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: September 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.
Conseco, Inc. ("Conseco") has recently announced the following:
(a) On September 26, 1996, Conseco announced an agreement under which
Conseco will acquire Transport Holdings Inc. ("Transport"), a leading
provider of cancer insurance and other supplemental health insurance,
for $70 per share in Conseco common stock. In the merger, each of the
issued and outstanding shares of Transport Class A common stock would
be converted into the right to receive the number of shares of Conseco
common stock determined by dividing $70.00 by the average closing
price of Conseco common stock during the 10 trading days immediately
preceding the second trading day prior to closing (such number to be
not more than 1.8301 nor less than 1.4000). Transport's outstanding
convertible debt, stock options and warrants, when converted or
exercised, would receive the same ratio of Conseco common shares. The
total value of the transaction would be $311 million, including: (i)
$228 million to purchase Transport's 3.2 million common shares and
equivalents; and (ii) $83 million to retire bank debt and preferred
stock. Consummation of the Transport transaction, which is subject to
customary terms and conditions, including approval by Transport
shareholders and regulatory approvals, is expected by the end of 1996.
Under the merger agreement, Transport would be merged into Conseco,
with Conseco being the surviving corporation. The terms of the
agreement also provide that to the extent required by its fiduciary
duties to Transport's shareholders, Transport's Board may evaluate
other offers. In the event that Transport enters into another
agreement or terminates the merger agreement with Conseco because of
another offer, Transport would be required to pay a break-up fee of
$7.5 million.
(b) On September 27, 1996, Conseco announced the completion of the
redemption of its Series D Cumulative Convertible Preferred Stock
("Series D"). A total of 6,358 Series D shares were redeemed at
$52.916 per share in cash, including $0.641 per share of accrued
dividends. Holders of the remaining 5,338,409 Series D shares
previously outstanding elected instead to convert their shares into
Conseco common stock at the rate of 1.5686 common shares for each
Series D share. The 8.4 million common shares issued upon conversion
were already included in Conseco's "weighted average shares
outstanding" for purposes of computing fully diluted earnings per
share. Conversion of the Series D shares increases Conseco's common
shareholders' equity and reduces future cash flow requirements for
dividends.
(c) On October 1, 1996, Conseco announced the completion of the
acquisition of all of the common shares of American Life Holdings,
Inc. ("ALH") not already owned by Conseco for approximately $165
million in cash. ALH, a provider of retirement savings annuities, was
originally acquired by Conseco Capital Partners II, L.P. ("Partnership
II") in September 1994. Conseco previously announced its intention to
terminate Partnership II. Conseco paid the other limited partners in
Partnership II, $23.00 for each of their shares of ALH.
The unaudited pro forma consolidated financial statements of Conseco,
attached as Exhibit 99.2, present Conseco's financial position and results of
operations for the year ended December 31, 1995, and as of and for the six
months ended June 30, 1996, giving effect to several transactions which have
already occurred, as described in the notes accompanying the pro forma financial
statements. The pro forma consolidated financial statements are not necessarily
indicative of what the financial position or results of operations would have
been if the transactions had occurred at the dates indicated. Furthermore, the
pro forma consolidated financial statements are not intended to be indicative of
Conseco's future financial position or future results of operations and should
be read in conjunction with the historical consolidated financial statements of
Conseco.
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CONSECO, INC. AND SUBSIDIARIES
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) EXHIBITS
2.8 Agreement and Plan of Merger dated as of September
25, 1996, by and between Conseco, Inc. and
Transport Holdings Inc.
99.2 Pro Forma Consolidated Financial Statements of
Conseco, Inc. and Subsidiaries reflecting several
transactions which have already occurred.
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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: October 1, 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 SEPTEMBER 25, 1996
By and Between
CONSECO, INC.
and
TRANSPORT HOLDINGS INC.
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TABLE OF CONTENTS
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ARTICLE I
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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............................................................. 3
1.10 Redemption of Preferred Stock........................................................ 6
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY................................................. 6
2.1 Organization, Standing and Corporate Power........................................... 6
2.2 Capital Structure.................................................................... 6
2.3 Authority; Noncontravention.......................................................... 7
2.4 SEC Documents........................................................................ 9
2.5 Absence of Certain Changes or Events................................................. 9
2.6 Absence of Changes in Benefit Plans.................................................. 10
2.7 Benefit Plans........................................................................ 10
2.8 Taxes................................................................................ 11
2.9 No Excess Parachute Payments; Section 162(m) of the Code............................. 12
2.10 Voting Requirements.................................................................. 12
2.11 Compliance with Applicable Laws...................................................... 12
2.12 Opinion of Financial Advisor......................................................... 14
2.13 Brokers.............................................................................. 14
2.14 Agreements with Travelers Group Inc.................................................. 14
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF CONSECO .................................................... 14
3.1 Organization, Standing and Corporate Power........................................... 14
3.2 Conseco Capital Structure............................................................ 15
3.3 Authority; Noncontravention.......................................................... 16
3.4 SEC Documents........................................................................ 17
3.5 Absence of Certain Changes or Events................................................. 17
3.6 Compliance with Applicable Laws...................................................... 18
3.7 Brokers.............................................................................. 19
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 Proxy Statement; Information Supplied................ 20
4.2 Meeting of Stockholders.............................................................. 21
4.3 Letter of the Company's Accountants.................................................. 21
4.4 Letter of Conseco's Accountants...................................................... 21
4.5 Access to Information; Confidentiality............................................... 22
4.6 Commercially Reasonable Efforts...................................................... 22
4.7 Public Announcements................................................................. 22
4.8 Acquisition Proposals................................................................ 23
4.9 Fiduciary Duties..................................................................... 23
4.10 Consents, Approvals and Filings...................................................... 24
4.11 Certain Fees......................................................................... 25
4.12 Affiliates and Certain Stockholders.................................................. 25
4.13 NYSE Listing......................................................................... 26
4.14 Stockholder Litigation............................................................... 26
4.15 Indemnification...................................................................... 26
4.16 Stock Options and Warrants........................................................... 27
4.17 Officers' Certificates Relating to Tax Treatment. ................................... 27
4.18 Severance and Other Payments ........................................................ 27
4.19 Convertible Debentures............................................................... 27
4.20 Warrants..............................................................................28
4.21 Letter Agreements.....................................................................28
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS PRIOR TO MERGER...................................... 28
5.1 Conduct of Business by the Company................................................... 28
5.2 Conduct of Business by Conseco....................................................... 31
5.3 Other Actions ....................................................................... 32
ARTICLE VI
CONDITIONS PRECEDENT.......................................................................... 32
6.1 Conditions to Each Party's Obligation To Effect the Merger........................... 32
6.2 Conditions to Obligations of Conseco ................................................ 33
6.3 Conditions to Obligation of the Company.............................................. 34
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER............................................................. 35
7.1 Termination.......................................................................... 35
7.2 Effect of Termination................................................................ 36
7.3 Amendment............................................................................ 36
7.4 Extension; Waiver.................................................................... 36
7.5 Procedure for Termination, Amendment, Extension or Waiver............................ 36
ARTICLE VIII
SURVIVAL OF PROVISIONS........................................................................ 37
8.1 Survival............................................................................. 37
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ARTICLE IX
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NOTICES....................................................................................... 37
9.1 Notices.............................................................................. 37
ARTICLE X
MISCELLANEOUS................................................................................. 38
10.1 Entire Agreement.................................................................... 38
10.2 Expenses............................................................................ 38
10.3 Counterparts ....................................................................... 38
10.4 No Third Party Beneficiary.......................................................... 38
10.5 Governing Law....................................................................... 39
10.6 Assignment; Binding Effect.......................................................... 39
10.7 Enforcement........................................................................ 39
10.8 Headings, Gender, etc............................................................... 39
10.9 Invalid Provisions.................................................................. 39
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made and entered
into as of September 25, 1996 by and between CONSECO, INC., an Indiana
corporation ("Conseco"), and TRANSPORT HOLDINGS INC., a Delaware 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") and the Delaware General
Corporation Law (the "DGCL"), 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. At the option of the
Company or Conseco, the structure of the merger may be changed such that a newly
formed subsidiary of Conseco shall be merged with and into the Company;
provided, however, that such structure change does not (i) have any adverse
impact on Conseco or the Company or (ii) prevent delivery of the opinion
specified in Section 6.3(c).
