SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
---------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): August 25, 1996
Capitol American Financial Corporation
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(Exact Name of Registrant as Specified in Charter)
Ohio 1-11612 34-1052643
- ---------------------------- --------------- --------------------
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
1001 Lakeside Avenue Cleveland, Ohio 44114
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (216) 696-6400
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Item 5. Other Events.
On August 25, 1996 Capitol American Financial Corporation
("Capitol American" or the "Corporation") signed a definitive Agreement and Plan
of Merger providing for the acquisition of the Corporation by Conseco, Inc. As a
result of the merger the Corporation will become a wholly owned subsidiary of
Conseco. Pursuant to the agreement, on the terms and subject to the conditions
thereof, each outstanding share of Capitol American stock will be entitled to
receive $30.00 in cash and a fraction of a share of common stock of Conseco with
a value of $6.50. For purposes of determining the exchange ratio, the value of
the Conseco common stock will be equal to the average closing price of the stock
on the New York Stock Exchange during the 20 consecutive trading days ending two
days prior to the closing of the merger. The cash consideration will increase by
$0.25 per share if the closing does not occur by December 10, 1996 and by an
additional $0.25 per share per month thereafter until the closing occurs. The
total consideration for the transaction is expected to be approximately $680
million.
The Agreement and Plan of Merger provides that the closing of
the merger is subject to approval of Capitol American's shareholders and the
satisfaction of certain conditions, including without limitation, the receipt of
any necessary governmental approvals.
In addition, certain shareholders who collectively control
approximately 44% of the Corporation's outstanding shares have agreed to vote in
favor of the merger.
The foregoing description is qualified in its entirety by
reference to the Agreement and Plan of Merger dated as of August 25, 1996, the
Shareholders Agreement dated as of August 25, 1996 and the Press Release dated
August 26, 1996, which are attached hereto as Exhibits 2.1, 99.1 and 99.2,
respectively, and incorporated herein by this reference.
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements -- None.
(b) Pro Forma Financial Information -- None.
(c) Exhibits
2.1 Agreement and Plan of Merger dated as of
August 25, 1996, by and among Conseco,
Inc., CAF Acquisition Company and Capitol
American Financial Corporation.
99.1 Shareholders Agreement dated as of August 25, 1996 by and
among Conseco, Inc. and Barry J. Hershey and Connie
Hershey.
99.2 Press Release issued by Capitol American Financial
Corporation on August 26, 1996.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
CAPITOL AMERICAN FINANCIAL CORPORATION
By: /s/ David H. Gunning
-----------------------------------------
Name: David H. Gunning
Title: Chairman of the Board, President
and Chief Executive Officer
Date: August 26, 1996
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Exhibit Index
Exhibit No. Description of Exhibits
- ----------- ----------------------------------------
2.1 Agreement and Plan of Merger dated
as of August 25, 1996, by and
among Conseco, Inc., CAF Acquisition
Company and Capitol American
Financial Corporation.
99.1 Shareholders Agreement dated as of
August 25, 1996 by and among Conseco,
Inc. and Barry J. Hershey and Connie
Hershey.
99.2 Press Release issued by Capitol American
Financial Corporation on August 26, 1996.
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Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
By and Among
CONSECO, INC.
CAF ACQUISITION COMPANY
and
CAPITOL AMERICAN FINANCIAL CORPORATION
Dated as of August 25, 1996
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TABLE OF CONTENTS
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ARTICLE I THE MERGER......................................................................................... 1
1.1 The Merger.................................................................................. 1
1.2 Closing..................................................................................... 1
1.3 Effective Time.............................................................................. 1
1.4 Articles of Incorporation................................................................... 2
1.5 Code of Regulations......................................................................... 2
1.6 Directors................................................................................... 2
1.7 Officers.................................................................................... 2
1.8 Conversion of CAF Acquisition Shares........................................................ 2
1.9 Conversion of Shares........................................................................ 2
1.10 Exchange of Certificates.................................................................... 4
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY..................................................... 6
2.1 Organization, Standing and Corporate Power.................................................. 6
2.2 Capital Structure........................................................................... 7
2.3 Authority; Noncontravention................................................................. 7
2.4 SEC Documents............................................................................... 8
2.5 Absence of Certain Changes or Events........................................................ 9
2.6 Absence of Changes in Benefit Plans......................................................... 9
2.7 Benefit Plans............................................................................... 9
2.8 Taxes....................................................................................... 10
2.9 No Excess Parachute Payments; Section 162(m) of the Code.................................... 11
2.10 Voting Requirements......................................................................... 11
2.11 Compliance with Applicable Laws............................................................. 11
2.12 State Takeover Laws......................................................................... 13
2.13 Opinion of Financial Advisor................................................................ 13
2.14 Brokers..................................................................................... 13
ARTICLE III REPRESENTATIONS AND WARRANTIES OF CONSECO AND CAF
ACQUISITION.............................................................................. 13
3.1 Organization, Standing and Corporate Power.................................................. 13
3.2 Conseco Capital Structure................................................................... 13
3.3 Authority; Noncontravention................................................................. 14
3.4 SEC Documents............................................................................... 15
3.5 Absence of Certain Changes or Events........................................................ 15
3.6 Compliance with Applicable Laws............................................................. 16
3.7 No Prior Activities......................................................................... 16
3.8 Brokers..................................................................................... 16
3.9 Financing................................................................................... 17
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TABLE OF CONTENTS
(Continued)
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ARTICLE IV ADDITIONAL AGREEMENTS............................................................................. 17
4.1 Preparation of Form S-4 and the Proxy Statement/Prospectus;
Information Supplied........................................................................ 17
4.2 Meeting of Shareholders..................................................................... 18
4.3 Letter of the Company's Accountants......................................................... 18
4.4 Letter of Conseco's Accountants............................................................. 18
4.5 Access to Information; Confidentiality...................................................... 18
4.6 Best Efforts................................................................................ 19
4.7 Public Announcements........................................................................ 19
4.8 Acquisition Proposals....................................................................... 19
4.9 Fiduciary Duties............................................................................ 20
4.10 Consents, Approvals and Filings............................................................. 20
4.11 Employee Matters............................................................................ 20
4.12 Affiliates and Certain Shareholders......................................................... 21
4.13 NYSE Listing................................................................................ 22
4.14 Shareholder Litigation...................................................................... 22
4.15 Indemnification............................................................................. 22
4.16 Capitol Insurance Company of Ohio........................................................... 22
4.17 Certain Fees................................................................................ 22
ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS PRIOR TO
MERGER..................................................................................... 23
5.1 Conduct of Business by the Company.......................................................... 23
5.2 Conduct of Business by Conseco.............................................................. 25
5.3 Stock Options and Restricted Shares......................................................... 26
5.4 Other Actions............................................................................... 27
5.5 Conduct of Business of CAF Acquisition...................................................... 27
5.6 Investment Advisory Agreements.............................................................. 27
5.7 Certain Company Actions..................................................................... 27
ARTICLE VI CONDITIONS PRECEDENT.............................................................................. 28
6.1 Conditions to Each Party's Obligation To Effect the Merger.................................. 28
6.2 Conditions to Obligations of Conseco and CAF Acquisition.................................... 29
6.3 Conditions to Obligation of the Company..................................................... 29
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER................................................................. 30
7.1 Termination................................................................................. 30
7.2 Effect of Termination....................................................................... 31
7.3 Amendment................................................................................... 31
7.4 Extension; Waiver........................................................................... 31
7.5 Procedure for Termination, Amendment, Extension or Waiver................................... 31
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ARTICLE VIII SURVIVAL OF PROVISIONS.......................................................................... 31
8.1 Survival.................................................................................... 31
ARTICLE IX NOTICES........................................................................................... 32
9.1 Notices..................................................................................... 32
ARTICLE X MISCELLANEOUS...................................................................................... 33
10.1 Entire Agreement............................................................................ 33
10.2 Expenses.................................................................................... 33
10.3 Counterparts................................................................................ 33
10.4 No Third Party Beneficiary.................................................................. 33
10.5 Governing Law............................................................................... 33
10.6 Assignment; Binding Effect.................................................................. 33
10.7 Headings, Gender, etc....................................................................... 34
10.8 Invalid Provisions.......................................................................... 34
10.9 Waiver of Jury Trial........................................................................ 34
10.10 Enforcement................................................................................. 34
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made
and entered into as of August 25, 1996 by and among Conseco, Inc., an Indiana
corporation ("Conseco"), CAF Acquisition Company, an Ohio corporation and
wholly-owned subsidiary of Conseco ("CAF Acquisition"), and Capitol American
Financial Corporation, an Ohio corporation (the "Company").
PREAMBLE
WHEREAS, the respective Boards of Directors of Conseco, CAF
Acquisition and the Company have approved the merger of CAF Acquisition with and
into the Company, upon the terms and subject to the conditions set forth herein;
and
WHEREAS, Conseco, CAF Acquisition and the Company desire to
make certain representations, warranties, covenants and agreements in connection
with such merger and also to prescribe various conditions to such merger;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Subject to the terms and conditions of
this Agreement, at the Effective Time (as such term is defined in Section 1.3
hereof), CAF Acquisition shall be merged with and into the Company (the
"Merger"), in accordance with the Ohio Revised Code (the "Ohio Code"), and the
separate corporate existence of CAF Acquisition shall cease and the Company
shall continue as the surviving corporation under the laws of the State of Ohio
(the "Surviving Corporation") with all the rights, privileges, immunities and
powers, and subject to all the duties and liabilities, of a corporation
organized under the Ohio Code. The Merger shall have the effects set forth in
the Ohio Code.
1.2 Closing. Unless this Agreement shall have been terminated
and the transactions herein contemplated shall have been abandoned pursuant to
Section 7.1, and subject to the satisfaction or waiver of the conditions set
forth in Article VI, the closing of the Merger (the "Closing") will take place
at 9:00 a.m. on the second business day following the date on which the last to
be fulfilled or waived of the conditions set forth in Article VI shall be
fulfilled or waived in accordance with this Agreement (the "Closing Date"), at
the office of Conseco in Carmel, Indiana, unless another date, time or place is
agreed to in writing by the parties hereto.
1.3 Effective Time. The parties hereto will file with
the Secretary of State of the State of Ohio (the "Ohio Secretary of State") on
the date of the Closing (or on such other date as Conseco and the Company may
agree) a certificate of merger or other
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appropriate documents, executed in accordance with the relevant provisions of
the Ohio Code, and make all other filings or recordings required under the Ohio
Code in connection with the Merger. The Merger shall become effective upon the
filing of the certificate of merger with the Ohio Secretary of State, or at such
later time as is specified in the certificate of merger (the "Effective Time").
1.4 Articles of Incorporation. The Articles of Incorporation
of the Surviving Corporation, as in effect immediately prior to the Effective
Time, shall be the Articles of Incorporation of the Surviving Corporation until
thereafter amended as provided by law.
1.5 Code of Regulations. The Code of Regulations of CAF
Acquisition, as in effect immediately prior to the Effective Time, shall be the
Code of Regulations of the Surviving Corporation until thereafter amended as
provided by law.
1.6 Directors. The directors of CAF Acquisition at the
Effective Time shall be the directors of the Surviving Corporation and will hold
office from the Effective Time until their respective successors are duly
elected or appointed and qualify in the manner provided in the Articles of
Incorporation and the Code of Regulations of the Surviving Corporation, or as
otherwise provided by law.
1.7 Officers. The officers of CAF Acquisition at the Effective
Time shall be the officers of the Surviving Corporation.
1.8 Conversion of CAF Acquisition Shares. Each share of common
stock of CAF Acquisition issued and outstanding immediately prior to the
Effective Time shall, by virtue of the Merger and without any action on the part
of the holder thereof, be converted into and become one validly issued, fully
paid and nonassessable share of common stock of the Surviving Corporation.
1.9 Conversion of Shares. (a) Outstanding Shares. Each of the
shares of common stock, without par value, of the Company (the "Shares") issued
and outstanding immediately prior to the Effective Time (other than Shares held
as treasury shares by the Company or Dissenting Shares (as defined below))
including all outstanding Restricted Shares (as defined below) shall, by virtue
of the Merger and without any action on the part of the holder thereof, be
converted into a right to receive (i) $30.00 in cash plus the Time Factor (as
defined below), if any (collectively, the "Cash Consideration") and (ii) the
fraction (rounded to the nearest ten-thousandth of a share) of a validly issued,
fully paid and nonassessable share of common stock, without par value, of
Conseco ("Conseco Common Stock") determined by dividing (x) $6.50 by (y) the
Trading Value (as defined below). For purposes hereof, the term "Total
Consideration Amount" shall mean the sum of the amount of the Cash Consideration
and $6.50. The "Trading Value" shall be equal to the average of the closing
prices of the Conseco Common Stock on the New York Stock Exchange ("NYSE")
Composite Transactions Reporting System, as reported in The Wall Street Journal,
for the 20 consecutive trading days immediately preceding the second trading day
prior to the Effective Time. The "Time Factor", if any, shall be equal to $0.25
if the Effective Time shall not have occurred by December 10, 1996, which amount
shall be increased by an additional $0.25 on the tenth day of each calendar
month thereafter until the occurrence of the Effective Time. The Cash
Consideration, the Conseco Common Stock to be issued to holders of Shares in
accordance with this Section and any cash to be paid in accordance with Section
1.10 in lieu of fractional shares of Conseco Common Stock are referred to
collectively as the "Merger Consideration."
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(b) Treasury Shares. Each Share issued and outstanding
immediately prior to the Effective Time which is then held as a treasury share
by the Company or any of its subsidiaries immediately prior to the Effective
Time shall, by virtue of the Merger and without any action on the part of the
Company, be cancelled and retired and cease to exist, without any conversion
thereof.
(c) Impact of Stock Splits, etc. In the event of any change in
Conseco Common Stock between the date of this Agreement and the Effective Time
of the Merger by reason of any stock split, stock dividend, subdivision,
reclassification, recapitalization, combination, exchange of shares or the like,
the number and class of shares of Conseco Common Stock to be issued and
delivered in the Merger in exchange for each outstanding Share as provided in
this Agreement and the calculation of all share prices provided for in this
Agreement shall be proportionately adjusted.
(d) Company Dissenting Shares. Notwithstanding anything in
this Agreement to the contrary, Shares which are held by the Company
shareholders who shall have effectively dissented from the Merger and perfected
their dissenters' rights in accordance with the provisions of Section 1701.85 of
the Ohio Code (the "Dissenting Shares") shall not be converted into or be
exchangeable for the right to receive the Merger Consideration, but the holders
thereof shall be entitled to payment from the Surviving Corporation of the
appraised value of such shares in accordance with the provisions of Section
1701.85 of the Ohio Code; provided, however, that if any such holder shall have
failed to perfect such dissenters' rights or shall have effectively withdrawn or
lost such rights, his or her outstanding Shares shall thereupon be converted
into and exchangeable for, as if completed at the Effective Time, the Merger
Consideration, as determined and paid in the manner set forth in this Agreement,
without any interest thereon. The Company shall give Conseco (i) prompt notice
of any notice or demands for payment for Dissenting Shares pursuant to Section
1701.85 of the Ohio Code received by the Company and (ii) the opportunity to
participate in and direct all negotiations and proceedings with respect to any
such demands or notices. The Company shall not, without the prior written
consent of Conseco, make any payment with respect to, to settle, offer to settle
or otherwise negotiate, any such demands.
