourn the meeting to another time and/or place (including, without limitation,
for the purpose of soliciting additional proxies), the persons named in the
enclosed form of proxy and acting thereunder will have discretion to vote on
such matters in accordance with their best judgment.
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Proxy Solicitation. Conseco and LPG will each bear the cost of
soliciting proxies from their respective shareholders. Additionally, Conseco and
LPG will each bear one-half the cost of preparing and mailing this Joint Proxy
Statement/Prospectus and the preparation and filing of the Registration
Statement. In addition to solicitation by mail, directors, officers and
employees of Conseco and LPG may solicit proxies by telephone, telegram or
otherwise. Such directors, officers and employees of Conseco and LPG will not be
additionally compensated for such solicitation, but may be reimbursed for
out-of-pocket expenses incurred in connection therewith. Brokerage firms,
fiduciaries and other custodians who forward soliciting material to the
beneficial owners of shares of Conseco Stock and shares of LPG Common Stock held
of record by them will be reimbursed for their reasonable expenses incurred in
forwarding such material. In addition, Conseco and LPG have retained Georgeson &
Company, Inc. ("Georgeson") to assist in soliciting proxies and to provide
materials to banks, brokerage firms, nominees, fiduciaries and other custodians.
For such services, Conseco and LPG will pay Georgeson a fee of $_________ plus
reimbursement of reasonable expenses.
LPG SHAREHOLDERS SHOULD NOT SEND ANY STOCK CERTIFICATES WITH THEIR PROXY CARDS.
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THE MERGER
Background of the Merger
In December 1995, representatives of Conseco requested a meeting with
representatives of LPG at which Conseco raised the possibility of an acquisition
of LPG. In January and February 1996, representatives of Conseco and LPG had
several telephone conversations during which Conseco raised again the
possibility of an acquisition. At a February 21, 1996 meeting, representatives
of Conseco and LPG discussed LPG's business and prospects and Conseco management
proposed a merger in which the consideration paid by Conseco would be a
combination of cash, preferred stock and common stock. After a discussion of
this proposal, the parties determined that merger consideration payable solely
in Conseco Common Stock would be preferable. As a result of these discussions,
from February 26 through February 28, 1996, representatives of Conseco met with
representatives of LPG and conducted a due diligence review of the business and
financial condition of LPG. From March 4 through March 6, 1996, representatives
of LPG met with representatives of Conseco and conducted a due diligence review
of the business and financial condition of Conseco.
Conseco provided LPG with an initial draft of a form of Merger
Agreement on February 27, 1996 setting forth the terms of Conseco's offer to
acquire LPG in exchange for Conseco Common Stock. From February 27, 1996 through
March 11, 1996, members of the senior management of Conseco and LPG, together
with their legal advisors, negotiated the provisions of the Merger Agreement.
Early on March 1, 1996, the outside directors of Conseco were informed
in a telephone conference by Stephen C. Hilbert, the Chairman of the Board,
President and Chief Executive Officer of Conseco, of the discussions regarding a
possible merger with LPG. Other members of Conseco's senior management also
participated in this call. Mr. Hilbert reviewed the background events leading to
the merger discussions, the proposed transaction structure, the proposed
principal terms and conditions of the acquisition, the due diligence that had
been accomplished to date and the probable timing of the transaction. Mr.
Hilbert indicated that a package of detailed financial information regarding
LPG, along with a summary of the anticipated effects of the merger on the
financial results of Conseco, had been sent to the directors for delivery later
that day. It was agreed that management of Conseco would continue to pursue a
possible acquisition of LPG, with the understanding that final approval of any
transaction would be considered at the regular quarterly meeting of the Conseco
Board of Directors to be held on March 7, 1996. The directors were encouraged to
call Mr. Hilbert or other senior officers of Conseco with any questions they had
after reviewing the information delivered to them.
On March 7, 1996, LPG's Board of Directors held a special meeting. At
this initial meeting, LPG's senior management and its legal and financial
advisors reviewed the ongoing discussions and negotiations between LPG and
Conseco.
The Conseco Board of Directors also met on March 7 to consider the
proposed merger. At the meeting, Conseco management reported on the due
diligence review undertaken by Conseco and its advisors and on the results of
the discussions to date with representatives of LPG and its legal and financial
advisors. The Conseco Board discussed the potential benefits to Conseco of an
acquisition of LPG. Management outlined for the Conseco Board the proposed terms
and conditions of the
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Merger Agreement. After reviewing and discussing the merger proposal, the
Conseco Board of Directors authorized management to execute and deliver the
Merger Agreement in the form presented at the meeting, with such further changes
as Conseco's management approved. See "- Conseco's Reasons for the Merger;
Recommendation of the Conseco Board of Directors."
After the March 7 Board meetings, representatives of Conseco and LPG
had additional negotiations concerning the Merger Agreement.
The Board of Directors of LPG held an additional meeting on March 11,
1996 after the completion of negotiations between the parties and their
respective representatives with regard to the definitive terms of the Merger.
Prior to the meeting of the LPG Board of Directors, each of the LPG directors
received the most recent draft of the definitive documents. Conseco management
delivered a presentation of Conseco's business and financial performance and
plans and prospects for the future operation of the combined enterprise and
answered questions posed by the LPG Board of Directors. Afterward, at the
meeting, the LPG Board of Directors heard presentations of its advisors with
regard to the Board's fiduciary duties to the shareholders of LPG in the context
of considering the terms of the Merger Agreement. LPG's advisors also summarized
the material terms and conditions of the Merger Agreement for the Board of
Directors. DLJ then presented its analysis of the financial terms of the Merger
Agreement and discussed various other financial considerations that it used to
reach its opinion on the fairness to the shareholders of LPG, from a financial
point of view, of the Merger Consideration to be received by the shareholders of
LPG pursuant to the Merger Agreement. DLJ then answered questions of the members
of the LPG Board before orally rendering its opinion that the Merger
Consideration to be received by the shareholders of LPG pursuant to the Merger
Agreement is fair, from a financial point of view, to such holders. See "-
Opinion of LPG's Financial Advisor." DLJ delivered its written opinion at the
end of the meeting.
After careful consideration by the members of the LPG Board of
Directors of the terms of the Merger Agreement and the advice rendered to the
LPG Board of Directors by LPG's advisors, the LPG Board of Directors voted
unanimously to approve the Merger Agreement in the form presented to it at the
Board of Directors meeting. See "- LPG's Reasons for the Merger; Recommendation
of the LPG Board of Directors."
Conseco's Reasons for the Merger; Recommendation of the Conseco Board of
Directors
The Board of Directors of Conseco approved the Merger Agreement and the
Merger Consideration Stock Issuance by a unanimous vote at its March 7 meeting.
In reaching its decision, the Conseco Board considered information provided at
the Board meeting, including, among other things, (i) information concerning the
financial performance and condition, business operations and prospects of LPG,
including an analysis of possible cost savings and synergies, and a qualitative
overview of the individual business segments, (ii) the potential long-term and
short-term effect of the transaction on Conseco's earnings per share, (iii) the
structure of the proposed transaction, (iv) the terms of the Merger Agreement
and (v) the presentation and recommendation made by the management of Conseco.
Conseco's principal strategic objective since it commenced operations
in 1982 has been to acquire financial services companies and to increase their
value by implementing management strategies to reduce costs and improve
administrative efficiency, centralize asset management, improve marketing and
distribution, eliminate unprofitable products and focus resources on the
development
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and expansion of profitable products. In furtherance of this strategy, Conseco
has completed 12 acquisitions of insurance companies and related businesses
since it commenced operations. Conseco believes that the value and profitability
of its existing insurance subsidiaries can be enhanced as a result of the
cross-selling opportunities presented by a company which complements Conseco's
existing product lines and distribution channels.
The Conseco Board of Directors believes that the insurance businesses
of Conseco and LPG complement each other. Conseco currently sells primarily
annuities, Medicare supplement policies and long-term care insurance, while LPG
currently sells primarily universal life insurance and annuities. The addition
of LPG's insurance business would enable Conseco to offer a more complete
portfolio of insurance products to its customers. The addition of LPG's 25,000
independent agents and its client company structure consisting of 30 marketing
organizations would further diversify Conseco's current distribution system
which includes (i) the senior market operations of BLH consisting of
approximately 200 branch offices and approximately 3,300 career agents, (ii)
approximately 3,000 educator market specialists and (iii) approximately 9,000
professional independent producers. LPG's distribution system would also provide
Conseco additional opportunities to cross-sell its current products.
The Conseco Board of Directors also believes that the Merger offers
Conseco and LPG the opportunity to improve their profitability and
capitalization through the achievement of economies of scale, the elimination of
redundancies and the enhancement of market position. By consolidating certain
operations and eliminating expenses, Conseco expects to achieve, over time,
significant savings of operating costs. See "The Merger -- Conduct of the
Business of Conseco and LPG After the Merger." The issuance of additional shares
of Conseco Common Stock in the Merger would result in a substantial increase in
Conseco's equity and further reduce its debt-to-capital ratio. The Conseco Board
of Directors believes that the Merger will further Conseco's efforts to
strengthen its debt ratings and the claims-paying ability ratings of its
insurance subsidiaries.
ACCORDINGLY, THE BOARD OF DIRECTORS OF CONSECO RECOMMENDS THAT THE
SHAREHOLDERS OF CONSECO VOTE FOR THE PROPOSAL TO APPROVE THE MERGER
CONSIDERATION STOCK ISSUANCE SET FORTH AS ITEM 1 ON THE CONSECO PROXY CARD.
LPG's Reasons for the Merger; Recommendation of the LPG Board of Directors
Since early 1995, LPG experienced a substantial decline in the price of
the LPG Common Stock. As a result, the $21.00 per share value offered by Conseco
represented a substantial premium over the then current market price of the LPG
Common Stock. The LPG Board of Directors believed that obtaining an equivalent
market price to the $21.00 per share offered by Conseco could not, in part
because of the reasons set forth below, reasonably be expected to be achieved in
the near term.
In order to enhance shareholder value, LPG had considered several
strategies to rebuild the market's confidence in the LPG Common Stock, including
growth through acquisitions. LPG determined, however, that it would be difficult
to implement an acquisition strategy because of the low price of the LPG Common
Stock, as well as the premiums being paid for those companies that LPG would
consider acquiring. In addition, LPG faced several near-term operating
challenges, including the introduction of new products and the maintenance of
marketing momentum of current products. Further, LPG anticipated a substantial
write-off in 1995 as a result of updating certain
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assumptions used to project future margins and the procedures used to develop
amortization charges. LPG was concerned, in light of these factors, about its
ability to raise additional equity capital if necessary to successfully
implement its business plan. Based on these and other factors, and on current
multiples and earning estimates, as well as the dilutive nature of issuing
additional equity, the LPG Board of Directors believed that the Conseco offer
represented the maximum value that could reasonably be expected to be achieved
for LPG's shareholders in the near term. After careful consideration of these
matters, as well as consideration of the offer of Conseco, the LPG Board of
Directors determined that it was in the best interest of LPG and its
shareholders to accept the Conseco offer.
After careful consideration by the members of the LPG Board of
Directors of the terms of the Merger Agreement and the advice rendered to the
LPG Board of Directors by LPG's advisors, the LPG Board of Directors voted
unanimously to approve the Merger Agreement in the form presented to it at the
Board of Directors meeting. In voting to approve the Merger Agreement, the LPG
Board of Directors relied upon many different factors, including (i) the
substantial premium over the then current market price of the LPG Common Stock
offered by Conseco, (ii) the financial condition and results of operations of
Conseco and the LPG Board of Directors' perceptions of the more favorable
overall business prospects of Conseco and LPG on a combined basis as compared to
such prospects as separate entities, (iii) the tax-deferred nature of the
transaction to the extent that the LPG shareholders receive shares of Conseco
Common Stock in exchange for their shares of LPG Common Stock, (iv) the
potential future performance of Conseco and the Conseco Common Stock after the
Merger and Conseco's strength and position in the insurance industry, and (v)
the opinion rendered to the LPG Board of Directors by DLJ with regard to the
fairness to the shareholders of LPG, from a financial point of view, of the
Merger Consideration to be received by the shareholders of LPG pursuant to the
Merger Agreement.
THE BOARD OF DIRECTORS OF LPG UNANIMOUSLY APPROVED THE TERMS OF THE
MERGER AGREEMENT AND RECOMMENDS THAT THE SHAREHOLDERS OF LPG VOTE FOR THE
PROPOSAL TO APPROVE THE MERGER AGREEMENT SET FORTH AS ITEM 1 ON THE LPG PROXY
CARD.
Opinion of LPG's Financial Advisor
In its role as financial advisor to LPG, DLJ was asked by LPG to render
its opinion to the LPG Board as to the fairness, from a financial point of view,
to the shareholders of LPG of the Merger Consideration to be paid by Conseco
pursuant to the Merger Agreement. On March 11, 1996, DLJ delivered its written
opinion (the "DLJ Opinion") to the LPG Board that the Merger Consideration to be
received pursuant to the Merger Agreement is fair, from a financial point of
view, to the shareholders of LPG.
A copy of the DLJ Opinion is attached hereto as Annex B. LPG
shareholders are urged to read the opinion in its entirety for assumptions made,
procedures followed, other matters considered and limits of the review by DLJ.
The summary of the opinion of DLJ set forth in this Joint Proxy
Statement/Prospectus is qualified in its entirety by reference to the full text
of such opinion. The DLJ Opinion was prepared for the LPG Board and is directed
only to the fairness, as of March 11, 1996, to the holders of LPG Common Stock,
from a financial point of view, of the Merger Consideration to be received
pursuant to the Merger Agreement and does not constitute a recommendation to any
shareholder as to how to vote at the LPG Special Meeting.
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No restrictions or limitations were imposed by the LPG Board upon DLJ
with respect to the investigations made or the procedures followed by DLJ in
rendering its opinion.
In arriving at its opinion, DLJ reviewed a draft of the Merger
Agreement. DLJ also reviewed financial and other information that was publicly
available or furnished to it by LPG and Conseco, including information provided
during discussions with their respective managements. In addition, DLJ (i)
reviewed prices and premiums paid in certain other selected business
combinations in the life insurance and annuity industries; (ii) compared certain
financial and securities data of LPG and Conseco with such data of selected
companies whose securities are traded in public markets; (iii) reviewed the
historical prices and trading volumes of LPG Common Stock and Conseco Common
Stock; (iv) analyzed the pro forma financial impact of the Merger on Conseco's
and LPG's shareholders; (v) compared the relative contribution of LPG to the
combined company's net operating income, shareholders' equity and total assets
with the relative ownership of LPG shareholders in the combined company after
giving effect to the Merger; and (vi) performed a net present value analysis of
LPG. DLJ also discussed the past and current operations, financial condition and
prospects of LPG and Conseco with the respective managements of LPG and Conseco,
received financial projections for LPG and Conseco from their respective
managements, and conducted such other financial studies, analyses and
investigations as DLJ deemed appropriate for purposes of rendering its opinion.
In addition, DLJ reviewed materials prepared for LPG by an outside actuarial
consulting firm.
In rendering its opinion, DLJ relied upon and assumed the accuracy,
completeness and fairness of all of the financial and other information that was
available to it from public sources, that was provided to DLJ by LPG and Conseco
or their respective representatives, or that was otherwise reviewed by DLJ. With
respect to the financial projections supplied to DLJ, DLJ has assumed that they
were reasonably prepared and reflected the best currently available estimates
and judgments of the managements of LPG and Conseco as to the future operating
and financial performance of LPG and Conseco. DLJ did not assume any
responsibility for making and did not make any independent evaluation of LPG's
or Conseco's assets or liabilities or any independent verification of any of the
information reviewed by DLJ. DLJ did not express any opinion with respect to
legal matters relating to the Merger and relied as to all legal matters relating
to the Merger on advice of counsel.
The DLJ Opinion was necessarily based on economic, market, financial
and other conditions as they existed on the date of the DLJ Opinion and on the
information made available to DLJ as of such date and on the review and analyses
conducted by DLJ as of such date. It should be understood that, although
subsequent developments may affect its opinion, DLJ does not have any obligation
to update, revise or reaffirm the DLJ Opinion.
The following is a summary of the material factors considered and
principal financial analyses performed by DLJ to arrive at the DLJ Opinion. DLJ
performed certain procedures, including each of the financial analyses described
below, and reviewed with the managements of LPG and Conseco the assumptions on
which such analyses were based and other factors.
DLJ used an assumed offer price of $21.00 per share in it's analysis
based on Conseco's stock price at the time DLJ performed its analysis and such
use should in no way be viewed by LPG shareholders as an opinion as to the value
of the Merger Consideration. Such use is merely for illustrative and analytical
purposes.
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Transaction Analysis. DLJ reviewed publicly available information for
selected transactions involving the acquisition of life insurance and annuity
companies since January 1, 1993 (the "Selected Transactions"). In reviewing
these transactions, several factors were considered including: (i) the lack of
public information for subsidiary and private company transactions which
represent a significant portion of the merger and acquisition activity, and (ii)
the lack of directly comparable transactions. The Selected Transactions were not
intended to represent the complete list of life insurance and annuity company
transactions which have occurred. Rather such transactions included only
selected recent transactions involving life insurance and annuity companies.
Such transactions were used in this analysis because the companies involved were
deemed by DLJ to operate in similar businesses or have similar financial
characteristics to LPG and Conseco.
DLJ reviewed the consideration paid in such transactions in terms of
the price paid for the common stock plus the amount of debt and preferred stock
assumed, repaid or redeemed in such transactions (the "Transaction Value") as a
multiple of statutory net operating income for the latest twelve months ("LTM")
or last fiscal year ended prior to the announcement of such transactions and as
a multiple of adjusted statutory capital and surplus as of the end of the last
fiscal quarter ended or last fiscal year ended prior to the announcement of such
transactions. In acquisitions of life insurance and annuity companies, the
purchase price paid may be expressed as multiples of the Transaction Value to
statutory net operating earnings and to adjusted capital and surplus. Variances
in multiples for different transactions may reflect such considerations as the
consistency, quality and growth of earnings and the company's capitalization,
asset quality and return on surplus. Since statutory net operating earnings and
adjusted statutory capital and surplus do not reflect the cost of a company's
debt or preferred stock financing, which are usually at the holding company
rather than the insurance company level, multiples of statutory net operating
earnings and adjusted capital and surplus are appropriately based on Transaction
Value which includes the cost of assuming, repaying or redeeming such debt or
preferred stock financing. Comparing the multiples of Transaction Value to be
paid for LPG by Conseco to the statutory net earnings and adjusted statutory
capital and surplus of LPG with the multiples paid by acquirors in other
transactions indicates whether the valuation being placed on LPG is within the
range of values paid for other life insurance and annuity companies.
The average and low multiples of Transaction Value to statutory net
operating income for the last fiscal year ended prior to the announcement of the
Selected Transactions were 16.5x and 5.1x, respectively. Based on an offer price
of $21.00 per share, the implied multiple of Transaction Value to LPG's 1994
statutory net operating income was 18.0x. This multiple is greater than the low
and the average multiples of the Selected Transactions. The average and low
multiples of Transaction Value to adjusted statutory capital and surplus as of
the end of the last fiscal year ended prior to the announcement of the Selected
Transactions were 1.8x and 0.9x, respectively. Based on the same offer price per
share, the implied multiple of Transaction Value to LPG's 1994 year end adjusted
statutory capital and surplus was 4.8x. This multiple is greater than the low
and the average multiples of the Selected Transactions.
Additionally, DLJ reviewed the consideration paid in such transactions
in terms of the price paid for the common stock in such transactions as a
multiple of net operating income prepared in accordance with GAAP for the LTM
prior to the announcement of such transactions and as a multiple of
shareholders' equity as of the end of the last fiscal quarter ended prior to the
announcement of such transaction. In acquisitions of life insurance and annuity
companies, the purchase price paid may be expressed as multiples of the price
paid for common stock to GAAP net operating earnings and to shareholders'
equity. Variances in multiples for different transactions may reflect such
considerations
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as the consistency, quality and growth of earnings and the company's
capitalization, asset quality and return on capital. Since GAAP net operating
earnings and shareholders' equity already reflect the cost of a company's debt
or preferred stock financing, multiples of GAAP net operating earnings or
shareholders' equity are appropriately based on the price paid for the company's
common stock which excludes the cost of assuming, repaying or redeeming such
debt or preferred stock financing. Comparing the multiples of price offered to
be paid for the LPG Common Stock by Conseco to the GAAP net operating earnings
and shareholders' equity of LPG with multiples paid by acquirors in other
transactions indicates whether the valuation being placed on LPG is within the
range of values paid for other life insurance and annuity companies.
The average and low multiples of price paid for common stock to LTM
GAAP net operating earnings for the Selected Transactions were 15.9x and 5.2x,
respectively. Based on an offer price of $21.00 per share, the implied multiple
of price paid for common stock to LPG's GAAP net operating earnings for the LTM
ended September 30, 1995 was 19.0x. This multiple is greater than the low and
the average multiples of the Selected Transactions. The average and low
multiples of price paid for common stock to shareholders' equity for the last
fiscal quarter ended prior to the announcement of the Selected Transactions were
1.4x and 0.8x, respectively. Based on an offer price of $21.00 per share, the
implied multiple of price paid for common stock to LPG's shareholders' equity as
of September 30, 1995 was 1.6x. This multiple is greater than the low and the
average multiples of the Selected Transactions.
DLJ also determined the percentage premium of the offer prices
(represented by the purchase price per share in cash transactions and the price
of the constituent securities times the exchange ratio in the case of
stock-for-stock mergers) over the public market trading prices one day, one week
and one month prior to the announcement date of selected life insurance and
annuity company transactions where the acquired company's stock was publicly
traded (the "Selected Public Transactions"). The average premiums of offer
prices to public market trading prices one day, one week and one month prior to
the announcement date for the Selected Public Transactions were 9.6%, 13.8% and
19.4%, respectively. An offer price of $21.00 per LPG share represents premiums
to the trading prices of LPG Common Stock one day, one week and one month prior
to the announcement of the Merger of 35.5%, 36.6% and 55.6%, respectively. These
premiums are greater than the average premiums of the Selected Public
Transactions.
Analysis of Certain Publicly Traded Companies. To provide comparative
market information, DLJ compared selected historical and projected operating and
financial ratios for LPG to the corresponding data and ratios of the following
companies whose securities are publicly traded: (i) Jefferson Pilot Corporation;
(ii) Kansas City Life Insurance Company; (iii) Protective Life Corporation; (iv)
ReliaStar Financial Corporation; and (v) USLIFE Corp. (together, the "LPG
Selected Companies").
Such analysis included, among other things, the ratios of stock price
to GAAP net operating earnings per share ("EPS") for fiscal year 1995, or, if
not available, for the LTM ended September 30, 1995, and estimated GAAP net
operating EPS for 1996 and 1997 (as estimated by research analysts and compiled
by Institutional Brokers Estimating Service for the LPG Selected Companies and
management's projections for LPG) and shareholders' equity per share as of
December 31, 1995, or, if not available, September 30, 1995, as well as the
ratios of the aggregate equity market capitalization plus the amount of debt and
preferred stock outstanding ("Enterprise Value") to 1994 statutory net operating
earnings and year end 1994 statutory capital and surplus. Closing prices as of
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March 8, 1996 were used in this analysis. The ratios described in this paragraph
have been designed to reflect the value attributable in the public equity
markets to various valuation measures of life insurance and annuity companies.
Measures utilized in the public marketplace to value the stock of publicly
traded companies in the life insurance and annuity industries are based on,
among other things, a company's historical and projected GAAP net operating
earnings, historical statutory net operating earnings, shareholders' equity and
statutory capital and surplus. The multiples of stock price to GAAP net
operating earnings per share and Enterprise Value to statutory net operating
earnings reflect the value attributed to a company by public equity market
investors based on the company's historical and projected earnings. The
multiples of stock price to shareholders' equity per share and Enterprise Value
to statutory capital and surplus reflect the values attributed to a company by
public equity market investors based on the company's net worth. Variances in
multiples for different companies may reflect such considerations as the
consistency, quality and growth of earnings and the company's capitalization,
asset quality and return on capital. Since GAAP net operating earnings and
stockholders' equity already reflect the cost of a company's debt or preferred
stock financing, multiples of GAAP net operating earnings or shareholders'
equity are appropriately based on the price paid for the company's common stock
which excludes debt or preferred stock financing. Since statutory net operating
earnings and capital and surplus do not reflect the cost of a company's debt or
preferred stock financing, which are usually at the holding company rather than
the insurance company level, multiples of statutory net operating earnings and
statutory capital and surplus are appropriately based on Enterprise Value which
includes debt or preferred stock financing. Comparing the multiples of price
offered to be paid by Conseco to the GAAP net operating earnings per share,
shareholders' equity, statutory net operating earnings and statutory capital and
surplus of LPG with the multiples at which the LPG Selected Companies trade
indicates whether the valuation being placed on LPG is within the range of
values at which the LPG Selected Companies trade.
The average and low ratios of public stock price to GAAP net operating
EPS for 1995, or, if not available, for the LTM ended September 30, 1995, were
11.5x and 8.8x, respectively, for the LPG Selected Companies. Based on an offer
price of $21.00 per share, the implied multiple of offer price to LPG's
estimated GAAP net operating EPS for 1995 was 19.6x. This multiple is greater
than the low and the average multiples of the LPG Selected Companies. The
average and low ratios of public stock price to estimated 1996 GAAP net
operating EPS were 10.4x and 8.6x respectively, for the LPG Selected Companies.
Based on the same offer price, the implied multiple of offer price to LPG's
estimated 1996 GAAP net operating EPS was 14.2x. This multiple is greater than
the low and the average multiples of the LPG Selected Companies. The average and
low ratios of public stock price to estimated 1997 GAAP operating EPS were 9.6x
and 8.5x, respectively, for the LPG Selected Companies. Based on the same offer
price, the implied multiple of offer price to LPG's estimated 1997 GAAP net
operating EPS was 13.5x. This multiple is greater than the low and the average
multiples of the LPG Selected Companies. The average and low ratios of public
stock price to shareholders' equity as of December 31, 1995 was 1.5x and 0.8x,
respectively, for the LPG Selected Companies. Based on the same offer price, the
implied multiple of offer price to LPG's shareholders' equity as of September
30, 1995 was 1.6x. This multiple is greater than the low and average multiples
of the LPG Selected Companies. The average and low ratios of Enterprise Value to
1994 statutory net operating earnings for the LPG Selected Companies were 23.9x
and 11.7x, respectively. Based on the same offer price, the implied ratio of
Enterprise Value to LPG's 1994 statutory net operating earnings was 18.0x. This
multiple is greater than the low and less than the average multiples of the LPG
Selected Companies. The average and low ratios of Enterprise Value to 1994 year
end statutory capital and surplus for the LPG Selected Companies were 2.9x and
1.8x, respectively. Based on the same offer price, the implied ratio of
Enterprise Value to LPG's 1994
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year end statutory capital and surplus was 6.1x. This multiple is greater than
the low and the average multiples of the LPG Selected Companies.
Since the consideration paid to LPG shareholders will be in the form of
Conseco Common Stock, to provide comparative market information, DLJ compared
selected historical and projected operating and financial ratios of Conseco to
the corresponding data and ratios of the following annuity companies whose
securities are publicly traded: (i) First Colony Corporation; (ii) AmVestors
Financial Corporation; (iii) Equitable of Iowa Companies; (iv) Presidential Life
Corporation; (v) SunAmerica, Inc. and (vi) American Annuity Group, Inc.
(together, the "Conseco Selected Companies--I"). The following accident and
health companies were also used to provide comparative market information for
Conseco: (i) AFLAC, Inc.; (ii) American Heritage Life Insurance Co.; (iii) Paul
Revere Corp.; (iv) PennCorp Financial Group, Inc.; and (v) UNUM Corporation
(together, the "Conseco Selected Companies-II").
Such analysis included, among other things, the ratios of stock price
to GAAP net operating EPS for 1995, or, if not available, for the LTM ended
September 30, 1995, and estimated GAAP net operating EPS for 1996 and 1997 (as
estimated by research analysts and compiled by Institutional Brokers Estimating
Service for the Conseco Selected Companies-I and II and management's projections
for Conseco) and shareholders' equity per share as of December 31, 1995, or, if
not available, September 30, 1995, as well as the ratios of the aggregate equity
market capitalization plus the amount of debt and preferred stock outstanding
("Enterprise Value") to statutory net operating earnings and year end 1994
statutory capital and surplus. Closing prices as of March 8, 1996 were used in
this analysis. Comparing the multiples of Conseco's stock price to GAAP net
operating earnings per share, shareholders' equity, statutory net operating
earnings and statutory capital and surplus with the multiples at which the
Conseco Selected Companies-I and II trade indicates whether Conseco's stock
price is within the range of values at which the Conseco Selected Companies-I
and II trade.