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 State of Delaware (the "Delaware Secretary of State")
on the Closing Date (or on such other date as Conseco and the Company may agree)
articles of merger executed in accordance with the relevant provisions of the
IBCL and a certificate of merger executed in accordance with the relevant
provisions of the DGCL, and make all other filings or recordings required under
the IBCL and the DGCL 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 certificate of merger with the Delaware Secretary of State, or
at such later time as is specified in the articles of merger and the certificate
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
Class A 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) shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into a right to receive
the whole number and fraction (rounded to the nearest ten- thousandth) of a
validly issued, fully paid and nonassessable share of common stock, without par
value, of Conseco ("Conseco Common Stock"), determined by dividing $70.00 by the
Conseco Share Price. The "Conseco Share Price" shall be equal to the Trading
Average (as defined below); provided, however, that if the Trading Average is
less than $38.25, then the Conseco Share Price shall be $38.25, and if the
Trading Average is greater than $50.00, then the Conseco Share Price shall be
$50.00. The "Trading Average" shall be equal to the average of the closing
prices of the Conseco Common Stock on the New York Stock Exchange ("NYSE")
Composite Transactions Reporting System, as reported in The Wall Street
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Journal, for the ten 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(f) 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 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. Subject to Section 5.2 hereof, 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) Treatment of Company Stock Options and Warrants. (i) From and
after the Effective Time, each outstanding unexpired stock option ("Company
Stock Option") to purchase Shares which has been granted pursuant to the
Company's 1995 Stock Plan, as amended to the date hereof (the "Company Stock
Plan"), shall be exerciseable, for the same aggregate consideration payable to
exercise such Company Stock Option, for 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 Option had been fully vested and exercised for Shares
prior to the Effective Time, and otherwise on the same terms and conditions as
were applicable under the Company Stock Plan and the underlying stock option
agreement except as provided in subsection (ii).
(ii) Each Company Stock Option, if not then vested, will vest
in full at the Effective Time in accordance with the Company Stock Plan.
(iii) From and after the Effective Time, each outstanding
warrant to purchase Shares shall be exerciseable, for the same aggregate
consideration payable to exercise such warrant, for the number of shares of
Conseco Common Stock which the holder would have been entitled to receive at the
Effective Time if such warrant had been exercised in full for Shares immediately
prior to the Effective Time, and otherwise on the same terms and conditions as
were applicable under such warrant.
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
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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 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)), 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
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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 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
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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 the cash portion of any Merger 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 Redemption of Preferred Stock. Before the Effective Time all of
the outstanding shares of Series A Cumulative Exchangeable Preferred Stock of
the Company (the "Series A Preferred Shares") will be redeemed for an amount
equal to the Redemption Price (as such term is defined in the Certificate of
Designations of Series A Cumulative Exchangeable Preferred Stock of the Company)
of such shares.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Conseco as follows:
2.1 Organization, Standing and Corporate Power. Each of the Company and
each subsidiary of the Company 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 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 Bylaws, as amended to the date of this Agreement.
2.2 Capital Structure. The authorized capital stock of the Company
consists of (i) 8,000,000 Shares, (ii) 2,000,000 shares of Class B Common Stock,
$.01 par value ("Class B Common Stock"), and (iii) 2,000,000 shares of preferred
stock, $.01 par value (the
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"Preferred Stock"). At the close of business on September 23, 1996: (i)
1,592,048 Shares were issued and outstanding, 480,000 Shares were reserved for
issuance pursuant to outstanding Company Stock Options and warrants and
1,517,805 Shares were reserved for issuance upon conversion of the outstanding
Series A Subordinated Convertible Notes due 2005 (the "Series A Notes") and the
outstanding Series B Subordinated Convertible Notes due 2005 ("Series B Notes");
(ii) no shares of Class B Common Stock were issued and outstanding; and (iii)
91,030 Series A Preferred Shares were outstanding. Except as set forth above, at
the close of business on September 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 Plan or any outstanding
Company Stock Options or warrants will be, when issued, duly authorized, validly
issued, fully paid and nonassessable and not subject to preemptive rights.
Except for $42,000,000 principal amount of Series A Notes and $8,000,000
principal amount of Series B Notes, 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 stockholders of the Company or any 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 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
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. No issued
and outstanding Shares are owned by the Company's subsidiaries.
2.3 Authority; Noncontravention. The Company has the requisite
corporate power and authority to enter into this Agreement and, subject to the
approval of its stockholders as set forth in Section 6.1(a) with respect to the
consummation of the Merger, to consummate the transactions contemplated by this
Agreement. The execution and delivery of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of the Company,
subject, in the case of the Merger, to the approval of its stockholders as set
forth in Section 6.1(a). This Agreement has been duly executed and
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delivered by the Company and, assuming that 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 Bylaws 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 approval by the stockholders of the
Company of the Merger (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 or articles of merger
with the Delaware 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
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of the Disclosure Schedule and (vi) any applicable filings under state anti-take
over 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,
1995 (such reports, schedules, forms, statements and other documents, including
the exhibits thereto and documents incorporated therein by reference, are
hereinafter referred to as the "SEC Documents"); (ii) as of their respective
dates, the SEC Documents complied with the requirements of the Securities Act of
1933, as amended (the "Securities Act"), or the Exchange Act, as the case may
be, and the rules and regulations of the SEC promulgated thereunder applicable
to such SEC Documents, and none of the SEC Documents as of such dates contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading; and (iii) the consolidated financial statements of the Company
included in the SEC Documents comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto or, in the case of
unaudited statements, as permitted by Rule 10-01 of Regulation S-X) and fairly
present, in all material respects, the consolidated financial position of the
Company and its consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited quarterly statements, to normal
year-end audit adjustments).
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
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audited financial statements included in the Filed SEC Documents, (y) any
granting by the Company or any of its subsidiaries to any such executive officer
or other employee of any increase in severance or termination pay, except in the
ordinary course of business consistent with prior practice or as was required
under any employment, severance or termination agreements in effect as of the
date of the most recent audited financial statements included in the Filed SEC
Documents or (z) any entry by the Company or any of its subsidiaries into any
employment, severance or termination agreement with any such executive officer
or other employee or (v) any change in accounting methods, principles or
practices by the Company or any of its subsidiaries materially affecting its
assets, liability or business, except insofar as may have been required by a
change in generally accepted accounting principles.
