<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 3, 1996
REGISTRATION NO. 33-53095
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
AMENDMENT NO. 3
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
CONSECO, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
INDIANA 35-1468632
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
11825 N. PENNSYLVANIA STREET
CARMEL, IN 46032
(317) 817-6100
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
MR. LAWRENCE W. INLOW
11825 N. PENNSYLVANIA STREET
CARMEL, IN 46032
(317) 817-6163
(Name, address, including zip code and telephone number,
including area code, of agent for service)
------------------------------
Approximate date of commencement of proposed sale to the public: From time
to time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / / _______________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / _______________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED BE REGISTERED (1) PER UNIT (2) OFFERING PRICE FEE (3)(4)
<S> <C> <C> <C> <C>
Debt Securities
Preferred Stock
Depositary Shares
Common Stock................................ $400,000,000 100% $400,000,000 $137,932
Warrants
</TABLE>
(1) Such amount in U.S. dollars or the equivalent thereof in foreign currencies
as shall result in an aggregate initial offering price for all securities of
$400,000,000. The Prospectus included herein covers $400,000,000 of
securities. In addition, this Registration Statement relates to such
presently indeterminate number of securities as may be issuable from time to
time upon conversion or exchange of the securities being registered
hereunder.
(2) Estimated solely for the purpose of calculating the registration fee and
exclusive of accrued interest and dividends, if any.
(3) The registration fee has been calculated in accordance with Rule 457(o)
under the Securities Act of 1933, as amended, and reflects the offering
price rather than the principal amount of any Debt Securities issued at a
discount or the liquidation value of any Preferred Stock.
(4) The Registrant paid $68,956 of this amount on April 11, 1994 upon the
initial filing of this Registration Statement in respect of $200,000,000 of
Debt Securities and paid an additional $34,483 upon the filing of Amendment
No. 1 when the aggregate amount registered was increased to $300,000,000 and
paid an additional $34,483 upon the filing of Amendment No. 2 when the
aggregate amount registered was increased to $400,000,000. Accordingly, no
additional registration fee is payable in connection with this Amendment No.
3.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS SUPPLEMENT DATED JANUARY 3, 1996
P R O S P E C T U S S U P P L E M E N T
- ------------------------------------
(TO PROSPECTUS DATED JANUARY , 1996)
3,200,000 SHARES
[LOGO]
% PRIDES-SM-
CONVERTIBLE PREFERRED STOCK
--------------
The shares offered hereby are 3,200,000 shares of Preferred Redeemable
Increased Dividend Equity Securities-SM-, % PRIDES-SM-, Convertible Preferred
Stock, no par value per share ("PRIDES"), of Conseco, Inc. (the "Company").
The annual dividend payable with respect to each share of PRIDES is $ .
Dividends will be cumulative from the date of issuance and will be payable
quarterly in arrears on each February 1, May 1, August 1 and November 1,
commencing February 1, 1996. The liquidation preference applicable to each share
of PRIDES is equal to the sum of (i) the per share price to the public shown
below and (ii) the amount of accrued and unpaid dividends thereon.
On February 1, 2000 (the "Mandatory Conversion Date"), unless either
previously redeemed or converted at the option of the holder, each of the
outstanding shares of PRIDES will mandatorily convert into (i) one share of
common stock, no par value per share, of the Company (the "Common Stock"),
subject to adjustment in certain events, and (ii) the right to receive an amount
in cash equal to all accrued and unpaid dividends thereon.
Shares of PRIDES are not redeemable prior to February 1, 1999. At any time
and from time to time on or after February 1, 1999 until immediately prior to
the Mandatory Conversion Date, the Company may redeem any or all of the
outstanding shares of PRIDES. Upon any such redemption, each holder will
receive, in exchange for each share of PRIDES, the number of shares of Common
Stock equal to (A) the sum of (i) $ , declining after February 1, 1999 as
set forth herein to $ until the Mandatory Conversion Date, and (ii) all
accrued and unpaid dividends thereon (the "Call Price") divided by (B) the
Current Market Price (as defined herein) on the applicable date of
determination, but in no event less than of a share of Common Stock, subject
to adjustment in certain events.
At any time prior to the Mandatory Conversion Date, unless previously
redeemed, each share of PRIDES is convertible at the option of the holder
thereof into of a share of Common Stock (equivalent to a conversion price of
$ per share of Common Stock (the "Conversion Price")), subject to adjustment
in certain events. The number of shares of Common Stock a holder will receive
upon redemption, and the value of the shares received upon conversion, will vary
depending on the market price of the Common Stock from time to time, all as set
forth herein.
Dividends on the shares of PRIDES will accrue at a higher rate than the rate
at which dividends are currently paid on the Common Stock. The opportunity for
equity appreciation afforded by an investment in the shares of PRIDES is less
than that afforded by an investment in the Common Stock because the Conversion
Price is higher than the per share price to the public of the shares of PRIDES
and the Company may, at its option, redeem the shares of PRIDES at any time on
or after February 1, 1999 and prior to the Mandatory Conversion Date, and may be
expected to do so if, among other circumstances, the Current Market Price of the
Common Stock exceeds the Call Price. In such event, a holder of a share of
PRIDES will receive less than one share of Common Stock, but no less than of
a share of Common Stock. The per share value of the Common Stock received by
holders of shares of PRIDES may be more or less than the per share amount paid
for the shares of PRIDES offered hereby, due to market fluctuations in the price
of the Common Stock. For a detailed description of the terms of the shares of
PRIDES, see "Description of PRIDES."
The shares of PRIDES have been approved for listing on the New York Stock
Exchange ("NYSE"), subject to official notice of issuance, under the symbol
"CNCPrE." On January 2, 1996, the last reported sale price of the Common Stock
on the NYSE was $63 per share.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO
WHICH IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT(2) COMPANY(1)(3)
<S> <C> <C> <C>
Per Share of PRIDES..................................... $ $ $
Total (4)............................................... $ $ $
</TABLE>
(1) Plus accrued dividends, if any, from the date of issue.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities under the Securities Act of 1933, as amended. See
"Underwriting."
(3) Before deducting expenses payable by the Company estimated at $700,000.
(4) The Company has granted to the Underwriters a 30-day option to purchase up
to an additional 480,000 shares of PRIDES to cover over-allotments, if any.
If such option is exercised in full, the total Price to Public, Underwriting
Discount and Proceeds to Company will be $ , $ , and $ ,
respectively. See "Underwriting."
---------------------
The PRIDES are offered by the several Underwriters, subject to prior sale,
when, as and if issued to and accepted by them, and subject to approval of
certain legal matters by counsel for the Underwriters and certain other
conditions. The Underwriters reserve the right to withdraw, cancel or modify
such offer and to reject orders in whole or in part. It is expected that
delivery of the PRIDES offered hereby will be made in New York, New York, on or
about January , 1996.
-SM-Service mark of Merrill Lynch & Co., Inc.
---------------------
MERRILL LYNCH & CO.
DEAN WITTER REYNOLDS INC.
SALOMON BROTHERS INC
------------
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS JANUARY , 1996.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SHARES OF
PRIDES AND THE COMMON STOCK OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT
OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE
NYSE OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY
TIME.
-------------------
FOR NORTH CAROLINA RESIDENTS: THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE COMMISSIONER OF INSURANCE FOR THE STATE OF NORTH CAROLINA,
NOR HAS THE COMMISSIONER OF INSURANCE RULED UPON THE ACCURACY OR ADEQUACY OF
THIS DOCUMENT.
-------------------
STATE INSURANCE HOLDING COMPANY LAWS AND REGULATIONS APPLICABLE TO THE
COMPANY GENERALLY PROVIDE THAT NO PERSON MAY ACQUIRE CONTROL OF THE COMPANY, AND
THUS INDIRECT CONTROL OF ITS INSURANCE SUBSIDIARIES, UNLESS SUCH PERSON HAS
PROVIDED CERTAIN REQUIRED INFORMATION TO, AND SUCH ACQUISITION IS APPROVED (OR
NOT DISAPPROVED) BY, THE APPROPRIATE INSURANCE REGULATORY AUTHORITIES.
GENERALLY, ANY PERSON ACQUIRING BENEFICIAL OWNERSHIP OF 10% OR MORE OF THE
COMMON STOCK WOULD BE PRESUMED TO HAVE ACQUIRED SUCH CONTROL, UNLESS THE
APPROPRIATE INSURANCE REGULATORY AUTHORITIES UPON ADVANCE APPLICATION DETERMINE
OTHERWISE.
S-2
<PAGE>
PROSPECTUS SUPPLEMENT SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND CONSOLIDATED FINANCIAL
STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING ELSEWHERE IN THE PROSPECTUS,
THIS PROSPECTUS SUPPLEMENT OR IN THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE.
EXCEPT AS OTHERWISE NOTED, ALL INFORMATION IN THIS PROSPECTUS SUPPLEMENT ASSUMES
THAT THE OVER-ALLOTMENT OPTION GRANTED TO THE UNDERWRITERS WILL NOT BE
EXERCISED. ALL FINANCIAL INFORMATION IN THIS PROSPECTUS SUPPLEMENT, THE
PROSPECTUS OR IN THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE IS PRESENTED IN
ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES ("GAAP"), UNLESS
OTHERWISE SPECIFIED. UNLESS THE CONTEXT OTHERWISE REQUIRES, REFERENCES IN THIS
PROSPECTUS SUPPLEMENT TO THE "COMPANY" INCLUDE THE COMPANY AND ITS CONSOLIDATED
SUBSIDIARIES AND AFFILIATES. CAPITALIZED TERMS USED IN THIS PROSPECTUS
SUPPLEMENT BUT NOT DEFINED HEREIN SHALL HAVE THE MEANINGS SET FORTH IN THE
PROSPECTUS UNLESS OTHERWISE PROVIDED HEREIN.
THE COMPANY
The Company is a financial services holding company engaged primarily in the
development, marketing, issuance and administration of annuity, supplemental
health and individual life insurance products. In addition, the Company provides
investment management, administrative and other fee-based services to affiliates
and non-affiliates and, through Conseco Capital Partners II, L.P. ("Partnership
II"), engages in the acquisition and restructuring of life insurance companies
in partnership with other investors. The Company's operating strategy is to
consolidate and streamline management and administrative functions, to realize
superior investment returns through active asset management, to eliminate
unprofitable products and distribution channels and to focus resources on the
development and expansion of profitable products and strong distribution
channels.
The following chart identifies the three major areas of the Company's
operations and its principal subsidiaries and affiliates.
<TABLE>
<S> <C> <C>
- -Bankers Life and Casualty -Conseco Capital Management -American Life and Casualty
Insurance Company ("CCM") Insurance Company
("Bankers Life") (88%) -Bankmark ("American Life") (36%)
- -Great American Reserve -Conseco Risk Management
Insurance Company ("GARCO") -Conseco Mortgage Capital
- -Beneficial Standard Life
Insurance Company ("BSLIC")
- -National Fidelity Life
Insurance
Company ("National Fidelity")
- -Bankers National Life
Insurance
Company ("Bankers National")
- -Lincoln American Life Insur-
ance
Company ("Lincoln American")
</TABLE>
Companies are wholly-owned unless
otherwise indicated.
% = the Company's approximate total
direct and indirect interest.
S-3
<PAGE>
The Company's insurance subsidiaries, which are listed under the "life
insurance operations" heading above, collected an aggregate of approximately
$1.8 billion of total premiums in the first nine months of 1995 from a diverse
portfolio of products. During such period, annuities and other
interest-sensitive products accounted for 40% of premiums. Medicare supplement
policies, long-term care insurance and other individual health insurance, life
insurance and other insurance products accounted for the remaining 60% of
premiums.
The Company's total assets and shareholders' equity at September 30, 1995
were approximately $17.0 billion and $1.0 billion, respectively.
THE OFFERING
<TABLE>
<S> <C>
Securities................... The PRIDES are shares of convertible preferred stock and
rank prior to the Common Stock and on a parity with the
Company's Series D Cumulative Convertible Preferred Stock
(the "Series D Preferred Stock") as to payment of dividends
and distribution of assets upon liquidation. The shares of
PRIDES mandatorily convert into shares of Common Stock on
February 1, 2000, the Mandatory Conversion Date, and the
Company has the option to redeem the shares of PRIDES, in
whole or in part, at any time and from time to time on or
after February 1, 1999 and prior to the Mandatory Conversion
Date at the Call Price, payable in shares of Common Stock.
In addition, the shares of PRIDES are convertible into
shares of Common Stock at the option of the holder at any
time prior to the Mandatory Conversion Date as set forth
below.
Dividends.................... Holders of shares of PRIDES will be entitled to receive
annual cumulative dividends at a rate per annum of % of
the stated liquidation preference (equivalent to a rate of
$ per annum for each share of PRIDES), from the date of
initial issuance, payable quarterly in arrears on each
February 1, May 1, August 1, and November 1, or, if any such
date is not a business day, on the next succeeding business
day, commencing February 1, 1996. See "Description of PRIDES
-- Dividends."
Mandatory Conversion......... On the Mandatory Conversion Date, unless previously redeemed
or converted, each outstanding share of PRIDES will
mandatorily convert into (i) one share of Common Stock,
subject to adjustment in certain events, and (ii) the right
to receive cash in an amount equal to all accrued and unpaid
dividends thereon (other than previously declared dividends
payable to a holder of record as of a prior date). See
"Description of PRIDES -- Mandatory Conversion of PRIDES."
The value of the Common Stock that may be received by
holders of shares of PRIDES upon their mandatory conversion
may be more or less than the amount paid for the shares of
PRIDES offered hereby due to market fluctuations in the
price of the Common Stock.
Optional Redemption.......... Shares of PRIDES are not redeemable prior to February 1,
1999. At any time and from time to time on or after February
1, 1999, and ending immediately prior to the Mandatory
Conversion Date, the Company may redeem any or all of the
outstanding shares of PRIDES. Upon any such redemption, each
holder will receive, in exchange for each share of PRIDES,
the number of shares of Common Stock equal to the Call Price
(the sum of (i) $ , declining after February 1, 1999
as set forth herein to $ until the Mandatory
Conversation Date and (ii) all accrued and unpaid dividends
thereon (other than previously
</TABLE>
S-4
<PAGE>
<TABLE>
<S> <C>
declared dividends payable to a holder of record as of a
prior date)) divided by the Current Market Price (as defined
herein) on the applicable date of determination, but in no
event less than of a share of Common Stock, subject to
adjustment as described herein. See "Description of PRIDES
-- Optional Redemption." The number of shares of Common
Stock to be delivered in payment of the applicable Call
Price will be determined on the basis of the Current Market
Price of the Common Stock prior to the announcement of the
redemption, and the market price of the Common Stock may
vary between the date of such determination and the
subsequent delivery of such shares.
Conversion at the Option of
the Holder.................. At any time prior to the Mandatory Conversion Date, unless
previously redeemed, each share of PRIDES is convertible at
the option of the holder thereof into of a share of
Common Stock (the "Optional Conversion Rate"), equivalent to
the Conversion Price of $ per share of Common Stock,
subject to adjustment as described herein. The number of
shares of Common Stock a holder will receive upon
redemption, and the value of the shares received upon
conversion, will vary depending on the market price of the
Common Stock from time to time, all as set forth herein. The
right of holders to convert shares of PRIDES called for
redemption will terminate immediately prior to the close of
business on the redemption date. See "Description of PRIDES
-- Conversion at the Option of the Holder."
Enhanced Dividend Yield; Less
Equity Appreciation Than
Common Stock................ Dividends will accrue on the shares of PRIDES at a higher
rate than the rate at which dividends are currently paid on
the Common Stock. The opportunity for equity appreciation
afforded by an investment in the shares of PRIDES is less
than that afforded by an investment in the Common Stock
because the Conversion Price is higher than the per share
price to the public of the shares of PRIDES and the Company
may, at its option, redeem the shares of PRIDES at any time
on or after February 1, 1999, and prior to the Mandatory
Conversion Date, and may be expected to do so if, among
other circumstances, the Current Market Price of the Common
Stock after February 1, 1999 exceeds the Call Price. In such
event, a holder of a share of PRIDES will receive less than
one share of Common Stock, but no less than of a share of
Common Stock, subject to adjustment as described herein. A
holder may also surrender for conversion any shares of
PRIDES called for redemption up to the close of business on
the redemption date, and a holder that so elects to convert
will receive of a share of Common Stock per share of
PRIDES, subject to adjustment as described herein. The per
share value of Common Stock received by holders of shares of
PRIDES may be more or less than the per share amount paid
for the shares of PRIDES offered hereby, due to market
fluctuations in the price of the Common Stock. See
"Description of PRIDES -- Enhanced Dividend Yield; Less
Equity Appreciation Than Common Stock."
Voting Rights................ The holders of shares of PRIDES will have the right with the
holders of Common Stock to vote in the election of Directors
and upon each other matter coming before any meeting of the
holders of Common Stock on the basis of 4/5 of a vote for
each share of PRIDES. On such matters,
</TABLE>
S-5
<PAGE>
<TABLE>
<S> <C>
the holders of shares of PRIDES and the holders of Common
Stock will vote together as one class except as otherwise
provided by law or the Company's Articles of Incorporation.
In addition, (i) whenever dividends on the shares of PRIDES
or any other series of the Company's preferred stock (all
series of which, including the shares of PRIDES and the
Series D Preferred Stock, hereinafter are called the
"Preferred Stock") with like voting rights are in arrears
and unpaid for six quarterly dividend periods, and in
certain other circumstances, the holders of the shares of
PRIDES (voting separately as a class) will be entitled to
vote, on the basis of one vote for each share of PRIDES, for
the election of two Directors of the Company, such Directors
to be in addition to the number of Directors constituting
the Board of Directors immediately prior to the accrual of
such right, and (ii) the holders of the shares of PRIDES may
have voting rights with respect to certain alterations of
the Company's Articles of Incorporation and certain other
matters, voting on the same basis or separately as a series.
See "Description of PRIDES -- Voting Rights" herein and
"Description of Capital Stock" in the Prospectus.
Liquidation Preference and
Ranking..................... The shares of PRIDES will rank prior to the Common Stock and
on a parity with the Series D Preferred Stock as to payment
of dividends and distribution of assets upon liquidation.
The liquidation preference of each share of PRIDES is an
amount equal to the sum of (i) the per share price to the
public shown on the cover page of this Prospectus Supplement
and (ii) all accrued and unpaid dividends thereon. See
"Description of PRIDES -- Dividends" and "-- Liquidation
Rights."
NYSE Symbol of Common
Stock....................... CNC
Listing...................... The shares of PRIDES have been approved for listing on the
NYSE, subject to official notice of issuance, under the
symbol "CNCPrE."
Use of Proceeds.............. The Company intends to use the net proceeds to reduce
outstanding indebtedness. See "Use of Proceeds."
</TABLE>
S-6
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
The summary financial data set forth below are derived from the Company's
consolidated financial statements. The Company's consolidated balance sheets at
December 31, 1993 and 1994, and the consolidated statements of operations,
shareholders' equity and cash flows for the years ended December 31, 1992, 1993
and 1994 and notes thereto were audited by Coopers & Lybrand L.L.P., independent
accountants, and are included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1994, which is incorporated by reference herein. The
Company's Annual Report on Form 10-K for the year ended December 31, 1994,
should be read in conjunction with the consolidated financial information. The
consolidated financial information set forth for the nine months ended September
30, 1994 and 1995, is unaudited; however, in the opinion of the Company's
management, the accompanying financial information contains all adjustments,
consisting only of normal recurring items, necessary to present fairly the
financial information for such periods. The results of operations for the nine
months ended September 30, 1995, may not be indicative of the results of
operations to be expected for a full year.
The unaudited pro forma consolidated income statement data for the year
ended December 31, 1994, of the Company are presented as if the following
transactions had all occurred on January 1, 1994: (i) the acquisition of all of
the outstanding common stock of CCP Insurance, Inc. ("CCP"), not owned by the
Company and related transactions (including the repayment of $250.0 million of
principal outstanding under a revolving credit agreement) (the "CCP Merger");
(ii) the increase in the Company's ownership of Bankers Life Holding Corporation
("BLH") to 88 percent as a result of the Company's purchases of common shares of
BLH in open market and negotiated transactions and share repurchases by BLH
during 1995 (the "BLH Transaction"); (iii) the acquisition of American Life
Group, Inc. ("AGP") (formerly The Statesman Group, Inc.) by Partnership II; (iv)
the initial public offering of Western National Corporation ("WNC"); and (v) the
sale of the Company's remaining 40 percent equity interest in WNC. The unaudited
pro forma consolidated income statement data for the nine months ended September
30, 1995, are presented as if the CCP Merger and the BLH Transaction had
occurred on January 1, 1994. See "Acquisition of Stock of Affiliates" and the
Company's Current Reports on Form 8-K dated December 23, 1994 and August 31,
1995, as amended, which are incorporated by reference herein.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
ACTUAL
---------------------------------------------------
1990 1991 1992 1993 1994
------- --------- --------- --------- ---------
PRO FORMA
1994
------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
STATEMENT OF OPERATIONS DATA
Insurance policy income..................................... $ 152.8 $ 280.8 $ 378.7 $ 1,293.8 $ 1,285.6 $ 1,439.8
Investment activity:
Net investment income..................................... 581.7 921.4 888.6 896.2 385.7 1,009.2
Net trading income (losses)............................... 6.0 50.7 35.9 93.1 (4.9) (5.8)
Net realized gains (losses)............................... 4.5 123.3 124.3 149.5 (25.6) (44.5)
Total revenues.............................................. 753.3 1,391.8 1,523.9 2,636.0 1,862.0 2,471.7(1)
Interest expense on notes payable........................... 51.5 69.9 46.2 58.0 59.3 142.1
Total benefits and expenses................................. 688.0 1,168.6 1,193.9 2,025.8 1,537.6 2,249.1
Income from continuing operations before extraordinary
charge..................................................... 41.7 121.0 174.8 308.9 154.4 105.4(1)
Net income.................................................. 41.7 116.0 169.5 297.0 150.4
Net income applicable to common shares...................... 36.1 109.2 164.0 276.4 131.8
PER SHARE DATA
Income from continuing operations before extraordinary
charge, fully diluted...................................... $ 1.36 $ 4.22 $ 5.56 $ 9.12 $ 5.00 $ 4.10(1)
Net income, fully diluted................................... 1.36 4.02 5.40 8.77 4.87
Book value per common share outstanding..................... 5.83 15.44 21.86 33.78 20.89
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
------------------------------------
ACTUAL
---------------------- PRO FORMA
1994 1995 1995
---------- --------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Insurance policy income..................................... $ 954.2 $ 1,103.3 $ 1,103.2
Investment activity:
Net investment income..................................... 213.0 850.5 846.9
Net trading income (losses)............................... (3.6) 2.8 2.8
Net realized gains (losses)............................... (17.4) 77.8 77.1
Total revenues.............................................. 1,328.0 2,066.1 2,061.4
Interest expense on notes payable........................... 37.4 83.9 104.9
Total benefits and expenses................................. 1,052.2 1,780.2 1,803.8
Income from continuing operations before extraordinary
charge..................................................... 152.5 167.8 111.9(2)
Net income.................................................. 150.1 167.8
Net income applicable to common shares...................... 136.1 154.0
PER SHARE DATA
Income from continuing operations before extraordinary
charge, fully diluted...................................... $ 4.87 $ 6.45 $ 4.30(2)
Net income, fully diluted................................... 4.79 6.45
Book value per common share outstanding..................... 20.43 35.69
</TABLE>
S-7
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
ACTUAL
---------------------------------------------------
1990 1991 1992 1993 1994
------- --------- --------- --------- ---------
PRO FORMA
1994
------------
(UNAUDITED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
BALANCE SHEET DATA -- PERIOD END
<S> <C> <C> <C> <C> <C> <C>
Total assets................................................ $8,371.1 $11,832.4 $11,772.7 $13,749.3 $10,811.9
Notes payable of Conseco.................................... 268.9 177.6 163.2 413.0 191.8
Notes payable of Partnership entities, not direct
obligations of Conseco..................................... 258.1 319.3 -- -- 331.1
Notes payable of Bankers Life Holding Corporation, not
direct obligations of Conseco.............................. -- -- 392.0 290.3 280.0
Total liabilities........................................... 8,173.8 11,321.3 11,154.4 12,382.9 9,743.2
Minority interest........................................... 17.1 79.5 24.0 223.8 321.7
Shareholders' equity........................................ 180.2 431.6 594.3 1,142.6 747.0
OTHER FINANCIAL DATA (3)
Premiums collected (4)...................................... $1,361.4 $ 1,648.7 $ 1,464.9 $ 2,140.1 $ 1,879.1
Operating earnings (5)...................................... 35.1 61.5 114.8 162.0 151.7 159.2
Operating earnings per fully diluted common share (5)....... 1.10 2.09 3.60 4.77 4.93 6.21
Shareholders' equity excluding unrealized appreciation
(depreciation) of fixed maturity securities (6)............ N/A N/A 560.3 1,055.2 884.7
Book value per common share outstanding, excluding
unrealized appreciation (depreciation) of fixed maturity
securities (6)............................................. N/A N/A 20.49 30.33 27.10
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
------------------------------------
ACTUAL
---------------------- PRO FORMA
1994 1995 1995
---------- --------- ------------
(UNAUDITED) (UNAUDITED)
BALANCE SHEET DATA -- PERIOD END
<S> <C> <C> <C>
Total assets................................................ $ 10,887.1 $17,009.1
Notes payable of Conseco.................................... 258.6 920.8
Notes payable of Partnership entities, not direct
obligations of Conseco..................................... 374.4 308.5
Notes payable of Bankers Life Holding Corporation, not
direct obligations of Conseco.............................. 279.8 272.6
Total liabilities........................................... 9,759.3 15,646.7
Minority interest........................................... 341.0 356.7
Shareholders' equity........................................ 786.8 1,005.7
OTHER FINANCIAL DATA (3)
Premiums collected (4)...................................... $ 1,195.7 $ 2,407.2
Operating earnings (5)...................................... 118.2 89.3 105.2
Operating earnings per fully diluted common share (5)....... 3.77 3.44 4.04
Shareholders' equity excluding unrealized appreciation
(depreciation) of fixed maturity securities (6)............ 870.7 945.4
Book value per common share outstanding, excluding
unrealized appreciation (depreciation) of fixed maturity
securities (6)............................................. 28.82 32.71
</TABLE>
- ----------------------------------
(1) Excluded from pro forma total revenues, income from continuing operations
before extraordinary charge and income from continuing operations before
extraordinary charge per fully diluted common share are $80.8 million, $46.5
million and $1.83, respectively, which amounts relate to the initial public
offering of WNC and the sale of the Company's remaining equity interest in
WNC.
(2) Excluded from pro forma income from continuing operations before
extraordinary charge and income from continuing operations before
extraordinary charge per fully diluted common share are amounts related to
the release of deferred income taxes that are no longer required to be
accrued as a result of the CCP Merger and the BLH Transaction of $74.9
million and $2.88, respectively.
(3) Amounts under this heading are included to assist the reader in analyzing
the Company's financial position and results of operations. Such amounts are
not intended to, and do not, represent insurance policy income, net income,
net income per share or shareholders' equity prepared in accordance with
generally accepted accounting principles ("GAAP").
(4) Includes premiums received from annuities and universal life policies, which
are not reported as revenues under GAAP.
(5) Represents income from continuing operations before extraordinary charge,
excluding net trading income (losses) (net of income taxes), net realized
gains (losses) on investments (less that portion of amortization of the cost
of policies purchased and the cost of policies produced and income taxes
relating to such gains) and restructuring activities (net of income taxes).
(6) Excludes the effects of reporting fixed maturities at fair value and
recording the unrealized gain or loss on such securities as a component of
shareholders' equity, net of tax and other adjustments, which the Company
began to do in 1992. Such adjustments are in accordance with Statement of
Financial Accounting Standards No. 115 "Accounting for Certain Investments
in Debt and Equity Securities" ("SFAS 115"), as described in note 1 to the
Notes to Consolidated Financial Statements of the Company included in Form
10-K for the year ended December 31, 1994, and in Form 10-Q for the quarter
ended September 30, 1995, both of which are incorporated by reference
herein.
S-8
<PAGE>
SUMMARY FINANCIAL INFORMATION BY SEGMENT
(UNAUDITED)
<TABLE>
<CAPTION>
NINE
MONTHS
ENDED
SEPTEMBER
YEAR ENDED DECEMBER 31, 30,
----------------------------------------------------- ---------
1990 1991 1992 1993 1994 1994
--------- --------- --------- --------- --------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Life Insurance Operations
Senior market operations (1):
Operating earnings................................... $ -- $ -- $ 4.8 $ 36.9 $ 68.9 $ 51.4
Net trading income (losses).......................... -- -- .7 6.9 (.6) (.4)
Net realized gains (losses).......................... -- -- (.1) 2.9 (3.4) (2.4)
Extraordinary charge................................. -- -- -- (3.1) -- --
--------- --------- --------- --------- --------- ---------
Net income......................................... -- -- 5.4 43.6 64.9 48.6
--------- --------- --------- --------- --------- ---------
Annuity operations (2):
Operating earnings................................... 1.7 10.9 19.0 24.9 23.7 20.1
Net trading income (losses).......................... -- 5.3 3.9 5.5 (.2) --
Net realized gains (losses).......................... .2 8.6 4.9 4.2 (.5) .5
Extraordinary charge................................. -- -- (3.9) -- (2.1) (.5)
--------- --------- --------- --------- --------- ---------
Net income......................................... 1.9 24.8 23.9 34.6 20.9 20.1
--------- --------- --------- --------- --------- ---------
Other life insurance operations (3):
Operating earnings................................... 12.6 14.0 18.6 27.5 23.5 15.8
Net trading income (losses).......................... (1.1) 1.5 1.6 8.6 (.7) (.4)
Net realized gains (losses).......................... -- 3.4 4.1 (1.3) (9.1) (7.0)
--------- --------- --------- --------- --------- ---------
Net income......................................... 11.5 18.9 24.3 34.8 13.7 8.4
--------- --------- --------- --------- --------- ---------
Fee-based operations..................................... 8.2 11.2 14.5 14.3 25.1 20.0
--------- --------- --------- --------- --------- ---------
Restructuring income (4)................................. -- -- 23.3 83.3 23.2 42.4
--------- --------- --------- --------- --------- ---------
Partnership operations (5):
Operating earnings..................................... -- -- -- -- 1.5 --
Net trading income (losses)............................ -- -- -- -- -- --
Net realized gains (losses)............................ -- -- -- -- -- --
Extraordinary charge................................... -- -- -- -- -- --
--------- --------- --------- --------- --------- ---------
Net income......................................... -- -- -- -- 1.5 --
--------- --------- --------- --------- --------- ---------
Western National Corporation (6):
Operating earnings..................................... 48.0 56.8 80.6 93.4 43.1 35.0
Net trading income (losses)............................ 5.1 15.7 16.5 32.1 2.6 2.6
Net realized gains (losses)............................ 2.4 25.0 5.1 4.5 (7.1) (.1)
--------- --------- --------- --------- --------- ---------
Net income......................................... 55.5 97.5 102.2 130.0 38.6 37.5
--------- --------- --------- --------- --------- ---------
Life Re net income (7)................................... 2.5 8.6 10.6 -- -- --
--------- --------- --------- --------- --------- ---------
Interest and other:
Interest expense on notes payable...................... (31.2) (32.7) (22.2) (19.9) (18.0) (13.4)
Operating expenses, net of revenue..................... (6.7) (7.3) (11.1) (15.1) (16.1) (10.7)
Net trading income (losses)............................ -- -- -- (.7) (1.4) (1.2)
Net realized gains (losses)............................ -- -- -- .9 (.1) .3
Extraordinary charge................................... -- (5.0) (1.4) (8.8) (1.9) (1.9)
--------- --------- --------- --------- --------- ---------
Net loss........................................... (37.9) (45.0) 34.7 (43.6) (37.5) (26.9)
--------- --------- --------- --------- --------- ---------
Consolidated earnings:
Operating earnings..................................... 35.1 61.5 114.8 162.0 151.7 118.2
Net trading income (losses)............................ 4.0 22.5 22.7 52.4 (.3) .6
Net realized gains (losses)............................ 2.6 37.0 14.0 11.2 (20.2) (8.7)
Restructuring income................................... -- -- 23.3 83.3 23.2 42.4
Extraordinary charge................................... -- (5.0) (5.3) (11.9) (4.0) (2.4)
--------- --------- --------- --------- --------- ---------
Net income......................................... $ 41.7 $ 116.0 $ 169.5 $ 297.0 $ 150.4 $ 150.1
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
<CAPTION>
1995
---------
<S> <C>
Life Insurance Operations
Senior market operations (1):
Operating earnings................................... $ 54.4
Net trading income (losses).......................... .9
Net realized gains (losses).......................... 2.1
Extraordinary charge................................. --
---------
Net income......................................... 57.4
---------
Annuity operations (2):
Operating earnings................................... 23.7
Net trading income (losses).......................... .7
Net realized gains (losses).......................... .9
Extraordinary charge................................. --
---------
Net income......................................... 25.3
---------
Other life insurance operations (3):
Operating earnings................................... 11.0
Net trading income (losses).......................... (1.2)
Net realized gains (losses).......................... (1.1)
---------
Net income......................................... 8.7
---------
Fee-based operations..................................... 17.3
---------
Restructuring income (4)................................. 74.9
---------
Partnership operations (5):
Operating earnings..................................... 7.9
Net trading income (losses)............................ .1
Net realized gains (losses)............................ 3.9
Extraordinary charge................................... --
---------
Net income......................................... 11.9
---------
Western National Corporation (6):
Operating earnings..................................... --
Net trading income (losses)............................ --
Net realized gains (losses)............................ --
---------
Net income......................................... --
---------
Life Re net income (7)................................... --
---------
Interest and other:
Interest expense on notes payable...................... (18.2)
Operating expenses, net of revenue..................... (6.8)
Net trading income (losses)............................ (1.0)
Net realized gains (losses)............................ (1.7)
Extraordinary charge................................... --
---------
Net loss........................................... (27.7)
---------
Consolidated earnings:
Operating earnings..................................... 89.3
Net trading income (losses)............................ (.4)
Net realized gains (losses)............................ 4.0
Restructuring income................................... 74.9
Extraordinary charge................................... --
---------
Net income......................................... $ 167.8
---------
---------
</TABLE>
- ------------------------------
(1) The senior market operations segment reflects the operations of BLH, whose
primary subsidiary is Bankers Life.
S-9
<PAGE>
(2) The annuity operations segment reflects the operations of GARCO and BSLIC,
which were previously subsidiaries of CCP.
(3) The other life insurance operations segment reflects the operations of the
Company's wholly owned subsidiaries, Bankers National, National Fidelity and
Lincoln American. New sales of insurance products are not currently being
pursued by these companies.
(4) Restructuring income was recorded: (a) in 1992, for: (i) incentive earnings
allocations (which are distributed to the Company when the total returns
realized by other partners exceed prescribed targets) from Conseco Capital
Partners, L.P. ("Partnership I") based on the returns resulting from the
value of the CCP shares distributed to the partners; (ii) the gain which
resulted from the sale of the Company's ownership interest in Life Re
Corporation; and (iii) the Company's share of the gain realized from the
public sale of shares of CCP; (b) in 1993 for: (i) incentive earnings
allocations from Partnership I, based on the returns resulting from the
value of the BLH shares distributed to the partners; and (ii) from the
Company's share of the gain realized from the public sale of shares of BLH;
(c) in 1994, from the gain realized from the sale of WNC, net of expenses
incurred in conjunction with a terminated acquisition; and (d) in 1995, as
the result of the release of deferred income taxes that are no longer
required to be accrued as a result of the CCP Merger and the BLH
Transaction.
(5) Partnership operations reflect the operations of AGP, whose primary
subsidiary is American Life.
(6) On February 15, 1994, the Company sold 60 percent of its equity interest in
WNC in connection with an initial public offering. On December 23, 1994, the
Company sold its remaining 40 percent equity interest in WNC.
(7) In 1992, the Company sold its equity interest in Life Re Corporation in
connection with an initial public offering.
S-10
<PAGE>
THE COMPANY
The Company is a financial services holding company engaged primarily in the
development, marketing, issuance and administration of annuity, supplemental
health and individual life insurance products. In addition, the Company provides
investment management, administrative and other fee-based services to affiliates
and non-affiliates, and, through Partnership II, engages in the acquisition and
restructuring of life insurance companies in partnership with other investors.
The Company's operating strategy is to consolidate and streamline management and
administrative functions, to realize superior investment returns through active
asset management, to eliminate unprofitable products and distribution channels
and to focus resources on the development and expansion of profitable products
and strong distribution channels.
The Company's insurance subsidiaries included in its life insurance
operations segment, collected an aggregate of approximately $1.8 billion of
total premiums in the first nine months of 1995 from a diverse portfolio of
products. During such period, annuities and other interest-sensitive products
accounted for 40% of premiums. Medicare supplement policies, long-term care
insurance and other individual health insurance, life insurance and other
policies accounted for the remaining 60% of premiums.
The Company's total assets and shareholders' equity at September 30, 1995
were approximately $17.0 billion and $1.0 billion, respectively.
The Company was organized in 1979 as an Indiana corporation and commenced
operations in 1982. Its executive offices are located at 11825 N. Pennsylvania
Street, Carmel, Indiana 46032, and its telephone number is (317) 817-6100.
LIFE INSURANCE OPERATIONS
The Company's life insurance operations are conducted through three
segments: (i) senior market operations, consisting of the activities of BLH;
(ii) annuity operations, consisting of the activities of the Company's annuity
companies (GARCO and BSLIC); and (iii) other life insurance operations,
consisting of the activities of the Company's other wholly owned subsidiaries
(National Fidelity, Bankers National and Lincoln American), which have
profitable blocks of business but do not currently market their products to new
customers. GARCO and BSLIC were subsidiaries of CCP prior to the CCP Merger. See
"Acquisition of Stock of Affiliates -- CCP Insurance, Inc."
SENIOR MARKET OPERATIONS
BLH, with total assets of approximately $4.7 billion at September 30, 1995,
markets health and life insurance and annuity products primarily to senior
citizens through approximately 200 branch offices and approximately 3,300 career
agents. Most of BLH's agents sell only BLH policies. Approximately 55 percent of
the $1,143.7 million of direct premiums collected by BLH in the nine months
ended September 30, 1995, were from the sale of individual health insurance
products, principally Medicare supplement and long-term care policies. BLH
believes that its success in the individual health insurance market is
attributable in large part to its career agency force, which permits one-on-one
contacts with potential policyholders and builds loyalty to BLH among existing
policyholders. Its efficient and highly automated claims processing system is
designed to complement its personalized marketing strategy by stressing prompt
payment of claims and rapid response to policyholder inquiries.
ANNUITY OPERATIONS
The annuity companies, with total assets of $5.4 billion at September 30,
1995, market, issue and administer annuity, life and employee benefit-related
insurance products through two cost-effective distribution channels: (i)
educator market specialists, who sell tax-qualified annuities and certain
employee benefit-related insurance products primarily to school teachers and
administrators; and (ii) professional independent producers who sell various
annuity and life insurance products aimed primarily at the retirement market.
Approximately 88 percent of the $557.3 million of total premiums collected in
the nine months ended September 30, 1995, was from the sale of annuity products.
S-11
<PAGE>
OTHER LIFE INSURANCE OPERATIONS
The Company's other life insurance subsidiaries had total assets of
approximately $.9 billion at September 30, 1995. These subsidiaries have
profitable in-force blocks of many annuity and life products, but do not
currently market their products to new customers. Premiums collected totaled
$59.2 million in the nine months ended September 30, 1995, including $5.1
million of premiums from deposit funds maintained by employee benefit plans of
the Company.
FEE-BASED OPERATIONS
The Company provides all affiliated and other unaffiliated clients with
various services including investment management, mortgage origination and
servicing, policy administration, data processing, product marketing and
executive management services. In addition, subsidiaries of the Company earn
fees by: (i) providing marketing services to financial institutions related to
the distribution of insurance and investment products; (ii) providing financing
services to Partnership II; and (iii) distributing property and casualty
insurance products as an independent agency. Total fees from affiliates and
nonaffiliates were $30.2 million, $49.0 million, $71.0 million and $49.4 million
for the years ended 1992, 1993 and 1994, and the nine months ended September 30,
1995, respectively. To the extent that these services are provided to entities
that are included in the financial statements on a consolidated basis, the
intercompany fees are eliminated in consolidation. Earnings in this segment
increase when the Company adds new clients (either affiliated or unaffiliated)
and when the Company increases the fee-producing activities conducted for
clients.
