REGISTRATION NO. 333-xxxxxx
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
---------------------
CONSECO, INC. INDIANA 35-1468632
(Exact name of the (State or other (I.R.S. Employer
Registrant as specified jurisdiction of Identification No.)
in its charter) incorporation or
organization)
11825 N. Pennsylvania St.
Carmel, Indiana 46032
(317) 817-6100
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
---------------------
John J. Sabl, Esquire
Conseco, Inc.
11825 N. Pennsylvania St.
Carmel, Indiana 46032
(317) 817-6092
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From
time to time after the Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
================================================================================
<PAGE>
<TABLE>
<CAPTION>
Calculation of Registration Fee
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
TITLE OF EACH CLASS AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
OF SECURITIES TO TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION
BE REGISTERED REGISTERED PER UNIT (1) PRICE (1) FEE
- --------------------------------------------------------------------------------
Common Stock
(no par value) 3,582,000 shares $29.25 $104,773,500 $29,127.03
- --------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of determining the
registration fee. Calculated on the basis of the average of the high and low
reported prices of the Registrant's Common Stock on the New York Stock
Exchange on June 28, 1999.
-------------------------------
The Registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that
this Registration Statement shall thereafter become effective in accordance
with Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission, acting
pursuant to Section 8(a), may determine.
<PAGE>
Subject to Completion, Dated June 29, 1999
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
PROSPECTUS June __, 1999
3,582,000 Shares
CONSECO, INC.
Common Stock
These shares are being offered for sale by UBS AG, London Branch under
the terms of a forward agreement between UBS and Conseco.
The common stock is traded on the New York Stock Exchange under the
symbol "CNC." On June 28, 1999, the last reported sale price for the common
stock on the New York Stock Exchange was $29-1/16 per share.
Neither the Securities and Exchange Commission nor any other regulatory
body has approved or disapproved of these securities or passed upon the adequacy
or accuracy of this prospectus. Any representation to the contrary is a criminal
offense.
Warburg Dillon Read LLC
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements,
registration statements and other information with the SEC. Our SEC filings are
available to the public over the Internet at the SEC's web site at
http://www.sec.gov. You may read and copy any document we file at the SEC's
public reference room at 450 Fifth Street, N.W. Washington, D.C. Please call the
SEC at 1-800-SEC-0330 for further information on the public reference rooms.
We have filed with the SEC a registration statement under the
Securities Act of 1933 to register the common stock offered by this prospectus.
This prospectus is only part of the registration statement and does not contain
all of the information in the registration statement and its exhibits because
certain parts are allowed to be omitted by SEC rules. Statements in this
prospectus about documents filed as an exhibit to the registration statement or
otherwise filed with the SEC are only summary statements and may not contain all
the information that may be important to you. For further information about us,
and the common stock offered under this prospectus, you should read the
registration statement, including its exhibits and the documents incorporated
into it by reference.
The SEC allows us to incorporate by reference the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus. Information that we file later with the
SEC will automatically update and supersede this information. We incorporated by
reference the documents listed below and any future filings made with the SEC
under Sections 13(a), 13(c), 14 or 15(d)of the Securities Exchange Act of 1934
until we sell all of the common stock offered under this prospectus.
1. Annual Report on Form 10-K for the fiscal year ended December 31,
1998;
2. Quarterly Report on Form 10-Q for the quarter ended March 31,
1999; and
3. The description of the common stock in the registration statements
filed by us pursuant to Section 12 of the Exchange Act and any
amendment or report filed for the purpose of updating any such
description.
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not authorized
anyone else to provide you with different information. We are not making an
offer of common stock in any state where the offer is not permitted. You should
not assume that the information in this prospectus is accurate as of any date
other than the date on the front of this prospectus.
You may request a copy of these filings at no cost, by writing or
telephoning us at the following address:
James W. Rosensteele, Senior Vice President, Corporate Communications
Conseco, Inc.
11825 N. Pennsylvania Street
Carmel, Indiana 46032
Telephone: (317) 817-4418
2
<PAGE>
CONSECO, INC.
We are a financial services holding company. We conduct and manage
our business through two operating segments, reflecting our major lines of
business: (1) insurance and fee-based operations and (2) finance operations.
Our insurance subsidiaries develop, market and administer supplemental health
insurance, annuity, individual life insurance, individual and group major
medical insurance and other insurance products. Our finance subsidiaries
originate, purchase, sell and service consumer and commercial finance loans.
Since 1982, we have acquired 19 insurance groups. In 1998, we acquired Green
Tree Financial Corporation, which comprises our finance operations. Our
operating strategy is to grow our businesses by focusing our resources on the
development and expansion of profitable products and strong distribution
channels, to seek to achieve superior investment returns through active asset
management and to control expenses.
Our executive offices are located at 11825 N. Pennsylvania Street,
Carmel, Indiana 46032, and our telephone number is (317) 817-6100.
USE OF PROCEEDS
We will use the net proceeds from the sale of common stock to Warburg
Dillon Read to reduce indebtedness by repaying commercial paper which we issued
on various dates in June 1999. The weighted average interest rate of such
commercial paper borrowings is approximately 5.3 percent and such borrowings are
due on June 30, 1999.
3
<PAGE>
MARKET PRICES OF COMMON STOCK
The common stock is listed and traded on the New York Stock Exchange.
The following table sets forth the quarterly dividends paid per share and the
high and low sales prices per share on the New York Stock Exchange, based upon
information supplied, by the Exchange. All applicable per share data have been
adjusted for Conseco's two-for-one stock split distributed February 11, 1997.
<TABLE>
<CAPTION>
Market Price Dividends
------------ ---------
Period High Low Paid
------ -------------- ----
<S> <C> <C> <C>
1997:
First Quarter................................... $43-7/8 $ 30-3/4 $.03125
Second Quarter.................................. 42-7/8 34-1/4 .03125
Third Quarter................................... 50 35-1/8 .03125
Fourth Quarter.................................. 50-1/16 39-7/8 .12500
1998:
First Quarter................................... $57-7/8 $ 38-1/2 $.12500
Second Quarter.................................. 58-1/8 43-1/2 .12500
Third Quarter................................... 51-3/4 26-5/8 .12500
Fourth Quarter.................................. 38-1/4 22 .14000
1999:
First Quarter................................... $37-13/16 $26-13/16 $.14000
Second Quarter (through June 28, 1999).......... 35-1/8 28 .14000
</TABLE>
On June 28, 1999, the last reported sale price of the common stock on
the New York Stock Exchange was $29-1/16.
4
<PAGE>
PURCHASE AND FORWARD AGREEMENTS
Warburg Dillon Read agreed to buy 3,115,000 shares of common stock from us
at $29-1/16 per share pursuant to a purchase agreement dated June 29, 1999.
Warburg Dillon Read is obligated to purchase all the shares if it purchases any
shares. On the same date, we also entered into a forward agreement with UBS, the
parent of Warburg Dillon Read, relating to the same number of shares of common
stock. That agreement is set forth in a master agreement and schedule, as well
as in an equity forward confirmation. We filed copies of these documents as
exhibits to the registration statement that includes this prospectus.
Warburg Dillon Read agreed to transfer the shares it purchases from us to
UBS immediately following the purchase. UBS expects to hold the shares and
dispose of them as provided in the forward agreement. UBS may, however, elect to
sell some or all of the shares for its own account at any time, but those sales
will not change our material rights and obligations under the forward agreement.
For simplicity of presentation, the following summary of the material terms of
the forward agreement assumes that UBS continues to hold the shares purchased
from us until termination of the transaction.
Under the forward agreement, we agreed that on December 15, 1999, we will
buy from UBS 3,115,000 shares of common stock for the same price per share
Warburg Dillon Read paid to us. In the interim, we will make payments at a
floating LIBOR rate on the original purchase price based on the number of shares
covered by the forward agreement, less any dividends that UBS receives on the
same number of shares. We may reduce the number of shares covered by the forward
agreement as described below.
Instead of buying 3,115,000 shares for cash on December 15, 1999, we may
elect under the forward agreement to have UBS sell that number of shares in
market transactions over a period of ten trading days ending December 15, 1999.
In that case, UBS will receive the proceeds of its sales and, in addition,
either:
. if the per share proceeds of those sales, net of a $.05 commission,
exceed the $29-1/16 per share original purchase price, UBS will
return to us the number of shares that it did not need to sell to
recover the original purchase price; or
. if the per share net proceeds of those sales are less than the
$29-1/16 per share original purchase price, we will issue
additional shares that can be sold by UBS to recover the original
purchase price.
We may also choose to have UBS sell some or all of the shares purchased
from us in market transactions before the December 1999 settlement process
described above. In that case, our obligation under the forward agreement to
purchase shares at December 15 will be reduced based on the net proceeds from
the shares sold at our direction. In addition, depending on the net proceeds
from those sales, UBS may return shares of common stock to us to the extent of
the excess proceeds received, or we may issue additional shares to UBS that it
may sell so that it receives net proceeds or payments equal to the original
purchase price of the shares sold at our direction.
5
<PAGE>
We are also required under the agreements with Warburg Dillon Read and
UBS to maintain an effective registration statement so that sales of shares of
common stock purchased from us and any shares issued under the forward agreement
may be sold under this prospectus.
SELLING STOCKHOLDER
The following table sets forth certain information regarding the
beneficial ownership of common stock by UBS and as adjusted to give effect to
the sale of the shares covered by this prospectus. See "Plan of Distribution."
The "Shares Beneficially Owned Prior to the Offering" include the
3,115,000 shares of common stock acquired from us pursuant to the purchase
agreement, which Warburg Dillon Read agreed to transfer to UBS immediately
following the purchase. In addition to the shares shown in the table, UBS may
receive additional shares of common stock that we may issue to it as required by
the forward agreement. See "Purchase and Forward Agreements."
Shares
Beneficially Owned
After Offering
-------------------
Shares
Name of Selling Beneficially Owned Number of Shares Number
Stockholder Prior to Offering Being Offered of Shares Percent
- --------------- ----------------- ------------- --------- -------
UBS AG,
London Branch 3,958,096 3,115,000 843,096 *
- ---------------
* Less than 1%
PLAN OF DISTRIBUTION
UBS proposes to sell from time to time shares of common stock that
Warburg Dillon Read initially purchased from us under the purchase agreement.
UBS has the right to sell any of those purchased shares, at any time, for its
own account. We can also direct UBS, at any time, to sell any purchased shares
that UBS still holds at the time it receives our direction to sell. We expect
that we will give UBS one or more directions to sell shares of common stock from
time to time, and that in December 1999 UBS may sell shares, to settle or
partially settle our obligations under the forward agreement. See "Purchase and
Forward Agreements." Although it has the right to sell the purchased shares at
any time, UBS currently expects to sell those shares only at our direction or on
final settlement of our obligations under the forward agreement.
If UBS sells shares of common stock at our direction or in settlement
of our obligation under the forward agreement, it will, in effect, be selling
shares on our behalf. If UBS fails to recover, through those sales, the original
purchase
6
<PAGE>
price per share paid by Warburg Dillon Read under the purchase agreement, we
will issue additional shares of common stock to UBS that it may sell to recover
the original purchase price of the shares. See "Purchase and Forward
Agreements." UBS also proposes to sell those additional shares of common stock,
from time to time, under this prospectus.
UBS will sell common stock, whether for its own account or at our
direction, only through Warburg Dillon Read in ordinary market or other types of
transactions, which may include block transactions, on the New York Stock
Exchange, in the over-the-counter market or in any other market in which the
common stock is traded, or in a combination of such methods, at market prices
prevailing at the time of sale or at negotiated prices. Warburg Dillon Read and
UBS are each "underwriters" under Section 2(a)(11) of the Securities Act with
respect to sales of those shares. We have agreed to pay a $.05 commission for
each share sold. Any fees or compensation or any net profit realized by Warburg
Dillon Read or UBS on the resale of those shares may be deemed to be
underwriting discounts or commissions under the Securities Act.
Our agreements with Warburg Dillon Read and UBS provide that we will
indemnify them against certain liabilities, including liabilities under the
Securities Act, or contribute to payments that they may be required to make in
respect of such liabilities.
In the ordinary course of business, Warburg Dillon Read, UBS or their
affiliates have engaged in commercial and investment banking transactions with
us and our affiliates and may do so in the future. At the time of entering into
the agreement to sell shares to Warburg Dillon Read, we agreed to pay it a fee
of $905,000 for its advisory services in structuring the transaction, including
the forward agreement. In addition, we have also agreed to reimburse Warburg
Dillon Read and UBS for up to $150,000 of their reasonable out-of-pocket
expenses, including legal fees, in connection with this transaction.
LEGAL MATTERS
The validity of the common stock will be passed upon on behalf of
Conseco by John J. Sabl, Executive Vice President and General Counsel of
Conseco. Mr. Sabl is a full-time employee and an officer of Conseco and owns
80,000 shares of common stock and holds options to purchase 450,000 shares of
common stock. Certain legal matters will be passed upon for Warburg Dillon Read
and UBS by Schiff Hardin & Waite, Chicago, Illinois. Schiff Hardin & Waite
represents Conseco from time to time in connection with certain legal matters.
EXPERTS
The consolidated financial statements of Conseco at December 31, 1998
and 1997, and for each of the three years ended December 31, 1998, which are
incorporated by reference in this prospectus, have been audited by
PricewaterhouseCoopers LLP, independent accountants, as set forth in their
report thereon, which as to the years 1997 and 1996, insofar as such financial
statements relate to Green Tree Financial Corporation, is based on the report of
KPMG Peat Marwick LLP, independent auditors. The financial statements referred
to above are incorporated herein by reference in reliance upon such reports
given upon the authority of such firms as experts in accounting and auditing.
7
<PAGE>
TABLE OF CONTENTS
PAGE
Where You Can Find More Information ....................................... 2
Conseco, Inc. ............................................................. 3
Use of Proceeds ........................................................... 3
Market Prices of Common Stock ............................................. 4
Purchase and Forward Agreements ........................................... 5
Selling Stockholder ....................................................... 6
Plan of Distribution ...................................................... 6
Legal Matters ............................................................. 7
Experts ................................................................... 7
CONSECO, INC.
3,582,000
Shares of
Common Stock
Warburg Dillon Read LLC
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Advisory fee to Warburg Dillon Read LLC............................ $ 905,000
Reimbursement of Warburg Dillon Read LLC expenses.................. 150,000
Securities and Exchange Commission registration fee................ 29,127
Legal fees and expenses............................................ 20,000
Accounting fees and expenses....................................... 10,000
Printing expenses.................................................. 5,000
Miscellaneous...................................................... 5,873
----------
Total........................................................... $1,125,000
Except for the advisory fees to Warburg Dillon Read LLC and the SEC
registration fee, all of the foregoing are estimates.
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Indiana Business Corporation Law grants authorization to Indiana
corporations to indemnify officers and directors for their conduct if such
conduct was in good faith and was in the corporation's best interests or, in the
case of directors, was not opposed to such best interests, and permits the
purchase of insurance in this regard. In addition, the shareholders of a
corporation may approve the inclusion of other or additional indemnification
provisions in the articles of incorporation and by-laws.
The Bylaws of Conseco provide for the indemnification of any person
made a party to any action, suit or proceeding by reason of the fact that he is
a director, officer or employee of Conseco, if (a) such person is wholly
successful with respect to such action, suit or proceeding or (b) if such person
is determined to have acted in good faith, in what he or she reasonably believed
to be the best interests of Conseco or at least not opposed to its best
interests and, in addition, with respect to any criminal claim, is determined to
have had reasonable cause to believe that his or her conduct was lawful or had
no reasonable cause to believe that his or her conduct was unlawful. Such
indemnification shall be against the reasonable expenses, including attorneys'
fees, incurred by such person in connection with the defense of such action,
suit or proceeding and amounts paid in settlement. If such person was not wholly
successful, the determination of entitlement to indemnification shall be made by
one of the following methods, such method to be selected by the Board of
Directors: (a) by the Board of Directors by a majority vote of a quorum
consisting of directors who are not and have not been parties to the claim; (b)
by the majority vote of a committee duly designated by the Board of Directors,
consisting solely of two or more directors who are not and have not been parties
to the claim; and (c) by special legal counsel.
The above discussion of Conseco's Bylaws and the Indiana Business
Corporation Law is not intended to be exhaustive and is qualified in its
entirety by such Bylaws and the Indiana Business Corporation Law.
Conseco has purchased director and officer liability insurance which
would provide coverage against certain liabilities, including liabilities under
the securities laws.
II-1
<PAGE>
ITEM 16. EXHIBITS
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
1.1 Form of Purchase Agreement between the Company and Warburg Dillon
Read LLC.
1.2 ISDA Master Agreement dated as of April 21, 1999 between the
Company and UBS AG, London Branch, with attached Schedule and form
of Confirmation.
3.1 Amended and Restated Articles of Incorporation of Conseco, Inc.
were filed with the Commission as Exhibit 3.1 to Conseco's Annual
Report on Form 10-K for the year ended December 31, 1997, and are
incorporated herein by this reference.
3.2 Amended and Restated Bylaws of Conseco, Inc. were filed with the
Commission as Exhibit 3.2 to its Report on Form 10-Q for the
quarter ended June 30, 1998 and are incorporated herein by this
reference.
5.1 Opinion of John J. Sabl, Esquire.
23.1 Consent of John J. Sabl, Esquire (included in Exhibit 5.1 hereto).
23.2 Consent of PricewaterhouseCoopers LLP.
23.3 Consent of KPMG Peat Marwick LLP.
24.1 Power of Attorney (included on the signature page hereto).
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration
Statement:
(i) To include any prospectus required by Section 10(a)
(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the Registration
Statement (or the most recent post-effective
amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the
information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the
total dollar value of securities offered would not
exceed that which was registered) and any deviation
from the low or high end of the estimated maximum
offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule
424(b) under the Securities Act if, in the aggregate,
the changes in volume and price represent no more
than a 20%
II-2
<PAGE>
change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table
in the effective Registration Statement.
II-3
<PAGE>
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in
the Registration Statement or any material change to
such information in the Registration Statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) above
do not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in
periodic reports filed with or furnished to the Commission by the
Registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference
in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which
remain unsold at the termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each
filing of the Registrant's annual report pursuant to Section 13(a)
or Section 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in the Registration Statement shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful defense
of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Carmel, State of Indiana, on June 28, 1999.
CONSECO, INC.
By: /s/ ROLLIN M. DICK
------------------------------
Rollin M. Dick,
Executive Vice President and
Chief Financial Officer
II-5
<PAGE>
POWER OF ATTORNEY
Each person whose signature to this Registration Statement appears below
hereby appoints John J. Sabl and Karl W. Kindig, and each of them, either of
whom may act without the joinder of the other, as his or her attorney-in-fact to
sign on his or her behalf individually and in the capacity stated below and to
file all amendments and post-effective amendments to this Registration
Statement, which amendments may make such changes in and additions to this
Registration Statement as such attorney-in-fact may deem necessary or
appropriate.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SIGNATURE TITLE DATE
--------- ----- ----
/s/ STEPHEN C. HILBERT
- ----------------------------- Director, Chairman of the Board, June 28, 1999
Stephen C. Hilbert President and Chief Executive Officer
(Principal Executive Officer)
/s/ ROLLIN M. DICK
- ----------------------------- Director, Executive Vice President June 28, 1999
Rollin M. Dick and Chief Financial Officer
(Principal Financial Officer)
/s/ JAMES S. ADAMS
- ----------------------------- Senior Vice President, Chief June 28, 1999
James S. Adams Accounting Officer and Treasurer
(Principal Accounting Officer)
/s/ LAWRENCE M. COSS
- ----------------------------- Director June 28, 1999
Lawrence M. Coss
/s/ NGAIRE E. CUNEO
- ----------------------------- Director June 28, 1999
Ngaire E. Cuneo
/s/ DAVID R. DECATUR
- ----------------------------- Director June 28, 1999
David R. Decatur
II-6
<PAGE>
/s/ M. PHIL HATHAWAY
- ----------------------------- Director June 28, 1999
M. Phil Hathaway
/s/ DONALD F. GONGAWARE
- ----------------------------- Director June 28, 1999
Donald F. Gongaware
/s/ JAMES D. MASSEY
- ----------------------------- Director June 28, 1999
James D. Massey
/s/ DENNIS E. MURRAY, SR.
- ------------------------------- Director June 28, 1999
Dennis E. Murray, Sr.
/s/ JOHN M. MUTZ
- ----------------------------- Director June 28, 1999
John M. Mutz
/s/ ROBERT S. NICKOLOFF
- ----------------------------- Director June 28, 1999
Robert S. Nickoloff
</TABLE>
II-7
Exhibit 1.1
PURCHASE AGREEMENT
June 29, 1999
Warburg Dillon Read LLC
677 Washington Boulevard
Stamford, Connecticut 06901
UBS AG, London Branch
c/o Warburg Dillon Read LLC
677 Washington Boulevard
Stamford, Connecticut 06901
Ladies and Gentlemen:
Conseco, Inc., an Indiana corporation (the "Company"), desires to make
arrangements with Warburg Dillon Read LLC (the "Purchaser"), pursuant to which
the Purchaser will purchase from the Company shares of Common Stock, in
accordance with Section 1(a), below. The Company understands that the Purchaser
intends to transfer any Purchased Shares (as defined in Section 1(a)) to UBS AG,
London Branch, the indirect parent of the Purchaser (the "Selling Stockholder").
The Company has prepared for filing with the Securities and Exchange
Commission (the "Commission") a registration statement for the registration of
3,115,000 shares of its Common Stock, including the Purchased Shares (as defined
in Section 1(a)) and up to 467,000 in the aggregate, of Payment Shares (as
defined in Section 1(b)) and Make-whole Shares (as defined in Section 1(b)),
under the Securities Act of 1933, as amended (the "1933 Act"), and the offering
thereof from time to time by the Purchaser, as agent for the Selling
Stockholder, in accordance with Rule 415 of the rules and regulations of the
Commission under the 1933 Act (the "1933 Act Regulations"). The Company will
file such amendments and post-effective amendments thereto as may be required
prior to any sale of the Purchased Shares by or on behalf of the Selling
Stockholder. Such registration statement, as so amended at the time it is
declared effective by the Commission, is referred to herein as the "Registration
Statement." The final prospectus, in the form in which it is filed with the
Commission under Rule 424 or (if no such filing is required) first furnished to
the Purchaser and the Selling Stockholder by the Company for use in connection
with the offering of the Purchased Shares, and all applicable amendments or
supplements thereto, are collectively
1
<PAGE>
referred to herein as the "Prospectus." A "Preliminary Prospectus" shall mean
any preliminary prospectus included in the Registration Statement prior to the
time the Registration Statement was declared effective.
All references to the "Registration Statement," the "Prospectus" or any
"Preliminary Prospectus" shall be deemed to include all documents incorporated
therein by reference pursuant to the Securities Exchange Act of 1934, as amended
(the "1934 Act"), which were filed with the Commission under the 1934 Act on or
before the date that the Registration Statement is declared effective or the
issue date of the Prospectus or Preliminary Prospectus, as the case may be, and
all references in this Agreement to financial statements and schedules and other
information which is "contained," "included," "stated" or "described" in the
Registration Statement, the Prospectus, or any Preliminary Prospectus (or other
references of like import) shall be deemed to mean and include all such
financial statements and schedules and other information which is incorporated
by reference in the Registration Statement, the Prospectus, or any Preliminary
Prospectus, as the case may be. Any reference herein to the terms "amend,"
"amendment," or "supplement" shall be deemed to refer to and include the filing
of any document under the 1934 Act after the date on which the Registration
Statement is declared effective or the issue date of the Prospectus, as the case
may be, that is deemed incorporated therein by reference. If the Company files a
registration statement with the Commission pursuant to Section 462(b) of the
1933 Act Regulations (a "Rule 462(b) Registration Statement"), then after such
filing, all references to the Registration Statement shall also be deemed to
include the Rule 462(b) Registration Statement. For purposes of this Agreement,
all references to the Registration Statement, the Prospectus, any Preliminary
Prospectus, or any amendment or supplement to any of the foregoing shall be
deemed to include the copy filed with the Commission pursuant to its Electronic
Data Gathering, Analysis and Retrieval system ("EDGAR").
The Company, the Purchaser and the Selling Stockholder hereby agree as
follows:
1. Agreement to Sell and Purchase.
(a) On the basis of the representations and warranties and subject to
the terms and conditions set forth in this Agreement, the Purchaser shall
purchase from the Company, and the Company shall sell to the Purchaser,
3,115,000 shares of Common Stock (the "Purchased Shares") at a purchase price
per share of $29-1/16 (the "Purchase Price"). The Company understands and
acknowledges that the Purchaser intends to transfer the Purchased Shares to the
Selling Stockholder immediately following the Closing (as defined in Section
1(d)).
(b) Concurrently with the execution and delivery of this Agreement, the
Company and the Selling Stockholder have entered into a forward equity
confirmation providing for the purchase, by the Company, at the Purchase Price
per share, of a number of shares of Common Stock equal to the number of
Purchased Shares (the "Forward Purchase Agreement"). The Company may issue
additional shares of Common Stock to the Selling Stockholder under the Forward
Purchase Agreement, on the terms and conditions specified therein, including
Payment Shares (as defined in the Forward Purchase Agreement) and Make-whole
Shares (as defined in the Forward Purchase Agreement). The Purchased Shares,
Payment Shares and Make-whole Shares are collectively referred to in this
Agreement as the "Shares").
2
<PAGE>
(c) As compensation to the Purchaser for its advisory services in
structuring the transaction, the Company shall pay the Purchaser a fee of
$905,000 (the "Advisory Fee").
(d) The closing of the purchase and sale of the Purchased Shares (the
"Closing") shall take place on the third business day following the date of this
Agreement (the "Closing Date") at 10:00 a.m., New York City time, at the offices
of Schiff Hardin & Waite, 6600 Sears Tower, Chicago, Illinois 60606. The
Purchaser shall pay the Purchase Price per share for the Purchased Shares to, or
at the direction of the Company, by federal funds wire transfer against delivery
of the Purchased Shares to the Purchaser through the facilities of The
Depository Trust Company, and the Company shall pay the Purchaser the Advisory
Fee, by federal funds wire transfer or as an offset against the aggregate
Purchase Price per share for the Purchased Shares.