The average and low ratios of public stock price to GAAP net operating
EPS for 1995, or, if not available, for the LTM ended September 30, 1995, were
12.1x and 10.0x, respectively, for the Conseco Selected Companies-I, and 15.9x
and 13.0x, respectively, for the Conseco Selected Companies-II. The multiple of
price to Conseco's GAAP net operating EPS for 1995 was 12.9x. This multiple is
greater than the low and the average multiples of the Conseco Selected
Companies-I and less than the low and the average multiples of the Conseco
Selected Companies-II. The average and low ratios of public stock price to
estimated 1996 GAAP net operating EPS were 10.8x and 9.6x, respectively, for the
Conseco Selected Companies-I and 12.2x and 11.4x, respectively, for the Conseco
Selected Companies-II. The multiple of prices to Conseco's estimated 1996 GAAP
net operating EPS was 10.0x. This multiple is greater than the low and less than
the average multiples of the Conseco Selected Companies-I and less than the low
and the average multiples of the Conseco Selected Companies-II. The average and
low ratios of public stock price to estimated 1997 GAAP operating EPS were 9.8x
and 8.5x, respectively, for the Conseco Selected Companies-I and 10.8x and 9.8x,
respectively, for the Conseco Selected Companies-II. The multiple of price to
Conseco's estimated 1997 GAAP net operating EPS was 9.0x. This multiple is
greater than the low and less than the average multiples of the Conseco Selected
Companies-I and less than the low and average the multiples of the Conseco
Selected Companies-II. The average and low ratios of public stock price to
shareholders' equity as of December 31, 1995 or, if not available, September 30,
1995, were 1.5x and 0.9x, respectively, for the Conseco Selected Companies-I and
1.8x and 1.5x, respectively, for the Conseco Selected Companies-II. The multiple
of price to Conseco's shareholders' equity as of
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December 31, 1995 was 1.5x. This multiple is greater than the low and equal to
the average multiples of the Conseco Selected Companies-I and equal to the low
and less than the average multiples of the Conseco Selected Companies-II. The
average and low ratios of Enterprise Value to 1994 statutory net operating
earnings for the Conseco Selected Companies-I were 22.4x and 12.3x,
respectively, and 21.8x and 18.8x, respectively, for the Conseco Selected
Companies-II. The ratio of Enterprise Value to Conseco's 1994 statutory net
operating earnings was 33.0x. This multiple is greater than the low and the
average multiples of the Conseco Selected Companies-I and II. The average and
low ratios of Enterprise Value to 1994 year end statutory capital and surplus
for the Conseco Selected Companies-I were 3.4x and 2.0x, respectively, and 3.2x
and 2.4x, respectively, for the Conseco Selected Companies-II. The ratio of
Enterprise Value to Conseco's 1994 year end statutory capital and surplus was
5.1x. This multiple is greater than the low and the average multiples of the
Conseco Selected Companies-I and II.
No company or transaction used in the Transaction Analysis or the
Analysis of Certain Publicly Traded Companies described above was directly
comparable to LPG, Conseco or the proposed Merger. Accordingly, an analysis of
the results of the foregoing was not simply mathematical nor necessarily
precise; rather, it involved complex considerations and judgments concerning
differences in financial and operating characteristics of companies and other
factors that could affect the transaction values and trading prices. For
example, many qualitative factors are involved in valuing a company or analyzing
a transaction in the life insurance and annuity industries including assessments
of the quality of management, the attractiveness of the company's target market,
the economics of the products being sold and the company's market position
relative to its competitors. Other factors that could affect the transaction
values or trading prices include differences in distribution, products,
geographic or demographic customer concentration, size, accounting practices,
asset portfolio quality, interest rate sensitivity and other factors. These
factors may affect the transaction values or trading prices in each case by
affecting in varying degrees investors' expectations of such factors as the
company's risk and future operating profitability.
Stock Trading History. To provide contextual data and comparative
market data, DLJ examined the history of the trading prices and their relative
relationships for both LPG Common Stock and Conseco Common Stock for the periods
ending one year, two years, five years (Conseco only) and ten years (Conseco
only) prior to the announcement of the Merger. DLJ also reviewed the daily
closing prices of LPG Common Stock and Conseco Common Stock and compared the LPG
and Conseco closing stock prices with the S&P 500 Index and an index of their
respective Selected Companies. DLJ reviewed the trading history since the March
24, 1993 initial public offering of LPG Common Stock and the one year and five
year trading history of Conseco Common Stock to determine whether trading levels
immediately prior to announcement of the Merger were reflective of longer term
trading levels or were affected by recent unusual or event specific trading
activity. In addition, DLJ reviewed the trading history of LPG Common Stock and
Conseco Common Stock relative to an index of their respective Selected Companies
in order to assess the relative stock price performance of LPG, Conseco and the
indices.
Pro Forma Merger Analysis. DLJ analyzed certain pro forma financial
effects resulting from the Merger. In conducting its analysis, DLJ relied upon
certain assumptions described above and financial projections provided by the
managements of both LPG and Conseco. DLJ analyzed the pro forma effect of
combining LPG and Conseco on the earnings, book value and leverage ratios of the
combined companies. Conseco's management has indicated that it believes that the
merger will offer consolidation opportunities which will result in expense
savings relative to the stand-alone projected
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expense levels of LPG and Conseco. DLJ has incorporated an estimate of these
expense savings, determined in conjunction with LPG management, in its analysis.
The results of the pro forma combination analysis are not necessarily indicative
of future operating results or financial position. Based on this analysis,
Conseco's shareholders would realize earnings per share accretion of 1.7% in
1996, 1.6% in 1997, and 0.7% in 1998 on a pro forma basis. On a share equivalent
basis, LPG stockholders would realize earnings per share pickup of 44.5% in
1996, 53.1% in 1997 and 55.8% in 1998 on a pro forma basis. The effect of the
Merger on Conseco's ratio of debt to total capitalization would be to decease
such ratio from 46.5% before the Merger to 42.5% after the Merger.
Contribution Analysis. DLJ analyzed LPG's and Conseco's relative
contributions to the combined company with respect to GAAP net operating
earnings, shareholders' equity and total assets and compared this with relative
ownership of LPG shareholders in the combined company after the Merger. Such
analysis was considered on a percentage contribution basis and was made, where
appropriate, (i) for 1995 (LTM ended September 30, 1995 for LPG) based on
Conseco's and LPG's reported financial results; and, (ii) with respect to GAAP
net operating earnings for 1996, 1997 and 1998, as projected by LPG's and
Conseco's managements.
For 1995, LPG's relative contribution to the combined company with
respect to GAAP net operating earnings (for the LTM ended September 30, 1995 for
LPG) was 18.7% of total. LPG's relative contribution to the combined company
with respect to the shareholders' equity (using an estimate for LPG at December
31, 1995) was 31.0% of total. LPG's relative contribution to the combined
company with respect to total assets (data at September 30, 1995 for LPG) was
22.7% of the total. For the projected twelve months ended December 31, 1996,
LPG's relative contribution to the combined company with respect to GAAP net
operating earnings was 17.5% of total. For the projected twelve months ending
December 31, 1997, LPG's relative contribution to the combined company with
respect to GAAP net operating earnings was 16.5% of total. For the projected
twelve months ended December 31, 1998, LPG's relative contribution to the
combined company with respect to GAAP net operating earnings was 16.1% of total.
Assuming a Conseco Stock Price of $32.375 (the split-adjusted market
price at the time the analysis was performed), LPG shareholders would own
approximately 22.3% of the combined company after the Merger. The results of
these contribution analyses are not necessarily indicative of the contributions
that the respective businesses may actually make in the future.
Net Present Value Analysis. DLJ also performed a net present value
analysis of LPG. In conducting this analysis, DLJ calculated the present value
per share of the net operating income projected by LPG's management for LPG on a
stand-alone basis. The net present value analysis was based on discount rates
ranging from 10% to 15%. The terminal value for this analysis was computed by
multiplying LPG's projected 2000 and 2001 net operating income by a range of
multiples. DLJ relied on its understanding of required equity returns in the
life insurance and annuity business to derive discount rates and the public
equity market analysis of selected life insurance and annuity companies to
calculate terminal values. At a multiple of 2000 net operating income of 12.0x,
the present value per share of LPG's terminal value ranged from $15.27 to $12.23
at discount rates ranging from 10% to 15%. At a multiple of 2000 net operating
income of 17.0x, the present value per share of LPG's projected terminal value
ranged from $21.64 to $17.33 at discount rates ranging from 10% to 15%. At a
multiple of 2001 net operating income of 9.0x, the present value per share of
LPG's projected terminal value ranged from $12.74 to $10.20 at discount rates
ranging from 10%
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to 15%. At a multiple of 2001 net operating income of 14.0x, the present value
per share of LPG's projected terminal value ranged from $19.82 to $15.87 at
discount rates ranging from 10% to 15%.
The summary set forth above does not purport to be a complete
description of the analyses performed by DLJ. The preparation of a fairness
opinion involves various determinations as to the most appropriate and relevant
methods of financial analysis and the application of these methods to the
particular circumstances and, therefore, such an opinion is not readily
susceptible to summary description. The preparation of a fairness opinion does
not involve a mathematical evaluation or weighing of the results of the
individual analyses performed, but requires DLJ to exercise its professional
judgment - based on its experience and expertise - in considering a wide variety
of analyses taken as a whole. Each of the analyses conducted by DLJ was carried
out in order to provide a different perspective on the transaction and add to
the total mix of information available. DLJ did not form a conclusion as to
whether any individual analysis, considered in isolation, supported or failed to
support an opinion as to fairness. Rather, in reaching its conclusion, DLJ
considered the results of the analyses in light of each other and did not place
particular reliance or weight on any individual analysis and ultimately reached
its opinion based on the results of all analyses taken as a whole. Accordingly,
notwithstanding the separate factors summarized above, DLJ believes that its
analyses must be considered as a whole and that selected portions of its
analyses and the factors considered by it, without considering all analyses and
factors, may create an incomplete view of the evaluation process underlying its
opinion. In performing its analyses, DLJ made numerous assumptions with respect
to industry performance, business and economic conditions and other matters.
These assumptions include but are not limited to assumptions regarding: (i)
macro- economic business conditions, (ii) competitive dynamics and general
trends in the life insurance and annuity industries, (iii) competition from
other industries including the banking and mutual fund industries, (iv) current
and projected interest rates, and (v) industry regulatory environment. The
analyses were prepared solely for purposes of DLJ's providing its opinion to the
Board of Directors of LPG as to the fairness, from a financial point of view, of
the Merger Consideration to be received by the holders of outstanding shares of
LPG Common Stock pursuant to the Merger Agreement and do not purport to be
appraisals. The analyses performed by DLJ are not necessarily indicative of
actual values or future results, which may be significantly more or less
favorable than suggested by such analyses.
The LPG Board selected DLJ as its financial advisor because it is a
nationally recognized investment banking firm that has substantial experience in
transactions similar to the Merger and is familiar with LPG, its business and
the life insurance and annuity industries. DLJ acted as lead manager for LPG's
March 24, 1993 initial public offering. Pursuant to the terms of an engagement
letter dated March 8, 1996 between LPG and DLJ, LPG paid DLJ a $100,000 retainer
fee and an additional $500,000 for the DLJ Opinion. Pursuant to the terms of the
engagement letter, LPG will pay DLJ, on the Closing Date, cash compensation
equal to $1,000,000, less the retainer fee and $500,000 paid to date. LPG also
agreed to reimburse DLJ for all out-of-pocket expenses (including the reasonable
fees and out-of-pocket expenses of counsel) incurred by DLJ in connection with
its engagement and to indemnify DLJ and certain related persons against certain
liabilities in connection with its engagement, including liabilities under the
federal securities laws. The terms of the fee arrangement with DLJ, which DLJ
and LPG believe are customary in transactions of this nature, were negotiated at
arms' length between LPG and DLJ and the LPG Board was aware of such
arrangement, including the fact that a significant portion of the aggregate fee
payable to DLJ is contingent upon consummation of the Merger.
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In the ordinary course of business, DLJ may actively trade the
securities of both LPG and Conseco for its own account and for the accounts of
its customers and, accordingly, may at any time hold a long or short position in
such securities. DLJ, as part of its investment banking services, is regularly
engaged in the valuation of businesses and securities in connection with
mergers, acquisitions, underwritings, sales and distributions of listed and
unlisted securities, private placements and valuations for estate, corporate and
other purposes.
Certain Consequences of the Merger
As a result of the Merger, the shareholders of LPG will become
shareholders of Conseco, and thereby will continue to have an interest in LPG
through Conseco. See "Comparison of Shareholders' Rights." Upon the consummation
of the Merger, each outstanding share of LPG Common Stock (other than shares of
LPG Common Stock held by LPG as treasury stock) will be cancelled and converted
into the right to receive the Merger Consideration. Conseco will apply to have
the additional shares of Conseco Common Stock issued pursuant to the Merger
listed on the NYSE.
LPG has agreed to use its best efforts to give effect to the following
with respect to LPG Stock Options which remain outstanding immediately prior to
the Effective Time: (a) LPG Stock Options held by persons who are officers or
employees of LPG at the Effective Time shall become options to purchase, for the
same aggregate consideration payable to exercise such LPG Stock Options, the
number of shares of Conseco Common Stock which the holder would have been
entitled to receive at the Effective Time if such LPG Stock Options had been
exercised for shares of LPG Common Stock prior to the Effective Time; (b) LPG
Stock Options held by persons who are not currently officers or employees of LPG
shall be required to be exercised prior to the Effective Time or forfeited; (c)
LPG Stock Options held by certain officers of LPG identified in the Disclosure
Schedule to the Merger Agreement may be repriced as provided for therein; (d)
LPG Stock Options held by an officer or employee of LPG shall expire and be
forfeited if not exercised within three (3) months after the date such person
ceases to be an officer or employee of LPG, the Surviving Corporation, Conseco,
or any other subsidiary of Conseco; and (e) LPG Stock Options held by an officer
subject to Section 16 of the Exchange Act who would incur liability under
Section 16(b) if such LPG Stock Options were to be exercised on the date on
which such options would otherwise expire under the Merger Agreement, shall
otherwise remain exercisable for five (5) business days from the date after
which no such liability would be incurred.
Conseco has agreed to take all corporate action necessary to reserve
for issuance a sufficient number of shares of Conseco Common Stock for delivery
upon exercise of LPG Stock Options assumed in accordance with the Merger
Agreement.
If necessary to effectuate the foregoing provisions regarding LPG Stock
Options, the parties have agreed to enter into an appropriate amendment to the
Merger Agreement to provide that Merger Sub shall be the Surviving Corporation
at the Effective Time rather than LPG.
Conduct of the Business of Conseco and LPG After the Merger
Pursuant to the Merger Agreement, (i) the members of the Board of
Directors of the Merger Sub immediately prior to the consummation of the Merger
shall become the directors of the Surviving Corporation following the
consummation of the Merger and (ii) the officers of the Merger Sub
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immediately prior to the consummation of the Merger shall become the officers of
the Surviving Corporation following the consummation of the Merger. Conseco's
Board of Directors and management will not be affected by the Merger.
See "Management of the Surviving Corporation Upon Consummation of the Merger."
Within two years following the Merger, Conseco expects to achieve
annual operating cost savings in the range of $25 - $40 million through the
consolidation of Conseco and LPG operations and the elimination of redundant
expenses. Such savings would be realized over time, as the consolidation is
completed, primarily through reductions in staff, the combination, elimination
or relocation of certain office facilities and the consolidation of certain data
processing and other back- office operations. In that connection, Conseco plans
to consolidate most of the operations of LPG into Conseco's operations in
Carmel, Indiana concurrently with or as soon as practicable after consummation
of the Merger. Marketing and certain other sales support operations of LPG are
expected to remain in Englewood, Colorado for some period of time in order to
maintain and promote LPG's marketing strategy. There can be no assurance that
such cost savings will be realized or that they will be realized on the schedule
indicated.
Interests of Certain Persons in the Merger
LPG Affiliate Registration Rights. Conseco has agreed to maintain the
effectiveness of the Registration Statement subsequent to the consummation of
the Merger for the purpose of resales of Conseco Common Stock by persons who, at
the time the Merger is submitted to the shareholders of LPG for approval, were
"affiliates" of LPG for purposes of Rule 145 under the Securities Act, but shall
not thereafter be required to file any post-effective amendment thereto. Conseco
shall not otherwise be required to maintain the effectiveness of the
Registration Statement or any other registration statement under the Securities
Act for the purposes of resale of Conseco Common Stock by such affiliates.
Notwithstanding the foregoing, if at such time as the Registration Statement is
no longer available for the purpose of resales by such affiliates, any such
affiliate is unable because of the volume limitations of Rule 144 of the
Commission to sell pursuant to Rule 144 at least 75% of the shares of Conseco
Common Stock received by such affiliate as Merger Consideration and still held
by such affiliate, such affiliate shall have the right, for so long as any such
balance of the affiliate's Merger Consideration is not eligible for immediate
sale under the applicable provisions of Rule 144, to require Conseco to elect,
in Conseco's sole discretion, with respect to such balance, either to (i)
acquire such shares directly from such affiliate at the current market price,
(ii) amend the Registration Statement and maintain its effectiveness to provide
for resale of such shares or (iii) file a Registration Statement on Form S-3
with the Commission to register such shares for resale by such affiliate.
Conseco has agreed to indemnify such affiliates, each of their officers
and directors and partners, and each person controlling such affiliates within
the meaning of Section 15 of the Securities Act, against all expenses, claims,
losses, damages or liabilities (or actions in respect thereof), including any of
the foregoing incurred in settlement of any litigation, commenced or threatened,
arising out of or based on any untrue statement (or alleged untrue statement) of
a material fact contained in such registration statement or prospectus, or any
amendment or supplement thereto, incident to any such registration, or based on
any omission (or alleged omission) to state therein a material fact required to
be stated therein or necessary to make the statements therein, in light of
circumstances in which they were made, not misleading, or any violation by
Conseco of the Securities Act or any rule or regulation in connection with such
registration, and reimburse each such person for
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any legal and any other expenses reasonably incurred (as they are incurred) in
connection with investigating, preparing or defending any such claim, loss,
damage, liability or action.
Financial Advisory Fees. In connection with the evaluation,
investigation, structuring, negotiation and completion of the Merger, LPG
engaged Hicks Muse to act as a financial advisor to LPG and to furnish financial
advisory services. As compensation for the services performed by Hicks Muse, LPG
will pay, in cash on the date of the closing of the Merger, the Transaction Fee.
In addition to the Transaction Fee, and regardless of whether the Merger is
completed, LPG is obligated to reimburse Hicks Muse for certain out-of-pocket
expenses. LPG has further agreed to provide indemnification, reimbursement, and
contribution to Hicks Muse and its officers, directors, employees, and other
specified persons in connection with Hicks Muse advisory services. Thomas O.
Hicks currently serves as a director of LPG and served as Chairman of the Board
and Chief Executive Officer of LPG from its inception until November 1991. John
R. Muse currently serves as a director of LPG and served as Executive Vice
President, Secretary, and Treasurer of LPG from its inception until December
1991. Each of Messrs. Hicks and Muse is an executive officer, director, and
shareholder of Hicks Muse.
HicksMuse and Mr. Hicks, directly and indirectly, beneficially owned
approximately 12.8% of the outstanding shares of LPG Common Stock on December
31, 1995. Mr. Muse, directly and indirectly, beneficially owned 3.4% of the
outstanding shares of LPG Common Stock on December 31, 1995.
Certain existing shareholders of LPG (consisting of directors, certain
officers and employees of LPG, and various other persons and entities, which
persons and entities collectively beneficially own as of the LPG Record Date
approximately ___% of the Common Stock) have entered into, or have become
subject to, a voting agreement with LPG and HMC/Life Partners, L.P., a limited
partnership which is no longer active and in which the sole general partner was
HMC Partners, L.P., a limited partnership of which Hicks, Muse & Co. (TX)
Incorporated ("Hicks Muse (TX)") served as the managing general partner ("Voting
Agreement"). During the term of the Voting Agreement, Hicks Muse (TX) is
entitled to vote, pursuant to an irrevocable proxy in its favor, all shares of
LPG Common Stock held by the parties subject to the Voting Agreement in
connection with the election of directors. The Voting Agreement generally
terminates upon the earlier of (i) the election by Hicks Muse (TX) to terminate
the Voting Agreement, (ii) the date on which Hicks Muse (TX) and its affiliates
cease to own beneficially at least 5% of the then outstanding LPG Common Stock,
or (iii) ten years after the effective date of the Voting Agreement, which
effective date was March 24, 1993.
Indemnification of Directors and Officers. Pursuant to the Merger
Agreement, the Certificate of Incorporation and By-laws of the Surviving
Corporation and its subsidiaries shall contain the provisions with respect to
indemnification set forth in the Certificate of Incorporation and By-Laws of LPG
on the date of the Merger Agreement, and such provisions shall not be amended,
repealed or otherwise modified for a period of six years after the Effective
Time in any manner that would adversely affect the rights of Indemnified Parties
in respect of actions or omissions occurring at or prior to the Effective Time
(including, without limitation, the transactions contemplated by the Merger
Agreement), unless such modification is required by law. Conseco has agreed to
be jointly and severally liable for the indemnification obligations of the
Surviving Corporation to the Indemnified Parties, as set forth above. The
foregoing provisions are intended to be for the benefit of, and shall be
enforceable by, each Indemnified Party, his heirs and his personal
representatives and shall be binding on all successors and assigns of Conseco,
the Surviving Corporation and LPG.
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Accounting Treatment
Conseco intends to account for the Merger under the purchase method of
accounting in accordance with APB No. 16. Under this method of accounting, the
cost of acquiring all outstanding shares of LPG Common Stock and the assumption
of all outstanding LPG Stock Options will be determined by the cost of shares of
LPG Common Stock currently owned by Conseco and the value at the Effective Time
of Conseco Common Stock (and cash in lieu of fractional shares) to be issued to
holders of LPG Common Stock and LPG Stock Options, plus the direct costs
associated with the Merger. Conseco will allocate such cost in establishing new
accounting and reporting bases for the underlying acquired assets and
liabilities based on their estimated fair values at the Effective Time.
Certain Federal Income Tax Consequences
The following is a summary description of the material United States
federal income tax consequences of the Merger for LPG and the LPG shareholders.
This summary is not a complete description of all of the consequences of the
Merger and, in particular, does not address tax considerations which may affect
the treatment of certain special status taxpayers such as financial
institutions, broker-dealers, life insurance companies, tax-exempt
organizations, investment companies, foreign taxpayers and persons who acquire
LPG Common Stock pursuant to employee stock options. In addition, no information
is provided herein with respect to the tax consequences of the Merger under
applicable foreign, state or local laws.
The following discussion is based on the Code, as in effect on the date
of this Joint Proxy Statement/Prospectus, without consideration of the
particular facts or circumstances of any holder of LPG Common Stock. LPG and
Conseco have not sought and will not seek any rulings from the Internal Revenue
Service with respect to any of the matters discussed herein.
The obligation of LPG to effect the Merger is conditioned on delivery
to LPG of an opinion dated the Closing Date from Weil, Gotshal & Manges LLP,
counsel to LPG, or other legal counsel reasonably acceptable to LPG and Conseco,
based on certain representations to be made by LPG, Conseco and certain
shareholders of LPG and on assumptions set forth in the opinion, that for
federal income tax purposes the Merger will constitute a reorganization within
the meaning of Section 368(a)(1) of the Code and that no gain or loss will be
recognized by the LPG shareholders with respect to the shares of Conseco Common
Stock received by the LPG shareholders in the Merger.
Based on such opinion, the material federal income tax consequences of
the Merger for LPG and the LPG shareholders will be:
(i) No gain or loss will be recognized by LPG as a
result of the Merger;
(ii) No gain or loss will be recognized by LPG
shareholders upon their exchange of LPG Common Stock for Conseco Common
Stock, except that any LPG shareholder who receives cash proceeds in
lieu of a fractional share interest in Conseco Common Stock will
recognize gain or loss equal to the difference between such proceeds
and the tax basis allocated to the fractional share interest and such
gain or loss will constitute capital gain or loss if such shareholder's
LPG Common Stock is held as a capital asset at the Effective Time;
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(iii) The tax basis of the Conseco Common Stock
(including any fractional share interest deemed received and exchanged
for a cash payment) received by an LPG shareholder in exchange for LPG
Common Stock will be the same as such shareholder's tax basis in the
LPG Common Stock surrendered in exchange therefor; and
(iv) The holding period of the Conseco Common Stock
(including any fractional share interest deemed received and exchanged
for a cash payment) received by an LPG shareholder will include the
period during which the LPG Common Stock surrendered in exchange
therefor was held (provided that such LPG Common Stock was held by such
LPG shareholder as a capital asset at the Effective Time).
THE FOREGOING IS A GENERAL DISCUSSION OF CERTAIN POTENTIAL MATERIAL
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER FOR LPG AND LPG SHAREHOLDERS AND
IS INCLUDED FOR GENERAL INFORMATION ONLY. THE FOREGOING DISCUSSION DOES NOT TAKE
INTO ACCOUNT THE PARTICULAR FACTS AND CIRCUMSTANCES OF EACH LPG SHAREHOLDER'S
TAX STATUS AND ATTRIBUTES. AS A RESULT, THE FEDERAL INCOME TAX CONSEQUENCES
ADDRESSED IN THE FOREGOING DISCUSSION MAY NOT APPLY TO EACH LPG SHAREHOLDER.
ACCORDINGLY, EACH LPG SHAREHOLDER SHOULD CONSULT HIS OWN TAX ADVISOR REGARDING
THE SPECIFIC TAX CONSEQUENCES OF THE MERGER, INCLUDING THE APPLICATION AND
EFFECT OF FEDERAL, STATE, LOCAL AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF
CHANGES IN FEDERAL, STATE, LOCAL AND OTHER TAX LAWS.
Regulatory Approvals
Antitrust. Under the HSR Act and the rules promulgated thereunder by
the Federal Trade Commission (the "FTC"), the Merger may not be consummated
until notifications have been given and certain information has been furnished
to the FTC and the Antitrust Division of the Department of Justice (the
"Antitrust Division") and specified waiting period requirements have been
satisfied. Conseco and LPG filed notification and report forms under the HSR Act
with the FTC and the Antitrust Division on April 12, 1996. The required waiting
period under the HSR Act was terminated on ___________, 1996. At any time before
or after the consummation of the Merger, and notwithstanding that the HSR Act
waiting period has been terminated, the Antitrust Division of the FTC could take
such action under the antitrust laws as it deems necessary or desirable in the
public interest, including seeking to enjoin the consummation of the Merger or
seeking divestiture of substantial assets of Conseco and LPG. At any time before
or after the consummation of the Merger, and notwithstanding that the HSR Act
waiting period has been terminated, any state could take such action under the
antitrust laws as it deems necessary or desirable in the public interest. Such
action could include seeking to enjoin the consummation of the Merger or seeking
divestiture of LPG or businesses of Conseco or LPG. Private parties may also
seek to take legal action under the antitrust laws under certain circumstances.
Conseco and LPG believe that the Merger can be effected in compliance
with federal and state antitrust laws. However, there can be no assurance that a
challenge to the consummation of the Merger on antitrust grounds will not be
made or that, if such a challenge were made, Conseco and LPG would prevail or
would not be required to accept certain conditions, possibly including certain
divestitures, in order to consummate the Merger.
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Insurance. The consummation of the Merger will require the approvals or
exemptive orders of the Insurance Commissioners, Directors of Insurance or
Superintendents of Insurance (the "Insurance Commissioners") under the state
insurance codes (the "Insurance Codes") of the states of California, Georgia,
Kentucky, Massachusetts, Mississippi and Pennsylvania, which are jurisdictions
in which insurance companies owned by LPG are domiciled or, in the case of
California, deemed to be domiciled. The Insurance Codes generally contain
provisions applicable to the acquisition of control of a domestic insurer,
including a presumption of control that arises from the ownership of 10% or more
of the voting securities of a domestic insurer or a person that controls a
domestic insurer. The filing of an application for acquisition of control of a
domestic insurer gives rise to mandatory or, in some states, discretionary
public hearing requirements and/or statutory periods (ranging from 30 to 90
days, which may be extended in certain circumstances) within which decisions
must be rendered approving or disapproving the acquisition of control.
Appropriate filings with the relevant Insurance Commissioners have been made and
it is anticipated, although there can be no assurance, that approvals of such
Insurance Commissioners will be obtained.
NYSE Listing of Conseco Common Stock
Pursuant to the Merger Agreement, Conseco is required to use best
efforts to obtain listing on the NYSE of the shares of Conseco Common Stock to
be issued in connection with the Merger. Approval of the listing on the NYSE (or
another national securities exchange or quotation on the NASDAQ National Market
System) of the shares of Conseco Common Stock to be issued in the Merger is a
condition to the respective obligations of LPG, Conseco and Merger Sub to
consummate the Merger.
