-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UyzJ1PeUBKVfVLx0Q97ws4fmfiurt6LsIUnCNlX1i4UOg9fnnxjVNf/Uyh6UlnbM rLhFzs5twE4HN6L56wQypg== 0000950137-02-004048.txt : 20020725 0000950137-02-004048.hdr.sgml : 20020725 20020725172701 ACCESSION NUMBER: 0000950137-02-004048 CONFORMED SUBMISSION TYPE: S-4/A PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20020725 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONSECO INC CENTRAL INDEX KEY: 0000719241 STANDARD INDUSTRIAL CLASSIFICATION: ACCIDENT & HEALTH INSURANCE [6321] IRS NUMBER: 351468632 STATE OF INCORPORATION: IN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-89802 FILM NUMBER: 02711256 BUSINESS ADDRESS: STREET 1: 11825 N PENNSYLVANIA ST CITY: CARMEL STATE: IN ZIP: 46032 BUSINESS PHONE: 3178176100 MAIL ADDRESS: STREET 1: 11825 N PENNSYLVANIA ST CITY: CARMEL STATE: IN ZIP: 46032 FORMER COMPANY: FORMER CONFORMED NAME: SECURITY NATIONAL OF INDIANA CORP DATE OF NAME CHANGE: 19840207 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CIHC INC CENTRAL INDEX KEY: 0001042689 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-89802-01 FILM NUMBER: 02711257 BUSINESS ADDRESS: STREET 1: 1209 ORANGE STREET CITY: WILMINGTON STATE: DE ZIP: 19801 BUSINESS PHONE: 3178172679 MAIL ADDRESS: STREET 1: 1209 ORANGE STREET CITY: WILMINGTON STATE: DE ZIP: 19801 S-4/A 1 c69885a1sv4za.txt PRE-EFFECTIVE AMENDMENTS AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 25, 2002 REGISTRATION NO. 333-89802 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------- AMENDMENT NO. 1 TO FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 --------------------- CONSECO, INC. (Exact Name of Registrant as Specified in Its Charter) INDIANA 6321 35-1468632 (State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer Incorporation or Organization) Classification Code Number) Identification Number)
11825 N. PENNSYLVANIA STREET CARMEL, INDIANA 46032 (Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices) DAVID K. HERZOG, ESQ. CONSECO, INC. 11825 N. PENNSYLVANIA STREET CARMEL, INDIANA 46032 (317) 817-6000 (Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent For Service) --------------------- INFORMATION REGARDING THE ADDITIONAL REGISTRANT APPEARS IN A SEPARATE TABLE BELOW --------------------- WITH COPIES TO: JEREMY W. DICKENS, ESQ. WEIL, GOTSHAL & MANGES LLP 767 FIFTH AVENUE NEW YORK, NEW YORK 10153-0119 (212) 310-8000 --------------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE PUBLIC: As soon as practicable after the effective date of this Registration Statement. If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. [ ] If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ADDITIONAL REGISTRANT
PRIMARY STANDARD ADDRESS, INCLUDING ZIP CODE STATE OR OTHER INDUSTRIAL AND TELEPHONE NUMBER, JURISDICTION OF CLASSIFICATION I.R.S. EMPLOYER INCLUDING AREA CODE, EXACT NAME OF REGISTRANT INCORPORATION CODE IDENTIFICATION OF REGISTRANT'S PRINCIPAL AS SPECIFIED IN ITS CHARTER OR ORGANIZATION NUMBER NUMBER EXECUTIVE OFFICE* REGISTRATION NO. - --------------------------- --------------- -------------- --------------- --------------------------- ---------------- CIHC, Incorporated Delaware 6321 51-0356511 1201 Orange Street 333-89802 Suite 789 Wilmington, DE 19801 Gary C. Wendt (302) 884-6703
- --------------- * Name, address, including zip code and telephone number, including area code, for agent of service of process for Additional Registrant. THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL OR OFFER THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER IS NOT PERMITTED. SUBJECT TO COMPLETION, DATED JULY 25, 2002 PROSPECTUS [CONSECO LOGO] $1,292,637,000 CONSECO, INC. We are offering to exchange, upon the terms and subject to the conditions set forth in this prospectus, each series of our outstanding, unregistered guaranteed notes for identical, newly-issued, registered notes listed below.
OUTSTANDING AGGREGATE FOR EACH $1,000 PRINCIPAL AMOUNT OF PRINCIPAL THE EXCHANGING HOLDERS WILL RECEIVE $1,000 PRINCIPAL THE FOLLOWING UNREGISTERED GUARANTEED NOTES: AMOUNT AMOUNT OF THE CORRESPONDING REGISTERED NOTES: - -------------------------------------------- ------------ ---------------------------------------------------- 8.5% Guaranteed Senior Notes due 2003 $ 991,000 8.5% Guaranteed Senior Notes due 2003 6.4% Guaranteed Senior Notes due 2004 14,936,000 6.4% Guaranteed Senior Notes due 2004 8.75% Guaranteed Senior Notes due 2006 364,294,000 8.75% Guaranteed Senior Notes due 2006 6.8% Guaranteed Senior Notes due 2007 150,783,000 6.8% Guaranteed Senior Notes due 2007 9% Guaranteed Senior Notes due 2008 399,200,000 9% Guaranteed Senior Notes due 2008 10.75% Guaranteed Senior Notes due 2009 362,433,000 10.75% Guaranteed Senior Notes due 2009
After giving effect to the consummation of the private exchange offer we completed on April 24, 2002, which we refer to as the April exchange offer, and this exchange offer, as if each had occurred on March 31, 2002, CIHC would have had outstanding up to $2,288.5 million of guarantees senior to the registered note guarantees (including $545.2 million of guarantees that Conseco, Inc. has also made), $1,823.5 million of debt and guarantees ranking equally with the registered note guarantees and $710.8 million of debt ranking junior to the registered note guarantees. The registered notes and any unregistered guaranteed notes remaining outstanding after the conclusion of this exchange offer will also be effectively junior to all the indebtedness, policy reserves and other liabilities of CIHC's subsidiaries, which totaled $50.2 billion at March 31, 2002. --------------------- THE EXCHANGE OFFER - THE EXCHANGE OFFER EXPIRES AT 5:00 P.M., NEW YORK CITY TIME, ON , 2002, UNLESS EXTENDED. - As more fully described in this prospectus, the exchange offer is subject to certain conditions, which we may waive in our sole discretion. - All unregistered guaranteed notes that are validly tendered and not validly withdrawn will be exchanged for registered notes. - Tenders of unregistered guaranteed notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on , 2002, the withdrawal deadline. - We will not receive any cash proceeds from the exchange offer. --------------------- YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS BEGINNING ON PAGE 11 OF THIS PROSPECTUS BEFORE PARTICIPATING IN THE EXCHANGE OFFER. --------------------- NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. , 2002 TABLE OF CONTENTS
PAGE ---- Prospectus Summary.................... 1 Risk Factors.......................... 11 Forward-Looking Statements............ 21 Use of Proceeds....................... 22 Selected Consolidated Financial Data................................ 23 The Exchange Offer.................... 28 Description of the Registered Notes... 37
PAGE ---- Certain Material United States Federal Income Tax Considerations........... 42 Plan of Distribution.................. 43 Legal Matters......................... 44 Experts............................... 44 Where You Can Find More Information and Incorporation of Certain Documents by Reference.............. 45
Unless otherwise stated, in this prospectus, "Conseco," the "Company," "we," "us" and "our" refer to Conseco, Inc. and its subsidiaries, unless the context requires otherwise. "CIHC" or the "guarantor" refers to CIHC, Incorporated, the guarantor of the registered notes and the unregistered guaranteed notes and the holding company of our principal operating subsidiaries. We also refer to the unregistered guaranteed notes issued in connection with the April exchange offer as the unregistered or existing guaranteed notes, and to the registered guaranteed notes to be issued in connection with this exchange offer as the registered notes. We refer to the unregistered guaranteed notes and the registered notes together as the guaranteed notes. We refer to the original notes for which the unregistered guaranteed notes were exchanged in the April exchange offer as the senior notes. We also refer to the Securities and Exchange Commission as the SEC or the Commission. This prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any of the notes offered hereby by any person in any jurisdiction in which it is unlawful for such person to make such an offering or solicitation. i PROSPECTUS SUMMARY This summary may not contain all of the information that may be important to you. You should carefully read the entire prospectus, including the other documents to which it refers, and the financial data and related notes incorporated by reference in the prospectus, before making an investment decision. CONSECO We are a financial services holding company with subsidiaries operating in the insurance and finance businesses, predominantly in the United States. Our insurance subsidiaries develop, market and administer supplemental health insurance, annuities, individual life insurance, and other insurance products. Our finance subsidiaries originate, securitize and service manufactured housing, home equity, retail credit, and floor plan loans. We were organized in 1979 as an Indiana corporation and commenced operations in 1982. Our executive offices are located at 11825 N. Pennsylvania Street, Carmel, Indiana 46032, and our telephone number is (317) 817-6100. Our common stock trades on the New York Stock Exchange under the ticker symbol "CNC." CREDIT RATINGS We have a recent history of net losses. For the three months ended March 31, 2002, on a consolidated basis, we had a net loss of $95.9 million, cash flows from operations of $263.0 million and interest expense of $368.7 million. For 2001, on a consolidated basis, we had a net loss of $405.9 million, cash flows from operations of $1,324.7 million and interest expense of $1,609.2 million. Our earnings before fixed charges were inadequate to cover our fixed charges by $148.5 million and $623.1 million for the three months ended March 31, 2002 and fiscal year 2001, respectively. Rating agencies have recently downgraded our credit rating for our debt, including the senior notes, and our company-obligated mandatorily redeemable preferred securities of subsidiary trusts. On May 28, 2002, Moody's Investor Services downgraded our credit rating for the senior notes two notches to "Caa1" from "B2," and said its ratings outlook for us is negative. Moody's employs a system of nine national ratings, ranging from Aaa to C, with modifiers 1, 2 and 3 to indicate the relative strength or weakness within each rating. B and Caa are the sixth and seventh best ratings, respectively, out of nine. B2 would therefore be a "middle B" and Caa1 would be a "high Caa." The ratings are based on research by analysts at Moody's who have evaluated our overall financial and liquidity positions and generally measure our ability to make long-term interest and principal payments on the securities rated when due and payable. Moody's believes that our slower than anticipated progress in generating cash from reinsurance and other transactions and our continued weak net income performance from our finance and insurance subsidiaries means that the possible risks of bankruptcy for us are more problematic. Prior to May 28, 2002, Moody's had last lowered our credit rating for the senior notes on January 9, 2002 from "B1" to "B2," as a result of Moody's concern for the impact on our liquidity of the fragile nature of the general economic environment and the execution of our plans to generate cash through asset sales. Our senior debt remains on credit watch for further downgrade at Standard & Poor's, which currently rates our senior unsecured debt at "B." On January 16, 2002, Standard & Poor's lowered our senior debt rating from "B+" to "B." Standard & Poor's based its ratings action on (i) the expectation that the current weakness in the economy would reduce our flexibility in making further planned debt reductions, (ii) an increased reliance on dividends from insurance operations to support our liquidity and (iii) the necessity of asset sales to meet our debt-reduction objectives. Standard & Poor's maintains a system of 11 credit ratings categories, ranging from "AAA (Extremely strong)" to "D (Defaulted)," with pluses and minuses used to show the relative standing within the categories. "B" is the is the sixth highest rating out of 11 and the lowest, or third, rating within Standard & Poor's second tier of ratings. Ratings are based on likelihood of payment, willingness to meet financial commitments, the nature and terms of the debt, and the protection and ranking available to the debt holders in the event of a bankruptcy. Standard & Poor's assigns a "B" rating to an obligation if it is vulnerable to nonpayment because of adverse business, financial, or economic conditions which are expected to impair the issuer's capacity or willingness to meet its financial commitment on the obligation in the future, 1 despite having current ability to meet the financial obligation. Ratings receive special surveillance, or credit watch, when identifiable events and short-term trends or deviations from expected trends occur and additional information is necessary to evaluate the current rating. A "negative" credit watch means a rating may be lowered. Standard & Poor's assigned our "B" rating after an analysis of our insurance operations as well as our progress in reducing debt and increasing financial flexibility. Standard & Poor's expects that we will be increasingly dependent on dividends from insurance operations to support our cash flow and liquidity needs and to meet debt repayment objectives. On June 7, 2002, our senior debt, including the unregistered guaranteed notes, was rated and affirmed as "B-" and removed from Ratings Watch Negative by Fitch IBCA. However, our senior debt ratings retain a long-term Negative Outlook by Fitch IBCA. On the same date, Fitch IBCA rated our senior notes for which the unregistered guaranteed notes were exchanged in the April exchange offer "CCC+." Fitch IBCA employs a system of 12 national ratings, ranging from AAA to D, with pluses and minuses used to indicate the relative position of a credit within a ratings category. B and CCC are the sixth and seventh best ratings, respectively, out of 12. B- would therefore be a "low B" and CCC+ would be a "high CCC." The ratings are based on research by analysts at Fitch IBCA who have evaluated our overall financial and liquidity positions and generally measure our ability to make long-term interest and principal payments on the securities rated when due and payable. Fitch remains concerned about our ability to meet 2003 debt maturities. Fitch believes we will require additional asset sales or other cash raising transactions in order to fund our 2003 debt maturities. Fitch believes these efforts will be challenging given the difficult economic environment and our limited financial flexibility. Fitch will continue to monitor our progress on these issues. INSURANCE We are the 28th largest life and health insurance company based on total admitted assets. Our investment portfolio included more than $24 billion of insurance-related investments at March 31, 2002. Our career agency force sells primarily Medicare Supplement and long-term care insurance policies, senior life insurance and annuities. These agents sell only Conseco policies and typically visit the customer's home which permits one-on-one contacts with potential policyholders and promotes strong personal relationships with existing policyholders. Our independent producer distribution channel consists of a general agency and insurance brokerage distribution system comprised of independent licensed agents doing business in all fifty states, the District of Columbia, and certain protectorates of the United States. Independent producers are a diverse network of independent agents, insurance brokers and marketing organizations. Our direct marketing distribution channel is engaged primarily in the sale of "graded benefit life" insurance policies which are sold directly from the Company to the policyholder. Supplemental health products include Medicare supplement, long-term care and specified-disease insurance products. During 2001, we collected Medicare supplement premiums of $975.1 million, long-term care premiums of $888.3 million, specified-disease premiums of $371.8 million, and other supplemental health premiums of $109.3 million. During the three months ended March 31, 2002, proceeds from Medicare supplement premiums were $261.9 million, long-term care premiums were $225.7 million, specified-disease premiums were $93.1 million, and other supplemental health premiums were $29.4 million. Supplemental health premiums represented 48% and 50% of our total premiums collected from continuing lines of business in 2001 and the first three months of 2002, respectively. Annuity products include equity-indexed annuity, variable annuity, traditional fixed rate annuity and market value-adjusted annuity products. During 2001 and the three months ended March 31, 2002, we collected annuity premiums of $1,637.9 million (or 34% of our total premiums collected from continuing lines of business) and $391.1 million (or 32% of our premiums collected from continuing lines of business), respectively. Life products include traditional, universal life and other life insurance products. During 2001, we collected life product premiums of $872.2 million, or 18% of our total premiums collected from continuing lines of business. During the three months ended March 31, 2002, we collected life product premiums of $214.2 million, or 18% of our total premiums collected from continuing lines of business. 2 CONSECO FINANCE Conseco Finance Corp., or "Conseco Finance," our subsidiary, is a large consumer finance company, with over $41.5 billion of managed finance receivables at March 31, 2002. We are the largest originator of manufactured housing loans (based on total securitizations of manufactured housing loans) and we also originate home equity mortgages, home improvement loans, and private label credit cards. At March 31, 2002, we had managed receivables of $41.5 billion. Conseco Finance provides financing for consumer purchases of manufactured housing and floor plan loans to manufactured housing dealers. A manufactured home is a structure, transportable in one or more sections, designed to be a dwelling with or without a permanent foundation. During 2001, we originated $2.5 billion of consumer contracts for manufactured housing purchases, or 22% of our total originations. At March 31, 2002, our managed receivables included $25.1 billion of contracts for manufactured housing purchases, or 60% of total managed receivables, and $.7 billion of floor plan loans. Conseco Finance offers its manufactured housing financing products through 33 regional offices and approximately 3,200 dealers. Mortgage services products include home equity and home improvement loans. During 2001, we originated $3.0 billion of contracts for these products, or 27 percent of our total originations. At March 31, 2002, our managed receivables included $11.4 billion of contracts for home equity and home improvement loans, or 27% of total managed receivables. During 2001, we originated $3.6 billion of private label credit card receivables, primarily through our bank subsidiaries, or 32% of our total originations. At March 31, 2002, our managed receivables included $2.6 billion of contracts for credit card loans, or 6% of total managed receivables. Private label credit card programs are offered to select retailers with a core focus on the home improvement industry. We offer consumer finance products through 123 home equity offices, approximately 1,300 home improvement dealers and approximately 3,500 private label retail outlets. CIHC CIHC is our direct subsidiary and the holding company of our principal operating subsidiaries, including the subsidiaries that engage in our insurance and finance businesses. CIHC has no direct operations. As permitted by SEC Regulation S-X, we consolidate CIHC's financial statements and reports in our annual and quarterly reports filed with the SEC. Separate financial information relating to CIHC is included in a note to our 2001 audited condensed financial information in Schedule II to our annual report on Form 10-K for the period ended December 31, 2001, filed with the SEC on April 1, 2002, and in a note to our quarterly report on Form 10-Q for the period ended March 31, 2002, filed with the SEC on May 15, 2002, which are incorporated by reference in this prospectus. PURPOSE OF THE EXCHANGE OFFER On April 24, 2002, we exchanged $1,292,637,000 aggregate principal amount of our then outstanding senior notes for a corresponding aggregate principal amount of our unregistered guaranteed notes, which we refer to as the April exchange offer. The April exchange offer was only made, and the unregistered guaranteed notes were only offered and issued, (i) in the United States, to "qualified institutional buyers," as that term is defined in Rule 144A under the Securities Act, and institutional "Accredited Investors" as that term is defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act, in a private transaction in reliance upon an exemption from the registration requirements of the Securities Act, and (ii) outside the United States, to persons other than "U.S. persons," as that term is defined in Rule 902 under the Securities Act, in offshore transactions in reliance upon Regulation S under the Securities Act. The April exchange offer was not registered under the Securities Act. The terms of the unregistered guaranteed notes are substantially identical to those of the senior notes, except that the unregistered guaranteed notes have longer maturities and are guaranteed by CIHC, Incorporated, our direct subsidiary and the holding company of our principal operating subsidiaries. The purpose of the April exchange offer was to extend the maturity profile of our senior notes in order to improve our financial flexibility and to enhance our future ability to refinance public debt. Following the April exchange offer, $1,247,662,000 in aggregate principal amount of senior notes remained outstanding (and without the benefit of the CIHC guarantee). 3 Simultaneously with the April exchange offer, we and the guarantor entered into a registration rights agreement with Banc of America Securities LLC, J.P. Morgan Securities Inc. and Lehman Brothers Inc., the dealer managers for the April exchange offer. Pursuant to that agreement, we have filed the registration statement of which this prospectus is a part. You should read the discussion under the headings " -- Summary of the Terms of the Registered Notes," "The Exchange Offer" and "Description of the Registered Notes" for further information regarding the registered notes. Because we did not register the unregistered guaranteed notes under the Securities Act, those notes may only be transferred in limited circumstances under the federal securities laws. If the holders of the unregistered guaranteed notes do not exchange their notes in the exchange offer, they will not have the right to have their unregistered guaranteed notes registered under the Securities Act. Any holder who does not participate in this exchange offer will be unable to publicly offer or sell the unregistered guaranteed notes and, therefore, may only offer and sell such notes in transactions exempt from registration under the Securities Act. In exchange for tendering $1,000 principal amount of your unregistered guaranteed notes, you will receive a corresponding principal amount of registered notes, which have identical terms and conditions to the unregistered guaranteed notes. The only difference between the unregistered guaranteed notes and the registered notes is that the offer and sale of the registered notes have been registered under the Securities Act and the registered notes will not bear legends restricting their transfer. Unless you are a broker-dealer, we believe that the registered notes to be issued in the exchange offer may be resold by you without compliance with the registration and prospectus delivery requirements of the Securities Act. You should read the discussions under the headings "The Exchange Offer" and "Description of the Registered Notes" for further information regarding the registered notes. The Exchange Offer............ We are offering to exchange the registered notes described below for any and up to all of the unregistered guaranteed notes described below: FOR EACH $1,000 PRINCIPAL AMOUNT OF THE FOLLOWING UNREGISTERED GUARANTEED NOTES: 8.5% Guaranteed Senior Notes due 2003 6.4% Guaranteed Senior Notes due 2004 8.75% Guaranteed Senior Notes due 2006 6.8% Guaranteed Senior Notes due 2007 9% Guaranteed Senior Notes due 2008 10.75% Guaranteed Senior Notes due 2009 THE EXCHANGING HOLDERS WILL RECEIVE $1,000 PRINCIPAL AMOUNT OF THE CORRESPONDING REGISTERED NOTES: 8.5% Guaranteed Senior Notes due 2003 6.4% Guaranteed Senior Notes due 2004 8.75% Guaranteed Senior Notes due 2006 6.8% Guaranteed Senior Notes due 2007 9% Guaranteed Senior Notes due 2008 10.75% Guaranteed Senior Notes due 2009 For further information relating to the terms of the registered notes, see "Description of the Registered Notes" below. Outstanding unregistered guaranteed notes may be exchanged only in minimum denominations of $1,000 principal amount and integral multiples of $1,000. Subject to the satisfaction or waiver of specified conditions, we will exchange the registered notes for any and up to all of the unregistered guaranteed notes that are validly tendered and not withdrawn prior to the withdrawal deadline. 4 We will issue the registered notes promptly after the expiration of the exchange offer. Resales of the Registered Notes; Letter of Transmittal................ We believe that the registered notes to be issued in the exchange offer may be offered for resale, resold and otherwise transferred (other than by broker-dealers participating in the exchange offer) without compliance with the registration and prospectus delivery provisions of the Securities Act if you meet the following conditions: (1) the registered notes to be issued to you in the exchange offer are acquired by you in the ordinary course of your business; (2) you have no arrangement or understanding with any person to participate in the distribution of the unregistered guaranteed notes or the registered notes to be issued to you in the exchange offer; and (3) you are not an affiliate of Conseco's or CIHC's. Our belief is based on interpretations by the staff of the Commission, as set forth in no-action letters issued to third parties unrelated to us. The staff has not considered the exchange offer in the context of a no-action letter, and we cannot assure you that the staff would make a similar determination with respect to the exchange offer. If you do not meet the above conditions, you may incur liability under the Securities Act if you transfer any registered note without delivering a prospectus meeting the requirements of the Securities Act. We do not assume or indemnify you against that liability. Each broker-dealer that receives registered notes in the exchange offer for its own account in exchange for unregistered guaranteed notes must deliver a prospectus meeting the requirements of the Securities Act in connection with any resales of such registered notes. By signing the letter of transmittal (or agreeing to its terms through the Depository Trust Company's, procedures for book-entry tenders), each broker-dealer participating in the exchange offer will agree to comply with its prospectus delivery obligations. See "Plan of Distribution." Expiration Date............... The exchange offer will expire at 5;00 p.m., New York City time, on , 2002, unless extended. We do not presently intend to extend the exchange offer, although we reserve the right to do so. The exchange offer is subject to certain general conditions, which we may assert or waive in our sole discretion. These conditions include the absence of: - any initiation or worsening of a material suit or proceeding; - any governmental or regulatory pronouncement or enactment which might have a material adverse effect on the exchange offer or our business; - anything that, in our sole judgment, would or might prohibit or delay the exchange offer or impair us from realizing the anticipated benefits of the exchange offer; and 5 - any event that would have a material adverse effect on the United States financial or securities markets, the trading prices of the registered notes or our business, operations, condition, properties or prospects. We also may postpone or terminate the offer if (i) the exchange offer is found to violate applicable law or applicable interpretations of the staff of the Commission and (ii) any injunction, order or decree has been issued which would prohibit, prevent or materially impair our ability to proceed with the exchange offer. See "The Exchange Offer -- Conditions Offer to the Exchange Offer." Withdrawal.................... You may withdraw the tender of your unregistered guaranteed notes at any time prior to 5:00 p.m., New York City time, on , 2002, the withdrawal deadline. Note that we may extend the expiration date of the offering without correspondingly extending the withdrawal deadline. Certain Material United States Federal Income Tax Considerations................ The exchange of unregistered guaranteed notes for registered notes should not be a taxable event for United States federal income tax purposes. See "Certain Material United States Federal Income Tax Considerations." Procedures for Tendering...... The unregistered guaranteed notes were issued as global securities in fully registered form without coupons. Beneficial interests in the unregistered guaranteed notes which are held by direct or indirect participants in the Depository Trust Company, as shown on, and transfers of the unregistered guaranteed notes can be made only through, records maintained in book-entry form by the Depository Trust Company with respect to its participants. If you are a holder of unregistered guaranteed notes held in the form of a book-entry interest and you wish to tender your notes pursuant to the exchange offer, you must transmit to State Street Bank and Trust Company, as exchange agent, on or prior to the expiration of the exchange offer either: - a written or facsimile copy of a properly completed and executed letter of transmittal and all other required documents to the address set forth on the cover page of the letter of transmittal; or - a computer-generated message transmitted by means of the Depository Trust Company's Automated Tender Offer Program system, and forming a part of a confirmation of book-entry transfer in which you acknowledge and agree to be bound by the terms of the letter of transmittal. The exchange agent must also receive on or prior to the expiration of the exchange offer a timely confirmation of the book-entry transfer of your notes into the exchange agent's account at the Depository Trust Company, in accordance with the procedure for book-entry transfers described in this prospectus under the heading "The Exchange Offer -- Procedures for Tendering." Special Procedures for Beneficial Owners............. If you are the beneficial owner of unregistered guaranteed notes and they are registered in the name of a broker, dealer, commercial bank, trust company or other nominee, and you wish to tender your 6 notes, you should promptly contact the person in whose name your notes are registered and instruct that person to tender on your behalf. If you wish to tender on your own behalf, you must, prior to completing and executing the letter of transmittal and delivering your notes, either make appropriate arrangements to register ownership of the notes in your name or obtain a properly completed bond power from the person in whose name your notes are registered. The transfer of registered ownership may take considerable time. See "The Exchange Offer -- Procedures for Tendering." Acceptance of Notes and Delivery of Registered Notes......................... Except under the circumstances described above under "Exchange Offer -- Conditions to the Exchange Offer," we will accept for exchange any and all unregistered guaranteed notes which are properly tendered prior to 5:00 p.m., New York City time, on the expiration date and not validly withdrawn. The registered notes to be issued to you will be delivered promptly following the expiration date for the exchange offer. See "The Exchange Offer -- Terms of the Exchange Offer." For a description of the consequences of a failure to exchange the unregistered guaranteed notes, see "Risk Factors -- Risks Related to Continuing Ownership of the Unregistered Guaranteed Notes." Exchange Agent................ State Street Bank and Trust Company is serving as the exchange agent in connection with the exchange offer. Information Agent............. Georgeson Shareholder Communications Inc. is the information agent for the exchange offer. The address and telephone number of the information agent are on the back cover page of this prospectus. 7 SUMMARY OF THE TERMS OF THE REGISTERED NOTES ISSUER........................ Conseco, Inc. Maturity...................... The maturity dates of the registered notes are as follows: - for the 8.5% Guaranteed Senior Notes due 2003, October 15, 2003; - for the 6.4% Guaranteed Senior Notes due 2004, February 10, 2004; - for the 8.75% Guaranteed Senior Notes due 2006, August 9, 2006; - for the 6.8% Guaranteed Senior Notes due 2007, June 15, 2007; - for the 9% Guaranteed Senior Notes due 2008, April 15, 2008; and - for the 10.75% Guaranteed Senior Notes due 2009, June 15, 2009. Interest...................... For each series of registered notes, interest will be payable at the same annual rate, on the same interest payment dates and upon the same terms as the corresponding series of unregistered guaranteed notes. Interest on each registered note will accrue from the last interest payment date on which interest was paid on the corresponding unregistered guaranteed note tendered or such other date, if any, from which interest was stated to accrue for each series of unregistered guaranteed notes. Indentures.................... We have entered into two new indentures, which are sometimes referred to as the "exchange offer indentures," under which we issued the unregistered guaranteed notes in the April exchange offer. The registered notes will also be issued pursuant to, and entitled to the benefits of, the exchange offer indentures. One of the exchange offer indentures governs the issuance of the registered 10.75% Guaranteed Senior Notes due 2009, which we refer to as the registered 10.75% notes and the other indenture will govern the issuance of the remaining registered notes. Guarantees.................... The registered notes will be guaranteed by CIHC, Incorporated, our domestic subsidiary and the holding company for our principal operating subsidiaries. If we cannot make interest or principal payments on the registered notes when they are due, CIHC, as the guarantor of the registered notes, must make them instead, subject to the rights of holders of senior debt. The guarantees will be full and unconditional, except that they will be subordinated and will be limited as necessary to prevent the guarantees from constituting a fraudulent conveyance. Ranking....................... The registered notes will be our general, unsecured senior debt and will rank equally with our other unsecured senior obligations, including our credit facility and any unregistered guaranteed notes not tendered in the exchange offer. The registered notes and any unregistered guaranteed notes remaining outstanding after the exchange offer will be structurally senior to our other senior notes because those senior notes are not guaranteed by CIHC. 8 The registered note guarantees will be general, unsecured senior subordinated debt of CIHC and will rank: - junior to all of CIHC's senior debt, including its guarantee of our credit facility, bank loans to certain of our current and former directors, officers and key employees, which we refer to as the D&O loans, and certain of the obligations of Conseco Finance; - on parity with all of CIHC's senior subordinated, unsecured debt, including intercompany notes in favor of Conseco Finance and CFIHC, Inc., a CIHC subsidiary, and its guarantee of any remaining unregistered guaranteed notes; and - senior to any of CIHC's debt that expressly provides that it is subordinate to the registered note guarantees. Because we are a holding company, all of our debt is effectively junior to the liabilities of our subsidiaries. Accordingly, in the event of a bankruptcy of us and our subsidiaries, the guaranteed notes (whether or not registered) will be effectively senior to our other senior notes and will be effectively junior to all of the liabilities of all of our subsidiaries and the senior debt of CIHC. After giving effect to the consummation of the April exchange offer and this exchange offer, as if each had occurred on March 31, 2002: - Conseco, Inc., the parent company, would have had outstanding approximately $6.6 billion of debt and guarantees, of which $235.1 million would have been secured, and therefore effectively senior to the guaranteed and senior notes, $1,894.7 million of debt and guarantees ranking equally with the guaranteed and senior notes and $4,470.3 million of debt ranking junior to the guaranteed and senior notes; - CIHC would have had outstanding up to $2,288.5 million of guarantees senior to the guaranteed note guarantees (including $545.2 million of guarantees that Conseco, Inc. has also made), $1,823.5 million of debt and guarantees ranking equally with the registered note guarantees and $710.8 million of debt ranking junior to the registered note guarantees; and - CIHC's subsidiaries would have had $50.2 billion of indebtedness, policy reserves and other liabilities, (including capitalized lease obligations but excluding indebtedness to affiliates) all of which would rank structurally senior to the notes and the guarantees. Separate financial information relating to CIHC is included in a note to our 2001 audited condensed financial information in Schedule II to our annual report on Form 10-K and in the notes to our quarterly report on Form 10-Q for the period ended March 31, 2002, which we incorporate by reference in this prospectus. Restrictive Covenants and Event of Default.............. The exchange offer indentures governing the registered notes will contain the same restrictive covenants and events of default that are in effect for the corresponding series of unregistered guaranteed notes. 