SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: August 25, 1996
CONSECO, INC.
State of Incorporation:
Indiana
Commission File Number IRS Employer Id. Number
No. 1-9250 No. 35-1468632
Address of Principal Executive Offices:
11825 North Pennsylvania Street
Carmel, Indiana 46032
Telephone No.
(317) 817-6100
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CONSECO, INC. AND SUBSIDIARIES
ITEM 5. OTHER EVENTS.
On August 26, 1996, Conseco, Inc. ("Conseco") announced the following:
(i) Conseco has agreed to acquire American Travellers Corporation
("American Travellers"), a provider of long- term care insurance, for
approximately $793 million in Conseco common stock. Under the
definitive agreement dated August 25, 1996, between Conseco and
American Travellers, each of the 18.0 million issued and outstanding
shares of American Travellers common stock would be converted into the
right to receive a fraction of a share of Conseco common stock having
a value between $32.00 and $35.03, depending on the average closing
price of Conseco shares in the 10 trading days immediately preceding
the second trading day prior to closing. Each $1,000 principal amount
of American Travellers' 6-1/2 Percent Convertible Subordinated
Debentures would become convertible into shares of Conseco common
stock having a value between $2,110 and $2,310, depending on the same
average price. The total value of Conseco common stock to be issued in
this transaction includes $575 million to acquire American Travellers
outstanding common shares and $218 million when the American
Travellers debentures are converted. Under the agreement, American
Travellers would be merged into Conseco. Consummation of the American
Travellers transaction, which is subject to customary terms and
conditions, including approval by the stockholders of both American
Travellers and Conseco and regulatory approvals, is expected by the
end of the fourth quarter of 1996.
(ii) Conseco has agreed to acquire Capitol American Financial Corporation
("Capitol American"), a provider of cancer insurance and other
supplemental health insurance products, for approximately $650 million
in cash and Conseco common stock. Under the definitive agreement dated
August 25, 1996, between Conseco and Capitol American, each of the
17.8 million issued and outstanding shares of Capitol American common
stock would be converted into the right to receive $30.00 in cash and
$6.50 of Conseco common stock. The $680 million total value of the
transaction includes $534 million in cash, $116 million in Conseco
stock and $30 million of Capitol American debt being assumed by
Conseco. Under the agreement, Capitol American would be merged into
Conseco. Consummation of the transaction, which is subject to
customary terms and conditions, including approval by the stockholders
of Capitol American and regulatory approvals, is expected by the end
of the fourth quarter of 1996.
(iii) Conseco is distributing the stock of American Life Holdings, Inc.
("American Life Holdings"), a provider of retirement savings
annuities, previously held by Conseco Capital Partners II, L.P. to all
partners. Conseco then intends to acquire the stock of American Life
Holdings not already owned by Conseco for approximately $165 million
in cash. Under Conseco's offer, each of the 7.2 million outstanding
shares of American Life Holdings not already owned by Conseco would be
converted into the right to receive $23.00 in cash. American Life
Holdings would become a wholly owned subsidiary of Conseco. Completion
of the transaction, which is subject to approval by the shareholders
of American Life Holdings, is expected by the fourth quarter of 1996.
(iv) Conseco intends to merge with Bankers Life Holding Corporation
("Bankers Life"), a provider of supplemental health insurance
products, in a transaction under which Conseco will acquire the
outstanding shares of Bankers Life that Conseco does not already own
for approximately $117 million in Conseco common stock. In the
intended merger, each of the 4.7 million outstanding shares of Bankers
Life common stock not already owned by Conseco would be converted into
the right to receive $25.00 in Conseco common stock. Bankers Life
would be merged into Conseco. Completion of the transaction, which is
subject to review by the Securities and Exchange Commission of the
information to be submitted to shareholders of Bankers Life describing
the terms of the merger, is expected to occur in the fourth quarter of
1996.
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CONSECO, INC. AND SUBSIDIARIES
On August 27, 1996, Conseco called for redemption all 5.3 million
outstanding shares of its Series D Cumulative Convertible Preferred Stock
("Series D Stock"). The Series D Stock will be redeemed on September 26, 1996,
at $52.916 per share in cash, including $0.641 per share of accrued and
accumulated unpaid dividends. Dividends on the Series D Stock will cease to
accrue on September 26, 1996. Each Series D share can be converted into 1.5686
shares of Conseco common stock (no par value) until 5:00 p.m. (Eastern Daylight
Savings Time) on September 20, 1996. No adjustments for accrued but unpaid
dividends will be paid upon conversion to common stock, and no fractional shares
of common stock will be delivered. Conseco will pay the cash equivalent of any
such fractional interests. All shares of Series D Stock not previously converted
will be redeemed on the redemption date.
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CONSECO, INC. AND SUBSIDIARIES
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) FINANCIAL STATEMENTS -- None
(b) PRO FORMA FINANCIAL INFORMATION -- None
(c) EXHIBITS
2.6 Agreement and Plan of Merger dated as of August 25,
1996, by and between Conseco, Inc. and American
Travellers Corporation
2.7 Agreement and Plan of Merger dated as of August
25, 1996, by and among Conseco, Inc., CAF
Acquisition Company and Capitol American Financial
Corporation
99.1 Shareholders Agreement dated as of August 25, 1996, by and
among Conseco, Inc. and Barry J. Hershey and Connie Hershey
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CONSECO, INC. AND SUBSIDIARIES
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: August 28, 1996
CONSECO, INC.
By: /s/ ROLLIN M. DICK
------------------
Rollin M. Dick
Executive Vice President
and Chief Financial Officer
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AGREEMENT AND PLAN OF MERGER
DATED AS OF AUGUST 25, 1996
By and Between
CONSECO, INC.
and
AMERICAN TRAVELLERS CORPORATION
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TABLE OF CONTENTS
Page
ARTICLE I
<S> <C>
THE MERGER.................................................................................... 1
1.1 The Merger........................................................................... 1
1.2 Closing.............................................................................. 1
1.3 Effective Time....................................................................... 2
1.4 Articles of Incorporation............................................................ 2
1.5 By-Laws.............................................................................. 2
1.6 Directors............................................................................ 2
1.7 Officers............................................................................. 2
1.8 Conversion of Shares................................................................. 2
1.9 Exchange of Certificates............................................................. 4
1.10 Conseco Substituted under Indenture and Debentures................................... 7
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY................................................. 7
2.1 Organization, Standing and Corporate Power........................................... 7
2.2 Capital Structure.................................................................... 8
2.3 Authority; Noncontravention.......................................................... 9
2.4 SEC Documents........................................................................ 10
2.5 Absence of Certain Changes or Events................................................. 11
2.6 Absence of Changes in Benefit Plans.................................................. 11
2.7 Benefit Plans........................................................................ 12
2.8 Taxes................................................................................ 12
2.9 No Excess Parachute Payments; Section 162(m) of
the Code............................................................................. 13
2.10 Voting Requirements.................................................................. 14
2.11 Compliance with Applicable Laws...................................................... 14
2.12 Opinion of Financial Advisor......................................................... 15
2.13 Brokers.............................................................................. 15
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF CONSECO .................................................... 15
3.1 Organization, Standing and Corporate Power........................................... 15
3.2 Conseco Capital Structure............................................................ 16
3.3 Authority; Noncontravention.......................................................... 17
3.4 SEC Documents........................................................................ 18
3.5 Absence of Certain Changes or Events................................................. 18
3.6 Compliance with Applicable Laws...................................................... 19
3.7 Brokers.............................................................................. 20
3.8 Voting Requirements.................................................................. 20
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ARTICLE IV
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ADDITIONAL AGREEMENTS......................................................................... 20
4.1 Preparation of Form S-4 and the Joint Proxy
Statement; Information Supplied...................................................... 20
4.2 Meetings of Stockholders............................................................. 21
4.3 Letter of the Company's Accountants.................................................. 22
4.4 Letter of Conseco's Accountants...................................................... 22
4.5 Access to Information; Confidentiality............................................... 22
4.6 Best Efforts......................................................................... 23
4.7 Public Announcements................................................................. 23
4.8 Acquisition Proposals................................................................ 23
4.9 Fiduciary Duties..................................................................... 24
4.10 Consents, Approvals and Filings...................................................... 25
4.11 Certain Fees......................................................................... 25
4.12 Affiliates and Certain Stockholders.................................................. 26
4.13 NYSE Listing......................................................................... 27
4.14 Stockholder Litigation............................................................... 27
4.15 Indemnification...................................................................... 27
4.16 Financing ........................................................................... 27
4.17 Stock Options........................................................................ 27
4.18 Employment Agreements................................................................ 28
4.19 Officers' Certificates Relating to Tax Treatment..................................... 28
4.20 Supplemental Indenture; Other Actions................................................ 28
4.21 Severance and Other Payments......................................................... 29
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS PRIOR TO MERGER..................................... 29
5.1 Conduct of Business by the Company................................................... 29
5.2 Conduct of Business by Conseco....................................................... 32
5.3 Other Actions ....................................................................... 33
5.4 Certificates......................................................................... 33
5.5 Investment Advisory Agreements ...................................................... 34
ARTICLE VI
CONDITIONS PRECEDENT.......................................................................... 34
6.1 Conditions to Each Party's Obligation To Effect
the Merger........................................................................... 34
6.2 Conditions to Obligations of Conseco ................................................ 36
6.3 Conditions to Obligation of the Company.............................................. 37
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER............................................................. 38
7.1 Termination.......................................................................... 38
7.2 Effect of Termination................................................................ 38
7.3 Amendment............................................................................ 39
7.4 Extension; Waiver.................................................................... 39
7.5 Procedure for Termination, Amendment, Extension
or Waiver............................................................................ 39
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ARTICLE VIII
<S> <C>
SURVIVAL OF PROVISIONS........................................................................ 40
8.1 Survival............................................................................. 40
ARTICLE IX
NOTICES....................................................................................... 40
9.1 Notices.............................................................................. 40
ARTICLE X
MISCELLANEOUS................................................................................. 41
10.1 Entire Agreement.................................................................... 41
10.2 Expenses............................................................................ 41
10.3 Counterparts ....................................................................... 41
10.4 No Third Party Beneficiary.......................................................... 41
10.5 Governing Law....................................................................... 42
10.6 Assignment; Binding Effect.......................................................... 42
10.7 Enforcement........................................................................ 42
10.8 Headings, Gender, etc............................................................... 42
10.9 Invalid Provisions.................................................................. 43
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made and entered
into as of August 25, 1996 by and between CONSECO, INC., an Indiana corporation
("Conseco"), and AMERICAN TRAVELLERS CORPORATION, a Pennsylvania corporation
(the "Company").
PREAMBLE
WHEREAS, the respective Boards of Directors of Conseco and the Company
have approved the merger of the Company with and into Conseco, upon the terms
and subject to the conditions set forth herein; and
WHEREAS, Conseco 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), the
Company shall be merged with and into Conseco (the "Merger"), in a transaction
intended to qualify as a tax-free reorganization under Section 368(a)(1) (A) of
the Internal Revenue Code of 1986, as amended (the "Code"), in accordance with
the Indiana Business Corporation Law (the "IBCL Code") and the Pennsylvania
Business Corporation Law (the "Pennsylvania Code") and the separate corporate
existence of the Company shall cease and Conseco shall continue as the surviving
corporation under the laws of the State of Indiana (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 IBCL. The Merger
shall have the effects set forth in the IBCL and the Pennsylvania 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
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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 Indiana (the "Indiana Secretary of State") and the
Secretary of State of the Commonwealth of Pennsylvania (the "Pennsylvania
Secretary of State") on the date of the Closing (or on such other date as
Conseco and the Company may agree) articles of merger or other appropriate
documents, executed in accordance with the relevant provisions of the IBCL and
the Pennsylvania Code, and make all other filings or recordings required under
the IBCL and the Pennsylvania Code in connection with the Merger. The Merger
shall become effective upon the filing of the articles of merger with the
Indiana Secretary of State and the Pennsylvania Secretary of State, or at such
later time as is specified in the articles of merger (the "Effective Time").
1.4 Articles of Incorporation. The Articles of Incorporation of
Conseco, as in effect immediately prior to the Effective Time, shall be the
Articles of Incorporation of the Surviving Corporation until thereafter amended
as provided by law.
1.5 By-Laws. The By-Laws of Conseco, as in effect immediately prior to
the Effective Time, shall be the By-Laws of the Surviving Corporation until
thereafter amended as provided by law.
1.6 Directors. The directors of Conseco at the Effective Time
shall be the directors of the Surviving Corporation.
1.7 Officers. The officers of Conseco at the Effective Time shall
be the officers of the Surviving Corporation.
1.8 Conversion of Shares. (a) Outstanding Shares. Each of the shares of
common stock, $.01 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 or Dissenting Shares (as defined below)) shall,
by virtue of the Merger and without any action on the part of the holder
thereof, be converted into a right to receive (i) if the Conseco Share Price (as
defined below) is greater than or equal to $42.25 per share and less than or
equal to $46.25 per share, .7574 of a validly issued, fully paid and
nonassessable share of common stock, without par value, of Conseco ("Conseco
Common Stock"), (ii) if the Conseco Share Price is less than $42.25 per share,
the fraction (rounded to the nearest ten-thousandth of a share) of a share (or
such fraction and whole number, as the case may
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be) of Conseco Common Stock determined by dividing $32.00 by the Conseco Share
Price or (iii) if the Conseco Share Price is greater than $46.25 per share, the
fraction (rounded to the nearest ten-thousandth of a share) of a share of
Conseco Common Stock determined by dividing $35.03 by the Conseco Share Price.
The "Conseco Share Price" 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
10 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
1.9 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 canceled 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.
(d) Company Dissenting Shares. Notwithstanding anything in this
Agreement to the contrary, Shares which are held by the Company shareholders who
shall have effectively dissented from the Merger and perfected their dissenters'
rights in accordance with the provisions of Section 1571 et seq. of the
Pennsylvania Code (the "Dissenting Shares") shall not be converted into or be
exchangeable for the right to receive the Merger Consideration, but the holders
thereof shall be entitled to payment from the Surviving Corporation of the
appraised value of such shares in accordance with the provisions of Section 1571
et seq. of the Pennsylvania Code; provided, however, that if any such holder
shall have failed to perfect such dissenters' rights or shall have effectively
withdrawn or lost such rights, his or her outstanding Shares shall thereupon be
converted into and exchangeable for, as if completed at the Effective Time, the
Merger Consideration, as determined and paid in the manner set forth in this
Agreement, without any interest thereon. The
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Company shall give Conseco (i) prompt notice of any notice or demands for
payment for Dissenting Shares pursuant to Section 1571 et seq. of the
Pennsylvania Code received by the Company and (ii) the opportunity to
participate in and direct all negotiations and proceedings with respect to any
such demands or notices. The Company shall not, without the prior written
consent of Conseco, make any payment with respect to, settle, offer to settle or
otherwise negotiate, any such demands.
