UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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): September 9, 2003
CONSECO, INC.
(Exact name of registrant as specified in its charter)
Delaware 001-31792 75-3108137
---------------------- ---------------- --------------
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
organization)
11825 North Pennsylvania Street
Carmel, Indiana 46032
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(Address of principal executive offices) (Zip Code)
(317) 817-6100
-------------------------
(Registrant's telephone number, including area code)
Not Applicable
----------------
(Former name or former address,
if changed since last report)
Item 3. Bankruptcy or Receivership.
On September 9, 2003, the United States Bankruptcy Court for the Northern
District of Illinois, Eastern Division (the "Bankruptcy Court") confirmed the
sixth amended joint plan of reorganization (the "Plan") of Conseco, Inc., an
Indiana corporation ("Old Conseco").
On September 10, 2003, under the terms of the Plan, Conseco, Inc., a
Delaware corporation and successor to Old Conseco (the "Company"), emerged with
a new capital structure consisting of: (1) a $1.3 billion secured bank facility;
(2) new convertible preferred stock with an aggregate liquidation preference of
approximately $860 million; (3) new warrants to purchase 6 million shares of
common stock at an exercise price of $27.60 per share; and (4) approximately 100
million shares of new common stock. On September 15, 2003, the Company issued
these securities pursuant to the terms of the Plan.
The new common stock is listed on the New York Stock Exchange ("NYSE")
under the symbol "CNO," and the new warrants are listed on the NYSE under the
symbol "CNO WS." The new convertible preferred stock is trading in the over the
counter market under the symbol "CNSJP." The Company intends to submit a
supplemental listing application to list the preferred stock on the NYSE as soon
as the new preferred stock is held by at least 100 holders (one of the
conditions for listing the security on the NYSE), and currently expects to
receive approval for listing once this condition is satisfied and the
supplemental application is approved. Old Conseco's common stock (OTCBB:CNCEQ)
and all of its other securities have been cancelled.
Under the terms of the Plan, the new convertible preferred stock is being
distributed to the prepetition lenders, the new warrants are being distributed
to the holders of the Trust Preferred Securities commonly known as "TOPrS," and
the new common stock is being distributed to the holders of the following
prepetition claims: (1) bonds, which were separately classified as the Exchange
Note Claims (those who had exchanged their bonds in 2002) and the Original Note
Claims (those who had not); (2) general unsecured claims against Conseco, Inc.;
(3) general unsecured claims against CIHC, Incorporated (CIHC); and (4) TOPrS.
The initial distribution of approximately 98 million shares of new common stock
is being made as follows:
o Exchange Note Claims are receiving approximately 60.6 million shares, which
corresponds to a projected recovery of approximately 72%.
o Original Note Claims are receiving approximately 32.3 million shares, which
corresponds to a projected recovery of approximately 42%.
o Conseco General Unsecured Claims are receiving approximately 1 million
shares, which corresponds to a projected recovery of approximately 22%.
o CIHC General Unsecured Claims are receiving approximately 1.9 million
shares, which corresponds to a projected recovery of approximately 100%.
o TOPrS are receiving 1.5 million shares, which corresponds to a projected
recovery of approximately 1.27% (excluding the new Conseco warrants and
other collection rights).
In each case, the projected recoveries are based on an estimated value of
the common stock of $16.40 per share for purposes of the plan. The initial
distributions represent approximately 98% of all new common stock to be
distributed under the Plan. The Company may make additional distributions to
holders of prepetition bonds and/or general unsecured claims on account of
disputed claims. Under the Plan, there will be only one distribution of new
common stock to holders of the TOPrS.
A copy of the Plan is attached hereto as Exhibit 2.2. Pursuant to the Plan,
the Company adopted an Amended and Restated Certificate of Incorporation,
Amended and Restated By-laws and a Certificate of Designations with respect to
the new convertible preferred stock. It also entered into a Warrant Agreement,
Credit Agreement, Common Stock Registration Rights Agreement and Preferred Stock
Registration Rights Agreement. Copies of each of these documents and agreements
are filed as exhibits to this Current Report on Form 8-K. A copy of the final
confirmation order is attached hereto as Exhibit 2.3. Related exhibits and court
filings can be obtained at www.bmccorp.net/conseco.
The most recent unaudited consolidated balance sheet of the Company is
included in Old Conseco's Quarterly Report on Form 10-Q for the period ended
June 30, 2003, which is incorporated herein by reference.
The Company adopted "fresh-start" reporting as of its emergence from
Chapter 11, in accordance with Statement of Position 90-7 "Financial Reporting
by Entities in Reorganization under the Bankruptcy Code". These rules require
the Company to revalue its assets and liabilities to current estimated fair
value, re-establish shareholders' equity at the reorganization value determined
in connection with the Plan, and record any portion of the reorganization value
which cannot be attributed to specific tangible or identified intangible assets
as goodwill. The adoption of fresh start accounting will have a material effect
on the Company's financial statements. As a result, the Company's financial
statements published for periods following September 9, 2003, will not be
comparable with those of Old Conseco prepared before that date.
Item 5. Other Events.
Pursuant to Rule 12g-3(a) promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), the Company's common stock, par value
$0.01 per share ("Common Stock"), is deemed registered under Section 12(g) of
the Exchange Act. The Common Stock has also been registered under Section 12(b)
of the Exchange Act in order to facilitate listing on the NYSE.
Item 7. Financial Statements and Exhibits.
(c) Exhibits
2.2 Sixth Amended Joint Plan of Reorganization of Conseco, Inc. and
its affiliated Debtors dated September 9, 2003.
2.3 Order Confirming Reorganizing Debtors' Sixth Amended Joint Plan
of Reorganization Pursuant to Chapter 11 of the United States
Bankruptcy Code dated September 9, 2003.
3.1 Amended and Restated Certificate of Incorporation of the Company.
3.2 Amended and Restated By-Laws of the Company.
4.1 Certificate of Designations of the Powers, Preferences and
Relative, Participating, Optional and Other Special Rights
of Class A Senior Cumulative Convertible Exchangeable
Preferred Stock and Qualifications, Limitations and
Restrictions Thereof.
4.2 Warrant Agreement between the Company and Wachovia Bank, N.A.,
as Warrant Agent.
10.1 Credit Agreement dated as of September 10, 2003 among Conseco,
Inc., Bank of America, N.A., as Agent, and other financial
institutions.
10.2 Common Stock Registration Rights Agreement.
10.3 Preferred Stock Registration Rights Agreement.
99.1 Press release dated September 9, 2003.
99.2 Press release dated September 10, 2003.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
CONSECO, INC.
September 15, 2003
By: /s/ John R. Kline
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John R. Kline
Senior Vice President and
Chief Accounting Officer
Exhibit 2.2
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
In re: ) Chapter 11
)
Conseco, Inc., et al.,(1) )
) Case No. 02 B49672
Debtors. ) Honorable Carol A. Doyle
) (Jointly Administered)
)
REORGANIZING DEBTORS' SIXTH AMENDED JOINT PLAN OF REORGANIZATION
PURSUANT TO CHAPTER 11 OF THE UNITED STATES BANKRUPTCY CODE
James H.M. Sprayregen, P.C.
Anne M. Huber
Anup Sathy
Ross M. Kwasteniet
KIRKLAND & ELLIS LLP
200 East Randolph Drive
Chicago, Illinois 60601
(312) 861-2000
Counsel for the Debtors and Debtors in Possession
Dated: September 9, 2003
----------------------
1 The Reorganizing Debtors are the following entities: (i) Conseco, Inc.,
(ii) CIHC, Incorporated, (iii) CTIHC, Inc., and (iv) Partners Health Group,
Inc., (defined herein, collectively, as the "Debtors" or "Reorganizing
Debtors"). This Plan is not a chapter 11 plan for the Finance Company
Debtors (as defined herein).
TABLE OF CONTENTS
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Article I. DEFINED TERMS, RULES OF INTERPRETATION, COMPUTATION OF TIME AND GOVERNING LAW..........................1
A. Rules of Interpretation, Computation of Time and Governing Law..................................1
B. Proponents of Plan..............................................................................1
C. Severability of Plan Provisions.................................................................1
D. Substantive Consolidation.......................................................................2
E. Defined Terms...................................................................................2
Article II. ADMINISTRATIVE AND PRIORITY TAX CLAIMS AGAINST ALL OF THE DEBTORS....................................18
A. Administrative Claims..........................................................................18
B. Priority Tax Claims............................................................................19
Article III. CLASSIFICATION AND TREATMENT OF CLASSIFIED CLAIMS AND EQUITY INTERESTS..............................19
A. Summary........................................................................................19
B. Classification and Treatment of Classified Claims and Equity Interests: CNC....................21
C. Classification and Treatment of Classified Claims and Equity Interests: CIHC...................25
D. Classification and Treatment of Classified Claims and Equity Interests: CTIHC..................30
E. Classification and Treatment of Classified Claims and Equity Interests:
Partners Health Group, Inc.....................................................................31
Article IV. ACCEPTANCE OR REJECTION OF THE PLAN..................................................................33
A. Voting Classes.................................................................................33
B. Acceptance by Impaired Classes.................................................................33
C. Presumed Acceptance of Plan....................................................................33
D. Presumed Rejection of Plan.....................................................................34
E. Non-Consensual Confirmation....................................................................34
Article V. MEANS FOR IMPLEMENTATION OF THE REORGANIZING SUBPLANS.................................................34
A. Corporate Existence and Vesting of Assets in the Reorganizing Debtors and Old CNC..............34
B. Cancellation of Old Notes, Old Preferred Stock and Old Common Stock............................34
C. Issuance of New Securities; Execution of Related Documents.....................................35
D. Creation of Residual Trust.....................................................................35
E. Liquidation of Old CNC.........................................................................35
F. Intercompany Settlement........................................................................35
G. Implementation of Senior Management KERP.......................................................36
H. Assumption of the Senior Management Employment Agreements......................................36
I. TOPrS Settlement...............................................................................36
J. Creation of Professional Escrow Account........................................................38
K. Corporate Governance, Directors and Officers, and Corporate Action.............................38
L. Sources of Cash for Plan Distribution..........................................................41
M. Retiree Benefits...............................................................................41
N. GM Building Sale...............................................................................41
Article VI. TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES................................................41
A. Executory Contracts and Unexpired Leases.......................................................41
B. Claims Based on Rejection of Executory Contracts or Unexpired Leases...........................42
C. Cure of Defaults for Executory Contracts and Unexpired Leases Assumed..........................42
D. Indemnification of Directors, Officers and Employees...........................................42
E. Compensation and Benefit Programs..............................................................42
F. Assumption of D&O Insurance....................................................................43
Article VII. PROVISIONS GOVERNING DISTRIBUTIONS..................................................................43
A. Distributions for Claims and Equity Interests Allowed as of the Effective Date.................43
B. Distributions by the Distribution Agent(s).....................................................44
C. Delivery and Distributions and Undeliverable or Unclaimed Distributions........................44
D. Timing and Calculation of Amounts to be Distributed............................................45
E. Minimum Distribution...........................................................................45
F. Setoff.........................................................................................45
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G. Surrender of Canceled Instruments or Securities................................................46
H. Failure to Surrender Canceled Instruments......................................................46
I. Lost, Stolen, Mutilated or Destroyed Securities................................................46
Article VIII. PROCEDURES FOR RESOLUTION OF DISPUTED, CONTINGENT AND UNLIQUIDATED CLAIMS OR EQUITY INTERESTS......46
A. Resolution of Disputed Claims..................................................................46
B. Allowance of Claims and Equity Interests.......................................................47
C. Controversy Concerning Impairment..............................................................47
D. Reserve of New CNC Common Stock................................................................47
Article IX. CONDITIONS PRECEDENT TO CONFIRMATION AND CONSUMMATION OF THE PLAN....................................48
A. Conditions to Confirmation.....................................................................48
B. Conditions Precedent to Consummation...........................................................48
C. Waiver of Conditions...........................................................................49
D. Effect of Non-Occurrence of Conditions to Consummation.........................................49
Article X. RELEASE, INJUNCTIVE AND RELATED PROVISIONS............................................................49
A. Compromise, Settlement and Discharge..........................................................49
B. Releases by the Debtors........................................................................50
C. Releases by Holders of Claims..................................................................50
D. Exculpation....................................................................................50
E. Preservation of Rights of Action...............................................................51
F. Discharge of Claims and Termination of Equity Interests........................................52
Article XI. RETENTION OF JURISDICTION............................................................................52
Article XII. MISCELLANEOUS PROVISIONS............................................................................53
A. Modification of Plan Supplement................................................................53
B. Effectuating Documents, Further Transactions and Corporation Action............................53
C. Dissolution of Committee(s)....................................................................53
D. Payment of Statutory Fees......................................................................53
E. Modification of Plan...........................................................................53
F. Revocation of Plan.............................................................................54
G. Successors and Assigns.........................................................................54
H. Reservation of Rights..........................................................................54
I. Section 1146 Exemption.........................................................................54
J. Further Assurances.............................................................................55
K. Service of Documents...........................................................................55
L. Transactions on Business Days..................................................................55
M. Filing of Additional Documents.................................................................55
N. Term of Injunctions or Stays...................................................................55
O. Entire Agreement...............................................................................55
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REORGANIZING DEBTORS' SIXTH AMENDED JOINT PLAN OF REORGANIZATION PURSUANT
TO CHAPTER 11 OF THE UNITED STATES BANKRUPTCY CODE
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Pursuant to Title 11 of the United States Code, 11 U.S.C. ss.ss. 101 et
seq., the Debtors and Debtors in Possession in the above-captioned and numbered
cases, hereby respectfully propose the following Joint Plan of Reorganization
under Chapter 11 of the Bankruptcy Code:
Article I.
DEFINED TERMS, RULES OF INTERPRETATION,
COMPUTATION OF TIME AND GOVERNING LAW
A. Rules of Interpretation, Computation of Time and Governing Law
1. For purposes herein: (a) whenever from the context it is appropriate,
each term, whether stated in the singular or the plural, shall include both the
singular and the plural, and pronouns stated in the masculine, feminine or
neuter gender shall include the masculine, feminine and the neuter gender; (b)
any reference herein to a contract, instrument, release, indenture or other
agreement or document being in a particular form or on particular terms and
conditions means that such document shall be substantially in such form or
substantially on such terms and conditions; (c) any reference herein to an
existing document or exhibit Filed, or to be Filed, shall mean such document or
exhibit, as it may have been or may be amended, modified or supplemented; (d)
unless otherwise specified, all references herein to Sections and Articles are
references to Sections and Articles hereof or hereto; (e) the words "herein,"
"hereof" and "hereto" refer to the Plan in its entirety rather than to a
particular portion of this Plan; (f) captions and headings to Articles and
Sections are inserted for convenience of reference only and are not intended to
be a part of or to affect the interpretation hereof; (g) the rules of
construction set forth in section 102 of the Bankruptcy Code shall apply; and
(h) any term used in capitalized form herein that is not otherwise defined but
that is used in the Bankruptcy Code or the Bankruptcy Rules shall have the
meaning assigned to such term in the Bankruptcy Code or the Bankruptcy Rules, as
the case may be.
2. In computing any period of time prescribed or allowed hereby, the
provisions of Bankruptcy Rule 9006(a) shall apply.
3. Except to the extent that the Bankruptcy Code or Bankruptcy Rules are
applicable, and subject to the provisions of any contract, instrument, release,
indenture or other agreement or document entered into in connection herewith,
the rights and obligations arising hereunder shall be governed by, and construed
and enforced in accordance with, the laws of the State of New York, without
giving effect to the principles of conflict of laws thereof.
B. Proponents of Plan
This Plan is proposed by the Reorganizing Debtors. The classification and
treatment of Claims and Equity Interests against the Reorganizing Debtors is
contained in Article III.
C. Severability of Plan Provisions
1. The Plan comprises four subplans of reorganization. The confirmation
requirements of section 1129 of the Bankruptcy Code must be satisfied separately
with respect to each subplan. If any subplan is not confirmed, the Debtors
reserve the right, with the prior written consent of the Conseco Creditors
Committee, to either (a) request that the other subplans be confirmed or (b)
withdraw some or all subplans; provided that (i) the subplan for CIHC may not be
confirmed unless the subplan for CNC is confirmed and (ii) the subplan for CNC
may not be confirmed unless the subplan for CIHC is confirmed. Subject to the
preceding provision, the Debtors' inability to confirm or election to withdraw
any subplan(s) shall not impair the confirmation of any other subplan(s).
D. Substantive Consolidation
The estates of the Debtors have not been substantively consolidated. The
Claims held solely against one of the Debtors will be satisfied solely from the
cash and assets of such Debtor except as provided for herein. Except as
specifically set forth herein, nothing in this Plan or the Disclosure Statement
shall constitute or be deemed to constitute an admission that one of the Debtors
is subject to or liable for any Claim against any other Debtor. Except as
specifically set forth herein, the Claims of Creditors that hold Claims against
multiple Debtors will be treated as separate Claims with respect to each
Debtor's estate for all purposes (including, but not limited to, distributions
and voting), and such Claims will be administered as provided in the Plan. Any
Claims against any Debtor will be satisfied according to the terms of the Plan.
E. Defined Terms
Unless the context otherwise requires, the following terms shall have the
following meanings when used in capitalized form herein:
1. "93/94 Notes" means, collectively, (i) 8.125% Senior Notes; and (ii)
10.5% Senior Notes.
2. "93/94 Note Claims" means all unpaid principal and interest (prepetition
and postpetition) on the 93/94 Notes, through the Effective Date, plus costs and
fees provided for under the indentures governing the 93/94 Notes.
3. "93/94 Notes Distribution" means, at CNC's option, (A) New CNC Common
Stock issued on the Effective Date having a value (based on Plan Value) equal to
the amount of the Allowed Class 4A 93/94 Note Claims, (B) the New Senior Notes
issued on the Effective Date with a principal amount equal to the amount of the
Allowed Class 4A 93/94 Note Claims in accordance with the terms summarized in
the 93/94 Notes Term Sheet as found in the Plan Supplement or (C) some
combination of (i) New CNC Common Stock (based on Plan Value) and (ii) New
Senior Notes that, in the aggregate, equal the value of the Allowed Class 4A
93/94 Note Claims. The Class 4A Notice (to be mailed to holders of the 93/94
Note Claims 30 days before the Voting Deadline) will disclose whether CNC chose
option (A) or option (B) for the 93/94 Notes Distribution, provided that such
election shall revert to option (A) above if CFC asserts a Class 4A Claim by
virtue of CFC previously satisfying the Holders of the 93/94 Notes, which is not
satisfied herein.
4. "93/94 Notes Term Sheet" means that document in the Plan Supplement
summarizing the new notes that may be issued pursuant to the 93/94 Notes
Distribution.
5. "6.4% Original Notes" means the $250 million original principal amount
6.4% senior notes due February 10, 2003, issued by CNC, with $246,880,305 in
principal and accrued but unpaid interest outstanding as of the Petition Date.
6. "6.8% Original Notes" means the $250 million original principal amount
6.8% senior medium-term notes, Series A, due June 15, 2005, issued by CNC, with
$102,646,601 in principal and accrued but unpaid interest outstanding as of the
Petition Date.
7. "8.5% Original Notes" means the $450 million original principal amount
8.5% senior notes due October 15, 2002, issued by CNC with $237,808,925
outstanding in principal and accrued but unpaid interest as of the Petition
Date.
8. "8.75% Original Notes" means the $800 million original principal amount
8.75% senior notes due February 9, 2004, issued by CNC pursuant to the senior
indenture dated as of November 13, 1997, and pursuant to prospectus supplement
filed with the SEC on February 3, 2000, with $455,528,087 in principal and
accrued but unpaid interest outstanding as of the Petition Date.
2
9. "9.0% Original Notes" means the $550 million original principal amount
9.0% senior notes due October 15, 2006, issued by CNC, with $159,961,100 in
principal and accrued but unpaid interest outstanding as of the Petition Date.
10. "10.75% Original Notes" means the $400 million original principal
amount 10.75% senior notes due June 15, 2008, issued by CNC, with $39,619,881 in
principal and accrued but unpaid interest outstanding as of the Petition Date.
11. "6.4% Exchange Notes" means the $14,936,000 original principal amount
6.4% senior notes due February 10, 2004, issued by CNC and guaranteed by CIHC,
with $15,763,476 in principal and accrued but unpaid interest outstanding as of
the Petition Date.
12. "6.8% Exchange Notes" means the $150,783,000 original principal amount
6.8% senior notes due June 15, 2007, issued by CNC and guaranteed by CIHC, with
$156,092,447 in principal and accrued but unpaid interest outstanding as of the
Petition Date.
13. "8.5% Exchange Notes" means the $991,000 original principal amount 8.5%
senior notes due October 15, 2003, issued by CNC and guaranteed by CIHC, with
$1,048,499 in principal and accrued but unpaid interest outstanding as of the
Petition Date.
14. "8.75% Exchange Notes" means the $364,294,000 original principal amount
8.75% senior notes due August 9, 2006, issued by CNC and guaranteed by CIHC,
with $391,889,271 in principal and accrued but unpaid interest outstanding as of
the Petition Date.
15. "9.0% Exchange Notes" means the $399,200,000 original principal amount
9.0% senior notes due April 15, 2008, issued by CNC and guaranteed by CIHC, with
$423,709,217 in principal and accrued but unpaid interest outstanding as of the
Petition Date.
16. "10.75% Exchange Notes" means the $362,433,000 original principal
amount 10.75% senior notes due June 15, 2009, issued by CNC and guaranteed by
CIHC, with $382,472,525 in principal and accrued but unpaid interest outstanding
as of the Petition Date.
17. "8.125% Senior Notes" means the $200,000,000 original principal amount
8.125% senior notes due February 15, 2003, issued by CNC, with $67,892,689 in
principal and accrued but unpaid interest outstanding as of the Petition Date.
18. "10.5% Senior Notes" means the $200,000,000 original principal amount
10.5% senior notes due December 15, 2004, issued by CNC, with $25,855,090 in
principal and accrued but unpaid interest outstanding as of the Petition Date.
19. "1997 D&O Credit Facility" means the Credit Agreement dated as of May
13, 1996 among certain officers, directors and employees of CNC and its
subsidiaries, Bank of America, N.A., as Administrative Agent, and the financial
institutions signatory thereto, and all other agreements and instruments,
including guarantees, entered into in connection therewith, in each case as
amended, restated, refinanced, supplemented, waived, extended, renewed, replaced
or otherwise modified from time to time, including, without limitation, pursuant
to the following instruments: Amended and Restated Credit Agreement dated as of
August 26, 1997, Agreement dated as of September 22, 2000, Credit Agreement
dated as of November 22, 2000, First Amendment dated as of August 21, 2001,
First Stage Amendment and Agreement dated as of March 20, 2002, Waiver No. 1
dated as of August 14, 2002, Waiver No. 2 dated as of September 8, 2002 and
Waiver No. 3 dated as of October 18, 2002. The 1997 D&O Credit Facility is
guaranteed by CNC and CIHC.
20. "1998 D&O Credit Facility" means the Credit Agreement dated as of
August 21, 1998 among certain officers, directors and employees of CNC and its
subsidiaries, Bank of America, N.A., as Administrative Agent, and the financial
institutions signatory thereto, and all other agreements and instruments,
including guarantees, entered into in connection therewith, in each case as
amended, restated, refinanced, supplemented,
3
waived, extended, renewed, replaced or otherwise modified from time to time,
including, without limitation, pursuant to the following instruments: Agreement
dated as of September 22, 2000, Credit Agreement dated as of November 22, 2000,
First Amendment dated as of August 21, 2001, Second Amendment dated as of
December 7, 2001, First Stage Amendment and Agreement dated as of March 20,
2002, Waiver No. 1 dated as of August 14, 2002, Waiver No. 2 dated as of
September 8, 2002 and Waiver No. 3 dated as of October 18, 2002. The 1998 D&O
Credit Facility is guaranteed by CNC and CIHC.
21. "1998 Non-Refinanced D&O Credit Facility" means the Credit Agreement
dated as of August 21, 1998 among certain officers, directors and employees of
CNC and its subsidiaries, Bank of America, N.A., as Administrative Agent, and
the financial institutions signatory thereto, and all other agreements and
instruments, including guarantees, entered into in connection therewith, in each
case as amended, restated, refinanced, supplemented, waived, extended, renewed,
replaced or otherwise modified from time to time, including, without limitation,
pursuant to the following instruments: Agreement dated as of September 22, 2000,
First Stage Amendment and Agreement dated as of March 20, 2002, Waiver No. 1
dated as of August 14, 2002, Waiver No. 2 dated as of September 8, 2002 and
Waiver No. 3 dated as of October 18, 2002. The 1998 Non-Refinanced D&O Credit
Facility is guaranteed by CNC and CIHC.
22. "1999 D&O Credit Facility" means the Credit Agreement dated as of
September 15, 1999 among certain officers, directors and employees of CNC and
its subsidiaries, JPMorgan Chase Bank, as Administrative Agent, and the
financial institutions signatory thereto, and all other agreements and
instruments, including guarantees, entered into in connection therewith, in each
case as amended, restated, refinanced, supplemented, waived, extended, renewed,
replaced or otherwise modified from time to time, including, without limitation,
pursuant to the following instruments: Termination and Replacement Agreement
dated as of May 30, 2000, Agreement dated as of September 22, 2000, Credit
Agreement dated as of November 22, 2000, First Stage Amendment and Agreement
dated as of March 20, 2002, Waiver No. 1 dated as of August 14, 2002, Waiver No.
2 dated as of September 8, 2002 and Waiver No. 3 dated as of October 18, 2002.
The 1999 D&O Credit Facility is guaranteed and secured by CNC and CIHC.
23. "Accrued Professional Compensation" means, at any given moment, all
accrued fees and expenses (including but not limited to success fees) for
services rendered by all Professionals in the Chapter 11 Cases that the
Bankruptcy Court has not denied by Final Order, to the extent such fees and
expenses have not been paid regardless of whether a fee application is filed for
such amount. To the extent a court denies by Final Order a Professional's fees
or expenses, such amounts shall no longer be considered Accrued Professional
Compensation.
24. "Administrative Claim" means a Claim for costs and expenses of
administration under sections 503(b), 507(a)(1), 507(b) or 1114(e)(2) of the
Bankruptcy Code, including, but not limited to: (a) the actual and necessary
costs and expenses incurred after the Petition Date of preserving the Estate and
operating the business of the Debtors (such as wages, salaries or commissions
for services and payments for goods and other services and leased premises); (b)
compensation for legal, financial advisory, accounting and other services and
reimbursement of expenses awarded or allowed under sections 328, 330(a) or 331
of the Bankruptcy Code or otherwise for the period commencing on the Petition
Date and ending on the Confirmation Date; and (c) all fees and charges assessed
against the Estate under chapter 123 of title 28 United States Code, 28 U.S.C.
ss.ss. 1911-1930.
25. "Allowed" means, with respect to Claims or Equity Interests, any Claim
against or Equity Interest in a Debtor, proof of which is timely Filed, or by
order of the Bankruptcy Court is not or will not be required to be Filed, any
Claim or Equity Interest that has been or is hereafter listed in the Schedules
as neither disputed, contingent or unliquidated, and for which no timely proof
of Claim has been Filed, or (c) any Claim Allowed pursuant to the Plan;
provided, however, that with respect to any Claim or Equity Interest described
in clauses (a) or (b) above, such Claim or Equity Interest shall be Allowed only
if (x) no objection to the allowance thereof has been interposed within the
applicable period of time fixed by the Plan, the Bankruptcy Code, the Bankruptcy
Rules or the Bankruptcy Court or (y) such an objection is so interposed and the
Claim or Equity Interest shall have been Allowed by a Final Order (but only if
such allowance was not solely for the purpose of voting to accept or reject the
Plan). Except as otherwise specified in the Plan or a Final Order of the
Bankruptcy Court, the amount of an Allowed Claim shall not include interest on
such Claim from and after the Petition Date.
26. "Allowed Claim" means an Allowed Claim in the particular Class
described.
4
27. "Allowed Equity Interest" means an Allowed Equity Interest in the
particular Class described.
28. "Allowed Lender Claims" means the Allowed Claims of the Lenders and the
Lenders' Agents consisting of (a) all unpaid principal, interest, Waiver
Consideration and other charges accrued through the Petition Date (including,
without limitation, interest at default contract rates) in respect of the Senior
Credit Facility and respective D&O Credit Facilities, together with all Claims
arising from the CIHC Guarantee of Senior Credit Facility Claims, and the
Guarantees of D&O Credit Facilities, plus (b) all reasonable fees and expenses
(including, without limitation, the fees and expenses of counsel and financial
advisors to the Lenders and Lenders' Agents), and other charges. The Claims
referred to in clause (a) of the preceding sentence will be Allowed in the
following amounts: (i) Senior Credit Facility: $1,537,808,635.55; (ii) 1997 D&O
Credit Facility: $206,426,597.90; (iii) 1998 D&O Credit Facility:
$134,205,323.05; (iv) 1998 Non-Refinanced D&O Credit Facility: $10,133,691.23;
and (v) 1999 D&O Credit Facility: $146,375,210.76; the fees and expenses
referred to in clause (b) of the preceding sentence will be separately
quantified through the Effective Date.
29. "Available Proceeds" means the amount of Cash received at any time by
Old CNC from its liquidation of Residual Assets, after the payment in full in
Cash of (a) the reasonable costs and expenses associated with the liquidation
(including, without limitation, the payment of any taxes, assessments, insurance
premiums, repairs, legal fees and costs, rent, storage and sales commissions),
and (b) if applicable, the reasonable costs and expenses associated with the
Residual Trust.
30. "B-2 Guarantee Claims" means all Claims based on or derived from the
CFC guarantee of those certain certificates commonly known as "B-2
certificates".
31. "Ballots" mean the ballots accompanying the Disclosure Statement upon
which Holders of Impaired Claims or Impaired Equity Interests entitled to vote
shall indicate their acceptance or rejection of the Plan in accordance with the
Plan and the Voting Instructions.
32. "Bankruptcy Code" means Title 11 of the United States Code and
applicable portions of Titles 18 and 28 of the United States Code.
33. "Bankruptcy Court" means the United States Bankruptcy Court for the
Northern District of Illinois, or any other court having jurisdiction over the
Chapter 11 Cases.
34. "Bankruptcy Rules" means the Federal Rules of Bankruptcy Procedure, as
amended from time to time, as applicable to the Chapter 11 Cases, promulgated
under 28 U.S.C. ss. 2075 and the General, Local and Chambers Rules of the
Bankruptcy Court.
35. "Bar Date for the Reorganizing Debtors" means February 21, 2003, except
as otherwise specified by order of the Bankruptcy Court.
36. "Beneficial Holder" means the Person or Entity holding the beneficial
interest in a Claim or Equity Interest.
37. "Business Day" means any day, other than a Saturday, Sunday or "legal
holiday" (as defined in Bankruptcy Rule 9006(a)).
38. "Cash" means cash and cash equivalents.
39. "Cause of Action" means any and all claims, causes of action, demands,
rights, actions, suits, obligations, liabilities, accounts, defenses, offsets,
powers, privileges, licenses and franchises of any kind or character whatsoever,
known, unknown, contingent or non-contingent, matured or unmatured, suspected or
unsuspected, whether arising before, on or after the Petition Date, in contract
or in tort, in law or in equity, or under any other theory of law. Without
limiting the generality of the foregoing, when referring to Causes of Action of
the Debtors or their Estates, "Causes of Action" shall include, but not be
limited to (i) rights of setoff, counterclaim or recoupment and claims on
contracts or for breaches of duties imposed by law; (ii) the right to object to
Claims or
5
Equity Interests; (iii) Claims pursuant to sections 362, 510, 542, 543, 544
through 550, or 553 of the Bankruptcy Code; and (iv) such Claims and defenses as
fraud, mistake, duress and usury.
40. "CFC" means Conseco Finance Corp., a Delaware corporation.
41. "CFC/CIHC Intercompany Note" means that certain $1,460,799,080 note due
May 11, 2005, issued September 9, 2000, by CFC to CIHC, with $277,376,671 in
principal and accrued but unpaid interest outstanding as of the Petition Date.
42. "CFC Preferred Stock" means those 750 shares of 9% Redeemable
Cumulative Preferred Stock of CFC, held by CNC, with a stated value of $1
million per share.
43. "CFC Residual Intercompany Claims" means the amount (if any) that CIHC
owes to CFC on account of the CIHC/CFC Intercompany Note after setoff of the
CFC/CIHC Intercompany Note.
44. "CFC Subsidiary Guarantee" means the CIHC guarantee of up to $250
million of indebtedness of CFC based on CIHC's guarantee of (i) up to $125
million of CFC residual and warehouse facilities with Lehman Brothers; and (ii)
up to $125 million of CFC swingline debt and cash management facility with U.S.
Bank.
45. "CFC Subsidiary Guarantee Claims" means any and all Claims derived from
or based upon the CFC Subsidiary Guarantee.
46. "Chapter 11 Cases" means the chapter 11 bankruptcy proceedings filed by
the Debtors on the Petition Date in the Bankruptcy Court, with case numbers
02-49671 through 02-49674.
47. "CIHC" means CIHC, Incorporated, a Delaware corporation.
48. "CIHC General Unsecured Claims Cap" means the Deemed amount of the
Reorganizing Debtor General Unsecured Claims against CIHC, not to exceed $60
million in the aggregate.
49. "CIHC Guarantee of D&O Credit Facilities" means, collectively, the
guarantees by CIHC of the D&O Credit Facilities.
50. "CIHC Guarantee of Exchange Notes" means those guarantees by CIHC of
the Exchange Notes, pursuant to the first senior indenture and terms resolutions
dated as of April 24, 2002.
51. "CIHC Guarantee of Senior Credit Facility" means that CIHC guarantee of
the Senior Credit Facility.
52. "CIHC Guarantee of Senior Credit Facility Claims" means any and all
Claims derived from or based upon the CIHC Guarantee of Senior Credit Facility.
53. "CIHC Unsecured Distribution Cap" means the lesser of (A) 1.00 and (B)
a number equal to (i) $3.8 billion, less the Allowed Class 5A Lender Claims,
divided by (ii) the sum of Allowed Class 6B Reorganizing Debtor General
Unsecured Claims and Total Exchange Note Claims.
54. "CIHC Unsecured Distribution" means a percentage of the New CNC Common
Stock to be issued on the Effective Date equal to the product of (1) (A) the
amount of Allowed Class 6B Reorganizing Debtor General Unsecured Claims, divided
by (B) $3.8 billion less the sum of (x) the Total Bank Debt Balance plus (y) the
amount of Allowed Class 4A 93/94 Note Claims, multiplied by (2) the CIHC
Unsecured Distribution Cap.
55. "CIHC/CFC Intercompany Note" means the $400 million original principal
amount note dated May 11, 2002, issued by CIHC to CFC, with approximately
$315,030,986 in principal and accrued but unpaid interest as of the Petition
Date.
6
56. "CIHC/CNC Intercompany Payables" means certain payables owed by CIHC to
CNC, including $88,202,660 on account of cash transfers, $523,785,034 on account
of intercompany notes payable, $159,087,485 on account of accrued but unpaid
interest on intercompany notes and $272,600 on account of accrued but unpaid
dividends on certain preferred stock.
57. "Claim" means a claim (as defined in section 101(5) of the Bankruptcy
Code) against a Debtor, including, but not limited to: (a) any right to payment
from a Debtor whether or not such right is reduced to judgment, liquidated,
unliquidated, contingent, matured, unmatured, disputed, undisputed, legal,
equitable, secured or unsecured; or (b) any right to an equitable remedy for
breach of performance if such performance gives rise to a right of payment from
a Debtor, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured
or unsecured.
58. "Claims Objection Bar Date" means the one hundred and eightieth day
following the Confirmation Date.
59. "Class" means a category of Holders of Claims or Equity Interests as
set forth in Article III herein (including, in the case of Class 5A and Class
4B, each subclass thereof).
60. "Class 4A Notice" means a notice Filed with the Bankruptcy Court that
discloses the treatment of the 93/94 Notes.
61. "CNC" means Conseco Inc., an Indiana corporation.
62. "CNC Guarantee of D&O Credit Facilities" means, collectively, the
guarantees by CNC of the D&O Credit Facilities.
63. "CNC Guarantees of Trust Preferred Securities" means the limited and
subordinated guarantees by CNC of the Trust Preferred Securities, which
guarantees were limited to the extent that the issuing Trust had funds available
for such distributions.
64. "CNC Guarantee of Trust Preferred Securities Claims" means any and all
Claims derived from or based upon the CNC Guarantees of Trust Preferred
Securities. Pursuant to its terms, the CNC Guarantee of Trust Preferred
Securities is limited to the extent the Trusts have funds available for
distribution. As of the Petition Date, the Trusts had no funds available for
distribution and, therefore, the CNC Guarantee of Trust Preferred Securities
Claims are Allowed in the amount of $0.
65. "CNC Old CIHC Preferred Stock Interests" means any and all Interests of
CNC in the Old CIHC Preferred Stock.
66. "CNC Unsecured Distribution" means a percentage of the New CNC Common
Stock equal to the result of (A) the CNC Unsecured Numerator, divided by (B)
$3.8 billion less (i) Allowed Class 5A Lender Claims plus (ii) the difference
between Total Bank Debt Balance and Allowed Class 5A Lender Claims.
67. "CNC Unsecured Numerator" means an amount equal to the product of (A)
the result of (i) $140 million (the assumed amount of Allowed Class 8A
Reorganizing Debtor General Unsecured Claims) divided by (ii) the sum of (w)
$140 million (the assumed amount of Allowed Class 8A Reorganizing Debtor General
Unsecured Claims), (x) Allowed Class 7A Original Note Claims, (y) Total Exchange
Note Claims multiplied by 1.7 and (z) Allowed Class 10A Trust Related Claims,
multiplied by (B) the First Stepdown Amount, provided however that the CNC
Unsecured Numerator shall not exceed $39.4 million.
68. "Confirmation" means the entry of the Confirmation Order, subject to
all conditions specified in Article IX herein having been satisfied or waived
pursuant to Article IX herein.
69. "Confirmation Date" means the date upon which the Confirmation Order is
entered by the Bankruptcy Court in its docket, within the meaning of Bankruptcy
Rules 5003 and 9021.
7
70. "Confirmation Order" means the order of the Bankruptcy Court confirming
the Plan pursuant to section 1129 of the Bankruptcy Code.
71. "Confirmation Hearing" means the hearing at which the Confirmation
Order is considered by the Bankruptcy Court.
72. "Conseco Creditors Committee" means the Official Committee of Unsecured
Creditors of the Reorganizing Debtors.
73. "Consenting Parties" means, collectively, each Holder of a Claim (not
to include any TOPrS Holder) (i) who has accepted the Plan and is a Holder in a
Class that has, as a Class, voted to accept the Plan, or (ii) who (a) receives a
distribution of property if the Plan is Confirmed, and (b) has not properly and
timely submitted an Opt Out Notice; provided, however, that any person who is a
Participant with respect to the Stock Programs, as defined in Article V.K.5 of
the Plan, who is not an Ineligible Person, also defined in Article V.K.5 of the
Plan, will not become a Consenting Party until such Person executes an
Adjustment Agreement, as defined in Article V.K.5 of the Plan.
74. "Consummation" means the occurrence of the Effective Date.
75. "Convenience Class Claims" means (i) any Reorganizing Debtor General
Unsecured Claim that is under $500 or (ii) any Reorganizing Debtor General
Unsecured Claim in excess of $500, which by election of the Holder thereof
pursuant to such Holder's ballot elects to have its claim reduced to an amount
of $500 and to be treated in Class 9A or Class 7B.
76. "Creditor" means any Holder of a Claim.
77. "CTIHC" means CTIHC, Inc., a Delaware corporation.
78. "D&O Credit Facilities" means the 1997 D&O Credit Facility, the 1998
D&O Credit Facility, the 1998 Non-Refinanced D&O Credit Facility and the 1999
D&O Credit Facility.
79. "D&O Lenders" means those Holders of Allowed Claims based on, derived
from, or under the D&O Credit Facilities.
80. "D&O Transfer Agreement" means a transfer agreement as described in
Article III.C.4 hereof, to be executed on the Effective Date.
81. "Debtor" shall mean, as the context requires, any of the Reorganizing
Debtors.
82. "Debtors" means the Reorganizing Debtors, as debtors in the Chapter 11
Cases.
83. "Debtors in Possession" means the Reorganizing Debtors, as debtors in
possession in the Chapter 11 Cases.
84. "Declaration of Trust" means the declaration of trust to be executed
and delivered by CNC and accepted by the Residual Trustee on the Effective Date
in substantially the form contained in the Plan Supplement.
85. "Deemed" means, for any particular Claim, (a) the scheduled amount of
the Claim, unless a proof of claim was Filed, in which case the proof of claim
amount supersedes the scheduled amount, (b) the amount asserted in Filed proofs
of claim for which there are not corresponding scheduled amounts, and (c) if a
Filed proof of claim does not assert a sum certain the Deemed amount shall be
determined by court order. In all events, if the amount of a Claim is determined
or estimated for any purposes by Final Order or stipulation, then that amount
shall be the Deemed amount for that Claim.
8
86. "Discharged Intercompany Claims" means those intercompany claims and
interests which are not Reinstated Intercompany Claims, including, but not
limited to, the CNC Old CIHC Preferred Stock Interests.
87. "Disclosure Statement" means the Disclosure Statement for Plan of
Reorganization of the Debtors under Chapter 11 of the Bankruptcy Code dated
January 31, 2003, as amended, supplemented, or modified from time to time,
describing the Plan, that is prepared and distributed in accordance with
sections 1125, 1126(b) and/or 1145 of the Bankruptcy Code and Bankruptcy Rule
3018 and/or other applicable law.
88. "Disputed" means, with respect to any Claim or Equity Interest, any
Claim or Equity Interest that is not Allowed.
89. "Distribution Agent" means Old CNC or entity or entities chosen by Old
CNC to make or to facilitate distributions required by the Plan.
90. "Distribution Record Date" means the date for determining which Holders
of Claims and Equity Interests are eligible to receive distributions hereunder,
and shall be the Confirmation Date or such other date as designated in an order
of the Bankruptcy Court.
91. "Effective Date" means the date selected by the Debtors and consented
to by the Conseco Creditors Committee, which is a Business Day after the
Confirmation Date on which: (a) no stay of the Confirmation Order is in effect,
and (b) all conditions specified in Article IX herein have been (i) satisfied or
(ii) waived pursuant to Article IX.C.
92. "Entity" means an entity as defined in section 101(15) of the
Bankruptcy Code.
93. "Equity Interest" means all equity interests in any of the Reorganizing
Debtors, including, but not limited to, all issued, unissued, authorized or
outstanding shares of stock, together with any warrants, options or contract
rights to purchase or acquire such interests at any time.
94. "Estates" means the estates of the Debtors created by section 541 of
the Bankruptcy Code upon the commencement of the Chapter 11 Cases.
95. "Exchange Notes" means, collectively, the (i) 8.5% Exchange Notes; (ii)
6.4% Exchange Notes; (iii) 8.75% Exchange Notes; (iv) 6.8% Exchange Notes; (v)
9.0% Exchange Notes; and (vi) 10.75% Exchange Notes.
96. "Exchange Note Claims" means any and all Claims derived from or based
upon the Exchange Notes.
97. "Exchange Note Distribution" means a percentage of the New CNC Common
Stock to be issued on the Effective Date equal to the result of (A) Exchange
Note Numerator, divided by (B) $3.8 billion less (i) the Allowed 5A Lender
Claims and plus (ii) the difference between Total Bank Debt Balance and Allowed
5A Lender Claims.
98. "Exchange Note Numerator" means an amount equal to the product of (A)
the result of (i) the Total Exchange Note Claims multiplied by 1.7, divided by
(ii) the sum of (w) Allowed Class 7A Original Note Claims, plus the Total
Exchange Note Claims multiplied by 1.7, multiplied by (B) the Second Stepdown
Amount.
99. "File" or "Filed" means file or filed with the Bankruptcy Court in the
Chapter 11 Cases.
100. "Final Decree" means the decree contemplated under Bankruptcy Rule
3022.
101. "Final Order" means an order or judgment of the Bankruptcy Court, or
other court of competent jurisdiction with respect to the subject matter, which
has not been reversed, stayed, modified or amended, and as to which the time to
appeal or seek certiorari has expired and no appeal or petition for certiorari
has been timely taken,
9
or as to which any appeal that has been taken or any petition for certiorari
that has been or may be filed has been resolved by the highest court to which
the order or judgment was appealed or from which certiorari was sought,
provided, however, that if the lower court order is not stayed, then the lower
court order shall be deemed a Final Order.
102. "Finance Company Creditors' Committee" means the official committee of
unsecured creditors appointed in the Finance Company Debtors' Cases.
103. "Finance Company Debtors" means Conseco Finance Corp., Conseco Finance
Servicing Corp., Conseco Finance Corp. - Alabama, Conseco Finance Credit Corp.,
Conseco Finance Consumer Discount Company, Conseco Finance Canada Holding
Company, Conseco Finance Canada Company, Conseco Finance Loan Company, Rice Park
Properties Corporation, Landmark Manufactured Housing, Inc., Conseco Finance Net
Interest Margin Finance Corp. I, Conseco Finance Net Interest Margin Finance
Corp. II, Green Tree Finance Corp. - Two, Conseco Agency of Nevada, Inc.,
Conseco Agency of New York, Inc., Green Tree Floorplan Funding Corp., Conseco
Agency, Inc., Conseco Agency of Alabama, Inc., Conseco Agency of Kentucky, Inc.,
Crum-Reed General Agency, Inc., Green Tree Finance Corp. - Five, Green Tree
Residual Finance Corp. I, and Conseco Finance Credit Card Funding Corp.
104. "Finance Company Debtors' Cases" means the chapter 11 bankruptcy
proceedings filed by the Finance Company Debtors.
105. "Finance Company Plan" means the plan of reorganization filed by the
Finance Company Debtors in the Finance Company Debtors' Cases, as amended from
time to time.
106. "First Stepdown Amount" means $3.8 billion, less (i) the Allowed Class
5A Lender Claims, (ii) the difference between (x) Total Bank Debt Balance and
(y) Allowed Lender Claims, (iii) the Allowed Class 6B Reorganizing Debtor
General Unsecured Claims, (iv) the Allowed Class 4A 93/94 Note Claims and (v)
the aggregate amount of the Convenience Class Claims.
107. "GM Building" means the office building commonly known as the GM
Building, located at 767 5th Avenue, New York, New York 10153.
108. "Guarantees of D&O Credit Facilities" means, collectively, the CNC
Guarantee of D&O Credit Facilities and CIHC Guarantee of D&O Credit Facilities.
109. "Guarantee of Senior Notes" means the CIHC Guarantee of the Senior
Notes.
110. "Holder" means a Person or Entity holding an Equity Interest or Claim.
111. "Holding Company Shared Recovery Allocation Amount" means 30% of the
Cash or assets in the Shared Recovery Escrow Account (as defined in the Finance
Company Plan).
112. "Impaired" means with respect to any Class of Claims or Equity
Interests, a Claim or Equity Interest that is impaired within the meaning of
section 1124 of the Bankruptcy Code.
113. "Impaired Claim" means a Claim classified in an Impaired Class.
114. "Insurance Subsidiary" means those subsidiaries of the Debtors
authorized or licensed to issue or write insurance.
115. "Lehman" means, collectively, Lehman ALI Inc., Lehman Brothers Inc.,
Lehman Commercial Paper Inc., and Lehman Brothers Holdings Inc. and their
affiliates.
116. "Lenders' Agents" means Bank of America, N.A. and JPMorgan Chase Bank,
in their respective roles as Administrative Agents under the Senior Credit
Facility and D&O Credit Facilities.
10
117. "Lender Claims" means any and all Claims based on or derived from the
(i) Senior Credit Facility; (ii) CIHC Guarantee of Senior Credit Facility, (iii)
CNC Guarantee of D&O Credit Facilities, or (iv) CIHC Guarantee of D&O Credit
Facilities.
118. "Lender Subcommittee" means a subcommittee of the Conseco Creditors
Committee consisting of Bank of America, N.A., Angelo Gordon & Co. and The Bank
of New York, together with JPMorgan Chase Bank as an ex officio member of such
subcommittee.
119. "Lenders" means all Holders of Lender Claims, the Lenders' Agents, and
their respective officers, directors, employees, agents, professionals and
representatives.
120. "Management Incentive Plan" means a post-Effective Date management
incentive compensation plan on terms substantially as set forth in the Plan
Supplement, as such plan may be modified or supplemented after the Effective
Date by the Board of Directors of New CNC.
121. "Market Value" means the then average daily closing price of New CNC
Common Stock measured over the preceding 60 trading days.
122. "Master Ballots" mean the master ballots accompanying the Disclosure
Statement upon which Holders of Impaired Claims or Impaired Equity Interests
shall indicate their acceptance or rejection of the Plan in accordance with the
Voting Instructions.
123. "Net D&O Litigation Proceeds" means the aggregate of all net proceeds
and collections (net of costs, fees and expenses), whether by judgment,
settlement, or otherwise, from claims based on or derived from the D&O Credit
Facilities or other derivative claims brought by the Reorganized Debtors against
those current or former directors and officers of the Reorganizing Debtors or
Reorganized Debtors who are not eligible to participate in the programs
described in Article V.K.5 below.
124. "New CNC" means a corporation that is incorporated under the laws of
the State of Delaware and pursuant hereto.
125. "New CNC By-laws" means the by-laws of New CNC, substantially in the
form contained in the Plan Supplement.
126. "New CNC Charter" means the Certificate of Incorporation of New CNC,
substantially in the form contained in the Plan Supplement.
127. "New CNC Common Stock" means approximately 8,000,000,000 shares of
common stock in New CNC, par value $.01 per share, to be authorized pursuant to
the New CNC Charter of which approximately 101,000,000 shares shall be initially
issued pursuant hereto on the Effective Date.
128. "New CNC Common Stock Holdback" means the New CNC Common Stock held in
reserve, as of the Effective Date, for distributions to Holders of Class 4A, 8A,
and 6 B Claims and Equity Interests that are Disputed or do not assert a sum
certain. The Deemed amount shall determine the New CNC Common Stock Holdback.
129. "New CNC Preferred Stock" means Class A Preferred Stock of New CNC to
be distributed on the Effective Date to the Holders of Allowed Claims in Classes
5A-1, 5A-2, 4B-1 and 4B-2 pursuant to the Plan with terms substantially as set
forth in the Plan Supplement, and an initial liquidation preference equal to the
Remaining Bank Debt Balance.
130. "New CNC Warrant Agreement" means the warrant agreement substantially
in the form contained in the Plan Supplement.
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131. "New CNC Warrants" means those certain warrants of New CNC to be
distributed on the Effective Date to the Holders of Allowed Claims in Class 10A,
as described in Article V.I below, and substantially in the form contained in
the New CNC Warrant Agreement.
132. "New Credit Facility" means a senior secured Credit Agreement among
New CNC, as borrower, Bank of America, N.A., as Agent, and the Holders of Lender
Claims, substantially in the form included in the Plan Supplement providing for
the New Tranche A Bank Debt and the New Tranche B Bank Debt, the Security
Agreement (as defined in the New Credit Facility) among New CNC, Reorganized
CIHC and certain other subsidiaries of New CNC, as Guarantors, and Bank of
America, N.A., as Agent, and all other documents entered into in connection
therewith or contemplated thereby.
133. "New Senior Notes" means the new senior notes issued by CNC with terms
substantially as set forth in the Class 4 A Notice and in the 93/94 Notes Term
Sheet.
134. "New Tranche A Bank Debt" means that portion of indebtedness of New
CNC under the New Credit Facility that constitutes Tranche A Term Loans as
defined therein having a principal amount of $1 billion.
135. "New Tranche B Bank Debt" means that portion of the indebtedness of
New CNC under the New Credit Facility that constitutes Tranche B Term Loans as
defined therein in a principal amount equal to the New Tranche B Bank Debt
Amount.
136. "New Tranche B Bank Debt Amount" means $300 million.
137. "Nominee" means any broker, dealer, commercial bank, trust company,
savings and loan, financial institution or other nominee in whose name
securities were registered or held of record on behalf of a Beneficial Holder.
138. "Non-D&O Lenders" means Holders of Allowed Lender Claims based on,
derived from, or under the Senior Credit Facility.
139. "Noteholder Subcommittee" means a subcommittee of the Conseco
Creditors Committee consisting of Appaloosa Management, L.P., HSBC Bank USA, and
First Pacific Advisors, Inc., together with Allfirst Trust Company, N.A. as an
ex officio member of such subcommittee.
140. "Official Committees" means the Conseco Creditors Committee and the
TOPrS Committee.
141. "Old CIHC Common Stock" means all of the issued and outstanding shares
of common stock of CIHC as of immediately prior to the Effective Date.
142. "Old CIHC Common Stock Interest" means all Equity Interests evidenced
by Old CIHC Common Stock.
143. "Old CIHC Preferred Stock" means all issued and outstanding shares of
preferred stock of CIHC as of immediately prior to the Effective Date.
144. "Old CNC" means CNC or any successor thereto (other than New CNC), by
merger, consolidation or otherwise, on and after the Effective Date.
145. "Old CNC Common Stock" means all of the issued and outstanding shares
of CNC common stock, as of immediately prior to the Effective Date.
146. "Old CNC Common Stock Interest" means all Equity Interests evidenced
by Old CNC Common Stock.
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147. "Old CNC Other Preferred Stock" means all preferred Equity Interests
in Old CNC that are not Series F Preferred Stock.
148. "Old CNC Other Preferred Stock Interests" means all Equity Interests
evidenced by the Old CNC Other Preferred Stock.
149. "Old CNC Preferred Stock" means all Equity Interests evidenced by (i)
the Old CNC Series F Preferred Stock and (ii) the Old CNC Other Preferred Stock.
150. "Old CNC Preferred Stock Interest" means all Equity Interests
evidenced by Old CNC Preferred Stock.
151. "Old CNC Series F Preferred Stock" means those certain Equity
Interests evidenced by Series F preferred stock in Old CNC, as of immediately
prior to the Effective Date.
152. "Old CNC Series F Preferred Stock Interests" means all Equity
Interests evidenced by Old CNC Series F Preferred Stock.
153. "Old CTIHC Common Stock" means all of the issued and outstanding
shares of CTIHC common stock, as of immediately prior to the Effective Date.
154. "Old CTIHC Common Stock Interest" means all Equity Interests evidenced
by Old CTIHC Common Stock.
155. "Old PHG Common Stock" means all of the issued and outstanding shares
of PHG common stock, as of immediately prior to the Effective Date.
156. "Old PHG Common Stock Interest" means all Equity Interests evidenced
by Old PHG Common Stock.
157. "Opt Out Notice" means those certain notices, approved by the
Bankruptcy Court, to be sent to Holders of Allowed Class 4A, 5A, 6A, 7A, 8A, 4B,
5B, and 6B Claims, giving such Holders the option to opt out of the release
provision set forth in Article X.C hereof.
158. "Original Notes Distribution" means a percentage of the New CNC Common
Stock to be issued on the Effective Date equal to the result of (A) Original
Notes Numerator, divided by (B) $3.8 billion less (i) the Allowed 5A Lender
Claims, plus (ii) the difference between Total Bank Debt Balance and Allowed 5A
Lender Claims.
159. "Original Notes" means, collectively: (i) 8.5% Original Notes; (ii)
6.4% Original Notes; (iii) 8.75% Original Notes; (iv) 6.8% Original Notes; (v)
9.0% Original Notes; and (vi) 10.75% Original Notes.
160. "Original Notes Numerator" means an amount equal to the product of (A)
the result of (i) the Allowed Class 7A Original Note Claims divided by (ii) the
sum of (w) Allowed Class 7A Original Note Claims, plus the Total Exchange Note
Claims multiplied by 1.7, multiplied by (B) the Second Stepdown Amount.
161. "Other Priority Claims" means any and all Claims accorded priority in
right of payment under section 507(a) of the Bankruptcy Code, other than a
Priority Tax Claim or an Administrative Claim.
162. "Other Secured Claims" means any and all Secured Claims against the
Debtors not specifically described herein, excluding, without limiting the
generality of the foregoing, the 93/94 Note Claims and the Lender Claims arising
under or derived from the 1999 D&O Credit Facility.
163. "Person" means an individual, corporation, partnership, joint venture,
association, joint stock company, limited liability company, limited liability
partnership, trust, trustee, United States Trustee, estate,
13
unincorporated organization, government, governmental unit (as defined in the
Bankruptcy Code), agency, or political subdivision thereof, or other entity.
164. "Petition Date" means December 17, 2002.
165. "PHG" means Partners Health Group, Inc., an Illinois corporation.
166. "Plan" means this Joint Plan of Reorganization pursuant to Chapter 11
of the Bankruptcy Code, together with all exhibits hereto, either in its present
form or as it may be altered, amended, modified or supplemented from time to
time in accordance with the terms hereof, the Bankruptcy Code and the Bankruptcy
Rules.
167. "Plan Supplement" means the compilation of documents and form of
documents, schedules and exhibits to be Filed prior to the hearing on the
Disclosure Statement, as modified or supplemented prior to the Confirmation
Hearing in accordance with Article XII.A of the Plan.
168. "Plan Value" means $3.8 billion as the value of New CNC.
169. "Priority Tax Claim" means a Claim of a governmental unit of the kind
specified in section 507(a)(8) of the Bankruptcy Code.
170. "Professional Escrow Account" means an interest-bearing savings
account funded and maintained by the Reorganized Debtors on and after the
Effective Date solely for the purpose of paying all fees and expenses of
Professionals in these Chapter 11 Cases.
171. "Professional", or collectively "Professionals" means a Person or
Entity (a) employed pursuant to a Final Order in accordance with sections 327
and 1103 of the Bankruptcy Code and to be compensated for services rendered
prior to the Confirmation Date, pursuant to sections 327, 328, 329, 330 and 331
of the Bankruptcy Code, or (b) for which compensation and reimbursement has been
allowed by the Bankruptcy Court pursuant to section 503(b)(4) of the Bankruptcy
Code.
172. "Pro Rata" means the proportion that an Allowed Claim or an Allowed
Equity Interest in a particular Class bears to the aggregate amount of Allowed
Claims or the aggregate number of Allowed Equity Interests in such Class.
173. "Registration Rights Agreement" means agreements entered into by New
CNC for the benefit of certain holders of New CNC Preferred Stock and New CNC
Common Stock, substantially in the form set forth in the Plan Supplement.
174. "Reinstated CIHC Preferred Stock" means such preferred stock issued by
CIHC to certain CIHC non-debtor insurance subsidiaries, pursuant to which
amounts owed to certain CIHC non-debtor insurance subsidiaries include (i)
$43,387,976 owed to Bankers Life and Casualty Company, $35,300,140 owed to
Conseco Annuity Assurance Company and $16,986,835 owed to Conseco Life Insurance
Company on account of 1994 series preferred stock, (ii) $10,224,000 owed to
Bankers Life and Casualty Company, $23,004,000 owed to Conseco Life Insurance
Company and $12,780,000 owed to Washington National Insurance Company on account
of 1998 series preferred stock, and (iii) $4,709,250 owed to Conseco Life
Insurance Company on account of the CIHC $2.32 redeemable callable preferred
stock.
175. "Reinstated CIHC Preferred Stock Dividends" means those amounts owed
to certain CIHC non-debtor insurance subsidiaries on account of accrued but
unpaid dividends on Reinstated CIHC Preferred Stock.
176. "Reinstated CIHC Preferred Stock Interest" means all Equity Interests
evidenced by Reinstated CIHC Preferred Stock.
14
177. "Reinstated Intercompany Claims" means those intercompany Claims set
forth on Exhibit G to the Disclosure Statement, including, but not limited to
the Reinstated CIHC Preferred Stock Dividends, plus any Claims arising from
executory contracts (i) between or among the Debtors or (ii) between or among a
Debtor or Debtors and an Insurance Subsidiary or Insurance Subsidiaries of the
Debtors which have been assumed on or prior to the Effective Date, including but
not limited to intercompany tax sharing agreements.
178. "Releasees" means all current and former officers, directors,
employees, attorneys, financial advisors, accountants, investment bankers,
agents and representatives of the Reorganizing Debtors and their subsidiaries
except for (i) the Finance Company Debtors and (ii) the subsidiaries of the
Finance Company Debtors, in each case in their capacity as such, and only if
serving in one such capacity on the Petition Date or thereafter.
179. "Remaining Bank Debt Balance" means the Total Bank Debt Balance minus
(i) the aggregate initial principal amount of New Tranche A Bank Debt and New
Tranche B Bank Debt and (ii) any portion of the Allowed Lender Claims paid in
cash on the Effective Date under the Plan.
180. "Reorganized CIHC" means CIHC, or any successor thereto, by merger,
consolidation, or otherwise, on and after the Effective Date.
181. "Reorganized Debtors" means the Reorganizing Debtors and New CNC, in
each case, on or after the Effective Date.
182. "Reorganizing Debtor" shall mean, as the context requires, CIHC, CNC,
CTIHC and/or PHG (collectively, the "Reorganizing Debtors").
183. "Reorganizing Debtor General Unsecured Claims" means any Claim against
the Reorganizing Debtors that is not a/an: (i) Administrative Claim; (ii)
Priority Tax Claim; (iii) Other Priority Claim; (iv) Other Secured Claim; (v)
Secured Claim; (vi) Reinstated Intercompany Claim; (vii) 93/94 Note Claim (to
the extent secured); (viii) Lender Claim; (ix) Exchange Note Claim; (x) Original
Note Claim; (xi) Convenience Class Claim; (xii) Trust Related Claim; (xiii)
Discharged Intercompany Claim; or (xiv) Securities Claim. Without limiting the
generality of the foregoing, "Reorganizing Debtor General Unsecured Claims"
includes, without limitation, the CFC Residual Intercompany Claims (after giving
effect to Article VII.F hereof).
184. "Reorganizing Debtors" means CNC, CIHC, CTIHC and PHG.
185. "Reorganizing Subplans" means the individual Plans of reorganization,
provided herein, for each of the Reorganizing Debtors.
186. "Residual Assets" means only the following assets of Old CNC: the
Residual Subsidiaries and to the extent not included in the assets of the
Residual Subsidiaries, an amount of Cash required to satisfy (a) the reasonable
costs and expenses associated with the liquidation of Old CNC (including,
without limitation, the payment of any taxes, assessments, insurance premiums,
repairs, legal fees, Residual Trustee's fees and costs, rent, storage and sales
commissions), and (b) if applicable, the reasonable costs and expenses
associated with the Residual Trust.
187. "Residual Claims" means the Claims assigned to the Residual Trust
pursuant to the provisions herein.
188. "Residual Share" means the authorized capital stock of Old CNC, which
shall consist of a single share of common stock, no par value.
189. "Residual Subsidiaries" means those direct or indirect subsidiaries of
CNC set forth on the Residual Subsidiary Schedule contained in the Plan
Supplement.
190. "Residual Trust" means the grantor trust to be created on the
Effective Date to hold the equity interests in Old CNC.
15
191. "Residual Trustee" means Wilmington Trust Company, who will be
appointed pursuant to the Declaration of Trust to serve as trustee of the
Residual Trust.
192. "Schedules" mean the schedules of assets and liabilities, schedules of
executory contracts, and the statement of financial affairs as the Bankruptcy
Court requires the Debtors to file pursuant to section 521 of the Bankruptcy
Code, the Official Bankruptcy Forms and the Bankruptcy Rules, as they may be
amended and supplemented from time to time.
193. "Second Stepdown Amount" means the First Stepdown Amount less (i) the
value of the CNC Unsecured Distribution and (ii) the value of the TOPrS
Settlement Equity Recovery based upon Plan Value.
194. "Secured Claim" means (a) a Claim that is secured by a lien on
property in which the Estate has an interest, which lien is valid, perfected and
enforceable under applicable law or by reason of a Final Order, or that is
subject to setoff under section 553 of the Bankruptcy Code, to the extent of the
value of the Creditor's interest in the Estate's interest in such property or to
the extent of the amount subject to setoff, as applicable, as determined
pursuant to section 506(a) of the Bankruptcy Code, or (b) a Claim Allowed under
this Plan as a Secured Claim.
195. "Securities Act" means the Securities Act of 1933, 15 U.S.C. sections
77a-77aa, as now in effect or hereafter amended, or any similar federal, state
or local law.
196. "Securities Claims" means Claims of the type described in, and subject
to subordination under, section 510(b) of the Bankruptcy Code, including any and
all Claims whatsoever, whether known or unknown, foreseen or unforeseen,
currently existing or hereafter arising, arising from rescission of a purchase
or sale of a security of the Debtors or an affiliate of the Debtors, for damages
arising from the purchase, sale or holding of such securities, or for
reimbursement, indemnification or contribution allowed under section 502 of the
Bankruptcy Code on account of such a Claim.
197. "Senior Credit Facility" means the $1,500,000,000 Five-Year Credit
Agreement dated as of September 25, 1998 among CNC, Bank of America, N.A., as
Agent, and the financial institutions signatory thereto, as amended,
supplemented, waived or otherwise modified from time to time, including, without
limitation, pursuant to the following instruments: Amendment dated as of
September 22, 2000, Amendment dated as of May 30, 2001, Amendment dated as of
March 20, 2002, Waiver No. 1 dated as of August 14, 2002, Waiver No. 2 dated as
of September 8, 2002 and Waiver No. 3 dated as of October 18, 2002. The Senior
Credit Facility is guaranteed by CIHC.
198. "Senior Management Employment Agreements" means, except as executives
otherwise agree, those employment agreements included in the Plan Supplement.
199. "Senior Management KERP" means that certain key employee retention
program described in the Debtors' motion for an order authorizing the Debtors to
implement a key employee retention program for senior management, filed February
5, 2003, and approved by the Bankruptcy Court on February 24, 2003.
200. "Senior Note Claims" means, collectively, the (i) Exchange Note Claims
and (ii) Original Note Claims.
201. "Stated Cure Amounts" means those cure amounts for contracts to be
assumed by the Debtors on or prior to the Effective Date, notice of which shall
be sent to affected contract counterparties no later than 10 days before the
Confirmation Hearing.
202. "Stated Intercompany Cure Amounts" means those Stated Cure Amounts
that relate to assumed contracts between the Debtors or between the Debtors and
their subsidiaries.
203. "Subordinated Debentures" means those certain subordinated deferrable
interest debentures that are held by the Trusts and issued under (A) a
subordinated indenture dated November 14, 1996 from CNC to State Street Bank and
Trust Company as successor trustee to Fleet National Bank, as trustee, as
supplemented and (B) a
16
subordinated indenture dated December 8, 1997 (as supplemented) between CNC and
the First National Bank of Chicago (n/k/a Bank One), including: (i) 9.16%
subordinated deferrable interest debentures dated November 14, 1996, due
November 30, 2026, (ii) 8.70% subordinated deferrable interest debentures dated
November 22, 1996, due November 15, 2026, (iii) 8.796% subordinated deferrable
interest debentures dated March 26, 1997, due April 1, 2027, (iv) 8.70%
subordinated deferrable interest debentures dated August 24, 1998, due September
30, 2028, (v) 9.00% subordinated deferrable interest debentures dated October
14, 1998, due December 31, 2028, (vi) 9.44% subordinated deferrable interest
debentures dated August 31, 1999, due September of 2029, and (vii) 6.75%
subordinated deferrable interest debentures due February 16, 2003.
204. "Subordinated Debenture Claims" means all Claims derived from or based
upon the Subordinated Debentures.
205. "TOPrS 9019 Motion" means that certain motion Filed in the Bankruptcy
Court seeking approval of the settlement as described in Article V.I hereof.
206. "TOPrS Appeals" means those appeals filed by the TOPrS Committee with
respect to (i) that certain order of the Bankruptcy Court dated July 16, 2003
[docket no. 4448], granting Debtors' motion for order approving amended
employment agreement with M. Bublitz; and (ii) that certain order of the
Bankruptcy Court dated June 18, 2003, ordering the dismissal of the TOPrS
Committee's adversary proceeding against Bank of America, N.A. and JPMorgan
Chase Bank, docketed in the Bankruptcy Court as adversary proceeding number
03-A-00659.
207. "TOPrS Committee" means the Official Committee of Trust Originated
Preferred Securities Holders.
208. "TOPrS Opt Out Notice" means that certain notice approved by the
Bankruptcy Court, to be sent to Holder of Allowed Class 10A Claims, giving such
Holders the option to opt out of the TOPrS Settlement.
209. "TOPrS Settlement D&O Litigation Recovery" means 45% of the Net D&O
Litigation Proceeds, in an aggregate amount not to exceed $30 million, payable
in (i) Cash, or (ii) in the sole discretion of New CNC, through the issuance of
New CNC Common Stock based on the Market Value of such New CNC Common Stock at
the time such payment is due and payable, on terms and conditions more fully
described in Article V.I hereof.
210. "TOPrS Settlement Equity Recovery" means 1.5% of the New CNC Common
Stock outstanding as of the Effective Date.
211. "TOPrS Settlement Recovery" means (i) the TOPrS Settlement D&O
Litigation Recovery Amount, (ii) the TOPrS Settlement Equity Recovery and (iii)
the New CNC Warrants. 212. "TOPrS Settlement Representative" means a member of
the TOPrS Committee or such other representative acceptable to the Debtors
designated in writing by the TOPrS Committee.
213. "Total Bank Debt Balance" means the aggregate amount of the Allowed
Lender Claims, plus all interest, Waiver Consideration and accrued but unpaid
interest thereon (at the contractual default rate), compounded monthly, through
the Effective Date in a manner consistent with the Senior Credit Facility and
D&O Credit Facilities. Such amount is intended to include all obligations under
the Senior Credit Facility and the D&O Credit Facilities, and the respective
guarantees thereof by CIHC that benefit from the contractual subordination of
other Allowed Claims.
214. "Total Exchange Note Claims" means the aggregate of the Allowed
Exchange Note Claims plus, to the extent permitted under the Bankruptcy Code,
interest through the Effective Date.
215. "Trust Preferred Securities" means the following securities that have
been issued by the Trusts: (i) 9.16% Trust Originated Preferred Securities, (ii)
8.70% Trust Pass-Through Securities, (iii) 8.796% Capital
17
Securities, (iv) 8.70% Trust Originated Preferred Securities, (v) 9% Trust
Originated Preferred Securities, (vi) 9.44% Trust Originated Preferred
Securities, and (vii) 6.75% Trust Originated Preferred Securities.
216. "Trust Indenture Act" means the Trust Indenture Act of 1939, 15 U.S.C.
section 77aaa, as now in effect or hereafter amended.
217. "Trust Related Claims" means collectively, (a) the Subordinated
Debenture Claims and (b) the CNC Guarantee of Trust Preferred Securities, and to
the extent related thereto, the Trust Preferred Securities.
218. "Trusts" means those certain Delaware business trusts which (a) issued
common securities to CNC, (b) issued the Trust Preferred Securities, and (c) are
the Holders of the Subordinated Debentures.
219. "Unimpaired" means, with respect to a Class of Claims or Equity
Interests, a Claim or Equity Interest that is unimpaired within the meaning of
section 1124 of the Bankruptcy Code.
220. "Unofficial Bank Committee" means that certain steering committee of
the Lenders formed prior to the Petition Date and comprised of Bank of America,
N.A., JPMorgan Chase Bank, The Bank of New York, Deutsche Bank, AG, Angelo,
Gordon and Co. L.P. and General Electric Capital Corporation.
221. "Unofficial Noteholder Committee" means that certain unofficial
committee of Noteholders formed prior to the Petition Date and comprised of
Appaloosa Management, L.P., Barclays Bank, Calvert Group, Ltd., First Pacific
Advisors, Inc., HSBC Bank USA, Metropolitan West Asset Management and
Whippoorwill Associates.
222. "Voting Deadline" means June 6, 2003, as extended from time to time.
223. "Voting Instructions" means the instructions for voting on the Plan
contained in the section of the Disclosure Statement entitled "SOLICITATION;
VOTING PROCEDURES" and in the Ballots and the Master Ballots.
224. "Waiver Consideration" means the aggregate amount of "Waiver
Consideration" as defined in each of the Waivers No. 2 dated as of September 8,
2002 with respect to the D&O Credit Facilities.
225. "Work-Down Plan" means the Conseco, Inc. 2000 Employee Stock Purchase
Program Work-Down Plan, and the Conseco, Inc. 2000 Non-Employee Stock Purchase
Program Work-Down Plan.
Article II.
ADMINISTRATIVE AND PRIORITY TAX CLAIMS AGAINST ALL OF THE DEBTORS
A. Administrative Claims
Subject to the provisions of sections 328, 330(a) and 331 of the Bankruptcy
Code, each Holder of an Allowed Administrative Claim will be paid the full
unpaid amount of such Allowed Administrative Claim in Cash (i) on the Effective
Date or as soon thereafter as is practicable, (ii) if such Administrative Claim
is Allowed after the Effective Date, on the date such Administrative Claim is
Allowed, or as soon thereafter as is practicable, or (iii) upon such other terms
as may be agreed upon by such Holder and the respective Reorganized Debtor or
otherwise upon an order of the Bankruptcy Court; provided that Allowed
Administrative Claims representing obligations incurred in the ordinary course
of business or otherwise assumed by the Debtors pursuant to the Plan will be
assumed on the Effective Date and paid or performed by the respective
Reorganized Debtor when due in accordance with the terms and conditions of the
particular agreements governing such obligations. The Reorganizing Debtors (and
the Reorganized Debtors) are not obliged to pay Administrative Claims (other
than the Administrative Claims of the U.S. Internal Revenue Service to the
extent the U.S. Internal Revenue Service is entitled to assert such claims under
applicable nonbankruptcy law) against any Finance Company Debtors.
18
Notwithstanding anything in this Plan to the contrary, the U.S. Internal
Revenue Service shall not be required to file an Administrative Claim for taxes
(or penalties and interest with respect to such taxes) for a tax period after
the Petition Date until the Reorganizing Debtors have first filed with the U.S.
Internal Revenue Service any and all required tax returns and the time for
assessment and collection of such liability, as provided under the nonbankruptcy
statutory authority governing such time limits, has expired.
B. Priority Tax Claims
On the Effective Date or as soon as practicable thereafter, each Holder of
an Allowed Priority Tax Claim due and payable on or prior to the Effective Date
shall be paid, at the option of the respective Debtor, (a) Cash in an amount
equal to the amount of such Allowed Priority Tax Claim, or (b) Cash over a
six-year period from the date of assessment as provided in section 1129(a)(9)(C)
of the Bankruptcy Code, with interest payable at a fixed rate determined as of
the Confirmation Date by the formula provided in section 6621(a)(2) of the
Internal Revenue Code and compounded daily (as provided in section 6622 of the
Internal Revenue Code). Any deferred payments made pursuant to section
1129(a)(9)(C) of the Bankruptcy Code shall be by equal monthly Cash payments
beginning on the first day of the calendar month following the Effective Date.
The amount of any Priority Tax Claim that is not an Allowed Claim or that is not
otherwise due and payable on or prior to the Effective Date, and the rights of
the Holder of such Claim, if any, to payment in respect thereof shall (x) be
determined in the manner in which the amount of such Claim and the rights of the
Holder of such Claim would have been resolved or adjudicated if the Chapter 11
Cases had not been commenced, (y) survive the Effective Date and Consummation of
the Plan as if the Chapter 11 Cases had not been commenced, and (z) not be
discharged pursuant to section 1141 of the Bankruptcy Code. If the Reorganizing
Debtors substantially default on the payments of a tax due to the U.S. Internal
Revenue Service under this Plan, then the total amount still owed to the U.S.
Internal Revenue Service under this Plan shall become due and payable, and the
U.S. Internal Revenue Service may collect such amount through the administrative
and judicial collection provisions of the Internal Revenue Code or as otherwise
permitted under nonbankruptcy law. In this context, "substantial default" shall
mean that the Reorganizing Debtors have defaulted on a series of Plan payments
to the U.S. Internal Revenue Service and have ceased making any payments under
the Plan, and, after receiving notice of such default from the U.S. Internal
Revenue Service, have not attempted to cure the default and satisfy their Plan
obligations.
Article III.
CLASSIFICATION AND TREATMENT OF CLASSIFIED CLAIMS AND EQUITY INTERESTS
A. Summary
The categories of Claims and Equity Interests listed below classify Claims
and Equity Interests in or against the Reorganizing Debtors for all purposes,
including voting, confirmation and distribution pursuant hereto and pursuant to
sections 1122 and 1123(a)(1) of the Bankruptcy Code. A Claim or Equity Interest
shall be deemed classified in a particular Class only to the extent that the
Claim or Equity Interest qualifies within the description of that Class and
shall be deemed classified in a different Class to the extent that any remainder
of such Claim or Equity Interest qualifies within the description of such
different Class. A Claim or Equity Interest is in a particular Class only to the
extent that such Claim or Equity Interest is Allowed in that Class and has not
been paid or otherwise satisfied prior to the Effective Date.
1. CNC: Summary of Classification and Treatment of Claims and Equity
Interests
<TABLE>
<CAPTION>
------------ ------------------------------------------------------ ----------------- ----------------------
Class Claim Status Voting Right
------------ ------------------------------------------------------ ----------------- ----------------------
<S> <C> <C> <C>
------------ ------------------------------------------------------ ----------------- ----------------------
1A Other Priority Claims Unimpaired Deemed to Accept
------------ ------------------------------------------------------ ----------------- ----------------------
------------ ------------------------------------------------------ ----------------- ----------------------
2A Other CNC Secured Claims Unimpaired Deemed to Accept
------------ ------------------------------------------------------ ----------------- ----------------------
------------ ------------------------------------------------------ ----------------- ----------------------
3A Reinstated Intercompany Claims Unimpaired Deemed to Accept
------------ ------------------------------------------------------ ----------------- ----------------------
------------ ------------------------------------------------------ ----------------- ----------------------
4A 93/94 Note Claims Impaired Entitled to vote
------------ ------------------------------------------------------ ----------------- ----------------------
------------ ------------------------------------------------------ ----------------- ----------------------
5A Lender Claims
------------ ------------------------------------------------------ ----------------- ----------------------
</TABLE>
19
<TABLE>
<CAPTION>
------------ ------------------------------------------------------ ----------------- ----------------------
Class Claim Status Voting Right
------------ ------------------------------------------------------ ----------------- ----------------------
<S> <C> <C> <C>
------------ ------------------------------------------------------ ----------------- ----------------------
Subclass 5A-1 Impaired Entitled to vote
Subclass 5A-2 Impaired Entitled to vote
------------ ------------------------------------------------------ ----------------- ----------------------
------------ ------------------------------------------------------ ----------------- ----------------------
6A Exchange Note Claims Impaired Entitled to vote
------------ ------------------------------------------------------ ----------------- ----------------------
------------ ------------------------------------------------------ ----------------- ----------------------
7A Original Note Claims Impaired Entitled to vote
------------ ------------------------------------------------------ ----------------- ----------------------
------------ ------------------------------------------------------ ----------------- ----------------------
8A Reorganizing Debtor General Unsecured Claims Impaired Entitled to vote
------------ ------------------------------------------------------ ----------------- ----------------------
------------ ------------------------------------------------------ ----------------- ----------------------
9A Convenience Class Claims Unimpaired Deemed to Accept
------------ ------------------------------------------------------ ----------------- ----------------------
------------ ------------------------------------------------------ ----------------- ----------------------
10A Trust Related Claims Impaired Deemed to reject
------------ ------------------------------------------------------ ----------------- ----------------------
------------ ------------------------------------------------------ ----------------- ----------------------
11A Old CNC Preferred Stock Interests
Subclass 11A-1 Impaired Deemed to reject
Subclass 11A-2 Impaired Deemed to reject
------------ ------------------------------------------------------ ----------------- ----------------------
------------ ------------------------------------------------------ ----------------- ----------------------
12A Old CNC Common Stock Interests Impaired Deemed to reject
------------ ------------------------------------------------------ ----------------- ----------------------
------------ ------------------------------------------------------ ----------------- ----------------------
13A Discharged Intercompany Claims Impaired Deemed to reject
------------ ------------------------------------------------------ ----------------- ----------------------
------------ ------------------------------------------------------ ----------------- ----------------------
14A Securities Claims Impaired Deemed to reject
------------ ------------------------------------------------------ ----------------- ----------------------
</TABLE>
2. CIHC: Summary of Classification and Treatment of Claims and Equity
Interests
<TABLE>
<CAPTION>
------------ ------------------------------------------------------ ----------------- ----------------------
Class Claim Status Voting Right
------------ ------------------------------------------------------ ----------------- ----------------------
<S> <C> <C> <C>
------------ ------------------------------------------------------ ----------------- ----------------------
1B Other Priority Claims Unimpaired Deemed to accept
------------ ------------------------------------------------------ ----------------- ----------------------
------------ ------------------------------------------------------ ----------------- ----------------------
2B Other Secured Claims Unimpaired Deemed to accept
------------ ------------------------------------------------------ ----------------- ----------------------
------------ ------------------------------------------------------ ----------------- ----------------------
3B Reinstated Intercompany Claims Unimpaired Deemed to accept
------------ ------------------------------------------------------ ----------------- ----------------------
------------ ------------------------------------------------------ ----------------- ----------------------
4B Lender Claims
Subclass 4B-1 Impaired Entitled to vote
Subclass 4B-2 Impaired Entitled to vote
------------ ------------------------------------------------------ ----------------- ----------------------
------------ ------------------------------------------------------ ----------------- ----------------------
5B Exchange Note Claims Impaired Entitled to vote
------------ ------------------------------------------------------ ----------------- ----------------------
------------ ------------------------------------------------------ ----------------- ----------------------
6B Reorganizing Debtor General Unsecured Claims Impaired Entitled to vote
------------ ------------------------------------------------------ ----------------- ----------------------
------------ ------------------------------------------------------ ----------------- ----------------------
7B Convenience Class Claims Unimpaired Deemed to accept
------------ ------------------------------------------------------ ----------------- ----------------------
------------ ------------------------------------------------------ ----------------- ----------------------
8B Reinstated CIHC Preferred Stock Interests Unimpaired Deemed to accept
------------ ------------------------------------------------------ ----------------- ----------------------
------------ ------------------------------------------------------ ----------------- ----------------------
9B Old CIHC Common Stock Interests Unimpaired Deemed to accept
------------ ------------------------------------------------------ ----------------- ----------------------
------------ ------------------------------------------------------ ----------------- ----------------------
10B Discharged Intercompany Claims Impaired Deemed to reject
------------ ------------------------------------------------------ ----------------- ----------------------
------------ ------------------------------------------------------ ----------------- ----------------------
11B Securities Claims Impaired Deemed to reject
------------ ------------------------------------------------------ ----------------- ----------------------
</TABLE>
3. CTIHC: Summary of Classification and Treatment of Claims and Equity
Interests
<TABLE>
<CAPTION>
------------ ------------------------------------------------------ ----------------- ----------------------
Class Claim Status Voting Right
------------ ------------------------------------------------------ ----------------- ----------------------
<S> <C> <C> <C>
------------ ------------------------------------------------------ ----------------- ----------------------
1C Other Priority Claims Unimpaired Deemed to accept
------------ ------------------------------------------------------ ----------------- ----------------------
------------ ------------------------------------------------------ ----------------- ----------------------
2C Other Secured Claims Unimpaired Deemed to accept
------------ ------------------------------------------------------ ----------------- ----------------------
------------ ------------------------------------------------------ ----------------- ----------------------
3C Reorganizing Debtor General Unsecured Claims Impaired Entitled to vote
------------ ------------------------------------------------------ ----------------- ----------------------
------------ ------------------------------------------------------ ----------------- ----------------------
4C Old CTIHC Common Stock Interests Impaired Deemed to reject
------------ ------------------------------------------------------ ----------------- ----------------------
</TABLE>
4. PHG: Summary of Classification and Treatment of Claims and Equity
Interests
<TABLE>
<CAPTION>
------------ ------------------------------------------------------ ----------------- ----------------------
Class Claim Status Voting Right
------------ ------------------------------------------------------ ----------------- ----------------------
<S> <C> <C> <C>
------------ ------------------------------------------------------ ----------------- ----------------------
1D Other Priority Claims Unimpaired Deemed to accept
------------ ------------------------------------------------------ ----------------- ----------------------
------------ ------------------------------------------------------ ----------------- ----------------------
2D Other Secured Claims Unimpaired Deemed to accept
------------ ------------------------------------------------------ ----------------- ----------------------
------------ ------------------------------------------------------ ----------------- ----------------------
3D Reorganizing Debtor General Unsecured Claims Impaired Deemed to accept
------------ ------------------------------------------------------ ----------------- ----------------------
------------ ------------------------------------------------------ ----------------- ----------------------
4D Old PHG Common Stock Interests Impaired Deemed to reject
------------ ------------------------------------------------------ ----------------- ----------------------
</TABLE>
20
B. Classification and Treatment of Classified Claims and Equity Interests: CNC
1. Class 1A--Other Priority Claims
(a) Classification: Class 1A consists of the Other Priority Claims
against CNC.
(b) Treatment: The legal, equitable and contractual rights of the
Holders of Allowed Class 1A Claims are unaltered by the Plan. Unless
otherwise agreed to by the Holders of the Allowed Other Priority Claim and
CNC, each Holder of an Allowed Class 1A Claim shall receive, in full and
final satisfaction of such Allowed Class 1A Claim, one of the following
treatments, in the sole discretion of CNC:
(i) CNC or the Distribution Agent will pay the Allowed Class 1A
Claim in full in Cash on the Effective Date or as soon thereafter as
is practicable; provided that, Class 1A Claims representing
obligations incurred in the ordinary course of business will be paid
in full in Cash when such Class 1A Claims become due and owing in the
ordinary course of business; or
(ii) such Claim will be treated in any other manner so that such
Claim shall otherwise be rendered Unimpaired pursuant to section 1124
of the Bankruptcy Code.
(c) Voting: Class 1A is Unimpaired and the Holders of Class 1A Claims
are conclusively deemed to have accepted the Plan pursuant to section
1126(f) of the Bankruptcy Code. Therefore, the Holders of Claims in Class
1A are not entitled to vote to accept or reject the Plan.
2. Class 2A--Other Secured Claims
(a) Classification: Class 2A consists of the Other Secured Claims
against CNC.
(b) Treatment: The legal, equitable and contractual rights of the
Holders of Class 2A Claims are unaltered by the Plan. Unless otherwise
agreed to by the Holder of the Allowed Class 2A Claim and CNC, each Holder
of an Allowed Class 2A Claim shall receive, in full and final satisfaction
of such Allowed Class 2A Claim, one of the following treatments, in the
sole discretion of CNC:
(i) the Allowed Class 2A Claims shall be reinstated as an
obligation of New CNC;
(ii) CNC shall surrender all collateral securing such Claim to
the Holder thereof, without representation or warranty by or further
recourse against CNC; provided that, such surrender must render such
Claim Unimpaired pursuant to section 1124 of the Bankruptcy Code; or
(iii) such Claim will be treated in any other manner so that such
Claim shall otherwise be rendered Unimpaired pursuant to section 1124
of the Bankruptcy Code.
On the Effective Date or as soon as practicable thereafter, the
Allowed Class 2A Claims of the U.S. Internal Revenue Service, if any, shall
be paid, at the option of the respective Reorganizing Debtor or Reorganized
Debtor, (a) Cash in an amount equal to the amount of such Allowed Class 2A
Claim, or (b) Cash over a six-year period from the date of assessment of
the tax to which the claim relates, with interest payable at a fixed rate
determined as of the Confirmation Date by the formula provided in section
6621(a)(2) of the Internal Revenue Code and compounded daily (as provided
in section 6622 of the Internal Revenue Code). Any deferred payments made
pursuant to this provision of the Plan shall be by equal monthly Cash
payment beginning on the first day of the calendar month following the
Effective Date.
Notwithstanding any other provision of this Plan, any oversecured
Allowed Class 2A Claim of the U.S. Internal Revenue Service shall be
entitled to postpetition interest at the rate provided for in section
6621(a)(2) of the Internal Revenue Code up to the amount by which the value
of the property securing the
21
oversecured Allowed Class 2A Claim of the U.S. Internal Revenue Service
exceeds the value of such claim.
The U.S. Internal Revenue Service shall retain the tax liens and
rights to setoff securing its Allowed Class 2A Claims and, in the event the
Reorganizing Debtors substantially default on the payment of such claims
(as provided for in this Plan), then the total amount still owed to the
U.S. Internal Revenue Service under this Plan shall become due and payable,
and the U.S. Internal Revenue Service may collect such amount through the
administrative or judicial collection provisions of the U.S. Internal
Revenue Code or as otherwise permitted under nonbankruptcy law. In this
context, "substantial default" shall mean that the Reorganizing Debtors
have defaulted on a series of Plan payments to the U.S. Internal Revenue
Service and have ceased making any payments under the Plan, and, after
receiving notice of such default from the U.S. Internal Revenue Service,
have not attempted to cure the default and satisfy their Plan obligations.
(c) Voting: Class 2A is Unimpaired and the Holders of Class 2A Claims
are conclusively deemed to have accepted the Plan pursuant to section
1126(f) of the Bankruptcy Code. Therefore, the Holders of Claims in Class
2A are not entitled to vote to accept or reject the Plan.
3. Class 3A--Reinstated Intercompany Claims
(a) Classification: Class 3A consists of the Reinstated Intercompany
Claims against CNC.
(b) Allowance: The Reinstated Intercompany Claims are Allowed in the
amount of the Reinstated CIHC Preferred Stock Dividends plus all Stated
Intercompany Cure Amounts.
(c) Treatment: The legal, equitable and contractual rights of the
Holders of Allowed Class 3A Claims are unaltered by the Plan. Unless
otherwise agreed to by the Holder of such Claim and CNC, each Allowed Class
3A Claim shall be reinstated as obligations of New CNC in full and final
satisfaction of such Class 3A Claim. The relevant agreements, instruments
and documents underlying Allowed Class 3A Claims will be also be
unimpaired.
(d) Voting: Class 3A is Unimpaired and the Holders of Class 3A Claims
are conclusively deemed to have accepted the Plan pursuant to section
1126(f) of the Bankruptcy Code. Therefore, the Holders of Claims in Class
3A are not entitled to vote to accept or reject the Plan.
4. Class 4A--93/94 Note Claims
(a) Classification: Class 4A consists of the 93/94 Note Claims against
CNC.
(b) Treatment: Pursuant to the Class 4A Notice, in full and final
satisfaction of their Claims against the Reorganizing Debtors and the
Finance Company Debtors, Holders of Allowed 93/94 Note Claims shall receive
a distribution specified under the Finance Company Plan and shall receive
no distribution under this Plan, and shall be deemed to release all
prepetition liens on any assets of, and all security interests they may
have held in or against, the Debtors or any of the Debtors' Subsidiaries or
their respective assets as of the Petition Date, including, but not limited
to, the CFC/CIHC Intercompany Note.
(c) Voting: Class 4A is Impaired and the Holders of Class 4A Claims
are entitled to vote to accept or reject the Plan.
5. Class 5A--Lender Claims
(a) Classification: Class 5A consists of two subclasses of the Lender
Claims against CNC: Lender Claims under or derived from the 1999 D&O Credit
Facility (Class 5A-1), which are partially Secured Claims, and all other
Lender Claims (Class 5A-2).
22
(b) Allowance: The respective Class 5A Claims are Allowed for all
purposes of the Chapter 11 Cases, without the need to File proofs of claim,
in the amount of the Allowed Lender Claims, but due to the contractual
subordination of certain other Allowed Claims, distributions will be made
on account of the Total Bank Debt Balance, and such Allowed Class 5A Claims
and the distributions hereunder in respect of Class 5A Claims shall not be
subject to offset, reduction or counterclaim in any respect.
(c) Treatment: On or as soon as practicable after the Effective Date,
(i) each Holder of an Allowed Class 5A-1 Claim shall receive on account of
its Allowed Class 5A-1 Claim and its related Allowed Class 4B-1 Claim, the
treatment as set forth for Class 4B-1 in Article III.C.4 below, and (ii)
each Holder of an Allowed Class 5A-2 Claim shall receive on account of its
Allowed Class 5A-2 Claim and its related Allowed Class 4B-2 Claim, the
treatment as set forth for Class 4B-2 in Article III.C.4 below. Such
treatments shall be in full and final satisfaction of all Class 5A Claims.
In addition, immediately prior to the Effective Date, but subject in all
respects to the immediate occurrence of the Effective Date, the Holders of
Class 5A Claims shall be deemed to release all prepetition liens on and
security interests in the CFC/CIHC Intercompany Note.
(d) Voting: Classes 5A-1 and 5A-2 are Impaired Classes and Holders of
Class 5A-1 and 5A-2 Claims are entitled to vote separately to accept or
reject the Plan.
6. Class 6A--Exchange Note Claims Against CNC
(a) Classification: Class 6A consists of the Exchange Note Claims
against CNC.
(b) Allowance: The Class 6A Claims are Allowed for all purposes under
this Plan, without the need to File proofs of claim, along with Class 5B
Claims, in an aggregate amount of $1,370,975,431.97, but to the extent that
the Holders of Exchange Note Claims are entitled to postpetition interest
under the Bankruptcy Code, distributions will be made on account of the
Total Exchange Note Claims. Allowed Class 6A Claims and the distributions
hereunder in respect thereof shall not be subject to offset, reduction or
counterclaim in any respect.
(c) Treatment: On or as soon as practicable after the Effective Date,
each Holder of an Allowed Class 6A Claim shall receive in full and final
satisfaction of all such Allowed Class 6A Claims, and related Allowed Class
5B Claims, the treatment set forth for Class 5B in Article III.C.5 below.
(d) Voting: Class 6A is Impaired and Holders of Class 6A Claims are
entitled to vote to accept or reject the Plan.
7. Class 7A--Original Note Claims
(a) Classification: Class 7A consists of the Original Note Claims
against CNC.
(b) Allowance: The Class 7A Claims are Allowed for all purposes under
this Plan, without the need to file Proofs of Claim, in an aggregate amount
of $1,242,444,895.76 and such Allowed Class 7A Claims and the distributions
hereunder in respect thereof shall not be subject to offset, reduction or
counterclaim in any respect.
(c) Treatment: On or as soon as practicable after the Effective Date,
each Holder of an Allowed Class 7A Claim shall receive, in full and final
satisfaction of all such Allowed Class 7A Claims, its Pro Rata share of the
Original Note Distribution. In addition, Houlihan Lokey Howard & Zukin and
any other professionals of the Unofficial Noteholders Committee will be
paid on the Effective Date their unpaid fees and expenses (whether incurred
prior to or after the Petition Date) in accordance with their prepetition
engagement letters.
23
(d) Voting: Class 7A is Impaired and Holders of Class 7A Claims are
entitled to vote to accept or reject the Plan.
8. Class 8A - Reorganizing Debtor General Unsecured Claims
(a) Classification: Class 8A consists of the Reorganizing Debtor
General Unsecured Claims against CNC.
(b) Treatment: On or as soon as practicable after the Effective Date,
each Holder of an Allowed Class 8A Claim will receive, in full and final
satisfaction of all such Allowed Class 8A Claims, its Pro Rata share of the
CNC Unsecured Distribution.
(c) Voting: Class 8A is Impaired and Holders of Class 8A Claims are
entitled to vote to accept or reject the Plan.
9. Class 9A-- Convenience Class Claims
(a) Classification: Class 9A consists of the Convenience Class Claims
against CNC.
(b) Treatment: CNC will treat such Allowed Class 9A Claims in a manner
that will render such Claims Unimpaired by the Bankruptcy Code. Each holder
of an Allowed Class 8A Claim may elect to be treated as a Holder of an
Allowed Class 9A Convenience Class Claim. Any such election must be made on
the Ballot, and no Creditor can elect Class 9A Claim treatment after the
Voting Deadline. Each Holder of an allowed Class 9A Claim shall receive the
lesser of (i) $500 or (ii) the amount of their Allowed Class 8A Claim. Any
Allowed Class 8A Claim that exceeds $500, but whose Holder elects to be
treated as a Class 9A Claim shall be automatically reduced in complete
satisfaction of such Class 8A Claim to the amount of distribution made on
account of such Convenience Class Claim.
(c) Voting: Class 9A is Unimpaired and the Holders of Class 9A Claims
are conclusively presumed to have accepted the Plan pursuant to section
1126(f) of the Bankruptcy Code.
10. Class 10A-- Trust Related Claims
(a) Classification: Class 10A consists of the Trust Related Claims
against CNC.
(b) Allowance: The Subordinated Debenture Claims will be Allowed in
the aggregate amount of $2,019,100,000, but distributions thereon will be
made to the holders of the Trust Preferred Securities.
(c) Treatment: Class 10A is deemed to reject; provided that holders of
the Trust Preferred Securities shall receive the TOPrS Settlement Recovery,
as set forth in Article V.I, below, in settlement of all Class 10A Claims.
Restriction on recovery: The TOPrS Settlement Recovery being offered to
Class 10A is subject to contractual subordination between the Holders of
the Trust Related Claims, on the one hand, and the Lender Claims and Senior
Note Claims, on the other hand, and is being provided by the Holders of the
Lender Claims and Senior Note Claims in order to facilitate a consensual
Plan subject to and in accordance with the TOPrS Settlement. The TOPrS
Settlement Recovery is being provided with the consent of the Holders of
the Lender Claims and Senior Note Claims, subject to and in accordance with
the TOPrS Settlement. The Debtors reserve the right (i) to request that the
Bankruptcy Court confirm the Plan in accordance with section 1129(b) of the
Bankruptcy Code and/or (ii) to modify the Plan in accordance with the terms
hereof.
(d) Voting: Class 10A is deemed to reject.
24
11. Class 11A--Old CNC Preferred Stock Interests
(a) Classification: Class 11A consists of the two subclasses of Old
CNC Preferred Stock Interests: Old CNC Series F Preferred Stock Interests
(Class 11A-1) and Old CNC Other Preferred Stock Interests (Class 11A-2).
(b) Treatment: On the Effective Date Class 11A-1 and 11A-2 Interests
will be cancelled and Holders thereof will not receive a distribution under
the Plan in respect of such Interests.
(c) Voting: Holders of Class 11A-1 and 11A-2 Interests are
conclusively deemed to reject the Plan and are not entitled to vote to
accept or reject the Plan.
12. Class 12A--Old CNC Common Stock Interests
(a) Classification: Class 12A consists of the Allowed Old CNC Common
Stock Interests.
(b) Treatment: On the Effective Date Class 12A Interests will be
cancelled and Holders thereof will not receive a distribution under the
Plan in respect of such Interests.
(c) Voting: Class 12A is Impaired and is conclusively deemed to reject
the Plan. Holders of Class 12A Old CNC Common Stock Interests are not
entitled to vote to accept or reject the Plan.
13. Class 13A-- Discharged Intercompany Claims
(a) Classification: Class 13A consists of the Discharged Intercompany
Claims against CNC.
(b) Treatment: Class 13A Claims will be cancelled and Holders thereof
will not receive a distribution under the Plan in respect of such Claims.
(c) Voting: Class 13A is Impaired and is conclusively deemed to reject
the Plan. Holders of Class 13A Discharged Intercompany Claims are not
entitled to vote to accept or reject the Plan.
14. Class 14A--Securities Claims
(a) Classification: Class 14A consists of the Securities Claims
against CNC.
(b) Treatment: Class 14A Claims will be cancelled and Holders thereof
will not receive a distribution under the Plan in respect of such Claims.
(c) Voting: Class 14A is Impaired, and is conclusively deemed to
reject the Plan. Holders of Class 14A Claims are not entitled to vote to
accept or reject the Plan.
C. Classification and Treatment of Classified Claims and Equity Interests:
CIHC
1. Class 1B--Other Priority Claims
(a) Classification: Class 1B consists of the Other Priority Claims
against CIHC.
(b) Treatment: The legal, equitable and contractual rights of the
Holders of Allowed Class 1B Claims are unaltered by the Plan. Unless
otherwise agreed to by the Holder of the Allowed Other Priority Claim and
CIHC, each Holder of an Allowed Class 1B Claim shall receive, in full and
final satisfaction of such Allowed Class 1B Claim, one of the following
treatments, in the sole discretion of CIHC:
25
(i) Reorganized CIHC or such Distribution Agent will pay the
Allowed Class 1B Claim in full in Cash on the Effective Date or as
soon thereafter as is practicable; provided that, Class 1B Claims
representing obligations incurred in the ordinary course of business
will be paid in full in Cash when such Claim becomes due and owing in
the ordinary course of business; or
(ii) such Claim will be treated in any other manner so that such
Claim shall otherwise be rendered Unimpaired pursuant to section 1124
of the Bankruptcy Code.
(c) Voting: Class 1B is Unimpaired and the Holders of Class 1B Claims
are conclusively deemed to have accepted the Plan pursuant to section
1126(f) of the Bankruptcy Code. Therefore, the Holders of Claims in Class
1B are not entitled to vote to accept or reject the Plan.
2. Class 2B--Secured Claims
(a) Classification: Class 2B consists of the Secured Claims against
CIHC.
(b) Treatment: The legal, equitable and contractual rights of the
Holders of Class 2B Claims are Unimpaired by the Plan. Unless otherwise
agreed to by the Holder of the Allowed Class 2B Claim and CIHC, each Holder
of an Allowed Class 2B Claim shall receive, in full and final satisfaction
of such Allowed Class 2B Claim, one of the following treatments, in the
sole discretion of CIHC:
(i) the Allowed Class 2B Claims shall be reinstated as an
obligation of Reorganized CIHC;
(ii) Reorganized CIHC or such Distribution Agent shall surrender
all collateral securing such Claim to the Holder thereof, without
representation or warranty by or further recourse against CIHC,
Reorganized CIHC or such Distribution Agent provided that, such
surrender must render such Claim Unimpaired pursuant to section 1124
of the Bankruptcy Code; or
(iii) such Claim will be treated in any other manner so that such
Claim shall otherwise be rendered Unimpaired pursuant to section 1124
of the Bankruptcy Code;
On the Effective Date or as soon as practicable thereafter, the Allowed
Class 2B Claims of the U.S. Internal Revenue Service, if any, shall be paid, at
the option of the respective Reorganizing Debtor or Reorganized Debtor, (a) Cash
in an amount equal to the amount of such Allowed Class 2B Claim, or (b) Cash
over a six-year period from the date of assessment of the tax to which the claim
relates, with interest payable at a fixed rate determined as of the Confirmation
Date by the formula provided in section 6621(a)(2) of the Internal Revenue Code
and compounded daily (as provided in section 6622 of the Internal Revenue Code).
Any deferred payments made pursuant to this provision of the Plan shall be by
equal monthly Cash payment beginning on the first day of the calendar month
following the Effective Date.
Notwithstanding any other provision of this Plan, any oversecured Allowed
Class 2B Claim of the U.S. Internal Revenue Service shall be entitled to
postpetition interest at the rate provided for in section 6621(a)(2) of the
Internal Revenue Code up to the amount by which the value of the property
securing the oversecured Allowed Class 2B Claim of the U.S. Internal Revenue
Service exceeds the value of such claim.
The U.S. Internal Revenue Service shall retain the tax liens and rights to
setoff securing its Allowed Class 2B Claims and, in the event the Reorganizing
Debtors substantially default on the payment of such claims (as provided for in
this Plan), then the total amount still owed to the U.S. Internal Revenue
Service under this Plan shall become due and payable, and the U.S. Internal
Revenue Service may collect such amount through the administrative or judicial
collection provisions of the U.S. Internal Revenue Code or as otherwise
permitted under nonbankruptcy law. In this context, "substantial default" shall
mean that the Reorganizing Debtors have defaulted on a series of Plan payments
to the U.S. Internal Revenue Service and have ceased making any payments under
the
26
Plan, and, after receiving notice of such default from the U.S. Internal
Revenue Service, have not attempted to cure the default and satisfy their Plan
obligations.
(c) Voting: Class 2B is Unimpaired and the Holders of Class 2B Claims
are conclusively deemed to have accepted the Plan pursuant to section
1126(f) of the Bankruptcy Code. Therefore, the Holders of Claims in Class
2B are not entitled to vote to accept or reject the Plan.
3. Class 3B--Reinstated Intercompany Claims
(a) Classification: Class 3B consists of the Reinstated Intercompany
Claims against CIHC.
(b) Treatment: The legal, equitable and contractual rights of the
Holders of Allowed Class 3B Claims are Unimpaired by the Plan. Unless
otherwise agreed to by the Holder of such Claim and CIHC, each Allowed
Class 3B Claim shall be reinstated by Reorganized CIHC in full and final
satisfaction of such Class 3B Claim.
(c) Voting: Class 3B is Unimpaired and the Holders of Class 3B Claims
are conclusively deemed to have accepted the Plan pursuant to section
1126(f) of the Bankruptcy Code. Therefore, the Holders of Claims in Class
3B are not entitled to vote to accept or reject the Plan.
4. Class 4B-- Lender Claims
(a) Classification: Class 4B consists of two subclasses of the Lender
Claims against CIHC: Lender Claims under or derived from the 1999 D&O
Credit Facility (Class 4B-1), which are partially Secured Claims, and all
other Lender Claims (Class 4B-2).
(b) Allowance: The Class 4B Claims are Allowed for all purposes of the
Chapter 11 Cases, without the need to File proofs of claim, in the amount
of the Allowed Lender Claims, but due to the contractual subordination of
certain other Allowed Claims, distributions will be made on account of the
Total Bank Debt Balance, and such Allowed Class 4B Claims and the
distributions hereunder in respect of Class 4B Claims shall not be subject
to offset, reduction or counterclaim in any respect.
(c) Treatment: On or as soon as practicable after the Effective Date,
each Holder of an Allowed Class 4B Claim shall receive on account of and in
full and final satisfaction of its Allowed Class 4B Claim and its related
Allowed Class 5A Claim its Pro Rata share of the (i) New Tranche A Bank
Debt; (ii) the New Tranche B Bank Debt; and (iii) the New CNC Preferred
Stock; provided, however, that, in connection with the compromise and
settlement of the TOPrS Committee's objections to confirmation of the Plan
and certain Lender Claims, and in consideration of the contributions of the
Non-D&O Lenders to such compromise and the TOPrS Settlement, the amount of
the New CNC Preferred Stock distributable to each D&O Lender in respect of
its Lender Claims based on or derived from the D&O Credit Facilities shall
be reduced by such D&O Lender's pro rata share of New CNC Preferred Stock
having an initial liquidation preference of $7 million and the amount of
New CNC Preferred Stock distributable to each Non-D&O Lender in respect of
its Lender Claims based on or derived from the Senior Credit Facility shall
be increased by such Non-D&O Lender's pro rata share of New CNC Preferred
Stock having an initial liquidation preference of $7 million. CIHC will
guaranty the New Tranche A Bank Debt and the New Tranche B Bank Debt and
the obligations in respect thereof will be secured as contemplated by the
New Credit Facility. Such treatment shall be in full and final satisfaction
of all Class 4B and Class 5A Claims, and of any rights to contractual
subordination of other Allowed Claims for the benefit of Class 4B and Class
5A Claims. In addition, immediately prior to the Effective Date, but
subject in all respects to the immediate occurrence of the Effective Date,
the Holders of Class 4B and Class 5A Claims shall be deemed to release all
prepetition liens on and security interests in the CFC/CIHC Intercompany
Note. In addition, the Lenders' Agents and each of the Lenders shall
receive in Cash on the Effective Date an amount equal to all of its fees,
expenses and other amounts (including, without limitation, all fees and
expenses of counsel and financial advisors including, without limitation,
Greenhill & Co., LLC) payable in connection with the Senior Credit Facility
or the D&O Credit Facilities, as the case may be, including, without
limitation, in
27
connection with the Chapter 11 Cases, the Plan, the implementation of the
Plan or any documentation relating thereto. The New Tranche A Bank Debt and
New Tranche B Bank Debt shall be issued in separate tranches as follows:
(i) to Holders of Claims under the Senior Credit Facility, (ii) to Holders
of Claims under or derived from the 1999 D&O Facility and (iii) to Holders
of Claims under or derived from the other D&O Credit Facilities. The
Lenders under the respective D&O Credit Facilities shall be deemed to have
transferred to New CNC, pursuant to the terms of the D&O Transfer Agreement
to be executed on the Effective Date, all loans made to the individual
borrowers under the D&O Credit Facilities as a result of satisfaction of
the Guarantees of D&O Credit Facilities and all rights and remedies in
respect thereof to New CNC, and all amounts paid by such borrowers (net of
the TOPrS Settlement D&O Litigation Recovery, regardless of whether such
amounts are paid in cash or New CNC Stock under the terms of the TOPrS
Settlement) shall be applied to the loans under the New Credit Facility as
set forth in the New Credit Facility.