Federal Securities Law Consequences
All shares of Conseco Common Stock issued in connection with the Merger
will be freely transferable, except that any shares of Conseco Common Stock
received by persons who are deemed to be "affiliates" (as such term is defined
under the Securities Act) of LPG prior to the Merger which may be resold by them
only in transactions registered under the Securities Act, permitted by the
resale provisions of Rule 145 promulgated under the Securities Act (or Rule 144
if such persons are or become affiliates of Conseco) or otherwise permitted
under the Securities Act. Persons who may be deemed to be affiliates of LPG
generally include individuals or entities that control, are controlled by, or
are under common control with, such party and may include certain officers and
directors of such party as well as principal shareholders of such party. See
"The Merger -- Interests of Certain Persons in the Merger -- LPG Affiliate
Registration Rights."
Absence of Appraisal Rights
Holders of LPG Common Stock will not be entitled to appraisal rights
under the DGCL. Holders of Conseco Stock will not be entitled to appraisal
rights under the Indiana Corporation Law in connection with the Merger because
Conseco is not a constituent corporation in the Merger.
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THE MERGER AGREEMENT
The following is a brief summary of certain provisions of the Merger
Agreement, which is attached as Annex A to this Joint Proxy Statement/Prospectus
and is incorporated herein by reference. This summary is qualified in its
entirety by reference to the Merger Agreement. The per share information for
Conseco Common Stock contained in this Joint Proxy Statement/Prospectus has been
adjusted, pursuant to the terms of the Merger Agreement, to reflect the
two-for-one stock split of the Conseco Common Stock effected April 1, 1996. All
shareholders are urged to read the Merger Agreement in its entirety.
The Merger
The Merger Agreement provides that, subject to satisfaction or waiver
of the terms and conditions contained in the Merger Agreement, including the
approval of the Merger Agreement and the transactions contemplated thereby by
the shareholders of LPG and approval of the Merger Consideration Stock Issuance
by the shareholders of Conseco, LPG will be merged with and into the Merger Sub,
with LPG being the surviving corporation.
Effective Time
The Merger Agreement provides that, subject to the satisfaction or
waiver of certain conditions and the requisite approval of the shareholders of
Conseco and LPG, the Merger will be consummated by and will become effective on
the date of the filing of a Certificate of Merger with the Secretary of State of
Delaware or at such time thereafter as is provided in the Certificate of Merger.
The Merger Agreement may be terminated by either Conseco or LPG if, among other
reasons, the Merger has not been consummated on or before September 30, 1996.
See "-- Conditions to the Merger" and " -- Termination."
Conversion of Shares; Exchange of Stock Certificates; No Fractional Amounts
At the Effective Time, pursuant to the Merger Agreement, each share of
LPG Common Stock issued and outstanding immediately prior to the Effective Time
(other than shares held as treasury shares by LPG) shall be converted into the
right to receive the Merger Consideration.
In the event of any change in Conseco Common Stock between the date of
the Merger Agreement and the Effective Time of the Merger by reason of any stock
dividend, subdivision, reclassification, recapitalization, combination, exchange
of shares or the like, the number and class of shares of Conseco Common Stock to
be issued and delivered in the Merger in exchange for each outstanding share of
LPG Common Stock as provided in the Merger Agreement shall be proportionately
adjusted.
The structure of the Merger was the result of arms-length negotiations
between LPG and Conseco and economic considerations and was intended to qualify
as a tax-free reorganization under Sections 368(a)(1) and 368(a)(2)(E) of the
Code. On ___________, 1996, the last full trading day for which information was
available prior to the mailing of this Joint Proxy Statement, the closing price
reported for shares of Conseco Common Stock and LPG Common Stock on the NYSE was
$___ per share and $___ per share, respectively. There can be no assurance or
prediction, and neither
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Conseco nor LPG hereby make any assurance or prediction, as to the future price
of the Conseco Common Stock or LPG Common Stock.
At the Effective Time, each share of common stock of the Merger Sub
issued and outstanding immediately prior to the Effective Time shall, by virtue
of the merger and without any action on the part of Merger Sub or the holder
hereof, be converted into a share of common stock of the Surviving Corporation.
No fractional shares of Conseco Common Stock will be issued in
connection with the Merger. Each LPG shareholder who otherwise would have been
entitled to a fraction of a share of Conseco Common Stock (after taking into
account all certificates delivered by such holder) shall receive in lieu thereof
cash (without interest) in an amount equal to such fractional part of a share of
Conseco Common Stock multiplied by the Conseco Share Price.
Promptly after the Effective Time, the Paying Agent will mail to each
record holder of Certificates a form of letter of transmittal and instructions
for use in surrendering such certificates and receiving the consideration to
which such holder shall be entitled. After receipt of such transmittal form,
each holder of certificates formerly representing shares of LPG Common Stock
should surrender such certificates to the Paying Agent together with such letter
of transmittal duly executed and completed in accordance with the instructions
thereto, and each such holder will be entitled to receive in exchange therefor
certificates for shares of Conseco Common Stock and/or a check for any cash
which may be payable in lieu of a fractional share of Conseco Common Stock.
LPG SHAREHOLDERS SHOULD NOT FORWARD THEIR CERTIFICATES TO THE
PAYING AGENT UNTIL THEY HAVE RECEIVED A TRANSMITTAL LETTER AND
INSTRUCTIONS.
After the Effective Time, each Certificate, until so surrendered and
exchanged, will be deemed, for all purposes, to evidence only the right to
receive the number of shares of Conseco Common Stock that the holder of such
certificate is entitled to receive pursuant to the terms of the Merger Agreement
and the right to receive any cash payment in lieu of a fractional share of
Conseco Common Stock.
Treatment of LPG Stock Options
LPG has agreed to use its best efforts to give effect to the following
with respect to LPG Stock Options which remain outstanding immediately prior to
the Effective Time: (a) LPG Stock Options held by persons who are officers or
employees of LPG at the Effective Time shall become options to purchase, for the
same aggregate consideration payable to exercise such LPG Stock Options, the
number of shares of Conseco Common Stock which the holder would have been
entitled to receive at the Effective Time if such LPG Stock Options had been
exercised for shares of LPG Common Stock prior to the Effective Time; (b) LPG
Stock Options held by persons who are not currently officers or employees of LPG
shall be required to be exercised prior to the Effective Time or forfeited; (c)
LPG Stock Options held by certain officers of LPG identified in the Disclosure
Schedule to the Merger Agreement may be repriced as provided for therein; (d)
LPG Stock Options held by an officer or employee of LPG shall expire and be
forfeited if not exercised within three (3) months after the date such person
ceases to be an officer or employee of LPG, the Surviving Corporation, Conseco,
or any other subsidiary of Conseco; and (e) LPG Stock Options held by an
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officer subject to Section 16 of the Exchange Act who would incur liability
under Section 16(b), if such LPG Stock Options were to be exercised on the date
on which such options would otherwise expire under the Merger Agreement, shall
otherwise remain exercisable for five (5) business days from the date after
which no such liability would be incurred.
Conseco has agreed to take all corporate action necessary to reserve
for issuance a sufficient number of shares of Conseco Common Stock for delivery
upon exercise of LPG Stock Options assumed in accordance with the Merger
Agreement and to register such shares of Conseco Common Stock with the
Commission pursuant to a Registration Statement on Form S-8.
If necessary to effectuate the foregoing provisions regarding LPG Stock
Options, the parties have agreed to enter into an appropriate amendment to this
Merger Agreement to provide that Merger Sub shall be the Surviving Corporation
at the Effective Time rather than LPG.
Representations and Warranties
The Merger Agreement contains certain customary representations and
warranties relating to, among other things, (a) each of Conseco's, the Merger
Sub's and LPG's organization and similar corporate matters; (b) each of
Conseco's, the Merger Sub's and LPG's capital structure; (c) the authorization,
execution, delivery, performance and enforceability of the Merger Agreement with
respect to Conseco, the Merger Sub and LPG and related matters; (d) documents
filed by each of Conseco and LPG with the Commission and the accuracy of
information contained therein; (e) the absence of material changes with respect
to the business of Conseco and LPG; and (f) compliance with applicable laws.
Certain Covenants
The Merger Agreement contains certain customary covenants and
agreements, including, without limitation, the following:
Conduct of Business. Pursuant to the Merger Agreement, Conseco has
agreed that during the period from the date of the Merger Agreement to the
Effective Time, Conseco shall, and shall cause its subsidiaries to, carry on
their respective businesses in the usual, regular and ordinary course and will
not, among other things, (a)(i) declare, set aside or pay any dividends on, or
make any other distributions (whether in cash, stock or property) in respect of,
any outstanding capital stock of Conseco (other than its regular quarterly cash
dividend of Conseco Common Stock and regular cash dividends on the Conseco
Series D Preferred Stock and the Conseco PRIDES, in each case with usual record
and payment dates and in accordance with Conseco's Articles of Incorporation and
its present dividend policy) or (ii) split, combine or reclassify any of its
outstanding capital stock other than the two-for-one stock split paid April 1,
1996 to holders of Conseco Common Stock or issue or authorize the issuance of
any other securities in respect of, in lieu of or in substitution for shares of
Conseco's outstanding capital stock (other than under the Conseco stock option
plans); (b) issue, sell, grant, pledge or otherwise encumber any shares of its
capital stock, any other voting securities or any securities convertible into,
or any rights, warrants or options to acquire, any such shares, voting
securities or convertible securities, in each case if any such action could
reasonably be expected to (i) delay materially the date of mailing of this Joint
Proxy Statement/Prospectus or, (ii) if it were to occur after such date of
mailing, require an amendment of this Joint Proxy Statement/Prospectus; or (c)
acquire any business or any corporation, partnership, joint venture, association
or other business
52
<PAGE>
organization or division thereof, in each case if any such action could
reasonably be expected to (i) delay materially the date of mailing of this Joint
Proxy Statement/Prospectus or, (ii) if it were to occur after such date of
mailing, require an amendment of this Joint Proxy Statement/Prospectus.
Pursuant to the Merger Agreement, LPG has agreed that, during the
period from the date of the Merger Agreement until the Effective Time, except as
permitted by the Merger Agreement, as set forth on the Disclosure Schedules
thereto or as otherwise consented to in writing by Conseco, LPG will, and will
cause its subsidiaries to, act and carry on their respective businesses in the
ordinary course of business and will not (without the prior consent of Conseco),
among other things (a) declare, set aside or pay any dividends on, or make any
other distributions (whether in cash, stock or property) in respect of, any of
LPG's outstanding capital stock (other than its regular quarterly cash
dividend); (b) issue, sell, grant, pledge or otherwise encumber any shares of
its capital stock, other than upon the exercise of LPG Stock Options outstanding
on the date of the Merger Agreement; (c) amend its certificate of incorporation
or By-laws; (d) acquire any business; (e) sell, mortgage or otherwise encumber
any of its properties or assets that are material to LPG and its subsidiaries
taken as a whole, except in the ordinary course of business; (f) incur any
indebtedness for borrowed money or make any loans or advances to any other
person, and other than routine advances to employees; (g) make any tax election
or settle or compromise any income tax liability that would reasonably be
expected to be material to LPG and its subsidiaries taken as a whole; (h) pay,
discharge, settle or satisfy any claims, liabilities or obligations other than
the payment, discharge or satisfaction, in the ordinary course of business
consistent with past practice or in accordance with their terms, of liabilities
reflected or reserved against in, or contemplated by, the most recent
consolidated financial statements of LPG; (i) invest its future cash flow, any
cash from matured and maturing investments, any cash proceeds from the sale of
its assets and properties, and any cash funds currently held by it, in any
investments other than cash equivalent assets or in short-term investments,
except (A) as otherwise required by law, (B) as required to provide cash (in the
ordinary course of business and consistent with past practice) to meet its
actual or anticipated obligations or (C) in publicly traded corporate bonds that
are rated investment grade by at least two nationally recognized statistical
rating organizations; (j) except as may be required by law, (A) make any
representation or promise to any employee or former director, officer or
employee of LPG or any subsidiary which is inconsistent with the terms of any
existing LPG benefit plan, (B) make any change to the contracts, salaries,
wages, or other compensation of any employee or any agent or consultant of LPG
or any subsidiary other than routine changes or amendments that are required
under existing contracts, (C) adopt, enter into, amend, alter or terminate any
benefit plan or any election made pursuant to the provisions of any existing LPG
benefit plan, to accelerate any payments, obligations or vesting schedules under
any existing LPG benefit plan, or (D) approve any general or company-wide pay
increases for employees; and (k) except in the ordinary course of business,
modify, amend or terminate any material agreement, permit, concession,
franchise, license or similar instrument to which LPG or any subsidiary is a
party or waive, release or assign any material rights or claims thereunder.
No Solicitation. Pursuant to the Merger Agreement, LPG shall not, nor
shall it permit any of its subsidiaries to, nor shall it authorize or permit any
officer, director or employee of, or any investment banker, attorney or other
advisor or representative of, LPG or any of its subsidiaries to, directly or
indirectly, (a) solicit, initiate or encourage the submission of any bona fide
proposal with respect to a merger, consolidation, share exchange or similar
transaction involving LPG, or Massachusetts General, Philadelphia Life and Lamar
Life (each a "Significant Subsidiary"), or any purchase of all or any
significant portion of the assets of LPG or any Significant Subsidiary, or any
equity interest in LPG or any Significant Subsidiary, other than the
transactions contemplated by the
53
<PAGE>
Merger Agreement (each an "Acquisition Proposal") or (b) participate in any
discussions or negotiations regarding, or furnish to any person any information
with respect to, or take any other action to facilitate any inquiries or the
making of any proposal that constitutes, or may reasonably be expected to lead
to, any Acquisition Proposal. The foregoing shall not prohibit the Board of
Directors of LPG from furnishing information to, or entering into discussions or
negotiations with, any person or entity that makes an unsolicited Acquisition
Proposal if, and only to the extent that (a) the Board of Directors of LPG,
after consultation with and based upon the advice of outside counsel, determines
in good faith that such action is necessary for the Board of Directors of LPG to
comply with its fiduciary duties to shareholders under applicable law and (b)
prior to taking such action, LPG (i) provides reasonable notice to Conseco to
the effect that it is taking such action and (ii) receives from such person or
entity an executed confidentiality agreement in reasonably customary form.
Indemnification of Directors and Officers. Pursuant to the Merger
Agreement, Conseco has agreed that the certificate of incorporation and by-laws
of the Surviving Corporation and each of its subsidiaries shall contain the
provisions with respect to indemnification set forth in the Certificate of
Incorporation and By-laws of LPG on the date of the Merger Agreement, and such
provisions shall not be amended, repealed or otherwise modified for a period of
six years after the Effective Time in any manner that would adversely affect the
rights of Indemnified Parties in respect of actions or omissions occurring at or
prior to the Effective Time unless such modification is required by law. Conseco
has agreed to be jointly and severally liable for the indemnification
obligations of LPG to the Indemnified Parties.
Conditions to the Merger
The respective obligations of Conseco, the Merger Sub and LPG to effect
the Merger are subject to the following conditions, among others: (a) the Merger
Agreement and the Merger shall have been approved and adopted by the
shareholders of LPG and the holders of Conseco Stock shall have approved and
adopted the Merger Consideration Stock Issuance; (b) all required consents,
approvals, permits and authorizations to the consummation of the transactions
contemplated hereby by LPG, Conseco and Merger Sub shall be obtained from (i)
the insurance regulators in the States of California, Kentucky, Massachusetts,
Mississippi and Pennsylvania, and (ii) any other governmental entity whose
consent, approval, permission or authorization is required by reason of a change
in law after the date of the Merger Agreement, unless the failure to obtain such
consent, approval, permission or authorization would not reasonably be expected
to have a material adverse effect on the business, financial condition or
results of operations of LPG and its subsidiaries, taken as a whole, or on the
validity or enforceability of the Merger Agreement; (c) the waiting period (and
any extension thereof) applicable to the Merger under the HSR Act shall have
been terminated or shall have otherwise expired; (d) no temporary restraining
order, preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger shall be in effect; (e) the shares of Conseco Common
Stock issuable to LPG's shareholders pursuant to the Merger shall have been
approved for listing on the NYSE, subject to official notice of issuance; and
(f) the Registration Statement shall have become effective under the Securities
Act and shall not be the subject of any stop order or proceedings seeking a stop
order.
The obligations of Conseco and the Merger Sub to effect the Merger are
subject to, among other things, the following additional conditions: (a) the
representations and warranties of LPG
54
<PAGE>
contained in the Merger Agreement shall have been true and correct on the date
of the Merger Agreement (except to the extent that they expressly relate only to
an earlier time, in which case they shall have been true and correct as of such
earlier time), other than such breaches of representations and warranties which
in the aggregate would not reasonably be expected to have a material adverse
effect on the business, financial condition or results of operations of LPG and
its subsidiaries taken as a whole; and (b) LPG shall have performed in all
material respects all obligations required to be performed by it under the
Merger Agreement at or prior to the Effective Time.
The obligation of LPG to effect the Merger is subject to, among other
things, the following additional conditions: (a) the representations and
warranties of Conseco and Merger Sub contained in the Merger Agreement shall
have been true and correct on the date of the Merger Agreement (except to the
extent that they expressly relate only to an earlier time, in which case they
shall have been true and correct as of such earlier time), other than such
breaches of representations and warranties which in the aggregate would not
reasonably be expected to have a material adverse effect on the business,
financial condition or results of operations of Conseco and its subsidiaries
taken as a whole; (b) Conseco and Merger Sub shall have performed in all
material respects all obligations required to be performed by them under the
Merger Agreement at or prior to the Effective Time; and (c) LPG shall have
received an opinion of counsel to the effect that the Merger will be treated as
a reorganization under Section 368(a)(1) of the Code and that shareholders of
LPG will not be subject to federal income tax on the receipt of shares of
Conseco Common Stock in the Merger. LPG's obligations are not conditioned upon
DLJ re-endering its fairness opinion.
Termination
The Merger Agreement may be terminated and the Merger abandoned at any
time prior to the Effective Time: (i) by the mutual written consent of Conseco
and LPG; (ii) by Conseco or LPG at any time if, upon a vote at a duly held
meeting of LPG or Conseco's shareholders or any adjournment thereof, any
required approval of the holders of LPG Common Stock or Conseco Stock shall not
be obtained; (iii) if the Merger shall not have been consummated on or before
September 30, 1996, unless the failure to consummate the Merger is the result of
a willful and material breach of the Merger Agreement by the party seeking to
terminate the Merger Agreement; (iv) if any governmental entity shall have
issued an order, decree or ruling or taken any other action permanently
enjoining, restraining or otherwise prohibiting the Merger and such order,
decree, ruling or other action shall have become final and nonappealable; or (v)
if the Board of Directors of LPG shall have exercised its rights set forth in
Section 4.9 of the Merger Agreement. See "-- Right of LPG Board of Directors to
Withdraw its Recommendation."
If the Merger Agreement is validly terminated as described above, the
Merger Agreement shall become null and void, except for certain covenants
regarding confidentiality and, as described herein, payment of expenses, and
except that no party thereto will be relieved of any liability for damages that
such party may have to the other party by reason of such party's breach of the
Merger Agreement.
Right of LPG Board of Directors to Withdraw its Recommendation
Under the Merger Agreement, the Board of Directors of LPG shall not (i)
withdraw or modify, in a manner materially adverse to Conseco, the approval or
recommendation by the Board of Directors of the Merger Agreement or the Merger,
(ii) approve or recommend an Acquisition
55
<PAGE>
Proposal or (iii) enter into any agreement with respect to any Acquisition
Proposal, unless LPG receives an Acquisition Proposal and the Board of Directors
of LPG determines in good faith, following consultation with outside counsel,
that in order to comply with its fiduciary duties to shareholders under
applicable law it is necessary for the Board of Directors to withdraw or modify,
in a manner materially adverse to Conseco, its approval or recommendation of the
Merger Agreement or the Merger, approve or recommend such Acquisition Proposal,
enter into an agreement with respect to such Acquisition Proposal or terminate
the Merger Agreement. In the event the Board of Directors of LPG takes any of
the foregoing actions, LPG shall, concurrently with the taking of any such
action, pay to Conseco the fee described in "-- Fees -- Acquisition Proposal
Fees."
Fees
Acquisition Proposal Fees. LPG has agreed to pay to Conseco upon demand
$20 million, payable in same-day funds, if a bona fide Acquisition Proposal is
commenced, publicly proposed, publicly disclosed or communicated to LPG (or the
willingness of any person to make such an Acquisition Proposal is publicly
disclosed or communicated to LPG) and (i) the Board of Directors of LPG, in
accordance with its fiduciary duties, withdraws or modifies in a manner
materially adverse to Conseco its approval or recommendation of the Merger
Agreement or the Merger, approves or recommends such Acquisition Proposal,
enters into an agreement with respect to such Acquisition Proposal, or
terminates the Merger Agreement or (ii) the requisite approval of LPG's
shareholders for the Merger is not obtained at the LPG Special Meeting.
Other Fees. In the absence of an Acquisition Proposal, unless Conseco
is materially in breach of the Merger Agreement or is unable to satisfy certain
closing conditions in the Merger Agreement, LPG has agreed to pay to Conseco
upon demand $20 million, payable in same-day funds, if the requisite approval of
LPG's shareholders for the Merger is not obtained and all other closing
conditions contained in the Merger Agreement have been satisfied or waived or,
with respect to any condition not then satisfied, it is substantially likely
that such condition will be satisfied on or before September 30, 1996, through
the exercise of best efforts to procure the satisfaction thereof; provided,
however, in the event that the Mailing Date Trading Average is less than $26.40,
then in lieu of the $20 million fee described above, Conseco shall receive
reimbursement of its out-of-pocket fees and expenses incurred or paid by or on
behalf of Conseco to third parties in connection with the Merger or the
consummation of any of the transactions contemplated by the Merger Agreement,
including all bank fees, financing fees, printing costs and reasonable fees and
expenses of counsel, investment banking firms, accountants, experts and
consultants to Conseco not to exceed $2 million.
In the absence of an Acquisition Proposal, unless LPG is materially in
breach of the Merger Agreement or is unable to satisfy certain closing
conditions in the Merger Agreement, Conseco has agreed to pay to LPG upon demand
$20 million, payable in same-day funds, if the requisite approval of holders of
Conseco Stock of the Merger Consideration Stock Issuance is not obtained and all
other closing conditions contained in the Merger Agreement have been satisfied
or waived or, with respect to any condition not then satisfied, it is
substantially likely that such condition will be satisfied on or before
September 30, 1996, through the exercise of best efforts to procure the
satisfaction thereof.
Expenses
Except as otherwise expressly provided in the Merger Agreement, whether
or not the Merger is consummated, each of LPG, Conseco and Merger Sub will pay
its own costs and expenses incident
56
<PAGE>
to preparing for, entering into and carrying out the Merger Agreement and the
consummation of the transactions contemplated thereby except that the expenses
incurred in connection with the printing, mailing and distribution of this Joint
Proxy Statement/Prospectus and the preparation and filing of the Registration
Statement shall be borne equally by Conseco and LPG. LPG has agreed that the
fees and expenses of LPG's legal and investment banking advisors incurred in
connection with the Merger (but excluding reasonable fees and expenses related
to litigation or Acquisition Proposals) shall not exceed $5,500,000.
Modification or Amendment
Subject to the applicable provisions of the DGCL, at any time prior to
the Effective Time, LPG, Conseco and Merger Sub may modify or amend the Merger
Agreement, by written agreement executed and delivered by duly authorized
officers of the respective parties; provided, however, that after approval of
the Merger by the shareholders of LPG, no amendment may be made which reduces
the consideration payable in the Merger or adversely affects the rights of the
LPG's shareholders under the Merger Agreement without the approval of such
shareholders.
57
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS OF CONSECO
The unaudited pro forma consolidated statement of operations of Conseco for
the year ended December 31, 1995, presents the consolidated operating results
for Conseco as if the Merger had occurred on January 1, 1995. The unaudited pro
forma consolidated balance sheet as of December 31, 1995, gives effect to the
Merger as if it had occurred on December 31, 1995. The pro forma consolidated
statement of operations data for Conseco set forth in the unaudited pro forma
consolidated statement of operations under the column "Pro forma Conseco before
the Merger" reflect the prior application of certain pro forma adjustments for
the following transactions, all of which have already occurred, as if such
transactions had occurred on January 1, 1995: (i) the acquisition of all of the
outstanding common stock of CCP not previously owned by Conseco and related
transactions (including the repayment of the existing $250.0 million revolving
credit agreement); (ii) the increase of Conseco's ownership in BLH to 90.5
percent, as a result of purchases of common shares of BLH by Conseco and BLH
during 1995 and the first three months of 1996; (iii) the issuance of 4.37
million shares of Conseco PRIDES in January 1996; (iv) the BLH tender offer for
its 13 percent senior subordinated notes due 2002 and related financing
transactions completed in March 1996; and (v) the debt restructuring of AGP in
the fourth quarter of 1995.
The data for Conseco set forth in the unaudited pro forma consolidated
balance sheet under the column "Pro forma Conseco before the Merger" reflect
the prior application of certain pro forma adjustments for the following
transactions, all of which occurred in 1996, as if such transactions had
occurred on December 31, 1995: (i) the issuance of the Conseco PRIDES; and (ii)
the repurchase of BLH common stock by BLH; and (iii) the BLH tender offer and
related financing transactions.
The pro forma adjustments referred to in the previous two paragraphs are
set forth in Exhibit 99.1 included in Conseco's Form 8-K dated April 10, 1996,
incorporated by reference herein.
The unaudited pro forma consolidated statement of operations data of LPG
set forth under the column "Pro forma LPG before the Merger" reflect the prior
application of the pro forma adjustments for the acquisition of Lamar (completed
on April 28, 1995) as if such acquisition had occurred on January 1, 1995. Such
pro forma adjustments are set forth in Exhibit 99.1 included in LPG's Form 8-K
dated April 10, 1996, incorporated by reference herein.
The unaudited pro forma consolidated financial statements should be read in
conjunction with the accompanying notes; Conseco's Annual Report and LPG's
Annual Report incorporated by reference herein; the unaudited pro forma
consolidated financial statements and notes thereto of Conseco contained in
Exhibit 99.1 included in Conseco's Form 8-K dated April 10, 1996, incorporated
by reference herein; and the unaudited pro forma consolidated statement of
operations of LPG contained in Exhibit 99.1 included in LPG's Form 8-K dated
April 10, 1996, incorporated by reference herein. The pro forma data are not
necessarily indicative of the results of operations or financial condition of
Conseco had these transactions occurred on January 1, 1995, nor the results of
future operations. Conseco anticipates cost savings and additional benefits as a
result of the Merger. Such benefits and any other changes that might have
resulted from management of the combined companies have not been included as
adjustments to the pro forma consolidated financial statements. Certain amounts
from the prior periods have been reclassified to conform to the current
presentation.
The unaudited pro forma consolidated financial statements reflect cost
allocations for the Merger based on: (i) the values of LPG's assets and
liabilities as of the assumed dates of Merger; and (ii) appraisals and other
studies, which are not yet completed. Accordingly, the final allocations will be
different from the amounts included in the accompanying pro forma consolidated
financial statements. Although the final allocations will differ, the pro forma
consolidated financial statements reflect management's best estimate based on
currently available information as if the Merger had occurred on the assumed
dates of Merger.
58
<PAGE>
<TABLE>
<CAPTION>
CONSECO
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
for the year ended December 31, 1995
(Amounts in millions, except per share amounts)
(unaudited)
Pro forma Pro forma Pro forma Pro forma
Conseco LPG adjustments Conseco
before the before the relating to reflecting the
Merger Merger the Merger Merger
------ ------ ---------- ------
<S> <C> <C> <C> <C>
Revenues:
Insurance policy income $ 1,464.9 $ 287.9 $ - $ 1,752.8
Investment activity:
Net investment income 1,138.5 299.4 16.0 (1) 1,455.6
1.7 (2)
Net trading income 2.5 - - 2.5
Net realized gains 185.7 15.8 2.4 (1) 203.9
Fee revenue 33.9 - - 33.9
Restructuring income 15.2 - - 15.2
Other income 9.4 3.2 - 12.6
---------- -------- ------ ----------
Total revenues 2,850.1 606.3 20.1 3,476.5
---------- -------- ------ ----------
Benefits and expenses:
Insurance policy benefits and change in future policy benefits 1,106.4 155.0 - 1,261.4
Interest expense on annuities and financial products 585.2 173.3 - 758.5
Interest expense on notes payable 110.7 28.1 (0.7)(3) 133.9
(4.2)(4)
Interest expense on investment borrowings 22.2 8.0 - 30.2
Amortization related to operations 207.8 165.0 (86.7)(5) 299.0
12.9 (6)
Amortization related to realized gains 126.0 (8.0) 15.6 (7) 133.6
Other operating costs and expenses 272.4 99.8 (15.8)(4) 356.4
---------- -------- ------ ----------
Total benefits and expenses 2,430.7 621.2 (78.9) 2,973.0
---------- -------- ------ ----------
Income (loss) before income taxes, minority
interest and extraordinary charge 419.4 (14.9) 99.0 503.5
Income tax expense (benefit) 163.3 (2.6) (2.5)(4) 196.2
38.0 (8)
---------- -------- ------ ----------
Income (loss) before minority interest and
extraordinary charge 256.1 (12.3) 63.5 307.3
Minority interest 72.5 - - 72.5
---------- -------- ------ ----------
Income (loss) before extraordinary charge $ 183.6 $ (12.3) $ 63.5 $ 234.8
========== ======== ====== ==========
Earnings per common share and common equivalent share:
Primary:
Weighted average shares outstanding 50.5 16.3 (9) 66.8
========== ====== ==========
Income before extraordinary charge $3.27 $3.24
========== ==========
Fully diluted:
Weighted average shares outstanding 59.7 16.3 (9) 76.0
========== ====== ==========
Income before extraordinary charge $3.07 $3.09
========== ==========
<FN>
The accompanying notes are an integral part of the pro forma
consolidated financial statements.