(e) Treatment of Company Stock Options. (i) At the Effective Time each
outstanding unexpired stock option ("Company Stock Option") to purchase Shares
which have been granted pursuant to the Company's 1987 Stock Option Plan, 1989
Stock Option Plan, 1993 Stock Option Plan, 1995 Stock Option Plan or 1996 Stock
Option Plan, as amended to the date hereof (the "Company Stock Option Plans")
shall be deemed disposed to the Company in accordance with final Rule 16b-3(e)
as promulgated by the Securities and Exchange Commission ("SEC") pursuant to
Release 34-37260 (May 31, 1996) and then converted automatically into an option
to purchase, for the same aggregate consideration payable to exercise such
Company 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 Company
Stock Options had been fully vested and exercised for shares prior to the
Effective Time, but otherwise on the same terms and conditions as were
applicable under the Company Stock Option Plan and the underlying stock option
agreement except as provided in subsections (ii) and (iii) below.
(ii) Except as provided in subsection (iii) below, each
Company Stock Option, if not then vested, will vest in full at the earlier of
(x) the expiration of three months after the Effective Time or (y) termination
by Conseco of the employment of the holder of such Company Stock Option.
(iii) Each Company Stock Option held by a non-employee
director of the Company, if not then vested, will vest in full at the Effective
Time.
1.9 Exchange of Certificates. (a) Exchange Agent. As of the Effective
Time, Conseco shall deposit with its transfer agent and registrar (the "Exchange
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 1.8(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 Exchange Agent of such
certificate or
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certificates and acceptance thereof by the Exchange 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 1.9) 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 1.8(a) of this Agreement. The Exchange
Agent shall accept such certificates upon compliance with such reasonable terms
and conditions as the Exchange Agent may impose to effect an orderly exchange
thereof in accordance with normal exchange practices. If the consideration to be
paid in the Merger (or any portion thereof) is to be delivered to any person
other than the person in whose name the certificate representing Shares
surrendered in exchange therefor is registered, it shall be a condition to such
exchange that the certificate so surrendered shall be properly endorsed or
otherwise be in proper form for transfer and that the person requesting such
exchange shall pay to the Exchange 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 Exchange 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 canceled against delivery of the Merger Consideration as hereinabove
provided. Until surrendered as contemplated by this Section 1.9(b), each
certificate representing Shares (other than certificates representing Shares to
be canceled in accordance with Section 1.8(b) and other than Dissenting Shares),
shall be deemed at any time after the Effective Time to represent only the right
to receive upon such surrender the Merger Consideration payable with respect to
such Shares, without any interest thereon, as contemplated by Section 1.8. 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 Exchange 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 1.8, 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 1.8.
(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
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pursuant to Section 1.8, 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 1.8, 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 1.8, 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
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Consideration and any dividends or distributions with respect to Conseco Common
Stock.
(h) No Liability. Neither Conseco nor the Exchange 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.
1.10 Conseco Substituted under Indenture and Debentures. As of the
Effective Time, Conseco shall succeed to, be substituted for, and assume all
obligations of, and may exercise every right and power of, the Company under the
Indenture (the "Indenture") governing the 6.5% Convertible Subordinated
Debentures due October 1, 2005 (the "Debentures") by and between the Company and
American Bank, National Association with the same effect as if Conseco had been
named therein as the Company. As of the Effective Time, Conseco shall assume all
the obligations of the Company pursuant to the Debentures.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Conseco and 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 American Travellers Life
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Insurance Company, United General 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 SEC.
2.2 Capital Structure. The authorized capital stock of the Company
consists of (i) 50,000,000 Shares and (ii) 5,000,000 shares of Preferred Stock,
$.01 par value (the "Preferred Stock"). At the close of business on August 23,
1996: (i) 16,281,432 Shares were issued and outstanding, 2,668,826 Shares were
reserved for issuance pursuant to outstanding Company Stock Options and
6,824,790 Shares were reserved for issuance upon conversion of the Debentures;
and (ii) no shares of Preferred Stock were issued and outstanding. Except as set
forth above, at the close of business on August 23, 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 Company Stock Option
Plans 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 for $103,500,000 of 6.5% Convertible Subordinated
Debentures due October 1, 2005, 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 dated the date
hereof and delivered by the Company to Conseco concurrently herewith (the
"Disclosure Schedule"), all the outstanding shares of capital stock of each
Significant Subsidiary of the Company have been validly issued and are fully
paid and nonassessable and are owned by the Company, by one or more subsidiaries
of the Company or by the Company and one or more such subsidiaries, free and
clear of all pledges, claims, liens, charges, encumbrances and security
interests of any kind or nature whatsoever (collectively, "Liens") except as may
be provided by law. Except as set forth above or in Section 2.2 of the
Disclosure Schedule, neither the Company nor any Significant Subsidiary of the
Company has any outstanding option, warrant, subscription or other right,
agreement or commitment which either (i) obligates the Company or any
Significant Subsidiary of the Company to issue, sell or transfer, repurchase,
redeem or otherwise acquire or vote any shares of the capital stock of the
Company or any Significant Subsidiary of the Company or (ii) restricts the
transfer of Shares. The Company has delivered to Conseco a complete and correct
copy of the Rights Agreement dated as of April 25, 1990, as amended to the date
of this Agreement (the "Rights Agreement").
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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). A majority of the members of the Board of Directors who
are not officers of the Company and who are not representatives, nominees,
affiliates or associates of Conseco, after receiving advice from one or more
investment banking firms, have determined that the price and terms of the
conversion of the Shares are (a) at a price which is fair to the stockholders of
the Company and (b) otherwise in the best interests of the Company and its
stockholders. This Agreement has been duly executed and delivered by the Company
and, assuming this Agreement constitutes the valid and binding agreement of
Conseco, 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
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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 (as hereinafter defined) 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 articles of merger with the Pennsylvania
Secretary of State and the Indiana Secretary of State and appropriate documents
with the relevant authorities of other states in which the Company is qualified
to do business, (v) such other consents, approvals, authorizations, filings or
notices as are set forth in Section 2.3 of the Disclosure Schedule and (vi) any
applicable filings under state anti-takeover laws.
2.4 SEC Documents. (i) The Company has filed all required reports,
schedules, forms, statements and other documents with the SEC since January 1,
1994 (such reports, schedules, forms, statements and other documents are
hereinafter referred to as the "SEC Documents"); (ii) as of their respective
dates, the SEC Documents complied with the requirements of the Securities Act of
1933, as amended (the "Securities Act"), or the Exchange Act, as the case may
be, and the rules and regulations of the SEC promulgated thereunder applicable
to such SEC Documents, and none of the SEC Documents as of such dates contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading; and (iii) the consolidated financial statements of the Company
included in the SEC Documents comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto or, in the case of
unaudited
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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, (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
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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 and all applicable laws and
regulations. All required contributions to the Benefit Plans have been made. The
Company, its subsidiaries and all the Benefit Plans are in compliance with the
applicable provisions of ERISA, the Internal Revenue Code of 1986, as amended
(the "Code"), all other applicable laws and all applicable collective bargaining
agreements.
(ii) None of the Company or any other person or entity that together
with the Company is treated as a single employer under Section 414(b), (c), (m)
or (o) of the Code (each a "Commonly Controlled Entity") 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
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<PAGE>
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
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<PAGE>
would not be characterized as an "excess parachute payment" (as such term is
defined in Section 280G(b)(1) of the Code).
(ii) Except as disclosed in Section 2.9 of the Disclosure Schedule, the
disallowance of a deduction under Section 162(m) of the Code for employee
remuneration will not apply to any amount paid or payable by the Company or any
subsidiary of the Company under any contract, Benefit Plan, program, arrangement
or understanding currently in effect.
2.10 Voting Requirements. The affirmative vote of a majority of the
votes cast by the holders of the Shares entitled to vote thereon at the
Stockholders Meeting with respect to the approval of the Merger is the only vote
of the holders of any class or series of the Company's capital stock necessary
to approve this Agreement and the transactions contemplated by this Agreement.
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 in all
material respects with all applicable statutes, laws, ordinances, rules, orders
and regulations of any Governmental Entity. Except as disclosed in the Filed SEC
Documents or Section 2.11 of the Disclosure Schedule 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
14
<PAGE>
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. ("DLJ"), 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 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
a true and complete copy of the agreement between the Company and DLJ, and the
Company has no other agreements or understandings (written or oral) with respect
to such services.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF CONSECO
Conseco hereby represents and warrants to the Company as follows:
3.1 Organization, Standing and Corporate Power. Each of Conseco 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 each Significant Subsidiary of Conseco is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such qualification
or licensing necessary. Conseco has delivered to the Company complete and
correct copies of its Articles of Incorporation and By-laws, as amended to the
date of this Agreement. For purposes of this Agreement, a "Significant
Subsidiary" of Conseco means
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<PAGE>
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 August 23, 1996,
(i) 58,416,433 shares of Conseco Common Stock, 5,264,767 shares of $3.25 Series
D Cumulative Convertible Preferred Stock of Conseco (the "Conseco Series D
Preferred Stock") and 4,369,700 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)
13,721,689 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) 8,258,314 shares of Conseco Common Stock were reserved for issuance upon
conversion of the Conseco Series D Preferred Stock and (iv) 8,739,400 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 1,105,550 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 August 23, 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. 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, except as set forth in the Filed
Conseco SEC Documents (as defined in Section 3.4), are owned by Conseco, free
and clear of all Liens. Except as set forth above or in the Filed Conseco SEC
Documents, neither Conseco nor any Significant Subsidiary of Conseco has any
outstanding option, warrant, subscription or other right, agreement or
commitment which either (i) obligates Conseco or any Significant Subsidiary of
Conseco to issue, sell or transfer, repurchase, redeem or otherwise acquire or
vote any shares of the capital stock of Conseco or any Significant Subsidiary of
Conseco or (ii) restricts the transfer of Conseco Common Stock.
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<PAGE>
3.3 Authority; Noncontravention. Conseco has 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 the consummation by
Conseco of the transactions contemplated by this Agreement have been duly
authorized by all necessary corporate action on the part of Conseco, 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 Conseco, enforceable
against Conseco 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, or the comparable documents of any Significant Subsidiary of
Conseco, (ii) subject to the governmental filings and other matters referred to
in the following sentence, conflict with, result in a breach of or default (with
or without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of a
material benefit under, or require the consent of any person under, any
indenture, or other agreement, permit, concession, franchise, license or similar
instrument or undertaking to which Conseco or any of its subsidiaries is a party
or by which Conseco or any of its subsidiaries or any of their assets is bound
or affected, 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 in connection
with the execution and delivery of this Agreement by Conseco or the consummation
by Conseco 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
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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 articles of merger with the Indiana
Secretary of State and the Pennsylvania 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
financial statements of Conseco 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).
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") or in Section 3.5 of a Disclosure
Schedule dated the date hereof and delivered concurrently herewith by Conseco to
the Company (the "Conseco Disclosure Schedule"), 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,
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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 of $.02 per share on July 1, 1996, and the
declaration of a cash dividend payable October 1, 1996 of $.0625 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) any split,
combination or reclassification of any of its outstanding capital stock or any
issuance or the authorization of any issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital stock, or (iv) any
change in accounting methods, principles or practices by Conseco materially
affecting its assets, liabilities or business, except as may have been required
by a change in generally accepted accounting principles.
3.6 Compliance with Applicable Laws. (i) Each of Conseco 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 Conseco SEC Documents, Conseco and its subsidiaries are in compliance in
all material respects with all applicable statutes, laws, ordinances, rules,
orders and regulations of any Governmental Entity. Except as disclosed in the
Filed Conseco 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
Conseco, no investigation by any Governmental Entity with respect to Conseco 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
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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 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.
3.8 Voting Requirements. The affirmative vote of the holders of a
majority of the votes entitled to be cast by the holders of Common Stock and
Conseco PRIDES present, or represented, and entitled to vote thereon at the
Conseco Stockholders Meeting with respect to the issuance of shares of Conseco
Common Stock in the Merger is the only vote of the holders of any class or
series of Conseco's capital stock necessary to approve this Agreement and the
transactions contemplated by this Agreement.
ARTICLE IV
ADDITIONAL AGREEMENTS
4.1 Preparation of Form S-4 and the Joint Proxy Statement; Information
Supplied.
(a) As soon as practicable following the date of this Agreement, the
Company and Conseco shall prepare and file with the SEC the Joint Proxy
Statement and Conseco shall prepare and file with the SEC the Form S-4, in which
the Joint Proxy Statement will be included as a prospectus. Each of the Company
and Conseco shall use its best efforts to have the Form S-4 declared effective
under the Securities Act as promptly as practicable after such filing. The
Company will use its best efforts to cause the Joint Proxy Statement to be
mailed to the Company's stockholders, and Conseco will use its best efforts to
cause the Joint Proxy Statement to be mailed to Conseco's stockholders, in each
case as promptly as practicable after the Form S-4 is declared effective under
the Securities Act. Conseco shall also take any action (other than qualifying to
do business in any jurisdiction in which it is not now so qualified) required to
be taken under any applicable state securities laws in connection with the
issuance of Conseco Common Stock in the Merger and the Company shall furnish all
information concerning the Company and the holders of the Common Stock as may be
reasonably requested in connection with any such action.
