<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 28, 1996
REGISTRATION NO. 333-02537
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
CONSECO, INC.
(Exact name of Registrant as specified in its charter)
INDIANA 6719 35-1468632
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification No.)
incorporation or Classification Code
organization) Number)
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. / /
------------------------
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.
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<PAGE> 2
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."
<PAGE> 3
CONSECO, INC.
CROSS-REFERENCE SHEET PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
LOCATION IN JOINT
FORM S-4 ITEM PROXY STATEMENT/PROSPECTUS
------------------------------------------ ------------------------------------------
<S> <C> <C> <C>
A. INFORMATION ABOUT THE TRANSACTION
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 Prospectus........................... Available Information; Incorporation of
Certain Documents by Reference; Table of
Contents
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information........... Summary; Shareholder Meetings; 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; 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
Reference............................... Incorporation of Certain Documents by
Reference
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
Authorizations Are To Be Solicited...... Incorporation of Certain Documents by
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
</TABLE>
<PAGE> 4
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 Thursday, June 27, 1996, at the
Hotel Crescent Court, 400 Crescent Court, 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 May 24, 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) 223-2064.
Sincerely,
Massey Sig
John H. Massey
Chairman of the Board and
Chief Executive Officer
May 28, 1996
<PAGE> 5
CONSECO LOGO
11825 NORTH PENNSYLVANIA STREET
CARMEL, INDIANA 46032
Dear Shareholder:
You are cordially invited to attend a special meeting of shareholders of
Conseco, Inc. ("Conseco") to be held on June 27, 1996 at 10:00 a.m., local time,
at the Ritz Charles, 12156 North Meridian Street, Carmel, Indiana (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 recommends
that shareholders vote FOR approval of the issuance of Conseco Common Stock
pursuant to the Merger Agreement.
Only holders of record of shares of Conseco Common Stock and Conseco PRIDES
as of the close of business on May 24, 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,
Hilbert Sig
Stephen C. Hilbert
Chairman of the Board
May 28, 1996
<PAGE> 6
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
Thursday, June 27, 1996, at the Hotel Crescent Court, 400 Crescent Court,
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 May 24,
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
Don Campbell
Secretary
May 28, 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.
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.
<PAGE> 7
CONSECO LOGO
11825 NORTH PENNSYLVANIA STREET
CARMEL, INDIANA 46032
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 27, 1996
NOTICE IS HEREBY GIVEN THAT a Special Meeting of the shareholders of
Conseco, Inc. ("Conseco"), will be held at the Ritz Charles, 12156 North
Meridian Street, Carmel, Indiana, at 10:00 a.m., local time, on June 27, 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 May 24, 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 of one 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
Inlow Sig
Lawrence W. Inlow, Secretary
May 28, 1996
Carmel, Indiana
<PAGE> 8
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 June 27, 1996, at the Ritz Charles, 12156
North Meridian Street, Carmel, Indiana, 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 June 27, 1996, at the Hotel Crescent
Court, 400 Crescent Court, Dallas, Texas, 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 May 24, 1996, the closing price of the
Conseco Common Stock as reported on the NYSE was $38.
The LPG Common Stock is quoted on the NYSE under the symbol "LPG". On May
24, 1996, the closing price of the LPG Common Stock as reported on the NYSE was
$21 7/8.
This Joint Proxy Statement/Prospectus and the related forms of proxy are
first being mailed to shareholders of Conseco and LPG on or about May 30, 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 MAY 28, 1996.
<PAGE> 9
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 NYSE, 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 BERNHARD 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 BY JUNE 20, 1996.
ii
<PAGE> 10
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 Quarterly Report
on Form 10-Q for the quarter ended March 31, 1996 ("Conseco's Quarterly
Report"); Conseco's Current Reports on Form 8-K dated June 30, 1995,
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 Quarterly Report on Form 10-Q for
the quarter ended March 31, 1996 ("LPG's Quarterly 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 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.
iii
<PAGE> 11
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
AVAILABLE INFORMATION.................................................................. ii
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE........................................ iii
TABLE OF CONTENTS...................................................................... iv
SUMMARY................................................................................ 1
SELECTED HISTORICAL FINANCIAL INFORMATION OF CONSECO................................. 11
SELECTED HISTORICAL FINANCIAL INFORMATION OF LPG..................................... 13
SUMMARY UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION....................... 15
COMPARATIVE UNAUDITED PER SHARE INFORMATION OF CONSECO AND LPG....................... 17
MARKET PRICE INFORMATION............................................................. 18
INFORMATION CONCERNING CONSECO AND THE MERGER SUB...................................... 19
INFORMATION CONCERNING LPG............................................................. 20
SHAREHOLDER MEETINGS................................................................... 21
THE MERGER............................................................................. 24
THE MERGER AGREEMENT................................................................... 39
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS.................................. 46
COMPARISON OF SHAREHOLDERS' RIGHTS..................................................... 53
MANAGEMENT OF THE SURVIVING CORPORATION UPON CONSUMMATION OF THE MERGER................ 57
LEGAL MATTERS.......................................................................... 57
EXPERTS................................................................................ 57
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS.............................................. 57
OTHER MATTERS.......................................................................... 57
Annex A -- Agreement and Plan of Merger
Annex B -- Opinion of Donaldson, Lufkin & Jenrette Securities Corporation
</TABLE>
iv
<PAGE> 12
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
businesses as well as non-affiliates. 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 (and $.7 billion in the
first quarter of 1996) from a diverse portfolio
of products. Conseco's total assets and
shareholders' equity at March 31, 1996 were
approximately $17.2 billion and $1.3 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."
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 $59.5 billion at March 31,
1996. See "Information Concerning LPG."
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<PAGE> 13
MEETINGS OF SHAREHOLDERS
TIME, DATE AND PLACE.......... Conseco. The Conseco Special Meeting will be
held at 10:00 a.m., local time, on June 27,
1996, at the Ritz Charles, 12156 North Meridian
Street, Carmel, Indiana, and at any adjournment
or postponement thereof.
LPG. The LPG Special Meeting will be held at
10:00 a.m., local time, on June 27, 1996, at
the Hotel Crescent Court, 400 Crescent Court,
Dallas, Texas, 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."
RECORD DATE, SHARES ENTITLED
TO VOTE, QUORUM............... Conseco. Holders of record of Conseco Common
Stock and Conseco PRIDES at the close of
business on May 24, 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 41,835,969 shares of Conseco Common
Stock outstanding and entitled to vote, and
4,369,700 shares of Conseco PRIDES outstanding
and entitled to vote. 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 one 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."
2
<PAGE> 14
The presence at the Conseco Special Meeting, in
person or by properly executed proxy, of the
holders of Conseco Common Stock and Conseco
PRIDES entitled to cast a majority of the votes
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 May 24, 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 28,166,549
shares of LPG Common Stock outstanding and
entitled to vote. 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."