PARTNERSHIP OPERATIONS
Since the Company commenced operations in 1982, it has completed 12
acquisitions of insurance companies and related businesses, the first seven as
wholly owned subsidiaries and the last five through its acquisition
partnerships. Partnership I was dissolved in 1993 after distributing to its
partners the securities of the companies it had acquired. In early 1994, the
Company formed Partnership II, its second acquisition partnership, to invest in
acquisitions of life insurance companies and related businesses. A wholly owned
subsidiary of the Company is the sole general partner of Partnership II, as was
the case with Partnership I. Partnership II has equity capital commitments
(after deducting commitments used to invest in AGP) totaling $552.4 million from
limited partner investors, primarily large institutional investors. Such
commitments to Partnership II include $155.0 million from Conseco's
subsidiaries. In addition, certain executive officers and directors of the
Company have remaining commitments to Partnership II of $26.8 million.
The Company believes the use of the partnership vehicle for acquisitions of
life insurance companies enables it to: (i) broaden its access to the capital
markets; (ii) increase the size and number of potential acquisitions it can
effect; and (iii) generate recurring fee income through management of the
acquired companies and their investments. The Company participates in the
acquisitions effected by Partnership II through: (i) its direct and indirect
ownership interest in Partnership II; and (ii) incentive compensation fees
payable (if Partnership II generates returns in excess of prescribed targets) by
Partnership II to the Company's wholly owned subsidiary that acts as general
partner of Partnership II. Partnership II completed the acquisition of 80
percent of the common stock of AGP in September 1994 and expects to make
additional acquisitions using partnership equity capital, together with
mezzanine and debt financing from various sources.
AGP, with total assets of approximately $6.0 billion at September 30, 1995,
is a financial services holding company engaged primarily in the development,
marketing, underwriting, issuance and administration of annuity and life
insurance products. AGP collected $647.0 million of insurance premiums and
annuity deposits in the nine months ended September 30, 1995.
The Company believes that the consolidation of the U.S. life insurance
industry will continue, and the Company intends to participate in this process.
The Company believes that, under appropriate circumstances, it is more
advantageous to acquire companies with large books of in-force life and health
insurance and annuities than to produce new business because initial
underwriting costs have already been incurred and mature business is generally
less likely to terminate, making more predictable profit analysis possible.
S-12
<PAGE>
ADMINISTRATION
The Company minimizes operating expenses by centralizing, standardizing and
more efficiently performing many functions common to most life insurance
companies. These functions include underwriting and policy administration,
accounting and financial reporting, marketing, regulatory compliance, actuarial
services and asset management.
The Company's centralized management techniques resulted in significant
employee reductions and expense savings in the nine insurance companies acquired
between 1985 and 1992. The ratio of aggregate operating expenses (excluding
commissions) to premiums collected for these nine companies was reduced from 11
percent for the last year prior to acquisition to 7.9 percent for the second
full year following acquisition. The ratio of such expenses to total assets of
these companies decreased from 3.4 percent to 1.6 percent in the same periods.
The administration of BLH's individual health insurance products, unlike
that of life insurance or annuities, involves a high volume of claims
processing, multiple contacts with policyholders and generally higher
operational costs. In 1994, BLH processed more than five million policyholder
claims. BLH has developed an efficient and highly automated policyholder
administration operation to minimize the costs of such large volume processing
and deliver a high level of service to its policyholders, with special emphasis
on the prompt payment of claims. In most cases, BLH mails a check within a week
of receiving a claim from a policyholder. BLH believes that its promptness in
processing policyholder claims is a major reason for its strong reputation for
service and the above-average persistency of its Medicare supplement products.
INVESTMENTS
Conseco Capital Management, Inc. ("CCM"), a registered investment adviser
wholly owned by the Company, manages the investment portfolios of the Company's
wholly owned subsidiaries, BLH, AGP and several nonaffiliated clients. CCM had
approximately $27.5 billion of assets (at fair value) under management at
September 30, 1995, of which $14.0 billion were assets of affiliated companies
and $13.5 billion were assets of nonaffiliated companies. CCM's investment
philosophy is to maintain a largely investment grade fixed-income portfolio,
provide adequate liquidity for expected liability durations and other
requirements and maximize total return through active investment management.
Investment activities are an integral part of the Company's business;
investment income is a significant component of the Company's total revenues.
Profitability is significantly affected by spreads between interest yields on
investments and rates credited on insurance liabilities. Although substantially
all credited rates on single premium deferred annuities and flexible premium
deferred annuities may be changed annually, changes in crediting rates may not
be sufficient to maintain targeted investment spreads in all economic and market
environments. In addition, competition and other factors, including the impact
of the level of surrenders and withdrawals, may limit the Company's ability to
adjust or to maintain crediting rates at levels necessary to avoid narrowing of
spreads under certain market conditions. As of September 30, 1995, the average
yield, computed on the cost basis of the Company's investment portfolio, was 8.3
percent and the average interest rate credited on the Company's liability
portfolio was 5.8 percent.
The Company seeks to balance the duration of its invested assets with the
expected duration of benefit payments arising from insurance liabilities. At
September 30, 1995, the adjusted modified duration of fixed maturities, trading
securities and short-term investments was 6.2 years. At September 30, 1995, the
duration of the Company's insurance liabilities was 6.3 years.
S-13
<PAGE>
The carrying values of the Company's investments at September 30, 1995 were
as follows:
<TABLE>
<CAPTION>
PERCENT OF TOTAL
INVESTMENT CATEGORY INVESTED ASSETS
- --------------------------------------------------------------------- CARRYING VALUE(1) -----------------
-----------------
(IN MILLIONS)
<S> <C> <C>
Fixed maturities at fair value:
U.S. government securities......................................... $ 264.7 2%
Obligations of states and political subdivisions and foreign
government obligations............................................ 92.7 1
Public utility bonds............................................... 2,422.5 17
Other corporate bonds.............................................. 5,619.6 40
Mortgage-backed securities......................................... 4,103.8 30
----------------- ---
Total fixed maturities........................................... 12,503.3 90
Equity securities.................................................... 38.8 *
Mortgage loans on real estate........................................ 351.9 2
Credit-tenant loans.................................................. 246.1 2
Policy loans......................................................... 313.2 2
Short-term investments............................................... 205.5 1
Other invested assets................................................ 74.2 1
Assets held in separate accounts..................................... 216.8 2
----------------- ---
Total investments................................................ $ 13,949.8 100%
----------------- ---
----------------- ---
</TABLE>
- ------------------------
* Less than one percent
(1) Carrying value represents the value for each investment category that is
reflected in the Company's consolidated financial statements (see note 1 to
the Notes to the Consolidated Financial Statements included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1994, which is
incorporated by reference herein).
The following table sets forth fixed maturity investments at September 30,
1995, classified by rating categories. The category assigned is the highest
rating by Standard & Poor's Corporation ("Standard & Poor's") or Moody's
Investors Service, Inc. ("Moody's"), or as to $182.9 million carrying value of
fixed maturities not rated by such firms, the rating assigned by the National
Association of Insurance Commissioners ("NAIC"). For purposes of the table, NAIC
Class 1 is included in the "A" rating; Class 2, "BBB-"; Class 3, "BB-" and
Classes 4 to 6, "B+ and below."
<TABLE>
<CAPTION>
PERCENT OF CARRYING VALUE
------------------------------------------
INVESTMENT RATING FIXED MATURITIES TOTAL INVESTMENTS
- --------------------------------------------------------------------- ------------------- ---------------------
<S> <C> <C>
AAA.................................................................. 36% 32%
AA................................................................... 9 8
A.................................................................... 25 23
BBB+................................................................. 8 7
BBB.................................................................. 10 9
BBB-................................................................. 7 6
--
---
Investment grade................................................... 95 85
--
---
BB+.................................................................. 2 2
BB................................................................... 1 1
BB-.................................................................. 1 1
B+ and below......................................................... 1 1
--
---
Below investment grade............................................. 5 5
--
---
Total fixed maturities............................................. 100% 90%
--
--
---
---
</TABLE>
S-14
<PAGE>
Fixed maturities which were below investment grade had an amortized cost of
$639.4 million and an estimated fair value of $648.1 million at September 30,
1995. At such date, less than .5 percent of the aggregate carrying value of all
fixed maturities held by the Company had defaulted as to principal or interest.
At September 30, 1995, fixed maturity investments included $4.1 billion of
mortgage-backed securities (33 percent of the carrying value of the fixed
maturity investment portfolio), of which $2.6 billion were collateralized
mortgage obligations ("CMOs") and $1.5 billion were pass-through securities.
CMOs are securities backed by pools of pass-through securities and/or mortgages
that are segregated into sections or "tranches." These securities provide for
sequential retirement of principal, rather than the pro rata share of principal
return which occurs through regular monthly principal payments on pass-through
securities.
The yield characteristics of mortgage-backed securities differ from those of
traditional fixed income securities. Interest and principal payments occur more
frequently, often monthly, and mortgage-backed securities are subject to risks
associated with variable prepayments. Prepayment rates are influenced by a
number of factors which cannot be predicted with certainty, including the
relative sensitivity of the underlying mortgages backing the assets to changes
in interest rates, a variety of economic, geographic and other factors and the
repayment priority of the securities in the overall securitization structures.
In general, prepayments on the underlying mortgage loans, and the securities
backed by these loans, increase when the level of prevailing interest rates
declines significantly below the interest rates on such loans. Mortgage-backed
securities purchased at a discount to par will experience an increase in yield
when the underlying mortgages prepay faster than expected. Those securities
purchased at a premium that prepay faster than expected will incur a reduction
in yield. When declines in interest rates occur, the proceeds from the
prepayment of mortgage-backed securities are likely to be reinvested at lower
rates than the Company was earning on the prepaid securities. As the level of
prevailing interest rates increases, prepayments on mortgage-backed securities
decrease, as fewer underlying mortgages are refinanced. When this occurs, the
average maturity and duration of the mortgage-backed securities increase, which
decreases the yield on mortgage-backed securities purchased at a discount
because the discount is realized as income at a slower rate and increases the
yield on those purchased at a premium as a result of a decrease in annual
amortization of the premium.
At September 30, 1995, the Company held mortgage loan investments with a
carrying value of $351.9 million (or 2.5 percent of total invested assets).
Approximately 97 percent of the carrying value of mortgage loan investments was
attributable to commercial loans. Non-current mortgage loans were not
significant at September 30, 1995. The Company realized losses of $1.4 million
on mortgage loans for the nine months ended September 30, 1995.
Credit-tenant loans are loans on commercial properties where the lease of
the principal tenant is assigned to the lender and the principal tenant, or any
guarantor of such tenant's obligations, has a credit rating at the time of
origination of the loan of at least BBB- or its equivalent. The Company's
underwriting guidelines consider such factors as: (i) the lease term of the
property; (ii) the mortgagee's management ability, including business
experience, property management capabilities and financial soundness; and (iii)
such economic, demographic or other factors that may affect the income generated
by the property, or its value. The underwriting guidelines also generally
require a loan-to-value ratio of 75 percent or less. Credit-tenant loans are
carried at amortized cost and had a carrying value of $246.1 million at
September 30, 1995, or 1.8 percent of total invested assets.
Short-term investments totaled $205.5 million, or 1.5 percent of invested
assets at September 30, 1995, and consisted primarily of commercial paper and
repurchase agreements relating to government securities.
POTENTIAL TAX LEGISLATION
Current federal income tax laws generally permit the tax-deferred
accumulation of earnings on the premiums paid by an annuitant. Taxes, if any,
are payable on the accumulated tax-deferred earnings when those earnings are
paid to the annuitant. In the event that the federal income tax laws are changed
such that accumulated earnings on annuity products do not enjoy the tax deferral
described above, or such that additional savings and investment products were to
achieve similar tax deferral status, or such that tax rates
S-15
<PAGE>
were significantly lower so that the annuitant's ability to defer income tax on
annuity earnings was no longer a significant factor for the policyholder,
consumer demand for the affected annuity products could decline materially and
the profitability of such products could decrease. From time to time proposals
to some of these effects have been made in Congress and no assurance can be
given that such a tax law change will not occur in the future. If the demand for
or profitability of its annuity products were to decrease significantly for any
reason, the Company's operations and financial condition could be materially and
adversely affected.
DEVELOPMENTS AFFECTING THE COMPANY
On October 31, 1995 A.M. Best Company ("A.M. Best") reduced its
claims-paying ability ratings on BSLIC, GARCO and Bankers Life from "A
(Excellent)" to "A- (Excellent)". An important competitive factor for life
insurance companies is the ratings they receive from nationally recognized
rating organizations. Agents, insurance brokers, marketing companies and
financial institutions who market the Company's products and prospective
purchasers of the Company's products use the ratings of an insurer as one factor
in determining which insurer's annuity to market or purchase. A.M. Best's
ratings are based upon factors relevant to policyholders, agents and
intermediaries and are not directed toward the protection of investors. Such
ratings are not recommendations to buy, sell or hold securities. A.M. Best
reviews its ratings of insurance companies from time to time. There can be no
assurance that any particular rating will continue for any given period of time
or that it will not be changed or withdrawn entirely if, in the judgment of the
rating agency, circumstances so warrant. If the A.M. Best ratings of BSLIC,
GARCO or Bankers Life were downgraded from their current levels, sales of their
products and the persistency of their in force business could be materially and
adversely affected.
ACQUISITION OF STOCK OF AFFILIATES
CCP INSURANCE, INC.
On August 31, 1995, the Company completed the purchase of all of the shares
of common stock of CCP it did not previously own (representing 51 percent of
CCP's total outstanding shares). As a result, CCP's subsidiaries (GARCO and
BSLIC) became wholly owned subsidiaries of the Company, and CCP's accounts are
now consolidated with those of the Company. The Company's consolidated statement
of operations for periods in 1995 prior to the CCP Merger has been restated to
reflect the operations of CCP on a consolidated basis. Such restatement had no
effect on the net income or shareholders' equity reported by the Company.
A total of 11.8 million shares were purchased for $273.9 million in the CCP
Merger. Income tax expense was reduced by $8.4 million in the third quarter of
1995 as a result of the release of deferred income taxes previously accrued on
income related to CCP. Such deferred tax is no longer required because the CCP
Merger was completed without incurring additional tax.
The CCP Merger (including the repayment of $251.0 million outstanding under
the Company's revolving credit facility) was funded with available cash and
borrowings from a new $600.0 million credit facility (the "Credit Agreement").
The sources and uses of the financing to complete the CCP Merger are summarized
below (dollars in millions):
<TABLE>
<S> <C>
Sources of funds:
Credit Agreement.......................................... $ 530.0
Cash on hand.............................................. 9.7
---------
Total sources........................................... $ 539.7
---------
---------
Uses of funds:
Purchase of all common equity interest in CCP not owned by
the Company.............................................. $ 273.9
Settlement of outstanding stock options of CCP............ 5.4
Repayment of revolving credit facility of the Company..... 251.0
Debt issuance and other transaction costs................. 9.4
---------
Total uses.............................................. $ 539.7
---------
---------
</TABLE>
S-16
<PAGE>
The Credit Agreement has two tranches. One tranche permits maximum principal
borrowings of $350.0 million ("Tranche A") and the other tranche permits maximum
principal borrowings of $250.0 million ("Tranche B"). On the CCP Merger date,
the Company borrowed $280.0 million under Tranche A and $250.0 million under
Tranche B.
Tranche A and Tranche B borrowings bear interest at rates based on either an
offshore rate or a base rate. Offshore rates are equal to the reserve adjusted
Interbank Offered Rate plus an applicable margin based on: (i) the Company's
aggregate outstanding bank debt; and (ii) the rating of the Company's senior
notes by Moody's and Standard & Poor's. Such margin varies from .75 percent to
1.75 percent. Base rates are equal to the bank's reference rate plus the
offshore rate margin less 1.25 percent (provided such margin is not less than
zero). The interest rate on both Tranche A and Tranche B borrowings was 7.5
percent on September 30, 1995.
The principal amounts borrowed are payable according to the following
schedule (dollars in millions):
<TABLE>
<CAPTION>
TRANCHE A TRANCHE B
----------- -----------
<S> <C> <C>
1998......................................................... $ 10.0 $ --
1999......................................................... 65.0 250.0(a)
2000......................................................... 65.0 --
2001......................................................... 140.0 --
----------- -----------
Total principal amounts.................................... $ 280.0 $ 250.0
----------- -----------
----------- -----------
</TABLE>
- ------------------------
(a) The repayment date can be extended for an additional year on each extension
date to the year 2001 subject to defined conditions.
Mandatory prepayments are required as follows: (i) from 50 percent of excess
cash flow (the excess of amounts that may be payable to the parent company from
subsidiaries over dividends, expenses and other cash payments of the parent
company), commencing with the year 1997; (ii) upon the sale or disposition of
any significant assets other than in the ordinary course of business; and (iii)
upon the sale or issuance of debt or equity securities of Conseco or any of its
subsidiaries. See "Use of Proceeds." The Credit Agreement is secured by, among
other things, pledges of: (i) the capital stock of the Company's wholly owned
subsidiaries; and (ii) the capital stock of BLH owned by the Company.
BANKERS LIFE HOLDING CORPORATION
On June 28, 1995, the Company completed a program to acquire additional
shares of BLH common stock. A total of 12.8 million shares was purchased for
$262.4 million in open market and negotiated transactions during 1995. The
shares purchased represented 24 percent of the then outstanding shares of BLH
common stock, increasing the Company's ownership of BLH to 82 percent (85
percent including shares of BLH owned by CCP) as of June 30, 1995. The
acquisition of such shares was funded with available cash, proceeds from the
Company's revolving credit facility and a $32.0 million loan from CCP. Income
tax expense was reduced by $66.5 million in the second quarter of 1995 as a
result of the release of deferred income taxes previously accrued on income
related to BLH. Such deferred tax is no longer required since the Company is
permitted to file a consolidated tax return with BLH and the income this tax
relates to can be distributed to the Company without the payment of tax.
In August 1995 BLH expanded its previously announced common share repurchase
program from two million to five million shares. During the third and fourth
quarters of 1995, BLH repurchased 2.2 million shares of its common stock under
this program at a cost of $42.1 million, increasing the Company's ownership
interest in BLH to 88 percent as of December 31, 1995.
On August 25, 1995 Standard & Poor's reduced its rating of the Company's
senior debt from BBB- to BB+, and on September 1, 1995 Moody's reduced its
rating of the Company's senior debt from Ba1 to Ba2. Such reductions reflected
primarily the increased financial leverage incurred by the Company in connection
with the CCP Merger and the Company's acquisition of additional shares of BLH
common stock.
S-17
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of the PRIDES will be used to reduce amounts
borrowed under Tranche A of the Credit Agreement. The Credit Agreement was
entered into on August 31, 1995 in connection with the closing of the CCP Merger
and the refinancing of the Company's prior credit facility. As of December 29,
1995, the interest rate on Tranche A borrowings was 7.475 percent. Principal
amounts borrowed under Tranche A must be repaid in annual installments
commencing in 1998, subject to certain prepayment obligations. See "Acquisition
of Stock of Affiliates -- CCP Insurance, Inc."
CAPITALIZATION
The following table sets forth the unaudited consolidated capitalization of
the Company as of September 30, 1995 and as adjusted to give effect to the sale
by the Company of the 3,200,000 shares of PRIDES offered hereby and the
application of the net proceeds therefrom, as described in "Use of Proceeds."
This table should be read in conjunction with the Company's consolidated
financial statements and the notes thereto included in the documents
incorporated by reference herein. See "Incorporation of Certain Documents by
Reference" in the accompanying Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995
----------------------
AS
ACTUAL ADJUSTED (1)
--------- -----------
(DOLLARS IN MILLIONS)
<S> <C> <C>
LONG-TERM DEBT (2):
Notes payable of Conseco............................................................... $ 920.8 $ 726.4
Notes payable of Partnership II entities, not direct obligations of Conseco............ 308.5 308.5
Notes payable of Bankers Life Holding Corporation, not direct obligations of Conseco... 272.5 272.5
--------- -----------
Total long-term debt................................................................. 1,501.8 1,307.4
--------- -----------
Minority interest........................................................................ 356.7 356.7
--------- -----------
SHAREHOLDERS' EQUITY:
% PRIDES, convertible preferred stock, no par value; 3,680,000 shares authorized;
3,200,000 shares outstanding.......................................................... -- 201.6
Series D Preferred Stock............................................................... 283.5 283.5
Common stock and additional paid-in capital, no par value, 500,000,000 shares
authorized, 20,233,840 shares outstanding............................................. 154.8 148.6
Unrealized appreciation (depreciation) of securities (net of $34.9 deferred income
taxes)................................................................................ 56.7 56.7
Retained earnings...................................................................... 510.7 509.7
--------- -----------
Total shareholders' equity........................................................... 1,005.7 1,200.1
--------- -----------
Total capitalization............................................................. $ 2,864.2 $ 2,864.2
--------- -----------
--------- -----------
</TABLE>
- ------------------------
(1) Adjusted to reflect the sale of 3,200,000 shares of PRIDES offered hereby,
net of estimated underwriting discount and offering expenses, and
application of the net proceeds from such sale.
(2) For information concerning the terms and maturities of the long-term debt,
see the notes to the Company's consolidated financial statements included in
the documents incorporated by reference herein. See "Incorporation of
Certain Documents by Reference" in the accompanying Prospectus.
S-18
<PAGE>
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The Company's Common Stock is listed on the NYSE under the symbol CNC. The
closing price for the Common Stock on January 2, 1996 was $63. The following
table sets forth the quarterly dividends paid per share and the ranges of high
and low sales prices per share on the NYSE for the last two fiscal years, based
upon information supplied by the NYSE.
<TABLE>
<CAPTION>
MARKET PRICE
-------------------- DIVIDEND
PERIOD HIGH LOW PAID
- ---------------------------------------------------------------------------- --------- --------- -----------
<S> <C> <C> <C>
1994:
First Quarter............................................................. $ 66 1/4 $ 53 1/8 $ 0.125
Second Quarter............................................................ 58 1/8 46 3/8 0.125
Third Quarter............................................................. 52 3/8 43 1/4 0.125
Fourth Quarter............................................................ 46 1/4 35 7/8 0.125
1995:
First Quarter............................................................. $ 48 5/8 $ 32 1/2 $ 0.125
Second Quarter............................................................ 46 5/8 39 1/8 0.125
Third Quarter............................................................. 53 1/4 45 1/2 0.020
Fourth Quarter............................................................ 63 1/8 50 7/8 0.020
1996:
First Quarter (through January 2, 1996)................................... $ 63 $ 62 1/2 $ 0.020
</TABLE>
As of December 15, 1995, there were approximately 13,000 holders of the
outstanding shares of Common Stock, including individual participants in
securities position listings.
The Company's Board of Directors has adopted a policy of paying regular
quarterly cash dividends on its Common Stock. In March 1995, the Company reduced
its quarterly cash dividend to $.02 per share, effective with the dividend paid
in July 1995. The Company's general policy is to retain most of its earnings.
The declaration and payment of future dividends on the Common Stock will be at
the discretion of the Board of Directors of the Company and will depend on the
Company's earnings and financial condition, capital requirements of the Company
and its subsidiaries, regulatory considerations and other factors the Board of
Directors deems relevant. Accordingly, there is no requirement or assurance that
dividends will be paid.
In February 1993, the Company issued 5,750,000 shares ($287.5 million
liquidation value) of Series D Preferred Stock, on which dividends ($3.25 per
share) are cumulative from the date of original issue and are payable quarterly,
commencing April 15, 1993. The terms of the Series D Preferred Stock prohibit
the payment of cash dividends on capital stock ranking junior to the Series D
Preferred Stock if the Company is not current in its dividend payments on the
Preferred Stock. The Company paid dividends on the Series D Preferred Stock of
$18.6 million during each of 1995 and 1994, and $13.5 million during 1993, and
is current on its payments.
The Company is a holding company. All of its operating income is generated
by its subsidiaries. The Company must rely on dividends or other payments from
its subsidiaries to generate the funds necessary to meet the Company's
obligations. The ability of such subsidiaries to pay such dividends or other
amounts will be subject to, among other things, applicable state laws,
including, in the case of insurance subsidiaries, state insurance laws. These
state insurance laws and regulations limit the ability of insurance subsidiaries
to make cash dividends, loans or advances to a holding company such as the
Company. However, these laws generally permit the payment, without prior notice
or regulatory approval, of dividends by subsidiaries which, when aggregated with
other dividends paid during the 12 months preceding the proposed dividend, do
not exceed the greater of: (i) the subsidiary's net gain from operations for the
prior calendar year, or (ii) 10% of the subsidiary's surplus at the prior
year-end, both computed on the statutory basis of accounting prescribed for
insurance companies. Any proposed dividend in excess of the amount determined
pursuant to the foregoing formula would be characterized as an "extraordinary
dividend" requiring prior regulatory approval. In any case, the maximum amount
of dividends that an insurance company may pay is, in general, limited to its
earned surplus, also known as unassigned funds. Finally, the maximum dividend
permitted by law is not
S-19
<PAGE>
necessarily indicative of an insurer's actual ability to pay dividends, which
may be constrained by business and regulatory considerations, such as the impact
of dividends on surplus, which could affect an insurer's ratings or competitive
position, the amount of premiums that can be written by such insurer and its
ability to pay future dividends.
DESCRIPTION OF PRIDES
THE FOLLOWING DESCRIPTION OF THE TERMS OF SHARES OF PRIDES OFFERED HEREBY
SUPPLEMENTS AND, TO THE EXTENT INCONSISTENT THEREWITH, REPLACES THE DESCRIPTION
OF THE GENERAL TERMS AND PROVISIONS OF THE PREFERRED STOCK SET FORTH IN THE
ACCOMPANYING PROSPECTUS. THE SUMMARY CONTAINED HEREIN OF THE TERMS OF SHARES OF
PRIDES DOES NOT PURPORT TO BE COMPLETE AND IS SUBJECT TO AND QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO ALL OF THE PROVISIONS OF THE COMPANY'S ARTICLES OF
INCORPORATION AND FORM OF ARTICLES OF AMENDMENT RELATING TO SHARES OF PRIDES
(THE "ARTICLES OF AMENDMENT"), A COPY OF EACH OF WHICH EITHER HAS BEEN OR WILL
BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION") AS AN
EXHIBIT TO OR INCORPORATED BY REFERENCE INTO THE REGISTRATION STATEMENT OF WHICH
THIS PROSPECTUS SUPPLEMENT IS A PART. THE STATED ANNUAL DIVIDEND, CERTAIN OF THE
CALL PRICES (AS DEFINED HEREIN) AND THE OPTIONAL CONVERSION RATE (AS DEFINED
HEREIN) APPLICABLE TO THE SHARES OF PRIDES HAVE BEEN ROUNDED.
The Company's Board of Directors has adopted resolutions authorizing the
issuance of up to 3,680,000 shares of % PRIDES, Convertible Preferred Stock,
no par value per share.
DIVIDENDS
Holders of shares of PRIDES will be entitled to receive, when, as and if
declared by the Board of Directors out of funds legally available therefor, cash
dividends from January , 1996, the date of initial issuance of the shares of
PRIDES, at the rate of % per annum of the stated liquidation preference per
share (equivalent to $ per annum or $ per quarter for each share of
PRIDES), payable quarterly in arrears on the 1st of February, May, August and
November or, if any such date is not a business day, on the next succeeding
business day; provided, however, that, with respect to any dividend period
during which a redemption occurs, the Company may, at its option, declare
accrued dividends to, and pay such dividends on, the date fixed for redemption,
in which case such dividends would be payable in cash to the holders of shares
of PRIDES as of the record date for such dividend payment and would not be
included in the calculation of the related Call Price as set forth below. The
first dividend period will be from January , 1996, the date of initial
issuance of the shares of PRIDES, to but excluding February 1, 1996, and the
first dividend will be payable on February 1, 1996. Dividends will cease to
accrue in respect of the shares of PRIDES on the Mandatory Conversion Date or on
the date of their earlier conversion or redemption.
Dividends will be payable to holders of record as they appear on the stock
register of the Company on such record date, not less than 10 days nor more than
60 days preceding the payment date thereof, as shall be fixed by the Board of
Directors. Dividends payable on shares of PRIDES for any period less than a full
quarterly dividend period will be computed on the basis of a 360-day year of
twelve 30-day months and the actual number of days elapsed in any period less
than one month.
Dividends on shares of PRIDES will accrue whether or not there are funds
legally available for the payment of such dividends and whether or not such
dividends are declared. Accrued but unpaid dividends on shares of PRIDES shall
cumulate as of the dividend payment date on which they first become payable, but
no interest shall accrue on accumulated but unpaid dividends on shares of
PRIDES.
The shares of PRIDES will rank on a parity, both as to payment of dividends
and distribution of assets upon liquidation, with the outstanding shares of
Series D Preferred Stock and with any future preferred stock issued by the
Company that by its terms ranks on a parity with the shares of PRIDES. See
"Description of Capital Stock -- Series D Preferred Stock" in the Prospectus.
As long as any shares of PRIDES are outstanding, no dividends for any
dividend period (other than dividends payable in shares of, or warrants, rights
or options exercisable for or convertible into shares of, Common Stock or any
other capital stock of the Company ranking junior to the shares of PRIDES as to
the payment of dividends and the distribution of assets upon liquidation
("Junior Stock") and cash in lieu of
S-20
<PAGE>
fractional shares of such Junior Stock in connection with any such dividend)
will be paid in cash or otherwise, nor will any other distribution be made
(other than a distribution payable in Junior Stock and cash in lieu of
fractional shares of such Junior Stock in connection with any such
distribution), on any Junior Stock unless (i) full dividends on Preferred Stock
(including the shares of PRIDES) that does not constitute Junior Stock ("Parity
Preferred Stock") have been paid, or declared and set aside for payment, for all
dividend periods terminating on or prior to the date of such Junior Stock
dividend or distribution payment to the extent such dividends are cumulative;
(ii) dividends in full, in the case of a dividend payment with respect to Junior
Stock, for any Parity Preferred Stock dividend period commencing on or prior to
the date of such Junior Stock dividend payment or, in the case of any other
distribution with respect to Junior Stock, for the current quarterly dividend
period, have been paid, or declared and set aside for payment, on all Parity
Preferred Stock to the extent such dividends are cumulative; (iii) the Company
has paid or set aside all amounts, if any, then or theretofore required to be
paid or set aside for all purchase, retirement, and sinking funds, if any, for
any Parity Preferred Stock; and (iv) the Company is not in default on any of its
obligations to redeem any Parity Preferred Stock.
In addition, as long as any shares of PRIDES are outstanding, no shares of
any Junior Stock may be purchased, redeemed, or otherwise acquired by the
Company or any of its subsidiaries (except in connection with a reclassification
or exchange of any Junior Stock through the issuance of other Junior Stock (and
cash in lieu of fractional shares of such Junior Stock in connection therewith)
or the purchase, redemption, or other acquisition of any Junior Stock with any
Junior Stock (and cash in lieu of fractional shares of such Junior Stock in
connection therewith)) nor may any funds be set aside or made available for any
sinking fund for the purchase or redemption of any Junior Stock unless: (i) full
dividends on Parity Preferred Stock have been paid, or declared and set aside
for payment, for all dividend periods terminating on or prior to the date of
such purchase, redemption or acquisition to the extent such dividends are
cumulative; (ii) the Company has paid or set aside all amounts, if any, then or
theretofore required to be paid or set aside for all purchase, retirement, and
sinking funds, if any, for any Parity Preferred Stock; and (iii) the Company is
not in default on any of its obligations to redeem any Parity Preferred Stock.
Subject to the provisions described above, such dividends or other
distributions (payable in cash, property, or Junior Stock) as may be determined
by the Board of Directors may be declared and paid on the shares of any Junior
Stock from time to time and Junior Stock may be purchased, redeemed or otherwise
acquired by the Company or any of its subsidiaries from time to time. In the
event of the declaration and payment of any such dividends or other
distributions, the holders of such Junior Stock will be entitled, to the
exclusion of holders of any Parity Preferred Stock, to share therein according
to their respective interests.
As long as any shares of PRIDES are outstanding, dividends for any dividend
period or other distributions may not be paid on any Parity Preferred Stock
(other than dividends or other distributions payable in Junior Stock and cash in
lieu of fractional shares of such Junior Stock in connection therewith), unless
either: (a)(i) full dividends on Parity Preferred Stock have been paid, or
declared and set aside for payment, for all dividend periods terminating on or
prior to the date of such Parity Preferred Stock dividend or distribution
payment to the extent such dividends are cumulative; (ii) dividends in full, in
the case of a dividend payment, for any Parity Preferred Stock dividend period
commencing on or prior to the date of such Parity Preferred Stock dividend
payment or, in the case of any other distribution, for the current quarterly
dividend period, have been paid, or declared and set aside for payment, on all
Parity Preferred Stock to the extent such dividends are cumulative; (iii) the
Company has paid or set aside all amounts, if any, then or theretofore required
to be paid or set aside for all purchase, retirement, and sinking funds, if any,
for any Parity Preferred Stock; and (iv) the Company is not in default on any of
its obligations to redeem any Parity Preferred Stock; or (b) any such dividends
are declared and paid pro rata so that the amounts of any dividends declared and
paid per share of PRIDES and each other share of such Parity Preferred Stock
will in all cases bear to each other the same ratio that accrued and unpaid
dividends (including any accumulation with respect to unpaid dividends for prior
dividend periods, if such dividends are cumulative) per share of PRIDES and such
other shares of Parity Preferred Stock bear to each other.
In addition, as long as any shares of PRIDES are outstanding, the Company
may not purchase, redeem or otherwise acquire any Parity Preferred Stock (except
with any Junior Stock and cash in lieu of fractional
S-21
<PAGE>
shares of such Junior Stock in connection therewith) unless: (i) full dividends
on Parity Preferred Stock have been paid, or declared and set aside for payment,
for all dividend periods terminating on or prior to the date of such Parity
Preferred Stock purchase, redemption or other acquisition payment to the extent
such dividends are cumulative; (ii) the Company has paid or set aside all
amounts, if any, then or theretofore required to be paid or set aside for all
purchase, retirement, and sinking funds, if any, for any Parity Preferred Stock;
and (iii) the Company is not in default on any of its obligations to redeem any
Parity Preferred Stock.
MANDATORY CONVERSION OF PRIDES
Unless previously either redeemed or converted at the option of the holder
into Common Stock, as hereinafter described, on the Mandatory Conversion Date,
each outstanding share of PRIDES will mandatorily convert into (i) shares of
Common Stock at the Common Equivalent Rate (as defined herein) in effect on such
date and (ii) the right to receive cash in an amount equal to all accrued and
unpaid dividends on such share of PRIDES (other than previously declared
dividends payable to a holder of record as of a prior date) to the Mandatory
Conversion Date, whether or not declared, out of funds legally available for the
payment of dividends, subject to the right of the Company to redeem the shares
of PRIDES on or after February 1, 1999, and prior to the Mandatory Conversion
Date, as described below, and subject to the conversion of the shares of PRIDES
at the option of the holder at any time prior to the Mandatory Conversion Date,
as described below. The "Common Equivalent Rate" is initially one share of
Common Stock for each share of PRIDES and is subject to adjustment as described
below. Dividends will cease to accrue on the Mandatory Conversion Date in
respect of the shares of PRIDES then outstanding.
Because the price of the Common Stock is subject to market fluctuations, the
value of the Common Stock that may be received by holders of shares of PRIDES
upon their mandatory conversion may be more or less than the amount paid for the
shares of PRIDES offered hereby.
OPTIONAL REDEMPTION
Shares of PRIDES are not redeemable by the Company prior to February 1,
1999. At any time and from time to time on or after that date until immediately
prior to the Mandatory Conversion Date, the Company will have the right to
redeem, in whole or in part, the outstanding shares of PRIDES. Upon any such
redemption, the Company will deliver to the holders thereof in exchange for each
share of PRIDES subject to redemption the greater of: (i) the number of shares
of Common Stock equal to the applicable Call Price in effect on the redemption
date divided by the Current Market Price of the Common Stock, determined as of
the second trading day immediately preceding the Notice Date (as defined
herein), or (ii) of a share of Common Stock (subject to adjustment in the
same manner as the Optional Conversion Rate (as defined herein) is adjusted).
Dividends will cease to accrue on the shares of PRIDES on the date fixed for
their redemption.
The "Call Price" of each share of PRIDES is the sum of (i) $ on and
after February 1, 1999, to and including April 30, 1999, $ on and after May
1, 1999, to and including July 31, 1999, $ on and after August 1, 1999, to
and including October 31, 1999, and $ (being the price to the public of a
share of PRIDES appearing on the cover page of this Prospectus Supplement), on
and after November 1, 1999, to and including February 1, 2000, and (ii) all
accrued and unpaid dividends thereon to but not including the date fixed for
redemption (other than previously declared dividends payable to a holder of
record as of a prior date).
The "Current Market Price" per share of the Common Stock on any date of
determination means the lesser of (x) the average of the Closing Prices (as
defined below) of the Common Stock for the 15 consecutive trading days ending on
and including such date of determination and (y) the Closing Price of the Common
Stock for such date of determination; provided, however, that, with respect to
any redemption of shares of PRIDES, if any event resulting in an adjustment of
the Common Equivalent Rate occurs during the period beginning on the first day
of such 15-day period and ending on the applicable redemption date, the Current
Market Price as determined pursuant to the foregoing will be appropriately
adjusted to reflect the occurrence of such event. The "Notice Date" with respect
to any notice given by the Company in connection with a redemption of the shares
of PRIDES means the earlier of the date of the public announcement of such
redemption or the commencement of mailing of such notice to the holders of
shares of PRIDES. The term
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"Closing Price" on any day means the last reported sales price or the average of
the bid and asked prices on the New York Stock Exchange or, if not listed
thereon, the Nasdaq National Market or the over the counter market, as
appropriate.
If fewer than all the outstanding shares of PRIDES are to be called for
redemption, shares of PRIDES to be called will be selected by the Company from
outstanding shares of PRIDES not previously called by lot or pro rata (as nearly
as may be) or by any other method determined by the Board of Directors in its
sole discretion to be equitable.
The Company will provide notice of any call for redemption of shares of
PRIDES to holders of record of the shares of PRIDES to be called for redemption
not less than 15 days nor more than 60 days prior to the date fixed for
redemption. Accordingly, the earliest Notice Date for any call for redemption of
shares of PRIDES will be December 3, 1998. Any such notice will be provided by
mail, sent to each holder of record of the shares of PRIDES to be called at such
holder's address as it appears on the stock register of the Company, first class
postage prepaid; provided, however, that failure to give such notice or any
defect therein shall not affect the validity of the proceeding for redemption of
any shares of PRIDES to be redeemed except as to the holder to whom the Company
has failed to give said notice or whose notice was defective. On and after the
redemption date, all rights of the holders of the shares of PRIDES called for
redemption shall terminate except the right to receive the redemption price
(unless the Company defaults on the payment of the redemption price). A public
announcement of any call for redemption will be made by the Company prior to, or
at the time of, the mailing of such notice for redemption.
Each holder of shares of PRIDES called for redemption must surrender the
certificates evidencing such shares of PRIDES to the Company at the place
designated in the notice of redemption and will thereupon be entitled to receive
certificates for shares of Common Stock and cash for any fractional share
amount.
CONVERSION AT THE OPTION OF THE HOLDER
The shares of PRIDES are convertible, in whole or in part, at the option of
the holders thereof, at any time prior to the Mandatory Conversion Date, unless
previously redeemed, into shares of Common Stock at a rate of of a share of
Common Stock for each share of PRIDES (the "Optional Conversion Rate"),
equivalent to a conversion price of $ per share of Common Stock (the
"Conversion Price"), subject to adjustment as described below. The right to
convert shares of PRIDES called for redemption will terminate immediately prior
to the close of business on any redemption date with respect to such shares.
Conversion of shares of PRIDES at the option of the holder may be effected
by delivering certificates evidencing such shares of PRIDES, together with
written notice of conversion and a proper assignment of such certificates to the
Company or in blank (and, if applicable, cash payment of an amount equal to the
dividend attributable to the current quarterly dividend accrued on such shares),
to the office of any transfer agent for shares of PRIDES or to any other office
or agency maintained by the Company for that purpose and otherwise in accordance
with conversion procedures established by the Company. Each optional conversion
shall be deemed to have been effected immediately prior to the close of business
on the date on which the foregoing requirements shall have been satisfied. The
conversion shall be at the Optional Conversion Rate in effect at such time and
on such date.