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(b) The Company agrees that none of the information supplied or to be
supplied by the Company specifically for inclusion or incorporation by reference
in (i) the Form S-4 will, at the time the Form S-4 is filed with the SEC, at any
time it is amended or supplemented or at the time it becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading or (ii) the Joint Proxy Statement will, at the
date it is first mailed to the Company's stockholders or at the time of the
Stockholders Meeting (as defined in Section 4.2), contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Joint Proxy
Statement will comply as to form in all material respects with the requirements
of the Exchange Act and the rules and regulations thereunder, except with
respect to statements made or incorporated by reference therein based on
information supplied by Conseco 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 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
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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. Subject to Section 4.9 hereof in the case of
the Company, the Company and Conseco will, through their respective Boards of
Directors, recommend to their respective stockholders approval of the foregoing
matters. Without limiting the generality of the foregoing, the Company agrees
that, subject to its right to terminate this Agreement pursuant to Section 4.9,
its obligations pursuant to the first sentence of Section 4.2 shall not be
affected by (i) the commencement, public proposal, public disclosure or
communication to the Company of any Acquisition Proposal (as defined in Section
4.8) or (ii) the withdrawal or modification by the Board of Directors of the
Company of its approval or recommendation of this Agreement or the Merger.
Conseco and the Company will use their best efforts to hold the Stockholders
Meeting and the Conseco Stockholders Meeting on the same day and use best
efforts to hold such Meetings and (except in the case of the Company, subject to
Section 4.9 hereof) to obtain the favorable votes of their respective
stockholders as soon as practicable after the date hereof.
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 Arthur Andersen LLP, the
Company'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
Arthur Andersen LLP, dated a date within two business days before the Closing
Date, 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
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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 August
14, 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 extent required by, and in accordance with,
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 the Company 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 or NASDAQ.
4.8 Acquisition Proposals. The Company shall not, nor shall it permit
any of its subsidiaries to, nor shall it authorize or permit any officer,
director or employee of, or any investment banker, attorney or other advisor or
representative of, the Company or any of its subsidiaries to, directly or
indirectly, (i) solicit, initiate or encourage the submission of any Acquisition
Proposal (as hereinafter defined) or (ii) participate in any discussions or
negotiations regarding, or furnish to any person any information with respect
to, or take
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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
(as defined below); 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, the approval
or recommendation by such Board of Directors of this Agreement or the Merger,
(ii) approve or recommend an Acquisition Proposal or (iii) enter into any
agreement with respect to any Acquisition Proposal, unless the Company receives
an Acquisition Proposal and the Board of Directors of the Company determines in
good faith, following consultation with outside counsel, that in order to comply
with its fiduciary duties to stockholders under applicable law it is necessary
for the Board of Directors to withdraw or modify, in a manner materially adverse
to Conseco, 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
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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, subject to the provisions of the first
sentence of this Section, the Company does not withdraw or modify, in a manner
materially adverse to Conseco, its position with respect to the Merger or
approve or recommend an Acquisition Proposal. Notwithstanding anything contained
in this Agreement to the contrary, any action by the Board of Directors
permitted by this Section 4.9 shall not constitute a breach of this Agreement by
the Company.
4.10 Consents, Approvals and Filings. The Company and Conseco will make
and cause their respective subsidiaries to make all necessary filings, as soon
as practicable, including, without limitation, those required under the HSR Act,
the Securities Act, the Exchange Act, and applicable state insurance laws in
order to facilitate prompt consummation of the Merger and the other transactions
contemplated by this Agreement. In addition, the Company and Conseco will each
use their best efforts, and will cooperate fully with each other (i) to comply
as promptly as practicable with all governmental requirements applicable to the
Merger and the other transactions contemplated by this Agreement and (ii) to
obtain as promptly as practicable all necessary permits, orders or other
consents of Governmental Entities and consents of all third parties necessary
for the consummation of the Merger and the other transactions contemplated by
this Agreement. Each of the Company and Conseco shall use best efforts to
promptly provide such information and communications to Governmental Entities as
such Governmental Entities may reasonably request. Each of the parties shall
provide to the other party copies of all applications in advance of filing or
submission of such applications to Governmental Entities in connection with this
Agreement and shall make such revisions thereto as reasonably requested by such
other party. Each party shall provide to the other party the opportunity to
participate in all meetings and material conversations with Governmental
Entities.
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
the Board of Directors of the Company, in accordance with Section 4.9, withdraws
or modifies in a manner materially
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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.
(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 an amount, not to exceed $2,000,000, to reimburse Conseco
for its Expenses (as such term is defined in subparagraph (d) of this Section
4.11), payable in same-day funds, if the requisite approval of the Company's
stockholders for the Merger is not obtained (other than 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 March 31, 1997, through the exercise of best
efforts to procure the satisfaction thereof.
(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, an amount, not to exceed $2,000,000, to reimburse the
Company for its Expenses, 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 March 31, 1997,
through the exercise of best efforts to procure the satisfaction thereof.
(d) 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 or the Company, as the case may be, 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.
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 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 not 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
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Common Stock by such affiliates and the certificates representing Conseco Common
Stock received by such affiliates in the Merger shall bear a customary legend
regarding applicable Securities Act restrictions and the provisions of this
Section 4.12.
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 each of the Company's subsidiaries shall contain the provisions with respect
to indemnification set forth therein 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 indemnify the Indemnified Parties, but only to the extent that
the Company would have been obligated to do so had it been the Surviving
Corporation.
(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.
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 Repurchase Payment (as defined in the
Indenture) for any of the Debentures which are required to be repurchased by the
Company in accordance with Section 11.1 of the Indenture.
4.17 Stock Options. (a) As soon as practicable following the date of
this Agreement, the Board of Directors of the Company (or, if appropriate, any
committee administering a Company Stock Option Plan) shall adopt such
resolutions or take such actions as may be required to adjust the terms of all
outstanding Company Stock Options in accordance with Section 1.8(e) and shall
make
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such other changes to the Company Stock Option Plans as it deems appropriate to
give effect to the Merger (subject to the approval of Conseco, which shall not
be unreasonably withheld). The parties agree that after the date hereof, except
for the Company Stock Options outstanding on the date hereof and any changes
thereto described in this Agreement or the Disclosure Schedule, no option,
warrants or other rights of any kind to purchase capital stock of the Company
shall be granted or made, under the Company Stock Plans 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 Conseco.
(b) 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. Prior to the Effective Time, Conseco
shall have filed 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.
4.18 Employment Agreements. The Company shall enter into the employment
agreements described in Section 4.18 of the Conseco Disclosure Schedule. Such
employment agreements shall be subject to the approval of Conseco, which shall
not be unreasonably withheld.
4.19 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.
4.20 Supplemental Indenture; Other Actions. Prior to the Effective
Time, Conseco shall execute and deliver to the Trustee, a supplemental indenture
or indentures evidencing the succession of Conseco to the Company and meeting
the requirements of the Indenture and the Company and Conseco shall take any and
all other actions required by the Indenture to substitute Conseco for the
Company under the Indenture and Debentures as of the Effective Time.
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4.21 Severance and Other Payments. If, after the Effective Time, the
employment of employees (other than officers) of the Company are terminated, the
Employee Severance Pay Plan of Conseco shall be applicable to such employees
giving credit for service to the Company as service to Conseco. In addition, an
aggregate of up to $2 million of additional severance pay may be paid to the
following individuals in such manner and in such proportions as shall be
determined from time to time by the Company's present chief executive office
after consultation with the Chief Operations Officer of Conseco or his designee:
(i) employees of the Company (other than officers) whose employment has
been terminated by Conseco within 18 months after the Effective Time;
(ii) outside actuarial consultants of the Company (other than officers)
whose services are terminated by Conseco within 18 months after the Effective
Time; and
(iii) Ronald J. Holmer, Benedict J. Iacovetti, Ernest Iannucci and
Wayne G. Vosik in order to satisfy such individuals' parachute payment tax
liability pursuant to Section 4999 of the Internal Revenue Code of 1986, as
amended and the regulations thereunder; provided that no individual shall
receive a payment in excess of $120,000.
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 Section 5.1 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. In addition, the Company agrees on and after the
Mailing Date (as defined in Section 5.4) to allow representatives of Conseco to
have access to the management and other personnel of the Company so that Conseco
can be fully informed at all times as to significant day-to-day executive,
legal, financial, marketing and other operational matters involving the Company,
its subsidiaries or their businesses. Prior to taking or approving any action
during such time with respect to any such significant matters involving the
Company, management of the Company will notify the representative of Conseco
designated by Conseco for oversight of the functional area(s) involved with such
decision
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and will, if consistent with the fiduciary obligations of such officer, follow
any suggestions made by the Conseco representative with respect to the proposed
action. During such time, the Company will cause its personnel to cooperate with
personnel from Conseco in preparing for any proposed relocation by Conseco of
the Company's operations following Closing. 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, (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 or the Rights Agreement;
(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;
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(vii) make any tax election or settle or compromise any income
tax liability that would reasonably be expected to be material to the
Company and its subsidiaries taken as a whole;
(viii)pay, discharge, settle or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or
satisfaction, in the ordinary course of business consistent with past
practice or in accordance with their terms, of liabilities reflected or
reserved against in, or contemplated by, the most recent consolidated
financial statements (or the notes thereto) of the Company included in
the Filed SEC Documents or incurred since the date of such financial
statements in the ordinary course of business consistent with past
practice;
(ix) except as may be otherwise required in the Company's
contractual undertakings with Transport Life Insurance Company or as
may be otherwise provided in the investment guidelines to be contained
in the investment advisory agreements specified in Section 5.6 hereof,
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 (a) changes or amendments that are
required under existing contracts of (b) individual, routine
changes or amendments that are made in the
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ordinary course of business and consistent with past practice
and do not exceed 8%;
(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;
(xii) hold any meeting of the board of directors of the
Company or any subsidiary or any committee of any such board, or take
any action by written consent of any such board of committee, without
providing (i) written notice five days in advance of any such meeting
or in advance of the date of any proposed action by written consent and
(ii) an agenda of the specific matters intended to be considered at
such meeting or a copy of the proposed written consent; provided,
however, that the submission of an agenda shall not prohibit the
directors from considering matters not on the agenda, if the Company
made a reasonable effort to give Conseco advance notice of such
matters; or
(xiii) authorize any of, or commit or agree to take any of,
the foregoing actions.
5.2 Conduct of Business by Conseco. Except as described in Section 5.2
of the Conseco Disclosure Schedule, during the period from the date of this
Agreement to the Effective Time, Conseco shall, and shall cause its subsidiaries
to, carry on their respective businesses in the usual, regular and ordinary
course in substantially the same manner as heretofore conducted and, to the
extent consistent therewith, use all reasonable efforts to preserve intact their
current business organizations, keep available the services of their current
officers and employees and preserve their relationships with customers,
suppliers, licensors, licensees, distributors and others having business
dealings with them to the end that their goodwill and ongoing businesses shall
be unimpaired at the Effective Time. Without limiting the generality of the
foregoing, during the period from the date of this Agreement to the Effective
Time, Conseco shall not, and shall not permit any of its subsidiaries to:
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<PAGE>
(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 $.0625 per share 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 (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 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) except as described in Section 3.5 of the Conseco
Disclosure Schedule, 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 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.
5.4 Certificates. (a) On the date the Joint Proxy Statement is first
mailed to the stockholders of the Company (the "Mailing Date"), the Company
shall deliver to Conseco a certificate dated as of the Mailing Date signed by
its Chief Executive Officer and its Chief Financial Officer, in their capacities
as officers of the Company, that the representations
33
<PAGE>
and warranties of the Company contained in this Agreement are true and correct
on the Mailing Date (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.
(b) On the Mailing Date, Conseco shall deliver to the Company
a certificate dated as of the Mailing Date signed by its Chief Executive Officer
and its Chief Financial Officer, in their capacities as officers of Conseco,
that the representations and warranties of Conseco contained in this Agreement
are true and correct on the Mailing Date (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.
5.5 Investment Advisory Agreements. The Company agrees to enter into.
and to cause each of its subsidiaries to enter into, an investment advisory
agreement with Conseco Capital Management, Inc., a wholly-owned subsidiary of
Conseco. Such agreements shall be effective as of the Mailing Date and shall
contain terms and conditions reasonably acceptable to the parties and which are
customary in investment advisory agreements.
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 in the manner contemplated in Section 2.10
hereof 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 and Conseco 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,
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<PAGE>
permission or authorization is required by reason of a change in law
after the date of this Agreement, unless the failure to obtain such
consent, approval, permission or authorization would not reasonably be
expected to have a material adverse effect on the business, financial
condition or results of operations of the Company and its subsidiaries,
taken as a whole, or on the validity or enforceability of this
Agreement. Notwithstanding the foregoing, in the event that all
governmental and regulatory consents required hereunder shall have been
obtained except the approval of the Insurance Regulator of any life
insurance subsidiary of the Company which does not constitute a
"significant subsidiary" (within the meaning of Rule 1-02 of Regulation
S-X of the SEC) of the Company (a "Non-Significant Life Subsidiary") to
the transfer of control of such Non-Significant Life Subsidiary, then,
subject to Article VII hereof, at any time thereafter at the option of
Conseco, the parties shall take one of the following actions with
respect to such Non-Significant Life Subsidiary and otherwise proceed
to consummate the Merger in accordance with this Agreement: (a) place
into escrow, pursuant to an escrow agreement reasonably acceptable to
the parties, the outstanding shares of capital stock of such
Non-Significant Life Subsidiary; such escrow agreement shall contain
customary provisions concerning duties and responsibilities of the
escrow agent and payment of the fees and expenses of the escrow agent
and shall provide that (i) pending transfer of control of the
Non-Significant Life Subsidiary to Conseco, its current Board of
Directors shall retain all power to vote its shares of capital stock
and to direct its business not inconsistent with this Agreement, (ii)
promptly following receipt of the approval of the Insurance Regulator,
control of the capital stock of such Non-Significant Life Subsidiary
shall be transferred to Conseco and (iii) at any time following June
30, 1997 and prior to receipt of the Insurance Regulator's approval,
Conseco may elect to terminate the escrow agreement, in which event
such Non-Significant Life Subsidiary shall be liquidated and dissolved
and the proceeds thereof shall be paid to Conseco; (b) cause such
Non-Significant Life Subsidiary to surrender its certificate of
authority to do business in its state of domicile; (c) cause such Non-
Significant Life Subsidiary to commence proceedings for its liquidation
and dissolution; (d) enter into an agreement for the sale and transfer
of the Non-Significant Life Subsidiary to a third party; or (e) take
such other action as may be mutually agreeable to the Company and
Conseco.
(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.
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<PAGE>
(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. The obligation of Conseco
to effect the Merger is 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 and as of the Mailing
Date (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 shall not have willfully or intentionally (i) breached any of
its representations or warranties herein or (ii) failed to perform or
satisfy any of its obligations or covenants hereunder, and Conseco
shall have received a certificate dated as of the Closing Date signed
on behalf of the Company by its Chief Executive Officer and its Chief
Financial Officer to such effect.