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."
3
<PAGE> 15
THE MERGER
EFFECT OF MERGER.............. Upon consummation of the Merger, (i) the 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."
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
4
<PAGE> 16
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.
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 were permitted to be
repriced; (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;
5
<PAGE> 17
(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 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
6
<PAGE> 18
Agreement is fair, from a financial point of
view, to such shareholders.
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 68% and 72% of the shares of
Conseco Common Stock to be outstanding after
consummation of the Merger, and the current LPG
shareholders will own between approximately 28%
and 32% 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."
7
<PAGE> 19
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."
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
8
<PAGE> 20
period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR
Act"). Such waiting period expired on May 17,
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.
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.
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
9
<PAGE> 21
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."
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.
10
<PAGE> 22
SELECTED HISTORICAL FINANCIAL INFORMATION OF CONSECO(A)
The selected historical financial information set forth below was derived
from the 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. The consolidated financial
information set forth for the three months ended March 31, 1995 and 1996, is
unaudited; however, in the opinion of Conseco's management, the accompanying
financial information contains all adjustments, consisting only of normal
recurring items, necessary to present fairly the financial information for such
periods. The results of operations for the three months ended March 31, 1996,
may not be indicative of the results of operations to be expected for a full
year.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
--------------------------------------------------------- ---------------------
1991 1992 1993 1994 1995 1995 1996
--------- --------- --------- --------- --------- --------- ---------
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <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 $ 367.6 $ 369.8
Investment activity:
Net investment income........................ 921.4 888.6 896.2 385.7 1,142.6 270.8 273.7
Net trading income (losses).................. 50.7 35.9 93.1 (4.9) 2.5 1.8 (3.5)
Net realized gains (losses).................. 123.3 124.3 149.5 (25.6) 186.4 1.5 9.4
Total revenues................................. 1,391.8 1,523.9 2,636.0 1,862.0 2,855.3 652.3 691.8
Interest expense on notes payable.............. 69.9 46.2 58.0 59.3 119.4 26.2 28.4
Total benefits and expenses.................... 1,168.6 1,193.9 2,025.8 1,537.6 2,436.8 566.5 571.6
Income before income taxes, minority interest
and extraordinary charge..................... 223.2 330.0 610.2 324.4 418.5 85.8 120.2
Extraordinary charge on extinguishment of debt,
net of tax................................... 5.0 5.3 11.9 4.0 2.1 -- 17.4
Net income..................................... 116.0 169.5 297.0 150.4 220.4 24.4 46.3
Preferred dividends............................ 6.8 5.5 20.6 18.6 18.4 4.6 8.1
Net income applicable to common stock.......... 109.2 164.0 276.4 131.8 202.0 19.8 38.2
PER SHARE DATA(B)
Income before extraordinary charge, primary.... $2.15 $2.79 $4.93 $2.58 $4.74 $0.45 $1.19
Net income, primary............................ 2.05 2.71 4.73 2.50 4.69 0.45 0.84
Income before extraordinary charge, fully
diluted...................................... 2.11 2.78 4.57 2.50 4.26 0.45 1.08
Net income, fully diluted...................... 2.01 2.70 4.39 2.44 4.22 0.45 0.78
Dividends declared per common share............ .035 .043 .15 .25 .093 0.063 0.020
Book value per common share outstanding at
period end................................... 7.73 10.93 16.89 10.45 20.44 11.44 17.51
Shares outstanding at period end............... 49.4 49.8 50.6 44.4 40.5 40.4 41.4
Average fully diluted shares outstanding....... 50.8 59.2 67.0 61.7 52.2 43.7 59.1
BALANCE SHEET DATA -- PERIOD END
Total assets................................... $11,832.4 $11,772.7 $13,749.3 $10,811.9 $17,297.5 $16,896.7 $17,230.0
Notes payable for which Conseco is directly
liable....................................... 177.6 163.2 413.0 191.8 871.4 418.2 660.7
Notes payable of BLH, not direct obligations of
Conseco...................................... -- 392.0 290.3 280.0 301.5 280.2 299.9
Notes payable of Partnership entities, not
direct obligations of Conseco................ 319.3 -- -- 331.1 283.2 315.7 283.5
Total liabilities.............................. 11,321.3 11,154.4 12,382.9 9,743.2 15,782.5 15,596.4 15,655.9
Minority interest.............................. 79.5 24.0 223.8 321.7 403.3 554.7 299.3
Shareholders' equity........................... 431.6 594.3 1,142.6 747.0 1,111.7 745.6 1,274.8
OTHER FINANCIAL DATA(C)
Premiums collected(d).......................... $ 1,648.7 $ 1,464.9 $ 2,140.1 $ 1,879.1 $ 3,106.4 $ 875.9 $ 746.2
Operating earnings(e).......................... 61.5 114.8 162.0 151.7 131.3 25.2 48.4
Operating earnings per fully diluted common
share(b)(e).................................. 1.05 1.80 2.39 2.46 2.52 0.47 0.82
Shareholders' equity excluding unrealized
appreciation (depreciation) of fixed maturity
securities(f)................................ 431.6 560.3 1,055.2 884.7 999.1 814.2 1,291.2
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 13.14 17.90
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 .30x .34x
Excluding unrealized appreciation
(depreciation)(f)........................ .29x .23x .28x .18x .47x .28x .34x
Adjusted statutory capital (at period
end)(g)...................................... $ 617.1 $ 603.1 $ 1,135.5 $ 509.0 $ 1,021.0 $ 873.6 $ 954.1
Adjusted statutory earnings(h)................. 90.0 153.4 273.8 248.6 321.7 73.0 77.8
Ratio of adjusted statutory earnings to cash
interest(i).................................. 2.62x 5.75x 4.94x 5.06x 3.79x 4.23x 3.72x
</TABLE>
(See footnotes on following page)
11
<PAGE> 23
- -------------------------
(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 Holdings, 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.
(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.