</FN>
</TABLE>
59
<PAGE>
<TABLE>
<CAPTION>
CONSECO
PRO FORMA CONSOLIDATED BALANCE SHEET
December 31, 1995
(Dollars in millions)
(unaudited)
Pro forma Pro forma Pro forma
Conseco adjustments Conseco
before the LPG relating to reflecting the
Merger historical the Merger Merger
------ ---------- ---------- ------
<S> <C> <C> <C> <C>
Assets:
Investments:
Actively managed fixed maturity securities
at fair value $ 12,963.3 $ 2,672.4 $ 678.8 (10) $ 16,357.1
42.6 (11)
Held-to-maturity fixed maturity securities - 678.8 (678.8) (10) -
Equity securities at fair value 36.6 23.7 - 60.3
Mortgage loans 339.9 110.2 (10.2) (11) 439.9
Credit-tenant loans 259.1 - - 259.1
Policy loans 307.6 226.2 - 533.8
Other invested assets 91.2 68.9 - 160.1
Short-term investments 172.8 197.7 (7.8) 362.7
Assets held in separate accounts 227.0 - - 227.0
---------- --------- --------- ----------
Total investments 14,397.5 3,977.9 24.6 18,400.0
Accrued investment income 207.8 54.8 - 262.6
Cost of policies purchased 1,030.7 306.0 (306.0) (12) 1,490.0
459.3 (12)
Cost of policies produced 391.0 238.7 (238.7) (13) 391.0
Reinsurance receivables 84.8 244.8 - 329.6
Goodwill 923.9 100.5 (100.5) (14) 1,404.9
481.0 (14)
Property and equipment 88.7 - - 88.7
Securites segregated for future redemption
of redeemable preferred stock of a
subsidiary 39.2 - - 39.2
Other assets 146.6 58.2 - 204.8
----------- --------- -------- ----------
Total assets $ 17,310.2 $ 4,980.9 $ 319.7 $ 22,610.8
=========== ========= ========= ==========
(continued)
<FN>
The accompanying notes are an integral part of the pro forma
consolidated financial statements.
</FN>
</TABLE>
60
<PAGE>
<TABLE>
<CAPTION>
CONSECO
PRO FORMA CONSOLIDATED BALANCE SHEET, continued
December 31, 1995
(Dollars in millions)
(unaudited)
Pro forma Pro forma Pro forma
Conseco adjustments Conseco
before the LPG relating to reflecting the
Merger historical the Merger Merger
------ ---------- ----------- ------
<S> <C> <C> <C> <C>
Liabilities:
Insurance liabilities $13,378.4 $4,146.9 $ 170.4 (15) $ 17,695.7
Income tax liabilities 87.2 39.2 (99.6) (16) 26.8
Investment borrowings 298.1 73.6 - 371.7
Other liabilities 319.9 74.6 50.0 (17) 444.5
Liabilities related to separate accounts 227.0 - - 227.0
Notes payable of Conseco 628.7 246.1 11.0 (18) 885.8
Notes payable of Bankers Life Holding
Corporation, not direct obligations of Conseco 340.0 - - 340.0
Notes payable of Partnership II entities, not
direct obligations of Conseco 283.2 - - 283.2
--------- -------- ------- ---------
Total liabilities 15,562.5 4,580.4 131.8 20,274.7
--------- -------- ------- ---------
Minority interest 388.5 - - 388.5
--------- -------- ------- ---------
Shareholders' equity:
Series D preferred stock 283.5 - - 283.5
Conseco PRIDES 267.1 267.1
Common stock and additional paid-in capital 148.1 287.9 (287.9) (19) 736.5
588.4 (19)
Unrealized appreciation (depreciation) of securities 112.7 58.3 (58.3) (19) 112.7
Retained earnings 547.8 54.3 (54.3) (19) 547.8
--------- -------- ------- ---------
Total shareholders' equity 1,359.2 400.5 187.9 1,947.6
--------- -------- ------- ---------
Total liabilities and shareholders' equity $17,310.2 $4,980.9 $ 319.7 $22,610.8
========= ======== ======== =========
<FN>
The accompanying notes are an integral part of the pro forma
consolidated financial statements.
</FN>
</TABLE>
61
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS OF CONSECO
PRO FORMA ADJUSTMENTS
Allocation of Cost to Acquire LPG
The acquisition of LPG will be accounted for under the purchase method of
accounting. Under this method, the total cost to acquire LPG will be allocated
to the assets and liabilities acquired based on their fair values as of the date
of the Merger, with any excess of the total purchase cost over the fair value of
the assets acquired less the fair value of the liabilities assumed recorded as
goodwill. For the purpose of the pro forma consolidated financial statements,
the average closing price of a share of Conseco Common Stock during the 20
trading days ending two days prior to the Merger has been assumed to be
approximately $36 per share, which would result in each of the issued and
outstanding shares of LPG Common Stock (other than shares held by Conseco) being
converted into .5833 shares of Conseco Common Stock. The actual average closing
price of a share of Conseco Common Stock for the 20 trading days ended April 4,
1996, was $35.38 per share.
The cost to acquire LPG is allocated as follows (dollars in millions):
<TABLE>
<S> <C>
Net assets acquired based on assumed date of the
Merger (December 31, 1995) ..................................................... $400.5
Increase (decrease) in LPG's net asset value to reflect estimated fair value at
the assumed date of the Merger:
Actively managed fixed maturity securities.................................. 721.4
Held-to-maturity fixed maturity securities.................................. (678.8)
Mortgage loans.............................................................. (10.2)
Cost of policies purchased (historical)..................................... (306.0)
Cost of policies purchased (related to the Merger).......................... 459.3
Cost of policies produced................................................... (238.7)
Goodwill (historical)....................................................... (100.5)
Goodwill (related to the Merger)............................................ 481.0
Insurance liabilities ...................................................... (170.4)
Other liabilities........................................................... 49.6
Notes payable............................................................... (11.0)
-------
Total estimated fair value adjustments................................... 195.7
-------
Net assets acquired................................................................. 596.2
Notes payable assumed by Conseco.................................................... 246.1
-------
Total cost to acquire LPG....................................................... $842.3
======
</TABLE>
Adjustments to the pro forma consolidated statement of operations to give
effect to the Merger as of January 1, 1995, are summarized below:
(1) Net investment income and net realized gains of LPG are adjusted to
include the effect of adjustments to restate the amortized cost basis
of fixed maturity securities and mortgage loans to their estimated
fair value.
(2) After the Merger, a subsidiary of Conseco will provide investment
advisory services to LPG. Investment advisory fees incurred by LPG
prior to the Merger are eliminated. LPG's pro forma net investment
income is not reduced to reflect the advisory fees to be paid under
agreements with the subsidiary of Conseco since, in accordance with
generally accepted accounting principles, such intercompany fees are
eliminated in consolidation and the subsidiary of Conseco will
provide such services without incurring additional costs.
(3) Interest expense on notes payable of LPG is adjusted as a result of
restating notes payable of LPG to their estimated fair value.
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<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS OF CONSECO
(4) At the assumed Merger date, certain contingent liabilities related to
potential losses for tax examinations and a class action lawsuit
existed. Expenses incurred in 1995 with respect to such contingencies
are eliminated, since such amounts are considered in the accounting
for the Merger.
(5) Amortization of the cost of policies produced, the historical cost of
policies purchased and deferred revenues for policies sold by LPG
prior to January 1, 1995, are replaced with the amortization of the
cost of policies purchased (amortized in relation to estimated
profits on the policies purchased with interest equal to the contract
rates primarily ranging from 4.0 percent to 7.0 percent).
(6) LPG's historical amortization of goodwill is eliminated and replaced
with the amortization of goodwill recognized in the Merger. Such
amortization is recognized over a 40-year period on a straight-line
basis.
(7) Anticipated returns, including realized gains and losses, from the
investment of policyholder balances are considered in determining the
amortization of the cost of policies purchased. Amortization of the
cost of policies purchased is adjusted to reflect amortization
related to the pro forma net realized gains of LPG during 1995.
(8) All applicable pro forma adjustments to operations are tax affected
at the appropriate rate for the specific item.
(9) Common shares outstanding are increased to reflect the shares issued
in the Merger.
Adjustments to the pro forma consolidated balance sheet to give effect to
the Merger as of December 31, 1995, are summarized below:
(10) After the Merger, all held-to-maturity fixed maturity securities are
classified as actively managed fixed maturity securities consistent
with the intention of the new management.
(11) LPG's held-to-maturity fixed maturity securities and mortgage loans
are restated to estimated fair value.
(12) LPG's historical cost of policies purchased is eliminated and
replaced with the cost of policies purchased recognized in the
Merger. Cost of policies purchased reflects the estimated fair value
of LPG's business in force and represents the portion of the cost to
acquire LPG that is allocated to the value of the right to receive
future cash flows from insurance contracts existing at December 31,
1995. Such value is the present value of the actuarially determined
projected cash flows from the acquired policies.
The 18 percent discount rate used to determine such value is the rate
of return required by Conseco to invest in the business being
acquired. In determining such rate of return, the following factors
are considered:
- The magnitude of the risks associated with each of the actuarial
assumptions used in determining the expected cash flows.
- Cost of capital available to fund the acquisition.
- The perceived likelihood of changes in insurance regulations and
tax laws.
- Complexity of the acquired company.
- Prices paid (i.e., discount rates used in determining
valuations) on similar blocks of business sold recently.
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<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS OF CONSECO
The value allocated to the cost of policies purchased is based on a preliminary
valuation; accordingly, this allocation may be adjusted upon final determination
of such value. Expected gross amortization of such value using current
assumptions and accretion of interest based on an interest rate equal to the
liability or contract rate (such rates primarily ranging from 4.0 percent to 7.0
percent) for each of the years in the five-year period ending December 31, 2000,
are as follows (dollars in millions):
<TABLE>
<CAPTION>
Beginning Gross Accretion Net Ending
Year balance amortization of interest amortization balance
---- ------- ------------ ----------- ------------ -------
<S> <C> <C> <C> <C> <C>
1996 $459.3 $94.9 $31.8 $63.1 $396.2
1997 396.2 84.8 27.2 57.6 338.6
1998 338.6 71.7 23.3 48.4 290.2
1999 290.2 60.1 19.9 40.2 250.0
2000 250.0 51.2 17.3 33.9 216.1
</TABLE>
(13) LPG's cost of policies produced is eliminated since such amounts are
reflected in the determination of the cost of policies purchased.
(14) LPG's historical goodwill is eliminated and replaced with goodwill
determined for the Merger. Such goodwill reflects the excess of the
cost to acquire LPG over the net assets acquired.
(15) Deferred revenues on certain life insurance and annuity policies of
LPG are eliminated, since such amounts are reflected in the
determination of the cost of policies purchased. Additional insurance
liabilities are recognized to reflect future losses expected to occur
on certain products. Such additional liabilities were reflected in
the determination of the cost of policies purchased.
(16) All of the applicable pro forma balance sheet adjustments are tax
affected at the appropriate rate.
(17) A liability is established for estimated expenses related to the
Merger.
(18) Notes payable are adjusted to reflect their estimated fair value.
(19) The prior shareholders' equity of LPG is eliminated in conjunction
with the Merger. Cash is reduced for the cost of shares of LPG
Common Stock purchased by Conseco during the first quarter of 1996.
Common stock and additional paid-in capital is increased by the
value of Conseco Common Stock issued in the Merger.
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<PAGE>
COMPARISON OF SHAREHOLDERS' RIGHTS
The rights of Conseco shareholders are governed by Conseco's Amended
and Restated Articles of Incorporation (the "Conseco Articles of
Incorporation"), its Amended and Restated Code of By-laws (the "Conseco
By-laws") and the Indiana Corporation Law. The rights of LPG shareholders are
governed by its Certificate of Incorporation, as amended (the "LPG Certificate
of Incorporation"), its By-laws (the "LPG By-laws") and the DGCL. After the
Effective Time, the rights of LPG shareholders who become Conseco shareholders
will be governed by the Conseco Articles of Incorporation, the Conseco By-laws
and the Indiana Corporation Law. The following is a summary of the material
differences between the rights of Conseco shareholders and the rights of LPG
shareholders.
Amendment of By-laws
The Conseco By-laws may be amended by majority vote of the Board of
Directors. The LPG By-laws may be amended by a majority vote of the LPG Board of
Directors and at least two-thirds (2/3) of the classified directors then
serving. The shareholders of LPG may amend the By-laws of LPG only upon the
affirmative vote of holders of two-thirds (2/3) of the outstanding LPG Common
Stock.
Voting with Respect to Certain Business Combinations
The Conseco Articles of Incorporation provide that Conseco may not
enter into a "Special Business Combination Transaction" (defined as a merger or
other business combination transaction with or involving a beneficial owner of
more than 10% of Conseco Common Stock (a "Related Person")) unless (i) the
consideration to be received per share by holders of Conseco Common Stock in
such transaction is at least equal to the highest per share price paid in order
to acquire any shares of Conseco Common Stock beneficially owned by the Related
Person or (ii) the transaction shall have been approved by two-thirds of the
Continuing Directors (defined as the directors of Conseco in office prior to the
date on which a Related Person became such).
The LPG Certificate of Incorporation provides that LPG shall be
expressly governed by Section 203 of the DGCL. Section 203 of the DGCL provides
that a corporation shall not engage in any business combination (generally
defined as a merger, consolidation, sale of greater than 10% of assets, issuance
of stock or granting of other financial benefits) with any interested
shareholder (generally defined as any person owning greater than 15% of the
voting stock of a corporation) for a period of three years following the time
that such shareholder became an interested shareholder, unless (i) prior to such
time the board of directors of the corporation approved either the business
combination or the transaction which resulted in the shareholder becoming an
interested shareholder, (ii) upon consummation of the transaction which resulted
in the shareholder becoming an interested shareholder, the interested
shareholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned (a) by persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer,
or (iii) at or subsequent to such time the business combination is approved by
the board of directors and authorized at an annual or special meeting of
shareholders, and not by written consent, by the
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<PAGE>
affirmative vote of at least two-thirds (2/3) of the outstanding voting stock
which is not owned by the interested shareholder.
Right to Bring Business Before an Annual or Special Meeting of Shareholders;
Notice of Director Nominations
The Conseco Articles of Incorporation and the Conseco By-laws do not
contain any restriction on the ability of shareholders to bring business before
a special meeting of shareholders. The LPG By-laws provide that a shareholder
must give timely, written notice to the Secretary of LPG to nominate directors
at an annual or special meeting or to propose business to be brought before an
annual or special meeting. To be timely in the case of an annual meeting, a
shareholder's notice must be received at the principal executive offices of LPG
not less than 120 days before the first anniversary of the preceding year's
annual meeting. To be timely in the case of a special meeting or in the event
that the date of the annual meeting is changed by more than 30 days from such
anniversary date, a shareholder's notice must be received at the principal
executive offices of LPG no later than the close of business on the tenth day
following the earlier of the day on which notice of the meeting date was mailed
or public disclosure of the meeting date was made.
Shareholder Action by Written Consent
The Conseco By-laws specifically authorize shareholder action by
written consent of all the shareholders entitled to vote on such action. The LPG
Certificate of Incorporation prohibits action by the shareholders by written
consent except for actions to be taken exclusively by classes or series of
preferred stock, voting separately as a class or series.
Removal of Directors
The Conseco Articles of Incorporation and the LPG Certificate of
Incorporation provide for a classified board of directors. Each board of
directors is divided into three classes. However, under the Conseco By-laws, a
director may be removed, either for or without cause, at any special meeting of
shareholders called for that purpose, by the affirmative vote of a majority in
number of shares of the shareholders present in person or by proxy and entitled
to vote for the election of such director.
Under the LPG Certificate of Incorporation, a director may be removed
for cause only by the affirmative vote of a majority of the outstanding shares
of each class of capital stock entitled to vote at an election of such director.
A director may be removed, without cause, upon the affirmative vote of the
holders of a majority of the outstanding shares of each class of capital stock
of LPG then entitled to vote at an election of such director, provided that if
LPG's Board of Directors does not approve such removal or if the Board of
Directors has approved such removal and the Voting Agreement is no longer in
effect, the affirmative vote of the holders of at least two-thirds (2/3) of the
outstanding shares of each class of capital stock of LPG then entitled to vote
at an election of directors shall be required in order to remove any or all
directors without cause.
Director Liability
The Conseco Articles of Incorporation and the Conseco By-laws do not
contain a specific exculpatory provision regarding director liability. However,
the Indiana Corporation Law provides that a director is not liable for any
action taken as a director, or any failure to take any action, unless
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<PAGE>
(i) the director has breached or failed to perform the duties of the director's
office in compliance with Section 23-1-35-1 of the Indiana Corporation Law
(which requires, among other things, that a director discharge his duties as a
director in good faith, with the care and ordinarily prudent person in a like
position would exercise under similar circumstances and in a manner the director
reasonably believes to be in the best interests of the corporation), and (ii)
the breach or failure to perform constitutes willful misconduct or recklessness.
The LPG Certificate of Incorporation provides that a director of LPG
shall not be personally liable to LPG or its shareholders for monetary damages
for breach of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to LPG or its shareholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or
knowing violation of law, (iii) under Section 174 of the DGCL (unlawful payment
of dividends), or (iv) for any transaction from which the director derived an
improper personal benefit.
Indemnification
The Indiana 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 Conseco By-laws provides 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 Conseco, 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.
The LPG Certificate of Incorporation provides that LPG shall indemnify
any person who was, is, or is threatened to be made a party to a proceeding by
reason of the fact that he or she (i) is or was a director or officer of LPG or
(ii) while a director or officer of LPG, is or was serving at the request of LPG
as a director, officer, partner, venturer, proprietor, trustee, employee, agent,
or similar functionary of another foreign or domestic corporation, partnership,
joint venture, sole proprietorship, trust, employee benefit plan, or other
enterprise, to the fullest extent permitted under the DGCL. Such right shall
include the right to be paid by LPG expenses incurred in defending any such
proceeding in advance of its final disposition to the maximum extent permitted
under the DGCL. If a claim for indemnification or advancement of expenses is not
paid in full by LPG within sixty (60) days after a written claim has been
received by LPG, the claimant may at any time thereafter bring suit against LPG
to recover the unpaid amount of the claim, and if successful in whole or in
part, the claimant shall also be entitled to be paid the expenses of prosecuting
such claim. It shall be a defense to any such action that such indemnification
or advancement of costs of defense are not permitted under the DGCL, but the
burden of proving such defense shall be on LPG. Neither the failure of LPG
(including its board of directors or any committee thereof, independent legal
counsel, or
67
<PAGE>
shareholders) to have made its determination prior to the commencement of such
action that indemnification of, or advancement of costs of defense to, the
claimant is permissible in the circumstances nor an actual determination by LPG
(including its board of directors or any committee thereof, independent legal
counsel, or shareholders) that such indemnification or advancement is not
permissible shall be a defense to the action or create a presumption that such
indemnification or advancement is not permissible. In the event of the death of
any person having a right of indemnification, such right shall inure to the
benefit of his or her heirs, executors, administrators, and personal
representatives. The rights conferred above shall not be exclusive of any other
right which any person may have or hereafter acquire under any statute, bylaw,
resolution of shareholders or directors, agreement, or otherwise. LPG may
additionally indemnify any employee or agent of the corporation to the fullest
extent permitted by law.
The Conseco Articles of Incorporation and Conseco By-laws do not
provide for the advancement of expenses. However, under the Indiana Corporation
Law, a corporation may advance expenses if (i) the director furnishes the
corporation a written affirmation of the director's good faith belief that the
director has met the standard of conduct called for by Section 23-1-37-8 of the
Indiana Corporation Law (which states that a corporation may indemnify an
individual made a part to a proceeding because the individual is or was a
director against liability incurred in the proceeding if: (1) the individual's
conduct was in good faith; and (2) the individual reasonably believed: (a) in
the case of conduct in the individual's official capacity with the corporation,
that the individual's conduct was in its best interests; and (B) in all other
cases, that the individual's conduct was at least not opposed to its best
interests; and (3) in the case of any criminal proceeding, the individual
either: (A) had reasonable cause to believe the individual's conduct was lawful;
or (B) had no reasonable cause to believe the individual's conduct was
unlawful), (ii) the director furnishes a written undertaking to repay the
advance if it is ultimately determined that he did not meet such standard of
conduct and (iii) a determination is made that the facts then known would not
preclude indemnification under Indiana laws.
Dividends and Repurchases
Under the DGCL, a corporation may pay dividends and repurchase stock
out of surplus or, if there is no surplus, out of any net profits for the fiscal
year in which the dividend was declared or for the preceding fiscal year as long
as no payment reduces capital below the amount of capital represented by all
classes of shares having a preference upon the distribution of assets. Under the
Indiana Corporation Law, a corporation may make distributions to its
shareholders as long as the corporation's net assets are greater than zero,
debts may be paid as they come due, and the payment of these distributions is
consistent with the corporation's articles of incorporation.
Dissenters' Rights
Under both Delaware and Indiana law, a shareholder is entitled, under
certain circumstances, to receive payment of the fair value of the shareholder's
common stock if the shareholder dissents from a proposed merger or
consolidation. Under the DGCL, dissenters' rights are unavailable in the case of
a sale of all or substantially all of the assets of a corporation. Dissenters'
rights are also unavailable if the shares of the Delaware corporation which is a
party to a merger or consolidation are listed on a national securities exchange,
or are held of record by more than 2,000 persons, and in the merger or
consolidation, shareholders receive shares of stock of the surviving or
resulting corporation and/or shares of stock of any other corporation which are
listed on a national securities
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<PAGE>
exchange or held of record by more than 2,000 persons. Since LPG's Common Stock
is currently listed and the shares of Conseco Common Stock to be received in the
Merger will be listed on the NYSE, dissenters' rights will not be available to
shareholders in connection with the Merger.
Unlike the DGCL, the Indiana Corporation Law provides for dissenters'
rights in the case of a share exchange or sale of all or substantially all of
the assets of an Indiana corporation. Dissenters' rights can also be made
applicable by affirmative provision in the articles of incorporation, bylaws or
a Board of Directors' resolution, or by other actions requiring a shareholder
vote. However, similar to its Delaware counterpart, under the Indiana
Corporation Law, dissenters' rights are unavailable to holders of shares
registered on a national securities exchange or quoted on NASDAQ on the record
date for a meeting of shareholders at which action on the proposed transaction
otherwise subject to dissenters' rights is to be taken.
Director and Officer Discretion
Under Sections 23-1-35-1-(d), (f), and (g) of the Indiana Corporation
Law, in discharging his or her duties to the corporation and in determining what
he or she believes to be in the best interests of the corporation, a director or
officer may, in addition to considering the effects of any action on
shareholders, consider the effects of the action on employees, suppliers,
customers, the communities in which the corporation operates and any other
factors that the director or officer considers pertinent. The DGCL does not
contain a comparable provision, and under Delaware law, the consideration that a
board may give to nonshareholder constituencies is less clear. In considering
the best interests of a corporation, under Delaware law, directors and officers
can generally take into consideration the interest of nonshareholders. However,
the Delaware Supreme Court has held that the consideration of nonshareholder
constituencies is inappropriate when an active "auction" is in process to sell a
company.
The foregoing discussion of certain similarities and material
differences between the rights of Conseco shareholders and the rights of LPG
shareholders is only a summary of certain provisions and does not purport to be
a complete description of such similarities and differences, and is qualified in
its entirety by reference to the Indiana Corporation Law and the common law
thereunder, the DGCL and the common law thereunder, and the full text of the
Certificate or Articles, as the case may be, of Incorporation and By-laws of
Conseco and LPG.
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MANAGEMENT OF THE SURVIVING CORPORATION
UPON CONSUMMATION OF THE MERGER
The directors and executive officers of Merger Sub are Stephen C.
Hilbert, Ngaire E. Cuneo, Rollin M. Dick, Donald F. Gongaware and Lawrence W.
Inlow, and such individuals will be the directors and executive officers of the
Surviving Corporation upon consummation of the Merger. Such individuals are also
the executive officers of Conseco and will have the same titles with the
Surviving Corporation as they currently have with Conseco.
LEGAL MATTERS
The validity of the Conseco Common Stock to be issued in connection
with the Merger will be passed upon for Conseco by Lawrence W. Inlow, Executive
Vice President, General Counsel and Secretary of Conseco. Mr. Inlow is a
full-time employee and officer of Conseco and owns 608,374 shares and holds
options to purchase 1,406,900 shares of Conseco Common Stock.
Certain tax matters in connection with the transaction will be passed
upon by Weil, Gotshal & Manges LLP, Dallas, Texas.
EXPERTS
The consolidated financial statements of Conseco at December 31, 1995
and 1994, and for each of the three years in the period ended December 31, 1995,
incorporated by reference in this Joint Proxy Statement/Prospectus, have been
audited by Coopers & Lybrand L.L.P., independent auditors, as set forth in their
report thereon incorporated by reference herein, and are incorporated by
reference in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
The consolidated financial statements of LPG at December 31, 1995 and
1994, and for each of the three years in the period ended December 31, 1995,
incorporated by reference in this Joint Proxy Statement/Prospectus, have been
audited by Coopers & Lybrand L.L.P., independent auditors, as set forth in their
report thereon incorporated by reference herein, and are incorporated by
reference in reliance upon such report, given upon authority of such firm as
experts in accounting and auditing.
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
Representatives of Coopers & Lybrand L.L.P. will be present at both the
Conseco Special Meeting and the LPG Special Meeting and will be available to
respond to appropriate questions and have the opportunity to make a statement if
they desire.
OTHER MATTERS
As of the date of this Joint Proxy Statement/Prospectus, the Boards of
Directors of Conseco and LPG do not intend to present, and have not been
informed that any other person intends to
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<PAGE>
present, any matter for action at the Conseco Special Meeting or the LPG Special
Meeting, as the case may be, other than as discussed herein.
If the Merger is consummated, shareholders of LPG will become
shareholders of Conseco as of the Effective Time. Conseco shareholders may
submit to Conseco proposals for formal consideration at the 1997 annual meeting
of Conseco's shareholders and inclusion in Conseco's proxy statement for such
meeting. Any such proposals must have been received in writing by the Secretary
of Conseco, 11825 North Pennsylvania Street, Carmel, Indiana 46032, by December
27, 1996 in order to be considered for inclusion in Conseco's proxy statement
and proxy for the 1997 annual meeting.