(d) Voting: Classes 4B-1 and 4B-2 are Impaired Classes and Holders of
Class 4B-1 and 4B-2 Claims are entitled to vote separately to accept or
reject the Plan.
5. Class 5B-- Exchange Note Claims
(a) Classification: Class 5B consists of the Exchange Note Claims
against CIHC.
(b) Allowance: Notwithstanding any provision to the contrary contained
in this Plan, the Class 5B Claims shall be deemed Allowed Class 5B Claims
for all purposes of the Chapter 11 Cases, without the need to File proofs
of claim, along with Class 6A Claims, in an aggregate amount of
$1,370,975,431.97, but to the extent that the Holders of Exchange Note
Claims are entitled to postpetition interest under the Bankruptcy Code,
distributions will be made on account of the Total Exchange Note Claims.
(c) Treatment: Each Holder of an Allowed Class 5B Claim shall receive
in full and final satisfaction of all such Allowed Class 6A and Class 5B
Claims, its Pro Rata share of (i) the Exchange Note Distribution on or as
soon as practicable after the Effective Date, and (ii) any Available
Proceeds, when and if such proceeds are available, as determined by the
Residual Trustee. In addition, Houlihan Lokey Howard & Zukin and any other
professionals of the Unofficial Noteholders Committee will be paid on the
Effective Date the unpaid fees and expenses (whether incurred prior to or
after the Petition Date) in accordance with their prepetition engagement
letters.
(d) Voting: Class 5B is Impaired and is entitled to vote to accept or
reject the Plan.
6. Class 6B--Reorganizing Debtor General Unsecured Claims
(a) Classification: Class 6B consists of the Reorganizing Debtor
General Unsecured Claims against CIHC, including the CIHC/CFC Intercompany
Note.
(b) Treatment: On or as soon as practicable after the Effective Date,
each Holder of an Allowed Class 6B Claim shall receive in full and final
satisfaction of such Class 6B Claims, its Pro Rata share of the CIHC
Unsecured Distribution.
(c) Voting: Class 6B is Impaired and Holders of Class 6B Claims are
entitled to vote to accept or reject the Plan.
7. Class 7B-- Convenience Class Claims
(a) Classification: Class 7B consists of the Convenience Class Claims
against CIHC.
(b) Treatment: CIHC will treat such Allowed 7B Claims in a manner that
will render such Claims Unimpaired under the Bankruptcy Code. Each Holder
of an Allowed Class 6B General Unsecured
28
Claim may elect to be treated as a Holder of an Allowed Class 7B
Convenience Class Claim. Any such election must be made on the Ballot, and
no Creditor can elect Class 7B Claim treatment after the Voting Deadline.
Each Holder of an Allowed Class 7B Claim shall receive the lesser of (i)
$500 or (ii) the amount of their Allowed Class 6B Claim. Any Allowed Class
6B Claim that exceeds $500 but whose Holder elects to be treated as a Class
7B Claim shall be automatically reduced in complete satisfaction of such
Class 6B Claim to the amount of distribution made on account of such
Convenience Class Claim.
(c) Voting: Class 7B is Unimpaired and the Holders of Class 7B Claims
are conclusively presumed to have accepted the Plan pursuant to section
1126(f) of the Bankruptcy Code.
8. Class 8B--Reinstated CIHC Preferred Stock Interests
(a) Classification: Class 8B consists of the Reinstated CIHC Preferred
Stock Interests.
(b) Treatment: Reorganized CIHC will reinstate the Allowed Reinstated
CIHC Preferred Stock Interests.
(c) Voting: Class 8B is Unimpaired and the Holders of Class 8B
Interests are conclusively deemed to have accepted the Plan pursuant to
section 1126(f) of the Bankruptcy Code. Therefore, the Holders of Interests
in Class 8B are not entitled to vote to accept or reject the Plan.
9. Class 9B--Old CIHC Common Stock Interests
(a) Classification: Class 9B consists of the Old CIHC Common Stock
Interests.
(b) Treatment: Reorganized CIHC will reinstate the Allowed Old CIHC
Common Stock Interests.
(c) Voting: Class 9B is Unimpaired and the Holders of Class 9B Old
Common Stock Interests are conclusively deemed to have accepted the Plan
pursuant to section 1126(f) of the Bankruptcy Code. Therefore, the Holders
of Interests in Class 9B are not entitled to vote to accept or reject the
Plan.
10. Class 10B-- Discharged Intercompany Claims
(a) Classification: Class 10B consists of the Discharged Intercompany
Claims against CIHC.
(b) Treatment: Class 10B Claims will be cancelled and the Holders
thereof will receive no distribution under the Plan in respect of such
Claims.
(c) Voting: Class 10B is Impaired and is conclusively deemed to reject
the Plan. Holders of Class 10B Discharged Intercompany Claims are not
entitled to vote to accept or reject the Plan.
11. Class 11B--Securities Claims
(a) Classification: Class 11B consists of the Securities Claims
against CIHC.
(b) Treatment: Class 11B will be cancelled and the Holders thereof
will receive no distribution under the Plan in respect of such Claims.
(c) Voting: Class 11B is Impaired, and is conclusively deemed to
reject the Plan. Holders of Class 11B Claims are not entitled to vote to
accept or reject the Plan.
29
D. Classification and Treatment of Classified Claims and Equity Interests:
CTIHC
1. Class 1C--Other Priority Claims
(a) Classification: Class 1C consists of the Other Priority Claims
against CTIHC.
(b) Treatment: The legal, equitable and contractual rights of the
Holders of Allowed Class 1C Claims are unaltered by the Plan. Unless
otherwise agreed to by the Holder of the Allowed Other Priority Claim and
CTIHC, each Holder of an Allowed Class 1C Claim shall receive, in full and
final satisfaction of such Allowed Class 1C Claim, one of the following
treatments, in the sole discretion of CTIHC:
(i) the Distribution Agent will pay the Allowed Class 1C Claim in
full in Cash on the Effective Date or as soon thereafter as is
practicable, provided that, Class 1C Claims representing obligations
incurred in the ordinary course of business will be paid in full in
Cash when such Class 1C Claims become due and owing in the ordinary
course of business; or
(ii) such Claim will be treated in any other manner so that such
Claim shall otherwise be rendered Unimpaired pursuant to section 1124
of the Bankruptcy Code.
(c) Voting: Class 1C is Unimpaired and the Holders of Class 1C Claims
are conclusively deemed to have accepted the Plan pursuant to section
1126(f) of the Bankruptcy Code. Therefore, the Holders of Claims in Class
1C are not entitled to vote to accept or reject the Plan.
2. Class 2C--Secured Claims
(a) Classification: Class 2C consists of the Secured Claims against
CTIHC.
(b) Treatment: The legal, equitable and contractual rights of the
Holders of Class 2C Claims are unaltered by the Plan. Unless otherwise
agreed to by the Holder of the Allowed Class 2C Claim and CTIHC, each
Holder of an Allowed Class 2C Claim shall receive, in full and final
satisfaction of such Allowed Class 2C Claim, one of the following
treatments, in the sole discretion of CTIHC:
(i) the Allowed Class 2C Claims shall be reinstated as an
obligation of Reorganized CTIHC;
(ii) CTIHC shall surrender all collateral securing such Claim to
the Holder thereof, without representation or warranty by or recourse
against CTIHC or Reorganized CTIHC, provided that, such surrender must
render such Claim Unimpaired pursuant to Section 1124 of the
Bankruptcy Code; or
(iii) such Claim will be treated in any other manner so that such
Claim shall otherwise be rendered Unimpaired pursuant to section 1124
of the Bankruptcy Code.
On the Effective Date or as soon as practicable thereafter, the Allowed
Class 2C Claims of the U.S. Internal Revenue Service, if any, shall be paid, at
the option of the respective Reorganizing Debtor or Reorganized Debtor, (a) Cash
in an amount equal to the amount of such Allowed Class 2C Claim, or (b) Cash
over a six-year period from the date of assessment of the tax to which the claim
relates, with interest payable at a fixed rate determined as of the Confirmation
Date by the formula provided in section 6621(a)(2) of the Internal Revenue Code
and compounded daily (as provided in section 6622 of the Internal Revenue Code).
Any deferred payments made pursuant to this provision of the Plan shall be by
equal monthly Cash payment beginning on the first day of the calendar month
following the Effective Date.
30
Notwithstanding any other provision of this Plan, any oversecured Allowed
Class 2C Claim of the U.S. Internal Revenue Service shall be entitled to
postpetition interest at the rate provided for in section 6621(a)(2) of the
Internal Revenue Code up to the amount by which the value of the property
securing the oversecured Allowed Class 2C Claim of the U.S. Internal Revenue
Service exceeds the value of such claim.
The U.S. Internal Revenue Service shall retain the tax liens and rights to
setoff securing its Allowed Class 2C Claims and, in the event the Reorganizing
Debtors substantially default on the payment of such claims (as provided for in
this Plan), then the total amount still owed to the U.S. Internal Revenue
Service under this Plan shall become due and payable, and the U.S. Internal
Revenue Service may collect such amount through the administrative or judicial
collection provisions of the U.S. Internal Revenue Code or as otherwise
permitted under nonbankruptcy law. In this context, "substantial default" shall
mean that the Reorganizing Debtors have defaulted on a series of Plan payments
to the U.S. Internal Revenue Service and have ceased making any payments under
the Plan, and, after receiving notice of such default from the U.S. Internal
Revenue Service, have not attempted to cure the default and satisfy their Plan
obligations.
(c) Voting: Class 2C is Unimpaired and the Holders of Class 2C Claims
are conclusively deemed to have accepted the Plan pursuant to section
1126(f) of the Bankruptcy Code. Therefore, the Holders of Claims in Class
2C are not entitled to vote to accept or reject the Plan.
3. Class 3C -- Reorganizing Debtor General Unsecured Claims against CTIHC
(a) Classification: Class 3C consists of the Reorganizing Debtor
General Unsecured Claims against CTIHC.
(b) Treatment: If there are any Allowed Class 3C Claims, Holders
thereof will receive a Pro Rata share of the Old CTIHC Common Stock.
(c) Voting: Class 3C is Impaired and Holders of Class 3C Reorganizing
Debtor General Unsecured Claims are entitled to vote to accept or reject
the Plan.
4. Class 4C-- Old CTIHC Common Stock Interests
(a) Classification: Class 4C consists of the Old CTIHC Common Stock
Interests.
(b) Treatment: Class 4C Interests will be allocated to the Holders of
Allowed Class 3C Claims, if any, and if none, shall be held by Reorganized
CIHC.
(c) Voting: Class 4C is Impaired and is conclusively deemed to reject
the Plan. Holders of Class 4C Old CTIHC Common Stock Interests are not
entitled to vote to accept or reject the Plan.
E. Classification and Treatment of Classified Claims and Equity Interests:
Partners Health Group, Inc.
1. Class 1D--Other Priority Claims
(a) Classification: Class 1D consists of the Other Priority Claims
against PHG.
(b) Treatment: The legal, equitable and contractual rights of the
Holders of Allowed Class 1D Claims are unaltered by the Plan. Unless
otherwise agreed to by the Holder of the Allowed Other Priority Claim and
PHG, each Holder of an Allowed Class 1D Claim shall receive, in full and
final satisfaction of such Allowed Class 1D Claim, one of the following
alternative treatments, in the sole discretion of PHG:
(i) the Distribution Agent will pay the Allowed Class 1D Claim in
full in Cash on the Effective Date or as soon thereafter as is
practicable, provided that, Class 1D Claims
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representing obligations incurred in the ordinary course of business
will be paid in full in Cash when such Class 1D Claims become due and
owing in the ordinary course of business; or
(ii) such Claim will be treated in any other manner so that such
Claim shall otherwise be rendered Unimpaired pursuant to section 1124
of the Bankruptcy Code.
(c) Voting: Class 1D is Unimpaired and the Holders of Class 1D Claims
are conclusively deemed to have accepted the Plan pursuant to section
1126(f) of the Bankruptcy Code. Therefore, the Holders of Claims in Class
1D are not entitled to vote to accept or reject the Plan.
2. Class 2D--Secured Claims
(a) Classification: Class 2D consists of the Secured Claims against
PHG.
(b) Treatment: The legal, equitable and contractual rights of the
Holders of Class 2D Claims are unaltered by the Plan. Unless otherwise
agreed to by the Holder of the Allowed Class 2D Claim and PHG, each Holder
of an Allowed Class 2D Claim shall receive, in full and final satisfaction
of such Allowed Class 2D Claim, one of the following alternative
treatments, in the sole discretion of PHG:
(i) the Allowed Class 2D Claims shall be reinstated as an
obligation of Reorganized PHG;
(ii) the Distribution Agent shall surrender all collateral
securing such Claim to the Holder thereof, without representation or
warranty by or recourse against PHG or Reorganized PHG, provided that,
such surrender must render such Claim Unimpaired pursuant to section
1124 of the Bankruptcy Code; or
(iii) such Claim will be treated in any other manner so that such
Claim shall otherwise be rendered Unimpaired pursuant to section 1124
of the Bankruptcy Code.
On the Effective Date or as soon as practicable thereafter, the Allowed
Class 2D Claims of the U.S. Internal Revenue Service, if any, shall be paid, at
the option of the respective Reorganizing Debtor or Reorganized Debtor, (a) Cash
in an amount equal to the amount of such Allowed Class 2D Claim, or (b) Cash
over a six-year period from the date of assessment of the tax to which the claim
relates, with interest payable at a fixed rate determined as of the Confirmation
Date by the formula provided in section 6621(a)(2) of the Internal Revenue Code
and compounded daily (as provided in section 6622 of the Internal Revenue Code).
Any deferred payments made pursuant to this provision of the Plan shall be by
equal monthly Cash payment beginning on the first day of the calendar month
following the Effective Date.
Notwithstanding any other provision of this Plan, any oversecured Allowed
Class 2D Claim of the U.S. Internal Revenue Service shall be entitled to
postpetition interest at the rate provided for in section 6621(a)(2) of the
Internal Revenue Code up to the amount by which the value of the property
securing the oversecured Allowed Class 2D Claim of the U.S. Internal Revenue
Service exceeds the value of such claim.
The U.S. Internal Revenue Service shall retain the tax liens and rights to
setoff securing its Allowed Class 2D Claims and, in the event the Reorganizing
Debtors substantially default on the payment of such claims (as provided for in
this Plan), then the total amount still owed to the U.S. Internal Revenue
Service under this Plan shall become due and payable, and the U.S. Internal
Revenue Service may collect such amount through the administrative or judicial
collection provisions of the U.S. Internal Revenue Code or as otherwise
permitted under nonbankruptcy law. In this context, "substantial default" shall
mean that the Reorganizing Debtors have defaulted on a series of Plan payments
to the U.S. Internal Revenue Service and have ceased making any payments under
the Plan, and, after receiving notice of such default from the U.S. Internal
Revenue Service, have not attempted to cure the default and satisfy their Plan
obligations.
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(c) Voting: Class 2D is Unimpaired and the Holders of Class 2D Claims
are conclusively deemed to have accepted the Plan pursuant to section
1126(f) of the Bankruptcy Code. Therefore, the Holders of Claims in Class
2D are not entitled to vote to accept or reject the Plan.
3. Class 3D-- Reorganizing Debtor General Unsecured Claims against PHG
(a) Classification: Class 3D consists of the Reorganizing Debtor
General Unsecured Claims against PHG.
(b) Treatment: Class 3D Claims will voluntarily waive any right to
receive a distribution under the Plan.
(c) Voting: CIHC is the only creditor in Class 3D and approves of its
treatment under this subplan.
4. Class 4D-- Old PHG Common Stock Interests
(a) Classification: Class 4D consists of the Old PHG Common Stock
Interests.
(b) Treatment: PHG is a Residual Subsidiary and the Old PHG Common
Stock will be transferred to the Residual Trust.
(c) Voting: CIHC is the indirect parent of PHG. CIHC and intermediate
holding company approve of their treatment under this subplan.
Article IV.
ACCEPTANCE OR REJECTION OF THE PLAN
A. Voting Classes
Each Holder of an Allowed Claim or Allowed Equity Interest in Classes 4A,
5A-1, 5A-2, 6A, 7A, 8A, 4B-1, 4B-2, 5B, 6B and 3C shall be entitled to vote to
accept or reject the Plan.
B. Acceptance by Impaired Classes
An Impaired Class of Claims shall have accepted the Plan if (a) the Holders
(other than any Holder designated under section 1126(e) of the Bankruptcy Code)
of at least two-thirds in amount of the Allowed Claims actually voting in such
Class have voted to accept the Plan and (b) the Holders (other than any Holder
designated under section 1126(e) of the Bankruptcy Code) of more than one-half
in number of the Allowed Claims actually voting in such Class have voted to
accept the Plan. An Impaired Class of Equity Interests shall have accepted the
Plan if Holders (other than any Holder designated under Section 1126(e) of the
Bankruptcy Code) that hold at least two-thirds in amount of the Allowed Equity
Interests actually voting in such Class have voted to accept the Plan.
C. Presumed Acceptance of Plan
Classes 1A, 2A, 3A, 9A, 1B, 2B, 3B, 7B, 8B, 9B, 1C, 2C, 1D, and 2D are
Unimpaired under the Plan, and, therefore, are presumed to have accepted the
Plan pursuant to section 1126(f) of the Bankruptcy Code.
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D. Presumed Rejection of Plan
Except as otherwise stated herein, Classes 10A, 11A, 12A, 13A, 14A, 10B,
11B, 4C and 4D are Impaired and shall receive no distributions, and, therefore,
are presumed to have rejected the Plan pursuant to section 1126(g) of the
Bankruptcy Code.
E. Non-Consensual Confirmation
The Debtors will seek Confirmation of the Plan under section 1129(b) of the
Bankruptcy Code with respect to the Impaired Classes presumed to reject the
Plan, and reserve the right to do so with respect to any other rejecting Class
and/or to modify the Plan in accordance with Article X.E hereof.
Article V.
MEANS FOR IMPLEMENTATION OF THE REORGANIZING SUBPLANS
A. Corporate Existence and Vesting of Assets in the Reorganizing Debtors and
Old CNC
1. On the Effective Date: (i) Old CNC shall continue to exist as a separate
corporate entity, with corporate powers in accordance with the laws of the State
of Indiana and its Articles of Incorporation and By-laws; provided that the
Articles of Incorporation shall be amended and restated to limit Old CNC's
activity to the implementation of the Plan, the liquidation of its Residual
Assets and the winding-up of its affairs; (ii) New CNC shall exist as a separate
corporate entity and initially as a wholly-owned subsidiary of Old CNC, with all
corporate powers in accordance with the laws of the State of Delaware, the New
CNC Charter and the New CNC By-laws; and (iii) (1) the Residual Trust shall be
settled and exist as a grantor trust and/or liquidating trust under the laws of
the State of Delaware and pursuant to the Declaration of Trust; (2) Reorganized
CIHC shall continue to exist as a separate corporate entity, with corporate
powers in accordance with the laws of the State of Delaware and its existing
charter and by-laws; (3) Reorganized CTIHC shall continue to exist as a separate
corporate entity, with corporate powers in accordance with the laws of the State
of Delaware and its existing charter and by-laws; and (4) Reorganized PHG shall
continue to exist as a separate corporate entity, with corporate powers in
accordance with the laws of the State of Illinois and its existing charter and
by-laws.
2. Except as otherwise contemplated by the Plan, on and after the Effective
Date, all property of the Estate, and any property retained or acquired by the
Debtors, Reorganizing Debtors or Reorganized Debtors under the Plan, shall vest
in the respective Debtor, Reorganizing Debtor or Reorganized Debtor free and
clear of all Claims, liens, charges, or other encumbrances. On and after the
Effective Date, each Debtor or Reorganized Debtor may operate its business and
may use, acquire or dispose of property and compromise or settle any Claims or
Equity Interests, without supervision or approval by the Bankruptcy Court and
free of any restrictions of the Bankruptcy Code or Bankruptcy Rules, other than
those restrictions expressly imposed by the Plan and the Confirmation Order.
3. On the Effective Date, all assets of Old CNC, other than the Residual
Assets, shall be transferred by Old CNC to New CNC in exchange for the New CNC
Common Stock, New CNC Preferred Stock, New CNC Warrants and the assumption of
the New Tranche A Bank Debt and the New Tranche B Bank Debt.
B. Cancellation of Old Notes, Old Preferred Stock and Old Common Stock
On the Effective Date, except to the extent otherwise expressly provided
herein, all notes, instruments, certificates, and other documents evidencing the
(i) Senior Credit Facility, (ii) Exchange Notes, (iii) Original Notes, (iv)
Subordinated Debentures, (v) 93/94 Notes, (vi) Old CNC Common Stock, and (vii)
Old CNC Preferred Stock and any and all other Claims and Equity Interests shall
be canceled and the obligations of the Reorganizing Debtors or Reorganized
Debtors thereunder or in any way related thereto shall be discharged. On the
Effective Date, except to the extent otherwise expressly provided herein, any
indenture or similar instrument relating to any of the foregoing shall be deemed
to be canceled, as permitted by section 1123(a)(5)(F) of the Bankruptcy Code,
and the
34
obligations of the respective Reorganizing Debtors or Reorganized Debtors
thereunder, shall be discharged and no such obligations will be assumed by the
Reorganized Debtors.
C. Issuance of New Securities; Execution of Related Documents
1. On or as soon as practicable after the Effective Date, the Reorganized
Debtors shall distribute or issue all securities, notes, instruments,
certificates, and other documents required to be issued pursuant to the Plan,
including, without limitation, (i) the New Credit Facility, (ii) New CNC Common
Stock, (iii) New CNC Preferred Stock, and (iv) New CNC Warrants, each of which
shall be distributed as provided herein. The Reorganized Debtors shall execute
and deliver such other agreements, documents and instruments as are required to
be executed pursuant to the terms hereof.
2. On the Effective Date, Old CNC shall issue the Residual Share to the
Residual Trust.
3. The Debtors and New CNC (and each of their respective affiliates,
agents, directors, officers, employees, advisors and attorneys), the Unofficial
Noteholders' Committee, the Unofficial Lenders' Committee, and the Official
Committees, and each of the members of such committees (and each of their
respective affiliates, agents, directors, officers, employees, advisors, and
attorneys) have, and upon confirmation of this Plan will be deemed to have,
participated in good faith and in compliance with the applicable provisions of
the Bankruptcy Code with regard to the distributions of the securities under
this Plan, and therefore are not, and on account of such distributions will not
be, liable at any time for the violation of any applicable law, rule, or
regulation governing the solicitation of acceptances or rejections of this Plan
or such distributions made pursuant to this Plan.
D. Creation of Residual Trust
On the Effective Date the Residual Trust shall be settled and exist as a
grantor trust and/or liquidating trust under the laws of the State of Delaware
and pursuant to the Declaration of Trust. The sole asset of the Residual Trust
shall be the Residual Share.
E. Liquidation of Old CNC
On or as soon as practicable after the Effective Date, Old CNC will be
liquidated and go out of existence under applicable state law. Thus, the
Residual Trust will hold the Residual Assets directly.
F. Intercompany Settlement
1. Except as otherwise explicitly provided herein, as between the Finance
Company Debtors and their affiliates, on the one hand, and the
Reorganizing Debtors and their affiliates, on the other hand, there
shall be no distributions made on account of prepetition intercompany
claims, including intercompany notes (including the CFC/CIHC
Intercompany Note and the CIHC/CFC Intercompany Note) and unpaid
interest thereon.
2. The Finance Company Debtors shall have (i) an Allowed Class 8A General
Unsecured Claim of $70 million against CNC and (ii) an Allowed Class
6B General Unsecured Claim against CIHC equal to $38 million less the
value (based on Plan Value) on the Effective Date of New CNC Common
Stock received on account of their $70 million Allowed Class 8A
General Unsecured Claim on the Effective Date. Other than such New CNC
Common Stock received on the Effective Date, the Finance Company
Debtors shall not be entitled to any other recovery on account of such
Class 8A General Unsecured Claims.
3. The Reorganizing Debtors shall be entitled to receive the Holding
Company Shared Recovery Allocation Amount.
35
4. The Reorganizing Debtors and their affiliates do not waive and shall
not be deemed to have waived their rights to receive payment on
account of any B-2 Guarantee Claims they may hold.
5. The Reorganizing Debtors and their Affiliates and the Finance Company
Debtors and their Affiliates shall mutually release each other from
any and all Claims (as defined in section 101(5) of the Bankruptcy
Code), obligations, rights, suits, damages, Causes of Action, remedies
and liabilities whatsoever, including any derivative Claims asserted
on behalf of such party, whether known or unknown, foreseen or
unforeseen, existing or hereinafter arising, in law, equity or
otherwise, that the party or its subsidiaries would have been legally
entitled to assert in their own right (whether individually or
collectively) or on behalf of the Holder of any Claim or Equity
Interest or other Person or Entity, based in whole or in part upon any
act or omission, transaction, agreement, event or other occurrence
taking place on or before the Effective Date, other than Claims or
liabilities arising out of or relating to any Releasee's obligations
to repay its obligations under the D&O Credit Facilities.
G. Implementation of Senior Management KERP
To the extent the Debtors have not already implemented all or part of the
Senior Management KERP prior to the Effective Date, on the Effective Date the
Debtors are directed to implement the Senior Management KERP with regard to
Edward M. Berube, Eugene M. Bullis, Charles H. Cremens, Eric R. Johnson, and
William J. Shea, and the Debtors and/or Reorganized Debtors shall perform any
and all obligations thereunder, including the payment of performance bonuses,
emergence bonuses and severance amounts contemplated thereby.
H. Assumption of the Senior Management Employment Agreements
To the extent the Debtors have not already assumed the Senior Management
Employment Agreements prior to the Effective Date (to the extent such agreements
apply to the Debtors), on the Effective Date the Reorganized Debtors shall be
deemed to have assumed the Senior Management Employment Agreements, and to the
extent such agreements apply to affiliated non-debtors, they shall be affirmed
and restated in all respects by the Reorganized Debtors and the applicable
affiliated non-debtors on the Effective Date.
I. TOPrS Settlement
Set forth below are the material terms and conditions of the proposed
settlement with the Holders of Trust Preferred Securities (the "TOPrS
Settlement"). A Holder of a Trust Preferred Security may opt out of the TOPrS
Settlement pursuant and subject to the TOPrS Opt-Out Notice.
1. The TOPrS Settlement Recovery. On the Effective Date, the Holders of
Trust Preferred Securities who have not opted out of the TOPrS Settlement will
receive their Pro Rata share of the TOPrS Settlement Recovery from the Debtors
and the Holders of Claims in Classes 5A, 6A, 7A, 4B and 5B. The TOPrS Settlement
Recovery consists of the following:
(a) The TOPrS Settlement Equity Recovery. The TOPrS Settlement Equity
Recovery is 1.5% of the New CNC Common Stock to be issued and outstanding
pursuant to the Plan on or as soon as practicable after the Effective Date.
(b) The New CNC Warrants. Pursuant to and subject to the New CNC
Warrant Agreement, the New CNC Warrants will (i) be exercisable for the
purchase of 6% of the New CNC Common Stock, (ii) have a term of 5 years
from the Effective Date, and (iii) have an exercise price based on a $4.9
billion enterprise valuation of New CNC, all in accordance with the terms
of the New CNC Warrant Agreement.
(c) The TOPrS Settlement D&O Litigation Recovery. Under the TOPrS
Settlement D&O Litigation Recovery, the Holders of Allowed Trust Preferred
Securities who have not opted out of the TOPrS Settlement will be entitled
from and after the Effective Date to receive 45% of Net D&O Litigation
36
Proceeds in an aggregate amount not to exceed $30 million, payable in (i)
Cash or (ii) in the sole discretion of New CNC, New CNC Common Stock
(valued at the Market Value of such New CNC Common Stock at the time a
distribution is due to be made to Holders of Trust Preferred Securities).
As such Net D&O Litigation Proceeds are received by New CNC, New CNC shall
promptly deposit the TOPrS Settlement D&O Recovery in a separate
interest-bearing account, and the interest accrued thereon shall be
included in the proceeds distributed to the Holders of Trust Preferred
Securities as of the Distribution Record Date who have not opted out of the
TOPrS Settlement. New CNC will make distributions of the TOPrS Settlement
D&O Recovery (in cash or New CNC Common Stock) to Holders of Trust
Preferred Securities who have not opted out of the TOPrS Settlement on the
first anniversary of the Effective Date and annually thereafter; provided
that a distribution shall not be made if there is less than $10 million in
value to distribute, in which case such amount shall be distributed on the
next distribution date, unless there has been no distribution for 24
months, in which event the available funds shall be distributed subject to
the right of the TOPrS Settlement Representative to further defer such
distribution until the next anniversary of the Effective Date. All
distributions shall be made only to the Holders of Trust Preferred
Securities as of the Distribution Record Date who have not opted out of the
TOPrS Settlement. All costs arising out of the distributions contemplated
in this paragraph shall be paid from the TOPrS Settlement D&O Recovery to
be distributed in any given distribution. The right to receive the TOPrS
Settlement D&O Litigation Recovery is not transferable to any party. New
CNC will provide the TOPrS Settlement Representative with a semi-annual
status report of New CNC's efforts to recover the Net D&O Litigation
Proceeds. To the extent provided in the D&O Transfer Agreement, the
Reorganized Debtors shall have the sole discretion to pursue, settle,
compromise or otherwise resolve all claims based on or derived from the D&O
Credit Facilities against those current or former directors and officers of
the Reorganizing Debtors or Reorganized Debtors who are not eligible to
participate in the programs described in Article V.K.5 of the Plan; and the
Reorganized Debtors and their officers, directors, employees agents and
professionals shall have no liability to any Holder of a Trust Preferred
Security (or the TOPrS Settlement Representative) on account of or related
to any decisions, actions or omissions related to such collections of such
Claims (if any) other than a breach of the Reorganized Debtors' obligations
to make distributions or deposits of the TOPrS D&O Litigation Recovery or
to make reports pursuant to this paragraph.
2. TOPrS Release Provision. Holders of Trust Preferred Securities that have
not validly submitted a TOPrS Opt Out Notice shall be deemed to have released,
expunged and discharged any and all Claims, obligations, rights, suits, damages,
causes of action, and remedies whatsoever, whether known or unknown, existing or
hereafter arising in law, equity or otherwise, based in whole or in part on any
act or omission, transaction, agreement, event or other occurrence taking place
on or before the Effective Date that could be asserted by a Holder of a Trust
Preferred Security against any third party (including, the Releasees (including
Gary Wendt) and the holders of Claims in Classes 5A, 6A, 7A, 4B and 5B) relating
in any way to Conseco or its subsidiaries, provided, however, that such release
shall not include claims based upon insurance policies, annuities, or other
similar contracts between a Holder of a Trust Preferred Security and any of the
Reorganized Debtors or their subsidiaries. The TOPrS Committee will withdraw
with prejudice all objections and appeals relating in any way to the Plan or the
Debtors' chapter 11 cases. Without limiting the generality of the foregoing, on
the Effective Date, to the extent they have not already been dismissed with
prejudice, the TOPrS Appeals will be deemed dismissed with prejudice promptly
upon the occurrence of the Effective Date.
3. Level of TOPrS Opt Out Participation. The Reorganizing Debtors and the
Conseco Creditors' Committee shall each have the right to withdraw from the
TOPrS Settlement if either of the following conditions (a "Cancellation
Condition") is met: (i) more than 750 Holders of Trust Preferred Securities opt
out of the TOPrS Settlement or, (ii) Holders of Trust Preferred Securities
holding more than $45 million in value in the aggregate opt out of the TOPrS
Settlement. However, if the Holders opting out of the TOPrS Settlement do not
either (i) exceed 2500 in number or (ii) hold in excess of $100 million in value
in the aggregate, such withdrawal by the Reorganizing Debtors or the Conseco
Creditors' Committee, as the case may be, would have to be approved by the
Bankruptcy Court, based upon a business judgment standard.
In the case that either the Reorganizing Debtors or the Conseco Creditors'
Committee withdraws from the TOPrS Settlement or if the Court does not approve
the TOPrS Settlement, the Plan will be modified to provide for distributions to
Classes 5A, 6A, 7A, 10A, 4B, and 5B to be as set forth in the Fourth Amended
Plan, notwithstanding any other provision of this Article V.I. herein. In
addition, in such event, notwithstanding any other
37
provision of Article V.I. herein, the TOPrS Settlement or the Plan, in the event
of a Cancellation Condition that is not waived by the Reorganizing Debtors and
the Conseco Creditors' Committee prior to the Confirmation Date, or if the Court
does not approve the TOPrS Settlement set forth herein, the TOPrS Settlement
will be null and void as if the parties had never entered into it, and each
party shall be restored to their claims, rights, objections and defenses without
prejudice; and in particular and without limitation, the TOPrS' Appeals shall
not be dismissed, and the TOPrS Committee's objections to confirmation of the
Fourth Amended Plan (and its predecessor Plans or any subsequent Plans) shall
remain in full effect.
J. Creation of Professional Escrow Account
On the Effective Date, the Reorganized Debtors shall establish the
Professional Escrow Account and reserve the amounts necessary to ensure the
payment of all Accrued Professional Compensation.
K. Corporate Governance, Directors and Officers, and Corporate Action
1. Amended Certificate of Incorporation and By-laws
On or before the Effective Date, New CNC will file the New CNC Charter with
the Secretary of State of Delaware in accordance with Section 103 of the
Delaware General Corporation Law. The New CNC Charter and the New CNC By-laws
will, among other things, authorize approximately 8,000,000,000 shares of New
CNC Common Stock and approximately 265,000,000 shares of New CNC Preferred
Stock. In addition, the New CNC Charter shall prohibit the issuance of
non-voting equity securities to the extent required by the provisions of Section
1123(a)(6) of the Bankruptcy Code. After the Effective Date, New CNC may amend
and restate the New CNC Charter and other constituent documents as permitted by
Delaware law.
2. Directors and Officers of the Reorganized Debtors
The Boards of Directors of each of New CNC, Reorganized CIHC and the other
Debtors as reorganized immediately following the Effective Date shall consist of
the individuals specified in the Plan Supplement.
3. Management Incentive Plan
On the Effective Date, New CNC will implement the Management Incentive Plan
substantially in the form set forth in the Plan Supplement.
4. Employment Agreements
On the Effective Date, New CNC shall enter into the Senior Management
Employment Agreements.
5. Resolution of the Directors & Officers Stock Purchase Program for
Certain Participants
Within fifteen (15) days after the Effective Date, New CNC and Reorganized
CIHC shall take the following actions with respect to the individuals and
entities (each a "Participant" and collectively, the "Participants") that, as of
the Effective Date (i) owe amounts under the D&O Credit Facilities or to New CNC
and Reorganized CIHC pursuant to the various directors, officers and key
employees stock purchase programs (the "Stock Programs") and (ii) purchased
40,000 or less shares of Conseco, Inc. common stock pursuant to the Stock
Programs and owe amounts under the D&O Credit Facilities or to New CNC and
Reorganized CIHC as part of the Stock Programs:
(a) New CNC and Reorganized CIHC, in settlement of any good faith
claims(2) such Participant may have in any manner relating to the D&O
Credit Facilities, the Stock Programs, or any
----------------
2 Pursuant to an order entered on February 19, 2003, the claims bar date for
Participants is 60 days after the Effective Date. As of the date this
amended Plan was filed with the Bankruptcy Court, it appears that very few
Participants have filed a proof of claim against any Reorganizing Debtor.
Any Participant who executes an Adjustment Agreement will release his or
her claims against the Reorganizing Debtors related to the D&O Credit
Facilities, Stock Programs and any Work-Down Plan.
38
Work-Down Plan, shall offer a Purchase Price Adjustment Agreement
substantially in the form attached as Exhibit H to the Disclosure Statement
(the "Adjustment Agreement") to such Participant pursuant to which (i) the
Participant's initial loan amounts shall be reduced to an amount equal to
an agreeable price(3) per share for the shares purchased by such
Participant (the "Adjusted Purchase Amount"), and (ii) New CNC and
Reorganized CIHC shall cause their affiliate Conseco Services, LLC ("LLC")
to execute the Adjustment Agreement and to reduce any loans such
Participant owes to LLC related to the D&O Credit Facilities and/or the
Stock Programs to an amount calculated on an agreeable price per share for
the shares purchased by such Participant (the "Adjusted Interest Amount");
provided, however, that under the Adjustment Agreement:
(i) Participant shall (A) pay to New CNC the Adjusted Purchase
Amount and (B) pay to LLC the Adjusted Interest Amount within 90 days
after the Participant signs the Adjustment Agreement, but if payment
is not made on such date, Participant shall owe (A) New CNC 4% per
annum simple interest on the Adjusted Purchase Amount, accruing as of
the 91st day, and (B) LLC 4% per annum simple interest on the Adjusted
Interest Amount, accruing as of the 91st day.
(ii) Participant releases New CNC, Reorganized CIHC, the original
lenders under the D&O Credit Facilities (and their successors and
assigns), their respective affiliates, and the respective officers,
directors, employees, agents (including financial consultants) and
attorneys of the original lenders under the D&O Credit Facilities (and
of their successors and assigns) (collectively, the "SP Releasees")
from any and all claims the Participant may have with respect to the
D&O Credit Facilities, his or her participation in the Stock Programs
or any Work-Down Plan, and/or this Plan, but Participant reserves all
rights against the Ineligible Persons (defined in paragraph c. below)
and all others (other than the SP Releasees) who were involved in the
D&O Credit Facilities and/or the Stock Programs (such others (other
than the SP Releasees) together with the Ineligible Persons, the
"Non-Released Entities") and waives no causes of action, setoffs,
claims, rights, defenses, powers, and/or remedies (or similar
matters), whether under the pertinent loan documents, applicable law
or otherwise, against the Non-Released Entities and/or the
Non-Released Entities' past, present or future property (including any
such property that may be in the hands of any immediate or mediate
transferee), all regardless of whether New CNC or Reorganized CIHC
asserts or exercises (or does not assert or exercise, as the case may
be) similar causes of action, setoffs, claims, rights, defenses and/or
remedies (or similar matters) (in any combination) against any other
person or entity.
(iii) Upon Participant's payment of (A) the Adjusted Purchase
Amount to New CNC and (B) the Adjusted Interest Amount to LLC, New
CNC, Reorganized CIHC, and LLC and their respective affiliates shall
release the Participant from any claims with respect to the D&O Credit
Facilities, Stock Programs or any Work-Down Plan, but New CNC,
Reorganized CIHC and LLC (A) waive no other causes of action, setoffs,
claims, rights, defenses, powers, and/or remedies (or similar matters)
against Participant and (B) New CNC, Reorganized CIHC and LLC reserve
all rights against Non-Released Entities (as defined in paragraph a.2.
above) and waive no causes of action, setoffs, claims, rights,
defenses, powers, and/or remedies (or similar matters), whether under
the pertinent loan documents, applicable law or otherwise, against the
Non-Released Entities and/or the Non-Released Entities' past, present
or future property (including any such property that may be in the
hands of any immediate or mediate transferee), all regardless of
whether New CNC or Reorganized CIHC asserts or exercises (or does not
assert or exercise, as the case may be) similar causes of action,
setoffs, claims, rights, defenses and/or remedies (or similar matters)
(in any combination) against any other person or entity.
-----------------------
3 New CNC and Reorganized CIHC shall negotiate with each Participant an
agreeable price per share unique to such Participant. New CNC and
Reorganized CIHC shall not be obliged to offer the same price to all
Participants.
39
(iv) Participant assigns to New CNC his or her rights against the
Non-Released Entities (as defined in paragraph (a)(ii) above).
The Adjustment Agreement annexed as Exhibit H to the Disclosure Statement
shall be executed on an individualized basis by the Reorganized Debtors and
Participants that are offered it and choose to sign it and, in addition to the
other restrictions set forth herein, no Participant shall be entitled to the
benefits of the Adjustment Agreement absent such execution and delivery of the
Adjustment Agreement. Participants who are offered the Adjustment Agreement may
choose to decline to sign it, but in such event, any such declining Participants
shall become Ineligible Persons (defined in paragraph c. below).
The Debtors have determined based on several different business and legal
considerations to offer an Adjustment Agreement to such Participants subject to
the foregoing conditions, and their decision to do so shall in no manner be
deemed to be an admission by either of them (or by any other Person) as to the
accuracy of any factual statement or legal theory underlying any such good faith
claims on the part of any such Participant or any other borrower under the D&O
Credit Facilities, but on the contrary, the Debtors deny the legal validity or
enforceability of any such claims or defenses and expressly reserves any and all
of their claims, defenses, rights, powers and/or remedies against any such
Participant in the event that this Plan is not confirmed and against Ineligible
Persons, whether or not this Plan is confirmed. The decision to offer an
Adjustment Agreement to a Participant under the terms and conditions of this
Article V.K.5.a has been made in connection with and is a part of this Plan and,
as such, is independent of and is expressly not a renewal or extension of any
Work-Down Plan, and shall not be deemed to be a renewal or extension of any
Work-Down Plan under any circumstances.
(b) Pursuant to Article III.C.4.(c) of this Plan, New CNC shall
succeed to the lenders' right, title and interest in the loans underlying
the D&O Credit Facilities.
(c) The following are ineligible to enter into an Adjustment Agreement
(collectively, "Ineligible Persons"): (i) persons or entities that
purchased more than 40,000 shares of Conseco, Inc. common stock and owe
amounts under the D&O Credit Facilities or to New CNC or Reorganized CIHC
as part of the Stock Programs, (ii) Participants who are offered an
Adjustment Agreement under paragraph a. above but who, for whatever reason,
refuse to sign an Adjustment Agreement, (iii) Participants who are not
offered an Adjustment Agreement under paragraph d. below, and (iv) any
director or executive officer (or the equivalent thereof) for purposes of
the Sarbanes-Oxley Act.
(d) Notwithstanding Article F.5.a above, New CNC and Reorganized CIHC
may choose not to offer an Adjustment Agreement to any Participant who
purchased 40,000 or less shares who New CNC and Reorganized CIHC reasonably
believe directed and/or authorized (1) the implementation of the Stock
Program, (2) the number of shares (or aggregate purchase price) of Conseco,
Inc. common stock to be purchased in the aggregate pursuant to the Stock
Program and/or (3) the selection of individuals eligible to participate in
the Stock Program and/or their permitted level of participation. The fact
that a Participant is or is not a current employee of New CNC, Reorganized
CIHC or any affiliate shall not be a factor in determining whether New CNC
and Reorganized CIHC offer a Participant an Adjustment Agreement.
6. Listing/Registration Rights
On the Effective Date New CNC shall (a) be a reporting company under the
Exchange Act, and (b) execute and deliver the Registration Rights Agreements
substantially in the form set forth in the Plan Supplement. After the
Confirmation Date, New CNC shall take all reasonable steps to cause the shares
of New CNC Preferred Stock, New CNC Common Stock and New CNC Warrants to be
listed, as soon as practicable after the Effective Date, on the New York Stock
Exchange or such other securities exchange as agreed with the Conseco Creditors
Committee, if the listing requirements for such securities exchange are
satisfied with respect to such securities.
40
7. Corporate Action
On the Effective Date (or on the Confirmation Date with respect to actions
taken prior to the Effective Date), the adoption and filing of the New CNC
Charter and New CNC By-laws, the appointment of directors and officers for the
Reorganized Debtors, the adoption of the Management Incentive Plan, and all
actions contemplated hereby shall be authorized and approved in all respects
(subject to the provisions hereof) pursuant to this Plan. All matters provided
for herein involving the corporate structure of the Debtor, Reorganizing
Debtors, or Reorganized Debtors and any corporate action required by the
Debtors, Reorganizing Debtors or Reorganized Debtors in connection with the
Plan, shall be deemed to have occurred and shall be in effect, without any
requirement of further action by the security holders or directors of the
Debtors, Reorganizing Debtors or Reorganized Debtors. On or before the Effective
Date, the appropriate officers of the Reorganized Debtors and members of the
board of directors of the Reorganized Debtors are authorized and directed to
issue, execute and deliver the agreements, documents, securities and instruments
contemplated by the Plan in the name of and on behalf of the Reorganized Debtors
without the need for any required approvals, authorizations or consents except
for express consents required under this Plan.
L. Sources of Cash for Plan Distribution
All Cash necessary for the Reorganizing Debtors and Reorganized Debtors to
make payments pursuant hereto shall be obtained from existing Cash balances of
the Debtors.
M. Retiree Benefits
The Reorganizing Debtors and/or Reorganized Debtors shall timely pay any
retiree benefits as defined in Section 1114(a) of the Bankruptcy Code to the
extent that such retiree benefits are payable by the Reorganizing Debtors and/or
Reorganized Debtors. Such retiree benefits include those that arise from the
plans, funds or programs described in the Plan Supplement.
N. GM Building Sale
The sale or transfer of the GM Building (or entities owning the GM Building
or interests therein) pursuant to or consistent with an Order of the Bankruptcy
Court shall be deemed a transfer under, pursuant to and in furtherance of this
Plan.
Article VI.
TREATMENT OF EXECUTORY CONTRACTS
AND UNEXPIRED LEASES
A. Executory Contracts and Unexpired Leases
Immediately prior to the Effective Date, except as otherwise provided
herein, all executory contracts including, without limitation, the prepetition
engagement letters for the financial and legal advisors to the Unofficial Bank
Committee and the Unofficial Noteholder Committee, respectively, stipulation
agreements entered into with Distribution Agents during the course of these
Chapter 11 Cases, or unexpired leases of the Reorganizing Debtors will be deemed
assumed in accordance with the provisions and requirements of sections 365 and
1123 of the Bankruptcy Code except those executory contracts and unexpired
leases that (1) have been rejected by order of the Bankruptcy Court, (2) have
previously been assumed by order of the Bankruptcy Court, (3) are the subject of
a motion to reject pending on the Effective Date, (4) are identified in the Plan
Supplement to be rejected, or (5) relate to the purchase or other acquisition of
Equity Interests. Entry of the Confirmation Order by the Bankruptcy Court shall
constitute approval of such assumptions and rejections pursuant to sections
365(a) and 1123 of the Bankruptcy Code.
41
B. Claims Based on Rejection of Executory Contracts or Unexpired Leases
All Proofs of Claims with respect to Claims arising from the rejection of
executory contracts or unexpired leases, if any, must be Filed with the
Bankruptcy Court within thirty (30) days after the date of entry of an order of
the Bankruptcy Court approving such rejection. Any Claims arising from the
rejection of an executory contract or unexpired lease not Filed within such time
will be forever barred from assertion against any Debtor or Reorganized Debtor,
any Estate, or property of any Debtor or Reorganized Debtor, unless otherwise
ordered by the Bankruptcy Court. All Allowed Claims arising from the rejection
of executory contracts or unexpired leases of the Reorganizing Debtor will be
classified as Reorganizing Debtor General Unsecured Claims.
C. Cure of Defaults for Executory Contracts and Unexpired Leases Assumed
Any monetary amounts by which each executory contract and unexpired lease
to be assumed pursuant to the Plan is in default shall be satisfied, pursuant to
section 365(b)(1) of the Bankruptcy Code, by payment of the default amount in
Cash on the Effective Date, or as soon thereafter as is practicable, or on such
other terms as the parties to such executory contracts or unexpired leases may
otherwise agree. In the event of a dispute regarding: (1) the amount of any cure
payments, (2) the ability of the relevant Reorganized Debtor or any assignee to
provide "adequate assurance of future performance" (within the meaning of
section 365 of the Bankruptcy Code) under the contract or lease to be assumed,
or (3) any other matter pertaining to assumption, the cure payments required by
section 365(b)(1) of the Bankruptcy Code shall be made following the entry of a
Final Order resolving the dispute and approving the assumption. Ten days before
the Confirmation Hearing, the Debtors will contact relevant contract
counterparties with the Stated Cure Amounts (if any) for all executory contracts
and unexpired leases to be assumed pursuant to the Plan.
D. Indemnification of Directors, Officers and Employees
The prepetition obligations of any Debtor to indemnify any Releasee serving
at any time on or after the Petition Date as one of its directors, officers or
employees by reason of such Releasee's service in such capacity, or as a
director, officer or employee of any other corporation or legal entity, to the
extent provided in such Debtor's constitutive documents, by a written agreement
with such Debtor or under applicable state corporate law (to the maximum extent
permitted thereunder), shall be deemed and treated as executory contracts that
are assumed by the relevant Reorganized Debtor (it being understood that New CNC
is the relevant Reorganized Debtor of CNC) pursuant hereto and section 365 of
the Bankruptcy Code as of the Effective Date. Accordingly, such indemnification
obligations shall survive Unimpaired and unaffected by entry of the Confirmation
Order, irrespective of whether such indemnification is owed for an act or event
occurring before or after the Petition Date. Notwithstanding any of the
foregoing or the terms of any bylaws, agreements or documents to the contrary,
the aggregate direct payments made by the Reorganized Debtors for prepetition
indemnity under this section for all Releasees who no longer serve after the
Effective Date as a director, officer or employee of a Reorganized Debtor and
for insurance premiums under Article VI.F. shall not exceed $3,000,000 in the
aggregate. Nothing in this Plan shall limit or cap the prepetition
indemnification obligations arising under the by-laws in effect on the Petition
Date(4) that are owed to Releasees who continue to serve as directors, officers
or employees of a Reorganized Debtor after the Effective Date, which shall be
assumed as set forth above. Furthermore, the prepetition obligations of any
Debtor to indemnify any officer, director or employee who is not a Releasee
shall be deemed terminated as of the Effective Date by the relevant Reorganizing
Debtor. As set forth above, nothing in this Plan shall affect the rights of any
Releasee or the obligations of the Reorganizing Debtors or the Reorganized
Debtors with respect to postpetition obligations to indemnify any Releasee with
respect to postpetition actions.
E. Compensation and Benefit Programs
Except as otherwise expressly provided herein, all employment and severance
agreements and policies, and all compensation and benefit plans, policies, and
programs of the Debtors applicable to their respective employees, former
employees, retirees and non-employee directors and the employees, former
employees and retirees of its
------------------------
4 The by-laws in effect as of the Petition Date are dated October 3, 2002.
42
subsidiaries, including, without limitation, all savings plans, retirement
plans, health care plans, disability plans, severance benefit agreements and
plans, incentive plans, deferred compensation plans and life, accidental death
and dismemberment insurance plans shall be treated as executory contracts under
the Plan and on the Effective Date shall be deemed assumed pursuant to the
provisions of sections 365 and 1123 of the Bankruptcy Code; and the Debtors'
obligations under such programs to Persons shall survive confirmation of this
Plan, except for (i) executory contracts or employee benefit plans specifically
rejected pursuant to this Plan (to the extent such rejection does not violate
sections 1114 and 1129(a)(13) of the Bankruptcy Code), (ii) all employee equity
or equity-based incentive plans, and (iii) such executory contracts or employee
benefit plans as have previously been rejected, are the subject of a motion to
reject as of the Confirmation Date, or have been specifically waived by the
beneficiaries of any employee benefit plan or contract; provided however, that
the Debtors' obligations, if any, to pay all "retiree benefits" as defined in
section 1114(a) of the Bankruptcy Code shall continue.
F. Assumption of D&O Insurance
All directors' and officers' liability insurance policies maintained by the
Debtors are hereby assumed. Entry of the order confirming the Plan by the clerk
of the Bankruptcy Court shall constitute approval of such assumptions pursuant
to section 365(a) of the Bankruptcy Code. The Reorganized Debtors shall maintain
for a period not less than 6 years from the Effective Date coverage for the
individuals covered, as of the Petition Date, under policies on terms not
substantially less favorable to such individuals than the terms provided for
under the policies assumed pursuant to the Plan. Solely with respect to
directors and officers of any of the Debtors who served in such capacity at any
time on or after the Petition Date, the Debtors shall be deemed to assume, as of
the Effective Date, their respective obligations to indemnify such individuals
(and only such individuals) with respect to or based upon any act or omission
taken or omitted in any of such capacities, or for or on behalf of any Debtor,
pursuant to and to the extent provided by the Debtors' respective articles of
incorporation, certificates of formation, corporate charters, bylaws, and
similar corporate documents as in effect as of the date of entry of the
Confirmation Order. Notwithstanding anything to the contrary contained herein,
such assumed indemnity obligations shall not be discharged, Impaired, or
otherwise modified by confirmation of this Plan and shall be deemed and treated
as executory contracts that have been assumed by the Debtors pursuant to this
Plan as to which no proofs of claim need be Filed. Notwithstanding any of the
foregoing or the terms of any bylaws, agreements or documents to the contrary,
aggregate direct payments made by the Reorganized Debtors for insurance premiums
under this section and for prepetition indemnity payments for Releasees who no
longer serve on the Effective Date as a director, officer or employee of a
Reorganized Debtor under Article VI.D shall not exceed $3,000,000 in the
aggregate, provided that no more than an additional $2,000,000 of indirect costs
of the Reorganizing Debtors shall be used to pay for such insurance; and further
provided that no provision of this Plan shall limit any Releasee's rights to
seek recovery or reimbursement under any directors' and officers' liability
insurance policy.
Article VII.
PROVISIONS GOVERNING DISTRIBUTIONS
A. Distributions for Claims and Equity Interests Allowed as of the Effective
Date
Except as otherwise provided herein or as may be ordered by the Bankruptcy
Court, distributions to be made on the Effective Date on account of Claims and
Equity Interests that are Allowed as of the Effective Date and are entitled to
receive distributions under the Plan shall be made on the Effective Date or as
soon as practicable thereafter. If allowance or disallowance of a Claim affects
the New CNC Common Stock Holdback, distributions of New CNC Common Stock that
are consequently no longer reserved will occur annually on each anniversary of
the Effective Date, or more frequently, as determined by New CNC in its sole and
absolute discretion.
For purposes of determining the accrual of interest, dividends or rights in
respect of any other payment from and after the Effective Date, the New Tranche
A Bank Debt, the New Tranche B Bank Debt, New CNC Preferred Stock, New CNC
Warrants and New CNC Common Stock shall be deemed issued as of the Effective
Date regardless of the date on which they are actually dated, authenticated or
distributed; provided that, the respective Reorganized Debtor shall withhold any
actual payment until such distribution is made.
43
B. Distributions by the Distribution Agent(s)
The Debtors shall have the authority, in their sole discretion, to enter
into agreements with one or more Distribution Agents, to facilitate the
solicitation of votes on the Reorganizing Subplans and distributions required
under the Reorganizing Subplans. As a condition to serving as a Distribution
Agent, a Distribution Agent must (i) affirm its obligation to facilitate the
prompt distribution of any documents or solicitation materials, (ii) affirm its
obligation to facilitate the prompt distribution of any recoveries or
distributions required under the Reorganizing Subplan at issue, and (iii) waive
any right or ability to setoff against, deduct from, or assert any lien or
encumbrance against the distributions required under the Reorganizing Subplan
that are to be distributed by such Distribution Agent. In consideration for
waiving its rights to setoff, deduct from or assert any lien or encumbrance
against such distributions, the Debtors shall pay all reasonable fees and
expenses (whether prepetition or postpetition) of such Distribution Agent. The
Distribution Agent shall submit detailed invoices to the Debtors for all fees
and expenses for which the Distribution Agent seeks reimbursement. The Debtors,
upon review of such invoices, shall pay those amounts the Debtors, in their sole
discretion, deem reasonable, and shall object in writing to those fees and
expenses, if any, that the Debtors deem to be unreasonable. In the event that
the Debtors object to all or any portion of a Distribution Agent's invoice, the
Debtors and such Distribution Agent will endeavor, in good faith, to reach
mutual agreement on the amount of such disputed fees and/or expenses. In the
event that the Debtors and a Distribution Agent are unable to resolve any
differences regarding disputed fees or expenses, either party shall be
authorized to move to have such dispute heard by the Bankruptcy Court. To the
extent the Debtors and any Distribution Agent entered into a stipulation during
these Chapter 11 Cases concerning the fees of such Distribution Agent, such
stipulations are assumed hereunder and the payment obligations evidenced thereby
shall become obligations of the Reorganized Debtors to the extent such
obligations remain unpaid as of the Effective Date.
C. Delivery and Distributions and Undeliverable or Unclaimed Distributions
1. Delivery of Distributions in General
Distributions to Holders of Allowed Claims and Allowed Equity Interests
shall be made to the Holders of such Allowed Claims and Allowed Equity Interests
as of the Distribution Record Date. Except as otherwise provided herein,
distributions to Holders of Allowed Claims and Allowed Equity Interests shall be
made at the address of the Holder of such Claim or Equity Interest as indicated
on the records of the Debtors as of the date that such distribution is made.
2. Undeliverable Distributions
(a) Holding of Undeliverable Distributions
If any distribution to a Holder of an Allowed Claim or Allowed Equity
Interest is returned to a Distribution Agent as undeliverable, no further
distributions shall be made to such Holder unless and until such Distribution
Agent is notified in writing of such Holder's then-current address.
Undeliverable distributions shall remain in the possession of such Distribution
Agent subject to Subsection (b) below until such time as a distribution becomes
deliverable. Undeliverable Cash shall not be entitled to any interest, dividends
or other accruals of any kind. As soon as reasonably practicable, a Distribution
Agent shall make all distributions that become deliverable.
(b) Failure to Claim Undeliverable Distributions
In an effort to ensure that all Holders of Allowed Claims and Equity
Interests receive their allocated distributions, ninety (90) days after the
Effective Date, the Reorganized Debtors will file with the Bankruptcy Court a
listing of unclaimed distributions. This list will be maintained for as long as
the Chapter 11 Cases stay open. Any Holder of an Allowed Claim or Equity
Interest (irrespective of when a Claim or Equity Interest became an Allowed
Claim or Equity Interest) that does not assert a Claim or Equity Interest
pursuant hereto for an undeliverable distribution (regardless of when not
deliverable) within two years after the Effective Date shall have its Claim or
Equity Interest for such undeliverable distribution discharged and shall be
forever barred from asserting any such Claim or Equity Interest against the
relevant Reorganized Debtor or its property. In such cases: (i) any Cash held
44
for distribution on account of such Claims or Equity Interests shall be property
of the relevant Reorganized Debtor free of any restrictions thereon; and (ii)
any securities issued hereunder held for distribution on account of such Claims
or Equity Interests shall be canceled and of no further force or effect. Nothing
contained herein shall require any Reorganized Debtor or any Distribution Agent
to attempt to locate any Holder of an Allowed Claim or Allowed Equity Interest.
3. Compliance with Tax Requirements/Allocations
In connection with the Plan, to the extent applicable, each Reorganizing
Debtor, Reorganized Debtor and Distribution Agent shall comply with all tax
withholding and reporting requirements imposed on it by any governmental unit,
and all distributions pursuant hereto shall be subject to such withholding and
reporting requirements. Each Reorganizing Debtor, Reorganized Debtor and
Distribution Agent shall be authorized to take all actions necessary or
appropriate to comply with such withholding and reporting requirements. For tax
purposes, distributions received in respect of Allowed Claims will be allocated
first to the principal amount of Allowed Claims, with any excess allocated to
unpaid interest that accrued on such Claims. If any Reorganizing Debtor,
Reorganized Debtor or Distribution Agent determines that withholding is required
with respect to any distribution, a Creditor will have the option of (a) paying
to the Reorganized Debtor or the Distribution Agent an amount of such tax
liability with respect to such distribution, and the recipient of such funds
shall remit such funds to the appropriate taxing authority, or (b) making
arrangements satisfactory to the Reorganized Debtor and the Distribution Agent
for the Creditor to liquidate a portion of the Plan distribution and to remit
such proceeds as necessary to cover required withholding taxes, with any
remaining Plan distribution being distributed to the Creditor.
D. Timing and Calculation of Amounts to be Distributed
On the Effective Date or as soon as practicable thereafter, each Holder of
an Allowed Claim against or Allowed Equity Interest in the Debtors shall receive
the full amount of the distributions that the Plan provides for Allowed Claims
or Allowed Equity Interests in the applicable Class. If and to the extent that
there are Disputed Claims or Disputed Equity Interests, distributions on account
of such Disputed Claims or Equity Interests shall be made pursuant to the
provisions set forth in Article VIII.A.3.
E. Minimum Distribution
Any other provision of the Plan notwithstanding, payments of fractions of
shares of New CNC Common Stock or New CNC Preferred Stock or fractions of New
CNC Warrants will not be made and will be deemed to be zero. Any other provision
of the Plan notwithstanding, the Reorganized Debtors or a Distribution Agent
will not be required to make distributions or payments of fractions of dollars.
Whenever any payment of a fraction of a dollar under the Plan would otherwise be
called for, the actual payment will reflect a rounding of such fraction to the
nearest whole dollar (up or down), with half dollars or less being rounded down.
F. Setoff
Except as expressly provided for herein, each Reorganizing Debtor and
Reorganized Debtor may, as the case may be, pursuant to the Bankruptcy Code
(including, without limitation, section 553) or applicable non-bankruptcy law or
as may be agreed to by the Holder of a Claim, set off against any Allowed Claim
or Equity Interest and the distributions to be made pursuant hereto on account
of such Allowed Claim or Equity Interest (before any distribution is made on
account of such Allowed Claim or Equity Interest), any Claims, Equity Interests,
rights and Causes of Action of any nature that such Reorganizing Debtor or
Reorganized Debtor, as the case may be, may hold against the Holder of such
Allowed Claim or Equity Interest to the extent the Claims, Equity Interests,
rights or Causes of Action against such Holder have not been compromised or
settled on or prior to the Effective Date (whether pursuant to the Plan or
otherwise); provided that, neither the failure to effect such a setoff nor the
allowance of any Claim or Equity Interest hereunder shall constitute a waiver or
release by such Reorganizing Debtor or Reorganized Debtor of any such Claims,
Equity Interests, rights and Causes of Action that such Reorganizing Debtor or
Reorganized Debtor may possess against such Holder.
45
G. Surrender of Canceled Instruments or Securities
Subject to Subsection I below, each record Holder of an Allowed Claim or
Equity Interest relating to the (i) Exchange Notes, (ii) Original Notes, (iii)
Subordinated Debentures, (iv) CNC Common Stock, or (v) CNC Preferred Stock shall
surrender the certificates or other documentation underlying such Claim or
Equity Interest, and all such surrendered certificates and other documentations
shall be marked as canceled. Any certificate or other documentation underlying
Claims related to (i) Senior Credit Facility, (ii) CIHC Guarantee of Senior
Credit Facility, (iii) CNC Guarantee of D&O Credit Facilities, (iv) CIHC
Guarantee of D&O Credit Facilities shall be deemed to be surrendered and
cancelled.
H. Failure to Surrender Canceled Instruments
Any Holder of Allowed Claims or Equity Interests relating to the (i)
Exchange Notes, (ii) Original Notes, (iii) Subordinated Debentures, (iv) CNC
Common Stock, or (v) CNC Preferred Stock that fails to surrender or is deemed to
have failed to surrender its certificates or other documentation representing
such Claim or Equity Interest required to be tendered hereunder within one year
after the Effective Date shall have its Claim for a distribution pursuant hereto
on account of such Allowed Claim or Allowed Equity Interests discharged and
shall be forever barred from asserting any such Claim or Equity Interest against
any Reorganizing Debtor, Reorganized Debtor, Distribution Agent or their assets.
I. Lost, Stolen, Mutilated or Destroyed Securities
Any Holder of Allowed Claims or Equity Interests relating to the (i)
Exchange Notes, (ii) Original Notes, (iii) Subordinated Debentures, (iv) CNC
Common Stock, or (v) CNC Preferred Stock that is evidenced by a note or by a
stock certificate which has been lost, stolen, mutilated or destroyed shall, in
lieu of surrendering such note or stock certificate, deliver to such relevant
Distribution Agent: (a) an affidavit of loss reasonably satisfactory to the
Distribution Agent setting forth the unavailability of the note or the stock
certificate; and (b) such additional indemnity as may reasonably be required by
the Distribution Agent to hold the Distribution Agent harmless from any damages,
liabilities or costs incurred in treating such individual as a Holder of an
Allowed Claim or Equity Interest. Upon compliance with this procedure by a
Holder of an Allowed Claim or Equity Interest evidenced by such a lost, stolen,
mutilated or destroyed note or stock certificate, such Holder shall, for all
purposes under the Plan, be deemed to have surrendered such note or certificate.
Article VIII.
PROCEDURES FOR RESOLUTION OF DISPUTED, CONTINGENT
AND UNLIQUIDATED CLAIMS OR EQUITY INTERESTS
A. Resolution of Disputed Claims
1. Prosecution of Objections to Claims
After the Effective Date, the Reorganized Debtors (for Claims against the
Reorganized Debtors) shall have the exclusive authority on or before the Claims
Objection Bar Date to file objections, settle, compromise, withdraw or litigate
to judgment objections to Claims or Equity Interests. From and after the
Effective Date, the Debtors and Reorganized Debtors may settle or compromise any
Disputed Claim or Equity Interest without approval of the Bankruptcy Court. The
Debtors, Reorganizing Debtors and Reorganized Debtors also reserve the right to
resolve any Disputed Claims or Equity Interests outside the Bankruptcy Court
under applicable governing law.
2. Estimation of Claims and Equity Interests
The Reorganizing Debtors and the Reorganized Debtors may, at any time,
request that the Bankruptcy Court estimate any contingent or unliquidated Claim
or Equity Interest pursuant to section 502(c) of the Bankruptcy Code regardless
of whether such Reorganizing Debtor or Reorganized Debtor has previously
objected to such Claim
46
or Equity Interest or whether the Bankruptcy Court has ruled on any such
objection, and the Bankruptcy Court will retain jurisdiction to estimate any
Claim or Equity Interest at any time during litigation concerning any objection
to any Claim or Equity Interest, including during the pendency of any appeal
relating to any such objection. In the event that the Bankruptcy Court estimates
any contingent or unliquidated Claim, that estimated amount will constitute
either the Allowed amount of such Claim or a maximum limitation on such Claim,
as determined by the Bankruptcy Court. If the estimated amount constitutes a
maximum limitation on such Claim, the relevant Reorganizing Debtor or
Reorganized Debtor may elect to pursue any supplemental proceedings to object to
any ultimate payment on such Claim. All of the aforementioned Claims or Equity
Interests and objection, estimation and resolution procedures are cumulative and
not necessarily exclusive of one another. Claims and Equity Interests may be
estimated and subsequently compromised, settled, withdrawn or resolved by any
mechanism approved by the Bankruptcy Court.
3. Payments and Distributions on Disputed Claims
Notwithstanding any provision herein to the contrary, except as otherwise
agreed by a Reorganizing Debtor or Reorganized Debtor (for Claims against such
Reorganizing Debtors) in its sole discretion, no partial payments and no partial
distributions will be made with respect to a Disputed Claim until the resolution
of such disputes by settlement or Final Order. No later than a Business Day that
is 20 calendar days after the calendar quarter in which a Disputed Claim becomes
an Allowed Claim, the Holder of such Allowed Claim will receive all payments and
distributions to which such Holder is then entitled under the Plan.
Notwithstanding the foregoing, any Person or Entity who holds both an Allowed
Claim(s) and a Disputed Claim(s) will not receive the appropriate payment or
distribution on the Allowed Claim(s) except, as otherwise agreed by such
Reorganizing Debtor or Reorganized Debtor, as the case may be, in its sole
discretion, until the Disputed Claim(s) are resolved by settlement or Final
Order. In the event that there are Disputed Claims requiring adjudication and
resolution, the Reorganizing Debtors and Reorganized Debtors reserve the right,
or upon order of the Court, to establish appropriate reserves for potential
payment of such Claims.
B. Allowance of Claims and Equity Interests
Except as expressly provided herein or in any order entered in the Chapter
11 Cases prior to the Effective Date (including the Confirmation Order), no
Claim or Equity Interest shall be deemed Allowed, unless and until such Claim or
Equity Interest is deemed Allowed under the Bankruptcy Code or the Bankruptcy
Court enters a Final Order in the Chapter 11 Cases allowing such Claim or Equity
Interest. Except as expressly provided in the Plan or any order entered in the
Chapter 11 Cases prior to the Effective Date (including the Confirmation Order),
the Reorganizing Debtors (for Claims against the Reorganizing Debtors) or
Reorganized Debtors after Confirmation will have and retain any and all rights
and defenses such Debtor had with respect to any Claim or Equity Interest as of
Petition Date.
C. Controversy Concerning Impairment
If a controversy arises as to whether any Claims or Equity Interests, or
any Class of Claims or Equity Interests, are Impaired under the Plan, the
Bankruptcy Court shall, after notice and a hearing, determine such controversy
before the Confirmation Date.
D. Reserve of New CNC Common Stock
On the Effective Date, CNC shall maintain in reserve shares of New CNC
Common Stock as the New CNC Common Stock Holdback. Deemed amounts shall
determine the New CNC Common Stock Holdback. The New CNC Common Stock Holdback,
along with any dividends or other distributions accruing with respect thereto,
shall be held for the Holders of Class 4A, 8A, and 6B Claims that are Disputed
or do not assert a sum certain. As Disputed and unliquidated Class 4A, 8A, and
6B Claims are resolved by the Bankruptcy Court, or higher court if a stay is
obtained, (a) CNC shall distribute, in accordance with the terms hereof, New CNC
Common Stock to Holders of Allowed Class 4A, 8A, and 6B Claims (along with
dividends and distributions that accrue after the Effective Date), and (b) the
New CNC Common Stock Holdback shall be adjusted. If allowance or disallowance of
a Claim
47
affects the New CNC Common Stock Holdback, distributions of New CNC Common Stock
that are consequently no longer reserved will occur annually on each anniversary
of the Effective Date, or more frequently, as determined by New CNC in its sole
and absolute discretion.
Article IX.
CONDITIONS PRECEDENT TO CONFIRMATION
AND CONSUMMATION OF THE PLAN
A. Conditions to Confirmation
The following are conditions precedent to confirmation of this Plan that
must be (i) satisfied or (ii) waived in accordance with Article IX.C below:
1. The Bankruptcy Court shall have entered an order, in form and substance
reasonably acceptable to the Debtors, the Noteholder Subcommittee, and the
Lender Subcommittee, approving the Disclosure Statement with respect to this
Plan as containing adequate information within the meaning of section 1125 of
the Bankruptcy Code.
2. The proposed Confirmation Order shall be in form and substance
reasonably acceptable to the Debtors, the Noteholder Subcommittee, and the
Lender Subcommittee.
3. The Plan Supplement and all of the schedules, documents, and exhibits
contained therein shall be in form and substance satisfactory to the Debtors,
the Noteholder Subcommittee, and the Lender Subcommittee.
4. The Deemed amount of the Reorganizing Debtor General Unsecured Claims
against CIHC being no greater than the CIHC General Unsecured Claims Cap.
5. The TOPrS 9019 Motion shall have been approved by the Bankruptcy Court.
B. Conditions Precedent to Consummation
The following are conditions precedent to Consummation of this Plan that
must be (i) satisfied or (ii) waived in accordance with Article IX.C below:
1. The Confirmation Order becoming a Final Order in form and substance
reasonably satisfactory to the Debtors, the Noteholder Subcommittee and the
Lender Subcommittee;
2. The Plan Supplement and all of the schedules, documents and exhibits
contained therein shall be in form and substance satisfactory to the Debtors,
the Noteholder Subcommittee and the Lender Subcommittee.
3. The following agreements, instruments and documents, in form and
substance satisfactory to the relevant Debtor, the Noteholder Subcommittee and
the Lender Subcommittee, becoming effective:
(a) the New CNC Charter, New CNC By-laws and any certificate of
designation providing for the New CNC Preferred Stock;
(b) the New Credit Facility;
(c) the New CNC Warrant Agreement;
(d) the Registration Rights Agreements;
4. Obtaining all necessary regulatory approvals for (a) Consummation of the
Plan and (b) approval of the application for change of control as a result of
stock ownership.
48
5. CIHC distributing all of the capital stock of the Residual Subsidiaries
and to the extent not included in the assets of the Residual Subsidiaries, any
other Residual Assets of CIHC or its Subsidiaries to CNC in the form of a
dividend;
6. The Residual Trust being established, and the Residual Assets being
vested in Old CNC without further action on the part of Old CNC, CIHC, the
Residual Trustee or any other Person;
7. The Residual Trustee being identified and being duly appointed and
qualified to serve;
8. Old CNC issuing the Residual Share to the Residual Trust;
9. The Deemed amount of the Reorganizing Debtor General Unsecured Claims
against CIHC being no more than the CIHC General Unsecured Claims Cap;
10. The CFC Subsidiary Guarantee Claims shall have been released, cancelled
or estimated at zero.
11. The board of directors of New CNC shall have been selected.
C. Waiver of Conditions
The Debtors, with the prior written consent of the Conseco Creditors
Committee, in the Debtors' reasonable discretion, may waive any of the
conditions to Confirmation of the Plan and/or Consummation of the Plan set forth
in Article IX at any time, without notice, without leave or order of the
Bankruptcy Court, and without any formal action other than proceeding to conform
and/or consummate the Plan; provided that (i) the conditions set forth in
sections A.1, A.2, A.3, A.4, B.1, B.2, B.3, B.9 and B.11 of this Article IX may
be waived only with the prior written consent of the Debtors, the Noteholder
Subcommittee and the Lender Subcommittee in their respective reasonable
discretion, and (ii) the condition set forth in section B.4.(b) may only be
waived with the prior written consent of the applicant of the referred-to
application, consistent with its fiduciary duties.
D. Effect of Non-Occurrence of Conditions to Consummation
If the Consummation of the Plan does not occur, the Plan shall be null and
void in all respects and nothing contained in the Plan or the Disclosure
Statement shall: (1) constitute a waiver or release of any Claims by or against,
or any Equity Interests in any Debtor; (2) prejudice in any manner the rights of
any Debtor; or (3) constitute an admission, acknowledgment, offer or undertaking
by any Debtor in any respect.
Article X.
RELEASE, INJUNCTIVE AND RELATED PROVISIONS
A. Compromise, Settlement and Discharge
The allowance, classification and treatment of all Allowed Claims and
Equity Interests and the respective distributions and treatments hereunder take
into account and/or conform to the relative priority and rights of the Claims
and Equity Interests in each Class in connection with any contractual, legal and
equitable subordination rights relating thereto whether arising under general
principles of equitable subordination, section 510(b) of the Bankruptcy Code or
otherwise, and, as of the Effective Date, any and all such rights are settled,
compromised, discharged and released pursuant hereto. In addition, the
allowance, classification and treatment of Allowed Claims in Classes 4A, 5A, 6A,
4B, 5B and 6B takes into account any Causes of Action, claims or counterclaims,
whether under the Bankruptcy Code or otherwise applicable law, that may exist
between the Debtors and the Holders of such Claims or among the Holders of such
Claims and other Holders of Claims or Equity Interests, and, as of the Effective
Date, any and all such Causes of Action, claims and counterclaims are settled,
compromised and released pursuant hereto. The Confirmation Order shall approve
the releases by all Persons and Entities of such contractual, legal and
equitable subordination rights or Causes of Action, claims or counterclaims
against such Holder satisfied,
49
compromised and settled in this manner, provided, however, the Guarantees of D&O
Credit Facilities are not cancelled or discharged solely to empower New CNC to
collect amounts the Ineligible Persons (as defined in Article V.K.5 hereof) owe
under the D&O Credit Facilities and related documents.
B. Releases by the Debtors
Except as otherwise specifically provided herein or in the Plan Supplement,
for good and valuable consideration, including the service of the Releasees to
facilitate the expeditious reorganization of the Debtors and the implementation
of the restructuring contemplated by the Plan, and the settlement with Lehman,
the Releasees and Lehman, on and after the Effective Date, are deemed released
by the Debtors and Reorganized Debtors from any and all Claims (as defined in
section 101(5) of the Bankruptcy Code), obligations, rights, suits, damages,
Causes of Action, remedies and liabilities whatsoever, including any derivative
Claims asserted on behalf of a Debtor, whether known or unknown, foreseen or
unforeseen, existing or hereinafter arising, in law, equity or otherwise, that
the Debtors, Reorganized Debtors or their subsidiaries would have been legally
entitled to assert in their own right (whether individually or collectively) or
on behalf of the Holder of any Claim or Equity Interest or other Person or
Entity, based in whole or in part upon any act or omission, transaction,
agreement, event or other occurrence taking place on or before the Effective
Date, other than Claims or liabilities arising out of or relating to (a) any act
or omission of a Releasee that constitutes (1) a failure to perform the duty to
act in good faith, with the care of an ordinarily prudent person and in a manner
the Releasee reasonably believed to be in the best interests of the corporation
(to the extent such duty is imposed by applicable non-bankruptcy law), or (2)
such failure to perform constitutes willful misconduct, or recklessness, or
gross negligence, or (b) any Releasee's obligations to repay its obligations
under the D&O Credit Facilities or related documents; provided, however, that
any such Release is conditional upon the Releasee's waiver of any prepetition
claim of such Releasee against the Debtors or Reorganized Debtors other than for
compensation in the ordinary course of business, as set forth in the Plan, or
claims related to such Releasee's obligations to repay its obligations under the
D&O Credit Facilities or related documents.
C. Releases by Holders of Claims
On and after the Effective Date, each Consenting Party shall be deemed to
have unconditionally released the Releasees from any and all Claims (as defined
in section 101(5) of the Bankruptcy Code), obligations, rights, suits, damages,
Causes of Action, remedies and liabilities whatsoever, including any derivative
Claims asserted on behalf of a Debtor, whether known or unknown, foreseen or
unforeseen, existing or hereafter arising, in law, equity or otherwise, that
such Person or Entity would have been legally entitled to assert (whether
individually or collectively), based in whole or in part upon any act or
omission, transaction, agreement, event or other occurrence taking place on or
before the Effective Date in any way relating or pertaining to (w) the purchase
or sale, or the rescission of a purchase or sale, of any security of a Debtor,
(x) a Debtor or Reorganized Debtor, (y) the Chapter 11 Cases, or (z) the
negotiation, formulation and preparation of the Plan, or any related agreements,
instruments or other documents. No portion of the limited releases by the
Consenting Party in any way impairs any Cause of Action, liability, Claim or
right arising out of or relating to (a) any act or omission of a Releasee that
constitutes (1) a failure to perform the duty to act in good faith, with the
care of an ordinarily prudent person and in a manner the Releasee reasonably
believed to be in the best interests of the corporation (to the extent such duty
is imposed by applicable non-bankruptcy law), or (2) constitutes willful
misconduct, gross negligence, or recklessness, or (b) any Releasee's obligations
to repay its obligations under the D&O Credit Facilities or related documents;
provided, however, that any such Release is conditional upon the Releasee's
waiver of any prepetition claim of such Releasee against the Debtors or
Reorganized Debtors other than for compensation in the ordinary course of
business, as set forth in the Plan, or claims related to such Releasee's
obligations to repay its obligations under the D&O Credit Facilities or related
documents.
D. Exculpation
The Debtors, Reorganizing Debtors, Releasees, Noteholder Subcommittee,
Lender Subcommittee, Official Committees, Unofficial Noteholder Committee,
Unofficial Bank Committee and their respective members, and the employees,
agents, and professionals of each of the foregoing (acting in such capacity)
shall neither have nor incur any liability to any Person or Entity for any
prepetition or postpetition act taken, or omitted to be taken, in
50
connection with, or related to formulating, negotiating, preparing,
disseminating, implementing, administering, Confirming or Consummating the Plan,
the Disclosure Statement, or any contract, instrument, release or any other
agreement or document created, or entered into, in connection with the Plan,
including but not limited to the TOPrS Settlement Recovery and the TOPrS
Settlement as reflected in the TOPrS 9019 Motion, or any other pre- or
postpetition act taken, or omitted to be taken, in connection with, or in
contemplation of the Debtors' restructuring, provided, however, that the
foregoing provisions of this Article X.D shall have no effect on the liability
of any Person or Entity that results from any such act or omission that is
determined in a Final Order to have constituted gross negligence, recklessness
or willful misconduct, and, provided further, that each Exculpated Party shall
be entitled to rely upon the advice of counsel concerning his, her or its duties
pursuant to, or in connection with, the Plan.
E. Preservation of Rights of Action
1. Maintenance of Causes of Action
Except as otherwise provided in the Plan, the Reorganized Debtors shall
retain all rights to commence and pursue, as appropriate, any and all Causes of
Action, whether arising before or after the Petition Date, in any court or other
tribunal including, without limitation, in an adversary proceeding Filed in one
or more of the Chapter 11 Cases including the actions specified in the Plan
Supplement.
Except as otherwise provided in the Plan, in accordance with section
1123(b)(3) of the Bankruptcy Code, any Claims, rights, and Causes of Action that
the respective Reorganizing Debtors may hold against any Entity shall vest in
the Reorganized Debtors, as the case may be. The applicable Reorganized Debtor,
through its authorized agents or representatives, shall retain and may
exclusively enforce any and all such Claims, rights or Causes of Action. The
Reorganized Debtors shall have the exclusive right, authority, and discretion to
institute, prosecute, abandon, settle, or compromise any and all such Claims,
rights, and Causes of Action without the consent or approval of any third party
and without any further order of court.
2. Preservation of All Causes of Action Not Expressly Settled or Released
Unless a Claim or Cause of Action against a Creditor or other Person is
expressly waived, relinquished, released, compromised or settled in the Plan or
any Final Order, the Debtors expressly reserve such Claim or Cause of Action for
later adjudication by the Debtors, and, therefore, no preclusion doctrine,
including, without limitation, the doctrines of res judicata, collateral
estoppel, issue preclusion, Claim preclusion, waiver, estoppel (judicial,
equitable or otherwise) or laches shall apply to such Claims or Causes of Action
upon or after the confirmation or Consummation of the Plan based on the
Disclosure Statement, the Plan or the Confirmation Order, except where such
Claims or Causes of Action have been waived, relinquished, released, compromised
or settled in the Plan or a Final Order. In addition, the Debtors and the
successor entities under the Plan expressly reserve the right to pursue or adopt
any Claims not so waived, relinquished, released, compromised or settled that
are alleged in any lawsuit in which the Debtors are a defendant or an interested
party, against any person or entity, including, without limitation, the
plaintiffs or co-defendants in such lawsuits.
Any Person to whom the Debtors have incurred an obligation (whether on
account of services, purchase or sale of goods or otherwise), or who has
received services from the Debtors or a transfer of money or property of the
Debtors, or who has transacted business with the Debtors, or leased equipment or
property from the Debtors should assume that such obligation, transfer, or
transaction may be reviewed by the Debtors subsequent to the Effective Date and
may, to the extent not theretofore waived, relinquished, released, compromised
or settled, be the subject of an action after the Effective Date, whether or not
(i) such Person has Filed a proof of Claim against the Debtors in the Chapter 11
Cases; (ii) such Person's proof of Claim has been objected to; (iii) such
Person's Claim was included in the Debtors' Schedules; or (iv) such Person's
scheduled Claim has been objected to by the Debtors or has been identified by
the Debtors as disputed, contingent, or unliquidated.
51
F. Discharge of Claims and Termination of Equity Interests
Except as otherwise provided herein: (1) the rights afforded herein and the
treatment of all Claims and Equity Interests herein, shall be in exchange for
and in complete satisfaction, discharge and release of Claims and Equity
Interests of any nature whatsoever, including any interest accrued on Claims
from and after the Petition Date, against the Reorganizing or Reorganized
Debtors or any of their assets or properties, (2) on the Effective Date, all
such Claims against, and Equity Interests in, the Reorganizing or Reorganized
Debtors shall be satisfied, discharged and released in full, and (3) all Persons
shall be precluded from asserting against the Reorganizing or Reorganized
Debtors, their successors or their assets or properties any other or further
Claims or Equity Interests based upon any act or omission, transaction or other
activity of any kind or nature that occurred prior to the Confirmation Date.
Article XI.
RETENTION OF JURISDICTION
Notwithstanding the entry of the Confirmation Order and the occurrence of
the Effective Date, the Bankruptcy Court shall retain such jurisdiction over the
Chapter 11 Cases after the Effective Date as legally permissible, including
jurisdiction to:
1. allow, disallow, determine, liquidate, classify, estimate or establish
the priority or secured or unsecured status of any Claim or Equity Interest,
including the resolution of any request for payment of any Administrative Claim
and the resolution of any and all objections to the allowance or priority of
Claims or Equity Interests;
2. grant or deny any applications for allowance of compensation or
reimbursement of expenses authorized pursuant to the Bankruptcy Code or the
Plan, for periods ending on or before the Confirmation Date;
3. resolve any matters related to the assumption, assumption and assignment
or rejection of any executory contract and unexpired lease to which a Debtor is
party or with respect to which a Debtor may be liable and to hear, determine
and, if necessary, liquidate, any Claims arising therefrom, including those
matters related to the amendment after the Effective Date pursuant to Article V
herein to add any executory contracts or unexpired leases to the list of
executory contracts and unexpired leases to be rejected;
4. ensure that distributions to Holders of Allowed Claims and Allowed
Equity Interests are accomplished pursuant to the provisions hereof;
5. decide or resolve any motions, adversary proceedings (including turnover
actions and efforts to collect loans due the Reorganizing Debtors), contested or
litigated matters and any other matters and grant or deny any applications
involving a Debtor that may be pending on the Effective Date;
6. enter such orders as may be necessary or appropriate to implement or
consummate the provisions hereof and all contracts, instruments, releases,
indentures and other agreements or documents created in connection with the Plan
or the Disclosure Statement;
7. resolve any cases, controversies, suits or disputes that may arise in
connection with the Consummation, interpretation or enforcement of the Plan or
any Person's obligations incurred in connection with the Plan;
8. issue injunctions, enter and implement other orders or take such other
actions as may be necessary or appropriate to restrain interference by any
Person with Consummation or enforcement of the Plan, except as otherwise
provided herein;
9. resolve any cases, controversies, suits or disputes with respect to the
releases, injunction and other provisions contained in Article XI hereof and
enter such orders as may be necessary or appropriate to implement such releases,
injunction and other provisions;
52
10. enter and implement such orders as are necessary or appropriate if the
Confirmation Order is for any reason modified, stayed, reversed, revoked or
vacated;
11. determine any other matters that may arise in connection with or relate
to this Plan, the Disclosure Statement, the Confirmation Order or any contract,
instrument, release, indenture or other agreement or document created in
connection with the Plan or the Disclosure Statement; and
12. enter an order and/or final decree concluding the Chapter 11 Cases.
Article XII.
MISCELLANEOUS PROVISIONS
A. Modification of Plan Supplement
Modification of or amendments to the Plan Supplement, may be Filed with the
Bankruptcy Court no later than the Confirmation Date. Any such modification or
supplement shall be considered a modification of the Plan and shall be made in
accordance with Article XII.E hereof. Upon its Filing, the Plan Supplement may
be inspected in the office of the clerk of the Bankruptcy Court or its designee
during normal business hours. Holders of Claims and Equity Interests may obtain
a copy of the Plan Supplement by contacting Bankruptcy Management Corporation at
1-888-909-0100 or review such documents on the internet at
www.bmccorp.net/Conseco. The documents contained in the Plan Supplement are an
integral part of the Plan and shall be approved by the Bankruptcy Court pursuant
to the Confirmation Order.
B. Effectuating Documents, Further Transactions and Corporation Action
Each of the Debtors and Reorganized Debtors is authorized to execute,
deliver, file or record such contracts, instruments, releases and other
agreements or documents and take such actions as may be necessary or appropriate
to effectuate, implement and further evidence the terms and conditions hereof
and the notes and securities issued pursuant hereto.
Prior to, on or after the Effective Date (as appropriate), all matters
provided for hereunder that would otherwise require approval of the shareholders
or directors of the Debtors or Reorganized Debtors shall be deemed to have
occurred and shall be in effect prior to, on or after the Effective Date (as
appropriate) pursuant to the general corporation laws of the State of Delaware,
the State of Indiana, or the State of Illinois (as appropriate) without any
requirement of further action by the shareholders or directors of the Debtors or
Reorganized Debtors.
C. Dissolution of Committee(s)
Upon the Effective Date, the Official Committees shall dissolve, except
with respect to any appeal of an order in the Chapter 11 Cases and applications
for Professional Fees, and members shall be released and discharged from all
rights, duties and liabilities arising from, or related to, the Chapter 11
Cases.
D. Payment of Statutory Fees
All fees payable pursuant to section 1930(a) of Title 28 of the United
States Code, as determined by the Bankruptcy Court at the hearing pursuant to
section 1128 of the Bankruptcy Code, shall be paid for each quarter (including
any fraction thereof) until the Chapter 11 Cases are converted, dismissed or
closed, whichever occurs first.
E. Modification of Plan
Subject to the limitations contained in the Plan,
53
(1) the Debtors reserve the right, in accordance with the Bankruptcy Code
and the Bankruptcy Rules, to amend or modify the Plan prior to the entry of the
Confirmation Order; and
(2) after the entry of the Confirmation Order, the Debtors or Reorganized
Debtors, as the case may be, may (with the consent of the Conseco Creditors
Committee whose consent shall not be unreasonably withheld, delayed or denied)),
upon order of the Bankruptcy Court, amend or modify the Plan, in accordance with
section 1127(b) of the Bankruptcy Code, or remedy any defect or omission or
reconcile any inconsistency in the Plan in such manner as may be necessary to
carry out the purpose and intent of the Plan, provided however, that (i) no
material modification of the Plan that adversely affects the treatment of
Classes 6A, 7A, or 5B shall be made without the written consent of the
Noteholder Subcommittee and (ii) no material modification of the Plan that
adversely affects the treatment of Classes 5A or 4B shall be made without the
written consent of the Lender Subcommittee.
F. Revocation of Plan
The Debtors reserve the right (with the prior consent of the Conseco
Creditors Committee) to revoke or withdraw the Plan prior to the Confirmation
Date and to file subsequent plans of reorganization. If a Debtor revokes or
withdraws the Plan, or if Confirmation or Consummation does not occur, then (a)
the Plan shall be null and void in all respects, (b) any settlement or
compromise embodied in the Plan (including the fixing or limiting to an amount
certain any Claim or Equity Interest or Class of Claims or Equity Interests),
assumption or rejection of executory contracts or leases affected by the Plan,
and any document or agreement executed pursuant hereto, shall be deemed null and
void, and (c) nothing contained in the Plan shall (i) constitute a waiver or
release of any Claims by or against, or any Equity Interests in, such Debtor or
any other Person, (ii) prejudice in any manner the rights of such Debtor or any
other Person, or (iii) constitute an admission of any sort by such Debtor or any
other Person.
G. Successors and Assigns
The rights, benefits and obligations of any Person named or referred to
herein shall be binding on, and shall inure to the benefit of any heir,
executor, administrator, successor or assign of such Person.
H. Reservation of Rights
Except as expressly set forth herein, this Plan shall have no force or
effect unless the Bankruptcy Court shall enter the Confirmation Order. None of
the filing of this Plan, any statement or provision contained herein, or the
taking of any action by any Debtor with respect to this Plan, the Disclosure
Statement or Plan Supplement shall be or shall be deemed to be an admission or
waiver of any rights of any Debtor with respect to the Holders of Claims or
Equity Interests prior to the Effective Date.
I. Section 1146 Exemption
Pursuant to section 1146(c) of the Bankruptcy Code, under this Plan, (i)
the issuance, distribution, transfer or exchange of any debt, equity security or
other interest in the Debtors or Reorganized Debtors; (ii) the creation,
modification, consolidation or recording of any mortgage, deed of trust, or
other security interest, or the securing of additional indebtedness by such or
other means; (iii) the making, assignment or recording of any lease or sublease;
or (iv) the making, delivery or recording of any deed or other instrument of
transfer under, in furtherance of, or in connection with, this Plan, including
any deeds, bills of sale, assignments or other instrument of transfer executed
in connection with any transaction arising out of, contemplated by, or in any
way related to this Plan shall not be subject to any document recording tax,
mortgage recording tax, stamp tax or similar government assessment, and the
appropriate state or local government official or agent shall be directed by the
Bankruptcy Court to forego the collection of any such tax or government
assessment and to accept for filing and recording any of the foregoing
instruments or other documents without the payment of any such tax or government
assessment.
All subsequent issuances, transfers or exchanges of securities, or the
making or delivery of any instrument of transfer by the Debtors in the Chapter
11 Cases, whether in connection with a sale under section 363 of the
54
Bankruptcy Code or otherwise, shall be deemed to be or have been done in
furtherance of this Plan. Specifically, because sale of the GM Building (or the
entities owning the GM Building or the interest therein), is being conducted
pursuant to this Plan, any instrument of transfer that would effect transfer of
the GM Building as proposed in pleadings filed in these Chapter 11 Cases may not
be taxed under any law imposing a stamp tax or similar tax.
J. Further Assurances
The Debtors, Reorganized Debtors and all Holders of Claims or Equity
Interests receiving distributions hereunder and all other parties in interest
shall, from time to time, prepare, execute and deliver any agreements or
documents and take any other actions as may be necessary or advisable to
effectuate the provisions and intent of this Plan.
K. Service of Documents
Any pleading, notice or other document required by the Plan to be served on
or delivered to the Debtors or Reorganized Debtors shall be sent by first class
U.S. mail, postage prepaid to:
with copies to:
Conseco, Inc. --------------
CIHC, Incorporated
CTIHC, Inc. Kirkland & Ellis LLP
Partners Health Group, Inc. 200 E. Randolph Drive
11825 N. Pennsylvania Street Chicago, Illinois 60601
P.O. Box 1911 (46082) Attn: James H.M. Sprayregen, P.C.
Carmel, Indiana 46032 Anne M. Huber
Attn: General Counsel Anup Sathy
L. Transactions on Business Days
If the date on which a transaction may occur under this Plan shall occur on
a day that is not a Business Day, then such transaction shall instead occur on
the next succeeding Business Day.
M. Filing of Additional Documents
On or before the Effective Date, the Debtors may file with the Bankruptcy
Court such agreements and other documents as may be necessary or appropriate to
effectuate and further evidence the terms and conditions hereof.
N. Term of Injunctions or Stays
Unless otherwise provided herein or in the Confirmation Order, all
injunctions or stays in effect in the Chapter 11 Cases under sections 105 or 362
of the Bankruptcy Code or any order of the Bankruptcy Court, and extant on the
Confirmation Date (excluding any injunctions or stays contained in this Plan or
the Confirmation Order) shall remain in full force and effect until the
Effective Date. All injunctions or stays contained in this Plan or the
Confirmation Order shall remain in full force and effect in accordance with
their terms.
O. Entire Agreement
This Plan and the Plan Supplement (as amended) supersede all previous and
contemporaneous negotiations, promises, covenants, agreements, understandings
and representations on such subjects, all of which have become merged and
integrated into this Plan. Specifically, the Plan filed on January 31, 2003, and
the First Amended Plan filed on March 12, 2003, and iterations of such documents
are void and of no legal effect.
55
Respectfully Submitted,
CONSECO, INC.
By: /s/ William J. Shea
----------------------------
Name: William J. Shea
Title: President and Chief Executive Officer
CIHC, INCORPORATED
By: /s/ William J. Shea
----------------------------
Name: William J. Shea
Title: President
CTIHC, Inc.
By: /s/ William J. Shea
----------------------------
Name: William J. Shea
Title: President
Partners Health Group Inc.
By: /s/ William J. Shea
----------------------------
Name: William J. Shea
Title: President
56
Prepared by:
James H.M. Sprayregen, P.C. (ARDC No. 6190206)
Anne Marrs Huber (ARDC No. 6226828)
Anup Sathy (ARDC No. 6230191)
Roger J. Higgins (ARDC No. 6257915)
Ross M. Kwasteniet (ARDC No. 6276604)
KIRKLAND & ELLIS LLP
200 East Randolph Drive
Chicago, IL 60601-6636
(312) 861-2000 (telephone)
(312) 861-2200 (facsimile)
COUNSEL TO DEBTORS AND DEBTORS IN POSSESSION
57
Exhibit 2.3
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
In re: ) Chapter 11
)
Conseco, Inc., et al.,(1) )
)
) Case No. 02 B49672
Debtors. ) Honorable Carol A. Doyle
) (Jointly Administered)
)
ORDER CONFIRMING REORGANIZING
DEBTORS' SIXTH AMENDED JOINT PLAN OF REORGANIZATION
PURSUANT TO CHAPTER 11 OF THE UNITED STATES BANKRUPTCY CODE
The above-captioned debtors and debtors in possession (collectively, the
"Reorganizing Debtors" or the "Debtors") having filed voluntary petitions for
relief under chapter 11 of title 11 of the United States Code (the "Bankruptcy
Code") on December 17, 2002 (the "Petition Date");
The Debtors having filed, on March 18, 2003, the Second Amended Disclosure
Statement for Reorganizing Debtors' Joint Plan of Reorganization Pursuant to
Chapter 11 of the Bankruptcy Code (as amended, the "Disclosure Statement"),
which Disclosure Statement was approved by the Court pursuant to that certain
Order dated March 18, 2003 (the "Solicitation Procedures Order");
The Debtors having filed the Second Joint Plan of Reorganization Pursuant
to Chapter 11 of the United States Bankruptcy Code on March 18, 2003 (the
"Second Amended Plan"), which was an exhibit to the Disclosure Statement;
---------------
1 The Reorganizing Debtors are the following entities: (i) Conseco, Inc.;
(ii) CIHC, Incorporated; (iii) CTIHC, Inc.; and (iv) Partners Health Group,
Inc. (defined herein, collectively, as the "Debtors" or "Reorganizing
Debtors"). This Order does not apply to the Finance Company Debtors (as
defined in the Plan).
The Debtors having filed on August 13, 2003 Debtors' Emergency Motion for
Entry of an Order (I) Approving (A) Notice of the TOPrS Settlement to the
Lenders and TOPrS Holders and (B) Release Provision Opt-Out Notices and (II)
Setting a Hearing Date for Plan Confirmation and Approval of the TOPrS
Settlement and having issued on August 15, 2003 a Notice of Settlement Regarding
TOPrS Claims Pursuant to Fed. R. Bankr. P. 9019 and Opt-Out Form;
The Debtors having filed on September 5, 2003, the Third Amended Plan
Supplement and the Addendum on September 9, 2003 (the "Plan Supplement"), which
includes the New CNC Warrant Agreement; the Debtors having filed on September 9,
2003, the Reorganizing Debtors' Sixth Amended Joint Plan of Reorganization
Pursuant to Chapter 11 of the Bankruptcy Code (as amended, the "Plan"); the
Debtors having distributed the Second Amended Plan and Disclosure Statement to
all Holders of Impaired Claims against the Debtors, together with a solicitation
of votes to accept or reject the Plan, beginning on or about April 3, 2003,
consistent with the Solicitation Procedures Order;(2)
This Court having set May 28, 2003, at 11:00 a.m. central as the date and
time of a hearing pursuant to Rules 3017 and 3018 of the Federal Rules of
Bankruptcy Procedure (the "Bankruptcy Rules") and sections 1126, 1128 and 1129
of the Bankruptcy Code to consider the Confirmation of the Plan (the
"Confirmation Hearing"); this Court having rescheduled the Confirmation Hearing
to June 13, 2003, at 9:00 a.m. central and thereafter until September 9, 2003,
at 1:30 p.m. central;
---------------
2 Capitalized terms not defined herein shall have those meanings ascribed to
them in the Plan or in Exhibit A. The rules of interpretation set forth in
Article I.A of the Plan shall apply to these Findings of Fact, Conclusions
of Law and Order (this "Confirmation Order"). If there is any direct
conflict between the terms of the Plan, the Plan Supplement and the terms
of this Confirmation Order, the terms of this Confirmation Order shall
control.
2
The documents listed on Exhibit A having been filed on the dates listed on
Exhibit A;
Objections to Confirmation of the Plan having been filed by numerous
parties, and each such objection having been resolved, withdrawn or overruled;
and an objection (the "TOPrS' Objection") to Confirmation of the Plan having
been filed by the TOPrS' Committee; and the TOPrS' Objection and all evidence
submitted by the TOPrS Committee having been withdrawn as part of the TOPrS
Settlement as defined in the Plan;
This Court having reviewed the Second Amended Plan, the Plan and Disclosure
Statement and the documents listed on Exhibit A and all filed pleadings,
exhibits, statements and comments regarding Confirmation; this Court having
heard the statements of counsel in respect of Confirmation; this Court having
considered all testimony, documents and affidavits regarding Confirmation;
This Order is divided into two parts: (I) Findings of Fact and Conclusions
of Law and (II) the Order;
After due deliberation thereon and good cause appearing therefor, this
Court hereby makes and issues the following Findings of Fact, Conclusions of Law
and Orders:(3)
I
FINDINGS OF FACT AND CONCLUSIONS OF LAW
Jurisdiction and Venue
a) On the Petition Date, each Reorganizing Debtor commenced a Chapter 11 Case by
filing a voluntary petition for relief under chapter 11 of the Bankruptcy Code.
The
---------------
3 This Confirmation Order constitutes this Court's findings of fact and
conclusions of law under Fed. R. Civ. P. 52, as made applicable by
Bankruptcy Rules 7052 and 9014. Any and all findings of fact shall
constitute findings of fact even if they are Stated as conclusions of law,
and any and all conclusions of law shall constitute conclusions of law even
if they are Stated as findings of fact.
3
Debtors were and are qualified to be debtors under section 109 of the Bankruptcy
Code. Venue in the Northern District of Illinois was proper as of the Petition
Date and continues to be proper. Confirmation of the Plan is a core proceeding
under 28 U.S.C. ss. 157(b)(2). This Court has subject matter jurisdiction over
this matter pursuant to 28 U.S.C. ss. 1334; and the Court has exclusive
jurisdiction to determine whether the Plan complies with the applicable
provisions of the Bankruptcy Code and should be confirmed.
Modifications to the Plan
b) With the exception of the Lender Claims (Classes 5A and 4B) and the
Trust Related Claims (Class 10A), the Plan does not adversely change the
treatment of the Claim of any creditor as compared to the treatment proposed in
the Second Amended Plan attached to the Disclosure Statement. Therefore, under
Rule 3019, creditors who voted to accept the Second Amended Plan (other than the
Lenders and the Trust Related Claims) are deemed to accept the Plan, except to
the extent the Plan provides otherwise. Class 10A is deemed to reject the Plan
and therefore holders of Class 10A Claims were not resolicited. As evidenced by
the Voting Report (as later defined, and as listed as item 29 in Exhibit A), the
Lenders, as Classes 5A-1, 5A-2, 4B-1 and 4B-2, have voted to accept the Plan.
c) On September 8, 2003, the Debtors served the "Notice of Intent to be
Listed on The New York Stock Exchange and Proposed Modifications of the
Certificate of Designations for New CNC Preferred Stock," listed on Exhibit A as
item 32 (the "Preferred Stock Modifications"). The Preferred Stock Modifications
do not adversely change the Plan's treatment of any claim under the Plan and
therefore creditors who voted to accept the Plan will be deemed to have accepted
the Plan, as amended by the Preferred Stock Modifications.
d) Pursuant to an order of this Court dated August 15, 2003, and as
evidenced by the Declaration listed on Exhibit A as item 18.d, the Reorganizing
Debtors sent
4
notices (collectively, the "Creditor Release Provision Opt-Out Notices") on
August 16, 2003, to Holders of Claim in Classes 4A, 6A, 7A, 8A, 5B and 6B. The
Release Provision Opt-Out Notice gave Holders who had not previously voted to
accept the Plan, but who nonetheless would be entitled to receive a distribution
under the Plan, the option to opt-out of the third-party release provision set
forth in Art. X.C. of the Plan (the "Release Provision") by 5:00 p.m. central
September 8, 2003. Holders who had previously voted to accept the Plan are bound
by the Release Provision and thus are not entitled to opt-out pursuant to the
Creditor Release Provision Opt-Out Notice.
e) Pursuant to orders dated August 15, 2003 and August 20, 2003, and as
evidenced by declarations listed as items 18.d and 19.e in Exhibit A, the
Reorganizing Debtors' agent sent notices (collectively, the "TOPrS Opt-Out
Notices" and with the Creditor Release Provision Opt-Out Notices, the "Opt-Out
Notices") to the intermediaries for all holders of Trust Preferred Securities in
compliance with such orders. The TOPrS Opt-Out Notices gave all holders of Trust
Preferred Securities the option to opt-out of the TOPrS Settlement by 5:00 p.m.
central September 8, 2003.
Solicitation Procedures Order
f) On March 18, 2003, the Court entered the Solicitation Procedures Order
that, among other things: (a) approved the Disclosure Statement as containing
adequate information within the meaning of section 1125 of the Bankruptcy Code
and Bankruptcy Rule 3017; (b) fixed time for voting to accept or reject the
plan; (c) fixed May 28, 2003, at 11:00 a.m. central, continued to June 13, 2003,
at 9:00 a.m. central, as the date and time for the commencement of the
Confirmation Hearing; (d) established the objection deadline and procedures for
objecting to the Plan; (e) approved the form and method of notice of the
5
Confirmation Hearing (the "Confirmation Hearing Notice"), and (f) established
the record date and certain procedures for soliciting and tabulating votes with
respect to the Plan.
Publication of Confirmation Hearing Notice
g) As evidenced in the documents listed as items 2, 3, 4 and 5 on Exhibit
A, the Debtors published the Confirmation Hearing Notice in the national
editions of The Wall Street Journal on April 7, 2003, the Indianapolis Star on
April 7, 2003, and the Chicago Tribune on April 7, 2003; and in USA Today on
April 7, May 2, and May 13, 2003.
Voting Report
h) On June 12, 2003, as amended on July 2, 2003 (item 12 in Exhibit A) and
September 9, 2003 (item 29 in Exhibit A), the Debtors filed with the Court a
report certifying the method and results of the Ballot tabulation for each of
the Voting Classes to accept or reject the Plan (as amended, the "Voting
Report").
i) All procedures used to distribute solicitation materials to the
applicable Holders of Claims and Equity Interests and to tabulate the Ballots
were fair and conducted in accordance with the Solicitation Procedures Order,
the Bankruptcy Code, the Bankruptcy Rules, the local rules of the Bankruptcy
Court for the Northern District of Illinois, Eastern Division, and all other
applicable rules, laws and regulations.
j) As evidenced by the Voting Report, as amended, changed Ballots received
after the Voting Deadline were properly tabulated. Pursuant to sections 1124 and
1126 of the Bankruptcy Code, all Impaired Classes entitled to vote on the Second
Amended Plan have voted to accept the Plan, with the exception of Class 10A
Trust Related Claims against CNC. The Trust Related Claims (Class 10A) are
deemed to reject the Plan.