9 Use of Proceeds............... We will not receive any cash proceeds upon the completion of the exchange offer. Form of Registered Notes...... The registered notes to be issued in the exchange offer will be represented by one or more global securities. Beneficial interests in the registered notes will be shown on, and transfer of these interests will be effected only through, records maintained in book-entry form by the Depository Trust Company with respect to its participants. See "Description of the Registered Notes -- Book-Entry, Delivery and Form." Each global note will be deposited with the trustee for the registered notes for the benefit of the Depository Trust Company, in each case for credit to the account of a direct or indirect participant of the Depository Trust Company. Investors in the global notes who are participants in the Depository Trust Company may hold their interests in the global notes directly through the Depository Trust Company. Investors in the global notes who are not participants in the Depository Trust Company may hold their interests indirectly through organizations that are participants in the Depository Trust Company. Interests in the global notes will be shown on, and transfers thereof will be effected only through, records maintained by the Depository Trust Company and its participants, including Euroclear and Clearstream. Except as set forth under "Description of the Registered Notes -- Exchange of Global Notes for Certificated Notes," participants and indirect participants will not be entitled to receive physical delivery of definitive registered notes or to have registered notes issued and registered in their names and will not be considered the owners or holders of the registered notes under their governing indentures. Interests in the global notes and the definitive registered notes, if any, will be issued in minimum denominations of $1,000 principal amount and integral multiples of $1,000. Risk Factors.................. You should refer to the section entitled "Risk Factors" beginning on page 11 for an explanation of the material risks of participating in the exchange offer and investing in the registered notes. 10 RISK FACTORS You should carefully consider all information included or incorporated by reference in this prospectus, including the information in our annual report on Form 10-K for the fiscal year ended December 31, 2001, which we filed with the SEC on April 1, 2002 and our quarterly report on Form 10-Q for the period ended March 31, 2002, which we filed with the SEC on May 15, 2002. These are not the only risks and uncertainties we face. Additional risks and uncertainties described elsewhere herein or in the documents incorporated by reference may also impair our financial condition, results of operations or prospects. RISKS RELATED TO OUR CREDIT, LIQUIDITY AND FINANCIAL CONDITION A NEGATIVE CHANGE IN THE CLAIMS-PAYING ABILITY RATINGS OF OUR INSURANCE CORPORATIONS COULD NEGATIVELY IMPACT OUR INSURANCE SUBSIDIARIES. An important competitive factor for life insurance companies is the ratings they receive from nationally recognized rating organizations. Agents, insurance brokers and marketing companies who market our products and prospective purchasers of our products use the ratings of our insurance subsidiaries as one factor in determining which insurer's products to market or purchase. Ratings have the most impact on our annuity and interest-sensitive life insurance products. Insurance claims-paying ability ratings are opinions of an insurance company's financial capacity to meet the obligations of its insurance policies in accordance with their terms. They are not directed toward the protection of investors. Such ratings are not recommendations to buy, sell or hold securities. On July 12, 2002, A.M. Best lowered the financial strength ratings of our primary insurance subsidiaries to "B++ (very good)." A.M. Best ratings for the industry currently range from "A++ (Superior)" to "F (In Liquidation)" and some companies are not rated. An "A++" ranking indicates superior overall performance and a strong ability to meet obligations to policyholders over a long period of time. "B++" is the fifth best rating out of 15, demonstrating very good financial strength, operating performance and market profile. The rating reflects A.M. Bests' concern that we will not be able to meet our obligations on our 8.5% guaranteed and senior notes. Standard & Poor's has given our insurance subsidiaries a claims paying ability rating of "BB+ (Marginal)." Rating categories from "BB" to "CCC" are classified as "vulnerable" claims-paying ability ratings, and pluses and minuses share the relative standing within a category. An insurer rated "BB" has marginal financial security characteristics. In Standard & Poor's view, we have positive attributes, but adverse business conditions could lead to insufficient ability to meet financial commitments. A.M. Best and Standard & Poor's each reviews its ratings from time to time. As a result of the A.M. Best downgrade, or a decision by Standard and Poor's to downgrade our claims-paying ability, sales of our insurance products could fall significantly and existing policyholders may redeem or lapse their policies, causing a material and adverse impact on our financial results and liquidity. WE MAY EXPERIENCE FURTHER DOWNGRADES IN OUR CREDIT RATING, WHICH COULD AFFECT OUR ABILITY TO REPAY OR REFINANCE THE REGISTERED NOTES. We have most recently experienced two consecutive years of net losses. Rating agencies have recently downgraded our credit rating for our debt, including the senior notes, and our Company-obligated mandatorily redeemable preferred securities of subsidiary trusts. On May 28, 2002, our credit rating for the senior notes was downgraded two notches to "Caa1" from "B2" by Moody's, which said its ratings outlook for us is negative. Our senior debt remains on credit watch for further downgrade at Standard & Poor's, which currently rates our senior unsecured debt at "B." On January 16, 2002, Standard & Poor's lowered our senior debt rating from "B+" to "B." Standard & Poor's based its ratings action on (i) the expectation that the current weakness in the economy would reduce our flexibility in making further planned debt reductions, (ii) an increased reliance on dividends from insurance operations to support our liquidity and (iii) the necessity of asset sales to meet our debt-reduction objectives. Standard & Poor's maintains 11 ratings categories, ranging from "AAA (Extremely strong)" to "D (Defaulted)." "B" is the sixth highest rating out of Standard & Poor's 11 credit ratings and the lowest, or third, rating within Standard & Poor's second tier of ratings. Standard & Poor's assigned our "B" rating after an analysis of our insurance operations as well as our progress in reducing debt and increasing financial flexibility. Standard & Poor's expects that we will be 11 increasingly dependent on dividends from insurance operations to support our cash flow and liquidity needs and to meet debt repayment objectives, although it expects our earnings to improve. On June 7, 2002, our senior debt, including the unregistered guaranteed notes, was rated and affirmed as "B-" and removed from Ratings Watch Negative by Fitch IBCA. However, our senior debt retains a long-term "Negative Outlook" by Fitch IBCA, which carries a longer-term possible ratings change than Ratings Watch. On the same date, Fitch IBCA rated our senior notes for which the unregistered guaranteed notes were exchanged in the April exchange offer "CCC+." A downgrade in our credit rating affects our cost of borrowing and our ability to borrow from lenders. Accordingly, for future periods beyond 2002, we can make no assurances that we will have, or will be able to obtain, sufficient funds to repay the registered notes when they become due. Moody's employs a system of nine national ratings, ranging from "Aaa" to "C," with modifiers 1, 2 and 3 to indicate the relative strength or weakness within each rating. "B" and "Caa" are the sixth and seventh best ratings, respectively, out of nine. Moody's believes that our slower than anticipated progress in generating cash from reinsurance and other transactions and our continued weak net income performance from our finance and insurance subsidiaries means that the possible risks of bankruptcy for us are more problematic. Prior to May 28, 2002, Moody's had last lowered our credit rating for the senior notes on January 9, 2002 from "B1" to "B2," as a result of Moody's concern for the impact on our liquidity of the fragile nature of the general economic environment and the execution of our plans to generate cash through asset sales. Fitch IBCA employs a system of 12 national ratings, ranging from "AAA" to "D," with pluses and minuses used to indicate the relative position of a credit within a ratings category. "B" and "CCC" are the sixth and seventh best ratings, respectively, out of 12. Fitch believes we will require additional asset sales or other cash raising transactions in order to fund our 2003 debt maturities. Fitch believes these efforts will be challenging given the difficult economic environment and our limited financial flexibility. Fitch will continue to monitor our progress on these issues. OUR DEGREE OF LEVERAGE MAY LIMIT OUR FINANCIAL AND OPERATING ACTIVITIES. As of March 31, 2002 we had substantial outstanding indebtedness. See "Prospectus Summary -- Summary of the Terms of the Registered Notes -- Ranking." With respect to the ratio of earnings to fixed charges, preferred stock dividends and distributions on company-obligated mandatorily redeemable preferred securities of subsidiary trusts for the three months ended March 31, 2002, adjusted earnings were $148.5 million less than fixed charges. For the year 2001, adjusted earnings were $623.1 million less than fixed charges. Consummation of the exchange offer will have no effect on our financial leverage. This degree of leverage could have material adverse consequences to us and the holders of the guaranteed notes (whether or not registered), including the following: (i) our ability to obtain additional financing in the future for working capital, capital expenditures or other purposes may be impaired; (ii) a substantial portion of our cash flow from operations will be required to be dedicated to the payment of interest expense and principal repayment obligations; (iii) higher interest rates will cause the interest expense on our variable rate debt to be higher; (iv) we may be more highly leveraged than other companies with which we compete, and this may place us at a competitive disadvantage; (v) our degree of leverage will make us more vulnerable to a downturn in our business or in the general economy; and (vi) our degree of leverage may adversely affect the ratings of our insurance company subsidiaries, which in turn may adversely affect their competitive position and ability to sell products. Our cash flow may be affected by a variety of factors, many of which are outside of our control, including insurance regulatory issues, competition, financial markets and other general business conditions. Although we believe that amounts required for us to meet our financial and operating obligations will be available from our subsidiaries, our results for future periods beyond 2002 are subject to numerous uncertainties. Consequently, we cannot assure you that we will possess sufficient cash flow and liquidity to meet all of our long-term debt service requirements beyond 2002, including with respect to the guaranteed notes (whether or not registered) and our other obligations. Though we expect to have sufficient cash from operating cash flow, asset sales and divestitures and other capital-raising activities, there can nevertheless be no assurances that we will have sufficient cash to extend the 12 maturity of our credit facility from December 31, 2003 to March 31, 2005 by making an optional principal prepayment of $193.3 million by September 30, 2002. WE FACE SIGNIFICANT CONTINGENT OBLIGATIONS ASSOCIATED WITH THE D&O LOANS. We have guaranteed bank loans totaling $545.2 million as of March 31, 2002 to approximately 155 current and former directors, officers and key employees, which we refer to as the D&O loans. The funds were used by the participants to purchase approximately 18.0 million shares of our common stock in open market or negotiated transactions with independent parties. Such shares are held by the banks as collateral for the loans. In addition, we have provided loans to participants for interest on the bank loans totaling $151.3 million. The bank loans which we and CIHC have each guaranteed mature on December 31, 2003. We have established a non-cash reserve for the exposure we have in connection with such guarantees. At March 31, 2002, our reserve for losses on the loan guarantees totaled $460.0 million based upon the value of the collateral and the creditworthiness of the participants. If we are required to pay on the guarantees, it could have a material adverse impact on our liquidity position. THE COVENANTS IN OUR CREDIT FACILITY ALSO RESTRICT OUR ACTIVITIES. In the first quarter of 2002, we amended the credit agreements related to our bank debt, which we refer to as our credit facility. We agreed to a number of covenants and other provisions that restrict our ability to borrow money and pursue some operating activities without the prior consent of the lenders under the credit facility. Those provisions restrict our ability to use the proceeds of asset sales. We agreed to meet or maintain various financial ratios and balances. Our ability to meet these financial tests and maintain ratings may be affected by events beyond our control including the following: - Debt to Capitalization: The debt to capitalization ratio consists of: (1) the sum of (i) the principal amount of all our indebtedness, (ii) accrued, unpaid interest and (iii) accrued, unpaid dividends on Trust Preferred Securities, and (2) our total capitalization. This ratio must not exceed the ratios which correspond to the end of each fiscal quarter listed below: for September 30, 2002 to December 31, 2002, 0.375 to 1.0; for March 31, 2003 to December 31, 2003, 0.350 to 1.0; for March 31, 2004 to maturity, 0.300 to 1.0. - Interest Coverage Ratio: The interest coverage ratio consists of (1) Conseco's available cash flow and (2) fixed interest charges. This ratio must equal or exceed the ratios which correspond to the end of each fiscal quarter specified below: for September 30, 2002 to December 31, 2002, 1.10 to 1.0; for March 31, 2003, 1.30 to 1.0; for June 30, 2003, 1.75 to 1.0; for September 30, 2003, 1.90 to 1.0; for December 31, 2003, 2.15 to 1.0; for March 31, 2004, 2.25 to 1.0; for June 30, 2004 to maturity, 2.50 to 1.0. - Conseco Adjusted Earnings: Conseco's adjusted earnings for the four-quarter periods ending as of any date below must equal or exceed the corresponding amounts listed below: for September 30, 2002, $1,200,000,000; for December 31, 2002 to March 31, 2003, $1,300,000,000; for June 30, 2003, $1,350,000,000; for September 30, 2003 to for December 31, 2003, $1,400,000,000; for March 31, 2004 to June 30, 2004, $1,500,000,000; for September 30, 2004 to maturity, $1,700,000,000. - Conseco Finance Tangible Net Worth. Conseco Finance's tangible net worth must equal or exceed the amounts which correspond to each fiscal quarter listed below: for September 30, 2002 to September 30, 2003, $1,200,000,000; for December 31, 2003 to December 31, 2004, $1,300,000,000; for March 31, 2005 to maturity, $1,600,000,000. - Risk-Based Capital Ratio. The risk-based capital ratio consists of (1) the aggregate total adjusted capital (as defined by the National Association of Insurance Commissioners) for such insurance subsidiaries to (2) the aggregate authorized control level risk-based capital (as defined by the National Association of Insurance Commissioners). For Conseco's insurance subsidiaries (other than Conseco Direct Life Insurance Company) taken as a whole, this ratio must not be less than 250% as at the end of any fiscal quarter during the term of the credit facility. The credit facility also limits our ability to issue additional debt, incur additional contingent obligations, grant liens, dispose of assets, enter into transactions with affiliates, make certain investments, including in existing and new businesses, change our businesses, and modify our outstanding debt and preferred stock. 13 Although we were in compliance with these provisions as of March 31, 2002, these provisions represent significant restrictions on the manner in which we may operate our business. If we default under any of these provisions, the lenders could declare all outstanding borrowings, accrued interest and fees to be due and payable. If that were to occur, no assurance can be given that we would have sufficient liquidity to repay our bank indebtedness in full or any of our other debts. The $1.5 billion facility is due December 31, 2003; however, subject to the absence of any default, we may further extend its maturity to March 31, 2005, provided that: (i) we pay an extension fee of 3.5% of the amount outstanding; (ii) cumulative principal payments of at least $200.0 million have been paid by September 30, 2002 and at least $500.0 million have been paid by September 30, 2003 and (iii) our interest coverage ratio for the four quarters ending September 30, 2003 is greater than or equal to 2.25 to 1. The notes in this exchange offer do not contain significant restrictive covenants, except for the 10.75% notes. Those notes and our credit facility contain restrictive covenants limiting our ability and our restricted subsidiaries' ability to, among other things, incur additional indebtedness; pay dividends on our capital stock or redeem, repurchase or retire our capital stock or subordinated indebtedness; make certain investments; create restrictions on the payment of dividends or other amounts to us from our restricted subsidiaries; incur liens; engage in transactions with affiliates; sell assets; and consolidate, merge or transfer assets. If we retire, redeem or repurchase or obtain waivers from holders of our 10.75% guaranteed and senior notes and our senior lenders under our credit facility, we will no longer be subject to these restrictive covenants. In that case, we may enter into transactions in the future which are permitted by the terms of the remaining notes but which may restrict or adversely affect our ability to pay interest or principal on the remaining notes. THE GUARANTEED NOTES ARE UNSECURED AND STRUCTURALLY SUBORDINATED TO THE OBLIGATIONS OF OUR SUBSIDIARIES. Because our operations are conducted through subsidiaries, claims of the creditors of those subsidiaries (including policyholders) will rank senior to claims to distributions from the subsidiaries, which we depend on to make payments on the guaranteed notes (whether or not registered). CIHC's subsidiaries had indebtedness for borrowed money (including capitalized lease obligations but excluding indebtedness to affiliates), policy reserves and other liabilities of $50.2 billion at March 31, 2002. The guaranteed notes will rank effectively junior to these liabilities. If an insurance company subsidiary were to be liquidated, that liquidation would be conducted under the insurance law of its state of domicile by such state's insurance regulator as the receiver with respect to such insurer's property and business. In the event of a default on our debt or our insolvency, liquidation or other reorganization, our creditors and stockholders will not have the right to proceed against the assets of our subsidiaries or to cause their liquidation under federal and state bankruptcy laws. In addition, Conseco, Inc. is the holder of $750.0 million aggregate liquidation preference of preferred stock of Conseco Finance, restricting Conseco Finance's ability to make distributions to CIHC, its sole common stockholder and the guarantor of the guaranteed notes. WE ARE A HOLDING COMPANY AND DEPEND ON OUR SUBSIDIARIES FOR CASH. We are a holding company with no business operations of our own; we depend on our operating subsidiaries for cash to make principal and interest payments on our debt (including payments to subsidiary trusts to be used for distributions on company-obligated mandatorily redeemable preferred securities), and to pay administrative expenses and income taxes. The cash we receive from our subsidiaries consists of fees for services, tax sharing payments, dividends and surplus debenture interest and principal payments. A deterioration in any of our material subsidiaries' financial condition, earnings or cash flow for any reason could limit such subsidiary's ability to pay cash dividends or other payments to us, which, in turn, would limit our ability to meet our debt service requirements and satisfy our other financial obligations. The ability of our insurance subsidiaries to pay dividends is subject to state insurance department regulations. These regulations generally permit dividends to be paid from earned surplus of the insurance company for any 12-month period in amounts equal to the greater of (or in a few states, the lesser of): (i) net gain from operations for the prior year; or (ii) 10% of surplus as of the end of the preceding year. Any dividends in excess of these levels require the approval of the director or commissioner of the applicable state 14 insurance department. In March 2002, we received approval from various insurance regulatory authorities to pay dividends to Conseco of $225.0 million, of which $100.0 million was paid in April 2002. In addition, during the first quarter of 2002, we requested permission to pay dividends to Conseco of $15.0 million which request was approved by regulatory authorities in early April 2002. During the remainder of 2002, we expect to request permission from the regulatory authorities to pay additional extraordinary dividends, substantially all of which are related to anticipated reinsurance transactions. Although we believe that amounts required for us to meet our financial and operating obligations will be available from our subsidiaries, our results for future periods beyond 2002 are subject to numerous uncertainties. We may encounter liquidity problems, which could affect our ability to meet our obligations while attempting to meet competitive pressures or adverse economic conditions. In that event, the value of the notes could be materially adversely affected. WE WILL LIKELY NOT BE ABLE TO SATISFY ALL OF OUR OBLIGATIONS FOLLOWING AN UNCURED EVENT OF DEFAULT. Events of default under the indentures include customary events of default. If an uncured event of default occurs with respect to a series of notes, it could result in the acceleration of and immediate maturity of all our notes and our credit facility through cross-acceleration and cross-default provisions contained in the indentures governing our senior debt and in our credit facility, which, as of March 31, 2002, totaled $4.1 billion. If this occurs, we will likely not be able to satisfy all of our obligations then due and payable under the credit facility and the guaranteed and senior notes. In addition, the indenture governing the 10.75% guaranteed and senior notes requires that upon the occurrence of a change of control (as defined in the indenture), the holders of the notes have the right to require us to repurchase the notes at a price equal to 101% of the principal amount, together with accrued and unpaid interest. In such a situation, we may not have sufficient funds to pay for all of the notes that are tendered under the offer to purchase. If we do not comply with this repurchase obligation, an event of default would occur under those notes and, through their cross-default and cross-acceleration provisions, the total amounts due under our credit facility and other series of senior debt would become immediately due and payable. If this occurs, we will most likely not be able to satisfy our obligations and we would most likely seek bankruptcy protection and relief. WE DEPEND UPON SECURITIZATION PROGRAMS TO FUND OUR FINANCE OPERATIONS. The most significant source of liquidity for our finance operations has been our ability to finance the receivables we originate through loan securitizations. Accordingly, adverse changes in the securitization market could impair our ability to originate, purchase and sell loans or other assets on a favorable or timely basis. Any such impairment could have a material adverse effect upon our business and results of operations. The securitization market is sensitive to the credit ratings of Conseco Finance in connection with our securitization program. A negative change in the credit ratings of Conseco Finance could have a material adverse effect on our ability to access capital through the securitization market. In addition, the securitization market for many types of assets is relatively undeveloped and may be more susceptible to market fluctuations or other adverse changes than more developed capital markets. Although we have alternative sources of funding, principally warehouse and bank credit facilities as well as loan sales, these alternatives may not be sufficient for us to continue to originate loans at our current origination levels. At May 28, 2002, we had $1.9 billion of committed (and an additional $1.9 billion of uncommitted) capacity under our warehouse and bank credit facilities to fund our finance operations, subject to certain conditions. At March 31, 2002, we had borrowed $2.0 billion under these agreements, leaving $1.8 billion available to borrow (of which approximately $0.3 billion is committed). If we are unable to securitize our asset portfolios, our loan originations will significantly decrease and our liquidity will be negatively affected. Although we expect to be able to obtain replacement financing when our current securitization facilities expire, there can be no assurance that financing will be obtainable on favorable terms, if at all. To the extent that we are unable to arrange any third party or other financing, our loan origination activities would be adversely affected, which could have a material adverse effect on our operations, financial results and cash position. 15 OUR FINANCIAL PERFORMANCE MAY BE SUBJECT TO VOLATILITY DUE TO POSSIBLE IMPAIRMENT CHARGES RELATING TO THE VALUATION OF INTEREST-ONLY SECURITIES. Conseco Finance holds substantial residual interests in securitization transactions executed prior to September 1999, which we refer to as interest-only securities. We carry these securities at estimated fair value, which we determine by discounting the projected cash flows over the expected life of the loan receivables sold using prepayment, default, loss and interest rate assumptions. Since September 1999, we have securitized our loan receivables using the portfolio method resulting in balance sheet financing treatment. As a result, we are no longer creating interests in interest-only securities. We are required to recognize declines in the value of our interest-only securities, and resulting charges to earnings, when: (i) their fair value is less than their carrying value, and (ii) the timing and/or amount of cash expected to be received from these securities has changed adversely from the previous valuation that determined the carrying value. The assumptions we use to determine new values are based on our internal evaluations and consultation with external advisors having significant experience in valuing these securities. Although we believe our methodology is reasonable, many of the assumptions and expectations underlying our determinations may prove wrong, in which case there may be an adverse effect on our financial results. Largely as a result of adverse changes in the underlying assumptions, we recognized impairment charges of $386.9 million in 2001, $515.7 million in 2000, $554.3 million in 1999 and $549.4 million in 1998 to reduce the book value of our interest-only securities and servicing rights. At March 31, 2002, the carrying value of our interest-only securities, net of servicing liabilities was $148.3 million (including unrealized gains of $25.1 million). No assurances can be given that our current valuation of interest-only securities will prove accurate in future periods. In addition, in the securitizations to which these interest-only securities relate, we have retained certain contingent risks in the form of guarantees of residual interests. At March 31, 2002, the total amount of these guarantees by Conseco Finance was $1.5 billion. If we have to make more payments on these guarantees than anticipated, or we experience higher than anticipated rates of loan repayment, including due to foreclosures or charge-offs, or any adverse changes in our other assumptions used for valuation (such as interest rates), we could be forced to recognize additional impairment charges which could have a material adverse effect on our financial condition or results of operations. RISKS RELATED TO OUR BUSINESSES AND OPERATIONS DELINQUENCIES AND COLLATERAL RECOVERY RATES EXPERIENCED BY OUR CONSUMER FINANCE SUBSIDIARY CAN BE ADVERSELY IMPACTED BY A VARIETY OF FACTORS, MANY OF WHICH ARE OUTSIDE OUR CONTROL. Conseco Finance provided approximately 34% of our revenues for the three months ended March 31, 2002. Delinquencies on loans held in our loan portfolio and our ability to recover collateral and mitigate loan losses can be adversely impacted by a variety of factors, many of which are outside our control. For example, proposed changes to the federal bankruptcy laws applicable to individuals would make it more difficult for borrowers to seek bankruptcy protection, and the prospect of these changes may encourage certain borrowers to seek bankruptcy protection before the law changes, thereby increasing delinquencies. When loans are delinquent and Conseco Finance forecloses on the loan, its ability to sell collateral to recover or mitigate its losses is subject to the market value of such collateral. In manufactured housing, those values may be affected by the available inventory of manufactured homes on the market, a factor over which we have no control. It is also dependent upon demand for new homes, which is tied to economic factors in the general economy. In addition, repossessed collateral is generally in poor condition, which reduces its value. Recently, many consumer lenders have stopped or significantly scaled back their consumer finance operations in the manufactured housing sector. These lenders began to foreclose on collateral pledged to secure loans at a more aggressive rate. Conseco Finance may face increased competition from such lenders in disposing of collateral pledged to secure its loans. Often collateral is in similar forms. There is a limited number of collateral buyers and the exiting consumer lenders may be willing to sell their foreclosed collateral at prices significantly below fair market value. As a result, collateral recovery rates for Conseco Finance may fall, which could have a material adverse effect on the financial position and results of Conseco Finance, and reduces the funds available for distribution to CIHC and us for the benefit of its and our creditors. 