12
<PAGE> 24
SELECTED HISTORICAL FINANCIAL INFORMATION OF LPG(A)
The selected historical financial information set forth below was derived
from the 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. The consolidated financial
information set forth for the three months ended March 31, 1995 and 1996, is
unaudited; however, in the opinion of LPG's management, the accompanying
financial information contains all adjustments, consisting only of normal
recurring items, necessary to present fairly the financial information for such
periods. The results of operations for the three months ended March 31, 1996,
may not be indicative of the results of operations to be expected for a full
year.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
-------------------------------------------------------- --------------------
1991 1992 1993 1994 1995 1995 1996
-------- -------- -------- -------- -------- -------- --------
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Insurance policy income....................... $ 187.1 $ 187.3 $ 210.8 $ 217.9 $ 280.1 $ 55.8 $ 77.4
Investment activity:
Net investment income....................... 207.5 218.6 221.1 225.4 277.1 61.0 73.6
Net realized gains (losses)................. 18.6 23.1 18.4 (19.7) 15.8 2.6 1.9
Total revenues................................ 420.6 436.5 455.7 428.2 576.1 120.3 154.0
Interest expense.............................. 43.4 35.3 26.0 20.7 27.9 5.4 6.0
Total benefits and expenses................... 376.6 374.9 373.9 369.8 592.8 109.4 136.2
Income (loss) before income taxes, minority
interest and extraordinary charge........... 44.1 61.7 81.9 58.5 (16.7) 10.9 17.8
Extraordinary charge, net of tax.............. -- 5.6 4.8 2.6 -- -- --
Net income (loss)............................. 22.8 32.1 47.2 34.6 (13.4) 6.9 11.4
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) 6.9 11.4
PER SHARE DATA
Income (loss) before extraordinary charge,
primary and fully diluted................... $ (0.61) $ 1.08 $ 2.05 $ 1.43 $ (0.49) $ 0.26 $ 0.40
Net income (loss), primary and fully
diluted..................................... (0.61) 0.62 1.85 1.33 (0.49) 0.26 0.40
Dividends declared per common share........... -- -- 0.0375 .08 .11 0.020 0.030
Book value per common share outstanding at
period end.................................. 13.92 15.98 12.25 11.50 14.35 12.43 13.37
Shares outstanding at period end.............. 8.0 14.4 25.4 25.5 27.9 25.7 27.9
Average fully diluted shares outstanding...... 9.0 12.1 23.4 26.1 27.1 26.1 28.4
BALANCE SHEET DATA -- PERIOD END
Total assets.................................. $2,976.9 $3,292.7 $3,589.4 $3,748.8 $4,980.9 $3,813.0 $4,988.1
Notes payable................................. 335.5 314.3 210.1 210.5 246.1 206.9 242.5
Total liabilities............................. 2,819.3 3,062.8 3,278.2 3,455.2 4,580.4 3,493.6 4,614.9
Minority interest............................. 24.1 -- -- -- -- -- --
Shareholders' equity.......................... 111.6 229.9 311.2 293.6 400.5 319.4 373.2
OTHER FINANCIAL DATA(B)
Premiums collected(c)......................... $ 508.2 $ 465.5 $ 470.2 $ 411.8 $ 497.3 $ 100.1 $ 131.8
Operating earnings (loss)(d).................. 15.5 31.9 44.1 50.0 (28.9) 4.8 10.2
Operating earnings (loss) per fully diluted
common share(d)............................. 1.72 2.63 1.88 1.91 (1.06) 0.18 0.36
Shareholders' equity excluding unrealized
appreciation (depreciation) of fixed
maturity securities(e)...................... 111.6 229.9 291.7 325.0 344.3 331.8 356.8
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 12.91 12.78
Ratio of debt to total capital:
As reported................................. .75x .58x 40x .42x .38x 0.39x 0.39x
Excluding unrealized appreciation
(depreciation)(e)......................... .75x .58x 42x .39x .42x 0.38x 0.41x
Adjusted statutory capital (at period
end)(f)..................................... $ 149.4 $ 191.3 $ 169.8 $ 174.3 $ 209.8 $ 175.1 $ 219.9
Adjusted statutory earnings(g)................ 75.7 76.4 83.4 75.8 78.1 18.4 24.0
Ratio of adjusted statutory earnings to cash
interest(h)................................. 1.83x 2.25x 3.46x 3.78x 3.46x 3.54x 4.14x
</TABLE>
(See footnotes on following page)
13
<PAGE> 25
- -------------------------
(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.
14
<PAGE> 26
SUMMARY UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
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 for the
three months ended March 31, 1996, reflects the consolidated operating results
for Conseco as if the following transactions had occurred on January 1, 1995:
(i) the Merger; (ii) the increase of Conseco's ownership in BLH to 90.5 percent,
as a result of purchases of common shares of BLH by BLH during the first three
months of 1996; (iii) the issuance of 4.37 million shares of Conseco PRIDES in
January 1996; and (iv) the BLH tender offer for and repurchase of its 13 percent
senior subordinated notes due 2002 and related financing transactions completed
in March 1996.
The summary unaudited pro forma consolidated financial information at March
31, 1996, reflects the financial position of Conseco as if the Merger had
occurred on March 31, 1996.
The summary unaudited pro forma financial information as of and for the
year ended December 31, 1995, and for the three months ended March 31, 1996, 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. 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. The Merger will be accounted for under the
purchase method of accounting.
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1995 MARCH 31, 1996
----------------- ------------------
(AMOUNTS IN MILLIONS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA
Insurance policy income........................................ $ 1,752.8 $ 447.2
Investment activity:
Net investment income........................................ 1,458.7 353.1
Net trading income (losses).................................. 2.5 (3.5)
Net realized gains........................................... 203.9 12.9
Total revenues................................................. 3,479.6 853.3
Interest expense on notes payable.............................. 133.9 31.8
Total benefits and expenses.................................... 2,982.8 709.4
Income before income taxes, minority interest and extraordinary
charge....................................................... 496.8 143.9
Income before extraordinary charge............................. 231.0 77.8
PER SHARE DATA
Income before extraordinary charge, primary.................... $3.18 1.08
Income before extraordinary charge, fully diluted.............. 3.04 1.01
Book value per common share outstanding at period end.......... 22.74
Shares outstanding at period end............................... 57.7
Average fully diluted shares outstanding....................... 76.0 77.2
</TABLE>
15
<PAGE> 27
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1995 MARCH 31, 1996
----------------- ------------------
(AMOUNTS IN MILLIONS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
ENDTotal assets................................................ $ 22,811.9
Notes payable for which Conseco is directly liable............. 914.2
Notes payable of BLH, not direct obligations of Conseco........ 299.9
Notes payable of Partnership entities, not direct obligations
of Conseco................................................... 283.5
Total liabilities.............................................. 20,649.4
Minority interest.............................................. 299.3
Shareholders' equity........................................... 1,863.2
OTHER FINANCIAL DATA(A)
Premiums collected(b).......................................... $ 3,671.8 $ 878.0
Operating earnings(c).......................................... 203.4 61.2
Operating earnings per fully diluted common share(c)........... 2.68 0.79
Shareholders' equity excluding unrealized appreciation
(depreciation) of fixed maturity securities(d)............... 1,879.6
Book value per common share outstanding, excluding unrealized
appreciation (depreciation) of fixed maturity
securities(d)................................................ 23.03
Ratio of debt for which Conseco is directly liable to total
capital of Conseco only:
As reported.................................................. 0.33x
Excluding unrealized appreciation (depreciation)(d).......... 0.33x
Adjusted statutory capital (at period end)(e).................. 1,230.8 1,174.0
Adjusted statutory earnings(f)................................. 401.9 101.8
Ratio of adjusted statutory earnings to cash interest(g)....... 3.94x 4.26x
</TABLE>
- -------------------------
(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 the wholly-owned life
insurance companies of Conseco, BLH and LPG 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.
