As filed with the Securities and Exchange Commission on April 27, 1998
Registration No. 333-
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
Form S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------
CONSECO, INC.
(Exact name of Registrant as specified in its charter)
Indiana 6719 35-1468632
- ------------------------------- ---------------------------- ---------------
(State or other jurisdiction of (Primary Standard Industrial I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
11825 N. Pennsylvania St., Carmel, Indiana 46032, (317) 817-6100
- --------------------------------------------------------------------------------
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
John J. Sabl
Conseco, Inc.
11825 N. Pennsylvania St.
Carmel, Indiana 46032
(317) 817-6092
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
Copies to:
<TABLE>
<S> <C> <C>
Paul L. Choi Joel H. Gottesman William B. Payne
Sidley & Austin 1100 Landmark Towers Dorsey & Whitney LLP
One First National Plaza 345 Saint Peter Street 220 South Sixth Street
Chicago, Illinois 60603 Saint Paul, Minnesota 55102-1639 Minneapolis, MN 55402-1498
(312) 853-7000 (612) 293-3423 (612) 340-2600
</TABLE>
Approximate date of commencement of proposed sale of the securities to
the public: As soon as practicable after the Registration Statement becomes
effective and all other conditions to the merger (the "Merger") of a wholly
owned subsidiary of Conseco, Inc. ("Conseco") with and into Green Tree Financial
Corporation ("Green Tree") pursuant to an Agreement and Plan of Merger described
in the enclosed Joint Proxy Statement/Prospectus have been satisfied or waived.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(d) 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 this Form is a post-effective amendment filed pursuant to Rule
462(d) 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. [ ]
__________________
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
Title of Each Class Amount Proposed Maximum Proposed Maximum
of Securities to to be Offering Price Per Aggregate Offering Amount of
be Registered Registered(1) Unit Price Registration Fee(2)
- --------------------- ------------------ ------------------ ------------------ -------------------
<S> <C> <C> <C> <C>
Common Stock, without 134,766,627 shares Not Applicable $5,725,559,781 $1,689,040
par value...............
======================== ===================== ======================= ======================= =======================
<FN>
(1) Based on the number of shares of Conseco common stock, without par value
("Conseco Common Stock"), issuable to holders of common stock par value
$.01 per share, of Green Tree ("Green Tree Common Stock"), and upon the
exercise of securities exercisable for shares of Green Tree Common Stock in
the Merger (which includes 9,437,321 shares for options and 2,504,795
shares for warrants).
(2) Pursuant to Rule 457(f), the registration fee was computed on the basis of
the market value of the Green Tree Common Stock to be exchanged in the
Merger, computed in accordance with Rule 457(c) on the basis of the average
of the high and low prices per share of such stock on the New York Stock
Exchange Composite Transactions Tape on April 20, 1998, which was $38.9375.
---------------------
</FN>
</TABLE>
<PAGE>
Conseco hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until Conseco shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
[GREEN TREE LOGO]
_____________, 1998
Dear Green Tree Stockholder:
You are cordially invited to attend a special meeting of stockholders
of Green Tree Financial Corporation which will be held at The Saint Paul Hotel,
350 Market Street, Saint Paul, Minnesota on ___________, 1998 at 10:00 a.m.
local time (including any adjournment or postponement thereof).
At the special meeting, you will be asked to vote on a proposal to
approve the merger between Green Tree and Conseco, Inc. The proposed merger will
be a stock-for-stock transaction whereby your shares of Green Tree common stock
will be converted into shares of Conseco common stock pursuant to a fixed
Exchange Ratio. The Exchange Ratio is the calculation whereby each share of
Green Tree common stock will be converted into 0.9165 shares of Conseco common
stock. As a result of the merger, you and the Green Tree stockholders will
become the owners of approximately 38% of the combined company. After the
merger, I will continue to manage Green Tree's business, which will operate as a
new subsidiary of Conseco.
Your Board of Directors has unanimously approved the merger and
recommends that you vote FOR approval and adoption of the merger agreement.
In a time of increasing consolidation in the financial services
industry, we are excited about this opportunity to join forces with Conseco to
create the nation's largest public company, based on market capitalization,
engaged exclusively in life/health insurance and consumer finance.
We have carefully reviewed and considered the terms of the merger
agreement and believe that they are fair to, and in the best interests of, the
stockholders of Green Tree. In arriving at our recommendation, we gave careful
consideration to a number of factors as described in the accompanying Joint
Proxy Statement/Prospectus. Under the Delaware General Corporation Law,
stockholders are not entitled to any appraisal rights with respect to the
merger.
Please give this Joint Proxy Statement/Prospectus your careful
attention. It is important that your shares be represented and voted at the
special meeting, regardless of the size of your holdings. Accordingly, whether
or not you plan to attend the special meeting, please promptly mark, sign and
date the enclosed proxy and return it in the enclosed postage-paid envelope to
assure that your shares will be represented at the special meeting.
Your prompt cooperation is greatly appreciated during this important
and exciting time for Green Tree.
Sincerely,
Lawrence M. Coss
Chairman of the Board
and Chief Executive Officer
<PAGE>
_________________, 1998
[CONSECO LOGO]
Dear Shareholder:
You are cordially invited to attend a special meeting of shareholders
of Conseco, Inc. ("Conseco") to be held on ______________, 1998 at 10:00 a.m.,
local time, at the Conseco Conference Center, 530 North College Drive, Carmel,
Indiana (including any adjournment or postponement thereof, the "Conseco Special
Meeting").
At the Conseco Special Meeting, holders of shares of common stock, no
par value per share, of Conseco ("Conseco Common Stock") and holders of shares
of Preferred Redeemable Increased Dividend Equity Securities, 7% PRIDES,
Convertible Preferred Stock of Conseco ("Conseco PRIDES") will be asked to
consider and vote upon a proposal to approve the issuance of Conseco Common
Stock pursuant to an Agreement and Plan of Merger, dated as of April 6, 1998
(the "Merger Agreement"), by and among Conseco, Marble Acquisition Corp., a
Delaware corporation and a wholly owned subsidiary of Conseco ("Merger Sub"),
and Green Tree Financial Corporation, a Delaware corporation ("Green Tree").
Pursuant to the terms of the Merger Agreement, among other things, (i) Merger
Sub will be merged with and into Green Tree (the "Merger") and Green Tree will
become a wholly owned subsidiary of Conseco, and (ii) each outstanding share of
the common stock of Green Tree will be canceled and converted into 0.9165 shares
of Conseco Common Stock.
Details of the proposed Merger and other important information
concerning Green Tree and Conseco appear in the accompanying Joint Proxy
Statement/Prospectus. Please give this material your careful attention. Details
regarding the background of and reasons for the proposed Merger, among other
things, may be found in the section of the Joint Proxy Statement/Prospectus
entitled "The Merger."
Your Board of Directors believes that the terms of the proposed Merger
are fair to, and in the best interests of, the holders of Conseco Common Stock
and Conseco PRIDES and has unanimously approved the Merger Agreement and the
transactions contemplated thereby. The Board of Directors of Conseco unanimously
recommends that shareholders vote FOR approval of the issuance of Conseco Common
Stock pursuant to the Merger Agreement and the transactions contemplated
thereby.
Only holders of record of shares of Conseco Common Stock and Conseco
PRIDES as of the close of business on ____________________, 1998 are entitled to
notice of, and to vote at, the Conseco Special Meeting.
YOUR VOTE IS IMPORTANT. Whether or not you are able to attend the
Conseco Special Meeting, please complete, sign, date and return the enclosed
proxy card as soon as possible. A postage-paid envelope is enclosed for your
convenience. If you attend the Conseco Special Meeting, you may revoke your
proxy and, if you wish, vote your shares of Conseco Common Stock and Conseco
PRIDES in person.
Sincerely,
Stephen C. Hilbert
Chairman of the Board, President
and Chief Executive Officer
<PAGE>
[GREEN TREE LOGO]
GREEN TREE FINANCIAL CORPORATION
1100 Landmark Towers
Saint Paul, Minnesota 55102-1639
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To be held on _______________, 1998
To the Stockholders of Green Tree Financial Corporation:
Notice is hereby given that a Special Meeting of the Stockholders of
Green Tree Financial Corporation, a Delaware corporation ("Green Tree"), will be
held at The Saint Paul Hotel, 350 Market Street, Saint Paul, Minnesota 55102, on
_______________, 1998, at 10:00 a.m. local time, for the following purposes:
1. To consider and vote upon a proposal to approve and adopt
an Agreement and Plan of Merger (the "Merger Agreement"),
dated as of April 6, 1998, among Conseco, Inc., an Indiana
corporation ("Conseco"), Marble Acquisition Corp., a Delaware
corporation and a wholly owned subsidiary of Conseco ("Merger
Sub"), and Green Tree, pursuant to which, among other things,
Merger Sub will be merged with and into Green Tree (the
"Merger") and Green Tree will become a wholly owned subsidiary
of Conseco. If the Merger Agreement is approved and adopted
and the Merger becomes effective, each issued and outstanding
share of common stock, par value $.01 per share, of Green Tree
("Green Tree Common Stock") will be converted into 0.9165 of a
share of Common Stock of Conseco ("Conseco Common Stock").
2. To transact such other business as may properly come before
the Special Meeting or any adjournment or postponement
thereof.
The close of business on _________________, 1998 has been fixed as the
"Record Date") for the determination of the stockholders of Green Tree entitled
to notice of and to vote at the Special Meeting and any adjournment or
postponement thereof. Accordingly, only holders of record of outstanding shares
of Green Tree Common Stock at the close of business on the Record Date shall be
entitled to notice of and to vote at the Special Meeting and any adjournment or
postponement thereof. The Merger Agreement is required to be approved and
adopted by the affirmative vote of the holders of a majority of the outstanding
shares of Green Tree Common Stock. The meeting may be postponed or adjourned
from time to time without notice other than such notice as may be given at the
meeting or any postponement or adjournment thereof, and any business for which
notice is hereby given may be transacted at any such postponed or adjourned
meeting.
Whether or not you plan to attend the Special Meeting, please promptly
mark, sign and date the enclosed proxy and return it in the enclosed
postage-paid envelope to assure that your shares will be represented at the
Special Meeting. If you attend the Special Meeting, you may revoke such proxy
and vote in person if you wish, even if you have previously returned your proxy
card. If you do not attend the Special Meeting, you may still revoke such proxy
at any time prior to the Special Meeting by providing written notice of such
revocation to Joel H. Gottesman, Secretary of Green Tree.
To assure your representation at the Special Meeting, please complete,
sign and date your proxy card and return it promptly in the enclosed envelope,
which requires no postage if mailed in the United States. Do not send any stock
certificates with the enclosed proxy card. The procedure for the exchange of
your shares after the Merger is consummated is set forth in the attached Joint
Proxy Statement/Prospectus.
By order of the Board of Directors,
Joel H. Gottesman
Senior Vice President, General Counsel
and Secretary
Saint Paul, Minnesota
________________________, 1998
<PAGE>
CONSECO, INC. [CONSECO LOGO]
11825 North Pennsylvania Street
Carmel, Indiana 46032
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held ___________, 1998
NOTICE IS HEREBY GIVEN THAT a Special Meeting of the shareholders of
Conseco, Inc. ("Conseco"), will be held at the Conseco Conference Center, 530
North College Drive, Carmel, Indiana 46032 at 10:00 a.m., local time, on
______________, 1998 (the "Conseco Special Meeting"), for the following
purposes:
1. To consider and vote upon a proposal to approve the issuance of
common stock, no par value per share, of Conseco ("Conseco Common
Stock") pursuant to the Agreement and Plan of Merger, dated as of
April 6, 1998 (the "Merger Agreement"), by and among Green Tree
Financial Corporation, a Delaware corporation ("Green Tree"),
Conseco and Marble Acquisition Corp., a Delaware corporation and
wholly owned subsidiary of Conseco ("Merger Sub"), pursuant to
which, among other things, (i) Merger Sub will be merged with and
into Green Tree (the "Merger") and Green Tree will become a wholly
owned subsidiary of Conseco, and (ii) each outstanding share of
the common stock, par value $.01 per share, of Green Tree will be
converted into 0.9165 of a share of Conseco Common Stock; and
2. To consider such other matters as may properly come before the
meeting.
Holders of record of outstanding shares of Conseco Common Stock and
Preferred Redeemable Increased Dividend Equity Securities, 7% PRIDES,
Convertible Preferred Stock of Conseco ("Conseco PRIDES") as of the close of
business on ___________, 1998, are entitled to notice of and to vote at the
meeting. Holders of Conseco Common Stock and Conseco PRIDES will vote together
as a single class at the Conseco Special Meeting. Holders of shares of Conseco
Common Stock have one vote for each share held of record, and holders of shares
of Conseco PRIDES have 4/5 of one vote for each share held of record.
Whether or not you plan to be present at the meeting, please complete,
sign and return the enclosed form of proxy. No postage is required to return the
form of proxy in the enclosed envelope. The proxies of shareholders who attend
the meeting in person may be withdrawn and such shareholders may vote personally
at the meeting.
By Order of the Board of Directors
John J. Sabl
Executive Vice President,
General Counsel and Secretary
__________, 1998
Carmel, Indiana
<PAGE>
SUBJECT TO COMPLETION
Dated April __, 1998
[GREEN TREE LOGO]
CONSECO, INC. [CONSECO LOGO]
and
GREEN TREE FINANCIAL CORPORATION
------------------
JOINT PROXY STATEMENT
------------------
CONSECO, INC. PROSPECTUS
This Joint Proxy Statement/Prospectus is being furnished to holders of
shares of Common Stock, no par value per share ("Conseco Common Stock"), and to
holders of shares of Preferred Redeemable Increased Dividend Equity Securities,
7% PRIDES, Convertible Preferred Stock ("Conseco PRIDES" and, together with the
Conseco Common Stock, the "Conseco Stock") of Conseco, Inc., an Indiana
corporation ("Conseco"), in connection with the solicitation of proxies by the
Board of Directors of Conseco (the "Conseco Board of Directors") for use at a
Special Meeting of Conseco shareholders to be held on _________, 1998, at the
Conseco Conference Center, 530 North College Drive, Carmel, Indiana 46032,
commencing at 10:00 a.m., local time, and at any adjournment or postponement
thereof (the "Conseco Special Meeting").
This Joint Proxy Statement/Prospectus is also being furnished to
holders of shares of common stock, par value $.01 per share ("Green Tree Common
Stock"), of Green Tree Financial Corporation, a Delaware corporation ("Green
Tree"), in connection with the solicitation of proxies by the Board of Directors
of Green Tree (the "Green Tree Board of Directors") for use at a Special Meeting
of Green Tree shareholders to be held on __________, 1998 at The Saint Paul
Hotel, 350 Market Street, Saint Paul, Minnesota, commencing at 10:00 a.m., local
time, and at any adjournment or postponement thereof (the "Green Tree Special
Meeting").
This Joint Proxy Statement/Prospectus also constitutes the Prospectus
of Conseco, filed as part of a Registration Statement on Form S-4 (together with
all amendments, supplements, exhibits and schedules thereto, the "Registration
Statement") with the Securities and Exchange Commission (the "Commission") under
the Securities Act of 1933, as amended (the "Securities Act"), relating to the
shares of Conseco Common Stock issuable in connection with the Merger (as
defined herein). All information concerning Conseco contained in this Joint
Proxy Statement/Prospectus has been furnished by Conseco, and all information
concerning Green Tree contained in this Joint Proxy Statement/Prospectus has
been furnished by Green Tree.
The Conseco Special Meeting has been called to consider and vote upon a
proposal to approve the issuance (the "Merger Consideration Stock Issuance") of
shares of Conseco Common Stock pursuant to the Agreement and Plan of Merger
dated as of April 6, 1998 (the "Merger Agreement") among Conseco, Marble
Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of
Conseco ("Merger Sub"), and Green Tree.
The Green Tree Special Meeting has been called to consider and vote
upon a proposal to approve and adopt the Merger Agreement.
The Merger Agreement contemplates, among other things, that Merger Sub
will be merged into Green Tree (the "Merger"), with the result that (i) Green
Tree will become a wholly owned subsidiary of Conseco and (ii) each outstanding
share of Green Tree Common Stock, other than shares held by Green Tree as
treasury stock, will be converted into 0.9165 of a share of Conseco Common
Stock.
The consummation of the Merger is subject, among other things, to: (i)
the approval of the Merger Consideration Stock Issuance by the affirmative vote
of a majority of the votes cast on such proposal at the Conseco Special Meeting,
provided that the total number of votes cast on such proposal represents more
than 50% of the outstanding shares of Conseco Stock entitled to vote thereon at
the Conseco Special Meeting; (ii) the approval and adoption of the Merger
Agreement by a majority of the voting power of the outstanding
<PAGE>
Green Tree Common Stock entitled to vote thereon at the Green Tree Special
Meeting; and (iii) the receipt of certain regulatory approvals.
The Conseco Common Stock is quoted on the New York Stock Exchange, Inc.
(the "NYSE") under the symbol "CNC". On ________ , 1998 the closing price of the
Conseco Common Stock as reported on the NYSE was $_________.
The Green Tree Common Stock is quoted on the NYSE and the Pacific Stock
Exchange (the "PSE") under the symbol "GNT". On ______ ___, 1998, the closing
price of the Green Tree Common Stock as reported on the NYSE was $___________.
See "Risk Factors" beginning on page ___ for a discussion of certain
factors that should be considered before executing a proxy solicited hereby.
This Joint Proxy Statement/Prospectus and the related forms of proxy
are first being mailed to shareholders of Conseco and Green Tree on or about
_____________________, 1998.
------------------
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 JOINT PROXY STATEMENT/PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-------------------------
The date of this Joint Proxy Statement/Prospectus is _____ __, 1998.
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>
State insurance holding company laws and regulations applicable to
Conseco generally provide that no person may acquire control of Conseco, 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
Conseco Stock would be presumed to have acquired such control, unless the
appropriate insurance regulatory authorities upon advance application determine
otherwise.
AVAILABLE INFORMATION
Conseco and Green Tree are each subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith file periodic reports, proxy statements and
other information with the Commission. The periodic reports, proxy statements
and other information filed by Conseco and Green Tree with the Commission may be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the regional offices of the Commission at 7 World Trade
Center, 13th Floor, New York, New York 10048 and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material
also can be obtained, at prescribed rates, from the Public Reference Section of
the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. In addition, the
Commission maintains a Web site at http://www.sec.gov that contains reports,
proxy and information statements and other information regarding registrants,
including Conseco and Green Tree, that file electronically with the Commission.
The Conseco Common Stock is listed on the NYSE and such reports and other
information may be inspected at the offices of the NYSE, 20 Broad Street, New
York, New York 10005. The Green Tree Common Stock is listed on the NYSE and the
PSE and such reports and such other information may be inspected at the offices
of the NYSE, 20 Broad Street, New York, New York 10005 or the PSE, 301 Pine
Street, San Francisco, California 94104.
Conseco has filed the Registration Statement with the Commission with
respect to the Conseco Common Stock to be issued pursuant to or as contemplated
by the Merger Agreement. This Joint Proxy Statement/Prospectus does not contain
all the information set forth in the Registration Statement, certain parts of
which are omitted in accordance with the rules and regulations of the
Commission. Statements contained in this Joint Proxy Statement/Prospectus as to
the contents of any contract or other document filed as an exhibit to the
Registration Statement are not necessarily complete, and in each instance
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement. Each such statement is qualified in its
entirety by such reference. The Registration Statement and any amendments
thereto, including exhibits filed as a part thereof, are available for
inspection and copying as set forth above.
-------------------------
THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY
REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF ANY
SUCH DOCUMENTS, OTHER THAN EXHIBITS TO SUCH DOCUMENTS WHICH ARE NOT SPECIFICALLY
INCORPORATED BY REFERENCE THEREIN, ARE AVAILABLE WITHOUT CHARGE TO ANY PERSON,
INCLUDING ANY BENEFICIAL OWNER, TO WHOM THIS JOINT PROXY STATEMENT/PROSPECTUS IS
DELIVERED, UPON WRITTEN OR ORAL REQUEST. WRITTEN REQUESTS FOR SUCH DOCUMENTS
RELATING TO CONSECO SHOULD BE DIRECTED TO JAMES W. ROSENSTEELE, SENIOR VICE
PRESIDENT, CORPORATE COMMUNICATIONS, CONSECO, INC., 11825 NORTH PENNSYLVANIA
STREET, CARMEL, INDIANA 46032, AND TELEPHONE REQUESTS MAY BE DIRECTED TO
ii
<PAGE>
MR. ROSENSTEELE AT (317) 817-2893. WRITTEN REQUESTS FOR SUCH DOCUMENTS RELATING
TO GREEN TREE SHOULD BE DIRECTED TO JOHN A. DOLPHIN, VICE PRESIDENT AND DIRECTOR
OF INVESTOR RELATIONS, GREEN TREE FINANCIAL CORPORATION, 1100 LANDMARK TOWERS,
SAINT PAUL, MINNESOTA 55102, AND TELEPHONE REQUESTS MAY BE DIRECTED TO MR.
DOLPHIN AT ((612) 293-3400. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS,
ANY REQUEST SHOULD BE MADE BEFORE _______________, 1998.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by Conseco and Green Tree,
respectively, with the Commission pursuant to the Exchange Act are incorporated
herein by this reference:
1. Conseco's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997 ("Conseco's Annual Report"); Conseco's Current Reports on Form
8-K dated February 4, 1998 and April 6, 1998; and the description of Conseco
Common Stock in Conseco's Registration Statements filed pursuant to Section 12
of the Exchange Act, and any amendment or report filed for the purpose of
updating any such description.
2. Green Tree's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997 ("Green Tree's Annual Report"); and Green Tree's Current
Reports on Form 8-K dated January 15, 1998 (total of 20 separate reports),
January 22, 1998, January 27, 1998, January 30, 1998 (total of 2 separate
reports), February 10, 1998, February 17, 1998 (total of 6 separate reports),
February 18, 1998, February 19, 1998, March 10, 1998, March 16, 1998 (total of 8
separate reports), March 18, 1998 (total of 2 separate reports including Form
8-K/A), March 19, 1998, March 23, 1998, March 24, 1998, March 31, 1998 (total of
2 separate reports), April 6, 1998, April 21, 1998 and April 27, 1998.
In addition, the Merger Agreement and the Stock Option Agreement (as
hereinafter defined), copies of which are attached hereto as Annex A and Annex
B, respectively, are incorporated herein by reference.
All documents filed by Conseco and Green Tree pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date hereof and
prior to the termination of the offering of any securities offered hereby shall
be deemed to be incorporated by reference herein and to be a part hereof from
the date any such document is filed. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes hereof to the extent that a statement
contained herein (or in any other subsequently filed document that also is
incorporated by reference herein) modifies or supersedes such statement. Any
statement so modified or superseded shall be deemed, except as so modified or
superseded, to constitute a part hereof. All information appearing in this Joint
Proxy Statement/Prospectus is qualified in its entirety by the information and
financial statements (including notes thereto) appearing in the documents
incorporated herein by reference, except to the extent set forth in the
immediately preceding statement.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
All statements, trend analyses and other information contained in this
Joint Proxy Statement/Prospectus or any document incorporated by reference
herein relative to markets for Conseco's or Green Tree's products and trends in
Conseco's or Green Tree's operations or financial results, as well as other
statements including words such as "anticipate," "believe," "plan," "estimate,"
"expect," "intend," and
iii
<PAGE>
other similar expressions, constitute forward-looking statements under the
Private Securities Litigation Reform Act of 1995. These forward-looking
statements are subject to known and unknown risks, uncertainties and other
factors which may cause actual results to be materially different from those
contemplated by the forward-looking statements. Such factors include, among
other things: (1) general economic conditions and other factors, including
prevailing interest rate levels, short-term interest rate fluctuations, stock
market performance and health care inflation, which may affect the ability of
Conseco to sell its products, the ability of Green Tree to make loans and access
capital resources, the market value of Conseco's or Green Tree's investments,
the lapse rate and profitability of policies and the level of defaults and
prepayments of loans made by Green Tree; (2) Conseco's ability to achieve
anticipated levels of operational efficiencies at recently acquired companies,
as well as through other cost-saving initiatives; (3) customer response to new
products, distribution channels and marketing initiatives; (4) mortality,
morbidity, usage of health care services and other factors which may affect the
profitability of Conseco's insurance products; (5) changes in the Federal income
tax laws and regulations which may affect the relative tax advantages of some of
Conseco's products; (6) increasing competition in the sale of insurance and
annuities and in the consumer finance business; (7) regulatory changes or
actions, including those relating to regulation of financial services affecting
(among other things) bank sales and underwriting of insurance products,
regulation of the sale, underwriting and pricing of insurance products, and
health care regulation affecting Conseco's supplemental health insurance
products; (8) the availability and terms of future acquisitions; and (9) the
risk factors or uncertainties listed in this Joint Proxy Statement/Prospectus
and from time to time in any document incorporated by reference herein. In
addition to the above, these statements are subject to uncertainties related to
the synergies, charges and expenses associated with the Merger.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS WITH RESPECT TO THE MATTERS DESCRIBED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS OTHER THAN THOSE CONTAINED HEREIN OR IN THE DOCUMENTS
INCORPORATED BY REFERENCE HEREIN. ANY INFORMATION OR REPRESENTATIONS WITH
RESPECT TO SUCH MATTERS NOT CONTAINED HEREIN OR THEREIN MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY CONSECO OR GREEN TREE. THIS JOINT PROXY
STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY SECURITIES OR THE SOLICITATION OF ANY PROXY IN ANY JURISDICTION
TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS JOINT PROXY STATEMENT/PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF CONSECO OR GREEN TREE SINCE THE
DATE HEREOF OR THAT THE INFORMATION IN THIS JOINT PROXY STATEMENT/PROSPECTUS OR
IN THE DOCUMENTS INCORPORATED BY REFERENCE HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF OR THEREOF.
As used herein, unless the context otherwise clearly requires,
"Conseco" refers to Conseco, Inc. and its consolidated subsidiaries and "Green
Tree" refers to Green Tree Financial Corporation and its consolidated
subsidiaries. Capitalized terms not defined herein have the respective meanings
specified in the Merger Agreement.
iv
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
AVAILABLE INFORMATION....................................................... ii
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................. iii
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS........................... iii
TABLE OF CONTENTS........................................................... v
SUMMARY ................................................................... 1
Risk Factors....................................................... 1
The Companies...................................................... 2
Meetings of Shareholders........................................... 3
The Merger......................................................... 5
Selected Financial Data............................................ 12
Selected Historical Consolidated Financial Data of Conseco......... 12
Selected Historical Consolidated Financial Data of Green Tree...... 14
Selected Unaudited Pro Forma Combined Financial Data............... 15
Comparative Unaudited Per Share Data of Conseco and
Green Tree......................................................... 17
Market Price Information........................................... 19
RISK FACTORS................................................................ 20
INFORMATION CONCERNING CONSECO AND MERGER SUB............................... 21
INFORMATION CONCERNING GREEN TREE........................................... 23
SHAREHOLDER MEETINGS........................................................ 24
General............................................................ 24
Matters to Be Considered at the Meetings........................... 24
Voting at the Meetings; Record Date; Quorum........................ 24
</TABLE>
v
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<TABLE>
<S> <C>
Proxies............................................................ 26
THE MERGER.................................................................. 28
Background of the Merger........................................... 28
Conseco's Reasons for the Merger; Recommendation of the Conseco
Board of Directors................................................. 31
Opinion of Conseco's Financial Advisor............................. 32
Green Tree's Reasons for the Merger; Recommendation of the
Green Tree Board of Directors...................................... 38
Opinion of Green Tree's Financial Advisor.......................... 38
Certain Consequences of the Merger................................. 44
Conduct of the Business of Conseco and Green Tree After the
Merger............................................................. 44
Interests of Certain Persons in the Merger......................... 45
Accounting Treatment............................................... 46
Certain Federal Income Tax Consequences............................ 46
Regulatory Approvals............................................... 47
NYSE Listing of Conseco Common Stock............................... 48
Federal Securities Law Consequences................................ 48
Absence of Appraisal Rights........................................ 49
THE MERGER AGREEMENT........................................................ 50
Terms of the Merger................................................ 50
Surrender and Payment.............................................. 51
Fractional Shares.................................................. 51
Conditions to the Merger........................................... 51
Representations and Warranties..................................... 53
</TABLE>
vi
<PAGE>
<TABLE>
<S> <C>
Conduct of Business Pending the Merger............................. 53
Green Tree Stock Options........................................... 55
Employee Benefit Plans............................................. 55
No Solicitation.................................................... 55
Indemnification; Directors and Officers Insurance.................. 56
Termination........................................................ 57
Fees and Expenses.................................................. 58
Amendment.......................................................... 59
Waiver............................................................. 59
THE STOCK OPTION AGREEMENT.................................................. 60
CONSECO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS................... 62
COMPARISON OF SHAREHOLDERS' RIGHTS.......................................... 72
Certain Provisions Relating to Acquisitions........................ 72
Amendment of Bylaws................................................ 74
Right to Bring Business Before an Annual or Special Meeting
of Shareholders; Notice of Director Nominations.................... 75
Director Liability................................................. 75
Indemnification.................................................... 75
Dividends and Repurchases.......................................... 76
Dissenters' Rights................................................. 76
Director and Officer Discretion.................................... 77
</TABLE>
vii
<PAGE>
<TABLE>
<S> <C>
MANAGEMENT OF THE SURVIVING CORPORATION UPON CONSUMMATION OF THE
MERGER............................................................. 77
LEGAL MATTERS............................................................... 78
EXPERTS ................................................................... 78
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS AND AUDITORS...................... 78
SHAREHOLDER PROPOSALS....................................................... 78
OTHER MATTERS............................................................... 79
Annex A - Agreement and Plan of Merger
Annex B - Stock Option Agreement
Annex C - Opinion of Merrill Lynch & Co.
Annex D - Opinion of Lehman Brothers Inc.
</TABLE>
viii
<PAGE>
SUMMARY
The following is a summary of certain important terms of the proposed
Merger and related information contained elsewhere in this Joint Proxy
Statement/Prospectus. This summary is not intended to be complete and is
qualified in its entirety by reference to the more detailed information and
financial statements, including the notes thereto, contained elsewhere, or
incorporated by reference, in this Joint Proxy Statement/Prospectus and the
Annexes hereto. Except as otherwise indicated, all financial information in this
Joint Proxy Statement/Prospectus is presented in accordance with generally
accepted accounting principles ("GAAP"). Shareholders are urged to read this
Joint Proxy Statement/Prospectus, the Annexes hereto and the documents
incorporated herein by reference in their entirety. Unless otherwise defined
herein, capitalized terms used in this summary have the respective meanings
ascribed to them elsewhere in this Joint Proxy Statement/Prospectus.
Shareholders of Conseco and Green Tree are urged to read this Joint
Proxy Statement/Prospectus and the Annexes hereto in their entirety and should
consider carefully the information set forth herein under "Risk Factors."
Risk Factors
In considering whether to approve the various matters pertaining to the
Merger, the shareholders of Conseco and Green Tree should consider, among other
things, that: (i) the Exchange Ratio is expressed in the Merger Agreement as a
fixed ratio and will not be adjusted in the event of any increase or decrease in
the price of the Conseco Common Stock or the price or value of Green Tree Common
Stock, nor will either party have the right to terminate the Merger Agreement or
elect not to consummate the Merger as a result of such changes; (ii) there can
be no assurance that synergies (such as potential cross-marketing of products)
and cost savings (primarily from lowering the cost of capital) currently
expected to result from the consummation of the Merger will be achieved or the
extent to which they will be achieved; (iii) uncertainty as to one-time
merger-related costs and factors affecting valuation of certain assets and (iv)
certain directors and executive officers of Conseco and Green Tree have
interests in the Merger that are in addition to their interests as holders of
Conseco Common Stock or Green Tree Common Stock generally. See "Risk Factors."
1
<PAGE>
The Companies
Conseco, Inc. ............ Conseco is a financial services holding
company. Conseco develops, markets and
administers supplemental health insurance,
annuity, life insurance, individual and
group major medical insurance and other
insurance products. Since 1982, Conseco has
acquired 19 insurance groups. Conseco's
operating strategy is to grow the insurance
business within its subsidiaries by focusing
its resources on the development and
expansion of profitable products and strong
distribution channels. Conseco has
supplemented such growth by acquisition of
companies that have profitable niche
products and strong distribution systems.
Once an insurance company has been acquired,
Conseco's operating strategy has been to
consolidate and streamline management and
administrative functions where appropriate,
to realize superior investment returns
through active asset management, to
eliminate unprofitable products and
distribution channels, and to expand and
develop the profitable distribution channels
and products.
Conseco was organized in 1979 as an Indiana
corporation and commenced operations in
1982. Its executive offices are located at
11825 North Pennsylvania Street, Carmel,
Indiana 46032 and its telephone number is
(317) 817-6100. See "Information Concerning
Conseco and the Merger Sub."
Marble Acquisition Corp.......... Merger Sub, a wholly owned subsidiary of
Conseco, was formed for the purposes of
effecting the Merger. To date, Merger Sub
has not engaged in any activities other than
those incident to its organization and the
consummation of the Merger. See "Information
Concerning Conseco and Merger Sub."
Green Tree Financial
Corporation ................ Green Tree is a diversified financial
services company that provides financing for
manufactured homes, home equity, home
improvements, consumer products and
equipment and provides consumer and
commercial revolving credit. Green Tree's
insurance agencies market physical damage
and term mortgage life insurance and other
credit protection relating to the customers'
contracts it services. Green Tree is the
largest servicer of manufactured housing
contracts in the United States. Through its
principal offices in Saint Paul, Minnesota
and service centers throughout the United
States, Green Tree serves all 50 states.
Green Tree pools and securitizes
substantially all of the contracts it
originates, retaining the servicing on the
contracts. Such pools are structured into
asset-backed securities which are sold in
the public securities markets. In servicing
the contracts, Green Tree collects payments
from the borrower and
2
<PAGE>
remits principal and interest payments to
the holder of the contract or investor
certificate backed by the contracts.
Green Tree was originally incorporated under
the laws of the State of Minnesota in 1975.
In 1995 Green Tree reincorporated under the
laws of the State of Delaware. Green Tree's
principal executive offices are located at
1100 Landmark Towers, 345 Saint Peter
Street, Saint Paul, Minnesota 55102-1639 and
its telephone number is (612) 293-3400. See
"Information Concerning Green Tree."
Meetings of Shareholders
Time, Date and Place........... Conseco. The Conseco Special Meeting will be
held at 10:00 a.m., local time, on
_________, 1998 at the Conseco Conference
Center, 530 North College Drive, Carmel,
Indiana 46032 and at any adjournment or
postponement thereof.
Green Tree. The Green Tree Special Meeting
will be held at 10:00 a.m., local time, on
__________, 1998 at The Saint Paul Hotel,
350 Market Street, Saint Paul, Minnesota
55102 and at any adjournment or postponement
thereof.
Purpose of the Meetings........ Conseco. The purpose of the Conseco Special
Meeting is to consider and vote upon (i) a
proposal to approve the Merger Consideration
Stock Issuance and (ii) such other business
as may properly come before the Conseco
Special Meeting or any adjournments or
postponements thereof. See "Shareholder
Meetings-- Matters to be Considered at the
Meetings -- Conseco."
Green Tree. The purpose of the Green Tree
Special Meeting is to consider and vote upon
(i) a proposal to approve and adopt the
Merger Agreement and (ii) such other
business as may properly come before the
Green Tree Special Meeting or any
adjournments or postponements thereof. See
"Shareholder Meetings -- Matters to be
Considered at the Meetings -- Green Tree."
Record Date, Shares
Entitled to Vote, Quorum ...... Conseco. Holders of record of Conseco
Common Stock and Conseco PRIDES at the close
of business on ____________, 1998 (the
"Conseco Record Date"), are entitled to
notice of and to vote, together as a single
class, at the Conseco Special Meeting. As of
the Conseco Record Date, there were ________
shares of Conseco Common Stock outstanding
and entitled to vote and _________ shares of
Conseco PRIDES outstanding and entitled to
vote. Each holder of record of shares of
Conseco Common Stock on the Conseco Record
Date is entitled to cast, either in person
or by properly executed proxy, one vote per
share of Conseco Common Stock on the Merger
Consideration Stock Issuance and such other
matters, if any, properly submitted for the
vote of the Conseco shareholders at the
Conseco Special Meeting. Each holder of
record of shares of Conseco PRIDES on the
Conseco Record Date is entitled to cast,
either in person or by properly
3
<PAGE>
executed proxy, four-fifths (4/5) of one
vote per share of Conseco PRIDES on the
Merger Consideration Stock Issuance and such
other matters, if any, properly submitted
for the vote of the Conseco shareholders at
the Conseco Special Meeting. See
"Shareholder Meetings."
The presence, in person or by properly
executed proxy, of the holders of Conseco
Common Stock and Conseco PRIDES representing
a majority of the voting power of all
outstanding Conseco Stock at the Conseco
Special Meeting is necessary to constitute a
quorum at the Conseco Special Meeting. See
"Shareholder Meetings."
Green Tree. Holders of record of shares of
Green Tree Common Stock at the close of
business on _______, 1998 (the "Green Tree
Record Date"), are entitled to notice of and
to vote at the Green Tree Special Meeting.
As of the Green Tree Record Date, there were
_______ shares of Green Tree Common Stock
outstanding and entitled to vote. Each
holder of record of shares of Green Tree
Common Stock on the Green Tree Record Date
is entitled to cast, either in person or by
properly executed proxy, one vote per share
on the approval and adoption of Merger
Agreement and the other matters, if any,
properly submitted for the vote of the Green
Tree shareholders at the Green Tree Special
Meeting. See "Shareholder Meetings."
The presence, in person or by properly
executed proxy, of the holders of stock
representing a majority of the voting power
of all outstanding shares of the Green Tree
Common Stock at the Green Tree Special
Meeting is necessary to constitute a quorum
at the Green Tree Special Meeting. See
"Shareholder Meetings."
Vote Required................ Conseco. Although approval of the Merger
and the Merger Agreement by the shareholders
of Conseco is not required under Indiana law
because Conseco is not a constituent
corporation to the Merger, under the rules
of the NYSE, on which the Conseco Common
Stock is listed, the affirmative vote of a
majority of the voting power of the
outstanding shares of voting stock present
and voting thereon (in person or by proxy)
is required for approval of the Merger
Consideration Stock Issuance, provided that
the total number of votes cast on such
proposal must represent more than 50% of the
voting power of Conseco Stock entitled to
vote thereon at the Conseco Special Meeting.
See "Shareholder Meetings-- Voting at the
Meetings; Record Date; Quorum-- Conseco."
Green Tree. The approval and adoption by
Green Tree of the Merger Agreement will
require the affirmative vote of the holders
of a majority of the voting power of the
outstanding shares of Green Tree Common
Stock entitled to vote thereon. See
"Shareholder Meetings -- Voting at the
Meetings; Record Date; Quorum -- Green
Tree."
Share Ownership of
Management................... Conseco. At the close of business on the
Conseco Record Date, directors and executive
officers of Conseco and their affiliates
4
<PAGE>
were the beneficial owners of an aggregate
of _______ shares of Conseco Common Stock
and ________ shares of Conseco PRIDES. See
"Shareholder Meetings--Voting at the
Meetings; Record Date; Quorum--Conseco."
Green Tree. At the close of business on the
Green Tree Record Date, directors and
executive officers of Green Gree and their
affiliates were the beneficial owners of an
aggregate of ________ shares of Green Tree
Common Stock. See "Shareholder Meetings --
Voting at the Meetings; Record Date; Quorum
-- Green Tree."
The Merger
Effect of Merger............. Upon consummation of the Merger, (i) Merger
Sub will be merged with and into Green Tree,
with Green Tree being the surviving
corporation (the "Surviving Corporation")
and a wholly owned subsidiary of Conseco;
(ii) each outstanding share of Green Tree
Common Stock (other than shares of Green
Tree Common Stock held by Green Tree as
treasury stock) will be canceled and
converted into 0.9165 (the "Exchange Ratio")
of a share of Conseco Common Stock; and
(iii) each outstanding share of common stock
of Merger Sub will be converted into one
share of the common stock of the Surviving
Corporation. A copy of the Merger Agreement
is attached as Annex A to this Joint Proxy
Statement/Prospectus and is incorporated by
reference herein. See "The Merger
Agreement."
Merger Consideration......... The Conseco Common Stock to be issued to
holders of shares of Green Tree Common Stock
in accordance with the Merger and any cash
to be paid in lieu of fractional shares of
Conseco Common Stock are referred to
collectively as the "Merger Consideration."
Conseco will apply to have the additional
shares of Conseco Common Stock issued
pursuant to the Merger listed on the NYSE.
See "The Merger Agreement-- Conditions to
the Merger."
No fractional shares of Conseco Common Stock
will be issued in the Merger. Each Green
Tree shareholder who otherwise would have
been entitled to a fraction of a share of
Conseco Common Stock will receive in lieu
thereof cash in accordance with the terms of
the Merger Agreement. See "The Merger
Agreement -- Fractional Shares."
As soon as reasonably practicable after
consummation of the Merger, a letter of
transmittal (including instructions setting
forth the procedures for exchanging such
holder's certificates representing Green
Tree Common Stock ("Certificates") for the
Merger Consideration payable to such holder
pursuant to the Merger Agreement) will be
sent to each holder of record, as of the
Effective Time, of shares of Green Tree
Common Stock. Upon surrender of such
Certificates to the Exchange Agent (as
defined herein) together with a duly
completed and executed letter of
transmittal, such holder will promptly
receive the Merger Consideration for each
share of Green Tree Common Stock previously
represented by the Certificates so
surrendered. See "The Merger Agreement --
Surrender and Payment."
5
<PAGE>
Treatment of Existing
Options .................... From and after the Effective Time, each
outstanding unexpired option to purchase
shares of Green Tree Common Stock (a "Green
Tree Stock Option") other than the Conseco
Option, by virtue of the terms of each such
option, shall be fully vested and shall
represent an option to purchase the number
of shares of Conseco Common Stock (a
"Substitute Option") determined by
multiplying (i) the number of shares of
Green Tree Common Stock subject to such
Green Tree Stock Option immediately prior to
the Effective Time by (ii) the Exchange
Ratio, at an exercise price per share of
Conseco Common Stock equal to the exercise
price per share of Green Tree Common Stock
provided therein divided by the Exchange
Ratio, and otherwise on the same terms and
conditions as were applicable under the
Green Tree Stock Option immediately prior to
the Effective Time. See "The Merger
Agreement-- Green Tree Stock Options."
Board Recommendations
Regarding the Merger......... Conseco. The Conseco Board of Directors has
unanimously determined that the Merger is in
the best interests of Conseco and its
shareholders and has approved the Merger
Agreement. THE CONSECO BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS
OF CONSECO VOTE IN FAVOR OF THE MERGER
CONSIDERATION STOCK ISSUANCE AT THE CONSECO
SPECIAL MEETING. For a discussion of the
relevant factors considered by the Conseco
Board of Directors in making its
recommendation and approving the Merger
Agreement, see "The Merger -- Conseco's
Reasons for the Merger; Recommendation of
the Conseco Board of Directors."
Green Tree. The Green Tree Board of
Directors has unanimously determined that
the Merger is in the best interests of Green
Tree and its shareholders and has approved
the Merger Agreement. THE GREEN TREE BOARD
OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE
SHAREHOLDERS OF GREEN TREE VOTE IN FAVOR OF
APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT AT THE GREEN TREE SPECIAL MEETING.
For a discussion of the interests that
certain executive officers and directors of
Green Tree have with respect to the Merger
in addition to their interests as
shareholders of Green Tree generally and
information regarding the treatment of Green
Tree Stock Options and other rights of
certain members of the Green Tree Board, see
"The Merger -- Interests of Certain Persons
in the Transaction." Such interests,
together with other relevant factors, were
considered by the Green Tree Board in making
its recommendation and approving the Merger
Agreement. See "The Merger -- Green Tree's
Reasons for the Merger; Recommendation of
the Green Tree Board of Directors."
6
<PAGE>
Opinion of Conseco's
Financial Advisor............ Merrill Lynch & Co. ("Merrill Lynch") has
delivered its written opinion to the Board
of Directors of Conseco that, as of April 6,
1998, the Exchange Ratio is fair, from a
financial point of view, to Conseco.
The full text of the written opinion of
Merrill Lynch, which sets forth assumptions
made, procedures followed, other matters
considered and limits of the review
undertaken in connection with the opinion,
is attached hereto as Annex C and is
incorporated herein by reference. Holders of
Conseco Stock are urged to, and should, read
such opinion in its entirety. See "The
Merger -- Opinion of Conseco's Financial
Advisor."
Opinion of Green Tree's
Financial Advisor............ Lehman Brothers Inc. ("Lehman Brothers") has
delivered its written opinion to the Board
of Directors of Green Tree that, as of April
6, 1998, the Exchange Ratio is fair, from a
financial point of view, to the shareholders
of Green Tree.
The full text of the written opinion of
Lehman Brothers, which sets forth
assumptions made, procedures followed, other
matters considered and limits of the review
undertaken in connection with the opinion,
is attached hereto as Annex D and is
incorporated herein by reference. Holders of
Green Tree Common Stock are urged to, and
should, read such opinion in its entirety.
See "The Merger -- Opinion of Green Tree's
Financial Advisor."
Certain Consequences
of the Merger................ Upon consummation of the Merger, the Green
Tree shareholders will become shareholders
of Conseco, and each share of Green Tree
Common Stock issued and outstanding
immediately prior to the consummation of the
Merger (other than shares held as Green Tree
treasury stock immediately prior to the
Effective Time) shall be converted into the
Merger Consideration. See "--Merger
Consideration." In addition, Green Tree
Stock Options will become Substitute Options
to purchase a number of shares of Conseco
Common Stock determined as described under
"The Merger Agreement-- Fractional Shares"
and "-- Green Tree Stock Options."
After consummation of the Merger, the
current Conseco shareholders will own
approximately 62% of the shares of Conseco
Common Stock to be outstanding after
consummation of the Merger, and the current
Green Tree shareholders will own
approximately 38% of such shares.
See "The Merger -- Certain Consequences of
the Merger."
7
<PAGE>
Conduct of the Business of
Conseco and Green Tree
After the Merger............. Conseco plans for the operations of Green
Tree in general to remain in current
locations after consummation of the Merger.
Conseco intends to support and encourage
Green Tree's continued growth and product
expansion. Conseco and Green Tree have a
similar "Middle America" customer focus, and
they plan to cross market their products to
the
8
<PAGE>
customer base of the combined company. In
addition, Conseco intends to seek to finance
the combined entity on a more efficient
basis and achieve other cost efficiencies
where possible. There can be no assurance
that these benefits will be realized from
the Merger. See "The Merger -- Conduct of
the Business of Conseco and Green Tree After
the Merger."
The Merger Agreement provides that prior to
or concurrently with the Effective Time,
Conseco's Board of Directors will be
expanded to add Mr. Lawrence M. Coss,
Chairman of the Board and Chief Executive
Officer of Green Tree, and one or two
additional persons at Conseco's option,
selected by Conseco among the individuals
who were directors of Green Tree as of April
6, 1998, as new directors of Conseco.
Pursuant to the Merger Agreement, (i) the
members of the Board of Directors of Merger
Sub immediately prior to the consummation of
the Merger shall become the directors of the
Surviving Corporation following the
consummation of the Merger, and (ii) the
officers of Green Tree immediately prior to
the consummation of the Merger shall be the
officers of the Surviving Corporation
following the consummation of the Merger.
See "Management of the Surviving Corporation
Upon Consummation of the Merger."
Effective Time of the Merger. The Merger will become effective upon the
date a Certificate of Merger is filed with
the Secretary of State of Delaware or at
such time thereafter as is provided in the
Certificate of Merger (the "Effective
Time"). See "The Merger Agreement-- Terms of
the Merger."
Conditions to the Merger...... The obligations of Conseco and Green Tree to
consummate the Merger are subject to the
satisfaction of certain conditions,
including, without limitation, obtaining
requisite Conseco and Green Tree shareholder
approvals, delivery to Conseco and Green
Tree of tax opinions, delivery to Conseco
and Green Tree of accountant "comfort
letters," delivery to Conseco of certain
accountant letters regarding pooling of
interest accounting treatment of the Merger,
the continued accuracy of the
representations and warranties contained in
the Merger Agreement and the receipt of
certain governmental consents and approvals
including, without limitation, certain
consents and approvals required under
applicable banking and finance laws and the
expiration (or earlier termination) of the
relevant waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR Act"). See
"The Merger-- Regulatory Approvals" and "The
Merger Agreement-- Conditions to the
Merger".
Termination of the Merger
Agreement; Fees and
Expenses..................... The Merger Agreement may be terminated at
any time prior to the Effective Time under
certain circumstances, including, among
other things:
9
<PAGE>
(i) by mutual written consent of Conseco and
Green Tree; (ii) by either Conseco or Green
Tree if the other fails to comply in any
material respect with any of its covenants
or agreements contained in the Merger
Agreement required to be complied with prior
to the date of such termination or
materially breaches any representation or
warranty that is not qualified as to
materiality or breaches any representation
or warranty that is so qualified (in each
case after a 30 business day cure period
following notice of such breach); (iii) by
either Conseco or Green Tree if the Merger
has not been effected prior to the close of
business on December 31, 1998, subject to
certain limitations; (iv) by either Conseco
or Green Tree if the requisite shareholder
approvals are not obtained; (v) by Conseco
or Green Tree if Green Tree enters into a
merger, acquisition or other agreement to
effect a Superior Proposal (as defined
below); (vi) by Conseco if the Board of
Directors of Green Tree, in breach of the
Merger Agreement, withdraws or modifies its
recommendation of the Merger, recommends a
competing transaction or fails to recommend
against a tender or exchange offer by a
third party; and (vii) by Green Tree if the
Board of Directors of Conseco withdraws or
modifies its recommendation of the Merger.
See "The Merger Agreement -- Termination."
The Merger Agreement provides for the
payment of breakup fees, not to exceed $295
million, following a termination of the
Merger Agreement under certain
circumstances. See "The Merger Agreement --
Fees and Expenses."
Stock Option Agreement. . . In connection with the execution of the
Merger Agreement, Conseco and Green Tree
entered into the Stock Option Agreement,
dated April 6, 1998 (the "Stock Option
Agreement"), pursuant to which Green Tree
has granted Conseco an option (the "Conseco
Option") to purchase up to 26,668,399 shares
of Green Tree Common Stock (or approximately
19.9% of the outstanding shares of Green
Tree Common Stock as of the Green Tree
Record Date, without including any shares
subject to or issued pursuant to the Conseco
Option) at an exercise price of $52.93 per
share (i.e., the closing sale price of
Conseco Common Stock on April 6, 1998
multiplied by the Exchange Ratio). The
Conseco Option is exercisable only upon the
occurrence of certain events and provides
Conseco the right, under certain
circumstances, to require Green Tree to
purchase for cash the unexercised portion of
the Conseco Option. The Conseco Option was a
condition to Conseco's entering into the
Merger Agreement and it might increase the
likelihood of consummation of the Merger by
discouraging competing offers for Green
Tree. Certain aspects of the Stock Option
Agreement may have the effect of
discouraging persons who may now, or prior
to the Effective Time, be interested in
acquiring all of or a significant interest
in Green Tree from considering or proposing
such an acquisition, even if such persons
were prepared to offer to pay consideration
to shareholders of Green Tree that had a
higher current market price than the shares
of Conseco Common Stock to be received for
each share of Green Tree Common Stock
pursuant to the Merger Agreement.
10
<PAGE>
The Stock Option Agreement is attached
hereto as Annex B to this Joint Proxy
Statement/Prospectus and is incorporated
herein by reference. See "The Stock Option
Agreement."
Absence of Appraisal
Rights ..................... Holders of Conseco Stock will not be
entitled to appraisal rights under the
Indiana Business Corporation Law (the
"Indiana Corporation Law") in connection
with the Merger. Holders of Green Tree
Common Stock will not be entitled to
appraisal rights under the Delaware General
Corporation Law (the "DGCL") in connection
with the Merger. See "The Merger -- Absence
of Appraisal Rights."
Certain Federal Income Tax
Consequences................. It is a condition to the obligations of
Green Tree and Conseco to consummate the
Merger that they receive from their
respective counsel an opinion to the effect
that the Merger will constitute a
reorganization under Section 368(a) of the
Internal Revenue Code of 1986, as amended
(the "Code"), for federal income tax
purposes and, accordingly, no gain or loss
will be recognized by Green Tree
shareholders upon their exchange of Green
Tree Common Stock for Conseco Common Stock
(except to the extent of any cash received
in lieu of a fractional share interest in
Conseco Common Stock). See "The Merger--
Certain Federal Income Tax Consequences."
Accounting Treatment......... The Merger is expected to be accounted for
as a "pooling of interests" in accordance
with generally accepted accounting
principles. See "The Merger -- Accounting
Treatment."
Comparison of Shareholders'
Rights ..................... Upon consummation of the Merger, the Green
Tree shareholders will become shareholders
of Conseco. See "Comparison of Shareholders'
Rights" for a summary of the material
differences between the rights of holders of
Conseco Common Stock and Green Tree Common
Stock. These differences arise from the
distinctions between the laws of the
jurisdictions in which Conseco and Green
Tree are incorporated (Indiana and Delaware,
respectively) and the distinctions between
the articles of incorporation and bylaws of
Conseco and the certificate of incorporation
and bylaws of Green Tree.
11
<PAGE>
SELECTED FINANCIAL DATA
The following tables present: (i) the selected historical consolidated
financial data for each of Conseco and Green Tree; and (ii) the unaudited pro
forma selected consolidated financial data reflecting the consummation of the
Merger.
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF CONSECO
The selected consolidated financial data for Conseco are based on and
derived from, and should be read in conjunction with, the historical
consolidated financial statements and the related notes thereto of Conseco,
audited by Coopers & Lybrand L.L.P., independent accountants, which are included
in Conseco's Annual Report, which is incorporated herein by reference. See
"Incorporation of Certain Documents by Reference".
The comparison of selected historical financial information in the table
below is significantly affected by: (1) the acquisitions consummated by Conseco
Capital Partners, L.P. ("Partnership I") and Conseco Capital Partners II, L.P.
("Partnership II"); (ii) the sale of Western National Corporation ("Western
National"); (iii) the transactions affecting Conseco's ownership interest in
Bankers Life Holding Corporation ("BLH") and CCP Insurance, Inc. ("CCP"); (iv)
the acquisition (the "LPG Merger") of Life Partners Group, Inc. ("LPG"); (v) the
acquisition (the "ATC Merger") of American Travellers Corporation ("ATC"); (vi)
the acquisition (the "THI Merger") of Transport Holdings Inc. ("THI"); (vii) the
acquisition (the "CAF Merger") of Capitol American Financial Corporation
("CAF"); (viii) the acquisition (the "PFS Merger") of Pioneer Financial
Services, Inc. ("PFS"); (ix) the acquisition (the "Colonial Penn Purchase") of
Colonial Penn Life Insurance Company and Providential Life Insurance Company and
certain other assets (collectively referred to as "Colonial Penn"); and (x) the
acquisition (the "WNIC Merger") of Washington National Corporation ("WNIC").
Conseco did not have unilateral control to direct all of CCP's activities during
1993 and 1994 and, therefore, did not consolidate the financial statements of
CCP with the financial statements of Conseco. As a result of the purchase by
Conseco of all the shares of common stock of CCP it did not already own on
August 31, 1995 (the "CCP Merger"), the financial statements of CCP's
subsidiaries are consolidated with the financial statements of Conseco,
effective January 1, 1995. Conseco has included BLH in its financial statements
since November 1, 1992. Through December 31, 1993, the financial statements of
Western National were consolidated with the financial statements of Conseco.