(e) Treatment of Company Stock Options and Restricted Shares.
(i) Except as otherwise provided in Section 1.9(e) of the Disclosure Schedule
(as defined below), immediately prior to the Effective Time, each outstanding
unexpired employee or director stock option to purchase Shares ("Company Stock
Option") and restricted stock right ("Restricted Shares") which have been
granted pursuant to the Company's 1992 Equity Participation Plan, as amended to
the date hereof (the "Company Stock Option Plan" ) shall be fully vested.
(ii) Except as otherwise provided in Section
1.9(e)(iii) or Section 1.9(e) of the Disclosure Schedule, at the Effective Time
each Company Stock Option shall be deemed disposed to the Company in accordance
with final Rule 16b-3 as promulgated by the Securities and Exchange Commission
("SEC") pursuant to Release 34-37260 (May 31, 1996) ("New Section 16") and then
converted automatically into an option (a "New Conseco Option") to purchase such
number of shares of Conseco Common Stock (rounding the result to the nearest
ten-thousandth of a share) equal to the number of Shares subject to such Company
Stock Option immediately prior to the Effective Time, multiplied by the
Conversion Ratio (as defined below), for an exercise price equal to the Adjusted
Exercise Price (as defined below), but otherwise on the same terms and
conditions as were applicable under the Company Stock Option Plan and the
underlying stock option agreement. The "Conversion
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Ratio" shall mean the number determined by dividing the Total Consideration
Amount by the Trading Value (rounding the result to the nearest ten-thousandth
of a share). The "Adjusted Exercise Price" shall be determined by multiplying
(A) the Trading Value by (B) the quotient of the current exercise price divided
by Total Consideration Amount.
(iii) If prior to the Effective Time Conseco has
given notice that any holder of a Company Stock Option who is an employee of the
Company will not be asked to remain in his or her position beyond the period
ending at the end of six months after the Effective Time, with respect to each
Company Stock Option held by such person immediately prior to the Effective Time
and, irrespective of the giving of any notice, with respect to each Company
Stock Option held by a non-employee director of the Company, except as otherwise
provided in Section 1.9(e) of the Disclosure Schedule, at the Effective Time
such Company Stock Option shall be deemed disposed to the Company in accordance
with New Section 16 and then converted automatically at the Effective Time into
the right to receive an amount (the "Spread") in cash equal to the product of
(A) the Total Consideration Amount minus the current exercise price thereof
multiplied by (B) the total number of Shares subject thereto.
(iv) With respect to any holder of a Company Stock
Option who is an employee of the Company immediately prior to the Effective Time
who does not receive the Spread at the Effective Time pursuant to Section
1.9(e)(iii), if the employment of such person shall be terminated prior to the
end of the six month period after the Effective Time, with respect to each New
Conseco Option held by such person at the time of termination of his employment,
such New Conseco Option shall be deemed not to have been issued pursuant to
Section 1.9(e)(ii) and the holder thereof shall be deemed to have disposed to
the Company immediately prior to the Effective Time the Company Stock Options
then held by such employee in accordance with New Section 16 and, with respect
to each such Company Stock Option, then converted automatically into the right
to receive the Spread, which Spread shall be payable to the employee in cash
upon termination.
1.10 Exchange of Certificates. (a) Paying Agent. As of the
Effective Time, Conseco shall deposit with its transfer agent and registrar (the
"Paying Agent"), for the benefit of the holders of Shares, cash equal to the
total Cash Consideration to be paid to holders of Shares pursuant to Section
1.9(a) and certificates representing the shares of Conseco Common Stock to be
issued to holders of Shares pursuant to Section 1.9(a) (such cash and
certificates, together with any dividends or distributions with respect to such
certificates and cash payable pursuant to Section 1.10(f), being hereinafter
referred to as the "Payment Fund").
(b) Exchange Procedures. As soon as practicable after the
Effective Time, each holder of an outstanding certificate or certificates which
prior thereto represented Shares shall, upon surrender to the Paying Agent of
such certificate or certificates and acceptance thereof by the Paying Agent, be
entitled to (i) a certificate representing that number of whole shares of
Conseco Common Stock (and cash in lieu of fractional shares of Conseco Common
Stock as contemplated by this Section 1.10) which the aggregate number of Shares
previously represented by such certificate or certificates surrendered shall
have been converted into the right to receive pursuant to Section 1.9(a) of this
Agreement, and (ii) cash equal to the amount of the Cash Consideration
multiplied by the number of Shares previously represented by such certificate or
certificates surrendered. The Paying Agent shall accept such certificates upon
compliance with such reasonable terms and conditions as the Paying Agent may
impose to effect an orderly exchange thereof in accordance with normal exchange
practices. If the
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consideration to be paid in the Merger (or any portion thereof) is to be
delivered to any person other than the person in whose name the certificate
representing Shares surrendered in exchange therefor is registered, it shall be
a condition to such exchange that the certificate so surrendered shall be
properly endorsed or otherwise be in proper form for transfer and that the
person requesting such exchange shall pay to the Paying Agent any transfer or
other taxes required by reason of the payment of such consideration to a person
other than the registered holder of the certificate surrendered, or shall
establish to the satisfaction of the Paying Agent that such tax has been paid or
is not applicable. After the Effective Time, there shall be no further transfer
on the records of the Company or its transfer agent of certificates representing
Shares and if such certificates are presented to the Company for transfer, they
shall be cancelled against delivery of the Merger Consideration as hereinabove
provided. Until surrendered as contemplated by this Section 1.10(b), each
certificate representing Shares (other than certificates representing Shares to
be cancelled in accordance with Section 1.9(b)), shall be deemed at any time
after the Effective Time to represent only the right to receive upon such
surrender the Merger Consideration, without any interest thereon, as
contemplated by Section 1.9. No interest will be paid or will accrue on any cash
payable as Merger Consideration.
(c) Letter of Transmittal. Promptly after the Effective Time
(but in no event more than five business days thereafter), the Surviving
Corporation shall require the Paying Agent to mail to each record holder of
certificates that immediately prior to the Effective Time represented Shares
which have been converted pursuant to Section 1.9, a form of letter of
transmittal and instructions for use in surrendering such certificates and
receiving the consideration to which such holder shall be entitled therefor
pursuant to Section 1.9.
(d) Distributions with Respect to Unexchanged Shares. No
dividends or other distributions with respect to Conseco Common Stock with a
record date after the Effective Time shall be paid to the holder of any
certificate that immediately prior to the Effective Time represented Shares
which have been converted pursuant to Section 1.9, until the surrender for
exchange of such certificate in accordance with this Article l. Following
surrender for exchange of any such certificate, there shall be paid to the
holder of such certificate, without interest, (i) at the time of such surrender,
the amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to the number of whole shares of
Conseco Common Stock into which the Shares represented by such certificate
immediately prior to the Effective Time were converted pursuant to Section 1.9,
and (ii) at the appropriate payment date, the amount of dividends or other
distributions with a record date after the Effective Time, but prior to such
surrender, and with a payment date subsequent to such surrender, payable with
respect to such whole shares of Conseco Common Stock.
(e) No Further Ownership Rights in Shares. The Merger
Consideration paid upon the surrender for exchange of certificates representing
Shares in accordance with the terms of this Article l shall be deemed to have
been issued and paid in full satisfaction of all rights pertaining to the Shares
theretofore represented by such certificates, subject, however, to the Surviving
Corporation's obligation (if any) to pay any dividends or make any other
distributions with a record date prior to the Effective Time which may have been
declared by the Company on such Shares in accordance with the terms of this
Agreement or prior to the date of this Agreement and which remain unpaid at the
Effective Time.
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(f) No Fractional Shares. (i) No certificates or scrip
representing fractional shares of Conseco Common Stock shall be issued upon the
surrender for exchange of certificates that immediately prior to the Effective
Time represented Shares which have been converted pursuant to Section 1.9, and
such fractional share interests will not entitle the owner thereof to vote or to
any rights of a shareholder of Conseco.
(ii) Notwithstanding any other provisions of this Agreement,
each holder of Shares who would otherwise have been entitled to receive a
fraction of a share of Conseco Common Stock (after taking into account all
certificates delivered by such holder) shall receive, in lieu thereof, cash
(without interest) in an amount equal to such fractional part of a share of
Conseco Common Stock multiplied by the Trading Value.
(g) Termination of Payment Fund. Any portion of the Payment
Fund which remains undistributed to the holders of the certificates representing
Shares for 180 days after the Effective Time shall be delivered to Conseco, upon
demand, and any holders of Shares who have not theretofore complied with this
Article shall thereafter look only to Conseco and only as general creditors
thereof for payment of their claim for any Merger Consideration and any
dividends or distributions with respect to Conseco Common Stock.
(h) Merger Consideration for Dissenting Shares. Any portion of
the Merger Consideration together with any dividends or other distributions
payable pursuant to Section 1.10(d) and cash for payment in lieu of fractional
Shares deposited with the Paying Agent to pay for Dissenting Shares for which
the right to receive a payment pursuant to Section 1701.85 of the Ohio Code
shall have been perfected shall be returned to the Surviving Corporation, upon
demand.
(i) No Liability. None of Conseco, CAF Acquisition, the
Surviving Corporation or the Paying Agent shall be liable to any person in
respect of any cash, shares, dividends or distributions payable from the Payment
Fund delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law. If any certificates representing Shares shall
not have been surrendered prior to five years after the Effective Time (or
immediately prior to such earlier date on which any Merger Consideration in
respect of such certificate would otherwise escheat to or become the property of
any Governmental Entity (as defined in Section 2.3)), any such cash, shares,
dividends or distributions payable in respect of such certificate shall, to the
extent permitted by applicable law, become the property of the Surviving
Corporation, free and clear of all claims or interest of any person previously
entitled thereto.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Conseco and CAF
Acquisition as follows:
2.1 Organization, Standing and Corporate Power. (i) Each of
the Company and each Subsidiary of the Company (as hereinafter defined) is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction in which it is incorporated and has the requisite corporate
power and authority to carry on its business as
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now being conducted. Each of the Company and each Subsidiary of the Company is
duly qualified or licensed to do business and is in good standing in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification or licensing necessary. The Company has
delivered to Conseco complete and correct copies of its Articles of
Incorporation and Code of Regulations, as amended to the date of this Agreement.
(ii) Except as disclosed in Section 2.1(ii) of the Disclosure
Schedule (the "Disclosure Schedule") dated the date hereof and delivered by the
Company to Conseco concurrently herewith (the "Subsidiaries"), the Company has
no subsidiaries and does not control, directly or indirectly, any other person.
2.2 Capital Structure. The authorized capital stock of the
Company consists of (i) 40,000,000 Shares and (ii) 5,000,000 shares of Preferred
Stock without par value (the "Preferred Stock"). At the close of business on
August 23, 1996: (a) 17,489,190 Shares were issued and outstanding, 696,000
Shares were reserved for issuance pursuant to outstanding Company Stock Options
(b) 18,000 Restricted Shares were issued and outstanding; and (c) no shares of
Preferred Stock were issued and outstanding. Except as set forth above, at the
close of business on August 23, 1996, no shares of capital stock or other equity
securities of the Company were issued, reserved for issuance or outstanding. All
outstanding shares of capital stock of the Company are, and all shares which may
be issued pursuant to the Company Stock Option Plan, or any outstanding Company
Stock Options will be, when issued, duly authorized, validly issued, fully paid
and nonassessable and not subject to preemptive rights. Except as set forth in
Section 2.2 of the Disclosure Schedule, no bonds, debentures, notes or other
indebtedness of the Company or any Subsidiary of the Company having the right to
vote (or convertible into, or exchangeable for, securities having the right to
vote) on any matters on which the shareholders of the Company or any Subsidiary
of the Company may vote are issued or outstanding. Except for the Restricted
Shares and as disclosed in Section 2.2 of the Disclosure Schedule, all the
outstanding shares of capital stock of each Subsidiary of the Company have been
validly issued and are fully paid and nonassessable and are owned by the
Company, by one or more subsidiaries of the Company or by the Company and one or
more such subsidiaries, free and clear of all pledges, claims, liens, charges,
encumbrances and security interests of any kind or nature whatsoever
(collectively, "Liens") except as may be provided by law. Except for the
Restricted Shares and as set forth above or in Section 2.2 of the Disclosure
Schedule, neither the Company nor any Subsidiary of the Company has any
outstanding option, warrant, subscription or other right, agreement or
commitment which either (i) obligates the Company or any Subsidiary of the
Company to issue, sell or transfer, repurchase, redeem or otherwise acquire or
vote any shares of the capital stock of the Company or any Subsidiary of the
Company or (ii) restricts the transfer of Shares.
2.3 Authority; Noncontravention. The Company has the requisite
corporate power and authority to enter into this Agreement and, subject to the
approval of its shareholders as set forth in Section 6.1(a) with respect to the
consummation of the Merger, to consummate the transactions contemplated by this
Agreement. The execution and delivery of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of the Company,
subject, in the case of the Merger, to the approval of its shareholders as set
forth in Section 6.1(a). This Agreement has been duly executed and delivered by
the Company and, assuming this Agreement constitutes the valid and binding
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agreement of Conseco and CAF Acquisition, constitutes a valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms except that the enforcement thereof may be limited by (a) bankruptcy,
insolvency, reorganization, moratorium or similar laws now or hereafter in
effect relating to creditor's rights generally and (b) general principles of
equity (regardless of whether enforceability is considered in a proceeding at
law or in equity). Except as disclosed in Section 2.3 of the Disclosure
Schedule, the execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated by this Agreement and compliance
with the provisions hereof will not, (i) conflict with any of the provisions of
the Articles of Incorporation or the Code of Regulations of the Company or the
comparable documents of any Subsidiary of the Company, (ii) subject to the
governmental filings and other matters referred to in the following sentence,
conflict with, result in a breach of or default (with or without notice or lapse
of time, or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of a material benefit under, or require
the consent of any person under, any indenture or other agreement, permit,
concession, franchise, license or similar instrument or undertaking to which the
Company or any of its subsidiaries is a party or by which the Company or any of
its subsidiaries or any of their assets is bound or affected, or (iii) subject
to the governmental filings and other matters referred to in the following
sentence, contravene any law, rule or regulation of any state or of the United
States or any political subdivision thereof or therein, or any order, writ,
judgment, injunction, decree, determination or award currently in effect. No
consent, approval or authorization of, or declaration or filing with, or notice
to, any governmental agency or regulatory authority (a "Governmental Entity")
which has not been received or made, is required by or with respect to the
Company or any of its subsidiaries in connection with the execution and delivery
of this Agreement by the Company or the consummation by the Company of the
transactions contemplated hereby, except for (i) the filing of premerger
notification and report forms under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act") with respect to the Merger, (ii) the
filings and/or notices required under the insurance laws of the jurisdictions
set forth in Section 2.3 of the Disclosure Schedule, (iii) the filing with the
SEC of (x) a proxy statement relating to the adoption by the shareholders of the
Company of this Agreement (such proxy statement, as amended or supplemented from
time to time, the "Proxy Statement"), and (y) such reports under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as may be required in
connection with this Agreement and the transactions contemplated by this
Agreement, (iv) the filing of the certificate of merger with the Ohio Secretary
of State and appropriate documents with the relevant authorities of other states
in which the Company is qualified to do business, (v) such other consents,
approvals, authorizations, filings or notices as are set forth in Section 2.3 of
the Disclosure Schedule and (vi) any applicable filings under state
anti-takeover laws.