2.6 Absence of Changes in Benefit Plans. Except as disclosed in the
Filed SEC Documents or in Section 2.6 of the Disclosure Schedule, since the date
of the most recent audited financial statements included in the Filed SEC
Documents, there has not been any adoption or amendment in any material respect
by the Company or any of its subsidiaries of any collective bargaining agreement
or any Benefit Plan (as defined in Section 2.7). Except as disclosed in the
Filed SEC Documents or in Section 2.6 of the Disclosure Schedule, there exist no
employment, consulting, severance, termination or indemnification agreements
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, bonus or incentive compensation, deferred compensation
or severance, 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 Code, all other applicable laws applicable to the Company's Benefit
Plans 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
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<PAGE>
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 reserves which are adequate in all
material respects 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,
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<PAGE>
tariffs or governmental charges of any nature whatsoever and any interest,
penalties and additions to taxes relating thereto. As used in this Agreement,
"tax returns" shall include any return, report, information return, or other
document (including any related or supporting information) filed or required to
be filed with any governmental agency, department, commission, board, bureau, or
instrumentality in connection with the determination, assessment, collection, or
administration of any taxes.
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 and Series A Preferred 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 and except with respect to 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 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") and except with respect to 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
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<PAGE>
respect to the Company or any of its subsidiaries is pending or threatened.
(ii) The Annual Statements (including without limitation the Annual
Statements of any separate accounts) for the year ended December 31, 1995,
together with all exhibits and schedules thereto, and financial statements
relating thereto, and any actuarial opinion, affirmation or certification filed
in connection therewith, and the Quarterly Statements for the periods ended
after January 1, 1996, together with all exhibits and schedules thereto, with
respect to each subsidiary of the Company that is a regulated insurance company
(an "Insurance Company"), in each case as filed with the applicable Insurance
Regulator of its jurisdiction of domicile, were prepared in conformity with
statutory accounting practices prescribed or permitted by such Insurance
Regulator applied on a consistent basis ("SAP"), present fairly, in all material
respects, to the extent required by and in conformity with SAP, the statutory
financial condition of such Insurance Company at their respective dates and the
results of operations, changes in capital and surplus and cash flow of such
Insurance Company for each of the periods then ended, and were correct in all
material respects when filed and there were no material omissions therefrom when
filed. No deficiencies or violations material to the financial condition or
operations of any Insurance Company have been asserted in writing by any
Insurance Regulator which have not been cured or otherwise resolved to the
satisfaction of such Insurance Regulator and which have not been disclosed in
writing to Conseco prior to the date of this Agreement.
(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
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<PAGE>
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.
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, from a financial point of view, 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, transaction fee, investment banking fee, 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.
2.14 Agreements with Travelers Group Inc. Section 2.14 of the
Disclosure Schedule sets forth all agreements between the Company
and Travelers Group Inc. and its affiliates.
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
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<PAGE>
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 any
subsidiary of Conseco that would constitute a Significant Subsidiary within the
meaning of Rule 1-02 of Regulation S-X promulgated under the Exchange Act.
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 September 23,
1996, (i) 66,821,974 shares of Conseco Common 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) 13,587,418 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") and (iii) 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
1,043,750 shares of Bankers Life Holding Corporation under its Stock Option Plan
and with respect to stock units awarded under the Conseco Stock Plans, at the
close of business on September 23, 1996, and (z) as set forth in the Filed
Conseco SEC Documents (as defined in Section 3.5), 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, 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
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<PAGE>
Conseco or any Significant Subsidiary of Conseco or (ii) restricts the transfer
of Conseco Common Stock.
3.3 Authority; Noncontravention. Conseco has 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 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. 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 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
with the SEC of a registration statement relating to the
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Conseco Debentures (as defined in Section 4.19) and the Conseco Common Stock
issuable upon conversion thereof, (v) the filing of the articles of merger or a
certificate of merger with the Indiana Secretary of State and the Delaware
Secretary of State, and appropriate documents with the relevant authorities of
the other states in which the Company is qualified to do business, (vi) such
other consents, approvals, authorizations, filings or notices as are set forth
in Section 2.3 of the Disclosure Schedule and (vii) 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, 1995 (such documents and the exhibits thereto and documents
incorporated therein by reference are hereinafter referred to as 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, 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
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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 and except with respect to matters covered by
Section 3.6(iii), 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 Insurance Regulators and
except with respect to matters covered by Section 3.6(iii), 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 the Company prior to the date of this
Agreement.
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(iii) Except as set forth in Section 3.6(iii) of the Conseco Disclosure
Schedule or in the Filed Conseco SEC Documents, (a) Conseco and its subsidiaries
(exclusive of their agents) and, to the knowledge of Conseco (without
independent inquiry), their agents have marketed, sold and issued Conseco
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 Conseco and its subsidiaries ("Conseco 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 Conseco and its subsidiaries,
taken as a whole, (b) there are (x) to the knowledge of Conseco, 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
Conseco (other than routine investigations in connection with Conseco's hiring
practices) ((x), (y) and (z) being collectively referred to as "Conseco
Actions") pending or, to the knowledge of Conseco, threatened, against or
involving Conseco, any of its subsidiaries or, to the knowledge of Conseco
(without independent inquiry), any of its agents that include allegations that
Conseco, any of its subsidiaries or any of its agents were in violation of or
failed to comply with such Conseco Laws, and, to the knowledge of Conseco, no
facts exist which would reasonably be expected to result in the filing or
commencement of any such Conseco Action, which Conseco 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 Conseco and its
subsidiaries, taken as a whole, and (c) Conseco 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 Conseco 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 Conseco or any of its subsidiaries ("Conseco Regulatory
Agreement"), which Conseco 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 Conseco and its
subsidiaries, taken as a whole.
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 its subsidiaries for a finder's fee, brokerage commission, transaction
fee, investment banking fee, or similar payment.
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3.8 Voting Requirements. No authorization or approval by the holders
of any class or series of Conseco's capital stock is necessary to approve this
Agreement or the transactions contemplated by this Agreement.
ARTICLE IV
ADDITIONAL AGREEMENTS
4.1 Preparation of Form S-4 and the 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 Proxy Statement and
Conseco shall prepare and file with the SEC the Form S-4, in which the Proxy
Statement will be included as a prospectus. Each of the Company and Conseco
shall use commercially reasonable efforts to have the Form S-4 declared
effective under the Securities Act as promptly as practicable after such filing.
The Company will use commercially reasonable efforts to cause the Proxy
Statement to be mailed to the Company's stockholders 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 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 Company agrees that
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 specifically for inclusion or
incorporation by reference in the Proxy Statement.
(c) Conseco agrees that none of the information supplied or to be
supplied by Conseco specifically for inclusion or
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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 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. Conseco
agrees that 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, except with respect to statements made or incorporated by reference
based on information supplied by the Company specifically for inclusion or
incorporation by reference therein.
4.2 Meeting 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. Subject to Section 4.9
hereof, the Company will, through its Board of Directors, recommend to its
stockholders approval of this Agreement and the Merger. 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 this 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
commercially reasonable efforts to hold the Stockholders Meeting and (subject to
Section 4.9 hereof) to obtain the favorable vote of its 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 KPMG Peat Marwick 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 KPMG Peat Marwick 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
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on which the Form S-4 shall become effective and a letter of Coopers & Lybrand
L.L.P., dated a date within two business days before the Closing Date, each
addressed to the Company, in form and substance reasonably satisfactory to the
Company and customary in scope and substance for letters delivered by
independent public accountants in connection with registration statements
similar to the Form S-4.
4.5 Access to Information; Confidentiality. Upon reasonable notice,
each of the Company and Conseco shall, and shall cause each of its respective
subsidiaries to, afford to the other party and to the officers, employees,
counsel, financial advisors and other representatives of such other party
reasonable access during normal business hours during the period prior to the
Effective Time to all its properties, books, contracts, commitments, personnel
and records and, during such period, each of the Company and Conseco shall, and
shall cause each of its respective subsidiaries to, furnish as promptly as
practicable to the other party such information concerning its business,
properties, financial condition, operations and personnel as such other party
may from time to time reasonably request. Except as required by law, Conseco
will hold, and will cause its respective directors, officers, partners,
employees, accountants, counsel, financial advisors and other representatives
and affiliates to hold, any nonpublic information obtained from the Company in
confidence to the extent required by, and in accordance with, the provisions of
the letter dated September 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 extent
required by, and in accordance with, the Confidentiality Agreement.