16
<PAGE> 28
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, and for the three months
ended March 31, 1996, giving effect to the 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 periods
presented, or of future results.
<TABLE>
<CAPTION>
THREE
MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
1995 1996
------------ ---------
<S> <C> <C>
NET INCOME (LOSS) BEFORE EXTRAORDINARY CHARGE PER FULLY DILUTED COMMON
SHARE:
Historical Conseco.................................................. $ 4.26 $ 1.08
Historical LPG...................................................... (.49) .40
Pro forma combined.................................................. 3.04 1.01
Pro forma equivalent for one share of LPG common stock.............. 1.77 .59
DIVIDENDS PER COMMON SHARE:
Historical Conseco.................................................. $ .093 $ .020
Historical LPG...................................................... .110 .030
Pro forma combined.................................................. .093 .020
Pro forma equivalent for one share of LPG common stock.............. .054 .012
BOOK VALUE PER COMMON SHARE:
Historical Conseco.................................................. $ 17.51
Historical LPG...................................................... 13.37
Pro forma combined.................................................. 22.74
Pro forma equivalent for one share of LPG common stock.............. 13.26
</TABLE>
17
<PAGE> 29
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 and the dividends paid 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, shareholders 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 May 24,
1996)........................... 39 7/8 34 3/4 0.02 22 1/4 20 1/2 --
</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 May 24, 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 May 24, 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 Conseco Share Price ($33.36 and $36.00 assuming
consummation of the Merger had occurred on March 11, 1996 and May 24, 1996,
respectively) (resulting in a ratio of one (1) share of LPG Common Stock for
each .6295 and .5833 shares of Conseco Common Stock at March 11, 1996 and May
24, 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 "The Merger -- Merger Consideration."
<TABLE>
<CAPTION>
LPG
COMMON STOCK
CONSECO LPG EQUIVALENT
COMMON COMMON PER
PER SHARE PRICE STOCK STOCK SHARE PRICE
- ------------------------------------------------------------- ------ ------ ------------
<S> <C> <C> <C>
March 11, 1996............................................... $31.50 $15.75 $19.83
May 24, 1996................................................. 38.00 21.88 22.17
</TABLE>
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.
18
<PAGE> 30
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 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 businesses
as well as non-affiliates. 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 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, 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 March 31, 1996, 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 premiums
collected by BLH in 1995 (approximately 60 percent of the $385.1 million of
direct premiums collected in the first quarter of 1996) 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 March 31, 1996, 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
19
<PAGE> 31
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 (approximately 88
percent of the $169.1 million of total premiums collected in the first quarter
of 1996) was from the sale of annuity products.
OTHER LIFE INSURANCE OPERATIONS. Conseco's other insurance subsidiaries had
total assets of approximately $.8 billion at March 31, 1996. 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 ($19.0 million in the first quarter of 1996), including
$6.6 million of premiums from deposit funds maintained by employee benefit plans
of Conseco ($2.0 million in the first quarter of 1996).
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 $6.0 billion
at March 31, 1996, 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 ($178.8 million in the first quarter of 1996).
Approximately 91 percent of such premiums collected in 1995 were from the sale
of deferred annuities (91 percent in the first quarter of 1996).
FEE-BASED OPERATIONS
Conseco's subsidiaries provide various services to affiliated and
unaffiliated clients. Conseco Capital Management, Inc. managed $24.3 billion of
invested assets at March 31, 1996, including $13.8 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 and $27.6 million, for 1995
and the first quarter of 1996, 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. Effective January 1, 1996, Conseco's
subsidiaries entered into new service agreements with Conseco's service
subsidiaries. Such new agreements had the effect of increasing revenues from
fee-based operations by $9.2 million. Such new service agreements had no effect
on consolidated net income.
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.
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
20
<PAGE> 32
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 $59.5 billion at
March 31, 1996.
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.
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
June 27, 1996, at the Ritz Charles, 12156 North Meridian Street, Carmel,
Indiana, 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 June 27, 1996, at
the Hotel Crescent Court, 400 Crescent Court, Dallas, Texas, 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 May 30, 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."
21
<PAGE> 33
VOTING AT THE MEETINGS; RECORD DATE; QUORUM
CONSECO. The Conseco Board of Directors has fixed May 24, 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 41,835,969 shares of Conseco
Common Stock outstanding and entitled to vote and 4,369,700 shares of Conseco
PRIDES outstanding and entitled to vote. 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 one 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 at
the Conseco Special Meeting, in person or by properly executed proxy, of the
holders of Conseco Common Stock and Conseco PRIDES entitled to cast a majority
of the votes at the Conseco Special Meeting is necessary to constitute a quorum.
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% in 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 5,596,364 shares of
Conseco Common Stock (including shares as to which such individuals or their
spouses had shared voting power), representing approximately 12.3% of the votes
entitled to be cast by holders of Conseco Stock outstanding 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 May 24, 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 28,166,549 shares of LPG Common
Stock outstanding and entitled to vote. 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
22
<PAGE> 34
representing a majority of the voting power of all outstanding shares of 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 4,527,796 shares of LPG Common Stock,
or approximately 16.1% of the number of shares of LPG Common Stock outstanding
and entitled to vote as of such date. The directors of LPG 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.
As of the LPG Record Date, Conseco owned 603,400 shares of LPG Common
Stock, approximately 2.1% 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.
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
23
<PAGE> 35
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.
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 $18,500 plus
reimbursement of reasonable expenses.
LPG SHAREHOLDERS SHOULD NOT SEND ANY STOCK CERTIFICATES WITH THEIR PROXY CARDS.
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
24
<PAGE> 36
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 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
continued 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. DLJ
delivered its written opinion at the end of the meeting. See "-- Opinion of
LPG's Financial Advisor."
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."
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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 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 value 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,
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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
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.
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
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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 its 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.
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
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<PAGE> 40
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 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
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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
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
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 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.
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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 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 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,
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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 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
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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% 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
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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.
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 were permitted to be repriced;
(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.
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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 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
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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.
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.
Hicks Muse 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 11.9% 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.
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
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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;
(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
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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 17, 1996. The required waiting period
under the HSR Act expired on May 17, 1996. At any time before or after the
consummation of the Merger, and notwithstanding that the HSR Act waiting period
has expired, 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 expired, 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.
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. Such shares of Conseco Common Stock have been
approved for listing on the NYSE, subject to approval of the Merger
Consideration Stock Issuance by the shareholders of Conseco. Approval of the
listing on the NYSE 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
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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.
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 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 is 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."