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<PAGE>
(c) Dissenting Shares. No more than 20% of the Shares shall
have become Dissenting Shares.
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 contained in this Agreement shall have been true
and correct on the date of this Agreement and as of the Mailing Date
(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. Conseco 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 shall not have willfully or intentionally (i) breached any of its
representations or warranties herein or (ii) failed to perform or
satisfy any of its obligations or covenants hereunder, and the Company
shall have received a certificate dated as of the Closing Date signed
on behalf of Conseco by its Chief Executive Officer and its Chief
Financial Officer to such effect.
(c) Opinion of Counsel. The Company shall have received the
opinion dated the Closing Date of Fox, Rothschild, O'Brien & Frankel,
counsel to the Company, (the "Tax Opinion 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 the Company 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.
(d) Update Letter. Immediately prior to the mailing of the
Joint Proxy Statement, the Company shall have received from DLJ an
update of the opinion referred to in Section 2.12 hereof, which update
shall not in any material way modify, rescind or revoke the opinion
referred to in said Section 2.12.
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<PAGE>
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 and
the stockholders of Conseco:
(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) at any time after December 31, 1996, if the
Merger shall not have been consummated by such date, 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; provided, however, that
either party may by notice to the other extend such date to
March 31, 1997 if the only conditions to closing not satisfied
as of December 31, 1996 are those set forth in Sections
6.1(a), (b) or (c) hereof;
(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;
(c) by Conseco if the Company does not deliver the certificate
specified in Section 5.4(a); or
(d) by the Company if Conseco does not deliver the
certificate specified in Section 5.4(b).
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
38
<PAGE>
no effect, without any liability or obligation on the part of Conseco or the
Company, other than the last two sentences of Section 4.5 and Sections 2.13,
3.7, 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 IBCL and the
Pennsylvania 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, each
party may (a) extend the time for the performance of any of the obligations or
other acts of the other party, (b) waive any inaccuracies in the representations
and warranties of the other party 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 party contained
in this Agreement. Any agreement on the part of a party to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party. The failure of any party to this Agreement to assert any
of its rights under this Agreement or otherwise shall not constitute a waiver of
such rights.
7.5 Procedure for Termination, Amendment, Extension or Waiver. A
termination of this Agreement pursuant to Section 7.1, an amendment of this
Agreement pursuant to Section 7.3 or an extension or waiver pursuant to Section
7.4 shall, in order to be effective, require in the case of Conseco or the
Company, action by its Board of Directors or the duly authorized designee of its
Board of Directors.
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<PAGE>
ARTICLE VIII
SURVIVAL OF PROVISIONS
8.1 Survival. The representations and warranties respectively required
to be made by the Company and Conseco 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:
American Travellers Corporation
3220 Tillman Drive
Bensalem, Pennsylvania 19020
Attention: John A. Powell, Chairman of the Board
Telephone: (215) 244-1600
Telecopy: (215) 244-4893
with copies to:
Fox, Rothschild, O'Brien & Frankel
2000 Market Street, Tenth Floor
Philadelphia, Pennsylvania 19103
Attention: Ramon R. Obod
Telephone: (215) 299-2036
Telecopy: (215) 299-2150
If to Conseco, to:
Conseco, Inc.
11825 N. Pennsylvania Street
Carmel, Indiana 46032
Attention: Lawrence W. Inlow
Telephone: (317) 817-6163
Telecopy: (317) 817-6327
40
<PAGE>
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 and
Conseco 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, the Conseco 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 and Conseco 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.
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.
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<PAGE>
10.5 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Indiana, 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.
10.7 Enforcement. The parties agree that irreparable damage would occur
in the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of Indiana, this being in addition to any other remedy to
which they are entitled at law or in equity. In addition, each of the parties
hereto (a) consents to submit itself to the personal jurisdiction of any Federal
court located in the State of Indiana in the event any dispute arises out of
this Agreement or any of the transactions contemplated by this Agreement, (b)
agrees that it will not attempt to deny or defeat such personal jurisdiction or
venue by motion or other request for leave from any such court and (c) agrees
that it will not bring any action relating to this Agreement or any of the
transactions contemplated by this Agreement in any court other than a Federal
court sitting in the State of Indiana.
10.8 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.
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<PAGE>
10.9 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 Conseco and the Company, effective as of the
date first written above.
CONSECO, INC.
By: /s/ Stephen C. Hilbert
----------------------
Stephen C. Hilbert
Chairman of the Board
AMERICAN TRAVELLERS CORPORATION
By: /s/ John A. Powell
------------------
John A. Powell
Chairman of the Board
G:\LEGAL\CHRIS\TEMP.ATC
43
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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 American Travellers Corporation, a Pennsylvania 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 August
25, 1996 (the "Merger Agreement"), by and between Conseco, Inc., an Indiana
corporation ("Conseco"), and the Company, the Company will be merged with and
into Conseco (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 $.01 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.
<PAGE>
3. I have carefully read this letter and the Merger Agreement
and have discussed the requirements of the Merger Agreement and other
limitations upon the sale, transfer or other disposition of the shares
of Conseco Common Stock to be received by me, to the extent I have felt
necessary, with my counsel or with counsel for the Company.
B. Furthermore, in connection with the matters set forth
herein, I understand and agree that:
Conseco is under no further obligation to register the sale,
transfer or other disposition of the shares of Conseco Common Stock
received by me as a result of the Merger or to take any other action
necessary in order to make compliance with an exemption from
registration available, except as set forth in Section 4.12 of the
Merger Agreement and in paragraph C below.
C. Conseco hereby represents, warrants and agrees that:
For as long as resales of any shares of Conseco Common Stock
owned by me are subject to Rule 145, Conseco will use all reasonable
efforts to make all filings of the nature specified in paragraph (c)(1)
of Rule 144 of the Rules and Regulations.
Very truly yours,
G:\LEGAL\EXHIBITS\EXHIBITA.CNC
<PAGE>
EXHIBIT B
[Closing Date]
American Travellers Corporation
3220 Tillman Drive
Bensalem, PA 19020
Ladies and Gentleman:
You have requested our opinion regarding certain Federal income tax
consequences of the merger (the "Merger") of American Travellers Corporation, a
Pennsylvania corporation (the "Company"), with and into Conseco, Inc., an
Indiana corporation ("Conseco"), pursuant to the terms of a certain Agreement
and Plan of Merger by and between the Company and Conseco entered into as of
August 25, 1996 (the "Agreement").
In formulating our opinion, we examined such documents as we deemed
appropriate, including the Agreement, the Joint Proxy Statement filed by the
Company and Conseco 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
was included as a prospectus, (with all amendments thereto, the "Registration
Statement"). In addition, we have examined such other records, documents and
instruments, as in our judgment have been necessary or appropriate and have
obtained and relied upon certain representations and certifications made to us
by the Company and Conseco and such additional information as we have deemed
relevant and necessary through consultation with various officers and
representatives of the Company and Conseco.
In addition to the foregoing, in rendering our opinion we have assumed
(1) the accuracy of the statements and facts concerning the Merger set forth in
the 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 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 the Company,
which are set forth in the Officers' Certificate delivered to us by the Company,
dated the date hereof and (iii) the representations make by certain shareholders
of the Company in Certificates delivered to us dated the date hereof.
Based upon the facts and statements set forth above, our examination
and review of the documents and other materials referred to herein and subject
to the assumptions and any qualifications set forth herein, it is our opinion
that, under existing law, for Federal income tax purposes:
<PAGE>
American Travellers Corporation
[Closing Date]
1. The Merger will constitute a reorganization within the meaning
of Section 368(a)(1)(A) of the Internal Revenue Code of 1986,
as amended (the "Code").
2. No gain or loss will be recognized by the shareholders of the
Company with respect to the shares of the common stock of
Conseco received by the shareholders of the Company in the
Merger.
We express no opinion concerning any tax consequences of the Merger or
any of the other transactions related thereto other than those specifically set
forth herein. We call your attention to the fact that shareholders of the
Company who exercise dissenters' rights will recognize gain or loss with respect
to their shares of the Company's stock; and shareholders of the Company who
receive cash in lieu of fractional shares of the common stock of Conseco will
recognize gain or loss with respect to the cash they receive.
The opinions set forth herein are based upon current provisions of the
Code, Treasury Regulations promulgated thereunder, Internal Revenue Service
rulings, judicial decisions and administrative pronouncements in effect as of
the date hereof, all of which are subject to change at any time, possibly with
retroactive effect. No ruling has been, or will be, sought from the Internal
Revenue Service as to the Federal income tax consequences of any aspect of the
Merger or any other transactions related thereto. 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,
G:\LEGAL\CHRIS\TAXCONS.ATC
AGREEMENT AND PLAN OF MERGER
By and Among
CONSECO, INC.
CAF ACQUISITION COMPANY
and
CAPITOL AMERICAN FINANCIAL CORPORATION
Dated as of August 25, 1996
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TABLE OF CONTENTS
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ARTICLE I THE MERGER......................................................................................... 1
1.1 The Merger.................................................................................. 1
1.2 Closing..................................................................................... 1
1.3 Effective Time.............................................................................. 1
1.4 Articles of Incorporation................................................................... 2
1.5 Code of Regulations......................................................................... 2
1.6 Directors................................................................................... 2
1.7 Officers.................................................................................... 2
1.8 Conversion of CAF Acquisition Shares........................................................ 2
1.9 Conversion of Shares........................................................................ 2
1.10 Exchange of Certificates.................................................................... 4
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY..................................................... 6
2.1 Organization, Standing and Corporate Power.................................................. 6
2.2 Capital Structure........................................................................... 7
2.3 Authority; Noncontravention................................................................. 7
2.4 SEC Documents............................................................................... 8
2.5 Absence of Certain Changes or Events........................................................ 9
2.6 Absence of Changes in Benefit Plans......................................................... 9
2.7 Benefit Plans............................................................................... 9
2.8 Taxes....................................................................................... 10
2.9 No Excess Parachute Payments; Section 162(m) of the Code.................................... 11
2.10 Voting Requirements......................................................................... 11
2.11 Compliance with Applicable Laws............................................................. 11
2.12 State Takeover Laws......................................................................... 13
2.13 Opinion of Financial Advisor................................................................ 13
2.14 Brokers..................................................................................... 13
ARTICLE III REPRESENTATIONS AND WARRANTIES OF CONSECO AND CAF
ACQUISITION.............................................................................. 13
3.1 Organization, Standing and Corporate Power.................................................. 13
3.2 Conseco Capital Structure................................................................... 13
3.3 Authority; Noncontravention................................................................. 14
3.4 SEC Documents............................................................................... 15
3.5 Absence of Certain Changes or Events........................................................ 15
3.6 Compliance with Applicable Laws............................................................. 16
3.7 No Prior Activities......................................................................... 16
3.8 Brokers..................................................................................... 16
3.9 Financing................................................................................... 17
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TABLE OF CONTENTS
(Continued)
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ARTICLE IV ADDITIONAL AGREEMENTS............................................................................. 17
4.1 Preparation of Form S-4 and the Proxy Statement/Prospectus;
Information Supplied........................................................................ 17
4.2 Meeting of Shareholders..................................................................... 18
4.3 Letter of the Company's Accountants......................................................... 18
4.4 Letter of Conseco's Accountants............................................................. 18
4.5 Access to Information; Confidentiality...................................................... 18
4.6 Best Efforts................................................................................ 19
4.7 Public Announcements........................................................................ 19
4.8 Acquisition Proposals....................................................................... 19
4.9 Fiduciary Duties............................................................................ 20
4.10 Consents, Approvals and Filings............................................................. 20
4.11 Employee Matters............................................................................ 20
4.12 Affiliates and Certain Shareholders......................................................... 21
4.13 NYSE Listing................................................................................ 22
4.14 Shareholder Litigation...................................................................... 22
4.15 Indemnification............................................................................. 22
4.16 Capitol Insurance Company of Ohio........................................................... 22
4.17 Certain Fees................................................................................ 22
ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS PRIOR TO
MERGER..................................................................................... 23
5.1 Conduct of Business by the Company.......................................................... 23
5.2 Conduct of Business by Conseco.............................................................. 25
5.3 Stock Options and Restricted Shares......................................................... 26
5.4 Other Actions............................................................................... 27
5.5 Conduct of Business of CAF Acquisition...................................................... 27
5.6 Investment Advisory Agreements.............................................................. 27
5.7 Certain Company Actions..................................................................... 27
ARTICLE VI CONDITIONS PRECEDENT.............................................................................. 28
6.1 Conditions to Each Party's Obligation To Effect the Merger.................................. 28
6.2 Conditions to Obligations of Conseco and CAF Acquisition.................................... 29
6.3 Conditions to Obligation of the Company..................................................... 29
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER................................................................. 30
7.1 Termination................................................................................. 30
7.2 Effect of Termination....................................................................... 31
7.3 Amendment................................................................................... 31
7.4 Extension; Waiver........................................................................... 31
7.5 Procedure for Termination, Amendment, Extension or Waiver................................... 31
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ARTICLE VIII SURVIVAL OF PROVISIONS.......................................................................... 31
8.1 Survival.................................................................................... 31
ARTICLE IX NOTICES........................................................................................... 32
9.1 Notices..................................................................................... 32
ARTICLE X MISCELLANEOUS...................................................................................... 33
10.1 Entire Agreement............................................................................ 33
10.2 Expenses.................................................................................... 33
10.3 Counterparts................................................................................ 33
10.4 No Third Party Beneficiary.................................................................. 33
10.5 Governing Law............................................................................... 33
10.6 Assignment; Binding Effect.................................................................. 33
10.7 Headings, Gender, etc....................................................................... 34
10.8 Invalid Provisions.......................................................................... 34
10.9 Waiver of Jury Trial........................................................................ 34
10.10 Enforcement................................................................................. 34
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<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made
and entered into as of August 25, 1996 by and among Conseco, Inc., an Indiana
corporation ("Conseco"), CAF Acquisition Company, an Ohio corporation and
wholly-owned subsidiary of Conseco ("CAF Acquisition"), and Capitol American
Financial Corporation, an Ohio corporation (the "Company").