Following the completion of the initial public offering of Western National (and
subsequent disposition of Conseco's remaining equity interest in Western
National), the financial statements of Western National were no longer
consolidated with the financial statements of Conseco. As of September 29, 1994,
Conseco began to include in its financial statements the newly acquired
Partnership II subsidiary, American Life Holdings, Inc. ("ALH"). As of July 1,
1996, Conseco began to include in its financial statements its newly acquired
subsidiary, LPG. Effective December 31, 1996, Conseco began to include in its
financial statements its subsidiaries acquired in the ATC Merger and the THI
Merger. As of January 1, 1997 Conseco began to include in its financial
statements its subsidiaries acquired in the CAF Merger. As of April 1, 1997,
Conseco began to include in its financial statements its subsidiaries acquired
in the PFS Merger. Effective September 30, 1997, Conseco began to include in its
financial statements its subsidiaries acquired in the Colonial Penn Purchase.
Effective December 1, 1997, Conseco began to include in its financial statements
its subsidiaries acquired in the WNIC Merger. Such business combinations are
described in the notes to the consolidated financial statements included in
Conseco's Annual Report, which is incorporated herein by reference.
12
<PAGE>
<TABLE>
<CAPTION>
Year ended December 31,
---------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(Amounts in millions, except per share data)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Insurance policy income $3,410.8 $1,654.2 $1,465.0 $1,285.6 $1,293.8
Net investment income 1,825.3 1,302.5 1,142.6 385.7 896.2
Net investment gains (losses) 266.5 60.8 204.1 (30.5) 242.6
Total revenues 5,568.4 3,067.3 2,855.3 1,862.0 2,636.0
Interest expense on notes payable 109.4 108.1 119.4 59.3 58.0
Total benefits and expenses 4,565.3 2,573.7 2,436.8 1,537.6 2,025.8
Income before income taxes, minority interest and
extraordinary charge 1,003.1 493.6 418.5 324.4 610.2
Extraordinary charge on extinguishment of debt, net of tax 6.9 26.5 2.1 4.0 11.9
Net income 567.3 252.4 220.4 150.4 297.0
Preferred stock dividends and charge related to induced
conversions of convertible preferred stock 21.9 27.4 18.4 18.6 20.6
Net income applicable to common stock 545.4 225.0 202.0 131.8 276.4
PER SHARE DATA (a)
Net income, basic $2.94 $2.15 $2.48 $1.31 $2.74
Net income, diluted 2.64 1.82 2.12 1.22 2.20
Dividends declared per common share .313 .083 .046 .125 .075
Book value per common share outstanding 20.22 16.86 10.22 5.22 8.45
Shares outstanding at year-end 186.7 167.1 81.0 88.7 101.2
Weighted average shares outstanding for diluted earnings 210.2 138.9 103.9 123.4 133.8
BALANCE SHEET - AT PERIOD END
Total assets $35,914.8 $25,612.7 $17,297.5 $10,811.9 $13,749.3
Notes payable for which Conseco is directly liable
and commercial paper 2,354.9 1,094.9 871.4 191.8 413.0
Notes payable of affiliates, not direct
obligations of Conseco - - 584.7 611.1 290.3
Total liabilities 30,640.1 21,829.7 15,782.5 9,743.2 12,382.9
Minority interest in consolidated subsidiaries:
Company-obligated mandatorily redeemable
preferred securities of subsidiary trusts 1,383.9 600.0 - - -
Preferred stock - 97.0 110.7 130.1 -
Common stock .7 .7 292.6 191.6 223.8
Shareholders' equity 3,890.1 3,085.3 1,111.7 747.0 1,142.6
OTHER FINANCIAL DATA (b)
Premiums collected (c) $5,055.7 $3,280.2 $3,106.5 $1,879.1 $2,140.1
Operating earnings (d) 574.9 267.7 131.3 151.7 162.0
Operating earnings per diluted common share (a) (d) 2.74 1.93 1.26 1.23 1.20
Assets under management (at fair value) (e) 32,079.0 31,109.0 24,725.0 23,113.0 18,260.0
Shareholders' equity, excluding unrealized appreciation
(depreciation) of fixed maturity securities at period
end (f) 3,712.9 3,045.5 999.1 884.7 1,055.2
Book value per common share, excluding
unrealized appreciation (depreciation) of fixed
maturity securities at period end (a) (f) 19.27 16.62 8.83 6.77 7.58
- --------------------
<FN>
(a) All share and per share amounts have been restated to reflect the two-for-
one stock splits paid on April 1, 1996 and February 11, 1997.
(b) Amounts under this heading are included to assist the reader in analyzing
Conseco's financial position and results of operations. Such amounts are
not intended to, and do not, represent insurance policy income, net income,
net income per share, invested assets, shareholders' equity or book value
per share prepared in accordance with generally accepted accounting
principles ("GAAP").
<PAGE>
(c) Includes premiums received from universal life and products without
mortality or morbidity risk. Such premiums are not reported as revenues
under GAAP and were $2,099.4 million in 1997, $1,881.3 million in 1996,
$1,757.5 million in 1995, $634.6 million in 1994 and $891.9 million in
1993.
(d) Represents income before extraordinary charge, excluding net investment
gains (losses) (less that portion of change in future policy benefits,
amortization of cost of policies purchased and cost of policies produced
and income taxes relating to such gains (losses)) and nonrecurring
activities (net of income taxes).
(e) Represents the total market value of the investment portfolios managed by
Conseco Capital Management, Inc. ("CCM") including assets of Conseco's
subsidiaries of $27.0 billion, $18.5 billion, $13.8 billion, $11.5 billion
and $7.4 billion at December 31, 1997, 1996, 1995, 1994 and 1993,
respectively, and assets of unaffiliated parties of $5.1 billion, $12.6
billion, $11.0 billion, $11.6 billion and $10.9 billion at December 31,
1997, 1996, 1995, 1994 and 1993, respectively.
(f) Excludes the effect of reporting fixed maturities at fair value and
recording the unrealized gain or loss on such securities as a component of
shareholders' equity, net of tax and other adjustments. Such adjustments
are in accordance with Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" ("SFAS
115"), as described in the notes to the consolidated financial statements
included in Conseco's Annual Report, which is incorporated herein by
reference.
</FN>
</TABLE>
13
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF GREEN TREE
The selected consolidated financial data for Green Tree are based on and
derived from, and should be read in conjunction with, the historical
consolidated financial statements and the related notes thereto of Green Tree,
audited by KPMG Peat Marwick LLP, independent auditors, which are included in
Green Tree's Annual Report, which is incorporated herein by reference. See
"Incorporation of Certain Documents by Reference".
<TABLE>
<CAPTION>
Year ended December 31,
---------------------------------------------------------
1997 1996 (a) 1995 1994 1993
---- ---- ---- ---- ----
(Amounts in millions, except per share data)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Interest income $ 370.6 $215.3 $176.0 $111.4 $112.5
Gain on sale of receivables 546.8 389.7 448.7 320.4 201.9
Total revenues 1,091.5 724.1 711.3 497.4 366.7
Interest expense on notes payable 160.9 70.1 57.3 41.6 51.2
Total expenses 605.4 400.3 301.7 195.3 166.1
Income before income taxes 486.1 323.8 409.6 302.1 200.6
Net income 301.4 200.8 254.0 181.3 116.4
PER SHARE DATA
Net income, basic $2.20 $1.47 $1.86 $1.34 $.93
Net income, diluted 2.15 1.43 1.81 1.31 .90
Dividends declared per common share .330 .260 .200 .120 .085
Book value per common share outstanding 9.90 8.26 6.83 5.37 4.10
Shares outstanding at year-end 134.6 137.7 135.5 135.3 134.1
Weighted average shares outstanding for diluted earnings 140.3 140.6 140.1 138.7 128.8
BALANCE SHEET - AT PERIOD END
Total assets $4,866.8 $3,098.0 $2,220.2 $1,687.8 $1,517.4
Notes payable and commercial paper 1,866.3 762.5 383.5 309.3 515.0
Total liabilities 3,534.7 1,960.5 1,295.2 961.9 968.0
Shareholders' equity 1,332.1 1,137.5 925.0 725.9 549.4
OTHER FINANCIAL DATA (b)
Managed receivables at period end (c) $27,957.0 $20,073.0 $13,888.0 $9,821.0 $7,194.0
Securitized assets sold 10,749.2 8,413.7 5,334.9 4,370.2 2,345.8
- --------------------
<FN>
(a) As more fully described in the consolidated financial statements and the
related notes thereto of Green Tree included in Green Tree's Annual Report,
which is incorporated herein by reference, financial data have been
restated to correct the December 31, 1996 valuation of Green Tree's excess
servicing rights and the expense related to the Chief Executive Officer's
stock bonus plan.
(b) Amounts under this heading are included to assist the reader in analyzing
Green Tree's financial position and results of operations. Such amounts are
not intended to, and do not, represent the receivables or revenues of Green
Tree prepared in accordance with GAAP.
(c) Represents the total fixed term and revolving credit receivables that Green
Tree manages, including receivables on its balance sheet and receivables
applicable to the holders of asset-backed securities sold by Green Tree.
</FN>
</TABLE>
14
<PAGE>
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The unaudited pro forma combined financial data have been prepared giving
effect to the Merger as a pooling of interests. See "THE MERGER -- Accounting
Treatment".
The unaudited pro forma combined statement of operations data for each of
the five years in the period ended December 31, 1997, assume that the Merger had
been consummated at the beginning of the earliest period presented. The selected
unaudited pro forma combined balance sheet data at December 31, 1997, assume the
Merger had been consummated at December 31, 1997. The selected unaudited pro
forma combined statement of operations data, net income per basic share, net
income per diluted share, operating earnings and operating earnings per diluted
share do not reflect any anticipated reorganization or restructuring expenses
resulting from the Merger.
The information set forth in the unaudited pro forma combined financial
data should be read in connection with the unaudited pro forma combined
financial statements and notes thereto appearing elsewhere herein. See "Conseco
Unaudited Pro Forma Combined Financial Statements."
The pro forma amounts are not necessarily indicative of the results of
operations or the combined financial position that would have resulted had the
Merger been consummated at the beginning of the period indicated, nor are they
necessarily indicative of future results of operations or financial position.
15
<PAGE>
<TABLE>
<CAPTION>
Year ended December 31,
---------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(Amounts in millions, except per share data)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Insurance policy income $3,410.8 $1,654.2 $1,465.0 $1,285.6 $1,293.8
Net investment income 2,195.9 1,517.8 1,318.6 497.1 1,008.7
Gain on sale of receivables 546.8 389.7 448.7 320.4 201.9
Net investment gains (losses) 266.5 60.8 204.1 (30.5) 242.6
Total revenues 6,659.9 3,791.4 3,566.6 2,359.4 3,002.7
Interest expense on notes payable 270.3 178.2 176.7 100.9 109.2
Total benefits and expenses 5,170.7 2,974.0 2,738.5 1,732.9 2,192.0
Income before income taxes, minority interest and
extraordinary charge 1,489.2 817.4 828.1 626.5 810.7
Extraordinary charge on extinguishment of debt, net of tax 6.9 26.5 2.1 4.0 11.9
Net income 868.7 453.2 474.4 331.7 413.4
Preferred stock dividends and charge related to induced
conversions of convertible preferred stock 21.9 27.4 18.4 18.6 20.6
Net income applicable to common stock 846.8 425.8 456.0 313.1 392.8
PER SHARE DATA
Net income, basic $2.72 $1.85 $2.21 $1.40 $1.82
Net income, diluted 2.53 1.69 2.04 1.32 1.63
Book value per common share outstanding (a) 15.70
Shares outstanding at year-end 310.0 293.3 205.2 212.7 224.1
Weighted average shares outstanding for diluted earnings 338.7 267.7 232.3 250.5 251.8
BALANCE SHEET - AT PERIOD END
Total assets $40,695.9
Notes payable and commercial paper:
Corporate 2,354.9
Related to finance receivables 1,866.2
Total liabilities 34,329.1
Minority interest in consolidated subsidiaries:
Company-obligated mandatorily redeemable
preferred securities of subsidiary trusts 1,383.9
Common stock .7
Shareholders' equity (a) 4,982.2
OTHER FINANCIAL DATA (b)
Operating earnings (c) $876.3 $468.5 $385.3 $333.0 $278.4
Operating earnings per diluted common share (c) 2.59 1.75 1.66 1.33 1.10
Assets under management and managed receivables (d) 60,036.0
Shareholders' equity, excluding unrealized appreciation
(depreciation) of fixed maturity securities at
period end (e) 4,805.0
Book value per common share, excluding
unrealized appreciation (depreciation) of fixed
maturity securities at period end (e) 15.13
- --------------------
<FN>
(a) Pro forma shareholders' equity and book value per share are shown after
deducting merger-related costs of $240 million, net of income tax.
(b) Amounts under this heading are included to assist the reader in analyzing
the pro forma combined financial position and results of operations of
Conseco and Green Tree. Such amounts are not intended to, and do not,
represent net income, net income per share, invested assets and
receivables, shareholders equity or book value per share prepared in
accordance with GAAP.
(c) Represents income before extraordinary charge, excluding net investment
gains (losses) (less that portion of change in future policy benefits,
amortization of cost of policies purchased and cost of policies produced
and income taxes relating to such gains (losses)) and nonrecurring
activities (net of income taxes).
(d) Represents the total market value of the investment portfolios managed by
CCM (including assets of Conseco subsidiaries of $27.0 billion and assets
of unaffiliated parties of $5.1 billion) and the total fixed and revolving
credit receivables that Green Tree manages,
<PAGE>
including receivables on its balance sheet and receivables applicable to
the holders of asset-backed securities sold by Green Tree.
(e) Excludes the effect of reporting fixed maturities at fair value and
recording the unrealized gain or loss on such securities as a component of
shareholders' equity, net of tax and other adjustments. Such adjustments
are in accordance with SFAS 115, as described in the notes to the
consolidated financial statements included in Conseco's Annual Report,
which is incorporated herein by reference.
</FN>
</TABLE>
16
<PAGE>
COMPARATIVE UNAUDITED PER SHARE INFORMATION
OF CONSECO AND GREEN TREE
The following table presents: (i) the selected comparative per share data
for each of Conseco and Green Tree on a historical basis; and (ii) the selected
unaudited pro forma comparative per share data reflecting the consummation of
the Merger. The unaudited pro forma comparative per share data assume the Merger
had been consummated at the beginning of the periods presented. The unaudited
pro forma data have been prepared giving effect to the Merger as a pooling of
interests.
Under the pooling of interests method of accounting, the historical bases
of the assets and liabilities of Conseco and Green Tree will be combined at the
Effective Time and carried forward at their previously recorded amounts. The
shareholders' equity accounts of Conseco and Green Tree will be combined on
Conseco's consolidated balance sheet and no goodwill or other intangible assets
will be created. Financial statements of Conseco issued after the Merger will be
restated retroactively to reflect the consolidated operations of Conseco and
Green Tree as if the Merger had taken place prior to the periods covered by such
financial statements.
The unaudited pro forma basic earnings per share and diluted earnings per
share data do not reflect any expenses associated with the Merger such as
investment banking, accounting, legal and regulatory filing fees and other
merger related expenses. The Green Tree pro forma equivalent amounts are
presented with respect to each set of pro forma information, and have been
calculated by multiplying the corresponding pro forma combined amounts per share
of Conseco Common Stock by the Exchange Ratio.
Conseco and Green Tree expect that the combined company will achieve
benefits from the Merger in the form of synergies and cost savings. However, the
unaudited pro forma comparative per share data do not reflect any synergies and
cost savings which are expected to result from the consolidation of operations
of Conseco and Green Tree, and therefore, do not purport to be indicative of the
results of future operations.
The comparative per share data presented herein are based on and derived
from, and should be read in conjunction with, the historical consolidated
financial statements and the related notes thereto of each of Conseco and Green
Tree included in the documents incorporated by reference herein. See
"Incorporation of Certain Documents by Reference". Pro forma amounts are not
necessarily indicative of the results of operations or the combined financial
position that would have resulted had the Merger been consummated at the
beginning of the periods indicated.
17
<PAGE>
<TABLE>
<CAPTION>
Year ended December 31,
------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Basic earnings per share
Conseco (1)
Historical $2.94 $2.15 $2.48
Pro forma combined 2.72 1.85 2.21
Green Tree
Historical 2.20 1.47 1.86
Pro forma equivalent (2) 2.49 1.70 2.03
Diluted earnings per share
Conseco (1)
Historical 2.64 1.82 2.12
Pro forma combined 2.53 1.69 2.04
Green Tree
Historical 2.15 1.43 1.81
Pro forma equivalent (2) 2.32 1.55 1.87
Dividends declared per common share
Conseco (1)
Historical .313 .083 .046
Pro forma combined (3) (4) .313 .083 .046
Green Tree
Historical .330 .260 .200
Pro forma equivalent (2) (4) .286 .076 .042
Book value per common share at period end
Conseco (1)
Historical $20.22
Pro forma combined 15.70
Green Tree
Historical 9.90
Pro forma equivalent (2) 14.39
<FN>
(1) Per share information has been restated to reflect the 2-for-1 stock splits
of Conseco distributed April 1, 1996, and February 11, 1997.
(2) Pro forma equivalent amounts for Green Tree are calculated by multiplying
the pro forma combined amounts by the Exchange Ratio.
(3) Pro forma combined dividends per share represent historical dividends per
share paid by Conseco.
(4) Effective for the second quarter of 1997, the dividend declared per common
share of Conseco was increased to $.125 per share ($.50 per share on an
annualized basis), and the dividend declared per common share of Green Tree
was increased to $.0875 per share ($.35 per share on an annualized basis).
If such increase in dividends had been declared for each of the quarters in
1997, the Green Tree pro forma equivalent dividends declared per common
share would have been $.458.
</FN>
</TABLE>
18
<PAGE>
MARKET PRICE INFORMATION
Conseco Common Stock is traded on the NYSE under the symbol "CNC".
Green Tree Common Stock is traded on the NYSE and the PSE under the symbol
"GNT". The table below sets forth for the periods indicated the high and low
sale prices per share of Conseco Common Stock and Green Tree Common Stock and
the dividends paid per share of Conseco Common Stock and Green Tree Common
Stock. For current price information with respect to the Conseco Common Stock
and Green Tree Common Stock, stockholders are urged to consult publicly
available sources. No assurance can be given as to future prices of, or markets
for, Conseco Common Stock or Green Tree Common Stock.
<TABLE>
<CAPTION>
Conseco Common Stock Green Tree Common Stock
----------------------------------- -------------------------------
High Low Dividends High Low Dividends
---- --- --------- ---- --- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1996
First Quarter.....................$18.16 $14.94 $.00500 $36.00 $23.25 $.0625
Second Quarter....................$20.38 $17.38 $.01000 $35.13 $30.38 $.0625
Third Quarter.....................$24.69 $17.63 $.01000 $39.25 $30.13 $.0625
Fourth Quarter....................$33.13 $24.44 $.03125 $41.88 $36.63 $.0750
1997
First Quarter.....................$43.88 $30.75 $.03125 $41.88 $33.75 $.0750
Second Quarter....................$42.88 $34.25 $.03125 $38.38 $26.75 $.0750
Third Quarter.....................$50.00 $35.13 $.03125 $48.63 $35.06 $.0875
Fourth Quarter....................$50.06 $39.88 $.12500 $50.25 $19.00 $.0875
1998
First Quarter.....................$57.88 $38.50 $.12500 $30.75 $17.50 $.0875
Second Quarter (through 4/24/98)..$58.13 $47.69 $------ $44.00 $27.63 $-----
</TABLE>
Set forth below are the last reported sale prices of the Conseco Common
Stock and the Green Tree Common Stock on April 6, 1998, the last trading day
prior to the public announcement of the Merger Agreement, and on ___________
1998, the last trading day prior to the date of this Joint Proxy
Statement/Prospectus, as well as the equivalent pro forma sale prices of the
Green Tree Common Stock on such dates, as determined by multiplying the
applicable last reported sale price of the Conseco Common Stock by the Exchange
Ratio.
<TABLE>
<CAPTION>
Conseco Green Tree Green Tree
Common Stock Common Stock Equivalent
------------ ------------ ----------
<S> <C> <C> <C>
April 6, 1998.................... $57.75 $29.00 $52.88
, 1998....................
</TABLE>
19
<PAGE>
Listing on the NYSE of the shares of Conseco Common Stock issuable in
connection with the Merger is a condition to consummation of the Merger. See
"The Merger Agreement -- Conditions to the Merger."
RISK FACTORS
In addition to the other information contained in this Joint Proxy
Statement/Prospectus, shareholders of each of Conseco and Green Tree should
consider the following factors before voting on matters pertaining to the
Merger.
Fixed Exchange Ratio Despite Changes in Relative Stock Prices
The Exchange Ratio establishing the percentage of a share of Conseco
Common Stock into which each share of Green Tree Common Stock will be converted
is expressed in the Merger Agreement as a fixed ratio. Accordingly, the Exchange
Ratio will not be adjusted in the event of any increase or decrease in the price
of Conseco Common Stock or the price or value of Green Tree Common Stock. In
addition, neither party will have the right to terminate the Merger Agreement or
elect not to consummate the Merger as a result of the changes in the prices of
such stocks. The price of Conseco Common Stock at the Effective Time may vary
from its price at the date of execution of the Merger Agreement, the date of
this Joint Proxy Statement/Prospectus and at the date of the Special Meetings.
Such variations may be the result of changes in the business, operations or
prospects of Conseco or Green Tree, market assessments of the likelihood that
the Merger will be consummated and the timing thereof, regulatory
considerations, general market and economic conditions and other factors.
Because the Effective Time may occur at a date later than the Special Meetings,
there can be no assurance that the price of Conseco Common Stock on the date of
the Special Meetings will be indicative of its price at the Effective Time. The
Effective Time will occur as soon as practicable following the Special Meetings
and the satisfaction or waiver of the other conditions set forth in the Merger
Agreement. Shareholders of Conseco and Green Tree are urged to obtain current
market quotations for Conseco Common Stock. See "The Merger Agreement -- Terms
of the Merger" and "-- Conditions to the Merger."
Uncertainties in Realizing Synergies of Merger
In determining that the Merger is advisable and in the best interests
of its shareholders, each of the Conseco Board of Directors and the Green Tree
Board of Directors considered, among other things, certain synergies, such as
potential cross-marketing of products, and cost savings, primarily from lowering
the cost of capital, expected to result from the consummation thereof. The
cross-marketing of products and the other synergies anticipated from the Merger
present significant management challenges. There can be no assurance that such
actions will be successfully accomplished, or accomplished as expeditiously as
currently expected. Moreover, there can be no assurance of the extent to which
such synergies and cost savings will be achieved.
Uncertainty as to the Amount of One-Time Merger-Related Costs; Factors Affecting
Valuation of Certain Assets
In connection with the Merger, Conseco expects to incur costs of
approximately $240 million (net of income taxes). Such costs include investment
banking, accounting, legal and regulatory fees, severance and retention costs
and other costs associated with the Merger. There can be no assurance that the
amount of such costs will not increase as more accurate estimates become
possible. See "Unaudited Pro Forma Combined Financial Information."
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Green Tree pools and securitizes substantially all of the loan contracts
it originates, retaining: (i) investments in interest-only securities that are
subordinated to the rights of other investors; and (ii) the servicing on the
contracts. The valuation of interest-only securities and servicing rights is
determined by discounting the projected cash flows over the expected life of the
finance receivables sold using prepayment, default, loss, interest rate and
servicing cost assumptions. The assumptions used in calculating the value of
interest only securities and servicing rights are subject to volatility.
Prepayments resulting from competition, obligor mobility, general and regional
economic conditions, and prevailing interest rates, as well as actual losses
incurred, may vary from the performance projected. Expectations of future
default, loss and prepayment experience are reviewed periodically. Valuation
reductions considered permanent are recognized as a reduction to earnings. The
conclusions reached in such reviews could result in material reductions in the
value of the interest-only securities and servicing rights that could materially
affect operating results.
Interests of Certain Persons in the Merger
In considering the recommendation of the Merger, the shareholders of
both Conseco and Green Tree should be aware that certain executive officers and
directors of Conseco and Green Tree may have interests in the Merger that are in
addition to their interests as shareholders of Conseco and Green Tree generally.
See "The Merger -- Interests of Certain Persons." Such interests, together with
other relevant factors, were considered by the Boards of Directors of Conseco
and Green Tree in recommending the Merger to their respective shareholders and
approving the Merger Agreement.
INFORMATION CONCERNING CONSECO AND MERGER SUB
Conseco is a financial services holding company. Conseco develops,
markets and administers supplemental health insurance, annuity, life insurance,
individual and group major medical insurance and other insurance products. Since
1982, Conseco has acquired 19 insurance groups. Conseco's operating strategy is
to grow the insurance business within its subsidiaries by focusing its resources
on the development and expansion of profitable products and strong distribution
channels. Conseco has supplemented such growth by acquiring companies that have
profitable niche products and strong distribution systems. Once an insurance
company has been acquired, Conseco's operating strategy has been to consolidate
and streamline management and administrative functions where appropriate, to
realize superior investment returns through active asset management, to
eliminate unprofitable products and distribution channels, and to expand and
develop the profitable distribution channels and products.
Conseco 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.
Conseco continues to regularly investigate acquisition opportunities in
the insurance industry, the financial services industry and other industries in
which it operates. Conseco evaluates potential acquisitions based on a variety
of factors, including the operating results and financial condition of the
business to be acquired, its growth potential, management and personnel and the
potential return on such acquisition in relation to other acquisition
opportunities and the internal development of its existing business
opportunities. No assurances can be given as to when, if at all, or upon what
terms Conseco will make any such acquisition.
Conseco conducts and manages its business through five segments,
reflecting Conseco's major lines of insurance business and target markets: (i)
supplemental health insurance; (ii) annuities; (iii) life insurance; (iv)
individual and group major medical insurance and (v) other.
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Supplemental health insurance. This segment includes Medicare
supplement, long-term care and specified disease insurance. Medicare is a
two-part federal health insurance program for disabled persons and senior
citizens (age 65 and older). Medicare supplement policies provide coverage for
many of the medical expenses which the Medicare program does not cover, such as
deductibles and coinsurance costs (in which the insured and Medicare share the
costs of medical expenses) and specified losses which exceed the federal
program's maximum benefits. Long-term care products provide coverage, within
prescribed limits, for nursing home, home health care, or a combination of both
nursing home and home health care expenses. Beginning in 1997, the supplemental
health segment includes specified disease products such as cancer and
heart/stroke insurance. These policies generally provide fixed or limited
benefits. Payments under cancer insurance policies are generally made directly
to, or at the direction of, the policyholder following diagnosis of, or
treatment for, a covered type of cancer. Heart/stroke policies provide for
payments directly to the policyholder for treatment of a covered heart disease,
heart attack or stroke.
Annuities. This segment includes fixed annuities, equity-indexed
annuities and variable annuities sold through both career agents and
professional independent producers. A fixed annuity is a savings vehicle in
which the policy holder, or annuitant, makes one or more premium payments to the
insurance company; the insurer guarantees the principal and accrues a stated
rate of interest (which may vary over time) or, in the case of an equity-indexed
annuity, a stated rate plus potentially additional amounts determined by
reference to an equity index. Variable annuities, sold on a single- or
flexible-premium basis, differ from fixed annuities in that the original
principal value may fluctuate, depending on the performance of assets allocated
pursuant to various investment options chosen by the contract owner.
Life insurance. This segment includes traditional life, universal life
and other life insurance products. This segment's products are currently sold
through career agents, professional independent producers and direct response
marketing. Interest-sensitive life products include universal life products that
provide whole life insurance with adjustable rates of return related to current
interest rates. Traditional life policies include whole life and term life
products. Under whole life policies, the policyholder generally pays a level
premium over the policyholders' expected lifetime. These policies, which
continue to be marketed by Conseco on a limited basis, combine insurance
protection with a savings component that increases in amount gradually over the
life of the policy. Term life products offer pure insurance protection for a
specified period of time -- typically one, five, 10 or 20 years.
Individual and group major medical insurance. This segment includes
individual and group major medical health insurance products. The size of this
segment increased significantly as a result of the acquisition of Pioneer
Financial Services, Inc. in May 1997. The profitability of this business depends
largely on the overall persistency of the business in force, claim experience
and expense management.
Other. This segment includes fee revenue generated by Conseco's nonlife
subsidiaries, including the investment advisory fees earned by Conseco Capital
Management, Inc. and commissions earned for insurance product marketing and
distribution. This segment also includes other health insurance business not
included in the segments listed above.
For additional information concerning Conseco, see Conseco's Annual
Report and other documents filed with the Commission and listed or described
under "Incorporation of Certain Documents by Reference."
Merger Sub, a wholly owned subsidiary of Conseco, was formed for the
purposes of effecting the Merger. To date, the Merger Sub has not engaged in any
activities other than those incident to its organization and the consummation of
the Merger.
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INFORMATION CONCERNING GREEN TREE
Green Tree is a diversified financial services company that provides
financing for manufactured homes, home equity, home improvements, consumer
products and equipment and provides consumer and commercial revolving credit.
Green Tree's insurance agencies market physical damage and term mortgage life
insurance and other credit protection relating to the customers' contracts it
services. Green Tree is the largest servicer of manufactured housing contracts
in the United States. Through its principal offices in Saint Paul, Minnesota and
service centers throughout the United States, Green Tree serves all 50 states.
Green Tree pools and securitizes substantially all of the contracts it
originates, retaining the servicing on the contracts. Such pools are structured
into asset-backed securities which are sold in the public securities markets. In
servicing the contracts, Green Tree collects payments from the borrower and
remits principal and interest payments to the holder of the contract or investor
certificate backed by the contracts.
Green Tree was originally incorporated under the laws of the State of
Minnesota in 1975. In 1995 Green Tree reincorporated under the laws of the State
of Delaware. Green Tree Financial Corporation's principal executive offices are
located at 1100 Landmark Towers, 345 Saint Peter Street, Saint Paul, Minnesota
55102-1639, and its telephone number is (612) 293-3400.
For additional information concerning Green Tree, see Green Tree's
Annual Report and other documents filed with the Commission and listed or
described under "Incorporation of Certain Documents by Reference."
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SHAREHOLDER MEETINGS
General
This Joint Proxy Statement/Prospectus is being furnished to holders of
shares of Conseco Stock in connection with the solicitation of proxies by the
Conseco Board of Directors for use at the Conseco Special Meeting to be held on
__________, 1998, at the Conseco Conference Center, 530 North College Drive,
Carmel, Indiana, commencing at 10:00 a.m., local time, and at any adjournment or
postponement thereof.
This Joint Proxy Statement/Prospectus is also being furnished to
holders of Green Tree Common Stock in connection with the solicitation of
proxies by the Green Tree Board of Directors for use at the Green Tree Special
Meeting to be held on ___________, 1998, at The Saint Paul Hotel, 350 Market
Tower, Saint Paul, Minnesota, commencing at 10:00 a.m., local time, and at any
adjournment or postponement thereof.
Matters to be Considered at the Meetings
Conseco. At the Conseco Special Meeting, holders of shares of Conseco
Stock will consider and vote upon (i) a proposal to approve the Merger
Consideration Stock Issuance, and (ii) such other business as may properly come
before the Conseco Special Meeting or any adjournments or postponements thereof.
The Conseco Board of Directors has unanimously approved the Merger
Agreement and the Merger Consideration Stock Issuance and unanimously recommends
that Conseco shareholders vote FOR approval of the Merger Consideration Stock
Issuance. See "The Merger -- Background of the Merger" and "-- Conseco's Reasons
for the Merger; Recommendation of the Conseco Board of Directors."
Holders of shares of Conseco Stock will not be entitled to appraisal
rights as a result of the Merger. See "The Merger -- Absence of Appraisal
Rights."
Green Tree. At the Green Tree Special Meeting, holders of shares of
Green Tree Common Stock will consider and vote upon (i) a proposal to approve
and adopt the Merger Agreement and the transactions contemplated thereby and
(ii) such other business as may properly come before the Green Tree Special
Meeting or any adjournments or postponements thereof.
The Green Tree Board of Directors has unanimously approved the Merger
Agreement and unanimously recommends that Green Tree shareholders vote FOR
approval and adoption of the Merger Agreement. See "The Merger -- Background of
the Merger" and "-- Green Tree's Reasons for the Merger; Recommendation of the
Green Tree Board of Directors."
Holders of shares of Green Tree Common Stock will not be entitled to
appraisal rights under the DGCL as a result of the Merger. See "The Merger --
Absence of Appraisal Rights."
Voting at the Meetings; Record Date; Quorum
Conseco. The Conseco Board of Directors has fixed ___________, 1998 as
the Conseco Record Date. Accordingly, only holders of record of shares of
Conseco Common Stock and Conseco PRIDES on the Conseco Record Date will be
entitled to notice of and to vote, together as a single class, at the Conseco
Special Meeting. As of the Conseco Record Date, there were ___________ shares of
Conseco Common Stock outstanding and entitled to vote, and ______________ shares
of Conseco PRIDES outstanding and entitled to vote. Each holder of record of
shares of Conseco Common Stock on the Conseco Record Date is entitled to cast,
either in person or by properly executed proxy, one vote per share of Conseco
Common
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Stock on the Merger Consideration Stock Issuance and such other matters,
properly submitted for the vote of the Conseco shareholders at the Conseco
Special Meeting. Each holder of record of shares of Conseco PRIDES on the
Conseco Record Date is entitled to cast, either in person or by properly
executed proxy, four-fifths (4/5) of one vote per share of Conseco PRIDES on the
Merger Consideration Stock Issuance and such other matters, properly submitted
for the vote of the Conseco shareholders at the Conseco Special Meeting. The
presence, in person or by properly executed proxy, of the holders of Conseco
Common Stock and Conseco PRIDES representing a majority of the voting power of
all outstanding Conseco Stock at the Conseco Special Meeting is necessary to
constitute a quorum at the Conseco Special Meeting.
Although approval of the Merger and the Merger Agreement by the
shareholders of Conseco is not required under Indiana law because Conseco is not
a constituent corporation to the Merger, under the rules of the NYSE, on which
the Conseco Common Stock is listed, the approval by a majority of the votes
cast, provided that the total vote cast represents over 50% in interest of all
securities entitled to vote on the proposal, is required for approval of the
issuance by a corporation of shares of its common stock in connection with the
acquisition of stock or assets of another company if the common stock so issued
will be equal to or in excess of 20% of the number of shares of common stock of
such corporation outstanding before the issuance of such shares. Accordingly,
because the number of shares of Conseco Common Stock to be issued pursuant to
the Merger will exceed 20% of the shares of Conseco Common Stock outstanding
immediately prior to the Merger, approval of the Merger Consideration Stock
Issuance is required pursuant to the rules of the NYSE.
Shares subject to abstentions will be treated as shares that are
present at the Conseco Special Meeting for purposes of determining the presence
of a quorum and as voted for purposes of determining the number of shares voting
on a particular proposal. If a broker or other nominee holder indicates on the
proxy card that it does not have discretionary authority to vote the shares for
which it is the holder of record on a particular proposal, those shares will not
be considered as votes cast for purposes of determining the number of Conseco
shareholders that have voted for or against the proposal. Accordingly,
abstentions will have the same practical effect as a vote against, and broker
non-votes will have no effect as to, the approval of the Merger Consideration
Stock Issuance or any other matter submitted to the Conseco shareholders which
requires approval by a majority of the votes cast, assuming the total votes cast
represents over 50% in interest of all securities entitled to vote on the
proposal.
As of the Conseco Record Date, the executive officers and directors of
Conseco (as a group, 12 persons) were entitled to vote ______ shares of Conseco
Common Stock and ______ shares of Conseco PRIDES representing approximately
____% of the outstanding votes of Conseco Stock entitled to be cast as of such
date. Although the executive officers and directors are not under contractual or
other legal obligation to vote their shares in favor of approval of the Merger
Consideration Stock Issuance, Conseco has been advised that all of such shares
will be voted in favor of approval of the Merger Consideration Stock Issuance.
Green Tree. The Green Tree Board of Directors has fixed ___________,
1998 as the Green Tree Record Date. Accordingly, only holders of record of
shares of Green Tree Common Stock on the Green Tree Record Date will be entitled
to notice of and to vote at the Green Tree Special Meeting. As of the Green Tree
Record Date, there were __________ shares of Green Tree Common Stock outstanding
and entitled to vote. Each holder of record of shares of Green Tree Common Stock
on the Green Tree Record Date is entitled to cast, either in person or by
properly executed proxy, one vote per share on the Merger Agreement and the
other matters, if any, properly submitted for the vote of the Green Tree
shareholders at the Green Tree Special Meeting. The presence, in person or by
properly executed proxy, of the holders of stock representing a majority of the
voting power of all outstanding shares of the Green Tree Common Stock at the
Green Tree Special Meeting is necessary to constitute a quorum at the Green Tree
Special Meeting.
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The approval and adoption by Green Tree of the Merger Agreement will
require the affirmative vote of the holders of at least a majority of the voting
power of the outstanding shares of Green Tree Common Stock. Shares subject to
abstentions will be treated as shares that are present at the Green Tree Special
Meeting for purposes of determining the presence of a quorum and as voted for
purposes of determining the number of shares voting on a particular proposal. If
a broker or other nominee holder indicates on the proxy card that it does not
have discretionary authority to vote the shares for which it is the holder of
record on a particular proposal, those shares will not be considered as voted
for purposes of determining the number of Green Tree shareholders that have
voted for or against the proposal. Accordingly, abstentions and brokers
non-votes will have the same practical effect as a vote against the approval and
adoption of the Merger Agreement or on any other matter submitted to the Green
Tree shareholders which requires a percentage of the total number of outstanding
shares for approval.
As of the Green Tree Record Date, the executive officers and directors
of Green Tree (as a group, __ persons) were entitled to vote _____ shares of
Green Tree Common Stock, or approximately ____% of the number of shares of Green
Tree Common Stock outstanding and entitled to vote as of such date. Although the
executive officers and directors are not under contractual or other legal
obligation to vote their shares in favor of the approval and adoption of the
Merger Agreement, Green Tree has been advised that all of such shares will be
voted in favor of the approval and adoption of the Merger Agreement.
Proxies
This Joint Proxy Statement/Prospectus is being furnished to holders of
Conseco Stock and Green Tree Common Stock in connection with the solicitation of
proxies by and on behalf of the respective Boards of Directors of Conseco and
Green Tree for use at the Conseco Special Meeting and the Green Tree Special
Meeting, as the case may be.
Conseco. Conseco Stock represented by properly executed proxies
received at or prior to the Conseco Special Meeting that have not been revoked
will be voted at the Conseco Special Meeting in accordance with the instructions
contained therein. Conseco Stock represented by properly executed proxies for
which no instruction is given will be voted FOR approval of the Merger
Consideration Stock Issuance. Conseco shareholders are requested to complete,
sign, date and return promptly the enclosed proxy card in the postage-prepaid
envelope provided for this purpose to ensure that their shares are voted. A
shareholder may revoke a proxy at any time prior to the vote on the Merger
Consideration Stock Issuance by submitting a later-dated proxy with respect to
the same Conseco Stock, delivering written notice of revocation to the Secretary
of Conseco at any time prior to such vote or attending the Conseco Special
Meeting and voting in person. Mere attendance at the Conseco Special Meeting
will not in and of itself revoke a proxy.
If the Conseco Special Meeting is postponed or adjourned for any
reason, at any subsequent reconvening of the Conseco Special Meeting all proxies
will be voted in the same manner as such proxies would have been voted at the
original convening of the Conseco Special Meeting (except for any proxies that
have theretofore effectively been revoked or withdrawn), notwithstanding that
they may have been effectively voted on the same or any other matter at a
previous meeting.
If any other matters are properly presented at the Conseco Special
Meeting for consideration, including among other things, consideration of a
motion to adjourn the meeting to another time and/or place (including, without
limitation, for the purpose of soliciting additional proxies), the persons named
in the enclosed form of proxy and acting thereunder will have discretion to vote
on such matters in accordance with their best judgment.
Green Tree. Shares of Green Tree Common Stock represented by properly
executed proxies received at or prior to the Green
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Tree Special Meeting that have not been revoked will be voted at the Green Tree
Special Meeting in accordance with the instructions contained therein. Shares of
Green Tree Common Stock represented by properly executed proxies for which no
instruction is given will be voted FOR approval and adoption of the Merger
Agreement. Green Tree shareholders are requested to complete, sign, date and
return promptly the enclosed proxy card in the postage-prepaid envelope provided
for this purpose to ensure that their shares are voted. A shareholder may revoke
a proxy at any time prior to the vote on the Merger Agreement by submitting a
later-dated proxy with respect to the same shares, delivering written notice of
revocation to the Secretary of Green Tree at any time prior to such vote or
attending the Green Tree Special Meeting and voting in person. Mere attendance
at the Green Tree Special Meeting will not in and of itself revoke a proxy.
If the Green Tree Special Meeting is postponed or adjourned for any
reason, at any subsequent reconvening of the Green Tree Special Meeting all
proxies will be voted in the same manner as such proxies would have been voted
at the original convening of the Green Tree Special Meeting (except for any
proxies that have theretofore effectively been revoked or withdrawn),
notwithstanding that they may have been effectively voted on the same or any
other matter at a previous meeting.
If any other matters are properly presented at the Green Tree Special
Meeting for consideration, including among other things, consideration of a
motion to adjourn the meeting to another time and/or place (including, without
limitation, for the purpose of soliciting additional proxies), the persons named
in the enclosed form of proxy and acting thereunder will have discretion to vote
on such matters in accordance with their best judgment.
Proxy Solicitation. Conseco and Green Tree will each bear the cost of
soliciting proxies from their respective shareholders. Additionally, Conseco and
Green Tree will each bear one-half the cost of preparing and mailing this Joint
Proxy Statement/Prospectus and the preparation and filing of the Registration
Statement. In addition to solicitation by mail, directors, officers and
employees of Conseco and Green Tree may solicit proxies by telephone, telegram
or otherwise. Such directors, officers and employees of Conseco and Green Tree
will not be additionally compensated for such solicitation, but may be
reimbursed for out-of-pocket expenses incurred in connection therewith.
Brokerage firms, fiduciaries and other custodians who forward soliciting
material to the beneficial owners of shares of Conseco Stock and shares of Green
Tree Common Stock held of record by them will be reimbursed for their reasonable
expenses incurred in forwarding such material. In addition, Conseco and Green
Tree have retained Georgeson & Company, Inc. ("Georgeson") to assist in
soliciting proxies and to provide materials to banks, brokerage firms, nominees,
fiduciaries and other custodians. For such services, Conseco and Green Tree will
pay Georgeson total fees of $_________ plus reimbursement of reasonable
expenses.
GREEN TREE SHAREHOLDERS SHOULD NOT SEND ANY STOCK CERTIFICATES WITH
THEIR PROXY CARDS.
27
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THE MERGER
Background of the Merger
Merrill Lynch introduced Lawrence M. Coss, Chairman and Chief Executive
Officer of Green Tree, to Stephen C. Hilbert, Chairman, President and Chief
Executive Officer of Conseco, and Rollin M. Dick, Executive Vice President and
Chief Financial Officer of Conseco, at a lunch in New York on September 10,
1997. At this lunch, the respective businesses of Green Tree and Conseco were
discussed.
On November 13, 1997, Green Tree issued a press release concerning
revised fourth quarter earnings expectations and stated that it would make a
supplemental non-cash addition to its reserves in the fourth quarter of 1997 in
response to higher prepayment assumptions for certain pools of manufactured
housing loans. On January 27, 1998, Green Tree announced that it would restate
its previously reported financial statements for 1996. As a result of the
restatement of its financial statements in 1996 and the revised earnings
expectations for 1997, Green Tree's senior unsecured debt ratings and short-term
debt ratings were lowered by each of the credit rating agencies which provide
ratings on Green Tree's debt. As a result of these ratings actions, continued
issuance of commercial paper by Green Tree was not practicable. Green Tree
utilized its existing warehouse lines to pay off its commercial paper as such
instruments matured. In addition, effective February 10, 1998, Green Tree
renegotiated its unsecured bank credit agreements to reduce the aggregate
commitment to $750 million and to make other changes to permit its use by Green
Tree for its continuing funding requirements through April 28, 1998. As a result
of these actions, Green Tree determined that it was necessary to find
additional funding sources to support its ongoing operations.
On February 2, 1998, Green Tree began negotiations with Lehman Commercial
Paper Inc., an affiliate of Lehman Brothers, to obtain a two-year $500 million
loan secured by Green Tree's interest-only securities. In partial consideration
for this loan, Green Tree issued to Lehman Commercial Paper Inc. a warrant to
purchase 2,735,688 shares of Green Tree Common Stock (approximately 2% of the
outstanding shares of Green Tree Common Stock) at the market price on the date
of the warrant. Green Tree negotiated a right to repurchase the warrant at a
price equal to $15 per warrant share. This loan transaction closed on February
13, 1998.
On February 10, 1998, members of Green Tree's senior management met with
representatives of Merrill Lynch to discuss potential sources of additional
capital, including public and private issuances of debt and equity securities of
Green Tree ranging up to $500 million. On February 18, representatives of
Merrill Lynch met with Mr. Coss to review preliminary financing plans.
On March 6, 1998, another meeting was held between members of Green
Tree's senior management and representatives of Merrill Lynch to discuss capital
raising, including private equity investments in Green Tree. At this meeting,
Merrill Lynch provided Green Tree with a list of a limited number of potential
investors.
On March 9, 1998, members of Green Tree's senior management met with
representatives of Lehman Brothers. At this meeting, Lehman Brothers explored
the possibility of raising capital in the public market through the issuance of
subordinated debt and/or preferred or common equity in the range of $400 million
to $600 million. Lehman Brothers also provided a list of a limited number of
investors that might be interested in making a private investment in Green Tree.
Green Tree determined to proceed with raising capital in the public market, and
on March 16, 1998, filed a universal shelf registration statement covering both
debt and equity securities with the Commission.
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On March 9, 1998, Mr. Hilbert telephoned Mr. Coss to discuss an
investment in the area of $200 million in Green Tree through the purchase of
subordinated debt and/or preferred equity securities of Green Tree. Mr. Hilbert
indicated that he would be travelling for the next two weeks and suggested that
Mr. Dick visit Green Tree. A meeting was scheduled for March 19, 1998 at Green
Tree's headquarters in Saint Paul between Mr. Dick and several Green Tree
executives.
A series of meetings were held between senior management of Green Tree
and investors which were on the lists that Merrill Lynch and Lehman Brothers had
provided to Green Tree. The purpose of these meetings was to discuss the
possibility of an investment in the range of $400 million to $600 million in
Green Tree by such investors through the purchase of subordinated debt and/or
preferred stock of Green Tree. Green Tree's management determined that an
investment in Green Tree by these investors was not Green Tree's preferred
method of obtaining funding.
On March 19, 1998, Mr. Dick met with several Green Tree executives,
including Edward L. Finn, Executive Vice President and Chief Financial Officer,
and Joel H. Gottesman, Senior Vice President, General Counsel and Secretary, to
further explore an investment by Conseco in Green Tree. Messrs. Finn and
Gottesman presented information on the customer base, growth opportunities,
exposure and business opportunities of Green Tree. At a previously scheduled
meeting of the Conseco Board of Directors held on March 23, 1998, Mr. Hilbert
discussed Mr. Dick's visit to Green Tree.
On March 30, 1998, Mr. Hilbert telephoned Mr. Coss to arrange a meeting
on March 31, 1998 to discuss a strategic initiative. On March 31, 1998, Messrs.
Hilbert and Coss met at Green Tree's headquarters in Saint Paul, Minnesota. Mr.
Hilbert stated that Conseco was interested in the opportunities for growth and
cross marketing which would exist from combining an insurance company with a
consumer finance company. Mr. Hilbert proposed a business combination between
Conseco and Green Tree. Mr. Coss responded that Green Tree would be willing to
explore whether a business combination would provide significant synergies, but
only on a very short time frame, because a road show with respect to Green
Tree's planned offerings was scheduled to commence on April 8, 1998 and Green
Tree did not want to delay or jeopardize the possible receipt of new capital. At
this meeting, Mr. Hilbert suggested a preliminary indication of value in the
range of $47 to $50 per share of Green Tree Common Stock, which was subject to
change based on due diligence investigations which had not yet begun. Mr. Coss
suggested that a value in excess of $50 per share was more appropriate.
On March 31, 1998, Conseco contacted Merrill Lynch, with Green Tree's
permission, to request that it act as Conseco's financial advisor in connection
with a proposed transaction. On that date Conseco distributed certain public
information concerning Green Tree to its Board of Directors.
On March 31, 1998, Green Tree requested Lehman Brothers to act as its
financial advisor in connection with any proposed transaction.
On April 1, 1998, Green Tree and Conseco executed confidentiality
agreements. On April 1, 1998, members of Conseco management and representatives
of Merrill Lynch and Sidley & Austin, Conseco's outside counsel, traveled to
Green Tree's headquarters and heard presentations by Green Tree's senior
management concerning Green Tree's businesses and business plans in order to
further discussions concerning the strategic potential of a business combination
between Conseco and Green Tree and to begin legal due diligence investigations.
On April 2 and 3, 1998, Conseco's management and financial and legal advisors
conducted intensive due diligence investigations.
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On April 2, 1998, a previously scheduled meeting of the Green Tree Board
of Directors was held at Green Tree's headquarters in Saint Paul, Minnesota. At
this meeting, Mr. Coss informed the directors that discussions had commenced
with Conseco to explore the strategic potential of a business combination,
including the preliminary indication of the value of the transaction, the
commencement, scope and timing of due diligence by both companies and
information about Conseco.
On April 3, 1998 Conseco furnished drafts of the Merger Agreement and
Stock Option Agreement to Green Tree and its advisors. The terms of these
agreements were negotiated and finalized during meetings held on April 5 and 6,
1998.
On April 4, 1998, Green Tree, together with representatives of Lehman
Brothers and KPMG Peat Marwick LLP, Green Tree's independent public accountants,
conducted an on-site business due diligence review of Conseco at Conseco's
headquarters in Carmel, Indiana. During April 4, 1998, representatives of Green
Tree and its advisors focused on, among other things, possible synergies from
the business combination and Conseco's customer and distribution base.
On April 5, 1998, Messrs. Coss and Hilbert met at Green Tree's
headquarters in Saint Paul, Minnesota to negotiate the terms of a possible
merger. After discussion, Messrs. Coss and Hilbert agreed to propose to their
respective Boards of Directors an exchange ratio of 0.9165 shares, the granting
to Conseco of a stock option to purchase approximately 19.9% of Green Tree's
outstanding Common Stock if certain events occurred, Green Tree's entering into
a non-solicitation provision and the granting of a termination fee to Conseco if
the Merger Agreement was terminated as a result of certain actions.
On April 5, 1998, the Green Tree Board of Directors held a special
meeting at Green Tree's headquarters in Saint Paul, Minnesota and considered the
proposed Merger. Members of Dorsey & Whitney LLP, Green Tree's outside counsel,
made a presentation to the Green Tree Board of Directors concerning the Board of
Directors' fiduciary duties in considering the proposed Merger. Representatives
of Lehman Brothers discussed the results of financial due diligence. Members of
Green Tree management discussed the results of due diligence and made a
presentation to the Green Tree Board of Directors regarding certain terms of the
proposed Merger, the business reasons for approving the Merger, the strategic
fit of Conseco and Green Tree and the opportunities for growth and
cross-marketing of each company's products and services. Following the
presentations and discussions, the Green Tree Board of Directors adjourned the
meeting until April 6, 1998 when Lehman Brothers would make a presentation on
the financial aspects of the Merger.
On April 6, 1998, the Conseco Board of Directors held a special meeting
at Conseco's headquarters in Carmel, Indiana and considered the proposed Merger
Agreement, the Stock Option Agreement and the transactions contemplated thereby.
Members of Conseco's management gave presentations concerning their diligence
investigation of Green Tree as well as their analysis of the terms of the
proposed Merger, the business reasons for approving the Merger and the
opportunities for growth and cross marketing of each company's products and
services. John J. Sabl, Conseco's Executive Vice President, General Counsel and
Secretary, made a presentation to the Conseco Board of Directors concerning the
Merger Agreement, the Stock Option Agreement and related documents and the Board
of Directors' fiduciary duties in considering the transactions contemplated by
the Merger Agreement. Representatives of Merrill Lynch presented its analyses of
the proposed transaction and delivered its opinion to Conseco's Board of
Directors that the Exchange Ratio is fair to Conseco from a financial point of
view. Mr. Coss gave a presentation concerning Green Tree's business and
prospects. Following significant discussion the Conseco Board of Directors
concluded that the Merger was in the best interests of Conseco and, by a
unanimous vote of all of the
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directors present, approved the Merger Agreement, the Stock Option Agreement and
the transactions contemplated thereby (including the Merger Consideration Stock
Issuance) and authorized the officers of Conseco to enter into the Merger
Agreement, the Stock Option Agreement and related agreements.
On April 6, 1998, the Green Tree Board of Directors reconvened and
management and the financial and legal advisors to Green Tree, including
representatives of Lehman Brothers and Dorsey & Whitney LLP were present. Lehman
Brothers presented its analysis of the financial terms of the Merger and
delivered its opinion to the Green Tree Board of Directors that the Exchange
Ratio to be offered to holders of Green Tree Common Stock in the Merger was fair
to the holders of Green Tree Common Stock from a financial point of view. Mr.
Hilbert made a presentation to the Green Tree Board of Directors regarding the
business of Conseco and potential synergies of the proposed Merger, including
benefits to Conseco, Green Tree and the combined companies. Following
significant discussion, the Green Tree Board of Directors concluded that the
Merger was in the best interests of Green Tree and its stockholders and, by a
unanimous vote of all of the directors, approved the Merger Agreement, the Stock
Option Agreement and the transactions contemplated thereby and authorized the
officers of Green Tree to enter into the Merger Agreement, the Stock Option
Agreement and related agreements.
On April 6, 1998, Conseco and Green Tree executed the Merger Agreement,
the Stock Option Agreement and related agreements. On April 7, 1998, prior to
the opening of trading on the NYSE, Conseco and Green Tree issued a joint press
release announcing the Merger.
Conseco's Reasons for the Merger; Recommendation of the Conseco Board
of Directors
At a meeting held on April 6, 1998 the Conseco Board of Directors
unanimously (with one director absent) determined that the Merger is advisable
and fair to and in the best interests of Conseco and its shareholders and
approved the Merger Agreement, the Merger and the other transactions
contemplated thereby and resolved to recommend that the shareholders of Conseco
vote in favor of the Merger Consideration Stock Issuance. In reaching these
conclusions, the Conseco Board of Directors considered, with the assistance of
management and Conseco's financial and legal advisors, a number of factors,
including the following:
(i) The results of operations, financial condition, business and
competitive position of Conseco and Green Tree, both on an
historical and prospective basis (including the substantial
internal growth of Green Tree's activities over a number of
years), their respective strategic business plans, recent
restatements of Green Tree's financial results and the reasons
therefor, and various challenges and opportunities facing
Conseco and Green Tree in executing their business plans;
(ii) The presentation by Merrill Lynch to the Conseco Board of
Directors on April 6, 1998, including the written opinion
rendered by Merrill Lynch dated April 6, 1998 to the effect
that, as of such date, the Exchange Ratio was fair to Conseco
from a financial point of view;
(iii) The historical market prices of Conseco Common Stock and Green
Tree Common Stock;
(iv) The judgment, advice and analysis of Conseco's management,
including the results of management's due diligence
investigation;
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(v) The potential synergies from the combination of Conseco and
Green Tree, especially the potential of each of Conseco and
Green Tree to cross-sell its products to the other's customers
given the common "Middle America" focus of both companies, the
potential financial and operating efficiencies that could
result from the combined operation, as well as the challenges
that existed in realizing these benefits from the Merger;
(vi) The desirability of expanding the size of Conseco and
diversifying Conseco's assets, earnings and cash flow
including the partial interest rate hedge in the different
assets held by the two companies (for example, Conseco's fixed
income assets tend to increase in value during periods of
interest rate decline while Green Tree's residual interests in
asset securitizations tend to decline in value during such
periods);
(vii) The substantial internal growth in Green Tree's business that
has been achieved over a period of years;
(viii) The respective corporate cultures of the two companies which
are focused on growth, performance and a variety of
distribution methods;
(ix) The terms of the Merger Agreement and the Stock Option
Agreement; and
(x) The contemplated accounting treatment of the Merger as a
pooling of interests.