2.4 SEC Documents. (i) The Company has filed all required
reports, schedules, forms, statements and other documents with the SEC since
January 1, 1994 (such reports, schedules, forms, statements and other documents
are hereinafter referred to as the "SEC Documents"); (ii) as of their respective
dates, the SEC Documents complied with the requirements of the Securities Act of
1933, as amended (the "Securities Act"), or the Exchange Act, as the case may
be, and the rules and regulations of the SEC promulgated thereunder applicable
to such SEC Documents, and none of the SEC Documents as of such dates contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading; and (iii) the consolidated financial statements of the Company
included in the SEC Documents comply as to form in all material respects with
applicable accounting requirements and the published rules and
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regulations of the SEC with respect thereto, have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto or,
in the case of unaudited statements, as permitted by Rule 10-01 of Regulation
S-X) and fairly present, in all material respects, the consolidated financial
position of the Company and its consolidated subsidiaries as of the dates
thereof and the consolidated results of their operations and cash flows for the
periods then ended (subject, in the case of unaudited quarterly statements, to
normal year-end audit adjustments).
2.5 Absence of Certain Changes or Events. Except as disclosed
in the SEC Documents filed and publicly available prior to the date of this
Agreement (the "Filed SEC Documents") or in Section 2.5 of the Disclosure
Schedule, since the date of the most recent audited financial statements
included in the Filed SEC Documents, the Company and its subsidiaries have
conducted their business only in the ordinary course, and there has not been (i)
any change which would have a material adverse effect on the business, financial
condition or results of operations of the Company and its subsidiaries taken as
a whole, (ii) any declaration, setting aside or payment of any dividend or other
distribution (whether in cash, stock or property) with respect to any of the
Company's outstanding capital stock (other than regular quarterly cash dividends
of $0.10 per Share, in accordance with usual record and payment dates and in
accordance with the Company's present dividend policy), (iii) any split,
combination or reclassification of any of its outstanding capital stock or any
issuance or the authorization of any issuance of any other securities in respect
of, in lieu of or in substitution for shares of its outstanding capital stock,
(iv) (x) any granting by the Company or any of its subsidiaries to any executive
officer or other employee of the Company or any of its subsidiaries of any
increase in compensation, except in the ordinary course of business consistent
with prior practice or as was required under employment agreements in effect as
of the date of the most recent audited financial statements included in the
Filed SEC Documents, (y) any granting by the Company or any of its subsidiaries
to any such executive officer or other employee of any increase in severance or
termination pay, except in the ordinary course of business consistent with prior
practice or as was required under any employment, severance or termination
agreements in effect as of the date of the most recent audited financial
statements included in the Filed SEC Documents or (z) any entry by the Company
or any of its subsidiaries into any employment, severance or termination
agreement with any such executive officer or other employee or (v) any change in
accounting methods, principles or practices by the Company or any of its
subsidiaries materially affecting its assets, liabilities or business, except
insofar as may have been required by a change in generally accepted accounting
principles.
2.6 Absence of Changes in Benefit Plans. Except as disclosed
in the Filed SEC Documents or in Section 2.6 of the Disclosure Schedule, since
the date of the most recent audited financial statements included in the Filed
SEC Documents, there has not been any adoption or amendment in any material
respect by the Company or any of its subsidiaries of any collective bargaining
agreement or any Benefit Plan (as defined in Section 2.7). Except as disclosed
in the Filed SEC Documents or in Section 2.6 of the Disclosure Schedule, there
exist no employment, consulting, severance, termination or indemnification
agreements, arrangements or understandings between the Company or any of its
subsidiaries and any current or former employee, officer or director of the
Company or any of its subsidiaries.
2.7 Benefit Plans. (i) Each "employee pension benefit plan"
(as defined in Section 3(2) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"))
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(hereinafter a "Pension Plan"), "employee welfare benefit plan" (as defined in
Section 3(1) of ERISA) (hereinafter a "Welfare Plan"), and each other plan,
arrangement or policy (written or oral) relating to stock options, stock
purchases, compensation, deferred compensation, severance, fringe benefits or
other employee benefits, in each case maintained or contributed to, or required
to be maintained or contributed to, by the Company and its subsidiaries for the
benefit of any present or former officers, employees, agents, directors or
independent contractors of the Company or any of its subsidiaries (all the
foregoing being herein called "Benefit Plans") has been administered in
accordance with its terms. The Company, its subsidiaries and all the Benefit
Plans are in compliance in all material respects with the applicable provisions
of ERISA, the Internal Revenue Code of 1986, as amended (the "Code"), all other
applicable laws and all applicable collective bargaining agreements.
(ii) None of the Company or any other person or
entity that together with the Company is treated as a single employer under
Section 414(b), (c), (m) or (o) of the Code (each a "Commonly Controlled
Entity") (a) has incurred any liability to a Pension Plan covered by Title IV of
ERISA (other than for contributions not yet due) or to the Pension Benefit
Guaranty Corporation (other than for the payment of premiums not yet due) which
liability has not been fully paid as of the date hereof.
(iii) No Commonly Controlled Entity is required to
contribute to any "multiemployer plan" (as defined in Section 4001(a)(3) of
ERISA) or has withdrawn from any multiemployer plan where such withdrawal has
resulted or would result in any "withdrawal liability" (within the meaning of
Section 4201 of ERISA) that has not been fully paid.
2.8 Taxes. Except as disclosed in Section 2.8 of the
Disclosure Schedule,
(i) Each of the Company and its subsidiaries has filed all tax
returns and reports required to be filed by it or requests for
extensions to file such returns or reports have been timely filed,
granted and have not expired, except to the extent that such failures
to file or to have extensions granted that remain in effect
individually and in the aggregate would not have a material adverse
effect on the business, financial condition or results of operations of
the Company and its subsidiaries taken as a whole. All tax returns
filed by the Company and each of its subsidiaries are complete and
accurate except to the extent that such failure to be complete and
accurate would not have a material adverse effect on the business,
financial condition or results of operations of the Company and its
subsidiaries taken as a whole. The Company and each of its subsidiaries
has paid (or the Company has paid on the subsidiaries' behalf) all
taxes shown as due on such returns, and the most recent financial
statements contained in the Filed SEC Documents reflect an adequate
reserve for all taxes payable by the Company and its subsidiaries for
all taxable periods and portions thereof accrued through the date of
such financial statements.
(ii) No deficiencies for any taxes have been proposed,
asserted or assessed against the Company or any of its subsidiaries
that are not adequately reserved for, except for deficiencies that
individually or in the aggregate would not have a material adverse
effect on the business, financial condition or results of operations of
the Company and its subsidiaries taken as a whole, and, except as set
forth on Section 2.8 of the Disclosure Schedule, no requests for
waivers of the time to assess any such taxes have been granted or are
pending. The Federal income tax returns of the Company and each of its
subsidiaries consolidated in such returns have been examined
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by and settled with the United States Internal Revenue Service, or the
statute of limitations on assessment or collection of any Federal
income taxes due from the Company or any of its subsidiaries has
expired, through such taxable years as are set forth in Section 2.8 of
the Disclosure Schedule.
(iii) As used in this Agreement, "taxes" shall include all
Federal, state, local and foreign income, property, premium, sales,
excise, employment, payroll, withholding and other taxes, tariffs or
governmental charges of any nature whatsoever and any interest,
penalties and additions to taxes relating thereto.
2.9 No Excess Parachute Payments; Section 162(m) of the Code.
(i) Except as disclosed in Section 2.9 of the Disclosure Schedule, any amount
that could be received (whether in cash or property or the vesting of property)
as a result of any of the transactions contemplated by this Agreement by any
employee, officer or director of the Company or any of its affiliates who is a
"disqualified individual" (as such term is defined in proposed Treasury
Regulation Section 1.280G-1) under any employment, severance or termination
agreement, other compensation arrangement or Benefit Plan currently in effect
would not be characterized as an "excess parachute payment" (as such term is
defined in Section 280G(b)(1) of the Code).
(ii) Except as disclosed in Section 2.9 of the
Disclosure Schedule, the disallowance of a deduction under Section 162(m) of the
Code for employee remuneration will not apply to any amount paid or payable by
the Company or any subsidiary of the Company under any contract, Benefit Plan,
program, arrangement or understanding currently in effect.
2.10 Voting Requirements. The affirmative vote of a majority
of the votes cast by the holders of the Shares entitled to vote thereon at the
Shareholders Meeting with respect to the approval of this Agreement is the only
vote of the holders of any class or series of the Company's capital stock
necessary to approve this Agreement and the transactions contemplated by this
Agreement under the Articles of Incorporation, the Code of Regulations or the
Ohio Code.
2.11 Compliance with Applicable Laws. (i) Each of the Company
and its subsidiaries has in effect all Federal, state, local and foreign
governmental approvals, authorizations, certificates, filings, franchises,
licenses, notices, permits and rights ("Permits") necessary for it to own, lease
or operate its properties and assets and to carry on its business as now
conducted, and there has occurred no default under any such Permit. Except as
disclosed in the Filed SEC Documents and except with respect to the matters
covered by Section 2.11(iii), the Company and its subsidiaries are in compliance
in all material respects with all applicable statutes, laws, ordinances, rules,
orders and regulations of any Governmental Entity. Except as disclosed in the
Filed SEC Documents and except for routine examinations by state Governmental
Entities charged with supervision of insurance companies ("Insurance
Regulators") and except with respect to the matters covered by Section
2.11(iii), as of the date of this Agreement, to the knowledge of the Company, no
investigation by any Governmental Entity with respect to the Company or any of
its subsidiaries is pending or threatened.
(ii) The Annual Statements (including without
limitation the Annual Statements of any separate accounts) for the year ended
December 31, 1995, together with all exhibits and schedules thereto, and
financial statements relating thereto, and any actuarial
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opinion, affirmation or certification filed in connection therewith, and the
Quarterly Statements for the periods ended after January 1, 1996, together with
all exhibits and schedules thereto, with respect to each subsidiary of the
Company that is a regulated insurance company (an "Insurance Company"), in each
case as filed with the applicable Insurance Regulator of its jurisdiction of
domicile, were prepared in conformity with statutory accounting practices
prescribed or permitted by such Insurance Regulator applied on a consistent
basis ("SAP"), present fairly, in all material respects, to the extent required
by and in conformity with SAP, the statutory financial condition of such
Insurance Company at their respective dates and the results of operations,
changes in capital and surplus and cash flow of such Insurance Company for each
of the periods then ended, and were correct in all material respects when filed
and there were no material omissions therefrom when filed. No deficiencies or
violations material to the financial condition or operations of any Insurance
Company have been asserted in writing by any Insurance Regulator which have not
been cured or otherwise resolved to the satisfaction of such Insurance Regulator
and which have not been disclosed in writing to Conseco prior to the date of
this Agreement.
(iii) Except as set forth in Section 2.11(iii) of
the Disclosure Schedule, (a) the Company and its subsidiaries (exclusive of
their agents) and, to the knowledge of the Company (without independent
inquiry), their agents have marketed, sold and issued Company products in
compliance, in all material respects, with all statutes, laws, ordinances,
rules, orders and regulations of any Governmental Entity applicable to the
business of the Company and its subsidiaries ("Laws") in the respective
jurisdictions in which such products have been sold, except where the failure to
do so, individually or in the aggregate, has not had or would not reasonably be
expected to have, a material adverse effect on the business, financial condition
or results of operations of the Company and its subsidiaries, taken as a whole,
(b) there are (x) to the knowledge of the Company, no claims asserted, (y) no
actions, suits, investigations or proceedings by or before any court or other
Governmental Entity or (z) no investigations by or on behalf of the Company
(other than routine investigations in connection with the Company's hiring
practices) ((x), (y) and (z) being collectively referred to as "Actions")
pending or, to the knowledge of the Company, threatened, against or involving
the Company, any of its subsidiaries or, to the knowledge of the Company
(without independent inquiry), any of its agents that include allegations that
the Company, any of its subsidiaries or any of its agents were in violation of
or failed to comply with such Laws, and, to the knowledge of the Company, no
facts exist which would reasonably be expected to result in the filing or
commencement of any such Action, which Actions, individually or in the
aggregate, would reasonably be expected to have a material adverse effect on the
business, financial condition or results of operations of the Company and its
subsidiaries, taken as a whole, and (c) the Company and its subsidiaries are in
compliance, in all material respects, with and have performed, in all material
respects, all obligations required to be performed by each of them under any
cease-and-desist or other order issued by any Insurance Regulator or other
Governmental Entity to the Company or any of its subsidiaries or under any
written agreement, consent agreement, memorandum of understanding or commitment
letter or similar undertaking entered into between any Insurance Regulator or
other Governmental Entity and the Company or any of its subsidiaries
("Regulatory Agreement"), which Regulatory Agreement remains in effect on the
date hereof, except where the failure to do so, individually or in the
aggregate, has not had or would not reasonably be expected to have, a material
adverse effect on the business, financial condition or results of operations of
the Company and its subsidiaries, taken as a whole. Each Regulatory Agreement
issued or entered into after December 31, 1992 is identified in Section
2.11(iii) of the Disclosure Schedule.
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2.12 State Takeover Laws. The Board of Directors of the
Company has approved the transactions contemplated by this Agreement and by the
Shareholders Agreement (as defined below) such that the provisions of Section
1701.83 of the Ohio Code and the provisions of Chapter 1704 of the Ohio Code
will not apply to this Agreement or the Shareholders Agreement or any of the
transactions contemplated hereby or thereby.
2.13 Opinion of Financial Advisor. The Company has received
the opinion of Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"),
dated the date hereof, to the effect that, as of such date, the consideration to
be received in the Merger by the Company's shareholders is fair from a financial
point of view to the Company's shareholders.
2.14 Brokers. Except with respect to DLJ, all negotiations
relative to this Agreement and the transactions contemplated hereby have been
carried out by the Company directly with Conseco, without the intervention of
any person on behalf of the Company in such manner as to give rise to any valid
claim by any person against Conseco, the Company or any subsidiary for a
finder's fee, brokerage commission, or similar payment. The Company has provided
Conseco with a true and complete copy of the agreement between the Company and
DLJ, and the Company has no other agreements or understandings (written or oral)
with respect to such services.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF CONSECO AND CAF ACQUISITION
Conseco and CAF Acquisition hereby represent and warrant to
the Company as follows:
3.1 Organization, Standing and Corporate Power. Each of
Conseco and CAF Acquisition and each Significant Subsidiary of Conseco (as
hereinafter defined) is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction in which it is incorporated and
has the requisite corporate power and authority to carry on its business as now
being conducted. Each of Conseco and CAF Acquisition and each Significant
Subsidiary of Conseco is duly qualified or licensed to do business and is in
good standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification or licensing
necessary. Conseco has delivered to the Company complete and correct copies of
its Articles of Incorporation and Bylaws, as amended to the date of this
Agreement. For purposes of this Agreement, a "Significant Subsidiary" of Conseco
means any subsidiary of Conseco that would constitute a Significant Subsidiary
within the meaning of Rule 1-02 of Regulation S-X of the SEC.