PREAMBLE
WHEREAS, the respective Boards of Directors of Conseco, CAF
Acquisition and the Company have approved the merger of CAF Acquisition with and
into the Company, upon the terms and subject to the conditions set forth herein;
and
WHEREAS, Conseco, CAF 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), CAF Acquisition shall be merged with and into the Company (the
"Merger"), in accordance with the Ohio Revised Code (the "Ohio Code"), and the
separate corporate existence of CAF Acquisition shall cease and the Company
shall continue as the surviving corporation under the laws of the State of Ohio
(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 Ohio Code. The Merger shall have the effects set forth in
the Ohio 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 Ohio (the "Ohio 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
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appropriate documents, executed in accordance with the relevant provisions of
the Ohio Code, and make all other filings or recordings required under the Ohio
Code in connection with the Merger. The Merger shall become effective upon the
filing of the certificate of merger with the Ohio Secretary of State, or at such
later time as is specified in the certificate of merger (the "Effective Time").
1.4 Articles of Incorporation. The Articles of Incorporation
of the Surviving Corporation, as in effect immediately prior to the Effective
Time, shall be the Articles of Incorporation of the Surviving Corporation until
thereafter amended as provided by law.
1.5 Code of Regulations. The Code of Regulations of CAF
Acquisition, as in effect immediately prior to the Effective Time, shall be the
Code of Regulations of the Surviving Corporation until thereafter amended as
provided by law.
1.6 Directors. The directors of CAF 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 Articles of
Incorporation and the Code of Regulations of the Surviving Corporation, or as
otherwise provided by law.
1.7 Officers. The officers of CAF Acquisition at the Effective
Time shall be the officers of the Surviving Corporation.
1.8 Conversion of CAF Acquisition Shares. Each share of common
stock of CAF 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, without 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 or Dissenting Shares (as defined below))
including all outstanding Restricted Shares (as defined below) shall, by virtue
of the Merger and without any action on the part of the holder thereof, be
converted into a right to receive (i) $30.00 in cash plus the Time Factor (as
defined below), if any (collectively, the "Cash Consideration") and (ii) 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 (x) $6.50 by (y) the
Trading Value (as defined below). For purposes hereof, the term "Total
Consideration Amount" shall mean the sum of the amount of the Cash Consideration
and $6.50. The "Trading Value" 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 consecutive trading days immediately preceding the second trading day
prior to the Effective Time. The "Time Factor", if any, shall be equal to $0.25
if the Effective Time shall not have occurred by December 10, 1996, which amount
shall be increased by an additional $0.25 on the tenth day of each calendar
month thereafter until the occurrence of the Effective Time. The Cash
Consideration, 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."
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(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.
(d) Company Dissenting Shares. Notwithstanding anything in
this Agreement to the contrary, Shares which are held by the Company
shareholders who shall have effectively dissented from the Merger and perfected
their dissenters' rights in accordance with the provisions of Section 1701.85 of
the Ohio Code (the "Dissenting Shares") shall not be converted into or be
exchangeable for the right to receive the Merger Consideration, but the holders
thereof shall be entitled to payment from the Surviving Corporation of the
appraised value of such shares in accordance with the provisions of Section
1701.85 of the Ohio Code; provided, however, that if any such holder shall have
failed to perfect such dissenters' rights or shall have effectively withdrawn or
lost such rights, his or her outstanding Shares shall thereupon be converted
into and exchangeable for, as if completed at the Effective Time, the Merger
Consideration, as determined and paid in the manner set forth in this Agreement,
without any interest thereon. The Company shall give Conseco (i) prompt notice
of any notice or demands for payment for Dissenting Shares pursuant to Section
1701.85 of the Ohio Code received by the Company and (ii) the opportunity to
participate in and direct all negotiations and proceedings with respect to any
such demands or notices. The Company shall not, without the prior written
consent of Conseco, make any payment with respect to, to settle, offer to settle
or otherwise negotiate, any such demands.
(e) Treatment of Company Stock Options and Restricted Shares.
(i) Except as otherwise provided in Section 1.9(e) of the Disclosure Schedule
(as defined below), immediately prior to the Effective Time, each outstanding
unexpired employee or director stock option to purchase Shares ("Company Stock
Option") and restricted stock right ("Restricted Shares") which have been
granted pursuant to the Company's 1992 Equity Participation Plan, as amended to
the date hereof (the "Company Stock Option Plan" ) shall be fully vested.
(ii) Except as otherwise provided in Section
1.9(e)(iii) or Section 1.9(e) of the Disclosure Schedule, at the Effective Time
each Company Stock Option shall be deemed disposed to the Company in accordance
with final Rule 16b-3 as promulgated by the Securities and Exchange Commission
("SEC") pursuant to Release 34-37260 (May 31, 1996) ("New Section 16") and then
converted automatically into an option (a "New Conseco Option") to purchase such
number of shares of Conseco Common Stock (rounding the result to the nearest
ten-thousandth of a share) equal to the number of Shares subject to such Company
Stock Option immediately prior to the Effective Time, multiplied by the
Conversion Ratio (as defined below), for an exercise price equal to the Adjusted
Exercise Price (as defined below), but otherwise on the same terms and
conditions as were applicable under the Company Stock Option Plan and the
underlying stock option agreement. The "Conversion
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Ratio" shall mean the number determined by dividing the Total Consideration
Amount by the Trading Value (rounding the result to the nearest ten-thousandth
of a share). The "Adjusted Exercise Price" shall be determined by multiplying
(A) the Trading Value by (B) the quotient of the current exercise price divided
by Total Consideration Amount.
(iii) If prior to the Effective Time Conseco has
given notice that any holder of a Company Stock Option who is an employee of the
Company will not be asked to remain in his or her position beyond the period
ending at the end of six months after the Effective Time, with respect to each
Company Stock Option held by such person immediately prior to the Effective Time
and, irrespective of the giving of any notice, with respect to each Company
Stock Option held by a non-employee director of the Company, except as otherwise
provided in Section 1.9(e) of the Disclosure Schedule, at the Effective Time
such Company Stock Option shall be deemed disposed to the Company in accordance
with New Section 16 and then converted automatically at the Effective Time into
the right to receive an amount (the "Spread") in cash equal to the product of
(A) the Total Consideration Amount minus the current exercise price thereof
multiplied by (B) the total number of Shares subject thereto.
(iv) With respect to any holder of a Company Stock
Option who is an employee of the Company immediately prior to the Effective Time
who does not receive the Spread at the Effective Time pursuant to Section
1.9(e)(iii), if the employment of such person shall be terminated prior to the
end of the six month period after the Effective Time, with respect to each New
Conseco Option held by such person at the time of termination of his employment,
such New Conseco Option shall be deemed not to have been issued pursuant to
Section 1.9(e)(ii) and the holder thereof shall be deemed to have disposed to
the Company immediately prior to the Effective Time the Company Stock Options
then held by such employee in accordance with New Section 16 and, with respect
to each such Company Stock Option, then converted automatically into the right
to receive the Spread, which Spread shall be payable to the employee in cash
upon termination.
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, cash equal to the
total Cash Consideration to be paid to holders of Shares pursuant to Section
1.9(a) and certificates representing the shares of Conseco Common Stock to be
issued to holders of Shares pursuant to Section 1.9(a) (such cash and
certificates, together with any dividends or distributions with respect to such
certificates and cash payable pursuant to Section 1.10(f), 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 (i) 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, and (ii) cash equal to the amount of the Cash Consideration
multiplied by the number of Shares previously represented by such certificate or
certificates surrendered. 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
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consideration to be paid in the Merger (or any portion thereof) is to be
delivered to any person other than the person in whose name the certificate
representing Shares surrendered in exchange therefor is registered, it shall be
a condition to such exchange that the certificate so surrendered shall be
properly endorsed or otherwise be in proper form for transfer and that the
person requesting such exchange shall pay to the Paying Agent any transfer or
other taxes required by reason of the payment of such consideration to a person
other than the registered holder of the certificate surrendered, or shall
establish to the satisfaction of the Paying Agent that such tax has been paid or
is not applicable. After the Effective Time, there shall be no further transfer
on the records of the Company or its transfer agent of certificates representing
Shares and if such certificates are presented to the Company for transfer, they
shall be cancelled against delivery of the Merger Consideration as hereinabove
provided. Until surrendered as contemplated by this Section 1.10(b), each
certificate representing Shares (other than certificates representing Shares to
be cancelled in accordance with Section 1.9(b)), shall be deemed at any time
after the Effective Time to represent only the right to receive upon such
surrender the Merger Consideration, without any interest thereon, as
contemplated by Section 1.9. No interest will be paid or will accrue on any cash
payable as Merger Consideration.
(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 l. 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 l shall be deemed to have
been issued and paid in full satisfaction of all rights pertaining to the Shares
theretofore represented by such certificates, subject, however, to the Surviving
Corporation's obligation (if any) to pay any dividends or make any other
distributions with a record date prior to the Effective Time which may have been
declared by the Company on such Shares in accordance with the terms of this
Agreement or prior to the date of this Agreement and which remain unpaid at the
Effective Time.
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(f) No Fractional Shares. (i) No certificates or scrip
representing fractional shares of Conseco Common Stock shall be issued upon the
surrender for exchange of certificates that immediately prior to the Effective
Time represented Shares which have been converted pursuant to Section 1.9, and
such fractional share interests will not entitle the owner thereof to vote or to
any rights of a shareholder of Conseco.
(ii) Notwithstanding any other provisions of this Agreement,
each holder of Shares who would otherwise have been entitled to receive a
fraction of a share of Conseco Common Stock (after taking into account all
certificates delivered by such holder) shall receive, in lieu thereof, cash
(without interest) in an amount equal to such fractional part of a share of
Conseco Common Stock multiplied by the Trading Value.
(g) Termination of Payment Fund. Any portion of the Payment
Fund which remains undistributed to the holders of the certificates representing
Shares for 180 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 shall thereafter look only to Conseco and only as general creditors
thereof for payment of their claim for any Merger Consideration and any
dividends or distributions with respect to Conseco Common Stock.
(h) Merger Consideration for Dissenting Shares. Any portion of
the Merger Consideration together with any dividends or other distributions
payable pursuant to Section 1.10(d) and cash for payment in lieu of fractional
Shares deposited with the Paying Agent to pay for Dissenting Shares for which
the right to receive a payment pursuant to Section 1701.85 of the Ohio Code
shall have been perfected shall be returned to the Surviving Corporation, upon
demand.
(i) No Liability. None of Conseco, CAF 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
The Company hereby represents and warrants to Conseco and CAF
Acquisition as follows:
2.1 Organization, Standing and Corporate Power. (i) Each of
the Company and each 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
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now being conducted. Each of the Company and each 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 Articles of
Incorporation and Code of Regulations, as amended to the date of this Agreement.
(ii) Except as disclosed in Section 2.1(ii) of the Disclosure
Schedule (the "Disclosure Schedule") dated the date hereof and delivered by the
Company to Conseco concurrently herewith (the "Subsidiaries"), the Company has
no subsidiaries and does not control, directly or indirectly, any other person.
2.2 Capital Structure. The authorized capital stock of the
Company consists of (i) 40,000,000 Shares and (ii) 5,000,000 shares of Preferred
Stock without par value (the "Preferred Stock"). At the close of business on
August 23, 1996: (a) 17,489,190 Shares were issued and outstanding, 696,000
Shares were reserved for issuance pursuant to outstanding Company Stock Options
(b) 18,000 Restricted Shares were issued and outstanding; and (c) no shares of
Preferred Stock were issued and outstanding. Except as set forth above, at the
close of business on August 23, 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 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 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 shareholders of the Company or any Subsidiary
of the Company may vote are issued or outstanding. Except for the Restricted
Shares and as disclosed in Section 2.2 of the Disclosure Schedule, all the
outstanding shares of capital stock of each 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 for the
Restricted Shares and as set forth above or in Section 2.2 of the Disclosure
Schedule, neither the Company nor any Subsidiary of the Company has any
outstanding option, warrant, subscription or other right, agreement or
commitment which either (i) obligates the Company or any Subsidiary of the
Company to issue, sell or transfer, repurchase, redeem or otherwise acquire or
vote any shares of the capital stock of the Company or any 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 shareholders 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 shareholders 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
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agreement of Conseco and CAF 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 Articles of Incorporation or the Code of Regulations of the Company or the
comparable documents of any 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 adoption by the shareholders of the
Company of this Agreement (such proxy statement, as amended or supplemented from
time to time, the "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 Ohio Secretary
of State and appropriate documents with the relevant authorities of other states
in which the Company is qualified to do business, (v) such other consents,
approvals, authorizations, filings or notices as are set forth in Section 2.3 of
the Disclosure Schedule and (vi) any applicable filings under state
anti-takeover laws.
2.4 SEC Documents. (i) The Company has filed all required
reports, schedules, forms, statements and other documents with the SEC since
January 1, 1994 (such reports, schedules, forms, statements and other documents
are hereinafter referred to as the "SEC Documents"); (ii) as of their respective
dates, the SEC Documents complied with the requirements of the Securities Act of
1933, as amended (the "Securities Act"), or the Exchange Act, as the case may
be, and the rules and regulations of the SEC promulgated thereunder applicable
to such SEC Documents, and none of the SEC Documents as of such dates contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading; and (iii) the consolidated financial statements of the Company
included in the SEC Documents comply as to form in all material respects with
applicable accounting requirements and the published rules and
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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 $0.10 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, liabilities 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"))
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(hereinafter a "Pension Plan"), "employee welfare benefit plan" (as defined in
Section 3(1) of ERISA) (hereinafter a "Welfare Plan"), and each other plan,
arrangement or policy (written or oral) relating to stock options, stock
purchases, compensation, deferred compensation, severance, fringe benefits or
other employee benefits, in each case maintained or contributed to, or required
to be maintained or contributed to, by the Company and its subsidiaries for the
benefit of any present or former officers, employees, agents, directors or
independent contractors of the Company or any of its subsidiaries (all the
foregoing being herein called "Benefit Plans") has been administered in
accordance with its terms. The Company, its subsidiaries and all the Benefit
Plans are in compliance in all material respects 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
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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
Shareholders Meeting with respect to the approval of this Agreement is the only
vote of the holders of any class or series of the Company's capital stock
necessary to approve this Agreement and the transactions contemplated by this
Agreement under the Articles of Incorporation, the Code of Regulations or the
Ohio Code.