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ANNEX A
AGREEMENT AND PLAN OF MERGER
DATED AS OF MARCH 11, 1996
By and Among
CONSECO, INC.,
LPG ACQUISITION COMPANY
and
LIFE PARTNERS GROUP, INC.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
ARTICLE I
<S> <C>
THE MERGER.................................................................................... 1
1.1 The Merger........................................................................... 1
1.2 Closing.............................................................................. 2
1.3 Effective Time....................................................................... 2
1.4 Certificate of Incorporation......................................................... 2
1.5 By-Laws.............................................................................. 2
1.6 Directors............................................................................ 2
1.7 Officers............................................................................. 2
1.8 Conversion of LPG Acquisition Shares................................................. 3
1.9 Conversion of Shares................................................................. 3
1.10 Exchange of Certificates............................................................. 4
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY................................................. 7
2.1 Organization, Standing and Corporate Power........................................... 7
2.2 Capital Structure.................................................................... 7
2.3 Authority; Noncontravention.......................................................... 8
2.4 SEC Documents........................................................................ 10
2.5 Absence of Certain Changes or Events................................................. 11
2.6 Absence of Changes in Benefit Plans.................................................. 12
2.7 Benefit Plans........................................................................ 12
2.8 Taxes................................................................................ 13
2.9 No Excess Parachute Payments; Section 162(m)
of the Code.......................................................................... 14
2.10 Voting Requirements.................................................................. 14
2.11 Compliance with Applicable Laws...................................................... 15
2.12 Opinion of Financial Advisor......................................................... 16
2.13 Brokers.............................................................................. 16
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF CONSECO AND LPG
ACQUISITION................................................................................... 16
3.1 Organization, Standing and Corporate Power........................................... 16
3.2 Conseco Capital Structure............................................................ 17
3.3 Authority; Noncontravention.......................................................... 18
3.4 SEC Documents........................................................................ 19
i
<PAGE>
3.5 Absence of Certain Changes or Events................................................. 20
3.6 Compliance with Applicable Laws...................................................... 21
3.7 No Prior Activities.................................................................. 21
3.8 Brokers.............................................................................. 22
3.9 Voting Requirements.................................................................. 22
ARTICLE IV
ADDITIONAL AGREEMENTS......................................................................... 22
4.1 Preparation of Form S-4 and the Joint Proxy
Statement; Information Supplied...................................................... 22
4.2 Meetings of Stockholders............................................................. 24
4.3 Letter of the Company's Accountants.................................................. 25
4.4 Letter of Conseco's Accountants...................................................... 25
4.5 Access to Information; Confidentiality............................................... 25
4.6 Best Efforts......................................................................... 26
4.7 Public Announcements................................................................. 26
4.8 Acquisition Proposals................................................................ 26
4.9 Fiduciary Duties..................................................................... 27
4.10 Consents, Approvals and Filings...................................................... 28
4.11 Certain Fees......................................................................... 29
4.12 Affiliates and Certain Stockholders.................................................. 30
4.13 NYSE Listing......................................................................... 31
4.14 Stockholder Litigation............................................................... 32
4.15 Indemnification...................................................................... 32
4.16 Financing............................................................................ 32
4.17 Officers' Certificates Relating to Tax
Treatment............................................................................ 32
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS PRIOR TO
MERGER........................................................................................ 33
5.1 Conduct of Business by the Company................................................... 33
5.2 Conduct of Business by Conseco....................................................... 36
5.3 Stock Options and Warrants........................................................... 38
5.4 Other Actions........................................................................ 39
5.5 Conduct of Business of LPG Acquisition............................................... 40
ARTICLE VI
CONDITIONS PRECEDENT.......................................................................... 40
6.1 Conditions to Each Party's Obligation To
Effect the Merger.................................................................... 40
ii
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6.2 Conditions to Obligations of Conseco and LPG
Acquisition.......................................................................... 41
6.3 Conditions to Obligation of the Company.............................................. 42
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER............................................................. 43
7.1 Termination.......................................................................... 43
7.2 Effect of Termination................................................................ 43
7.3 Amendment............................................................................ 44
7.4 Extension; Waiver.................................................................... 44
7.5 Procedure for Termination, Amendment,
Extension or Waiver.................................................................. 44
ARTICLE VIII
SURVIVAL OF PROVISIONS........................................................................ 44
8.1 Survival............................................................................. 44
ARTICLE IX
NOTICES....................................................................................... 45
9.1 Notices.............................................................................. 45
ARTICLE X
MISCELLANEOUS................................................................................. 46
10.1 Entire Agreement.................................................................... 46
10.2 Expenses............................................................................ 47
10.3 Counterparts........................................................................ 47
10.4 No Third Party Beneficiary.......................................................... 47
10.5 Governing Law....................................................................... 47
10.6 Assignment; Binding Effect.......................................................... 47
10.7 Headings, Gender, etc............................................................... 48
10.8 Invalid Provisions.................................................................. 48
</TABLE>
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made and entered
into as of March 11, 1996 by and among CONSECO, INC., an Indiana corporation
("Conseco"), LPG ACQUISITION COMPANY, a Delaware corporation and wholly-owned
subsidiary of Conseco ("LPG Acquisition"), and LIFE PARTNERS GROUP, INC., a
Delaware corporation (the "Company").
PREAMBLE
WHEREAS, the respective Boards of Directors of Conseco, LPG Acquisition
and the Company have approved the merger of LPG Acquisition with and into the
Company, upon the terms and subject to the conditions set forth herein; and
WHEREAS, Conseco, LPG Acquisition and the Company desire to make
certain representations, warranties, covenants and agreements in connection with
such merger and also to prescribe various conditions to such merger;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Subject to the terms and conditions of this Agreement,
at the Effective Time (as such term is defined in Section 1.3 hereof), LPG
Acquisition shall be merged with and into the Company (the "Merger"), in a
transaction intended to qualify as a tax-free reorganization under Sections
368(a)(1) and 368(a)(2)(E) of the Internal Revenue Code of 1986, as amended (the
"Code"), in accordance with the Delaware General Corporation Law (the "Delaware
Code") and the separate corporate existence of LPG Acquisition shall cease and
the Company shall continue as the surviving corporation under the laws of the
State of Delaware (the "Surviving Corporation") with all the rights, privileges,
immunities and powers, and subject to all the duties and liabilities, of a
corporation organized under the Delaware Code. The Merger shall have the effects
set forth in the Delaware Code.
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1.2 Closing. Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to Section
7.1, and subject to the satisfaction or waiver of the conditions set forth in
Article VI, the closing of the Merger (the "Closing") will take place at 9:00
a.m. on the second business day following the date on which the last to be
fulfilled or waived of the conditions set forth in Article VI shall be fulfilled
or waived in accordance with this Agreement (the "Closing Date"), at the office
of Conseco in Carmel, Indiana, unless another date, time or place is agreed to
in writing by the parties hereto.
1.3 Effective Time. The parties hereto will file with the Secretary of
State of the State of Delaware (the "Delaware Secretary of State") on the date
of the Closing (or on such other date as Conseco and the Company may agree) a
certificate of merger or other appropriate documents, executed in accordance
with the relevant provisions of the Delaware Code, and make all other filings or
recordings required under the Delaware Code in connection with the Merger. The
Merger shall become effective upon the filing of the certificate of merger with
the Delaware Secretary of State, or at such later time as is specified in the
certificate of merger (the "Effective Time").
1.4 Certificate of Incorporation. The Certificate of Incorporation of
the Company, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided by law.
1.5 By-Laws. The By-Laws of LPG Acquisition, as in effect immediately
prior to the Effective Time, shall be the By-Laws of the Surviving Corporation
until thereafter amended as provided by law.
1.6 Directors. The directors of LPG Acquisition at the Effective Time
shall be the directors of the Surviving Corporation and will hold office from
the Effective Time until their respective successors are duly elected or
appointed and qualify in the manner provided in the Certificate of Incorporation
and By-Laws of the Surviving Corporation, or as otherwise provided by law
1.7 Officers. The officers of LPG Acquisition at the Effective Time
shall be the officers of the Surviving Corporation.
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1.8 Conversion of LPG Acquisition Shares. Each share of common stock
of LPG Acquisition issued and outstanding immediately prior to the Effective
Time shall, by virtue of the Merger and without any action on the part of the
holder thereof, be converted into and become one validly issued, fully paid and
nonassessable share of common stock of the Surviving Corporation.
1.9 Conversion of Shares. (a) Outstanding Shares. Each of the shares
of common stock, $.001 par value, of the Company (the "Shares") issued and
outstanding immediately prior to the Effective Time (other than Shares held as
treasury shares by the Company) shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into a right to receive
the fraction (rounded to the nearest ten-thousandth of a share) of a validly
issued, fully paid and nonassessable share of common stock, without par value,
of Conseco ("Conseco Common Stock") determined by dividing $21.00 by the Conseco
Share Price (as defined below). The "Conseco Share Price" shall be equal to the
Trading Average (as defined below); provided, however, that if the Trading
Average is less than $60.00, then the Conseco Share Price shall be $60.00, and
if the Trading Average is greater than $72.00, then the Conseco Share Price
shall be $72.00. The "Trading Average" shall be equal to the average of the
closing prices of the Conseco Common Stock on the New York Stock Exchange
("NYSE") Composite Transactions Reporting System, as reported in The Wall Street
Journal, for the 20 trading days immediately preceding the second trading day
prior to the Effective Time. The Conseco Common Stock to be issued to holders of
Shares in accordance with this Section and any cash to be paid in accordance
with Section 1.10 in lieu of fractional shares of Conseco Common Stock are
referred to collectively as the "Merger Consideration."
(b) Treasury Shares. Each Share issued and outstanding immediately
prior to the Effective Time which is then held as a treasury share by the
Company or any of its subsidiaries immediately prior to the Effective Time
shall, by virtue of the Merger and without any action on the part of the
Company, be cancelled and retired and cease to exist, without any conversion
thereof.
(c) Impact of Stock Splits, etc. In the event of any change in Conseco
Common Stock between the date of this Agreement and the Effective Time of the
Merger by reason of any stock split, stock dividend, subdivision,
reclassification, recapitalization, combination, exchange of shares or the like,
the number and class of shares of Conseco Common Stock to be issued and
delivered in the Merger in exchange for each outstanding Share as provided in
this Agreement and the calculation of all share prices provided for in this
Agreement shall be proportionately adjusted.
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1.10 Exchange of Certificates. (a) Paying Agent. As of the Effective
Time, Conseco shall deposit with its transfer agent and registrar (the "Paying
Agent"), for the benefit of the holders of Shares, certificates representing the
shares of Conseco Common Stock to be issued to holders of Shares pursuant to
Section 1.9(a) (such certificates, together with any dividends or distributions
with respect to such certificates, being hereinafter referred to as the "Payment
Fund").
(b) Exchange Procedures. As soon as practicable after the Effective
Time, each holder of an outstanding certificate or certificates which prior
thereto represented Shares shall, upon surrender to the Paying Agent of such
certificate or certificates and acceptance thereof by the Paying Agent, be
entitled to a certificate representing that number of whole shares of Conseco
Common Stock (and cash in lieu of fractional shares of Conseco Common Stock as
contemplated by this Section 1.10) which the aggregate number of Shares
previously represented by such certificate or certificates surrendered shall
have been converted into the right to receive pursuant to Section 1.9(a) of this
Agreement. The Paying Agent shall accept such certificates upon compliance with
such reasonable terms and conditions as the Paying Agent may impose to effect an
orderly exchange thereof in accordance with normal exchange practices. If the
consideration to be paid in the Merger (or any portion thereof) is to be
delivered to any person other than the person in whose name the certificate
representing Shares surrendered in exchange therefor is registered, it shall be
a condition to such exchange that the certificate so surrendered shall be
properly endorsed or otherwise be in proper form for transfer and that the
person requesting such exchange shall pay to the Paying Agent any transfer or
other taxes required by reason of the payment of such consideration to a person
other than the registered holder of the certificate surrendered, or shall
establish to the satisfaction of the Paying Agent that such tax has been paid or
is not applicable. After the Effective Time, there shall be no further transfer
on the records of the Company or its transfer agent of certificates representing
Shares and if such certificates are presented to the Company for transfer, they
shall be cancelled against delivery of the Merger Consideration as hereinabove
provided. Until surrendered as contemplated by this Section 1.10(b), each
certificate representing Shares (other than certificates representing Shares to
be cancelled in accordance with Section 1.9(b)), shall be deemed at any time
after the Effective Time to represent only the right to receive upon such
surrender the Merger Consideration, without any interest thereon, as
contemplated by Section 1.9. No interest will be paid or will accrue on any cash
payable as Merger Consideration.
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(c) Letter of Transmittal. Promptly after the Effective Time (but in no
event more than five business days thereafter), the Surviving Corporation shall
require the Paying Agent to mail to each record holder of certificates that
immediately prior to the Effective Time represented Shares which have been
converted pursuant to Section 1.9, a form of letter of transmittal and
instructions for use in surrendering such certificates and receiving the
consideration to which such holder shall be entitled therefor pursuant to
Section 1.9.
(d) Distributions with Respect to Unexchanged Shares. No dividends or
other distributions with respect to Conseco Common Stock with a record date
after the Effective Time shall be paid to the holder of any certificate that
immediately prior to the Effective Time represented Shares which have been
converted pursuant to Section 1.9, until the surrender for exchange of such
certificate in accordance with this Article I. Following surrender for exchange
of any such certificate, there shall be paid to the holder of such certificate,
without interest, (i) at the time of such surrender, the amount of dividends or
other distributions with a record date after the Effective Time theretofore paid
with respect to the number of whole shares of Conseco Common Stock into which
the Shares represented by such certificate immediately prior to the Effective
Time were converted pursuant to Section 1.9, and (ii) at the appropriate payment
date, the amount of dividends or other distributions with a record date after
the Effective Time, but prior to such surrender, and with a payment date
subsequent to such surrender, payable with respect to such whole shares of
Conseco Common Stock.
(e) No Further Ownership Rights in Shares. The Merger Consideration
paid upon the surrender for exchange of certificates representing Shares in
accordance with the terms of this Article I shall be deemed to have been issued
and paid in full satisfaction of all rights pertaining to the Shares theretofore
represented by such certificates, subject, however, to the Surviving
Corporation's obligation (if any) to pay any dividends or make any other
distributions with a record date prior to the Effective Time which may have been
declared by the Company on such Shares in accordance with the terms of this
Agreement or prior to the date of this Agreement and which remain unpaid at the
Effective Time.
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(f) No Fractional Shares. (i) No certificates or scrip representing
fractional shares of Conseco Common Stock shall be issued upon the surrender for
exchange of certificates that immediately prior to the Effective Time
represented Shares which have been converted pursuant to Section 1.9, and such
fractional share interests will not entitle the owner thereof to vote or to any
rights of a shareholder of Conseco.
(ii) Notwithstanding any other provisions of this Agreement, each
holder of Shares who would otherwise have been entitled to receive a fraction of
a share of Conseco Common Stock (after taking into account all certificates
delivered by such holder) shall receive, in lieu thereof, cash (without
interest) in an amount equal to such fractional part of a share of Conseco
Common Stock multiplied by the Conseco Share Price.
(g) Termination of Payment Fund. Any portion of the Payment Fund which
remains undistributed to the holders of the certificates representing Shares for
120 days after the Effective Time shall be delivered to Conseco, upon demand,
and any holders of Shares who have not theretofore complied with this Article I
shall thereafter look only to Conseco and only as general creditors thereof for
payment of their claim for any Merger Consideration and any dividends or
distributions with respect to Conseco Common Stock.
(h) No Liability. None of Conseco, LPG Acquisition, the Surviving
Corporation or the Paying Agent shall be liable to any person in respect of any
cash, shares, dividends or distributions payable from the Payment Fund delivered
to a public official pursuant to any applicable abandoned property, escheat or
similar law. If any certificates representing Shares shall not have been
surrendered prior to five years after the Effective Time (or immediately prior
to such earlier date on which any Merger Consideration in respect of such
certificate would otherwise escheat to or become the property of any
Governmental Entity (as defined in Section 2.3)), any such cash, shares,
dividends or distributions payable in respect of such certificate shall, to the
extent permitted by applicable law, become the property of the Surviving
Corporation, free and clear of all claims or interest of any person previously
entitled thereto.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth under the heading "General Matters" in the
Disclosure Schedule, dated the date hereof and delivered concurrently herewith
(the "Disclosure Schedule"), the Company hereby represents and warrants to
Conseco and LPG Acquisition as follows:
2.1 Organization, Standing and Corporate Power. Each of the Company and
each Significant Subsidiary of the Company (as hereinafter defined) is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction in which it is incorporated and has the requisite corporate
power and authority to carry on its business as now being conducted. Each of the
Company and each Significant Subsidiary of the Company is duly qualified or
licensed to do business and is in good standing in each jurisdiction in which
the nature of its business or the ownership or leasing of its properties makes
such qualification or licensing necessary. The Company has delivered to Conseco
complete and correct copies of its Certificate of Incorporation and By-laws, as
amended to the date of this Agreement. For purposes of this Agreement, a
"Significant Subsidiary" of the Company means each of Massachusetts General Life
Insurance Company, Philadelphia Life Insurance Company, Lamar Life Insurance
Company and any other subsidiary of the Company that would constitute a
Significant Subsidiary within the meaning of Rule 1-02 of Regulation S-X of the
Securities and Exchange Commission (the "SEC").
2.2 Capital Structure. The authorized capital stock of the Company
consists of (i) 50,000,000 Shares and (ii) 10,000,000 shares of Preferred Stock
$.01 par value (the "Preferred Stock"). At the close of business on March 8,
1996: (i) 27,910,918 Shares were issued and outstanding, 1,449,793 Shares were
reserved for issuance pursuant to outstanding options or warrants to purchase
Shares which have been granted to directors, officers or employees of the
Company or others ("Company Stock Options"); and (ii) no shares of Preferred
Stock were issued and outstanding. Except as set forth above, at the close of
business on March 8, 1996, no shares of capital stock or other equity securities
of the Company were issued, reserved for issuance or outstanding. All
outstanding shares of capital stock of the Company are, and all shares which may
be issued pursuant to the Life Partners Group, Inc. 1992 Incentive and
Nonstatutory Stock Option Plan, as amended to the date hereof (the "Company
Stock Option Plan"), or any outstanding Company Stock Options will be, when
issued, duly authorized, validly issued, fully paid and nonassessable and not
subject to preemptive rights. Except as set forth in Section 2.2 of
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the Disclosure Schedule, no bonds, debentures, notes or other indebtedness of
the Company or any Significant Subsidiary of the Company having the right to
vote (or convertible into, or exchangeable for, securities having the right to
vote) on any matters on which the stockholders of the Company or any Significant
Subsidiary of the Company may vote are issued or outstanding. Except as
disclosed in Section 2.2 of the Disclosure Schedule, all the outstanding shares
of capital stock of each Significant Subsidiary of the Company have been validly
issued and are fully paid and nonassessable and are owned by the Company, by one
or more subsidiaries of the Company or by the Company and one or more such
subsidiaries, free and clear of all pledges, claims, liens, charges,
encumbrances and security interests of any kind or nature whatsoever
(collectively, "Liens") except as may be provided by law. Except as set forth
above or in Section 2.2 of the Disclosure Schedule, neither the Company nor any
Significant Subsidiary of the Company has any outstanding option, warrant,
subscription or other right, agreement or commitment which either (i) obligates
the Company or any Significant Subsidiary of the Company to issue, sell or
transfer, repurchase, redeem or otherwise acquire or vote any shares of the
capital stock of the Company or any Significant Subsidiary of the Company or
(ii) restricts the transfer of Shares.
2.3 Authority; Noncontravention. The Company has the requisite
corporate power and authority to enter into this Agreement and, subject to the
approval of its stockholders as set forth in Section 6.1(a) with respect to the
consummation of the Merger, to consummate the transactions contemplated by this
Agreement. The execution and delivery of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of the Company,
subject, in the case of the Merger, to the approval of its stockholders as set
forth in Section 6.1(a). This Agreement has been duly executed and delivered by
the Company and, assuming this Agreement constitutes the valid and binding
agreement of Conseco and LPG Acquisition, constitutes a valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms except that the enforcement thereof may be limited by (a) bankruptcy,
insolvency, reorganization, moratorium or
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similar laws now or hereafter in effect relating to creditor's rights generally
and (b) general principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity. Except as disclosed in Section
2.3 of the Disclosure Schedule, the execution and delivery of this Agreement do
not, and the consummation of the transactions contemplated by this Agreement and
compliance with the provisions hereof will not, (i) conflict with any of the
provisions of the Certificate of Incorporation or By-laws of the Company or the
comparable documents of any Significant Subsidiary of the Company, (ii) subject
to the governmental filings and other matters referred to in the following
sentence, conflict with, result in a breach of or default (with or without
notice or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of a material benefit
under, or require the consent of any person under, any indenture or other
agreement, permit, concession, franchise, license or similar instrument or
undertaking to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries or any of their assets is bound or
affected, or (iii) subject to the governmental filings and other matters
referred to in the following sentence, contravene any law, rule or regulation of
any state or of the United States or any political subdivision thereof or
therein, or any order, writ, judgment, injunction, decree, determination or
award currently in effect. No consent, approval or authorization of, or
declaration or filing with, or notice to, any governmental agency or regulatory
authority (a "Governmental Entity") which has not been received or made, is
required by or with respect to the Company or any of its subsidiaries in
connection with the execution and delivery of this Agreement by the Company or
the consummation by the Company of the transactions contemplated hereby, except
for (i) the filing of premerger notification and report forms under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act")
with respect to the Merger, (ii) the filings and/or notices required under the
insurance laws of the jurisdictions set forth in Section 2.3 of the Disclosure
Schedule, (iii) the filing with the SEC of (x) a proxy statement relating to the
approval by the stockholders of the Company of the Merger (such proxy statement,
together with the proxy statement relating to the approval of the
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issuance of Conseco Common Stock in the Merger by an affirmative vote of the
holders of a majority of the votes entitled to be cast by the holders of Conseco
Common Stock and Conseco PRIDES present, or represented, and entitled to vote
thereon at the meeting to be called therefor (the "Conseco Stockholder
Approval"), in each case as amended or supplemented from time to time, the
"Joint Proxy Statement"), and (y) such reports under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), as may be required in connection with
this Agreement and the transactions contemplated by this Agreement, (iv) the
filing of the certificate of merger with the Delaware Secretary of State and
appropriate documents with the relevant authorities of other states in which the
Company is qualified to do business, (v) such other consents, approvals,
authorizations, filings or notices as are set forth in Section 2.3 of the
Disclosure Schedule and (vi) any applicable filings under state anti-takeover
laws.
2.4 SEC Documents. (i) The Company has filed all required reports,
schedules, forms, statements and other documents with the SEC since January 1,
1994 (such reports, schedules, forms, statements and other documents are
hereinafter referred to as the "SEC Documents"); (ii) as of their respective
dates, the SEC Documents complied with the requirements of the Securities Act of
1933, as amended (the "Securities Act"), or the Exchange Act, as the case may
be, and the rules and regulations of the SEC promulgated thereunder applicable
to such SEC Documents, and none of the SEC Documents as of such dates contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading; and (iii) the consolidated financial statements of the Company
included in the SEC Documents comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto or, in the case of
unaudited statements, as permitted by Rule 10-01 of Regulation S-X) and fairly
present, in all material respects, the consolidated financial position of the
Company and its consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited quarterly statements, to normal
year-end audit adjustments).
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2.5 Absence of Certain Changes or Events. Except as disclosed in the
SEC Documents filed and publicly available prior to the date of this Agreement
(the "Filed SEC Documents") or in Section 2.5 of the Disclosure Schedule, since
the date of the most recent audited financial statements included in the Filed
SEC Documents, the Company and its subsidiaries have conducted their business
only in the ordinary course, and there has not been (i) any change which would
have a material adverse effect on the business, financial condition or results
of operations of the Company and its subsidiaries taken as a whole, (ii) any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to any of the Company's
outstanding capital stock (other than regular quarterly cash dividends of $.03
per Share, in accordance with usual record and payment dates and in accordance
with the Company's present dividend policy), (iii) any split, combination or
reclassification of any of its outstanding capital stock or any issuance or the
authorization of any issuance of any other securities in respect of, in lieu of
or in substitution for shares of its outstanding capital stock, (iv) (x) any
granting by the Company or any of its subsidiaries to any executive officer or
other employee of the Company or any of its subsidiaries of any increase in
compensation, except in the ordinary course of business consistent with prior
practice or as was required under employment agreements in effect as of the date
of the most recent audited financial statements included in the Filed SEC
Documents, (y) any granting by the Company or any of its subsidiaries to any
such executive officer or other employee of any increase in severance or
termination pay, except in the ordinary course of business consistent with prior
practice or as was required under any employment, severance or termination
agreements in effect as of the date of the most recent audited financial
statements included in the Filed SEC Documents or (z) any entry by the Company
or any of its subsidiaries into any employment, severance or termination
agreement with any such executive officer or other employee or (v) any change in
accounting methods, principles or practices by the Company or any of its
subsidiaries materially affecting its assets, liability or business, except
insofar as may have been required by a change in generally accepted accounting
principles.
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2.6 Absence of Changes in Benefit Plans. Except as disclosed in the
Filed SEC Documents or in Section 2.6 of the Disclosure Schedule, since the date
of the most recent audited financial statements included in the Filed SEC
Documents, there has not been any adoption or amendment in any material respect
by the Company or any of its subsidiaries of any collective bargaining agreement
or any Benefit Plan (as defined in Section 2.7). Except as disclosed in the
Filed SEC Documents or in Section 2.6 of the Disclosure Schedule, there exist no
employment, consulting, severance, termination or indemnification agreements,
arrangements or understandings between the Company or any of its subsidiaries
and any current or former employee, officer or director of the Company or any of
its subsidiaries.
2.7 Benefit Plans. (i) Each "employee pension benefit plan" (as
defined in Section 3(2) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")) (hereinafter a "Pension Plan"), "employee welfare benefit
plan" (as defined in Section 3(1) of ERISA) (hereinafter a "Welfare Plan"), and
each other plan, arrangement or policy (written or oral) relating to stock
options, stock purchases, compensation, deferred compensation, severance, fringe
benefits or other employee benefits, in each case maintained or contributed to,
or required to be maintained or contributed to, by the Company and its
subsidiaries for the benefit of any present or former officers, employees,
agents, directors or independent contractors of the Company or any of its
subsidiaries (all the foregoing being herein called "Benefit Plans") has been
administered in accordance with its terms. The Company, its subsidiaries and all
the Benefit Plans are in compliance with the applicable provisions of ERISA, the
Internal Revenue Code of 1986, as amended (the "Code"), all other applicable
laws and all applicable collective bargaining agreements.
(ii) None of the Company or any other person or entity that together
with the Company is treated as a single employer under Section 414(b), (c), (m)
or (o) of the Code (each a "Commonly Controlled Entity") (a) has incurred any
liability to a Pension Plan covered by Title IV of ERISA (other than for
contributions not yet due) or to the Pension Benefit Guaranty Corporation (other
than for the payment of premiums not yet due) which liability has not been fully
paid as of the date hereof.
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(iii) No Commonly Controlled Entity is required to contribute to any
"multiemployer plan" (as defined in Section 4001(a)(3) of ERISA) or has
withdrawn from any multiemployer plan where such withdrawal has resulted or
would result in any "withdrawal liability" (within the meaning of Section 4201
of ERISA) that has not been fully paid.
2.8 Taxes. Except as disclosed in Section 2.8 of the Disclosure
Schedule,
(i) Each of the Company and its subsidiaries has filed all tax returns
and reports required to be filed by it or requests for extensions to file such
returns or reports have been timely filed, granted and have not expired, except
to the extent that such failures to file or to have extensions granted that
remain in effect individually and in the aggregate would not have a material
adverse effect on the business, financial condition or results of operations of
the Company and its subsidiaries taken as a whole. All tax returns filed by the
Company and each of its subsidiaries are complete and accurate except to the
extent that such failure to be complete and accurate would not have a material
adverse effect on the business, financial condition or results of operations of
the Company and its subsidiaries taken as a whole. The Company and each of its
subsidiaries has paid (or the Company has paid on the subsidiaries' behalf) all
taxes shown as due on such returns, and the most recent financial statements
contained in the Filed SEC Documents reflect an adequate reserve for all taxes
payable by the Company and its subsidiaries for all taxable periods and portions
thereof accrued through the date of such financial statements.
(ii) No deficiencies for any taxes have been proposed, asserted or
assessed against the Company or any of its subsidiaries that are not adequately
reserved for, except for deficiencies that individually or in the aggregate
would not have a material adverse effect on the business, financial condition or
results of operations of the Company and its subsidiaries taken as a whole, and,
except as set forth on Section 2.8 of the Disclosure Schedule, no requests for
waivers of the time to assess any such taxes have been granted or are pending.
The Federal income tax returns of the Company and each of its subsidiaries
consolidated in such returns have been examined by and settled with the United
States Internal Revenue Service, or the statute of limitations on assessment or
collection of any Federal income taxes due from the Company or any of its
subsidiaries has expired, through such taxable years as are set forth in Section
2.8 of the Disclosure Schedule.
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(iii) As used in this Agreement, "taxes" shall include all Federal,
state, local and foreign income, property, premium, sales, excise, employment,
payroll, withholding and other taxes, tariffs or governmental charges of any
nature whatsoever and any interest, penalties and additions to taxes relating
thereto.
2.9 No Excess Parachute Payments; Section 162(m) of the Code. (i)
Except as disclosed in Section 2.9 of the Disclosure Schedule, any amount that
could be received (whether in cash or property or the vesting of property) as a
result of any of the transactions contemplated by this Agreement by any
employee, officer or director of the Company or any of its affiliates who is a
"disqualified individual" (as such term is defined in proposed Treasury
Regulation Section 1.280G-1) under any employment, severance or termination
agreement, other compensation arrangement or Benefit Plan currently in effect
would not be characterized as an "excess parachute payment" (as such term is
defined in Section 280G(b)(1) of the Code).
(ii) Except as disclosed in Section 2.9 of the Disclosure Schedule, the
disallowance of a deduction under Section 162(m) of the Code for employee
remuneration will not apply to any amount paid or payable by the Company or any
subsidiary of the Company under any contract, Benefit Plan, program, arrangement
or understanding currently in effect.
2.10 Voting Requirements. The affirmative vote of a majority of the
votes cast by the holders of the Shares entitled to vote thereon at the
Stockholders Meeting with respect to the approval of the Merger is the only vote
of the holders of any class or series of the Company's capital stock necessary
to approve this Agreement and the transactions contemplated by this Agreement.
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2.11 Compliance with Applicable Laws. (i) Each of the Company and its
subsidiaries has in effect all Federal, state, local and foreign governmental
approvals, authorizations, certificates, filings, franchises, licenses, notices,
permits and rights ("Permits") necessary for it to own, lease or operate its
properties and assets and to carry on its business as now conducted, and there
has occurred no default under any such Permit. Except as disclosed in the Filed
SEC Documents, the Company and its subsidiaries are in compliance with all
applicable statutes, laws, ordinances, rules, orders and regulations of any
Governmental Entity. Except as disclosed in the Filed SEC Documents and except
for routine examinations by state Governmental Entities charged with supervision
of insurance companies ("Insurance Regulators"), as of the date of this
Agreement, to the knowledge of the Company, no investigation by any Governmental
Entity with respect to the Company or any of its subsidiaries is pending or
threatened.