6
Judicial Notice
k) The Court takes judicial notice of the docket of the Chapter 11 Cases
maintained by the Clerk of the Court and/or its duly appointed agent, including,
without limitation, all pleadings and other documents on file, all orders
entered, and all evidence (that was not subsequently withdrawn) and arguments
made, proffered or adduced at the hearings held before the Court during the
pendency of the Chapter 11 Cases. The Court admits into evidence the documents
listed on Exhibit A. Resolutions of objections to Confirmation explained on the
record at the Confirmation Hearing are hereby incorporated by reference.
Transmittal and Mailing of Materials; Notice
l) As evidenced by the Declaration of Voting Agent regarding solicitation
listed as item 11 in Exhibit A, due, adequate and sufficient notice of the
Disclosure Statement and Plan and of the Confirmation Hearing, along with all
deadlines for voting on or objecting to the Plan and notice of the TOPrS
Settlement, has been given to (a) all known Creditors and Holders of Equity
Interests; (b) parties that requested notice in accordance with Bankruptcy Rule
2002; (c) all parties to unexpired leases and executory contracts with the
Debtors, and (d) all taxing authorities listed on the Debtors' Schedules or in
the Debtors' Claims database, in accordance with the procedures set forth in the
Solicitation Procedures Order, in substantial compliance with Bankruptcy Rules
2002(b), 3017 and 3020(b) and the Solicitation Procedures Order, and such
transmittal and service were adequate and sufficient. Adequate and sufficient
notice of the Confirmation Hearing, as continued from time-to-time, and other
bar dates and hearings described in the Solicitation Procedures Order was given
in compliance with the Bankruptcy Rules and Solicitation Procedures Order, and
no other or further notice is or shall be required.
7
Transmittal of Opt-Out Notices; Notice
m) The Opt-Out Notices were properly served pursuant to the Declaration of
Service listed as item 18.d in Exhibit A and the Declaration of Service listed
as item 19.e in Exhibit A. Such notices provided adequate and sufficient
opportunity for entities receiving an Opt-Out Notice to return such opt-out
forms in accordance with applicable law.
Solicitation
n) Votes for acceptance and rejection of the Plan were solicited in good
faith and complied with sections 1125 and 1126 of the Bankruptcy Code, Rules
3017 and 3018 of the Bankruptcy Rules, the Disclosure Statement, the
Solicitation Procedures Order, all other applicable provisions of the Bankruptcy
Code and all other applicable rules, laws and regulations.
o) The Debtors, the Official Committees (and their current and former
members and ex officio members), and their respective directors, officers,
agents, affiliates, representatives, attorneys and advisors have solicited votes
on the Plan in good faith and in compliance with the applicable provisions of
the Bankruptcy Code and the Solicitation Procedures Order and are entitled to
the protections afforded by section 1125(e) of the Bankruptcy Code and the
exculpation provisions set forth in Article X.D of the Plan.
Burden of Proof
p) The Debtors, as proponents of the Plan, have met their burden of proving
the elements of section 1129(a) and (b) of the Bankruptcy Code by a
preponderance of the evidence, which is the applicable evidentiary standard in
this Court. The Court also finds that the Debtors have satisfied the elements of
section 1129(a) and (b) of the Bankruptcy Code by clear and convincing evidence.
8
Compliance with the Requirements of Section 1129 of the Bankruptcy Code
Section 1129(a)(1) - Compliance of the Plan with Applicable Provisions of
the Bankruptcy Code
q) The Plan complies with all applicable provisions of the Bankruptcy Code
as required by section 1129(a)(1) of the Bankruptcy Code, including, without
limitation, sections 1122 and 1123. Pursuant to sections 1122(a) and 1123(a)(1)
of the Bankruptcy Code, Article III of the Plan designates Classes of Claims and
Equity Interests, other than Administrative Claims and Priority Tax Claims.(4)
As required by section 1122(a) of the Bankruptcy Code, each Class of Claims and
Equity Interests contains only Claims or Equity Interests that are substantially
similar to the other Claims or Equity Interests within that Class.
r) Pursuant to section 1123(a)(2) and (3) of the Bankruptcy Code, Article
III of the Plan specifies all Claims that are not Impaired and specifies the
treatment of all Claims and Equity Interests that are Impaired. Pursuant to
section 1123(a)(4) of the Bankruptcy Code, Article III of the Plan also provides
the same treatment for each Claim or Equity Interest within a particular Class.
s) Pursuant to section 1123(a)(5) of the Bankruptcy Code, the Plan provides
adequate and proper means for the Plan's implementation. The Debtors will have,
immediately upon the Effective Date of the Plan, sufficient Cash to make all
payments required to be made on the Effective Date pursuant to the terms of the
Plan. Moreover, Article V and various other provisions of the Plan specifically
provide adequate means for the Plan's implementation, including, without
limitation: (a) the continuation of the corporate existence and the vesting of
assets in the Reorganized Debtors; (b) the adoption of the New CNC Charter and
New CNC
---------------
4 The Administrative Claims and the Priority Tax Claims are not required to
be designated pursuant to section 1123(a)(1) of the Bankruptcy Code. 11
U.S.C. ss. 1123(a)(1).
9
By-laws;(5) (c) the cancellation of the Senior Credit Facility, Exchange Notes,
Original Notes, Subordinated Debentures, the 93/94 Notes, Old CNC Common Stock,
and Old CNC Preferred Stock; (d) the authorization and issuance or distribution
of the New Credit Facility, New CNC Common Stock, New CNC Preferred Stock, and
New CNC Warrants, and the execution of related documents; (e) the selection of
the initial directors and officers of New CNC, subject to applicable state
insurance regulatory approval; (f) the creation of the Residual Trust; (g) the
liquidation of Old CNC; (h) the Intercompany Settlement (as described in Article
V.F of the Plan); (i) the TOPrS Settlement (as described in Article V.I of the
Plan); (j) the sale of the GM Building, and (k) the sources of Cash for
distributions under the Plan.
t) The New CNC Charter and New CNC By-laws in the Plan Supplement comply
with section 1123(a)(6) and section 1123(a)(7).
Section 1129(a)(2) - Compliance with Applicable Provisions of the
Bankruptcy Code
u) The Debtors, as proponents of the Plan, have complied with all
applicable provisions of the Bankruptcy Code as required by section 1129(a)(2)
of the Bankruptcy Code, including, without limitation, sections 1125 and 1126
and Bankruptcy Rules 3017, 3018 and 3019. In particular, the Reorganizing
Debtors are proper debtors under section 109 of the Bankruptcy Code and proper
proponents of the Plan under section 1121(a) of the Bankruptcy Code.
Furthermore, the solicitation of acceptances or rejections of the Plan was (i)
pursuant to the Solicitation Procedures Order; (ii) in compliance with all
applicable laws, rules and regulations governing the adequacy of disclosure in
connection with such solicitation; and (iii) solicited after disclosure to
Holders of Claims or Interests of adequate information as defined in
---------------
5 Article V.I(1) of the Plan provides for the inclusion in the New CNC
Charter and New CNC By-laws of all provisions required to be included in
the corporate charter of the Reorganized Debtors under section 1123(a)(6)
of the Bankruptcy Code.
10
section 1125(a) of the Bankruptcy Code. Accordingly, the Debtors, the Official
Committees (and their current and former members and ex officio members), and
their respective directors, officers, employees, agents, affiliates and
Professionals have acted in "good faith" within the meaning of section 1125(e)
of the Bankruptcy Code.
Section 1129(a)(3) - Proposal of Plan in Good Faith
v) The Debtors have proposed the Plan in good faith and not by any means
forbidden by law. In determining that the Plan has been proposed in good faith,
the Court has examined the totality of the circumstances surrounding the filing
of the Chapter 11 Cases, the Plan itself, and the process leading to its
formulation. See Bankruptcy Rule 3020(b). The Chapter 11 Cases were filed, and
the Plan was proposed, with the legitimate purpose of allowing the Debtors to
reorganize and emerge from bankruptcy with a capital structure that will allow
them to satisfy their obligations with sufficient liquidity and capital
resources.
Section 1129(a)(4) - Bankruptcy Court Approval of Certain Payments as
Reasonable
w) Pursuant to section 1129(a)(4) of the Bankruptcy Code, the payments to
be made by the Reorganized Debtors for services or for costs in connection with
the Chapter 11 Cases or the Plan, as described (a) in the "Reorganized Debtors'
Section 1129(a)(4) Disclosure" filed on September 4, 2003 or (b) in the Plan,
are approved.
x) State Street Bank and Trust Company shall hold an Allowed Administrative
Claim in the amount of $50,000, but it shall be precluded from asserting
additional claims against the Debtors and/or holders of the Trust Preferred
Securities. Before receiving payment of the $50,000 Allowed Administrative Claim
specified herein, State Street Bank and Trust Company shall return to New CNC
the Subordinated Debentures and related
11
documents as reasonably requested by New CNC. State Street Bank and Trust
Company shall cooperate with New CNC and its agents regarding distributions to
be made under the Plan.
y) In addition, fees and expenses incurred by professionals retained by the
Debtors or an Official Committee shall be payable according to the Orders
approving such firms' retention.
Section 1129(a)(5) - Disclosure of Identity of Proposed Management,
Compensation of Insiders and Consistency of Management Proposals with the
Interests of Creditors and Public Policy
z) Pursuant to section 1129(a)(5) of the Bankruptcy Code, the Debtors have
disclosed the identity of the proposed directors and officers of the Reorganized
Debtors following Confirmation of the Plan and the identity and compensation of
insiders who will be employed or retained by the Reorganized Debtors in the Plan
Supplement.
Section 1129(a)(6) - Approval of Rate Changes
aa) The Debtors' current businesses do not involve the establishment of
rates over which any regulatory commission has or will have jurisdiction after
Confirmation. Section 1129(a)(6) of the Bankruptcy Code is thus not applicable
to these Chapter 11 Cases.
Section 1129(a)(7) - Best Interests of Creditors and Equity Interest
Holders
bb) The liquidation analysis annexed to the Disclosure Statement as Exhibit
B, and the other evidence related thereto that was proffered or adduced at or
prior to, or in affidavits in connection with, the Confirmation Hearing, is
reasonable. The methodology used and assumptions made in the liquidation
analysis, as supplemented by the evidence proffered or adduced at or prior to,
or in affidavits filed in connection with, the Confirmation Hearing, are
reasonable.
cc) With respect to each Impaired Class, each Holder of an Allowed Claim or
Equity Interest in such Class has accepted the Plan or will receive under the
Plan on account of
12
such Claim or Equity Interest property of a value, as of the Effective Date,
that is not less than the amount such Holder would receive if the Debtors were
liquidated on the Effective Date under Chapter 7 of the Bankruptcy Code.
Section 1129(a)(8) - Acceptance of the Plan by Each Impaired Class
dd) As indicated in Articles III and IV of the Plan, the following Classes
are Unimpaired and conclusively presumed to have accepted the Plan:
<TABLE>
<CAPTION>
-------------------------------------------------------------- -------------------------------------------------------
Description of Class Class Designation
-------------------------------------------------------------- -------------------------------------------------------
-------------------------------------------------------------- -------------------------------------------------------
<S> <C>
Other Priority Claims 1A, 1B, 1C, 1D
-------------------------------------------------------------- -------------------------------------------------------
Other CNC Secured Claims 2A
-------------------------------------------------------------- -------------------------------------------------------
Other Secured Claims 2B, 2C, 2D
-------------------------------------------------------------- -------------------------------------------------------
Reinstated Intercompany Claims 3A, 3B
-------------------------------------------------------------- -------------------------------------------------------
Reinstated CIHC Preferred Stock Interests 8B
-------------------------------------------------------------- -------------------------------------------------------
Convenience Class Claims 9A, 7B
-------------------------------------------------------------- -------------------------------------------------------
Old CIHC Common Stock Interests 9B
-------------------------------------------------------------- -------------------------------------------------------
</TABLE>
ee) As indicated in the Voting Report, as amended, every Impaired Class
that was entitled to vote has voted to accept the Plan. The following Impaired
Classes voted in favor of the Plan:
<TABLE>
<CAPTION>
--------------------------------------------------------------- ------------------------------------------------------
Description of Class Class Designation
--------------------------------------------------------------- ------------------------------------------------------
--------------------------------------------------------------- ------------------------------------------------------
<S> <C>
93/94 Note Claims 4A
--------------------------------------------------------------- ------------------------------------------------------
Lender Claims 5A-1, 5A-2, 4B-1, 4B-2
--------------------------------------------------------------- ------------------------------------------------------
Exchange Note Claims 6A, 5B
--------------------------------------------------------------- ------------------------------------------------------
Original Note Claims 7A
--------------------------------------------------------------- ------------------------------------------------------
Reorganizing Debtor General Unsecured Claims 8A, 6B, 3C
--------------------------------------------------------------- ------------------------------------------------------
</TABLE>
ff) Because the Plan provides that the Classes listed below will not
receive any distribution or retain any property under the Plan, they are "Deemed
Rejected Classes" and are deemed to have rejected the Plan pursuant to section
1126(g) of the Bankruptcy Code:
13
<TABLE>
<CAPTION>
--------------------------------------------------------------- ------------------------------------------------------
Class of Claims Class Designation
--------------------------------------------------------------- ------------------------------------------------------
--------------------------------------------------------------- ------------------------------------------------------
<S> <C>
Old CTIHC Common Stock Interests 4C
--------------------------------------------------------------- ------------------------------------------------------
Old PHG Common Stock Interests 4D
--------------------------------------------------------------- ------------------------------------------------------
Discharged Intercompany Claims 10B
--------------------------------------------------------------- ------------------------------------------------------
Old CNC Series F Preferred Stock Interests 11A-1
--------------------------------------------------------------- ------------------------------------------------------
Old CNC Other Preferred Stock Interests 11A-2
--------------------------------------------------------------- ------------------------------------------------------
Old CNC Common Stock Interests 12A
--------------------------------------------------------------- ------------------------------------------------------
Discharged Intercompany Claims 13A
--------------------------------------------------------------- ------------------------------------------------------
Securities Claims 14A, 11B
--------------------------------------------------------------- ------------------------------------------------------
Trust Related Claims 10A
--------------------------------------------------------------- ------------------------------------------------------
</TABLE>
Section 1129(a)(9) - Treatment of Claims Entitled to Priority Pursuant to
Section 507(a) of the Bankruptcy Code
gg) The treatment of Administrative, Priority Tax, and Other Priority
Claims under Articles II.A, II.B and III of the Plan, respectively, satisfies
the requirements of section 1129(a)(9) of the Bankruptcy Code.
hh) To resolve the objection of the Illinois Department of Revenue
("IDOR"), Allowed Claims of the IDOR that have priority under section 507(a)(8)
of the Bankruptcy Code are to be paid, at the option of the Reorganizing
Debtors, either (i) in Cash on the Effective Date or (ii) in Cash over a period
not to exceed six years from the date of assessment of the tax to which the
Allowed Priority Tax Claim relates, with interest at a 9% annual rate
(compounded annually).
Section 1129(a)(10) - Acceptance By At Least One Impaired Class
ii) As set forth in the Voting Report each Impaired Class, other than the
Deemed Rejected Classes, has voted to accept the Plan. Accordingly, section
1129(a)(10) of the Bankruptcy Code is satisfied.
Section 1129(a)(11) - Feasibility of the Plan
jj) The Plan satisfies section 1129(a)(11) of the Bankruptcy Code. Based
upon the evidence proffered or adduced at, or prior to, or in affidavits filed
in connection with the Confirmation Hearing, the Plan is feasible and
Confirmation of the Plan is not likely to be
14
followed by the liquidation, or the need for further financial reorganization,
of the Debtors, the Reorganized Debtors or any successor to the Reorganized
Debtors under the Plan. Furthermore, the Reorganized Debtors will have adequate
capital to meet their ongoing obligations.
Section 1129(a)(12) - Payment of Bankruptcy Fees
kk) In accordance with section 1129(a)(12) of the Bankruptcy Code, Article
XII.D of the Plan provides for the payment of all fees payable under 28 U.S.C.
ss. 1930(a). The Reorganizing Debtors have adequate means to pay all such fees.
Section 1129(a)(13) - Retiree Benefits
ll) In accordance with section 1129(a)(13) of the Bankruptcy Code, Article
VI.E of the Plan provides for the timely payment post-Confirmation of retiree
benefits (as that term is defined in section 1114 of the Bankruptcy Code), if
any, to the extent such retiree benefits are payable by the Reorganizing
Debtors. Such retiree benefits include those that arise from the plans, funds or
programs described in the Plan Supplement.
Section 1129(b) - Confirmation of Plan Over Nonacceptance of Impaired Class
mm) Pursuant to section 1129(b)(1) of the Bankruptcy Code, the Plan may be
confirmed notwithstanding the fact that not all Impaired Classes have voted to
accept the Plan. All of the requirements of section 1129(a) of the Bankruptcy
Code other than section 1129(a)(8) have been met. All Classes of Impaired Claims
have voted to accept the Plan other than the Deemed Rejected Classes.
nn) With respect to the Deemed Rejected Classes, no Holders of Claims or
Interests subordinate to the Holders of the Claims and Interests in the Deemed
Rejected Classes will receive or retain any property under the Plan. Accordingly
the requirements of sections
15
1129(b)(2)(B)(ii) and 1129(b)(2)(C)(ii) are satisfied with respect to Class 10A
and the Deemed Rejected Classes, and the Plan is fair and equitable with respect
to such Classes.
oo) Pursuant to section 1129(b) of the Bankruptcy Code, the Court finds
that the Plan is "fair and equitable" (as defined in section 1129(b) of the
Bankruptcy Code) with respect to Impaired Classes that have not voted to accept
the Plan and the Plan does not unfairly discriminate against such Classes.
pp) The Plan provides for distribution to Classes 7A (Original Note
Claims), 8A (CNC General Unsecured Claims) and 6B (CIHC General Unsecured
Claims), notwithstanding that Classes 6A and 5B (Exchange Note Claims) will not
receive full payment on their Claims. The distributions to such junior Classes
do not violate the absolute priority rule of section 1129(b)(2) of the
Bankruptcy Code because such distributions are based on the agreement of Classes
6A and 5B (Exchange Note Claims) to voluntarily allocate a portion of the value
that they would otherwise receive to these Classes. Such value was provided to
Classes 7A and 8A to ensure that the Debtors' reorganization efforts are
completed consensually and as expeditiously as possible. The subordination
provisions in the prepetition documents that govern the Subordinated Debentures
and the Trust Preferred Securities are enforceable in a bankruptcy proceeding
and therefore the Plan's distributions do not violate the absolute priority
rule.
Principal Purpose of the Plan Is Not Avoidance of Taxes
qq) The principal purpose of the Plan is not the avoidance of taxes or the
avoidance of the application of Section 5 of the Securities Act of 1933 (15
U.S.C. ss. 77e), and no governmental entity has filed any objection asserting
such avoidance.
16
Objections to Confirmation of the Plan
rr) All objections to Confirmation filed with the Court have been
withdrawn, settled, or are overruled on their merits.
Issuance and Distribution of the New Securities
ss) The Debtors and each of the current and former members and ex officio
members of the Official Committees (and each of their respective affiliates,
agents, directors, officers, employees, advisors, and attorneys) have, and upon
Confirmation of the Plan shall be deemed to have, participated in good faith and
in compliance with the applicable provisions of the Bankruptcy Code with regard
to the distribution of the New Securities (as defined below) under the Plan, and
therefore are not, and on account of such distributions will not be, liable at
any time for the violation of any applicable law, rule, or regulation governing
the solicitation of acceptances or rejections of the Plan or such distributions
made pursuant to the Plan.
tt) The issuance and distribution of all of the New Credit Facility, New CNC
Common Stock, New CNC Warrants, and the New CNC Preferred Stock (collectively,
the "New Securities") when issued or distributed as provided in the Plan, will
be duly authorized, validly issued and, if applicable, fully paid and
nonassessable. The issuance of the New Securities (including, without
limitation, the fee payable to Houlihan Lokey Howard & Zukin under its
engagement letter, which includes 462,444 shares of New CNC Common Stock) are in
exchange for Claims against or Interests in the Debtors, or principally in such
exchange and partly for cash or property, within the meaning of section
1145(a)(1) of the Bankruptcy Code. In addition, under section 1145 of the
Bankruptcy Code, to the extent, if any, that the above-listed items constitute
"securities" (a) the offering of such items is exempt and the issuance and
distribution of such items will be exempt from Section 5 of the Securities Act
and any State or local law requiring registration prior to the offering,
issuance, distribution, or sale of securities and (b) all
17
of the above-described items will be freely tradeable by the recipients thereof,
subject to (i) the provisions of section 1145(b)(1) of the Bankruptcy Code
relating to the definition of an underwriter in Section 2(a)(11) of the
Securities Act, and compliance with any rules and regulations of the SEC, if
any, applicable at the time of any future transfer of such securities or
instruments; (ii) the restrictions, if any, on the transferability of such
securities and instruments; and (iii) applicable regulatory approval.
Executory Contracts and Unexpired Leases
uu) On or about May 16, 2003, July 24, 2003, and July 31, 2003, the Debtors
sent notice to counterparties to contracts and leases that the Debtors intend to
assume pursuant to the Plan, including a proposed cure amount, if any. Annexed
hereto as Exhibit B is a list of contracts and leases that the Debtors have
assumed pursuant to such notices (the "Assumed Contracts") and the Claims
asserted by the contract counterparties. The Claims listed on Exhibit B are
hereby deemed disallowed.
Releases and Discharges
vv) The releases and discharges of Claims and Causes of Action described in
Article X of the Plan and this Order, including releases by Holders of Claims,
constitute good faith compromises and settlements of the matters covered thereby
and are consensual. Such compromises and settlements are made in exchange for
consideration and are in the best interest of Holders of Claims, are fair,
equitable, reasonable, and are integral elements of the resolution of the
Chapter 11 Cases in accordance with the Plan. Each of the discharge, release,
indemnification and exculpation provisions set forth in the Plan and this Order
(i) is within the jurisdiction of the Court under 28 U.S.C. ss.ss. 1334(a),
1334(b) and 1334(d); (ii) is an essential means of implementing the Plan
pursuant to section 1123(a)(6) of the Bankruptcy Code; (iii) is an integral
element of the transactions incorporated into the Plan; (iv) confers material
benefit
18
on, and is in the best interests of, the Debtors, their estates and their
creditors; (v) is important to the overall objectives of the Plan to finally
resolve all Claims among or against the parties-in-interest in the Chapter 11
Cases with respect to the Debtors; and (vi) is consistent with sections 105,
1123, 1129 and other applicable provisions of the Bankruptcy Code.
Preservation of Causes of Action
ww) It is in the best interests of the Creditors and Interest Holders of
the Debtors' Estates that all Causes of Action not expressly waived,
relinquished, released, compromised or settled in the Plan or any Final Order be
retained by the Reorganizing Debtors (before the Effective Date) and the
Reorganized Debtors (after the Effective Date) pursuant to Article X of the
Plan, to preserve the value of the Debtors' Estates.
Approval of Settlements and Compromises
xx) Pursuant to Bankruptcy Rule 9019 and any applicable State law, and as
consideration for the distributions and other benefits provided under the Plan,
all settlements and compromises of Claims, Causes of Action and objections to
Claims that are embodied in the Plan (including, without limitation, the
Intercompany Settlement in Article V.F of the Plan and the TOPrS Settlement of
Article V.I. of the Plan) constitute a good faith compromise and settlement of
any Claims, Causes of Action and objections to Claims, which compromises and
settlements are hereby approved as fair, equitable, reasonable, and appropriate
in light of the relevant facts and circumstances underlying such compromise and
settlement, and are in the best interests of the Debtors and their Estates and
Creditors.
Satisfaction of Conditions to Confirmation
yy) Each of the conditions precedent to the entry of this Confirmation
Order, as set forth in Article IX.A of the Plan, has been satisfied or waived in
accordance with the Plan.
19
Likelihood of Satisfaction of Conditions Precedent to Consummation
zz) Each of the conditions precedent to the Effective Date, as set forth in
Article IX.B of the Plan, is reasonably likely to be satisfied.
Retention of Jurisdiction
aaa) The Court may properly retain jurisdiction over the matters set forth
in Article XI of the Plan.
Exemptions from Taxation
bbb) No property located in the State of Illinois that would be the subject
of an Illinois transfer tax that would be the subject of a section 1146(c)
exclusion has been sold by the Reorganizing Debtors during the course of these
Chapter 11 Cases.
Based on the foregoing, it is hereby ORDERED:
II
ORDER
Confirmation of the Plan
1. The Plan and Plan Supplement, substantially in the form as amended, and
each of its provisions are confirmed in each and every respect pursuant to
section 1129 of the Bankruptcy Code. The terms of the Plan, the Plan Supplement,
and exhibits thereto are incorporated by reference into, and are an integral
part of, this Confirmation Order. The terms of the Plan, the Plan Supplement,
all exhibits thereto, and all other relevant and necessary documents, shall be
effective and binding as of the Effective Date of the Plan. Notwithstanding the
foregoing, if there is any direct conflict between the terms of the Plan or the
Plan Supplement and the terms of this Confirmation Order, the terms of this
Confirmation Order shall control. All objections and responses to and Statements
and comments regarding the Plan, to the extent not
20
already withdrawn, waived, or settled, and all reservation of rights included
therein, shall be, and hereby are, overruled.
Plan Modifications
2. All modifications or amendments to the Plan since the solicitation
(including those summarized in the Notice listed as item 32 of Exhibit A) are
approved pursuant to section 1127(a) of the Bankruptcy Code and do not require
additional disclosure or resolicitation under Rule 3019.
Plan Classification Controlling
3. The classification of Claims and Equity Interests for purposes of the
distributions to be made under the Plan shall be governed solely by the terms of
the Plan. The classifications set forth on the Ballots tendered to or returned
by the Debtors' Creditors in connection with voting on the Plan (a) were set
forth on the Ballots solely for purposes of voting to accept or reject the Plan;
(b) do not necessarily represent, and in no event shall be deemed to modify or
otherwise affect, the actual classification of such Claims under the Plan for
distribution purposes; (c) may not be relied upon by any Creditor as
representing the actual classification of such Claims under the Plan for
distribution purposes; and (d) shall not be binding on the Debtors or the
Reorganized Debtors.
Settlement of Claims and Interests
4. In consideration of the Plan, certain U.S. Bank Claims, Lehman Claims,
Intercompany Claims, 93/94 Note Claims, Exchange Note Claims, Original Note
Claims, Lender Claims, and Claims asserted by or for the Releasees against the
Debtors are hereby resolved as follows:
21
<TABLE>
<CAPTION>
-------------------------------------------- ----------------- ----------------------- ---------------------------
TYPE OF CLAIM CLAIM NO. ALLEGED AMOUNT OF ALLOWED AMOUNT OF
CLAIM CLAIM
-------------------------------------------- ----------------- ----------------------- ---------------------------
-------------------------------------------- ----------------- ----------------------- ---------------------------
<S> <C> <C> <C>
U.S. BANK CLAIMS
U S Bank National Association, as 49674-000137 $1,000,000,000 Disallowed
Securitization Trustee
U S Bank National Association, as 49672-006859 $1,000,000,000 Disallowed
Securitization Trustee
-------------------------------------------- ----------------- ----------------------- ---------------------------
-------------------------------------------- ----------------- ----------------------- ---------------------------
LEHMAN CLAIMS 49672-005452 $6,000,000 Disallowed on Effective
Date of the Finance
Company Plans
49674-000059 $6,000,000 Disallowed on Effective
Date of the Finance
Company Plans
49674-000055 $125,000,000 Disallowed
49674-000056 $125,000,000 Disallowed
49674-000057 $125,000,000 Disallowed
49674-000058 $125,000,000 Disallowed
49674-000078 Contingent Disallowed
49672-005451 Contingent Disallowed
49672-006864 Contingent Disallowed
-------------------------------------------- ----------------- ----------------------- ---------------------------
-------------------------------------------- ----------------- ----------------------- ---------------------------
INTERCOMPANY CLAIMS
Conseco Finance Corp. 49672-007941 $30,271,727 Disallowed
Conseco Agency Inc. 49672-007943 $394,208 Disallowed
Conseco Fin. Consumer Discount Co. 49672-007946 $186,944 Disallowed
Consumer Finance Corp. Alabama 49672-007944 $239,776 Disallowed
Conseco Finance Credit Corp. 49672-007945 $105,664 Disallowed
Conseco Finance Servicing Corp. 49672-007942 $14,878,304 Disallowed
Conseco Agency Inc. 49674-000256 $394,208 Disallowed
Conseco Annuity Assurance Company 49674-000234 Not Stated Disallowed
Conseco Fin. Consumer Discount Co. 49674-000259 $186,944 Disallowed
Conseco Finance Corp. 49674-000254 $337,630,130 See Plan Article V.F.
Conseco Finance Corp. Alabama 49674-000257 $239,776 Disallowed
Conseco Finance Credit Corp. 49674-000258 $105,664 Disallowed
Conseco Finance Servicing Corp. 49674-000255 $14,878,304 Disallowed
Conseco Life Insurance Company 49674-000232 Not Stated Disallowed
-------------------------------------------- ----------------- ----------------------- ---------------------------
-------------------------------------------- ----------------- ----------------------- ---------------------------
93/94 NOTE CLAIMS 49674-000197 $93,711,875.12 Disallowed
49672-006935 $93,711,875.12 Disallowed
-------------------------------------------- ----------------- ----------------------- ---------------------------
-------------------------------------------- ----------------- ----------------------- ---------------------------
EXCHANGE NOTE CLAIMS 49674-006930 $382,472,524.69 Allowed in the aggregate
49674-006931 $988,502,907.35 in the amount of
49674-000079 $382,472,526.63 $1,370,975,431.97 and
49674-000080 $988,502,907.35 postpetition interest
will not be allowed to
calculate Total Exchange
Note Claim
-------------------------------------------- ----------------- ----------------------- ---------------------------
-------------------------------------------- ----------------- ----------------------- ---------------------------
ORIGINAL NOTE CLAIMS 49672-06393 $1,242,088,736.16 Allowed in the aggregate
in the amount of
$1,242,444,895.76
-------------------------------------------- ----------------- ----------------------- ---------------------------
-------------------------------------------- ----------------- ----------------------- ---------------------------
</TABLE>
22
<TABLE>
<CAPTION>
-------------------------------------------- ----------------- ----------------------- ---------------------------
TYPE OF CLAIM CLAIM NO. ALLEGED AMOUNT OF ALLOWED AMOUNT OF
CLAIM CLAIM
-------------------------------------------- ----------------- ----------------------- ---------------------------
-------------------------------------------- ----------------- ----------------------- ---------------------------
<S> <C> <C> <C>
LENDER CLAIMS 49672-003986 $145,535,970.27
49672-003982 $10,020,041.41
49672-003983 $133,649,282.13
49672-003984 $205,583,532.24 Allowed as set forth in
49672-003985 $1,537,426,989.45 Article III of the Plan
49674-000020 $1,537,426,989.45
49674-000021 $205,583,532.24
49674-000022 $145,535,970.27
49674-000023 $10,020,041.41
49674-000024 $133,649,282.13
-------------------------------------------- ----------------- ----------------------- ---------------------------
-------------------------------------------- ----------------- ----------------------- ---------------------------
RELEASEES
Barea, Julio A 49674-000236 Unknown Disallowed
Barea, Julio A 49672-007816 Unknown Disallowed
Bellamy, Carol 49672-007817 Unknown Disallowed
Bellamy, Carol 49674-000237 Unknown Disallowed
Berube, Edward M 49672-007834 Unknown Disallowed
Berube, Edward M 49674-000247 Unknown Disallowed
Bublitz, Maxwell E. 49672-007827 Unknown Disallowed
Bublitz, Maxwell E 49674-000248 Unknown Disallowed
Bullis, Eugene M 49674-000231 Unknown Disallowed
Bullis, Eugene M 49674-000225 Unknown Disallowed
Bullis, Eugene M 49672-007825 Unknown Disallowed
Coss, Lawrence M 49674-000238 Unknown Disallowed
Coss, Lawrence M 49672-007836 Unknown Disallowed
Devanney, William T Jr. 49674-000224 Unknown Disallowed
Dykhouse, Richard R 49672-007831 Unknown Disallowed
Dykhouse, Richard R 49674-000251 Unknown Disallowed
Hagerty, Thomas M * 49672-006453 $3,500 + $3,500
Hagerty, Thomas M 49672-007837 Unknown Disallowed
Hagerty, Thomas M 49674-000239 Unknown Disallowed
Harkins, David V ** 49672-006508 $6,500 + $6,500
Harkins, David V 49674-000240 Unknown Disallowed
Harkins, David V 49672-007818 Unknown Disallowed
Hathaway, M Phil 49674-000241 Unknown Disallowed
Hathaway, M Phil 49672-007819 Unknown Disallowed
Herzog, David K 49672-007824 Unknown Disallowed
Herzog, David K 49674-000227 Unknown Disallowed
Herzog, David K 49674-000220 Unknown Disallowed
Hill, Tammy M 49672-007828 Unknown Disallowed
Hill, Tammy M 49674-000249 Unknown Disallowed
Kiefer, Kathleen S 49672-007832 Unknown Disallowed
Kiefer, Kathleen S 49674-000252 Unknown Disallowed
Kindig, Karl W 49674-000230 Unknown Disallowed
Kindig, Karl W 49674-000253 Unknown Disallowed
Kindig, Karl W 49672-007833 Unknown Disallowed
Kindig, Karl W 49674-000221 Unknown Disallowed
-------------------------------------------- ----------------- ----------------------- ---------------------------
<FN>
------------------
* Claim No. 49672-006453 is allowed in the amount of $3,500 as compensation
for director's fees but the remainder of the claim is disallowed for all
purposes.
** Claim No. 49672-006508 is allowed in the amount of $6,500 as compensation
for director's fees but the remainder of the claim is disallowed for all
purposes.
</FN>
</TABLE>
23
<TABLE>
<CAPTION>
-------------------------------------------- ----------------- ----------------------- ---------------------------
TYPE OF CLAIM CLAIM NO. ALLEGED AMOUNT OF ALLOWED AMOUNT OF
CLAIM CLAIM
-------------------------------------------- ----------------- ----------------------- ---------------------------
-------------------------------------------- ----------------- ----------------------- ---------------------------
<S> <C> <C> <C>
Kline, John R 49674-000250 Unknown Disallowed
Kline, John R 49672-007829 Unknown Disallowed
Lubbers, Mark R 49672-007826 Unknown Disallowed
Lubbers, Mark R 49674-000246 Unknown Disallowed
Murphy, Daniel J 49674-000229 Unknown Disallowed
Murphy, Daniel J 49672-007830 Unknown Disallowed
Murphy, Daniel J 49674-000222 Unknown Disallowed
Mutz, John M 49674-000242 Unknown Disallowed
Mutz, John M 49672-007820 Unknown Disallowed
Nickoloff, Robert S 49672-007821 Unknown Disallowed
Nickoloff, Robert S 49674-000243 Unknown Disallowed
Shea, William J 49674-000223 Unknown Disallowed
Shea, William J 49672-007822 Unknown Disallowed
Shea, William J. 49674-000228 Unknown Disallowed
Thompson, Samme 49672-007835 Unknown Disallowed
Thompson, Samme 49674-000244 Unknown Disallowed
-------------------------------------------- ----------------- ----------------------- ---------------------------
</TABLE>
Effects of Confirmation
Executory Contracts and Unexpired Leases
5. The executory contract and unexpired lease provisions of Article VI of
the Plan shall be, and hereby are, approved. After today's date, the Debtors are
authorized to amend the tax sharing agreement among the Debtors and their
subsidiaries as requested by the regulatory authorities for the Debtors'
subsidiaries. As of the Effective Date, all executory contracts or unexpired
leases assumed by the Debtors shall be assigned and transferred to, and remain
in full force and effect for the benefit of, the Reorganized Debtors
notwithstanding any provision in such contract or lease (including those
described in sections 365(b)(2) and (f) of the Bankruptcy Code) that prohibits
such assignment or transfer or that enables or requires termination of such
contract or lease. The Claims asserted on behalf of creditors whose executory
contracts are Assumed Contracts are listed on Exhibit B and shall be disallowed
as of today's date.
24
6. The Amended Employment Agreement, dated June 1, 2002, between CNC and
William J. Shea, is rejected as of the Effective Date and all Claims and Causes
of Action in respect thereof shall be deemed waived as of the Effective Date.
The Senior Management Employment Agreements in the Plan Supplement and CNC's
agreement with Charles H. Cremens regarding the sale of the GM Building shall
bind New CNC as of the Effective Date.
Existing Injunction and Stays Remain in Effect until Effective Date
7. The stay imposed by section 362 of the Bankruptcy Code shall remain in
full force and effect until the Effective Date. All injunctions or stays imposed
during the Chapter 11 Cases or contained in the Plan or this Confirmation Order
shall remain in full force and effect in accordance with their terms. Nothing
herein shall bar the taking of such other actions as are necessary to effectuate
the transactions specifically contemplated by the Plan or by this Confirmation
Order.
Plan Confirmation Shall Not Affect the Nauert Adversary Proceeding
8. Nothing in the Plan, the Plan Supplement or this Order shall have any
issue or claim preclusive effect on the rights, claims, counterclaims and
interests asserted by Peter W. Nauert in the adversary proceeding captioned
Peter W. Nauert v. CIHC, Inc. and U.S. Bank, N.A., Adv. No. 03 A 00452 (the
"Nauert Adversary Proceeding"), including, without limitation, the issue of
Plaintiff's Benefit Entitlement, as defined in the complaint filed in the Nauert
Adversary Proceeding. Nothing in the Plan, or this Order shall be construed to
enjoin the Nauert Adversary Proceeding. The Court shall retain jurisdiction over
the Nauert Adversary Proceeding and his proofs of claim. The Stipulation and
Agreed Order Regarding Peter W. Nauert's Motion for Preliminary Injunction Filed
Against CIHC, Inc. and U.S. Bank, N.A., entered by the Court on March 31, 2003,
regarding notice to Nauert and U.S. Bank of any withdrawal or transfer of monies
held in an account at U.S. Bank (Account #08524041) shall
25
remain in effect until a final order is entered in the Nauert Adversary
Proceeding, notwithstanding Confirmation of the Plan.
Exemption from Registration
9. Pursuant to section 1145 of the Bankruptcy Code, the offering, issuance
and distribution of the New Securities shall be exempt from, among other things,
the registration requirements of Section 5 of the Securities Act and any State
or local law requiring registration prior to the offering, issuance,
distribution or sale of securities. In addition, under section 1145 of the
Bankruptcy Code the New Securities (including, without limitation, the 462,444
shares of New CNC Common Stock distributed to Houlihan Lokey Howard & Zukin
under its engagement letter) will be freely tradeable by the recipients thereof,
subject to (i) the provisions of section 1145(b)(1) of the Bankruptcy Code
relating to the definition of an underwriter in Section 2(a)(11) of the
Securities Act, and compliance with any rules and regulations of the Securities
and Exchange Commission, if any, applicable at the time of any future transfer
of such securities or instruments; (ii) the restrictions, if any, on the
transferability of such securities and instruments; and (iii) applicable
regulatory approval.
Matters Relating to Implementation of the Plan
Immediate Effectiveness; Successors and Assigns
10. Notwithstanding Rules 3020(e), 6004(g) or 7062, or otherwise,
immediately upon the entry of this Confirmation Order, the terms of the Plan,
the Plan Supplement and this Order shall be, and hereby are, immediately
effective and enforceable and deemed binding upon the Debtors, the Reorganized
Debtors, any and all Holders of Claims or Equity Interests and the Trust
Preferred Securities (irrespective of whether such Claims or Equity Interests
are impaired under the Plan or whether the Holders of such Claims or Equity
Interests accepted or are deemed to have accepted the Plan), all entities that
are parties to or are subject to
26
the settlements, compromises, releases, discharges, and injunctions described in
the Plan or herein, each Person acquiring property under the Plan, and any and
all non-Debtor parties to executory contracts and unexpired leases with the
Debtors and the respective heirs, executors, administrators, successors or
assigns, affiliates, officers, directors, agents, representatives, attorneys,
beneficiaries, or guardians, if any, of any of the foregoing.
Continued Corporate Existence; Vesting of Assets
11. On the Effective Date, subject to applicable state insurance regulatory
approval: (a) Old CNC shall continue to exist as a separate corporate entity,
with corporate powers in accordance with the laws of the State of Indiana and
its Articles of Incorporation and By-laws, provided that the Articles of
Incorporation shall be amended and restated to limit Old CNC's activity to the
implementation of the Plan, the liquidation of its Residual Assets and the
winding-up of its affairs; (b) each of the President, the Secretary and any
other officer of Old CNC is authorized to file such Amended and Restated
Articles of Incorporation with the Secretary of State of Indiana pursuant to
23-1-38-8 of the Indiana Business Corporation Law; (c) New CNC shall be
incorporated and shall exist thereafter as a separate corporate entity, with all
corporate powers in accordance with the laws of the State of Delaware, the New
CNC Charter and the New CNC By-laws; and (d) (i) the Residual Trust shall be
settled and exist as a grantor trust and/or liquidating trust under the laws of
the State of Delaware and pursuant to the Declaration of Trust; (ii) Reorganized
CIHC shall continue to exist as a separate corporate entity, with corporate
powers in accordance with the laws of the State of Delaware and its existing
charter and by-laws; (iii) Reorganized CTIHC shall continue to exist as a
separate corporate entity, with corporate powers in accordance with the laws of
the State of Delaware and its existing charter and by-laws; and (iv) Reorganized
PHG shall continue to exist as a separate
27
corporate entity, with corporate powers in accordance with the laws of the State
of Illinois and its existing charter and by-laws.
12. The Plan does not impair post-Effective Date (i) transfer and
assumption of certain assets and liabilities of CIHC to and by CDOC, Inc., a
non-debtor subsidiary of Conseco, Inc. and (ii) conversion of CIHC into a life
insurance company and (iii) the merger of Conseco Life Insurance Company of
Texas into CIHC, with CIHC being the surviving company, all subject to
applicable state insurance regulatory approval.
13. Except as otherwise contemplated by the Plan and the Plan Supplement
(including the New Credit Facility), on and after the Effective Date, all
property of each Debtor's Estate, and any property retained or acquired by such
Debtor, Reorganizing Debtor or Reorganized Debtor under the Plan, shall vest in
the respective Debtor, Reorganizing Debtor or Reorganized Debtor free and clear
of all Claims, liens, charges, or other encumbrances, and such transfer does not
constitute an avoidable transfer under the Bankruptcy Code or under applicable
non-Bankruptcy law, and does not and shall not subject the Debtors, Reorganizing
Debtors, or Reorganized Debtors to any liability by reason of such transfer
under the Bankruptcy Code or under applicable non-Bankruptcy law. As of the
Effective Date, all property of the Reorganized Debtors shall be free and clear
of all claims, encumbrances, Interests, charges, and liens except as
specifically provided in the Plan or this Order.
14. On the Effective Date, all assets of Old CNC, other than the Residual
Assets, shall be transferred by Old CNC to New CNC in exchange for the New CNC
Common Stock, New CNC Preferred Stock, New CNC Warrants and the assumption of
the New Tranche A Bank Debt and the New Tranche B Bank Debt.
28
Cancellation of Old Notes, Old Preferred Stock, Old Common Stock and Stock
Options
15. On the Effective Date, except to the extent otherwise expressly
provided in the Plan, all notes, instruments, certificates, and other documents
evidencing the (a) Senior Credit Facility and the Guarantees of D&O Credit
Facilities; (b) Exchange Notes; (c) Original Notes; (d) Subordinated Debentures
and the related guarantees and the Trust Preferred Securities; (e) 93/94 Notes;
(f) Old CNC Common Stock; (g) Old CNC Preferred Stock; (h) any and all other
Claims and Equity Interests and (i) any rights, options, warrants, calls,
commitments, contractual, or otherwise, obligating the Debtors to issue,
transfer or sell any shares of Old CNC Common Stock or Old CNC Preferred Stock,
shall be canceled and the obligations of the Reorganizing Debtors or Reorganized
Debtors thereunder or in any way related thereto shall be discharged, provided,
however, the Guarantees of D&O Credit Facilities are not cancelled or discharged
solely to empower New CNC to collect amounts the Ineligible Persons (as defined
in Plan Article V.K.5) owe under the D&O Credit Facilities and related
documents.
Issuance of New Securities and Execution of Related Documents
16. On or as soon as practicable after the Effective Date, the Reorganized
Debtors are hereby authorized, empowered, and directed, and shall distribute or
issue all securities, notes, instruments, certificates, and other documents
required to be issued pursuant to the Plan, including, without limitation; (a)
the New Credit Facility; (b) New CNC Common Stock; (c) New CNC Preferred Stock,
and (d) New CNC Warrants, each of which shall be distributed as provided herein
or in the Plan. The Reorganized Debtors and Old CNC shall execute and deliver
such other agreements, documents and instruments as are required to be executed
pursuant to the terms of the Plan. On the Effective Date, the New Credit
Facility and
29
all documents, instruments, certificates and other agreements ancillary thereto
to which any of the Lenders are a party, including the D&O Transfer Agreement,
will bind all Lenders, regardless of whether all Lenders voted to accept the
Plan or execute such documents.
17. Each distribution and issuance referred to in the prior paragraph shall
be governed by the terms and conditions set forth in the Plan applicable to such
distribution or issuance and by the terms and conditions of the instruments
evidencing or relating to such distribution or issuance, which terms and
conditions shall bind each Person receiving such distribution or issuance.
18. On the Effective Date, the Lenders under the D&O Credit Facilities
shall be deemed to have transferred to New CNC, and New CNC shall be deemed to
have succeeded to, all of the rights, title and interest of such Lenders in the
Transferred Property (as defined in the D&O Transfer Agreement), all as more
fully set forth in the D&O Transfer Agreement. The D&O Transfer Agreement is
binding for all purposes.
19. On the Effective Date, Reorganized CIHC shall be authorized to require
its direct and indirect subsidiaries to execute and deliver all such agreements,
documents and instruments as are required to transfer the Residual Subsidiaries,
as defined and described in the Residual Subsidiary Schedule in the Plan
Supplement, to Old CNC. Thereafter, Old CNC shall issue the Residual Share to
the Residual Trust.
20. The Debtors and New CNC (and each of their respective affiliates,
agents, directors, officers, employees, advisors and attorneys), the Unofficial
Noteholders' Committee, the Unofficial Lenders' Committee, and the Official
Committees, and each of the former and current members and ex officio members of
such committees (and each of their respective affiliates, agents, directors,
officers, employees, advisors, and attorneys) have, and are deemed to
30
have, participated in good faith and in compliance with the applicable
provisions of the Bankruptcy Code with regard to the solicitation of acceptances
or rejections of this Plan and the distributions under this Plan, and therefore
are not, and on account of such distributions will not be, liable at any time
for the violation of any applicable law, rule, or regulation governing the
solicitation of acceptances or rejections of this Plan or such distributions
made pursuant to this Plan.
Corporate Governance, Directors and Officers and Corporate Action
Amended Certificate of Incorporation and By-laws
21. On or before the Effective Date, New CNC will file the New CNC Charter
with the Secretary of State of Delaware in accordance with Section 103 of the
Delaware General Corporation Law. The New CNC Charter and the New CNC By-laws
will, among other things, authorize approximately 8,000,000,000 shares of New
CNC Common Stock and approximately 265,000,000 shares of New CNC Preferred
Stock. In addition, the New CNC Charter shall prohibit the issuance of
non-voting equity securities to the extent required by the provisions of section
1123(a)(6) of the Bankruptcy Code. After the Effective Date, New CNC may amend
and restate the New CNC Charter and other constituent documents as permitted by
Delaware law.
Directors and Officers of the Reorganized Debtors
22. The officers of the Debtors immediately prior to the Effective Date
will be the officers of the Reorganized Debtors unless otherwise provided by
valid corporate action of any such Reorganized Debtor in accordance with
applicable law and the applicable constituent documents for such Reorganized
Debtor. The Senior Management Employment Agreements set forth at TAB J to the
Plan Supplement will be effective as of the Effective Date.
23. Subject to applicable state insurance regulatory approval, the Boards
of Directors of Old CNC, New CNC, Reorganized CIHC, Reorganized CTIHC and
Reorganized
31
PHG, on the Effective Date shall consist of the individuals specified in the
Plan Supplement and the terms of the current Boards of Directors for each such
entity shall expire and the members thereof shall be deemed to have resigned and
shall cease to serve in such capacity.
24. Pursuant to section 1129(a)(5)(A)(ii) of the Bankruptcy Code, subject
to applicable state insurance regulatory approval, the Court approves as
consistent with the interests of Creditors and Interest holders and with public
policy the selection, election, and/or continuance, as the case may be, of these
individuals; provided, however, that nothing set forth herein shall prevent any
of the foregoing individuals from resigning or from being removed or replaced as
an officer or director without further order of the Court. On the Effective
Dates, the operation of New CNC shall become the general responsibility of the
Board of Directors of New CNC, subject to, and in accordance with, the New CNC
Charter and New CNC By-laws.
Management Incentive Plan
25. On the Confirmation Date, New CNC will adopt the Management Incentive
Plan substantially in the form set forth in the Plan Supplement. On or after the
Effective Date, the compensation committee of the board of directors of New CNC
will make initial awards under the Management Incentive Plan, other than those
approved under the Senior Management Employment Agreements. Approval by the sole
shareholder of New CNC on or before the Confirmation Date and receipt of
sufficient votes to accept the Plan as reflected on the Voting Report shall be
deemed to constitute shareholder approval of the Management Incentive Plan for
all purposes.
Senior Management Employment Agreements
26. On the Effective Date, New CNC shall be bound by the Senior Management
Employment Agreements substantially in the form set forth in the Plan
32
Supplement, and the officers of New CNC shall be authorized and directed to
execute such Senior Management Employment Agreements.
Resolution of the Directors & Officers Stock Purchase Program for Certain
Participants
27. Amounts owed by the Participants under the D&O Credit Facilities shall
be treated in accordance with Article V.K.5 of the Plan. "Executive officers"
(as defined in the Sarbanes-Oxley Act) shall not be Participants as defined in
Article V.K.5 of the Plan.
Sources of Cash for Plan Distribution
28. All Cash necessary for the Reorganizing Debtors and Reorganized Debtors
to make payments pursuant hereto shall be obtained from existing Cash balances
of the Debtors.
Dismissal of TOPrS' Appeals
29. Within one business day of today's date, counsel for the TOPrS
Committee shall execute Exhibits F and G and deliver said executed documents to
counsel for the Debtors. After the Effective Date (as confirmed by the filing
with the Court of a Notice of Effective Date), counsel for the Debtors is
authorized to file said executed documents with the appropriate court.
Distributions
30. The distribution provisions of Article VII of the Plan shall be, and
hereby are, approved. The Reorganized Debtors shall make all distributions
required under the Plan. The Distribution Record Date shall be the close of
business on the date hereof for the following Classes: Class 5A-1, Class 5A-2,
Class 4B-1 and Class 4B-2 (Lender Claims), Class 6A and Class 5B (Exchange Note
Claims), Class 7A (Original Note Claims) and Class 10A (Trust
33
Related Claims). The Distribution Record Date shall remain May 30, 2003 for all
other claims, as previously established by Order entered May 20, 2003 (Docket
#3290).
31. If a claimant appeals disallowance of a claim pursuant to a lower
court's order, but fails to obtain a stay of the lower court's order, then the
Reorganized Debtors shall not consider such claim when calculating the New CNC
Common Stock Holdback.
32. As of the close of business on today's date, the transfer registers for
the Lender Claims, the Exchange Notes, the Original Notes and the Trust
Preferred Securities shall be closed and there shall be no further changes in
the record Holders of any Lender Claim, Exchange Note, Original Note or Trust
Preferred Securities. Moreover, the Reorganized Debtors shall have no obligation
to recognize the transfer of any Lender Claim, Exchange Note, Original Note or
Trust Preferred Securities after today's date, and the Reorganized Debtors shall
be entitled for all purposes to recognize and deal only with those Holders of
record as of the close of business on today's date.
33. The Reorganized Debtors shall distribute the TOPrS Settlement to
holders of Trust Preferred Securities who have not timely opted out of the TOPrS
Settlement. Such distributions will be made to the Depository Trust Company, who
shall (a) transfer such distributions to its nominee Cede & Co. and (b) take
reasonable steps to ensure that such distributions are transferred to the
participant accounts of the record holders of the Trust Preferred Securities who
have not timely opted out of the TOPrS Settlement. Because the TOPrS Settlement
D&O Litigation Recovery is not transferable, Depository Trust Company shall
maintain the record holders of Trust Preferred Securities as of today's close of
business to enable future distributions of the TOPrS Settlement D&O Litigation
Recovery. The TOPrS
34
Settlement Equity Recovery and the New CNC Warrants constitute New Securities
and are transferable as otherwise specified in this Order.
34. Except as otherwise provided by the Plan or this Confirmation Order,
distributions to be made on the Effective Date on account of Claims and Equity
Interests that are Allowed as of the Effective Date and are entitled to receive
distributions under the Plan shall be made on the Effective Date or as soon as
practicable thereafter.
35. For purposes of determining the accrual of interest, dividends or
rights in respect of any other payment from and after the Effective Date, the
New Tranche A Bank Debt, the New Tranche B Bank Debt, New CNC Preferred Stock,
New CNC Warrants and New CNC Common Stock shall be deemed issued as of the
Effective Date regardless of the date on which they are actually dated,
authenticated or distributed; provided that, the respective Reorganized Debtor
shall withhold any actual payment until such distribution is made.
36. The Debtors or Reorganized Debtors, as the case may be, are authorized
and empowered to retain, without further order of the Court, and shall have the
authority, in their sole discretion, to enter into agreement with one or more
Distribution Agents, to facilitate the solicitation of votes on the Reorganizing
Subplans and the distributions required under the Reorganizing Subplans, as set
forth in Section VII.B of the Plan.
Preservation of All Causes of Action Not Expressly Settled or Released
37. Unless a Claim or Cause of Action against a Creditor or other Person is
expressly waived, relinquished, released, compromised or settled in the Plan or
any Final Order, the Debtors expressly reserve such Claim or Cause of Action for
later adjudication by the Debtors, and, therefore, no preclusion doctrine,
including, without limitation, the doctrines of res judicata, collateral
estoppel, issue preclusion, Claim preclusion, waiver, estoppel (judicial,
equitable or otherwise) or laches shall apply to such Claims or Causes of Action
upon or after the
35
Confirmation or Consummation of the Plan based on the Disclosure Statement, the
Plan or the Confirmation Order, except where such Claims or Causes of Action
have been waived, relinquished, released, compromised or settled in the Plan or
a Final Order. In addition, the Debtors and the successor entities under the
Plan expressly reserve the right to pursue or adopt any Claims not so waived,
relinquished, released, compromised or settled that are alleged in any lawsuit
in which the Debtors are a defendant or an interested party, against any person
or entity, including, without limitation, the plaintiffs or co-defendants in
such lawsuits.
Prosecution of Objections to Claims
38. After the Effective Date, the Reorganized Debtors (for Claims against
the Reorganized Debtors) shall have the exclusive authority to file objections,
settle, compromise, withdraw or litigate to judgment objections to Claims or
Equity Interests.
39. The Conseco Creditors' Committee shall remain in existence after the
Effective Date solely for the purpose of concluding their litigation with the
Securities Plaintiffs (Anchorage Police & Fire Retirement System and the State
of Louisiana Firefighters Retirement System, as lead plaintiffs and class
representatives for the class of plaintiffs in In re Conseco, Inc. Securities
Litigation, IP-0585-C Y/S (appointed on May 28, 2002)) including, but not
limited to, the appeal of this Court's Order dated August 20, 2003, filed on
August 29, 2003, and any post-appeal related proceedings.
Corporate Action
40. On the Effective Date (or on the Confirmation Date with respect to any
actions taken prior to the Effective Date), the adoption and filing of the New
CNC Charter and New CNC By-laws, the appointment of directors and officers for
the Reorganized Debtors, the adoption of the Management Incentive Plan, the
effectiveness of the Senior Management Employment Agreements (including the
grant of equity awards thereunder) and all actions
36
contemplated hereby shall be authorized and approved in all respects (subject to
the provisions hereof) pursuant to the Plan, subject to applicable state
insurance regulatory approval. All matters provided for herein involving the
corporate structure of the Debtors, Reorganizing Debtors or Reorganized Debtors,
and any corporate action required by the Debtors, Reorganizing Debtors or
Reorganized Debtors in connection with the Plan, shall be deemed to have
occurred and shall be in effect, without any requirement of further action by
the security holders or directors of the Debtors, Reorganizing Debtors or
Reorganized Debtors, subject to applicable state insurance regulatory approval.
On or before the Effective Date, the appropriate officers of the Debtors,
Reorganizing Debtors and Reorganized Debtors are authorized and directed to (a)
issue, execute, deliver and implement the agreements, documents, securities and
instruments contemplated by the Plan, including, but not limited to, the New
Credit Facility and the New Securities, and (b) issue, execute, deliver, file,
and record any documents, court papers, or pleadings, and take any and all
actions as may be necessary or desirable to implement, effect, or consummate the
transactions contemplated by the Plan, whether or not specifically referred to
in the Plan or related documents and without further application to or order of
the Court, in the name of and on behalf of the Debtors, Reorganizing Debtors
and/or Reorganized Debtors, without the need for any shareholder's or director's
approval, or any other authorizations or consents, except for express consents
under the Plan, subject to applicable state insurance regulatory approval.
Release and Exculpation Provisions
41. The compromises and settlements contemplated by Art. X.A of the Plan
are hereby approved.
42. The releases in Art. X.A of the Plan by all Persons and Entities of
such contractual, legal and equitable subordination rights or Causes of Action,
claims or
37
counterclaims against such Holder satisfied, compromised and settled in this
manner are approved.
43. The Release Provisions of Art. X.B and X.C of the Plan and the
Exculpation Provision of Art. X.D of the Plan are hereby approved in their
entirety. In particular, and without limitation, Article X.D. of the Plan
applies to all parties involved in negotiating the TOPrS Settlement, including
the option for holders of the Trust Preferred Securities to opt-out of the TOPrS
Settlement if they choose to not accept it.
44. All Consenting Parties have consented to the releases set forth in Art.
X.C of the Plan (Release by Holders of Claims) and therefore are bound by such
releases.
Discharge and Injunction Provisions
45. Pursuant to Art. X.F of the Plan, and except as otherwise provided
herein or in the Plan or in any other Order entered in these cases:
(i) the rights afforded in the Plan and the treatment of all Claims
and Equity Interests in the Plan, shall be in exchange for and in
complete satisfaction, discharge and release of Claims and Equity
Interests of any nature whatsoever, including any interest
accrued on Claims after the Petition Date to and including the
Confirmation Date, against the Reorganizing or Reorganized
Debtors or any of their assets or properties;
(ii) on the Effective Date, all such Claims against, and Equity
Interests in, the Reorganizing or Reorganized Debtors shall be
satisfied, discharged and released in full, and
(iii) all Persons shall be permanently enjoined from
(a) Asserting against the Reorganizing or Reorganized Debtors,
their successors or their assets or properties such Claims
or Equity Interests based upon any act or omission,
transaction or other activity of any kind or nature that
occurred on or prior to the Confirmation Date.
(b) Creating, perfecting, or enforcing any encumbrance of any
kind premised on such Claim or Equity Interest
38
against any Reorganizing Debtor or the property or estate of
any Reorganizing Debtor or Reorganized Debtor;
(c) Asserting any right of setoff, subrogation or recoupment of
any kind against any obligation due from any Reorganizing
Debtor or Reorganized Debtor or against the property or
estate of any Reorganizing Debtor or Reorganized Debtor with
respect to any such Claim or Equity Interest.
Consummation
46. The substantial consummation of the Plan, within the meaning of section
1127 of the Bankruptcy Code, shall be, and hereby is, deemed to mean the
occurrence of the Effective Date.
47. The consummation of the Plan shall not constitute a change of ownership
or change in control, as such terms are used in any employment, severance or
termination agreement in effect on the Effective Date and to which either of the
Debtors is a party or under any applicable law of any applicable Governmental
Unit.
Failure to Consummate the Plan
48. In accordance with Article IX.D of the Plan, if consummation of the
Plan does not occur, then (a) the Plan shall be null and void in all respects;
(b) any settlement or compromise embodied in the Plan (including the fixing or
limiting to an amount any Claim or Interest or Class of Claims or Interests),
assumption or rejection of executory contracts or leases effected by the Plan,
and any document or agreement executed pursuant to the Plan shall be deemed null
and void, and (c) nothing contained in the Plan, and no acts taken in
preparation for consummation of the Plan, shall (i) constitute or be deemed to
constitute a waiver or release of any Claims by or against, or any Interests in,
the Debtors or any other Person; (ii) prejudice in any manner the rights of the
Debtors or any Person in any further proceedings involving the Debtors; or (iii)
constitute an admission of any sort by the Debtors or any other Person.
39
Retention of Jurisdiction
49. Pursuant to sections 105(a) and 1142 of the Bankruptcy Code, and
sections 157 and 1334 of title 28 of the United States Code, notwithstanding the
entry of the Confirmation Order and the occurrence of the Effective Date, the
Bankruptcy Court shall retain such exclusive jurisdiction over all matters
arising out of or related to the Chapter 11 Cases and the Plan after the
Effective Date, as legally permissible, including jurisdiction to:
(ii) allow, disallow, determine, liquidate, classify, estimate or
establish the priority or secured or unsecured status of any
Claim or Equity Interest, including the resolution of any
request for payment of any Administrative Claim and the
resolution of any and all objections to the allowance or
priority of Claims or Equity Interests;
(iii) grant or deny any applications for allowance of compensation or
reimbursement of expenses authorized pursuant to the Bankruptcy
Code or the Plan, for periods ending on or before the
Confirmation Date; provided, however, that final fee
applications must be filed on or before 30 days after the date
of this Order, and that such fee applications need only cover
the period from the Petition Date to the Confirmation Date;
(iv) resolve any matters related to the assumption, assumption and
assignment or rejection of any executory contract and unexpired
lease to which a Debtor is party or with respect to which a
Debtor may be liable and to hear, determine and, if necessary,
liquidate, any Claims arising therefrom, including those
matters related to the amendment after the Effective Date
pursuant to Article V of the Plan to add any executory
contracts or unexpired leases to the list of executory
contracts and unexpired leases to be rejected;
(v) ensure that distributions to Holders of Allowed Claims and
Allowed Equity Interests are accomplished pursuant to the
provisions hereof;
(vi) decide or resolve any motions, adversary proceedings (including
turnover actions and efforts to collect loans due the
Reorganizing Debtors), contested or litigated matters and any
other matters and grant or deny any applications involving a
Debtor that may be pending on the Effective Date;
(vii) enter such orders as may be necessary or appropriate to
implement or consummate the provisions hereof and all
contracts, instruments, releases, indentures and other
agreements or documents created in connection with the Plan or
the Disclosure Statement;
40
(viii) resolve any cases, controversies, suits or disputes that may
arise in connection with the Consummation, interpretation or
enforcement of the Plan or any Person's obligations incurred in
connection with the Plan;
(ix) issue injunctions, enter and implement other orders or take
such other actions as may be necessary or appropriate to
restrain interference by any Person with Consummation or
enforcement of the Plan, except as otherwise provided herein;
(x) resolve any cases, controversies, suits or disputes with
respect to the releases, injunction and other provisions
contained in Article X of the Plan and enter such orders as may
be necessary or appropriate to implement such releases,
injunction and other provisions;
(xi) enter and implement such orders as are necessary or appropriate
if the Confirmation Order is for any reason modified, stayed,
reversed, revoked or vacated;
(xii) determine any other matters that may arise in connection with
or relate to this Plan, the Disclosure Statement, the
Confirmation Order or any contract, instrument, release,
indenture or other agreement or document created in connection
with the Plan or the Disclosure Statement; and
(xiii) enter an order and/or final decree concluding the Chapter 11
Cases.
Notwithstanding any provision of this Order that may read to the contrary,
nothing in this Order is intended to preempt or usurp the jurisdiction of state
insurance regulators from the exercise of their applicable authority over the
Reorganized Debtors.
Payment of Statutory Fees
50. All fees payable pursuant to 28 U.S.C. ss. 1930(a), as determined by
the Bankruptcy Court at the hearing pursuant to section 1128 of the Bankruptcy
Code, shall be paid for each quarter (including any fraction thereof) for each
Debtor until such Debtor's Chapter 11 Case is converted, dismissed or closed,
whichever occurs first.
Exemption from Stamp Taxes
51. Pursuant to section 1146(c) of the Bankruptcy Code: (a) the issuance,
distribution, transfer or exchange of any debt, equity security or other
interest of the Debtors or Reorganized Debtors; (b) the creation, modification,
consolidation or recording of any mortgage,
41
deed of trust or other security interest, the securing of additional
indebtedness by such or other means; (c) the making, assignment or recording of
any lease or sublease, or (d) the making, delivery or recording of any deed or
other instrument of transfer under, in furtherance of, or in connection with,
the Plan, including any deeds, bills of sale, assignments or other instruments
of transfer executed in connection with any transactions arising out of,
contemplated by or in any way related to the Plan or this Confirmation Order,
shall not be subject to any document recording tax, stamp tax, conveyance fee,
intangibles or similar tax, mortgage tax, transfer tax, mortgage recording tax
or other similar tax or governmental assessment, and the appropriate State or
local government officials or agents shall be, and hereby are, directed to
forego the collection of any such tax or governmental assessment and to accept
for filing and recordation any of the foregoing instruments or other documents
without the payment of any such tax or governmental assessment. The Court
specifically retains jurisdiction to enforce the foregoing direction, by
contempt or otherwise. Exhibit C shall have the effect of an order of the Court,
shall constitute sufficient notice of the entry of this Order to such filing and
recording officers, and shall be a recordable instrument notwithstanding any
contrary provision of applicable non-bankruptcy law.
References to Plan Provisions
52. The failure specifically to include or to refer to any particular
provision of the Plan in this Order shall not diminish or impair the
effectiveness of such provision, it being the intent of the Court that the Plan
be confirmed in its entirety.
Post-Confirmation Notices and Bar Dates
Notice of Entry of the Confirmation Order
53. In accordance with Fed. R. Bankr. P. 2002 and 3020(c), within five
business days of the date of entry of this Confirmation Order, the Reorganized
Debtors (or their
42
agents) shall give notice of the entry of this Order, in substantially the form
of Exhibit C annexed hereto (the "Notice of Confirmation") by United States
mail, first class postage prepaid, by hand, or by overnight courier service to
all parties having been served with the Confirmation Hearing Notice; provided,
however, that no notice or service of any kind shall be required to be mailed or
made upon any person to whom the Debtors mailed a Confirmation Hearing Notice,
but received such notice returned marked "undeliverable as addressed," "moved,
left no forwarding address" or "forwarding order expired," or similar reason,
unless the Debtors have been informed in writing by such person, or are
otherwise aware, of that person's new address. To supplement the notice
described in the preceding sentence, within fifteen days of the date of this
Order the Debtors shall publish Notice of Confirmation once each in The Wall
Street Journal, USA Today, the Chicago Tribune and the Indianapolis Star.
54. Mailing and publication of the Notice of Confirmation in the time and
manner set forth in the preceding paragraph are good and sufficient under the
particular circumstances and in accordance with the requirements of Fed. R.
Bankr. P. 2002 and 3020(c), and no further notice is necessary.
Bar Date for Requests for Administrative Claims
55. All requests for administrative expenses pursuant to section 503 of the
Bankruptcy Code must be filed within thirty (30) days of the date of this Order
with the Bankruptcy Management Corporation.
Final Fee Applications
56. Any professional seeking an allowance, pursuant to sections 327, 328,
330, 331, 503(b), 507(a)(1) and/or 1103 of the Bankruptcy Code, of (i) an
Administrative Claim or (ii) final compensation or reimbursement of expenses
incurred on or before the Confirmation Date for professional services rendered
to the Reorganizing Debtors or in relation to these cases
43
("Professional Fees and Expenses") shall file and serve an application for
allowance of such Administrative Claim or Professional Fees and Expenses (each,
an "Application"), on each of the following entities not later than thirty (30)
days after the Confirmation Date:
<TABLE>
------------------------------------------------------------ ---------------------------------------------------------
<S> <C>
Counsel to the Debtors The Office of the United States Trustee
Kirkland & Ellis LLP 227 West Monroe St.
200 East Randolph Drive Suite 3350
Chicago, Illinois 60601 Chicago, IL 60606
Attn: Anne Marrs Huber, Esq. Attn: Richard Friedman, Esq. and
and Roger Higgins, Esq. Gretchen Silver, Esq.
------------------------------------------------------------ ---------------------------------------------------------
------------------------------------------------------------ ---------------------------------------------------------
Counsel to the Unsecured Creditors' Committee Counsel for the Official Committee
Fried, Frank, Harris, Shriver & Jacobson of Trust Preferred Debt Holders
One New York Plaza Jenner & Block, LLC
New York, NY 10004 One IBM Plaza
Attn: Brad Eric Scheler, Esq. And Chicago, Illinois 60611
Vivek Melwani, Esq. Attn: Daniel R. Murray, Esq. And
Catherine Steege, Esq.
and and
Mayer Brown Rowe & Maw Saul Ewing LLP
190 South La Salle Street 100 South Charles Street, 15th Floor
Chicago, Illinois 60603-3441 Baltimore, Maryland 21201
Attn: Thomas S. Kiriakos, Esq. Attn: Irving E. Walker, Esq.
------------------------------------------------------------ ---------------------------------------------------------
</TABLE>
57. Each Application shall comply with the applicable provisions of the
Bankruptcy Code, the Bankruptcy Rules and the Local Bankruptcy Rules, and shall
set forth, among other things, in reasonable detail; (i) the name and address of
the applicant; (ii) the nature of the Professional Fees and Expenses for which
reimbursement is requested for all periods from the date the particular
applicant was retained through the Confirmation Date; (iii) the amount of the
Professional Fees and Expenses requested; (iv) the amounts of Professional Fees
and Expenses previously allowed by the Court, if any; and (v) the amount or
amounts of payments made to date, if any, by the Debtors to reduce such allowed
amount.
44
58. No applications need be filed for compensation and reimbursement by a
professional person for services rendered or expenses incurred on or after the
Confirmation Date, and such compensation and reimbursement may be paid by the
Reorganized Debtors in accordance with ordinary business practices and without
order of the Court.
Captions
59. On the Confirmation Date, the Reorganizing Debtors shall use the
caption with respect to the Reorganizing Debtors' cases, in the form of Exhibit
D annexed hereto. On the Confirmation Date, the Finance Company Debtors shall
use the caption with respect to the Finance Company Debtors' cases in the form
annexed hereto as Exhibit E.
Non-Material Changes
60. Without limiting the generality of the foregoing, and without the need
for a further order or authorization of this Court, the Debtors, with the prior
written consent of the Conseco Creditors Committee, shall be authorized and
empowered to make non-material modifications to the exhibits comprising the Plan
Supplement as in their reasonable business judgment may be necessary.
Authorization to Consummate
61. The Debtors are authorized to consummate the Plan at any time after the
entry of this Order subject to satisfaction or waiver of the conditions
precedent to Consummation set forth in Article IX.B of the Plan.
Final Order
62. This Order is a final order and the period in which an appeal must be
filed shall commence upon the entry hereof.
45
Miscellaneous
63. Paragraph 39 of this Order shall not limit the provisions of Plan
Article XII.C.
64. Notwithstanding Article XII.C of the Plan, the Committee appointed on
August 20, 2003 to represent a certain class asserting claims under Section 1114
"for the purpose of assisting class members in determining how and when cure
amounts should be . . . resolved-as well as the specific cure amounts of the
individual class members" (August 20, 2003 transcript at page 16) shall remain
in existence after the Effective Date for the purposes specified by the Court.
IT IS SO ORDERED.
Chicago, Illinois
Dated: September 9, 2003 /s/
------------------------------------
Honorable Carol A. Doyle
United States Bankruptcy Judge
46
Exhibit 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
CONSECO, INC.
ARTICLE ONE
The name of the Corporation is Conseco, Inc.
ARTICLE TWO
The address of the Corporation's registered office in the State of Delaware
is Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County,
Delaware 19801. The name of its registered agent at such address is The
Corporation Trust Company.
ARTICLE THREE
The nature of the business or purposes to be conducted or promoted is to
engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of the State of Delaware.
ARTICLE FOUR
Section 1. Authorized Shares. The total number of shares of capital stock
which the Corporation has authority to issue is 8,265,000,000 shares, consisting
of:
(a) 265,000,000 shares of Preferred Stock, par value $.01 per share
("Preferred Stock"); and
(b) 8,000,000,000 shares of Common Stock, par value $.01 per share ("Common
Stock").
The Preferred Stock and the Common Stock shall have the rights, preferences and
limitations set forth below.
Section 2. Preferred Stock. The Preferred Stock may be issued from time to
time and in one or more series. The Board of Directors of the Corporation is
authorized to determine or alter the powers, preferences and rights, and the
qualifications, limitations and restrictions granted to or imposed upon any
wholly unissued series of Preferred Stock, and within the limitations or
restrictions stated in any resolution or resolutions of the Board of Directors
originally fixing the number of shares constituting any series of Preferred
Stock, to increase or decrease (but not below the number of shares of any such
series of Preferred Stock then outstanding) the number of shares of any such
series of Preferred Stock, and to fix the number of shares of any series of
Preferred Stock. In the event that the number of shares of any series of
Preferred Stock shall be so decreased, the shares constituting such decrease
shall resume the status which such shares had prior to the adoption of the
resolution originally fixing the number of shares of such series of Preferred
Stock subject to the requirements of applicable law.
Section 3. Common Stock.
(a) Dividends. Except as otherwise provided by the Delaware General
Corporation Law or this Amended and Restated Certificate of Incorporation (the
"Certificate"), the holders of Common Stock, subject to the rights of holders of
any series of Preferred Stock, shall share ratably in all dividends as may from
time to time be declared by the Board of Directors in respect of the Common
Stock out of funds legally available for the payment thereof and payable in
cash, stock or otherwise and other distributions, whether in respect of
liquidation or dissolution (voluntary or involuntary) or otherwise after payment
of liabilities and liquidation preference on any outstanding Preferred Stock.
(b) Preemptive Rights. No holder of Common Stock shall have any preemptive
rights with respect to the Common Stock or any other securities of the
Corporation, or to any obligations convertible (directly or indirectly) into
securities of the Corporation whether now or hereafter authorized.
(c) Voting Rights. Except as otherwise provided by the Delaware General
Corporation Law or this Certificate and subject to the rights of holders of any
series of Preferred Stock, all of the voting power of the stockholders of the
Corporation shall be vested in the holders of the Common Stock, and each holder
of Common Stock shall have one vote for each share held by such holder on all
matters voted upon by the stockholders of the Corporation.
Section 4. Limitations on Voting Rights.
Notwithstanding the voting rights granted to holders of Common Stock and
Preferred Stock (collectively, the "Stock") elsewhere in this Certificate or in
any certificate of designations with respect to Preferred Stock, the voting
rights of any Stock held by any holder as of the effective date of the
Reorganizing Debtors' Joint Plan of Reorganization pursuant to Chapter 11 of the
United States Bankruptcy Code, dated March 18, 2003, as amended from time to
time shall be automatically reduced, with respect to any particular stockholder
vote or action by written consent, to the extent, if any, required to avoid a
presumption of control arising from the beneficial ownership of voting
securities under the insurance statutes or regulations applicable to any direct
or indirect insurance company subsidiary of the Corporation, provided that no
such reduction shall (without such holder's written consent) reduce such voting
rights (i) by more than the minimum amount required to reduce such voting rights
to less than 10% of the aggregate voting rights of all Stock entitled to vote or
consent with respect to such vote or action, or (ii) to the extent that such
holder's acquisition of control or deemed acquisition of control of the direct
and indirect insurance company subsidiaries of the Corporation has been approved
2
under, or is exempt from the approval requirements of, all insurance statutes
and regulations applicable to the direct and indirect insurance company
subsidiaries of the Corporation.
ARTICLE FIVE
The Corporation is to have perpetual existence.
ARTICLE SIX
Except as otherwise provided in this Certificate (including any duly
authorized certificate of designation of any series of Preferred Stock),
Directors shall be elected by a plurality of the votes of the shares present in
person or represented by proxy at the meeting of the stockholders at which
Directors are elected and entitled to vote in the election of Directors or
pursuant to a valid written consent in lieu of a meeting. Elections of directors
need not be by written ballot unless the Bylaws of the Corporation shall so
provide.
ARTICLE SEVEN
Subject to any rights of the holders of any series of Preferred Stock
pursuant to a duly authorized certificate of designation to elect additional
Directors under specified circumstances, the number of directors which shall
constitute the Board of Directors shall initially be established at seven and,
thereafter, shall be fixed from time to time by resolution adopted by the
affirmative vote of a majority of the total number of Directors then in office.
ARTICLE EIGHT
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized to make, alter, amend or repeal
the Bylaws of the Corporation.
ARTICLE NINE
Section 1. Limitation of Liability.
(a) To the fullest extent permitted by the Delaware General Corporation Law
as it now exists or may hereafter be amended (but, in the case of any such
amendment, only to the extent that such amendment permits the Corporation to
provide broader indemnification rights than permitted prior thereto), and except
as otherwise provided in the Corporation's Bylaws, no Director of the
Corporation shall be liable to the Corporation or its stockholders for monetary
damages arising from a breach of fiduciary duty owed to the Corporation or its
stockholders.
(b) Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any right or
protection of a Director of the Corporation existing at the time of such repeal
or modification.
3
Section 2. Right to Indemnification. Each person who was or is made a party
or is threatened to be made a party to or is otherwise involved (including
involvement as a witness) in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (a "proceeding"), by reason of the
fact that he or she is or was a Director, officer or employee of the Corporation
or a wholly owned subsidiary of the Corporation or, while a Director, officer or
employee of the Corporation or a wholly owned subsidiary of the Corporation, is
or was serving at the request of the Corporation or a wholly owned subsidiary of
the Corporation as a Director, officer, employee, partner, member, manager,
trustee, fiduciary or agent of another corporation or of a partnership, joint
venture, limited liability company, trust or other entity or enterprise,
including service with respect to an employee benefit plan (an "indemnitee")
shall be indemnified and held harmless by the Corporation to the fullest extent
authorized by the Delaware General Corporation Law, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits the Corporation to provide broader indemnification
rights than permitted prior thereto), against all expense, liability and loss
(including attorneys' fees, judgments, fines, excise taxes or penalties and
amounts paid in settlement) reasonably incurred or suffered by such indemnitee
in connection therewith and such indemnification shall continue as to an
indemnitee who has ceased to be a Director, officer, employee, partner, member,
trustee, fiduciary or agent and shall inure to the benefit of the indemnitee's
heirs, executors and administrators; provided, however, that the Corporation
shall indemnify any such indemnitee in connection with a proceeding (or part
thereof) initiated by such indemnitee only if such proceeding (or part thereof)
was authorized by the Board of Directors of the Corporation. The right to
indemnification conferred in this Section 2 of this ARTICLE NINE shall be a
contract right and shall include the obligation of the Corporation to pay the
expenses incurred in defending any such proceeding in advance of its final
disposition (an "advance of expenses"); provided, however, that, if and to the
extent that the Delaware General Corporation Law requires, an advance of
expenses incurred by an indemnitee in his or her capacity as a Director or
officer shall be made only upon delivery to the Corporation of an undertaking,
by or on behalf of such indemnitee, to repay all amounts so advanced if it shall
ultimately be determined by final judicial decision from which there is no
further right to appeal that such indemnitee is not entitled to be indemnified
for such expenses under this Section 2 or otherwise.
ARTICLE TEN
Section 1. Classification of Directors. At each annual meeting of
stockholders, directors of the Corporation shall be elected to hold office until
the expiration of the term for which they are elected, and until their
successors have been duly elected and qualified; except that if any such
election shall be not so held, such election shall take place at a stockholders'
meeting called and held in accordance with the Delaware General Corporation Law.
The directors of the Corporation shall initially be divided into two classes as
nearly equal in size as is practicable, hereby designated Class I and Class II.
The term of office of the initial Class I directors shall expire at the next
succeeding annual meeting of stockholders and the term of office of the initial
Class II directors shall expire at the second succeeding annual meeting of
stockholders. Other than the term of office of the initial Class II directors,
the term of office of each Class of directors shall expire at the next
succeeding annual meeting of stockholders. For the purposes hereof, the initial
Class I and Class II directors shall be those directors elected by
4
the stockholders of the Corporation in connection with the adoption of this
Certificate. At each annual meeting of stockholders, directors to replace those
of a Class or Classes whose terms expire at such annual meeting shall be elected
to hold office until the next succeeding annual meeting and until their
respective successors shall have been duly elected and qualified. If the number
of directors is hereafter changed, any newly created directorships or decrease
in directorships shall be so apportioned among the classes as to make all
classes as nearly equal in number as practicable.
Section 2. Removal. Subject to the rights, if any, of the holders of any
series of Preferred Stock to remove directors (with or without cause) and fill
the vacancies thereby created (as specified in any duly authorized certificate
of designation of any series of Preferred Stock), (i) prior to the second annual
meeting of stockholders, no Director may be removed from office without cause
and without the affirmative vote of the holders of a majority of the voting
power of the then outstanding shares of capital stock entitled to vote generally
in the election of Directors voting together as a single class and (ii)
thereafter, a Director may be removed with or without cause with the affirmative
vote of the holders of a majority of the voting power of the then outstanding
shares of capital stock entitled to vote generally in the election of Directors
voting together as a single class; provided, however, that if the holders of any
class or series of capital stock are entitled by the provisions of any duly
authorized certificate of designation to elect one or more Directors, such
Director or Directors so elected may be removed with or without cause by the
vote of the holders of a majority of the outstanding shares of that class or
series entitled to vote.
Section 3. Vacancies. Subject to the rights of the holders of any series of
Preferred Stock to remove Directors and fill the vacancies thereby created (as
specified in any duly authorized certificate of designation of any series of
Preferred Stock), vacancies occurring on the Board of Directors for any reason
may be filled by vote of a majority of the remaining members of the Board of
Directors, although less than a quorum, at any meeting of the Board of Directors
or by the stockholders. A person so elected by the Board of Directors to fill a
vacancy shall hold office until the next succeeding annual meeting of
stockholders of the Corporation and until his or her successor shall have been
duly elected and qualified.
ARTICLE ELEVEN
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the statutes) outside of the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of the Corporation.
ARTICLE TWELVE
The stockholders of the Corporation may take any action by written consent
in lieu of a meeting. Subject to the rights of the holders of any series of
Preferred Stock as specified in any duly authorized certificate of designation,
special meetings of stockholders of the Corporation
5
may be called only by the Board of Directors pursuant to a resolution adopted by
the affirmative vote of the majority of the total number of directors then in
office, by the chairman of the Board of Directors or the chief executive officer
of the Corporation, or by the secretary of the Corporation upon request in
writing of the stockholder or stockholders holding of record at least 25% of the
voting power of the issued and outstanding shares of stock of the Corporation
entitled to vote at such meeting.
ARTICLE THIRTEEN
The Corporation expressly elects not to be governed by Section 203 of the
Delaware General Corporation Law.
ARTICLE FOURTEEN
The Corporation shall not issue any class of non-voting equity securities
unless and solely to the extent permitted by Section 1123(a)(6) of the United
States Bankruptcy Code (the "Bankruptcy Code") as in effect on the date of
filing this Certificate with the Secretary of State of the State of Delaware;
provided, however, that this ARTICLE FOURTEEN: (a) will have no further force
and effect beyond that required under Section 1123(a)(6) of the Bankruptcy Code;
(b) will have such force and effect, if any, only for so long as Section
1123(a)(6) of the Bankruptcy Code is in effect and applicable to the
Corporation; and (c) in all events may be amended or eliminated in accordance
with applicable law from time to time in effect.
* * * * * *
6
Exhibit 3.2
AMENDED AND RESTATED
BY-LAWS
OF
CONSECO, INC.
A Delaware Corporation
(Adopted as of September 10, 2003)
ARTICLE I
---------
OFFICES
-------
Section 1. Registered Office. The registered office of Conseco, Inc. (the
"Corporation") in the State of Delaware shall be located at 1209 Orange Street,
Wilmington, DE 19801. The name of the Corporation's registered agent at such
address shall be CT Corporation. The registered office and/or registered agent
of the Corporation may be changed from time to time by action of the Board of
Directors.
Section 2. Other Offices. The Corporation may also have offices at such
other places, both within and without the State of Delaware, as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
ARTICLE II
----------
MEETINGS OF STOCKHOLDERS
------------------------
Section 1. Annual Meeting. An annual meeting of the stockholders shall be
held each year within 180 days after the close of the immediately preceding
fiscal year of the Corporation or at such other time specified by the Board of
Directors for the purpose of electing Directors and conducting such other proper
business as may come before the annual meeting; provided, however, that the
first and the second annual meeting after the date of the adoption of these
By-laws shall not be held earlier than on the 11th month and the 23rd month
anniversary of such date, respectively. At the annual meeting, stockholders
shall elect Directors and transact such other business as properly may be
brought before the annual meeting pursuant to Section 11 of ARTICLE II hereof.
Section 2. Special Meetings. Special meetings of the stockholders may only
be called in the manner provided in the Corporation's certificate of
incorporation, as amended from time to time (the "Cerificate of Incorporation").
Section 3. Place of Meetings. The Board of Directors may designate any
place, either within or without the State of Delaware, as the place of meeting
for any annual meeting or for any special meeting. If no designation is made, or
if a special meeting be otherwise called, the
place of meeting shall be the principal executive office of the Corporation. If
for any reason any annual meeting shall not be held during any year, the
business thereof may be transacted at any special meeting of the stockholders.
Section 4. Notice. Whenever stockholders are required or permitted to take
action at a meeting, written or printed notice stating the place, date, time
and, in the case of special meetings, the purpose or purposes, of such meeting,
shall be given to each stockholder entitled to vote at such meeting not less
than 10 nor more than 60 days before the date of the meeting. All such notices
shall be delivered, either personally or by mail, by or at the direction of the
Board of Directors, the chairman of the board, the president or the secretary,
and if mailed, such notice shall be deemed to be delivered when deposited in the
United States mail, postage prepaid, addressed to the stockholder at his, her or
its address as the same appears on the records of the Corporation. Attendance of
a person at a meeting shall constitute a waiver of notice of such meeting,
except when the person attends for the express purpose of objecting at the
beginning of the meeting to the transaction of any business because the meeting
is not lawfully called or convened.
Section 5. Stockholders List. The officer having charge of the stock ledger
of the Corporation shall make, at least 10 days before every meeting of the
stockholders, a complete list of the stockholders entitled to vote at such
meeting arranged in alphabetical order, showing the address of each stockholder
and the number of shares registered in the name of each stockholder. Such list
shall be open to the examination of any stockholder, for any purpose germane to
the meeting for a period of at least 10 days prior to the meeting, (i) on a
reasonably accessible electronic network, provided that the information required
to gain access to such list shall be provided with the notice of the meeting or
(ii) during ordinary business hours, at the principal place of business of the
Corporation. The list shall also be produced and kept at the time and place of
the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
Section 6. Quorum. The holders of a majority of the outstanding shares of
capital stock entitled to vote, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders, except as otherwise
provided by the General Corporation Law of the State of Delaware or by the
Certificate of Incorporation. If a quorum is not present, the holders of a
majority of the shares present in person or represented by proxy at the meeting,
and entitled to vote at the meeting, may adjourn the meeting to another time
and/or place. When a specified item of business requires a vote by a class or
series (if the Corporation shall then have outstanding shares of more than one
class or series) voting as a class or series, the holders of a majority of the
shares of such class or series shall constitute a quorum (as to such class or
series) for the transaction of such item of business.
Section 7. Adjourned Meetings. When a meeting is adjourned to another time
and place, notice need not be given of the adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment is taken. At
the adjourned meeting the Corporation may transact any business which might have
been transacted at the original meeting. If the adjournment is for more than 30
days, or if after the adjournment a new record date is fixed
-2-
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting.
Section 8. Vote Required. When a quorum is present, the affirmative vote of
the majority of shares present in person or represented by proxy at the meeting
and entitled to vote on the subject matter shall be the act of the stockholders,
unless (i) by express provisions of an applicable law or of the Certificate of
Incorporation a different vote is required, in which case such express provision
shall govern and control the decision of such question, or (ii) the subject
matter is the election of Directors, in which case Section 2 of ARTICLE III
hereof shall govern and control the approval of such subject matter.
Section 9. Voting Rights. Except as otherwise provided by the General
Corporation Law of the State of Delaware, the Certificate of Incorporation or
these By-laws, every stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of capital stock held
by such stockholder.
Section 10. Proxies. Each stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him or her
by proxy, but no such proxy shall be voted or acted upon after three years from
its date, unless the proxy provides for a longer period. A duly executed proxy
shall be irrevocable if it states that it is irrevocable and if, and only as
long as, it is coupled with an interest sufficient in law to support an
irrevocable power. A proxy may be made irrevocable regardless of whether the
interest with which it is coupled is an interest in the stock itself or an
interest in the Corporation generally. Any proxy is suspended when the person
executing the proxy is present at a meeting of stockholders and elects to vote,
except that when such proxy is coupled with an interest and the fact of the
interest appears on the face of the proxy, the agent named in the proxy shall
have all voting and other rights referred to in the proxy, notwithstanding the
presence of the person executing the proxy. At each meeting of the stockholders,
and before any voting commences, all proxies filed at or before the meeting
shall be submitted to and examined by the secretary or a person designated by
the secretary, and no shares may be represented or voted under a proxy that has
been found to be invalid or irregular.
Section 11. Business Brought Before an Annual Meeting. At an annual meeting
of the stockholders, only such business shall be conducted as shall have been
properly brought before the meeting. To be properly brought before an annual
meeting, business must be (i) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors, (ii)
brought before the meeting by or at the direction of the Board of Directors or
(iii) otherwise properly brought before the meeting by a stockholder. For
business to be properly brought before an annual meeting by a stockholder, the
stockholder must have given timely notice thereof in writing to the secretary of
the Corporation. To be timely, a stockholder's notice must be delivered to or
mailed and received at the principal executive offices of the Corporation, not
less than 60 days nor more than 90 days prior to the meeting; provided, however,
that in the event that less than 70 days' notice or prior public announcement of
the date of the meeting is given or made to stockholders, notice by the
stockholder to be timely must be so received not later than the close of
business on the 10th day following the date on which such notice of the date of
the annual meeting was mailed or such public announcement was made. A
stockholder's
-3-
notice to the secretary shall set forth as to each matter the stockholder
proposes to bring before the annual meeting (i) a brief description of the
business desired to be brought before the annual meeting, (ii) the name and
address, as they appear on the Corporation's books, of the stockholder proposing
such business, (iii) the class and number of shares of the Corporation which are
beneficially owned by the stockholder and (iv) any material interest of the
stockholder in such business. Notwithstanding anything in these By-laws to the
contrary, no business shall be conducted at an annual meeting except in
accordance with the procedures set forth in this section. The presiding officer
of an annual meeting shall, if the facts warrant, determine and declare to the
meeting that business was not properly brought before the meeting and in
accordance with the provisions of this section; if he or she should so
determine, he or she shall so declare to the meeting and any such business not
properly brought before the meeting shall not be transacted. For purposes of
this section, "public announcement" shall mean disclosure in a press release
reported by Dow Jones News Service, Associated Press or a comparable national
news service. Nothing in this section shall be deemed to affect any rights of
stockholders to request inclusion of proposals in the Corporation's proxy
statement pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
ARTICLE III
-----------
Directors
---------
Section 1. General Powers. The business and affairs of the Corporation
shall be managed by or under the direction of the Board of Directors. In
addition to such powers as are herein and in the Certificate of Incorporation
expressly conferred upon it, the Board of Directors shall have and may exercise
all the powers of the Corporation, subject to the provisions of the laws of
Delaware, the Certificate of Incorporation and these By-laws.
Section 2. Number, Election and Term of Office. The number of directors
which constitute the entire Board of Directors of the Corporation shall be such
number as is specified in, and the Directors shall be elected and shall hold
office only in the manner provided in, the Certificate of Incorporation and any
duly authorized certificate of designation.
Section 3. Resignation. Any Director may resign at any time upon written
notice to the Corporation.
Section 4. Vacancies. Vacancies and newly created directorships resulting
from any increase in the total number of Directors may be filled only in the
manner provided in the Certificate of Incorporation.
Section 5. Nominations.
(a) Subject to any duly authorized certificate of designation, only
persons who are nominated in accordance with the procedures set forth in these
By-laws shall be eligible to serve as Directors. Nominations of persons for
election to the Board of Directors of the Corporation may be made at a meeting
of stockholders (i) by or at the direction of the Board of Directors or (ii) by
any stockholder of the Corporation who was a stockholder of record at the
-4-
time of giving of notice provided for in this By-law, who is entitled to vote
generally in the election of Directors at the meeting and who shall have
complied with the notice procedures set forth below in Section 5(b).
(b) In order for a stockholder to nominate a person for election to
the Board of Directors of the Corporation at a meeting of stockholders, such
stockholder shall have delivered timely notice of such stockholder's intent to
make such nomination in writing to the secretary of the Corporation. To be
timely, a stockholder's notice shall be delivered to or mailed and received at
the principal executive offices of the Corporation (i) in the case of an annual
meeting, not less than 60 nor more than 90 days prior to the first anniversary
of the preceding year's annual meeting; provided, however, that in the event
that the date of the annual meeting is changed by more than 30 days from such
anniversary date or in the event of the first annual meeting, notice by the
stockholder to be timely must be so received not later than the close of
business on the 10th day following the earlier of the day on which notice of the
date of the meeting was mailed or public disclosure of the meeting was made, and
(ii) in the case of a special meeting at which Directors are to be elected, not
later than the close of business on the 10th day following the earlier of the
day on which notice of the date of the meeting was mailed or public disclosure
of the meeting was made. Such stockholder's notice shall set forth (i) as to
each person whom the stockholder proposes to nominate for election as a Director
at such meeting all information relating to such person that is required to be
disclosed in solicitations of proxies for election of Directors, or is otherwise
required, in each case pursuant to Regulation 14A under the Exchange Act
(including such person's written consent to being named in the proxy statement
as a nominee and to serving as a Director if elected); (ii) as to the
stockholder giving the notice (A) the name and address, as they appear on the
Corporation's books, of such stockholder and (B) the class and number of shares
of the Corporation which are beneficially owned by such stockholder and also
which are owned of record by such stockholder; and (iii) as to the beneficial
owner, if any, on whose behalf the nomination is made, (A) the name and address
of such person and (B) the class and number of shares of the Corporation which
are beneficially owned by such person. At the request of the Board of Directors,
any person nominated by the Board of Directors for election as a Director shall
furnish to the secretary of the Corporation that information required to be set
forth in a stockholder's notice of nomination which pertains to the nominee.
(c) Subject to any duly authorized certificate of designation, no
person shall be eligible to serve as a Director of the Corporation unless
nominated in accordance with the procedures set forth in this Section 5 or
Section 4 above. The chairman of the meeting shall, if the facts warrant,
determine and declare to the meeting that a nomination was not made in
accordance with the procedures prescribed by this section, and if he or she
should so determine, he or she shall so declare to the meeting and the defective
nomination shall be disregarded. A stockholder seeking to nominate a person to
serve as a Director must also comply with all applicable requirements of the
Exchange Act, and the rules and regulations thereunder with respect to the
matters set forth in this section.
Section 6. Annual Meetings. The annual meeting of the Board of Directors
shall be held without other notice than this By-law immediately after, and at
the same place as, the annual meeting of stockholders.
-5-
Section 7. Other Meetings and Notice. Regular meetings, other than the
annual meeting, of the Board of Directors may be held without notice at such
time and at such place as shall from time to time be determined by resolution of
the Board of Directors. Special meetings of the Board of Directors may be called
by the chairman of the board, the president (if the president is a Director) or,
upon the written request of at least a majority of the Directors then in office,
the secretary of the Corporation on at least 24 hours notice to each Director,
either personally, by telephone, by mail or by telecopy (notice by mail shall be
deemed delivered 3 days after deposit in the U.S. mail).
Section 8. Chairman of the Board, Quorum, Required Vote and Adjournment.
The Board of Directors shall elect, by the affirmative vote of a majority of the
total number of Directors then in office, a chairman of the board, who shall
preside at all meetings of the stockholders and Board of Directors at which he
or she is present and shall have such powers and perform such duties as the
Board of Directors may from time to time prescribe. If the chairman of the board
is not present at a meeting of the stockholders or the Board of Directors, the
president (if the president is a Director and is not also the chairman of the
board) shall preside at such meeting, and, if the president is not present at
such meeting, a majority of the Directors present at such meeting shall elect
one of their members to so preside. A majority of the total number of Directors
then in office shall constitute a quorum for the transaction of business. Unless
by express provision of an applicable law, the Certificate of Incorporation or
these By-laws a different vote is required, the vote of a majority of Directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors. If a quorum shall not be present at any meeting of the Board of
Directors, the Directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.
Section 9. Committees. The Board of Directors may, by resolution passed by
a majority of the total number of Directors then in office, designate one or
more committees, each committee to consist of one or more of the Directors of
the Corporation, which to the extent provided in such resolution or these
By-laws shall have, and may exercise, the powers of the Board of Directors in
the management and affairs of the Corporation, except as otherwise limited by
law. The Board of Directors may designate one or more Directors as alternate
members of any committee, who may replace any absent or disqualified member at
any meeting of the committee. Such committee or committees shall have such name
or names as may be determined from time to time by resolution adopted by the
Board of Directors. Each committee shall keep regular minutes of its meetings
and report the same to the Board of Directors upon request.
Section 10. Committee Rules. Each committee of the Board of Directors may
fix its own rules of procedure and shall hold its meetings as provided by such
rules, except as may otherwise be provided by a resolution of the Board of
Directors designating such committee. Unless otherwise provided in such a
resolution, the presence of at least a majority of the members of the committee
shall be necessary to constitute a quorum. Unless otherwise provided in such a
resolution, in the event that a member and that member's alternate, if
alternates are designated by the Board of Directors, of such committee is or are
absent or disqualified, the member or members thereof present at any meeting and
not disqualified from voting, whether or
-6-
not such member or members constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in place of any such
absent or disqualified member.
Section 11. Communications Equipment. Members of the Board of Directors or
any committee thereof may participate in and act at any meeting of such board or
committee through the use of a conference telephone or other communications
equipment by means of which all persons participating in the meeting can hear
and speak with each other, and participation in the meeting pursuant to this
section shall constitute presence in person at the meeting.
Section 12. Waiver of Notice and Presumption of Assent. Any member of the
Board of Directors or any committee thereof who is present at a meeting shall be
conclusively presumed to have waived notice of such meeting except when such
member attends for the express purpose of objecting at the beginning of the
meeting to the transaction of any business because the meeting is not lawfully
called or convened. Such member shall be conclusively presumed to have assented
to any action taken unless his or her dissent shall be entered in the minutes of
the meeting or unless his or her written dissent to such action shall be filed
with the person acting as the secretary of the meeting before the adjournment
thereof or shall be forwarded by registered mail to the secretary of the
Corporation immediately after the adjournment of the meeting. Such right to
dissent shall not apply to any member who voted in favor of such action.
Section 13. Action by Written Consent. Unless otherwise restricted by the
Certificate of Incorporation, any action required or permitted to be taken at
any meeting of the Board of Directors, or of any committee thereof, may be taken
without a meeting if all members of such board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the board or committee.
ARTICLE IV
----------
OFFICERS
--------
Section 1. Number. The officers of the Corporation shall be elected by the
Board of Directors and shall consist of a chairman of the board, a chief
executive officer, a president, one or more vice-presidents, a secretary, a
chief financial officer and such other officers and assistant officers as may be
deemed necessary or desirable by the Board of Directors. Any number of offices
may be held by the same person, except that neither the chief executive officer
nor the president shall also hold the office of secretary. In its discretion,
the Board of Directors may choose not to fill any office for any period as it
may deem advisable, except that the offices of president and secretary shall be
filled as expeditiously as possible.
Section 2. Election and Term of Office. The officers of the Corporation
shall be elected annually by the Board of Directors at its first meeting held
after each annual meeting of stockholders or as soon thereafter as convenient.
Vacancies may be filled or new offices created and filled at any meeting of the
Board of Directors. Each officer shall hold office until a successor is duly
elected and qualified or until his or her earlier death, resignation or removal
as hereinafter provided.
-7-
Section 3. Removal. Any officer or agent elected by the Board of Directors
may be removed by the Board of Directors at its discretion, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed.
Section 4. Vacancies. Any vacancy occurring in any office because of death,
resignation, removal, disqualification or otherwise may be filled by the Board
of Directors.
Section 5. Compensation. Compensation of all executive officers shall be
approved by the Board of Directors, and no officer shall be prevented from
receiving such compensation by virtue of his or her also being a Director of the
Corporation; provided however, that compensation of all executive officers may
be determined by a committee established for that purpose if so authorized by
the unanimous vote of the Board of Directors.
Section 6. Chairman of the Board. The chairman of the board shall preside
at all meetings of the stockholders and of the Board of Directors and shall have
such other powers and perform such other duties as may be prescribed to him or
her by the Board of Directors or provided in these By-laws.
Section 7. Chief Executive Officer. The chief executive officer shall have
the powers and perform the duties incident to that position. Subject to the
powers of the Board of Directors and the chairman of the board, the chief
executive officer shall be in the general and active charge of the entire
business and affairs of the Corporation, and shall be its chief policy making
officer. The chief executive officer shall have such other powers and perform
such other duties as may be prescribed by the Board of Directors or provided in
these By-laws. The chief executive officer is authorized to execute bonds,
mortgages and other contracts requiring a seal, under the seal of the
Corporation, except where required or permitted by law to be otherwise signed
and executed and except where the signing and execution thereof shall be
expressly delegated by the Board of Directors to some other officer or agent of
the Corporation. Whenever the president is unable to serve, by reason of
sickness, absence or otherwise, the chief executive officer shall perform all
the duties and responsibilities and exercise all the powers of the president.
Section 8. The President. The president of the Corporation shall, subject
to the powers of the Board of Directors, the chairman of the board and the chief
executive officer, have general charge of the business, affairs and property of
the Corporation, and control over its officers, agents and employees. The
president shall see that all orders and resolutions of the Board of Directors
are carried into effect. The president is authorized to execute bonds, mortgages
and other contracts requiring a seal, under the seal of the Corporation, except
where required or permitted by law to be otherwise signed and executed and
except where the signing and execution thereof shall be expressly delegated by
the Board of Directors to some other officer or agent of the Corporation. The
president shall have such other powers and perform such other duties as may be
prescribed by the chairman of the board, the chief executive officer, the Board
of Directors or as may be provided in these By-laws.
Section 9. Vice Presidents. The vice president, or if there shall be more
than one, the vice presidents in the order determined by the Board of Directors
or the chairman of the board,
-8-
shall, in the absence or disability of the president, act with all of the powers
and be subject to all the restrictions of the president. The vice presidents
shall also perform such other duties and have such other powers as the Board of
Directors, the chairman of the board, the chief executive officer, the president
or these By-laws may, from time to time, prescribe. The vice presidents may also
be designated as executive vice presidents or senior vice presidents, as the
Board of Directors may from time to time prescribe.
Section 10. The Secretary and Assistant Secretaries. The secretary shall
attend all meetings of the Board of Directors, all meetings of the committees
thereof and all meetings of the stockholders and record all the proceedings of
the meetings in a book or books to be kept for that purpose or shall ensure that
his or her designee attends each such meeting to act in such capacity. Under the
chairman of the board's supervision, the secretary shall give, or cause to be
given, all notices required to be given by these By-laws or by law; shall have
such powers and perform such duties as the Board of Directors, the chairman of
the board, the chief executive officer, the president or these By-laws may, from
time to time, prescribe; and shall have custody of the corporate seal of the
Corporation. The secretary, or an assistant secretary, shall have authority to
affix the corporate seal to any instrument requiring it and when so affixed, it
may be attested by his or her signature or by the signature of such assistant
secretary. The Board of Directors may give general authority to any other
officer to affix the seal of the Corporation and to attest the affixing by his
or her signature. The assistant secretary, or if there be more than one, any of
the assistant secretaries, shall in the absence or disability of the secretary,
perform the duties and exercise the powers of the secretary and shall perform
such other duties and have such other powers as the Board of Directors, the
chairman of the board, the chief executive officer, the president, or the
secretary may, from time to time, prescribe.
Section 11. The Chief Financial Officer. The chief financial officer shall
have the custody of the corporate funds and securities; shall keep full and
accurate all books and accounts of the Corporation as shall be necessary or
desirable in accordance with applicable law or generally accepted accounting
principles; shall deposit all monies and other valuable effects in the name and
to the credit of the Corporation as may be ordered by the chairman of the board
or the Board of Directors; shall cause the funds of the Corporation to be
disbursed when such disbursements have been duly authorized, taking proper
vouchers for such disbursements; and shall render to the Board of Directors, at
its regular meeting or when the Board of Directors so requires, an account of
the Corporation; shall have such powers and perform such duties as the Board of
Directors, the chairman of the board, the chief executive officer, the president
or these By-laws may, from time to time, prescribe. If required by the Board of
Directors, the chief financial officer shall give the Corporation a bond (which
shall be rendered every six years) in such sums and with such surety or sureties
as shall be satisfactory to the Board of Directors for the faithful performance
of the duties of the office of chief financial officer and for the restoration
to the Corporation, in case of death, resignation, retirement or removal from
office of all books, papers, vouchers, money and other property of whatever kind
in the possession or under the control of the chief financial officer belonging
to the Corporation.
Section 12. Other Officers, Assistant Officers and Agents. Officers,
assistant officers and agents, if any, other than those whose duties are
provided for in these By-laws, shall have
-9-
such authority and perform such duties as may from time to time be prescribed by
resolution of the Board of Directors.
Section 13. Absence or Disability of Officers. In the case of the absence
or disability of any officer of the Corporation and of any person hereby
authorized to act in such officer's place during such officer's absence or
disability, the Board of Directors may by resolution delegate the powers and
duties of such officer to any other officer or to any Director, or to any other
person selected by it.
ARTICLE V
---------
INDEMNIFICATION
---------------
Section 1. Procedure for Indemnification. Any indemnification of a Director
or officer of the Corporation or advance of expenses under Section 2 of ARTICLE
NINE of the Certificate of Incorporation shall be made promptly, and in any
event within forty-five days (or, in the case of an advance of expenses, twenty
days), upon the written request of the Director or officer. If a determination
by the Corporation that the Director or officer is entitled to indemnification
pursuant to ARTICLE NINE of the Certificate of Incorporation is required, and
the Corporation fails to respond within sixty days to a written request for
indemnity, the Corporation shall be deemed to have approved the request. If the
Corporation denies a written request for indemnification or advance of expenses,
in whole or in part, or if payment in full pursuant to such request is not made
within forty-five days (or, in the case of an advance of expenses, twenty days),
the right to indemnification or advances as granted by ARTICLE NINE of the
Certificate of Incorporation shall be enforceable by the Director or officer in
any court of competent jurisdiction. Such person's costs and expenses incurred
in connection with successfully establishing his or her right to
indemnification, in whole or in part, in any such action shall also be
indemnified by the Corporation. It shall be a defense to any such action that
the claimant has not met the standards of conduct which make it permissible
under the Delaware General Corporation Law for the Corporation to indemnify the
claimant for the amount claimed, but the burden of such defense shall be on the
Corporation. The procedure for indemnification of other employees and agents for
whom indemnification is provided pursuant to Section 2 of ARTICLE NINE of the
Certificate of Incorporation shall be the same procedure set forth in this
Section 1 for Directors or officers, unless otherwise set forth in the action of
the Board of Directors providing indemnification for such employee or agent.