Holders of shares of PRIDES at the close of business on a record date for
any payment of declared dividends will be entitled to receive the dividend
payable on such shares of PRIDES on the corresponding dividend payment date
notwithstanding the optional conversion of such shares of PRIDES following such
record date and prior to the corresponding dividend payment date. However,
shares of PRIDES surrendered for conversion after the close of business on a
record date for any payment of declared dividends and before the opening of
business on the next succeeding dividend payment date must be accompanied by
payment in cash of an amount equal to the dividend attributable to the current
quarterly dividend period payable on such date (unless such shares of PRIDES are
subject to redemption on a redemption date between such record date and such
dividend payment date). A holder of shares of PRIDES called for redemption on
February 1, 1999 or any other dividend payment date thereafter will receive the
dividend on such shares of PRIDES payable on that date and will be able to
convert such shares of PRIDES after the
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record date for such dividend without paying an amount equal to such dividend to
the Company upon conversion. Except as provided above, upon any optional
conversion of shares of PRIDES, the Company will make no payment of or allowance
for unpaid dividends, whether or not in arrears, on such shares of PRIDES, or
for previously declared dividends or distributions on the shares of Common Stock
issued upon such conversion.
ENHANCED DIVIDEND YIELD; LESS EQUITY APPRECIATION THAN COMMON STOCK
Dividends will accrue on the shares of PRIDES at a higher rate than the rate
at which dividends are currently paid on the Common Stock. The opportunity for
equity appreciation afforded by an investment in shares of PRIDES is less than
that afforded by an investment in the Common Stock because the Conversion Price
is higher than the per share price to the public of the shares of PRIDES and the
Company may, at its option, redeem the shares of PRIDES at any time on or after
February 1, 1999, and prior to the Mandatory Conversion Date, and may be
expected to do so if, among other circumstances, the Current Market Price of the
Common Stock after February 1, 1999 exceeds the Call Price for a share of
PRIDES. In such event, a holder of a share of PRIDES will receive less than one
share of Common Stock per share of PRIDES, but not less than of a share of
Common Stock, subject to adjustment as described herein. A holder may also
surrender for conversion any shares of PRIDES called for redemption up to the
close of business on the redemption date, and a holder that so elects will
receive of a share of Common Stock, subject to adjustment as described
herein. The per share value of Common Stock received by holders of shares of
PRIDES may be more or less than the per share amount paid for the shares of
PRIDES offered hereby, due to market fluctuations in the price of the Common
Stock.
As a result of these provisions, holders of shares of PRIDES would be
expected to realize no equity appreciation if the Current Market Price of the
Common Stock is below the Conversion Price, and less than all of such
appreciation if the Current Market Price of the Common Stock is above the
Conversion Price. Holders of shares of PRIDES will realize the entire decline in
equity value if the market price of the Common Stock is less than the price paid
for a share of PRIDES.
CONVERSION ADJUSTMENTS
The Common Equivalent Rate and the Optional Conversion Rate are each subject
to adjustment as appropriate in certain circumstances, including if the Company
shall (a) pay a stock dividend or make a distribution with respect to its Common
Stock in shares of Common Stock, (b) subdivide or split its outstanding Common
Stock, (c) combine its outstanding Common Stock into a smaller number of shares,
(d) issue by reclassification of its shares of Common Stock any shares of Common
Stock, (e) issue certain rights or warrants to all holders of its Common Stock
unless such rights or warrants are issued to each holder of shares of PRIDES on
a pro rata basis with the shares of Common Stock based on the Common Equivalent
Rate in effect on the date immediately preceding such issuance, or (f) pay a
dividend or distribute to all holders of its Common Stock evidences of its
indebtedness, cash or other assets (including capital stock of the Company but
excluding any cash dividends or distributions, other than Extraordinary Cash
Distributions (as defined below), and dividends referred to in clause (a) above)
unless such dividend or distribution is made to each holder of shares of PRIDES
on a pro rata basis with the shares of Common Stock based on the Common
Equivalent Rate in effect on the date immediately preceding such dividend or
distribution. In addition, the Company will be entitled (but will not be
required) to make upward adjustments in the Common Equivalent Rate, the Optional
Conversion Rate and the Call Price as the Company, in its sole discretion, shall
determine to be advisable, in order that any stock dividend, subdivision or
split of shares, distribution of rights to purchase stock or securities, or
distribution of securities convertible into or exchangeable for stock (or any
transaction which could be treated as any of the foregoing transactions pursuant
to Section 305 of the Internal Revenue Code of 1986, as amended (the "Code"))
hereafter made by the Company to its shareholders will not be taxable.
"Extraordinary Cash Distributions" means, with respect to any cash dividend or
distribution paid on any date, the amount, if any, by which all cash dividends
and cash distributions on the Common Stock paid during the consecutive 12-month
period ending on and including such date (other than cash dividends and cash
distributions for which an adjustment to the Common Equivalent Rate or the
Optional Conversion Rate was previously made) exceeds, on a per share of Common
Stock basis, 10% of the average of the daily Closing Prices of the Common Stock
over such consecutive
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12-month period. All adjustments to the Common Equivalent Rate and the Optional
Conversion Rate will be calculated to the nearest 1/100th of a share of Common
Stock. No adjustment in the Common Equivalent Rate or the Optional Conversion
Rate will be required unless such adjustment would require an increase or
decrease of at least one percent in the Common Equivalent Rate; provided,
however, that any adjustments which, by reason of the foregoing, are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment. All adjustments will be made successively.
Whenever the Common Equivalent Rate and the Optional Conversion Rate are
adjusted as provided in the preceding paragraph, the Company will file with the
transfer agent for the shares of PRIDES a certificate with respect to such
adjustment, make a prompt public announcement thereof and mail a notice to
holders of the shares of PRIDES providing specified information with respect to
such adjustment.
ADJUSTMENT FOR CERTAIN CONSOLIDATIONS OR MERGERS
In the case of (i) any consolidation or merger to which the Company is a
party (other than a merger or consolidation in which the Company is the
surviving or continuing corporation and in which the shares of Common Stock
outstanding immediately prior to the merger or consolidation remain unchanged),
(ii) any sale or transfer to another corporation of the property of the Company
as an entirety or substantially as an entirety, or (iii) any statutory exchange
of securities with another corporation (other than in connection with a merger
or acquisition), each share of PRIDES shall, after consummation of such
transaction, be subject to (A) conversion at the option of the holder into the
kind and amount of securities, cash or other property receivable upon
consummation of such transaction by a holder of the number of shares of Common
Stock into which such share of PRIDES might have been converted immediately
prior to consummation of such transaction, (B) conversion on the Mandatory
Conversion Date into the kind and amount of securities, cash, or other property
receivable upon consummation of such transaction by a holder of the number of
shares of Common Stock into which such share of PRIDES would have been converted
if the conversion on the Mandatory Conversion Date had occurred immediately
prior to the date of consummation of such transaction, plus the right to receive
cash in an amount equal to all accrued and unpaid dividends on such share of
PRIDES (other than previously declared dividends payable to a holder of record
as of a prior date), and (C) redemption on any redemption date in exchange for
the kind and amount of securities, cash, or other property receivable upon
consummation of such transaction by a holder of the number of shares of Common
Stock that would have been issuable, using the Call Price in effect on such
redemption date, upon a redemption of such shares of PRIDES immediately prior to
consummation of such transaction, assuming that, if the Notice Date for such
redemption is not prior to such transaction, the Notice Date had been the date
of such transaction; and assuming in each case that such holder of shares of
Common Stock failed to exercise rights of election, if any, as to the kind or
amount of securities, cash, or other property receivable upon consummation of
such transaction (provided that, if the kind or amount of securities, cash or
other property receivable upon consummation of such transaction is not the same
for each non-electing share, then the kind and amount of securities, cash, or
other property receivable upon consummation of such transaction for each
non-electing share shall be deemed to be the kind and amount so receivable per
share by a plurality of the non-electing shares). The kind and amount of
securities into or for which the shares of PRIDES shall be convertible or
redeemable after consummation of such transaction shall be subject to adjustment
as described above under the caption "Conversion Adjustments" following the date
of consummation of such transaction. The Company may not become a party to any
such transaction unless the terms thereof are consistent with the foregoing or
the last sentence of the third paragraph under "-- Voting Rights" below.
For purposes of the preceding paragraph, any sale or transfer to another
corporation of property of the Company which did not account for at least 50% of
the consolidated net income of the Company for its most recent fiscal year
ending prior to the consummation of such transaction will not in any event be
deemed to be a sale or transfer of the property of the Company as an entirety or
substantially as an entirety.
FRACTIONAL SHARES
No fractional shares of Common Stock will be issued upon redemption or
conversion of shares of PRIDES. In lieu of any fractional share otherwise
issuable in respect of the aggregate number of shares of
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PRIDES of any holder that are redeemed or converted on any redemption date or
upon mandatory conversion or any optional conversion, such holder shall be
entitled to receive an amount, in cash equal to the same fraction of the (i)
Current Market Price of the Common Stock, determined as of the second trading
day immediately preceding the Notice Date, in the case of redemption, or (ii)
Closing Price of the Common Stock determined (A) as of the fifth trading day
immediately preceding the Mandatory Conversion Date, in the case of mandatory
conversion, or (B) as of the second trading day immediately preceding the
effective date of conversion, in the case of an optional conversion by a holder.
LIQUIDATION RIGHTS
In the event of any voluntary or involuntary liquidation, dissolution, or
winding up of the Company, and subject to the rights of holders of any other
series of Preferred Stock, the holders of outstanding shares of PRIDES are
entitled to receive an amount equal to the per share price to the public of the
shares of PRIDES shown on the cover page of this Prospectus Supplement, plus
accrued and unpaid dividends thereon, out of the assets of the Company available
for distribution to shareholders, before any distribution of assets is made to
holders of Junior Stock upon liquidation, dissolution, or winding up.
If upon any voluntary or involuntary liquidation, dissolution, or winding up
of the Company, the assets of the Company are insufficient to permit the payment
of the full preferential amounts payable with respect to shares of PRIDES and
all other series of Parity Preferred Stock, the holders of shares of PRIDES and
of all other series of Parity Preferred Stock will share ratably in any
distribution of assets of the Company in proportion to the full respective
preferential amounts to which they are entitled. After payment of the full
amount of the liquidating distribution to which they are entitled, the holders
of shares of PRIDES will not be entitled to any further participation in any
distribution of assets by the Company. A consolidation or merger of the Company
with one or more corporations (whether or not the Company is the corporation
surviving such consolidation or merger), or a sale, lease or transfer or
exchange of all or substantially all of the assets of the Company shall not be
deemed to be a voluntary or involuntary liquidation, dissolution, or winding up
of the Company.
VOTING RIGHTS
The holders of shares of PRIDES shall have the right with the holders of
Common Stock to vote in the election of Directors and upon each other matter
coming before any meeting of the holders of Common Stock on the basis of 4/5 of
a vote for each share of PRIDES held. The holders of shares of PRIDES and the
holders of Common Stock will vote together as one class on such matters except
as otherwise provided by law or the Articles of Incorporation of the Company.
In the event that dividends on the shares of PRIDES or any other series of
Preferred Stock are in arrears and unpaid for six quarterly dividend periods, or
if any other series of Preferred Stock are entitled for any other reason to
exercise voting rights, separate from the Common Stock, to elect any Directors
of the Company ("Preferred Stock Directors"), the holders of the shares of
PRIDES (voting separately as a class with holders of all other series of
Preferred Stock upon which like voting rights have been conferred and are
exercisable), with each share of PRIDES entitled to one vote on this and other
matters on which Preferred Stock votes as a group, will be entitled to vote for
the election of two Preferred Stock Directors, such Directors to be in addition
to the number of Directors constituting the Board of Directors immediately prior
to the accrual of such right. Such right, when vested, shall continue until all
dividends in arrears on the shares of PRIDES and such other series of Preferred
Stock shall have been paid in full and the right of any other series of
Preferred Stock to exercise voting rights, separate from the Common Stock, to
elect Preferred Stock Directors terminates or has terminated, and, when so paid
and any such termination occurs or has occurred, such right of the holders of
the shares of PRIDES will cease. The term of office of any Preferred Stock
Director elected by the holders of the shares of PRIDES and such other series
will terminate on the earlier of (i) the next annual meeting of shareholders at
which a successor shall have been elected and qualified or (ii) the termination
of the right of holders of the shares of PRIDES and such other series to vote
for such Directors. Vacancies on the Board of Directors of the Company
(including with respect to a Preferred Stock Director) resulting from death,
resignation or other cause shall be filled exclusively by no less than of the
remaining Directors and the Director so elected shall hold office until a
successor is elected and qualified.
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The Company will not, without the affirmative vote or consent of the holders
of at least 66 2/3% of the shares of PRIDES actually voting (voting separately
as a class): (i) amend, alter, or repeal any of the provisions of the Articles
of Incorporation of the Company so as to affect adversely the powers,
preferences, or rights of the holders of the shares of PRIDES then outstanding
or reduce the minimum time required for any notice to which only the holders of
the shares of PRIDES then outstanding may be entitled (an amendment of the
Articles of Incorporation to authorize or create, or to increase the authorized
amount, of Junior Stock or any stock of any class ranking on a parity with the
shares of PRIDES shall not be deemed to affect adversely the powers,
preferences, or rights of the holders of the shares of PRIDES); (ii) authorize
or create, or increase the authorized amount of, any capital stock, or any
security convertible into capital stock, of any class ranking senior to the
shares of PRIDES as to payment of dividends or the distribution of assets upon
liquidation, dissolution or winding up of the Company; or (iii) merge or
consolidate with or into any other corporation, unless each holder of the shares
of PRIDES immediately preceding such merger or consolidation shall have the
right either to (A) receive or continue to hold in the resulting corporation the
same number of shares, with substantially the same rights and preferences, as
correspond to the shares of PRIDES so held or (B) convert into shares of Common
Stock at the Common Equivalent Rate in effect on the date immediately preceding
the announcement of any such merger or consolidation.
There is no limitation on the issuance by the Company of Parity Preferred
Stock or of any class ranking junior to the shares of PRIDES.
Notwithstanding the provisions summarized in the preceding two paragraphs,
however, no such approval described therein of the holders of the shares of
PRIDES shall be required to authorize an increase in the number of authorized
shares of Preferred Stock or if, at or prior to the time when such amendment,
alteration, or repeal is to take effect or when the authorization, creation or
increase of any such senior stock or such security is to be made, or when such
consolidation or merger, liquidation, dissolution or winding up is to take
effect, as the case may be, provision is made for the redemption of all shares
of PRIDES at the time outstanding.
LISTING
The shares of PRIDES have been approved for listing on the NYSE, subject to
official notice of issuance, under the symbol "CNCPrE."
TRANSFER AGENT AND REGISTRAR
First Union National Bank of North Carolina will act as transfer agent and
registrar for, and paying agent for the payment of dividends on, the shares of
PRIDES.
MISCELLANEOUS
Upon issuance, the shares of PRIDES will be fully paid and nonassessable.
Holders of shares of PRIDES have no preemptive rights. The Company shall at all
times reserve and keep available out of its authorized and unissued Common
Stock, solely for issuance upon the conversion or redemption of shares of
PRIDES, such number of shares of Common Stock as shall from time to time be
issuable upon the conversion or redemption of all the shares of PRIDES then
outstanding. Shares of PRIDES redeemed for, or converted into, Common Stock of
the Company or otherwise reacquired by the Company shall resume the status of
authorized and unissued shares of Preferred Stock, undesignated as to series,
and shall be available for subsequent issuance.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
In the opinion of Krieg, DeVault, Alexander & Capehart, special tax counsel
to the Company ("Special Tax Counsel"), the following sets forth the material
United States Federal income tax consequences under existing law of the
purchase, ownership and disposition of shares of PRIDES. A copy of that opinion
will be filed with the Commission as an exhibit to or incorporated by reference
into the Registration Statement of which this Prospectus Supplement is a part,
and the following summary is qualified in its entirety by reference thereto,
including the assumptions set forth therein. The Company does not intend to seek
a ruling from the Internal Revenue Service (the "IRS") with respect to any of
these tax consequences. This summary is intended for general information only
and deals only with holders who are initial holders of shares of PRIDES and who
hold shares of PRIDES as capital assets within the meaning of Section 1221 of
the Code. It does not address aspects of taxation, other than Federal income
taxation, or all tax consequences that may be relevant in the particular
circumstances of each holder (some of which, such as dealers in securities,
banks, insurance companies and tax-exempt organizations, may be subject to
special rules). Stock having terms closely resembling those of shares of PRIDES
has not been the subject of any regulation, ruling or judicial decision
currently in effect, and there can be no assurance that the IRS will adopt the
positions set forth below. There can be no assurance that future changes in
applicable law or administrative and judicial interpretations thereof, any of
which could have a retroactive effect, will not adversely affect the tax
consequences discussed herein or that there will not be differences of opinion
as to the interpretation of applicable law. For purposes of this section, "U.S.
Holder" means a citizen or resident of the United States, a corporation,
partnership or other entity created or organized under the laws of the United
States or of any State, or an estate or trust the income of which is subject to
United States Federal income taxation regardless of its source and "non-U.S.
Holder" means a holder other than a U.S. Holder. Certain aspects of United
States Federal income and estate tax relevant to a non-U.S. Holder are discussed
separately below. Persons considering the purchase of shares of PRIDES should
consult their tax advisors with respect to the application of the United States
Federal income tax laws to their particular situations as well as any tax
consequences arising under the laws of any state, local, or foreign taxing
jurisdiction.
DIVIDENDS
Dividends paid on shares of PRIDES out of the Company's current or
accumulated earnings and profits will be taxable as ordinary income. Corporate
U.S. Holders will generally qualify for the 70% intercorporate
dividends-received deduction subject to satisfaction of the minimum holding
period (generally at least 46 days) and other applicable requirements. Under
certain circumstances, a corporate holder may be subject to the alternative
minimum tax with respect to the amount of its dividends-received deduction.
Under certain circumstances, a corporation that receives an "extraordinary
dividend," as defined in Section 1059(c) of the Code, is required to reduce its
stock basis by the non-taxed portion of such dividend. Generally, quarterly
dividends not in arrears paid to an original holder of shares of PRIDES will not
constitute extraordinary dividends under Section 1059(c). Under Section 1059(f),
any dividend with respect to "disqualified preferred stock" is treated as an
"extraordinary dividend." While there is no authority directly on point, and the
issue is not free from doubt, based on the accuracy of certain factual
representations made by the Company, Special Tax Counsel believes that shares of
PRIDES should not be determined to constitute "disqualified preferred stock."
REDEMPTION PREMIUM
Under certain circumstances, Section 305(c) of the Code requires that any
excess of the redemption price of preferred stock over its issue price be
includible in income, prior to receipt, as a constructive dividend. However,
while there is no authority directly on point, and the issue is not free from
doubt, based on the accuracy of certain factual representations made by the
Company, Special Tax Counsel believes that a holder of shares of PRIDES should
not be required to include any redemption premium in income under Section
305(c).
REDEMPTION OR MANDATORY OR OPTIONAL CONVERSION INTO COMMON STOCK
As a general rule, gain or loss will not be recognized by a holder upon the
redemption of shares of PRIDES for shares of Common Stock or the conversion of
shares of PRIDES into shares of Common Stock
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if no cash is received. Income may be recognized, however, to the extent Common
Stock or cash is received in payment of accrued and unpaid dividends upon a
redemption or conversion. Such income would likely be characterized as dividend
income although some uncertainty exists as to the appropriate characterization
of payments in satisfaction of undeclared, accrued and unpaid dividends. In
addition, a holder who receives cash in lieu of a fractional share will be
treated as having received such fractional share and as having exchanged it for
cash in a transaction subject to Section 302 of the Code and related provisions.
Such exchange should generally result in capital gain or loss measured by the
difference between the cash received for the fractional share interest and the
holder's basis in the fractional share interest.
Generally, a holder's basis in the Common Stock received upon the redemption
or conversion of shares of PRIDES, other than shares of Common Stock taxed upon
receipt, will equal the adjusted tax basis of the redeemed or converted shares
of PRIDES (exclusive of any basis allocable to a fractional share interest) plus
the amount of gain (if any) recognized, minus the amount of cash (if any)
received, and the holding period of such Common Stock will include the holding
period of the redeemed or converted shares of PRIDES. As a general rule, a
holder's basis in shares of Common Stock taxed upon receipt will equal the fair
market value thereof and the holding period for such Common Stock will begin on
the day following the redemption or conversion.
ADJUSTMENT OF CONVERSION RATE
Certain adjustments to the Common Equivalent Rate and the Optional
Conversion Rate to reflect the Company's distribution of certain rights,
warrants, evidences of indebtedness, securities or other assets to holders of
Common Stock may result in constructive distributions taxable as dividends to
the holders of shares of PRIDES which may constitute (and cause other dividends
to constitute) "extraordinary dividends" to corporate holders as described
above.
CONVERSION OF PRIDES AFTER DIVIDEND RECORD DATE
If a holder, whose shares of PRIDES have not been called for redemption,
surrenders such shares for conversion into shares of Common Stock after a
dividend record date but before payment of the dividend, such holder will be
required to pay the Company an amount equal to such dividend upon conversion.
The holder would likely recognize the dividend payment which is received as
income, and would increase the basis of the Common Stock received by the amount
paid to the Company in connection with the receipt of such dividend.
BACKUP WITHHOLDING
Certain U.S. Holders may be subject to backup withholding at a rate of 31%
on dividends on certain consideration received upon the redemption or conversion
of shares of PRIDES unless such holders provide proof of an applicable exemption
or a correct taxpayer identification number, and otherwise comply with
applicable requirements of the backup withholding rules.
NON-U.S. HOLDERS
DIVIDENDS
In general, dividends (including constructive distributions taxable as
dividends) paid to a non-U.S. Holder will be subject to United States
withholding tax at a 30% rate (or a lower rate prescribed by an applicable tax
treaty) unless the dividends are either (i) effectively connected with a trade
or business carried on by the non-U.S. Holder within the United States, or (ii)
if a tax treaty applies, attributable to a United States permanent establishment
maintained by the non-U.S. Holder. Dividends effectively connected with such
trade or business or attributable to such permanent establishment will generally
be subject to United States Federal income tax at regular rates and, in the case
of a non-U.S. Holder which is a corporation, may be subject to the branch
profits tax. To determine the applicability of a tax treaty providing for a
lower rate of withholding, dividends paid to an address in a foreign country are
presumed under current Treasury regulations to be paid to a resident of that
country. Treasury regulations proposed in 1984 which have not been finally
adopted, however, would require non-U.S. Holders to file certain forms to obtain
the benefit of any applicable tax treaty providing for a lower rate of
withholding tax on dividends.
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GAIN ON REDEMPTION OR CONVERSION INTO COMMON STOCK
A non-U.S. Holder generally will not be subject to United States Federal
income tax on any gain recognized on a disposition, redemption or conversion (a
"Disposition") of a share of PRIDES unless (i) such gain is treated as dividend
income; (ii) the Company is or has been a "U.S. real property holding
corporation" for United States Federal income tax purposes (which the Company
does not believe that it is or is likely to become) and the non-U.S. Holder
disposing of the share owned, directly or constructively, at any time during the
five-year period preceding the disposition, more than five percent of shares of
PRIDES or the shares of PRIDES are not regularly traded (within the meaning of
applicable Treasury Regulations) on an established securities market; (iii) the
gain is effectively connected with a trade or business carried on by the
non-U.S. Holder within the United States or, if a tax treaty applies,
attributable to a United States permanent establishment maintained by the
non-U.S. Holder; (iv) in the case of a non-U.S. Holder who is an individual, who
holds the share as a capital asset and who is present in the United States for
183 days or more in the taxable year of the disposition, either (a) such
non-U.S. Holder has a "tax home" (as defined for U.S. Federal income tax
purposes) in the United States and the gain from the disposition is not
attributable to an office or other fixed place of business maintained by such
non-U.S. Holder outside of the United States or (b) the gain from the
disposition is attributable to an office or other fixed place of business
maintained by such non-U.S. Holder in the United States; or (v) the non-U.S.
Holder is subject to tax pursuant to provisions of the Code applicable to
certain United States expatriates.
FEDERAL ESTATE TAX
Shares of PRIDES owned or treated as owned by an individual who is not a
citizen or resident (as defined for United States Federal estate tax purposes)
of the United States at the time of death will be includible in the individual's
gross estate for United States Federal estate tax purposes unless an applicable
estate tax treaty provides otherwise.
BACKUP WITHHOLDING AND INFORMATION REPORTING REQUIREMENTS
The Company must report annually to the IRS and to each non-U.S. Holder the
amount of dividends paid to, and the tax withheld with respect to, such holder.
These information reporting requirements apply regardless of whether withholding
was reduced or eliminated by an applicable tax treaty. Copies of these
information returns may also be made available under the provisions of a
specific treaty or agreement to the tax authorities in the country in which the
non-U.S. Holder resides. United States backup withholding tax (which generally
is a withholding tax imposed at the rate of 31% on certain payments to persons
that fail to furnish the information required under the United States
information reporting requirements) will generally not apply to dividends paid
on shares of PRIDES to a non-U.S. Holder at an address outside the United
States.
The payment of the proceeds from the disposition of shares of PRIDES to or
through the United States office of a broker will be subject to information
reporting and backup withholding at a rate of 31% unless the owner certifies,
among other things, its status as a non-U.S. Holder under penalties of perjury
or otherwise establishes an exemption. The payment of the proceeds from the
disposition of shares of PRIDES to or through a non-U.S. office of a broker will
generally, except as noted below, not be subject to backup withholding and
information reporting. In the case of proceeds from a disposition of shares of
PRIDES paid to or through a non-U.S. office of a U.S. broker or paid to or
through a non-U.S. office of a non-U.S. broker that is (i) a "controlled foreign
corporation" for United States Federal income tax purposes or (ii) a person 50%
or more of whose gross income from all sources for a certain three-year period
was effectively connected with a United States trade or business, (a) backup
withholding will not apply unless the broker has actual knowledge that the owner
is not a non-U.S. Holder, and (b) information reporting will not apply if the
broker has documentary evidence in its files that the owner is a non-U.S. Holder
(unless the broker has actual knowledge to the contrary).
Any amounts withheld under the backup withholding rules from a payment to a
non-U.S. Holder will be refunded (or credited against the non-U.S. Holder's
United States Federal income tax liability, if any), provided that the required
information is furnished to the IRS.
S-30
<PAGE>
The backup withholding and information reporting rules are currently under
review by the Treasury Department, and their application to shares of PRIDES is
subject to change.
PROPOSED LEGISLATION
On May 3, 1995, legislation was introduced that would amend portions of
Sections 302 and 1059 of the Code and characterize non-pro rata redemptions
otherwise eligible for the dividends-received deduction as a sale of the stock
redeemed. The Congressional statement introducing this legislation indicated
that the bill retained the existing regulatory authority of the Treasury
Department to issue regulations which, among other things, would subject certain
reorganizations, including recapitalizations, and similar transactions to the
provisions of the bill. This legislation was passed by Congress and vetoed by
the President. It is not possible to predict whether and, if so, in what form
any such legislation will be enacted into law and, if enacted, whether it would
affect the tax treatment of the PRIDES, as discussed above.
TREASURY TAX PROPOSALS
On December 7, 1995, the United States Treasury Department released a budget
plan which includes certain Federal income tax proposals (the "Proposals") which
could adversely affect holders of the PRIDES. The Proposals have not been
introduced as legislation, and it is therefore unclear that they will become
law. Under the Proposals, the dividends received deduction currently available
to corporate shareholders for dividends received from another corporation in
which the shareholder owns less than 20 percent would be reduced from 70 percent
to 50 percent with respect to dividends paid after January 31, 1996. In
addition, the 46-day holding period would be extended to cover the period
immediately before or immediately after the corporate shareholder becomes
entitled to receive the dividend. This provision would be effective for
dividends paid after January 31, 1996. It should be noted that if the dividends
received deduction is reduced in accordance with the Proposals or for any other
reason, the amount of dividends payable with respect to the PRIDES will not be
adjusted.
S-31
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in a purchase agreement (the
"Purchase Agreement") between the Company and Merrill Lynch, Pierce, Fenner &
Smith Incorporated, Dean Witter Reynolds Inc. and Salomon Brothers Inc, who are
acting as representatives (the "Representatives") for the underwriters named
below (the "Underwriters"), the Company has agreed to sell to the Underwriters
and each of the Underwriters severally has agreed to purchase from the Company
the number of shares of PRIDES set forth opposite each Underwriter's name.
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERWRITER OF PRIDES
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.....................................................
Dean Witter Reynolds Inc...................................................
Salomon Brothers Inc.......................................................
-----------------
Total............................................................ 3,200,000
-----------------
-----------------
</TABLE>
In the Purchase Agreement, the Underwriters severally have agreed, subject
to the terms and conditions set forth therein, to purchase all of the shares of
PRIDES being sold pursuant to the Purchase Agreement if any of the shares being
sold pursuant to the Purchase Agreement are purchased. Under certain
circumstances, the commitments of a non-defaulting Underwriter may be increased.
The Representatives have advised the Company that they propose initially to
offer the shares of PRIDES to the public at the public offering price set forth
on the cover page of this Prospectus Supplement and to certain dealers at such
price less a concession not in excess of $ per share. The Underwriters may
allow, and such dealers may reallow, a discount not in excess of $ per share
on sales to certain other dealers. After the initial public offering, the public
offering price, concession and discount may be changed.
The Company has granted to the Underwriters an option, exercisable for 30
days after the date of this Prospectus Supplement, to purchase up to 480,000
additional shares of PRIDES at the price to the public set forth on the cover
page of this Prospectus Supplement, less the underwriting discount. The
Underwriters may exercise this option only to cover over-allotments, if any,
made on the sale of shares of PRIDES offered hereby. To the extent that the
Underwriters exercise this option, each of the Underwriters will have a firm
commitment, subject to certain conditions, to purchase the same percentage of
such shares as the number of shares of PRIDES to be purchased by such
Underwriter shown in the foregoing table bears to the total number of shares
initially offered hereby.
The Company has agreed, for a period of 90 days after the date of this
Prospectus Supplement, to not, without the prior written consent of the
Representatives, directly or indirectly, sell, offer to sell, grant any option
for the sale of, or otherwise dispose of, any shares of its capital stock or
securities convertible into or exchangeable for capital stock of the Company
other than to the Underwriters pursuant to the Purchase Agreement, subject to
certain exceptions set forth in the Purchase Agreement, and other than currently
authorized shares of Common Stock or options for shares of Common Stock issued
pursuant to or sold in connection with qualified employee benefit and stock
option plans and shares of Common Stock issuable upon conversion of securities,
including shares of PRIDES, or exercise of stock options.
Prior to this offering, there has been no public market for the shares of
PRIDES. The initial public offering price for the shares of PRIDES was
determined by negotiations between the Company and the Representatives. Among
the factors considered in determining the price to the public were the market
price of the Common Stock, an assessment of the Company's recent results of
operations, the future prospects of the Company and the industry in general,
market prices of securities of other companies engaged in activities similar to
the Company and prevailing conditions in the securities markets. There can be no
assurance that an active trading market will develop for the shares of PRIDES or
that the shares of PRIDES will trade in the public market subsequent to the
offering at or above the initial public offering price.
S-32
<PAGE>
The Underwriters receive customary fees for ordinary brokerage transactions
with the Company and its affiliates. The Underwriters and their affiliates have
performed investment banking services in the ordinary course of their respective
businesses for the Company and its affiliates in the past, for which they have
received customary compensation, and may continue to do so in the future.
The Company and the several Underwriters have agreed to indemnify each other
against certain liabilities, including liabilities under the Securities Act, or
to contribute to payments that the other may be required to make in respect
thereof.
LEGAL MATTERS
Certain legal matters in connection with the Preferred Stock offered hereby
and the Common Stock issuable upon the conversion or redemption thereof, will be
passed upon for the Company by Krieg, DeVault, Alexander & Capehart,
Indianapolis, Indiana and by Lawrence W. Inlow, Executive Vice President,
Secretary and General Counsel of the Company, and for the Underwriters by
LeBoeuf, Lamb, Greene & MacRae, L.L.P., New York, New York. With respect to
certain matters governed by the laws of the State of Indiana, LeBoeuf, Lamb,
Greene & MacRae, L.L.P. will rely on the opinion of Krieg, DeVault, Alexander &
Capehart. Krieg, DeVault, Alexander & Capehart will also pass upon certain
matters relating to federal income tax considerations for the Company. Mr. Inlow
is a full-time employee and an officer of the Company and owns 245,876 shares
and holds options to purchase 762,000 shares of Common Stock of the Company.
S-33
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED JANUARY 3, 1996
P R O S P E C T U S
- -----------------
[LOGO]
DEBT SECURITIES
PREFERRED STOCK
DEPOSITARY SHARES
COMMON STOCK
WARRANTS
------------------
Conseco, Inc., an Indiana corporation ("Conseco" or the "Company"), may
offer and sell from time to time, in one or more series, (i) its debt
securities, consisting of debentures, notes and/or other evidences of
indebtedness representing unsecured obligations of Conseco (the "Debt
Securities"), (ii) shares of its preferred stock, no par value per share
("Preferred Stock"), which may be represented by depositary shares (the
"Depositary Shares") as described herein, (iii) shares of its common stock, no
par value per share ("Common Stock"), and (iv) warrants to purchase Debt
Securities, Preferred Stock, Common Stock or other securities or rights
("Warrants"). The Debt Securities, Preferred Stock, Depositary Shares, Common
Stock and Warrants are herein collectively referred to as the "Securities."
Certain specific terms of the particular Securities in respect of which this
Prospectus is being delivered will be set forth in an accompanying supplement to
this Prospectus (the "Prospectus Supplement"), which will describe, without
limitation and where applicable, the following: (i) in the case of Debt
Securities, the specific designation, aggregate principal amount, ranking as
senior or subordinated Debt Securities, denomination, maturity, premium, if any,
interest rate (which may be fixed or variable), time and method of calculating
interest, if any, place or places where principal of, premium, if any, and
interest, if any, on such Debt Securities will be payable, the currencies or
currency units in which principal of, premium, if any, and interest, if any, on
such Debt Securities will be payable, any terms of redemption or conversion, any
sinking fund provisions, the purchase price, any listing on a securities
exchange and other special terms; (ii) in the case of Preferred Stock and
Depositary Shares, the specific designation, stated value and liquidation
preference per share and number of shares offered, the purchase price, dividend
rate (which may be fixed or variable), method of calculating payment of
dividends, place or places where dividends on such Preferred Stock will be
payable, any terms of redemption, dates on which dividends shall be payable and
dates from which dividends shall accrue, any listing on a securities exchange,
voting and other rights, including conversion or exchange rights, if any, and
other special terms, including whether interests in the Preferred Stock will be
represented by Depositary Shares and, if so, the fraction of a share of
Preferred Stock represented by each Depositary Share; (iii) in the case of
Common Stock, the number of shares offered, the initial offering price, market
price and dividend information; and (iv) in the case of Warrants, the specific
designation, the number, purchase price, exercise price and other terms thereof,
any listing of the Warrants or the underlying Securities on a securities
exchange or any other terms in connection with the offering, sale and exercise
of the Warrants, as well as the terms on which and the Securities for which such
Warrants may be exercised.
The offering price to the public of the Securities will be limited to U.S.
$400,000,000 in the aggregate (or its equivalent (based on the applicable
exchange rate at the time of issue), if Securities are offered for consideration
denominated in one or more foreign currencies or currency units as shall be
designated by Conseco). The Debt Securities may be denominated in United States
dollars or, at the option of Conseco if so specified in the applicable
Prospectus Supplement, in one or more foreign currencies or currency units. The
Debt Securities may be issued in registered form or bearer form, or both. If so
specified in the applicable Prospectus Supplement, Debt Securities of a series
may be issued in whole or in part in the form of one or more temporary or
permanent global securities.
The Securities may be sold to or through underwriters, through dealers or
agents or directly to purchasers. See "Plan of Distribution." The names of any
underwriters, dealers or agents involved in the sale of the Securities in
respect of which this Prospectus is being delivered and any applicable fee,
commission or discount arrangements with them will be set forth in a Prospectus
Supplement. See "Plan of Distribution" for possible indemnification arrangements
for dealers, underwriters and agents.
This Prospectus may not be used to consummate sales of Securities unless
accompanied by a Prospectus Supplement.
--------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is January , 1996.
<PAGE>
AVAILABLE INFORMATION
Conseco is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by Conseco with the Commission can be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at
the following regional offices of the Commission: New York Regional Office, 7
World Trade Center, 13th Floor, New York, New York 10048; and Chicago Regional
Office, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
such material can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, upon payment of
the prescribed rates. Copies of such reports, proxy statements and other
information can also be inspected at the offices of the New York Stock Exchange,
20 Broad Street, New York, New York 10005.
Conseco has filed with the Commission a Registration Statement under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
Securities offered hereby. This Prospectus, which constitutes part of the
Registration Statement, does not contain all of the information set forth in the
Registration Statement and the exhibits thereto, certain parts of which are
omitted in accordance with the rules and regulations of the Commission.
Statements contained herein concerning the provisions of any document do not
purport to be complete and, in each instance, are qualified in all respects by
reference to the copy of such document filed as an exhibit to the Registration
Statement or otherwise filed with the Commission. For further information with
respect to Conseco and the Securities, reference is hereby made to such
Registration Statement, including the exhibits thereto and the documents
incorporated herein by reference, which can be examined at the Commission's
principal office, 450 Fifth Street, N.W., Washington, D.C. 20549, or copies of
which can be obtained from the Commission at such office upon payment of the
fees prescribed by the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by Conseco with the Commission pursuant to the
Exchange Act are incorporated herein by reference: (i) Annual Report on Form
10-K for the year ended December 31, 1994, (ii) Quarterly Reports on Form 10-Q
for the quarterly periods ended March 31, 1995, June 30, 1995 and September 30,
1995 and (iii) Current Reports on Form 8-K dated December 23, 1994 and August
31, 1995, as amended. All documents filed by Conseco pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus and
prior to the termination of the offering made hereby shall be deemed to be
incorporated by reference in this Prospectus and to be part hereof from the date
of filing of such documents.
Any statement contained herein, or in a document incorporated or deemed to
be incorporated by reference herein, shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus. To
the extent that any proxy statement is incorporated by reference herein, such
incorporation shall not include any information contained in such proxy
statement that is not, pursuant to the Commission's rules, deemed to be "filed"
with the Commission or subject to the liabilities of Section 18 of the Exchange
Act.
Conseco will provide without charge to each person to whom this Prospectus
is delivered, upon the written or oral request of such person, a copy of any or
all of the documents incorporated herein by reference (other than exhibits to
such documents unless such exhibits are specifically incorporated by reference
into such documents). Any such request should be directed to James W.
Rosensteele, Vice President, Investor Relations, Conseco, Inc., 11825 N.
Pennsylvania Street, Carmel, Indiana 46032 (telephone number: (317) 817-2893).
2
<PAGE>
FOR NORTH CAROLINA RESIDENTS:
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE COMMISSIONER OF
INSURANCE FOR THE STATE OF NORTH CAROLINA, NOR HAS THE COMMISSIONER OF INSURANCE
RULED UPON THE ACCURACY OR THE ADEQUACY OF THIS DOCUMENT.
State insurance holding company laws and regulations applicable to the
Company generally provide that no person may acquire control of the Company, and
thus indirect control of its insurance subsidiaries, unless such person has
provided certain required information to, and such acquisition is approved (or
not disapproved) by, the appropriate insurance regulatory authorities.
Generally, any person acquiring beneficial ownership of 10% or more of the
Common Stock would be presumed to have acquired such control, unless the
appropriate insurance regulatory authorities upon advance application determine
otherwise.
No dealer, salesman or other individual has been authorized to give any
information or to make any representations not contained in this Prospectus in
connection with the offering covered by this Prospectus. If given or made, such
information or representations must not be relied upon as having been authorized
by the Company or any underwriter, dealer or agent. This Prospectus does not
constitute an offer to sell, or a solicitation of an offer to buy, any
securities other than the registered securities to which it relates, or an offer
to sell or a solicitation of an offer to buy those securities to which it
relates, in any jurisdiction where, or to any person to whom, it is unlawful to
make such offer or solicitation. Neither the delivery of this Prospectus nor any
sale made hereunder shall, under any circumstances, create any implication that
there has not been any change in the facts set forth in this Prospectus or in
the affairs of the Company since the date hereof.