(ii) The Annual Statements (including without limitation the Annual
Statements of any separate accounts) for the year ended December 31, 1995,
together with all exhibits and schedules thereto, and financial statements
relating thereto, and any actuarial opinion, affirmation or certification filed
in connection therewith, and the Quarterly Statements for the periods ended
after January 1, 1996, together with all exhibits and schedules thereto, with
respect to each subsidiary of the Company that is a regulated insurance company
(an "Insurance Company"), in each case as filed with the applicable Insurance
Regulator of its jurisdiction of domicile, were prepared in conformity with
statutory accounting practices prescribed or permitted by such Insurance
Regulator applied on a consistent basis ("SAP"), present fairly, in all material
respects, to the extent required by and in conformity with SAP, the statutory
financial condition of such Insurance Company at their respective dates and the
results of operations, changes in capital and surplus and cash flow of such
Insurance Company for each of the periods then ended, and were correct in all
material respects when filed and there were no material omissions therefrom when
filed. No deficiencies or violations material to the financial condition or
operations of any Insurance Company have been asserted in writing by any
Insurance Regulator which have not been cured or otherwise resolved to the
satisfaction of such Insurance Regulator and which have not been disclosed in
writing to Conseco prior to the date of this Agreement.
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2.12 Opinion of Financial Advisor. The Company has received the opinion
of Donaldson, Lufkin & Jenrette Securities Corp., dated the date hereof, to the
effect that, as of such date, the consideration to be received in the Merger by
the Company's stockholders is fair to the Company's stockholders.
2.13 Brokers. Except with respect to Hicks, Muse, Tate & Furst
Incorporated ("HMTF") and Donaldson, Lufkin & Jenrette Securities Corp. ("DLJ"),
all negotiations relative to this Agreement and the transactions contemplated
hereby have been carried out by the Company directly with Conseco, without the
intervention of any person on behalf of the Company in such manner as to give
rise to any valid claim by any person against Conseco, the Company or any
subsidiary for a finder's fee, brokerage commission, or similar payment. The
Company has provided Conseco with true and complete copies of the agreements
between the Company and each of Hicks, Muse, Tate & Furst Incorporated and
Donaldson, Lufkin & Jenrette Securities Corp., and the Company has no other
agreements or understandings (written or oral) with respect to such services.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF CONSECO AND LPG ACQUISITION
Conseco and LPG Acquisition hereby represent and warrant to the Company
as follows:
3.1 Organization, Standing and Corporate Power. Each of Conseco and LPG
Acquisition and each Significant Subsidiary of Conseco (as hereinafter defined)
is a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction in which it is incorporated and has the requisite
corporate power and authority to carry on its business as now being conducted.
Each of Conseco and LPG Acquisition and each Significant Subsidiary of Conseco
is duly qualified or licensed to do business and is in good standing in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification or licensing necessary. Conseco has
delivered to the Company complete and correct copies of its Articles of
Incorporation and Bylaws, as amended to the date of this Agreement. For purposes
of this Agreement, a "Significant Subsidiary" of Conseco means any subsidiary of
Conseco that would constitute a Significant Subsidiary within the meaning of
Rule 1-02 of Regulation S-X of the SEC.
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3.2 Conseco Capital Structure. The authorized capital stock of Conseco
consists of 500,000,000 shares of Conseco Common Stock and 20,000,000 shares of
preferred stock, without par value. At the close of business on March 8, 1996,
(i) 20,297,299 shares of Conseco Common Stock, 5,669,226 shares of $3.25 Series
D Cumulative Convertible Preferred Stock of Conseco (the "Conseco Series D
Preferred Stock") and 4,370,000 shares of Preferred Redeemable Increased
Dividend Equity Securities of Conseco (the "Conseco PRIDES") were issued and
outstanding (net of treasury shares or shares held by subsidiaries), (ii)
7,027,925 shares of Conseco Common Stock were reserved for issuance pursuant to
outstanding options to purchase shares of Conseco Common Stock and other
benefits granted under Conseco's benefit plans (the "Conseco Stock Plans"),
(iii) 4,446,373 shares of Conseco Common Stock were reserved for issuance upon
conversion of the Conseco Series D Preferred Stock and (iv) 4,370,000 shares of
Conseco Common Stock were reserved for issuance upon conversion of the Conseco
PRIDES. Except (x) as set forth above, (y) for outstanding options to purchase
an aggregate of 1,148,960 shares of Bankers Life Holding Corporation under its
Stock Option Plan and (z) with respect to stock units awarded under the Conseco
Stock Option Plans, at the close of business on March 8, 1996, no shares of
capital stock or other voting securities of Conseco were issued, reserved for
issuance or outstanding. All outstanding shares of capital stock of Conseco are,
and all shares which may be issued pursuant to this Agreement will be, when
issued, duly authorized, validly issued, fully paid and nonassessable and not
subject to preemptive rights. The authorized capital stock of LPG Acquisition
consists of 1,000 shares of common stock, par value $.001 per share, all of
which have been validly issued, are fully paid and nonassessable and are owned
by Conseco free and clear of any Lien. No bonds, debentures, notes or other
indebtedness of Conseco or any Significant Subsidiary of Conseco having the
right to vote (or convertible into, or exchangeable for, securities having the
right to vote) on any matters on which the stockholders of Conseco or any
Significant Subsidiary of Conseco may vote are issued or outstanding. All the
outstanding shares of capital stock of each Significant Subsidiary of Conseco
have been validly issued and are fully paid and nonassessable and (other than
Bankers Life Holding Corporation) are owned by Conseco, free and clear of all
Liens. Except as set forth above, neither Conseco nor any Significant Subsidiary
of Conseco has any outstanding option, warrant, subscription or other right,
agreement or commitment which either (i) obligates Conseco or any Significant
Subsidiary of Conseco to issue, sell or transfer, repurchase, redeem or
otherwise acquire or vote any shares of the capital stock of Conseco or any
Significant Subsidiary of Conseco or (ii) restricts the transfer of Conseco
Common Stock.
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3.3 Authority; Noncontravention. Conseco and LPG Acquisition have all
requisite corporate power and authority to enter into this Agreement and,
subject to the Conseco Stockholder Approval with respect to the issuance of
Conseco Common Stock in the Merger, to consummate the transactions contemplated
by this Agreement. The execution and delivery of this Agreement by Conseco and
LPG Acquisition and the consummation by Conseco and LPG Acquisition of the
transactions contemplated by this Agreement have been duly authorized by all
necessary corporate action on the part of Conseco and LPG Acquisition and by the
stockholder of LPG Acquisition, subject, in the case of the issuance of Conseco
Common Stock in the Merger, to the Conseco Stockholder Approval. This Agreement
has been duly executed and delivered by and, assuming this Agreement constitutes
the valid and binding agreement of the Company, constitutes a valid and binding
obligation of each of Conseco and LPG Acquisition, enforceable against such
party in accordance with its terms except that the enforcement thereof may be
limited by (a) bankruptcy, insolvency, reorganization, moratorium or similar
laws now or hereafter in effect relating to creditor's rights generally and (b)
general principles of equity (regardless of whether enforceability is considered
in a proceeding at law or in equity). The execution and delivery of this
Agreement do not, and the consummation of the transactions contemplated by this
Agreement and compliance with the provisions of this Agreement will not (i)
conflict with any of the provisions of the Articles of Incorporation or By-laws
of Conseco, the Certificate of Incorporation or By-laws of LPG Acquisition or
the comparable documents of any Significant Subsidiary of Conseco, (ii) subject
to the governmental filings and other matters referred to in the following
sentence, conflict with, result in a breach of or default (with or without
notice or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of a material benefit
under, or require the consent of any person under, any indenture, or other
agreement, permit, concession, franchise, license or similar instrument or
undertaking to which Conseco or any of its subsidiaries is a party or by which
Conseco or any of its subsidiaries or any of their assets is bound or affected,
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or (iii) subject to the governmental filings and other matters referred to in
the following sentence, contravene any law, rule or regulation of any state or
of the United States or any political subdivision thereof or therein, or any
order, writ, judgment, injunction, decree, determination or award currently in
effect. No consent, approval or authorization of, or declaration or filing with,
or notice to, any Governmental Entity which has not been received or made is
required by or with respect to Conseco or LPG Acquisition in connection with the
execution and delivery of this Agreement by Conseco or LPG Acquisition or the
consummation by Conseco or LPG Acquisition, as the case may be, of any of the
transactions contemplated by this Agreement, except for (i) the filing of
premerger notification and report forms under the HSR Act with respect to the
Merger, (ii) the filings and/or notices required under the insurance laws of the
jurisdictions set forth in Section 2.3 of the Disclosure Schedule, (iii) the
filing with the SEC of the registration statement on Form S-4 to be filed with
the SEC by Conseco in connection with the issuance of Conseco Common Stock in
the Merger (the "Form S-4"), the Joint Proxy Statement relating to the Conseco
Stockholder Approval and such reports under the Exchange Act as may be required
in connection with this Agreement and the transactions contemplated hereby, (iv)
the filing of the certificate of merger with the Delaware Secretary of State,
and appropriate documents with the relevant authorities of the other states in
which the Company is qualified to do business, (v) such other consents,
approvals, authorizations, filings or notices as are set forth in Section 2.3 of
the Disclosure Schedule and (vi) any applicable filings under state
anti-takeover laws.
3.4 SEC Documents. Conseco and its subsidiaries have filed all required
reports, schedules, forms, statements and other documents with the SEC since
January 1, 1994 (the "Conseco SEC Documents"). As of their respective dates, the
Conseco SEC Documents complied with the requirements of the Securities Act or
the Exchange Act, as the case may be, and the rules and regulations of the SEC
promulgated thereunder applicable to such Conseco SEC Documents, and none of the
Conseco SEC Documents as of such dates contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
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statements of Conseco included in the Conseco SEC Documents comply as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto or, in the case of unaudited statements, as permitted by Rule 10-01 of
Regulation S-X) and fairly present, in all material respects, the consolidated
subsidiaries as of the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments).
3.5 Absence of Certain Changes or Events. Except as disclosed in the
Conseco SEC Documents filed and publicly available prior to the date of this
Agreement (the "Filed Conseco SEC Documents"), since the date of the most recent
audited financial statements included in the Filed Conseco SEC Documents,
Conseco has conducted its business only in the ordinary course, and there has
not been (i) any change which would have a material adverse effect on the
business, financial condition or results of operations of Conseco and its
subsidiaries, taken as a whole, (ii) any declaration, setting aside or payment
of any dividend or distribution (whether in cash, stock or property) with
respect to any of Conseco's outstanding capital stock (other than the payment of
cash dividends in the aggregate amount of $.31 per share, and the declaration of
a cash dividend payable April 1, 1996 of $.04 per share, on Conseco Common Stock
and regular cash dividends on the Conseco Series D Preferred Stock and the
Conseco PRIDES, in each case in accordance with usual record and payment dates
and in accordance with Conseco's dividend policy and Articles of Incorporation
at the date of such payment), (iii) except for the two-for-one stock split to be
paid April 1, 1996 to holders of record of Conseco Common Stock at the close of
business on March 20, 1996 (the "Conseco Stock Split"), any split, combination
or reclassification of any of its outstanding capital stock or any issuance or
the authorization of any issuance of any other securities in respect of, in lieu
of or in substitution for shares of its capital stock, or (iv) any change in
accounting methods, principles or practices by Conseco materially affecting its
assets, liabilities or business, except as may have been required by a change in
generally accepted accounting principles.
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3.6 Compliance with Applicable Laws. (i) Each of the Company and its
subsidiaries has in effect all Permits necessary for it to own, lease or operate
its properties and assets and to carry on its business as now conducted, and
there has occurred no default under any such Permit. Except as disclosed in the
Filed SEC Documents, the Company and its subsidiaries are in compliance with all
applicable statutes, laws, ordinances, rules, orders and regulations of any
Governmental Entity. Except as disclosed in the Filed SEC Documents and except
for routine examinations by state Governmental Entities charged with supervision
of insurance companies ("Insurance Regulators"), as of the date of this
Agreement, to the knowledge of the Company, no investigation by any Governmental
Entity with respect to the Company or any of its subsidiaries is pending or
threatened.
(ii) The Annual Statements (including without limitation the Annual
Statements of any separate accounts) for the year ended December 31, 1995,
together with all exhibits and schedules thereto, and any actuarial opinion,
affirmation or certification filed in connection therewith, and the Quarterly
Statements for the periods ended after January 1, 1996, together with all
exhibits and schedules thereto, with respect to each subsidiary of Conseco that
is an Insurance Company, in each case as filed with the applicable Insurance
Regulator of its jurisdiction of domicile, were prepared in conformity with,
present fairly, in all material respects, to the extent required by and in
conformity with SAP, the statutory financial condition of such Insurance Company
at their respective dates and the results of operations, changes in capital and
surplus and cash flow of such Insurance Company for each of the periods then
ended, and were correct in all material respects when filed and there were no
material omissions therefrom when filed. No deficiencies or violations material
to the financial condition or operations of any Insurance Company have been
asserted in writing by any Insurance Regulator which have not been cured or
otherwise resolved to the satisfaction of such Insurance Regulator and which
have not been disclosed in writing to the Company prior to the date of this
Agreement.
3.7 No Prior Activities. LPG Acquisition has not incurred, and will not
incur, directly or through any subsidiary, any liabilities or obligations for
borrowed money or otherwise, except incidental liabilities or obligations not
for borrowed money incurred in connection with its organization and except in
connection with obtaining financing in connection with the Merger. Except as
contemplated by this Agreement, LPG Acquisition (i) has not engaged, directly or
through any subsidiary, in any business activities of any type or kind
whatsoever, (ii) has not entered into any agreements or arrangements with any
person or entity, and (ii) is not subject to or bound by any obligation or
undertaking.
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3.8 Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by Conseco directly with
the Company, without the intervention of any person on behalf of Conseco in such
manner as to give rise to any valid claim by any person against the Company or
any of the Subsidiaries for a finder's fee, brokerage commission, or similar
payment.
3.9 Voting Requirements. The affirmative vote of the holders of a
majority of the votes entitled to be cast by the holders of Common Stock and
Conseco PRIDES present, or represented, and entitled to vote thereon at the
Conseco Stockholders Meeting with respect to the issuance of shares of Conseco
Common Stock in the Merger is the only vote of the holders of any class or
series of Conseco's capital stock necessary to approve this Agreement and the
transactions contemplated by this Agreement.
ARTICLE IV
ADDITIONAL AGREEMENTS
4.1 Preparation of Form S-4 and the Joint Proxy Statement; Information
Supplied.
(a) As soon as practicable following the date of this Agreement, the
Company and Conseco shall prepare and file with the SEC the Joint Proxy
Statement and Conseco shall prepare and file with the SEC the Form S-4, in which
the Joint Proxy Statement will be included as a prospectus. Each of the Company
and Conseco shall use its best efforts to have the Form S-4 declared effective
under the Securities Act as promptly as practicable after such filing. The
Company will use its best efforts to cause the Joint Proxy Statement to be
mailed to the Company's stockholders, and Conseco will use its best efforts to
cause the Joint Proxy Statement to be mailed to Conseco's stockholders, in each
case as promptly as practicable after the Form S-4 is declared effective under
the Securities Act. Conseco shall also take any action (other than qualifying to
do business in any jurisdiction in which it is not now so qualified) required to
be taken under any applicable state securities laws in connection with the
issuance of Conseco Common Stock in the Merger and the Company shall furnish all
information concerning the Company and the holders of the Common Stock as may be
reasonably requested in connection with any such action.
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(b) The Company agrees that none of the information supplied or to be
supplied by the Company specifically for inclusion or incorporation by reference
in (i) the Form S-4 will, at the time the Form S-4 is filed with the SEC, at any
time it is amended or supplemented or at the time it becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading or (ii) the Joint Proxy Statement will, at the
date it is first mailed to the Company's stockholders or at the time of the
Stockholders Meeting (as defined in Section 4.2), contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Joint Proxy
Statement will comply as to form in all material respects with the requirements
of the Exchange Act and the rules and regulations thereunder, except with
respect to statements made or incorporated by reference therein based on
information supplied by Conseco or LPG Acquisition specifically for inclusion or
incorporated by reference in the Joint Proxy Statement.
(c) Conseco agrees that none of the information supplied or to be
supplied by Conseco or LPG Acquisition specifically for inclusion or
incorporation by reference in (i) the Form S-4 will, at the time the Form S-4 is
filed with the SEC, at any time it is amended or supplemented or at the time it
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, or (ii) the Joint
Proxy Statement will, at the date the Joint Proxy Statement is first mailed to
Conseco's stockholders or at the time of the Conseco Stockholders Meeting (as
defined in Section 4.2), contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
are made, not misleading. The Form S-4 will comply as to form in all material
respects with the requirements of the Securities Act and the rules and
regulations promulgated thereunder and the Joint Proxy Statement will comply as
to form in all material respects with the requirements of the Exchange Act and
the rules and regulations promulgated thereunder, except with respect to
statements made or incorporated by reference in either the Form S-4 or the Joint
Proxy Statement based on information supplied by the Company specifically for
inclusion or incorporation by reference therein.
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4.2 Meetings of Stockholders. The Company will take all action
necessary in accordance with applicable law and its Certificate of Incorporation
and By-laws to convene a meeting of its stockholders (the "Stockholders
Meeting") to consider and vote upon the approval of the Merger. Conseco will
take all action necessary in accordance with applicable law and its Articles of
Incorporation and By-laws to convene a meeting of its stockholders (the "Conseco
Stockholders Meeting") to consider and vote upon the approval of the issuance of
Conseco Common Stock in the Merger. Conseco shall (i) cause LPG Acquisition to
submit this Agreement and the transactions contemplated hereby for approval and
adoption of Conseco, as sole stockholder, by written consent, (ii) cause the
shares of capital stock of LPG Acquisition to be voted for adoption and approval
of this Agreement and the transactions contemplated hereby, and (iii) cause to
be taken all additional actions necessary for LPG Acquisition to adopt and
approve this Agreement and the transactions contemplated hereby. Subject to
Section 4.9 hereof in the case of the Company, the Company and Conseco will,
through their respective Boards of Directors, recommend to their respective
stockholders approval of the foregoing matters. Without limiting the generality
of the foregoing, the Company agrees that, subject to its right to terminate
this Agreement pursuant to Section 4.9, its obligations pursuant to the first
sentence of Section 4.2 shall not be affected by (i) the commencement, public
proposal, public disclosure or communication to the Company of any Acquisition
Proposal (as defined in Section 4.8) or (ii) the withdrawal or modification by
the Board of Directors of the Company of its approval or recommendation of this
Agreement or the Merger. Conseco and the Company will use their best efforts to
hold the Stockholders Meeting and the Conseco Stockholders Meeting on the same
day and use best efforts to hold such Meetings and (except in the case of the
Company, subject to Section 4.9 hereof) to obtain the favorable votes of their
respective stockholders as soon as practicable after the date hereof.
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4.3 Letter of the Company's Accountants. The Company shall use its best
efforts to cause to be delivered to Conseco a letter of Coopers & Lybrand
L.L.P., the Company's independent public accountants, and a letter of Ernst &
Young LLP, formerly the accountants for Lamar Life Insurance Company, each dated
a date within two business days before the date on which the Form S-4 shall
become effective and letters of Coopers & Lybrand L.L.P. and Ernst & Young LLP,
each dated a date within two business days before the Closing Date, each
addressed to Conseco, in form and substance reasonably satisfactory to Conseco
and customary in scope and substance for letters delivered by independent public
accountants in connection with registration statements similar to the Form S-4.
4.4 Letter of Conseco's Accountants. Conseco shall use its best efforts
to cause to be delivered to the Company a letter of Coopers & Lybrand L.L.P.,
Conseco's independent public accountants, dated a date within two business days
before the date on which the Form S-4 shall become effective and a letter of
Coopers & Lybrand L.L.P., dated a date within two business days before the
Closing Date, each addressed to the Company, in form and substance reasonably
satisfactory to the Company and customary in scope and substance for letters
delivered by independent public accountants in connection with registration
statements similar to the Form S-4.
4.5 Access to Information; Confidentiality. Upon reasonable notice,
each of the Company and Conseco shall, and shall cause each of its respective
subsidiaries to, afford to the other party and to the officers, employees,
counsel, financial advisors and other representatives of such other party
reasonable access during normal business hours during the period prior to the
Effective Time to all its properties, books, contracts, commitments, personnel
and records and, during such period, each of the Company and Conseco shall, and
shall cause each of its respective subsidiaries to, furnish as promptly as
practicable to the other party such information concerning its business,
properties, financial condition, operations and personnel as such other party
may from time to time reasonably request. Except as required by law, Conseco
will hold, and will cause its respective directors, officers, partners,
employees, accountants, counsel, financial advisors and other representatives
and affiliates to hold, any nonpublic information obtained from the Company in
confidence to the extent required by, and in accordance with, the provisions of
the letter dated February 23, 1996, between Conseco and the Company (the
"Confidentiality Agreement"). Except as required by law, the Company will hold,
and will cause its directors, officers, partners, employees, accountants,
counsel, financial advisors and other representatives and affiliates to hold,
any nonpublic information obtained from Conseco in confidence to the same extent
that Conseco is required to hold information of the Company in confidence
pursuant to the Confidentiality Agreement.
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4.6 Best Efforts. Upon the terms and subject to the conditions and
other agreements set forth in this Agreement, each of the parties agrees to use
its best efforts to take, or cause to be taken, all actions, and to do, or cause
to be done, and to assist and cooperate with the other parties in doing, all
things necessary, proper or advisable to consummate and make effective, in the
most expeditious manner practicable, the Merger and the other transactions
contemplated by this Agreement.
4.7 Public Announcements. Conseco and LPG Acquisition, on the one hand,
and the Company, on the other hand, will consult with each other before issuing,
and provide each other the opportunity to review and comment upon, any press
release or other public statements with respect to the transactions contemplated
by this Agreement, including the Merger, and shall not issue any such press
release or make any such public statement prior to such consultation, except as
may be required by applicable law, court process or by obligations pursuant to
any listing agreement with any national securities exchange.
4.8 Acquisition Proposals. The Company shall not, nor shall it permit
any of its subsidiaries to, nor shall it authorize or permit any officer,
director or employee of, or any investment banker, attorney or other advisor or
representative of, the Company or any of its subsidiaries to, directly or
indirectly, (i) solicit, initiate or encourage the submission of any Acquisition
Proposal (as hereinafter defined) or (ii) participate in any discussions or
negotiations regarding, or furnish to any person any information with respect
to, or take any other action to facilitate any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead to, any
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Acquisition Proposal; provided, however, that nothing contained in this Section
4.8 shall prohibit the Board of Directors of the company from furnishing
information to, or entering into discussions or negotiations with, any person or
entity that makes an unsolicited Acquisition Proposal if, and only to the extent
that (A) the Board of Directors of the Company, after consultation with and
based upon the advice of outside counsel, determines in good faith that such
action is necessary for the Board of Directors of the Company to comply with its
fiduciary duties to stockholders under applicable law and (B) prior to taking
such action, the Company (x) provides reasonable notice to Conseco to the effect
that it is taking such action and (y) receives from such person or entity an
executed confidentiality agreement in reasonably customary form. Notwithstanding
anything in this Agreement to the contrary, the Company shall promptly advise
Conseco orally and in writing of the receipt by it (or any of the other entities
or persons referred to above) after the date hereof of any Acquisition Proposal,
or any inquiry which could lead to any Acquisition Proposal, the material terms
and conditions of such Acquisition Proposal or inquiry, and the identity of the
person making any such Acquisition Proposal or inquiry. The Company will keep
Conseco fully informed of the status and details of any such Acquisition
Proposal or inquiry. For purposes of this Agreement, "Acquisition Proposal"
means any bona fide proposal with respect to a merger, consolidation, share
exchange or similar transaction involving the Company or any Significant
Subsidiary of the Company, or any purchase of all or any significant portion of
the assets of the Company or any Significant Subsidiary of the Company, or any
equity interest in the Company or any Significant Subsidiary of the Company,
other than the transactions contemplated hereby.
4.9 Fiduciary Duties. The Board of Directors of the Company shall not
(i) withdraw or modify, in a manner materially adverse to Conseco or LPG
Acquisition, the approval or recommendation by such Board of Directors of this
Agreement or the Merger, (ii) approve or recommend an Acquisition Proposal or
(iii) enter into any agreement with respect to any Acquisition Proposal, unless
the Company receives an Acquisition Proposal and the Board of Directors of the
Company determines in good faith, following consultation with outside counsel,
that in order to comply with its fiduciary duties to stockholders under
applicable law it is necessary for the Board of Directors to withdraw or modify,
in a manner materially adverse to Conseco or LPG Acquisition, its approval or
recommendation of this Agreement or the Merger, approve or recommend such
Acquisition Proposal, enter into an agreement with respect to such Acquisition
Proposal or terminate this Agreement. In the event the Board of Directors of the
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Company takes any of the foregoing actions, the Company shall, concurrently with
the taking of any such action, pay to Conseco the Section 4.11 Fee pursuant to
Section 4.11. Nothing contained in this Section 4.9 shall prohibit the Company
from taking and disclosing to its stockholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act or from making any disclosure to the
Company's stockholders which, in the good faith reasonable judgment of the Board
of Directors of the Company based on the advice of outside counsel, is required
under applicable law; provided that the Company does not withdraw or modify, in
a manner materially adverse to Conseco or LPG Acquisition, its position with
respect to the Merger or approve or recommend an Acquisition Proposal.
Notwithstanding anything contained in this Agreement to the contrary, any action
by the Board of Directors permitted by this Section 4.9 shall not constitute a
breach of this Agreement by the Company.
4.10 Consents, Approvals and Filings. The Company and Conseco will make
and cause their respective subsidiaries to make all necessary filings, as soon
as practicable, including, without limitation, those required under the HSR Act,
the Securities Act, the Exchange Act, and applicable state insurance laws in
order to facilitate prompt consummation of the Merger and the other transactions
contemplated by this Agreement. In addition, the Company and Conseco will each
use their best efforts, and will cooperate fully with each other (i) to comply
as promptly as practicable with all governmental requirements applicable to the
Merger and the other transactions contemplated by this Agreement and (ii) to
obtain as promptly as practicable all necessary permits, orders or other
consents of Governmental Entities and consents of all third parties necessary
for the consummation of the Merger and the other transactions contemplated by
this Agreement. Each of the Company and Conseco shall use best efforts to
promptly provide such information and communications to Governmental Entities as
such Governmental Entities may reasonably request. Each of the parties shall
provide to the other party copies of all applications in advance of filing or
submission of such applications to Governmental Entities in connection with this
Agreement and shall make such revisions thereto as reasonably requested by such
other party. Each party shall provide to the other party the opportunity to
participate in all meetings and material conversations with Governmental
Entities.
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4.11 Certain Fees. (a) The Company shall pay to Conseco upon demand $20
million (the "Section 4.11 Fee"), payable in same-day funds, if a bona fide
Acquisition Proposal is commenced, publicly proposed, publicly disclosed or
communicated to the Company (or the willingness of any person to make such an
Acquisition Proposal is publicly disclosed or communicated to the Company) and
(i) the Board of Directors of the Company, in accordance with Section 4.9,
withdraws or modifies in a manner materially adverse to Conseco its approval or
recommendation of this Agreement or the Merger, approves or recommends such
Acquisition Proposal, enters into an agreement with respect to such Acquisition
Proposal, or terminates this Agreement or (ii) the requisite approval of the
Company's stockholders for the Merger is not obtained at the Stockholders
Meeting.
(b) Unless Conseco is materially in breach of this Agreement
or is unable to satisfy the condition of Section 6.3(a) hereof, the Company
shall pay to Conseco upon demand $20 million, payable in same-day funds, if the
requisite approval of the Company's stockholders for the Merger is not obtained
(other than in the circumstances specified in Section 4.11(a) hereof) and all
other conditions contained in Section 6.1 of this Agreement have been satisfied,
waived or, with respect to any condition not then satisfied, it is substantially
likely that such condition will be satisfied on or before September 30, 1996,
through the exercise of best efforts to procure the satisfaction thereof;
provided, however, in the event that the Mailing Date Trading Average (as
defined below) is less than $52.80, then in lieu of the $20 million fee payable
above, Conseco shall receive reimbursement of its Expenses (as defined below)
not to exceed $2,000,000.
(c) Unless the Company is materially in breach of this
Agreement or is unable to satisfy the condition of Section 6.2(a) hereof,
Conseco shall pay to the Company upon demand $20 million, payable in same-day
funds, if the requisite approval of Conseco's stockholders for the Merger is not
obtained and all other conditions contained in Section 6.1 of this Agreement
have been satisfied, waived or, with respect to any condition not then
satisfied, it is substantially likely that such condition will be satisfied on
or before September 30, 1996, through the exercise of best efforts to procure
the satisfaction thereof.