Section 2. Insurance. The Corporation may purchase and maintain insurance
on its own behalf and on behalf of any person who is or was a Director, officer,
employee, partner, member, manager, trustee, fiduciary or agent of the
Corporation or a wholly owned subsidiary of the Corporation or was serving at
the request of the Corporation or a wholly owned subsidiary of the Corporation
as a Director, officer, employee, partner, member, manager, trustee, fiduciary
or agent of another corporation, partnership, joint venture, limited liability
company, trust or other entity or enterprise against any expense, liability or
loss asserted against him or her and incurred by him or her in any such
capacity, whether or not the Corporation would have the power to indemnify such
person against such expenses, liability or loss under the Delaware General
Corporation Law.
-10-
Section 3. Reliance. Persons who after the date of the adoption of this
provision become or remain Directors or officers of the Corporation or who,
while a Director or officer of the Corporation, become or remain a Director,
officer, employee or agent of a subsidiary, shall be conclusively presumed to
have relied on the rights to indemnity, advance of expenses and other rights
contained in ARTICLE NINE of the Certificate of Incorporation in entering into
or continuing such service. The rights to indemnification and to the advance of
expenses conferred in ARTICLE NINE of the Certificate of Incorporation shall
apply to claims made against an indemnitee arising out of acts or omissions
which occurred or occur both prior and subsequent to the adoption hereof.
Section 4. Non-Exclusivity of Rights. The rights to indemnification and to
the advance of expenses conferred in ARTICLE NINE of the Certificate of
Incorporation shall not be exclusive of any other right which any person may
have or hereafter acquire under this Certificate or under any statute, by-law,
agreement, vote of stockholders or disinterested Directors or otherwise.
ARTICLE VI
----------
CERTIFICATES OF STOCK
---------------------
Section 1. Form. Every holder of stock in the Corporation shall be entitled
to have a certificate, signed by, or in the name of the Corporation by the
chairman of the board, the chief executive officer or the president and the
secretary or an assistant secretary of the Corporation, certifying the number of
shares owned by such holder in the Corporation. If such a certificate is
countersigned (i) by a transfer agent or an assistant transfer agent other than
the Corporation or its employee or (ii) by a registrar, other than the
Corporation or its employee, the signature of any such chairman of the board,
chief executive officer, president, secretary or assistant secretary may be
facsimiles. In case any officer or officers who have signed, or whose facsimile
signature or signatures have been used on, any such certificate or certificates
shall cease to be such officer or officers of the Corporation whether because of
death, resignation or otherwise before such certificate or certificates have
been delivered by the Corporation, such certificate or certificates may
nevertheless be issued and delivered as though the person or persons who signed
such certificate or certificates or whose facsimile signature or signatures have
been used thereon had not ceased to be such officer or officers of the
Corporation. All certificates for shares shall be consecutively numbered or
otherwise identified. The name of the person to whom the shares represented
thereby are issued, with the number of shares and date of issue, shall be
entered on the books of the Corporation. Shares of stock of the Corporation
shall only be transferred on the books of the Corporation by the holder of
record thereof or by such holder's attorney duly authorized in writing, upon
surrender to the Corporation of the certificate or certificates for such shares
endorsed by the appropriate person or persons, with such evidence of the
authenticity of such endorsement, transfer, authorization and other matters as
the Corporation may reasonably require, and accompanied by all necessary stock
transfer stamps. In that event, it shall be the duty of the Corporation to issue
a new certificate to the person entitled thereto, cancel the old certificate or
certificates and record the transaction on its books. Each such new certificate
will be registered in such name as is requested by the holder of the surrendered
certificate and shall be substantially identical in form to the surrendered
certificate. The Board of Directors may appoint
-11-
a bank or trust company organized under the laws of the United States or any
state thereof to act as its transfer agent or registrar, or both in connection
with the transfer of any class or series of securities of the Corporation.
Section 2. Lost Certificates. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates previously issued by the Corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Corporation
may, in its discretion and as a condition precedent to the issuance thereof,
require the owner of such lost, stolen or destroyed certificate or certificates,
or his or her legal representative, to give the Corporation a bond sufficient to
indemnify the Corporation against any claim that may be made against the
Corporation on account of the loss, theft or destruction of any such certificate
or the issuance of such new certificate.
Section 3. Fixing a Record Date for Stockholder Meetings. In order that the
Corporation may determine the stockholders entitled to notice of or to vote at
any meeting of stockholders or any adjournment thereof, the Board of Directors
may fix a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted by the Board of Directors, and
which record date shall not be more than 60 nor less than 10 days before the
date of such meeting. If no record date is fixed by the Board of Directors, the
record date for determining stockholders entitled to notice of or to vote at a
meeting of stockholders shall be the close of business on the next day preceding
the day on which notice is first given. A determination of stockholders of
record entitled to notice of or to vote at a meeting of stockholders shall apply
to any adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
Section 4. Fixing a Record Date for Other Purposes. In order that the
Corporation may determine the stockholders entitled to receive payment of any
dividend or other distribution or allotment or any rights or the stockholders
entitled to exercise any rights in respect of any change, conversion or exchange
of stock, or for the purposes of any other lawful action, the Board of Directors
may fix a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted, and which record date shall be
not more than 60 days nor less than 10 days prior to such action. If no record
date is fixed, the record date for determining stockholders for any such purpose
shall be at the close of business on the day on which the Board of Directors
adopts the resolution relating thereto.
Section 5. Registered Stockholders. Prior to the surrender to the
Corporation of the certificate or certificates for a share or shares of stock
with a request to record the transfer of such share or shares, the Corporation
may treat the registered owner as the person entitled to receive dividends, to
vote, to receive notifications and otherwise to exercise all the rights and
powers of an owner. The Corporation shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part of
any other person, whether or not it shall have express or other notice thereof.
-12-
Section 6. Subscriptions for Stock. Unless otherwise provided for in the
subscription agreement, subscriptions for shares shall be paid in full at such
time, or in such installments and at such times, as shall be determined by the
Board of Directors. Any call made by the Board of Directors for payment on
subscriptions shall be uniform as to all shares of the same class or as to all
shares of the same series. In case of default in the payment of any installment
or call when such payment is due, the Corporation may proceed to collect the
amount due in the same manner as any debt due the Corporation.
ARTICLE VII
-----------
GENERAL PROVISIONS
------------------
Section 1. Dividends. Dividends upon the capital stock of the Corporation,
subject to the provisions of the Certificate of Incorporation, if any, may be
declared by the Board of Directors at any regular or special meeting, in
accordance with applicable law. Dividends may be paid in cash, in property or in
shares of the capital stock, subject to the provisions of the Certificate of
Incorporation. Before payment of any dividend, there may be set aside out of any
funds of the Corporation available for dividends such sum or sums as the
Directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or any other purpose
and the Directors may modify or abolish any such reserve in the manner in which
it was created.
Section 2. Checks, Drafts or Orders. All checks, drafts or other orders for
the payment of money by or to the Corporation and all notes and other evidences
of indebtedness issued in the name of the Corporation shall be signed by such
officer or officers, agent or agents of the Corporation, and in such manner, as
shall be determined by resolution of the Board of Directors or a duly authorized
committee thereof.
Section 3. Contracts. In addition to the powers otherwise granted to
officers pursuant to ARTICLE IV hereof, the Board of Directors may authorize any
officer or officers, or any agent or agents, of the Corporation to enter into
any contract or to execute and deliver any instrument in the name of and on
behalf of the Corporation, and such authority may be general or confined to
specific instances.
Section 4. Fiscal Year. The fiscal year of the Corporation shall be fixed
by resolution of the Board of Directors.
Section 5. Corporate Seal. The Board of Directors may provide a corporate
seal which shall be in the form of a circle and shall have inscribed thereon the
name of the Corporation and the words "Corporate Seal, Delaware." The seal may
be used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.
Section 6. Voting Securities Owned By Corporation. Voting securities in any
other Corporation held by the Corporation shall be voted by the chief executive
officer, the president or a vice president, unless the Board of Directors
specifically confers authority to vote with respect
-13-
thereto, which authority may be general or confined to specific instances, upon
some other person or officer. Any person authorized to vote securities shall
have the power to appoint proxies, with general power of substitution.
Section 7. Inspection of Books and Records. The Board of Directors shall
have power from time to time to determine to what extent and at what times and
places and under what conditions and regulations the accounts and books of the
Corporation, or any of them, shall be open to the inspection of the
stockholders; and no stockholder shall have any right to inspect any account or
book or document of the Corporation, except as conferred by the laws of the
State of Delaware, unless and until authorized so to do by resolution of the
Board of Directors or of the stockholders of the Corporation.
Section 8. Section Headings. Section headings in these By-laws are for
convenience of reference only and shall not be given any substantive effect in
limiting or otherwise construing any provision herein.
Section 9. Inconsistent Provisions. In the event that any provision of
these By-laws is or becomes inconsistent with any provision of the Certificate
of Incorporation, the General Corporation Law of the State of Delaware or any
other applicable law, the provision of these By-laws shall not be given any
effect to the extent of such inconsistency but shall otherwise be given full
force and effect.
Section 10. Notices. All notices referred to herein shall be in writing,
shall be delivered personally or by first class mail, postage prepaid, and shall
be deemed to have been given when so delivered or mailed to the Corporation at
its principal executive offices and to any stockholder at such holder's address
as it appears in the stock records of the Corporation (unless otherwise
specified in a written notice to the Corporation by such holder).
ARTICLE VIII
------------
AMENDMENTS
----------
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors of the Corporation is expressly authorized to make,
alter, amend, change, add to or repeal these By-laws by the affirmative vote of
a majority of the total number of Directors then in office. Any alteration or
repeal of these By-laws by the stockholders of the Corporation shall require the
affirmative vote of a majority of the outstanding shares of the Corporation
entitled to vote on such alteration or repeal.
-14-
Exhibit 4.1
CERTIFICATE OF DESIGNATIONS OF THE POWERS,
PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL AND OTHER SPECIAL RIGHTS
OF CLASS A SENIOR CUMULATIVE
CONVERTIBLE EXCHANGEABLE PREFERRED STOCK AND
QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS THEREOF
--------------------------------------------------------------------------------
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
--------------------------------------------------------------------------------
Conseco, Inc. (the "Corporation"), a corporation organized and existing
under the General Corporation Law of the State of Delaware, does hereby certify
that, pursuant to authority conferred upon the board of directors of the
Corporation (the "Board of Directors") by its Amended and Restated Certificate
of Incorporation (hereinafter referred to as the "Certificate of
Incorporation"), and pursuant to the provisions of Section 151 of the General
Corporation Law of the State of Delaware, said Board of Directors, by unanimous
written consent dated as of September 9, 2003, duly approved and adopted the
following resolution (the "Certificate of Designations"):
RESOLVED, that, pursuant to the authority vested in the Board of Directors
by its Certificate of Incorporation, the Board of Directors does hereby create,
authorize and provide for the issuance of Class A Senior Cumulative Convertible
Exchangeable Preferred Stock, par value $0.01 per share, with a stated value of
$25 per share, consisting of 164,537,777 shares, having the designations,
preferences, relative, participating, optional and other special rights and the
qualifications, limitations and restrictions that are set forth in the
Certificate of Incorporation and in this Certificate of Designations as follows:
(a) Designation. There is hereby created out of the authorized and
unissued shares of Preferred Stock of the Corporation a class of Preferred
Stock designated as the "Class A Senior Cumulative Convertible Exchangeable
Preferred Stock." The number of shares constituting such class shall be
164,537,777 and are referred to as the "Convertible Exchangeable Preferred
Stock," of which 34,386,740 shares of Convertible Exchangeable Preferred
Stock shall be initially issued, with an additional 130,151,037 shares
reserved for issuance in accordance with
1
paragraph (c)(i) hereof and with the remaining shares issuable as otherwise
permitted hereunder or under applicable law. The liquidation preference of
the Convertible Exchangeable Preferred Stock shall be $25 per share.
(b) Rank. The Convertible Exchangeable Preferred Stock shall, with
respect to dividend distributions and distributions upon the liquidation,
winding-up or dissolution of the Corporation, rank (i) senior to all
classes of Common Stock of the Corporation and to each other class of
Capital Stock of the Corporation or series of Preferred Stock of the
Corporation hereafter established, the terms of which do not expressly
provide that it ranks senior to, or on a parity with, the Convertible
Exchangeable Preferred Stock as to dividend distributions and distributions
upon the liquidation, winding-up or dissolution of the Corporation
(collectively referred to, together with all classes of Common Stock of the
Corporation, as "Junior Securities"); (ii) on a parity with any class of
Capital Stock of the Corporation or series of Preferred Stock of the
Corporation hereafter established, the terms of which expressly provide
that such class or series will rank on a parity with the Convertible
Exchangeable Preferred Stock as to dividend distributions and distributions
upon the liquidation, winding-up or dissolution of the Corporation
(collectively referred to as "Parity Securities"); and junior to each other
class of Capital Stock of the Corporation or series of Preferred Stock of
the Corporation hereafter established, the terms of which expressly provide
that such class or series will rank senior to the Convertible Exchangeable
Preferred Stock as to dividend distributions and distributions upon the
liquidation, winding-up or dissolution of the Corporation (collectively
referred to as "Senior Securities"). The respective definitions of Junior
Securities, Parity Securities and Senior Securities shall also include any
rights, options, warrants or calls exercisable for or convertible into any
of the Junior Securities, Parity Securities and Senior Securities, as the
case may be.
(c) Dividends.
(i) Beginning on the Issue Date, the Holders of the outstanding
shares of Convertible Exchangeable Preferred Stock shall be entitled
to receive, when, as and if declared by the Board of Directors, out of
funds legally available therefor, distributions in the form of
dividends on each share of Convertible Exchangeable Preferred Stock,
at a rate per annum equal to 10.5% of the liquidation preference per
share of the Convertible Exchangeable Preferred Stock, payable
semi-annually, which rate per annum will increase to 11% of the
liquidation preference per
2
share of Convertible Exchangeable Preferred Stock beginning on the day
after the second anniversary of the Issue Date. All dividends shall
accrue, whether or not declared, on a daily basis from the date of
issuance of the Convertible Exchangeable Preferred Stock and shall be
payable, when, as and if declared, semi-annually in arrears on each
Dividend Payment Date, commencing March 1, 2004. Until the later of
(i) the second anniversary of the Issue Date and (ii) the first day of
the first Fiscal Quarter after the first date on which each of the
Active Material Insurance Subsidiaries has a financial strength rating
of at least "A-" by A.M. Best, dividends declared shall be paid on any
Dividend Payment Date by the issuance of additional shares of
Convertible Exchangeable Preferred Stock (and, at the Corporation's
option, payment of a whole share (after rounding up) or payment of
cash in lieu of a fractional share or issuance of whole shares
representing the fractional shares that would be issuable to all
Holders to an agent who will have the right to either sell all such
shares and remit the proceeds to the Holders or buy or sell fractional
shares on behalf of the Holders (as directed by the Holders)) having
an aggregate liquidation preference equal to the amount of such
dividends. Commencing with the day after the later of (i) the second
anniversary of the Issue Date and (ii) the first day of the first
Fiscal Quarter after the first date on which each of the Active
Material Insurance Subsidiaries has a financial strength rating of at
least "A-" by A.M. Best, dividends declared may be paid, at the
Corporation's option, either in cash, out of funds legally available
therefor, or by the issuance of additional shares of Convertible
Exchangeable Preferred Stock (and, at the Corporation's option,
payment of a whole share (after rounding up) or payment of cash in
lieu of a fractional share or issuance of whole shares representing
the fractional shares that would be issuable to all Holders to an
agent who will have the right to either sell all such shares and remit
the proceeds to the Holders or buy or sell fractional shares on behalf
of the Holders (as directed by the Holders)) having an aggregate
liquidation preference equal to the amount of such dividends. In the
event that dividends are declared and paid through the issuance of
additional shares of Convertible Exchangeable Preferred Stock as
provided in this paragraph, such dividends shall be deemed paid in
full and shall not accumulate. If dividends are not paid in full in
either cash or additional shares of Convertible Exchangeable Preferred
Stock on any Dividend Payment Date as provided in this paragraph,
dividends will accumulate as if dividends had been paid in additional
shares of Convertible Exchangeable Preferred Stock
3
and such additional shares were outstanding for succeeding Dividend
Periods. Each dividend shall be payable to the Holders of record as
they appear on the stock books of the Corporation on the Dividend
Record Date immediately preceding the related Dividend Payment Date.
Dividends shall cease to accumulate in respect of the Convertible
Exchangeable Preferred Stock held by any Holder on the earliest to
occur of the Conversion Date, the Exchange Date or the Redemption Date
applicable to the Convertible Exchangeable Preferred Stock held by
such Holder, unless, in the case of the Redemption Date, the
Corporation shall have failed to pay the relevant Optional Redemption
Price (or deposit funds in trust pursuant to paragraph (e)(ii)(C)) on
the Redemption Date.
(ii) All dividends paid with respect to shares of the Convertible
Exchangeable Preferred Stock pursuant to paragraph (c)(i) shall be
paid pro rata to the Holders entitled thereto.
(iii) In the event of any optional redemption pursuant to
paragraph (e)(i), dividends may be declared and paid at such time,
without reference to any regular Dividend Payment Date, to Holders of
record on such date, not more than forty-five (45) days prior to the
payment thereof, as may be fixed by the Board of Directors.
(iv) Dividends payable on the Convertible Exchangeable Preferred
Stock for any period less than a year shall be computed on the basis
of a 360-day year of twelve 30 day months.
(v) The Corporation shall not declare, pay or set apart for
payment any dividends or other distributions on Parity Securities or
Junior Securities or make any payment on account of, or set apart for
payment money for a sinking or other similar fund for, the purchase,
redemption or other retirement of any Parity Securities or Junior
Securities, and shall not permit any corporation or other entity
directly or indirectly controlled by the Corporation to purchase or
redeem any Parity Securities or Junior Securities, unless full
cumulative dividends have been paid on the Convertible Exchangeable
Preferred Stock.
(d) Liquidation Preference. In the event of any voluntary or
involuntary liquidation, dissolution or winding-up of the affairs of the
Corporation, the Holders of shares of Convertible Exchangeable Preferred
4
Stock then outstanding shall be entitled, after payment shall be made or
provision for payment of the debts and other liabilities of the Corporation
and the payment or distribution of the assets of the Corporation (whether
capital or surplus) shall be made to or set apart for payment to holders of
Senior Securities, to be paid out of the assets of the Corporation
available for distribution to its stockholders, an amount in cash equal to
the Total Liquidation Preference for each share as of the date fixed for
liquidation, dissolution or winding-up, before any distribution shall be
made or any assets distributed to the holders of any Junior Securities
including, without limitation, Common Stock of the Corporation. Except as
provided in the preceding sentence, Holders of Convertible Exchangeable
Preferred Stock shall not be entitled to any distribution in the event of
any liquidation, dissolution or winding-up of the affairs of the
Corporation. If upon any voluntary or involuntary liquidation, dissolution
or winding-up of the Corporation, the amounts payable with respect to the
Convertible Exchangeable Preferred Stock and all other Parity Securities
are not sufficient to pay in full the liquidation payments payable to the
Holders of outstanding shares of the Convertible Exchangeable Preferred
Stock and all Parity Securities, then the holders of all such shares shall
share equally and ratably in such distribution of assets first in
proportion to the full liquidation preference to which each is entitled
until such preferences are paid in full, and then in proportion to their
respective amounts of accumulated but unpaid dividends, plus dividends
accrued for the period from the most recent Dividend Payment Date to the
date fixed for liquidation, dissolution or winding-up.
(e) Redemption.
(i) Optional Redemption.
(A) The Corporation may, at the option of the Board of
Directors, redeem, to the extent of funds legally available
therefor, in whole or in part, in the manner provided for in
paragraph (e)(ii) hereof, any or all of the shares of the
Convertible Exchangeable Preferred Stock, at a redemption price
in cash equal to the Total Liquidation Preference for each share
as of the Redemption Date (the "Optional Redemption Price").
(B) In the event of a redemption pursuant to paragraph
(e)(i)(A) hereof of only a portion of the then outstanding shares
of the Convertible Exchangeable Preferred Stock, the Corporation
shall effect such redemption on a pro rata basis according to the
number of
5
shares held by each Holder of the Convertible Exchangeable
Preferred Stock, provided that the Corporation may redeem any or
all such shares held by any Holder of fewer than 100 shares (or
shares held by any Holder who would hold less than 100 shares as
a result of such redemption), as may be determined by the
Corporation.
(ii) Procedures for Redemption.
(A) At least thirty (30) days and not more than sixty (60)
days prior to the date fixed for any redemption of the
Convertible Exchangeable Preferred Stock, written notice (the
"Redemption Notice") shall be given by first class mail, postage
prepaid, to each Holder of record on the record date fixed for
such redemption of the Convertible Exchangeable Preferred Stock
at such Holder's address as it appears on the stock books of the
Corporation; provided that no failure to give such notice nor any
deficiency therein shall affect the validity of the procedure for
the redemption of any shares of Convertible Exchangeable
Preferred Stock to be redeemed except as to the Holder or Holders
to whom the Corporation has failed to give said notice or to whom
such notice was defective. The Redemption Notice shall state:
(1) that the redemption is pursuant to paragraph
(e)(i)(A) hereof;
(2) the Optional Redemption Price;
(3) whether all or less than all the outstanding shares
of the Convertible Exchangeable Preferred Stock are to be
redeemed and the total number of shares of the Convertible
Exchangeable Preferred Stock being redeemed, and in the
event that less than all the outstanding shares of
Convertible Exchangeable Preferred Stock are to be redeemed,
the number of shares to be redeemed from such Holder;
(4) the date fixed for redemption;
(5) that the Holder is to surrender to the Corporation,
in the manner, at the place or
6
places and at the price designated, the certificate or
certificates representing the shares of Convertible
Exchangeable Preferred Stock to be redeemed; and
(6) that dividends on the shares of the Convertible
Exchangeable Preferred Stock to be redeemed shall cease to
accumulate on such Redemption Date unless the Corporation
defaults in the payment in full of the Optional Redemption
Price on such date.
(B) Each Holder of Convertible Exchangeable Preferred Stock
shall surrender the certificate or certificates representing such
shares of Convertible Exchangeable Preferred Stock to the
Corporation, duly endorsed (or otherwise in proper form for
transfer, as determined by the Corporation), in the manner and at
the place designated in the Redemption Notice, and on the
Redemption Date the full Optional Redemption Price for such
shares shall be payable in cash to the Person whose name appears
on such certificate or certificates as the owner thereof, and
each surrendered certificate shall be canceled and retired and
the shares represented thereby shall no longer be deemed to be
outstanding. In the event that less than all of the shares
represented by any such certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares.
(C) On and after the Redemption Date, unless the Corporation
defaults in the payment in full of the Optional Redemption Price,
dividends on the Convertible Exchangeable Preferred Stock called
for redemption shall cease to accumulate on the Redemption Date,
and all rights of the Holders of redeemed shares shall terminate
with respect thereto on the Redemption Date, other than the right
to receive the Optional Redemption Price without interest;
provided, however, that if a notice of redemption shall have been
given as provided in paragraph (ii)(A) above and the funds
necessary for redemption (including an amount in respect of all
dividends that will accrue to the Redemption Date) shall have
been deposited in trust for the equal and ratable benefit of the
Holders of the shares to be redeemed (with
7
such funds not being revocable until two years after the proposed
Redemption Date), then, at the close of business on the day on
which such funds are segregated and set aside, the Holders of the
shares to be redeemed shall cease to be stockholders of the
Corporation and shall be entitled only to receive the Optional
Redemption Price, without interest.
(f) Voting Rights.
(i) After the occurrence of a Trigger Event, the Holders of each
share of Convertible Exchangeable Preferred Stock shall be entitled to
vote together with the holders of Common Stock as a single class on
all matters on which the holders of the Common Stock of the
Corporation shall be entitled to vote; provided, however, if such
Trigger Event occurs prior to the first anniversary of the Issue Date
and is not an Immediate Trigger Event, then the Holders of the
Convertible Exchange Preferred Stock shall only be entitled to
exercise the voting rights described in this paragraph (f)(i) as a
result of such Trigger Event if such Trigger Event is continuing on or
occurs after the first anniversary of the Issue Date. Each share of
Convertible Exchangeable Preferred Stock shall be entitled to the
number of votes equal to the number of shares of Common Stock into
which such share of Convertible Exchangeable Preferred Stock could be
converted pursuant to paragraph (h) hereof (assuming such share was
immediately convertible into shares of Common Stock pursuant to
paragraph (h)) at the record date for determination of the
stockholders entitled to vote on such matters, or if no record date is
established, at the date such vote is taken or any written consent of
stockholders is solicited, such votes to be counted together with all
other shares of stock of the Corporation having general voting power
and not counted separately as a class. After the occurrence of a
Trigger Event, Holders of Convertible Exchangeable Preferred Stock
shall be entitled to notice of any stockholders' meeting in accordance
with the Bylaws. At any time (and from time to time) after the voting
rights of the Convertible Exchangeable Preferred Stock described in
this paragraph (f)(i) become exercisable, directors of the Corporation
may be removed with or without cause and a proper officer of the
Corporation may, and upon the written request of the Holders of record
of at least forty percent (40%) of the outstanding shares of
Convertible Exchangeable Preferred Stock addressed to the secretary of
the Corporation shall, call a special meeting of the
8
shareholders for the purpose of (i) voting on the removal (with or
without cause) of one or more of the directors of the Corporation and
the filling of any vacancies thereby created, (ii) having the holders
of Common Stock approve the selection of a Non-Voting Observer, who
shall have the right to attend all scheduled meetings of the Board of
Directors of the Corporation as an observer and to whom the
Corporation shall afford the opportunity to participate in the
deliberations of the board of directors of the Corporation at such
scheduled meetings, including through receipt, at the same time as the
board of directors of the Corporation receives the same, of all
written information and material as is distributed to the board of
directors of the Corporation. The Non-Voting Observer shall agree to
keep confidential any such information and materials received and
shall not disclose or make use of any such information for any purpose
other than for the participation in the scheduled meetings of the
board of directors as an observer. The Non-Voting Observer shall be
elected for, and only for, a single term to coincide with the initial
term for which the directors are being nominated pursuant to this
paragraph, and (iii) for any other matter on which holders of Common
Stock are entitled to vote. If such meeting shall not be called by a
proper officer of the Corporation within thirty (30) days after
personal service of said written request upon the secretary of the
Corporation, or within thirty-five (35) days after mailing the same
within the United Sates by certified mail, addressed to the secretary
of the Corporation at its principal executive offices, then the
Holders of record of at least forty percent (40%) of the outstanding
shares of Convertible Exchangeable Preferred Stock may designate one
of their number to call such meeting at the expense of the
Corporation. Any Holder of Convertible Exchangeable Preferred Stock so
designated shall have, and the Corporation shall provide, access to
the lists of stockholders to be called pursuant to the provisions
hereof. The Person so designated may designate any place, either
within or without the State of Delaware, as the place of meeting for
such meeting. If no designation is made, the place of meeting shall be
the principal executive office of the Corporation. Written or printed
notice stating the place, date, time and the purpose or purposes, of
such meeting, shall be given to each stockholder entitled to vote at
such meeting not less than 10 nor more than 60 days before the date of
the meeting. All such notices shall be delivered, either personally or
by mail, and if mailed, such notice shall be deemed to be delivered
when deposited in the United States mail, postage prepaid, addressed
to the stockholder at his,
9
her or its address as the same appears on the records of the
Corporation.
Nominations of persons for election to the Board of Directors of the
Corporation may be made at any special meeting called pursuant to the
provisions of this paragraph by any person who was a Holder of record
of Common Stock or Convertible Exchangeable Preferred Stock at the
time of giving of notice provided for in this paragraph, and who shall
have delivered timely notice of such Holder's intent to make such
nomination in writing to the secretary of the Corporation. To be
timely, a Holder's notice shall be delivered to or mailed and received
at the principal executive offices of the Corporation not later than
the close of business on the 10th day following the earlier of the day
on which notice of the date of the meeting was mailed or public
disclosure of the meeting was made. Such Holder's notice shall set
forth (i) as to each person whom the Holder proposes to nominate for
election as a Director at such meeting all information relating to
such person that is required to be disclosed in solicitations of
proxies for election of Directors, or is otherwise required, in each
case pursuant to Regulation 14A under the Exchange Act (including such
person's written consent to being named in the proxy statement as a
nominee and to serving as a Director if elected); (ii) as to the
Holder giving the notice (A) the name and address, as they appear on
the Corporation's books, of such Holder and (B) the class and number
of shares of Common Stock or Convertible Exchangeable Preferred Stock
of the Corporation which are beneficially owned by such Holder and
also which are owned of record by such Holder; and (iii) as to the
beneficial owner, if any, on whose behalf the nomination is made, (A)
the name and address of such person and (B) the class and number of
shares of Common Stock or Convertible Exchangeable Preferred Stock of
the Corporation which are beneficially owned by such person.
(ii) So long as any shares of the Convertible Exchangeable
Preferred Stock are outstanding, without the affirmative vote or
consent of Holders of at least a majority of the issued and
outstanding shares of Convertible Exchangeable Preferred Stock, voting
or consenting, as the case may be, as one class, given in person or by
proxy, either in writing or by resolution adopted at an annual or
special meeting (unless all shares of the Convertible Exchangeable
Preferred Stock will be redeemed in full in accordance with paragraph
(e) hereof upon the
10
occurrence or consummation of any of the following), the Corporation
shall not:
(A) effect or permit any amendment, alteration or repeal (by
merger, consolidation, combination, reclassification or
otherwise) of any provision of the Certificate of Incorporation
or by-laws which would adversely alter, circumvent or otherwise
adversely affect the preferences, rights or powers of the Holders
of Convertible Exchangeable Preferred Stock (including without
limitation the granting of any voting rights to any other holder
of Capital Stock of the Corporation (other than (v) voting rights
to holders of Common Stock no superior than the voting rights to
which holders of Common Stock are entitled on the Issue Date and
(w) voting rights to holders of Preferred Stock of this
Corporation of the type customarily provided to holders of
publicly traded Preferred Stock (whether or not such class of the
Corporation's Preferred Stock being issued is publicly traded),
it being understood that certain of the voting rights granted to
the Convertible Exchangeable Preferred Stock are not customary
for publicly traded Preferred Stock, and in no event shall such
voting rights include voting rights superior to the voting rights
of the Convertible Exchangeable Preferred Stock) or holder of
obligations of the Corporation) and, prior to the second annual
meeting of the Corporation held after the date hereof, Section 1
of Article 10 of the Certificate of Incorporation and Section 1
of Article II of the by-laws, or any provisions of any thereof;
provided that any such amendment that changes (i) the dividend
payable on or the Total Liquidation Preference of the Convertible
Exchangeable Preferred Stock, (ii) the Conversion Price Per
Common Share or (iii) the Exchange Rate shall require the
affirmative vote of the Holder of each share of Convertible
Exchangeable Preferred Stock;
(B) authorize the issuance of or issue (or, in the case of
clause (iii) below, permit any Subsidiary to authorize or issue)
(i) shares of any class of Senior Securities, (ii) any shares of
Capital Stock of the Corporation or series of Preferred Stock of
the Corporation entitled to any mandatory cash redemption
obligation or mandatory cash dividend payments at any
11
time when any shares of Convertible Exchangeable Preferred Stock
are outstanding or (iii) any Indebtedness of the Corporation or
any Subsidiary (such shares of Capital Stock and Preferred Stock
and such Indebtedness, together with Senior Securities, "Senior
Debt and Equity Securities") or any securities exchangeable for,
convertible into, or evidencing the right to purchase Senior Debt
and Equity Securities (or amend the provisions of any existing
class of Capital Stock of the Corporation to make such class of
Capital Stock into Senior Debt and Equity Securities), other than
Indebtedness set forth in Schedule D hereto, except to the extent
that 100% of the Net Proceeds thereof are applied to permanently
repay or prepay loans under the Credit Agreement, provided that
the aggregate liquidation preference and aggregate principal
amount, as applicable, of the Senior Debt and Equity Securities
so issued is not greater than the sum of (x) the aggregate
principal amount of the loans under the Credit Agreement so
repaid or prepaid and (y) the reasonable costs and expenses
incurred by the Corporation in connection with the issuance of
such Senior Debt and Equity Securities;
(C) authorize the issuance of or issue additional shares of
any class of Parity Securities and any securities exchangeable
for, convertible into, or evidencing the right to purchase Parity
Securities (or amend the provisions of any existing class of
Capital Stock of the Corporation to make such class of Capital
Stock into Parity Securities) except to the extent that 100% of
the Net Proceeds thereof are applied (x) to redeem shares of
Convertible Exchangeable Preferred Stock pursuant to paragraph
(e)(i) hereof, (y) to otherwise repurchase shares of Convertible
Exchangeable Preferred Stock or (z) to permanently repay or
prepay loans under the Credit Agreement; provided that, in each
case, the aggregate liquidation preference of the Parity
Securities so issued is not greater than the sum of (x) the
aggregate Total Liquidation Preference of the Convertible
Exchangeable Preferred Stock so redeemed as of the date of
redemption or otherwise repurchased by the Corporation, (y) the
aggregate principal amount of loans under the Credit Agreement so
repaid or prepaid and (z) the reasonable costs and expenses
incurred by the
12
Corporation in connection with the issuance of such Parity
Securities;
(D) authorize or permit the issuance of any Preferred Stock
by any subsidiary of the Corporation other than to the
Corporation or any of its direct or indirect wholly owned
subsidiaries;
(E) consent to any liquidation, dissolution or winding up of
the Corporation;
(F) sell all or substantially all of the Corporation's
assets; provided however, that the right to vote or consent
pursuant to this paragraph (f)(ii)(F) shall terminate on
September 30, 2005;
(G) effect a merger or consolidation or any other
transaction resulting in the acquisition of the Corporation by
another corporation or entity; provided however, that the right
to vote or consent pursuant to this paragraph (f)(ii)(G) shall
terminate on September 30, 2005;
(H) redeem or otherwise acquire any shares of Junior
Securities except pursuant to any bona fide plan for the benefit
of directors, officers or employees of the Corporation now or
hereafter in effect;
(I) redeem or otherwise acquire any shares of Parity
Securities unless shares of Convertible Exchangeable Preferred
Stock are redeemed, on a pro rata basis pursuant to paragraph
(e)(i)(B);
(J) pay or set apart for payment any cash dividends or
distributions on Junior Securities; or
(K) pay or set apart for payment any cash dividends or
distributions on Parity Securities, unless cash dividends are
paid concurrently on the Convertible Exchangeable Preferred Stock
on a pro rata basis.
(iii) The consent or votes required in paragraph (f)(i) and (ii)
shall be in addition to any approval of stockholders of the
Corporation which may be required by law or pursuant to any provision
of the Corporation's Certificate of Incorporation or by-
13
laws. In any case in which the Holders of Convertible Exchangeable
Preferred Stock shall be entitled to vote as one class on any matter
(other than when voting as a single class together with the holders of
the Common Stock pursuant to paragraph (f)(i) hereof), and as one
class together with any other series of Preferred Stock on any matter,
each Holder of Convertible Exchangeable Preferred Stock, and each
holder of any such other series, entitled to vote with respect to such
matter shall be entitled to one vote for each $25 in liquidation
preference plus the amount of any accumulated and unpaid dividends. In
any case in which the Holders of Convertible Exchangeable Preferred
Stock shall be entitled to vote on any matter, whether as one class or
together with any other series or class of capital stock of the
Corporation, such Holders may act by written consent in lieu of a
meeting of the stockholders.
(iv) If at any time dividends on the Convertible Exchangeable
Preferred Stock shall be in arrears for dividend periods (whether or
not consecutive) containing in the aggregate a number of days
equivalent to six calendar quarters, then the Holders of the
Convertible Exchangeable Preferred Stock will be entitled to vote for
the election of two additional directors on the terms set forth below
and until all past dividends accumulated on the Convertible
Exchangeable Preferred Stock have been paid in full. In such case, the
Board of Directors will be increased by two directors, and the Holders
of the Convertible Exchangeable Preferred Stock will have the
exclusive right to elect two directors at the next annual meeting of
stockholders of the Corporation or at a special meeting held in place
thereof, or at a special meeting of the Holders of the Convertible
Exchangeable Preferred Stock called as hereinafter provided. When all
arrears in dividends on the Convertible Exchangeable Preferred Stock
then outstanding have been paid, then the right of the Holders of the
Convertible Exchangeable Preferred Stock to elect such additional two
directors shall cease (but subject always to the same provisions for
the vesting of such voting rights in the case of any similar future
arrearages for dividend periods (whether or not consecutive)
containing in the aggregate a number of days equivalent to six
calendar quarters), and the terms of office of all Persons elected as
directors by the Holders of the Convertible Exchangeable Preferred
Stock shall immediately terminate and the number of directors serving
on the Board of Directors shall be reduced accordingly. At any time
after such voting power has been so vested in the Holders of
Convertible Exchangeable Preferred
14
Stock, the secretary of the Corporation may, and upon the written
request of any Holder of Convertible Exchangeable Preferred Stock
(addressed to the secretary at the principal office of the
Corporation) shall, call a special meeting of the Holders of the
Convertible Exchangeable Preferred Stock for the election of the two
directors to be elected by them as herein provided, such call to be
made by notice similar to that provided in the by-laws of the
Corporation for a special meeting of the stockholders or as required
by law. If the secretary does not call a meeting as above provided
within 20 days after receipt of any such request, then any Holder of
Convertible Exchangeable Preferred Stock may call such meeting, upon
the notice above provided, and for that purpose shall have access to
the stock books of the Corporation. The directors elected by the
Holders of Convertible Exchangeable Preferred Stock at any such
meeting shall hold office until the next annual meeting of the
stockholders or special meeting held in lieu thereof if such office
shall not have terminated as above provided. If any vacancy shall
occur among the directors elected by the Holders of the Convertible
Exchangeable Preferred Stock, a successor shall be elected by the
Board of Directors, upon the nomination of the then-remaining director
elected by the Holders of the Convertible Exchangeable Preferred Stock
or the successor of such remaining director, to serve until the next
annual meeting of the stockholders or special meeting held in place
thereof if such office shall not have terminated as provided above. At
any meeting held for the purpose of electing directors pursuant to
this paragraph (f)(iv), the presence in person or by proxy of the
Holders of at least ten percent (10%) of the outstanding shares of
Convertible Exchangeable Preferred Stock shall be required to
constitute a quorum of such Convertible Exchangeable Preferred Stock.
(g) Exchange.
(i) Requirements.
The outstanding shares of Convertible Exchangeable Preferred Stock are
exchangeable, at the option of the Holder, at any time (and from time to
time) on or after the tenth anniversary of the Issue Date, for the
Corporation's Common Stock (the "Exchange Common Stock"). The "Exchange
Rate" shall be equal to the Total Liquidation Preference of the Convertible
Exchangeable Preferred Stock to be exchanged as of the Exchange Date
divided by the Current Market Price Per Common Share; provided that the
maximum number of shares of the Corporation's
15
Common Stock issued pursuant to this paragraph (g) upon the exchange of all
the Convertible Exchangeable Preferred Stock shall not exceed the greater
of (x) 7,840,000,000 shares of the Corporation's Common Stock, which number
of shares shall be reduced proportionately to the extent that any shares of
Convertible Exchangeable Preferred Stock have previously been converted or
exchanged pursuant to the terms hereof(1) and (y) such number of shares of
the Corporation's Common Stock as shall be authorized but unissued pursuant
to paragraph (g)(iii)(B) hereof; and provided further that the Corporation
shall have the right, at its option, to pay cash in an amount equal to the
Total Liquidation Preference of such Convertible Exchangeable Preferred
Stock as of the Exchange Date instead of delivering Exchange Common Stock.
(ii) Procedure for Exchange.
(A) In order to exercise its exchange right hereunder, a
Holder must execute and deliver to the Corporation not less than
10 days nor more than 60 days prior to the Exchange Date a
written notice of election to exchange, with respect to the
shares of Convertible Exchangeable Preferred Stock to be
exchanged. On or prior to the Exchange Date, such Holder shall
surrender the certificate or certificates representing such
shares of Convertible Exchangeable Preferred Stock, at the office
of the transfer agent for the Corporation's securities, or, if
none, the primary business office of the Corporation. Unless the
shares of Common Stock issuable upon exchange are to be issued in
the same name as the name in which such shares of Convertible
Exchangeable Preferred Stock are registered, each share of
Convertible Exchangeable Preferred Stock surrendered for
conversion shall be accompanied by instruments of transfer, in
form satisfactory to the Corporation, duly executed by the Holder
or the Holder's duly authorized attorney and an amount sufficient
to pay any transfer or similar tax to the
---------------------
1 By way of illustration, if there are 40,000,000 shares of Convertible
Exchangeable Preferred Stock outstanding on a given date and 10,000,000 shares
of Convertible Exchangeable Preferred Stock are converted or exchanged on such
date, then the maximum number of shares of Common Stock issuable upon exchange
of all remaining outstanding shares of Convertible Exchangeable Preferred Stock
outstanding at any time thereafter would be 5,880,000,000 and the maximum number
of shares of Common Stock issuable upon exchange of 50% of the shares of
Convertible Exchangeable Preferred Stock outstanding at any time thereafter
would be 2,940,000,000.
16
extent required below in this paragraph. Upon delivery of the
duly executed notice of election to exchange and certificate or
certificates representing such shares of Convertible Exchangeable
Preferred Stock (the "Exchange Date"), unless the Corporation has
elected to pay cash in an amount equal to the Total Liquidation
Preference of the Convertible Exchangeable Preferred Stock, as of
the Exchange Date, the Holder shall be deemed to be the holder of
record of the whole number of shares of Exchange Common Stock
subject to such exercise, notwithstanding that the stock transfer
books of the Corporation shall then be closed or that
certificates representing such shares of Exchange Common Stock
shall not then be actually delivered to the Holder. The
Corporation shall pay any and all issuance, delivery and transfer
taxes in respect of the issuance or delivery of shares of
Exchange Common Stock. The Corporation shall not, however, be
required to pay any tax in respect of any transfer involved in
the issuance or delivery of shares of Exchange Common Stock in a
name other than that of the Holder of the Convertible
Exchangeable Preferred Stock so exchanged, and no such issuance
or delivery shall be made unless and until the Person requesting
such issuance or delivery has paid to the Corporation the amount
of any such tax or has established to the Corporation's
satisfaction that such tax has been paid. All shares of Exchange
Common Stock will upon delivery be duly and validly issued and
fully paid and non-assessable, free of all liens and charges and
not subject to any preemptive rights. Upon the surrender of
certificates representing shares of Convertible Exchangeable
Preferred Stock, such shares shall no longer be deemed to be
outstanding and all rights of a Holder with respect to such
shares surrendered for exchange shall immediately terminate
except the right to receive Exchange Common Stock and any cash
amounts payable pursuant to this paragraph (g).
(B) From the date of delivery by a Holder of Convertible
Exchangeable Preferred Stock of such notice of election to
exchange, in lieu of dividends on such Convertible Exchangeable
Preferred Stock pursuant to paragraph (c), such Convertible
Exchangeable Preferred Stock shall participate equally and
ratably with the
17
holders of Common Stock in all dividends paid on Common Stock as
if such shares of Convertible Exchangeable Preferred Stock had
been exchanged for shares of Common Stock at the time of such
delivery.
(C) Upon delivery to the Corporation by a Holder of
Convertible Exchangeable Preferred Stock of a notice of election
to exchange, the right of the Corporation to redeem such shares
of Convertible Exchangeable Preferred Stock shall terminate,
regardless of whether a notice of redemption has been mailed.
(iii) (A) The Corporation shall, subject to paragraph (g)(i), at
all times reserve and keep available, free from preemptive rights,
such number of its authorized but unissued shares of Common Stock as
may be required to effect exchanges of the Convertible Exchangeable
Preferred Stock.
(B) The Corporation shall use its best efforts to reserve
and keep available, free from preemptive rights, not less than
98% of its authorized shares of Common Stock as unissued for
purposes of effecting exchanges of the Convertible Exchangeable
Preferred Stock; provided that any shares of Common Stock issued
upon the conversion or exchange of Convertible Exchangeable
Preferred Stock pursuant to the terms hereof shall be deemed to
be unissued for purposes of this paragraph (g)(iii)(B).
(C) Prior to the delivery of any securities that the
Corporation is obligated to deliver upon exchange of the
Convertible Exchangeable Preferred Stock, the Corporation shall
comply with all applicable federal and state laws and regulations
which require action by the Corporation.
(iv) In connection with the exchange of any shares of Convertible
Exchangeable Preferred Stock, no fractions of shares of Common Stock
shall be issued. In lieu thereof the Corporation shall, at its option,
issue a whole share in respect of any fraction of a share or pay a
cash adjustment in respect of such fractional interest in an amount
equal to such fractional interest multiplied by the Current Market
Price Per Common Share on the Exchange Date.
18
(h) Conversion
(i) Subject to the provisions of this paragraph (h), each Holder
of Convertible Exchangeable Preferred Stock has the right, at any time
(and from time to time) on or after September 30, 2005, at such
Holder's option, to convert any or all outstanding shares of
Convertible Exchangeable Preferred Stock, in whole or in part, into
fully paid and non-assessable shares of Common Stock. The number of
shares of Common Stock deliverable upon conversion of a share of
Convertible Exchangeable Preferred Stock, adjusted as provided herein,
is the "Conversion Ratio." The Conversion Ratio shall be a number
equal to the Total Liquidation Preference as of the Conversion Date
divided by the then applicable Conversion Price Per Common Share. The
"Conversion Price Per Common Share" will initially be equal to the
greater of (x) the Daily Price Per Common Share for each of the
Trading Days in the 60 calendar day period immediately preceding
January 8, 2004 and (y) $0.15 per share of Common Stock, and will be
subject to adjustment from time to time pursuant to paragraph
(h)(vii). The Corporation will promptly notify the Holders of the
Convertible Exchangeable Preferred Stock of the initial Conversion
Price Per Common Share following its determination. In the event of
any call for redemption pursuant to paragraph (e), the right to
convert shares so called for redemption shall terminate at the close
of business on the date immediately prior to the Redemption Date
unless the Corporation defaults in paying the amount payable upon such
redemption.
(ii) (A) In order to exercise the conversion right, the Holder of
the shares of Convertible Exchangeable Preferred Stock to be converted
shall surrender the certificate representing such shares at the office
of the transfer agent for the Corporation's securities or, if none,
the primary business office of the Corporation, with a written notice
of election (which notice shall be delivered not less than 10 days nor
more than 60 days prior to the proposed Conversion Date) to convert
completed and signed by such Holder of such Holder's duly authorized
attorney, specifying the number of shares of Convertible Exchangeable
Preferred Stock to be converted and the proposed Conversion Date.
Unless the shares of Common Stock issuable on conversion are to be
issued in the same name as the name in which such shares of
Convertible Exchangeable Preferred Stock are registered, each share
surrendered for conversion shall be
19
accompanied by instruments of transfer, in form satisfactory to the
Corporation, duly executed by the Holder or the Holder's duly
authorized attorney and an amount sufficient to pay any transfer or
similar tax to the extent required by paragraph (h)(v) hereof.
(B) As promptly as practicable after the surrender by the
Holder of the certificates for shares of Convertible Exchangeable
Preferred Stock for conversion pursuant to this paragraph (h),
the Corporation shall issue and deliver to such Holder or, on the
Holder's written order, to the Holder's transferee a certificate
or certificates for the whole number of shares of Common Stock
issuable upon conversion.
(C) Each conversion shall be deemed to have been effected
immediately prior to the close of business on the date on which
the certificates for shares of Convertible Exchangeable Preferred
Stock were surrendered and notice of conversion was received by
the Corporation (the "Conversion Date"). The Person in whose name
or names any certificate or certificates for shares of Common
Stock are issuable upon such conversion shall be deemed to have
become the holder of record of the shares of Common Stock
represented thereby at such time on such date, and such
conversion shall be into a number of shares of Common Stock equal
to the product of the number of shares of Convertible
Exchangeable Preferred Stock surrendered multiplied by the
Conversion Ratio in effect at such time on such date. All shares
of Common Stock delivered upon conversion of the Convertible
Exchangeable Preferred Stock will upon delivery be duly and
validly issued and fully paid and non-assessable, free of all
liens and charges and not subject to any preemptive rights. Upon
the surrender of certificates representing shares of Convertible
Exchangeable Preferred Stock, such shares shall no longer be
deemed to be outstanding and all rights of a Holder with respect
to such shares surrendered for conversion shall immediately
terminate except the right to receive Common Stock and other
amounts payable pursuant to this paragraph (h).
(iii) (A) Upon delivery to the Corporation by a Holder of
Convertible Exchangeable Preferred Stock of a notice of
20
election to convert, the right of the Corporation to redeem such
shares of Convertible Exchangeable Preferred Stock shall terminate,
regardless of whether a notice of redemption has been mailed.
(B) From the date of delivery by a Holder of Convertible
Exchangeable Preferred Stock of such notice of election to
convert, in lieu of dividends on such Convertible Exchangeable
Preferred Stock pursuant to paragraph (c), such Convertible
Exchangeable Preferred Stock shall participate equally and
ratably with the holders of Common Stock in all dividends paid on
Common Stock as if such shares of Convertible Exchangeable
Preferred Stock had been converted to shares of Common Stock at
the time of such delivery.
(C) If a Holder of Convertible Exchangeable Preferred Stock
delivers to the Corporation a notice of election to convert prior
to or after receipt by such Holder of a notice of redemption,
such shares of Convertible Exchangeable Preferred Stock shall
cease to accumulate dividends pursuant to paragraph (c) but shall
continue to be entitled to receive all accumulated and unpaid
dividends that such Holder is entitled to receive pursuant to
paragraph (c) through the date of delivery of such notice of
election to convert together with pro rata accrued but unpaid
dividends such Holder is entitled to receive for the period from
the last Dividend Payment Date to the date of delivery of the
notice of election to convert in preference to and in priority
over any dividends on Common Stock. Such accumulated and unpaid
dividends shall be payable to such Holder when, as and if
declared by the Board of Directors, out of funds legally
available for the payment of dividends, as provided in paragraph
(c).
(D) Except as provided above and in paragraph (h)(vii), the
Corporation shall make no payment or adjustment for accumulated
and unpaid dividends on shares of Convertible Exchangeable
Preferred Stock, whether or not in arrears, on conversion of such
shares or for dividends in cash on the shares of Common Stock
issued upon such conversion.
21
(iv) (A) The Corporation shall at all times reserve and keep
available, free from preemptive rights, such number of its authorized
but unissued shares of Common Stock as may be required to effect
conversions of the Convertible Exchangeable Preferred Stock.
(B) Prior to the delivery of any securities that the
Corporation is obligated to deliver upon conversion of the
Convertible Exchangeable Preferred Stock, the Corporation shall
comply with all applicable federal and state laws and regulations
which require action by the Corporation.
(v) The Corporation shall pay any and all issuance, delivery and
transfer taxes in respect of the issuance or delivery of shares of
Common Stock on conversion of the Convertible Exchangeable Preferred
Stock pursuant hereto. The Corporation shall not, however, be required
to pay any tax in respect of any transfer involved in the issuance or
delivery of shares of Common Stock in a name other than that of the
Holder of the Convertible Exchangeable Preferred Stock so converted,
and no such issuance or delivery shall be made unless and until the
Person requesting such issuance or delivery has paid to the
Corporation the amount of any such tax or has established to the
Corporation's satisfaction that such tax has been paid.
(vi) In connection with the conversion of any shares of
Convertible Exchangeable Preferred Stock, no fractions of shares of
Common Stock shall be issued. In lieu thereof the Corporation shall,
at its option, issue a whole share in respect of any fraction of a
share or pay a cash adjustment in respect of such fractional interest
in an amount equal to such fractional interest multiplied by the
Conversion Price Per Common Share on the Conversion Date.
(vii) If the Corporation at any time after the date of issue of
the Convertible Exchangeable Preferred Stock (1) declares a dividend
or makes a distribution on Common Stock payable in Common Stock (or
securities convertible into Common Stock), (2) subdivides or splits
the outstanding Common Stock, (3) combines or reclassifies the
outstanding Common Stock into a smaller number of shares, (4) issues
any shares of its Capital Stock in a reclassification of Common Stock
(including any such reclassification in connection with a
consolidation or merger in
22
which the Corporation is the continuing corporation), or (5)
consolidates with, merges with or into or is converted into any other
Person, the Conversion Price Per Common Share in effect at the time of
the record date for such dividend or distribution or of the effective
date of such subdivision, split, combination, consolidation,
conversion, merger or reclassification shall be adjusted so that the
conversion of the Convertible Exchangeable Preferred Stock after such
time shall entitle the Holder to receive the aggregate number of
shares of Common Stock or other securities of the Corporation (or
shares of any security into which such shares of Common Stock have
been combined, consolidated, converted, merged or reclassified
pursuant to paragraphs (h)(vii)(A)(3), (4) or (5)) which, if the
Convertible Exchangeable Preferred Stock had been converted
immediately prior to such time, such Holder would have owned upon such
conversion and been entitled to receive by virtue of such dividend,
distribution, subdivision, split, combination, consolidation,
conversion, merger or reclassification, assuming such holder of Common
Stock (x) is not a Person with which the Corporation consolidated or
into which the Corporation merged or which merged into the Corporation
or to which such recapitalization, sale or transfer was made, as the
case may be ("constituent Person"), or an affiliate of a constituent
Person and (y) failed to exercise any rights of election as to the
kind or amount of securities, cash and other property receivable upon
such reclassification, change, consolidation, conversion, merger,
recapitalization, sale or transfer (provided, that if the kind or
amount of securities, cash and other property receivable upon such
reclassification, change, consolidation, conversion, merger,
recapitalization, sale or transfer is not the same for each share of
Common Stock held immediately prior to such reclassification, change,
consolidation, conversion, merger, recapitalization, sale or transfer
by other than a constituent Person or an affiliate thereof and in
respect of which such rights of election shall not have been exercised
("non-electing share"), then for the purpose of this paragraph
(h)(vii) the kind and amount of securities, cash and other property
receivable upon such reclassification, change, consolidation,
conversion, merger, recapitalization, sale or transfer by each
non-electing share shall be deemed to be the kind and amount so
receivable per share by a plurality of the non-electing shares). In
any such event referred to in paragraph (h)(vii)(A)(5), effective
provisions shall be made in the certificate or articles of
incorporation of the resulting or surviving corporation, in any
contract, sale, conveyance, lease or transfer or otherwise so that the
provisions
23
set forth herein for the protection of the conversion rights of the
Convertible Exchangeable Preferred Stock shall thereafter continue to
be applicable. Any such resulting or surviving corporation shall
expressly assume the obligation to deliver, upon conversion, such
shares of stock, of securities, cash or property. Such adjustment
shall be made successively whenever any event listed above shall
occur.
(B) Prior to September 30, 2005, if the Corporation issues
or sells any Common Stock (other than Common Stock issued upon
conversion of the Convertible Exchangeable Preferred Stock, upon
exercise or conversion of any security the issuance of which
caused an adjustment under paragraphs (h)(vii)(C) (D) or (E)),
(3) pursuant to any bona fide plan for the benefit of employees
or directors of the Corporation now or hereafter in effect, in an
amount not to exceed 10,000,000 shares of Common Stock, (4) upon
conversion of shares of Convertible Exchangeable Preferred Stock
issued as payment of dividends pursuant to paragraph (c)(ii), or
(5) upon exercise of warrants issued pursuant to the Warrant
Agreement), for a consideration per share (the "Issue Price Per
Common Share") less than the then Conversion Price Per Common
Share, the Conversion Price Per Common Share to be in effect
after such issuance or sale shall be adjusted so that the same
shall equal the price determined by multiplying the Conversion
Price Per Common Share in effect immediately prior to such
issuance or sale by a fraction the numerator of which shall equal
the number of shares of Common Stock outstanding on the date of
such issuance or sale, immediately prior to such issuance or
sale, plus the number of shares of Common Stock which the
aggregate offering price of the total number of shares so offered
would purchase at the Conversion Price Per Common Share in effect
immediately prior to such issuance or sale and the denominator
shall equal the number of shares of Common Stock outstanding on
the date of such issuance or sale, immediately prior to such
issuance or sale, plus the number of additional shares of Common
Stock which are to be issued or sold.
On or after September 30, 2005, if the Corporation issues or
sells any Common Stock (other than (x) Common
24
Stock issued as described in paragraph (h)(vii)(B)(1), (2), (3),
(4) or (5) above or (y) in a bona fide public offering pursuant
to a firm commitment underwriting at a price per share to the
public of not less than 95% of the Closing Price Per Common Share
calculated as of the date the underwriting agreement for such
offering is entered into) for a consideration per share less than
the then Current Market Price Per Common Share, the Conversion
Price Per Common Share to be in effect after such issuance or
sale shall be adjusted so that the same shall equal the price
determined by multiplying the Conversion Price Per Common Share
in effect immediately prior to such issuance or sale by a
fraction the numerator of which shall equal the number of shares
of Common Stock outstanding on the date of such issuance or sale,
immediately prior to such issuance or sale, plus the number of
shares of Common Stock which the aggregate offering price of the
total number of shares so offered would purchase at the Current
Market Price Per Common Share and the denominator shall equal the
number of shares of Common Stock outstanding on the date of such
issuance or sale, immediately prior to such issuance or sale,
plus the number of additional shares of Common Stock which are to
be issued or sold.
If any portion of the Issue Price Per Common Share is in a form
other than cash, the fair market value of such noncash
consideration shall be utilized in the foregoing computation.
Such fair market value shall be determined by the Board of
Directors of the Corporation. The Holders shall be notified
promptly of any consideration other than cash to be received by
the Corporation and furnished with a description of the
consideration and the fair market value thereof, as determined by
the Board of Directors.
(C) Prior to September 30, 2005, if the Corporation fixes a
record date for the issuance of, or issues or sells, rights,
options or warrants entitling the Holders thereof to subscribe
for or purchase shares of Common Stock (or securities convertible
into shares of Common Stock) or convertible securities (other
than (1) pursuant to any bona fide plan for the benefit of
employees or directors of the Corporation now or
25
hereafter in effect, in an amount not to exceed 10,000,000 shares
of Common Stock, (2) shares of Convertible Exchangeable Preferred
Stock issued as payment of dividends pursuant to paragraph
(c)(ii) or (3) warrants issued pursuant to the Warrant
Agreement), at a price per share of Common Stock (including, in
the case of rights, options or warrants, the price at which they
may be exercised, or in the case of convertible securities, the
conversion price per share of Common Stock) (such price per share
being the "New Option Price Per Common Share") less than the then
Conversion Price Per Common Share on such record date or date of
issuance or sale, the Conversion Price Per Common Share shall be
adjusted so that the same shall equal the price determined by
multiplying the Conversion Price Per Common Share in effect
immediately prior to such issuance or sale by a fraction the
numerator of which shall be the number of shares of Common Stock
outstanding on the date of such issuance or sale, immediately
prior to such issuance or sale, plus the number of shares of
Common Stock which the aggregate offering price of the total
number of shares so offered (including the aggregate exercise
price of any rights, options or warrants) would purchase at the
Conversion Price Per Common Share in effect immediately prior to
such issuance or sale (determined by multiplying such total
number of shares by the exercise price of such rights, warrants
or options and dividing the product so obtained by the Conversion
Price Per Common Share in effect immediately prior to such
issuance or sale) and the denominator shall be the number of
shares of Common Stock outstanding on the date of such issuance
or sale, immediately prior to such issuance or sale, plus the
number of additional shares of Common Stock which are to be
issued or sold.
(D) On or after September 30, 2005, if the Corporation fixes
a record date for the issuance of, or issues or sells, rights,
options or warrants entitling the holders thereof to subscribe
for or purchase shares of Common Stock (or securities convertible
into shares of Common Stock) or convertible securities (other
than (1) pursuant to any bona fide plan for the benefit of
employees or directors of the Corporation now or hereafter in
effect, in an amount not to exceed 10,000,000
26
shares of Common Stock, (2) shares of Convertible Exchangeable
Preferred Stock issued as payment of dividends pursuant to
paragraph (c)(ii), or (3) warrants issued pursuant to the Warrant
Agreement), at a New Option Price Per Common Share less than the
then Current Market Price Per Common Share, the Conversion Price
Per Common Share to be in effect after such issuance or sale
shall be adjusted so that the same shall equal the price
determined by multiplying the Conversion Price Per Common Share
in effect immediately prior to such issuance or sale by a
fraction the numerator of which shall equal the number of shares
of Common Stock outstanding on the date of such issuance or sale,
immediately prior to such issuance or sale, plus the number of
shares of Common Stock which the aggregate offering price
(including the aggregate exercise price of any rights options or
warrants) of the total number of shares so offered would purchase
at the Current Market Price Per Common Share and the denominator
shall equal the number of shares of Common Stock outstanding on
the date of such issuance or sale, immediately prior to such
issuance or sale, plus the number of additional shares of Common
Stock which are to be issued or sold.
If any portion of the New Option Price Per Common Share is in a
form other than cash, the fair market value of such noncash
consideration shall be determined as set forth in paragraph
(h)(vii)(B). Such adjustment shall be made successively whenever
such record date is fixed or whenever such rights, options,
warrants or convertible securities are issued or sold; and if
such rights, options, warrants or convertible securities are not
so issued or expire unexercised, or if there is a change in the
number of shares of Common Stock to which the Holders of such
rights, options, warrants or convertible securities are entitled
(other than pursuant to adjustment provisions therein comparable
to those contained in this paragraph (h)(vii)), the Conversion
Price Per Common Share shall again be adjusted to be the
Conversion Price Per Common Share which would then be in effect
if such record date had not been fixed or such rights, options,
warrants or convertible securities not so issued, in the former
event, or the Conversion Price Per Common Share which would then
be in effect if such Holder had initially been entitled
27
to such changed number of shares of Common Stock, in the latter
event. No adjustment of the Conversion Price Per Common Share
shall be made pursuant to this paragraph (h)(vii)(C) upon the
issuance or sale of any rights, options, warrants or convertible
securities to the extent that the Conversion Price Per Common
Share has already been adjusted upon the setting of any record
date relating to such rights, options, warrants or convertible
securities and such adjustment fully reflects the number of
shares of Common Stock to which the holders of such rights,
options, warrants or convertible securities are entitled and the
price payable therefor.
(E) If the Corporation fixes a record date for a
distribution to holders of Common Stock (including any such
distribution made in connection with a consolidation or merger in
which the Corporation is the continuing corporation) of evidences
of indebtedness, assets or other property (other than dividends
payable in Common Stock or rights, options or warrants referred
to in, and for which an adjustment is made pursuant to, paragraph
(h)(vii)(C)), the Conversion Price Per Common Share to be in
effect after such record date shall be reduced by the fair market
value (determined as set forth in paragraph (h)(vii)(B)) of the
portion of the assets, other property or evidence of indebtedness
so to be distributed which is applicable to one share of Common
Stock. Such adjustments shall be made successively whenever such
a record date is fixed; and if such distribution is not so made,
the Conversion Price Per Common Share shall again be adjusted to
be the Conversion Price Per Common Share which would then be in
effect if such record date had not been fixed.
(F) No adjustment to the Conversion Price Per Common Share
pursuant to any of paragraphs (h)(vii)(B), (C), (D) or (E) shall
be required unless such adjustment would require an adjustment of
at least 1% in the Conversion Price Per Common Share; provided
that any adjustments which by reason of this paragraph
(h)(vii)(F) are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. All
calculations under this paragraph (h)(vii) shall be made to the
nearest four decimal points.
28
(G) If, at any time as a result of the provisions of this
paragraph (h)(vii), Holders of Convertible Exchangeable Preferred
Stock upon subsequent conversion shall become entitled to receive
any shares of capital stock of the Corporation other than Common
Stock, the number of such other shares so receivable upon
conversion of the Convertible Exchangeable Preferred Stock shall
thereafter be subject to adjustment from time to time in a manner
and on terms as nearly equivalent as practicable to the
provisions contained herein.
All adjustments pursuant to this paragraph (h) shall be notified to the Holders
of Convertible Exchangeable Preferred Stock, and such notice shall be
accompanied by a schedule of computations of the adjustments.
(i) Reissuance of Convertible Exchangeable Preferred Stock. Shares of
Convertible Exchangeable Preferred Stock that have been issued and
reacquired in any manner, including shares purchased or redeemed or
exchanged, shall (upon compliance with any applicable provisions of the
laws of Delaware) have the status of authorized and unissued shares of
Preferred Stock undesignated as to series and may be redesignated and
reissued as part of any series of Preferred Stock, provided that any
issuance of such shares as Convertible Exchangeable Preferred Stock must be
in compliance with the terms hereof.
(j) Business Day. If any payment, redemption or exchange shall be
required by the terms hereof to be made on a day that is not a Business
Day, such payment, redemption or exchange shall be made on the immediately
succeeding Business Day.
(k) Definitions. As used in this Certificate of Designations, the
following terms shall have the following meanings (with terms defined in
the singular having comparable meanings when used in the plural and vice
versa), unless the context otherwise requires:
"Active Material Insurance Subsidiary" means Bankers Life and
Casualty Company, Conseco Life Insurance Company, Conseco Annuity
Assurance Company, Conseco Health Insurance Company and any other
Insurance Subsidiary which, on a stand-alone basis (excluding any
equity ownership in its Subsidiaries), has in excess of 5% of New
Annualized Premiums of the Conseco Insurance Group.
29
"Aggregate RBC Ratio" means the Risk-Based Capital Ratio for all
Insurance Subsidiaries taken as a whole.
"A.M. Best" means A.M. Best Company, together with any Person
succeeding thereto by merger, consolidation or acquisition of all or
substantially all of its assets, including substantially all of its
business of rating insurance companies.
"Annual Statement" means the annual statutory financial statement
of any Insurance Subsidiary required to be filed with the insurance
commissioner (or similar authority) of its jurisdiction of
incorporation, which statement shall be in the form required by such
Insurance Subsidiary's jurisdiction of incorporation or, if no
specific form is so required, in the form of financial statements
permitted by such insurance commissioner (or such similar authority)
to be used for filing annual statutory financial statements and shall
contain the type of information permitted or required by such
insurance commissioner (or such similar authority) to be disclosed
therein, together with all exhibits or schedules filed therewith.
"Bankers Life Group" means Bankers Life and Casualty Company,
Bankers Life Insurance Company of Illinois and Colonial Penn Life
Insurance Company.
"Board of Directors" shall have the meaning set forth in the
introductory paragraph of this Certificate of Designations.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which banking institutions in The
Borough of Manhattan, The City of New York, New York are authorized or
obligated by law or executive order to close.
"Calculation Period" means, with respect to any ratio or
calculation, the period for which such ratio or calculation is being
calculated.
"Capital Stock" means (i) in the case of a corporation, corporate
stock, (ii) in the case of any association or business entity, any and
all shares, interests, participations, rights or other equivalents
(however designated) of corporate stock and (iii) in the case of a
partnership, partnership interests (whether general or limited).
30
"Capitalized Lease Liabilities" means, with respect to any
Person, all monetary obligations of such Person under any leasing or
similar arrangement which, in accordance with GAAP, would be
classified as a capitalized lease, and, for purposes of this
Certificate of Designations, the amount of such obligations shall be
the capitalized amount thereof, determined in accordance with GAAP,
and the stated maturity thereof shall be the date of the last payment
of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without
payment of a penalty.
"Certificate of Incorporation" shall have the meaning set forth
in the introductory paragraph of this Certificate of Designations.
"Closing Price Per Common Share" means (A) if the shares of such
class of Common Stock are listed and traded on the NYSE, the closing
price per share of Common Stock on such day as reported on the NYSE
Consolidated Tape; (B) if the shares of such class of Common Stock are
not listed and traded on the NYSE, the closing price per share of
Common Stock on such day as reported by the principal national
securities exchange on which the shares are listed and traded; (C) if
the shares of such class of Common Stock are not listed and traded on
any such securities exchange and are reported on Nasdaq, the closing
price per share of Common Stock on such day on Nasdaq; or (D) if the
shares of such class of Common Stock are not traded on Nasdaq, the
average of the last reported bid and last reported asked price not
identified as having been reported late, on such day as reported by
Nasdaq. If on any determination date the shares of such class of
Common Stock are not quoted by any such organization, the Closing
Price Per Common Share shall be the fair market value of such shares
on such determination date as determined by the Board of Directors.
"Combined Statutory Statement" means a statement combining the
Quarterly Statements or Annual Statements, as applicable, of all the
Insurance Subsidiaries.
"Common Stock" of any Person means Capital Stock of such Person
that does not rank prior, as to the payment of dividends or as to the
distribution of assets upon any voluntary or involuntary liquidation,
dissolution or winding-up of such Person, to shares of Capital Stock
of any other class of such Person.
31
Unless otherwise specified, "Common Stock" means Common Stock of the
Corporation.
"Conseco EBITDA" means, for any Calculation Period, the
consolidated Net Income of the Corporation for such period plus,
without duplication and to the extent reflected as a charge in the
statement of such consolidated Net Income for such period, the sum of
(a) income tax expense, (b) interest expense, including, to the extent
included as interest expense in accordance with GAAP, amortization or
write off of debt discount and debt issuance costs and commissions,
discounts and other fees and charges associated with Indebtedness, (c)
depreciation and amortization expense of tangible and intangible
assets, (d) any losses on sales of assets outside of the ordinary
course of business, (e) any realized or unrealized losses on
Investments of Insurance Subsidiaries, (f) solely for any Calculation
Period ending on or prior to March 31, 2005, cash charges not
exceeding $20,000,000 in the aggregate and other non-cash charges, in
each case related to the Reorganization Transactions and incurred on
or prior to June 30, 2004, (g) any other non-recurring cash charges
(not to exceed $25,000,000 in the aggregate for all Calculation
Periods) and non-recurring non-cash charges (not to exceed $50,000,000
in the aggregate for all Calculation Periods) taken by any Insurance
Subsidiary arising out of the restructuring, consolidation, severance
or discontinuance of any portion of the operations, employees and/or
management of such Insurance Subsidiary or any businesses thereof, (h)
non-cash charges reflecting the cumulative effect of changes in GAAP
to the extent such charges relate to any prior Calculation Period and
(i) non-cash charges taken to write off any goodwill included in the
Corporation's balance sheet on the Issue Date to the extent such
charges are required by FAS 142, and minus, without duplication and to
the extent reflected as a gain in the statement of such consolidated
Net Income for such period, the sum of (a) any gains on sales of
assets outside of the ordinary course of business and (b) realized or
unrealized gains on Investments of Insurance Subsidiaries, all as
determined on a consolidated basis for such Calculation Period.
"Conseco Insurance Group" means all Insurance Subsidiaries of the
Corporation from time to time, other than any Insurance Subsidiary
that is part of the Bankers Life Group.
"Contingent Obligation" means, without duplication, any
agreement, undertaking or arrangement by which any Person
32
guarantees, endorses or otherwise becomes or is contingently liable
upon (by direct or indirect agreement, contingent or otherwise, to
provide funds for payment, to supply funds to, or otherwise to invest
in, a debtor, or otherwise to assure a creditor against loss) the
debt, obligation or other liability of any other Person (other than by
endorsements of instruments in the course of collection), or
guarantees the payment of dividends or other distributions upon the
shares of any other Person; provided, that the obligations of any
Person under Reinsurance Agreements or in connection with Investments
of Insurance Subsidiaries permitted by the applicable Department shall
not be deemed Contingent Obligations of such Person. The amount of any
Contingent Obligation of any Person shall (subject to any limitation
set forth therein) be deemed to be an amount equal to the stated or
determinable amount of the related primary obligation, or portion
thereof, in respect of which such Contingent Obligation is made or, if
not stated or determinable, the maximum reasonably anticipated
liability in respect thereof as determined by such Person in good
faith.
"Conversion Date" has the meaning set forth in paragraph
(h)(ii)(C) hereof.
"Conversion Price Per Common Share" has the meaning set forth in
paragraph (h)(i) hereof.
"Conversion Ratio" has the meaning set forth in paragraph (h)(i)
hereof.
"Convertible Exchangeable Preferred Stock" shall have the meaning
set forth in paragraph (a) hereof.
"Corporation" has the meaning set forth in the introductory
paragraph of this Certificate of Designations.
"Credit Agreement" means the Credit Agreement dated on or about
the Issue Date among the Corporation, the lenders party thereto, and
Bank of America, N.A. as agent, as amended, restated or refinanced and
in effect from time to time.
"Current Market Price Per Common Share" means the volume weighted
arithmetic mean of the Daily Price Per Common Share for the ten
consecutive Trading Days ending on the date of the event giving rise
to such calculation.
33
"Daily Price Per Common Share" means (A) if the shares of such
class of Common Stock are listed and traded on the NYSE, the volume
weighted average price per share of Common Stock on such day as
reported on the NYSE Consolidated Tape; (B) if the shares of such
class of Common Stock are not listed and traded on the NYSE, the
volume weighted average price per share of Common Stock on such day as
reported by the principal national securities exchange on which the
shares are listed and traded; (C) if the shares of such class of
Common Stock are not listed and traded on any such securities exchange
and are reported on the Nasdaq, the volume weighted average price per
share of Common Stock on such day on Nasdaq; or (D) if the shares of
such class of Common Stock are not traded on Nasdaq, the average of
the highest reported bid and lowest reported asked price not
identified as having been reported late, on such day as reported by
Nasdaq. If on any determination date the shares of such class of
Common Stock are not quoted by any such organization, the Daily Price
Per Common Share shall be the fair market value of such shares on such
determination date as determined by the Board of Directors.
"Department" means, with respect to any Insurance Subsidiary, the
Governmental Authority of such Insurance Subsidiary's state of
domicile with which such Insurance Subsidiary is required to file its
Annual Statement.
"Dividend Payment Date" means March 1 and September 1 of each
year.
"Dividend Period" means the Initial Dividend Period and,
thereafter, each semi-annual period commencing on a Dividend Payment
Date and ending one day before the next Dividend Payment Date.
"Dividend Record Date" means February 15 and August 15 of each
year.
"Exchange Common Stock" has the meaning set forth in paragraph
(g)(i).
"Exchange Date" has the meaning set forth in paragraph
(g)(ii)(A).
"Exchange Rate" has the meaning set forth in paragraph (g)(i).
34
"Fiscal Quarter" means a fiscal quarterly period of the
Corporation.
"GAAP" means generally accepted accounting principles set forth
from time to time in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial
Accounting Standards Board (or agencies with similar functions of
comparable stature and authority within the U.S. accounting
profession), which are applicable to the circumstances as of the date
of determination.
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof, any central bank (or
similar monetary or regulatory authority) thereof, any entity
exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, and any
corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing, including any
board of insurance, insurance department or insurance commissioner.
"Holder" means a holder of shares of Convertible Exchangeable
Preferred Stock as reflected in the stock books of the Corporation.
"Immaterial Subsidiary" means any Non-Insurance Subsidiary that
(a) has assets with an aggregate fair market value less than
$1,000,000, (b) has aggregate revenues less than $1,000,000 for the
period of four consecutive Fiscal Quarters most recently ended, (c)
has no Indebtedness (other than intercompany Indebtedness permitted
under clause (ix) of Schedule D hereto and other Indebtedness in an
aggregate principal amount not exceeding at any time one-half of the
fair market value of the assets of such Subsidiary at such time), (d)
is not integral to the business or operations of the Corporation or
its Subsidiaries (other than Immaterial Subsidiaries), (e) has no
Subsidiaries (other than Immaterial Subsidiaries) and (f) is not a
guarantor of the obligations of the Corporation under the Credit
Agreement; provided that each of CNC Entertainment Nevada, Inc. and
Conseco Risk Management, Inc. shall be deemed to be an Immaterial
Subsidiary for so long as such Person meets all the requirements set
forth above other than, prior to the end of the
35
fourth full Fiscal Quarter after the Issue Date, the requirements of
clause (b) above.
"Immediate Trigger Event" means any of the events described in
clauses (i) through (iv) under the definition of Trigger Event hereof.
"Indebtedness" means, with respect to any Person, without
duplication: (a) all obligations of such Person for borrowed money or
in respect of loans or advances; (b) all obligations of such Person
evidenced by bonds, debentures, notes or other similar instruments;
(c) all obligations in respect of letters of credit, whether or not
drawn, and bankers' acceptances and letters of guaranty issued for the
account or upon the application or request of such Person; (d) all
Capitalized Lease Liabilities of such Person; (e) all obligations of
such Person in respect of Swap Contracts; (f) all obligations of such
Person to pay the deferred purchase price of property or services
which are included as liabilities in accordance with GAAP (other than
accrued expenses incurred and trade accounts payable in each case in
the ordinary course of business), and all obligations secured by a
Lien on property owned or being purchased by such Person (including
obligations arising under conditional sales or other title retention
agreements); (g) any obligations of a partnership of the kind referred
to in clauses (a) through (f) above or clause (h) below in which such
Person is a general partner; and (h) all Contingent Obligations of
such Person in connection with Indebtedness or obligations of others
of the kinds referred to in clauses (a) through (g) above.
"Initial Dividend Period" means the dividend period commencing on
the Issue Date and ending on March 1, 2004.
"Insurance Subsidiary" means any Subsidiary which is required to
be licensed as an insurer or reinsurer.
"Investment" means any advance, loan, extension of credit (by way
of guaranty or otherwise) or capital contribution to, or purchase
(including purchases financed with equity) of any Capital Stock,
bonds, notes, debentures or other debt securities of, or any other
investment in, any Person.
"Issue Date" means September 10, 2003.
"Junior Securities" shall have the meaning set forth in paragraph
(b)(i) hereof.
36
"License" means any license, certificate of authority, permit or
other authorization which is required to be obtained from any
Governmental Authority in connection with the operation, ownership or
transaction of insurance business.
"Lien" means any security interest, mortgage, deed of trust,
pledge, hypothecation, assignment, charge or deposit arrangement,
encumbrance, lien (statutory or other) or preferential arrangement of
any kind or nature whatsoever in respect of any property (including
those created by, arising under or evidenced by, any conditional sale
or other title retention agreement, the interest of a lessor under a
capital lease or any financing lease having substantially the same
economic effect as any of the foregoing) and any contingent or other
agreement to provide any of the foregoing, but not including the
interest of a lessor under an operating lease.
"Material Adverse Regulatory Effect" means a material adverse
change in, or a material adverse effect upon, the business,
properties, condition (financial or otherwise) or prospects of the
Corporation or the Corporation and its Subsidiaries taken as a whole.
"Material Adverse Regulatory Event" means the occurrence of any
of the following events: (a) the applicable Department of any Material
Insurance Subsidiary or a court of competent jurisdiction finds that
any Material Insurance Subsidiary (x) is in hazardous financial
condition, if such finding, together with all other such findings,
could reasonably be expected to have a Material Adverse Regulatory
Effect or (y) is insolvent, (b) any Material Insurance Subsidiary is
required to comply with any letter, bulletin or order of a state
insurance regulator materially restricting its operations or business,
or enters into an agreement (whether oral or written) with any state
insurance regulator for substantially the same purpose, and such
event, together with all other such events, could reasonably be
expected to have a Material Adverse Regulatory Effect; (c) any
Material Insurance Subsidiary becomes subject to orders of
supervision, conservation, rehabilitation or liquidation, by agreement
or otherwise, or has a receiver or supervisor appointed or (d) any
material License of any Material Insurance Subsidiary is suspended or
revoked and such suspension or revocation continues for 30 days, or
any renewal application by any Material Insurance Subsidiary for any
material License is disapproved or ultimately fails to be approved,
and such event, together with all other such events, could reasonably
be
37
expected to have a material adverse effect upon the business,
properties, condition (financial or otherwise) or prospects of such
Material Insurance Subsidiary.
"Material Insurance Subsidiary" means (i) any Active Material
Insurance Subsidiary and (ii) any other Insurance Subsidiary having
assets as determined pursuant to SAP greater than or equal to 10% of
the aggregate assets as determined pursuant to SAP of all Insurance
Subsidiaries as determined as of the date of the most recently
prepared Combined Statutory Statement.
"Nasdaq" means the National Association of Securities Dealers,
Inc. Automated Quotation Market System.
"Net Income" means, for any Person for any Calculation Period,
the net income (or loss) of such Person for such period as determined
in accordance with GAAP.
"Net Proceeds" means, with respect to any issuance of Capital
Stock of, or capital contribution to, the Corporation or any
Subsidiary, or any incurrence of Indebtedness by the Corporation or
any of its Subsidiaries, the proceeds thereof in the form of cash and
cash equivalents, minus the costs and expenses paid or payable within
60 days of incurrence (so long as, if any such amount is not paid
within such period, it shall become "Net Proceeds" on the last day of
such period) by the Corporation or any of its Subsidiaries to third
parties in connection therewith (including legal fees, notarial fees,
accountants fees, investment banking fees, underwriting discounts and
commissions and other customary fees and expenses incurred in
connection therewith) and required to be paid in cash or deducted from
the proceeds of such issuance, contribution or incurrence.
"New Annualized Premiums" means, with respect to any Insurance
Subsidiary, the aggregate annualized first year insurance premiums of
such Insurance Subsidiary; provided that (x) if such Insurance
Subsidiary is part of the Conseco Insurance Group, New Annualized
Premiums on any single premium annuity issued by such Insurance
Subsidiary shall be calculated as 1/15th of such premium and (y) if
such Insurance Subsidiary is part of the Bankers Life Group, New
Annualized Premiums on any single premium annuity issued by such
Insurance Subsidiary shall be calculated as 6% of such premium.
38
"Non-Insurance Subsidiary" means any Subsidiary which is not an
Insurance Subsidiary.
"Non-Voting Observer" means a person selected by the holders of
the shares of Common Stock on the same basis as if such selection was
for the election of a director pursuant to Delaware law, which
Non-Voting Observer may be a director, officer or employee of any such
holder.
"NYSE" means the New York Stock Exchange, Inc.
"Optional Redemption Price" shall have the meaning set forth in
paragraph (e)(i)(A) hereof.
"Parity Securities" shall have the meaning set forth in paragraph
(b)(ii) hereof.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint stock
corporation, trust, estate, unincorporated organization or government
or any agency or political subdivision thereof.
"Plan of Reorganization" means the Corporation's Joint Plan of
Reorganization dated as of March 12, 2003, as amended through the
Issue Date.
"Preferred Stock," as applied to the Capital Stock of any Person,
means Capital Stock of such Person of any class or classes (however
designated) that ranks prior, as to the payment of dividends or as to
the distribution of assets upon any voluntary or involuntary
liquidation, dissolution or winding-up of such Person, to shares of
Capital Stock of any other class of such Person.
"Quarterly Statement" means the quarterly statutory financial
statement of any Insurance Subsidiary required to be filed with the
insurance commissioner (or similar authority) of its jurisdiction of
incorporation or, if no specific form is so required, in the form of
financial statements permitted by such insurance commissioner (or such
similar authority) to be used for filing quarterly statutory financial
statements and shall contain the type of financial information
permitted by such insurance commissioner (or such similar authority)
to be disclosed therein, together with all exhibits or schedules filed
therewith.
39
"Redemption Date," with respect to any shares of Convertible
Exchangeable Preferred Stock, means the date on which such shares of
Convertible Exchangeable Preferred Stock are redeemed by the
Corporation.
"Redemption Notice" shall have the meaning set forth in paragraph
(e)(ii)(A) hereof.
"Reinsurance Agreements" means any agreement, contract, treaty,
certificate or other arrangement by which any Insurance Subsidiary
agrees to transfer or cede to another insurer all or part of the
liability assumed or assets held by it under one or more insurance,
annuity, reinsurance or retrocession policies, agreements, contracts,
treaties, certificates or similar arrangements. Reinsurance Agreements
shall include, but not be limited to, any agreement, contract, treaty,
certificate or other arrangement which is treated as such by the
applicable Department.
"Reorganization Transactions" means the transactions contemplated
by the Plan of Reorganization to occur upon the effective date
thereof.
"Risk-Based Capital Ratio" means, with respect to any Insurance
Subsidiary or the Insurance Subsidiaries taken as a whole, on any date
of determination, one-half of the ratio (expressed as a percentage) of
(a) the aggregate Total Adjusted Capital (as defined by the relevant
Insurance Subsidiary's Department) for such Insurance Subsidiary or
Insurance Subsidiaries to (b) the aggregate Authorized Control Level
Risk-Based Capital (as defined by the relevant Insurance Subsidiary's
Department) for such Insurance Subsidiary or Insurance Subsidiaries.
"SAP" means, with respect to any Insurance Subsidiary, the
statutory accounting practices prescribed or permitted by the
insurance commissioner (or other similar authority) in the
jurisdiction of such Insurance Subsidiary for the preparation of
annual statements and other financial reports by insurance companies
of the same type as such Insurance Subsidiary, which are applicable to
the circumstances as of the date of filing of such statement or
report.
"Senior Debt and Equity Securities" shall have the meaning set
forth in paragraph (b)(iii) hereof.
40
"Senior Securities" shall have the meaning set forth in paragraph
(b)(iii) hereof.
"Subsidiary" of a Person means any corporation, partnership,
limited liability company, limited liability partnership, joint
venture, trust, association or other unincorporated organization of
which or in which such Person and such Person's Subsidiaries own
directly or indirectly more than 50% of (a) the combined voting power
of all classes of stock having general voting power under ordinary
circumstances to elect a majority of the board of directors, if it is
a corporation, (b) the voting or managing interests (which shall mean
the general partner in the case of a partnership), if it is a
partnership, joint venture or similar entity, (c) the beneficial
interest, if it is a trust, association or other unincorporated
organization or (d) the membership interest, if it is a limited
liability company; provided that none of Paladin Entertainment
Holdings, LLC ("Paladin"), 767 LLC or Resortport Investment
Partnership shall be considered a Subsidiary for any purpose of this
Certificate of Designations for so long as (w) such Person has no
Indebtedness other than intercompany Indebtedness and non-recourse
Indebtedness, (x) the aggregate principal amount of Indebtedness of
such Person (other than intercompany Indebtedness) does not exceed 85%
of the fair market value of the assets of such Person, (y) such Person
is not integral to the business or operations of the Corporation or
any Subsidiary and (z) in the case of Paladin, the accounts thereof
are not consolidated or are not required pursuant to GAAP to be
consolidated with those of the Corporation in the Corporation's
consolidated financial statements. Unless otherwise specified,
"Subsidiary" means a Subsidiary of the Corporation.
"Swap Contract" means any agreement, whether or not in writing,
relating to any transaction that is a rate swap, basis swap, forward
rate transaction, commodity swap, commodity option, equity or equity
index swap or option, bond, note or bill option, interest rate option,
forward foreign exchange transaction, cap, collar or floor
transaction, currency swap, cross-currency rate swap, swaption,
currency option or any other similar transaction (including any option
to enter into any of the foregoing) or any combination of the
foregoing, and, unless the context otherwise clearly requires, any
master agreement relating to or governing any or all of the foregoing.
41
"Total Liquidation Preference" means, with respect to any share
of Convertible Exchangeable Preferred Stock and as of any date, the
liquidation preference for such share plus, without duplication, an
amount equal to accumulated and unpaid dividends thereon (whether or
not declared) to such date, plus an amount equal to a prorated
dividend for the period from the last Dividend Payment Date to such
date.
"Trading Day" means a day on which the specified securities
exchange or quotation system is open for trading or quotation;
provided, however, if no closing price, sale price or bid or asked
price, as the case may be, is reported by such securities exchange or
quotation system in respect of the Common Stock for such Trading Day,
such day or days will be disregarded in any relevant calculation and
will be deemed not to have existed when ascertaining any period of
consecutive Trading Days.
"Trigger Event" means any of (i) a reduction in the claims pay
rating assigned to any Active Material Insurance Subsidiary by A.M.
Best to a level (counting any "+" or "-" modifier as a separate level)
below the level prevailing on September 10, 2003 or by two or more
levels (counting any "+" or "-" modifier as a separate level) in any
six-month period, (ii) the occurrence of an Event of Default (as
defined in the Credit Agreement) with respect to any payment of
principal or interest under the Credit Agreement which Event of
Default is continuing, (iii) the occurrence of any Material Adverse
Regulatory Event with respect to any Material Insurance Subsidiary,
(iv) the Convertible Exchangeable Preferred Stock becoming convertible
in accordance with the provisions of paragraph (h) hereof, (v) Conseco
EBITDA as of the end of any Fiscal Quarter set forth in Schedule A
hereto for the four Fiscal Quarters then ended (or, if less, the
number of full fiscal Quarters commencing after the Issue Date) being
less than the amount set forth in such Schedule for such Fiscal
Quarter, (vi) the Risk-Based Capital Ratio for any Active Material
Insurance Subsidiary set forth in Schedule B hereto as at the end of
any fiscal year of the Corporation ending after the Issue Date being
less than the ratio set forth in such Schedule for such Active
Material Insurance Subsidiary as at the end of such fiscal year and
(vii) the Aggregate RBC Ratio as at the end of any Fiscal Quarter set
forth in Schedule C hereto being less than the ratio set forth in such
Schedule for such Fiscal Quarter.
42
"Warrant Agreement" means the warrant agreement dated the Issue
Date between the Corporation and the Warrant Agent named therein.
43
SCHEDULE A
CONSECO EBITDA
---------------------------------------------- ------------------------
--------------------------------------------- ------------------------
Fiscal Quarter Ending Amount
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
June 30, 2004 $632,000,000
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
September 30, 2004 $877,000,000
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
December 31, 2004 $878,000,000
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
March 31, 2005 $878,000,000
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
June 30, 2005 $879,000,000
---------------------------------------------- ------------------------
44
SCHEDULE B
<TABLE>
<CAPTION>
MINIMUM RISK-BASED CAPITAL RATIO
------------- --------------- --------------- ---------------- --------------- ---------------
Each other
Conseco Conseco Active
Bankers Life Conseco Life Annuity Health Material
and Casualty Insurance Assurance Insurance Insurance
Fiscal Year Company Company Company Company Subsidiary
------------- --------------- --------------- ---------------- --------------- ---------------
------------- --------------- --------------- ---------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
2003 125% 125% 125% 165%* 175%
------------- --------------- --------------- ---------------- --------------- ---------------
------------- --------------- --------------- ---------------- --------------- ---------------
2004 145% 150% 152% 152% 175%
------------- --------------- --------------- ---------------- --------------- ---------------
</TABLE>
* If the proposed merger of Conseco Life Insurance Company with and into
Conseco Health Insurance Company shall have been consummated on or prior to
December 31, 2003, the relevant ratio for 2003 shall instead be 145%.
45
SCHEDULE C
AGGREGATE RISK-BASED CAPITAL RATIO
---------------------------------------------- ------------------------
Fiscal Quarter Ending Ratio
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
March 31, 2004 157%
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
June 30, 2004 165%
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
September 30, 2004 174%
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
December 31, 2004 182%
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
March 31, 2005 185%
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
June 30, 2005 188%
---------------------------------------------- ------------------------
46
SCHEDULE D
PERMITTED INDEBTEDNESS
The Corporation and its Subsidiaries shall be permitted to incur the
following Indebtedness:
(i) Indebtedness under the Credit Agreement in an aggregate
principal amount not to exceed $1,400,000,000 at any time outstanding;
(ii) any Surplus Debentures issued by any Insurance Subsidiary to
the Corporation or any of its Subsidiaries that remain outstanding on
the Issue Date, and extensions, renewals or replacements thereof;
(iii) Permitted Transactions entered into by Insurance
Subsidiaries;
(iv) Permitted Swap Obligations;
(v) Indebtedness existing on the Issue Date, and extensions,
renewals or replacements thereof, provided that no such extension,
renewal or replacement shall increase the principal amount thereof,
except to the extent the increase would otherwise be permitted under
this Schedule, or result in an earlier maturity date or decreased
average weighted life;
(vi) non-recourse Indebtedness of Insurance Subsidiaries incurred
in the ordinary course of business resulting from the sale or
securitization of non-admitted assets, policy loans, CBOs and CMOs;
(vii) Capitalized Lease Liabilities and Purchase Money Debt in an
aggregate principal amount not to exceed $50,000,000 at any time
outstanding;
(viii) intercompany Indebtedness (including Surplus Debentures)
among the Corporation and its Subsidiaries (other than Excluded
Subsidiaries) and among the Subsidiaries (other than Excluded
Subsidiaries);
(ix) intercompany Indebtedness of Excluded Subsidiaries in an
aggregate principal amount not to exceed $10,000,000 at any time
outstanding;
47
(x) Indebtedness in respect of letters of credit issued in
connection with reinsurance transactions entered into in the ordinary
course of business;
(xi) Indebtedness in respect of surety and other similar bonds in
the ordinary course of business and consistent with past practice;
(xii) other secured Indebtedness in an aggregate principal amount
not to exceed the greater of (A) $10,000,000 and (B) the lesser of (x)
2% of Modified Total Adjusted Capital and (y) $50,000,000 at any time
outstanding;
(xiii) other unsecured Indebtedness in an aggregate principal
amount not to exceed the greater of (A) $50,000,000 and (B) the lesser
of (x) 10% of Modified Total Adjusted Capital and (y) $250,000,000 at
any time outstanding; and
(xiv) Contingent Obligations in respect of Indebtedness permitted
under (vii), (xii) or (xiii).
"Capital and Surplus" means, as to any Insurance Subsidiary, as of any
date, the total amount shown on line 38, page 3, column 1 of the Annual
Statement of such Insurance Subsidiary, or an amount determined in a consistent
manner for any date other than one as of which an Annual Statement is prepared.
"CBOs" means notes or other instruments (other than CMOs) secured by
collateral consisting primarily of debt securities and/or other types of debt
obligations, including loans.
"CMOs" means notes or other instruments secured by collateral consisting
primarily of mortgages, mortgage-backed securities and/or other types of
mortgage-related obligations.
"Excluded Subsidiary" means any Subsidiary that is a Foreign Subsidiary,
non-Wholly-Owned Subsidiary or Immaterial Subsidiary.
"Foreign Subsidiary" means a Subsidiary (which may be a corporation,
limited liability company, partnership or other legal entity) organized under
the laws of a jurisdiction outside the United States, and conducting
substantially all its operations outside the United States, other than any such
entity that is (whether as a matter of law, pursuant to an election by such
entity or otherwise) treated as a partnership in which any Subsidiary is a
partner or as a branch of any Subsidiary for United States income tax purposes.
48
"Modified Total Adjusted Capital" means, at any date, the aggregate Total
Adjusted Capital (as defined by each relevant Insurance Subsidiary's Department)
of the Insurance Subsidiaries taken as a whole, as determined as of such date;
provided that not more than $150,000,000 of anticipated future benefit of tax
loss carry-forwards may be included for purposes of determining Modified Total
Adjusted Capital at any date.
"Permitted Swap Obligations" means all obligations (contingent or
otherwise) of the Corporation or any Subsidiary existing or arising under Swap
Contracts, provided that each of the following criteria is satisfied: (a) such
obligations are (or were) entered into by such Person in the ordinary course of
business for the purpose of directly mitigating risks associated with
liabilities, commitments or assets held by such Person, or changes in the value
of securities issued by such Person in conjunction with a securities repurchase
program not otherwise prohibited under the Credit Agreement, and not for
purposes of speculation or taking a "market view;" and (b) such Swap Contracts
do not contain any provision ("walk-away" provision) exonerating the
non-defaulting party from its obligation to make payments on outstanding
transactions to the defaulting party.
"Permitted Transactions" means (a) mortgage-backed security transactions in
which an investor sells mortgage collateral, such as securities issued by the
Government National Mortgage Association and the Federal Home Loan Mortgage
Corporation for delivery in the current month while simultaneously contracting
to repurchase "substantially the same" (as determined by the Public Securities
Association and GAAP) collateral for a later settlement, (b) transactions in
which an investor lends cash to a primary dealer and the primary dealer
collateralizes the borrowing of the cash with certain securities, (c)
transactions in which an investor lends securities to a primary dealer and the
primary dealer collateralizes the borrowing of the securities with cash
collateral, (d) transactions in which an investor makes loans of securities to a
broker-dealer under an agreement requiring such loans to be continuously secured
by cash collateral or United States government securities and (e) transactions
in which a federal home loan mortgage bank (a "FHLMB") makes loans to an
Insurance Subsidiary, which are sufficiently secured by appropriate assets of
such Insurance Subsidiary consisting of government agency mortgage-backed
securities, in accordance with the rules, regulations and guidelines of such
FHLMB for its loan programs.
"Purchase Money Debt" means Indebtedness incurred by a Person in connection
with the purchase of fixed or capital assets by such Person, in which such
assets the seller or financier thereof has taken or retained a Lien therein;
provided that (x) any such Lien attaches to such assets concurrently with or
within 120 days after the purchase thereof by such Person and (y) at the time of
49
incurrence of such Indebtedness, the aggregate principal amount of such
Indebtedness shall not exceed the costs of the assets so purchased plus fees and
expenses reasonably related thereto.
"Surplus Debentures" means, as to any Insurance Subsidiary, debt securities
of such Insurance Subsidiary issued to the Corporation or any other Subsidiary
the proceeds of which are permitted to be included, in whole or in part, as
Capital and Surplus of such Insurance Subsidiary as approved and permitted by
the applicable Department.
"United States" and "U.S." each means the United States of America.
"Wholly-Owned Subsidiary" means any corporation in which (other than
directors' and national citizen qualifying shares required by law) 100% of the
capital stock of each class having ordinary voting power, and 100% of the
capital stock of every other class, in each case (or, in the case of Persons
other than corporations, membership interests or other equity interests), at the
time as of which any determination is being made, is owned, beneficially and of
record, by the Corporation, or by one or more of the other Wholly-Owned
Subsidiaries, or both.
50
IN WITNESS WHEREOF, the undersigned has signed this Certificate this
th day of September, 2003.
-----
CONSECO, INC
By:
--------------------------------------------
Name:
Title:
Attested By:
-----------------------------------------------
Name:
Title:
51
Exhibit 4.2
================================================================================
CONSECO, INC.
AND
WACHOVIA BANK, N.A.,
as Warrant Agent
=================================================
Series A Warrant Agreement
Dated as of September 10, 2003
Warrants to Purchase
Shares of Common Stock
=================================================
================================================================================
TABLE OF CONTENTS
<TABLE>
<S><C> <C> <C>
ARTICLE 1 DEFINITIONS.............................................................................................1
Section 1.01 Definitions...............................................................................1
Section 1.02 Rules of Construction.....................................................................4
ARTICLE 2 APPOINTMENT OF WARRANT AGENT............................................................................4
Section 2.01 Appointment of Warrant Agent..............................................................4
ARTICLE 3 THE WARRANTS............................................................................................4
Section 3.01 Form and Dating; Legends..................................................................4
Section 3.02 Execution and Countersignature............................................................5
Section 3.03 Warrant Registrar and Countersignature Agent..............................................5
Section 3.04 Replacement Warrants......................................................................5
Section 3.05 Outstanding Warrants......................................................................5
Section 3.06 Temporary Warrants........................................................................6
Section 3.07 Cancellation..............................................................................6
Section 3.08 CUSIP and CINS Numbers....................................................................6
Section 3.09 Registration, Transfer and Exchange.......................................................7
ARTICLE 4 TERMS OF WARRANTS; EXERCISE OF WARRANTS.................................................................9
Section 4.01 Terms of Warrants; Exercise of Warrants...................................................9
ARTICLE 5 COVENANTS OF THE COMPANY...............................................................................11
Section 5.01 Maintenance of Office or Agency..........................................................11
Section 5.02 Payment of Taxes.........................................................................11
Section 5.03 Reports..................................................................................11
Section 5.04 Reservation of Warrant Shares............................................................12
Section 5.05 Obtaining Stock Exchange Listings........................................................12
ARTICLE 6 ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES ISSUABLE.....................................13
Section 6.01 Adjustment of Exercise Price and Number of Warrant Shares Issuable.......................13
Section 6.02 Fractional Interests.....................................................................16
Section 6.03 Notices to Warrant Holders...............................................................17
Section 6.04 No Rights as Stockholders................................................................18
ARTICLE 7 WARRANT AGENT..........................................................................................18
Section 7.01 Warrant Agent............................................................................18
Section 7.02 Compensation; Indemnity..................................................................19
Section 7.03 Individual Rights of Warrant Agent.......................................................20
Section 7.04 Replacement of Warrant Agent.............................................................20
Section 7.05 Successor Warrant Agent by Merger........................................................21
Section 7.06 Eligibility..............................................................................21
Section 7.07 Holder Lists.............................................................................21
</TABLE>
i
<TABLE>
<S><C> <C> <C>
ARTICLE 8 MISCELLANEOUS..........................................................................................21
Section 8.01 Warrantholder Actions....................................................................21
Section 8.02 Notices..................................................................................22
Section 8.03 Supplements and Amendments...............................................................23
Section 8.04 Governing Law............................................................................24
Section 8.05 No Adverse Interpretation of Other Agreements............................................24
Section 8.06 Successors...............................................................................24
Section 8.07 Duplicate Originals......................................................................24
Section 8.08 Separability.............................................................................25
Section 8.09 Table of Contents and Headings...........................................................25
Section 8.10 Benefits of this Agreement...............................................................25
</TABLE>
EXHIBITS
Exhibit A Face of Series A Warrant Subscription Certificate
Exhibit B Reverse of Series A Warrant Subscription Certificate
Exhibit C DTC Legend
ii
THIS SERIES A WARRANT AGREEMENT is dated as of September 10, 2003 between
Conseco, Inc., a Delaware Corporation (the "Company"), and Wachovia Bank, N.A.,
as warrant agent (the "Warrant Agent").
WHEREAS, concurrently with the execution hereof, the Company is emerging
from the protection of Chapter 11 of Title 11 of the United States Code pursuant
to that certain plan of reorganization dated March 18, 2003, as the same may be
amended, restated, supplemented or otherwise modified (the "Plan").
WHEREAS, pursuant to the terms of, and subject to the conditions contained
in, the Plan, the Company has agreed to issue 6,000,000 Series A Warrants (each,
a "Warrant" and collectively the "Warrants") entitling the holders thereof to
purchase shares of the common stock, par value $0.01 per share (the "Common
Stock"), of the Company (the Common Stock issuable on exercise of the Warrants
being referred to herein as the "Warrant Shares") at a price of $27.60 per share
of Common Stock (as adjusted from time to time hereunder, the "Exercise Price").
WHEREAS, the Company wishes the Warrant Agent to act on its behalf, and the
Warrant Agent is willing to act on behalf of the Company, in connection with the
issuance, exchange, transfer, substitution and exercise of the Warrants.
WHEREAS, the Company desires to enter into this Agreement to set forth the
terms and conditions of the Warrants and the rights and obligations of the
Company, the Warrant Agent and the registered holders of the Certificates
evidencing Warrants (the "Holders").
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements set forth herein and in the Plan, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
Company and the Warrant Agent, intending to be legally bound, hereby agree as
follows:
ARTICLE 1
DEFINITIONS
Section 1.01 Definitions. As used in this Agreement, the following terms
shall have the following respective meanings:
"Affiliate" means, with respect to any Person, any other Person directly or
indirectly controlling, controlled by, or under direct or indirect common
control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with") with respect to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Agent" means any Registrar or Countersignature Agent.
"Agent Member" means a member of, or a participant in, the Depositary.
1
"Agreement" means this Warrant Agreement, as amended or supplemented from
time to time.
"Board of Directors" means the board of directors or comparable governing
body of the Company, or any committee thereof duly authorized to act on its
behalf.
"Board Resolution" means a resolution duly adopted by the Board of
Directors which is certified by the Secretary or an Assistant Secretary of the
Company and remains in full force and effect as of the date of its
certification.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in New York City or in the city where the Corporate Trust
Office of the Warrant Agent is located are authorized or required by law to
close.
"Capital Stock" means any and all shares, interests, participations, rights
or other equivalents (however designated) of corporate stock or partnership or
membership interests, whether common or preferred.
"Certificated Warrant" means a Warrant in registered individual form.
"Commission" means the Securities and Exchange Commission.
"Company" means the party named as such in the preamble of this Agreement,
or any successor obligor under this Agreement.
"Corporate Trust Office" means the office of the Warrant Agent at which the
corporate trust business of the Warrant Agent is principally administered, which
at the Issue Date is located at 1525 West W. T. Harris Blvd., Charlotte, North
Carolina 28288-1153.
"Countersignature Agent" refers to a Person engaged to countersign the
Warrants in the stead of the Warrant Agent.
"Daily Price" means (A) if the shares of Common Stock then are listed and
traded on the New York Stock Exchange ("NYSE"), the closing price on such day as
reported on the NYSE Composite Transactions Tape; (B) if the shares of Common
Stock then are not listed and traded on the NYSE, the closing price on such day
as reported by the principal national securities exchange on which the shares
are listed and traded; (C) if the shares of Common Stock then are not listed and
traded on any such securities exchange, the last reported sale price on such day
on the National Market of the National Association of Securities Dealers, Inc.
Automated Quotation System ("Nasdaq"); or (D) if the shares of Common Stock then
are not traded on the Nasdaq National Market, the average of the highest
reported bid and lowest reported asked price on such day as reported by Nasdaq.
If on any determination date the shares of such class of Common Stock are not
quoted by any such organization, the Daily Price shall be the fair market value
of such shares on such determination date as reasonably determined in good faith
by the Board of Directors.
"Depositary" means the depositary of each Global Warrant, which will
initially be DTC.
2
"DTC" means The Depository Trust Company, a New York corporation, and its
successors.
"DTC Legend" means the legend set forth in Exhibit C.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exercise Price" has the meaning assigned to such term in the preamble of
this Agreement.
"Expiration Date" has the meaning assigned to such term in Section 4.01.
"Fundamental Change" means any merger, consolidation, amalgamation, sale or
other conveyance of all or substantially all of the assets of the Company with
or to any entity, any reclassification, recapitalization, reorganization,
compulsory share exchange, tender offer or exchange offer, stock split or
reverse stock split affecting the Capital Stock of the Company for which the
Warrants are exercisable.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect from time to time.
"Global Warrant" means a Warrant in registered global form.
"Holder" or "Warrantholder" means the record owner of any Warrant.
"Issue Date" means the date on which the Warrants are originally issued
under the Agreement.
"Liquidation Event" means a liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary.
"Officer" means the chairman of the Board of Directors, the president or
chief executive officer, any vice president, the chief financial officer, the
treasurer or any assistant treasurer, or the secretary or any assistant
secretary, of the Company.
"Officers' Certificate" means a certificate signed in the name of the
Company (i) by the chairman of the Board of Directors, the president or chief
executive officer or any vice president and (ii) by the chief financial officer,
the treasurer or any assistant treasurer or the secretary or any assistant
secretary of the Company.
"Opinion of Counsel" means a written opinion signed by legal counsel, who
may be an employee of or counsel to the Company, reasonably satisfactory to the
Warrant Agent.