(e) The Company shall not pay or give, directly or indirectly, any
commission or other remuneration to the Purchaser or any other person or entity
for soliciting, within the meaning of Section 3(a)(9) of the 1933 Act,
conversions of the 6-1/2% Convertible Subordinated Notes due 2003 of Pioneer
Financial Services, Inc., a wholly-owned subsidiary of the Company (the
"Notes"), into Common Stock, and the Purchaser shall not solicit, within the
meaning of that Section, any such conversions.
(f) The Selling Stockholder may sell the Shares at any time or from
time to time pursuant to the Registration Statement, provided that the
effectiveness of the Registration Statement has not been suspended pursuant to
Section 3(f), or an available exemption under the 1933 Act. All such sales shall
be made through the Purchaser.
(g) The Company shall have the right to direct the Selling Stockholder
to sell, from time to time, such number of Purchased Shares as may be held by
the Selling Stockholder at the time of such notice by giving verbal notice,
followed by written confirmation thereof, to the Selling Stockholder directing
such sale (a "Direction to Sell") in connection and concurrent with notice to
the Selling Stockholder of early termination of all or a portion of the Forward
Purchase Agreement. A Direction to Sell may be given on any day that is a
trading day on the New York Stock Exchange, Inc. (the "NYSE") other than a day
on which trading on the NYSE is scheduled to close prior to its regular weekday
closing time (an "Exchange Business Day"); provided, however, that no Direction
to Sell may be given within ten Exchange Business Days prior to the Termination
Date (as defined in the Forward Purchase Agreement) in the event that the
Company has given notice to the Selling Stockholder of its election to settle
the Forward Purchase Agreement on a net share basis on the Termination Date.
Each Direction to Sell shall specify the number of, and date or dates on which
such number of, Purchased Shares are to be sold. Each date specified for such
sale must be an Exchange Business Day; provided, however, that if any date
specified for such sale is the same Exchange Business Day on which the Direction
to Sell is delivered to the Selling Stockholder, such Direction to Sell must be
delivered to the Selling Stockholder no later than 9:30 a.m., New York City
time, on such Exchange Business Day, unless otherwise agreed upon by the Selling
Stockholder. Upon receipt of a Direction to Sell that complies with this Section
1(g) and subject to the receipt, by the Selling Stockholder, of any deliveries
required under Section 6(b), the Selling Stockholder shall direct the Purchaser
to, and the Purchaser shall use, commercially reasonable efforts to sell
Purchased Shares in accordance with the Direction to Sell; provided, however,
that the Purchaser shall not be obligated to sell more Purchased Shares than
required to produce net proceeds equal to the Total Forward Price (as defined in
the Forward Purchase Agreement) at the time that such Direction to Sell is
received by the Purchaser.
3
<PAGE>
2. Representations and Warranties of the Company.
(a) The Company represents and warrants to the Purchaser and the
Selling Stockholder on and as of the date hereof, the Closing Date, each date
that the Company delivers a Direction to Sell or Make-whole Shares to the
Selling Stockholder, and each date that the Company files a Material Amendment
or Supplement to the Registration Statement (as defined in Section 6(c)) (each,
a "Representation Date") as follows :
(i) The Company meets the requirements for use of Form S-3
under the 1933 Act. The Company has prepared and filed the Registration
Statement with the Commission and, as of the Closing Date, the
Registration Statement (including any Rule 462(b) Registration
Statement) will have become effective under the 1933 Act; as of the
Closing Date and each Representation Date following the Closing Date,
no stop order suspending the effectiveness of the Registration
Statement (including any Rule 462(b) Registration Statement) will have
been issued under the 1933 Act and no proceedings for that purpose will
have been instituted or will be pending or, to the knowledge of the
Company, contemplated by the Commission, and any request on the part of
the Commission for additional information will have been complied with;
at the respective times that the Registration Statement, any Rule
462(b) Registration Statement, and any post-effective amendment thereto
(including the filing of the Company's most recent Annual Report on
Form 10-K with the Commission (the "Annual Report on Form 10-K"))
become effective and at each subsequent Representation Date, the
Registration Statement (including any Rule 462(b) Registration
Statement) and any amendments thereto comply and will comply in all
material respects with the requirements of the 1933 Act and the 1933
Act Regulations and do not and will not contain an untrue statement of
a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading;
each Preliminary Prospectus and Prospectus filed as part of the
Registration Statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the 1933 Act, complied or
will comply when so filed in all material respects with the 1933 Act;
each Preliminary Prospectus and the Prospectus delivered to the
Purchaser for use in connection with the offering of the Shares are or
will be identical to any electronically transmitted copies thereof
filed with the Commission pursuant to EDGAR, except to the extent
permitted by Regulation S-T; and neither the Prospectus nor any
amendment or supplement thereto includes or will include an untrue
statement of a material fact or omits or will omit to state a material
fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading; provided,
however, that the representations and warranties in this subsection
shall not apply to statements in or omissions from the Registration
Statement or the Prospectus made in reliance upon and in conformity
with information furnished to the Company in writing by the Purchaser
or the Selling Stockholder expressly for use in the Registration
Statement or the Prospectus.
(ii) The documents incorporated or deemed to be incorporated
by reference in the Registration Statement or the Prospectus, at the
time they were or hereafter are filed with the Commission, complied and
will comply in all material respects with the requirements of the 1934
Act and the rules and regulations of the Commission under the 1934 Act
(the "1934 Act Regulations").
4
<PAGE>
(iii) PricewaterhouseCoopers LLP and KPMG Peat Marwick LLP,
which certified the financial statements and supporting schedules of
the Company and Green Tree Financial Corporation ("Green Tree"),
respectively, included or incorporated by reference in the Registration
Statement and the Prospectus, each are independent public accountants
as required by the 1933 Act and the 1933 Act Regulations with respect
to the Company and Green Tree, respectively.
(iv) The financial statements of the Company included or
incorporated by reference in the Registration Statement and the
Prospectus, together with the related schedules and notes, present
fairly the financial position of the Company and its subsidiaries as of
the dates indicated and the results of their operations for the periods
specified. Except as otherwise stated therein, said financial
statements have been prepared in conformity with generally accepted
accounting principles applied on a consistent basis throughout the
periods involved. The supporting schedules, if any, included or
incorporated by reference in the Registration Statement and the
Prospectus present fairly the information required to be stated
therein. Any selected financial data and summary financial information
included in the Prospectus present fairly the information shown therein
and have been compiled on a basis consistent with that of the audited
financial statements included in the Registration Statement and the
Prospectus. Any pro forma financial statements and the related notes
thereto included in the Registration Statement and the Prospectus
present fairly the information shown therein, have been prepared in
accordance with the Commission's rules and guidelines with respect to
pro forma financial statements and have been properly compiled on the
bases described therein, and the assumptions used in the preparation
thereof are reasonable and the adjustments used therein are appropriate
to give effect to the transactions and circumstances referred to
therein.
(v) The statutory financial statements of each of the
Company's insurance subsidiaries, from which certain ratios and other
statistical data contained in the Registration Statement from time to
time have been derived, have for each relevant period been prepared in
accordance with accounting practices prescribed or permitted by the
National Association of Insurance Commissioners, and with respect to
each insurance subsidiary, the appropriate insurance department of the
state of domicile of such insurance subsidiary, and such accounting
practices have been applied on a consistent basis throughout the
periods involved, except as disclosed therein.
(vi) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, and except as
otherwise stated therein, (A) there has been no material adverse change
and no development which could reasonably be expected to result in a
material adverse change in the condition, financial or otherwise, or in
the earnings, business affairs or business prospects of the Company and
its subsidiaries, considered as one enterprise, whether or not arising
in the ordinary course of business (a "Material Adverse Effect"), (B)
there have been no transactions entered into by the Company or any of
its subsidiaries, other than those arising in the ordinary course of
business, which are material with respect to the Company and its
subsidiaries, considered as one enterprise, or (C) except for regular
dividends on the Common Stock or on the preferred stock of the Company
in amounts per share that are consistent with past practice (which
includes periodic dividend increases) or the applicable charter
document or supplement thereto,
5
<PAGE>
respectively, there has been no dividend or distribution of any kind
declared, paid or made by the Company on any class of its capital
stock.
(vii) The Company has been duly incorporated, is validly
existing as a corporation and its status is active under the laws of
the State of Indiana, with corporate power and authority to own, lease
and operate its properties and to conduct its business as presently
conducted and as described in the Prospectus and to enter into and
perform its obligations under, or as contemplated under, this Agreement
and the Forward Purchase Agreement. The Company is qualified as a
foreign corporation to transact business and is in good standing in
each jurisdiction in which such qualification is required, whether by
reason of the ownership or leasing of property or the conduct of
business, except where the failure to so qualify or be in good standing
would not have a Material Adverse Effect.
(viii) Each significant subsidiary (as such term is defined in
Rule 1-02 of Regulation S-X promulgated under the 1933 Act) (each, a
"Significant Subsidiary") of the Company is set forth on Schedule A
hereto and has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to own, lease and
operate its properties and to conduct its business as presently
conducted and as described in the Prospectus, and is qualified as a
foreign corporation to transact business and is in good standing in
each jurisdiction in which such qualification is required, whether by
reason of the ownership or leasing of property or the conduct of
business, except where the failure to so qualify or be in good standing
would not have a Material Adverse Effect. Except as otherwise stated in
the Registration Statement and the Prospectus, all of the issued and
outstanding shares of capital stock of each Significant Subsidiary of
the Company have been duly authorized and validly issued, are fully
paid and non-assessable and all such shares are owned by the Company,
directly or through its subsidiaries, free and clear of any material
security interest, mortgage, pledge, lien, encumbrance, claim or
equity.
(ix) The Company and its subsidiaries possess such permits,
licenses, approvals, consents and other authorizations issued by the
appropriate federal, state, local or foreign regulatory agencies or
bodies (including, without limitation, insurance licenses from the
insurance departments of the various states where the subsidiaries
write insurance business (the "Insurance Licenses")) that are material
to the Company and its subsidiaries taken as a whole and are necessary
to conduct the business now conducted by them; the Company and its
subsidiaries are in compliance with the terms and conditions of all
such Insurance Licenses, except where the failure to comply would not,
singly or in the aggregate, result in a Material Adverse Effect; all of
such Insurance Licenses are valid and in full force and effect, except
where the invalidity of such Insurance Licenses or the failure of such
Insurance Licenses to be in full force and effect would not result in a
Material Adverse Effect; and neither the Company nor any of its
subsidiaries has received any notice of proceedings relating to the
revocation or modification of any such Insurance Licenses which, singly
or in the aggregate, may reasonably be expected to result in a Material
Adverse Effect.
(x) All of the issued and outstanding shares of capital
stock of the Company have been duly authorized and are validly issued,
fully paid and non-assessable; and none of the outstanding shares of
capital stock of the Company were issued in violation of
6
<PAGE>
preemptive or other similar rights of any securityholder of the
Company; each of the Purchased Shares, when issued and delivered in
accordance with the provisions of this Agreement, and the Payment
Shares and Make-whole Shares, when issued and delivered in accordance
with the provisions of the Forward Purchase Agreement, will be duly
authorized, validly issued and fully paid and non-assessable and will
conform in all material respects to the description thereof contained
in the Prospectus; and the issuance of the Shares will not be subject
to preemptive or other similar rights.
(xi) Neither the Company nor any of its Significant
Subsidiaries is in violation of its charter or by-laws. None of the
Company or any of its Significant Subsidiaries is in default in the
performance or observance of any obligation, agreement, covenant or
condition contained in any contract, indenture, mortgage, note, lease,
loan or credit agreement or any other agreement or instrument (the
"Agreements and Instruments") to which the Company or any of its
Significant Subsidiaries is a party or by which any of them may be
bound, or to which any of the property or assets of the Company or any
of its Significant Subsidiaries is subject, or in violation of any
applicable law, rule or regulation or any judgment, order or decree of
any government, governmental instrumentality or court, domestic or
foreign, having jurisdiction over the Company or any of its Significant
Subsidiaries or any of their respective properties or assets, which
violation or default would, singly or in the aggregate, have a Material
Adverse Effect or materially and adversely affect the Company's
performance of its obligations under this Agreement or the Forward
Purchase Agreement.
(xii) The offer of the Shares as contemplated herein and in
the Prospectus, the execution, delivery and performance of this
Agreement and the Forward Purchase Agreement, and the consummation of
the transactions contemplated herein, therein and in the Registration
Statement (including the issuance and sale of the Shares and the use of
proceeds from the sale of the Purchased Shares as described in the
Prospectus under the caption "Use of Proceeds") and compliance by the
Company with its obligations hereunder and thereunder do not and will
not, whether with or without the giving of notice or passage of time or
both, conflict with or constitute a breach of any of the terms or
provisions of, or constitute a default or Repayment Event (as defined
below) under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or any
subsidiary pursuant to, the Agreements and Instruments (except for such
conflicts, breaches or defaults or liens, charges or encumbrances that
would not result in a Material Adverse Effect or materially and
adversely affect the Company's performance of its obligations under
this Agreement or the Forward Purchase Agreement), nor will such action
result in any violation of any applicable law, statute, rule,
regulation, judgment, order, writ or decree of any government,
governmental instrumentality or court, domestic or foreign, having
jurisdiction over the Company or any of its Significant Subsidiaries,
or any of their assets, properties or operations (except for such
violations that would not result in a Material Adverse Effect or
materially and adversely affect the Company's performance of its
obligations under this Agreement or the Forward Purchase Agreement),
nor will such action result in any violation of the provisions of the
charter or by-laws of the Company or any Significant Subsidiary. As
used herein, a "Repayment Event" means any event or condition which
gives the holder of any note, debenture or other evidence of
indebtedness of the Company or any Significant Subsidiary (or any
person acting on such holder's behalf) the
7
<PAGE>
right to require the repurchase, redemption or repayment of all or a
portion of such indebtedness by the Company or any Significant
Subsidiary.
(xiii) There is no action, suit, proceeding, inquiry or
investigation before or by any court or governmental agency or body,
domestic or foreign (including, without limitation, any proceeding to
revoke or deny renewal of any Insurance Licenses), now pending, or, to
the knowledge of the Company, threatened, against or affecting the
Company or any of its Significant Subsidiaries which is required to be
disclosed in the Registration Statement and the Prospectus (other than
as stated therein), or which might be reasonably expected to result in
a Material Adverse Effect or to materially and adversely affect the
Company's performance of its obligations under this Agreement or the
Forward Purchase Agreement. The aggregation of all pending legal or
governmental proceedings to which the Company or any of its
subsidiaries is a party or of which any of their respective properties
or assets is the subject which are not described in the Registration
Statement or the Prospectus, including ordinary routine litigation
incidental to the business of the Company or any of its subsidiaries,
could not be reasonably expected to result in a Material Adverse
Effect; and there are no contracts or documents of the Company or any
of its subsidiaries which are required to be filed as exhibits to the
Registration Statement, or to be incorporated by reference therein, by
the 1933 Act, the 1933 Act Regulations, the 1934 Act or the 1934 Act
Regulations, which have not been so filed or incorporated by reference.
(xiv) No authorization, approval, consent, order, registration
or qualification of or with any court or governmental authority or
agency (including, without limitation, any insurance regulatory agency
or body) is required in connection with the issuance and sale of the
Shares hereunder or under the Forward Purchase Agreement, or the
consummation by the Company of any other transactions contemplated
hereby, except such as have been obtained and made under the federal
securities laws or state insurance laws and such as may be required
under state or foreign securities or Blue Sky laws.
(xv) There are no holders of securities of the Company with
currently exercisable registration rights to have any securities
registered as part of the Registration Statement or included in the
offering contemplated by this Agreement.
(xvi) This Agreement and the Forward Purchase Agreement have
been duly authorized, executed and delivered by the Company and
constitute valid and legally binding agreements of the Company,
enforceable against the Company in accordance with their terms except
to the extent that enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally or by general principles of equity
(regardless of whether enforcement is considered in a proceeding at law
or in equity) (the "Bankruptcy Exceptions") or that enforcement of the
indemnification and contribution provisions of this Agreement may be
subject to public policy limitations.
(xvii) The Company is in compliance with the provisions of
that certain Florida act relating to disclosure of doing business in
Cuba, codified as Section 517.075 of the Florida statutes, and the
rules and regulations thereunder or is exempt therefrom.
8
<PAGE>
(xviii) Neither the Company nor any of its Significant
Subsidiaries is, or upon the issuance and sale of the Shares as herein
contemplated and the application of the net proceeds therefrom as
described in the Prospectus will be, an "investment company" or an
entity "controlled" by an "investment company" as such terms are
defined in the Investment Company Act of 1940, as amended (the "1940
Act").
(xix) None of the Company, its Significant Subsidiaries or any
of their respective directors, officers or controlling persons, has
taken, directly or indirectly, any action resulting in a violation of
Regulation M under the 1934 Act, or designed to cause or result in, or
that has constituted or that reasonably might be expected to
constitute, the stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the Common
Stock, in each case in violation of applicable law.
(b) Any certificate signed by an officer of the Company and delivered
to the Purchaser or the Selling Stockholder or to counsel for the Purchaser or
the Selling Stockholder pursuant to the provisions of this Agreement or the
Forward Purchase Agreement shall be deemed a representation and warranty by the
Company to the Purchaser or the Selling Stockholder, as applicable, as to the
matters covered thereby.
3. Certain Covenants of the Company, the Purchaser and the Selling
Stockholder. The Company, the Purchaser, and the Selling Stockholder agree as
follows:
(a) The Company and the Purchaser shall use commercially reasonable
efforts to have the Registration Statement declared effective on or before the
Closing Date and shall make any required filing of the Prospectus pursuant to
Rule 424(b) in the manner and within the time period required by Rule 424(b).
(b) The Company shall not mail or cause to be mailed a notice of
redemption of $85,965,000 principal amount of Notes to holders of record of the
Notes sooner than the second business day following the date of this Agreement.
(c) The Company shall use reasonable commercial efforts to have the
Purchased Shares and up to 467,000, in the aggregate, of Payment Shares and
Make-whole Shares listed, subject to official notice of issuance, on the NYSE on
or before the Closing Date.
(d) The Company shall furnish to the Purchaser and the Selling
Stockholder two signed copies of the Registration Statement, as initially filed
with the Commission, and of all amendments thereto, including all exhibits
thereto and all documents incorporated by reference therein.
(e) Subject to Section 3(f), the Company shall maintain the
effectiveness of the Registration Statement from the Closing Date until ten
Exchange Business Days following the settlement of the Company's obligations, if
any, under the Forward Purchase Agreement or such earlier date upon which the
Purchaser, as agent for the Selling Stockholder, has notified the Company that
all of the Shares (including the Payment Shares and Make-whole Shares, if any)
have been sold by the Purchaser on behalf of the Selling Stockholder (the
"Effective Period"). During the Effective Period, the Company shall:
9
<PAGE>
(i) file all documents required to be filed by the Company
with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of
the 1934 Act within the time periods required by the 1934 Act and the
1934 Act Regulations;
(ii) advise the Purchaser and the Selling Stockholder
promptly after the Company receives notice thereof, of the issuance by
the Commission of any stop order or of any order preventing or
suspending the use of any Prospectus, or the suspension of the
qualification of the Shares for offering or sale in any jurisdiction,
of the initiation or threatening of any proceeding for any such
purpose, or of any request by the Commission for the amendment or
supplementation of the Registration Statement or Prospectus or for
additional information; and in the event of the issuance of any such
stop order by the Commission or of any such order preventing or
suspending the use of any such prospectus or suspending any such
qualification, promptly use commercially reasonable efforts to obtain
its withdrawal;
(iii) subject to Section 3(e)(iv) and 3(f), prepare and file
such amendment or amendments to the Registration Statement and the
Prospectus as may be necessary to comply with the requirements of
Section 10(a)(3) of the 1933 Act;
(iv) furnish the Purchaser and the Selling Stockholder with a
copy of any proposed amendment or supplement to the Registration
Statement or Prospectus (other than any document proposed to be filed
by the Company pursuant to Section 13, 14 or 15(d)of the 1934 Act) a
reasonable amount of time before the proposed filing of such amendment
or supplement with the Commission and with such other information as
the Purchaser or Selling Stockholder may from time to time reasonably
request concerning the Company and its subsidiaries;
(v) advise the Purchaser and the Selling Stockholder
promptly after the Company receives notice thereof of the time when any
amendment to the Registration Statement has been filed or becomes
effective or any supplement to the Prospectus or any amended Prospectus
has been filed with the Commission;
(vi) furnish such information as may be required and
otherwise to cooperate in qualifying the Shares for offering and sale
under the securities or blue sky laws of such states as the Purchaser,
as agent for the Selling Stockholder, may designate and maintain such
qualifications in effect so long as required for the distribution of
the Shares; provided that the Company shall not be required to qualify
as a foreign corporation in any jurisdiction in which it is not so
qualified or subject itself to taxation in respect of doing business in
any jurisdiction in which it is not otherwise so subject or to consent
to the service of process under the laws of any such state (except
service of process with respect to the offering and sale of the
Shares); and promptly advise the Purchaser, as agent for the Selling
Stockholder, of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Shares for sale
in any jurisdiction or the initiation or threatening of any proceeding
for such purpose;
(vii) make available to the Purchaser, as agent for the
Selling Stockholder, as soon as practicable after the Closing Date, and
thereafter from time to time furnish to the
10
<PAGE>
Purchaser, as many copies of the Prospectus (or of the Prospectus as
amended or supplemented if the Company shall have made any amendments
or supplements thereto after the effective date of the Registration
Statement) as the Purchaser may reasonably request for the purposes
contemplated by the 1933 Act; and
(viii) furnish, as soon as practicable after the Closing Date,
and thereafter from time to time to the NYSE such number of copies of
the Prospectus (or of the Prospectus as amended or supplemented if the
Company shall have made any amendments or supplements thereto after the
effective date of the Registration Statement) as may be requested by
the NYSE under Rule 153 of the 1933 Act Regulations.
(f) The Company shall provide prompt notice, confirmed in writing, to
the Purchaser and the Selling Stockholder of (i) the discovery of any
information or the happening of any event known to the Company which, in the
judgment of the Company, would require the making of any change in the
Prospectus then being used, or in the information incorporated therein by
reference, so that the Prospectus would not include an untrue statement of
material fact or omit to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they are made, not
misleading, (ii) the Company's determination, for any reason, that it is
necessary to amend or supplement the Prospectus, or (iii) the Company's
election, for any business reason that the Company reasonably deems sufficient,
to delay filing an amendment or amendment to the Registration Statement or
Prospectus that it would otherwise be required to file under Section 3(e)(iii).
Upon the receipt of such notice, the Purchaser shall immediately discontinue
disposition of the Shares pursuant to the Registration Statement on behalf of
the Selling Stockholder until such time as the Purchaser and the Selling
Stockholder shall have received from the Company an amended or supplemented
Prospectus or, if appropriate, written notice from the Company that dispositions
of Shares may be resumed without amendment or supplementation of the
Registration Statement or Prospectus. The Company shall not have the right to
deliver to the Selling Stockholder a Direction to Sell or to elect net share
settlement or elect to deliver Make-whole Shares in payment of the Make-whole
Amount (as defined in the Forward Purchase Agreement) under the Forward Purchase
Agreement until such time as the Company shall have filed with the Commission
such amendment or supplement to the Registration Statement or Prospectus as may
be required and shall have delivered an amended or supplemented Prospectus to
the Purchaser and Selling Stockholder or shall have provided, if appropriate,
written notice to the Purchaser and Selling Stockholder that dispositions of
Shares may be resumed without amendment or supplementation of the Registration
Statement or Prospectus.
(g) The Purchaser and the Selling Stockholder shall each provide prompt
notice, confirmed in writing, to the Company of the discovery of any information
or the happening of any event known to the Purchaser or the Selling Stockholder,
respectively, which would require the making of any change in the information
furnished to the Company by the Purchaser or the Selling Stockholder,
respectively, for use in the Prospectus then being used so that such information
would not include an untrue statement of a material fact or omit to state a
material fact necessary to make the statements included in such information, in
the light of the circumstances in which they are made, not misleading.
(h) The Purchaser shall inform the Company of its intent to sell any of
the Purchased Shares on behalf of the Selling Stockholder, other than pursuant
to a Direction to Sell, sufficiently
11
<PAGE>
in advance of such sale to enable the Company to verify that the Prospectus then
being used will meet the requirements of the 1933 Act at the time of the
intended sales and to amend such Prospectus if it will not meet those
requirements.
(i) The Company shall apply the net proceeds from the sale of the
Purchased Shares in the manner set forth under the caption "Use of Proceeds" in
the Prospectus.
(j) The Company shall timely file such reports pursuant to the 1934 Act
as are necessary in order to make generally available to its security holders as
soon as practicable earnings statements of the Company satisfying the provisions
of Section 11(a) of the 1933 Act.
(k) The Company, if necessary or appropriate, shall file a registration
statement pursuant to Rule 462(b) under the 1933 Act to the extent necessary to
register the offering and sale of all Payment Shares and Make-whole Shares
issued under the Forward Purchase Agreement.
(l) The Company shall pay all costs, expenses, fees and taxes in
connection with (i) the preparation and filing of the Registration Statement,
any Preliminary Prospectus, the Prospectus, and any amendments or supplements
thereto, and the printing and furnishing of copies of each thereof to the
Purchaser and the Selling Stockholder (including costs of mailing and shipment),
(ii) the registration, issue, sale and delivery of the Shares to the Purchaser,
(iii) the producing and/or printing of this Agreement, any powers of attorney
and any closing documents (including compilations thereof) and the reproduction
and/or printing and furnishing of copies of each thereof to the Purchaser and
the Selling Stockholder (including costs of mailing and shipment), (iv) the
qualification of the Shares for offering and sale under state securities laws,
(v) the listing of the Shares on the NYSE, and (vi) the performance of the
Company's other obligations hereunder.
4. Conditions to the Obligations of the Purchaser to Purchase the
Purchased Shares.
The obligations of the Purchaser to purchase and pay for the Purchased
Shares shall be subject to the accuracy, as of the date of this Agreement and
the Closing Date, of the representations and warranties of the Company contained
herein and in the certificates of any officer of the Company or any of its
subsidiaries pursuant to the provisions hereof, to the performance by the
Company of its obligations hereunder, and to the following additional
conditions:
(a) The Registration Statement (including any Rule 462(b) Registration
Statement) shall have become effective not later than 10:00 a.m., New York City
time, on the Closing Date, no stop order suspending the effectiveness of the
Registration Statement or any part thereof shall have been issued under the 1933
Act or proceedings therefor instituted or threatened by the Commission, and any
request on the part of the Commission for additional information shall have been
complied with to the satisfaction of counsel to the Purchaser. If the filing of
a Prospectus, or any supplement thereto, is required pursuant to Rule 424(b),
such Prospectus shall have been filed within the manner and within the time
period required by the 1933 Act and the 1933 Act Regulations.
(b) The Shares shall have been approved for listing on the NYSE,
subject to official notice of issuance.
12
<PAGE>
(c) The Purchaser shall have received the favorable opinion of John J.
Sabl, Executive Vice President, General Counsel and Secretary of the Company,
dated the Closing Date, in form and substance satisfactory to counsel for the
Purchaser, to the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation under the laws of the State of Indiana.
(ii) The Company has corporate power and authority to own,
lease, and operate its properties and to conduct its business as
described in the Prospectus.
(iii) The Company is qualified as a foreign corporation to
transact business and is in good standing in each jurisdiction in which
such qualification is required, except where the failure to so qualify
or be in good standing would not result in a Material Adverse Effect.
(iv) All of the issued and outstanding shares of capital
stock of the Company have been duly authorized and are validly issued,
fully paid and non-assessable; none of the outstanding shares of
capital stock of the Company were issued in violation of preemptive or
other similar rights of any securityholder of the Company.
(v) Each Significant Subsidiary has been duly incorporated
and is validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation, has the corporate power
and authority to own, lease and operate its properties and to conduct
its business as described in the Prospectus, and is qualified as a
foreign corporation to transact business and is in good standing in
each jurisdiction in which such qualification is required, whether by
reason of the ownership or leasing of property or the conduct of
business, except where the failure to so qualify or be in good standing
would not have a Material Adverse Effect; all of the issued and
outstanding capital stock of each Significant Subsidiary has been duly
authorized and validly issued, is fully paid and nonassessable, and,
except as set forth in the Prospectus, all such shares are owned by the
Company, directly or through its subsidiaries, free and clear of any
material security interest, mortgage, pledge, lien, encumbrance, claim
or equity.
(vi) All legally required proceedings in connection with the
authorization and valid issuance of the Shares in accordance with this
Agreement and the Forward Purchase Agreement and the sale of the Shares
in accordance with this Agreement and the Prospectus (other than the
filing of post-issuance reports, the non-filing of which would not
render the Shares invalid) have been taken, and all legally required
orders, consents or other authorizations or approvals of any other
public boards or bodies (including, without limitation, any insurance
regulatory agency or body) in connection with the authorization and
valid issuance of the Shares in accordance with this Agreement and the
Forward Purchase Agreement and the sale of the Shares in accordance
with this Agreement and the Prospectus (other than in connection with
or in compliance with the provisions of the securities or Blue Sky laws
of any jurisdictions, as to which no opinion need be expressed) have
been obtained and are in full force and effect.
(vii) The Registration Statement is effective under the 1933
Act; any required filing of the Prospectus pursuant to Rule 424(b) has
been made in the manner and within the time
13
<PAGE>
period required by Rule 424(b); and, to the knowledge of counsel, no
stop order suspending the effectiveness of the Registration Statement
has been issued under the 1933 Act, and no proceedings therefor have
been initiated or threatened by the Commission.
(viii) The Registration Statement, as of its effective date,
and the Prospectus and each amendment or supplement thereto, as of its
issue date (in each case, other than the financial statements and the
notes thereto, the financial schedules, and any other financial data
included or incorporated by reference therein, as to which such counsel
need express no opinion) complied as to form in all material respects
with the requirements of the 1933 Act and the 1933 Act Regulations.
(ix) Each of the documents incorporated by reference in the
Registration Statement or Prospectus, at the time they were filed or
last amended (other than the financial statements and the notes
thereto, the financial schedules, and any other financial data included
or incorporated by reference therein, as to which such counsel need
express no opinion) complied as to form in all material respects with
the requirements of the 1934 Act and the 1934 Act Regulations, as
applicable.
(x) The Common Stock, including the Shares, conforms in all
material respects to the description thereof contained in the
Prospectus and the Registration Statement.
(xi) This Agreement has been duly authorized, executed and
delivered by the Company and constitutes a valid and legally binding
obligation of the Company, enforceable against the Company in
accordance with its terms, except to the extent that enforcement
thereof may be limited by the Bankruptcy Exceptions and that
enforcement of the indemnification and contribution provisions thereof
may be subject to public policy limitations.
(xii) The Forward Purchase Agreement has been duly authorized,
executed and delivered by the Company and constitutes a valid and
legally binding obligation of the Company, enforceable against the
Company in accordance with its terms, except to the extent that
enforcement thereof may be limited by the Bankruptcy Exceptions; the
Forward Purchase Agreement conforms in all material respects to the
description thereof contained in the Prospectus.
(xiii) The issuance and sale of the Purchased Shares, in
accordance with the provisions of this Agreement, and the issuance and
sale of the Payment Shares and Make- whole Shares, in accordance with
the provisions of the Forward Purchase Agreement, have been duly
authorized by the Company, and the Purchased Shares, when issued and
delivered in accordance with the provisions of this Agreement, and the
Payment Shares and Make-whole Shares, if and when issued in accordance
with the provisions of the Forward Purchase Agreement, will be validly
issued and fully paid and non-assessable and will conform in all
material respects to the description thereof contained in the
Prospectus; the issuance of the Shares is not subject to preemptive or
other similar rights; the Purchased Shares and up to 467,000 in the
aggregate, of Payment Shares and Make- whole Shares have been approved
for listing on the NYSE, upon official notice of issuance.
14
<PAGE>
(xiv) The offer of the Shares as contemplated herein and in
the Prospectus, the execution, delivery and performance of this
Agreement and the Forward Purchase Agreement, and the consummation of
the transactions contemplated herein, therein and in the Registration
Statement (including the issuance and sale of the Shares and the use of
the proceeds from the sale of the Purchased Shares as described in the
Prospectus under the caption "Use of Proceeds") and compliance by the
Company with its obligations hereunder and thereunder have been
authorized by all necessary corporate action and do not and will not,
whether with or without the giving of notice or passage of time or
both, conflict with or constitute a breach of any of the terms or
provisions of, or constitute a default or Repayment Event under, or
result in the creation or imposition of any lien, charge or encumbrance
upon any property or assets of the Company or any Significant
Subsidiary pursuant to, the Agreements and Instruments (except for such
conflicts, breaches, defaults, or liens, charges or encumbrances that
would not result in a Material Adverse Effect or materially and
adversely affect the Company's performance of its obligations under
this Agreement or the Forward Purchase Agreement) nor will such action
result in any violation of any applicable law, statute, rule,
regulation, judgment, order, writ or decree of any government,
government instrumentality or court, domestic or foreign, having
jurisdiction over the Company or any Significant Subsidiary or any of
their assets, properties, or operations (except for such violations
that would not result in a Material Adverse Effect or materially and
adversely affect the Company's performance of its obligations under
this Agreement or the Forward Purchase Agreement), nor will such action
result in any violation of the provisions of the charter or by-laws of
the Company or any Significant Subsidiary.
(xv) To such counsel's knowledge, there are no statutes
required to be described or incorporated by reference in the
Registration Statement which are not described or incorporated by
reference, and there are no legal or governmental proceedings pending
or, to such counsel's knowledge, threatened which are required to be
disclosed or incorporated by reference in the Registration Statement,
other than those disclosed or incorporated by reference therein.
(xvi) To such counsel's knowledge, there are no contracts,
indentures, mortgages, agreements, notes, leases or other instruments
required to be described or referred to or incorporated by reference in
the Registration Statement or to be filed as exhibits thereto other
than those described or referred to or incorporated by reference
therein or filed as exhibits thereto; the descriptions thereof or
references thereto are true and correct in all material respects.
(xvii) To such counsel's knowledge, neither the Company nor
any of its Significant Subsidiaries is in violation of its charter or
by-laws and no default by the Company or any of its Significant
Subsidiaries exists in the due performance or observance of any
material obligation, agreement, covenant or condition contained in any
Agreement and Instrument that is described or referred to in the
Registration Statement or the Prospectus or filed or incorporated by
reference as an exhibit to the Registration Statement.
(xviii) No authorization, approval, consent, registration or
qualification of or with any court or governmental authority or agency
(including, without limitation, any insurance regulatory agency or
body) is required for the issuance and sale of the Shares by the
15
<PAGE>
Company to the Purchaser or the performance by the Company of its
obligations under this Agreement and the Forward Purchase Agreement,
except such as has been obtained and made under the federal securities
laws or such as may be required under state or foreign securities or
Blue Sky laws.
(xix) The Company and its subsidiaries possess such permits,
licenses, approvals, consents and other authorizations issued by the
appropriate federal, state, local or foreign regulatory agencies or
bodies (including, without limitation, the Insurance Licenses) that are
material to the Company and its subsidiaries taken as a whole and are
necessary to conduct the business now conducted by them; the Company
and its subsidiaries are in compliance with the terms and conditions of
all such Insurance Licenses, except where the failure to so comply
would not, singly or in the aggregate, result in a Material Adverse
Effect; all of the Insurance Licenses are valid and in full force and
effect, except where the invalidity of such Insurance Licenses or the
failure of such Insurance Licenses to be in full force and effect would
not result in a Material Adverse Effect or materially and adversely
affect the Company's performance of its obligations under this
Agreement or the Forward Purchase Agreement; and neither the Company
nor any of its subsidiaries has received any notice of proceedings
relating to the revocation or modification of any such Insurance
Licenses which, singly or in the aggregate, may reasonably be expected
to result in a Material Adverse Effect or to materially and adversely
affect the Company's performance of its obligations under this
Agreement or the Forward Purchase Agreement.
(xx) Neither the Company nor any of its subsidiaries is, and
upon the consummation of the transactions contemplated in this
Agreement and the Forward Purchase Agreement and the application of the
net proceeds from the Shares as described in the Prospectus will be, an
"investment company" or an entity "controlled" by an "investment
company," as such terms are defined in the 1940 Act.
Moreover, such counsel shall confirm that nothing has come to such
counsel's attention that causes such counsel to believe that the Registration
Statement (except for financial statements and the notes thereto, the financial
schedules and any other financial data included or incorporated by reference
therein as to which such counsel need express no opinion), at the time it became
effective or at the Representation Date, contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading or that the
Prospectus (except for financial statements and the notes thereto, the financial
schedules and any other financial data included or incorporated by reference
therein as to which such counsel need express no opinion), on the date of issue
or the Representation Date, included or includes an untrue statement of a
material fact or omitted or omits to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
(d) On the Closing Date, the Purchaser shall have received from Schiff
Hardin & Waite, counsel for the Purchaser, such opinion or opinions, dated the
date hereof, with respect to the issuance and sale of the Shares, the
Registration Statement, the Prospectus (together with any supplement thereto)
and other related matters as the Purchaser may reasonably require.
16
<PAGE>
(e) On the Closing Date, the Purchaser shall have received a
certificate of the President or a Vice-President of the Company and of the Chief
Financial Officer or Chief Accounting Officer of the Company, dated the Closing
Date, to the effect that:
(i) The Registration Statement has been declared effective,
and no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
initiated or, to the knowledge of such officers, threatened by the
Commission;
(ii) the representations and warranties of the Company in
Section 1 of this Agreement are true and correct as though expressly
made at and as of the Closing Date;
(iii) the Company has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied at or
prior to the Closing Date; and
(iv) since the date of the most recent financial statements
included in the Prospectus (exclusive of any supplement thereto), there
has been no material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects
of the Company and its subsidiaries considered as one enterprise,
whether or not in the ordinary course of business, except as set forth
in the Prospectus (exclusive of any supplement thereto).
(f) On the Closing Date, PricewaterhouseCoopers LLP shall have
furnished to the Purchaser a letter, dated the Closing Date, in form and
substance satisfactory to the Purchaser, to the effect set forth in Exhibit A.
(g) Since the execution of this Agreement or, if earlier, the dates as
of which information is given in the Registration Statement (exclusive of any
amendment thereof) and the Prospectus (exclusive of any supplement thereto), no
material adverse change shall have occurred in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects of the
Company and its subsidiaries, considered as one enterprise, whether or not in
the ordinary course of business.
(h) Counsel for the Purchaser shall have been furnished with such
documents and opinions as they may require for the purpose of enabling them to
pass upon the issuance and sale of the Shares under this Agreement and the
Forward Purchase Agreement, as herein and therein contemplated, and related
proceedings, or in order to evidence the accuracy of any of the representations
or warranties, or the fulfillment of any of the conditions herein contained; and
all proceedings taken by the Company in connection with the issuance and sale of
the Shares under this Agreement and the Forward Purchase Agreement as herein and
therein contemplated shall be satisfactory in form and substance to the
Purchaser and counsel for the Purchaser.
5. Reimbursement of Purchaser's Expenses. The Company shall reimburse
the Purchaser and the Selling Stockholder for all reasonable out-of-pocket
expenses (including reasonable fees and disbursements of counsel in connection
with the transactions contemplated by this Agreement), up to a maximum
reimbursement of $150,000 in the aggregate for all such out-of-pocket expenses
incurred by the Purchaser and the Selling Stockholder in connection with the
17
<PAGE>
proposed purchase and sale of the Shares. Such reimbursement shall be made, from
time to time, within 20 days of the Company's receipt of a written invoice from
the Purchaser and the Selling Stockholder itemizing such expenses.
6. Additional Covenants of the Company.
The Company further covenants and agrees with the Purchaser and the
Selling Stockholder as follows:
(a) Each delivery by the Company of a Direction to Sell to the
Purchaser or of Make- whole Shares to the Selling Stockholder shall be deemed to
be an affirmation that the representations and warranties of the Company
contained in Section 1 of this Agreement and in any officers' certificate
delivered to the Purchaser or the Selling Stockholder pursuant hereto are true
and correct at the time of such delivery, and an undertaking that such
representations and warranties will be true and correct at the date of sale
specified in the Direction to Sell, as though made at and as of each such time
(it being understood that such representations and warranties shall relate to
the Registration Statement and Prospectus as amended and supplemented to each
such time).
(b) Each time that (i) the Company shall file a Material Amendment or
Supplement to the Registration Statement or the Prospectus (as defined in
Section 6(c)), (ii) the Purchaser or the Selling Stockholder shall so require as
a condition to the sale of Purchased Shares pursuant to a Direction to Sell, or
(iii) the Selling Stockholder shall so require as a condition to the acceptance
by the Selling Stockholder of Make-whole Shares under the Forward Purchase
Agreement in payment of the Make-whole Amount (as defined in the Forward
Purchase Agreement), the Company shall furnish or cause to be furnished to the
Purchaser and/or the Selling Stockholder, as applicable, the following:
(i) a certificate, dated the date of filing with the
Commission or the date of effectiveness of such amendment or
supplement, as applicable, or the date of delivery of a Direction to
Sell or of Make-whole Shares, as the case may be, in form and substance
reasonably satisfactory to the Purchaser and/or the Selling
Stockholder, as applicable, to the effect that the representations
contained in Section 1 of this Agreement and in the certificate
referred to in Section 4(e) hereof are true and correct at the time of
the filing or effectiveness of such amendment or supplement, as
applicable, or of the delivery of the Direction to Sell or of
Make-whole Shares, as the case may be, as though made at and as of such
time (except that such representations and warranties shall be deemed
to relate to the Registration Statement and the Prospectus as amended
and supplemented to such time) or, in lieu of such certificate, a
certificate of the same tenor as the certificate referred to Section
4(e) hereof, modified as necessary to relate to the Registration
Statement and the Prospectus as amended and supplemented to the time of
delivery of such certificate;
(ii) the written opinion of John J. Sabl, Executive Vice
President, General Counsel and Secretary of the Company, or other
counsel satisfactory to the Purchaser and/or the Selling Stockholder,
as the case may be, dated the date of filing with the Commission or the
date of effectiveness of such amendment or supplement, as applicable,
or the date of delivery of a Direction to Sell or of Make-whole Shares,
as the case may be,
18
<PAGE>
in form and substance satisfactory to the Purchaser and/or the Selling
Stockholder, as applicable, of the same tenor as the opinion referred
to in Section 4(c) hereof, but modified as necessary to relate to the
Registration Statement and the Prospectus as amended and supplemented
to the time of delivery of such opinion or, in lieu of such opinion,
counsel last furnishing such opinion to the Purchaser and/or the
Selling Stockholder shall furnish the Purchaser and/or the Selling
Stockholder, as applicable, with a letter substantially to the effect
that the Purchaser and/or the Selling Stockholder, as applicable, may
rely on such last opinion to the same extent as though it were dated
the date of such letter authorizing reliance (except that statements in
such last opinion shall be deemed to relate to the Registration
Statement and the Prospectus as amended and supplemented to the time of
delivery of such letter authorizing reliance); and
(iii) a letter, dated the date of filing with the Commission
or the date of effectiveness of such amendment or supplement, as
applicable, or the date of such delivery of a Direction to Sell or of
Make-whole Shares, as the case may be, of PricewaterhouseCoopers LLP to
the same tenor as the letter referred to in Section 4(f) hereof, but
modified to relate to the Registration Statement and Prospectus as
amended and supplemented to the date of such letter.
(c) A "Material Amendment or Supplement to the Registration Statement
or the Prospectus" shall mean, during the Effective Period, (i) any amendment to
the Registration Statement filed by the Company under the 1933 Act, (ii) each
Annual Report on Form 10-K or Quarterly Report on Form 10-Q filed by the
Company, (iii) any Current Report on Form 8-K which contains financial
information required to be set forth in or incorporated by reference into the
Prospectus pursuant to Item 11 of Form S-3 under the Securities Act, and (iv)
any Current Report on Form 8-K , upon the reasonable request of the Purchaser
and the Selling Stockholder. The Company shall deliver the documents provided
for in Section 6(b) upon the date of filing of any Material Amendment or
Supplement to the Registration Statement or Prospectus or such other date
mutually agreed upon by the Company, the Purchaser and the Selling Stockholder.
(d) In the event that the Purchaser or the Selling Stockholder elects
to exercise its right to require delivery of the documents provided for in
Section 6(b) as a condition to the sale of Purchased Shares pursuant to a
Direction to Sell or that the Selling Stockholder elects to exercise its right
to require delivery of such documents as a condition to its acceptance of
Make-whole Shares in payment of the Make-whole Amount, the Purchaser or the
Selling Stockholder, as applicable, shall provide written notice of its intent
to require delivery of such documents within 24 hours of receipt of a Direction
to Sell or of receipt by the Selling Stockholder of notice from the Company of
its election to pay the Make-whole Amount in Make-whole Shares. Neither the
Selling Stockholder nor the Purchaser shall have any obligation to sell
Purchased Shares pursuant to a Direction to Sell and the Selling Stockholder
shall have no obligation to accept Payment Shares or Make-whole Shares in
payment of the Make-whole Amount until such time as the Company has complied
with the provisions of Section 6(b).
7. Termination by the Purchaser.
(a) The Purchaser may terminate this Agreement in its absolute
discretion at any time prior to the purchase of the Purchased Shares, if (i)
since the time of execution of this Agreement,
19
<PAGE>
there has been any material adverse change, financial or otherwise (other than
as disclosed in the Registration Statement and Prospectus), in the operations,
business, condition or prospects of the Company and its subsidiaries, considered
as one enterprise, (ii) at the time of such termination, (x) trading in
securities on the NYSE, the American Stock Exchange or the Nasdaq National
Market shall have been suspended or limitations or minimum prices shall have
been established on any such exchange or market, (y) a banking moratorium shall
have been declared either by the United States or New York State authorities, or
(z) the United States shall have declared war in accordance with its
constitutional processes or there shall have occurred any material outbreak or
escalation of hostilities or other national or international calamity or crisis
of such magnitude in its effect on the financial markets of the United States
as, in the Purchaser's judgment, to make it impracticable to market the Shares
in the manner contemplated by this Agreement, or (iii) the Common Stock shall
have ceased to be registered under the 1934 Act or listed on the NYSE, or the
Commission, the NYSE or the Company shall have initiated proceedings for such
deregistration or delisting.
(b) If the Purchaser elects to terminate this Agreement as provided in
this Section 7, the Purchaser shall notify the Company promptly of such
termination. Such termination shall be effective upon the Company's receipt of
such notice. Upon such termination, the Purchaser shall not be under any
obligation or liability to the Company under this Agreement, and Company shall
not be under any obligation or liability under this Agreement (except to the
extent provided in Sections 3(l) and 5).
8. Indemnification.
(a) The Company agrees to indemnify and hold harmless the Purchaser and
each person, if any, who controls the Purchaser within the meaning of Section 15
of the 1933 Act or Section 20 of the 1934 Act, as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment thereto) or the omission or
alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not misleading or
arising out of any untrue statement or alleged untrue statement of a
material fact included in any Preliminary Prospectus or the Prospectus
(or any amendment or supplement thereto), or the omission or alleged
omission therefrom of a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened,
or of any claim whatsoever arising out of or based upon any such untrue
statement or omission, or any such alleged untrue statement or
omission, provided, that (subject to Section 8(f) below) any such
settlement is effected with the written consent of the Company; and
(iii) against any and all expense whatsoever, as incurred
(including the fees and disbursements of counsel chosen by the
Purchaser), reasonably incurred in investigating,
20
<PAGE>
preparing or defending against any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened,
or any claim whatsoever arising out of or based upon any such untrue
statement or omission, or any such alleged untrue statement or
omission, to the extent that any such expense is not paid under (i) or
(ii) above; provided, however, that the foregoing indemnity agreement
shall not apply to any loss, liability, claim, damage or expense to the
extent arising out of or based upon any untrue statement or omission or
alleged untrue statement or omission (A) made in reliance upon and in
conformity with written information furnished to the Company by the
Purchaser expressly for use in the Registration Statement (or any
amendment thereto), or any Preliminary Prospectus or the Prospectus (or
any amendment or supplement thereto), or (B) made in any Preliminary
Prospectus and corrected in the Prospectus, as supplemented, where the
person asserting any such loss, liability, claim, damage or expense
purchased the Shares that are the subject thereof, and it shall have
been established (i) that there was not sent or given, at or prior to
the written confirmation of such sale, a copy of the Prospectus
(excluding documents incorporated by reference) in any case where such
delivery is required by the 1933 Act and (ii) the Company shall have
previously furnished copies thereof in sufficient quantities to the
Purchaser.
(b) The Purchaser agrees to indemnify and hold harmless the Company,
its directors, each of its officers who signed the Registration Statement, and
each person, if any, who controls the Company within the meaning of Section 15
of the 1933 Act or Section 20 of the 1934 Act against any and all loss,
liability, claim, damage and expense described in the indemnity contained in
Section 8(a), as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in the Registration
Statement (or any amendment thereto), or any Preliminary Prospectus or the
Prospectus (or any amendment or supplement thereto) in reliance upon and in
conformity with written information furnished to the Company by the Purchaser
expressly for use in the Registration Statement (or any amendment thereto) or
such preliminary prospectus or the Prospectus (or any amendment or supplement
thereto).
(c) The Company agrees to indemnify and hold harmless the Selling
Stockholder and each person, if any, who controls the Selling Stockholder within
the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act, as
follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment thereto) or the omission or
alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not misleading or
arising out of any untrue statement or alleged untrue statement of a
material fact included in any Preliminary Prospectus or the Prospectus
(or any amendment or supplement thereto), or the omission or alleged
omission therefrom of a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened,
or of any claim whatsoever arising out of or based upon any such untrue
21
<PAGE>
statement or omission, or any such alleged untrue statement or
omission, provided, that (subject to Section 8(f) below) any such
settlement is effected with the written consent of the Company; and
(iii) against any and all expense whatsoever, as incurred
(including the fees and disbursements of counsel chosen by the Selling
Stockholder), reasonably incurred in investigating, preparing or
defending against any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or any claim
whatsoever arising out of or based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, to the
extent that any such expense is not paid under (i) or (ii) above;
provided, however, that the foregoing indemnity agreement shall not
apply to any loss, liability, claim, damage or expense to the extent
arising out of or based upon any untrue statement or omission or
alleged untrue statement or omission (A) made in reliance upon and in
conformity with written information furnished to the Company by the
Selling Stockholder expressly for use in the Registration Statement (or
any amendment thereto), or any Preliminary Prospectus or the Prospectus
(or any amendment or supplement thereto), or (B) made in any
Preliminary Prospectus and corrected in the Prospectus, where the
person asserting any such loss, liability, claim, damage or expense
purchased the Shares that are the subject thereof, and it shall have
been established (i) that there was not sent or given, at or prior to
the written confirmation of such sale, a copy of the Prospectus
(excluding documents incorporated by reference) in any case where such
delivery is required by the 1933 Act and (ii) the Company shall have
previously furnished copies thereof in sufficient quantities to the
Selling Stockholder or the Purchaser, as agent for the Selling
Stockholder.
(d) The Selling Stockholder agrees to indemnify and hold harmless the
Company, its directors, each of its officers who signed the Registration
Statement, and each person, if any, who controls the Company within the meaning
of Section 15 of the 1933 Act or Section 20 of the 1934 Act against any and all
loss, liability, claim, damage and expense described in the indemnity contained
in Section 8(c), as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in the Registration
Statement (or any amendment thereto), or any Preliminary Prospectus or the
Prospectus (or any amendment or supplement thereto) in reliance upon and in
conformity with written information furnished to the Company by the Selling
Stockholder expressly for use in the Registration Statement (or any amendment
thereto) or such preliminary prospectus or the Prospectus (or any amendment or
supplement thereto).
(e) Each indemnified party shall give notice as promptly as reasonably
practicable to each indemnifying party of any action commenced against it in
respect of which indemnity may be sought hereunder, but failure to so notify an
indemnifying party shall not relieve such indemnifying party from any liability
hereunder to the extent it is not materially prejudiced as a result thereof and
in any event shall not relieve it from any liability which it may have otherwise
than on account of this indemnity agreement. In the case of parties indemnified
pursuant to Section 6(a) of this Section, counsel to the indemnified parties
shall be selected by the Purchaser, in the case of parties indemnified pursuant
to Section 6(c) of this Section, counsel to the indemnified parties shall be
selected by the Selling Stockholder, and in the case of parties indemnified
pursuant to Section 6(b) and Section 6(d) of this Section, counsel to the
indemnified parties shall be selected by the Company; provided, however, that in
the event that the Company is obligated to indemnify parties
22
<PAGE>
pursuant to both Section 6(a) and Section 6(c) in connection with any one action
or separate but similar or related actions in the same jurisdiction arising out
of the same general allegations or circumstances, one and the same counsel (in
addition to any local counsel) to such indemnified parties shall be selected by
the Selling Stockholder. An indemnifying party may participate at its own
expense in the defense of any such action; provided, however, that counsel to
the indemnifying party shall not (except with the consent of the indemnified
party) also be counsel to the indemnified party. In no event shall the
indemnifying parties be liable for fees and expenses of more than one counsel
(in addition to any local counsel) separate from their own counsel for all
indemnified parties in connection with any one action or separate but similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances. No indemnifying party shall, without the prior
written consent of the indemnified parties, settle or compromise or consent to
the entry of any judgment with respect to any litigation, or any investigation
or proceeding by any governmental agency or body, commenced or threatened, or
any claim whatsoever in respect of which indemnification or contribution could
be sought under this Section 8 or Section 9 (whether or not the indemnified
parties are actual or potential parties thereto), unless such settlement,
compromise or consent (i) includes an unconditional release of each indemnified
party from all liability arising out of such litigation, investigation,
proceeding or claim and (ii) does not include a statement as to or an admission
of fault, culpability or a failure to act by or on behalf of any indemnified
party.
(f) If at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel, such indemnifying party agrees that it shall be liable for any
settlement of the nature contemplated by Section 6(a)(ii) and Section 6(c)(ii)
effected without its written consent if (i) such settlement is entered into more
than 45 days after receipt by such indemnifying party of the aforesaid request,
(ii) such indemnifying party shall have received notice of the terms of such
settlement at least 30 days prior to such settlement being entered into and
(iii) such indemnifying party shall not have reimbursed such indemnified party
in accordance with such request prior to the date of such settlement.
Notwithstanding the immediately preceding sentence, if at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, an indemnifying party shall
not be liable for any settlement of the nature contemplated by Section 6(a)(ii)
or Section 6(c)(ii) effected without its consent if such indemnifying party (i)
reimburses such indemnified party in accordance with such request to the extent
it considers such request to be reasonable and (ii) provides written notice to
the indemnified party substantiating the unpaid balance as unreasonable, in each
case prior to the date of such settlement.
9. Contribution.
(a) If the indemnification provided for in Section 8 is for any reason
unavailable to or insufficient to hold harmless an indemnified party in respect
of any losses, liabilities, claims, damages or expenses referred to therein,
then each indemnifying party shall contribute to the aggregate amount of such
losses, liabilities, claims, damages and expenses incurred by such indemnified
party, as incurred, (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company, the Purchaser, and the Selling
Stockholder from the offering of the Purchased Shares pursuant to this Agreement
or (ii) if the allocation provided by clause (i) is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of the
Company, the Purchaser, and the Selling Stockholder in connection with the
statements or omissions which resulted in such
23
<PAGE>
losses, liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations.
The relative benefits received by Company, the Purchaser, and the
Selling Stockholder in connection with the offering of the Shares pursuant to
this Agreement shall be deemed to be in the same respective proportions as (i)
the total proceeds from the sale to the Purchaser of the Purchased Shares (less
the Advisory Fee, the Commission (as defined in the Forward Purchase Agreement),
and the aggregate Floating Amounts (as defined in the Forward Purchase
Agreement) received by the Selling Stockholder less the Selling Stockholder's
cost of funding the Total Forward Price (as defined in the Forward Purchase
Agreement), but before deducting expenses) received by the Company, (ii) the
Advisory Fee and the Commission received by the Purchaser, and (iii) the
aggregate Floating Amounts (as defined in the Forward Purchase Agreement)
received by the Selling Stockholder less the Selling Stockholder's cost of
funding the Total Forward Price (as defined in the Forward Purchase Agreement).
The relative fault of the Company, the Purchaser, and the Selling
Stockholder shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Company, the Purchaser or the Selling Stockholder and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The Company, the Purchaser and the Selling Stockholder agree that it
would not be just and equitable if contribution pursuant to this Section 9 were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to above in this
Section 9. The aggregate amount of losses, liabilities, claims, damages and
expenses incurred by an indemnified party and referred to above in this Section
9 shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue or alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 9, each person, if any, who controls the
Purchaser or Selling Stockholder within the meaning of Section 15 of the 1933
Act or Section 20 of the 1934 Act shall have the same rights to contribution as
the Purchaser or the Selling Stockholder, respectively, and each director of the
Company, each officer of the Company who signed the Registration Statement, and
each person, if any, who controls the Company within the meaning of section 15
of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to
contribution as the Company.
10. Notices. All notices hereunder shall be in writing and delivered by
hand, overnight courier, mail or facsimile, and (i) if to the Purchaser, shall
be sufficient in all respects if delivered to Warburg Dillon Read LLC, 677
Washington Boulevard Stamford, Connecticut 06901, Attention: Equity Risk
Management Department, Facsimile No. 203-719-7031, with a copy at that same
address to the attention of Legal & External Affairs, Facsimile No.
203-719-6097, (ii) if to the Selling
24
<PAGE>
Stockholder, shall be sufficient in all respects if delivered to UBS AG, London
Branch, c/o Warburg Dillon Read LLC, 677 Washington Boulevard Stamford,
Connecticut 06901, Attention: Equity Risk Management Department, Facsimile No.
203-719-7031, with a copy at that same address to the attention of Legal &
External Affairs, Facsimile No. 203-719-6097, and (iii) if to the Company, shall
be sufficient in all respects if delivered or sent to the Company at the offices
of the Company at 11825 N. Pennsylvania Street, Carmel, Indiana 46032,
Attention: John J. Sabl, Executive Vice President, General Counsel and
Secretary, Facsimile No. 317-817-6327.
11. Governing Law; Construction. This Agreement and any claim,
counterclaim or dispute of any kind or nature whatsoever arising out of or in
any way relating to this Agreement ("Claim"), directly or indirectly, shall be
governed by, and construed in accordance with, the laws of the State of New
York, other than rules governing choice of applicable law. The Section headings
in this Agreement have been inserted as a matter of convenience of reference and
are not a part of this Agreement.
12. Parties in Interest. The Agreement herein set forth has been and is
made solely for the benefit of the Purchaser, the Selling Stockholder and the
Company and to the extent provided in Section 8 and Section 9 hereof the
controlling persons, directors and officers referred to in such sections, and
their respective successors, assigns, heirs, personal representatives and
executors and administrators. No other person, partnership, association or
corporation (including a purchaser, as such purchaser, from the Selling
Stockholder or the Purchaser (other than the Selling Stockholder)) shall acquire
or have any right under or by virtue of this Agreement.
13. Counterparts. This Agreement may be signed by the parties in one or
more counterparts, which together shall constitute one and the same agreement
among the parties.
14. Successors and Assigns. This Agreement shall be binding upon the
Purchaser, the Selling Stockholder and the Company and their successors and
assigns and any successor or assign of any substantial portion of the Company's,
the Purchaser's and the Selling Stockholder's respective businesses and/or
assets.
15. Relationship between the Purchaser and the Selling Stockholder.
Warburg Dillon Read LLC, an indirect, wholly owned subsidiary of UBS AG, is not
a bank and is separate from any affiliated bank, including the London Branch of
UBS AG or any U.S. branch or agency of UBS AG. Because Warburg Dillon Read LLC
is a separately incorporated entity, it is solely responsible for its own
contractual obligations and commitments, including obligations with respect to
sales and purchases of securities. Purchased Shares offered and sold by the
Purchaser, as agent for the Selling Stockholder, are not deposits, are not
insured by the Federal Deposit Insurance Corporation, are not guaranteed by the
Selling Stockholder or any other branch or agency of UBS AG, and are not
otherwise an obligation or responsibility of a branch or agency of UBS AG.
25
<PAGE>
If the foregoing correctly sets forth the understanding among the
Company, the Purchaser and the Selling Stockholder, please so indicate in the
space provided below for the purpose, whereupon this letter and your acceptance
shall constitute a binding agreement between the Company, the Purchaser and the
Selling Stockholder.
Very truly yours,
CONSECO, INC.
By: __________________________________
Name: __________________________________
Title: __________________________________
Accepted and agreed to as of the
date first above written:
WARBURG DILLON READ LLC
By: _____________________________
Name: _____________________________
Title: _____________________________
By: _____________________________
Name: _____________________________
Title: _____________________________
UBS AG, LONDON BRANCH
By: _____________________________
Name: _____________________________
Title: _____________________________
By: _____________________________
Name: _____________________________
Title: _____________________________
26
<PAGE>
SCHEDULE A
Significant Subsidiaries of
Conseco, Inc.
CIHC, Incorporated
Jefferson National Life Insurance Company of Texas
Bankers Life and Casualty Company
Conseco Senior Health Insurance Company
Conseco Annuity Assurance Company
Conseco Life Insurance Company
Pioneer Financial Services, Inc.
Pioneer Life Insurance Company
Capitol American Financial Corporation
Conseco Health Insurance Company
Green Tree Financial Corporation
27
<PAGE>
Exhibit A
Form of Accountant's Letter
pursuant to Section 4(f)
The comfort letter shall have been prepared in accordance with
Statement on Auditing Standards No. 72 and shall be to the effect that:
(i) the accountants furnishing such letter are independent
certified public accountants with respect to the Company within the
meaning of the 1933 Act and the 1933 Act Regulations;
(ii) in their opinion, the audited consolidated financial
statements and financial statement schedules included or incorporated
by reference in the Registration Statement and the Prospectus comply as
to form in all material respects with the applicable accounting
requirements of the 1933 Act and the 1933 Act Regulations and the 1934
Act and the 1934 Act Regulations;
(iii) on the basis of (A) the performance of procedures
specified by the American Institute of Public Accountants for a review
of interim financial information as described in Statement on Auditing
Standards No. 71, Interim Financial Information, on the unaudited
consolidated financial statements of the Company and its subsidiaries
included in the Company's quarterly reports on Form 10-Q as of dates
subsequent to the date of the most recent audited consolidated
financial statements incorporated by reference in the Registration
Statement and Prospectus, (B) a reading of the latest available
unaudited financial statements of the Company, (C) a reading of the
minutes of the meetings of the stockholders, board of directors and
appropriate committees of the Company and its subsidiaries, and (D)
inquiries of certain officials of the Company who have responsibility
for financial and accounting matters of the Company and its
subsidiaries (it being understood that the foregoing procedures do not
constitute an audit made in accordance with generally applicable
accounting principles and would not necessarily reveal matters of
significance with respect to the comments made in such letter), nothing
came to their attention which caused them to believe that:
(1) any material modifications should be made to the
unaudited consolidated financial statements included in the
Form 10-Qs and incorporated by reference in the Registration
Statement and the Prospectus for them to be in conformity with
generally accepted accounting principles, or
(2) the unaudited consolidated financial statements
included in the Form 10-Qs and incorporated by reference in
the Registration Statement and the Prospectus do not comply as
to form in all material respects with the applicable
accounting requirements of the 1934 Act and the 1934 Act
Regulations, as they apply to Form 10-Q; or
(3) as of the date of the latest available unaudited
financial statements and as of a specified date not more than
five business days prior to the date of the
28
<PAGE>
letter, there were any increases in the consolidated long-term
debt of the Company or decreases in consolidated assets or
stockholders' equity of the Company, in each case as compared
with the amounts shown in the most recent consolidated balance
sheet of the Company incorporated by reference in the
Registration Statement and the Prospectus, or for the period
from the date of such balance sheet to the date of the most
recent available financial statements and such specified date,
there were any decreases, as compared with the corresponding
periods in the preceding year, in consolidated revenues
excluding realized gains, net income, earnings applicable to
common stock or net income per diluted common share, except in
all instances for changes, increases or decreases that the
Registration Statement and Prospectus disclose have occurred
or may occur or (solely in the case of the letter delivered at
the Closing) except for such exceptions enumerated in such
letter as shall have been agreed to by the Purchaser and the
Company.
(iv) In the event that pro forma financial statements are
included or incorporated by reference in the Registration Statement and
the Prospectus, on the basis of (A) a reading of the pro forma
financial statements, (B) the performance of procedures specified by
the American Institute of Public Accountants for a review of interim
financial information as described in Statement on Auditing Standards
No. 71, Interim Financial Information, on the financial statements to
which the pro forma adjustments were applied, (C) inquiries of certain
officials of the Company and the acquired company who have
responsibility for financial and accounting matters, and (D) the
proving of the arithmetic accuracy of the application of the pro forma
adjustments to the historical amounts in the pro forma financial
statements, nothing came to their attention that led them to believe
that the pro forma financial statements included or incorporated by
reference in the Registration Statement and the Prospectus do not
comply in all material respects with the applicable requirements of
Rule 11-02 of Regulation S-X or that the pro forma adjustments have not
been properly applied to the historical amounts in the compilation of
those statements.
29
Exhibit 1.2
(MULTICURRENCY-CROSS BORDER)
ISDA-Registered Trademark-
International Swap Dealers Association, Inc.
MASTER AGREEMENT
dated as of April 21, 1999
UBS AG and Conseco, Inc. have entered and/or anticipate entering into one or
more transactions (each a "Transaction") that are or will be governed by this
Master Agreement, which includes the schedule (the "Schedule"), and the
documents and other confirming evidence (each a "Confirmation") exchanged
between the parties confirming those Transactions.
Accordingly, the parties agree as follows:-
1. INTERPRETATION
(a) DEFINITIONS. The terms defined in Section 14 and in the Schedule will
have the meanings therein specified for the purpose of
this Master Agreement.
(b) INCONSISTENCY. In the event of any inconsistency between the provisions
of the Schedule and the other provisions of this Master Agreement, the Schedule
will prevail. In the event of any inconsistency between the provisions of any
Confirmation and this Master Agreement (including the Schedule), such
Confirmation will prevail for the purposes of the relevant Transaction.
(c) SINGLE AGREEMENT. All Transactions are entered into in reliance on the
fact that this Master Agreement and all Confirmation form a single agreement
between the parties (collectively referred to as this "Agreement"), and the
parties would not otherwise enter into any Transactions.
2. OBLIGATIONS
(a) GENERAL CONDITIONS.
(i) Each party will make each payment or delivery specified in each
Confirmation to be made by it, subject to the other provisions of
this Agreement.
(ii) Payments under this Agreement will be made on the due date for
value on that date in the place of the account specified in the
relevant Confirmation or otherwise pursuant to this Agreement, in
freely transferable funds and in the manner customary for payments
in the required currency. Where settlement is by delivery (that
is, other than by payment), such delivery will be made for receipt
on the due date in the manner customary for the relevant
obligation unless otherwise specified in the relevant Confirmation
or elsewhere in this Agreement.
(iii) Each obligation of each party under Section 2(a)(i) is subject to
(1) the condition precedent that no Event of Default or Potential
Event of Default with respect to the other party has occurred and
is continuing, (2) the condition precedent that no Early
Termination Date in respect of the relevant Transaction has
occurred or been effectively designated and (3) each other
applicable condition precedent specified in this Agreement.
1
<PAGE>
(b) CHANGE OF ACCOUNT. Either party may change its account for receiving a
payment or delivery by giving notice to the other party at least five Local
Business Days prior to the scheduled date for the payment or delivery to which
such change applies unless such other party gives timely notice of a reasonable
objection to such change.
(c) NETTING. If on any date amounts would otherwise be payable:-
(i) in the same currency; and
(ii) in respect of the same Transaction.
by each party to the other, then, on such date, each party's obligation to make
payment of any such amount will be automatically satisfied and discharged and,
if the aggregate amount that would otherwise have been payable by one party
exceeds the aggregate amount that would otherwise have been payable by the other
party, replaced by an obligation upon the party by whom the larger aggregate
amount would have been payable to pay to the other party the excess of the
larger aggregate amount over the smaller aggregate amount.
The parties may elect in respect of two or more Transactions that a net amount
will be determined in respect of all amounts payable on the same date in the
same currency in respect of such Transactions, regardless of whether such
amounts are payable in respect of the same Transaction. The election may be made
in the Schedule or a Confirmation by specifying that subparagraph (ii) above
will not apply to the Transactions identified as being subject to the election,
together with the starting date (in which case subparagraph (ii) above will not,
or will cease to, apply to such Transactions from such date). This election may
be made separately for different groups of Transactions and will apply
separately to each pairing of Offices through which the parties make and receive
payments or deliveries.
(d) DEDUCTION OR WITHHOLDING FOR TAX.
(i) GROSS-UP. All payments under this Agreement will be made without
any deduction or withholding for or on account of any Tax unless
such deduction or withholding is required by any applicable law,
as modified by the practice of any relevant governmental revenue
authority, then in effect. If a party is so required to deduct or
withhold, then that party ("X") will:-
(1) promptly notify the other ("Y") of such requirement;
(2) pay to the relevant authorities the full amount required to
be deducted or withheld (including the full amount required to be
deducted or withheld from any additional amount paid by X to Y
under this Section 2(d)) promptly upon the earlier of determining
that such deduction or withholding is required or receiving notice
that such amount has been assessed against Y;
(3) promptly forward to Y an official receipt (or a certified
copy), or other documentation reasonably acceptable to Y,
evidencing such payment to such authorities; and
(4) if such Tax is an Indemnifiable Tax, pay to Y, in addition to
the payment to which Y is otherwise entitled under this Agreement,
such additional amount as is necessary to ensure that the net
amount actually received by Y (free and clear of Indemnifiable
Taxes, whether assessed against X or Y) will equal the full amount
Y would have received had no such deduction or withholding been
required. However, X will not be required to pay any additional
amount to Y to the extent that it would not be required to be paid
but for:-
(A) the failure by Y to comply with or perform any agreement
contained in Section 4(a)(i), 4(a)(iii) or 4(d); or
(B) the failure of a representation made by Y pursuant to
Section 3(f) to be accurate and true unless such failure
would not have occurred but for (I) any action taken by a
taxing authority, or brought in a court of competent
jurisdiction, on or after the date on which a Transaction is
entered into (regardless of whether such action is taken or
brought with respect to a party to this Agreement) or (II) a
Change in Tax Law.
2
<PAGE>
(ii) LIABILITY. If:-
(1) X is required by any applicable law, as modified by the
practice of any relevant governmental revenue authority, to make
any deduction or withholding in respect of which X would not be
required to pay an additional amount to Y under Section
2(d)(i)(4);
(2) X does not so deduct or withhold; and
(3) a liability resulting from such Tax is assessed directly
against X,
then, except to the extent Y has satisfied or then satisfies the
liability resulting from such Tax, Y will promptly pay to X the amount of
such liability (including any related liability for interest, but
including any related liability for penalties only if Y has failed to
comply with or perform any agreement contained in Section 4(a)(i),
4(a)(iii) or 4(d)).
(e) DEFAULT INTEREST; OTHER AMOUNTS. Prior to the occurrence or effective
designation of an Early Termination Date in respect of the relevant Transaction,
a party that defaults in the performance of any payment obligation will, to the
extent permitted by law and subject to Section 6(c), be required to pay interest
(before as well as after judgment) on the overdue amount to the other party on
demand in the same currency as such overdue amount, for the period from (and
including) the original due date for payment to (but excluding) the date of
actual payment, at the Default Rate. Such interest will be calculated on the
basis of daily compounding and the actual number of days elapsed. If, prior to
the occurrence or effective designation of an Early Termination Date in respect
of the relevant Transaction, a party defaults in the performance of any
obligation required to be settled by delivery, it will compensate the other
party on demand if and to the extent provided for in the relevant Confirmation
or elsewhere in this Agreement.
3. REPRESENTATIONS
Each party represents to the other party (which representations will be deemed
to be repeated by each party on each date on which a Transaction is entered into
and, in the case of the representations in Section 3(f), at all times until the
termination of this Agreement) that:-
(a) BASIC REPRESENTATIONS.
(i) STATUS. It is duly organised and validly existing under the laws
of the jurisdiction of its organisation or incorporation and, if relevant
under such laws, in good standing;
(ii) POWERS. It has the power to execute this Agreement and any other
documentation relating to this Agreement to which it is a party, to
deliver this Agreement and any other documentation relating to this
Agreement that it is required by this Agreement to deliver and to perform
its obligations under this Agreement and any obligations it has under any
Credit Support Document to which it is a party and has taken all
necessary action to authorise such execution, delivery and performance;
(iii) NO VIOLATION OR CONFLICT. Such execution, delivery and performance
performance do not violate or conflict with any law applicable to it, any
provision of its constitutional documents, any order or judgment of any
court or other agency of government applicable to it or any of its assets
or any contractual restriction binding on or affecting it or any of its
assets;
(iv) CONSENTS. All governmental and other consents that are required
to have been obtained by it with respect to this Agreement or any Credit
Support Document to which it is a party have been obtained and are in
full force and effect and all conditions of any such consents have been
complied with; and
(v) OBLIGATIONS BINDING. Its obligations under this Agreement and any
Credit Support Document to which it is a party constitute its legal,
valid and binding obligations, enforceable in accordance with their
respective terms (subject to applicable bankruptcy, reorganisation,
insolvency, moratorium or similar laws affecting creditors' rights
generally and subject, as to enforceability, to equitable principles of
general application (regardless of whether enforcement is sought in a
proceeding in equity or at law)).
3
<PAGE>
(b) ABSENCE OF CERTAIN EVENTS. No Event of Default or Potential Event of
Default or, to its knowledge, Termination Event with respect to it has occurred
and is continuing and no such event or circumstance would occur as a result of
its entering into or performing its obligations under this Agreement or any
Credit Support Document to which it is a party.
(c) ABSENCE OF LITIGATION. There is not pending or, to its knowledge,
threatened against it or any of its Affiliates any action, suit or proceeding at
law or in equity or before any court, tribunal, governmental body, agency or
official or any arbitrator that is likely to affect the legality, validity or
enforceability against it of this Agreement or any Credit Support Document to
which it is a party or its ability to perform its obligations under this
Agreement or such Credit Support Document.
(d) ACCURACY OF SPECIFIED INFORMATION. All applicable information that is
furnished in writing by or on behalf of it to the other parry and is identified
for the purpose of this Section 3(d) in the Schedule is, as of the date of the
information, true, accurate and complete in every material respect.
(e) PAYER TAX REPRESENTATION. Each representation specified in the Schedule
as being made by it for the purpose of this Section 3(e) is accurate and true.
(f) PAYEE TAX REPRESENTATIONS. Each representation specified in the Schedule
as being made by it for the purpose of this Section 3(f) is accurate and true.
4. AGREEMENTS
Each party agrees with the other that, so long as either party has or may have
any obligation under this Agreement or under any Credit Support Document to
which it is a party:-
(a) FURNISH SPECIFIED INFORMATION. It will deliver to the other party or, in
certain cases under subparagraph (iii) below, to such government or taxing
authority as the other party reasonably directs:-
(i) any forms, documents or certificates relating to taxation
specified in the Schedule or any Confirmation;
(ii) any other documents specified in the Schedule or any Confirmation;
and
(iii) upon reasonable demand by such other party, any form or document
that may be required or reasonably requested in writing in order to allow
such other party or its Credit Support Provider to make a payment under
this Agreement or any applicable Credit Support Document without any
deduction or withholding for or on account of any Tax or with such
deduction or withholding at a reduced rate (so long as the completion,
execution or submission of such form or document would not materially
prejudice the legal or commercial position of the party in receipt of
such demand), with any such form or document to be accurate and completed
in a manner reasonably satisfactory to such other party and to be
executed and to be delivered with any reasonably required certification,
in each case by the date specified in the Schedule or such Confirmation or, if
none is specified, as soon as reasonably practicable.
(b) MAINTAIN AUTHORISATIONS. It will use all reasonable efforts to maintain
in full force and effect all consents of any governmental or other authority
that are required to be obtained by it with respect to this Agreement or any
Credit Support Document to which it is a party and will use all reasonable
efforts to obtain any that may become necessary in the future.
(c) COMPLY WITH LAWS. It will comply in all material respects with all
applicable laws and orders to which it may be subject if failure so to comply
would materially impair its ability to perform its bligations under this
Agreement or any Credit Support Document to which it is a party.
(d) TAX AGREEMENT. It will give notice of any failure of a representation
made by it under Section 3(f) to be accurate and true promptly upon learning of
such failure.
(e) PAYMENT OF STAMP TAX. Subject to Section 11, it will pay any Stamp Tax
levied or imposed upon it or in respect of its execution or performance of this
Agreement by a jurisdiction in which it is incorporated,
4
<PAGE>
organized, managed and controlled, or considered to have its seat, or in which a
branch or office through which it is acting for the purpose of this Agreement is
located ("Stamp Tax Jurisdiction") and will indemnify the other party against
any Stamp Tax levied or imposed upon the other party or in respect of the other
party's execution or performance of this Agreement by any such Stamp Tax
Jurisdiction which is not also a Stamp Tax Jurisdiction with respect to the
other party.
5. EVENTS OF DEFAULT AND TERMINATION EVENTS
(a) EVENTS OF DEFAULT. The occurrence at any time with respect to a party
or, if applicable, any Credit Support Provider of such party or any Specified
Entity of such party of any of the following events constitutes an event of
default (an "Event of Default") with respect to such party:-
(i) FAILURE TO PAY OR DELIVER. Failure by the party to make, when
due, any payment under this Agreement or delivery under Section 2(a)(i)
or 2(e) required to be made by it if such failure is not remedied on or
before the third Local Business Day after notice of such failure is given
to the party;
(ii) BREACH OF AGREEMENT. Failure by the party to comply with or
perform any agreement or obligation (other than an obligation to make any
payment under this Agreement or delivery under Section 2(a)(i) or 2(e) or
to give notice of a Termination Event or any agreement or obligation
under Section 4(a)(i), 4(a)(iii) or 4(d)) to be complied with or
performed by the party in accordance with this Agreement if such failure
is not remedied on or before the thirtieth day after notice of such
failure is given to the party;
(iii) CREDIT SUPPORT DEFAULT.
(1) Failure by the party or any Credit Support Provider of such
party to comply with or perform any agreement or obligation to be
complied with or performed by it in accordance with any Credit
Support Document if such failure is continuing after any
applicable grace period has elapsed;
(2) the expiration or termination of such Credit Support Document
or the failing or ceasing of such Credit Support Document to be in
full force and effect for the purpose of this Agreement (in either
case other than in accordance with its terms) prior to the
satisfaction of all obligations of such party under each
Transaction to which such Credit Support Document relates without
the written consent of the other party; or
(3) the party or such Credit Support Provider disaffirms,
disclaims, repudiates or rejects, in whole or in part, or
challenges the validity of, such Credit Support Document;
(iv) MISREPRESENTATION. A representation (other than a representation
under Section 3(e) or (f)) made or repeated or deemed to have been made
or repeated by the party or any Credit Support Provider of such party in
this Agreement or any Credit Support Document proves to have been
incorrect or misleading in any material respect when made or repeated or
deemed to have been made or repeated.
(v) DEFAULT UNDER SPECIFIED TRANSACTION. The party, any Credit Support
Provider of such party or any applicable Specified Entity of such party
(1) defaults under a Specified Transaction and, after giving effect to
any applicable notice requirement or grace period, there occurs a
liquidation of, an acceleration of obligations under, or an early
termination of, that Specified Transaction, (2) defaults, after giving
effect to any applicable notice requirement or grace period, in making
any payment or delivery due on the last payment, delivery or exchange
date of, or any payment on early termination of, a Specified Transaction
(or such default continues for at least three Local Business Days if
there is no applicable notice requirement or grace period) or (3)
disaffirms, disclaims, repudiates or rejects, in whole or in part, a
Specified Transaction (or such action is taken by any person or entity
appointed or empowered to operate it or act on its behalf);
(vi) CROSS DEFAULT. If "Cross Default" is specified in the Schedule as
applying to the party, the occurrence or existence of (1) a default,
event of default or other similar condition or event (however
5
<PAGE>
described) in respect of such party, any Credit Support Provider of such
party or any applicable Specified Entity of such party under one or more
agreements or instruments relating to Specified Indebtedness of any of
them (individually or collectively) in an aggregate amount of not less
than the applicable Threshold Amount (as specified in the Schedule)which
has resulted in such Specified Indebtedness becoming, or becoming capable
at such time of being declared, due and payable under such agreements or
instruments, before it would otherwise have been due and payable or (2) a
default by such party, such Credit Support Provider or such Specified
Entity (individually or collectively) in making one or more payments on
the due date thereof in an aggregate amount of not less than the
applicable Specified Amount under such agreements or instruments (after
giving effect to any applicable notice requirement or grace period);
(vii) BANKRUPTCY. The party, any Credit Support Provider of such party
or any applicable Specified Entity of such party:-
(1) is dissolved (other than pursuant to a consolidation,
amalgamation or merger); (2) becomes insolvent or is unable to pay
its debts or fails or admits in writing its inability generally to
pay its debts as they become due; (3) makes a general assignment,
arrangement or composition with or for the benefit of its
creditors; (4) institutes or has instituted against it a
proceeding seeking a judgment of insolvency or bankruptcy or any
other relief under any bankruptcy or insolvency law or other
similar law affecting creditors' rights, or a petition is
presented for its winding-up or liquidation, and, in the case of
any such proceeding or petition instituted or presented against
it, such proceeding or petition (A) results in a judgment of
insolvency or bankruptcy or the entry of an order for relief or
the making of an order for its winding-up or liquidation or (B) is
not dismissed, discharged, stayed or restrained in each case
within 30 days of the institution or presentation thereof; (5) has
a resolution passed for its winding-up, official management or
liquidation (other than pursuant to a consolidation, amalgamation
or merger); (6) seeks or becomes subject to the appointment of an
administrator, provisional liquidator, conservator, receiver,
trustee, custodian or other similar official for it or for all or
substantially all its assets; (7) has a secured party take
possession of all or substantially all its assets or has a
distress, execution, attachment, sequestration or other legal
process levied, enforced or sued on or against all or
substantially all its assets and such secured party maintains
possession, or any such process is not dismissed, discharged,
staved or restrained, in each case within 30 days thereafter; (8)
causes or is subject to any event with respect to it which, under
the applicable laws of any jurisdiction, has an analogous effect
to any of the events specified in clauses (1) to (7) (inclusive);
or (9) takes any action in furtherance of, or indicating its
consent to, approval of, or acquiescence in, any of the foregoing
acts; or
(viii) MERGER WITHOUT ASSUMPTION. The party or any Credit Support
Provider of such party consolidates or amalgamates with, or merges with
or into, or transfers all or substantially all its assets to, another
entity and, at the time of such consolidation, amalgamation, merger or
transfer:-
(1) the resulting, surviving or transferee entity fails to assume
all the obligations of such party or such Credit Support Provider
under this Agreement or any Credit Support Document to which it or
its predecessor was a party by operation of law or pursuant to an
agreement reasonably satisfactory to the other party to this
Agreement; or
(2) the benefits of any Credit Support Document fail to extend
without the consent of the other party) to the performance by such
resulting, surviving or transferee entity of its obligations under
this Agreement.
(b) TERMINATION EVENTS. The occurrence at any time with respect to a party
or, if applicable, any Credit Support Provider of such party or any Specified
Entity of such party of any event specified below constitutes an Illegality if
the event is specified in (i) below, a Tax Event if the event is specified in
(ii) below or a Tax Event Upon Merger if the event is specified in (iii) below,
and, if specified to be applicable, a Credit Event
6
<PAGE>
Upon Merger if the event is specified pursuant to (iv) below or an Additional
Termination Event if the event is specified pursuant to (v) below:-
(i) ILLEGALITY. Due to the adoption of, or any change in, any
applicable law after the date on which a Transaction is entered into, or
due to the promulgation of, or any change in, the interpretation by any
court, tribunal or regulatory authority with competent jurisdiction of
any applicable law after such date, it becomes unlawful (other than as a
result of a breach by the party of Section 4(b)) for such party (which
will be the Affected Party):-
(1) to perform any absolute or contingent obligation to make a
payment or delivery or to receive a payment or delivery in respect
of such Transaction or to comply with any other material provision
of this Agreement relating to such Transaction; or
(2) to perform, or for any Credit Support Provider of such party
to perform, any contingent or other obligation which the party (or
such Credit Support Provider) has under any Credit Support
Document relating to such Transaction;
(ii) TAX EVENT. Due to (x) any action taken by a tax authority, or
brought in a court of competent jurisdiction, on or after the date on
which a Transaction is entered into (regardless of whether such action is
taken or brought with respect to a party to this Agreement) or (y) a
Change in Tax Law, the party (which will be the Affected Party) will, or
there is a substantial likelihood that it will, on the next succeeding
Scheduled Payment Date (1) be required to pay to the other party an
additional amount in respect of an Indemnifiable Tax under Section
2(d)(i)(4) (except in respect of interest under Section 2(e), 6(d)(ii) or
6(e)) or (2) receive a payment from which an amount is required to be
deducted or withheld for or on account of a Tax (except in respect of
interest under Section 2(e), 6(d)(ii) or 6(e)) and no additional amount
is required to be paid in respect of such Tax under Section 2(d)(i)(4)
(other than by reason of Section 2(d)(i)(4)(A) or (B));
(iii) TAX EVENT UPON MERGER. The party (the "Burdened Party") on the
next succeeding Scheduled Payment Date will either (1) be required to pay
an additional amount in respect of an Indemnifiable Tax under Section
2(d)(i)(4) (except in respect of interest under Section 2(e), 6(d)(ii) or
6(e)) or (2) receive a payment from which an amount has been deducted or
withheld for or on account of any Indemnifiable Tax in respect of which
the other party is not required to pay an additional amount (other than
by reason of Section 2(d)(i)(4)(A) or (B)), in either case as a result of
a party consolidating or amalgamating with, or merging with or into, or
transferring all or substantially all its assets to, another entity
(which will be the Affected Party) where such action does not constitute
an event described in Section 5(a)(viii);
(iv) CREDIT EVENT UPON MERGER. If "Credit Event Upon Merge" is
specified in the Schedule as applying to the party, such party ("X"), any
Credit Support Provider of X or any applicable Specified Entity of X
consolidates or amalgamates with, or merges with or into, or transfers
all or substantially all its assets to, another entity and such action
does not constitute an event described in Section 5(a)(viii) but the
creditworthiness of the resulting, surviving or transferee entity is
materially weaker than that of X, such Credit Support Provider or such
Specified Entity, as the case my be, immediately prior to such action
(and, in such event, X or its successor or transferee, as appropriate,
will be the Affected Party); or
(v) ADDITIONAL TERMINATION EVENT. If any "Additional Termination
Event" is specified in the Schedule or any Confirmation as applying, the
occurrence of such event (and, in such event, the Affected Party or
Affected Parties shall be as specified for such Additional Termination
Event in the Schedule or such Confirmation).
(c) EVENT OF DEFAULT AND ILLEGALITY. If an event or circumstance which would
otherwise constitute or give rise to an Event of Default also constitutes an
Illegality, it will be treated is an Illegality and will not constitute an Event
of Default.
7
<PAGE>
6. EARLY TERMINATION
(a) RIGHT TO TERMINATE FOLLOWING EVENT OF DEFAULT. If at any time an Event
of Default with respect to a party (the "Defaulting Party") has occurred and is
then continuing, the other party (the "Non-defaulting Party") may, by not more
than 20 days notice to the Defaulting Party specifying the relevant Event of
Default, designate a day not earlier than the day such notice is effective as an
Early Termination Date in respect of all outstanding Transactions. If, however,
"Automatic Early Termination" is specified in the Schedule as applying to a
party, then an Early Termination Date in respect of all outstanding Transactions
will occur immediately upon the occurrence with respect to such party of an
Event of Default specified in Section 5(a)(vii)(l), (3), (5), (6) or, to the
extent analogous thereto, (8), and as of the time immediately preceding the
institution of the relevant proceeding or the presentation of the relevant
petition upon the occurrence with respect to such party of an Event of Default
specified in Section 5(a)(vii)(4) or, to the extent analogous thereto, (8).
(b) RIGHT TO TERMINATE FOLLOWING TERMINATION EVENT.
(i) NOTICE. If a Termination Event occurs, an Affected Party will,
promptly upon becoming aware of it, notify the other party, specifying
the nature of that Termination Event and each Affected Transaction and
will also give such other information about that Termination Event as the
other party may reasonably require.
(ii) TRANSFER TO AVOID TERMINATION EVENT. If either an Illegality under
Section 5(b)(i)(1) or a Tax Event occurs and there is only one Affected
Party, or if a Tax Event Upon Merger occurs and the Burdened Party is the
Affected Party, the Affected Party will, as a condition to its right to
designate an Early Termination Date under Section 6(b)(iv), use all
reasonable efforts (which will not require such party to incur a loss,
excluding immaterial, incidental expenses) to transfer within 20 days
after it gives notice under Section 6(b)(i) all its rights and
obligations under this Agreement in respect of the Affected Transactions
to another of its Offices or Affiliates so that such Termination Event
ceases to exist.
If the Affected Party is not able to make such a transfer it will give
notice to the other party to that effect within such 20 day period,
whereupon the other party may effect such a transfer within 30 days after
the notice is given under Section 6(b)(i).
Any such transfer by a party under this Section 6(b)(ii) will be Subject
to and conditional upon the prior written consent of the other party,
which consent will not be withheld if such other party's policies in
effect at such time would permit it to enter into transactions with the
transferee on the terms proposed.
(iii) TWO AFFECTED PARTIES. If an Illegality under Section 5(b)(i)(1)
or a Tax Event occurs and there are two Affected Parties, each party will
use all reasonable efforts to reach agreement within 30 days after notice
thereof is given under Section 6(b)(i) on action to avoid that
Termination Event.
(iv) RIGHT TO TERMINATE. If:-
(1) a transfer under Section 6(b)(ii) or an agreement under
Section 6(b)(iii), as the case may be, has not been effected with
respect to all Affected Transactions within 30 days after an
Affected Party gives notice under Section 6(b)(i); or
(2) an Illegality under Section 5(b)(i)(2), a Credit Event Upon
Merger or an Additional Termination Event occurs, or a Tax Event
Upon Merger occurs and the Burdened Party is not the Affected
Party,
either party in the case of an Illegality, the Burdened Party in the case
of a Tax Event Upon Merger, any Affected Party in the case of a Tax Event
or an Additional Termination Event if there is more than one Affected
Party, or the party which is not the Affected Party in the case of a
Credit Event Upon Merger or an Additional Termination Event if there is
only one Affected Party may, by not more than 20 days notice to the other
party and provided that the relevant Termination Event is then
8
<PAGE>
continuing, designate a day not earlier than the day such notice is
effective as an Early Termination Date in respect of all Affected
Transactions.
(c) EFFECT OF DESIGNATION.
(i) If notice designating an Early Termination Date is given under
Section 6(a) or (b), the Early Termination Date will occur on the date so
designated, whether or not the relevant Event of Default or Termination
Event is then continuing.
(ii) Upon the occurrence or effective designation of an Early
Termination Date, no further payments or deliveries under Section 2(a)(i)
or 2(e) in respect of the Terminated Transactions will be required to be
made, but without prejudice to the other provisions of this Agreement.
The amount, if any, payable in respect of an Early Termination Date shall
be determined pursuant to Section 6(e).
(d) CALCULATIONS.
(i) STATEMENT. On or as soon as reasonably practicable following the
occurrence of an Early Termination Date, each party will make the
calculations on its part, if any, contemplated by Section 6(e) and will
provide to the other party a statement (1) showing, in reasonable detail,
such calculations (including all relevant quotations and specifying any
amount payable under Section 6(e)) and (2) giving details of the relevant
account to which any amount payable to it is to be paid. In the absence
of written confirmation from the source of a quotation obtained in
determining a Market Quotation, the records of the party obtaining such
quotation will be conclusive evidence of the existence and accuracy of
such quotation.
(ii) PAYMENT DATE. An amount calculated as being due in respect of any
Early Termination Date under Section 6(e) will be payable on the day that
notice of the amount payable is effective (in the case of an Early
Termination Date which is designated or occurs as a result of an Event,
of Default) and on the day which is two Local Business Days after the day
on which notice of the amount payable is effective (in the case of an
Early Termination Date which is designated as a result of a Termination
Event). Such amount will be paid together with (to the extent permitted
under applicable law) interest thereon (before as well as after judgment)
in the Termination Currency, from (and including) the relevant Early
Termination Date to (but excluding) the date such amount is paid, at the
Applicable Rate. Such interest will be calculated on the basis of daily
compounding and the actual number of days elapsed.
(e) PAYMENTS ON EARLY TERMINATION. If an Early Termination Date occurs, the
following provisions shall apply based on the parties' election in the Schedule
of a payment measure, either "Market Quotation" or "Loss", and a payment method,
either the "First Method" or the "Second Method". If the parties fail to
designate a payment measure or payment method in the Schedule, it will be deemed
that "Market Quotation" or the "Second Method", as the case may be, shall apply.
The amount, if any, payable in respect of an Early Termination Date and
determined pursuant to this Section will be subject to any Set-off.
(i) EVENTS OF DEFAULT. If the Early Termination Date results from an
Event of Default:-
(1) First Method and Market Quotation. If the First Method and
Market Quotation apply, the Defaulting Party will pay to the
Non-defaulting Party the excess, if a positive number, of (A) the
sum of the Settlement Amount (determined by the Non-defaulting
Party) in respect of the Terminated Transactions and the
Termination Currency Equivalent of the Unpaid Amounts owing to the
Non-defaulting Party over (B) the Termination Currency Equivalent
of the Unpaid Amounts owing to the Defaulting Party.
(2) First Method and Loss. If the First Method and Loss apply, the
Defaulting Party will pay to the Non-defaulting Party, if a
positive number, the Non-defaulting Party's Loss in respect of
this Agreement.
(3) Second Method and Market Quotation. If the Second Method and
Market Quotation apply, an amount will be payable equal to (A) the
sum of the Settlement Amount (determined by the
9
<PAGE>
Non-defaulting Party) in respect of the Terminated Transactions
and the Termination Currency Equivalent of the Unpaid Amounts
owing to the Non-defaulting Party less (B) the Termination
Currency Equivalent of the Unpaid Amounts owing to the Defaulting
Party. If that amount is a positive number, the Defaulting Party
will pay it to the Non-defaulting Party; if it is a negative
number, the Non-defaulting Party will pay the absolute value of
that amount to the Defaulting Party.
(4) Second Method and Loss. If the Second Method and Loss apply,
an amount will be payable equal to the Non-defaulting Party's Loss
in respect of this Agreement. If that amount is a positive number,
the Defaulting Party will pay it to the Non-defaulting Party; if
it is a negative number, the Non-defaulting Party will pay the
absolute value of that amount to the Defaulting Party.
(ii) TERMINATION EVENTS. If the Early Termination Date results from a
Termination Event:-
(1) ONE AFFECTED PARTY. If there is one Affected Party, the
amount payable will be determined in accordance with Section
6(e)(i)(3), if Market Quotation applies, or Section 6(e)(i)(4), if
Loss applies, except that, in either case, references to the
Defaulting Party and to the Non-defaulting Party will be deemed to
be references to the Affected Party and the party which is not the
Affected Party, respectively, and, if Loss applies and fewer than
all the Transactions are being terminated, Loss shall be
calculated in respect of all Terminated Transactions.
(2) TWO AFFECTED PARTIES. If there are two Affected Parties:-
(A) if Market Quotation applies, each party will determine a
Settlement Amount in respect of the Terminated Transactions,
and an amount will be payable equal to (I) the sum of (a)
one-half of the difference between the Settlement Amount of
the party with the higher Settlement Amount ("X") and the
Settlement Amount of the party with the lower Settlement
Amount ("Y") and (b) the Termination Currency Equivalent of
the Unpaid Amounts owing to X less (II) the Termination
Currency Equivalent of the Unpaid Amounts owing to Y; and
(B) if Loss applies, each party will determine its Loss in
respect of this Agreement (or, if fewer than all the
Transactions are being terminated, in respect of all
Terminated Transactions) and an amount will be payable equal
to one-half of the difference between the Loss of the party
with the higher Loss ("X") and the Loss of the party with the
lower Loss ("Y").
If the amount payable is a positive number, Y will pay it to X; if
it is a negative number, X will pay the absolute value of that
amount to Y.
(iii) ADJUSTMENT FOR BANKRUPTCY. In circumstances where an Early
Termination Date occurs because "Automatic Early Termination" applies in
respect of a party, the amount determined under this Section 6(e) will be
subject to such adjustments as are appropriate and permitted by law to
reflect any payments or deliveries made by one party to the other under
this Agreement (and retained by such other party) during the period from
the relevant Early Termination Date to the date for payment determined
under Section 6(d)(ii).
(iv) PRE-ESTIMATE. The parties agree that if Market Quotation applies
an amount recoverable under this Section 6(e) is a reasonable
pre-estimate of loss and not a penalty. Such amount is payable for the
loss of bargain and the loss of protection against future risks and
except as otherwise provided in this Agreement neither party will be
entitled to recover any additional damages as a consequence of such
losses.
10
<PAGE>
7. TRANSFER
Subject to Section 6(b)(ii), neither this Agreement nor any interest or
obligation in or under this Agreement may be transferred (whether by way of
security or otherwise) by either party without the prior written consent of the
other party, except that:-
(a) a party may make such a transfer of this Agreement pursuant to a
consolidation or amalgamation with, or merger with or into, or transfer of all
or substantially all its assets to, another entity (but without prejudice to any
other right or remedy under this Agreement); and
(b) a party may make such a transfer of all or any part of its interest in
any amount payable to it from a Defaulting Party under Section 6(e).
Any purported transfer that is not in compliance with this Section will be void.
8. CONTRACTUAL CURRENCY
(a) PAYMENT IN THE CONTRACTUAL CURRENCY. Each payment under this Agreement
will be made in the relevant currency specified in this Agreement for that
payment (the "Contractual Currency"). To the extent permitted by applicable law,
any obligation to make payments under this Agreement in the Contractual Currency
will not be discharged or satisfied by any tender in any currency other than the
Contractual Currency, except to the extent such tender results in the actual
receipt by the party to which payment is owed, acting in a reasonable manner and
in good faith in converting the currency so tendered into the Contractual
Currency, of the full amount in the Contractual Currency of all amounts payable
in respect of this Agreement. If for any reason the amount in the Contractual
Currency so received falls short of the amount in the Contractual Currency
payable in respect of this Agreement, the party required to make the payment
will, to the extent permitted by applicable law, immediately pay such additional
amount in the Contractual Currency as may be necessary to compensate for the
shortfall. If for any reason the amount in the Contractual Currency so received
exceeds the amount in the Contractual Currency payable in respect of this
Agreement, the party receiving the payment will refund promptly the amount of
such excess.
(b) JUDGMENTS. To the extent permitted by applicable law, if any judgment or
order expressed in a currency other than the Contractual Currency is rendered
(i) for the payment of any amount owing in respect of this Agreement, (ii) for
the payment of any amount relating to any early termination in respect of this
Agreement or (iii) in respect of a judgment or order of another court for the
payment of any amount described in (i) or (ii) above, the party seeking
recovery, after recovery in full of the aggregate amount to which such party is
entitled pursuant to the judgment or order, will be entitled to receive
immediately from the other party the amount of any shortfall of the Contractual
Currency received by such party as a consequence of sums paid in such other
currency and will refund promptly to the other party any excess of the
Contractual Currency received by such party as a consequence of sums paid in
such other currency if such shortfall or such excess arises or results from any
variation between the rate of exchange at which the Contractual Currency is
converted into the currency of the judgment or order for the purposes of such
judgment or order and the rate of exchange at which such party is able, acting
in a reasonable manner and in good faith in converting the currency received
into the Contractual Currency, to purchase the Contractual Currency with the
amount of the currency of the judgment or order actually received by such party.
The term "rate of exchange" includes, without limitation, any premiums and costs
of exchange payable in connection with the purchase of or conversion into the
Contractual Currency.
(c) SEPARATE INDEMNITIES. To the extent permitted by applicable law, these
indemnities constitute separate and independent obligations from the other
obligations in this Agreement, will be enforceable as separate and independent
causes of action, will apply notwithstanding any indulgence granted by the party
to which any payment is owed and will not be affected by judgment being obtained
or claim or proof being made for any other sums payable in respect of this
Agreement.
(d) EVIDENCE OF LOSS. For the purpose of this Section 8, it will be
sufficient for a party to demonstrate that it would have suffered a loss had an
actual exchange or purchase been made.
11
<PAGE>
9. MISCELLANEOUS
(a) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and
understanding of the parties with respect to its subject matter and supersedes
all oral communication and prior writings with respect thereto.
(b) AMENDMENTS. No amendment, modification or waiver in respect of this
Agreement will be effective unless in writing (including a writing evidenced by
a facsimile transmission) and executed by each of the parties or confirmed by an
exchange of telexes or electronic messages on an electronic messaging system.
(c) SURVIVAL OF OBLIGATIONS. Without prejudice to Sections 2(a)(iii) and
6(c)(ii), the obligations of the parties under this Agreement will survive the
termination of any Transaction.
(d) REMEDIES CUMULATIVE. Except as provided in this Agreement, the rights,
powers, remedies and privileges provided in this Agreement are cumulative and
not exclusive of any rights, powers, remedies and privileges provided by law.
(e) COUNTERPARTS AND CONFIRMATIONS.
(i) This Agreement (and each amendment, modification and waiver in
respect of it) may be executed and delivered in counterparts (including
by facsimile transmission), each of which will be deemed an original.
(ii) The parties intend that they are legally bound by the terms of each
Transaction from the moment they agree to those terms (whether orally or
otherwise). A Confirmation shall be entered into as soon as practicable
and may be executed and delivered in counterparts (including by facsimile
transmission) or be created by an exchange of telexes or by an exchange
of electronic messages on an electronic messaging system, which in each
case will be sufficient for all purposes to evidence a binding supplement
to this Agreement. The parties will specify therein or through another
effective means that any such counterpart, telex or electronic message
constitutes a Confirmation.
(f) NO WAIVER OF RIGHTS. A failure or delay in exercising any right, power
or privilege in respect of this Agreement will not be presumed to operate as a
waiver, and a single or partial exercise of any right, power or privilege will
not be presumed to preclude any subsequent or further exercise, of that right,
power or privilege or the exercise of any other right, power or privilege.
(g) HEADINGS. The headings used in this Agreement are for convenience of
reference only and are not to affect the construction of or to be taken into
consideration in interpreting this Agreement.
10. OFFICES; MULTIBRANCH PARTIES
(a) If Section 10(a) is specified in the Schedule as applying, each party
that enters into a Transaction through an Office other than its head or home
office represents to the other party that, notwithstanding the place of booking
office or jurisdiction of incorporation or organisation of such party, the
obligations of such party are the same as if it had entered into the Transaction
through its head or home office. This representation will be deemed to be
repeated by such party on each date on which a Transaction is entered into.
(b) Neither party may change the Office through which it makes and receives
payments or deliveries for the purpose of a Transaction without the prior
written consent of the other party.
(c) If a party is specified as a Multibranch Party in the Schedule, such
Multibranch Party may make and receive payments or deliveries under any
Transaction through any Office listed in the Schedule, and the Office through
which it makes and receives payments or deliveries with respect to a Transaction
will be specified in the relevant Confirmation.
11. EXPENSES
A Defaulting Party will, on demand, indemnify and hold harmless the other party
for and against all reasonable out-of-pocket expenses, including legal fees and
Stamp Tax, incurred by such other party by reason of the enforcement and
protection of its rights under this Agreement or any Credit Support Document
12
<PAGE>
to which the Defaulting Party is a party or by reason of the early termination
of any Transaction, including, but not limited to, costs of collection.
12. NOTICES
(a) EFFECTIVENESS. Any notice or other communication in respect of this
Agreement may be given in any manner set forth below (except that a notice or
other communication under Section 5 or 6 may not be given by facsimile
transmission or electronic messaging system) to the address or number or in
accordance with the electronic messaging system details provided (see the
Schedule) and will be deemed effective as indicated:-
(i) if in writing and delivered in person or by courier, on the date
it is delivered;
(ii) if sent by telex, on the date the recipient's answerback is
received;
(iii) if sent by facsimile transmission, on the date that transmission
is received by a responsible employee of the recipient in legible form
(it being agreed that the burden of proving receipt will be on the sender
and will not be met by a transmission report generated by the sender's
facsimile machine);
(iv) if sent by certified or registered mail (airmail, if overseas) or
the equivalent (return receipt requested), on the date that mail is
delivered or its delivery is attempted; or
(v) if sent by electronic messaging system, on the date that
electronic message is received,
unless the date of that delivery (or attempted delivery) or that receipt, as
applicable, is not a Local Business Day or that communication is delivered (or
attempted) or received, as applicable, after the close of business on a Local
Business Day, in which case that communication shall be deemed given and
effective on the first following day that is a Local Business Day.
(b) CHANGE OF ADDRESSES. Either party may by notice to the other change the
address, telex or facsimile number or electronic messaging system details at
which notices or other communications are to be given to it.
13. GOVERNING LAW AND JURISDICTION
(a) GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the law specified in the Schedule.
(b) JURISDICTION. With respect to any suit, action or proceedings relating
tothis Agreement ("Proceedings"), each party irrevocably:-
(i) submits to the jurisdiction of the English courts, if this Agreement
is expressed to be governed by English law, or to the non-exclusive
jurisdiction of the courts of the State of New York and the United States
District Court located in the Borough of Manhattan in New York City, if
this Agreement is expressed to be governed by the laws of the State of
New York; and
(ii) waives any objection which it may have at any time to the laying of
venue of any Proceedings brought in any such court, waives any claim that
such Proceedings have been brought in an inconvenient forum, and further
waives the right to object, with respect to such Proceedings, that such
court does not have any jurisdiction over such party.
Nothing in this Agreement precludes either party from bringing Proceedings in
any other jurisdiction (outside, if this Agreement is expressed to be governed
by English law, the Contracting States, as defined in Section 1(3) of the Civil
Jurisdiction and Judgments Act 1982 or any modification, extension or
re-enactment thereof for the time being in force) nor will the bringing of
Proceedings in any one or more jurisdictions preclude the bringing of
Proceedings in any other jurisdiction.
(c) SERVICE OF PROCESS. Each party irrevocably appoints the Process Agent
(if any) specified opposite its name in the Schedule to receive, for it and on
its behalf, service of process in any Proceedings. If for any
13
<PAGE>
reason any party's Process Agent is unable to act as such, such party will
promptly notify the other party and within 30 days appoint a substitute process
agent acceptable to the other party. The parties irrevocably consent to service
of process given in the manner provided for notices in Section 12. Nothing in
this Agreement will affect the right of either party to serve process in any
other manner permitted by law.
(d) WAIVER OF IMMUNITIES. Each party irrevocably waives, to the fullest
extent permitted by applicable law, with respect to itself and its revenues and
assets (irrespective of their use or intended use), all immunity on the grounds
of sovereignty or other similar grounds from (i) suit, (ii) jurisdiction of any
court, (iii) relief by way of injunction, order for specific performance or for
recovery of property, (iv) attachment of its assets (whether before or after
judgment) and (v) execution or enforcement of any judgment to which it or its
revenues or assets might otherwise be entitled in any Proceedings in the courts
of any jurisdiction and irrevocably agrees, to the extent permitted by
applicable law, that it will not claim any such immunity in any Proceedings.
14. DEFINITIONS
As used in this Agreement:-
"ADDITIONAL TERMINATION EVENT" has the meaning specified in Section 5(b).
"AFFECTED PARTY" has the meaning specified in Section 5(b).
"AFFECTED TRANSACTIONS" means (a) with respect to any Termination Event
consisting of an Illegality, Tax Event or Tax Event Upon Merger, all
Transactions affected by the occurrence of such Termination Event and (b) with
respect to any other Termination Event, all Transactions.
"AFFILIATE" means, subject to the Schedule, in relation to any person, any
entity controlled, directly or indirectly, by the person, any entity that
controls, directly or indirectly, the person or any entity directly or
indirectly under common control with the person. For this purpose, "control" of
any entity or person means ownership of a majority of the voting power of the
entity or person.
"APPLICABLE RATE" means:-
(a) in respect of obligations payable or deliverable (or which would have
been but for Section 2(a)(iii)) by a Defaulting Party, the Default Rate;
(b) in respect of an obligation to pay an amount under Section 6(e) of
either party from and after the date (determined in accordance with Section
6(d)(ii)) on which that amount is payable, the Default Rate;
(c) in respect of all other obligations payable or deliverable (or which
would have been but for Section 2(a)(iii)) by a Non-defaulting Party, the
Non-default Rate; and
(d) in all other cases, the Termination Rate.
"BURDENED PARTY" has the meaning specified in Section 5(b).
"CHANGE IN TAX LAW" means the enactment, promulgation, execution or ratification
of, or any change in or amendment to any law (or in the application or official
interpretation of any law) that occurs on or after the date on which the
relevant Transaction is entered into.
"CONSENT" includes a consent, approval, action, authorisation, exemption,
notice, filing, registration or exchange control consent.
"CREDIT EVENT UPON MERGER" has the meaning specified in Section 5(b).
"CREDIT SUPPORT DOCUMENT" means any agreement or instrument that is specified as
such in this Agreement.
"CREDIT SUPPORT PROVIDER" has the meaning specified in the Schedule.
"DEFAULT RATE" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the relevant payee (as certified by it) if it
were to fund or of funding the relevant amount plus l% per annum.
14
<PAGE>
"DEFAULTING PARTY" has the meaning specified in Section 6(a).
"EARLY TERMINATION DATE" means the date determined in accordance with Section
6(a) or 6(b)(iv).
"EVENT OF DEFAULT" has the meaning specified in Section 5(a) and, if applicable,
in the Schedule.
"ILLEGALITY" has the meaning specified in Section 5(b).
"INDEMNIFIABLE TAX" means any Tax other than a Tax that would not be imposed in
respect of a payment under this Agreement but for a present or former connection
between the jurisdiction of the government or taxation authority imposing such
Tax and the recipient of such payment or a person related to such recipient
(including, without limitation, a connection arising from such recipient or
related person being or having been a citizen or resident of such jurisdiction,
or being or having been organised, present or engaged in a trade or business in
such jurisdiction, or having or having had a permanent establishment or fixed
place of business in such jurisdiction, but excluding a connection arising
solely from such recipient or related person having executed, delivered,
performed its obligations or received a payment under, or enforced, this
Agreement or a Credit Support Document).
"LAW" includes any treaty, law, rule or regulation (as modified, in the case of
tax matters, by the practice of any relevant governmental revenue authority) and
"LAWFUL" and "UNLAWFUL" will be construed accordingly.
"LOCAL BUSINESS DAY" means, subject to the Schedule, a day on which commercial
banks are open for business (including dealings in foreign exchange and foreign
currency deposits) (a) in relation to any obligation under Section 2(a)(i), in
the place(s) specified in the relevant Confirmation or, if not so specified, as
otherwise agreed by the parties in writing or determined pursuant to provisions
contained, or incorporated by reference, in this Agreement, (b) in relation to
any other payment, in the place where the relevant account is located and. if
different. in the principal financial centre, if any, of the currency of such
payment, (c) in relation to any notice or other communication, including notice
contemplated under Section 5(a)(i), in the city specified in the address for
notice provided by the recipient and, in the case of a notice contemplated by
Section 2(b), in the place where the relevant new account is to be located and
(d) in relation to Section 5(a)(v)(2), in the relevant locations for performance
with respect to such Specified Transaction.
"LOSS" means, with respect to this Agreement or one or more Terminated
Transactions, as the case may be, and a party, the Termination Currency
Equivalent of an amount that party reasonably determines in good faith to be its
total losses and costs (or gain, in which case expressed as a negative number)
in connection with this Agreement or that Terminated Transaction or group of
Terminated Transactions, as the case may be, including any loss of bargain, cost
of funding or, at the election of such party but without duplication, loss or
cost incurred as a result of its terminating, liquidating, obtaining or
reestablishing any hedge or related trading position (or any gain resulting from
any of them). Loss includes losses and costs (or gains) in respect of any
payment or delivery required to have been made (assuming satisfaction of each
applicable condition precedent) on or before the relevant Early Termination Date
and not made, except, so as to avoid duplication, if Section 6(e)(i)(1) or (3)
or 6(e)(ii)(2)(A) applies. Loss does not include a party's legal fees and
out-of-pocket expenses referred to under Section 11. A party will determine its
Loss as of the relevant Early Termination Date, or, if that is not reasonably
practicable, as of the earliest date thereafter as is reasonably practicable. A
party may (but need not) determine its Loss by reference to quotations of
relevant rates or prices from one or more leading dealers in the relevant
markets.
"MARKET QUOTATION" means, with respect to one or more Terminated Transactions
and a party making the determination, an amount determined on the basis of
quotations from Reference Market-makers. Each quotation will be for an amount,
if any, that would be paid to such party (expressed as a negative number) or by
such party (expressed as a positive number) in consideration of an agreement
between such party (taking into account any existing Credit Support Document
with respect to the obligations of such party) and the quoting Reference
Market-maker to enter into a transaction (the "Replacement Transaction") that
would have the effect of preserving for such party the economic equivalent of
any payment or delivery (whether the underlying obligation was absolute or
contingent and assuming the satisfaction of each applicable condition precedent)
by the parties under Section 2(a)(i) in respect of such Terminated Transaction
or group of Terminated Transactions that would, but for the occurrence of the
relevant Early Termination Date, have
15
<PAGE>
been required after that date. For this purpose, Unpaid Amounts in respect of
the Terminated Transaction or group of Terminated Transactions are to be
excluded but, without limitation, any payment or delivery that would, but for
the relevant Early Termination Date, have been required (assuming satisfaction
of each applicable condition precedent) after that Early Termination Date is to
be included. The Replacement Transaction would be subject to such documentation
as such party and the Reference Market-maker may, in good faith, agree. The
party making the determination (or its agent) will request each Reference
Market-maker to provide its quotation to the extent reasonably practicable as of
the same day and time (with regard to different time zones) on or as soon as
reasonably practicable after the relevant Early Termination Date. The day and
time as of which those quotations are to be obtained will be selected in good
faith by the party obliged to make a determination under Section 6(e), and, if
each party is so obliged, after consultation with the other. If more than three
quotations are provided, the Market Quotation will be the arithmetic mean of the
quotations, without regard to the quotations having the highest and lowest
values. If exactly three such quotations are provided, the Market Quotation will
be the quotation remaining after disregarding the highest and lowest quotations.
For this purpose, if more than one quotation has the same highest value or
lowest value, then one of such quotations shall be disregarded. If fewer than
three quotations are provided, it will be deemed that the Market Quotation in
respect of such Terminated Transaction or group of Terminated Transactions
cannot be determined.
"NON-DEFAULT RATE" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the Non-defaulting Party (as certified by it) if
it were to fund the relevant amount.
"NON-DEFAULTING PARTY" has the meaning specified in Section 6(a).
"OFFICE" means a branch or office of a party, which may be such party's head or
home office.
"POTENTIAL EVENT OF DEFAULT" means any event which, with the giving of notice or
the lapse of time or both, would constitute an Event of Default.
"REFERENCE MARKET-MAKERS" means four leading dealers in the relevant market
selected by the party determining a Market Quotation in good faith (a) from
among dealers of the highest credit standing which satisfy all the criteria that
such party applies generally at the time in deciding whether to offer or to make
an extension of credit and (b) to the extent practicable, from among such
dealers having an office in the same city.
"RELEVANT JURISDICTION" means, with respect to a party, the jurisdictions (a) in
which the party is incorporated, organised, managed and controlled or considered
to have its seat, (b) where an Office through which the party is acting for
purposes of this Agreement is located, (c) in which the party executes this
Agreement and (d) in relation to any payment, from or through which such payment
is made.
"SCHEDULED PAYMENT DATE" means a date on which a payment or delivery is to be
made under Section 2(a)(i) with respect to a Transaction.
"SET-OFF" means set-off, offset, combination of accounts, right of retention or
withholding or similar right or requirement to which the payer of an amount
under Section 6 is entitled or subject (whether arising under this Agreement,
another contract, applicable law or otherwise) that is exercised by, or imposed
on, such payer.
"SETTLEMENT AMOUNT" means, with respect to a party and any Early Termination
Date, the sum of:-
(a) the Termination Currency Equivalent of the Market Quotations (whether
positive or negative) for each Terminated Transaction or group of Terminated
Transactions for which a Market Quotation is determined; and
(b) such party's Loss (whether positive or negative and without reference to
any Unpaid Amounts) for each Terminated Transaction or group of Terminated
Transactions for which a Market Quotation cannot be determined or would not (in
the reasonable belief of the party making the determination) produce a
commercially reasonable result.
"SPECIFIED ENTITY" has the meaning specified in the Schedule.
16
<PAGE>
"SPECIFIED INDEBTEDNESS" means, subject to the Schedule, any obligation (whether
present or future, contingent or otherwise, as principal or surety or otherwise)
in respect of borrowed money.
"SPECIFIED TRANSACTION" means, subject to the Schedule, (a) any transaction
(including an agreement with respect thereto) now existing or hereafter entered
into between one party to this Agreement (or any Credit Support Provider of such
party or any applicable Specified Entity of such party) and the other party to
this Agreement (of any Credit Support Provider of such other parry or any
applicable Specified Entity of such other party) which is a rate swap
transaction, basis swap, forward rate transaction, commodity swap, commodity
option, equity or equity index swap, equity or equity index option, bond option,
interest rate option, foreign exchange transaction, cap transaction, floor
transaction, collar transaction, currency swap transaction, cross-currency rate
swap transaction, currency option or any other similar transaction (including
any option with respect to any of these transactions), (b) any combination of
these transactions and (c) any other transaction identified as a Specified
Transaction in this Agreement or the relevant confirmation.
"STAMP TAX" means any stamp, registration, documentation or similar tax.
"TAX" means any present or future tax, levy, impost, duty, charge, assessment or
fee of any nature (including interest, penalties and additions thereto) that is
imposed by any government or other taxing authority in respect of any payment
under this Agreement other than a stamp, registration, documentation or similar
tax.
"TAX EVENT" has the meaning specified in Section 5(b).
"TAX EVENT UPON MERGER" has the meaning specified in Section 5(b).
"TERMINATED TRANSACTIONS" means with respect to any Early Termination Date (a)
if resulting from a Termination Event, all Affected Transactions and (b) if
resulting from an Event of Default, all Transactions (in either case) in effect
immediately before the effectiveness of the notice designating that Early
Termination Date (or, if "Automatic Early Termination" applies, immediately
before that Early Termination Date).
"TERMINATION CURRENCY" has the meaning specified in the Schedule.
"TERMINATION CURRENCY EQUIVALENT" means, in respect of any amount denominated in
the Termination Currency, such Termination Currency amount and, in respect of
any amount denominated in currency other than the Termination Currency (the
"Other Currency"), the amount in the Termination Currency determined by the
party making the relevant determination as being required to purchase such
amount of such Other Currency as at the relevant Early Termination Date, or, if
the relevant Market Quotation or Loss (as the case may be), is determined as of
a later date, that later date, with the Termination Currency at the rate equal
to the spot exchange rate of the foreign exchange agent (selected as provided
below) for the purchase of such Other Currency with the Termination Currency at
or about 11:00 a.m. (in the city in which such foreign exchange agent is
located) on such date as would be customary for the determination of such a rate
for the purchase of such Other Currency for value on the relevant Early
Termination Date or that later date. The foreign exchange agent will, if only
one party is obliged to make a determination under Section 6(e), be selected in
good faith by that party and otherwise will be agreed by the parties.
"TERMINATION EVENT" means an Illegality, a Tax Event or a Tax Event Upon Merger
or, if specified to be applicable, a Credit Event Upon Merger or an Additional
Termination Event.
"TERMINATION RATE" means a rate per annum equal to the arithmetic mean of the
cost (without proof or evidence of any actual cost) to each party (as certified
by such party) if it were to fund or of funding such amounts.
"UNPAID AMOUNTS" owing to any party means, with respect to an Early Termination
Date the aggregate of (a) in respect of all Terminated Transactions, the amounts
that became payable (or that would have become payable but for Section
2(a)(iii)) to such party under Section 2(a)(i) on or prior to such Early
Termination Date and which remain unpaid as at such Early Termination Date and
(b) in respect of each Terminated Transaction, for each obligation under Section
2(a)(i) which was (or would have been but for Section 2(a)(iii)) required to be
settled by delivery to, such party on or prior to such Early Termination Date
and which has not been so settled as at such Early Termination Date an amount
equal to the fair market
17
<PAGE>
value of that which was (or would have been) required to be delivered as of the
originally scheduled date for delivery, in each case together with (to the
extent permitted under applicable law) interest, in the currency of such
amounts, from (and including) the date such amounts or obligations were or would
have been required to have been paid or performed to (but excluding) such Early
Termination Date, at the Applicable Rate. Such amounts of interest will be
calculated on the basis of daily compounding and the actual number of days
elapsed. The fair market value of any obligation referred to in clause (b) above
shall be reasonably determined by the party obliged to make the determination
under Section 6(e) or, if each party is so obliged, it shall be the average of
the Termination Currency Equivalents of the fair market values reasonably
determined by both parties.
IN WITNESS WHEREOF the parties have executed this document on the respective
dates specified below with effect from the date specified on the first page of
this document.
UBS AG CONSECO, INC.
- ----------------------------------- ------------------------------------------
(Name of Party) (Name of Party)
By: /s/ MARTIN WEBER By: /s/ JAMES S. ADAMS
------------------------------- ------------------------------------
Name: Martin Weber Name: James S. Adams
Title: Legal Counsel Title: Senior Vice President,
Date: April 21, 1999 Chief Accounting Officer
and Treasurer
Date: April 21, 1999
By: /s/ DANIELA BEN SABER
-------------------------------
Name: Daniela Ben Saber
Title: Associate Director
Date: April 21, 1999
<PAGE>
SCHEDULE
to the Master Agreement
dated as of April 21, 1999
between
UBS AG, a bank organized and CONSECO, Inc. a corporation
under the laws of Switzerland organized under the laws of the
State of Indiana
("Party A") ("Party B")
Part 1
Termination Provisions
In this Agreement:
(a) "Specified Entity" means in relation to Party A for the purpose of:
Section 5(a)(v), Any Affiliate of Party A
Section 5(a)(vi), NONE
Section 5(a)(vii), NONE
Section 5(b)(iv), NONE
and in relation to Party B for the purpose of:
Section 5(a)(v), NONE
Section 5(a)(vi), NONE
Section 5(a)(vii), NONE
Section 5(b)(iv), NONE
(b) "Specified Transaction" will have the meaning specified in Section 14
of this Agreement and shall also include any Additional Specified Transactions.
As used herein, Additional Specified Transaction means repurchase agreements,
reverse repurchase agreements, securities lending agreements, forward contracts,
precious metals transactions, letters of credit reimbursement obligations and
indebtedness for borrowed money (whether or not evidenced by a note or similar
instrument) now existing or hereafter entered into between a party to this
Agreement (or any Credit Support Provider of such party or any applicable
Specified Entity of such party) and the other party to this Agreement (or any
Credit Support Provider of such other party or any applicable Specified Entity
of such other party),
(c) The "Cross Default" provisions of Section 5(a)(vi) f this Agreement,
as modified below, will apply to Party A and to Party B. Section 5(a)(vi) of
this Agreement is hereby amended by the addition of the following at the end
thereof:
"provided, however, that notwithstanding the foregoing, an Event of
Default shall not occur under either (1) or (2) above if, as demonstrated to the
reasonable satisfaction of the other party, (a) the event or condition referred
to in (1) or the failure to pay referred to in (2) is a failure to pay caused by
an error or omission of an administrative or operational nature; and (b) funds
were available to such party to enable it to make the relevant payment when due;
and (c) such relevant
1
<PAGE>
payment is made within three Business Days following
receipt of written notice from an interested party of such failure to pay."
If such provisions apply:
"Specified Indebtedness" means any obligation (whether present or
future, contingent or otherwise, as principal or surety or otherwise) for the
payment or repayment of any money.
"Threshold Amount" means:
(i) with respect to Party A , or any Specified Entity, an amount
equal to 2% of shareholders' equity (howsoever described) of
Party A or the relevant Specified Entity as shown on the most
recent annual audited financial statements of Party A or the
relevant Specified Entity and
(ii) with respect to Party B, an amount equal to 2% of shareholders'
equity (howsoever described) of Party B as shown on the most
recent annual audited financial statements of Party B.
(d) The "Credit Event Upon Merger" provisions of Section 5(b)(iv) will
apply to Party A and Party B, amended as follows:
"Credit Event Upon Merger' shall mean that a Designated Event (as
defined below) occurs with respect to a party, any Credit Support Provider of
the party or any applicable Specified Entity (any such party or entity, "X"),
and such Designated Event does not constitute an event described in Section
5(a)(viii) but the creditworthiness of X, or, if applicable, the successor,
surviving or transferee entity of X, is materially weaker than that of X
immediately prior to such event. In any such case the Affected Party shall be
the party with respect to which, or with respect to the Credit Support Provider
or Specified Entity of which, the Designated Event occurred, or, if applicable,
the successor, surviving or transferee entity of such party. For purposes
hereof, a Designated Event means that, after the date hereof:
(i) X consolidates, amalgamates with or merges with or into, or
transfers all or substantially all its assets to, or receives all
or substantially all the assets or obligations of, another
entity; or
(ii) any person or entity acquires directly or indirectly the
beneficial ownership of equity securities having the power to
elect a majority of the board of directors of X or otherwise
acquires directly or indirectly the power to control the
policy-making decisions of X."
(e) The "Automatic Early Termination" provision of Section 6(a) will not
apply to Party A or Party B.
(f) "Payments on Early Termination". For the purpose of Section 6(e) of
this Agreement:
(i) Market Quotation will apply.
(ii) The Second Method will apply.
(g) "Termination Currency" means one of the currencies in which payments
are required to be made pursuant to a Confirmation in respect of a Terminated
Transaction selected by the Non-Defaulting Party or the Non-Affected Party, as
the case may be, or, in the circumstances where there are two Affected Parties,
as agreed between the parties or, failing such agreement, if
2
<PAGE>
the currency so selected is not freely available, the Termination Currency shall
be U.S. Dollars.
(h) "Additional Termination Event" will apply to Party A and Party B.
The following shall constitute an Additional Termination Event: At any time the
rating issued by Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc. ("S&P") or Duff & Phelps Ratings Co. ("Duff &
Phelps"), with respect to the long-term unsecured, unsubordinated debt
securities ("Debt Securities") of either Party A or Party B is below BB+ in the
case of S&P or Duff & Phelps. If one of the foregoing credit rating agencies
ceases to be in the business of rating Debt Securities and such business is not
continued by a successor or assign of such agency (the "Discontinued Agency"),
Party A and Party B shall jointly and in good faith (i) select a credit rating
agency in substitution thereof and (ii) agree on the rating level issued by such
substitute agency that is equivalent to the ratings specified herein of the
Discontinued Agency, whereupon such substitute agency and equivalent rating
shall replace the Discontinued Agency and the rating level thereof for the
purposes of this Agreement. If at any time, all of the agencies specified have
become Discontinued Agencies and Party A and Party B have not previously agreed
in good faith on at least one agency and equivalent rating in substitution for
the Discontinued Agency and the applicable rating thereof, the foregoing shall
cease to constitute an Additional Termination Event.
Part 2
Tax Representations
(i) Payer Tax Representation. For the purpose of Section 3(e), Party A and
Party B hereby make the following representation: It is not required by
any applicable law, as modified by the practice of any relevant
governmental revenue authority, of any Relevant Jurisdiction to make
any deduction or withholding for or on account of any Tax from any
payment (other than interest under Section 2(e), 6(d)(ii) or 6(e)) to
be made by it to the other party under this Agreement. In making this
representation, it may rely on: (A) the accuracy of any representation
made by the other party pursuant to Section 3(f); (B) the satisfaction
of the agreement of the other party contained in Section 4(a)(i) or
4(a)(iii) and the accuracy and effectiveness of any document provided
by the other party pursuant to Section 4(a)(i) or 4(a)(iii); and (C)
the satisfaction of the agreement of the other party contained in
Section 4(d); provided that it shall not be a breach of this
representation where reliance is placed on clause (B) and the other
party does not deliver a form or document under Section 4(a)(iii) by
reason of material prejudice to its legal or commercial position.
(ii) Payee Tax Representations. For the purpose of Section 3(f), Party A
makes the representation(s) specified below:
(A) The following representation will apply with respect to each
Transaction effectuated by an Office of Party A not located in
the United States of America and the Office of Party B which is
located in the United States of America:
It is fully eligible for the benefits of the "Business Profits"
or "Industrial and Commercial Profits" provision, as the case may
be, the "Interest" provision or the "Other Income" provision (if
any) of the Specified Treaty with respect to any payment
described in such provisions and received or to be received by it
in connection with this Agreement and no such payment is
attributable to a trade or business carried on by it through a
permanent establishment in the Specified Jurisdiction.
3
<PAGE>
If such representation applies, then:
"Specified Treaty" means, with respect to a Transaction, the tax
treaty applicable between the United States of America and
Switzerland; and
"Specified Jurisdiction" means the United States of America.
Party A is a 'financial institution' and a 'non-U.S. branch of a
foreign person' as those terms are used in section
1.1441-4(a)(3)(ii) of United States Treasury Regulations (as
contained in Treasury Decision 8734 (October 6, 1997) ("TD
8734")), and Party A is a 'foreign person' as that term is used
in section 1.6041-4(a)(4) of TD 8734.
(B) The following representation will apply with respect to each
Transaction effectuated between an Office of Party A and an
Office of Party B located in the United States of America in both
cases:
Each payment received or to be received by Party A in connection
with this Agreement will be effectively connected with its
conduct of a trade or business in the United States of America.
(iii) Payee Tax Representations. For the purpose of Section 3(f), Party B
makes the representation(s) specified below:
(A) It is a corporation duly organized and incorporated under the
laws of the State of Indiana and is not a foreign corporation for
United States tax purposes.
Part 3
Agreement to Deliver Documents
For the purpose of Sections 3(d), 4(a)(i) and 4(a)(ii) of this Agreement, each
party agrees to deliver the following documents:
(a) Tax forms, documents or certificates to be delivered are:
Each party agrees to complete, accurately and in a manner reasonably
satisfactory to the other party (or any Specified Entity of the other party),
and to execute, arrange for any required certification of, and deliver to the
other party (or such Specified Entity) (or to such government or taxing
authority as the other party (or such Specified Entity) reasonably directs), any
form or document that may be required or reasonably requested in order to allow
the other party (or such Specified Entity) to make a payment under this
Agreement (or a Credit Support Document of the other party or a Specified Entity
thereof) without any deduction or withholding for or on account of any Tax or
with such deduction or withholding at a reduced rate, promptly upon the earlier
of (i) reasonable demand by the other party (or such Specified Entity) and (ii)
learning that the form or document is required.
4
<PAGE>
(b) Other documents to be delivered are:
<TABLE>
<CAPTION>
Party required Covered by
to deliver Date by which to Section 3(d)
document Form/Document/Certificate be delivered Representation
<S> <C> <C> <C>
Party A and Evidence of the authority and On or before Yes
Party B true signatuares of each official execution of this
or representative signing this Agreement and, if
Agreement or, as the case may requested by the
be, a Confirmation, on its other party each
behalf. Confirmation
forming a part of
this Agreement.
Party B Certified copy of the resolution On or before Yes
of Party B's Board of Directors execution of this
(or equivalent authorizing Agreement.
documentation) authorizing the
execution and delivery of this
Agreement and each
Confirmation and performance
of its obligation hereunder.
Party B Opinion of Party B's legal On or before Yes
counsel in a form satisfactory execution of this
to Party A regarding (inter alia) Agreement.
the power and authority of
Party B to enter into this
Agreement and Transactions
hereunder.
Party A Tax forms 1001 and 4224 On or before Yes
execution of this
Agreement.
</TABLE>
Part 4
Miscellaneous
(a) Addresses for Notices. For the purposes of Section 12(a) of this
Agreement:
(i) All notices or communications to Party A shall, with respect to a
particular Transaction, be sent to the address, telex number, or
facsimile number reflected in the Confirmation of that Transaction, and
any notice for purposes of Sections 5 or 6 shall be sent to:
Address: UBS AG, Stamford Branch, 677 Washington Blvd., Stamford,
CT 06912-0300
Attention: Legal Affairs Facsimile: (203) 719-6097
with a copy to: UBS AG, Legal Services, Bahnhofstrasse 45, Zurich,
CH-270.3.004.646-4, Switzerland, (Fax) +41 1 236 5111
5
<PAGE>
(ii) All notices or communications to Party B shall be sent to the
address, or facsimile number reflected below:
Address: Conseco, Inc. 11825 N. Pennsylvania Street,
Carmel Indiana 46032
Attention: Andrew Chow, CFA
Facsimile: (317) 817-6419 Telephone No: (317) 817-2602
Copies to:
James Adams, Treasurer
11825 N. Pennsylvania Street,
Carmel, Indiana 46032
Fax: (317) 817-2166, Phone: (317) 817-6166
John S. Sabl, General Counsel
11825 N. Pennsylvania Street
Carmel, Indiana 46032
Fax: (317) 817-6327, Phone: (317) 817-6092
(b) Process Agent. For the purpose of Section 13(c) of this Agreement:
Party A appoints as its Process Agent: Not Applicable.
Party B appoints as its Process Agent: Not Applicable.
(c) Offices. The provisions of Section 10(a) of this Agreement will
apply to Party A and Party B.
(d) Multibranch Party. For the purpose of Section 10(c) of this Agreement:
(i) Party A is a Multibranch Party and may act through its branches
in any of the following countries: England and Wales and the
United States of America.
(ii) Party B is not a Multibranch Party.
(e) Calculation Agent. The Calculation Agent is Party A, unless an Event
of Default or Potential Event of Default has occurred and is continuing with
respect to Party A or otherwise specified in a Confirmation in relation to the
relevant Transaction, in which case both parties will negotiate in good faith
and appoint a mutually acceptable third party dealer as Calculation Agent. All
determinations by the Calculation Agent are subject to agreement by Party A and
Party B. If the parties are unable to agree on a particular calculation, another
mutually acceptable third-party Calculation Agent which is a dealer in the
relevant market will be appointed.
(f) Credit Support Document. Not Applicable.
(g) Credit Support Provider. Credit Support Provider means: Not Applicable.
(h) Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of New York.
(i) Netting of Payments. Subparagraph (ii) of Section 2(c) of this
Agreement will apply, except the following groups of Transactions: (1) foreign
exchange transactions and currency
6
<PAGE>
options, in which case subparagraph (ii) of Section 2(c) of this Agreement will
not apply.
(j) "Affiliate" will have the meaning specified in Section 14 of this
Agreement with respect to Party B and for Party A shall mean any subsidiary
consolidated for financial reporting purposes in the group financial statements
as presented in the annual report of Party A.
Part 5
Other Provisions
(a) Set-off. Without affecting the provisions of the Agreement requiring
the calculation of certain net payment amounts, all payments under this
Agreement will be made without set-off or counterclaim; provided, however, that
upon the designation of any Early Termination Date, in addition to and not in
limitation of any other right or remedy (including any right to set off,
counterclaim, or otherwise withhold payment or any recourse to any Credit
Support Document) under applicable law the Non- defaulting Party or Non-affected
Party (in either case, "X") may without prior notice to any person set off any
sum or obligation (whether or not arising under this Agreement and whether
matured or unmatured, whether or not contingent and irrespective of the
currency, place of payment or booking office of the sum or obligation) owed by
the Defaulting Party or Affected Party (in either case, "Y") to X or any
Affiliate of X against any sum or obligation (whether or not arising under this
Agreement, whether matured or unmatured, whether or not contingent and
irrespective of the currency, place of payment or booking office of the sum or
obligation) owed by X or any Affiliate of X to Y and, for this purpose, may
convert one currency into another at a market rate determined by X. If any sum
or obligation is unascertained, X may in good faith estimate that sum or
obligation using available market input, and set-off in respect of that
estimate, subject to X or Y, as the case may be, accounting to the other party
when such sum or obligation is ascertained. X will give notice to Y of any
set-off effected under this provision.
(b) Representations. Section 3(a) is amended by adding the following
paragraphs (vi), (vii), (viii) and (ix):
(vi) No Agency. It is entering into this Agreement and each
Transaction as principal (and not as agent or in any other capacity,
fiduciary or otherwise).
(vii) Eligible Swap Participant. It is an "eligible swap participant"
as that term is defined by the United States Commodity Futures Trading
Commission in 17 C.F.R.ss.35.1(b)(2) and it has entered into this
Agreement and it is entering into each Transaction in connection with
its line of business (including financial intermediation services) or
the financing of its business; and the material terms of this Agreement
and such Transaction have been individually tailored and negotiated.
(viii) Compliance with Internal Investment Policies. In the case of
Party B, each Transaction entered into under this Agreement will be
entered into in accordance with, and will at all times comply with,
applicable internal investment policies and guidelines from time to
time adopted by Party B; and
(ix) Purpose. In the case of Party B, it has entered into this
Agreement (and it will enter into each Transaction hereunder) in
connection with exchange rate, interest rate or other price exposures
arising in the conduct or financing of its business or in order to
manage its assets or liabilities.
(c) Relationship Between Parties. Each party will be deemed to represent
to the other party
7
<PAGE>
on the date on which it enters into a Transaction that (absent a written
agreement between the parties that expressly imposes affirmative obligations to
the contrary for that Transaction):
(i) Non-Reliance. It is cting for its own account, and it has made
its own independent decisions to enter into that Transaction and as to
whether that Transaction is appropriate or proper for it based upon its
own judgment and upon advice from such advisers as it has deemed
necessary. It is not relying on any communication (written or oral) of
the other party as investment advice or as a recommendation to enter
into that Transaction; it being understood that information and
explanations related to the terms and conditions of a Transaction shall
not be considered investment advice or a recommendation to enter into
that Transaction. No communication (written or oral) received from the
other party shall be deemed to be an assurance or guarantee as to the
expected results of that Transaction.
(ii) Assessment and Understanding. It is capable of assessing the
merits of and understanding (on its own behalf or through independent
professional advice), and understands and accepts the terms, conditions
and risks of that Transaction. It is also capable of assuming, and
assumes, the risks of that Transaction.
(iii) Status of Parties. The other party is not acting as a fiduciary
for or an adviser to it in respect of that Transaction.
(d) Waiver of Jury Trial. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY AND ALL
RIGHT TO TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY TRANSACTION AND ACKNOWLEDGES THAT THIS WAIVER
IS A MATERIAL INDUCEMENT TO THE OTHER PARTY'S ENTERING INTO THIS AGREEMENT.
(e) Consent to Recording. Each Party (i) consents to the recording of all
telephone conversations between trading, operations and marketing personnel of
the parties and their Affiliates in connection with this Agreement or any
potential Transaction; (ii) agrees to give notice to such personnel of it and
its Affiliates that their calls will be recorded; and (iii) agrees that in any
Proceedings, it will not object to the introduction of such recordings in
evidence on grounds that consent was not properly given.
(f) Scope of Agreement. Upon the effectiveness of this Agreement, unless
otherwise agreed to in writing by the parties to this Agreement with respect to
specific Specified Transactions, all Specified Transactions then outstanding or
any future Specified Transactions between Offices of the parties listed in Part
4(d) shall be subject to the terms hereof, with the exception of any Additional
Specified Transaction, and each such Specified Transaction shall be a
"Transaction" for purposes of this Agreement.
(g) Tax Event. Section 5(b)(ii) of this Agreement is hereby amended by the
deletion of "or there is a substantial likelihood that it will," from line four
thereof.
(h) Agreements. Section 4 of this Agreement is hereby amended by the
addition of Section 4(f) as follows:
"(f) Physical Delivery. In respect of any physically settled
Transactions, it will, at the time of delivery, be the legal and
beneficial owner, free of liens and other encumbrances, of any
securities or commodities it delivers to the other party; and, in
addition, with respect to any breach of this Section 4(f), Section
5(a)(ii) of this Agreement is hereby amended by the insertion of a
period after "Agreement" on the fifth line and the deletion of the
remainder of
8
<PAGE>
the Section.
(i) Transactions governed by FRABBA Terms. Any forward rate agreement into
which the parties have entered and in respect of which the confirmation or other
confirming evidence refers to or incorporates the British Bankers' Association
London Interbank Forward Rate Agreements Recommended Terms and Conditions (1985
edition) ("FRABBA Terms") will be governed by this Agreement. Any forward rate
agreement into which the parties may enter and in respect of which the
confirmation or other confirming evidence refers to or incorporates the FRABBA
Terms will be governed by this Agreement in all circumstances except when the
parties expressly agree otherwise. Each such transaction will be deemed to be a
Transaction and each such confirmation or other confirming evidence will be
deemed to constitute a Confirmation for purposes of this Agreement. Sections B,
C and E and clauses 1, 4, 5 and 6 of Section D of the FRABBA Terms are hereby
incorporated by reference in this Agreement. Those Sections are applicable only
to Transactions to which this provision relates and will prevail in the event of
any inconsistency with any other provision of this Agreement. In the event of
any other inconsistency between the FRABBA Terms and this Agreement, this
Agreement will govern. Clauses 2, 3, 7, 8, 9 and 10 of Section D of the FRABBA
Terms are not applicable to any Transactions to which this provision relates.
Part 6
Foreign Exchange Transactions and Currency Options
Notwithstanding anything to the contrary in this Agreement, the following
provisions shall apply with respect to FX Transactions and Currency Options.
Unless otherwise specified by the parties hereof, any "FX Transactions" and
"Currency Options" entered into by such parties shall be deemed to be
Transactions, and Specified Transactions, as the case may be, for the purposes
of this Agreement:
(a) Incorporation of the FX Definitions
The provisions of the 1998 FX and Currency Option Definitions (as
published by the International Swaps and Derivatives Association, Inc.
(the Emerging Markets Traders Association and the Foreign Exchange
Committee) (the "1998 FX Definitions") are hereby incorporated in their
entirety and shall (unless, in relation to a particular Transaction, as
otherwise specified in the relevant Confirmation) apply to any FX
Transaction or Currency Option entered into by the parties hereto. In
relation to any such FX Transaction or Currency Option and in the event
of any inconsistency between the provisions of the 1998 FX Definitions
and the provisions of the 1992 ISDA FX and Currency Option Definitions as
published by the International Swaps and Derivatives Association, Inc.
(the "1992 FX Definitions"), the 1998 FX Definitions shall prevail (such
1992 FX Definitions and 1998 FX Definitions collectively referred to
herein as the "FX Definitions").
The provisions of the 1992 FX Definitions are hereby incorporated herein
in their entirety and shall in relation to a particular Transaction if so
specified in the relevant Confirmation, apply to such FX Transaction or
Currency Option entered into by the parties hereto. In relation to any
such FX Transaction or Currency Option and in the event of any
inconsistency between the provisions of the 1992 FX Definitions and
provisions of the 1998 FX Definitions, the 1992 FX Definitions shall
prevail. In the event of any inconsistency between the provisions of: (i)
the 1992 FX Definitions and/or the 1998 FX Definitions and (ii) this Part
6 of the Schedule, this Part 6 will prevail.
9
<PAGE>
(b) Amendments to the FX Definitions
The following amendments are made to the FX Definitions:
With respect to all FX Transactions and Currency Options:
Section 1.2 of the 1992 FX Definitions is hereby amended by adding
the following new sub-section "(c)":
"Currency" means money denominated in the lawful currency of any
country or any "composite currency" such as the European Currency
Unit."
With respect to all Currency Options:
A. Section 2.2 of the 1992 FX Definitions is amended by the addition
of the following definitions with respect to Currency Options:
"Call Option" means a Currency Option entitling, but not
obligating, the Buyer to purchase from the Seller at the Strike
Price a specified quantity of the Call Currency;
"Put Option" means a Currency Option entitling, but not
obligating, the Buyer to sell to the Seller at the Strike Price a
specified quantity of the Put Currency.
B. Section 2.2(k) of the 1992 FX Definitions is amended by the
deletion of the word "facsimile," in the third line thereof.
(c) Foreign Exchange Contract Netting Agreement
This Agreement supersedes and cancels the terms of all Foreign Exchange
contract(s) and/or netting agreement(s) ("the Prior Agreement(s)") entered into
between the parties. Such Prior Agreement(s) shall cease to have effect as of
the date of this Master Agreement but without prejudice to any rights and
liabilities which may have arisen under the Prior Agreement(s) prior to the date
hereof and which have not been replaced by this Agreement.
IN WITNESS WHEREOF the parties have executed this document on the respective
dates specified below with effect from the date specified on the first page of
this document.
UBS AG CONSECO, INC.
PARTY A PARTY B
By: /s/ Martin Weber By: /s/ James S. Adams
------------------------------- -----------------------------------
Name: Martin Weber Name: James S. Adams
Title: Legal Counsel Title: Senior Vice President,
Date: April 21, 1999 Chief Accounting Officer
and Treasurer
Date: April 21, 1999
By: /s/ Daniela Ben Saber
-------------------------------
Name: Daniela Ben Saber
Title: Associate Director
Date: April 21, 1999
10
<PAGE>
CONFIRMATION
Date: June 29, 1999
To: Conseco, Inc. ("Party B")
11825 N. Pennsylvania Street
Carmel, Indiana 46032
Attention: James S. Adams, Senior Vice President and Treasurer
Phone: (317) 817- 6166
Fax: (317) 817-2166
From: UBS AG, London Branch ("Party A")
Re: Equity Forward Confirmation
Reference Number: _____________
The purpose of this communication is to confirm the terms and conditions of the
forward transaction (the "Transaction") entered into between us on the Trade
Date specified below. This communication constitutes a "Confirmation" as
referred to in the 1992 ISDA Master Agreement specified below.
The definitions and provisions contained in the 1991 ISDA Definitions (the "Swap
Definitions") and the 1996 ISDA Equity Derivatives Definitions (the Equity
Definitions and, together with the Swap Definitions, the "Definitions"), each as
published by the International Swaps and Derivatives Association, Inc., are
incorporated into this Confirmation. In the event of any inconsistency between
the Swap Definitions and the Equity Definitions, the Equity Definitions will
govern. In the event of any inconsistency between the Definitions and this
Confirmation, this Confirmation will govern.
This Confirmation supplements, forms part of, and is subject to, the ISDA Master
Agreement dated as of April 21, 1999 (the "Agreement") between Party B and Party
A. All provisions contained in the Agreement govern this confirmation except as
expressly modified below.
The terms of the Transaction to which this Confirmation relates are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
General
- -------
Type of Transaction : Share Forward Transaction
Trade Date : June 29, 1999 (time of execution available upon
request)
<PAGE>
Effective Date : The Closing Date (if any) under the Purchase
Agreement
Termination Date : December 15, 1999, as it may be extended as
provided elsewhere in this Confirmation, or if
such day is not an Exchange Business Day, the next
succeeding day that is an Exchange Business Day
Buyer : Party B
Seller : Party A
Shares : Common Stock of Conseco, Inc. (Symbol: CNC)
Initial Number
of Shares : The number of Purchased Shares (as defined in the
Purchase Agreement)
Current Number
of Shares : At any time, the Initial Number of Shares less the
aggregate Number of Terminated Shares at that
time, determined as of the end of the most recent
Business Day
Number of
Terminated Shares : In respect of any early termination hereunder,
(i) the proceeds, net of Commission, of Party A's
sales of Purchased Shares pursuant to Party B's
Direction to Sell divided by (ii) the Forward
Price Per Share
Forward Price
per Share : The Purchase Price (as defined in the Purchase
Agreement)
Total Forward Price : At any time, the Current Number of Shares at that
time multiplied by the Forward Price per Share
Direction to Sell : As defined in the Purchase Agreement
Averaging Period : As defined under Settlement Terms, below
Purchase Agreement : The Purchase Agreement among Party A, Party B and
WDR, dated as of June 29, 1999
Purchased Shares : The Shares sold by Party B to WDR pursuant to the
Purchase Agreement and immediately transferred by
WDR to Party A
WDR : Warburg Dillon Read LLC, which shall serve as
Party A's selling agent in respect of Party A's
sales of Shares
<PAGE>
Exchange : New York Stock Exchange
Related Exchange : Any exchange on which options with respect to the
Shares are traded
Calculation Agent : Party A, subject to Section 4(e) of the Schedule
to the Agreement
Clearance System : The Depository Trust Company
Commission : $ 0.05 per Share, for each Share (as defined in
the Purchase Agreement) sold by Party A.
Parallel Termination : If the Purchase Agreement is terminated for any
reason before the purchase and sale of the
Purchased Shares contemplated therein is
consummated, this Confirmation and the Transaction
hereby confirmed shall likewise be terminated, and
neither party shall have any further obligation
hereunder.
Dividend Payment
- ----------------
Dividend Amount
Payer : Party A
Dividend Amount
Payee : Party B
Dividend Payment
Dates : The Floating Rate Payer Payment Date for each
Calculation Period during which an Applicable
Dividend is paid by Party B, provided that if an
Applicable Dividend is paid by Party B after the
termination of the Transaction, the Dividend
Payment Date in respect of that dividend shall be
the second Business Day after receipt thereof by
Party A
Dividend Amount : The per-share amount of an Applicable Dividend
multiplied by the aggregate number of Purchased
Shares, Payment Shares and Make- whole Shares of
which Party A or its nominee is the record holder
on the record date for such Applicable Dividend
(after giving effect to any sales of Purchased
Shares, Payment Shares or Make-whole Shares that
are settled on the record date)
3
<PAGE>
Applicable Dividend : Each dividend paid in respect of the Shares the
ex-dividend date of which occurs during the
Dividend Period
Dividend Period : The period from and including the second Exchange
Business Day before the Effective Date to and
including the Termination Date or any Early End
Date on which the Transaction (or such portion of
the Transaction as remains after any previous
terminations in part) is terminated in whole,
provided that if Party A holds Payment Shares
or Make-whole Shares after such termination, the
Dividend Period shall be extended until Party A
has disposed of all such Shares
Floating Rate Payments
- -----------------------
Floating Rate Payer : Party B
Floating Rate Payee : Party A
Initial Notional
Amount : The Total Forward Price on the Effective Date
Current Notional
Amount : At any time, the Total Forward Price at that time,
provided that for this purpose the Current Number
of Shares shall be reduced in respect of each sale
by Party A of Purchased Shares in the Averaging
Period by a number equal to the net proceeds of
such sale divided by the Forward Price per Share,
and provided further that no reduction (whether in
respect of a sale of Shares in the Averaging
Period or otherwise) shall take effect until Party
A has received the net proceeds of such sale.
Final Calculation
Period : The last day of the final Calculation Period
shall be the date on which Party A has received
the net proceeds of all sales of Purchased Shares
during the Averaging Period.
Floating Amount : For any day in a Calculation Period, the result of
multiplying (i) the Current Notional Amount on
that day by (ii) the sum of the Floating Rate for
that Calculation Period and the Spread by (iii)
the Floating Rate Day Count Fraction
4
<PAGE>
Floating Rate Option : USD-LIBOR-BBA
Designated Maturity : 1 month
Spread : plus 0.65%
Floating Rate for
Initial Calculation
Period : To be determined by Party A two London Banking
Days before the Effective Date and advised to
Party B
Floating Rate Day
Count Fraction : 1/360 for each day in the Calculation Period. (See
"Daily Basis" below)
Reset Dates : The first day of each Calculation Period
Floating Rate Payer
Payment Dates : Monthly, on the calendar date corresponding to the
Closing Date, and on the Termination Date, subject
to adjustment in accordance with the Business Day
Convention specified below.
Business Day
Convention : Modified Following
Daily Basis : Floating Amounts hereunder shall be calculated on
a daily basis and paid on each Floating Rate Payer
Payment Date.
Settlement Terms
- ----------------
Settlement : The Transaction will be physically settled;
provided, however, that Party B may elect to
require that the Transaction be net share settled
by giving an irrevocable notice to Party A no
later than ten Exchange Business Days before the
Termination Date.
Settlement Date : Three Clearance System Business Days after the
Termination Date
Physical Settlement : If the Transaction is to be physically settled, on
the Settlement Date the Seller shall deliver to
the Buyer the Current Number of Shares at
5
<PAGE>
the Termination Date against payment in
immediately available U.S. funds by the Buyer to
the Seller of an amount equal to the Total Forward
Price.
Net Share Settlement : If the Transaction is to be net share settled, the
following provisions shall apply (subject to
"Termination on Satisfaction in Full," below):
(a) If the Forward Price per Share is less than
the Final Price, on the Settlement Date Party A
shall deliver to Party B the number of whole
Shares equal to (i) the product of (A) the Current
Number of Shares at the close of trading on the
Exchange on the Termination Date multiplied by (B)
the amount by which the Forward Price per Share is
less than the Final Price, divided by (ii) the
Final Price, plus cash in lieu of any fractional
Share.
(b) If the Forward Price per Share is greater than
the Final Price, on the Settlement Date Party B
shall deliver to Party A the number of whole
Shares (the "Payment Shares") equal to (i) the
product of (A) the Current Number of Shares at the
close of trading on the Exchange on the
Termination Date multiplied by (B) the amount by
which the Forward Price per Share is greater than
the Final Price, divided by (ii) the Final Price,
plus cash in lieu of any fractional Share.
(c) If the Forward Price per Share is equal to the
Final Price, no delivery shall be made by either
Party A or Party B.
Final Price : (a) If on the first day of the Averaging Period
Party A holds Purchased Shares in a number greater
than or equal to one-half the Current Number of
Shares at that time, the volume-weighted average
price at which Party A sells its entire holding of
the Purchased Shares during the Averaging Period,
less Commission, provided that if Party A is
unable to sell its entire holding in a
commercially reasonable manner, the Final Price
shall be the volume-weighted average price at
which Party A sells the number of Purchased Shares
that it is able to sell during the Averaging
Period in a commercially reasonable manner, or
(b) if on the first day of the Averaging Period
Party A holds Purchased Shares in a number less
than one-half the Current Number
6
<PAGE>
of Shares at that time, then the Transaction shall
be bifurcated into Transactions 1 and 2, where
Transaction 1 comprises that portion of the
Current Number of Shares equal to the number of
Purchased Shares then held by Party A and
Transaction 2 comprises the remainder of the
Current Number of Shares. The Final Price for
purposes of the settlement of Transaction 1 shall
be the volume-weighted average sale price at which
Party A sells its Purchased Shares during the
Averaging Period, and the Final Price for purposes
of the settlement of Transaction 2 shall be the
arithmetic average of the Relevant Prices on all
Averaging Dates.
Averaging Period : The period from and including the ninth Exchange
Business Day immediately preceding the Termination
Date to and including the Termination Date
Relevant Price : With respect to any Averaging Date , the closing
price of a Share on such Averaging Date, as
reported by the Exchange
Averaging Dates : The Exchange Business Days in the Averaging Period
Averaging Date
Market Disruption : Modified Postponement, and for this purpose the
Transaction shall be deemed to be a Share
Transaction.
Valuation Date : The Termination Date
Extension for
Residual Shares : If Party A is unable to sell in a commercially
reasonable manner its entire holding of the
Purchased Shares during the Averaging Period,
Party A shall so notify Party B, and settlement of
the Transaction shall proceed, except with respect
to the Purchased Shares not sold. The Termination
Date of the Transaction shall be postponed until
the earliest date on which all such unsold
Purchased Shares (the "Residual Shares") have been
sold or until January 17, 2000, whichever first
occurs. A new Averaging Period ("Supplemental
Averaging Period") shall commence on the Exchange
Business Day following the last day of the
Averaging Period, and net share settlement shall
apply (provided that the Conditions for Net Share
Settlement are met during the Supplemental
Averaging Period).
7
<PAGE>
The Final Price for purposes of settlement shall
be the volume-weighted average price at which
Residual Shares are sold during the Supplemental
Averaging Period. For purposes of floating rate
payments, a supplemental Calculation Period shall
run from the last day of the final Calculation
Period to the date on which Party A has received
the net proceeds of all sales of Residual Shares
made during the Supplemental Averaging Period.
Conditions on Net
Share Settlement : If Party B elects to have the Transaction
net-share settled, the following conditions must
be met at all times during the Averaging Period:
(i) the Registration Statement shall be effective,
(ii) Party B shall have filed all reports and any
definitive proxy or information statements
required to be filed by Party B pursuant to
Section 13(a), 13(c) or 15(d) of the Securities
Exchange Act of 1934, (iii) no stop order or any
order preventing or suspending the use of any
prospectus relating to the Registered Shares or
suspending the qualification of the Registered
Shares for offering or sale in any jurisdiction
shall have been issued and shall continue in
effect, (iv) no notice by Party B to Party A
pursuant to Section 3(f) of the Purchase Agreement
shall have been given and remain in effect, (v)
Party B shall not be in possession of material
non-public information relating to Party B, (vi)
any Shares deliverable to Party A shall have been
authorized for listing on the Exchange, and (vii)
if Party A is delivering Shares to Party B, (1) no
issuer or third-party tender offer shall be in
effect in respect of the Shares on the Settlement
Date, and no issuer tender offer shall have been
in effect within the ten business days preceding
the Settlement Date, and (2) net share settlement
of the Transaction shall not constitute or cause a
violation of Rule 102 of Regulation M under the
Securities Exchange Act of 1934. If any of the
foregoing conditions are not met at all required
times, physical settlement shall apply to the
relevant termination.
Registration Statement: The registration statement and any additional
registration statements filed by Party B with the
Securities and Exchange Commission on Form S-3,
registering the Purchased Shares, the Payment
Shares or the Make-whole Shares, as amended and
supplemented from time to time
8
<PAGE>
Registered Shares : All Shares registered under the Registration
Statement
Make-Whole
Provisions : If Party A receives Payment Shares pursuant to net
share settlement, whether incident to an early
termination in part or in whole or final
settlement, and if within ten Exchange Business
Days after the Settlement Date Party A resells all
or any portion of the Payment Shares in
commercially reasonable market transactions and
the net proceeds received by Party A upon the
resale of such shares exceeds the product of the
number of Payment Shares multiplied by the Final
Pric (the "Settlement Amount") (or if less than
all of the Payment Shares are sold, the applicable
pro rata portion of the Settlement Amount), Party
A shall promptly refund in cash such difference to
Party B. If such net proceeds are less than the
Settlement Amount (or if less than all the Payment
Shares are sold, the applicable pro rata portion
of the Settlement Amount), Party B shall pay in
cash or (subject to the satisfaction of the
Conditions on Net Share Settlement) additional
Shares such difference (the "Make-whole Amount")
to Party A promptly after receipt of notice
thereof. If Party B elects to pay the Make-Whole
Amount in additional Shares, Party B shall deliver
to Party A the number of whole Shares (the
"Make-whole Shares") equal to (i) the Make-whole
Amount divided by (ii) the closing price of the
Shares as reported on the Exchange on the Exchange
Business Day immediately preceding the day of
delivery of such Shares. If within ten Exchange
Business Days after delivery of the Make-whole
Shares to Party A, Party A resells all or any
portion of such Shares in commercially reasonable
market transactions and the net proceeds received
by Party A from the resale of Make-whole Shares
exceed or are less than the Make-whole Amount (or
if less than all of the Make-whole Shares are
sold, the applicable portion of the Make-whole
Amount), Party A shall pay to Party B any such
excess in cash and Part B shall pay to Party A any
additional Make-whole Amount in cash. In
calculating the net proceeds from the resale of
any Payment Shares or Make-whole Shares, the
Commission shall be deducted from the proceeds. In
determining when the ten Exchange Business Days
referred to above in relation to resales by Party
A of Payment Shares or Make-whole Shares have
elapsed, Exchange Business Days occurring during
any period when Party A is required to suspend
sales of the Shares
9
<PAGE>
pursuant to a notice given by Party B under
Section 3(f) of the Purchase Agreement, and
Exchange Business Days on which a Market
Disruption Event occurs, shall be disregarded.
Deficiency of
Registered Shares : If there is an insufficient number of Registered
Shares to enable Party B to satisfy its obligation
to Party A to deliver Registered Shares as Payment
Shares or Make-whole Shares, the Transaction shall
be cash-settled to the extent of the deficiency,
and Party B, in addition to delivering such
Registered Shares as it has, shall pay to Party A
on the Settlement Date (in the case of Payment
Shares) or on the date of delivery (in the case of
Make-whole Shares) an amount in immediately
available U.S. funds equal to the Settlement
Amount or the Make-whole Amount, as the case may
be, less the product of the number of Registered
Shares delivered by Party B times the Final Price
(in the case of Payment Shares) or the closing
price of the Shares as reported on the Exchange on
the Exchange Business Day immediately preceding
the day of delivery of such Registered Shares (in
the case of Make-whole Shares).
Settlement Disruption : If a Settlement Disruption Event prevents delivery
of Shares (whether pursuant to physical settlement
or net share settlement) on the Settlement Date,
then the Settlement Date will be the first
succeeding day on which delivery of the Shares can
take place through the relevant Clearance System
unless a Settlement Disruption Event prevents
settlement on each of the 10 relevant Clearance
System Business Days immediately following the
original date, that, but for the Settlement
Disruption Event, would have been the Settlement
Date. In that case (a) if such Shares can be
delivered in any other commercially reasonable
manner, then the Settlement Date will be the first
day on which settlement of a sale of Shares
executed on the 10th relevant Clearance System
Business Day customarily would take place using
such other commercially reasonable manner of
delivery (which other manner of delivery will be
deemed the relevant Clearance System for the
purposes of delivery of the relevant Shares), and
(b) if such Shares cannot be delivered in any
other commercially reasonable manner, then the
Settlement Date will be postponed until delivery
can be effected through the relevant Clearance
System or in any other commercially reasonable
manner.
10
<PAGE>
Settlement
Disruption Event : An event beyond the control of the parties as a
result of which the relevant Clearance System
cannot clear the transfer of Shares
Early Termination
- -----------------
Early End Date : Any Exchange Business Day in advance of the
Termination Date on which the Transaction is
terminated, in whole or in part, pursuant to the
terms hereof
Termination on
Satisfaction in Full : If at any time while the Transaction is
outstanding Party A has attained the full amount
(after deducting Commission) of the Total Forward
Price (as adjusted from time to time) through
sales of Purchased Shares pursuant to Directions
to Sell, Payment Shares or Make-whole Shares in
any combination, Party A shall promptly cease all
sales of such Shares and shall promptly notify
Party B accordingly. Upon the giving of such
notice, and notwithstanding any other terms of the
Transaction regarding termination, the Transaction
shall terminate, The Early End Date shall be the
date on which such notice is given, and Party A
shall forthwith deliver to Party B the remaining
Purchased Shares, Payment Shares and Make-whole
Shares that it may be holding (other than Shares
needed to meet delivery requirements resulting
from previous sales), and Party A shall pay to
Party B in cash the amount of any excess that
Party A may have attained over the Total Forward
Price.
Termination on
Direction to Sell : If Party A sells Shares pursuant to a Direction to
Sell given by Party B, the Transaction shall be
terminated on the date of sale (which shall be the
Early End Date) to the extent of the Number of
Terminated Shares. If the Number of Terminated
Shares equals the entire Current Number of Shares
on the date of the Direction to Sell, the
Transaction shall be terminated in whole. If the
Number of Terminated Shares is less than the
entire Current Number of Shares on the date of the
Direction to Sell, the Transaction shall be
terminated in part as to the Number of Terminated
Shares. If the Transaction is terminated in part,
then on the Early End Date the Current Number of
Shares shall
11
<PAGE>
be reduced by the Number of Terminated Shares, the
Total Forward Price shall be recalculated using
the Current Number of Shares as so reduced, and
the Transaction, with the Current Number of Shares
and Total Forward Price so reduced, shall continue
to be a Transaction for all purposes of this
Confirmation and the Agreement.
Conditions on
Termination on
Direction to Sell : The early termination of the Transaction or part
thereof is subject to the satisfaction of the
following conditions at all times from the giving
of the Direction to Sell to the consummation of
the early termination: (i) the Registration
Statement shall be effective, (ii) Party B shall
have filed all reports and any definitive proxy or
information statements required to be filed by
Party B pursuant to Section 13(a), 13(c) or 15(d)
of the Securities Exchange Act of 1934, (iii) no
stop order or any order preventing or suspending
the use of any prospectus relating to the
Registered Shares or suspending the qualification
of the Registered Shares for offering or sale in
any jurisdiction shall have been issued and shall
continue in effect, (iv) no notice by Party B to
Party A pursuant to Section 3(f) of the Purchase
Agreement shall have been given and remain in
effect, (v) Party B shall not be in possession of
material non-public information relating to Party
B, (vi) any Shares deliverable to Party A shall
have been authorized for listing on the Exchange,
(vii) the Early End Date shall not fall within the
Averaging Period, and (viii) if Party A is
delivering Shares to Party B, (1) no issuer or
third-party tender offer shall be in effect in
respect of the Shares on the Settlement Date in
respect of the early termination, and no issuer
tender offer shall have been in effect within the
ten business days preceding such Settlement Date,
and (2) net share settlement of the Transaction or
part thereof shall not constitute or cause a
violation of Rule 102 of Regulation M under the
Securities Exchange Act of 1934. If any of the
foregoing conditions are not met at all required
times, the Direction to Sell shall be void and no
early termination shall take place.
Net Share Settlement
on Termination on
Direction to Sell : Any Termination on Direction to Sell shall be net
share settled as follows:
12
<PAGE>
(a) If the Forward Price per Share is less than
the Final Price on Early Termination, on the
Settlement Date Party A shall deliver to Party B
the number of whole Shares equal to (i) the
product of (A) the Number of Terminated Shares
multiplied by (B) the amount by which the Forward
Price per Share is less than the Final Price on
Early Termination, divided by (ii) the Final Price
on Early Termination, plus cash in lieu of any
fractional Share.
(b) If the Forward Price per Share is greater
than the Final Price on Early Termination, on the
Settlement Date Party B shall deliver to Party A
the number of whole Shares (the "Payment Shares")
equal to (i) the product of (A) the Number of
Terminated Shares multiplied by (B) the amount by
which the Forward Price per Share is greater than
the Final Price on Early Termination, divided by
(ii) the Final Price on Early Termination, plus
cash in lieu of any fractional Share.
(c) If the Forward Price per Share is equal to
the Final Price on Early Termination, no delivery
shall be made by either Party A or Party B.
Final Price on Early
Termination : The volume-weighted average price at which Party A
sells the number of Purchased Shares that it is
directed to sell, less Commission, provided that
if Party A does not hold that number of Purchased
Shares, Party A shall sell such Purchased Shares
as it does hold and shall also be deemed to have
sold, at the closing price on the Early End Date,
an additional number of Shares equal to the
difference between the number of Purchased Shares
that Party A is directed to sell and the number of
Purchased Shares that Party A then holds, and the
Final Price on Early Termination shall in that
case equal the volume-weighted average price of
Party A's sales of Purchased Shares, less
Commission, and deemed sales of additional Shares.
Early Termination
Settlement Date : All payments and deliveries required to be made
upon the early termination of the Transaction,
whether in whole or in part, shall be made on the
third Clearance System Business Day after the
Early End Date.
13
<PAGE>
Make-whole Provisions : The Make-whole Provisions set forth above under
Settlement Terms shall apply to settlements on
early termination.
No Termination
During Call : If Pioneer Financial Services, Inc. calls for
redemption its 6-1/2% Convertible Subordinated
Notes Due 2003 (the "Notes") while the Transaction
is outstanding, Party B may not give Party A a
Direction to Sell, and the Transaction shall not
be terminated in whole or in part, during the
period from and including the day that is one
Business Day before the effective date of the call
to and including the last day on which the Notes
may be tendered for conversion.
No Further
Obligations : Upon the early termination of the Transaction,
whether in whole or in part, and payment of all
amounts due and owing and the making of all
required deliveries to either party hereunder,
neither party shall have any further obligation to
the other party with respect to the Transaction as
a whole, in the case of termination in whole, and
the portion so terminated, in the case of
termination in part.
Breakage Cost : In the case of any early termination on an Early
End Date that is not also a Reset Date, Party A
shall determine whether it has sustained a net
economic cost or a net economic benefit from such
event. If Party A determines that it has sustained
a net economic cost, then (i) if physical
settlement applies, the aggregate amount of such
cost shall be added to the Total Forward Price,
and (ii) if net share settlement applies, the
result of dividing the amount of the cost b the
Number of Terminated Shares shall be subtracted
from the Final Price on Early Termination. If
Party A determines that it has sustained a net
economic benefit, then (iii) if physical
settlement applies, the aggregate amount of such
benefit shall be subtracted from the Total Forward
Price, and (iv) if net share settlement applies,
the result of dividing the amount of the benefit
by the Number of Terminated Shares shall be added
to the Final Price on Early Termination If Party A
determines that it has sustained neither a net
economic cost nor a net economic benefit, then no
such adjustments shall be made. Party A shall
provide to Party B an accounting if any
14
<PAGE>
adjustment is made pursuant to this paragraph,
which shall be binding on the parties, absent
demonstrable error.
Predelivery of Shares
- ---------------------
Requirement to
Predeliver Shares : If the closing price of the Shares on the Exchange
first becomes less than or equal to $15 per share
on a date while the Transaction is outstanding
(the "Threshold Date"), Party A shall notify Party
B of the occurrence of the Threshold Date within
seven Exchange Business Days thereafter, and Party
B shall thereupon issue and predeliver to Party A,
no later than the third Clearance System Business
Day after the date on which Party B receives such
notice, the number of Shares that Party B would be
required to deliver if the Transaction were
terminated in whole on the Threshold Date, net
share settlement applied and the Final Price on
Early Termination were the closing price on the
Threshold Date (the "Predelivered Shares").
Registration of Shares: If the Predelivered Shares are not registered
under the Registration Statement, Party B shall as
promptly as practicable cause such shares to be
registered under the Securities Act of 1933.
Application of Shares : If Party B elects net share settlement at
termination or any early termination, and Party B
is the party required to deliver Shares, Party B's
obligation to deliver Payment Shares and
Make-whole Shares shall be satisfied first out of
the Predelivered Shares, to the extent thereof.
Retention of Shares : Party A shall not sell or otherwise transfer any
Predelivered Shares that it has not applied to the
satisfaction of an obligation of Party B to
deliver Shares.
Return of Shares : If the Transaction is terminated in whole, whether
on the Termination Date or an Early End Date, and
Party A has Predelivered Shares remaining after
all obligations of Party B to deliver Payment
Shares, Make-whole Shares or cash have been
satisfied, Party A shall return such remaining
Predelivered Shares to Party B.
15
<PAGE>
Dividends : The provisions under Dividend Payment above shall
apply to Predelivered Shares until such time as
they are sold or otherwise transferred as
permitted hereunder, or until they are returned to
Party B.
Other Provisions
- ----------------
Undirected Sales
of Purchased Shares
by Party A : Party A may sell Purchased Shares in its
discretion without having received a Direction to
Sell from Party B, provided that Party A shall
notify Party B of its intent to make any such sale
sufficiently in advance of such sale to enable
Party B to verify that the Prospectus provided by
Party B for delivery by Party A to offerees and
purchasers of the Shares registered under the
Registration Statement will meet the requirements
of the Securities Act of 1933 at the time of
the intended sales, and to amend such Prospectus
if it will not meet those requirements. Such sales
shall not in any way reduce Party A's obligations
hereunder, including but not limited to its
obligations in regard to scheduled or early
termination.
Commercial
Reasonableness : All sales by Party A of Purchased hares, Payment
Shares and Make-whole Shares shall be made in a
commercially reasonable manner, provided that
undirected sales of Purchased Shares (if any)
shall not be subject to this requirement.
Market Transactions : Party A shall not, and shall cause WDR as its
selling agent not to, sell any Purchased Shares,
Payment Shares or Make-whole Shares otherwise than
in ordinary trading transactions for purposes of
Rule 100 of Regulation M.
Direction to Sell : Party A shall use its best efforts to comply with
a valid Direction to Sell, but shall not be liable
to Party B if Party A is unable, despite its best
efforts, to sell the entire number of Shares
specified in the Direction to Sell.
Registration
Statement Ineffective : If the Registration Statement is declared
effective but does not remain effective until all
Payment and Make-whole Shares have been sold by
16
<PAGE>
Party A, Party A shall have the right to require
that Party B repurchase any unsold Payment Shares
at a price per share equal to the Final Price and
any unsold Make-whole Shares at an aggregate price
equal to that portion of the Make-whole Amount not
recovered in the net proceeds of prior sales of
Make-whole Shares.
Method of Settlement : All payments of funds and deliveries of Shares
pursuant to scheduled termination and early
termination of the Transaction in whole or in part
shall be made through the Clearance System at the
accounts specified as provided below, on a
delivery versus payment basis.
Adjustments and Extraordinary Events
- ------------------------------------
Adjustments :
Method of Adjustment : Options Exchange Adjustment; provided that
references in the Equity Definitions to "Strike
Price" shall be deemed to refer to "Notional
Amount" and references to "Number of Options"
shall be deemed to refer to "Current Number of
Shares" herein.
Options Exchange : The Options Clearing Corporation
Consequences of Merger Events:
(a) Share-for-Share : Cancellation and Payment
(b) Share-for-Other : Cancellation and Payment
(c) Share-for-Combined : Cancellation and Payment
Nationalization and Insolvency : Cancellation and Payment
Amendment of the
Equity Definitions : For the purposes of this Transaction, the
Definitions are amended as follows:
(A) A new Section 1.3A is added after Section
1.3:
Section 1.3A. Share Forward Transaction. "Share
Forward
17
<PAGE>
Transaction" means an OTC equity forward
transaction relating to a single share or other
security.
(B) Section 1.5 is amended to read:
Section 1.5. Share Transaction."Share Transaction"
means a Share Option Transaction, a Share Swap
Transaction, and for the purposes of Article 9, a
Share Forward Transaction.
(C) A new clause (E) is added to Section 9.1(c):
"(E) in respect of a Share Forward Transaction,
the Forward Price per Share and the Current Number
of Shares";
(D) Clause (vi) of Section 9.1(e) is amended
to read:
"(vi) any other similar event that, in the
reasonable judgment of the Calculation Agent, may
have a diluting or concentrative effect on the
theoretical value of the relevant Shares."
Miscellaneous
- -------------
Title to Shares : A party delivering Shares or Predelivered Shares
to the other party hereunder represents, warrants
and agrees that (a) it is the legal and beneficial
owner of the Shares it is required to deliver; (b)
it has the right to transfer those Shares; and (c)
it will convey good title to the Shares it is
required to deliver, free from all liens, charges,
equities, preemptive rights or other security
interests or encumbrances whatsoever.
In addition, if the Transaction is net share
settled, Party B represents with respect to any
Payment Shares and Make-whole Shares delivered to
Party A that such Shares will, at the time of
delivery, be duly authorized, validly issued,
fully paid and nonassessable.
Transfer : Neither party may transfer the Transaction, in
whole or in part, without the prior written
consent of the non-transferring party.
Account Details
- ---------------
18
<PAGE>
Party A : As provided in separate direction
Party B : As provided in separate direction
</TABLE>
Special Provisions
- ------------------
1. Additional Party B Representations
Party B will be deemed to represent to Party A on the date on which it enters
into this Transaction that:
(a) Party B has a valid business purpose for entering into this Transaction.
(b) Party B is not entering into this Transaction to create actual or apparent
trading activity in the Shares (or any security convertible into or exchangeable
for Shares) or to raise or depress or otherwise manipulate the price of the
Shares (or any security convertible into or exchangeable for Shares).
(c) At the time of Party B's entry into the Transaction no "restricted period"
for purposes of Rule 102 of Regulation M under the Securities Exchange Act of
1934 and no tender offer for Shares (whether by Party B or a third party) is in
effect, and no Party B tender offer has been in effect within the preceding ten
business days.
2. Offeree/Buyer Representations
If the parties enter into a Transaction, or if one party offers to transfer or
transfers the security underlying a Transaction to the other party, in either
case in reliance on Section 4(2) of the Securities Act or Regulation D
thereunder, then the offeree or buyer of the Transaction and/or the offeree or
buyer of the security underlying the Transaction (the "Offeree"), shall make the
following representations, warranties and covenants on and as of the date on
which the Offeree enters into such a Transaction or makes any payment or
delivery relating thereto or to the transfer of the underlying security:
(a) the Offeree is entering into the Transaction for its own account as
principal, for investment purposes only, and not with a view to, or for, resale,
distribution or fractionalization thereof, in whole or in part, and no other
person has a direct or indirect beneficial interest in the Transaction entered
into by the Offeree hereunder;
19
<PAGE>
(b) the Offeree acknowledges its understanding that the offer and sale of any
Transaction with the other party is intended to be exempt from registration
under the Securities Act, by virtue of Section 4(2) of the Securities Act. In
furtherance thereof, the Offeree represents and warrants to the other party that
(i) it has the financial ability to bear the economic risk of its investment,
and (ii) the Offeree qualifies as an "accredited investor" as that term is
defined under Regulation D under the Securities Act.
(c) the Offeree has been given the opportunity to ask questions of, and receive
answers from, the other party concerning the terms and conditions of the
Transaction and has been given the opportunity to obtain such additional
information necessary in order for the Offeree to evaluate the merits and risks
of the Transaction, to the extent the other party possesses such information or
can acquire it without unreasonable effort or expense, and the Offeree has
determined that the Transaction is a suitabl investment for the Offeree. The
Offeree represents and warrants to the other party that, each time the Offeree
enters into a Transaction with the other party, the Offeree will be able to bear
a loss of its entire investment. The Offeree further understands and agrees that
in circumstances where the Offeree holds a short position, its risk of loss
could be unlimited;
(d) the Offeree represents and warrants that, in effecting a Transaction, it
will not be in possession of any material non-public information with respect to
any security related to a Transaction that, under the U.S. federal securities
laws, it would have to disclose in advance to a party effecting a purchase or
sale with the Offeree of such security;
(e) the Offeree fully understands and agrees that it must bear the economic risk
of the Transaction for the entire time period set forth in the Confirmation; and
the Offeree understands and agrees that disposition of the Transaction is
restricted under the Master Agreement, the Securities Act and state securities
laws. The Offeree understands that the Transaction has not been, and is not
intended to be, registered under the Securities Act or under the securities laws
of certain states and, therefore cannot be resold, pledged, assigned or
otherwise disposed of unless registered under the Securities Act and under the
applicable laws of such states, or an exemption from such registration is
available. The Offeree understands and agrees that the other party is not
obliged to register the Transaction on behalf of the Offeree or to assist the
Offeree in complying with any exemption from registration under the Securities
Act or state securities laws. The Offeree further understands and agrees that
the other party is not, and will not be, obliged under any circumstances to
enter into or arrange a Transaction for the purpose of offsetting a particular
Transaction, but may do so in its discretion; and
(f) nothing contained herein shall require the other party to enter into any
part or all of a Transaction offered by the Offeree. The other party reserves
the right to limit the number and amount of certain Transactions that the
Offeree, acting by itself or as part of a group, may maintain
20
<PAGE>
or acquire through or from the other party (or any affiliate of the other party)
at any time.
3. Relationship Between Parties
Each party will be deemed to represent to the other party on the date on which
it enters into a Transaction that (absent a written agreement between the
parties that expressly imposes affirmative obligations to the contrary for that
Transaction):
(a) It is acting for its own account, and it has made its own independent
decisions to enter into that Transaction and as to whether that Transaction is
appropriate or proper for it based upon its own judgement and upon advice from
such advisers as it has deemed necessary. It is not relying on any communication
(written or oral) of the other party as investment advice or as a recommendation
to enter into that Transaction; it being understood that information and
explanations related to the terms and conditions of a Transaction shall not be
considered investment advice or a recommendation to enter into that Transaction.
No communication (written or oral) received from the other party shall be deemed
to be an assurance or guarantee as to the expected results of that Transaction.
(b) It is capable of assessing the merits of and understanding (on its own
behalf or through independent professional advice), and understands and accepts,
the terms, conditions and risks of that Transaction. It is also capable of
assuming, and assumes, the risks of that Transaction.
(c) The other party is not acting as a fiduciary for or an adviser to it in
respect of that Transaction.
Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing the copy of this Confirmation enclosed for that purpose
and returning it to us or by sending to us a letter or telex substantially
similar to this letter, which letter or telex sets forth the material terms of
the Transaction to which this Confirmation relates and indicates your agreement
to those terms.
Yours sincerely,
UBS AG, LONDON BRANCH
By: ______________________ By: _____________________
Name: Name:
Title: Title:
21
<PAGE>
Confirmed as of the 29th day of June, 1999
CONSECO, INC.
By: ______________________
Name:
Title:
Exhibit 5.1
June 28, 1999
Board of Directors
Conseco, Inc.
11825 N. Pennsylvania Street
Carmel, Indiana 46032
Re: Conseco, Inc.
Registration Statement on Form S-3
Gentlemen and Madam:
I am Executive Vice President, General Counsel and Secretary of
Conseco, Inc., an Indiana corporation (the "Company"), and in such capacity, I
exercise general supervision over the Company's legal affairs. I and lawyers
over whom I exercise general supervision ("we") have acted as counsel to the
Company in connection with the Registration Statement on Form S-3 concerning
shares of common stock, no par value, of the Company ("Common Stock") to be
issued in connection with a Purchase Agreement between the Company and Warburg
Dillon Read LLC (the "Purchase Agreement") and a Forward Agreement between the
Company and UBS AG, London Branch (the "Forward Agreement"). In connection with
our representation, we have examined the corporate records of the Company,
including its Amended and Restated Articles of Incorporation, its Amended and
Restated By-Laws and other corporate records and documents and have made such
other examinations as we consider necessary to render this opinion. Based upon
the foregoing, I am of the opinion that:
1. The Company is a corporation organized and validly existing
under the laws of the State of Indiana.
2. The Purchase Agreement, the Forward Agreement and the shares
of Common Stock to be issued pursuant to the Purchase
Agreement, the Forward Agreement and the transactions
contemplated thereby have been duly authorized by all
requisite corporate action.
3. With respect to the authorized but unissued shares of Common
Stock to be issued pursuant to the Purchase Agreement and the
Forward Agreement, such shares, when issued in accordance with
the terms and provisions for their issuance, will be validly
issued, fully paid and non-assessable.
<PAGE>
Board of Directors
June 28, 1999
Page 2
I consent to the filing of this opinion as an exhibit to the
registration statement referred to above and to all references to me in such
registration statement.
Very truly yours,
/s/ JOHN J. SABL
---------------------------------------------
John J. Sabl
Executive Vice President, General Counsel
and Secretary
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement
of Conseco, Inc. on Form S-3 (File No. 333-00000), of our report dated March 30,
1999 on our audits of the consolidated financial statements and financial
statement schedules of Conseco, Inc. and subsidiaries as of December 31, 1998
and 1997, and for the years ended December 31, 1998, 1997 and 1996, included in
the Annual Report on Form 10-K. We also consent to the reference to our firm
under the caption "Experts."
/s/ PRICEWATERHOUSECOOPERS LLP
------------------------------
PricewaterhouseCoopers LLP
Indianapolis, Indiana
June 28, 1999
Exhibit 23.3
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Conseco, Inc.
We consent to the incorporation by reference in the Registration Statement dated
June 29, 1999 on Form S-3 of Conseco, Inc. of our report dated January 27, 1998,
relating to the consolidated balance sheet of Green Tree Financial Corporation
and subsidiaries as of December 31, 1997, and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
years in the two-year period ended December 31, 1997, not separately presented
in or incorporated by reference in the Annual Report on Form 10-K of Conseco,
Inc. for the year ended December 31, 1998, and to the reference to our firm
under the heading "EXPERTS" in the Registration Statement. Our report refers to
the Company's adoption of the Financial Accounting Standards Board's Statement
No. 125 "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities," in 1997.
/s/ KPMG PEAT MARWICK LLP
Minneapolis, Minnesota
June 28, 1999