3.2 Conseco Capital Structure. The authorized capital stock of
Conseco consists of 500,000,000 shares of Conseco Common Stock and 20,000,000
shares of preferred stock, without par value. At the close of business on August
23, 1996, (i) 58,416,433 shares of Conseco Common Stock, 5,264,767 shares of
$3.25 Series D Cumulative Convertible Preferred Stock of Conseco (the "Conseco
Series D Preferred Stock") and 4,369,700 shares of Preferred Redeemable
Increased Dividend Equity Securities of Conseco (the "Conseco PRIDES") were
issued and outstanding (net of treasury shares or shares held by subsidiaries),
(ii) 13,721,689 shares of Conseco Common Stock were reserved for issuance
pursuant to outstanding options to purchase shares of Conseco Common Stock
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and other benefits granted under Conseco's benefit plans (the "Conseco Stock
Plans"), (iii) 8,258,314 shares of Conseco Common Stock were reserved for
issuance upon conversion of the Conseco Series D Preferred Stock and (iv)
8,739,400 shares of Conseco Common Stock were reserved for issuance upon
conversion of the Conseco PRIDES. Except (x) as set forth above, (y) for
outstanding options to purchase an aggregate of 1,105,550 shares of Bankers Life
Holding Corporation under its Stock Option Plan and (z) with respect to stock
units awarded under the Conseco Stock Plans, at the close of business on August
23, 1996, no shares of capital stock or other voting securities of Conseco were
issued, reserved for issuance or outstanding. All outstanding shares of capital
stock of Conseco are, and all shares which may be issued pursuant to this
Agreement will be, when issued, duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights. The authorized capital stock
of CAF Acquisition consists of 750 shares of common stock, no par value, 100 of
which have been validly issued, are fully paid and nonassessable and are owned
by Conseco free and clear of any Lien. No bonds, debentures, notes or other
indebtedness of Conseco or any Significant Subsidiary of Conseco having the
right to vote (or convertible into, or exchangeable for, securities having the
right to vote) on any matters on which the shareholders of Conseco or any
Significant Subsidiary of Conseco may vote are issued or outstanding. All the
outstanding shares of capital stock of each Significant Subsidiary of Conseco
have been validly issued and are fully paid and nonassessable and (other than
Bankers Life Holding Corporation) are owned by Conseco, free and clear of all
Liens except as disclosed in the Filed Conseco SEC Documents (as defined below).
Except as set forth above or as disclosed in the Filed Conseco SEC Documents,
neither Conseco nor any Significant Subsidiary of Conseco has any outstanding
option, warrant, subscription or other right, agreement or commitment which
either (i) obligates Conseco or any Significant Subsidiary of Conseco to issue,
sell or transfer, repurchase, redeem or otherwise acquire or vote any shares of
the capital stock of Conseco or any Significant Subsidiary of Conseco or (ii)
restricts the transfer of Conseco Common Stock.
3.3 Authority; Noncontravention. Conseco and CAF Acquisition
have all requisite corporate power and authority to enter into this Agreement
and to consummate the transactions contemplated by this Agreement. The execution
and delivery of this Agreement by Conseco and CAF Acquisition and the
consummation by Conseco and CAF Acquisition of the transactions contemplated by
this Agreement have been duly authorized by all necessary corporate action on
the part of Conseco and CAF Acquisition. This Agreement has been duly executed
and delivered by and, assuming this Agreement constitutes the valid and binding
agreement of the Company, constitutes a valid and binding obligation of each of
Conseco and CAF Acquisition, enforceable against such party in accordance with
its terms except that the enforcement thereof may be limited by (a) bankruptcy,
insolvency, reorganization, moratorium or similar laws now or hereafter in
effect relating to creditor's rights generally and (b) general principles of
equity (regardless of whether enforceability is considered in a proceeding at
law or in equity). The execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated by this Agreement and compliance
with the provisions of this Agreement will not (i) conflict with any of the
provisions of the Articles of Incorporation or Bylaws of Conseco, the Articles
of Incorporation or the Code of Regulations of CAF Acquisition or the comparable
documents of any Significant Subsidiary of Conseco, (ii) subject to the
governmental filings, other matters referred to in the following sentence and
Section 3.3 of the Conseco Disclosure Schedule, conflict with, result in a
breach of or default (with or without notice or lapse of time, or both) under,
or give rise to a right of termination, cancellation or acceleration of any
obligation or loss of a material benefit under, or require the consent of any
person under, any indenture, or other agreement, permit, concession,
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franchise, license or similar instrument or undertaking to which Conseco or any
of its subsidiaries is a party or by which Conseco or any of its subsidiaries or
any of their assets is bound or affected, or (iii) subject to the governmental
filings and other matters referred to in the following sentence, contravene any
law, rule or regulation of any state or of the United States or any political
subdivision thereof or therein, or any order, writ, judgment, injunction,
decree, determination or award currently in effect. No consent, approval or
authorization of, or declaration or filing with, or notice to, any Governmental
Entity which has not been received or made is required by or with respect to
Conseco or CAF Acquisition in connection with the execution and delivery of this
Agreement by Conseco or CAF Acquisition or the consummation by Conseco or CAF
Acquisition, as the case may be, of any of the transactions contemplated by this
Agreement, except for (i) the filing of premerger notification and report forms
under the HSR Act with respect to the Merger, (ii) the filings and/or notices
required under the insurance laws of the jurisdictions set forth in Section 2.3
of the Disclosure Schedule, (iii) the filing with the SEC of the registration
statement on Form S-4 to be filed with the SEC by Conseco in connection with the
issuance of Conseco Common Stock in the Merger (the "Form S-4"), and such
reports under the Exchange Act as may be required in connection with this
Agreement and the transactions contemplated hereby, (iv) the filing of the
certificate of merger with the Ohio Secretary of State, and appropriate
documents with the relevant authorities of the other states in which the Company
is qualified to do business, (v) such other consents, approvals, authorizations,
filings or notices as are set forth in Section 2.3 of the Disclosure Schedule
and (vi) any applicable filings under state anti-takeover laws.
3.4 SEC Documents. Conseco and its subsidiaries have filed all
required reports, schedules, forms, statements and other documents with the SEC
since January 1, 1994 (the "Conseco SEC Documents"). As of their respective
dates, the Conseco SEC Documents complied with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to such Conseco SEC
Documents, and none of the Conseco SEC Documents as of such dates contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
financial statements of Conseco included in the Conseco SEC Documents comply as
to form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis during the periods involved (except as may be indicated in
the notes thereto or, in the case of unaudited statements, as permitted by Rule
10-01 of Regulation S-X) and fairly present, in all material respects, the
consolidated subsidiaries as of the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal year-end audit adjustments).
3.5 Absence of Certain Changes or Events. Except as disclosed
in the Conseco SEC Documents filed and publicly available prior to the date of
this Agreement (the "Filed Conseco SEC Documents") or in Section 3.5 of a
Disclosure Schedule dated the date hereof and delivered concurrently herewith by
Conseco to the Company (the "Conseco Disclosure Schedule"), since the date of
the most recent audited financial statements included in the Filed Conseco SEC
Documents, Conseco has conducted its business only in the ordinary course, and
there has not been (i) any change which would have a material adverse effect on
the business, financial condition or results of operations of Conseco and its
subsidiaries, taken as a whole, (ii) any declaration, setting aside or payment
of any dividend or distribution
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(whether in cash, stock or property) with respect to any of Conseco's
outstanding capital stock (other than regular quarterly cash dividends of $.0625
per share, on Conseco Common Stock and regular cash dividends on the Conseco
Series D Preferred Stock and the Conseco PRIDES, in each case in accordance with
usual record and payment dates and in accordance with Conseco's dividend policy
and Articles of Incorporation at the date of such payment), (iii) any split,
combination or reclassification of any of its outstanding capital stock or any
issuance or the authorization of any issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital stock, or (iv) any
change in accounting methods, principles or practices by Conseco materially
affecting its assets, liabilities or business, except as may have been required
by a change in generally accepted accounting principles.
3.6 Compliance with Applicable Laws. (i) Each of Conseco and
its subsidiaries has in effect all Permits necessary for it to own, lease or
operate its properties and assets and to carry on its business as now conducted,
and there has occurred no default under any such Permit. Except as disclosed in
the Filed Conseco SEC Documents, Conseco and its subsidiaries are in compliance
in all material respects with all applicable statutes, laws, ordinances, rules,
orders and regulations of any Governmental Entity. Except as disclosed in the
Filed Conseco SEC Documents and except for routine examinations by state
Governmental Entities charged with supervision of insurance companies
("Insurance Regulators"), as of the date of this Agreement, to the knowledge of
Conseco, no investigation by any Governmental Entity with respect to Conseco or
any of its subsidiaries is pending or threatened.
(ii) The Annual Statements (including without
limitation the Annual Statements of any separate accounts) for the year ended
December 31, 1995, together with all exhibits and schedules thereto, and any
actuarial opinion, affirmation or certification filed in connection therewith,
and the Quarterly Statements for the periods ended after January 1, 1996,
together with all exhibits and schedules thereto, with respect to each
subsidiary of Conseco that is an Insurance Company, in each case as filed with
the applicable Insurance Regulator of its jurisdiction of domicile, were
prepared in conformity with, present fairly, in all material respects, to the
extent required by and in conformity with SAP, the statutory financial condition
of such Insurance Company at their respective dates and the results of
operations, changes in capital and surplus and cash flow of such Insurance
Company for each of the periods then ended, and were correct in all material
respects when filed and there were no material omissions therefrom when filed.
No deficiencies or violations material to the financial condition or operations
of any Insurance Company have been asserted in writing by any Insurance
Regulator which have not been cured or otherwise resolved to the satisfaction of
such Insurance Regulator and which have not been disclosed in writing to Conseco
prior to the date of this Agreement.
3.7 No Prior Activities. CAF Acquisition has not incurred, and
will not incur, directly or through any subsidiary, any liabilities or
obligations for borrowed money or otherwise, except incidental liabilities or
obligations not for borrowed money incurred in connection with its organization
and except in connection with obtaining financing in connection with the Merger.
Except as contemplated by this Agreement, CAF Acquisition (i) has not engaged,
directly or through any subsidiary, in any business activities of any type or
kind whatsoever, (ii) has not entered into any agreements or arrangements with
any person or entity, and (iii) is not subject to or bound by any obligation or
undertaking.
3.8 Brokers. All negotiations relative to this Agreement
and the transactions contemplated hereby have been carried out by Conseco
directly with the Company, without
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the intervention of any person on behalf of Conseco in such manner as to give
rise to any valid claim by any person against the Company or any of the
Subsidiaries for a finder's fee, brokerage commission, or similar payment.
3.9 Financing. At the Effective Time, Conseco will have
sufficient funds to pay the aggregate Cash Consideration and any other cash
payable in respect of Shares pursuant to Section 1.9, on the terms and subject
to the conditions contemplated by this Agreement.
ARTICLE IV
ADDITIONAL AGREEMENTS
4.1 Preparation of Form S-4 and the Proxy
Statement/Prospectus; Information Supplied. (a) As soon as practicable following
the date of this Agreement, the Company and Conseco shall prepare and file with
the SEC the Proxy Statement and Conseco shall prepare and file with the SEC the
Form S-4 and the Proxy Statement and Prospectus required pursuant to such Form
shall be included (the "Proxy Statement/Prospectus"). Each of the Company and
Conseco shall use its best efforts to have the Form S-4 declared effective under
the Securities Act as promptly as practicable after such filing. The Company
shall use its best efforts to cause the Proxy Statement/Prospectus to be mailed
to the Company's shareholders as promptly as practicable after the Form S-4 is
declared effective under the Securities Act. Conseco shall also take any action
(other than qualifying to do business in any jurisdiction in which it is not now
so qualified) required to be taken under any applicable state securities laws in
connection with the issuance of Conseco Common Stock in the Merger and the
Company shall furnish all information concerning the Company and the holders of
the Common Stock as may be reasonably requested in connection with any such
action.
(b) The Company agrees that none of the information supplied
or to be supplied by the Company specifically for inclusion or incorporation by
reference in (i) the Form S-4 will, at the time the Form S-4 is filed with the
SEC, at any time it is amended or supplemented or at the time it becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading or (ii) the Proxy
Statement will, at the date it is first mailed to the Company's shareholders or
at the time of the Shareholders Meeting (as defined in Section 4.2), contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading. The Proxy
Statement will comply as to form in all material respects with the requirements
of the Exchange Act and the rules and regulations thereunder, except with
respect to statements made or incorporated by reference therein based on
information supplied by Conseco or CAF Acquisition specifically for inclusion or
incorporated by reference in the Proxy Statement.
(c) Conseco agrees that none of the information supplied or to
be supplied by Conseco or CAF Acquisition specifically for inclusion or
incorporation by reference in (i) the Form S-4 will, at the time the Form S-4 is
filed with the SEC, at any time it is amended or supplemented or at the time it
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading. The Form S-4 and the
Prospectus
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contained therein will comply as to form in all material respects with the
requirements of the Securities Act and the rules and regulations promulgated
thereunder, except with respect to statements made or incorporated by reference
in either the Form S-4 or the Prospectus based on information supplied by the
Company specifically for inclusion or incorporation by reference therein.
4.2 Meeting of Shareholders. The Company will take all action
necessary in accordance with applicable law and its Articles of Incorporation
and the Code of Regulations to convene a meeting of its shareholders (the
"Shareholders Meeting") to consider and vote upon the adoption of this
Agreement. Subject to Section 4.9 hereof, the Company will, through its Board of
Directors, recommend to its shareholders the adoption of this Agreement. Without
limiting the generality of the foregoing, the Company agrees that, subject to
its right to terminate this Agreement pursuant to Section 4.9, its obligations
pursuant to the first sentence of Section 4.2 shall not be affected by (i) the
commencement, public proposal, public disclosure or communication to the Company
of any Acquisition Proposal (as defined in Section 4.8) or (ii) the withdrawal
or modification by the Board of Directors of the Company of its approval or
recommendation of this Agreement or the Merger. The Company will use its best
efforts to hold the Shareholders Meeting and (subject to Section 4.9 hereof) to
obtain the favorable votes of its shareholders as soon as practicable after the
date hereof.
4.3 Letter of the Company's Accountants. The Company shall use
its best efforts to cause to be delivered to Conseco a letter of KPMG Peat
Marwick L.L.P., the Company's independent public accountants, dated a date
within two business days before the date on which the Form S-4 shall become
effective and a letter of KPMG Peat Marwick L.L.P., dated a date within two
business days before the Closing Date, addressed to Conseco, in form and
substance reasonably satisfactory to Conseco and customary in scope and
substance for letters delivered by independent public accountants in connection
with registration statements similar to the Form S-4.
4.4 Letter of Conseco's Accountants. Conseco shall use its
best efforts to cause to be delivered to the Company a letter of Coopers &
Lybrand L.L.P., Conseco's independent public accountants, dated a date within
two business days before the date on which the Form S-4 shall become effective
and a letter of Coopers & Lybrand L.L.P., dated a date within two business days
before the Closing Date, each addressed to the Company, in form and substance
reasonably satisfactory to the Company and customary in scope and substance for
letters delivered by independent public accountants in connection with
registration statements similar to the Form S-4.