"Person" means an individual, a corporation, a partnership, a limited
liability company, an association, a trust or any other entity, including a
government or political subdivision or an agency or instrumentality thereof.
"Register" has the meaning assigned to such term in Section 3.09.
3
"Registrar" means a Person engaged to maintain the Register.
"Warrant Agent" means the party named as such in the preamble of this
Agreement or any successor warrant agent under the Agreement pursuant to Article
7.
"Warrant Shares" has the meaning assigned to such term in the preamble of
this Agreement.
"Warrants" has the meaning assigned to such term in the Recitals to this
Agreement.
Section 1.02 Rules of Construction. Unless the context otherwise requires
or except as otherwise expressly provided,
(i) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(ii) "herein," "hereof" and other words of similar import refer
to the Agreement as a whole and not to any particular Section, Article or
other subdivision;
(iii) all references to Sections, subsections or Articles or
Exhibits refer to Sections, subsections or Articles or Exhibits of or to
the Agreement unless otherwise indicated; and
(iv) references to agreements or instruments, or to statutes or
regulations, are to such agreements or instruments, or statutes or
regulations, as amended from time to time (or to successor statutes and
regulations).
ARTICLE 2
APPOINTMENT OF WARRANT AGENT
Section 2.01 Appointment of Warrant Agent. The Company hereby appoints the
Warrant Agent to act as agent for the Company in accordance with the
instructions set forth in this Agreement and the Warrant Agent hereby accepts
such appointment.
ARTICLE 3
THE WARRANTS
Section 3.01 Form and Dating; Legends. The face of the Warrants will be
substantially in the form attached hereto as Exhibit A and the reverse of the
Warrants will be substantially in the form attached hereto as Exhibit B. The
terms and provisions contained in the form of the Warrants annexed as Exhibit A
and B constitute, and are hereby expressly made, a part of this Agreement. The
Warrants may have notations, legends or endorsements required by law, rules of
or agreements with national securities exchanges to which the Company is
subject, or usage. Each Warrant will be dated the date of its countersignature.
The Company and the Warrant Agent, by their execution and delivery of this
Agreement, expressly agree to such terms and provisions and to be bound thereby.
However, to the extent any provision of any Warrant Certificate conflicts with
the express provisions of this Agreement, the provisions of this Agreement shall
govern and be controlling.
4
Section 3.02 Execution and Countersignature. (a) An Officer shall execute
the Warrants for the Company by facsimile or manual signature in the name and on
behalf of the Company. If an Officer whose signature is on a Warrant no longer
holds that office at the time the Warrant is countersigned, the Warrant will
still be valid.
(b) A Warrant will not be valid until the Warrant Agent manually
countersigns the Warrant, with the signature conclusive evidence that the
Warrant has been countersigned under this Agreement. At any time and from time
to time after the execution and delivery of this Agreement, the Company may
deliver Warrants executed by the Company to the Warrant Agent for
countersignature. The Warrant Agent will countersign and deliver a number of
Warrants for original issue in an aggregate amount not to exceed the amount
stated in the preamble hereof after receipt by the Warrant Agent of an Officers'
Certificate specifying:
(i) the amount of Warrants to be countersigned and the date on
which the Warrants are to be countersigned, (ii) whether the Warrants are
to be issued as one or more Global Warrants or Certificated Warrants, and
(ii) other information the Company may determine to include or
the Warrant Agent may reasonably request.
Section 3.03 Warrant Registrar and Countersignature Agent. The Company may
appoint one or more Registrars, and the Warrant Agent may appoint a
Countersignature Agent, in which case each reference in the Agreement to the
Warrant Agent in respect of the obligations of the Warrant Agent to be performed
by the Countersignature Agent will be deemed to be references to the
Countersignature Agent. The Company may act as Registrar. In each case the
Company and the Warrant Agent will enter into an appropriate agreement with the
applicable Agent implementing the provisions of the Agreement relating to the
obligations of the Warrant Agent or Registrar to be performed by the applicable
Agent and the related rights. The Company initially appoints the Warrant Agent
as Registrar.
Section 3.04 Replacement Warrants. If a mutilated Warrant is surrendered to
the Warrant Agent or if a Holder delivers to the Company a sworn affidavit that
its Warrant has been lost, destroyed or wrongfully taken, the Company will issue
and the Warrant Agent will countersign a replacement Warrant. Every replacement
Warrant is an additional obligation of the Company and entitled to the benefits
of this Agreement. If required by the Warrant Agent or the Company, an indemnity
must be furnished that is sufficient in the judgment of both the Warrant Agent
and the Company to protect the Company and the Warrant Agent from any loss they
may suffer if a Warrant is replaced. The Company may charge the Holder for the
expenses of the Company and the Warrant Agent in replacing a Warrant.
Section 3.05 Outstanding Warrants. (a)Warrants outstanding at any time are
all Warrants that have been countersigned by the Warrant Agent except for:
(i) Warrants cancelled by the Warrant Agent or delivered to it
for cancellation;
(ii) Warrants exercised by the Holder thereof; and
5
(iii) any Warrant which has been replaced pursuant to Section
3.04.
(b) A Warrant shall not cease to be outstanding because the Company or one
of its Affiliates holds the Warrant, provided that in determining whether the
Holders of the requisite number of the outstanding Warrants have given or taken
any request, demand, authorization, direction, notice, consent, waiver or other
action hereunder, Warrants owned by the Company or any Affiliate of the Company
will be disregarded and deemed not to be outstanding (it being understood that
in determining whether the Warrant Agent is protected in relying upon any such
request, demand, authorization, direction, notice, consent, waiver or other
action, only Warrants which the Warrant Agent knows to be so owned will be so
disregarded). Warrants so owned which have been pledged in good faith may be
regarded as outstanding if the pledgee establishes to the satisfaction of the
Warrant Agent the pledgee's right so to act with respect to such Warrants and
that the pledgee is not the Company or any Affiliate of the Company.
Section 3.06 Temporary Warrants. Until definitive Warrants are ready for
delivery, the Company may prepare and the Warrant Agent or the Countersignature
Agent, as applicable, will countersign temporary Warrants. Temporary Warrants
will be substantially in the form of definitive Warrants but may have
insertions, substitutions, omissions and other variations determined to be
appropriate by the Officer executing the temporary Warrants, as evidenced by the
execution of the temporary Warrants. If temporary Warrants are issued, the
Company will cause definitive Warrants to be prepared without unreasonable
delay. After the preparation of definitive Warrants, the temporary Warrants will
be exchangeable for definitive Warrants upon surrender of the temporary Warrants
without charge to the Holder. Upon surrender for cancellation of any temporary
Warrants, the Company will execute and the Warrant Agent or the Countersignature
Agent, as applicable, will countersign and deliver in exchange therefor a like
amount of definitive Warrants. Until so exchanged, the temporary Warrants will
be entitled to the same benefits as definitive Warrants.
Section 3.07 Cancellation. The Company at any time may deliver to the
Warrant Agent for cancellation any Warrants previously countersigned and
delivered hereunder which the Company may have acquired in any manner
whatsoever, and may deliver to the Warrant Agent for cancellation any Warrants
previously countersigned hereunder which the Company has not issued and sold.
Any Registrar will forward to the Warrant Agent any Warrants surrendered to it
for transfer, exchange or exercise. The Warrant Agent (and no one else) will
cancel all Warrants surrendered for transfer, exchange, exercise or cancellation
and dispose of them in accordance with its normal procedures or the written
instructions of the Company. The Company may not issue new Warrants to replace
Warrants that have been exercised or delivered to the Warrant Agent for
cancellation. The Registrar shall provide the Company with a list of all
Warrants that have been cancelled.
Section 3.08 CUSIP and CINS Numbers. The Company in issuing the Warrants
may use "CUSIP" and "CINS" numbers, and the Warrant Agent will use CUSIP numbers
or CINS numbers in notices as a convenience to Holders, the notice to state that
no representation is made as to the correctness of such numbers either as
printed on the Warrants or as contained in any notice to any Holder. The Company
will promptly notify the Warrant Agent of any change in the CUSIP or CINS
numbers.
6
Section 3.09 Registration, Transfer and Exchange. (a) The Warrants will be
issued in registered form only, and the Company shall cause the Warrant Agent to
maintain a register (the "Register") of the Warrants, for registering the record
ownership of the Warrants by the Holders and transfers and exchanges of the
Warrants.
(b) (i) Each Global Warrant will be registered in the name of the
Depositary or its nominee and, so long as DTC is serving as the Depositary
thereof, will bear the DTC Legend.
(ii) Each Global Warrant will be delivered to the Warrant Agent as
custodian for the Depositary. Transfers of a Global Warrant (but not a
beneficial interest therein) will be limited to transfers thereof in whole,
but not in part, to the Depositary, its successors or their respective
nominees, except (1) as set forth in Section 3.09(b)(iv) and (2) transfers
of portions thereof in the form of Certificated Warrants may be made upon
request of an Agent Member (for itself or on behalf of a beneficial owner)
by written notice given to the Warrant Agent by or on behalf of the
Depositary in accordance with customary procedures of the Depositary and in
compliance with this Section.
(iii) Agent Members will have no rights under the Agreement with
respect to any Global Warrant held on their behalf by the Depositary, and
the Depositary may be treated by the Company, the Warrant Agent and any
agent of the Company or the Warrant Agent as the absolute owner and Holder
of such Global Warrant for all purposes whatsoever. Notwithstanding the
foregoing, the Depositary or its nominee may grant proxies and otherwise
authorize any Person (including any Agent Member and any Person that holds
a beneficial interest in a Global Warrant through an Agent Member) to take
any action which a Holder is entitled to take under the Warrant or the
Warrants, and nothing herein will impair, as between the Depositary and its
Agent Members, the operation of customary practices governing the exercise
of the rights of a holder of any security.
(iv) If (x) the Depositary notifies the Company that it is unwilling
or unable to continue as Depositary for a Global Warrant and a successor
depositary is not appointed by the Company within 90 days of the notice or
(y) the Warrant Agent has received a request from the Depositary, the
Warrant Agent will promptly exchange all beneficial interest in the Global
Warrant for one or more Certificated Warrants having an equal number
registered in the name of the owner of each beneficial interest, as
identified to the Warrant Agent by the Depositary, and thereupon the Global
Warrant will be deemed canceled.
(c) Each Certificated Warrant will be registered in the name of the holder
thereof or its nominee.
(d) A Holder may transfer a Warrant (or a beneficial interest therein) to
another Person or exchange a Warrant (or a beneficial interest therein) for
another Warrant by presenting to the Warrant Agent a written request therefor
stating the name of the proposed transferee or requesting such an exchange,
accompanied by any document required by the Agreement. The Warrant Agent will
promptly register any transfer or exchange that meets the requirements of
7
this Section by noting the same in the register maintained by the Warrant Agent
for the purpose; provided that no transfer or exchange will be effective until
it is registered in such register. Prior to the registration of any transfer,
the Company, the Warrant Agent and their agents will treat the Person in whose
name the Warrant is registered as the owner and Holder thereof for all purposes,
and will not be affected by notice to the contrary.
From time to time the Company will execute and the Warrant Agent or the
Countersignature Agent, as applicable, will countersign additional Warrants as
necessary in order to permit the registration of a transfer or exchange in
accordance with this Section. All Warrants issued upon transfer or exchange
shall be the duly authorized, executed and delivered Warrants of the Company
entitled to the benefits of the Agreement.
No service charge will be imposed in connection with any transfer or
exchange of any Warrant, but the Company may require payment of a sum sufficient
to cover any transfer tax or similar governmental charge payable in connection
therewith (other than a transfer tax or other similar governmental charge
payable upon exchange pursuant to Section 3.09(b)(iv)).
(e) (i) Global Warrant to Global Warrant. If a beneficial interest in a
Global Warrant is transferred or exchanged for a beneficial interest in another
Global Warrant, the Warrant Agent will (x) record a decrease in the amount of
the Global Warrant being transferred or exchanged equal to the amount of such
transfer or exchange and (y) record a like increase in the amount of the other
Global Warrant. Any beneficial interest in one Global Warrant that is
transferred to a Person who takes delivery in the form of an interest in another
Global Warrant, or exchanged for an interest in another Global Warrant, will,
upon transfer or exchange, cease to be an interest in such Global Warrant and
become an interest in the other Global Warrant and, accordingly, will thereafter
be subject to all transfer and exchange restrictions, if any, and other
procedures applicable to beneficial interests in such other Global Warrant for
as long as it remains such an interest.
(ii) Global Warrant to Certificated Warrant. If a beneficial interest
in a Global Warrant is transferred or exchanged for a Certificated Warrant,
the Warrant Agent will (x) record a decrease in the number of such Global
Warrant equal to the number of such transfer or exchange and (y) deliver a
new Certificated Warrant to the transferee (in the case of a transfer) or
the owner of such beneficial interest (in the case of an exchange),
registered in the name of such transferee or owner, as applicable.
(iii) Certificated Warrant to Global Warrant. If a Certificated
Warrant is transferred or exchanged for a beneficial interest in a Global
Warrant, the Warrant Agent will (x) cancel such Certificated Warrant, (y)
record an increase in such Global Warrant equal to the number of Warrants
being transferred or exchanged and (z) in the event that such transfer or
exchange involves less than the entire amount of the canceled Certificated
Warrant, deliver to the Holder thereof one or more new Certificated
Warrants having an aggregate number of Warrants equal to the untransferred
or unexchanged portion of the canceled Certificated Warrant, registered in
the name of the Holder thereof.
8
(f) Certificated Warrant to Certificated Warrant. If a Certificated Warrant
is transferred or exchanged for another Certificated Warrant, the Warrant Agent
will (x) cancel the Certificated Warrant being transferred or exchanged, (y)
deliver one or more new Certificated Warrants having a number equal to the
amount of Warrants being transferred or exchanged to the transferee (in the case
of a transfer) or the Holder of the canceled Certificated Warrant (in the case
of an exchange), registered in the name of such transferee or Holder, as
applicable, and (z) if such transfer or exchange involves less than the entire
amount of the canceled Certificated Warrant, deliver to the Holder thereof one
or more Certificated Warrants having an aggregate amount of Warrants equal to
the untransferred or unexchanged portion of the canceled Certificated Warrant,
registered in the name of the Holder thereof.
ARTICLE 4
TERMS OF WARRANTS; EXERCISE OF WARRANTS
Section 4.01 Terms of Warrants; Exercise of Warrants.
(a) Each Warrant not exercised prior to 5:00 p.m., New York City time, on
September 10, 2008 (the "Expiration Date") shall become void and all rights
thereunder and all rights in respect thereof under this agreement shall cease as
of such time.
(b) Subject to the terms of this Agreement, the Warrants shall be
exercisable, at the election of the Holders thereof, either in full or from time
to time in part during the period commencing at the opening of business on the
Issue Date and until 5:00 p.m., New York City time on the Expiration Date, and
shall entitle any Holder thereof to receive from the Company the number of fully
paid and nonassessable Warrant Shares which the Holder may at the time be
entitled to receive on exercise of such Warrants and payment of the Exercise
Price in cash, by wire transfer or by certified or official check payable to the
order of the Company, in each case, equal to the Exercise Price for such Warrant
Shares or by cashless exercise as set forth in subsection (c) below. No
adjustments as to dividends will be made upon exercise of the Warrants.
(c) Subject to the terms of this Agreement, and in the sole discretion of
the Company, a Holder may elect to convert Warrants into shares of Common Stock,
in which event the Company will issue to the Holder the number of shares of
Common Stock equal to the result obtained by (i) subtracting B from A, (ii)
dividing the result by A as set forth in the following equation, and (iii)
multiplying the result by C:
X = (A-B) x C where:
----
A
X = the number of shares of Common Stock issuable upon exercise pursuant to
this subsection (c).
A = the Daily Price on the day immediately preceding the date on which the
Holder delivers written notice to the Company pursuant to subsection
(d)below.
B = the Exercise Price.
9
C = the number of shares of Common Stock as to which the Warrants are then
being exercised.
If the foregoing calculation results in a negative number, then no shares
of Common Stock shall be issued upon exercise pursuant to this subsection (c).
(d) In order to exercise all or any of the Warrants, the Holder thereof
must deliver to the Warrant Agent at its Corporate Trust Office (i) such
Warrants, (ii) the form of election to purchase on the reverse thereof duly
filled in and signed, which signature shall be medallion guaranteed by an
institution which is a member of a Securities Transfer Association recognized
signature guarantee program, and (iii) payment to the Warrant Agent for the
account of the Company of the then-current Exercise Price (in the manner set
forth in subsections (b) or (c) above) for the number of Warrant Shares in
respect of which the Warrants are being exercised.
(e) Subject to the provisions of Section 6.01 hereof and upon the Holder's
compliance with the provisions set forth in subsection (d) above, the Company
shall cause the Warrant Agent to credit such aggregate number of whole Warrant
Shares to which the Holder shall be entitled to the Holder's or its designee's
balance account with DTC; provided, however, if the Common Stock is not DTC
eligible, the Company shall deliver or cause to be delivered with all reasonable
dispatch, to or upon the written order of the Holder and in such name or names
as the Holder may designate, a certificate or certificates for the number of
whole Warrant Shares issuable upon the exercise of such Warrants or other
securities or property to which such Holder is entitled.
(f) No fractional Warrant Shares are to be issued upon any exercise of a
Warrant, but rather cash in lieu of fractional shares shall be delivered to the
Holder as provided in Section 6.02 hereof.
(g) Upon the Holder's compliance with the provisions set forth in
subsection (d) above, such Holder shall be deemed for all corporate purposes to
have become the holder of the Warrant Shares with respect to which the Warrant
has been exercised.
(h) If less than all the Warrants represented by a Warrant Certificate are
exercised, such Warrant Certificate shall be surrendered and a new Warrant
Certificate of the same tenor and for the number of Warrants which were not
exercised shall be executed by the Company and delivered to the Warrant Agent
and the Warrant Agent or the Countersignature Agent, as applicable, shall
countersign the new Warrant Certificate, registered in such name or names as may
be directed in writing by the Holder, and shall deliver the new Warrant
Certificate to the Person or Persons entitled to receive the same.
(i) All Warrant Certificates surrendered upon exercise of Warrants shall be
cancelled by the Warrant Agent. Such cancelled Warrant Certificates shall then
be disposed of by the Warrant Agent in a manner satisfactory to the Company. The
Warrant Agent shall account promptly to the Company with respect to Warrants
exercised and concurrently pay to the Company all monies received by the Warrant
Agent for the purchase of the Warrant Shares through the exercise of such
Warrants.
(j) The Warrant Agent shall keep copies of this Agreement and any notices
given or received hereunder available for inspection by the Holders during
normal business hours at its
10
office. The Company shall supply the Warrant Agent from time to time with such
numbers of copies of this Agreement as the Warrant Agent may reasonably request.
ARTICLE 5
COVENANTS OF THE COMPANY
Section 5.01 Maintenance of Office or Agency. The Company will maintain in
the Borough of Manhattan, the City of New York, an office or agency where
Warrants may be surrendered for registration of transfer or exchange or for
presentation for exercise. The Company hereby initially designates the Corporate
Trust Office of the Warrant Agent as such office of the Company. The Company
will give prompt written notice to the Warrant Agent of the location, and any
change in the location, of such office or agency. If at any time the Company
fails to maintain any such required office or agency or fails to furnish the
Warrant Agent with the address thereof, such presentations, surrenders, notices
and demands may be made or served to the Warrant Agent.
The Company may also from time to time designate one or more other offices
or agencies where the Warrants may be surrendered or presented for any of such
purposes and may from time to time rescind such designations. The Company will
give prompt written notice to the Warrant Agent of any such designation or
rescission and of any change in the location of any such other office or agency.
Section 5.02 Payment of Taxes. The Company will pay all documentary, stamp
or similar issue or transfer taxes and other governmental charges, if any, in
respect of the issuance or delivery of Warrant Shares upon the exercise of
Warrants; provided that the Company shall not be required to pay any tax, taxes
or charges which may be payable in respect of any transfer involved in the issue
of any Warrants or any Warrant Shares in a name other than that of the
registered holder of a Warrant surrendered upon exercise, and the Company shall
not be required to issue or deliver such Warrant Shares unless or until the
Person or Persons requesting the issuance thereof shall have paid to the Company
the amount of such taxes or charges or shall have established to the
satisfaction of the Company that such taxes or charges have been paid.
Section 5.03 Reports. (a) Whether or not the Company is subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company
must provide the Warrant Agent within the time periods specified in those
sections for filers that are not "accelerated filers" and the regulations
thereunder with:
(i) all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms 10-Q and
10-K if the Company were required to file such forms, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and, with respect to annual information only, a report thereon
by the Company's certified independent accountants, and
(ii) all current reports that would be required to be filed with
the Commission on Form 8-K if the Company were required to file such
reports.
11
In addition, whether or not required by the Commission, the Company will,
after the effectiveness of a shelf registration statement if the Commission will
accept the filing, file a copy of all of the information and reports referred to
in clauses (i) and (ii) with the Commission for public availability within the
time periods for filers that are not "accelerated filers" specified in the
Commission's rules and regulations.
Section 5.04 Reservation of Warrant Shares.
(a) The Company will at all times reserve and keep available for issuance
and delivery, free and clear of all liens, security interests, charges and other
encumbrances or restrictions on sale and free and clear of all preemptive
rights, such number of shares of its authorized but unissued Common Stock or
other securities of the Company from time to time issuable upon exercise of the
Warrants as will be sufficient to permit the exercise in full of all outstanding
Warrants.
(b) The Company or, if appointed, the transfer agent for the Common Stock
(the "Transfer Agent") and every subsequent transfer agent for any securities of
the Company issuable upon the exercise of any of the rights of purchase
aforesaid will be irrevocably authorized and directed at all times to reserve
such number of authorized securities as shall be required for such purpose. The
Company will keep a copy of this Agreement on file with the Transfer Agent and
with every subsequent transfer agent for any of the Company's securities
issuable upon the exercise of the rights of purchase represented by the
Warrants. The Warrant Agent is hereby irrevocably authorized to requisition from
time to time from such Transfer Agent the certificates for securities of the
Company required to honor outstanding Warrants upon exercise thereof in
accordance with the terms of this Agreement. The Company will supply such
Transfer Agent with duly executed certificates for such purposes and will
provide or otherwise make available any cash which may be payable as provided in
Section 6.02 hereof. The Company will furnish such Transfer Agent a copy of all
notices of adjustments, and certificates related thereto, transmitted to each
holder pursuant to Section 6.03 hereof.
(c) Before taking any action which would cause an adjustment pursuant to
Section 6.01 hereof to reduce the Exercise Price below the then par value (if
any) of the Warrant Shares, the Company will take any corporate action which
may, in the opinion of its counsel (which may be counsel employed by the
Company), be necessary in order that the Company may validly and legally issue
fully paid and nonassessable Warrant Shares at the Exercise Price as so
adjusted.
(d) The Company covenants that all Warrant Shares which may be issued upon
exercise of Warrants will, upon issue, be fully paid, nonassessable, free of
preemptive rights and free from all taxes, liens, charges and security interests
with respect to the issuance thereof.
Section 5.05 Obtaining Stock Exchange Listings. To the extent not already
listed, upon the written request of Holders holding Warrants for the purchase of
at least ten percent (10%) of the initial Warrant Shares issuable hereunder, the
Company will from time to time use reasonable best efforts to take all actions
which may be necessary so that the Warrants will be listed on the principal
securities exchanges, automated quotation systems or other markets within the
United States of America, if any, on which shares of Common Stock are then
listed; provided, however, that the Company shall not be required to seek to
list the Warrants if the
12
Warrants do not then satisfy the listing requirements for such principal
securities exchanges, automated quotation systems or other markets. The Company
will from time to time use reasonable best efforts to take all action which may
be necessary so that the Warrant Shares, immediately upon their issuance upon
the exercise of Warrants, will be listed on the principal securities exchanges,
automated quotation systems or other markets within the United States of
America, if any, on which other shares of Common Stock are then listed.
ARTICLE 6
ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES
ISSUABLE
Section 6.01 Adjustment of Exercise Price and Number of Warrant Shares
Issuable. The Exercise Price and the number of Warrant Shares issuable upon the
exercise of each Warrant are subject to adjustment from time to time upon the
occurrence of the events enumerated in this Article 6. For purposes of this
Article 6, "Common Stock" means shares now or hereafter authorized of any class
of common stock of the Company and any other stock of the Company, however
designated, that has the right (subject to any prior rights of any class or
series of preferred stock) to participate in any distribution of the assets or
earnings of the Company without limit as to per share amount (it being
understood that Common Stock shall not include the Class A Senior Cumulative
Convertible Exchangeable Preferred Stock of the Company but shall include stock
appreciation rights and phantom stock rights).
(a) Adjustment for Change in Capital Stock.
If the Company (i) pays a dividend or makes a distribution on its Common
Stock in shares of its Common Stock, (ii) subdivides its outstanding shares of
Common Stock into a greater number of shares, (iii) combines its outstanding
shares of Common Stock into a smaller number of shares, or (iv) issues by
reclassification of its Common Stock any shares of its Capital Stock, then the
Exercise Price in effect immediately prior to such action shall be
proportionately adjusted so that the holder of any Warrant thereafter exercised
may receive upon exercise of such Warrant the aggregate number and kind of
shares of Capital Stock of the Company which he would have owned immediately
following such action if such Warrant had been exercised immediately prior to
such action.
The adjustment under this Section 6.01(a) shall become effective
immediately after the record date in the case of a dividend or distribution and
immediately after the effective date in the case of a subdivision, combination
or reclassification. If, after an adjustment, a holder of a Warrant upon
exercise of it may receive shares of two or more classes of Capital Stock of the
Company, the Company shall determine, in good faith, the allocation of the
adjusted Exercise Price between the classes of Capital Stock. After such
allocation, the exercise privilege and the Exercise Price of each class of
Capital Stock shall thereafter be subject to adjustment on terms comparable to
those applicable to Common Stock in this Section 6. Such adjustment shall be
made successively whenever any event listed above shall occur.
(b) Adjustment for Certain Derivative Securities.
13
If the Company distributes any rights, options, warrants or other
securities exercisable for or convertible into shares of its Common Stock
(collectively, "Derivative Securities") to all holders of its Common Stock
entitling them to purchase shares of Common Stock at a price per share less than
the Daily Price per share on the record date applicable to such distribution,
the Exercise Price shall be adjusted in accordance with the formula:
O + NxP
-------
E' = E x M
-----------------
O + N
where:
E' = the adjusted Exercise Price.
E = the then current Exercise Price.
O = the number of shares of Common Stock outstanding on the record
date.
N = the number of additional shares of Common Stock issued or
issuable pursuant to such Derivative Securities.
P = the price per unit, if any, for the Derivative Securities plus
the price per share required to be paid for the additional shares
upon exercise or conversion of any Derivative Securities.
M = the Daily Price per share of Common Stock on the record date.
The adjustment shall be made successively whenever any such Derivative
Securities are issued and shall become effective immediately after the record
date for the determination of stockholders entitled to receive such Derivative
Securities. If at the end of the period during which such Derivative Securities
are exercisable or convertible, not all such Derivative Securities shall have
been exercised or converted, the Exercise Price shall be immediately readjusted
to what it would have been if "N" in the above formula had been the number of
shares actually issued.
(c) When De Minimis Adjustment may be Deferred.
No adjustment in the Exercise Price need be made unless the adjustment
would require an increase or decrease of at least 1% in the Exercise Price. Any
adjustments that are not made shall be carried forward and taken into account in
any subsequent adjustment. All calculations under this Section 6.01 shall be
made to the nearest cent or to the nearest 1/10,000th of a share, as the case
may be, it being understood that no such rounding shall be made under subsection
(i).
(d) When no Adjustment Required.
14
No adjustment need be made for a transaction referred to in Section 6.01(a)
or (b) hereof if Warrantholders are to participate (without being required to
exercise their Warrants) in the transaction on a basis and with notice that the
Board of Directors reasonably and in good faith determines to be fair and
appropriate in light of the basis and notice on which holders of Common Stock
participate in the transaction. No adjustment need be made for (i) rights to
purchase Common Stock pursuant to a Company plan for reinvestment of dividends
or interest, or (ii) a change in the par value or no par value of the Common
Stock. To the extent the Warrants become convertible into cash, no adjustment
need be made thereafter as to the cash. Interest will not accrue on the cash.
(e) Notice of Adjustment.
Whenever the Exercise Price is adjusted, the Company shall provide the
notices required by Section 8.02 hereof.
(f) Notice of Certain Transactions.
If (i) the Company takes any action that would require an adjustment in the
Exercise Price pursuant to Section 6.01(a) or (b) hereof and if the Company does
not arrange for Warrantholders to participate pursuant to Section 6.01(d)
hereof, (ii) the Company takes any action that would require a supplemental
Warrant Agreement pursuant to Section 6.01(g) hereof or (iii) there is a
Liquidation Event, then the Company shall mail to Warrantholders a notice
stating the proposed record date for a dividend or distribution or the proposed
effective date of a subdivision, combination, reclassification, consolidation,
merger, transfer, lease, liquidation, dissolution or wind-up. The Company shall
mail the notice at least 15 days before such date. Failure to mail the notice or
any defect in it shall not affect the validity of the transaction.
(g) Reorganization of the Company.
After the date hereof, if the Company consolidates or merges with or into,
or transfers or leases all or substantially all its assets to, any Person, upon
consummation of such transaction the Warrants shall automatically become
exercisable for the kind and amount of securities, cash or other assets which
the Holder would have owned immediately after the consolidation, merger,
transfer or lease if the Holder had exercised the Warrant immediately before the
effective date of the transaction. Concurrently with the consummation of such
transaction, the corporation formed by or surviving any such consolidation or
merger if other than the Company, or the Person to which such sale or conveyance
shall have been made, shall enter into a supplemental Warrant Agreement so
providing and further providing for adjustments which shall be as nearly
equivalent as may be practical to the adjustments provided for in this Section
6.01(g). The successor company shall mail to Holders a notice describing the
supplemental Warrant Agreement. If the issuer of securities deliverable upon
exercise of Warrants under the supplemental Warrant Agreement is an affiliate of
the formed, surviving, transferee or lessee corporation, that issuer shall join
in the supplemental Warrant Agreement. If this Section 6.01(g) applies, Section
6.01(a) or (b) hereof shall not apply.
(h) When Issuance or Payment may be Deferred.
15
In any case in which this Section 6.01 shall require that an adjustment in
the Exercise Price be made effective as of a record date for a specified event,
the Company may elect to defer until the occurrence of such event (i) issuing to
the holder of any Warrant exercised after such record date the Warrant Shares
and other Capital Stock of the Company, if any, issuable upon such exercise over
and above the Warrant Shares and other Capital Stock of the Company, if any,
issuable upon such exercise on the basis of the Exercise Price and (ii) paying
to such holder any amount in cash in lieu of a fractional share pursuant to
Section 6.02 hereof; provided that the Company shall deliver to such holder a
due bill or other appropriate instrument evidencing such holder's right to
receive such additional Warrant Shares, other Capital Stock and cash upon the
occurrence of the event requiring such adjustment.
(i) Adjustment in Number of Shares.
Upon each adjustment of the Exercise Price pursuant to this Section 6.01,
each Warrant outstanding prior to the making of the adjustment in the Exercise
Price shall thereafter evidence the right to receive upon payment of the
adjusted Exercise Price that number of shares of Common Stock (calculated to the
nearest hundredth) obtained from the following formula:
N x E
N' = -----------
E'
where:
N' = the adjusted number of Warrant Shares issuable upon exercise of a
Warrant by payment of the adjusted Exercise Price.
N = the number or Warrant Shares previously issuable upon exercise of
a Warrant by payment of the Exercise Price prior to adjustment.
E' = the adjusted Exercise Price.
E = the Exercise Price prior to adjustment.
(j) Form of Warrants.
Irrespective of any adjustments in the Exercise Price or the number or kind
of shares purchasable upon the exercise of the Warrants, Warrants theretofore or
thereafter issued may continue to express the same price and number and kind of
shares as are stated in the Warrants initially issuable pursuant to this
Agreement.
Section 6.02 Fractional Interests. The Company shall not be required to
issue fractional Warrant Shares or scrip representing fractional shares on the
exercise of Warrants. If more than one Warrant shall be presented for exercise
in full at the same time by the same holder, the number of full Warrant Shares
which shall be issuable upon the exercise thereof shall be computed on the basis
of the aggregate number of Warrant Shares purchasable on exercise of the
Warrants so presented. If any fraction of a Warrant Share would, except for the
provisions of this Section 6.02, be issuable on the exercise of any Warrants (or
specified portion thereof), the
16
Company shall pay an amount in cash equal to the Daily Price per Warrant Share,
as determined on the day immediately preceding the date the Warrant is presented
for exercise, multiplied by such fraction, computed to the nearest whole U.S.
cent.
Section 6.03 Notices to Warrant Holders. (a) Upon any adjustment of the
Exercise Price pursuant to Section 6.01 hereof, the Company shall promptly
thereafter (i) cause to be filed with the Warrant Agent an Officer's Certificate
setting forth the Exercise Price after such adjustment and setting forth in
reasonable detail the method of calculation and the facts upon which such
calculations are based and setting forth the number of Warrant Shares (or
portion thereof) issuable after such adjustment in the Exercise Price, upon
exercise of a Warrant and payment of the adjusted Exercise Price, which
certificate shall be conclusive evidence of the correctness of the matters set
forth therein, and (ii) cause to be given to each of the Holders, at the address
of such Holder appearing in the Registrar, written notice of such adjustments by
first-class mail, postage prepaid. Where appropriate, such notice may be given
in advance and included as a part of the notice required to be mailed under the
other provisions of this Section 6.03.
(b) In case:
(i) the Company shall authorize the issuance to all holders of
shares of Common Stock of rights, options or warrants to subscribe for or
purchase shares of Common Stock or of any other subscription rights or
warrants;
(ii) the Company shall authorize the distribution to all holders
of shares of Common Stock of evidences of its indebtedness or assets;
(iii) of any Fundamental Change (other than a change in par
value, or from par value to no par value, or from no par value to par
value, or as a result of a subdivision or combination);
(iv) of any Liquidation Event; or
(v) the Company proposes to take any action which would require
an adjustment of the Exercise Price pursuant to Section 6.01 hereof;
then the Company shall cause to be filed with the Warrant Agent and shall cause
to be given to each of the Holders, at least 20 days (or 10 days in any case
specified in clauses (i) or (ii) above) prior to the applicable record date
hereinafter specified, or promptly in the case of events for which there is no
record date, by first-class mail, postage prepaid, a written notice stating (x)
the date as of which the holders of record of shares of Common Stock to be
entitled to receive any such rights, options, warrants or distribution are to be
determined, (y) the initial expiration date set forth in any tender offer or
exchange offer for shares of Common Stock, or (z) the date on which any such
Fundamental Change or Liquidation Event is expected that holders of record of
shares of Common Stock shall be entitled to exchange such shares for securities
or other property, if any, deliverable upon such Fundamental Change or
Liquidation Event. The failure to give the notice required by this Section 6.03
or any defect therein shall not affect the legality
17
or validity of any distribution, right, option, warrant, Fundamental Change,
Liquidation Event, or the vote upon any action.
Section 6.04 No Rights as Stockholders. Nothing contained in this Agreement
or the Warrants shall be construed as conferring upon the holders of Warrants
the right to vote or to consent or to receive notice as stockholders in respect
of the meetings of stockholders or the election of directors of the Company or
any other matter, or any rights whatsoever, including the right to receive
dividends, as stockholders of the Company.
ARTICLE 7
WARRANT AGENT
Section 7.01 Warrant Agent. The Warrant Agent undertakes the duties and
obligations imposed by this Agreement upon the following terms and conditions,
by all of which the Company and the holders of Warrants, by their acceptance
thereof, shall be bound:
(a) The statements contained herein and in the Warrants shall be taken as
statements of the Company and the Warrant Agent assumes no responsibility for
the correctness of any of the same except such as describe the Warrant Agent or
action taken or to be taken by it. The Warrant Agent assumes no responsibility
with respect to the distribution of the Warrants except as herein otherwise
provided.
(b) The Warrant Agent has no duty to determine when an adjustment under
Article 6 should be made, how it should be made or what it should be. The
Warrant Agent has no duty to determine whether any provisions of a supplemental
Warrant Agreement under Section 8.03 hereof are correct. The Warrant Agent makes
no representation as to the validity or value of any securities or assets issued
upon exercise of Warrants.
(c) The Warrant Agent shall not be accountable with respect to the validity
or value or the kind or amount of any Warrant Shares or of any securities or
property which may at any time be issued or delivered upon the exercise of any
Warrant or with respect to whether any such Warrant Shares or other securities
will, when issued, be validly issued and fully paid and nonassessable, and makes
no representation with respect thereto.
(d) The Warrant Agent shall not be responsible for any failure of the
Company to comply with any of the covenants contained in this Agreement or in
the Warrants.
(e) In the absence of bad faith on its part, the Warrant Agent may rely,
and will be protected in acting or refraining from acting, upon any resolution,
certificate, statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness or other
paper or document believed by it to be genuine and to have been signed or
presented by the proper Person. The Warrant Agent need not investigate any fact
or matter stated in the document, but, in the case of any document which is
specifically required to be furnished to the Warrant Agent pursuant to any
provision hereof, the Warrant Agent shall examine the document to determine
whether it conforms to the requirements of the Agreement (but need not confirm
or investigate the accuracy of mathematical calculations or other facts
18
stated therein). The Warrant Agent, in its discretion, may make further inquiry
or investigation into such facts or matters as it sees fit.
(f) The Warrant Agent may act through its attorneys and agents and will not
be responsible for the misconduct or negligence of any agent appointed with due
care.
(g) The Warrant Agent will be under no obligation to exercise any of the
rights or powers vested in it by the Agreement at the request or direction of
any of the Holders, unless such Holders have offered to the Warrant Agent
reasonable security or indemnity against the costs, expenses and liabilities
that might be incurred by it in compliance with such request or direction. All
rights of action under this Agreement or under any of the Warrants may be
enforced by the Warrant Agent without the possession of any of the Warrants or
the production thereof at any trial or other proceeding relative thereto, and
any such action, suit or proceeding instituted by the Warrant Agent shall be
brought in its name as Warrant Agent and any recovery of judgment shall be for
the ratable benefit of the Holders of the Warrants, as their respective rights
or interests may appear.
(h) The Warrant Agent may consult with counsel, and the written advice of
such counsel or any Opinion of Counsel will be full and complete authorization
and protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon.
(i) No provision of the Agreement will require the Warrant Agent to expend
or risk its own funds or otherwise incur any financial liability in the
performance of its duties hereunder, or in the exercise of its rights or powers,
unless it receives indemnity satisfactory to it against any loss, liability or
expense.
(j) The Warrant Agent shall act hereunder solely as agent for the Company,
and its duties shall be determined solely by the provisions hereof. No provision
of the Agreement shall be construed to relieve the Warrant Agent from liability
for its own negligent action, its own negligent failure to act or its own
willful misconduct.
Section 7.02 Compensation; Indemnity. (a) The Company will pay the Warrant
Agent compensation as agreed upon in writing for its services. The Company will
reimburse the Warrant Agent upon request for all reasonable out-of-pocket
expenses, disbursements and advances incurred or made by the Warrant Agent,
including the reasonable compensation and expenses of the Warrant Agent's agents
and counsel.
(b) The Company will indemnify the Warrant Agent for, and hold it harmless
against, any loss or liability or expense incurred by it without negligence,
willful misconduct or bad faith on its part arising out of or in connection with
the acceptance or administration of the Agreement and its duties under the
Agreement and the Warrants, including the costs and expenses of defending itself
against any claim or liability and of complying with any process served upon it
or any of its officers in connection with the exercise or performance of any of
its powers or duties under the Agreement and the Warrants, except to the extent
any such loss, liability or expense may be attributable to its negligence, bad
faith or wilfull misconduct. The Warrant Agent shall notify the Company promptly
of any claim for which it may seek indemnity. Failure
19
by the Warrant Agent to so notify the Company shall not relieve the Company of
its obligations hereunder. At the Warrant Agent's sole discretion, the Company
shall defend the claim and the Warrant Agent shall cooperate in the defense at
the Company's expense. The Warrant Agent may have separate counsel and the
Company shall pay the reasonable fees and expenses of such counsel. The Company
need not pay for any settlement made without its consent, which consent shall
not be unreasonably withheld.
Section 7.03 Individual Rights of Warrant Agent. The Warrant Agent, and any
stockholder, director, officer or employee of it, may buy, sell or deal in any
of the Warrants or other securities of the Company or become pecuniarily
interested in any transaction in which the Company may be interested, or
contract with or lend money to the Company or otherwise act as fully and freely
as though it were not Warrant Agent under this Agreement. Nothing herein shall
preclude the Warrant Agent from acting in any other capacity for the Company or
for any other legal entity. An Agent may do the same with like rights.
Section 7.04 Replacement of Warrant Agent. (a) The Warrant Agent
(i) may resign at any time by written notice to the Company,
(ii) may be removed at any time by the Holders of a majority of
the outstanding Warrants by written notice to the Warrant Agent,
(iii) shall, if no longer eligible under Section 7.06, be subject
to removal upon the request of any Holder to the Company
(iv) shall be removed by the Company if: (A) the Warrant Agent is
no longer eligible under Section 7.06; (B) the Warrant Agent is adjudged a
bankrupt or an insolvent; (C) a receiver or other public officer takes
charge of the Warrant Agent or its property; or (D) the Warrant Agent
becomes incapable of acting.
A resignation or removal of the Warrant Agent and appointment of a successor
Warrant Agent will become effective only upon the successor Warrant Agent's
acceptance of appointment as provided in this Section.
(b) If the Warrant Agent has been removed by the Holders, Holders of a
majority of the Warrants may appoint a successor Warrant Agent with the consent
of the Company. Otherwise, if the Warrant Agent resigns or is removed, or if a
vacancy exists in the office of Warrant Agent for any reason, the Company will
promptly appoint a successor Warrant Agent. If the successor Warrant Agent does
not deliver its written acceptance within 30 days after the retiring Warrant
Agent resigns or is removed, the retiring Warrant Agent, the Company or the
Holders of a majority of the outstanding Warrants may petition any court of
competent jurisdiction for the appointment of a successor Warrant Agent.
(c) Upon delivery by the successor Warrant Agent of a written acceptance of
its appointment to the retiring Warrant Agent and to the Company, (i) the
retiring Warrant Agent will transfer all property held by it as Warrant Agent to
the successor Warrant Agent, (ii) the resignation or removal of the retiring
Warrant Agent will become effective, and (iii) the
20
successor Warrant Agent will have all the rights, powers and duties of the
Warrant Agent under the Warrant Agent. Upon request of any successor Warrant
Agent, the Company will execute any and all instruments for fully and vesting in
and confirming to the successor Warrant Agent all such rights, powers and
trusts. The Company will give notice of any resignation and any removal of the
Warrant Agent and each appointment of a successor Warrant Agent to all Holders,
and include in the notice the name of the successor Warrant Agent and the
address of its Corporate Trust Office.
(d) Notwithstanding replacement of the Warrant Agent pursuant to this
Section, the Company's obligations under Section 7.02 will continue for the
benefit of the retiring Warrant Agent.
Section 7.05 Successor Warrant Agent by Merger. (a) If the Warrant Agent
consolidates with, merges or converts into, or transfers all or substantially
all of its corporate trust business to, another corporation or national banking
association, the resulting, surviving or transferee corporation or national
banking association without any further act will be the successor Warrant Agent
with the same effect as if the successor Warrant Agent had been named as the
Warrant Agent in the Agreement.
(b) If, at the time such successor to the Warrant Agent shall succeed to
the agency created by this Agreement, any of the Warrants have been
countersigned but not delivered, the successor Warrant Agent may adopt the
countersignature of the original Warrant Agent; and if any of the Warrants shall
not have been countersigned, the successor Warrant Agent may countersign such
Warrants, and in all such cases such Warrants shall have the full force and
effect provided in the Warrants and in this Agreement.
Section 7.06 Eligibility. The Agreement must always have a Warrant Agent
that has a combined capital and surplus of at least $50,000,000 as set forth in
its most recent published annual report of condition and satisfies the
eligibility requirements set forth in Section 310(a) of the Trust Indenture Act
of 1939.
Section 7.07 Holder Lists. The Warrant Agent shall preserve in as current a
form as is reasonably practicable the most recent list available to it of the
names and addresses of all Holders. If the Warrant Agent is not the Warrant
Registrar, the Company shall promptly furnish to the Warrant Agent at such times
as the Warrant Agent may request in writing, a list in such form and as of such
date as the Warrant Agent may reasonably require of the names and addresses of
the Holders.
ARTICLE 8
MISCELLANEOUS
Section 8.01 Warrantholder Actions. (a) Any request, demand, authorization,
direction, notice, consent to amendment, supplement or waiver or other action
provided by this Agreement to be given or taken by a Holder (an "act") may be
evidenced by an instrument signed by the Holder delivered to the Warrant Agent.
The fact and date of the execution of the instrument, or the authority of the
Person executing it, may be proved in any manner that the Warrant Agent deems
sufficient.
21
(b) The Warrant Agent may make reasonable rules for action by or at a
meeting of Holders, which will be binding on all the Holders.
(c) Any act by the Holder of any Warrant binds that Holder and every
subsequent Holder of a Warrant certificate that evidences the same Warrant of
the acting Holder, even if no notation thereof appears on the Warrant
certificate. Subject to subsection (d) below, a Holder may revoke an act as to
its Warrants, but only if the Warrant Agent receives the notice of revocation
before the date the amendment or waiver or other consequence of the act becomes
effective.
(d) The Company may, but is not obligated to, fix a record date for the
purpose of determining the Holders entitled to act with respect to any amendment
or waiver or in any other regard. If a record date is fixed, those Persons that
were Holders at such record date and only those Persons will be entitled to act,
or to revoke any previous act, whether or not those Persons continue to be
Holders after the record date. No act will be valid or effective for more than
90 days after the record date.
Section 8.02 Notices. (a) Any notice or communication to the Company will
be deemed given if in writing (i) when delivered in person or (ii) five days
after mailing when mailed by first class mail, or (iii) when sent by facsimile
transmission, with transmission confirmed. Any notice to the Warrant Agent will
be effective only upon receipt. In each case the notice or communication should
be addressed as follows:
if to the Company:
CONSECO, INC.
11825 North Pennsylvania St.
Carmel, IN 46032
ATTN: General Counsel
FAX: (317) 817-6327
if to the Warrant Agent:
WACHOVIA BANK, N.A.
Equity Services Group
1525 West W.T. Harris Blvd.
Charlotte, NC 28288-1153
ATTN: Myron Gray
FAX: (704) 590-7598
The Company or the Warrant Agent by notice to the other may designate
additional or different addresses for subsequent notices or communications.
(b) Except as otherwise expressly provided with respect to published
notices, any notice or communication to a Holder will be deemed given when
mailed to the Holder at its address as it appears on the Register by first class
mail or, as to any Global Warrant registered in the name of DTC or its nominee,
as agreed by the Company, the Warrant Agent and DTC.
22
Copies of any notice or communication to a Holder, if given by the Company, will
be mailed to the Warrant Agent at the same time. Defect in mailing a notice or
communication to any particular Holder will not affect its sufficiency with
respect to other Holders.
(c) Where the Agreement provides for notice, the notice may be waived in
writing by the Person entitled to receive such notice, either before or after
the event, and the waiver will be the equivalent of the notice. Waivers of
notice by Holders must be filed with the Warrant Agent, but such filing is not a
condition precedent to the validity of any action taken in reliance upon such
waivers.
Section 8.03 Supplements and Amendments. (a) The Company and the Warrant
Agent may amend or supplement the Agreement or the Warrants without notice to or
the consent of any Holder
(i) to cure any ambiguity, defect or inconsistency in the
Agreement or the Warrants;
(ii) to comply with Section 6.01(f);
(iii) to evidence and provide for the acceptance of an
appointment hereunder by a successor Warrant Agent; or
(iv) to make any other change that does not adversely affect the
rights of any Holder.
(b) Except as otherwise provided in subsections (a) above or (c) below, the
Company and the Warrant Agent may amend the Agreement and the Warrants with the
written consent of the Holders of a majority of the outstanding Warrants, and
the Holders of a majority of the outstanding Warrants by written notice to the
Warrant Agent may waive future compliance by the Company with any provision of
the Agreement or the Warrants.
(c) Notwithstanding the provisions of subsection (b) above, without the
consent of each Holder affected, an amendment or waiver may not
(i) increase the Exercise Price;
(ii) decrease the number of Warrant Shares or other securities or
property issuable upon exercise of the Warrants except, in each case, for
adjustments provided for in the Agreement; or
(iii) designate an earlier Expiration Date.
(d) It is not necessary for Holders to approve the particular form of any
proposed amendment, supplement or waiver, but is sufficient if their consent
approves the substance thereof.
23
(e) An amendment, supplement or waiver under this Section will become
effective on receipt by the Warrant Agent of written consents from the Holders
of the requisite percentage of the outstanding Warrants. After an amendment,
supplement or waiver under this Section becomes effective, the Company will send
to the Holders affected thereby a notice briefly describing the amendment,
supplement or waiver. Any failure of the Company to send such notice, or any
defect therein, will not, however, in any way impair or affect the validity of
any such supplemental indenture or waiver.
(f) After an amendment, supplement or waiver becomes effective, it will
bind every Holder unless it is of the type requiring the consent of each Holder
affected. If the amendment, supplement or waiver is of the type requiring the
consent of each Holder affected, the amendment, supplement or waiver will bind
each Holder that has consented to it and every subsequent Holder of a Warrant
with respect to which consent was granted.
(g) If an amendment, supplement or waiver changes the terms of a Warrant,
the Warrant Agent may require the Holder to deliver it to the Warrant Agent so
that the Warrant Agent may place an appropriate notation of the changed terms on
the Warrant and return it to the Holder, or exchange it for a new Warrant that
reflects the changed terms. The Warrant Agent may also place an appropriate
notation on any Warrant thereafter countersigned. However, the effectiveness of
the amendment, supplement or waiver is not affected by any failure to annotate
or exchange Warrants in this fashion.
(h) The Warrant Agent is entitled to receive, and will be fully protected
in relying upon, an Opinion of Counsel stating that the execution of any
amendment, supplement or waiver authorized pursuant to this section is
authorized or permitted by the Agreement. If the Warrant Agent has received such
an Opinion of Counsel, it shall sign the amendment, supplement or waiver so long
as the same does not adversely affect the rights of the Warrant Agent. The
Warrant Agent may, but is not obligated to, execute any amendment, supplement or
waiver that affects the Warrant Agent's own rights, duties or immunities under
the Agreement.
Section 8.04 Governing Law. The Agreement and the Warrants shall be
governed by, and construed in accordance with, the laws of the State of New
York.
Section 8.05 No Adverse Interpretation of Other Agreements. The Agreement
may not be used to interpret another agreement of the Company, and no such
agreement may be used to interpret the Agreement.
Section 8.06 Successors. All agreements of the Company in the Agreement and
the Warrants will bind its successors. All agreements of the Warrant Agent in
the Agreement will bind its successors.
Section 8.07 Duplicate Originals. The parties may sign any number of copies
of the Agreement. Each signed copy shall be an original, but all of them
together represent the same agreement.
24
Section 8.08 Separability. In case any provision in the Agreement or in the
Warrants is invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions will not in any way be affected or
impaired thereby.
Section 8.09 Table of Contents and Headings. The Table of Contents and
headings of the Articles, Sections and subsections of this Agreement have been
inserted for convenience of reference only, are not to be considered a part of
the Agreement and in no way modify or restrict any of the terms and provisions
of the Agreement.
Section 8.10 Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any Person or corporation other than the Company, the
Warrant Agent and the registered holders of Warrants any legal or equitable
right, remedy or claim under this Agreement; but this Agreement shall be for the
sole and exclusive benefit of the Company, the Warrant Agent and the registered
holders of Warrants.
25
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
CONSECO, INC.
By:/s/Daniel J. Murphy
----------------------------------
Name: Daniel J. Murpny
Title: Senior Vice President and
Treasurer
WACHOVIA BANK, N.A., as Warrant Agent
By:/s/Myron O. Gray
---------------------------------
Name: Myron O. Gray
Title: Vice President
[SIGNATURE PAGE TO WARRANT AGREEMENT]
EXHIBIT A
[Face of Series A Warrant Subscription Certificate]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS A BENEFICIAL INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL WARRANT ARE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN
PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S
NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL WARRANT ARE LIMITED TO
TRANSFERS MADE IN ACCORDANCE WITH THE TRANSFER PROVISIONS OF THE WARRANT
AGREEMENT.
No. Warrants to Subscribe for
---------- ------
shares of Common Stock
------
CUSIP No.
---------
Series A Warrant Subscription Certificate
This Warrant Subscription Certificate certifies that Cede & Co., or its
registered assigns, is the registered holder of Series A Warrants (the
"Warrants") to purchase Common Stock, par value $0.01 per share (the "Common
Stock"), of Conseco, Inc., a Delaware corporation. Each Warrant entitles the
registered holder upon exercise at any time from 9:00 a.m. on the Issue Date
until 5:00 p.m. New York City Time on September 10, 2008 (the "Expiration
Date"), to receive from the Company fully paid and nonassessable shares of
Common Stock (the "Warrant Shares") at an initial exercise price (the "Exercise
Price") of $27.60 per share payable upon surrender of this Warrant Certificate
at the office or agency of the Warrant Agent, subject to the conditions set
forth herein and in the Warrant Agreement referred to on the reverse hereof. The
Exercise Price and number of Warrant Shares issuable upon exercise of the
Warrants are subject to adjustment upon the occurrence of certain events set
forth in the Warrant Agreement.
Reference is hereby made to the further provisions of this Warrant
Certificate set forth on the reverse hereof and such further provisions shall
for all purposes have the same effect as though fully set forth at this place.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
signed below manually or by facsimile by its duly authorized officer.
Dated: September , 2003
---
CONSECO, INC.
By:
----------------------------------
Name: William J. Shea
Title: President
Countersigned:
WACHOVIA BANK, N.A.,
as Warrant Agent
By:
--------------------------------
Authorized Signatory
EXHIBIT B
CONSECO, INC.
[Reverse of Series A Warrant Subscription Certificate
1. Warrant Agreement.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued or to be issued pursuant to a Warrant
Agreement dated as of September 10, 2003 (the "Warrant Agreement"), between the
Company and Wachovia Bank, N.A., as warrant agent (the "Warrant Agent"), which
Warrant Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to for a description of the rights, limitation
of rights, obligations, duties and immunities thereunder of the Warrant Agent,
the Company and the holders (the words "holders" or "holder" meaning the
registered holders or registered holder) of the Warrants. To the extent
permitted by law, in the event of an inconsistency or conflict between the terms
of this Warrant and the Warrant Agreement, the terms of the Warrant Agreement
will prevail.
2. Exercise.
Warrants may be exercised at any time on or after 9:00 a.m on the Issue
Date and on or before 5:00 p.m. New York City time on the Expiration Date. In
order to exercise all or any of the Warrants represented by this Warrant
Certificate, the holder must deliver to the Warrant Agent at its Corporate Trust
Office set forth in the Warrant Agreement this Warrant Certificate and the form
of election to purchase on the reverse hereof duly completed, which signature
shall be medallion guaranteed by an institution which is a member of a
Securities Transfer Association recognized signature guarantee program, and upon
payment to the Warrant Agent for the account of the Company of the Exercise
Price in the manner set forth in the Warrant Agreement for the number of Warrant
Shares in respect of which such Warrants are then exercised.
No Warrant may be exercised after 5:00 p.m., New York City time on the
Expiration Date, and to the extent not exercised by such time the Warrants shall
become void.
3. Adjustments.
The Warrant Agreement provides that, upon the occurrence of certain events,
the Exercise Price set forth on the face hereof may, subject to certain
conditions, be adjusted. The Warrant Agreement also provides that the number of
shares of Common Stock issuable upon the exercise of each Warrant shall be
adjusted in certain events.
4. No Fractional Shares.
No fractions of a share of Common Stock will be issued upon the exercise of
any Warrant, but the Company will pay the cash value thereof determined as
provided in the Warrant Agreement.
5. Registered Form; Transfer and Exchange.
The Warrants are in registered form. Warrant Certificates, when surrendered
at the office of the Warrant Agent by the registered holder thereof in person or
by legal representative or attorney duly authorized in writing, may be
exchanged, in the manner and subject to the limitations provided in the Warrant
Agreement, but without payment of any service charge (except as specified in the
Warrant Agreement), for another Warrant Certificate or Warrant Certificates of
like tenor evidencing in the aggregate a like number of Warrants.
Upon due presentation for registration of transfer of this Warrant
Certificate at the office of the Warrant Agent a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided in the Warrant Agreement,
without charge except for any tax or other governmental charge imposed in
connection therewith.
The Company and the Warrant Agent may deem and treat the registered
holder(s) thereof as the absolute owner(s) of this Warrant Certificate
(notwithstanding any notation of ownership or other writing hereon made by
anyone), for the purpose of any exercise hereof, of any distribution to the
holder(s) hereof, and for all other purposes, and neither the Company nor the
Warrant Agent shall be affected by any notice to the contrary. Neither the
Warrants nor this Warrant Certificate entitles any holder hereof to any rights
of a stockholder of the Company.
6. Countersignature. This Warrant Certificate shall not be valid unless
countersigned by the Warrant Agent or the Countersignature Agent, as applicable,
as such term is used in the Warrant Agreement.
7. Governing Law.
This Warrant Certificate shall be governed by and construed in accordance
with the internal laws of the State of New York
8. Abbreviations.
Customary abbreviations may be used in the name of a Holder or an assignee,
such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties),
JT TEN (= joint tenants with right of survivorship and not as tenants in
common), CUST (= Custodian) and U/G/M/A/ (= Uniform Gifts to Minors Act).
A copy of the Warrant Agreement may be obtained by the holder hereof upon
written request to the Company.
[Form of Election to Purchase]
(To Be Executed Upon Exercise Of Warrant)
(1) The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to receive _____________ shares of
Common Stock and herewith tenders payment for such shares to the order of
CONSECO, INC., in the amount of $__________ in accordance with the terms hereof.
OR
The undersigned hereby irrevocably elects to convert this Warrant into
___________ shares of Common Stock (before giving effect to the cashless
exercise provisions) and herewith agrees to make payment therefor pursuant to
the cashless exercise provisions of the Warrant Agreement, all on the terms and
the conditions specified in the Warrant Certificate and the Warrant Agreement.
(2) The undersigned requests that the Company deliver
______________________ shares of Common Stock in accordance with the terms of
the Warrant Agreement.
-------------------------------
Signature
Date:
-------------------------------
Signature Guaranteed
Signatures must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Warrant Agent, which requirements include membership or
participation in the Security Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be determined by the Warrant Agent in
addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
SCHEDULE OF EXCHANGES OF INTERESTS OF GLOBAL WARRANTS
The following exchanges of a part of this Global Warrant have been made:
<TABLE>
<CAPTION>
Number of Warrants
Amount of decrease Amount of increase in in this Global Signature of
in number of number of Warrants in Warrant following authorized officer
Date of Exchange Warrants in this this Global Warrant such decrease or of Warrant Agent
Global Warrant increase
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C>
</TABLE>
[FORM OF TRANSFER NOTICE]
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s),
assign(s) and transfer(s) unto _____________________________ (the "Assignee")
(Please type or print block letters)
__________________________________________________________________ (Please print
or typewrite name and address including zip code of assignee) the within Warrant
and all rights thereunder, hereby irrevocably constituting and appointing
__________________________________________________________________ attorney to
transfer said Warrant on the books of the Company with full power of
substitution in the premises.
Date:
---------------------
--------------------------
Seller
By:
------------------------
NOTICE: The signature to this assignment must correspond with the name as
written upon the face of the within-mentioned instrument in every particular,
without alteration or any change whatsoever.
Signature Guarantee:(1)
---------------------------
---------------------------
1 Signatures must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Registrar, which requirements include
membership or participation in the Securities Transfer Association
Medallion Program ("STAMP") or such other "signature guarantee program" as
may be determined by the Registrar in addition to, or in substitution for,
STAMP, all in accordance with the Securities Exchange Act of 1934, as
amended.
EXHIBIT C
DTC LEGEND
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS A BENEFICIAL INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL WARRANT ARE LIMITED TO TRANSFERS IN WHOLE, BUT NOT
IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S
NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL WARRANT ARE LIMITED TO
TRANSFERS MADE IN ACCORDANCE WITH THE TRANSFER PROVISIONS OF THE WARRANT
AGREEMENT.
Exhibit 10.1
--------------------------------------------------------------------------------
CREDIT AGREEMENT
Dated as of September 10, 2003
among
CONSECO, INC.,
BANK OF AMERICA, N.A.,
as Agent,
and
THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO
--------------------------------------------------------------------------------
BANC OF AMERICA SECURITIES LLC
and
J.P. MORGAN SECURITIES INC.
Joint Lead Arrangers and Joint Bookrunners
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 1
DEFINITIONS
Section 1.01. Certain Defined Terms..............................................................................1
Section 1.02. Other Interpretive Provisions.....................................................................39
Section 1.03. Classification of Loans and Borrowings............................................................40
Section 1.04. Accounting Principles.............................................................................40
ARTICLE 2
THE CREDITS
Section 2.01. Commitments.......................................................................................41
Section 2.02. Loans.............................................................................................42
Section 2.03. Notes; Loan Accounts..............................................................................42
Section 2.04. Interest Elections................................................................................42
Section 2.05. Termination of Commitments........................................................................43
Section 2.06. Payment at Maturity...............................................................................43
Section 2.07. Scheduled Amortization............................................................................44
Section 2.08. Optional and Mandatory Prepayments................................................................45
Section 2.09. Interest..........................................................................................48
Section 2.10. Fees..............................................................................................49
Section 2.11. Computation of Fees and Interest..................................................................50
Section 2.12. Payments by the Company...........................................................................50
Section 2.13. Sharing of Payments, Etc..........................................................................51
ARTICLE 3
TAXES, YIELD PROTECTION AND ILLEGALITY
Section 3.01. Taxes.............................................................................................51
Section 3.02. Illegality........................................................................................53
Section 3.03. Increased Costs and Reduction of Return...........................................................54
Section 3.04. Funding Losses....................................................................................55
Section 3.05. Inability to Determine Rates......................................................................55
Section 3.06. Certificates of Banks.............................................................................56
Section 3.07. Substitution of Banks.............................................................................56
Section 3.08. Survival..........................................................................................56
ARTICLE 4
CONDITIONS PRECEDENT
Section 4.01. Effective Date....................................................................................56
</TABLE>
i
<TABLE>
<S> <C>
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
Section 5.01. Corporate Existence and Power.....................................................................60
Section 5.02. Corporate Authorization; No Contravention.........................................................60
Section 5.03. Governmental Authorization........................................................................61
Section 5.04. Binding Effect....................................................................................61
Section 5.05. Litigation........................................................................................61
Section 5.06. No Default........................................................................................62
Section 5.07. ERISA Compliance..................................................................................62
Section 5.08. Margin Regulations................................................................................63
Section 5.09. Title to Properties...............................................................................63
Section 5.10. Taxes.............................................................................................63
Section 5.11. Financial Condition...............................................................................64
Section 5.12. Environmental Matters.............................................................................65
Section 5.13. Regulated Entities................................................................................66
Section 5.14. Subsidiaries......................................................................................66
Section 5.15. Insurance Licenses................................................................................66
Section 5.16. Full Disclosure...................................................................................67
Section 5.17. Solvency..........................................................................................67
Section 5.18. Security Interests................................................................................67
Section 5.19. Insurance.........................................................................................68
Section 5.20. Reinsurance Agreements............................................................................68
ARTICLE 6
AFFIRMATIVE COVENANTS
Section 6.01. Financial Statements..............................................................................68
Section 6.02. Certificates; Other Information...................................................................70
Section 6.03. Notices...........................................................................................74
Section 6.04. Preservation of Corporate Existence, Etc..........................................................76
Section 6.05. Insurance.........................................................................................76
Section 6.06. Payment of Obligations............................................................................76
Section 6.07. Compliance With Laws..............................................................................77
Section 6.08. Compliance With ERISA.............................................................................77
Section 6.09. Inspection of Property and Books and Records; Expense Reimbursement; Appraisal Reports............77
Section 6.10. A.M. Best Rating Reduction Remedy.................................................................78
Section 6.11. Financial Advisor.................................................................................79
Section 6.12. Information Regarding Collateral..................................................................79
Section 6.13. Casualty and Condemnation.........................................................................80
Section 6.14. Additional Subsidiaries; Immaterial Subsidiaries..................................................80
Section 6.15. Further Assurances................................................................................81
Section 6.16. D&O Loans.........................................................................................82
</TABLE>
ii
<TABLE>
<S> <C>
ARTICLE 7
NEGATIVE COVENANTS
Section 7.01. Limitation on Indebtedness; Certain Capital Stock.................................................83
Section 7.02. Liens.............................................................................................84
Section 7.03. Disposition of Assets.............................................................................86
Section 7.04. Other Agreements..................................................................................88
Section 7.05. Transactions With Affiliates......................................................................88
Section 7.06. Change in Business................................................................................88
Section 7.07. Fundamental Changes...............................................................................88
Section 7.08. Restricted Payments...............................................................................89
Section 7.09. Investments and Acquisitions......................................................................90
Section 7.10. Prepayments of Indebtedness; Modifications of Certain Agreements; Synthetic Purchase Agreements...91
Section 7.11. Debt to Total Capitalization Ratio................................................................93
Section 7.12. Interest Coverage Ratio...........................................................................93
Section 7.13. Conseco EBITDA....................................................................................93
Section 7.14. Aggregate RBC Ratio...............................................................................93
Section 7.15. Individual Risk-Based Capital Ratio...............................................................93
Section 7.16. Combined Statutory Capital and Surplus Level......................................................94
Section 7.17. Investment Portfolio Requirement..................................................................94
Section 7.18. Restrictive Agreements............................................................................94
Section 7.19. Holding Company Activities........................................................................95
Section 7.20. Changes In Fiscal Year............................................................................96
ARTICLE 8
EVENTS OF DEFAULT
Section 8.01. Events of Default.................................................................................96
Section 8.02. Remedies.........................................................................................100
Section 8.03. Rights Not Exclusive.............................................................................101
ARTICLE 9
THE AGENT
Section 9.01. Appointment and Authorization; "Agent"...........................................................101
Section 9.02. Delegation of Duties.............................................................................102
Section 9.03. Liability of Agent...............................................................................102
Section 9.04. Reliance by Agent................................................................................102
Section 9.05. Notice of Default................................................................................103
Section 9.06. Credit Decision..................................................................................103
Section 9.07. Indemnification of Agent.........................................................................104
Section 9.08. Agent in Individual Capacity.....................................................................104
Section 9.09. Successor Agent..................................................................................105
Section 9.10. Agent May File Proofs Of Claim...................................................................105
Section 9.11. Collateral And Guaranty Matters..................................................................106
Section 9.12. Withholding Tax..................................................................................106
</TABLE>
iii
<TABLE>
<S> <C>
ARTICLE 10
MISCELLANEOUS
Section 10.01. Amendments and Waivers..........................................................................108
Section 10.02. Notices.........................................................................................110
Section 10.03. No Waiver; Cumulative Remedies..................................................................111
Section 10.04. Costs and Expenses..............................................................................111
Section 10.05. Company Indemnification; Damage Waiver..........................................................112
Section 10.06. Payments Set Aside..............................................................................113
Section 10.07. Assignments, Participations, etc................................................................113
Section 10.08. Confidentiality.................................................................................116
Section 10.09. Set-off.........................................................................................117
Section 10.10. Notification of Addresses, Lending Offices, Etc.................................................118
Section 10.11. Counterparts....................................................................................118
Section 10.12. Survival of Representations and Warranties......................................................118
Section 10.13. Severability....................................................................................118
Section 10.14. Governing Law; Jurisdiction; Consent to Service of Process......................................119
Section 10.15. Waiver of Jury Trial............................................................................119
Section 10.16. Entire Agreement................................................................................120
</TABLE>
<TABLE>
<CAPTION>
SCHEDULES
<S> <C>
Schedule 2.01 Commitments
Schedule 5.03 Governmental Authorizations
Schedule 5.05 Litigation
Schedule 5.07 ERISA
Schedule 5.13 Investment Companies
Schedule 5.14 Subsidiaries
Schedule 5.20 Non-Ordinary Course Reinsurance Agreements
Schedule 7.01 Existing Indebtedness
Schedule 7.02 Existing Liens
Schedule 7.06 Business Activities
Schedule 7.09 Committed Investments
Schedule 7.10 Amendment of Debt Agreements
Schedule 7.11 Debt to Total Capitalization Ratio
Schedule 7.12 Interest Coverage Ratio
Schedule 7.13 Conseco EBITDA
Schedule 7.14 Aggregate Risk-Based Capital Ratio
Schedule 7.15 Minimum Risk-Based Capital Ratio
Schedule 7.18 Restrictive Agreements
Schedule 10.02 Addresses for Notices
</TABLE>
iv
<TABLE>
<CAPTION>
EXHIBITS
<S> <C>
Exhibit A Form of Compliance Certificate
Exhibit B Form of Note
Exhibit C Form of Notice of Continuation
Exhibit D Form of Assignment and Assumption
Exhibit E Offshore Rate Funding Loss Determination Methodology
Exhibit F Form of Security Agreement
Exhibit G Subordination Provisions
Exhibit H-1 Form of Opinion of Kirkland & Ellis
Exhibit H-2 Form of Opinion of Baker & Daniels
Exhibit H-3 Form of Opinion of Baker & Daniels (as to insurance matters)
Exhibit I Terms of Replacement Preferred Stock
</TABLE>
v
CREDIT AGREEMENT
This CREDIT AGREEMENT is entered into as of September 10, 2003, among
CONSECO, INC., a Delaware corporation (together with its successors, the
"Company"), the several financial institutions from time to time party to this
Agreement (collectively, the "Banks"; individually, a "Bank") and Bank of
America, N.A., as agent for the Banks.
WHEREAS, on December 17, 2002, Conseco, Inc., an Indiana corporation ("Old
Conseco"), and certain of its Subsidiaries (such term and other capitalized
terms used in these recitals without definition having the meanings set forth in
Section 1.01 of this Agreement) filed voluntary petitions for relief under the
Bankruptcy Code with the Bankruptcy Court, such petitions being jointly
administered;
WHEREAS, Old Conseco and such Subsidiaries have proposed a Plan of
Reorganization that provides inter alia (x) for Old Conseco to transfer
substantially all of its assets to the Company pursuant to a reorganization
under Section 368(a)(1)(G) of the Code and (y) as a condition to consummation
thereof that the Company enter into this Agreement in order to provide for the
partial satisfaction of certain pre-petition claims of the Banks against Old
Conseco and CIHC;
WHEREAS, the Company is willing to secure its obligations under this
Agreement and certain other obligations by granting Liens on substantially all
of its assets to the Agent as provided in the Security Documents; and
WHEREAS, the Company is willing to cause each of its current and future
Domestic Subsidiaries (other than Insurance Subsidiaries, Subsidiaries of
Insurance Subsidiaries and Immaterial Subsidiaries) to guarantee the foregoing
obligations of the Company and to secure its guarantee thereof by granting Liens
on substantially all of its assets to the Agent as provided in the Security
Documents;
NOW, THEREFORE, in consideration of the mutual agreements, provisions and
covenants contained herein, the parties agree as follows:
Article 1
DEFINITIONS
Section 1.01 Certain Defined Terms. The following terms have the following
meanings:
"Acquisition" means (i) any Investment by the Company or any of its
Subsidiaries in a Person whereby such Person becomes a direct or indirect
Subsidiary of the Company or is merged with and into the Company or such
Subsidiary or (ii) an acquisition by the Company or any of its Subsidiaries of
the property and assets of any Person that constitutes all or substantially all
of the assets of such Person, or any division, line of business or other
business unit of such Person.
"Active Material Insurance Subsidiary" means Bankers Life and Casualty
Company, Conseco Life Insurance Company, Conseco Annuity Assurance Company,
Conseco Health Insurance Company and any other Insurance Subsidiary which, on a
stand-alone basis (excluding any equity ownership in its Subsidiaries), has in
excess of 5% of New Annualized Premiums of the Conseco Insurance Group.
"Adjustment Agreement" means, with respect to any obligor under any D&O
Credit Facility, any Adjustment Agreement substantially in the form attached to
the Disclosure Statement (as defined in the Plan of Reorganization) entered into
among such obligor, the Company, CIHC and Conseco Services, LLC as contemplated
by the Plan of Reorganization.
"Affiliate" means, as to any Person, any other Person which, directly or
indirectly, is in control of, is controlled by, or is under common control with,
such Person. A Person shall be deemed to control another Person if the
controlling Person possesses, directly or indirectly, the power (a) to vote 10%
or more of the securities (on a fully diluted basis) having ordinary voting
power for the election of directors or managing general partners of the other
Person, or (b) to direct or cause the direction of the management and policies
of the other Person, whether through the ownership of voting securities,
membership interests, by contract, or otherwise.
"Agent" means Bank of America, N.A., in its capacity as administrative
agent under the Loan Documents, and its successors and assigns in such capacity.
"Agent-Related Persons" means the initial Agent and any successor agent
appointed under Section 9.09, together with their respective Affiliates, and the
officers, directors, employees, agents and attorneys-in-fact of such Persons and
Affiliates.
"Agent's Office" means the Agent's address and, as appropriate, account as
set forth on Schedule 10.02, or such other address or account as the Agent may
from time to time specify.
"Aggregate RBC Ratio" means the Risk-Based Capital Ratio for all Insurance
Subsidiaries taken as a whole.
2
"Agreement" means this Credit Agreement.
"Allowed Class 10A Claims" has the meaning specified in the Plan of
Reorganization.
"A.M. Best" means A.M. Best Company.
"Annual Statement" means the annual statutory financial statement of any
Insurance Subsidiary required to be filed with the insurance commissioner (or
similar authority) of its jurisdiction of incorporation, which statement shall
be in the form required by such Insurance Subsidiary's jurisdiction of
incorporation or, if no specific form is so required, in the form of financial
statements permitted by such insurance commissioner (or such similar authority)
to be used for filing annual statutory financial statements and shall contain
the type of information permitted or required by such insurance commissioner (or
such similar authority) to be disclosed therein, together with all exhibits or
schedules filed therewith.
"Applicable Margin" means, for any day, with respect to any Offshore Rate
Tranche A Term Loan, Base Rate Tranche A Term Loan, Offshore Rate Tranche B Term
Loan or Base Rate Tranche B Term Loan, the respective percentage per annum set
forth below under the applicable column in the row corresponding to the Status
that exists on such day:
<TABLE>
<CAPTION>
-------------------- ----------------- ---------------- ----------------- ------------------
Status Offshore Rate Base Rate Offshore Rate Base Rate
Tranche A Term Tranche A Term Tranche B Term Tranche B Term
Loans Loans Loans Loans
-------------------- ----------------- ---------------- ----------------- ------------------
-------------------- ----------------- ---------------- ----------------- ------------------
<S> <C> <C> <C> <C>
Level I 5.25% 3.25% 7.25% 5.25%
-------------------- ----------------- ---------------- ----------------- ------------------
-------------------- ----------------- ---------------- ----------------- ------------------
Level II 4.75% 2.75% 6.75% 4.75%
-------------------- ----------------- ---------------- ----------------- ------------------
-------------------- ----------------- ---------------- ----------------- ------------------
Level III 4.25% 2.25% 6.25% 4.25%
-------------------- ----------------- ---------------- ----------------- ------------------
-------------------- ----------------- ---------------- ----------------- ------------------
Level IV 3.75% 1.75% 5.75% 3.75%
-------------------- ----------------- ---------------- ----------------- ------------------
</TABLE>
For purposes of this definition, subject to the following paragraphs of
this definition, the following terms have the following meanings:
"Level I Status" exists at any date if, at such date, (i) the Company
is rated "CCC+" or below by S&P or "Caa1" or below by Moody's or (ii) no
other Status exists.
"Level II Status" exists at any date if, at such date, the Company is
rated "B-", "B" or "B+" by S&P or "B3", "B2" or "B1" by Moody's.
3
"Level III Status" exists at any date if, at such date, the Company is
rated "BB-", "BB" or "BB+" by S&P or "Ba3", "Ba2" or "Ba1" by Moody's.
"Level IV Status" exists at any date if, at such date, the Company is
rated "BBB-" or higher by S&P or "Baa3" or higher by Moody's.
"Status" refers to the determination of which of Level I Status, Level
II Status, Level III Status or Level IV Status exists at any date.
The S&P and Moody's credit ratings to be utilized for purposes of this
definition are those assigned to the senior secured long-term debt securities of
the Company (including the Loans) without third-party credit enhancement
("Long-Term Debt"), and any rating assigned to any other debt security of the
Company shall be disregarded. The ratings in effect for any day are those in
effect on the close of business on such day. If either S&P or Moody's shall not
have in effect on any date a Long-Term Debt rating, such agency shall be deemed
to have a Long-Term Debt rating referred to in the definition of "Level I
Status" on such date; provided that if such event is as a result of such rating
agency ceasing to be in the business of rating debt securities, then so long as
the other rating agency has in effect on such date a Long-Term Debt rating, the
Long-Term Debt rating of such other rating agency in effect on such date shall
be used to determine the applicable Status until such time as the Company and
the Agent (with the consent of the Required Banks) shall have agreed upon an
alternate rating agency that has a Long-Term Debt rating and shall have made all
necessary changes to this Agreement (including this definition) to give effect
to such agreement. In the case of split ratings from S&P and Moody's, the rating
to be used to determine the applicable Status is the lower of the two; provided
that if the split is more than one full rating category, the rating to be used
to determine the applicable Status is any rating in the rating category which is
one rating category higher than the lower of the two rating categories.
Notwithstanding anything to the contrary herein, if the Status as determined
pursuant to this definition on any date is either Level III Status or Level IV
Status and, on such date, any Active Material Insurance Subsidiary has a
financial strength rating less than "A-" by A.M. Best, then Level II Status
shall be deemed to exist on such date. A rating category means (i) with respect
to S&P, any of the following categories: AAA, AA, A, BBB, BB, B, CCC, CC, C and
D (or equivalent successor categories) and (ii) the equivalent of any such
category of S&P used by Moody's.
Initially, unless Level I Status exists at any date during the period
commencing on the Effective Date through the end of the second full Fiscal
Quarter after the Effective Date, Level II Status shall be deemed to exist for
each day during such period. Commencing on the first day of the third full
Fiscal Quarter following the Effective Date, the Applicable Margin shall be
determined based on the ratings in effect on such date. Thereafter, each change
in the
4
Applicable Margin resulting from a publicly announced change in a rating shall
be effective during the period commencing on the date of the public announcement
thereof and ending on the date immediately preceding the effective date of the
next such change.
"Asset Sale" means any Disposition of property or series of related
Dispositions of property, excluding any such Disposition permitted by Section
7.03(a), Section 7.03(b), Section 7.03(c), Section 7.03(d), Section 7.03(e)(i),
Section 7.03(e)(ii) (but only to the extent proceeds therefrom are required to
be retained by any Insurance Subsidiary pursuant to regulatory restrictions),
Section 7.03(f), Section 7.03(h), Section 7.03(i) and Section 7.03(j).
"Assignment and Assumption" means an Assignment and Assumption
substantially in the form of Exhibit D.
"Attorney Costs" means and includes all reasonable fees, expenses and
disbursements of any law firm or other external legal counsel and, without
duplication, the reasonable allocated cost of internal legal services and all
reasonable expenses and disbursements of internal counsel.
"Bankers Life Group" means Bankers Life and Casualty Company, Bankers Life
Insurance Company of Illinois and Colonial Penn Life Insurance Company.
"Bankruptcy Code" means Title 11 of the United States Code and applicable
provisions of Titles 18 and 28 of the United States Code.
"Bankruptcy Court" means the United States Bankruptcy Court for the
Northern District of Illinois, Eastern Division.
"Banks" has the meaning specified in the introduction to this Agreement and
includes any other Person that shall have become a party hereto pursuant to an
Assignment and Assumption in accordance with Section 10.07, other than any such
Person that ceases to be a party hereto pursuant to an Assignment and
Assumption.
"Base Rate" means, for any day, a fluctuating rate per annum equal to the
higher of: (a) 0.50% per annum above the latest Federal Funds Rate and (b) the
rate of interest in effect for such day as publicly announced from time to time
by BofA as its "prime rate". The "prime rate" is a rate set by BofA based upon
various factors including BofA's costs and desired return, general economic
conditions and other factors, and is used as a reference point for pricing some
loans, which may be priced at, above, or below such announced rate. Any change
in such rate announced by BofA shall take effect at the opening of business on
the day specified in the public announcement of such change.
5
"Base Rate Loan" means a Loan that bears interest based on the Base Rate.
"BofA" means Bank of America, N.A., a national banking association, and its
successors.
"Borrowing" means Loans of the same Class and Interest Type deemed made,
converted or continued on the same day and, in the case of Offshore Rate Loans,
as to which the same Interest Period is in effect.
"Business Day" means any day other than a Saturday, Sunday or other day on
which commercial banks are authorized to close under the laws of, or are in fact
closed in, the state where the Agent's Office is located or New York City and,
if such day relates to any Offshore Rate Loan, means any such day on which
dealings in Dollar deposits are conducted by and between banks in the London
interbank eurodollar market.
"Calculation Period" means, with respect to any ratio or calculation, the
period for which such ratio or calculation is being calculated.
"Capital Adequacy Regulation" means any guideline, request or directive of
any central bank or other Governmental Authority, or any other law, rule or
regulation, whether or not having the force of law, in each case, regarding
capital adequacy of any bank or of any corporation controlling a bank.
"Capital and Surplus" means, as to any Insurance Subsidiary, as of any
date, the total amount shown on line 38, page 3, column 1 of the Annual
Statement of such Insurance Subsidiary, or an amount determined in a consistent
manner for any date other than one as of which an Annual Statement is prepared.
"Capital Expenditures" means, for any period, (a) the additions to
property, plant and equipment capitalized in accordance with GAAP and other
capital expenditures of the Company and its Subsidiaries that are (or would be)
set forth in a consolidated statement of cash flows of the Company and its
Subsidiaries for such period prepared in accordance with GAAP and (b) any
Capitalized Lease Liabilities incurred by the Company and its Subsidiaries
during such period.
"Capital Stock" means any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a corporation, any
and all equivalent ownership interests in a Person (other than a corporation)
and any and all warrants, rights or options to purchase any of the foregoing.
"Capitalized Lease Liabilities" means, with respect to any Person, all
monetary obligations of such Person under any leasing or similar arrangement
6
which, in accordance with GAAP, would be classified as a capitalized lease, and,
for purposes of this Agreement, the amount of such obligations shall be the
capitalized amount thereof, determined in accordance with GAAP, and the stated
maturity thereof shall be the date of the last payment of rent or any other
amount due under such lease prior to the first date upon which such lease may be
terminated by the lessee without payment of a penalty.
"Cash Equivalents" means (a) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition; (b)
certificates of deposit, time deposits, eurodollar time deposits or overnight
bank deposits having maturities of nine months or less from the date of
acquisition issued by any commercial bank organized under the laws of the United
States or any state thereof having combined capital and surplus of not less than
$500,000,000 and a short term deposit rating of at least A-1 by S&P and P-l by
Moody's, or carrying an equivalent rating by a nationally recognized rating
agency, if both of the two named rating agencies cease publishing ratings of
commercial paper issuers generally; (c) commercial paper of an issuer rated at
least A-1 by S&P and P-l by Moody's, or carrying an equivalent rating by a
nationally recognized rating agency, if both of the two named rating agencies
cease publishing ratings of commercial paper issuers generally, and maturing
within nine months from the date of acquisition; (d) repurchase obligations of
any Bank or of any commercial bank satisfying the requirements of clause (b) of
this definition, having a term of not more than 30 days, with respect to
securities issued or fully guaranteed or insured by the United States
government; (e) securities with maturities of one year or less from the date of
acquisition issued or fully guaranteed by any state, commonwealth or territory
of the United States, by any political subdivision or taxing authority of any
such state, commonwealth or territory or by any foreign government, the
securities of which state, commonwealth, territory, political subdivision,
taxing authority or foreign government (as the case may be) are rated at least A
by S&P and A2 by Moody's; (f) securities with maturities of six months or less
from the date of acquisition backed by standby letters of credit issued by any
Bank or any commercial bank satisfying the requirements of clause (b) of this
definition; or (g) shares of money market mutual or similar funds which invest
exclusively in assets satisfying the requirements of clauses (a) through (f) of
this definition.
"Cash Interest Expense" means, for any Calculation Period, the sum of (a)
total interest expense, to the extent paid or payable in cash, of the Company
and its Subsidiaries determined on a consolidated basis in accordance with GAAP,
excluding interest paid or, without duplication, accrued but unpaid by any
Insurance Subsidiary to the extent otherwise included in total interest expense
in this clause (a) and (b) total dividends paid or payable in cash on any
preferred
7
stock issued by the Company to the extent the terms of such preferred stock
require payment of cash dividends, in each case for such Calculation Period.
"Casualty Event" means any casualty or other insured damage to any property
of the Company or any of its Subsidiaries (other than Insurance Subsidiaries or
Subsidiaries of Insurance Subsidiaries), or any taking of any such property
under power of eminent domain or by condemnation or similar proceeding, or any
transfer of any such property in lieu of a condemnation or similar taking
thereof.
"CBOs" means notes or other instruments (other than CMOs) secured by
collateral consisting primarily of debt securities and/or other types of debt
obligations, including loans.
"CCM" means Conseco Capital Management, Inc. (to be renamed 40/86 Advisors,
Inc.), a Delaware corporation.
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980.
"CERCLIS" means the Comprehensive Environmental Response, Compensation and
Liability Information System List.
"Change of Control" means (a) any acquisition, directly or indirectly, by
any Person, or two or more Persons acting in concert, of beneficial ownership
(within the meaning of Rule 13d-3 of the SEC under the Exchange Act) of 40% or
more of the outstanding shares of voting stock of the Company, (b) during any
period of 12 consecutive calendar months, commencing on the Effective Date, the
ceasing of those individuals (the "Continuing Directors") who (i) were directors
of the Company on the first day of each such period or (ii) who subsequently
became directors of the Company and whose election or initial nomination for
election subsequent to that date was approved by a majority of the Continuing
Directors then on the board of directors of the Company, to constitute a
majority of the board of directors of the Company; provided that such cessation
shall not constitute a "Change of Control" if (x) such cessation is as a result
of the holders of the New CNC Preferred Stock exercising their voting rights
following the occurrence of a Trigger Event (as defined in the certificate of
designations setting forth the terms of the New CNC Preferred Stock (as in
effect on the date hereof)) and (y) the holders of a majority of the shares of
New CNC Preferred Stock at the time of such cessation are also Banks then
holding at least a majority of the aggregate unpaid principal amount of the
Loans or (c) the occurrence of a "change of control" (howsoever defined) in the
indenture or any other instrument evidencing Permitted Refinancing Indebtedness
or in any instrument evidencing the Existing CIHC Preferred Stock or the
Replacement Preferred Stock.
8
"CIHC" means CIHC, Incorporated, a Delaware corporation, and a direct
Wholly-Owned Subsidiary of the Company on the Effective Date.
"Class" (a) when used with respect to Banks, refers to whether such banks
are Tranche A Banks or Tranche B Banks, (b) when used with respect to
Commitments, refers to whether such Commitments are Tranche A Commitments or
Tranche B Commitments and (c) when used with respect to Loans or a Borrowing,
refers to whether such Loans, or the Loans comprising such Borrowing, are
Tranche A Term Loans or Tranche B Term Loans.
"CMOs" means notes or other instruments secured by collateral consisting
primarily of mortgages, mortgage-backed securities and/or other types of
mortgage-related obligations.
"Code" means the Internal Revenue Code of 1986, and regulations promulgated
thereunder.
"Collateral" means any and all "Collateral", as defined in any Security
Document.
"Collateral Account" has the meaning specified in the Security Agreement.
"Collateral and Guarantee Requirement" means the requirement that:
(a) the Agent shall have received from each Obligor either (i) a
counterpart of the Security Agreement duly executed and delivered on behalf
of such Obligor or (ii) in the case of any Person that becomes an Obligor
after the Effective Date, a supplement to the Security Agreement, in the
form specified therein, duly executed and delivered on behalf of such
Obligor;
(b) all outstanding Capital Stock in any Subsidiary owned by or on
behalf of any Obligor shall have been pledged pursuant to the Security
Agreement (except that the Obligors shall not be required to pledge more
than 65% of the outstanding voting Capital Stock in any Foreign Subsidiary
that is not an Obligor) and the Agent shall have received all certificates
or other instruments representing such Capital Stock, together with stock
powers or other instruments of transfer with respect thereto endorsed in
blank;
(c) all documents and instruments, including Uniform Commercial Code
financing statements, required by law or reasonably requested by the Agent
to be filed, registered or recorded to create the Liens intended to be
created by the Security Documents and perfect or
9
record such Liens to the extent, and with the priority, required by the
Security Agreement, shall have been filed, registered or recorded or
delivered to the Agent for filing, registration or recording;
(d) each Obligor shall have obtained all consents and approvals
required to be obtained by it in connection with the execution and delivery
of all Security Documents to which it is a party, the performance of its
obligations thereunder and the granting of the Liens granted by it
thereunder; and
(e) each Obligor shall have taken all other action required under the
Security Documents to perfect, register and/or record the Liens granted by
it thereunder.
"Combined Statutory Capital and Surplus" means, as of the last day of any
Fiscal Quarter, the sum of the amounts shown on the Combined Statutory Statement
of the Insurance Subsidiaries as of the last day of such Fiscal Quarter on (i)
p. 3, line 38 and (ii) p. 3, line 24.1.
"Combined Statutory Statement" means a statement combining the Quarterly
Statements or Annual Statements, as applicable, of all the Insurance
Subsidiaries.
"Commitment" means a Tranche A Commitment or Tranche B Commitment, or any
combination thereof (as the context requires).
"Company" has the meaning specified in the introduction to this Agreement.
"Compliance Certificate" means a certificate substantially in the form of
Exhibit A.
"Confirmation Date" means the date upon which the Confirmation Order is
entered by the Bankruptcy Court in its docket, within the meaning of bankruptcy
rules 5003 and 9021.
"Confirmation Order" means the order of the Bankruptcy Court confirming the
Plan of Reorganization.
"Conseco Available Cash Flow" means, for any Calculation Period, the sum,
without duplication, of (a) dividends paid in cash to the Company by any
Subsidiary plus (b) interest paid in cash to the Company by any Subsidiary
pursuant to any intercompany Indebtedness owing by such Subsidiary to the
Company plus (c) interest or principal paid in cash to the Company with respect
to any Surplus Debenture plus (d) amounts paid in cash to the Company under the
Tax Sharing Agreement plus (e) management and other similar fees received by the
10
Company under servicing agreements or otherwise from any Subsidiary plus (f)
amounts paid in cash to the Company pursuant to a loan made to it by any
Subsidiary plus (g) the Company's Investment Income received in cash minus (h)
cash operating expenses of the Company minus (i) Capital Expenditures of the
Company made in cash minus (j) any amounts paid by the Company in respect of
interest on or in repayment of any loan referred to in clause (f) above minus
(k) solely for any Calculation Period ending on or prior to March 31, 2005, the
cash portion of any charges referred to in clause (f) of the definition of
"Conseco EBITDA" and incurred on or prior to June 30, 2004 (other than any such
charges to the extent that payment thereof was reserved by the Company prior to
such Calculation Period and such reserve is reflected in the business plan
prepared by the Company in connection with the Reorganization Transactions, a
copy of which plan has been provided to the Banks prior to the Effective Date)
minus (l) any amounts paid in cash by the Company to any Insurance Subsidiary in
respect of any overpayment by such Insurance Subsidiary of amounts required to
be paid by such Insurance Subsidiary to the Company under the Tax Sharing
Agreement, in each case for such Calculation Period. Amounts received by the
Company or any of its Subsidiaries and required to be applied to prepay the
Borrowings pursuant to Section 2.08 (other than pursuant to Section 2.08(e))
shall, to the extent otherwise included in Conseco Available Cash Flow for any
Calculation Period, be excluded from this calculation for such Calculation
Period.
"Conseco EBITDA" means, for any Calculation Period, the consolidated Net
Income of the Company for such period plus, without duplication and to the
extent reflected as a charge in the statement of such consolidated Net Income
for such period, the sum of (a) income tax expense, (b) interest expense,
including, to the extent included as interest expense in accordance with GAAP,
amortization or write off of debt discount and debt issuance costs and
commissions, discounts and other fees and charges associated with Indebtedness,
(c) depreciation and amortization expense of tangible and intangible assets, (d)
any losses on sales of assets outside of the ordinary course of business, (e)
any realized or unrealized losses on Investments of Insurance Subsidiaries, (f)
solely for any Calculation Period ending on or prior to March 31, 2005, cash
charges not exceeding $20,000,000 in the aggregate and other non-cash charges,
in each case related to the Reorganization Transactions and incurred on or prior
to June 30, 2004, (g) any other non-recurring cash charges (not to exceed
$25,000,000 in the aggregate for all Calculation Periods) and non-recurring
non-cash charges (not to exceed $50,000,000 in the aggregate for all Calculation
Periods) taken by any Insurance Subsidiary arising out of the restructuring,
consolidation, severance or discontinuance of any portion of the operations,
employees and/or management of such Insurance Subsidiary or any businesses
thereof, (h) non-cash charges reflecting the cumulative effect of changes in
GAAP to the extent such charges relate to any prior Calculation Period and (i)
non-cash charges taken to write off any goodwill included in the Company's
balance sheet on the Effective Date to
11
the extent such charges are required by FAS 142, and minus, without duplication
and to the extent reflected as a gain in the statement of such consolidated Net
Income for such period, the sum of (a) any gains on sales of assets outside of
the ordinary course of business and (b) realized or unrealized gains on
Investments of Insurance Subsidiaries, all as determined on a consolidated basis
for such Calculation Period.
"Conseco Excess Cash Flow" means, for any Excess Cash Calculation Period,
Conseco Available Cash Flow for such Excess Cash Calculation Period minus,
without duplication, the sum of (a) cash income taxes paid or to be paid by the
Company with respect to such Excess Cash Calculation Period, (b) cash interest
expense paid by the Company with respect to such Excess Cash Calculation Period
and not reflected in the calculation of Conseco Available Cash Flow for such
Excess Cash Calculation Period and (c) permanent repayments of Indebtedness by
the Company during such Excess Cash Calculation Period to the extent permitted
under Section 7.10(a), other than repayments already reflected in the
calculation of Conseco Available Cash Flow for such Excess Cash Calculation
Period.
"CFC" means Conseco Finance Corp., a Delaware corporation.
"Conseco Insurance Group" means all Insurance Subsidiaries of the Company
from time to time, other than any Insurance Subsidiary that is part of the
Bankers Life Group.
"Contingent Obligation" means, without duplication, any agreement,
undertaking or arrangement by which any Person guarantees, endorses or otherwise
becomes or is contingently liable upon (by direct or indirect agreement,
contingent or otherwise, to provide funds for payment, to supply funds to, or
otherwise to invest in, a debtor, or otherwise to assure a creditor against
loss) the debt, obligation or other liability of any other Person (other than by
endorsements of instruments in the course of collection), or guarantees the
payment of dividends or other distributions upon the shares of any other Person;
provided, that the obligations of any Person under Reinsurance Agreements or in
connection with Investments of Insurance Subsidiaries permitted by the
applicable Department shall not be deemed Contingent Obligations of such Person.
The amount of any Contingent Obligation of any Person shall (subject to any
limitation set forth therein) be deemed to be an amount equal to the stated or
determinable amount of the related primary obligation, or portion thereof, in
respect of which such Contingent Obligation is made or, if not stated or
determinable, the maximum reasonably anticipated liability in respect thereof as
determined by such Person in good faith.
12
"Continuation Date" means any date on which, under Section 2.04, the
Company continues as Loans of the same Interest Type, but with a new Interest
Period, Loans having Interest Periods expiring on such date.
"Contractual Obligation" means, as to any Person, any provision of any
security issued by such Person or of any agreement, undertaking, contract,
indenture, mortgage, deed of trust or other instrument, document or agreement to
which such Person is a party or by which it or any of its property is bound.
"D&O Credit Facility" means each of (and "D&O Credit Facilities" means the
collective reference to the following):
(i) the Credit Agreement dated as of May 13, 1996 among certain officers,
directors and employees of Old Conseco and its subsidiaries, BofA, as
Administrative Agent, and the financial institutions signatory thereto, and all
other agreements and instruments, including guarantees, entered into in
connection therewith, in each case as amended, restated, refinanced,
supplemented, waived, extended, renewed, replaced or otherwise modified from
time to time prior to the Effective Date, including pursuant to the Amended and
Restated Credit Agreement dated as of August 26, 1997, Agreement dated as of
September 22, 2000 and Credit Agreement dated as of November 22, 2000;
(ii) the Credit Agreement dated as of August 21, 1998 among certain
officers, directors and employees of Old Conseco and its subsidiaries, BofA, as
Administrative Agent, and the financial institutions signatory thereto, and all
other agreements and instruments, including guarantees, entered into in
connection therewith, in each case as amended, restated, refinanced,
supplemented, waived, extended, renewed, replaced or otherwise modified from
time to time prior to the Effective Date, including pursuant to the Agreement
dated as of September 22, 2000 and Credit Agreement dated as of November 22,
2000;
(iii) the Credit Agreement dated as of August 21, 1998 among certain
officers, directors and employees of Old Conseco and its subsidiaries, BofA, as
Administrative Agent, and the financial institutions signatory thereto, and all
other agreements and instruments, including guarantees, entered into in
connection therewith, in each case as amended, restated, refinanced,
supplemented, waived, extended, renewed, replaced or otherwise modified from
time to time prior the Effective Date, including pursuant to the Agreement dated
as of September 22, 2000; and
(iv) the Credit Agreement dated as of September 15, 1999 among certain
officers, directors and employees of Old Conseco and its subsidiaries, JPMorgan
Chase Bank, as Administrative Agent, and the financial institutions signatory
thereto, and all other agreements and instruments, including guarantees,
13
entered into in connection therewith, in each case as amended, restated,
refinanced, supplemented, waived, extended, renewed, replaced or otherwise
modified from time to time prior to the Effective Date, including pursuant to
the Termination and Replacement Agreement dated as of May 30, 2000, Agreement
dated as of September 22, 2000 and Credit Agreement dated as of November 22,
2000.
"D&O Loans" means loans made pursuant to the D&O Credit Facilities.
"Debt to Total Capitalization Ratio" means, as of any date of
determination, without duplication, the ratio of (a) the principal amount of and
accrued but unpaid interest on all Indebtedness of the Company outstanding on
such date, other than (i) Indebtedness owing to any Subsidiary Guarantor and
(ii) Indebtedness of the kind referred to in clause (e) of the definition of
"Indebtedness", to (b) Total Capitalization on such date.
"Default" means any event or circumstance which constitutes an Event of
Default or which, with the giving of notice, the lapse of time, or both, would
(if not cured or otherwise remedied during such time) constitute an Event of
Default.
"Department" means, with respect to any Insurance Subsidiary, the
Governmental Authority of such Insurance Subsidiary's state of domicile with
which such Insurance Subsidiary is required to file its Annual Statement.
"Disposition" means the sale, assignment, leasing (other than in the
ordinary course), transfer, contribution, conveyance, issuance or other disposal
of, or granting of options, warrants or other rights with respect to, any of a
Person's assets (including any transaction pursuant to a Reinsurance Agreement
or a sale and leaseback transaction and, in the case of any Subsidiary, the
issuance or sale of its Capital Stock). The terms "Dispose" and "Disposed of"
shall have correlative meaning.
"Dollars", "dollars" and "$" each mean lawful money of the United States.
"Domestic Subsidiary" means a Subsidiary that is not a Foreign Subsidiary.
"Effective Date" means the date on which all conditions precedent set forth
in Section 4.01 are satisfied or waived in accordance with Section 10.01 (or, in
the case of subsection 4.01(e), waived by the Person entitled to receive any
payment required thereunder).
"Eligible Assignee" has the meaning specified in Section 10.07.
14
"Environmental Claims" means all claims, complaints, notices or inquiries,
however asserted or made, by any Governmental Authority or other Person alleging
potential liability or responsibility for violation of any Environmental Law, or
for release or injury to the environment or threat to public health, personal
injury (including sickness, disease or death), property damage, natural
resources damage, or otherwise alleging liability or responsibility for damages
(punitive or otherwise), cleanup, removal, remedial or response costs,
restitution, civil or criminal penalties, injunctive relief, or other type of
relief, resulting from or based upon the presence, placement, discharge,
emission or release (including intentional or unintentional, negligent or
non-negligent, sudden or nonsudden, accidental or non-accidental, placement,
spills, leaks, discharges, emissions or releases) of any Hazardous Material at,
in, or from property, whether or not owned by the Company or any of its
Subsidiaries.
"Environmental Laws" means all federal, state or local Requirements of Law,
statutes, common law duties, rules, regulations, ordinances and codes, together
with all administrative orders, directed duties, requests, licenses,
authorizations and permits of, and agreements with, any Governmental
Authorities, in each case relating to environmental, health, safety and land use
matters, as now or hereafter in effect.
"ERISA" means the Employee Retirement Income Security Act of 1974, and
regulations promulgated thereunder.
"ERISA Affiliate" means any trade or business (whether or not incorporated)
under common control with the Company within the meaning of Section 414(b) or
(c) of the Code (and Sections 414(m) and (o) of the Code for purposes of
provisions relating to Section 412 of the Code).
"ERISA Event" means (a) a Reportable Event with respect to a Pension Plan;
(b) a withdrawal by the Company or any ERISA Affiliate from a Pension Plan
subject to Section 4063 of ERISA during a plan year in which it was a
substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation
of operations which is treated as such a withdrawal under Section 4062(e) of
ERISA; (c) a complete or partial withdrawal by the Company or any ERISA
Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is
in reorganization; (d) the filing of a notice of intent to terminate, the
treatment of a Plan amendment as a termination under Section 4041 or 4041A of
ERISA, or the commencement of proceedings by the PBGC to terminate a Pension
Plan or Multiemployer Plan; (e) an event or condition which could reasonably be
expected to constitute grounds under Section 4042 of ERISA for the termination
of, or the appointment of a trustee to administer, any Pension Plan or
Multiemployer Plan; or (f) the imposition of any liability under Title IV of
ERISA, other than PBGC premiums due but not delinquent under Section 4007 of
ERISA, upon the Company or any ERISA Affiliate.
15
"Eurodollar Base Rate" has the meaning specified in the definition of
"Offshore Rate".
"Eurodollar Reserve Percentage" has the meaning specified in the definition
of "Offshore Rate".
"Event of Default" has the meaning specified in Section 8.01.
"Excess Cash Calculation Period" means (i) initially, the period beginning
on the first day of the first full Fiscal Quarter after the Effective Date and
ending on the last day of the Fiscal Year in which the Effective Date occurs and
(ii) thereafter, each subsequent Fiscal Year.
"Exchange Act" means the Securities Exchange Act of 1934 and the
regulations promulgated thereunder.
"Excluded Subsidiary" means any Subsidiary that is a Foreign Subsidiary,
non-Wholly-Owned Subsidiary or Immaterial Subsidiary.
"Existing CIHC Preferred Stock" means preferred stock of CIHC that is
reinstated pursuant to the Plan of Reorganization and that is held by one or
more of the Insurance Subsidiaries.
"Existing Reinsurance Transactions" means the reinsurance transactions
consummated in 2002 by Bankers Life and Casualty Company and Colonial Penn Life
Insurance Company.
"Federal Funds Rate" means, for any day, the rate per annum equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank on the Business Day next
succeeding such day; provided that (a) if such day is not a Business Day, the
Federal Funds Rate for such day shall be such rate on such transactions on the
next preceding Business Day as so published on the next succeeding Business Day,
and (b) if no such rate is so published on such next succeeding Business Day,
the Federal Funds Rate for such day shall be the average rate (rounded upward,
if necessary, to a whole multiple of 1/100 of 1%) charged to BofA on such day on
such transactions as determined by the Agent.
"Final Order" means an order or judgment of the Bankruptcy Court, or other
court of competent jurisdiction with respect to the subject matter, which has
not been reversed, stayed, modified or amended.
"Financing Transactions" means the execution, delivery and performance by
each Obligor of the Loan Documents to which it is to be a party and the deemed
borrowing of the Loans hereunder.
16
"Fiscal Quarter" means any fiscal quarter of a Fiscal Year.
"Fiscal Year" means any period of twelve consecutive calendar months ending
on December 31.
"Foreign Subsidiary" means a Subsidiary (which may be a corporation,
limited liability company, partnership or other legal entity) organized under
the laws of a jurisdiction outside the United States, and conducting
substantially all its operations outside the United States, other than any such
entity that is (whether as a matter of law, pursuant to an election by such
entity or otherwise) treated as a partnership in which any Obligor is a partner
or as a branch of any Obligor for United States income tax purposes.
"FRB" means the Board of Governors of the Federal Reserve System, and any
Governmental Authority succeeding to any of its principal functions.
"Further Taxes" means any and all present or future taxes, levies,
assessments, imposts, duties, deductions, fees, withholdings or similar charges
(including net income taxes and franchise taxes), and all liabilities with
respect thereto, imposed by any jurisdiction on account of amounts payable or
paid pursuant to Section 3.01.
"GAAP" means generally accepted accounting principles set forth from time
to time in the opinions and pronouncements of the Accounting Principles Board
and the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board (or agencies with
similar functions of comparable stature and authority within the U.S. accounting
profession), which are applicable to the circumstances as of the date of
determination.
"Governmental Authority" means any nation or government, any state or other
political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
and any corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing, including any board of
insurance, insurance department or insurance commissioner.
"Greenhill" means Greenhill & Co., LLC, a New York limited liability
company.
"Hazardous Material" means: (a) any "hazardous substance," as defined by
CERCLA; (b) any "hazardous waste," as defined by the Resource Conservation and
Recovery Act; (c) any petroleum product; or (d) any pollutant or contaminant or
hazardous, dangerous or toxic chemical, material or substance
17
within the meaning of any other Environmental Law, all as amended or hereafter
amended.
"Immaterial Subsidiary" means any Non-Insurance Subsidiary that (a) has
assets with an aggregate fair market value less than $1,000,000, (b) has
aggregate revenues less than $1,000,000 for the period of four consecutive
Fiscal Quarters most recently ended, (c) has no Indebtedness (other than
Indebtedness existing on the date hereof and listed in Schedule 7.01 or
permitted under Section 7.01(a)(x) and other Indebtedness in an aggregate
principal amount not exceeding at any time one-half of the fair market value of
the assets of such Subsidiary at such time), (d) is not integral to the business
or operations of the Company or its Subsidiaries (other than Immaterial
Subsidiaries), (e) has no Subsidiaries (other than Immaterial Subsidiaries) and
(f) is not an Obligor; provided that each of CNC Entertainment Nevada, Inc. and
Conseco Risk Management, Inc. shall be deemed to be an Immaterial Subsidiary for
so long as such Person meets all the requirements set forth above other than,
prior to the end of the fourth full Fiscal Quarter after the Effective Date, the
requirements of clause (b) above.
"Income Taxes" means any Taxes based upon net income.
"Indebtedness" means, with respect to any Person, without duplication: (a)
all obligations of such Person for borrowed money or in respect of loans or
advances; (b) all obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments; (c) all obligations in respect of letters of
credit, whether or not drawn, and bankers' acceptances and letters of guaranty
issued for the account or upon the application or request of such Person; (d)
all Capitalized Lease Liabilities of such Person; (e) all obligations of such
Person in respect of Swap Contracts; (f) all obligations of such Person to pay
the deferred purchase price of property or services which are included as
liabilities in accordance with GAAP (other than accrued expenses incurred and
trade accounts payable in each case in the ordinary course of business), and all
obligations secured by a Lien on property owned or being purchased by such
Person (including obligations arising under conditional sales or other title
retention agreements); (g) any obligations of a partnership of the kind referred
to in clauses (a) through (f) above or clause (h) or (i) below in which such
Person is a general partner; (h) solely for purposes of Section 7.11, all
obligations in respect of preferred stock (other than preferred stock that
qualifies as permanent equity for purposes of GAAP) of such Person; and (i) all
Contingent Obligations of such Person in connection with Indebtedness or
obligations of others of the kinds referred to in clauses (a) through (h) above;
provided that in no event shall "Indebtedness" include the Company's obligations
in respect of any Recharacterized Portion.
"Indemnified Liabilities" has the meaning specified in Section 10.05.
"Indemnified Person" has the meaning specified in Section 10.05.
18
"Independent Auditor" has the meaning specified in Section 6.01(a).
"Initial A.M. Best Rating" of any Active Material Insurance Subsidiary
means the financial strength rating of such Active Material Insurance Subsidiary
by A.M. Best in effect at the close of business on the 60th day after the
Effective Date.
"Insolvency Proceeding" means, with respect to any Person, (a) any case,
action or proceeding with respect to such Person before any court or other
Governmental Authority relating to bankruptcy, reorganization, insolvency,
liquidation, conservation, rehabilitation, receivership, dissolution, winding-up
or relief of debtors, or (b) any general assignment for the benefit of
creditors, composition, marshalling of assets for creditors, or other similar
arrangement in respect of its creditors generally or any substantial portion of
its creditors, in any case, undertaken under U.S. Federal, state or foreign law,
including the Bankruptcy Code.
"Insurance Subsidiary" means any Subsidiary which is required to be
licensed as an insurer or reinsurer.
"Interest Coverage Ratio" means, for any Calculation Period, the ratio of
(a) Conseco Available Cash Flow for such Calculation Period to (b) Cash Interest
Expense for such Calculation Period.
"Interest Payment Date" means (a) with respect to any Base Rate Loan, the
last Business Day of each calendar month and (b) with respect to any Offshore
Rate Loan, the last day of each Interest Period applicable to the Borrowing of
which such Loan is a part; provided, however, that if any Interest Period for an
Offshore Rate Loan exceeds one month, the date that falls one month after the
beginning of such Interest Period and after each Interest Payment Date
thereafter is also an Interest Payment Date (but in each case, subject to the
definition of "Interest Period").
"Interest Period" means, with respect to any Offshore Rate Borrowing, the
period beginning on the date of such Borrowing and ending on the numerically
corresponding day in the calendar month that is one, two, three or six months
thereafter, as the Company may elect; provided, that:
(i) if any Interest Period would otherwise end on a day that is not a Business
Day, that Interest Period shall be extended to the following Business Day
unless the result of such extension would be to carry such Interest Period
into another calendar month, in which event such Interest Period shall end
on the preceding Business Day;
19
(ii) any Interest Period that begins on the last Business Day of a calendar
month (or on a day for which there is no numerically corresponding day in
the calendar month at the end of such Interest Period) shall end on the
last Business Day of the calendar month at the end of such Interest Period;
and
(iii) no Interest Period for any Tranche A Term Loan shall extend beyond the
Tranche A Maturity Date and no Interest Period for any Tranche B Term Loan
shall extend beyond the Tranche B Maturity Date.
For purposes hereof, the date of a Borrowing initially shall be the date on
which such Borrowing is deemed made and thereafter shall be deemed to be the
effective date of the most recent continuation of such Borrowing.
"Interest Type", when used with respect to any Loan or Borrowing, refers to
whether the rate of interest on such Loan, or on the Loans comprising such
Borrowing, is determined by reference to the Offshore Rate or the Base Rate.
"Investment" means any advance, loan, extension of credit (by way of
guaranty or otherwise) or capital contribution to, or purchase (including
purchases financed with equity) of any Capital Stock, bonds, notes, debentures
or other debt securities of, or any other investment in, any Person.
"Investment Grade Asset" means any Investment with a fixed maturity that
has a rating of (x) at least BBB- by S&P and, if such Investment is rated by
Moody's, at least Ba2 from Moody's or (y) at least Baa3 by Moody's and, if such
Investment is rated by S&P, at least BB from S&P, or, if such Investment is not
rated by either S&P or Moody's, an NAIC rating of at least Class 2.
"Investment Income" means the amount of earnings of the Company on
Investments, net of expenses actually incurred in connection with such
Investments and taking into account realized gains and losses on such
Investments.
"IRS" means the Internal Revenue Service or any Governmental Authority
succeeding to any of its principal functions under the Code.
"Lender Claims" has the meaning specified in the Plan of Reorganization.
"Lending Office" means, as to any Bank, the office or offices of such Bank
specified as its "Lending Office" or "Domestic Lending Office" or "Offshore
Lending Office", as the case may be, on Schedule 10.02 or in its administrative
questionnaire delivered to the Agent, or such other office or offices as such
Bank may from time to time notify the Company and the Agent.
20
"License" means any license, certificate of authority, permit or other
authorization which is required to be obtained from any Governmental Authority
in connection with the operation, ownership or transaction of insurance
business.
"Lien" means any security interest, mortgage, deed of trust, pledge,
hypothecation, assignment, charge or deposit arrangement, encumbrance, lien
(statutory or other) or preferential arrangement of any kind or nature
whatsoever in respect of any property (including those created by, arising under
or evidenced by, any conditional sale or other title retention agreement, the
interest of a lessor under a capital lease or any financing lease having
substantially the same economic effect as any of the foregoing) and any
contingent or other agreement to provide any of the foregoing, but not including
the interest of a lessor under an operating lease.
"Loan Documents" means this Agreement, all Notes, the Security Documents
and any fee letter agreement entered into pursuant to Section 2.10.
"Loans" means loans deemed made by the Banks to the Company pursuant to
this Agreement.
"Margin Stock" means "margin stock" as such term is defined in Regulation
T, U or X of the FRB.
"Material Acquisition" means any acquisition of assets by the Company or
its Subsidiaries in a transaction or series of related transactions for
consideration exceeding $50,000,000, other than any such acquisition by any
Insurance Subsidiary in the ordinary course of business in compliance with
Section 7.17 and the investment policy approved by the board of directors of
such Insurance Subsidiary.
"Material Adverse Effect" means (a) a material adverse change in, or a
material adverse effect upon, the business, properties or condition (financial
or otherwise) of the Company or the Company and its Subsidiaries taken as a
whole; (b) a material impairment of the ability of any Obligor to perform under
any Loan Document to which it is a party; or (c) a material adverse effect upon
the legality, validity, binding effect or enforceability against any Obligor of
any Loan Document to which it is a party.
"Material Adverse Regulatory Effect" means (a) a material adverse change
in, or a material adverse effect upon, the business, properties, condition
(financial or otherwise) or prospects of the Company or the Company and its
Subsidiaries taken as a whole; (b) a material impairment of the ability of any
Obligor to perform under any Loan Document to which it is a party; or (c) a
material adverse effect upon the legality, validity, binding effect or
enforceability against any Obligor of any Loan Document to which it is a party.
21
"Material Adverse Regulatory Event" means the occurrence of any of the
following events: (a) the applicable Department of any Material Insurance
Subsidiary or a court of competent jurisdiction finds that any Material
Insurance Subsidiary (x) is in hazardous financial condition, if such finding,
together with all other such findings, could reasonably be expected to have a
Material Adverse Regulatory Effect or (y) is insolvent, (b) any Material
Insurance Subsidiary is required to comply with any letter, bulletin or order of
a state insurance regulator materially restricting its operations or business,
or enters into an agreement (whether oral or written) with any state insurance
regulator for substantially the same purpose, and such event, together with all
other such events, could reasonably be expected to have a Material Adverse
Regulatory Effect; (c) any Material Insurance Subsidiary becomes subject to
orders of supervision, conservation, rehabilitation or liquidation, by agreement
or otherwise, or has a receiver or supervisor appointed or (d) any material
License of any Material Insurance Subsidiary is suspended or revoked and such
suspension or revocation continues for 30 days, or any renewal application by
any Material Insurance Subsidiary for any material License is disapproved or
ultimately fails to be approved, and such event, together with all other such
events, could reasonably be expected to have a material adverse effect upon the
business, properties, condition (financial or otherwise) or prospects of such
Material Insurance Subsidiary.
"Material Disposition" means any disposition of assets by the Company or
its Subsidiaries in a transaction or series of related transactions for
consideration exceeding $50,000,000, other than any such disposition by any
Insurance Subsidiary in the ordinary course of business consistent with past
practices and the investment policy approved by the board of directors of such
Insurance Subsidiary.
"Material Insurance Subsidiary" means (i) any Active Material Insurance
Subsidiary and (ii) any other Insurance Subsidiary having assets as determined
pursuant to SAP greater than or equal to 10% of the aggregate assets as
determined pursuant to SAP of all Insurance Subsidiaries as determined as of the
date of the most recently prepared Combined Statutory Statement.
"Minimum Statutory Capital and Surplus" means, as of the last day of any
Fiscal Quarter, the sum of (a) 85% of the Combined Statutory Capital and Surplus
of the Insurance Subsidiaries as of the last day of the Fiscal Quarter most
recently ended prior to the Effective Date plus (b) an amount equal to 50% of
Statutory Net Income (if positive) of the Insurance Subsidiaries for each Fiscal
Quarter after the Effective Date and ending on or prior to the last day of such
Fiscal Quarter plus (c) the aggregate principal amount of Surplus Debentures
issued by the Insurance Subsidiaries during the period from the Effective Date
to the last day of such Fiscal Quarter less (d) the lesser of (x) the aggregate
amount of dividends paid and principal amount of Surplus Debentures paid or
prepaid directly or indirectly in cash to the Company by the Insurance
Subsidiaries and
22
(y) the aggregate amount of cash applied to the prepayment, repayment,
repurchase or redemption of the Loans or the New CNC Preferred Stock, in each
case during the period from the Effective Date to the last day of such Fiscal
Quarter. For purposes of calculating Minimum Statutory Capital and Surplus,
Statutory Net Income shall be calculated excluding any portion thereof
attributable to the Existing Reinsurance Transactions and separately deducted
from Combined Statutory Capital and Surplus.
"Moody's" means Moody's Investors Service, Inc., together with any Person
succeeding thereto by merger, consolidation or acquisition of all or
substantially all of its assets, including substantially all of its business of
rating securities.
"Multiemployer Plan" means a "multiemployer plan", within the meaning of
Section 4001(a)(3) of ERISA, to which the Company or any ERISA Affiliate makes,
is making, or is obligated to make contributions or, during the preceding three
calendar years, has made, or been obligated to make, contributions.
"NAIC" means the National Association of Insurance Commissioners or any
successor thereto, or in the absence of the National Association of Insurance
Commissioners or such successor, any other association, agency or other
organization performing advisory, coordination or other like functions among
insurance departments, insurance commissioners and similar Governmental
Authorities of the various states of the United States toward the promotion of
uniformity in the practices of such Governmental Authorities.
"NASD" means the National Association of Securities Dealers, Inc. or any
Person succeeding to any of its principal functions.
"Net Income" means, for any Person for any Calculation Period, the net
income (or loss) of such Person for such period as determined in accordance with
GAAP.
"Net Proceeds" means (a) with respect to any Asset Sale or Casualty Event,
the aggregate amount of cash and cash equivalents received in respect of such
Asset Sale or Casualty Event, as the case may be (including any such amounts
received by way of deferred payment of principal pursuant to a note or
installment receivable or purchase price adjustment receivable or otherwise, but
only as and when received and, in the case of a Casualty Event, insurance
proceeds, condemnation awards and similar payments), minus the sum of (i) all
costs and expenses (including legal fees, notarial fees, accountants fees,
investment banking fees, survey costs and title insurance premiums) paid by the
Company or any of its Subsidiaries to third parties, amounts applied to the
repayment of Indebtedness (other than the Loans) secured by a Lien expressly
23
permitted hereunder on any asset that is the subject of such Asset Sale or
Casualty Event, costs of discontinuance (including any reasonable severance
payments), Taxes other than Income Taxes (after taking into account any
available tax credits, exemptions or deductions and any tax sharing
arrangements) and other customary fees and expenses incurred in connection with
such Asset Sale or Casualty Event and required to be paid in cash or deducted
from the proceeds of such Asset Sale or Casualty Event, (ii) the estimated
Income Tax actually required to be paid in cash in connection with such Asset
Sale (after taking into account any available tax credits, exemptions or
deductions and any tax sharing arrangements), (iii) purchase price adjustments
reasonably expected to be payable in connection therewith (not to exceed 10% of
the purchase price for the relevant Asset Sale) so long as, if any such amount
ceases to be payable, it shall then become "Net Proceeds" and (iv) for an
Insurance Subsidiary, any amounts which the Department will not permit such
Insurance Subsidiary to distribute (including as a dividend or otherwise)
directly or indirectly to the Company as a result of such Asset Sale or Casualty
Event and (b) with respect to any issuance of Capital Stock of, or capital
contribution to, the Company or any Subsidiary, or any incurrence of
Indebtedness by the Company or any of its Subsidiaries, the proceeds thereof in
the form of cash and cash equivalents, minus the costs and expenses paid or
payable within 60 days of incurrence (so long as, if any such amount is not paid
within such period, it shall become "Net Proceeds" on the last day of such
period) by the Company or any of its Subsidiaries to third parties in connection
therewith (including legal fees, notarial fees, accountants fees, investment
banking fees, underwriting discounts and commissions and other customary fees
and expenses incurred in connection therewith) and required to be paid in cash
or deducted from the proceeds of such issuance, contribution or incurrence. For
purposes of this definition, the Net Proceeds received by any Person in respect
of any Disposition shall include such cash or cash equivalents as may be
received ("subsequent cash proceeds") by such Person at any time or from time to
time in connection with the sale, transfer, lease or other disposition, or
otherwise in respect of, any consideration other than cash or cash equivalents
received by such Person in respect of such Disposition, less the estimated
Income Tax to be paid in connection with the receipt of such subsequent cash
proceeds (after taking into account any available tax credits, exemptions or
deductions and any tax sharing arrangements) that was not theretofore deducted
in computing Net Proceeds.
"New Annualized Premiums" means, with respect to any Insurance Subsidiary,
the aggregate annualized first year insurance premiums of such Insurance
Subsidiary; provided that (x) if such Insurance Subsidiary is part of the
Conseco Insurance Group, New Annualized Premiums on any single premium annuity
issued by such Insurance Subsidiary shall be calculated as 1/15th of such
premium and (y) if such Insurance Subsidiary is part of the Bankers Life Group,
24
New Annualized Premiums on any single premium annuity issued by such Insurance
Subsidiary shall be calculated as 6% of such premium.
"New CNC Preferred Stock" means the Class A Preferred Stock of the Company
to be issued to the Banks on the Effective Date pursuant to the Plan of
Reorganization. Such term shall include any pay-in-kind dividends issued in
respect of or accrued on the New CNC Preferred Stock from time to time in
accordance with the terms thereof.
"New CNC Warrant Agreement" means the Series A Warrant Agreement dated as
of the Effective Date between the Company and Wachovia, Bank, N.A., as warrant
agent (as in effect on the Effective Date).
"New HoldCo" means CDOC, Inc., a Delaware corporation, or any other
Domestic Subsidiary that is a corporation and is a direct Wholly-Owned
Subsidiary of the Company on the Effective Date designated in a notice delivered
by the Company to the Agent prior to the commencement of the Proposed CIHC
Transactions and that is reasonably acceptable to the Agent.
"1999 D&O Facility" means the Credit Agreement referred to in clause (iv)
of the definition of "D&O Credit Facility".
"1999 Facility Collateral" has the meaning specified in the Security
Agreement.
"Non-Insurance Subsidiary" means any Subsidiary which is not an Insurance
Subsidiary.
"Notes" has the meaning specified in Section 2.03(b).
"Notice of Continuation" means a notice in substantially the form of
Exhibit C.
"Obligations" means all advances, debts, liabilities, obligations,
covenants and duties for the payment of money arising under any Loan Document
owing by the Company to the Agent, the Banks or any Indemnified Person, whether
direct or indirect (including those acquired by assignment), absolute or
contingent, due or to become due, now existing or hereafter arising.
"Obligors" means the Company and the Subsidiary Guarantors.
"Offshore Rate" means for any Interest Period with respect to any Offshore
Rate Loan, the greater of (a) (x) on or prior to September 30, 2004, in the case
of any Tranche A Term Loan, 2.00% per annum, and in the case of any Tranche B
Term Loan, 2.25% per annum and (y) thereafter, in the case of any Tranche A Term
Loan, 2.50% per annum, and in the case of any Tranche B Term
25
Loan, 2.75% per annum and (b) a rate per annum determined by the Agent pursuant
to the following formula:
Offshore Rate = Eurodollar Base Rate
----------------------------------------------------
1.00-Eurodollar Reserve Percentage
Where,
"Eurodollar Base Rate" means, for such Interest Period:
(a) the rate per annum equal to the rate determined by the Agent
to be the offered rate that appears on the page of the
Telerate screen (or any successor thereto) that displays an
average British Bankers Association Interest Settlement Rate
for deposits in Dollars (for delivery on the first day of
such Interest Period) with a term equivalent to such
Interest Period, determined as of approximately 11:00 a.m.
(London time) two Business Days prior to the first day of
such Interest Period, or
(b) if the rate referenced in the preceding clause (a) does not
appear on such page or service or such page or service shall
not be available, the rate per annum equal to the rate
determined by the Agent to be the offered rate on such other
page or other service that displays an average British
Bankers Association Interest Settlement Rate for deposits in
Dollars (for delivery on the first day of such Interest
Period) with a term equivalent to such Interest Period,
determined as of approximately 11:00 a.m. (London time) two
Business Days prior to the first day of such Interest
Period, or
(c) if the rates referenced in the preceding clauses (a) and (b)
are not available, the rate per annum determined by the
Agent as the rate of interest at which deposits in Dollars
for delivery on the first day of such Interest Period in
same day funds in the approximate amount of the Offshore
Rate Loan deemed being made, continued or converted by BofA
and with a term equivalent to such Interest Period would be
offered by BofA's London Branch to major banks in the London
interbank eurodollar market at their request at
approximately 4:00 p.m. (London time) two Business Days
prior to the first day of such Interest Period.
26
"Eurodollar Reserve Percentage" means, for any day
during any Interest Period, the reserve percentage
(expressed as a decimal, carried out to five decimal places)
in effect on such day, whether or not applicable to any
Bank, under regulations issued from time to time by the FRB
for determining the maximum reserve requirement (including
any emergency, supplemental or other marginal reserve
requirement) with respect to Eurocurrency funding (currently
referred to as "Eurocurrency liabilities"). The Offshore
Rate for each outstanding Offshore Rate Loan shall be
adjusted automatically as of the effective date of any
change in the Eurodollar Reserve Percentage.
"Offshore Rate Loan" means any Loan that bears interest based on the
Offshore Rate.
"Old Conseco" has the meaning set forth in the recitals hereto.
"Organization Documents" means (i) with respect to any corporation, the
certificate or articles of incorporation, the bylaws, any certificate of
determination or instrument relating to the rights of preferred shareholders of
such corporation, any shareholder rights agreement, and all applicable
resolutions of the board of directors (or any committee thereof) of such
corporation, (ii) with respect to any limited liability company, the certificate
or articles of formation or organization and operating agreement, and all
applicable resolutions or consents of the governing body (or any committee
thereof) of such limited liability company and (iii) with respect to any
partnership, joint venture, trust or other form of business entity, the
partnership, joint venture or other applicable agreement of formation or
organization and any agreement, instrument, filing or notice with respect
thereto filed in connection with its formation or organization with the
applicable Governmental Authority in the jurisdiction of its formation or
organization and, if applicable, any certificate or articles of formation or
organization of such entity, and all applicable resolutions or consents of the
governing body (or any committee thereof), or in the case of clauses (i), (ii)
and (iii), the equivalent or comparable constituent documents with respect to
any Foreign Subsidiary.
"Other Taxes" means any present or future recording, stamp, court or
documentary taxes or any other excise, sales or property taxes, charges or
similar levies which arise from any payment made under this Agreement or any
other Loan Document or from the execution, delivery, performance, enforcement or
registration of, or otherwise with respect to, this Agreement or any other Loan
Document.
"Participant" has the meaning specified in subsection 10.07(d).
27
"PBGC" means the Pension Benefit Guaranty Corporation, or any Governmental
Authority succeeding to any of its principal functions under ERISA.
"Pension Plan" means a pension plan (as defined in Section 3(2) of ERISA)
subject to Title IV of ERISA which the Company or any ERISA Affiliate sponsors,
maintains, or to which it makes, is making, or is obligated to make
contributions, or in the case of a multiple employer plan (as described in
Section 4064(a) of ERISA) has made contributions at any time during the
immediately preceding five plan years.
"Perfection Certificate" means a certificate in the form of Exhibit E to
the Security Agreement or any other form approved by the Agent.
"Permitted Preferred Stock" means preferred stock of the Company that (i)
does not require (or permit at the option of the holder) any dividend, interest,
sinking fund or redemption payment (other than payments made in common stock or
Permitted Preferred Stock) to be made and (ii) is not convertible or
exchangeable (unless at the sole option of the Company) for debt securities or
any Capital Stock other than Capital Stock of the type described in clause (i).
"Permitted Refinancing Indebtedness" means Indebtedness of the Company that
(i) does not require mandatory principal payments prior to the first anniversary
of the Tranche B Maturity Date, (ii) contains covenants and events of default no
more restrictive to the Company than those in the Loan Documents and (iii) is
subordinated to the Loans on substantially the terms set forth in Exhibit G
hereto or otherwise on terms satisfactory to the Required Banks; provided that
(x) no Event of Default shall have occurred and be continuing at the time or
immediately after such Indebtedness is incurred, (y) immediately after giving
effect to the incurrence of such Indebtedness and the application of the
proceeds thereof, the Company and its Subsidiaries are in compliance with all of
the covenants contained in the Loan Documents (including all financial and
ratings covenants) calculated on a Pro Forma Basis and (z) the Company shall
have delivered a certificate of a Responsible Officer to the Agent stating that
A.M. Best has confirmed that none of the Active Material Insurance Subsidiaries
will have their financial strength rating placed on credit watch with negative
outlook or downgraded following the incurrence of such Indebtedness (and, if
such confirmation was provided in writing, attaching a copy of such
confirmation).
"Permitted Refinancing Preferred Stock" means preferred stock of the
Company that (i) does not require (or permit at the option of the holder) (x)
the declaration or payment of cash dividend payments in an aggregate amount
exceeding the maximum amount that the Company could have paid during the
applicable Calculation Period without contravening Section 7.12 as of the end of
the most recently ended Fiscal Quarter calculated on a Pro Forma Basis or (y)
any
28
sinking fund or redemption payment (other than payments made in common stock or
Permitted Refinancing Preferred Stock) to be made prior to the first anniversary
of the Tranche B Maturity Date and (ii) is not convertible or exchangeable
(unless at the sole option of the Company) for debt securities or any Capital
Stock other than common stock of the Company, Permitted Preferred Stock or
Permitted Refinancing Preferred Stock prior to the first anniversary of the
Tranche B Maturity Date.
"Permitted Swap Obligations" means all obligations (contingent or
otherwise) of the Company or any Subsidiary existing or arising under Swap
Contracts, provided that each of the following criteria is satisfied: (a) such
obligations are (or were) entered into by such Person in the ordinary course of
business for the purpose of directly mitigating risks associated with
liabilities, commitments or assets held by such Person, or changes in the value
of securities issued by such Person in conjunction with a securities repurchase
program not otherwise prohibited hereunder, and not for purposes of speculation
or taking a "market view;" and (b) such Swap Contracts do not contain any
provision ("walk-away" provision) exonerating the non-defaulting party from its
obligation to make payments on outstanding transactions to the defaulting party.
"Permitted Transactions" means (a) mortgage-backed security transactions in
which an investor sells mortgage collateral, such as securities issued by the
Government National Mortgage Association and the Federal Home Loan Mortgage
Corporation for delivery in the current month while simultaneously contracting
to repurchase "substantially the same" (as determined by the Public Securities
Association and GAAP) collateral for a later settlement, (b) transactions in
which an investor lends cash to a primary dealer and the primary dealer
collateralizes the borrowing of the cash with certain securities, (c)
transactions in which an investor lends securities to a primary dealer and the
primary dealer collateralizes the borrowing of the securities with cash
collateral, (d) transactions in which an investor makes loans of securities to a
broker-dealer under an agreement requiring such loans to be continuously secured
by cash collateral or United States government securities and (e) transactions
in which a federal home loan mortgage bank (a "FHLMB") makes loans to an
Insurance Subsidiary, which are sufficiently secured by appropriate assets of
such Insurance Subsidiary consisting of government agency mortgage-backed
securities, in accordance with the rules, regulations and guidelines of such
FHLMB for its loan programs.
"Person" means an individual, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated association,
joint venture or Governmental Authority or other entity of whatever nature.
"Plan" means an employee benefit plan (as defined in Section 3(3) of ERISA)
which the Company sponsors or maintains or to which the Company makes, is
making, or is obligated to make contributions and includes any Pension Plan.
29
"Plan of Reorganization" means the Company's Joint Plan of Reorganization
dated as of March 12, 2003, as amended through the Effective Date.
"Pro Forma Basis" means, with respect to compliance with any test or
covenant hereunder and in connection with any event or transaction requiring a
calculation on a Pro Forma Basis for any period, compliance with such test or
covenant after giving effect to such event or transaction, and (i) in the case
of any Material Acquisition or Material Disposition, including pro forma
adjustments only to the extent consistent with Article 11 of Regulation S-X of
the Securities Act and using for purposes of determining such compliance (x) in
the case of any Material Acquisition, the historical financial statements of all
entities or assets so acquired or to be acquired and (y) the consolidated
financial statements of the Company and its Subsidiaries which shall be
reformulated as if such Material Acquisition or Material Disposition, and any
other Material Acquisitions or Material Dispositions that have been consummated
during such period, had been consummated on the first day of such period, (ii)
in the case of any incurrence of Indebtedness, assuming such Indebtedness was
incurred on the first day of such period and assuming that such Indebtedness
bears interest during the portion of such period prior to the date of incurrence
at, in the case of Indebtedness bearing interest at a floating rate, the
weighted average of the interest rates applicable to outstanding Loans during
such period and, in the case of Indebtedness bearing interest at a fixed rate,
such fixed rate, (iii) in the case of any prepayment of Indebtedness, assuming
that such prepayment had occurred on the first day of such period and (iv) in
the case of the declaration or payment of any dividend, assuming such dividend
had been declared and paid on the first day of such period.
"Pro Rata Share" means, as to any Bank (a) at any time at which the
Commitments remain outstanding, the percentage equivalent (expressed as a
decimal, rounded to the ninth decimal place) at such time of such Bank's
Commitment divided by the combined Commitments of all Banks, and (b) after the
termination of the Commitments, the percentage equivalent (expressed as a
decimal, rounded to the ninth decimal place) at such time of the principal
amount of such Bank's outstanding Loans divided by the aggregate principal
amount of the outstanding Loans of all the Banks.
"Proposed CIHC Transactions" means a multi-step transaction in which the
following steps occur substantially simultaneously: (i) the Company and Conseco
Annuity Assurance Company each contributes all common stock that it owns in CIHC
to New HoldCo, (ii) CIHC distributes or otherwise transfers all Capital Stock
that it owns in any Non-Insurance Subsidiary (other than CFC) and
30
in Conseco Life Insurance (Bermuda) Limited, and all other assets not
constituting Capital Stock, to New HoldCo, (iii) New HoldCo satisfies the
Collateral and Guarantee Requirement with respect to all property distributed or
otherwise transfered to it pursuant to clause (ii), (iv) each Insurance
Subsidiary that holds Existing CIHC Preferred Stock transfers such Existing CIHC
Preferred Stock to New HoldCo in exchange for Replacement Preferred Stock, (v)
New HoldCo forms a new Wholly-Owned Subsidiary that is a Texas general business
corporation ("CIHC-TX"), (vi) CIHC merges with CIHC-TX (with CIHC-TX surviving),
(vii) CIHC-TX applies to become a life insurance company, (viii) CIHC-TX merges
with Conseco Life Insurance Company of Texas (with CIHC-TX surviving) and (ix)
immediately following the merger referred to in clause (viii), CIHC-TX is a life
insurance company.
"Purchase Money Debt" means Indebtedness incurred by a Person in connection
with the purchase of fixed or capital assets by such Person, in which such
assets the seller or financier thereof has taken or retained a Lien therein;
provided that (x) any such Lien attaches to such assets concurrently with or
within 120 days after the purchase thereof by such Person and (y) at the time of
incurrence of such Indebtedness, the aggregate principal amount of such
Indebtedness shall not exceed the costs of the assets so purchased plus fees and
expenses reasonably related thereto.
"Quarterly Statement" means the quarterly statutory financial statement of
any Insurance Subsidiary required to be filed with the insurance commissioner
(or similar authority) of its jurisdiction of incorporation or, if no specific
form is so required, in the form of financial statements permitted by such
insurance commissioner (or such similar authority) to be used for filing
quarterly statutory financial statements and shall contain the type of financial
information permitted by such insurance commissioner (or such similar authority)
to be disclosed therein, together with all exhibits or schedules filed
therewith.
"Recharacterized Portion" means the portion, if any, of the New CNC
Preferred Stock or Permitted Refinancing Preferred Stock that qualified as
permanent equity for purposes of GAAP at the time of initial issuance but no
longer qualifies as permanent equity for purposes of GAAP on the Company's
consolidated balance sheet as a result of a change in GAAP after the date of
such issuance.
"Reinsurance Agreements" means any agreement, contract, treaty, certificate
or other arrangement by which any Insurance Subsidiary agrees to transfer or
cede to another insurer all or part of the liability assumed or assets held by
it under one or more insurance, annuity, reinsurance or retrocession policies,
agreements, contracts, treaties, certificates or similar arrangements.
Reinsurance Agreements shall include, but not be limited to, any agreement,
contract, treaty,
31
certificate or other arrangement which is treated as such by the applicable
Department.
"Reorganization Transactions" means the transactions contemplated by the
Plan of Reorganization to occur upon the effective date thereof.
"Replacement Preferred Stock" means preferred stock to be issued to certain
Insurance Subsidiaries by New HoldCo having terms at least as favorable to New
HoldCo as those in the Existing CIHC Preferred Stock (it being understood that
the terms set forth in Exhibit I shall be deemed to be at least as favorable to
New HoldCo as those in the Existing CIHC Preferred Stock) in exchange for the
Existing CIHC Preferred Stock in connection with the Proposed CIHC Transactions.
"Reportable Event" means any of the events set forth in Section 4043(c) of
ERISA or the regulations thereunder, other than any such event for which the
30-day notice requirement under ERISA has been waived in regulations issued by
the PBGC.
"Required Banks" means (a) Banks then holding at least 50.1% of the
aggregate amount of the Commitments or (b) if the Commitments have terminated or
expired, Banks then holding at least 50.1% of the aggregate unpaid principal
amount of the Loans.
"Requirement of Law" means, as to any Person, any law (statutory or
common), treaty, rule or regulation or determination of an arbitrator or of a
Governmental Authority, in each case applicable to or binding upon the Person or
any of its property or to which the Person or any of its property is subject.
"Responsible Officer" means the chief executive officer, president, chief
financial officer, treasurer or assistant treasurer of an Obligor. Any document
delivered under any Loan Document that is signed by a Responsible Officer of an
Obligor shall be conclusively presumed to have been authorized by all necessary
corporate, partnership and/or other action on the part of such Obligor and such
Responsible Officer shall be conclusively presumed to have acted on behalf of
such Obligor. Unless otherwise specified, "Responsible Officer" means a
Responsible Officer of the Company.
"Restricted Payments" has the meaning set forth in Section 7.08.
"Risk-Based Capital Ratio" means, with respect to any Insurance Subsidiary
or the Insurance Subsidiaries taken as a whole, on any date of determination,
one-half of the ratio (expressed as a percentage) of (a) the aggregate Total
Adjusted Capital (as defined by the relevant Insurance Subsidiary's Department)
for such Insurance Subsidiary or Insurance Subsidiaries
32
to (b) the aggregate Authorized Control Level Risk-Based Capital (as defined by
the relevant Insurance Subsidiary's Department) for such Insurance Subsidiary or
Insurance Subsidiaries.
"S&P" means Standard & Poor's Ratings Group, a division of McGraw-Hill,
Inc., together with any Person succeeding thereto by merger, consolidation or
acquisition of all or substantially all of its assets, including substantially
all of its business of rating securities.
"SAP" means, with respect to any Insurance Subsidiary, the statutory
accounting practices prescribed or permitted by the insurance commissioner (or
other similar authority) in the jurisdiction of such Insurance Subsidiary for
the preparation of annual statements and other financial reports by insurance
companies of the same type as such Insurance Subsidiary, which are applicable to
the circumstances as of the date of filing of such statement or report.
"SEC" means the Securities and Exchange Commission, or any Governmental
Authority succeeding to any of its principal functions.
"Secured Guarantee" has the meaning specified in the Security Agreement.
"Secured Obligations" has the meaning specified in the Security Agreement.
"Security Agreement" means the Guarantee and Security Agreement among the
Obligors and the Agent, substantially in the form of Exhibit F.
"Security Documents" means the Security Agreement and each other security
agreement, instrument or document executed and delivered pursuant thereto or
pursuant to Section 6.14 or Section 6.15 to secure any of the Secured
Obligations.
"Single Employer Pension Plan" means a pension plan as such term is defined
in section 3(2) of ERISA, other than a multiemployer plan as defined in section
4001(a)(3) of ERISA, to which the Company or any other ERISA Affiliate may have
liability, including any liability by reason of having been a substantial
employer within the meaning of section 4063 of ERISA at any time during the
preceding five years, or by reason of being deemed to be a contributing sponsor
under section 4069 of ERISA.
"Statutory Net Income" means, for any period, the net income of an
Insurance Subsidiary determined in accordance with SAP.
"Sub-Class" (a) when used with respect to Banks, refers to whether such
Banks are Tranche A-1 Banks, Tranche A-2 Banks, Tranche A-3 Banks, Tranche
33
B-1 Banks, Tranche B-2 Banks or Tranche B-3 Banks and (b) when used with respect
to Loans or a Borrowing, refers to whether such Loans, or the Loans comprising
such Borrowing, are Tranche A-1 Term Loans, Tranche A-2 Term Loans, Tranche A-3
Term Loans, Tranche B-1 Term Loans, Tranche B-2 Term Loans or Tranche B-3 Term
Loans.
"Subsidiary" of a Person means any corporation, partnership, limited
liability company, limited liability partnership, joint venture, trust,
association or other unincorporated organization of which or in which such
Person and such Person's Subsidiaries own directly or indirectly more than 50%
of (a) the combined voting power of all classes of stock having general voting
power under ordinary circumstances to elect a majority of the board of
directors, if it is a corporation, (b) the voting or managing interests (which
shall mean the general partner in the case of a partnership), if it is a
partnership, joint venture or similar entity, (c) the beneficial interest, if it
is a trust, association or other unincorporated organization or (d) the
membership interest, if it is a limited liability company; provided that none of
Paladin Entertainment Holdings, LLC ("Paladin"), 767 LLC or Resortport
Investment Partnership shall be considered a Subsidiary for any purpose of this
Agreement for so long as (w) such Person has no Indebtedness other than
intercompany Indebtedness and non-recourse Indebtedness, (x) the aggregate
principal amount of Indebtedness of such Person (other than intercompany
Indebtedness) does not exceed 85% of the fair market value of the assets of such
Person, (y) such Person is not integral to the business or operations of the
Company or any Subsidiary and (z) in the case of Paladin, the accounts thereof
are not consolidated or are not required pursuant to GAAP to be consolidated
with those of the Company in the Company's consolidated financial statements;
and provided further that CFC shall not be considered a Subsidiary for any
purpose of this Agreement so long as CFC is liquidated pursuant to and in
accordance with the Finance Company Plan (as defined in the Plan of
Reorganization) prior to the 180th day after the Effective Date. Unless
otherwise specified, "Subsidiary" means a Subsidiary of the Company.
"Subsidiary Guarantors" means each Subsidiary listed on the signature pages
of the Security Agreement under the caption "Subsidiary Guarantors" and each
Subsidiary that shall, at any time after the date hereof, become a Subsidiary
Guarantor pursuant to Section 28 of the Security Agreement.
"Surplus Debentures" means, as to any Insurance Subsidiary, debt securities
of such Insurance Subsidiary issued to the Company or any other Subsidiary the
proceeds of which are permitted to be included, in whole or in part, as Capital
and Surplus of such Insurance Subsidiary as approved and permitted by the
applicable Department.
"Swap Contract" means any agreement, whether or not in writing, relating to
any transaction that is a rate swap, basis swap, forward rate transaction,
34
commodity swap, commodity option, equity or equity index swap or option, bond,
note or bill option, interest rate option, forward foreign exchange transaction,
cap, collar or floor transaction, currency swap, cross-currency rate swap,
swaption, currency option or any other similar transaction (including any option
to enter into any of the foregoing) or any combination of the foregoing, and,
unless the context otherwise clearly requires, any master agreement relating to
or governing any or all of the foregoing.
"Swap Termination Value" means, in respect of any one or more Swap
Contracts, after taking into account the effect of any legally enforceable
netting agreement relating to such Swap Contracts, (a) for any date on or after
the date such Swap Contracts have been closed out and termination value(s)
determined in accordance therewith, such termination value(s), and (b) for any
date prior to the date referenced in clause (a), the amount(s) determined as the
mark-to-market value(s) for such Swap Contracts, as determined by the Company
based upon one or more mid-market or other readily available quotations provided
by any recognized dealer in such Swap Contracts (which may include any Bank).
"Synthetic Purchase Agreement" means any agreement pursuant to which the
Company or any of its Subsidiaries is or may become obligated to make (a) any
payment in connection with the purchase by any third party from a Person other
than the Company or any of its Subsidiaries (other than any Subsidiary that is a
Subsidiary of an Insurance Subsidiary but is not itself an Insurance Subsidiary)
of any Capital Stock or Indebtedness of the Company or any of its Subsidiaries
(other than any Subsidiary that is a Subsidiary of an Insurance Subsidiary but
is not itself an Insurance Subsidiary) or (b) any payment the amount of which is
determined by reference to the price or value at any time of any such Capital
Stock or Indebtedness; provided, that (i) no phantom stock or similar plan
providing for payments only to current or former directors, officers or
employees of the Company or any of its Subsidiaries (or to their heirs or
estates), and (ii) no such agreement in respect of any Disposition of any
Capital Stock of a Subsidiary of the Company that is permitted by Section 7.03
shall be deemed to be a Synthetic Purchase Agreement.
"Tax Sharing Agreement" means the tax sharing agreement dated January 1,
2002 among the Company and certain of its Subsidiaries.
"Taxes" means any and all present or future taxes, levies, assessments,
imposts, duties, deductions, fees, withholdings or similar charges, and all
liabilities with respect thereto, excluding, in the case of each Bank and the
Agent, respectively, taxes imposed as a result of a connection between such Bank
or the Agent and the jurisdiction imposing such tax (other than any connection
arising solely from such Bank or the Agent having executed, delivered or
performed its obligations or received a payment under this Agreement or any
other Loan Document) including the jurisdiction (or any political subdivision
thereof) under
35
the laws of which such Bank or the Agent, as the case may be, is organized or
maintains its Lending Office.
"Total Capitalization" means, without duplication, (a) the amount described
in clause (a) of the definition of "Debt to Total Capitalization Ratio" plus (b)
the Total Shareholders' Equity of the Company.
"Total Shareholders' Equity" means the total common and preferred
shareholders' equity of the Company as determined in accordance with GAAP
(calculated including any Recharacterized Portion but excluding (i) unrealized
gains (losses) of securities as determined in accordance with FAS 115 and (ii)
any charges taken to write off any goodwill included on the Company's balance
sheet on the Effective Date to the extent such charges are required by FAS 142).
"Tranche A Bank" means a Tranche A-1 Bank, Tranche A-2 Bank or Tranche A-3
Bank, or any combination thereof (as the context requires).
"Tranche A Commitment" means a Tranche A-1 Commitment, Tranche A-2
Commitment or Tranche A-3 Commitment, or any combination thereof (as the context
requires).
"Tranche A Maturity Date" means the sixth anniversary of the Effective
Date, or if such day is not a Business Day, the next succeeding Business Day.
"Tranche A Term Loan" means a Tranche A-1 Term Loan, Tranche A-2 Term Loan
or Tranche A-3 Term Loan, or any combination thereof (as the context requires).
"Tranche A-1 Bank" means a Bank with a Tranche A-1 Commitment or an
outstanding Tranche A-1 Term Loan.
"Tranche A-1 Commitment" means, with respect to each Bank, the commitment,
if any, of such Bank to make a Tranche A-1 Term Loan on the Effective Date,
expressed as an amount representing the maximum principal amount of such Tranche
A-1 Term Loan. The initial amount of each Bank's Tranche A-1 Commitment is set
forth on Schedule 2.01. The initial aggregate amount of the Tranche A-1
Commitments is $754,345,049.96.
"Tranche A-1 Term Loan" means a Loan deemed made pursuant to Section
2.01(a).
"Tranche A-2 Bank" means a Bank with a Tranche A-2 Commitment or an
outstanding Tranche A-2 Term Loan.
"Tranche A-2 Commitment" means, with respect to each Bank, the commitment,
if any, of such Bank to make a Tranche A-2 Term Loan on the
36
Effective Date, expressed as an amount representing the maximum principal amount
of such Tranche A-2 Term Loan. The initial amount of each Bank's Tranche A-2
Commitment is set forth on Schedule 2.01. The initial aggregate amount of the
Tranche A-2 Commitments is $72,348,180.07.
"Tranche A-2 Term Loan" means a Loan deemed made pursuant to Section
2.01(b).
"Tranche A-3 Bank" means a Bank with a Tranche A-3 Commitment or an
outstanding Tranche A-3 Term Loan.
"Tranche A-3 Commitment" means, with respect to each Bank, the commitment,
if any, of such Bank to make a Tranche A-3 Term Loan on the Effective Date,
expressed as an amount representing the maximum principal amount of such Tranche
A-3 Term Loan. The initial amount of each Bank's Tranche A-3 Commitment is set
forth on Schedule 2.01. The initial aggregate amount of the Tranche A-3
Commitments is $173,306,769.97.
"Tranche A-3 Term Loan" means a Loan deemed made pursuant to Section
2.01(c).
"Tranche B Bank" means a Tranche B-1 Bank, Tranche B-2 Bank or Tranche B-3
Bank, or any combination thereof (as the context requires).
"Tranche B Commitment" means a Tranche B-1 Commitment, Tranche B-2
Commitment or Tranche B-3 Commitment, or any combination thereof (as the context
requires).
"Tranche B Maturity Date" means the seventh anniversary of the Effective
Date, or if such day is not a Business Day, the next succeeding Business Day.
"Tranche B Term Loan" means a Tranche B-1 Term Loan, Tranche B-2 Term Loan
or Tranche B-3 Term Loan, or any combination thereof (as the context requires).
"Tranche B-1 Bank" means a Bank with a Tranche B-1 Commitment or an
outstanding Tranche B-1 Term Loan.
"Tranche B-1 Commitment" means, with respect to each Bank, the commitment,
if any, of such Bank to make a Tranche B-1 Term Loan on the Effective Date,
expressed as an amount representing the maximum principal amount of such Tranche
B-1 Term Loan. The initial amount of each Bank's Tranche B-1 Commitment is set
forth on Schedule 2.01. The initial aggregate amount of the Tranche B-1
Commitments is $226,303,514.99.
37
"Tranche B-1 Term Loan" means a Loan deemed made pursuant to Section
2.01(d).
"Tranche B-2 Bank" means a Bank with a Tranche B-2 Commitment or an
outstanding Tranche B-2 Term Loan.
"Tranche B-2 Commitment" means, with respect to each Bank, the commitment,
if any, of such Bank to make a Tranche B-2 Term Loan on the Effective Date,
expressed as an amount representing the maximum principal amount of such Tranche
B-2 Term Loan. The initial amount of each Bank's Tranche B-2 Commitment is set
forth on Schedule 2.01. The initial aggregate amount of the Tranche B-2
Commitments is $21,704,454.02.
"Tranche B-2 Term Loan" means a Loan deemed made pursuant to Section
2.01(e).
"Tranche B-3 Bank" means a Bank with a Tranche B-3 Commitment or an
outstanding Tranche B-3 Term Loan.
"Tranche B-3 Commitment" means, with respect to each Bank, the commitment,
if any, of such Bank to make a Tranche B-3 Term Loan on the Effective Date,
expressed as an amount representing the maximum principal amount of such Tranche
B-3 Term Loan. The initial amount of each Bank's Tranche B-3 Commitment is set
forth on Schedule 2.01. The initial aggregate amount of the Tranche B-3
Commitments is $51,992,030.99.
"Tranche B-3 Term Loan" means a Loan deemed made pursuant to Section
2.01(f).
"Transaction Liens" means the Liens granted by the Obligors under the
Security Documents.
"Transactions" means the Financing Transactions and the Reorganization
Transactions.
"Transfer Agreement" means, with respect to any D&O Credit Facility, any
D&O Loan Transfer Agreement entered into in connection with such D&O Credit
Facility among the Company and the agent and lenders under such D&O Credit
Facility with respect to the transfer of ownership of and subsequent collection
of D&O Loans made under such D&O Credit Facility.
"Trigger Date" means (i) in the case of the sale of Sufficient Assets (as
defined in Section 6.10), the Reduction Date (as defined in Section 6.10) and
(ii) in the case of any other Approved Strategic Alternative (as defined in
Section 6.10), the date such Approved Strategic Alternative is approved by the
Required Banks.
38
"Unfunded Pension Liability" means the excess of a Plan's benefit
liabilities under Section 400l(a)(16) of ERISA, over the current value of that
Plan's assets, determined in accordance with the assumptions used for funding
the Pension Plan pursuant to Section 412 of the Code for the applicable plan
year.
"United States" and "U.S." each means the United States of America.
"Wholly-Owned Subsidiary" means any corporation in which (other than
directors' and national citizen qualifying shares required by law) 100% of the
capital stock of each class having ordinary voting power, and 100% of the
capital stock of every other class, in each case (or, in the case of Persons
other than corporations, membership interests or other equity interests), at the
time as of which any determination is being made, is owned, beneficially and of
record, by the Company, or by one or more of the other Wholly-Owned
Subsidiaries, or both.
Section 1.02 Other Interpretive Provisions. (a) The meanings of defined
terms are equally applicable to the singular and plural forms of the defined
terms.
(b) The words "hereof", "herein", "hereunder" and similar words refer to
this Agreement as a whole and not to any particular provision of this Agreement;
and subsection, Section, Schedule and Exhibit references are to this Agreement
unless otherwise specified.
(c) (i) The term "documents" includes any and all instruments, documents,
agreements, certificates, indentures, notices and other writings, however
evidenced.
(ii) The term "including" is not limiting and means "including without
limitation."
(iii) In the computation of periods of time from a specified date to a
later specified date, the word "from" means "from and including"; the words
"to" and "until" each mean "to but excluding", and the word "through" means
"to and including."
(d) Unless otherwise expressly provided herein or the context requires
otherwise, (i) references to agreements (including this Agreement) and other
contractual instruments shall be deemed to include all subsequent amendments and
other modifications thereto, but only to the extent such amendments and other
modifications are not prohibited by the terms of any Loan Document, (ii)
references to any statute or regulation are to be construed as including all
statutory and regulatory provisions consolidating, amending, replacing,
supplementing or interpreting the statute or regulation, (iii) any reference
herein
39
to a Person shall be construed to include such Person's permitted successors and
assigns and (iv) the word "property" shall be construed to refer to any and all
tangible and intangible assets and properties, including cash, securities,
accounts and contract rights.
(e) The captions and headings of this Agreement are for convenience of
reference only and shall not affect the interpretation of this Agreement.
(f) This Agreement and other Loan Documents may use several different
limitations, tests or measurements to regulate the same or similar matters. All
such limitations, tests and measurements are cumulative and shall each be
performed in accordance with their terms. Unless otherwise expressly provided,
any reference to any action of the Agent or the Banks by way of consent,
approval or waiver shall be deemed modified by the phrase "in its/their sole and
reasonable discretion."
(g) This Agreement and the other Loan Documents are the result of
negotiations among and have been reviewed by counsel to the Agent, the Company
and the other parties, and are the products of all parties. Accordingly, they
shall not be construed against the Banks or the Agent merely because of the
Agent's or Banks' involvement in their preparation.
Section 1.03. Classification of Loans and Borrowings. For purposes of this
Agreement, Loans may be classified and referred to by Class (e.g., a "Tranche A
Term Loan") or by Interest Type (e.g., an "Offshore Rate Loan") or by Class and
Interest Type (e.g., an "Offshore Rate Tranche A Term Loan"). Borrowings also
may be classified and referred to by Class (e.g., a "Tranche A Term Borrowing")
or by Interest Type (e.g., an "Offshore Rate Borrowing") or by Class and
Interest Type (e.g., an "Offshore Rate Tranche A Term Borrowing").
Section 1.04. Accounting Principles. (a) Unless the context otherwise
clearly requires, all accounting terms not expressly defined herein shall be
construed, and all financial computations required under this Agreement shall be
made, in accordance with GAAP as in effect from time to time, consistently
applied.
(b) References herein to particular columns, lines or sections of any
Person's Annual Statement shall be deemed, where appropriate, to be references
to the corresponding column, line or section of such Person's Quarterly
Statement, or if no such corresponding column, line or section exists or if any
report form changes, then to the corresponding item referenced thereby. In the
event the columns, lines or sections of the Annual Statement or Quarterly
Statement referenced herein are changed or renumbered from the columns, lines
and sections applicable to the 2002 Annual Statement or the March 31, 2003
40
Quarterly Statement, all such references shall be deemed references to such
column, line or section as so renumbered or changed.
(c) In the event of any future Material Acquisition or Material
Disposition, determinations of compliance with the financial covenants contained
herein for any applicable calculation period shall be made on a Pro Forma Basis.
Article 2
THE CREDITS
Section 2.01. Commitments. Subject to the terms and conditions set forth
herein:
(a) each Tranche A-1 Bank agrees that in partial satisfaction of its Lender
Claims it shall be deemed to have made a Tranche A-1 Term Loan to the Company on
the Effective Date in a principal amount equal to its Tranche A-1 Commitment;
(b) each Tranche A-2 Bank agrees that in partial satisfaction of its Lender
Claims it shall be deemed to have made a Tranche A-2 Term Loan to the Company on
the Effective Date in a principal amount equal to its Tranche A-2 Commitment;
(c) each Tranche A-3 Bank agrees that in partial satisfaction of its Lender
Claims it shall be deemed to have made a Tranche A-3 Term Loan to the Company on
the Effective Date in a principal amount equal to its Tranche A-3 Commitment;
(d) each Tranche B-1 Bank agrees that in partial satisfaction of its Lender
Claims it shall be deemed to have made a Tranche B-1 Term Loan to the Company on
the Effective Date in a principal amount equal to its Tranche B-1 Commitment;
(e) each Tranche B-2 Bank agrees that in partial satisfaction of its Lender
Claims it shall be deemed to have made a Tranche B-2 Term Loan to the Company on
the Effective Date in a principal amount equal to its Tranche B-2 Commitment;
and
(f) each Tranche B-3 Bank agrees that in partial satisfaction of its Lender
Claims it shall be deemed to have made a Tranche B-3 Term Loan to the Company on
the Effective Date in a principal amount equal to its Tranche B-3 Commitment.
Amounts repaid in respect of the Loans may not be reborrowed.
41
Section 2.02. Loans. Each Loan shall be deemed made as part of a Borrowing
consisting of Loans of the same Class and Interest Type deemed made by the Banks
ratably in accordance with their respective Commitments of the applicable Class,
provided that all the Borrowings deemed made on the Effective Date must be
Offshore Rate Borrowings with an initial Interest Period of three months. Each
Bank at its option may be deemed to have made any Offshore Rate Loan by
designating (by notice to the Agent) any domestic or foreign branch or Affiliate
of such Bank as deemed to have made such Loan. Any exercise of such option shall
not affect the Company's obligation to repay such Loan as provided herein.
Section 2.03. Notes; Loan Accounts. (a) Each Tranche A Term Loan and
Tranche B Term Loan deemed made by each Bank shall be evidenced by one or more
loan accounts or records maintained by such Bank in the ordinary course of
business. The loan accounts or records maintained by the Agent and each Bank
shall be presumptive evidence of the amount of the Loans deemed made by the
Banks to the Company and the interest and payments thereon. Any failure so to
record or any error in doing so shall not, however, limit or otherwise affect
the obligation of the Company hereunder to pay any amount owing with respect to
the Loans.
(b) Upon the request of any Bank made through the Agent, instead of or in
addition to loan accounts, the Loans deemed made by each Bank may be evidenced
by one or more notes in substantially the form of Exhibit B hereto (each such
note, a "Note", and collectively, the "Notes"). Each Bank shall endorse on the
schedules annexed to its Note(s) the date, amount and maturity of each Loan
deemed made by it and the amount of each payment of principal made by the
Company with respect thereto. Each such Bank is irrevocably authorized by the
Company to endorse its Note(s) and each Bank's record shall be conclusive absent
demonstrable error; provided, however, that the failure of a Bank to make, or an
error in making, a notation thereon with respect to any Loan shall not limit or
otherwise affect the obligations of the Company hereunder or under any such Note
to such Bank.
Section 2.04. Interest Elections. (a) Each Borrowing deemed made on the
Effective Date shall have an initial Interest Period of three months.
Thereafter, the Company shall, upon irrevocable (subject to Section 3.05)
written notice to the Agent in accordance with subsection 2.04(b) elect, as of
the last day of the applicable Interest Period, to continue any Borrowings
having Interest Periods expiring on such day (or any part thereof in an amount
not less than $5,000,000, or that is in an integral multiple of $1,000,000 in
excess thereof) for one or more Interest Periods, all as provided in this
Section.
(b) The Company shall deliver a written Notice of Continuation (which
notice must be received by the Agent not later than 12:00 noon (Central time)
42
three Business Days in advance of the Continuation Date signed by a Responsible
Officer and specifying:
(A) the proposed Continuation Date;
(B) the aggregate amount of Borrowings to be continued; and
(C) the duration of the requested Interest Period (each such
Interest Period shall comply with the provisions of the definition of
"Interest Period").
(c) Subject to Section 2.04(e), if the Company fails to deliver a timely
Notice of Continuation to the Agent in accordance with the provisions of Section
2.04(b) or if any Notice of Continuation does not specify an Interest Period,
the Company shall be deemed to have elected an Interest Period of one month.
(d) The Agent will promptly notify each Bank of its receipt of a Notice of
Continuation, or, if no timely notice is provided by the Company, the Agent will
promptly notify each Bank of the details of any deemed election of an Interest
Period. All continuations shall be made ratably according to the respective
outstanding principal amounts of the Loans with respect to which the notice was
given by each Bank.
(e) Notwithstanding any contrary provision hereof, if an Event of Default
has occurred and is continuing, unless the Required Banks otherwise consent,
each Borrowing will be converted into a Base Rate Borrowing at the end of the
Interest Period applicable thereto.
(f) After giving effect to any continuation of Loans, unless the Agent
shall otherwise consent, there may not be more than six different Interest
Periods in effect in respect of all Loans then outstanding.
Section 2.05. Termination of Commitments. Unless previously terminated,
the Commitments will terminate on the Effective Date immediately after the
closing hereunder.
Section 2.06. Payment at Maturity. The Company shall repay to the Agent
(i) on the Tranche A Maturity Date, for the account of each Tranche A Bank, the
then unpaid principal amount of such Bank's Tranche A Term Loans and (ii) on the
Tranche B Maturity Date, for the account of each Tranche B Bank, the then unpaid
principal amount of such Bank's Tranche B Term Loans, together in each case with
accrued and unpaid interest thereon to but excluding the date of such payment.
43
Section 2.07. Scheduled Amortization. (a) Subject to adjustment pursuant
to Section 2.07(c), the Company shall repay Tranche A Term Loans on each date
set forth below in the aggregate principal amount set forth opposite such date:
<TABLE>
<CAPTION>
------------------------------- ---------------------------------------------------------------------------
Date Amount
------------------------------- ---------------------------------------------------------------------------
------------------------------- ------------------- ------------------ ------------------ -----------------
Tranche A-1 Term Tranche A-2 Term Tranche A-3 Term Total
Loans Loans Loans
------------------------------- ------------------- ------------------ ------------------ -----------------
<S> <C> <C> <C> <C>
------------------------------- ------------------- ------------------ ------------------ -----------------
June 30, 2004 $37,717,252.50 $3,617,409.00 $8,665,338.50 $50,000,000
------------------------------- ------------------- ------------------ ------------------ -----------------
------------------------------- ------------------- ------------------ ------------------ -----------------
June 30, 2005 $37,717,252.50 $3,617,409.00 $8,665,338.50 $50,000,000
------------------------------- ------------------- ------------------ ------------------ -----------------
------------------------------- ------------------- ------------------ ------------------ -----------------
June 30, 2006 $37,717,252.50 $3,617,409.00 $8,665,338.50 $50,000,000
------------------------------- ------------------- ------------------ ------------------ -----------------
------------------------------- ------------------- ------------------ ------------------ -----------------
December 31, 2006 $37,717,252.50 $3,617,409.00 $8,665,338.50 $50,000,000
------------------------------- ------------------- ------------------ ------------------ -----------------
------------------------------- ------------------- ------------------ ------------------ -----------------
June 30, 2007 $56,575,878.75 $5,426,113.50 $12,998,007.75 $75,000,000
------------------------------- ------------------- ------------------ ------------------ -----------------
------------------------------- ------------------- ------------------ ------------------ -----------------
December 31, 2007 $56,575,878.75 $5,426,113.50 $12,998,007.75 $75,000,000
------------------------------- ------------------- ------------------ ------------------ -----------------
------------------------------- ------------------- ------------------ ------------------ -----------------
June 30, 2008 $56,575,878.75 $5,426,113.50 $12,998,007.75 $75,000,000
------------------------------- ------------------- ------------------ ------------------ -----------------
------------------------------- ------------------- ------------------ ------------------ -----------------
December 31, 2008 $56,575,878.75 $5,426,113.50 $12,998,007.75 $75,000,000
------------------------------- ------------------- ------------------ ------------------ -----------------
------------------------------- ------------------- ------------------ ------------------ -----------------
Tranche A Maturity Date $377,172,524.96 $36,174,090.07 $86,653,384.97 $500,000,000
------------------------------- ------------------- ------------------ ------------------ -----------------
</TABLE>
(b) Subject to adjustment pursuant to Section 2.07(c), the Company shall
repay Tranche B Term Loans on each date set forth below in the aggregate
principal amount set forth opposite such date:
<TABLE>
<CAPTION>
------------------------------ --------------------------------------------------------------------------
Date Amount
------------------------------ --------------------------------------------------------------------------
------------------------------ -------------------- ------------------ ----------------- ----------------
Tranche B-1 Term Tranche B-2 Term Tranche B-3 Total
Loans Loans Term Loans
------------------------------- -------------------- ------------------ ----------------- ----------------
<S> <C> <C> <C> <C>
------------------------------- -------------------- ------------------ ----------------- ----------------
June 30, 2004 $2,263,035.15 $217,044.54 $519,920.31 $3,000,000
------------------------------- -------------------- ------------------ ----------------- ----------------
------------------------------- -------------------- ------------------ ----------------- ----------------
June 30, 2005 $2,263,035.15 $217,044.54 $519,920.31 $3,000,000
------------------------------- -------------------- ------------------ ----------------- ----------------
------------------------------- -------------------- ------------------ ----------------- ----------------
June 30, 2006 $1,131,517.57 $108,522.28 $259,960.15 $1,500,000
------------------------------- -------------------- ------------------ ----------------- ----------------
------------------------------- -------------------- ------------------ ----------------- ----------------
December 31, 2006 $1,131,517.57 $108,522.28 $259,960.15 $1,500,000
------------------------------- -------------------- ------------------ ----------------- ----------------
------------------------------- -------------------- ------------------ ----------------- ----------------
June 30, 2007 $1,131,517.57 $108,522.28 $259,960.15 $1,500,000
------------------------------- -------------------- ------------------ ----------------- ----------------
------------------------------- -------------------- ------------------ ----------------- ----------------
December 31, 2007 $1,131,517.57 $108,522.28 $259,960.15 $1,500,000
------------------------------- -------------------- ------------------ ----------------- ----------------
------------------------------- -------------------- ------------------ ----------------- ----------------
June 30, 2008 $1,131,517.57 $108,522.28 $259,960.15 $1,500,000
------------------------------- -------------------- ------------------ ----------------- ----------------
------------------------------- -------------------- ------------------ ----------------- ----------------
December 31, 2008 $1,131,517.57 $108,522.28 $259,960.15 $1,500,000
------------------------------- -------------------- ------------------ ----------------- ----------------
------------------------------- -------------------- ------------------ ----------------- ----------------
June 30, 2009 $1,131,517.57 $108,522.28 $259,960.15 $1,500,000
------------------------------- -------------------- ------------------ ----------------- ----------------
------------------------------- -------------------- ------------------ ----------------- ----------------
December 31, 2009 $1,131,517.57 $108,522.28 $259,960.15 $1,500,000
------------------------------- -------------------- ------------------ ----------------- ----------------
------------------------------- -------------------- ------------------ ----------------- ----------------
Tranche B Maturity Date $212,725,304.13 $20,402,186.70 $48,872,509.17 $282,000,000
------------------------------- -------------------- ------------------ ----------------- ----------------
</TABLE>
(c) Any prepayment of Loans of either Class (or any Sub-Class(es) thereof)
will be applied to reduce the subsequent scheduled repayments of the Loans of
such Class (or such Sub-Class(es) thereof) to be made pursuant to this Section
ratably; provided that any prepayments made pursuant to Section 2.08(e) will be
applied to reduce such subsequent scheduled repayments in direct order of
maturity.
44
(d) Before repaying any Loans of either Class pursuant to this Section, the
Company shall select the Borrowing or Borrowings of the applicable Class to be
repaid and shall (i) in the case of an Offshore Rate Borrowing, notify the Agent
in writing of such selection not later than 11:00 a.m. (Central time) three
Business Days before the scheduled date of such repayment and (ii) in the case
of a Base Rate Borrowing, notify the Agent in writing of such selection not
later than 11:00 a.m. (Central time) on the prepayment date. Each such repayment
of a Borrowing shall be applied ratably to the applicable Loans (and Sub-Classes
thereof) included in such Borrowing and shall be accompanied by accrued interest
on the amount repaid.
Section 2.08. Optional and Mandatory Prepayments. (a) Optional Prepayments.
The Company will have the right at any time to prepay any Borrowing in whole or
in part, in minimum amounts of $3,000,000 or any multiple of $1,000,000 in
excess thereof, subject to the provisions of this Section.
(b) Indebtedness. Within five Business Days after any Net Proceeds are
received by or on behalf of the Company or any Subsidiary in respect of the
incurrence of any Indebtedness by the Company or such Subsidiary, including
Permitted Refinancing Indebtedness but excluding all other Indebtedness
permitted pursuant to Section 7.01, the Company shall prepay Borrowings in an
aggregate amount equal to such Net Proceeds; provided that so long as no Event
of Default is continuing or shall result from the repurchase or redemption
thereof, the Net Proceeds of the incurrence of any Permitted Refinancing
Indebtedness shall not be required to be applied to the prepayment of the
Borrowings to the extent that such Net Proceeds are applied to repurchase or
redeem the New CNC Preferred Stock.
(c) Equity Issuances. Within five Business Days after any Net Proceeds are
received by or on behalf of the Company or any Subsidiary in respect of the
issuance by the Company or such Subsidiary of any Capital Stock, or the receipt
by the Company or such Subsidiary of any capital contribution (other than (x)
issuances of Capital Stock to the Company or its Subsidiaries or capital
contributions between the Company and its Subsidiaries or between Subsidiaries
or (y) the issuance of Capital Stock to, or otherwise acquired by, directors,
officers or employees of the Company or its Subsidiaries pursuant to any stock
option, restricted stock or similar compensation plan approved by the board of
directors of the Company), the Company shall prepay Borrowings in an aggregate
amount equal to (i) in the case of an issuance of Permitted Refinancing
Preferred Stock, 100% of such Net Proceeds, (ii) in the case of an issuance or
contribution other than an issuance of Permitted Refinancing Preferred Stock, to
the extent that the Company contributes up to 50% of the Net Proceeds of such
issuance or contribution to one or more Insurance Subsidiaries and such Net
Proceeds are retained as capital and surplus of such Insurance Subsidiaries, the
remaining
45
portion of such Net Proceeds and (iii) in all other cases, 75% of such Net
Proceeds; provided that so long as no Event of Default is continuing or shall
result from the repurchase or redemption thereof, the Net Proceeds of any such
event shall not be required to be applied to the prepayment of the Borrowings to
the extent that such Net Proceeds are applied to repurchase or redeem the New
CNC Preferred Stock.
(d) Asset Sales and Casualty Events. Within five Business Days after any
Net Proceeds are received by or on behalf of the Company or any Subsidiary in
respect of the occurrence of any Asset Sale or Casualty Event, the Company shall
(i) first, until such time as the Company shall have prepaid Tranche A-2 Term
Borrowings and Tranche B-2 Term Borrowings in an aggregate principal amount
equal to $32,500,000 pursuant to this paragraph, prepay Tranche A-2 Term
Borrowings and Tranche B-2 Term Borrowings in an aggregate amount equal to the
lesser of (x) such Net Proceeds and (y) $32,500,000, until such Borrowings are
repaid in full and (ii) then, prepay other Borrowings (and Tranche A-2 Term
Borrowings and Tranche B-2 Term Borrowings if then outstanding) with any
remaining amount of such Net Proceeds; provided that a prepayment of the
Borrowings shall be required pursuant to this paragraph only to the extent that
the aggregate Net Proceeds of all Asset Sales and Casualty Events in any Fiscal
Year exceeds $2,500,000; provided further that any prepayment in respect of any
Asset Sale or Casualty Event involving 1999 Facility Collateral shall be
governed by Section 2.08(g).
(e) Conseco Excess Cash Flow and Excess Aggregate RBC Ratio. Commencing
with the Excess Cash Calculation Period ending December 31, 2003, the Company
shall prepay Borrowings in an aggregate amount equal to the lesser of (i) the
sum of (A) Conseco Excess Cash Flow for each Excess Cash Calculation Period plus
(B) to the extent that the Aggregate RBC Ratio exceeds 300% as at the end of any
Excess Cash Calculation Period, 100% of the amount in excess of the amount
required to maintain an Aggregate RBC Ratio of 300% and (ii) the amount by which
the aggregate amount of cash on hand and Cash Equivalents of the Company and its
Subsidiaries (other than the Insurance Subsidiaries) exceeds $50,000,000 at the
time of prepayment; provided that (x) the amount, if any, required to be applied
towards prepayment of Borrowings pursuant to clause (i)(A) above shall be
reduced by any amount that any Department shall require the Company to reinvest
in or otherwise return to any Insurance Subsidiary to the extent that such
amount is included in the calculation of the amount determined pursuant to
clause (i)(A) above and (y) the amount, if any, required to be applied towards
prepayment of Borrowings pursuant to clause (i)(B) above shall be reduced by any
amount that any Department shall prohibit any Insurance Subsidiary from
distributing to the Company to the extent that such prohibited amount is
included in the calculation of the amount determined pursuant to clause (i)(B)
above, in each case as certified by a Responsible Officer pursuant to a
certificate delivered to the Agent at the time of prepayment (or, if no
46
prepayment is required with respect to any Excess Cash Calculation Period,
within 120 days after the end of such Excess Cash Calculation Period); provided
further that up to 50% of the amount, if any, required to be applied to prepay
the Borrowings pursuant to this paragraph may instead be applied to the
redemption or repurchase of the New CNC Preferred Stock so long as both before
and after giving pro forma effect to such redemption or repurchase (w) no Event
of Default shall have occurred and be continuing or shall occur, (x) the A.M.
Best financial strength rating of each Active Material Insurance Subsidiary is
at least A-, (y) the Company's implied senior unsecured long-term debt rating
from S&P is at least BBB+ and (z) the Aggregate RBC Ratio as of the end of such
Excess Cash Calculation Period is, and, if applicable, as at the end of the
second and third Fiscal Quarters of such Excess Cash Calculation Period has
been, at least 250%. Each such prepayment shall be made on or before the date on
which financial statements are delivered pursuant to Section 6.01(a) with
respect to the relevant Excess Cash Calculation Period (and in any event within
120 days after the end of such Excess Cash Calculation Period).
(f) Loan Recoveries. Within five Business Days after any amounts are
received or recovered by or on behalf of the Company in respect of the D&O
Loans, the Company shall first, prepay Borrowings (other than Tranche A-1 Term
Borrowings and Tranche B-1 Term Borrowings) in an aggregate amount equal to the
amounts so received or recovered less any fees, costs and expenses reasonably
incurred by or on behalf of the Company in connection therewith (the "D&O
Prepayment Amount"), until such Borrowings are repaid in full and then, prepay
other Borrowings with any remaining amount of such D&O Prepayment Amount;
provided that a prepayment of the Borrowings with respect to amounts received
under or in respect of any Adjustment Agreement shall be required pursuant to
this paragraph only to the extent that the aggregate amount of D&O Prepayment
Amounts received under or in respect of all Adjustment Agreements in any Fiscal
Year exceeds $2,500,000 (and then only in an aggregate amount equal to such
excess); and provided further that until such time as the Company shall have
applied or contributed $30,000,000 in the aggregate pursuant to this proviso, up
to 45% of the amount of any D&O Prepayment Amount shall not be required to be
applied to the prepayment of the Borrowings to the extent otherwise applied to
pay Allowed Class 10A Claims in cash or contributed by the Company to one or
more Insurance Subsidiaries and retained as capital and surplus of such
Insurance Subsidiaries.
(g) 1999 Facility Collateral Recoveries. Within five Business Days after
any Net Proceeds are received by or on behalf of the Company or any Subsidiary
under or in respect of any 1999 Facility Collateral, including pursuant to any
Asset Sale, the Company shall first, prepay Tranche A-2 Term Borrowings and
Tranche B-2 Term Borrowings in an aggregate amount equal to such Net Proceeds,
until such Borrowings are repaid in full and then, prepay other Borrowings with
any remaining amount of such Net Proceeds.
47
(h) Allocation of Prepayments. Before any optional or mandatory prepayment
of Borrowings hereunder (or of any Sub-Class(es) thereof as specified above),
the Company shall select the Borrowing or Borrowings to be prepaid and shall
specify such selection in the notice of such prepayment pursuant to Section
2.08(k). If any such optional or mandatory prepayment of Loans is made at a time
when Borrowings of both Classes remain outstanding, the Company shall select
Borrowings to be prepaid so that the aggregate amount of such prepayment is
allocated between the Tranche A Term Loans (or relevant Sub-Class(es) thereof)
and Tranche B Term Loans (or relevant Sub-Class(es) thereof) pro rata based on
the aggregate outstanding principal amount of the Loans of each such Class (or
relevant Sub-Class(es) thereof).
(i) Partial Prepayments. Each partial prepayment of a Borrowing (or
Sub-Class thereof) shall be applied ratably to the Loans included in such
Borrowing (or Sub-Class thereof).
(j) Accrued Interest. Each prepayment of a Borrowing shall be accompanied
by accrued interest on the amount prepaid.
(k) Notice of Prepayments. The Company shall notify the Agent in writing of
any prepayment of any Borrowing hereunder (i) in the case of an Offshore Rate
Borrowing, not later than 11:00 a.m. (Central time) three Business Days before
the date of prepayment and (ii) in the case of a Base Rate Borrowing, not later
than 11:00 a.m. (Central time) on the prepayment date. Each such notice shall be
irrevocable and shall specify the prepayment date, the principal amount of each
Borrowing or portion thereof to be prepaid and, without limiting Section 6.02,
in the case of a mandatory prepayment, a reasonably detailed calculation of the
amount of such prepayment. Promptly after it receives any such notice, the Agent
shall advise the Banks of the contents thereof.
Section 2.09. Interest. Each Base Rate Loan of any Class shall bear
interest on the outstanding principal amount thereof for each day at a rate per
annum equal to the Base Rate plus the Applicable Margin for such Class.
(b) Each Offshore Rate Loan of any Class shall bear interest on the
outstanding principal amount for each Interest Period applicable thereto at a
rate per annum equal to the Offshore Rate for such Interest Period plus the
Applicable Margin for such Class.
(c) Notwithstanding the foregoing, upon the occurrence of any Event of
Default, for so long as such Event of Default shall be continuing, the principal
of and interest on each Loan shall, without further notice in the case of any
Event of Default pursuant to Section 8.01(a), Section 8.01(c) (with respect to
the Company's failure to comply with any covenant or agreement set forth in
Section 7.11 through Section 7.17 (inclusive and without giving effect to any
cure period
48
provided for thereunder)), Section 8.01(f) or Section 8.01(g), and upon notice
from the Agent (upon the instruction of the Required Banks) in the case of any
other Event of Default, bear interest, after as well as before judgment to the
extent permitted by law, at a rate per annum equal to 2% plus the rate otherwise
applicable to such Loan as provided in the preceding subsections of this
Section. In addition, if any fee or other amount (other than principal or
interest on any Loan) payable by the Company pursuant to any Loan Document is
not paid when due, whether upon acceleration or otherwise, such overdue amount
shall bear interest, after as well as before judgment to the extent permitted by
law, at a rate per annum equal to 5.25% plus the Base Rate.
(d) Interest on each Loan shall be paid in arrears on each Interest Payment
Date for such Loan; provided that (i) interest accrued pursuant to Section
2.09(c) shall be payable on demand of the Agent (upon the instruction of the
Required Banks), (ii) upon any repayment of any Loan, interest accrued on the
principal amount repaid shall be payable on the date of such repayment and (iii)
upon any conversion of an Offshore Rate Loan before the end of the current
Interest Period therefor, interest accrued on such Loan shall be payable on the
effective date of such conversion.
(e) Anything herein to the contrary notwithstanding, the obligations of the
Company to any Bank hereunder shall be subject to the limitation that payments
of interest shall not be required for any period for which interest is computed
hereunder to the extent (but only to the extent) that contracting for or
receiving such payment by such Bank would be contrary to the provisions of any
law applicable to such Bank limiting the highest rate of interest that may be
lawfully contracted for, charged or received by such Bank, and in such event the
Company shall pay such Bank interest at the highest rate permitted by applicable
law.
Section 2.10. Fees. (a) The Company shall pay to the Agent, for its own
account, fees payable in the amounts and at the times separately agreed upon by
the Company and the Agent. Fees paid shall not be refundable under any
circumstances.
(b) The Company shall by no later than June 30, 2004 pay to the Agent, for
the account of the Banks ratably in proportion to the principal amount of their
outstanding Loans, fees in an aggregate amount equal to $6,500,000; provided
that such fees shall not be payable if the Company shall have prior to June 30,
2004 repaid or prepaid all principal of and interest on each Loan, all fees and
all other amounts payable hereunder (other than contingent indemnification
obligations not yet due and payable) for which invoices have been submitted to
the Company prior to June 30, 2004.
49
Section 2.11. Computation of Fees and Interest. (a) All computations of
interest for Base Rate Loans when the Base Rate is determined by BofA's "prime
rate" shall be made on the basis of a year of 365 or 366 days, as the case may
be, and actual days elapsed. All other computations of fees and interest shall
be made on the basis of a 360-day year and actual days elapsed (which results in
more interest being paid than if computed on the basis of a 365-day year).
Interest and fees shall accrue during each period during which interest or such
fees are computed from the first day thereof to the last day thereof.
(b) Each determination of an interest rate by the Agent shall be conclusive
and binding on the Company and the Banks in the absence of demonstrable error.
The Agent will, at the request of the Company or any Bank, deliver to the
Company or the Bank, as the case may be, a statement showing the quotations used
by the Agent in determining any interest rate and the resulting interest rate.
Section 2.12. Payments by the Company. (a) All payments to be made by the
Company under the Loan Documents shall be made without condition or deduction
for any defense, set-off, recoupment or counterclaim. Except as otherwise
expressly provided in any Loan Document, all payments to be made by the Company
under any Loan Document shall be made to the Agent for the account of the Banks
at the Agent's Office, and shall be made in dollars and in immediately available
funds, no later than 2:00 p.m. (Central time) on the date specified in such Loan
Document. The Agent will promptly distribute to each Bank its Pro Rata Share (or
other applicable share as expressly provided herein) of such payment in like
funds as received. Any payment received by the Agent later than 2:00 p.m.
(Central time) shall be deemed to have been received on the following Business
Day and any applicable interest or fee shall continue to accrue.
(b) Subject to the provisions set forth in the definition of "Interest
Period" herein, whenever any payment is due on a day other than a Business Day,
such payment shall be made on the following Business Day, and such extension of
time shall in such case be included in the computation of interest or fees, as
the case may be.
(c) Unless the Company has notified the Agent, prior to the date any
payment is required to be made by it to the Agent hereunder, that the Company
will not make such payment, the Agent may assume that the Company has timely
made such payment and may (but shall not be so required to), in reliance
thereon, make available a corresponding amount to the Person entitled thereto.
If and to the extent that such payment was not in fact made to the Agent in
immediately available funds, then each Bank shall forthwith on demand repay to
the Agent the portion of such assumed payment that was made available to such
Bank in immediately available funds, together with interest thereon in respect
of each day
50
from and including the date such amount was made available by the Agent to such
Bank to the date such amount is repaid to the Agent in immediately available
funds at the Federal Funds Rate from time to time in effect. A notice of the
Agent to any Bank with respect to any amount owing under this subsection (c)
shall be conclusive, absent manifest error.
Section 2.13. Sharing of Payments, Etc. If, other than as expressly
provided elsewhere in any Loan Document, any Bank shall obtain on account of the
Loans made by it any payment (whether voluntary, involuntary, through the
exercise of any right of set-off, counterclaim or otherwise) in excess of its
ratable share (or other share contemplated in such Loan Document), such Bank
shall immediately (a) notify the Agent of such fact, and (b) purchase from the
other Banks such participations in the Loans made by them as shall be necessary
to cause such purchasing Bank to share the excess payment pro rata with each of
them; provided, however, that if all or any portion of such excess payment is
thereafter recovered from the purchasing Bank, such purchase shall to that
extent be rescinded and each other Bank shall repay to the purchasing Bank the
purchase price paid therefor, together with an amount equal to such paying
Bank's ratable share (according to the proportion of (i) the amount of such
paying Bank's required repayment to (ii) the total amount so recovered from the
purchasing Bank) of any interest or other amount paid or payable by the
purchasing Bank in respect of the total amount so recovered. The Company agrees
that any Bank so purchasing a participation from another Bank may, to the
fullest extent permitted by law, exercise all its rights of payment (including
the right of set-off and counterclaim, but subject to Section 10.09) with
respect to such participation as fully as if such Bank were the direct creditor
of the Company in the amount of such participation. The Agent will keep records
(which shall be conclusive and binding in the absence of demonstrable error) of
participations purchased under this Section 2.13 and will in each case notify
the Banks following any such purchases or repayments.
Article 3
TAXES, YIELD PROTECTION AND ILLEGALITY
Section 3.01 . Taxes. (a) Any and all payments by the Company to any Bank
or the Agent under this Agreement and any other Loan Document shall be made free
and clear of, and without deduction or withholding for, any Taxes. In addition,
the Company shall pay all Other Taxes.
(b) If the Company shall be required by law to deduct or withhold any
Taxes, Other Taxes or Further Taxes from or in respect of any sum payable
hereunder to any Bank or the Agent and in the case of Taxes, such Taxes arise as
a result of a change in law occurring after the date hereof, then:
51
(i) the sum payable shall be increased as necessary so that, after
making all required deductions and withholdings (including deductions and
withholdings applicable to additional sums payable under this Section
3.01), such Bank or the Agent, as the case may be, receives and retains an
amount equal to the sum it would have received and retained had no such
deductions or withholdings been made;
(ii) the Company shall make such deductions and withholdings;
(iii) the Company shall pay the full amount deducted or withheld to
the relevant taxing authority or other authority in accordance with
applicable law; and
(iv) the Company shall also pay to each Bank or the Agent, at the time
interest is paid, Further Taxes in the amount that the respective Bank or
the Agent specifies as necessary to preserve the after-tax yield the Bank
or the Agent would have received if such Taxes, Other Taxes or Further
Taxes had not been imposed.
(c) The Company agrees to indemnify and hold harmless each Bank and the
Agent for the full amount of Taxes, Other Taxes, and Further Taxes (provided
that, in the case of Taxes, such Taxes arise as a result of a change in law
occurring after the date hereof) in the amount that the respective Bank or the
Agent specifies as necessary to preserve the after-tax yield the Bank or the
Agent would have received if such Taxes, Other Taxes or Further Taxes had not
been imposed, and any liability (including penalties, interest, additions to tax
and expenses) arising therefrom or with respect thereto, whether or not such
Taxes, Other Taxes or Further Taxes were correctly or legally asserted. Payment
under this indemnification shall be made within 30 days after the date the Bank
or the Agent makes written demand therefor. If any Bank receives a refund in
respect of any Taxes, Other Taxes or Further Taxes as to which it has been
indemnified by the Company or with respect to which the Company (or any Person
on behalf of the Company) has paid additional amounts pursuant to this Section
3.01, it shall promptly repay such refund to the Company (but only to the extent
of indemnity payments made, or additional amounts paid, by the Company (or such
Person acting on behalf of the Company) under this Section 3.01 with respect to
the Taxes, Other Taxes or Further Taxes giving rise to such refund), net of all
out-of-pocket expenses of such Bank or the Agent, as the case may be; provided,
that the Company, upon the request of such Bank or the Agent, agrees to return
such refund (together with any penalties, interest or other charges due in
connection therewith to the appropriate taxing authority or other Governmental
Authority) to such Bank or the Agent in the event such Bank or the Agent is
required to pay or to return such refund to the relevant taxing authority or
other Governmental Authority. Nothing contained herein shall require any Bank to
disclose its tax
52
records to the Company or any other Person except for such tax records as relate
solely to Taxes, Other Taxes and Further Taxes as to which it has been
indemnified by the Company or with respect to which the Company (or any Person
on behalf of the Company) has paid additional amounts pursuant to this Section
3.01.
(d) Within 30 days after the date of any payment by the Company of any
Taxes, Other Taxes or Further Taxes that relate to the Agent or any Bank, the
Company shall furnish to each affected Bank or the Agent, as applicable, the
original or a certified copy of a receipt evidencing payment thereof, or other
evidence of payment reasonably satisfactory to such Bank or the Agent.
(e) If the Company is required to pay any amount to any Bank pursuant to
subsection (b) or (c) of this Section 3.01, then such Bank shall use reasonable
efforts (consistent with legal and regulatory restrictions) to change the
jurisdiction of its Lending Office so as to eliminate any such additional
payment by the Company which may thereafter accrue, if such change, in the sole
judgment of such Bank, is not otherwise disadvantageous to such Bank.
Section 3.02. Illegality. (a) If any Bank determines that the introduction
of any Requirement of Law, or any change in any Requirement of Law, or in the
interpretation or administration of any Requirement of Law, has made it
unlawful, or that any central bank or other Governmental Authority has asserted
that it is unlawful, for any Bank or its applicable Lending Office to make
Offshore Rate Loans, then, on notice thereof by the Bank to the Company through
the Agent, any obligation of that Bank to make Offshore Rate Loans shall be
suspended until the Bank notifies the Agent and the Company that the
circumstances giving rise to such determination no longer exist.
(b) If a Bank determines that it is unlawful for such Bank to maintain any
Offshore Rate Loan, the Company shall, upon its receipt of written notice of
such fact and demand from such Bank (with a copy to the Agent), prepay in full
such Offshore Rate Loans of that Bank then outstanding, together with interest
accrued thereon and amounts required under Section 3.04, either on the last day
of the Interest Period thereof, if the Bank may lawfully continue to maintain
such Offshore Rate Loans to such day, or immediately, if the Bank may not
lawfully continue to maintain such Offshore Rate Loan. If the Company is
required to so prepay any Offshore Rate Loan, then concurrently with such
prepayment, the Company shall borrow from the affected Bank, in the amount of
such prepayment, a Base Rate Loan.
(c) If the obligation of any Bank to make or maintain Offshore Rate Loans
has been so terminated or suspended, the Company may elect, by giving notice to
the Bank through the Agent, that all Loans which would otherwise be
53
made or maintained by the Bank as Offshore Rate Loans shall instead be Base Rate
Loans.
(d) Before giving any notice to the Agent under this Section 3.02, the
affected Bank shall designate a different Lending Office with respect to its
Offshore Rate Loans if such designation will avoid the need for giving such
notice or making such demand and will not, in the judgment of the Bank, be
illegal or otherwise disadvantageous to the Bank.
Section 3.03. Increased Costs and Reduction of Return. (a) If any Bank
determines that, due to either (i) the introduction of or any change in or in
the interpretation of any law or regulation or (ii) the compliance by that Bank
with any guideline or request from any central bank or other Governmental
Authority (whether or not having the force of law), there shall be any increase
in the cost to such Bank of agreeing to make or making, funding or maintaining
any Offshore Rate Loans, then the Company shall be liable for, and shall from
time to time, upon demand (with a copy of such demand to be sent to the Agent),
pay to the Agent for the account of such Bank, additional amounts as are
sufficient to compensate such Bank for such increased costs.
(b) If any Bank shall have determined that (i) the introduction of any
Capital Adequacy Regulation, (ii) any change in any Capital Adequacy Regulation,
(iii) any change in the interpretation or administration of any Capital Adequacy
Regulation by any central bank or other Governmental Authority charged with the
interpretation or administration thereof, or (iv) compliance by the Bank (or its
Lending Office) or any corporation controlling the Bank with any Capital
Adequacy Regulation, affects or would affect the amount of capital required or
expected to be maintained by the Bank or any corporation controlling the Bank
and (taking into consideration such Bank's or such corporation's policies with
respect to capital adequacy and such Bank's desired return on capital)
determines that the amount of such capital is increased as a consequence of its
Commitment, loans, credits or obligations under this Agreement, then, thirty
(30) days after written demand by such Bank to the Company through the Agent,
the Company shall pay to the Bank, from time to time as specified by the Bank,
additional amounts sufficient to compensate the Bank for such increase;
provided, however, that if any such Bank fails to deliver such demand within 120
days after the date on which an officer of such Bank has actual knowledge of its
right to compensation under this Section 3.03(b), then such Bank shall only be
entitled to additional compensation for any such increases in capital required
from and after the date that is 120 days prior to the date such Bank delivers
such demand.
(c) Section 3.01 and not this Section 3.03 shall be the only Section of
this Agreement that applies to increased costs with respect to Taxes, Further
Taxes and Other Taxes.
54
Section 3.04. Funding Losses. The Company shall reimburse each Bank and
hold each Bank harmless from any loss or expense which the Bank may sustain or
incur as a consequence of:
(a) the failure of the Company to make on a timely basis any payment of
principal of any Offshore Rate Loan;
(b) the failure of the Company to continue a Loan after the Company has
given (or is deemed to have given) a Notice of Continuation;
(c) the failure of the Company to make any prepayment of any Loan in
accordance with any notice delivered under Section 2.08; or
(d) the prepayment (including pursuant to Section 2.08) or other payment
(including after acceleration thereof) of an Offshore Rate Loan on a day that is
not the last day of the relevant Interest Period;
including any such loss or expense arising from the liquidation or reemployment
of funds obtained by it to maintain its Offshore Rate Loans or from fees payable
to terminate the deposits from which such funds were obtained, but excluding any
administrative fee or other amount chargeable by such Bank for the calculation
of such loss. For purposes of calculating amounts payable by the Company to the
Banks under this Section 3.04 and under subsection 3.03(a), each Offshore Rate
Loan made by a Bank (and each related reserve, special deposit or similar
requirement) shall be conclusively deemed to have been funded at the Eurodollar
Base Rate used in determining the Offshore Rate for such Offshore Rate Loan by a
matching deposit or other borrowing in the interbank eurodollar market for a
comparable amount and for a comparable period, whether or not such Offshore Rate
Loan is in fact so funded.
Section 3.05. Inability to Determine Rates. If the Required Banks
determine that for any reason adequate and reasonable means do not exist for
determining the Offshore Rate for any requested Interest Period with respect to
a proposed Offshore Rate Loan, or that the Offshore Rate for any requested
Interest Period with respect to a proposed Offshore Rate Loan does not
adequately and fairly reflect the cost to such Banks of funding such Loan, the
Agent will promptly so notify the Company and each Bank. Thereafter, the
obligation of the Banks to make or maintain Offshore Rate Loans shall be
suspended until the Agent (upon the instruction of the Required Banks) revokes
such notice in writing. Upon receipt of such notice, the Company may revoke any
Notice of Continuation then submitted by it. If the Company does not revoke such
Notice of Continuation, the Banks shall make, convert or continue the Loans, as
proposed by the Company, in the amount specified in the applicable notice
submitted by the Company, but such Loans shall be made, converted or continued
as Base Rate Loans instead of Offshore Rate Loans.
55
Notwithstanding the foregoing, the Agent and each Bank shall take any reasonable
actions available to them (including designation of different Lending Offices),
consistent with legal and regulatory restrictions, that will avoid the need to
take the steps described in this Section 3.05, which will not, in the reasonable
judgment of the Agent or such Bank, be materially disadvantageous to the Agent,
such Bank or the Company, as compared to the steps described in this Section
3.05.
Section 3.06. Certificates of Banks. Any Bank claiming reimbursement or
compensation under this Article shall deliver to the Company (with a copy to the
Agent) a certificate setting forth in reasonable detail the amount payable to
the Bank hereunder and such certificate shall be conclusive and binding on the
Company in the absence of demonstrable error. Such certificate shall set forth
in reasonable detail (in the form of Exhibit E hereto for amounts claimed with
respect to Offshore Rate Loans under Section 3.04 and in a form reasonably
determined by the applicable Bank with respect to Base Rate Loans) the
methodology used in determining the amount payable to the Bank.
Section 3.07. Substitution of Banks. If the Company receives notice from
any Bank of a claim for compensation under Section 3.01, 3.02 or 3.03, the
Company may, upon notice to such Bank and the Agent, replace such Bank by
causing such Bank to assign its Loans (with the assignment fee to be paid by the
Company in such instance) pursuant to Section 10.07(b) to one or more other
Banks or Eligible Assignees procured by the Company; provided, however, that (x)
the Company shall be obligated to replace all Banks that have made similar
requests for compensation and (y) each such Bank shall have received payment of
an amount equal to the outstanding principal of its Loans, accrued interest
thereon, accrued fees and all other amounts payable to it under the Loan
Documents from the applicable assignee (to the extent of such outstanding
principal and accrued interest and fees) or the Company (in the case of all
other amounts). The Company shall release such Bank from its obligations under
the Loan Documents. Any Bank being replaced shall execute and deliver an
Assignment and Assumption with respect to such Bank's outstanding Loans.
Section 3.08. Survival. The agreements and obligations of the Company in
Section 3.01, Section 3.03, Section 3.04 and Section 3.06 shall survive the
termination of this Agreement and the payment of all other Obligations for a
period of one year.
Article 4
CONDITIONS PRECEDENT
Section 4.01. Effective Date. The obligations of the Banks to have deemed
to have made Loans hereunder shall not become effective until the date
56
on which each of the following conditions is satisfied (or waived in accordance
with Section 10.01):
(a) If any Bank shall have requested any Note(s) pursuant to Section
2.03(b), the Company shall have distributed, or made arrangements to distribute
promptly after the Effective Date, to such Bank such Note(s) duly executed by a
Responsible Officer of the Company.
(b) The Agent shall have received:
(i) copies of the resolutions of the board of directors or other
equivalent body of each Obligor authorizing the Transactions to which such
Obligor is a party, certified as of the Effective Date by the Secretary or
an Assistant Secretary of such Obligor; and
(ii) a certificate of the Secretary or Assistant Secretary of each
Obligor certifying the names and true signatures of the officers of such
Obligor authorized to execute, deliver and perform, as applicable, this
Agreement and all other Loan Documents to be delivered by such Obligor
hereunder.
(c) The Agent shall have received:
(i) the articles or certificate of incorporation or equivalent
document of each Obligor as in effect on the Effective Date, certified by
the Secretary of State of its state of incorporation or organization as of
a recent date;
(ii) the bylaws or equivalent document of each Obligor as in effect on
the Effective Date, certified by the Secretary or Assistant Secretary of
such Obligor as of the Effective Date;
(iii) a certificate of existence for each Obligor from the Secretary
of State (or similar, applicable Governmental Authority) of its state of
incorporation or organization as of a recent date; and
(iv) a compliance certificate for each Insurance Subsidiary from the
Department of its jurisdiction of domicile as of a recent date.
(d) The Agent shall have received a favorable written opinion (addressed to
the Agent and the Banks and dated the Effective Date) of each of (i) Kirkland &
Ellis, counsel for the Obligors, substantially in the form of Exhibit H-1 and
(ii) Baker & Daniels, Indiana and insurance regulatory counsel for the Obligors,
substantially in the form of Exhibits H-2 and H-3. The Agent shall have also
received such other legal opinions, in form and substance satisfactory to the
Agent, covering such matters relating to the Loan Documents and the
57
Transactions as the Agent may reasonably require. The Company requests such
counsel to deliver such opinions.
(e) The Agent and each Bank shall have been paid all accrued and unpaid
fees, and reasonable costs and expenses to the extent then due and payable to
the Agent or such Bank on or before the Effective Date, including Attorney Costs
of the Agent or such Bank to the extent invoiced prior to or on the Effective
Date, plus such additional amounts of Attorney Costs as shall constitute the
Agent's reasonable estimate of Attorney Costs incurred or to be incurred by it
through the closing proceedings (provided that such estimate shall not
thereafter preclude final settling of accounts between the Company and the
Agent) including any such costs, fees and expenses arising under or referenced
in Section 2.10 and 10.04. Without limiting the foregoing, each of the Lenders'
Agents and each of the Lenders (each as defined in the Plan of Reorganization)
shall have received all amounts distributable to them pursuant to Article
III.C.4 of the Plan of Reorganization, including all fees and expenses payable
thereunder.
(f) The Agent shall have received a certificate signed by a Responsible
Officer on behalf of the Company, dated as of the Effective Date, confirming the
satisfaction of the conditions set forth in Section 4.01(g), Section 4.01(h) and
the second sentence of Section 4.01(m) and confirming that the Company and its
Subsidiaries have received all required approvals of the transactions
contemplated hereby and by the other Loan Documents, including the Transactions,
from each applicable Governmental Authority.
(g) The fact that the representations and warranties of each Obligor
contained in the Loan Documents shall be true and correct on and as of the
Effective Date, as though made on and as of such date.
(h) The fact that, immediately after giving effect to the Transactions, no
Default shall have occurred and be continuing.
(i) The Collateral and Guarantee Requirement shall have been satisfied and
the Agent shall have received (i) a completed Perfection Certificate with
respect to each Obligor dated the Effective Date and signed by a Responsible
Officer or other executive officer of such Obligor, together with all
attachments contemplated thereby, including the results of a search of the
Uniform Commercial Code (or equivalent) filings made with respect to such
Obligor in the jurisdictions contemplated by such Perfection Certificate and
copies of the financing statements (or similar documents) disclosed by such
search and evidence reasonably satisfactory to the Agent that the Liens
indicated by such financing statements (or similar documents) are permitted by
Section 7.02 or have been released, (ii) evidence that any lockbox and
concentration account arrangements contemplated by the Security Agreement have
been established and (iii) evidence that all insurance required by Section 6.05
is in effect.
58
(j) Upon completion of the solicitation of votes on the Plan of
Reorganization, the Holders (such term and other capitalized terms used in this
paragraph and not defined herein having the meanings set forth in the Plan of
Reorganization) of at least two-thirds in amount and one-half in number of the
Allowed Claims in each of Classes 5A-1, 5A-2, 4B-1 and 4B-2 actually voting in
such Classes shall have voted to accept the Plan of Reorganization (the Plan of
Reorganization as so accepted, the "Accepted Plan"). Any material amendments or
modifications to the Accepted Plan or any related document (including the Plan
Supplement (as defined in the Plan of Reorganization)) shall be satisfactory to
the Required Banks.
(k) The Effective Date (as defined in the Plan of Reorganization) of the
Plan of Reorganization shall have occurred (or shall occur simultaneously with
the closing hereunder), all conditions precedent enumerated therein shall have
been satisfied (or waived by the parties entitled to do so) as set forth in the
Plan of Reorganization and the Reorganization Transactions (including the
issuance of the New CNC Preferred Stock) shall have been consummated.
(l) The Confirmation Order pursuant to which the Plan of Reorganization is
consummated shall have become a Final Order; the Confirmation Order shall be in
form and substance satisfactory to the Required Banks and shall not provide that
the Bankruptcy Court's retention of jurisdiction thereunder governs the
enforcement of the Loan Documents or any of the rights or remedies of the Banks
or the Agent related thereto.
(m) The Banks shall have received the pro forma financial statements
described in Section 5.11(b); and such pro forma financial statements shall be
reasonably satisfactory to the Banks. Immediately after giving effect to the
Transactions, no Obligor shall have outstanding any shares of preferred stock or
any Indebtedness, except (i) Indebtedness permitted under Section 7.01 (other
than Section 7.01(a)(iii), Section 7.01(a)(xiii), Section 7.01(a)(xiv) and
Section 7.01(a)(xv)) and (ii) the Existing CIHC Preferred Stock and the New CNC
Preferred Stock.
(n) There shall not exist any (i) pending or threatened action, suit,
investigation, proceeding or other litigation in which the Required Banks
determine there is a reasonable likelihood of a decision which could reasonably
be expected to have a Material Adverse Effect or a material adverse effect on
the rights of the Banks under the Loan Documents or that seeks to enjoin the
Transactions or the Loan Documents or the transactions contemplated thereby or
(ii) order or injunction restraining the Transactions or the Loan Documents or
the transaction contemplated thereby.
(o) All agreements, orders and other restrictions binding on the Company or
any of its Subsidiaries on the Effective Date, and the corporate and
59
capital structure of the Obligors and all organizational documents thereof,
shall be reasonably satisfactory to the Required Banks.
(p) The Agent shall have received such other approvals, opinions, documents
or materials as the Agent may reasonably request, all in form and substance
reasonably satisfactory to the Agent.
Promptly after the Effective Date occurs, the Agent shall notify the
Company and the Banks thereof, and such notice shall be conclusive and binding.
Article 5
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Agent and each Bank that:
Section 5.01. Corporate Existence and Power. The Company and each of its
Subsidiaries:
(a) is duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation or organization;
(b) has the power and authority and all governmental licenses,
authorizations, consents and approvals (i) to own its assets and carry on its
business and (ii) to execute, deliver, and perform its obligations under the
Loan Documents;
(c) is duly qualified and is licensed and in good standing under the laws
of each jurisdiction where its ownership, lease or operation of property or the
conduct of its business requires such qualification or license;
(d) is in compliance with all Requirements of Law; and
(e) has a fiscal year ending December 31;
except, in each case referred to in clauses (a) (with respect to Subsidiaries
other than Obligors and Material Insurance Subsidiaries), (b)(i) (with respect
to Subsidiaries other than Material Insurance Subsidiaries), (c) or (d), to the
extent that the failure to do so, in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
Section 5.02. Corporate Authorization; No Contravention. The Transactions
to be entered into by each Obligor are within its corporate or other
organizational powers. The Transactions (including the execution, delivery and
performance by each Obligor of each Loan Document to which it is a party)
60
have been duly authorized by all necessary corporate or other organizational
action of each Obligor, and do not and will not:
(a) contravene the terms of any of such Obligor's Organization Documents;
(b) conflict with or result in any breach or contravention of, or result in
or require the creation of any Lien (other than the Transaction Liens) under,
any document evidencing any material Contractual Obligation to which such
Obligor is a party or any order, injunction, writ or decree of any Governmental
Authority to which such Obligor or its property is subject; or
(c) violate any Requirement of Law, except to the extent that such
violations, in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
Section 5.03. Governmental Authorization. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority is necessary or required in connection with the
Transactions (including the execution, delivery or performance by, or
enforcement against, each Obligor of each Loan Document to which it is a party),
except (i) such as have been obtained and are in full force and effect and
listed on Schedule 5.03 and (ii) filings necessary to perfect the Transaction
Liens.
Section 5.04. Binding Effect. This Agreement has been duly executed and
delivered by the Company and constitutes, and each other Loan Document to which
any Obligor is to be a party, when executed and delivered by such Obligor, will
constitute, a legal, valid and binding obligation of the Company or such
Obligor, as the case may be, in each case enforceable against the Company or
such Obligor, as the case may be, in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency, or similar
laws affecting the enforcement of creditors' rights generally or by equitable
principles relating to enforceability.
Section 5.05. Litigation. Except as set forth on Schedule 5.05, there are
no actions, suits, proceedings, claims or disputes pending, or to the knowledge
of the Company, threatened or contemplated, at law, in equity, in arbitration or
before any Governmental Authority, against the Company or its Subsidiaries or
any of their respective properties which: (a) purport to affect or pertain to
this Agreement or any other Loan Document, or any of the transactions (including
the Transactions) contemplated hereby or thereby; or (b) that individually or in
the aggregate could reasonably be expected to have a Material Adverse Effect. No
injunction, writ, temporary restraining order or any order of any nature has
been issued by any court or other Governmental Authority purporting to enjoin
61
or restrain the execution, delivery or performance of this Agreement or any
other Loan Document, or directing that the transactions (including the
Transactions) provided for herein or therein not be consummated as herein or
therein provided.
Section 5.06. No Default. No Default has occurred and is continuing.
Without limiting the foregoing, no Default would result from the consummation of
the Transactions. As of the Effective Date, neither the Company nor any
Subsidiary is in default under or with respect to any Contractual Obligation in
any respect which, individually or together with all such defaults, could
reasonably be expected to have a Material Adverse Effect, or that would, if such
default had occurred after the Effective Date, create an Event of Default under
Section 8.01(e).
Section 5.07. ERISA Compliance.
(a) Each Plan is in compliance with the applicable provisions of ERISA, the
Code and other federal or state law except to the extent that such
non-compliance could not reasonably be expected to have a Material Adverse
Effect. Each Plan which is intended to qualify under Section 401(a) of the Code
has either (i) received a favorable determination letter from the IRS and to the
knowledge of the Company, nothing has occurred which would reasonably be
expected to cause the loss of such qualification or (ii) with respect to the
Plans identified on Schedule 5.07, is in the process of requesting a favorable
determination letter from the IRS as to its qualified status, and the Company is
not aware of any fact or issue which would reasonably be expected to cause the
IRS to fail to issue a favorable determination letter, except where such
non-qualification could not reasonably be expected to have a Material Adverse
Effect. The Company and each ERISA Affiliate has made all required contributions
to any Plan subject to Section 412 of the Code, and no application for a funding
waiver or an extension of any amortization period pursuant to Section 412 of the
Code has been made with respect to any Plan, except where such lack of
contribution or application for funding waiver could not reasonably be expected
to have a Material Adverse Effect.
(b) Except as set forth on Schedule 5.07, there are no pending or, to the
knowledge of the Company, threatened claims, actions or lawsuits, or action by
any Governmental Authority, with respect to any Plan that could reasonably be
expected to have a Material Adverse Effect. To the knowledge of the Company,
there has been no prohibited transaction or violation of the fiduciary
responsibility rules with respect to any Plan that could reasonably be expected
to have a Material Adverse Effect.
(c) Except for occurrences or circumstances which individually or in the
aggregate could not reasonably be expected to have a Material Adverse Effect,
(i) except as set forth on Schedule 5.07, since the Confirmation Date, no ERISA
62
Event has occurred or is reasonably expected to occur; (ii) except as set forth
on Schedule 5.07, since the Confirmation Date, no Pension Plan has any Unfunded
Pension Liability; (iii) neither the Company nor any ERISA Affiliate has
incurred, or reasonably expects to incur, any liability under Title IV of ERISA
with respect to any Pension Plan (other than premiums due and not delinquent
under Section 4007 of ERISA); (iv) neither the Company nor any ERISA Affiliate
has incurred, or reasonably expects to incur, any liability (and no event has
occurred which, with the giving of notice under Section 4219 of ERISA, would
result in such liability) under Section 4201 or 4243 of ERISA with respect to a
Multiemployer Plan; and (v) neither the Company nor any ERISA Affiliate has
engaged in a transaction that could be subject to Section 4069 or 4212(c) of
ERISA.
Section 5.08. Margin Regulations. Neither the Company nor any Subsidiary
is engaged principally, or as one of its important activities, in the business
of extending credit for the purpose of purchasing or carrying Margin Stock.
Margin Stock does not constitute more than 25% of the value of the consolidated
assets of the Company and its Subsidiaries. None of the transactions
contemplated by this Agreement (including the direct or indirect use of the
proceeds of the Loans) will violate or result in a violation of the Securities
Act of 1933, as amended, or the Exchange Act, or regulations issued pursuant
thereto, or Regulation T, U or X of the FRB.
Section 5.09. Title to Properties. The Company and each Subsidiary have
good record and marketable title in fee simple to, or valid leasehold interests
in, all real property necessary or used in the ordinary conduct of their
respective businesses, except for such defects in title or interests as could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. As of the Effective Date, the property of the Company and its
Subsidiaries is subject to no Liens, other than Liens permitted under Section
7.02.
Section 5.10. Taxes. The Company and its Subsidiaries have timely filed
all federal Tax, material Income Tax and other material Tax returns and reports
required to be filed, and have paid all federal Tax, Income Tax and other
material Taxes levied or imposed upon them or their properties, income or assets
otherwise due and payable, except those which are being contested in good faith
by appropriate proceedings and for which adequate reserves have been provided in
accordance with SAP or GAAP, as applicable. There is no proposed Tax assessment
against the Company or any Subsidiary for which a notice of deficiency or
similar notice has been issued and which would, if made, individually or in the
aggregate, have a Material Adverse Effect and for which adequate reserves in
accordance with GAAP are not being maintained by the Company or such Subsidiary.
63
Section 5.11. Financial Condition. (a) Each of (i) the audited
consolidated financial statements of the Company and its Subsidiaries dated
December 31, 2002, and the related consolidated statements of income,
shareholders' equity and cash flows for the Fiscal Year ended on that date,
reported on by PricewaterhouseCoopers, LLP, independent public accountants, (ii)
the unaudited consolidated financial statements of the Company and its
Subsidiaries dated March 31, 2003, and the related consolidated statements of
income, shareholders' equity and cash flows for the period ended on that date,
(iii) the December 31, 2002 Annual Statement of each Insurance Subsidiary and
(iv) the March 31, 2003 Quarterly Statement of each Insurance Subsidiary:
(A) were prepared in accordance with GAAP or SAP, as applicable,
consistently applied throughout the period covered thereby, except as
otherwise expressly noted therein, subject, in the case of such
unaudited financial statements, to ordinary, good faith year end and
audit adjustments and the absence of footnote disclosure;
(B) fairly present in all material respects the financial
condition of the Company and its Subsidiaries as of the date thereof
and results of operations for the period covered thereby; and
(C) show all material indebtedness and other liabilities, direct
or contingent, of the Company and its consolidated Subsidiaries as of
the date thereof, including liabilities for Taxes, material
commitments and Contingent Obligations.
(b) The Company has heretofore furnished to the Banks its pro forma
consolidated balance sheet and income statement as of the last day of the Fiscal
Quarter most recently ended prior to the Effective Date for which financial
statements have been prepared (the "Preparation Date"), prepared giving effect
to the Transactions as if the Transactions had occurred on such date. Such pro
forma consolidated balance sheet and income statement (i) have been prepared in
good faith based on the same assumptions used to prepare the pro forma financial
statements included in the Disclosure Statement (as defined in the Plan of
Reorganization) (which assumptions are believed by the Company to be reasonable)
and using the principles of fresh start accounting as required by AICPA
Statement of Position 90-7, (ii) are based on the best information available to
the Company after due inquiry, (iii) accurately reflect all material adjustments
necessary to give effect to the Transactions, (iv) present fairly, in all
material respects, the pro forma financial position of the Company and its
consolidated Subsidiaries as of the Preparation Date as if the Transactions had
occurred on such date and (v) demonstrate that the covenants set forth in
Section
64
7.11 through Section 7.16 are satisfied as at the Preparation Date after giving
effect to the Transactions.
(c) Since the Confirmation Date, there has been no material adverse change
in the business, assets, operations or condition, financial or otherwise, of the
Company and its Subsidiaries, taken as a whole.
Section 5.12. Environmental Matters. (a) All facilities and property
(including underlying groundwater) owned or leased by the Company or any of its
Subsidiaries have been, and continue to be, owned or leased by the Company and
its Subsidiaries in material compliance with all Environmental Laws, except
where failure to so comply could not, individually or in the aggregate, be
reasonably expected to have a Material Adverse Effect;
(b) there have been no past, and there are no pending or threatened,
Environmental Claims, except where such Environmental Claims could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect;
(c) there have been no releases of Hazardous Materials at, on or under any
property now or previously owned or leased by the Company or any of its
Subsidiaries that, individually or in the aggregate, have had, or could
reasonably be expected to have, a Material Adverse Effect;
(d) the Company and each of its Subsidiaries have been issued and are in
material compliance with all permits, certificates, approvals, licenses and
other authorizations relating to environmental matters and necessary or
desirable for their businesses except where failure to comply could not,
individually or in the aggregate, be reasonably expected to have a Material
Adverse Effect;
(e) no property now or previously owned or leased by the Company or any of
its Subsidiaries is listed or, to the Company's knowledge, proposed for listing
(with respect to owned property only) on the National Priorities List pursuant
to CERCLA, on the CERCLIS or on any similar state list of sites requiring
investigation or clean-up, except where such listing could not, individually or
in the aggregate, be reasonably expected to have a Material Adverse Effect;
(f) there are no underground storage tanks, active or abandoned, including
petroleum storage tanks, on or under any property now or previously owned or
leased by the Company or any of its Subsidiaries that, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect;
(g) neither the Company nor any of its Subsidiaries has directly
transported or directly arranged for the transportation of any Hazardous
Material
65
to any location which is listed or, to Company's knowledge, proposed for listing
on the National Priorities List pursuant to CERCLA, on the CERCLIS or on any
similar state list or which is the subject of federal, Governmental Authority or
local enforcement actions or other investigations which could reasonably be
expected to lead to material claims against the Company or any of its
Subsidiaries for any remedial work, damage to natural resources or personal
injury, including claims under CERCLA, except where such claims could not,
individually or in the aggregate, be reasonably expected to have a Material
Adverse Effect;
(h) there are no polychlorinated biphenyls or friable asbestos present at
any property now or previously owned or leased by the Company or any of its
Subsidiaries that, individually or in the aggregate, could be reasonably
expected to have a Material Adverse Effect; and
(i) no conditions exist at, on or under any property now or previously
owned or leased by the Company or any of its Subsidiaries which, with the
passage of time, or the giving of notice or both, would give rise to liability
under any Environmental Law, except where such liability could not, individually
or in the aggregate, be reasonably expected to have a Material Adverse Effect.
Section 5.13. Regulated Entities. Except as disclosed on Schedule 5.13,
none of the Company, any Person controlling the Company, or any Subsidiary, is
an "Investment Company" within the meaning of, or subject to regulation under,
the Investment Company Act of 1940. None of the Company or any Subsidiary is
subject to regulation under the Public Utility Holding Company Act of 1935, the
Federal Power Act, the Interstate Commerce Act, any state public utilities code,
or any other Federal or state statute or regulation limiting its ability to
incur Indebtedness.
Section 5.14. Subsidiaries. Schedule 5.14 sets forth the name of, and the
ownership interest of the Company (or the applicable Subsidiary) in, each of its
Subsidiaries and identifies each Subsidiary that is a Subsidiary Guarantor, a
Foreign Subsidiary, an Immaterial Subsidiary, an Insurance Subsidiary, an Active
Material Insurance Subsidiary and/or a Material Insurance Subsidiary, in each
case as of the Effective Date. All the Company's Subsidiaries are, and will at
all times be, fully consolidated in its consolidated financial statements. As of
the Effective Date (i) each Subsidiary is a Wholly-Owned Subsidiary and (ii)
each Subsidiary (other than the Insurance Subsidiaries, Subsidiaries of
Insurance Subsidiaries, Foreign Subsidiaries and Immaterial Subsidiaries) is
also a Subsidiary Guarantor.
Section 5.15. Insurance Licenses. No License of the Company or any
Insurance Subsidiary, the loss of which individually or in the aggregate could
reasonably be expected to have a Material Adverse Effect, is the subject of a
proceeding for suspension or revocation. To the Company's knowledge, there is
66
no sustainable basis for such suspension or revocation, and no such suspension
or revocation has been threatened by any Governmental Authority.
Section 5.16. Full Disclosure. The Company has disclosed to the Banks all
agreements, instruments and corporate or other restrictions to which it or any
Subsidiary is subject, and all other matters known to any of them, that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect. None of the representations or warranties made by any
Obligor in any Loan Document to which it is a party as of the date such
representations and warranties are made or deemed made, and neither the
Disclosure Statement prepared in connection with the confirmation of the Plan of
Reorganization nor any of the exhibits, reports, statements or certificates
furnished by or on behalf of the Company or any Subsidiary pursuant to the Loan
Documents, in either case, taken as a whole, contains any untrue statement of a
material fact or omits any material fact required to be stated therein or
necessary to make the statements made therein, in light of the circumstances
under which they are made, not misleading as of the time when made or delivered.
Section 5.17. Solvency. Immediately after the Transactions to occur on the
Effective Date are consummated, (a) the fair value of the assets of each
Obligor, at a fair valuation, will exceed its debts and liabilities,
subordinated, contingent or otherwise; (b) the present fair saleable value of
the property of each Obligor will exceed the amount that will be required to pay
the probable liability of its debts and other liabilities, subordinated,
contingent or otherwise, as such debts and other liabilities become absolute and
matured; (c) each Obligor will be able to pay its debts and liabilities,
subordinated, contingent or otherwise, as such debts and liabilities become
absolute and matured; and (d) no Obligor will have unreasonably small capital
with which to conduct the business in which it is engaged as such business is
now conducted and proposed to be conducted after the Effective Date.
Section 5.18. Security Interests. On the Effective Date, the Security
Documents will create valid security interests in the Collateral to the extent
set forth therein. At all times thereafter, the Security Documents will create
valid and, when financing statements are filed in the offices specified in the
Perfection Certificates delivered pursuant to the Security Agreement, perfected
security interests in the Collateral from time to time covered or purportedly
covered thereby to the extent that a security interest in such Collateral may be
perfected by filing under the Uniform Commercial Code. Such security interests
will be prior to all other Liens (except Liens permitted under Section 7.02(c),
Section 7.02(e), Section 7.02(f), Section 7.02(g), Section 7.02(i) and Section
7.02(j)) on the Collateral until the applicable Security Interest are released
in accordance with the Loan Documents.
67
Section 5.19. Insurance. The insurance maintained by or reserved on the
books of the Company and its Subsidiaries is sufficient to protect the Company
and its Subsidiaries and their respective directors and officers against such
risks as are usually insured against in accordance with industry practice by
companies in the same or similar business.
Section 5.20. Reinsurance Agreements. Each Reinsurance Agreement entered
into on or after December 31, 2000 (other than any Reinsurance Agreement entered
into in the ordinary course of business for the purpose of managing insurance
risk consistent with industry practice) to which any Insurance Subsidiary is a
party as of the Effective Date is listed on Schedule 5.20. The information set
forth on Schedule 5.20 with respect to each such agreement, including the
identity of each Person party thereto, each Person's rating from A.M. Best (or
another rating agency, if rated) and the subject matter thereof, is accurate and
complete in all material respects. The copies of each such Reinsurance Agreement
delivered to the Agent prior to the Effective Date is true and complete in all
material respects. Each of the reinsurers identified on Schedule 5.20 either (i)
is duly licensed to transact an insurance business, (ii) is duly authorized to
transact a reinsurance business or (iii) has pledged collateral to secure its
obligations under the applicable Reinsurance Agreement such that each of the
Insurance Subsidiaries is entitled to take full statutory credit for all
reinsurance ceded under such Reinsurance Agreement.
Section 5.21. Tax Shelter Regulations. The Company does not intend to
treat the Loans and related transactions as being a "reportable transaction"
(within the meaning of Treasury Regulation Section 1.6011-4). In the event the
Company determines to take any action inconsistent with such intention, it will
promptly notify the Agent thereof. If the Company so notifies the Agent, the
Company acknowledges that one or more of the Banks may treat its Loans as part
of a transaction that is subject to Treasury Regulation Section 301.6112-1, and
such Bank or Banks, as applicable, will maintain the lists and other records
required by such Treasury Regulation.
Article 6
AFFIRMATIVE COVENANTS
Until all principal of and interest on each Loan and all fees and other
amounts payable hereunder have been paid in full (other than contingent
indemnification obligations not yet due and payable), the Company covenants and
agrees with the Banks that:
Section 6.01. Financial Statements. The Company shall deliver to the Agent
and each Bank:
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(a) promptly upon filing thereof with the SEC (including as part of a Form
10-K) but not later than 120 days after the end of each Fiscal Year, copies of
the audited consolidated and the unaudited consolidating balance sheet of the
Company and its Subsidiaries as at the end of such year and the related audited
consolidated and unaudited consolidating statements of operations, shareholders'
equity and cash flows for such year, setting forth in the case of the audited
consolidated statements in comparative form the figures for the previous Fiscal
Year, and accompanied by the opinion of PricewaterhouseCoopers LLP or another
nationally-recognized independent public accounting firm ("Independent
Auditor"), which opinion shall state that such audited consolidated financial
statements present fairly in all material respects the financial position and
result of operations of the Company and its Subsidiaries for the periods
indicated in conformity with GAAP applied on a basis consistent with prior
years, except as stated therein. Such opinion shall be without a "going concern"
or like qualification and shall not be qualified or limited because of a
restricted or limited examination by the Independent Auditor of any material
portion of the Company's or any Subsidiary's records;
(b) promptly upon filing thereof with the SEC (including as part of a Form
10-Q) but not later than 60 days after the end of each of the first three Fiscal
Quarters of each Fiscal Year, copies of the condensed unaudited consolidated and
consolidating balance sheet of the Company and its Subsidiaries as of the end of
such quarter and the related condensed unaudited consolidated and consolidating
statements of operations, shareholders' equity and cash flows for the period
commencing on the first day and ending on the last day of such quarter and for
the then elapsed portion of such Fiscal Year, setting forth in the case of the
consolidated statements in comparative form the figures for the corresponding
period or periods of (or, in the case of the balance sheet, as of the end of)
the previous Fiscal Year, and certified by a Responsible Officer as fairly
presenting in all material respects, in accordance with GAAP (subject to the
absence of footnotes and ordinary, good faith year-end and audit adjustments),
the financial position and the results of operations of the Company and the
Subsidiaries;
(c) as soon as available but not later than 75 days (or, in the case of the
Annual Statement prepared on a combined basis, 90 days) after the close of each
Fiscal Year of each Insurance Subsidiary, copies of the unaudited Annual
Statement of such Insurance Subsidiary on a stand-alone basis and on a combined
basis for all Insurance Subsidiaries, the stand-alone Annual Statement to be
certified by a Responsible Officer of such Insurance Subsidiary, all such
statements to be prepared in accordance with SAP consistently applied throughout
the periods reflected therein and, if required by the applicable Governmental
Authority, audited and certified by independent certified public accountants of
recognized national standing (such audited Annual Statement to be delivered as
soon as available but not later than June 15 of each Fiscal Year of such
Insurance Subsidiary);
69
(d) as soon as available but not later than 60 days (or, in the case of the
Quarterly Statement prepared on a combined basis, 75 days) after the close of
each of the first three Fiscal Quarters of each Fiscal Year of each Insurance
Subsidiary, copies of the Quarterly Statement of such Insurance Subsidiary on a
stand-alone basis and on a combined basis for all Insurance Subsidiaries, the
stand-alone Quarterly Statement to be certified by a Responsible Officer of such
Insurance Subsidiary, all such statements to be prepared in accordance with SAP
consistently applied through the period reflected therein;
(e) promptly following the delivery to or receipt by the Company or any of
its Subsidiaries of any regular or periodic final Triennial Examination Reports,
risk adjusted capital reports or results of any market conduct examination or
examination by any Department or the NAIC of the financial condition and
operations of, or any notice of any assertion as to violation of any Requirement
of Law by, any Insurance Subsidiary, or any report with respect to any Active
Material Insurance Subsidiary (including any summary report from the NAIC with
respect to the performance of such Active Material Insurance Subsidiary as
measured against the ratios and other financial measurements developed by the
NAIC under its Insurance Regulatory Information System as in effect from time to
time); and
(f) within 90 days after the close of each Fiscal Year of each Insurance
Subsidiary, a copy of the "Statement of Actuarial Opinion" and "Management
Discussion and Analysis" for each such Insurance Subsidiary which is provided to
the applicable Department (or equivalent information should such Department no
longer require such a statement) as to the adequacy of loss reserves of such
Insurance Subsidiary, such opinion to be in the format prescribed by the
insurance code of the state of domicile of such Insurance Subsidiary.
Section 6.02. Certificates; Other Information. The Company shall furnish
to the Agent, with sufficient copies for each Bank (other than in the case of
Section 6.02(r)):
(a) concurrently with the delivery of the financial statements referred to
in Section 6.01(a) and Section 6.01(b), a Compliance Certificate executed by a
Responsible Officer;
(b) concurrently with the delivery of the financial statements referred to
in Section 6.01(a), a certificate of the accounting firm that reported on such
financial statements stating (i) whether during the course of their examination
of such financial statements they obtained knowledge of any Default relating to
accounting matters (which certificate may be limited to the extent required by
auditing rules or guidelines), (ii) if a Default relating to accounting matters
has come to their attention, specifying the nature and period of existence
thereof and (iii) stating whether or not, based on their audit examination,
anything has come
70
to their attention which causes them to believe that the matters set forth in
Schedule 3 to the Compliance Certificate delivered pursuant to Section 6.02(a)
for the applicable Fiscal Year to the extent such matters relate to accounting
are not stated in accordance with the terms of this Agreement;
(c) promptly upon receipt thereof, copies of all reports submitted to the
Company by independent public accountants in connection with each annual,
interim or special audit of the financial statements of the Company made by such
accountants, including the comment letter submitted by such accountants to
management in connection with their annual audit;
(d) promptly, copies of all Forms 10-K and 10-Q that the Company or any
Subsidiary may file with the SEC, all financial statements and reports that the
Company sends to its shareholders and copies of all other financial statements
and regular, periodic or special reports (including Form 8-K) that the Company
or any Subsidiary may make to, or file with, the SEC;
(e) promptly and in any event within three Business Days after learning
thereof, notification of any changes after the date hereof in the rating given
by S&P or Moody's in respect of the Company's senior secured Indebtedness or by
A.M. Best in respect of any Insurance Subsidiary;
(f) concurrently with the occurrence of any event described in Section
2.08(b) through Section 2.08(d), Section 2.08(f) or Section 2.08(g), (i) a
description of such event and (ii) a calculation of the Net Proceeds (including
an accounting of the items deducted from the cash or cash equivalents received
in connection with such event) or, in the case of Section 2.08(f), other net
amounts received in respect thereof;
(g) at least 5 days before the beginning of each Fiscal Year, a detailed
consolidated budget for the next six Fiscal Quarters (prepared on a quarterly
basis and including statements of projected operations and cash flows for such
period and setting forth the assumptions used in preparing such budget) and,
promptly when available, any significant revisions of such budget;
(h) as soon as available, but not later than 60 days after the end of each
Fiscal Quarter, a variance analysis, in form and scope reasonably acceptable to
the Agent, comparing actual results of operations and cash flows for such Fiscal
Quarter against projected results of operations and cash flows for such Fiscal
Quarter, together with a statement of a Responsible Officer setting forth the
reasons, in reasonable detail, for such variance;
(i) as soon as available but not later than 60 days after the end of each
Fiscal Quarter, a list of the investments of the Company and its Subsidiaries
(and valuations thereof) appearing on the then current "watchlist" maintained by
CCM
71
(or any other Person that shall then be performing the functions performed by
CCM on the Effective Date), such "watchlist" to be prepared in a manner
consistent with past practice;
(j) as soon as available but not later than 10 Business Days after the end
of each calendar month, monthly production reports in form and scope reasonably
acceptable to the Agent of new business activity of the Conseco Insurance Group
and the Bankers Life Group;
(k) as soon as available but not later than 60 days after the end of each
Fiscal Quarter, a quarterly report in form and scope reasonably acceptable to
the Agent on the status of the D&O Loan collection program, including the status
of the Company's progress in pursuing collection of payment obligations owed in
respect of the D&O Loans, including through enforcement proceedings and the
aggregate amount of such collections that shall have been applied to pay Allowed
Class 10A Claims or contributed to the Insurance Subsidiaries to the extent
permitted by the second proviso to Section 2.08(f); provided that after the end
of the fourth full Fiscal Quarter after the Effective Date, such report shall be
required to be delivered on a semi-annual basis only by no later than 60 days
after the end of each of the second and fourth Fiscal Quarters of each Fiscal
Year, commencing with the Fiscal Quarter ended December 31, 2004;
(l) promptly upon filing thereof, copies of all annual Form B amendments
and all other material amendments to the registration statement of any Insurance
Subsidiary that the Company or such Insurance Subsidiary may file with the
applicable Department;
(m) to the extent not otherwise provided under Section 6.01 or Section
6.02, promptly upon receipt thereof, or delivery thereof by the Company or any
Material Insurance Subsidiary, as applicable, a copy of any written
communication setting forth or relating to any matter that may reasonably be
expected to be materially adverse to the interests of the Company, such Material
Insurance Subsidiary or the Banks delivered to or received from any applicable
Department or any other applicable insurance regulatory authority;
(n) to the extent not otherwise provided under Section 6.01 or Section
6.02, promptly upon receipt thereof, or delivery thereof by the Company or any
Subsidiary, as applicable, a copy of any written communication setting forth or
relating to any matter that may reasonably be expected to be materially adverse
to the interests of the Company, such Subsidiary or the Banks delivered to or
received from S&P, Moody's or A.M. Best or any other rating agency;
(o) as soon as available but not later than five Business Days after
receipt, execution or delivery of any Reinsurance Agreement (other than any
Reinsurance Agreement entered into in the ordinary course of business for the
72
purpose of managing insurance risk consistent with industry practice), including
any proposal, binder, cover note or line slip (where the Person to be reinsured
or reinsured is an Insurance Subsidiary), (i) a written notice specifying each
Person party to such agreement, (ii) for each such Person, its most recently
published rating, if any, (iii) the subject matter of each such agreement and
(iv) if requested by the Agent or any Bank, attaching thereto, a true and
complete copy of such agreement;
(p) promptly after receipt of any notice of termination, cancellation
(which cancellation notice is not accompanied by a corresponding request for
renewal), commutation or recapture of any Reinsurance Agreement (other than any
Reinsurance Agreement that was entered into in the ordinary course of business
for the purpose of managing insurance risk consistent with industry practice)
where the Person reinsured is an Insurance Subsidiary, a copy thereof;
(q) promptly after the Company has notified the Agent of any intention by
the Company to treat the Loans and related transactions as being a "reportable
transaction" (within the meaning of Treasury Regulation Section 1.6011-4), a
duly completed copy of IRS Form 8886 or any successor form; and
(r) promptly, such additional information regarding the business, financial
or corporate affairs of the Company or any Subsidiary, or compliance with the
terms of any Loan Document, as the Agent, for itself or at the request of any
Bank, may from time to time reasonably request.
Documents required to be delivered pursuant to Section 6.01, Section 6.02(d) or
Section 6.02(l) (to the extent any such documents are included in materials
otherwise filed with the SEC, the NAIC or any other Governmental Authority) may
be delivered electronically and if so delivered, shall be deemed to have been
delivered on the date (i) on which the Company posts such documents, or provides
a link thereto on the Company's website on the Internet at the website address
listed on Schedule 10.02; or (ii) on which such documents are posted on the
Company's behalf on IntraLinks/IntraAgency or another relevant website, if any,
to which each Bank and the Agent have access (whether a commercial, third-party
website or whether sponsored by the Agent); provided that: (i) the Company shall
deliver paper copies of such documents to the Agent or any Bank that requests
the Company to deliver such paper copies until a written request to cease
delivering paper copies is given by the Agent or such Bank and (ii) the Company
shall notify (which may be by facsimile or electronic mail) the Agent and each
Bank of the posting of any such documents and provide to the Agent by electronic
mail electronic versions (i.e., soft copies) of such documents. Notwithstanding
anything contained herein, in every instance the Company shall be required to
provide paper copies of the Compliance Certificates required by Section 6.02(a)
to the Agent. Except for such Compliance Certificates, the Agent shall have no
obligation to request the delivery or to maintain copies of the documents
referred
73
to above, and in any event shall have no responsibility to monitor compliance by
the Company with any such request for delivery, and each Bank shall be solely
responsible for requesting delivery to it or maintaining its copies of such
documents.
Section 6.03. Notices. The Company shall promptly notify the Agent:
(a) of the occurrence of any Default;
(b) of any matter that has resulted in, or could reasonably be expected to
result in, a Material Adverse Effect, including (i) any breach or
non-performance of, or any default under, a Contractual Obligation of the
Company or any Subsidiary; (ii) any dispute, litigation, investigation,
proceeding or suspension between the Company or any Subsidiary and any
Governmental Authority; or (iii) the commencement of, or any material
development in, any litigation (including any governmental proceeding or
arbitration proceeding), tax audit or investigative proceeding, claim, lawsuit,
and/or investigation against or involving the Company or any of its Subsidiaries
or any of its or their businesses or operations, including pursuant to any
applicable Environmental Laws;
(c) of the filing or commencement of, or the occurrence of any development
in, any litigation or proceeding which seeks to enjoin, prohibit, discontinue or
otherwise impacts (i) the validity or enforceability of this Agreement or any of
the other Loan Documents or (ii) the transactions contemplated hereby or thereby
and, in the case of clause (ii), which could reasonably be expected to have a
Material Adverse Effect;
(d) of the occurrence of any of the following events affecting the Company
or any ERISA Affiliate (but in no event more than 10 days after such event) and
deliver to the Agent and each Bank a copy of any notice with respect to such
event that is filed with a Governmental Authority and any notice delivered by a
Governmental Authority to the Company or any ERISA Affiliate with respect to
such event:
(i) an ERISA Event; or
(ii) a material increase in the Unfunded Pension Liabilities of any
Pension Plan;
(iii) the adoption of or the commencement of contributions to, any
Plan subject to Section 412 of the Code by the Company or any ERISA
Affiliate; or
(iv) the adoption of any amendment to a Plan subject to Section 412 of
the Code, if such amendment results in a material increase in
74
contributions or Unfunded Pension Liability; provided, however, that no
such notice will be required under this Section 6.03(d) with respect to the
occurrence of any such event if such occurrence does not result in, and is
not reasonably expected to result in, any liability to the Company or any
ERISA Affiliate of more than $30,000,000 in the aggregate.
(e) of any material change in accounting policies or financial reporting
practices by the Company or any of its Subsidiaries;
(f) of the receipt of any notice from any Governmental Authority of the
expiration without renewal, revocation, suspension or restriction of, or the
institution of any proceedings to revoke, suspend or restrict, any License now
or hereafter held by any Insurance Subsidiary which is required to conduct
insurance business in compliance with all applicable laws and regulations;
provided that if such Insurance Subsidiary is not an Active Material Insurance
Subsidiary, the Company shall be required to deliver a notice under this
paragraph (f) only if such event, together with all other such events, could
reasonably be expected to have a Material Adverse Effect;
(g) of the receipt of any notice from any Governmental Authority of the
institution of any disciplinary proceedings against or in respect of any
Insurance Subsidiary, or the issuance of any order, the taking of any action or
any request for an extraordinary audit for cause by any Governmental Authority;
provided that if such Insurance Subsidiary is not an Active Material Insurance
Subsidiary, the Company shall be required to deliver a notice under this
paragraph (g) only if such event, together with all other such events, could
reasonably be expected to have a Material Adverse Effect;
(h) of any judicial or administrative order limiting or controlling the
insurance business of any Insurance Subsidiary (and not the insurance industry
generally) which has been issued or adopted; provided that if such Insurance
Subsidiary is not an Active Material Insurance Subsidiary, the Company shall be
required to deliver a notice under this paragraph (h) only if such event,
together with all other such events, has had or could reasonably be expected to
have a Material Adverse Effect; or
(i) of any actual or proposed changes in any applicable insurance code
which could reasonably be expected to have a Material Adverse Effect.
Each notice under this Section shall be accompanied by a written statement by a
Responsible Officer setting forth details of the occurrence referred to therein,
and stating what action the Company or any affected Subsidiary proposes to take
with respect thereto and at what time. Each notice under Section 6.03(a) shall
describe with particularity any and all clauses or provisions of this Agreement
or other
75
Loan Document that have been (or reasonably foreseeably will be) breached or
violated.
Section 6.04. Preservation of Corporate Existence, Etc.. The Company
shall, and shall cause each Subsidiary (other than any Immaterial Subsidiary) to
(except as permitted by Section 7.03 or Section 7.07):
(a) preserve and maintain in full force and effect its existence and good
standing under the laws of its state or jurisdiction of incorporation or
organization, as applicable;
(b) preserve and maintain in full force and effect all governmental rights,
privileges, qualifications, permits, licenses and franchises necessary in the
normal conduct of its business, except where such failure to preserve and
maintain could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect; and
(c) use reasonable efforts, in the ordinary course of business, to preserve
its business organization and goodwill.
Section 6.05. Insurance. (a) The Company shall, and shall cause each
Subsidiary to, maintain with financially sound and reputable independent
insurers, insurance with respect to its properties and business against loss or
damage of the kinds customarily insured against by Persons engaged in the same
or similar business, of such types and in such amounts as are customarily
carried under similar circumstances by such other Persons.
(b) The Company shall maintain (on behalf of itself and its Subsidiaries)
with financially sound and reputable independent insurers, director and officer
liability insurance on terms and in amounts (i) at least as favorable to the
directors and officers thereof as is in effect or in place on the Effective Date
or (ii) as is customary for other Persons engaged in the same or similar
business.
Section 6.06. Payment of Obligations. The Company shall, and shall cause
each Subsidiary to, pay and discharge as the same shall become due and payable,
all of the following:
(a) all material Tax liabilities imposed upon it or its material properties
or assets, unless the same (i) are not overdue for a period of more than 60 days
or (ii) are being contested in good faith by appropriate proceedings and
adequate reserves in accordance with GAAP are being maintained by the Company or
such Subsidiary and such contest effectively suspends collection of the same and
the enforcement of any Lien securing the same; and
76
(b) all material Indebtedness, as and when due and payable, but subject to
any subordination provisions contained in any instrument or agreement evidencing
such Indebtedness.
Section 6.07. Compliance With Laws. The Company shall, and shall cause each
Subsidiary to, comply with all Requirements of Law of any Governmental Authority
having jurisdiction over it or its business (including the Federal Fair Labor
Standards Act and all applicable Environmental Laws), except (i) for such
noncompliance which could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect or (ii) as may be contested in good
faith and by appropriate proceedings and with respect to which adequate reserves
are being maintained in accordance with GAAP.
Section 6.08. Compliance With ERISA. The Company shall, and shall cause
each of its ERISA Affiliates to: (a) maintain each Plan in compliance in all
material respects with the applicable provisions of ERISA, the Code and other
federal or state law; (b) cause each Plan which is qualified under Section
401(a) of the Code to maintain such qualification, and (c) make all required
contributions to any Plan subject to Section 412 of the Code, except where such
failure to maintain as set forth in (a) or (b) or to make contributions as set
forth in (c) could not, individually or in the aggregate, be reasonably expected
to have a Material Adverse Effect.
Section 6.09. Inspection of Property and Books and Records; Expense
Reimbursement; Appraisal Reports. (a) The Company shall, and shall cause each
Subsidiary to, maintain proper books of record and account, in which full, true
and correct entries in all material respects in conformity with GAAP or SAP, as
applicable, consistently applied (except as stated therein) shall be made of all
financial transactions and matters involving the assets and business of the
Company and such Subsidiary. The Company shall permit, and shall cause each
Subsidiary to permit, representatives and independent contractors of the Agent
or any Bank to visit and inspect any of their respective properties, to examine
their respective corporate, financial and operating records, and make copies
thereof or abstracts therefrom, and to discuss their respective affairs,
finances and accounts with their respective directors, officers, and independent
public accountants, all at such reasonable times during normal business hours
and as often as may be reasonably desired, upon reasonable advance notice to the
Company, provided, however, when an Event of Default exists the Agent or any
Bank may do any of the foregoing at any time during normal business hours and
without advance notice.
(b) Until each Active Material Insurance Subsidiary has a financial
strength rating of at least B++ by A.M. Best, the Company shall, if requested by
the Agent or the Required Banks, cause each Active Material Insurance Subsidiary
to permit any actuarial firm designated by the Agent (in consultation
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with the Company) to conduct an analysis of the statutory reserves of such
Active Material Insurance Subsidiary; provided that each such analysis shall be
carried out at reasonable times and no more than one such analysis with respect
to any Active Material Insurance Subsidiary shall be conducted in any Fiscal
Year. The Company shall pay the fees and expenses of any actuarial firm retained
by the Agent to conduct any such analysis.
Section 6.10. A.M. Best Rating Reduction Remedy. If on any date on or
after the 60th date after the Effective Date (the "Reduction Date"), the
financial strength rating of any Active Material Insurance Subsidiary by A.M.
Best is reduced to less than the Initial A.M. Best Rating of such Active
Material Insurance Subsidiary, the Company shall be obligated to retain an
investment banker of national recognition (the "Investment Banker") reasonably
satisfactory to the Agent to explore strategic alternatives ("Strategic
Alternatives") to repaying in full in cash all Obligations (other than
contingent indemnification obligations then not due and payable) under the Loan
Documents and, if the Required Banks request, all obligations in respect of the
New CNC Preferred Stock, which Strategic Alternatives shall include either (x)
the sale of one or more of its Subsidiaries ("Sufficient Assets") the value of
which will be sufficient to repay in full in cash all such obligations, (y) such
other Strategic Alternative(s) approved by the Required Banks or (z) both the
sale of Sufficient Assets and one or more other Strategic Alternatives approved
by the Required Banks (clauses (x), (y) or (z), individually, an "Approved
Strategic Alternative"). At any time, the Required Banks may amend, supplement
or otherwise modify the requirements of this Section 6.10, including amending
the terms and/or conditions of an Approved Strategic Alternative, releasing the
Company from its obligations to proceed with the sale of Sufficient Assets or
otherwise. The Company shall, and shall cause each Subsidiary to, diligently
pursue and take material steps toward achieving each Approved Strategic
Alternative, including, to the extent applicable, the preparation and
distribution of offering materials with respect to each Approved Strategic
Alternative, facilitating advisors of the Company in making contact with
potential purchasers or other relevant parties in their due diligence processes,
using reasonable best efforts to prepare, negotiate and execute transaction
documents with respect thereto and consummate such transactions. The Company
shall provide the Agent with bi-weekly written reports (in form and scope
acceptable to the Agent), describing the status of its progress in pursuing, and
actions it has taken and is planning on taking toward achieving, each Approved
Strategic Alternative. Without limiting the generality of the Company's
obligations set forth above, the Company shall have:
(a) Engaged the Investment Banker to explore Strategic Alternatives no
later than 30 days after the Reduction Date;
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(b) Distributed offering materials, and provided copies thereof to the
Agent, with respect to any Approved Strategic Alternative, no later than 90 days
after the Trigger Date;
(c) Used reasonable best efforts to receive written expressions of
interest, and provided copies thereof to the Agent, with respect to each
Approved Strategic Alternative, no later than 120 days after the Trigger Date;
(d) Used reasonable best efforts to sign the appropriate transaction
documents with respect to any Approved Strategic Alternative no later than 180
days after the Trigger Date, unless the Required Banks have agreed to extend
such date; and
(e) Used reasonable best efforts to consummate any Approved Strategic
Alternative no later than 270 days after the Trigger Date, unless the Required
Banks have agreed to extend such date.
Section 6.11. Financial Advisor. Until each Active Material Insurance
Subsidiary has a financial strength rating of at least A- by A.M. Best, the
Company shall continue the retention of Greenhill or another financial advisor
reasonably satisfactory to the Required Banks to review the financial condition
and performance of the Company and its Subsidiaries on behalf of the Banks (and
the Company agrees to use reasonable best efforts to facilitate such review) and
the Company shall pay the reasonable fees, costs and expenses incurred from time
to time in connection with such review promptly upon receipt of an invoice for
such services.
Section 6.12. Information Regarding Collateral. (a) The Company will
furnish to the Agent prompt written notice of any change in (i) any Obligor's
name or any trade name used to identify it in the conduct of its business or any
Obligor's location (determined as provided in Section 9-307 of the Uniform
Commercial Code), (ii) any Obligor's identity or corporate structure or (iii)
any Obligor's Federal Taxpayer Identification Number or organization
identification number. The Company will not effect or permit any change referred
to in the preceding sentence unless all filings have been made under the Uniform
Commercial Code and all other actions have been taken that are required so that
such change will not at any time adversely affect the validity, perfection or
priority of any Transaction Lien on any of the Collateral.
(b) Each year, at the time annual financial statements with respect to the
preceding Fiscal Year are delivered pursuant to Section 6.01(a), the Company
will deliver to the Agent a certificate of a Responsible Officer (i) setting
forth the information required pursuant to Sections A and B of the Perfection
Certificate or confirming that there has been no change in such information
since the date of any Perfection Certificate delivered on the Effective Date or
the date of the most
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recent certificates delivered pursuant to this subsection and (ii) certifying
that all Uniform Commercial Code financing statements (including fixture
filings, as applicable) or other appropriate filings, recordings or
registrations, including all refilings, rerecordings and reregistrations,
containing a description of the Collateral have been filed of record in each
appropriate office in each jurisdiction identified pursuant to clause (i) above
to the extent necessary to protect and perfect the Transaction Liens for a
period of at least 18 months after the date of such certificate (except as noted
therein with respect to any continuation statements to be filed within such
period).
Section 6.13. Casualty and Condemnation. The Company (a) will furnish to
the Agent and the Banks prompt written notice of any casualty or other insured
damage to any material portion of the Collateral or the commencement of any
action or proceeding for the taking of any material portion of the Collateral
under power of eminent domain or by condemnation or similar proceeding and (b)
will ensure that the Net Proceeds of any such event (whether in the form of
insurance proceeds, condemnation awards or otherwise) are collected and applied
in accordance with Section 2.08.
Section 6.14. Additional Subsidiaries; Immaterial Subsidiaries. (a) If any
additional Subsidiary is formed or acquired after the Effective Date, the
Company will, within five Business Days after such Subsidiary is formed or
acquired, notify the Agent and the Banks thereof and cause any Capital Stock in
or Indebtedness of such Subsidiary owned by or on behalf of any Obligor to be
added to the Collateral (except that the Obligors shall not be required to
pledge more than 65% of the outstanding voting Capital Stock in any Foreign
Subsidiary that is not an Obligor). If such Subsidiary is or subsequently
becomes a Domestic Subsidiary and is not an Insurance Subsidiary or a Subsidiary
of an Insurance Subsidiary or an Immaterial Subsidiary, the Company shall
promptly cause the Collateral and Guarantee Requirement to be satisfied with
respect to such Subsidiary, whereupon such Subsidiary will become an "Obligor",
a "Subsidiary Guarantor" and "Lien Grantor" for purposes of the Loan Documents.
Without limiting the preceding sentence, if any Domestic Immaterial Subsidiary
that is not an Insurance Subsidiary or a Subsidiary of an Insurance Subsidiary
loses its status as an Immaterial Subsidiary, the Company shall promptly cause
the Collateral and Guarantee Requirement to be satisfied with respect to such
Subsidiary, whereupon such Subsidiary will become an "Obligor", a "Subsidiary
Guarantor" and "Lien Grantor" for purposes of the Loan Documents.
(b) If at any time (i) the aggregate fair market value of the assets of all
Immaterial Subsidiaries exceeds $20,000,000 or (ii) the aggregate revenues of
all Immaterial Subsidiaries for the period of four consecutive Fiscal Quarters
most recently ended exceeds $20,000,000, the Company shall promptly cause the
Collateral and Guarantee Requirement to be satisfied with respect to one or more
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of the Immaterial Subsidiaries to the extent necessary to ensure that
immediately after giving effect thereto (x) the aggregate fair market value of
the assets of all Immaterial Subsidiaries shall not exceed $20,000,000 and (y)
the aggregate revenues of all Immaterial Subsidiaries for the period of four
consecutive Fiscal Quarters most recently ended shall not exceed $20,000,000,
whereupon each such Subsidiary will become an "Obligor", a "Subsidiary
Guarantor" and "Lien Grantor" for purposes of the Loan Documents.
Section 6.15. Further Assurances. (a) The Company will, and will cause each
other Obligor to, execute and deliver any and all further documents, financing
statements, agreements and instruments, and take all such further actions
(including the filing and recording of financing statements, fixture filings,
mortgages, deeds of trust and other documents), that may be required under any
applicable law, or that the Agent or the Required Banks may reasonably request,
to cause the Collateral and Guarantee Requirement to be and remain satisfied,
all at the Company's expense. The Company will provide to the Agent, from time
to time upon request, evidence reasonably satisfactory to the Agent as to the
perfection and priority of the Transaction Liens created or intended to be
created by the Security Documents.
(b) If any material assets (including any real property or improvements
thereto or any interest therein) are acquired by the Company or any Subsidiary
Guarantor, or cease to be subject to Liens permitted pursuant to Section 7.02
after the Effective Date (other than assets constituting Collateral that become
subject to Transaction Liens upon acquisition thereof), the Company will notify
the Agent and the Banks thereof, and, if requested by the Agent or the Required
Banks, will cause such assets to be subjected to a Transaction Lien securing the
Secured Obligations and will take, or cause the relevant Subsidiary Guarantor to
take, such actions as shall be necessary or reasonably requested by the Agent to
grant and perfect or record such Transaction Lien, including actions described
in Section 6.15(a), all at the Company's expense.
(c) The Company shall cause all cash and Cash Equivalents of each Obligor
to be maintained in one or more Collateral Accounts pending application towards
any purpose not prohibited by this Agreement; provided that this paragraph (c)
shall not apply to (u) cash and Cash Equivalents maintained in the Professional
Escrow Account (as defined in the Plan of Reorganization) so long as (A) such
account is funded and maintained solely for the purpose of paying all fees and
expenses of Professionals (as defined in the Plan of Reorganization) as
contemplated by the Plan of Reorganization, (B) to the extent any such fees or
expenses are disallowed pursuant to an order of the Bankruptcy Court, an amount
equal to the amount of such disallowed fees or expenses shall be promptly
transferred to a Collateral Account and (C) such account is funded on the
Effective Date in an amount not exceeding the aggregate amount in respect of
such fees and expenses for which the Company has received invoices from the
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Professionals on or prior to the Effective Date, and no amounts are deposited in
such account thereafter, (v) cash and Cash Equivalents maintained in any account
of CCM so long as (A) such account is funded to satisfy CCM's obligations under
expense reimbursement agreements to which CCM is a party and such account is
funded in a manner consistent with past practice and (B) the aggregate amount of
cash and Cash Equivalents in all such accounts does not exceed $2,000,000 at any
time, (w) cash and Cash Equivalents maintained in any trust account so long as
(A) such account is maintained as a trust account solely for the purpose for
which it was established and is funded in a manner consistent with past practice
and (B) the aggregate amount of cash and Cash Equivalents in all such accounts
does not exceed $2,000,000 at any time, (x) cash and Cash Equivalents maintained
in any account of any Obligor which is an investment adviser registered under
the Investment Advisers Act of 1940 (including CCM) so long as (A) such account
is maintained to satisfy qualified professional asset manager requirements under
ERISA and (B) the aggregate amount of cash and Cash Equivalents in all such
accounts does not exceed $2,000,000 at any time, (y) cash and Cash Equivalents
maintained in any account of any Obligor which is a broker-dealer registered
under the Exchange Act and a member of the NASD (including Conseco Equity Sales,
Inc.) so long as (A) such account is maintained to satisfy minimum net
regulatory capital requirements imposed by NASD regulations pursuant to the
Exchange Act and (B) the aggregate amount of cash and Cash Equivalents in all
such accounts does not exceed $10,000,000 at any time and (z) other accounts
that in the aggregate hold less than $1,000,000 of cash and Cash Equivalents at
any time.
(d) The Company shall, by no later than the day that is 30 days after the
Effective Date, contribute or otherwise invest as capital in one or more of the
Insurance Subsidiaries cash in an amount equal to the amount by which the
aggregate amount of cash on hand and Cash Equivalents of the Company exceeds
$112,000,000 as of the Effective Date. Promptly upon making such contribution or
investment, the Company shall provide evidence of the same to the Agent, such
evidence to be in form and substance satisfactory to the Agent.
Section 6.16. D&O Loans. On and after the Effective Date, the Company
hereby agrees to be obligated to, and the Company shall, use its commercially
reasonable efforts to collect, or cause to be collected, in accordance with the
applicable Transfer Agreement the D&O Loans other than the D&O Loans whose
obligors are eligible to participate and in fact have satisfied all of the
requirements (including executing and delivering an Adjustment Agreement) for
participation in the D&O Loan repricing plan described in Article V.K.5. of the
Plan of Reorganization. The Company will ensure that any amounts so collected by
or on behalf of the Company are applied in accordance with Section 2.08.
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ARTICLE 7
NEGATIVE COVENANTS
Until all principal of and interest on each Loan and all fees and other
amounts payable hereunder have been paid in full (other than contingent
indemnification obligations not yet due and payable), the Company covenants and
agrees with the Banks that:
Section 7.01. Limitation on Indebtedness; Certain Capital Stock. (a) The
Company shall not, and shall not permit any of its Subsidiaries to, incur or at
any time be liable with respect to any Indebtedness, except:
(i) Indebtedness under the Loan Documents;
(ii) any Surplus Debentures issued by any Insurance Subsidiary to the
Company or any of its Subsidiaries that remain outstanding on the Effective
Date, and extensions, renewals or replacements thereof;
(iii) Permitted Refinancing Indebtedness;
(iv) Permitted Transactions entered into by Insurance Subsidiaries;
(v) Permitted Swap Obligations;
(vi) Indebtedness existing on the date hereof and listed in Schedule
7.01, and extensions, renewals or replacements thereof, provided that no
such extension, renewal or replacement shall increase the principal amount
thereof, except to the extent the increase would otherwise be permitted
under this Section, or result in an earlier maturity date or decreased
average weighted life;
(vii) non-recourse Indebtedness of Insurance Subsidiaries incurred in
the ordinary course of business resulting from the sale or securitization
of non-admitted assets, policy loans, CBOs and CMOs;
(viii) Capitalized Lease Liabilities and Purchase Money Debt in an
aggregate principal amount not to exceed $25,000,000 at any time
outstanding;
(ix) intercompany Indebtedness (including Surplus Debentures) among
the Company and its Subsidiaries (other than Excluded Subsidiaries) and
among the Subsidiaries (other than Excluded Subsidiaries);
83
(x) intercompany Indebtedness of Excluded Subsidiaries in an aggregate
principal amount not to exceed $5,000,000 at any time outstanding;
(xi) Indebtedness in respect of letters of credit issued in connection
with reinsurance transactions entered into in the ordinary course of
business;
(xii) Indebtedness in respect of surety and other similar bonds in the
ordinary course of business and consistent with past practice;
(xiii) other secured Indebtedness in an aggregate principal amount not
to exceed $10,000,000 at any time outstanding;
(xiv) other unsecured Indebtedness in an aggregate principal amount
not to exceed $50,000,000 at any time outstanding; and
(xv) Contingent Obligations in respect of Indebtedness permitted under
Section 7.01(a)(viii), Section 7.01(a)(xiii) or Section 7.01(a)(xiv).
(b) The Company shall not permit any of its Subsidiaries to issue any
Capital Stock other than to the Company or another Subsidiary. The Company shall
not issue any preferred stock other than the New CNC Preferred Stock, Permitted
Preferred Stock and Permitted Refinancing Preferred Stock.
(c) The Company shall not at any time permit any Person, other than an
Insurance Subsidiary, to own any Existing CIHC Preferred Stock or any
Replacement Preferred Stock.
Section 7.02. Liens. The Company shall not, and shall not permit any of
its Subsidiaries to, create, assume or suffer to exist any Lien on any property
now owned or hereafter acquired by it, except for the following:
(a) Transaction Liens;
(b) Liens in connection with Permitted Transactions;
(c) Liens for Taxes which are not overdue for more than 60 days or for
Taxes being contested in good faith and by appropriate proceedings and with
respect to which adequate reserves are being maintained in accordance with GAAP;
(d) Liens existing on the date hereof and listed in Schedule 7.02,
including extensions, renewals and replacements of such Liens; provided that (i)
such Lien shall not apply to any additional property (other than after acquired
title
84
in or on such property and proceeds of the existing collateral in accordance
with the document creating such Lien) and (ii) the Indebtedness secured thereby
is not increased except as otherwise permitted under Section 7.01 (in which case
the portion representing any additional increase must be permitted by another
paragraph of this Section 7.02);
(e) Liens incurred in the ordinary course of business in connection with
worker's compensation, unemployment insurance or other forms of governmental
insurance or benefits or to secure performance of tenders, statutory
obligations, leases and contracts (other than for borrowed money) entered into
in the ordinary course of business or to secure obligations on surety or appeal
bonds;
(f) Liens of mechanics, carriers, and materialmen and other like Liens
imposed by law and arising in the ordinary course of business in respect of
obligations which are not overdue for more than 60 days or which are being
contested in good faith and by appropriate proceedings and with respect to which
adequate reserves are being maintained in accordance with GAAP;
(g) Liens arising in the ordinary course of business for sums being
contested in good faith and by appropriate proceedings and with respect to which
adequate reserves are being maintained in accordance with GAAP, or for sums not
due, and in either case not involving any deposits or advances for borrowed
money or the deferred purchase price of property or services;
(h) Liens securing Indebtedness permitted by Section 7.01(a)(viii);
provided that such Liens are limited to the assets subject to the relevant
capital lease or purchase money transaction;
(i) easements, rights-of-way, zoning restrictions, restrictions and other
similar encumbrances incurred in the ordinary course of business that do not
secure any monetary obligation and which do not materially interfere with the
ordinary course of business of the Company and its Subsidiaries;
(j) Liens on property of the Company and its Subsidiaries in favor of
landlords securing licenses, subleases or leases of property not otherwise
prohibited hereunder;
(k) licenses, leases or subleases permitted hereunder granted to others not
materially interfering in any material respect in the business of the Company
and its Subsidiaries;
(l) attachment or judgment Liens not constituting an Event of Default under
Section 8.01(i);
85
(m) Liens arising from precautionary Uniform Commercial Code financing
statement filings with respect to operating leases or consignment arrangements
entered into by the Company and its Subsidiaries in the ordinary course of
business;
(n) customary set-off rights in favor of depositary banks; and
(o) other Liens securing Indebtedness or other obligations in an aggregate
amount not exceeding $10,000,000 at any time outstanding.
None of the Liens permitted by this Section (other than Transaction Liens and
Liens of the applicable depositary bank to the extent permitted under Section
7.02(n)) shall be permitted on any Collateral Account.
Section 7.03. Disposition of Assets. The Company shall not, and shall not
permit any of its Subsidiaries to, sell, assign, lease, transfer or otherwise
Dispose of (whether in one or a series of transactions) any property (including
accounts and notes receivable with or without recourse and Capital Stock of any
Subsidiary whether newly issued or otherwise) or enter into any agreement to do
any of the foregoing, except:
(a) Dispositions of inventory, equipment and Cash Equivalents, all in the
ordinary course of business consistent with past practices;
(b) the sale of equipment to the extent that such equipment is exchanged
for credit against the purchase price of similar replacement equipment or the
proceeds of such sale are reasonably promptly applied to the purchase price of
such replacement equipment;
(c) Dispositions of Investments by any Insurance Subsidiary (other than any
of its Investments in Subsidiaries engaged in insurance lines of business) in
the ordinary course of business consistent with past practices and the
investment policy approved by the board of directors of such Insurance
Subsidiary;
(d) intercompany Dispositions in the ordinary course of business (i) among
the Company and its Subsidiaries (other than Dispositions to Excluded
Subsidiaries) and among the Subsidiaries (other than Dispositions to Excluded
Subsidiaries) and (ii) to Excluded Subsidiaries in an aggregate amount not to
exceed $5,000,000;
(e) (i) any Dispositions pursuant to a Reinsurance Agreement so long as
such Disposition is entered into in the ordinary course of business for the
purpose of managing insurance risk consistent with industry practice and (ii)
any other Dispositions pursuant to a Reinsurance Agreement so long as the
aggregate statutory profit and/or gains on insurance policy sales or other
portfolio transfers
86
resulting from all Dispositions described in this clause (ii) consummated after
the Effective Date do not exceed $250,000,000 in the aggregate during the term
of this Agreement or $100,000,000 in any Fiscal Year; provided that (x) the Net
Proceeds therefrom are, unless required to be retained by any Insurance
Subsidiary pursuant to regulatory restrictions, applied to prepay the Loans as
provided in Section 2.08 and (y) any Net Proceeds therefrom that are required to
be retained by any Insurance Subsidiary pursuant to regulatory restrictions are
so retained by such Insurance Subsidiary;
(f) obsolete or worn out property disposed of by the Company or any of its
Subsidiaries in the ordinary course of business and consistent with past
practices of the Company and its Subsidiaries;
(g) transfers resulting from any casualty or condemnation of property or
assets;
(h) licenses or sublicenses of intellectual property and general
intangibles and licenses, leases or subleases of other property in the ordinary
course of business and consistent with the past practices of the Company and its
Subsidiaries and which do not materially interfere with the business of the
Company and its Subsidiaries;
(i) Dispositions consisting of intercompany mergers and consolidations
among the Company and its Subsidiaries, or of any liquidation, winding up or
dissolution of any Immaterial Subsidiary, in each case to the extent permitted
by Section 7.07(b);
(j) the Proposed CIHC Transactions;
(k) Dispositions not otherwise permitted hereunder (other than pursuant to
Reinsurance Agreements, which shall be subject to the limitations in clause (e)
above); provided that (w) such Dispositions shall be for fair market value
(which determination must be supported by a fairness opinion in form and
substance reasonably satisfactory to the Agent from a nationally-recognized
investment banking firm in connection with any Disposition or series of
Dispositions the aggregate consideration for which exceeds $50,000,000) and at
least 85% of the consideration received in connection therewith at closing shall
consist of cash, (x) on a Pro Forma Basis after giving effect to such
Disposition, the Company and its Subsidiaries would be in compliance with all of
the covenants contained in the Loan Documents (including all financial and
ratings covenants), (y) no such Disposition shall include the sale of any
capital stock of any Subsidiary unless 100% of the capital stock of such
Subsidiary owned by the Obligors is sold and (z) the Net Proceeds thereof shall
be applied to prepay the Loans in accordance with Section 2.08.
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Section 7.04. Other Agreements. The Company shall not, and shall not permit
any of its Subsidiaries to, enter into any agreement (other than any agreement
with any Department to the extent required by such Department) containing any
provision which (a) would be violated or breached by the performance of its
obligations hereunder or under any other Loan Document or under any instrument
or document delivered or to be delivered by it hereunder or thereunder in
connection herewith or therewith or (b) prohibits or restricts the ability of
the Company or such Subsidiary to amend or otherwise modify this Agreement, any
other Loan Document or any other document executed in connection herewith or
therewith.
Section 7.05. Transactions With Affiliates. The Company shall not, and
shall not suffer or permit any Subsidiary to, enter into any transaction with
any Affiliate of the Company, except (a) upon fair and reasonable terms no less
favorable to the Company or such Subsidiary than would be obtained in a
comparable arm's-length transaction with a Person not an Affiliate of the
Company or such Subsidiary which, in the case of any transaction with any
Excluded Subsidiary (other than transactions pursuant to and in accordance with
Section 7.01(a)(x), Section 7.03(d)(ii), Section 7.07 or Section 7.09(h)), shall
also be in the ordinary course, (b) for insurance transactions, intercompany
pooling and other reinsurance transactions entered into in the ordinary course
of business and consistent with past practice, (c) intercompany transactions in
the ordinary course and consistent with past practices between or among the
Company and its Subsidiaries (other than Excluded Subsidiaries) and between or
among Subsidiaries (other than Excluded Subsidiaries), (d) the Proposed CIHC
Transactions and (e) any Restricted Payment permitted by Section 7.08.
Section 7.06. Change in Business. The Company shall not, and shall not
suffer or permit any Subsidiary (other than any Immaterial Subsidiary) to,
fundamentally change the type of business in which it is engaged as of the
Effective Date as described in Schedule 7.06; provided that any Subsidiary that
is not an Active Material Insurance Subsidiary may cease to engage in any type
of business in which such Subsidiary is engaged as of the Effective Date if the
board of directors of the Company or such Subsidiary shall determine that
ceasing to engage in such type of business is in the best interests of the
Company and its Subsidiaries, taken as a whole, or such Subsidiary.
Section 7.07. Fundamental Changes. Unless the Obligations shall be paid in
full concurrently therewith, the Company shall not, and shall not suffer or
permit any of its Subsidiaries to, enter into any merger, consolidation,
amalgamation, or sale of all or substantially all of the assets of the Company
and its Subsidiaries taken as a whole, or liquidate, wind up or dissolve itself
(or suffer any liquidation or dissolution), except (a) in connection with a
Disposition of a Subsidiary otherwise permitted by Section 7.03 (other than
Section 7.03(i)) and (b) if at the time thereof and immediately after giving
effect thereto no Event
88
of Default shall have occurred and be continuing, (i) any Subsidiary Guarantor
(other than New HoldCo, or prior to the consummation of the Proposed CIHC
Transactions, CIHC) may merge, consolidate or amalgamate into the Company in a
transaction in which the Company is the surviving corporation, (ii) any
Subsidiary Guarantor may merge, consolidate or amalgamate into any Subsidiary in
a transaction in which the surviving entity is a Subsidiary Guarantor (and if
New HoldCo, or prior to the consummation of the Proposed CIHC Transactions,
CIHC, is a party to such transaction, New HoldCo or CIHC, as the case may be, is
the surviving entity) and the Company determines in good faith that such action
is in the best interests of the Company and is not materially disadvantageous to
the Banks, (iii) any two Subsidiaries that are not Subsidiary Guarantors may
merge, consolidate or amalgamate, provided that if either such Subsidiary is a
direct Subsidiary of an Obligor, the surviving entity shall be a direct
Subsidiary of an Obligor; provided further that, notwithstanding the immediately
preceding proviso, Bankers National Life Insurance Company may merge with and
into any direct or indirect Insurance Subsidiary of Conseco Life Insurance
Company of Texas, (iv) the Proposed CIHC Transactions shall be permitted and (v)
any Immaterial Subsidiary may liquidate, wind up or dissolve itself if the
Company determines in good faith that such liquidation, winding up or
dissolution is in the best interests of the Company and is not materially
disadvantageous to the Banks.
Section 7.08. Restricted Payments. The Company shall not, and shall not
suffer or permit any Subsidiary to, declare or pay any dividend on (or make any
payment to a related trust for the purpose of paying a dividend), or make any
payment on account of, or set apart assets for a sinking or other analogous fund
for, the purchase, redemption, defeasance, retirement or other acquisition of,
any Capital Stock of the Company or such Subsidiary (or any related trust),
whether now or hereafter outstanding, or make any other distribution in respect
thereof, either directly or indirectly, whether in cash or property or in
obligations of the Company or such Subsidiary (collectively, "Restricted
Payments"), except that:
(a) (i) any Subsidiary may declare or pay dividends with respect to its
Capital Stock to the Company and to any Wholly-Owned Subsidiary (and in the case
of a non-Wholly-Owned Subsidiary, to the Company and any Subsidiary and to each
other owner of Capital Stock or other equity interests of such Subsidiary on a
pro rata basis based on their relative ownership interests) and (ii) on or after
February 5, 2008, CIHC, and following the consummation of the Proposed CIHC
Transactions, New HoldCo may redeem the then outstanding shares of the Existing
CIHC Preferred Stock or the Replacement Preferred Stock, as the case may be,
with the designation "$2.32 Redeemable Cumulative Preferred Stock" for an
aggregate redemption price not exceeding $6,500,000, plus accrued and unpaid
dividends thereon to the date of redemption;
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(b) the Company may pay dividends solely in the form of shares of common
stock or additional shares of New CNC Preferred Stock to the holders of the New
CNC Preferred Stock;
(c) so long as no Event of Default is continuing (both before and
immediately after giving effect to the payment thereto or the redemption or
repurchase thereof), the Company may redeem or repurchase the New CNC Preferred
Stock to the extent expressly permitted by Section 2.08(b), Section 2.08(c) and
Section 2.08(e) so long as any amounts that are required to be applied to prepay
the Borrowings pursuant to such provisions are so applied;
(d) the Company may pay dividends solely in the form of shares of common
stock or additional shares of Permitted Preferred Stock to the holders of the
Permitted Preferred Stock;
(e) the Company may pay dividends solely in the form of shares of common
stock or additional shares of Permitted Refinancing Preferred Stock to the
holders of the Permitted Refinancing Preferred Stock;
(f) so long as no Event of Default is continuing (both before and
immediately after giving effect to the payment thereto), the Company may pay
cash dividends on the Permitted Refinancing Preferred Stock to the extent the
terms thereof (as in effect on the date of initial issuance) require cash
dividend payments; and
(g) the Company may, upon the exercise of a warrant under the New CNC
Warrant Agreement, pay cash in lieu of delivering fractional shares of common
stock to the holder thereof to the extent the Company is permitted to do so
pursuant to the terms of the New CNC Warrant Agreement.
Section 7.09. Investments and Acquisitions. The Company shall not, and
shall not suffer or permit any Subsidiary to, directly or indirectly, make any
Acquisition or hold or make any other Investment in any Person, except:
(a) Investments in existence on the Effective Date and commitments to make
Investments existing on the Effective Date and listed on Schedule 7.09;
(b) Investments consisting of non-cash consideration received in connection
with a permitted asset sale;
(c) Investments received in connection with the bankruptcy or
reorganization of customers and suppliers in the ordinary course of business;
(d) Investments consisting of Contingent Obligations permitted by Section
7.01 of Indebtedness permitted by Section 7.01;
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(e) Investments in Cash Equivalents;
(f) Investments by any Insurance Subsidiary (including by any Subsidiary of
such Insurance Subsidiary that is not itself an Insurance Subsidiary) in the
ordinary course of business in compliance with Section 7.17 and the investment
policy approved by the board of directors of such Insurance Subsidiary;
(g) intercompany Investments other than in Excluded Subsidiaries in the
ordinary course of business and intercompany Investments necessary to consummate
the Proposed CIHC Transactions;
(h) intercompany Investments in Excluded Subsidiaries in the ordinary
course of business in an aggregate amount expended not to exceed $5,000,000;
(i) security deposits held in the ordinary course of business;
(j) loans and advances in the ordinary course of business to employees for
moving, relocation or travel purposes;
(k) Permitted Swap Obligations;
(l) Acquisitions (other than Acquisitions that constitute Investments
permitted by Section 7.09(f) above or Section 7.09(m) below) in an aggregate
amount expended not to exceed $250,000,000 during the term of this Agreement or
$75,000,000 in any Fiscal Year and/or financed with Capital Stock of the Company
(other than Capital Stock prohibited under Section 7.01(b)); provided that (x)
at the time of such Acquisition no Event of Default shall be continuing and
immediately after giving effect to such Acquisition, no Default (including any
failure to be in compliance with the financial covenants calculated on a Pro
Forma Basis) would occur and (y) at the time of such Acquisition each Active
Material Insurance Subsidiary has, and for the twelve consecutive month period
ending on the date of such Acquisition each Active Material Insurance Subsidiary
had, a financial strength rating by A.M. Best of at least A-; and
(m) Investments not otherwise permitted hereby in an aggregate amount
expended not to exceed $25,000,000 in any Fiscal Year.
Section 7.10. Prepayments of Indebtedness; Modifications of Certain
Agreements; Synthetic Purchase Agreements. (a) The Company shall not, and shall
not permit any of its Subsidiaries to, make or agree to pay or make, directly or
indirectly, any prepayment (whether in cash, securities or other property, and
including optional prepayments and open market purchases) of or in respect of
principal of or interest on any Indebtedness, or any prepayment (whether in
cash, securities or other property), including any sinking fund or similar
deposit, on
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account of the purchase, redemption, defeasance or termination of any
Indebtedness, other than:
(i) prepayments of Indebtedness under the Loan Documents;
(ii) prepayments in respect of Indebtedness of a Subsidiary of the
Company owed to the Company or another Subsidiary of the Company or of the
Company owed to a Subsidiary of the Company, in each case to the extent
prepaid in the ordinary course of business, which Indebtedness is not a
prepayment of loans referred to in clause (f) of the definition of "Conseco
Available Cash Flow" unless, in the case of this clause (ii), at the time
of, and after giving effect on a Pro Forma Basis to, such prepayment, the
Company is in compliance with Section 7.12;
(iii) prepayments of Capitalized Lease Liabilities or Purchase Money
Debt that become due as a result of the voluntary sale or transfer of the
related asset; and
(iv) other prepayments in an aggregate amount expended not to exceed
$20,000,000.
(b) Notwithstanding anything herein to the contrary, the Company shall not,
and shall not permit any of its Subsidiaries to, make or agree to pay or make,
directly or indirectly, any payment or other distribution (whether in cash,
securities or other property, and including optional prepayments and open market
purchases) of or in respect of principal of or interest on any Permitted
Refinancing Indebtedness, or any payment or other distribution (whether in cash,
securities or other property), including any sinking fund or similar deposit, on
account of the purchase, redemption, defeasance or termination of any Permitted
Refinancing Indebtedness, other than payment of regularly scheduled interest and
principal payments as and when due in respect thereof, except payments in
respect thereof prohibited by the subordination provisions thereof.
(c) The Company shall not, and shall not permit any of its Subsidiaries to,
amend, modify, waive or otherwise change, or consent or agree to any amendment,
modification, waiver or other change to, any of the material terms of any
Indebtedness of the Company or any of its Subsidiaries specified on Schedule
7.10 hereto or any Permitted Refinancing Indebtedness (other than any such
amendment, modification, waiver or other change that (i) would extend the
maturity or reduce the amount of any payment of principal thereof or reduce the
rate or extend any date for payment of interest thereon and (ii) does not
involve the payment of a consent fee that is not customary under the
circumstances).
(d) The Company shall not, and shall not permit any of its Subsidiaries to,
amend, modify, waive or otherwise change, or consent or agree to any
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amendment, modification, waiver or other change to, any of the material terms of
any preferred stock issued by the Company or any of its Subsidiaries (including
the New CNC Preferred Stock, the Permitted Preferred Stock and the Permitted
Refinancing Preferred Stock) or any related trust in a manner which adversely
affects the interests of the Banks, it being understood that the following shall
be permitted: any such amendment, modification, waiver or other change that (i)
would extend the scheduled redemption date or reduce the amount of any scheduled
redemption payment or reduce the rate or extend any date for payment of
dividends thereon and (ii) does not involve the payment of a consent fee that is
not customary under the circumstances.
(e) The Company shall not, and shall not permit any of its Subsidiaries to,
amend or modify its respective Organization Documents, other than any amendments
or modifications which do not, individually or in the aggregate, adversely
affect the interests of the Banks.
(f) The Company shall not, and shall not permit any of its Subsidiaries to,
enter into or be party to, or make any payment under, any Synthetic Purchase
Agreement.
Section 7.11. Debt to Total Capitalization Ratio. The Company shall not
permit the Debt to Total Capitalization Ratio as of the end of any Fiscal
Quarter set forth in Schedule 7.11 to be greater than the ratio set forth in
Schedule 7.11 for such Fiscal Quarter.
Section 7.12. Interest Coverage Ratio. The Company shall not permit the
Interest Coverage Ratio as of the end of any Fiscal Quarter set forth in
Schedule 7.12 for the four Fiscal Quarters then ended (or, if less, the number
of full Fiscal Quarters commencing after the Effective Date) to be less than the
ratio set forth in Schedule 7.12 for such Fiscal Quarter.
Section 7.13. Conseco EBITDA. The Company shall not permit the Conseco
EBITDA as of the end of any Fiscal Quarter set forth in Schedule 7.13 for the
four Fiscal Quarters then ended (or, if less, the number of full Fiscal Quarters
commencing after the Effective Date) to be less than the amount set forth in
Schedule 7.13 for such Fiscal Quarter.
Section 7.14. Aggregate RBC Ratio. The Company shall not permit the
Aggregate RBC Ratio as of the end of any Fiscal Quarter set forth in Schedule
7.14 to be less than the ratio set forth in Schedule 7.14 for such Fiscal
Quarter.
Section 7.15. Individual Risk-Based Capital Ratio. The Company shall not
permit the Risk-Based Capital Ratio for any Insurance Subsidiary listed in
Schedule 7.15 as of the end of any Fiscal Year to be less than the ratio set
forth in Schedule 7.15 for such Insurance Subsidiary for such Fiscal Year.
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Section 7.16. Combined Statutory Capital and Surplus Level. The Company
shall not permit the Combined Statutory Capital and Surplus of the Insurance
Subsidiaries as of the end of any Fiscal Quarter ending on or after September
30, 2003 to be less than the Minimum Statutory Capital and Surplus for such
Fiscal Quarter.
Section 7.17. Investment Portfolio Requirement. The Company shall not
permit any Insurance Subsidiary to purchase, make or otherwise acquire:
(a) any Investment that is not an Investment Grade Asset, unless, after
giving effect thereto, the aggregate fair market value of all Investments of the
Insurance Subsidiaries that are not Investment Grade Assets will not exceed 10%
of the aggregate fair market value of all Investments held by the Insurance
Subsidiaries;
(b) any Investment that is non-NAIC rated, unless, after giving effect
thereto, the aggregate fair market value of all Investments of the Insurance
Subsidiaries that are non-NAIC rated will not exceed 6% of the aggregate fair
market value of all Investments held by the Insurance Subsidiaries; and
(c) any Investment involving Capital Stock, unless, after giving effect
thereto, the aggregate fair market value of all Investments of the Insurance
Subsidiaries that consist of Capital Stock will not exceed 1% of the aggregate
fair market value of all Investments held by the Insurance Subsidiaries;
provided that (x) any Insurance Subsidiary shall be permitted to make any
Investment that it is committed to make as of the Effective Date and listed on
Schedule 7.09 (it being understood, however, that each such Investment shall be
taken into account for purposes of determining whether any additional
Investments may be purchased, made or otherwise acquired hereunder) and (y) one
or more of the Insurance Subsidiaries shall be permitted to directly or
indirectly acquire the remaining interest in 767 LLC (it being understood that
(A) on or prior to June 30, 2004, any Investment held directly or indirectly by
any Insurance Subsidiary in the building located at 767 5th Avenue, New York, NY
10153 shall not be taken into account for purposes of determining whether any
additional Investments may be purchased, made or otherwise acquired hereunder
and (B) after such date, any such Investment shall be taken into account for
such purpose). If one or more of the percentage thresholds referred in clauses
(a), (b) or (c) above is exceeded solely as a result of the making of any
Investment permitted to be made pursuant to the foregoing proviso (after giving
effect to any Investments made prior thereto), such event shall not constitute a
Default for purposes hereof.
Section 7.18. Restrictive Agreements. The Company shall not, and shall not
permit any of its Subsidiaries to, directly or indirectly, enter into or permit
to
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exist any agreement or other arrangement that prohibits, restricts or imposes
any condition on (a) the ability of the Company or any Subsidiary to create or
permit to exist any Lien on any of its property or (b) the ability of any
Subsidiary to pay dividends or other distributions with respect to any shares of
its Capital Stock or to make, repay or prepay loans or advances to the Company
or any other Subsidiary or to Dispose of assets to the Company or any other
Subsidiary; provided that (i) the foregoing shall not apply to restrictions and
conditions imposed by law (including pursuant to regulatory restrictions), by
Official Orders No. 02-1126 and 02-1127 dated October 30, 2002 of the
Commissioner of Insurance of the State of Texas (and any replacement orders that
are no more restrictive to the Company or its Subsidiaries (it being understood
that any term in any such replacement order that provides that the relevant
Insurance Subsidiary may not request any dividends or other distributions prior
to January 1, 2004 shall be deemed not to be more restrictive to the Company or
its Subsidiaries)) or by any Loan Document, (ii) the foregoing shall not apply
to restrictions and conditions existing on the date hereof and identified on
Schedule 7.18 (but shall apply to any amendment or modification expanding the
scope of, or any extension or renewal of, any such restriction or condition),
(iii) the foregoing shall not apply to customary restrictions and conditions
contained in agreements relating to the sale of a Subsidiary or assets or
property of the Company or any Subsidiary pending such sale, provided that such
restrictions and conditions apply only to the Subsidiary or assets or property
that is to be sold and such sale is permitted hereunder, (iv) the foregoing
shall not apply to restrictions which are not more restrictive than those
contained in this Agreement contained in any documents governing any
Indebtedness incurred after the Effective Date in accordance with the provisions
of this Agreement, (v) clause (a) of this Section shall not apply to
restrictions or conditions imposed by any agreement relating to secured
Indebtedness (including Capitalized Lease Liabilities and Purchase Money Debt)
permitted by this Agreement if such restrictions or conditions apply only to the
collateral securing such Indebtedness and (vi) clause (a) of this Section shall
not apply to customary provisions in leases or licenses or other contracts and
agreements restricting the assignment, subletting or sublicensing thereof.
Section 7.19. Holding Company Activities. The Company shall not, and shall
not permit New HoldCo, or prior to the consummation of the Proposed CIHC
Transactions, CIHC, to, engage in any business or activity except owning all the
outstanding shares of Capital Stock of their respective Subsidiaries and
activities related or incidental thereto. The Company shall not permit New
HoldCo, or prior to the consummation of the Proposed CIHC Transactions, CIHC, to
own or acquire any assets (except shares of Capital Stock of its Subsidiaries
and cash and Cash Equivalents and other assets owned by it on the Effective
Date) or incur any liabilities (except liabilities under the Loan Documents,
liabilities imposed by law, including tax liabilities, liabilities in
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existence on the Effective Date and other liabilities incidental to its
existence and permitted business and activities).
Section 7.20. Changes In Fiscal Year. The Company shall not, and shall not
permit any of its Subsidiaries to, change the last day of its fiscal year from
December 31 of each year.
Article 8
EVENTS OF DEFAULT
Section 8.01. Events of Default. Each of the following shall constitute an
"Event of Default":
(a) Non Payment. The Company fails to pay, (i) when and as required to be
paid herein, whether at the due date thereof or at a date fixed for prepayment
thereof or otherwise, any amount of principal of any Loan, or (ii) within five
days after the same becomes due, any interest, fee or any other amount payable
hereunder or under any other Loan Document; or
(b) Representation or Warranty. Any representation or warranty by the
Company or any of its Subsidiaries made or deemed made herein or in connection
with any other Loan Document or any amendment or modification hereof or thereof
or waiver hereunder or thereunder, or contained in any certificate, document or
financial or other statement by the Company, any Subsidiary or any Responsible
Officer, furnished at any time in connection with this Agreement or in
connection with any other Loan Document or any amendment or modification hereof
or thereof or waiver hereunder or thereunder, is incorrect in any material
respect on or as of the date made or deemed made; or
(c) Specific Defaults. The Company fails to perform or observe any term,
covenant or agreement contained in any of (i) Section 6.03(a), Section 6.04(a)
(with respect to the Company's corporate existence), Section 6.10(a), Section
6.10(b), Section 6.10(e), Section 6.11 or Article 7 (other than Section 7.15 or
Section 7.17) or (ii) Section 7.15 or Section 7.17 and, in the case of clause
(ii), such default shall continue unremedied for a period of 30 days (it being
understood that if the Company takes any action during such 30 day period which
action, if it had been taken on or prior to the relevant date on which
compliance with Section 7.15 or Section 7.17, as applicable, was tested, would
have resulted in the Company being in compliance with such Section on such test
date, such default shall be deemed to have been remedied on the date on which
such action was taken); or
(d) Other Defaults. The Company or any of its Subsidiaries fails to perform
or observe any other term or covenant contained in this Agreement or
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any other Loan Document, and such default shall continue unremedied for a period
of 30 days after the date upon which written notice thereof is given to the
Company by the Agent or any Bank; or
(e) Cross-Default. (i) The Company or any Subsidiary (A) fails to make any
payment in respect of any Indebtedness or Contingent Obligation (other than in
respect of Swap Contracts), having an aggregate principal amount (including
undrawn committed or available amounts and including amounts owing to all
creditors under any combined or syndicated credit arrangement) of more than
$20,000,000, when due (whether by scheduled maturity, required prepayment,
acceleration, demand, or otherwise); or (B) fails to perform or observe any
other condition or covenant, or any other event shall occur or condition exist,
under any agreement or instrument relating to any such Indebtedness (and, solely
in the case of a failure to comply with any financial statement or other
information delivery or reporting requirement or in the case of the entry of any
judgment or decree, so long as such judgment or decree constitutes a Default but
not an Event of Default under Section 8.01(i), such failure or event continues
after the applicable grace or notice period, if any, specified in the relevant
document on the date of such failure or event) if the effect of such failure,
event or condition is to cause, or to permit (or, with the giving of notice or
lapse of time or both, would permit) the holder or holders of such Indebtedness
or beneficiary or beneficiaries of such Indebtedness (or a trustee or agent on
behalf of such holder or holders or beneficiary or beneficiaries) to cause, such
Indebtedness to be declared to be due and payable prior to its stated maturity,
or, in the case of any such Indebtedness consisting of Contingent Obligations,
to become payable or cash collateral in respect thereof to be demanded; or (ii)
there occurs under any Swap Contract an Early Termination Date (as defined in
such Swap Contract) resulting from (x) any event of default under such Swap
Contract as to which the Company or any Subsidiary is the Defaulting Party (as
defined in such Swap Contract) or (y) any Termination Event (as so defined) as
to which the Company or any Subsidiary is an Affected Party (as so defined),
and, in either event, the Swap Termination Value owed by the Company or such
Subsidiary as a result thereof is greater than $20,000,000; or
(f) Insolvency; Voluntary Proceedings. The Company or any Subsidiary (other
than an Immaterial Subsidiary) (i) ceases or fails to be solvent, or generally
fails to pay, or admits in writing its inability to pay, its debts as they
become due, subject to applicable grace periods, if any, whether at stated
maturity or otherwise; (ii) voluntarily ceases to conduct its business in the
ordinary course; (iii) commences any Insolvency Proceeding with respect to
itself; (iv) applies for or consents to the appointment of a receiver, trustee,
custodian, conservator, liquidator, mortgagee in possession (or agent therefor),
or other similar Person for itself or for a substantial part of its assets, or
(v) takes any action to effectuate or authorize any of the foregoing; or
97
(g) Involuntary Proceedings. (i) Any involuntary Insolvency Proceeding is
commenced or filed against the Company or any Subsidiary (other than an
Immaterial Subsidiary), or any writ, judgment, warrant of attachment, execution
or similar process, is issued or levied against a substantial part of the
Company's or any Subsidiary's (other than an Immaterial Subsidiary's)
properties, and any such proceeding or petition shall not be dismissed, or such
writ, judgment, warrant of attachment, execution or similar process shall not be
released, vacated or fully bonded within 60 days after commencement, filing or
levy; (ii) the Company or any Subsidiary (other than an Immaterial Subsidiary)
admits the material allegations of a petition against it in any Insolvency
Proceeding, or an order for relief (or similar order under non-U.S. law) is
ordered in any Insolvency Proceeding; (iii) the Company or any Subsidiary (other
than an Immaterial Subsidiary) acquiesces in the appointment of a receiver,
trustee, custodian, conservator, liquidator, mortgagee in possession (or agent
therefor), or other similar Person for itself or a substantial portion of its
property or business; or (iv) any Subsidiary (other than an Immaterial
Subsidiary) shall become subject to any conservation, rehabilitation or
liquidation order, directive or mandate issued by any Governmental Authority; or
(h) Pension Plans and Welfare Plans. With respect to any Single Employer
Pension Plan as to which the Company or any other ERISA Affiliate may have any
liability, there shall exist an Unfunded Pension Liability of more than
$30,000,000 in the aggregate as to the Company or any ERISA Affiliate, and steps
are undertaken to terminate such plan or such Pension Plan is terminated or the
Company or any other ERISA Affiliate withdraws from or institutes steps to
withdraw from such Pension Plan, or the Company has knowledge that steps have
been taken to terminate any Multiemployer Plan and such termination may result
in liability to the Company or any ERISA Affiliate in excess of $30,000,000 in
the aggregate or any Reportable Event with respect to such Pension Plan has
occurred which could result in the incurrence of liability by the Company or any
ERISA Affiliate in excess of $30,000,000 in the aggregate or steps are taken to
terminate any Multiemployer Plan and such termination may result in any
liability of the Company or any ERISA Affiliate in excess of $30,000,000 in the
aggregate; or
(i) Material Judgments. One or more judgments or decrees shall be entered
against the Company or any of its Subsidiaries involving in the aggregate a
liability (not paid or fully covered by insurance as to which the relevant
insurance company has not denied coverage) of $25,000,000 or more, and all such
judgments or decrees shall not have been vacated, discharged, stayed or bonded
pending appeal within 30 days from the entry thereof, or any action shall be
taken by a judgment creditor to attach or levy upon any asset of the Company or
any of its Subsidiaries to enforce any such judgment or decree; or
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(j) Material Regulatory Matters. (i) Any Insurance Subsidiary shall not
make a scheduled payment of interest or principal on any surplus note or similar
form of indebtedness (due to actions of any Governmental Authority or
otherwise), (ii) any Insurance Subsidiary's ability to pay fees to its
Affiliates under existing agreements (or extensions of existing agreements)
shall be restricted (due to actions of any Governmental Authority or otherwise),
(iii) in any Fiscal Year, an Insurance Subsidiary's ability to pay dividends to
its stockholders is restricted in any manner (due to actions of any Governmental
Authority or otherwise), other than by restrictions relating to dividends that
apply generally to other insurance companies domiciled in the Insurance
Subsidiary's state of domicile under the insurance law of the state or (iv) any
other Material Adverse Regulatory Event occurs, and (x) in the cases of clauses
(i) through (iii) above, such event or condition, together with all other such
events or conditions, could reasonably be expected to have a Material Adverse
Regulatory Effect and (y) in each case, such event or condition was not in
effect as of the date hereof; or
(k) Change of Control. There occurs any Change of Control; or
(l) Subsidiary Guarantee. Any Subsidiary Guarantor's Secured Guarantee
shall cease, for any reason, to constitute a valid and binding agreement of such
Subsidiary Guarantor or to be in full force and effect (other than in accordance
with the terms thereof or if released by the Agent at the direction of the
Required Banks) or the Company or any Subsidiary of the Company shall so assert;
or
(m) Liens. Any Lien purported to be created under any Security Document
shall cease to be, or shall be asserted by the Company or any Subsidiary of the
Company not to be, a valid and perfected Lien on any Collateral covered thereby,
with the priority required by the applicable Security Document (except as a
result of a sale or other disposition of the applicable Collateral in a
transaction permitted under the Loan Documents or as a result of the Agent's
failure to maintain possession of any stock certificates, promissory notes or
other documents or possessory collateral delivered to it under the Security
Agreement), except to the extent that such cessation would not, together with
all other such cessations, be with respect to Collateral having a fair market
value in excess of $10,000,000.
(n) Subordination Provisions. Any subordination provisions applicable to
the Permitted Refinancing Indebtedness shall cease to be, or shall be asserted
by the Company or any Subsidiary or by holders of 25% or more of the aggregate
principal amount of such Indebtedness then outstanding not to be, valid and
enforceable in accordance with the terms thereof; or the Obligations shall cease
to constitute "Senior Debt" (howsoever defined) for purposes of the Permitted
Refinancing Indebtedness.
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(o) A.M. Best Rating. (i) The financial strength rating of any Active
Material Insurance Subsidiary by A.M. Best shall be less than (A) B at the close
of business on the 60th day after the Effective Date, (B) the Initial A.M. Best
Rating of such Active Material Insurance Subsidiary at any time during the
period commencing on the 60th day after the Effective Date and ending on the A-
Effective Date or (C) A- thereafter. For purposes of this paragraph, "A-
Effective Date" means August 15, 2005; provided, however, that A- Effective Date
shall mean December 31, 2005 if (x) the Debt to Total Capitalization Ratio as of
the end of the Fiscal Quarter ended June 30, 2005 is less than 0.270:1.0 and (y)
the Aggregate RBC Ratio as of the end of the Fiscal Quarter ended June 30, 2005
is greater than 250%.
(ii) The financial strength rating by A.M. Best of any Active Material
Insurance Subsidiary (A) that has a financial strength rating above A- by A.M.
Best immediately prior to the Rating Test Date shall be downgraded to below A-
by A.M. Best at any time on or after the Rating Test Date or (B) that has a
financial strength rating of A- or below by A.M. Best immediately prior to the
Rating Test Date shall be downgraded by one or more levels by A.M. Best at any
time on or after the Rating Test Date; provided that notwithstanding that a
Rating Test Date has occurred, no Event of Default under this clause shall occur
until the first date on which the Company would not have been in compliance with
(x) the covenant in Section 7.11 assuming that the non-qualifying portion of
preferred stock referred to in clause (i) of the definition of "Rating Test
Date" had been treated as Indebtedness and not equity of the Company for the
purposes of such covenant or (y) the covenant in Section 7.13 if the Company had
not been permitted to add back the charges referred to in clause (ii) of the
definition of "Rating Test Date". For purposes of this paragraph, "Rating Test
Date" shall mean the earlier of (i) if there is a change in GAAP after the
Effective Date as a result of which all or any portion of any preferred stock
issued by the Company no longer qualifies as permanent equity of the Company,
the date on which such disqualification takes effect and (ii) if the Company
takes any charges after the Effective Date to write off any goodwill included on
the Company's balance sheet on the Effective Date, the date on which the first
such charge was taken.
Section 8.02. Remedies. If any Event of Default occurs, the Agent shall,
at the request of, or may, with the consent of, the Required Banks,
(a) declare the Commitment of each Bank to have deemed to have made Loans
to be terminated, whereupon such Commitments shall be terminated;
(b) declare the unpaid principal amount of all outstanding Loans, all
interest accrued and unpaid thereon, and all other amounts owing or payable
hereunder or under any other Loan Document to be immediately due and payable,
whereupon such Loans, all interest accrued and unpaid thereon, and all other
amounts owing or payable hereunder or under any other Loan Document shall
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become immediately due and payable, without presentment, demand, protest or
other notice of any kind, all of which are hereby expressly waived by the
Company; and
(c) exercise on behalf of itself and the Banks all rights and remedies
available to it and the Banks under the Loan Documents or applicable law;
provided, however, that upon the occurrence of any event specified in Section
8.01(f) or Section 8.01(g) upon the expiration of the 60-day period mentioned
therein, the obligation of each Bank to have deemed to have made Loans shall
automatically terminate and the unpaid principal amount of all outstanding Loans
and all interest and other amounts as aforesaid shall automatically become due
and payable without presentment, demand, protest or other notice of any kind,
all of which are hereby expressly waived by the Company.
Section 8.03. Rights Not Exclusive. The rights provided for in this
Agreement and the other Loan Documents are cumulative and are not exclusive of
any other rights, powers, privileges or remedies provided by law or in equity,
or under any other instrument, document or agreement now existing or hereafter
arising.
Article 9
THE AGENT
Section 9.01. Appointment and Authorization; "Agent". Each Bank hereby
irrevocably appoints, designates and authorizes the Agent to take such action on
its behalf under the provisions of this Agreement and each other Loan Document
and to exercise such powers and perform such duties as are expressly delegated
to it by the terms of this Agreement or any other Loan Document, together with
such powers as are reasonably incidental thereto. Notwithstanding any provision
to the contrary contained elsewhere herein or in any other Loan Document, the
Agent shall not have any duties or responsibilities, except those expressly set
forth herein, nor shall the Agent have or be deemed to have any fiduciary
relationship with any Bank or participant, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against the Agent.
Without limiting the generality of the foregoing sentence, the use of the term
"agent" herein and in the other Loan Documents with reference to the Agent is
not intended to connote any fiduciary or other implied (or express) obligations
arising under agency doctrine of any applicable law. Instead, such term is used
merely as a matter of market custom, and is intended to create or reflect only
an administrative relationship between independent contracting parties.
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Section 9.02. Delegation of Duties. The Agent may execute any of its duties
under this Agreement or any other Loan Document by or through agents, employees
or attorneys-in-fact and shall be entitled to advice of counsel and other
consultants or experts concerning all matters pertaining to such duties. The
Agent shall not be responsible for the negligence or misconduct of any agent or
attorney-in-fact that it selects in the absence of gross negligence or willful
misconduct. The exculpatory provisions of this Article shall apply to any such
agent, employee or attorney-in-fact.
Section 9.03. Liability of Agent. No Agent-Related Person shall (a) be
liable for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or any other Loan Document or the transactions
contemplated hereby (except for its own gross negligence or willful misconduct
in connection with its duties expressly set forth herein), or (b) be responsible
in any manner to any Bank or participant for any recital, statement,
representation or warranty made by the Company or any Subsidiary or Affiliate
thereof, or any officer thereof, contained herein or in any other Loan Document,
or in any certificate, report, statement or other document referred to or
provided for in, or received by the Agent under or in connection with, this
Agreement or any other Loan Document, or the validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other Loan
Document, or for any failure of the Company or any Subsidiary or Affiliate
thereof or any other party to any Loan Document to perform its obligations
hereunder or thereunder. No Agent-Related Person shall be under any obligation
to any Bank or participant to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or any other Loan Document, or to inspect the properties, books or
records of the Company or any Subsidiary or Affiliate thereof.
Section 9.04. Reliance by Agent. (a) The Agent shall be entitled to rely,
and shall be fully protected in relying, upon any writing, communication,
signature, resolution, representation, notice, consent, certificate, affidavit,
letter, telegram, facsimile, telex or telephone message, electronic mail
message, statement or other document or conversation believed by it to be
genuine and correct and to have been signed, sent or made by the proper Person
or Persons, and upon advice and statements of legal counsel (including counsel
to the Company or any Subsidiary), independent accountants and other experts
selected by the Agent. The Agent shall be fully justified in failing or refusing
to take any action under any Loan Document unless it shall first receive such
advice or concurrence of the Required Banks as it deems appropriate and, if it
so requests, it shall first be indemnified to its satisfaction by the Banks
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Agent shall in all cases be
fully protected in acting, or in refraining from acting, under this Agreement or
any other Loan Document in accordance with a request or consent of the Required
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Banks (or such other number of Banks as may be expressly required hereby in any
instance) and such request and any action taken or failure to act pursuant
thereto shall be binding upon all the Banks.
(b) For purposes of determining compliance with the conditions specified in
Section 4.01, each Bank that has signed this Agreement shall be deemed to have
consented to, approved or accepted or to be satisfied with, each document or
other matter required thereunder to be consented to or approved by or acceptable
or satisfactory to a Bank unless the Agent shall have received notice from such
Bank prior to the proposed Effective Date specifying its objection thereto.
Section 9.05. Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default, except with respect to
defaults in the payment of principal, interest and fees required to be paid to
the Agent for the account of the Banks, unless the Agent shall have received
written notice from a Bank or the Company referring to this Agreement,
describing such Default and stating that such notice is a "notice of default."
The Agent will notify the Banks of its receipt of any such notice. The Agent
shall take such action with respect to such Default as may be directed by the
Required Banks in accordance with Article 8; provided, however, that unless and
until the Agent has received any such direction, the Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default as it shall deem advisable or in the best interest of the Banks.
Section 9.06. Credit Decision. Each Bank acknowledges that no
Agent-Related Person has made any representation or warranty to it, and that no
act by the Agent hereafter taken, including any consent to and acceptance of any
assignment or review of the affairs of the Company, any Subsidiary or any
Affiliate thereof, shall be deemed to constitute any representation or warranty
by any Agent-Related Person to any Bank as to any matter, including whether
Agent-Related Persons have disclosed material information in their possession.
Each Bank represents to the Agent that it has, independently and without
reliance upon any Agent-Related Person and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, prospects, operations, property, financial and
other condition and creditworthiness of the Company and its Subsidiaries, and
all applicable bank or other regulatory laws relating to the transactions
contemplated hereby, and made its own decision to enter into this Agreement and
to extend credit to the Company hereunder. Each Bank also represents that it
will, independently and without reliance upon any Agent-Related Person and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking or
not taking action under this Agreement and the other Loan Documents, and to make
such investigations as it deems necessary to inform itself as to the
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business, prospects, operations, property, financial and other condition and
creditworthiness of the Company and its Subsidiaries. Except for notices,
reports and other documents expressly required to be furnished to the Banks by
the Agent herein, the Agent shall not have any duty or responsibility to provide
any Bank with any credit or other information concerning the business,
prospects, operations, property, financial and other condition or
creditworthiness of the Company or any of its Subsidiaries or any of their
respective Affiliates which may come into the possession of any Agent-Related
Person.
Section 9.07. Indemnification of Agent. Whether or not the transactions
contemplated hereby are consummated, the Banks shall indemnify upon demand each
Agent-Related Person (to the extent not reimbursed by or on behalf of the
Company and without limiting the obligation of the Company to do so), pro rata,
and hold harmless each Agent-Related Person from and against any and all
Indemnified Liabilities incurred by it; provided, however, that no Bank shall be
liable for the payment to any Agent-Related Person of any portion of such
Indemnified Liabilities to the extent determined in a final, nonappealable
judgment by a court of competent jurisdiction to have resulted from such
Agent-Related Person's own gross negligence or willful misconduct; provided,
however, that no action taken in accordance with the directions of the Required
Banks shall be deemed to constitute gross negligence or willful misconduct for
purposes of this Section. Without limitation of the foregoing, each Bank shall
reimburse the Agent upon demand for its ratable share of any costs or
out-of-pocket expenses (including Attorney Costs) incurred by the Agent in
connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, any other Loan Document, or any document
contemplated by or referred to herein, to the extent that the Agent is not
reimbursed for such expenses by or on behalf of the Company. The undertaking in
this Section shall survive the payment of all other Obligations and the
resignation of the Agent.
Section 9.08. Agent in Individual Capacity. BofA and its Affiliates may
make loans to, issue letters of credit for the account of, accept deposits from,
acquire equity interests in and generally engage in any kind of banking, trust,
financial advisory, underwriting or other business with the Company or any of
its Subsidiaries and their respective Affiliates as though BofA were not the
Agent hereunder and without notice to or consent of the Banks. The Banks
acknowledge that, pursuant to such activities, BofA or its Affiliates may
receive information regarding the Company or its Subsidiaries or Affiliates
(including information that may be subject to confidentiality obligations in
favor of the Company, such Subsidiary or such Affiliate) and acknowledge that
the Agent shall be under no obligation to provide such information to them. With
respect to its Loans, BofA shall have the same rights and powers under this
Agreement as any other Bank and may exercise such rights and powers as though it
were not
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the Agent, and the terms "Bank" and "Banks" include BofA in its individual
capacity.
Section 9.09. Successor Agent. The Agent may resign as Agent upon 30 days'
notice to the Banks. If the Agent resigns under this Agreement, the Required
Banks shall appoint from among the Banks a successor administrative agent for
the Banks, which successor administrative agent shall be consented to by the
Company at all times other than during the existence of an Event of Default
(which consent of the Company shall not be unreasonably withheld or delayed). If
no successor administrative agent is appointed prior to the effective date of
the resignation of the Agent, the Agent may appoint, after consulting with the
Banks and the Company, a successor administrative agent from among the Banks.
Upon the acceptance of its appointment as successor administrative agent
hereunder, the Person acting as such successor administrative agent shall
succeed to all the rights, powers and duties of the retiring Agent and the term
"Agent" shall mean such successor administrative agent and the retiring Agent's
appointment, powers and duties as Agent shall be terminated. After any retiring
Agent's resignation hereunder as Agent, the provisions of this Article 9 and
Sections 10.04 and 10.05 shall inure to its benefit and to the benefit of the
Agent-Related Persons as to any actions taken or omitted to be taken by it while
it was Agent under this Agreement. If no successor administrative agent has
accepted appointment as Agent by the date which is 30 days following a retiring
Agent's notice of resignation, the retiring Agent's resignation shall
nevertheless thereupon become effective and the Banks shall perform all of the
duties of the Agent hereunder until such time, if any, as the Required Banks
appoint a successor agent as provided for above.
Section 9.10. Agent May File Proofs Of Claim. In case of the pendency of
any receivership, insolvency, liquidation, bankruptcy, reorganization,
arrangement, adjustment, composition or other judicial proceeding relative to
the Company or any other Obligor, the Agent (irrespective of whether the
principal of any Loan shall then be due and payable as herein expressed or by
declaration or otherwise and irrespective of whether the Agent shall have made
any demand on the Company) shall be entitled and empowered, by intervention in
such proceeding or otherwise:
(a) to file and prove a claim for the whole amount of the principal and
interest owing and unpaid in respect of the Loans and all other Obligations that
are owing and unpaid and to file such other documents as may be necessary or
advisable in order to have the claims of the Banks and the Agent (including any
claim for the reasonable compensation, expenses, disbursements and advances of
the Banks and the Agent and their respective agents and counsel and all other
amounts due the Banks and the Agent under Section 2.10 and Section 10.04)
allowed in such judicial proceeding; and
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(b) to collect and receive any monies or other property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Bank to make such payments to the Agent and, in the event that the Agent
shall consent to the making of such payments directly to the Banks, to pay to
the Agent any amount due for the reasonable compensation, expenses,
disbursements and advances of the Agent and its agents and counsel, and any
other amounts due the Agent under Section 2.10 and Section 10.04.
Nothing contained herein shall be deemed to authorize the Agent to
authorize or consent to or accept or adopt on behalf of any Bank any plan of
reorganization, arrangement, adjustment or composition affecting the Obligations
or the rights of any Bank or to authorize the Agent to vote in respect of the
claim of any Bank in any such proceeding.
Section 9.11. Collateral And Guaranty Matters. The Banks irrevocably
authorize the Agent, at its option and in its discretion:
(a) to release any Lien on any property granted to or held by the Agent
under any Loan Document (i) upon payment in full of all Obligations (other than
contingent indemnification obligations), (ii) that is sold or otherwise disposed
of or to be sold or otherwise disposed of as part of or in connection with any
sale or other disposition permitted hereunder or under any other Loan Document,
or (iii) subject to Section 10.01, if approved, authorized or ratified in
writing by the Required Banks;
(b) to subordinate any Lien on any property granted to or held by the Agent
under any Loan Document to the holder of any Lien on such property that is
permitted by Section 7.02(h); and
(c) to release any Subsidiary Guarantor from its obligations under its
Secured Guarantee if such Person ceases to be a Subsidiary as a result of a
transaction permitted hereunder.
Upon request by the Agent at any time, the Required Banks will confirm in
writing the Agent's authority to release or subordinate its interest in
particular types or items of property, or to release any Subsidiary Guarantor
from its obligations under its Secured Guarantee pursuant to this Section.
Section 9.12. Withholding Tax. (a) If any Bank (including a Bank that
becomes a party to this Agreement by assignment in accordance with Section
10.07) is not a "United Stated Person" for U.S. federal income tax purposes as
defined in Section 7701(a)(30) of the Code and such Bank claims exemption
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from, or a reduction of, U.S. withholding tax under Sections 1441 or 1442 of the
Code, such Bank agrees with and in favor of the Agent and the Company, to
deliver to the Agent and the Company:
(i) if such Bank claims an exemption from, or a reduction of,
withholding tax under a United States tax treaty, two properly completed
and executed copies of IRS Form W-8BEN (or any successor form) before the
payment of any interest in the first calendar year and before the payment
of any interest in each third succeeding calendar year during which
interest may be paid under this Agreement;
(ii) if such Bank claims that interest paid under this Agreement is
exempt from United States withholding tax because it is effectively
connected with a United States trade or business of such Bank, two properly
completed and executed copies of IRS Form W-8ECI (or any successor form)
before the payment of any interest is due in the first taxable year of such
Bank and in each third succeeding taxable year of such Bank during which
interest may be paid under this Agreement; and
(iii) such other form or forms as may be required under the Code or
other laws of the United States as a condition to exemption from, or
reduction of, United States withholding tax.
Such Bank agrees to promptly notify the Agent and the Company of any change in
circumstances which would modify or render invalid any claimed exemption or
reduction.
(b) If any Bank claims exemption from, or reduction of, withholding tax
under a United States tax treaty by providing an IRS Form W-8BEN, W-8ECI or
other required form and such Bank sells, assigns, grants a participation in, or
otherwise transfers all or part of the Obligations of the Company to such Bank,
such Bank agrees to notify the Agent and the Company of the percentage amount in
which it is no longer the beneficial owner of Obligations of the Company to such
Bank. To the extent of such percentage amount, the Agent and the Company will
treat such Bank's IRS Form W-8BEN, W-8ECI or other required form as no longer
valid.
(c) If any Bank claiming exemption from United States withholding tax by
filing IRS Form W-8ECI with the Agent sells, assigns, grants a participation in,
or otherwise transfers all or part of the Obligations of the Company to such
Bank, such Bank agrees to undertake sole responsibility for complying with the
withholding tax requirements imposed by Sections 1441 and 1442 of the Code.
(d) If any Bank is entitled to a reduction in the applicable withholding
tax, the Company may withhold from any interest payment to such Bank (or the
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Agent) an amount equivalent to the applicable withholding tax after taking into
account such reduction. However, if the forms or other documentation required by
subsection (a) of this Section are not delivered to the Company and the Agent,
or if any Bank is not entitled to submit such forms or other documentation, then
the Company may withhold from any interest payment to such Bank (or the Agent)
an amount equivalent to the applicable withholding tax imposed by Sections 1441
and 1442 of the Code, without reduction. If the Company withholds tax from any
interest payment, it shall deliver to the Agent on the Interest Payment Date a
written notice setting forth in reasonable detail the amount of withholding made
and the reason for said calculation of such amount.
(e) If the IRS or any other Governmental Authority of the United States or
other jurisdiction asserts a claim that the Company or the Agent did not
properly withhold tax from amounts paid to or for the account of any Bank
(because the appropriate form was not delivered or was not properly executed, or
because such Bank failed to notify the Company or the Agent of a change in
circumstances which rendered the exemption from, or reduction of, withholding
tax ineffective, or for any other reason) such Bank shall indemnify the Company
or the Agent, as the case may be, fully for all amounts paid, directly or
indirectly, by the Company or the Agent as tax or otherwise, including penalties
and interest, and including any taxes imposed by any jurisdiction on the amounts
payable to the Company or the Agent under this Section, together with all costs
and expenses (including Attorney Costs). The obligation of the Banks under this
subsection shall survive the payment of all Obligations and the resignation or
replacement of the Agent.
(f) Any amounts withheld from a Bank as a result of the failure of such
Bank to claim an exemption from withholding available to it, or otherwise to
comply with this Section 9.12 shall not be subject to indemnification under
Section 3.01, Section 10.05 or otherwise.
ARTICLE 10
Miscellaneous
Section 10.01. Amendments and Waivers. No amendment or waiver of any
provision of this Agreement or any other Loan Document, and no consent to any
departure by the Company or any other Obligor therefrom, shall be effective
unless in writing signed by the Required Banks and the Company or the applicable
Obligor, as the case may be, and acknowledged by the Agent, and each such waiver
or consent shall be effective only in the specific instance and for the specific
purpose for which given; provided, however, that no such amendment, waiver or
consent shall:
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(a) extend or increase the Commitment of any Bank (or reinstate any
Commitment terminated pursuant to Section 8.02) without the written consent of
such Bank;
(b) postpone or delay the maturity of any Loan, or any scheduled date of
payment of the principal amount of any Loan under Section 2.07, or any date for
the payment of any interest or fees due to the Banks (or any of them) hereunder
or under any other Loan Document, or reduce the amount of, waive or excuse any
such payment, without the written consent of each Bank affected thereby;
provided that this clause shall not apply to any amendment, waiver or consent
that is entered into as contemplated by the definition of "Applicable Margin"
for purposes of giving effect to the replacement of S&P or Moody's if such
agency ceases to be in the business of rating debt securities;
(c) change the percentage of the Commitments or of the aggregate unpaid
principal amount of the Loans which is required for the Banks (or Banks of any
Class) or any of them to take any action hereunder, without the written consent
of each Bank, or each Bank of such Class, as the case may be;
(d) release all or any substantial part of the Collateral from the
Transaction Liens (except as expressly permitted hereunder or in the Security
Agreement), without the written consent of each Bank;
(e) change any provision of any Loan Document in a manner that by its terms
adversely affects the rights in respect of payments due to Banks holding Loans
of any Class or Sub-Class differently than those holding Loans of any other
Class or Sub-Class, without the written consent of Banks holding a majority in
interest of the outstanding Loans of each adversely affected Class or Sub-Class,
as applicable;
(f) change clause (i) of Section 2.08(d), the second proviso to Section
2.08(d) or Section 2.08(g), without the written consent of Banks holding a
majority in interest of the outstanding Tranche A-2 Term Loans and Tranche B-2
Term Loans;
(g) change Section 2.08(f), without the written consent of Banks holding a
majority in interest of the outstanding Tranche A-2 Term Loans, Tranche A-3 Term
Loans, Tranche B-2 Term Loans and Tranche B-3 Term Loans; or
(h) amend this Section 10.01 or Section 2.13, without the written consent
of each Bank;
and, provided further, that (i) no such agreement shall, unless in writing and
signed by the Agent in addition to the Required Banks or all the Banks, as the
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case may be, affect the rights or duties of the Agent under this Agreement or
any other Loan Document (except with respect to the removal of the Agent), (ii)
any fee agreement referred to in Section 2.10 may be amended, or rights or
privileges thereunder waived, in a writing executed by the parties thereto and
(iii) any amendment, waiver or consent that by its terms affects the rights or
duties under this Agreement of one Class or Sub-Class of Banks (but not of any
other Class or Sub-Class of Banks) may be effected by an agreement or agreements
in writing entered into by the Company and the requisite percentage in interest
of the affected Class or Sub-Class of Banks that would be required to consent
thereto under this Section if such Class or Sub-Class of Banks were the only
Class or Sub-Class of Banks hereunder at the time.
Section 10.02. Notices. (a) Unless otherwise expressly provided herein, all
notices and other communications provided for hereunder shall be in writing
(including by facsimile transmission). All such written notices shall be mailed,
faxed or delivered to the applicable address, facsimile number (provided that
any matter transmitted by the Company by facsimile (1) shall be immediately
confirmed by a telephone call to the recipient at the number specified on
Schedule 10.02, and (2) shall be followed promptly by delivery of a hard copy
original thereof) or (subject to subsection (c) below) electronic mail address,
and all notices and other communications expressly permitted hereunder to be
given by telephone shall be made to the applicable telephone number, as follows:
(i) if to the Company or the Agent, to the address, facsimile number,
electronic mail address or telephone number specified for such Person on
Schedule 10.02 or to such other address, facsimile number, electronic mail
address or telephone number as shall be designated by such party in a
notice to the other parties; and
(ii) if to any other Bank, to the address, facsimile number,
electronic mail address or telephone number specified in its administrative
questionnaire or to such other address, facsimile number, electronic mail
address or telephone number as shall be designated by such party in a
notice to the Company and the Agent.
All such notices and other communications shall be deemed to be given or
made upon the earlier to occur of (i) actual receipt by the relevant party
hereto and (ii) (A) if delivered by hand or by courier, when signed for by or on
behalf of the relevant party hereto; (B) if delivered by mail, four Business
Days after deposit in the mails, postage prepaid; (C) if delivered by facsimile,
when sent and receipt has been confirmed by telephone; and (D) if delivered by
electronic mail (which form of delivery is subject to the provisions of
subsection (c) below), when delivered; provided, however, that notices and other
communications to the Agent pursuant to Article 2 shall not be effective until
actually received by such
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Person. In no event shall a voicemail message be effective as a notice,
communication or confirmation hereunder.
(b) Loan Documents may be transmitted and/or signed by facsimile. The
effectiveness of any such documents and signatures shall, subject to applicable
law, have the same force and effect as manually-signed originals and shall be
binding on all Obligors, the Agent and the Banks. The Agent may also require
that any such documents and signatures be confirmed by a manually-signed
original thereof; provided, however, that the failure to request or deliver the
same shall not limit the effectiveness of any facsimile document or signature.
(c) Electronic mail and Internet and intranet websites may be used only to
distribute routine communications, such as financial statements and other
information as provided in Section 6.02 and to distribute Loan Documents for
execution by the parties thereto, and may not be used for any other purpose.
(d) The Agent and the Banks shall be entitled to rely and act upon any
notices purportedly given by or on behalf of the Company even if (i) such
notices were not made in a manner specified herein, were incomplete or were not
preceded or followed by any other form of notice specified herein, or (ii) the
terms thereof, as understood by the recipient, varied from any confirmation
thereof. The Company shall indemnify each Agent-Related Person and each Bank
from all losses, costs, expenses and liabilities resulting from the reliance by
such Person on each notice purportedly given by or on behalf of the Company;
provided that such indemnity shall not, as to any such Person, be available to
the extent that such losses, costs, expenses or liabilities are determined by a
court of competent jurisdiction by final and nonappealable judgment to have
resulted from the gross negligence or willful misconduct of such Person. All
telephonic notices to and other communications with the Agent may be recorded by
the Agent, and each of the parties hereto hereby consents to such recording.
Section 10.03. No Waiver; Cumulative Remedies. No failure to exercise and
no delay in exercising, on the part of the Agent or any Bank, any right, remedy,
power or privilege hereunder, shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, remedy, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege.
Section 10.04. Costs and Expenses. The Company agrees (a) to pay or
reimburse the Agent for all reasonable costs and expenses incurred in connection
with the development, preparation, negotiation and execution of this Agreement
and the other Loan Documents and any amendment, waiver, consent or other
modification of the provisions hereof and thereof (whether or not the
transactions contemplated hereby or thereby are consummated), and the
consummation and administration of the transactions contemplated hereby and
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thereby, including all Attorney Costs, and (b) to pay or reimburse the Agent and
each Bank for all costs and expenses incurred in connection with the
enforcement, attempted enforcement, or preservation of any rights or remedies
under this Agreement or the other Loan Documents (including all such costs and
expenses incurred during any "workout" or restructuring in respect of the
Obligations and during any legal proceeding, including in any Insolvency
Proceeding or appellate proceeding), including all fees, expenses and
disbursements of any law firm or other external legal counsel and, without
duplication, the allocated cost of internal legal services and all expenses and
disbursements of internal counsel. The foregoing costs and expenses shall
include all search, filing, recording, title insurance and appraisal charges and
fees and taxes related thereto, and other out-of-pocket expenses incurred by the
Agent and the cost of independent public accountants and other outside experts
retained by the Agent or any Bank. All amounts due under this Section shall be
payable within five Business Days after written demand therefor together with,
if requested by the Company, backup documentation supporting such payment or
reimbursement request. The agreements in this Section shall survive the
repayment of the Loans and the other Obligations.
Section 10.05. Company Indemnification; Damage Waiver. (a) Whether or not
the transactions contemplated hereby are consummated, the Company shall
indemnify and hold harmless each Agent-Related Person, each Bank and their
respective Affiliates, directors, officers, employees, counsel, agents and
attorneys-in-fact (collectively the "Indemnified Persons") from and against any
and all liabilities, obligations, losses, damages, penalties, claims, demands,
actions, judgments, suits, charges and reasonable costs, expenses and
disbursements (including Attorney Costs) of any kind or nature whatsoever
(including those arising from or relating to any environmental matters) which
may at any time be imposed on, incurred by or asserted against any such
Indemnified Person in any way relating to or arising out of or in connection
with (a) the execution, delivery, enforcement, performance or administration of
any Loan Document or any other agreement, letter or instrument delivered in
connection with the transactions contemplated thereby or the consummation of the
transactions contemplated thereby, (b) any Commitment or Loan or the use or
proposed use of the proceeds therefrom or (c) any actual or prospective claim,
litigation, investigation or proceeding relating to any of the foregoing,
whether based on contract, tort or any other theory (including any investigation
of, preparation for, or defense of any pending or threatened claim,
investigation, litigation or proceeding) and regardless of whether any
Indemnified Person is a party thereto (all the foregoing, collectively, the
"Indemnified Liabilities"), in all cases, whether or not caused by or arising,
in whole or in part, out of the negligence of the Indemnified Person; provided
that such indemnity shall not, as to any Indemnified Person, be available to the
extent that such liabilities, obligations, losses, damages, penalties, claims,
demands, actions, judgments,
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suits, costs, expenses or disbursements are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the gross
negligence or willful misconduct of such Indemnified Person. No Indemnified
Person shall be liable for any damages arising from the use by others of any
information or other materials obtained through IntraLinks or other similar
information transmission systems in connection with this Agreement, nor shall
any Indemnified Person have any liability for any indirect or consequential
damages relating to this Agreement or any other Loan Document or arising out of
its activities in connection herewith or therewith (whether before or after the
Effective Date). All amounts due under this Section shall be payable within
thirty days after written demand therefor together with, if requested by the
Company, backup documentation supporting such indemnification request. The
agreements in this Section shall survive the resignation of the Agent, the
replacement of any Bank and the repayment, satisfaction or discharge of all the
other Obligations.
(b) To the extent permitted by applicable law, the Company shall not
assert, and hereby waives, any claim against any Indemnified Person, on any
theory of liability, for special, indirect, consequential or punitive damages
(as opposed to direct or actual damages) arising out of, in connection with, or
as a result of, this Agreement or any agreement or instrument contemplated
hereby, the Transactions, any Loan or the use of the proceeds thereof.
Section 10.06. Payments Set Aside. To the extent that the Company makes a
payment to the Agent or the Banks, or the Agent or the Banks exercise their
right of set-off, and such payment or the proceeds of such set-off or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside or required (including pursuant to any settlement entered into by the
Agent or such Bank in its discretion) to be repaid to a trustee, receiver or any
other party, in connection with any Insolvency Proceeding or otherwise, then (a)
to the extent of such recovery the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force and effect
as if such payment had not been made or such set-off had not occurred, and (b)
each Bank severally agrees to pay to the Agent upon demand its pro rata share of
any amount so recovered from or repaid by the Agent.
Section 10.07. Assignments, Participations, etc. (a) The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns permitted hereby, except that the
Company may not assign or otherwise transfer any of its rights or obligations
hereunder without the prior written consent of each Bank and no Bank may assign
or otherwise transfer any of its rights or obligations hereunder except (i) to
an Eligible Assignee in accordance with the provisions of subsection (b) of this
Section, (ii) by way of participation in accordance with the provisions of
subsection (d) of this Section or (iii) by way of pledge or assignment of a
113
security interest subject to the restrictions of subsection (f) or (h) of this
Section (and any other attempted assignment or transfer by any party hereto
shall be null and void). Nothing in this Agreement, expressed or implied, shall
be construed to confer upon any Person (other than the parties hereto, their
respective successors and assigns permitted hereby, Participants to the extent
provided in subsection (d) of this Section and, to the extent expressly
contemplated hereby, the Indemnified Persons, and their permitted successors and
assigns) any legal or equitable right, remedy or claim under or by reason of
this Agreement.
(b) Any Bank may at any time assign to one or more Eligible Assignees all
or a portion of its rights and obligations under this Agreement (including all
or a portion of its Loans at the time owing to it); provided that (i) except in
the case of an assignment of the entire remaining amount of the assigning Bank's
Loans at the time owing to it or in the case of an assignment to a Bank or an
Affiliate of a Bank or an Approved Fund (as defined in subsection (g) of this
Section) with respect to a Bank, the aggregate amount of the Loans subject to
each such assignment, determined as of the date the Assignment and Assumption
with respect to such assignment is delivered to the Agent or, if "Trade Date" is
specified in the Assignment and Assumption, as of the Trade Date, shall not be
less than $3,000,000 unless each of the Agent and, so long as no Event of
Default has occurred and is continuing, the Company otherwise consents (each
such consent not to be unreasonably withheld or delayed); (ii) each partial
assignment shall be made as an assignment of a proportionate part of all the
assigning Bank's rights and obligations under this Agreement with respect to the
Loans assigned; and (iii) the parties to each assignment shall execute and
deliver to the Agent an Assignment and Assumption, together with a processing
and recordation fee of $3,500. Subject to acceptance and recording thereof by
the Agent pursuant to subsection (c) of this Section, from and after the
effective date specified in each Assignment and Assumption, the Eligible
Assignee thereunder shall be a party to this Agreement and, to the extent of the
interest assigned by such Assignment and Assumption, have the rights and
obligations of a Bank under this Agreement, and the assigning Bank thereunder
shall, to the extent of the interest assigned by such Assignment and Assumption,
be released from its obligations under this Agreement (and, in the case of an
Assignment and Assumption covering all of the assigning Bank's rights and
obligations under this Agreement, such Bank shall cease to be a party hereto but
shall continue to be entitled to the benefits of Section 3.01, Section 3.03,
Section 3.04, Section 10.04 and Section 10.05 with respect to facts and
circumstances occurring prior to the effective date of such assignment). Upon
request, the Company (at its expense) shall execute and deliver a Note to the
assignee Bank. Any assignment or transfer by a Bank of rights or obligations
under this Agreement that does not comply with this subsection shall be treated
for purposes of this Agreement as a sale by such Bank of a participation in such
rights and obligations in accordance with subsection (d) of this Section.
114
(c) The Agent, acting solely for this purpose as an agent of the Company,
shall maintain at the Agent's Office a copy of each Assignment and Assumption
delivered to it and a register for the recordation of the names and addresses of
the Banks, and the principal amounts of the Loans owing to each Bank pursuant to
the terms hereof from time to time (the "Register"). The entries in the Register
shall be conclusive, and the Company, the Agent and the Banks may treat each
Person whose name is recorded in the Register pursuant to the terms hereof as a
Bank hereunder for all purposes of this Agreement, notwithstanding notice to the
contrary. The Register shall be available for inspection by the Company and any
Bank, at any reasonable time and from time to time upon reasonable prior notice.
(d) Any Bank may at any time, without the consent of, or notice to, the
Company or the Agent, sell participations to any Person (other than a natural
person or the Company or any of the Company's Subsidiaries) (each, a
"Participant") in all or a portion of such Bank's rights and/or obligations
under this Agreement (including all or a portion of the Loans owing to it);
provided that (i) such Bank's obligations under this Agreement shall remain
unchanged, (ii) such Bank shall remain solely responsible to the other parties
hereto for the performance of such obligations and (iii) the Company, the Agent
and the other Banks shall continue to deal solely and directly with such Bank in
connection with such Bank's rights and obligations under this Agreement. Any
agreement or instrument pursuant to which a Bank sells such a participation
shall provide that such Bank shall retain the sole right to enforce this
Agreement and to approve any amendment, modification or waiver of any provision
of this Agreement; provided that such agreement or instrument may provide that
such Bank will not, without the consent of the Participant, agree to any
amendment, waiver or other modification described in the first proviso to
Section 10.01 that directly affects such Participant. Subject to subsection (e)
of this Section, the Company agrees that each Participant shall be entitled to
the benefits of Section 3.01, Section 3.03, and Section 3.04 to the same extent
as if it were a Bank and had acquired its interest by assignment pursuant to
subsection (b) of this Section. To the extent permitted by law, each Participant
also shall be entitled to the benefits of Section 10.09 as though it were a
Bank, provided such Participant agrees to be subject to Section 2.13 as though
it were a Bank.
(e) A Participant shall not be entitled to receive any greater payment
under Section 3.01 or Section 3.03 than the applicable Bank would have been
entitled to receive with respect to the participation sold to such Participant,
unless the sale of the participation to such Participant is made with the
Company's prior written consent. A Participant that is not a "United States
person" within the meaning of Section 7701(a)(30) of the Code shall not be
entitled to the benefits of Section 3.01 unless the Company is notified of the
participation sold to such Participant and such Participant agrees, for the
benefit of the Company, to comply with Section 9.12 as though it were a Bank.
115
(f) Any Bank may at any time pledge or assign a security interest in all or
any portion of its rights under this Agreement (including under its Note, if
any) to secure obligations of such Bank, including any pledge or assignment to
secure obligations to a Federal Reserve Bank; provided that no such pledge or
assignment shall release such Bank from any of its obligations hereunder or
substitute any such pledgee or assignee for such Bank as a party hereto.
(g) As used herein, the following terms have the following meanings:
"Eligible Assignee" means (a) a Bank; (b) an Affiliate of a Bank; (c) an
Approved Fund; and (d) any other Person (other than a natural person)
approved by (i) the Agent and (ii) unless an Event of Default has occurred
and is continuing, the Company (each such approval not to be unreasonably
withheld or delayed); provided that notwithstanding the foregoing,
"Eligible Assignee" shall not include the Company or any of the Company's
Subsidiaries.
"Fund" means any Person (other than a natural person) that is (or will be)
engaged in making, purchasing, holding or otherwise investing in commercial
loans and similar extensions of credit in the ordinary course of its
business.
"Approved Fund" means any Fund that is administered or managed by (a) a
Bank, (b) an Affiliate of a Bank or (c) an entity or an Affiliate of an
entity that administers or manages a Bank.
(h) Notwithstanding anything to the contrary contained herein, any Bank
that is a Fund may create a security interest in all or any portion of the Loans
owing to it and the Note, if any, held by it to the trustee for holders of
obligations owed, or securities issued, by such Fund as security for such
obligations or securities, provided that unless and until such trustee actually
becomes a Bank in compliance with the other provisions of this Section, (i) no
such pledge shall release the pledging Bank from any of its obligations under
the Loan Documents and (ii) such trustee shall not be entitled to exercise any
of the rights of a Bank under the Loan Documents even though such trustee may
have acquired ownership rights with respect to the pledged interest through
foreclosure or otherwise.
Section 10.08. Confidentiality. Each Bank agrees to take and to cause its
Affiliates to take normal and reasonable precautions and exercise due care to
maintain the confidentiality of all information provided to it by the Company or
any Subsidiary, or by the Agent on the Company's or such Subsidiary's behalf,
under this Agreement or any other Loan Document, and neither it nor any of its
Affiliates shall use any such information (x) other than in connection with or
in enforcement of this Agreement and the other Loan Documents or in connection
116
with other business now or hereafter existing or contemplated with the Company
or any Subsidiary or (y) in any manner that would constitute a violation of
applicable laws, except, in either case, to the extent such information (i) was
or becomes generally available to the public other than as a result of
disclosure by the Bank, or (ii) was or becomes available on a non-confidential
basis from a source other than the Company, provided that such source is not
bound by a confidentiality agreement with the Company known to the Bank;
provided, however, that any Bank may disclose such information (a) at the
request or pursuant to any requirement of any Governmental Authority to which
the Bank is subject or in connection with an examination of such Bank by any
such authority; (b) pursuant to subpoena or other court process; (c) when
required to do so in accordance with the provisions of any applicable
Requirement of Law; (d) to the extent reasonably required in connection with any
litigation or proceeding to which the Agent or any Bank or their respective
Affiliates may be party; (e) to the extent reasonably required in connection
with the exercise of any remedy hereunder or under any other Loan Document; (f)
to such Bank's independent auditors and other professional advisors; (g) to any
Participant or Eligible Assignee, actual or potential, provided that such Person
agrees in writing to keep such information confidential to the same extent
required of the Banks hereunder; (h) as to any Bank or its Affiliate, as
expressly permitted under the terms of any other document or agreement regarding
confidentiality to which the Company or any Subsidiary is party with such Bank
or such Affiliate; (i) to its Affiliates, provided that such Affiliates are not
insurance companies; and (j) to any other party to this Agreement.
Notwithstanding anything herein to the contrary, "information" shall not
include, and the Agent and each Bank and their respective Affiliates may
disclose without limitation of any kind, any information with respect to the
"tax treatment" and "tax structure" (in each case, within the meaning of
Treasury Regulation Section 1.6011-4) of the transactions contemplated hereby
and all materials of any kind (including opinions or other tax analyses) that
are provided to the Agent or such Bank or Affiliate relating to such tax
treatment and tax structure; provided that with respect to any document or
similar item that in either case contains information concerning the tax
treatment or tax structure of the transaction as well as other information, this
sentence shall only apply to such portions of the document or similar item that
relate to the tax treatment or tax structure of the Loans and transactions
contemplated hereby.
Section 10.09. Set-off. In addition to any rights and remedies of the Banks
provided by law, if an Event of Default shall have occurred and be continuing,
each Bank and each of its Affiliates is authorized at any time and from time to
time, without prior notice to the Company, any such notice being waived by the
Company, to the fullest extent permitted by law, to set off and apply any and
all deposits (general or special, time or demand, provisional or final) at any
time held by, and other indebtedness at any time owing by, such
117
Bank or Affiliate to or for the credit or the account of the Company against any
and all Obligations owing to such Bank, now or hereafter existing, irrespective
of whether or not the Agent or such Bank shall have made demand under this
Agreement or any Loan Document and although such Obligations may be contingent
or unmatured; provided that neither any Bank nor any of its Affiliates shall be
entitled to exercise any such set off with respect to any account that is
certified by a Responsible Officer pursuant to a certificate delivered to such
Bank (with a copy to the Agent) as being a trust account of the type described
in Section 6.15(c)(w); and provided further that until such time as all
outstanding Loans have become due and payable (whether pursuant to Article 8 or
otherwise), neither any Bank nor any of its Affiliates shall be entitled to
exercise any such set off with respect to any account that is certified by a
Responsible Officer pursuant to a certificate (which certificate may be included
in any account control agreement required by the Security Agreement and
applicable to such account) delivered to such Bank (with a copy to the Agent) as
being a payroll account if the aggregate amount of cash and Cash Equivalents in
all such accounts does not exceed $15,000,000. Each Bank agrees promptly to
notify the Company and the Agent after any such set-off and application made by
such Bank; provided, however, that the failure to give such notice shall not
affect the validity of such set-off and application.
Section 10.10. Notification of Addresses, Lending Offices, Etc. Each Bank
shall notify the Agent in writing of any changes in the address to which notices
to the Bank should be directed, of addresses of any Lending Office, of payment
instructions in respect of all payments to be made to it hereunder and of such
other administrative information as the Agent shall reasonably request.
Section 10.11. Counterparts. This Agreement may be executed in any number
of separate counterparts, each of which, when so executed, shall be deemed an
original, and all of said counterparts taken together shall be deemed to
constitute but one and the same instrument.
Section 10.12. Survival of Representations and Warranties. All
representations and warranties made hereunder and in any other Loan Document or
other document delivered pursuant hereto or thereto or in connection herewith or
therewith shall survive the execution and delivery hereof and thereof. Such
representations and warranties have been or will be relied upon by the Agent and
each Bank, regardless of any investigation made by the Agent or any Bank or on
their behalf, and shall continue in full force and effect as long as any Loan or
any other Obligation hereunder shall remain unpaid or unsatisfied.
Section 10.13 Severability. If any provision of any Loan Document is
invalid, illegal or unenforceable in any jurisdiction then, to the fullest
extent permitted by law, (i) such provision shall, as to such jurisdiction, be
ineffective to the extent (but only to the extent) of such invalidity,
illegality or
118
unenforceability, (ii) the other provisions of the Loan Documents shall remain
in full force and effect in such jurisdiction and shall be liberally construed
in favor of the Banks in order to carry out the intentions of the parties
thereto as nearly as may be possible and (iii) the invalidity, illegality or
unenforceability of any such provision in any jurisdiction shall not affect the
validity, legality or enforceability of such provision in any other
jurisdiction.
Section 10.14. Governing Law; Jurisdiction; Consent to Service of Process.
(a) This Agreement shall be construed in accordance with and governed by the law
of the State of New York.
(b) The Company irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of the Supreme Court of the State of
New York sitting in New York County and of the United States District Court of
the Southern District of New York, and any relevant appellate court, in any
action or proceeding arising out of or relating to any Loan Document, or for
recognition or enforcement of any judgment, and each party hereto irrevocably
and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State court or, to the
extent permitted by law, in such Federal court. Each party hereto agrees that a
final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in any Loan Document shall affect any right that any
Bank or the Agent may otherwise have to bring any action or proceeding relating
to any Loan Document against any Obligor or its properties in the courts of any
jurisdiction.
(c) The Company irrevocably and unconditionally waives, to the fullest
extent it may legally and effectively do so, any objection that it may now or
hereafter have to the laying of venue of any suit, action or proceeding arising
out of or relating to any Loan Document in any court referred to in subsection
(b) of this Section. Each party hereto irrevocably waives, to the fullest extent
permitted by law, the defense of an inconvenient forum to the maintenance of any
such suit, action or proceeding in any such court.
(d) Each party hereto irrevocably consents to service of process in the
manner provided for notices in Section 10.02. Nothing in any Loan Document will
affect the right of any party hereto to serve process in any other manner
permitted by law.
Section 10.15. Waiver of Jury Trial. EACH PARTY TO THIS AGREEMENT HEREBY
EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH OR
RELATED OR INCIDENTAL TO THE DEALINGS
119
OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO ANY LOAN DOCUMENT, OR THE
TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER FOUNDED IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY
HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO
THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH
ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE
WAIVER OF THEIR RIGHT TO TRIAL BY JURY. THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS.
Section 10.16. Entire Agreement. This Agreement, together with the other
Loan Documents and any separate agreements with respect to fees payable to the
Agent, embodies the entire agreement and understanding among the Company, the
Banks and the Agent, and supersedes all prior or contemporaneous agreements and
understandings of such Persons, verbal or written, relating to the subject
matter hereof and thereof.
[signature pages to follow]
120
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their proper and duly authorized officers as of the day and
year first above written.
CONSECO, INC.
By:/s/William J. Shea
--------------------------------------------
Name: William J. Shea
Title: President and Chief
Executive Officer
BANK OF AMERICA, N.A., as Agent
By:/s/Molly J. Oxford
--------------------------------------------
Name: Molly J. Oxford
Title: Vice President
BANK OF AMERICA, N.A., as a Bank
By:/s/Bridget A. Garavalia
--------------------------------------------
Name: Bridget A. Garavalia
Title: Managing Director
121
[OTHER SIGNATURE BLOCKS]
122
SCHEDULE 7.11
DEBT TO TOTAL CAPITALIZATION RATIO
<TABLE>
<CAPTION>
---------------------------------------------- ------------------------
Fiscal Quarter Ending Ratio
---------------------------------------------- ------------------------
<S> <C>
---------------------------------------------- ------------------------
September 30, 2003 0.358:1.0
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
December 31, 2003 0.356:1.0
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
March 31, 2004 0.351:1.0
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
June 30, 2004 0.339:1.0
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
September 30, 2004 0.335:1.0
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
December 31, 2004 0.333:1.0
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
March 31, 2005 0.328:1.0
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
June 30, 2005 0.317:1.0
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
September 30, 2005 0.313:1.0
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
December 31, 2005 0.305:1.0
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
March 31, 2006 0.295:1.0
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
June 30, 2006 0.284:1.0
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
September 30, 2006 0.280:1.0
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
December 31, 2006 0.267:1.0
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
March 31, 2007 0.261:1.0
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
June 30, 2007 0.243:1.0
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
September 30, 2007 0.237:1.0
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
December 31, 2007 0.216:1.0
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
March 31, 2008 0.210:1.0
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
each Fiscal Quarter thereafter 0.200:1.0
---------------------------------------------- ------------------------
</TABLE>
SCHEDULE 7.12
INTEREST COVERAGE RATIO
<TABLE>
<CAPTION>
---------------------------------------------- ------------------------
Fiscal Quarter Ending Ratio
---------------------------------------------- ------------------------
<S> <C>
---------------------------------------------- ------------------------
December 31, 2003 1.00:1.0
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
March 31, 2004 1.00:1.0
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
June 30, 2004 1.00:1.0
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
September 30, 2004 1.00:1.0
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
December 31, 2004 1.05:1.0
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
March 31, 2005 1.10:1.0
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
June 30, 2005 1.10:1.0
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
September 30, 2005 1.36:1.0
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
December 31, 2005 1.37:1.0
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
March 31, 2006 1.50:1.0
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
June 30, 2006 1.50:1.0
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
September 30, 2006 1.63:1.0
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
December 31, 2006 1.94:1.0
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
March 31, 2007 1.99:1.0
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
June 30, 2007 2.15:1.0
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
September 30, 2007 2.25:1.0
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
December 31, 2007 2.25:1.0
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
March 31, 2008 2.26:1.0
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
June 30, 2008 2.47:1.0
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
September 30, 2008 2.62:1.0
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
December 31, 2008 2.78:1.0
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
March 31, 2009 2.96:1.0
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
June 30, 2009 3.17:1.0
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
September 30, 2009 3.72:1.0
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
each Fiscal Quarter thereafter 4.50:1.0
---------------------------------------------- ------------------------
</TABLE>
SCHEDULE 7.13
CONSECO EBITDA
<TABLE>
<CAPTION>
---------------------------------------------- ------------------------
Fiscal Quarter Ending Amount
---------------------------------------------- ------------------------
<S> <C>
---------------------------------------------- ------------------------
March 31, 2004 $490,000,000
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
June 30, 2004 $767,000,000
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
September 30, 2004 $1,065,000,000
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
December 31, 2004 $1,066,000,000
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
March 31, 2005 $1,067,000,000
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
June 30, 2005 $1,067,000,000
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
September 30, 2005 $1,068,000,000
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
December 31, 2005 $1,073,000,000
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
March 31, 2006 $1,078,000,000
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
June 30, 2006 $1,083,000,000
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
September 30, 2006 $1,089,000,000
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
December 31, 2006 $1,098,000,000
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
March 31, 2007 $1,108,000,000
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
June 30, 2007 $1,118,000,000
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
September 30, 2007 $1,129,000,000
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
December 31, 2007 $1,141,000,000
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
March 31, 2008 $1,155,000,000
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
June 30, 2008 $1,169,000,000
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
September 30, 2008 $1,185,000,000
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
December 31, 2008 $1,200,000,000
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
March 31, 2009 $1,216,000,000
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
June 30, 2009 $1,233,000,000
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
September 30, 2009 $1,252,000,000
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
December 31, 2009 $1,273,000,000
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
each Fiscal Quarter thereafter $1,296,000,000
---------------------------------------------- ------------------------
</TABLE>
SCHEDULE 7.14
AGGREGATE RISK-BASED CAPITAL RATIO
<TABLE>
<CAPTION>
---------------------------------------------- ------------------------
Fiscal Quarter Ending Ratio
---------------------------------------------- ------------------------
<S> <C>
---------------------------------------------- ------------------------
September 30, 2003 158%
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
December 31, 2003 158%
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
March 31, 2004 167%
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
June 30, 2004 176%
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
September 30, 2004 185%
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
December 31, 2004 195%
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
March 31, 2005 197%
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
June 30, 2005 210%
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
September 30, 2005 215%
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
December 31, 2005 220%
---------------------------------------------- ------------------------
---------------------------------------------- ------------------------
each Fiscal Quarter thereafter 225%
---------------------------------------------- ------------------------
</TABLE>
SCHEDULE 7.15
MINIMUM RISK-BASED CAPITAL RATIO
<TABLE>
<CAPTION>
------------- --------------- --------------- ---------------- --------------- ---------------
Each other
Active
Conseco Conseco Material
Bankers Life Conseco Life Annuity Health Insurance
and Casualty Insurance Assurance Insurance Subsidiary
Fiscal Year Company Company Company Company
------------- --------------- --------------- ---------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
------------- --------------- --------------- ---------------- --------------- ---------------
2003 125% 139% 125% 200%* 200%
------------- --------------- --------------- ---------------- --------------- ---------------
------------- --------------- --------------- ---------------- --------------- ---------------
2004 176% 183% 179% 184% 200%
------------- --------------- --------------- ---------------- --------------- ---------------
------------- --------------- --------------- ---------------- --------------- ---------------
2005 190% 179% 191% 184% 200%
------------- --------------- --------------- ---------------- --------------- ---------------
------------- --------------- --------------- ---------------- --------------- ---------------
2006 191% 178% 191% 191% 200%
------------- --------------- --------------- ---------------- --------------- ---------------
------------- --------------- --------------- ---------------- --------------- ---------------
2007 191% 178% 191% 192% 200%
------------- --------------- --------------- ---------------- --------------- ---------------
------------- --------------- --------------- ---------------- --------------- ---------------
2008 191% 178% 191% 191% 200%
------------- --------------- --------------- ---------------- --------------- ---------------
------------- --------------- --------------- ---------------- --------------- ---------------
2009 191% 178% 191% 191% 200%
------------- --------------- --------------- ---------------- --------------- ---------------
</TABLE>
* If the proposed merger of Conseco Life Insurance Company with and into
Conseco Health Insurance Company shall have been consummated on or prior to
December 31, 2003, the relevant ratio for 2003 shall instead be 183%.
Exhibit 10.2
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is entered into as of
September 10, 2003 by and between CONSECO, INC., a Delaware corporation (the
"Issuer"), and the holders of common stock of the Issuer named on the signature
pages hereto; which holders shall be limited to (i) holders of 5% or more of
such class of the Issuer's securities as of the Effective Date, (ii) other
holders who have notified the Issuer in writing that they are members of a
"group" (as such term is defined for purposes of the Exchange Act) of holders
owning 5% or more of such class of the Issuer's securities as of the Effective
Date and (iii) other holders who have notified the Issuer in writing that they
are "underwriters" (as such term is defined in Section 1145 of the Bankruptcy
Code (as defined below)) (the "Initial Holders").
WHEREAS, concurrently herewith the Issuer is consummating the issuance of
Conseco, Inc. common stock, par value $.01 per share (the "Common Stock"),
pursuant to a reorganization plan (the "Plan") under chapter 11 of title 11 of
the United States Code (the "Bankruptcy Code");
WHEREAS, the Initial Holders will be holders of Common Stock of the Issuer
following the confirmation of the Plan;
WHEREAS, the parties hereto wish to enter into this Agreement in order to
provide for certain arrangements concerning their relationship following the
issuance of the Common Stock;
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Defined Terms. As used herein the following terms shall have
the following meanings:
"Affiliate" of any Person means any other Person directly or indirectly
controlling or controlled by or under common control with such Person. For the
purposes of this definition, "control" when used with respect to any Person,
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Agreement" has the meaning set forth in the Preamble hereto.
"Appaloosa" means Appaloosa Management, L.P. and its Affiliates.
"Commission" means the United States Securities and Exchange Commission.
"Common Stock" has the meaning set forth in the Preamble hereto.
"Demand Registration" means a Demand Registration as defined in Section
2.2.
"Effective Date" means the date the Plan becomes effective under the
Bankruptcy Code.
"Exchange Act" means the United States Securities Exchange Act of 1934, as
amended.
"Holder" shall mean any Initial Holder who holds Registrable Securities or
any assignee or transferee of a Registrable Security unless such Registrable
Security is acquired in a public distribution pursuant to a registration
statement under the Securities Act or pursuant to a transaction exempt from
registration under the Securities Act where securities sold in such transaction
may be resold without subsequent registration under the Securities Act.
"Issuer" has the meaning set forth in the Preamble hereto.
"Person" means any individual, corporation, partnership, trust, limited
liability company, government or governmental agency.
"Piggy-Back Registration" means a Piggy-Back Registration as defined in
Section 2.3.
"Preferred Registration Rights Agreement" means that certain Registration
Rights Agreement dated as of even date herewith by and between the Issuer and
certain holders of Preferred Stock.
"Preferred Stock" means the Preferred Stock, par value $.01, of the Issuer.
The terms "register", "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.
"Registrable Securities" means (i) the Common Stock, (ii) any shares of
Common Stock issued upon conversion or exchange of any securities held by the
Initial Holders convertible or exchangeable into Common Stock and (iii) any
other securities that may be issued or distributed in respect of such Common
Stock by way of any stock split, stock dividend, exchange or other distribution,
recapitalization, reclassification, merger, consolidation or similar event. For
the purposes of this Agreement, Registrable Securities of any Holder will cease
to be Registrable Securities when (a) a registration statement covering such
Registrable Securities has been declared effective and such Registrable
Securities have been sold pursuant to such effective registration statement or
(b) in the opinion of counsel for the Issuer the sale of such Holder's
Registrable Securities are not required to be registered under the Securities
Act.
"Securities" means the Common Stock.
"Securities Act" means the United States Securities Act of 1933, as
amended.
"Selling Holder" means a Holder who is selling Registrable Securities
pursuant to a registration statement under the Securities Act.
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"Shelf Registration Statement" means a Shelf Registration Statement as
defined in Section 2.1.
"Underwriter" means a securities dealer who purchases any Registrable
Securities as principal and not as part of such dealer's market-making
activities.
ARTICLE II
REGISTRATION RIGHTS
SECTION 2.1 Shelf Registration.
(a) As expeditiously as practicable (but in no event after the later of (i)
15 days after the date the Issuer is required to file its first annual report on
Form 10-K or quarterly report on Form 10-Q in each case including fresh start
financial statements, whichever comes first and (ii) 90 days after the Effective
Date), the Issuer shall file with the Commission a registration statement (the
"Shelf Registration Statement") relating to the offer and sale of Registrable
Securities by the Holders to the public, from time to time, on a delayed or
continuous basis (but not involving any underwriting). The Issuer shall use its
reasonable best efforts to cause the Shelf Registration Statement to be declared
effective by the Commission as soon as practicable thereafter.
(b) The Issuer agrees to use its reasonable best efforts to keep the Shelf
Registration Statement continuously effective and not to suspend use of the
prospectus included therein in order to permit the prospectus included therein
to be usable by the Holders until the earlier of: (1) the date all Holders could
sell shares free of any volume limitations imposed by Rule 144 of the Securities
Act; (2) the date all Holders have disposed of all Registrable Securities; or
(3) three years from the date on which such Shelf Registration Statement was
declared effective; provided, that the Issuer shall be deemed to have used its
reasonable best efforts to keep the Shelf Registration Statement effective
during the requisite period if it determines, in its reasonable judgment and
upon the advice of counsel, as authorized by a resolution of its Board of
Directors, that the filing of such Shelf Registration Statement or the
maintenance of effectiveness of such Shelf Registration Statement or prospectus
included therein would materially interfere with any material financing,
corporate reorganization or other material transaction involving the Issuer or
any subsidiary, or would require premature disclosure thereof, and the Issuer
promptly gives the Holders written notice of such determination, containing a
general statement of the reasons for such postponement or suspension and an
approximation of the anticipated delay; provided, however, that the failure to
keep the Shelf Registration Statement effective and usable for offers and sales
of Registrable Securities for such reasons shall last no longer than 120 days in
the aggregate in any 12-month period.
SECTION 2.2 Demand Registration.
(a) Commencing 30 days following the Effective Date, any Holder of
Registrable Securities may make a written request substantially in the form of
Annex A hereto for registration under the Securities Act of all or part of its
or their Registrable Securities (a "Demand Registration"); provided that the
Issuer shall not be obligated to effect (i) any
3
Demand Registration, except for the first Demand Registration hereunder, unless
the aggregate market value of the Registrable Securities covered by such written
requests (calculated as of a recent date as determined by the Issuer) is at
least $50,000,000, (ii) more than one Demand Registration in any 6-month period,
(iii) more than three Demand Registrations requested by Appaloosa and more than
two Demand Registrations requested by Holders other than Appaloosa, (iv) any
Demand Registration within 3 months of a previous registration in which the
holders of Registrable Securities were given piggyback rights pursuant to
Section 2.3 and in which there was no reduction in the number of Registrable
Securities requested to be included or (v) any Demand Registration at a time
when doing so would be in violation of Section 5.3(b) of the Preferred
Registration Rights Agreement. Each such request will specify the number of
Registrable Securities proposed to be sold and will also specify the intended
method of disposition thereof and may specify the book-running managing
Underwriter and any additional investment bankers and managers to be used in
connection with an underwritten offering. Promptly after receipt of requests for
the registration of Registrable Securities with an aggregate market value of at
least $50,000,000 (determined as aforesaid) or, in the case of the first Demand
Registration hereunder, promptly after the receipt of a request for the
registration of Registrable Securities, the Issuer will give written notice of
such registration request to all other Holders of the Registrable Securities and
include in such registration all such Registrable Securities with respect to
which the Issuer has received a written request for inclusion therein within 30
calendar days after written notice has been mailed. Each such request will also
specify the number of Registrable Securities to be registered and the intended
method of disposition thereof. The registration statement to be filed pursuant
to a Demand Registration shall not include securities being sold for the account
of other persons and entities (other than securities being sold for the account
of other persons and entities pursuant to the piggy-back registration rights
provisions of the Preferred Registration Rights Agreement) or for the account of
the Issuer, unless the Holders of a majority of the Registrable Securities to be
included in such Demand Registration consent in writing thereto.
(b) A registration will not count as a Demand Registration until it has
become effective and remains effective for not less than 90 days or such shorter
period as is required for all of the Registrable Securities so registered to be
sold unless such Demand Registration has not become effective due solely to the
fault of, or is terminated at the request of, the requesting Holders.
(c) If the Holders of a majority of the Registrable Securities to be
registered in a Demand Registration so elect, the offering of such Registrable
Securities pursuant to such Demand Registration shall be in the form of an
underwritten offering. Unless otherwise specified by the Holders of a majority
of the Registrable Securities to be included in such Demand Registration, and
subject to the approval of such Holders, which shall not be unreasonably
withheld, the Issuer shall select the book-running managing Underwriter in
connection with such offering and any additional investment bankers and managers
to be used in connection with the offering. Any book-running managing
Underwriter or additional investment bankers and managers specified by the
Holders shall be subject to the approval of the Issuer, which shall not be
unreasonably withheld. To the extent 25% or more of the Registrable Securities
so requested to be registered are excluded from the offering in accordance with
Section 2.4, the registration of such offering will not count as a Demand
Registration.
4
SECTION 2.3 Piggy-Back Registration. If the Issuer proposes to file a
registration statement under the Securities Act with respect to an equity
offering by the Issuer for its own account or for the account of any of its
respective securityholders of any class of equity security (other than a
registration statement on Form S-4 or S-8 (or any substitute form that may be
adopted by the Commission) or a registration statement to be filed in connection
with an exchange offer or offering of securities solely to the Issuer's existing
securityholders), then the Issuer shall give written notice of such proposed
filing to the Holders of Registrable Securities as soon as practicable (but in
no event less than 30 calendar days before the anticipated filing date), and
such notice shall offer such Holders the opportunity to register such number of
shares of Registrable Securities as each such Holder may request (a "Piggy-Back
Registration"). The Issuer shall use its reasonable best efforts to cause the
managing Underwriter or Underwriters of a proposed underwritten offering to
permit the Registrable Securities requested to be included in a Piggy-Back
Registration to be included on the same terms and conditions as any similar
securities of the Issuer included therein.
SECTION 2.4 Reduction of Offering. Notwithstanding anything to the contrary
contained herein, if the managing Underwriter or Underwriters of an offering
described in Section 2.2 or 2.3 shall advise the Issuer that, in its judgment,
either (a) the size of the offering that the Holders, the Issuer and such other
persons intend to make exceeds the size that can be sold in an orderly manner in
such offering within a price range acceptable to the Holders, the Issuer or such
other persons participating in the offering, or (b) in the case of a Piggy-Back
Registration, the type of securities proposed to be offered in such registration
statement by the Holders or such other persons would materially adversely affect
such offering, then in the case of (a) above, the amount of securities to be
offered for the accounts of Holders shall be reduced pro rata (according to the
Registrable Securities proposed for registration), to the extent necessary to
reduce the total amount of securities to be included in such offering to the
amount recommended by such managing Underwriter or Underwriters; provided that,
in the case of a Piggy-Back Registration initiated for the account of the
Issuer, the amount of Registrable Securities being offered by Holders shall be
reduced before the amount of securities being offered by the Issuer is reduced
but, subject to (b) above, the proportion by which the amount of Registrable
Securities being offered by Holders is reduced shall not exceed the proportion
by which the amount of such securities intended to be offered by such other
persons or entities is reduced; provided further that, in the case of a
Piggy-Back Registration initiated for the account of other persons or entities,
then the amount of Registrable Securities being offered by Holders shall be
reduced before the amount of securities being offered by such other persons or
entities or the Issuer is reduced; and provided further that, in the case of a
Demand Registration, if securities are being offered for the account of other
persons or entities or for the account of the Issuer, then the amount of such
securities being offered by such other persons or entities or by the Issuer
shall be reduced before the amount of any Registrable Securities intended to be
offered by Holders is reduced; and in the case of (b) above, the type of
securities proposed to be offered in such registration statement by Holders or
such other persons shall not be included in such registration statement.
5
ARTICLE III
REGISTRATION PROCEDURES
SECTION 3.1 Filings; Information. Whenever Holders validly request that any
Registrable Securities be registered pursuant to Section 2.2 hereof, the Issuer
will use its reasonable best efforts to effect the registration and the sale of
such Registrable Securities in accordance with the intended method of
disposition thereof as quickly as practicable, and in connection with any such
request:
(a) The Issuer will as expeditiously as practicable prepare and file with
the Commission a registration statement on any form for which the Issuer then
qualifies or which counsel for the Issuer shall deem appropriate and which form
shall be available for the sale of the Registrable Securities to be registered
thereunder in accordance with the intended method of distribution thereof, and
use its reasonable best efforts to cause such filed registration statement to
become and remain effective for a period of not less than 90 days; provided that
if the Issuer shall furnish to the Holders making a request pursuant to Section
2.2 a resolution of its Board of Directors stating that in their good faith
judgment it would be disadvantageous to the Issuer or its shareholders for such
a registration statement to be filed as expeditiously as practicable or that
such registration and offering would materially interfere with any material
financing, corporate reorganization or other material transaction involving the
Issuer or any of its subsidiaries, or would require premature disclosure
thereof, and promptly gives the Holders making such request written notice that
such determination has been made (a "Valid Business Reason"), the Issuer shall
have a period of not more than 180 days within which to file such registration
statement measured from the date the notice is sent to the Holders in accordance
with Section 2.2 or, in the case of a registration statement that has been filed
in connection with a Demand Registration, the Issuer may cause such registration
statement to be withdrawn and its effectiveness terminated or may postpone
amending or supplementing such registration statement until such Valid Business
Reason no longer exists.
(b) The Issuer will prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective and to comply with the registration form utilized by the Issuer or by
the instructions applicable to such registration form or by the Securities Act
or the rules and regulations promulgated thereunder, until the earlier of (i)
such time as all of such Registrable Securities and other securities have been
disposed of in accordance with the intended methods of disposition or otherwise
by the Selling Holders set forth in such registration statement and (ii) 90
days, in either case, after the initial effective date of such registration
statement.
(c) The Issuer will, prior to filing a registration statement or prospectus
or any amendment or supplement thereto, furnish copies of all such documents to
each Selling Holder and each Underwriter, if any, and their respective counsel,
which documents shall be subject to the review and comment of such Selling
Holder, Underwriter and counsel, and thereafter furnish, without charge, to such
Selling Holder and Underwriter, if any, such number of copies of such
registration statement, each amendment and supplement thereto (in each case
including all exhibits thereto and documents incorporated by reference therein),
the prospectus included in
6
such registration statement (including each preliminary prospectus) and such
other documents as such Selling Holder or Underwriter may reasonably request in
order to facilitate the disposition of the Registrable Securities owned by such
Selling Holder. The information contained in such documents are confidential
shall not be disclosed by such Selling Holder unless (i) the disclosure of such
information is necessary to avoid or correct a misstatement or omission in such
registration statement or (ii) the release of such information is ordered
pursuant to a subpoena or other order from a court of competent jurisdiction.
Each Selling Holder of such Registrable Securities agrees that information
obtained by it as a result of such inspections shall be deemed confidential and
shall not be used by it as the basis for any market transactions in the
securities of the Issuer or its Affiliates unless and until such information is
made generally available to the public. Each Selling Holder of such Registrable
Securities further agrees that it will, upon learning that disclosure of such
information is sought in a court of competent jurisdiction, give notice to the
Issuer and allow the Issuer, at its expense, to undertake appropriate action to
prevent disclosure of the information deemed confidential.
(d) After the filing of the registration statement, the Issuer will
promptly notify each Selling Holder of Registrable Securities covered by such
registration statement of any stop order issued or threatened by the Commission
and take all reasonable actions required to prevent the entry of such stop order
or to remove it if entered.
(e) The Issuer will use its reasonable best efforts to (i) register or
qualify the Registrable Securities under such other securities or blue sky laws
of such jurisdictions in the United States as any Selling Holder reasonably (in
the light of such Selling Holder's intended plan of distribution) requests and
(ii) cause such Registrable Securities to be registered with or approved by such
other federal and state governmental agencies or authorities as may be necessary
to enable the Selling Holders to consummate the disposition of such Registrable
Securities and do any and all other acts and things that may be reasonably
necessary or advisable to enable such Selling Holder to consummate the
disposition of the Registrable Securities owned by such Selling Holder; provided
that the Issuer will not be required to (A) qualify generally to do business in
any jurisdiction where it would not otherwise be required to qualify but for
this paragraph (e), (B) subject itself to taxation in any such jurisdiction or
(C) consent to general service of process in any such jurisdiction.
(f) The Issuer will promptly notify each Selling Holder of such Registrable
Securities, at any time when a prospectus relating thereto is required to be
delivered under the Securities Act, of the discovery of any condition or the
occurrence of any event requiring the preparation of a supplement or amendment
to such prospectus so that, as thereafter delivered to the purchasers of such
Registrable Securities, such prospectus will not contain an 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 and promptly make
available to each Selling Holder any such supplement or amendment.
(g) The Issuer will enter into customary agreements (including an
underwriting agreement in customary form) and take such other actions as are
reasonably required in order to expedite or facilitate the disposition of such
Registrable Securities.
7
(h) The Issuer will make available for inspection by any Selling Holder,
any Underwriter participating in any disposition pursuant to such registration
statement and any attorney, accountant or other professional retained by any
such Selling Holder or Underwriter (collectively, the "Inspectors"), all
financial and other records, pertinent corporate documents and properties of the
Issuer (collectively, the "Records") as shall be reasonably necessary to enable
them to exercise their due diligence responsibility, and cause the Issuer's
officers, directors and employees to supply all information reasonably requested
by any Inspectors in connection with such registration statement. Records which
the Issuer determines, in good faith, to be confidential and which it notifies
the Inspectors are confidential shall not be disclosed by the Inspectors unless
(i) the disclosure of such Records is necessary to avoid or correct a
misstatement or omission in such registration statement or (ii) the release of
such Records is ordered pursuant to a subpoena or other order from a court of
competent jurisdiction. Each Selling Holder of such Registrable Securities
agrees that information obtained by it as a result of such inspections shall be
deemed confidential and shall not be used by it as the basis for any market
transactions in the securities of the Issuer or its Affiliates unless and until
such information is made generally available to the public. Each Selling Holder
of such Registrable Securities further agrees that it will, upon learning that
disclosure of such Records is sought in a court of competent jurisdiction, give
notice to the Issuer and allow the Issuer, at its expense, to undertake
appropriate action to prevent disclosure of the Records deemed confidential.
(i) The Issuer will use reasonable best efforts to cause to be furnished to
each Selling Holder and to each Underwriter, if any, a signed counterpart,
addressed to such Selling Holder or Underwriter, of (i) an opinion or opinions
of counsel to the Issuer and (ii) a comfort letter or comfort letters from the
Issuer's independent public accountants, each in customary form and covering
such matters of the type customarily covered by opinions of counsel or comfort
letters, as the case may be, as the managing Underwriter for the offering
reasonably requests.
(j) The Issuer will otherwise use its reasonable best efforts to comply
with all applicable rules and regulations of the Commission, and make available
to its securityholders, as soon as reasonably practicable, an earnings statement
covering the first fiscal year of the Issuer commencing after the effective date
of the registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act.
(k) The Issuer will use its reasonable best efforts to cause all such
Registrable Securities to be listed or quoted on each securities exchange or
inter-dealer automated quotation system on which similar securities issued by
the Issuer are then listed or quoted.
The Issuer may require each Selling Holder of Registrable Securities to
promptly furnish in writing to the Issuer such information regarding such
Selling Holder and the distribution of the Registrable Securities as the Issuer
may from time to time reasonably request and such other information as may be
legally required in connection with such registration.
Each Selling Holder agrees that, upon receipt of any notice from the Issuer
of the discovery of any condition or the happening of any event, in each case of
the kind described in Section 3.1(f) hereof, such Selling Holder will forthwith
discontinue disposition of Registrable Securities pursuant to the registration
statement covering such Registrable Securities until such Selling Holder's
receipt of the copies of the supplemented or amended prospectus contemplated
8
by Section 3.1(f) hereof, and, if so directed by the Issuer, such Selling Holder
will deliver to the Issuer (at the Issuer's expense) all copies, other than
permanent file copies then in such Selling Holder's possession, of the most
recent prospectus covering such Registrable Securities at the time of receipt of
such notice. In the event the Issuer shall give such notice, the Issuer shall
extend the period during which such registration statement shall be maintained
effective (including the periods referred to in Sections 3.1(a) and 3.1(b)
hereof) by the number of days during the period from and including the date of
the giving of notice pursuant to Section 3.1(f) hereof to the date when the
Issuer shall make available to the Selling Holders of Registrable Securities
covered by such registration statement a prospectus supplemented or amended to
conform with the requirements of Section 3.1(f) hereof.
SECTION 3.2 Registration Expenses. In connection with any registration
statement required to be filed hereunder, the Issuer shall pay the following
expenses incurred in connection with the registration hereunder (the
"Registration Expenses"): (i) all registration and filing fees, (ii) fees and
expenses of compliance with State securities or "blue sky" laws (including
reasonable fees and disbursements of counsel in connection with blue sky
qualifications of the Registrable Securities), (iii) printing, messenger and
customary delivery expenses, (iv) internal expenses (including, without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties), (v) the fees and expenses incurred in connection
with any listing or quotation of the Registrable Securities on any securities
exchange or inter-dealer automated quotation system, (vi) reasonable fees and
disbursements of counsel for the Issuer and customary fees and expenses for
independent certified public accountants retained by the Issuer (including the
costs associated with the delivery by independent certified public accountants
of a comfort letter or comfort letters requested pursuant to Section 3.1(i)
hereof), (vii) the reasonable fees and expenses of any special experts retained
by the Issuer in connection with such registration, and (viii) reasonable fees
and expenses of one counsel (who shall be reasonably acceptable to the Issuer)
for the Holders.
ARTICLE IV
INDEMNIFICATION AND CONTRIBUTION
SECTION 4.1 Indemnification by the Issuer. The Issuer agrees to indemnify
and hold harmless each Selling Holder of Registrable Securities, its officers,
directors, partners, employees, advisors and agents, and each Person, if any,
who controls such Selling Holder within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act from and against any and all
losses, claims, damages, expenses (including without limitation reasonable costs
of investigation and fees, disbursements and other charges of counsel) and
liabilities caused by any untrue statement or alleged untrue statement of a
material fact contained in any registration statement or prospectus relating to
the Registrable Securities (as amended or supplemented if the Issuer shall have
furnished any amendments or supplements thereto) or any preliminary prospectus
or any document incorporated by reference in any of the foregoing, or caused by
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except insofar as such
losses, claims, damages, expenses or liabilities are caused by any such untrue
statement or omission or alleged untrue statement or omission based upon
information furnished in writing to the Issuer by such Selling Holder or on
9
such Selling Holder's behalf expressly for use therein. The Issuer also agrees
to indemnify any Underwriters of the Registrable Securities, their officers and
directors and each person who controls such underwriters on substantially the
same basis as that of the indemnification of the Selling Holders provided in
this Section 4.1.
SECTION 4.2 Indemnification by Holders of Registrable Securities. Each
Selling Holder agrees, severally but not jointly, to indemnify and hold harmless
the Issuer, its officers, directors and agents and each Person, if any, who
controls the Issuer within the meaning of either Section 15 of the Securities
Act or Section 20 of the Exchange Act to the same extent as the foregoing
indemnity from the Issuer to such Selling Holder, but only with reference to
information related to such Selling Holder furnished in writing by such Selling
Holder or on such Selling Holder's behalf expressly for use in any registration
statement or prospectus relating to the Registrable Securities, or any amendment
or supplement thereto, or any preliminary prospectus; provided that the
liability of any Selling Holder under this Section 4.2 shall be limited to the
net proceeds received by such Selling Holder in the offering giving rise to such
liability. In case any action or proceeding shall be brought against the Issuer
or its officers, directors or agents or any such controlling person, in respect
of which indemnity may be sought against such Selling Holder, such Selling
Holder shall have the rights and duties given to the Issuer, and the Issuer or
its officers, directors or agents or such controlling person shall have the
rights and duties given to such Selling Holder, by the preceding paragraph. Each
Selling Holder also agrees to indemnify and hold harmless Underwriters of the
Registrable Securities, their officers and directors and each person who
controls such Underwriters on substantially the same basis as that of the
indemnification of the Issuer provided in this Section 4.2.
SECTION 4.3 Conduct of Indemnification Proceedings. In case any proceeding
(including any governmental investigation) shall be instituted involving any
person in respect of which indemnity may be sought pursuant to Section 4.1 or
4.2, such person (an "Indemnified Party") shall promptly notify the person
against whom such indemnity may be sought (an "Indemnifying Party") in writing
and the Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to such Indemnified Party, and
shall assume the payment of all fees and expenses. In any such proceeding, any
Indemnified Party shall have the right to retain its own counsel, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Party
unless (i) the Indemnifying Party and the Indemnified Party shall have mutually
agreed to the retention of such counsel or (ii) the named parties to any such
proceeding (including any impleaded parties) include both the Indemnified Party
and the Indemnifying Party and representation of both parties by the same
counsel would be inappropriate due to actual or potential differing interests
between them. It is understood that the Indemnifying Party shall not, in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for the reasonable fees and expenses of more than one separate firm of
attorneys (in addition to any local counsel) at any time for all such
Indemnified Parties, and that all such fees and expenses shall be reimbursed as
they are incurred. In the case of any such separate firm for the Indemnified
Parties, such firm shall be designated in writing by the Indemnified Parties.
The Indemnifying Party shall not be liable for any settlement of any proceeding
effected without such consent, but if settled with such consent, or if there be
a final judgment for the plaintiff, the Indemnifying Party shall indemnify and
hold harmless such Indemnified Parties from and against any loss or liability
(to the extent stated above) by reason of such settlement or judgment. No
indemnifying party shall, without the prior written consent
10
of the indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of such indemnified
party from all liability arising out of such proceeding.
SECTION 4.4 Contribution. If the indemnification provided for in this
Article 4 is unavailable to the Indemnified Parties in respect of any losses,
claims, damages, expenses or liabilities referred to herein, then each such
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such losses, claims, damages, expenses or liabilities (i) as between the
Issuer and the Selling Holders on the one hand and the Underwriters on the
other, in such proportion as is appropriate to reflect the relative benefits
received by the Issuer and the Selling Holders on the one hand and the
Underwriters on the other from the offering of the Registrable Securities, or if
such allocation is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits but also the relative
fault of the Issuer and the Selling Holders on the one hand and of the
Underwriters on the other in connection with the statements or omissions which
resulted in such losses, claims, damages, expenses or liabilities, as well as
any other relevant equitable considerations, and (ii) as between the Issuer on
the one hand and each Selling Holder on the other, in such proportion as is
appropriate to reflect the relative fault of the Issuer and of each Selling
Holder in connection with such statements or omissions, as well as any other
relevant equitable considerations. The relative benefits received by the Issuer
and the Selling Holders on the one hand and the Underwriters on the other shall
be deemed to be in the same proportion as the total proceeds from the offering
(net of underwriting discounts and commissions but before deducting expenses)
received by the Issuer and the Selling Holders bear to the total underwriting
discounts and commissions received by the Underwriters, in each case as set
forth in the table on the cover page of the prospectus. The relative fault of
the Issuer and the Selling Holders on the one hand and of the Underwriters on
the other shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Issuer
and the Selling Holders or by the Underwriters. The relative fault of the Issuer
on the one hand and of each Selling Holder on the other shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by such party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The Issuer and the Selling Holders agree that it would not be just and
equitable if contribution pursuant to this Section 4.4 were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which did not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an Indemnified Party as a result of the losses,
claims, damages or liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such Indemnified Party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 4.4, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission, and no Selling Holder
shall be required to contribute any amount in excess of the amount by which the
total price at which the Securities of such Selling Holder were offered to the
public exceeds the
11
amount of any damages which such Selling Holder has otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The Selling
Holders' obligations to contribute pursuant to this Section 4.4 are several in
proportion to the proceeds of the offering received by each such Selling Holder
bears to the total proceeds of the offering received by all the Selling Holders
and not joint.
ARTICLE V
MISCELLANEOUS
SECTION 5.1 Participation in Underwritten Registrations. No Person may
participate in any underwritten registration hereunder unless such Person (a)
agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Persons entitled hereunder to approve
such arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements and hereunder.
SECTION 5.2 Rule 144 and Rule 145. The Issuer covenants that it will file
any reports required to be filed by it under the Securities Act and the Exchange
Act and that it will take such further action as any Holder may reasonably
request, all to the extent required from time to time to enable Holders to sell
Registrable Securities without registration under the Securities Act within the
limitation of the exemptions provided by (a) Rule 144 and Rule 145 under the
Securities Act, as such Rules may be amended from time to time, or (b) any
similar rule or regulation hereafter adopted by the Commission. Upon the request
of any Holder, the Issuer will deliver to such Holder a written statement as to
whether it has complied with such requirements.
SECTION 5.3 Holdback Agreements. (a) Restrictions on Public Sale by Holder
of Registrable Securities. To the extent not inconsistent with applicable law,
each Holder whose securities are included in a registration statement agrees not
to effect any public sale or distribution of securities of the same class as the
securities being registered or a similar security of the Issuer, or any
securities convertible into or exchangeable or exercisable for such securities,
including a sale pursuant to Rule 144 or Rule 145 under the Securities Act,
during the 14 days prior to, and during the up to 180-day period beginning on,
the effective date of such registration statement (except as part of such
registration), if and to the extent requested by the Issuer in the case of a
non-underwritten public offering or if and to the extent requested by the
managing Underwriter or Underwriters in the case of an underwritten public
offering.
(b) Restrictions on Public Sale by the Issuer and Others. The Issuer agrees
not to effect any public sale or distribution of any securities of the same
class as those being registered in accordance with Section 2.2 or Section 2.3
hereof, or any securities convertible into or exchangeable or exercisable for
such securities, during the 14 days prior to, and during the
12
period beginning on, the effective date requested by the managing Underwriter or
Underwriters (which period shall not exceed 90 days) of any registration
statement with respect to an underwritten public offering (except as part of
such registration statement as provided herein); provided that the provisions of
this paragraph (b) shall not prevent the conversion or exchange of any
securities pursuant to their terms into or for other securities.
SECTION 5.4 Delay of Registration. No Holder shall have any right to take
any action to restrain, enjoin, or otherwise delay any registration as the
result of any controversy that might arise with respect to the implementation of
this Agreement.
SECTION 5.5 Governing Law. This Agreement shall be interpreted, construed
and enforced in accordance with the laws of the State of New York.
SECTION 5.6 Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors and assigns of the parties hereto.
SECTION 5.7 Entire Agreement; Amendment; Waiver. This Agreement constitutes
the full and entire understanding and agreement between the parties hereto with
respect to the subject hereof. Neither this Agreement nor any terms hereof may
be amended, waived, discharged or terminated, except by a written instrument
signed by the holders of at least a majority of the Registrable Securities
outstanding as of such time and the Issuer and any such amendment, waiver,
discharge or termination shall be binding on all the Holders, but in no event
shall the obligation of any Holder hereunder be materially increased, except
upon the written consent of such Holder.
SECTION 5.8 Notices, etc. All notices and other communications required or
permitted hereunder to the Issuer shall be in writing and shall be mailed by
first-class mail, postage prepaid, or delivered by hand, facsimile transmission
or by messenger, addressed to it at 11825 North Pennsylvania Street, Carmel, IN
46032, Attn.: General Counsel, or to such other address as the Issuer may
specify by notice to the Holders.
SECTION 5.9 Separability. In case any provision of this Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 5.10 Titles and Subtitles. The titles of the paragraphs and
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
SECTION 5.11 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
* * * * *
13
[SIGNATURE PAGE TO COMMON STOCK REGISTRATION RIGHTS AGREEMENT] IN WITNESS
WHEREOF, the parties hereto have set their hands as of the date first above
written.
CONSECO, INC.
By:/s/Daniel J. Murphy
-----------------------------------
Name: Daniel J. Murphy
Title: Senior Vice President and
Treasurer
ANGELO GORDON & CO., L.P.,
on behalf of itself and its affiliates
By: AG Partners, L.P.,
Its General Partner
By:/s/Jeffrey H. Aronson
-----------------------------------
Name: Jeffrey H. Aronson
Title: Authorized Signatory
APPALOOSA MANAGEMENT, L.P.,
on behalf of certain funds for which
it acts as investment advisor
By:/s/Ronald Goldstein
-----------------------------------
Name: Ronald Goldstein
Title: Authorized Signatory
[SIGNATURE PAGE TO COMMON STOCK REGISTRATION RIGHTS AGREEMENT]
CONSECO FINANCE CORP.
By:/s/Charles H. Cremens
-----------------------------------
Name: Charles H. Cremens
Title: President and Chief
Executive Officer
[SIGNATURE PAGE TO COMMON STOCK REGISTRATION RIGHTS AGREEMENT]
ANNEX A
FORM OF NOTICE TO BE DELIVERED
IN CONNECTION WITH A REQUEST FOR
DEMAND REGISTRATION
, 200
------------ --
CONSECO, INC.
11825 N. Pennsylvania Street
Carmel, IN 46032
Dear Sirs:
Pursuant to Section 2.2 of the Registration Rights Agreement dated
September 10, 2003, the undersigned hereby requests Conseco, Inc. (the
"Company") to register __________ shares of the Company's Common Stock, of which
the undersigned is the registered holder.
[We request that such securities be sold in an underwritten offering
[to be lead-managed by _________________]].
[Name of Transferor]
By:
------------------------------------
Exhibit 10.3
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is entered into as of
September 10, 2003 by and between CONSECO, INC., a Delaware corporation (the
"Issuer"), and the holders of convertible exchangeable preferred stock of the
Issuer named on the signature pages hereto; which holders shall be limited to
(i) holders of 5% or more of such class of the Issuer's securities as of the
Effective Date, (ii) other holders who have notified the Issuer in writing that
they are members of a "group" (as such term is defined for purposes of the
Exchange Act) of holders owning 5% or more of such class of the Issuer's
securities as of the Effective Date and (iii) other holders who have notified
the Issuer in writing that they are "underwriters" (as such term is defined in
Section 1145 of the Bankruptcy Code (as defined below)) (the "Initial Holders").
WHEREAS, concurrently herewith the Issuer is consummating the issuance of
Conseco, Inc. Class A Convertible Exchangeable Preferred Stock (the "Preferred
Stock"), pursuant to a reorganization plan (the "Plan") under chapter 11 of
title 11 of the United States Code (the "Bankruptcy Code");
WHEREAS, the Initial Holders will be holders of Preferred Stock of the
Issuer following the confirmation of the Plan;
WHEREAS, the parties hereto wish to enter into this Agreement in order to
provide for certain arrangements concerning their relationship following the
issuance of the Preferred Stock;
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Defined Terms. As used herein the following terms shall have
the following meanings:
"Affiliate" of any Person means any other Person directly or indirectly
controlling or controlled by or under common control with such Person. For the
purposes of this definition, "control" when used with respect to any Person,
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Agreement" has the meaning set forth in the Preamble hereto.
"Angelo Gordon" means Angelo Gordon & Co., L.P. and its Affiliates.
"Bank of America" means Bank of America, N.A. and its Affiliates.
"Commission" means the United States Securities and Exchange Commission.
"Common Stock" means the Common Stock, par value $0.01, of the Issuer.
"Common Registration Rights Agreement" means that certain Registration
Rights Agreement dated of even date herewith by and between the Issuer and
certain holders of Common Stock.
"Demand Registration" means a Demand Registration as defined in Section
2.2.
"Effective Date" means the date the Plan becomes effective under the
Bankruptcy Code.
"Exchange Act" means the United States Securities Exchange Act of 1934, as
amended.
"Holder" shall mean any Initial Holder who holds Registrable Securities or
any assignee or transferee of a Registrable Security unless such Registrable
Security is acquired in a public distribution pursuant to a registration
statement under the Securities Act or pursuant to a transaction exempt from
registration under the Securities Act where securities sold in such transaction
may be resold without subsequent registration under the Securities Act.
"Issuer" has the meaning set forth in the Preamble hereto.
"Naugatuck" means Naugatuck Holding Corp. and its Affiliates.
"Person" means any individual, corporation, partnership, trust, limited
liability company, government or governmental agency.
"Piggy-Back Registration" means a Piggy-Back Registration as defined in
Section 2.3.
"Preferred Stock" has the meaning set forth in the preamble hereto.
The terms "register", "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.
"Registrable Securities" means (i) the Preferred Stock, (ii) any other
securities that may be issued or distributed in respect of such Preferred Stock
by way of any stock split, stock dividend, exchange or other distribution,
recapitalization, reclassification, merger, consolidation or similar event and
(iii) the shares of Common Stock issuable upon conversion or exchange of the
Preferred Stock. For the purposes of this Agreement, Registrable Securities of
any Holder will cease to be Registrable Securities when (a) a registration
statement covering such Registrable Securities has been declared effective and
such Registrable Securities have been sold pursuant to such effective
registration statement or (b) in the opinion of counsel for the Issuer the sale
of such Holder's Registrable Securities are not required to be registered under
the Securities Act.
"Securities" means the Preferred Stock.
2
"Securities Act" means the United States Securities Act of 1933, as
amended.
"Selling Holder" means a Holder who is selling Registrable Securities
pursuant to a registration statement under the Securities Act.
"Shelf Registration Statement" means a Shelf Registration Statement as
defined in Section 2.1.
"Underwriter" means a securities dealer who purchases any Registrable
Securities as principal and not as part of such dealer's market-making
activities.
ARTICLE II
REGISTRATION RIGHTS
SECTION 2.1 Shelf Registration.
(a) As expeditiously as practicable (but in no event after the later of (i)
15 days after the date the Issuer is required to file its first annual report on
Form 10-K or quarterly report on Form 10-Q in each case including fresh start
financial statements, whichever comes first and (ii) 90 days after the Effective
Date), the Issuer shall file with the Commission a registration statement (the
"Shelf Registration Statement") relating to the offer and sale of Registrable
Securities by the Holders to the public, from time to time, on a delayed or
continuous basis (but not involving any underwriting). The Issuer shall use its
reasonable best efforts to cause the Shelf Registration Statement to be declared
effective by the Commission as soon as practicable thereafter.
(b) The Issuer agrees to use its reasonable best efforts to keep the Shelf
Registration Statement continuously effective and not to suspend use of the
prospectus included therein in order to permit the prospectus included therein
to be usable by the Holders until the earlier of: (1) the date all Holders could
sell shares free of any volume limitations imposed by Rule 144 of the Securities
Act; (2) the date all Holders have disposed of all Registrable Securities; or
(3) three years from the date on which such Shelf Registration Statement was
declared effective; provided, that the Issuer shall be deemed to have used its
reasonable best efforts to keep the Shelf Registration Statement effective
during the requisite period if it determines, in its reasonable judgment and
upon the advice of counsel, as authorized by a resolution of its Board of
Directors, that the filing of such Shelf Registration Statement or the
maintenance of effectiveness of such Shelf Registration Statement or prospectus
included therein would materially interfere with any material financing,
corporate reorganization or other material transaction involving the Issuer or
any subsidiary, or would require premature disclosure thereof, and the Issuer
promptly gives the Holders written notice of such determination, containing a
general statement of the reasons for such postponement or suspension and an
approximation of the anticipated delay; provided, however, that the failure to
keep the Shelf Registration Statement effective and usable for offers and sales
of Registrable Securities for such reasons shall last no longer than 120 days in
the aggregate in any 12-month period.
3
SECTION 2.2 Demand Registration.
(a) Commencing 30 days following the Effective Date, any Holder of
Registrable Securities may make a written request substantially in the form of
Annex A hereto for registration under the Securities Act of all or part of its
or their Registrable Securities (a "Demand Registration"); provided that the
Issuer shall not be obligated to effect (i) any Demand Registration, except for
the first Demand Registration hereunder, unless the aggregate market value of
the Registrable Securities covered by such written requests (calculated as of a
recent date as determined by the Issuer) is at least $50,000,000; provided that
in the case of a Demand Registration which may only be requested by Angelo
Gordon, Bank of America or Naugatuck (as provided in clause (iii) below) the
aggregate market value of the Registrable Securities covered by such written
requests (calculated as of a recent date as determined by the Issuer) is at
least $25,000,000, (ii) more than one Demand Registration in any 6-month period,
(iii) more than five Demand Registrations in total (of which, one such Demand
Registration may only be requested by Angelo Gordon, one such Demand
Registration may only be requested by Bank of America and one such Demand
Registration may only be requested by Naugatuck), (iv) any Demand Registration
within 3 months of a previous registration in which the holders of Registrable
Securities were given piggyback rights pursuant to Section 2.3 and in which
there was no reduction in the number of Registrable Securities requested to be
included or (v) any Demand Registration at a time when doing so would be in
violation of Section 5.3(b) of the Common Registration Rights Agreement. Each
such request will specify the number of Registrable Securities proposed to be
sold and will also specify the intended method of disposition thereof and may
specify the book-running managing Underwriter and any additional investment
bankers and managers to be used in connection with an underwritten offering.
Promptly after receipt of requests for the registration of Registrable
Securities with an aggregate market value of at least $50,000,000 (or
$25,000,000 for a Demand Registration which may only be requested by Angelo
Gordon, Bank of America or Naugatuck, as provided in clause (iii) above), in
each case, determined as aforesaid or, in the case of the first Demand
Registration hereunder, promptly after the receipt of a request for the
registration of Registrable Securities, the Issuer will give written notice of
such registration request to all other Holders of the Registrable Securities and
include in such registration all such Registrable Securities with respect to
which the Issuer has received a written request for inclusion therein within 30
calendar days after written notice has been mailed. Each such request will also
specify the number of Registrable Securities to be registered and the intended
method of disposition thereof. The registration statement to be filed pursuant
to a Demand Registration shall not include securities being sold for the account
of other persons and entities (other than securities being sold for the account
of other persons and entities pursuant to the piggy-back registration rights
provisions of the Common Registration Rights Agreement) or for the account of
the Issuer, unless the Holders of a majority of the Registrable Securities to be
included in such Demand Registration consent in writing thereto.
(b) A registration will not count as a Demand Registration until it has
become effective and remains effective for not less than 90 days or such shorter
period as is required for all of the Registrable Securities so registered to be
sold unless such Demand Registration has not become effective due solely to the
fault of, or is terminated at the request of, the requesting Holders.
4
(c) If the Holders of a majority of the Registrable Securities to be
registered in a Demand Registration so elect, the offering of such Registrable
Securities pursuant to such Demand Registration shall be in the form of an
underwritten offering. Unless otherwise specified by the Holders of a majority
of the Registrable Securities to be included in such Demand Registration, and
subject to the approval of such Holders, which shall not be unreasonably
withheld, the Issuer shall select the book-running managing Underwriter in
connection with such offering and any additional investment bankers and managers
to be used in connection with the offering. Any book-running managing
Underwriter or additional investment bankers and managers specified by the
Holders shall be subject to the approval of the Issuer, which shall not be
unreasonably withheld. To the extent 25% or more of the Registrable Securities
so requested to be registered are excluded from the offering in accordance with
Section 2.4, the registration of such offering will not count as a Demand
Registration.
SECTION 2.3 Piggy-Back Registration. If the Issuer proposes to file a
registration statement under the Securities Act with respect to an equity
offering by the Issuer for its own account or for the account of any of its
respective securityholders of any class of equity security (other than a
registration statement on Form S-4 or S-8 (or any substitute form that may be
adopted by the Commission) or a registration statement to be filed in connection
with an exchange offer or offering of securities solely to the Issuer's existing
securityholders), then the Issuer shall give written notice of such proposed
filing to the Holders of Registrable Securities as soon as practicable (but in
no event less than 30 calendar days before the anticipated filing date), and
such notice shall offer such Holders the opportunity to register such number of
shares of Registrable Securities as each such Holder may request (a "Piggy-Back
Registration"). The Issuer shall use its reasonable best efforts to cause the
managing Underwriter or Underwriters of a proposed underwritten offering to
permit the Registrable Securities requested to be included in a Piggy-Back
Registration to be included on the same terms and conditions as any similar
securities of the Issuer included therein.
SECTION 2.4 Reduction of Offering. Notwithstanding anything to the contrary
contained herein, if the managing Underwriter or Underwriters of an offering
described in Section 2.2 or 2.3 shall advise the Issuer that, in its judgment,
either (a) the size of the offering that the Holders, the Issuer and such other
persons intend to make exceeds the size that can be sold in an orderly manner in
such offering within a price range acceptable to the Holders, the Issuer or such
other persons participating in the offering, or (b) in the case of a Piggy-Back
Registration, the type of securities proposed to be offered in such registration
statement by the Holders or such other persons would materially adversely affect
such offering, then in the case of (a) above, the amount of securities to be
offered for the accounts of Holders shall be reduced pro rata (according to the
Registrable Securities proposed for registration), to the extent necessary to
reduce the total amount of securities to be included in such offering to the
amount recommended by such managing Underwriter or Underwriters; provided that,
in the case of a Piggy-Back Registration initiated for the account of the
Issuer, the amount of Registrable Securities being offered by Holders shall be
reduced before the amount of securities being offered by the Issuer is reduced
but, subject to (b) above, the proportion by which the amount of Registrable
Securities being offered by Holders is reduced shall not exceed the proportion
by which the amount of such securities intended to be offered by such other
persons or entities is reduced; provided further that, in the case of a
Piggy-Back Registration initiated for the account of other persons or entities,
then the amount of Registrable Securities being offered by Holders shall be
reduced
5
before the amount of securities being offered by such other persons or entities
or the Issuer is reduced; and provided further that, in the case of a Demand
Registration, if securities are being offered for the account of other persons
or entities or for the account of the Issuer, then the amount of such securities
being offered by such other persons or entities or by the Issuer shall be
reduced before the amount of any Registrable Securities intended to be offered
by Holders is reduced; and in the case of (b) above, the type of securities
proposed to be offered in such registration statement by Holders or such other
persons shall not be included in such registration statement.
ARTICLE III
REGISTRATION PROCEDURES
SECTION 3.1 Filings; Information. Whenever Holders validly request that any
Registrable Securities be registered pursuant to Section 2.2 hereof, the Issuer
will use its reasonable best efforts to effect the registration and the sale of
such Registrable Securities in accordance with the intended method of
disposition thereof as quickly as practicable, and in connection with any such
request:
(a) The Issuer will as expeditiously as practicable prepare and file with
the Commission a registration statement on any form for which the Issuer then
qualifies or which counsel for the Issuer shall deem appropriate and which form
shall be available for the sale of the Registrable Securities to be registered
thereunder in accordance with the intended method of distribution thereof, and
use its reasonable best efforts to cause such filed registration statement to
become and remain effective for a period of not less than 90 days; provided that
if the Issuer shall furnish to the Holders making a request pursuant to Section
2.2 a resolution of its Board of Directors stating that in their good faith
judgment it would be disadvantageous to the Issuer or its shareholders for such
a registration statement to be filed as expeditiously as practicable or that
such registration and offering would materially interfere with any material
financing, corporate reorganization or other material transaction involving the
Issuer or any of its subsidiaries, or would require premature disclosure
thereof, and promptly gives the Holders making such request written notice that
such determination has been made (a "Valid Business Reason"), the Issuer shall
have a period of not more than 180 days within which to file such registration
statement measured from the date the notice is sent to the Holders in accordance
with Section 2.2 or, in the case of a registration statement that has been filed
in connection with a Demand Registration, the Issuer may cause such registration
statement to be withdrawn and its effectiveness terminated or may postpone
amending or supplementing such registration statement until such Valid Business
Reason no longer exists.
(b) The Issuer will prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective and to comply with the registration form utilized by the Issuer or by
the instructions applicable to such registration form or by the Securities Act
or the rules and regulations promulgated thereunder, until the earlier of (i)
such time as all of such Registrable Securities and other securities have been
disposed of in accordance with the intended methods of disposition or otherwise
by the Selling Holders set
6
forth in such registration statement and (ii) 90 days, in either case, after the
initial effective date of such registration statement.
(c) The Issuer will, prior to filing a registration statement or prospectus
or any amendment or supplement thereto, furnish copies of all such documents to
each Selling Holder and each Underwriter, if any, and their respective counsel,
which documents shall be subject to the review and comment of such Selling
Holder, Underwriter and counsel, and thereafter furnish, without charge, to such
Selling Holder and Underwriter, if any, such number of copies of such
registration statement, each amendment and supplement thereto (in each case
including all exhibits thereto and documents incorporated by reference therein),
the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such Selling Holder or
Underwriter may reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such Selling Holder. The information contained
in such documents are confidential shall not be disclosed by such Selling Holder
unless (i) the disclosure of such information is necessary to avoid or correct a
misstatement or omission in such registration statement or (ii) the release of
such information is ordered pursuant to a subpoena or other order from a court
of competent jurisdiction. Each Selling Holder of such Registrable Securities
agrees that information obtained by it as a result of such inspections shall be
deemed confidential and shall not be used by it as the basis for any market
transactions in the securities of the Issuer or its Affiliates unless and until
such information is made generally available to the public. Each Selling Holder
of such Registrable Securities further agrees that it will, upon learning that
disclosure of such information is sought in a court of competent jurisdiction,
give notice to the Issuer and allow the Issuer, at its expense, to undertake
appropriate action to prevent disclosure of the information deemed confidential.
(d) After the filing of the registration statement, the Issuer will
promptly notify each Selling Holder of Registrable Securities covered by such
registration statement of any stop order issued or threatened by the Commission
and take all reasonable actions required to prevent the entry of such stop order
or to remove it if entered.
(e) The Issuer will use its reasonable best efforts to (i) register or
qualify the Registrable Securities under such other securities or blue sky laws
of such jurisdictions in the United States as any Selling Holder reasonably (in
the light of such Selling Holder's intended plan of distribution) requests and
(ii) cause such Registrable Securities to be registered with or approved by such
other federal and state governmental agencies or authorities as may be necessary
to enable the Selling Holders to consummate the disposition of such Registrable
Securities and do any and all other acts and things that may be reasonably
necessary or advisable to enable such Selling Holder to consummate the
disposition of the Registrable Securities owned by such Selling Holder; provided
that the Issuer will not be required to (A) qualify generally to do business in
any jurisdiction where it would not otherwise be required to qualify but for
this paragraph (e), (B) subject itself to taxation in any such jurisdiction or
(C) consent to general service of process in any such jurisdiction.
(f) The Issuer will promptly notify each Selling Holder of such Registrable
Securities, at any time when a prospectus relating thereto is required to be
delivered under the Securities Act, of the discovery of any condition or the
occurrence of any event requiring the preparation of a supplement or amendment
to such prospectus so that, as thereafter delivered to
7
the purchasers of such Registrable Securities, such prospectus will not contain
an 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 and promptly make available to each Selling Holder any such
supplement or amendment.
(g) The Issuer will enter into customary agreements (including an
underwriting agreement in customary form) and take such other actions as are
reasonably required in order to expedite or facilitate the disposition of such
Registrable Securities.
(h) The Issuer will make available for inspection by any Selling Holder,
any Underwriter participating in any disposition pursuant to such registration
statement and any attorney, accountant or other professional retained by any
such Selling Holder or Underwriter (collectively, the "Inspectors"), all
financial and other records, pertinent corporate documents and properties of the
Issuer (collectively, the "Records") as shall be reasonably necessary to enable
them to exercise their due diligence responsibility, and cause the Issuer's
officers, directors and employees to supply all information reasonably requested
by any Inspectors in connection with such registration statement. Records which
the Issuer determines, in good faith, to be confidential and which it notifies
the Inspectors are confidential shall not be disclosed by the Inspectors unless
(i) the disclosure of such Records is necessary to avoid or correct a
misstatement or omission in such registration statement or (ii) the release of
such Records is ordered pursuant to a subpoena or other order from a court of
competent jurisdiction. Each Selling Holder of such Registrable Securities
agrees that information obtained by it as a result of such inspections shall be
deemed confidential and shall not be used by it as the basis for any market
transactions in the securities of the Issuer or its Affiliates unless and until
such information is made generally available to the public. Each Selling Holder
of such Registrable Securities further agrees that it will, upon learning that
disclosure of such Records is sought in a court of competent jurisdiction, give
notice to the Issuer and allow the Issuer, at its expense, to undertake
appropriate action to prevent disclosure of the Records deemed confidential.
(i) The Issuer will use reasonable best efforts to cause to be furnished to
each Selling Holder and to each Underwriter, if any, a signed counterpart,
addressed to such Selling Holder or Underwriter, of (i) an opinion or opinions
of counsel to the Issuer and (ii) a comfort letter or comfort letters from the
Issuer's independent public accountants, each in customary form and covering
such matters of the type customarily covered by opinions of counsel or comfort
letters, as the case may be, as the managing Underwriter for the offering
reasonably requests.
(j) The Issuer will otherwise use its reasonable best efforts to comply
with all applicable rules and regulations of the Commission, and make available
to its securityholders, as soon as reasonably practicable, an earnings statement
covering the first fiscal year of the Issuer commencing after the effective date
of the registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act.
(k) The Issuer will use its reasonable best efforts to cause all such
Registrable Securities to be listed or quoted on each securities exchange or
inter-dealer automated quotation system on which similar securities issued by
the Issuer are then listed or quoted.
8
The Issuer may require each Selling Holder of Registrable Securities to
promptly furnish in writing to the Issuer such information regarding such
Selling Holder and the distribution of the Registrable Securities as the Issuer
may from time to time reasonably request and such other information as may be
legally required in connection with such registration.
Each Selling Holder agrees that, upon receipt of any notice from the Issuer
of the discovery of any condition or the happening of any event, in each case of
the kind described in Section 3.1(f) hereof, such Selling Holder will forthwith
discontinue disposition of Registrable Securities pursuant to the registration
statement covering such Registrable Securities until such Selling Holder's
receipt of the copies of the supplemented or amended prospectus contemplated by
Section 3.1(f) hereof, and, if so directed by the Issuer, such Selling Holder
will deliver to the Issuer (at the Issuer's expense) all copies, other than
permanent file copies then in such Selling Holder's possession, of the most
recent prospectus covering such Registrable Securities at the time of receipt of
such notice. In the event the Issuer shall give such notice, the Issuer shall
extend the period during which such registration statement shall be maintained
effective (including the periods referred to in Sections 3.1(a) and 3.1(b)
hereof) by the number of days during the period from and including the date of
the giving of notice pursuant to Section 3.1(f) hereof to the date when the
Issuer shall make available to the Selling Holders of Registrable Securities
covered by such registration statement a prospectus supplemented or amended to
conform with the requirements of Section 3.1(f) hereof.
SECTION 3.2 Registration Expenses. In connection with any registration
statement required to be filed hereunder, the Issuer shall pay the following
expenses incurred in connection with the registration hereunder (the
"Registration Expenses"): (i) all registration and filing fees, (ii) fees and
expenses of compliance with State securities or "blue sky" laws (including
reasonable fees and disbursements of counsel in connection with blue sky
qualifications of the Registrable Securities), (iii) printing, messenger and
customary delivery expenses, (iv) internal expenses (including, without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties), (v) the fees and expenses incurred in connection
with any listing or quotation of the Registrable Securities on any securities
exchange or inter-dealer automated quotation system, (vi) reasonable fees and
disbursements of counsel for the Issuer and customary fees and expenses for
independent certified public accountants retained by the Issuer (including the
costs associated with the delivery by independent certified public accountants
of a comfort letter or comfort letters requested pursuant to Section 3.1(i)
hereof), (vii) the reasonable fees and expenses of any special experts retained
by the Issuer in connection with such registration, and (viii) reasonable fees
and expenses of one counsel (who shall be reasonably acceptable to the Issuer)
for the Holders.
ARTICLE IV
INDEMNIFICATION AND CONTRIBUTION
SECTION 4.1 Indemnification by the Issuer. The Issuer agrees to indemnify
and hold harmless each Selling Holder of Registrable Securities, its officers,
directors, partners, employees, advisors and agents, and each Person, if any,
who controls such Selling Holder within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act from and against any and all
losses, claims, damages, expenses (including without limitation
9
reasonable costs of investigation and fees, disbursements and other charges of
counsel) and liabilities caused by any untrue statement or alleged untrue
statement of a material fact contained in any registration statement or
prospectus relating to the Registrable Securities (as amended or supplemented if
the Issuer shall have furnished any amendments or supplements thereto) or any
preliminary prospectus or any document incorporated by reference in any of the
foregoing, or caused by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except insofar as such losses, claims, damages, expenses or
liabilities are caused by any such untrue statement or omission or alleged
untrue statement or omission based upon information furnished in writing to the
Issuer by such Selling Holder or on such Selling Holder's behalf expressly for
use therein. The Issuer also agrees to indemnify any Underwriters of the
Registrable Securities, their officers and directors and each person who
controls such underwriters on substantially the same basis as that of the
indemnification of the Selling Holders provided in this Section 4.1.
SECTION 4.2 Indemnification by Holders of Registrable Securities. Each
Selling Holder agrees, severally but not jointly, to indemnify and hold harmless
the Issuer, its officers, directors and agents and each Person, if any, who
controls the Issuer within the meaning of either Section 15 of the Securities
Act or Section 20 of the Exchange Act to the same extent as the foregoing
indemnity from the Issuer to such Selling Holder, but only with reference to
information related to such Selling Holder furnished in writing by such Selling
Holder or on such Selling Holder's behalf expressly for use in any registration
statement or prospectus relating to the Registrable Securities, or any amendment
or supplement thereto, or any preliminary prospectus; provided that the
liability of any Selling Holder under this Section 4.2 shall be limited to the
net proceeds received by such Selling Holder in the offering giving rise to such
liability. In case any action or proceeding shall be brought against the Issuer
or its officers, directors or agents or any such controlling person, in respect
of which indemnity may be sought against such Selling Holder, such Selling
Holder shall have the rights and duties given to the Issuer, and the Issuer or
its officers, directors or agents or such controlling person shall have the
rights and duties given to such Selling Holder, by the preceding paragraph. Each
Selling Holder also agrees to indemnify and hold harmless Underwriters of the
Registrable Securities, their officers and directors and each person who
controls such Underwriters on substantially the same basis as that of the
indemnification of the Issuer provided in this Section 4.2.
SECTION 4.3 Conduct of Indemnification Proceedings. In case any proceeding
(including any governmental investigation) shall be instituted involving any
person in respect of which indemnity may be sought pursuant to Section 4.1 or
4.2, such person (an "Indemnified Party") shall promptly notify the person
against whom such indemnity may be sought (an "Indemnifying Party") in writing
and the Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to such Indemnified Party, and
shall assume the payment of all fees and expenses. In any such proceeding, any
Indemnified Party shall have the right to retain its own counsel, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Party
unless (i) the Indemnifying Party and the Indemnified Party shall have mutually
agreed to the retention of such counsel or (ii) the named parties to any such
proceeding (including any impleaded parties) include both the Indemnified Party
and the Indemnifying Party and representation of both parties by the same
counsel would be inappropriate due to actual or potential differing interests
between them. It is understood that
10
the Indemnifying Party shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys (in addition to any local
counsel) at any time for all such Indemnified Parties, and that all such fees
and expenses shall be reimbursed as they are incurred. In the case of any such
separate firm for the Indemnified Parties, such firm shall be designated in
writing by the Indemnified Parties. The Indemnifying Party shall not be liable
for any settlement of any proceeding effected without such consent, but if
settled with such consent, or if there be a final judgment for the plaintiff,
the Indemnifying Party shall indemnify and hold harmless such Indemnified
Parties from and against any loss or liability (to the extent stated above) by
reason of such settlement or judgment. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability arising out of such proceeding.
SECTION 4.4 Contribution. If the indemnification provided for in this
Article 4 is unavailable to the Indemnified Parties in respect of any losses,
claims, damages, expenses or liabilities referred to herein, then each such
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such losses, claims, damages, expenses or liabilities (i) as between the
Issuer and the Selling Holders on the one hand and the Underwriters on the
other, in such proportion as is appropriate to reflect the relative benefits
received by the Issuer and the Selling Holders on the one hand and the
Underwriters on the other from the offering of the Registrable Securities, or if
such allocation is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits but also the relative
fault of the Issuer and the Selling Holders on the one hand and of the
Underwriters on the other in connection with the statements or omissions which
resulted in such losses, claims, damages, expenses or liabilities, as well as
any other relevant equitable considerations, and (ii) as between the Issuer on
the one hand and each Selling Holder on the other, in such proportion as is
appropriate to reflect the relative fault of the Issuer and of each Selling
Holder in connection with such statements or omissions, as well as any other
relevant equitable considerations. The relative benefits received by the Issuer
and the Selling Holders on the one hand and the Underwriters on the other shall
be deemed to be in the same proportion as the total proceeds from the offering
(net of underwriting discounts and commissions but before deducting expenses)
received by the Issuer and the Selling Holders bear to the total underwriting
discounts and commissions received by the Underwriters, in each case as set
forth in the table on the cover page of the prospectus. The relative fault of
the Issuer and the Selling Holders on the one hand and of the Underwriters on
the other shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Issuer
and the Selling Holders or by the Underwriters. The relative fault of the Issuer
on the one hand and of each Selling Holder on the other shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by such party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
11
The Issuer and the Selling Holders agree that it would not be just and
equitable if contribution pursuant to this Section 4.4 were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which did not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an Indemnified Party as a result of the losses,
claims, damages or liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such Indemnified Party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 4.4, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission, and no Selling Holder
shall be required to contribute any amount in excess of the amount by which the
total price at which the Securities of such Selling Holder were offered to the
public exceeds the amount of any damages which such Selling Holder has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Selling Holders' obligations to contribute pursuant to
this Section 4.4 are several in proportion to the proceeds of the offering
received by each such Selling Holder bears to the total proceeds of the offering
received by all the Selling Holders and not joint.
ARTICLE V
MISCELLANEOUS
SECTION 5.1 Participation in Underwritten Registrations. No Person may
participate in any underwritten registration hereunder unless such Person (a)
agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Persons entitled hereunder to approve
such arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements and hereunder.
SECTION 5.2 Rule 144 and Rule 145. The Issuer covenants that it will file
any reports required to be filed by it under the Securities Act and the Exchange
Act and that it will take such further action as any Holder may reasonably
request, all to the extent required from time to time to enable Holders to sell
Registrable Securities without registration under the Securities Act within the
limitation of the exemptions provided by (a) Rule 144 and Rule 145 under the
Securities Act, as such Rules may be amended from time to time, or (b) any
similar rule or regulation hereafter adopted by the Commission. Upon the request
of any Holder, the Issuer will deliver to such Holder a written statement as to
whether it has complied with such requirements.
SECTION 5.3 Holdback Agreements. (a) Restrictions on Public Sale by Holder
of Registrable Securities. To the extent not inconsistent with applicable law,
each Holder whose securities are included in a registration statement agrees not
to effect any public sale or distribution of securities of the same class as the
securities being registered or a similar security
12
of the Issuer, or any securities convertible into or exchangeable or exercisable
for such securities, including a sale pursuant to Rule 144 or Rule 145 under the
Securities Act, during the 14 days prior to, and during the up to 180-day period
beginning on, the effective date of such registration statement (except as part
of such registration), if and to the extent requested by the Issuer in the case
of a non-underwritten public offering or if and to the extent requested by the
managing Underwriter or Underwriters in the case of an underwritten public
offering.
(b) Restrictions on Public Sale by the Issuer and Others. The Issuer agrees
not to effect any public sale or distribution of any securities of the same
class as those being registered in accordance with Section 2.2 or Section 2.3
hereof, or any securities convertible into or exchangeable or exercisable for
such securities, during the 14 days prior to, and during the period beginning
on, the effective date requested by the managing Underwriter or Underwriters
(which period shall not exceed 90 days) of any registration statement with
respect to an underwritten public offering (except as part of such registration
statement as provided herein); provided that the provisions of this paragraph
(b) shall not prevent the conversion or exchange of any securities pursuant to
their terms into or for other securities.
SECTION 5.4 Delay of Registration. No Holder shall have any right to take
any action to restrain, enjoin, or otherwise delay any registration as the
result of any controversy that might arise with respect to the implementation of
this Agreement.
SECTION 5.5 Governing Law. This Agreement shall be interpreted, construed
and enforced in accordance with the laws of the State of New York.
SECTION 5.6 Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors and assigns of the parties hereto.
SECTION 5.7 Entire Agreement; Amendment; Waiver. This Agreement constitutes
the full and entire understanding and agreement between the parties hereto with
respect to the subject hereof. Neither this Agreement nor any terms hereof may
be amended, waived, discharged or terminated, except by a written instrument
signed by the holders of at least a majority of the Registrable Securities
outstanding as of such time and the Issuer and any such amendment, waiver,
discharge or termination shall be binding on all the Holders, but in no event
shall the obligation of any Holder hereunder be materially increased, except
upon the written consent of such Holder.
SECTION 5.8 Notices, etc. All notices and other communications required or
permitted hereunder to the Issuer shall be in writing and shall be mailed by
first-class mail, postage prepaid, or delivered by hand, facsimile transmission
or by messenger, addressed to it at 11825 North Pennsylvania Street, Carmel, IN
46032, Attn.: General Counsel, or to such other address as the Issuer may
specify by notice to the Holders.
SECTION 5.9 Separability. In case any provision of this Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
13
SECTION 5.10 Titles and Subtitles. The titles of the paragraphs and
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
SECTION 5.11 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
* * * * *
14
IN WITNESS WHEREOF, the parties hereto have set their hands as of the date
first above written.
CONSECO, INC.
By:/s/Daniel J. Murphy
------------------------------------------
Name: Daniel J. Murphy
Title: Senior Vice President and
Treasurer
ANGELO GORDON & CO., L.P.,
on behalf of itself and its affiliates
By: AG Partners, L.P.,
Its General Partner
By:/s/Jeffrey H. Aronson
-------------------------------------------
Name: Jeffrey H. Aronson
Title: Authorized Signatory
BANK OF AMERICA, N.A.
By:/s/Bridget A. Garavalia
-------------------------------------------
Name: Bridget A. Garavalia
Title: Managing Director
NAUGATUCK HOLDING CORP.
By:/s/Charles O. Freegood
-------------------------------------------
Name: Charles O. Freegood
Title: President
[SIGNATURE PAGE TO PREFERRED STOCK REGISTRATION RIGHTS AGREEMENT]
ANNEX A
FORM OF NOTICE TO BE DELIVERED
IN CONNECTION WITH A REQUEST FOR
DEMAND REGISTRATION
, 200
------------ --
CONSECO, INC.
11825 N. Pennsylvania Street
Carmel, IN 46032
Dear Sirs:
Pursuant to Section 2.2 of the Registration Rights Agreement dated
September 10, 2003, the undersigned hereby requests Conseco, Inc. (the
"Company") to register __________ shares of the Company's Convertible
Exchangeable Preferred Stock, of which the undersigned is the registered holder.
[We request that such securities be sold in an underwritten offering [to be
lead-managed by ____________]].
[Name of Transferor]
By:
---------------------------------
For Release Immediate
Contacts (News Media) Jim Rosensteele, SVP, Corporate
Communications 317.817.4418
(News Media) Brenda Adrian, Sitrick and Company Inc. 212.573.6100
(Investors) Tammy Hill, SVP, Investor Relations 317.817.2893
Conseco, Inc. Announces Confirmation of Plan of Reorganization
Indianapolis, Ind., Sept. 9, 2003: Conseco, Inc. (OTCBB:CNCEQ) today announced
that the U.S. Bankruptcy Court confirmed the Company's Sixth Amended Joint Plan
of Reorganization. Confirmation of the plan clears the way for the Company's
emergence from Chapter 11, which is expected shortly.
William J. Shea, Conseco's president and chief executive officer, said, "Today
we thank the associates and outside experts who worked so hard to help us
navigate the bankruptcy process. To have completed such a large and complex
restructuring in less than nine months is truly a remarkable achievement. We
thank the insurance regulators, distribution partners, customers and suppliers
who supported us at each step along the way. And we especially thank all those
associates who demonstrated their resilience by continuing to write and issue
new business, process and pay claims, and serve customers and agents."
"Because of this tremendous team effort, Conseco will emerge as a re-energized
company with greatly reduced debt and a single business focus," Shea said. The
reorganization will eliminate approximately $5.2 billion of debt and trust
preferred securities. "As we emerge, we intend to apply the same effort to
building our capital and growing profitably," Shea said.
Conseco, Inc. filed for protection under Chapter 11 of the federal bankruptcy
code in December 2002. Under the Plan of Reorganization, the Company's existing
bank debt will be cancelled as of the effective date in favor of a new credit
facility. The Company's outstanding bonds, trust preferred securities and common
stock also will be cancelled. Shares of new common stock, new preferred stock
and new warrants will be issued by the company's successor, Conseco, Inc., a
Delaware corporation, and distributed to various classes of the company's
creditors as outlined in the Plan of Reorganization upon emergence.
The court today also confirmed Conseco Finance's reorganization plan. Both
reorganization plans, confirmation orders and related documents will be
available at http://www.bmccorp.net/conseco.
Conseco, Inc.'s insurance companies help protect working American families and
seniors from financial adversity: Medicare supplement, cancer, heart/stroke and
accident policies protect people against major unplanned expenses; annuities and
life insurance products help people plan for the financial future.
- more -
Conseco (2)
Sept. 9, 2003
Cautionary Statement Regarding Forward-Looking Statements: All statements, trend
analyses and other information contained in this report and elsewhere (such as
in filings by Conseco with the Securities and Exchange Commission, press
releases, presentations by Conseco or its management or oral statements)
relative to markets for Conseco's products and trends in Conseco's operations or
financial results, as well as other statements including words such as
"anticipate," "believe," "plan," "estimate," "expect," "project," "intend,"
"may," "will," "would," "contemplate," "possible," "attempts," "seeks,"
"should," "could," "goal," "target," "on track," "comfortable with,"
"optimistic" and other similar expressions, constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. Forward-looking statements are subject to known and unknown risks,
uncertainties and other factors which may cause actual results, performance or
achievements to be materially different from the future results, performance or
achievements expressed or implied by the forward-looking statements. Assumptions
and other important factors that could cause our actual results to differ
materially from those anticipated in our forward-looking statements include,
among other things: (i) the ability of Conseco to consummate one or more plans
of reorganization with respect to the Chapter 11 Cases under the Bankruptcy Code
filed by Conseco and some of its subsidiaries, including CFC and CIHC; (ii) the
potential lingering adverse impact of the Chapter 11 Cases on Conseco's
operations, management and employees; (iii) general economic conditions and
other factors, including prevailing interest rate levels, stock and credit
market performance and health care inflation, which may affect (among other
things) Conseco's ability to sell its products, the market value of Conseco's
investments and the lapse rate and profitability of policies; (iv) Conseco's
ability to achieve anticipated synergies and levels of operational efficiencies
and to achieve the goals of recent restructuring initiatives undertaken at
Conseco Insurance Group; (v) customer response to new products, distribution
channels, marketing initiatives and the Chapter 11 Cases; (vi) mortality,
morbidity, usage of health care services and other factors which may affect the
profitability of Conseco's insurance products; (vii) performance of our
investments; (viii) changes in the Federal income tax laws and regulations which
may affect the relative tax advantages of some of Conseco's products; (ix)
increasing competition in the sale of insurance and annuities; (x) regulatory
changes or actions, including those relating to regulation of the financial
affairs of our insurance companies, regulation of the sale, underwriting and
pricing of products, and health care regulation affecting health insurance
products; (xi) actions by rating agencies and the effects of past or future
actions by these agencies on Conseco's business, including the impact of recent
rating downgrades; (xii) the ultimate outcome of lawsuits filed against Conseco;
(xiii) the risk factors or uncertainties listed from time to time in Conseco's
filings with the SEC and with the Bankruptcy Court in connection with the
Chapter 11 Cases; (xiv) our ability to continue as a going concern; and (xv) our
ability to obtain Bankruptcy Court approval with respect to motions in the
Chapter 11 proceedings from time to time. Other factors and assumptions not
identified above are also relevant to the forward-looking statements, and if
they prove incorrect, could also cause actual results to differ materially from
those projected.
- # # # # -
For Release Immediate
Contacts (News Media) Jim Rosensteele, SVP, Corporate
Communications 317.817.4418
(News Media) Brenda Adrian, Sitrick and Company Inc. 212.573.6100
(Investors) Tammy Hill, SVP, Investor Relations 317.817.2893
Conseco, Inc. Emerges from Chapter 11
Indianapolis, Ind., Sept. 10, 2003. Conseco, Inc. announced today that its sixth
amended joint plan of reorganization under Chapter 11, which was confirmed by
the U.S. Bankruptcy Court yesterday, has become effective. William J. Shea,
Conseco's president and CEO, said, "We are very pleased to announce that Conseco
has emerged from bankruptcy court protection as a financially stable company now
totally focused on the insurance business."
New capital structure
Under the terms of the plan, the company has emerged as a Delaware corporation
with a new capital structure consisting of: (1) a $1.3 billion secured bank
facility; (2) new convertible preferred stock with an aggregate liquidation
preference of approximately $860 million; (3) new warrants to purchase 6 million
shares of common stock at an exercise price of $27.60 per share; and (4)
approximately 100 million shares of new common stock. The company expects to
issue these securities shortly, pursuant to the terms of the plan.
The new common stock has been approved for listing on the New York Stock
Exchange (NYSE) under the symbol "CNO," and the new warrants have been approved
for listing on the NYSE under the symbol "CNO WS." "Regular way" trading of the
new common stock and new warrants is expected to commence in the near future.
The common stock is currently trading on a "when issued" basis in the
over-the-counter market under the symbol "CNSJV." The company's former common
stock (OTCBB:CNCEQ) has been cancelled.
The new convertible preferred stock will be distributed to the prepetition
lenders, the new warrants will be distributed to the holders of the Trust
Preferred Securities commonly known as "TOPrS," and the new common stock will be
distributed to the holders of the following prepetition claims: (1) bonds, which
were separately classified as the Exchange Note Claims (those who had exchanged
their bonds in 2002) and the Original Note Claims (those who had not); (2)
general unsecured claims against Conseco, Inc.; (3) general unsecured claims
against CIHC, Incorporated (CIHC); and (4) TOPrS. The initial distribution of
approximately 98 million shares of new common stock is expected to be made as
follows:
o Exchange Note Claims will receive approximately 60.6 million shares, which
corresponds to a projected recovery of approximately 72%.
o Original Note Claims will receive approximately 32.3 million shares, which
corresponds to a projected recovery of approximately 42%.
- more -
Conseco (2)
Sept. 10, 2003
o Conseco General Unsecured Claims will receive approximately 1 million
shares, which corresponds to a projected recovery of approximately 22%.
o CIHC General Unsecured Claims will receive approximately 1.9 million
shares, which corresponds to a projected recovery of approximately 100%.
o TOPrS will receive 1.5 million shares, which corresponds to a projected
recovery of approximately 1.27% (excluding the new Conseco warrants and
other collection rights).
In each case, the projected recoveries are based on an estimated value of the
common stock of $16.40 per share for purposes of the plan. The initial
distributions are expected to represent approximately 98% of all new common
stock to be distributed under the plan. The company may make additional
distributions to holders of prepetition bonds and/or general unsecured claims on
account of disputed claims. Under the plan, there will be only one distribution
of new common stock to holders of the TOPrS.
New board of directors takes office
"As part of the reorganization," Shea said, "we have selected a new board of
directors. I have been joined on the Board by six new independent directors
selected by the official creditors committee through a formal selection
process:"
o R. Glenn Hilliard (60) (the non-executive chairman of the board) is the
retired former chairman and chief executive officer of ING Americas. As CEO
of ING Americas, he was responsible for insurance, funds and retail banking
operations in North and South America. He also served as chairman of the
ING America Insurance Holdings Board.
o Philip Roberts (61) is a consultant for investment management firms,
advising on mergers, acquisitions and product development, having retired
as chief investment officer of the trust business at Mellon Financial
Corporation.
o Neal Schneider (58) is managing partner of the New York office of Smart and
Associates LLP, a business advisory and accounting firm.
o Mike Shannon (45) is the co-founder and current president and chief
executive officer of KSL Resorts, a firm that owns and operates resort
hotels and golf courses throughout the United States.
o Michael Tokarz (53) is a founding member and current CEO of Tokarz Cadigan
Partners LLC, a private investment firm focused on middle-market companies.
o John Turner (62) is chairman of Hillcrest Capital Partners, a private
equity firm, and is the retired vice chairman and member of the executive
committee for ING Americas.
(Visit conseco.com for more detailed biographical information on the
members of Conseco's new board.)
R. Glenn Hilliard, Conseco's new non-executive chairman, said: "Our near-term
goal is to build the capital in the insurance companies in order to put Conseco
on a track toward steady growth. Longer-term, our goal is to build a company
that delivers meaningful value to our customers, our shareholders, our
distribution partners and our associates. I'm convinced that this management
team and board will make that happen."
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Conseco (3)
Sept. 10, 2003
"Fresh start" accounting to be implemented
Conseco will adopt "fresh-start" reporting as of its emergence from Chapter 11,
in accordance with accounting rules. These rules require Conseco to revalue its
assets and liabilities to current estimated fair value, re-establish
shareholders' equity at the reorganization value determined in connection with
the plan, and record any portion of the reorganization value which cannot be
attributed to specific tangible or identified intangible assets as goodwill. The
adoption of fresh start accounting will have a material effect on Conseco's
financial statements. As a result, the company's financial statements published
for periods following Sept. 9, 2003, will not be comparable with those prepared
before that date.
The Sixth Amended Joint Plan of Reorganization is available at
http://www.bmccorp.net/conseco.
Conseco, Inc.'s insurance companies help protect working American families and
seniors from financial adversity: Medicare supplement, cancer, heart/stroke and
accident policies protect people against major unplanned expenses; annuities and
life insurance products help people plan for their financial future.
Note on forward-looking statements: Some of the statements contained in this
press release are "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements include those that
use words such as "anticipate," "believe," "plan," "estimate," "expect,"
"project," "intend," "may," "will," "would," "contemplate," "possible,"
"attempts," "seeks," "should," "could," "goal," and other similar expressions.
Forward-looking statements are subject to known and unknown risks, uncertainties
and other factors which may cause actual results, performance or achievements to
be materially different from the future results, performance or achievements
expressed or implied by the forward-looking statements. Assumptions and other
important factors that could cause our actual results to differ materially from
those anticipated in our forward-looking statements include, among other things:
(i) the potential lingering adverse impact of the Chapter 11 petitions on
Conseco's operations, management and employees; (ii) the successful consummation
of the plan of reorganization of Conseco Finance; (iii) general economic
conditions and other factors, including prevailing interest rate levels, stock
and credit market performance and health care inflation, which may affect (among
other things) Conseco's ability to sell its products, its ability to make loans
and access capital resources and the costs associated therewith, the market
value of Conseco's investments, the lapse rate and profitability of policies,
and the level of defaults and prepayments of loans made by Conseco; (v)
Conseco's ability to achieve anticipated synergies and levels of operational
efficiencies, including from our process excellence initiatives; (iv) customer
response to new products, distribution channels and marketing initiatives; (v)
mortality, morbidity, usage of health care services and other factors which may
affect the profitability of Conseco's insurance products; (vi) performance of
our investments; (vii) changes in the Federal income tax laws and regulations
which may affect the relative tax advantages of some of Conseco's products;
(viii) increasing competition in the sale of insurance and annuities; (ix)
regulatory changes or actions, including those relating to regulation of the
financial affairs of our insurance companies, regulation of financial services
affecting (among other things) bank sales and underwriting of insurance
products, regulation of the sale, underwriting and pricing of products, and
health care regulation affecting health insurance products; (x) actions by
rating agencies and the effects of past or future actions by these agencies on
Conseco's business, including the impact of recent rating downgrades; (xi) the
ultimate outcome of lawsuits filed against Conseco; and (xii) the risk factors
or uncertainties listed from time to time in Conseco's filings with the
Securities and Exchange Commission and with the U.S. Bankruptcy Court in
connection with the Company's Chapter 11 petitions. Other factors and
assumptions not identified above are also relevant to the forward-looking
statements, and if they prove incorrect, could also cause actual results to
differ materially from those projected.
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