<PAGE> 1
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JUNE 24, 1997)
$250,000,000
CONSECO, INC.
6.4% NOTES DUE FEBRUARY 10, 2003 CONSECO LOGO
---------------------
Interest on the Notes is payable semi-annually on February 10 and August 10
of each year, commencing August 10, 1998. See "Description of the Notes."
The Notes will be represented by global Notes registered in the name of the
nominee of The Depository Trust Company, which will act as the depositary (the
"Depository"). Interests in the global Notes will be shown on, and transfers
thereof will be effected only through, records maintained by the Depository and
its participants. Except as described herein, Notes in definitive form will not
be issued. Settlement for the Notes will be made in immediately available funds.
The Notes will trade in the Depository's Same-Day Funds Settlement System until
maturity, and secondary market trading activity for the Notes will therefore
settle in immediately available funds. All payments of principal and interest
will be made by the Company in immediately available funds. See "Description of
the Notes -- Same-Day Settlement and Payment."
The Notes will be redeemable as a whole or in part at the option of the
Company at any time, at a redemption price equal to the greater of (i) 100% of
the principal amount thereof and (ii) the sum of the present values of the
remaining scheduled payments of principal and interest thereon from the
redemption date to the maturity date, computed by discounting such payments, in
each case, to the redemption date on a semiannual basis (assuming a 360-day year
consisting of twelve 30-day months) at the Treasury Rate (as defined herein)
plus 25 basis points plus, in each case, accrued and unpaid interest on the
principal amount thereof to the date of redemption. See "Description of the
Notes" herein and "Description of Debt Securities" in the accompanying
Prospectus.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT
RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
=================================================================================================================
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT(2) COMPANY(1)(3)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note.............................. 99.928% .6% 99.328%
- -----------------------------------------------------------------------------------------------------------------
Total................................. $249,820,000 $1,500,000 $248,320,000
=================================================================================================================
</TABLE>
(1) Plus accrued interest, if any, from February 9, 1998.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including certain liabilities under the Securities Act of 1933,
as amended. See "Underwriting."
(3) Before deducting expenses payable by the Company estimated to be $300,000.
---------------------
The Notes are offered by the several Underwriters, subject to prior sale,
when, as and if issued to and accepted by them, subject to approval of certain
legal matters by counsel for the Underwriters. The Underwriters reserve the
right to reject orders in whole or in part. It is expected that delivery of the
Notes will be made through the book-entry facilities at the Depository on or
about February 9, 1998.
---------------------
MERRILL LYNCH & CO.
DEUTSCHE MORGAN GRENFELL
FIRST UNION CAPITAL MARKETS
SALOMON SMITH BARNEY
SBC WARBURG DILLON READ INC.
---------------------
The date of this Prospectus Supplement is February 4, 1998.
<PAGE> 2
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE NOTES. SUCH
TRANSACTIONS MAY INCLUDE STABILIZING TRANSACTIONS, THE PURCHASE OF NOTES TO
COVER SYNDICATE SHORT POSITIONS AND THE IMPOSITION OF PENALTY BIDS. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
All statements, trend analyses and other information contained in this
Prospectus Supplement, the accompanying Prospectus or any document incorporated
by reference herein relative to markets for the Company's products and trends in
the Company's operations or financial results, as well as other statements
including words such as "anticipate," "believe," "plan," "estimate," "expect,"
"intend," and 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, stock market performance and health care
inflation, which may affect the ability of the Company to sell its products, the
market value of the Company's investments and the lapse rate and profitability
of the Company's policies; (2) the Company'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
the Company's insurance products; (5) changes in the Federal income tax laws and
regulations which may affect the relative tax advantages of some of the
Company's products; (6) increasing competition in the sale of the Company's
products; (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 the
Company's supplemental health insurance products; (8) the availability and terms
of future acquisitions; and (9) the risk factors or uncertainties listed from
time to time in any document incorporated by reference herein.
THE COMPANY
BACKGROUND
The Company is a financial services holding company. The Company develops,
markets and administers annuity, supplemental health insurance, individual and
group major medical insurance and individual life insurance products. The
Company'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. The Company has
supplemented such growth by acquiring companies that have profitable niche
products and strong distribution systems. Once a company has been acquired, the
Company'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.
Since 1982, the Company has acquired 19 insurance groups and related
businesses. The Company continues to regularly investigate acquisition
opportunities in the insurance industry and other industries in which it
operates. Any decision to make an acquisition will depend on a favorable
evaluation by the Company of 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
the Company's business operations. No assurances can be given as to when, if at
all, or upon what terms the Company will make any such acquisition.
S-2
<PAGE> 3
OPERATING SEGMENTS
Conseco conducts and manages its business through five segments, reflecting
the Company's major lines of insurance business and target markets: (i)
annuities; (ii) supplemental health insurance; (iii) life insurance; (iv)
individual and group major medical insurance and (v) other.
Annuities
This segment includes fixed annuities and variable annuities sold through
both career agents and professional independent producers. A fixed annuity is a
savings vehicle in which the policyholder, 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.
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 healthcare,
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.
Life insurance
This segment includes traditional life, universal life and other life
insurance products. This segment's products are currently sold through both
career agents and professional independent producers. 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 the Company 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
inforce, 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.
S-3
<PAGE> 4
MARKETING AND DISTRIBUTION
Conseco's insurance subsidiaries are collectively licensed to market the
Company's insurance products in all states and in the District of Columbia, and
certain protectorates of the United States. Conseco believes that people
generally purchase life, accident and health insurance and annuity products only
after being contacted and solicited by an insurance agent or by direct
marketing. Accordingly, the success of the Company's distribution system is
dependent primarily on its ability to attract and retain agents who are
experienced and highly motivated. Conseco has formed a marketing subsidiary to
coordinate the marketing and distribution of its insurance companies and promote
cross selling of their products.
A description of the Company's primary distribution channels follows:
Professional Independent Producers. This distribution channel consists of a
general agency and insurance brokerage distribution system comprised of
approximately 190,000 independent licensed agents doing business in all states.
Career Agents. This agency force of approximately 4,100 agents working from
185 branch offices permits one-on-one contacts with potential policyholders and
promotes strong personal relationships with existing policyholders. The career
agents sell primarily Medicare supplement and long-term care insurance policies.
Direct Marketing. This distribution channel was added on September 30, 1997
with the acquisition of Colonial Penn Life Insurance Company, which is engaged
in the sale of "graded benefit life" insurance policies through direct
marketing. Conseco intends to cross market other products through this
distribution channel.
RECENT ACQUISITION
Washington National Corporation ("WNC") was acquired on December 5, 1997 by
merger (the "WNC Merger"). In the merger, each share of WNC common stock was
converted into the right to receive $33.25 in cash, for a total transaction
value of approximately $410 million. The principal operating subsidiaries of
WNC, Washington National Insurance Company and United Presidential Life
Insurance Company, are engaged primarily in marketing and underwriting life
insurance and annuities for individuals and specialty health insurance for
educators.
GENERAL
The Company's executive offices are located at 11825 North Pennsylvania
Street, Carmel, Indiana 46032 and the telephone number is (317) 817-6100. For
additional information concerning the Company, see the Company's Annual Report
on Form 10-K for the year ended December 31, 1996 and other documents filed with
the Commission and listed or described under "Incorporation of Certain Documents
by Reference" in the accompanying Prospectus.
S-4
<PAGE> 5
SELECTED HISTORICAL FINANCIAL INFORMATION OF THE COMPANY
The selected historical financial information set forth below is derived
from the consolidated financial statements of the Company. The Company's
consolidated balance sheets at December 31, 1995 and 1996, and the consolidated
statements of operations, shareholders' equity and cash flows for the years
ended December 31, 1994, 1995 and 1996 and notes thereto were audited by Coopers
& Lybrand L.L.P., independent accountants, and are included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1996, which is
incorporated by reference herein. The selected historical financial information
set forth below for the nine months ended September 30, 1996 and 1997, is
unaudited; however, in the opinion of the Company's management, such financial
information contains all adjustments, consisting only of normal recurring items,
necessary to present fairly the financial information for such periods. The
results of operations for the nine month period ended September 30, 1997 may not
be indicative of the results of operations to be expected for a full year. The
selected historical financial information is qualified in its entirety by, and
should be read in conjunction with, the Company's Annual Report on Form 10-K for
the year ended December 31, 1996, and the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1997, both of which are incorporated by
reference herein.
The comparison of selected historical financial information in the table
below is significantly affected by: (i) 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"); and (ix) the acquisition (the "CPL Acquisition") of
Colonial Penn Life Insurance Company and Providential Life Insurance Company and
certain other assets (collectively "CPL"). For periods beginning with their
acquisitions by Partnership I and ending June 30, 1992, Partnership I and its
subsidiaries were consolidated with the financial statements of the Company.
Following the completion of the initial public offering by CCP in July 1992, the
Company did not have unilateral control to direct all of CCP's activities and,
therefore, did not consolidate the financial statements of CCP with the
financial statements of the Company. As a result of the purchase by the Company
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 the Company, effective January 1,
1995. The Company 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 the Company. Following the
completion of the initial public offering of Western National (and subsequent
disposition of the Company's remaining equity interest in Western National), the
financial statements of Western National were no longer consolidated with the
financial statements of the Company. As of September 29, 1994, the Company began
to include in its financial statements the newly acquired Partnership II
subsidiary, American Life Holdings, Inc. ("ALH"). As of July 1, 1996, the
Company began to include in its financial statements its subsidiaries acquired
in the LPG Merger. Effective December 31, 1996, the Company began to include in
its financial statements its subsidiaries acquired in the ATC Merger and the THI
Merger. As of January 1, 1997 the Company began to include in its financial
statements its subsidiaries acquired in the CAF Merger. As of April 1, 1997, the
Company began to include in its financial statements its subsidiaries acquired
in the PFS Merger. Effective September 30, 1997, the Company began to include in
its balance sheet its subsidiaries acquired in the CPL Acquisition. Such
business combinations are described in the notes to the consolidated financial
statements included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1996, and the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1997, both of which are incorporated by reference
herein.
S-5
<PAGE> 6
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------------------------- ---------------------
1992 1993 1994 1995 1996 1996 1997
--------- --------- --------- --------- --------- --------- ---------
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Insurance policy income....................... $ 378.7 $ 1,293.8 $ 1,285.6 $ 1,465.0 $ 1,654.2 $ 1,193.2 $ 2,440.9
Net investment income......................... 888.6 896.2 385.7 1,142.6 1,302.5 926.7 1,314.7
Net investment gains (losses)................. 160.2 242.6 (30.5) 188.9 30.4 9.8 137.3
Total revenues................................ 1,523.9 2,636.0 1,862.0 2,855.3 3,067.3 2,198.6 3,943.0
Interest expense on notes payable............. 46.2 58.0 59.3 119.4 108.1 84.6 76.0
Total benefits and expenses................... 1,193.9 2,025.8 1,537.6 2,436.8 2,573.7 1,845.6 3,241.2
Income before income taxes, minority interest
and extraordinary charge.................... 330.0 610.2 324.4 418.5 493.6 353.0 701.8
Extraordinary charge on extinguishment of
debt, net of tax............................ 5.3 11.9 4.0 2.1 26.5 18.6 6.2
Net income.................................... 169.5 297.0 150.4 220.4 252.4 174.5 395.9
Preferred stock dividends and charge related
to induced conversions of convertible
preferred stock............................. 5.5 20.6 18.6 18.4 27.4 22.7 19.9
Net income applicable to common stock......... 164.0 276.4 131.8 202.0 225.0 151.8 376.0
PER SHARE DATA(A):
Net income, primary........................... $ 1.36 $ 2.36 $ 1.25 $ 2.35 $ 1.91 $ 1.42 $ 1.82
Net income, fully diluted..................... 1.35 2.19 1.22 2.11 1.77 1.29 1.82
Dividends declared per common share........... .021 .075 .125 .046 .083 .051 .188
Book value per common share outstanding at
period end.................................. 5.46 8.45 5.22 10.22 16.86 12.61 19.49
Shares outstanding at period end.............. 99.6 101.2 88.7 81.0 167.1 133.9 188.0
Average fully diluted shares outstanding...... 118.4 134.0 123.4 104.5 142.5 134.7 210.2
BALANCE SHEET DATA (AT PERIOD END):
Total assets.................................. $11,772.7 $13,749.3 $10,811.9 $17,297.5 $25,612.7 $23,176.0 $33,138.0
Notes payable for which the Company is
directly liable............................. 163.2 413.0 191.8 871.4 1,094.9 1,169.0 1,876.8
Notes payable of affiliates, not direct
obligations of the Company.................. 392.0 290.3 611.1 584.7 -- 431.1 --
Commercial paper.............................. -- -- -- -- -- -- 492.9
Total liabilities............................. 11,154.4 12,382.9 9,743.2 15,782.5 21,829.7 21,072.3 28,450.7
Minority interests in consolidated
subsidiaries:
Company-obligated mandatorily redeemable
preferred securities of subsidiary
trusts.................................... -- -- -- -- 600.0 -- 900.0
Preferred stock............................. -- -- 130.1 110.7 97.0 92.5 --
Common stock................................ 24.0 223.8 191.6 292.6 .7 55.3 .7
Shareholders' equity.......................... 594.3 1,142.6 747.0 1,111.7 3,085.3 1,955.9 3,786.6
OTHER FINANCIAL DATA(B):
Premiums collected(c)......................... $ 1,464.9 $ 2,140.1 $ 1,879.1 $ 3,106.4 $ 3,210.4 $ 2,428.0 $ 3,657.5
Operating earnings(d)......................... 114.8 162.0 151.7 131.3 267.7 181.8 407.9
Operating earnings per fully diluted common
share(a)(d)................................. .90 1.19 1.23 1.26 1.89 1.35 1.94
Shareholders' equity excluding unrealized
appreciation (depreciation) of fixed
maturity securities(e)...................... 560.3 1,055.2 884.7 999.1 3,045.5 2,002.6 3,639.4
Book value per common share outstanding,
excluding unrealized appreciation
(depreciation) of fixed maturity
securities(a)(e)............................ 5.12 7.58 6.77 8.83 16.62 12.96 18.71
Ratio of debt to total capital (f):
As reported................................. .49X .34X .43X .49X .22X .43X .34X
Excluding unrealized appreciation
(depreciation) of fixed maturity
securities (e)............................ .50X .36X .39X .53X .23X .43X .34X
Ratio of debt and Company-obligated
mandatorily redeemable preferred securities
of subsidiary trusts to total capital(f):
As reported............................... .49X .34X .43X .49X .35X .43X .46X
Excluding unrealized appreciation
(depreciation) of fixed maturity
securities (e).......................... .50X .36X .39X .53X .35X .43X .47X
Adjusted statutory capital (at period end)
(g)......................................... $ 603.1 $ 1,135.5 $ 791.6 $ 1,298.7 $ 1,775.1 $ 1,582.3 $ 2,340.0
</TABLE>
- ---------------
(a) All share and per share amounts have been restated to reflect two-for-one
stock splits of the Company's common stock paid on April 1, 1996 and
February 11, 1997.
(b) Amounts under this heading are included to assist the reader in analyzing
the Company's financial position and results of operations. Such amounts are
not intended to, and do not, represent insurance policy income, net income,
net income per share, shareholders' equity or book value per share prepared
in accordance with generally accepted accounting principles ("GAAP").
S-6
<PAGE> 7
(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 $1,131.8 million in 1992; $891.9 million in 1993; $634.6
million in 1994; $1,757.4 million in 1995; $1,811.5 million in 1996;
$1,266.5 in the nine month period ended September 30, 1996; and $1,426.7
million in the nine month period ended September 30, 1997.
(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 non-recurring activities
(net of income taxes).
(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,
which the Company began to do in 1992, 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 the Company's Annual
Report on Form 10-K for the year ended December 31, 1996, which is
incorporated herein by reference.
(f) For periods prior to 1996, debt includes obligations for which the Company
was not directly liable.
(g) Includes: (1) statutory capital and surplus; (2) asset valuation reserve and
interest maintenance reserve; and (3) the portion of surplus debentures
carried by the life companies as a liability to the Company. Such statutory
data reflect the combined data derived from the annual statements of the
Company's consolidated life insurance companies as filed with insurance
regulatory agencies and prepared in accordance with statutory accounting
practices.
S-7
<PAGE> 8
CAPITALIZATION
The following table summarizes the actual capitalization of the Company and
its consolidated subsidiaries at September 30, 1997 and such capitalization
adjusted on a pro forma basis to reflect: (i) the WNC Merger and the related
financing transactions; (ii) the sale of $503.7 million of FELINE PRIDES
(including overallotment); (iii) the repurchase of 5 million shares of the
Company's common stock; and (iv) the sale of the Notes offered hereby and an
assumed application of the proceeds from such sale, after underwriting
commissions and estimated expenses of this offering, to repay indebtedness. This
table should be read in conjunction with the Company's Annual Report on Form
10-K for the year ended December 31, 1996, and the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1997, both of which are
incorporated by reference herein.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
--------------------------------------------------------
PRO FORMA
PRO FORMA ADJUSTMENTS
ADJUSTMENTS RELATED TO THE
ACTUAL AS FOR COMPLETED ISSUANCE OF PRO FORMA
REPORTED TRANSACTIONS THE NOTES AS ADJUSTED
--------- ------------- -------------- -----------
<S> <C> <C> <C> <C>
Commercial paper and notes payable:
Commercial paper................................ $ 492.9 $ -- $ (48.0) $ 444.9
Borrowings under revolving credit agreements.... 955.0 (487.3)(1) 684.3
216.6(2)
Bank debt incurred to finance the WNC Merger.... -- 400.0(3) (200.0) 200.0
Notes........................................... -- 250.0 250.0
Notes payable to Leucadia National
Corporation.................................. 400.0 400.0
Senior notes due 2003........................... 170.0 170.0
Senior notes due 2004........................... 191.6 191.6
Subordinated notes due 2004..................... 10.9 10.9
Convertible subordinated debentures due 2005.... 32.6 32.6
Convertible subordinated notes due 2003......... 86.1 86.1
Other........................................... 24.1 -- -- 24.1
-------- ------- ------- --------
Total principal amount....................... 2,363.2 129.3 2.0 2,494.5
Unamortized net (discount) premium........... 6.5 (.1)(3) (2.0) 4.4
-------- ------- ------- --------
Total commercial paper and notes payable... 2,369.7 129.2 -- 2,498.9
Minority interest:
Company-obligated mandatorily redeemable
preferred securities of subsidiary trusts.... 900.0 487.3(1) 1,387.3
Common stock of subsidiary...................... .7 .7
Shareholders' equity:
7% PRIDES, convertible preferred stock, no par
value; 4,370,000 shares authorized; 1,995,300
shares outstanding........................... 122.0 122.0
Common and additional paid-in capital, no par
value; 1,000,000,000 shares authorized;
188,009,367 shares outstanding............... 2,452.5 (216.6)(2) 2,232.5
(3.4)(1)
Unrealized appreciation of securities, net of
deferred income taxes........................ 149.8 149.8
Retained earnings............................... 1,062.3 -- -- 1,062.3
-------- ------- ------- --------
Total shareholders' equity...................... 3,786.6 (220.0) -- 3,566.6
-------- ------- ------- --------
Total capitalization....................... $7,057.0 $ 396.5 $ -- $7,453.5
======== ======= ======= ========
</TABLE>
- ---------------
(1) Pro forma adjustments reflect the issuance of $503.7 million of FELINE
PRIDES (including overallotment) and related financing transactions. The net
proceeds were used to reduce borrowings under the revolving credit
agreements.