4.5 Access to Information; Confidentiality. Upon reasonable
notice, each of the Company and Conseco shall, and shall cause each of its
respective subsidiaries to, afford to the other party and to the officers,
employees, counsel, financial advisors and other representatives of such other
party reasonable access during normal business hours during the period prior to
the Effective Time to all its properties, books, contracts, commitments,
personnel and records and, during such period, each of the Company and Conseco
shall, and shall cause each of its respective subsidiaries to, furnish as
promptly as practicable to the other party such information concerning its
business, properties, financial condition, operations and personnel as such
other party may from time to time reasonably request. Except as required by law,
Conseco will hold, and will cause its respective directors, officers, partners,
employees, accountants, counsel, financial advisors and other representatives
and affiliates to hold, any nonpublic information obtained from the Company in
confidence to the extent
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required by, and in accordance with, the provisions of the letter dated August
12, 1996, between Conseco and the Company (the "Confidentiality Agreement").
Except as required by law, the Company will hold, and will cause its directors,
officers, partners, employees, accountants, counsel, financial advisors and
other representatives and affiliates to hold, any nonpublic information obtained
from Conseco in confidence to the same extent that Conseco is required to hold
information of the Company in confidence pursuant to the Confidentiality
Agreement.
4.6 Best Efforts. Upon the terms and subject to the conditions
and other agreements set forth in this Agreement, each of the parties agrees to
use its best efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, and to assist and cooperate with the other parties in doing,
all things necessary, proper or advisable to consummate and make effective, in
the most expeditious manner practicable, the Merger and the other transactions
contemplated by this Agreement.
4.7 Public Announcements. Conseco and CAF Acquisition, on the
one hand, and the Company, on the other hand, will consult with each other
before issuing, and provide each other the opportunity to review and comment
upon, any press release or other public statements with respect to the
transactions contemplated by this Agreement, including the Merger, and shall not
issue any such press release or make any such public statement prior to such
consultation, except as may be required by applicable law, court process or by
obligations pursuant to any listing agreement with any national securities
exchange.
4.8 Acquisition Proposals. The Company shall not, nor shall it
permit any of its subsidiaries to, nor shall it authorize or permit any officer,
director or employee of, or any investment banker, attorney or other advisor or
representative of, the Company or any of its subsidiaries to, directly or
indirectly, (i) solicit, initiate or encourage the submission of any Acquisition
Proposal (as herein after defined) or (ii) participate in any discussions or
negotiations regarding, or furnish to any person any information with respect
to, or take any other action to facilitate any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead to, any
Acquisition Proposal; provided, however, that nothing contained in this Section
4.8 shall prohibit the Board of Directors of the Company from furnishing
information to, or entering into discussions or negotiations with, any person or
a entity that makes an unsolicited Acquisition Proposal if, and only to the
extent that (A) the Board of Directors of the Company, after consultation with
and based upon the advice of outside counsel, determines in good faith that such
action is necessary for the Board of Directors of the Company to comply with its
fiduciary duties to the Company under applicable law and (B) prior to taking
such action, the Company (x) provides reasonable notice to Conseco to the effect
that it is taking such action and (y) receives from such person or entity an
executed confidentiality agreement in reasonably customary form. Notwithstanding
anything in this Agreement to the contrary, the Company shall promptly advise
Conseco orally and in writing of the receipt by it (or any of the other entities
or persons referred to above) after the date hereof of any Acquisition Proposal,
of any inquiry which could lead to any Acquisition Proposal, the material terms
and conditions of such Acquisition Proposal or inquiry, and the identity of the
person making any such Acquisition Proposal or inquiry. The Company will keep
Conseco informed of the status and details of any such Acquisition Proposal or
inquiry. For purposes of this Agreement, "Acquisition Proposal" means any bona
fide proposal with respect to a merger, consolidation, share exchange or similar
transaction involving the Company or any Subsidiary of the Company, or any
purchase of all or any significant portion
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of the assets of the Company or any Subsidiary of the Company, or any equity
interest in the Company or any Subsidiary of the Company, other than the
transactions contemplated hereby.
4.9 Fiduciary Duties. The Board of Directors of the Company
shall not (i) withdraw or modify, in a manner materially adverse to Conseco or
CAF Acquisition, the approval or recommendation by such Board of Directors of
this Agreement or the Merger, (ii) approve or recommend an Acquisition Proposal
or (iii) enter into any agreement with respect to any Acquisition Proposal,
unless the Company receives an Acquisition Proposal and the Board of Directors
of the Company determines in good faith, following consultation with outside
counsel, that in order to comply with its fiduciary duties to the Company under
applicable law it is necessary for the Board of Directors to withdraw or modify,
in a manner materially adverse to Conseco or CAF Acquisition, its approval or
recommendation of this Agreement or the Merger, approve or recommend such
Acquisition Proposal, enter into an agreement with respect to such Acquisition
Proposal or terminate this Agreement. In the event the Board of Directors of the
Company takes any of the foregoing actions, the Company shall, concurrently with
the taking of any such action, pay to Conseco the Section 4.17 Fee (as defined
below). Nothing contained in this Section 4.9 shall prohibit the Company from
taking and disclosing to its shareholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act or from making any disclosure to the
Company's shareholders which, in the good faith reasonable judgment of the Board
of Directors of the Company based on the advice of outside counsel, is required
under applicable law; provided that the Company does not withdraw or modify, in
a manner materially adverse to Conseco or CAF Acquisition, its position with
respect to the Merger or approve or recommend an Acquisition Proposal.
Notwithstanding anything contained in this Agreement to the contrary, any action
by the Board of Directors permitted by this Section 4.9 shall not constitute a
breach of this Agreement by the Company.
4.10 Consents, Approvals and Filings. The Company and Conseco
will make and cause their respective subsidiaries to make all necessary filings,
as soon as practicable, including, without limitation, those required under the
HSR Act, the Securities Act, the Exchange Act, and applicable state insurance
laws in order to facilitate prompt consummation of the Merger and the other
transactions contemplated by this Agreement. In addition, the Company and
Conseco will each use their best efforts, and will cooperate fully with each
other (i) to comply as promptly as practicable with all governmental
requirements applicable to the Merger and the other transactions contemplated by
this Agreement and (ii) to obtain as promptly as practicable all necessary
permits, orders or other consents of Governmental Entities and consents of all
third parties necessary for the consummation of the Merger and the other
transactions contemplated by this Agreement. Each of the Company and Conseco
shall use best efforts to promptly provide such information and communications
to Governmental Entities as such Governmental Entities may reasonably request.
Each of the parties shall provide to the other party copies of all applications
in advance of filing or submission of such applications to Governmental Entities
in connection with this Agreement and shall make such revisions thereto as
reasonably requested by such other party. Each party shall provide to the other
party the opportunity to participate in all meetings and material conversations
with Governmental Entities.
4.11 Employee Matters. (i) From and after the Effective Time,
Conseco shall, with respect to benefits accrued, honor in accordance with their
respective terms the employee benefit plans, programs, policies, arrangements
and agreements listed on Section 4.11 of the Disclosure Schedule (the "Section
4.11 Plans") and shall not take, or permit to be
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taken, any action that would reduce, eliminate or otherwise adversely affect the
compensation accrued or benefits accrued at the Effective Time (or, if greater,
at termination of employment after the Effective Time) for any employee or
former employee of the Company or any Company Affiliate under any Section 4.11
Plan. For purposes of any Section 4.11 Plan that contains a provision relating
to a change in control of the Company, Conseco acknowledges that the
consummation of the Merger constitutes such a change in control.
(ii) For the year ending December 31, 1996, the
Company or the Surviving Corporation shall pay to each employee of the Company
and/or its Subsidiaries who is entitled to receive a cash bonus under the bonus
arrangement established by the Company prior to the date of this Agreement (the
"Bonus") and who is an employee of the Company or its Subsidiaries as of the
Effective Time (each, a "Bonus Payee"), one or more cash payments as follows:
(a) with respect to the non-discretionary portion of the Bonus, the amount
thereof shall be calculated in accordance with the terms of the Bonus and shall
be paid at the time it is determined in accordance with past practice, whether
or not any Bonus Payee is then an employee of the Company or the Surviving
Corporation; provided, that if the employment with the Company of any Bonus
Payee is terminated between the Effective Time and December 31, 1996, such Bonus
Payee shall be entitled to receive a prorated portion thereof based on the
number of days that such Bonus Payee was employed by the Company or the
Surviving Corporation during the year ending December 31, 1996 (the "Prorated
Portion") and (b) with respect to the discretionary portion of the Bonus, the
amount thereof shall equal 75% of the amount previously established by the
Company as the maximum to be paid as a discretionary award for 1996, which
amount shall be paid in cash at the earlier of (i) the time of the payment of
the non-discretionary portion of the Bonus and (ii) termination of any Bonus
Payee's employment with the Company or the Surviving Corporation; provided, that
if the employment with the Company of any Bonus Payee is terminated between the
Effective Time and December 31, 1996, upon termination such Bonus Payee shall be
paid the Prorated Portion.
4.12 Affiliates and Certain Shareholders. Prior to the Closing
Date, the Company shall deliver to Conseco a letter identifying all persons who
are, at the time the Merger is submitted for approval to the shareholders of the
Company, "affiliates" of the Company for purposes of Rule 145 under the
Securities Act. The Company shall use its best efforts to cause each such person
to deliver to Conseco on or prior to the Closing Date a written agreement
substantially in the form attached as Exhibit A to the Disclosure Schedule.
Conseco shall not be required to maintain the effectiveness of the Form S-4 or
any other registration statement under the Securities Act for the purposes of
resale of Conseco Common Stock by such affiliates. Conseco Common Stock received
by such affiliates in the Merger shall bear a customary legend regarding
applicable Securities Act restrictions and the provisions of this Agreement.
If any such affiliate is unable because of the volume limitations of
Rule 144 of the SEC to sell pursuant to Rule 144 the shares of Conseco Common
Stock received by such affiliate as Merger Consideration and still held by such
affiliate, such affiliate shall have the right, for so long as any such balance
of the affiliate's Merger Consideration is not eligible for immediate sale under
the applicable provisions of Rule 144, to require Conseco to elect, in Conseco's
sole discretion, with respect to such balance, either to (i) acquire such shares
directly from such affiliate at the current market price, (ii) amend the Form
S-4 and maintain its effectiveness to provide for registration of such shares or
(iii) file promptly and in any event
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within 10 business days a Registration Statement on Form S-3 with the SEC to
register such shares for resale by such affiliate and provide customary
indemnities with respect thereto.
4.13 NYSE Listing. Conseco shall use its best efforts to cause
the shares of Conseco Common Stock to be issued in the Merger to be approved for
listing on the NYSE, subject to official notice of issuance, prior to the
Closing Date.
4.14 Shareholder Litigation. The Company shall give Conseco
the opportunity to participate in the defense or settlement of any shareholder
litigation against the Company and its directors relating to the transactions
contemplated by this Agreement; provided, however, that no such settlement shall
be agreed to without Conseco's consent, which consent shall not be unreasonably
withheld.
4.15 Indemnification. (a) The articles of incorporation and
the code of regulations of the Surviving Corporation and each of its
subsidiaries shall contain the provisions with respect to indemnification set
forth in the Articles of Incorporation and the Code of Regulations of the
Company or the respective Subsidiary, as the case may be, on the date of this
Agreement, and such provisions shall not be amended, repealed or otherwise
modified for a period of six years after the Effective Time in any manner that
would adversely affect the rights thereunder of individuals who at any time
prior to the Effective Time were directors or officers of the Company or any of
its subsidiaries (the "Indemnified Parties") in respect of actions or omissions
occurring at or prior to the Effective Time (including, without limitation, the
transactions contemplated by this Agreement), unless such modification is
required by law. Conseco agrees to be jointly and severally liable for the
indemnification obligations of the Company to the Indemnified Parties, as set
forth above.
(b) From and after the Effective Time, Conseco shall honor in
accordance with their respective terms the indemnification agreements identified
in Section 4.15 of the Disclosure Schedule and shall not take, or permit to be
taken, any action that would reduce, eliminate or otherwise adversely affect the
rights of the persons entitled to indemnification thereunder.
(c) For a period of two years after the Effective Time,
Conseco shall cause to be maintained officers' and directors' liability
insurance covering the Indemnified Parties who are currently covered, in their
capacities as officers and directors, by the Company's existing officers' and
directors' liability insurance policies on terms substantially no less
advantageous to the Indemnified Parties than such existing insurance.
(d) The provisions of this Section 4.15 are intended to be for
the benefit of, and shall be enforceable by, each Indemnified Party, his heirs
and his personal representatives and shall be binding on all successors and
assigns of Conseco, CAF Acquisition, the Company and the Surviving Corporation.
4.16 Capitol Insurance Company of Ohio. The Company shall use
its reasonable best efforts to have control of Capitol Insurance Company of
Ohio, a mutual association organized under the Ohio Non-Profit Corporation Law,
transferred to Conseco.
4.17 Certain Fees. The Company shall pay to Conseco upon
demand $15
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million (the "Section 4.17 Fee"), payable in same-day funds, if a bona fide
Acquisition Proposal is commenced, publicly proposed, publicly disclosed or
communicated to the Company (or the willingness of any person to make such an
Acquisition Proposal is publicly disclosed or communicated to the Company) and
the Board of Directors of the Company, in accordance with Section 4.9, withdraws
or modifies in a manner materially adverse to Conseco its approval or
recommendation of this Agreement or the Merger, approves or recommends such
Acquisition Proposal, enters into an agreement with respect to such Acquisition
Proposal or terminates this Agreement.
ARTICLE V
COVENANTS RELATING TO CONDUCT
OF BUSINESS PRIOR TO MERGER
5.1 Conduct of Business by the Company. Except as contemplated
by this Agreement or as set forth in Section 5.1 of the Disclosure Schedule,
during the period from the date of this Agreement to the Effective Time, the
Company shall, and shall cause its subsidiaries to, act and carry on their
respective businesses in the ordinary course of business and, to the extent
consistent therewith, use reasonable efforts to preserve intact their current
business organizations, keep available the services of their current key
officers and employees and preserve the goodwill of those engaged in material
business relationships with them. The Company agrees throughout such time to
allow representatives of Conseco to have access to the management and other
personnel of the Company so that Conseco can be fully informed at all times as
to significant day-to-day executive, legal, financial, marketing and other
operational matters involving the Company, its Subsidiaries or their businesses.