16 AN ECONOMIC DOWNTURN MAY LEAD TO A DETERIORATION IN OUR ASSET QUALITY AND ADVERSELY AFFECT OUR FINANCE BUSINESS EARNINGS AND CASH FLOW. The risks associated with our finance business become more acute in any economic slowdown or recession. Periods of economic slowdown or recession may be accompanied by decreased demand for consumer credit and declining asset values. In the home equity mortgage and manufactured housing businesses, any material decline in real estate values reduces the ability of borrowers to use home equity to support borrowing and increases the loan-to-value ratios of loans previously made, thereby weakening collateral coverage and increasing the possibility of a loss in the event of a default. Delinquencies, foreclosures and losses generally increase during economic slowdowns or recessions. For our finance customers, loss of employment, increases in cost-of-living or other adverse economic conditions would impair their ability to meet their payment obligations. In addition, in an economic slowdown or recession, our servicing and litigation costs increase. Any sustained period of increased delinquencies, foreclosures, losses or increased costs would adversely affect our financial condition and results of operations. OUR NET INTEREST INCOME AND SERVICING FEES FROM OUR FINANCE OPERATIONS ARE SUBJECT TO PREPAYMENT RISK. At March 31, 2002, we had $41.5 billion of managed receivables on which we earn net interest income and servicing fees. Prepayments of our managed receivables, whether due to refinancing, repayments or foreclosures, in excess of management's estimates could adversely affect our future cash flow at our finance subsidiary due to the resulting loss of servicing fee revenue and net interest income on such prepaid receivables. Prepayments can result from a variety of factors, many of which are beyond our control, including changes in interest rates and general economic conditions. OUR INSURANCE BUSINESS PERFORMANCE MAY DECLINE IF OUR PREMIUM RATES ARE NOT ADEQUATE. We set the premium rates on our health insurance policies based on facts and circumstances known at the time we issue the policies and on assumptions about numerous variables, including the actuarial probability of a policyholder incurring a claim, the severity, and the interest rate earned on our investment of premiums. In setting premium rates, we consider historical claims information, industry statistics, the rates of our competitors and other factors. If our actual claims experience proves to be less favorable than we assumed and we are unable to raise our premium rates, our financial results may be adversely affected. We generally cannot raise our premiums in any state unless we first obtain the approval of the insurance regulator in that state. We review the adequacy of our premium rates regularly and file rate increases on our products when we believe existing premium rates are too low. It is possible that we will not be able to obtain approval for premium rate increases from currently pending requests or requests filed in the future. If we are unable to raise our premium rates because we fail to obtain approval for a rate increase in one or more states, our net income may decrease. If we are successful in obtaining regulatory approval to raise premium rates due to unfavorable actual claims experience, the increased premium rates may reduce the volume of our new sales and cause existing policyholders to allow their policies to lapse. This would reduce our premium income in future periods. Increased lapse rates also could require us to expense all or a portion of the deferred policy costs relating to lapsed policies in the period in which those policies lapse, adversely affecting our financial results in that period. OUR RESERVES FOR FUTURE INSURANCE POLICY BENEFITS AND CLAIMS MAY PROVE TO BE INADEQUATE, REQUIRING US TO INCREASE LIABILITIES AND RESULTING IN REDUCED NET INCOME AND SHAREHOLDERS' EQUITY. We calculate and maintain reserves for the estimated future payment of claims to our policyholders using the same actuarial assumptions that we use to set our premiums. For our health insurance business, we establish an active life reserve plus a liability for due and unpaid claims, claims in the course of settlement, and incurred but not reported claims, as well as a reserve for the present value of amounts not yet due on claims. Many factors can affect these reserves and liabilities, such as economic and social conditions, inflation, hospital and pharmaceutical costs, changes in doctrines of legal liability, and extracontractual damage awards. Therefore, the reserves and liabilities we establish are necessarily based on extensive estimates, assumptions and prior years' statistics. Establishing reserves is an uncertain process, and it is possible that actual claims will 17 materially exceed our reserves and have a material adverse effect on our results of operations and financial condition. Our financial performance depends significantly upon the extent to which our actual claims experience is consistent with the assumptions we used in setting our reserves and pricing our policies. If our assumptions with respect to future claims are incorrect, and our reserves are insufficient to cover our actual losses and expenses, we would be required to increase our liabilities resulting in an adverse effect to our financial results and financial position. WE ARE SUBJECT TO EXTENSIVE REGULATION. Our finance and insurance businesses are subject to extensive regulation and supervision in the jurisdictions in which we operate, which is primarily for the benefit and protection of our customers, and not for the benefit of our investors or creditors. Our finance operations are subject to regulation by federal, state and local government authorities, as well as to various laws and judicial and administrative decisions, that impose requirements and restrictions affecting, among other things, our loan originations, credit activities, maximum interest rates, finance and other charges, disclosure to customers, the terms of secured transactions, collection, repossession and claims-handling procedures, multiple qualification and licensing requirements for doing business in various jurisdictions, and other trade practices. Although we believe that we are in compliance in all material respects with applicable local, state and federal laws, rules and regulations, it is possible that more restrictive laws, rules or regulations will be adopted in the future that could make compliance more difficult or expensive, restrict our ability to originate or sell loans, further limit or restrict the amount of interest and other charges earned on loans originated by us, further limit or restrict the terms of loan agreements, or otherwise adversely affect our business or prospects. Our insurance subsidiaries are subject to state insurance laws that establish supervisory agencies with broad administrative powers relative to granting and revoking licenses to transact business, regulating sales and other practices, licensing agents, approving policy forms, setting reserve and solvency requirements, determining the form and content of required statutory financial statements, limiting dividends and prescribing the type and amount of investments. RECENTLY ENACTED AND PENDING OR FUTURE LEGISLATION COULD ALSO AFFECT THE FINANCIAL PERFORMANCE OF OUR INSURANCE OPERATIONS. During recent years, the health insurance industry has experienced substantial changes, primarily caused by healthcare legislation. Recent federal and state legislation and legislative proposals relating to healthcare reform contain features that could severely limit or eliminate our ability to vary our pricing terms or apply medical underwriting standards with respect to individuals which could have the effect of increasing our loss ratios and have an adverse effect on our financial results. In particular, Medicare reform and legislation concerning prescription drugs could affect our ability to price or sell our products. In addition, proposals currently pending in Congress and some state legislatures may also affect our financial results. These proposals include the implementation of minimum consumer protection standards for inclusion in all long term care policies, including: guaranteed premium rates; protection against inflation; limitations on waiting periods for pre-existing conditions; setting standards for sales practices for long term care insurance; and guaranteed consumer access to information about insurers, including lapse and replacement rates for policies and the percentage of claims denied. Enactment of any of these proposals could adversely affect our financial results. CHANGING INTEREST RATES MAY ADVERSELY AFFECT OUR RESULTS OF OPERATIONS. We finance our loans held pending securitization through funds obtained through master repurchase agreements, commercial paper conduit facilities, facilities with various banking and investment banking firms and other borrowings. Such borrowings were $2.2 billion on March 31, 2002, of which $2.0 billion was borrowed at variable interest rates. Our direct corporate obligations were $4.1 billion at March 31, 2002, of which $1.5 billion was borrowed at variable interest rates. In addition, the D&O loans which we guarantee had a total balance of $0.5 billion at March 31, 2002, all of which was borrowed at variable interest rates. Our profitability may be directly affected by the level of and fluctuations in interest rates which affect our ability to earn a spread between interest received on loans and the costs of liabilities in our finance operations. While we 18 monitor the interest rate environment and employ hedging strategies designed to mitigate the impact of changes in interest rates, our financial results could be adversely affected by changes in interest rates. During periods of increasing interest rates, we generally experience market pressure to reduce servicing spreads in our financing operations. In addition, an increase in interest rates may decrease the demand for consumer credit. A substantial and sustained increase in interest rates could, among other things: (i) adversely affect our ability to purchase or originate loans or other assets; (ii) reduce the average size of loans underwritten; and (iii) increase securitization funding costs. A significant decline in interest rates could decrease the size of our loan servicing portfolio by increasing the level of loan prepayments, thereby shortening the life and impairing the value of our interest-only securities. Fluctuating interest rates also may affect our net interest income earned resulting from the difference between the yield to us on loans held pending securitization and the cost of funds obtained by us to finance such loans. Our spread-based insurance business is subject to several inherent risks arising from movements in interest rates, especially if we fail to anticipate or respond to such movements. First, interest rate changes can cause compression of our net spread between interest earned on investments and interest credited on customer deposits, thereby adversely affecting our results. Second, if interest rate changes produce an unanticipated increase in surrenders of our spread-based products, we may be forced to sell investment assets at a loss in order to fund such surrenders. At December 31, 2001, approximately 19% of our total insurance liabilities (or approximately $4.8 billion) could be surrendered by the policyholder without penalty. Finally, changes in interest rates can have significant effects on the performance of our mortgage-backed securities portfolio, including collateralized mortgage obligations, as a result of changes in the prepayment rate of the loans underlying such securities. We follow asset/liability strategies that are designed to mitigate the effect of interest rate changes on our profitability. However, there can be no assurance that management will be successful in implementing such strategies and achieving adequate investment spreads. WE ARE SUBJECT TO LITIGATION CLAIMS WHICH COULD BE MATERIAL. We and our subsidiaries are involved on an ongoing basis in lawsuits relating to our operations, including with respect to sales practices, and we and current and former officers and directors are defendants in pending class action lawsuits asserting claims under the securities laws and derivative claims. The ultimate outcome of these lawsuits cannot be predicted with certainty. Director and officer liability insurance against certain liabilities, including liabilities under the securities laws, was in force at the time the securities and derivative litigation was commenced. The outcome of these lawsuits may have a material adverse effect on our financial performance and liquidity. THE MARKETS IN WHICH WE COMPETE ARE HIGHLY COMPETITIVE. Each of the markets in which we operate is highly competitive. Competitors include, in the finance segment, finance companies, commercial banks, thrifts, other financial institutions, credit unions and manufacturers and vendors, and in the insurance segment, other life insurers, commercial banks, thrifts, mutual funds and broker-dealers. Competitors include, in the insurance segment, GE Financial Assurance Holdings, Inc., John Hancock Life Insurance Company, Mutual of Omaha Insurance Company, American Family Life Assurance Company (AFLAC), CNA Financial Corporation, Colonial Life & Accident Insurance Company (UnumProvident Corporation), Fidelity & Guaranty Life Insurance Company, Allianz Life Insurance Company of North America and Jackson National Life Insurance Company. Many of our competitors in different segments and regions are larger companies that have greater capital, technological and marketing resources, and have access to capital at a lower cost. Because the actual cost of products is unknown when they are sold, we are subject to competitors who may sell a product at a price that does not cover its actual cost. In the insurance business, claims paying ability ratings can be a key competitive factor in marketing products and in attracting and retaining agents. Should the claims paying ability rating of one or more of our insurance subsidiaries decline, we may not be able to compete successfully. 19 TAX LAW CHANGES COULD ADVERSELY AFFECT OUR INSURANCE PRODUCT SALES AND PROFITABILITY. We sell deferred annuities and some forms of life insurance products which are attractive to purchasers, in part, because policyholders generally are not subject to United States federal income tax on increases in policy values until some form of distribution is made. Recently, Congress enacted legislation to lower marginal tax rates, reduce the federal estate tax gradually over a ten-year period, with total elimination of the federal estate tax in 2010 and increase contributions which may be made to individual retirement accounts and 401(k) accounts. While these tax law changes will sunset at the beginning of 2011 absent future congressional action, they could in the interim diminish the appeal of our annuity and life insurance products. Additionally, Congress has considered, from time to time, other possible changes to the U.S. tax laws, including elimination of the tax deferral on the accretion of value within certain annuities and life insurance products. There can be no assurance that further tax legislation will not be enacted which would contain provisions with possible adverse effects on our annuity and life insurance products. RISKS RELATED TO CONTINUING OWNERSHIP OF THE UNREGISTERED GUARANTEED NOTES THE UNREGISTERED GUARANTEED NOTES ARE NOT REGISTERED FOR PUBLIC RESALE UNDER THE SECURITIES ACT. We expect that a substantial majority of holders of unregistered guaranteed notes issued in the April exchange offer will tender their notes for registered notes. Following the completion of the exchange offer, the registered notes generally may be resold without compliance with the registration and prospectus delivery requirements of the Securities Act, except as described elsewhere in this prospectus with respect to broker-dealers participating in the exchange offer. The unregistered guaranteed notes, in contrast, are not and will not be registered under the Securities Act. Consequently, you may not be able to publicly sell your unregistered guaranteed notes and may therefore only sell such notes to persons in transactions exempt from registration under the Securities Act. This means you may only be able to sell your notes to qualified institutional buyers, certain sophisticated, accredited investors or in other negotiated transactions and you may not be able to obtain the prevailing public trading price of the registered notes in your transactions. THERE WILL BE NO ACTIVE TRADING MARKET FOR THE UNREGISTERED GUARANTEED NOTES. We expect that a substantial majority of holders of unregistered guaranteed notes issued in the April exchange offer will tender their notes for registered notes. As a result, we believe there will be far fewer holders of unregistered guaranteed notes, whom we believe have a greater appetite for unregistered guaranteed notes than the general investing community, to whom you can sell your unregistered guaranteed notes following the exchange offer. You may be forced to sell your unregistered guaranteed notes for a lower price than the prevailing market price of the registered notes. Furthermore, under the registration rights agreement we executed in connection with the April exchange offer, we are under no obligation following the exchange offer to register the untendered unregistered guaranteed notes. Therefore, failure to exchange your unregistered guaranteed notes in the exchange offer is likely to leave you with an illiquid security with no active trading market. 20 FORWARD-LOOKING STATEMENTS Some of the statements in this prospectus (including the information incorporated by reference) may constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. When used in this prospectus or in documents incorporated by reference in this prospectus, the words "believe," "anticipate," "estimate," "project," "intend," "expect," "may," "will," "plan," "should," "would," "contemplate," "possible," "attempts," "seeks" and similar expressions are intended to identify forward-looking statements. Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from the future results, performance or achievements expressed or implied by our 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, but are not limited to: - the factors described in this prospectus under "Risk Factors"; - general economic conditions and other factors, including prevailing interest rate levels, stock and credit market performance, and health care inflation, which may affect (among other things) our ability to sell our products, our ability to make loans and access capital resources and the costs associated therewith, the market value of our investments, the lapse rate and profitability of policies, and the level of defaults and prepayments of loans we made; - our ability to achieve anticipated synergies and levels of operational efficiencies, including from our "Process Excellence" initiatives; - customer response to new products, distribution channels, and marketing initiatives; - mortality, morbidity, usage of health care services and other factors that may affect the profitability of our insurance products; - the performance of our investments; - changes in tax laws and regulations that may affect the relative tax advantages of some of our products; - increasing competition in the sale of insurance and annuities and in the finance business; - regulatory changes or actions, including those relating to regulation of financial services affecting (among other things) bank sales and underwriting of insurance products, regulation of the sale, underwriting and pricing of products, and health care regulation affecting health insurance products; - the outcome of our efforts to sell assets and reduce, refinance or modify indebtedness and the availability and cost of capital in connection with this process; - actions by rating agencies and the effects of past or future actions by these agencies on our business; and - the risk factors or uncertainties listed from time to time in our filings with the SEC. Other factors not currently known to us or not currently considered material by us may also be relevant to our forward-looking statements and could also cause actual results to differ materially from those projected. All written or oral forward-looking statements attributable to us are expressly qualified in their entirety by the foregoing cautionary statement. Our forward-looking statements speak only as of the date made. Except as required by law, we assume no obligation to update or to publicly announce the results of any revisions to any of our forward-looking statements to reflect actual results, future events or developments, changes in assumptions or changes in other factors affecting the forward-looking statements. 21 USE OF PROCEEDS This exchange offer is intended to satisfy certain of our obligations under the registration rights agreement entered into in connection with the April exchange offer. We will not receive any cash proceeds from the issuance of the registered notes. We have agreed to bear the expenses of the exchange offer. 22 SELECTED CONSOLIDATED FINANCIAL DATA Our selected consolidated financial data are based on and derived from, and should be read in conjunction with, our quarterly report on Form 10-Q for the quarter ended March 31, 2002, and our annual report on Form 10-K for the year ended December 31, 2001, and the related notes thereto. Our consolidated balance sheets at December 31, 2001 and 2000, and the consolidated statements of operations, shareholders' equity and cash flows for each of the three years ended December 31, 2001, 2000 and 1999, and notes thereto were audited by PricewaterhouseCoopers LLP, independent accountants. Our consolidated financial statements as of December 31, 2001 and 2000, and for each of the three years ended December 31, 2001, are included in our annual report on Form 10-K for the year ended December 31, 2001, which is incorporated by reference herein. The selected consolidated financial data set forth for the three months ended March 31, 2002 and 2001 are unaudited; however, in the opinion of our management, the accompanying selected financial data contain all adjustments, consisting only of normal recurring items, necessary to present fairly the selected financial data for such periods. The results of operations for the three months ended March 31, 2002, may not be indicative of the results of operations to be expected for a full year. See "Incorporation of Certain Documents by Reference" on page i of this prospectus. The comparison of selected consolidated financial data is significantly affected by the following business combinations accounted for as purchases: Washington National Corporation (effective December 1, 1997); Colonial Penn Life Insurance Company and Providential Life Insurance Company (September 30, 1997); Pioneer Financial Services, Inc. (April 1, 1997); and Capitol American Financial Corporation (January 1, 1997). All financial data have been restated to give retroactive effect to the merger (completed on June 30, 1998) with Conseco Finance accounted for as a pooling of interests.
THREE MONTHS ENDED MARCH 31, YEARS ENDED DECEMBER 31, --------------------- --------------------------------------------------------- 2002 2001 2001 2000 1999 1998 1997 --------- --------- --------- --------- --------- --------- --------- (AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA) STATEMENT OF OPERATIONS DATA Insurance policy income......... $ 957.2 $ 1,029.2 $ 4,065.7 $ 4,220.3 $ 4,040.5 $ 3,948.8 $ 3,410.8 Gain on sale of finance receivables(a)................ 7.2 8.9 26.9 7.5 550.6 745.0 779.0 Net investment income........... 856.7 897.8 3,778.1 3,914.3 3,411.4 2,506.5 2,171.5 Net realized investment gains (losses)...................... (52.2) (113.3) (413.7) (358.3) (156.2) 208.2 266.5 Impairment charge related to retained interests in securitization transactions... -- (7.9) (386.9) (515.7) (554.3) (549.4) (190.0) Total revenues.................. 1,859.3 2,123.0 7,695.2 7,771.2 7,781.4 7,210.8 6,682.2 Interest expense: Corporate..................... 74.4 105.1 369.6 438.4 249.1 182.2 109.4 Finance and investment borrowings.................. 294.3 313.9 1,239.6 1,014.7 312.6 258.3 202.9 Total benefits and expenses..... 1,961.4 1,948.7 8,114.6 9,133.0 6,630.5 6,165.1 5,196.5 Income (loss) before extraordinary gain (loss) and cumulative effect of accounting change............. (99.9) 83.8 (423.1) (1,130.9) 595.0 509.7 873.3 Adjusted income (loss) before extraordinary gain (loss) and cumulative effect of accounting change(h).......... (99.9) 111.3 (313.5) (1,018.4) 705.1 619.9 957.8 Extraordinary gain (loss) on extinguishment of debt, net of income tax.................... 4.0 .3 17.2 (5.0) -- (42.6) (6.9) Cumulative effect of accounting change, net of income tax..... -- -- -- 55.3 -- -- --
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THREE MONTHS ENDED MARCH 31, YEARS ENDED DECEMBER 31, --------------------- --------------------------------------------------------- 2002 2001 2001 2000 1999 1998 1997 --------- --------- --------- --------- --------- --------- --------- (AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA) Net income (loss)(b)............ (95.9) 84.1 (405.9) (1,191.2) 595.0 467.1 866.4 Adjusted net income (loss)(h)... (95.9) 111.6 (296.3) (1,078.7) 705.1 577.3 950.9 Preferred stock dividends....... 1.0 3.9 12.8 11.0 1.5 7.8 21.9 Net income (loss) applicable to common stock.................. (96.9) 80.2 (418.7) (1,202.2) 593.5 459.3 844.5 Adjusted net income (loss) applicable to common stock(h)...................... (96.9) 107.7 (309.1) (1,089.7) 703.6 569.5 929.0 PER SHARE DATA(C) Net income (loss), basic........ $ (.28) $ .24 $ (1.24) $ (3.69) $ 1.83 $ 1.47 $ 2.72 Adjusted net income (loss), basic(h)...................... (.28) .32 (.92) (3.34) 2.17 1.82 2.99 Net income (loss), diluted...... (.28) .23 (1.24) (3.69) 1.79 1.40 2.52 Adjusted net income (loss), diluted(h).................... (.28) .30 (.92) (3.34) 2.12 1.73 2.77 Dividends declared per common share......................... -- -- -- .100 .580 .530 .313 Book value per common share outstanding................... 11.88 14.00 12.34 11.95 15.50 16.37 16.45 Shares outstanding at period-end.................... 346.0 337.6 344.7 325.7 327.7 315.8 310.0 Weighted average shares outstanding for diluted earnings...................... 345.2 372.7 338.1 326.0 332.9 332.7 338.7 BALANCE SHEET DATA -- PERIOD END Total investments............... $24,999.7 $25,581.1 $25,027.2 $25,017.6 $26,431.6 $26,073.0 $26,699.2 Goodwill........................ 3,695.4 3,744.7 3,695.4 3,800.8 3,927.8 3,960.2 3,693.4 Total assets.................... 61,490.8 58,459.4 61,392.3 58,589.2 52,185.9 43,599.9 40,679.8 Notes payable and commercial paper: Corporate..................... 4,092.8 4,925.0 4,087.6 5,055.0 4,624.2 3,809.9 2,354.9 Finance....................... 2,202.8 2,000.2 2,527.9 2,810.9 2,540.1 1,511.6 1,863.0 Related to securitized finance receivables structured as collateralized borrowings... 15,048.7 12,396.1 14,484.5 12,100.6 4,641.8 -- -- Total liabilities............... 54,962.3 51,334.0 54,724.8 51,810.9 43,990.6 36,229.4 34,082.0 Company-obligated mandatorily redeemable preferred securities of subsidiary trusts........................ 1,916.2 1,909.4 1,914.5 2,403.9 2,639.1 2,096.9 1,383.9 Shareholders' equity............ 4,612.3 5,216.0 4,753.0 4,374.4 5,556.2 5,273.6 5,213.9 OTHER FINANCIAL DATA(C)(D) Premium and asset accumulation product collections(e)........ $ 1,520.5 $ 1,620.6 $ 6,247.1 $ 7,158.6 $ 6,986.0 $ 6,051.3 $ 5,075.6 Operating earnings(f)........... 39.9 54.0 218.0 151.8 749.2 841.1 991.8 Managed finance receivables..... 41,532.2 44,776.9 43,002.3 46,585.9 45,791.4 37,199.8 27,957.1 Total managed assets (at fair value)(g)..................... 93,112.0 93,603.2 94,567.7 95,471.7 98,561.8 87,247.4 70,259.8 Shareholders' equity, excluding accumulated other comprehensive income (loss)... 5,108.0 5,612.9 5,192.0 5,025.4 6,327.8 5,302.0 5,013.3 Book value per common share outstanding, excluding accumulated other comprehensive income (loss)... 13.32 15.17 13.61 13.95 17.85 16.46 15.80
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THREE MONTHS ENDED MARCH 31, YEARS ENDED DECEMBER 31, --------------------- --------------------------------------------------------- 2002 2001 2001 2000 1999 1998 1997 --------- --------- --------- --------- --------- --------- --------- (AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA) Delinquencies greater than 60 days as a percentage of managed finance receivables... 1.99% 1.72% 2.10% 1.76% 1.42% 1.19% 1.08%
- --------------- (a) Subsequent to September 8, 1999, we no longer structure the securitizations of the loans we originate in a manner that results in gain-on-sale revenues. After that date, the gains we recognize are generally related to the sale of the entire loan (with no interests retained by the Company). For more information on this change, refer to our annual report on Form 10-K for the fiscal year ended December 31, 2001 and our quarterly report on Form 10-Q for the period ended March 31, 2002, both of which are incorporated by reference herein. (b) Net income (loss) includes the following:
THREE MONTHS ENDED MARCH 31, YEARS ENDED DECEMBER 31, --------------- ----------------------------------------------- 2002 2001 2001 2000 1999 1998 1997 ------ ------ ------- ------- ------- ------- ------- (DOLLARS IN MILLIONS) Net investment gains (losses), net of income tax and other items....... $(34.1) $(59.1) $(242.8) $(198.1) $(111.9) $ (32.8) $ 44.1 Impairment charge, net of income tax................ -- (5.0) (250.4) (324.9) (349.2) (355.8) (117.8) Special charges and additional amortization, net of income tax......... (45.2) (10.0) (123.5) (534.9) -- (148.0) -- Gain on sale of interest in riverboat, net of income tax....................... -- 122.6 122.6 -- -- -- -- Provision for losses related to loan guarantees, net of income tax................ (26.0) -- (110.2) (150.0) (11.9) -- -- Venture capital income (loss), net of expenses and taxes................. (35.5) (17.5) (15.2) (99.4) 170.0 -- -- Amounts related to discontinued businesses and other non-recurring items, net of income tax....................... -- (5.1) (34.4) 13.6 147.3 205.2 (44.8) Cumulative effect of accounting change, net of income tax................ -- -- -- (55.3) -- -- -- Extraordinary gain (loss) on extinguishment of debt, net of income tax......... 4.0 .3 17.2 (5.0) -- (42.6) (6.9)
- --------------- For additional discussion of the above items refer to our annual report on Form 10-K for the fiscal year ended December 31, 2001 and our quarterly report on Form 10-Q for the period ended March 31, 2002, both of which are incorporated by reference herein. (c) All share and per-share amounts have been restated to reflect the two-for-one stock split paid on February 11, 1997. (d) Amounts under this heading are included to assist the reader in analyzing the Company's financial position and results of operations. Such amounts are not intended to, and do not, represent insurance 25 policy income, net income, shareholders' equity or book value per share prepared in accordance with generally accepted accounting principles. (e) Includes premiums received from universal life products and products without mortality or morbidity risk. Such premiums are not reported as revenues under generally accepted accounting principles and were $585.5 million and $610.5 million for the three months ended March 31, 2002 and 2001, respectively; $2,267.2 million in 2001; $2,731.1 million in 2000; $3,023.3 million in 1999; $2,585.7 million in 1998; and $2,099.4 million in 1997. Also includes deposits in mutual funds totaling $88.5 million and $111.3 million for the three months ended March 31, 2002 and 2001, respectively; $468.7 million in 2001; $794.2 million in 2000; $479.3 million in 1999; $87.1 million in 1998; and $19.9 million in 1997. Also includes premiums related to our discontinued major medical business, totaling $134.8 million and $209.5 million for the three months ended March 31, 2002 and 2001, respectively; $737.1 million in 2001; $910.6 million in 2000; $855.7 million in 1999; $878.2 million in 1998; and $744.0 million in 1997. (f) Represents net income excluding the items described in note (b) above. For additional discussion of the criteria we use to identify the items excluded from operating earnings refer to our annual report on Form 10-K for the fiscal year ended December 31, 2001 and our quarterly report on Form 10-Q for the period ended March 31, 2002, both of which are incorporated by reference herein. (g) Includes: (i) all of the Company's assets; (ii) the total finance receivables managed by Conseco Finance applicable to the holders of asset-backed securities sold by Conseco Finance in securitizations structured in a manner that resulted in gain-on-sale revenue (adjusted for the interests retained by the Company); and (iii) the total market value of the investment portfolios managed by the Company for others of $8.3 billion and $6.9 billion at March 31, 2002 and 2001, respectively, $8.3 billion, $7.2 billion, $11.4 billion, 11.2 billion and $5.1 billion at December 31, 2001, 2000, 1999, 1998 and 1997, respectively. (h) The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142") in June 2001. Under the new rules, intangible assets with an indefinite life are no longer amortized in periods subsequent to December 31, 2001, but are subject to annual impairment tests (or more frequent under certain circumstances), effective January 1, 2002. Conseco has determined that all of its goodwill has an indefinite life and is therefore subject to the new rules. For additional discussion of our adoption of SFAS 142 refer to our annual report on Form 10-K for the fiscal year ended December 31, 2001 and our quarterly report on Form 10-Q for the period ended March 31, 2002, both of which are incorporated by reference herein. A reconciliation of reported net income (loss) to adjusted net income (loss) before the extraordinary gain (loss) on extinguishment of debt and cumulative effect of accounting change is as follows assuming that the nonamortization provisions of SFAS 142 were applied in all periods presented:
THREE MONTHS ENDED MARCH 31, YEARS ENDED DECEMBER 31, ---------------- ---------------------------------------------------- 2002 2001 2001 2000 1999 1998 1997 ------ ------ ------- --------- ---- ------ ------ (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA) Net income (loss), as reported...... $(95.9) $ 84.1 $(405.9) $(1,191.2) $595.0 $467.1 $866.4 Add: amortization of goodwill, net of income taxes................... -- 27.5 109.6 112.5 110.1 110.2 84.5 ------ ------ ------- --------- ------ ------ ------ Adjusted net income (loss).......... (95.9) 111.6 (296.3) (1,078.7) 705.1 577.3 950.9 Less: extraordinary (gain) loss on extinguishment of debt, net of income taxes...................... (4.0) (.3) (17.2) 5.0 -- 42.6 6.9 Add: cumulative effect of accounting change, net of income taxes....... -- -- -- 55.3 -- -- -- ------ ------ ------- --------- ------ ------ ------ Adjusted net income (loss) before extraordinary (gain) loss on extinguishment of debt and cumulative effect of accounting change.......................... $(99.9) $111.3 $(313.5) $(1,018.4) $705.1 $619.9 $957.8 ====== ====== ======= ========= ====== ====== ======
26
THREE MONTHS ENDED MARCH 31, YEARS ENDED DECEMBER 31, ---------------- ---------------------------------------------------- 2002 2001 2001 2000 1999 1998 1997 ------ ------ ------- --------- ---- ------ ------ (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA) Income (loss) per common share: Basic: Net income (loss) as reported... $ (.28) $ .24 $ (1.24) $ (3.69) $ 1.83 $ 1.47 $ 2.72 Add: amortization of goodwill, net of income taxes.......... -- .08 .32 .35 .34 .35 .27 ------ ------ ------- --------- ------ ------ ------ Adjusted net income (loss)...... (.28) .32 (.92) (3.34) 2.17 1.82 2.99 Less: extraordinary (gain) loss on extinguishment of debt, net of income taxes.......... (.01) -- (.05) .01 -- .14 .02 Add: cumulative effect of accounting change, net of income taxes................. -- -- -- .17 -- -- -- ------ ------ ------- --------- ------ ------ ------ Adjusted net income (loss) before extraordinary (gain) loss on extinguishment of debt and cumulative effect of accounting change....... $ (.29) $ .32 $ (.97) $ (3.16) $ 2.17 $ 1.96 $ 3.01 ====== ====== ======= ========= ====== ====== ====== Diluted: Net income (loss) as reported... $ (.28) $ .23 $ (1.24) $ (3.69) $ 1.79 $ 1.40 $ 2.52 Add: amortization of goodwill, net of income taxes.......... -- .07 .32 .35 .33 .33 .25 ------ ------ ------- --------- ------ ------ ------ Adjusted net income (loss)...... (.28) .30 (.92) (3.34) 2.12 1.73 2.77 Less: extraordinary (gain) loss on extinguishment of debt, net of income taxes.......... (.01) -- (.05) .01 -- .13 .02 Add: cumulative effect of accounting change, net of income taxes................. -- -- -- .17 -- -- -- ------ ------ ------- --------- ------ ------ ------ Adjusted net income (loss) before extraordinary (gain) loss on extinguishment of debt and cumulative effect of accounting change....... $ (.29) $ .30 $ (.97) $ (3.16) $ 2.12 $ 1.86 $ 2.79 ====== ====== ======= ========= ====== ====== ======