(2) In December 1997, the Company announced a new share repurchase program to
repurchase up to 5 million shares of its common stock. As of February 4,
1998, all 5 million shares had been repurchased under the program for $216.6
million.
(3) Pro forma adjustments reflect the financing of the WNC Merger, in part, with
bank debt of $400.0 million.
S-8
<PAGE> 9
USE OF PROCEEDS
The net proceeds from the sale of the Notes, estimated to be approximately
$248.0 million (after underwriting discounts and estimated offering expenses),
will be used by the Company for the repayment of a portion of the bank debt
incurred to finance the WNC Merger and for the repayment of commercial paper.
The bank debt to be repaid has a maturity of March 31, 1998 and as of the date
of this Prospectus Supplement the interest rate on such bank debt was 6.1875%.
The commercial paper to be repaid matures in February 1998 and as of the date of
this Prospectus Supplement the average interest rate on such commercial paper
was 5.749%.
RATIOS OF EARNINGS TO FIXED CHARGES, EARNINGS TO FIXED
CHARGES AND PREFERRED STOCK DIVIDENDS
AND EARNINGS TO FIXED CHARGES, PREFERRED STOCK DIVIDENDS
AND DISTRIBUTIONS ON COMPANY-OBLIGATED MANDATORILY
REDEEMABLE PREFERRED SECURITIES OF SUBSIDIARY TRUSTS
The following table sets forth the Company's ratios of earnings to fixed
charges, earnings to fixed charges and preferred stock dividends and earnings to
fixed charges, preferred stock dividends and distributions on Company-obligated
mandatorily redeemable preferred securities of subsidiary trusts for each of the
five years ended December 31, 1996 and for the nine months ended September 30,
1996 and 1997.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------- -------------
1992 1993 1994 1995 1996 1996 1997
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges:
As reported........................... 1.54X 2.19X 2.26X 1.57X 1.61X 1.64X 2.13X
Excluding interest on annuities and
financial products(1)(2)........... 6.24X 8.85X 4.55X 3.80X 4.55X 4.32X 7.94X
Ratio of earnings to fixed charges and
preferred dividends:
As reported........................ 1.50X 2.04X 1.95X 1.50X 1.50X 1.51X 2.01X
Excluding interest on annuities and
financial products(1)(2)......... 5.09X 6.00X 3.14X 3.06X 3.14X 2.97X 5.81X
Ratio of earnings to fixed charges,
preferred dividends and distributions
on Company-obligated mandatorily
redeemable preferred securities of
subsidiary trusts:
As reported........................ 1.50X 2.04X 1.95X 1.50X 1.49X 1.51X 1.86X
Excluding interest on annuities and
financial products(1)(2)......... 5.09X 6.00X 3.14X 3.06X 3.06X 2.97X 4.20X
</TABLE>
- -------------------------
(1) These ratios are included to assist the reader in analyzing the impact of
interest on annuities and financial products (which is not generally
required to be paid in cash in the period it is recognized). Such ratios are
not intended to, and do not, represent the following ratios prepared in
accordance with GAAP: the ratio of earnings to fixed charges; the ratio of
earnings to fixed charges and preferred dividends; or the ratio of earnings
to fixed charges, preferred dividends and distributions on Company-obligated
mandatorily redeemable preferred securities of subsidiary trusts.
(2) Excludes interest credited to annuity and financial products of $506.8
million, $408.5 million, $134.7 million, $585.4 million and $668.6 million
for the years ended December 31, 1992, 1993, 1994, 1995 and 1996,
respectively, and $445.9 million and $518.0 million for the nine months
ended September 30, 1996 and 1997, respectively.
S-9
<PAGE> 10
DESCRIPTION OF THE NOTES
The following description of the particular terms of the Notes (referred to
in the accompanying Prospectus as the "Senior Debt Securities") supplements, and
to the extent inconsistent therewith replaces, the description of the general
terms and provisions of the Senior Debt Securities set forth in the accompanying
Prospectus, to which reference is hereby made.
GENERAL
The Notes are to be issued as a separate series under an indenture, dated
as of November 13, 1997 (the "Indenture"), between the Company and LTCB Trust
Company, as trustee (the "Trustee"). The following summary of certain provisions
of the Indenture should be read in conjunction with the "Description of Debt
Securities" contained in the Prospectus. Capitalized terms not otherwise defined
under the heading "Description of the Notes" have the meanings given to them in
the Prospectus and the Indenture.
The Notes will be limited to $250,000,000 in aggregate principal amount and
will mature on February 10, 2003. The Notes may be redeemed prior to maturity as
described below under "-- Redemption." The Notes will be unsecured and will rank
pari passu with all other unsecured and unsubordinated obligations of the
Company. At December 31, 1997, the Company had $1.8 billion of such unsecured
and unsubordinated indebtedness outstanding. In addition, the Company's
subsidiaries had $182 million of indebtedness outstanding at December 31, 1997,
which would be structurally senior to the Notes. The Indenture does not limit
the aggregate amount of Senior Debt Securities that may be issued thereunder,
nor does it limit the incurrence or issuance of other secured or unsecured debt
of the Company. Senior Debt Securities may be issued from time to time in one or
more series up to the aggregate amount from time to time authorized by the
Company for each series.
The Notes will bear interest at the rate per annum shown on the cover page
of this Prospectus Supplement from February 9, 1998 or from the most recent
Interest Payment Date to which interest has been paid or provided for, payable
semi-annually in arrears on February 10 and August 10 of each year, commencing
August 10, 1998 (each an "Interest Payment Date"), to the persons in whose names
such Notes were registered at the close of business on the next preceding
February 1 and August 1, whether or not a Business Day (as defined below) (each
a "Regular Record Date"), respectively. Interest on the Notes will be computed
on the basis of a 360-day year comprised of twelve 30-day months.
Interest payable on a Note on any Interest Payment Date or at maturity
shall be the amount of interest accrued from and including the next preceding
Interest Payment Date in respect of which interest has been paid or provided for
(or from and including February 9, 1998, if no interest has been paid or
provided for with respect to such Note) to, but excluding, the Interest Payment
Date or the date of maturity, as the case may be. If any Interest Payment Date
or the maturity date of a Note falls on a day that is not a Business Day, the
payment shall be made on the next Business Day as if it were made on the date
such payment was due and no interest shall accrue on the amount so payable for
the period from and after such Interest Payment Date or the maturity date, as
the case may be. "Business Day" means any day, other than a Saturday, Sunday,
legal holiday, or other day on which banks in The City of New York are required
or authorized by law, regulation or executive order to close.
The provisions of Article Four of the Indenture relating to defeasance and
covenant defeasance, described in the Prospectus under "Description of Debt
Securities-Defeasance and Covenant Defeasance," are applicable to the Notes.
S-10
<PAGE> 11
REDEMPTION
The Notes will be redeemable as a whole or in part at the option of the
Company at any time, at a redemption price equal to the sum of (a) the greater
of (i) 100% of the principal amount of such Notes and (ii) the sum of the
present values of the remaining scheduled payments of principal and interest
thereon from the redemption date to the maturity date, computed by discounting
such payments, in each case, to the redemption date on a semiannual basis
(assuming a 360-day year consisting of twelve 30-day months) at the Treasury
Rate, plus 25 basis points, plus (b) accrued and unpaid interest on the
principal amount thereof to the date of redemption.
"Treasury Rate" means, with respect to any redemption date, the rate per
annum equal to the semi-annual equivalent yield to maturity of the Comparable
Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as
a percentage of its principal amount) equal to the Comparable Treasury Price for
such redemption date.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term of the Notes to be redeemed that would be utilized, at the
time of selection and in accordance with customary financial practice, in
pricing new issues of corporate debt securities of comparable maturity to the
remaining terms of such Notes. "Independent Investment Banker" means one of the
Reference Treasury Dealers appointed by the Trustee after consultation with the
Company.
"Comparable Treasury Price" means, with respect to any redemption date, (i)
the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
Business Day preceding such redemption date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S.
Government Securities" or (ii) if such release (or any successor release) is not
published or does not contain such prices on such Business Day, the average of
the Reference Treasury Dealer Quotations actually obtained by the Trustee for
such redemption date. "Reference Treasury Dealer Quotations" means, with respect
to each Reference Treasury Dealer and any redemption date, the average, as
determined by the Trustee, of the bid and asked prices for the Comparable
Treasury Issue (expressed in each case as a percentage of its principal amount)
quoted in writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m.
(New York City time) on the third Business Day preceding such redemption date.
"Reference Treasury Dealer" means each of Merrill Lynch, Pierce, Fenner &
Smith Incorporated, Deutsche Morgan Grenfell Inc., Salomon Brothers Inc and SBC
Warburg Dillon Read Inc. and their respective successors; provided, however,
that if any of the foregoing shall cease to be a primary U.S. Government
securities dealer in New York City (a "Primary Treasury Dealer"), the Company
may substitute therefor another Primary Treasury Dealer.
Notice of any redemption will be mailed at least 30 days but no more than
60 days before the redemption date to each holder of Notes to be redeemed. If,
at the time notice of redemption is given, the redemption moneys are not held by
the Trustee, the redemption may be made subject to their receipt on or before
the date fixed for redemption and such notice shall be of no effect unless such
moneys are so received.
Upon payment of the redemption price, on and after the redemption date
interest will cease to accrue on the Notes or portions thereof called for
redemption.
CERTAIN COVENANTS
The Notes contain the following covenants:
Limitations on Issuance or Disposition of Stock of Significant
Subsidiaries. The Company will not, nor will it permit any Significant
Subsidiary to, issue, sell or otherwise dispose of any shares of Capital Stock
(other than non-voting Preferred Stock) of any Significant Subsidiary, except
for (i) directors' qualifying shares; (ii) sales or other dispositions to the
Company or to one or more wholly owned Significant Subsidiaries; (iii) the sale
or other disposition of all or any part of the Capital Stock of any Significant
S-11
<PAGE> 12
Subsidiary for consideration which is at least equal to the fair value of such
Capital Stock as determined by the Company's board of directors (acting in good
faith); or (iv) any issuance, sale, assignment, transfer or other disposition
made in compliance with an order of a court or regulatory authority of competent
jurisdiction, other than an order issued at the request of the Company or any
Significant Subsidiary.
Limitation on Liens. Except as provided below, neither the Company nor any
Significant Subsidiary may incur, issue, assume or guarantee any Indebtedness
secured by a Lien on any property or assets of the Company or any Significant
Subsidiary, or any shares of Capital Stock of any Significant Subsidiary,
without effectively providing that the Notes (together with, if the Company
shall so determine, any other Indebtedness which is not subordinated to the
Notes) shall be secured equally and ratably with (or prior to) such
Indebtedness, so long as such Indebtedness shall be so secured; provided,
however, that this covenant shall not apply to Indebtedness secured by (i) Liens
existing on the date of this Prospectus Supplement; (ii) Liens on property of,
or on any shares of stock of, any corporation existing at the time such
corporation becomes a Significant Subsidiary or merges into or consolidates with
the Company or a Significant Subsidiary; (iii) Liens on property or on shares of
stock existing at the time of acquisition thereof by the Company or any
Significant Subsidiary; (iv) Liens to secure the financing of the acquisition,
construction or improvement of property, or the acquisition of shares of stock
by the Company or any Significant Subsidiary, provided that such Liens are
created not later than one year after such acquisition or, in the case of
property, no later than one year after completion of construction or
commencement of commercial operation, whichever is later, are limited to the
property acquired, constructed or improved or the shares of stock acquired and
do not secure indebtedness in excess of the cost of such acquisition,
construction or improvement; (v) Liens in favor of the Company or any
Subsidiary; (vi) Liens in favor of, or required by, governmental authorities;
and (vii) any extension, renewal or replacement as a whole or in part, of any
Lien referred to in the foregoing clauses (i) to (vi) inclusive; provided,
however, that (a) such extension, renewal or replacement Lien shall be limited
to all or a part of the same property or shares of stock that secured the Lien
extended, renewed or replaced and (b) the Indebtedness secured by such Lien at
such time is not so increased.
The restrictions in the immediately preceding paragraph do not apply if,
immediately after the incurrence, issuance, assumption or guarantee of any
Indebtedness secured by a Lien, the aggregate principal amount of such secured
Indebtedness (other than Indebtedness secured by Liens described in clauses (i)
to (vii), inclusive, of the immediately preceding paragraph) would not exceed
10% of Consolidated Capitalization.
Neither the Notes nor the Indenture contain any provisions other than the
foregoing which will restrict the Company from incurring, assuming or becoming
liable with respect to any indebtedness or other obligations, whether secured or
unsecured, or from paying dividends or making other distributions on its capital
stock or purchasing or redeeming its capital stock. Neither the Notes nor the
Indenture contain any financial ratios, or specified levels of net worth or
liquidity to which the Company must adhere. In addition, neither the Notes nor
the Indenture contain any provision which would require the Company to
repurchase or redeem or otherwise modify the terms of any of the Notes upon a
change in control or other events involving the Company which may adversely
affect the creditworthiness of the Notes.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Notes will be made by the Underwriters in immediately
available funds. All payments of principal and interest will be made by the
Company in U.S. dollars in immediately available funds.
The Notes will trade in the Same-Day Funds Settlement System of the
Depository until maturity, and secondary market trading activity in the Notes
will therefore be required by the Depository to settle in immediately available
funds.
BOOK-ENTRY, DELIVERY AND FORM
The Company has established a depositary arrangement with The Depository
Trust Company with respect to the Notes, the terms of which are summarized
below. The Notes will be represented by global Notes registered in the name of
the nominee of the Depository. Beneficial interests in each Note will be shown
S-12
<PAGE> 13
on, and transfers thereof will be effected only through, records maintained by
the Depository (with respect to beneficial interests of Participants(as defined
below)) or by Participants or persons that hold interests through Participants
(with respect to beneficial interests of owners).
So long as the Depository or its nominee is the registered owner of the
Notes, the Depository or its nominee, as the case may be, will be the sole
Holder of the Notes represented thereby for all purposes under the Indenture.
Except as otherwise provided below, the Beneficial Owners (as defined below) of
the Notes will not be entitled to receive physical delivery of certificated
Notes and will not be considered the Holders thereof for any purpose under the
Indenture, and no Notes shall be exchangeable or transferable. Accordingly, each
Beneficial Owner must rely on the procedures of the Depository and, if such
Beneficial Owner is not a Participant, on the procedures of the Participant
through which such Beneficial Owner owns its interest in order to exercise any
rights of a Holder under such Note or the Indenture. The laws of some
jurisdictions require that certain purchasers of securities take physical
delivery of such securities in certificated form. Such limits and laws may
impair the ability to transfer beneficial interests in the Notes.
The following is based on information furnished by the Depository:
The Depository will act as securities depository for the Notes. The
Notes will be issued as fully registered securities registered in the name
of Cede & Co. (the Depository's partnership nominee). One global Note will
be issued with respect to each $200,000,000 of principal amount and an
additional global Note will be issued with respect to any remaining
principal amount of the issue.
The Depository is a limited-purpose trust company organized under the
New York Banking Law, a "banking organization" within the meaning of the
New York Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code,
and a "clearing agency" registered pursuant to the provisions of Section
17A of the Securities Exchange Act of 1934, as amended. The Depository
holds securities that its participants ("Participants") deposit with the
Depository. The Depository also facilitates the settlement among
Participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry changes in
Participants' accounts, thereby eliminating the need for physical movement
of securities certificates. Direct Participants of the Depository ("Direct
Participants") include securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations. The
Depository is owned by a number of its Direct Participants and by the New
York Stock Exchange, Inc., the American Stock Exchange, Inc., and the
National Association of Securities Dealers, Inc. Access to the Depository's
system is also available to others such as securities brokers and dealers,
banks and trust companies that clear through or maintain a custodial
relationship with a Direct Participant, either directly or indirectly
("Indirect Participants"). The rules applicable to the Depository and its
Participants are on file with the Securities and Exchange Commission.
Purchases of Notes under the Depository's system must be made by or
through Direct Participants, which will receive a credit for such Notes on
the Depository's records. The ownership interest of each actual purchaser
of each Note represented by a global Note ("Beneficial Owner") is in turn
to be recorded on the records of Direct Participants and Indirect
Participants. Beneficial Owners will not receive written confirmation from
the Depository of their purchase, but Beneficial Owners are expected to
receive written confirmations providing details of the transaction, as well
as periodic statements of their holdings, from the Direct Participants or
Indirect Participants through which such Beneficial Owner entered into the
transaction. Transfers of ownership interests in the Notes are to be
accomplished by entries made on the books of Participants acting on behalf
of Beneficial Owners. Beneficial Owners of Notes will not receive
certificated Notes representing their ownership interests therein, except
in the event that use of the book-entry system for the Notes is
discontinued.