Prior to taking or approving any action with respect to any such significant
matters involving the Company, management of the Company will notify the
representative of Conseco designated by Conseco for oversight of the functional
area(s) involved with such decision and will, if consistent with the legal or
fiduciary obligations of such officer or the Directors of the Company, follow
any suggestions made by the Conseco representative with respect to the proposed
action. During such time, the Company will cause its personnel to cooperate with
personnel from Conseco in preparing for any proposed relocation by Conseco of
the Company's operations following Closing. Without limiting the generality of
the foregoing, during the period from the date of this Agreement to the
Effective Time, the Company shall not, and shall not permit any of its
subsidiaries to, without the prior consent of Conseco:
(i) (x) declare, set aside or pay any dividends on, or make
any other distributions (whether in cash, stock or property) in respect
of, any of the Company's outstanding capital stock (other than regular
quarterly cash dividends not in excess of $0.10 per Share, with usual
record and payment dates and in accordance with the Company's present
dividend policy), (y) split, combine or reclassify any of its
outstanding capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for
shares of its outstanding capital stock, or (z) purchase, redeem or
otherwise acquire any shares of outstanding capital stock or any
rights, warrants or options to acquire any such shares;
(ii) issue, sell, grant, pledge or otherwise encumber any
shares of its capital stock, any other voting securities or any
securities convertible into, or any rights, warrants or options to
acquire, any such shares, voting securities or convertible
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securities other than upon the exercise of Company Stock Options
outstanding on the date of this Agreement;
(iii) amend its Articles of Incorporation, the Code of
Regulations or other comparable charter or organizational documents;
(iv) acquire any business or any corporation, partnership,
joint venture, association or other business organization or division
thereof;
(v) sell, mortgage or otherwise encumber or subject to any
Lien or otherwise dispose of any of its properties or assets that are
material to the Company and its subsidiaries taken as a whole, except
in the ordinary course of business;
(vi) (x) incur any indebtedness for borrowed money or
guarantee any such indebtedness of another person, other than (A)
indebtedness owing to or guarantees of indebtedness owing to the
Company or any direct or indirect wholly-owned subsidiary of the
Company, (B) indebtedness incurred by the Company in connection with
the declaration and payment of the regular quarterly dividend or (C)
indebtedness incurred by the Company in connection with the payment of
its expenses relating to this Agreement and the transactions
contemplated hereby, subject to the limitation set forth in Section
10.2 or (y) make any loans or advances to any other person, other than
(A) to the Company, or to any direct or indirect wholly-owned
subsidiary of the Company, (B) routine advances to agents of the
Company or (C) special individual advances of not more than $30,000
each to agents of the Company;
(vii) make any tax election or settle or compromise any income
tax liability that would reasonably be expected to be material to the
Company and its subsidiaries taken as a whole;
(viii) pay, discharge, settle or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or
satisfaction, in the ordinary course of business consistent with past
practice or in accordance with their terms, of liabilities reflected or
reserved against in, or contemplated by, the most recent consolidated
financial statements (or the notes thereto) of the Company included in
the Filed SEC Documents or incurred since the date of such financial
statements in the ordinary course of business consistent with past
practice;
(ix) except as otherwise provided in the investment guidelines
to be contained in the investment advisory agreements specified in
Section 5.6 hereof, invest its future cash flow, any cash from matured
and maturing investments, any cash proceeds from the sale of its assets
and properties, and any cash funds currently held by it, in any
investments (which investments shall, in each case, be classified as
available-for-sale in accordance with SFAS 115, as defined in Section
5.6) other than cash equivalent assets or in short-term investments
(consisting of United States government issued or guaranteed
securities, or commercial paper rated A-I or P-1), except (i) as
otherwise required by law, (ii) as required to provide cash (in the
ordinary course of business and consistent with past practice) to meet
its actual or anticipated obligations or (iii) publicly-traded
corporate bonds that are rated investment grade by at least two
nationally recognized statistical rating organizations;
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(x) except as may be required by law,
(i) make any change to, or amend in any way,
the contracts, salaries, wages, or other compensation of any
employee or any agent or consultant of the Company or any
subsidiary other than routine changes or amendments that are
required under existing contracts or by law;
(ii) adopt, enter into, amend, alter or
terminate, partially or completely, any Benefit Plan or any
election made pursuant to the provisions of any Benefit Plan,
to accelerate any payments, obligations or vesting schedules
under any Benefit Plan;
(iii) approve any general or company-wide pay
increases for employees; or
(iv) make any representation or promise, oral
or written, to any employee or former director, officer or
employee of the Company or any subsidiary to do any of the
foregoing;
(xi) except in the ordinary course of business, modify, amend
or terminate any material agreement, permit, concession, franchise,
license or similar instrument to which the Company or any subsidiary is
a party or waive, release or assign any material rights or claims
thereunder;
(xii) hold any meeting of the Board of Directors of the
Company or any Subsidiary or any committee of any such board, or take
any action by written consent of any such board or committee, without
providing to Conseco (i) written notice of any such meeting or any
proposed action by written consent at the same time such notice or
action is provided to the directors and (ii) an agenda of any specific
matters to be considered at such meeting or a copy of the proposed
written consent; or
(xiii) authorize any of, or commit or agree to take any of,
the foregoing actions.
5.2 Conduct of Business by Conseco. During the period from the
date of this Agreement to the Effective Time, Conseco shall, and shall cause its
subsidiaries to, carry on their respective businesses in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted and, to
the extent consistent therewith, use all reasonable efforts to preserve intact
their current business organizations, keep available the services of their
current officers and employees and preserve their relationships with customers,
suppliers, licensors, licensees, distributors and others having business
dealings with them to the end that their goodwill and ongoing businesses shall
be unimpaired at the Effective Time. Except as set forth in Sections 3.5 or 5.2
of the Conseco Disclosure Schedule, without limiting the generality of the
foregoing, during the period from the date of this Agreement to the Effective
Time, Conseco shall not, and shall not permit any of its subsidiaries to:
(i) (x) declare, set aside or pay any dividends on, or make
any other distributions (whether in cash, stock or property) in respect of, any
outstanding capital stock of Conseco (other than regular quarterly cash
dividends of $.0625 per share of Conseco Common Stock and regular cash dividends
on the Conseco Series D Preferred Stock and the
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Conseco PRIDES, in each case with usual record and payment dates and in
accordance with Conseco's Articles of Incorporation and its present dividend
policy) or (y) split, combine or reclassify any of its outstanding capital stock
or issue or authorize the issuance of any other securities in respect of, in
lieu of or in substitution for shares of Conseco's outstanding capital stock;
(ii) issue, sell, grant, pledge or otherwise encumber any
shares of its capital stock, any other voting securities or any
securities convertible into, or any rights, warrants or options to
acquire, any such shares, voting securities or convertible securities,
in each case if any such action could reasonably be expected to (A)
delay materially the date of mailing of the Proxy Statement/Prospectus
or, (B) if it were to occur after such date of mailing, require an
amendment of the Proxy Statement/Prospectus;
(iii) acquire any business or any corporation, partnership,
joint venture, association or other business organization or division
thereof, in each case if any such action could reasonably be expected
to (A) delay materially the date of mailing of the Proxy
Statement/Prospectus or, (B) if it were to occur after such date of
mailing, require an amendment of the Proxy Statement/Prospectus; or
(iv) authorize any of, or commit or agree to take any of,
the foregoing actions.
5.3 Stock Options and Restricted Shares. (i) The Company
agrees to use its best efforts, including without limitation additional actions
by its Board of Directors or the committee thereof which administers the Company
Stock Option Plan, to cause to be made such clarifications, modifications,
amendments or supplements to the Company Stock Option Plan and to the agreements
evidencing outstanding Company Stock Options and Restricted Shares to give
effect to the desires and intentions of the parties with respect to Company
Stock Options and Restricted Shares as contemplated by this Agreement, including
the following:
(a) The treatment of the Company Stock Options and Restricted
Shares in accordance with Section 1.9; and
(b) The Board of Directors of the Company shall approve the
disposition of Company Stock Options and Restricted Shares to the
Company pursuant to Section 1.9(e) in accordance with New Section 16 in
a manner intended to exempt the disposition from Section 16(b) of the
Exchange Act.
(ii) Conseco agrees to use its best efforts, including without
limitation additional actions by its Board of Directors or the committee thereof
which administers compensation, to give effect to the following desires and
intentions of the parties with respect to Company Stock Options and Restricted
Shares which remain outstanding immediately prior to the Effective Time:
(a) Conseco shall take all corporate action necessary to
reserve for issuance a sufficient number of shares of Conseco Common
Stock for delivery upon exercise of the New Conseco Options. Following
the Effective Time, Conseco will issue the Conseco Common Shares
required to be issued upon the exercise of any New Conseco
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Options as provided in Section 1.9. As soon as practicable after the
Effective Time, Conseco shall file a registration statement on Form S-8
(or any successor form) or another appropriate form with respect to the
shares of Conseco Common Stock subject to the New Conseco Options and
shall use its best efforts to maintain the effectiveness of such
registration statement or registration statements (and maintain the
current status of the prospectus or prospectuses contained therein) for
so long as New Conseco Options remain outstanding.
(b) The Board of Directors of Conseco shall approve the grant
of the New Conseco Options in accordance with New Section 16 in a
manner intended to exempt the grant from Section 16(b) of the Exchange
Act.
(iii) The parties agree that after the date hereof, except for
the Company Stock Options and Restricted Shares outstanding on the date hereof
and the changes thereto, as described in the Disclosure Schedule, no options,
warrants or other rights of any kind to purchase capital stock of the Company
shall be granted or made, under the Company Stock Plan or otherwise, and no
amendment, repricing or other change to the outstanding Company Stock Options
and Restricted Shares shall be made, without the prior written consent of
Conseco, and any such grant, issuance, amendment, repricing or other change
without Conseco's consent shall be null, void and unenforceable against the
Surviving Corporation or Conseco.
5.4 Other Actions. Except as otherwise contemplated by this
Agreement, the Company and Conseco shall not, and shall not permit any of their
respective subsidiaries to, take any action that would, or that could reasonably
be expected to, result in (i) any of the representations and warranties of such
party set forth in this Agreement becoming untrue as of the date of this
Agreement in any material respect or (ii) any of the conditions of the Merger
set forth in Article VI not being satisfied.
5.5 Conduct of Business of CAF Acquisition. During the period
from the date of this Agreement to the Effective Time, CAF Acquisition shall not
engage in any activities of any nature except as provided in or contemplated by
this Agreement.
5.6 Investment Advisory Agreements. Except with respect to
investments classified on the date of this Agreement as "held-to-maturity" under
Statement of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" ("SFAS 115"), the Company agrees to
enter into, and to cause each of its Subsidiaries to enter into, an investment
advisory agreement with Conseco Capital Management, Inc. ("CCM"), a wholly-owned
subsidiary of Conseco. Such agreements shall be effective as of the date of this
Agreement and shall contain terms and conditions which are customary in
investment advisory agreements between CCM and its clients.
5.7 Certain Company Actions. Notwithstanding any other
provision of this Agreement to the contrary, the Directors of the Company and
its officers and employees shall be entitled to take all actions necessary,
appropriate or desirable to cause the stay pay and severance arrangements
identified in Section 5.1 of the Disclosure Schedule and for the special cash
bonus described in Section 1.9(e) to the Disclosure Schedule to be adopted and
implemented and all payments identified in such Sections 1.9(e) and 5.1 of the
Disclosure Schedule to be paid as provided therein.
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ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions to Each Party's Obligation To Effect the
Merger. The respective obligation of each party to effect the Merger
is subject to the satisfaction or waiver on or prior to the Closing
Date of the following conditions:
(a) Shareholder Approval. This Agreement shall have been
adopted by the affirmative vote of the shareholders of the Company
entitled to cast at least a majority of the votes which all
shareholders of the Company are entitled to cast thereon.
(b) Governmental and Regulatory Consents. All required
consents, approvals, permits and authorizations to the consummation of
the transactions contemplated hereby by the Company, Conseco and CAF
Acquisition shall be obtained from (i) the Insurance Regulators in the
jurisdictions set forth in Section 2.3 of the Disclosure Schedule, and
(ii) any other Governmental Entity whose consent, approval, permission
or authorization is required by reason of a change in law after the
date of this Agreement, unless the failure to obtain such consent,
approval, permission or authorization would not reasonably be expected
to have a material adverse effect on the business, financial condition
or results of operations of the Company and its subsidiaries, taken as
a whole, or on the validity or enforceability of this Agreement;
provided, however, that, notwithstanding the foregoing, in the event
that all governmental and regulatory consents required hereunder shall
have been obtained except the approval of the Insurance Regulator of
any life insurance subsidiary of the Company, which does not constitute
a "significant subsidiary" (within the meaning of Rule 1-02 of
Regulation S-X of the SEC) of the Company (a "Non-Significant Life
Subsidiary") to the transfer of control of such Non-Significant Life
Subsidiary, then, subject to Article VII hereof, at any time thereafter
at the option of Conseco, the parties shall take one of the following
actions with respect to such Non-Significant Life Subsidiary and
otherwise proceed to consummate the Merger in accordance with this
Agreement: (a) place into escrow, pursuant to an escrow agreement
reasonably acceptable to the parties, the outstanding shares of capital
stock of such Non- Significant Life Subsidiary; such escrow agreement
shall contain customary provisions concerning duties and
responsibilities of the escrow agent and payment of the fees and
expenses of the escrow agent and shall provide that (i) pending
transfer of control of the Non-Significant Life Subsidiary to Conseco,
its current Board of Directors shall retain all power to vote its
shares of capital stock and to direct its business not inconsistent
with this Agreement, (ii) promptly following receipt of the approval of
the Insurance Regulator, control of the capital stock of such
Non-Significant Life Subsidiary shall be transferred to Conseco and
(iii) at any time following June 30, 1997 and prior to receipt of the
Insurance Regulator's approval, Conseco may elect to terminate the
escrow agreement, in which event such Non-Significant Life Subsidiary
shall be liquidated and dissolved and the proceeds thereof shall be
paid to Conseco; (b) cause such Non-Significant Life Subsidiary to
surrender its certificate of authority to do business in its state of
domicile; (c) cause such Non-Significant Life Subsidiary to commence
proceedings for its liquidation and dissolution; (d) enter into an
agreement for the sale and transfer of the Non-Significant Life
Subsidiary to a third party; or (e) take such other action as may be
mutually agreeable to the Company and Conseco.
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(c) HSR Act. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated
or shall have otherwise expired.
(d) No Injunctions or Restraints. No temporary restraining
order, preliminary or permanent injunction or other order issued by any
court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Merger shall be in effect; provided,
however, that the parties invoking this condition shall use best
reasonable efforts to have any such order or injunction vacated.
(e) NYSE Listing. The shares of Conseco Common Stock issuable
to the Company's shareholders pursuant to this Agreement shall have
been approved for listing on the NYSE, subject to official notice of
issuance.
(f) Form S-4. The Form S-4 shall have become effective under
the Securities Act and shall not be the subject of any stop order or
proceedings seeking a stop order.
6.2 Conditions to Obligations of Conseco and CAF Acquisition.
The obligations of Conseco and CAF Acquisition to effect the Merger are further
subject to the following conditions:
(a) Representations and Warranties. The representations and
warranties of the Company contained in this Agreement shall have been
true and correct on the date of this Agreement (except to the extent
that they expressly relate only to an earlier time, in which case they
shall have been true and correct as of such earlier time) other than
such breaches of representations and warranties which in the aggregate
(after disregarding any qualification with respect to a material
adverse effect in Section 2.11(iii)) would not reasonably be expected
to have a material adverse effect on the business, financial condition
or results of operations of the Company and its subsidiaries taken as a
whole. The Company shall have delivered to Conseco a certificate dated
as of the Closing Date, signed by its Chief Executive Officer and its
Chief Financial Officer, in their capacities as officers of the
Company, to the effect set forth in this Section 6.2(a).