3
<PAGE>
THE COMPANY
Conseco is a financial services holding company. Conseco: (i) owns and
operates life insurance companies; (ii) provides investment management,
administrative and other services to affiliates and non-affiliates for fees; and
(iii) acquires and restructures life insurance companies in partnership with
other investors. Conseco's operating strategy for acquired businesses is to
consolidate and streamline management and administrative functions, to realize
superior investment returns through active asset management, to eliminate
unprofitable products and distribution channels and to focus resources on the
development and expansion of profitable products and strong distribution
channels. The companies Conseco targets for acquisition have profitable niche
products, strong distribution systems and progressive management teams who can
work with Conseco to implement Conseco's operating and growth strategies. The
insurance companies in which Conseco has made investments develop, market, issue
and administer primarily annuity, individual health insurance and life insurance
products.
The Company's principal executive offices are located at 11825 N.
Pennsylvania Street, Carmel, Indiana 46032. Its telephone number is (317)
817-6100.
USE OF PROCEEDS
Unless otherwise specified in the applicable Prospectus Supplement, the net
proceeds from the sale of any Securities are expected to be used by Conseco for
general corporate purposes. Any specific allocation of the proceeds to a
particular purpose that has been made at the date of any Prospectus Supplement
will be described therein.
RATIO OF EARNINGS TO FIXED CHARGES AND EARNINGS TO FIXED
CHARGES AND PREFERRED STOCK DIVIDENDS
The following table sets forth Conseco's ratios of earnings to fixed charges
and earnings to fixed charges and preferred stock dividends for each of the five
years ended December 31, 1994, and for the nine-month periods ended September
30, 1994 and 1995:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------------- --------------------
1990 1991 1992 1993 1994 1994 1995
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to fixed charges (1)................ 1.17x 1.32x 1.54x 2.19x 2.26x 3.18x 1.53x
Ratio of earnings to fixed charges, excluding interest
on annuities and financial products (1)(2)........... 1.97x 3.41x 6.24x 8.85x 4.55x 5.54x 3.62x
Ratio of earnings to fixed charges and preferred stock
dividends............................................ 1.14x 1.30x 1.50x 2.04x 1.99x 2.64x 1.47x
Ratio of earnings to fixed charges and preferred stock
dividends, excluding interest on annuities and
financial products (2)............................... 1.74x 2.99x 5.09x 6.00x 3.30x 3.89x 3.01x
</TABLE>
- ------------------------
(1) Excludes preferred stock dividends.
(2) Excludes interest credited to annuity and financial products of $314.7
million, $576.7 million, $506.8 million, $408.5 million and $134.7 million
for the years ended December 31, 1990, 1991, 1992, 1993 and 1994,
respectively, and $51.9 million and $432.8 million for the nine months ended
September 30, 1994 and 1995, respectively.
4
<PAGE>
DESCRIPTION OF DEBT SECURITIES
The Debt Securities offered hereby, consisting of notes, debentures and
other evidences of indebtedness, are to be issued in one or more series
constituting either senior Debt Securities ("Senior Debt Securities") or
subordinated Debt Securities ("Subordinated Debt Securities"). The Debt
Securities will be issued pursuant to indentures described below (as applicable,
the "Senior Indenture" or the "Subordinated Indenture", each, an "Indenture"
and, together, the "Indentures"), in each case between Conseco and the trustee
identified therein (the "Trustee"), the forms of which have been filed as
exhibits to the Registration Statement of which this Prospectus forms a part.
Except for the subordination provisions of the Subordinated Indenture, for which
there are no counterparts in the Senior Indenture, the provisions of the
Subordinated Indenture are substantially identical in substance to the
provisions of the Senior Indenture that bear the same section numbers.
The statements herein relating to the Debt Securities and the following
summaries of certain general provisions of the Indentures do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, all the provisions of the Indentures (as they may be amended or supplemented
from time to time), including the definitions therein of certain terms
capitalized in this Prospectus. All article and section references appearing
herein are to articles and sections of the applicable Indenture and whenever
particular Sections or defined terms of the Indentures (as they may be amended
or supplemented from time to time) are referred to herein or in a Prospectus
Supplement, such Sections or defined terms are incorporated herein or therein by
reference.
GENERAL
The Debt Securities will be unsecured obligations of Conseco. The Indentures
do not limit the aggregate amount of Debt Securities which may be issued
thereunder, nor do they limit the incurrence or issuance of other secured or
unsecured debt of Conseco. The Debt Securities issued under the Senior Indenture
will be unsecured and will rank PARI PASSU with all other unsecured and
unsubordinated obligations of Conseco. The Debt Securities issued under the
Subordinated Indenture will be subordinate and junior in right of payment, to
the extent and in the manner set forth in the Subordinated Indenture, to all
Senior Indebtedness of Conseco. See "-- Subordination under the Subordinated
Indenture."
Reference is made to the applicable Prospectus Supplement which will
accompany this Prospectus for a description of the specific series of Debt
Securities being offered thereby, including: (1) the title, designation and
purchase price, of such Debt Securities; (2) any limit upon the aggregate
principal amount of such Debt Securities; (3) the date or dates on which the
principal of and premium, if any, on such Debt Securities will mature or the
method of determining such date or dates; (4) the rate or rates (which may be
fixed or variable) at which such Debt Securities will bear interest, if any, or
the method of calculating such rate or rates; (5) the date or dates from which
interest, if any, will accrue or the method by which such date or dates will be
determined; (6) the date or dates on which interest, if any, will be payable and
the record date or dates therefor; (7) the place or places where principal of,
premium, if any, and interest, if any, on such Debt Securities will be payable;
(8) the period or periods within which, the price or prices at which, the
currency or currencies (including currency unit or units) in which, and the
terms and conditions upon which, such Debt Securities may be redeemed, in whole
or in part, at the option of Conseco; (9) the obligation, if any, of Conseco to
redeem or purchase such Debt Securities pursuant to any sinking fund or
analogous provisions or upon the happening of a specified event and the period
or periods within which, the price or prices at which and the other terms and
conditions upon which, such Debt Securities shall be redeemed or purchased, in
whole or in part, pursuant to such obligations; (10) the denominations in which
such Debt Securities are authorized to be issued; (11) the currency or currency
unit for which Debt Securities may be purchased or in which Debt Securities may
be denominated and/or the currency or currencies (including currency unit or
units) in which principal of, premium, if any, and interest, if any, on such
Debt Securities will be payable and whether Conseco or the holders of any such
Debt Securities may elect to receive payments in respect of such Debt Securities
in a currency or currency unit other than that in which such Debt Securities are
stated to be payable; (12) if other than the principal amount thereof, the
portion of the principal amount of such Debt Securities which will be payable
upon declaration of the acceleration of the maturity thereof or the method
5
<PAGE>
by which such portion shall be determined; (13) the person to whom any interest
on any such Debt Security shall be payable if other than the person in whose
name such Debt Security is registered on the applicable record date; (14) any
addition to, or modification or deletion of, any Event of Default or any
covenant of Conseco specified in the Indenture with respect to such Debt
Securities; (15) the application, if any, of such means of defeasance or
covenant defeasance as may be specified for such Debt Securities; (16) whether
such Debt Securities are to be issued in whole or in part in the form of one or
more temporary or permanent global securities and, if so, the identity of the
depositary for such global security or securities; (17) any United States
Federal income tax considerations applicable to holders of the Debt Securities;
and (18) any other special terms pertaining to such Debt Securities. Unless
otherwise specified in the applicable Prospectus Supplement, the Debt Securities
will not be listed on any securities exchange. (Section 3.1.)
Unless otherwise specified in the applicable Prospectus Supplement, Debt
Securities will be issued in fully-registered form without coupons. Where Debt
Securities of any series are issued in bearer form, the special restrictions and
considerations, including special offering restrictions and special Federal
income tax considerations, applicable to any such Debt Securities and to payment
on and transfer and exchange of such Debt Securities will be described in the
applicable Prospectus Supplement. Bearer Debt Securities will be transferable by
delivery. (Section 3.5.)
Debt Securities may be sold at a substantial discount below their stated
principal amount, bearing no interest or interest at a rate which at the time of
issuance is below market rates. Certain Federal income tax consequences and
special considerations applicable to any such Debt Securities, or to Debt
Securities issued at par that are treated as having been issued at a discount,
will be described in the applicable Prospectus Supplement.
If the purchase price of any of the Debt Securities is payable in one or
more foreign currencies or currency units or if any Debt Securities are
denominated in one or more foreign currencies or currency units or if the
principal of, premium, if any, or interest, if any, on any Debt Securities is
payable in one or more foreign currencies or currency units, or by reference to
commodity prices, equity indices or other factors, the restrictions, elections,
certain U.S. Federal income tax considerations, specific terms and other
information with respect to such issue of Debt Securities and such foreign
currency or currency units or commodity prices, equity indices or other factors
will be set forth in the applicable Prospectus Supplement. In general, holders
of such series of Debt Securities may receive a principal amount on any
principal payment date, or a payment of premium, if any, on any premium interest
payment date or a payment of interest on any interest payment date, that is
greater than or less than the amount of principal, premium, if any, or interest
otherwise payable on such dates, depending on the value on such dates of the
applicable currency, commodity, equity index or other factor.
PAYMENT, REGISTRATION, TRANSFER AND EXCHANGE
Unless otherwise provided in the applicable Prospectus Supplement, payments
in respect of the Debt Securities will be made in the designated currency at the
office or agency of Conseco maintained for that purpose as Conseco may designate
from time to time, except that, at the option of Conseco, interest payments, if
any, on Debt Securities in registered form may be made (i) by checks mailed to
the holders of Debt Securities entitled thereto at their registered addresses or
(ii) by wire transfer to an account maintained by the person entitled thereto as
specified in the Register. (Sections 3.7(a) and 9.2.) Unless otherwise indicated
in the applicable Prospectus Supplement, payment of any installment of interest
on Debt Securities in registered form will be made to the person in whose name
such Debt Security is registered at the close of business on the regular record
date for such interest. (Section 3.7(a).)
Payment in respect of Debt Securities in bearer form will be made in the
currency and in the manner designated in the Prospectus Supplement, subject to
any applicable laws and regulations, at such paying agencies outside the United
States as Conseco may appoint from time to time. The paying agents outside the
United States initially appointed by Conseco for a series of Debt Securities
will be named in the Prospectus Supplement. Conseco may at any time designate
additional paying agents or rescind the designation of any paying agents, except
that, if Debt Securities of a series are issuable as Registered Securities,
Conseco will be required to maintain at least one paying agent in each Place of
Payment for such series and, if Debt
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Securities of a series are issuable as Bearer Securities, Conseco will be
required to maintain a paying agent in a Place of Payment outside the United
States where Debt Securities of such series and any coupons appertaining thereto
may be presented and surrendered for payment. (Section 9.2.)
Unless otherwise provided in the applicable Prospectus Supplement, Debt
Securities in registered form will be transferable or exchangeable at the agency
of Conseco maintained for such purpose as designated by Conseco from time to
time. (Sections 3.5 and 9.2.) Debt Securities may be transferred or exchanged
without service charge, other than any tax or other governmental charge imposed
in connection therewith. (Section 3.5.)
GLOBAL DEBT SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more fully registered global securities (a "Registered Global
Security") that will be deposited with a depositary (the "Depositary") or with a
nominee for the depositary identified in the applicable Prospectus Supplement.
In such a case, one or more Registered Global Securities will be issued in a
denomination or aggregate denominations equal to the portion of the aggregate
principal amount of outstanding Debt Securities of the series to be represented
by such Registered Global Security or Securities. (Section 3.3 of each
Indenture.) Unless and until it is exchanged in whole or in part for Debt
Securities in definitive certificated form, a Registered Global Security may not
be registered for transfer or exchange except as a whole by the depositary for
such Registered Global Security to a nominee of such Depositary or by a nominee
of such Depositary to such Depositary or another nominee of such Depositary or
by such Depositary or any such nominee to a successor Depositary for such series
or a nominee of such successor Depositary and except in the circumstances
described in the applicable Prospectus Supplement. (Section 3.5.)
The specific terms of the depository arrangement with respect to any portion
of a series of Debt Securities to be represented by a Registered Global Security
will be described in the applicable Prospectus Supplement. Conseco expects that
the following provisions will apply to such depository arrangements.
Ownership of beneficial interests in a Registered Global Security will be
limited to participants or persons that may hold interests through participants
(as such term is defined below). Upon the issuance of any Registered Global
Security, and the deposit of such Registered Global Security with or on behalf
of the Depositary for such Registered Global Security, the Depositary will
credit, on its book-entry registration and transfer system, the respective
principal amounts of the Debt Securities represented by such Registered Global
Security to the accounts of institutions ("participants") that have accounts
with the Depositary or its nominee. The accounts to be credited will be
designated by the underwriters or agents engaging in the distribution of such
Debt Securities or by Conseco, if such Debt Securities are offered and sold
directly by Conseco. Ownership of beneficial interests by participants in such
Registered Global Security will be shown on, and the transfer of such beneficial
interests will be effected only through, records maintained by the Depositary
for such Registered Global Security or by its nominee. Ownership of beneficial
interests in such Registered Global Security by persons that hold through
participants will be shown on, and the transfer of such beneficial interests
within such participants will be effected only through, records maintained by
such participants. The laws of some jurisdictions require that certain
purchasers of securities take physical delivery of such securities in
certificated form. The foregoing limitations and such laws may impair the
ability to transfer beneficial interests in such Registered Global Security.
So long as the Depositary for a Registered Global Security, or its nominee,
is the registered owner of such Registered Global Security, such Depositary or
such nominee, as the case may be, will be considered the sole owner or holder of
the Debt Securities represented by such Registered Global Security for all
purposes under the applicable Indenture. Unless otherwise specified in the
applicable Prospectus Supplement and except as specified below, owners of
beneficial interests in such Registered Global Security will not be entitled to
have Debt Securities of the series represented by such Registered Global
Security registered in their names, will not receive or be entitled to receive
physical delivery of Debt Securities of such series in certificated form and
will not be considered the holders thereof for any purposes under the relevant
Indenture. (Section 3.8.) Accordingly, each person owning a beneficial interest
in such Registered Global Security must rely on the procedures of the Depositary
and, if such person is not a participant, on the
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procedures of the participant through which such person owns its interest, to
exercise any rights of a holder under the relevant Indenture. The Depositary may
grant proxies and otherwise authorize participants to give or take any request,
demand, authorization, direction, notice, consent, waiver or other action which
a holder is entitled to give or take under the relevant Indenture. Conseco
understands that, under existing industry practices, if Conseco requests any
action of holders or if any owner of a beneficial interest in such Registered
Global Security desires to give any notice or take any action which a holder is
entitled to give or take under the relevant Indenture, the Depositary would
authorize the participants to give such notice or take such action, and such
participants would authorize beneficial owners owning through such participants
to give such notice or take such action or would otherwise act upon the
instructions of beneficial owners owning through them.
Unless otherwise specified in the applicable Prospectus Supplement, payments
with respect to principal, premium, if any, and interest, if any, on Debt
Securities represented by a Registered Global Security registered in the name of
a Depositary or its nominee will be made to such Depositary or its nominee, as
the case may be, as the registered owner of such Registered Global Security.
Conseco expects that the Depositary for any Debt Securities represented by a
Registered Global Security, upon receipt of any payment of principal, premium or
interest, will immediately credit participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of such Registered Global Security as shown on the records of such
Depositary. Conseco also expects that payments by participants to owners of
beneficial interests in such Registered Global Security held through such
participants will be governed by standing instructions and customary practices,
as is now the case with the securities held for the accounts of customers
registered in "street names," and will be the responsibility of such
participants. None of Conseco, the respective Trustees or any agent of Conseco
or the respective Trustees shall have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
interests of a Registered Global Security, or for maintaining, supervising or
reviewing any records relating to such beneficial interests. (Section 3.8.)
Unless otherwise specified in the applicable Prospectus Supplement, if the
Depositary for any Debt Securities represented by a Registered Global Security
is at any time unwilling or unable to continue as Depositary or ceases to be a
clearing agency registered under the Exchange Act and a duly registered
successor Depositary is not appointed by Conseco within 90 days, Conseco will
issue such Debt Securities in definitive certificated form in exchange for such
Registered Global Security. In addition, Conseco may at any time and in its sole
discretion determine not to have any of the Debt Securities of a series
represented by one or more Registered Global Securities and, in such event, will
issue Debt Securities of such series in definitive certificated form in exchange
for all of the Registered Global Security or Securities representing such Debt
Securities. (Section 3.5.)
The Debt Securities of a series may also be issued in whole or in part in
the form of one or more bearer global securities (a "Bearer Global Security")
that will be deposited with a depository, or with a nominee for such depository,
identified in the applicable Prospectus Supplement. Any such Bearer Global
Security may be issued in temporary or permanent form. (Section 3.4.) The
specific terms and procedures, including the specific terms of the depository
arrangement, with respect to any portion of a series of Debt Securities to be
represented by one or more Bearer Global Securities will be described in the
applicable Prospectus Supplement.
CONSOLIDATION, MERGER OR SALE BY CONSECO
Conseco shall not consolidate with or merge into any other corporation or
sell its assets substantially as an entirety, unless: (i) the corporation formed
by such consolidation or into which Conseco is merged or the corporation which
acquires its assets is organized in the United States; (ii) the corporation
formed by such consolidation or into which Conseco is merged expressly assumes
all of the obligations of Conseco under each Indenture; and (iii) immediately
after giving effect to such transaction, no Default or Event of Default shall
have happened and be continuing. Upon any such consolidation, merger or sale,
the successor corporation formed by such consolidation, or into which Conseco is
merged or to which such sale is made, shall succeed to, and be substituted for
Conseco under each Indenture. (Section 7.1.)
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EVENTS OF DEFAULT, NOTICE AND CERTAIN RIGHTS ON DEFAULT
Each Indenture provides that, if an Event of Default specified therein
occurs with respect to the Debt Securities of any series and is continuing, the
Trustee for such series or the holders of 25% in aggregate principal amount of
all of the outstanding Debt Securities of that series, by written notice to
Conseco (and to the Trustee for such series, if notice is given by such holders
of Debt Securities), may declare the principal of (or, if the Debt Securities of
that series are Original Issue Discount Securities or Indexed Securities, such
portion of the principal amount specified in the Prospectus Supplement) and
accrued interest on all the Debt Securities of that series to be due and payable
(provided, with respect to any Debt Securities issued under the Subordinated
Indenture, that the payment of principal and interest on such Debt Securities
shall remain subordinated to the extent provided in Article 12 of the
Subordinated Indenture). (Section 5.2.)
Events of Default with respect to Debt Securities of any series are defined
in each Indenture as being: (a) default for 30 days in payment of any interest
on any Debt Security of that series or any coupon appertaining thereto or any
additional amount payable with respect to Debt Securities of such series as
specified in the applicable Prospectus Supplement when due; (b) default in
payment of principal, or premium, if any, at maturity or on redemption or
otherwise, or in the making of a mandatory sinking fund payment of any Debt
Securities of that series when due; (c) default for 60 days after notice to
Conseco by the Trustee for such series, or by the holders of 25% in aggregate
principal amount of the Debt Securities of such series then outstanding, in the
performance of any other agreement in the Debt Securities of that series, in the
Indenture or in any supplemental indenture or board resolution referred to
therein under which the Debt Securities of that series may have been issued; (d)
default resulting in acceleration of other indebtedness of Conseco for borrowed
money where the aggregate principal amount so accelerated exceeds $25 million
and such acceleration is not rescinded or annulled within 30 days after the
written notice thereof to Conseco by the Trustee or to Conseco and the Trustee
by the holders of 25% in aggregate principal amount of the Debt Securities of
such series then outstanding, provided that such Event of Default will be
remedied, cured or waived if the default that resulted in the acceleration of
such other indebtedness is remedied, cured or waived; and (e) certain events of
bankruptcy, insolvency or reorganization of Conseco. (Section 5.1.) Events of
Default with respect to a specified series of Debt Securities may be added to
the Indenture and, if so added, will be described in the applicable Prospectus
Supplement. (Sections 3.1 and 5.1(7).)
Each Indenture provides that the Trustee will, within 90 days after the
occurrence of a Default with respect to the Debt Securities of any series, give
to the holders of the Debt Securities of that series notice of all Defaults
known to it unless such Default shall have been cured or waived; PROVIDED that
except in the case of a Default in payment on the Debt Securities of that
series, the Trustee may withhold the notice if and so long as a committee of its
Responsible Officers in good faith determines that withholding such notice is in
the interests of the holders of the Debt Securities of that series. (Section
6.6.) "Default" means any event which is, or after notice or passage of time or
both, would be, an Event of Default. (Section 1.1.)
Each Indenture provides that the holders of a majority in aggregate
principal amount of the Debt Securities of each series affected (with each such
series voting as a class) may, subject to certain limited conditions, direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee for such series, or exercising any trust or power conferred on such
Trustee. (Section 5.8.)
Each Indenture includes a covenant that Conseco will file annually with the
Trustee a certificate as to Conseco's compliance with all conditions and
covenants of such Indenture. (Section 9.5.)
The holders of a majority in aggregate principal amount of any series of
Debt Securities by notice to the Trustee for such series may waive, on behalf of
the holders of all Debt Securities of such series, any past Default or Event of
Default with respect to that series and its consequences except a Default or
Event of Default in the payment of the principal of, premium, if any, or
interest, if any, on any Debt Security, and except in respect of an Event of
Default resulting from the breach of a covenant or provision of either Indenture
which, pursuant to the applicable Indenture, cannot be amended or modified
without the consent of the holders of each outstanding Debt Security of such
series affected. (Section 5.7.)
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MODIFICATION OF THE INDENTURES
Each Indenture contains provisions permitting Conseco and the Trustee to
enter into one or more supplemental indentures without the consent of the
holders of any of the Debt Securities in order (i) to evidence the succession of
another corporation to Conseco and the assumption of the covenants of Conseco by
a successor to Conseco; (ii) to add to the covenants of Conseco or surrender any
right or power of Conseco; (iii) to add additional Events of Default with
respect to any series of Debt Securities; (iv) to add or change any provisions
to such extent as necessary to permit or facilitate the issuance of Debt
Securities in bearer form; (v) to change or eliminate any provision affecting
only Debt Securities not yet issued; (vi) to secure the Debt Securities; (vii)
to establish the form or terms of Debt Securities; (viii) to evidence and
provide for successor Trustees; (ix) if allowed without penalty under applicable
laws and regulations, to permit payment in respect of Debt Securities in bearer
form in the United States; (x) to correct any defect or supplement any
inconsistent provisions or to make any other provisions with respect to matters
or questions arising under such Indenture, provided that such action does not
adversely affect the interests of any holder of Debt Securities of any series;
or (xi) to cure any ambiguity or correct any mistake. (Section 8.1.)
Each Indenture also contains provisions permitting Conseco and the Trustee,
with the consent of the holders of a majority in aggregate principal amount of
the outstanding Debt Securities affected by such supplemental indenture (with
the Debt Securities of each series voting as a class), to execute supplemental
indentures adding any provisions to or changing or eliminating any of the
provisions of such Indenture or any supplemental indenture or modifying the
rights of the holders of Debt Securities of such series, except that, without
the consent of the holder of each Debt Security so affected, no such
supplemental indenture may: (i) change the time for payment of principal or
premium, if any, or interest on any Debt Security; (ii) reduce the principal of,
or any installment of principal of, or premium, if any, or interest on any Debt
Security, or change the manner in which the amount of any of the foregoing is
determined; (iii) reduce the amount of premium, if any, payable upon the
redemption of any Debt Security; (iv) reduce the amount of principal payable
upon acceleration of the maturity of any Original Issue Discount or Index
Security; (v) change the currency or currency unit in which any Debt Security or
any premium or interest thereon is payable; (vi) impair the right to institute
suit for the enforcement of any payment on or with respect to any Debt Security;
(vii) reduce the percentage in principal amount of the outstanding Debt
Securities affected thereby the consent of whose holders is required for
modification or amendment of such Indenture or for waiver of compliance with
certain provisions of the Indenture or for waiver of certain defaults; (viii)
change the obligation of Conseco to maintain an office or agency in the places
and for the purposes specified in such Indenture; (ix) modify the provisions
relating to the subordination of outstanding Debt Securities of any series in a
manner adverse to the holders thereof; or (x) modify the provisions relating to
waiver of certain defaults or any of the foregoing provisions. (Section 8.2.)
SUBORDINATION UNDER THE SUBORDINATED INDENTURE
In the Subordinated Indenture, Conseco will covenant and agree that any
Subordinated Debt Securities issued thereunder are subordinate and junior in
right of payment to all Senior Indebtedness to the extent provided in the
Subordinated Indenture. (Section 12.1 of the Subordinated Indenture.) The
Subordinated Indenture defines the term "Senior Indebtedness" as the principal,
premium, if any, and interest on: (i) all indebtedness of Conseco, whether
outstanding on the date of the issuance of Subordinated Debt Securities or
thereafter created, incurred or assumed, which is for money borrowed, or
evidenced by a note or similar instrument given in connection with the
acquisition of any business, properties or assets, including securities; (ii)
any indebtedness of others of the kinds described in the preceding clause (i)
for the payment of which Conseco is responsible or liable as guarantor or
otherwise; and (iii) amendments, renewals, extensions and refundings of any such
indebtedness, unless in any instrument or instruments evidencing or securing
such indebtedness or pursuant to which the same is outstanding, or in any such
amendment, renewal, extension or refunding, it is expressly provided that such
indebtedness is not superior in right of payment to Subordinated Debt
Securities. The Senior Indebtedness shall continue to be Senior Indebtedness and
entitled to the benefits of the subordination provisions irrespective of any
amendment, modification or waiver of any term of the Senior Indebtedness or
extension or renewal of the Senior Indebtedness. (Section 12.2 of the
Subordinated Indenture.)
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If (i) Conseco defaults in the payment of any principal, or premium, if any,
or interest on any Senior Indebtedness when the same becomes due and payable,
whether at maturity or at a date fixed for prepayment or declaration or
otherwise or (ii) an event of default occurs with respect to any Senior
Indebtedness permitting the holders thereof to accelerate the maturity thereof
and written notice of such event of default (requesting that payments on
Subordinated Debt Securities cease) is given to Conseco by the holders of Senior
Indebtedness, then unless and until such default in payment or event of default
shall have been cured or waived or shall have ceased to exist, no direct or
indirect payment (in cash, property or securities, by set-off or otherwise)
shall be made or agreed to be made on account of the Subordinated Debt
Securities or interest thereon or in respect of any repayment, redemption,
retirement, purchase or other acquisition of Subordinated Debt Securities.
(Section 12.4 of the Subordinated Indenture.)
In the event of (i) any insolvency, bankruptcy, receivership, liquidation,
reorganization, readjustment, composition or other similar proceeding relating
to Conseco, its creditors or its property, (ii) any proceeding for the
liquidation, dissolution or other winding-up of Conseco, voluntary or
involuntary, whether or not involving insolvency or bankruptcy proceedings,
(iii) any assignment by Conseco for the benefit of creditors or (iv) any other
marshalling of the assets of Conseco, all Senior Indebtedness (including,
without limitation, interest accruing after the commencement of any such
proceeding, assignment or marshalling of assets) shall first be paid in full
before any payment or distribution, whether in cash, securities or other
property, shall be made by Conseco on account of Subordinated Debt Securities.
In any such event, any payment or distribution, whether in cash, securities or
other property (other than securities of Conseco or any other corporation
provided for by a plan of reorganization or readjustment, the payment of which
is subordinate, at least to the extent provided in the subordination provisions
of the Subordinated Indenture with respect to the indebtedness evidenced by
Subordinated Debt Securities, to the payment of all Senior Indebtedness at the
time outstanding and to any securities issued in respect thereof under any such
plan of reorganization or readjustment), which would otherwise (but for the
subordination provisions) be payable or deliverable in respect of Subordinated
Debt Securities (including any such payment or distribution which may be payable
or deliverable by reason of the payment of any other indebtedness of Conseco
being subordinated to the payment of Subordinated Debt Securities) shall be paid
or delivered directly to the holders of Senior Indebtedness, or to their
representative or trustee, in accordance with the priorities then existing among
such holders until all Senior Indebtedness shall have been paid in full.
(Section 12.3 of the Subordinated Indenture.) No present or future holder of any
Senior Indebtedness shall be prejudiced in the right to enforce subordination of
the indebtedness evidenced by Subordinated Debt Securities by any act or failure
to act on the part of Conseco. (Section 12.9 of the Subordinated Indenture.)
Senior Indebtedness shall not be deemed to have been paid in full unless the
holders thereof shall have received cash, securities or other property equal to
the amount of such Senior Indebtedness then outstanding. Upon the payment in
full of all Senior Indebtedness, the holders of Subordinated Debt Securities
shall be subrogated to all the rights of any holders of Senior Indebtedness to
receive any further payments or distributions applicable to the Senior
Indebtedness until all Subordinated Debt Securities shall have been paid in
full, and such payments or distributions received by any holder of Subordinated
Debt Securities, by reason of such subrogation, of cash, securities or other
property which otherwise would be paid or distributed to the holders of Senior
Indebtedness, shall, as between Conseco and its creditors other than the holders
of Senior Indebtedness, on the one hand, and the holders of Subordinated Debt
Securities, on the other, be deemed to be a payment by Conseco on account of
Senior Indebtedness, and not on account of Subordinated Debt Securities.
(Section 12.7 of the Subordinated Indenture.)
The Subordinated Indenture provides that the foregoing subordination
provisions, insofar as they relate to any particular issue of Subordinated Debt
Securities, may be changed prior to such issuance. Any such change would be
described in the applicable Prospectus Supplement relating to such Subordinated
Debt Securities.
DEFEASANCE AND COVENANT DEFEASANCE
If indicated in the applicable Prospectus Supplement, Conseco may elect
either (i) to defease and be discharged from any and all obligations with
respect to the Debt Securities of or within any series (except as
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otherwise provided in the relevant Indenture) ("defeasance") or (ii) to be
released from its obligations with respect to certain covenants applicable to
the Debt Securities of or within any series ("covenant defeasance"), upon the
deposit with the relevant Trustee (or other qualifying trustee), in trust for
such purpose, of money and/or Government Obligations which through the payment
of principal and interest in accordance with their terms will provide money in
an amount sufficient, without reinvestment, to pay the principal of and any
premium or interest on such Debt Securities to Maturity or redemption, as the
case may be, and any mandatory sinking fund or analogous payments thereon. As a
condition to defeasance or covenant defeasance, Conseco must deliver to the
Trustee an Opinion of Counsel to the effect that the Holders of such Debt
Securities will not recognize income, gain or loss for Federal income tax
purposes as a result of such defeasance or covenant defeasance and will be
subject to Federal income tax on the same amounts and in the same manner and at
the same times as would have been the case if such defeasance or covenant
defeasance had not occurred. Such Opinion of Counsel, in the case of defeasance
under clause (i) above, must refer to and be based upon a ruling of the Internal
Revenue Service or a change in applicable Federal income tax law occurring after
the date of the relevant Indenture. (Article 4.) If indicated in the applicable
Prospectus Supplement, in addition to obligations of the United States or an
agency or instrumentality thereof, Government Obligations may include
obligations of the government or an agency or instrumentality of the government
issuing the currency or currency unit in which Debt Securities of such series
are payable. (Section 3.1.)
In addition, with respect to the Subordinated Indenture, in order to be
discharged no event or condition shall exist that, pursuant to certain
provisions described under "-- Subordination under the Subordinated Indenture"
above, would prevent Conseco from making payments of principal of (and premium,
if any) and interest on Subordinated Debt Securities at the date of the
irrevocable deposit referred to above. (Section 4.6(j) of the Subordinated
Indenture.)
Conseco may exercise its defeasance option with respect to such Debt
Securities notwithstanding its prior exercise of its covenant defeasance option.
If Conseco exercises its defeasance option, payment of such Debt Securities may
not be accelerated because of a Default or an Event of Default. (Section 4.4.)
If Conseco exercises its covenant defeasance option, payment of such Debt
Securities may not be accelerated by reason of a Default or an Event of Default
with respect to the covenants to which such covenant defeasance is applicable.
However, if such acceleration were to occur by reason of another Event of
Default, the realizable value at the acceleration date of the money and
Government Obligations in the defeasance trust could be less than the principal
and interest then due on such Debt Securities, in that the required deposit in
the defeasance trust is based upon scheduled cash flow rather than market value,
which will vary depending upon interest rates and other factors.
THE TRUSTEES
LTCB Trust Company will be the Trustee under the Senior Indenture. Star
Bank, National Association will be the Trustee under the Subordinated Indenture.
Conseco may also maintain banking and other commercial relationships with each
of the Trustees and their affiliates in the ordinary course of business.
DESCRIPTION OF CAPITAL STOCK
At November 1, 1995, the authorized capital stock of Conseco was 520,000,000
shares, consisting of:
(a) 20,000,000 shares of Preferred Stock, of which 5,750,000 shares were
designated as Series D Cumulative Convertible Preferred Stock (the "Series D
Preferred Stock"), of which 5,669,725 shares were outstanding; and
(b) 500,000,000 shares of Common Stock, of which 20,237,224 shares were
outstanding.
In general, the classes of authorized capital stock are afforded preferences
with respect to dividends and liquidation rights in the order listed above. The
Board of Directors of Conseco is empowered, without approval of the
shareholders, to cause the Preferred Stock to be issued in one or more series,
with the numbers of shares of each series and the rights, preferences and
limitations of each series to be determined
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by it including, without limitation, the dividend rights, conversion rights,
redemption rights and liquidation preferences, if any, of any wholly unissued
series of Preferred Stock (or of the entire class of Preferred Stock if none of
such shares have been issued), the number of shares constituting each such
series and the terms and conditions of the issue thereof. The descriptions set
forth below do not purport to be complete and are qualified in their entirety by
reference to the Amended and Restated Articles of Incorporation of Conseco, as
amended (the "Articles of Incorporation").
The Prospectus Supplement relating to an offering of Common Stock will
describe terms relevant thereto, including the number of shares offered, the
initial offering price, market price and dividend information.
The applicable Prospectus Supplement will describe the following terms of
any Preferred Stock in respect of which this Prospectus is being delivered (to
the extent applicable to such Preferred Stock): (i) the specific designation,
number of shares, seniority and purchase price; (ii) any liquidation preference
per share; (iii) any date of maturity; (iv) any redemption, repayment or sinking
fund provisions; (v) any dividend rate or rates and the dates on which any such
dividends will be payable (or the method by which such rates or dates will be
determined); (vi) any voting rights; (vii) if other than the currency of the
United States of America, the currency or currencies, including composite
currencies, in which such Preferred Stock is denominated and/or in which
payments will or may be payable; (viii) the method by which amounts in respect
of such Preferred Stock may be calculated and any commodities, currencies or
indices, or value, rate or price, relevant to such calculation; (ix) whether the
Preferred Stock is convertible or exchangeable and, if so, the securities or
rights into which such Preferred Stock is convertible or exchangeable (which may
include other Preferred Stock, Debt Securities, Common Stock or other securities
or rights of the Company (including rights to receive payment in cash or
securities based on the value, rate or price of one or more specified
commodities, currencies or indices) or a combination of the foregoing), and the
terms and conditions upon which such conversions or exchanges will be effected,
including the initial conversion or exchange prices or rates, the conversion or
exchange period and any other related provisions; (x) the place or places where
dividends and other payments on the Preferred Stock will be payable; and (xi)
any additional voting, dividend, liquidation, redemption and other rights,
preferences, privileges, limitations and restrictions.
As described under "Description of Depositary Shares", the Company may, at
its option, elect to offer depositary shares ("Depositary Shares") evidenced by
depositary receipts ("Depositary Receipts"), each representing an interest (to
be specified in the applicable Prospectus Supplement relating to the particular
series of the Preferred Stock) in a share of the particular series of the
Preferred Stock issued and deposited with a Preferred Stock Depositary (as
defined herein).
All shares of Preferred Stock offered hereby, or issuable upon conversion,
exchange or exercise of Securities, will, when issued, be fully paid and
non-assessable.
COMMON STOCK
DIVIDENDS. Except as provided below, holders of Common Stock are entitled
to receive dividends and other distributions in cash, stock or property of the
Company, when, as and if declared by the Board of Directors out of assets or
funds of the Company legally available therefor and shall share equally on a per
share basis in all such dividends and other distributions (subject to the rights
of holders of Preferred Stock).
VOTING RIGHTS. At every meeting of shareholders, every holder of Common
Stock is entitled to one vote per share. Subject to any voting rights which may
be granted to holders of Preferred Stock any action submitted to shareholders is
approved if the number of votes cast in favor of such action exceeds the number
of votes against, except where other provision is made by law and subject to
applicable quorum requirements.
LIQUIDATION RIGHTS. In the event of any liquidation, dissolution or
winding-up of the business of the Company, whether voluntary or involuntary (any
such event, a "Liquidation"), the holders of Common Stock are entitled to share
equally in the assets available for distribution after payment of all
liabilities and provision for the liquidation preference of any shares of
Preferred Stock then outstanding.
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MISCELLANEOUS. The holders of Common Stock have no preemptive rights,
cumulative voting rights, subscription rights, or conversion rights and the
Common Stock is not subject to redemption.
The transfer agent and registrar with respect to the Common Stock is First
Union National Bank of North Carolina.
All shares of Common Stock offered hereby, or issuable upon conversion,
exchange or exercise of Securities, will, when issued, be fully paid and
non-assessable.
SERIES D PREFERRED STOCK
DIVIDENDS. Subject to the rights of holders of other classes of stock
ranking on a parity with or senior to the Series D Preferred Stock which may
from time to time be issued by the Company, the holders of Series D Preferred
Stock are entitled to receive, when, as and if the Board of Directors declares a
dividend on the Series D Preferred Stock, out of assets legally available for
dividends, cumulative preferential cash dividends from the issue date of the
Series D Preferred Stock (January 26, 1993), accruing at the rate per share of
$3.25 per annum or $.8125 per quarter, payable quarterly in arrears on the 15th
day of each January, April, July and October or, if any such date is not a
business day, on the next succeeding business day.
Dividends on the Series D Preferred Stock accrue whether or not the Company
has earnings, whether or not there are funds legally available for the payment
of such dividends and whether or not such dividends are declared, and will
accumulate to the extent they are not paid on the dividend payment date for the
quarter for which they accrue. Accumulated unpaid dividends do not bear
interest.
VOTING RIGHTS. Except as indicated below, or except as expressly required
by applicable law, the holders of the Series D Preferred Stock have no voting
rights.
If the equivalent of six quarterly dividends payable on the Series D
Preferred Stock is in arrears, the number of directors of the Company will be
increased by two and the holders of Series D Preferred Stock, voting separately
as a class with the holders of shares of any one or more other series of
preferred stock ranking on a parity with the Series D Preferred Stock, whether
as to payment of dividends or the distribution of assets and upon which like
voting rights have been conferred and are exercisable, will be entitled to
elect, within 120 days, two directors for one-year terms to fill such vacancies,
either at the Company's next annual meeting of shareholders or at a special
meeting. Such right to elect two additional directors shall continue at each
subsequent annual meeting until all dividends in arrears have been paid or
declared and set apart for payment. Upon payment or declaration and reservation
of funds for payment of all such dividends in arrear, the term of office of each
such director so elected shall immediately terminate and the number of directors
constituting the entire Board of Directors of the Company shall be reduced by
the number of directors elected by the holders of the Series D Preferred Stock
and any other series of preferred stock ranking on a parity with the Series D
Preferred Stock as discussed above.
Unless the vote or consent of the holders of a greater number of shares
shall then be required by law, the affirmative vote or consent of the holders of
at least 66 2/3% of the outstanding shares of Series D Preferred Stock and any
one or more other series of preferred stock of the Company similarly affected,
voting separately as a single class, without regard to series, will be required
for any amendment, alteration or repeal of the Articles of Incorporation which
would adversely affect the preferences, rights, powers or privileges of the
Series D Preferred Stock and any such other series of the Company's preferred
stock. Unless the vote or consent of the holders of a greater number of shares
shall then be required by law, the affirmative vote or consent of the holders of
at least 66 2/3% of the outstanding shares of the Series D Preferred Stock and
any other series of preferred stock of the Company ranking on a parity with the
Series D Preferred Stock either as to dividends or upon distribution of assets,
voting as a single class, without regard to series, will be required to create,
authorize or issue, or reclassify any authorized stock of the Company into, or
create, authorize or issue any obligation or security convertible into or
evidencing a right to purchase, any shares of any class of stock of the Company
ranking prior to the Series D Preferred Stock or ranking prior to any other
series of Preferred Stock of the Company which ranks on a parity with the Series
D
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Preferred Stock as to dividends or upon a distribution of assets. The Articles
of Incorporation may be amended to increase the number of authorized shares of
preferred stock of the Company without the vote of the holders of the
outstanding preferred stock, including the Series D Preferred Stock.