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 and except with respect to the matters
covered by Section 2.11(iii), the Company and its subsidiaries are in compliance
in all material respects 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") and except with respect to the matters covered by Section
2.11(iii), 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
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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.
(iii) Except as set forth in Section 2.11(iii) of
the Disclosure Schedule, (a) the Company and its subsidiaries (exclusive of
their agents) and, to the knowledge of the Company (without independent
inquiry), their agents have marketed, sold and issued Company products in
compliance, in all material respects, with all statutes, laws, ordinances,
rules, orders and regulations of any Governmental Entity applicable to the
business of the Company and its subsidiaries ("Laws") in the respective
jurisdictions in which such products have been sold, except where the failure to
do so, individually or in the aggregate, has not had or 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,
(b) there are (x) to the knowledge of the Company, no claims asserted, (y) no
actions, suits, investigations or proceedings by or before any court or other
Governmental Entity or (z) no investigations by or on behalf of the Company
(other than routine investigations in connection with the Company's hiring
practices) ((x), (y) and (z) being collectively referred to as "Actions")
pending or, to the knowledge of the Company, threatened, against or involving
the Company, any of its subsidiaries or, to the knowledge of the Company
(without independent inquiry), any of its agents that include allegations that
the Company, any of its subsidiaries or any of its agents were in violation of
or failed to comply with such Laws, and, to the knowledge of the Company, no
facts exist which would reasonably be expected to result in the filing or
commencement of any such Action, which Actions, individually or in the
aggregate, would 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, and (c) the Company and its subsidiaries are in
compliance, in all material respects, with and have performed, in all material
respects, all obligations required to be performed by each of them under any
cease-and-desist or other order issued by any Insurance Regulator or other
Governmental Entity to the Company or any of its subsidiaries or under any
written agreement, consent agreement, memorandum of understanding or commitment
letter or similar undertaking entered into between any Insurance Regulator or
other Governmental Entity and the Company or any of its subsidiaries
("Regulatory Agreement"), which Regulatory Agreement remains in effect on the
date hereof, except where the failure to do so, individually or in the
aggregate, has not had or 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. Each Regulatory Agreement
issued or entered into after December 31, 1992 is identified in Section
2.11(iii) of the Disclosure Schedule.
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2.12 State Takeover Laws. The Board of Directors of the
Company has approved the transactions contemplated by this Agreement and by the
Shareholders Agreement (as defined below) such that the provisions of Section
1701.83 of the Ohio Code and the provisions of Chapter 1704 of the Ohio Code
will not apply to this Agreement or the Shareholders Agreement or any of the
transactions contemplated hereby or thereby.
2.13 Opinion of Financial Advisor. The Company has received
the opinion of Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"),
dated the date hereof, to the effect that, as of such date, the consideration to
be received in the Merger by the Company's shareholders is fair from a financial
point of view to the Company's shareholders.
2.14 Brokers. Except with respect to 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 a true and complete copy of the agreement between the Company and
DLJ, 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 CAF ACQUISITION
Conseco and CAF Acquisition hereby represent and warrant to
the Company as follows:
3.1 Organization, Standing and Corporate Power. Each of
Conseco and CAF 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 CAF Acquisition and each Significant
Subsidiary of Conseco is duly qualified or licensed to do business and is in
good standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification or licensing
necessary. Conseco has delivered to the Company complete and correct copies of
its Articles of Incorporation and Bylaws, as amended to the date of this
Agreement. For purposes of this Agreement, a "Significant Subsidiary" of Conseco
means any subsidiary of Conseco that would constitute a Significant Subsidiary
within the meaning of Rule 1-02 of Regulation S-X of the SEC.
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 August
23, 1996, (i) 58,416,433 shares of Conseco Common Stock, 5,264,767 shares of
$3.25 Series D Cumulative Convertible Preferred Stock of Conseco (the "Conseco
Series D Preferred Stock") and 4,369,700 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) 13,721,689 shares of Conseco Common Stock were reserved for issuance
pursuant to outstanding options to purchase shares of Conseco Common Stock
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and other benefits granted under Conseco's benefit plans (the "Conseco Stock
Plans"), (iii) 8,258,314 shares of Conseco Common Stock were reserved for
issuance upon conversion of the Conseco Series D Preferred Stock and (iv)
8,739,400 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 1,105,550 shares of Bankers Life
Holding Corporation under its Stock Option Plan and (z) with respect to stock
units awarded under the Conseco Stock Plans, at the close of business on August
23, 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 CAF Acquisition consists of 750 shares of common stock, no par value, 100 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 shareholders 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 disclosed in the Filed Conseco SEC Documents (as defined below).
Except as set forth above or as disclosed in the Filed Conseco SEC Documents,
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 CAF Acquisition
have all requisite corporate power and authority to enter into this Agreement
and to consummate the transactions contemplated by this Agreement. The execution
and delivery of this Agreement by Conseco and CAF Acquisition and the
consummation by Conseco and CAF Acquisition of the transactions contemplated by
this Agreement have been duly authorized by all necessary corporate action on
the part of Conseco and CAF Acquisition. 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 CAF 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 Bylaws of Conseco, the Articles
of Incorporation or the Code of Regulations of CAF Acquisition or the comparable
documents of any Significant Subsidiary of Conseco, (ii) subject to the
governmental filings, other matters referred to in the following sentence and
Section 3.3 of the Conseco Disclosure Schedule, 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,
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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 CAF Acquisition in connection with the execution and delivery of this
Agreement by Conseco or CAF Acquisition or the consummation by Conseco or CAF
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"), 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 Ohio 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") or in Section 3.5 of a
Disclosure Schedule dated the date hereof and delivered concurrently herewith by
Conseco to the Company (the "Conseco Disclosure Schedule"), 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
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(whether in cash, stock or property) with respect to any of Conseco's
outstanding capital stock (other than regular quarterly cash dividends of $.0625
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) any split,
combination or reclassification of any of its outstanding capital stock or any
issuance or the authorization of any issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital stock, or (iv) any
change in accounting methods, principles or practices by Conseco materially
affecting its assets, liabilities or business, except as may have been required
by a change in generally accepted accounting principles.
3.6 Compliance with Applicable Laws. (i) Each of Conseco 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 Conseco SEC Documents, Conseco and its subsidiaries are in compliance
in all material respects with all applicable statutes, laws, ordinances, rules,
orders and regulations of any Governmental Entity. Except as disclosed in the
Filed Conseco 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
Conseco, no investigation by any Governmental Entity with respect to Conseco 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 Conseco
prior to the date of this Agreement.
3.7 No Prior Activities. CAF 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, CAF 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 (iii) 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
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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 Financing. At the Effective Time, Conseco will have
sufficient funds to pay the aggregate Cash Consideration and any other cash
payable in respect of Shares pursuant to Section 1.9, on the terms and subject
to the conditions contemplated by this Agreement.
ARTICLE IV
ADDITIONAL AGREEMENTS
4.1 Preparation of Form S-4 and the Proxy
Statement/Prospectus; 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 Proxy Statement and Conseco shall prepare and file with the SEC the
Form S-4 and the Proxy Statement and Prospectus required pursuant to such Form
shall be included (the "Proxy Statement/Prospectus"). Each of the Company and
Conseco shall use its best efforts to have the Form S-4 declared effective under
the Securities Act as promptly as practicable after such filing. The Company
shall use its best efforts to cause the Proxy Statement/Prospectus to be mailed
to the Company's shareholders 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 Proxy
Statement will, at the date it is first mailed to the Company's shareholders or
at the time of the Shareholders 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 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 CAF Acquisition specifically for inclusion or
incorporated by reference in the Proxy Statement.
(c) Conseco agrees that none of the information supplied or to
be supplied by Conseco or CAF 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. The Form S-4 and the
Prospectus
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contained therein will comply as to form in all material respects with the
requirements of the Securities 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 Prospectus based on information supplied by the
Company specifically for inclusion or incorporation by reference therein.
4.2 Meeting of Shareholders. The Company will take all action
necessary in accordance with applicable law and its Articles of Incorporation
and the Code of Regulations to convene a meeting of its shareholders (the
"Shareholders Meeting") to consider and vote upon the adoption of this
Agreement. Subject to Section 4.9 hereof, the Company will, through its Board of
Directors, recommend to its shareholders the adoption of this Agreement. Without
limiting the generality of the foregoing, the Company agrees that, subject to
its right to terminate this Agreement pursuant to Section 4.9, its obligations
pursuant to the first sentence of Section 4.2 shall not be affected by (i) the
commencement, public proposal, public disclosure or communication to the Company
of any Acquisition Proposal (as defined in Section 4.8) or (ii) the withdrawal
or modification by the Board of Directors of the Company of its approval or
recommendation of this Agreement or the Merger. The Company will use its best
efforts to hold the Shareholders Meeting and (subject to Section 4.9 hereof) to
obtain the favorable votes of its shareholders 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 KPMG Peat
Marwick L.L.P., the Company'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 KPMG Peat Marwick L.L.P., dated a date within two
business days before the Closing Date, 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
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required by, and in accordance with, the provisions of the letter dated August
12, 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 CAF Acquisition, on the
one hand, and the Company, on the other hand, will consult with each other
before issuing, and provide each other the opportunity to review and comment
upon, any press release or other public statements with respect to the
transactions contemplated by this Agreement, including the Merger, and shall not
issue any such press release or make any such public statement prior to such
consultation, except as may be required by applicable law, court process or by
obligations pursuant to any listing agreement with any national securities
exchange.
4.8 Acquisition Proposals. The Company shall not, nor shall it
permit any of its subsidiaries to, nor shall it authorize or permit any officer,
director or employee of, or any investment banker, attorney or other advisor or
representative of, the Company or any of its subsidiaries to, directly or
indirectly, (i) solicit, initiate or encourage the submission of any Acquisition
Proposal (as herein after 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
a 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 the Company 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,
of 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 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 Subsidiary of the Company, or any
purchase of all or any significant portion
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of the assets of the Company or any Subsidiary of the Company, or any equity
interest in the Company or any 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
CAF Acquisition, the approval or recommendation by such Board of Directors of
this Agreement or the Merger, (ii) approve or recommend an Acquisition Proposal
or (iii) enter into any agreement with respect to any Acquisition Proposal,
unless the Company receives an Acquisition Proposal and the Board of Directors
of the Company determines in good faith, following consultation with outside
counsel, that in order to comply with its fiduciary duties to the Company under
applicable law it is necessary for the Board of Directors to withdraw or modify,
in a manner materially adverse to Conseco or CAF 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 4.17 Fee (as defined
below). Nothing contained in this Section 4.9 shall prohibit the Company from
taking and disclosing to its shareholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act or from making any disclosure to the
Company's shareholders 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 CAF Acquisition, its position with
respect to the Merger or approve or recommend an Acquisition Proposal.
Notwithstanding anything contained in this Agreement to the contrary, any action
by the Board of Directors permitted by this Section 4.9 shall not constitute a
breach of this Agreement by the Company.
4.10 Consents, Approvals and Filings. The Company and Conseco
will make and cause their respective subsidiaries to make all necessary filings,
as soon as practicable, including, without limitation, those required under the
HSR Act, the Securities Act, the Exchange Act, and applicable state insurance
laws in order to facilitate prompt consummation of the Merger and the other
transactions contemplated by this Agreement. In addition, the Company and
Conseco will each use their best efforts, and will cooperate fully with each
other (i) to comply as promptly as practicable with all governmental
requirements applicable to the Merger and the other transactions contemplated by
this Agreement and (ii) to obtain as promptly as practicable all necessary
permits, orders or other consents of Governmental Entities and consents of all
third parties necessary for the consummation of the Merger and the other
transactions contemplated by this Agreement. Each of the Company and Conseco
shall use best efforts to promptly provide such information and communications
to Governmental Entities as such Governmental Entities may reasonably request.
Each of the parties shall provide to the other party copies of all applications
in advance of filing or submission of such applications to Governmental Entities
in connection with this Agreement and shall make such revisions thereto as
reasonably requested by such other party. Each party shall provide to the other
party the opportunity to participate in all meetings and material conversations
with Governmental Entities.
4.11 Employee Matters. (i) From and after the Effective Time,
Conseco shall, with respect to benefits accrued, honor in accordance with their
respective terms the employee benefit plans, programs, policies, arrangements
and agreements listed on Section 4.11 of the Disclosure Schedule (the "Section
4.11 Plans") and shall not take, or permit to be
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taken, any action that would reduce, eliminate or otherwise adversely affect the
compensation accrued or benefits accrued at the Effective Time (or, if greater,
at termination of employment after the Effective Time) for any employee or
former employee of the Company or any Company Affiliate under any Section 4.11
Plan. For purposes of any Section 4.11 Plan that contains a provision relating
to a change in control of the Company, Conseco acknowledges that the
consummation of the Merger constitutes such a change in control.
(ii) For the year ending December 31, 1996, the
Company or the Surviving Corporation shall pay to each employee of the Company
and/or its Subsidiaries who is entitled to receive a cash bonus under the bonus
arrangement established by the Company prior to the date of this Agreement (the
"Bonus") and who is an employee of the Company or its Subsidiaries as of the
Effective Time (each, a "Bonus Payee"), one or more cash payments as follows:
(a) with respect to the non-discretionary portion of the Bonus, the amount
thereof shall be calculated in accordance with the terms of the Bonus and shall
be paid at the time it is determined in accordance with past practice, whether
or not any Bonus Payee is then an employee of the Company or the Surviving
Corporation; provided, that if the employment with the Company of any Bonus
Payee is terminated between the Effective Time and December 31, 1996, such Bonus
Payee shall be entitled to receive a prorated portion thereof based on the
number of days that such Bonus Payee was employed by the Company or the
Surviving Corporation during the year ending December 31, 1996 (the "Prorated
Portion") and (b) with respect to the discretionary portion of the Bonus, the
amount thereof shall equal 75% of the amount previously established by the
Company as the maximum to be paid as a discretionary award for 1996, which
amount shall be paid in cash at the earlier of (i) the time of the payment of
the non-discretionary portion of the Bonus and (ii) termination of any Bonus
Payee's employment with the Company or the Surviving Corporation; provided, that
if the employment with the Company of any Bonus Payee is terminated between the
Effective Time and December 31, 1996, upon termination such Bonus Payee shall be
paid the Prorated Portion.
4.12 Affiliates and Certain Shareholders. 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 shareholders 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 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 to the Disclosure Schedule.