(b) Performance of Obligations of the Company. The Company
shall have performed in all material respects all obligations required
to be performed by it under this Agreement at or prior to the Closing
Date, and Conseco shall have received a certificate dated as of the
Closing Date signed on behalf of the Company by the chief executive
officer and the chief financial officer of the Company to such effect.
(c) Shareholders Agreement. The Shareholders thereunder shall
have complied with their respective obligations under the Shareholders
Agreement, dated the date hereof, by and among Conseco and the shareholders of
the Company parties thereto (the "Shareholders Agreement").
6.3 Conditions to Obligation of the Company. The obligation
of the Company to effect the Merger is further subject to the following
conditions:
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(a) Representations and Warranties. The representations and
warranties of Conseco and CAF Acquisition contained in this Agreement
shall have been true and correct on the date of this Agreement (except
to the extent that they expressly relate only to an earlier time, in
which case they shall have been true and correct as of such earlier
time), other than such breaches of representations and warranties which
in the aggregate would not reasonably be expected to have a material
adverse effect on the business, financial condition or results of
operations of Conseco and its subsidiaries taken as a whole. Conseco
shall have delivered to the Company a certificate dated as of the
Closing Date, signed by its Chief Executive Officer and its Chief
Financial Officer, in their capacities as officers of Conseco, to the
effect set forth in this Section 6.3(a).
(b) Performance of Obligations of Conseco and CAF Acquisition.
Conseco and CAF Acquisition shall have performed in all material
respects all obligations required to be performed by them under this
Agreement at or prior to the Closing Date, and the Company shall have
received a certificate dated as of the Closing Date signed on behalf of
Conseco by the chief executive officer and the chief financial officer
of Conseco to such effect.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated and
abandoned at any time prior to the Effective Time, whether before or after
approval of matters presented in connection with the Merger by the shareholders
of the Company:
(a) by mutual written consent of Conseco and the Company;
(b) by either Conseco or the Company:
(i) if, upon a vote at a duly held
Shareholders Meeting or any adjournment thereof, any required
approval of the shareholders of the Company shall not have
been obtained;
(ii) if the Merger shall not have been
consummated on or before March 31, 1997, unless the failure to
consummate the Merger is the result of a willful and material
breach of this Agreement by the party seeking to terminate
this Agreement;
(iii) if any Governmental Entity shall have
issued an order, decree or ruling or taken any other action
permanently enjoining, restraining or otherwise prohibiting
the Merger and such order, decree, ruling or other action
shall have become final and nonappealable; or
(iv) if the Board of Directors of the Company
shall have exercised its rights set forth in Section 4.9 of
this Agreement.
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7.2 Effect of Termination. In the event of termination of this
Agreement by either the Company or Conseco as provided in Section 7.1, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Conseco, CAF Acquisition or the Company, other than
the last two sentences of Section 4.5 and Sections 2.14, 3.8, 4.17, 7.2 and
10.2. Nothing contained in this Section shall relieve any party from any
liability resulting from any material breach of the representations, warranties,
covenants or agreements set forth in this Agreement.
7.3 Amendment. Subject to the applicable provisions of the
Ohio Code, at any time prior to the Effective Time, the parties hereto may
modify or amend this Agreement, by written agreement executed and delivered by
duly authorized officers of the respective parties; provided, however, that
after approval of the Merger by the shareholders of the Company, no amendment
shall be made which reduces the consideration payable in the Merger or adversely
affects the rights of the Company's shareholders hereunder without the approval
of such shareholders. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties.
7.4 Extension; Waiver. At any time prior to the Effective
Time, the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties of the other parties contained in this
Agreement or in any document delivered pursuant to this Agreement or (c) subject
to Section 7.3, waive compliance with any of the agreements or conditions of the
other parties contained in this Agreement. Any agreement on the part of a party
to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party. The failure of any party
to this Agreement to assert any of its rights under this Agreement or otherwise
shall not constitute a waiver of such rights.
7.5 Procedure for Termination, Amendment, Extension or Waiver.
A termination of this Agreement pursuant to Section 7.1, an amendment of this
Agreement pursuant to Section 7.3 or an extension or waiver pursuant to Section
7.4 shall, in order to be effective, require in the case of Conseco, CAF
Acquisition or the Company action by its Board of Directors or the duly
authorized designee of its Board of Directors.
ARTICLE VIII
SURVIVAL OF PROVISIONS
8.1 Survival. The representations and warranties respectively
required to be made by the Company, Conseco and CAF Acquisition in this
Agreement, or in any certificate, respectively, delivered by the Company or
Conseco pursuant to Section 6.2 or Section 6.3 hereof will not survive the
Closing.
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ARTICLE IX
NOTICES
9.1 Notices. All notices and other communications under this
Agreement must be in writing and will be deemed to have been duly given if
delivered, telecopied or mailed, by certified mail, return receipt requested,
first-class postage prepaid, to the parties at the following addresses:
If to the Company, to:
Capitol American Financial Corporation
1001 Lakeside Avenue
Cleveland, OH 44114
Attention: David H. Gunning
Chairman, President
and Chief Executive Officer
Telephone: (216) 363-6306
Telecopy: (216) 363-6373
with copies to:
Jones, Day, Reavis & Pogue
599 Lexington Avenue
New York, New York 10022
Attention: Joanne L. Bober
Telephone: (212) 326-3939
Telecopy: (212) 755-7306
If to Conseco, to:
Conseco
11825 N. Pennsylvania Street
Carmel, Indiana 46032
Attention: Lawrence W. Inlow, Esq.
Telephone: (317) 817-6163
Telecopy: (317) 817-6327
If to CAF Acquisition, to:
CAF Acquisition
11825 N. Pennsylvania Street
Carmel, Indiana 46032
Attention: Lawrence W. Inlow, Esq.
Telephone: (317) 817-6163
Telecopy: (317) 817-6327
All notices and other communications required or permitted under this Agreement
that are addressed as provided in this Article IX will, if delivered personally,
be deemed given upon delivery, will, if delivered by telecopy, be deemed
delivered when confirmed and will, if
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delivered by mail in the manner described above, be deemed given on the third
Business Day after the day it is deposited in a regular depository of the United
States mail. Any party from time to time may change its address for the purpose
of notices to that party by giving a similar notice specifying a new address,
but no such notice will be deemed to have been given until it is actually
received by the party sought to be charged with the contents thereof.
ARTICLE X
MISCELLANEOUS
10.1 Entire Agreement. Except for documents executed by the
Company, Conseco and CAF Acquisition pursuant hereto, this Agreement supersedes
all prior discussions and agreements between the parties with respect to the
subject matter of this Agreement, and this Agreement (including the exhibits
hereto, the Disclosure Schedule, the Conseco Disclosure Schedule and other
documents delivered in connection herewith), the Shareholders Agreement and the
Confidentiality Agreement contain the sole and entire agreement between the
parties hereto with respect to the subject matter hereof.
10.2 Expenses. Except as provided in Section 4.17, whether or
not the Merger is consummated, each of the Company, Conseco and CAF Acquisition
will pay its own costs and expenses incident to preparing for, entering into and
carrying out this Agreement and the consummation of the transactions
contemplated hereby except that the expenses incurred in connection with the
printing, mailing and distribution of the Proxy Statement/Prospectus and the
preparation and filing of the Form S-4 shall be borne equally by Conseco and the
Company. The Company agrees and covenants that the fees and expenses of the
Company's legal and investment banking advisors (including DLJ) incurred in
connection with the Merger (but excluding reasonable fees and expenses incurred
in connection with related litigation) shall not exceed $5,000,000.
10.3 Counterparts. This Agreement may be executed in one or
more counterparts, each of which will be deemed an original, but all of which
will constitute one and the same instrument and shall become effective when one
or more counterparts have been signed by each of the parties and delivered to
the other parties.
10.4 No Third Party Beneficiary. Except as otherwise provided
herein, the terms and provisions of this Agreement are intended solely for the
benefit of the parties hereto, and their respective successors or assigns, and
it is not the intention of the parties to confer third-party beneficiary rights
upon any other person.
10.5 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Ohio, regardless of the
laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
10.6 Assignment; Binding Effect. Neither this Agreement nor
any of the rights, interests or obligations under this Agreement shall be
assigned, in whole or in part, by operation of law or otherwise by any of the
parties without the prior written consent of the other parties, and any such
assignment that is not consented to shall be null and void. Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit of
and be enforceable by, the parties and their respective successors and assigns.
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10.7 Headings, Gender, etc. The headings used in this
Agreement have been inserted for convenience and do not constitute matter to be
construed or interpreted in connection with this Agreement. Unless the context
of this Agreement otherwise requires, (a) words of any gender are deemed to
include each other gender; (b) words using the singular or plural number also
include the plural or singular number, respectively; (c) the terms "hereof,"
"herein," "hereby," "hereto," and derivative or similar words refer to this
entire Agreement; (d) the terms "Article" or "Section" refer to the specified
Article or Section of this Agreement; (e) all references to "dollars" or "$"
refer to currency of the United States of America; and (f) the term "person"
shall include any natural person, corporation, limited liability company,
general partnership, limited partnership, or other entity, enterprise, authority
or business organization.
10.8 Invalid Provisions. If any provision of this Agreement is
held to be illegal, invalid, or unenforceable under any present or future law,
and if the rights or obligations of the Company or Conseco under this Agreement
will not be materially and adversely affected thereby, (a) such provision will
be fully severable; (b) this Agreement will be construed and enforced as if such
illegal, invalid, or unenforceable provision had never comprised a part hereof;
and (c) the remaining provisions of this Agreement will remain in full force and
effect and will not be affected by the illegal, invalid, or unenforceable
provision or by its severance herefrom.
10.9 Waiver of Jury Trial. Each party to this Agreement
waives, to the fullest extent permitted by applicable law, any right it may have
to a trial by jury in respect of any action, suit or proceeding arising out of
or relating to this Agreement.
10.10 Enforcement. The parties hereto agree that irreparable
damage would occur in the event any provision of this Agreement was not
performed in accordance with the terms hereof or were otherwise breached,
therefore the parties will be entitled to an injunction or injunctions to
prevent breaches of this Agreement and to enforce specifically the terms and
provisions hereof, in addition to any other remedy at law or in equity.
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IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of the Company, Conseco and CAF
Acquisition effective as of the date first written above.
CONSECO, INC.
By: /s/ Stephen C. Hilbert
----------------------
Stephen C. Hilbert
Chairman of the Board, President and Chief
Executive Officer
CAF ACQUISITION COMPANY
By: /s/ Stephen C. Hilbert
----------------------
Stephen C. Hilbert
President
CAPITOL AMERICAN FINANCIAL CORPORATION
By: /s/ David H. Gunning
--------------------
David H. Gunning
Chairman of the Board, President and Chief
Executive Officer
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Exhibit 99.1
- ------------------------------------------------------------------------------
SHAREHOLDERS AGREEMENT
by and among
CONSECO, INC.
and
BARRY J. HERSHEY
and
CONNIE HERSHEY
--------------------------------------------------
Dated as of August 25, 1996
--------------------------------------------------
- ------------------------------------------------------------------------------
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Table of Contents
Page
------
1. Certain Covenants.................................................... 1
1.1 Voting of Shares....................................... 1
1.2 No Solicitation........................................ 2
1.3 Prohibited Transfers................................... 2
2. Representations and Warranties of the Shareholders................... 3
2.1 Authorization, Validity and Effect of Agreement. ...... 3
2.2 No Conflict; Required Filings and Consents............. 3
2.3 Ownership of Owned Shares.............................. 3
3. Representations and Warranties of Conseco............................. 3
3.1 Authorization, Validity and Effect of Agreement........ 4
3.2 No Conflict; Required Filings and Consents............. 4
4. General Provisions................................................... 4
4.1 Notices................................................ 4
4.2 Entire Agreement....................................... 5
4.3 Counterparts........................................... 5
4.4 Governing Law.......................................... 5
4.5 Assignment; Binding Effect............................. 5
4.6 Headings, Gender, etc.................................. 5
4.7 Invalid Provisions..................................... 6
4.8 Termination............................................ 6
4.9 Specific Performance................................... 6
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Shareholders Agreement
Shareholders Agreement (this "Agreement"), dated as of August
25, 1996, by and between Conseco, Inc., an Indiana corporation ("Conseco"), and
Barry J. Hershey ("BJH") and Connie Hershey ("CH"), each an individual residing
at 900 Tanglewood Drive, Concord, Massachusetts (collectively, the
"Shareholders").
Recitals
A. Conseco, CAF Acquisition Company, an Ohio corporation and
wholly owned subsidiary of Conseco ("Merger Sub"), and Capitol American
Financial Corporation, an Ohio corporation (the "Company"), have entered into an
Agreement and Plan of Merger, dated as of the date hereof (the "Merger
Agreement"), pursuant to which the parties thereto have agreed, on the terms and
subject to the conditions set forth therein, to merge the Merger Sub with and
into the Company (the "Merger").
B. As of the date hereof, BJH is the beneficial owner of, and
has the sole right to vote and dispose of, 5,571,572 shares (the "BJH Owned
Shares") of Common Stock, without par value, of the Company (the "Company Common
Shares"), CH is the record or beneficial owner of, and has the sole right to
vote and dispose of, 1,885,060 Company Common Shares (the "CH Owned Shares") and
the Hershey Family Foundation is the beneficial owner of 297,371 shares, for
which shares BJH and CH share voting rights (the "Foundation Shares") and,
collectively with the BJH Owned Shares and the CH Owned Shares, the "Owned
Shares").
C. As a condition to its willingness to enter into the Merger
Agreement, Conseco has required that simultaneously with the execution of the
Merger Agreement Shareholders agree, and Shareholders are each willing to agree,
to the matters set forth herein.
1. Certain Covenants
1.1 Voting of Shares. Each of the Shareholders will, with
respect to all Owned Shares owned respectively by such Shareholder, together
with (a) any additional shares of capital stock of the Company which such
Shareholder is or becomes entitled to receive from the Company by reason of
being a record holder of the Owned Shares owned by such Shareholder, (b) any
securities or other property into which any such Owned Shares shall have been or
shall be converted or changed (other than Conseco Common Shares (as defined
below)), whether by amendment to the Articles of Incorporation of the Company,
merger, consolidation, reorganization, capital change or otherwise, (c) any
additional Company Common Shares acquired by Shareholders as the result of
Shareholders exercising an option, warrant or other right to acquire shares of
capital stock from the Company (all of the foregoing hereinafter collectively
referred to as the "Additional Owned Shares"), and (d) any shares of capital
stock referred to in clauses (a), (b), and (c) above that are issued or issuable
in respect of Additional Owned Shares (the Owned Shares, the Additional Owned
Shares and any securities referred to in clause (d) above hereinafter
collectively referred to as the "Voting Shares"), that such Shareholder owns of
record or beneficially on the record date for voting at the meeting of
shareholders called to consider and vote upon the Merger (the "Shareholders
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Meeting"), vote or cause to be voted such Voting Shares (or execute or cause to
be executed written consents with respect to such Voting Shares) (i) in favor of
the adoption of the Merger Agreement and any other transactions contemplated by
the Merger Agreement, (ii) against any Acquisition Proposal (as defined in the
Merger Agreement), and (iii) in favor of any other matter necessary for the
consummation of the transactions contemplated by the Merger Agreement and
considered and voted upon at the Shareholders Meeting. In addition, BJH agrees
that, with respect to Company Common Shares as to which he shares voting power
with other fiduciaries, he will recommend that such other fiduciaries vote such
shares in accordance with the voting agreements of BJH under this Section 1.1
or, if the Company Common Shares as to which he shares voting power with other
fiduciaries are distributed to family members, he will recommend that such
family members vote such shares in accordance with the voting agreements of BJH
under this Section 1.1. Each of the Shareholders acknowledges receipt and review
of a copy of the Merger Agreement.