27 THE EXCHANGE OFFER PURPOSE AND EFFECT On April 24, 2002, we exchanged $1,292,637,000 aggregate principal amount of our senior notes for a corresponding amount of our unregistered guaranteed notes. The April exchange offer was only made, and the unregistered guaranteed notes were only offered and issued (i) in the United States, to "qualified institutional buyers," as that term is defined in Rule 144A under the Securities Act, and institutional "Accredited Investors" as that term is defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act, in a private transaction in reliance upon an exemption from the registration requirements of the Securities Act, and (ii) outside the United States, to persons other than "U.S. persons," as that term is defined in Rule 902 under the Securities Act, in offshore transactions in reliance upon Regulation S under the Securities Act. The April exchange offer was not registered under the Securities Act. The terms of the unregistered guaranteed notes are substantially identical to those of the tendered senior notes, except that the unregistered guaranteed notes have longer maturities and are guaranteed by CIHC, Incorporated, our direct subsidiary and the holding company of our principal operating subsidiaries. The purpose of the April exchange offer was to extend the maturity profile of our debt in order to improve our financial flexibility and to enhance our future ability to refinance public debt. Following the April exchange offer, an aggregate of $1,247,662,000 principal amount of senior notes remained outstanding (and without the benefit of the CIHC guarantee). Simultaneously with the April exchange offer, we and the guarantor entered into a registration rights agreement with the Banc of America Securities LLC, J.P. Morgan Securities Inc. and Lehman Brothers Inc., the dealer managers for the April exchange offer. Under the agreement, we have filed the registration statement of which this prospectus is a part and we are making this exchange offer. You should read the discussion under the headings "Prospectus Summary -- Summary of the Terms of the Registered Notes," "The Exchange Offer" and "Description of the Registered Notes" for further information regarding the registered notes. Because we did not register the unregistered guaranteed notes issued in the April exchange offer under the Securities Act, they may only be transferred in limited circumstances under the federal securities laws. If the holders of the unregistered guaranteed notes do not exchange their notes in the exchange offer, they will not have the further right to have their unregistered guaranteed notes registered under the Securities Act. Anyone who still holds unregistered guaranteed notes after the exchange offer therefore may not be able to publicly sell his or her unregistered guaranteed notes and may therefore only sell such notes to persons in transactions exempt from registration under the Securities Act. The registered notes will be issued without a restrictive legend under the Securities Act. Based on an interpretation by the staff of the Commission set forth in no-action letters issued to third parties, if you are not our "affiliate" within the meaning of Rule 405 under the Securities Act or a broker-dealer referred to in the next paragraph, we believe that the registered notes to be issued to you in the exchange offer may be offered for resale, resold and otherwise transferred by you without compliance with the registration and prospectus delivery provisions of the Securities Act. This interpretation, however, is based on your representation to us (which you will be deemed to make by delivering a completed letter of transmittal or agent's message if you tender through the Depository Trust Company) that: (1) you are acquiring the registered notes to be issued to you in the exchange offer in the ordinary course of your business; (2) you have no arrangement or understanding with any person to participate in the distribution of the unregistered guaranteed notes or the registered notes to be issued to you in the exchange offer; and (3) you are not an affiliate of Conseco's or CIHC's. If you tender your notes in the exchange offer for the purpose of participating in a distribution of the registered notes, you cannot rely on this interpretation by the staff of the Commission. Under those 28 circumstances, you must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction. Each broker-dealer that receives registered notes in the exchange offer for its own account must acknowledge (by delivering a completed letter of transmittal or agent's message) that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resales of those registered notes. We have agreed that, during a period starting on the expiration date of this exchange offer and ending on the close of business one year after the expiration date, we will make this prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution." CONSEQUENCES OF FAILURE TO EXCHANGE Consummation of the exchange offer may have adverse consequences to holders of unregistered guaranteed notes who elect not to tender their notes in the exchange offer. After we complete the exchange offer, if you have not tendered your unregistered guaranteed notes, you will not have any further registration rights. Your unregistered guaranteed notes will continue to be subject to restrictions on transfer. Therefore, the liquidity of the market for untendered unregistered guaranteed notes likely will be adversely affected upon completion of the exchange offer. See "Risk Factors -- Risks Related to Continuing Ownership of the Unregistered Guaranteed Notes." TERMS OF THE EXCHANGE OFFER Upon the terms and subject to the conditions set forth herein and in the letter of transmittal, we are offering to exchange:
FOR EACH $1,000 PRINCIPAL AMOUNT OF THE FOLLOWING UNREGISTERED OUTSTANDING AGGREGATE THE EXCHANGING HOLDERS WILL RECEIVE $1,000 PRINCIPAL GUARANTEED NOTES: PRINCIPAL AMOUNT AMOUNT OF THE CORRESPONDING REGISTERED NOTES: - ----------------------------------- --------------------- ---------------------------------------------------- 8.5% Guaranteed Senior Notes due 2003......................... $ 991,000 8.5% Guaranteed Senior Notes due 2003 6.4% Guaranteed Senior Notes due 2004......................... 14,936,000 6.4% Guaranteed Senior Notes due 2004 8.75% Guaranteed Senior Notes due 2006......................... 364,294,000 8.75% Guaranteed Senior Notes due 2006 6.8% Guaranteed Senior Notes due 2007......................... 150,783,000 6.8% Guaranteed Senior Notes due 2007 9% Guaranteed Senior Notes due 2008......................... 399,200,000 9% Guaranteed Senior Notes due 2008 10.75% Guaranteed Senior Notes due 2009......................... 362,433,000 10.75% Guaranteed Senior Notes due 2009
The registered notes will be issued in exchange for unregistered guaranteed notes validly tendered and not withdrawn in the exchange offer, if consummated, on the settlement date, which will be approximately three business days following the expiration date of the exchange offer, or as soon as practicable thereafter. Interest on each registered note will accrue from the last interest payment date on which interest was paid on the corresponding unregistered guaranteed note tendered or from such earlier date from which interest is stated to accrue on such notes. Outstanding unregistered guaranteed notes may be exchanged only in minimum denominations of $1,000 principal amount and integral multiples of $1,000. The form and terms of the registered notes are substantially the same as the form and terms of the unregistered guaranteed notes, except that the registered notes will not bear legends restricting their transfer. See "Description of the Registered Notes." The registered notes will be issued pursuant to, and entitled to the benefits of, the exchange offer indentures. One of the exchange offer indentures will govern the issuance of the registered 10.75% notes and the other indenture will govern the issuance of the remaining registered notes. 29 This prospectus, together with the letter of transmittal, is being sent to all registered holders of the unregistered guaranteed notes. We will conduct the exchange offer in accordance with the applicable requirements of the Securities Act and the Exchange Act and the related rules and regulations of the Commission. We will be deemed to have accepted validly tendered unregistered guaranteed notes when, as, and if we have given oral or written notice of our acceptance to the exchange agent. The exchange agent will act as our agent for the tendering holders for the purpose of receiving the registered notes from us. If we do not accept any tendered unregistered guaranteed notes because of an invalid tender, the occurrence of certain other events set forth in this prospectus or otherwise, we will return certificates for any unaccepted unregistered guaranteed notes, without expense, to the tendering holder as promptly as practicable after the expiration date. You will not be required to pay brokerage commissions or fees or, except as set forth below under "-- Transfer Taxes," transfer taxes with respect to the exchange of your notes in the exchange offer. We will pay all charges and expenses, if any, other than certain applicable taxes, in connection with the exchange offer. See "-- Fees and Expenses" below. EXPIRATION DATE; AMENDMENTS The exchange offer will expire at 5:00 p.m., New York City time, on , 2002, unless we determine, in our sole discretion, to extend the exchange offer in respect of any series of unregistered guaranteed notes, in which case, it will expire at the later date and time to which it is extended with respect to such series. We do not intend to extend the exchange offer, although we reserve the right, in our absolute discretion, to do so. If the exchange offer is amended in a manner we determine constitutes a material change, we will extend the exchange offer with respect to the applicable series for a period of five to ten business days, depending upon the significance of the amendment and the manner of disclosure to the holders, if the exchange offer would otherwise have expired during the five to ten business day period. We also reserve the right, in our sole discretion, (1) to delay accepting any unregistered guaranteed notes or, if any of the conditions set forth below under "-- Conditions to the Exchange Offer" have not been satisfied or waived at the expiration date, to terminate the exchange offer by giving oral or written notice of such delay or termination to the exchange agent, or (2) to amend the terms of the exchange offer in respect of any series of unregistered guaranteed notes, in any manner, by filing an amendment to this prospectus with the Commission. We will promptly file a post-effective amendment to the registration statement of which this prospectus is a part upon any extension, amendment or termination of the exchange offer. We will also promptly announce any such extension, amendment or termination of the exchange offer by issuing a press release to the Dow Jones News Service or other similar media outlet. We will announce any extension of the expiration date no later than 9:00 a.m., New York City time, on the first business day after the previously scheduled expiration date. We have no other obligation to publish, advertise or otherwise communicate any information about any extension, amendment or termination. All acceptances delivered and accepted prior to any amendment will constitute acceptances of the amended exchange offer and will be binding upon a tendering noteholder. LETTER OF TRANSMITTAL; REPRESENTATIONS, WARRANTIES AND COVENANTS OF HOLDERS OF UNREGISTERED GUARANTEED NOTES Upon the submission of the letter of transmittal, or agreement to the terms of the letter of transmittal pursuant to an agent's message, as to a series of unregistered guaranteed notes, a holder, or the beneficial holder of such notes on behalf of which the holder has tendered, will, subject to the terms and conditions of the exchange offer generally, be deemed, among other things, to: (1) irrevocably exchange, assign and transfer to or upon our order or the order of our nominee, all right, title and interest in and to, and any and all claims in respect of or arising or having arisen as a result 30 of such holder's status as a holder of, all unregistered guaranteed notes tendered thereby, such that thereafter it shall have no contractual or other rights or claims in law or equity against us or any fiduciary, trustee, fiscal agent or other person connected with the unregistered guaranteed notes arising under, from or in connection with such notes; (2) to the extent permitted by law, waive any and all rights with respect to the unregistered guaranteed notes tendered thereby (including, without limitation, any existing or past defaults and their consequences in respect of such notes); and (3) to the extent permitted by law, release and discharge us and the trustee from any and all claims such holder may have, now or in the future, arising out of or related to the unregistered guaranteed notes tendered thereby, including, without limitation, any claims that such holder is entitled to receive additional principal or interest payments with respect to the unregistered guaranteed notes tendered thereby (other than as expressly provided in this prospectus and in the letter of transmittal) or to participate in any redemption or defeasance of the unregistered guaranteed notes tendered thereby. In addition to those representations, warranties and agreements described under "--Purpose and Effect" above, the tendering holder will be deemed to represent, warrant and agree that: (1) it has received and has had the opportunity to review this prospectus; (2) it is the beneficial owner (as defined below) of, or a duly authorized representative of one or more such beneficial owners of, the unregistered guaranteed notes tendered thereby and it has full power and authority to execute the letter of transmittal; (3) the unregistered guaranteed notes being tendered thereby were owned as of the date of tender, free and clear of any liens, charges, claims, encumbrances, interests and restrictions of any kind, and acknowledges that we will acquire good, indefeasible and unencumbered title to such notes, free and clear of all liens, charges, claims, encumbrances, interests and restrictions of any kind, when we accept the same; (4) it will not sell, pledge, hypothecate or otherwise encumber or transfer any unregistered guaranteed notes tendered thereby from the date of the letter of transmittal and agrees that any purported sale, pledge, hypothecation or other encumbrance or transfer will be void and of no effect; (5) the execution and delivery of the letter of transmittal shall constitute an undertaking to execute any further documents and give any further assurances that may be required in connection with any of the foregoing, in each case on and subject to the terms and conditions set out or referred to in this prospectus; (6) the submission of the letter of transmittal to the exchange agent shall, subject to a holder's ability to withdraw its tender and subject to the terms and conditions of the exchange offer generally, constitute the irrevocable appointment of the exchange agent as its attorney and agent, and an irrevocable instruction to such attorney and agent to complete and execute all or any form(s) of transfer and other document(s) at the discretion of such attorney and agent in relation to the unregistered guaranteed notes tendered thereby in favor of us or such other person or persons as we may direct and to deliver such form(s) of transfer and other document(s) in the attorney's and agent's discretion and/or the certificate(s) and other document(s) of title relating to such senior notes' registration and to execute all such other documents and to do all such other acts and things as may be in the opinion of such attorney or agent necessary or expedient for the purpose of, or in connection with, the acceptance of the exchange offer, and to vest in us or our nominees such notes; and (7) that the terms and conditions of the exchange offer shall be deemed to be incorporated in, and form a part of, the letter of transmittal, which shall be read and construed accordingly. The representations and warranties and agreements of a holder tendering unregistered guaranteed notes shall be deemed to be repeated and reconfirmed on and as of the expiration date and the settlement date. For purposes of this prospectus, the "beneficial owner" of any unregistered guaranteed notes shall mean any holder that exercises investment discretion with respect to such notes. 31 PROCEDURES FOR TENDERING A holder of unregistered guaranteed notes who wishes to accept the exchange offer, and whose notes are held by a custodial entity such as a bank, broker, dealer, trust company or other nominee, must instruct that custodial entity to tender with respect to such holder's notes on the holder's behalf pursuant to the procedures of the custodial entity. To tender in the exchange offer, a holder of unregistered guaranteed notes must either (i) complete, sign and date the letter of transmittal (or a facsimile thereof) in accordance with its instructions (including guaranteeing the signature(s) to the letter of transmittal, if required), and mail or otherwise deliver such letter of transmittal or such facsimile, together with the certificates representing the unregistered guaranteed notes specified therein, to the exchange agent at the address set forth in the letter of transmittal for receipt on or prior to the expiration date, or (ii) comply with the Automated Tender Offer Program system procedures for book-entry transfer described below on or prior to the expiration date. The exchange agent and the Depository Trust Company have confirmed that the exchange offer is eligible for Automated Tender Offer Program system. The letter of transmittal (or facsimile thereof), with any required signature guarantees, or (in the case of book entry transfer) an agent's message in lieu of the letter of transmittal, and any other required documents, must be transmitted to and received by the exchange agent on or prior to the expiration date of the exchange offer at one of its addresses set forth on the back cover page of this prospectus. Unregistered guaranteed notes will not be deemed surrendered until the letter of transmittal and signature guarantees, if any, or agent's message, are received by the exchange agent. The method of delivery of unregistered guaranteed notes, the letter of transmittal, and all other required documents to the exchange agent is at the election and risk of the holder. Instead of delivery by mail, holders should use an overnight or hand delivery service, properly insured. In all cases, sufficient time should be allowed to assure delivery to and receipt by the exchange agent on or before the expiration date. You must not send the letter of transmittal or any unregistered guaranteed notes to anyone other than the exchange agent. All registered notes will be delivered only in book-entry form through the Depository Trust Company. Accordingly, if you anticipate tendering other than through the Depository Trust Company, you are urged to contact promptly a bank, broker or other intermediary (that has the capability to hold securities custodially through the Depository Trust Company) to arrange for receipt of any registered notes to be delivered to you pursuant to the exchange offer and to obtain the information necessary to provide the required Depository Trust Company participant with account information for the letter of transmittal. BOOK-ENTRY DELIVERY PROCEDURES FOR TENDERING UNREGISTERED GUARANTEED NOTES HELD WITH THE DEPOSITORY TRUST COMPANY If you wish to tender unregistered guaranteed notes held on your behalf by a nominee with the Depository Trust Company, you must (i) inform your nominee of your interest in tendering such notes pursuant to the exchange offer, and (ii) instruct your nominee to tender all notes you wish to be tendered in the exchange offer into the exchange agent's account at the Depository Trust Company on or prior to the expiration date. Any financial institution that is a nominee in the Depository Trust Company, including Euroclear and Clearstream, must tender unregistered guaranteed notes by effecting a book-entry transfer of the unregistered guaranteed notes to be tendered in the exchange offer into the account of the exchange agent at the Depository Trust Company by electronically transmitting its acceptance of the exchange offer through the Automated Tender Offer Program system procedures for transfer. The Depository Trust Company will then verify the acceptance, execute a book-entry delivery to the exchange agent's account at the Depository Trust Company, and send an agent's message to the exchange agent. An "agent's message" is a message, transmitted by the Depository Trust Company to and received by the exchange agent and forming part of a book-entry confirmation, which states that the Depository Trust Company has received an express acknowledgement from an organization that participates in the Depository Trust Company (a "participant") tendering unregistered guaranteed notes that the participant has received and agrees to be bound by the terms of the letter of transmittal and that we may enforce the agreement against the participant. A letter of transmittal need not accompany tenders effected through the Automated Tender Offer Program system. 32 PROPER EXECUTION AND DELIVERY OF LETTER OF TRANSMITTAL Signatures on a letter of transmittal or notice of withdrawal described below (see "-- Withdrawal Rights"), as the case may be, must be guaranteed by an eligible institution unless the notes tendered pursuant to the letter of transmittal are tendered (i) by a holder who has not completed the box entitled "Special Delivery Instructions" on the letter of transmittal or (ii) for the account of an eligible institution. If signatures on a letter of transmittal, or notice of withdrawal are required to be guaranteed, such guarantee must be made by an eligible institution. If the letter of transmittal is signed by the holder(s) of unregistered guaranteed notes tendered thereby, the signature(s) must correspond with the name(s) as written on the face of the unregistered guaranteed notes without alteration, enlargement or any change whatsoever. If any of the unregistered guaranteed notes tendered thereby are held by two or more holders, all such holders must sign the letter of transmittal. If any of the unregistered guaranteed notes tendered thereby are registered in different names on different unregistered guaranteed notes, it will be necessary to complete, sign and submit as many separate letters of transmittal, and any accompanying documents, as there are different registrations of certificates. If unregistered guaranteed notes that are not tendered for exchange pursuant to the exchange offer are to be returned to a person other than the holder thereof, certificates for such notes must be endorsed or accompanied by an appropriate instrument of transfer, signed exactly as the name of the registered owner appears on the certificates, with the signatures on the certificates or instruments of transfer guaranteed by an eligible institution. If the letter of transmittal is signed by a person other than the holder of any unregistered guaranteed notes listed therein, such unregistered guaranteed notes must be properly endorsed or accompanied by a properly completed bond power, signed by such holder exactly as such holder's name appears on such unregistered guaranteed notes. If the letter of transmittal or any unregistered guaranteed notes, bond powers or other instruments of transfer are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and, unless waived by us, evidence satisfactory to us of their authority to so act must be submitted with the letter of transmittal. No alternative, conditional, irregular or contingent tenders will be accepted. By executing the letter of transmittal (or facsimile thereof), the tendering holders of unregistered guaranteed notes waive any right to receive any notice of the acceptance for exchange of their unregistered guaranteed notes. Tendering holders should indicate in the applicable box in the letter of transmittal the name and address to which substitute certificates evidencing unregistered guaranteed notes for amounts not tendered or not exchanged are to be issued or sent, if different from the name and address of the person signing the letter of transmittal. If no such instructions are given, unregistered guaranteed notes not tendered or exchanged will be returned to such tendering holder. All questions as to the validity, form, eligibility (including time of receipt), and acceptance and withdrawal of tendered unregistered guaranteed notes will be determined by us in our absolute discretion, which determination will be final and binding. We reserve the absolute right to reject any and all tendered unregistered guaranteed notes determined by us not to be in proper form or not to be properly tendered or any tendered unregistered guaranteed notes our acceptance of which would, in the opinion of our counsel, be unlawful. We also reserve the right to waive, in our absolute discretion, any defects, irregularities or conditions of tender as to particular unregistered guaranteed notes, whether or not waived in the case of other unregistered guaranteed notes. Our interpretation of the terms and conditions of the exchange offer (including the instructions in the letter of transmittal) will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of unregistered guaranteed notes must be cured within such time as we shall determine. Although we intend to notify holders of defects or irregularities with respect to tenders of unregistered guaranteed notes, neither we, the exchange agent, nor the information agent, nor any other person will be under any duty to give such notification or shall incur any liability for failure to give any such notification. 33 Tenders of unregistered guaranteed notes will not be deemed to have been made until such defects or irregularities have been cured or waived. Any holder whose unregistered guaranteed notes have been mutilated, lost, stolen or destroyed will be responsible for obtaining replacement securities or for arranging for indemnification with the trustee of the unregistered guaranteed notes. Holders may contact the information agent for assistance with such matters. WITHDRAWAL RIGHTS You may withdraw tenders of unregistered guaranteed notes of any series at any time prior to the withdrawal deadline, 5:00 p.m., New York City time on , 2002. You may not withdraw your tenders of unregistered guaranteed notes subsequent to that time, even if we extend the expiration date of the exchange offer. For a withdrawal of a tender to be effective, a written or facsimile transmission notice of withdrawal must be received by the exchange agent prior to the withdrawal deadline at one of its addresses set forth on the back cover page of this prospectus. The withdrawal notice must specify the name of the person who tendered the unregistered guaranteed notes to be withdrawn; must contain a description of the unregistered guaranteed notes to be withdrawn, the certificate numbers shown on the particular certificates evidencing such unregistered guaranteed notes and the aggregate principal amount represented by such unregistered guaranteed notes; and must be signed by the holder of such unregistered guaranteed notes in the same manner as the original signature on the letter of transmittal (including any required signature guarantees) or be accompanied by evidence satisfactory to us that the person withdrawing the tender has succeeded to the beneficial ownership of the unregistered guaranteed notes. In addition, the notice of withdrawal must specify, in the case of unregistered guaranteed notes tendered by delivery of certificates for such notes, the name of the registered holder (if different from that of the tendering holder) or, in the case of unregistered guaranteed notes tendered by book-entry transfer, the name and number of the account at the Depository Trust Company to be credited with the withdrawn unregistered guaranteed notes. The signature on the notice of withdrawal must be guaranteed by an eligible institution unless the unregistered guaranteed notes have been tendered for the account of an eligible institution. Withdrawal of tenders of unregistered guaranteed notes may not be rescinded, and any unregistered guaranteed notes properly withdrawn will thereafter be deemed not validly tendered for purposes of the exchange offer. Properly withdrawn unregistered guaranteed notes may, however, be retendered by again following one of the procedures described in "-- Procedures for Tendering" prior to the expiration date. CONDITIONS TO THE EXCHANGE OFFER The completion of the exchange offer is subject to certain conditions including (1) that the exchange offer not violate applicable law or applicable interpretations of the staff of the Commission or (2) that no injunction, order or decree has been issued which would prohibit, prevent or materially impair our ability to proceed with the exchange offer. Notwithstanding any other provisions of the exchange offer, or any extension of the exchange offer, we will not be required to issue registered notes, and we may terminate the exchange offer or, at our option, modify, extend or otherwise amend the exchange offer, if any of the following conditions has not been satisfied or waived, prior to or concurrently with the expiration of the exchange offer, as extended: (1) nothing shall have occurred or been threatened, no action shall have been taken, and no statute, rule, regulation, judgment, order, stay, decree or injunction shall have been promulgated, enacted, entered, enforced or deemed applicable to the exchange offer, or the exchange of registered notes for unregistered guaranteed notes under the exchange offer, by or before any court or governmental regulatory or administrative agency, authority or tribunal, that either: (a) challenges the making of the exchange offer or the exchange of registered notes for unregistered guaranteed notes under the exchange offer, or might, directly or indirectly, prohibit, prevent, restrict or delay consummation of, or might otherwise adversely affect in any material 34 manner, the exchange offer or the exchange of registered notes for unregistered guaranteed notes under the exchange offer; or (b) in our reasonable judgment, could materially adversely affect our business, condition (financial or otherwise), income, operations, properties, assets, liabilities or prospects and those of our subsidiaries, individually or taken as a whole, or materially impair the contemplated benefits to us of the exchange offer or the exchange of registered notes for unregistered guaranteed notes under the exchange offer; (2) there shall not have occurred any of the following: (a) trading in securities generally on the New York Stock Exchange or the American Stock Exchange or in the over-the-counter market, or trading in any securities of the Company on any exchange or in the over-the-counter market, shall have been suspended or the settlement of such trading generally shall have been materially disrupted or minimum prices shall have been established on any such exchange or such market by the Commission, by such exchange or by any other regulatory body or governmental authority having jurisdiction, (b) a banking moratorium shall have been declared by Federal or state authorities, (c) the United States shall have become engaged in hostilities, there shall have been an escalation in hostilities involving the United States or there shall have been a declaration of a national emergency or war by the United States, (d) there shall have occurred such a material adverse change in general economic, political or financial conditions, including, without limitation, as a result of terrorist activities after the date hereof (or the effect of international conditions on the financial markets in the United States shall be such) as to make it, in the judgment of our board of directors, impracticable or inadvisable to proceed with the exchange offer on the terms and in the manner contemplated in this prospectus or (e) in the case of any of the foregoing existing at the time of the commencement of the exchange offer, a material acceleration or worsening thereof; and (3) one or more of the trustees with respect to the indentures for the registered notes shall not have objected in any respect, or taken any action that could, in our reasonable judgment, adversely affect the consummation of, the exchange offer or the exchange of registered notes for unregistered guaranteed notes under the exchange offer, nor shall any trustee have taken any action that challenges the validity or effectiveness of the procedures used by us in making the exchange offer or the exchange of the unregistered guaranteed notes under the exchange offer. The foregoing conditions are for our sole benefit and may be waived by us in whole or in part, and with respect to any or all series of unregistered guaranteed notes, at our absolute discretion. Any determination made by us concerning an event, development or circumstance described or referred to above shall be conclusive and binding. If any of the foregoing conditions are not satisfied with respect to any series of unregistered guaranteed notes, we may, at any time before or concurrently with the expiration date for the exchange offer: (1) terminate the exchange offer with respect to that series of unregistered guaranteed notes and return all tendered unregistered guaranteed notes of that series to the holders thereof; (2) modify, extend or otherwise amend the exchange offer with respect to that series of unregistered guaranteed notes and retain all unregistered guaranteed notes of that series tendered and not withdrawn until the expiration date of the modified, extended or amended exchange offer with respect to such series (see "-- Withdrawal Rights" and "-- Letter of Transmittal; Representations, Warranties and Covenants of Holders of Unregistered Guaranteed Notes"); or (3) waive the unsatisfied conditions with respect to the exchange offer and accept all unregistered guaranteed notes of that series tendered and not previously withdrawn. We reserve the right, in our absolute discretion, to purchase or make offers to purchase any senior notes, to the extent permitted by applicable law, in the open market, in privately negotiated transactions or otherwise. The terms of any such purchases or offers could differ from the terms of the exchange offer. Any purchase or offer to purchase will not be made except in accordance with applicable law. 35 EXCHANGE AGENT State Street Bank and Trust Company has been appointed the exchange agent for the exchange offer. Letters of transmittal and all correspondence in connection with the exchange offer should be sent or delivered by each holder of unregistered guaranteed notes, or by a beneficial owner's commercial bank, broker, dealer, trust company or other nominee, to the exchange agent at the addresses and telephone numbers set forth on the back cover page of this prospectus. We will pay the exchange agent reasonable and customary fees for its services and will reimburse it for its reasonable, out-of-pocket expenses in connection therewith. The exchange agent also acts as trustee under the exchange offer indentures. INFORMATION AGENT Georgeson Shareholder Communications Inc. has been appointed as the information agent for the exchange offer and will receive customary compensation for its services. Questions concerning tender procedures and requests for additional copies of this prospectus or the letter of transmittal should be directed to the information agent at the address and telephone numbers set forth on the back cover page of this prospectus. Holders of senior notes may also contact their commercial bank, broker, dealer, trust company or other nominee for assistance concerning the exchange offer. FEES AND EXPENSES We will bear the expenses of soliciting tenders of the unregistered guaranteed notes. The principal solicitation is being made by mail; additional solicitations may, however, be made by telegraph, facsimile transmission, telephone, electronic mail or in person by the information agent, as well as by our officers and other employees and those of our affiliates. If a tendering holder handles the transaction through its broker, dealer, commercial bank, trust company or other institution, such holder may be required to pay brokerage fees or commissions. TRANSFER TAXES You will not be obligated to pay any transfer taxes in connection with a tender of your unregistered guaranteed notes for exchange unless you instruct us to register registered notes in the name of, or request that unregistered guaranteed notes not tendered or not accepted in the exchange offer be returned to, a person other than the registered tendering holder, in which event the registered tendering holder will be responsible for the payment of any applicable transfer tax. ACCOUNTING TREATMENT We will not recognize any gain or loss for accounting purposes upon the consummation of the exchange offer and the costs associated with the exchange offer will be expensed as incurred. 