To facilitate subsequent transfers, all Notes which are deposited
with, or on behalf of, the Depository are registered in the name of the
Depository's nominee, Cede & Co. The deposit of Notes with, or on behalf
of, the Depository and their registration in the name of Cede & Co. effect
no change in beneficial ownership. The Depository has no knowledge of the
actual Beneficial Owners of the Notes; the Depository's records reflect
only the identity of the Direct Participants to whose accounts such Notes
are
S-13
<PAGE> 14
credited, which may or may not be the Beneficial Owners. The Participants
will remain responsible for keeping account of their holdings on behalf of
their customers.
Conveyance of notices and other communications by the Depository to
Direct Participants, by Direct Participants to Indirect Participants, and
by Direct Participants and Indirect Participants to Beneficial Owners will
be governed by arrangements among them, subject to any statutory or
regulatory requirements as may be in effect from time to time.
Neither the Depository nor Cede & Co. will consent or vote with
respect to the Notes. Under its usual procedures, the Depository mails an
Omnibus Proxy to the Company as soon as possible after the applicable
record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting
rights to those Direct Participants to whose accounts the Notes are
credited on the applicable record date (identified in a listing attached to
the Omnibus Proxy).
Principal, premium, if any, and/or interest, if any, payments on the
Notes will be made in immediately available funds to the Depository. The
Depository's practice is to credit Direct Participants' accounts on the
applicable payment date in accordance with their respective holdings shown
on the Depository's records unless the Depository has reason to believe
that it will not receive payment on such date. Payments by Participants to
Beneficial Owners will be governed by standing instructions and customary
practices, as is the case with securities held for the accounts of
customers in bearer form or registered in "street name", and will be the
responsibility of such Participant and not of the Underwriters, the
Depository, the Trustee or the Company, subject to any statutory or
regulatory requirements as may be in effect from time to time. Payment of
principal, premium, if any, and/or interest, if any, to the Depository is
the responsibility of the Company and the Trustee, disbursement of such
payments to Direct Participants shall be the responsibility of the
Depository, and disbursement of such payments to the Beneficial Owners
shall be the responsibility of Direct Participants and Indirect
Participants.
Redemption notices shall be sent to Cede & Co. If less than all of the
Notes are being redeemed, the Depository's practice is to determine by lot
the amount of the interest of each Direct Participant in such issue to be
redeemed.
The Depository may discontinue providing its services as securities
depository with respect to the Notes at any time by giving reasonable
notice to the Company or the Trustee. Under such circumstances, in the
event that a successor securities depository is not obtained, certificated
Notes are required to be printed and delivered.
The Company may decide to discontinue use of the system of book-entry
transfers through the Depository (or a successor securities depository). In
that event, certificated Notes will be printed and delivered.
The information in this section concerning the Depository and the
Depository's system has been obtained from sources that the Company believes to
be reliable, but the Company takes no responsibility for the accuracy thereof.
CERTAIN DEFINITIONS
Set forth below is a summary of certain defined terms used in the Notes.
"Capital Lease Obligations" of a Person means any obligation that is
required to be classified and accounted for as a capital lease on the face of a
balance sheet of such person prepared in accordance with generally accepted
accounting principles; the amount of such obligations shall be the capitalized
amount thereof, determined in accordance with generally accepted accounting
principles; and the Stated Maturity thereof shall be the date of the last
payment of rent or any other amount due under such lease prior to the first date
upon which such lease may be terminated by the lessee without payment of a
penalty.
"Capital Stock" means any and all shares, interests, rights to purchase,
warrants, options, participations or other equivalents of or interest in
(however designated) corporate stock, including any Preferred Stock.
S-14
<PAGE> 15
"Consolidated Capitalization" means the sum of the Company's consolidated
shareholders' equity, redeemable preferred stock and preferred securities in any
trust, partnership, corporation or other entity of which more than 50% of the
voting equity is owned directly or indirectly by the Company, including, without
limitation, the trust securities issued by Conseco Financing Trust I, Conseco
Financing Trust II, Conseco Financing Trust III and Conseco Financing Trust IV.
"Indebtedness" means (i) any liability of any Person (1) for borrowed
money, or under any reimbursement obligation relating to a letter of credit
(other than letters of credit obtained in the ordinary course of business), or
(2) evidenced by a bond, note, debenture or similar instrument (including a
purchase money obligation) given in connection with the acquisition of any
businesses, properties or assets of any kind or with services incurred in
connection with capital expenditures (other than accounts payable or other
indebtedness to trade creditors arising in the ordinary course of business), or
(3) for the payment of money relating to a Capital Lease Obligation; (ii) any
liability of others described in the preceding clause (i) that the Person has
guaranteed or that is otherwise its legal liability; and (iii) any amendment,
supplement, modification, deferral, renewal, extension or refunding of any
liability of types referred to in clauses (i) and (ii) above.
"Lien" means any lien, mortgage, pledge, security interest, charge or
encumbrance of any kind (including any conditional sale or other title retention
agreement and any lease in the nature thereof).
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock or limited liability company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
"Preferred Stock," as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"Significant Subsidiary" means any Subsidiary with net earnings which
constituted at least 20% of the Company's consolidated total net earnings, as
determined as of the date of the Company's most recently prepared quarterly
financial statements for the 12-month period then ended.
"Stated Maturity," when used with respect to any security or any
installment of interest on any security, means the date specified in such
security as the fixed date on which the principal of such security or such
installment of interest, respectively, is finally due and payable, except as
otherwise provided in the case of Capital Lease Obligations.
"Subsidiary" means a corporation of which a majority of the Capital Stock
having voting power under ordinary circumstances to elect a majority of the
board of directors is owned directly or indirectly by the Company or by one or
more Subsidiaries, or by the Company and one or more Subsidiaries.
UNDERWRITING
Subject to the terms and conditions set forth in a purchase agreement (the
"Purchase Agreement") among the Company and Merrill Lynch, Pierce, Fenner &
Smith Incorporated, Deutsche Morgan Grenfell Inc., First Union Capital Markets,
a division of Wheat First Securities, Inc., Salomon Brothers Inc and SBC Warburg
Dillon Read Inc. (the "Underwriters"), the Company has agreed to sell to the
Underwriters, and the Underwriters have severally agreed to purchase, the
respective principal amounts of the Notes set forth opposite their names below.
The Purchase Agreement provides that the obligations of the Underwriters are
S-15
<PAGE> 16
subject to certain conditions precedent and that the Underwriters will be
obligated to purchase all of the Notes if any are purchased.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OF
UNDERWRITER NOTES
----------- ---------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................... $ 50,000,000
Deutsche Morgan Grenfell Inc................................ 50,000,000
First Union Capital Markets, a division of Wheat First
Securities, Inc........................................... 50,000,000
Salomon Brothers Inc........................................ 50,000,000
SBC Warburg Dillon Read Inc................................. 50,000,000
------------
Total.......................................... $250,000,000
============
</TABLE>
The Underwriters have advised the Company that they propose initially to
offer the Notes to the public at the public offering price set forth on the
cover page of this Prospectus Supplement, and to certain dealers at such price
less a concession not in excess of .35% of the principal amount of the Notes.
The Underwriters may allow, and such dealers may reallow, a discount not in
excess of .25% of the principal amount of the Notes to certain other dealers.
After the initial public offering, the public offering price, concession and
discount may be changed.
The Company has been advised by the Underwriters that they intend to make a
market in the Notes, but they are not obligated to do so and may discontinue
such market making at any time without notice. No assurance can be given as to
the development or liquidity of a trading market for the Notes.
Until the distribution of the Notes is completed, the rules of the
Securities and Exchange Commission may limit the ability of the Underwriters to
bid for and purchase the Notes. As an exception to these rules, the Underwriters
will be permitted to engage in certain transactions that stabilize the price of
the Notes. Such transactions consist of bids or purchases for the purpose of
pegging, fixing or maintaining the price of the Notes.
If the Underwriters create a short position in the Notes in connection with
this offering, i.e., if they sell more of the Notes than are set forth on the
cover page of this Prospectus Supplement, they may reduce that short position by
purchasing Notes in the open market.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases.
Neither the Company nor the Underwriters make any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Notes. In addition, neither the
Company nor the Underwriters make any representation that the Underwriters will
engage in such transactions. Any such transactions, once commenced, may be
discontinued at any time without notice.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
In the ordinary course of business, the Underwriters and affiliates thereof
have engaged and may in the future engage in investment banking or commercial
banking transactions with the Company and certain of its affiliates.
LEGAL MATTERS
The validity of the Notes will be passed upon for the Company by John J.
Sabl, Executive Vice President, General Counsel and Secretary of the Company,
and for the Underwriters by Sidley & Austin, Chicago, Illinois. In rendering
their opinions, Sidley & Austin and Mr. Sabl will rely as to matters of Indiana
law on the opinion of Karl W. Kindig, Senior Vice President, Legal of Conseco
Services, LLC, a subsidiary of the
S-16
<PAGE> 17
Company. Certain other matters with respect to the offering will be passed upon
for the Company by Locke Reynolds Boyd & Weisell, Indianapolis, Indiana. Messrs.
Sabl and Kindig are full-time employees and own shares, and have options to
purchase shares, of Common Stock of the Company. Sidley & Austin provides legal
services to the Company in certain other matters.
S-17
<PAGE> 18
PROSPECTUS
$1,500,000,000
CONSECO, INC.
DEBT SECURITIES, PREFERRED STOCK, DEPOSITARY SHARES, COMMON STOCK AND WARRANTS
CONSECO FINANCING TRUST IV
CONSECO FINANCING TRUST V
CONSECO FINANCING TRUST VI
CONSECO FINANCING TRUST VII
PREFERRED SECURITIES FULLY AND UNCONDITIONALLY GUARANTEED
BY CONSECO, INC.
------------------------
Conseco, Inc., an Indiana corporation ("Conseco" or the "Company"), may
offer and sell from time to time, in one or more series, (i) its debt
securities, consisting of debentures, notes and/or other evidences of
indebtedness representing unsecured obligations of Conseco (the "Debt
Securities"), (ii) shares of its preferred stock, no par value per share
("Preferred Stock"), which may be represented by depositary shares (the
"Depositary Shares") as described herein, (iii) shares of its common stock, no
par value per share ("Common Stock"), and (iv) warrants to purchase Debt
Securities, Preferred Stock, Common Stock or other securities or rights
("Warrants").
Conseco Financing Trust IV, Conseco Financing Trust V, Conseco Financing
Trust VI and Conseco Financing Trust VII (each, a "Conseco Trust"), statutory
business trusts formed under the laws of the State of Delaware, may offer, from
time to time, preferred securities, representing preferred undivided beneficial
interests in the assets of the respective Conseco Trusts ("Preferred
Securities"). The payment of periodic cash distributions ("Distributions") with
respect to Preferred Securities out of moneys held by each of the Conseco
Trusts, and payments on liquidation, redemption or otherwise with respect to
such Preferred Securities, will be guaranteed by the Company to the extent
described herein (each, a "Trust Guarantee"). See "Description of Preferred
Securities" and "Description of Trust Guarantees." The Company's obligations
under the Trust Guarantees will rank junior and subordinate in right of payment
to all other liabilities of the Company and pari passu with its obligations
under the senior most preferred or preference stock of the Company. See
"Description of Trust Guarantees -- Status of the Trust Guarantees."
Subordinated Debt Securities (as defined herein) may be issued and sold by the
Company in one or more series to a Conseco Trust or a trustee of such Conseco
Trust in connection with the investment of the proceeds from the offering of
Preferred Securities and Common Securities (as defined herein) of such Conseco
Trust. The Subordinated Debt Securities purchased by a Conseco Trust may be
subsequently distributed pro rata to holders of Preferred Securities and Common
Securities in connection with the dissolution of such Conseco Trust. The Debt
Securities, Preferred Stock, Depositary Shares, Common Stock, Warrants and
Preferred Securities are herein collectively referred to as the "Securities."
Certain specific terms of the particular Securities in respect of which
this Prospectus is being delivered will be set forth in an accompanying
supplement to this Prospectus (the "Prospectus Supplement"), which will
describe, without limitation and where applicable, the following: (i) in the
case of Debt Securities, the specific designation, aggregate principal amount,
ranking as senior or subordinated Debt Securities, denomination, maturity,
premium, if any, interest rate (which may be fixed or variable), time and method
of calculating interest, if any, place or places where principal of, premium, if
any, and interest, if any, on such Debt Securities will be payable, the
currencies or currency units in which principal of, premium, if any, and
interest, if any, on such Debt Securities will be payable, any terms of
redemption or conversion, any sinking fund provisions, the purchase price, any
listing on a securities exchange, any right of the Company to defer payment of
interest on the Debt Securities and the maximum length of such deferral period
and other special terms; (ii) in the case of Preferred Stock and Depositary
Shares, the specific designation, stated value and
<PAGE> 19
liquidation preference per share and number of shares offered, the purchase
price, dividend rate (which may be fixed or variable), method of calculating
payment of dividends, place or places where dividends on such Preferred Stock
will be payable, any terms of redemption, dates on which dividends shall be
payable and dates from which dividends shall accrue, any listing on a securities
exchange, voting and other rights, including conversion or exchange rights, if
any, and other special terms, including whether interests in the Preferred Stock
will be represented by Depositary Shares and, if so, the fraction of a share of
Preferred Stock represented by each Depositary Share; (iii) in the case of
Common Stock, the number of shares offered, the initial offering price, market
price and dividend information; (iv) in the case of Warrants, the specific
designation, the number, purchase price, exercise price and other terms thereof,
any listing of the Warrants or the underlying Securities on a securities
exchange or any other terms in connection with the offering, sale and exercise
of the Warrants, as well as the terms on which and the Securities for which such
Warrants may be exercised; and (v) in the case of Preferred Securities, the
specific designation, number of securities, liquidation amount per security, the
purchase price, any listing on a securities exchange, distribution rate (or
method of calculation thereof), dates on which distributions shall be payable
and dates from which distributions shall accrue, any voting rights, terms for
any conversion or exchange into other securities, any redemption, exchange or
sinking fund provisions, any other rights, preferences, privileges, limitations
or restrictions relating to the Preferred Securities and the terms upon which
the proceeds of the sale of the Preferred Securities shall be used to purchase a
specific series of Subordinated Debt Securities of the Company.
The offering price to the public of the Securities will be limited to U.S.
$1,500,000,000 in the aggregate (or its equivalent (based on the applicable
exchange rate at the time of issue), if Securities are offered for consideration
denominated in one or more foreign currencies or currency units as shall be
designated by the Company). The Debt Securities may be denominated in United
States dollars or, at the option of the Company if so specified in the
applicable Prospectus Supplement, in one or more foreign currencies or currency
units. The Debt Securities may be issued in registered form or bearer form, or
both. If so specified in the applicable Prospectus Supplement, Debt Securities
of a series may be issued in whole or in part in the form of one or more
temporary or permanent global securities.
The Securities may be sold to or through underwriters, through dealers or
agents or directly to purchasers. See "Plan of Distribution." The names of any
underwriters, dealers or agents involved in the sale of the Securities in
respect of which this Prospectus is being delivered and any applicable fee,
commission or discount arrangements with them will be set forth in a Prospectus
Supplement. See "Plan of Distribution" for possible indemnification arrangements
for dealers, underwriters and agents.
This Prospectus may not be used to consummate sales of Securities unless
accompanied by a Prospectus Supplement.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is June 24, 1997.
2
<PAGE> 20
FOR NORTH CAROLINA RESIDENTS: THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE COMMISSIONER OF INSURANCE FOR THE STATE OF NORTH CAROLINA,
NOR HAS THE COMMISSIONER OF INSURANCE RULED UPON THE ACCURACY OR THE ADEQUACY OF
THIS DOCUMENT.
State insurance holding company laws and regulations applicable to the
Company generally provide that no person may acquire control of the Company, and
thus indirect control of its insurance subsidiaries, unless such person has
provided certain required information to, and such acquisition is approved (or
not disapproved) by, the appropriate insurance regulatory authorities.
Generally, any person acquiring beneficial ownership of 10% or more of the
Common Stock would be presumed to have acquired such control, unless the
appropriate insurance regulatory authorities upon advance application determine
otherwise.
NO DEALER, SALESMAN OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, ANY
ACCOMPANYING PROSPECTUS SUPPLEMENT OR THE DOCUMENTS INCORPORATED OR DEEMED
INCORPORATED BY REFERENCE HEREIN. IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR ANY UNDERWRITER, DEALER OR AGENT. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN
THE REGISTERED SECURITIES TO WHICH IT RELATES, OR AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY THOSE SECURITIES TO WHICH IT RELATES, IN ANY
JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS OR ANY PROSPECTUS
SUPPLEMENT NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN
THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by Conseco with the Commission can be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at
the following regional offices of the Commission: New York Regional Office, 7
World Trade Center, 13th Floor, New York, New York 10048; and Chicago Regional
Office, Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of such material can be obtained from the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, upon
payment of the prescribed rates. 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 the Company,
that file electronically with the Commission. Copies of such reports, proxy
statements and other information can also be inspected at the offices of the New
York Stock Exchange, 20 Broad Street, New York, New York 10005.
The Company and the Conseco Trusts have filed with the Commission a
Registration Statement on Form S-3 under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the Securities offered hereby. This
Prospectus, which constitutes part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement and the
exhibits thereto, certain parts of which are omitted in accordance with the
rules and regulations of the Commission. Statements contained herein or in any
Prospectus Supplement concerning the provisions of any document do not purport
to be complete and, in each instance, are qualified in all respects by reference
to the copy of such document filed as an exhibit to the Registration Statement
or otherwise filed with the Commission. For further information with respect to
the Company, the Conseco Trusts and the Securities, reference is hereby made to
such Registration Statement, including the exhibits thereto and the documents
incorporated herein by reference, which can be examined at the Commission's
principal office, 450 Fifth Street, N.W., Washington, D.C. 20549, or copies of
which can be obtained from the Commission at such office upon payment of the
fees prescribed by the Commission.