Conseco shall not 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. Conseco Common Stock received
by such affiliates in the Merger shall bear a customary legend regarding
applicable Securities Act restrictions and the provisions of this Agreement.
If any such affiliate is unable because of the volume limitations of
Rule 144 of the SEC to sell pursuant to Rule 144 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 promptly and in any event
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within 10 business days a Registration Statement on Form S-3 with the SEC to
register such shares for resale by such affiliate and provide customary
indemnities with respect thereto.
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 Shareholder Litigation. The Company shall give Conseco
the opportunity to participate in the defense or settlement of any shareholder
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 articles of incorporation and
the code of regulations of the Surviving Corporation and each of its
subsidiaries shall contain the provisions with respect to indemnification set
forth in the Articles of Incorporation and the Code of Regulations of the
Company or the respective Subsidiary, as the case may be, 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) From and after the Effective Time, Conseco shall honor in
accordance with their respective terms the indemnification agreements identified
in Section 4.15 of the Disclosure Schedule and shall not take, or permit to be
taken, any action that would reduce, eliminate or otherwise adversely affect the
rights of the persons entitled to indemnification thereunder.
(c) For a period of two years after the Effective Time,
Conseco shall cause to be maintained officers' and directors' liability
insurance covering the Indemnified Parties who are currently covered, in their
capacities as officers and directors, by the Company's existing officers' and
directors' liability insurance policies on terms substantially no less
advantageous to the Indemnified Parties than such existing insurance.
(d) 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, CAF Acquisition, the Company and the Surviving Corporation.
4.16 Capitol Insurance Company of Ohio. The Company shall use
its reasonable best efforts to have control of Capitol Insurance Company of
Ohio, a mutual association organized under the Ohio Non-Profit Corporation Law,
transferred to Conseco.
4.17 Certain Fees. The Company shall pay to Conseco upon
demand $15
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million (the "Section 4.17 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
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.
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 Section 5.1 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. The Company agrees throughout such time to
allow representatives of Conseco to have access to the management and other
personnel of the Company so that Conseco can be fully informed at all times as
to significant day-to-day executive, legal, financial, marketing and other
operational matters involving the Company, its Subsidiaries or their businesses.
Prior to taking or approving any action with respect to any such significant
matters involving the Company, management of the Company will notify the
representative of Conseco designated by Conseco for oversight of the functional
area(s) involved with such decision and will, if consistent with the legal or
fiduciary obligations of such officer or the Directors of the Company, follow
any suggestions made by the Conseco representative with respect to the proposed
action. During such time, the Company will cause its personnel to cooperate with
personnel from Conseco in preparing for any proposed relocation by Conseco of
the Company's operations following Closing. 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 $0.10 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
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securities other than upon the exercise of Company Stock Options
outstanding on the date of this Agreement;
(iii) amend its Articles of Incorporation, the Code of
Regulations 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 (A)
indebtedness owing to or guarantees of indebtedness owing to the
Company or any direct or indirect wholly-owned subsidiary of the
Company, (B) indebtedness incurred by the Company in connection with
the declaration and payment of the regular quarterly dividend or (C)
indebtedness incurred by the Company in connection with the payment of
its expenses relating to this Agreement and the transactions
contemplated hereby, subject to the limitation set forth in Section
10.2 or (y) make any loans or advances to any other person, other than
(A) to the Company, or to any direct or indirect wholly-owned
subsidiary of the Company, (B) routine advances to agents of the
Company or (C) special individual advances of not more than $30,000
each to agents of the Company;
(vii) make any tax election or settle or compromise any income
tax liability that would reasonably be expected to be material to the
Company and its subsidiaries taken as a whole;
(viii) pay, discharge, settle or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or
satisfaction, in the ordinary course of business consistent with past
practice or in accordance with their terms, of liabilities reflected or
reserved against in, or contemplated by, the most recent consolidated
financial statements (or the notes thereto) of the Company included in
the Filed SEC Documents or incurred since the date of such financial
statements in the ordinary course of business consistent with past
practice;
(ix) except as otherwise provided in the investment guidelines
to be contained in the investment advisory agreements specified in
Section 5.6 hereof, 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 (which investments shall, in each case, be classified as
available-for-sale in accordance with SFAS 115, as defined in Section
5.6) other than cash equivalent assets or in short-term investments
(consisting of United States government issued or guaranteed
securities, or commercial paper rated A-I 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;
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(x) except as may be required by law,
(i) 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 or by law;
(ii) 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;
(iii) approve any general or company-wide pay
increases for employees; or
(iv) make any representation or promise, oral
or written, to any employee or former director, officer or
employee of the Company or any subsidiary to do any of the
foregoing;
(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;
(xii) hold any meeting of the Board of Directors of the
Company or any Subsidiary or any committee of any such board, or take
any action by written consent of any such board or committee, without
providing to Conseco (i) written notice of any such meeting or any
proposed action by written consent at the same time such notice or
action is provided to the directors and (ii) an agenda of any specific
matters to be considered at such meeting or a copy of the proposed
written consent; or
(xiii) authorize any of, or commit or agree to take any of,
the foregoing actions.
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. Except as set forth in Sections 3.5 or 5.2
of the Conseco Disclosure Schedule, 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 $.0625 per share of Conseco Common Stock and regular cash dividends
on the Conseco Series D Preferred Stock and the
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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
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;
(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 Proxy Statement/Prospectus
or, (B) if it were to occur after such date of mailing, require an
amendment of the Proxy Statement/Prospectus;
(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 Proxy
Statement/Prospectus or, (B) if it were to occur after such date of
mailing, require an amendment of the Proxy Statement/Prospectus; or
(iv) authorize any of, or commit or agree to take any of,
the foregoing actions.
5.3 Stock Options and Restricted Shares. (i) 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 and Restricted Shares to give
effect to the desires and intentions of the parties with respect to Company
Stock Options and Restricted Shares as contemplated by this Agreement, including
the following:
(a) The treatment of the Company Stock Options and Restricted
Shares in accordance with Section 1.9; and
(b) The Board of Directors of the Company shall approve the
disposition of Company Stock Options and Restricted Shares to the
Company pursuant to Section 1.9(e) in accordance with New Section 16 in
a manner intended to exempt the disposition from Section 16(b) of the
Exchange Act.
(ii) Conseco agrees to use its best efforts, including without
limitation additional actions by its Board of Directors or the committee thereof
which administers compensation, to give effect to the following desires and
intentions of the parties with respect to Company Stock Options and Restricted
Shares which remain outstanding immediately prior to the Effective Time:
(a) 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 New Conseco Options. Following
the Effective Time, Conseco will issue the Conseco Common Shares
required to be issued upon the exercise of any New Conseco
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Options as provided in Section 1.9. 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 New Conseco 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 New Conseco Options remain outstanding.
(b) The Board of Directors of Conseco shall approve the grant
of the New Conseco Options in accordance with New Section 16 in a
manner intended to exempt the grant from Section 16(b) of the Exchange
Act.
(iii) The parties agree that after the date hereof, except for
the Company Stock Options and Restricted Shares 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
and Restricted Shares 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. Except as otherwise contemplated by this
Agreement, 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 as of the date of this
Agreement 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 CAF Acquisition. During the period
from the date of this Agreement to the Effective Time, CAF Acquisition shall not
engage in any activities of any nature except as provided in or contemplated by
this Agreement.
5.6 Investment Advisory Agreements. Except with respect to
investments classified on the date of this Agreement as "held-to-maturity" under
Statement of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" ("SFAS 115"), the Company agrees to
enter into, and to cause each of its Subsidiaries to enter into, an investment
advisory agreement with Conseco Capital Management, Inc. ("CCM"), a wholly-owned
subsidiary of Conseco. Such agreements shall be effective as of the date of this
Agreement and shall contain terms and conditions which are customary in
investment advisory agreements between CCM and its clients.
5.7 Certain Company Actions. Notwithstanding any other
provision of this Agreement to the contrary, the Directors of the Company and
its officers and employees shall be entitled to take all actions necessary,
appropriate or desirable to cause the stay pay and severance arrangements
identified in Section 5.1 of the Disclosure Schedule and for the special cash
bonus described in Section 1.9(e) to the Disclosure Schedule to be adopted and
implemented and all payments identified in such Sections 1.9(e) and 5.1 of the
Disclosure Schedule to be paid as provided therein.
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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) Shareholder Approval. This Agreement shall have been
adopted by the affirmative vote of the shareholders of the Company
entitled to cast at least a majority of the votes which all
shareholders of the Company are entitled to cast thereon.
(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 CAF
Acquisition shall be obtained from (i) the Insurance Regulators in the
jurisdictions set forth in Section 2.3 of the Disclosure Schedule, and
(ii) any other Governmental Entity whose consent, approval, permission
or authorization is required by reason of a change in law after the
date of this Agreement, unless the failure to obtain such consent,
approval, permission or authorization would not reasonably be expected
to have a material adverse effect on the business, financial condition
or results of operations of the Company and its subsidiaries, taken as
a whole, or on the validity or enforceability of this Agreement;
provided, however, that, notwithstanding the foregoing, in the event
that all governmental and regulatory consents required hereunder shall
have been obtained except the approval of the Insurance Regulator of
any life insurance subsidiary of the Company, which does not constitute
a "significant subsidiary" (within the meaning of Rule 1-02 of
Regulation S-X of the SEC) of the Company (a "Non-Significant Life
Subsidiary") to the transfer of control of such Non-Significant Life
Subsidiary, then, subject to Article VII hereof, at any time thereafter
at the option of Conseco, the parties shall take one of the following
actions with respect to such Non-Significant Life Subsidiary and
otherwise proceed to consummate the Merger in accordance with this
Agreement: (a) place into escrow, pursuant to an escrow agreement
reasonably acceptable to the parties, the outstanding shares of capital
stock of such Non- Significant Life Subsidiary; such escrow agreement
shall contain customary provisions concerning duties and
responsibilities of the escrow agent and payment of the fees and
expenses of the escrow agent and shall provide that (i) pending
transfer of control of the Non-Significant Life Subsidiary to Conseco,
its current Board of Directors shall retain all power to vote its
shares of capital stock and to direct its business not inconsistent
with this Agreement, (ii) promptly following receipt of the approval of
the Insurance Regulator, control of the capital stock of such
Non-Significant Life Subsidiary shall be transferred to Conseco and
(iii) at any time following June 30, 1997 and prior to receipt of the
Insurance Regulator's approval, Conseco may elect to terminate the
escrow agreement, in which event such Non-Significant Life Subsidiary
shall be liquidated and dissolved and the proceeds thereof shall be
paid to Conseco; (b) cause such Non-Significant Life Subsidiary to
surrender its certificate of authority to do business in its state of
domicile; (c) cause such Non-Significant Life Subsidiary to commence
proceedings for its liquidation and dissolution; (d) enter into an
agreement for the sale and transfer of the Non-Significant Life
Subsidiary to a third party; or (e) take such other action as may be
mutually agreeable to the Company and Conseco.
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(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 shareholders 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 CAF Acquisition.
The obligations of Conseco and CAF 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
(after disregarding any qualification with respect to a material
adverse effect in Section 2.11(iii)) 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 dated as of the
Closing Date signed on behalf of the Company by the chief executive
officer and the chief financial officer of the Company to such effect.
(c) Shareholders Agreement. The Shareholders thereunder shall
have complied with their respective obligations under the Shareholders
Agreement, dated the date hereof, by and among Conseco and the shareholders of
the Company parties thereto (the "Shareholders Agreement").
6.3 Conditions to Obligation of the Company. The obligation
of the Company to effect the Merger is further subject to the following
conditions:
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(a) Representations and Warranties. The representations and
warranties of Conseco and CAF 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 CAF Acquisition.
Conseco and CAF 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 dated as of the Closing Date signed on behalf of
Conseco by the chief executive officer and the chief financial officer
of Conseco to such effect.
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 shareholders
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
Shareholders Meeting or any adjournment thereof, any required
approval of the shareholders of the Company shall not have
been obtained;
(ii) if the Merger shall not have been
consummated on or before March 31, 1997, 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.
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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, CAF Acquisition or the Company, other than
the last two sentences of Section 4.5 and Sections 2.14, 3.8, 4.17, 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
Ohio 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 shareholders 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 shareholders hereunder without the approval
of such shareholders. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties.
7.4 Extension; Waiver. At any time prior to the Effective
Time, the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties of the other parties contained in this
Agreement or in any document delivered pursuant to this Agreement or (c) subject
to Section 7.3, waive compliance with any of the agreements or conditions of the
other parties contained in this Agreement. Any agreement on the part of a party
to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party. The failure of any party
to this Agreement to assert any of its rights under this Agreement or otherwise
shall not constitute a waiver of such rights.
7.5 Procedure for Termination, Amendment, Extension or Waiver.
A termination of this Agreement pursuant to Section 7.1, an amendment of this
Agreement pursuant to Section 7.3 or an extension or waiver pursuant to Section
7.4 shall, in order to be effective, require in the case of Conseco, CAF
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 CAF 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.
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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:
Capitol American Financial Corporation
1001 Lakeside Avenue
Cleveland, OH 44114
Attention: David H. Gunning
Chairman, President
and Chief Executive Officer
Telephone: (216) 363-6306
Telecopy: (216) 363-6373
with copies to:
Jones, Day, Reavis & Pogue
599 Lexington Avenue
New York, New York 10022
Attention: Joanne L. Bober
Telephone: (212) 326-3939
Telecopy: (212) 755-7306
If to Conseco, to:
Conseco
11825 N. Pennsylvania Street
Carmel, Indiana 46032
Attention: Lawrence W. Inlow, Esq.
Telephone: (317) 817-6163
Telecopy: (317) 817-6327
If to CAF Acquisition, to:
CAF Acquisition
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
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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 CAF 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, the Conseco Disclosure Schedule and other
documents delivered in connection herewith), the Shareholders Agreement 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 provided in Section 4.17, whether or
not the Merger is consummated, each of the Company, Conseco and CAF 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 Proxy Statement/Prospectus 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) incurred in
connection with the Merger (but excluding reasonable fees and expenses incurred
in connection with related litigation) shall not exceed $5,000,000.
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 Ohio, 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.
10.9 Waiver of Jury Trial. Each party to this Agreement
waives, to the fullest extent permitted by applicable law, any right it may have
to a trial by jury in respect of any action, suit or proceeding arising out of
or relating to this Agreement.