36 DESCRIPTION OF THE REGISTERED NOTES We issued the unregistered guaranteed notes and will issue the registered notes under two new indentures by and among us, CIHC and State Street Bank and Trust Company, as trustee. We sometimes refer to these new indentures as the "exchange offer indentures". The terms of the registered notes include those stated in the exchange offer indentures and those made part of the exchange offer indentures by reference to the Trust Indenture Act of 1939, as amended. One of the exchange offer indentures governs the issuance of the registered 10.75% notes, under which we issued the 10.75% unregistered guaranteed notes in the April exchange offer and the other exchange offer indenture governs the issuance of the remaining registered notes, under which we issued the remaining unregistered guaranteed notes in the April exchange offer. The terms of an exchange offer indenture will only apply to the registered notes issued by that indenture. The terms and conditions of the registered notes are identical to the terms and conditions of the unregistered guaranteed notes, with the exception of any restrictive legends applicable to the unregistered guaranteed notes. We incorporate by reference in this prospectus the description of our senior notes in the various prospectuses and prospectus supplements used in connection with the original issuance and sale of the senior notes, in exchange for which the unregistered guaranteed notes were issued in the April exchange offer. We urge you to read the exchange offer indentures because they, and not this description, define your rights as holders of the registered notes. Georgeson Shareholder Communications Inc., the information agent for the exchange offer, will provide a copy of the exchange offer indentures governing the registered notes, at no cost, to any holder requesting a copy. To request a copy of any or all of these documents, you should call Georgeson at the telephone number on the back cover of this prospectus. GUARANTEES AND RELATED PROVISIONS The registered notes will be guaranteed by CIHC on an unsecured senior subordinated basis. The guarantees will be subordinated to the prior payment in full of all obligations under our credit facility and all other senior debt of CIHC and equal in right of payment to the unregistered guaranteed notes. The guarantees will be full and unconditional, except that they will be subordinated and will be limited as necessary to prevent the guarantees from constituting a fraudulent conveyance. CHANGE OF CONTROL Under the terms of the indentures governing our 10.75% guaranteed and senior notes, if a Change of Control occurs, each holder of the issued and outstanding 10.75% guaranteed and senior notes will have the right to require us to repurchase all or any part of such holder's 10.75% guaranteed and senior notes. In such event, we will offer a payment in cash equal to 101% of the aggregate principal amount of the notes repurchased plus accrued and unpaid interest and liquidated damages, if any, to the purchase date. Within 10 days following any Change of Control, we will mail an offer to purchase to each holder of 10.75% notes describing the transaction or transactions that constitute the Change of Control and offering to repurchase the 10.75% notes on the date specified in the offer, which will be no earlier than 30 days and no later than 60 days from the date such notice is mailed, pursuant to the procedures required by the respective indentures and described in the offer to purchase. The Board of Directors does not have the right to waive our obligation to repurchase the 10.75% notes upon a change of control. We cannot assure you that we will have sufficient funds available at the time of any Change of Control to make any payments required by the 10.75% notes or other indebtedness that we have outstanding at the time of the Change of Control, which may have similar provisions. "Change of Control" means the occurrence of any of the following: (a) the direct or indirect sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the 37 properties or assets of us and our Restricted Subsidiaries (as defined in the indentures) taken as a whole to any "person" (as that term is used in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended); (b) the adoption of a plan relating to our liquidation or dissolution; (c) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any "person" (as defined above) becomes the beneficial owner, directly or indirectly, of more than 50% of our common stock; or (d) the first day on which a majority of our directors on June 29, 2001, do not remain our directors. Although there is a developing body of case law interpreting the phrase "all or substantially all," there is no precise established definition under applicable law. Accordingly, the ability of a holder of the 10.75% notes to require us to repurchase such notes as a result of a sale, lease, transfer, conveyance or other disposition of less than all of our assets may be uncertain. We have no present intention to engage in a transaction involving a Change of Control, although we could decide to do so in the future. LIMITATIONS ON INDEBTEDNESS The indentures governing the 10.75% guaranteed and senior notes restrict us from creating, assuming, guaranteeing or otherwise indirectly or directly incurring debt or assuming debt (as defined in the indenture). We equally cannot permit CIHC, Conseco Finance and other subsidiaries which have been designated as "restricted subsidiaries" under the indentures to do so. This limitation on indebtedness also prohibits us from issuing stock or from permitting our restricted subsidiaries from issuing preferred stock. However, we, and our restricted subsidiaries, may generally undertake the above-mentioned transactions if: - In the case of indebtedness, the debt is among those permitted by the indentures governing the 10.75% notes. The indentures permit us to: carry pre-existing debt, including the credit facility and the notes; debt in order to refinance existing loans, notes and guarantees; incur intercompany debt between us and our restricted subsidiaries; incur debt in the ordinary course of business or debt secured by assets, so long as it does not exceed 10% of our total shareholder's equity; incur non-recourse debt incurred by non-restricted subsidiaries; incur debt representing collateralized loans or mortgage-backed loans or securitizations entered into by our subsidiaries; have debt incurred by our insurance operating subsidiaries in respect of surplus debentures; incur limited-recourse debt representing securitizations of assets; and incur additional debt in an amount not to exceed $200 million (including refinancing debt). - In the case of indebtedness incurred by Conseco Finance, the debt does not exceed 50% of Conseco Finance's total shareholder's equity, provided that, at the time of incurrence, the ratio of Conseco Finance's total shareholder's equity to total managed receivables is at least 4%. - In the case of stock, the stock, by its terms, is not mandatorily redeemable or does not mature prior to 91 days after the date on which the 10.75% notes mature, and is not convertible or exchangeable into such stock. - On the date we are contemplating such transactions, our fixed charges coverage ratio, which reflects our level of cash flows to fixed interest and other periodic charges, such as dividends, for the four quarters immediately preceding the reference date, is at least two to one (2.0:1.0). This ratio would be calculated as if the debt or issuance had already occurred. As of March 31, 2002, our fixed charge coverage rates, before the incurrence of any additional debt, was 2.0:1.0. This description of certain indenture covenants is merely a summary. Holders may want to receive the actual indenture which is an exhibit to the registration statement of which this prospectus is a part. 38 BOOK-ENTRY, DELIVERY AND FORM GLOBAL NOTES The unregistered guaranteed notes were, and the registered notes will be, issued in the form of one or more registered notes in global form, without interest coupons. The Global Notes will be deposited on the date of issuance with, or on behalf of, the Depository Trust Company and registered in the name of Cede & Co., as nominee of the Depository Trust Company, or will remain in the custody of the trustee pursuant to the Fast Automated Securities Program Balance Certificate Agreement between the Depository Trust Company and the trustee. DEPOSITORY PROCEDURES The following description of the operations of the Depository Trust Company, Euroclear and Clearstream are provided solely as a matter of convenience. These operations and procedures are solely within the control of the respective settlement systems and are subject to changes by them. We take no responsibility for these operations and procedures and urge you to contact the system or their participants directly to discuss these matters. The Depository Trust Company has advised us that it is (i) a limited purpose trust company organized under the laws of the State of New York, (ii) a "banking organization" within the meaning of the New York Banking Law, (iii) a member of the Federal Reserve System, (iv) a "clearing corporation" within the meaning of the Uniform Commercial Code, as amended, and (v) a "clearing agency" registered pursuant to Section 17A of the Exchange Act. The Depository Trust Company was created to hold securities for its participants and facilitates the clearance and settlement of securities transactions between participants through electronic book-entry changes to the accounts of its participants, thereby eliminating the need for physical transfer and delivery of certificates. The Depository Trust Company's participants include securities brokers and dealers (including the initial purchasers), banks and trust companies, clearing corporations and certain other organizations. Indirect access to the Depository Trust Company's system is also available to other entities such as banks, brokers, dealers and trust companies (collectively, the "Indirect Participants") that clear through or maintain a custodial relationship with a participant, either directly or indirectly. Investors who are not participants may beneficially own securities held by or on behalf of the Depository Trust Company only through participants or Indirect Participants. We expect that pursuant to procedures established by the Depository Trust Company (i) upon deposit of each Global Note, the Depository Trust Company will credit the accounts of participants designated by the holders of unregistered guaranteed notes who exchange their unregistered guaranteed notes in the exchanger offer with an interest in the Global Note and (ii) ownership of the notes will be shown on, and the transfer of ownership thereof will be effected only through, records maintained by the Depository Trust Company (with respect to the interests of participants) and the records of participants and the Indirect Participants (with respect to the interests of persons other than participants). The laws of some jurisdictions may require that certain purchasers of securities take physical delivery of such securities in definitive form. Accordingly, the ability to transfer interests in the notes represented by a Global Note to such persons may be limited. In addition, because the Depository Trust Company can act only on behalf of its participants, who in turn act on behalf of persons who hold interests through participants, the ability of a person having an interest in notes represented by a Global Note to pledge or transfer such interest to persons or entities that do not participate in the Depository Trust Company's system, or to otherwise take actions in respect of such interest, may be affected by the lack of a physical definitive security in respect of such interest. So long as the Depository Trust Company or its nominee is the registered owner of a Global Note, the Depository Trust Company or such nominee, as the case may be, will be considered the sole owner or holder of the notes represented by the Global Note for all purposes under the indenture. Except as provided below, owners of beneficial interests in a Global Note will not be entitled to have notes represented by such Global Note registered in their names, will not receive or be entitled to receive physical delivery of Certificated Notes, 39 and will not be considered the owners or holders thereof under the indenture for any purpose, including with respect to the giving of any direction, instruction or approval to the trustee thereunder. Accordingly, each holder owning a beneficial interest in a Global Note must rely on the procedures of the Depository Trust Company and, if such holder is not a participant or an Indirect Participant, on the procedures of the participant through which such holder owns its interest, to exercise any rights of a holder of notes under the indenture or such Global Note. We understand that under existing industry practice, in the event that we request any action of holders of registered notes, or a holder that is an owner of a beneficial interest in a Global Note desires to take any action that the Depository Trust Company, as the holder of such Global Note, is entitled to take, the Depository Trust Company would authorize the participants to take such action and the participants would authorize holders owning through such participants to take such action or would otherwise act upon the instruction of such holders. Neither we nor the trustee will have any responsibility or liability for any aspect of the records relating to or payments made on account of registered notes by the Depository Trust Company, or for maintaining, supervising or reviewing any records of the Depository Trust Company relating to such registered notes. Payments with respect to the principal of, and premium, if any, additional interest, if any, and interest on, any registered notes represented by a Global Note registered in the name of the Depository Trust Company or its nominee on the applicable record date will be payable by the trustee to or at the direction of the Depository Trust Company or its nominee in its capacity as the registered holder of the Global Note representing such registered notes under the indenture. Under the terms of the Indenture, we and the trustee may treat the persons in whose names the registered notes, including the Global Notes, are registered as the owners thereof for the purpose of receiving payment thereon and for any and all other purposes whatsoever. Accordingly, neither we nor the trustee has or will have any responsibility or liability for the payment of such amounts to owners of beneficial interests in a Global Note (including principal, premium, if any, additional interest, if any, and interest). Payments by the participants and the Indirect Participants to the owners of beneficial interests in a Global Note will be governed by standing instructions and customary industry practice and will be the responsibility of the participants or the Indirect Participants and the Depository Trust Company. Transfers between participants in the Depository Trust Company will be effected in accordance with the Depository Trust Company's procedures, and will be settled in same-day funds. Transfers between participants in Euroclear or Clearstream will be effected in the ordinary way in accordance with their respective rules and operating procedures. Cross-market transfers between the participants in the Depository Trust Company, on the one hand, and Euroclear or Clearstream participants, on the other hand, will be effected through the Depository Trust Company in accordance with the Depository Trust Company's rules on behalf of Euroclear or Clearstream, as the case may be, by its respective depositary; however, such cross-market transactions will require delivery of instructions to Euroclear or Clearstream, as the case may be, by the counterparty in such system in accordance with the rules and procedures and within the established deadlines (Brussels time) of such system. Euroclear or Clearstream, as the case may be, will, if the transaction meets its settlement requirements, deliver instructions to its respective depositary to take action to effect final settlement on its behalf by delivering or receiving interests in the relevant Global Notes in the Depository Trust Company, and making or receiving payment in accordance with normal procedures for same-day funds settlement applicable to the Depository Trust Company. Euroclear participants and Clearstream participants may not deliver instructions directly to the depositaries for Euroclear or Clearstream. Because of time zone differences, the securities account of a Euroclear or Clearstream participant purchasing an interest in a Global Note from a participant in the Depository Trust Company will be credited, and any such crediting will be reported to the relevant Euroclear or Clearstream participant, during the securities settlement processing day (which must be a business day for Euroclear and Clearstream) immediately following the settlement date of the Depository Trust Company. Cash received in Euroclear or Clearstream as a result of sales of interest in a Global Note by or through a Euroclear or Clearstream participant to a participant in the Depository Trust Company will be received with value on the settlement date of the Depository Trust Company but will be available in the relevant Euroclear or Clearstream cash 40 account only as of the business day for Euroclear or Clearstream following the Depository Trust Company's settlement date. Although the Depository Trust Company, Euroclear and Clearstream have agreed to the foregoing procedures to facilitate transfers of interests in the Global Notes among participants in the Depository Trust Company, Euroclear and Clearstream, they are under no obligation to perform or to continue to perform such procedures, and such procedures may be discontinued at any time. Neither we nor the trustee will have any responsibility for the performance by the Depository Trust Company, Euroclear or Clearstream or their respective participants or indirect participants of their respective obligations under the rules and procedures governing their operations. EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN THE GLOBAL NOTES WILL NOT HAVE REGISTERED NOTES REGISTERED IN THEIR NAME, WILL NOT RECEIVE PHYSICAL DELIVERY OF REGISTERED NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR "HOLDERS" THEREOF UNDER THE EXCHANGE OFFER INDENTURES FOR ANY PURPOSE. EXCHANGE OF GLOBAL NOTES FOR CERTIFICATED NOTES A Global Note is exchangeable for definitive registered notes in registered certificated form ("Certificated Notes") if: (1) the Depository Trust Company (a) notifies us that it is unwilling or unable to continue as depositary for the Global Notes, and we fail to appoint a successor depositary, or (b) has ceased to be a clearing agency registered under the Exchange Act; (2) at our option, we notify the trustee in writing that we elect to cause the issuance of the Certificated Notes; or (3) there has occurred and is continuing a default or event of default with respect to the registered notes. In all cases, Certificated Notes delivered in exchange for any Global Note or beneficial interests in Global Notes will be registered in the names, and issued in any approved denominations, requested by or on behalf of the depositary (in accordance with its customary procedures). SAME DAY SETTLEMENT AND PAYMENT We will make payments in respect of the notes represented by the Global Notes (including principal, premium, if any, interest and liquidated damages, if any) by wire transfer of immediately available funds to the accounts specified by the Global Note holder. We will make all payments of principal, interest and premium and liquidated damages, if any, with respect to Certificated Notes by wire transfer of immediately available funds to the accounts specified by the holders thereof or, if no account is specified, by mailing a check to that holder's registered address. The registered notes represented by the Global Notes are expected to trade in the Depository Trust Company's Same Day Funds Settlement System, and any permitted secondary market trading activity in the registered notes will, therefore, be required by the Depository Trust Company to be settled in immediately available funds. We expect that secondary trading in any Certificated Notes will also be settled in immediately available funds. 41 CERTAIN MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS The following is a summary of the material U.S. federal income tax considerations relating to the exchange of unregistered guaranteed notes for registered notes in the exchange offer. It does not contain a complete analysis of all the potential tax considerations relating to the exchange. This summary is limited to holders of unregistered guaranteed notes who hold the unregistered guaranteed notes as "capital assets" (in general, assets held for investment). Special situations, such as the following, are not addressed: - tax consequences to holders who may be subject to special tax treatment, such as tax-exempt entities, dealers in securities or currencies, banks, other financial institutions, insurance companies, regulated investment companies, and traders in securities that elect to use a mark-to-market method of accounting for their securities holdings; - tax consequences to persons holding notes as part of a hedging, integrated, constructive sale or conversion transaction or a straddle or other risk reduction transaction; - tax consequences to holders whose "functional currency" is not the U.S. dollar; - tax consequences to persons who hold notes through a partnership or similar pass-through entity; - any U.S. federal gift, estate or alternative minimum tax consequences; or - any state, local or foreign tax consequences. The discussion below is based upon the provisions of the Internal Revenue Code of 1986, as amended, existing and proposed Treasury regulations promulgated thereunder, and rulings, judicial decisions and administrative interpretations thereunder, as of the date hereof. Those authorities may be changed, perhaps retroactively, so as to result in U.S. federal income tax consequences different from those discussed below. CONSEQUENCES OF TENDERING NOTES The exchange of your unregistered guaranteed notes for registered notes in the exchange offer should not constitute an exchange for U.S. federal income tax purposes. Accordingly, the exchange offer should have no U.S. federal income tax consequences to you and you should not recognize gain or loss if you exchange your unregistered guaranteed notes for registered notes. For example, there should be no change in your tax basis and your holding period should carry over to the registered notes. In addition, the U.S. federal income tax consequences of holding and disposing of your registered notes should be the same as those applicable to your unregistered guaranteed notes. THE PRECEDING DISCUSSION OF CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS OF THE EXCHANGE OFFER IS FOR GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. ACCORDINGLY, EACH INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR AS TO PARTICULAR TAX CONSEQUENCES TO IT OF EXCHANGING UNREGISTERED GUARANTEED NOTES FOR REGISTERED NOTES, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS, AND OF ANY PROPOSED CHANGES IN APPLICABLE LAWS. 42 PLAN OF DISTRIBUTION Each broker-dealer that receives registered notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of such registered notes. This prospectus, as it may be amended or supplemented from time to time, may be used by all persons subject to the prospectus delivery requirements of the Securities Act, including broker-dealers, in connection with resales of registered notes. We have agreed that, starting on the expiration date and ending on the close of business one year after the expiration date, we will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. We reserve the right in our sole discretion to purchase or make offers for, or to offer registered notes for, any unregistered guaranteed notes that remain outstanding subsequent to the expiration of the exchange offer pursuant to this prospectus or otherwise and, to the extent permitted by applicable law, purchase unregistered guaranteed notes in the open market, in privately negotiated transactions or otherwise. We will not receive any proceeds from any sale of registered notes by broker-dealers. Registered notes received by broker-dealers for their own account pursuant to the exchange offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the registered notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer and/or the purchasers of any such registered notes. Any broker-dealer that resells registered notes that were received by it for its own account pursuant to the exchange offer and any broker or dealer that participates in a distribution of such registered notes may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit of any such resale of registered notes and any commissions or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The letter of transmittal states that by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. For a period of one year after the expiration date, we will promptly send additional copies of this prospectus and any amendment or supplement to this prospectus to any broker-dealer that requests such documents in the letter of transmittal. We have agreed to pay all expenses incident to the exchange offer other than commissions or concessions of any brokers or dealers and will indemnify the holders of the registered notes (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act. 43 LEGAL MATTERS Certain legal maters on behalf of the Company will be passed upon for us by David K. Herzog, our Executive Vice President, General Counsel and Secretary. Mr. Herzog is a full-time employee and officer of ours and holds shares and options to purchase shares of our common stock. Certain legal matters relating to the registered notes offered hereby will be passed upon for us by Weil, Gotshal & Manges LLP. EXPERTS The consolidated financial statements of Conseco, Inc. and subsidiaries as of December 31, 2001 and 2000, and for the three years ended December 31, 2001, incorporated in this prospectus by reference to the Annual Report on Form 10-K for the year ended December 31, 2001, have been so incorporated in reliance on the report of PricewaterhouseCoopers LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. 44 WHERE YOU CAN FIND MORE INFORMATION AND INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE Conseco files annual, quarterly and current reports, proxy statements and other information with the Commission. You can inspect and copy these reports, proxy statements and other information at the public reference facilities of the Commission, in Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549. You can also obtain copies of these materials from the public reference section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Please call the Commission at 1-800-SEC-0330 for further information on its public reference room. The Commission also maintains a web site that contains reports, proxy statements and other information regarding registrants that file electronically with the Commission (http://www.sec.gov). You can inspect reports and other information we file at the office of the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005. We are "incorporating by reference" certain documents we file with the Commission, which means that by referring you to those documents, we are disclosing to you important business and financial information about us that is not included in or delivered with this prospectus. The information in the documents incorporated by reference is considered to be part of this prospectus. We incorporate by reference the documents listed below and any future filings we may make with the Commission under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended (other than current reports filed under item 9 of Form 8-K), which we refer to as the Exchange Act, prior to the termination or completion of this offering: - Our annual report on Form 10-K for the fiscal year ended December 31, 2001, filed with the Commission on April 1, 2002; - Our quarterly report on Form 10-Q for the period ended March 31, 2002, filed with the Commission on May 15, 2002; - Our current reports on Form 8-K filed with the Commission on February 8, 2002, February 21, 2002 and March 18, 2002; - The sections entitled "Description of the Notes" contained in each of our prospectus supplements or pricing supplements relating to our senior notes (but not the unregistered guaranteed notes) filed with the Commission on February 6, 1998 (with respect to the 6.4% notes), June 5, 1998 (with respect to the 6.8% notes), October 19, 1999 (with respect to the 8.5% and 9% notes), February 3, 2000 (with respect to the 8.75% notes) and June 27, 2001 (with respect to the 10.75% notes); and - The sections entitled "Securities Ownership," "Election of Directors," "Executive Compensation, Related Party Transactions and Other Information," "Board Meetings and Committees," and "Section 16(a) Beneficial Ownership Reporting Compliance" contained in our definitive proxy statement filed with the SEC on April 30, 2002, relating to our 2002 annual meeting of stockholders. We filed a registration statement on Form S-4 to register with the Commission the securities described in this prospectus. This prospectus is part of that registration statement. As permitted by the Commission rules, this prospectus does not contain all the information contained in the registration statement or the exhibits to the registration statement. You may refer to the registration statement and accompanying exhibits for more information about us and our securities. Information contained in this prospectus modifies or supersedes, as applicable, the information contained in the earlier-dated documents incorporated by reference. Information in documents that we file with the Commission after the date of this prospectus will automatically update and supersede information in this prospectus or in earlier-dated documents incorporated by reference. We will provide you with copies of the documents we incorporate by reference in this prospectus, including the indentures governing the registered notes and other material agreements that we summarize in this prospectus, at no cost. To request a copy of any or all of these documents, you should write or telephone us at: 11825 North Pennsylvania Street, Carmel, Indiana 46032, (317) 817-2893, Attention: Tammy H. Hill, Senior Vice President, Investor Relations NO LATER THAN FIVE BUSINESS DAYS PRIOR TO THE EXPIRATION DATE. 45 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- The exchange agent for the exchange offer is: [STATE STREET BANK LOGO] By Mail: By Hand or Overnight Express Delivery: State Street Bank and Trust Company State Street Bank and Trust Company P.O. Box 778 Two Avenue de Lafayette Boston, MA 02102-0078 5th Floor, Corporate Trust Window Attn: Ralph Jones Boston, MA 02111-1724 Attn: Ralph Jones
By Facsimile (for Eligible Institutions only): (617) 662-1452 Confirm by Telephone: (617) 662-1548 Questions, requests for assistance and requests for additional copies of the offering memorandum and related letter of transmittal may be directed to the information agent at the address set forth below. The information agent for the exchange offer is: [GEORGESON SHAREHOLDER LOGO] 17 State Street, 10th Floor New York, NY 10004 Banks and Brokers call: (212) 440-9800 All Others Call Toll Free: (866) 867-0999 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The Indiana Business Corporation Law grants authorization to Indiana corporations to indemnify officers and directors for their conduct provided such conduct was in good faith and was for a purpose the person reasonably believed to be in or not opposed to the best interests of the corporation, and permits the purchase of insurance in this regard. In addition, the shareholders of a corporation may approve the inclusion of other or additional indemnification provisions in the articles of incorporation and by-laws. The By-laws of Conseco, Inc. (the "Company") provide for the indemnification of any person made a party to any action, suit or proceeding by reason of the fact that he is a director, officer or employee of the Company, if (a) such person is wholly successful with respect to such action, suit or proceeding or (b) if such person is determined to have acted in good faith, in what he or she reasonably believed to be the best interests of the Company or at least not opposed to its best interests and, in addition, with respect to any criminal claim, is determined to have had reasonable cause to believe that his or her conduct was lawful or had no reasonable cause to believe that his or her conduct was unlawful. Such indemnification shall be against the reasonable expenses, including attorneys' fees, incurred by such person in connection with the defense of such action, suit or proceeding and amounts paid in settlement. If such person was not wholly successful, the determination of entitlement to indemnification shall be made by one of the following methods, such method to be selected by the board of directors: (a) by the board of directors by a majority vote of a quorum consisting of directors who are not and have not been parties to the claim; (b) by the majority vote of a committee duly designated by the board of directors, consisting solely of two or more directors who are not and have not been parties to the claim; and (c) by special legal counsel. The above discussion of Company's By-laws and the Indiana Business Corporation law is not intended to be exhaustive and is qualified in its entirety by such By-laws and the Indiana Business Corporation Law. We have purchased director and officer liability insurance which would provide coverage against certain liabilities, including liabilities under the securities laws. ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE
EXHIBIT NO. EXHIBIT DESCRIPTION - ------- ------------------- 3.1 Amended and Restated Certificate of Incorporation of Conseco, Inc.(2) 3.2 By-Laws of Conseco, Inc.(3) 3.3*** Certificate of Incorporation of CIHC, Incorporated. 3.4* By-Laws of CIHC, Incorporated. 4.1*** First Senior Supplemental Indenture, dated as of April 24, 2002 to Second Senior Indenture for the 10.75% Guaranteed Senior Notes dated as of April 24, 2002 between Conseco, Inc., CIHC, Incorporated and State Street Bank and Trust Company. 4.2*** Second Senior Indenture, dated as of April 24, 2002 for 10.75% Guaranteed Senior Notes, between Conseco, Inc., CIHC, Incorporated and State Street Bank and Trust Company. 4.3*** First Senior Indenture, dated as of April 24, 2002 among Conseco, Inc., CIHC, Incorporated and State Street Bank and Trust Company. 4.4*** Terms Resolution, dated as of April 24, 2002 with respect to the 6.4% Guaranteed Senior Notes, due February 10, 2004. 4.5*** Terms Resolution, dated as of April 24, 2002 with respect to the 8.5% Guaranteed Senior Notes due October 15, 2003. 4.6*** Terms Resolution, dated as of April 24, 2002 with respect to the 6.8% Guaranteed Senior Notes due June 15, 2007.