1.2 No Solicitation. Prior to the Effective Time (as defined
in the Merger Agreement), (a) each Shareholder will not, and will cause his or
her agents or representatives (including, without limitation, any investment
banker, attorney or accountant retained by such Shareholder) not to, initiate,
solicit or encourage, directly or indirectly, any inquiries or the making or
implementation of any Acquisition Proposal or engage in any negotiations
concerning, or provide any confidential information or data to, or have any
discussions with, any person relating to an Acquisition Proposal, or otherwise
facilitate any effort or attempt to make or implement an Acquisition Proposal,
and (b) Shareholders will notify Conseco immediately if any such inquiries or
proposals are received by, any such information is requested from, or any such
negotiations or discussions are sought to be initiated or continued with, such
Shareholder.
1.3 Prohibited Transfers. During the term of this Agreement,
neither Shareholder will, except pursuant hereto or the Merger Agreement (a)
sell, pledge or otherwise dispose of any Voting Shares or any interest therein,
(b) deposit any Voting Shares into a voting trust or enter into a voting
agreement or arrangement with respect to any Voting Shares or grant any proxy
with respect thereto, or (c) enter into any contract, option or other
arrangement or undertaking with respect to the foregoing or the direct or
indirect acquisition or sale, assignment, transfer or other disposition of any
Company Common Shares or any interest therein; provided, however, the
Shareholders may transfer Voting Shares to their children or the Hershey Family
Foundation or to any family or charitable entity if, and only if, the
Shareholders, or Shareholder, as the case may be, retains the power to vote such
transferred Voting Shares in favor of the Merger.
1.4 Capitol Insurance Company of Ohio. Conseco agrees to
provide a slate of nominees for directors of Capitol Insurance Company of Ohio,
an Ohio Non-Profit Corporation ("CIO"), and each of the Shareholders agrees to
use such Shareholder's respective best efforts to elect the Conseco nominees as
directors of CIO effective as of the Effective Time and as of that time each of
the Shareholders agrees to resign as officers and directors of CIO and to use
such Shareholder's respective best efforts to cause the other officers and
directors of CIO to resign.
Conseco agrees for a period of two years after the
Effective Time to cause to be maintained officers and directors liability
insurance covering the Shareholders and all other current directors of CIO, in
their capacities as such officers and directors, on the
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same terms or on terms substantially no less advantageous than the existing
officers and directors liability insurance policy of the Company.
2. Representations and Warranties of the Shareholders
Each of the Shareholders, with respect only to such
Shareholder and the Owned Shares owned by Shareholder, hereby represents and
warrants to Conseco as follows:
2.1 Authorization, Validity and Effect of Agreement. Such
Shareholder has the requisite capacity to execute and deliver this Agreement and
to consummate the transactions contemplated hereby. This Agreement has been duly
executed and delivered by such Shareholder and constitutes the valid and binding
obligation of such Shareholder, enforceable against such Shareholder in
accordance with its terms.
2.2 No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement by such Shareholder do not, and the
consummation by Shareholders of the transactions contemplated hereby will not,
(i) subject to making the filings and obtaining the approvals identified in
Section 2.2(b), conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to such Shareholder or by which such Shareholder
or any Voting Shares owned by such Shareholder is bound or affected, or (ii)
result in any breach of or constitute a default (or an event which with notice
or lapse of time or both would become a default) under, result in the loss of a
material benefit under, or give to others any right of purchase or sale, or any
right of termination, amendment, acceleration, increased payments or
cancellation of, or result in the creation of a lien or other encumbrance on any
Voting Shares owned by such Shareholder pursuant to any contract, agreement or
other instrument or obligation to which such Shareholder is a party or by which
such Shareholder or any property or asset of such Shareholder is bound or
affected.
(b) The execution and delivery of this Agreement by such
Shareholder do not, and the performance of this Agreement and the consummation
by such Shareholder of the transactions contemplated hereby will not, require
any consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority, domestic or foreign
(each a "Governmental Entity"), except for (i) applicable requirements, if any,
of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and (ii)
the filings and/or notices required under the insurance laws of the
jurisdictions set forth in Section 2.3 of the Disclosure Schedule, if any.
2.3 Ownership of Owned Shares. BJH is the sole record or
beneficial owner of the BJH Owned Shares, free and clear of any security
interests, liens, charges, encumbrances, equities, claims, options, proxies,
shareholder agreements or limitations of whatever nature and free of any other
limitation or restriction (including any restriction on the right to vote, sell
or otherwise dispose of the BJH Owned Shares or any interest therein) except
pursuant to this Agreement (an "Encumbrance"). CH is the sole record or
beneficial owner of the CH Owned Shares, free and clear of any Encumbrance.
3. Representations and Warranties of Conseco
Conseco hereby represents and warrants to the Shareholders as
follows:
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3.1 Authorization, Validity and Effect of Agreement. Conseco
has the requisite corporate power and authority to execute and deliver this
agreement and to consummate the transactions contemplated hereby. This Agreement
has been duly executed and delivered by Conseco and constitutes the valid and
binding obligation of Conseco, enforceable against Conseco in accordance with
its terms.
3.2 No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement by Conseco do not, and the consummation
by Conseco and of the transactions contemplated hereby will not, (i) conflict
with or violate the articles of incorporation or by-laws of Conseco, (ii)
subject to making the filings and obtaining the approvals identified in Section
3.2(b), conflict with or violate any law, rule, regulation, order, judgment or
decree applicable to Conseco or by which any property or asset of Conseco is
bound or affected, or (iii) result in any breach of or constitute a default (or
an event which with notice or lapse of time or both would become a default)
under, result in the loss of a material benefit under, or give to others any
right of termination, amendment, acceleration, increased payments or
cancellation of, or result in the creation of a lien or other encumbrance on any
property or asset of Conseco pursuant to, any contract, agreement or other
instrument or obligation to which Conseco is a party or by which Conseco or any
property or asset of Conseco is bound or affected.
(b) The execution and delivery of this Agreement by Conseco do
not, and the performance of this Agreement and the consummation by Conseco of
the transactions contemplated hereby will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any Governmental
Entity, except for (i) applicable requirements, if any, of the Exchange Act and
(ii) the filings and/or notices required under the insurance laws of the
jurisdictions set forth in Section 2.3 of the Disclosure Schedule, if any.
4. General Provisions
4.1 Notices. All notices and other communications under this
Agreement must be in writing and will be deemed to have been duly given if
delivered, telecopied or mailed, by certified mail, return receipt requested,
first-class postage prepaid, to the parties at the following addresses:
If to Conseco, to:
Conseco
11825 N. Pennsylvania Street
Carmel, Indiana 46032
Attention: Lawrence W. Inlow, Esq.
Telephone: (371) 817-6163
Telecopy: (371) 817-6327
If to either Shareholder, to:
Barry J. Hershey
900 Tanglewood Drive
Concord, MA 07142
Telephone: (508) 369-8933
Telecopy: (508) 371-7523
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with copies to:
Ropes & Gray
One International Place
Boston, Massachusetts 02110
Attention: Edward Benjamin, Esq.
Telephone: (617) 951-7000
Telecopy: (617) 951-7050
All notices and other communications required or permitted under this Agreement
that are addressed as provided in this Section 4.1 will, if delivered
personally, be deemed given upon delivery, will, if delivered by telecopy, be
deemed delivered when confirmed and will, if delivered by mail in the manner
described above, be deemed given on the third business day after the day it is
deposited in a regular depository of the United States mail. Any party from time
to time may change its address for the purpose of notices to that party by
giving a similar notice specifying a new address, but no such notice will be
deemed to have been given until it is actually received by the party sought to
be charged with the contents thereof.
4.2 Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior agreements and understandings between the parties with
respect thereto.
4.3 Counterparts. This Agreement may be executed in one or
more counterparts, each of which will be deemed an original, but all of which
will constitute one and the same instrument and will become effective when one
or more counterparts have been signed by each of the parties and delivered to
the other parties.
4.4 Governing Law. This Agreement will be governed by and
construed in accordance with the laws of the State of Ohio, regardless of the
laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
4.5 Assignment; Binding Effect. Neither this Agreement nor any
of the rights, interests or obligations under this Agreement may be assigned, in
whole or in part, by operation of law or otherwise by any of the parties without
the prior written consent of the other parties, and any such assignment that is
not consented to will be null and void. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by,
the parties and their respective successors and assigns.
4.6 Headings, Gender, etc. The headings used in this Agreement
have been inserted for convenience and do not constitute matter to be construed
or interpreted in connection with this Agreement. Unless the context of this
Agreement otherwise requires, (a) words of any gender are deemed to include each
other gender; (b) words using the singular or plural number also include the
plural or singular number, respectively; (c) the terms "hereof," "herein,"
"hereby," "hereto," and derivative or similar words refer to this entire
Agreement; (d) the terms "Article" or "Section" refer to the specified Article
or Section of this Agreement; (e) all references to "dollars" or "$" refer to
currency of the United States of America; and (f) the term "person" shall
include any natural person, corporation, limited
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liability company, general partnership, limited partnership, or other entity,
enterprise, authority or business organization.
4.7 Invalid Provisions. If any provision of this
Agreement is held to be illegal, invalid, or unenforceable under any present or
future law, and if the rights or obligations of the Shareholders or Conseco
under this Agreement will not be materially and adversely affected thereby, (a)
such provision will be fully severable; (b) this Agreement will be construed and
enforced as if such illegal, invalid, or unenforceable provision had never
comprised a part hereof; and (c) the remaining provisions of this Agreement will
remain in full force and effect and will not be affected by the illegal,
invalid, or unenforceable provision or by its severance herefrom.
4.8 Termination. This Agreement will terminate
automatically immediately upon the earlier to occur of the Effective Time and
the termination of the Merger Agreement pursuant to Section 7.1 thereof.
4.9 Specific Performance. The parties hereto
agree that irreparable damage would occur in the event any provision of this
Agreement was not performed in accordance with the terms hereof and that the
parties will be entitled to specific performance of the terms hereof, in
addition to any other remedy at law or in equity.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
CONSECO, INC.
By:/s/ Stephen C. Hilbert
-------------------------
Name: Stephen C. Hilbert
Title: Chairman of the Board,
President and Chief Executive Officer
/s/ Barry J. Hershey
-------------------
Barry J. Hershey
/s/ Connie Hershey
------------------
Connie Hershey
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Exhibit 99.2
FROM: CAPITOL AMERICAN FINANCIAL CORPORATION
1001 Lakeside Avenue
Cleveland, Ohio 44114
CONTACT: Ronald L. Sarosy, Senior Vice President and Chief Financial Officer
(216) 987-6413
Jim Rosensteele, Vice President-Investor Relations, Conseco, Inc.
(317) 817-2893
FOR RELEASE MONDAY, AUGUST 26, 1996 AT 8:15 AM
CAPITOL AMERICAN FINANCIAL TO BE ACQUIRED BY CONSECO, INC.
CLEVELAND, Ohio -- August 26, 1996 -- Capitol American
Financial Corporation (NYSE:CAF) today announced an agreement under which the
Company will be acquired by and become a wholly owned subsidiary of Conseco,
Inc. (NYSE:CNC). The transaction, valued at approximately $680 million and
subject to approval by Capitol American shareholders and certain regulatory
agencies, is expected to be completed during the fourth quarter.
Capitol American, which has approximately $1 billion in
assets, is a leading provider of supplemental accident and health insurance.
Conseco, headquartered in Carmel, Indiana, is a financial services holding
company engaged primarily in the development, marketing and administration of
annuity, supplemental health and individual life insurance products. Conseco has
$23 billion in assets.
"Capitol American's net income has increased every year since
the Company was founded in 1970," said David H. Gunning, chairman and chief
executive officer of Capitol American. "Now, however, we have reached a level
where the next logical growth step is to become part of a significantly larger
insurance organization so we can continue to provide value to our shareholders
as well as outstanding products and service to our agents and policyholders."
Gunning said certain members of the Hershey family, who
collectively control in excess of 40 percent of Capitol American's outstanding
shares, have agreed to vote in favor of the transaction. He said no significant
regulatory issues in connection with the transaction are anticipated.
Stephen C. Hilbert, president and chief executive officer of
Conseco, said, "This is a significant strategic step for Conseco, because we
view market leadership and product distribution as the keys to our continued
growth. Capitol American's cancer, accident, intensive care and heart care
businesses will complement our current products, and its agents will
significantly expand our distribution capacity."
Under the agreement, each outstanding share of Capitol
American stock will be entitled to receive $30 in cash and a fraction of a share
of Conseco common stock with a
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value of $6.50. For purposes of determining the exchange ratio, the value of the
Conseco common stock will be equal to the average closing price of the stock on
the New York Stock Exchange during the 20 consecutive trading days ending two
days prior to the closing of the transaction. The cash consideration will
increase by $0.25 per share if the closing does not occur by December 10, 1996,
and by an additional $0.25 per share per month thereafter until the closing
occurs.
Capitol American has approximately 300 employees, virtually
all of whom are based at the Cleveland headquarters. Gunning said it has not
been determined how Capitol American's operations will be incorporated into
those of Conseco.
Gunning said the independent agents who currently sell Capitol
American policies will benefit from the enhanced support provided by a larger
organization and potentially be able to broaden their product portfolio.
Capitol American Financial Corporation's market focus is on
specialty lines including cancer, accident, intensive care, heart and hospital
indemnity insurance programs. Capitol is licensed in 47 states, the District of
Columbia, Puerto Rico and the Virgin Islands and has more than 739,000 policies
in force.
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FACT SHEET
CAPITOL AMERICAN FINANCIAL CORP. (NYSE:CAF)
Headquarters: Cleveland, Ohio
Chief Executive: David H. Gunning (Chairman, President and Chief
Executive Officer)
Principal Subsidiaries: Capitol American Life Insurance Co., Frontier
National Life Insurance, Capitol National Life
Insurance Co.
Assets: $1.0 billion (6/96)
Total Earned Premiums: $282 million (full year 1995); $147 million
(six months 1996)
In-Force
Policies: 739,000 (6/96)
Premiums: $301 million (6/96)
Principal Product: Cancer insurance (66% of 1995 premiums), #2 share
of cancer insurance market (AFLAC is #1)
Other Products: Accident insurance (15% of
premiums, #5 market share),
intensive care insurance (11% of
premiums, #2 market share behind
AFLAC), heart care insurance (6% of
premiums, #2 market share behind
Transport Life).
Products Distributed By: 3,700 independent agents in 47 states, District of
Columbia, Puerto Rico and U.S. Virgin Islands
organized in two divisions -- Consumer Marketing
(soliciting individuals door-to-door) and Business
Marketing (soliciting individuals at the
workplace).
52-Week Trading Range: $26-3/4 - $19-1/2
Common Shares
Outstanding: 17.5 million (6/96)
Fully Diluted: 18.2 million (6/96)
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