LIQUIDATION RIGHTS. Subject to the rights of holders of other classes of
stock ranking on a parity with or senior to the Series D Preferred Stock, in the
event of any Liquidation, the holders of the Series D Preferred Stock, after
payment or provision for payment of the debts and other liabilities of the
Company, will be entitled to receive for each share of Series D Preferred Stock,
an amount equal to the sum of $50.00 and all accrued and unpaid dividends
thereon, and no more. If, upon any Liquidation, there are insufficient assets to
permit full payment of holders of Series D Preferred Stock and shares of any
other class of outstanding Preferred Stock, the holders of Series D Preferred
Stock and such other shares shall be paid ratably in proportion to the full
distributable amounts to which holders of Series D Preferred Stock and such
other shares are respectively entitled upon Liquidation.
REDEMPTION. The Series D Preferred Stock is not redeemable prior to January
22, 1996. On and after such date, the Series D Preferred Stock is redeemable in
cash at the option of the Company, in whole or in part, from time to time, at
redemption prices declining to $50.00 per share on and after January 15, 2003,
plus accrued and unpaid dividends to the date fixed for redemption.
The Series D Preferred Stock is not entitled to the benefits of any sinking
fund.
CERTAIN PROVISIONS OF THE ARTICLES OF INCORPORATION AND BY-LAWS OF CONSECO
Certain provisions of the Articles of Incorporation and the Code of By-laws
of Conseco (the "By-laws") may make it more difficult to effect a change in
control of Conseco if the Board of Directors determines that such action would
not be in the best interests of the shareholders. It could be argued, contrary
to the belief of the Board of Directors, that such provisions are not in the
best interests of the shareholders to the extent that they will have the effect
of tending to discourage possible takeover bids, which might be at prices
involving a premium over then recent market quotations for the Common Stock. The
most important of those provisions are described below.
The Articles of Incorporation authorize the establishment of a classified
Board of Directors pursuant to the By-laws. The By-laws, in turn, provide that
the Directors serve staggered three-year terms, with the members of only one
class being elected in any year.
A classified Board of Directors may increase the difficulty of removing
incumbent directors, providing such directors with enhanced ability to retain
their positions. A classified Board of Directors may also make the acquisition
of control of Conseco by a third party by means of a proxy contest more
difficult. In addition, the classification may make it more difficult to replace
a majority of directors for business reasons unrelated to a change in control.
The Articles of Incorporation provide that holders of Conseco's voting stock
shall not be entitled to vote on certain business transactions (defined to
include, among other things, certain mergers, consolidations, sales, leases,
transfers or other dispositions of a substantial part of Conseco's assets) with
certain related persons (which includes persons beneficially owning more than
10% of Conseco's outstanding voting stock), nor may such business combination
transactions be effected, unless (i) the relevant business combination shall
have been approved by two-thirds of the continuing directors or (ii) the
aggregate amount of the cash and the fair value of any consideration other than
cash to be received by any holder of Conseco's Common Stock or Preferred Stock
in the business combination for each such share of Common Stock or Preferred
Stock shall be at least equal to the highest per share price paid by the related
person in order to acquire any shares of Common Stock or Preferred Stock, as the
case may be, beneficially owned by such related person.
As discussed above, Preferred Stock may be issued from time to time in one
or more series with such rights, preferences, limitations and restrictions as
may be determined by the Board of Directors. The issuance of Preferred Stock
could be used, under certain circumstances, as a method of delaying or
preventing a change of control of Conseco and could have a detrimental effect on
the rights of holders of Common Stock, including loss of voting control.
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The provisions of the Articles of Incorporation regarding the classified
Board of Directors and certain business combination transactions may not be
amended without the affirmative approval of holders of not less than 80% of the
outstanding voting stock of Conseco.
The By-laws may be amended by majority vote of the Board of Directors.
CERTAIN PROVISIONS OF CORPORATE AND INSURANCE LAWS
In addition to Conseco's Articles of Incorporation and By-laws, certain
provisions of Indiana law may delay, deter or prevent a merger, tender offer or
other takeover attempt of Conseco.
Under the Indiana Business Corporation Law (the "IBCL"), a director may, in
considering the best interests of a corporation, consider the effects of any
action on shareholders, employees, suppliers and customers of the corporation,
on communities in which offices or other facilities of the corporation are
located, and any other factors the director considers pertinent.
The IBCL provides that no business combination (defined to include certain
mergers, sales of assets, sales of 5% or more of outstanding stock, loans,
recapitalizations or liquidations or dissolutions) involving a corporation and
an interested shareholder (defined to include any holder of 10% or more of such
corporation's voting stock) may be entered into unless (1) it has been approved
by the board of directors of the corporation or (2) (a) five years have expired
since the acquisition of shares of the corporation by the interested
shareholder, (b) all requirements of the Articles of Incorporation relating to
business combinations have been satisfied and (c) either (i) a majority of
shareholders of the corporation (excluding the interested shareholder) approve
the business combination or (ii) all shareholders are paid fair value (as
defined in the statute) for their stock. However, such law does not restrict any
offer to purchase all of a corporation's shares.
The IBCL also provides that when a target corporation (such as Conseco),
incorporated in Indiana and having its principal place of business, principal
office or substantial assets in Indiana, has a certain threshold of ownership by
Indiana residents, any acquisition which, together with its previous holdings,
gives the acquiror at least 20% of the target's voting stock triggers a
shareholder approval mechanism. If the acquiror files a statutorily required
disclosure statement, the target's management has 50 days within which to hold a
special meeting of shareholders at which all disinterested shareholders of the
target (those not affiliated with the acquiror or any officer or inside director
of the target) consider and vote upon whether the acquiror shall have voting
rights with respect to the shares of the target held by it. Without shareholder
approval, the shares acquired by the acquiror have no voting rights. If the
acquiror fails to file the statutorily required disclosure statement, the target
can redeem the acquiror's shares at a price to be determined according to
procedures devised by the target. In order for these provisions of the IBCL NOT
to apply to a particular Indiana company, the company must affirmatively so
provide in its articles of incorporation or bylaws.
In addition, the insurance laws and regulations of the jurisdictions in
which Conseco's insurance subsidiaries do business may impede or delay a
business combination involving Conseco.
DESCRIPTION OF DEPOSITARY SHARES
The description set forth below of certain provisions of the Deposit
Agreement (as defined below) and of the Depositary Shares and Depositary
Receipts summarizes the material terms of the Deposit Agreement and of the
Depositary Shares and Depositary Receipts and is qualified in its entirety by
reference to the form of Deposit Agreement and form of Depositary Receipts
relating to each series of the Preferred Stock, as well as the Company's
Articles of Incorporation or any required amendment thereto describing the
applicable series of Preferred Stock.
GENERAL
The Company may, as its option, elect to have shares of Preferred Stock be
represented by Depositary Shares. The shares of any series of the Preferred
Stock underlying the Depositary Shares will be deposited under a separate
deposit agreement (the "Deposit Agreement") to be entered into by the Company
and a bank or trust company selected by the Company (the "Preferred Stock
Depositary") a form of which will be
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filed as an exhibit to a Current Report on Form 8-K. The Prospectus Supplement
relating to a series of Depositary Shares will set forth the name and address of
the Preferred Stock Depositary. Subject to the terms of the Deposit Agreement,
each owner of a Depositary Share will be entitled, proportionately, to all the
rights, preferences and privileges of the Preferred Stock represented thereby
(including dividend, voting, redemption, conversion, exchange and liquidation
rights).
The Depositary Shares will be evidenced by Depositary Receipts issued
pursuant to the Deposit Agreement, each of which will represent the fractional
interest in the number of shares of a particular series of the Preferred Stock
described in the applicable Prospectus Supplement.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Preferred Stock Depositary will distribute all cash dividends or other
cash distributions in respect of the series of Preferred Stock represented by
the Depositary Shares to the record holders of Depositary Receipts in
proportion, insofar as possible, to the number of Depositary Shares owned by
such holders. The Depositary, however, will distribute only such amount as can
be distributed without attributing to any Depositary Share a fraction of one
cent, and any balance not so distributed will be added to and treated as part of
the next sum received by the Depositary for distribution to record holders of
Depositary Receipts then outstanding.
In the event of a distribution other than in cash in respect of the
Preferred Stock, the Preferred Stock Depositary will distribute property
received by it to the record holders of Depositary Receipts in proportion,
insofar as possible, to the number of Depositary Shares owned by such holders,
unless the Preferred Stock Depositary determines (after consultation with the
Company) that it is not feasible to make such distribution, in which case the
Preferred Stock Depositary may, with the approval of the Company, adopt such
method as it deems equitable and practicable for the purpose of effecting such
distribution, including a public or private sale, of such property, and
distribution of the net proceeds from such sale to such holders.
The amount so distributed to record holders of Depositary Receipts in any of
the foregoing cases will be reduced by any amount required to be withheld by the
Company or the Preferred Stock Depositary on account of taxes.
CONVERSION AND EXCHANGE
If any series of Preferred Stock underlying the Depositary Shares is subject
to provisions relating to its conversion or exchange, as set forth in the
applicable Prospectus Supplement relating thereto, each record holder of
Depositary Receipts will have the right or obligation to convert or exchange the
Depositary Shares represented by such Depositary Receipts pursuant to the terms
thereof.
REDEMPTION OF DEPOSITARY SHARES
If any series of Preferred Stock underlying the Depositary Shares is subject
to redemption, the Depositary Shares will be redeemed from the proceeds received
by the Preferred Stock Depositary resulting from the redemption, in whole or in
part, of the Preferred Stock held by the Preferred Stock Depositary. Whenever
the Company redeems Preferred Stock from the Preferred Stock Depositary, the
Preferred Stock Depositary will redeem as of the same redemption date a
proportionate number of Depositary Shares representing the shares of Preferred
Stock that were redeemed. If less than all the Depositary Shares are to be
redeemed, the Depositary Shares to be redeemed will be selected by lot or pro
rata as may be determined by the Company.
After the date fixed for redemption, the Depositary Shares so called for
redemption will no longer be deemed to be outstanding and all rights of the
holders of the Depositary Shares will cease, except the right to receive the
redemption price upon such redemption. Any funds deposited by the Company with
the Preferred Stock Depositary for any Depositary Shares which the holders
thereof fail to redeem shall be returned to the Company after a period of two
years from the date such funds are so deposited.
VOTING
Upon receipt of notice of any meeting at which the holders of any shares of
Preferred Stock underlying the Depositary Shares are entitled to vote, the
Preferred Stock Depositary will mail the information
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contained in such notice to the record holders of the Depositary Receipts. Each
record holder of such Depositary Receipts on the record date (which will be the
same date as the record date for the Preferred Stock) will be entitled to
instruct the Preferred Stock Depositary as to the exercise of the voting rights
pertaining to the number of shares of Preferred Stock underlying such holder's
Depositary Shares. The Preferred Stock Depositary will endeavor, insofar as
practicable, to vote the number of shares of Preferred Stock underlying such
Depositary Shares in accordance with such instructions, and the Company will
agree to take all reasonable action which may be deemed necessary by the
Preferred Stock Depositary in order to enable the Preferred Stock Depositary to
do so. The Preferred Stock Depositary will abstain from voting any of the
Preferred Stock to the extent it does not receive specific written instructions
from holders of Depositary Receipts representing such Preferred Stock.
RECORD DATE
Whenever (i) any cash dividend or other cash distribution shall become
payable, any distribution other than cash shall be made, or any rights,
preferences or privileges shall be offered with respect to the Preferred Stock,
or (ii) the Preferred Stock Depositary shall receive notice of any meeting at
which holders of Preferred Stock are entitled to vote or of which holders of
Preferred Stock are entitled to notice, or of the mandatory conversion of, or
any election on the part of the Company to call for the redemption of, any
Preferred Stock, the Preferred Stock Depositary shall in each such instance fix
a record date (which shall be the same as the record date for the Preferred
Stock) for the determination of the holders of Depositary Receipts (x) that
shall be entitled to receive such dividend, distribution, rights, preferences or
privileges or the net proceeds of the sale thereof or (y) that shall be entitled
to give instructions for the exercise of voting rights at any such meeting or to
receive notice of such meeting or of such redemption or conversion, subject to
the provisions of the Deposit Agreement.
WITHDRAWAL OF PREFERRED STOCK
Upon surrender of Depositary Receipts at the principal office of the
Preferred Stock Depositary, upon payment of any unpaid amount due the Preferred
Stock Depositary, and subject to the terms of the Deposit Agreement, the owner
of the Depositary Shares evidenced thereby is entitled to delivery of the number
of whole shares of Preferred Stock and all money and other property, if any,
represented by such Depositary Shares. Partial shares of Preferred Stock will
not be issued. If the Depositary Receipts delivered by the holder evidence a
number of Depositary Shares in excess of the number of Depositary Shares
representing the number of whole shares of Preferred Stock to be withdrawn, the
Preferred Stock Depositary will deliver to such holder at the same time a new
Depositary Receipt evidencing such excess number of Depositary Shares. Holders
of Preferred Stock thus withdrawn will not thereafter be entitled to deposit
such shares under the Deposit Agreement or to receive Depositary Receipts
evidencing Depositary Shares therefor.
AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT
The Deposit Agreement will provide that the form of Depositary Receipt and
any provision of the Deposit Agreement may at any time be amended by agreement
between the Company and the Preferred Stock Depositary. However, any amendment
which imposes or increases any fees, taxes or other charges payable by the
holders of Depositary Receipts (other than taxes and other governmental charges,
fees and other expenses payable by such holders as stated under "Charges of
Preferred Stock Depositary"), or which otherwise prejudices any substantial
existing right of holders of Depositary Receipts, will not take effect as to
outstanding Depositary Receipts until the expiration of 90 days after notice of
such amendment has been mailed to the record holders of outstanding Depositary
Receipts.
Whenever so directed by the Company, the Preferred Stock Depositary will
terminate the Deposit Agreement by mailing notice of such termination to the
record holders of all Depositary Receipts then outstanding at least 30 days
prior to the date fixed in such notice for such termination. The Preferred Stock
Depositary may likewise terminate the Deposit Agreement if at any time 45 days
shall have expired after the Preferred Stock Depositary shall have delivered to
the Company a written notice of its election to resign and a successor
depositary shall not have been appointed and accepted its appointment. If any
Depositary Receipts remain outstanding after the date of termination, the
Preferred Stock Depositary thereafter will discontinue the transfer of
Depositary Receipts, will suspend the distribution of dividends to the holders
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thereof, and will not give any further notices (other than notice of such
termination) or perform any further acts under the Deposit Agreement except as
provided below and except that the Preferred Stock Depositary will continue (i)
to collect dividends on the Preferred Stock and any other distributions with
respect thereto and (ii) to deliver the Preferred Stock together with such
dividends and distributions and the net proceeds of any sales of rights,
preferences, privileges or other property, without liability for interest
thereon, in exchange for Depositary Receipts surrendered. At any time after the
expiration of two years from the date of termination, the Preferred Stock
Depositary may sell the Preferred Stock then held by it at public or private
sales, at such place or places and upon such terms as it deems proper, and may
thereafter hold the net proceeds of any such sale, together with any money and
other property then held by it, without liability for interest thereon, for the
pro rata benefit of the holders of Depositary Receipts which have not been
surrendered.
CHARGES OF PREFERRED STOCK DEPOSITARY
The Company will pay all charges of the Preferred Stock Depositary including
charges in connection with the initial deposit of the Preferred Stock, the
initial issuance of the Depositary Receipts, the distribution of information to
the holders of Depositary Receipts with respect to matters on which Preferred
Stock is entitled to vote, withdrawals of the Preferred Stock by the holders of
Depositary Receipts or redemption or conversion of the Preferred Stock, except
for taxes (including transfer taxes, if any) and other governmental charges and
such other charges as are expressly provided in the Deposit Agreement to be at
the expense of holders of Depositary Receipts or persons depositing Preferred
Stock.
MISCELLANEOUS
The Preferred Stock Depositary will make available for inspection by holders
of Depositary Receipts, at its Corporate Office and its New York Office, all
reports and communications from the Company which are delivered to the Preferred
Stock Depositary as the holder of Preferred Stock.
Neither the Preferred Stock Depositary nor the Company will be liable if it
is prevented or delayed by law or any circumstance beyond its control in
performing its obligations under the Deposit Agreement. The obligations of the
Preferred Stock Depositary under the Deposit Agreement are limited to performing
its duties thereunder without negligence or bad faith. The obligations of the
Company under the Deposit Agreement are limited to performing its duties
thereunder in good faith. Neither the Company nor the Preferred Stock Depositary
is obligated to prosecute or defend any legal proceeding in respect of any
Depositary Shares or Preferred Stock unless satisfactory indemnity is furnished.
The Company and the Preferred Stock Depositary are entitled to rely upon advice
of or information from counsel, accountants or other persons believed to be
competent and on documents believed to be genuine.
The Preferred Stock Depositary may resign at any time or be removed by the
Company, effective upon the acceptance by its successor of its appointment;
provided, that if a successor Preferred Stock Depositary has not been appointed
or accepted such appointment within 45 days after the Preferred Stock Depositary
has delivered a notice of election to resign to the Company, the Preferred Stock
Depositary may terminate the Deposit Agreement. See "Amendment and Termination
of the Deposit Agreement" above.
DESCRIPTION OF WARRANTS
GENERAL
The Company may issue Warrants to purchase Securities, and such Warrants may
be issued independently or together with any Securities and may be attached to
or separate from such Securities. Each series of Warrants will be issued under a
separate warrant agreement (each a "Warrant Agreement") to be entered into
between the Company and a warrant agent ("Warrant Agent") a form of which will
be filed as an exhibit to a Current Report on Form 8-K. The Warrant Agent will
act solely as an agent of the Company in connection with the Warrants of each
such series and will not assume any obligation or relationship of agency for or
with holders or beneficial owners of Warrants. The following sets forth certain
general terms and provisions of the Warrants offered hereby. Further terms of
the Warrants and the applicable Warrant Agreement will be set forth in the
applicable Prospectus Supplement.
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The applicable Prospectus Supplement will describe the terms of any Warrants
in respect of which this Prospectus is being delivered, including the following:
(i) the title of such Warrants; (ii) the aggregate number of such Warrants;
(iii) the price or prices at which such Warrants will be issued; (iv) the
currency or currencies, including composite currencies, in which the price of
such Warrants may be payable; (v) the designation and terms of the Securities
purchasable upon exercise of such Warrants; (vi) the price at which and the
currency or currencies, including composite currencies, in which the Securities
purchasable upon exercise of such Warrants may be purchased; (vii) the date on
which the right to exercise such Warrants shall commence and the date on which
such right shall expire; (viii) whether such Warrants will be issued in
registered form or bearer form; (ix) if applicable, the minimum or maximum
amount of such Warrants which may be exercised at any one time; (x) if
applicable, the designation and terms of the Securities with which such Warrants
are issued and the number of such Warrants issued with each such Security; (xi)
if applicable, the date on and after which such Warrants and the related
Securities will be separately transferable; (xii) information with respect to
book-entry procedures, if any; (xiii) if applicable, a discussion of certain
United States federal income tax considerations; and (xiv) any other terms of
such Warrants, including terms, procedures and limitations relating to the
exchange and exercise of such Warrants.
PLAN OF DISTRIBUTION
Conseco may sell any of the Securities being offered hereby in any one or
more of the following ways from time to time: (i) through agents; (ii) to or
through underwriters; (iii) through dealers; or (iv) directly to purchasers.
The distribution of the Securities may be effected from time to time in one
or more transactions at a fixed price or prices, which may be changed, at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices or at negotiated prices.
Offers to purchase Securities may be solicited by agents designated by
Conseco from time to time. Any such agent involved in the offer or sale of the
Securities in respect of which this Prospectus is delivered will be named, and
any commissions payable by Conseco to such agent will be set forth, in the
applicable Prospectus Supplement. Unless otherwise indicated in such Prospectus
Supplement, any such agent will be acting on a reasonable best efforts basis for
the period of its appointment. Any such agent may be deemed to be an
underwriter, as that term is defined in the Securities Act, of the Securities so
offered and sold.
If Securities are sold by means of an underwritten offering, Conseco will
execute an underwriting agreement with an underwriter or underwriters at the
time an agreement for such sale is reached, and the names of the specific
managing underwriter or underwriters, as well as any other underwriters, and the
terms of the transaction, including commissions, discounts and any other
compensation of the underwriters and dealers, if any, will be set forth in the
Prospectus Supplement which will be used by the underwriters to make resales of
the Securities in respect of which this Prospectus is delivered to the public.
If underwriters are utilized in the sale of the Securities in respect of which
this Prospectus is delivered, the Securities will be acquired by the
underwriters for their own account and may be resold from time to time in one or
more transactions, including negotiated transactions, at fixed public offering
prices or at varying prices determined by the underwriter at the time of sale.
Securities may be offered to the public either through underwriting syndicates
represented by managing underwriters or directly by the managing underwriters.
If any underwriter or underwriters are utilized in the sale of the Securities,
unless otherwise indicated in the Prospectus Supplement, the underwriting
agreement will provide that the obligations of the underwriters are subject to
certain conditions precedent and that the underwriters with respect to a sale of
Securities will be obligated to purchase all such Securities of a series if any
are purchased.
If a dealer is utilized in the sales of the Securities in respect of which
this Prospectus is delivered, Conseco will sell such Securities to the dealer as
principal. The dealer may then resell such Securities to the public at varying
prices to be determined by such dealer at the time of resale. Any such dealer
may be deemed to be an underwriter, as such term is defined in the Securities
Act, of the Securities so offered and sold. The name of the dealer and the terms
of the transaction will be set forth in the Prospectus Supplement relating
thereto.
20
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Offers to purchase Securities may be solicited directly by Conseco and the
sale thereof may be made by Conseco directly to institutional investors or
others, who may be deemed to be underwriters within the meaning of the
Securities Act with respect to any resale thereof. The terms of any such sales
will be described in the Prospectus Supplement relating thereto.
Agents, underwriters and dealers may be entitled under relevant agreements
to indemnification or contribution by Conseco against certain liabilities,
including liabilities under the Securities Act.
Agents, underwriters and dealers may be customers of, engage in transactions
with, or perform services for, Conseco and its subsidiaries in the ordinary
course of business.
Securities may also be offered and sold, if so indicated in the applicable
Prospectus Supplement, in connection with a remarketing upon their purchase, in
accordance with a redemption or repayment pursuant to their terms, or otherwise,
by one or more firms ("remarketing firms"), acting as principals for their own
accounts or as agents for Conseco. Any remarketing firm will be identified and
the terms of its agreement, if any, with its compensation will be described in
the applicable Prospectus Supplement. Remarketing firms may be deemed to be
underwriters, as such term is defined in the Securities Act, in connection with
the Securities remarketed thereby. Remarketing firms may be entitled under
agreements which may be entered into with Conseco to indemnification or
contribution by Conseco against certain civil liabilities, including liabilities
under the Securities Act, and may be customers of, engage in transactions with
or perform services for Conseco and its subsidiaries in the ordinary course of
business.
If so indicated in the applicable Prospectus Supplement, Conseco may
authorize agents, underwriters or dealers to solicit offers by certain types of
institutions to purchase Securities from Conseco at the public offering prices
set forth in the applicable Prospectus Supplement pursuant to delayed delivery
contracts ("Contracts") providing for payment and delivery on a specified date
or dates in the future. A commission indicated in the applicable Prospectus
Supplement will be paid to underwriters, dealers and agents soliciting purchases
of Securities pursuant to Contracts accepted by Conseco.
LEGAL MATTERS
Unless otherwise indicated in the applicable Prospectus Supplement, the
legal validity of Securities will be passed upon for Conseco by Lawrence W.
Inlow, Executive Vice President, Secretary and General Counsel of Conseco. Mr.
Inlow is a full-time employee and an officer of Conseco and owns 245,876 shares
and holds options to purchase 762,000 shares of Conseco common stock.
EXPERTS
The consolidated financial statements and schedules of Conseco as of
December 31, 1994 and 1993, and for each of the three years in the period ended
December 31, 1994 incorporated by reference in this Prospectus, have been
audited by Coopers & Lybrand L.L.P., independent accountants, as set forth in
their reports thereon included therein and are incorporated herein by reference
in reliance upon such reports given upon the authority of such firm as experts
in accounting and auditing.
21
<PAGE>
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER MADE
BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY
UNDERWRITER. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH
SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Supplement Summary................. S-3
Summary Consolidated Financial Information.... S-7
The Company................................... S-11
Acquisition of Stock of Affiliates............ S-16
Use of Proceeds............................... S-18
Capitalization................................ S-18
Price Range of Common Stock and Dividends..... S-19
Description of PRIDES......................... S-20
Certain Federal Income Tax Considerations..... S-28
Underwriting.................................. S-32
Legal Matters................................. S-33
PROSPECTUS
Available Information......................... 2
Incorporation of Certain Documents by
Reference.................................... 2
The Company................................... 4
Use of Proceeds............................... 4
Ratios of Earnings to Fixed Charges and
Earnings to Fixed Charges and Preferred Stock
Dividends.................................... 4
Description of Debt Securities................ 5
Description of Capital Stock.................. 12
Description of Depositary Shares.............. 16
Description of Warrants....................... 19
Plan of Distribution.......................... 20
Legal Matters................................. 21
Experts....................................... 21
</TABLE>
3,200,000 SHARES
[LOGO]
% PRIDES-SM-
CONVERTIBLE PREFERRED STOCK
------------------------
PROSPECTUS SUPPLEMENT
------------------------
MERRILL LYNCH & CO.
DEAN WITTER REYNOLDS INC.
SALOMON BROTHERS INC
JANUARY , 1996
-SM-SERVICE MARK OF MERRILL LYNCH & CO. INC.
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
<PAGE>
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses in connection with the issuance and distribution of the
securities being registered, other than underwriting compensation, are:
<TABLE>
<S> <C>
SEC registration fee............................................ $ 137,932
NASD filing fee................................................. 50,000
Accounting fees and expenses.................................... 150,000
Blue sky fees and expenses...................................... 90,000
Legal fees and expenses......................................... 200,000
Printing and engraving fees..................................... 400,000
Rating agency fees.............................................. 150,000
Miscellaneous................................................... 222,068
---------
TOTAL....................................................... $1,400,000
---------
---------
</TABLE>
All expenses except SEC registration fee are estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The IBCL grants authorization to Indiana corporations to indemnify officers
and directors for their conduct if such conduct was in good faith and was in the
corporation's best interests or, in the case of directors, was not opposed to
such best interests, and permits the purchase of insurance in this regard. In
addition, the shareholders of a corporation may approve the inclusion of other
or additional indemnification provisions in the articles of incorporation and
by-laws.
The Code of By-laws of Conseco provides for the indemnification of any
person made a party to any action, suit or proceeding by reason of the fact that
he is a director, officer or employee of the Registrant, unless it is adjudged
in such action, suit or proceeding that such person is liable for negligence or
misconduct in the performance of his duties. Such indemnification shall be
against the reasonable expenses, including attorneys' fees, incurred by such
person in connection with the defense of such action, suit or proceeding. In
some circumstances, Conseco may reimburse any such person for the reasonable
costs of settlement of any such action, suit or proceeding if a majority of the
members of the Board of Directors not involved in the controversy shall
determine that it was in the interests of Conseco that such settlement be made
and that such person was not guilty of negligence or misconduct.
Reference is made to the proposed forms of underwriting agreements to be
filed as Exhibits 1.1 and 1.2 hereto, pursuant to which the underwriters will
agree to indemnify Conseco's directors and officers who sign the Registration
Statement against certain liabilities which might arise under the Securities Act
from information furnished to Conseco by such underwriters.
ITEM 16. EXHIBITS.
<TABLE>
<C> <S>
*1.1 Form of Underwriting Agreement -- Debt Securities. ((i) An Underwriting
Agreement relating to Securities to be distributed outside the United States
or for Securities denominated in foreign currencies or foreign currency units
or (ii) any Selling Agency or Distribution Agreement with any Agent will be
filed as an exhibit to a Current Report of Form 8-K and incorporated herein
by reference.)
*1.2 Form of Underwriting Agreement -- Equity
</TABLE>
II-1
<PAGE>
<TABLE>
<C> <S>
3.1 Amended and Restated Articles of Incorporation of Conseco were filed with the
Commission as Exhibit 3.1 to the Registration Statement on Form S-2, No.
33-8498; Articles of Amendment thereto, as filed September 9, 1988 with the
Indiana Secretary of State, were filed with the Commission as Exhibit 3.1.1
to Conseco's Annual Report on Form 10-K for 1988; Articles of Amendment
thereto, as filed June 13, 1989 with the Indiana Secretary of State, were
filed with the Commission as Exhibit 3.1.2 to Conseco's Report on Form 10-Q
for the quarter ended June 30, 1989; and Articles of Amendment thereto, as
filed June 29, 1993 with the Indiana Secretary of State, were filed with the
Commission as Exhibit 3.1.3 to Conseco's Report on Form 10-Q for the quarter
ended June 30, 1993, and are incorporated herein by this reference.
3.2 Amended and Restated By-Laws of Conseco effective February 10, 1986 were filed
with the Commission as Exhibit 3.2 to its Registration Statement on Form S-1,
No. 33-4367, and an Amendment thereto was filed with the Commission as
Exhibit 3.2.1 to Amendment No. 2 to its Registration Statement on Form S-1,
No. 33-4367; and are incorporated herein by this reference.
3.3 Form of Articles of Amendment to the Articles of Incorporation of Conseco,
Inc. relating to the PRIDES.
**4.1 Form of Senior Indenture.
**4.2 Form of Subordinated Indenture.
The form or forms of such Debt Securities with respect to each particular
offering will be filed as an exhibit to a Current Report on Form 8-K and
incorporated herein by reference.
4.3 Form of Deposit Agreement.
The form of such Deposit Agreement will be filed as an exhibit to a Current
Report on Form 8-K and incorporated herein by reference.
4.4 Form of Warrant Agreement.
Any amendment to the Company's Articles of Incorporation authorizing the
creation of any series of Preferred Stock or Depositary Shares representing
such shares of Preferred Stock and setting forth the rights, preferences and
designations thereof will be filed as an exhibit to a Current Report on Form
8-K and incorporated herein by reference.
The form of such Warrant Agreement will be filed as an exhibit to a Current
Report on Form 8-K and incorporated herein by reference.
5.1 Opinion of Lawrence W. Inlow, Executive Vice President, Secretary and General
Counsel of Conseco.
*8.1 Opinion of Krieg DeVault Alexander & Capehart with respect to certain federal
income tax consequences.
**12.1 Computation of Ratio of Earnings to Fixed Charges and Preferred Stock
Dividends.
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Lawrence W. Inlow (included in Exhibit 5.1).
*23.3 Consent of Krieg DeVault Alexander & Capehart (included in Exhibit 8.1).
**24.1.2 Power of Attorney of Donald F. Gongaware.
**24.1.3 Powers of Attorney of Stephen C. Hilbert, Rollin M. Dick, Louis P. Ferrero and
Dennis E. Murray, Sr.
24.1.4 Power of Attorney of Ngaire E. Cuneo.
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
25.1 Form T-1, Statement of Eligibility and Qualification under the Trust Indenture
Act of 1939, of the Trustee under the Senior Indenture.
25.2 Form T-1, Statement of Eligibility and Qualification under the Trust Indenture
Act of 1939, of the Trustee under the Subordinated Indenture.
</TABLE>
- ------------------------
*To be supplied by amendment.
**Previously filed.
ITEM 17. UNDERTAKINGS.
(A) RULE 415 OFFERING
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
PROVIDED, HOWEVER, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed by
the Company pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(B) FILINGS INCORPORATING SUBSEQUENT EXCHANGE ACT DOCUMENTS BY REFERENCE.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-3
<PAGE>
(C) ACCELERATION OF EFFECTIVENESS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(D) QUALIFICATION OF TRUST INDENTURE ACT OF 1939 FOR DELAYED OFFERINGS
The undersigned registrant hereby undertakes to file an application for the
purpose of determining the eligibility of the trustee to act under subsection
(a) of section 310 of the Trust Indenture Act, as amended (the "Trust Indenture
Act"), in accordance with the rules and regulations prescribed by the Commission
under section 305(b)(2) of the Trust Indenture Act.
(E) RULE 430A
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Conseco, Inc.
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Carmel, State of Indiana, on the 3rd day of
January, 1996.
CONSECO, INC.
By: /s/ LAWRENCE W. INLOW
-----------------------------------
Lawrence W. Inlow, Executive Vice
President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to Registration Statement has been signed below by the following persons in the
capacities on January 3, 1996.
SIGNATURE TITLE (CAPACITY)
- ----------------------------------- -------------------------------------------
* Chairman of the Board, President and Chief
- ----------------------------------- Executive Officer (Principal Executive
Stephen C. Hilbert Officer)
Executive Vice President and Chief
* Financial Officer and Director (Principal
- ----------------------------------- Financial Officer and Principal Accounting
Rollin M. Dick Officer)
*
- ----------------------------------- Director
Ngaire E. Cuneo
- ----------------------------------- Director
David R. Decatur
*
- ----------------------------------- Director
Louis P. Ferrero
*
- ----------------------------------- Director
Donald F. Gongaware
- ----------------------------------- Director
M. Phil Hathaway
- ----------------------------------- Director
James D. Massey
*
- ----------------------------------- Director
Dennis E. Murray, Sr.
*By: /s/ KARL W. KINDIG
-----------------------------
Karl W. Kindig,
Attorney-in-fact
II-5
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION OF EXHIBITS NUMBERED PAGE
- --------- --------------------------------------------------------------------------------------- --------------
<C> <S> <C>
*1.1 Form of Underwriting Agreement -- Debt Securities. ((i) An Underwriting Agreement
relating to Securities to be distributed outside the United States or for Securities
denominated in foreign currencies or foreign currency units or (ii) any Selling Agency
or Distribution Agreement with any Agent will be filed as an exhibit to a Current
Report of Form 8-K and incorporated herein by reference.)
*1.2 Form of Underwriting Agreement -- Equity
3.1 Amended and Restated Articles of Incorporation of Conseco were filed with the
Commission as Exhibit 3.1 to the Registration Statement on Form S-2, No. 33-8498;
Articles of Amendment thereto, as filed September 9, 1988 with the Indiana Secretary
of State, were filed with the Commission as Exhibit 3.1.1 to Conseco's Annual Report
on Form 10-K for 1988; Articles of Amendment thereto, as filed June 13, 1989 with the
Indiana Secretary of State, were filed with the Commission as Exhibit 3.1.2 to
Conseco's Report on Form 10-Q for the quarter ended June 30, 1989; and Articles of
Amendment thereto, as filed June 29, 1993 with the Indiana Secretary of State, were
filed with the Commission as Exhibit 3.1.3 to Conseco's Report on Form 10-Q for the
quarter ended June 30, 1993, and are incorporated herein by this reference.
3.2 Amended and Restated By-Laws of Conseco effective February 10, 1986 were filed with the
Commission as Exhibit 3.2 to its Registration Statement on Form S-1, No. 33-4367, and
an Amendment thereto was filed with the Commission as Exhibit 3.2.1 to Amendment No. 2
to its Registration Statement on Form S-1, No. 33-4367; and are incorporated herein by
this reference.
3.3 Form of Articles of Amendment to the Articles of Incorporation of Conseco, Inc.
relating to the PRIDES.
**4.1 Form of Senior Indenture.
**4.2 Form of Subordinated Indenture.
The form or forms of such Debt Securities with respect to each particular offering will
be filed as an exhibit to a Current Report on Form 8-K and incorporated herein by
reference.
4.3 Form of Deposit Agreement.
The form of such Deposit Agreement will be filed as an exhibit to a Current Report on
Form 8-K and incorporated herein by reference.
4.4 Form of Warrant Agreement.
Any amendment to the Company's Articles of Incorporation authorizing the creation of
any series of Preferred Stock or Depositary Shares representing such shares of
Preferred Stock and setting forth the rights, preferences and designations thereof
will be filed as an exhibit to a Current Report on Form 8-K and incorporated herein by
reference.
The form of such Warrant Agreement will be filed as an exhibit to a Current Report on
Form 8-K and incorporated herein by reference.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION OF EXHIBITS NUMBERED PAGE
- --------- --------------------------------------------------------------------------------------- --------------
5.1 Opinion of Lawrence W. Inlow, Executive Vice President, Secretary and General Counsel
of Conseco.
<C> <S> <C>
*8.1 Opinion of Krieg DeVault Alexander & Capehart with respect to certain federal income
tax consequences.
**12.1 Computation of Ratio of Earnings to Fixed Charges and Preferred Stock Dividends.
23.1 Consent of Coopers & Lybrand L.L.P.
*23.2 Consent of Lawrence W. Inlow (included in Exhibit 5.1).
*23.3 Consent of Krieg DeVault Alexander & Capehart (included in Exhibit 8.1).
**24.1.2 Power of Attorney of Donald F. Gongaware.
**24.1.3 Powers of Attorney of Stephen C. Hilbert, Rollin M. Dick, Louis P. Ferrero and Dennis
E. Murray, Sr.
24.1.4 Power of Attorney of Ngaire E. Cuneo.
25.1 Form T-1, Statement of Eligibility and Qualification under the Trust Indenture Act of
1939, of the Trustee under the Senior Indenture.
25.2 Form T-1, Statement of Eligibility and Qualification under the Trust Indenture Act of
1939, of the Trustee under the Subordinated Indenture.
</TABLE>
- ------------------------
*To be supplied by amendment.
**Previously filed.
<PAGE>
ARTICLES OF AMENDMENT TO THE
ARTICLES OF INCORPORATION OF
CONSECO, INC.
CONSECO, INC. (hereinafter referred to as the "Corporation"), an Indiana
corporation governed by the provisions of the Indiana Business Corporation
Law, as amended, desiring to give notice of corporate action effectuating
amendment of its Articles of Incorporation, as previously restated and
amended (the "Articles of Incorporation"), sets forth the following:
ARTICLE I
THE AMENDMENT
Section 1. CREATION OF NEW ARTICLE XIV. There is hereby created a new
Article XIV of the Articles of Incorporation the exact text of which is as
follows:
ARTICLE XIV
DESIGNATIONS, RIGHTS AND PREFERENCES OF %
PRIDES (SM), CONVERTIBLE PREFERRED STOCK
The designations, rights, preferences, limitations and restrictions of
the shares of Preferred Stock, without par value, to be designated as %
PRIDES (SM), Convertible Preferred Stock are hereby fixed as follows;
Section 1. DESIGNATION AND AMOUNT.
The designation of the series of Preferred Stock created by this
Article XIV shall be " % PRIDES (SM), Convertible Preferred Stock,
no par value per share" (the "PRIDES"). The PRIDES are Preferred
Redeemable Increased Dividend Equity Securities (SM). The authorized
number of shares constituting the PRIDES shall be 3,680,000.
(SM)Service mark of Merrill Lynch & Co., Inc.
Section 2. DIVIDENDS.
(a) The holders of outstanding shares of PRIDES shall be entitled to
receive, when, as and if declared by the Board of Directors out of funds
legally available therefor, cumulative preferential dividends from January ,
1996, at the rate per share of $ per annum, and no more, payable quarterly
for each share of PRIDES, payable in arrears on the 1st day of each February,
May, August and November, respectively (each such date being hereinafter
referred to as a "Dividend Payment Date"), or, if any Dividend Payment Date
is not a business day, then the Dividend Payment Date shall be the next
succeeding business day; provided, however, that, with respect to any
dividend period during which a redemption occurs, the Corporation may, at its
option, declare accrued dividends to, and pay such dividends on, the
redemption date, in which case such dividends would be
<PAGE>
payable on the redemption date in cash to the holders of the shares of PRIDES
as of the record date for such dividend payment and such accrued dividends
would not be included in the calculation of the related Call Price (as
hereinafter defined). Each dividend on the shares of PRIDES shall be payable
to holders of record as they appear on the stock register of the Corporation
on such record date, not less than 10 nor more than 60 days preceding the
payment dates thereof, as shall be fixed by the Board of Directors. The first
dividend payment shall be for the period from January , 1996 to but
excluding February 1, 1996 and the first dividend will be payable on
February 1, 1996. Dividends (or amounts equal to accrued and unpaid dividends)
payable on shares of PRIDES for any period less than a full quarterly dividend
period will be computed on the basis of a 360-day year of twelve 30-day months
and the actual number of days elapsed in any period less than one month.