The foregoing discussion of the information and factors considered and
given weight by the Conseco Board of Directors is not intended to be exhaustive.
In view of the variety of factors considered in connection with its evaluation
of the Merger, the Conseco Board of Directors did not find it practicable to and
did not quantify or otherwise assign relative weights to the specific factors
considered in reaching its determination. In addition, individual members of the
Conseco Board of Directors may have given different weights to different
factors.
ACCORDINGLY, THE CONSECO BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
THE SHAREHOLDERS OF CONSECO VOTE FOR THE PROPOSAL TO APPROVE THE MERGER
CONSIDERATION STOCK ISSUANCE.
Opinion of Conseco's Financial Advisor
Conseco retained Merrill Lynch to act as its exclusive financial advisor
in connection with the Merger and related matters based upon its qualifications,
expertise and reputation as well as Merrill Lynch's prior investment banking
relationship and general familiarity with Conseco and Green Tree. At the April
6, 1998 meeting of the Conseco Board of Directors, Merrill Lynch rendered its
written opinion to the Conseco Board of Directors, dated as of that date, to the
effect that, as of such date, and based upon the assumptions made, matters
considered and limits of review set forth in such opinion, the Exchange Ratio
was fair from a financial point of view to Conseco.
A full text of Merrill Lynch's written opinion (the "Merrill Lynch
Opinion"), which sets forth, among other things, the assumptions made,
procedures followed, matters considered and certain limitations on the scope of
review
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undertaken by Merrill Lynch, is attached as Annex C to this Joint Proxy
Statement/Prospectus and is incorporated herein by reference. Holders of Conseco
Stock are urged to, and should, read such opinion in its entirety. The Merrill
Lynch Opinion was provided to the Conseco Board of Directors for its information
and is directed only to the fairness of the Exchange Ratio from a financial
point of view to Conseco. The Merrill Lynch Opinion is not intended to be, nor
should it be construed as, a recommendation to any Conseco shareholder as to how
such shareholder should vote at the Conseco Special Meeting. The summary of the
Merrill Lynch Opinion set forth in this Joint Proxy Statement/Prospectus is
qualified in its entirety by reference to the full text of such opinion.
In arriving at the Merrill Lynch Opinion, Merrill Lynch, among other
things: (1) reviewed certain publicly available business and financial
information relating to Conseco and Green Tree which it deemed to be relevant;
(2) reviewed certain information, including financial forecasts, relating to the
businesses, earnings, cash flow, assets, liabilities and prospects of Conseco
and Green Tree, as well as the amount and timing of the cost savings and related
charges and expenses and revenue enhancements expected to result from the
Merger, furnished to it by the senior management of Conseco (the "Merger
Benefits"); (3) conducted discussions with members of senior management of
Conseco and Green Tree concerning the foregoing, including the respective
businesses, prospects, regulatory condition and contingencies of Conseco and
Green Tree before and after giving effect to the Merger and the Merger Benefits;
(4) reviewed the market prices and valuation multiples for Conseco Common Stock
and Green Tree Common Stock and compared them with those of certain publicly
traded companies which it deemed to be relevant; (5) reviewed the results of
operations of Conseco and Green Tree and compared them with those of certain
publicly traded companies which it deemed to be relevant; (6) compared the
proposed financial terms of the Merger with the financial terms of certain other
transactions which it deemed to be relevant; (7) participated in certain
discussions and negotiations among representatives of Conseco and Green Tree and
their respective financial and legal advisors; (8) reviewed the potential pro
forma impact of the Merger; (9) reviewed the Merger Agreement and the Stock
Option Agreement; and (10) reviewed such other financial studies and analyses
and took into account such other matters as it deemed necessary, including its
assessment of general economic, market and monetary conditions.
In preparing the Merrill Lynch Opinion, Merrill Lynch assumed and relied
on the accuracy and the completeness of all information supplied or otherwise
made available to it, discussed with or reviewed by or for it, or publicly
available, and it has not assumed responsibility for independently verifying
such information or undertaken an independent evaluation or appraisal of any of
the assets or liabilities, contingent or otherwise, of Green Tree or Conseco or
any actuarial analysis with respect to Conseco, nor has it been furnished with
any such evaluation, appraisal or actuarial analysis. Merrill Lynch is not an
expert in the evaluation of allowances for credit or loan losses or in the
valuation of residual interests or other assets resulting from Green Tree's
securitization transactions ("Securitization Assets"), and has not made an
independent evaluation of the adequacy of the allowance for credit or loan
losses of Green Tree, reviewed any individual credit or loan files relating to
Green Tree nor made an independent evaluation of the Securitization Assets. In
addition, Merrill Lynch has not assumed any obligation to conduct, nor has it
conducted, any physical inspection of the properties or facilities of Green Tree
or Conseco. With respect to the financial forecast information of Green Tree and
Conseco, including, without limitation, financial forecasts, evaluation of
contingencies and projections regarding, among other things, receivable
originations, prepayment speeds, delinquencies, under-performing and
non-performing assets, net charge-offs, adequacy of reserves, valuation of the
Securitization Assets and future economic conditions pertaining to Green Tree,
and the Merger Benefits, furnished to or discussed with Merrill Lynch by Green
Tree and Conseco, Merrill Lynch has assumed that they were reasonably prepared
and reflected the best currently available estimates, allocations and judgments
of the senior management of Green Tree and Conseco as to the expected future
financial performance of Green Tree, Conseco or the combined entity, as the case
may be, and the Merger
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Benefits. Merrill Lynch expressed no opinion as to such financial forecast
information or the Merger Benefits or the assumptions upon which they were
based. Merrill Lynch further assumed that the Merger will qualify as a tax-free
reorganization for U.S. federal income tax purposes and will be accounted for as
a pooling of interests under generally accepted accounting principles.
The Merrill Lynch Opinion is necessarily based upon market, economic and
other conditions as in effect on, and the information made available to Merrill
Lynch as of, the date of such opinion. For purposes of rendering its opinion,
Merrill Lynch assumed, in all respects material to its analysis, that the
representations and warranties of each party in the Merger Agreement and all
related documents and instruments (collectively, the "Documents") contained
therein are true and correct, that each party to the Documents will perform all
of the covenants and agreements required to be performed by such party under
such Documents, and that all conditions to the consummation of the Merger will
be satisfied without waiver thereof. Merrill Lynch also assumed that in the
course of obtaining the necessary regulatory or other consents or approvals
(contractual or otherwise) for the Merger, no restrictions, including any
divestiture requirements or amendment or modifications, will be imposed that
will have a material adverse effect on the contemplated benefits of the Merger,
including the Merger Benefits.
Merrill Lynch was retained by the Conseco Board of Directors to act as
Conseco's financial advisor in connection with the Merger, and Merrill Lynch has
and will receive a fee from Conseco for its services, a significant portion of
which is contingent upon the consummation of the Merger. In addition, Conseco
has agreed to indemnify Merrill Lynch for certain liabilities arising out of
Merrill Lynch's engagement. In the past, Merrill Lynch has provided financial
advisory and financing advisory, investment banking and other services to
Conseco and may continue to do so, and has received, and may receive, customary
fees for the rendering of such services. In the past, Merrill Lynch has
provided, and is currently providing financial advisory, investment banking and
other services to Green Tree and its affiliates, including acting as a lender to
Green Tree (pursuant to an uncommitted reverse repurchase agreement, dated July
1997 in the amount of $1 billion) and may continue to do so, and has received,
and may receive, customary fees for the rendering of such services. In the
ordinary course of Merrill Lynch's business, Merrill Lynch may actively trade
the debt and/or equity securities of Conseco and its affiliates and Green Tree
and its affiliates for its own account and for the accounts of its customers
and, accordingly, may at any time hold a long or short position in such
securities.
The Merrill Lynch Opinion is for the use and benefit of the Conseco Board
of Directors. It addresses only the financial fairness of the Exchange Ratio,
does not address the merits of the underlying decision by Conseco to engage in
the Merger, and does not constitute a recommendation to any shareholder as to
how such shareholder should vote on the proposed Merger or any matter related
thereto. In having delivered the Merrill Lynch Opinion, Merrill Lynch does not
express any opinion as to the prices at which shares of Conseco Common Stock
will trade following the consummation of the Merger.
The following is a summary of certain of the financial and comparative
analyses presented by Merrill Lynch to the Conseco Board of Directors on April
6, 1998 in connection with the Merrill Lynch Opinion dated as of such date.
Publicly Traded Comparables -- Acquisition Mode. Merrill Lynch reviewed
and compared certain financial and operating information and ratios (described
below) for Green Tree with the publicly available corresponding data compiled by
First Call for a group of selected companies that make loans and hold them in
portfolio on their balance sheets and a group of selected companies that
securitize their loans using gain on sale accounting treatment, in each case,
which Merrill Lynch deemed to be reasonably comparable to Green Tree. The group
of selected portfolio lending companies (the "Portfolio Companies") consisted
of: Associates First Capital Corporation, Household International, Inc. and
Beneficial Corporation. The group
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of selected gain on sale companies (the "Gain on Sale Companies") consisted of:
The Money Store, Inc., FIRSTPLUS Financial Group, Inc., Ocwen Financial
Corporation, ContiFinancial Corporation, AMRESCO, Inc. and United Companies
Financial Corporation.
Based on a review of such information for the Portfolio Companies,
Merrill Lynch compared: (i) current trading price to actual 1997 earnings per
share ("EPS") for the Portfolio Companies, which figures were obtained from
First Call, as of March 27, 1998, and ranged from 22.0x to 26.9x, with an
average of 24.5x, compared to a multiple of 13.3x for Green Tree Common Stock
based upon figures from First Call; (ii) current trading price to estimated 1998
EPS for the Portfolio Companies, which estimates were obtained from First Call
and ranged from 18.2x to 23.0x, with an average of 20.5x, compared to a multiple
of 11.6x for Green Tree Common Stock based upon estimates from First Call; (iii)
current trading price to estimated 1999 EPS for the Portfolio Companies, which
estimates were obtained from First Call and ranged from 15.4x to 21.3x, with an
average of 17.4x, compared to a multiple of 10.4x for Green Tree Common Stock
based upon estimates from First Call; (iv) current trading price to book value
for the Portfolio Companies, as of December 31, 1997, which ranged from 3.40x to
4.42x, with an average of 3.91x, compared to a multiple of 2.89x for Green Tree
Common Stock; (v) market value less total equity to managed receivables (the
"Implied Receivables Premium") for the Portfolio Companies, which ranged from
24.6% to 37.2%, with an average of 30.9%, compared to the Implied Receivables
Premium of 8.7% for Green Tree Common Stock; (vi) estimated 5 year growth rate
for the Portfolio Companies, which estimates were obtained from Institutional
Brokers Estimate System ("IBES") and ranged from 11.0% to 19.0%, with an average
of 18.5%, compared to the estimated 5 year growth rate of 18.7% for Green Tree
Common Stock, based on an average of First Call, Zacks and IBES; and (vii) 1999
price to earnings ratio to 5 year growth ratio for the Portfolio Companies,
which ranged from 0.81x to 1.94x, with an average of 0.95x, compared to the 1999
price to earnings ratio to 5 year growth ratio of 0.55x for Green Tree Common
Stock. Financial and operating information and ratios for Beneficial Corporation
were included in the calculation of the foregoing ranges; however, such
information and ratios were excluded from the calculation of the foregoing
averages.
Based on a review of such information for the Gain on Sale Companies,
Merrill Lynch compared: (i) current trading price to actual 1997 EPS for the
Gain on Sale Companies, which figures were obtained from First Call as of March
27, 1998, and ranged from 7.0x to 22.1x, with a mean of 14.7x and median of
14.8x, compared to a multiple of 13.3x for Green Tree Common Stock based upon
figures from First Call; (ii) current trading price to estimated 1998 EPS for
the Gain on Sale Companies, which estimates were obtained from First Call and
ranged from 9.3x to 16.7x, with a mean of 14.3x and a median of 15.1x, compared
to a multiple of 11.6x for Green Tree Common Stock based upon estimates from
First Call; (iii) current trading price to estimated 1999 EPS for the Gain on
Sale Companies, which estimates were obtained from First Call and ranged from
8.0x to 13.6x, with a mean of 10.8x and a median of 11.2x, compared to a
multiple of 10.4x for Green Tree Common Stock based upon estimates from First
Call; (iv) current trading price to book value for the Gain on Sale Companies,
as of December 31, 1997, which ranged from 1.26x to 3.76x, with a mean of 2.94x
and a median of 3.28x, compared to a multiple of 2.89x for Green Tree Common
Stock; (v) Implied Receivables Premium for the Gain on Sale Companies, which
ranged from 1.7% to 25.1%, with a mean of 10.9% and a median of 8.7%, compared
to the Implied Receivables Premium of 8.7% for Green Tree Common Stock; (vi)
estimated 5 year growth rate for the Gain on Sale Companies, which estimates
were obtained from IBES which ranged from 16.0% to 25.0%, with a mean of 20.8%
and a median of 20.0%, compared to the estimated 5 year growth rate ratio of
18.7% for Green Tree Common Stock based on an average of First Call, Zacks and
IBES; and (vii) 1999 price to earnings ratio to 5 year growth for the Gain on
Sale Companies, which ranged from 0.36x to 0.72x, with a mean of 0.53x and a
median of 0.50x, compared to the 1999 price to earnings ratio to 5 year growth
of 0.55x for Green Tree Common Stock. Financial and operating information and
ratios for The Money Store, Inc. were included in the calculation of the
foregoing ranges; however, such information and ratios were excluded from the
calculation of the foregoing means and medians.
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No public company utilized as a comparison in the analyses described
above is identical to Green Tree. Accordingly, an analysis of publicly traded
comparable companies is not mathematical; rather it involves complex
considerations and judgments concerning differences in financial and operating
characteristics of the comparable companies and other factors that could affect
the public trading value of the comparable companies or company to which they
are being compared.
Selected Consumer Finance Transactions. Merrill Lynch reviewed publicly
available information regarding seven consumer finance merger transactions with
a value greater than $300 million which had occurred in the United States since
September 1994 that it deemed to be relevant (the "Consumer Finance Merger
Transactions"). The Consumer Finance Merger Transactions and the month in which
each transaction was announced were as follows: Barnett Banks, Inc./Equicredit
Corporation (September 1994), Norwest Corporation/ITT Island Finance (December
1994), Bank One Corporation/First USA, Inc. (January 1997),
Household/Transamerica Cons. Finance (May 1997), Travelers Group, Inc./Security
Pacific Corporation (June 1997), Associates First/Beneficial Canada (February
1998) and First Union Corporation/The Money Store, Inc. (March 1998).
Merrill Lynch compared the 30 day premium to market price, price to
last-twelve-months earnings, price to forward earnings, price to book value and
premium to receivables. This analysis yielded a range of (i) 30 day premium to
market price of 49.4% to 92.2% with an average of 66.0% and a median of 56.5%,
(ii) price to last-twelve-months earnings multiples of 11.7x to 25.1x with an
average of 17.3x and a median of 16.5x, (iii) price to forward earnings
multiples of 14.3x to 21.7x with an average of 17.4x and a median of 16.9x, (iv)
price to book value multiples of 2.81x to 5.46x with an average of 3.81x and a
median of 3.25x, (v) premium to receivables of 9.0% to 48.3% with an average of
23.9% and a median of 23.0%; and estimated transaction prices for Green Tree on
the basis of such multiples.
None of the business combinations utilized as a comparison in the
analyses described above is identical to the Merger. Accordingly, an analysis of
comparable business combinations is not mathematical; rather it involves complex
considerations and judgments concerning differences in financial and operating
characteristics of the comparable companies and other factors that could affect
the public trading value of the comparable companies or company to which they
are being compared.
Discounted Dividend Analysis. Using a discounted dividend analysis,
Merrill Lynch estimated the present value of the future streams of after-tax
earnings that Green Tree could produce from 1998 through 2002 and distribute to
shareholders ("dividendable net income") assuming a pre-tax cost savings
assumption of $0 million in 1998, $48 million in 1999 and $50 million in 2000
and an after-tax restructuring charge of $452 million. Merrill Lynch assumed
that Green Tree performed in accordance with earnings forecasts provided to
Merrill Lynch by Conseco's senior management and that Green Tree's tangible
common equity to managed assets ratio would be maintained at a 4.6% level.
Merrill Lynch estimated the terminal values for Green Tree Common Stock at
12.0x, 14.0x and 16.0x Green Tree's 2003 estimated net income (defined as
earnings less amortization). The dividendable net income streams and terminal
values were then discounted to present values using discount rates (ranging from
13% to 17%) chosen to reflect different assumptions regarding required rates of
return of holders or prospective buyers of Green Tree Common Stock. This
discounted dividend analysis indicated a reference range of $46.12 to $71.22 per
share of Green Tree Common Stock. As indicated above, this analysis is not
necessarily indicative of actual values or actual future results and does not
purport to reflect the prices at which any securities may trade at the present
or at any time in the future. Discounted dividend analysis is a widely used
valuation methodology, but the results of such methodology are highly dependent
upon the numerous assumptions that must be made, including earnings growth
rates, dividend payout rates, terminal values and discount rates.
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Pro Forma Impact. Based on projections provided by senior management of
Conseco and the Merger Benefits, including pre-tax cost savings of $0 million in
1998, $48 million in 1999 and $50 million in 2000, Merrill Lynch analyzed
certain pro forma effects of the Merger. This analysis indicated that the
transaction would be dilutive to projected earnings per share of Conseco Common
Stock in 1998 and accretive to projected earnings per share of Conseco Common
Stock in 1999 and 2000. The analysis also indicated that the Merger would be
dilutive to Conseco's book value and accretive to its tangible book value per
share based on reported financial results as of December 31, 1997. In this
analysis, Merrill Lynch assumed that Conseco performed in accordance with the
publicly available earnings forecasts and the Merger Benefits provided to
Merrill Lynch by Conseco's senior management.
The summary set forth above does not purport to be a complete description
of the analyses performed by Merrill Lynch underlying the Merrill Lynch Opinion.
Arriving at a fairness opinion is a complex process not necessarily susceptible
to partial analysis or summary description. Merrill Lynch believes that its
analyses must be considered as a whole and that selecting portions of its
analyses and of the factors considered by it, without considering all such
factors and analyses, could create a misleading view of the processes underlying
the Merrill Lynch Opinion. Merrill Lynch did not assign relative weights to any
of its analyses in preparing the Merrill Lynch Opinion. The matters considered
by Merrill Lynch in its analyses are based on numerous macroeconomic, operating
and financial assumptions with respect to industry performance, general business
and economic conditions and other matters, many of which are beyond Conseco's or
Green Tree's control and involve the application of complex methodologies and
educated judgment. Any estimates incorporated in the analyses performed by
Merrill Lynch are not necessarily indicative of actual past or future results or
values, which may be significantly more or less favorable than such estimates.
Estimated values do not purport to be appraisals and do not necessarily reflect
the prices at which businesses or companies may be sold in the future, and such
estimates are inherently subject to uncertainty.
The projections furnished to Merrill Lynch and used by it in certain of
its analyses were prepared by the senior management of Conseco. Conseco does not
publicly disclose internal management projections of the type provided to
Merrill Lynch in connection with its review of the Merger, and as a result, such
projections were not prepared with a view towards public disclosure. The
projections were based on numerous variables and assumptions which are
inherently uncertain, including, without limitation, factors related to general
economic and competitive conditions, and accordingly, actual results could vary
significantly from those set forth in such projections.
Merrill Lynch is an internationally recognized investment banking and
advisory firm and is continually engaged in the valuation of businesses and
their securities in connection with mergers and acquisitions, corporate and
other purposes. Merrill Lynch was selected to act as financial advisor to the
Conseco Board of Directors because of its substantial expertise in transactions
similar to the Merger and its reputation in investment banking and mergers and
acquisitions.
In connection with Conseco's engagement of Merrill Lynch, Conseco and
Merrill Lynch have entered into a letter agreement dated April 1, 1998 relating
to the services to be provided by Merrill Lynch in connection with the Merger.
Conseco has agreed to pay Merrill Lynch fees as follows: (i) a cash fee of $2.5
million which was paid upon the execution of the Merger Agreement; and (ii) a
cash fee of $22 million
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(less the $2.5 million in fees paid pursuant to clause (i) above) payable upon
consummation of the Merger (or of certain similar business combination
transactions between Conseco and Green Tree). In such letter, Conseco also
agreed to reimburse Merrill Lynch for its reasonable out-of-pocket expenses
incurred in connection with its advisory work, including the reasonable fees and
disbursements of its legal counsel, and to indemnify Merrill Lynch against
certain liabilities relating to or arising out of the Merger, including
liabilities under the federal securities laws.
Green Tree's Reasons for the Merger; Recommendation of the Green Tree Board of
Directors
In reaching its decision to approve the Merger Agreement, the Green Tree
Board of Directors consulted with its management team and advisors and
independently considered the proposed Merger Agreement, including the material
factors described below. Based upon its independent review of such factors and
the business and operations of Conseco, the Green Tree Board of Directors
approved the Merger Agreement and the transactions contemplated thereby. There
can be no assurance, however, that any of the opportunities described in the
following reasons for the Merger will be achieved through the consummation of
the Merger.
The Green Tree Board of Directors concluded that the Merger is in the
best interests of Green Tree and its shareholders because the Merger would
enhance the combined company's opportunities for future growth and create a
stronger competitor in the consumer finance and life/health insurance markets.
The Green Tree Board of Directors concluded that the Merger would further such
objectives in part because of its belief that: (i) the demographics of the
customers of each of Green Tree and Conseco are similar; (ii) since the customer
base of each of Green Tree and Conseco are complementary, consummation of the
Merger would create opportunities for cross-marketing; (iii) the combined
company will enjoy earnings diversity and stability; (iv) consummation of the
Merger would provide improved liquidity and capital access to Green Tree; and
(v) the combined companies would have improved systems management.
In reaching its conclusions, the Green Tree Board of Directors also
considered, among other things, the following factors: (i) its knowledge of the
business, operations, properties, assets, financial condition, operating results
and prospects of each of Green Tree and Conseco; (ii) current industry, economic
and market conditions; (iii) presentations by its management and its financial
advisors with respect to Conseco; (iv) the opinion of Lehman Brothers as to the
fairness, from a financial point of view, of the Exchange Ratio to the holders
of Green Tree Common Stock; (v) the terms of the Merger Agreement and Stock
Option Agreement; (vi) the similarity of the respective business philosophies,
entrepreneurial spirit and business culture of Green Tree and Conseco; and (vii)
the opportunity for Green Tree shareholders to participate in a larger, more
43diversified company.
In view of the variety of factors considered in connection with its
evaluation of the Merger, the Green Tree Board of Directors did not find it
practicable to and did not quantify or otherwise assign relative weights to the
specific factors considered in reaching its determination.
The Green Tree Board of Directors believes that the Merger is fair to,
and in the best interests of, Green Tree and its shareholders.
THE BOARD OF DIRECTORS OF GREEN TREE UNANIMOUSLY APPROVED THE TERMS OF
THE MERGER AGREEMENT AND UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS OF GREEN
TREE VOTE FOR THE PROPOSAL TO APPROVE THE MERGER AGREEMENT.
Opinion of Green Tree's Financial Advisor
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In connection with serving as the financial advisor to Green Tree, Lehman
Brothers delivered an oral opinion to the Green Tree Board of Directors on April
6, 1998, to the effect that as of April 6, 1998, and based upon assumptions
made, matters considered, and limitations as set forth therein, from a financial
point of view, the Exchange Ratio is fair to the shareholders of Green Tree.
Later that afternoon, Lehman Brothers confirmed its oral opinion by delivery of
its written opinion dated April 6, 1998 (the "Lehman Brothers Opinion").
The full text of the Lehman Brothers Opinion is attached as Annex D to
this Joint Proxy Statement/Prospectus and is incorporated herein by reference.
Stockholders may read the Lehman Brothers Opinion for a discussion of
assumptions made, matters considered and limitations on the review undertaken by
Lehman Brothers in rendering its opinion. The summary of the Lehman Brothers
Opinion set forth in this Joint Proxy Statement/Prospectus is qualified in its
entirety by reference to the full text of the Lehman Brothers Opinion.
No limitations were imposed by Green Tree on the scope of Lehman
Brothers's investigation or the procedures to be followed by Lehman Brothers in
rendering its opinion, except that Green Tree did not authorize Lehman Brothers
to solicit, and Lehman Brothers did not solicit, any indications of interest
from any third party with respect to the purchase of all or a part of Green
Tree's business. The form and amount of the consideration to be received by
Green Tree's shareholders in the Merger was determined through arm's-length
negotiations between the parties. In arriving at its opinion, Lehman Brothers
did not ascribe a specific range of value to Green Tree, but rather made its
determination as to the fairness, from a financial point of view, of the
consideration to be received by Green Tree's shareholders in the Merger on the
basis of the financial and comparative analyses described below. The Lehman
Brothers Opinion is for the use and benefit of the Green Tree Board of
Directors, was rendered to the Green Tree Board of Directors in connection with
its consideration of the Merger, relates only to the fairness of the Exchange
Ratio from a financial point of view and does not address any other aspect of
the Merger or the Merger Agreement or any related transaction. The Lehman
Brothers Opinion is not intended to be and does not constitute a recommendation
to any Green Tree shareholder as to how such shareholder should vote with
respect to the Merger. Lehman Brothers was not requested to opine as to, and its
opinion does not address, Green Tree's underlying business decision to proceed
with or effect the Merger.
In connection with its opinion, Lehman Brothers reviewed and analyzed:
(i) the proposed financial terms of the Merger as described to Lehman Brothers
by Green Tree and Green Tree's legal advisors, (ii) publicly available
information concerning Green Tree and Conseco that Lehman Brothers believed to
be relevant to its analysis, (iii) financial and operating information with
respect to the business, operations and prospects of Green Tree and Conseco
furnished to Lehman Brothers by Green Tree and Conseco, (iv) a trading history
of the Green Tree Common Stock from January 1, 1993 to the present and a
comparison of that trading history with those of other companies that Lehman
Brothers deemed relevant, (v) a trading history of the Conseco Common Stock from
January 1, 1993 to the present and a comparison of that trading history with
those of other companies that Lehman Brothers deemed relevant, (vi) a comparison
of the historical financial results and present financial condition of Green
Tree with those of other companies Lehman Brothers deemed relevant, (vii) a
comparison of the historical financial results and present financial condition
of Conseco with other companies Lehman Brothers deemed relevant, (viii)
estimates of third party research analysts regarding the future financial
performance of Green Tree and Conseco, (ix) a comparison of the financial terms
of the Merger with the financial terms of certain other recent transactions
Lehman Brothers deemed relevant, and (x) the potential pro forma impact of the
Merger on Conseco. In addition, Lehman Brothers had discussions with the
management of Green Tree and Conseco concerning their respective businesses,
operations, assets, liabilities, financial conditions and prospects, and the
potential cost savings, operating synergies and strategic benefits expected by
the managements of Green Tree and Conseco, and undertook such other studies,
analyses and investigations it deemed appropriate.
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In arriving at its opinion, Lehman Brothers assumed and relied upon the
accuracy and completeness of the financial and other information used by Lehman
Brothers without assuming any responsibility for independent verification of
such information and further relied upon the assurances of the management of
Green Tree and Conseco that they are not aware of any facts or circumstances
that would make such information inaccurate or misleading. With respect to the
financial projections of Green Tree, upon advice of Green Tree, Lehman Brothers
assumed that such projections were reasonably prepared on a basis reflecting the
best currently available estimates and judgments of Green Tree and that Green
Tree will perform substantially in accordance with such projections. In arriving
at its opinion, with the consent of Green Tree, Lehman Brothers was not provided
with and did not have any access to any financial forecasts or projections
prepared by the management of Conseco as to the projected financial performance
of Conseco beyond 1998, and accordingly, in performing its analysis, based upon
advice of Conseco and with the consent of Green Tree, Lehman Brothers assumed
that the publicly available estimates of research analysts are a reasonable
basis upon which to evaluate and analyze the future financial performance of
Conseco and that Conseco will perform substantially in accordance with such
estimates. In arriving at its opinion, Lehman Brothers did not conduct a
physical inspection of the properties and facilities of Green Tree or Conseco
and did not make or obtain any evaluations or appraisals of the assets or
liabilities of Green Tree or Conseco. Upon advice of Conseco and its legal and
accounting advisors, Lehman Brothers assumed that the Merger would qualify for
pooling of interests accounting treatment. The Lehman Brothers Opinion is
necessarily based upon market, economic and other conditions as they existed on,
and could be evaluated as of, the date of the Lehman Brothers Opinion.
In connection with the preparation and delivery of its opinion to the
Green Tree Board of Directors, Lehman Brothers performed a variety of financial
and comparative analyses, as described below. The preparation of a fairness
opinion involves various determinations as to the most appropriate and relevant
methods of financial and comparative analysis and the application of those
methods to the particular circumstances and, therefore, such an opinion is not
readily susceptible to summary description. Furthermore, in arriving at its
opinion, Lehman Brothers did not attribute any particular weight to any analysis
or factor considered by it, but rather made qualitative judgments as to the
significance and relevance of each analysis and factor. Accordingly, Lehman
Brothers believes that its analyses must be considered as a whole and that
considering any portion of such analyses and factors, without considering all
analyses and factors, could create a misleading or incomplete view of the
process underlying its opinion. In its analyses, Lehman Brothers made numerous
assumptions with respect to industry performance, general business and economic
conditions and other matters, many of which are beyond the control of Green Tree
and Conseco. Any estimates contained in these analyses are not necessarily
indicative of actual values or predictive of future results or values, which may
be significantly more or less favorable than as set forth therein. In addition,
analyses relating to the value of businesses do not purport to be appraisals or
to reflect the prices at which businesses actually may be sold.
Purchase Price Ratio Analysis. Based upon the Exchange Ratio, the closing
price of the Conseco Common Stock on April 3, 1998 of $56.75 represented a value
to be received by holders of Green Tree Common Stock of $52.01 per share. Based
on this implied transaction value per share, Lehman Brothers calculated the
price-to-market, price-to-book, and price-to-earnings multiples in the Merger.
The implied transaction value per share yielded a premium of 81.3% over the
closing price of Green Tree Common Stock of $28.69 as of the close of business
on April 3, 1998. This analysis also yielded a price-to-book value multiple of
5.54x, a price to actual 1997 earnings of 24.2x, a price to estimated 1998
earnings in the range of 19.6x to 20.8x, and a price to estimated 1999 earnings
in the range of 16.4x to 18.1x based on Green Tree management and IBES median
estimates as of April 3, 1998 of Green Tree's 1998 and 1999 earnings. IBES is a
data services that monitors and publishes a compilation of earnings estimates
produced by selected research analysts regarding companies of interest to
institutional investors.
Selected Comparable Companies Analysis. Using publicly available
information, Lehman Brothers compared the financial performance and stock market
valuation of Green Tree with the following selected
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finance institutions (the "Comparable Companies") deemed relevant by Lehman
Brothers: Associates First Capital Corporation, Beneficial Corp., CIT Group,
Finova Group Inc. and Household International, Inc. Indications of such
financial performance and stock market valuation included the ratio of stock
price to 1997 reported earnings (13.3x for Green Tree and a mean and median of
21.2x and 22.1x, respectively, for the Comparable Companies); the ratio of stock
price to estimated 1998 earnings based on Green Tree management and IBES
estimates (in a range of 10.8x to 11.5x for Green Tree and a mean and median of
18.6x and 18.2x, respectively, for the Comparable Companies); the ratio of stock
price to estimated 1999 earnings based on Green Tree management and IBES
estimates (in a range of 9.1x to 10.0x for Green Tree and a mean and median of
16.2x and 15.3x, respectively, for the Comparable Companies); the ratio of stock
price to book value (2.90x for Green Tree and a mean and median of 2.12x and
2.52x, respectively, for the Comparable Companies); and the ratio of stock price
to tangible book value (3.03x for Green Tree (where such tangible book value
equals book value less unidentifiable intangibles) and a mean and median of
3.05x and 2.64x, respectively, for the Comparable Companies). These ratios for
the Comparable Companies are based on public financial statements as of December
31, 1997 and closing stock prices on April 3, 1998.
In addition, Lehman Brothers also compared the stock price performance
since January 1, 1993 of Green Tree to that of the Comparable Companies.
Indications of such stock price performance included the ratio of stock price to
52-week high (57.1% for Green Tree and a mean and median of 98.5% and 98.4%,
respectively, for the Comparable Companies); the ratio of stock price to 52-week
low (163.9% for Green Tree and a mean and median of 160.7% and 181.5%,
respectively, for the Comparable Companies); January 1, 1998 to date stock price
appreciation on absolute and compounded annual growth rate bases (9.5% and
43.0%, respectively, for Green Tree and median of 12.2% and 118.3%,
respectively, for the Comparable Companies); January 1, 1997 to date stock price
appreciation on absolute and compounded annual growth rate bases (-25.7% and
- -21.1%, respectively, for Green Tree and median of 84.9% and 63.4%,
respectively, for the Comparable Companies); January 1, 1995 to date stock price
appreciation on absolute and compounded annual growth rate bases (88.9% and
21.6%, respectively, for Green Tree and median of 281.9% and 50.9%,
respectively, for the Comparable Companies); and January 1, 1993 to date stock
price appreciation on absolute and compounded annual growth rate bases (378.1%
and 50.1%, respectively, for Green Tree and median of 383.1% and 35.0%,
respectively, for the Comparable Companies). These ratios for the Comparable
Companies are based on closing stock prices on April 3, 1998.
However, because of the inherent differences in the businesses,
operations, financial conditions and prospects of Green Tree and the companies
included in the Comparable Companies, Lehman Brothers believed that it was
inappropriate to, and therefore did not, rely solely on the quantitative results
of the Comparable Companies analysis, and accordingly also made qualitative
judgments concerning differences between the characteristics of the Comparable
Companies and Green Tree that would affect the trading values of Green Tree and
such companies.
Selected Comparable Transactions Analysis. Using publicly available
information and IBES earnings estimates, Lehman Brothers reviewed certain terms
and financial characteristics, including historical price-to-earnings and
price-to-book ratios of nine acquisition transactions (the "Comparable
Transactions") which Lehman Brothers deemed comparable to the Merger. The
Comparable Transactions considered by Lehman Brothers in its analysis consisted
of the following transactions (identified by acquiror/ acquiree): First Union
Corp./The Money Store, Household International/ACC Consumer Finance,
KeyCorp/Champion Mortgage, Household International/Transamerica Finance, Barnett
Banks/Oxford Resources, Southern National/Regional Acceptance, Bay View
Capital/CTL Credit, KeyCorp/AutoFinance Group, and Barnett Banks/EquiCredit
Corporation. The values for these transactions for the price to latest twelve
months earning ratio, price to current year earnings, price to next year
earnings and price to book value, on a mean basis were 19.7x, 17.2x, 14.0x and
3.95x, respectively, on a median basis were 17.7x, 16.5x, 14.3x and 3.23x,
respectively, and the range of values for these parameters were from 12.7x to
37.4x, 11.1x to 25.6x, 10.2x to 19.5x, and 1.41x to
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8.01x, respectively. These mean and median ratios implied a valuation per Green
Tree Common Stock in the range of $38.08 to $42.39, $41.19 to $45.65, $40.46 to
$45.23, and $31.98 to $39.13.
Using publicly available information, Lehman Brothers also reviewed the
premium of the price paid in the Comparable Transactions to the share price of
the companies included in the Comparable Transactions 1 day and 7, 30, 45 and 60
days prior to the announcement of the Comparable Transactions. The mean premium
for each time period was 35.5%, 38.2%, 50.5%, 59.3% and 63.8%, respectively, the
median premium for each time period was 35.8%, 28.6%, 47.1%, 58.4% and 75.8%,
respectively, and range of premiums for these periods were from 9.3% to 72.5%,
6.6% to 82.3%, 25.4% to 87.6%, 18.2% to 96.3%, and 6.4% to 108.4%, respectively.
These mean and median premiums implied a valuation per Green Tree Common Stock
in the range of $38.86 to $38.96, $36.97 to $39.73, $42.48 to $43.46, $35.44 to
$35.64, and $37.27 to $39.98.
However, because the reasons for and the circumstances surrounding each
of the transactions analyzed were specific to each transaction and because of
the inherent differences between the businesses, operations and prospects of
Green Tree and Conseco and the businesses, operations and prospects of the
acquired companies included in the Comparable Transactions, Lehman Brothers
believed that it was inappropriate to, and therefore did not, rely solely on the
quantitative results of the Comparable Transactions analysis, and accordingly
also made qualitative judgments concerning differences between the
characteristics of these transactions and the Merger that would affect the
acquisition values of Green Tree and such acquired companies. In particular,
Lehman Brothers considered the form of consideration, whether the transactions
involved the purchase of assets or stock, the cross-selling opportunities that
the transactions offered to the acquirors and the potential cost savings.
Discounted Cash Flow Analysis. Lehman Brothers discounted estimated cash
flows of Green Tree through the end of 2003 and an estimated terminal value of
Green Tree Common Stock, assuming net income based on Green Tree management
estimates, assuming a dividend rate sufficient to maintain a book value less
goodwill to managed assets less goodwill of 4.50%, and using a range of discount
rates of 12% to 18%. Lehman Brothers derived an estimate of a range of terminal
values by applying multiples ranging from 12x to 18x to estimated year-end 2003
net income. These rates and values were chosen to reflect different assumptions
regarding the required rates of return of holders or prospective buyers of Green
Tree Common Stock. This analysis, and its underlying assumptions, yielded a
range of values for Green Tree Common Stock of approximately $32.92 to $61.57,
as compared to a per share transaction value of $52.01, based on the closing
price of Conseco Common Stock on April 3, 1998.
Black-Scholes Option Pricing Model Analysis. Lehman Brothers analyzed the
premium or deficit that the per share transaction value of $52.01, based on the
closing price of Conseco Common Stock on April 3, 1998, constituted compared to
the theoretical price Green Tree Common Stock was likely to reach under
Black-Scholes option pricing theory, Green Tree Common Stock's market price of
$28.69 on April 3, 1998, and Green Tree Common Stock price volatility of 67.59%.
Lehman Brothers analyzed such theoretical value as of June 30, 1998, and as of
December 31 for the years ending 1998 through 2004. According to such analysis,
and as of such dates, the per share transaction value of $52.01, based on the
closing price of Conseco Common Stock on April 3, 1998, reflected a premium to
Green Tree Common Stock's theoretical value of $23.13, $21.43, $18.00, $15.25,
$13.05, $11.26, $9.78, and $8.56.
Pro Forma Merger Analysis. Lehman Brothers analyzed the impact of the
Merger on Green Tree's estimated earnings per share based on Green Tree
management and IBES estimates for the 1998 and 1999 earnings of Green Tree and
based on estimates for the 1998 and 1999 earnings of Conseco published by IBES,
and assumed growth rates of 17% from 1999 to 2003 for both Green Tree and
Conseco. In connection with this analysis, projections for cost savings and
operating synergies from the Merger were incorporated in Lehman Brothers's
analysis. Based on such estimates, assumed growth rates, and projections of cost
savings
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and operating synergies, Lehman Brothers concluded that the Merger would result
in accretion of 17.1% to Green Tree's earnings per share in 1999, accretion of
16.8% to Green Tree's earnings per share in 2000, accretion of 3.0% to Conseco's
earnings per share in 1999, and accretion of 2.7% to Conseco's earnings per
share in 2000.
Contribution Analysis. Lehman Brothers analyzed the respective
contributions of Green Tree and Conseco to the combined company's pro forma
balance sheet as of December 31, 1997 and pro forma historic income for 1996 and
1997. This analysis showed that Green Tree would have contributed 11.9% of total
assets, 13.0% of total assets less unidentifiable intangibles, 26.1% of total
equity, 90.3% of total equity less unidentifiable intangibles, 47.2% of 1996 net
income and 35.6% of 1997 net income. This analysis also showed that, based upon
IBES earnings estimates for 1998 and 1999, without giving effect to any cost
savings or operational synergies resulting from the Merger, Green Tree's
contribution to the combined company's net income would be 33.0% in 1998 and
32.9% in 1999. This analysis also showed that, based upon IBES earnings
estimates for 1998 and 1999 for Conseco, and based upon management earnings
estimates for 1998 and 1999 for Green Tree both without and with giving effect
to any cost savings or operational synergies resulting from the Merger to Green
Tree's estimated earnings for 1998 and 1999, Green Tree's contribution to the
combined company's net income would be 33.2% and 34.7% in 1998 and 33.9% and
40.2% in 1999. Based upon the Exchange Ratio, Green Tree stockholders would own
an estimated 39.9% of the combined company's primary shares upon completion of
the Merger and 40.1% of the combined company's fully diluted shares upon
completion of the Merger.
Historic P/E Multiple Analysis. Lehman Brothers analyzed the ratio of
Green Tree's and Conseco's historic stock price to next twelve months projected
earnings (as published by IBES) from April 3, 1993 to April 3, 1998 and compared
such ratios to the same ratio for the Standard & Poor's 500 Index, an index of
finance companies composed of Amersco Inc., Associates First Capital
Corporation, Beneficial Corp., Finova Group Inc., Household International, Inc.
and United Companies Financial Corporation (the "Finance Company Index"), and an
index of life insurance companies composed of American General Corporation, The
Equitable Companies Incorporated, Lincoln National Corporation, SunAmerica Inc.,
Aetna Inc., AFLAC Incorporated and UNUM Corporation (the "Life Insurance Company
Index"). This analysis showed that Green Tree, Conseco, the Finance Company
Index and the Life Insurance Company Index had a lower ratio throughout the
period analyzed than the ratio of the Standard & Poor's 500 Index. This analysis
also showed that while Green Tree usually had a ratio equal to or in excess of
the ratio for the Finance Company Index until October 1997, after which Green
Tree had a lower ratio, and as of April 3, 1998 had a ratio of 11.1x compared to
a ratio for the Finance Company Index of 19.6x. This analysis also indicated
that Conseco has usually had a ratio less than the ratio for the Life Insurance
Company Index, and as of April 3, 1998 had a ratio of 16.7x compared to a ratio
for the Life Insurance Company Index of 18.6x.
Lehman Brothers is an internationally recognized investment banking firm
and, as part of its investment banking activities, is regularly engaged in the
evaluation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive bids, secondary
distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. The Green Tree Board of Directors
selected Lehman Brothers because of its expertise, reputation and familiarity
with Green Tree in particular and the consumer and commercial finance industry
in general and because its investment banking professionals have substantial
experience in transactions similar to the Merger.
As compensation for its services as financial advisor in connection with
the Merger, Green Tree has agreed to pay Lehman Brothers a fee of $2 million in
connection with the delivery of its opinion (such fee to be decreased to $1
million if the Merger is not consummated) (the "Opinion Fee"), and additionally,
Green Tree has agreed to pay Lehman Brothers a fee (including the Opinion Fee),
upon consummation of the Merger, equal to 0.275% of the total consideration
received by Green Tree shareholders on consummation of the Merger, which fee as
of the date of this Joint Proxy Statement/Prospectus is approximately
$____________. In
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addition, Green Tree has agreed to reimburse Lehman Brothers for reasonable
out-of-pocket expenses incurred in connection with the Merger and to indemnify
Lehman Brothers for certain liabilities that may arise out of its engagement by
Green Tree and the rendering of its opinion.
Lehman Brothers is acting as financial advisor to Green Tree in
connection with the Merger. Lehman Brothers has also performed various
investment banking services for Green Tree in the past and has received
customary fees for such services. In addition, an affiliate of Lehman Brothers,
Lehman Brothers Commercial Paper Inc., has received warrants to purchase
approximately 2% of the outstanding Green Tree Common Stock in connection with
certain credit facilities provided by it to Green Tree. In the ordinary course
of its business, Lehman Brothers actively trades in the debt and equity
securities of Green Tree and Conseco for its own account and for the accounts of
its customers and, accordingly, may at any time hold a long or short position in
such securities, which positions may be significant. Additionally, Mr. Mark H.
Burton, a Managing Director of Lehman Brothers, is also a Director of Green
Tree.
Certain Consequences of the Merger
As a result of the Merger, the shareholders of Green Tree will become
shareholders of Conseco, and thereby will continue to have an interest in Green
Tree through Conseco. See "Comparison of Shareholders' Rights." Upon the
consummation of the Merger, each outstanding share of Green Tree Common Stock
(other than shares of Green Tree Common Stock held by Green Tree, its
subsidiaries and Conseco as treasury stock) will be cancelled and converted into
the Merger Consideration. Conseco will apply to have the additional shares of
Conseco Common Stock issued pursuant to the Merger listed on the NYSE.
Each Green Tree Stock Option will become and represent a Substitute
Option to purchase the number of shares of Conseco Common Stock (decreased to
the nearest full share) determined by multiplying (i) the number of shares of
Conseco Common Stock subject to such Green Tree Stock Option immediately prior
to the Effective Time by (ii) the Exchange Ratio, at an exercise price per share
of Conseco Common Stock (rounded up to the nearest tenth of a cent) equal to the
exercise price per share of Green Tree Common Stock immediately prior to or at
the Effective Time divided by the Exchange Ratio. Except as provided in the
Merger Agreement, after the Effective Time, each Substitute Option shall be
exercisable upon the same terms and conditions as were applicable under the
related Green Tree Stock Option immediately prior to or at the Effective Time.
Conseco has agreed to take all corporate action necessary to reserve for
issuance a sufficient number of shares of Conseco Common Stock for delivery upon
exercise of Green Tree Stock Options assumed in accordance with the Merger
Agreement.
Conduct of the Business of Conseco and Green Tree After the Merger
The Conseco Board of Directors will be expanded to add Mr. Coss and one
or two additional persons, at Conseco's option, selected by Conseco from among
the individuals who were directors of Green Tree as of April 6, 1998. Pursuant
to the Merger Agreement, (i) the members of the Board of Directors of Merger Sub
immediately prior to the consummation of the Merger shall become the directors
of the Surviving Corporation following the consummation of the Merger and (ii)
the officers of Green Tree immediately prior to the consummation of the Merger
shall be the officers of the Surviving Corporation following the consummation of
the Merger. See "Management of the Surviving Corporation Upon Consummation of
the Merger."
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Conseco plans for the operations of Green Tree in general to remain in
their current locations after the Effective Time. Conseco intends to support and
encourage Green Tree's continued growth and product expansion. Conseco and Green
Tree have similar "Middle America" customer focus, and they plan to cross market
their products to the customer base of the combined company. In addition,
Conseco intends to seek to finance the combined entity on a more efficient basis
and achieve other cost efficiencies where possible. There can be no assurance
that these benefits will be realized from the Merger. See "Risk Factors --
Uncertainty in Realizing Synergies of Merger."
Interests of Certain Persons in the Merger
Green Tree. In considering the recommendation of the Green Tree Board of
Directors with respect to the Merger, holders of Green Tree Common Stock should
be aware that certain members of Green Tree's management, some of whom are
members of the Green Tree Board of Directors, and certain members of the Green
Tree Board of Directors have certain interests in the Merger in addition to
those of shareholders generally. The Green Tree Board of Directors was aware of
these interests when it considered and approved the Merger and the Merger
Agreement.
Pursuant to the terms of the Merger Agreement, Conseco has agreed to take
all action necessary to cause Lawrence M. Coss and, at Conseco's option, one or
two additional members of the Green Tree Board of Directors to become members of
the Conseco Board of Directors upon consummation of the Merger. In addition, Mr.
Coss will remain the Chief Executive Officer of Green Tree following the Merger.
Under Mr. Coss's employment agreement with Green Tree, if Mr. Coss terminates
his employment with Green Tree within two years after the consummation of the
Merger, he will be entitled to a payment (a "Termination Payment") that is equal
to 0.5% of the value of the aggregate consideration received by the Green Tree
shareholders in the transactions resulting from the Merger. Pursuant to an
Amendment Agreement to Mr. Coss's existing employment agreement with Green Tree,
which was executed in connection with the Merger Agreement (the "Coss
Amendment"), Mr. Coss agreed that if his employment with Green Tree is
terminated by him or Green Tree prior to the first anniversary of the
consummation of the Merger, Mr. Coss will continue to provide certain consulting
services to Green Tree until such first anniversary and will continue to receive
the compensation he would have otherwise received as an employee through such
first anniversary. The Coss Amendment also provides that for a 30 day period
following termination of Mr. Coss's employment with Green Tree, Mr. Coss will
have the right to purchase Green Tree's Hawker 800XP aircraft and Green Tree's
hangar for a cash payment equal to their then fair market value in lieu of his
right to use Green Tree's aircraft for personal use until the end of the term of
Mr. Coss's non-competition agreement with Green Tree. In addition, pursuant to
the terms of the Coss Amendment, Green Tree agreed to provide Mr. Coss use of an
office in the city of Mr. Coss's principal residence, a personal secretary and a
security person during the period from the termination of Mr. Coss's employment
with Green Tree until the end of the term of Mr. Coss's non-competition
agreement with Green Tree.
Green Tree and Conseco have acknowledged that the Merger, upon
consummation, will be treated as a "change in control" for purposes of certain
Green Tree option agreements and Conseco agreed to cause the Surviving
Corporation to honor the provisions of any such agreements, including provisions
which relate to a change in control such as the accelerated vesting of stock
options. As of the date of the Merger Agreement, all of the executive officers
of Green Tree held a total of 4,230,667 unvested stock options which will become
100% vested at the Effective Time. Prior to the Effective Time, Green Tree has
agreed to enter into an agreement with each of Green Tree's executive officers
(the "Excise Agreements") which will become effective after the consummation of
the Merger. Pursuant to the terms of the Excise Agreements, if Green Tree
determines that as a result of such acceleration of options the executive
officer would be subject to an excise tax pursuant to Section 4999 of the Code,
Green Tree will pay such executive officer within 30 days of such determination
a cash payment (the "Gross-Up Payment") equal to an amount
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such that after payment by the executive officer of all taxes, including any
excise tax, interest or penalties imposed upon the Gross-Up Payment, the
executive officer would retain an amount of the Gross-Up Payment equal to the
excise tax imposed on such executive officer. Green Tree estimates that the
total amount of payments which could be made pursuant to the Excise Agreements
is approximately $9.5 million, based on the value of the Merger Consideration at
the time the Merger Agreement was executed.
The Merger Agreement provides that for a period of six years after the
Effective Time, Conseco will cause the Surviving Corporation to, and will
guarantee the obligation of the Surviving Corporation to, indemnify and hold
harmless all past and present officers and directors of Green Tree and its
subsidiaries to the same extent such persons are indemnified as of the date of
the Merger Agreement by Green Tree pursuant to Green Tree's Certificate of
Incorporation, Restated Bylaws or agreements in existence as of April 6, 1998
for acts or omissions occurring at or prior to the Effective Time. Conseco also
agreed to provide, or to cause the Surviving Corporation to provide, for an
aggregate period of not less than six years after the Effective Time, a policy
of directors' and officers' liability insurance that is substantially similar
(with respect to limits and deductibles) to Green Tree's existing policy or, if
substantially equivalent coverage is unavailable, the best available coverage;
provided, however, that the Surviving Corporation will not be required to pay
premiums aggregating more than $3 million for such insurance for the six year
period commencing on the Effective Time.
Mr. Burton, a member of the Green Tree Board of Directors, is also a
managing director of Lehman Brothers, Green Tree's financial advisor. The
material facts as to Mr. Burton's relationship with Lehman Brothers were
disclosed to the Green Tree Board of Directors and the Green Tree Board of
Directors unanimously concluded that Mr. Burton should participate in the
deliberations and vote with respect to the proposed Merger.
Conseco. Stephen C. Hilbert owns 50,000 shares of Green Tree Common
Stock, which he purchased at a cost of $19.125 per share on January 27, 1998.
Accounting Treatment
The Merger is expected to be accounted for as a pooling of interests in
accordance with generally accepted accounting principles. Under this accounting
method, the recorded assets and liabilities of Conseco and Green Tree will be
carried forward at their recorded amounts to the combined enterprise, income of
the combined enterprise will include income of Conseco and Green Tree for the
entire fiscal year in which the Merger occurs and the reported income of Conseco
and Green Tree for prior periods will be combined and restated as income of the
combined enterprise. See "The Merger Agreement - Conditions of the Merger."
Certain Federal Income Tax Consequences
It is a condition to the consummation of the Merger that Green Tree
receive an opinion from its counsel, Dorsey & Whitney LLP, and that Conseco
receive an opinion from its counsel, Sidley & Austin, substantially to the
effect that for federal income tax purposes: (i) the Merger will constitute a
"reorganization" within the meaning of Section 368(a) of the Code, and Green
Tree, Merger Sub and Conseco will each be a party to such reorganization within
the meaning of Section 368(b) of the Code; (ii) no gain or loss will be
recognized by Conseco or Green Tree as a result of the Merger; (iii) no gain or
loss will be recognized by the shareholders of Green Tree upon the exchange of
their Green Tree Common Stock solely for shares of Conseco Common Stock pursuant
to the Merger, except with respect to cash, if any, received in lieu of
fractional shares of Conseco Common Stock; (iv) the aggregate tax basis of the
shares of Conseco Common Stock received solely in exchange for Green Tree Common
Stock pursuant to the Merger (including fractional shares of Conseco Common
Stock for which cash is received) will be the same as the aggregate tax basis of
the Green Tree Common Stock exchanged therefor; (v) the holding period for
shares
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of Conseco Common Stock received in exchange for Green Tree Common Stock
pursuant to the Merger will include the holding period of the Green Tree Common
Stock exchanged therefor, provided such Green Tree Common Stock were held as
capital assets by the shareholder at the Effective Time; and (vi) a shareholder
of Green Tree who receives cash in lieu of a fractional share of Conseco Common
Stock will recognize gain or loss equal to the difference, if any, between such
shareholder's tax basis in such fractional share (as described in clause (iv)
above) and the amount of cash received.
In rendering such opinions, Dorsey & Whitney LLP and Sidley & Austin
may receive and rely upon representations contained in certificates of Green
Tree, Conseco and others.
THE FOREGOING IS A GENERAL DISCUSSION OF CERTAIN POTENTIAL MATERIAL
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER AND IS INCLUDED FOR GENERAL
INFORMATION ONLY. THE FOREGOING DISCUSSION DOES NOT TAKE INTO ACCOUNT THE
PARTICULAR FACTS AND CIRCUMSTANCES OF EACH GREEN TREE SHAREHOLDER'S TAX STATUS
AND ATTRIBUTES. AS A RESULT, THE FEDERAL INCOME TAX CONSEQUENCES ADDRESSED IN
THE FOREGOING DISCUSSION MAY NOT APPLY TO EACH GREEN TREE SHAREHOLDER.
ACCORDINGLY, EACH GREEN TREE SHAREHOLDER SHOULD CONSULT HIS, HER OR ITS OWN TAX
ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES OF THE MERGER, INCLUDING THE
APPLICATION AND EFFECT OF FEDERAL, STATE, LOCAL AND OTHER TAX LAWS AND THE
POSSIBLE EFFECTS OF CHANGES IN FEDERAL, STATE, LOCAL AND OTHER TAX LAWS.