No separate financial statements of the Conseco Trusts have been included
or incorporated by reference herein. The Company does not consider that such
financial statements would be material to holders of the
3
<PAGE> 21
Preferred Securities because (i) all of the voting securities of the Conseco
Trusts will be owned, directly or indirectly, by the Company, a reporting
company under the Exchange Act, (ii) the Conseco Trusts have and will have no
independent operations but exist for the sole purpose of issuing securities
representing undivided beneficial interests in their assets and investing the
proceeds thereof in Subordinated Debt Securities issued by the Company, and
(iii) the Company's obligations described herein and in any accompanying
prospectus supplement, under the Declaration (including the obligation to pay
expenses of the Conseco Trusts), the Subordinated Indenture and any supplemental
indentures thereto, the Subordinated Debt Securities issued to the Conseco Trust
and the Trust Guarantees taken together, constitute a full and unconditional
guarantee by the Company of payments due on the Preferred Securities. See
"Description of Preferred Securities of the Conseco Trusts" and "Description of
Trust Guarantees."
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by the Company with the Commission
pursuant to the Exchange Act are incorporated herein by this reference:
1. Annual Report on Form 10-K for the fiscal year ended December 31, 1996
including Part III thereof which is incorporated by reference from the Company's
proxy statement dated April 10, 1997 for its annual meeting of shareholders (the
"Company's Annual Report");
2. Quarterly Report on Form 10-Q for the quarter ended March 31, 1997;
3. Current Reports on Form 8-K dated April 1, 1997 and April 30, 1997;
and
4. The description of the Company's Common Stock in its 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.
All documents filed by the Company pursuant to Sections 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 made hereby shall be deemed to be incorporated by
reference in this Prospectus or any Prospectus Supplement and to be part hereof
from the date of filing of such documents.
Any statement contained herein, or in a document incorporated or deemed to
be incorporated by reference herein, shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus or
any Prospectus Supplement. To the extent that any proxy statement is
incorporated by reference herein, such incorporation shall not include any
information contained in such proxy statement that is not, pursuant to the
Commission's rules, deemed to be "filed" with the Commission or subject to the
liabilities of Section 18 of the Exchange Act.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon the written or oral request of such person, a copy
of any or all of the documents incorporated herein by reference (other than
exhibits to such documents unless such exhibits are specifically incorporated by
reference into such documents). Any such request should be directed to James W.
Rosensteele, Senior Vice President, Corporate Communications, Conseco, Inc.,
11825 N. Pennsylvania Street, Carmel, Indiana 46032 (telephone number: (317)
817-2893).
4
<PAGE> 22
THE COMPANY
The Company is a financial services holding company. The Company develops,
markets and administers annuity, individual health insurance and individual life
insurance products. The Company'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. The
Company has supplemented such growth by acquiring companies that have profitable
niche products, strong distribution systems and progressive management teams who
can work with the Company to implement the Company's operating and growth
strategies. Once a company has been acquired, the Company's operating strategy
has been to consolidate and streamline management and administrative functions,
to realize superior investment returns through active asset management, to
eliminate unprofitable products and distribution channels, and to expand and
develop the profitable distribution channels and products.
The Company's principal executive offices are located at 11825 N.
Pennsylvania Street, Carmel, Indiana 46032. Its telephone number is (317)
817-6100.
THE CONSECO TRUSTS
Each of the Conseco Trusts is a statutory business trust formed under
Delaware law pursuant to (i) a declaration of trust (each a "Declaration")
executed by the Company as sponsor for such trust (the "Sponsor"), and the
Conseco Trustees (as defined herein) of such trust and (ii) the filing of a
certificate of trust with the Secretary of State of the State of Delaware on May
23, 1997. Each Conseco Trust exists for the exclusive purposes of (i) issuing
and selling the Preferred Securities and common securities representing common
undivided beneficial interests in the assets of such Conseco Trust (the "Common
Securities" and, together with the Preferred Securities, the "Trust
Securities"), (ii) using the gross proceeds from the sale of the Trust
Securities to acquire the Subordinated Debt Securities and (iii) engaging in
only those other activities necessary, appropriate, convenient or incidental
thereto. All of the Common Securities will be directly or indirectly owned by
the Company. The Common Securities will rank pari passu, and payments will be
made thereon pro rata, with the Preferred Securities, except that, if an event
of default under the Declaration has occurred and is continuing, the rights of
the holders of the Common Securities to payment in respect of distributions and
payments upon liquidation, redemption and otherwise will be subordinated to the
rights of the holders of the Preferred Securities. The Company will directly or
indirectly acquire Common Securities, in an aggregate liquidation amount equal
to at least 3% of the total capital of each Conseco Trust.
Each Conseco Trust has a term of approximately 55 years but may terminate
earlier, as provided in the Declaration. Each Conseco Trust's business and
affairs will be conducted by the trustees (the "Conseco Trustees") appointed by
the Company as the direct or indirect holder of all of the Common Securities.
The holder of the Common Securities will be entitled to appoint, remove or
replace any of, or increase or reduce the number of, the Conseco Trustees of
each Conseco Trust. The duties and obligations of the Conseco Trustees shall be
governed by the Declaration of such Conseco Trust. A majority of the Conseco
Trustees (the "Regular Trustees") of each Conseco Trust will be persons who are
employees or officers of or who are affiliated with the Company. One Conseco
Trustee of each Conseco Trust will be a financial institution that is not
affiliated with the Company and has a minimum amount of combined capital and
surplus of not less than $50,000,000, which shall act as property trustee and as
indenture trustee for the purposes of compliance with the provisions of Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"), pursuant to the
terms set forth in the applicable Prospectus Supplement (the "Property
Trustee"). In addition, unless the Property Trustee maintains a principal place
of business in the State of Delaware and otherwise meets the requirements of
applicable law, one Conseco Trustee of each Conseco Trust will be an entity
having a principal place of business in, or a natural person resident of, the
State of Delaware (the "Delaware Trustee"). The Company will pay all fees and
expenses related to the Conseco Trusts and the offering of the Trust Securities.
The Property Trustee for each Conseco Trust is Fleet National Bank, 777
Main Street, Hartford, Connecticut 06115. The Delaware Trustee for each Conseco
Trust is First Union Trust Company, National Association, and its address in the
State of Delaware is One Rodney Square, 920 King Street, Wilmington, Delaware
19801. The principal place of business of each Conseco Trust shall be c/o
Conseco, Inc., 11825 N. Pennsylvania Street, Carmel, Indiana 46032; telephone
(317) 817-6100.
5
<PAGE> 23
USE OF PROCEEDS
Unless otherwise indicated in the accompanying Prospectus Supplement, the
net proceeds received by the Company from the sale of any Debt Securities,
Common Stock, Preferred Stock, Depositary Shares or Warrants offered hereby are
expected to be used for general corporate purposes. The proceeds from the sale
of Preferred Securities by the Conseco Trusts will be invested in the
Subordinated Debt Securities of the Company. Except as may otherwise be
described in the Prospectus Supplement relating to such Preferred Securities,
the Company expects to use the net proceeds from the sale of such Subordinated
Debt Securities to the Conseco Trusts for general corporate purposes. Any
specific allocation of the proceeds to a particular purpose that has been made
at the date of any Prospectus Supplement will be described therein.
RATIOS OF EARNINGS TO FIXED CHARGES, EARNINGS TO FIXED
CHARGES AND PREFERRED STOCK DIVIDENDS
AND EARNINGS TO FIXED CHARGES, PREFERRED STOCK DIVIDENDS
AND DISTRIBUTIONS ON COMPANY-OBLIGATED MANDATORILY
REDEEMABLE PREFERRED SECURITIES OF SUBSIDIARY TRUSTS
The following table sets forth the Company's ratios of earnings to fixed
charges, earnings to fixed charges and preferred stock dividends and earnings to
fixed charges, preferred stock dividends and distributions on Company-obligated
mandatorily redeemable preferred securities of subsidiary trusts for each of the
five years ended December 31, 1996 and for the three months ended March 31, 1996
and 1997.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------------- ---------------
1992 1993 1994 1995 1996 1996 1997
----- ----- ----- ----- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges:
As reported............................ 1.54X 2.19X 2.26X 1.57X 1.61X 1.69X 1.89X
Excluding interest on annuities and
financial products(1)(2)............ 6.24X 8.85X 4.55X 3.80X 4.55X 4.51X 7.36X
Ratio of earnings to fixed charges and
preferred dividends:
As reported......................... 1.50X 2.04X 1.95X 1.50X 1.50X 1.54X 1.84X
Excluding interest on annuities and
financial products(1)(2).......... 5.09X 6.00X 3.14X 3.06X 3.14X 3.01X 6.21X
Ratio of earnings to fixed charges,
preferred dividends and distributions
on Company-obligated mandatorily
redeemable preferred securities of
subsidiary trusts:
As reported......................... 1.50X 2.04X 1.95X 1.50X 1.49X 1.54X 1.74X
Excluding interest on annuities and
financial products(1)(2).......... 5.09X 6.00X 3.14X 3.06X 3.06X 3.01X 4.54X
</TABLE>
- ---------------
(1) These ratios are included to assist the reader in analyzing the impact of
interest on annuities and financial products (which is not generally
required to be paid in cash in the period it is recognized). Such ratios are
not intended to, and do not, represent the following ratios prepared in
accordance with generally accepted accounting principles ("GAAP"): the ratio
of earnings to fixed charges; the ratio of earnings to fixed charges and
preferred dividends; or the ratio of earnings to fixed charges, preferred
dividends and distributions on Company-obligated mandatorily redeemable
preferred securities of subsidiary trusts.
(2) Excludes interest credited to annuity and financial products of $506.8
million, $408.5 million, $134.7 million, $585.4 million and $668.6 million
for the years ended December 31, 1992, 1993, 1994, 1995 and 1996,
respectively, and $139.1 million and $189.9 million for the three months
ended March 31, 1996 and 1997, respectively.
6
<PAGE> 24
DESCRIPTION OF DEBT SECURITIES
The Debt Securities offered hereby, consisting of notes, debentures and
other evidences of indebtedness, are to be issued in one or more series
constituting either senior Debt Securities ("Senior Debt Securities") or
subordinated Debt Securities ("Subordinated Debt Securities"). The Debt
Securities will be issued pursuant to indentures described below (as applicable,
the "Senior Indenture" or the "Subordinated Indenture", each, an "Indenture"
and, together, the "Indentures"), in each case between the Company and the
trustee identified therein (the "Trustee"), the forms of which have been filed
as exhibits to the Registration Statement of which this Prospectus forms a part.
Except for the subordination provisions of the Subordinated Indenture, for which
there are no counterparts in the Senior Indenture, the provisions of the
Subordinated Indenture are substantially identical in substance to the
provisions of the Senior Indenture that bear the same section numbers.
The statements herein relating to the Debt Securities and the following
summaries of certain general provisions of the Indentures do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, all the provisions of the Indentures (as they may be amended or supplemented
from time to time), including the definitions therein of certain terms
capitalized in this Prospectus. All article and section references appearing
herein are to articles and sections of the applicable Indenture and whenever
particular Sections or defined terms of the Indentures (as they may be amended
or supplemented from time to time) are referred to herein or in a Prospectus
Supplement, such Sections or defined terms are incorporated herein or therein by
reference.
GENERAL
The Debt Securities will be unsecured obligations of the Company. The
Indentures do not limit the aggregate amount of Debt Securities which may be
issued thereunder, nor do they limit the incurrence or issuance of other secured
or unsecured debt of the Company. The Debt Securities issued under the Senior
Indenture will be unsecured and will rank pari passu with all other unsecured
and unsubordinated obligations of the Company. The Debt Securities issued under
the Subordinated Indenture will be subordinate and junior in right of payment,
to the extent and in the manner set forth in the Subordinated Indenture, to all
Senior Indebtedness of the Company. See "-- Subordination under the Subordinated
Indenture."
Reference is made to the applicable Prospectus Supplement which will
accompany this Prospectus for a description of the specific series of Debt
Securities being offered thereby, including: (1) the title, designation and
purchase price, of such Debt Securities; (2) any limit upon the aggregate
principal amount of such Debt Securities; (3) the date or dates on which the
principal of and premium, if any, on such Debt Securities will mature or the
method of determining such date or dates; (4) the rate or rates (which may be
fixed or variable) at which such Debt Securities will bear interest, if any, or
the method of calculating such rate or rates; (5) the date or dates from which
interest, if any, will accrue or the method by which such date or dates will be
determined; (6) the date or dates on which interest, if any, will be payable and
the record date or dates therefor; (7) the place or places where principal of,
premium, if any, and interest, if any, on such Debt Securities will be payable;
(8) the right, if any, of the Company to defer payment of interest on Debt
Securities and the maximum length of any such deferral period; (9) the period or
periods within which, the price or prices at which, the currency or currencies
(including currency unit or units) in which, and the terms and conditions upon
which, such Debt Securities may be redeemed, in whole or in part, at the option
of the Company; (10) the obligation, if any, of the Company to redeem or
purchase such Debt Securities pursuant to any sinking fund or analogous
provisions or upon the happening of a specified event and the period or periods
within which, the price or prices at which and the other terms and conditions
upon which, such Debt Securities shall be redeemed or purchased, in whole or in
part, pursuant to such obligations; (11) the denominations in which such Debt
Securities are authorized to be issued; (12) the currency or currency unit for
which Debt Securities may be purchased or in which Debt Securities may be
denominated and/or the currency or currencies (including currency unit or units)
in which principal of, premium, if any, and interest, if any, on such Debt
Securities will be payable and whether the Company or the holders of any such
Debt Securities may elect to receive payments in respect of such Debt Securities
in a currency or currency unit other than that in which such Debt Securities are
stated to be payable; (13) if other than the principal amount
7
<PAGE> 25
thereof, the portion of the principal amount of such Debt Securities which will
be payable upon declaration of the acceleration of the maturity thereof or the
method by which such portion shall be determined; (14) the person to whom any
interest on any such Debt Security shall be payable if other than the person in
whose name such Debt Security is registered on the applicable record date; (15)
any addition to, or modification or deletion of, any Event of Default or any
covenant of the Company specified in the Indenture with respect to such Debt
Securities; (16) the application, if any, of such means of defeasance or
covenant defeasance as may be specified for such Debt Securities; (17) whether
such Debt Securities are to be issued in whole or in part in the form of one or
more temporary or permanent global securities and, if so, the identity of the
depositary for such global security or securities; (18) any United States
Federal income tax considerations applicable to holders of the Debt Securities;
and (19) any other special terms pertaining to such Debt Securities. Unless
otherwise specified in the applicable Prospectus Supplement, the Debt Securities
will not be listed on any securities exchange. (Section 3.1.)
Unless otherwise specified in the applicable Prospectus Supplement, Debt
Securities will be issued in fully-registered form without coupons. Where Debt
Securities of any series are issued in bearer form, the special restrictions and
considerations, including special offering restrictions and special Federal
income tax considerations, applicable to any such Debt Securities and to payment
on and transfer and exchange of such Debt Securities will be described in the
applicable Prospectus Supplement. Bearer Debt Securities will be transferable by
delivery. (Section 3.5.)
Debt Securities may be sold at a substantial discount below their stated
principal amount, bearing no interest or interest at a rate which at the time of
issuance is below market rates. Certain Federal income tax consequences and
special considerations applicable to any such Debt Securities, or to Debt
Securities issued at par that are treated as having been issued at a discount,
will be described in the applicable Prospectus Supplement.
If the purchase price of any of the Debt Securities is payable in one or
more foreign currencies or currency units or if any Debt Securities are
denominated in one or more foreign currencies or currency units or if the
principal of, premium, if any, or interest, if any, on any Debt Securities is
payable in one or more foreign currencies or currency units, or by reference to
commodity prices, equity indices or other factors, the restrictions, elections,
certain U.S. Federal income tax considerations, specific terms and other
information with respect to such issue of Debt Securities and such foreign
currency or currency units or commodity prices, equity indices or other factors
will be set forth in the applicable Prospectus Supplement. In general, holders
of such series of Debt Securities may receive a principal amount on any
principal payment date, or a payment of premium, if any, on any premium interest
payment date or a payment of interest on any interest payment date, that is
greater than or less than the amount of principal, premium, if any, or interest
otherwise payable on such dates, depending on the value on such dates of the
applicable currency, commodity, equity index or other factor.
PAYMENT, REGISTRATION, TRANSFER AND EXCHANGE
Unless otherwise provided in the applicable Prospectus Supplement, payments
in respect of the Debt Securities will be made in the designated currency at the
office or agency of the Company maintained for that purpose as the Company may
designate from time to time, except that, at the option of the Company, interest
payments, if any, on Debt Securities in registered form may be made (i) by
checks mailed to the holders of Debt Securities entitled thereto at their
registered addresses or (ii) by wire transfer to an account maintained by the
person entitled thereto as specified in the Register. (Sections 3.7(a) and 9.2.)
Unless otherwise indicated in the applicable Prospectus Supplement, payment of
any installment of interest on Debt Securities in registered form will be made
to the person in whose name such Debt Security is registered at the close of
business on the regular record date for such interest. (Section 3.7(a).)
Payment in respect of Debt Securities in bearer form will be made in the
currency and in the manner designated in the Prospectus Supplement, subject to
any applicable laws and regulations, at such paying agencies outside the United
States as the Company may appoint from time to time. The paying agents outside
the United States initially appointed by the Company for a series of Debt
Securities will be named in the
8
<PAGE> 26
Prospectus Supplement. The Company may at any time designate additional paying
agents or rescind the designation of any paying agents, except that, if Debt
Securities of a series are issuable as Registered Securities, the Company will
be required to maintain at least one paying agent in each Place of Payment for
such series and, if Debt Securities of a series are issuable as Bearer
Securities, the Company will be required to maintain a paying agent in a Place
of Payment outside the United States where Debt Securities of such series and
any coupons appertaining thereto may be presented and surrendered for payment.
(Section 9.2.)
Unless otherwise provided in the applicable Prospectus Supplement, Debt
Securities in registered form will be transferable or exchangeable at the agency
of the Company maintained for such purpose as designated by the Company from
time to time. (Sections 3.5 and 9.2.) Debt Securities may be transferred or
exchanged without service charge, other than any tax or other governmental
charge imposed in connection therewith. (Section 3.5.)
GLOBAL DEBT SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more fully registered global securities (a "Registered Global
Security") that will be deposited with a depository (the "Depository") or with a
nominee for the Depository identified in the applicable Prospectus Supplement.
In such a case, one or more Registered Global Securities will be issued in a
denomination or aggregate denominations equal to the portion of the aggregate
principal amount of outstanding Debt Securities of the series to be represented
by such Registered Global Security or Securities. (Section 3.3 of each
Indenture.) Unless and until it is exchanged in whole or in part for Debt
Securities in definitive certificated form, a Registered Global Security may not
be registered for transfer or exchange except as a whole by the Depository for
such Registered Global Security to a nominee of such Depository or by a nominee
of such Depository to such Depository or another nominee of such Depository or
by such Depository or any such nominee to a successor Depository for such series
or a nominee of such successor Depository and except in the circumstances
described in the applicable Prospectus Supplement. (Section 3.5.)
The specific terms of the depository arrangement with respect to any
portion of a series of Debt Securities to be represented by a Registered Global
Security will be described in the applicable Prospectus Supplement. The Company
expects that the following provisions will apply to such depository
arrangements.
Ownership of beneficial interests in a Registered Global Security will be
limited to participants or persons that may hold interests through participants
(as such term is defined below). Upon the issuance of any Registered Global
Security, and the deposit of such Registered Global Security with or on behalf
of the Depository for such Registered Global Security, the Depository will
credit, on its book-entry registration and transfer system, the respective
principal amounts of the Debt Securities represented by such Registered Global
Security to the accounts of institutions ("participants") that have accounts
with the Depository or its nominee. The accounts to be credited will be
designated by the underwriters or agents engaging in the distribution of such
Debt Securities or by the Company, if such Debt Securities are offered and sold
directly by the Company. Ownership of beneficial interests by participants in
such Registered Global Security will be shown on, and the transfer of such
beneficial interests will be effected only through, records maintained by the
Depository for such Registered Global Security or by its nominee. Ownership of
beneficial interests in such Registered Global Security by persons that hold
through participants will be shown on, and the transfer of such beneficial
interests within such participants will be effected only through, records
maintained by such participants. The laws of some jurisdictions require that
certain purchasers of securities take physical delivery of such securities in
certificated form. The foregoing limitations and such laws may impair the
ability to transfer beneficial interests in such Registered Global Security.
So long as the Depository for a Registered Global Security, or its nominee,
is the registered owner of such Registered Global Security, such Depository or
such nominee, as the case may be, will be considered the sole owner or holder of
the Debt Securities represented by such Registered Global Security for all
purposes under the applicable Indenture. Unless otherwise specified in the
applicable Prospectus Supplement and except as specified below, owners of
beneficial interests in such Registered Global Security will not be entitled to
have Debt Securities of the series represented by such Registered Global
Security registered in their names, will not
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receive or be entitled to receive physical delivery of Debt Securities of such
series in certificated form and will not be considered the holders thereof for
any purposes under the relevant Indenture. (Section 3.8.) Accordingly, each
person owning a beneficial interest in such Registered Global Security must rely
on the procedures of the Depository and, if such person is not a participant, on
the procedures of the participant through which such person owns its interest,
to exercise any rights of a holder under the relevant Indenture. The Depository
may grant proxies and otherwise authorize participants to give or take any
request, demand, authorization, direction, notice, consent, waiver or other
action which a holder is entitled to give or take under the relevant Indenture.
The Company understands that, under existing industry practices, if the Company
requests any action of holders or if any owner of a beneficial interest in such
Registered Global Security desires to give any notice or take any action which a
holder is entitled to give or take under the relevant Indenture, the Depository
would authorize the participants to give such notice or take such action, and
such participants would authorize beneficial owners owning through such
participants to give such notice or take such action or would otherwise act upon
the instructions of beneficial owners owning through them.
Unless otherwise specified in the applicable Prospectus Supplement,
payments with respect to principal, premium, if any, and interest, if any, on
Debt Securities represented by a Registered Global Security registered in the
name of a Depository or its nominee will be made to such Depository or its
nominee, as the case may be, as the registered owner of such Registered Global
Security.
The Company expects that the Depositary for any Debt Securities represented
by a Registered Global Security, upon receipt of any payment of principal,
premium or interest, will immediately credit participants' accounts with
payments in amounts proportionate to their respective beneficial interests in
the principal amount of such Registered Global Security as shown on the records
of such Depositary. The Company also expects that payments by participants to
owners of beneficial interests in such Registered Global Security held through
such participants will be governed by standing instructions and customary
practices, as is now the case with the securities held for the accounts of
customers registered in "street names," and will be the responsibility of such
participants. None of the Company, the respective Trustees or any agent of the
Company or the respective Trustees shall have any responsibility or liability
for any aspect of the records relating to or payments made on account of
beneficial interests of a Registered Global Security, or for maintaining,
supervising or reviewing any records relating to such beneficial interests.
(Section 3.8.)
Unless otherwise specified in the applicable Prospectus Supplement, if the
Depository for any Debt Securities represented by a Registered Global Security
is at any time unwilling or unable to continue as Depository or ceases to be a
clearing agency registered under the Exchange Act and a duly registered
successor Depository is not appointed by the Company within 90 days, the Company
will issue such Debt Securities in definitive certificated form in exchange for
such Registered Global Security. In addition, the Company may at any time and in
its sole discretion determine not to have any of the Debt Securities of a series
represented by one or more Registered Global Securities and, in such event, will
issue Debt Securities of such series in definitive certificated form in exchange
for all of the Registered Global Security or Securities representing such Debt
Securities. (Section 3.5.)
The Debt Securities of a series may also be issued in whole or in part in
the form of one or more bearer global securities (a "Bearer Global Security")
that will be deposited with a depository, or with a nominee for such depository,
identified in the applicable Prospectus Supplement. Any such Bearer Global
Security may be issued in temporary or permanent form. (Section 3.4.) The
specific terms and procedures, including the specific terms of the depository
arrangement, with respect to any portion of a series of Debt Securities to be
represented by one or more Bearer Global Securities will be described in the
applicable Prospectus Supplement.
CONSOLIDATION, MERGER OR SALE BY THE COMPANY
The Company shall not consolidate with or merge into any other corporation
or sell its assets substantially as an entirety, unless: (i) the corporation
formed by such consolidation or into which the Company is merged or the
corporation which acquires its assets is organized in the United States; (ii)
the corporation formed by such consolidation or into which the Company is merged
or which acquires the Company's assets substantially
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<PAGE> 28
as an entirety expressly assumes all of the obligations of the Company under
each Indenture; (iii) immediately after giving effect to such transaction, no
Default or Event of Default shall have happened and be continuing, and (iv) if,
as a result of such transaction, properties or assets of the Company would
become subject to an encumbrance which would not be permitted by the terms of
any series of Debt Securities, the Company or the successor corporation, as the
case may be, shall take such steps as are necessary to secure such Debt
Securities equally and ratably with all indebtedness secured thereunder. Upon
any such consolidation, merger or sale, the successor corporation formed by such
consolidation, or into which the Company is merged or to which such sale is
made, shall succeed to, and be substituted for the Company under each Indenture.
(Section 7.1.)
EVENTS OF DEFAULT, NOTICE AND CERTAIN RIGHTS ON DEFAULT
Each Indenture provides that, if an Event of Default specified therein
occurs with respect to the Debt Securities of any series and is continuing, the
Trustee for such series or the holders of 25% in aggregate principal amount of
all of the outstanding Debt Securities of that series, by written notice to the
Company (and to the Trustee for such series, if notice is given by such holders
of Debt Securities), may declare the principal of (or, if the Debt Securities of
that series are Original Issue Discount Securities or Indexed Securities, such
portion of the principal amount specified in the Prospectus Supplement) and
accrued interest on all the Debt Securities of that series to be due and payable
(provided, with respect to any Debt Securities issued under the Subordinated
Indenture, that the payment of principal and interest on such Debt Securities
shall remain subordinated to the extent provided in Article 12 of the
Subordinated Indenture). (Section 5.2.)
Events of Default with respect to Debt Securities of any series are defined
in each Indenture as being: (a) default for 30 days in payment of any interest
on any Debt Security of that series or any coupon appertaining thereto or any
additional amount payable with respect to Debt Securities of such series as
specified in the applicable Prospectus Supplement when due; (b) default in
payment of principal, or premium, if any, at maturity or on redemption or
otherwise, or in the making of a mandatory sinking fund payment of any Debt
Securities of that series when due; (c) default for 60 days after notice to the
Company by the Trustee for such series, or by the holders of 25% in aggregate
principal amount of the Debt Securities of such series then outstanding, in the
performance of any other agreement in the Debt Securities of that series, in the
Indenture or in any supplemental indenture or board resolution referred to
therein under which the Debt Securities of that series may have been issued; (d)
default resulting in acceleration of other indebtedness of the Company for
borrowed money where the aggregate principal amount so accelerated exceeds $25
million and such acceleration is not rescinded or annulled within 30 days after
the written notice thereof to the Company by the Trustee or to the Company and
the Trustee by the holders of 25% in aggregate principal amount of the Debt
Securities of such series then outstanding, provided that such Event of Default
will be remedied, cured or waived if the default that resulted in the
acceleration of such other indebtedness is remedied, cured or waived; and (e)
certain events of bankruptcy, insolvency or reorganization of the Company.
(Section 5.1.) The definition of "Event of Default" in each Indenture
specifically excludes a default under a secured debt under which the obligee has
recourse (exclusive of recourse for ancillary matters such as environmental
indemnities, misapplication of funds, costs of enforcement, etc.) only to the
collateral pledged for repayment, and where the fair market value of such
collateral does not exceed two percent of Total Assets (as defined in the
Indenture) at the time of the default. Events of Default with respect to a
specified series of Debt Securities may be added to the Indenture and, if so
added, will be described in the applicable Prospectus Supplement. (Sections 3.1
and 5.1(7).)
Each Indenture provides that the Trustee will, within 90 days after the
occurrence of a Default with respect to the Debt Securities of any series, give
to the holders of the Debt Securities of that series notice of all Defaults
known to it unless such Default shall have been cured or waived; provided that
except in the case of a Default in payment on the Debt Securities of that
series, the Trustee may withhold the notice if and so long as a committee of its
Responsible Officers in good faith determines that withholding such notice is in
the interests of the holders of the Debt Securities of that series. (Section
6.6.) "Default" means any event which is, or after notice or passage of time or
both, would be, an Event of Default. (Section 1.1.)
Each Indenture provides that the holders of a majority in aggregate
principal amount of the Debt Securities of each series affected (with each such
series voting as a class) may, subject to certain limited
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<PAGE> 29
conditions, direct the time, method and place of conducting any proceeding for
any remedy available to the Trustee for such series, or exercising any trust or
power conferred on such Trustee. (Section 5.8.)
Each Indenture includes a covenant that the Company will file annually with
the Trustee a certificate as to the Company's compliance with all conditions and
covenants of such Indenture. (Section 9.5.)
The holders of a majority in aggregate principal amount of any series of
Debt Securities by notice to the Trustee for such series may waive, on behalf of
the holders of all Debt Securities of such series, any past Default or Event of
Default with respect to that series and its consequences except a Default or
Event of Default in the payment of the principal of, premium, if any, or
interest, if any, on any Debt Security, and except in respect of an Event of
Default resulting from the breach of a covenant or provision of either Indenture
which, pursuant to the applicable Indenture, cannot be amended or modified
without the consent of the holders of each outstanding Debt Security of such
series affected. (Section 5.7.)
MODIFICATION OF THE INDENTURES
Each Indenture contains provisions permitting the Company and the Trustee
to enter into one or more supplemental indentures without the consent of the
holders of any of the Debt Securities in order (i) to evidence the succession of
another corporation to the Company and the assumption of the covenants of the
Company by a successor to the Company; (ii) to add to the covenants of the
Company or surrender any right or power of the Company; (iii) to add additional
Events of Default with respect to any series of Debt Securities; (iv) to add or
change any provisions to such extent as necessary to permit or facilitate the
issuance of Debt Securities in bearer form; (v) to change or eliminate any
provision affecting only Debt Securities not yet issued; (vi) to secure the Debt
Securities; (vii) to establish the form or terms of Debt Securities; (viii) to
evidence and provide for successor Trustees; (ix) if allowed without penalty
under applicable laws and regulations, to permit payment in respect of Debt
Securities in bearer form in the United States; (x) to correct any defect or
supplement any inconsistent provisions or to make any other provisions with
respect to matters or questions arising under such Indenture, provided that such
action does not adversely affect the interests of any holder of Debt Securities
of any series; or (xi) to cure any ambiguity or correct any mistake. The
Subordinated Indenture also permits the Company and the Trustee thereunder to
enter into such supplemental indentures to modify the subordination provisions
contained in the Subordinated Debenture except in a manner adverse to any
outstanding Debt Securities. (Section 8.1.)
Each Indenture also contains provisions permitting the Company and the
Trustee, with the consent of the holders of a majority in aggregate principal
amount of the outstanding Debt Securities affected by such supplemental
indenture (with the Debt Securities of each series voting as a class), to
execute supplemental indentures adding any provisions to or changing or
eliminating any of the provisions of such Indenture or any supplemental
indenture or modifying the rights of the holders of Debt Securities of such
series, except that, without the consent of the holder of each Debt Security so
affected, no such supplemental indenture may: (i) change the time for payment of
principal or premium, if any, or interest on any Debt Security; (ii) reduce the
principal of, or any installment of principal of, or premium, if any, or
interest on any Debt Security, or change the manner in which the amount of any
of the foregoing is determined; (iii) reduce the amount of premium, if any,
payable upon the redemption of any Debt Security; (iv) reduce the amount of
principal payable upon acceleration of the maturity of any Original Issue
Discount or Index Security; (v) change the currency or currency unit in which
any Debt Security or any premium or interest thereon is payable; (vi) impair the
right to institute suit for the enforcement of any payment on or with respect to
any Debt Security; (vii) reduce the percentage in principal amount of the
outstanding Debt Securities affected thereby the consent of whose holders is
required for modification or amendment of such Indenture or for waiver of
compliance with certain provisions of the Indenture or for waiver of certain
defaults; (viii) change the obligation of the Company to maintain an office or
agency in the places and for the purposes specified in such Indenture; (ix)
modify the provisions relating to the subordination of outstanding Debt
Securities of any series in a manner adverse to the holders thereof; or (x)
modify the provisions relating to waiver of certain defaults or any of the
foregoing provisions. (Section 8.2.)
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SUBORDINATION UNDER THE SUBORDINATED INDENTURE
In the Subordinated Indenture, the Company will covenant and agree that any
Subordinated Debt Securities issued thereunder are subordinate and junior in
right of payment to the prior payment in full of all Senior Indebtedness to the
extent provided in the Subordinated Indenture. (Section 12.1 of the Subordinated
Indenture.) The Subordinated Indenture defines the term "Senior Indebtedness" as
the principal, premium, if any, and interest on: (i) all indebtedness of the
Company, whether outstanding on the date of the issuance of Subordinated Debt
Securities or thereafter created, incurred or assumed, which is for money
borrowed, or evidenced by a note or similar instrument given in connection with
the acquisition of any business, properties or assets, including securities;
(ii) any indebtedness of others of the kinds described in the preceding clause
(i) for the payment of which the Company is responsible or liable as guarantor
or otherwise; and (iii) amendments, renewals, extensions and refundings of any
such indebtedness, unless in any instrument or instruments evidencing or
securing such indebtedness or pursuant to which the same is outstanding, or in
any such amendment, renewal, extension or refunding, it is expressly provided
that such indebtedness is not superior in right of payment to Subordinated Debt
Securities. The Senior Indebtedness shall continue to be Senior Indebtedness and
entitled to the benefits of the subordination provisions irrespective of any
amendment, modification or waiver of any term of the Senior Indebtedness or
extension or renewal of the Senior Indebtedness. (Section 12.2 of the
Subordinated Indenture.)
If (i) the Company defaults in the payment of any principal, or premium, if
any, or interest on any Senior Indebtedness when the same becomes due and
payable, whether at maturity or at a date fixed for prepayment or declaration or
otherwise or (ii) an event of default occurs with respect to any Senior
Indebtedness permitting the holders thereof to accelerate the maturity thereof
and written notice of such event of default (requesting that payments on
Subordinated Debt Securities cease) is given to the Company by the holders of
Senior Indebtedness, then unless and until such default in payment or event of
default shall have been cured or waived or shall have ceased to exist, no direct
or indirect payment (in cash, property or securities, by set-off or otherwise)
shall be made or agreed to be made on account of the Subordinated Debt
Securities or interest thereon or in respect of any repayment, redemption,
retirement, purchase or other acquisition of Subordinated Debt Securities.
(Section 12.4 of the Subordinated Indenture.)
In the event of (i) any insolvency, bankruptcy, receivership, liquidation,
reorganization, readjustment, composition or other similar proceeding relating
to the Company, its creditors or its property, (ii) any proceeding for the
liquidation, dissolution or other winding-up of the Company, voluntary or
involuntary, whether or not involving insolvency or bankruptcy proceedings,
(iii) any assignment by the Company for the benefit of creditors or (iv) any
other marshalling of the assets of the Company, all Senior Indebtedness
(including, without limitation, interest accruing after the commencement of any
such proceeding, assignment or marshalling of assets) shall first be paid in
full before any payment or distribution, whether in cash, securities or other
property, shall be made by the Company on account of Subordinated Debt
Securities. In any such event, any payment or distribution, whether in cash,
securities or other property (other than securities of the Company or any other
corporation provided for by a plan of reorganization or readjustment, the
payment of which is subordinate, at least to the extent provided in the
subordination provisions of the Subordinated Indenture with respect to the
indebtedness evidenced by Subordinated Debt Securities, to the payment of all
Senior Indebtedness at the time outstanding and to any securities issued in
respect thereof under any such plan of reorganization or readjustment), which
would otherwise (but for the subordination provisions) be payable or deliverable
in respect of Subordinated Debt Securities (including any such payment or
distribution which may be payable or deliverable by reason of the payment of any
other indebtedness of the Company being subordinated to the payment of
Subordinated Debt Securities) shall be paid or delivered directly to the holders
of Senior Indebtedness, or to their representative or trustee, in accordance
with the priorities then existing among such holders until all Senior
Indebtedness shall have been paid in full. (Section 12.3 of the Subordinated
Indenture.) No present or future holder of any Senior Indebtedness shall be
prejudiced in the right to enforce subordination of the indebtedness evidenced
by Subordinated Debt Securities by any act or failure to act on the part of the
Company. (Section 12.9 of the Subordinated Indenture.)
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<PAGE> 31
Senior Indebtedness shall not be deemed to have been paid in full unless
the holders thereof shall have received cash, securities or other property equal
to the amount of such Senior Indebtedness then outstanding. Upon the payment in
full of all Senior Indebtedness, the holders of Subordinated Debt Securities
shall be subrogated to all the rights of any holders of Senior Indebtedness to
receive any further payments or distributions applicable to the Senior
Indebtedness until all Subordinated Debt Securities shall have been paid in
full, and such payments or distributions received by any holder of Subordinated
Debt Securities, by reason of such subrogation, of cash, securities or other
property which otherwise would be paid or distributed to the holders of Senior
Indebtedness, shall, as between the Company and its creditors other than the
holders of Senior Indebtedness, on the one hand, and the holders of Subordinated
Debt Securities, on the other, be deemed to be a payment by the Company on
account of Senior Indebtedness, and not on account of Subordinated Debt
Securities. (Section 12.7 of the Subordinated Indenture.)
The Subordinated Indenture provides that the foregoing subordination
provisions, insofar as they relate to any particular issue of Subordinated Debt
Securities, may be changed prior to such issuance. Any such change would be
described in the applicable Prospectus Supplement relating to such Subordinated
Debt Securities.
DEFEASANCE AND COVENANT DEFEASANCE
If indicated in the applicable Prospectus Supplement, the Company may elect
either (i) to defease and be discharged from any and all obligations with
respect to the Debt Securities of or within any series (except as otherwise
provided in the relevant Indenture) ("defeasance") or (ii) to be released from
its obligations with respect to certain covenants applicable to the Debt
Securities of or within any series ("covenant defeasance"), upon the deposit
with the relevant Trustee (or other qualifying trustee), in trust for such
purpose, of money and/or Government Obligations which through the payment of
principal and interest in accordance with their terms will provide money in an
amount sufficient, without reinvestment, to pay the principal of and any premium
or interest on such Debt Securities to Maturity or redemption, as the case may
be, and any mandatory sinking fund or analogous payments thereon. As a condition
to defeasance or covenant defeasance, the Company must deliver to the Trustee an
Opinion of Counsel to the effect that the Holders of such Debt Securities will
not recognize income, gain or loss for Federal income tax purposes as a result
of such defeasance or covenant defeasance and will be subject to Federal income
tax on the same amounts and in the same manner and at the same times as would
have been the case if such defeasance or covenant defeasance had not occurred.
Such Opinion of Counsel, in the case of defeasance under clause (i) above, must
refer to and be based upon a ruling of the Internal Revenue Service or a change
in applicable Federal income tax law occurring after the date of the relevant
Indenture. (Article 4.) If indicated in the applicable Prospectus Supplement, in
addition to obligations of the United States or an agency or instrumentality
thereof, Government Obligations may include obligations of the government or an
agency or instrumentality of the government issuing the currency or currency
unit in which Debt Securities of such series are payable. (Section 3.1.)
In addition, with respect to the Subordinated Indenture, in order to be
discharged no event or condition shall exist that, pursuant to certain
provisions described under "-- Subordination under the Subordinated Indenture"
above, would prevent the Company from making payments of principal of (and
premium, if any) and interest on Subordinated Debt Securities at the date of the
irrevocable deposit referred to above. (Section 4.6(j) of the Subordinated
Indenture.)
The Company may exercise its defeasance option with respect to such Debt
Securities notwithstanding its prior exercise of its covenant defeasance option.
If the Company exercises its defeasance option, payment of such Debt Securities
may not be accelerated because of a Default or an Event of Default. (Section
4.4.) If the Company exercises its covenant defeasance option, payment of such
Debt Securities may not be accelerated by reason of a Default or an Event of
Default with respect to the covenants to which such covenant defeasance is
applicable. However, if such acceleration were to occur by reason of another
Event of Default, the realizable value at the acceleration date of the money and
Government Obligations in the defeasance trust could be less than the principal
and interest then due on such Debt Securities, in that the required deposit in
the defeasance trust is based upon scheduled cash flow rather than market value,
which will vary depending upon interest rates and other factors.
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THE TRUSTEES
LTCB Trust Company will be the Trustee under the Senior Indenture. Fleet
National Bank will be the Trustee under the Subordinated Indenture. The Company
may also maintain banking and other commercial relationships with each of the
Trustees and their affiliates in the ordinary course of business.
DESCRIPTION OF CAPITAL STOCK
At May 16, 1997, the authorized capital stock of the Company was
1,020,000,000 shares, consisting of:
(a) 20,000,000 shares of Preferred Stock, of which 2,177,500 shares of
Preferred Redeemable Increased Dividend Equity Securities, 7% PRIDES,
were outstanding; and
(b) 1,000,000,000 shares of Common Stock, of which 179,880,594 shares were
outstanding.
In general, the classes of authorized capital stock are afforded
preferences with respect to dividends and liquidation rights in the order listed
above. The Board of Directors of the Company is empowered, without approval of
the shareholders, to cause the Preferred Stock to be issued in one or more
series, with the numbers of shares of each series and the rights, preferences
and limitations of each series to be determined by it including, without
limitation, the dividend rights, conversion rights, redemption rights and
liquidation preferences, if any, of any wholly unissued series of Preferred
Stock (or of the entire class of Preferred Stock if none of such shares have
been issued), the number of shares constituting each such series and the terms
and conditions of the issue thereof. The descriptions set forth below do not
purport to be complete and are qualified in their entirety by reference to the
Amended and Restated Articles of Incorporation of the Company, as amended (the
"Articles of Incorporation").
The Prospectus Supplement relating to an offering of Common Stock will
describe terms relevant thereto, including the number of shares offered, the
initial offering price, market price and dividend information.
The applicable Prospectus Supplement will describe the following terms of
any Preferred Stock in respect of which this Prospectus is being delivered (to
the extent applicable to such Preferred Stock): (i) the specific designation,
number of shares, seniority and purchase price; (ii) any liquidation preference
per share; (iii) any date of maturity; (iv) any redemption, repayment or sinking
fund provisions; (v) any dividend rate or rates and the dates on which any such
dividends will be payable (or the method by which such rates or dates will be
determined); (vi) any voting rights; (vii) if other than the currency of the
United States of America, the currency or currencies, including composite
currencies, in which such Preferred Stock is denominated and/or in which
payments will or may be payable; (viii) the method by which amounts in respect
of such Preferred Stock may be calculated and any commodities, currencies or
indices, or value, rate or price, relevant to such calculation; (ix) whether the
Preferred Stock is convertible or exchangeable and, if so, the securities or
rights into which such Preferred Stock is convertible or exchangeable (which may
include other Preferred Stock, Debt Securities, Common Stock or other securities
or rights of the Company (including rights to receive payment in cash or
securities based on the value, rate or price of one or more specified
commodities, currencies or indices) or a combination of the foregoing), and the
terms and conditions upon which such conversions or exchanges will be effected,
including the initial conversion or exchange prices or rates, the conversion or
exchange period and any other related provisions; (x) the place or places where
dividends and other payments on the Preferred Stock will be payable; and (xi)
any additional voting, dividend, liquidation, redemption and other rights,
preferences, privileges, limitations and restrictions.
As described under "Description of Depositary Shares", the Company may, at
its option, elect to offer Depositary Shares evidenced by depositary receipts
("Depositary Receipts"), each representing an interest (to be specified in the
applicable Prospectus Supplement relating to the particular series of the
Preferred Stock) in a share of the particular series of the Preferred Stock
issued and deposited with a Preferred Stock Depositary (as defined herein).
All shares of Preferred Stock offered hereby, or issuable upon conversion,
exchange or exercise of Securities, will, when issued, be fully paid and
non-assessable.
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COMMON STOCK
Dividends. Except as provided below, holders of Common Stock are entitled
to receive dividends and other distributions in cash, stock or property of the
Company, when, as and if declared by the Board of Directors out of assets or
funds of the Company legally available therefor and shall share equally on a per
share basis in all such dividends and other distributions (subject to the rights
of holders of Preferred Stock).
Voting Rights. At every meeting of shareholders, every holder of Common
Stock is entitled to one vote per share. Subject to any voting rights which may
be granted to holders of Preferred Stock any action submitted to shareholders is
approved if the number of votes cast in favor of such action exceeds the number
of votes against, except where other provision is made by law and subject to
applicable quorum requirements.
Liquidation Rights. In the event of any liquidation, dissolution or
winding-up of the business of the Company, whether voluntary or involuntary (any
such event, a "Liquidation"), the holders of Common Stock are entitled to share
equally in the assets available for distribution after payment of all
liabilities and provision for the liquidation preference of any shares of
Preferred Stock then outstanding.
Miscellaneous. The holders of Common Stock have no preemptive rights,
cumulative voting rights, subscription rights, or conversion rights and the
Common Stock is not subject to redemption.
The transfer agent and registrar with respect to the Common Stock and the
PRIDES is First Union National Bank of North Carolina.
All shares of Common Stock offered hereby, or issuable upon conversion,
exchange or exercise of Securities, will, when issued, be fully paid and
non-assessable. The Common Stock is traded on the New York Stock Exchange under
the symbol "CNC".
PRIDES
General. The PRIDES are shares of convertible preferred stock and rank
prior to the Common Stock as to payment of dividends and distribution of assets
upon liquidation. The shares of PRIDES mandatorily convert into shares of Common
Stock on February 1, 2000, (the "Mandatory Conversion Date"), and the Company
has the option to redeem the shares of PRIDES, in whole or in part, at any time
and from time to time on or after February 1, 1999 and prior to the Mandatory
Conversion Date pursuant to the terms described below and payable in shares of
Common Stock. In addition, the shares of PRIDES are convertible into shares of
Common Stock at the option of the holder at any time prior to the Mandatory
Conversion Date as set forth below.
Dividends. Holders of shares of PRIDES are entitled to receive annual
cumulative dividends at a rate per annum of 7% of the stated liquidation
preference (equivalent to $4.279 per each share of PRIDES) payable quarterly in
arrears on each February 1, May 1, August 1, and November 1.
Mandatory Conversion. On the Mandatory Conversion Date, unless previously
redeemed or converted, each outstanding share of PRIDES will mandatorily convert
into (i) two shares of Common Stock, subject to adjustment in certain events,
and (ii) the right to receive cash in an amount equal to all accrued and unpaid
dividends thereon (other than previously declared dividends payable to a holder
of record as of a prior date).
Optional Redemption. Shares of PRIDES are not redeemable prior to February
1, 1999. At any time and from time to time on or after February 1, 1999 and
ending immediately prior to the Mandatory Conversion Date, the Company may
redeem any or all of the outstanding shares of PRIDES. Upon any such redemption,
each holder will receive, in exchange for each share of PRIDES, the number of
shares of Common Stock equal to the Call Price (which is the sum of (i) $62.195,
declining after February 1, 1999 to $61.125 until the Mandatory Conversation
Date and (ii) all accrued and unpaid dividends thereon (other than previously
declared dividends payable to a holder of record as of a prior date)) divided by
the current market price on the applicable date of determination, but in no
event less than 3.42 shares of Common Stock, subject to adjustment. The number
of shares of Common Stock to be delivered in payment of the applicable Call
Price will be determined on the basis of the current market price of the Common
Stock prior to the announcement of the redemption.
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Conversion at the Option of the Holder. At any time prior to the Mandatory
Conversion Date, unless previously redeemed, each share of PRIDES is convertible
at the option of the holder thereof into 3.42 shares of Common Stock (the
"Optional Conversion Rate"), equivalent to the conversion price of $17.8728 per
share of Common Stock, subject to adjustment as described herein. The right of
holders to convert shares of PRIDES called for redemption will terminate
immediately prior to the close of business on the redemption date.
Voting Rights. The holders of shares of PRIDES will have the right with
the holders of Common Stock to vote in the election of directors and upon each
other matter coming before any meeting of the holders of Common Stock on the
basis of 4/5 of one vote for each share of PRIDES. On such matters, the holders
of shares of PRIDES and the holders of Common Stock will vote together as one
class except as otherwise provided by law or the Company's Articles of
Incorporation. In addition, (i) whenever dividends on the shares of PRIDES or
any other series of the Company's preferred stock with like voting rights are in
arrears and unpaid for six quarterly dividend periods, and in certain other
circumstances, the holders of the shares of PRIDES (voting separately as a class
with the holders of all other series of the Company's preferred stock with like
voting rights that are exercisable) will be entitled to vote, on the basis of
one vote for each share of PRIDES, for the election of two directors of the
Company, such directors to be in addition to the number of directors
constituting the Board of Directors immediately prior to the accrual of such
right, and (ii) the holders of the shares of PRIDES may have voting rights with
respect to certain alterations of the Company's Articles of Incorporation and
certain other matters, voting on the same basis or separately as a series.
Liquidation Preference and Ranking. The shares of PRIDES rank prior to the
Common Stock as to payment of dividends and distribution of assets upon
liquidation. The liquidation preference of each share of PRIDES is an amount
equal to the sum of (i) $61.125 per share and (ii) all accrued and unpaid
dividends thereon.
CERTAIN PROVISIONS OF THE ARTICLES OF INCORPORATION AND BY-LAWS OF CONSECO
Certain provisions of the Articles of Incorporation and the Code of By-laws
of the Company (the "By-laws") may make it more difficult to effect a change in
control of the Company if the Board of Directors determines that such action
would not be in the best interests of the shareholders. It could be argued,
contrary to the belief of the Board of Directors, that such provisions are not
in the best interests of the shareholders to the extent that they will have the
effect of tending to discourage possible takeover bids, which might be at prices
involving a premium over then recent market quotations for the Common Stock. The
most important of those provisions are described below.
The Articles of Incorporation authorize the establishment of a classified
Board of Directors pursuant to the By-laws. The By-laws, in turn, provide that
the Directors serve staggered three-year terms, with the members of only one
class being elected in any year.
A classified Board of Directors may increase the difficulty of removing
incumbent directors, providing such directors with enhanced ability to retain
their positions. A classified Board of Directors may also make the acquisition
of control of the Company by a third party by means of a proxy contest more
difficult. In addition, the classification may make it more difficult to replace
a majority of directors for business reasons unrelated to a change in control.
The Articles of Incorporation provide that holders of the Company's voting
stock shall not be entitled to vote on certain business transactions (defined to
include, among other things, certain mergers, consolidations, sales, leases,
transfers or other dispositions of a substantial part of the Company's assets)
with certain related persons (which includes persons beneficially owning more
than 10% of the Company's outstanding voting stock), nor may such business
combination transactions be effected, unless (i) the relevant business
combination shall have been approved by two-thirds of the continuing directors
or (ii) the aggregate amount of the cash and the fair value of any consideration
other than cash to be received by any holder of the Company's Common Stock or
Preferred Stock in the business combination for each such share of Common Stock
or Preferred Stock shall be at least equal to the highest per share price paid
by the related person in
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order to acquire any shares of Common Stock or Preferred Stock, as the case may
be, beneficially owned by such related person.
As discussed above, Preferred Stock may be issued from time to time in one
or more series with such rights, preferences, limitations and restrictions as
may be determined by the Board of Directors. The issuance of Preferred Stock
could be used, under certain circumstances, as a method of delaying or
preventing a change of control of the Company and could have a detrimental
effect on the rights of holders of Common Stock, including loss of voting
control.
The provisions of the Articles of Incorporation regarding the classified
Board of Directors and certain business combination transactions may not be
amended without the affirmative approval of holders of not less than 80% of the
outstanding voting stock of the Company.
The By-laws may be amended by majority vote of the Board of Directors.
CERTAIN PROVISIONS OF CORPORATE AND INSURANCE LAWS
In addition to the Articles of Incorporation and By-laws, certain
provisions of Indiana law may delay, deter or prevent a merger, tender offer or
other takeover attempt of the Company.
Under the Indiana Business Corporation Law (the "IBCL"), a director may, in
considering the best interests of a corporation, consider the effects of any
action on shareholders, employees, suppliers and customers of the corporation,
on communities in which offices or other facilities of the corporation are
located, and any other factors the director considers pertinent.
The IBCL provides that no business combination (defined to include certain
mergers, sales of assets, sales of 5% or more of outstanding stock, loans,
recapitalizations or liquidations or dissolutions) involving a corporation and
an interested shareholder (defined to include any holder of 10% or more of such
corporation's voting stock) may be entered into unless (1) it has been approved
by the board of directors of the corporation or (2) (a) five years have expired
since the acquisition of shares of the corporation by the interested
shareholder, (b) all requirements of the corporation's articles of incorporation
relating to business combinations have been satisfied and (c) either (i) a
majority of shareholders of the corporation (excluding the interested
shareholder) approve the business combination or (ii) all shareholders are paid
fair value (as defined in the statute) for their stock. However, such law does
not restrict any offer to purchase all of a corporation's shares.
The IBCL also provides that when a target corporation (such as the
Company), incorporated in Indiana and having its principal place of business,
principal office or substantial assets in Indiana, has a certain threshold of
ownership by Indiana residents, any acquisition which, together with its
previous holdings, gives the acquiror at least 20% of the target's voting stock
triggers a shareholder approval mechanism. If the acquiror files a statutorily
required disclosure statement, the target's management has 50 days within which
to hold a special meeting of shareholders at which all disinterested
shareholders of the target (those not affiliated with the acquiror or any
officer or inside director of the target) consider and vote upon whether the
acquiror shall have voting rights with respect to the shares of the target held
by it. Without shareholder approval, the shares acquired by the acquiror have no
voting rights. If the acquiror fails to file the statutorily required disclosure
statement, the target can redeem the acquiror's shares at a price to be
determined according to procedures devised by the target. In order for these
provisions of the IBCL not to apply to a particular Indiana company, the company
must affirmatively so provide in its articles of incorporation or bylaws.
In addition, the insurance laws and regulations of the jurisdictions in
which the Company's insurance subsidiaries do business may impede or delay a
business combination involving the Company.
DESCRIPTION OF DEPOSITARY SHARES
The description set forth below of certain provisions of the Deposit
Agreement (as defined below) and of the Depositary Shares and Depositary
Receipts summarizes the material terms of the Deposit Agreement and of the
Depositary Shares and Depositary Receipts and is qualified in its entirety by
reference to the form of
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Deposit Agreement and form of Depositary Receipts relating to each series of the
Preferred Stock, as well as the Articles of Incorporation or any required
amendment thereto describing the applicable series of Preferred Stock.
GENERAL
The Company may, as its option, elect to have shares of Preferred Stock be
represented by Depositary Shares. The shares of any series of the Preferred
Stock underlying the Depositary Shares will be deposited under a separate
deposit agreement (the "Deposit Agreement") to be entered into by the Company
and a bank or trust company selected by the Company (the "Preferred Stock
Depositary") a form of which will be filed as an exhibit to a Current Report on
Form 8-K. The Prospectus Supplement relating to a series of Depositary Shares
will set forth the name and address of the Preferred Stock Depositary. Subject
to the terms of the Deposit Agreement, each owner of a Depositary Share will be
entitled, proportionately, to all the rights, preferences and privileges of the
Preferred Stock represented thereby (including dividend, voting, redemption,
conversion, exchange and liquidation rights).
The Depositary Shares will be evidenced by Depositary Receipts issued
pursuant to the Deposit Agreement, each of which will represent the fractional
interest in the number of shares of a particular series of the Preferred Stock
described in the applicable Prospectus Supplement.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Preferred Stock Depositary will distribute all cash dividends or other
cash distributions in respect of the series of Preferred Stock represented by
the Depositary Shares to the record holders of Depositary Receipts in
proportion, insofar as possible, to the number of Depositary Shares owned by
such holders. The Depositary, however, will distribute only such amount as can
be distributed without attributing to any Depositary Share a fraction of one
cent, and any balance not so distributed will be added to and treated as part of
the next sum received by the Depositary for distribution to record holders of
Depositary Receipts then outstanding.
In the event of a distribution other than in cash in respect of the
Preferred Stock, the Preferred Stock Depositary will distribute property
received by it to the record holders of Depositary Receipts in proportion,
insofar as possible, to the number of Depositary Shares owned by such holders,
unless the Preferred Stock Depositary determines (after consultation with the
Company) that it is not feasible to make such distribution, in which case the
Preferred Stock Depositary may, with the approval of the Company, adopt such
method as it deems equitable and practicable for the purpose of effecting such
distribution, including a public or private sale, of such property, and
distribution of the net proceeds from such sale to such holders.
The amount so distributed to record holders of Depositary Receipts in any
of the foregoing cases will be reduced by any amount required to be withheld by
the Company or the Preferred Stock Depositary on account of taxes.
CONVERSION AND EXCHANGE
If any series of Preferred Stock underlying the Depositary Shares is
subject to provisions relating to its conversion or exchange, as set forth in
the applicable Prospectus Supplement relating thereto, each record holder of
Depositary Receipts will have the right or obligation to convert or exchange the
Depositary Shares represented by such Depositary Receipts pursuant to the terms
thereof.
REDEMPTION OF DEPOSITARY SHARES
If any series of Preferred Stock underlying the Depositary Shares is
subject to redemption, the Depositary Shares will be redeemed from the proceeds
received by the Preferred Stock Depositary resulting from the redemption, in
whole or in part, of the Preferred Stock held by the Preferred Stock Depositary.
Whenever the Company redeems Preferred Stock from the Preferred Stock
Depositary, the Preferred Stock Depositary will redeem as of the same redemption
date a proportionate number of Depositary Shares representing the shares
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of Preferred Stock that were redeemed. If less than all the Depositary Shares
are to be redeemed, the Depositary Shares to be redeemed will be selected by lot
or pro rata as may be determined by the Company.
After the date fixed for redemption, the Depositary Shares so called for
redemption will no longer be deemed to be outstanding and all rights of the
holders of the Depositary Shares will cease, except the right to receive the
redemption price upon such redemption. Any funds deposited by the Company with
the Preferred Stock Depositary for any Depositary Shares which the holders
thereof fail to redeem shall be returned to the Company after a period of two
years from the date such funds are so deposited.
VOTING
Upon receipt of notice of any meeting at which the holders of any shares of
Preferred Stock underlying the Depositary Shares are entitled to vote, the
Preferred Stock Depositary will mail the information contained in such notice to
the record holders of the Depositary Receipts. Each record holder of such
Depositary Receipts on the record date (which will be the same date as the
record date for the Preferred Stock) will be entitled to instruct the Preferred
Stock Depositary as to the exercise of the voting rights pertaining to the
number of shares of Preferred Stock underlying such holder's Depositary Shares.
The Preferred Stock Depositary will endeavor, insofar as practicable, to vote
the number of shares of Preferred Stock underlying such Depositary Shares in
accordance with such instructions, and the Company will agree to take all
reasonable action which may be deemed necessary by the Preferred Stock
Depositary in order to enable the Preferred Stock Depositary to do so. The
Preferred Stock Depositary will abstain from voting any of the Preferred Stock
to the extent it does not receive specific written instructions from holders of
Depositary Receipts representing such Preferred Stock.
RECORD DATE
Whenever (i) any cash dividend or other cash distribution shall become
payable, any distribution other than cash shall be made, or any rights,
preferences or privileges shall be offered with respect to the Preferred Stock,
or (ii) the Preferred Stock Depositary shall receive notice of any meeting at
which holders of Preferred Stock are entitled to vote or of which holders of
Preferred Stock are entitled to notice, or of the mandatory conversion of, or
any election on the part of the Company to call for the redemption of, any
Preferred Stock, the Preferred Stock Depositary shall in each such instance fix
a record date (which shall be the same as the record date for the Preferred
Stock) for the determination of the holders of Depositary Receipts (x) that
shall be entitled to receive such dividend, distribution, rights, preferences or
privileges or the net proceeds of the sale thereof or (y) that shall be entitled
to give instructions for the exercise of voting rights at any such meeting or to
receive notice of such meeting or of such redemption or conversion, subject to
the provisions of the Deposit Agreement.
WITHDRAWAL OF PREFERRED STOCK
Upon surrender of Depositary Receipts at the principal office of the
Preferred Stock Depositary, upon payment of any unpaid amount due the Preferred
Stock Depositary, and subject to the terms of the Deposit Agreement, the owner
of the Depositary Shares evidenced thereby is entitled to delivery of the number
of whole shares of Preferred Stock and all money and other property, if any,
represented by such Depositary Shares. Partial shares of Preferred Stock will
not be issued. If the Depositary Receipts delivered by the holder evidence a
number of Depositary Shares in excess of the number of Depositary Shares
representing the number of whole shares of Preferred Stock to be withdrawn, the
Preferred Stock Depositary will deliver to such holder at the same time a new
Depositary Receipt evidencing such excess number of Depositary Shares. Holders
of Preferred Stock thus withdrawn will not thereafter be entitled to deposit
such shares under the Deposit Agreement or to receive Depositary Receipts
evidencing Depositary Shares therefor.
AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT
The Deposit Agreement will provide that the form of Depositary Receipt and
any provision of the Deposit Agreement may at any time be amended by agreement
between the Company and the Preferred Stock
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Depositary. However, any amendment which imposes or increases any fees, taxes or
other charges payable by the holders of Depositary Receipts (other than taxes
and other governmental charges, fees and other expenses payable by such holders
as stated under "Charges of Preferred Stock Depositary"), or which otherwise
prejudices any substantial existing right of holders of Depositary Receipts,
will not take effect as to outstanding Depositary Receipts until the expiration
of 90 days after notice of such amendment has been mailed to the record holders
of outstanding Depositary Receipts.
Whenever so directed by the Company, the Preferred Stock Depositary will
terminate the Deposit Agreement by mailing notice of such termination to the
record holders of all Depositary Receipts then outstanding at least 30 days
prior to the date fixed in such notice for such termination. The Preferred Stock
Depositary may likewise terminate the Deposit Agreement if at any time 45 days
shall have expired after the Preferred Stock Depositary shall have delivered to
the Company a written notice of its election to resign and a successor
depositary shall not have been appointed and accepted its appointment. If any
Depositary Receipts remain outstanding after the date of termination, the
Preferred Stock Depositary thereafter will discontinue the transfer of
Depositary Receipts, will suspend the distribution of dividends to the holders
thereof, and will not give any further notices (other than notice of such
termination) or perform any further acts under the Deposit Agreement except as
provided below and except that the Preferred Stock Depositary will continue (i)
to collect dividends on the Preferred Stock and any other distributions with
respect thereto and (ii) to deliver the Preferred Stock together with such
dividends and distributions and the net proceeds of any sales of rights,
preferences, privileges or other property, without liability for interest
thereon, in exchange for Depositary Receipts surrendered. At any time after the
expiration of two years from the date of termination, the Preferred Stock
Depositary may sell the Preferred Stock then held by it at public or private
sales, at such place or places and upon such terms as it deems proper, and may
thereafter hold the net proceeds of any such sale, together with any money and
other property then held by it, without liability for interest thereon, for the
pro rata benefit of the holders of Depositary Receipts which have not been
surrendered.
CHARGES OF PREFERRED STOCK DEPOSITARY
The Company will pay all charges of the Preferred Stock Depositary
including charges in connection with the initial deposit of the Preferred Stock,
the initial issuance of the Depositary Receipts, the distribution of information
to the holders of Depositary Receipts with respect to matters on which Preferred
Stock is entitled to vote, withdrawals of the Preferred Stock by the holders of
Depositary Receipts or redemption or conversion of the Preferred Stock, except
for taxes (including transfer taxes, if any) and other governmental charges and
such other charges as are expressly provided in the Deposit Agreement to be at
the expense of holders of Depositary Receipts or persons depositing Preferred
Stock.
MISCELLANEOUS
The Preferred Stock Depositary will make available for inspection by
holders of Depositary Receipts, at its Corporate Office and its New York Office,
all reports and communications from the Company which are delivered to the
Preferred Stock Depositary as the holder of Preferred Stock.
Neither the Preferred Stock Depositary nor the Company will be liable if it
is prevented or delayed by law or any circumstance beyond its control in
performing its obligations under the Deposit Agreement. The obligations of the
Preferred Stock Depositary under the Deposit Agreement are limited to performing
its duties thereunder without negligence or bad faith. The obligations of the
Company under the Deposit Agreement are limited to performing its duties
thereunder in good faith. Neither the Company nor the Preferred Stock Depositary
is obligated to prosecute or defend any legal proceeding in respect of any
Depositary Shares or Preferred Stock unless satisfactory indemnity is furnished.
The Company and the Preferred Stock Depositary are entitled to rely upon advice
of or information from counsel, accountants or other persons believed to be
competent and on documents believed to be genuine.
The Preferred Stock Depositary may resign at any time or be removed by the
Company, effective upon the acceptance by its successor of its appointment;
provided, that if a successor Preferred Stock Depositary has not been appointed
or accepted such appointment within 45 days after the Preferred Stock Depositary
has
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delivered a notice of election to resign to the Company, the Preferred Stock
Depositary may terminate the Deposit Agreement. See "Amendment and Termination
of the Deposit Agreement" above.
DESCRIPTION OF WARRANTS
GENERAL
The Company may issue Warrants to purchase Debt Securities, Preferred
Stock, Common Stock or any combination thereof, and such Warrants may be issued
independently or together with any such Securities and may be attached to or
separate from such Securities. Each series of Warrants will be issued under a
separate warrant agreement (each a "Warrant Agreement") to be entered into
between the Company and a warrant agent ("Warrant Agent") a form of which will
be filed as an exhibit to a Current Report on Form 8-K. The Warrant Agent will
act solely as an agent of the Company in connection with the Warrants of each
such series and will not assume any obligation or relationship of agency for or
with holders or beneficial owners of Warrants. The following sets forth certain
general terms and provisions of the Warrants offered hereby. Further terms of
the Warrants and the applicable Warrant Agreement will be set forth in the
applicable Prospectus Supplement.
The applicable Prospectus Supplement will describe the terms of any
Warrants in respect of which this Prospectus is being delivered, including the
following: (i) the title of such Warrants; (ii) the aggregate number of such
Warrants; (iii) the price or prices at which such Warrants will be issued; (iv)
the currency or currencies, including composite currencies, in which the price
of such Warrants may be payable; (v) the designation and terms of the Securities
(other than Preferred Securities and Common Securities) purchasable upon
exercise of such Warrants; (vi) the price at which and the currency or
currencies, including composite currencies, in which the Securities (other than
Preferred Securities and Common Securities) purchasable upon exercise of such
Warrants may be purchased; (vii) the date on which the right to exercise such
Warrants shall commence and the date on which such right shall expire; (viii)
whether such Warrants will be issued in registered form or bearer form; (ix) if
applicable, the minimum or maximum amount of such Warrants which may be
exercised at any one time; (x) if applicable, the designation and terms of the
Securities (other than Preferred Securities and Common Securities) with which
such Warrants are issued and the number of such Warrants issued with each such
Security; (xi) if applicable, the date on and after which such Warrants and the
related Securities (other than Preferred Securities and Common Securities) will
be separately transferable; (xii) information with respect to book-entry
procedures, if any; (xiii) if applicable, a discussion of certain United States
federal income tax considerations; and (xiv) any other terms of such Warrants,
including terms, procedures and limitations relating to the exchange and
exercise of such Warrants.
DESCRIPTION OF PREFERRED SECURITIES OF THE CONSECO TRUSTS
GENERAL
Each Conseco Trust may issue, from time to time, only one series of
Preferred Securities having terms described in the Prospectus Supplement
relating thereto. The Declaration of each Conseco Trust authorizes the Regular
Trustees of such Conseco Trust to issue on behalf of such Conseco Trust one
series of Preferred Securities. Each Declaration will be qualified as an
indenture under the Trust Indenture Act. The Property Trustee, an independent
trustee, will act as indenture trustee for the Preferred Securities for purposes
of compliance with the provisions of the Trust Indenture Act. The Preferred
Securities will have such terms, including distributions, redemption, voting,
liquidation rights and such other preferred, deferred or other special rights or
such restrictions as shall be established by the Regular Trustees in accordance
with the applicable Declaration or as shall be set forth in the Declaration or
made part of the Declaration by the Trust Indenture Act. Reference is made to
any Prospectus Supplement relating to the Preferred Securities of a Conseco
Trust for specific terms of the Preferred Securities, including, to the extent
applicable, (i) the distinctive designation of such Preferred Securities, (ii)
the number of Preferred Securities issued by such Conseco Trust, (iii) the
annual distribution rate (or method of determining such rate) for Preferred
Securities issued by such Conseco Trust and the date or dates upon which such
distributions shall be payable
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(provided, however, that distributions on such Preferred Securities shall,
subject to any deferral provisions, and any provisions for payment of defaulted
distributions, be payable on a quarterly basis to holders of such Preferred
Securities as of a record date in each quarter during which such Preferred
Securities are outstanding), (iv) any right of such Conseco Trust to defer
quarterly distributions on the Preferred Securities as a result of an interest
deferral right exercised by the Company on the Subordinated Debt Securities held
by such Conseco Trust; (v) whether distributions on Preferred Securities shall
be cumulative, and, in the case of Preferred Securities having such cumulative
distribution rights, the date or dates or method of determining the date or
dates from which distributions on Preferred Securities shall be cumulative, (vi)
the amount or amounts which shall be paid out of the assets of such Conseco
Trust to the holders of Preferred Securities upon voluntary or involuntary
dissolution, winding-up or termination of such Conseco Trust, (vii) the
obligation or option, if any, of such Conseco Trust to purchase or redeem
Preferred Securities and the price or prices at which, the period or periods
within which and the terms and conditions upon which Preferred Securities shall
be purchased or redeemed, in whole or in part, pursuant to such obligation or
option with such redemption price to be specified in the applicable Prospectus
Supplement, (viii) the voting rights, if any, of Preferred Securities in
addition to those required by law, including the number of votes per Preferred
Security and any requirement for the approval by the holders of Preferred
Securities as a condition to specified action or amendments to the Declaration,
(ix) the terms and conditions, if any, upon which Subordinated Debt Securities
held by such Conseco Trust may be distributed to holders of Preferred
Securities, and (x) any other relevant rights, preferences, privileges,
limitations or restrictions of Preferred Securities consistent with the
Declaration or with applicable law. All Preferred Securities offered hereby will
be guaranteed by the Company to the extent set forth below under "Description of
Trust Guarantees." The Trust Guarantee issued to each Conseco Trust, when taken
together with the Company's back-up undertakings, consisting of its obligations
under each Declaration (including the obligation to pay expenses of each Conseco
Trust), the Indenture and any applicable supplemental indentures thereto and the
Subordinated Debt Securities issued to any Conseco Trust will provide a full and
unconditional guarantee by the Company of amounts due on the Preferred
Securities issued by each Conseco Trust. The payment terms of the Preferred
Securities will be the same as the Subordinated Debt Securities issued to the
applicable Conseco Trust by the Company.
Each Declaration authorizes the Regular Trustees to issue on behalf of the
applicable Trust one series of Common Securities having such terms including
distributions, redemption, voting, liquidation rights or such restrictions as
shall be established by the Regular Trustees in accordance with the Declaration
or as shall otherwise be set forth therein. The terms of the Common Securities
issued by each Conseco Trust will be substantially identical to the terms of the
Preferred Securities issued by such Conseco Trust, and the Common Securities
will rank pari passu, and payments will be made thereon pro rata, with the
Preferred Securities except that, if an event of default under such Declaration
has occurred and is continuing, the rights of the holders of the Common
Securities to payment in respect of distributions and payments upon liquidation,
redemption and otherwise will be subordinated to the rights of the holders of
the Preferred Securities. The Common Securities will also carry the right to
vote and to appoint, remove or replace any of the Conseco Trustees of such
Conseco Trust. All of the Common Securities of each Conseco Trust will be
directly or indirectly owned by the Company.
The financial statements of any Conseco Trust that issues Preferred
Securities will be reflected in the Company's consolidated financial statements
with the Preferred Securities shown as Company-obligated mandatorily-redeemable
preferred securities of a subsidiary trust under minority interest in
consolidated subsidiaries. In a footnote to the Company's audited financial
statements there will be included statements that the applicable Conseco Trust
is wholly-owned by the Company and that the sole asset of such Conseco Trust is
the Subordinated Debt Securities (indicating the principal amount, interest rate
and maturity date thereof).
DESCRIPTION OF TRUST GUARANTEES
Set forth below is a summary of information concerning the Trust Guarantees
that will be executed and delivered by the Company for the benefit of the
holders, from time to time, of Preferred Securities. Each Trust Guarantee will
be qualified as an indenture under the Trust Indenture Act. Fleet National Bank
will act as
23
<PAGE> 41
independent indenture trustee for Trust Indenture Act purposes under each Trust
Guarantee (the "Preferred Securities Guarantee Trustee"). The terms of each
Trust Guarantee will be those set forth in such Trust Guarantee and those made
part of such Trust Guarantee by the Trust Indenture Act. The following summary
does not purport to be complete and is subject to and qualified in its entirety
by reference to the provisions of the form of Trust Guarantee, a copy of which
has been filed as an exhibit to the Registration Statement of which this
Prospectus is a part, and the Trust Indenture Act. Each Trust Guarantee will be
held by the Preferred Securities Guarantee Trustee for the benefit of the
holders of the Preferred Securities of the applicable Conseco Trust.
GENERAL
Pursuant to each Trust Guarantee, the Company will agree, to the extent set
forth therein, to pay in full to the holders of the Preferred Securities, the
Guarantee Payments (as defined below) (except to the extent paid by such Conseco
Trust), as and when due, regardless of any defense, right of set-off or
counterclaim which such Conseco Trust may have or assert. The following payments
or distributions with respect to the Preferred Securities (the "Guarantee
Payments"), to the extent not paid by such Conseco Trust, will be subject to the
Trust Guarantee (without duplication): (i) any accrued and unpaid distributions
that are required to be paid on such Preferred Securities, to the extent such
Conseco Trust shall have funds available therefor, (ii) the redemption price,
including all accrued and unpaid distributions to the date of redemption (the
"Redemption Price"), to the extent such Conseco Trust has funds available
therefor, with respect to any Preferred Securities called for redemption by such
Conseco Trust and (iii) upon a voluntary or involuntary dissolution, winding-up
or termination of such Conseco Trust (other than in connection with such
distribution of Subordinated Debt Securities to the holders of Preferred
Securities or the redemption of all of the Preferred Securities upon maturity or
redemption of the Subordinated Debt Securities) the lesser of (a) the aggregate
of the liquidation amount and all accrued and unpaid distributions on such
Preferred Securities to the date of payment, to the extent such Conseco Trust
has funds available therefor or (b) the amount of assets of such Conseco Trust
remaining for distribution to holders of such Preferred Securities in
liquidation of such Conseco Trust. The Company's obligation to make a Guarantee
Payment may be satisfied by direct payment of the required amounts by the
Company to the holders of Preferred Securities or by causing the applicable
Conseco Trust to pay such amounts to such holders.
Each Trust Guarantee will not apply to any payment of distributions except
to the extent the applicable Conseco Trust shall have funds available therefor.
If the Company does not make interest or principal payments on the Subordinated
Debt Securities purchased by such Conseco Trust, such Conseco Trust will not pay
distributions on the Preferred Securities issued by such Conseco Trust and will
not have funds available therefore.
The Company has also agreed to guarantee the obligations of each Conseco
Trust with respect to the Common Securities (the "Common Guarantee") issued by
such Conseco Trust to the same extent as the Trust Guarantee, except that, if an
Event of Default under the Subordinated Indenture has occurred and is
continuing, holders of Preferred Securities under the Trust Guarantee shall have
priority over holders of the Common Securities under the Trust Common Guarantee
with respect to distributions and payments on liquidation, redemption or
otherwise.
CERTAIN COVENANTS OF THE COMPANY
In each Trust Guarantee, the Company will covenant that, so long as any
Preferred Securities issued by the applicable Conseco Trust remain outstanding,
if there shall have occurred any event of default under such Trust Guarantee or
under the Declaration of such Conseco Trust, then (a) the Company will not
declare or pay any dividend on, make any distributions with respect to, or
redeem, purchase, acquire or make a liquidation payment with respect to, any of
its capital stock; (b) the Company shall not make any payment of interest,
principal or premium, if any, on or repay, repurchase or redeem any debt
securities (including guarantees) issued by the Company which rank pari passu
with or junior to the Subordinated Debt Securities issued to the applicable
Conseco Trust and (c) the Company shall not make any guarantee payments with
respect to the foregoing (other than pursuant to a Trust Guarantee); provided,
however, that the Company
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<PAGE> 42
may (i) declare and pay a stock dividend where the dividend stock is the same
stock as that on which the dividend is being paid and (ii) purchase or acquire
shares of Company Common Stock in connection with the satisfaction by the
Company of its obligations under any employee benefit plans.
MODIFICATION OF THE TRUST GUARANTEES; ASSIGNMENT
Except with respect to any changes that do not adversely affect the rights
of holders of Preferred Securities (in which case no consent of such holders
will be required), each Trust Guarantee may be amended only with the prior
approval of the holders of not less than a majority in liquidation amount of the
outstanding Preferred Securities of such Conseco Trust. The manner of obtaining
any such approval of holders of such Preferred Securities will be set forth in
accompanying Prospectus Supplement. All guarantees and agreements contained in a
Trust Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of the Company and shall inure to the benefit of the holders of
the Preferred Securities of the applicable Conseco Trust then outstanding.
EVENTS OF DEFAULT
An event of default under a Trust Guarantee will occur upon the failure of
the Company to perform any of its payment or other obligations thereunder. The
holders of a majority in liquidation amount of the Preferred Securities to which
such Trust Guarantee relates have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Preferred
Securities Guarantee Trustee in respect of such Trust Guarantee or to direct the
exercise of any trust or power conferred upon the Preferred Securities Guarantee
Trustee under such Trust Guarantee.
If the Preferred Securities Guarantee Trustee fails to enforce such Trust
Guarantee, any record holder of Preferred Securities to which such Trust
Guarantee relates may institute a legal proceeding directly against the Company
to enforce the Preferred Securities Guarantee Trustee's rights under such Trust
Guarantee without first instituting a legal proceeding against the applicable
Conseco Trust, the Preferred Securities Guarantee Trustee or any other person or
entity. Notwithstanding the foregoing, if the Company has failed to make a
Guarantee Payment under a Trust Guarantee, a record holder of Preferred
Securities to which such Trust Guarantee relates may directly institute a
proceeding against the Company for enforcement of such Trust Guarantee for such
payment to the record holder of the Preferred Securities to which such Trust
Guarantee relates of the principal of or interest on the applicable Subordinated
Debt Securities on or after the respective due dates specified in the
Subordinated Debt Securities, and the amount of the payment will be based on the
holder's pro rata share of the amount due and owing on all of the Preferred
Securities to which such Trust Guarantee relates. The Company has waived any
right or remedy to require that any action be brought first against the
applicable Conseco Trust or any other person or entity before proceeding
directly against the Company. The record holder in the case of the issuance of
one or more global Preferred Securities certificates will be The Depository
Trust Company acting at the direction of the beneficial owners of the Preferred
Securities.
The Company will be required to provide annually to the Preferred
Securities Guarantee Trustee a statement as to the performance by the Company of
certain of its obligations under each outstanding Trust Guarantee and as to any
default in such performance.
INFORMATION CONCERNING THE PREFERRED SECURITIES GUARANTEE TRUSTEE
The Preferred Securities Guarantee Trustee, prior to the occurrence of a
default to a Trust Guarantee, undertakes to perform only such duties as are
specifically set forth in such Trust Guarantee and, after default with respect
to such Trust Guarantee, shall exercise the same degree of care as a prudent
individual would exercise in the conduct of his or her own affairs. Subject to
such provision, the Preferred Securities Guarantee Trustee is under no
obligation to exercise any of the powers vested in it by a Trust Guarantee at
the request of any holder of Preferred Securities to which such Trust Guarantee
relates unless it is offered reasonable indemnity against the costs, expenses
and liabilities that might be incurred thereby.
25
<PAGE> 43
TERMINATION
Each Trust Guarantee will terminate as to the Preferred Securities issued
by the applicable Conseco Trust upon full payment of the Redemption Price of all
Preferred Securities of such Conseco Trust, upon distribution of the
Subordinated Debt Securities held by such Conseco Trust to the holders of all of
the Preferred Securities of such Conseco Trust or upon full payment of the
amounts payable in accordance with the Declaration of such Conseco Trust upon
liquidation of such Conseco Trust. Each Trust Guarantee will continue to be
effective or will be reinstated, as the case may be, if at any time any holder
of Preferred Securities issued by the applicable Conseco Trust must restore
payment of any sums paid under such Preferred Securities or such Trust
Guarantee.
STATUS OF THE TRUST GUARANTEES
The Trust Guarantees will constitute an unsecured obligation of the Company
and will rank (i) subordinate and junior in right of payment to all other
liabilities of the Company, including the Subordinated Debt Securities, except
those liabilities of the Company made pari passu or subordinate by their terms,
(ii) pari passu with the most senior preferred or preference stock now or
hereafter issued by the Company and with any guarantee now or hereafter entered
into by the Company in respect of any preferred or preference stock of any
affiliate of the Company and (iii) senior to the Company's Common Stock. The
terms of the Preferred Securities provide that each holder of Preferred
Securities by acceptance thereof agrees to the subordination provisions and
other terms of the Trust Guarantee relating thereto.
Each Trust Guarantee will constitute a guarantee of payment and not of
collection (that is, the guaranteed party may institute a legal proceeding
directly against the Company to enforce its rights under such Trust Guarantee
without instituting a legal proceeding against any other person or entity).
GOVERNING LAW
The Trust Guarantees will be governed by and construed in accordance with
the law of the State of New York.
PLAN OF DISTRIBUTION
The Company and/or any Conseco Trust may sell any of the Securities being
offered hereby in any one or more of the following ways from time to time: (i)
through agents; (ii) to or through underwriters; (iii) through dealers; or (iv)
directly to purchasers.
The Prospectus Supplement with respect to the Securities will set forth the
terms of the offering of the Securities, including the name or names of any
underwriters, dealers or agents; the purchase price of the Securities and the
proceeds to the Company and/or a Conseco Trust from such sale; any underwriting
discounts and commissions or agency fees and other items constituting
underwriters' or agents' compensation; any initial public offering price and any
discounts or concessions allowed or reallowed or paid to dealers and any
securities exchange on which such Securities may be listed. Any initial public
offering price, discounts or concessions allowed or reallowed or paid to dealers
may be changed from time to time.
The distribution of the Securities may be effected from time to time in one
or more transactions at a fixed price or prices, which may be changed, at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices or at negotiated prices.
Offers to purchase Securities may be solicited by agents designated by the
Company from time to time. Any such agent involved in the offer or sale of the
Securities in respect of which this Prospectus is delivered will be named, and
any commissions payable by the Company and/or the applicable Conseco Trust to
such agent will be set forth, in the applicable Prospectus Supplement. Unless
otherwise indicated in such Prospectus Supplement, any such agent will be acting
on a reasonable best efforts basis for the period of its appointment. Any such
agent may be deemed to be an underwriter, as that term is defined in the
Securities Act, of the Securities so offered and sold.
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<PAGE> 44
If Securities are sold by means of an underwritten offering, the Company
and/or the applicable Conseco Trust will execute an underwriting agreement with
an underwriter or underwriters at the time an agreement for such sale is
reached, and the names of the specific managing underwriter or underwriters, as
well as any other underwriters, and the terms of the transaction, including
commissions, discounts and any other compensation of the underwriters and
dealers, if any, will be set forth in the Prospectus Supplement which will be
used by the underwriters to make resales of the Securities in respect of which
this Prospectus is delivered to the public. If underwriters are utilized in the
sale of the Securities in respect of which this Prospectus is delivered, the
Securities will be acquired by the underwriters for their own account and may be
resold from time to time in one or more transactions, including negotiated
transactions, at fixed public offering prices or at varying prices determined by
the underwriter at the time of sale. Securities may be offered to the public
either through underwriting syndicates represented by managing underwriters or
directly by the managing underwriters. If any underwriter or underwriters are
utilized in the sale of the Securities, unless otherwise indicated in the
Prospectus Supplement, the underwriting agreement will provide that the
obligations of the underwriters are subject to certain conditions precedent and
that the underwriters with respect to a sale of Securities will be obligated to
purchase all such Securities of a series if any are purchased.
If a dealer is utilized in the sales of the Securities in respect of which
this Prospectus is delivered, the Company and/or the applicable Conseco Trust
will sell such Securities to the dealer as principal. The dealer may then resell
such Securities to the public at varying prices to be determined by such dealer
at the time of resale. Any such dealer may be deemed to be an underwriter, as
such term is defined in the Securities Act, of the Securities so offered and
sold. The name of the dealer and the terms of the transaction will be set forth
in the Prospectus Supplement relating thereto.
Offers to purchase Securities may be solicited directly by the Company
and/or the applicable Conseco Trust and the sale thereof may be made by the
Company and/or the applicable Conseco Trust directly to institutional investors
or others, who may be deemed to be underwriters within the meaning of the
Securities Act with respect to any resale thereof. The terms of any such sales
will be described in the Prospectus Supplement relating thereto.
Agents, underwriters and dealers may be entitled under relevant agreements
to indemnification or contribution by the Company and/or the applicable Conseco
Trust against certain liabilities, including liabilities under the Securities
Act.
Agents, underwriters and dealers may be customers of, engage in
transactions with, or perform services for, the Company and its subsidiaries in
the ordinary course of business.
Securities may also be offered and sold, if so indicated in the applicable
Prospectus Supplement, in connection with a remarketing upon their purchase, in
accordance with a redemption or repayment pursuant to their terms, or otherwise,
by one or more firms ("remarketing firms"), acting as principals for their own
accounts or as agents for the Company and/or the applicable Conseco Trust. Any
remarketing firm will be identified and the terms of its agreement, if any, with
its compensation will be described in the applicable Prospectus Supplement.
Remarketing firms may be deemed to be underwriters, as such term is defined in
the Securities Act, in connection with the Securities remarketed thereby.
Remarketing firms may be entitled under agreements which may be entered into
with the Company and/or the applicable Conseco Trust to indemnification or
contribution by the Company and/or the applicable Conseco Trust against certain
civil liabilities, including liabilities under the Securities Act, and may be
customers of, engage in transactions with or perform services for Conseco and
its subsidiaries in the ordinary course of business.
If so indicated in the applicable Prospectus Supplement, the Company and/or
the applicable Conseco Trust may authorize agents, underwriters or dealers to
solicit offers by certain types of institutions to purchase Securities from the
Company and/or the applicable Conseco Trust at the public offering prices set
forth in the applicable Prospectus Supplement pursuant to delayed delivery
contracts ("Contracts") providing for payment and delivery on a specified date
or dates in the future. A commission indicated in the applicable Prospectus
Supplement will be paid to underwriters, dealers and agents soliciting purchases
of Securities pursuant to Contracts accepted by the Company and/or the
applicable Conseco Trust.
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<PAGE> 45
LEGAL MATTERS
Unless otherwise indicated in the applicable Prospectus Supplement, the
legal validity of Securities (other than the Preferred Securities) will be
passed upon for the Company by Karl W. Kindig, Senior Vice President, Legal of
Conseco Services, LLC, a subsidiary of the Company. Mr. Kindig is a full-time
employee of the Company and owns shares and holds options to purchase shares of
Company common stock.
Certain matters of Delaware law relating to the validity of the Preferred
Securities will be passed upon for the Conseco Trusts by Richards, Layton &
Finger, P.A., Wilmington, Delaware, special Delaware counsel to the Conseco
Trusts.
EXPERTS
The consolidated financial statements and schedules of the Company as of
December 31, 1996 and 1995, and for each of the three years in the period ended
December 31, 1996 incorporated by reference in this Prospectus, have been
audited by Coopers & Lybrand L.L.P., independent accountants, as set forth in
their reports thereon included therein and are incorporated herein by reference
in reliance upon such reports given upon the authority of such firm as experts
in accounting and auditing.
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======================================================
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IN
CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITERS. NEITHER THE
DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS, NOR ANY SALE MADE
HEREUNDER AND THEREUNDER, SHALL UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS SHALL NOT CONSTITUTE AN
OFFER OR SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH OFFER OR SOLICITATION
IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS
NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Special Note Regarding Forward-Looking
Statements.......................... S-2
The Company........................... S-2
Selected Historical Financial
Information of the Company.......... S-5
Capitalization........................ S-8
Use of Proceeds....................... S-9
Ratios of Earnings to Fixed Charges,
Earnings to Fixed Charges and
Preferred Stock Dividends and
Earnings to Fixed Charges, Preferred
Stock Dividends and Distributions on
Company-obligated Mandatorily
Redeemable Preferred Securities of
Subsidiary Trusts................... S-9
Description of the Notes.............. S-10
Underwriting.......................... S-15
Legal Matters......................... S-16
PROSPECTUS
Available Information................. 3
Incorporation of Certain Documents by
Reference........................... 4
The Company........................... 5
The Conseco Trusts.................... 5
Use of Proceeds....................... 6
Ratios of Earnings to Fixed Charges,
Earnings to Fixed Charges and
Preferred Stock Dividends and
Earnings to Fixed Charges, Preferred
Stock Dividends and Distributions on
Company-obligated Mandatorily
Redeemable Preferred Securities of
Subsidiary Trusts................... 6
Description of Debt Securities........ 7
Description of Capital Stock.......... 15
Description of Depositary Shares...... 18
Description of Warrants............... 22
Description of Preferred Securities of
the Conseco Trusts.................. 22
Description of Trust Guarantees....... 23
Plan of Distribution.................. 26
Legal Matters......................... 28
Experts............................... 28
</TABLE>
======================================================
======================================================
$250,000,000
CONSECO, INC.
6.4% NOTES DUE FEBRUARY 10, 2003
------------------------------
PROSPECTUS SUPPLEMENT
------------------------------
MERRILL LYNCH & CO.
DEUTSCHE MORGAN GRENFELL
FIRST UNION CAPITAL MARKETS
SALOMON SMITH BARNEY
SBC WARBURG DILLON READ INC.
FEBRUARY 4, 1998
======================================================