Dividends on the shares of PRIDES will accrue whether or not there are
funds legally available for the payment of such dividends and whether or not
such dividends are declared on a daily basis from the previous Dividend
Payment Date. Accumulated unpaid dividends shall not bear interest. Dividends
will cease to accrue in respect of shares of PRIDES on the Mandatory
Conversion Date (as hereinafter defined) or on the date of their earlier
conversion or redemption.
The shares of PRIDES will rank on a parity, both as to payment of
dividends and distribution of assets upon liquidation, with the Cumulative
Convertible Preferred Stock and with any future preferred stock issued by the
Corporation (the "Preferred Stock") that by its terms ranks pari passu with
the shares of PRIDES.
(b) As long as any shares of PRIDES are outstanding, no dividends for
any dividend period (other than dividends payable in shares of, or warrants,
rights or options exercisable for or convertible into shares of, Common Stock
(as defined below) or any other capital stock of the Corporation ranking
junior to the shares of PRIDES as to the payment of dividends and the
distribution of assets upon liquidation ("Junior Stock") and cash in lieu of
fractional shares of such Junior Stock in connection with any such dividend)
will be paid in cash or otherwise, nor will any other distribution be made
(other than a distribution payable in Junior Stock and cash in lieu of
fractional shares of such Junior Stock in connection with any such
distribution), on any Junior Stock unless: (i) full dividends on all
outstanding shares of Preferred Stock (including the shares of PRIDES), that
does not constitute Junior Stock ("Parity Preferred Stock") have been paid,
or declared and set aside for payment, for all dividend periods terminating
on or prior to the date of such Junior Stock dividend or distribution payment
to the extent such dividends are cumulative; (ii) dividends in full, in the
case of a dividend payment with respect to Junior Stock, for any Parity
Preferred Stock dividend period commencing on or prior to the date of such
2
<PAGE>
Junior Stock dividend payment or, in the case of any other distribution with
respect to Junior Stock, for the current quarterly dividend period, have been
paid, or declared and set aside for payment, on all outstanding shares of
Parity Preferred Stock to the extent such dividends are cumulative; (iii) the
Corporation has paid or set aside all amounts, if any, then or theretofore
required to be paid or set aside for all purchase, retirement, and sinking
funds, if any, for any outstanding shares of Parity Preferred Stock; and (iv)
the Corporation is not in default on any of its obligations to redeem any
outstanding shares of Parity Preferred Stock.
In addition, as long as any shares of PRIDES are outstanding, no shares
of any Junior Stock may be purchased, redeemed, or otherwise acquired by the
Corporation or any of its subsidiaries (except in connection with a
reclassification or exchange of any Junior Stock through the issuance of
other Junior Stock (and cash in lieu of fractional shares of such Junior
Stock in connection therewith) or the purchase, redemption, or other
acquisition of any Junior Stock with any Junior Stock (and cash in lieu of
fractional shares of such Junior Stock in connection therewith)) nor may any
funds be set aside or made available for any sinking fund for the purchase or
redemption of any Junior Stock unless: (i) full dividends on all outstanding
shares of Parity Preferred Stock have been paid, or declared and set aside
for payment, for all dividend periods terminating on or prior to the date of
such purchase, redemption or acquisition to the extent such dividends are
cumulative; (ii) the Corporation has paid or set aside all amounts, if any,
then or theretofore required to be paid or set aside for all purchase,
retirement, and sinking funds, if any, for any outstanding shares of Parity
Preferred Stock; and (iii) the Corporation is not in default on any of its
obligations to redeem any outstanding shares of Parity Preferred Stock.
Subject to the provisions described above, such dividends or other
distributions (payable in cash, property, or Junior Stock) as may be
determined by the Board of Directors may be declared and paid on the shares
of any Junior Stock from time to time and Junior Stock may be purchased,
redeemed or otherwise acquired by the Corporation or any of its subsidiaries
from time to time. In the event of the declaration and payment of any such
dividends or other distributions, the holders of such Junior Stock will be
entitled, to the exclusion of holders of any outstanding Parity Preferred
Stock, to share therein according to their respective interests.
As long as any shares of PRIDES are outstanding, dividends for any
dividend period or other distributions may not be paid on any outstanding
shares of Parity Preferred Stock (other than dividends or other distributions
payable in Junior Stock and cash in lieu of fractional shares of such Junior
Stock in connection therewith), unless either: (a) (i) full dividends on all
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outstanding shares of Parity Preferred Stock have been paid, or declared and
set aside for payment, for all dividend periods terminating on or prior to
the date of such Parity Preferred Stock dividend or distribution payment to
the extent such dividends are cumulative; (ii) dividends in full, in the case
of a dividend payment, for any Parity Preferred Stock dividend period
commencing on or prior to the date of such dividend payment or, in the case
of any other distribution, for the current quarterly dividend period, have
been paid, or declared and set aside for payment, on all outstanding shares
of Parity Preferred Stock to the extent such dividends are cumulative; (iii)
the Corporation has paid or set aside all amounts, if any, then or
theretofore required to be paid or set aside for all purchase, retirement and
sinking funds, if any, for any outstanding shares of Parity Preferred Stock;
and (iv) the Corporation is not in default on any of its obligations to
redeem any outstanding shares of Parity Preferred Stock; or (b) any such
dividends are declared and paid pro rata so that the amounts of any dividends
declared and paid per share on outstanding shares of PRIDES and each other
share of such Parity Preferred Stock will in all cases bear to each other the
same ratio that accrued and unpaid dividends (including any accumulation with
respect to unpaid dividends for prior dividend periods, if such dividends are
cumulative) per share of outstanding shares of PRIDES and such other
outstanding shares of Parity Preferred Stock bear to each other.
In addition, as long as any shares of PRIDES are outstanding, the
Corporation may not purchase, redeem or otherwise acquire any Parity
Preferred Stock (except with any Junior Stock and cash in lieu of fractional
shares of such Junior Stock in connection therewith) unless: (i) full
dividends on Parity Preferred Stock have been paid, or declared and set aside
for payment, for all dividend periods terminating on or prior to the date of
such Parity Preferred Stock purchase, redemption or other acquisition payment
to the extent such dividends are cumulative; (ii) the Corporation has paid or
set aside all amounts, if any, then or theretofore required to be paid or set
aside for all purchase, retirement, and sinking funds, if any, for any Parity
Preferred Stock; and (iii) the Corporation is not in default of any of its
obligations to redeem any Parity Preferred Stock.
(c) Any dividend payment made on the shares of PRIDES shall first be
credited against the earliest accrued but unpaid dividend due with respect to
the shares of PRIDES.
(d) All dividends paid with respect to the shares of PRIDES shall be
paid pro rata to the holders entitled thereto.
(e) Holders of the shares of PRIDES shall be entitled to receive
dividends in preference to and in priority over any dividends upon any shares
of the Corporation ranking junior to the shares of PRIDES as to dividends,
but subject to the rights of holders of shares of the Corporation having a
preference and a priority over the payment of dividends on the shares of
PRIDES.
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Section 3. REDEMPTION AND CONVERSION.
(a) Mandatory Conversion. On February 1, 2000 (the "Mandatory
Conversion Date"), each outstanding share of PRIDES shall convert
automatically (the "Mandatory Conversion") into shares of Common Stock at the
Common Equivalent Rate (as hereinafter defined) in effect on the Mandatory
Conversion Date and the right to receive an amount in cash equal to all
accrued and unpaid dividends on such share of PRIDES (other than previously
declared dividends payable to a holder of record on a prior date) to the
Mandatory Conversion Date, whether or not declared, out of funds legally
available for the payment of dividends, subject to the right of the
Corporation to redeem the shares of PRIDES on or after February 1, 1999 (the
"Initial Redemption Date") and prior to the Mandatory Conversion Date, as
described below, and subject to the conversion of the shares of PRIDES at the
option of the holder at any time prior to the Mandatory Conversion Date. The
Common Equivalent Rate is initially one share of Common Stock for each share
of PRIDES and is subject to adjustment as set forth below. Dividends on the
shares of PRIDES shall cease to accrue and such shares shall cease to be
outstanding on the Mandatory Conversion Date. The Corporation shall make such
arrangements as it deems appropriate for the issuance of certificates
representing shares of Common Stock and for the payment of cash in respect of
such accrued and unpaid dividends, if any, or cash in lieu of fractional
shares, if any, in exchange for and contingent upon surrender of certificates
representing the shares of PRIDES, and the Corporation may defer the payment
of dividends on such shares of Common Stock and the voting thereof until, and
make such payment and voting contingent upon, the surrender of such
certificates representing the shares of PRIDES, provided that the Corporation
shall give the holders of the shares of PRIDES such notice of any such
actions as the Corporation deems appropriate and upon such surrender such
holders shall be entitled to receive such dividends declared and paid on such
shares of Common Stock subsequent to the Mandatory Conversion Date. Amounts
payable in cash in respect of the shares of PRIDES or in respect of such
shares of Common Stock shall not bear interest.
(b) Redemption by the Corporation.
(i) Right to Redeem. Shares of PRIDES are not redeemable by the
Corporation prior to the Initial Redemption Date. At any time and
from time to time on or after the Initial Redemption Date and
prior to the Mandatory Conversion Date, the Corporation shall
have the right to redeem, in whole or in part, the outstanding
shares of PRIDES. Upon any such redemption, the Corporation shall
deliver to the holders of shares of PRIDES, in accordance with the
provisions of this Article XIV, in exchange for each share so
redeemed, the greater of (A) a number of shares of Common Stock
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equal to the Call Price in effect on the redemption date, divided
by the Current Market Price (as hereinafter defined) of the Common
Stock determined as of the second trading day immediately
preceding the Notice Date (as hereinafter defined) or (B) . of a
share of Common Stock (subject to adjustment in the same manner as
the Optional Conversion Rate (as hereinafter defined) is
adjusted). The public announcement of any call for redemption
shall be made prior to, or at the time of, the mailing of the
notice of such call to holders of shares of PRIDES as described
below. If fewer than all the outstanding shares of PRIDES are to
be redeemed, shares of PRIDES to be redeemed shall be selected by
the Corporation from outstanding shares of PRIDES not previously
redeemed by lot or pro rata (as nearly as may be practicable) or
by any other method determined by the Board of Directors in its
sole discretion to be equitable. As used in this subparagraph
(b), the term "Notice Date" with respect to any notice given by
the Corporation in connection with a redemption of shares of
PRIDES means the date on which first occurs either the public
announcement of such redemption or the commencement of mailing
of such notice to the holders of shares of PRIDES.
(ii) Notice of Redemption. The Corporation shall provide notice of
any redemption of the shares of PRIDES to holders of record of
PRIDES to be called for redemption not less than 15 nor more
than 60 days prior to the date fixed for such redemption. Such
notice shall be provided by mailing notice of such redemption,
first class postage prepaid, to each holder of record of shares
of PRIDES to be redeemed, at such holder's address as it appears
on the stock register of the Corporation; provided, however, that
neither failure to give such notice nor any defect therein shall
affect the validity of the proceeding for the redemption of any
shares of PRIDES to be redeemed except as to the holders to whom
the Corporation has failed to give said notice or whose notice
was defective.
Each such notice shall state, as appropriate, the following and
may contain such other information as the Corporation deems
advisable:
(A) the redemption date;
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(B) that all outstanding shares of PRIDES are to be redeemed or,
in the case of a call for redemption of fewer than all
outstanding shares of PRIDES, the number of such shares held
by such holder to be redeemed;
(C) the number of shares of Common Stock deliverable upon
redemption of each share of PRIDES to be redeemed and, if
applicable, the Call Price and the Current Market Price used
to calculate such number of shares of Common Stock;
(D) the place or places where certificates for such shares are
to be surrendered for redemption; and
(E) that dividends on the shares of PRIDES to be redeemed shall
cease to accrue on such redemption date (except as otherwise
provided herein).
(iii) Deposit of Shares and Funds. The Corporation's obligation to
deliver shares of Common Stock and provide funds upon redemption
in accordance with this Section 3 shall be deemed fulfilled if,
on or before a redemption date, the Corporation shall irrevocably
deposit, with a bank or trust company, or an affiliate of a bank
or trust company, having an office or agency in New York City
and having a capital and surplus of at least $50,000,000, or
shall set aside or make other reasonable provision for the
issuance of such number of shares of Common Stock as are required
to be delivered by the Corporation pursuant to this Section 3
upon the occurrence of the related redemption (and for the
payment of cash in lieu of the issuance of fractional share
amounts and accrued and unpaid dividends payable in cash on the
shares to be redeemed as and to the extent provided by this
Section 3). Any interest accrued on such funds shall be paid to
the Corporation from time to time. Any shares of Common Stock or
funds so deposited and unclaimed at the end of two years from
such redemption date shall be repaid and released to the
Corporation, after which the holder or holders of such shares
of PRIDES so called for redemption shall look only to the
Corporation for delivery of such shares of Common Stock or funds.
(iv) Surrender of Certificates; Status. Each holder of shares of
PRIDES to be redeemed shall surrender the certificates evidencing
such shares (properly endorsed or assigned for transfer, if the
Board of Directors shall so require and the notice shall so
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state) to the Corporation at the place designated in the notice
of such redemption and shall thereupon be entitled to receive
certificates evidencing shares of Common Stock and to receive
any funds payable pursuant to this Section 3 following such
surrender and following the date of such redemption. In case
fewer than all the shares represented by any such surrendered
certificate are called for redemption, a new certificate shall
be issued at the expense of the Corporation representing the
unredeemed shares. If such notice of redemption shall have been
given, and if on the date fixed for redemption, shares of Common
Stock and funds necessary for the redemption shall have been
irrevocably either set aside by the Corporation separate and
apart from its other funds or assets in trust for the account of
the holders of the shares to be redeemed or converted (and so as
to be and continue to be available therefor) or deposited with a
bank or a trust company or an affiliate thereof as provided
herein or the Corporation shall have made other reasonable
provision therefor, then, notwithstanding that the certificates
evidencing any shares of PRIDES so called for redemption or
subject to conversion shall not have been surrendered, the shares
represented thereby so called for redemption shall be deemed no
longer outstanding, dividends with respect to the shares so
called for redemption shall cease to accrue on the date fixed for
redemption (except that holders of shares of PRIDES at the close
of business on a record date for any payment of dividends shall
be entitled to receive the dividend payable on such shares on
the corresponding Dividend Payment Date notwithstanding the
redemption of such shares following such record date and prior
to such Dividend Payment Date) and all rights with respect to
the shares so called for redemption shall forthwith after such
date cease and terminate, except for the rights of the holders
to receive the shares of Common Stock and funds, if any, payable
pursuant to this Section 3 without interest upon surrender of
their certificates therefor (unless the Corporation defaults on
the delivery of such shares or the payment of such funds).
Holders of shares of PRIDES that are redeemed shall not be
entitled to receive dividends declared and paid on such shares
of Common Stock, and such shares of Common Stock shall not be
entitled to vote, until such shares of Common Stock are issued
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upon the surrender of the certificates representing such shares
of PRIDES and upon such surrender such holders shall be entitled
to receive such dividends declared and paid on such shares of
Common Stock subsequent to such redemption date without interest
thereon.
(c) Conversion at Option of Holder. Shares of PRIDES are convertible,
in whole or in part, at the option of the holders thereof, at any time prior
to the Mandatory Conversion Date, unless previously redeemed, into shares of
Common Stock at a rate of . of a share of Common Stock for each share of
PRIDES (the "Optional Conversion Rate") (equivalent to a conversion price of
$ per share of Common Stock), subject to adjustment as set forth below. The
right to convert shares of PRIDES called for redemption shall terminate
immediately prior to the close of business on the redemption date.
Conversion of shares of PRIDES at the option of the holder may be
effected by delivering certificates evidencing such shares, together with
written notice of conversion and a proper assignment of such certificates to
the Corporation or in blank, to the office or agency to be maintained by the
Corporation for that purpose (and, if applicable, cash payment of an amount
equal to the dividend payable on such shares), and otherwise in accordance
with conversion procedures established by the Corporation. Each optional
conversion shall be deemed to have been effected immediately prior to the
close of business on the date on which the foregoing requirements shall have
been satisfied. The conversion shall be at the Optional Conversion Rate in
effect at such time and on such date.
Holders of shares of PRIDES at the close of business on a record date
for any payment of declared dividends shall be entitled to receive the
dividend payable on such shares on the corresponding Dividend Payment Date
notwithstanding the conversion of such shares following such record date and
prior to the corresponding Dividend Payment Date. However, shares of PRIDES
surrendered for conversion after the close of business on a record date for
any payment of dividends and before the opening of business on the next
succeeding Dividend Payment Date must be accompanied by payment in cash of an
amount equal to the dividend thereon which is to be paid on such Dividend
Payment Date (unless such shares have been called for redemption on a
redemption date between such record date and such Dividend Payment Date). A
holder of shares of PRIDES called for redemption on February 1, 1999 or any
other Dividend Payment Date thereafter will receive the dividend on such
shares payable on that date without paying an amount equal to such dividend
to the Corporation upon conversion. Except as provided above, upon any
optional conversion of shares of PRIDES, the Corporation shall make no
payment or allowance for unpaid dividends, whether or not in arrears, on
converted shares of PRIDES or for previously declared dividends or
distributions on the shares of Common Stock issued upon such conversion.
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(d) Common Equivalent Rate and Optional Conversion Rate Adjustments.
The Common Equivalent Rate and the Optional Conversion Rate shall be each
subject to adjustment from time to time as provided below in this section (d).
(i) If the Corporation shall, after January , 1996:
(A) pay a stock dividend or make a distribution with respect to
its Common Stock in shares of such Common Stock,
(B) subdivide or split its outstanding Common Stock into a
greater number of shares,
(C) combine its outstanding shares of Common Stock into a
smaller number of shares, or
(D) issue by reclassification of its shares of Common Stock any
shares of common stock of the Corporation,
then, in any such event, the Common Equivalent Rate and the
Optional Conversion Rate in effect immediately prior to such
event shall each be adjusted so that the holder of any shares
of PRIDES shall thereafter be entitled to receive, upon Mandatory
Conversion or upon conversion at the option of the holder, the
number of shares of Common Stock of the Corporation which such
holder would have owned or been entitled to receive immediately
following any event described above had such shares of PRIDES been
converted immediately prior to such event or any record date with
respect thereto. Such adjustment shall become effective at the
opening of business on the business day next following the record
date for determination of stockholders entitled to receive such
dividend or distribution, in the case of a dividend or
distribution, and shall become effective immediately after the
effective date, in the case of a subdivision, split, combination
or reclassification. Such adjustment shall be made successively.
(ii) If the Corporation shall, after January , 1996, issue rights or
warrants to all holders of its Common Stock entitling them (for
a period not exceeding 45 days from the date of such issuance)
to subscribe for or purchase shares of Common Stock at a price
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<PAGE>
per share less than the Current Market Price of the Common Stock,
then, in any such event unless such rights or warrants are issued
to holders of shares of PRIDES on a pro rata basis with the
shares of Common Stock based on the Common Equivalent Rate on
the date immediately preceding such issuance, the Common
Equivalent Rate and Optional Conversion Rate shall each be
adjusted by multiplying the Common Equivalent Rate and the
Optional Conversion Rate, in effect immediately prior to the
date of issuance of such rights or warrants, by a fraction, of
which the numerator shall be the number of shares of Common Stock
outstanding on the date of issuance of such rights or warrants,
immediately prior to such issuance, plus the number of additional
shares of Common Stock offered for subscription or purchase
pursuant to such rights or warrants, and of which the denominator
shall be the number of shares of Common Stock outstanding on
the date of issuance of such rights or warrants, immediately
prior to such issuance, plus the number of additional shares of
Common Stock which the aggregate offering price of the total
number of shares of Common Stock so offered for subscription or
purchase pursuant to such rights or warrants would purchase at
such Current Market Price (determined by multiplying such total
number of shares by the exercise price of such rights or warrants
and dividing the product so obtained by such Current Market
Price). Such adjustment shall become effective at the opening of
business on the business day next following the record date for
the determination of stockholders entitled to receive such
rights or warrants. To the extent that shares of Common Stock
are not delivered after the expiration of such rights or
warrants, the Common Equivalent Rate and the Optional Conversion
Rate shall each be readjusted to the Common Equivalent Rate and
the Optional Conversion Rate which would then be in effect had
the adjustments been made upon the issuance of such rights or
warrants upon the basis of delivery of only the number of shares
of Common Stock actually delivered. Such adjustment shall be made
successively.
(iii) If the Corporation shall, after January , 1996, pay a dividend
or make a distribution to all holders of its Common Stock of
evidences of its indebtedness, cash or other assets (including
capital stock of the Corporation but excluding any cash dividends
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or distributions, other than Extraordinary Cash Distributions (as
hereinafter defined) and dividends referred to in subparagraph
(i) above) or shall issue to all holders of its Common Stock
rights or warrants to subscribe for or purchase any of its
securities (other than Rights issued pursuant to the Rights Plan
and those referred to in subparagraph (ii) above), then unless
such dividend is paid or distribution is made to each holder of
shares of PRIDES on a pro rata basis with the shares of Common
Stock based on the Common Equivalent Rate on the date immediately
preceding such payment or distribution, in any such event, the
Common Equivalent Rate and the Optional Conversion Rate shall
each be adjusted by multiplying the Common Equivalent Rate and
the Optional Conversion Rate in effect on the record date
mentioned below, by a fraction of which the numerator shall be
the Current Market Price per share of the Common Stock on the
record date for the determination of stockholders entitled to
receive such dividend or distribution, and of which the
denominator shall be such Current Market Price per share of
Common Stock less the fair market value (as determined by the
Board of Directors, whose determination shall be conclusive, and
described in a resolution adopted with respect thereto) as of
such record date of the portion of the assets or evidences of
indebtedness so distributed or of such subscription rights or
warrants applicable to one share of Common Stock. Such adjustment
shall become effective on the opening of business on the business
day next following the record date for the determination of
stockholders entitled to receive such dividend or distribution.
Such adjustment shall be made successively. As used in this
section (d), the term "Extraordinary Cash Distributions" means,
with respect to any cash dividend or distribution paid on any
date, the amount, if any, by which all cash dividends and cash
distributions on the Common Stock paid during the consecutive
12-month period ending on and including such date (other than
cash dividends and cash distributions for which an adjustment to
the Common Equivalent Rate and the Optional Conversion Rate was
previously made) exceeds, on a per share of Common Stock basis,
10% of the average of the daily Closing Prices of the Common
Stock over such consecutive 12-month period.
(iv) Any shares of Common Stock issuable in payment of a dividend
shall be deemed to have been issued immediately prior to the
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close of business on the record date for such dividend for
purposes of calculating the number of outstanding shares of
Common Stock under subsection (ii) above.
(v) The Corporation shall also be entitled to make upward adjustments
in the Common Equivalent Rate, the Optional Conversion Rate and
the Call Price, as it in its sole discretion shall determine to
be advisable, in order that any stock dividends, subdivisions of
shares, distribution of rights to purchase stock or securities,
or distribution of securities convertible into or exchangeable
for stock (or any transaction which could be treated as any of
the foregoing transactions pursuant to Section 305 of the
Internal Revenue Code of 1986, as amended) made by the
Corporation to its stockholders after January , 1996 shall not
be taxable.
(vi) In any case in which subsection 3(d) shall require that an
adjustment as a result of any event become effective at the
opening of business on the business day next following a record
date and the date fixed for conversion pursuant to subsection
3(a) or redemption pursuant to subsection 3(b) occurs after such
record date, but before the occurrence of such event, the
Corporation may, in its sole discretion, elect to defer the
following until after the occurrence of such event: (A) issuing
to the holder of any converted or redeemed shares of PRIDES the
additional shares of Common Stock issuable upon such conversion
or redemption over the shares of Common Stock issuable before
giving effect to such adjustments and (B) paying to such holder
any amount in cash in lieu of a fractional share of Common Stock
pursuant to subsection 3(g).
(vii) All adjustments to the Common Equivalent Rate and the Optional
Conversion Rate shall be calculated to the nearest 1/100th of
a share of Common Stock. No adjustment in the Common Equivalent
Rate or the Optional Conversion Rate shall be required unless
such adjustment would require an increase or decrease of at
least one percent therein; provided, however, that any
adjustment which by reason of this subsection (vii) is not
required to be made shall be carried forward and taken into
account in any subsequent adjustment.
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(e) Adjustment for Consolidation or Merger. In case of any consolidation
or merger to which the Corporation is a party (other than a merger or
consolidation in which the Corporation is the surviving or continuing
corporation and in which the Common Stock outstanding immediately prior to
the merger or consolidation remains unchanged), or in case of any sale or
transfer to another corporation of the property of the Corporation as an
entirety or substantially as an entirety, or in case of any statutory
exchange of securities with another corporation (other than in connection
with a merger or acquisition), proper provision shall be made so that each
share of PRIDES shall, after consummation of such transaction, be subject to
(i) conversion at the option of the holder into the kind and amount of
securities, cash or other property receivable upon consummation of such
transaction by a holder of the number of shares of Common Stock into which
such share of PRIDES might have been converted immediately prior to
consummation of such transaction, (ii) conversion on the Mandatory Conversion
Date into the kind and amount of securities, cash or other property
receivable upon consummation of such securities, cash or other property
receivable upon consummation of such transaction by a holder of the number of
shares of Common Stock into which such share of PRIDES would have converted
if the conversion on the Mandatory Conversion Date had occurred immediately
prior to the date of consummation of such transaction, plus the right to
receive cash in an amount equal to all accrued and unpaid dividends on such
shares of PRIDES (other than previously declared dividends payable to a
holder of record as of a prior date), (iii) redemption on any redemption date
in exchange for the kind and amount of securities, cash or other property
receivable upon consummation of such transaction by a holder of the number of
shares of Common Stock that would have been issuable at the Call Price in
effect on such redemption date upon a redemption of such share immediately
prior to consummation of such transaction, assuming that, if the Notice Date
for such redemption is not prior to such transaction, the Notice Date had
been the date of such transaction and assuming in each case that such holder
of Common Stock failed to exercise rights of election, if any, as to the kind
or amount of securities, cash or other property receivable upon consummation
of such transaction (provided that if the kind or amount of securities, cash
or other property receivable upon consummation of such transaction is not the
same for each non-electing share, then the kind and amount of securities,
cash or other property receivable upon consummation of such transaction for
each non-electing share shall be deemed to be the kind and amount so
receivable per share by a plurality of the non-electing shares). The kind and
amount of securities into or for which the shares of PRIDES shall be
convertible or redeemable after consummation of such transaction shall be
subject to adjustment as described in the immediately preceding paragraph
following the date of consummation of such transaction. The Corporation may
not become a party to any such transaction unless the terms thereof are
consistent with the foregoing or consistent with clause (iii) of Section 7(c).
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For purposes of the immediately preceding paragraph and subsection 3(g)
(iii), any sale or transfer to another corporation of property of the
Corporation which did not account for at least 50% of the consolidated net
income of the Corporation for its most recent fiscal year ending prior to the
consummation of such transaction shall not in any event be deemed to be a
sale or transfer of the property of the Corporation as an entirety or
substantially as an entirety.
(f) Notice of Adjustments. Whenever the Common Equivalent Rate and
Optional Conversion Rate are adjusted as herein provided, the Corporation
shall:
(i) forthwith compute the adjusted Common Equivalent Rate and
Optional Conversion Rate in accordance herewith and prepare a
certificate signed by an officer of the Corporation setting forth
the adjusted Common Equivalent Rate and the Optional Conversion
Rate, the method of calculation thereof in reasonable detail and
the facts requiring such adjustment and upon which such adjustment
is based, which certificate shall be conclusive, final and binding
evidence of the correctness of the adjustment, and file such
certificate forthwith with the transfer agent for the shares of
PRIDES and the Common Stock; and
(ii) make a prompt public announcement and mail a notice to the
holders of the outstanding shares of PRIDES stating that the
Common Equivalent Rate and the Optional Conversion Rate have been
adjusted, the facts requiring such adjustment and upon which such
adjustment is based and setting forth the adjusted Common
Equivalent Rate and Optional Conversion Rate, such notice to be
mailed at or prior to the time the Corporation mails an interim
statement to its stockholders covering the fiscal quarter during
which the facts requiring such adjustment occurred, but in any
event within 45 days of the end of such fiscal quarter.
(g) Notices. In case, at any time while any of the shares of PRIDES are
outstanding,
(i) the Corporation shall declare a dividend (or any other
distribution) on its Common Stock, excluding any cash dividends; or
(ii) the Corporation shall authorize the issuance to all holders of
its Common Stock of rights or warrants to subscribe for or
purchase shares or its Common Stock or of any other subscription
rights or warrants; or
(iii) the Corporation shall authorize any reclassification of its
Common Stock (other than a subdivision or combination thereof) or
any consolidation or merger to which the Corporation is a party
and for which approval of any stockholders of the Corporation is
required (except for a merger of the Corporation into one of its
subsidiaries solely for the purpose of changing the corporate
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domicile of the Corporation to another state of the United States
and in connection with which there is no substantive change in the
rights or privileges of any securities of the Corporation other
than changes resulting from differences in the corporate statutes
of the then existing and the new state of domicile), or the sale
or transfer to another corporation of the property of the
Corporation as an entirety or substantially as an entirety; or
(iv) the Corporation shall authorize the voluntary or involuntary
dissolution, liquidation or winding up of the Corporation;
then the Corporation shall cause to be filed at each office or agency
maintained for the purpose of conversion of the shares of PRIDES, and shall
cause to be mailed to the holders of shares of PRIDES at their last addresses
as they shall appear on the stock register, at least 10 days before the date
hereinafter specified (or the earlier of the dates hereinafter specified, in
the event that more than one date is specified), a notice stating (A) the
date on which a record is to be taken for the purpose of such dividend,
distribution, rights or warrants, or, if a record is not to be taken, the
date as of which the holders of Common Stock of record to be entitled to such
dividend, distribution, rights or warrants are to be determined, or (B) the
date on which any such reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding up is expected to become
effective, and the date as of which it is expected that holders of Common
Stock of record shall be entitled to exchange their Common Stock for
securities or other property (including cash), if any, deliverable upon such
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up. The failure to give or receive the notice required
by this subsection (g) or any defect therein shall not affect the legality or
validity of such dividend, distribution, right or warrant or other action.
(h) Effect of Conversions and Redemptions. The person or persons in
whose name or names any certificate or certificates for shares of Common
Stock shall be issuable upon any conversion or redemption shall be deemed to
have become on the date of any such conversion or redemption the holder or
holders of record of the shares represented thereby; provided, however, that
any such surrender on any date when the stock transfer books of the
Corporation shall be closed shall constitute the person or persons in whose
name or names the certificate or certificates for such shares are to be
issued as the record holder or holders thereof for all purposes at the
opening of business on the next succeeding day on which such stock transfer
books are open.
(i) No Fractional Shares. No fractional shares or script representing
fractional shares of Common Stock shall be issued upon the redemption or
conversion of any shares of PRIDES. In lieu of any fractional share otherwise
issuable in respect of the aggregate number of shares of PRIDES of any holder
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which are redeemed or converted on any redemption date or upon Mandatory
Conversion or any optional conversion, such holder shall be entitled to
receive an amount in cash (computed to the nearest cent) equal to the same
fraction of the (i) Current Market Price as of the second trading day
immediately preceding the Notice Date, in the case of redemption, or (ii)
Closing Price of the Common Stock determined (A) as of the fifth Trading Date
immediately preceding the Mandatory Conversion Date, in the case of Mandatory
Conversion, or (B) as of the second Trading Date immediately preceding the
effective date of conversion, in the case of an optional conversion by a
holder. If more than one share shall be surrendered for conversion or
redemption at one time by or for the same holder, the number of full shares
of Common Stock issuable upon conversion thereof shall be computed on the
basis of the aggregate number of shares of PRIDES so surrendered or redeemed.
(j) Reissuance. Shares of PRIDES that have been issued and reacquired in
any manner, including shares purchased, exchanged, redeemed or converted,
shall not be reissued as part of PRIDES and shall (upon compliance with any
applicable provisions of the laws of the State of Indiana) have the status of
authorized and unissued shares of the Preferred Stock undesignated as to
series and may be redesignated and reissued as part of any series of
Preferred Stock.
(k) Definitions. As used in this Article XIV:
(i) the term "business day" shall mean any day other than a
Saturday, Sunday, or a day on which banking institutions in the
State of Indiana are authorized or obligated by law or executive
order to close or are closed because of a banking moratorium or
otherwise;
(ii) the term "Call Price" of each share of PRIDES shall be the sum
of (x) $ on and after February 1, 1999, to and including
April 30, 1999, $ on and after May 1, 1999, to and including
July 31, 1999, $ on and after August 1, 1999, to and including
October 31, 1999, $ on and after November 1, 1999, through
February 1, 2000 and (y) all accrued and unpaid dividends thereon
to but not including the redemption date (other than previously
declared dividends payable to a holder of record as of a prior
date);
(iii) the term "Closing Price" on any day shall mean the last reported
sales price on such day or, in case no such sale takes place on
such day, the average of the reported closing high and low
quotations, in each case on the New York Stock Exchange or, if
the Common Stock is not listed on the New York Stock Exchange,
on the Nasdaq National Market, or, if the Common Stock is not
17
<PAGE>
listed on the Nasdaq National Market, the average of the high bid
and low-asked quotations of the Common Stock in the over-the-
counter market on the day in question as reported by the National
Quotation Bureau Incorporated, or a similarly generally accepted
reporting service, or, if no such quotations are available, the
fair market value of the Common Stock as determined by any New York
Stock Exchange member firm selected from time to time by the Board
of Directors for such purpose;
(iv) the term "Current Market Price" per share of Common Stock at any
date shall be deemed to be the lesser of (x) the average of the
daily Closing Prices for the fifteen consecutive Trading Dates
ending on and including the date in question or (y) the Closing
Price of the Common Stock for such date of determination;
provided, however, if any event that results in an adjustment
of the Common Equivalent Rate occurs during such fifteen-day
period, the Current Market Price as determined pursuant to the
foregoing shall be appropriately adjusted to reflect the
occurrence of such event; and
(v) the term "Trading Date" shall mean a date on which the New York
Stock Exchange (or any successor thereto) is open for the
transaction of business.
(l) Payment of Taxes. The Corporation shall pay any and all documentary,
stamp or similar issue or transfer taxes payable in respect of the issue or
delivery of shares of Common Stock on the redemption or conversion of shares
of PRIDES pursuant to this Section 3; provided, however, that the Corporation
shall not be required to pay any tax which may be payable in respect of any
registration of transfer involved in the issue or delivery of shares of
Common Stock in a name other than that of the registered holder of shares of
PRIDES redeemed or converted or to be redeemed or converted, and no such
issue or delivery shall be made unless and until the person requesting such
issue has paid to the Corporation the amount of any such tax or has
established, to the satisfaction of the Corporation, that such tax has been
paid.
(m) Reservation of Common Stock. The Corporation shall at all times
reserve and keep available, free from preemptive rights, out of the aggregate
of its authorized but unissued Common Stock and/or its issued Common Stock
held in its treasury, for the purpose of effecting any Mandatory Conversion
of the shares of PRIDES or any conversion of the shares of PRIDES at the
option of the holder, the full number of shares of Common Stock then
deliverable upon any such conversion of all outstanding shares of PRIDES.
18
<PAGE>
Section 4. LIQUIDATION RIGHTS.
(a) In the event of the liquidation, dissolution, or winding up of the
business of the Corporation, whether voluntary or involuntary, the holders of
shares of PRIDES then outstanding, after payment or provision for payment of
the debts and other liabilities of the Corporation and the payment or
provision for payment of any distribution on any shares of the Corporation
having a preference and a priority over the shares of PRIDES on liquidation,
and before any distribution to the holders of Junior Stock, shall be entitled
to be paid out of the assets of the Corporation available for distribution to
its stockholders an amount per share of PRIDES in cash equal to the sum of
(i) $ plus (ii) all accrued and unpaid dividends thereon. In the event the
assets of the Corporation available for distribution to the holders of the
shares of PRIDES upon any dissolution, liquidation or winding up of the
Corporation shall be insufficient to pay in full the liquidation payments
payable to the holders of outstanding shares of PRIDES and of all other
series of Parity Preferred Stock, the holders of shares of PRIDES and of all
other series of Parity Preferred Stock shall share ratably in such
distribution of assets in proportion to the amount which would be payable on
such distribution if the amounts to which the holders of outstanding shares
of PRIDES and the holders of outstanding shares of such Parity Preferred
Stock were paid in full. Except as provided in this Section 4, holders of
PRIDES shall not be entitled to any distribution in the event of liquidation,
dissolution or winding up of the affairs of the Corporation.
(b) For the purposes of this Section 4, none of the following shall be
deemed to be a voluntary or involuntary liquidation, dissolution or winding
up of the Corporation:
(i) the sale, lease, transfer or exchange of all or substantially
all of the assets of the Corporation; or
(ii) the consolidation or merger of the Corporation with one or more
other corporations (whether or not the Corporation is the
corporation surviving such consolidation or merger).
Section 5. DEFINITION. As used in this Article XIV, the term "Common
Stock" shall mean any stock of any class of the Corporation which has no
preference in respect of dividends or of amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation and which is not subject to redemption by the Corporation.
However, shares of Common Stock issuable upon conversion of shares of PRIDES
shall include only shares of the class designated as Common stock as of
January , 1996, or shares of the Corporation of any class or classes
resulting from any reclassification or reclassification thereof and which
19
<PAGE>
have no preference in respect of dividends or of amounts payable in the event
of any voluntary or involuntary liquidation, dissolution or winding up of the
Corporation and which are not subject to redemption by the Corporation;
provided, however, that, if at any time there shall be more than one such
resulting class, the shares of each such class then so issuable shall be
substantially in the proportion which the total number of shares of such
class resulting from such reclassification bears to the total number of
shares of all classes resulting from all such reclassification.
Section 6. NO PREEMPTIVE RIGHTS. The holders of shares of PRIDES shall
have no preemptive rights, including preemptive rights with respect to any
shares of capital stock or other securities of the Corporation convertible
into or carrying rights or options to purchase any such shares.
Section 7. VOTING RIGHTS.
(a) The holders of shares of PRIDES shall have the right with the
holders of Common Stock to vote in the election of directors and upon each
other matter coming before any meeting of the stockholders on the basis of
4/5 of a vote for each share held. The holders of shares of PRIDES and the
holders of Common stock shall vote together as one class except as otherwise
set forth herein or as otherwise provided by law or elsewhere in the Articles
of Incorporation.
(b) If at any time dividends payable on the shares of PRIDES or any
other series of Preferred Stock are in arrears and unpaid in an aggregate
amount equal to or exceeding the aggregate amount of dividends payable
thereon for six quarterly dividend periods, or if any other series of
Preferred Stock shall be entitled for any other reason to exercise voting
rights, separate from the Common Stock, to elect any Directors of the
Corporation ("Preferred Stock Directors"), the holders of the shares of
PRIDES, voting separately as a class with the holders of all other series of
Preferred Stock upon which like voting rights have been conferred and are
exercisable, with each share of PRIDES entitled to vote on this and other
matters upon which Preferred Stock votes as a group, shall have the right to
vote for the election of two Preferred Stock Directors of the Corporation,
such Directors to be in addition to the number of Directors constituting the
Board of Directors immediately prior to the accrual of such right. Such right
of the holders of shares of PRIDES to elect two Preferred Stock Directors
shall, when vested, continue until all dividends in arrears on the shares of
PRIDES and such other series of Preferred Stock shall have been paid in full
and the right of any other series of Preferred Stock to exercise voting
rights, separate from the Common Stock, to elect Preferred Stock Directors
shall terminate or have terminated and, when so paid, and any such
termination occurs or has occurred, such right of the holders of shares of
20
<PAGE>
PRIDES to elect two Preferred Stock Directors separately as a class shall
cease, subject always to the same provisions for the vesting of such right of
the holders of the shares of PRIDES to elect two Preferred Stock Directors in
the case of future dividend defaults.