Regulatory Approvals
Antitrust. Under the HSR Act and the rules promulgated thereunder by
the Federal Trade Commission (the "FTC"), the Merger may not be consummated
until notifications have been given and certain information has been furnished
to the FTC and the Antitrust Division of the Department of Justice (the
"Antitrust Division") and specified waiting period requirements have been
satisfied. Conseco, Green Tree and certain shareholders of Green Tree who may be
deemed acquirors of Conseco by virtue of their ownership of Green Tree Common
Stock filed notification and report forms under the HSR Act with the FTC and the
Antitrust Division on April 20, 1998. At any time before or after the
consummation of the Merger, the Antitrust Division of the FTC could take such
action under the antitrust laws as it deems necessary or desirable in the public
interest, including seeking to enjoin the consummation of the Merger or seeking
divestiture of substantial assets of Conseco and Green Tree. At any time before
or after the consummation of the Merger and notwithstanding that the HSR Act
waiting period may have expired, any state could take such action under the
antitrust laws as it deems necessary or desirable in the public interest. Such
action could include seeking to enjoin the consummation of the Merger or seeking
divestiture of Green Tree or businesses of Conseco or Green Tree. Private
parties may also seek to take legal action under the antitrust laws under
certain circumstances.
Conseco and Green Tree believe that the Merger can be effected in
compliance with federal and state antitrust laws. However, there can be no
assurance that a challenge to the consummation of the Merger on antitrust
grounds will not be made or that, if such a challenge were made, Conseco and
Green Tree would prevail or would not be required to accept certain conditions,
possibly including certain divestitures, in order to consummate the Merger.
Banking and Finance Licenses. The consummation of the Merger will
require the approvals of the Federal Deposit Insurance Corporation (the "FDIC"),
the Utah Department of Financial Institutions and the South Dakota Division of
Banking of the Department of Commerce and Regulation. Such approval requirements
result from Green Tree's ownership of Green Tree Retail Services Bank, Inc., a
South Dakota
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chartered bank, and Green Tree Capital Bank, Inc., a Utah industrial loan
company (the "Banks"). The Banks are insured by the FDIC, but do not impose Bank
Holding Company Act requirements on Green Tree. Accordingly, under the Federal
Deposit Insurance Act, Conseco must give the FDIC 60 days prior written notice
before a change in control of the Banks may occur. Similar filing requirements
must be complied with in Utah and South Dakota. Conseco had filed all of the
required notices of change in control by April 23, 1998. Once the FDIC deems the
filing to be complete, the 60-day time period will begin. Conseco and Green Tree
expect to obtain the approvals of Utah and South Dakota within the same period.
Although there can be no assurance, it is anticipated that approvals of the
FDIC, the Utah Department of Financial Institutions and the South Dakota
Division of Banking of the Department of Commerce and Regulation will be
obtained.
Green Tree and/or its subsidiaries are licensed in all 50 states with
respect to their retail sales, mortgage lending and small loan finance business
(the "Lending Licenses"). Eleven of such states require a notice filing or
approval process in connection with the Merger. Green Tree had submitted the
required notices and approval applications on or before April 27, 1998. Although
there can be no assurance, it is anticipated that approvals of the required
states with respect to the Lending Licenses will be obtained within
approximately 60 days.
Each of the following has approved Green Tree and/or its subsidiaries as
a lender (the "Lending Approvals"): (i) Federal National Mortgage Association;
(ii) Veterans Affairs; (iii) Government National Mortgage Association; and (iv)
Federal Housing Administration. The Lending Approvals require notice filings in
connection with the Merger. Green Tree completed the notice filings on April 27,
1998.
NYSE Listing of Conseco Common Stock
Pursuant to the Merger Agreement, Conseco is required to use its
reasonable best efforts to obtain listing on the NYSE of the shares of Conseco
Common Stock to be issued in connection with the Merger. Approval of the listing
on the NYSE of the shares of Conseco Common Stock to be issued in the Merger is
a condition to the respective obligations of Green Tree, Conseco and Merger Sub
to consummate the Merger.
Federal Securities Law Consequences
All shares of Conseco Common Stock issued in connection with the Merger
will be freely transferable, except that any shares of Conseco Common Stock
received by persons who are deemed to be "affiliates" (as such term is defined
under the Securities Act) of Green Tree prior to the Merger may be resold by
them only in transactions registered under the Securities Act, permitted by the
resale provisions of Rule 145 promulgated under the Securities Act (or Rule 144
if such persons are or become affiliates of Conseco) or otherwise permitted
under the Securities Act. Persons who may be deemed to be affiliates of Green
Tree generally include individuals or entities that control, are controlled by,
or are under common control with, such party and may include certain officers
and directors of such party as well as principal shareholders of such party.
Green Tree has agreed to use its reasonable best efforts to cause its
affiliates to deliver to Conseco on or prior to May 6, 1998 a written agreement
providing that such person will not (i) sell, pledge, transfer or otherwise
dispose of, any Green Tree Common Stock or any shares of Conseco Common Stock
issued to such person in connection with the Merger, except pursuant to an
effective registration statement or in compliance with such Rule 145 or another
exemption from the registration requirements of the Securities Act or (ii) sell
or in any other way reduce such person's risk relative to any Green Tree Common
Stock or any
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shares of Conseco Common Stock received in the Merger during the period
(the "Resale Period") commencing 30 days prior to the Effective Time and ending
at such time as the financial results covering at least 30 days of post-Merger
operations have been published by Conseco.
Conseco has agreed to use its reasonable best efforts to cause its
affiliates to deliver to Green Tree on or prior to May 6, 1998 a written
agreement providing that such person will not sell, pledge, transfer or
otherwise dispose of, or in any other way reduce such person's risk relative to,
any shares of Conseco Common Stock or any Green Tree Common Stock during the
Resale Period.
Absence of Appraisal Rights
Holders of Green Tree Common Stock will not be entitled to appraisal
rights under the DGCL in connection with the Merger. Holders of Conseco Common
Stock will not be entitled to appraisal rights under the Indiana Corporation Law
in connection with the Merger because Conseco is not a constituent corporation
in the Merger.
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THE MERGER AGREEMENT
The following is a summary of certain provisions of the Merger
Agreement, which appears as Annex A to this Joint Proxy Statement/Prospectus and
is incorporated herein by reference. The following summary includes the material
terms of such agreement but is not necessarily complete and is qualified in its
entirety by reference to the Merger Agreement.
Terms of the Merger
The Merger Agreement provides that, upon the terms and subject to the
conditions contained therein, including the approval of the Merger Consideration
Stock Issuance by the holders of Conseco Common Stock and the adoption of the
Merger Agreement by the holders of Green Tree Common Stock, Merger Sub will be
merged with and into Green Tree at the Effective Time, and Green Tree will
continue as the Surviving Corporation.
After the conditions precedent to the Merger have been fulfilled or
waived (where permissible), the filing of a duly executed Certificate of Merger
will be made with the Secretary of State of the State of Delaware, and the
Merger will become effective at the Effective Time, which will occur upon the
filing of the Certificate of Merger or such later time established thereby
(provided that such later date is not more than 30 days after the Certificate of
Merger is filed).
Pursuant to the Merger Agreement, as of the Effective Time, all shares
of Green Tree Common Stock that are held in the treasury of Green Tree or by any
wholly owned subsidiary of Green Tree and any shares of Green Tree Common Stock
owned by Conseco will be cancelled and no capital stock of Conseco or other
consideration will be delivered in exchange therefor.
Each issued and outstanding share of common stock, par value $.01 per
share, of Merger Sub will be converted into one validly issued, fully paid and
nonassessable share of common stock of the Surviving Corporation.
Subject to the terms and conditions of the Merger Agreement, each share
of Green Tree Common Stock issued and outstanding immediately prior to the
Effective Time (other than shares to be cancelled) will be converted into 0.9165
(such number being the "Exchange Ratio") validly issued, fully paid and
nonassessable shares of Conseco Common Stock. All such shares of Green Tree
Common Stock, when so converted, will no longer be outstanding and will
automatically be cancelled and retired and each holder of a certificate
representing any such shares will cease to have any rights with respect thereto,
except the right to receive certain dividends and other distributions,
certificates representing the shares of Conseco Common Stock into which such
shares are converted and any cash, without interest, in lieu of fractional
shares to be issued or paid in consideration therefor upon the surrender of such
certificate.
In the event of any reclassification, stock split or stock dividend
with respect to Conseco Common Stock, any change or conversion of Conseco Common
Stock into other securities or any other dividend or distribution with respect
to Conseco Common Stock other than normal quarterly cash dividends as the same
may be adjusted from time to time pursuant to the terms of the Merger Agreement
(or if a record date with respect to any of the foregoing should occur) prior to
the Effective Time, appropriate and proportionate adjustments, if any, will be
made to the Exchange Ratio, and all references to the Exchange Ratio in the
Merger Agreement will be deemed to be to the Exchange Ratio as so adjusted.
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Surrender and Payment
Conseco will authorize a commercial bank (or such other person or
persons as shall be reasonably acceptable to Conseco and Green Tree) to act as
Exchange Agent (the "Exchange Agent"). As soon as practicable after the
Effective Time, Conseco will deposit with the Exchange Agent, in trust for the
holders of shares of Green Tree Common Stock converted in the Merger,
certificates representing the shares of Conseco Common Stock issuable pursuant
to the Merger Agreement in exchange for outstanding shares of Green Tree Common
Stock and cash, as required to make payments in lieu of any fractional shares
(such cash and shares of Conseco Common Stock, together with any dividends or
distributions with respect thereto, being the "Exchange Fund"). The Exchange
Agent will deliver the Conseco Common Stock issuable pursuant to the Merger
Agreement out of the Exchange Fund.
Conseco will instruct the Exchange Agent, as soon as practicable after
the Effective Time, to mail to each record holder of a certificate or
certificates, which immediately prior to the Effective Time represented
outstanding shares of Green Tree Common Stock converted in the Merger (the
"Certificates"), a letter of transmittal (which will specify that delivery will
be effected, and risk of loss and title to the Certificates will pass, only upon
actual delivery of the Certificates to the Exchange Agent, and will contain
instructions for use in effecting the surrender of the Certificates in exchange
for certificates representing shares of Conseco Common Stock and cash in lieu of
fractional shares). Upon surrender for cancellation to the Exchange Agent of all
Certificates held by any record holder of a Certificate, together with such
letter of transmittal, duly executed, the holder of such Certificate will be
entitled to receive in exchange therefor a certificate representing that number
of whole shares of Conseco Common Stock into which the shares represented by the
surrendered Certificate will have been converted at the Effective Time, cash in
lieu of any fractional share, and certain dividends and other distributions in
accordance with the Merger Agreement, and any Certificate so surrendered will
forthwith be cancelled.
All shares of Conseco Common Stock issued upon the surrender for
Certificates in accordance with the terms of the Merger Agreement (including any
cash paid pursuant to the Merger Agreement) will be deemed to have been issued
in full satisfaction of all rights pertaining to the shares of Green Tree Common
Stock represented by such Certificates.
Fractional Shares
No certificates or scrip representing fractional shares of Conseco
Common Stock will be issued upon the surrender for exchange of Certificates, and
no Conseco dividend or other distribution or stock split will relate to any
fractional share, and no fractional share will entitle the owner thereof to vote
or to any other rights of a security holder of Conseco. In lieu of any such
fractional share, each holder of Green Tree Common Stock who would otherwise
have been entitled to a fraction of a share of Conseco Common Stock upon
surrender of Certificates for exchange will be paid an amount in cash (without
interest), rounded to the nearest cent, determined by multiplying (i) the per
share closing price on the NYSE of Conseco Common Stock (as reported in the NYSE
Composite Transactions) on the date of the Effective Time (or, if the shares of
Conseco Common Stock do not trade on the NYSE on such date, the first date of
trading of the Conseco Common Stock on the NYSE after the Effective Time) by
(ii) the fractional interest to which such holder would otherwise be entitled.
Conditions to the Merger
The respective obligations of Conseco, Green Tree and Merger Sub to
effect the Merger will be subject to the fulfillment of certain conditions at or
prior to the Effective Time, including: (a) approval of the Merger Agreement by
the requisite vote of shareholders of Green Tree, and approval of the Merger
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Consideration Stock Issuance by the requisite vote of the shareholders of
Conseco; (b) the authorization for listing on the NYSE, subject to official
notice of issuance, of the shares of Conseco Common Stock issuable in the
Merger; (c) expiration or termination of the waiting period (and any extension
thereof) applicable to the consummation of the Merger under the HSR Act; (d) all
authorizations, consents, orders, declarations or approvals of, or filings with,
or terminations or expirations of waiting periods imposed by, any governmental
entity, which the failure to obtain, make or occur would have the effect of
making the Merger or any of the transactions contemplated by the Merger
Agreement illegal or would have, individually or in the aggregate, a material
adverse effect on Conseco (assuming the Merger had taken place), will have been
obtained, will have been made or will have occurred; (e) no stop order
suspending the effectiveness of the Registration Statement shall have been
issued by the Commission and no proceedings for that purpose shall have been
initiated or, to the knowledge of Conseco or Green Tree, threatened by the
Commission; and (f) no court or other governmental entity having jurisdiction
over Green Tree or Conseco, or any of their respective subsidiaries, shall have
enacted, issued, promulgated, enforced or entered any law, rule, regulation,
executive order, decree, injunction or other order (whether temporary,
preliminary or permanent) which is then in effect and has the effect of making
the Merger or any of the transactions contemplated by the Merger Agreement
illegal.
The obligations of Green Tree to effect the Merger are also subject to
the satisfaction of certain conditions at or prior to the Effective Time,
including: (a) each of the representations and warranties of Conseco and Merger
Sub that is qualified by materiality shall be true and correct on and as of the
Effective Time as if made on and as of the Effective Time (except to the extent
they relate to a particular date) and each of the representations and warranties
of Conseco and Merger Sub that is not so qualified shall be true and correct in
all material respects on and as of the Effective Time as if made on and as of
the Effective Time (except to the extent they relate to a particular date), in
each case except as contemplated or permitted by the Merger Agreement; each of
Conseco and Merger Sub shall have performed in all material respects each of its
agreements contained in the Merger Agreement required to be performed on or
prior to the Effective Time; and Green Tree shall have received from Conseco and
Merger Sub certificates to that effect; (b) Green Tree shall have received an
opinion of Dorsey & Whitney LLP relating to certain tax matters; (c) in
obtaining any approval or consent required to consummate any of the transactions
contemplated by the Merger Agreement or the Stock Option Agreement, no
governmental entity shall have imposed or shall have sought to impose any
condition, penalty or requirement which, in the reasonable opinion of Green
Tree, individually or in the aggregate, would have a material adverse effect on
Conseco (assuming the consummation of the Merger); and (d) Conseco shall have
taken all action necessary to cause Mr. Coss and one or two additional persons,
at Conseco's option, selected by Conseco among the individuals who were
directors of Green Tree as of the date of the Merger Agreement, to become
members of the Board of Directors of Conseco upon consummation of the Merger,
subject to the willingness of each such individual to serve as a director of
Conseco.
The obligations of Conseco and Merger Sub to effect the Merger are
subject to the satisfaction of certain conditions at or prior to the Effective
Time, including: (a) each of the representations and warranties of Green Tree
that is qualified by materiality shall be true and correct on and as of the
Effective Time as if made on and as of the Effective Time (except to the extent
they relate to a particular date) and each of the representations and warranties
of Green Tree that is not so qualified shall be true and correct in all material
respects on and as of the Effective Time as if made on and as of the Effective
Time (except to the extent they relate to a particular date), in each case
except as contemplated or permitted by the Merger Agreement; Green Tree shall
have performed in all material respects each of its agreements contained in the
Merger Agreement required to be performed on or prior to the Effective Time; and
Conseco shall have received from Green Tree a certificate to that effect; (b)
Conseco shall have received an opinion of Sidley & Austin relating to certain
tax matters; (c) receipt by Conseco of an opinion dated as of the Effective Time
of Coopers & Lybrand L.L.P. (or any successor thereto) that the Merger will
qualify for pooling of interests
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accounting treatment under Accounting Principles Board Opinion No. 16 if closed
and consummated in accordance with the Merger Agreement and receipt by Conseco
of "comfort letters" from KPMG Peat Marwick LLP in form and substance reasonably
satisfactory to Conseco; (d) Green Tree shall have obtained the consent or
approval of each person or governmental entity whose consent or approval will be
required in connection with the transactions contemplated by the Merger
Agreement under any loan or credit agreement, note, mortgage, indenture, lease
or other agreement or instrument or any applicable law, rule or regulation,
except as to which the failure to obtain such consents and approvals would not,
in the reasonable opinion of Conseco, individually or in the aggregate, have a
material adverse effect on Green Tree or Conseco or upon the consummation of the
transactions contemplated in the Merger Agreement or the Stock Option Agreement,
and in obtaining any approval or consent required to consummate any of the
transactions contemplated by the Merger Agreement or by the Stock Option
Agreement, no governmental entity shall have imposed or shall have sought to
impose any condition, penalty or requirement which, in the reasonable opinion of
Conseco, individually or in aggregate would have a material adverse effect on
Green Tree or Conseco; and (e) there shall not be instituted or pending any
suit, action or proceeding before any governmental entity as a result of the
Merger Agreement, the Stock Option Agreement or any of the transactions
contemplated therein which would have a material adverse effect on Conseco.
Representations and Warranties
The Merger Agreement contains customary representations and warranties
of Conseco and Merger Sub, including, among other things, (a) that the documents
filed by Conseco with the Commission since January 1, 1995 did not, at the time
they were filed, contain material misstatements or omissions; (b) that the
information supplied by Conseco and Merger Sub to be included herein or in the
Registration Statement in connection with the Special Meetings will be free from
material misstatements and omissions; (c) that there has been no material
adverse change with respect to Conseco and its subsidiaries except as disclosed
in its documents filed with the Commission; (d) as to governmental licenses and
permits, and compliance with laws; (e) as to compliance with relevant tax laws;
(f) with respect to actions and proceedings pending against or involving Conseco
or its subsidiaries; (g) as to employee benefit plans and labor matters; (h) as
to compliance with worker safety laws and environmental laws; (i) as to
intellectual property; (j) as to actions taken or not taken that would
jeopardize the contemplated tax and accounting treatment of the Merger; (k) the
receipt of a fairness opinion from Merrill Lynch; (1) as to brokers; and (m)
that the Board of Directors of Conseco has taken all action necessary to exempt
Conseco, its subsidiaries and affiliates, the Merger, the Merger Agreement and
the transactions contemplated thereby from certain state takeover statutes and
certain provisions of Conseco's charter. In addition, the Merger Agreement
contains representations and warranties by each of Conseco and Merger Sub as to,
among other things, its organization, capital structure, authority to enter into
the Merger Agreement and, with respect to Conseco, the Stock Option Agreement,
and the binding effect of the Merger Agreement and the Stock Option Agreement.
The Merger Agreement also contains similar customary representations
and warranties of Green Tree.
Conduct of Business Pending the Merger
Actions by Green Tree. Pursuant to the Merger Agreement, Green Tree has
agreed that, during the period from the date of the Merger Agreement through the
Effective Time (except as otherwise expressly permitted by the terms of the
Merger Agreement), it will, and will cause its subsidiaries to, in all material
respects carry on its business in the ordinary course as conducted as of the
date of the Merger Agreement and, to the extent consistent therewith, use
reasonable best efforts to preserve intact its current business organizations,
keep available the services of its current officers and employees and preserve
its relationships with customers, suppliers and others having business dealings
with it to the end that its goodwill and ongoing
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business will be unimpaired at the Effective Time. Without limiting the
generality of the foregoing, and except as otherwise expressly contemplated by
the Merger Agreement, Green Tree will not, and will not permit any of its
subsidiaries to, without the prior written consent of Conseco (which consent
shall not be unreasonably withheld or delayed): (a) (1) declare, set aside or
pay any dividends on, or make any other actual, constructive or deemed
distributions in respect of, any of its capital stock, or otherwise make any
payments to its stockholders in their capacity as such (other than (A) regular
quarterly dividends of not more than $.0875 per share of Green Tree Common Stock
and (B) dividends and other distributions by subsidiaries), (2) other than in
the case of any subsidiary, split, combine or reclassify any of its capital
stock or issue or authorize the issuance of any other securities in respect of,
in lieu of or in substitution for shares of its capital stock or (3) purchase,
redeem or otherwise acquire any shares of capital stock of Green Tree or any
other securities thereof or any rights, warrants or options to acquire any such
shares or other securities; (b) issue, deliver, sell, pledge, dispose of or
otherwise encumber any shares of its capital stock, any other voting securities
or equity equivalent or any securities convertible into, or any rights, warrants
or options to acquire any such shares, voting securities, equity equivalent or
convertible securities, other than (1) the issuance of shares of Green Tree
Common Stock upon the exercise of Green Tree Stock Options outstanding on the
date of the Merger Agreement in accordance with their then current terms and (2)
the issuance of Green Tree Common Stock pursuant to the Stock Option Agreement;
(c) amend its charter or bylaws; (d) acquire or agree to acquire any business or
any corporation, limited liability company, partnership, association or other
business organization or division thereof or otherwise acquire or agree to
acquire any assets, other than transactions that are in the ordinary course of
business consistent with past practice and not material to Green Tree and its
subsidiaries taken as a whole; (e) sell, lease or otherwise dispose of, or agree
to sell, lease or otherwise dispose of, any of its assets other than
transactions in the ordinary course of business consistent with past practice;
(f) incur any indebtedness for borrowed money, guarantee any such indebtedness
or make any loans, advances or capital contributions to, or other investments
in, any other person, other than (1) in the ordinary course of business
consistent with past practices, provided that Green Tree may not, without the
written consent of Conseco, incur more than $25 million of indebtedness for
borrowed money, other than borrowings under credit facilities existing on the
date of the Merger Agreement, and (2) indebtedness, loans, advances, capital
contributions and investments between Green Tree and any of its wholly owned
subsidiaries or between any of such wholly owned subsidiaries; (g) alter the
corporate structure or ownership of Green Tree or any subsidiary; (h) enter into
or adopt any, or amend any existing, severance plan, agreement or arrangement or
enter into or amend any Green Tree benefit plan or employment or consulting
agreement, other than as required by law; (i) increase the compensation payable
or to become payable to its directors, officers or employees (except for
increases in the ordinary course of business consistent with past practice in
salaries or wages of employees of Green Tree or any of its subsidiaries who are
not officers of Green Tree or any of its subsidiaries) or grant any severance or
termination pay to, or enter into or amend any employment or severance agreement
with, any director or officer of Green Tree or any of its subsidiaries, or
establish, adopt, enter into, or, except as may be required to comply with
applicable law, amend in any material respect or take action to enhance in any
material respect or accelerate any rights or benefits under, any plan or
arrangement for the benefit of any director, officer or employee; (j) knowingly
violate or knowingly fail to perform any obligation or duty imposed upon it or
any subsidiary by any applicable material federal, state or local law, rule,
regulation, guideline or ordinance; (k) make any change to accounting policies
or procedures (other than actions required to be taken by generally accepted
accounting principles); (l) prepare or file any tax return inconsistent with
past practice or, on any such tax return, take any position, make any election,
or adopt any method that is inconsistent with positions taken, elections made or
methods used in preparing or filing similar tax returns in prior periods; (m)
make any tax election or settle or compromise any material federal, state, local
or foreign income tax liability; (n) enter into or amend any agreement or
contract material to Green Tree and its subsidiaries, taken as a whole, except
in the ordinary course of business consistent with past practice (other than
certain agreements) or make or agree to make any new capital expenditure or
expenditures which, individually, is in excess of $5 million or, in the
aggregate, are in excess of $60 million, (o) pay, discharge
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or satisfy any claims, liabilities or obligations, other than the payment,
discharge or satisfaction, in the ordinary course of business consistent with
past practice or in accordance with their terms, of liabilities reflected or
reserved against in, or contemplated by, the most recent financial statements
(or the notes thereto) of Green Tree included in documents filed with the
Commission or incurred in the ordinary course of business consistent with past
practice; or (p) authorize, recommend, propose or announce an intention to do
any of the foregoing, or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing.
During the period from the date of the Merger Agreement through the
Effective Time, Green Tree will not terminate, amend, modify or waive any
provision of any confidentiality agreement relating to a takeover proposal or
standstill agreement to which Green Tree or any of its subsidiaries is a party
(other than any involving Conseco).
Actions by Conseco. During the period from the date of the Merger
Agreement to the Effective Time of the Merger, Conseco will not, and will not
permit any of its subsidiaries to (a) declare, set aside or pay any dividends
on, or make any other distributions in respect of, any of its capital stock,
except that Conseco may continue the declaration and payment of regular
quarterly cash dividends of not more than $.20 per share of Conseco Common Stock
or (b) issue or authorize the issuance of any other securities in respect of, in
lieu of or in substitution for shares of Conseco's capital stock.
Green Tree Stock Options
Each Green Tree Stock Option which is outstanding immediately prior to
the Effective Time will become and represent a Substitute Option to purchase the
number of shares of Conseco Common Stock (decreased to the nearest full share)
determined by multiplying (i) the number of shares of Green Tree Common Stock
subject to such Green Tree Stock Option by (ii) the Exchange Ratio, at an
exercise price per share of Conseco Common Stock (rounded up to the nearest
tenth of a cent) equal to the exercise price per share of Green Tree Common
Stock immediately prior to or at the Effective Time divided by the Exchange
Ratio. Conseco will pay cash to holders of Green Tree Stock Options in lieu of
issuing fractional shares of Conseco Common Stock upon the exercise of
Substitute Options for shares of Conseco Common Stock, unless in the judgment of
Conseco such payment would adversely affect the ability to account for the
Merger under the pooling of interests method. Each Substitute Option will be
otherwise exercisable upon the same terms and conditions as were applicable
under the related Green Tree Stock Option immediately prior to or at the
Effective Time. Green Tree has agreed that it will not grant any stock
appreciation rights or limited stock appreciation rights and will not permit
cash payments to holders of Green Tree Stock Options in lieu of the substitution
therefor of Substitute Options.
Employee Benefit Plans
Pursuant to the Merger Agreement, Conseco will cause the Surviving
Corporation from and after the Effective Time to honor all Green Tree benefit
plans and all employment agreements entered into by Green Tree prior to the date
of the Merger Agreement; provided, however, that the Merger Agreement does not
limit the power of Conseco or the Surviving Corporation to amend or terminate
any Green Tree benefit plan or require Conseco or the Surviving Corporation to
offer to continue (other than as required by its terms) any written employment
contract.
No Solicitation
Pursuant to the Merger Agreement, Green Tree will not, nor will it
permit any of its subsidiaries to and will not authorize or permit any of its
officers, directors, employees, financial advisors, attorneys or other
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<PAGE>
advisors or representatives or those of any of its subsidiaries to solicit,
initiate or encourage the submission of, any Takeover Proposal (as defined
herein), enter into any agreement with respect to any Takeover Proposal or
participate in any discussions or negotiations regarding, or furnish to any
person any information with respect to, or take any other action to facilitate
any inquiries or the making of any proposal that constitutes, or may reasonably
be expected to lead to, any Takeover Proposal; provided, however, that prior to
the Green Tree Special Meeting, if the Board of Directors of Green Tree
reasonably determines the Takeover Proposal constitutes a Superior Proposal (as
defined herein), then, to the extent required by the fiduciary obligations of
the Board of Directors of Green Tree, as determined in good faith by a majority
of the disinterested members thereof after receiving the advice of independent
counsel, Green Tree may, in response to an unsolicited request therefor, furnish
information with respect to Green Tree to, and enter into discussions with, any
person pursuant to a customary confidentiality agreement. Without limiting the
foregoing, any violation of these restrictions by any executive officer of Green
Tree or any of its subsidiaries or any financial advisor, attorney or other
advisor or representative of Green Tree or any of its subsidiaries, whether or
not such person is purporting to act on behalf of Green Tree or any of its
subsidiaries or otherwise, will be deemed to be a breach of the Merger Agreement
by Green Tree. For purposes of the Merger Agreement, "Takeover Proposal" means
any proposal for a merger or other business combination involving Green Tree or
any of its subsidiaries or any proposal or offer to acquire in any manner,
directly or indirectly, a substantial equity interest in, a substantial portion
of the voting securities of, or a substantial portion of the assets of Green
Tree or any of its subsidiaries, other than the transactions contemplated by the
Merger Agreement and the Stock Option Agreement, and "Superior Proposal" means a
bona fide Takeover Proposal made by a third party which a majority of the
disinterested members of the Board of Directors of Green Tree determines in its
reasonable good faith judgment to be more favorable to Green Tree's shareholders
than the Merger (after receiving the written opinion, with only customary
qualifications, of Green Tree's independent financial advisor that the value of
the consideration provided for in such proposal exceeds the value of the
consideration provided for in the Merger) and for which financing, to the extent
required, is then committed or which, in the reasonable good faith judgment of a
majority of such disinterested members (after receiving the written advice of
Green Tree's independent financial advisor), is highly likely to be financed by
such third party.
In addition, Green Tree has agreed that neither its Board of Directors
nor any committee thereof will withdraw or modify, or propose to withdraw or
modify, in a manner adverse to Conseco or Merger Sub, the approval or
recommendation by such Board of Directors or any such committee of the Merger
Agreement or the Merger, or approve or recommend, or propose to approve or
recommend, any Takeover Proposal. Green Tree will advise Conseco orally (within
one business day) and in writing (as promptly as practicable) of any Takeover
Proposal or any inquiry with respect to or which could lead to any Takeover
Proposal, the material terms of such Takeover Proposal and the identity of the
person making any such Takeover Proposal or inquiry, and will keep Conseco fully
informed of the status and details of any such Takeover Proposal or inquiry.
Indemnification; Directors and Officers Insurance
The Merger Agreement provides that for six years from and after the
Effective Time, Conseco agrees to cause the Surviving Corporation to, and to
guarantee the obligation of the Surviving Corporation to, indemnify and hold
harmless all past and present officers and directors of Green Tree and of its
subsidiaries to the same extent such persons are indemnified as of the date of
the Merger Agreement by Green Tree pursuant to Green Tree's Certificate of
Incorporation, Restated Bylaws and agreements for acts or omissions occurring at
or prior to the Effective Time. In addition, Conseco will provide, or will cause
the Surviving Corporation to provide, for an aggregate period of not less than
six years from the Effective Time, Green Tree's current directors and officers
with an insurance and indemnification policy that provides coverage for events
occurring prior to the Effective Time that is substantially similar to Green
Tree's existing policy or, if substantially equivalent insurance coverage is
unavailable, the best available coverage; provided, however,
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<PAGE>
the Surviving Corporation will not be required to pay premiums for such
insurance aggregating more than $3 million for the six year period commencing on
the Effective Time.
Termination
The Merger Agreement may be terminated at any time prior to the
Effective Time, whether before or after any approval of the matters presented in
connection with the Merger by the shareholders of Green Tree or Conseco: (a) by
mutual written consent of Green Tree and Conseco; (b) except for the breach by
Green Tree of its obligations with respect to calling the Green Tree Special
Meeting and the recommendation of the Green Tree Board of Directors to Green
Tree shareholders, by either Conseco or Green Tree if the other party shall have
failed to comply in any material respect with any of its covenants or agreements
contained in the Merger Agreement required to be complied with prior to the date
of such termination, which failure to comply has not been cured within thirty
business days following receipt by such other party of written notice of such
failure to comply; (c) by either Conseco or Green Tree if there has been (1) a
breach by the other party (in the case of Conseco, including any material breach
by Merger Sub) of any representation or warranty that is not qualified as to
materiality which has the effect of making such representation or warranty not
true and correct in all material respects or (2) a breach by the other party (in
the case of Conseco, including any material breach by Merger Sub) of any
representation or warranty that is qualified as to materiality, in each case of
the foregoing clauses (c)(1) and (c)(2) which breach has not been cured within
thirty business days following receipt by the breaching party from the
non-breaching party of written notice of the breach; (d) by Conseco or Green
Tree if: (1) the Merger has not been effected on or prior to the close of
business on December 31, 1998, provided, however, that the right to terminate
the Merger Agreement pursuant to this clause will not be available to any party
whose failure to fulfill any of its obligations contained in the Merger
Agreement has been the cause of, or resulted in, the failure of the Merger to
have occurred on or prior to the aforesaid date; or (2) any court or other
governmental entity having jurisdiction over a party to the Merger Agreement has
issued an order, decree or ruling or taken any other action permanently
enjoining, restraining or otherwise prohibiting the transactions contemplated by
the Merger Agreement and such order, decree, ruling or other action has become
final and nonappealable; (e) by Conseco or Green Tree if the shareholders of
Green Tree do not approve the Merger Agreement at the Green Tree Special
Meeting; (f) by Conseco or Green Tree if the shareholders of Conseco do not
approve the Merger Consideration Stock Issuance at the Conseco Special Meeting;
(g) by Conseco or Green Tree if Green Tree enters into a merger, acquisition or
other agreement (including an agreement in principle) to effect a Superior
Proposal or the Green Tree Board of Directors resolves to do so; provided,
however, that Green Tree may not terminate the Merger Agreement pursuant to this
clause unless (i) Green Tree has delivered to Conseco a written notice of the
Green Tree's intent to enter into such an agreement to effect the Superior
Proposal, (ii) five business days have elapsed following delivery to Conseco of
such written notice by Green Tree and (iii) during such five business day period
Green Tree has fully cooperated with Conseco, including, without limitation,
informing Conseco of the terms and conditions of the Takeover Proposal and the
identity of the person making the Takeover Proposal, with the intent of enabling
Conseco to agree to a modification of the terms and conditions of the Merger
Agreement so that the transactions contemplated by the Merger Agreement may be
effected; provided, further, that Green Tree may not terminate the Merger
Agreement pursuant to this clause unless at the end of such five business day
period the Board of Directors of Green Tree continues reasonably to believe that
the Takeover Proposal constitutes a Superior Proposal and prior to such
termination Green Tree pays to Conseco the Termination Fee described below; (h)
by Conseco if (1) the Green Tree Board, in breach of the Merger Agreement, has
not recommended, or has resolved not to recommend, or has qualified, modified or
withdrawn its recommendation of the Merger or declaration that the Merger is
advisable and fair to and in the best interest of Green Tree and its
shareholders, or has resolved to do so, (2) the Board of Directors of Green Tree
has recommended to the shareholders of Green Tree any Takeover Proposal or has
resolved to do so or (3) a tender offer or exchange offer for 20% or more of the
outstanding shares of capital stock of Green Tree is commenced, and the Board of
Directors of Green Tree fails to recommend against acceptance of such tender
offer or exchange offer by its shareholders, or (i) by Green Tree if the Board
of Directors of Conseco has
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<PAGE>
not recommended, or has resolved not to recommend, or has qualified or modified
or withdrawn its recommendation of the Merger or declaration that the Merger is
advisable and fair to and in the best interest of Conseco and its shareholders,
or shall have resolved to do so.
Fees and Expenses
Regardless of whether the Merger is consummated, except as described
below upon certain events of termination of the Merger Agreement and with
respect to certain real estate transfer and gains taxes, all costs and expenses
incurred in connection with the Merger Agreement and the transactions
contemplated thereby will be paid by the party incurring such costs and
expenses; provided that all printing expenses and filing fees will be divided
equally between Conseco and Green Tree. Notwithstanding the foregoing, if the
Merger Agreement is terminated (A) by Green Tree or Conseco pursuant to clause
(e) or (g) under "-- Termination" above, (B) by Conseco pursuant to clause (h)
under "-- Termination" above or (C) by Green Tree or Conseco at a time when
Conseco is entitled to terminate the Merger Agreement pursuant to clause (e),
(g) or (h) under "-- Termination" above, then, in each case, Green Tree shall
(without prejudice to any other rights Conseco may have against Green Tree for
breach of the Merger Agreement) reimburse Conseco upon demand for all
out-of-pocket fees and expenses incurred or paid by or on behalf of Conseco or
any affiliate of Conseco in connection with the Merger Agreement, the Stock
Option Agreement and the transactions contemplated therein, including all fees
and expenses of counsel, investment banking firms, accountants and consultants.
If (A) the Merger Agreement is terminated by Green Tree or Conseco at a
time when Conseco is entitled to terminate the Merger Agreement pursuant to
clause (b), (c) or (e) under "-- Termination" above, and, concurrently with or
within twelve months after such a termination a Third Party Acquisition Event
(as defined below) occurs, or (B) the Merger Agreement is terminated pursuant to
clause (g) or (h) under "-- Termination" above or by Green Tree or Conseco at a
time when Conseco is entitled to terminate the Merger Agreement pursuant to
clause (g) or (h) under "-- Termination" above, then, in each case, Green Tree
shall (in addition to any obligation under the Merger Agreement and without
prejudice to any other rights that Conseco may have against Green Tree for a
breach of the Merger Agreement) pay to Conseco the Termination Fee in cash, such
payment to be made promptly, but in no event later than the second business day
following, in the case of clause (A), the later to occur of such termination and
such Third Party Acquisition Event or, in the case of clause (B), such
termination.
For purposes of the Merger Agreement, "Termination Fee" means $200
million minus the product obtained by multiplying (i) the value (if any) of the
Spread (as defined below) as of the date when the Termination Fee is payable by
(ii) the number of Optioned Shares (as defined below) held by Conseco as to
which the Conseco Option has not yet been exercised; provided, however, that in
no event shall the Termination Fee be less than $100 million.
For purposes of the Merger Agreement, "Third Party Acquisition Event"
means any of the following events: (A) any person (other than Conseco or its
affiliates) acquires or becomes the beneficial owner of 20% or more of the
outstanding shares of Green Tree Common Stock; (B) any group (other than a group
which includes or may reasonably be deemed to include Conseco or any of its
affiliates) is formed which, at the time of formation, beneficially owns 20% or
more of the outstanding shares of Green Tree Common Stock; (C) any person (other
than Conseco or its affiliates) shall have commenced a tender or exchange offer
for 20% or more of the then outstanding shares of Green Tree Common Stock or
publicly proposed any bona fide merger, consolidation or acquisition of all or
substantially all the assets of Green Tree, or other similar business
combination involving Green Tree; (D) Green Tree enters into, or announces that
it proposes to enter into, an agreement, including, without limitation, an
agreement in principle, providing for a merger or other business combination
involving Green Tree or a significant subsidiary of Green Tree or the
acquisition of a substantial interest in, or a substantial portion of the
assets, business or operations of, Green Tree or a significant
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<PAGE>
subsidiary (other than the transactions contemplated by the Merger Agreement);
(E) any person (other than Conseco or its affiliates) is granted any option or
right, conditional or otherwise, to acquire or otherwise become the beneficial
owner of shares of Green Tree Common Stock which, together with all shares of
Green Tree Common Stock beneficially owned by such person, results or would
result in such person being the beneficial owner of 20% or more of the
outstanding shares of Green Tree Common Stock; or (F) there is a public
announcement with respect to a plan or intention by Green Tree or any person,
other than Conseco and its affiliates, to effect any of the foregoing
transactions.
Amendment
The Merger Agreement may be amended by the parties thereto, by or
pursuant to action taken by their respective Boards of Directors, at any time
before or after approval of the matters presented in connection with the Merger
by the shareholders of Conseco and Green Tree, but, after any such approval, no
amendment shall be made which by law requires further approval by such
shareholders without such further approval.
Waiver
The Merger Agreement provides that, at any time prior to the Effective
Time, the parties thereto may (a) extend the time for the performance of any of
the obligations or other acts of the other parties thereto, (b) waive any
inaccuracies in the representations and warranties contained therein or in any
document delivered pursuant thereto and (c) waive compliance with any of the
agreements or conditions contained therein which may legally be waived.
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<PAGE>
THE STOCK OPTION AGREEMENT
The following is a summary of certain provisions of the Stock Option
Agreement, which appears as Annex B to this Joint Proxy Statement/Prospectus and
is incorporated herein by reference. The following summary includes the material
terms of such agreement but is not necessarily complete and is qualified in its
entirety by reference to the Stock Option Agreement.
In connection with the execution of the Merger Agreement, Conseco and
Green Tree entered into the Stock Option Agreement pursuant to which Green Tree
has granted to Conseco the Conseco Option to purchase up to 26,668,399 shares
(the "Optioned Shares") of Green Tree Common Stock (approximately 19.9% of the
outstanding shares of Green Tree Common Stock as of the Green Tree Record Date,
without including any shares subject to or issued pursuant to the Conseco
Option) at an exercise price of $52.93 per share (the "Exercise Price") payable
in Conseco Common Stock, cash or a combination of Conseco Common Stock and cash,
in each case at Conseco's option. The Exercise Price shall from time to time be
adjusted so that in no event shall the Aggregate Spread Value (as defined
below), together with the Termination Fee, exceed $295 million (it being
understood that, if the Exercise Price has been increased from time to time as a
result of this sentence, the Exercise Price shall from time to time be adjusted
downward to the extent of any decrease in the price of the Green Tree Common
Stock). "Spread Value" with respect to an Optioned Share means the product
obtained by multiplying (x) the excess, if any, of (i) the average of the
closing prices on the NYSE of Green Tree Common Stock during the five trading
days immediately preceding the written notice of exercise (in the case of an
Optioned Share previously exercised) or the date of determination (in the case
of an Optioned Share as to which the Conseco Option has not yet been exercised)
over (ii) the Exercise Price. The "Aggregate Spread Value" is the sum of the
Spread Value of all Optioned Shares.
The Conseco Option is exercisable only upon the occurrence of one of
the following events: (i) any person, other than Conseco or its affiliates,
acquires or becomes the beneficial owner of 20% or more of the outstanding
shares of Green Tree Common Stock; (ii) any new group is formed which
beneficially owns 20% or more of the outstanding shares of Green Tree Common
Stock (other than a group which includes or may reasonably be deemed to include
Conseco or any of its affiliates); (iii) any person (other than Conseco or its
affiliates) shall have commenced a tender or exchange offer for 20% or more of
the then outstanding shares of Green Tree Common Stock or publicly proposed any
bona fide merger, consolidation or acquisition of all or substantially all the
assets of Green Tree, or other similar business combination involving Green
Tree; (iv) Green Tree enters into, or announces that it proposes to enter into,
an agreement, including, without limitation, an agreement in principle,
providing for a merger or other business combination involving Green Tree or a
significant subsidiary of Green Tree or the acquisition of a substantial
interest in, or a substantial portion of the assets, business or operations of
Green Tree or a significant subsidiary (other than the transactions contemplated
by the Merger Agreement); (v) any person (other than Conseco or its affiliates)
is granted any option or right, conditional or otherwise, to acquire or
otherwise become the beneficial owner of shares of Green Tree Common Stock
which, together with all shares of Green Tree Common Stock beneficially owned by
such person, results or would result in such person being the beneficial owner
of 20% or more of the outstanding shares of Green Tree Common Stock; or (vi)
there is a public announcement with respect to a plan or intention by Green Tree
or any person, other than Conseco or its affiliates, to effect any of the
foregoing transactions (each of the above-described events is referred to herein
as a "Purchase Event"). No Purchase Event has occurred as of the date of this
Joint Proxy Statement/Prospectus.
Notwithstanding the occurrence of a Purchase Event, Conseco may not
exercise the Conseco Stock Option if (a) Conseco or Merger Sub has breached any
of their material obligations under the Merger Agreement or has terminated the
Merger Agreement in violation of its terms, or (b) a preliminary or
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<PAGE>
permanent injunction or other order issued by any federal or state court which
invalidates the grant or prohibits the exercise of the Conseco Stock Option is
in effect.
Conseco's obligation to purchase the Optioned Shares following the
exercise of the Conseco Option, and Green Tree's obligation to deliver the
Optioned Shares, are subject to the conditions that (i) no preliminary or
permanent injunction or other order issued by any federal or state court of
competent jurisdiction in the United States prohibiting the delivery of the
Optioned Shares shall be in effect; (ii) the purchase of the Optioned Shares
will not violate Rule 10b-13 promulgated under the Exchange Act; and (iii) all
applicable waiting periods under the HSR Act shall have expired or been
terminated.
The Conseco Option terminates upon the earlier of (i) the Effective
Time and (ii) the termination of the Merger Agreement in accordance with its
terms; provided, however, the Conseco Option shall not terminate pursuant to
clause (ii) if (A) the Merger Agreement is terminated by Conseco pursuant to
clause (b) or (c) under "The Merger Agreement -- Termination" above or (B) the
Merger Agreement is terminated by Conseco or Green Tree pursuant to clause (e),
(g), or (h) under "The Merger Agreement -- Termination" above.
The Stock Option Agreement further provides that, prior to the
termination of the Conseco Option, from and after the occurrence of a Put Event
(as defined below), Conseco will be entitled to require Green Tree to purchase
(the "Put Right") for cash the Conseco Option from Conseco, at a price equal to
the product determined by multiplying (A) the number of Optioned Shares as to
which the Conseco Option has not yet been exercised by (B) the Spread (as
defined below). For purposes of the Stock Option Agreement, "Put Event" means
the occurrence on or after the date of the Stock Option Agreement of any of the
following: (i) any person (other than Conseco or its affiliates) acquires or
becomes the beneficial owner of 30% or more of the outstanding shares of Green
Tree Common Stock or (ii) Green Tree consummates a merger or other business
combination involving Green Tree or a significant subsidiary of Green Tree or
the acquisition of a substantial interest in, or a substantial portion of the
assets, business or operations of Green Tree or a significant subsidiary (other
than the transactions contemplated by the Merger Agreement). As used in the
Stock Purchase Agreement, the term "Spread" means the excess, if any of (i) the
greater of (x) the highest price (in cash or fair market value of securities or
other property) per share of Green Tree Common Stock paid or to be paid within
12 months preceding the date of exercise of the Put Right for any shares of
Green Tree Common Stock beneficially owned by any person who shall have acquired
or become the beneficial owner of 30% or more of the outstanding shares of Green
Tree Common Stock after the date of the Stock Purchase Agreement or (y) the
average of the closing prices on the NYSE of Green Tree Common Stock during the
five trading days immediately preceding the written notice of exercise of the
Put Right over (ii) the Exercise Price. Notwithstanding the foregoing, in no
event shall the aggregate Put Price, together with the Aggregate Spread Value of
any Optioned Shares previously exercised and the amount of the Termination Fee
then payable, exceed $295 million.
The Conseco Option, which Conseco required that Green Tree grant as a
condition to Conseco's entering into the Merger Agreement, might increase the
likelihood of consummation of the Merger by discouraging competing offers for
Green Tree. Certain aspects of the Stock Option Agreement may have the effect of
discouraging persons who may now, or prior to the Effective Time, be interested
in acquiring all of or a significant interest in Green Tree from considering or
proposing such an acquisition, even if such persons were prepared to offer to
pay consideration to shareholders of Green Tree that had a higher current market
price than the shares of Conseco Common Stock to be received for each share of
Green Tree Common Stock pursuant to the Merger Agreement.
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CONSECO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma consolidated balance sheet as of
December 31, 1997, combines the historical consolidated balance sheets of
Conseco and Green Tree as if the Merger had been effective on December 31, 1997,
after giving effect to certain adjustments described in the accompanying notes
to the unaudited pro forma consolidated financial information.
The unaudited pro forma consolidated statements of operations for each of
the three years ended December 31, 1997, present the combined results of
operations of Conseco and Green Tree as if the Merger had been effective at the
earliest period presented.
The unaudited pro forma consolidated financial information and
accompanying notes reflect the application of the pooling of interests method of
accounting for the Merger. Under this method of accounting, the recorded assets,
liabilities, shareholders' equity, income and expense of Conseco and Green Tree
are combined and reflected at their historical amounts.
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<TABLE>
<CAPTION>
CONSECO, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
December 31, 1997
(Dollars in millions)
ASSETS
PRO FORMA
CONSECO GREEN TREE ADJUSTMENTS COMBINED
------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Investments:
Actively managed fixed maturities at fair value.................. $22,773.7 $ - $ - $22,773.7
Equity securities at fair value.................................. 228.9 - - 228.9
Interest only securities......................................... - 1,363.2 - 1,363.2
Finance receivables.............................................. - 1,971.0 - 1,971.0
Mortgage loans................................................... 516.2 - - 516.2
Credit-tenant loans.............................................. 558.6 - - 558.6
Policy loans..................................................... 692.4 - - 692.4
Other invested assets ........................................... 518.1 25.3 - 543.4
Short-term investments........................................... 990.5 741.4 - 1,731.9
Assets held in separate accounts................................. 682.8 - - 682.8
--------- -------- ------ ---------
Total investments.......................................... 26,961.2 4,100.9 - 31,062.1
Accrued investment income............................................ 379.3 - - 379.3
Other receivables.................................................... - 235.7 - 235.7
Servicing rights..................................................... - 96.3 - 96.3
Cost of policies purchased........................................... 2,466.4 - - 2,466.4
Cost of policies produced............................................ 915.2 - - 915.2
Reinsurance receivables.............................................. 849.1 - - 849.1
Income tax assets.................................................... 85.6 - (85.6)(2) -
Goodwill............................................................. 3,637.3 56.1 - 3,693.4
Property and equipment............................................... 171.6 112.4 - 284.0
Cash deposits, restricted............................................ - 247.2 - 247.2
Other assets......................................................... 449.1 18.1 - 467.2
--------- -------- ------ ---------
Total assets............................................... $35,914.8 $4,866.7 $(85.6) $40,695.9
========= ======== ====== =========
(continued on next page)
The accompanying notes are an integral
part of the unaudited pro forma combined financial
statements.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
CONSECO, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED BALANCE SHEET (Continued)
December 31, 1997
(Dollars in millions)
LIABILITIES AND SHAREHOLDERS' EQUITY
PRO FORMA
CONSECO GREEN TREE ADJUSTMENTS COMBINED
------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Liabilities:
Insurance liabilities:
Interest sensitive products................................... $17,357.6 $ - $ - $17,357.6
Traditional products.......................................... 5,784.8 - - 5,784.8
Claims payable and other policyholder funds................... 1,668.8 - - 1,668.8
Unearned premiums............................................. 406.1 - - 406.1
Liabilities related to separate accounts...................... 682.8 - - 682.8
Investment borrowings............................................ 1,389.5 - - 1,389.5
Investor payables................................................ - 552.8 - 552.8
Other liabilities................................................ 995.6 492.8 240.0 (3) 1,728.4
Income tax liabilities........................................... - 622.8 (85.6)(2) 537.2
Notes payable and commercial paper:
Corporate...................................................... 2,354.9 - - 2,354.9
Related to finance receivables................................. - 1,866.2 - 1,866.2
---------- -------- ------ ---------
Total liabilities.......................................... 30,640.1 3,534.6 154.4 34,329.1
--------- -------- ------ ---------
Minority interest:
Company-obligated mandatorily redeemable
preferred securities of subsidiary trust...................... 1,383.9 - - 1,383.9
Common stock of subsidiary....................................... 0.7 - - 0.7
Shareholders' equity:
Preferred stock.................................................. 115.8 - - 115.8
Common stock and additional paid-in capital...................... 2,382.0 437.0 (199.2)(4) 2,619.8
Accumulated other comprehensive income:
Unrealized appreciation of fixed maturity investments......... 177.2 - - 177.2
Unrealized appreciation of other investments.................. 4.8 21.8 - 26.6
Minimum pension liability adjustment.......................... - (3.2) - (3.2)
Less treasury shares at cost..................................... - (199.2) 199.2 (4) -
Retained earnings................................................ 1,210.3 1,075.7 (240.0)(3) 2,046.0
--------- -------- ------ ---------
Total shareholders' equity................................. 3,890.1 1,332.1 (240.0) 4,982.2
--------- -------- ------ ---------
Total liabilities and shareholders' equity................. $35,914.8 $4,866.7 $(85.6) $40,695.9
========= ======== ====== =========
The accompanying notes are an integral
part of the unaudited pro forma combined financial
statements.
</TABLE>
64
<PAGE>
<TABLE>
<CAPTION>
CONSECO, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
for the year ended December 31, 1997
(Dollars in millions, except per share data)
PRO FORMA
CONSECO GREEN TREE ADJUSTMENTS COMBINED
------- ---------- ----------- --------
<S> <C> <C> <C> <C>
Revenues:
Insurance policy income:
Traditional products............................................. $2,954.1 $ - $2,954.1
Interest sensitive products...................................... 456.7 - 456.7
Net investment income............................................... 1,825.3 370.6 2,195.9
Gain on sale of receivables......................................... - 546.8 546.8
Net investment gains................................................ 266.5 - 266.5
Fee revenue and other income........................................ 65.8 174.1 239.9
-------- -------- --------
Total revenues.............................................. 5,568.4 1,091.5 6,659.9
-------- -------- --------
Benefits and expenses:
Insurance policy benefits........................................... 2,185.7 - 2,185.7
Change in future policy benefits.................................... 182.6 - 182.6
Amounts added to annuity and financial product
policyholder account balances:
Interest...................................................... 697.1 - 697.1
Other amounts added to variable and equity-indexed
annuity products........................................... 109.6 109.6
Interest expense on notes payable................................... 109.4 160.9 270.3
Interest expense on short-term investment borrowings................ 42.0 - 42.0
Amortization related to operations.................................. 408.8 - 408.8
Amortization related to investment gains............................ 181.2 - 181.2
Nonrecurring charges................................................ 71.7 - 71.7
Other operating costs and expenses.................................. 577.2 444.5 1,021.7
-------- -------- --------
Total benefits and expenses................................... 4,565.3 605.4 5,170.7
-------- -------- --------
Income before income taxes, minority interest
and extraordinary charge ................................. 1,003.1 486.1 1,489.2
Income tax expense...................................................... 376.6 184.7 561.3
-------- -------- --------
Income before minority interest and
extraordinary charge ..................................... 626.5 301.4 927.9
Minority interest:
Distributions on Company-obligated mandatorily redeemable
preferred securities of subsidiary trusts, net of income taxes... 49.0 - 49.0
Dividends on preferred stock of subsidiaries........................ 3.3 - 3.3
-------- -------- --------
Income before extraordinary charge ......................... 574.2 301.4 875.6
Extraordinary charge on extinguishment of
debt, net of taxes and minority interest............................ 6.9 - 6.9
-------- -------- --------
Net income.................................................. 567.3 301.4 868.7
Less amounts applicable to preferred stock:
Charge related to induced conversions............................... 13.2 - 13.2
Preferred stock dividends........................................... 8.7 - 8.7
-------- -------- --------
Net income applicable to common stock....................... $ 545.4 $ 301.4 $ 846.8
======== ======== ========
(continued on next page)
The accompanying notes are an integral
part of the unaudited pro forma combined financial
statements.
</TABLE>
65
<PAGE>
<TABLE>
<CAPTION>
CONSECO, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS (Continued)
for the year ended December 31, 1997
(Dollars in millions, except per share data)
PRO FORMA
CONSECO GREEN TREE ADJUSTMENTS COMBINED
------- ---------- ----------- --------
<S> <C> <C> <C> <C>
Earnings per common share:
Basic:
Weighted average shares outstanding............................ 185,751,000 136,715,000 (11,416,000)(4) 311,050,000
Net income before extraordinary charge ........................ $2.98 $2.20 $2.74
Extraordinary charge .......................................... .04 - .02
----- ----- -----
Net income................................................ $2.94 $2.20 $2.72
===== ===== =====
Diluted:
Weighted average shares outstanding............................ 210,179,000 140,254,000 (11,711,000)(4) 338,722,000
Net income before extraordinary charge ........................ $2.67 $2.15 $2.55
Extraordinary charge........................................... .03 - .02
----- ----- -----
Net income................................................ $2.64 $2.15 $2.53
===== ===== =====
The accompanying notes are an integral
part of the unaudited pro forma combined financial
statements.