10.10 Enforcement. The parties hereto agree that irreparable
damage would occur in the event any provision of this Agreement was not
performed in accordance with the terms hereof or were otherwise breached,
therefore the parties will be entitled to an injunction or injunctions to
prevent breaches of this Agreement and to enforce specifically the terms and
provisions hereof, in addition to any other remedy at law or in equity.
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IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of the Company, Conseco and CAF
Acquisition effective as of the date first written above.
CONSECO, INC.
By: /s/ Stephen C. Hilbert
----------------------
Stephen C. Hilbert
Chairman of the Board, President and Chief
Executive Officer
CAF ACQUISITION COMPANY
By: /s/ Stephen C. Hilbert
----------------------
Stephen C. Hilbert
President
CAPITOL AMERICAN FINANCIAL CORPORATION
By: /s/ David H. Gunning
--------------------
David H. Gunning
Chairman of the Board, President and Chief
Executive Officer
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Exhibit 99.1
- ------------------------------------------------------------------------------
SHAREHOLDERS AGREEMENT
by and among
CONSECO, INC.
and
BARRY J. HERSHEY
and
CONNIE HERSHEY
--------------------------------------------------
Dated as of August 25, 1996
--------------------------------------------------
- ------------------------------------------------------------------------------
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Table of Contents
Page
------
1. Certain Covenants.................................................... 1
1.1 Voting of Shares....................................... 1
1.2 No Solicitation........................................ 2
1.3 Prohibited Transfers................................... 2
2. Representations and Warranties of the Shareholders................... 3
2.1 Authorization, Validity and Effect of Agreement. ...... 3
2.2 No Conflict; Required Filings and Consents............. 3
2.3 Ownership of Owned Shares.............................. 3
3. Representations and Warranties of Conseco............................. 3
3.1 Authorization, Validity and Effect of Agreement........ 4
3.2 No Conflict; Required Filings and Consents............. 4
4. General Provisions................................................... 4
4.1 Notices................................................ 4
4.2 Entire Agreement....................................... 5
4.3 Counterparts........................................... 5
4.4 Governing Law.......................................... 5
4.5 Assignment; Binding Effect............................. 5
4.6 Headings, Gender, etc.................................. 5
4.7 Invalid Provisions..................................... 6
4.8 Termination............................................ 6
4.9 Specific Performance................................... 6
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Shareholders Agreement
Shareholders Agreement (this "Agreement"), dated as of August
25, 1996, by and between Conseco, Inc., an Indiana corporation ("Conseco"), and
Barry J. Hershey ("BJH") and Connie Hershey ("CH"), each an individual residing
at 900 Tanglewood Drive, Concord, Massachusetts (collectively, the
"Shareholders").
Recitals
A. Conseco, CAF Acquisition Company, an Ohio corporation and
wholly owned subsidiary of Conseco ("Merger Sub"), and Capitol American
Financial Corporation, an Ohio corporation (the "Company"), have entered into an
Agreement and Plan of Merger, dated as of the date hereof (the "Merger
Agreement"), pursuant to which the parties thereto have agreed, on the terms and
subject to the conditions set forth therein, to merge the Merger Sub with and
into the Company (the "Merger").
B. As of the date hereof, BJH is the beneficial owner of, and
has the sole right to vote and dispose of, 5,571,572 shares (the "BJH Owned
Shares") of Common Stock, without par value, of the Company (the "Company Common
Shares"), CH is the record or beneficial owner of, and has the sole right to
vote and dispose of, 1,885,060 Company Common Shares (the "CH Owned Shares") and
the Hershey Family Foundation is the beneficial owner of 297,371 shares, for
which shares BJH and CH share voting rights (the "Foundation Shares") and,
collectively with the BJH Owned Shares and the CH Owned Shares, the "Owned
Shares").
C. As a condition to its willingness to enter into the Merger
Agreement, Conseco has required that simultaneously with the execution of the
Merger Agreement Shareholders agree, and Shareholders are each willing to agree,
to the matters set forth herein.
1. Certain Covenants
1.1 Voting of Shares. Each of the Shareholders will, with
respect to all Owned Shares owned respectively by such Shareholder, together
with (a) any additional shares of capital stock of the Company which such
Shareholder is or becomes entitled to receive from the Company by reason of
being a record holder of the Owned Shares owned by such Shareholder, (b) any
securities or other property into which any such Owned Shares shall have been or
shall be converted or changed (other than Conseco Common Shares (as defined
below)), whether by amendment to the Articles of Incorporation of the Company,
merger, consolidation, reorganization, capital change or otherwise, (c) any
additional Company Common Shares acquired by Shareholders as the result of
Shareholders exercising an option, warrant or other right to acquire shares of
capital stock from the Company (all of the foregoing hereinafter collectively
referred to as the "Additional Owned Shares"), and (d) any shares of capital
stock referred to in clauses (a), (b), and (c) above that are issued or issuable
in respect of Additional Owned Shares (the Owned Shares, the Additional Owned
Shares and any securities referred to in clause (d) above hereinafter
collectively referred to as the "Voting Shares"), that such Shareholder owns of
record or beneficially on the record date for voting at the meeting of
shareholders called to consider and vote upon the Merger (the "Shareholders
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Meeting"), vote or cause to be voted such Voting Shares (or execute or cause to
be executed written consents with respect to such Voting Shares) (i) in favor of
the adoption of the Merger Agreement and any other transactions contemplated by
the Merger Agreement, (ii) against any Acquisition Proposal (as defined in the
Merger Agreement), and (iii) in favor of any other matter necessary for the
consummation of the transactions contemplated by the Merger Agreement and
considered and voted upon at the Shareholders Meeting. In addition, BJH agrees
that, with respect to Company Common Shares as to which he shares voting power
with other fiduciaries, he will recommend that such other fiduciaries vote such
shares in accordance with the voting agreements of BJH under this Section 1.1
or, if the Company Common Shares as to which he shares voting power with other
fiduciaries are distributed to family members, he will recommend that such
family members vote such shares in accordance with the voting agreements of BJH
under this Section 1.1. Each of the Shareholders acknowledges receipt and review
of a copy of the Merger Agreement.
1.2 No Solicitation. Prior to the Effective Time (as defined
in the Merger Agreement), (a) each Shareholder will not, and will cause his or
her agents or representatives (including, without limitation, any investment
banker, attorney or accountant retained by such Shareholder) not to, initiate,
solicit or encourage, directly or indirectly, any inquiries or the making or
implementation of any Acquisition Proposal or engage in any negotiations
concerning, or provide any confidential information or data to, or have any
discussions with, any person relating to an Acquisition Proposal, or otherwise
facilitate any effort or attempt to make or implement an Acquisition Proposal,
and (b) Shareholders will notify Conseco immediately if any such inquiries or
proposals are received by, any such information is requested from, or any such
negotiations or discussions are sought to be initiated or continued with, such
Shareholder.
1.3 Prohibited Transfers. During the term of this Agreement,
neither Shareholder will, except pursuant hereto or the Merger Agreement (a)
sell, pledge or otherwise dispose of any Voting Shares or any interest therein,
(b) deposit any Voting Shares into a voting trust or enter into a voting
agreement or arrangement with respect to any Voting Shares or grant any proxy
with respect thereto, or (c) enter into any contract, option or other
arrangement or undertaking with respect to the foregoing or the direct or
indirect acquisition or sale, assignment, transfer or other disposition of any
Company Common Shares or any interest therein; provided, however, the
Shareholders may transfer Voting Shares to their children or the Hershey Family
Foundation or to any family or charitable entity if, and only if, the
Shareholders, or Shareholder, as the case may be, retains the power to vote such
transferred Voting Shares in favor of the Merger.
1.4 Capitol Insurance Company of Ohio. Conseco agrees to
provide a slate of nominees for directors of Capitol Insurance Company of Ohio,
an Ohio Non-Profit Corporation ("CIO"), and each of the Shareholders agrees to
use such Shareholder's respective best efforts to elect the Conseco nominees as
directors of CIO effective as of the Effective Time and as of that time each of
the Shareholders agrees to resign as officers and directors of CIO and to use
such Shareholder's respective best efforts to cause the other officers and
directors of CIO to resign.
Conseco agrees for a period of two years after the
Effective Time to cause to be maintained officers and directors liability
insurance covering the Shareholders and all other current directors of CIO, in
their capacities as such officers and directors, on the
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same terms or on terms substantially no less advantageous than the existing
officers and directors liability insurance policy of the Company.
2. Representations and Warranties of the Shareholders
Each of the Shareholders, with respect only to such
Shareholder and the Owned Shares owned by Shareholder, hereby represents and
warrants to Conseco as follows:
2.1 Authorization, Validity and Effect of Agreement. Such
Shareholder has the requisite capacity to execute and deliver this Agreement and
to consummate the transactions contemplated hereby. This Agreement has been duly
executed and delivered by such Shareholder and constitutes the valid and binding
obligation of such Shareholder, enforceable against such Shareholder in
accordance with its terms.
2.2 No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement by such Shareholder do not, and the
consummation by Shareholders of the transactions contemplated hereby will not,
(i) subject to making the filings and obtaining the approvals identified in
Section 2.2(b), conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to such Shareholder or by which such Shareholder
or any Voting Shares owned by such Shareholder is bound or affected, or (ii)
result in any breach of or constitute a default (or an event which with notice
or lapse of time or both would become a default) under, result in the loss of a
material benefit under, or give to others any right of purchase or sale, or any
right of termination, amendment, acceleration, increased payments or
cancellation of, or result in the creation of a lien or other encumbrance on any
Voting Shares owned by such Shareholder pursuant to any contract, agreement or
other instrument or obligation to which such Shareholder is a party or by which
such Shareholder or any property or asset of such Shareholder is bound or
affected.
(b) The execution and delivery of this Agreement by such
Shareholder do not, and the performance of this Agreement and the consummation
by such Shareholder of the transactions contemplated hereby will not, require
any consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority, domestic or foreign
(each a "Governmental Entity"), except for (i) applicable requirements, if any,
of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and (ii)
the filings and/or notices required under the insurance laws of the
jurisdictions set forth in Section 2.3 of the Disclosure Schedule, if any.
2.3 Ownership of Owned Shares. BJH is the sole record or
beneficial owner of the BJH Owned Shares, free and clear of any security
interests, liens, charges, encumbrances, equities, claims, options, proxies,
shareholder agreements or limitations of whatever nature and free of any other
limitation or restriction (including any restriction on the right to vote, sell
or otherwise dispose of the BJH Owned Shares or any interest therein) except
pursuant to this Agreement (an "Encumbrance"). CH is the sole record or
beneficial owner of the CH Owned Shares, free and clear of any Encumbrance.
3. Representations and Warranties of Conseco
Conseco hereby represents and warrants to the Shareholders as
follows:
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3.1 Authorization, Validity and Effect of Agreement. Conseco
has the requisite corporate power and authority to execute and deliver this
agreement and to consummate the transactions contemplated hereby. This Agreement
has been duly executed and delivered by Conseco and constitutes the valid and
binding obligation of Conseco, enforceable against Conseco in accordance with
its terms.
3.2 No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement by Conseco do not, and the consummation
by Conseco and of the transactions contemplated hereby will not, (i) conflict
with or violate the articles of incorporation or by-laws of Conseco, (ii)
subject to making the filings and obtaining the approvals identified in Section
3.2(b), conflict with or violate any law, rule, regulation, order, judgment or
decree applicable to Conseco or by which any property or asset of Conseco is
bound or affected, or (iii) result in any breach of or constitute a default (or
an event which with notice or lapse of time or both would become a default)
under, result in the loss of a material benefit under, or give to others any
right of termination, amendment, acceleration, increased payments or
cancellation of, or result in the creation of a lien or other encumbrance on any
property or asset of Conseco pursuant to, any contract, agreement or other
instrument or obligation to which Conseco is a party or by which Conseco or any
property or asset of Conseco is bound or affected.
(b) The execution and delivery of this Agreement by Conseco do
not, and the performance of this Agreement and the consummation by Conseco of
the transactions contemplated hereby will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any Governmental
Entity, except for (i) applicable requirements, if any, of the Exchange Act and
(ii) the filings and/or notices required under the insurance laws of the
jurisdictions set forth in Section 2.3 of the Disclosure Schedule, if any.
4. General Provisions
4.1 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 Conseco, to:
Conseco
11825 N. Pennsylvania Street
Carmel, Indiana 46032
Attention: Lawrence W. Inlow, Esq.
Telephone: (371) 817-6163
Telecopy: (371) 817-6327
If to either Shareholder, to:
Barry J. Hershey
900 Tanglewood Drive
Concord, MA 07142
Telephone: (508) 369-8933
Telecopy: (508) 371-7523
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with copies to:
Ropes & Gray
One International Place
Boston, Massachusetts 02110
Attention: Edward Benjamin, Esq.
Telephone: (617) 951-7000
Telecopy: (617) 951-7050
All notices and other communications required or permitted under this Agreement
that are addressed as provided in this Section 4.1 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.
4.2 Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior agreements and understandings between the parties with
respect thereto.
4.3 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 will become effective when one
or more counterparts have been signed by each of the parties and delivered to
the other parties.
4.4 Governing Law. This Agreement will be governed by and
construed in accordance with the laws of the State of Ohio, regardless of the
laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
4.5 Assignment; Binding Effect. Neither this Agreement nor any
of the rights, interests or obligations under this Agreement may 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 will 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.
4.6 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
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liability company, general partnership, limited partnership, or other entity,
enterprise, authority or business organization.
4.7 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 Shareholders 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.
4.8 Termination. This Agreement will terminate
automatically immediately upon the earlier to occur of the Effective Time and
the termination of the Merger Agreement pursuant to Section 7.1 thereof.
4.9 Specific Performance. The parties hereto
agree that irreparable damage would occur in the event any provision of this
Agreement was not performed in accordance with the terms hereof and that the
parties will be entitled to specific performance of the terms hereof, in
addition to any other remedy at law or in equity.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
CONSECO, INC.
By:/s/ Stephen C. Hilbert
-------------------------
Name: Stephen C. Hilbert
Title: Chairman of the Board,
President and Chief Executive Officer
/s/ Barry J. Hershey
-------------------
Barry J. Hershey
/s/ Connie Hershey
------------------
Connie Hershey
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