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EXHIBIT NO. EXHIBIT DESCRIPTION - ------- ------------------- 4.7*** Terms Resolution, dated as of April 24, 2002 with respect to the 9% Guaranteed Senior Notes due April 15, 2008. 4.8*** Terms Resolution, dated as of April 24, 2002 with respect to the 8.75% Guaranteed Senior Notes due August 9, 2006. 4.9*** Registration Rights Agreement, dated as of April 24, 2002 among Conseco, Inc., CIHC, Incorporated and Banc of America Securities LLC, J.P. Morgan Securities Inc. and Lehman Brothers Inc., as Dealer Managers. 4.10 Senior Indenture, dated November 13, 1997, by and between the Registrant and Bank of New York as successor in interest to LTCB Trust Company, as Trustee.(6) 4.11* Five-Year Credit Agreement, dated as of September 25, 1998, among Conseco, Inc., Bank of America National Trust and Savings Association, as Agent, First Union National Bank and JPMorgan Chase Bank, as Syndication Agents, Morgan Guaranty Company of New York, as Documentation Agent, and the other financial institutions party thereto. 4.12 First Amendment to the Five-Year Credit Agreement, dated as of September 22, 2000, among Conseco, Inc., the various financial institutions parties thereto and Bank of America, N.A.(7) 4.13 Second Amendment to Five-Year Credit Agreement, dated as of May 30, 2001, by and among Conseco, Inc., the various financial institutions signatory thereto and Bank of America, N.A.(1) 4.14 Third Amendment to Five-Year Credit Agreement, dated as of March 20, 2002, by and among Conseco, Inc., the various financial institutions signatory thereto and Bank of America, N.A.(1) 5.1** Opinion of Weil, Gotshal & Manges LLP. 5.2** Opinion of David K. Herzog. 10.1.13 Employment Agreement, dated February 9, 1996 between Green Tree and Lawrence Coss and related Noncompetition agreement dated February 9, 1996, as amended by the Amendment Agreement dated April 6, 1998.(8) 10.1.14 Employment Agreement, amended and restated as of December 15, 1999, between the Conseco, Inc. and Maxwell E. Bublitz.(9) 10.1.15 Employment Agreement, amended and restated as of December 15, 1999, between Conseco, Inc. and James S. Adams.(9) 10.1.16 Description of incentive compensation and severance arrangement with Edward M. Berube.(10) 10.1.24 Second Amendment Agreement , dated as of November 1, 1999, between Conseco Finance Corp. and Lawrence M. Coss.(11) 10.1.27 Employment Agreement by and between Gary C. Wendt and Conseco, Inc., dated as of June 28, 2000.(12) 10.1.28 Nonqualified Stock Option Agreement by and between Gary C. Wendt and Conseco, Inc. dated as of June 28, 2000.(12) 10.1.29 Restricted Stock Agreement by and between Gary C. Wendt and Conseco, Inc., dated as of June 28, 2000.(12) 10.1.30 Employment Agreement by and between David K. Herzog and Conseco, Inc., dated as of August 11, 2000.(13) 10.1.31 Supplemental Retirement Agreement dated as of August 16, 2000, between Conseco, Inc. and Gary C. Wendt.(13) 10.1.32 Guaranty dated as of August 16, 2000, between Bankers Life and Casualty Company as Guarantor, and Gary C. Wendt.(13)
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EXHIBIT NO. EXHIBIT DESCRIPTION - ------- ------------------- 10.1.34 Employment Agreement by and between David Gubbay and Conseco, Inc., dated as of February 21, 2001.(14) 10.1.35 Restricted Stock Agreement by and between David Gubbay and Conseco, Inc., dated as of March 13, 2001.(14) 10.1.36 Employment Agreement by and between Charles B. Chokel and Conseco, Inc., dated as of March 16, 2001.(14) 10.1.37 Restricted Stock Agreement by and between Charles B. Chokel and Conseco, Inc., dated as of March 16, 2001.(14) 10.1.38 Employment Agreement between William J. Shea and Conseco, Inc., dated as of September 10, 2001.(15) 10.1.39 Restricted Stock Agreement dated as of September 17, 2001 between Conseco, Inc. and William J. Shea.(15) 10.8 Conseco, Inc.'s Stock Option Plan(16); Amendment No. 1 thereto(17); Amendment No. 2 thereto(18); Amendment No. 3 thereto(19); Amendment No. 4 thereto(20); Amendment No. 5 thereto(21) 10.8.3 Conseco, Inc.'s Cash Bonus Plan.(22) 10.8.4 Amended and Restated Conseco Stock Bonus and Deferred Compensation Program.(23) 10.8.6 Conseco Performance-Based Compensation Plan for Executive Officers.(24) 10.8.7 Conseco, Inc. Amended and Restated Deferred Compensation Plan.(25) 10.8.8 Amendment to the Amended and Restated Conseco Stock Bonus and Deferred Compensation Program.(26) 10.8.9 Conseco Amended and Restated 1994 Stock and Incentive Plan.(1) 10.8.10 Amendment No. 2 to the Amended and Restated Conseco Stock Bonus and Deferred Compensation Program.(27) 10.8.11 Amended and Restated Director, Officer and Key Employee Stock Purchase Plan of Conseco, Inc.(28) 10.8.13 Form of Promissory Note payable to Conseco, Inc. relating to Conseco, Inc.'s Director, Officer and Key Employee Stock Purchase Plan.(29) 10.8.14 Conseco, Inc. Amended and Restated 1997 Non-qualified Stock Option Plan.(1) 10.8.21 Amended and Restated 1999 Director and Executive Officer Stock Purchase Plan of Conseco, Inc.(28) 10.8.22 Guaranty regarding 1999 Director and Executive Officer Stock Purchase Plan.(28) 10.8.23 Form of Borrower Pledge Agreement dated as of September 15, 1999 with The Chase Manhattan Bank relating to the 1999 Director and Executive Officer Stock Purchase Plan.(28) 10.8.24 Form of note payable to Conseco, Inc. relating to the 1999 Director and Executive Officer Stock Purchase Plan.(28) 10.8.25 Conseco, Inc. 2000 Employee Stock Purchase Program Work-Down Plan.(10) 10.8.26 Conseco, Inc. 2000 Non-Employee Stock Purchase Program Work-Down Plan.(10)
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EXHIBIT NO. EXHIBIT DESCRIPTION - ------- ------------------- 10.8.27 Guaranty, dated as of November 22, 2000 between Conseco, Inc. as Guarantor, and Bank of America, National Association, as Administrative Agent; Guaranty and Subordination Agreement, dated as of November 22, 2000, made by CIHC, Incorporated, as Guarantor and Subordinated Borrower, and Conseco, Inc., as Obligor and Subordinated Lender, in favor of Bank of America, National Association, as Administrative Agent under the Credit Agreement dated as of November 22, 2000; and Form of Credit Agreement, dated as of November 22, 2000 among the Borrowers, the other financial institutions party thereto and Bank of America, National Association, as Administrative Agent (Relating to Refinancing of certain Loans under that certain Credit Agreement, dated as of August 21, 1998).(10) 10.8.28 Guaranty, dated as of November 22, 2000 between Conseco, Inc. as Guarantor, and Bank of America, National Association, as Administrative Agent; Guaranty and Subordination Agreement, dated as of November 22, 2000, made by CIHC, Incorporated, as Guarantor and Subordinated Borrower, and Conseco, Inc., as Obligor and Subordinated Lender, in favor of Bank of America, National Association, as Administrative Agent under the Credit Agreement dated as of November 22, 2000; and Form of Credit Agreement, dated as of November 22, 2000 among the Borrowers, the other financial institutions party thereto and Bank of America, National Association, as Administrative Agent (Relating to the Refinancing of Certain Loans under that certain Amended and Restated Credit Agreement, dated as of August 26, 1997).(10) 10.8.29 Guaranty, dated as of November 22, 2000, between Conseco, Inc., as Guarantor, and The Chase Manhattan Bank, as Administrative Agent; Guaranty and Subordination Agreement, dated as of November 22, 2000 made by CIHC, Incorporated, as Guarantor and Subordinated Borrower, and Conseco, Inc., as Obligor and Subordinated Lender, in favor of The Chase Manhattan Bank, as Administrative Agent under the Credit Agreement dated as of November 22, 2000; and the Form of Credit Agreement, dated as of November 22, 2000, among the Borrowers, the other financial institutions party thereto and the Chase Manhattan Bank, as Administrative Agent (Relating to the Refinancing of Certain Loans under that certain Credit Agreement, dated as of September 15, 1999, as terminated an replaced by that certain Termination and Replacement Agreement, dated as of May 30, 2000).(10) 10.8.30 Forms of note payable to Conseco Services, LLC regarding the 2000 Work-Down Plans, Form of Unconditional Guarantee and Form of Indemnification Agreement.(10) 10.8.31 First Stage Amendment and Agreement re: Non-Refinanced 1998 D&O Loans, dated as of March 20, 2002, among Conseco, Inc., CDOC, Inc., CIHC, Incorporated, Bank of America, N.A. and the various financial institutions parties thereto.(1) 10.8.32 First Stage Amendment and Agreement re: Non-Refinanced 1997 D&O Loans, dated as of March 20, 2002, among Conseco, Inc., CDOC, Inc., CIHC, Incorporated, Bank of America, N.A. and the various financial institutions parties thereto.(1) 10.8.33 Cash Collateral Pledge Agreement among CDOC, Inc. and JP Morgan Chase Bank, dated as of March 20, 2002.(1) 10.8.34 First Stage Amendment and Agreement Re: 1998 D&O Loans, dated as of March 20, 2002, among Conseco, Inc., CDOC, Inc., CIHC Incorporated, Bank of America, N.A. and various financial institutions parties thereto.(1) 10.8.35 Amended and Restated Collateral Agreement made by Conseco, Inc. and CIHC, Incorporated in form of JP Morgan Chase Bank, dated as of March 20, 2002.(1) 10.8.36 First Stage Amendment and Agreement re: 1999 D&O Loans, dated as of March 20, 2002, among Conseco, Inc., CDOC, Inc., CIHC, Incorporated, JPMorgan Chase Bank and the various financial institutions parties thereto.(1)
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EXHIBIT NO. EXHIBIT DESCRIPTION - ------- ------------------- 10.43 Amended and Restated Securities Purchase Agreement dated as of December 15, 1999 between Conseco, Inc. and the purchasers named therein.(30) 10.45.1 Warrant to Purchase Common Stock of Conseco Finance Corp., dated May 11, 2000, by and between Conseco Finance Corp. and Lehman Brothers Holdings Inc.(31) 10.45.2 Exchange Agreement by and between Lehman Brothers Holdings Inc. and Conseco, Inc., dated January 30, 2002.(1) 10.46.1 Amended and Restated Agreement dated January 30, 2002, by and among Conseco Finance Corp., Conseco, Inc., CIHC, Incorporated, Green Tree Residual Finance Corp. I, Green Tree Finance Corp. -- Five and Lehman Brothers Holdings Inc.(1) 10.46.2 Amended and Restated Master Repurchase Agreement dated as of April 5, 2001 between Merrill Lynch Mortgage Capital Inc. and Green Tree Finance Corp. -- Three.(32) 10.46.3 Second Amended and Restated Master Repurchase Agreement dated January 30, 2002 between Lehman Commercial Paper Inc. and Green Tree Finance Corp. -- Five.(32) 10.46.4** Asset Assignment Agreement dated as of February 13, 1998 between Green Tree Residual Finance Corp. I and Lehman Commercial Paper, Inc.(33); Amendment to the First Residual Facility, dated as of September 22, 2000, by and among Lehman ALI Inc. and Green Tree Residual Finance Corp. I(34); Amendment, dated January 30, 2002, by and between Lehman ALI Inc. and Green Tree Residual Finance Corp. 10.46.5 Insurance Agreement by and between Conseco, Inc. and Gary C. Wendt 2000 Irrevocable Insurance Trust dated 11/22/00 ("Wendt Trust"), dated December 1, 2000 and Collateral Assignment by Wendt Trust in favor of Conseco, Inc. dated December 1, 2000.(10) 10.48 Insurance Agreement by and between Conseco, Inc. and Wendt Trust, dated January 16, 2001 and Collateral Assignment by Wendt Trust in favor of Registrant dated January 16, 2001.(10) 10.49 Insurance Agreement by and between Registrant and Wendt Trust, dated January 16, 2001 and Collateral Assignment by Wendt Trust in favor of Registrant dated January 16, 2001.(10) 10.50 Agreement and Plan of Merger dated as of July 27, 2001 by and among Conseco, Inc., Noida Acquisition Corp. and ExlService.com, Inc.(35) 10.51 Restricted Stock Agreement dated as of July 31, 2001, between Conseco, Inc., Gary Wendt and Rosemarie Wendt.(35) 12.1 Computation of Ratio of Earnings to Fixed Charges, Preferred Dividends and Distributions on Company-Obligated Mandatorily Redeemable Preferred Securities of Subsidiary Trusts.(1)(41) 21 Subsidiaries of Conseco, Inc.(1) 23.1** Consent of PricewaterhouseCoopers LLP. 23.2** Consent of Weil, Gotshal & Manges LLP (included in Exhibit 5.1 hereto). 23.3** Consent of David K. Herzog (included in Exhibit 5.2 hereto). 24.1*** Power of Attorney (included on signature page). 25.1*** Form T-1 statement of eligibility under the Trust Indenture Act of 1939, as amended, of State Street Bank and Trust, as trustee. 99.1*** Form of Letter of Transmittal. 99.2 Prospectus Supplement dated February 4, 1998 to Prospectus dated June 24, 1997.(36) 99.3 Pricing Supplement dated June 4, 1998 to Prospectus dated June 24, 1997 and Prospectus Supplement dated February 23, 1998.(37) 99.4 Prospectus Supplement dated October 18, 1999 to Prospectus dated October 1, 1999.(38) 99.5 Prospectus Supplement dated February 2, 2000 to Prospectus dated October 1, 1999.(39)
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EXHIBIT NO. EXHIBIT DESCRIPTION - ------- ------------------- 99.6 Prospectus Supplement dated June 27, 2001 to Prospectus dated October 1, 1999.(40)
- --------------- * Filed herewith. ** To be filed by amendment. *** Previously filed with the initial filing of this Registration Statement. (1) Incorporated by reference to Conseco, Inc.'s Annual Report on Form 10-K (No. 001-09250) for the period ended December 31, 2001. (2) Incorporated by reference to Conseco, Inc.'s Registration Statement on Form S-3 (No. 333-94683), dated January 14, 2000. (3) Incorporated by reference to Conseco, Inc.'s Annual Report on Form 10-K (No. 001-09250), dated April 1, 2002. (4) Incorporated by reference to Conseco, Inc.'s Current Report on Form 8-K (No. 001-09250), dated October 21, 1999. (5) Incorporated by reference to Conseco, Inc.'s Current Report on Form 8-K (No. 001-09250), dated June 10, 1998. (6) Incorporated by reference to Conseco, Inc.'s Post-Effective Amendment No. 1 to the Registrant's Registration Statement on Form S-3 (No. 333-27803), dated November 18, 1997. (7) Incorporated by reference to Conseco, Inc.'s Current Report on Form 8-K/A (No. 001-09250), dated September 28, 2000. (8) Incorporated by reference to Conseco Finance Corp's (f/h/a Green Tree Financial Corp) Registration Statement Amendment on Form S-3/A (No. 333-52233), dated June 16, 1998. (9) Incorporated by reference to Conseco, Inc.'s Annual Report on Form 10-K (No. 001-09250) for the period ended December 31, 1999. (10) Incorporated by reference to Conseco, Inc.'s Annual Report on Form 10-K (No. 001-09250) for the period ended December 31, 2000. (11) Incorporated by reference to Conseco, Inc.'s Amended Annual Report on Form 10-K/A (No. 001-09250) for the period ended December 31, 1999. (12) Incorporated by reference to Conseco, Inc.'s Current Report on Form 8-K (No. 001-09250), dated July 10, 2000. (13) Incorporated by reference to Conseco, Inc.'s Quarterly Report on Form 10-Q (No. 001-09250), for the period ended September 30, 2000. (14) Incorporated by reference to Conseco, Inc.'s Quarterly Report on Form 10-Q (No. 001-09250), for the period ended March 31, 2001. (15) Incorporated by reference to Conseco, Inc.'s Quarterly report on Form 10-Q (No. 001-09250), for the period ended September 30, 2001. (16) Incorporated by reference to Exhibit B of Conseco, Inc.'s definitive proxy statement dated December 10, 1983 relating to the Conseco, Inc.'s 1983 annual meeting of stockholders. (17) Incorporated by reference to Exhibit 10.8.1 to Conseco, Inc.'s Quarterly Report on Form 10-Q for the period ended June 30, 1985. (18) Incorporated by reference to Exhibit 10.8.2 to Conseco, Inc.'s registration statement on Form S-1 (No. 33-4367). (19) Incorporated by reference to Exhibit 10.8.3 to Conseco, Inc.'s Annual Report on Form 10-K for the period ended December 31, 1986. (20) Incorporated by reference to Exhibit 10.8 to Conseco, Inc.'s Annual Report on Form 10-K for the period ended December 31, 1987. II-vi (21) Incorporated by reference to Exhibit 10.8 to Conseco, Inc.'s Quarterly Report on Form 10-Q for the period ended September 30, 1991. (22) Incorporated by reference to Exhibit 10.8.3 to Conseco, Inc.'s Quarterly Report on Form 10-Q for the period ended March 31, 1989. (23) Incorporated by reference to Exhibit 10.8.4 to Conseco, Inc.'s Annual Report on Form 10-K for the period ended December 31, 1992. (24) Incorporated by reference to Conseco, Inc.'s Quarterly Report on Form 10-Q (No. 001-09250), for the period ended March 31, 1998. (25) Incorporated by reference to Exhibit A to Conseco, Inc.'s definitive proxy statement dated April 26, 1995 relating to Conseco, Inc.'s 1995 annual meeting of stockholders. (26) Incorporated by reference to Conseco, Inc.'s Annual Report on Form 10-K (No. 001-09250), for the period ended December 31, 1994. (27) Incorporated by reference to Conseco, Inc.'s Annual Report on Form 10-K (No. 001-09250), for the period ended December 31, 1995. (28) Incorporated by reference to Conseco, Inc.'s Quarterly Report on Form 10-Q (No. 001-09250) for the period ended September 30, 1999. (29) Incorporated by reference to Conseco, Inc.'s Annual Report on Form 10-K (No. 001-09250) for the period ended December 31, 1998. (30) Incorporated by reference to Conseco, Inc.'s Current Report on Form 8-K (No. 001-09250), dated December 15, 1999. (31) Incorporated by reference to Conseco, Inc.'s Quarterly Report on Form 10-Q (No. 001-09250), for the period ended June 30, 2000. (32) Incorporated by reference to Conseco Finance Corp.'s Annual Report on Form 10-K (No. 001-08916), for the period ended December 31, 2001. (33) Incorporated by reference to Conseco Finance Corp.'s Quarterly Report on From 10-Q (No. 001-08916), for the period ended March 31, 1998. (34) Incorporated by reference to Conseco Finance Corp.'s Annual Report on Form 10-K (No. 001-08916), for the period ended December 31, 2000. (35) Incorporated by reference to Conseco, Inc.'s Quarterly Report on Form 10-Q (No. 001-09250), for the period ended June 30, 2001. (36) Previously filed pursuant to Rule 424(b)(2) on February 4, 1998 (No. 333-27803). (37) Previously filed pursuant to Rule 424(b)(5) on June 6, 1998 (No. 333-27803). (38) Previously filed pursuant to Rule 424(b)(5) on October 19, 1999 (No. 333-83465) (39) Previously filed pursuant to Rule 424(b)(2) on February 3, 2000 (No. 333-83465). (40) Previously filed pursuant to Rule 424(b)(2) on June 27, 2001 (No. 333-83465). (41) Incorporated by reference to Conseco, Inc.'s Quarterly Report on Form 10-Q (No. 001-09250) for the period ended March 31, 2002. ITEM 22. UNDERTAKINGS. (a) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by a Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled II-vii by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. (b) The Registrant hereby undertakes to respond to requests for information that is incorporated by reference into the Prospectus pursuant to Items 4, 10(b), 11 or 13 of this form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the Registration Statement through the date of responding to the request. (c) Prior to any public reoffering of the securities registered hereunder through use of a prospectus which is a part of this registration statement, by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus will contain the information called for by the applicable registration form with respect to reofferings by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable form. (d) The Registrant hereby undertakes that every prospectus: (i) that is filed pursuant to paragraph (c) immediately preceding, or (ii) that purports to meet the requirements of Section 10(a)(3) of the Act and is used in connection with an offering of securities subject to Rule 415, will be filed as a part of an amendment to the registration statement and will not be used until such amendment is effective, and that, for purposes of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (e) The Registrant hereby undertakes to supply by means of post- effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective. II-viii SIGNATURES Pursuant to the requirements of the Securities Act of 1933, each registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-4 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Carmel, state of Indiana, on this 25th day of July, 2002. CONSECO, INC. By: /s/ WILLIAM J. SHEA ------------------------------------ William J. Shea, President, Chief Operating Officer and Acting Chief Financial Officer CIHC, INCORPORATED By: /s/ GARY C. WENDT ------------------------------------ Gary C. Wendt, Chairman of the Board and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons on July 25, 2002 in the capacities indicated. FOR CONSECO, INC.:
SIGNATURE CAPACITY DATE --------- -------- ---- /s/ GARY C. WENDT Chairman of the Board, Chief July 25, 2002 ------------------------------------------------ Executive Officer and Director Gary C. Wendt (Principal Executive Officer) /s/ WILLIAM J. SHEA President, Chief Operating Officer July 25, 2002 ------------------------------------------------ and Acting Chief Financial Officer William J. Shea (Principal Financial Officer) /s/ JOHN R. KLINE Senior Vice President July 25, 2002 ------------------------------------------------ and Chief Accounting Officer John R. Kline (Principal Accounting Officer) * Director July 25, 2002 ------------------------------------------------ Lawrence M. Coss * Director July 25, 2002 ------------------------------------------------ Thomas M. Hagerty
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SIGNATURE CAPACITY DATE --------- -------- ---- ' * Director July 25, 2002 ------------------------------------------------ M. Phil Hathaway * Director July 25, 2002 ------------------------------------------------ John M. Mutz * Director July 25, 2002 ------------------------------------------------ Robert S. Nickoloff * Director July 25, 2002 ------------------------------------------------ David V. Harkins * Director July 25, 2002 ------------------------------------------------ Julio A. Barea * Director July 25, 2002 ------------------------------------------------ Carol Bellamy * Director July 25, 2002 ------------------------------------------------ Samme Thompson /s/ WILLIAM J. SHEA* ------------------------------------------------ William J. Shea Attorney-in-fact
FOR CIHC, INCORPORATED:
SIGNATURE CAPACITY DATE --------- -------- ---- /s/ GARY C. WENDT Chairman of the Board July 25, 2002 ------------------------------------------------ and Chief Executive Officer Gary C. Wendt (Principal Executive, Financial and Accounting Officer) /s/ WILLIAM J. SHEA Director July 25, 2002 ------------------------------------------------ William J. Shea /s/ DOMENIC A. BORRIELLA Director July 25, 2002 ------------------------------------------------ Domenic A. Borriella
II-x EXHIBIT INDEX
EXHIBIT NO. EXHIBIT DESCRIPTION ------- ------------------- 3.1 Amended and Restated Certificate of Incorporation of Conseco, Inc.(2) 3.2 By-Laws of Conseco, Inc.(3) 3.3*** Certificate of Incorporation of CIHC, Incorporated. 3.4* By-Laws of CIHC, Incorporated. 4.1*** First Senior Supplemental Indenture, dated as of April 24, 2002 to Second Senior Indenture for the 10.75% Guaranteed Senior Notes dated as of April 24, 2002 between Conseco, Inc., CIHC, Incorporated and State Street Bank and Trust Company. 4.2*** Second Senior Indenture, dated as of April 24, 2002 for 10.75% Guaranteed Senior Notes, between Conseco, Inc., CIHC, Incorporated and State Street Bank and Trust Company. 4.3*** First Senior Indenture, dated as of April 24, 2002 among Conseco, Inc., CIHC, Incorporated and State Street Bank and Trust Company. 4.4*** Terms Resolution, dated as of April 24, 2002 with respect to the 6.4% Guaranteed Senior Notes, due February 10, 2004. 4.5*** Terms Resolution, dated as of April 24, 2002 with respect to the 8.5% Guaranteed Senior Notes due October 15, 2003. 4.6*** Terms Resolution, dated as of April 24, 2002 with respect to the 6.8% Guaranteed Senior Notes due June 15, 2007. 4.7*** Terms Resolution, dated as of April 24, 2002 with respect to the 9% Guaranteed Senior Notes due April 15, 2008. 4.8*** Terms Resolution, dated as of April 24, 2002 with respect to the 8.75% Guaranteed Senior Notes due August 9, 2006. 4.9*** Registration Rights Agreement, dated as of April 24, 2002 among Conseco, Inc., CIHC, Incorporated and Banc of America Securities LLC, J.P. Morgan Securities Inc. and Lehman Brothers Inc., as Dealer Managers. Senior Indenture, dated November 13, 1997, by and between the Registrant 4.10* and Bank of New York as successor in interest to LTCB Trust Company, as Trustee (the "Senior Indenture").(6) 4.10 Senior Indenture, dated November 13, 1997, by and between the Registrant and Bank of New York as successor in interest to LTCB Trust Company, as Trustee.(6) 4.11* Five-Year Credit Agreement, dated as of September 25, 1998, among Conseco, Inc., Bank of America National Trust and Savings Association, as Agent, First Union National Bank and JPMorgan Chase Bank, as Syndication Agents, Morgan Guaranty Company of New York, as Documentation Agent, and the other financial institutions party thereto. 4.12 First Amendment to the Five-Year Credit Agreement, dated as of September 22, 2000, among Conseco, Inc., the various financial institutions parties thereto and Bank of America, N.A..(7) 4.13 Second Amendment to Five-Year Credit Agreement, dated as of May 30, 2001, by and among Conseco, Inc., the various financial institutions signatory thereto and Bank of America, N.A.(1) 4.14 Third Amendment to Five-Year Credit Agreement, dated as of March 20, 2002, by and among Conseco, Inc., the various financial institutions signatory thereto and Bank of America, N.A.(1) 5.1** Opinion of Weil, Gotshal & Manges LLP. 5.2** Opinion of David K. Herzog.