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
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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 May 24, 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
$38 per share and $21 7/8 per share, respectively. There can be no assurance or
prediction, and neither 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 were permitted to be repriced;
(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.
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<PAGE> 52
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 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 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
41
<PAGE> 53
ordinary course of business; (f) incur any indebtedness for borrowed money or
make any loans or advances to any other person, 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 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,
however, 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.
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<PAGE> 54
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 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 reaffirming 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
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<PAGE> 55
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 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 the following paragraph.
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.
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 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
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<PAGE> 56
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.
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<PAGE> 57
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The unaudited pro forma consolidated statements of operations of Conseco
for the year ended December 31, 1995, and for the three months ended March 31,
1996, present the consolidated operating results for Conseco as if the Merger
had occurred on January 1, 1995.
The pro forma consolidated statement of operations data for Conseco for the
year ended December 31, 1995, 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. Such pro forma adjustments are set forth in Exhibit 99.1 included in
Conseco's Form 8-K dated April 10, 1996, incorporated by reference herein.
The pro forma consolidated statement of operations data for Conseco for the
three months ended March 31, 1996, 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 increase of Conseco's
ownership in BLH to 90.5 percent, as a result of purchases of common shares of
BLH by BLH during the first three months of 1996; (ii) the issuance of 4.37
million shares of Conseco PRIDES in January 1996; and (iii) the BLH tender offer
for and repurchase of its 13 percent senior subordinated notes due 2002 and
related financing transactions completed in March 1996. Such pro forma
adjustments are set forth in Exhibit 99.1 included in Conseco's Quarterly
Report, incorporated by reference herein.
The unaudited pro forma consolidated balance sheet as of March 31, 1996,
gives effect to the Merger as if it had occurred on March 31, 1996.
The unaudited pro forma consolidated statement of operations data of LPG
for the year ended December 31, 1995, 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 and the following (all of which are
incorporated by reference herein): Conseco's Annual Report; LPG's Annual Report;
Conseco's Quarterly Report; LPG's Quarterly Report; 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; 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. 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.
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<PAGE> 58
CONSECO
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
CONSECO LPG PRO FORMA PRO FORMA
BEFORE BEFORE ADJUSTMENTS CONSECO
THE 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) 1,458.7
4.8(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 23.2 3,479.6
-------- ------ ------ --------
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 (75.5)(5) 308.8
11.5(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 (69.1) 2,982.8
-------- ------ ------ --------
Income (loss) before income taxes, minority
interest and extraordinary charge......... 419.4 (14.9) 92.3 496.8
Income tax expense (benefit)........................ 163.3 (2.6) (2.5)(4) 193.3
35.1(8)
-------- ------ ------ --------
Income (loss) before minority interest and
extraordinary charge......................... 256.1 (12.3) 59.7 303.5
Minority interest................................... 72.5 -- -- 72.5
-------- ------ ------ --------
Income (loss) before extraordinary charge.... $ 183.6 $ (12.3) $ 59.7 $ 231.0
======== ====== ====== ========
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 $ 3.18
======== ========
Fully diluted:
Weighted average shares outstanding............ 59.7 16.3(9) 76.0
======== ====== ========
Income before extraordinary charge............. $ 3.07 $ 3.04
======== ========
</TABLE>
The accompanying notes are an integral part of the pro forma consolidated
financial statements.
47
<PAGE> 59
CONSECO
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
CONSECO PRO FORMA PRO FORMA
BEFORE ADJUSTMENTS CONSECO
THE LPG RELATING TO REFLECTING THE
MERGER HISTORICAL THE MERGER MERGER
--------- ---------- ----------- --------------
<S> <C> <C> <C> <C>
Revenues:
Insurance policy income........................... $ 369.8 $ 77.4 $ -- $447.2
Investment activity:
Net investment income.......................... 273.7 74.6 3.7(1) 353.1
1.1(2)
Net trading losses............................. (3.5) -- -- (3.5)
Net realized gains............................. 9.4 1.9 1.6(1) 12.9
Fee revenue....................................... 10.1 -- -- 10.1
Restructuring income.............................. 30.4 -- -- 30.4
Other income...................................... 1.9 1.2 -- 3.1
------- ------ ------- ------
Total revenues............................... 691.8 155.1 6.4 853.3
------- ------ ------- ------
Benefits and expenses:
Insurance policy benefits and change in future
policy benefits................................ 283.9 34.6 -- 318.5
Interest expense on annuities and financial
products....................................... 139.1 43.9 -- 183.0
Interest expense on notes payable................. 25.6 6.0 0.2(3) 31.8
Interest expense on investment borrowings......... 3.7 1.1 -- 4.8
Amortization related to operations................ 44.6 30.7 (1.1)(5) 77.0
2.8(6)
Amortization related to realized gains............ 9.1 0.1 1.4(7) 10.6
Other operating costs and expenses................ 62.8 20.9 -- 83.7
------- ------ ------- ------
Total benefits and expenses.................. 568.8 137.3 3.3 709.4
------- ------ ------- ------
Income before income taxes, minority interest
and extraordinary charge.................. 123.0 17.8 3.1 143.9
Income tax expense.................................. 45.9 6.4 2.1(8) 54.4
------- ------ ------- ------
Income before minority interest and
extraordinary charge......................... 77.1 11.4 1.0 89.5
Minority interest................................... 11.7 -- -- 11.7
------- ------ ------- ------
Income before extraordinary charge........... $ 65.4 $ 11.4 $ 1.0 $ 77.8
======= ====== ======= ======
Earnings per common share and common equivalent
share:
Primary:
Weighted average shares outstanding............ 51.5 16.3(9) 67.8
======= ======= ======
Income before extraordinary charge............. $ 1.18 $ 1.08
======= ======
Fully diluted:
Weighted average shares outstanding............ 60.9 16.3(9) 77.2
======= ======= ======
Income before extraordinary charge............. $ 1.07 $ 1.01
======= ======
</TABLE>
The accompanying notes are an integral part of the pro forma consolidated
financial statements.