</TABLE>
66
<PAGE>
<TABLE>
<CAPTION>
CONSECO, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
for the year ended December 31, 1996
(Dollars in millions, except per share data)
PRO FORMA
CONSECO GREEN TREE ADJUSTMENTS COMBINED
------- ---------- ----------- --------
<S> <C> <C> <C> <C>
Revenues:
Insurance policy income:
Traditional products............................................. $1,384.3 $ - $1,384.3
Interest sensitive products...................................... 269.9 - 269.9
Net investment income............................................... 1,302.5 215.3 1,517.8
Gain on sale of receivables......................................... - 389.7 389.7
Net investment gains................................................ 60.8 - 60.8
Fee revenue and other income........................................ 49.8 119.1 168.9
-------- -------- --------
Total revenues.............................................. 3,067.3 724.1 3,791.4
-------- -------- --------
Benefits and expenses:
Insurance policy benefits........................................... 1,173.3 - 1,173.3
Change in future policy benefits.................................... 21.7 - 21.7
Amounts added to annuity and financial product
policyholder account balances:
Interest...................................................... 620.2 - 620.2
Other amounts added to variable and equity-indexed
annuity products........................................... 48.4 - 48.4
Interest expense on notes payable................................... 108.1 70.1 178.2
Interest expense on short-term investment borrowings................ 22.0 - 22.0
Amortization related to operations.................................. 240.0 - 240.0
Amortization related to investment gains............................ 36.0 - 36.0
Other operating costs and expenses.................................. 304.0 330.2 634.2
-------- -------- --------
Total benefits and expenses................................... 2,573.7 400.3 2,974.0
-------- -------- --------
Income before income taxes, minority interest
and extraordinary charge ................................. 493.6 323.8 817.4
Income tax expense...................................................... 179.8 123.0 302.8
-------- -------- --------
Income before minority interest and
extraordinary charge ..................................... 313.8 200.8 514.6
Minority interest:
Distributions on Company-obligated mandatorily redeemable
preferred securities of subsidiary trusts, net of income taxes... 3.6 - 3.6
Dividends on preferred stock of subsidiaries........................ 8.9 - 8.9
Equity in earnings of subsidiaries.................................. 22.4 - 22.4
-------- -------- --------
Income before extraordinary charge ......................... 278.9 200.8 479.7
Extraordinary charge on extinguishment of
debt, net of taxes and minority interest............................ 26.5 - 26.5
-------- -------- --------
Net income.................................................. 252.4 200.8 453.2
Less preferred stock dividends.......................................... 27.4 - 27.4
-------- -------- --------
Net income applicable to common stock....................... $ 225.0 $ 200.8 $ 425.8
======== ======== ========
(continued on next page)
The accompanying notes are an integral
part of the unaudited pro forma combined financial
statements.
</TABLE>
67
<PAGE>
<TABLE>
<CAPTION>
CONSECO, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS (Continued)
for the year ended December 31, 1996
(Dollars in millions, except per share data)
PRO FORMA
CONSECO GREEN TREE ADJUSTMENTS COMBINED
------- ---------- ----------- --------
<S> <C> <C> <C> <C>
Earnings per common share:
Basic:
Weighted average shares outstanding............................ 104,584,000 136,996,000 (11,439,000)(4) 230,141,000
Net income before extraordinary charge ........................ $2.40 $1.47 $1.96
Extraordinary charge .......................................... .25 - .11
----- ----- -----
Net income................................................ $2.15 $1.47 $1.85
===== ===== =====
Diluted:
Weighted average shares outstanding............................ 138,860,000 140,562,000 (11,737,000)(4) 267,685,000
Net income before extraordinary charge ........................ $2.01 $1.43 $1.79
Extraordinary charge........................................... .19 - .10
----- ----- -----
Net income................................................ $1.82 $1.43 $1.69
===== ===== =====
The accompanying notes are an integral
part of the unaudited pro forma combined financial
statements.
</TABLE>
68
<PAGE>
<TABLE>
<CAPTION>
CONSECO, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
for the year ended December 31, 1995
(Dollars in millions, except per share data)
PRO FORMA
CONSECO GREEN TREE ADJUSTMENTS COMBINED
------- ---------- ----------- --------
<S> <C> <C> <C> <C>
Revenues:
Insurance policy income:
Traditional products............................................. $1,355.6 $ - $1,355.6
Interest sensitive products...................................... 109.4 - 109.4
Net investment income............................................... 1,142.6 176.0 1,318.6
Gain on sale of receivables......................................... - 448.7 448.7
Net investment gains................................................ 204.1 - 204.1
Fee revenue and other income........................................ 43.6 86.6 130.2
-------- -------- --------
Total revenues.............................................. 2,855.3 711.3 3,566.6
-------- -------- --------
Benefits and expenses:
Insurance policy benefits........................................... 1,075.5 - 1,075.5
Change in future policy benefits.................................... 32.0 - 32.0
Amounts added to annuity and financial product
policyholder account balances:
Interest...................................................... 556.6 - 556.6
Other amounts added to variable and equity-indexed
annuity products........................................... 28.8 - 28.8
Interest expense on notes payable................................... 119.4 57.3 176.7
Interest expense on short-term investment borrowings................ 22.2 - 22.2
Amortization related to operations.................................. 203.6 - 203.6
Amortization related to investment gains............................ 126.6 - 126.6
Other operating costs and expenses.................................. 272.1 244.4 516.5
-------- -------- --------
Total benefits and expenses................................... 2,436.8 301.7 2,738.5
-------- -------- --------
Income before income taxes, minority interest
and extraordinary charge ................................. 418.5 409.6 828.1
Income tax expense...................................................... 87.0 155.6 242.6
-------- -------- --------
Income before minority interest and
extraordinary charge ..................................... 331.5 254.0 585.5
Minority interest:
Dividends on preferred stock of subsidiaries........................ 11.9 - 11.9
Equity in earnings of subsidiaries.................................. 97.1 - 97.1
-------- -------- --------
Income before extraordinary charge ......................... 222.5 254.0 476.5
Extraordinary charge on extinguishment of
debt, net of taxes and minority interest............................ 2.1 - 2.1
-------- -------- --------
Net income.................................................. 220.4 254.0 474.4
Less preferred stock dividends.......................................... 18.4 - 18.4
-------- -------- --------
Net income applicable to common stock....................... $ 202.0 $ 254.0 $ 456.0
======== ======== ========
(continued on next page)
The accompanying notes are an integral
part of the unaudited pro forma combined financial
statements.
</TABLE>
69
<PAGE>
<TABLE>
<CAPTION>
CONSECO, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS (Continued)
for the year ended December 31, 1995
(Dollars in millions, except per share data)
PRO FORMA
CONSECO GREEN TREE ADJUSTMENTS COMBINED
------- ---------- ----------- --------
<S> <C> <C> <C> <C>
Earnings per common share:
Basic:
Weighted average shares outstanding............................ 81,405,000 136,644,000 (11,410,000)(4) 206,639,000
Net income before extraordinary charge ........................ $2.51 $1.86 $2.22
Extraordinary charge .......................................... .03 - .01
----- ----- -----
Net income................................................ $2.48 $1.86 $2.21
===== ===== =====
Diluted:
Weighted average shares outstanding............................ 103,881,000 140,090,000 (11,698,000)(4) 232,273,000
Net income before extraordinary charge ........................ $2.14 $1.81 $2.05
Extraordinary charge........................................... .02 - .01
----- ----- -----
Net income................................................ $2.12 $1.81 $2.04
===== ===== =====
The accompanying notes are an integral
part of the unaudited pro forma combined financial
statements.
</TABLE>
70
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The unaudited pro forma combined financial statements have been prepared
assuming that the Merger will be accounted for under the pooling of
interests method and is based on the historical consolidated financial
statements of Conseco and Green Tree. Certain amounts in the historical
financial statements of Green Tree have been reclassified to conform with
Conseco's historical financial statement presentation.
Conseco and Green Tree are still in the process of reviewing their
respective accounting policies relative to those followed by the other
entity. As a result of this review, it might be necessary to restate
certain amounts in Conseco's or Green Tree's financial statements to
conform to those accounting policies that are most appropriate. In
management's opinion, any such restatements will not be material.
Green Tree pools and securitizes substantially all of the loan contracts
it originates, retaining: (i) investments in interest-only securities
that are subordinated to the rights of other investors; and (ii) the
servicing on the contracts. The valuation of interest-only securities and
servicing rights is determined by discounting the projected cash flows
over the expected life of the finance receivables sold using prepayment,
default, loss, interest rate and servicing cost assumptions. The
assumptions used in calculating the value of interest only securities and
servicing rights are subject to volatility. Prepayments resulting from
competition, obligor mobility, general and regional economic conditions,
and prevailing interest rates, as well as actual losses incurred, may
vary from the performance projected. Expectations of future default, loss
and prepayment experience are reviewed periodically. Valuation reductions
considered permanent are recognized as a reduction to earnings. The
conclusions reached in such reviews could result in material reductions
in the value of the interest-only securities and servicing rights that
could materially affect operating results.
The unaudited pro forma consolidated financial information should be read
in conjunction with the historical consolidated financial statements of
Conseco and Green Tree, incorporated by reference herein.
2. INCOME TAX LIABILITIES
The income tax assets of Conseco are netted against the income tax
liabilities of Green Tree.
3. MERGER AND INTEGRATION COSTS
In connection with the Merger, Conseco expects to incur merger-related
costs of approximately $240 million, net of income taxes. Such costs
include investment banking, accounting, legal and regulatory fees,
severance and retention costs and other costs associated with the Merger.
These expenses (including the related tax effect) have been reflected in
the unaudited pro forma combined balance sheet financial information as
of December 31, 1997, but are not reflected in the unaudited pro forma
statement of operations financial information since such expenses are not
expected to have a continuing impact on the combined company.
4. SHAREHOLDERS' EQUITY AND WEIGHTED AVERAGE SHARES OUTSTANDING
Weighted average shares outstanding have been adjusted to reflect the
issuance of .9165 shares of Conseco Common Stock for each share of Green
Tree Common Stock or equivalent. The following shares of Green Tree
Common Stock or equivalents were outstanding at April 6, 1998: (i)
134,012,054 shares of Green Tree Common Stock; (ii) 10,297,132 options
outstanding to purchase Green Tree Common Stock at an average price of
$23.12 per share (such options are equivalent to 6,174,713 shares of
Conseco Common Stock, based on the last reported sale price of a share of
Conseco Common Stock on April 6, 1998); and (iii) warrants to purchase
2,735,688 shares of Green Tree Common Stock at $22.75 per share (such
warrants are equivalent to 736,060 shares of Conseco Common Stock, based
on the last reported sale price of a share of Conseco Common Stock on
April 6, 1998 based on Green Tree's right to call the warrant by issuing
stock equivalents at $15 per warrant). The treasury stock held by Green
Tree prior to the Merger has been reclassified to common stock and
additional paid-in capital to conform to Conseco's presentation.
5. OPERATING COST SAVINGS
No adjustment has been included in the unaudited pro forma consolidated
financial information for the anticipated operating cost savings. The
combined company expects to achieve operating cost savings through the
reduction of certain borrowing costs as well as potentially through the
elimination of redundant staff functions, data processing, marketing
synergies and certain back office operations and the reduction of
corporate overhead. There can be no assurance that anticipated operating
cost savings will be achieved.
71
<PAGE>
COMPARISON OF SHAREHOLDERS' RIGHTS
The rights of Conseco shareholders are governed by Conseco's Amended
and Restated Articles of Incorporation (the "Conseco Articles of
Incorporation"), its Amended and Restated Bylaws (the "Conseco Bylaws") and the
Indiana Corporation Law. The rights of Green Tree shareholders are governed by
its Certificate of Incorporation, as amended (the "Green Tree Certificate of
Incorporation"), its Restated Bylaws (the "Green Tree Bylaws") and the DGCL.
After the Effective Time, the rights of Green Tree shareholders who become
Conseco shareholders will be governed by the Conseco Articles of Incorporation,
the Conseco Bylaws and the Indiana Corporation Law. The following is a summary
of the material differences between the rights of Conseco shareholders and the
rights of Green Tree shareholders.
Certain Provisions Relating to Acquisitions
The Indiana Corporation Law, the DGCL, the Conseco Articles of
Incorporation and the Green Tree Certificate of Incorporation contain certain
provisions, including the ones described below, which purport to apply to
certain types of share acquisitions or corporate transactions.
Business Combinations. The Conseco Articles of Incorporation provide
that Conseco may not enter into a "Special Business Combination Transaction"
(defined as a merger or other business combination transaction with or involving
a beneficial owner of more than 10% of Conseco Common Stock (a "Related
Person")) unless (i) the consideration to be received per share by holders of
Conseco Common Stock in such transaction is at least equal to the highest per
share price paid in order to acquire any shares of Conseco Common Stock
beneficially owned by the Related Person or (ii) the transaction shall have been
approved by two-thirds of the Continuing Directors (defined as the directors of
Conseco in office prior to the date on which a Related Person became such).
Section 23-1-43-18 of the Indiana Corporation Law provides that a
corporation may not engage in any "business combination" with any "interested
shareholder" for a period of five years following the interested shareholder's
share acquisition date unless the business combination or the purchase of shares
made by the interested shareholder is approved by the board of directors of the
corporation before the interested shareholder's share acquisition date. A
"business combination" under the Indiana Corporation Law is generally defined as
any of the following transactions involving the corporation and an interested
shareholder thereof: (i) a merger or consolidation; (ii) a sale, lease,
exchange, mortgage, pledge, transfer, or other disposition of 10% or more of
corporation's assets or representing 10% or more of the earning power or net
income of the corporation; (iii) an issuance or transfer of shares of the
corporation's stock representing 5% or more of the aggregate market value of all
of such corporation's outstanding stock; (iv) the adoption of a plan of
liquidation or dissolution proposed by or under agreement with such interested
shareholder; (v) a transaction having the effect of directly or indirectly
increasing the proportionate share of the corporation's stock held by such
interested shareholder; or (vi) any receipt by such interested shareholder of
the benefit of any loans, advances, guarantees, pledges, or other financial
assistance or any tax credits or other tax advantages. An "interested
shareholder" under the Indiana Corporation Law is generally defined as any
person owning 10% or more of the voting power of the outstanding voting shares
of the corporation.
The Green Tree Certificate of Incorporation provides that (a) any
merger or consolidation of Green Tree or any subsidiary with a beneficial owner
of more than 10% of Green Tree's Common Stock or an affiliate or associate of
such beneficial owner (an "Interested Stockholder"), (b) any sale, lease,
exchange, mortgage, pledge, grant of a security interest, transfer, or other
disposition, other than in the ordinary course of business to an Interested
Stockholder, (c) the issuance or transfer by Green Tree or any subsidiary of any
securities (except pursuant to stock dividends, stock splits, or similar
transactions which would not have the
72
<PAGE>
effect of increasing the proportionate voting power of an interested
stockholder) of Green Tree or any subsidiary to an Interested Stockholder, (d)
the adoption of any plan or proposal for the liquidation or dissolution of Green
Tree proposed by an Interested Stockholder, or (e) any reclassification of
securities or recapitalization of Green Tree or any merger or consolidation of
Green Tree with any of its subsidiaries or any other transaction which has the
effect of increasing the proportionate share of the outstanding shares of any
class of equity or convertible securities of Green Tree of any subsidiary
beneficially owned by an Interested Stockholder, in each case shall not be
consummated without the approval by the affirmative vote of the holders of at
least 80% of the voting power of the then outstanding shares of voting stock of
Green Tree. The Green Tree Certificate of Incorporation provides that the
foregoing sentence does not apply if the transaction has been approved by a
majority vote of the Continuing Directors (defined as a member of the Green Tree
Board of Directors prior to the time an Interested Stockholder became such and
is not an affiliate or an associate of an Interested Stockholder) or if (i) the
consideration payable in the transaction is at least equal to the higher of (a)
the highest per share price paid by the Interested Stockholder to acquire any
shares of Green Tree Common Stock within the preceding two years or (b) the fair
market value of the Green Tree Common Stock on the announcement date or the
determination date, (ii) after an Interested Stockholder has become an
Interested Stockholder and prior to the consummation of the transaction, there
has been no failure to declare and pay at the regular date the full amount of
any dividends payable on any outstanding preferred stock, no reduction in the
annual rate of dividends paid on Green Tree Common Stock (other than as approved
by a majority of the Continuing Directors), and such Interested Stockholder
shall not become the beneficial owner of any additional shares of Green Tree
voting stock, (iii) after an Interested Stockholder became such, it has not
received the benefit of any loans, advances, guarantees, pledges, or other
financial assistance or any tax credits or other tax advantages provided by
Green Tree, and (iv) a proxy or information statement describing the proposed
transaction and complying with the requirements of the Exchange Act and the
rules and regulations thereunder shall be mailed to the stockholders of Green
Tree no later than the earlier of (a) 30 days prior to any vote on the proposed
transaction or (b) if no vote is required, 60 days prior to the consummation of
such proposed transaction. Any such proxy statement must contain any
recommendations of the Continuing Directors may have furnished in writing and,
if deemed advisable by a majority of the Continuing Directors, an opinion of a
reputable investment banking firm as to the fairness of the terms of the
proposed transaction from the point of view of the holders of voting stock other
than the Interested Stockholder. The Green Tree Bylaws do not have any
restrictions with respect to business combinations.
In addition, Green Tree is governed by Section 203 of the DGCL. Section
203 of the DGCL provides that a corporation shall not engage in any "business
combination" with any "interested stockholder" for a period of three years
following the time that such stockholder became an interested stockholder,
unless (i) prior to such time, the board of directors of the corporation
approved either the business combination or the transaction which resulted in
the stockholder becoming an interested stockholder, (ii) upon consummation of
the transaction which resulted in the stockholder becoming an interested
stockholder, the interested stockholder owned at least 85% of the voting stock
of the corporation outstanding at the time the transaction commenced, excluding
for purposes of determining the number of shares outstanding those shares owned
(a) by persons who are directors and also officers and (b) employee stock plans
in which employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or exchange
offer, or (iii) at or subsequent to such time, the business combination is
approved by the board of directors and authorized at an annual or special
meeting of stockholders, and not by written consent, by the affirmative vote of
at least two-thirds (2/3) of the outstanding voting stock which is not owned by
the interested stockholder. A "business combination" under the DGCL is generally
defined as any of the following transactions involving the corporation and an
interested stockholder thereof: (i) a merger or consolidation; (ii) a sale,
lease, exchange, mortgage, pledge, transfer or other disposition of 10% or more
of the corporation's assets; (iii) an issuance or transfer of the corporation's
stock; (iv) a transaction having the effect of directly or indirectly increasing
the proportionate share of the corporation's stock held by such
73
<PAGE>
interested stockholder; or (v) any receipt by such interested stockholder of the
benefit of any loans, guarantees, pledges or other financial benefits. An
"interested stockholder" under the DGCL is generally defined as any person
owning 15% or more of the corporation's outstanding voting stock.
Control Share Acquisitions. Chapter 23-1-42 of the Indiana Corporation
Law requires that, unless the articles or bylaws of a corporation exempt the
corporation therefrom (which Conseco's Articles of Incorporation and Bylaws do
not), any person who proposes to acquire or has acquired (a "control share
acquisition") ownership of (or the power to direct the voting of) shares
representing one-fifth, one-third, or a majority of the voting power of an
issuing public corporation in the election of directors must provide the
corporation with a statement describing such acquisition (an "acquiring person
statement"). If the acquiring person so requests at the time of delivery of such
statement (and undertakes to pay the expenses relating thereto), the corporation
shall cause a special meeting of its shareholders to be called for the purpose
of considering the voting rights to be accorded the shares acquired in the
control share acquisition. The shares so acquired shall be accorded the same
voting rights as were accorded such shares before the control share acquisition
only to the extent granted by resolution of the shareholders of such
corporation. Shares acquired in a control share acquisition as to which no
acquiring person statement has been filed may be redeemed by the corporation at
the fair value thereof under certain circumstances. In the event that shares
acquired in a control share acquisition are accorded full voting rights and the
acquiring person has acquired shares representing a majority or more of all
voting power, the other shareholders will be entitled to appraisal rights. The
DGCL does not contain a comparable provision.
Takeover Offers. Chapter 23-2-3.1 of the Indiana Corporation Law
provides that a person shall not make a takeover offer unless the following
conditions are satisfied: (i) a statement which consists of each document
required to be filed with the Commission is filed with the Indiana securities
commissioner and delivered to the president of the target company before making
the takeover offer; (ii) a consent to service of process and the requisite
filing fee accompanies the statement filed with the Indiana securities
commissioner; (iii) the takeover offer is made to all offerees holding the same
class of equity securities on substantially equivalent terms; (iv) a hearing is
held within 20 business days after the statement described in clause (i) above
is filed; and (v) the Indiana securities commissioner shall have approved the
takeover offer. In addition, such section provides that no offeror may acquire
any equity security of any class of a target company within two years following
the conclusion of a takeover offer with respect to that class, unless the holder
of such equity security is afforded, at the time of that acquisition, a
reasonable opportunity to dispose of such securities to the offeror upon
substantially equivalent terms. A "takeover offer" means an offer to acquire or
an acquisition of any equity security of a target company pursuant to a tender
offer or request or invitation for tenders if, after the acquisition, the
offeror is directly or indirectly a record or beneficial owner of more than ten
percent of any class of the outstanding equity securities of the target company.
A "target company" means an issuer of securities which is organized under the
laws of Indiana, has its principal place of business in Indiana and has
substantial assets in Indiana. The DGCL does not contain a comparable provision.
Amendment of Bylaws
The Conseco Bylaws may be amended by majority vote of the Conseco Board
of Directors only. The Green Tree Bylaws may be amended by the Green Tree Board
of Directors at a meeting duly called for such purpose. The shareholders of
Green Tree may amend the Green Tree Bylaws by a majority vote of the
shareholders at any meeting called for such purpose, except that provisions
relating to directors must be approved by the affirmative vote of 80% of all
shareholders.
74
<PAGE>
Right to Bring Business Before an Annual or Special Meeting of Shareholders;
Notice of Director Nominations
The Conseco Bylaws provide that a shareholder must give timely, written
notice to the Secretary of Conseco to propose business to be brought before an
annual meeting or to nominate directors. To be timely, a shareholder's notice
must be received not later than 90 calendar days in advance of the anniversary
date of the release of Conseco's proxy statement to shareholders in connection
with the preceding year's annual meeting of shareholders, except that if no
annual meeting was held in the previous year or the date of the annual meeting
has been changed by more than 30 calendar days from the anniversary of the
annual meeting date stated in the previous year's proxy statement, such proposal
shall be received a reasonable time before the solicitation is made. The Conseco
Bylaws also provide that special meetings of shareholders may be called by the
Board of Directors, the Chairman of the Board or the President and the business
transacted at such meeting shall be limited to the purpose or purposes specified
in the notice for such meeting.
The Green Tree Certificate of Incorporation and the Green Tree Bylaws
do not contain any restriction on the ability of shareholders to bring business
before an annual or a special meeting of shareholders. The Green Tree Bylaws
provide that a director candidate may be nominated by a shareholder giving
written notice to the Secretary of Green Tree of such nomination not less than
60 days prior to the date of the applicable annual meeting.
Director Liability
The Conseco Articles of Incorporation and the Conseco Bylaws do not
contain a specific exculpatory provision regarding director liability. However,
the Indiana Corporation Law provides that a director is not liable for any
action taken as a director, or any failure to take any action, unless (i) the
director has breached or failed to perform the duties of the director's office
in compliance with Section 23-1-35-1 of the Indiana Corporation Law (which
requires, among other things, that a director discharge his duties as a director
in good faith, with the care and ordinarily prudent person in a like position
would exercise under similar circumstances and in a manner the director
reasonably believes to be in the best interests of the corporation), and (ii)
the breach or failure to perform constitutes willful misconduct or recklessness.
The Green Tree Certificate of Incorporation provides that a director of
Green Tree shall not be personally liable to Green Tree or its shareholders for
monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to Green Tree or
its shareholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or knowing violation of law, (iii) under Section 174 of
the DGCL (unlawful payment of dividends), or (iv) for any transaction from which
the director derived an improper personal benefit.
Indemnification
The Indiana Corporation Law grants authorization to Indiana
corporations to indemnify officers and directors for their conduct if such
conduct was in good faith and was in the corporation's best interests or, in the
case of directors, was not opposed to such best interests, and permits the
purchase of insurance in this regard. In addition, the shareholders of a
corporation may approve the inclusion of other or additional indemnification
provisions in the articles of incorporation and bylaws.
The Conseco Bylaws provide for the indemnification of any person made a
party to any action, suit or proceeding by reason of the fact that he or she is
a director, officer or employee of Conseco, if (a) such person is wholly
successful with respect to such action, suit or proceeding or (b) if such person
is determined to have acted in good faith, in what he or she reasonably believed
to be the best interests of Conseco or at
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least not opposed to its best interests and, in addition, with respect to any
criminal claim, is determined to have had reasonable cause to believe that his
or her conduct was lawful or had no reasonable cause to believe that his or her
conduct was unlawful. 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 and amounts paid in settlement.
If such person was not wholly successful, the determination of entitlement to
indemnification shall be made by one of the following methods, such method to be
selected by the Board of Directors: (a) by the Board of Directors by a majority
vote of a quorum consisting of directors who are not and have not been parties
to the claim; (b) by the majority vote of a committee duly designated by the
Board of Directors, consisting solely of two or more directors who are not and
have not been parties to the claim; and (c) by special legal counsel. The
Conseco Bylaws also provide that Conseco shall advance to a director or officer
the expenses incurred by such individual. The rights conferred above shall not
be exclusive of any other right which any person may have or hereafter acquire
under any statute, bylaw, resolution of shareholders or directors, agreement or
otherwise.
The Green Tree Bylaws provide that Green Tree shall indemnify any
person who was, is, or is threatened to be made a party to a proceeding by
reason of the fact that he or she (i) is or was a director or officer of Green
Tree or (ii) while a director, officer, employee or agent of Green Tree, is or
was serving at the request of Green Tree as a director, officer, employee,
agent, or in any other capacity of another corporation, partnership, joint
venture, trust, employee benefit plan, or other enterprise, to the fullest
extent permitted under the DGCL. Such right shall include the right to be paid
by Green Tree expenses incurred in defending any such proceeding in advance of
its final disposition to the maximum extent permitted under the DGCL. If a claim
for indemnification or advancement of expenses is not paid in full by Green Tree
within sixty (60) days after a written claim has been received by Green Tree,
the claimant may at any time thereafter bring suit against Green Tree to recover
the unpaid amount of the claim, and if successful in whole or in part, the
claimant shall also be entitled to be paid the expenses of prosecuting such
claim. It shall be a defense to any such action that such indemnification or
advancement of costs of defense are not permitted under the DGCL, but the burden
of proving such defense shall be on Green Tree. Neither the failure of Green
Tree (including its board of directors or any committee thereof, independent
legal counsel, or shareholders) to have made its determination prior to the
commencement of such action that indemnification of, or advancement of costs of
defense to, the claimant is permissible in the circumstances nor an actual
determination by Green Tree (including its board of directors or any committee
thereof, independent legal counsel, or shareholders) that such indemnification
or advancement is not permissible shall be a defense to the action or create a
presumption that such indemnification or advancement is not permissible. The
rights conferred above shall not be exclusive of any other right which any
person may have or hereafter acquire under any statute, bylaw, resolution of
shareholders or directors, agreement, or otherwise.
Dividends and Repurchases
Under the Indiana Corporation Law, a corporation may make distributions
to its shareholders as long as the corporation's net assets are greater than
zero, debts may be paid as they come due, and the payment of these distributions
is consistent with the corporation's articles of incorporation. Under the DGCL,
a corporation may pay dividends and repurchase stock out of surplus or, if there
is no surplus, out of any net profits for the fiscal year in which the dividend
was declared or for the preceding fiscal year as long as no payment reduces
capital below the amount of capital represented by all classes of shares having
a preference upon the distribution of assets.
Dissenters' Rights
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Under the Indiana Corporation Law, dissenters' rights are unavailable
to holders of shares registered on a national securities exchange or quoted on
NASDAQ Market System on the record date for a meeting of shareholders at which
action on the proposed transaction otherwise subject to dissenters' rights is to
be taken.
Under the DGCL, a shareholder is entitled, under certain circumstances,
to receive payment of the fair value of the shareholder's common stock if the
shareholder dissents from a proposed merger or consolidation. Dissenters' rights
are unavailable in the case of a sale of all or substantially all of the assets
of a corporation. Dissenters' rights are also unavailable if the shares of the
Delaware corporation which is a party to a merger or consolidation are listed on
a national securities exchange, or are held of record by more than 2,000
persons, and in the merger or consolidation, shareholders receive shares of
stock of the surviving or resulting corporation and/or shares of stock of any
other corporation which are listed on a national securities exchange or held of
record by more than 2,000 persons. Since the Green Tree Common Stock is
currently listed and the shares of Conseco Common Stock to be received in the
Merger will be listed on the NYSE, dissenters' rights will not be available to
shareholders of Green Tree in connection with the Merger.
Director and Officer Discretion
Under Sections 23-1-35-1-(d), (f), and (g) of the Indiana Corporation
Law, in discharging his or her duties to the corporation and in determining what
he or she believes to be in the best interests of the corporation, a director or
officer may, in addition to considering the effects of any action on
shareholders, consider the effects of the action on employees, suppliers,
customers, the communities in which the corporation operates and any other
factors that the director or officer considers pertinent. The DGCL does not
contain a comparable provision, and under Delaware law, the consideration that a
board may give to nonshareholder constituencies is less clear. In considering
the best interests of a corporation, under Delaware law, directors and officers
may generally take into consideration the interest of nonshareholders. However,
the Delaware Supreme Court has held that the consideration of nonshareholder
constituencies is inappropriate when an active "auction" is in process to sell a
company.
The foregoing discussion of certain similarities and material
differences between the rights of Conseco shareholders and the rights of Green
Tree shareholders is a summary of certain provisions only, does not purport to
be a complete description of such similarities and differences and is qualified
in its entirety by reference to the Indiana Corporation Law and the common law
thereunder, the DGCL and the common law thereunder, and the full text of the
Conseco Articles of Incorporation, the Conseco Bylaws, the Green Tree
Certificate of Incorporation and the Green Tree Bylaws.
MANAGEMENT OF THE SURVIVING CORPORATION
UPON CONSUMMATION OF THE MERGER
The directors of Merger Sub are Stephen C. Hilbert, Rollin M. Dick and
Thomas J. Kilian. The current executive officers of Green Tree are Lawrence M.
Coss, Gregory D. Aplin, Jerry W. Britton, Bruce A. Crittenden, Richard G. Evans,
Edward L. Finn, Jack F. Brandom, III, James R. Breakey, Barbara J. Didrikson,
Joel H. Gottesman, Joseph E. Huguelet, III, Phyllis A. Knight, Michael L.
Newell, Brent H. Peterson, Mark A. Shepherd, Jeffrey A. Vanthournout, Scott T.
Young, Lyle D. Zeller, Gary V. Busch and John A. Dolphin and such individuals
will be the executive officers of the Surviving Corporation upon consummation of
the Merger and will have the same titles with the Surviving Corporation as they
currently have with Green Tree.
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LEGAL MATTERS
The validity of the Conseco Common Stock to be issued in connection
with the Merger will be passed upon for Conseco by John J. Sabl, Executive Vice
President, General Counsel and Secretary of Conseco. Mr. Sabl is a full-time
employee and officer of Conseco and owns 75,000 shares and holds options to
purchase 200,000 shares of Conseco Common Stock.
Certain tax matters in connection with the transaction will be passed
upon by Sidley & Austin and Dorsey & Whitney LLP.
EXPERTS
The consolidated financial statements of Conseco at December 31, 1997
and 1996, and for each of the three years in the period ended December 31, 1997,
incorporated by reference in this Joint Proxy Statement/Prospectus, have been
audited by Coopers & Lybrand L.L.P., independent accountants, as set forth in
their report thereon incorporated by reference herein, and are incorporated by
reference in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
The consolidated financial statements of Green Tree at December 31,
1997 and 1996, and for each of the three years in the period ended December 31,
1997, incorporated by reference in this Joint Proxy Statement/Prospectus, have
been audited by KPMG Peat Marwick LLP, independent auditors, as set forth in
their report thereon incorporated by reference herein, and are incorporated by
reference in reliance upon such report, given upon authority of such firm as
experts in accounting and auditing.
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS AND AUDITORS
Representatives of Coopers & Lybrand L.L.P. will be present at the
Conseco Special Meeting and will be available to respond to appropriate
questions and have the opportunity to make a statement if they desire.
Representatives of KPMG Peat Marwick LLP will be present at the Green Tree
Special Meeting and will be available to respond to appropriate questions and
have the opportunity to make a statement if they desire.
SHAREHOLDERS PROPOSALS
Any proper proposal which a shareholder of Conseco wishes to have
included in the Conseco Board's proxy statement and form of proxy for the 1999
Annual Meeting must be received by Conseco by December 10, 1998. Such proposals
must meet the requirements set forth in the rules and regulations of the
Commission in order to be eligible for inclusion in the proxy statement for the
1999 Annual Meeting. In addition, the Conseco Bylaws establish advance notice
procedures as to: (i) business to be brought before an annual meeting of
shareholders other than by or at the direction of the Board of Directors; and
(ii) the nomination, other than by the Board of Directors or a committee
appointed by the Board of Directors, of candidates for election as directors.
Any shareholder who wishes to submit a proposal to be acted upon at the 1999
Annual Meeting or who wishes to nominate a candidate for election as director
should obtain a copy of these Bylaw provisions and may do so by written
requested addressed to the Secretary of Conseco at 11825 N. Pennsylvania Street,
Carmel, Indiana 46032.
In the event that the Merger is not consummated, all proposals of
shareholders of Green Tree intended to be presented at the 1999 Annual Meeting
of Shareholders of Green Tree must be received by Green Tree at its executive
offices in Saint Paul, Minnesota on or before November 29, 1998, for inclusion
in the Green Tree's Proxy Statement and Proxy for such meeting. Such proposals
must meet the requirements set forth in the rules and regulations of the
Commission in order to be eligible for inclusion in the proxy statement for the
1999 Annual Meeting.
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OTHER MATTERS
As of the date of this Joint Proxy Statement/Prospectus, the Boards of
Directors of Conseco and Green Tree do not intend to present, and have not been
informed that any other person intends to present, any matter for action at the
Conseco Special Meeting or the Green Tree Special Meeting, as the case may be,
other than as discussed herein.
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ANNEX A
AGREEMENT AND PLAN OF MERGER
AMONG
CONSECO, INC.,
MARBLE ACQUISITION CORP.
AND
GREEN TREE FINANCIAL CORPORATION
Dated as of April 6, 1998
<PAGE>
TABLE OF CONTENTS
AGREEMENT AND PLAN OF MERGER
<TABLE>
<S> <C>
ARTICLE I--THE MERGER
Section 1.1 The Merger A-2
Section 1.2 Effective Time A-2
Section 1.3 Effects of the Merger; Directors and Officers A-2
Section 1.4 Charter and Bylaws; Directors and Officers A-2
Section 1.5 Conversion of Securities A-3
Section 1.6 Parent to Make Certificates Available A-3
Section 1.7 Dividends; Transfer Taxes; Withholding A-4
Section 1.8 No Fractional Securities A-5
Section 1.9 Return of Exchange Fund A-5
Section 1.10 Adjustment of Exchange Ratio A-6
Section 1.11 No Further Ownership Rights in
Company Common Stock A-6
Section 1.12 Closing of Company Transfer Books A-6
Section 1.13 Lost Certificates A-6
Section 1.14 Further Assurances A-7
Section 1.15 Closing A-7
ARTICLE II--REPRESENTATIONS AND WARRANTIES
OF PARENT AND SUB
Section 2.1 Organization, Standing and Power A-7
Section 2.2 Capital Structure A-8
Section 2.3 Authority. A-9
Section 2.4 Consents and Approvals; No Violation A-10
Section 2.5 SEC Documents and Other Reports A-11
Section 2.6 Registration Statement and Joint Proxy Statement A-12
Section 2.7 Absence of Certain Changes or Events A-12
Section 2.8 Permits and Compliance A-12
Section 2.9 Tax Matters A-13
Section 2.10 Actions and Proceedings A-14
Section 2.11 Certain Agreements A-14
Section 2.12 ERISA A-15
Section 2.13 Compliance with Worker Safety and
Environmental Laws A-16
Section 2.14 Labor Matters A-16
Section 2.15 Intellectual Property A-16
<PAGE>
Section 2.16 Pooling of Interests; Reorganization A-16
Section 2.17 Required Vote of Parent Stockholders. A-17
Section 2.18 Operations of Sub A-17
Section 2.19 Opinion of Financial Advisor A-17
Section 2.20 Brokers A-17
Section 2.21 State Takeover Statutes;
Certain Charter Provisions A-17
ARTICLE III--REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.1 Organization, Standing and Power A-18
Section 3.2 Capital Structure A-18
Section 3.3 Authority A-19
Section 3.4 Consents and Approvals; No Violation A-19
Section 3.5 SEC Documents and Other Reports A-20
Section 3.6 Registration Statement and Joint Proxy Statement A-21
Section 3.7 Absence of Certain Changes or Events A-22
Section 3.8 Permits and Compliance A-22
Section 3.9 Tax Matters A-23
Section 3.10 Actions and Proceedings A-24
Section 3.11 Certain Agreements A-24
Section 3.12 ERISA A-25
Section 3.13 Compliance with Worker Safety and
Environmental Laws A-26
Section 3.14 Labor Matters. A-26
Section 3.15 Intellectual Property A-27
Section 3.16 Opinion of Financial Advisor A-27
Section 3.17 State Takeover Statutes; Certain Charter Provisions A-27
Section 3.18 Required Vote of Company Stockholders A-27
Section 3.19 Pooling of Interests; Reorganization A-27
Section 3.20 Brokers A-27
ARTICLE IV--COVENANTS RELATING TO CONDUCT
OF BUSINESS
Section 4.1 Conduct of Business Pending the Merger A-28
Section 4.2 No Solicitation A-31
Section 4.3 Third Party Standstill Agreements A-32
Section 4.4 Pooling of Interests; Reorganization A-32
ARTICLE V--ADDITIONAL AGREEMENTS
Section 5.1 Stockholder Meetings. A-33
<PAGE>
Section 5.2 Preparation of the Registration Statement
and the Joint Proxy Statement. A-33
Section 5.3 Comfort Letters A-33
Section 5.4 Access to Information A-34
Section 5.5 Compliance with the Securities Act A-34
Section 5.6 Stock Exchange Listings. A-35
Section 5.7 Fees and Expenses A-35
Section 5.8 Company Stock Options A-36
Section 5.9 Reasonable Best Efforts; Pooling of Interests A-37
Section 5.10 Public Announcements A-38
Section 5.11 Real Estate Transfer and Gains Tax A-38
Section 5.12 State Takeover Law A-38
Section 5.13 Indemnification; Directors and Officers Insurance A-39
Section 5.14 Notification of Certain Matters A-39
Section 5.15 Employee Benefit Plans and Agreements A-39
ARTICLE VI--CONDITIONS PRECEDENT TO THE MERGER
Section 6.1 Conditions to Each Party's Obligation
to Effect the Merger A-40
Section 6.2 Conditions to Obligation of the Company
to Effect the Merger A-41
Section 6.3 Conditions to Obligations of Parent and
Sub to Effect the Merger A-43
ARTICLE VII--TERMINATION, AMENDMENT AND WAIVER
Section 7.1 Termination A-45
Section 7.2 Effect of Termination A-47
Section 7.3 Amendment A-47
Section 7.4 Waiver A-47
ARTICLE VIII--GENERAL PROVISIONS
Section 8.1 Non-Survival of Representations and Warranties A-48
Section 8.2 Notices A-48
Section 8.3 Interpretation A-49
Section 8.4 Counterparts A-49
Section 8.5 Entire Agreement; No Third-Party Beneficiaries A-49
Section 8.6 Governing Law A-49
Section 8.7 Assignment A-49
Section 8.8 Severability A-49
Section 8.9 Enforcement of this Agreement A-50
</TABLE>
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of April 6, 1998 (this
"Agreement"), among Conseco, Inc., an Indiana corporation ("Parent"), Marble
Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of
Parent ("Sub"), and Green Tree Financial Corporation, a Delaware corporation
(the "Company") (Sub and the Company being hereinafter collectively referred to
as the "Constituent Corporations").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of Parent, Sub and
the Company have approved and declared advisable the merger of Sub and the
Company (the "Merger"), upon the terms and subject to the conditions set forth
herein, whereby each issued and outstanding share of common stock, par value
$.01 per share, of the Company ("Company Common Stock") not owned directly or
indirectly by Parent or the Company will be converted into shares of Common
Stock, no par value, of Parent ("Parent Common Stock");
WHEREAS, the respective Boards of Directors of Parent and the
Company have determined that the Merger is in furtherance of and consistent with
their respective long-term business strategies and is in the best interest of
their respective stockholders;
WHEREAS, in order to induce Parent and Sub to enter into this
Agreement, concurrently herewith Parent and the Company are entering into the
Stock Option Agreement dated as of the date hereof (the "Stock Option
Agreement") in the form of the attached Exhibit A;
WHEREAS, for federal income tax purposes, it is intended that
the Merger shall qualify as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, it is intended that the Merger shall be recorded for
accounting purposes as a pooling of interests.
NOW, THEREFORE, in consideration of the premises,
representations, warranties and agreements herein contained, the parties agree
as follows:
ARTICLE I
A-1
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THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the
conditions hereof, and in accordance with the Delaware General Corporation Law
(the "DGCL"), Sub shall be merged with and into the Company at the Effective
Time (as hereinafter defined). Following the Merger, the separate corporate
existence of Sub shall cease and the Company shall continue as the surviving
corporation (the "Surviving Corporation") and shall succeed to and assume all
the rights and obligations of Sub in accordance with the DGCL. Notwithstanding
anything to the contrary herein, at the election of Parent, any direct wholly
owned Subsidiary (as hereinafter defined) of Parent may be substituted for Sub
as a constituent corporation in the Merger; provided that such substituted
corporation is a Delaware corporation which is formed solely for the purpose of
engaging in the transactions contemplated by this Agreement and has engaged in
no other business activities. In such event, the parties agree to execute an
appropriate amendment to this Agreement, in form and substance reasonably
satisfactory to Parent and the Company, in order to reflect such substitution.
Section 1.2 Effective Time. The Merger shall become effective
when a Certificate of Merger (the "Certificate of Merger"), executed in
accordance with the relevant provisions of the DGCL, is filed with the Secretary
of State of the State of Delaware; provided, however, that, upon mutual consent
of the Constituent Corporations, the Certificate of Merger may provide for a
later date of effectiveness of the Merger not more than 30 days after the date
the Certificate of Merger is filed. When used in this Agreement, the term
"Effective Time" shall mean the date and time at which the Certificate of Merger
is accepted for record or such later time established by the Certificate of
Merger. The filing of the Certificate of Merger shall be made on the date of the
Closing (as defined in Section 1.15).
Section 1.3 Effects of the Merger; Directors and Officers.
The Merger shall have the effects set forth in Section 259 of the DGCL.
Section 1.4 Charter and Bylaws; Directors and Officers. (a) At
the Effective Time, the Certificate of Incorporation of the Company, as in
effect immediately prior to the Effective Time, shall be amended so that (i)
Article 4 of such Certificate of Incorporation reads in its entirety as follows:
"The total number of shares of all classes of capital stock which the
Corporation shall have authority to issue is 100 shares of Common Stock, par
value $.01 per share" and (ii) Articles 8 and 9 of such Certificate of
Incorporation are deleted. As so amended, such Certificate of Incorporation of
the Company shall be the Certificate of Incorporation of the Surviving
Corporation until thereafter changed or amended as provided therein or by
applicable law. At the Effective Time, the Restated Bylaws of the Company, as in
effect immediately prior to the Effective Time, shall be the Bylaws of the
Surviving Corporation until thereafter changed or amended as provided
A-2
<PAGE>
therein or by the Certificate of Incorporation.
(b) The directors of Sub at the Effective Time of the Merger
shall be the directors of the Surviving Corporation, until the earlier of their
resignation or removal or until their respective successors are duly elected and
qualified, as the case may be. The officers of the Company at the Effective Time
of the Merger shall be the officers of the Surviving Corporation, until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
Section 1.5 Conversion of Securities. As of the Effective
Time, by virtue of the Merger and without any action on the part of Sub, the
Company or the holders of any securities of the Constituent Corporations:
(a) Each issued and outstanding share of common stock, par
value $.01 per share, of Sub shall be converted into one validly issued, fully
paid and nonassessable share of common stock of the Surviving Corporation.
(b) All shares of Company Common Stock that are held in the
treasury of the Company or by any wholly owned Subsidiary of the
Company and any shares of Company Common Stock owned by Parent shall be
cancelled and no capital stock of Parent or other consideration shall
be delivered in exchange therefor.
(c) Subject to the provisions of Sections 1.8 and 1.10 hereof,
each share of Company Common Stock issued and outstanding immediately
prior to the Effective Time (other than shares to be cancelled in
accordance with Section 1.5(b)) shall be converted into 0.9165 (such
number being the "Exchange Ratio") validly issued, fully paid and
nonassessable shares of Parent Common Stock. All such shares of Company
Common Stock, when so converted, shall no longer be outstanding and
shall automatically be cancelled and retired and each holder of a
certificate representing any such shares shall cease to have any rights
with respect thereto, except the right to receive any dividends and
other distributions in accordance with Section 1.7, certificates
representing the shares of Parent Common Stock into which such shares
are converted and any cash, without interest, in lieu of fractional
shares to be issued or paid in consideration therefor upon the
surrender of such certificate in accordance with Section 1.6.
Section 1.6 Parent to Make Certificates Available. (a)
Exchange of Certificates. Parent shall authorize a commercial bank (or such
other person or persons as shall be reasonably acceptable to Parent and the
Company) to act as Exchange Agent hereunder (the "Exchange Agent" ). As soon as
practicable after the Effective Time, Parent shall deposit with the Exchange
Agent, in trust for the holders of shares of Company Common Stock converted in
the Merger, certificates representing the shares of Parent Common Stock issuable
pursuant to Section 1.5(c) in exchange for outstanding shares of
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<PAGE>
Company Common Stock and cash, as required to make payments in lieu of any
fractional shares pursuant to Section 1.8 (such cash and shares of Parent Common
Stock, together with any dividends or distributions with respect thereto, being
hereinafter referred to as the "Exchange Fund"). The Exchange Agent shall
deliver the Parent Common Stock contemplated to be issued pursuant to Section
1.5(c) out of the Exchange Fund.
(b) Exchange Procedures. Parent shall instruct the Exchange
Agent, as soon as practicable after the Effective Time, to mail to each record
holder of a certificate or certificates which immediately prior to the Effective
Time represented outstanding shares of Company Common Stock converted in the
Merger (the "Certificates") a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon actual delivery of the Certificates to the Exchange Agent, and
shall contain instructions for use in effecting the surrender of the
Certificates in exchange for certificates representing shares of Parent Common
Stock and cash in lieu of fractional shares). Upon surrender for cancellation to
the Exchange Agent of all Certificates held by any record holder of a
Certificate, together with such letter of transmittal, duly executed, the holder
of such Certificate shall be entitled to receive in exchange therefor a
certificate representing that number of whole shares of Parent Common Stock into
which the shares represented by the surrendered Certificate shall have been
converted at the Effective Time pursuant to this Article I, cash in lieu of any
fractional share in accordance with Section 1.8 and certain dividends and other
distributions in accordance with Section 1.7, and any Certificate so surrendered
shall forthwith be cancelled.
Section 1.7 Dividends; Transfer Taxes; Withholding. No
dividends or other distributions that are declared on or after the Effective
Time on Parent Common Stock, or are payable to the holders of record thereof on
or after the Effective Time, will be paid to any person entitled by reason of
the Merger to receive a certificate representing Parent Common Stock until such
person surrenders the related Certificate or Certificates, as provided in
Section 1.6, and no cash payment in lieu of fractional shares will be paid to
any such person pursuant to Section 1.8 until such person shall so surrender the
related Certificate or Certificates. Subject to the effect of applicable law,
there shall be paid to each record holder of a new certificate representing such
Parent Common Stock: (i) at the time of such surrender or as promptly as
practicable thereafter, the amount of any dividends or other distributions
theretofore paid with respect to the shares of Parent Common Stock represented
by such new certificate and having a record date on or after the Effective Time
and a payment date prior to such surrender; (ii) at the appropriate payment date
or as promptly as practicable thereafter, the amount of any dividends or other
distributions payable with respect to such shares of Parent Common Stock and
having a record date on or after the Effective Time but prior to such surrender
and a payment date on or subsequent to such surrender; and (iii) at the time of
such surrender or as promptly as practicable thereafter, the amount of any cash
payable with respect to a fractional share of Parent Common Stock to which such
holder is entitled pursuant to
A-4
<PAGE>
Section 1.8. In no event shall the person entitled to receive such dividends or
other distributions be entitled to receive interest on such dividends or other
distributions. If any cash or certificate representing shares of Parent Common
Stock is to be paid to or issued in a name other than that in which the
Certificate surrendered in exchange therefor is registered, it shall be a
condition of such exchange that the Certificate so surrendered shall be properly
endorsed and otherwise in proper form for transfer and that the person
requesting such exchange shall pay to the Exchange Agent any transfer or other
taxes required by reason of the issuance of certificates for such shares of
Parent Common Stock in a name other than that of the registered holder of the
Certificate surrendered, or shall establish to the satisfaction of the Exchange
Agent that such tax has been paid or is not applicable. Parent or the Exchange
Agent shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of shares of Company Common
Stock such amounts as Parent or the Exchange Agent is required to deduct and
withhold with respect to the making of such payment under the Code or under any
provision of state, local or foreign tax law. To the extent that amounts are so
withheld by Parent or the Exchange Agent, such withheld amounts shall be treated
for all purposes of this Agreement as having been paid to the holder of the
shares of Company Common Stock in respect of which such deduction and
withholding was made by Parent or the Exchange Agent.
Section 1.8 No Fractional Securities. No certificates or scrip
representing fractional shares of Parent Common Stock shall be issued upon the
surrender for exchange of Certificates pursuant to this Article I, and no Parent
dividend or other distribution or stock split shall relate to any fractional
share, and no fractional share shall entitle the owner thereof to vote or to any
other rights of a security holder of Parent. In lieu of any such fractional
share, each holder of Company Common Stock who would otherwise have been
entitled to a fraction of a share of Parent Common Stock upon surrender of
Certificates for exchange pursuant to this Article I will be paid an amount in
cash (without interest), rounded to the nearest cent, determined by multiplying
(i) the per share closing price on the New York Stock Exchange, Inc. (the
"NYSE") of Parent Common Stock (as reported in the NYSE Composite Transactions)
on the date of the Effective Time (or, if the shares of Parent Common Stock do
not trade on the NYSE on such date, the first date of trading of shares of
Parent Common Stock on the NYSE after the Effective Time) by (ii) the fractional
interest to which such holder would otherwise be entitled. As promptly as
practicable after the determination of the amount of cash, if any, to be paid to
holders of fractional share interests, the Exchange Agent shall so notify the
Parent, and the Parent shall deposit such amount with the Exchange Agent and
shall cause the Exchange Agent to forward payments to such holders of fractional
share interests subject to and in accordance with the terms of Section 1.7 and
this Section 1.8.
Section 1.9 Return of Exchange Fund. Any portion of the
Exchange Fund which remains undistributed to the former stockholders of the
Company for six months after the Effective Time shall be delivered to Parent,
upon demand of Parent, and any such
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former stockholders who have not theretofore complied with this Article I shall
thereafter look only to Parent for payment of their claim for Parent Common
Stock, any cash in lieu of fractional shares of Parent Common Stock and any
dividends or distributions with respect to Parent Common Stock. Neither Parent
nor the Surviving Corporation shall be liable to any former holder of Company
Common Stock for any such shares of Parent Common Stock, cash and dividends and
distributions held in the Exchange Fund which is delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
Section 1.10 Adjustment of Exchange Ratio. In the event of any
reclassification, stock split or stock dividend with respect to Parent Common
Stock, any change or conversion of Parent Common Stock into other securities of
Parent or any other dividend or distribution with respect to the Parent Common
Stock other than normal quarterly cash dividends as the same may be adjusted
from time to time pursuant to the terms of this Agreement (or if a record date
with respect to any of the foregoing should occur) prior to the Effective Time,
appropriate and proportionate adjustments, if any, shall be made to the Exchange
Ratio, and all references to the Exchange Ratio in this Agreement shall be
deemed to be to the Exchange Ratio as so adjusted.
Section 1.11 No Further Ownership Rights in Company Common
Stock. All shares of Parent Common Stock issued upon the surrender for exchange
of Certificates in accordance with the terms hereof (including any cash paid
pursuant to Section 1.8) shall be deemed to have been issued in full
satisfaction of all rights pertaining to the shares of Company Common Stock
represented by such Certificates.
Section 1.12 Closing of Company Transfer Books. At the
Effective Time, the stock transfer books of the Company shall be closed and no
transfer of shares of Company Common Stock shall thereafter be made on the
records of the Company. If, after the Effective Time, Certificates are presented
to the Surviving Corporation, the Exchange Agent or the Parent, such
Certificates shall be cancelled and exchanged as provided in this Article I.
Section 1.13 Lost Certificates. If any Certificate shall have
been lost, stolen or destroyed, upon the making of an affidavit of that fact by
the person claiming such Certificate to be lost, stolen or destroyed and, if
required by Parent or the Exchange Agent, the posting by such person of a bond,
in such reasonable amount as Parent or the Exchange Agent may direct as
indemnity against any claim that may be made against them with respect to such
Certificate, the Exchange Agent will issue in exchange for such lost, stolen or
destroyed Certificate the shares of Parent Common Stock, any cash in lieu of
fractional shares of Parent Common Stock to which the holders thereof are
entitled pursuant to Section 1.8 and any dividends or other distributions to
which the holders thereof are entitled pursuant to Section 1.7.
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Section 1.14 Further Assurances. If at any time after the
Effective Time the Surviving Corporation shall consider or be advised that any
deeds, bills of sale, assignments or assurances or any other acts or things are
necessary, desirable or proper (a) to vest, perfect or confirm, of record or
otherwise, in the Surviving Corporation its right, title or interest in, to or
under any of the rights, privileges, powers, franchises, properties or assets of
either of the Constituent Corporations, or (b) otherwise to carry out the
purposes of this Agreement, the Surviving Corporation and its proper officers
and directors or their designees shall be authorized to execute and deliver, in
the name and on behalf of either of the Constituent Corporations, all such
deeds, bills of sale, assignments and assurances and to do, in the name and on
behalf of either Constituent Corporation, all such other acts and things as may
be necessary, desirable or proper to vest, perfect or confirm the Surviving
Corporation's right, title or interest in, to or under any of the rights,
privileges, powers, franchises, properties or assets of such Constituent
Corporation and otherwise to carry out the purposes of this Agreement.