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(d) For purposes of this Section 4.11, "Mailing Date Trading
Average" shall be equal to the average of the closing prices of the Conseco
Common Stock on the NYSE Composite Transactions Reporting System, as reported in
The Wall Street Journal, for the 20 trading days immediately preceding the
second trading day prior to the date on which the Joint Proxy Statement is first
mailed to stockholders of the Company. For purposes of this Section 4.11,
"Expenses" shall mean all documented out-of-pocket fees and expenses incurred or
paid by or on behalf of Conseco to third parties in connection with the Merger
or the consummation of any of the transactions contemplated by this Agreement,
including all bank fees, financing fees, printing costs and reasonable fees and
expenses of counsel, investment banking firms, accountants, experts and
consultants to Conseco.
4.12 Affiliates and Certain Stockholders. Prior to the Closing Date,
the Company shall deliver to Conseco a letter identifying all persons who are,
at the time the Merger is submitted for approval to the stockholders of the
Company, "affiliates" of the Company for purposes of Rule 145 under the
Securities Act. The Company shall use its best efforts to cause to each such
person to deliver to Conseco on or prior to the Closing Date a written agreement
substantially in the form attached as Exhibit A hereto. Conseco shall maintain
the effectiveness of the Form S-4 subsequent to the Closing Date for the purpose
of resales of Conseco Common Stock by such affiliates, but shall not thereafter
be required to file any post-effective amendment thereto in accordance with Item
512(a) of Regulation S-K under the Securities Act. Subject to the remainder of
this Section 4.12, Conseco shall not otherwise be required to maintain the
effectiveness of the Form S-4 or any other registration statement under the
Securities Act for the purposes of resale of Conseco Common Stock by such
affiliates. Notwithstanding the foregoing, if at such time as the Form S-4 is no
longer available for the purpose of resales by such affiliates, any such
affiliate is unable because of the volume limitations of Rule 144 of the SEC to
sell pursuant to Rule 144 at least 75% of the shares of Conseco Common Stock
received by such affiliate as Merger Consideration and still held by such
affiliate, such affiliate shall have the right, for so long as any such balance
of the affiliate's Merger Consideration is not eligible for immediate sale under
the applicable provisions of Rule 144, to require Conseco to elect, in Conseco's
sole discretion, with respect to such balance, either to (i) acquire such shares
directly from such affiliate at the current market price, (ii) amend the Form
S-4 and maintain its effectiveness to provide for registration of such shares or
(iii) file a Registration Statement on Form S-3 with the SEC to register such
shares for resale by such affiliate.
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In the case of the Form S-4 to be maintained effective following the
Closing Date with respect to affiliate resales in accordance with the third
sentence of this Section 4.12 and in such other cases as Conseco chooses option
(ii) or (iii) of the preceding sentence, Conseco shall (i) provide to such
affiliate such reasonable number of copies of the registration statement, the
prospectus, and such other documents as the affiliates may reasonably request in
order to facilitate the public offering of such securities; (ii) prepare and
file with the SEC such amendments and supplements to such registration statement
and the prospectus used in connection with such registration statement as may be
necessary to comply with the provisions of the Securities Act with respect to
the disposition of all securities covered by such registration statement; (iii)
pay all expenses of such registration other than underwriting or sales
commissions; and (iv) indemnify such affiliates, each of their officers and
directors and partners, and each person controlling such affiliates within the
meaning of Section 15 of the Securities Act, against all expenses, claims,
losses, damages or liabilities (or actions in respect thereof), including any of
the foregoing incurred in settlement of any litigation, commenced or threatened,
arising out of or based on any untrue statement (or alleged untrue statement) of
a material fact contained in such registration statement or prospectus, or any
amendment or supplement thereto, incident to any such registration, or based on
any omission (or alleged omission) to state therein a material fact required to
be stated therein or necessary to make the statements therein, in light of
circumstances in which they were made, not misleading, or any violation by
Conseco of the Securities Act or any rule or regulation in connection with such
registration, and reimburse each such person for any legal and any other
expenses reasonably incurred (as they are incurred) in connection with
investigating, preparing or defending any such claim, loss, damage, liability or
action.
4.13 NYSE Listing. Conseco shall use its best efforts to cause the
shares of Conseco Common Stock to be issued in the Merger to be approved for
listing on the NYSE, subject to official notice of issuance, prior to the
Closing Date.
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4.14 Stockholder Litigation. The Company shall give Conseco the
opportunity to participate in the defense or settlement of any stockholder
litigation against the Company and its directors relating to the transactions
contemplated by this Agreement; provided, however, that no such settlement shall
be agreed to without Conseco's consent, which consent shall not be unreasonably
withheld.
4.15 Indemnification. (a) The certificate of incorporation and by-laws
of the Surviving Corporation and each of its subsidiaries shall contain the
provisions with respect to indemnification set forth in the Certificate of
Incorporation and By-Laws of the Company on the date of this Agreement, and such
provisions shall not be amended, repealed or otherwise modified for a period of
six years after the Effective Time in any manner that would adversely affect the
rights thereunder of individuals who at any time prior to the Effective Time
were directors or officers of the Company or any of its subsidiaries (the
"Indemnified Parties") in respect of actions or omissions occurring at or prior
to the Effective Time (including, without limitation, the transactions
contemplated by this Agreement), unless such modification is required by law.
Conseco agrees to be jointly and severally liable for the indemnification
obligations of the Company to the Indemnified Parties, as set forth above.
(b) The provisions of this Section 4.15 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party, his heirs and
his personal representatives and shall be binding on all successors and assigns
of Conseco, LPG Acquisition, the Company and the Surviving Corporation.
4.16 Financing. Conseco shall have funds available sufficient to repay
when due all indebtedness outstanding under the Company's senior credit facility
and to pay when due the aggregate Change of Control Purchase Price (as defined)
for any of the Company's 12 3/4% Senior Subordinated Notes due 2002 which are
required to be repurchased by the Company in accordance with Section 4.09 of the
indenture pursuant to which such notes were issued.
4.17 Officers' Certificates Relating to Tax Treatment. Conseco shall
provide to the Tax Opinion Provider (as defined in Section 6.3(c) hereof), a
certificate in the form agreed to by Conseco dated the Closing Date and signed
on behalf of Conseco by the chief executive officer and the chief financial
officer of Conseco. The Company shall provide to the Tax Opinion Provider a
certificate in the form agreed to by the Company dated the Closing Date and
signed on behalf of the Company by the chief executive officer and the chief
financial officer of the Company. The Company shall use its best efforts to
cause each of its affiliates to deliver to the Tax Opinion Provider on or before
the Closing Date a signed certificate in the form agreed to by the Company.
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ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS PRIOR TO
MERGER
5.1 Conduct of Business by the Company. Except as contemplated by this
Agreement or as set forth in the Section 6.1 of the Disclosure Schedule, during
the period from the date of this Agreement to the Effective Time, the Company
shall, and shall cause its subsidiaries to, act and carry on their respective
businesses in the ordinary course of business and, to the extent consistent
therewith, use reasonable efforts to preserve intact their current business
organizations, keep available the services of their current key officers and
employees and preserve the goodwill of those engaged in material business
relationships with them. Without limiting the generality of the foregoing,
during the period from the date of this Agreement to the Effective Time, the
Company shall not, and shall not permit any of its subsidiaries to, without the
prior consent of Conseco:
(i) (x) declare, set aside or pay any dividends on, or make
any other distributions (whether in cash, stock or property) in respect
of, any of the Company's outstanding capital stock (other than regular
quarterly cash dividends not in excess of $.03 per Share, with usual
record and payment dates and in accordance with the Company's present
dividend policy), (y) split, combine or reclassify any of its
outstanding capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for
shares of its outstanding capital stock, or (z) purchase, redeem or
otherwise acquire any shares of outstanding capital stock or any
rights, warrants or options to acquire any such shares;
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(ii) issue, sell, grant, pledge or otherwise encumber any
shares of its capital stock, any other voting securities or any
securities convertible into, or any rights, warrants or options to
acquire, any such shares, voting securities or convertible securities
other than upon the exercise of Company Stock Options outstanding on
the date of this Agreement;
(iii) amend its articles of organization, By-laws or other
comparable charter or organizational documents;
(iv) acquire any business or any corporation, partnership,
joint venture, association or other business organization or division
thereof;
(v) sell, mortgage or otherwise encumber or subject to any
Lien or otherwise dispose of any of its properties or assets that are
material to the Company and its subsidiaries taken as a whole, except
in the ordinary course of business;
(vi) (x) incur any indebtedness for borrowed money or
guarantee any such indebtedness of another person, other than
indebtedness owing to or guarantees of indebtedness owing to the
Company or any direct or indirect wholly-owned subsidiary of the
Company or (y) make any loans or advances to any other person, other
than to the Company, or to any direct or indirect wholly-owned
subsidiary of the Company and other than routine advances to employees;
(vii) make any tax election or settle or compromise any income
tax liability that would reasonably be expected to be material to the
Company and its subsidiaries taken as a whole;
(viii) pay, discharge, settle or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or
satisfaction, in the ordinary course of business consistent with past
practice or in accordance with their terms, of liabilities reflected or
reserved against in, or contemplated by, the most recent consolidated
financial statements (or the notes thereto) of the Company included in
the Filed SEC Documents or incurred since the date of such financial
statements in the ordinary course of business consistent with past
practice;
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(ix) invest its future cash flow, any cash from matured and
maturing investments, any cash proceeds from the sale of its assets and
properties, and any cash funds currently held by it, in any investments
other than cash equivalent assets or in short-term investments
(consisting of United States government issued or guaranteed
securities, or commercial paper rated A-1 or P-1), except (i) as
otherwise required by law, (ii) as required to provide cash (in the
ordinary course of business and consistent with past practice) to meet
its actual or anticipated obligations or (iii) publicly-traded
corporate bonds that are rated investment grade by at least two
nationally recognized statistical rating organizations;
(x) except as may be required by law,
(i) make any representation or promise, oral or
written, to any employee or former director, officer or
employee of the Company or any subsidiary which is
inconsistent with the terms of any Benefit Plan;
(ii) make any change to, or amend in any way, the
contracts, salaries, wages, or other compensation of any
employee or any agent or consultant of the Company or any
subsidiary other than routine changes or amendments that are
required under existing contracts;
(iii) adopt, enter into, amend, alter or terminate,
partially or completely, any Benefit Plan or any election made
pursuant to the provisions of any Benefit Plan, to accelerate
any payments, obligations or vesting schedules under any
Benefit Plan; or
(iv) approve any general or company-wide pay
increases for employees;
(xi) except in the ordinary course of business, modify, amend
or terminate any material agreement, permit, concession, franchise,
license or similar instrument to which the Company or any subsidiary is
a party or waive, release or assign any material rights or claims
thereunder; or
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(xii) authorize any of, or commit or agree to take any of, the
foregoing actions.
Without limiting the generality of this Section 5.1, during the period from the
date of this Agreement to the Effective Time, the Company shall and the Company
shall cause its subsidiaries, where applicable, to exercise their rights to
obtain all extensions through August 28, 1996, to the expiration of that certain
Data Processing Services Agreement, dated October 28, 1991 by and among Perot
Systems Corporation ("Perot"), Wabash Life Insurance Company and the Company, as
amended ("the "DPS Agreement"); provided, however, that in the event the Company
is unable to obtain an extension to the DPS Agreement from August 28, 1996
through the date of the Closing on terms acceptable to the Company, the Company
shall be permitted to enter into a new data processing services agreement with
such third party provider or providers and upon such terms as are acceptable to
the Company in its sole discretion; provided further, however, that (i) prior to
entering into such new agreement, the Company shall give Conseco written notice
and Conseco shall have 15 days to arrange for alternative data processing
services to be provided to the Company, which services must be mutually
acceptable to Conseco and the Company, (ii) Conseco shall be presumptively
acceptable to the Company as the provider of services under such new agreement
if Conseco guarantees that the costs and other terms of such services will not
be less favorable to the Company than those offered by any other prospective
provider and (iii) if Conseco is not the provider of services under such new
agreement, the Company shall use its best efforts consistent with negotiations
to-date with Perot and other possible providers and subsequent negotiations
after the date hereof to obtain the lowest possible cost and the shortest term
under any such new agreement.
5.2 Conduct of Business by Conseco. During the period from the date of
this Agreement to the Effective Time, Conseco shall, and shall cause its
subsidiaries to, carry on their respective businesses in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted and, to
the extent consistent therewith, use all reasonable efforts to preserve intact
their current business organizations, keep available the services of their
current officers and employees and preserve their relationships with customers,
suppliers, licensors, licensees, distributors and others having business
dealings with them to the end that their goodwill and ongoing businesses shall
be unimpaired at the Effective Time. Without limiting the generality of the
foregoing, during the period from the date of this Agreement to the Effective
Time, Conseco shall not, and shall not permit any of its subsidiaries to:
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(i) (x) declare, set aside or pay any dividends on, or make
any other distributions (whether in cash, stock or property) in respect
of, any outstanding capital stock of Conseco (other than regular
quarterly cash dividends of $.04 per share of Conseco Common Stock
(without giving effect to the Conseco Stock Split) and regular cash
dividends on the Conseco Series D Preferred Stock and the Conseco
PRIDES, in each case with usual record and payment dates and in
accordance with Conseco's Articles of Incorporation and its present
dividend policy) or (y) split, combine or reclassify any of its
outstanding capital stock (other than the Conseco Stock Split) or issue
or authorize the issuance of any other securities in respect of, in
lieu of or in substitution for shares of Conseco's outstanding capital
stock (other than under the Conseco Stock Plans);
(ii) issue, sell, grant, pledge or otherwise encumber any
shares of its capital stock, any other voting securities or any
securities convertible into, or any rights, warrants or options to
acquire, any such shares, voting securities or convertible securities,
in each case if any such action could reasonably be expected to (a)
delay materially the date of mailing of the Joint Proxy Statement or,
(B) if it were to occur after such date of mailing, require an
amendment of the Joint Proxy Statement;
(iii) acquire any business or any corporation, partnership,
joint venture, association or other business organization or division
thereof, in each case if any such action could reasonably be expected
to (A) delay materially the date of mailing of the Joint Proxy
Statement or, (B) if it were to occur after such date of mailing,
require an amendment of the Joint Proxy Statement; or
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(iv) authorize any of, or commit or agree to take any of, the
foregoing actions.
5.3 Stock Options and Warrants. The Company agrees to use its best
efforts, including without limitation additional actions by its Board of
Directors or the committee thereof which administers the Company Stock Option
Plan, to cause to be made such clarifications, modifications, amendments or
supplements to the Company Stock Option Plan and to the agreements evidencing
outstanding Company Stock Options to give effect to the following desires and
intentions of the parties with respect to Company Stock Options which remain
outstanding immediately prior to the Effective Time:
(a) Company Stock Options held by persons who are officers or employees
of the Company at the Effective Time shall become options to purchase, for the
same aggregate consideration payable to exercise such Options, the number of
shares of Conseco Common Stock which the holder would have been entitled to
receive at the Effective Time if such Options had been exercised for Shares
prior to the Effective Time;
(b) Company Stock Options held by persons who are not currently
officers or employees of the Company shall be required to be exercised prior to
the Effective Time or forfeited;
(c) Company Stock Options held by the officers of the Company
identified in Paragraph 4 of Section 2.5 to the Disclosure Schedule shall be
amended as described in such Paragraph, subject to subsection (e) below;
(d) Company Stock Options held by officers of the Company covered by
Paragraph 5 of Section 2.5 to the Disclosure Schedule shall be amended as
described in such Paragraph, subject to subsection (e) below;
(e) Company Stock Options held by an officer or employee of the Company
shall expire and be forfeited if not exercised within three (3) months after the
date such person ceases to be an officer or employee of the Company, the
Surviving Corporation, Conseco, or any other subsidiary of Conseco;
(f) Company Stock Options held by an officer subject to Section 16 of
the Exchange Act who would incur liability under Section 16(b), if such Options
were to be exercised on the date on which such options would otherwise expire
under subsections (b), (c), (d) or (e) above, shall otherwise remain exercisable
for five (5) business days from the date after which no such liability would be
incurred; and
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(g) Conseco shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Conseco Common Stock for delivery upon
exercise of the Company Stock Options assumed in accordance with this Section
5.3. As soon as practicable after the Effective Time, Conseco shall file a
registration statement on Form S-8 (or any successor form) or another
appropriate form with respect to the shares of Conseco Common Stock subject to
the Company Stock Options and shall use its best efforts to maintain the
effectiveness of such registration statement or registration statements (and
maintain the current status of the prospectus or prospectuses contained therein)
for so long as Company Stock Options remain outstanding.
If necessary to effectuate the foregoing provisions regarding Company Stock
Options, the parties agree to enter into an appropriate amendment to this Merger
Agreement to provide that LPG Acquisition shall be the Surviving Corporation at
the Effective Time rather than the Company. The parties agree that after the
date hereof, except for the Company Stock Options outstanding on the date hereof
and the changes thereto, as described in the Disclosure Schedule, no options,
warrants or other rights of any kind to purchase capital stock of the Company
shall be granted or made, under the Company Stock Plan or otherwise, and no
amendment, repricing or other change to the outstanding Company Stock Options
shall be made, without the prior written consent of Conseco, and any such grant,
issuance, amendment, repricing or other change without Conseco's consent shall
be null, void and unenforceable against the Surviving Corporation or Conseco.
5.4 Other Actions. The Company and Conseco shall not, and shall not
permit any of their respective subsidiaries to, take any action that would, or
that could reasonably be expected to, result in (i) any of the representations
and warranties of such party set forth in this Agreement becoming untrue in any
material respect or (ii) any of the conditions of the Merger set forth in
Article VI not being satisfied.
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5.5 Conduct of Business of LPG Acquisition. During the period from the
date of this Agreement to the Effective Time, LPG Acquisition shall not engage
in any activities of any nature except as provided in or contemplated by this
Agreement.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions to Each Party's Obligation To Effect the Merger. The
respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Stockholder Approval. This Agreement and the Merger shall
have been approved and adopted by the affirmative vote of the
stockholders of the Company entitled to cast at least a majority of the
votes which all stockholders of the Company are entitled to cast
thereon and the Conseco Stockholder Approval shall have been obtained.
(b) Governmental and Regulatory Consents. All required
consents, approvals, permits and authorizations to the consummation of
the transactions contemplated hereby by the Company, Conseco and LPG
Acquisition shall be obtained from (i) the Insurance Regulators in the
jurisdictions set forth in Section 6.1(b) of the Disclosure Schedule,
and (ii) any other Governmental Entity whose consent, approval,
permission or authorization is required by reason of a change in law
after the date of this Agreement, unless the failure to obtain such
consent, approval, permission or authorization would not reasonably be
expected to have a material adverse effect on the business, financial
condition or results of operations of the Company and its subsidiaries,
taken as a whole, or on the validity or enforceability of this
Agreement.
(c) HSR Act. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated
or shall have otherwise expired.
(d) No Injunctions or Restraints. No temporary restraining
order, preliminary or permanent injunction or other order issued by any
court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Merger shall be in effect; provided,
however, that the parties invoking this condition shall use best
reasonable efforts to have any such order or injunction vacated.
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(e) NYSE Listing. The shares of Conseco Common Stock issuable
to the Company's stockholders pursuant to this Agreement shall have
been approved for listing on the NYSE, subject to official notice of
issuance.
(f) Form S-4. The Form S-4 shall have become effective under
the Securities Act and shall not be the subject of any stop order or
proceedings seeking a stop order.
6.2 Conditions to Obligations of Conseco and LPG Acquisition. The
obligations of Conseco and LPG Acquisition to effect the Merger are further
subject to the following conditions:
(a) Representations and Warranties. The representations and
warranties of the Company contained in this Agreement shall have been
true and correct on the date of this Agreement (except to the extent
that they expressly relate only to an earlier time, in which case they
shall have been true and correct as of such earlier time), other than
such breaches of representations and warranties which in the aggregate
would not reasonably be expected to have a material adverse effect on
the business, financial condition or results of operations of the
Company and its subsidiaries taken as a whole. The Company shall have
delivered to Conseco a certificate dated as of the Closing Date, signed
by its Chief Executive Officer and its Chief Financial Officer, in
their capacities as officers of the Company, to the effect set forth in
this Section 6.2(a).
(b) Performance of Obligations of the Company. The Company
shall have performed in all material respects all obligations required
to be performed by it under this Agreement at or prior to the Closing
Date, and Conseco shall have received a certificate signed on behalf of
the Company by the chief executive officer and the chief financial
officer of the Company to such effect.
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6.3 Conditions to Obligation of the Company. The obligation of the
Company to effect the Merger is further subject to the following conditions:
(a) Representations and Warranties. The representations and
warranties of Conseco and LPG Acquisition contained in this Agreement
shall have been true and correct on the date of this Agreement (except
to the extent that they expressly relate only to an earlier time, in
which case they shall have been true and correct as of such earlier
time), other than such breaches of representations and warranties which
in the aggregate would not reasonably be expected to have a material
adverse effect on the business, financial condition or results of
operations of Conseco and its subsidiaries taken as a whole. Conseco
shall have delivered to the Company a certificate dated as of the
Closing Date, signed by its Chief Executive Officer and its Chief
Financial Officer, in their capacities as officers of Conseco, to the
effect set forth in this Section 6.3(a).
(b) Performance of Obligations of Conseco and LPG Acquisition.
Conseco and LPG Acquisition shall have performed in all material
respects all obligations required to be performed by them under this
Agreement at or prior to the Closing Date, and the Company shall have
received a certificate signed on behalf of Conseco by the chief
executive officer and the chief financial officer of Conseco to such
effect.
(c) Opinion of Counsel. The Company shall have received the
opinion dated the Closing Date of Weil, Gotshal & Manges LLP, counsel
to the Company, or such other legal counsel reasonably acceptable to
the Company and Conseco (the "Tax Option Provider") substantially in
the form of Exhibit B, to the effect that the Merger will be treated as
a reorganization under Section 368(a)(1) of the Code and that
shareholders of LPG will not be subject to federal income tax on the
receipt of shares of Conseco Common Stock in exchange for Shares
pursuant to the Merger.
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ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated and abandoned at any
time prior to the Effective Time, whether before or after approval of matters
presented in connection with the Merger by the stockholders of the Company:
(a) by mutual written consent of Conseco and the Company;
(b) by either Conseco or the Company:
(i) if, upon a vote at a duly held Stockholders
Meeting or Conseco Stockholders Meeting or any adjournment
thereof, any required approval of the stockholders of the
Company or Conseco, as the case may be, shall not have been
obtained;
(ii) if the Merger shall not have been consummated on
or before September 30, 1996, unless the failure to consummate
the Merger is the result of a willful and material breach of
this Agreement by the party seeking to terminate this
Agreement;
(iii)if any Governmental Entity shall have issued an
order, decree or ruling or taken any other action permanently
enjoining, restraining or otherwise prohibiting the Merger and
such order, decree, ruling or other action shall have become
final and nonappealable; or
(iv) if the Board of Directors of the Company shall
have exercised its rights set forth in Section 4.9 of this
Agreement.
7.2 Effect of Termination. In the event of termination of this
Agreement by either the Company or Conseco as provided in Section 7.1, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Conseco, LPG Acquisition or the Company, other than
the last two sentences of Section 4.5 and Sections 2.13, 3.8, 4.11, 7.2 and
10.2. Nothing contained in this Section shall relieve any party from any
liability resulting from any material breach of the representations, warranties,
covenants or agreements set forth in this Agreement.
43
<PAGE>
7.3 Amendment. Subject to the applicable provisions of the Delaware
Code, at any time prior to the Effective Time, the parties hereto may modify or
amend this Agreement, by written agreement executed and delivered by duly
authorized officers of the respective parties; provided, however, that after
approval of the Merger by the stockholders of the Company, no amendment shall be
made which reduces the consideration payable in the Merger or adversely affects
the rights of the Company's stockholders hereunder without the approval of such
stockholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties.
7.4 Extension; Waiver. At any time prior to the Effective Time, the
parties may (a) extend the time for the performance of any of the obligations or
other acts of the other parties, (b) waive any inaccuracies in the
representations and warranties of the other parties contained in this Agreement
or in any document delivered pursuant to this Agreement or (c) subject to
Section 7.3, waive compliance with any of the agreements or conditions of the
other parties contained in this Agreement. Any agreement on the part of a party
to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party. The failure of any party
to this Agreement to assert any of its rights under this Agreement or otherwise
shall not constitute a waiver of such rights.
7.5 Procedure for Termination, Amendment, Extension or Waiver. A
termination of this Agreement pursuant to Section 7.1, an amendment of this
Agreement pursuant to Section 7.3 or an extension or waiver pursuant to Section
7.4 shall, in order to be effective, require in the case of Conseco, LPG
Acquisition or the Company, action by its Board of Directors or the duly
authorized designee of its Board of Directors.
ARTICLE VIII
SURVIVAL OF PROVISIONS
8.1 Survival. The representations and warranties respectively required
to be made by the Company, Conseco and LPG Acquisition in this Agreement, or in
any certificate, respectively, delivered by the Company or Conseco pursuant to
Section 6.2 or Section 6.3 hereof will not survive the Closing.
44
<PAGE>
ARTICLE IX
NOTICES
9.1 Notices. All notices and other communications under this Agreement
must be in writing and will be deemed to have been duly given if delivered,
telecopied or mailed, by certified mail, return receipt requested, first-class
postage prepaid, to the parties at the following addresses:
If to the Company, to:
Life Partners Group, Inc.
7887 East Belleview Avenue
Englewood, Colorado 80111
Attention: Don Campbell
Telephone: (303) 779-1111
Telecopy: (303) 796-7576
with copies to:
Hicks, Muse, Tate & Furst Incorporated
200 Crescent Court, Suite 1600
Dallas, Texas 75201
Attention: Thomas O. Hicks
Lawrence D. Stuart, Jr.
Telephone: (214) 740-7300
Telecopy: (214) 740-7313
Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, Texas 75201
Attention: R. Scott Cohen, Esq.
Telephone: (214) 746-7738
Telecopy: (214) 746-7777
45
<PAGE>
If to Conseco, to:
Conseco, Inc.
11825 N. Pennsylvania Street
Carmel, Indiana 46032
Attention: Lawrence W. Inlow, Esq.
Telephone: (317) 817-6163
Telecopy: (317) 817-6327
If to LPG Acquisition, to:
LPG Acquisition Company
11825 N. Pennsylvania Street
Carmel, Indiana 46032
Attention: Lawrence W. Inlow, Esq.
Telephone: (317) 817-6163
Telecopy: (317) 817-6327
All notices and other communications required or permitted under this Agreement
that are addressed as provided in this Article IX will, if delivered personally,
be deemed given upon delivery, will, if delivered by telecopy, be deemed
delivered when confirmed and will, if delivered by mail in the manner described
above, be deemed given on the third Business Day after the day it is deposited
in a regular depository of the United States mail. Any party from time to time
may change its address for the purpose of notices to that party by giving a
similar notice specifying a new address, but no such notice will be deemed to
have been given until it is actually received by the party sought to be charged
with the contents thereof.
ARTICLE X
MISCELLANEOUS
10.1 Entire Agreement. Except for documents executed by the Company,
Conseco and LPG Acquisition pursuant hereto, this Agreement supersedes all prior
discussions and agreements between the parties with respect to the subject
matter of this Agreement, and this Agreement (including the exhibits hereto, the
Disclosure Schedule, and other documents delivered in connection herewith) and
the Confidentiality Agreement contain the sole and entire agreement between the
parties hereto with respect to the subject matter hereof.
46
<PAGE>
10.2 Expenses. Except as otherwise expressly provided in Section 4.11,
whether or not the Merger is consummated, each of the Company, Conseco and LPG
Acquisition will pay its own costs and expenses incident to preparing for,
entering into and carrying out this Agreement and the consummation of the
transactions contemplated hereby except that the expenses incurred in connection
with the printing, mailing and distribution of the Joint Proxy Statement and the
preparation and filing of the Form S-4 shall be borne equally by Conseco and the
Company. The Company agrees and covenants that the fees and expenses of the
Company's legal and investment banking advisors (including DLJ and HMTF)
incurred in connection with the Merger (but excluding reasonable fees and
expenses incurred in connection with related litigation or Acquisition
Proposals) shall not exceed $5,500,000.
10.3 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original, but all of which will
constitute one and the same instrument and shall become effective when one or
more counterparts have been signed by each of the parties and delivered to the
other parties.
10.4 No Third Party Beneficiary. Except as otherwise provided herein,
the terms and provisions of this Agreement are intended solely for the benefit
of the parties hereto, and their respective successors or assigns, and it is not
the intention of the parties to confer third-party beneficiary rights upon any
other person.
10.5 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, regardless of the laws
that might otherwise govern under applicable principles of conflicts of laws
thereof.
10.6 Assignment; Binding Effect. Neither this Agreement nor any of the
rights, interests or obligations under this Agreement shall be assigned, in
whole or in part, by operation of law or otherwise by any of the parties without
the prior written consent of the other parties, and any such assignment that is
not consented to shall be null and void. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by,
the parties and their respective successors and assigns.