48
<PAGE> 60
CONSECO
PRO FORMA CONSOLIDATED BALANCE SHEET
MARCH 31, 1996
(DOLLARS IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
ADJUSTMENTS CONSECO
CONSECO LPG RELATING TO REFLECTING THE
HISTORICAL HISTORICAL THE MERGER MERGER
---------- ---------- ----------- --------------
<S> <C> <C> <C> <C>
Assets:
Investments:
Actively managed fixed maturity securities at fair
value.............................................. $ 12,623.7 $2,735.7 $ 676.4 (10) $ 16,052.3
16.5 (11)
Held-to-maturity fixed maturity securities........... -- 676.4 (676.4)(10) --
Equity securities at fair value...................... 32.3 29.0 -- 61.3
Mortgage loans....................................... 325.3 105.1 (10.2)(11) 420.2
Credit-tenant loans.................................. 284.0 -- -- 284.0
Policy loans......................................... 306.3 226.8 -- 533.1
Other invested assets................................ 97.2 69.9 -- 167.1
Trading account securities........................... 0.6 0.6
Short-term investments............................... 105.8 90.7 -- 196.5
Assets held in separate accounts..................... 242.8 -- -- 242.8
--------- -------- ------- ---------
Total investments.................................. 14,018.0 3,933.6 6.3 17,957.9
Accrued investment income.............................. 226.6 55.4 -- 282.0
Cost of policies purchased............................. 1,174.7 300.8 (300.8)(12) 1,750.7
576.0 (12)
Cost of policies produced.............................. 481.6 256.5 (256.5)(13) 481.6
Reinsurance receivables................................ 93.0 282.1 -- 375.1
Income taxes........................................... 39.3 109.2 (16) 148.5
Goodwill............................................... 913.5 99.8 (99.8)(14) 1,480.7
567.2 (14)
Property and equipment................................. 86.9 -- -- 86.9
Securities segregated for future redemption of
redeemable preferred stock of a subsidiary........... 39.9 -- -- 39.9
Other assets........................................... 156.5 59.9 (7.8)(19) 208.6
--------- -------- ------- ---------
Total assets....................................... $ 17,230.0 $4,988.1 $ 593.8 $ 22,811.9
========= ======== ======= =========
Liabilities:
Insurance liabilities.................................. $ 13,502.9 $4,211.7 $ 340.0 (15) $ 18,054.6
Income tax liabilities................................. -- 22.4 (22.4)(16) --
Investment borrowings.................................. 285.1 72.5 -- 357.6
Other liabilities...................................... 381.0 65.8 50.0 (17) 496.8
Liabilities related to separate accounts............... 242.8 -- -- 242.8
Notes payable of Conseco............................... 660.7 242.5 11.0 (18) 914.2
Notes payable of BLH, not direct obligations of
Conseco.............................................. 299.9 -- -- 299.9
Notes payable of Partnership II entities, not direct
obligations of Conseco............................... 283.5 -- -- 283.5
--------- -------- ------- ---------
Total liabilities.................................. 15,655.9 4,614.9 378.6 20,649.4
--------- -------- ------- ---------
Minority interest........................................ 299.3 -- -- 299.3
--------- -------- ------- ---------
Shareholders' equity:
Preferred stock........................................ 550.6 -- -- 550.6
Common stock and additional paid-in capital............ 168.3 287.9 (287.9)(19) 756.7
588.4 (19)
Unrealized appreciation (depreciation) of securities... (16.9) 20.4 (20.4)(19) (16.9)
Retained earnings...................................... 572.8 64.9 (64.9)(19) 572.8
--------- -------- ------- ---------
Total shareholders' equity......................... 1,274.8 373.2 215.2 1,863.2
--------- -------- ------- ---------
Total liabilities and shareholders' equity......... $ 17,230.0 $4,988.1 $ 593.8 $ 22,811.9
========= ======== ======= =========
</TABLE>
The accompanying notes are an integral part of the pro forma consolidated
financial statements.
49
<PAGE> 61
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 greater
than $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 May 20, 1996, was
$36.97 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
March 31, 1996)................................................... $ 373.2
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..................... 692.9
Held-to-maturity fixed maturity securities..................... (676.4)
Mortgage loans................................................. (10.2)
Cost of policies purchased (historical)........................ (300.8)
Cost of policies purchased (related to the Merger)............. 576.0
Cost of policies produced...................................... (256.5)
Goodwill (historical).......................................... (99.8)
Goodwill (related to the Merger)............................... 567.2
Insurance liabilities.......................................... (340.0)
Notes payable.................................................. (11.0)
Other.......................................................... 81.6
-------
Total estimated fair value adjustments....................... 223.0
-------
Net assets acquired................................................. 596.2
Notes payable assumed by Conseco.................................... 242.5
-------
Total cost to acquire LPG.................................... $ 838.7
=======
</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 GAAP, 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.
50
<PAGE> 62
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
OF CONSECO (CONTINUED)
(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 March 31, 1996, 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 March 31, 1996. 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.
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
51
<PAGE> 63
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
OF CONSECO (CONTINUED)
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 March
31, 2001, are as follows (dollars in millions):
<TABLE>
<CAPTION>
BEGINNING GROSS ACCRETION NET ENDING
YEAR ENDING MARCH 31, BALANCE AMORTIZATION OF INTEREST AMORTIZATION BALANCE
---------------------------------- --------- ------------ ----------- ------------ -------
<S> <C> <C> <C> <C> <C>
1997.............................. $ 576.0 $108.1 $31.9 $ 76.2 $ 499.8
1998.............................. 499.8 96.5 28.2 68.3 431.5
1999.............................. 431.5 81.7 24.3 57.4 374.1
2000.............................. 374.1 70.8 21.2 49.6 324.5
2001.............................. 324.5 60.9 18.1 42.8 281.7
</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. Other assets are reduced to eliminate
Conseco's investment in LPG Common Stock purchased prior to the Merger.
Common stock and additional paid-in capital is increased by the value of
Conseco Common Stock issued in the Merger.
52
<PAGE> 64
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 the outstanding shares 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 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
an annual or 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
53
<PAGE> 65
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 unanimous
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 (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 an 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 the officer or director reasonably believed that his or her conduct
was in the corporation's best interests and permits the purchase of insurance in
this regard. The indemnification provided for in the Indiana Corporation Law
does not exclude any other rights to indemnification that a person may have
under: (i) a corporation's articles of incorporation or bylaws; (ii) a
54
<PAGE> 66
resolution of the board of directors or of the shareholders; or (iii) any other
authorization, whenever adopted, after notice, by a majority vote of all the
voting shares then issued and outstanding.
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 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 party 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 the best interests of the corporation; and (B) in
all other cases, that the individual's conduct was at least not opposed to the
best interests of the corporation; 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.
55
<PAGE> 67
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 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. 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.
56
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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 beneficially owns 683,564 shares and holds
options to purchase 1,406,900 shares of Conseco Common Stock.