Section 1.15 Closing. The closing of the transactions
contemplated by this Agreement (the "Closing") and all actions specified in this
Agreement to occur at the Closing shall take place at the offices of Dorsey &
Whitney LLP, 220 South Sixth Street, Minneapolis, Minnesota, at 10:00 a.m.,
local time, no later than the second business day following the day on which the
last of the conditions set forth in Article VI shall have been fulfilled or
waived (if permissible) or at such other time and place as Parent and the
Company shall agree.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub represent and warrant to the Company as
follows:
Section 2.1 Organization, Standing and Power. Each of Parent
and Sub is a corporation duly organized, validly existing and in good standing
under the laws of its place of incorporation and has the requisite corporate
power and authority to carry on its business as now being conducted. Each
Subsidiary (as hereinafter defined) of Parent is duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it is
organized and has the requisite corporate power and authority to carry on its
business as now being conducted, except where the failure to be so organized,
existing or in good standing or to have such power or authority would not,
individually or in the aggregate, have a Material Adverse Effect (as hereinafter
defined) on Parent. Parent and each of its Subsidiaries are duly qualified to do
business, and are in good standing, in each jurisdiction where the character of
their properties owned or held under lease or the nature of their activities
makes such qualification necessary, except where the failure to be so qualified
would not, individually or in the aggregate, have a Material Adverse Effect on
Parent. For purposes of this Agreement (a) "Material Adverse Change" or
"Material Adverse
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Effect" means, when used with respect to Parent or the Company, as the case may
be, any change or effect that is or could reasonably be expected (as far as can
be foreseen at the time) to be materially adverse to the business, assets,
liabilities, financial condition or results of operations of Parent and its
Subsidiaries, taken as a whole, or the Company and its Subsidiaries, taken as a
whole, as the case may be; provided, however, that in determining whether a
Material Adverse Change or Material Adverse Effect has occurred with respect to
either referenced party, any change or effect, to the extent it is attributable
to changes in prevailing interest rates, to any change in general economic
conditions affecting companies in industries similar to the industries in which
the Company and its Subsidiaries or Parent and its Subsidiaries, as the case may
be, operate or to the actions described in Section 2.1 of the Company Letter (as
hereinafter defined) shall not be considered when determining if a Material
Adverse Change or Material Adverse Effect has occurred; and (b) "Subsidiary"
means any corporation, partnership, limited liability company, joint venture or
other legal entity of which Parent or the Company, as the case may be (either
alone or through or together with any other Subsidiary), owns, directly or
indirectly, 50% or more of the stock or other equity interests the holders of
which are generally entitled to vote for the election of the board of directors
or other governing body of such corporation, partnership, limited liability
company, joint venture or other legal entity.
Section 2.2 Capital Structure. As of the date hereof, the
authorized capital stock of Parent consists of 1,000,000,000 shares of Parent
Common Stock and 20,000,000 shares of Preferred Stock, no par value (the "Parent
Preferred Stock"). At the close of business on April 3, 1998, (i) 186,696,453
shares of Parent Common Stock were issued and outstanding all of which were
validly issued, fully paid and nonassessable and free of preemptive rights, (ii)
39,823,149 shares of Parent Common Stock were held in treasury of Parent or by
Subsidiaries of Parent, (iii) 1,895,250 shares of Preferred Redeemable Increased
Dividend Equity Securities of Parent (the "Parent PRIDES") were issued and
outstanding under which Parent had the obligation to deliver 6,481,755 shares of
Parent Common Stock, (iv) 90,000 shares of Series E Preferred Stock held by
Bankers National Life Insurance Company, a wholly owned subsidiary of Parent,
were issued and outstanding, (v) 10,074,900 FELINE PRIDES of Parent ("FELINE
PRIDES") were issued and outstanding under which Parent has the obligation to
deliver 9,463,332 shares of Parent Common Stock, (vi) $29,128,000 in principal
amount of 6.5% Convertible Subordinated Notes of Parent due 2005, which debt is
convertible into an aggregate of 2,241,691 shares of Parent Common Stock, (vii)
$86,038,000 in principal amount of 6.5% Convertible Subordinated Notes of
Pioneer Financial Services, Inc. due 2003, which notes are convertible into an
aggregate of 3,044,454 shares of Parent Common Stock, (viii) 700,000 warrants to
purchase Parent Common Stock, (ix) 23,974,665 shares of Parent Common Stock were
reserved for issuance pursuant to outstanding options to purchase shares of
Parent Common Stock and other benefits granted under Parent's benefit plans (the
"Parent Stock Plans"), or pursuant to any plans assumed by Parent Company in
connection with any acquisition, business combination or similar transaction and
(x) 15,945,087 shares of Parent Common Stock were reserved for issuance upon
conversion of
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the Parent PRIDES and FELINE PRIDES. As of the date of this Agreement, except
(i) as set forth above and (ii) as set forth in the Parent SEC Documents (as
hereinafter defined), no shares of capital stock or other voting securities of
Parent were issued, reserved for issuance or outstanding. All of the shares of
Parent Common Stock issuable in exchange for Company Common Stock at the
Effective Time in accordance with this Agreement will be, when so issued, duly
authorized, validly issued, fully paid and nonassessable and free of preemptive
rights. As of the date of this Agreement, except for (i) this Agreement, (ii) as
set forth above, or (iii) as disclosed in any Parent SEC Documents and (iv)
except as set forth in Section 2.2 of the letter dated the date hereof and
delivered on the date hereof by Parent to the Company, which letter relates to
this Agreement and is designated therein as the Parent Letter (the "Parent
Letter"), there are no options, warrants, calls, rights or agreements to which
Parent or any of its wholly owned Subsidiaries is a party or by which any of
them is bound obligating Parent or any of its wholly owned Subsidiaries to
issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock of Parent or any of its wholly owned Subsidiaries or
obligating Parent or any of its wholly owned Subsidiaries to grant, extend or
enter into any such option, warrant, call, right or agreement. Except as set
forth in Section 2.2 of the Parent Letter, each outstanding share of capital
stock of each Subsidiary of Parent is duly authorized, validly issued, fully
paid and nonassessable and, except as disclosed in the Parent SEC Documents
filed prior to the date of this Agreement, each such share is owned by Parent or
another Subsidiary of Parent, free and clear of all security interests, liens,
claims, pledges, options, rights of first refusal, agreements, limitations on
voting rights, charges and other encumbrances of any nature whatsoever. Except
as set forth above, Parent does not have any outstanding bonds, debentures,
notes or other obligations the holders of which have the right to vote (or
convertible into or exercisable for securities having the right to vote) with
the stockholders of the Company on any matter. All of Parent's material
Subsidiaries are wholly owned by Parent. Exhibit 21 to Parent's Annual Report on
Form 10-K for the year ended December 31, 1997 as filed with the Securities and
Exchange Commission (the "SEC") (the "Parent Annual Report"), is a true,
accurate and correct statement in all material respects of all of the
information required to be set forth therein by the regulations of the SEC.
Section 2.3 Authority. On or prior to the date of this
Agreement, the Boards of Directors of Parent and Sub have declared the Merger
advisable and fair to and in the best interest of Parent and Sub, respectively,
and their stockholders, approved and adopted this Agreement in accordance with
the Business Corporation Law of the State of Indiana and the DGCL, respectively,
and the Board of Directors of Parent has resolved to recommend the approval by
Parent's stockholders of the issuance of Parent Common Stock in connection with
the Merger (the "Share Issuance"). Each of Parent and Sub has all requisite
corporate power and authority to enter into this Agreement, Parent has all
requisite corporate power and authority to enter into the Stock Option
Agreement, and, subject to approval by the stockholders of Parent of the Share
Issuance, to consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement by Parent and Sub, the execution and
delivery of the Stock Option Agreement by
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Parent and the consummation by Parent and Sub of the transactions contemplated
hereby and thereby have been duly authorized by all necessary corporate action
on the part of Parent and Sub, subject to (x) approval by the stockholders of
Parent of the Share Issuance and (y) the filing of appropriate Merger documents
as required by the DGCL. This Agreement and the consummation of the transactions
contemplated hereby have been approved by the sole stockholder of Sub. This
Agreement has been duly executed and delivered by Parent and Sub, the Stock
Option Agreement has been duly executed and delivered by Parent, and (assuming
the valid authorization, execution and delivery of this Agreement and the Stock
Option Agreement by the Company and the validity and binding effect hereof and
thereof on the Company) this Agreement constitutes the valid and binding
obligation of Parent and Sub enforceable against each of them in accordance with
its terms and the Stock Option Agreement constitutes the valid and binding
obligation of Parent enforceable against Parent in accordance with its terms.
The Share Issuance and the filing of a registration statement on Form S-4 with
the SEC by Parent under the Securities Act of 1933, as amended (together with
the rules and regulations promulgated thereunder, the " Securities Act"), for
the purpose of registering the shares of Parent Common Stock to be issued in the
Merger (together with any amendments or supplements thereto, whether prior to or
after the effective date thereof, the "Registration Statement") have been duly
authorized by Parent's Board of Directors.
Section 2.4 Consents and Approvals; No Violation. Assuming
that all consents, approvals, authorizations and other actions described in this
Section 2.4 have been obtained and all filings and obligations described in this
Section 2.4 have been made, and except as set forth in Section 2.4 of the Parent
Letter, the execution and delivery of this Agreement and the Stock Option
Agreement do not, and the consummation of the transactions contemplated hereby
and thereby and compliance with the provisions hereof and thereof will not,
result in any violation of, or default (with or without notice or lapse of time,
or both) under, or give to others a right of termination, cancellation or
acceleration of any obligation or the loss of a material benefit under, or
result in the creation of any lien, security interest, charge or encumbrance
upon any of the properties or assets of Parent or any of its Subsidiaries under,
any provision of (i) the Amended and Restated Articles of Incorporation or the
Amended and Restated By-Laws of Parent or the Certificate of Incorporation or
Bylaws of Sub, (ii) any provision of the comparable charter or organization
documents of any of Parent's Subsidiaries, (iii) any loan or credit agreement,
note, bond, mortgage, indenture, lease or other agreement, instrument, permit,
concession, franchise or license applicable to Parent or any of its Subsidiaries
or (iv) any judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Parent or any of its Subsidiaries or any of their respective
properties or assets, other than, in the case of clauses (ii), (iii) or (iv),
any such violations, defaults, rights, liens, security interests, charges or
encumbrances that, individually or in the aggregate, would not have a Material
Adverse Effect on Parent, materially impair the ability of Parent or Sub to
perform their respective obligations hereunder or under the Stock Option
Agreement or prevent the consummation of any of the transactions contemplated
hereby or thereby. No filing or
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registration with, or authorization, consent or approval of, any domestic
(federal and state), foreign or supranational court, commission, governmental
body, regulatory agency, authority or tribunal (a "Governmental Entity") is
required by or with respect to Parent or any of its Subsidiaries in connection
with the execution and delivery of this Agreement or the Stock Option Agreement
by Parent or Sub or is necessary for the consummation of the Merger and the
other transactions contemplated by this Agreement or the Stock Option Agreement,
except for (i) in connection, or in compliance, with the provisions of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), the Securities Act and the Securities Exchange Act of 1934, as amended
(together with the rules and regulations promulgated thereunder, the "Exchange
Act"), (ii) the filing of the Certificate of Merger with the Secretary of State
of the State of Delaware and appropriate documents with the relevant authorities
of other states in which the Company or any of its Subsidiaries is qualified to
do business, (iii) such filings, authorizations, orders and approvals as may be
required by state takeover laws (the " State Takeover Approvals"), (iv) such
filings as may be required in connection with the taxes described in Section
5.11, (v) applicable requirements, if any, of state securities or "blue sky"
laws ("Blue Sky Laws") and the NYSE, (vi) as may be required under foreign laws,
(vii) such filings and consents as may be required under federal and state
commercial finance, lending and banking laws, (viii) any required filings and/or
notices required under the insurance laws of the jurisdictions set forth in
Section 2.4 of the Parent Letter and (ix) such other consents, orders,
authorizations, registrations, declarations and filings the failure of which to
be obtained or made would not, individually or in the aggregate, have a Material
Adverse Effect on Parent, materially impair the ability of Parent or Sub to
perform its obligations hereunder or under the Stock Option Agreement or prevent
the consummation of any of the transactions contemplated hereby or thereby.
Section 2.5 SEC Documents and Other Reports. Parent has filed
all required documents with the SEC since January 1, 1995 (the "Parent SEC
Documents"). As of their respective dates, the Parent SEC Documents complied in
all material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, and, at the respective times they were filed,
none of the Parent SEC Documents contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The consolidated financial statements
(including, in each case, any notes thereto) of Parent included in the Parent
SEC Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, were prepared in accordance with generally accepted accounting
principles (except, in the
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case of the unaudited statements, as permitted by Form 10-Q of the SEC) applied
on a consistent basis during the periods involved (except as may be indicated
therein or in the notes thereto) and fairly presented in all material respects
the consolidated financial position of Parent and its consolidated Subsidiaries
as at the respective dates thereof and the consolidated results of their
operations and their consolidated cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments and to any other adjustments described therein). Except as set forth
in Section 2.5 of the Parent Letter, as disclosed in the Parent SEC Documents or
as required by generally accepted accounting principles, Parent has not, since
December 31, 1997, made any change in the accounting practices or policies
applied in the preparation of financial statements.
Section 2.6 Registration Statement and Joint Proxy Statement.
None of the information to be supplied by Parent or Sub for inclusion or
incorporation by reference in the Registration Statement or the joint proxy
statement/prospectus included therein relating to the Stockholder Meetings (as
defined in Section 5.1) (together with any amendments or supplements thereto,
the "Joint Proxy Statement") will (i) in the case of the Registration Statement,
at the time it becomes effective, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading or (ii) in the
case of the Joint Proxy Statement, at the time of the mailing of the Joint Proxy
Statement, at the time of each of the Stockholder Meetings and at the Effective
Time, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading. If at any time prior to the Effective Time any event with respect to
Parent, its officers and directors or any of its Subsidiaries shall occur which
is required to be described in the Joint Proxy Statement or the Registration
Statement, such event shall be so described, and an appropriate amendment or
supplement shall be promptly filed with the SEC and, as required by law,
disseminated to the stockholders of Parent and the Company. The Registration
Statement will comply (with respect to Parent) as to form in all material
respects with the provisions of the Securities Act, and the Joint Proxy
Statement will comply (with respect to Parent) as to form in all material
respects with the provisions of the Exchange Act.
Section 2.7 Absence of Certain Changes or Events. Except as
disclosed in Parent SEC Documents filed with the SEC prior to the date of this
Agreement, since December 31, 1997, (A) Parent and its Subsidiaries have not
incurred any material liability or obligation (indirect, direct or contingent),
or entered into any material oral or written agreement or other transaction,
that is not in the ordinary course of business or that would result in a
Material Adverse Effect on Parent, (B) Parent and its Subsidiaries have not
sustained any loss or interference with their business or properties from fire,
flood, windstorm, accident or other calamity (whether or not covered by
insurance) that has had a Material Adverse Effect on Parent, and (C) there has
been no event causing a Material Adverse Effect on Parent, nor any development
that would, individually or in the aggregate, result in a Material Adverse
Effect on Parent.
Section 2.8 Permits and Compliance. Each of Parent and its
Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, charters, easements, variances, exceptions, consents,
certificates, approvals and orders of any
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Governmental Entity necessary for Parent or any of its Subsidiaries to own,
lease and operate its properties or to carry on its business as it is now being
conducted (the "Parent Permits"), except where the failure to have any of the
Parent Permits would not, individually or in the aggregate, have a Material
Adverse Effect on Parent, and, as of the date of this Agreement, no suspension
or cancellation of any of the Parent Permits is pending or, to the Knowledge of
Parent (as hereinafter defined), threatened, except where the suspension or
cancellation of any of the Parent Permits would not, individually or in the
aggregate, have a Material Adverse Effect on Parent. Neither Parent nor any of
its Subsidiaries is in violation of (A) its charter, by-laws or other
organizational documents, (B) any applicable law, ordinance, administrative or
governmental rule or regulation or (C) any order, decree or judgment of any
Governmental Entity having jurisdiction over Parent or any of its Subsidiaries,
except, in the case of clauses (A), (B) and (C), for any violations that,
individually or in the aggregate, would not have a Material Adverse Effect on
Parent. Except as disclosed in the Parent SEC Documents filed prior to the date
of this Agreement or in Section 2.8 of the Parent Letter, as of the date hereof
there is no contract or agreement that is material to the business, assets,
liabilities, financial condition or results of operations of Parent and its
Subsidiaries, taken as a whole. Except as set forth in the Parent SEC Documents
filed prior to the date of this Agreement or Section 2.8 of the Parent Letter,
no event of default or event that, but for the giving of notice or the lapse of
time or both, would constitute an event of default exists or, upon the
consummation by Parent or Sub of the transactions contemplated by this Agreement
or the Stock Option Agreement, will exist under any indenture, mortgage, loan
agreement, note or other agreement or instrument for borrowed money, any
guarantee of any agreement or instrument for borrowed money or any lease,
contractual license or other agreement or instrument to which Parent or any of
its Subsidiaries is a party or by which Parent or any such Subsidiary is bound
or to which any of the properties, assets or operations of Parent or any such
Subsidiary is subject, other than any defaults that, individually or in the
aggregate, would not have a Material Adverse Effect on Parent. For purposes of
this Agreement, "Knowledge of Parent" means the actual knowledge of the
individuals identified in Section 2.8 of the Parent Letter.
Section 2.9 Tax Matters. Except as otherwise set forth in
Section 2.9 of the Parent Letter, (i) Parent and each of its Subsidiaries have
filed all federal, and all material state, local, foreign and provincial, Tax
Returns (as hereinafter defined) required to have been filed or appropriate
extensions therefor have been properly obtained, and such Tax Returns are
correct and complete, except to the extent that any failure to so file or any
failure to be correct and complete would not, individually or in the aggregate,
have a Material Adverse Effect
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on Parent; (ii) all Taxes (as hereinafter defined) shown to be due on such Tax
Returns have been timely paid or extensions for payment have been properly
obtained, or such Taxes are being timely and properly contested, (iii) Parent
and each of its Subsidiaries have complied in all material respects with all
rules and regulations relating to the withholding of Taxes except to the extent
that any failure to comply with such rules and regulations would not,
individually or in the aggregate, have a Material Adverse Effect on Parent; (iv)
neither Parent nor any of its Subsidiaries has waived any statute of limitations
in respect of its Taxes; (v) any Tax Returns referred to in clause (i) relating
to federal and state income Taxes have been examined by the Internal Revenue
Service (the "IRS") or the appropriate state taxing authority or the period for
assessment of the Taxes in respect of which such Tax Returns were required to be
filed has expired; (vi) no issues that have been raised in writing by the
relevant taxing authority in connection with the examination of the Tax Returns
referred to in clause (i) are currently pending; and (vii) all deficiencies
asserted or assessments made as a result of any examination of such Tax Returns
by any taxing authority have been paid in full or are being timely and properly
contested. The representations set forth in the Parent Tax Certificate attached
to the Parent Letter, if made on the date hereof (assuming the Merger were
consummated on the date hereof), would be true and correct. For purposes of this
Agreement: (i) "Taxes" means any federal, state, local, foreign or provincial
income, gross receipts, property, sales, use, license, excise, franchise,
employment, payroll, withholding, alternative or added minimum, ad valorem,
value-added, transfer or excise tax, or other tax, custom, duty, governmental
fee or other like assessment or charge of any kind whatsoever, together with any
interest or penalty imposed by any Governmental Entity, and (ii) "Tax Return"
means any return, report or similar statement (including the attached schedules)
required to be filed with respect to any Tax, including, without limitation, any
information return, claim for refund, amended return or declaration of estimated
Tax.
Section 2.10 Actions and Proceedings. Except as set forth in
the Parent SEC Documents filed prior to the date of this Agreement, there are no
outstanding orders, judgments, injunctions, awards or decrees of any
Governmental Entity against or involving Parent or any of its Subsidiaries, or
against or involving any of the present or former directors, officers,
employees, consultants, agents or stockholders of Parent or any of its
Subsidiaries, as such, any of its or their properties, assets or business that,
individually or in the aggregate, would have a Material Adverse Effect on Parent
or materially impair the ability of Parent to perform its obligations hereunder.
As of the date of this Agreement, there are no actions, suits or claims or
legal, administrative or arbitrative proceedings or investigations pending or,
to the Knowledge of Parent, threatened against or involving Parent or any of its
Subsidiaries or any of its or their present or former directors, officers,
employees, consultants, agents or stockholders, as such, or any of its or their
properties, assets or business that, individually or in the aggregate, would
have a Material Adverse Effect on Parent or materially impair the ability of
Parent to perform its obligations hereunder. As of the date hereof, there are no
actions, suits, labor disputes or other litigation, legal or administrative
proceedings or governmental investigations pending or, to the Knowledge of
Parent, threatened against or affecting Parent or any of its Subsidiaries or any
of its or their present or former officers, directors, employees, consultants,
agents or stockholders, as such, or any of its or their properties, assets or
business relating to the transactions contemplated by this Agreement and the
Stock Option Agreement.
Section 2.11 Certain Agreements. Neither Parent nor any of its
Subsidiaries
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is a party to any material oral or written agreement or plan, including any
employment agreement, severance agreement, stock option plan, stock appreciation
rights plan, restricted stock plan or stock purchase plan, any of the benefits
of which will be increased, or the vesting of the benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the Stock Option Agreement or the value of any of the benefits of
which will be calculated on the basis of any of the transactions contemplated by
this Agreement or the Stock Option Agreement.
Section 2.12 ERISA. (a) Except as would not have a Material
Adverse Effect on Parent, each Parent Plan complies in all respects with Title
IV of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")
, the Code and all other applicable statutes and governmental rules and
regulations, and (i) no "reportable event" (within the meaning of Section 4043
of ERISA) has occurred with respect to any Parent Plan that is likely to have
individually or in the aggregate, a Material Adverse Effect on Parent and (ii)
neither Parent nor any of its ERISA Affiliates (as hereinafter defined) has
withdrawn from any Parent Plan or Parent Multiemployer Plan (as hereinafter
defined) or instituted, or is currently considering taking, any action to do so.
Except as would not have a Material Adverse Effect on Parent, no Parent Plan,
nor any trust created thereunder, has incurred any "accumulated funding
deficiency" (as defined in Section 302 of ERISA), whether or not waived.
(b) With respect to the Parent Plans, no event has occurred
and, to the Knowledge of Parent, there exists no condition or set of
circumstances in connection with which Parent or any ERISA Affiliate or Parent
Plan fiduciary could be subject to any liability under the terms of such Parent
Plans, ERISA, the Code or any other applicable law, other than liabilities for
benefits payable in the normal course, which would have a Material Adverse
Effect on Parent.
(c) As used herein, (i) "Parent Plan" means a "pension plan"
(as defined in Section 3(2) of ERISA (other than a Parent Multiemployer Plan)),
a "welfare plan" (as defined in Section 3(1) of ERISA), or any bonus, profit
sharing, deferred compensation, incentive compensation, stock ownership, stock
purchase, stock option, phantom stock, holiday pay, vacation, severance, death
benefit, sick leave, fringe benefit, personnel policy, insurance or other plan,
arrangement or understanding, in each case established or maintained by Parent
or any of its ERISA Affiliates or as to which Parent or any of its ERISA
Affiliates has contributed or otherwise may have any liability, (ii) "Parent
Multiemployer Plan" means a "multiemployer plan" (as defined in Section
4001(a)(3) of ERISA) to which Parent or any of its ERISA Affiliates is or has
been obligated to contribute or otherwise may have any liability, and (iii) with
respect to any person, "ERISA Affiliate" means any trade or business (whether or
not incorporated) which is under common control or would be considered a single
employer with such person pursuant to Section 414(b), (c), (m) or (o) of the
Code and the regulations promulgated under those sections or pursuant to Section
4001(b) of ERISA and the regulations promulgated thereunder.
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Section 2.13 Compliance with Worker Safety and Environmental
Laws. The properties, assets and operations of Parent and its Subsidiaries are
in compliance with all applicable federal, state, local and foreign laws, rules
and regulations, orders, decrees, judgments, permits and licenses relating to
public and worker health and safety (collectively, "Worker Safety Laws") and the
protection and clean-up of the environment and activities or conditions related
thereto, including, without limitation, those relating to the generation,
handling, disposal, transportation or release of hazardous materials
(collectively, "Environmental Laws"), except for any violations that,
individually or in the aggregate, would not have a Material Adverse Effect on
Parent. With respect to such properties, assets and operations, including any
previously owned, leased or operated properties, assets or operations, there are
no events, conditions, circumstances, activities, practices, incidents, actions
or plans of Parent or any of its Subsidiaries that may interfere with or prevent
compliance or continued compliance with applicable Worker Safety Laws and
Environmental Laws, other than any such interference or prevention as would not,
individually or in the aggregate with any such other interference or prevention,
have a Material Adverse Effect on Parent.
Section 2.14 Labor Matters. Neither Parent nor any of its
Subsidiaries has engaged in any unfair labor practice with respect to any
persons employed by or otherwise performing services primarily for Parent or any
of its Subsidiaries (the "Parent Business Personnel"), and there is no unfair
labor practice complaint or grievance against Parent or any of its Subsidiaries
by the National Labor Relations Board or any comparable state agency pending or
threatened in writing with respect to Parent Business Personnel, except where
such unfair labor practice, complaint or grievance would not have a Material
Adverse Effect on Parent. There is no labor strike, dispute, slowdown or
stoppage pending or, to the Knowledge of Parent, threatened against or affecting
Parent or any of its Subsidiaries which may interfere with the respective
business activities of Parent or any of its Subsidiaries, except where such
dispute, strike or work stoppage would not have a Material Adverse Effect on
Parent.
Section 2.15 Intellectual Property. Parent and its
Subsidiaries have through ownership or licensing all patents, trademarks, trade
names, service marks, trade secrets, copyrights and other proprietary
intellectual property rights (collectively, "Intellectual Property Rights") as
are necessary in connection with the business of Parent and its Subsidiaries,
taken as a whole, except where the failure to have such Intellectual Property
Rights would not have a Material Adverse Effect on Parent. Neither Parent nor
any of its Subsidiaries has infringed any Intellectual Property Rights of any
third party other than any infringements that, individually or in the aggregate,
would not have a Material Adverse Effect on Parent.
Section 2.16 Pooling of Interests; Reorganization. To the
Knowledge of Parent, neither Parent nor any of its Subsidiaries has (i) taken
any action or failed to take any action which action or failure would jeopardize
the treatment of the Merger as a
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pooling of interests for accounting purposes or (ii) taken any action or failed
to take any action which action or failure would jeopardize the qualification of
the Merger as a reorganization within the meaning of Section 368(a) of the Code.
Section 2.17 Required Vote of Parent Stockholders. The
affirmative vote of a majority of the votes cast on the Share Issuance is
required to approve the Share Issuance, provided that the total votes cast on
the proposal represent a majority of the outstanding shares of Parent Common
Stock. No other vote of the securityholders of Parent is required by law, the
Amended and Restated Articles of Incorporation or the Amended and Restated
By-Laws of Parent or otherwise in order for Parent to consummate the Merger and
the transactions contemplated hereby.
Section 2.18 Operations of Sub. Sub is a direct, wholly owned
subsidiary of Parent, was formed solely for the purpose of engaging in the
transactions contemplated hereby, has engaged in no other business activities
and has conducted its operations only as contemplated hereby.
Section 2.19 Opinion of Financial Advisor. Parent has received
the written opinion of Merrill Lynch & Co., dated the date hereof, to the effect
that, as of the date hereof, the Exchange Ratio is fair to Parent from a
financial point of view, a copy of which opinion has been delivered to the
Company.
Section 2.20 Brokers. No broker, investment banker or other
person, other than Merrill Lynch & Co., the fees and expenses of which will be
paid by Parent (as reflected in an agreement between Merrill Lynch & Co. and
Parent, a copy of which has been furnished to the Company), is entitled to any
broker's, finder's or other similar fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Parent.
Section 2.21 State Takeover Statutes; Certain Charter
Provisions. The Board of Directors of Parent has, to the extent such statutes
are applicable, taken all action (including appropriate approvals of the Board
of Directors of Parent) necessary to exempt Parent, its Subsidiaries and
affiliates, the Merger, this Agreement, the Stock Option Agreement and the
transactions contemplated hereby and thereby from Section 23-1-43-5 of the
Indiana Business Corporation Law and Article 8 of Parent's Amended and Restated
Article of Incorporation. To the Knowledge of Parent, no other state takeover
statutes or similar charter or bylaw provisions are applicable to the Merger,
this Agreement, the Stock Option Agreement and the transactions contemplated
hereby and thereby.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
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The Company represents and warrants to Parent and Sub as
follows:
Section 3.1 Organization, Standing and Power. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the requisite corporate power and authority to
carry on its business as now being conducted. Each Subsidiary of the Company is
duly organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized and has the requisite corporate (in the
case of a Subsidiary that is a corporation) or other power and authority to
carry on its business as now being conducted, except where the failure to be so
organized, existing or in good standing or to have such power or authority would
not, individually or in the aggregate, have a Material Adverse Effect on the
Company. The Company and each of its Subsidiaries are duly qualified to do
business, and are in good standing, in each jurisdiction where the character of
their properties owned or held under lease or the nature of their activities
makes such qualification necessary, except where the failure to be so qualified
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company.
Section 3.2 Capital Structure. As of the date hereof, the
authorized capital stock of the Company will consist of 400,000,000 shares of
Company Common Stock and 15,000,000 shares of preferred stock, par value $.01
per share ("Company Preferred Stock"). At the close of business on April 3,
1998, (i) 134,012,054 shares of Company Common Stock were issued and
outstanding, all of which were validly issued, fully paid and nonassessable and
free of preemptive rights, (ii) 7,887,263 shares of Company Common Stock were
held in the treasury of the Company or by Subsidiaries of the Company and (iii)
10,732,932 shares of Company Common Stock were reserved for future issuance
pursuant to the Company's Key Executive Bonus Program, 1987 Stock Option Plan,
Key Executive Stock Bonus Plan, Restated 1992 Supplemental Stock Option Plan,
Chief Executive Cash Bonus and Stock Option Plan, 1995 Employee Stock Incentive
Plan and 1998 Company Stock Option Plan (collectively, the "Company Stock Option
Plans"). The Company Stock Option Plans are the only benefit plans of the
Company or its Subsidiaries under which any securities of the Company or any of
its Subsidiaries are issuable. No shares of Company Preferred Stock are
outstanding. As of the date of this Agreement, except (i) as set forth above,
and (ii) as set forth in the Company SEC Documents (as hereinafter defined), no
shares of capital stock or other voting securities of the Company were issued,
reserved for issuance or outstanding. As of the date of this Agreement, except
for stock options covering not in excess of 10,297,132 shares of Company Common
Stock issued under the Company Stock Option Plans (collectively, the "Company
Stock Options"), and the warrant held by Lehman Brothers Inc. there are no
options, warrants, calls,
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rights or agreements to which the Company or any of its Subsidiaries is a party
or by which any of them is bound obligating the Company or any of its
Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock of the Company or any of its
Subsidiaries or obligating the Company or any of its Subsidiaries to grant,
extend or enter into any such option, warrant, call, right or agreement. Each
outstanding share of capital stock of each Subsidiary of the Company that is a
corporation is duly authorized, validly issued, fully paid and nonassessable
and, except as disclosed in the Company SEC Documents filed prior to the date of
this Agreement, each such share is owned by the Company or another Subsidiary of
the Company, free and clear of all security interests, liens, claims, pledges,
options, rights of first refusal, agreements, limitations on voting rights,
charges and other encumbrances of any nature whatsoever. The Company does not
have any outstanding bonds, debentures, notes or other obligations the holders
of which have the right to vote (or convertible into or exercisable for
securities having the right to vote) with the stockholders of the Company on any
matter. Exhibit 21 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1997, as filed with the SEC (the "Company Annual Report"), is
a true, accurate and correct statement in all material respects of all of the
information required to be set forth therein by the regulations of the SEC.
Section 3.3 Authority. On or prior to the date of this
Agreement, the Board of Directors of the Company has declared the Merger
advisable and fair to and in the best interest of the Company and its
stockholders, approved this Agreement in accordance with the DGCL, resolved to
recommend the adoption of this Agreement by the Company's stockholders and
directed that this Agreement be submitted to the Company's stockholders for
adoption. The Company has all requisite corporate power and authority to enter
into this Agreement and the Stock Option Agreement, to consummate the
transactions contemplated by the Stock Option Agreement and, subject to approval
by the stockholders of the Company of this Agreement, to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the Stock Option Agreement by the Company and the consummation by the
Company of the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action on the part of the Company,
subject, in the case of this Agreement, to (x) approval of this Agreement by the
stockholders of the Company and (y) the filing of appropriate Merger documents
as required by the DGCL. This Agreement and the Stock Option Agreement have been
duly executed and delivered by the Company and (assuming the valid
authorization, execution and delivery of this Agreement by Parent and Sub and
the Stock Option Agreement by Parent and the validity and binding effect of the
Agreement on Parent and Sub and the Stock Option Agreement on Parent) constitute
the valid and binding obligation of the Company enforceable against the Company
in accordance with its terms. The filing of the Joint Proxy Statement with the
SEC and the issuance of the shares of Company Common Stock pursuant to the Stock
Option Agreement have been duly authorized by the Company's Board of Directors.
Section 3.4 Consents and Approvals; No Violation. Assuming
that all consents, approvals, authorizations and other actions described in this
Section 3.4 have been obtained and all filings and obligations described in this
Section 3.4 have been made, except as set forth in Section 3.4 of the Company
Letter, the execution and delivery of this Agreement and the Stock Option
Agreement do not, and the consummation of the
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transactions contemplated hereby and thereby and compliance with the provisions
hereof and thereof will not, result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give to others a right of
termination, cancellation or acceleration of any obligation or the loss of a
material benefit under, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties or assets of the
Company or any of its Subsidiaries under, any provision of (i) the Certificate
of Incorporation or Restated Bylaws of the Company, (ii) any provision of the
comparable charter or organization documents of any of the Company's
Subsidiaries, (iii) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession, franchise
or license applicable to the Company or any of its Subsidiaries or (iv) any
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to the Company or any of its Subsidiaries or any of their respective properties
or assets, other than, in the case of clauses (ii), (iii) or (iv), any such
violations, defaults, rights, liens, security interests, charges or encumbrances
that, individually or in the aggregate, would not have a Material Adverse Effect
on the Company, materially impair the ability of the Company to perform its
obligations hereunder or under the Stock Option Agreement or prevent the
consummation of any of the transactions contemplated hereby or thereby. No
filing or registration with, or authorization, consent or approval of, any
Governmental Entity is required by or with respect to the Company or any of its
Subsidiaries in connection with the execution and delivery of this Agreement or
the Stock Option Agreement by the Company or is necessary for the consummation
of the Merger and the other transactions contemplated by this Agreement or the
Stock Option Agreement, except for (i) in connection, or in compliance, with the
provisions of the HSR Act, the Securities Act and the Exchange Act, (ii) the
filing of the Certificate of Merger with the Secretary of State of the State of
Delaware and appropriate documents with the relevant authorities of other states
in which the Company or any of its Subsidiaries is qualified to do business,
(iii) such filings, authorizations, orders and approvals as may be required to
obtain the State Takeover Approvals, (iv) such filings as may be required in
connection with the taxes described in Section 5.11, (v) applicable
requirements, if any, of Blue Sky Laws, the NYSE and the Pacific Stock Exchange,
(vi) as may be required under foreign laws, (vii) such filings and consents as
may be required under federal and state commercial finance, lending and banking
laws, and (viii) such other consents, orders, authorizations, registrations,
declarations and filings the failure of which to be obtained or made would not,
individually or in the aggregate, have a Material Adverse Effect on the Company,
materially impair the ability of the Company to perform its obligations
hereunder or under the Stock Option Agreement or prevent the consummation of any
of the transactions contemplated hereby or thereby.
Section 3.5 SEC Documents and Other Reports. The Company has
filed all required documents with the SEC since January 1, 1995 (the "Company
SEC Documents"). Except as set forth in Section 3.5 of the letter dated the date
hereof and delivered on the date hereof by the Company to Parent, which letter
relates to this Agreement and is designated therein as the Company Letter (the
"Company Letter"), as of their respective dates, the Company SEC Documents
complied in all material respects with the requirements
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of the Securities Act or the Exchange Act, as the case may be, and, at the
respective times they were filed, none of the Company SEC Documents contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. Except as
set forth in Section 3.5 of the Company Letter, the consolidated financial
statements (including, in each case, any notes thereto) of the Company included
in the Company SEC Documents (the "Financial Statements") complied as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, were prepared in
accordance with generally accepted accounting principles (except, in the case of
the unaudited statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated therein
or in the notes thereto) and fairly presented in all material respects the
consolidated financial position of the Company and its consolidated Subsidiaries
as at the respective dates thereof and the consolidated results of their
operations and their consolidated cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments and to any other adjustments described therein). Except as disclosed
in the Company SEC Documents or as required by generally accepted accounting
principles, the Company has not, since December 31, 1997, made any change in the
accounting practices or policies applied in the preparation of financial
statements. Except as and to the extent set forth in Section 3.5 of the Company
Letter or in the Company Annual Report, neither the Company nor any of its
Subsidiaries had as of December 31, 1997 any liabilities or obligations of any
nature, whether or not accrued, contingent or otherwise, that would be required
by generally accepted accounting principles to be reflected on the consolidated
balance sheet of the Company and its Subsidiaries (including the notes thereto)
included in the Financial Statements that are not so reflected.
Section 3.6 Registration Statement and Joint Proxy Statement.
None of the information to be supplied by the Company for inclusion or
incorporation by reference in the Registration Statement or the Joint Proxy
Statement will (i) in the case of the Registration Statement, at the time it
becomes effective, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein not misleading or (ii) in the case of the Joint
Proxy Statement, at the time of the mailing of the Joint Proxy Statement, at the
time of each of the Stockholder Meetings and at the Effective Time, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading. If at any
time prior to the Effective Time any event with respect to the Company, its
officers and directors or any of its Subsidiaries shall occur which is required
at that time to be described in the Joint Proxy Statement or the Registration
Statement, such event shall be so described, and an appropriate amendment or
supplement shall be promptly filed with the SEC and, as required by law,
disseminated to the stockholders of Parent and the Company. The Registration
Statement will comply (with
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respect to the Company) as to form in all material respects with the provisions
of the Securities Act, and the Joint Proxy Statement will comply (with respect
to the Company) as to form in all material respects with the provisions of the
Exchange Act.
Section 3.7 Absence of Certain Changes or Events. Except as
disclosed in the Company SEC Documents filed with the SEC prior to the date of
this Agreement or as disclosed in Section 3.12(d) of the Company Letter, since
December 31, 1997, (A) the Company and its Subsidiaries have not incurred any
material liability or obligation (indirect, direct or contingent), or entered
into any material oral or written agreement or other transaction, that is not in
the ordinary course of business or that would result in a Material Adverse
Effect on the Company, (B) the Company and its Subsidiaries have not sustained
any loss or interference with their business or properties from fire, flood,
windstorm, accident or other calamity (whether or not covered by insurance) that
has had a Material Adverse Effect on the Company, (C) there has been no change
in the capital stock of the Company except for the issuance of shares of the
Company Common Stock pursuant to Company Stock Options and no dividend or
distribution of any kind declared, paid or made by the Company on any class of
its stock, except for the regular quarterly dividend of not more than $.0875 per
share of Company Common Stock, (D) there has not been (x) any granting by the
Company or any of its Subsidiaries to any executive officer of the Company or
any of its Subsidiaries of any increase in compensation, except in the ordinary
course of business consistent with prior practice or as was required under
employment agreements in effect as of the date of the most recent audited
financial statements included in the Company SEC Documents, (y) any granting by
the Company or any of its Subsidiaries to any such executive officer of any
increase in severance or termination agreements in effect as of the date of the
most recent audited financial statements included in the Company SEC Documents
or (z) any entry by the Company or any of its Subsidiaries into any employment,
severance or termination agreement with any such executive officer and (E) there
has been no event causing a Material Adverse Effect on the Company, nor any
development that would, individually or in the aggregate, result in a Material
Adverse Effect on the Company.
Section 3.8 Permits and Compliance. Each of the Company and
its Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exceptions, consents, certificates,
approvals and orders of any Governmental Entity necessary for the Company or any
of its Subsidiaries to own, lease and operate its properties or to carry on its
business as it is now being conducted (the "Company Permits"), except where the
failure to have any of the Company Permits would not, individually or in the
aggregate, have a Material Adverse Effect on the Company, and, as of the date of
this Agreement, no suspension or cancellation of any of the Company Permits is
pending or, to the Knowledge of the Company (as hereinafter defined),
threatened, except where the suspension or cancellation of any of the Company
Permits would not, individually or in the aggregate, have a Material Adverse
Effect on the Company. Neither the Company nor any of its Subsidiaries is in
violation of (A) its charter, by-laws or
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other organizational documents, (B) any applicable law, ordinance,
administrative or governmental rule or regulation or (C) any order, decree or
judgment of any Governmental Entity having jurisdiction over the Company or any
of its Subsidiaries, except, in the case of clauses (A), (B) and (C), for any
violations that, individually or in the aggregate, would not have a Material
Adverse Effect on the Company. Except as disclosed in the Company SEC Documents
filed prior to the date of this Agreement or as disclosed in Section 3.8 of the
Company Letter, as of the date hereof there is no contract or agreement that is
material to the business, properties, assets, liabilities, condition (financial
or otherwise), results of operations or prospects of the Company and its
Subsidiaries, taken as a whole. Except as set forth in the Company SEC Documents
filed prior to the date of this Agreement or as disclosed in Section 3.8 of the
Company Letter, no event of default or event that, but for the giving of notice
or the lapse of time or both, would constitute an event of default exists or,
upon the consummation by the Company of the transactions contemplated by this
Agreement or the Stock Option Agreement, will exist under any indenture,
mortgage, loan agreement, note or other agreement or instrument for borrowed
money, any guarantee of any agreement or instrument for borrowed money or any
lease, contractual license or other agreement or instrument to which the Company
or any of its Subsidiaries is a party or by which the Company or any such
Subsidiary is bound or to which any of the properties, assets or operations of
the Company or any such Subsidiary is subject, other than any defaults that,
individually or in the aggregate, would not have a Material Adverse Effect on
the Company. As of the date of this Agreement, set forth in Section 3.8 of the
Company Letter is a description of any material changes to the amount and terms
of the indebtedness of the Company and its Subsidiaries as described in the
Company Annual Report. For purposes of this Agreement, "Knowledge of the
Company" means the actual knowledge of the individuals identified on Section 3.8
of the Company Letter.
Section 3.9 Tax Matters. Except as otherwise set forth in
Section 3.9 of the Company Letter, (i) the Company and each of its Subsidiaries
have filed all federal, and all material state, local, foreign and provincial,
Tax Returns required to have been filed or appropriate extensions therefor have
been properly obtained, and such Tax Returns are correct and complete, except to
the extent that any failure to so file or any failure to be correct and complete
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company; (ii) all Taxes shown to be due on such Tax Returns have been timely
paid or extensions for payment have been properly obtained, or such Taxes are
being timely and properly contested; (iii) the Company and each of its
Subsidiaries have complied in all material respects with all rules and
regulations relating to the withholding of Taxes except to the extent that any
failure to comply with such rules and regulations would not, individually or in
the aggregate, have a Material Adverse Effect on the Company; (iv) neither the
Company nor any of its Subsidiaries has waived any statute of limitations in
respect of its Taxes; (v) any Tax Returns referred to in clause (i) relating to
federal and state income Taxes have been examined by the IRS or the appropriate
state taxing authority or the period for assessment of the Taxes in respect of
which such Tax Returns were required to
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be filed has expired; (vi) no issues that have been raised in writing by the
relevant taxing authority in connection with the examination of the Tax Returns
referred to in clause (i) are currently pending; (vii) all deficiencies asserted
or assessments made as a result of any examination of such Tax Returns by any
taxing authority have been paid in full or are being timely and properly
contested; and (viii) no withholding is required under Section 1445 of the Code
in connection with the Merger. The representations set forth in the Company Tax
Certificate attached to the Company Letter, if made on the date hereof (assuming
the Merger were consummated on the date hereof), would be true and correct.
Section 3.10 Actions and Proceedings. Except as set forth in
the Company SEC Documents filed prior to the date of this Agreement or in
Section 3.10 of the Company Letter, there are no outstanding orders, judgments,
injunctions, awards or decrees of any Governmental Entity against or involving
the Company or any of its Subsidiaries, or against or involving any of the
present or former directors, officers, employees, consultants, agents or
stockholders of the Company or any of its Subsidiaries, as such, any of its or
their properties, assets or business or any Company Plan (as hereinafter
defined) that, individually or in the aggregate, would have a Material Adverse
Effect on the Company or materially impair the ability of the Company to perform
its obligations hereunder or under the Stock Option Agreement. As of the date of
this Agreement, there are no actions, suits or claims or legal, administrative
or arbitrative proceedings or investigations pending or, to the Knowledge of the
Company, threatened against or involving the Company or any of its Subsidiaries
or any of its or their present or former directors, officers, employees,
consultants, agents or stockholders, as such, or any of its or their properties,
assets or business or any Company Plan that, individually or in the aggregate,
would have a Material Adverse Effect on the Company or materially impair the
ability of the Company to perform its obligations hereunder or under the Stock
Option Agreement. As of the date hereof, there are no actions, suits, labor
disputes or other litigation, legal or administrative proceedings or
governmental investigations pending or, to the Knowledge of the Company,
threatened against or affecting the Company or any of its Subsidiaries or any of
its or their present or former officers, directors, employees, consultants,
agents or stockholders, as such, or any of its or their properties, assets or
business relating to the transactions contemplated by this Agreement and the
Stock Option Agreement.
Section 3.11 Certain Agreements. Except as set forth in
Section 3.11 of the Company Letter, neither the Company nor any of its
Subsidiaries is a party to any oral or written agreement or plan, including any
employment agreement, severance agreement, stock option plan, stock appreciation
rights plan, restricted stock plan or stock purchase plan, any of the benefits
of which will be increased, or the vesting of the benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the Stock Option Agreement or the value of any of the benefits of
which will be calculated on the basis of any of the transactions contemplated by
this Agreement or the Stock Option Agreement (collectively, "Transaction
Agreements"). No holder of any option to purchase shares of Company Common
Stock, or shares of Company Common Stock
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granted in connection with the performance of services for the Company or its
Subsidiaries, is or will be entitled to receive cash from the Company or any
Subsidiary in lieu of or in exchange for such option or shares as a result of
the transactions contemplated by this Agreement or the Stock Option Agreement.
Section 3.11 of the Company Letter sets forth (i) for each officer, director or
employee who is a party to, or will receive benefits under, any Transaction
Agreement, the total amount that each such person may receive, or is eligible to
receive, assuming that the transactions contemplated by this Agreement is
consummated on the date hereof, and (ii) the total amount of indebtedness owed
to the Company or its Subsidiaries from each officer or director of the Company
and its Subsidiaries.
Section 3.12 ERISA. (a) Each Company Plan is listed in Section
3.12(a) of the Company Letter. Except as would not have a Material Adverse
Effect on the Company, each Company Plan complies in all respects with ERISA,
the Code and all other applicable statutes and governmental rules and
regulations, and (i) no "reportable event" (within the meaning of Section 4043
of ERISA) has occurred with respect to any Company Plan that is likely to have
individually or in the aggregate, a Material Adverse Effect on the Company, (ii)
neither the Company nor any of its ERISA Affiliates (as hereinafter defined) has
withdrawn from Company Multiemployer Plan (as hereinafter defined) or
instituted, or is currently considering taking, any action to do so, and (iii)
no action has been taken, or is currently being considered, to terminate any
Company Plan subject to Title IV of ERISA. No Company Plan, nor any trust
created thereunder, has incurred any "accumulated funding deficiency" (as
defined in Section 302 of ERISA), whether or not waived.
(b) Except as listed in Section 3.12(b) of the Company Letter,
with respect to the Company Plans, no event has occurred and, to the Knowledge
of the Company, there exists no condition or set of circumstances in connection
with which the Company or any ERISA Affiliate or Company Plan fiduciary could be
subject to any liability under the terms of such Company Plans, ERISA, the Code
or any other applicable law, other than liabilities for benefits payable in the
normal course, which would have a Material Adverse Effect on the Company. All
Company Plans that are intended to be qualified under Section 401(a) of the Code
have been determined by the IRS to be so qualified, or a timely application for
such determination is now pending or a request for such a determination filed
within the remedial amendment period of Section 401(b) of the Code is pending,
and the Company is not aware of any reason why any such Company Plan is not so
qualified in operation. Neither the Company nor any of its ERISA Affiliates has
been notified by any Company Multiemployer Plan that such Company Multiemployer
Plan is currently in reorganization or insolvency under and within the meaning
of Section 4241 or 4245 of ERISA or that such Company Multiemployer Plan intends
to terminate or has been terminated under Section 4041A of ERISA. Except as
disclosed in Section 3.12(b) of the Company Letter, neither the Company nor any
of its ERISA Affiliates has any liability or obligation under any welfare plan
to provide benefits after termination of employment to any employee or dependent
other than as required by Section 4980B of the Code.
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(c) As used herein, (i) "Company Plan" means a "pension plan"
(as defined in Section 3(2) of ERISA (other than a Company Multiemployer Plan)),
a "welfare plan" (as defined in Section 3(1) of ERISA), or any bonus, profit
sharing, deferred compensation, incentive compensation, stock ownership, stock
purchase, stock option, phantom stock, holiday pay, vacation, severance, death
benefit, sick leave, fringe benefit, personnel policy, insurance or other plan,
arrangement or understanding, in each case established or maintained by the
Company or any of its ERISA Affiliates or as to which the Company or any of its
ERISA Affiliates has contributed or otherwise may have any liability, and (ii)
"Company Multiemployer Plan" means a "multiemployer plan" (as defined in Section
4001(a)(3) of ERISA) to which the Company or any of its ERISA Affiliates is or
has been obligated to contribute or otherwise may have any liability.
(d) Item 3.12(d) of the Company Letter contains a list of all
(i) severance and employment agreements with employees of the Company and each
ERISA Affiliate, (ii) severance programs and policies of the Company and each
ERISA Affiliate with or relating to its employees and (iii) plans, programs,
agreements and other arrangements of the Company and each ERISA Affiliate with
or relating to its employees containing change of control or similar provisions.
Section 3.13 Compliance with Worker Safety and Environmental
Laws. The properties, assets and operations of the Company and its Subsidiaries
are in compliance with all applicable Worker Safety Laws and Environmental Laws,
except for any violations that, individually or in the aggregate, would not have
a Material Adverse Effect on the Company. With respect to such properties,
assets and operations, including any previously owned, leased or operated
properties, assets or operations, there are no events, conditions,
circumstances, activities, practices, incidents, actions or plans of the Company
or any of its Subsidiaries that may interfere with or prevent compliance or
continued compliance with applicable Worker Safety Laws and Environmental Laws,
other than any such interference or prevention as would not, individually or in
the aggregate with any such other interference or prevention, have a Material
Adverse Effect on the Company.
Section 3.14 Labor Matters. Neither the Company nor any of its
Subsidiaries is a party to any collective bargaining agreement or labor
contract. Neither the Company nor any of its Subsidiaries has engaged in any
unfair labor practice with respect to any persons employed by or otherwise
performing services primarily for the Company or any of its Subsidiaries (the
"Company Business Personnel"), and there is no unfair labor practice complaint
or grievance against the Company or any of its Subsidiaries by the National
Labor Relations Board or any comparable state agency pending or threatened in
writing with respect to the Company Business Personnel, except where such unfair
labor practice, complaint or grievance would not have a Material Adverse Effect
on the Company. There is no labor strike, dispute, slowdown or stoppage pending
or, to the Knowledge of the Company, threatened against or affecting the Company
or any of its Subsidiaries which may interfere with the respective business
activities of the Company or any of its Subsidiaries,
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except where such dispute, strike or work stoppage would not have a Material
Adverse Effect on the Company.
Section 3.15 Intellectual Property. The Company and its
Subsidiaries have through ownership or licensing all Intellectual Property
Rights as are necessary in connection with the business of the Company and its
Subsidiaries, taken as a whole, except where the failure to have such
Intellectual Property Rights would not have a Material Adverse Effect on the
Company. Neither the Company nor any of its Subsidiaries has infringed any
Intellectual Property Rights of any third party other than any infringements
that, individually and in the aggregate, would not have a Material Adverse
Effect on the Company.
Section 3.16 Opinion of Financial Advisor. The Company has
received the written opinion of Lehman Brothers Inc., dated the date hereof, to
the effect that, as of the date hereof, the Exchange Ratio is fair to the
Company's stockholders from a financial point of view, a copy
of which opinion has been delivered to Parent.
Section 3.17 State Takeover Statutes; Certain Charter
Provisions. The Board of Directors of the Company has, to the extent such
statutes are applicable, taken all action (including appropriate approvals of
the Board of Directors of the Company) necessary to exempt Parent, its
Subsidiaries and affiliates, the Merger, this Agreement, the Stock Option
Agreement and the transactions contemplated hereby and thereby from Section 203
of the DGCL and Articles 8 and 9 of the Company's Certificate of Incorporation.
To the Knowledge of the Company, no other state takeover statutes or similar
charter or bylaw provisions are applicable to the Merger, this Agreement, the
Stock Option Agreement and the transactions contemplated hereby and thereby.
Section 3.18 Required Vote of Company Stockholders. The
affirmative vote of the holders of a majority of the outstanding shares of
Company Common Stock is required to adopt this Agreement. No other vote of the
securityholders of the Company is required by law, the Certificate of
Incorporation or Restated Bylaws of the Company or otherwise in order for the
Company to consummate the Merger and the transactions contemplated hereby and in
the Stock Option Agreement.
Section 3.19 Pooling of Interests; Reorganization. To the
Knowledge of the Company, neither it nor any of its Subsidiaries has (i) taken
any action or failed to take any action which action or failure would jeopardize
the treatment of the Merger as a pooling of interests for accounting purposes or
(ii) taken any action or failed to take any action which action or failure would
jeopardize the qualification of the Merger as a reorganization within the
meaning of Section 368(a) of the Code.