4.6 Commercially Reasonable Efforts. Upon the terms and subject to the
conditions and other agreements set forth in this Agreement, each of the parties
agrees to use commercially reasonable 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 and make
a good faith effort to agree 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.
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4.8 Acquisition Proposals. The Company shall not, nor shall it permit
any of its subsidiaries to, nor shall it authorize or permit any officer,
director or employee of, or any investment banker, attorney or other advisor or
representative of, the Company or any of its subsidiaries to, directly or
indirectly, (i) solicit, initiate or encourage the submission of any Acquisition
Proposal (as hereinafter defined) or (ii) participate in any discussions or
negotiations regarding, or furnish to any person any information with respect
to, or take any other action to facilitate any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead to, any
Acquisition Proposal; provided, however, that nothing contained in this Section
4.8 shall prohibit the Board of Directors of the Company from furnishing
information to, or entering into discussions or negotiations with, any person or
entity that makes an unsolicited Acquisition Proposal if, and only to the extent
that (A) the Board of Directors of the Company, after consultation with and
based upon the advice of outside counsel, determines in good faith that in order
for the Board of Directors of the Company to comply with its fiduciary duties to
stockholders under applicable law it should take such action 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
(i) promptly advise Conseco orally and in writing of the (A) 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, (B) the material terms and conditions of such Acquisition Proposal or
inquiry, and (C) the identity of the person making any such Acquisition Proposal
or inquiry, and (ii) keep Conseco fully informed of the status and details of
any such Acquisition Proposal or inquiry. Notwithstanding the immediately
preceding sentence, the Company may delay providing any of the information
described in clause (i) (B), (i) (C) or (ii) of such sentence if, and for so
long as, the Board of Directors of the Company, after consultation with outside
counsel, determines and continues to believe in good faith that in order to
comply with its fiduciary duties to stockholders under applicable law it should
not provide such information. 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 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, the
approval or recommendation by such Board of Directors of this Agreement or the
Merger, or (ii) enter into any agreement with respect to any Acquisition
Proposal, unless the
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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 the Board of Directors should withdraw or modify, in a manner
materially adverse to Conseco, its approval or recommendation of this Agreement
or the Merger, or enter into an agreement with respect to such Acquisition
Proposal or terminate this Agreement. In the event the Board of Directors of the
Company takes any of the foregoing actions, the Company shall, concurrently with
the taking of any such action, pay to Conseco the Section 4.11 Fee pursuant to
Section 4.11. Subject to the provisions of the first sentence of this Section
4.9, 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 after consultation with outside counsel, should be
made under applicable law. Notwithstanding anything contained in this Agreement
to the contrary, (x) any action by the Board of Directors permitted by this
Section 4.9 shall not constitute a breach of this Agreement by the Company and
(y) a "stop-look-and-listen" communication with respect to the Merger or this
Agreement of the nature contemplated in Rule 14d-9 under the Exchange Act made
by the Company as a result of an Acquisition Proposal shall in no event be
deemed a withdrawal or modification by the Board of Directors of the Company of
its approval or recommendation of this Agreement or the Merger.
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 commercially reasonable 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
commercially reasonable 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
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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
$7.5 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 adverse to Conseco its approval or
recommendation of this Agreement or the Merger or enters into an agreement with
respect to such Acquisition Proposal (other than a confidentiality agreement as
contemplated by Section 4.8), or terminates this Agreement; provided, however,
that no such fee shall be payable if this Agreement shall have been terminated
in accordance with any of the provisions of Section 7.1 (other than Section
7.1(b)(iv)).
(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 (c) 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
commercially reasonable efforts to procure the satisfaction thereof.
(c) For purposes of this Section 4.11, "Expenses" shall mean all
documented, reasonable out-of-pocket fees and expenses incurred or paid by or on
behalf of Conseco to third parties in connection with the Merger or the
consummation of any of the transactions contemplated by this Agreement,
including all 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 commercially reasonable 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 and the
certificates representing Conseco Common Stock received by
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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 commercially reasonable 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) For a period of three years after the Effective Time, the Surviving
Corporation shall maintain in effect the current policies of directors' and
officers' liability insurance maintained by the Company and its subsidiaries on
the date hereof (provided that the Surviving Corporation may substitute therefor
policies with at least as favorable coverage, limits and deductibles and
containing terms and conditions which are no less advantageous as the policy for
which the substitution is made) with respect to claims arising out of facts or
events that occurred before the Effective Time; provided, however, that in no
event shall the Surviving Corporation be required to expend pursuant to this
Section 4.15 on an annual basis more than an amount equal to 200% of the current
annual premiums paid by the Company and its subsidiaries for such insurance and,
in the event the cost of such coverage shall exceed that amount, the Surviving
Corporation shall purchase as much coverage as possible for such amount.
(c) The provisions of this Section 4.15 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party and the heirs
and personal representatives of such
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Indemnified Party and shall be binding on all successors and assigns of Conseco.
4.16 Stock Options and Warrants. (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 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(d) and shall
make such other changes to the Company Stock Plan 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 and warrants outstanding on the date hereof and
any changes thereto described in or contemplated by this Agreement or the
Disclosure Schedule, no options, warrants or other rights of any kind to
purchase capital stock of the Company shall be granted or made, under the
Company Stock Plan or otherwise, and no amendment, repricing or other change to
the outstanding Company Stock Options shall be made, without the prior written
consent of Conseco, and any such grant, issuance, amendment, repricing or other
change without Conseco's consent shall be null, void and unenforceable against
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 and warrants. 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.
4.17 Officers' Certificates Relating to Tax Treatment. Conseco shall
provide to the Tax Opinion Provider (as defined in Section 6.3(c) hereof), a
certificate in the form agreed to by Conseco, which agreement shall not be
unreasonably withheld, 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, which agreement shall not be unreasonably withheld,
dated the Closing Date and signed on behalf of the Company by the chief
executive officer and the chief financial officer of the Company.
4.18 Severance and Other Payments. Employees of the Company who are
terminated by Conseco within 18 months after the Closing Date will be entitled
to receive the severance payments set forth on Section 4.18 of the Disclosure
Schedule.
4.19 Convertible Debentures. Conseco shall offer to exchange, as of
the Effective Time, Conseco convertible debentures
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(the "Conseco Debentures") in an aggregate principal amount of $50,000,000 and
otherwise containing the terms set forth in Section 4.19 of the Disclosure
Schedule for the outstanding Series A Notes and Series B Notes. Conseco agrees
to take such action as is necessary for the making and consummation of such
exchange and the issuance by it of the Conseco Debentures, including filing of a
registration statement with the SEC with respect to the Conseco Debentures and
the shares of Conseco Common Stock to be issuable upon conversion of the Conseco
Debentures. At the Company's option, such registration shall be either included
in the Form S-4 or filed as a separate registration statement. If a separate
registration statement is filed, the provisions of this Agreement relating to
the Form S-4 will apply to such separate registration statement. In addition,
Conseco agrees that if any of the shares of Conseco Common Stock issued upon
conversion of Conseco Debentures shall not be immediately freely tradeable by
the holder thereof, then, at the request of the holder, Conseco shall, as
promptly as practicable, at Conseco's option, either (i) acquire such shares
directly from such holder at the then current market price, or (ii) file and
have declared effective a registration statement on Form S-3 (or other
appropriate form) with the SEC to register such shares for resale by such holder
and use commercially reasonable efforts to keep such registration statement
effective until such time as such shares become freely tradeable. For purposes
of the preceding sentence, shares which may be sold at such time pursuant to
Rule 144 (as promulgated by the SEC) shall be considered "freely tradeable."