Certain tax matters in connection with the transaction as discussed under
"The Merger -- Certain Federal Income Tax Consequences" 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 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 24, 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> 70
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
ARTICLE I
THE MERGER............................................................................. A-1
1.1 The Merger..................................................................... A-1
1.2 Closing........................................................................ A-1
1.3 Effective Time................................................................. A-1
1.4 Certificate of Incorporation................................................... A-1
1.5 By-Laws........................................................................ A-2
1.6 Directors...................................................................... A-2
1.7 Officers....................................................................... A-2
1.8 Conversion of LPG Acquisition Shares........................................... A-2
1.9 Conversion of Shares........................................................... A-2
1.10 Exchange of Certificates....................................................... A-2
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.......................................... A-4
2.1 Organization, Standing and Corporate Power..................................... A-4
2.2 Capital Structure.............................................................. A-4
2.3 Authority; Noncontravention.................................................... A-5
2.4 SEC Documents.................................................................. A-5
2.5 Absence of Certain Changes or Events........................................... A-6
2.6 Absence of Changes in Benefit Plans............................................ A-6
2.7 Benefit Plans.................................................................. A-6
2.8 Taxes.......................................................................... A-7
2.9 No Excess Parachute Payments; Section 162(m) of the Code....................... A-7
2.10 Voting Requirements............................................................ A-7
2.11 Compliance with Applicable Laws................................................ A-8
2.12 Opinion of Financial Advisor................................................... A-8
2.13 Brokers........................................................................ A-8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF CONSECO AND LPG ACQUISITION.......................... A-8
3.1 Organization, Standing and Corporate Power..................................... A-8
3.2 Conseco Capital Structure...................................................... A-9
3.3 Authority; Noncontravention.................................................... A-9
3.4 SEC Documents.................................................................. A-10
3.5 Absence of Certain Changes or Events........................................... A-10
3.6 Compliance with Applicable Laws................................................ A-11
3.7 No Prior Activities............................................................ A-11
3.8 Brokers........................................................................ A-11
3.9 Voting Requirements............................................................ A-11
ARTICLE IV
ADDITIONAL AGREEMENTS.................................................................. A-11
4.1 Preparation of Form S-4 and the Joint Proxy Statement; Information Supplied.... A-11
4.2 Meetings of Stockholders....................................................... A-12
4.3 Letter of the Company's Accountants............................................ A-13
4.4 Letter of Conseco's Accountants................................................ A-13
4.5 Access to Information; Confidentiality......................................... A-13
4.6 Best Efforts................................................................... A-13
</TABLE>
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<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
4.7 Public Announcements........................................................... A-13
4.8 Acquisition Proposals.......................................................... A-13
4.9 Fiduciary Duties............................................................... A-14
4.10 Consents, Approvals and Filings................................................ A-14
4.11 Certain Fees................................................................... A-15
4.12 Affiliates and Certain Stockholders............................................ A-15
4.13 NYSE Listing................................................................... A-16
4.14 Stockholder Litigation......................................................... A-16
4.15 Indemnification................................................................ A-16
4.16 Financing...................................................................... A-16
4.17 Officers' Certificates Relating to Tax Treatment............................... A-17
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS PRIOR TO MERGER.............................. A-17
5.1 Conduct of Business by the Company............................................. A-17
5.2 Conduct of Business by Conseco................................................. A-19
5.3 Stock Options and Warrants..................................................... A-19
5.4 Other Actions.................................................................. A-20
5.5 Conduct of Business of LPG Acquisition......................................... A-20
ARTICLE VI
CONDITIONS PRECEDENT................................................................... A-20
6.1 Conditions to Each Party's Obligation To Effect the Merger..................... A-20
6.2 Conditions to Obligations of Conseco and LPG Acquisition....................... A-21
6.3 Conditions to Obligation of the Company........................................ A-21
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER...................................................... A-22
7.1 Termination.................................................................... A-22
7.2 Effect of Termination.......................................................... A-22
7.3 Amendment...................................................................... A-22
7.4 Extension; Waiver.............................................................. A-22
7.5 Procedure for Termination, Amendment, Extension or Waiver...................... A-22
ARTICLE VIII
SURVIVAL OF PROVISIONS................................................................. A-23
8.1 Survival....................................................................... A-23
ARTICLE IX
NOTICES................................................................................ A-23
9.1 Notices........................................................................ A-23
ARTICLE X
MISCELLANEOUS.......................................................................... A-24
10.1 Entire Agreement............................................................... A-24
10.2 Expenses....................................................................... A-24
10.3 Counterparts................................................................... A-24
10.4 No Third Party Beneficiary..................................................... A-24
10.5 Governing Law.................................................................. A-24
10.6 Assignment; Binding Effect..................................................... A-24
10.7 Headings, Gender, etc.......................................................... A-25
10.8 Invalid Provisions............................................................. A-25
</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.
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.
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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.
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.
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
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(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.
(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.
(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.
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(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.
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 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
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<PAGE> 76
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 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 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
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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).
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.
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
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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.
(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.
(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
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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.
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.
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
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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.
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.
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
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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, 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
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,
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liabilities or business, except as may have been required by a change in
generally accepted accounting principles.
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.
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
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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.
(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.
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
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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.
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.
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
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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 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,
unlessthe 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
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
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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.
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.
(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
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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.
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.
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
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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.
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;
(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;
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(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;
(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
(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.
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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:
(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
(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;
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(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
(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.
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
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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.
(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.
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
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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.
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.
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
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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.
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
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
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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.
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.
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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.
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
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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, (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.
EA-1
<PAGE> 98
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,
EA-2
<PAGE> 99
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 delivered to us by Conseco, dated the date hereof, (ii) the
representations made by LPG, which are set forth in the Officers' Certificate
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,
EB-1
<PAGE> 100
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 $60.00, the Conversion
Ratio will be .35000 and if the Average Price is greater than $72.00, the
Conversion Ratio will be .29167.
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 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.
B-1
<PAGE> 101
THE BOARD OF DIRECTORS
LIFE PARTNERS GROUP, INC.
PAGE 2 MARCH 11, 1996
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 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/ PERRY H. BRAUN
------------------------------------
Perry H. Braun
Senior Vice President
B-2
<PAGE> 102
[ALTERNATE PAGE FOR RESALE PROSPECTUS]
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION................................................................. ii
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE....................................... iii
TABLE OF CONTENTS..................................................................... iv
SUMMARY............................................................................... 1
SELECTED HISTORICAL FINANCIAL INFORMATION OF CONSECO.................................. 11
SELECTED HISTORICAL FINANCIAL INFORMATION OF LPG...................................... 13
SUMMARY UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION........................ 15
COMPARATIVE UNAUDITED PER SHARE INFORMATION OF CONSECO AND LPG........................ 17
MARKET PRICE INFORMATION.............................................................. 18
INFORMATION CONCERNING CONSECO AND THE MERGER SUB..................................... 19
INFORMATION CONCERNING LPG............................................................ 20
SHAREHOLDER MEETINGS.................................................................. 21
THE MERGER............................................................................ 24
THE MERGER AGREEMENT.................................................................. 39
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS................................. 46
COMPARISON OF SHAREHOLDERS' RIGHTS.................................................... 53
MANAGEMENT OF THE SURVIVING CORPORATION UPON CONSUMMATION OF THE MERGER............... 57
LEGAL MATTERS......................................................................... 57
EXPERTS............................................................................... 57
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS............................................. 57
OTHER MATTERS......................................................................... 57
SELLING SHAREHOLDERS.................................................................. 58
PLAN OF DISTRIBUTION.................................................................. 59
</TABLE>
ALT-1
<PAGE> 103
[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 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.