The term of office of each Director elected pursuant to the preceding
paragraph shall terminate on the earlier of (i) the next annual meeting of
stockholders at which a successor shall have been elected and qualified or
(ii) the termination of the right of the holders of shares of PRIDES and such
other series of Preferred Stock to vote for Directors pursuant to the
preceding paragraph. Vacancies on the Board of Directors resulting from the
death, resignation or other cause of any such Director shall be filled
exclusively by no less than two-thirds of the remaining Directors and the
Director so elected shall hold office until a successor is elected and
qualified.
(c) For as long as any shares of PRIDES remain outstanding, the
affirmative consent of the holders of at least two-thirds thereof actually
voting (voting separately as a class) given in person or by proxy, at any
annual meeting or special meeting of the shareholders called for such
purpose, shall be necessary to (i) amend, alter or repeal any of the
provisions of the Articles of Incorporation of the Corporation which would
adversely affect the powers, preferences or rights of the holders of the
shares of PRIDES then outstanding or reduce the minimum time required for any
notice to which holders of shares of PRIDES then outstanding may be entitled;
provided, however, that any such amendment, alteration or repeal that would
authorize, create or increase the authorized amount of any additional shares
of Junior Stock or any other shares of stock (whether or not already
authorized) ranking on a parity with the shares of PRIDES shall be deemed not
to adversely affect such powers, preferences or rights and shall not be
subject to approval by the holders of shares of PRIDES; and provided further
that clause (i) shall not be applicable to the amendment, alteration or
repeal of any provisions of the Articles of Incorporation of the Corporation
approved at a meeting of the shareholders the record date of which is prior
to the issuance of any shares of PRIDES; (ii) authorize or create, or
increase the authorized amount of, any capital stock, or any security
convertible into capital stock, of any class ranking senior to PRIDES as to
payment of dividends or the distribution of assets upon liquidation,
dissolution or winding up of the Corporation; or (iii) merge or consolidate
with or into any other corporation, unless each holder of the shares of
PRIDES immediately preceding such merger or consolidation shall have the
right either to (A) receive or continue to hold in the resulting corporation
the same number of shares, with substantially the same rights and
preferences, as correspond to the shares of PRIDES so held or (B) convert
into shares of Common Stock at the Common Equivalent Rate in effect on the
date immediately preceding the announcement of any such merger or
consolidation.
21
<PAGE>
There is no limitation on the issuance by the Corporation of Parity
Preferred Stock or of any class ranking junior to the shares of PRIDES.
Notwithstanding the provisions summarized in the preceding two
paragraphs, however, no such approval described therein of the holders of the
shares of PRIDES shall be required to authorize an increase in the number of
authorized shares of Preferred Stock or if, at or prior to the time when such
amendment, alteration, or repeal is to take effect or when the authorization,
creation or increase of any such senior stock or security is to be made, or
when such consolidation or merger, liquidation, dissolution or winding up is
to take effect, as the case may be, provision is made for the redemption of
all shares of PRIDES at the time outstanding."
ARTICLE II
MANNER OF ADOPTION AND VOTE
Section 1. ACTION BY DIRECTORS. The Board of Directors of the
Corporation, at a meeting thereof, duly called, constituted and held on
December , 1995, at which a quorum of such Board of Directors was present,
duly adopted a resolution that the provisions and terms of the Articles of
Incorporation be amended as set forth in Article I above.
Section 2. SHAREHOLDER VOTE NOT REQUIRED. The Amendments set forth in
Article I above were adopted by the Board of Directors without shareholder
action and shareholder action was not required.
ARTICLE III
STATEMENT OF CHANGES WITH RESPECT TO AUTHORIZED SHARES
Section 1. AUTHORIZED STOCK BEFORE THE AMENDMENTS. Prior to these
Articles of Amendment, the authorized capital stock of the corporation
consisted of 520,000,000 shares divided into two classes: 500,000,000 shares
of Common stock, without par value, and 20,000,000 shares of Preferred Stock,
without par value.
Section 2. CHANGES MADE BY THE AMENDMENTS. These Articles of Amendment
do not increase or decrease the number of authorized shares of capital stock
of the Corporation.
22
<PAGE>
IN WITNESS WHEREOF, the undersigned officer executes these Articles of
Amendment to the Articles of Incorporation of Conseco, Inc., this day of
January, 1996.
CONSECO, INC.
By: _____________________________
Stephen C. Hilbert,
Chairman of the Board
This instrument was prepared by Karl W. Kindig, Attorney at Law, 11825 N.
Pennsylvania Street, Carmel, Indiana 46032.
23
<PAGE>
Exhibit 5.1
January 2, 1996
Board of Directors
Conseco, Inc.
11825 N. Pennsylvania Street
Carmel, IN 46032
Gentlemen and Madam:
I am Executive Vice President and General Counsel of Conseco, Inc. (the
"Corporation"). At your request, I have examined or caused to be examined the
Registration Statement on Form S-3 (Registration No. 33-53095), as amended by
Pre-Effective Amendments No. 1, 2 and 3 filed with the Securities and
Exchange Commission (as so amended, the "Registration Statement") in
connection with the registration under the Securities Act of 1933 of (i) debt
securities, which may be either senior (the "Senior Debt Securities") or
subordinated (the "Subordinated Debt Securities" and, together with the
Senior Debt Securities, the "Debt Securities"), (ii) shares of preferred
stock (the "Preferred Stock"), interests in which may be represented by
depositary shares (the "Depositary Shares"), (iii) shares of common stock
(the "Common Stock"), and (iv) warrants to purchase Debt Securities,
Preferred Shares or Common Stock (the "Warrants"). All of the foregoing
securities will be referred to herein collectively as the "Securities."
The Securities will be sold or delivered from time to time as set forth
in the Registration Statement, any amendment thereto, the prospectus
contained therein (the "Prospectus") and supplements to the Prospectus (the
"Prospectus Supplements"). The Senior Debt Securities will be issued under an
Indenture to be entered into by and between the Corporation and LTCB Trust
Company, as Trustee (the "Senior Indenture"). The Subordinated Debt
Securities will be issued under an Indenture to be entered into by and
between the Corporation and Star Bank, National Association, as Trustee (the
"Subordinated Indenture"). The forms of the Senior Indenture and the
subordinated Indenture are included as exhibits to the Registration Statement.
The opinions expressed in paragraphs 1, 5, and 6 below, relating to
whether the securities described therein will be legal, valid and binding
obligations of the Corporation, are qualified as to:
<PAGE>
Board of Directors
Conseco, Inc.
January 2, 1996
Page 2
(a) limitations imposed by applicable bankruptcy, insolvency,
reorganization, liquidation, receivership, conservatorship, readjustment of
debt, arrangement, moratorium or other laws relating to or affecting the
rights of creditors, generally;
(b) limitations imposed by general principles of equity, including
without limitation, concepts of materiality, reasonableness, good faith and
fair dealing, and the possible unavailability of specific performance,
injunctive relief or other equitable remedies, regardless of whether such
enforceability is considered in a proceeding in equity or at law; and
(c) the effect of applicable court decisions holding that provisions of
agreements are unenforceable where the breach thereof imposes restrictions or
burdens on a debtor and it cannot be demonstrated that the enforcement
thereof is necessary for the protection of the creditor; and the effect of
applicable statutes or court decisions limiting in certain circumstances
enforcement of provisions imposing penalties, forfeitures, late payment
charges or increases in interest rates upon delinquency in payment or
default; and the enforceability of any choice of forum which may be included
in the securities, which may be subject to limitation by certain procedural
rules of and statutes applicable to the Federal courts.
I have examined, or caused to be examined, instruments, documents and
record which I have deemed relevant and necessary for the basis of my
opinions hereinafter expressed. Based on such examination, I am of the
opinion that:
1. When appropriate corporate action has been taken to authorize the
issuance of any Debt Securities, officers' certificates have been duly
executed and delivered in accordance with the applicable Indenture, and such
Debt Securities have been duly completed, executed, authenticated, sold and
delivered in the applicable form filed as an exhibit to the Registration
Statement, in accordance with the applicable Indenture and in the manner
described in the Registration Statement, any amendment thereto, the
Prospectus and any Prospectus Supplement relating thereto, such Debt
Securities will be legal, valid and binding obligations of the Corporation,
entitled to the benefits of the applicable Indenture.
2. When appropriate corporate action has been taken to authorize the
issuance of any Preferred Stock and such Preferred Stock has been duly
executed, countersigned, sold and delivered in the form filed as an exhibit
to the Registration Statement and in
<PAGE>
Board of Directors
Conseco, Inc.
January 2, 1996
Page 3
the manner described in the Registration Statement, any amendment thereto,
the Prospectus and any Prospectus Supplement relating thereto, such Preferred
Stock will be duly authorized, validly issued, fully paid and nonassessable.
3. When appropriate corporate action has been taken to authorize the
issuance of any Common Stock and such Common Stock has been duly executed,
countersigned, sold and delivered in the form filed as an exhibit to the
Registration Statement and in the manner described in the Registration
Statement, any amendment thereto, the Prospectus and any Prospectus
Supplement relating thereto, such Common Stock will be duly authorized,
validly issued, fully paid and nonassessable.
4. When appropriate corporate action has been taken to authorize the
issuance of any Depositary Shares and the underlying Preferred Stock and the
execution and delivery of a deposit agreement relating to such Depositary
Shares (the "Depositary Agreement"), such Deposit Agreement has been duly
executed and depositary receipts representing the Depositary Shares (the
"Depositary Receipts") and the underlying Preferred Stock have been duly
executed, countersigned, sold and delivered in the manner described in the
Registration Statement, any amendment thereto, the Prospectus and any
Prospectus Supplement relating thereto, such Depositary Shares will be
validly issued and will entitle the holders thereof to the rights specified
in the Depositary Receipts and in the Deposit Agreement.
5. When appropriate corporate action has been taken to authorize the
issuance of any Warrants and the underlying Debt Securities, Preferred Stock
or Common Stock, as the case may be, and the execution and delivery of a
warrant agreement relating to such Warrants (the "Warrant Agreement"), such
Warrant Agreement has been duly executed and delivered, and such Warrants
have been duly executed, countersigned, sold and delivered in the manner
described in the Registration Statement, any amendment thereto, the
Prospectus and any Prospectus Supplement relating thereto, such Warrants will
be legal, valid and binding obligations of the Corporation.
6. When appropriate corporation action has been taken to authorize the
issuance of any Debt Securities, Preferred Stock or Common Stock upon
exercise of any Warrants, such Warrants have been duly issued and exercised
in accordance with their terms and in the manner described in the
Registration Statement, any amendment thereto, the Prospectus and any
Prospectus Supplement relating thereto, such Debt Securities, Preferred Stock
or Common Stock, as
<PAGE>
Board of Directors
Conseco, Inc.
January 2, 1996
Page 4
the case may be, have been duly issued and executed, countersigned and
delivered in the applicable form filed as an exhibit to or incorporated by
reference into the Registration Statement, any such Debt Securities will be
legal, valid and binding obligations of the Corporation, entitled to the
benefit of the applicable Indenture and any such Preferred Stock or Common
Stock will be duly authorized, validly issued, fully paid and nonassessable.
7. When appropriate corporate action has been taken to authorize the
issuance of any shares of Common Stock upon conversion of any convertible
Preferred Stock, and such Preferred Stock has been duly issued and converted
in accordance with its terms and in the manner described in the Registration
Statement, any amendment thereto, the Prospectus and any Prospectus
Supplement relating thereto, such shares of Common Stock will be duly
authorized, validly issued, fully paid and nonassessable.
8. When appropriate corporate action has been taken to authorize the
issuance of any shares of Common Stock or Preferred Stock upon conversion of
any convertible Debt Securities or upon exchange of any exchangeable Debt
Securities, such Debt Securities have been duly issued and converted or
exchanged, as the case may be, in accordance with their terms and the terms
of the applicable Indenture and in the manner described in the Registration
Statement, any amendment thereto, the Prospectus and any Prospectus
Supplement relating thereto, and such shares of Common Stock or Preferred
Stock, as the case may be, have been duly executed, countersigned and
delivered in the applicable form filed as an exhibit to the Registration
Statement, such shares of Common Stock or Preferred Stock, as the case may
be, will be duly authorized, validly issued, fully paid and nonassessable.
I consent to the use of this opinion as an exhibit to the Registration
Statement and of my name under the caption "Legal Matters" in the
Registration Statement, the Prospectus and the Prospectus Supplement.
Very truly yours,
/s/ LAWRENCE W. INLOW
---------------------------------
Lawrence W. Inlow
Executive Vice President and
General Counsel
LWI/sb
<PAGE>
EXHIBIT 23.1
[LETTERHEAD]
CONSENT OF INDEPENDENT ACCOUNTANTS
---------------
We consent to the incorporation by reference in this registration statement
on Form S-3 (Registration No. 33-53095) of our reports dated March 6, 1995 on
our audits of the consolidated financial statements and financial statement
schedules of Conseco, Inc. and subsidiaries as of December 31, 1994 and 1993
and for the years ended December 31, 1994, 1993 and 1992. We also consent to
the reference to our firm under the caption "Experts."
Coopers & Lybrand L.L.P.
-----------------------------
COOPERS & LYBRAND L.L.P.
Indianapolis, Indiana
January 2, 1996
<PAGE>
EXHIBIT 24.1.4
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Lawrence W. Inlow, James
S. Adams and Karl W. Kindig, jointly and severally, as his true and lawful
attorney-in-fact and agent, each with full power of substitution
and resubstitutuion for him and in his name, place and stead, in any and all
capacities, to sign the Registration Statement on Form S-3 of Conseco, Inc.
(No. 33-53095), and any and all amendments (including post-effective
amendments) thereto and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each said
attorney-in-fact or agent or substitute lawfully does or causes to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
on the 21st day of November, 1995.
/s/ Ngaire E. Cuneo
______________________________
Ngaire E. Cuneo
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) [ ]
- --------------------------------------------------------------------------------
LTCB TRUST COMPANY
- --------------------------------------------------------------------------------
(Exact name of trustee as specified in its character)
New York State 13-3191890
- --------------------------------------------------------------------------------
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Indentification Number)
165 Broadway New York, N.Y. 10006
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
LTCB Trust Company 165 Broadway New York, N.Y. 10006
Corporate Trust Administration 47th Floor
Attn: Barbara Bevelaqua, Vice President (212) 335-4901
Lisa Karlsen, Assistant Vice President (212) 335-4899
- --------------------------------------------------------------------------------
(Name, address and telephone number of agent for service)
- --------------------------------------------------------------------------------
CONSECO, INC.
- --------------------------------------------------------------------------------
(Exact name of obligor as specified in its charter)
INDIANA 35-1468632
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Indentification Number)
incorporation or organization)
11825 N. PENNSYLVANIA STREET
CARMEL, INDIANA 46032
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
SENIOR DEBT SECURITIES
- --------------------------------------------------------------------------------
(Title of the indenture securities)
<PAGE>
ITEM 1. GENERAL INFORMATION
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
a) Name and address of each examining or supervising authority to which it is
subject:
Superintendent of Banks Federal Reserve Bank of New York (District 2)
State of New York 33 Liberty Street
Albany, New York New York, N.Y. 10045
Federal Deposit Insurance Corporation
550 17th Street, N.W.
Washington, D.C. 20429
b) Whether it is authorized to exercise corporate trust powers:
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH AFFILIATION:
The obligor is not an affiliate of the trustee.
ITEM 16. LIST OF EXHIBITS
EXHIBIT I
A copy of the authorization certificate of LTCB Trust Company as well as
supplemental and related documents now in effect, which contain the
authority to commence business and a grant of powers to said LTCB Trust
Company to exercise corporate trust powers. **
EXHIBIT II
A copy of the existing By-Laws of LTCB Trust Company. **
EXHIBIT III
The consent of the trustee as required by Section 321(b) of the Act.
EXHIBIT IV
A copy of the latest published report of condition of the trust issued as
at September 30, 1995.
**Exhibits I and II are herein incorporated by reference to Exhibits bearing
identical numbers in Item 16 of the Form T-1 of LTCB Trust Company, filed as
Exhibit 21.5 to the Registration Statement on Form S-1 of ALHC Merger
Corporation, filed with the Securities and Exchange Commission on September 12,
1994 (Registration No. 33-81858).
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as amended by
The Trust Indenture Reform Act of 1990, the trustee, LTCB Trust Company, a
corporation organized and existing under the laws of the State of New York, has
duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of New York, and State
of New York, on the 28th day of December, 1995.
LTCB Trust Company
By: /s/ Barbara Bevelaqua
------------------------
Barbara Bevelaqua
Vice President
<PAGE>
EXHIBIT III
AUTHORIZATION AND CONSENT OF LTCB TRUST COMPANY
REQUIRED BY SECTION 321(b) OF THE ACT
LTCB Trust Company hereby authorizes and consents that any reports, records,
or other available information in the possession of the Board of Governors of
the Federal Reserve System, the New York Federal Reserve Board, the New York
State Banking Department and the Federal Deposit Insurance Corporation be
furnished by such authorities to the Securities and Exchange Commission (SEC)
upon request therefore, in connection with the SEC's acting upon form T-1 and
Exhibits filed with it by LTCB Trust Company to establish its eligibility and
qualification under the Trust Indenture Act of 1939 (as amended by the Trust
Indenture Reform Act of 1990) to be designated as trustee under the indenture
to be executed in connection with the issuance by Conseco, Inc. of its SENIOR
DEBT SECURITIES IN A SERIES.
December 28, 1995 /s/ Barbara Bevelaqua
- ------------------ -------------------------
Dated Barbara Bevelaqua
Vice President
<PAGE>
LTCB TRUST COMPANY Call Date: 09/30/95 ST-BK:36-5259 FFIEC 031
165 BROADWAY Page RI-1
NEW YORK, NY 10006 Vendor ID:D Cert: 25822
3
Transit Number 00000031
TRANSMITTED TO EDS AS 0060867 ON 10/27/95 at 09:42:31 CST
CONSOLIDATED REPORT OF INCOME
FOR THE PERIOD JANUARY 1, 1995 - SEPTEMBER 30, 1995
ALL REPORT OF INCOME SCHEDULES ARE TO BE REPORTED ON A CALENDAR YEAR-TO-DATE
BASIS IN THOUSANDS OF DOLLARS.
SCHEDULE RI - INCOME STATEMENT
<TABLE>
I480
Dollar Amounts in Th
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Interest Income:
a. Interest and fee income on loans:
(1) In domestic offices:
(a) Loans secured by real estate...................................................RIAD 4011 9,959 1.a.1.a
(b) Loans to depository institutions...............................................RIAD 4019 0 1.a.1.b
(c) Loans to finance agricultural production and other loans to farmers............RIAD 4024 0 1.a.1.c
(d) Commercial and industrial loans................................................RIAD 4012 41,161 1.a.1.d
(e) Acceptances of other banks.....................................................RIAD 4026 0 1.a.1.e
(f) Loans to individuals for household, family, and other personal expenditures:
(1) Credit cards and related plans.............................................RIAD 4054 0 1.a.1.f.1
(2) Other......................................................................RIAD 4055 0 1.a.1.f.2
(g) Loans to foreign governments and official institutions.........................RIAD 4056 0 1.a.1.g
(h) Obligations (other than securities and leases) of states and political
subdivisions in the U.S.:
(1) Taxable obligations........................................................RIAD 4503 0 1.a.1.h.1
(2) Tax-exempt obligations.....................................................RIAD 4504 258 1.a.1.h.2
(i) All other loans in domestic offices............................................RIAD 4058 994 1.a.1.i
(2) In foreign offices, Edge and Agreement subsidiaries, and IBFs......................RIAD 4059 0 1.a.2
b. Income from lease financing receivables:
(1) Taxable leases.....................................................................RIAD 4505 1,269 1.b.1
(2) Tax-exempt leases..................................................................RIAD 4307 0 1.b.2
c. Interest income on balances due from depository institutions: (1)
(1) In domestic offices................................................................RIAD 4105 743 1.c.1
(2) In foreign offices, Edge and Agreement subsidiaries, and IBFs......................RIAD 4106 0 1.c.2
d. Interest and dividend income on securities:
(1) U.S. Treasury securities and U.S. Government agency and corporation obligations....RIAD 4027 4,539 1.d.1
(2) Securities issued by states and political subdivisions in the U.S.:
(a) Taxable securities.............................................................RIAD 4506 0 1.d.2.a
(b) Tax-exempt securities..........................................................RIAD 4507 355 1.d.2.b
(3) Other domestic debt securities.....................................................RIAD 3657 1,086 1.d.3
(4) Foreign debt securities............................................................RIAD 3658 0 1.d.4
(5) Equity securities (including investments in mutual funds)..........................RIAD 3659 0 1.d.5
e. Interest income from trading assets....................................................RIAD 4069 0 1.e
</TABLE>
- -------------
(1) Includes interest income on time certificates of deposits not held
for trading.
<PAGE>
LTCB TRUST COMPANY Call Date: 09/30/95 ST-BK:36-5259 FFIEC 031
165 BROADWAY Page RI-2
NEW YORK, NY 10006 Vendor ID:D Cert: 25822
3
Transit Number 00000031
TRANSMITTED TO EDS AS 0060867 ON 10/27/95 at 09:42:31 CST
SCHEDULE RI - CONTINUED
<TABLE>
Dollar Amounts in Th
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1. Interest income (continued) Year-to-date
f. Interest income on federal funds sold and securities purchased
under agreements to resell in domestic offices of the bank and
of its Edge and Agreement subsidiaries, and in IBFs.................RIAD 4020 1,031 1.f
g. Total interest income (sum of items 1.a through 1.f)................RIAD 4107 61,395 1.g
2. Interest expense:
a. Interest on deposits:
(1) Interest on deposits in domestic offices:
(a) Transaction accounts (NOW accounts, ATS accounts, and
telephone and preauthorized transfer accounts)..............RIAD 4508 0 2.a.1.a
(b) Nontransaction accounts:
(1) Money market deposit accounts (MMDAs)...................RIAD 4509 0 2.a.1.b.1
(2) Other savings deposits..................................RIAD 4511 0 2.a.1.b.2
(3) Time certificates of deposit of $100,000 or more........RIAD 4174 2,593 2.a.1.b.3
(4) All other time deposits.................................RIAD 4512 9 2.a.1.b.4
(2) Interest on deposits in foreign offices, Edge and
agreement subsidiaries, and IBFs................................RIAD 4172 30,259 2.a.2
b. Expense of federal funds purchased and securities sold under
agreements to repurchase in domestic offices of the bank and of its
Edge and Agreement subsidiaries, and in IBFs........................RIAD 4180 446 2.b
c. Interest on demand notes issued to the U.S. Treasury, trading
liabilities, and on other borrowed money............................RIAD 4185 9,038 2.c
d. Interest on mortgage indebtedness and obligations under
capitalized leases..................................................RIAD 4072 0 2.d
e. Interest on subordinated notes and debentures.......................RIAD 4200 35 2.e
f. Total interest expense (sum of items 2.a through 2.e)...............RIAD 4073 42,380 2.f
3. Net interest income (item 1.g minus 2.f).......................................................RIAD 4074 19,015 3.
4. Provisions:
a. Provision for loan and lease losses.........................................................RIAD 4230 (2,812) 4.a
b. Provision for allocated transfer risk.......................................................RIAD 4243 0 4.b
5. Noninterest income:
a. Income from fiduciary activities....................................RIAD 4070 5,107 5.a
b. Service charges on deposit accounts in domestic offices.............RIAD 4080 0 5.b
c. Trading gains (losses) and fees from foreign exchange transactions..RIAD 4075 0 5.c
d. Other foreign transaction gains (losses)............................RIAD 4076 0 5.d
e. Other gains (losses) and fees from trading assets and liabilities...RIAD 4077 0 5.e
f. Other noninterest income:
(1) Other fee income................................................RIAD 5407 4,330 5.f.1
(2) All other noninterest income *..................................RIAD 5408 77 5.f.2
g. Total noninterest income (sum of items 5.a through 5.f)......................................RIAD 4079 9,514 5.g
6. a. Realized gains (losses) on held-to-maturity securities.......................................RIAD 3521 62 6.a
b. Realized gains (losses) on available-for-sale securities.....................................RIAD 3196 104 6.b
7. Noninterest expense:
a. Salaries and employee benefits......................................RIAD 4135 5,090 7.a
b. Expenses of premises and fixed assets (net of rental income)
(excluding salaries and employee benefits and mortgage interest)....RIAD 4217 2,611 7.b
c. Other noninterest expense *.........................................RIAD 4092 2,480 7.c
d. Total noninterest expense (sum of items 7.a through 7.c).....................................RIAD 4093 10,181 7.d
8. Income (loss) before income taxes and extraordinary items and other
adjustments (item 3 plus or minus items 4.a, 4.b, 5.g, 6.a, 6.b,
and 7.d)........................................................................................RIAD 4301 21,326 8.
9. Applicable income taxes (on item 8).............................................................RIAD 4302 9,816 9.
10. Income (loss) before extaordinary items and other adjustments (item 8
minus 9)........................................................................................RIAD 4300 11,510 10.
</TABLE>
- ----------
* Describe on Schedule RI-E - Explanations.
<PAGE>
LTCB TRUST COMPANY Call Date: 09/30/95 ST-BK:36-5259 FFIEC 031
165 BROADWAY Page RI-3
NEW YORK, NY 10006 Vendor ID:D Cert: 25822
5
Transit Number 00000031
TRANSMITTED TO EDS AS 0060867 ON 10/27/95 at 09:42:31 CST
SCHEDULE RI - CONTINUED
<TABLE>
Dollar Amounts in Th
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
11. Extraordinary items and other adjustments: Year-to-date
a. Extraordinary items and other adjustments, gross of income taxes *..RIAD 4310 0 11.a
b. Applicable income taxes (on item 11.a) *............................RIAD 4315 0 11.b
c. Extraordinary items and other adjustments, net of income taxes
(item 11.a minus 11.b).......................................................................RIAD 4320 0 11.c
12. Net income (loss) (sum of items 10 and 11.c)....................................................RIAD 4340 11,510 12.
</TABLE>
MEMORANDA
<TABLE>
I480
Dollar Amounts in Thousands
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Interest expense incurred to carry tax-exempt securities, loans, and leases acquiried on Year-to-date
August 7, 1986, that is not deductible for federal income tax purposes...........................RIAD 4513 0 M.1
2. Income from the sale and servicing of mutual funds and annuities in domestic
offices (included in Schedule RI, item 8)........................................................RIAD 8431 0 M.2
3. Estimated foreign tax credit included in applicable income taxes, items 9 and 11.b above.........RIAD 4309 0 M.3
4. To be completed only by banks with $1 billion or more in total assets:
Taxable equivalent adjustment to "Income (loss) before income taxes and extraordinary
items and other adjustments" (item 8 above)......................................................RIAD 1244 552 M.4
5. Number of full-time equivalent employees on payroll at end of current period (rounded to Number
nearest whole number)............................................................................RIAD 4150 51 M.5
6. Not applicable
7. If the reporting bank has restated its balance sheet as a result of applying push d MM DD YY
accounting this calendar year, report the date of the bank's acquisition.........................RIAD 9105 N/A M.7
8. Trading revenue (from cash instruments and off-balance sheet derivative instruments)
(included in Schedule RI, items 5.c and 5.e):
a. Interest rate exposures.......................................................................RIAD 8757 0 M.8.a
b. Foreign exchange exposures....................................................................RIAD 8758 0 M.8.b
c. Equity security and index exposures...........................................................RIAD 8759 0 M.8.c
d. Commodity and other exposures.................................................................RIAD 8760 0 M.8.d
9. Impact on income of off-balance sheet derivatives held for purposes other than trading:
a. Net increase (decrease) to interest income....................................................RIAD 8761 0 M.9.a
b. Net (increase) decrease to interest expense...................................................RIAD 8762 3,121 M.9.b
c. Other (noninterest) allocations...............................................................RIAD 8763 0 M.9.c
</TABLE>
- --------------
* Described on Schedule RI-E - Explanations.
<PAGE>
LTCB TRUST COMPANY Call Date: 09/30/95 ST-BK:36-5259 FFIEC 031
165 BROADWAY Page RC-1
NEW YORK, NY 10006 Vendor ID:D Cert: 25822
11
Transit Number 00000031
TRANSMITTED TO EDS AS 0060867 ON 10/27/95 at 09:42:31 CST
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR SEPTEMBER 30, 1995
ALL SCHEDULES ARE TO BE REPORTED IN THOUSANDS OF DOLLARS. UNLESS OTHERWISE
INDICATED, REPORT THE AMOUNT OUTSTANDING AS OF THE LAST BUSINESS DAY OF
THE QUARTER.
SCHEDULE RC - BALANCE SHEET
<TABLE>
C400
Dollar Amounts in Th
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
1. Cash and balances due from depository institutions (from Schedule RC-A):
a. Noninterest-bearing balances and currency and coin (1)..................................RCFD 0081 33,624 1.a
b. Interest-bearing balances (2)...........................................................RCFD 0071 7,616 1.b
2. Securities:
a. Held-to-maturity securities (from Schedule RC-B, column A)..............................RCFD 1754 9,509 2.a
b. Available-for-sale securities (from Schedule RC-B, column D)............................RCFD 1773 104,951 2.b
3. Federal funds sold and securities purchased under agreements to resell in domestic offices
of the bank and of its Edge and Agreement subsidiaries, and in IBFs:
a. Federal funds sold......................................................................RCFD 0276 9,000 3.a
b. Securities purchased under agreements to resell.........................................RCFD 0277 0 3.b
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income (from Schedule RC-C)....RCFD 2122 986,357 4.a
b. LESS: Allowance for loan and lease losses........................RCFD 3123 21,448 4.b
c. LESS: Allocated transfer risk reserve............................RCFD 3128 0 4.c
d. Loans and leases, net of unearned income,
allowance, and reserve (item 4.a minus 4.b and 4.c).....................................RCFD 2125 964,909 4.d
5. Trading assets (from Schedule RC-D)........................................................RCFD 3545 0 5.
6. Premises and fixed assets (including capitalized leases)...................................RCFD 2145 2,585 6.
7. Other real estate owned (from Schedule RC-M)...............................................RCFD 2150 6,501 7.
8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M)...RCFD 2130 0 8.
9. Customers' liability to this bank on acceptances outstanding...............................RCFD 2155 0 9.
10. Intangible assets (from Schedule RC-M).....................................................RCFD 2143 0 10.
11. Other assets (from Schedule RC-F)..........................................................RCFD 2160 17,704 11.
12. Total assets (sum of items 1 through 11)...................................................RCFD 2170 1,156,399 12.
</TABLE>
- ------------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
<PAGE>
LTCB TRUST COMPANY Call Date: 09/30/95 ST-BK:36-5259 FFIEC 031
165 BROADWAY Page RC-2
NEW YORK, NY 10006 Vendor ID:D Cert: 25822
12
Transit Number 00000031
TRANSMITTED TO EDS AS 0060867 ON 10/27/95 at 09:42:31 CST
SCHEDULE RC - CONTINUED
<TABLE>
Dollar Amounts in Th
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
LIABILITIES
13. Deposits:
a. In domestic offices (sum of totals of columns A and C from Schedule RC-E,
part I).................................................................................RCON 2200 136,873 13.a
(1) Noninterest-bearing (1)......................................RCON 6631 38,480 13.a.1
(2) Interest-bearing.............................................RCON 6636 98,393 13.a.2
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from
Schedule RC-E, part II).................................................................RCFN 2200 599,130 13.b
(1) Noninterest-bearing..........................................RCFN 6631 0 13.b1
(2) Interest-bearing.............................................RCFN 6636 599,130 13.b2
14. Federal funds purchased and securities sold under agreements to repurchase in
domestic offices of the bank and of Edge and Agreement subsidiaries, and in IBFs:
a. Federal funds purchased.................................................................RCFD 0278 0 14.a
b. Securities sold under agreements to repurchase..........................................RCFD 0279 0 14.b
15. a. Demand notes issued to the U.S. Treasury................................................RCON 2840 0 15.a
b. Trading liabilities (from Schedule RC-D)................................................RCFD 3548 0 15.b
16. Other borrowed money:
a. With original maturity of one year or less..............................................RCFD 2332 47,500 16.a
b. With original maturity of more than one year............................................RCFD 2333 160,748 16.b
17. Mortgage indebtedness and obligations under capitalized leases.............................RCFD 2910 0 17.
18. Bank's liability on acceptances executed and outstanding...................................RCFD 2920 0 18.
19. Subordinated notes and debentures..........................................................RCFD 3200 50,000 19.
20. Other liabilities (from Schedule RC-G).....................................................RCFD 2930 30,318 20.
21. Total liabilities (sum of items 13 through 20).............................................RCFD 2948 1,024,569 21.
22. Limited-life preferred stock and related surplus...........................................RCFD 3282 0 22.
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus..............................................RCFD 3838 0 23.
24. Common stock...............................................................................RCFD 3230 52,250 24.
25. Surplus (exclude all surplus related to preferred stock)...................................RCFD 3839 52,750 25.
26. a. Undivided profits and capital reserves..................................................RCFD 3632 25,162 26.a
b. Net unrealized holding gains (losses) on available-for-sale securities..................RCFD 8434 1,668 26.b
27. Cumulative foreign currency translation adjustments........................................RCFD 3284 0 27.
28. Total equity capital (sum of items 23 through 27)..........................................RCFD 3210 131,830 28.
29. Total liabilities, limited-life preferred stock, and equity capital
(sum of items 21, 22, and 28)..............................................................RCFD 3300 1,156,399 29.
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below that best describes the
most comprehensive level of auditing work performed for the bank by independent Number
auditors as of any date during 1994.........................................................RCFD 6724 N/A M.1
</TABLE>
1 = Independent audit of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm
which submits a report on the bank
2 = Independent audit of the bank's parent holding company conducted in
accordance with generally accepted auditing standards by a certified
public accounting firm which submits a report on the consolidated
holding company (but not on the bank separately)
3 = Directors' examination of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm (may
be required by state chartering authority)
4 = Directors' examination of the bank performed by other external auditors
(may be required by state chartering authority)
5 = Review of the bank's financial statements by external auditors
6 = Compilation of the bank's financial statements by external auditors
7 = Other audit procedures (excluding tax preparation work)
8 = No external audit work
- --------------
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
<PAGE>
Securities Act of 1933 File No. ___________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
__________________________________________________
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
PURSUANT TO SECTION 305(b) (2) /X/
__________________________________________________
STAR BANK, NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
A National Banking Association 31-0841368
________________________________
(IRS Employer Identification No.)
425 Walnut Street
Cincinnati, Ohio 45202
____________________________________________________ __________
(Address of Principal Executive Offices (Zip Code)
_________________________________________________
Nancy V. Kelly
Vice President and Trust Officer
Star Bank, National Association
425 Walnut Street
Cincinnati, Ohio 45202
(513) 632-4390
(Name, address, and telephone number of agent for services)
__________________________________________________________
CONSECO, INC.
______________________________
(Exact name of obligor as specified in its charter)
Indiana 35-1468632
_______________________ ________________________________
(State of Incorporation) (IRS Employer Identification No.)
11815 N. Pennsylvania Street 46032
_________________________________________ ______________________
(Address of principal executive offices) (Zip Code)
% Subordinated Debt Securities
_________________________________
(Title of the Indenture securities)
<PAGE>
1. GENERAL INFORMATION. Furnish the following information
as Trustee --
(a) Name and address of each examining or supervising
authority to which it is subject.
Comptroller of the Currency, Washington, D.C.
Federal Reserve Bank of Cleveland, Ohio
Federal Deposit Insurance Corporation, Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
The Trustee is authorized to exercise corporate trust powers.
2. AFFILIATIONS WITH OBLIGOR. If the obligor is an
affiliate of the trustee, describe each such affiliation.
The obligor is not an affiliate of the Trustee (including its
parent and any affiliates).
3. VOTING SECURITIES OF THE TRUSTEE. Furnish the following
information as to each class of voting securities of the trustee
(and its parent). As of December 28, 1995
<TABLE>
<CAPTION>
Col A. Col B
______________ ____________________
(Title of Class) (Amount Outstanding)
<S> <C>
Star Banc Corporation Common Stock 29,858,465
Star Banc Corporation Series B Cum Pfd 3,520
</TABLE>
4. TRUSTEESHIPS UNDER OTHER INDENTURES. If the trustee is a
trustee under another Indenture under which any other securities, or
certificates of interest or participation in any other securities, of the
obligor are outstanding, furnish the following information:
(a) Title of the securities outstanding under each such other
indenture.
(b) A brief statement of the facts relied upon as a basis for the claim
that no conflicting interest within the meaning of Section 310(b) (1)
of the Act arises as a result of the trusteeship under any such
other indenture, including a statement as to how the indenture
securities will rank as compared with the securities issued under
such other indenture.
<PAGE>
5. INTERLOCKING DIRECTORATES AND SIMILAR RELATIONSHIPS WITH THE
OBLIGOR OR UNDERWRITERS.
If the trustee (including its parent and any other affiliates) or any of
the directors or executive officers of the trustee is a director, officer,
partner, employee, appointee, or representative of the obligor or of any
underwriter for the obligor, identify each such person having any such
connection and state the nature of each such connection.
6. VOTING SECURITIES OF THE TRUSTEE (INCLUDING ITS PARENT AND
ANY AFFILIATE) OWNED BY THE OBLIGOR OR ITS OFFICIALS. Furnish the following
information as to the voting securities of the trustee (including its parent
and any affiliates) owned beneficially by the obligor and each director,
partner and executive officer of the obligor:
As of _______________________ (insert date within 31 days)
<TABLE>
<CAPTION>
Col. A. Col. B. Col. C Col. D
Percentage of
Voting Securities
Represented by
Amount Owned Amount Given
Name of Owner Title of Class Beneficially in Col. C
______________ __________________ _________________ ____________________
<S> <C> <C> <C>
</TABLE>
7. VOTING SECURITIES OF THE TRUSTEE (INCLUDING ITS PARENT AND
ANY AFFILIATES) OWNED BY UNDERWRITERS OR THEIR OFFICIALS. Furnish the
following information as to the voting securities of the trustee (including
its parent and any affiliates) owned beneficially by each underwriter for
the obligor and each director, partner, and executive officer of each such
underwriter:
As of _______________________ (insert date within 31 days)
<TABLE>
<CAPTION>
Col. A. Col. B. Col. C Col. D
Percentage of
Voting Securities
Represented by
Amount Owned Amount Given
Name of Owner Title of Class Beneficially in Col. C
______________ __________________ _________________ ____________________
<S> <C> <C> <C>
</TABLE>
<PAGE>
8. SECURITIES OF THE OBLIGOR OWNED OR HELD BY THE TRUSTEE
(INCLUDING ITS PARENT AND ANY AFFILIATES). Furnish the following
information as to securities of the obligor owned beneficially or held
as collateral security for obligations default by the trustee (including
its parent and any affiliates):
As of ___________________(insert date within 31 days)
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D
Amount Owned
Whether the Beneficially or
Securities Are Held as Collateral Percent of
Voting or Security for Class Represented
Nonvoting obligations in by Amount Given
Title of Class Securities Default in Col. C
_______________ _________________ ___________________ __________________
<S> <C> <C> <C>
</TABLE>
9. SECURITIES OF UNDERWRITERS OWNED OR HELD BY THE TRUSTEE
(INCLUDING ITS PARENT AND ANY AFFILIATES). If the trustee (including
its parent and any affiliates) owns beneficially or holds as collateral
security for obligations in default any securities of an underwriter for the
obligor, furnish the following information as to each class of securities of
such underwriter any of which are so owned or held by the trustee:
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D
Amount Owned
Beneficially or
Held as Collateral Percent of
Security for Class Represented
Title of Issuer Obligations in by Amount
and Title of Amount Default by Given in
Class Outstanding Trustee Col. C
________________ ________________ ____________________ __________________
<S> <C> <C> <C>
</TABLE>
10. OWNERSHIP OR HOLDINGS BY THE TRUSTEE (INCLUDING ITS PARENT
AND ANY AFFILIATES) OF VOTING SECURITIES OF CERTAIN AFFILIATES OR SECURITY
HOLDERS OF THE OBLIGOR. If the trustee (including its parent and any
affiliates) owns beneficially or holds as collateral security for obligations
in default voting securities of a person who, to the knowledge of the trustee
(1) owns 10% or more of the voting securities
<PAGE>
of the obligor or (2) is an affiliate, other than a subsidiary, of the
obligor, furnish the following information as to the voting securities of
such person:
As of _______________________(insert date within 31 days)
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D
Amount Owned
Beneficially or
Held as Collateral Percent of
Security for Class Represented
Title of Issuer Obligations in by Amount
and Title of Amount Default by Given in
Class Outstanding Trustee Col. C
________________ _________________ ____________________ ________________
<S> <C> <C> <C>
</TABLE>
11. OWNERSHIP OR HOLDINGS BY THE TRUSTEE (INCLUDING ITS PARENT AND ANY
AFFILIATES) OF ANY SECURITIES OF A PERSON OWNING 50 PERCENT OR MORE OF THE
VOTING SECURITIES OF THE OBLIGOR. If the trustee (including its parent and
any affiliates) owns beneficially or holds as collateral security for
obligations in default any securities of a person who, to the knowledge of
the trustee, owns 50 percent or more of the voting securities of the obligor,
furnish the following information as to each class of securities of such
person any of which are so owned or held by the trustee (including its
parent and affiliates):
As of ______________________(insert date within 31 days)
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D
Amount Owned
Beneficially or
Held as Collateral Percent of
Security for Class Represented
Title of Issuer Obligations in by Amount
and Title of Amount Default by Given in
Class Outstanding Trustee Col. C
________________ _________________ _____________________ _________________
<S> <C> <C> <C>
</TABLE>
<PAGE>
12. INDEBTEDNESS OF THE OBLIGOR TO THE TRUSTEE. Except as noted
in the instructions, if the obligor is indebted to the trustee, furnish the
following information:
As of ____________________(insert date with 31 days)
<TABLE>
<CAPTION>
Col. A Col. B Col. C
Amount
Nature of Indebtedness Outstanding Due Date
__________________________ __________________________ ______________
<S> <C> <C>
</TABLE>
13. DEFAULTS BY THE OBLIGOR.
a) State whether there is or has been a default with respect
to the securities under this indenture. Explain
the nature of any such default.