Section 3.20 Brokers. No broker, investment banker or other
person, other than Lehman Brothers Inc., the fees and expenses of which will be
paid by the Company (as
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reflected in an agreement between Lehman Brothers Inc. and the Company, a copy
of which has been furnished to Parent), is entitled to any broker's, finder's or
other similar fee or commission in connection with the transactions contemplated
by this Agreement and by the Stock Option Agreement based upon arrangements made
by or on behalf of the Company.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 4.1 Conduct of Business Pending the Merger. (a)
Conduct of Business by the Company. Except as expressly permitted by clauses (i)
through (xvi) of this Section 4.1(a), during the period from the date of this
Agreement through the Effective Time, the Company shall, and shall cause each of
its Subsidiaries to, in all material respects carry on its business in the
ordinary course of its business as currently conducted and, to the extent
consistent therewith, use reasonable best efforts to preserve intact its current
business organizations, keep available the services of its current officers and
employees and preserve its relationships with customers, suppliers and others
having business dealings with it to the end that its goodwill and ongoing
business shall be unimpaired at the Effective Time. Without limiting the
generality of the foregoing, and except as otherwise expressly contemplated by
this Agreement or as set forth in the Company Letter (with specific reference to
the applicable subsection below), the Company shall not, and shall not permit
any of its Subsidiaries to, without the prior written consent of Parent (which
consent shall not be unreasonably withheld or delayed):
(i) (A) declare, set aside or pay any dividends on, or make
any other actual, constructive or deemed distributions in respect of,
any of its capital stock, or otherwise make any payments to its
stockholders in their capacity as such (other than (1) regular
quarterly dividends of not more than $.0875 per share of Company Common
Stock declared and paid on dates consistent with past practice and (2)
dividends and other distributions by Subsidiaries), (B) other than in
the case of any Subsidiary, split, combine or reclassify any of its
capital stock or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares of
its capital stock or (C) purchase, redeem or otherwise acquire any
shares of capital stock of the Company or any other securities thereof
or any rights, warrants or options to acquire any such shares or other
securities;
(ii) issue, deliver, sell, pledge, dispose of or otherwise
encumber any shares of its capital stock, any other voting securities
or equity equivalent or any securities convertible into, or any rights,
warrants or options to acquire any such shares, voting securities,
equity equivalent or convertible securities, other than (A) the
issuance of shares of Company Common Stock upon the exercise of Company
Stock Options outstanding on the date of this Agreement in accordance
with their
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current terms and (B) the issuance of shares of Company Common Stock
pursuant to the Stock Option Agreement;
(iii) amend its charter or by-laws;
(iv) acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial portion of the assets of or equity
in, or by any other manner, any business or any corporation, limited
liability company, partnership, association or other business
organization or division thereof or otherwise acquire or agree to
acquire any assets, other than transactions that are in the ordinary
course of business consistent with past practice and not material to
the Company and its Subsidiaries taken as a whole;
(v) sell, lease or otherwise dispose of, or agree to sell,
sell, lease or otherwise dispose of, any of its assets, other than
transactions that are in the ordinary course of business consistent
with past practice;
(vi) incur any indebtedness for borrowed money, guarantee any
such indebtedness or make any loans, advances or capital contributions
to, or other investments in, any other person, other than (A) in the
ordinary course of business consistent with past practices, provided,
that the Company may not, without the written consent of Parent, incur
more than $25,000,000 of indebtedness for borrowed money, other than
borrowings under credit facilities existing on the date hereof (it
being understood that if any new credit facility is established by
Parent for the benefit of the Company or its Subsidiaries or
indebtedness is purchased or guaranteed by Parent or any of its
Subsidiaries, the terms of such extension of credit or guarantee of
Parent or its Subsidiaries shall contain provisions mutually agreed by
Parent and the Company providing for an extension or transition period
for a mutually agreed period following a termination of this Agreement)
and (B) indebtedness, loans, advances, capital contributions and
investments between the Company and any of its wholly owned
Subsidiaries or between any of such wholly owned Subsidiaries;
(vii) alter (through merger, liquidation, reorganization,
restructuring or in any other fashion) the corporate structure or
ownership of the Company or any Subsidiary;
(viii) enter into or adopt any, or amend any existing,
severance plan, agreement or arrangement or enter into or amend any
Company Plan or employment or consulting agreement, except as required
by applicable law;
(ix) increase the compensation payable or to become payable to
its directors, officers or employees (except for increases in the
ordinary course of
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business consistent with past practice in salaries or wages of
employees of the Company or any of its Subsidiaries who are not
officers of the Company or any of its Subsidiaries) or grant any
severance or termination pay to, or enter into or amend any employment
or severance agreement with, any director or officer of the Company or
any of its Subsidiaries, or establish, adopt, enter into, or, except as
may be required to comply with applicable law, amend in any material
respect or take action to enhance in any material respect or accelerate
any rights or benefits under, any labor, collective bargaining, bonus,
profit sharing, thrift, compensation, stock option, restricted stock,
pension, retirement, deferred compensation, employment, termination,
severance or other plan, agreement, trust, fund, policy or arrangement
for the benefit of any director, officer or employee;
(x) knowingly violate or knowingly fail to perform any
obligation or duty imposed upon it or any Subsidiary by any applicable
material federal, state or local law, rule, regulation, guideline or
ordinance;
(xi) make any change to accounting policies or procedures
(other than actions required to be taken by generally accepted
accounting principles);
(xii) prepare or file any Tax Return inconsistent with past
practice or, on any such Tax Return, take any position, make any
election, or adopt any method that is inconsistent with positions
taken, elections made or methods used in preparing or filing similar
Tax Returns in prior periods;
(xiii) make any tax election or settle or compromise any
material federal, state, local or foreign income tax liability;
(xiv) enter into or amend any agreement or contract material
to the Company and its Subsidiaries, taken as a whole, except in the
ordinary course of business consistent with past practices (provided,
however, that the Company may not amend the Common Stock Warrant
Agreement by and between the Company and Lehman Commercial Paper Inc.
dated as of February 13, 1998, as amended as of the date hereof, and
the related Warrant Certificates); or make or agree to make any new
capital expenditure or expenditures which, individually, is in excess
of $5,000,000 or, in the aggregate, are in excess of $60,000,000;
(xv) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, in the
ordinary course of business consistent with past practice or in
accordance with their terms, of liabilities reflected or reserved
against in, or contemplated by, the most recent financial statements
(or the notes thereto) of the Company included in the Company SEC
Documents or incurred in the ordinary course of business consistent
with past practice; or
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(xvi) authorize, recommend, propose or announce an intention
to do any of the foregoing, or enter into any contract, agreement,
commitment or arrangement to do any of the foregoing.
(b) Conduct of Business by Parent. During the period from the
date of this Agreement to the Effective Time of the Merger, Parent shall not,
and shall not permit any of its Subsidiaries to (i) declare, set aside or pay
any dividends on, or make any other distributions in respect of, any capital
stock of Parent, except that Parent may continue the declaration and payment of
regular quarterly cash dividends not in excess of $0.20 per share of Parent
Common Stock with usual record and payment dates and in accordance with Parent's
past dividend policy or (ii) issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares of Parent's
capital stock.
Section 4.2 No Solicitation. (a) The Company shall not, nor
shall it permit any of its Subsidiaries to, nor shall it authorize or permit any
officer, director or employee of or any financial advisor, attorney or other
advisor or representative of, the Company or any of its Subsidiaries to, (i)
solicit, initiate or encourage the submission of, any Takeover Proposal (as
hereafter defined), (ii) enter into any agreement with respect to any Takeover
Proposal or (iii) participate in any discussions or negotiations regarding, or
furnish to any person any information with respect to, or take any other action
to facilitate any inquiries or the making of any proposal that constitutes, or
may reasonably be expected to lead to, any Takeover Proposal; provided, however,
that prior to the Company Stockholders Meeting, if the Board of Directors of the
Company reasonably determines the Takeover Proposal constitutes a Superior
Proposal (as defined below), then, to the extent required by the fiduciary
obligations of the Board of Directors of the Company, as determined in good
faith by a majority of the disinterested members thereof after receiving the
advice of independent counsel, the Company may, in response to an unsolicited
request therefor, furnish information with respect to the Company to, and enter
into discussions with, any person pursuant to a customary confidentiality
agreement. Without limiting the foregoing, it is understood that any violation
of the restrictions set forth in the preceding sentence by any executive officer
of the Company or any of its Subsidiaries or any financial advisor, attorney or
other advisor or representative of the Company or any of its Subsidiaries,
whether or not such person is purporting to act on behalf of the Company or any
of its Subsidiaries or otherwise, shall be deemed to be a breach of this Section
4.2(a) by the Company. For purposes of this Agreement, "Takeover Proposal" means
any proposal for a merger or other business combination involving the Company or
any of its Subsidiaries or any proposal or offer to acquire in any manner,
directly or indirectly, a substantial equity interest in, a substantial portion
of the voting securities of, or a substantial portion of the assets of the
Company or any of its Subsidiaries, other than the transactions contemplated by
this Agreement and the Stock Option Agreement, and "Superior Proposal" means a
bona fide Takeover Proposal made by a third party which a majority of the
disinterested members of the Board of Directors of the Company determines in its
reasonable good faith judgment to be more favorable to the Company's
stockholders than the Merger (after
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receiving the written opinion, with only customary qualifications, of the
Company's independent financial advisor that the value of the consideration
provided for in such proposal exceeds the value of the consideration provided
for in the Merger) and for which financing, to the extent required, is then
committed or which, in the reasonable good faith judgment of a majority of such
disinterested members (after receiving the written advice of the Company's
independent financial advisor), is highly likely to be financed by such third
party.
(b) Neither the Board of Directors of the Company nor any
committee thereof shall (i) withdraw or modify, or propose to withdraw or
modify, in a manner adverse to Parent or Sub, the approval or recommendation by
such Board of Directors or any such committee of this Agreement or the Merger or
(ii) approve or recommend, or propose to approve or recommend, any Takeover
Proposal.
(c) The Company shall advise Parent orally (within one
business day) and in writing (as promptly as practicable) of (i) any Takeover
Proposal or any inquiry with respect to or which could lead to any Takeover
Proposal, (ii) the material terms of such Takeover Proposal and (iii) the
identity of the person making any such Takeover Proposal or inquiry. The Company
will keep Parent fully informed of the status and details of any such Takeover
Proposal or inquiry.
Section 4.3 Third Party Standstill Agreements. During the
period from the date of this Agreement through the Effective Time, the Company
shall not terminate, amend, modify or waive any provision of any confidentiality
agreement relating to a Takeover Proposal or standstill agreement to which the
Company or any of its Subsidiaries is a party (other than any involving Parent).
During such period, the Company agrees to enforce, to the fullest extent
permitted under applicable law, the provisions of any such agreements,
including, but not limited to, obtaining injunctions to prevent any breaches of
such agreements and to enforce specifically the terms and provisions thereof in
any court of the United States or any state thereof having jurisdiction.
Section 4.4 Pooling of Interests; Reorganization. During the
period from the date of this Agreement through the Effective Time, unless the
other party shall otherwise agree in writing, none of Parent, the Company or any
of their respective Subsidiaries shall (a) knowingly take or fail to take any
action which action or failure would jeopardize the treatment of the Merger as a
pooling of interests for accounting purposes or (b) knowingly take or fail to
take any action which action or failure would jeopardize the qualification of
the Merger as a reorganization within the meaning of Section 368(a) of the Code
or would cause any of the representations and warranties set forth in the
Company Tax Certificate attached to the Company Letter or the Parent Tax
Certificate attached to the Parent Letter to be untrue or incorrect in any
material respect. Between the date of this Agreement and the Effective Time,
Parent and the Company each shall take all reasonable actions necessary to cause
the characterization of the Merger as a pooling of
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interests for accounting purposes if such a characterization were jeopardized by
action taken by Parent or the Company, respectively, prior to the Effective
Time.
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.1 Stockholder Meetings. The Company and Parent will each, as
soon as practicable following the date of this Agreement, duly call, give notice
of, convene and hold a meeting of stockholders (respectively, the "Company
Stockholder Meeting" and the "Parent Stockholder Meeting" and, collectively, the
"Stockholder Meetings") for the purpose of considering the approval of this
Agreement (in the case of the Company) and the Share Issuance (in the case of
Parent). The Company and Parent will, through their respective Boards of
Directors, recommend to their respective stockholders adoption or approval of
such matters, as the case may be, shall use all reasonable efforts to solicit
such approvals by their respective stockholders and shall not withdraw such
recommendation, except, in the case of Parent, subject to the fiduciary duties
of the Board of Directors of Parent under applicable law. Without limiting the
generality of the foregoing, the Company agrees that its obligations pursuant to
the first sentence of this Section 5.1 shall not be affected by the
commencement, public proposal, public disclosure or communication to the Company
of a Takeover Proposal. The Company and Parent shall coordinate and cooperate
with respect to the timing of such meetings and shall use their reasonable best
efforts to hold such meetings on the same day.
Section 5.2 Preparation of the Registration Statement and the Joint
Proxy Statement. The Company and Parent shall promptly prepare and file with the
SEC the Joint Proxy Statement and Parent shall prepare and file with the SEC the
Registration Statement, in which the Joint Proxy Statement will be included as a
prospectus. Each of Parent and the Company shall use its reasonable best efforts
to have the Registration Statement declared effective under the Securities Act
as promptly as practicable after such filing. As promptly as practicable after
the Registration Statement shall have become effective, each of Parent and the
Company shall mail the Joint Proxy Statement to its respective stockholders.
Parent shall also take any action reasonably required to be taken under any
applicable state securities laws in connection with the issuance of Parent
Common Stock in the Merger and upon the exercise of the Substitute Options (as
defined in Section 5.8), and the Company shall furnish all information
concerning the Company and the holders of Company Common Stock as may be
reasonably requested in connection with any such action.
Section 5.3 Comfort Letters. (a) The Company shall use its reasonable
best efforts to cause to be delivered to Parent "comfort" letters of KPMG Peat
Marwick LLP, the Company's independent public accountants, dated the date on
which the Registration
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Statement shall become effective and as of the Effective Time, and addressed to
Parent and the Company, in form and substance reasonably satisfactory to Parent
and reasonably customary in scope and substance for letters delivered by
independent public accountants in connection with transactions such as those
contemplated by this Agreement.
(b) Parent shall use its reasonable best efforts to cause to be
delivered to the Company "comfort" letters of Coopers & Lybrand L.L.P. (or any
successor thereto), Parent's independent public accountants, dated the date on
which the Registration Statement shall become effective and as of the Effective
Time, and addressed to the Company and Parent, in form and substance reasonably
satisfactory to the Company and reasonably customary in scope and substance for
letters delivered by independent public accountants in connection with
transactions such as those contemplated by this Agreement.
Section 5.4 Access to Information. Subject to currently existing
contractual and legal restrictions applicable to Parent or to the Company or any
of their Subsidiaries, each of Parent and the Company shall, and shall cause
each of its Subsidiaries to, afford to the accountants, counsel, financial
advisors and other representatives of the other party hereto reasonable access
to, and permit them to make such inspections as they may reasonably require of,
during normal business hours during the period from the date of this Agreement
through the Effective Time, all their respective properties, books, contracts,
commitments and records (including, without limitation, the work papers of
independent accountants, if available and subject to the consent of such
independent accountants) and, during such period, Parent and the Company shall,
and shall cause each of its Subsidiaries to, furnish promptly to the other (i) a
copy of each report, schedule, registration statement and other document filed
by it during such period pursuant to the requirements of federal or state
securities laws and (ii) all other information concerning its business,
properties and personnel as the other may reasonably request. No investigation
pursuant to this Section 5.4 shall affect any representation or warranty in this
Agreement of any party hereto or any condition to the obligations of the parties
hereto. All information obtained by Parent or the Company pursuant to this
Section 5.4 shall be kept confidential in accordance with each of the
Confidentiality Agreements, dated April 1, 1998 between Parent and the Company
(collectively, the "Confidentiality Agreement").
Section 5.5 Compliance with the Securities Act. (a) Section 5.5(a) of
the Company Letter contains a list (reasonably satisfactory to counsel for
Parent) identifying all persons who, at the time of the Company Stockholder
Meeting, may be deemed to be "affiliates" of the Company as that term is used in
paragraphs (c) and (d) of Rule 145 under the Securities Act (the "Rule 145
Affiliates"). The Company shall use its reasonable best efforts to cause each
person who is identified as a Rule 145 Affiliate in such list to deliver to
Parent within 30 days of the date hereof a written agreement in substantially
the form of Exhibit 5.5(a) hereto, executed by each of such persons identified
in the foregoing list.
(b) Section 5.5(b) of the Parent Letter contains a list
(reasonably
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satisfactory to counsel for the Company) identifying those persons who may be,
at the time of the Parent Stockholder Meeting, affiliates of Parent under
applicable SEC accounting releases with respect to pooling of interests
accounting treatment. Parent shall use its reasonable best efforts to enter into
a written agreement in substantially the form of Exhibit 5.5(b) hereto within 30
days of the date hereof with each of such persons identified in the foregoing
list.
Section 5.6 Stock Exchange Listings. Parent shall use its reasonable
best efforts to list on the NYSE, upon official notice of issuance, the shares
of Parent Common Stock to be issued in connection with the Merger.
Section 5.7 Fees and Expenses. (a) Except as provided in this Section
5.7 and Section 5.11, whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby including, without limitation, the fees and disbursements of
counsel, financial advisors and accountants, shall be paid by the party
incurring such costs and expenses, provided that all printing expenses and all
filing fees (including, without limitation, filing fees under the Securities
Act, the Exchange Act and the HSR Act) shall be divided equally between Parent
and the Company.
(b) Notwithstanding any provision in this Agreement to the contrary,
if this Agreement is terminated (A) by the Company or Parent pursuant to Section
7.1(e) or 7.1(g), (B) by Parent pursuant to Section 7.1(h) or (C) by the Company
or Parent at a time when Parent is entitled to terminate this Agreement pursuant
to Section 7.1(e), 7.1(g) or 7.1(h), then, in each case, the Company shall
(without prejudice to any other rights Parent may have against the Company for
breach of this Agreement) reimburse Parent upon demand for all out-of-pocket
fees and expenses incurred or paid by or on behalf of Parent or any Affiliate
(as hereinafter defined) of Parent in connection with this Agreement, the Stock
Option Agreement and the transactions contemplated herein or therein, including
all fees and expenses of counsel, investment banking firms, accountants and
consultants. As used herein, "Affiliate" shall have the meaning set forth in
Rule 405 under the Securities Act.
(c) Notwithstanding any provision in this Agreement to the contrary,
if (i) this Agreement is terminated by the Company or Parent at a time when
Parent is entitled to terminate this Agreement pursuant to Section 7.1(b), (c)
or (e), and, concurrently with or within twelve months after such a termination
a Third Party Acquisition Event (as defined below) occurs, or (ii) this
Agreement is terminated pursuant to Section 7.1(g) or 7.1(h) or by the Company
or Parent at a time when Parent is entitled to terminate this Agreement pursuant
to Section 7.1(g) or 7.1(h), then, in each case, the Company shall (in addition
to any obligation under Section 5.7(b) and without prejudice to any other rights
that Parent may have against the Company for a breach of this Agreement) pay to
Parent the Termination Fee in cash, such payment to be made promptly, but in no
event later
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than the second business day following, in the case of clause (i), the later to
occur of such termination and such Third Party Acquisition Event or, in the case
of clause (ii), such termination.
"Termination Fee" means $200,000,000 minus the product obtained by
multiplying (i) the value (if any) of the Spread (as defined in Section 9 of the
Stock Option Agreement) as of the date when the Termination Fee is payable by
(ii) the number of Optioned Shares held by Parent as to which the Option has not
yet been exercised (as such terms are defined in Section 1 of the Stock Option
Agreement); provided, however, that in no event shall the Termination Fee be
less than $100,000,000.
A "Third Party Acquisition Event" means any of the following events:
(A) any Person (other than Parent or its Affiliates) acquires or becomes the
beneficial owner of 20% or more of the outstanding shares of Company Common
Stock; (B) any group (other than a group which includes or may reasonably be
deemed to include Parent or any of its Affiliates) is formed which, at the time
of formation, beneficially owns 20% or more of the outstanding shares of Company
Common Stock; (C) any Person (other than Parent or its Affiliates) shall have
commenced a tender or exchange offer for 20% or more of the then outstanding
shares of Company Common Stock or publicly proposed any bonafide merger,
consolidation or acquisition of all or substantially all the assets of the
Company, or other similar business combination involving the Company; (D) the
Company enters into, or announces that it proposes to enter into, an agreement,
including, without limitation, an agreement in principle, providing for a merger
or other business combination involving the Company or a "significant
subsidiary" (as defined in Rule 1.02(v) of Regulation S-X as promulgated by the
SEC) of the Company or the acquisition of a substantial interest in, or a
substantial portion of the assets, business or operations of, the Company or a
significant subsidiary (other than the transactions contemplated by this
Agreement); (E) any Person (other than Parent or its Affiliates) is granted any
option or right, conditional or otherwise, to acquire or otherwise become the
beneficial owner of shares of Company Common Stock which, together with all
shares of Company Common Stock beneficially owned by such Person, results or
would result in such Person being the beneficial owner of 20% or more of the
outstanding shares of Company Common Stock; or (F) there is a public
announcement with respect to a plan or intention by the Company or any Person,
other than Parent and its Affiliates, to effect any of the foregoing
transactions. For purposes of this Section 5.7(c), the terms "group" and "
beneficial owner" shall be defined by reference to Section 13(d) of the Exchange
Act.
Section 5.8 Company Stock Options. Not later than the Effective Time,
each Company Stock Option which is outstanding immediately prior to the
Effective Time pursuant to the Company's stock option plans (other than any
"stock purchase plan" within the meaning of Section 423 of the Code) in effect
on the date hereof (the "Stock Plans") shall become and represent an option to
purchase the number of shares of Parent Common Stock (a "Substitute Option")
(decreased to the nearest full share) determined by
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multiplying (i) the number of shares of Company Common Stock subject to such
Company Stock Option immediately prior to the Effective Time by (ii) the
Exchange Ratio, at an exercise price per share of Parent Common Stock (rounded
up to the nearest tenth of a cent) equal to the exercise price per share of
Company Common Stock immediately prior to or at the Effective Time divided by
the Exchange Ratio. Parent shall pay cash to holders of Company Stock Options in
lieu of issuing fractional shares of Parent Common Stock upon the exercise of
Substitute Options for shares of Parent Common Stock, unless in the judgment of
Parent such payment would adversely affect the ability to account for the Merger
under the pooling of interests method. After the Effective Time, except as
provided above in this Section 5.8, each Substitute Option shall be exercisable
upon the same terms and conditions as were applicable under the related Company
Stock Option immediately prior to or at the Effective Time. The Company shall
take all necessary action to implement the provisions of this Section 5.8. The
Company agrees that it will not grant any stock appreciation rights or limited
stock appreciation rights and will not permit cash payments to holders of
Company Stock Options in lieu of the substitution therefor of Substitute
Options, as described in this Section 5.8.
Section 5.9 Reasonable Best Efforts; Pooling of Interests. (a) Upon
the terms and subject to the conditions set forth in this Agreement, each of the
parties agrees to use reasonable best efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, and to assist and cooperate with the
other parties in doing, all things necessary, proper or advisable to consummate
and make effective, in the most expeditious manner practicable, the Merger and
the other transactions contemplated by this Agreement, including, but not
limited to: (i) the obtaining of all necessary actions or non-actions, waivers,
consents and approvals from all Governmental Entities and the making of all
necessary registrations and filings (including filings with Governmental
Entities) and the taking of all reasonable steps as may be necessary to obtain
an approval or waiver from, or to avoid an action or proceeding by, any
Governmental Entity (including those in connection with the HSR Act and State
Takeover Approvals), (ii) the obtaining of all necessary consents, approvals or
waivers from third parties, (iii) the defending of any lawsuits or other legal
proceedings, whether judicial or administrative, challenging this Agreement, the
Stock Option Agreement or the consummation of the transactions contemplated
hereby and thereby, including seeking to have any stay or temporary restraining
order entered by any court or other Governmental Entity vacated or reversed,
(iv) each of Parent and the Company agreeing to take, together with their
respective accountants, all actions reasonably necessary in order to obtain a
favorable determination (if required) from the SEC that the Merger may be
accounted for as a pooling of interests in accordance with generally accepted
accounting principles and (v) the execution and delivery of any additional
instruments necessary to consummate the transactions contemplated by this
Agreement. No party to this Agreement shall consent to any voluntary delay of
the consummation of the Merger at the behest of any Governmental Entity without
the consent of the other parties to this Agreement, which consent shall not be
unreasonably withheld. The Company and Parent shall coordinate with each other
as to the declaration of dividends
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or other distributions on Company Common Stock and Parent Common Stock,
including the record dates thereof, it being the intention of the parties that
the holders of Company Common Stock shall not receive more than one dividend for
any single calendar quarter (it being understood that the Company customarily
pays its dividend for a quarter on the last day thereof while the Parent
customarily pays its dividend for a quarter on the first business day of the
succeeding quarter) on their shares of stock (including any shares of Parent
Common Stock received in the Merger).
(b) Each party shall use all reasonable best efforts to not take any
action, or enter into any transaction, which would cause any of its
representations or warranties contained in this Agreement to be untrue or result
in a breach of any covenant made by it in this Agreement.
(c) Notwithstanding anything to the contrary contained in this
Agreement, in connection with any filing or submission required or action to be
taken by either Parent or the Company to effect the Merger and to consummate the
other transactions contemplated hereby, the Company shall not, without Parent's
prior written consent, commit to any divestiture transaction, and neither Parent
nor any of its Affiliates shall be required to divest or hold separate or
otherwise take or commit to take any action that limits its freedom of action
with respect to, or its ability to retain, the Company or any of the material
businesses, product lines or assets of Parent or any of its Subsidiaries or that
otherwise would have a Material Adverse Effect on Parent.
Section 5.10 Public Announcements. Parent and the Company will not
issue any press release with respect to the transactions contemplated by this
Agreement or otherwise issue any written public statements with respect to such
transactions without prior consultation with the other party, except as may be
required by applicable law or by obligations pursuant to any listing agreement
with any national securities exchange.
Section 5.11 Real Estate Transfer and Gains Tax. Parent and the
Company agree that either the Company or the Surviving Corporation will pay any
state or local tax which is attributable to the transfer of the beneficial
ownership of the Company's or its Subsidiaries' real property, if any
(collectively, the "Gains Taxes"), and any penalties or interest with respect to
the Gains Taxes, payable in connection with the consummation of the Merger. The
Company and Parent agree to cooperate with the other in the filing of any
returns with respect to the Gains Taxes, including supplying in a timely manner
a complete list of all real property interests held by the Company and its
Subsidiaries and any information with respect to such property that is
reasonably necessary to complete such returns. The portion of the consideration
allocable to the real property of the Company and its Subsidiaries shall be
determined by Parent in its reasonable discretion.
Section 5.12 State Takeover Laws. If any "fair price," "business
combination" or "control share acquisition" statute or other similar statute or
regulation shall become
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applicable to the transactions contemplated hereby or in the Stock Option
Agreement, Parent and the Company and their respective Boards of Directors shall
use their best efforts to grant such approvals and take such actions as are
necessary so that the transactions contemplated hereby and thereby may be
consummated as promptly as practicable on the terms contemplated hereby and
thereby and otherwise act to minimize the effects of any such statute or
regulation on the transactions contemplated hereby and thereby.
Section 5.13 Indemnification; Directors and Officers Insurance. For
six years from and after the Effective Time, Parent agrees to cause the
Surviving Corporation to, and shall guarantee the obligation of the Surviving
Corporation to, indemnify and hold harmless all past and present officers and
directors of the Company and of its Subsidiaries to the same extent such persons
are indemnified as of the date of this Agreement by the Company pursuant to the
Company's Certificate of Incorporation, Restated Bylaws or agreements in
existence on the date hereof for acts or omissions occurring at or prior to the
Effective Time. Parent shall provide, or shall cause the Surviving Corporation
to provide, for an aggregate period of not less than six years from the
Effective Time, the Company's current directors and officers an insurance and
indemnification policy that provides coverage for events occurring prior to the
Effective Time (the "D&O Insurance") that is substantially similar (with respect
to limits and deductibles) to the Company's existing policy or, if substantially
equivalent insurance coverage is unavailable, the best available coverage;
provided, however, that the Surviving Corporation shall not be required to pay
premiums aggregating more than $3,000,000 for D&O Insurance for the six year
period commencing on the Effective Time.
Section 5.14 Notification of Certain Matters. Parent shall use its
reasonable best efforts to give prompt notice to the Company, and the Company
shall use its reasonable best efforts to give prompt notice to Parent, of: (i)
the occurrence, or non-occurrence, of any event the occurrence, or
non-occurrence, of which it is aware and which would be reasonably likely to
cause (x) any representation or warranty contained in this Agreement to be
untrue or inaccurate in any material respect or (y) any covenant, condition or
agreement contained in this Agreement not to be complied with or satisfied in
all material respects, (ii) any failure of Parent or the Company, as the case
may be, to comply in a timely manner with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder or (iii) any change
or event which would be reasonably likely to have a Material Adverse Effect on
Parent or the Company, as the case may be; provided, however, that the delivery
of any notice pursuant to this Section 5.14 shall not limit or otherwise affect
the remedies available hereunder to the party receiving such notice.
Section 5.15 Employee Benefit Plans and Agreements. (a) Parent agrees
that it will cause the Surviving Corporation from and after the Effective Time
to honor all Company Plans and all employment agreements entered into by the
Company prior to the
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date hereof; provided, however, that nothing in this Agreement shall be
interpreted as limiting the power of Parent or the Surviving Corporation to
amend or terminate any Company Plan or any other individual employee benefit
plan, program, agreement or policy or as requiring Parent or the Surviving
Corporation to offer to continue (other than as required by its terms) any
written employment contract.
(b) The Company shall use its reasonable best efforts to enter into
excise tax agreements, a form of which is set forth on Section 5.15 of the
Company Letter, prior to the Effective Time. Section 5.15 of the Company Letter
also sets forth the estimated amount that each such identified officer would be
entitled to receive under such agreement if such officers' retention payouts
were being made as of the date hereof.
ARTICLE VI
CONDITIONS PRECEDENT TO THE MERGER
Section 6.1 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of each party to effect the Merger shall be
subject to the fulfillment at or prior to the Effective Time of the following
conditions:
(a) Stockholder Approval. This Agreement shall have been duly approved
by the requisite vote of stockholders of the Company in accordance with
applicable law and the Certificate of Incorporation and Restated Bylaws of the
Company, and the Share Issuance shall have been approved by the requisite vote
of the stockholders of Parent in accordance with applicable rules of the NYSE,
applicable law and the Amended and Restated Articles of Incorporation and
Amended and Restated By-Laws of Parent.
(b) Stock Exchange Listings. The Parent Common Stock issuable in the
Merger shall have been authorized for listing on the NYSE, subject to official
notice of issuance.
(c) HSR and Other Approvals. (i) The waiting period (and any extension
thereof) applicable to the consummation of the Merger under the HSR Act shall
have expired or been terminated.
(ii) All authorizations, consents, orders, declarations or approvals
of, or filings with, or terminations or expirations of waiting periods imposed
by, any Governmental Entity, which the failure to obtain, make or occur would
have the effect of making the Merger or any of the transactions contemplated
hereby illegal or would have, individually or in the aggregate, a Material
Adverse Effect on Parent (assuming the Merger had taken place), shall have been
obtained, shall have been made or shall have occurred.
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(d) Registration Statement. The Registration Statement shall have
become effective in accordance with the provisions of the Securities Act. No
stop order suspending the effectiveness of the Registration Statement shall have
been issued by the SEC and no proceedings for that purpose shall have been
initiated or, to the Knowledge of Parent or the Company, threatened by the SEC.
All necessary state securities or blue sky authorizations (including State
Takeover Approvals) shall have been received.
(e) No Order. No court or other Governmental Entity having
jurisdiction over the Company or Parent, or any of their respective
Subsidiaries, shall have enacted, issued, promulgated, enforced or entered any
law, rule, regulation, executive order, decree, injunction or other order
(whether temporary, preliminary or permanent) which is then in effect and has
the effect of making the Merger or any of the transactions contemplated hereby
illegal.
Section 6.2 Conditions to Obligation of the Company to Effect the
Merger. The obligation of the Company to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Time of the following additional
conditions:
(a) Performance of Obligations; Representations and Warranties. Each
of Parent and Sub shall have performed in all material respects each of its
agreements contained in this Agreement required to be performed on or prior to
the Effective Time, each of the representations and warranties of Parent and Sub
contained in this Agreement that is qualified by materiality shall be true and
correct on and as of the Effective Time as if made on and as of such date (other
than representations and warranties which address matters only as of a certain
date which shall be true and correct as of such certain date) and each of the
representations and warranties that is not so qualified shall be true and
correct in all material respects on and as of the Effective Time as if made on
and as of such date (other than representations and warranties which address
matters only as of a certain date which shall be true and correct in all
material respects as of such certain date), in each case except as contemplated
or permitted by this Agreement, and the Company shall have received certificates
signed on behalf of each of Parent and Sub by its Chief Executive Officer and
its Chief Financial Officer to such effect.
(b) Tax Opinion. The Company shall have received an opinion of Dorsey
& Whitney LLP, in form and substance reasonably satisfactory to the Company,
dated the Effective Time, substantially to the effect that on the basis of
facts, representations and assumptions set forth in such opinion which are
consistent with the state of facts existing as of the Effective Time, for
federal income tax purposes:
(i) the Merger will constitute a "reorganization" within the meaning
of Section 368(a) of the Code, and the Company, Sub and Parent will each be
a party to that reorganization within the meaning of Section 368(b) of the
Code;
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(ii) no gain or loss will be recognized by Parent or the Company as a
result of the Merger;
(iii) no gain or loss will be recognized by the stockholders of the
Company upon the conversion of their shares of Company Common Stock into
shares of Parent Common Stock pursuant to the Merger, except with respect
to cash, if any, received in lieu of fractional shares of Parent Common
Stock;
(iv) the aggregate tax basis of the shares of Parent Common Stock
received in exchange for shares of Company Common Stock pursuant to the
Merger (including a fractional share of Parent Common Stock for which cash
is paid) will be the same as the aggregate tax basis of such shares of
Company Common Stock;
(v) the holding period for shares of Parent Common Stock received in
exchange for shares of Company Common Stock pursuant to the Merger will
include the holder's holding period for such shares of Company Common
Stock, provided such shares of Company Common Stock were held as capital
assets by the holder at the Effective Time; and
(vi) a stockholder of the Company who receives cash in lieu of a
fractional share of Parent Common Stock will recognize gain or loss equal
to the difference, if any, between such stockholder's basis in the
fractional share (determined under clause (iv) above) and the amount of
cash received.
In rendering such opinion, Dorsey & Whitney LLP may rely as to matters of fact
upon the representations contained herein and may receive and rely upon
representations from Parent, the Company, and others, including representations
from Parent substantially similar to the representations in the Parent Tax
Certificate attached to the Parent Letter and representations from the Company
substantially similar to the representations in the Company Tax Certificate
attached to the Company Letter.
(c) Certain Consents. In obtaining any approval or consent required to
consummate any of the transactions contemplated herein or in the Stock Option
Agreement, no Governmental Entity shall have imposed or shall have sought to
impose any condition, penalty or requirement which, in the reasonable opinion of
the Company, individually or in the aggregate, would have a Material Adverse
Effect on Parent (assuming the consummation of the Merger).
(d) Board Representation. Parent shall have taken all action necessary
to cause Mr. Lawrence Coss and one additional person, selected by Parent among
the individuals who are directors of the Company as of the date hereof, to
become members of the Board of Directors of Parent upon consummation of the
Merger (it being understood that Parent, at its sole discretion, may choose to
appoint one additional individual from
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such existing Board of Directors of the Company to become a member of the Board
of Directors of Parent), subject in each case to the willingness of each such
individual to serve as a director of Parent.
Section 6.3 Conditions to Obligations of Parent and Sub to Effect the
Merger. The obligations of Parent and Sub to effect the Merger shall be subject
to the fulfillment at or prior to the Effective Time of the following additional
conditions:
(a) Performance of Obligations; Representations and Warranties. The
Company shall have performed in all material respects each of its agreements
contained in this Agreement required to be performed on or prior to the
Effective Time, each of the representations and warranties of the Company
contained in this Agreement that is qualified by materiality shall be true and
correct on and as of the Effective Time as if made on and as of such date (other
than representations and warranties which address matters only as of a certain
date which shall be true and correct as of such certain date) and each of the
representations and warranties that is not so qualified shall be true and
correct in all material respects on and as of the Effective Time as if made on
and as of such date (other than representations and warranties which address
matters only as of a certain date which shall be true and correct in all
material respects as of such certain date), in each case except as contemplated
or permitted by this Agreement, and Parent shall have received a certificate
signed on behalf of the Company by its Chief Executive Officer and its Chief
Financial Officer to such effect.
(b) Tax Opinion. Parent shall have received an opinion of Sidley &
Austin, in form and substance reasonably satisfactory to Parent, dated the
Effective Time, substantially to the effect that on the basis of facts,
representations and assumptions set forth in such opinion which are consistent
with the state of facts existing as of the Effective Time, for federal income
tax purposes:
(i) the Merger will constitute a "reorganization" within the meaning
of Section 368(a) of the Code, and the Company, Sub and Parent will each be
a party to that reorganization within the meaning of Section 368(b) of the
Code;
(ii) no gain or loss will be recognized by Parent or the Company as a
result of the Merger;
(iii) no gain or loss will be recognized by the stockholders of the
Company upon the conversion of their shares of Company Common Stock into
shares of Parent Common Stock pursuant to the Merger, except with respect
to cash, if any, received in lieu of fractional shares of Parent Common
Stock;
(iv) the aggregate tax basis of the shares of Parent Common Stock
received in exchange for shares of Company Common Stock pursuant to the
Merger
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(including a fractional share of Parent Common Stock for which cash is
paid) will be the same as the aggregate tax basis of such shares of Company
Common Stock;
(v) the holding period for shares of Parent Common Stock received in
exchange for shares of Company Common Stock pursuant to the Merger will
include the holder's holding period for such shares of Company Common
Stock, provided such shares of Company Common Stock were held as capital
assets by the holder at the Effective Time; and
(vi) a stockholder of the Company who receives cash in lieu of a
fractional share of Parent Common Stock will recognize gain or loss equal
to the difference, if any, between such stockholder's basis in the
fractional share (determined under clause (iv) above) and the amount of
cash received.
In rendering such opinion, Sidley & Austin may rely as to matters of fact upon
representations contained herein and may receive and rely upon representations
from Parent, the Company, and others, including representations from Parent
substantially similar to the representations in the Parent Tax Certificate
attached to the Parent Letter and representations from the Company substantially
similar to the representations in the Company Tax Certificate attached to the
Company Letter.
(c) Accounting. (i) Parent shall have received an opinion of Coopers &
Lybrand L.L.P. (or any successor thereto), in form and substance reasonably
satisfactory to Parent, that the Merger will qualify for pooling of interests
accounting treatment under Accounting Principles Board Opinion No. 16 if closed
and consummated in accordance with this Agreement (which opinion shall be based,
as to the financial statements of the Company, on a customary "pooling" letter
of KPMG Peat Marwick LLP); and
(ii) Parent shall have received the "comfort letters" described in
Section 5.3(a), in form and substance reasonably satisfactory to Parent.
(d) Consents. (i) The Company shall have obtained the consent or
approval of each person or Governmental Entity whose consent or approval shall
be required in connection with the transactions contemplated hereby under any
loan or credit agreement, note, mortgage, indenture, lease or other agreement or
instrument or any applicable law, rule or regulation, except as to which the
failure to obtain such consents and approvals would not, in the reasonable
opinion of Parent, individually or in the aggregate, have a Material Adverse
Effect on the Company or Parent or upon the consummation of the transactions
contemplated in this Agreement or the Stock Option Agreement.
(ii) In obtaining any approval or consent required to consummate any
of the transactions contemplated herein or in the Stock Option Agreement, no
Governmental
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Entity shall have imposed or shall have sought to impose any condition, penalty
or requirement which, in the reasonable opinion of Parent, individually or in
aggregate would have a Material Adverse Effect on the Company or Parent.
(e) Litigation. There shall not be instituted or pending any suit,
action or proceeding before any Governmental Entity as a result of this
Agreement, the Stock Option Agreement or any of the transactions contemplated
herein or therein which would have a Material Adverse Effect on the Company or
Parent.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
Section 7.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after any approval of the matters
presented in connection with the Merger by the stockholders of the Company or
Parent:
(a) by mutual written consent of Parent and the Company;
(b) except for a breach by the Company of Section 5.1, by either
Parent or the Company if the other party shall have failed to comply in any
material respect with any of its covenants or agreements contained in this
Agreement required to be complied with prior to the date of such
termination, which failure to comply has not been cured within thirty
business days following receipt by such other party of written notice from
the non-breaching party of such failure to comply;
(c) by either Parent or the Company if there has been (i) a breach by
the other party (in the case of Parent, including any material breach by
Sub) of any representation or warranty that is not qualified as to
materiality which has the effect of making such representation or warranty
not true and correct in all material respects or (ii) a breach by the other
party (in the case of Parent, including any material breach by Sub) of any
representation or warranty that is qualified as to materiality, in each
case which breach has not been cured within thirty business days following
receipt by the breaching party from the non-breaching party of written
notice of the breach;
(d) by Parent or the Company if: (i) the Merger has not been effected
on or prior to the close of business on December 31, 1998; provided,
however, that the right to terminate this Agreement pursuant to this
Section 7.1(d)(i) shall not be available to any party whose failure to
fulfill any of its obligations contained in this Agreement has been the
cause of, or resulted in, the failure of the Merger to have
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occurred on or prior to the aforesaid date; or (ii) any court or other
Governmental Entity having jurisdiction over a party hereto shall have
issued an order, decree or ruling or taken any other action permanently
enjoining, restraining or otherwise prohibiting the transactions
contemplated by this Agreement and such order, decree, ruling or other
action shall have become final and nonappealable;
(e) by Parent or the Company if the stockholders of the Company do not
approve this Agreement at the Company Stockholder Meeting or at any
adjournment or postponement thereof;
(f) by Parent or the Company if the stockholders of Parent do not
approve the Share Issuance at the Parent Stockholder Meeting or at any
adjournment or postponement thereof;
(g) by Parent or the Company if the Company enters into a merger,
acquisition or other agreement (including an agreement in principle) to
effect a Superior Proposal or the Board of Directors of the Company
resolves to do so; provided, however, that the Company may not terminate
this Agreement pursuant to this Section 7.1(g) unless (i) the Company has
delivered to Parent a written notice of the Company's intent to enter into
such an agreement to effect the Superior Proposal, (ii) five business days
have elapsed following delivery to Parent of such written notice by the
Company and (iii) during such five business day period the Company has
fully cooperated with Parent, including, without limitation, informing
Parent of the terms and conditions of the Takeover Proposal and the
identity of the Person making the Takeover Proposal, with the intent of
enabling Parent to agree to a modification of the terms and conditions of
this Agreement so that the transactions contemplated hereby may be
effected; provided, further, that the Company may not terminate this
Agreement pursuant to this Section 7.1(g) unless at the end of such five
business day period the Board of Directors of the Company continues
reasonably to believe that the Takeover Proposal constitutes a Superior
Proposal and prior to such termination the Company pays to Parent the
amounts specified under Sections 5.7(a), (b) and (c);
(h) by Parent if (i) the Board of Directors of the Company, in breach
of Section 5.1, shall not have recommended, or shall have resolved not to
recommend, or shall have qualified, modified or withdrawn its
recommendation of the Merger or declaration that the Merger is advisable
and fair to and in the best interest of the Company and its stockholders,
or shall have resolved to do so, (ii) the Board of Directors of the Company
shall have recommended to the stockholders of the Company any Takeover
Proposal or shall have resolved to do so or (iii) a tender offer or
exchange offer for 20% or more of the outstanding shares of capital stock
of the Company is commenced, and the Board of Directors of the Company
fails to recommend against acceptance of such tender offer or exchange
offer by its
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stockholders (including by taking no position with respect to the
acceptance of such tender offer or exchange offer by its stockholders); or
(i) by the Company if the Board of Directors of Parent shall not have
recommended, or shall have resolved not to recommend, or shall have
qualified or modified or withdrawn its recommendation of the Merger or
declaration that the Merger is advisable and fair to and in the best
interest of Parent and its stockholders, or shall have resolved to do so.
The right of any party hereto to terminate this Agreement pursuant to
this Section 7.1 shall remain operative and in full force and effect regardless
of any investigation made by or on behalf of any party hereto, any person
controlling any such party or any of their respective officers or directors,
whether prior to or after the execution of this Agreement.
Section 7.2 Effect of Termination. In the event of termination of this
Agreement by either Parent or the Company, as provided in Section 7.1, this
Agreement shall forthwith become void and there shall be no liability hereunder
on the part of the Company, Parent, Sub or their respective officers or
directors (except for the last sentence of Section 5.4 and the entirety of
Section 5.7, which shall survive the termination); provided, however, that
nothing contained in this Section 7.2 shall relieve any party hereto from any
liability for any willful breach of a representation or warranty contained in
this Agreement or the breach of any covenant contained in this Agreement.
Section 7.3 Amendment. This Agreement may be amended by the parties
hereto, by or pursuant to action taken by their respective Boards of Directors,
at any time before or after approval of the matters presented in connection with
the Merger by the stockholders of Parent and the Company, but, after any such
approval, no amendment shall be made which by law requires further approval by
such stockholders without such further approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
Section 7.4 Waiver. At any time prior to the Effective Time, the
parties hereto may (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (iii) waive compliance with any of the
agreements or conditions contained herein which may legally be waived. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
ARTICLE VIII
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GENERAL PROVISIONS
Section 8.1 Non-Survival of Representations and Warranties. The
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall terminate at the Effective Time.
Section 8.2 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given when delivered personally, one day
after being delivered to an overnight courier or when telecopied (with a
confirmatory copy sent by overnight courier) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to Parent or Sub, to
Conseco, Inc.
11825 North Pennsylvania Street
Carmel, Indiana 46032
Attention: Stephen C. Hilbert
Facsimile No.: (317) 817-6327
with a copy to:
Conseco, Inc.
11825 North Pennsylvania Street
Carmel, Indiana 46032
Attention: John J. Sabl, Esq.
Facsimile No.: (317) 817-6327
and
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attention: Thomas A. Cole, Esq.
Paul L. Choi, Esq.
Facsimile No.: (312) 853-7036
(b) if to the Company, to
Green Tree Financial Corporation
1100 Landmark Towers
345 St. Peter Street
St. Paul, Minnesota 55102
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Attention: Lawrence M. Coss
Facsimile No.: (612) 293-3646
with a copy to:
Dorsey & Whitney LLP
Pillsbury Center South
220 South Sixth Street
Minneapolis, Minnesota 55402
Attention: William B. Payne, Esq.
Facsimile No.: (612) 340-8738
Section 8.3 Interpretation. When a reference is made in this Agreement
to a Section, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation."
Section 8.4 Counterparts. This Agreement may be executed in
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
Section 8.5 Entire Agreement; No Third-Party Beneficiaries. This
Agreement, except for the Stock Option Agreement and as provided in the last
sentence of Section 5.4, constitutes the entire agreement and supersedes all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof. This Agreement, except for the
provisions of Section 5.13, is not intended to confer upon any person other than
the parties hereto any rights or remedies hereunder.
Section 8.6 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
Section 8.7 Assignment. Subject to Section 1.1, neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned by
any of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other parties.
Section 8.8 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other terms, conditions and provisions of this Agreement
shall nevertheless remain in full
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force and effect so long as the economic and legal substance of the transactions
contemplated hereby are not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties shall negotiate in good
faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in a mutually acceptable manner in order that the
transactions contemplated by this Agreement may be consummated as originally
contemplated to the fullest extent possible.
Section 8.9 Enforcement of this Agreement. The parties hereto agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific wording or
were otherwise breached. It is accordingly agreed that the parties hereto shall
be entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions hereof in any
court of the United States or any state having jurisdiction, such remedy being
in addition to any other remedy to which any party is entitled at law or in
equity.
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IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized
all as of the date first written above.
CONSECO, INC.
By: /s/Stephen C. Hilbert
-----------------------
Name: Stephen C. Hilbert
Title: Chairman, President and
Chief Executive Officer
Attest:
/s/John J. Sabl
- ---------------
Name: John J. Sabl
Title: Executive Vice President,
Secretary and General Counsel
MARBLE ACQUISITION CORP.
By: /s/Stephen C. Hilbert
-----------------------
Name: Stephen C. Hilbert
Title: Chairman, President and
Chief Executive Officer
Attest:
/s/John J. Sabl
- ---------------
Name: John J. Sabl
Title: Executive Vice President and Secretary
GREEN TREE FINANCIAL
CORPORATION
By: /s/Lawrence M. Coss
-----------------------
Name: Lawrence M. Coss
Title: Chairman and Chief
Executive Officer
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<PAGE>
Attest:
/s/Joel H. Gottesman
- --------------------
Name: Joel H. Gottesman
Title: Senior Vice President, Secretary
and General Counsel
A-52
<PAGE>
ANNEX B
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of April 6, 1998 (the
"Agreement"), between Conseco, Inc., an Indiana corporation ("Parent"), and
Green Tree Financial Corporation, a Delaware corporation (the "Company").
W I T N E S S E T H:
WHEREAS, simultaneously with the execution and delivery of
this Agreement, Parent, Marble Acquisition Corp., a newly formed Delaware
corporation and a direct wholly owned subsidiary of Parent ("Sub"), and the
Company are entering into an Agreement and Plan of Merger, dated as of the date
hereof (the "Merger Agreement"), which provides for the merger of Sub with and
into the Company;
WHEREAS, as a condition to Parent's willingness to enter into
the Merger Agreement, Parent has requested that the Company grant to Parent an
option to purchase up to 26,668,399 authorized and unissued shares of Company
Common Stock, upon the terms and subject to the conditions hereof; and
WHEREAS, in order to induce Parent to enter into the Merger
Agreement, the Company has agreed to grant Parent the requested option.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements set forth herein, the parties hereto agree as
follows:
1. The Option; Exercise; Adjustments. The Company hereby
grants to Parent an irrevocable option (the "Option") to purchase from time to
time up to 26,668,399 authorized and unissued shares of common stock, par value
$.01 per share, of the Company (the "Company Common Stock") upon the terms and
subject to the conditions set forth herein (the "Optioned Shares"). Subject to
the conditions set forth in Section 2, the Option may be exercised by Parent in
whole or from time to time in part, at any time after the date hereof and prior
to the termination of the Option in accordance with Section 19. In the event
Parent wishes to exercise the Option, Parent shall send a written notice to the
Company (the "Stock Exercise Notice") specifying the total number of Optioned
Shares it wishes to purchase and a date (not later than 20 business days and not
earlier than two business days from the date such notice is given) for the
closing of such purchase (the "Closing Date"). Parent may revoke an exercise of
the Option at any time prior to the Closing Date by written notice to the
Company. In the event of any change in the number of issued and outstanding
shares of Company Common Stock by reason of any stock dividend, stock split,
split-up, recapitalization, merger or other change in the corporate or capital
structure of the Company, the number of Optioned Shares subject to the Option
and the Exercise Price (as hereinafter defined) per Optioned Share shall be
appropriately adjusted. In the event that any additional shares of Company
Common Stock are issued
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after the date of this Agreement (other than pursuant to an event described in
the preceding sentence or pursuant to this Agreement), the number of Optioned
Shares subject to the Option shall be adjusted so that, after such issuance, it
equals at least 19.9% of the number of shares of Company Common Stock then
issued and outstanding (without considering any shares subject to or issued
pursuant to the Option).
2. Conditions to Exercise of Option and Delivery of Optioned
Shares. (a) Parent's right to exercise the Option is subject to the following
conditions that:
(i) Neither Parent nor Sub shall have breached any of its
material obligations under the Merger Agreement or have terminated
the Merger Agreement in violation of its terms;
(ii) No preliminary or permanent injunction or other order
issued by any federal or state court of competent jurisdiction in
the United States invalidating the grant or prohibiting the
exercise of the Option shall be in effect; and
(iii) One or more of the following events shall have occurred
on or after the date hereof or Parent shall have become aware on or
after the date hereof of the occurrence of any of the following:
(A) any person, corporation, partnership, limited liability
company, or other entity or group (such person, corporation,
partnership or other entity or group being referred to hereinafter,
singularly or collectively, as a "Person"), other than Parent or
its affiliates, acquires or becomes the beneficial owner of 20% or
more of the outstanding shares of Company Common Stock; (B) any new
group is formed which beneficially owns 20% or more of the
outstanding shares of Company Common Stock (other than a group
which includes or may reasonably be deemed to include Parent or any
of its affiliates); (C) any Person (other than Parent or its
affiliates) shall have commenced a tender or exchange offer for 20%
or more of the then outstanding shares of Company Common Stock or
publicly proposed any bona fide merger, consolidation or
acquisition of all or substantially all the assets of the Company,
or other similar business combination involving the Company; (D)
the Company enters into, or announces that it proposes to enter
into, an agreement, including, without limitation, an agreement in
principle, providing for a merger or other business combination
involving the Company or a "significant subsidiary" of the Company
(as defined in Rule 1.02(v) of Regulation S-X as promulgated by the
Securities and Exchange Commission (the "SEC")) or the acquisition
of a substantial interest in, or a substantial portion of the
assets, business or operations of the Company or a significant
subsidiary (other than the transactions contemplated by the Merger
Agreement); (E) any Person (other than Parent or its affiliates) is
granted any option or right, conditional or otherwise, to acquire
or otherwise become the beneficial owner of shares of Company
Common Stock which, together with all shares of Company Common
Stock beneficially owned by such Person, results or would result in
such Person being the beneficial owner of 20% or more of the
outstanding shares of Company Common Stock; or (F) there is a
public announcement with respect to a plan or intention by the
Company or any Person, other than Parent or its affiliates, to
effect any of the foregoing transactions. For purposes of this
subparagraph (iii), the terms "group" and "beneficial owner" shall
be defined by reference to Section 13(d) of the Securities Exchange
Act of 1934, as amended, and
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<PAGE>
the rules and regulations promulgated thereunder (the "Exchange Act").
(b) Parent's obligation to purchase the Optioned Shares
following the exercise of the Option, and the Company's obligation
to deliver the Optioned Shares, are subject to the conditions that:
(i) No preliminary or permanent injunction or other order
issued by any federal or state court of competent jurisdiction in
the United States prohibiting the delivery of the Optioned Shares
shall be in effect;
(ii) The purchase of the Optioned Shares will not violate Rule
10b-13 promulgated under the Exchange Act; and
(iii) All applicable waiting periods under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR Act"), shall have expired or been terminated.
3. Exercise Price for Optioned Shares. At any Closing Date,
the Company will deliver to Parent a certificate or certificates representing
the Optioned Shares in the denominations designated by Parent in its Stock
Exercise Notice and Parent will purchase the Optioned Shares from the Company at
a price per Optioned Share equal to $52.93 (the "Exercise Price"), payable in
Common Stock, no par value, of Parent (the "Parent Common Stock"), cash or a
combination of Parent Common Stock or cash, in each case at Parent's option, as
specified in the Stock Exercise Notice. Any cash payment made by Parent to the
Company pursuant to this Agreement shall be made by wire transfer of federal
funds to a bank designated by the Company or a check payable in immediately
available funds. If Parent elects to pay the Exercise Price or a portion thereof
in Parent Common Stock, the Parent Common Stock shall be valued at the average
of the closing prices of the Parent Common Stock on the New York Stock Exchange
for the five trading days immediately prior to the Closing Date. After payment
of the Exercise Price for the Optioned Shares covered by the Stock Exercise
Notice, the Option shall be deemed exercised to the extent of the Optioned
Shares specified in the Stock Exercise Notice as of the date such Stock Exercise
Notice is given to the Company. Notwithstanding anything to the contrary herein,
the Exercise Price shall from time to time be adjusted so that in no event shall
the Aggregate Spread Value, together with the Termination Fee (as defined in
Section 5.7(c) of the Merger Agreement and as may be adjusted pursuant thereto),
exceed $295,000,000 (it being understood that, if the Exercise Price has been
increased from time to time as a result of this sentence, the Exercise Price
shall from time to time be adjusted downward to the extent of any decrease in
the price of the Company Common Stock). "Spread Value" with respect to an
Optioned Share means the product obtained by multiplying (x) the excess, if any,
of (i) the average of the closing prices on the New York Stock Exchange of the
Company Common Stock during the five trading days immediately preceding the
written notice of exercise (in the case of an Optioned Share previously
exercised) or the date of determination (in the case of an Optioned Share as to
which the Option has not yet been exercised) over (ii) the Exercise Price. The
Aggregate Spread Value shall be the sum of the Spread Value of all Optioned
Shares.
4. Representations and Warranties of the Company. The Company
represents
B-3
<PAGE>
and warrants to Parent that (a) the execution and delivery of this Agreement by
the Company and the consummation by it of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part of the
Company and this Agreement has been duly executed and delivered by the Company
and constitutes a valid and binding obligation of the Company enforceable
against the Company in accordance with its terms; (b) the Company has taken all
necessary corporate action to authorize and reserve the Optioned Shares for
issuance upon exercise of the Option, and the Optioned Shares, when issued and
delivered by the Company to Parent upon exercise of the Option, will be duly
authorized, validly issued, fully paid and nonassessable and free of preemptive
rights; (c) except as otherwise required by the HSR Act, except for routine
filings and subject to Section 7, the execution and delivery of this Agreement
by the Company and the consummation by it of the transactions contemplated
hereby do not require the consent, approval or authorization of, or filing with,
any person or public authority and will not violate or conflict with the
Company's Certificate of Incorporation or Restated Bylaws, or result in the
acceleration or termination of, or constitute a default under, any indenture,
license, approval, agreement, understanding or other instrument, or any statute,
rule, regulation, judgment, order or other restriction binding upon or
applicable to the Company or any of its subsidiaries or any of their respective
properties or assets; (d) the Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all requisite corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby; and (e) the
Company has taken all appropriate actions so that the restrictions on business
combinations contained in Section 203 of the General Corporation Law of the
State of Delaware, as amended, and neither Article 8 nor Article 9 of its
Certificate of Incorporation will apply with respect to or as a result of the
transactions contemplated hereby.