Upon the exchange of any Series A Notes or Series B Notes for Conseco
Debentures, Conseco shall pay to the exchanging holder an amount equal to the
accrued and unpaid interest on such Series A Notes or Series B Notes, as
applicable, through and including the Closing Date.
4.20 Warrants. The Company's outstanding warrants shall be amended as
soon as practicable after the Effective Time to include the provisions specified
in Section 4.20 of the Disclosure Schedule.
4.21 Letter Agreements. At or prior to the Effective Time, Conseco
shall enter into the letter agreements described in Section 4.21 of the
Disclosure Schedule.
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
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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 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 executive, legal, financial, marketing and other
operational matters involving the Company, its subsidiaries or their businesses.
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; provided, however, that the Company may pay dividends on the
outstanding Series A Preferred Shares in accordance with the terms of
such Series A Preferred Shares, and may, at its option, redeem any
outstanding Series A Preferred Shares in accordance with the terms of
such Series A Preferred Shares;
(ii) issue, sell, grant, pledge or otherwise encumber any
shares of its capital stock, any other voting securities or any
securities convertible into, or any rights, warrants or options to
acquire, any such shares, voting securities or convertible securities
other than upon the exercise of Company Stock Options outstanding on
the date of this Agreement;
(iii) amend its articles of organization, By-laws or other
comparable charter or organizational documents;
(iv) acquire, form or commence the operations of any business
or any corporation, partnership, joint venture, association or other
business organization or division thereof (including, but not limited
to, the entering into of any reinsurance or coinsurance agreements
involving Mid- America Reinsurance, Ltd.);
(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
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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 agents and
employees;
(vii) make any tax election or settle or compromise any income
tax liability that would reasonably be expected to be material to the
Company and its subsidiaries taken as a whole;
(viii) pay, discharge, settle or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or
satisfaction, in the ordinary course of business consistent with past
practice or in accordance with their terms, of liabilities reflected or
reserved against in, or contemplated by, the most recent consolidated
financial statements (or the notes thereto) of the Company included in
the Filed SEC Documents or incurred since the date of such financial
statements in the ordinary course of business consistent with past
practice;
(ix) invest its future cash flow, any cash from matured and
maturing investments, any cash proceeds from the sale of its assets and
properties, and any cash funds currently held by it, in any investments
other than cash equivalent assets or in short-term investments
(consisting of United States government issued or guaranteed
securities, or commercial paper rated A-1 or P-1), except (i) as
otherwise required by law, (ii) as required to provide cash (in the
ordinary course of business and consistent with past practice) to meet
its actual or anticipated obligations or (iii) publicly-traded
corporate bonds that are rated investment grade by at least two
nationally recognized statistical rating organizations;
(x) except as may be required by law,
(i) make any representation or promise, oral or
written, to any employee or former director, officer or
employee of the Company or any subsidiary which is
inconsistent with the terms of any Benefit Plan;
(ii) make any change to, or amend in any way, the
contracts, salaries, wages, or other compensation of any
employee or any agent or consultant of the Company or any
subsidiary other than changes or amendments that are required
under existing contracts;
(iii) adopt, enter into, amend, alter or terminate,
partially or completely, any Benefit Plan or any election made
pursuant to the provisions of any Benefit Plan, to accelerate
any
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<PAGE>
payments, obligations or vesting schedules under any Benefit
Plan; or
(iv) approve any general or company-wide payincreases
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 or committee, without
providing to Conseco (i) notice of any such meeting no later than the
date notice is given to the board of directors or in advance of the
date of any proposed action by written consent and (ii) with such
notice, an agenda of the specific matters intended to be considered at
such meeting or a copy of the proposed written consent, unless, in the
reasonable good faith judgment of the President or Chairman of the
Company, providing prior notice of any agenda item or any item of such
written consent will prejudice the ability of the board of directors or
any committee of the board of directors to discharge its duties, in
which case such item may be omitted from the agenda or written consent
provided to Conseco; or
(xiii) authorize any of, or commit or agree to take anyof, 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 and except as disclosed in Conseco SEC Filed Documents, 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
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dividends on 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 Proxy Statement or, (B) if
it were to occur after such date of mailing, require an amendment of
the Proxy Statement;
(iii) acquire any business or any corporation, partnership,
joint venture, association or other business organization or division
thereof, in each case if any such action could reasonably be expected
to (A) delay materially the date of mailing of the Proxy Statement or,
(B) if it were to occur after such date of mailing, require an
amendment of the 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.
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.
(b) Governmental and Regulatory Consents. All required consents,
approvals, permits and authorizations to the consummation of the
transactions contemplated hereby by the
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<PAGE>
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, permission or authorization is required by reason of a change
in law after the date of this Agreement, unless the failure to obtain
such consent, approval, permission or authorization would not
reasonably be expected to have a material adverse effect on the
business, financial condition or results of operations of the Company
and its subsidiaries, taken as a whole, or on the validity or
enforceability of this Agreement.
(c) HSR Act. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated
or shall have otherwise expired.
(d) No Injunctions or Restraints. No temporary restraining
order, preliminary or permanent injunction or other order issued by any
court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Merger shall be in effect; provided,
however, that the parties invoking this condition shall use
commercially 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 Closing
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 and except for actions contemplated by this
Agreement), 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).
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<PAGE>
(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.
(c) Convertible Debentures. Holders of at least 90% of the
aggregate principal amount of Series A and Series B Notes shall have
accepted the offer made by Conseco pursuant to Section 4.19 to exchange
such Series A and Series B Notes for Conseco Debentures as of the
Effective Time.
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 Closing 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 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 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 Weil, Gotshal & Manges LLP, counsel
to the Company, or such other legal counsel reasonably acceptable to
the Company and Conseco (the "Tax Opinion Provider") to the effect that
the Merger will be treated as a reorganization under Section 368(a)(1)
of the
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<PAGE>
Code as a result of which the stockholders 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.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated and abandoned at any
time prior to the Effective Time, whether before or after approval of matters
presented in connection with the Merger by the stockholders of the Company:
(a) by mutual written consent of Conseco and the Company; or
(b) by either Conseco or the Company:
(i) if, upon a vote at a duly held Stockholders
Meeting or any adjournment thereof, any required approval of
the stockholders of the Company shall not have been obtained;
(ii) at any time after January 31, 1997, 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 January 31, 1997 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;
(iv) if the Board of Directors of the Company shall
have exercised its rights set forth in Section 4.9 of this
Agreement; or
(v) if on the scheduled Closing Date the Five Day
Trading Average is less than $34.875. The "Five Day Trading
Average" shall be equal to the average of the closing prices
of the Conseco Common Stock on the NYSE Composite Transactions
Reporting System, as reported in The Wall Street Journal, for
the five trading days immediately preceding the second trading
day prior to the scheduled Closing Date.
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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 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
DGCL, 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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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:
Transport Holdings Inc.
714 Main Street
Fort Worth, Texas 76102-5252
Attention: T. Gary Cole
Telephone: (817) 390-8000
Telecopy: (817) 347-3297
with a copy to:
Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, Texas 75201-6950
Attention: Thomas A. Roberts
Telephone: (214) 746-7700
Telecopy: (214) 746-7777
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
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<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. The parties agree that any item disclosed in any section of the
Disclosure Schedule or the Conseco Disclosure Schedule shall be deemed to be
disclosed for all purposes of this Agreement, notwithstanding the fact that such
item was not disclosed in any other section of the Disclosure Schedule or the
Conseco Disclosure Schedule.