-NONE-
b) If the Trustee is a trustee under another
indenture under which any other securities, or certificates of
interest or participation in any other securities, of the
obligor are outstanding, or is trustee for more than one
outstanding series or securities under the indenture, state
whether there has been a default under any such indenture
or series, identify the indenture or series affected,
and explain the nature of any such default.
As of January 17, 1994 (insert date within 31 days)
________________________________
-NONE-
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D
Amount Owned
Beneficially or
Held as Collateral Percent of
Security for Class Represented
Title of Issuer Obligations in by Amount
and Title of Amount Default by Given in
Class Outstanding Trustee Col. C
________________ ________________ ____________________ _________________
<S> <C> <C> <C>
</TABLE>
<PAGE>
14. AFFILIATIONS WITH THE UNDERWRITERS. If any underwriter
is an affiliate of the trustee (including its parent and any affiliates),
described each such affiliation.
15. FOREIGN TRUSTEE. Identify the order or rule pursuant to
which the foreign trustee is authorized to act as sole trustee under
indentures qualified or to be qualified under the Act.
16. LIST OF EXHIBITS. List below all exhibits filed as part of
this statement of eligibility.
1. (a) A copy of the Articles of Association of Star
Bank, National Association, Cincinnati (now Star Bank, National
Association) as now in effect.
(b) A copy of the Amended Articles of Association dated
June 14, 1991, changing the name of the association to
Star Bank, National Association.
2. (a) A copy of the certificate of authority of The First
National Bank of Cincinnati (now Star Bank, National
Association) to commence business dated September 1, 1922.
(b) A copy of a Certificate of the Comptroller of the
Currency dated December 21, 1973, authorizing F N National
Bank to commence the business of banking.
(c) A copy of a Certificate of the Comptroller of the
Currency dated December 28, 1973, approving the merger of
The First National Bank of Cincinnati (now Star Bank,
National Association) into F N National Bank under the
title "The First National Bank of Cincinnati" effective
January 2, 1974.
(d) A copy of a letter dated June 8, 1988, from the Comptroller
of the Currency indicating the change in the name of the
association to Star Bank, National Association,
Cincinnati, effective July 1, 1988.
<PAGE>
(e) A copy of a letter dated July 15, 1991, from the
Comptroller of the Currency indicating the change in the name
of the association to Star Bank, National Association,
effective June 14, 1991.
3. A copy of the authorization of The First National Bank
of Cincinnati (now Star Bank, National Association) to exercise corporate
trust powers.
4. A copy of existing By-Laws to Star Bank, National
Association, Cincinnati (now Star Bank, National Association)
5. The consent of the Trustee required by section 321 (b)
of the Trust Indenture Act of 1939.
6. A copy of the latest report of condition of Star Bank,
National Association, published pursuant to law or the
requirements of its supervising or examining authority.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
Trustee, Star Bank, National Association, a national banking association
organized and existing under the laws of the United States of America, has
duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of Cincinnati and
State of Ohio on the 28th day of December, 1995.
STAR BANK, NATIONAL ASSOCIATION
By: /s/ Nancy V. Kelly
_________________________
Nancy V. Kelly
Vice President and Trust Officer
<PAGE>
EXHIBIT 1 (a)
STAR BANK, NATIONAL ASSOCIATION, CINCINNATI
CHARTER NO. 24
ARTICLES OF ASSOCIATION
FIRST: The title of this Association shall be "Star Bank,
National Association, Cincinnati."*
SECOND: The main office of the Association shall be in the City
of Cincinnati, County of Hamilton, State of Ohio. The general
business of the Association shall be conducted at its main
office and its branches.
THIRD: The Board of Directors of this Association shall
consist of not less than five (5) nor more than twenty-five (25)
shareholders, the exact number of Directors within such minimum
and maximum limits to be fixed and determined from time to time
by resolution of a majority of the full Board of Directors or by
resolution of the shareholders at any annual or special meeting
thereof. Unless otherwise provided by the laws of the United
States, any vacancy in the Board of Directors for any reason,
including an increase in the number thereof, may be filled by
action of the Board of Directors.
FOURTH: The annual meeting of the shareholders for the election
of Directors and the transaction of whatever other business may
be brought before said meeting shall be held at the main office
or such other place as the Board of Directors may designate, on
the day of each year specified therefor by the Bylaws, but if no
election is held on that day, it may be held on any subsequent
day according to the provisions of law; and all elections shall
be held according to such lawful regulations as may be
prescribed by the Board of Directors.
FIFTH: The authorized amount of capital stock of this
Association shall be 3,640,000 shares of common stock of the par
value of five dollars ($5.00) each, but said capital stock may
be increased or decreased from time to time, in accordance with
the provisions of the laws of the United States.
No holder of shares of the capital stock of any class of the
Association shall have any pre-emptive or preferential right of
subscription to any shares of any class of stock of the
Association, whether now or hereafter authorized, or to any
obligations convertible into stock of the Association issued or
sold, nor any right of subscription to any thereof other than
such, if any, as the Board of Directors, in its discretion, may
from time to time determine and at such price as the Board of
Directors may from time to time fix.
The Association, at any time and from time to time, may
authorized and issue debt obligations, whether or not
subordinated, without the approval of the shareholders.
*AMENDED JUNE 14, 1991, SEE ATTACHED.
<PAGE>
SIXTH: The Board of Directors shall appoint one of its members
President of this Association, who shall be Chairman of the
Board, unless the Board appoints another Director to be the
Chairman. The Board of Directors shall have the power to
appoint one or more Vice Presidents; and to appoint a Cashier
and such other officers and employees as may be required to
transact the business of this Association. The Board of
Directors shall have the power to define the duties of the
officers and employees of the Association; to fix the salaries
to be paid to them; to dismiss them; to require bonds from them
and to fix the penalty thereof; to regulate the manner in which
any increase of the capital of the Association shall be made; to
manage and administer the business and affairs of the
Association; to make all Bylaws that it may be lawful for them
to make and generally to do and perform all acts that it may be
legal for a Board of Directors to do and perform.
The Board of Directors, without need for approval of
shareholders, shall have the power to change the location of the
main office of this Association, subject to such limitations as
from time to time may be provided by law; and shall have the
power to establish or change the location of any branch or
branches of the Association to any other location, without the
approval of the shareholders, but subject to the approval of the
Comptroller of the Currency.
SEVENTH: The corporate existence of this Association shall
continue until terminated in accordance with the laws of the
United States.
EIGHTH: The Board of Directors of this Association, the
Chairman of the Board, the President, or any three or more shareholders
owning, in the aggregate, not less twenty-five percent of the
stock of this Association, may call a special meeting of
shareholders at any time. Unless otherwise provided by the laws
of the United States, a notice of the time, place, and purpose
of every annual and special meeting of the shareholders shall be
given by first-class mail, postage prepaid, mailed at least ten
days prior to the date of such meeting to each shareholder of
record at his address as shown upon the books of this
Association.
NINTH: Any person, his heirs, executors, or administrators,
may be indemnified or reimbursed by the Association for reasonable
expenses actually incurred in connection with any action, suit,
or proceeding, civil or criminal, to which he or they shall be
made a party by reason of his being or having been a director,
officer, or employee of the Association or of any firm,
corporation, or organization which he served in any such
capacity at the request of the Association. Provided, however,
that no person shall be so indemnified or reimbursed in relation
to any matter in such action, suit, or proceeding as to which he
shall finally be adjudged to have been guilty of or liable for
gross negligence, willful misconduct or criminal acts in the
performance of his duties to the Association; and, provided
further, that no person shall be so indemnified or reimbursed in
relation to any matter in such action, suit, or proceeding which
has been made the subject of a compromise settlement except with
the approval of a court of competent jurisdiction, or the
holders of record of a majority of the outstanding shares of the
Association, or the Board of Directors, acting by vote of
Directors not parties to the same or substantially the same
action, suit, or proceeding, constituting a majority of the
whole number of Directors. The foregoing right of
indemnification shall not be exclusive of other rights to which
such person, his heirs, executors, or administrators, may be
entitled as a matter of law. The
<PAGE>
Association may, upon the affirmative vote of a majority of its Board of
Directors, purchase insurance for the purpose of indemnifying its directors,
officers and other employees to the extent that such indemnification is
allowed in the preceding paragraph. Such insurance may, but need not, be for
the benefit of all directors, officers, or employees.
TENTH: These Articles of Association may be amended at any
regular or special meeting of the shareholders by the
affirmative vote of the holders of a majority of the stock of
this Association, unless the vote of the holders of a greater
amount of stock is required by law and in that case by the vote
of the holders of such greater amount.
August 18, 1988
<PAGE>
EXHIBIT 1(B)
STAR BANC
CORPORATION
June 14, 1991
Deputy Comptroller
Central District
Office of the Comptroller of the Currency
One Financial Place
440 S. LaSalle, Suite 2700
Chicago, Illinois 60605
Dear Deputy Comptroller:
Re: Letter of Notification
Star Bank, National Association, Cincinnati, Charter #24
intends to change its corporate title to Star Bank, National
Association. The effective date of the change is June 14,
1991.
A certified copy of the amendment to the articles of
association is enclosed. The amendment conforms to the
requirements of 12 USC 21 a.
Sincerely, /s/
__________________
F. Kristen Koepcke
FKK:bjt
Enclosure
<PAGE>
EXHIBIT 1 (b)
MINUTES OF SPECIAL MEETING OF THE SHAREHOLDER
STAR BANK, NATIONAL ASSOCIATION, CINCINNATI
A Special Meeting of the shareholder of Star Bank, National
Association, Cincinnati (the "Bank") was held on June 14, 1991.
Mr. Oliver W. Waddell called the meeting to order and selected
Mr. F. Kristen Koepke to act as Secretary.
The Secretary reported that all the outstanding shares of the
Bank were represented at this meeting and that the shareholder
had waived notice of this special meeting. Therefore, a quorum
was present.
Mr. Waddell stated that the purpose of the meeting was to
consider a proposed name change for the Bank as recommended by
the Board of Directors. On motion duly made and carried, the
following resolution was adopted:
RESOLVED, That Article First of the Articles of
Association of the Bank be amended in its entirely
to read as follows:
FIRST: The title of this Association shall be "Star
Bank, National Association."
There being no further business to come before the meeting, on
motion duly made and carried, the meeting was adjourned.
/s/
________________________
F. Kristen Koepke, Secretary
Approved:
/s/
____________________
Oliver W. Waddell
Chairman, Star Banc Corporation,
Shareholder Certified Copy
/s/
__________________________
Secretary
<PAGE>
EXHIBIT 2 (a)
COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO COMMENCE
BUSINESS:
NO. 24
E Pluribus Unum
TREASURY DEPARTMENT
Office of Comptroller of the Currency
Washington, D.C., September 1, 1992
WHEREAS, the Act of Congress of the United States, entitled,
"An Act to amend section 5136, Revised Statutes of the United
States, relating to corporate powers of associations, so as to
provide succession thereof for a period of ninety-nine years or
until dissolved, and to apply said section as so amended to all
national banking association", approved by the President on July
1, 1922, provided that all national banking associations
organized and operating under any law of the United States on
July 1, 1992 should have succession until ninety-nine years from
that date, unless such association should be sooner dissolved by
the act of its shareholders owning two-thirds of its stock, or
unless its franchise should become forfeited by reason of
violation of law, or unless it should be terminated by an Act of
Congress hereinafter enacted;
NOW THEREFORE, I, D. R. Crissinger
__________________________________________
Comptroller of the Currency, do hereby certify that
The First National Bank of Cincinnati and State of Ohio ,
_____________________________________ _____________
was organized and operating under the laws of the United States on
July 1, 1922, and that its corporate existence was extended for the
period of ninety-nine years from that date in accordance with and
subject to the condition in the Act of Congress hereinbefore recited.
(SEAL) IN TESTIMONY WHEREOF, witness my hand
and seal of office this first day of September, 1922
_____ _______________
(Signed) D. R. Crissinger
______________________________________
Comptroller of the Currency
<PAGE>
EXHIBIT 2 (b)
Comptroller of the Currency
TREASURY DEPARTMENT OF THE UNITED STATES
Washington, D.C.
Whereas, satisfactory evidence has been presented to the Comptroller of
the Currency that "FN NATIONAL BANK".
located in CINCINNATI, State of OHIO, has
complied with all provisions of the Statutes of the United States required to
be complied with before being authorized to commence the business of banking
as National Banking Association;
Now, therefore, I hereby certify that the above-named association is
authorized to commence the business of banking as a National Banking
Association.
In testimony whereof, witness my signature and seal of
SEAL office this 21st day of December, 1913.
/S/
____________________________________________
<PAGE>
EXHIBIT 2 (c)
Comptroller of the Currency
TREASURY DEPARTMENT OF THE UNITED STATES
Washington, D.C.
WHEREAS, satisfactory evidence has been presented to the Comptroller of
the Currency that all requisite legal and corporate action has been taken, in
accordance with the statutes of the United States, to merge The First National
Bank of Cincinnati, Cincinnati, Ohio, into FN National Bank, Cincinnati, Ohio,
under the charter of FN National Bank and under the title "The First National
Bank of Cincinnati," with capital stock of $18,200,000;
NOW, THEREFORE, it is hereby certified that such merger was approved
November 29, 1973, and is effective as of the opening of business January 2,
1974.
IN TESTIMONY WHEREOF witness my signature
and seal of office this 28th day of
December, 1973
SEAL /S/
_______________________________
James E. Smith
Comptroller of the Currency
<PAGE>
EXHIBIT 2(d)
_________________________________________________________________
Comptroller of the Currency
Administrator of National Banks
_________________________________________________________________
Central District
One Financial Plaza, Suite 2700
440 South LaSalle Street
Chicago, Illinois 60605
June 8, 1988
Mr. Raymond D. Beck
Secretary & Counsel
First National Cincinnati Corporation
First National Bank Center
425 Walnut Street
Cincinnati, Ohio 45201-1038
Dear Mr. Beck:
The office of the Comptroller of the Currency acknowledges
receipt of your letters concerning First National Cincinnati
Corporation's banking subsidiarys' title changes and the
appropriate amendments to each bank's articles of association.
The Office has recorded the following banks' title changes
effective July 1, 1988.
Old Title New Title
__________________________________ ___________________________
The First National Bank of Ironton Star Bank, National Association,
Ironton, Ohio Tri-State
Charter No. 16607
Farmers and Traders National Bank Star Bank, National Association
Hillsboro, Ohio Hillsboro
Charter No. 17646
The First National Bank of Cincinnati Star Bank, National Association
Cincinnati, Ohio Cincinnati
Charter No. 24
The First National Bank & Trust Company Star Bank, National Association
Troy, Ohio Troy
Charter No. 9336
<PAGE>
Page 2
Mr. Raymond D. Beck (cont'd)
The Second National Bank of Hamilton Star Bank, National Association
Hamilton, Ohio Butler County
Charter No. 17200
The Second National Bank of Richmond Star Bank, National Association
Richmond, Indiana Eastern Indiana
Charter No. 1988
The First National Bank of Aurora Star Bank, National Association
Aurora, Indiana Aurora
Charter No. 699
The Peoples National Bank of Lawrenceburg Star Bank, National Association
Lawrenceburg, Indiana Southeastern Indiana
Charter No. 2612
Newport National Bank Star Bank, National Association
Newport, Kentucky Campbell County
Charter No. 4765
The First National Bank Star Bank, National Association
Sidney, Ohio Sidney
Charter No. 5214
Very truly yours,
David J. Rogers
National Bank Examiner
Analysis Division
<PAGE>
EXHIBIT 2(e)
_________________________________________________________________
Comptroller of the Currency
Administrator of National Banks
_________________________________________________________________
Central District
One Financial Place
440 S. LaSalle, Suite 2700
Chicago, Illinois 60605
July 15, 1991
Mr. F. Kristen Koepcke
Vice President, General Counsel and Secretary
Star Banc Corporation
425 Walnut Street
P.O. Box 1038
Cincinnati, Ohio 45201-1038
Dear Mr. Koepcke:
The Office of the Comptroller of the Currency has received your
letter concerning the title change and the appropriate amendment
to the bank's articles of association. The Office has recorded
that as of June 14, 1991, the title of Star Bank, National
Association, Cincinnati, Charter No. 24, was changed to Star
Bank, National Association.
As a result of the Garn-St Germain Depository Institutions Act
of 1982, this Office is no longer responsible for the approval
of national bank name changes nor does it maintain official
records on the use of alternate titles. The use of other titles
or the retention of the rights to any previously used title is
the responsibility of the bank's board of directors. Legal
counsel should be consulted to determine whether or not the new
title, or any previously used title, could be challenged by
competing institutions under the provisions of federal or state
law.
Very truly yours,
David J. Rogers
National Bank Examiner
Analysis Division
<PAGE>
EXHIBIT 3
THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE CORPORATE TRUST
POWERS:
FEDERAL RESERVE BOARD
Washington, D.C.
October 9, 1919
Pursuant to authority vested in the Federal Reserve Board by
the Act of Congress approved December 23, 1913, known as the
Federal Reserve Act, as amended by the Act of September 26,
1918, the
FIRST NATIONAL BANK OF CINCINNATI
has been granted the right to act, when not in contravention of
State or local law, as TRUSTEE, EXECUTOR, ADMINISTRATOR,
REGISTRAR OF STOCKS AND BONDS, GUARDIAN OF ESTATES, ASSIGNEE,
RECEIVER OR IN ANY OTHER FIDUCIARY CAPACITY IN WHICH STATE
BANKS, TRUST COMPANIES OR OTHER CORPORATIONS WHICH COME INTO
COMPETITION WITH NATIONAL BANKS ARE PERMITTED TO ACT UNDER THE
LAWS OF THE STATE OF OHIO. The exercise of such rights shall be
subject to regulations prescribed by the Federal Reserve Board.
Federal Reserve Board,
By W. P. G. Harding
Governor.
ATTEST:
W. T. Chapman
Secretary.
STATE OF OHIO
DEPARTMENT OF BANKS AND BANKING
Certificate of Authority No. 17
NATIONAL BANKS
I, Philip C. Berg, Superintendent of Banks, do hereby
certify that the First National Bank of Cincinnati, Hamilton County,
Ohio has complied with all the requirements provided by law and
is authorized to transact the business of a trust company and to
perform all the functions granted to such companies by the laws
of this state.
Given under my hand and official Seal at Columbus,
Ohio, this twenty-fifth day of November, A.D. 1919
Philip C. Berg,
Superintendent of Banks.
(SEAL)
<PAGE>
EXHIBIT 4
BY-LAWS
STAR BANK, N.A., CINCINNATI
ARTICLE I
MEETINGS OF SHAREHOLDERS
SECTION 1. ANNUAL MEETING
The annual meeting of shareholders shall be held in the main
banking house of the Association at 11:00 a.m. on the second
Tuesday in February of each year. Notice of such meeting shall
be mailed to shareholders not less than ten (10) nor more than
sixty (60) days prior to the meeting date.
SECTION 2. SPECIAL MEETINGS
Special meetings of shareholders may be called and held at such
times and upon such notice as is specified in the Articles of
Association.
SECTION 3. QUORUM
A majority of the outstanding capital stock represented in
person or by proxy shall constitute a quorum of any meeting of
the shareholders, unless otherwise provided by law, but less
than a quorum may adjourn any meeting, from time to time, and
the meeting amy be held as adjourned without further notice.
SECTION 4. INSPECTORS
The Board of Directors may, and in the event of its failure so
to do, the Chairman of the Board shall appoint Inspectors of
Election who shall determine the presence of a quorum, the
validity of proxies, and the results of all elections and all
other matters voted upon by shareholders at all annual and
special meetings of shareholders.
SECTION 5. VOTING
In deciding on questions at meetings of shareholders, except in
the election of directors, each shareholder shall be entitled to
one vote for each share of stock held. A majority of votes cast
shall decide each matter submitted to the shareholders, except
where by law a larger vote is required. In all elections of
directors, each shareholder shall have the right to vote the
number of shares owned by him for as many persons as there are
directors to be elected, or to cumulate such shares and give one
candidate as many votes as the number of directors multiplied by
the number
<PAGE>
of his shares equal, or to distribute them on the
same principle among as many candidates as he shall think fit.
ARTICLE II
SECTION 1. TERM OF OFFICE
The directors of this Association shall hold office for one year
and until their successors are duly elected and qualified.
SECTION 2. REGULAR MEETINGS
The organization meeting of the Board of Directors shall be held
as soon as practical following the annual meeting of
shareholders at the main banking house. Other regular meetings
of the Board of Directors shall be held without notice at 11:00
a.m. on the second Tuesday of each month except February, at the
main banking house, or, provided notice is given by telegram,
letter, telephone or in person to every Director, at such time
and place as may be designated in the notice of the meeting.
When any regular meeting of the Board falls on a holiday, the
meeting shall be held on the next banking business day, unless
the Board shall designate some other day.
SECTION 3. SPECIAL MEETINGS
Special meetings of the Board of Directors may be called by the
Chairman of the Board of the Association, or at the request of
three or more Directors. Notice of the time, place and purposes
of such meetings shall be given by telegram, letter, telephone
or in person to every Director.
SECTION 4. QUORUM
A majority of the entire membership of the Board shall
constitute a quorum at any meeting of the Board.
SECTION 5. NECESSARY VOTE
A majority of those Directors present and voting at any meeting
of the Board of Directors shall decide each matter considered,
except where otherwise required by law or the Articles or
By-Laws of this Association.
SECTION 6. COMPENSATION
Directors, excluding full-time employees of the Bank, shall
receive such reasonable compensation as may be fixed from time
to time by the Board of Directors.
SECTION 7. ELECTION-AGE LIMITATION
No person shall be elected or reelected a Director after
reaching his seventieth (70th) birthday, provided that any
person who is a Director on December 10, 1985, may continue to
be reelected a Director until he reaches his seventy-fifth
(75th) birthday.
<PAGE>
SECTION 8 RETIREMENT-AGE LIMITATION
Every Director of the Bank shall retire no later than the first
month next following his seventieth (70th) birthday, except for
any person who was a Director on December 10, 1985, who shall
retire not later that the first of the next month following his
seventy-fifth (75th) birthday.
SECTION 9 DIRECTORS EMERITUS
The Board shall have the right from time to time to choose as
Directors Emeritus persons who have had prior service as members
of the Board and who may receive such compensation as shall be
fixed from time to time by the Board of Directors.
ARTICLE III
OFFICERS
SECTION 1 WHO SHALL CONSTITUTE
The Officers of the Association shall be a Chairman of the
Board, a President, a Secretary, and other officers such as
Chairman of the Executive Committee, Vice Chairman of the Board,
Executive Vice Presidents, Senior Vice Presidents, Vice
Presidents, Assistant Secretaries, Trust Officers, Trust
Investment Officers, Trust Real Estate Officers, Assistant Trust
Officers, a Controller, Assistant Controller, an Auditor and
Assistant Auditors, as the Board may appoint from time to time.
Any person may hold two offices. The Chairman of the Board, all
Vice Chairmen of the Board and the President shall at all times
be members of the Board of Directors.
SECTION 2 TERM OF OFFICE
All officers shall be elected for and shall hold office for one
year and until their successors are elected and qualified,
subject to the right in the Board of Directors by a majority
vote of the entire membership to discharge any officer at any
time.
SECTION 3 CHAIRMAN OF THE BOARD (Amended 12/13/88-see attachment)
The Chairman of the Board shall be the Chief Executive Officer
of the Association and shall have all duties, responsibilities
and powers of the Chief Executive Officer. He shall, when
present, preside at all meetings of shareholders and directors
and shall be ex officio a member of all committees of the Board.
He shall name all members of the committees of the Board,
subject to the confirmation thereof by the Board.
In the event that there is a vacancy in the position of
President or in the event of the absence or incapacity of the
President, the Chairman may appoint, or in the event of his
failure to do so, the Board of Directors or the Executive
Committee thereof may designate any Vice Chairman
<PAGE>
of the Board, any Executive Vice President or any Senior Vice President of
the Association temporarily to exercise the powers and perform the
duties of the Chairman as Chief Executive Officer when the
Chairman is absent or incapacitated.
The Board of Directors shall have the power to elect a Chairman
of the Executive Committee. Any such Chairman of the Executive
Committee shall participate in the formation of the policies of
the Association and shall have such other duties as may be
assigned to him from time to time by the President or by the
Board of Directors.
SECTION 4 PRESIDENT (amended 12/13/88-see attachment)
The President shall participate in the formation and supervision
of the policies and operations of the Association and shall
perform such other duties as may be assigned to him from time to
time by the Board of Directors or by the Chairman of the Board.
In the event that there is a vacancy in the position of the
Chairman of the Board, the President shall be the Chief
Executive Officer of the Association and shall have all the
powers and perform all the duties of the Chairman of the Board,
including the same power to name temporarily a Chief Executive
Officer to serve in the absence of the President.
SECTION 5 CHAIRMAN OF THE EXECUTIVE COMMITTEE
The Board of Directors shall have the power to elect a Chairman
of the Executive Committee. Any such Chairman of the Executive
Committee shall participate in the formation of the policies of
the Association and shall have such other duties as may be
assigned to him from time to time by the President or by the
Board of Directors.
SECTION 6 VICE CHAIRMEN OF THE BOARD
The Board of Directors shall have the power to elect one or more
Vice Chairmen of the Board of Directors. Any such Vice Chairmen
of the Board shall participate in the formation of the policies
of the Association and shall have such other duties as may be
assigned to him from time to time by the Chairman of the Board
or by the Board of Directors.
SECTION 7 OTHER OFFICERS
The Secretary and all other officers appointed by the Board of
Directors shall have such duties as defined by law and as may
from time to time be assigned to them by the Chief Executive
Officer or the Board of Directors.
SECTION 8 RETIREMENT
Every officer of the Association shall retire not later than the
first of the month next following his sixty-fifth (65th)
birthday. The Board of Directors may, in its discretion, set
the retirement date and terms of retirement of an officer at a
date later than provided above.
<PAGE>
ARTICLE IV
COMMITTEES
SECTION 1 EXECUTIVE COMMITTEE
There shall be a standing committee of Directors in this
Association to be known as the Executive Committee. This
Committee shall meet at 11:00 a.m. on the first and fourth
Tuesday of each month. It shall have all of the powers of the
Board of Directors between meetings of the Board, except as the
Board only by law is authorized to perform or exercise. All
actions of the Executive Committee shall be reported to the
Board of Directors. In the event that any member of the
Executive Committee is unable to attend a meeting of that
committee, the Chairman of the Board or the President may, at
his discretion, appoint another Director to attend said meeting
of the Executive Committee and for that meeting to serve as a
member of the Executive Committee with full power to act in
place of the absent regular member of the committee.
SECTION 2 COMPENSATION COMMITTEE
There shall be a standing committee of directors of this
Association to be known as the Compensation Committee who shall
review the compensation of all Executive Officers and those
officers who participate in the Profit Sharing Pool as well as
fees for directors of the Association. They will recommend
specific compensation arrangements to the Board of Directors for
their confirmation.
SECTION 3 COMMITTEE ON AUDIT
There shall be a standing committee of Directors of this
Association to be known as the Committee on Audit, none of whose
members shall be active officers of the Association. This
Committee shall make or cause to be made a suitable examination
of the affairs of the Association and the Trust Department at
least once during each period of twelve months. The results of
such examination shall be reported in writing to the Board at
the next regular meeting thereafter stating whether the
Association and/or Trust Department is in a sound solvent
condition, whether adequate internal audit controls and
procedures are being maintained and make such recommendations as
it deems advisable.
SECTION 4 TRUST COMMITTEE
There shall be a standing committee of Directors of this
Association to be known as the Trust Committee. The Trust
Committee shall determine policies of the Department and review
actions of the Trust Investment Committee. All actions of the
Trust Committee shall be reported to the Board of Directors.
SECTION 5 TRUST INVESTMENT COMMITTEE
There shall be a standing committee of this Association to be
known as the Trust Investment Committee composed of officers of
the Association. The Trust Investment Committee OR SUCH
<PAGE>
OFFICERS AS MAY BE DULY DESIGNATED BY THE TRUST INVESTMENT
COMMITTEE, shall pass upon the acceptance of all trusts, the
closing out or relinquishment of all trusts and the making,
retention, or disposition of all investments of trust funds in
conformity with policies established by the Trust Committee.
Actions of the Trust Investment Committee shall be reported to
the Trust Committee.
SECTION 6 PENSION COMMITTEE
There shall be a standing committee of directors or officers of
this Association to be known as the Pension Committee, who shall
have the powers and duties as set forth in the Association's
Employees' Pension Plan. A report of the condition of the
pension fund shall be submitted annually to the Board of
Directors.
SECTION 7 OTHER COMMITTEES
The Chairman may appoint, from time to time, other committees
for such purposes and with such powers as he or the Board may
direct.
ARTICLE V
SEAL
SECTION 1 IMPRESSION
The following is an impression of the seal of this Association.
August 25, 1988
<PAGE>
RESOLVED, That Section 3 of Article III of the By-Laws of the
Bank shall be amended to read:
SECTION 3 CHAIRMAN OF THE BOARD
The Chairman of the Board shall have general executive powers
and duties and shall perform such other duties as amy be
assigned from time to time by the Board of Directors. In
addition, unless the Board of Directors shall have designated
the President to be the Chief Executive Officer, the Chairman of
the Board shall be the Chief Executive Officer and shall have
all the powers and duties of the Chief Executive Officer. He
shall, when present, preside at all meetings of shareholders and
directors and shall be ex officio a member of all committees of
the Board. He shall name all members of the committees of the
Board, subject to the confirmation thereof by the Board.
If he is Chief Executive Officer, in the event that there is a
vacancy in the position of President or in the event of the
absence or incapacity of the President, the Chairman may
appoint, or in the event of his failure to do so, the Board of
Directors or the Executive Committee thereof may designate, any
Vice Chairman of the Board, any Executive Vice President or any
Senior Vice President of the Association temporarily to exercise
the powers and perform the duties of the Chairman as Chief
Executive Officer when the Chairman is absent or incapacitated.
If the President has been designated Chief Executive Officer by
the Board of Directors, in the event that there is a vacancy in
the position of the President or in the event of the absence or
incapacity of the President, the Chairman shall be the Chief
Executive Officer of the Association and shall have all the
powers and perform all the duties of the President, including
the powers to name temporarily a Chief Executive Officer to
serve in the absence of the Chairman.
FURTHER RESOLVED, That Section 4 of Article III of the By-Laws
of the bank shall be amended to read:
SECTION 4 PRESIDENT
The President shall have general executive powers and duties and
shall perform such other duties as may be assigned from time to
time by the Board of Directors. In addition, if designated by
the Board of Directors, the President shall be the Chief
Executive Officer and shall have all the powers and duties of
the Chief Executive Officer, including the same power to name
temporarily a Chief Executive Officer to serve in the absence of
the President if there is a vacancy in the position of the
Chairman or in the event of the absence or incapacity of the
Chairman.
If the Chairman has been designated Chief Executive Officer by
the Board of Directors, in the event that there is a vacancy in
the position of the Chairman of the Board or in the event of the
absence or incapacity of the Chairman of the Board, the
President shall be the Chief Executive Officer of the
Association and shall have all the powers and perform all the
duties of the Chairman of the Board, including the same power to
name temporarily a Chief Executive Officer to serve in the
absence of the President.
<PAGE>
EXHIBIT 5
THE CONSENT OF THE TRUSTEE
REQUIRED BY 321 (b) OF THE ACT
Star Bank, National Association, the Trustee executing the
statement of eligibility and qualification to which this Exhibit is
attached does hereby consent that reports of examinations
of the undersigned by Federal, State, Territorial or District
authorities may be furnished by such authorities to the Securities
and Exchange Commission upon request therefor in accordance with
the provisions of 321 (b) of the Trust Indenture Act of 1939.
STAR BANK, NATIONAL ASSOCIATION
BY: /s/ Nancy V. Kelly
______________________________ ________________________
Date Nancy V. Kelly
Vice President and Trust Officer
<PAGE>
Legal Title of Bank: Star Bank, National Association Page RC-1
Call Date: 9/30/95 ST-BK 39-1240 FFIBC 011
Address: P.O. Box 1034
City, State, Zip: Cincinnati, OH 45201
FDIC Certificate No.: 06548
Consolidated Report of Condition for Insured Commercial
and State-Chartered Savings Banks for September 30, 1995
DI schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding as of the last business day of the
quarter.
Schedule RC -- Balance Sheet
<TABLE>
<CAPTION>
<S> <C> <C> <C>
C400
Dollar Amounts in Thousands RCFD Bil Mil Thou
______________________________________________________________________________ _______ _____________
ASSETS
1. Cash and balances due from depository institutions (from Schedule RC-A):
a. Noninterest-bearing balances and currency and coin (1)................. 0081 451,065 1.a.
b. Interest-bearing balances (2).......................................... 0071 0 1.b.
2. Securities:
a. Hold-to-maturity securities (from Schedule RC-B, column A)............. 1754 1,447,188 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D)........... 1772 198,443 2.b.
3. Federal funds sold and securities purchased under agreements to resell in
domestic offices of the bank and of its Edge and Agreement subsidiaries,
and in YBFs:
a. Federal funds sold..................................................... 0276 5,524 3.a.
b. Securities purchased under agreements to resell........................ 0277 0 3.b.
4. Loans and lease financing receivables:
a. Loans and losses, net of unearned income (from schedule RC-C)
..................................................RCRD 2122 5,011,307 4.a.
b. LESS: Allowance for loan and lease losses.........RCFD 3123 93,952 4.b.
c. LESS: Allocated transfer risk reserve.............RCFD 3128 0 4.c.
d. Loans and leases, net of unearned income, allowance, and reserve
(items 4.a minus 4.b and 4.c).......................................... 2125 5,919,755 4.d.
5. Trading assets (from Schedule RC-D)....................................... 3345 0 5.
6. Premiums and fixed assets (including capitalized leases).................. 2145 100,250 6.
7. Other real estate owned (from Schedule RC-M).............................. 3150 2,745 7.
8. Investments in unconsolidated subsidiaries and associated companies
(from Schedule RC-M)...................................................... 2130 0 8.
9. Customers' liability to this bank on acceptance outstanding............... 2155 25,372 9.
10. Intangible assets (from Schedule RC-M).................................... 2143 225,460 10.
11. Other assets (from Schedule RC-F)......................................... 2160 173,361 11.
12. Total assets (sum of items 1 through 11).................................. 2170 8,534,763 12.
</TABLE>
1) Includes cash items in process of collection and unposted debits.
2) Includes time certificates of deposit not held for trading.
<PAGE>
Legal Title of Bank: Star Bank, National Association Page RC-2
Call Date: 9/30/95 ST-BK 39-1240 FFIBC 011
Address: P.O. Box 1034
City, State, Zip: Cincinnati, OH 45201
FDIC Certificate No.: 06548
Schedule RC -- Continued
<TABLE>
<CAPTION>
<S> <C> <C> <C>
C400
Dollar Amounts in Thousands Bil Mil Thou
______________________________________________________________________________ _______ _____________
LIABILITIES
13. Deposits:
a. In domestic offices (sum of totals of columns A and C from Schedule
RC-E, part I).......................................................... RCON 2200 6,604,066 13.a.
(1) Noninterest-bearing (1)......................RCON 5631 1,157,784 13.a.(1)
(2) Interest-bearing.............................RCON 6636 5,406,236 13.a.(3)
b. In foreign offices, Edge and Agreement subsidiaries, and ISFs
(from Schedule RC-E, part II).......................................... RCFN 2200 41,512 13.b.
(1) Noninterest-bearing..........................RCFE6633 0 13.b.(2)
(2) Interest-bearing.............................RCFS 6636 41,513 13.b.(2)
14. Federal funds purchased and securities sold under agreements to repurchase
in domestic offices of the bank and of its Edge and Agreement subsidiaries,
and in IBFs:
a. Federal funds purchased................................................. RCFD 0278 878,587 14.a.
b. Securities sold under agreements to repurchase.......................... RCFD 0279 5,549 14.b.
15. a. Demand notes issued to the U.S. Treasury................................ RCON 2840 117,934 15.a.
b. Trading liabilities (from Schedule RC-D)................................ RCFD 3548 0 15.b.
16. Other borrowed money:
a. With original maturity of one year or less.............................. RCFD 2332 2,422 16.a.
b. With original maturity of more than one year............................ RCFD 2353 0 16.b.
17. Mortgage indebtedness and obligations under capitalized leases............. RCFD 2910 11,711 17.
18. Bank's liability on acceptance executed and outstanding.................... RCFD 2920 25,378 18.
19. Subordinated notes and debentures.......................................... RCFD 3200 148,362 19.
20. Other liabilities (from Schedule RC-G)..................................... RCFD 2930 98,782 20.
21. Total liabilities (sum of items 13 through 20)............................. RCFD 2948 7,891,290 21.
22. Limited-life preferred stock adn related surplus........................... RCFD 3282 0 22.
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus.............................. RCFD 3831 0 23.
24. Common stock............................................................... RCFD 3230 18,200 24.
25. Surplus (exclude all surplus related to preferred stock)................... RCFD 3831 157,880 25.
26. a. Undivided profits and capital reserves.................................. RCFD 3632 437,179 26.a.
b. Net unrealized holding gains (losses) on available-for-sale
securities.............................................................. RCFD 5434 (4,756) 26.b.
27. Cumulative foreign currency translation adjustments........................ RCFD 3284 0 27.
28. Total equity capital (sum of items 23 through 27).......................... RCFD 3210 548,473 28.
29. Total liabilities, limited-life preferred stock, and equity capital
(sum of items 21, 22, and 23).............................................. RCFD 3300 8,539,763 29.
MEMORANDUM
TO BE REPORTED ONLY WITH THE MARCH REPORT OF CONDITION
1. Indicate in the box at the right the number on the statement below that
best describes the most comprehensive level of auditing work performed Number
for the bank by independent external auditors as of any date _________
during 1994................................................................ RCFD 6724 N/L M.1.
</TABLE>
1 = Independent audit of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm which
submits a report on the bank
2 = Independent audit of the bank's parent holding company conducted in
accordance with generally accepted auditing standards by a certified public
accounting firm which submits a report on the consolidated holding company
(but not on the bank separately)
3 = Directors' examination of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm (may be
required by state chartering authority)
4 = Directors' examination of the bank performed by other external auditors
(may be required by state chartering authority)
5 = Review of the bank's financial statements by external auditors
6 = Compilation of the bank's financial statements by external auditors
7 = Other audit procedures (excluding tax preparation work)
8 = No external audit work
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