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF CONSECO
NAME OF AFFILIATE LPG SHARES OWNED SHARES REGISTERED
--------------------------------------------- ---------------- -----------------
<S> <C> <C>
Gene H. Bishop............................... 268,772 188,140
Thomas O. Hicks.............................. 965,539 675,877
John H. Massey............................... 16,445 11,512
John R. Muse................................. 621,649 435,154
Bruce D. Schnitzer........................... 269,849 188,894
Roger T. Staubach............................ 12,572 8,800
Hicks, Muse & Co. (TX) Incorporated.......... 317,316 222,121
Nimrod Holdings Inc. ........................ 1,579,616 1,105,731
Moross Family Protection Trust............... 147,739 103,417
Moross Family Foundation..................... 221,108 154,776
Muse Children's GS-Trust..................... 10,000 7,000
Magical Corporation.......................... 50,520 35,364
William Cree Hicks Trust..................... 5,303 3,712
</TABLE>
58
<PAGE> 104
[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.
59
<PAGE> 105
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> 106
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<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 -- Opinion of Weil, Gotshal & Manges LLP as to certain tax matters.*
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.**
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.*
</TABLE>
- -------------------------
* Filed herewith.
** Filed previously.
(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.
(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
II-2
<PAGE> 107
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 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.
(d) 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.
(e) 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.
(f) See Item 20.
II-3
<PAGE> 108
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to 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 24th day of May, 1996.
CONSECO, INC.
By: /s/ STEPHEN C. HILBERT
------------------------------------
Stephen C. Hilbert,
Chairman of the Board,
Chief Executive Officer and
President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to 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>
* Director, Chairman of the Board, Chief May 24, 1996
- ------------------------------ Executive Officer and President (Principal
Stephen C. Hilbert Executive Officer of the Registrant)
* Director, Executive Vice President and Chief May 24, 1996
- ------------------------------ Financial Officer (Principal Financial and
Rollin M. Dick Accounting Officer of the Registrant)
* Director May 24, 1996
- ------------------------------
Ngaire E. Cuneo
* Director May 24, 1996
- ------------------------------
M. Phil Hathaway
* Director May 24, 1996
- ------------------------------
Louis P. Ferrero
* Director May 24, 1996
- ------------------------------
Donald F. Gongaware
* Director May 24, 1996
- ------------------------------
David R. Decatur
* Director May 24, 1996
- ------------------------------
James D. Massey
* Director May 24, 1996
- ------------------------------
Dennis E. Murray, Sr.
*By: /s/ KARL W. KINDIG
- ------------------------------
Karl W. Kindig,
Attorney-in-Fact
</TABLE>
II-4
<PAGE> 1
EXHIBIT 5
May 24, 1996
Board of Directors
Conseco, Inc.
11825 N. Pennsylvania Street
Carmel, Indiana 46032
Gentlemen and Madam:
I am Executive Vice President and General Counsel of Conseco, Inc. (the
"Corporation"). At your request, I have examined or caused to be examined the
Registration Statement on Form S-4 (Registration No. 333-02537) filed with the
Securities and Exchange Commission and Amendment No. 1 thereto (as so amended,
the "Registration Statement") in connection with the registration under the
Securities Act of 1933 of shares of common stock, no par value, of the
Corporation (the "Common Stock") to be issued pursuant to that certain Agreement
and Plan of Merger dated March 11, 1996 among the Corporation, LPG Acquisition
Company and Life Partners Group, Inc.
I have examined, or caused to be examined, instruments, documents and
records which I have deemed relevant and necessary for the basis of my opinions
hereinafter expressed. Based on such examination, I am of the opinion that:
1. The Corporation is a corporation duly organized and validly
existing under the laws of the State of Indiana.
2. When the Common Stock has been issued in the manner described in
the Registration Statement, any amendment thereto and the Joint Proxy
Statement/Prospectus contained therein, such Common Stock will be duly
authorized, validly issued, fully paid and nonassessable.
I consent to the filing of this opinion as an exhibit to the Registration
Statement and to the use of my name under the caption "Legal Matters" in the
Registration Statement and the Joint Proxy Statement/Prospectus.
Very truly yours,
/S/ LAWRENCE W. INLOW
Lawrence W. Inlow
Executive Vice President and
General Counsel
<PAGE> 1
EXHIBIT 8
May 28, 1996
Life Partners Group, Inc.
7887 East Belleview Avenue
Englewood, Colorado 80111
Ladies & 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 as of March 11, 1996 (the "Merger Agreement"), the
Joint Proxy Statement/Prospectus dated May 28, 1996 (the "Joint Proxy
Statement"), included in Amendment No. 1 to Registration Statement on Form S-4,
being filed by Conseco with the Securities and Exchange Commission on May 28,
1996 (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 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, except with respect to cash received by
shareholders in lieu of fractional shares of the common stock of Conseco.
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.
This opinion is rendered solely for your benefit in connection with the
transaction described above. This opinion may not be used or relied upon by any
other person and may not be disclosed, quoted, filed with a governmental agency
or otherwise referred to without our prior written consent.
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" in the Joint Proxy Statement.
Very truly yours,
/s/ WEIL, GOTSHAL & MANGES LLP
<PAGE> 1
[Coopers & Lybrand L.L.P. Letterhead]
EXHIBIT 23(B)
CONSENT OF INDEPENDENT ACCOUNTANTS
-------------------------
We consent to the incorporation by reference in the registration statement
of Conseco, Inc. on Form S-4 (File No. 333-02537), 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. Sig.]
COOPERS & LYBRAND L.L.P.
Indianapolis, Indiana
May 23, 1996
<PAGE> 1
[Coopers & Lybrand L.L.P. Letterhead]
EXHIBIT 23(C)
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. 333-02537), 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. Sig]
COOPERS & LYBRAND L.L.P.
Denver, Colorado
May 23, 1996
<PAGE> 1
EXHIBIT 99.2
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 and shares of
Preferred Redeemable Increased Dividend Equity Securities, 7% PRIDES,
Convertible Preferred Stock which such person is entitled to vote at the Special
Meeting of Shareholders of Conseco, Inc. ("Conseco"), to be held at the Ritz
Charles, 12156 North Meridian Street, Carmel, Indiana, at 10:00 a.m. local time
on June 27, 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 hereon. 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 May 28, 1996.
Dated
----------------------------------
Signature(s)
----------------------------
----------------------------------------
PLEASE DATE, SIGN, AND RETURN THIS PROXY PROMPTLY.
<PAGE> 1
EXHIBIT 99.3
[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 JUNE 27, 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 June 27, 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:
--------------------------