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 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 Delaware, regardless of the laws
that might otherwise govern under applicable principles of conflicts of laws
thereof.
10.6 Assignment; Binding Effect. Neither this Agreement nor any of the
rights, interests or obligations under this Agreement shall be assigned, in
whole or in part, by operation of law or otherwise by any of the parties without
the prior written consent of the other parties, and any such assignment that is
not consented to shall be null and void. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by,
the parties and their respective successors and assigns.
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, this being in addition to any other
remedy to which they are entitled at law or in equity.
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.
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.
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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
TRANSPORT HOLDINGS INC.
By: /s/Garland M. Lasater, Jr.
--------------------------
Garland M. Lasater, Jr.
President
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UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS OF CONSECO
The unaudited pro forma consolidated statements of operations of Conseco,
Inc. ("Conseco") for the year ended December 31, 1995, and for the six months
ended June 30, 1996, present the consolidated operating results for Conseco as
if the following transactions, which have already occurred, had occurred on
January 1, 1995: (1) the call of Conseco's Series D Convertible Preferred Stock
(the "Series D Call") completed on September 26, 1996; and (2) the acquisition
of all of the outstanding common stock of American Life Holdings, Inc. ("ALH"),
not previously owned by Conseco, and related transactions (the "ALH
Transaction") completed on September 30, 1996.
The pro forma consolidated statement of operations data for Conseco for the
year ended December 31, 1995, set forth in the unaudited pro forma consolidated
statement of operations under the column "Pro forma Conseco before the Series D
Call and the ALH Transaction" reflect the prior application of certain pro forma
adjustments for the following transactions, all of which have already occurred,
as if such transactions had occurred on January 1, 1995: (1) the acquisition of
Life Partners Group, Inc. (the "LPG Merger"); (2) the acquisition of all of the
outstanding common stock of CCP Insurance, Inc. ("CCP"), not previously owned by
Conseco, and related transactions (including the repayment of the existing
$250.0 million revolving credit agreement); (3) the increase of Conseco's
ownership in Bankers Life Holding Corporation ("BLH") to 90.5 percent, as a
result of purchases of common shares of BLH by Conseco and BLH during 1995 and
the first three months of 1996; (4) the issuance of 4.37 million shares of
Preferred Redeemable Increased Dividend Equity Securities Convertible Preferred
Stock ("PRIDES") of Conseco in January 1996; (5) the BLH tender offer for and
repurchase of its 13 percent senior subordinated notes due 2002 and related
financing transactions completed in March 1996 (the "BLH Tender Offer"); and (6)
the debt restructuring of ALH in the fourth quarter of 1995. Such pro forma
adjustments are set forth in Conseco's Current Report on Form 8-K dated August
2, 1996 and in Exhibit 99.1 included in Conseco's Current Report on Form 8-K
dated April 10, 1996.
The pro forma consolidated statement of operations data for Conseco for the
six months ended June 30, 1996, set forth in the unaudited pro forma
consolidated statement of operations under the column "Pro forma Conseco before
the Series D Call and the ALH Transaction" reflect the prior application of
certain pro forma adjustments for the following transactions, all of which have
already occurred, as if such transactions had occurred on January 1, 1995: (1)
the LPG Merger; (2) the issuance of 4.37 million shares of Conseco PRIDES in
January 1996; and (3) the BLH Tender Offer. Such pro forma adjustments are set
forth in Conseco's Current Report on Form 8-K dated August 2, 1996 and in
Exhibit 99.1 included in Conseco's Form 10-Q for the quarterly period ended June
30, 1996.
The unaudited pro forma consolidated balance sheet as of June 30, 1996,
gives effect to the Series D Call and the ALH Transaction as if each had
occurred on June 30, 1996.
The unaudited pro forma consolidated balance sheet data as of June 30,
1996, set forth in the unaudited pro forma consolidated balance sheet under the
column "Pro forma Conseco before the Series D Call and the ALH Transaction"
reflect the prior application of certain pro forma adjustments for the LPG
Merger, which has already occurred. Such pro forma adjustments are set forth in
Conseco's Current Report on Form 8-K dated August 2, 1996.
The pro forma consolidated financial statements are based on the historical
financial statements of Conseco and should be read in conjunction with the
historical financial statements and notes included in Conseco's Form 10-Q for
the quarterly period ended June 30, 1996, and in Conseco's Form 10-K for the
year ended December 31, 1995. The pro forma data are not necessarily indicative
of the results of operations or financial condition of Conseco had these
transactions occurred on January 1, 1995, nor the results of future operations.
Conseco anticipates cost savings and additional benefits as a result of the
transactions included in the pro forma financial statements. Such benefits and
any other changes that might have resulted from managements' changes have not
been included as adjustments to the pro forma consolidated financial statements.
Certain amounts from the prior periods have been reclassified to conform to the
current presentation.
The ALH Transaction will be accounted for using the step acquisition method
of accounting. The unaudited pro forma consolidated financial statements reflect
cost allocations for the ALH Transaction using estimated values of the assets
and liabilities of ALH as of the assumed acquisition dates based on appraisals
and other studies, which are not yet complete. Accordingly, the final
allocations will be different than the amounts included in the accompanying pro
forma consolidated financial statements. Although the final allocations will
differ, the pro forma consolidated financial statements reflect management's
best estimate based on currently available information as if the ALH Transaction
had occurred on the assumed dates of acquisition.
1
<PAGE>
CONSECO
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
for the year ended December 31, 1995
(Amounts in millions, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Pro forma
Conseco Pro forma Pro forma Pro forma
before the adjustments Conseco adjustments
Series D Call relating to before the relating to Pro forma
and the the Series ALH the ALH Conseco
ALH Transaction D Call Transaction Transaction totals
-------------- ------ ----------- ----------- ------
<S> <C> <C> <C> <C> <C>
Revenues:
Insurance policy income $ 1,752.8 $ 1,752.8 $ - $ 1,752.8
Investment activity:
Net investment income 1,457.8 1,457.8 3.8 (4) 1,461.1
(0.5)(5)
Net trading income 2.5 2.5 - 2.5
Net realized gains 203.9 203.9 16.4 (4) 220.3
Fee revenue 33.9 33.9 - 33.9
Restructuring income 15.2 15.2 - 15.2
Other income 12.6 12.6 - 12.6
------ -------- -------- ----------
Total revenues 3,478.7 3,478.7 19.7 3,498.4
------- -------- -------- ----------
Benefits and expenses:
Insurance policy benefits and change in future policy
benefits 1,261.4 1,261.4 - 1,261.4
Interest expense on annuities and financial products 758.5 758.5 - 758.5
Interest expense on notes payable 132.9 132.9 11.6 (5) 143.5
(1.0)(6)
Interest expense on investment borrowings 30.2 30.2 30.2
Amortization related to operations 308.8 308.8 1.5 (4) 307.3
(21.1)(4)
18.1 (4)
Amortization related to realized gains 133.6 133.6 10.8 (4) 144.4
Other operating costs and expenses 356.4 356.4 356.4
------ -------- ---------- --------
Total benefits and expenses 2,981.8 2,981.8 19.9 3,001.7
-------- -------- ---------- --------
Income (loss) before income taxes, minority interest
and extraordinary charge 496.9 496.9 (.2) 496.7
Income tax expense (benefit) 193.4 193.4 (1.6)(7) 192.3
0.5 (7)
------ ------- ---------- --------
Income (loss) before minority interest and
extraordinary charge 303.5 303.5 0.9 304.4
Minority interest 72.5 72.5 (51.2)(8) 21.3
------ ------- ------- ---------
Income (loss) before extraordinary charge $ 231.0 $ 231.0 $ 52.1 $ 283.1
====== ====== ====== =========
Earnings per common share and common equivalent share:
Primary:
Weighted average shares outstanding 66.8 8.9 (1) 75.7 75.7
====== ==== ========= ========
Income before extraordinary charge $3.18 $3.05 (2) $3.74
====== ======== =======
Fully diluted:
Weighted average shares outstanding 76.0 76.0 76.0
====== ========= ========
Income before extraordinary charge $3.04 $3.04 $3.72
====== ========= ========
The accompanying notes are an integral part of the pro forma consolidated financial statements.
</TABLE>
2
<PAGE>
CONSECO
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
for the six months ended June 30, 1996
(Amounts in millions, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Pro forma
Conseco Pro forma Pro forma Pro forma
before the adjustments Conseco adjustments
Series D Call relating to before relating to Pro forma
and the the Series the ALH the ALH Conseco
ALH Transaction D Call Transaction Transaction totals
--------------- ----------- ----------- ----------- ------
<S> <C> <C> <C> <C> <C>
Revenues:
Insurance policy income $ 897.2 $ 897.2 $ - $ 897.2
Investment activity:
Net investment income 719.0 719.0 0.6 (4) 719.4
(0.2)(5)
Net trading losses (7.3) (7.3) - (7.3)
Net realized gains 14.4 14.4 1.0 (4) 15.4
Fee revenue 20.1 20.1 - 20.1
Restructuring income 30.4 30.4 - 30.4
Other income 10.2 10.2 - 10.2
------- --------- ----- -------
Total revenues 1,684.0 1,684.0 1.4 1,685.4
------- --------- ----- -------
Benefits and expenses:
Insurance policy benefits and change in future policy
benefits 626.0 626.0 - 626.0
Interest expense on annuities and financial products 378.3 378.3 - 378.3
Interest expense on notes payable 62.2 62.2 5.8 (5) 67.6
(0.4)(6)
Interest expense on investment borrowings 10.7 10.7 - 10.7
Amortization related to operations 168.3 168.3 (11.5)(4) 168.3
0.7 (4)
10.8 (4)
Amortization related to realized gains 14.2 14.2 0.9 (4) 15.1
Other operating costs and expenses 157.9 157.9 157.9
------- --------- ----- -------
Total benefits and expenses 1,417.6 1,417.6 6.3 1,423.9
------- --------- ----- -------
Income (loss) before income taxes, minority
interest and extraordinary charge 266.4 266.4 (4.9) 261.5
Income tax expense (benefit) 102.4 102.4 (0.6)(7) 100.3
(1.5)(7)
------- --------- ----- -------
Income (loss) before minority interest and
extraordinary charge 164.0 164.0 (2.8) 161.2
Minority interest 23.5 23.5 (11.2)(8) 12.3
------- --------- ----- -------
Income (loss) before extraordinary charge $ 140.5 140.5 $ 8.4 $ 148.9
======= ========= ===== =======
Earnings per common share and common equivalent share:
Primary:
Weighted average shares outstanding 68.3 8.7 (1) 77.0 77.0
======= ===== ======== =======
Income before extraordinary charge $1.93 $1.82 (2) $1.93
======= ======== =======
Fully diluted:
Weighted average shares outstanding 77.8 77.8 77.8
======= ======== =======
Income before extraordinary charge $1.81 $1.81 $1.91
======= ======== =======
The accompanying notes are an integral part of the pro forma consolidated financial statements.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
CONSECO
PRO FORMA CONSOLIDATED BALANCE SHEET
June 30, 1996
(Dollars in millions)
(unaudited)
Pro forma
Conseco Pro forma Pro forma Pro forma
before the adjustments Conseco adjustments
Series D Call relating to before the relating to Pro forma
and the the Series ALH the ALH Conseco
ALH Transaction D Call Transaction Transaction totals
-------------- ------ ----------- ----------- ------
<S> <C> <C> <C> <C> <C>
Assets
Investments:
Actively managed fixed maturity securities
at fair value $15,872.3 $ - $15,872.3 $ - $ 15,872.3
Equity securities at fair value 99.6 99.6 - 99.6
Mortgage loans 404.2 404.2 404.2
Credit-tenant loans 309.7 309.7 - 309.7
Policy loans 528.7 528.7 - 528.7
Other invested assets 191.0 191.0 - 191.0
Trading account securities 0.7 0.7 0.7
Short-term investments 217.3 (0.3)(3) 217.0 165.0 (9) 204.6
(165.0)(9)
(12.4)(9)
Assets held in separate accounts 271.6 271.6 - 271.6
--------- -------- --------- ------- ---------
Total investments 17,895.1 (0.3) 17,894.8 (12.4) 17,882.4
Accrued investment income 284.1 - 284.1 - 284.1
Cost of policies purchased 1,794.8 1,794.8 (178.4)(4) 1,893.6
277.2 (4)
Cost of policies produced 561.2 561.2 (78.0)(4) 483.2
Reinsurance receivables 374.6 374.6 - 374.6
Income taxes 212.0 212.0 (4.6)(7) 209.7
2.3 (10)
Goodwill 1,508.0 1,508.0 58.8 (4) 1,566.8
Property and equipment 89.0 89.0 - 89.0
Securites segregated for future redemption
of redeemable preferred stock of a
Partnership II entity 40.7 40.7 - 40.7
Other assets 234.2 234.2 - 234.2
--------- --------- --------- ------- ---------
Total assets $22,993.7 $ (0.3) $22,993.4 $ 64.9 $23,058.3
========= ========= ========= ======= =========
The accompanying notes are an integral part of the pro forma consolidated financial statements.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
CONSECO
PRO FORMA CONSOLIDATED BALANCE SHEET
June 30, 1996
(Dollars in millions)
(unaudited)
Pro forma
Conseco Pro forma Pro forma Pro forma
before the adjustments Conseco adjustments
Series D Call relating to before the relating to Pro forma
and the the Series ALH the ALH Conseco
ALH Transaction D Call Transaction Transaction totals
-------------- ------ ----------- ----------- ------
<S> <C> <C> <C> <C> <C>
Liabilities:
Insurance liabilities $18,133.2 $ - $18,133.2 $ - $18,133.2
Income tax liabilities
Investment borrowings 516.6 516.6 516.6
Other liabilities 457.9 457.9 457.9
Liabilities related to separate accounts 271.6 271.6 271.6
Notes payable of Conseco 888.7 888.7 25.0 (9) 1,198.5
284.8 (11)
Notes payable of Bankers Life Holding
Corporation, not direct obligations of Conseco 297.9 297.9 140.0 (9) 437.9
Notes payable of Partnership II entities, not
direct obligations of Conseco 277.1 277.1 7.7 (4) 0.0
(284.8)(11)
--------- ------- ---------- -------- --------
Total liabilities 20,843.0 20,843.0 172.7 21,015.7
--------- ------- ---------- -------- --------
Minority interest 285.8 285.8 (122.7)(12) 150.7
(12.4)(12)
--------- ------- ---------- -------- --------
Shareholders' equity:
Preferred stock 536.5 (269.1)(3) 267.1 - 267.1
(.3)(3)
Common stock and additional paid-in capital 771.8 269.1 (3) 1,040.9 1,040.9
Unrealized appreciation (depreciation) of securities (56.1) (56.1) (56.1)
Retained earnings 612.7 612.7 27.3 (13) 640.0
--------- -------- --------- -------- --------
Total shareholders' equity 1,864.9 (0.3) 1,864.6 27.3 1,891.9
--------- -------- --------- -------- --------
Total liabilities and shareholders' equity $22,993.7 $ (0.3) $22,993.4 $ 64.9 $23,058.3
========= ======== ========= ======== =========
The accompanying notes are an integral part of the pro forma consolidated financial statements.
</TABLE>
5
<PAGE>
CONSECO AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
PRO FORMA ADJUSTMENTS
TRANSACTIONS RELATED TO THE SERIES D CALL
On August 27, 1996, Conseco called for redemption all outstanding shares of
the Series D preferred stock at a redemption price plus accrued dividends of
$52.916. At June 30, 1996, Conseco had approximately 5.7 million shares of
Series D preferred stock outstanding with a carrying value of $269.4 million.
Each Series D share is convertible at any time into shares of Conseco's common
stock at a conversion price of $31.875 per common share (equivalent to 1.56860
shares of Conseco's common stock for each share of Series D preferred stock
outstanding). The Series D preferred stock was redeemable at Conseco's option at
any time subsequent to January 22, 1996, at a price of $52.275 per share (such
price declines to $50 per share over the period through January 15, 2003).
Dividends on the Series D preferred stock were paid quarterly at an annual rate
of 6.5 percent. All outstanding shares of the Series D preferred stock were
converted into common stock other than preferred shares with a carrying value of
$.3 million which were redeemed in cash.
Adjustments to give effect to the Series D Call are summarized below:
(1) Primary weighted average shares outstanding are adjusted to reflect the
issuance of common stock that each share of Series D preferred stock
was converted into based on the stock's conversion provisions (1.56860
shares of Conseco's common stock for each share of Series D preferred
stock converted). Such issuance had no effect on fully diluted average
shares outstanding or fully diluted earnings per share since the Series
D preferred stock was considered to have been converted for fully
diluted calculations.
(2) Primary earnings per share are adjusted to reflect the elimination of
the Series D preferred stock dividend and the increase in the Conseco
common shares outstanding.
(3) Preferred stock is reduced and common stock and additional paid-in
capital is increased to reflect the conversion effected by the Series D
Call. In addition, short-term investments and preferred stock are
reduced for the Series D preferred shares that were redeemed in cash.
TRANSACTIONS RELATING TO THE ALH TRANSACTION
On September 30, 1996, Conseco acquired all of the common stock of ALH, not
previously owned by Conseco, for a purchase price of approximately $165 million.
ALH's former shareholders, other than Conseco, received $23.00 per common share.
In addition, Conseco purchased all outstanding payment-in-kind preferred stock
of ALH, not owned by Conseco. These transactions were financed using available
cash and additional borrowings under Conseco's credit facility (the "Conseco
Credit Agreement") and BLH's credit facility (the "BLH Credit Agreement").
Hereinafter ALH refers to ALH or the former subsidiaries of ALH.
The sources and uses of the financing to complete the ALH Transaction are
summarized below (dollars in millions):
<TABLE>
<CAPTION>
<S> <C>
Sources of funds:
Available Cash........................................................................ $ 12.4
Conseco Credit Agreement.............................................................. 25.0
BLH Credit Agreement.................................................................. 140.0
------
Total sources...................................................................... $177.4
======
Uses of funds:
Purchase of all outstanding common stock of ALH, not owned by Conseco*................ $165.0
Purchase of all outstanding payment-in-kind preferred stock of ALH,
not owned by Conseco............................................................... 12.4
------
Total uses......................................................................... $177.4
======
</TABLE>
6
<PAGE>
CONSECO AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
- --------------------
*Excludes approximately 1.2 million shares of ALH common stock which were
distributed to Conseco, the general partner of Conseco Capital Partners II, L.P
("Partnership II"), based on the returns earned by the limited partners on the
ALH investment as defined by Partnership II's Partnership Agreement. Conseco
recognized a gain of approximately $25.0 million representing the value of the
common stock distributed to Conseco from the limited partners (other than
limited partners that are subsidiaries of Conseco).
The pro forma adjustments are applied to the historical consolidated
financial statements of Conseco using the step acquisition method of accounting.
Under this method, the total purchase cost of the common stock of ALH, not
already owned by Conseco, is allocated to the assets and liabilities acquired
based on their relative fair values as of the date of acquisition, with any
excess of the total purchase cost over the fair value of the assets acquired
less the fair value of the liabilities assumed recorded as goodwill. The values
of the assets and liabilities of ALH included in Conseco's pro forma
consolidated financial statements represent the combination of the following
values: (1) the portion of ALH's net assets acquired by Conseco in the initial
acquisition made by Partnership II is valued as of its acquisition date,
September 29, 1994; (2) the portion acquired in the fourth quarter of 1995, is
valued as of its assumed acquisition date; and (3) the portion of ALH's net
assets acquired in the ALH Transaction is valued as of the assumed dates of
acquisition.
Adjustments to give effect to the ALH Transaction are summarized below:
(4) As described above, the ALH Transaction is accounted for as a step
acquisition. The accounts of ALH are adjusted to reflect the step
acquisition method of accounting as if the ALH Transaction was
completed on the assumed dates of acquisition.
(5) Net investment income and interest expense are adjusted to reflect
the sources of the financing to complete the ALH Transaction (net
investment income is reduced for the lost investment income on cash
used in the ALH Transaction and interest expense is increased to
reflect the additional borrowing Transaction and under the Conseco
Credit Agreement and the BLH Credit Agreement).
A change in interest rates of .5 percent on the additional borrowings
under the Conseco Credit Agreement and the BLH Credit Agreement used
to complete the ALH Transaction would result in: (1) an increase (or
decrease) in pro forma interest expense of $.8 million and $.4
million for the year ended December 31, 1995, and the six months
ended June 30, 1996, respectively; and (2) a decrease (or increase)
in pro forma net income of $.5 million and $.3 million for the same
respective periods.
(6) Interest expense is adjusted to reflect the fair value of ALH's
subordinated debentures.
(7) All pro forma adjustments are tax affected based on the appropriate
rate for the specific item. In addition, tax expense is adjusted to
reflect the reduction in tax expense as a result of Conseco's
increased ownership of ALH.
(8) Minority interest is reduced to eliminate the income attributable to
the former shareholders of ALH and the preferred dividends on the
payment-in-kind preferred stock of ALH, not owned by Conseco.
(9) The sources and uses of the financing to complete the purchase of
additional shares of ALH and related transactions (as summarized
above) are recorded.
(10) A tax benefit is recognized as a result of the release of deferred
tax previously accrued on income related to ALH. Such deferred tax is
no longer required since Conseco is permitted to file a consolidated
tax return with ALH and the income to which this tax relates can be
distributed to Conseco without the payment of tax.
(11) Notes payable of Partnership II entities are reclassified as notes
payable of Conseco since ALH is now a wholly owned subsidiary of
Conseco.
(12) Minority interest is reduced to eliminate the ownership interest of
the former shareholders of ALH and the payment-in-kind preferred
stock of ALH, not owned by Conseco prior to the ALH Transaction.
7
<PAGE>
CONSECO AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(13) The retained earnings account is adjusted to reflect: (1) the gain
representing the value of the common stock of ALH distributed to
Conseco from the limited partners (other than limited partners which
are subsidiaries of Conseco); and (2) the tax benefit recognized as
described in entry (10) above.
J:\8KCNC.925\PROFORM.WPD
8