47
<PAGE>
10.7 Headings, Gender, etc. The headings used in this Agreement have
been inserted for convenience and do not constitute matter to be construed or
interpreted in connection with this Agreement. Unless the context of this
Agreement otherwise requires, (a) words of any gender are deemed to include each
other gender; (b) words using the singular or plural number also include the
plural or singular number, respectively; (c) the terms "hereof," "herein,"
"hereby," "hereto," and derivative or similar words refer to this entire
Agreement; (d) the terms "Article" or "Section" refer to the specified Article
or Section of this Agreement; (e) all references to "dollars" or "$" refer to
currency of the United States of America; and (f) the term "person" shall
include any natural person, corporation, limited liability company, general
partnership, limited partnership, or other entity, enterprise, authority or
business organization.
10.8 Invalid Provisions. If any provision of this Agreement is held to
be illegal, invalid, or unenforceable under any present or future law, and if
the rights or obligations of the Company or Conseco under this Agreement will
not be materially and adversely affected thereby, (a) such provision will be
fully severable; (b) this Agreement will be construed and enforced as if such
illegal, invalid, or unenforceable provision had never comprised a part hereof;
and (c) the remaining provisions of this Agreement will remain in full force and
effect and will not be affected by the illegal, invalid, or unenforceable
provision or by its severance herefrom.
48
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the duly authorized officers of the Company, Conseco and LPG Acquisition
effective as of the date first written above.
CONSECO, INC.
By: /s/ STEPHEN C. HILBERT
-----------------------
Stephen C. Hilbert
Chairman of the Board
LPG ACQUISITION COMPANY
By: /s/ ROLLIN M. DICK
------------------
Rollin M. Dick
Executive Vice President
LIFE PARTNERS GROUP, INC.
By: /s/ JOHN H. MASSEY
------------------
John H. Massey
Chairman of the Board and
Chief Executive Officer
49
<PAGE>
EXHIBIT A
[Closing Date]
CONSECO, INC.
11825 N. Pennsylvania Street
Carmel, IN 46032
Gentlemen:
I have been advised that I have been identified as a possible
"affiliate" of Life Partners Group, Inc., a Delaware corporation (the
"Company"), as that term is defined for purposes of paragraphs (c) and (d) of
Rule 145 of the General Rules and Regulations (the "Rules and Regulations") of
the Securities and Exchange Commission (the "Commission") under the Securities
Act of 1933 (the "Securities Act"), although nothing contained herein should be
construed as an admission of such fact.
Pursuant to the terms of an Agreement and Plan of Merger dated March
11, 1996 (the "Merger Agreement"), by and among Conseco, Inc., an Indiana
corporation ("Conseco"), LPG Acquisition Company, a Delaware corporation ("LPG
Acquisition") and a wholly-owned subsidiary of Conseco, and the Company, LPG
Acquisition will be merged with and into the Company (the "Merger"). As a result
of the Merger, I will receive Merger Consideration (as defined in the Merger
Agreement), including shares of Common Stock, without par value, of Conseco
("Conseco Common Stock") in exchange for shares of Common Stock, $.001 par
value, of the Company ("Shares") owned by me at the effective time of the Merger
as determined pursuant to the Merger Agreement.
A. In connection therewith, I represent, warrant and agree
that:
1. I shall not make any sale, transfer or other disposition of
the Conseco Common Stock I receive as a result of the Merger in
violation of the Securities Act or the Rules and Regulations.
2. I have been advised that the issuance of Conseco Common
Stock to me as a result of the Merger has been registered with the
Commission under the Securities Act on a Registration Statement on Form
S-4. However, I have also been advised that, because at the time the
Merger was submitted for a vote of the stockholders of the Company I
may have been an "affiliate" of the Company and, accordingly, any sale
by me of the shares of Conseco Common Stock I receive as a result of
the Merger must be (i) registered under the Securities Act,
<PAGE>
(ii) made in conformity with the provisions of Rule 145 promulgated by
the Commission under the Securities Act or (iii) made pursuant to a
transaction which, in the opinion of counsel, reasonably satisfactory
to Conseco or as described in a "no action" or interpretive letter from
the staff of the Commission, is not required to be registered under the
Securities Act.
3. I have carefully read this letter and the Merger Agreement
and have discussed the requirements of the Merger Agreement and other
limitations upon the sale, transfer or other disposition of the shares
of Conseco Common Stock to be received by me, to the extent I have felt
necessary, with my counsel or with counsel for the Company.
B. Furthermore, in connection with the matters set forth
herein, I understand and agree that:
Conseco is under no further obligation to register the sale,
transfer or other disposition of the shares of Conseco Common Stock
received by me as a result of the Merger or to take any other action
necessary in order to make compliance with an exemption from
registration available, except as set forth in Section 4.12 of the
Merger Agreement and in paragraph C below.
C. Conseco hereby represents, warrants and agrees that:
For as long as resales of any shares of Conseco Common Stock
owned by me are subject to Rule 145, Conseco will use all reasonable
efforts to make all filings of the nature specified in paragraph (c)(1)
of Rule 144 of the Rules and Regulations.
Very truly yours,
<PAGE>
EXHIBIT B
----------------------, 1996
Life Partners Group, Inc.
7887 East Belleview Avenue
Englewood, Colorado 80111
Ladies and Gentlemen:
You have requested our opinion regarding certain federal income tax
consequences of the merger (the "Merger") of LPG Acquisition Company
("Acquisition"), a Delaware corporation and a direct wholly-owned subsidiary of
Conseco, Inc. ("Conseco"), an Indiana corporation, with and into Life Partners
Group, Inc. ("LPG"), a Delaware corporation.
In formulating our opinion, we examined such documents as we deemed
appropriate, including the Agreement and Plan of Merger among Conseco,
Acquisition, and LPG dated March 11, 1996, as amended (the "Merger Agreement"),
the Joint Proxy Statement filed by Conseco and LPG with the Securities and
Exchange Commission (the "SEC")____________________on , 1996 (the "Joint Proxy
Statement"), and the Registration Statement on Form S-4, as filed by Conseco
with the SEC on ____________________, 1996, in which the Joint Proxy Statement
will be included as a prospectus, (with all amendments thereto, the
"Registration Statement"). In addition, we have obtained such additional
information as we have deemed relevant and necessary through consultation with
various officers and representatives of Conseco, Acquisition and LPG.
Our opinion set forth below assumes (1) the accuracy of the statements and
facts concerning the Merger set forth in the Merger Agreement, the Joint Proxy
Statement, and the Registration Statement, (2) the consummation of the Merger in
the manner contemplated by, and in accordance with the terms set forth in, the
Merger Agreement, the Joint Proxy Statement and the Registration Statement and
(3) the accuracy of (i) the representations made by Conseco, which are set forth
in the Officers' Certificate delivered to us by Conseco, dated the date hereof,
(ii) the representations made by LPG, which are set forth in the Officers'
Certificate
<PAGE>
Life Partners Group, Inc.
_________________ _, 1996
Page 2
delivered to us by LPG, dated the date hereof and (iii) the representations made
by certain shareholders of LPG in Certificates delivered to us by such persons
pursuant to the terms of the Merger Agreement.
Based upon the facts and statements set forth above, our examination
and review of the documents referred to above and subject to the assumptions set
forth above, we are of the opinion that for federal income tax purposes:
1. The Merger will constitute a reorganization within the
meaning of Section 368(a)(1) of the Internal Revenue Code of
1986, as amended (the "Code").
2. No gain or loss will be recognized by the shareholders of LPG with
respect to the shares of the common stock of Conseco received by the
shareholders of LPG in the Merger.
We express no opinion concerning any tax consequences of the Merger other than
those specifically set forth herein.
Our opinion is based on current provisions of the Code, the Treasury
Regulations promulgated thereunder, published pronouncements of the Internal
Revenue Service and case law, any of which may be changed at any time with
retroactive effect. Any change in applicable laws or facts and circumstances
surrounding the Merger, or any inaccuracy in the statements, facts, assumptions
and representations on which we have relied, may affect the continuing validity
of the opinions set forth herein. We assume no responsibility to inform you of
any such change or inaccuracy that may occur or come to our attention.
Very truly yours,
<PAGE>
ANNEX B
[Donaldson, Lufkin & Jenrette]
March 11, 1996
The Board of Directors
Life Partners Group, Inc.
7887 East Belleview Avenue
Englewood, Colorado 80111
Dear Sirs:
You have requested our opinion as to the fairness from a financial
point of view to the shareholders of Life Partners Group, Inc. (the "Company")
of the consideration to be received by such shareholders in the merger (the
"Merger") to be effected pursuant to the terms of the Agreement and Plan of
Merger dated as of March 11, 1996 (the "Agreement"), among the Company, Conseco,
Inc. ("Conseco") and LPG Acquisition Company, a wholly-owned subsidiary of
Conseco.
Pursuant to the Agreement, as of the Effective Time (as defined in the
Agreement) of the Merger, each share of common stock, $0.001 par value, of the
Company will be converted into a right to receive that fraction of a share (the
"Conversion Ratio") of common stock, no par value, of Conseco as defined in the
Agreement. Pursuant to the Agreement, the Conversion Ratio is determined by
dividing $21.00 by the average closing price of Conseco Common Stock on the New
York Stock Exchange (Composite Transaction Reporting System) for the 20 trading
days ending two days prior to the Effective Time (the "Average Price"),
provided, however, that if the Average Price is less than $60.30, the Conversion
Ratio will be .34826 and if the Average Price is greater than $73.70, the
Conversion Ratio will be .28494.
In arriving at our opinion, we have reviewed the Agreement, as well as
financial and other information that was publicly available or furnished to us
by the Company and Conseco including information provided during discussions
with their respective managements. Included in the information provided during
discussions with the respective managements were certain earnings projections
for Conseco for fiscal years 1996 through 2000 prepared by the management of
Conseco, and certain earnings projections for the Company for fiscal
DAFS02...:\50\59450\0012\1686\OPN4046P.240
<PAGE>
The Board of Directors
Life Partners Group, Inc.
Page 2
March 11, 1996
years 1996 to 2001 prepared by the management of the Company. In addition, we
have compared certain financial and securities data of the Company with certain
financial and securities data of various other companies whose securities are
traded in public markets, reviewed the historical stock prices and trading
volumes of the common stock of Conseco and the Company, reviewed prices and
premiums paid in other business combinations and conducted such other financial
studies, analyses and investigations as we deemed appropriate for purposes of
this opinion. We were not requested to, nor did we, solicit the interest of any
other party in acquiring the Company.
In rendering our opinion we have relied upon and assumed the accuracy,
completeness and fairness of all of the financial and other information that was
available to us from public sources, that was provided to us by the Company and
Conseco or their representatives, or that was otherwise reviewed by us. With
respect to the financial projections supplied to us, we have assumed that they
have been reasonably prepared on the basis reflecting the best currently
available estimates and judgments of the management of the Company and Conseco
as to the future operating and financial performance of the Company and Conseco.
We have relied upon the estimates of the management of the Company of the
operating synergies achievable as a result of the Merger and upon our discussion
of such synergies with the management of Conseco. We have not assumed any
responsibility for making an independent evaluation of the Company's or
Conseco's assets or liabilities or for making any independent verification of
any of the information reviewed by us. We have relied as to all legal matters on
advice of counsel to the Company.
Our opinion is necessarily based on economic, market, financial and
other conditions as they exist on, and on the information made available to us
as of, the date of this letter. It should be understood that, although
subsequent developments may affect this opinion, we do not have any obligation
to update, revise or reaffirm this opinion. Our opinion is limited to the
fairness, from a financial point of view, of the consideration to be received by
the Company's shareholders and does not address the Company's underlying
business decision to proceed with the Merger. We are expressing no opinion
herein as to the prices at which Conseco's common stock will actually trade at
any time. Our opinion is not intended to be and does not constitute a
recommendation to any shareholder as to how such shareholder should vote with
respect to the proposed Merger.
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), as part of
its investment banking services, is regularly engaged in the valuation of
businesses and securities in connection with mergers, acquisitions,
underwritings, sales and distributions of listed and unlisted securities,
private placements and valuations for estate, corporate and
DAFS02...:\50\59450\0012\1686\OPN4046P.240
<PAGE>
The Board of Directors
Life Partners Group, Inc.
Page 3
March 11, 1996
other purposes. DLJ has performed investment banking and other services for the
Company in the past and has been compensated for such services. DLJ acted as
lead manager for the Company's March 24, 1993 initial public offering. In the
ordinary course of its business, DLJ may trade securities of the Company or
Conseco for its own account or for the account of its customers and,
accordingly, may at any time hold a long or short position in such securities.
Based upon the foregoing and such other factors as we deem relevant, we
are of the opinion that the consideration to be received by the shareholders of
the Company pursuant to the Agreement is fair to the shareholders of the Company
from a financial point of view.
Very truly yours,
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ MARK K. GORMLEY
----------------------
Mark K. Gormley
Managing Director
<PAGE>
[Alternate Page for Resale Prospectus]
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
AVAILABLE INFORMATION........................................................................................... ii
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE................................................................. ii
TABLE OF CONTENTS................................................................................................ v
SUMMARY......................................................................................................... 1
SELECTED HISTORICAL FINANCIAL INFORMATION OF CONSECO............................................................ 13
SELECTED HISTORICAL FINANCIAL INFORMATION OF LPG................................................................ 16
SUMMARY UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION.................................................. 18
COMPARATIVE UNAUDITED PER SHARE INFORMATION OF CONSECO AND LPG ..................................................20
MARKET PRICE INFORMATION........................................................................................ 21
INFORMATION CONCERNING CONSECO AND THE MERGER SUB............................................................... 23
INFORMATION CONCERNING LPG...................................................................................... 26
SHAREHOLDER MEETINGS............................................................................................ 27
THE MERGER...................................................................................................... 32
THE MERGER AGREEMENT............................................................................................ 50
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS........................................................... 58
COMPARISON OF SHAREHOLDERS' RIGHTS.............................................................................. 65
MANAGEMENT OF THE SURVIVING CORPORATION UPON CONSUMMATION OF THE
MERGER.......................................................................................................... 70
LEGAL MATTERS................................................................................................... 70
EXPERTS......................................................................................................... 70
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS....................................................................... 70
OTHER MATTERS................................................................................................... 70
SELLING SHAREHOLDERS............................................................................................ 71
A-1
DAFS02...:\50\59450\0012\1686\NOT3026S.28G
<PAGE>
PLAN OF DISTRIBUTION............................................................................................ 72
</TABLE>
A-2
<PAGE>
[Alternate Page for Resale Prospectus]
SELLING SHAREHOLDERS
The following table sets forth the names of persons who, at the time
the Merger is submitted to the shareholders of LPG for approval, were
"affiliates" of LPG for purposes of Rule 145 under the Securities Act (the
"Affiliates"), the aggregate number of shares of LPG Common Stock beneficially
owned by each Affiliate as of the date hereof, and the aggregate number of
shares of Conseco Common Stock that each Affiliate may (following the
consummation of the Merger) offer and sell pursuant to this Joint Proxy
Statement/Prospectus.
Number of Shares Number of
Name of Affiliate Beneficially Owned Shares Registered
- ----------------- ------------------ -----------------
A-3
<PAGE>
[Alternate Page for Resale Prospectus]
PLAN OF DISTRIBUTION
Following consummation of the Merger, the shares of Conseco Common
Stock received by the Affiliates in the Merger may be sold from time to time to
purchasers directly by any of the Affiliates. Alternatively, the Affiliates may
sell the shares of Conseco Common Stock in one or more transactions (which may
involve one or more block transactions) on the NYSE, in separately negotiated
transactions, or in a combination of such transactions. Each sale may be made
either at market prices prevailing at the time of such sale or at negotiated
prices; some or all of the shares of Conseco Common Stock may be sold through
brokers acting on behalf of the Affiliates or to dealers for resale by such
dealers; and in connection with such sales, such brokers or dealers may receive
compensation in the form of discounts or commissions from Affiliates and/or the
purchasers of such shares for whom they may act as broker or agent (which
discounts or commissions are not anticipated to exceed those customary in the
types of transactions involved). However, any securities covered by this Joint
Proxy Statement/Prospectus which qualify for sale pursuant to Rule 144 under the
Securities Act may be sold under Rule 144 rather than pursuant to this Joint
Proxy Statement/Prospectus. All expenses of registration incurred in connection
with this offering are being borne by Conseco, but all brokerage commissions and
other expenses incurred by an individual Affiliate will be borne by each such
Affiliate. Conseco will not receive any of the proceeds from such sales.
The Affiliates and any dealer participating in the distribution of any
of the shares of Conseco Common Stock or any broker executing selling orders on
behalf of the Affiliates may be deemed to be "underwriters" within the meaning
of the Securities Act, in which event any profit on the sale of any or all of
the shares of Conseco Common Stock by them and any discounts or commissions
received by any such brokers or dealers may be deemed to be underwriting
discounts and commissions under the Securities Act.
Any broker or dealer participating in any distribution of shares of
Conseco Common Stock in connection with this offering may be deemed to be an
"underwriter" within the meaning of the Securities Act and will be required to
deliver a copy of this Joint Proxy Statement/Prospectus to any person who
purchases any of the shares of Conseco Common Stock from or through such broker
or dealer.
In order to comply with the securities laws of certain states, if
applicable, the shares of Conseco Common Stock will be sold only through
registered or licensed brokers or dealers. In addition, in certain states, the
shares of Conseco Common Stock may not be sold unless they have been registered
or qualified for sale in such state or an exemption from such registration or
qualification requirement is available and is complied with.
A-4
<PAGE>
PART II.
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 20. Indemnification of Directors and Officers.
The Indiana 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 By-laws of Conseco provides 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 Conseco, 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.
The above discussion of Conseco's By-laws and the Indiana Corporation
Law is not intended to be exhaustive and is qualified in its entirety by such
By-laws and the Indiana Corporation Law.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Securities Act
and is therefore unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person thereof in the
successful defense of any action, suit or proceeding) is asserted by a director,
officer or controlling person in connection with the securities being
registered, the 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 of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
II-1
<PAGE>
Item 21. Exhibits and Financial Statement Schedules.
<TABLE>
<CAPTION>
(a) Exhibits
<S> <C> <C>
2 - Agreement and Plan of Merger, dated as of March 11, 1996 by and among
Conseco, Inc., LPG Acquisition Company and Life Partners Group, Inc.
(included as Annex A to the Joint Proxy Statement/Prospectus (schedules
omitted -- the Registrant agrees to furnish a copy of any schedule to the
Securities and Exchange Commission (the "Commission") upon request)).*
5 - Opinion of Lawrence W. Inlow, General Counsel to Conseco, Inc., as to the
validity of the issuance of the securities registered hereby.**
8 - Form of Opinion of Weil, Gotshal & Manges LLP as to certain tax matters
(included as Exhibit B to Annex A of the Joint Proxy Statement/Prospectus).*
23(a) - Consent of Lawrence W. Inlow, General Counsel to Conseco, Inc. (included in
the opinion filed as Exhibit 5 to the Registration Statement).**
23(b) - Consent of Coopers & Lybrand L.L.P., with respect to the financial statements
of the Registrant.*
23(c) - Consent of Coopers & Lybrand L.L.P. with respect to the financial statements
of Life Partners Group, Inc.*
23(d) - Consent of Donaldson, Lufkin & Jenrette Securities
Corporation.*
23(e) - Consent of Weil, Gotshal & Manges LLP (included in the opinion filed as
Exhibit 8 to the Registration Statement).**
24(a) - Powers of Attorney of directors and officers of Conseco. (See page II-5 of this
Registration Statement).
99.1 - Opinion of Donaldson, Lufkin & Jenrette Securities Corporation (included as
Annex B to the Joint Proxy Statement/Prospectus).*
99.2 - Form of proxy card for Conseco Stock.*
99.3 - Form of proxy card for LPG Common Stock.*
<FN>
* Filed herewith.
** To be filed by amendment.
</FN>
</TABLE>
(b) Financial Statement Schedules - Inapplicable.
Item 22. Undertakings.
(a) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant'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.
II-2
<PAGE>
(b) The undersigned registrant hereby undertakes as follows:
(1) that prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this
registration statement, by any person or party who is deemed to
be an underwriter within the meaning of Rule 145(c), the issuer
undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters,
in addition to the information called for by the other items of
the applicable form.
(2) That every prospectus: (i) that is filed pursuant to paragraph
(1) immediately preceding, or (ii) that purports to meet the
requirements of Section 10(a)(3) of the Securities Act and is
used in connection with an offering of securities subject to Rule
415, will be filed as a part of an amendment to the registration
statement and will not be used until such amendment is effective,
and that, for purposes 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.
(c) The undersigned registrant hereby undertakes that:
(1) 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
registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) 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) The undersigned registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(e) The undersigned registrant hereby undertakes to supply by means of
a post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-3
<PAGE>
(f) The undersigned registrant hereby undertakes:
(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;
(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.
(2) That, for the purpose of determining any liability under the
Securities Act, 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.
(g) See Item 20.
II-4
<PAGE>
SIGNATURES AND POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Carmel and
the State of Indiana, on the 16th day of April, 1996.
CONSECO, INC.
By: /s/ Stephen C. Hilbert
--------------------------
Stephen C. Hilbert,
Chairman of the Board,
Chief Executive Officer
and President
Each person whose signature to this Registration Statement appears
below hereby appoints Lawrence W. Inlow and Karl W. Kindig, and each of them,
either of whom may act without the joinder of the other, as his or her
attorney-in-fact to sign on his or her behalf individually and in the capacity
stated below and to file all amendments and post-effective amendments to this
Registration Statement, which amendments may make such changes in and additions
to this Registration Statement as such attorney-in-fact may deem necessary or
appropriate.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Stephen C. Hilbert Director, Chairman of the Board, April 16, 1996
- --------------------------------------- Chief Executive Officer and President
Stephen C. Hilbert (Principal Executive Officer of the
Registrant)
/s/ Rollin M. Dick Director, Executive Vice President April 16, 1996
- --------------------------------------- and Chief Financial Officer (Principal
Rollin M. Dick Financial and Accounting Officer of
the Registrant)
/s/ Ngaire E. Cuneo Director April 16, 1996
- ---------------------------------------
Ngaire E. Cuneo
/s/ M. Phil Hathaway Director April 16, 1996
- ---------------------------------------
M. Phil Hathaway
/s/ Louis P. Ferrero Director April 16, 1996
- ---------------------------------------
Louis P. Ferrero
/s/ Donald F. Gongaware Director April 16, 1996
- ---------------------------------------
Donald F. Gongaware
II-5
<PAGE>
/s/ David R. Decatur Director April 16, 1996
- ---------------------------------------
David R. Decatur
/s/James D. Massey Director April 16, 1996
- --------------------------------------
James D. Massey
/s/Dennis E. Murray, Sr. Director April 16, 1996
- --------------------------------------
Dennis E. Murray, Sr.
</TABLE>
II-6
CONSENT OF INDEPENDENT ACCOUNTANTS
------------------------------------
We consent to the incorporation by reference in the registration statement of
Conseco, Inc. on Form S-4 (File No. 333-0000), of our reports dated March 20,
1996 on our audits of the consolidated financial statements and financial
statement schedules of Conseco, Inc. and subsidiaries as of December 31, 1995
and 1994, and for the years ended December 31, 1995, 1994 and 1993, included in
the Annual Report on Form 10-K. We also consent to the reference to our firm
under the caption "Experts."
COOPERS & LYBRAND L.L.P.
Indianapolis, Indiana
April 11, 1996
CONSENT OF INDEPENDENT ACCOUNTANTS
------------------------------------
We consent to the incorporation by reference in the registration statement of
Life Partners Group, Inc. on Form S-4 (File No. 333-0000), of our reports dated
March 27, 1996 on our audits of the consolidated financial statements and
financial statement schedules of Life Partners Group, Inc. and subsidiaries as
of December 31, 1995 and 1994, and for the years ended December 31, 1995, 1994
and 1993, included in the Annual Report on Form 10-K. We also consent to the
reference to our firm under the caption "Experts."
COOPERS & LYBRAND L.L.P.
Indianapolis, Indiana
April 11, 1996
CONSENT OF DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
We hereby consent to (i) the inclusion of our opinion letter, dated
March 11, 1996, to the Board of Directors of Life Partners Group, Inc. (the
"Company") as Annex B to the Joint Proxy Statement/Prospectus of the Company and
Conseco, Inc. ("Conseco") relating to the proposed merger of LPG Acquisition
Company, a wholly-owned subsidiary of Conseco, and the Company and (ii) all
references to DLJ in the sections captioned "Opinion of LPG's Financial Advisor"
of the Joint Proxy Statement/Prospectus of the Company and Conseco which forms a
part of this Registration Statement on Form S-4. In giving such consent, we do
not admit that we come within the category of persons whose consent is required
under, and we do not admit and we disclaim that we were "experts" for purposes
of, the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /S/ PERRY H. BRAUN
Perry H. Braun
Senior Vice President
New York, New York
April 12, 1996
G:\LEGAL\WRITCONS\CONSENT.DLJ
CONSECO, INC.
11825 North Pennsylvania Street, Carmel, IN 46032
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Each person signing this card on the reverse side hereby appoints as proxies
Rollin M. Dick, Donald F. Gongaware and Stephen C. Hilbert, or any of them, with
full power of substitution, to vote all shares of common stock which such person
is entitled to vote at the Special Meeting of Shareholders of Conseco, Inc.
("Conseco"), to be held at----------------------------------------------------
- -----------,------------ at 10:00 a.m. local time on , 1996 and
any ------------ adjournments thereof.
The proxies are hereby authorized to vote as follows:
1. Approval of the issuance of common stock, no par value per share, of Conseco
as provided in the Agreement and Plan of Merger, dated as of March 11, 1996, by
and among Life Partners Group, Inc., a Delaware corporation ("LPG"), Conseco and
LPG Acquisition Company ("Merger Sub"), pursuant to which, among other things,
(i) Merger Sub will be merged with and into LPG, with LPG being the surviving
corporation (the "Merger"), and (ii) each outstanding share of the common stock,
par value $.001 per share (the "LPG Common Stock") of LPG (other than shares of
LPG Common Stock held by LPG as treasury stock immediately prior to the
Effective Time (as defined in the Merger Agreement)) will be cancelled and
converted into the right to receive the Merger Consideration (as defined in the
Merger Agreement).
/ / FOR / / AGAINST / / ABSTAIN
2. In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
(PLEASE DATE AND SIGN ON REVERSE SIDE)
THE SHARES REPRESENTED BY THIS PROXY, UNLESS OTHERWISE SPECIFIED, SHALL BE VOTED
FOR ITEM 1.
Please sign below exactly as your name appears on the label. When
signing as attorney, corporate officer or fiduciary, please give
full title as such. The undersigned hereby acknowledges receipt
of the Notice of the Special Meeting and Joint Proxy
Statement/Prospectus dated , 1996.
Dated__________________________________________
Signature(s)_____________________________________
----------------------------------------------
PLEASE DATE, SIGN, AND RETURN THIS PROXY PROMPTLY.
G:\LEGAL\PROXIES\SPECIAL.CNC
[Form of Proxy]
LIFE PARTNERS GROUP, INC.
Proxy Solicited on Behalf of the Board of Directors of
Life Partners Group, Inc. for a Special Meeting
of Shareholders to be held on , 1996.
The undersigned Shareholder of Life Partners Group, Inc. ("LPG") hereby
appoints John H. Massey and Don Campbell, and either of them, the lawful
attorneys and proxys of the undersigned, with several powers of substitution, to
vote all shares of Common Stock par value $.001 per share of LPG (the "LPG
Common Stock") which the undersigned is entitled to vote at the Special Meeting
of Shareholders to be held on _________, 1996, and any adjournments thereof:
1. Approval of the Agreement and Plan of Merger, dated as of March
11, 1996 (the "Merger Agreement"), by and among LPG, Conseco,
Inc., an Indiana corporation ("Conseco"), and LPG Acquisition
Company, a Delaware corporation and wholly-owned subsidiary of
Conseco ("Merger Sub"), and the transactions contemplated
thereby, pursuant to which, among other things, (i) Merger Sub
will be merged with and into LPG, with LPG being the surviving
corporation (the "Merger"), and (ii) each outstanding share of
the LPG Common Stock (other than shares of LPG Common Stock held
by LPG as treasury stock immediately prior to the Effective Time
(as defined in the Merger Agreement)) will be cancelled and
converted into the right to receive the Merger Consideration (as
defined in the Merger Agreement).
FOR |_| AGAINST |_| ABSTAIN |_|
2. To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
The Board of Directors recommends that the shareholders of LPG vote FOR
the approval and adoption of the Merger Agreement and the transactions
contemplated thereby. In the absence of specific instructions, proxys will be
voted for approval of the Merger Agreement and in the discretion of the proxy
holders as to any other matters.
Note:Please sign exactly as name appears hereon. Joint owners
should each sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title
as such.
Signature: Date:
Signature: Date:
