<PAGE> 1
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED OCTOBER 1, 1999
2,597,403 Shares
CONSECO, INC.
Series F Common-Linked Convertible Preferred Stock
We are selling 2,597,403 shares of our Series F Common-Linked
Convertible Preferred Stock to Thomas H. Lee Equity Fund IV, L.P. (the "Fund")
and certain other persons designated by the Fund. The convertible preferred
stock is convertible at the option of the holder into shares of Conseco common
stock at a conversion rate of 10 shares of common stock for each share of
convertible preferred stock, equivalent to a conversion price of $19.25 per
share of common stock, subject to adjustments as described under "Description of
Convertible Preferred Stock - Conversion Adjustments" at page S-10 of this
prospectus supplement.
Our convertible preferred stock is not redeemable. Dividends on the
convertible preferred stock are cumulative from the date of issuance and are
payable in cash in an amount not less than the dividends per share of common
stock, multiplied by the conversion rate. If the per share cash dividends on the
convertible preferred stock in any fiscal quarter are less than $1.925, the
holders of the convertible preferred stock will be entitled to receive an
additional dividend per share, in shares of convertible preferred stock, in an
amount equal to (a) the difference between (i) $1.925 and (ii) the cash dividend
paid in such fiscal quarter, divided by (b) $192.50, subject to adjustments as
described under "Description of Convertible Preferred Stock Other Adjustments"
at page S-11 of this prospectus supplement. This prospectus supplement relates
to the convertible preferred stock (including any shares subsequently issued as
dividends) and the common stock into which the convertible preferred stock is
convertible.
<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Offering Price . . . . . . . . . . . . . . . . . . . .$192.50 $500,000,077
Proceeds to Conseco (before fees and expenses) . . . .$192.50 $500,000,077
</TABLE>
The convertible preferred stock will not be registered on any exchange,
and we do not expect that any market for the convertible preferred stock will
develop. The convertible preferred stock will be subject to certain restrictions
on transfer described under "Description of Convertible Preferred Stock
- - Securities Purchase Agreement and Transfer Restrictions" at page S-6. The
common stock is traded on the New York Stock Exchange under the symbol "CNC." On
December 13, 1999, the last reported sale price for the common stock on the New
York Stock Exchange was $18-15/16 per share.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus supplement or the accompanying
prospectus. Any representation to the contrary is a criminal offense.
The date of this prospectus supplement is December 14, 1999.
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You should rely only on the information contained or incorporated by
reference in this prospectus supplement or the prospectus. We have not
authorized any other person to provide you with different information. If anyone
provides you with different or inconsistent information, you should not rely on
it. We are not making an offer to sell these securities in any jurisdiction
where the offer or sale is not permitted. You should assume that the information
appearing in this prospectus supplement or the prospectus, as well as
information we previously filed with the Securities and Exchange Commission and
incorporated by reference, is accurate as of the date on the front cover of this
prospectus supplement only. Our business, financial condition, results of
operations and prospects may have changed since that date.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PROSPECTUS SUPPLEMENT
Conseco.................................................................................................S-3
Use of Proceeds.........................................................................................S-5
Market Prices of Common Stock...........................................................................S-5
Description of the Convertible Preferred Stock..........................................................S-6
Certain Federal Income Tax Consideration................................................................S-18
Plan of Distribution....................................................................................S-21
Legal Matters...........................................................................................S-22
PROSPECTUS
About This Prospectus...................................................................................3
Where You Can Find More Information.....................................................................3
The Securities We May Offer.............................................................................4
Conseco, Inc............................................................................................4
The Conseco Trusts......................................................................................5
Use of Proceeds.........................................................................................6
Ratios of Earnings to Fixed Charges, Earnings to Fixed
Charges and Preferred Stock Dividends and Earnings to
Fixed Charges, Preferred Stock Dividends and Distributions on
Company-Obligated Mandatorily Redeemable Preferred Securities
of Subsidiary Trusts..................................................................................6
Description of Debt Securities..........................................................................6
Description of Capital Stock............................................................................18
Description of Depositary Shares........................................................................22
Description of Warrants.................................................................................26
Description of Preferred Securities
of the Conseco Trusts.................................................................................26
Description of Guarantees...............................................................................28
Description of Stock Purchase Contracts and Stock Purchase Units........................................31
Plan of Distribution....................................................................................32
Special Note Regarding Forward-Looking Statements.......................................................34
Legal Matters...........................................................................................35
Experts.................................................................................................35
</TABLE>
CONSECO
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
S-2
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medical insurance and other insurance products. Our finance subsidiaries make,
purchase, sell and service consumer and commercial finance loans throughout the
United States. Since 1982, we have acquired 19 insurance groups. In 1998, we
acquired Conseco Finance Corp. (formerly, Green Tree Financial Corporation),
which comprises our finance operations. Our operating strategy is to grow our
businesses by focusing our resources on developing and expanding profitable
products and strong distribution channels, by actively managing assets to seek
to achieve superior investment returns and by controlling expenses.
Our principal executive offices are located at 11825 N. Pennsylvania
Street, Carmel, Indiana 46032. Our telephone number is (317) 817-6100.
INSURANCE AND FEE-BASED OPERATIONS
Supplemental health insurance. These products include Medicare
supplement, long-term care and specified disease insurance. Medicare is a
federal health insurance program for disabled persons and senior citizens (age
65 and older). Medicare supplement policies provide coverage for many of the
medical expenses which the Medicare program does not cover, such as deductibles
and coinsurance costs (in which the insured and Medicare share the costs of
medical expenses) and specified losses which exceed the federal program's
maximum benefits. Long-term care products provide coverage, within prescribed
limits, for nursing home, home health care, or a combination of both nursing
home and home health care expenses. These products also include specified
disease products such as cancer and heart/stroke insurance. These policies
generally provide fixed or limited benefits. Payments under cancer insurance
policies are generally made directly to, or at the discretion of, the
policyholder following diagnosis of, or treatment for, a covered type of cancer.
Heart/stroke policies provide for payments directly to the policyholder for
treatment of a covered heart disease, heart attack or stroke.
Annuities. These products include fixed annuities, including equity-
indexed annuities, and variable annuities sold through both career agents and
professional independent producers. A fixed annuity is a savings vehicle in
which the policyholder, or annuitant, makes one or more premium payments to the
insurance company; the insurer guarantees the principal and accrues a stated
rate of interest (which may vary over time) or, in the case of an equity-indexed
annuity, a stated rate plus potentially additional amounts determined by
reference to an equity index. Variable annuities, sold on a single- or
flexible-premium basis, differ from fixed annuities in that the original
principal value may fluctuate, depending on the performance of assets allocated
pursuant to various investment options chosen by the contract owner.
Life insurance. These products include traditional life, universal life
and other life insurance products. These products are currently sold through
career agents, professional independent producers and direct response marketing.
Interest-sensitive life products include universal life products that provide
whole life insurance with adjustable rates of return related to current interest
rates. Traditional life policies include whole life and term life products.
Under whole life policies, the policyholder generally pays a level premium over
the policyholder's expected lifetime. These policies, which continue to be
marketed by Conseco on a limited basis, combine insurance protection with a
savings component that increases in amount gradually over the life of the
policy. Term life products offer pure insurance protection for a specified
period of time--typically one, five, 10 or 20 years.
S-3
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Individual and group major medical insurance and other. These products
include individual and group major medical health insurance products. The
profitability of this business depends largely on the overall persistency of the
business in force, claim experience and expense management.
FINANCE OPERATIONS
This segment provides financing for manufactured housing, home equity,
home improvements, consumer products and equipment and provides consumer and
commercial revolving credit. Conseco Finance Corp.'s insurance agencies market
physical damage and term mortgage life insurance and other credit protection
relating to the customers' contracts we service. Conseco Finance Corp. is the
largest servicer of manufactured housing contracts in the United States.
To date, we have pooled and securitized substantially all of the
contracts we have originated. Such pools are structured into asset-backed
securities which are sold in the public securities markets. We continue to
service the loans after the sale. The availability and cost of capital in
securitization transactions can materially affect the results of operations of
our finance segment.
See "Where You Can Find More Information" on page 3 of the accompanying
prospectus for additional information concerning Conseco.
RECENT DEVELOPMENTS
In addition to offering the convertible preferred stock, we plan to
reduce the cash dividends on our common stock to a quarterly rate of 5 cents per
share beginning with the dividend to be paid in April of 2000. We also plan to
manage the growth of our finance receivables by focusing on our most profitable
operations. In connection with these steps we also plan to reduce our holding
company leverage and the leverage in our finance segment over time.
USE OF PROCEEDS
The proceeds from the sale of the convertible preferred stock are
estimated to be approximately $478.2 million (after fees and estimated offering
expenses). We expect to add the net proceeds to our capital to support future
growth. Initially, $216.2 million of the proceeds will be used to repay
commercial paper which was issued on various dates in November through December
1999, matures on December 15,1999, and has a weighted average interest rate of
5.8157 percent. All such borrowings were made to provide us with working
capital.
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.
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<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.................................. 35-5/16 28 .14000
Third Quarter................................... 31-15/16 19 .14000
Fourth Quarter (through December 13, 1999)...... 25-13/16 18-1/2 .15000
</TABLE>
On December 13, 1999, the last reported sale price of the common stock
on the New York Stock Exchange was $18-15/16.
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DESCRIPTION OF CONVERTIBLE PREFERRED STOCK
The following summary description of the Series F Common-Linked
Convertible Preferred Stock of Conseco is qualified in its entirety by reference
to (i) an Amended and Restated Securities Purchase Agreement, dated as of
December 15, 1999, to be entered into among Conseco, the Fund and the other
purchasers of the convertible preferred stock and (ii) Conseco's current Amended
and Restated Articles of Incorporation and the additional article setting forth
the designations, rights and preferences of the convertible preferred stock
referred to below. The Articles of Incorporation are filed as an exhibit to
Conseco's filings incorporated by reference in the Registration Statement of
which this prospectus supplement is a part and the additional article and the
purchase agreement will be filed as exhibits to a Current Report on Form 8-K
after the date of this prospectus supplement.
Securities Purchase Agreement and Transfer Restrictions
The convertible preferred stock is being purchased pursuant to the
purchase agreement by the Fund and the other purchasers. The purchase agreement
contains various representations, warranties and covenants of the parties and
conditions to closing. We expect that the closing of the sales of the
convertible preferred stock will occur in mid-December but could extend past
that date. Either Conseco or the purchasers (so long as they are not in material
breach of the purchase agreement) can terminate the purchase agreement if the
closing has not occurred by January 31, 2000.
Under the terms of the purchase agreement, the purchasers will agree to
not transfer the convertible preferred stock or enter into a hedge transaction
with respect to the convertible preferred stock for a period of 18 months after
the closing date. A "hedge transaction" by a holder of a Conseco security is the
creation of a hedge, entry into of a derivative transaction, or entry into of
another financial transaction with respect to securities of Conseco (whether or
not the particular securities which are the subject of the transaction are owned
by the holder of the Conseco security) such that the holder no longer has all
material benefits and risks of ownership of that Conseco security. The
restrictions on transferring the convertible preferred stock will lapse if (i)
the nominee designated by the holders of the convertible preferred stock (or the
common stock into which it converts) is not elected to the board of directors
and (ii) such nominee (or a replacement nominee designated) is not elected a
director within 30 days thereafter or the holders no longer have a right to
designate a nominee. See "Voting; Nomination of a Director" on page S-15.
During the standstill period described under "Standstill" at page S-12
of this prospectus supplement, purchasers of convertible preferred stock
generally may not transfer the convertible preferred stock or common stock to
any person or any group which (i) prior to such transfer has filed a Schedule
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13D with the Securities and Exchange Commission with respect to the common
stock, (ii) to the knowledge of the purchaser, based on inquiry of the proposed
purchaser, is required to or intends to file a Schedule 13D after consummation
of the transfer of the convertible preferred stock or common stock or (iii) to
the knowledge of the purchaser, based on inquiry of the proposed purchaser,
would be the beneficial owner of more than 10% of the common stock after
consummation of the transfer of the convertible preferred stock or common stock.
So long as these transfer restrictions remain in effect, the purchasers
must give us written notice of any transfer at least five business days before
the date of the proposed transfer. Otherwise, the purchasers must give us notice
of any transfer or hedge of the convertible preferred stock or common stock not
later than five days after the happening of such transfer or transaction. The
certificates for the convertible preferred stock will bear a restrictive legend
that refers to the transfer restrictions contained in the purchase agreement.
If a purchaser is deemed to be an affiliate of Conseco, sales of
convertible preferred stock or common stock generally will require an exemption
from the registration requirements of the Securities Act of 1933, as amended,
such as compliance with the requirements of Rule 144 under the act.
Ranking
The convertible preferred stock will rank senior as to dividends and
distribution of assets upon liquidation, dissolution or winding up, with respect
to Conseco's Series E Preferred Stock, all of which is owned by a wholly owned
subsidiary of Conseco, and to the common stock. The terms of the convertible
preferred stock do not restrict our ability to issue additional classes of
preferred stock, including preferred stock ranking senior or equal to the
convertible preferred stock.
Dividends
Holders of shares of the convertible preferred stock are entitled to
receive per share cumulative cash dividends at the time and in an amount not
less than the amount declared payable by the board of directors per share of
common stock multiplied by the number of shares of common stock into which each
share of convertible preferred stock is then convertible. In addition, the
holders of shares of convertible preferred stock are entitled to receive any
non-cash dividends or distributions (other than dividends or distributions
payable in Conseco common
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stock) in the same type of property paid to holders of common stock or in an
amount per share equal to the dividend or distributions payable per share of
common stock multiplied by the number of shares of common stock into which a
share of convertible preferred stock is then convertible. If the per share cash
dividends paid to the holders of the shares of convertible preferred stock in
any fiscal quarter are less than $1.925, the holders of the convertible
preferred stock shall be entitled to receive an additional dividend per share.
The additional dividend will be paid in shares of convertible preferred stock in
an amount equal to (A) the difference between (i) $1.925 and (ii) the cash
dividend paid in such fiscal quarter, divided by (B) $192.50, subject to
adjustment as described under "Other Adjustments" on page S-11 of this
prospectus supplement. In-kind dividend payments shall be rounded to the nearest
one-hundredth of a share of convertible preferred stock. For a discussion of
certain federal income tax considerations relevant to the payment of dividends
on the convertible preferred stock, see "Certain Federal Income Tax
Considerations" on page S-18 of this prospectus supplement.
We must declare dividends payable in additional shares of convertible
preferred stock on or prior to the last business day of each fiscal quarter,
with such dividends being payable on the first business day of the next fiscal
quarter commencing January 3, 2000. Dividends in arrears may be declared and
paid at any time. Dividends will be cumulative and accrue from the date of
issuance of convertible preferred stock. Dividends for the initial dividend
period and for any period less than a full fiscal quarter shall be prorated
based on the number of days the convertible preferred stock is outstanding
during the quarter, computed on the basis of a 90-day quarter, provided that
convertible preferred stock issued on the first business day of a quarter will
be deemed to be issued on the first day.
We may not declare a dividend on any other class or series of stock
ranking on a parity with the convertible preferred stock unless we also declare
like dividends on the convertible preferred stock ratably in proportion to the
respective annual dividend rates of the various classes or series of stock.
Unless full cumulative dividends on the convertible preferred stock have been
paid, or declared and sums set aside for the payment thereof, we will not
declare, pay or set apart for payment any dividends (other than in common stock
or any other stock of Conseco ranking junior to the convertible preferred stock
as to dividends or as to liquidation rights) or make any distribution in cash or
other property on any Conseco security ranking junior to the convertible
preferred stock as to dividends or upon liquidation; and neither the common
stock nor any other Conseco security ranking junior to the convertible preferred
stock as to dividends may be redeemed, purchased or otherwise acquired for any
consideration (except by conversion into or exchange for other Conseco capital
stock ranking junior to the convertible preferred stock as to dividends and
except for capital stock acquired by us in connection with the payment of any
amounts upon the exercise of our stock options).
S-8
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Conversion Rights
Each share of convertible preferred stock will be convertible into 10
shares of common stock at any time at the option of the holder, adjusted as
described in "Conversion Adjustments" at page S-10 of this prospectus
supplement. In order for a holder to convert shares of convertible preferred
stock into shares of common stock, the holder must surrender the certificate or
certificates for the shares of convertible preferred stock, at the office of the
transfer agent, initially Conseco, for the convertible preferred stock. The
certificate or certificates must be accompanied by written notice that the
holder is electing to convert all or any number of shares of convertible
preferred stock represented by the certificate or certificates. The notice must
state the holder's name or the names of the nominees in which the holder wishes
the certificate or certificates for shares of common stock to be issued and the
number of shares of convertible preferred stock to be converted. If we require,
certificates surrendered for conversion must be endorsed or accompanied by a
written instrument or instruments of transfer, in form satisfactory to us, duly
executed by the registered holder or the holder's attorney duly authorized in
writing accompanied by the payment of any applicable transfer taxes. The date of
receipt of the certificates and notice by the transfer agent shall be the
conversion date, and the conversion will be effective as of the close of
business on the conversion date. As soon as practicable after the conversion
date, we will issue and deliver a certificate or certificates for the number of
shares of common stock to which the holder is entitled, together with cash
instead of any fraction of a share based upon the closing price of the common
stock on the date of conversion. All shares of convertible preferred stock
surrendered for conversion will no longer be deemed to be outstanding and all
rights with respect to the shares, including the rights, if any, to receive
notices, to vote and to accrual of dividends will immediately cease and
terminate at the close of business on the conversion date. We will retire and
cancel any shares of convertible preferred stock converted to common stock.
Mandatory Conversion
Conseco may require that shares of convertible preferred stock be
converted as follows:
- On or after June 15, 2001 and prior to December 15, 2002, upon a
notice of proposed transfer from a holder of shares of
convertible preferred stock, if the closing price per share of
the common stock is $55.00 or greater, as it may be adjusted as
described under "Other Adjustments" on page S-11 of this
prospectus supplement, for any period of 20 consecutive trading
days within the 45 trading days preceding our receipt of a notice
to transfer, we may require conversion of
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any or all of the outstanding shares covered by the notice of
proposed transfer at the applicable conversion rate.
- On or after December 15, 2002, if the closing price per share of
the common stock is $55.00 or greater, as it may be adjusted, for
twenty consecutive trading days, Conseco may require the
conversion by delivering a notice to the holders within fifteen
business days following the twentieth consecutive trading day
giving rise to the mandatory conversion.
The applicable holders of the convertible preferred stock must surrender their
share certificates within ten days of receipt of Conseco's conversion notice.
Conversion Adjustments
The conversion rate is subject to adjustment if we:
- pay a stock dividend,
- subdivide or split the outstanding common stock,
- combine outstanding common stock into a smaller number of shares,
or
- issue by reclassification of shares of common stock any shares of
common stock.
In addition, we will be entitled (but will not be required) to make
upward adjustments in the number of shares of common stock into which the
convertible preferred stock is convertible as we, in our sole discretion shall
determine to be advisable, in order that any stock dividend, subdivision or
split of shares, distribution of rights to purchase stock or securities or
distribution of securities convertible into or exchangeable for stock (or any
transaction which could be treated as any of the foregoing transactions pursuant
to Section 305 of the Internal Revenue Code of 1986, as amended (the "Code"))
hereafter made by us to our shareholders will not be taxable. All adjustments to
the number of shares of common stock into which the convertible preferred stock
is convertible will be calculated to the nearest 1/100th of a share of common
stock. No adjustment in the number of shares of common stock into which the
convertible preferred stock is convertible will be required unless such
adjustment would require an increase or decrease of at least one percent in the
number of shares of common stock into which the convertible preferred stock is
convertible provided, however, that any adjustments which, by reason of the
foregoing, are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All adjustments will be made successively.
S-10
<PAGE> 11
Whenever the number of shares of common stock into which the
convertible preferred stock is convertible are adjusted as provided in the
preceding paragraph, we will mail a notice to the transfer agent and holders of
the shares of convertible preferred stock providing specified information with
respect to such adjustment.
In the case of (i) any consolidation or merger to which we are a party
(other than a merger or consolidation in which we are the surviving or
continuing corporation and in which the shares of common stock outstanding
immediately prior to the merger or consolidation remain unchanged), (ii) any
sale or transfer to another entity of our property as an entirety or
substantially as an entirety, or (iii) any statutory exchange of securities with
another entity (other than in connection with a merger or acquisition), each
share of convertible preferred stock shall, after consummation of such
transactions, be subject to (A) conversion at the option of the holder into the
kind and amount of securities, cash or other property receivable upon
consummation of such transaction by a holder of the number of shares of common
stock into which such share of convertible preferred stock might have been
converted immediately prior to consummation of such transaction and (B)
conversion on the date specified by us pursuant to a mandatory conversion into
the kind and amount of securities, cash, or other property receivable upon
consummation of such transaction by a holder of the number of shares of common
stock into which such share of convertible preferred stock would have been
converted if the conversion date specified by us pursuant to a mandatory
conversion had occurred immediately prior to the date of consummation of such
transaction, plus the right to receive cash in an amount equal to all accrued
and unpaid dividends on such share of convertible preferred stock (other than
previously declared dividends payable to a holder of record as of a prior date).
The kind and amount of securities into or for which the shares of convertible
preferred stock shall be convertible after consummation of such transaction
shall be subject to adjustment as described above under the caption "Conversion
Adjustments" following the date of consummation of such transaction. For
purposes of the preceding paragraph, any sale or transfer to another entity of
our property which did not account for at least 50% of our consolidated net
income for our most recent fiscal year ending prior to the consummation of such
transaction will not in any event be deemed to be a sale or transfer of our
property as an entirety or substantially as an entirety.
Other Adjustments
All dollar amounts related to the convertible preferred stock,
including the dividend rate, the dollar amounts used to calculate dividends paid
with shares of convertible preferred stock and the closing price per share of
common stock that triggers the mandatory conversion right will be equitably
adjusted when there is:
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- a stock split,
- a combination,
- a reclassification,
- a dividend (other than regular cash dividend),
- an issuance of rights or warrants to holders of stock to
purchase shares of stock,
- a consolidation,
- a merger,
- a sale or transfer of our property as an entirety or
substantially as an entirety or
- any other similar event.
Any adjustment shall be made by our board of directors (whose
determination will be conclusive, final and binding). Promptly after making the
adjustment, we will notify the transfer agent for the convertible preferred
stock and the holders about the adjustment.
Standstill
Purchasers of the convertible preferred stock may not, directly or
indirectly, unless specifically requested by us in advance:
- acquire, offer to acquire, seek to acquire or agree to
acquire, including by joining a partnership, limited
partnership, syndicate or other "group" (i) any material
portion of our assets or business or (ii) any of our
securities entitled to vote generally in the election of
directors or convertible or exercisable or exchangeable for or
into such securities to the extent that following the
acquisition, the purchasers and their affiliates hold in
excess of 9% of our outstanding securities entitled to vote
generally on the elections of directors (including any shares
issuable upon the exercise, conversion or exchange of
securities by the purchasers and their affiliates), except
that there is no prohibition on (i) converting shares of
convertible preferred stock, (ii) receiving any dividend on
shares of convertible preferred stock or common stock or (iii)
executing unsolicited buy orders if the purchaser or affiliate
is a registered broker-dealer and executes the orders for bona
fide accounts of its brokerage customers, unaffiliated and not
acting in concert with any purchaser or any affiliate other
than the broker-dealer;
- participate in, or encourage, the formation of any entity or
group which owns or seeks to acquire beneficial ownership of,
or otherwise acts in respect of, any of our securities
entitled to vote generally in the election of directors or
convertible or
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exercisable or exchangeable for or into such securities, other
than any group comprised exclusively of the purchasers and
their affiliates;
- make, or in any way participate in, directly or indirectly,
any solicitation of proxies or become a participant in any
election contest with respect to Conseco, or initiate, propose
or otherwise solicit stockholders for the approval of one or
more stockholder proposals with respect to Conseco or induce
or attempt to induce any other person to initiate or propose
any stockholder proposal, or seek to advise, encourage or
influence any person with respect to the voting of any of our
securities, or make any communication exempted from the
definition of solicitation by the proxy rules of the
Securities and Exchange Commission, except that the foregoing
limitations will not apply to efforts by the holders to cause
the election of the director representative contemplated by
the purchase agreement;
- call or seek to have called any meeting of our stockholders,
other than any such action taken by the purchasers'
representative on our board of directors taken in his or her
capacity as a director;
- (i) initiate, solicit, seek or offer to effect, (ii) negotiate
with or provide any information to any party with respect to,
(iii) make any statement or proposal, whether written or oral,
either alone or in concert with others, to the board, or to
any director (other than actions taken by the purchasers'
representative on the board of directors, acting in his or her
capacity as such, and other than actions taken with respect to
a matter approved by the board of directors) or to any other
legal or beneficial owner of our securities entitled to vote
with respect to, or (iv) otherwise make any public
announcement, proposal, offer or filing under the applicable
securities laws, or take action to cause us to make any such
announcement, proposal, offer or filing with respect to any of
the following matters which has not been approved by the board
of directors: (A) any tender or exchange offer for our
securities or securities of any of our subsidiaries are
entitled to vote generally in the election of directors or
convertible into or exercisable or exchangeable for such
securities, (B) any form of business combination or similar
transaction involving us or any of our subsidiaries,
including, a merger, tender or exchange offer or liquidation
of our assets, (C) any form of restructuring, recapitalization
or similar transaction with respect to us or any of our
subsidiaries, including, a merger, tender or exchange offer
involving us or any of our subsidiaries or liquidation of our
assets, (D) any disposition of all or substantially all of our
assets, (E) any request to amend, waive or terminate any of
the standstill provisions in the purchase agreement or (F) any
proposal or other statement inconsistent with the terms of the
purchase agreement;
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<PAGE> 14
- take any action challenging the validity or enforceability of
any covenant or agreement in the purchase agreement concerning
the standstill or the restrictions on transfer described
herein; or
- instigate, advise, assist, encourage or finance (or assist or
arrange financing to or for) any person in connection with any
of the foregoing.
Except as described herein, the purchasers of the convertible preferred
stock may exercise their voting and other rights granted pursuant to the
purchase agreement and the Amended Articles of Incorporation or in connection
with any proposed merger, sale of assets or similar transaction or tender or
exchange offer proposed by any person not acting in concert with, or affiliated
with, any purchaser. The foregoing standstill restrictions will remain in effect
until the earlier to occur of:
- the fifth anniversary of the closing date of the purchase of
the convertible preferred stock;
- the designation of any date by a majority of the members of
our board of directors or by written consent of all of our
directors;
- our material breach of any of our obligations contained in the
purchase agreement or the Amended Articles of Incorporation;
- our bankruptcy, insolvency or reorganization or bankruptcy,
insolvency or reorganization of one or more of our significant
subsidiaries that would have a material adverse effect on us
or certain other events of insolvency;
- without any breach by the purchasers of the restrictions on
transfer or standstill provisions described herein, a purchase
by any person or group of our securities entitled to vote
generally on the elections of directors resulting in such
person or group owning 25% or more of our securities that are
entitled to be voted for the election of directors or the
receipt by such person or group of our agreement or consent to
make such acquisition;
- without any breach by the purchasers of the restrictions on
transfer or standstill provisions described herein, the
commencement of a tender offer for our securities entitled to
vote generally on the elections of directors by any person or
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<PAGE> 15
group, which tender offer, if consummated would result in such
person or group owning 25% or more of the total voting power
of our securities entitled to vote generally on the elections
of directors, provided that our board of directors has
recommended that the holders tender into such tender offer and
that the standstill restrictions will remain in full force and
effect if any such tender offer is withdrawn or terminated or
expires without extension; or
- termination of the purchase agreement, provided the purchasers
have not purchased any convertible preferred stock and have
not violated the purchase agreement.
Additionally, the standstill restrictions will terminate if (i) the nominee
designated by the holders of the convertible preferred stock (or the common
stock into which it converts) is not elected to the board of directors and
(ii) such nominee (or a replacement nominee designated) is not elected a
director within 30 days thereafter or the holders no longer have a right to
designate a nominee. See "Voting; Nomination of a Director" on page S-15.
The holders of convertible preferred stock will not be required to
divest themselves of any of our securities if they own in excess of 9% of our
outstanding securities entitled generally to vote on the election of directors
as a result of our repurchase of outstanding securities or comparable program
which reduces the number of shares outstanding.
Voting; Nomination of a Director
The shares of convertible preferred stock will have the right to vote
together with the common stock and all other classes entitled to vote, on all
other matters brought for action by our common shareholders and will have the
number of votes equal to the shares of common stock into which the convertible
preferred stock is then convertible.
If the original purchasers and their affiliates continue to own at
least 50% of the original number of shares of the convertible preferred stock
and common stock into which the convertible stock may be converted (measured on
an as converted basis), then we and the purchasers and their affiliates will use
all reasonable commercial efforts to cause to be nominated and elected to the
board of directors one designee of the purchasers. A purchaser or permitted
assignee of convertible preferred stock will not be deemed to own the shares if
the holder engages in a hedge transaction of the type described under
"Description of Convertible Preferred Stock - Securities Purchase Agreement and
Transfer Restrictions" at page S-6. A holder must give notice to our corporate
secretary at our principal office not later than five business days after the
holder engages in a transfer of the convertible securities (including a hedge
transaction). The designee must be a managing director, as
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<PAGE> 16
of December 15, 1999, of Thomas H. Lee Company, or a successor entity or be
acceptable to us. The initial nominee of the purchasers will be David V.
Harkins, and each initial purchaser of shares of convertible preferred stock
consents to the designation of Mr. Harkins without a separate meeting of the
holders of the convertible preferred stock. Mr. Harkins will be elected to the
board of directors at the closing of the sale of the convertible preferred stock
to serve a term scheduled to expire at the annual meeting in 2001. Because the
fund will own a majority of the shares of convertible preferred stock, it will
control who is selected as the designated board nominee.
The reasonable commercial efforts to elect the nominee include
inclusion of the purchasers' designee in any proxy statement or comparable
material distributed in connection with any meeting of our shareholders at which
directors are to be elected, accompanied by a recommendation that the
shareholders vote in favor of such designee.
The restrictions on transfer of the convertible preferred stock and the
standstill restrictions applicable to the holders of the convertible preferred
stock will lapse if (i) the nominee designated by the holders of the convertible
preferred stock (or the common stock into which it converts) is not elected to
the board of directors and (ii) such nominee (or a replacement nominee
designated) is not elected a director within 30 days thereafter or the holders
no longer have a right to designate a nominee.
Amendment or Waiver
The terms of the purchase agreement may be amended or waived by
purchasers holding at least a majority of the convertible preferred stock and
common stock into which the convertible preferred stock may convert (considered
together as a single class with the convertible preferred stock being treated on
an as-converted basis for this purpose). For as long as any shares of
convertible preferred stock remain outstanding, the affirmative consent of the
holders of at least a majority thereof (voting separately as a class but
excluding from any calculation any shares of convertible preferred stock held by
us or any of our subsidiaries) in person or by proxy, at any annual meeting or
special meeting of the shareholders called for such purpose, shall be necessary
to amend, alter or repeal any of the provisions of the Articles of Incorporation
(including any amendment resulting from a merger, consolidation or
reorganization involving Conseco) which would adversely affect the powers,
preferences or rights of the holders of the shares of convertible preferred
stock then outstanding, except as otherwise provided by the Articles of
Incorporation, as amended. Each purchaser affiliated with the fund will
designate the fund, David V. Harkins and Thomas M. Hagerty, as its
attorney-in-fact, to serve as their representative. In that capacity, the
representatives may authorize an amendment or waiver on behalf of the affiliated
purchasers and exercise other rights of the purchasers under the purchase
agreement. Initially, the fund will also have the power to waive or amend any
provision because its ownership will constitute the majority of the convertible
preferred stock.
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<PAGE> 17
Liquidation Rights
In the event of any liquidation, dissolution or winding up of Conseco
and subject to the rights of creditors of Conseco and holders of any preferred
stock senior in right of payment in the event of a liquidation of Conseco, the
holders of shares of convertible preferred stock are entitled to receive a
liquidation preference of $192.50 per share, plus an amount equal to any accrued
and unpaid dividends to the date of payment before any distribution of assets is
made to holders of Series E Preferred Stock, common stock or any other stock
that ranks junior to the convertible preferred stock as to liquidation rights.
The holders of convertible preferred stock along with Series E Preferred Stock
and all series or classes of Conseco's stock hereafter issued that rank on a
parity as to liquidation rights with the convertible preferred stock are
entitled to share ratably, in accordance with the respective preferential
amounts payable on such stock, in any distribution which is not sufficient to
pay in full the aggregate of the amounts payable thereon. After payment in full
of the liquidation preference of the shares of the convertible preferred stock,
the holders of such shares will be entitled to further participation in any
distribution of assets by Conseco equal to the amount the holders would have
received upon final distribution, if the shares of convertible preferred stock
had been converted into shares of common stock. We will not be deemed to have
engaged in a voluntary or involuntary liquidation, dissolution or winding up
upon the happening of:
- the sale, lease, transfer or exchange of all or substantially
all of our assets; or
- our consolidation or merger with one or more other
corporations (whether or not we are the corporation surviving
such consolidation or merger).
Other Provisions
The shares of convertible preferred stock, when issued, will be duly
and validly issued, fully paid and nonassessable.
The holders of shares of convertible preferred stock have no preemptive
rights with respect to any securities of Conseco.
The purchasers will be entitled to receive certain financial
information concerning us as well as notices we mail to common stockholders
generally. The fund may also reasonably request additional information.
We will act as the initial registrar, transfer agent, conversion agent,
and dividend disbursing agent for the convertible preferred stock, and the
transfer agent and registrar for the common stock issuable upon conversion
thereof is First Union National Bank.
S-17
<PAGE> 18
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes the material federal income tax
considerations generally applicable to United States Holders acquiring
convertible preferred stock upon its issuance by Conseco. This discussion deals
only with convertible preferred stock held as capital assets (within the meaning
of section 1221 of the Code) by United States Holders and does not deal with
special situations, such as those of dealers in securities or currencies,
financial institutions, tax-exempt entities, life insurance companies, persons
holding the convertible preferred stock as a part of a hedging, short sale or
conversion transaction or a straddle or United States Holders whose "functional
currency" is not the United States dollar. Furthermore, the discussion below is
based upon the provisions of the Code, Treasury regulations, Internal Revenue
Service ("IRS") rulings and judicial decisions thereunder as of the date hereof,
and such authorities may be repealed, revoked or modified so as to result in
federal income tax consequences different from those discussed below. The
consequences set forth in this discussion are not binding on the IRS or the
courts. Conseco has not sought and will not seek any rulings from the IRS with
respect to the positions of Conseco discussed herein, and there can be no
assurance that the IRS will not take a different position concerning the tax
consequences of the purchase, ownership or disposition of the convertible
preferred stock. ALL PROSPECTIVE PURCHASERS ARE ADVISED TO CONSULT THEIR TAX
ADVISORS REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE
PURCHASE, OWNERSHIP AND DISPOSITION OF THE CONVERTIBLE PREFERRED STOCK.
As used herein, the term "United States Holder" means a person or
entity that, for United States federal income tax purposes, is a citizen or
resident of the United States, a corporation or partnership created or organized
in the United States or under the laws of the United States or of any political
subdivision thereof, an estate whose income is includible in gross income for
United States federal income tax purposes regardless of its source or a trust
which is subject to the supervision of a court within the United States and the
control of a United States person as described in Section 7701(a)(30) of the
Code.
Distributions
Distributions, including cash and the fair market value of shares of
convertible preferred stock declared in lieu of cash, on the convertible
preferred stock will be treated as dividends to United States Holders to the
extent of Conseco's current or accumulated earnings and profits as determined
under federal income tax principles. The amount of Conseco's earnings and
profits at any time will depend upon its future actions and financial
performance. To the extent that the amount of a distribution on the convertible
preferred stock exceeds Conseco's current and accumulated earnings and profits,
such distributions will be treated as a nontaxable return of capital and will be
applied against and reduce the adjusted tax basis of the convertible preferred
stock in the hands of each United States Holder (but not below zero), thus
increasing the amount of any gain (or reducing the amount of any loss) which
would otherwise be realized by such United States Holder upon the sale or other
taxable disposition of such convertible preferred stock. The
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<PAGE> 19
amount of any such distribution that exceeds the adjusted tax basis of the
convertible preferred stock in the hands of the United States Holder will be
treated as capital gain and will be either long-term or short-term capital gain
depending on the United States Holder's holding period for the convertible
preferred stock.
Under Section 243 of the Code, corporate United States Holders
generally will be able to deduct 70% of the amount of any distribution
qualifying as a dividend (although as described above distributions on the
convertible preferred stock may not qualify as dividends). There are, however,
many exceptions and restrictions relating to the availability of such dividends
received deduction.
Section 246A of the Code reduces the dividends received deduction
allowed to a corporate United States Holder that has incurred indebtedness
"directly attributable" to its investment in portfolio stock. Section 246(c) of
the Code requires that, in order to be eligible for the dividends received
deduction, a corporate United States Holder must generally hold the shares of
convertible preferred stock for a 46 day minimum holding period (91 days in the
case of certain dividends) during the 90 day period beginning on the date which
is 45 days before the date on which such shares become ex-dividend with respect
to such dividend (during the 180 day period beginning 90 days before such date
in the case of certain dividends). A United States Holder's holding period for
these purposes is suspended during any period in which a United States Holder
has certain options or contractual obligations with respect to substantially
identical stock or holds one or more other positions with respect to
substantially identical stock that diminishes the risk of loss from holding the
convertible preferred stock.
A corporate United States Holder's liability for alternative minimum
tax may be affected by the portion of the dividends received which such
corporate United States Holder deducts in computing taxable income. This results
from the fact that corporate United States Holders are required to increase
alternative minimum taxable income by 75% of the excess of the adjusted current
earnings of the corporation (as defined in Section 56 of the Code) over the
alternative minimum taxable income (determined without regard to the adjustments
for determining adjusted current earnings or the alternative tax net operating
loss deduction).
Conversion
No gain or loss generally will be recognized upon conversion of shares
of convertible preferred stock into shares of common stock, except with respect
to any cash paid in lieu of fractional shares of common stock. However, under
certain circumstances, a United States Holder of convertible preferred stock may
recognize dividend income to the extent there are dividends in arrears on such
stock at the time of conversion into common
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<PAGE> 20
stock. The tax basis of the common stock received upon conversion of shares of
convertible preferred stock generally will be equal to the tax basis of the
shares of convertible preferred stock so converted and the holding period of the
common stock generally will include the holding period of the shares of
convertible preferred stock converted. However, the tax basis of any common
stock received on conversion and treated as a dividend will be equal to its fair
market value on the date of the distribution and the holding period of such
common stock will commence on the day after its receipt.
Adjustment of Conversion Ratio
United States Holders of convertible preferred stock may be deemed to
have received a constructive distribution of stock that is taxable as a dividend
when the conversion ratio is adjusted to reflect a cash or property distribution
with respect to stock into which such convertible preferred stock is
convertible. An adjustment to the conversion price made pursuant to a reasonable
adjustment formula which has the effect of preventing the dilution of the
interest of the United States Holders, however, generally will not be considered
to result in a constructive distribution of stock. Certain of the possible
adjustments provided in the convertible preferred stock, including, those in
connection with the special conversion rights applicable to the convertible
preferred stock may not qualify as being pursuant to a reasonable adjustment
formula. If a nonqualifying adjustment were made, the United States Holders of
convertible preferred stock might be deemed to have received a taxable stock
dividend (or if certain adjustments are not made). In such case, the amount of
the dividend to be included in income would be the fair market value of the
additional common stock to which United States Holders of convertible preferred
stock would be entitled by reason of the reduction in the conversion price.
Sale Or Other Taxable Disposition
A United States Holder who sells or otherwise disposes of convertible
preferred stock or common stock in a taxable transaction will recognize capital
gain or loss equal to the difference between the amount of cash and the fair
market value of property received and the United States Holder's adjusted tax
basis in the convertible preferred stock or common stock disposed. Such gain or
loss would be long-term capital gain or loss if the holding period exceeded one
year. For corporate taxpayers, long-term capital gains are taxed at the same
rate as ordinary income. For individual taxpayers, net capital gains (the excess
of the taxpayer's net long-term capital gains over this net short-term capital
losses) will be subject to a maximum tax rate of 20%, if such stock were held
for more than 12 months.
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<PAGE> 21
Backup Withholding
A United States Holder of convertible preferred stock or common stock
will be subject to backup withholding at the rate of 31% with respect to
"reportable payments," which include dividends on, and gross proceeds of a sale
of, the convertible preferred stock or common stock unless (i) such United
States Holder is a corporation or comes within other exempt categories and, when
required, demonstrates this fact, or (ii) provides a correct taxpayer
identification number, certifies as to no loss of exemption from backup
withholding and otherwise complies with applicable requirements of the backup
withholding rules. A United States Holder of convertible preferred stock or
common stock who does not provide Conseco with his or her correct taxpayer
identification number may be subject to penalties imposed by the IRS. Amounts
paid as backup withholding do not constitute an additional tax and will be
credited against the United States Holders' federal income tax liabilities, so
long as the required information is provided to the IRS. Conseco will report to
United States Holders of convertible preferred stock and common stock and to the
IRS the amount of any "reportable payments" for each calendar year and the
amount of tax withheld, if any, with respect to payments on the convertible
preferred stock or common stock.
THE FOREGOING DISCUSSION IS FOR GENERAL INFORMATION ONLY AND IS NOT TAX
ADVICE. ACCORDINGLY, EACH PROSPECTIVE HOLDER OF CONVERTIBLE PREFERRED STOCK OR
COMMON STOCK SHOULD CONSULT ITS TAX ADVISOR AS TO THE PARTICULAR TAX
CONSEQUENCES TO IT OF THE CONVERTIBLE PREFERRED STOCK AND COMMON STOCK,
INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN INCOME TAX
LAWS, AND ANY RECENT OR PROSPECTIVE CHANGES IN APPLICABLE TAX LAWS.
PLAN OF DISTRIBUTION
The purchasers will be the Fund and the other purchasers. The
purchasers of the convertible preferred stock will purchase the shares directly
from Conseco pursuant to the purchase agreement. Conseco will pay the reasonable
expenses of the purchasers (as specified by the purchasers prior to closing).
Conseco also will pay a fee of 4% of the aggregate purchase price of the
convertible preferred stock, less the amount of expenses reimbursed, to one or
more designees of the purchasers.
LEGAL MATTERS
The validity of the convertible preferred stock will be passed upon on our
behalf 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 90,000
shares of Conseco common stock and holds options to purchase 450,000 shares of
Conseco common stock.
S-21
<PAGE> 22
PROSPECTUS
$3,700,000,000
CONSECO, INC.
DEBT SECURITIES, PREFERRED STOCK, DEPOSITARY SHARES, COMMON STOCK, STOCK
PURCHASE CONTRACTS, STOCK PURCHASE UNITS AND WARRANTS
CONSECO FINANCING TRUST VIII
CONSECO FINANCING TRUST IX
CONSECO FINANCING TRUST X
PREFERRED SECURITIES FULLY AND UNCONDITIONALLY
GUARANTEED BY CONSECO, INC.
---------------------
We will provide the specific terms of the particular securities issued
under this prospectus in a prospectus supplement for each security. You should
read this prospectus and any supplement carefully before investing.
The amount of the securities issued under this prospectus will be limited
to a total of U.S. $3,700,000,000 or the equivalent amount if denominated in
foreign currencies.
Our common stock is listed on the New York Stock Exchange under the trading
symbol "CNC".
---------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OF ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is October 1, 1999.
<PAGE> 23
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
About This Prospectus....................................... 3
Where You Can Find More Information......................... 3
The Securities We May Offer................................. 4
Conseco, Inc................................................ 4
The Conseco Trusts.......................................... 5
Use of Proceeds............................................. 5
Ratios of Earnings to Fixed Charges, Earnings to Fixed
Charges and Preferred Stock Dividends and Earnings to
Fixed Charges, Preferred Stock Dividends and Distributions
on Company-Obligated Mandatorily Redeemable Preferred
Securities of Subsidiary Trusts........................... 6
Description of Debt Securities.............................. 6
Description of Capital Stock................................ 17
Description of Depositary Shares............................ 20
Description of Warrants..................................... 23
Description of Preferred Securities of the Conseco Trusts... 24
Description of Guarantees................................... 25
Description of Stock Purchase Contracts and Stock Purchase
Units..................................................... 28
Plan of Distribution........................................ 29
Special Note Regarding Forward-Looking Statements........... 31
Legal Matters............................................... 31
Experts..................................................... 32
</TABLE>
<PAGE> 24
ABOUT THIS PROSPECTUS
In this prospectus, Conseco, Inc. may be referred to as "Conseco" or "we".
This prospectus is part of a registration statement that we and Conseco
Financing Trust VIII, Conseco Financing Trust IX and Conseco Financing Trust X,
referred to in this prospectus as the "Conseco Trusts", filed with the
Securities and Exchange Commission utilizing a "shelf" registration process.
Under this shelf process, we may sell any combination of the securities
described in this prospectus in one or more offerings up to a total dollar
amount of $3,700,000,000. This prospectus provides you with a general
description of the securities we may offer. Each time we sell securities, we
will provide a prospectus supplement that will contain specific information
about the terms of that offering. The prospectus supplement may also add, update
or change information contained in this prospectus. You should read both this
prospectus and any prospectus supplement together with additional information
described under the heading "WHERE YOU CAN FIND MORE INFORMATION."
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy 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 and the Conseco Trusts have filed with the SEC a registration statement
under the Securities Act of 1933 to register the securities offered by this
prospectus. This prospectus constitutes only part of the registration statement
and does not contain all of the information in the registration statement and
its exhibits because parts of the registration statement are allowed to be
omitted by SEC rules. Statements in this prospectus or in any prospectus
supplement 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
Conseco, the Conseco Trusts and the securities 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 incorporate 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 securities offered under this prospectus.
1. Annual Report on Form 10-K for the fiscal year ended December 31,
1998;
2. Quarterly Reports on Form 10-Q for the quarters ended March 31,
1999 and June 30, 1999, as amended;
3. Current Report on Form 8-K dated August 31, 1999; and
4. The description of our common stock in the registration statements
filed by us with the SEC and any amendment or report filed for the purpose
of updating the description.
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
3
<PAGE> 25
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 these securities in any state where the offer is not permitted. You
should not assume that the information in this prospectus or any prospectus
supplement is accurate as of any date other than the date on the front of those
documents.
THE SECURITIES WE MAY OFFER
We may offer and sell from time to time, in one or more series,
- debt securities,
- preferred stock, which may be represented by depositary shares,
- common stock,
- stock purchase contracts to purchase shares of our common stock,
- stock purchase units, each representing ownership of a stock purchase
contract and preferred securities of one of the Conseco Trusts or debt
obligations of third parties, including U.S. treasury securities,
securing the holder's obligations to purchase our common stock under the
stock purchase contracts and
- warrants to purchase debt securities, preferred stock, common stock or
other securities or rights.
The Conseco Trusts may offer, from time to time, preferred securities
representing preferred undivided beneficial interests in the assets of a Conseco
Trust, referred to in this prospectus as "preferred securities". We will
guarantee the payment of periodic cash distributions on preferred securities out
of moneys held by each of the Conseco Trusts, and payments on liquidation,
redemption or otherwise with respect to the preferred securities to the extent
described in this prospectus or the applicable prospectus supplement. We will
directly or indirectly acquire common securities representing undivided
beneficial interests in the assets of each Conseco Trust, referred to in this
prospectus as "common securities". We may issue subordinated debt securities in
one or more series to a Conseco Trust as part of the investment of the proceeds
from the offering of preferred securities and common securities of the Conseco
Trust. The subordinated debt securities purchased by a Conseco Trust may be
subsequently distributed on a proportionate basis to holders of preferred
securities and common securities in connection with the dissolution of the
Conseco Trust.
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 make, purchase, sell and
service consumer and commercial finance loans throughout the United States.
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
developing and expanding profitable products and strong distribution channels,
by actively managing assets to seek to achieve superior investment returns and
by controlling expenses.
Our principal executive offices are located at 11825 N. Pennsylvania
Street, Carmel, Indiana 46032. Our telephone number is (317) 817-6100.
4
<PAGE> 26
THE CONSECO TRUSTS
Each of the Conseco Trusts is a statutory business trust formed under
Delaware law. Each Conseco Trust exists for the exclusive purposes of:
- issuing and selling the preferred securities and the common securities;
- using the proceeds from the sale of the preferred securities and common
securities to acquire our subordinated debt securities; and
- engaging in only those other activities that are related to those
purposes.
All of the common securities will be directly or indirectly owned by
Conseco. The common securities will rank equally, and payments will be made
proportionally, with the preferred securities, except that, if an event of
default under the declaration of trust of the Conseco Trust has occurred and is
continuing, the rights of the holders of the common securities to payment of
distributions and payments upon liquidation, redemption and otherwise will be
subordinated to the rights of the holders of the preferred securities. We will
directly or indirectly acquire common securities in an amount equal to at least
3% of the total capital of each Conseco Trust.
Unless otherwise specified in the applicable prospectus supplement, each
Conseco Trust has a term of up to 55 years but may terminate earlier, as
provided in the declaration of trust. Each Conseco Trust's business and affairs
will be conducted by the trustees appointed by us as the direct or indirect
holder of all of the common securities. We will be entitled to appoint, remove
or replace any of, or increase or reduce the number of, the trustees of each
Conseco Trust. The declaration of trust will set forth the duties and
obligations of the trustees. A majority of the trustees of each Conseco Trust
will be employees or officers of or persons who are affiliated with Conseco,
referred to as "regular trustees". One trustee of each Conseco Trust will be an
institution, referred to as the "institutional trustee", that is not affiliated
with Conseco and has a minimum amount of combined capital and surplus of not
less than $50,000,000, which will act as property trustee and as indenture
trustee for the purposes of compliance with the provisions of Trust Indenture
Act of 1939, under the terms of the applicable prospectus supplement. In
addition, unless the institutional trustee maintains a principal place of
business in the State of Delaware and otherwise meets the requirements of
applicable law, one trustee of each Conseco Trust will be an institution having
a principal place of business in, or a natural person resident of, the State of
Delaware, referred to as the "Delaware trustee". Conseco will pay all fees and
expenses related to the Conseco Trust and the offering of the preferred
securities and the common securities.
Unless otherwise specified in the applicable prospectus supplement, the
institutional trustee for each Conseco Trust will be Harris Trust and Savings
Bank. Unless otherwise specified in the applicable prospectus supplement, the
Delaware trustee for each Conseco Trust will be First Union Trust Company,
National Association, and its address in the State of Delaware is One Rodney
Square, 920 King Street, Wilmington, Delaware 19801. The principal place of
business of each Conseco Trust is c/o Conseco, Inc., 11825 N. Pennsylvania
Street, Carmel, Indiana 46032; telephone (317) 817-6100.
USE OF PROCEEDS
Unless otherwise indicated in the accompanying prospectus supplement, we
expect to use the net proceeds received by us from the sale of the securities
offered by this prospectus for general corporate purposes. The proceeds from the
sale of preferred securities by the Conseco Trusts will be invested in our
subordinated debt securities. Except as may otherwise be described in the
prospectus supplement relating to the preferred securities, we expect to use the
net proceeds from the sale of subordinated debt securities to the Conseco Trusts
for general corporate purposes. Any specific allocation of the proceeds to a
particular purpose that has been made at the date of any prospectus supplement
will be described in the prospectus supplement.
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<PAGE> 27
RATIOS OF EARNINGS TO FIXED CHARGES, EARNINGS TO FIXED
CHARGES AND PREFERRED STOCK DIVIDENDS
AND EARNINGS TO FIXED CHARGES, PREFERRED STOCK DIVIDENDS
AND DISTRIBUTIONS ON COMPANY-OBLIGATED MANDATORILY
REDEEMABLE PREFERRED SECURITIES OF SUBSIDIARY TRUSTS
Our ratios of earnings to fixed charges, earnings to fixed charges and
preferred stock dividends and earnings to fixed charges, preferred stock
dividends and distributions on company-obligated mandatorily redeemable
preferred securities of subsidiary trusts for each of the five years ended
December 31, 1998 and for the six months ended June 30, 1998 and 1999 are set
forth in the following table:
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
-------------------------------------- ---------------
1994 1995 1996 1997 1998 1998 1999
----- ----- ----- ------ ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges:
As reported........................ 5.80x 4.94x 4.85x 5.55x 3.30x 1.39x 5.16x
Excluding interest expense on debt
related to finance receivables
and other investments(1)........ 9.28x 7.36x 7.80x 13.00x 6.79x 2.05x 11.92x
Ratio of earnings to fixed charges,
preferred stock dividends and
distributions on company-obligated
mandatorily redeemable preferred
securities of subsidiary trusts:
As reported..................... 4.48x 4.14x 3.74x 4.10x 2.47x 1.08x 3.73x
Excluding interest expense on
debt related to finance
receivables and other
investments(1)................ 6.14x 5.61x 5.11x 6.72x 3.68x 1.15x 5.93x
</TABLE>
- ---------------
(1) These ratios are included to assist the reader in analyzing the impact of
interest expense on debt related to finance receivables and other
investments (which is generally offset by interest earned on finance
receivables and other investments financed by such debt). The ratios are not
intended to, and do not, represent the following ratios prepared in
accordance with generally accepted accounting principles: the ratio of
earnings to fixed charges; or the ratio of earnings to fixed charges,
preferred stock dividends and distributions on company-obligated mandatorily
redeemable preferred securities of subsidiary trusts.
DESCRIPTION OF DEBT SECURITIES
We may offer one or more series of debt securities that are either senior
debt securities or subordinated debt securities. Unless otherwise specified in
the applicable prospectus supplement, the debt securities will be issued under
the senior indenture or the subordinated indenture, in each case between us and
the trustee identified in the indenture, copies of which have been filed as
exhibits to the registration statement of which this prospectus forms a part.
Except for the subordination provisions of the subordinated indenture, which do
not exist in the senior indenture, the provisions of the subordinated indenture
are substantially identical in substance to the provisions of the senior
indenture that bear the same section numbers.
We have summarized below the material provisions of the indentures and the
debt securities, or indicated which material provisions will be described in the
applicable prospectus supplement. These descriptions are only summaries, and you
should refer to the indentures which describe completely the terms and
definitions summarized below and contain additional information regarding the
debt securities. All article and section references in this prospectus are to
articles and sections of the applicable indenture and whenever particular
sections or defined terms of the indentures are referred to in this prospectus
or in a prospectus supplement, the sections or defined terms are incorporated
into this prospectus or the prospectus supplement by reference.
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<PAGE> 28
The debt securities will be unsecured obligations of Conseco. The
indentures do not limit the aggregate amount of debt securities that we may
issue and do not limit the incurrence or issuance by us of other secured or
unsecured debt. The debt securities issued under the senior indenture will be
unsecured and will rank equally with all our other unsecured and unsubordinated
obligations. The debt securities issued under the subordinated indenture will be
subordinate and junior in right of payment, to the extent and in the manner set
forth in the subordinated indenture, to all our senior indebtedness. See
"-- Subordination under the Subordinated Indenture."
The applicable prospectus supplement will describe the specific terms of
the series of debt securities being offered. The following terms may be
included:
- the title, designation and purchase price, of the debt securities;
- whether the debt securities are senior debt securities or subordinated
debt securities and whether the debt securities will be issued under the
senior indenture, the subordinated indenture or another indenture
described in the prospectus supplement;
- any limit upon the aggregate principal amount of the debt securities;
- the date or dates on which the principal of and premium, if any, on the
debt securities will mature or the method of determining or resetting the
date or dates;
- the rate or rates, which may be fixed or variable, at which the debt
securities will bear interest, if any, or the method of calculating or
resetting the rate or rates;
- the date or dates from which interest, if any, will accrue or the method
by which the date or dates will be determined;
- the date or dates on which interest, if any, will be payable and the
record date or dates for payment of interest;
- the place or places where principal of, premium, if any, and interest, if
any, on the debt securities will be payable;
- our right, if any, to defer payment of interest on debt securities and
the maximum length of any permitted deferral period;
- the period or periods within which, the price or prices at which, the
currency or currencies, including currency unit or units, in which, and
the terms and conditions upon which, the debt securities may be redeemed,
in whole or in part, at our option;
- our obligation, if any, to redeem or purchase the debt securities under
any sinking fund or similar provisions or upon the happening of a
specified event and the period or periods within which, the price or
prices at which and the other terms and conditions upon which, the debt
securities will be redeemed or purchased, in whole or in part, under
these obligations;
- the authorized denominations of the debt securities;
- the currency or currency unit for which debt securities may be purchased
or in which debt securities may be denominated and/or the currency or
currencies, including currency unit or units, in which principal of,
premium, if any, and interest, if any, on the debt securities will be
payable and whether we or the holders of any debt securities may elect to
receive payments in respect of the debt securities in a currency or
currency unit other than that in which the debt securities are stated to
be payable;
- if other than the principal amount of the debt securities, the portion of
the principal amount of the debt securities which will be payable upon
declaration of the acceleration of the maturity of the debt securities or
the method by which that portion will be determined;
- the person to whom any interest on any debt security will be payable if
other than the person in whose name the debt security is registered on
the applicable record date;
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<PAGE> 29
- any addition to, or modification or deletion of, any event of default or
any of our covenants specified in the indenture for the debt securities;
- the application, if any, of defeasance or covenant defeasance provisions
to the debt securities;
- whether the debt securities are to be issued in whole or in part in the
form of one or more temporary or permanent global securities and, if so,
the identity of the depositary for the global security or securities;
- any federal income tax considerations applicable to holders of the debt
securities; and
- any other special terms relating to the debt securities.
Unless otherwise specified in the applicable prospectus supplement, the debt
securities will not be listed on any securities exchange. (Section 3.1.)
Unless otherwise specified in the applicable prospectus supplement, debt
securities will be issued in fully-registered form without coupons. Where debt
securities of any series are issued in bearer form and are payable to the bearer
of the security, the special restrictions and considerations, including special
offering restrictions and special federal income tax considerations, applicable
to the debt securities and to payment on and transfer and exchange of the debt
securities will be described in the applicable prospectus supplement. Bearer
debt securities will be transferable by delivery. (Section 3.5.)
Debt securities may be sold at a substantial discount below their stated
principal amount, bearing no interest or interest at a rate which at the time of
issuance is below market rates. Federal income tax consequences and special
considerations applicable to these debt securities, or to debt securities issued
at par that are treated as having been issued at a discount, will be described
in the applicable prospectus supplement.
If the purchase price of any of the debt securities is payable in one or
more foreign currencies or currency units or if any debt securities are
denominated in one or more foreign currencies or currency units or if the
principal of, premium, if any, or interest, if any, on any debt securities is
payable in one or more foreign currencies or currency units, or by reference to
commodity prices, equity indices or other factors, the restrictions, elections,
federal income tax considerations, specific terms and other information about
the issue of debt securities and the foreign currency or currency units or
commodity prices, equity indices or other factors will be set forth in the
applicable prospectus supplement. In general, holders of these series of debt
securities may receive a principal amount on any principal payment date, or a
payment of premium, if any, on any premium interest payment date or a payment of
interest on any interest payment date, that is greater than or less than the
amount of principal, premium, if any, or interest otherwise payable on the
payment dates, depending on the value on the payment dates of the applicable
currency, commodity, equity index or other factor.
PAYMENT, REGISTRATION, TRANSFER AND EXCHANGE
Unless otherwise provided in the applicable prospectus supplement, payments
with respect to the debt securities will be made in the designated currency at
the office or agency maintained for that purpose that we may designate from time
to time, except that, at our option, interest payments, if any, on debt
securities in registered form may be made (1) by checks mailed to the holders of
debt securities entitled to receive these payments at their registered addresses
or (2) by wire transfer to an account maintained by the person entitled to
receive these payments as specified in the register maintained to record the
holders of the debt securities and transfer of debt securities. (Sections 3.7(a)
and 9.2.) Unless otherwise indicated in the applicable prospectus supplement,
payment of any installment of interest on debt securities in registered form
will be made to the person in whose name the debt security is registered at the
close of business on the regular record date for payment of interest. (Section
3.7(a).)
Payment with respect to debt securities in bearer form will be made in the
currency and in the manner designated in the prospectus supplement, subject to
any applicable laws and regulations, at paying agencies outside the United
States that we may appoint from time to time. The paying agents outside the
United States initially appointed by us for a series of debt securities will be
named in the prospectus supplement. We may at
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<PAGE> 30
any time designate additional paying agents or rescind the designation of any
paying agents, except that, if debt securities of a series are issuable as
registered securities, we will be required to maintain at least one paying agent
in each place, a "place of payment", where payment of principal, premium, if
any, and interest or other payments on the securities are payable and, if debt
securities of a series are issuable as bearer securities, we will be required to
maintain a paying agent in a place of payment outside the United States where
debt securities of the series and any coupons may be presented and surrendered
for payment. (Section 9.2.)
Unless otherwise provided in the applicable prospectus supplement, debt
securities in registered form will be transferable or exchangeable at the agency
maintained for this purpose that we will designate from time to time. (Sections
3.5 and 9.2.) Debt securities may be transferred or exchanged without service
charge, other than any tax or other governmental charge imposed in connection
with the transfer or exchange. (Section 3.5.)
GLOBAL DEBT SECURITIES
Unless otherwise specified in the applicable prospectus supplement, the
debt securities of a series may be issued in whole or in part in the form of one
or more global securities that will be deposited with the depositary or with a
nominee for the depositary identified in the applicable prospectus supplement.
In this event, one or more global securities will be issued in a denomination or
aggregate denominations equal to the portion of the aggregate principal amount
of outstanding debt securities of the series to be represented by the global
security or securities. (Section 3.3.) Except as described in the applicable
prospectus supplement, unless and until it is exchanged in whole or in part for
debt securities in definitive certificated form, a global security may not be
registered for transfer or exchange except as a whole by:
- the depositary for the global security to a nominee of the depositary;
- a nominee of the depositary to the depositary or another nominee of the
depositary; or
- the depositary or any nominee to a successor depositary for the series or
a nominee of the successor depositary. (Section 3.5.)
The specific terms of the depositary arrangement for any portion of a
series of debt securities to be represented by a global security will be
described in the applicable prospectus supplement. Unless otherwise specified in
the applicable prospectus supplement, we expect that the following provisions
will apply to the depositary arrangements.
Ownership of beneficial interests in a global security will be limited to
persons that have accounts with the depositary or a nominee of the depositary,
referred to as "participants", or persons that may hold interests through
participants. Upon the issuance of any global security, and the deposit of the
global security with or on behalf of the depositary for the global security, the
depositary will credit, on its book-entry registration and transfer system, the
respective principal amounts of the debt securities represented by the global
security to the accounts of participants. The accounts to be credited will be
designated by the underwriters or agents engaging in the distribution of the
debt securities or by us, if the debt securities are offered and sold directly
by us. Ownership of beneficial interests by participants in the global security
will be shown on, and the transfer of these beneficial interests will be
effected only through, records maintained by the depositary for the global
security or by its nominee. Ownership of beneficial interests in a global
security by persons that hold through participants will be shown on, and the
transfer of these beneficial interests within the participants will be effected
only through, records maintained by the participants. The laws of some
jurisdictions require that some purchasers of securities take physical delivery
of securities in certificated form. The limitations described above and these
laws may impair the ability to transfer beneficial interests in the global
security.
So long as the depositary for a global security, or its nominee, is the
registered owner of the global security, the depositary or the nominee, as the
case may be, will be considered the sole owner or holder of the debt securities
represented by the global security for all purposes under the applicable
indenture. Unless otherwise specified in the applicable prospectus supplement
and except as specified below, owners of beneficial interests in the global
security will not be entitled to have debt securities of the series represented
by the global
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<PAGE> 31
security registered in their names, will not receive or be entitled to receive
physical delivery of debt securities of that series in certificated form and
will not be considered the holders of the debt securities for any purposes under
the relevant indenture. (Section 3.8.) Accordingly, each person owning a
beneficial interest in a global security must rely on the procedures of the
depositary and, if the person is not a participant, on the procedures of the
participant through which the person owns its interest, to exercise any rights
of a holder under the relevant indenture. The depositary may grant proxies and
otherwise authorize participants to give or take any request, demand,
authorization, direction, notice, consent, waiver or other action which a holder
is entitled to give or take under the relevant indenture. We understand that,
under existing industry practices, if we request any action of holders or if any
owner of a beneficial interest in a global security desires to give any notice
or take any action which a holder is entitled to give or take under the relevant
indenture, the depositary would authorize the participants to give the notice or
take the action, and the participants would authorize beneficial owners owning
through the participants to give the notice or take the action or would
otherwise act upon the instructions of beneficial owners owning through them.
Unless otherwise specified in the applicable prospectus supplement,
payments of principal, premium, if any, and interest, if any, on debt securities
represented by a global security registered in the name of a depositary or its
nominee will be made to the depositary or its nominee, as the case may be, as
the registered owner of the global security. We expect that the depositary for
any debt securities represented by a global security, upon receipt of any
payment of principal, premium or interest, will immediately credit participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the principal amount of the global security as shown on the records
of the depositary. We also expect that payments by participants to owners of
beneficial interests in a global security held through the participants will be
governed by standing instructions and customary practices, as is now the case
with the securities held for the accounts of customers registered in "street
names," and will be the responsibility of the participants. Neither we nor the
trustees nor any agent of ours or the trustees will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial interests of a global security, or for maintaining, supervising or
reviewing any records relating to the beneficial interests. (Section 3.8.)
Unless otherwise specified in the applicable prospectus supplement, if the
depositary for any debt securities represented by a global security is at any
time unwilling or unable to continue as depositary or ceases to be a clearing
agency registered under the Securities Exchange Act of 1934 and a duly
registered successor depositary is not appointed by us within 90 days, we will
issue these debt securities in definitive certificated form in exchange for the
global security. In addition, we may at any time and in our sole discretion
determine not to have any of the debt securities of a series represented by one
or more global securities and, in that event, will issue debt securities of the
series in definitive certificated form in exchange for the global security or
securities representing the debt securities. (Section 3.5.)
The debt securities of a series may also be issued in whole or in part in
the form of one or more global securities issued as a bearer security that will
be deposited with a depositary, or with a nominee for the depositary, identified
in the applicable prospectus supplement. Bearer global securities may be issued
in temporary or permanent form. (Section 3.4.) The specific terms and
procedures, including the specific terms of the depositary arrangement, for any
portion of a series of debt securities to be represented by one or more bearer
global securities will be described in the applicable prospectus supplement.
CONSOLIDATION, MERGER OR SALE BY CONSECO
Unless otherwise specified in the applicable prospectus supplement, we may
not consolidate with or merge into any other corporation or sell our assets
substantially as an entirety, unless:
- the corporation formed by the consolidation or into which we are merged
or the corporation which acquires our assets is organized in the United
States;
- the corporation formed by the consolidation or into which we are merged
or which acquires our assets substantially as an entirety expressly
assumes all of our obligations under each indenture;
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<PAGE> 32
- immediately after giving effect to the transaction, no default or event
of default under the applicable indenture has happened and is continuing,
and
- if, as a result of the transaction, our properties or assets would become
subject to an encumbrance which would not be permitted by the terms of
any series of debt securities, we or the successor corporation, as the
case may be, take the steps that are necessary to secure the debt
securities equally and ratably with all indebtedness secured by that
encumbrance.
Upon the consolidation, merger or sale, the successor corporation formed by
the consolidation, or into which we are merged or to which the sale is made,
will succeed to, and be substituted for us under each indenture. (Section 7.1.)
EVENTS OF DEFAULT, NOTICE AND RIGHTS ON DEFAULT
Each indenture provides that, if an event of default occurs relating to the
debt securities of any series and is continuing, the trustee for the series or
the holders of 25% in aggregate principal amount of all of the outstanding debt
securities of that series, by written notice to us and to the trustee for the
series, if notice is given by the holders of debt securities, may declare the
principal of or, if the debt securities of that series provide for an amount
that is more or less than the principal amount of the debt securities to be due
and payable upon a declaration of maturity of the debt securities upon an event
of default, that portion of the principal amount specified in the prospectus
supplement, and accrued interest on all the debt securities of that series to be
due and payable; provided, for any debt securities issued under the subordinated
indenture, that the payment of principal and interest on the debt securities
will remain subordinated to the extent provided in the subordinated indenture.
(Section 5.2.)
Unless otherwise specified in the applicable prospectus supplement, events
of default for debt securities of any series are defined in each indenture as
being:
- default for 30 days in payment of any interest on any debt security of
that series or any coupon pertaining to the debt security or any
additional amount payable on debt securities of that series as specified
in the applicable prospectus supplement when due;
- default in payment of principal, or premium, if any, at maturity or on
redemption or otherwise, or in the making of a mandatory sinking fund
payment on any debt securities of that series when due;
- default for 60 days after notice to us by the trustee for that series, or
by the holders of 25% in aggregate principal amount of the debt
securities of that series then outstanding, in the performance of any
other agreement in the debt securities of that series, in the indenture
or in any supplemental indenture or board resolution referred to in the
indenture under which the debt securities of that series may have been
issued;
- default resulting in acceleration of any of our other indebtedness for
borrowed money where the aggregate principal amount so accelerated
exceeds $25 million and the acceleration is not rescinded or annulled
within 30 days after the written notice of the default to us by the
trustee or to us and the trustee by the holders of 25% in aggregate
principal amount of the debt securities of that series then outstanding,
provided that the event of default will be remedied, cured or waived if
the default that resulted in the acceleration of the other indebtedness
is remedied, cured or waived; and
- our bankruptcy, insolvency or reorganization. (Section 5.1.)
The definition of event of default in each indenture specifically excludes
a default under a secured debt under which the obligee has recourse, exclusive
of recourse for ancillary matters including environmental indemnities,
misapplication of funds and costs of enforcement, only to the collateral pledged
for repayment and where the fair market value of the collateral is 2% or less of
our total assets appearing on our most recently prepared consolidated balance
sheet as at the end of one of our fiscal quarters, prepared in accordance with
generally accepted accounting principles, at the time of the default.
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<PAGE> 33
Events of default for a specified series of debt securities may be added to
the indenture and, if so added, will be described in the applicable prospectus
supplement. (Sections 3.1 and 5.1(7).) Each indenture provides that the trustee
will, within 90 days after the occurrence of a default for the debt securities
of any series, give to the holders of the debt securities of that series notice
of all defaults known to it unless the default has been cured or waived;
provided that except in the case of a default in payment on the debt securities
of that series, the trustee may withhold the notice if and so long as a
committee of its officers determines that withholding the notice is in the
interests of the holders of the debt securities of that series. (Section 6.6.)
Each indenture provides that the holders of a majority in aggregate principal
amount of the debt securities of each series affected, with each series voting
as a class, may, subject to limited conditions, direct the time, method and
place of conducting any proceeding for any remedy available to the trustee for
the series, or exercising any trust or power conferred on the trustee. (Section
5.8.) Each indenture includes a covenant that we will file annually with the
trustee a certificate as to our compliance with all conditions and covenants of
the indenture. (Section 9.5.) The holders of a majority in aggregate principal
amount of any series of debt securities by notice to the trustee for the series
may waive, on behalf of the holders of all debt securities of the series, any
past default or event of default for that series and its consequences except a
default or event of default in the payment of the principal of, premium, if any,
or interest, if any, on any debt security, and except for an event of default
resulting from the breach of a covenant or provision of either indenture which,
under the applicable indenture, cannot be amended or modified without the
consent of the holders of each outstanding debt security of the series affected.
(Section 5.7.)
OPTION TO DEFER INTEREST PAYMENTS
If provided in the applicable prospectus supplement, we will have the right
at any time and from time to time during the term of the series of debt
securities to defer the payment of interest for the number of consecutive
interest payment periods specified in the applicable prospectus supplement,
subject to the terms, conditions and covenants, if any, specified in the
prospectus supplement, provided that the deferral period may not extend beyond
the stated maturity of the debt securities. Material United States federal
income tax consequences and special considerations applicable to these debt
securities will be described in the applicable prospectus supplement. Unless
otherwise specified in the applicable prospectus supplement, at the end of the
deferral period, we will pay all interest then accrued and unpaid together with
interest on accrued and unpaid interest compounded semiannually at the rate
specified for the debt securities to the extent permitted by applicable law;
provided, that during the deferral period we may not:
- declare or pay dividends on, make distributions regarding, or redeem,
purchase, acquire or make a liquidation payment regarding, any of our
capital stock, other than:
(1) purchases or acquisitions of our capital stock in connection with
the satisfaction of our obligations under any employee or agent benefit
plans or the satisfaction of our obligations under any contract or
security outstanding on the date of the event requiring us to purchase
capital stock,
(2) as a result of a reclassification of our capital stock or the
exchange or conversion of one class or series of our capital stock for
another class or series of our capital stock,
(3) the purchase of fractional interests in shares of our capital stock
in connection with the conversion or exchange provisions of that capital
stock or the security being converted or exchanged,
(4) dividends or distributions in our capital stock, or rights to
acquire capital stock, or repurchases or redemptions of capital stock
solely from the issuance or exchange of capital stock, or
(5) redemptions or repurchases of any rights outstanding under a
shareholder rights plan,
- make any payment of interest, principal or premium, if any, on or repay,
repurchase or redeem any debt securities issued by us that rank junior to
the debt securities, and
- make any guarantee payments regarding the foregoing, other than payments
under our guarantee of the preferred securities or the common securities.
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<PAGE> 34
Prior to the termination of any deferral period, we may further defer
payments of interest by extending the interest payment period; provided,
however, that, the deferral period, including all previous and further
extensions, may not extend beyond the maturity of the debt securities.
Upon the termination of any deferral period and the payment of all amounts
then due, we may commence a new deferral period, subject to the terms set forth
in this section. No interest during a deferral period, except at the end of the
deferral period, will be due and payable, but we may prepay at any time all or
any portion of the interest accrued during a deferral period. We have no present
intention of exercising our right to defer payments of interest by extending the
interest payment period on the debt securities. If the institutional trustee is
the sole holder of the debt securities, we will give the regular trustees and
the institutional trustee notice of our selection of a deferral period one
business day before the earlier of (1) the date distributions on the preferred
securities are payable or (2) the date the regular trustees are required to give
notice to the New York Stock Exchange, or other applicable self-regulatory
organization, or to holders of the preferred securities of the record or payment
date of the distribution. The regular trustees will give notice of our selection
of the deferral period to the holders of the preferred securities. If the
institutional trustee is not the sole holder of the debt securities, we will
give the holders of the debt securities notice of our selection of a deferral
period ten business days before the earlier of (1) the interest payment date or
(2) the date upon which we are required to give notice to the New York Stock
Exchange, or other applicable self-regulatory organization, or to holders of the
debt securities of the record or payment date of the related interest payment.
MODIFICATION OF THE INDENTURES
Unless otherwise specified in the applicable prospectus supplement, each
indenture contains provisions permitting us and the trustee to enter into one or
more supplemental indentures without the consent of the holders of any of the
debt securities in order to:
- evidence the succession of another corporation to Conseco and the
assumption of our covenants by the successor;
- add to our covenants or surrender any of our rights or powers;
- add additional events of default for any series of debt securities;
- add or change any provisions to the extent necessary to permit or
facilitate the issuance of bearer securities;
- change or eliminate any provision affecting only debt securities not yet
issued;
- provide for security for the debt securities;
- to establish the form or terms of debt securities;
- evidence and provide for successor trustees;
- if allowed without penalty under applicable laws and regulations, permit
payment in respect of bearer securities in the United States;
- correct any defect or supplement any inconsistent provisions or to make
any other provisions concerning matters or questions arising under the
indenture, provided that the action does not adversely affect the
interests of any holder of debt securities of any series; or
- cure any ambiguity or correct any mistake.
The subordinated indenture also permits us and the trustee to enter into
supplemental indentures to modify the subordination provisions contained in the
subordinated indenture except in a manner adverse to any outstanding debt
securities. (Section 8.1.)
Unless otherwise specified in the applicable prospectus supplement, each
indenture also contains provisions permitting us and the trustee, with the
consent of the holders of a majority in aggregate principal amount of the
outstanding debt securities affected by a supplemental indenture, with the debt
securities of
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each series voting as a class, to execute supplemental indentures adding any
provisions to or changing or eliminating any of the provisions of the indenture
or any supplemental indenture or modifying the rights of the holders of debt
securities of that series, except that, without the consent of the holder of
each debt security so affected, no supplemental indenture may:
- change the time for payment of principal or premium, if any, or interest
on any debt security;
- reduce the principal of, or any installment of principal of, or premium,
if any, or interest on any debt security, or change the manner in which
they are determined;
- reduce the amount of premium, if any, payable upon the redemption of any
debt security;
- reduce the amount of principal payable upon acceleration of the maturity
of any debt security providing for an amount more or less than the
principal amount of the debt security to be due and payable upon a
declaration of maturity upon an event of default;
- change the currency or currency unit in which any debt security or any
premium or interest on the debt security is payable;
- impair the right to institute suit for the enforcement of any payment on
or regarding any debt security;
- reduce the percentage in principal amount of the outstanding debt
securities affected by the supplemental indenture the consent of whose
holders is required for amendment of the indenture or for waiver of
compliance with provisions of the indenture or for waiver of defaults;
- change our obligation to maintain an office or agency in the places and
for the purposes specified in the indenture;
- modify the provisions relating to the subordination of outstanding debt
securities of any series in a manner adverse to the holders of the debt
securities; or
- modify the provisions relating to waiver of defaults or any of the
provisions set forth above. (Section 8.2.)
SUBORDINATION UNDER THE SUBORDINATED INDENTURE
The subordinated indenture provides that any subordinated debt securities
issued under the subordinated indenture are subordinate and junior in right of
payment to the extent provided in the subordinated indenture (Section 12.1 of
the subordinated indenture.) to our senior indebtedness, which is defined as:
- all of our indebtedness, whether outstanding on the date of the
subordinated indenture or created after that date, incurred or assumed,
which is for money borrowed, or evidenced by a note or similar instrument
given in connection with the acquisition of any business, properties or
assets, including securities;
- any indebtedness of others of the kinds described in the preceding
bulletpoint for the payment of which we are is responsible or liable as
guarantor or otherwise; and
- amendments, renewals, extensions and refundings of any of that
indebtedness, unless in any instrument or instruments evidencing or
securing that indebtedness or under which the indebtedness is
outstanding.
Senior indebtedness will continue to be senior indebtedness and entitled to
the benefits of the subordination provisions irrespective of any amendment,
modification or waiver of any term of the senior indebtedness or extension or
renewal of the senior indebtedness. Senior indebtedness does not include:
- any of our indebtedness to any of our subsidiaries;
- indebtedness incurred for the purchase of goods or materials or for
services obtained in the ordinary course of business; and
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- any indebtedness which by its terms ranks equally with or subordinate to
the subordinated debt securities. (Section 12.2 of the subordinated
indenture.)
If (1) we default in the payment of any principal, or premium, if any, or
interest on any senior indebtedness when the same becomes due and payable,
whether at maturity or at a date fixed for prepayment or declaration or
otherwise or (2) an event of default occurs for any senior indebtedness
permitting the holders of the senior indebtedness to accelerate the maturity of
the senior indebtedness and written notice of the event of default, requesting
that payments on subordinated debt securities cease, is given to us by the
holders of senior indebtedness, then unless and until the default in payment or
event of default is cured or waived or ceases to exist, no direct or indirect
payment, in cash, property or securities, by set-off or otherwise, will be made
or agreed to be made on account of the subordinated debt securities or interest
on the subordinated debt securities or with respect to any repayment,
redemption, retirement, purchase or other acquisition of subordinated debt
securities. (Section 12.4 of the subordinated indenture.)
In the event of:
- any insolvency, bankruptcy, receivership, liquidation, reorganization,
readjustment, composition or other similar proceeding relating to us, our
creditors or our property,
- any proceeding for the liquidation, dissolution or other winding-up of
Conseco, voluntary or involuntary, whether or not involving insolvency or
bankruptcy proceedings,
- any assignment by us for the benefit of our creditors, or
- any other marshaling of our assets,
then all senior indebtedness including, without limitation, interest accruing
after the commencement of the proceeding, assignment or marshaling of assets,
must first be paid in full before any payment or distribution, whether in cash,
securities or other property, is made by us on account of subordinated debt
securities. In that event, except as described in this paragraph, any payment or
distribution, which, but for the subordination provisions, would be payable or
deliverable with respect to subordinated debt securities, will be paid or
delivered directly to the holders of senior indebtedness, or to their
representative or trustee, in accordance with the priorities then existing among
the holders until all senior indebtedness has been paid in full. (Section 12.3
of the subordinated indenture.) The payments or distributions described in the
previous sentence include those which may be payable or deliverable because of
the payment of any other indebtedness of ours being subordinated to the payment
of subordinated debt securities. The payments or distributions described in the
first sentence of this paragraph do not include payments or distributions of our
securities or the securities of any other corporation provided for by a plan of
reorganization or readjustment, the payment of which is subordinate, at least to
the extent provided in the subordination provisions of the subordinated
indenture for the indebtedness evidenced by subordinated debt securities, to the
payment of all senior indebtedness at the time outstanding and to any securities
issued with respect to the senior indebtedness under the plan of reorganization
or readjustment. No present or future holder of any senior indebtedness will be
prejudiced in the right to enforce subordination of the indebtedness evidenced
by subordinated debt securities by any act or failure to act on our part.
(Section 12.9 of the subordinated indenture.)
Senior indebtedness will be deemed to have been paid in full if the holders
of senior indebtedness will have received cash, securities or other property
equal to the amount of the senior indebtedness then outstanding. Upon the
payment in full of all senior indebtedness, the holders of subordinated debt
securities will be subrogated to all the rights of any holders of senior
indebtedness to receive any further payments or distributions applicable to the
senior indebtedness until all subordinated debt securities are paid in full. The
payments or distributions received by any holder of subordinated debt
securities, by reason of the subrogation, of cash, securities or other property
which otherwise would be paid or distributed to the holders of senior
indebtedness, will, as between us and our creditors other than the holders of
senior indebtedness, on the one hand, and the holders of subordinated debt
securities, on the other, be deemed to be a payment by us on account of senior
indebtedness, and not on account of subordinated debt securities. (Section 12.7
of the subordinated indenture.)
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The subordinated indenture provides that the subordination provisions
described in this section, to the extent as they relate to any particular issue
of subordinated debt securities, may be changed before the issuance of the
subordinated debt securities. Any change of this nature would be described in
the applicable prospectus supplement relating to the subordinated debt
securities.
DEFEASANCE AND COVENANT DEFEASANCE
If indicated in the applicable prospectus supplement, we may elect either
to defease and be discharged from any and all obligations with respect to the
debt securities of or within any series, referred to as "defeasance", or to be
released from our obligations with respect to selected covenants applicable to
the debt securities of or within any series, referred to as "covenant
defeasance", upon the deposit with the appropriate trustee, in trust for that
purpose, of money and/or U.S. government obligations which through the payment
of principal and interest in accordance with their terms will provide money in
an amount sufficient, without reinvestment, to pay the principal of and any
premium or interest on the debt securities to maturity or redemption, as the
case may be, and any mandatory sinking fund or similar payments on the debt
securities. As a condition to defeasance or covenant defeasance, we must deliver
to the trustee an opinion of counsel to the effect that the holders of the debt
securities will not recognize income, gain or loss for federal income tax
purposes as a result of the defeasance or covenant defeasance and will be
subject to federal income tax on the same amounts and in the same manner and at
the same times as would have been the case if the defeasance or covenant
defeasance had not occurred. The opinion of counsel, in the case of defeasance,
must refer to and be based upon a ruling of the Internal Revenue Service or a
change in applicable federal income tax law occurring after the date of the
relevant indenture. (Article 4.) If indicated in the applicable prospectus
supplement, in addition to obligations of the United States or an agency or
instrumentality of the United States, government obligations may include
obligations of the government or an agency or instrumentality of the government
issuing the currency or currency unit in which debt securities of the series are
payable. (Section 3.1.)
In addition, in order for covenants contained in the subordinated indenture
to be discharged no event or condition may exist that, under provisions
described in "-- Subordination under the Subordinated Indenture" above, would
prevent us from making payments of principal of, and premium, if any, and
interest on subordinated debt securities at the date of the required irrevocable
deposit. (Section 4.6(j) of the subordinated indenture.)
We may exercise our defeasance option for the debt securities in spite of
our earlier exercise of our covenant defeasance option. If we exercise our
defeasance option, payment of the debt securities may not be accelerated because
of a default or an event of default. (Section 4.4.) If we exercise our covenant
defeasance option, payment of the debt securities may not be accelerated by
reason of a default or an event of default under the covenants to which the
covenant defeasance is applicable. However, if the acceleration occurs by reason
of another event of default, the realizable value at the acceleration date of
the money and government obligations in the defeasance trust could be less than
the principal and interest then due on the debt securities, because the required
deposit in the defeasance trust is based upon scheduled cash flow rather than
market value, which will vary depending upon interest rates and other factors.
THE TRUSTEES
Unless otherwise specified in the applicable prospectus supplement, Bank of
New York will be the trustee under the senior indenture, and Harris Trust and
Savings Bank will be the trustee under the subordinated indenture. We may also
maintain banking and other commercial relationships with each of the trustees
and their affiliates in the ordinary course of business.
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DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock was 1,020,000,000 shares as of September 27,
1999, consisting of:
- 20,000,000 shares of preferred stock, of which none were outstanding; and
- 1,000,000,000 shares of common stock, of which 327,116,139 shares were
outstanding.
In general, our authorized preferred stock is afforded preferences
regarding dividends and liquidation rights over our common stock. Our board of
directors is empowered, without approval of our shareholders, to cause the
preferred stock to be issued in one or more series, with the numbers of shares
of each series and the rights, preferences and limitations of each series to be
determined by the board, including the dividend rights, conversion rights,
redemption rights and liquidation preferences, if any, of any wholly unissued
series of preferred stock, or of the entire class of preferred stock if none of
the shares have been issued, the number of shares constituting each series and
the terms and conditions of the issue of each series. The following is a summary
of the terms of our preferred stock and common stock and provisions of our
articles of incorporation, bylaws and statutes that affect our preferred stock
and common stock and is subject to the actual provisions of the articles of
incorporation, bylaws and these statutes.
PREFERRED STOCK
The applicable prospectus supplement will describe the following terms of
any preferred stock offered pursuant to this prospectus, to the extent
applicable to the preferred stock:
- the specific designation, number of shares, seniority and purchase price;
- any liquidation preference per share;
- any date of maturity;
- any redemption, repayment or sinking fund provisions;
- any dividend rate or rates and the dates on which any dividends will be
payable, or the method by which the rates or dates will be determined;
- any voting rights;
- if other than the currency of the United States, the currency or
currencies, including composite currencies, in which the preferred stock
is denominated and/or in which payments will or may be payable;
- the method by which amounts with respect to the preferred stock may be
calculated and any commodities, currencies or indices, or value, rate or
price, relevant to the calculation;
- whether the preferred stock is convertible or exchangeable and, if so,
the securities or rights into which the preferred stock is convertible or
exchangeable, which may include other preferred stock, debt securities,
common stock or other securities or rights of Conseco, including rights
to receive payment in cash or securities based on the value, rate or
price of one or more specified commodities, currencies or indices, or a
combination any of these, and the terms and conditions upon which the
conversions or exchanges will be effected, including the initial
conversion or exchange prices or rates, the conversion or exchange period
and any other related provisions;
- the place or places where dividends and other payments on the preferred
stock will be payable; and
- any additional voting, dividend, liquidation, redemption and other
rights, preferences, privileges, limitations and restrictions.
As described under "Description of Depositary Shares", we may, at our
option, elect to offer depositary shares evidenced by depositary receipts, each
representing an interest, to be specified in the applicable prospectus
supplement for the particular series of the preferred stock, in a share of the
particular series of the
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preferred stock issued and deposited with a preferred stock depositary. All
shares of preferred stock offered by this prospectus, or issuable upon
conversion, exchange or exercise of securities, will, when issued, be fully paid
and non-assessable.
COMMON STOCK
The prospectus supplement relating to an offering of common stock will
describe relevant terms, including the number of shares offered, the initial
offering price, market price and dividend information.
Dividends. Holders of common stock are entitled to receive dividends and
other distributions in cash, stock or property, when, as and if declared by the
board of directors out of our assets or funds legally available for payment of
dividends or other distributions and will share equally on a per share basis in
all dividends and other distributions, subject to the rights of holders of
preferred stock.
Voting Rights. At every meeting of shareholders, every holder of common
stock is entitled to one vote per share. Subject to any voting rights which may
be granted to holders of preferred stock, any action submitted to shareholders
is approved if the number of votes cast in favor of the action exceeds the
number of votes against, except where other provision is made by law and subject
to applicable quorum requirements.
Liquidation Rights. If there is any liquidation, dissolution or winding-up
of Conseco, whether voluntary or involuntary, the holders of common stock are
entitled to share equally in the assets available for distribution after payment
of all liabilities and provision for the liquidation preference of any shares of
preferred stock then outstanding.
The holders of common stock have no preemptive rights, cumulative voting
rights, subscription rights, or conversion rights and the common stock may not
be redeemed. The transfer agent and registrar for the common stock is First
Union National Bank. The common stock is traded on the New York Stock Exchange
under the symbol "CNC". All shares of common stock offered by this prospectus,
or issuable upon conversion, exchange or exercise of securities, will, when
issued, be fully paid and non-assessable.
PROVISIONS OF OUR ARTICLES OF INCORPORATION AND BY-LAWS
Some provisions of our articles of incorporation and bylaws may make it
more difficult to effect a change in control if our board of directors
determines that the change in control would not be in the best interests of our
shareholders. It could be argued, contrary to the belief of our board of
directors, that these provisions are not in the best interests of the
shareholders to the extent that they will have the effect of tending to
discourage possible takeover bids, which might be at prices that are higher than
the recent market prices for our common stock. The most important of those
provisions are described below.
Our articles of incorporation authorize the establishment in the bylaws of
a classified board of directors. The bylaws, in turn, provide that the directors
serve staggered three-year terms, with the members of only one class being
elected in any year.
A classified board of directors may increase the difficulty of removing
incumbent directors, providing the directors with enhanced ability to retain
their positions. A classified board of directors may also make it more difficult
for a third party to acquire control of Conseco by means of a proxy contest. In
addition, the classification may make it more difficult to replace a majority of
directors for business reasons unrelated to a change in control.
Our articles of incorporation provide that holders of our voting stock will
not be entitled to vote on some business transactions, defined to include, among
other things, some mergers, consolidations, sales, leases, transfers or other
dispositions of a substantial part of our assets, with related persons,
including persons
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beneficially owning more than 10% of our outstanding voting stock, nor may the
business combination transactions be effected, unless:
- the relevant business combination has been approved by two-thirds of the
continuing directors; or
- the aggregate amount of the cash and the fair value of any consideration
other than cash to be received by any holder of our common stock or
preferred stock in the business combination for each share of common
stock or preferred stock will be at least equal to the highest per share
price paid by the related person to acquire any shares of common stock or
preferred stock, as the case may be, beneficially owned by the related
person.
As discussed above, our preferred stock may be issued from time to time in
one or more series with the rights, preferences, limitations and restrictions
that may be determined by the board of directors. The issuance of preferred
stock could be used, under some circumstances, as a method of delaying or
preventing a change of control of Conseco and could have a detrimental effect on
the rights of holders of common stock, including loss of voting control.
The provisions of our articles of incorporation regarding the classified
board of directors and business combination transactions may be amended only
with the affirmative approval of holders of at least 80% of our outstanding
voting stock.
Our bylaws may be amended by majority vote of the board of directors.
PROVISIONS OF CORPORATE AND INSURANCE LAWS
In addition to our articles of incorporation and bylaws, some provisions of
Indiana law may delay, deter or prevent a merger, tender offer or other takeover
attempt of Conseco.
Under the Indiana Business Corporation Law, a director may, in considering
the best interests of a corporation, consider the effects of any action on
shareholders, employees, suppliers and customers of the corporation, on
communities in which offices or other facilities of the corporation are located,
and any other factors the director considers pertinent.
The Indiana Business Corporation Law provides that no business combination,
defined to include some mergers, sales of assets, sales of 5% or more of
outstanding stock, loans, recapitalizations or liquidations or dissolutions,
involving a corporation and an interested shareholder, defined to include any
holder of 10% or more of the corporation's voting stock, may be entered into
unless it has been approved by the board of directors of the corporation or:
- five years have expired since the acquisition of shares of the
corporation by the interested shareholder;
- all requirements of the corporation's articles of incorporation relating
to business combinations have been satisfied; and
- either (1) a majority of shareholders of the corporation, excluding the
interested shareholder, approve the business combination or (2) all
shareholders are paid fair value for their stock, as defined in the
statute.
However, this law does not restrict any offer to purchase all of a corporation's
shares.
The Indiana Business Corporation Law also provides that when a target
corporation, incorporated in Indiana and having its principal place of business,
principal office or substantial assets in Indiana, like Conseco, has a specified
threshold of ownership by Indiana residents, any acquisition which, together
with its previous holdings, gives the acquiror at least 20% of the target's
voting stock triggers a shareholder approval mechanism. If the acquiror files a
statutorily required disclosure statement, the target's management has 50 days
within which to hold a special meeting of shareholders at which all
disinterested shareholders of the target not affiliated with the acquiror or any
officer or inside director of the target consider and vote upon whether the
acquiror will have voting rights for the shares of the target held by it.
Without shareholder
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approval, the shares acquired by the acquiror have no voting rights. If the
acquiror fails to file the statutorily required disclosure statement, the target
can redeem the acquiror's shares at a price to be determined according to
procedures devised by the target. These provisions of the Indiana Business
Corporation Law apply to Indiana corporations, unless the corporation has
elected otherwise, which we have not done, in its articles of incorporation or
bylaws.
In addition, the insurance laws and regulations of the jurisdictions in
which we or our insurance subsidiaries do business may impede or delay a
business combination involving us. State insurance holding company laws and
regulations applicable to us generally provide that no person may acquire
control of a company, and thus indirect control of its insurance subsidiaries,
unless the person has provided required information to, and the acquisition is
approved or not disapproved by, the appropriate insurance regulatory
authorities. Generally, any person acquiring beneficial ownership of 10% or more
of the common stock would be presumed to have acquired control, unless the
appropriate insurance regulatory authorities upon advance application determine
otherwise.
DESCRIPTION OF DEPOSITARY SHARES
The following sections summarize the material terms of a deposit agreement
which we may, at our option, elect to enter into, and of depositary shares and
depositary receipts which would be described in the deposit agreement, and are
qualified by, and are subject to, the form of deposit agreement, if any, and
form of depositary receipts, if any, relating to each series of the preferred
stock, as well as the articles of incorporation or any required amendment to the
articles of incorporation describing the applicable series of preferred stock.
We may, at our option, elect to have shares of preferred stock be
represented by depositary shares. The shares of any series of the preferred
stock underlying the depositary shares will be deposited under a separate
deposit agreement to be entered into by us and a bank or trust company selected
by us as a preferred stock depositary. The prospectus supplement relating to a
series of depositary shares will set forth the name and address of the preferred
stock depositary. Subject to the terms of the deposit agreement, each owner of a
depositary share will be entitled, proportionately, to all the rights,
preferences and privileges of the preferred stock represented by the depositary
share, including dividend, voting, redemption, conversion, exchange and
liquidation rights.
The depositary shares will be evidenced by depositary receipts issued in
accordance with the deposit agreement, each of which will represent the
fractional interest in the number of shares of a particular series of the
preferred stock described in the applicable prospectus supplement.
DIVIDENDS AND OTHER DISTRIBUTIONS
The preferred stock depositary will distribute all cash dividends or other
cash distributions with respect to the series of preferred stock represented by
the depositary shares to the record holders of depositary receipts in
proportion, to the extent possible, to the number of depositary shares owned by
the holders. The depositary, however, will distribute only the amount that can
be distributed without attributing to any depositary share a fraction of one
cent, and any undistributed balance will be added to and treated as part of the
next sum received by the depositary for distribution to record holders of
depositary receipts then outstanding.
If a distribution of property other than cash on the preferred stock
occurs, the preferred stock depositary will distribute the property to the
record holders of depositary receipts in proportion, to the extent possible, to
the number of depositary shares owned by the holders, unless the preferred stock
depositary determines, after consultation with us, that it is not feasible to
make the distribution, in which case the preferred stock depositary may, with
our approval, adopt a method it deems equitable and practicable for the purpose
of effecting the distribution, including a public or private sale of the
property, and distribution of the net proceeds from the sale to the holders.
The amount distributed to record holders of depositary receipts in any of
the cases described in this section will be reduced by any amount that we or the
preferred stock depositary are required to withhold on account of taxes.
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CONVERSION AND EXCHANGE
If any series of preferred stock underlying the depositary shares is
subject to provisions relating to its conversion or exchange, as set forth in
the applicable prospectus supplement relating to that series, each record holder
of depositary receipts will have the right or obligation to convert or exchange
the depositary shares represented by the depositary receipts under their terms.
REDEMPTION OF DEPOSITARY SHARES
If any series of preferred stock underlying the depositary shares is
subject to redemption, the depositary shares will be redeemed from the proceeds
received by the preferred stock depositary resulting from the redemption, in
whole or in part, of the preferred stock held by the preferred stock depositary.
Whenever we redeem preferred stock from the preferred stock depositary, the
preferred stock depositary will redeem as of the same redemption date a
proportionate number of depositary shares representing the shares of preferred
stock that were redeemed. If less than all the depositary shares are to be
redeemed, the depositary shares to be redeemed will be selected by lot or on a
proportionate basis as we may determine.
After the date fixed for redemption, the depositary shares so called for
redemption will no longer be deemed to be outstanding and all rights of the
holders of the depositary shares will cease, except the right to receive the
redemption price upon redemption. Any funds that we deposit with the preferred
stock depositary relating to depositary shares which are not redeemed by the
holders of the depositary shares will be returned to us after a period of two
years from the date the funds are deposited by us.
VOTING
Upon receipt of notice of any meeting at which the holders of any shares of
preferred stock underlying the depositary shares are entitled to vote, the
preferred stock depositary will mail the information contained in the notice to
the record holders of the depositary receipts. Each record holder of the
depositary receipts on the record date, which will be the same date as the
record date for the preferred stock, will be entitled to instruct the preferred
stock depositary as to the exercise of the voting rights pertaining to the
number of shares of preferred stock underlying the holder's depositary shares.
The preferred stock depositary will endeavor, to the extent practicable, to vote
the number of shares of preferred stock underlying the depositary shares in
accordance with the holder's instructions, and we will take all reasonable
action that is deemed necessary by the preferred stock depositary to enable the
preferred stock depositary to do so. Unless the preferred stock depositary
receives specific written instructions from holders of depositary receipts, it
will abstain from voting any of the preferred stock.
RECORD DATE
Subject to the provisions of the deposit agreement, the preferred stock
depositary will fix a record date, which will be the same as the record date for
the preferred stock, for the determination of the holders of depositary receipts
that are entitled to receive a distribution, exercise voting rights or receive a
notice whenever:
- any cash dividend or other cash distribution becomes payable;
- any distribution other than cash is to be made;
- any rights, preferences or privileges will be offered relating to the
preferred stock;
- the preferred stock depositary receives notice of any meeting at which
holders of preferred stock are entitled to vote or of which holders of
preferred stock are entitled to notice; or
- the preferred stock depositary receives notice of the mandatory
conversion of, or any election on our part to call for redemption, any
preferred stock.
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WITHDRAWAL OF PREFERRED STOCK
Upon surrender of depositary receipts at the principal office of the
preferred stock depositary, upon payment of any unpaid amount due the preferred
stock depositary, and subject to the terms of the deposit agreement, the owner
of the depositary shares evidenced by the depositary receipts is entitled to
delivery of the number of whole shares of preferred stock and all money and
other property, if any, represented by the depositary shares. Partial shares of
preferred stock will not be issued. If the depositary receipts delivered by the
holder evidence a number of depositary shares in excess of the number of
depositary shares representing the number of whole shares of preferred stock to
be withdrawn, the preferred stock depositary will deliver to the holder at the
same time a new depositary receipt evidencing the excess number of depositary
shares. Holders of preferred stock that are withdrawn will not be entitled to
deposit the shares that have been withdrawn under the deposit agreement or to
receive depositary receipts.
AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT
The deposit agreement will provide that the form of depositary receipt and
any provision of the deposit agreement may at any time be amended by agreement
between us and the preferred stock depositary. However, any amendment which
imposes or increases any fees, taxes or other charges payable by the holders of
depositary receipts, other than taxes and other governmental charges, fees and
other expenses payable by the holders as stated under "Charges of Preferred
Stock Depositary", or which otherwise prejudices any substantial existing right
of holders of depositary receipts, will not take effect as to outstanding
depositary receipts until the expiration of 90 days after notice of the
amendment has been mailed to the record holders of outstanding depositary
receipts.
Whenever directed by us to do so, the preferred stock depositary will
terminate the deposit agreement by mailing notice of the termination to the
record holders of all depositary receipts then outstanding at least 30 days
before the date fixed in the notice for the termination. The preferred stock
depositary may likewise terminate the deposit agreement if at any time 45 days
have expired after the preferred stock depositary has delivered to us a written
notice of its election to resign and a successor depositary has not been
appointed and accepted its appointment. If any depositary receipts remain
outstanding after the date of termination, the preferred stock depositary will
discontinue the transfer of depositary receipts, will suspend the distribution
of dividends to the holders of depositary receipts, and will not give any
further notices, other than notice of the termination, or perform any further
acts under the deposit agreement except as provided below and except that the
preferred stock depositary will continue to collect dividends and any other
distributions on the preferred stock and deliver the preferred stock together
with the dividends and distributions and the net proceeds of any sales of
rights, preferences, privileges or other property, without liability for any
interest, in exchange for surrendered depositary receipts. At any time after the
expiration of two years from the date of termination, the preferred stock
depositary may sell the preferred stock then held by it at public or private
sales, at any place or places and upon terms as it deems proper, and may hold
the net proceeds of any sale, together with any money and other property then
held by it, without liability for any interest, for the benefit, on a
proportionate basis, of the holders of depositary receipts which have not been
surrendered.
CHARGES OF PREFERRED STOCK DEPOSITARY
We will pay all charges of the preferred stock depositary including charges
in connection with:
- the initial deposit of the preferred stock,
- the initial issuance of the depositary receipts,
- the distribution of information to the holders of depositary receipts
regarding matters on which holders of preferred stock are entitled to
vote,
- withdrawals of the preferred stock by the holders of depositary receipts,
or
- redemption or conversion of the preferred stock,
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except for taxes, including transfer taxes, if any, and other governmental
charges and the other charges that are expressly provided in the deposit
agreement to be at the expense of holders of depositary receipts or persons
depositing preferred stock.
DUTIES OF PREFERRED STOCK DEPOSITARY
The preferred stock depositary will make available for inspection by
holders of depositary receipts, at its corporate office and its office in New
York City, all reports and communications from us which are delivered to the
preferred stock depositary as the holder of preferred stock. Neither the
preferred stock depositary nor we will be liable if it is prevented or delayed
by law or any circumstance beyond its control in performing its obligations
under the deposit agreement. The obligations of the preferred stock depositary
under the deposit agreement are limited to performing its duties without
negligence or bad faith. Our obligations under the deposit agreement are limited
to performing our duties in good faith. Neither we nor the preferred stock
depositary is obligated to prosecute or defend any legal proceeding with respect
to any depositary shares or preferred stock unless satisfactory indemnity is
furnished. We and the preferred stock depositary are entitled to rely upon
advice of or information from counsel, accountants or other persons believed to
be competent and on documents believed to be genuine.
The preferred stock depositary may resign at any time or be removed by us,
effective upon the acceptance by its successor of its appointment; provided,
that if a successor preferred stock depositary has not been appointed or
accepted the appointment within 45 days after the preferred stock depositary has
delivered a notice of election to resign to us, the preferred stock depositary
may terminate the deposit agreement.
DESCRIPTION OF WARRANTS
We may issue warrants to purchase debt securities, preferred stock, common
stock or any combination of any of them, and these warrants may be issued
independently or together with any debt securities, preferred stock or common
stock and may be attached to or separate from these securities. Each series of
warrants will be issued under a separate warrant agreement to be entered into
between us and a warrant agent. The warrant agent will act solely as our agent
in connection with the warrants of each series and will not assume any
obligation or relationship of agency for or with holders or beneficial owners of
warrants. Further terms of the warrants and the applicable warrant agreement
will be included in the applicable prospectus supplement.
The applicable prospectus supplement will describe the terms of any
warrants for which this prospectus is being delivered, including the following:
- the title of the warrants;
- the aggregate number of warrants;
- the price or prices at which the warrants will be issued;
- the currency or currencies, including composite currencies, in which the
price of the warrants may be payable;
- the designation and terms of the securities, other than preferred
securities and common securities, purchasable upon exercise of the
warrants;
- the price at which and the currency or currencies, including composite
currencies, in which the securities, other than preferred securities and
common securities, purchasable upon exercise of the warrants may be
purchased;
- the date on which the right to exercise the warrants will commence and
the date on which this right will expire;
- whether the warrants will be issued in registered form or bearer form;
- if applicable, the minimum or maximum amount of the warrants that may be
exercised at any one time;
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- if applicable, the designation and terms of the securities, other than
preferred securities and common securities, with which the warrants are
issued and the number of warrants issued with each security;
- if applicable, the date on and after which the warrants and the related
securities, other than preferred securities and common securities, will
be separately transferable;
- information about book-entry procedures, if any;
- if applicable, a discussion of applicable United States federal income
tax considerations; and
- any other terms of the warrants, including terms, procedures and
limitations relating to the exchange and exercise of the warrants.
DESCRIPTION OF PREFERRED SECURITIES OF THE CONSECO TRUSTS
Each Conseco Trust may issue, from time to time, only one series of
preferred securities having terms described in the prospectus supplement. The
declaration of trust of each Conseco Trust authorizes the regular trustees of
the Conseco Trust to issue on behalf of the Conseco Trust one series of
preferred securities. Each declaration of trust will be qualified as an
indenture under the Trust Indenture Act. The institutional trustee, an
independent trustee, will act as indenture trustee for the preferred securities
for purposes of compliance with the provisions of the Trust Indenture Act. The
preferred securities will have the terms, including distributions, redemption,
voting, liquidation rights, maturity date or dates and the other preferred,
deferred or other special rights or restrictions as are established by the
regular trustees in accordance with the applicable declaration of trust or as
are set forth in the declaration of trust or made part of the declaration of
trust by the Trust Indenture Act. The prospectus supplement relating to the
preferred securities of a Conseco Trust will set forth the specific terms of the
preferred securities, including, to the extent applicable:
- the distinctive designation of the preferred securities;
- the number of preferred securities issued by the Conseco Trust;
- the annual distribution rate, or method of determining the rate, for
preferred securities issued by the Conseco Trust and the date or dates
upon which distributions will be payable; provided, however, that
distributions on the preferred securities will, subject to any deferral
provisions and any provisions for payment of defaulted distributions, be
payable on a quarterly basis to holders of the preferred securities as of
a record date in each quarter during which the preferred securities are
outstanding and any provisions relating to the resetting or adjustment of
the distribution rate;
- any right of the Conseco Trust to defer quarterly distributions on the
preferred securities as a result of an interest deferral right exercised
by us on the subordinated debt securities held by the Conseco Trust;
- whether distributions on preferred securities will be cumulative, and, in
the case of preferred securities having cumulative distribution rights,
the date or dates or method of determining the date or dates from which
distributions on preferred securities will be cumulative;
- the amount or amounts which will be paid out of the assets of the Conseco
Trust to the holders of preferred securities upon voluntary or
involuntary dissolution, winding-up or termination of the Conseco Trust;
- the obligation or option, if any, of the Conseco Trust to purchase or
redeem preferred securities and the price or prices at which, the period
or periods within which and the terms and conditions upon which preferred
securities will be purchased or redeemed, in whole or in part, under this
obligation or option with the redemption price or formula for determining
the redemption price to be specified in the applicable prospectus
supplement;
- the voting rights, if any, of preferred securities in addition to those
required by law, including the number of votes per preferred security and
any requirement for the approval by the holders of preferred securities
as a condition to specified action or amendments to the declaration of
trust;
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- the terms and conditions, if any, upon which subordinated debt securities
held by the Conseco Trust may be distributed to holders of preferred
securities; and
- any other relevant terms, rights, preferences, privileges, limitations or
restrictions of preferred securities consistent with the declaration of
trust or applicable law.
All preferred securities offered by the prospectus will be guaranteed by us to
the extent set forth below under "Description of Guarantees." The guarantee
issued by us to each Conseco Trust, when taken together with our back-up
undertakings, consisting of our obligations under each declaration of trust,
including the obligation to pay expenses of each Conseco Trust, the applicable
indenture and any applicable supplemental indentures and the subordinated debt
securities issued to any Conseco Trust will provide a full and unconditional
guarantee by us of amounts due on the preferred securities issued by each
Conseco Trust. The payment terms of the preferred securities will be the same as
the subordinated debt securities issued to the applicable Conseco Trust by us.
Each declaration of trust authorizes the regular trustees to issue on
behalf of the applicable trust one series of common securities having terms,
including distributions, redemption, voting and liquidation rights, and
restrictions that are established by the regular trustees in accordance with the
declaration of trust or that are otherwise set forth in the declaration of
trust. The terms of the common securities issued by each Conseco Trust will be
substantially identical to the terms of the preferred securities issued by the
Conseco Trust, and the common securities will rank equally, and payments will be
made on the common securities on a proportionate basis, with the preferred
securities except that, if an event of default under the declaration of trust
has occurred and is continuing, the rights of the holders of the common
securities to payment of distributions and payments upon liquidation, redemption
and otherwise will be subordinated to the rights of the holders of the preferred
securities. The common securities will also carry the right to vote and to
appoint, remove or replace any of the trustees of the Conseco Trust. We will own
directly or indirectly all of the common securities of each Conseco Trust.
The financial statements of any Conseco Trust that issues preferred
securities will be reflected in our consolidated financial statements with the
preferred securities shown as company-obligated mandatorily-redeemable preferred
securities of a subsidiary trust under minority interest in consolidated
subsidiaries. We will include in a footnote to our audited financial statements,
statements that the applicable Conseco Trust is wholly-owned by us and that the
sole asset of the Conseco Trust is the subordinated debt securities, indicating
the principal amount, interest rate and maturity date of the subordinated debt
securities.
DESCRIPTION OF GUARANTEES
Set forth below is a summary of information concerning the guarantees that
will be executed and delivered by us for the benefit of the holders, from time
to time, of preferred securities. Each guarantee will be qualified as an
indenture under the Trust Indenture Act. Unless otherwise specified in the
applicable prospectus supplement, Harris Trust and Savings Bank will act as the
preferred securities guarantee trustee. The terms of each guarantee will be set
forth in the guarantee and will include the terms made part of the guarantee by
the Trust Indenture Act. The following is a summary of the material terms of the
guarantees. You should refer to the provisions of the form of guarantee, a copy
of which has been filed as an exhibit to the registration statement of which
this prospectus is a part, and the Trust Indenture Act. Each guarantee will be
held by the preferred securities guarantee trustee for the benefit of the
holders of the preferred securities of the applicable Conseco Trust.
Unless otherwise specified in the applicable prospectus supplement, we will
agree, to the extent set forth in each guarantee, to pay in full to the holders
of the preferred securities, the payments and distributions to be made with
respect to the preferred securities, except to the extent paid by the applicable
Conseco Trust, as and when due, regardless of any defense, right of set-off or
counterclaim which the Conseco Trust may have or
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assert. The following payments or distributions with respect to the preferred
securities, to the extent not paid by the Conseco Trust, will be subject to the
guarantee, without duplication:
- any accrued and unpaid distributions that are required to be paid on the
preferred securities, to the extent the Conseco Trust has funds available
to make the payment;
- the redemption price, to the extent the Conseco Trust has funds available
to make the payment, for any preferred securities called for redemption
by the Conseco Trust; and
- upon a voluntary or involuntary dissolution, winding-up or termination of
the Conseco Trust, other than in connection with the distribution of
subordinated debt securities to the holders of preferred securities or
the redemption of all of the preferred securities upon maturity or
redemption of the subordinated debt securities, the lesser of (1) the sum
of the liquidation amount and all accrued and unpaid distributions on the
preferred securities to the date of payment, to the extent the Conseco
Trust has funds available to make the payment or (2) the amount of assets
of the Conseco Trust remaining for distribution to holders of the
preferred securities in liquidation of the Conseco Trust.
Our obligation to make a guarantee payment may be satisfied by our direct
payment of the required amounts to the holders of preferred securities or by
causing the applicable Conseco Trust to pay the amounts to the holders.
Each guarantee will not apply to any payment of distributions except to the
extent the applicable Conseco Trust has funds available to make the payment. If
we do not make interest or principal payments on the subordinated debt
securities purchased by the Conseco Trust, the Conseco Trust will not pay
distributions on the preferred securities issued by the Conseco Trust and will
not have funds available to make the payment.
We have also agreed to guarantee the obligations of each Conseco Trust with
respect to the common securities issued by the Conseco Trust to the same extent
as the guarantee with respect to the preferred securities, except that, if an
event of default under the subordinated indenture has occurred and is
continuing, holders of preferred securities guaranteed by us will have priority
over holders of the common securities guaranteed by us with respect to
distributions and payments on liquidation, redemption or otherwise.
COVENANTS OF CONSECO
Unless otherwise specified in the applicable prospectus supplement, in each
guarantee of the payment obligations of a Conseco Trust with respect to
preferred securities, we will covenant that, so long as any preferred securities
issued by the Conseco Trust remain outstanding, if there has occurred any event
of default under the guarantee or under the declaration of trust of the Conseco
Trust, then we will not:
- declare or pay any dividend on, make any other distributions on, or
redeem, purchase, acquire or make a liquidation payment regarding, any of
our capital stock, except:
(1) purchases or acquisitions of our capital stock in connection with
the satisfaction of our obligations under any employee or agent benefit
plans or the satisfaction of our obligations under any contract or
security outstanding on the date of the event requiring us to purchase our
capital stock;
(2) as a result of a reclassification of our capital stock or the
exchange or conversion of one class or series of our capital stock for
another class or series of our capital stock;
(3) the purchase of fractional interests in shares of our capital stock
in connection with the conversion or exchange provisions of our capital
stock or the security being converted or exchanged;
(4) dividends or distributions in our capital stock, or rights to
acquire our capital stock, or repurchases or redemptions of capital stock
solely from the issuance or exchange of capital stock; or
(5) redemptions or repurchases of any rights outstanding under a
shareholder rights plan;
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- make any payment of interest, principal or premium, if any, on or repay,
repurchase or redeem any debt securities issued by us which rank junior
to the subordinated debt securities issued to the applicable Conseco
Trust; and
- make any guarantee payments regarding the foregoing, other than under a
guarantee of the payment obligations of a Conseco Trust with respect to
preferred securities.
MODIFICATION OF THE GUARANTEES; ASSIGNMENT
Except for any changes that do not adversely affect the rights of holders
of preferred securities, in which case no consent of the holders will be
required, each guarantee of the payment obligations of a Conseco Trust with
respect to preferred securities may be amended only with the prior approval of
the holders of at least a majority in liquidation amount of the outstanding
preferred securities of the Conseco Trust. The manner of obtaining any approval
of holders of the preferred securities will be set forth in accompanying
prospectus supplement. All guarantees and agreements contained in a guarantee of
the obligations of a Conseco Trust with respect to preferred securities will
bind the successors, assigns, receivers, trustees and representatives of Conseco
and will inure to the benefit of the holders of the preferred securities of the
applicable Conseco Trust then outstanding.
EVENTS OF DEFAULT
An event of default under a preferred securities guarantee will occur upon
our failure to perform any of our payment or other obligations under the
guarantee. The holders of a majority in liquidation amount of the preferred
securities to which the preferred securities guarantee relates have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the preferred securities guarantee trustee with respect to the
guarantee or to direct the exercise of any trust or power conferred upon the
preferred securities guarantee trustee under the guarantee.
If the preferred securities guarantee trustee fails to enforce the
guarantee, any record holder of preferred securities to which the guarantee
relates may institute a legal proceeding directly against us to enforce the
preferred securities guarantee trustee's rights under the guarantee without
first instituting a legal proceeding against the applicable Conseco Trust, the
preferred securities guarantee trustee or any other person or entity. If we have
failed to make a guarantee payment under a guarantee, a record holder of
preferred securities to which the guarantee relates may directly institute a
proceeding against us for enforcement of the guarantee for the payment to the
record holder of the preferred securities to which the guarantee relates of the
principal of or interest on the applicable subordinated debt securities on or
after the respective due dates specified in the subordinated debt securities,
and the amount of the payment will be based on the holder's proportionate share
of the amount due and owing on all of the preferred securities to which the
guarantee relates. We have waived any right or remedy to require that any action
be brought first against the applicable Conseco Trust or any other person or
entity before proceeding directly against us. The record holder in the case of
the issuance of one or more global preferred securities certificates will be The
Depository Trust Company, or its nominee, acting at the direction of the
beneficial owners of the preferred securities.
We will be required to provide annually to the preferred securities
guarantee trustee a statement as to the performance of our obligations under
each outstanding preferred securities guarantee and as to any default in our
performance.
INFORMATION CONCERNING THE PREFERRED SECURITIES GUARANTEE TRUSTEE
The preferred securities guarantee trustee, before the occurrence of a
default under a preferred securities guarantee, undertakes to perform only the
duties that are specifically set forth in the guarantee and, after a default
under a guarantee, will exercise the same degree of care as a prudent individual
would exercise in the conduct of his or her own affairs. Subject to this
provision, the preferred securities guarantee trustee is under no obligation to
exercise any of the powers vested in it by a preferred securities guarantee at
the request of any holder of preferred securities to which the guarantee relates
unless it is offered reasonable indemnity against
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the costs, expenses and liabilities that might be incurred by the preferred
securities guarantee trustee in exercising any of its powers.
TERMINATION
Each preferred securities guarantee will terminate as to the preferred
securities issued by the applicable Conseco Trust upon full payment of the
redemption price of all preferred securities of the Conseco Trust, upon
distribution of the subordinated debt securities held by the Conseco Trust to
the holders of all of the preferred securities of the Conseco Trust or upon full
payment of the amounts payable in accordance with the declaration of trust of
the Conseco Trust upon liquidation of the Conseco Trust. Each preferred
securities guarantee will continue to be effective or will be reinstated, as the
case may be, if at any time any holder of preferred securities issued by the
applicable Conseco Trust must restore payment of any sums paid under the
preferred securities or the preferred securities guarantee.
STATUS OF THE GUARANTEES
The preferred stock guarantees will constitute our unsecured obligations
and will rank:
- subordinate and junior in right of payment to all of our other
liabilities, including the subordinated debt securities, except those
liabilities made equivalent or subordinate by their terms;
- equivalently with the most senior preferred or preference stock now or
hereafter issued by us and with any guarantee now or hereafter entered
into by us in respect of any preferred or preference stock of any of our
affiliates; and
- senior to our common stock.
The terms of the preferred securities provide that each holder of preferred
securities by acceptance of the preferred securities agrees to the subordination
provisions and other terms of our guarantee relating to the preferred
securities.
Each preferred securities guarantee will constitute a guarantee of payment
and not of collection. This means that the guaranteed party may institute a
legal proceeding directly against us to enforce its rights under the guarantee
without instituting a legal proceeding against any other person or entity.
GOVERNING LAW
The preferred securities guarantees will be governed by and construed in
accordance with the law of the State of New York.
DESCRIPTION OF STOCK PURCHASE CONTRACTS AND STOCK PURCHASE UNITS
We may issue stock purchase contracts, including contracts obligating
holders to purchase from us, and us to sell to the holders, shares of common
stock, preferred stock or depositary shares at a future date or dates or, in any
case, a number or dollar amount to be determined by a specified formula or some
other means. The consideration for the common stock, preferred stock or
depositary shares may be fixed at the time the stock purchase contracts are
issued or may be determined by reference to a specific formula set forth in the
stock purchase contracts. The stock purchase contracts may be issued separately
or as a part of stock purchase units consisting of a stock purchase contract and
our debt securities, preferred securities issued by a Conseco Trust or debt
obligations of third parties, including U.S. Treasury securities, securing the
holders' obligations to purchase the common stock, preferred stock or depositary
shares under the stock purchase contracts. We may be required under the stock
purchase contracts to make periodic payments to the holders of the stock
purchase units or by the stock purchase units to make periodic payments to the
holders of the stock purchase units, and these payments may be unsecured or
prefunded on some basis. The stock purchase contracts may require holders to
secure their obligations under those contracts in a specified manner. The
applicable prospectus supplement will describe the terms of any stock purchase
contracts or stock purchase units.
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PLAN OF DISTRIBUTION
We and/or any Conseco Trust may sell any of the securities being offered by
this prospectus in any one or more of the following ways from time to time:
- through agents;
- to or through underwriters;
- through dealers; or
- directly to purchasers.
The prospectus supplement for the securities will set forth the terms of
the offering of the securities, including the name or names of any underwriters,
dealers or agents; the purchase price of the securities and the proceeds to us
and/or a Conseco Trust from the sale; any underwriting discounts and commissions
or agency fees and other items constituting underwriters' or agents'
compensation; any initial public offering price and any discounts or concessions
allowed or reallowed or paid to dealers and any securities exchange on which the
securities may be listed. Any initial public offering price, discounts or
concessions allowed or reallowed or paid to dealers may be changed from time to
time.
The distribution of the securities may be effected from time to time in one
or more transactions at a fixed price or prices, which may be changed, at market
prices prevailing at the time of sale, at prices related to the prevailing
market prices or at negotiated prices.
Offers to purchase securities may be solicited by agents designated by us
from time to time. Any agent involved in the offer or sale of the securities in
respect of which this prospectus is delivered will be named, and any commissions
payable by us and/or the applicable Conseco Trust to the agent will be set
forth, in the applicable prospectus supplement. Unless otherwise indicated in
the prospectus supplement, any agent will be acting on a reasonable best efforts
basis for the period of its appointment. Any agent may be deemed to be an
underwriter, as that term is defined in the Securities Act of 1933, of the
securities so offered and sold.
If securities are sold by means of an underwritten offering, we and/or the
applicable Conseco Trust will execute an underwriting agreement with an
underwriter or underwriters at the time an agreement for the sale is reached,
and the names of the specific managing underwriter or underwriters, as well as
any other underwriters, and the terms of the transaction, including commissions,
discounts and any other compensation of the underwriters and dealers, if any,
will be set forth in the prospectus supplement which will be used by the
underwriters to make resales of the securities in respect of which this
prospectus is delivered to the public. We and/or the applicable Conseco Trust
may also agree with an underwriter or underwriters to enter into an underwriting
agreement or conduct an underwritten offering, in each case, at some future
date. If underwriters are utilized in the sale of the securities with respect to
which this prospectus is delivered, the securities will be acquired by the
underwriters for their own account and may be resold from time to time in one or
more transactions, including negotiated transactions, at fixed public offering
prices or at varying prices determined by the underwriter at the time of sale.
Securities may be offered to the public either through underwriting syndicates
represented by managing underwriters or directly by the managing underwriters.
If any underwriter or underwriters are utilized in the sale of the securities,
unless otherwise indicated in the prospectus supplement, the underwriting
agreement will provide that the obligations of the underwriters are subject to
specific conditions and that the underwriters for a sale of securities will be
obligated to purchase all of the securities of a series if any are purchased.
If a dealer is utilized in the sales of the securities with respect to
which this prospectus is delivered, we and/or the applicable Conseco Trust will
sell the securities to the dealer as principal. The dealer may then resell the
securities to the public at varying prices to be determined by the dealer at the
time of resale. Any dealer may be deemed to be an underwriter, as the term is
defined in the Securities Act of 1933, of the securities so offered and sold.
The name of the dealer and the terms of the transaction will be set forth in the
prospectus supplement relating to the sale of securities.
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Offers to purchase securities may be solicited directly by us and/or the
applicable Conseco Trust and the sale of securities may be made by us and/or the
applicable Conseco Trust directly to institutional investors or others, who may
be deemed to be underwriters within the meaning of the Securities Act of 1933
for any resale of securities. The terms of any sales will be described in the
prospectus supplement relating to the sale of securities.
Agents, underwriters and dealers may be entitled under relevant agreements
to indemnification or contribution by us and/or the applicable Conseco Trust
against specified liabilities, including liabilities under the Securities Act of
1933.
Agents, underwriters and dealers may be customers of, engage in
transactions with, or perform services for, us and our subsidiaries in the
ordinary course of business.
Securities may also be offered and sold, if so indicated in the applicable
prospectus supplement, in connection with a remarketing upon their purchase, in
accordance with a redemption or repayment under their terms, the occurrence of
specified events, or otherwise, by one or more remarketing firms, acting as
principals for their own accounts or as agents for us and/or the applicable
Conseco Trust. Any remarketing firm will be identified and the terms of its
agreement, if any, with its compensation will be described in the applicable
prospectus supplement. Remarketing firms may be deemed to be underwriters, as
the term is defined in the Securities Act of 1933, in connection with the
securities remarketed by the remarketing firms. Remarketing firms may be
entitled under agreements which may be entered into with us and/or the
applicable Conseco Trust to indemnification or contribution by us and/or the
applicable Conseco Trust against specified civil liabilities, including
liabilities under the Securities Act of 1933, and may be customers of, engage in
transactions with or perform services for us and our subsidiaries in the
ordinary course of business.
If so indicated in the applicable prospectus supplement, we and/or the
applicable Conseco Trust may authorize agents, underwriters or dealers to
solicit offers by specified types of institutions to purchase securities from us
and/or the applicable Conseco Trust at the public offering prices set forth in
the applicable prospectus supplement under delayed delivery contracts providing
for payment and delivery on a specified date or dates in the future. A
commission indicated in the applicable prospectus supplement will be paid to
underwriters, dealers and agents soliciting purchases of securities under the
delayed delivery contracts accepted by us and/or the applicable Conseco Trust.
No dealer, salesman or other individual has been authorized to give any
information or to make any representations not contained in this prospectus, any
accompanying prospectus supplement or the documents incorporated or deemed
incorporated into this prospectus by reference. If given or made, the
information or representations must not be relied upon as having been authorized
by us or any underwriter, dealer or agent. This prospectus does not constitute
an offer to sell, or a solicitation of an offer to buy, any securities other
than the registered securities to which it relates, or an offer to sell or a
solicitation of an offer to buy those securities to which it relates, in any
jurisdiction where, or to any person to whom, it is unlawful to make the offer
or solicitation. Neither the delivery of this prospectus or any prospectus
supplement nor any sale made under this prospectus should, under any
circumstances, create any implication that there has not been any change in the
facts set forth in this prospectus or in our affairs since the date of this
prospectus.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
All statements, trend analyses and other information contained in this
prospectus, any prospectus supplement or any document incorporated into this
prospectus by reference relative to markets for the our products and trends in
our operations or financial results, as well as other statements including words
like "anticipate," "believe," "plan," "estimate," "expect," "intend," "should,"
"could," "goal," "target," "on track," "comfortable with," and other similar
expressions, constitute forward-looking statements under the Private Securities
Litigation Reform Act of 1995. These forward-looking statements are subject to
known and unknown risks, uncertainties and other factors which may cause actual
results to be materially different from those contemplated by the
forward-looking statements. These factors include, among other things:
- general economic conditions and other factors, including prevailing
interest rate levels, stock and credit market performance and health care
inflation, which may affect, among other things, our ability to sell our
products, make loans and access capital resources and the costs
associated therewith, the market value of our investments, the lapse rate
and profitability of our policies and the level of defaults and
prepayments of loans we make;
- our ability to achieve anticipated synergies and levels of operational
efficiencies;
- customer response to new products, distribution channels and marketing
initiatives;
- mortality, morbidity, usage of health care services and other factors
which may affect the profitability of our insurance products;
- changes in the federal income tax laws and regulations which may affect
the relative tax advantages of some of our products;
- increasing competition in the sale of insurance and annuities and in the
finance business;
- regulatory changes or actions, including those relating to regulation of
financial services affecting, among other things, bank sales and
underwriting of insurance products, regulation of the sale, underwriting
and pricing of insurance products, and health care regulation affecting
our health insurance products;
- the availability and terms of future acquisitions;
- our ability and the ability of our vendors and other external parties to
achieve year 2000 readiness for significant systems and operations on a
timely basis; and
- the risk factors or uncertainties listed from time to time in any
prospectus supplement or any document incorporated into this prospectus
by reference.
LEGAL MATTERS
Unless otherwise indicated in the applicable prospectus supplement, the
legal validity of securities, other than the preferred securities, will be
passed upon for us by John J. Sabl, our Executive Vice President and General
Counsel. Mr. Sabl is a full-time employee and owns shares and holds options to
purchase shares of our common stock. Matters of Delaware law relating to the
validity of the preferred securities will be passed upon for the Conseco Trusts
by Richards, Layton & Finger, P.A., Wilmington, Delaware, special Delaware
counsel to the Conseco Trusts.
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EXPERTS
The consolidated financial statements of Conseco at December 31, 1998 and
1997, and for each of the three years in the period 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 the financial
statements relate to Green Tree Financial Corporation, is based on the report of
KPMG LLP, independent auditors. The financial statements referred to above are
incorporated herein by reference in reliance upon these reports given upon the
authority of the firms as experts in accounting and auditing.
32