5. Representations and Warranties of Parent. Parent represents
and warrants to the Company that (a) the execution and delivery of this
Agreement by Parent and the consummation by it of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Parent and this Agreement has been duly executed and delivered by Parent and
constitutes a valid and binding agreement of Parent; and (b) Parent is acquiring
the Option and, if and when it exercises the Option, will be acquiring the
Optioned Shares issuable upon the exercise thereof, for its own account and not
with a view to distribution or resale in any manner which would be in violation
of the Securities Act of 1933, as amended (the "Securities Act"), and will not
sell or otherwise dispose of the Optioned Shares except pursuant to an effective
registration statement under the Securities Act or a valid exemption from
registration under the Securities Act.
6. The Closing. Any closing hereunder shall take place on the
Closing Date specified by Parent in its Stock Exercise Notice pursuant to
Section 1 at 10:00 A.M., local time, or the first business day thereafter on
which all of the conditions in Section 2 are met, at the principal executive
office of the Company, or at such other time and place as the parties hereto may
agree.
7. Filings Related to Optioned Shares. The Company will make
such filings with the SEC and the National Association of Securities Dealers,
Inc. as are required by the Exchange Act, and will use its best efforts to
effect all necessary filings by the Company
B-4
<PAGE>
under the HSR Act and to list the Optioned Shares on the New York Stock
Exchange.
8. Registration Rights. (a) If the Company effects any
registration or registrations of shares of Company Common Stock under the
Securities Act for its own account or for any other stockholder of the Company
at any time after the exercise of the Option (other than a registration on Form
S-4, Form S-8 or any successor forms), it will allow Parent to participate in
such registration or registrations with respect to any or all of the Optioned
Shares acquired upon the exercise of the Option; provided, however, that if the
managing underwriters in such offering advise the Company that, in their written
opinion, the number of Optioned Shares requested by Parent to be included in
such registration exceeds the number of shares of Company Common Stock which can
be sold in such offering, the Company may exclude from such registration all or
a portion, as may be appropriate, of the Optioned Shares requested for inclusion
by Parent.
(b) At any time after the exercise of the Option, upon the
request of Parent, the Company will promptly file and use its best efforts to
cause to be declared effective a registration statement under the Securities Act
(and applicable Blue Sky statutes) with respect to any or all of the Optioned
Shares acquired upon the exercise of the Option; provided, however, that the
Company shall not be required to have declared effective more than two
registration statements hereunder and shall be entitled to delay the
effectiveness of each such registration statement, for a period not to exceed 90
days in the aggregate, if the commencement of such offering would, in the
reasonable good faith judgment of the Board of Directors of the Company, require
premature disclosure of any material corporate development or otherwise
materially interfere with or materially adversely affect any pending or proposed
offering of securities of the Company. In connection with any such registration
requested by Parent, the costs of such registration shall be borne by the
Company, and the Company and Parent each shall provide the other and any
underwriters with customary indemnification and contribution agreements.
9. Optional Put. Prior to the termination of the Option in
accordance with Section 19, if a Put Event has occurred, Parent shall have the
right, upon three business days' prior written notice to the Company, to require
the Company to purchase the Option from Parent (the "Put Right") at a cash
purchase price (the "Put Price") equal to the product determined by multiplying
(A) the number of Optioned Shares as to which the Option has not yet been
exercised by (B) the Spread (as defined below). As used herein, "Put Event"
means the occurrence on or after the date hereof or Parent becoming aware on or
after the date hereof of any of the following: (i) any Person (other than Parent
or its affiliates) acquires or becomes the beneficial owner of 30% or more of
the outstanding shares of Company Common Stock or (ii) the Company consummates a
merger or other business combination involving the Company or a "significant
subsidiary" of the Company (as defined in Rule 1.02(v) of Regulation S-X as
promulgated by the SEC) or the acquisition of a substantial interest in, or a
substantial portion of the assets, business or operations of the Company or a
significant subsidiary (other than the transactions contemplated by the Merger
Agreement). As used herein, the term "Spread" shall mean the excess, if any, of
(i) the greater of (x) the highest price (in cash or fair market value of
securities or other property) per share of Company Common Stock paid or to be
paid within 12 months preceding the date of exercise of the Put Right for any
shares of Company Common Stock beneficially owned by any Person who shall have
acquired or become the beneficial owner of
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30% or more of the outstanding shares of Company Common Stock after the date
hereof or (y) the average of the closing prices on the New York Stock Exchange
of the Company Common Stock during the five trading days immediately preceding
the written notice of exercise of the Put Right over (ii) the Exercise Price.
Notwithstanding anything herein to the contrary, in no event shall the aggregate
Put Price, together with the Aggregate Spread Value of any Optioned Shares
previously exercised and the amount of the Termination Fee (as defined in
Section 5.7(c) of the Merger Agreement and as may be adjusted pursuant thereto)
then payable, exceed $295,000,000.
10. Expenses. Each party hereto shall pay its own expenses
incurred in connection with this Agreement, except as otherwise provided in
Section 8 or as specified in the Merger Agreement.
11. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state thereof having jurisdiction, this being in addition to any
other remedy to which they are entitled at law or in equity.
12. Notice. All notices, requests, demands and other
communications hereunder shall be deemed to have been duly given and made if in
writing and if served by personal delivery upon the party for whom it is
intended or if sent by telex or telecopier (and also confirmed in writing) to
the person at the address set forth below, or such other address as may be
designated in writing hereafter, in the same manner, by such person:
(a) if to Parent or Sub, to
Conseco, Inc.
11825 North Pennsylvania Street
Carmel, Indiana 46032
Attention: Stephen C. Hilbert
Facsimile No.: (317) 817-6327
with copies to:
Conseco, Inc.
11825 North Pennsylvania Street
Carmel, Indiana 46032
Attention: John J. Sabl, Esq.
Facsimile No.: (317) 817-6327
and
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
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Attention: Thomas A. Cole, Esq.
Paul L. Choi, Esq.
Facsimile No.: (312) 853-7036
(b) if to the Company, to
Green Tree Financial Corporation
1100 Landmark Towers
345 St. Peter Street
St. Paul, Minnesota 55102
Attention: Lawrence M. Coss
Facsimile No.: (612) 293-3646
with a copy to:
Dorsey & Whitney LLP
Pillsbury Center South
220 South Sixth Street
Minneapolis, Minnesota 55402
Attention: William B. Payne, Esq.
Facsimile No.: (612) 340-8738
13. Parties in Interest. This Agreement shall inure to the
benefit of and be binding upon the parties named herein and their respective
successors and assigns. Nothing in this Agreement, expressed or implied, is
intended to confer upon any Person other than Parent or the Company, or their
permitted successors or assigns, any rights or remedies under or by reason of
this Agreement.
14. Entire Agreement; Amendments. This Agreement, together
with the Merger Agreement and the other documents referred to therein, contains
the entire agreement between the parties hereto with respect to the subject
matter hereof and supersedes all prior and contemporaneous agreements and
understandings, oral or written, with respect to such transactions. This
Agreement may not be changed, amended or modified orally, but only by an
agreement in writing signed by the party against whom any waiver, change,
amendment, modification or discharge may be sought.
15. Assignment. No party to this Agreement may assign any of
its rights or delegate any of its obligations under this Agreement (whether by
operation of law or otherwise) without the prior written consent of the other
party hereto, except that Parent may, without a written consent, assign its
rights and delegate its obligations hereunder in whole or in part to one or more
of its direct or indirect wholly owned subsidiaries.
16. Headings. The section headings herein are for convenience
only and shall not affect the construction of this Agreement.
17. Counterparts. This Agreement may be executed in one or
more counterparts, each of which, when executed, shall be deemed to be an
original and all of which together shall constitute one and the same document.
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18. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without giving
effect to the principles of conflicts of laws thereof.
19. Termination. This Agreement and the Option shall terminate
upon the earlier of (i) the Effective Time (as defined in the Merger Agreement)
and (ii) the termination of the Merger Agreement in accordance with its terms;
provided, however, the Option shall not terminate pursuant to clause (ii)
immediately above if (A) the Merger Agreement is terminated by Parent pursuant
to Section 7.1(b) or (c) thereof or (B) the Merger Agreement is terminated by
Parent or the Company pursuant to Section 7.1(e), (g), or (h) thereof.
20. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic and legal
substance of the transactions contemplated hereby are not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the transactions contemplated by this Agreement may be consummated as
originally contemplated to the fullest extent possible.
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<PAGE>
IN WITNESS WHEREOF, Parent and the Company have caused this
Agreement to be duly executed and delivered on the day and year first above
written.
CONSECO, INC.
By: /s/ Stephen C. Hilbert
--------------------------------
Name: Stephen C. Hilbert
Title: Chairman, President and
Chief Executive Officer
GREEN TREE FINANCIAL CORPORATION
By: /s/ Lawrence M. Coss
-------------------------------
Name: Lawrence M. Coss
Title: Chairman and Chief
Executive Officer
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<PAGE>
ANNEX C
April 6, 1998
Board of Directors
Conseco, Inc.
11825 N. Pennsylvania Street
Carmel, IN 46032
Members of the Board:
We understand that Conseco, Inc. (the "Acquiror"), a newly formed,
wholly owned subsidiary of the Acquiror (the "Acquisition Sub"), and Green Tree
Financial Corporation (the "Company") propose to enter into an Agreement and
Plan of Merger (the "Agreement"), dated April 6, 1998, pursuant to which the
Acquisition Sub is to be merged with and into the Company in a transaction (the
"Merger") in which each outstanding share of the Company's common stock, par
value $.01 per share, (the "Company Shares"), will be converted into the right
to receive .9165 shares (the "Exchange Ratio") of the common stock, no par
value, of the Acquiror ("the Acquiror Shares"), all as set forth more fully in
the Agreement. In connection with the Merger, the Acquiror and the Company also
propose to enter into a Stock Option Agreement (the "Option Agreement"),
pursuant to which the Company will grant to the Acquiror an option to acquire,
under certain circumstances, up to 19.9% of the Company Shares outstanding on
the date of the Option Agreement, all as set forth more fully in the Option
Agreement.
You have asked us whether, in our opinion, the Exchange Ratio is fair
from a financial point of view to the Acquiror.
In arriving at the opinion set forth below, we have, among other
things:
Reviewed certain publicly available business and financial information
relating to the Acquiror and the Company that we deemed to be relevant;
Reviewed certain information, including financial forecasts, relating
to the businesses, earnings, cashflow, assets, liabilities and
prospects of the Acquiror and the Company, as well as the amount and
timing of the cost savings and related charges and expenses and revenue
enhancements expected to result from the Merger furnished to us by the
senior management of the Acquiror (the "Merger Benefits");
Conducted discussions with members of senior management of the Acquiror
and the Company concerning the foregoing, including the respective
businesses, prospects, regulatory condition and contingencies of the
Acquiror and the Company before and after giving effect to the Merger
and the Merger Benefits;
Reviewed the market prices and valuation multiples for the Acquiror
Shares and the Company Shares and compared the Acquiror Shares and the
Company Shares with those of certain publicly traded companies that we
deemed to be relevant;
Reviewed the results of operations of the Company and the Acquiror and
compared them with those of certain publicly traded companies that we
deemed to be relevant;
Compared the proposed financial terms of the Merger with the financial
terms of certain other transactions that we deemed to be relevant;
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Participated in certain discussions and negotiations among
representatives of the Company and the Acquiror and their respective
financial and legal advisors;
Reviewed the potential pro forma impact of the Merger;
Reviewed draft dated April 6, 1998 of the Agreement and the Option
Agreement; and
Reviewed such other financial studies and analyses and took into
account such other matters as we deemed necessary, including our
assessment of general economic, market and monetary conditions
In preparing our opinion, we have assumed and relied on the accuracy
and completeness of all information supplied or otherwise made available to us,
discussed with or reviewed by or for us, or publicly available, and we have not
assumed responsibility for independently verifying such information or
undertaken an independent evaluation or appraisal of any of the assets or
liabilities, contingent or otherwise, of the Company or the Acquiror or any
actuarial analysis with respect to the Acquiror, nor have we been furnished any
such evaluation, appraisal or actuarial analysis. We are not experts in the
evaluation of allowances for credit or loan losses or in the valuation of
residual interests or other assets resulting from the Company's securitization
transactions ('Securitization Assets"), and we have not made an independent
evaluation of the adequacy of the allowance for credit or loan losses of the
Company, reviewed any individual credit or loan files relating to the Company
nor made an independent valuation of the Securitization Assets. In addition, we
have not assumed any obligation to conduct, nor have we conducted, any physical
inspection of the properties or facilities of the Company or the Acquiror. With
respect to the financial forecast information of the Company and the Acquiror,
including, without limitation, financial forecasts, evaluation of contingencies
and projections regarding, among other things, receivable originations,
prepayment speeds, delinquencies, under-performing and non-performing assets,
net charge-offs, adequacy of reserves, valuation of the Securitization Assets
and future economic conditions pertaining to the Company, and the Merger
Benefits, furnished to or discussed with us by the Company and the Acquiror, we
have assumed that they have been reasonably prepared and reflect the best
currently available estimates, allocations and judgements of the senior
management of the Company and the Acquiror as to the expected future financial
performance of the Company, the Acquiror or the combined entity, as the case may
be, and the Merger Benefits. We express no opinion as to such financial forecast
information or the Merger Benefits or the assumptions upon which they were
based. We have further assumed that the Merger will qualify as a tax-free
reorganization for U.S. federal income tax purposes and will be accounted for as
a pooling-of-interests under generally accepted accounting principles. We have
also assumed that the final forms of the Agreement and the Option Agreement will
be substantially similar to the last drafts reviewed by us.
Our opinion is necessarily based upon market, economic and other
conditions as in effect on, and the information made available to us as of, the
date hereof. For the purposes of rendering this opinion, we have assumed, in all
respects material to our analysis, that the representations and warranties of
each party in the Agreement and all related documents and instruments
(collectively, the "Documents") contained therein are true and correct, that
each party to the Documents will perform all of the covenants and agreements
required to be performed by such party under such Documents, and that all
conditions to the consummation of the Merger will be satisfied without waiver
thereof. We have also assumed that in the course of obtaining the necessary
regulatory or other consents or approvals (contractual or otherwise) for the
Merger, no restrictions, including any divestiture requirements or amendment or
modifications, will be imposed that will have a material adverse affect on the
contemplated benefits of the Merger, including the Merger Benefits.
We are acting as financial advisor to the Acquiror in connection with
the Merger and will receive a fee from the Acquiror for our services, a
significant portion of which is contingent upon the consummation of the Merger.
In addition, the Acquiror has agreed to indemnify us for certain liabilities
arising out of our engagement. We have in the past provided financial advisory
and financing advisory, investment banking and other services to the Acquiror
and may continue to do so, and have received, and may receive, customary fees
for the rendering of such services. We have in the past provided, and are
currently providing financial
C-2
<PAGE>
advisory, investment banking and other services to the Company and its
affiliates, including acting as a lender to the Company (pursuant to the
uncommitted reverse repurchase agreement, dated July 1997, of which you are
aware), and may continue to do so, and have received, and may receive, customary
fees for the rendering of such services. In addition, in the ordinary course of
our business, we may actively trade debt and equity securities of the Acquiror
and its affiliates and the Company and its affiliates for our own account and
the accounts of our customers, and therefore we may from time to time hold a
long or short position in such securities.
This opinion is for the use and benefit of the Board of Directors of
the Acquiror. Our opinion addresses only the financial fairness of the Exchange
Ratio, and does not address the merits of the underlying decision by the
Acquiror to engage in the Merger, and does not constitute a recommendation to
any stockholder as to how such stockholder should vote on the proposed Merger or
any matter related thereto.
We are not expressing any opinion herein as to the prices at which the
Acquiror Shares will trade following the announcement or consummation of the
Merger.
On the basis of and subject to the foregoing, we are of the opinion
that, as of the date hereof, the Exchange Ratio is fair from a financial point
of view to the Acquiror.
Very truly yours,
/s/MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
C-3
<PAGE>
ANNEX D
LEHMAN BROTHERS
April 6, 1998
Board of Directors
Green Tree Financial Corporation
1100 Landmark Towers
Saint Paul, MN 55102-1639
Members of the Board:
We understand that Green Tree Financial Corporation (the "Company") and
Conseco, Inc. ("Conseco") propose to enter into a definitive merger agreement
pursuant to which a wholly owned subsidiary of Conseco (the "Subsidiary") will
be merged with and into the Company and each share of common stock of the
Company will be converted into the right to receive 0.9165 shares (the "Exchange
Ratio") of common stock of Conseco (the "Merger"). The terms and conditions of
the Merger will be set forth in more detail in an Agreement and Plan of Merger
to be dated as of April 6, 1998 by and among Conseco, the Subsidiary and the
Company (the "Merger Agreement").
We have been requested by the Board of Directors of the Company to
render our opinion with respect to the fairness, from a financial point of view,
to the Company's stockholders of the Exchange Ratio to be offered to such
stockholders in the Merger. We have not been requested to opine as to, and our
opinion does not in any manner address, the Company's underlying business
decision to proceed with or effect the Merger.
D-1
<PAGE>
In arriving at our opinion, we reviewed and analyzed: (1) the financial
terms of the Merger as described to us by the Company and its legal advisors,
(2) such publicly available information concerning the Company and Conseco that
we believe to be relevant to our analysis including, without limitation, the
Annual Reports on Forms 10-K for the year ended December 31, 1997 for the
Company and Conseco, (3) financial and operating information with respect to the
business, operations and prospects of the Company and Conseco furnished to us by
the Company and Conseco, (4) a trading history of the common stock of the
Company from January 1, 1993 to the present and a comparison of that trading
history with those of other companies that we deemed relevant, (5) a trading
history of the common stock of Conseco from January 1, 1993 to the present and a
comparison of that trading history with those of other companies that we deemed
relevant, (6) a comparison of the historical financial results and present
financial condition of the Company with those of other companies that we deemed
relevant, (7) a comparison of the historical financial results and present
financial condition of Conseco with those of other companies that we deemed
relevant, (8) estimates of third party research analysts regarding the future
financial performance of the Company and Conseco, (9) a comparison of the
financial terms of the Merger with the financial terms of certain other recent
transactions that we deemed relevant, and (10) the potential pro forma impact of
the Merger on Conseco. In addition, we have had discussions with the management
of the Company and Conseco concerning their respective businesses, operations,
assets, liabilities, financial conditions and prospects, and the potential cost
savings, operating synergies and strategic benefits expected by the managements
of the Company and Conseco to result from a combination of the businesses of the
Company and Conseco, and have undertaken such other studies, analyses and
investigations as we deemed appropriate.
In arriving at our opinion, we have assumed and relied upon the
accuracy and completeness of the financial and other information used by us
without assuming any responsibility for independent verification of such
information and have further relied upon the assurances of management of the
Company and Conseco that they are not aware of any facts or circumstances that
would make such information inaccurate or misleading. With respect to the
financial projections of the Company, upon advice of the Company we have assumed
that such projections have been reasonably prepared on a basis reflecting the
best currently available estimates and judgments of the management of the
Company as to the future financial performance of the Company and that the
Company will perform substantially in accordance with such projections. In
arriving at our opinion, with the consent of the Company, we were not provided
with and did not have any access to any financial forecasts or projections
prepared by the management of Conseco as to the projected financial performance
of Conseco beyond 1998, and accordingly, in performing our analysis, based upon
advice of Conseco and with the consent of the Company, we have assumed that the
publicly available estimates of research analysts are a reasonable basis upon
which to evaluate and analyze the future financial performance of Conseco and
that Conseco will perform substantially in accordance with such estimates. In
arriving at our opinion, we have not conducted a physical inspection of the
properties and facilities of the Company or Conseco and have not made or
obtained any evaluations or appraisals of the assets or liabilities of the
Company or Conseco. In addition, you have not authorized us to solicit, and we
have not solicited, any indications of interest from any third party with
respect to the purchase of all or a part of the Company's business. Upon advice
of Conseco and its legal and accounting advisors, we have assumed that the
Merger will qualify for "pooling-of interests" accounting treatment. Our opinion
necessarily is based upon market, economic and other conditions as they exist
on, and can be evaluated as of, the date of this letter.
D-2
<PAGE>
Based upon and subject to the foregoing, we are of the opinion as of
the date hereof that, from a financial point of view, the Exchange Ratio to be
offered to the stockholders of the Company in the Merger is fair to such
stockholders.
We have acted as financial advisor to the Company in connection with
the Merger and will receive a fee for our services, a significant portion of
which is contingent upon the consummation of the Merger. In addition, the
Company has agreed to indemnify us for certain liabilities that may arise out of
the rendering of this opinion. We and our affiliates also have performed various
investment banking and financing services for the Company in the past, and have
received customary fees for such services. In addition, our affiliate, Lehman
Commercial Paper Inc., has received warrants to purchase approximately 2% of the
outstanding common stock of the Company in connection with certain credit
facilities provided by it to the Company. In the ordinary course of our
business, we actively trade in the debt and equity securities of the Company and
Conseco for our own account and for the accounts of our customers and,
accordingly, may at any time hold a long or short position in such securities,
which positions may be significant. Mr. Mark H. Burton, a Managing Director of
Lehman Brothers, is also a Director of the Company.
This opinion is for the use and benefit of the Board of Directors of
the Company and is rendered to the Board of Directors in connection with its
consideration of the Merger. This opinion is not intended to be and does not
constitute a recommendation to any stockholder of the Company as to how such
stockholder should vote with respect to the Merger.
Very truly yours,
/s/ LEHMAN BROTHERS
LEHMAN BROTHERS
D-3
<PAGE>
PART II.
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 20. Indemnification of Directors and Officers.
The Indiana Corporation Law grants authorization to Indiana
corporations to indemnify officers and directors for their conduct if such
conduct was in good faith and was in the corporation's best interests or, in the
case of directors, was not opposed to such best interests, and permits the
purchase of insurance in this regard. In addition, the shareholders of a
corporation may approve the inclusion of other or additional indemnification
provisions in the articles of incorporation and bylaws.
The Conseco Bylaws provides for the indemnification of any person made
a party to any action, suit or proceeding by reason of the fact that he or she
is a director, officer or employee of Conseco, if (a) such person is wholly
successful with respect to such action, suit or proceeding or (b) if such person
is determined to have acted in good faith, in what he or she reasonably believed
to be the best interests of Conseco or at least not opposed to its best
interests and, in addition, with respect to any criminal claim, is determined to
have had reasonable cause to believe that his or her conduct was lawful or had
no reasonable cause to believe that his or her conduct was unlawful. 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 and amounts paid in settlement. If such person was not wholly
successful, the determination of entitlement to indemnification shall be made by
one of the following methods, such method to be selected by the Board of
Directors: (a) by the Board of Directors by a majority vote of a quorum
consisting of directors who are not and have not been parties to the claim; (b)
by the majority vote of a committee duly designated by the Board of Directors,
consisting solely of two or more directors who are not and have not been parties
to the claim; and (c) by special legal counsel.
The above discussion of the Conseco Bylaws and the Indiana Corporation
Law is not intended to be exhaustive and is qualified in its entirety by the
Conseco Bylaws and the Indiana Corporation Law.
II-1
<PAGE>
Item 21. Exhibits and Financial Statement Schedules.
(a) Exhibits
2(a) - Agreement and Plan of Merger, dated as of April 6,
1998 by and among Conseco, Inc., Marble Acquisition
Corp. and Green Tree Financial Corporation (included
as Annex A to the Joint Proxy Statement/Prospectus
(schedules omitted - the Registrant agrees to furnish
a copy of any schedule to the Securities and Exchange
Commission (the "Commission") upon request)).*
2(b) - Stock Option Agreement, dated as of April 6, 1998, by
and between Conseco, Inc. and Green Tree Financial
Corporation (included as Annex B to the Joint Proxy
Statement/Prospectus).*
3(a) - Amended and Restated Articles of Incorporation of
Conseco was filed with the Commission as Exhibit 3.1
to Conseco's Annual Report on 10-K dated March 31,
1998, and is incorporated herein by this reference.
3(b) - Amended and Restated Bylaws of Conseco was filed
with the Commission as Exhibit 3.2 to Conseco's
Annual Report on 10-K dated March 31, 1998, and is
incorporated herein by this reference.
4.8 - Indenture dated as of February 18, 1993, between the
Registrant and Shawmut Bank Connecticut, National
Association, as Trustee, for the 8 1/8 percent Senior
Notes due 2003, was filed with the Commission as
Exhibit 4.8 to the Registrant's Annual Report on Form
10-K for 1992, and is incorporated herein by this
reference.
4.12 - Indenture dated as of September 29, 1994 between ALHC
Merger Corporation and LTCB Trust Company and First
Supplemental Indenture dated as of September 29, 1994
between American Life Holding Company and the Trustee
for the 11 1/4% Senior Subordinated Notes due 2004
were filed with the Commission as Exhibit 4.12 to the
Registrant's Report on Form 8-K dated September 29,
1994, and are incorporated herein by this reference.
4.13 - Indenture dated as of December 15, 1994, between CCP
Insurance, Inc., and LTCB Trust Company, as Trustee,
for the $200,000,000 aggregate principal amount of 10
1/2% Senior Notes due 2004 was filed with the
Commission as Exhibit 4.13 to the Registrant's Annual
Report on Form 10-K for 1995, and is incorporated
herein by this reference.
4.13.1 - First Supplemental Indenture between Conseco, Inc.,
as Issuer, and LTCB Trust Company as Trustee, dated as
of August 31, 1995, was filed with the Commission as
Exhibit 4.13.1 to the Registrant's Report on Form 10-Q
for the quarter ended September 30, 1995, and is
incorporated herein by this reference.
4.14 - Credit Agreement among the Registrant, Bank of America
National Trust and Savings Association, First Union
National Bank of North Carolina and Nationsbank, N.A.
dated November 22, 1996 ("Credit Agreement"), was
filed with the Commission as Exhibit 4.17 to the
Registrant's Report on Form 8-K dated December 17,
1996, and is incorporated herein by this reference.
4.14.1 - First Amendment dated as of March 10, 1997 to Credit
Agreement was filed with the Commission as Exhibit
4.14.1 to the Registrant's Report on Form 8-K dated
April 1, 1997, and is incorporated herein by this
reference.
4.17.1 - Subordinated Indenture, dated as of November 14, 1996,
between the Registrant and Fleet National Bank, as
Trustee, was filed with the Commission as Exhibit
4.17.1 to the Registrant's Report on Form 8-K dated
November 19, 1996, and is incorporated herein by this
reference.
4.17.2 - First Supplemental Indenture, dated as of November 14,
<PAGE>
1996, between the Registrant and Fleet National Bank,
as Trustee, was filed with the Commission as Exhibit
4.17.2 to the Registrant's Report on Form 8-K dated
November 19, 1996, and is incorporated herein by this
reference.
4.17.3 - 9.16% Subordinated Deferrable Interest Debenture due
2006 was filed with the Commission as Exhibit 4.17.3
to the Registrant's Report on Form 8-K dated November
19, 1996, and is incorporated herein by this
reference.
4.17.4 - Second Supplemental Indenture, dated as of November
22, 1996, between Conseco, Inc. and Fleet National
Bank, as Trustee was filed with the Commission as
Exhibit 4.17.1 to the Registrant's Report on Form 8-K
dated November 27, 1996, and is incorporated herein by
this reference.
4.17.5 - 8.70% Subordinated Deferrable Interest Debenture due
2026 was filed with the Commission as Exhibit 4.17.4
to the Registrant's Report on Form 8-K dated November
27, 1996, and is incorporated herein by this
reference.
4.17.6 - Third Supplemental Indenture, dated as of March 26,
1997 between the Registrant and Fleet National Bank,
as Trustee, was filed with the Commission as Exhibit
4.17.6 to the Registrant's Report on Form 8-K dated
April 1, 1997, and is incorporated herein by this
reference.
4.17.7 - 8.796% Subordinated Deferrable Interest Debenture due
2027 was filed with the Commission as Exhibit 4.17.7
to the Registrant's Report on Form 8-K dated April 1,
1997, and is incorporated herein by this reference.
4.18.1 - Amended and Restated Declaration of Trust of Conseco
Financing Trust I, dated as of November 14, 1996,
among Conseco, Inc., as sponsor, the Trustees named
therein and the holders from time to time of undivided
beneficial interests in the assets of Conseco
Financing Trust I was filed with the Commission as
Exhibit 4.18.1 to the Registrant's Report on Form 8-K
dated November 19, 1996, and is incorporated herein by
this reference.
4.18.2 - Global Certificate for Preferred Security of Conseco
Financing Trust I was filed with the Commission as
Exhibit 4.18.2 to the Registrant's Report on Form 8-K
dated November 19, 1996, and is incorporated herein by
this reference.
4.18.3 - Preferred Securities Guarantee Agreement, dated as of
November 19, 1996, between the Registrant and Fleet
National Bank was filed with the Commission as Exhibit
<PAGE>
4.18.3 to the Registrant's Report on Form 8-K dated
November 19, 1996, and is incorporated herein by this
reference.
4.19.1 - Amended and Restated Declaration of Trust of Conseco
Financing Trust II, dated as of November 22, 1996,
among Conseco, Inc., as sponsor, the Trustees named
therein and the holders from time to time of undivided
beneficial interests in the assets of Conseco
Financing Trust II was filed with the Commission as
Exhibit 4.19.1 to the Registrant's Report on Form 8-K
dated November 27, 1996, and is incorporated herein by
this reference.
4.19.2 - Global Certificate for Preferred Security of Conseco
Financing Trust II was filed with the Commission as
Exhibit 4.19.2 to the Registrant's Report on Form 8-K
dated November 27, 1996, and is incorporated herein by
this reference.
4.19.3 - Preferred Securities Guarantee Agreement, dated as of
November 27, 1996, between Conseco, Inc. and Fleet
National Bank was filed with the Commission as Exhibit
4.19.3 to the Registrant's Report on Form 8-K dated
November 27, 1996, and is incorporated herein by this
reference.
4.20 - Indenture relating to the 6.5% Convertible
Subordinated Subordinated Debentures due October 1,
2005 issued by American Travellers Corporation was
filed with the Commission as Exhibit 4(c) to the
Annual Report on Form 10-K of American Travellers
Corporation for the year ended December 31, 1995, and
is incorporated herein by this reference.
4.20.1 - First Supplemental Indenture between the Registrant
and Firstar Bank of Minnesota, N.A. Trustee, as
Trustee, relating to the 6.5% Convertible Subordinated
Debentures due October 1, 2005 was filed with the
Commission as Exhibit 4.20.1 to the Registrant's
Annual Report on Form 10-K for the year ended December
31, 1996, and is incorporated herein by this
reference.
4.21.1 - Amended and Restated Declaration of Trust of Conseco
Financing Trust III, dated as of March 26, 1997, among
the Registrant, as sponsor, the trustees named therein
and the holders from time to time of undivided
beneficial interests in the assets of Conseco
Financing Trust III was filed with the Commission as
Exhibit 4.20.1 to the Registrant's Report on Form 8-K
dated April 1, 1997, and is incorporated herein by
this reference.
<PAGE>
4.21.2 - Global Certificate for Capital Security of Conseco
Financing Trust III was filed with the Commission as
Exhibit 4.20.2 to the Registrant's Report on Form 8-K
dated April 1, 1997, and is incorporated herein by
this reference.
4.21.3 - Capital Securities Guarantee Agreement, dated as of
April 1, 1997 between the Registrant and Fleet
National Bank was filed with the Commission as Exhibit
4.20.3 to the Registrant's Report on Form 8-K dated
April 1, 1997, and is incorporated herein by this
reference.
4.22.1 - Senior Indenture, dated November 13, 1997, by and
between the Registrant and LTCB Trust Company, as
Trustee (the "Senior Indenture"), was filed with the
Commission as Exhibit 4.1 to Post-Effective Amendment
No. 1 to the Registrant's Registration Statement on
Form S-3, No. 333-27803, and is incorporated herein by
this reference.
4.22.2 - 6.4% Note due February 10, 2003 issued under the
Senior Indenture (one of several identical notes
aggregating $250 million) was filed with the
Commission as Exhibit 4.22.2 in the Registrant's
Annual Report on Form 10-K for the year ended December
31, 1997, and is incorporated herein by this
reference.
4.23.1 - Subordinated Indenture between the Registrant and The
First National Bank of Chicago, as Trustee, was filed
with the Commission as Exhibit 4.2 to the Registrant's
Registration Statement on Form S-3, No. 333-40423, and
is incorporated herein by this reference.
4.24.1 - Amended and Restated Declaration of Trust of Conseco
Financing Trust IV was filed with the Commission as
Exhibit 4.12 to the Registrant's Registration
Statement on Form S-3, No. 333-40423, and is
incorporated herein by this reference.
4.24.2 - Preferred Securities Guarantee of the Registrant for
the benefit of the holders of trust preferred
securities of Conseco Financing Trust IV was filed
with the Commission as Exhibit 4.13 to the
Registrant's Registration Statement on Form S-3, No.
333-40423, and is incorporated herein by reference.
4.24.3 - Purchase Contract Agreement between the Registrant and
The First National Bank of Chicago, as Purchase
Contract Agent, was filed with the Commission as
Exhibit 4.20 to the Registrant's Registration
Statement on Form S-3, No. 333-40423, and is
incorporated herein by reference.
4.24.4 - Pledge Agreement among the Registrant, The Chase
Manhattan Bank, as Collateral Agent, and The First
National Bank of Chicago, as Purchase Contract Agent,
was filed with the Commission as Exhibit 4.21 to the
Registrant's
<PAGE>
Registration Statement on Form S-3, No. 333-40423, and
is incorporated herein by reference.
5 - Opinion of John J. Sabl, General Counsel to Conseco,
Inc., as to the validity of the issuance of the
securities registered hereby.**
8(a) - Opinion of Dorsey & Whitney LLP as to certain tax
matters.**
8(b) - Opinion of Sidley & Austin as to certain tax
matters.**
10.1.2 - Employment Agreement dated January 1, 1987, between
the Registrant and Stephen C. Hilbert was filed with
the Commission as Exhibit 10.1.2 to the Registrant's
Annual Report on Form 10-K for 1986, and Amendment No.
1 thereto were filed with the Commission as Exhibit
10.1.2 to the Registrant's Annual Report on Form 10-K
for 1987; and are incorporated herein by this
reference.
10.1.3 - Employment Agreement dated July 1, 1991, between the
Registrant and Rollin M. Dick was filed with the
Commission as Exhibit 10.1.3 to the Registrant's
Report on Form 10-Q for the quarter ended June 30,
1991, and is incorporated herein by this reference.
10.1.3(a) - Amendment No. 1 to Employment Agreement between the
Registrant and Rollin M. Dick was filed with the
Commission as Exhibit 10.1.3(a) to the Registrant's
Annual Report on Form 10-K for the year ended December
31, 1996, and is incorporated herein by this
reference.
10.1.3(b) - Amendment No.2 to Employment Agreement between the
Registrant and Rollin M. Dick was filed with the
Commission as Exhibit 10.1.3(b) to the Registrant's
Report on Form 10-Q for the quarter ended September
30, 1997, and is incorporated herein by this
reference.
10.1.4 - Employment Agreement dated July 1, 1991, between the
Registrant and Donald F. Gongaware was filed with the
Commission as Exhibit 10.1.4 to the Registrant's
Report on Form 10-Q for the quarter ended June 30,
1991, and is incorporated herein by this reference.
10.1.4(a) - Amendment No. 1 to Employment Agreement between the
Registrant and Donald F. Gongaware was filed with the
Commission as Exhibit 10.1.4(a) to the Registrant's
Annual Report on Form 10-K for the year ended December
31, 1996, and is incorporated herein by this
reference.
10.1.4(b) - Amendment No. 2 to Employment Agreement between the
Registrant and Donald F. Gongaware was filed with the
Commission as Exhibit 10.1.4(b) to the Registrant's
Report on Form 10-Q for the quarter ended September
30, 1997, and is incorporated herein by this
reference.
<PAGE>
10.1.9 - Unsecured Promissory Note of Stephen C. Hilbert dated
May 13, 1996 was filed with the Commission as Exhibit
10.1.9 to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1996, and is
incorporated herein by this reference.
10.1.10 - Employment Agreement dated August 17, 1992, between
the Registrant and Ngaire E. Cuneo was filed with the
Commission as Exhibit 10.1.10 to the Registrant's
Report on Form 10-Q for the quarter ended September
30, 1992, and is incorporated herein by this
reference.
10.1.10(a) - Amendment No. 1 to Employment Agreement between the
Registrant and Ngaire E. Cuneo was filed with the
Commission as Exhibit 10.1.10(a) to the Registrant's
Report on Form 10-K for the year ended December 31,
1996, and is incorporated herein by this reference.
10.1.10(b) - Amendment No. 2 to Employment Agreement between the
Registrant and Ngaire E. Cuneo was filed with the
Commission as Exhibit 10.1.10(b) to the Registrant's
Report on Form 10-Q for the quarter ended September
30, 1997, and is incorporated herein by this
reference.
10.1.11 - Employment Agreement dated September 8, 1997 between
the Registrant and John J. Sabl was filed with the
Commission as Exhibit 10.1.11 to the Registrant's
Report on Form 10-Q for the quarter ended September
30, 1997, and is incorporated herein by this
reference.
10.8 - The Registrant's Stock Option Plan was filed with the
Commission as Exhibit B to its definitive Proxy
Statement dated December 10, 1983; Amendment No. 1
thereto was filed with the Commission as Exhibit
10.8.1 to its Report on Form 10-Q for the quarter
ended June 30, 1985; Amendment No. 2 thereto was filed
with the Commission as Exhibit 10.8.2 to its
Registration Statement on Form S-1, No. 33-4367;
Amendment No. 3 thereto was filed with the Commission
as Exhibit 10.8.3 to the Registrant's Annual Report on
Form 10-K for 1986; Amendment No. 4 thereto was filed
with the Commission as Exhibit 10.8 to the
Registrant's Annual Report on Form 10-K for 1987;
Amendment No. 5 thereto was filed with the Commission
as Exhibit 10.8 to the Registrant's Report on Form
10-Q for the quarter ended September 30, 1991; and are
incorporated herein by this reference.
10.8.3 - The Registrant's Cash Bonus Plan was filed with the
Commission as Exhibit 10.8.3 to the Registrant's
Report on Form 10-Q for the quarter ended March 31,
1989, and is incorporated herein by this reference.
10.8.4 - Amended and Restated Conseco Stock Bonus and Deferred
Compensation Program was filed with the Commission as
Exhibit 10.8.4 to the Registrant's Annual Report on
Form 10-K for 1992, and is incorporated herein by this
<PAGE>
reference.
10.8.6 - Conseco Performance - Based Compensation Bonus Plan
for Executive Vice Presidents was filed with the
Commission as Exhibit B to the Registrant's definitive
Proxy Statement dated April 29, 1994, and is
incorporated herein by this reference.
10.8.7 - Conseco, Inc. Amended and Restated Deferred
Compensation Plan was filed with the Commission as
Exhibit A to the Registrant's definitive Proxy
Statement dated April 26, 1995, and is incorporated
herein by this reference.
10.8.8 - Amendment to the Amended and Restated Conseco Stock
Bonus and Deferred Compensation Program was filed with
the Commission as Exhibit 10.8.8 to the Registrant's
Annual Report on Form 10-K for 1994, and is
incorporated herein by this reference.
10.8.9 - Conseco 1994 Stock and Incentive Plan was filed as
Exhibit A to the Registrant's definitive Proxy
Statement dated April 29, 1994 and is incorporated
herein by this reference.
10.8.10 - Amendment Number 2 to the Amended and Restated
Conseco Stock Bonus and Deferred Compensation Program
was filed with the Commission as Exhibit 10.8.10 to
the Registrant's Annual Report on Form 10-K for 1995
and is incorporated herein by reference.
10.8.11 - Amended and Restated Director, Executive and Senior
Officer Stock Purchase Plan was filed with the
Commission as Exhibit 10.8.11 to the Registrant's
Annual Report on Form 10-K for the year ended December
31, 1997, and is incorporated herein by this
reference.
10.8.12 - Guaranty regarding Director, Executive and Senior
Officer Stock Purchase Plan was filed with the
Commission as Exhibit 10.8.12 to the Registrant's
Report on Form 10-Q for the quarter ended June 30,
1996, and is incorporated herein by this reference.
10.8.13 - Form of Promissory Note payable to the Registrant
relating to the Registrant's Director, Executive and
Senior Officer Stock Purchase Plan was filed with the
Commission as Exhibit 10.8.13 to the Registrant's
Report on Form 10-Q for the quarter ended September
30, 1996, and is incorporated herein by this
reference.
10.8.14 - Conseco, Inc. Amended And Restated 1997 Non-qualified
Stock Option Plan was filed with the Commission as
Exhibit 10.8.14 to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1997, and is
incorporated herein by this reference.
10.23 - Aircraft Lease Agreement dated December 22, 1988,
between General Electrical Capital Corporation and
Conseco Investment Holding Company was filed with the
Commission as Exhibit 10.23 to the Registrant's Annual
Report on Form 10-K for 1988, and is incorporated
herein by this reference.
<PAGE>
10.23.1 - Amendment to Aircraft Lease Agreement dated December
22, 1988, between General Electric Capital Corporation
and Conseco Investment Holding Company was filed with
the Commission as Exhibit 10.23.1 to the Registrant's
Annual Report on Form 10-K for 1993, and is
incorporated herein by this reference.
10.24 - Aircraft Lease Agreement dated April 26, 1991 between
General Electric Capital Corporation and Conseco
Investment Holding Company was filed with the
Commission as Exhibit 10.29 to the Registrant's Report
on Form 10-Q for the quarter ended September 30, 1991,
and is incorporated herein by this reference.
10.24.1 - Amendment to Aircraft Lease Agreement dated April 26,
1991, between General Electric Capital Corporation and
Conseco Investment Holding Company was filed with the
Commission as Exhibit 10.24.1 to the Registrant's
Annual Report on Form 10-K for 1993, and is
incorporated herein by this reference.
10.25 - Aircraft Lease Purchase Agreement dated December 28,
1993, between MetLife Capital Corporation and Conseco
Investment Holding Company was filed with the
Commission as Exhibit 10.25 to the Registrant's Annual
Report on Form 10-K for 1993, and is incorporated
herein by this reference.
10.31 - Helicopter Lease Agreement dated April 9, 1992 between
General Electric Capital Corporation and Conseco
Investment Holding Company was filed with the
Commission as Exhibit 10.31 to the Registrant's Report
on Form 10-Q for the quarter ended June 30, 1992, and
is incorporated herein by this reference.
10.32 - Aircraft Lease Agreement dated October 6, 1993,
between General Electric Capital Corporation and
Conseco Investment Holding Company and the associated
Assignment Agreement dated October 25, 1993, between
General Electric Capital Corporation and Nationsbanc
Leasing Corporation were filed with the Commission as
Exhibit 10.32 to the Registrant's Annual Report on
Form 10-K for 1993, and are incorporated herein by
this reference.
10.36 - Lease dated as of December 18, 1992 between LaSalle
National Trust, N.A. as trustee and Bankers Life and
Casualty Company relating to the lease of executive
office and administration space by BLH was filed with
the Commission as Exhibit 10.17 to Amendment No. 1 to
BLH's Registration Statement on Form S-1, No.
33-55026, and is incorporated herein by this
reference.
10.37 - Lease dated as of August 20, 1993 between REO Holding
Corporation and Bankers Life and Casualty Company
relating the lease of warehouse space by BLH was filed
with the Commission as Exhibit 10.14 to BLH's Report
on Form
<PAGE>
10-K for 1994, and is incorporated herein by this
reference.
23(a) - Consent of John J. Sabl, General Counsel to Conseco,
Inc. (included in the opinion filed as Exhibit 5 to
the Registration Statement).**
23(b) - Consent of Coopers & Lybrand L.L.P., with respect to
the financial statements of Conseco, Inc.*
23(c) - Consent of KPMG Peat Marwick LLP with respect to
the financial statements of Green Tree Financial
Corporation.*
23(d) - Consent of Lehman Brothers, Inc.*
23(e) - Consent of Merrill Lynch & Co.*
23(f) - Consent of Dorsey & Whitney LLP (included in the
opinion filed as Exhibit 8(a) to the Registration
Statement).**
23(g) - Consent of Sidley & Austin (included in the opinion
filed as Exhibit 8(b) to the Registration
Statement).**
23(h) _ Consent of Lawrence M. Coss.*
24(a) - Powers of Attorney of directors and officers of
Conseco, Inc. (See page II-5 of this Registration
Statement).
II-2
<PAGE>
99(a) - Opinion of Merrill Lynch & Co. (included as Annex C
to the Joint Proxy Statement/Prospectus).*
99(b) - Opinion of Lehman Brothers Inc. (included as Annex D
to the Joint Proxy Statement/Prospectus).*
99(c) - Form of proxy card for Conseco Stock.*
99(d) - Form of proxy card for Green Tree Common Stock.*
* Filed herewith.
** To be filed by amendment.
(b) Financial Statement Schedules - Inapplicable.
(c) The written opinions of Merrill Lynch & Co. and Lehman Brothers,
Inc. are attached as Annexes C and D to this Joint Proxy
Statement/Prospectus.
II-3
<PAGE>
Item 22. Undertakings.
(a) The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act
of 1933, each filing of the registrant's annual report
pursuant to Section 13(a) or 15(d) of the Securities Exchange
Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Commission, such
indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable. In the event
that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person thereof
in the successful defense of any action, suit or proceeding)
is asserted by a director, officer or controlling person in
connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final
adjudication of such issue.
(c) The undersigned registrant hereby undertakes to respond to
requests for information that is incorporated by reference
into the prospectus pursuant to Item 4, 10(b), 11 or 13 of
this form, within one business day of receipt of such request,
and to send the incorporated documents by first class mail or
other equally prompt means. This includes information
contained in documents filed subsequent to the effective date
of the registration statement through the date of responding
to the request.
(d) The undersigned registrant hereby undertakes to supply by
means of a post-effective amendment all information concerning
a transaction, and the company being acquired involved
therein, that was not the subject of and included in the
registration statement when it became effective.
(e) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this
Registration Statement;
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or
events arising after the effective date of the
Registration Statement (or the most recent
post-effective amendment thereof) which,
individually or in the aggregate, represent a
fundamental change in the information set forth
in the Registration Statement. Notwithstanding
the foregoing, any increase or decrease in the
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
II-4
<PAGE>
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.
(2) That, for the purpose of determining any liability
under the Securities Act, each such post-effective
amendment shall be deemed to be a new registration
statement relating to the securities offered therein,
and the offering of such securities at that time
shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being
registered which remain unsold at the termination of
the offering.
II-5
<PAGE>
SIGNATURES AND POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Carmel and
the State of Indiana, on the 27th day of April, 1998.
CONSECO, INC.
By: /s/ Stephen C. Hilbert
----------------------------------------------
Stephen C. Hilbert,
Chairman of the Board, Chief Executive Officer
and President
Each person whose signature to this Registration Statement appears
below hereby appoints John J. Sabl and Karl W. Kindig, and each of them, either
of whom may act without the joinder of the other, as his or her attorney-in-fact
to sign on his or her behalf individually and in the capacity stated below and
to file all amendments and post-effective amendments to this Registration
Statement, which amendments may make such changes in and additions to this
Registration Statement as such attorney-in-fact may deem necessary or
appropriate.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
------------------ ---------- ------------
<S> <C> <C>
/s/ Stephen C. Hilbert Director, Chairman of the Board, Chief April 27, 1998
- ------------------------ Executive Officer and President
Stephen C. Hilbert (Principal Executive Officer of the
Registrant)
/s/ Rollin M. Dick Director, Executive Vice President and April 27, 1998
- ------------------------ Chief Financial Officer (Principal
Rollin M. Dick Financial Officer of the Registrant)
/s/ James S. Adams Senior Vice President, Chief April 27, 1998
- ------------------------ Accounting Officer and Treasurer
James S. Adams (Principal Accounting Officer of
Registrant)
/s/ Ngaire E. Cuneo Director April 27, 1998
- ------------------------
Ngaire E. Cuneo
/s/ M. Phil Hathaway Director April 27, 1998
- ------------------------
M. Phil Hathaway
/s/ John M. Mutz Director April 27, 1998
- ------------------------
John M. Mutz
/s/ Donald F. Gongaware Director April 27, 1998
- ------------------------
Donald F. Gongaware
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ David R. Decatur Director April 27, 1998
- ------------------------
David R. Decatur
/s/James D. Massey Director April 27, 1998
- -----------------------
James D. Massey
/s/Dennis E. Murray, Sr. Director April 27, 1998
- ------------------------
Dennis E. Murray, Sr.
</TABLE>
II-7
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement
of Conseco, Inc. on Form S-4 (File No. 333-00000), of our reports dated March
23, 1998 on our audits of the consolidated financial statements and financial
statement schedules of Conseco, Inc. and subsidiaries as of December 31, 1997
and 1996, and for the years ended December 31, 1997, 1996 and 1995, included in
the Annual Report on Form 10-K. We also consent to the reference to our firm
under the caption "Experts."
/s/ COOPERS & LYBRAND L.L.P.
----------------------------
COOPERS & LYBRAND L.L.P.
Indianapolis, Indiana
April 27, 1998
Exhibit 23(c)
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Green Tree Financial Corporation:
We consent to the use of our report incorporated herein by reference and to the
reference to our firm under the heading "EXPERTS" in the Registration Statement
on Form S-4 of Conseco, Inc. Our report refers to the Company's adoption of the
Financial Accounting Standards Board's Statement No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,"
in 1997.
/s/KPMG PEAT MARWICK LLP
------------------------
KPMG PEAT MARWICK LLP
Minneapolis, Minnesota
April 27, 1998
EXHIBIT 23(d)
CONSENT OF LEHMAN BROTHERS
We hereby consent to the use of our opinion letter dated April 6, 1998
to Board of Directors of Green Tree Financial Corporation ("Green Tree")
attached as Appendix D to Green Tree's Joint Proxy Statement/Prospectus on Form
S-4 (the "Prospectus") and to references to our firm in the Prospectus under the
headings "Summary" and "The Merger". In giving such consent, we do not admit
that we come within the category of persons whose consent is required under
Section 7 of the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission thereunder (the
"Securities Act") and we do not thereby admit that we are experts with respect
to any part of the Registration Statement under the meaning of the term "expert"
as used in the Securities Act.
LEHMAN BROTHERS INC.
By:/s/ SIMON K. ADAMIYATT
----------------------
Managing Director
New York, New York
April 27, 1998
EXHIBIT 23(e)
CONSENT OF MERRILL LYNCH
We hereby consent to the use of our opinion letter dated April 6, 1998
to the Board of Directors of Conseco, Inc. included as Annex C to the Joint
Proxy Statement/Prospectus which forms a part of the Registration Statement on
Form S-4 relating to the proposed merger of a wholly owned subsidiary of
Conseco, Inc. with and into Green Tree Financial Corporation and to the
references to such opinion in such Joint Proxy Statement/Prospectus. In giving
such consent, we do not admit that we come within the category of persons whose
consent is required under Section 7 of the Securities Act of 1933, as amended,
or the rules and regulations of the Securities and Exchange Commission
thereunder, nor do we thereby admit that we are experts with respect to any part
of such Registration Statement within the meaning of the term "experts" as used
in the Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder.
MERRILL LYNCH, PIERCE, FENNER
& SMITH INCORPORATED
By: /s/ David C. Sherwood
-----------------------
April 24, 1998
EXHIBIT 23(h)
CONSENT TO BE NAMED AS A DIRECTOR
I, Lawrence Coss, hereby consent to be nominated as a director of
Conseco, Inc., and to be named as a nominated director in the Form S-4
Registration Statement filed with the Securities and Exchange Commission by
Conseco, Inc.
Date: April 24, 1998 /s/Lawrence Coss
--------------------------
Lawrence Coss
EXHIBIT 99(c)
CONSECO, INC.
11825 North Pennsylvania Street, Carmel, IN 46032
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Each person signing this card hereby appoints as proxies Rollin M. Dick, Thomas
J. Kilian and Stephen C. Hilbert, or any of them, with full power of
substitution, to vote all shares of common stock and shares of Preferred
Redeemable Increased Dividend Equity Securities, 7% PRIDES, Convertible
Preferred Stock which such person is entitled to vote at the Special Meeting of
Shareholders of Conseco, Inc. ("Conseco"), to be held at the Conseco Conference
Center, 530 North College Drive, Carmel, Indiana 46032 at 10:00 a.m. local time
on ______________, 1998 and any adjournments thereof.
The proxies are hereby authorized to vote as follows:
1. Approval of the issuance of Conseco Common Stock as provided in the Agreement
and Plan of Merger, dated as of April 6, 1998, by and among Conseco, Marble
Acquisition Corp., a Delaware corporation wholly owned by Conseco ("Merger Sub")
and Green Tree Financial Corporation, a Delaware corporation ("Green Tree"),
pursuant to which, among other things, (i) Merger Sub will be merged with and
into Green Tree, with Green Tree being the surviving corporation (the "Merger"),
such that Green Tree will become a wholly owned subsidiary of Conseco, and (ii)
each outstanding share of Green Tree Common Stock will be converted into 0.9165
of a share of Conseco Common Stock.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THE SHARES REPRESENTED BY THIS PROXY, UNLESS OTHERWISE SPECIFIED, SHALL BE VOTED
FOR ITEM 1.
Please sign below exactly as your name appears on the
label. When signing as attorney, corporate officer or
fiduciary, please give full title as such. The
undersigned hereby acknowledges receipt of the Notice
of the Special Meeting and Joint Proxy
Statement/Prospectus dated _______________ , 1998.
Dated__________________________________________________
Signature(s)___________________________________________
PLEASE DATE, SIGN, AND RETURN THIS PROXY PROMPTLY.
EXHIBIT 99(d)
PROXY
GREEN TREE FINANCIAL CORPORATION
1100 Landmark Towers
Saint Paul, Minnesota 55102-1639
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
_________________ and _________________, or either of them, are hereby
appointed attorneys and proxies of the undersigned, each with the power of
substitution, to attend, vote and act for the undersigned at the Special Meeting
of stockholders of Green Tree Financial Corporation ("Green Tree") to be held on
________________, 1998 in Saint Paul, Minnesota, and at any adjournment or
adjournments thereof, in connection therewith to vote all of the shares of
Common Stock of Green Tree which the undersigned would be entitled to vote as
follows:
1. A proposal to approve and adopt an Agreement and Plan of Merger (the
"Merger Agreement"), dated as of April 6, 1998, among Conseco, Inc., an
Indiana corporation ("Conseco"), Marble Acquisition Corp., a Delaware
corporation wholly owned by Conseco ("Merger Sub"), and Green Tree,
pursuant to which, among other things, Merger Sub will be merged with
and into Green Tree (the "Merger"), such that Green Tree will become a
wholly owned subsidiary of Conseco, and each issued and outstanding
share of Common Stock of Green Tree will be converted into 0.9165 of a
share of Common Stock of Conseco.
For |_| Against|_| Abstain |_|
2. Such other business as may properly come before the Special Meeting or
any adjournment or adjournments thereof.
If this proxy is duly executed and returned, this proxy will be voted,
and will be voted in accordance with the instructions specified above. If no
instruction is specified, the proxy will be voted FOR Item 1.
The undersigned hereby revokes any other proxy or proxies heretofore
given to vote or act with respect to such Common Stock, and hereby ratifies and
confirms all action that said attorneys and proxies, their substitutes, or
either of them, may lawfully take by virtue thereof.
Dated:____________, 1998
________________________________________________
Signature(s) of Stockholder
This proxy should be signed exactly as your name
appears thereon. Joint owners should both sign.
If signed by an attorney, executor, guardian or
in some other capacity or as officer of a
corporation, please add title as such.
PLEASE COMPLETE, DATE AND SIGN THIS PROXY
AND RETURN IT IN THE ENCLOSED ENVELOPE.