II-xi
EXHIBIT NO. EXHIBIT DESCRIPTION ------- ------------------- 10.1.13 Employment Agreement, dated February 9, 1996 between Green Tree and Lawrence Coss and related Noncompetition agreement dated February 9, 1996, as amended by the Amendment Agreement dated April 6, 1998.(8) 10.1.14 Employment Agreement, amended and restated as of December 15, 1999, between the Conseco, Inc. and Maxwell E. Bublitz.(9) 10.1.15 Employment Agreement, amended and restated as of December 15, 1999, between Conseco, Inc. and James S. Adams.(9) 10.1.16 Description of incentive compensation and severance arrangement with Edward M. Berube.(10) 10.1.24 Second Amendment Agreement , dated as of November 1, 1999, between Conseco Finance Corp. and Lawrence M. Coss.(11) 10.1.27 Employment Agreement by and between Gary C. Wendt and Conseco, Inc., dated as of June 28, 2000.(12) 10.1.28 Nonqualified Stock Option Agreement by and between Gary C. Wendt and Conseco, Inc. dated as of June 28, 2000.(12) 10.1.29 Restricted Stock Agreement by and between Gary C. Wendt and Conseco, Inc., dated as of June 28, 2000.(12) 10.1.30 Employment Agreement by and between David K. Herzog and Conseco, Inc., dated as of August 11, 2000.(13) 10.1.31 Supplemental Retirement Agreement dated as of August 16, 2000, between Conseco, Inc. and Gary C. Wendt.(13) 10.1.32 Guaranty dated as of August 16, 2000, between Bankers Life and Casualty Company as Guarantor, and Gary C. Wendt.(13) 10.1.34 Employment Agreement by and between David Gubbay and Conseco, Inc., dated as of February 21, 2001.(14) 10.1.35 Restricted Stock Agreement by and between David Gubbay and Conseco, Inc., dated as of March 13, 2001.(14) 10.1.36 Employment Agreement by and between Charles B. Chokel and Conseco, Inc., dated as of March 16, 2001.(14) 10.1.37 Restricted Stock Agreement by and between Charles B. Chokel and Conseco, Inc., dated as of March 16, 2001.(14) 10.1.38 Employment Agreement between William J. Shea and Conseco, Inc., dated as of September 10, 2001.(15) 10.1.39 Restricted Stock Agreement dated as of September 17, 2001 between Conseco, Inc. and William J. Shea.(15) 10.8 Conseco, Inc.'s Stock Option Plan(16); Amendment No. 1 thereto(17); Amendment No. 2 thereto(18); Amendment No. 3 thereto(19); Amendment No. 4 thereto(20); Amendment No. 5 thereto(21) 10.8.3 Conseco, Inc.'s Cash Bonus Plan.(22) 10.8.4 Amended and Restated Conseco Stock Bonus and Deferred Compensation Program.(23) 10.8.6 Conseco Performance-Based Compensation Plan for Executive Officers.(24) 10.8.7 Conseco, Inc. Amended and Restated Deferred Compensation Plan.(25) 10.8.8 Amendment to the Amended and Restated Conseco Stock Bonus and Deferred Compensation Program.(26) 10.8.9 Conseco Amended and Restated 1994 Stock and Incentive Plan.(1)
II-xii
EXHIBIT NO. EXHIBIT DESCRIPTION ------- ------------------- 10.8.10 Amendment No. 2 to the Amended and Restated Conseco Stock Bonus and Deferred Compensation Program.(27) 10.8.11 Amended and Restated Director, Officer and Key Employee Stock Purchase Plan of Conseco, Inc.(28) 10.8.13 Form of Promissory Note payable to Conseco, Inc. relating to Conseco, Inc.'s Director, Officer and Key Employee Stock Purchase Plan.(29) 10.8.14 Conseco, Inc. Amended and Restated 1997 Non-qualified Stock Option Plan.(1) 10.8.21 Amended and Restated 1999 Director and Executive Officer Stock Purchase Plan of Conseco, Inc.(28) 10.8.22 Guaranty regarding 1999 Director and Executive Officer Stock Purchase Plan.(28) 10.8.23 Form of Borrower Pledge Agreement dated as of September 15, 1999 with The Chase Manhattan Bank relating to the 1999 Director and Executive Officer Stock Purchase Plan.(28) 10.8.24 Form of note payable to Conseco, Inc. relating to the 1999 Director and Executive Officer Stock Purchase Plan.(28) 10.8.25 Conseco, Inc. 2000 Employee Stock Purchase Program Work-Down Plan.(10) 10.8.26 Conseco, Inc. 2000 Non-Employee Stock Purchase Program Work-Down Plan.(10) 10.8.27 Guaranty, dated as of November 22, 2000 between Conseco, Inc. as Guarantor, and Bank of America, National Association, as Administrative Agent; Guaranty and Subordination Agreement, dated as of November 22, 2000, made by CIHC, Incorporated, as Guarantor and Subordinated Borrower, and Conseco, Inc., as Obligor and Subordinated Lender, in favor of Bank of America, National Association, as Administrative Agent under the Credit Agreement dated as of November 22, 2000; and Form of Credit Agreement, dated as of November 22, 2000 among the Borrowers, the other financial institutions party thereto and Bank of America, National Association, as Administrative Agent (Relating to Refinancing of certain Loans under that certain Credit Agreement, dated as of August 21, 1998).(10) 10.8.28 Guaranty, dated as of November 22, 2000 between Conseco, Inc. as Guarantor, and Bank of America, National Association, as Administrative Agent; Guaranty and Subordination Agreement, dated as of November 22, 2000, made by CIHC, Incorporated, as Guarantor and Subordinated Borrower, and Conseco, Inc., as Obligor and Subordinated Lender, in favor of Bank of America, National Association, as Administrative Agent under the Credit Agreement dated as of November 22, 2000; and Form of Credit Agreement, dated as of November 22, 2000 among the Borrowers, the other financial institutions party thereto and Bank of America, National Association, as Administrative Agent (Relating to the Refinancing of Certain Loans under that certain Amended and Restated Credit Agreement, dated as of August 26, 1997).(10) 10.8.29 Guaranty, dated as of November 22, 2000, between Conseco, Inc., as Guarantor, and The Chase Manhattan Bank, as Administrative Agent; Guaranty and Subordination Agreement, dated as of November 22, 2000 made by CIHC, Incorporated, as Guarantor and Subordinated Borrower, and Conseco, Inc., as Obligor and Subordinated Lender, in favor of The Chase Manhattan Bank, as Administrative Agent under the Credit Agreement dated as of November 22, 2000; and the Form of Credit Agreement, dated as of November 22, 2000, among the Borrowers, the other financial institutions party thereto and the Chase Manhattan Bank, as Administrative Agent (Relating to the Refinancing of Certain Loans under that certain Credit Agreement, dated as of September 15, 1999, as terminated an replaced by that certain Termination and Replacement Agreement, dated as of May 30, 2000).(10) 10.8.30 Forms of note payable to Conseco Services, LLC regarding the 2000 Work-Down Plans, Form of Unconditional Guarantee and Form of Indemnification Agreement.(10)
II-xiii
EXHIBIT NO. EXHIBIT DESCRIPTION ------- ------------------- 10.8.31 First Stage Amendment and Agreement re: Non-Refinanced 1998 D&O Loans, dated as of March 20, 2002, among Conseco, Inc., CDOC, Inc., CIHC, Incorporated, Bank of America, N.A. and the various financial institutions parties thereto.(1) 10.8.32 First Stage Amendment and Agreement re: Non-Refinanced 1997 D&O Loans, dated as of March 20, 2002, among Conseco, Inc., CDOC, Inc., CIHC, Incorporated, Bank of America, N.A. and the various financial institutions parties thereto.(1) 10.8.33 Cash Collateral Pledge Agreement among CDOC, Inc. and JP Morgan Chase Bank, dated as of March 20, 2002.(1) 10.8.34 First Stage Amendment and Agreement Re: 1998 D&O Loans, dated as of March 20, 2002, among Conseco, Inc., CDOC, Inc., CIHC Incorporated, Bank of America, N.A. and various financial institutions parties thereto.(1) 10.8.35 Amended and Restated Collateral Agreement made by Conseco, Inc. and CIHC, Incorporated in form of JP Morgan Chase Bank, dated as of March 20, 2002.(1) 10.8.36 First Stage Amendment and Agreement re: 1999 D&O Loans, dated as of March 20, 2002, among Conseco, Inc., CDOC, Inc., CIHC, Incorporated, JPMorgan Chase Bank and the various financial institutions parties thereto.(1) 10.43 Amended and Restated Securities Purchase Agreement dated as of December 15, 1999 between Conseco, Inc. and the purchasers named therein.(30) 10.45.1 Warrant to Purchase Common Stock of Conseco Finance Corp., dated May 11, 2000, by and between Conseco Finance Corp. and Lehman Brothers Holdings Inc.(31) 10.45.2 Exchange Agreement by and between Lehman Brothers Holdings Inc. and Conseco, Inc., dated January 30, 2002.(1) 10.46.1 Amended and Restated Agreement dated January 30, 2002, by and among Conseco Finance Corp., Conseco, Inc., CIHC, Incorporated, Green Tree Residual Finance Corp. I, Green Tree Finance Corp. -- Five and Lehman Brothers Holdings Inc.(1) 10.46.2 Amended and Restated Master Repurchase Agreement dated as of April 5, 2001 between Merrill Lynch Mortgage Capital Inc. and Green Tree Finance Corp. -- Three.(32) 10.46.3 Second Amended and Restated Master Repurchase Agreement dated January 30, 2002 between Lehman Commercial Paper Inc. and Green Tree Finance Corp.-Five.(32) 10.46.4** Asset Assignment Agreement dated as of February 13, 1998 between Green Tree Residual Finance Corp. I and Lehman Commercial Paper, Inc.(33); Amendment to the First Residual Facility, dated as of September 22, 2000, by and among Lehman ALI Inc. and Green Tree Residual Finance Corp. I(34); Amendment, dated January 30, 2002, by and between Lehman ALI Inc. and Green Tree Residual Finance Corp.(33) 10.46.5 Insurance Agreement by and between Conseco, Inc. and Gary C. Wendt 2000 Irrevocable Insurance Trust dated 11/22/00 ("Wendt Trust"), dated December 1, 2000 and Collateral Assignment by Wendt Trust in favor of Conseco, Inc. dated December 1, 2000.(10) 10.48 Insurance Agreement by and between Conseco, Inc. and Wendt Trust, dated January 16, 2001 and Collateral Assignment by Wendt Trust in favor of Registrant dated January 16, 2001.(10) 10.49 Insurance Agreement by and between Registrant and Wendt Trust, dated January 16, 2001 and Collateral Assignment by Wendt Trust in favor of Registrant dated January 16, 2001.(10) 10.50 Agreement and Plan of Merger dated as of July 27, 2001 by and among Conseco, Inc., Noida Acquisition Corp. and ExlService.com, Inc.(35) 10.51 Restricted Stock Agreement dated as of July 31, 2001, between Conseco, Inc., Gary Wendt and Rosemarie Wendt.(35)
II-xiv
EXHIBIT NO. EXHIBIT DESCRIPTION ------- ------------------- 12.1 Computation of Ratio of Earnings to Fixed Charges, Preferred Dividends and Distributions on Company-Obligated Mandatorily Redeemable Preferred Securities of Subsidiary Trusts.(1)(41) 21 Subsidiaries of Conseco, Inc.(1) 23.1** Consent of PricewaterhouseCoopers LLP. 23.2** Consent of Weil, Gotshal & Manges LLP (included in Exhibit 5.1 hereto). 23.3** Consent of David K. Herzog (included in Exhibit 5.2 hereto). 24.1*** Power of Attorney (included on signature page). 25.1*** Form T-1 statement of eligibility under the Trust Indenture Act of 1939, as amended, of State Street Bank and Trust, as trustee. 99.1*** Form of Letter of Transmittal. 99.2 Prospectus Supplement dated February 4, 1998 to Prospectus dated June 24, 1997.(36) 99.3 Pricing Supplement dated June 4, 1998 to Prospectus dated June 24, 1997 and Prospectus Supplement dated February 23, 1998.(37) 99.4 Prospectus Supplement dated October 18, 1999 to Prospectus dated October 1, 1999.(38) 99.5 Prospectus Supplement dated February 2, 2000 to Prospectus dated October 1, 1999.(39) 99.6 Prospectus Supplement dated June 27, 2001 to Prospectus dated October 1, 1999.(40)
- --------------- * Filed herewith. ** To be filed by amendment. *** Previously filed with the initial filing of this Registration Statement. (1) Incorporated by reference to Conseco, Inc.'s Annual Report on Form 10-K (No. 001-09250) for the period ended December 31, 2001. (2) Incorporated by reference to Conseco, Inc.'s Registration Statement on Form S-3 (No. 333-94683), dated January 14, 2000. (3) Incorporated by reference to Conseco, Inc.'s Annual Report on Form 10-K (No. 001-09250), dated April 1, 2002. (4) Incorporated by reference to Conseco, Inc.'s Current Report on Form 8-K (No. 001-09250), dated October 21, 1999. (5) Incorporated by reference to Conseco, Inc.'s Current Report on Form 8-K (No. 001-09250), dated June 10, 1998. (6) Incorporated by reference to Conseco, Inc.'s Post-Effective Amendment No. 1 to the Registrant's Registration Statement on Form S-3 (No. 333-27803), dated (7) Incorporated by reference to Conseco, Inc.'s Current Report on Form 8-K/A (No. 001-09250), dated September 28, 2000. (8) Incorporated by reference to Conseco Finance Corp's (f/h/a Green Tree Financial Corp) Registration Statement Amendment on Form S-3/A (No. 333-52233), dated June 16, 1998. (9) Incorporated by reference to Conseco, Inc.'s Annual Report on Form 10-K (No. 001-09250) for the period ended December 31, 1999. (10) Incorporated by reference to Conseco, Inc.'s Annual Report on Form 10-K (No. 001-09250) for the period ended December 31, 2000. (11) Incorporated by reference to Conseco, Inc.'s Amended Annual Report on Form 10-K/A (No. 001-09250) for the period ended December 31, 1999. (12) Incorporated by reference to Conseco, Inc.'s Current Report on Form 8-K (No. 001-09250), dated July 10, 2000.
II-xv (13) Incorporated by reference to Conseco, Inc.'s Quarterly Report on Form 10-Q (No. 001-09250), for the period ended September 30, 2000. (14) Incorporated by reference to Conseco, Inc.'s Quarterly Report on Form 10-Q (No. 001-09250), for the period ended March 31, 2001. (15) Incorporated by reference to Conseco, Inc.'s Quarterly report on Form 10-Q (No. 001-09250), for the period ended September 30, 2001. (16) Incorporated by reference to Exhibit B of Conseco, Inc.'s definitive proxy statement dated December 10, 1983 relating to the Conseco, Inc.'s 1983 annual meeting of stockholders. (17) Incorporated by reference to Exhibit 10.8.1 to Conseco, Inc.'s Quarterly Report on Form 10-Q for the period ended June 30, 1985. (18) Incorporated by reference to Exhibit 10.8.2 to Conseco, Inc.'s registration statement on Form S-1 (No. 33-4367). (19) Incorporated by reference to Exhibit 10.8.3 to Conseco, Inc.'s Annual Report on Form 10-K for the period ended December 31, 1986. (20) Incorporated by reference to Exhibit 10.8 to Conseco, Inc.'s Annual Report on Form 10-K for the period ended December 31, 1987. (21) Incorporated by reference to Exhibit 10.8 to Conseco, Inc.'s Quarterly Report on Form 10-Q for the period ended September 30, 1991. (22) Incorporated by reference to Exhibit 10.8.3 to Conseco, Inc.'s Quarterly Report on Form 10-Q for the period ended March 31, 1989. (23) Incorporated by reference to Exhibit 10.8.4 to Conseco, Inc.'s Annual Report on Form 10-K for the period ended December 31, 1992. (24) Incorporated by reference to Conseco, Inc.'s Quarterly Report on Form 10-Q (No. 001-09250), for the period ended March 31, 1998. (25) Incorporated by reference to Exhibit A to Conseco, Inc.'s definitive proxy statement dated April 26, 1995 relating to Conseco, Inc.'s 1995 annual meeting of stockholders. (26) Incorporated by reference to Conseco, Inc.'s Annual Report on Form 10-K (No. 001-09250), for the period ended December 31, 1994. (27) Incorporated by reference to Conseco, Inc.'s Annual Report on Form 10-K (No. 001-09250), for the period ended December 31, 1995. (28) Incorporated by reference to Conseco, Inc.'s Quarterly Report on Form 10-Q (No. 001-09250) for the period ended September 30, 1999. (29) Incorporated by reference to Conseco, Inc.'s Annual Report on Form 10-K (No. 001-09250) for the period ended December 31, 1998. (30) Incorporated by reference to Conseco, Inc.'s Current Report on Form 8-K (No. 001-09250), dated December 15, 1999. (31) Incorporated by reference to Conseco, Inc.'s Quarterly Report on Form 10-Q (No. 001-09250), for the period ended June 30, 2000. (32) Incorporated by reference to Conseco Finance Corp.'s Annual Report on Form 10-K (No. 001-08916), for the period ended December 31, 2001. (33) Incorporated by reference to Conseco Finance Corp.'s Quarterly Report on From 10-Q (No. 001-08916), for the period ended March 31, 1998. (34) Incorporated by reference to Conseco Finance Corp's Annual Report on Form 10-K (No. 001-08916), for the period ended December 31, 2000. (35) Incorporated by reference to Conseco, Inc.'s Quarterly Report on Form 10-Q (No. 001-09250), for the period ended June 30, 2001. (36) Previously filed pursuant to Rule 424(b)(2) on February 4, 1998 (No. 333-27803).
II-xvi (37) Previously filed pursuant to Rule 424(b)(5) on June 6, 1998 (No. 333-27803). (38) Previously filed pursuant to Rule 424(b)(5) on October 19, 1999 (No. 333-83465) (39) Previously filed pursuant to Rule 424(b)(2) on February 3, 2000 (No 333-83465). (40) Previously filed pursuant to Rule 424(b)(2) on June 27, 2001 (No. 333-83465). (41) Incorporated by reference to Conseco, Inc.'s Quarterly Report on Form 10-Q (No. 001-09250) for the period ended March 31, 2002.
II-xvii EX-3.4 3 c69885a1exv3w4.txt BYLAWS OF CIHC, INCORPORATED EXHIBIT 3.4 BYLAWS OF CIHC, INCORPORATED August 23, 1995 BY-LAWS OF CIHC, INCORPORATED ARTICLE I Offices Section 1. Registered office. The registered office of CIHC, Incorporated (the "Corporation"), in the State of Delaware shall be at Corporation Trust Center, 1209 Orange Street, City of Wilmington, County of New Castle. The name of the registered agent in charge thereof is The Corporation Trust Company. Section 2. Other Offices. The Corporation may have such other office or offices in such place or places, within or without the State of Delaware, as the Board of Directors (the "Board") may from time to time determine or the business of the Corporation may require. ARTICLE II Meetings of Stockholders Stockholders' Consent in Lieu of Meeting Section 1. Place of Meeting. All meetings of the stockholders of the Corporation (the "stockholders") shall be held at the office of the Corporation or at such other place or places, within or without the State of Delaware, as may from time to time be fixed by the Board or the President. Section 2. Annual Meetings. The annual meeting of the stockholders for the election of directors and for the transaction of such other business as may properly come before the meeting shall be held on such date and at such place and hour as shall be fixed by the Board and specified in the notice of such meeting. Section 3. Special Meeting. A special meeting of the stockholders for any purpose or purposes, unless otherwise prescribed by law, may be called at any time by the President or by order of the Board or by a stockholder or stockholders holding of record at least 50% of all the shares of stock of the Corporation then outstanding and entitled to vote thereat, to be held on such date and at such place and hour as shall be specified in the notice thereof. Section 4. Notice of Meetings. Except as otherwise provided by law, written notice of each meeting of the stockholders shall be given not less than 10 days nor more than 60 days before the date on which the meeting is to be held, to each stockholder of record entitled to notice of, or to vote at, such meeting by delivering a notice thereof to such stockholder personally, or by depositing such notice in the United States mail in a postage-prepaid envelope addressed to him at his post office address furnished by him to the Secretary for such purpose, or, if he shall not have furnished his address to the Secretary for such purpose, then at his post office address as it appears on the records of the Corporation, or by transmitting a notice thereof to him at such address by telegraph, cable or other form of recorded communication. Every such notice shall state the place, date and hour of the meeting and, in the case of a special meeting, the purpose or purposes thereof. Notice of any meeting of stockholders shall not be required to be given to any stockholder who shall attend such meeting in person or by proxy (other than a stockholder who attends such meeting 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), or who shall have waived notice thereof as provided in Article X. Section 5. List of Stockholders. It shall be the duty of the Secretary or other officer of the Corporation who shall have charge of its stock ledger, to prepare and make, at least 10 days before every meeting of the stockholders, a complete list of the stockholders entitled to vote thereat, arranged in alphabetical order and showing the address of each stockholder and the number of shares registered in such stockholder's name. Such list shall be produced and kept available at the time and places required by law. Section 6. Quorum. At each meeting of the stockholders, except as otherwise provided by law or by the Certificate of Incorporation of the Corporation, stockholders holding of record a majority of the shares of stock of the Corporation entitled to be voted thereat shall be present in person or by proxy to constitute a quorum for the transaction of business. The absence from any meeting of stockholders holding the number of shares of stock of the Corporation required by the laws of the State of Delaware or by the Certificate of Incorporation of the Corporation or by these By-laws for action upon any given matter shall not prevent action at such meeting upon any other matter or matters which may properly come before the meeting, if there shall be present thereat in person or by proxy stockholders holding the number of shares of stock of the Corporation required in respect of such other matter or matters. Section 7. Adjournments. In the absence of a quorum at any meeting of stockholders or any adjournment or adjournments thereof, a majority in voting interest of those present in person or by proxy and entitled to vote thereat, or in the absence therefrom of all the stockholders, any officer entitled to preside at, or to act as secretary of, such meeting may adjourn such meeting from time to time. At any such adjourned meeting at which a quorum may be present, any business may be transacted which might have been transacted at the meeting as originally called. Notice of any adjourned meeting of the stockholders need not be given if the time and place thereof are announced at the meeting at which the adjournment is taken, except if the adjournment is for more than 30 days or if after the adjournment a new record date is fixed for the adjourned meeting. Section 8. Organization. At each meeting of the stockholders, the President, or, in his absence, a chairman chosen by a majority in voting interest of the stockholders present in person or by proxy and entitled to vote thereat, shall act as chairman. The Secretary, or, in his absence, an Assistant Secretary, shall act as secretary at all meetings of the stockholders. In the absence of the Secretary and the Assistant Secretaries, the chairman may appoint any person present to act as secretary of the meeting. Section 9. Order of Business. The order of business at each meeting of the stockholders shall be determined by the chairman of the meeting, but such order of business may be changed by the vote of a majority in voting interest of stockholders present in person or by proxy and entitled to vote thereat. Section 10. Voting. Except as otherwise provided by law or by the Certificate of Incorporation of the Corporation, each stockholder shall, at each meeting of stockholders, be entitled to one vote in person or by proxy for each share of stock of the Corporation registered in his name on the books of the Corporation: (a) on the date fixed by the Board as the record date for the determination of stockholders entitled to notice of and to vote at such meeting, which date shall be not more than 60 nor less than 10 days before the date of such meeting; or (b) if no such record date shall have been fixed, then (i) at the close of business on the day next preceding the day on which notice of the meeting shall be given, or (ii) if notice of the meeting shall be waived, at the close of business on the day next preceding the day on which the meeting shall be held. Shares of its own stock belonging to the Corporation shall not be voted directly or indirectly. At all meetings of the stockholders all matters, except as otherwise provided by the Certificate of Incorporation of the Corporation, by these By-laws or by law, shall be decided by the vote of a majority in voting interest of stockholders present in person or by proxy and entitled to vote thereat, a quorum being present. Except as otherwise provided by the Certificate of Incorporation of the Corporation, by these By-laws or by law, or demanded by a stockholder present in person or by proxy at any meeting of the stockholders and entitled to vote thereat, or so directed by the chairman of the meeting, the vote thereat on any question need not be by ballot. On a vote by ballot, each ballot shall be signed by the stockholder voting, or by his proxy if there be such proxy, and shall state the number of shares voted. Section 11. Action by Consent. Anything in these By-laws to the contrary notwithstanding, any action required by law to be, or which may be, taken at any annual or special meeting of the stockholders may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed in person or by proxy by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at, a meeting at which all shares entitled to vote thereon were present and voted. Such writing or writings shall be filed with the minutes of stockholders' meetings and prompt notice of the taking of any such action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. ARTICLE III Board of Directors Section 1. General Powers. The property, business and affairs of the Corporation shall be managed by the Board, which may exercise all such authority and powers of the Corporation and do all such lawful acts and things as are not by law, by the Certificate of Incorporation of the Corporation or by these By-laws directed or required to be exercised or done by the stockholders. Section 2. Number and Term of Office. The number of directors shall be such number, not less than one, nor more than nine, as shall from time to time be determined by the Board; and, unless otherwise determined by the Board, shall be three. As used herein, the term "whole Board" shall mean the total number of positions on the Board fixed in the manner provided by these By-laws, regardless of the number of directors then holding office. Directors need not be stockholders. Each director shall hold office until his successor shall have been elected and shall qualify, or until his earlier death, or until his earlier resignation or removal in the manner hereinafter provided. Section 3. Election of Directors. At each meeting of the stockholders for the election of directors at which a quorum is present, the persons receiving the greatest number of votes, up to the number of directors to be elected, shall be the directors. Section 4. Quorum and Manner of Acting. Except as otherwise expressly required by law, by the Certificate of Incorporation of the Corporation or by these By-laws, a majority of the directors then holding office shall constitute a quorum for the transaction of business at any meeting except that in no case may a number less than one-third of the whole Board constitute a quorum, and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board. In the absence of a quorum, a majority of the directors present may adjourn any meeting from time to time until a quorum shall be present thereat. Notice of any adjourned meeting need not be given. Section 5. Place of Meeting. The Board may hold its meetings at such place or places within or without the State of Delaware as the Board may from time to time determine or as shall be specified or fixed in the respective notices or waivers of notice thereof. Section 6. Organizational Meetings. The Board shall meet for the purpose of organization, the election of officers and the transaction of other business as soon as practicable after the annual election of directors and on the same day and at the same place at which a regular meeting of the Board is to be held, in which case notice of such meeting need not be given, or at any other time or place which shall be specified in a notice given as provided in Section 9 of this Article III or in a consent and waiver of notice thereof signed by all the directors. Section 7. Regular Meetings. Regular meetings of the Board shall be held at such places and at such times as the Board shall from time to time determine. Section 8. Special Meetings. Special meetings of the Board, at which any and all business may be transacted, shall be held whenever called by any director. Section 9. Notice of Meetings. Notice of regular meetings of the Board need not be given. Notice of each special meeting of the Board shall be mailed to each director, addressed to him at his residence or usual place of business, at least two days before the day on which the meeting is to be held, or shall be sent to him at such place by telegraph, cable or other form of recorded communication, or be given personally or by telephone, not later than the day before the day on which such meeting is to be held. Every such notice shall state the time and place of the meeting but need not state the purposes thereof except as otherwise by these By-laws provided. Notice of any meeting of the Board need not be given to any director who shall have waived notice thereof as provided in Article X. The Secretary, or, in his absence, an Assistant Secretary, or, in the absence of the Secretary and Assistant Secretaries, any person appointed by the chairman, shall act as secretary of the meeting. Section 10. Order of Business. At all meetings of the Board, business shall be transacted in the order determined by the chairman of the meeting, subject to the approval of the Board. Section 11. Action by Consent. Any action required or permitted to be taken at any meeting of the Board or of any committee thereof may be taken without a meeting if all members of the Board or of such committee, as the case may be, consent thereto in a writing or writings and such writing or writings are filed with the minutes of the proceedings of the Board or such committee. Section 12. Action by Means of Conference Telephone or Similar Communications Equipment. Any member of the Board of Directors or any committee thereof may participate in any meeting of the Board or of such committee, as the case may be, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at such meeting. Section 13. Resignations. Any director of the Corporation may resign at any time by giving written notice to the Board, the President or the Secretary. The resignation of any director shall take effect upon receipt of such notice or at any later date specified therein; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 14. Removal of Directors. Any director or the entire Board may be removed, either with or without cause, at any time, by the affirmative vote of stockholders holding of record a majority of the shares of stock of the Corporation entitled to be voted at a meeting of stockholders, given at a special meeting of stockholders called for the purpose; and the vacancy in the Board caused by any such removal may be filled by the stockholders at such meeting or as otherwise provided in Section 15 of this Article III. Section 15. Vacancies. Any vacancies in the Board caused by death, resignation, removal, disability, an increase in the number of directors or any other cause may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director. Each director so chosen shall hold office until the next annual election and until his successor shall have been elected and shall qualify, or until his earlier death, or until his earlier resignation or removal in the manner herein provided. Any vacancy in the Board created by the resignation of a director effective at a future date may be filled by a majority of the directors then in office, including such resigning director, the vote thereon to take effect when such resignation becomes effective. Section 16. Compensation. Directors, as such, shall not receive any stated salary for their services, but by resolution of the Board may receive a fixed sum and expenses incurred in performing the functions of director and member of any committee of the Board. Nothing herein contained shall be construed so as to preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Section 17. Indemnification of Directors and Officers. (a) Any person made, or threatened to be made, a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, or is or was a director, officer, employee or agent of any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees or agents, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall be indemnified by the Corporation to the full extent and under the circumstances permitted by the General Corporation Law of the State of Delaware in effect from time to time and the common law of the State of Delaware. Expenses incurred by any such person in defending any such action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding if authorized by a majority of the directors of the Corporation in office who are not interested in such action, suit or proceeding. (b) The indemnification provided by this Section 17 shall not be deemed exclusive of any other rights to which a person seeking indemnification may be entitled under any agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent of the type referred to above and shall inure to the benefit of the heirs, executors and administrators of such a person. (c) The officers of the Corporation, without authorization by the Board, may in their discretion purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the type referred to above against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation shall have the power to indemnify him against such liability under the General Corporation Law of the State of Delaware or under this Section 17. ARTICLE IV Committees Section 1. Appointment and Powers. The Board may, by resolution passed by a majority of the whole Board, designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board 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. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the Certificate of Incorporation of the Corporation (except that a committee may, to the extent authorized in the resolution or resolutions providing for the issuance of shares of stock of the Corporation adopted by the Board as provided in Section 151 of the General Corporation Law of the State of Delaware, fix any of the preferences or rights of such shares relating to dividends, redemption, dissolution, any distribution of assets of the Corporation or the conversion into, or the exchange of such shares for, shares of any other class or classes or any other series of the same or any other class or classes of stock of the Corporation), adopting an agreement of merger or consolidation under Section 251 or 252 of the General Corporation Law of the State of Delaware, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution, or amending the By-laws of the Corporation, and unless the resolution or the Certificate of Incorporation of the Corporation expressly so provides, no such committee shall have the power or authority to declare a dividend, to authorize the issuance of stock of the Corporation or to adopt a certificate of ownership and merger pursuant to Section 253 of the General Corporation Law of the State of Delaware. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board. Section 2. Committee Minutes. Each committee shall keep regular minutes of its meetings and report the same to the Board when required. ARTICLE V Officers Section 1. Number. The officers of the Corporation shall be a President, a Treasurer and a Secretary. other officers may be elected in accordance with the provisions of Section 3 of this Article V including without limitation one or more Vice Presidents and one or more Assistant Secretaries. One person may hold the offices and perform the duties of any two or more of said officers, except that no one person shall simultaneously hold the offices of President and Secretary. Section 2. Election, Term of Office, Qualifications and Removal. The officers shall be elected by the Board. Each officer shall hold office until his successor shall have been elected and shall qualify or until his earlier death, or until his earlier resignation or removal in the manner hereinafter provided. Any officer may be removed at any time, either with or without cause, by an affirmative vote of a majority of the Board. Section 3. Additional Officers. The Board may from time to time elect such other officers as it may deem necessary who shall hold their offices for such terms and shall exercise such powers and perform such duties as the Board may from time to time specify. The Board or the President may from time to time appoint such agents and employees of the Corporation as may be deemed proper who shall hold office for such period, have such authority and perform such duties as are provided in these By-laws or as the Board or the President may from time to time prescribe. Section 4. Resignations. Any officer may resign at any time by giving notice to the Board, the President or the Secretary. Any such resignation shall take effect at the date of receipt of such notice or at any later date specified therein; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 5. Vacancies. Any vacancies in any office because of death, resignation, removal or disability shall be filled for the unexpired portion of the term in the manner prescribed in these By-laws for election to such office. Section 6. President. The President, subject to the direction of the Board, shall be the chief executive officer of the Corporation, shall have the responsibility for the general management and control of the affairs and business of the Corporation, shall have the direction of all other officers, agents and employees and may delegate such duties and powers to the other officers of the Corporation as he deems appropriate. He shall preside at the meetings of the Board and of the stockholders. Section 7. Vice Presidents. Each Vice President shall have such powers and perform such duties as the President or the Board may from time to time prescribe. At the request of the President, or in case of his inability to act, any of the Vice Presidents shall perform the duties of the President and, when so acting, shall have all the powers of, and be subject to all the restrictions upon, the President. Section 8. Treasurer. The Treasurer shall receive and have the custody of all moneys and securities belonging to the Corporation, and shall deposit all moneys in the name and to the credit of the Corporation. He shall disburse for its account the funds of the Corporation, taking proper vouchers therefor, but each person or persons as he may from time to time authorize shall have authority to draw checks against deposits of the Corporation in any bank or trust company, and drafts as required, to endorse checks, drafts, bills of exchange, orders and certificates of deposit which may need endorsement, for deposit to the credit of the Corporation in any bank or trust company, and to accept drafts or bills of exchange which may be drawn on the Corporation. He shall keep such records as may be required in the proper performance of his duties and shall render to the President and the Board, at the regular meetings of the Board and whenever they may desire it, an account of all his transactions as Treasurer and of the financial condition of the Corporation, and shall perform all acts incident to the position of Treasurer. Section 9. Secretary. The Secretary shall have the custody of all stock certificate books, transfer books and stock ledgers, and all books, records and papers of the corporation except such as the Treasurer shall have charge of. He shall affix the corporate seal to all documents and contracts requiring the corporate seal when the same shall have been signed on behalf of the Corporation by a duly authorized officer, employee or agent. He shall, to the extent practicable, attend and keep the minutes of all meetings of the Board, the stockholders and any committees of the Board in one or more books kept for that purpose. He shall attend to the giving and serving of all notices of meetings of stockholders and special meetings of directors and such other notices as he may be directed to give and serve by the Board. He shall, in general, subject to the control of the Board, perform all the duties incident to the office of Secretary and such other duties as may be from time to time assigned to him by the Board or the President. Section 10. Assistant Secretaries. The Assistant Secretary or, if there be more than one Assistant Secretary, any Assistant Secretary, shall, in the absence, disability or death of the Secretary, perform the duties and exercise the powers of the Secretary. Each Assistant Secretary shall have such other powers and shall perform such other duties as may be from time to time assigned to him by the Board, by the President or by the Secretary. ARTICLE VI Contracts, Checks, Drafts, Bank Accounts, etc. Section 1. Execution of Documents. The Board shall designate the officers, employees and agents of the Corporation who shall have power to execute and deliver deeds, contracts, mortgages, bonds, debentures, checks, drafts and other orders for the payment of money and other documents for and in the name of the Corporation and may authorize such officers, employees and agents to delegate such power (including authority to redelegate) by written instrument to other officers, employees or agents of the Corporation. Unless so authorized by the Board, no such officer, employee or agent shall have any power or authority to bind the Corporation by any contract or engagement or pledge its credit or render it liable for any purpose or amount. Section 2. Deposits. All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation or otherwise as the Board or the President or any other officer of the Corporation to whom power in that respect shall have been delegated by the Board shall select. Section 3. Proxies in Respect of Stock or other Securities of Other Corporations. The Board shall designate the officers of the Corporation who shall have authority from time to time to appoint an agent or agents of the Corporation to exercise in the name and on behalf of the Corporation the powers and rights which the Corporation may have as the holder of stock or other securities or interests in any other corporation or business entity and to vote or consent in respect of such stock, securities or interest; such designated officers may instruct the person or persons so appointed as to the manner of exercising such powers and rights; and such designated officers may execute or cause to be executed in the name and on behalf of the Corporation and under its corporate seal, or otherwise, such written proxies, powers of attorney and other instruments as they may deem necessary or proper in order that the Corporation may exercise its said powers and rights. ARTICLE VII Shares and Their Transfer Section 1. Certificates for Shares. Every owner of stock of the Corporation shall be entitled to have a certificate certifying the number of shares owned by him in the Corporation and designating the class of stock to which such shares belong, which shall otherwise be in such form as the Board shall prescribe. Each such certificate shall be signed by or in the name of the Corporation by the President or a Vice President and by the Secretary or the Treasurer. Any of or all such signatures may be facsimiles. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may nevertheless be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. A record shall be kept of the name of the person, firm or corporation owning the shares represented by each certificate for stock of the Corporation issued, the number of shares represented by each such certificate, the date thereof and, in the case of cancellation, the date of cancellation. Section 2. Transfer of Shares. The transfer of stock and certificates which represent the stock of the Corporation shall be governed by Article 8 of Subtitle 1 of Title 6 of the Delaware Code (the Uniform Commercial Code), as amended from time to time. Except as otherwise expressly required by law, the person in whose name shares of stock stand on the books of the Corporation shall be deemed the owner thereof for all purposes as regards the Corporation. Section 3. Lost, Destroyed and Mutilated Certificates. (a) Where a certificate for stock of the Corporation has been lost, apparently destroyed or wrongfully taken, the issuance of a new stock certificate or the claims based on such certificate shall be governed by Article 8 of Subtitle 1 of Title 6 of the Delaware Code (the Uniform Commercial Code), as amended from time to time. (b) Where the holder of any certificate for stock of the Corporation notifies the Corporation of the mutilation of such certificate within a reasonable time after he has notice of it, the Corporation will issue a new certificate for stock in exchange for such mutilated certificate theretofore issued by it. (c) The Board may, in its discretion, require the owner of the lost, stolen, destroyed or mutilated certificate to give the Corporation a bond in such sum, limited or unlimited, in such form and with such surety or sureties sufficient to indemnify the Corporation against any claim that may be made against it on account of the loss, theft, destruction or mutilation of any such certificate or the issuance of any such new certificate. ARTICLE VIII Seal The Board may provide a corporate seal, which shall be in the form of a circle and shall bear the full name of the Corporation, the words "Corporate Seal" and, in figures, the year of its incorporation, or such other words or figures as the Board may approve and adopt. ARTICLE IX Fiscal Year The fiscal year of the Corporation shall end on the 31st day of December in each year or on such other date as may be determined by resolution of the Board. ARTICLE X Waiver of Notice Whenever any notice is required to be given by these By-laws or by the Certificate of Incorporation of the Corporation or by any law, the person entitled thereto may, in person or by attorney thereunto authorized, in writing or by telegraph, cable or other form of recorded communication, waive such notice, whether before or after the meeting or other matter in respect of which such notice is given, and in such event such notice need not be given to such person and such waiver shall be deemed equivalent to such notice. ARTICLE XI Amendments These By-laws, or any of them, may be altered, amended or repealed, or new By-laws may be made, at any annual or special meeting, by the stockholders having voting power, or by Board action. By-laws made, altered or amended by the Board shall be subject to alteration, amendment or repeal by the stockholders. EX-4.11 4 c69885a1exv4w11.txt $1,500,000,000 FIVE-YEAR CREDIT AGREEMENT EXHIBIT 4.11 EXECUTION COPY - -------------------------------------------------------------------------------- $1,500,000,000 FIVE-YEAR CREDIT AGREEMENT DATED AS OF SEPTEMBER 25, 1998 AMONG CONSECO, INC., BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, AS AGENT, FIRST UNION NATIONAL BANK AND THE CHASE MANHATTAN BANK AS SYNDICATION AGENTS, MORGAN GUARANTY COMPANY OF NEW YORK, AS DOCUMENTATION AGENT AND THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO ARRANGED BY BANCAMERICA SECURITIES, INC. - -------------------------------------------------------------------------------- TABLE OF CONTENTS $1,500,000,000.................................................................1 FIVE-YEAR CREDIT AGREEMENT.....................................................1 Dated as of September 25, 1998.................................................1 among..........................................................................1 CONSECO, INC.,.................................................................1 as Agent,......................................................................1 as Syndication Agents,.........................................................1 as Documentation Agent.........................................................2 and............................................................................2 THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO..................................2 Arranged by....................................................................2 BANCAMERICA SECURITIES, INC....................................................2 FIVE-YEAR CREDIT AGREEMENT.....................................................5 ARTICLE I......................................................................5 DEFINITIONS....................................................................5 ARTICLE II....................................................................29 THE CREDITS...................................................................29 2.11 Repayment...........................................................38 ARTICLE III...................................................................42 TAXES, YIELD PROTECTION AND ILLEGALITY........................................42 ARTICLE IV....................................................................46 CONDITIONS PRECEDENT..........................................................46 ARTICLE V.....................................................................48 REPRESENTATIONS AND WARRANTIES................................................48 5.07 ERISA Compliance....................................................50 ARTICLE VI....................................................................54 AFFIRMATIVE COVENANTS.........................................................54 6.03 Notices. The Company shall promptly notify the Agent:..............55 ARTICLE VII...................................................................58 NEGATIVE COVENANTS............................................................58 ARTICLE VIII..................................................................62 EVENTS OF DEFAULT.............................................................62 ARTICLE IX....................................................................65 THE AGENT.....................................................................65 ARTICLE X.....................................................................69 MISCELLANEOUS.................................................................69 10.04 Costs and Expenses. The Company shall:.............................71 SCHEDULE 2.01.................................................................78 AND PRO RATA SHARES...........................................................78 SCHEDULE 10.02................................................................79 ADDRESSES FOR NOTICES.........................................................79 CONSECO, INC...............................................................79 Conversion/Continuation):..................................................80 -2- SCHEDULES Schedule 1.01 Persons Not Subsidiaries Schedule 2.01 Commitments Schedule 5.05 Litigation Schedule 5.07 ERISA Schedule 5.13 Investment Companies Schedule 5.14 Subsidiaries Schedule 7.02(c) Liens Schedule 7.02(g) Permitted Indentures Schedule 7.07 Business Activities Schedule 10.02 Lending Offices; Addresses for Notices EXHIBITS Exhibit A Form of Compliance Certificate Exhibit B Form of Notice of Borrowing Exhibit C Form of Notice of Conversion/Continuation Exhibit D Form of Swing Line Note Exhibit E Form of Committed Loan Note Exhibit F Form of Assignment and Acceptance Exhibit G Form of Invitation for Competitive Bids Exhibit H Form of Competitive Bid Request Exhibit I Form of Competitive Bid Exhibit J Offshore Rate Funding Loss Determination Methodology -3- FIVE-YEAR CREDIT AGREEMENT This FIVE-YEAR CREDIT AGREEMENT is entered into as of September 25, 1998, among CONSECO, INC., an Indiana corporation (the "Company"), the several financial institutions from time to time party to this Agreement (collectively, the "Banks"; individually, a "Bank"), Bank of America National Trust and Savings Association, as agent for the Banks and as Swing Line Bank, First Union National Bank and The Chase Manhattan Bank, as syndication agents for the Banks (the "Syndication Agents") and Morgan Guaranty Company of New York, as documentation agent (the "Documentation Agent"). WHEREAS, the Agent, the Banks and the Swing Line Bank have agreed to make available to the Company a revolving credit facility upon the terms and subject to the conditions set forth herein; NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained herein, the parties agree as follows: ARTICLE I DEFINITIONS 1.01 Certain Defined Terms. The following terms have the following meanings: "Absolute Rate" has the meaning specified in subsection 2.08(c). "Absolute Rate Auction" means a solicitation of Competitive Bids setting forth Absolute Rates pursuant to Section 2.08. "Absolute Rate Bid Loan" means a Bid Loan that bears interest at a rate determined by reference to the Absolute Rate. "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, 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 BofA in its capacity as agent for the Banks hereunder, and any successor agent appointed under Section 9.09. "Agent-Related Persons" means the initial Agent and any successor agent appointed under Section 9.09, together with their respective Affiliates (including, in the -4- case of BofA, the Arranger), and the officers, directors, employees, agents and attorneys-in-fact of such Persons and Affiliates. "Agent's Payment Office" means the address for payments set forth on Schedule 10.02 or such other address as the Agent may from time to time specify. "Agreement" means this Credit Agreement. "Amounts Available for Dividends" means, without duplication, the maximum amount of dividends the Insurance Subsidiaries are permitted to pay under the insurance code of their respective state of domicile without necessitating approval by the applicable Department plus the amount of dividends actually paid by the Insurance Subsidiaries with the prior approval of the applicable Department in excess of the maximum amount permitted; provided, however, that with respect to dividends paid from BLI, LALI, NGLIC, PLIC or WLI to the Company, Amounts Available for Dividends shall also mean the maximum amount BLI, LALI, NGLIC, PLIC or WLI is permitted to pay under the applicable insurance code of its state of domicile with approval of the applicable Department, not to exceed in the aggregate in any one Fiscal Year of the Company the Statutory Net Income of BLI, LALI, NGLIC, PLIC or WLI, as the case may be, for the immediately preceding Fiscal Year. "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 Facility Fee Rate" means the lowest applicable percentage set forth below based upon the rating of the Company's senior unsecured long-term Indebtedness then in existence: Rating Applicable Facility Fee ------ ----------------------- A or above by S&P or DCR 0.08% A- by S&P or DCR 0.09% BBB+ by S&P or DCR 0.10% BBB by S&P or DCR 0.125% Lower than BBB by S&P or DCR or 0.15% unrated The Applicable Facility Fee Rate shall be adjusted, as applicable, upon each change in the rating by S&P or DCR of the Company's senior unsecured long-term Indebtedness, effective as of the date of such change. At any time at which S&P's rating of the Company's senior unsecured long term Indebtedness differs from DCR's rating thereof -5- by more than one level (including each modifier as a separate level), then the Applicable Facility Fee Rate shall be determined by reference to the rating which is one level below the higher of the two ratings. "Applicable Offshore Rate Margin" means on any date the lowest applicable percentage set forth below based upon the rating of the Company's senior unsecured long-term Indebtedness then in existence: Rating Applicable Offshore Rate Margin ------ ------------------------------- A or above by S&P or DCR 0.17% A- by S&P or DCR 0.21% BBB+ by S&P or DCR 0.25% BBB by S&P or DCR 0.275% Lower than BBB by S&P or DCR or 0.35% unrated The Applicable Offshore Rate Margin shall be adjusted, as applicable, upon each change in the rating of the Company's senior unsecured long-term Indebtedness, effective as of the date of such change. At any time at which S&P's rating of the Company's senior unsecured long-term Indebtedness differs from DCR's rating thereof by more than one level (including each modifier as a separate level), then the Applicable Offshore Rate Margin shall be determined by reference to the rating which is one level below the higher of the two ratings. "Arranger" means BancAmerica Securities, Inc. "Asset Backed Security" means a security of a Green Tree Entity or a Sub-Prime Auto Loan Company that is collateralized by loans, leases, receivables, installment contracts or interests in or components of Interest Only Securities. "Assignee" has the meaning specified in subsection 10.08(a). "Assignment and Acceptance" has the meaning specified in subsection 10.08(a). "Attorney Costs" means and includes all reasonable fees and disbursements of any law firm or other external counsel, the reasonable allocated cost of internal legal services and all reasonable disbursements of internal counsel. "Average Life" means, as of the date of determination, with respect to any Indebtedness, the quotient obtained by dividing (a) the sum of the products of the numbers of years from the date of determination to the dates of each successive scheduled principal payment of such Indebtedness multiplied by the amount of such scheduled principal payment by (b) the sum of all such scheduled principal payments. "B-Share Financings" means the financing of fees or commissions related to B-Shares. -6- "B-Shares" means those shares of ownership representing a mutual interest in a pool of assets on which 12b-1 fees or contingent deferred sales commissions (CDSC), as defined under the Investment Company Act of 1940, are applicable. "Bank" has the meaning specified in the introductory clause hereto. "Bankruptcy Code" means the Federal Bankruptcy Reform Act of 1978 (11 U.S.C.ss.101, et seq.). "Base Rate" means, for any day, 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 in San Francisco, California, as its "reference rate." (The "reference 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 the reference rate announced by BofA shall take effect at the opening of business on the day specified in the public announcement of such change. "Base Rate Committed Loan" means a Committed Loan that bears interest based on the Base Rate. "Bid Borrowing" means a Borrowing hereunder consisting of one or more Bid Loans made to the Company on the same day by one or more Banks. "Bid Loan" means a Loan by a Bank to the Company pursuant to Section 2.07, which may be an Offshore Rate Bid Loan or an Absolute Rate Bid Loan. "Bid Loan Lender" means, in respect of any Bid Loan, the Bank making such Bid Loan to the Company. "BLI" means Bankers Life Insurance Company of Illinois, an Illinois insurance corporation. "BofA" means Bank of America National Trust and Savings Association, a national banking association. "Borrowing" means a borrowing pursuant to Article II hereof consisting of Loans of the same Type made to the Company on the same day by one or more of the Banks and may be a Committed Borrowing or a Bid Borrowing and, in the case of Offshore Rate Loans, having the same Interest Period. A Swing Line Loan shall not constitute a Borrowing. "Borrowing Date" means any date on which a Borrowing occurs under Sections 2.03 or 2.08. "Business Day" means any day other than a Saturday, Sunday or other day on which commercial banks in Chicago, New York City or San Francisco are authorized or -7- required by law to close and, if the applicable Business Day relates to any Offshore Rate Loan, means such a day on which dealings are carried on in the applicable offshore dollar interbank 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. "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 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) securities with maturities of one (1) year or less from the date of determination issued or fully guaranteed or insured by the United States Government, or any instrumentality or agency thereof, (b) certificates of deposit, eurodollar time deposits, overnight bank deposits, bankers' acceptances and repurchase agreements of any Bank or any other commercial bank whose unsecured long-term debt obligations are rated at least "BBB-" by S&P, "Baa-3" by Moody's, "BBB-" by DCR, "BBB-" by Fitch or "NAIC 2" by the NAIC having maturities of six (6) months or less from the date of determination and (c) commercial paper having maturities of six (6) months or less from the date of determination rated at least "A-2" by Standard Poor's, "P-2" by Moody's, "D-2" by DCR, "F-2" by Fitch or "NAIC 2" by the NAIC, or carrying an equivalent rating by a nationally recognized rating agency, if all of the named rating agencies cease publishing ratings of investments. "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. "CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended. "CERCLIS" means the Comprehensive Environmental Response, Compensation and Liability Information System List. -8- "Change of Control" means (a) any acquisition by any Person, or two or more Persons acting in concert of beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Exchange Act) of 30% or more of the outstanding shares of voting stock of the Company (other than an acquisition by any Person or Persons who are officers or directors of the Company on the Closing Date) or (b) during any period of 25 consecutive calendar months, commencing on the date of this Agreement, 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) subsequently became directors of the Company and whose actual 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. "Closing Date" means the date on which all conditions precedent set forth in Section 4.01 are satisfied or waived by all Banks (or, in the case of subsection 4.01(e), waived by the Person entitled to receive such payment). "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. "Committed Borrowing" means a Borrowing hereunder consisting of Committed Loans made on the same day by the Banks ratably according to their respective Pro Rata Shares and, in the case of Offshore Rate Committed Loans, having the same Interest Period. "Committed Loan" means a Loan by a Bank to the Company pursuant to Section 2.01, and may be an Offshore Rate Committed Loan or a Base Rate Committed Loan. "Committed Loan Note" has the meaning specified in Section 2.02. "Commitment", as to each Bank, has the meaning specified in Section 2.01. "Company" has the meaning specified in the introduction to this Agreement. "Competitive Bid" means an offer by a Bank to make a Bid Loan in accordance with subsection 2.08(b). "Competitive Bid Request" has the meaning specified in subsection 2.08(a). "Compliance Certificate" means a certificate substantially in the form of Exhibit A. -9- "Conseco Series E Preferred Stock" means $900,000,000 stated value of the Company's Series E Preferred Stock, without par value. "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 (a) the obligations of any Person under Reinsurance Agreements or in connection with Investments of Insurance Subsidiaries permitted by the applicable Department, (b) the obligations of the Company in connection with its guaranty of the Trust Preferred Securities and the Unit Securities and (c) the obligations of any Person in connection with its guaranty of Asset Backed Securities shall not be deemed Contingent Obligations of any such Person or the Company, as applicable. The amount of any Person's liability with respect to any Contingent Obligation shall (subject to any limitation set forth therein) be deemed to be the outstanding principal amount (or maximum outstanding principal amount, if larger) of the debt, obligation or other liability outstanding thereunder or, if not stated or if indeterminable, the maximum reasonably anticipated liability in respect thereof at the time of determination. "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. "Conversion/Continuation Date" means any date on which, under Section 2.04, the Company (a) converts Committed Loans of one Type to another Type, or (b) continues as Loans of the same Type, but with a new Interest Period, Committed Loans having Interest Periods expiring on such date. "Costs and Expenses" has the meaning specified in Section 10.05. "DCR" means Duff & Phelps Credit Rating Co., 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. "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 recourse Indebtedness for borrowed money (including, without limitation, any Indebtedness evidenced by bonds, debentures, notes or other similar instruments) of the Company or any Subsidiary for which the Company or any such Subsidiary, respectively, is directly liable on such date and which is neither a Contingent Obligation nor Indebtedness arising out of a Permitted Transaction; to (b) Total Capitalization on such date; provided, however, that solely for the purposes of calculating the Debt to Total Capitalization Ratio the term "Indebtedness" shall exclude (i) debt securities that are -10- convertible into shares of the Company's common stock having a current market value of at least 125% of the principal amount of such convertible securities, (ii) preferred securities issued by business trusts formed by the Company or any Wholly-Owned Subsidiary, guaranteed by such entity and related to guarantees and intercompany notes, and (iii) Indebtedness of Sub-Prime Auto Loan Companies. "Default" means any event or circumstance 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. "Defaulted Bank" means a Bank that has either (a) refused (which refusal has not been retracted) to make available any Committed Loan when required hereunder or (b) a Bank that has notified the Agent and/or the Company that it does not intend to comply with its obligations under Section 2.01 of this Agreement. "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. "Direct Competitor" means a Person substantially engaged in a business which directly competes with the primary business of a Green Tree Entity. "Disposition" means the sale, assignment, leasing, 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. "Documentation Agent" has the meaning specified in the introduction to this Agreement. "Dollars", "dollars" and "$" each mean lawful money of the United States. "Eligible Assignee" means any bank, pension fund, mutual fund, investment fund or other financial institution or a Subsidiary thereof (other than an insurance company or any Affiliate of an insurance company except those to which the Company consents). "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 Borrower. -11- "Environmental Laws" means all federal, state or local laws, 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. "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. "Eurodollar Reserve Percentage" has the meaning specified in the definition of "Offshore Rate". "Event of Default" means any of the events or circumstances specified in Section 8.01. "Exchange Act" means the Securities Exchange Act of 1934 and the regulations promulgated thereunder. "FDIC" means the Federal Deposit Insurance Corporation, and any Governmental Authority succeeding to any of its principal functions. "Federal Funds Rate" means, for any day, the rate set forth in the weekly statistical release designated as H.15(519), or any successor publication, published by the Federal Reserve Bank of New York (including any such successor, "H.15(519)") on the preceding Business Day opposite the caption "Federal Funds (Effective)"; or, if for any relevant day such rate is not so published on any such preceding Business Day, the rate for such day will be the arithmetic mean as determined by the Agent of the rates for the -12- last transaction in overnight Federal funds arranged prior to 9:00 a.m. (New York City time) on that day by each of three leading brokers of Federal funds transactions in New York City selected by the Agent. "Fee Letter" has the meaning specified in subsection 2.13(a). "Fiscal Quarter" means any fiscal quarter of a Fiscal Year. "Fiscal Year" means any period of twelve consecutive calendar months ending on December 31. "Fitch" means Fitch Investors Services, 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. "Fixed Interest Charges" means, for any Calculation Period, (a) interest paid or, without duplication, accrued but unpaid on the Loans with respect to such Calculation Period, plus (b) interest paid or, without duplication, accrued but unpaid on any Indebtedness set forth in clause (a) or (b) of the definition thereof during such Calculation Period, minus (c) interest paid or, without duplication, accrued but unpaid on any Indebtedness which has been eliminated from the balance sheet liabilities of the Company on a consolidated basis in accordance with GAAP, minus (d) interest paid or, without duplication, accrued but unpaid on any Indebtedness arising under financing transactions in which a Green Tree Entity or a Sub-Prime Auto Loan Company sells or transfers as collateral loans, leases, receivables or installment contracts to a third party while simultaneously contracting to repurchase or reacquire substantially the same assets. "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, without limitation, 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 -13- foregoing, including any board of insurance, insurance department or insurance commissioner. "Green Tree" means Green Tree Financial Corporation, a Delaware corporation. "Green Tree Entities" means, collectively, Green Tree and its consolidated Subsidiaries and "Green Tree Entity" means any one of them individually. "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 within the meaning of any other applicable federal, state or local law, regulation, ordinance or requirement (including consent decrees and administrative orders) relating or imposing liability or standards of conduct concerning any hazardous, toxic or dangerous waste, substance or material, all as amended or hereafter amended. "Income Taxes" means any Taxes based upon net income. "Indebtedness" shall mean, 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 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 trade payables entered into in the ordinary course of business on ordinary terms), 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 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; provided, however, that the term "Indebtedness" shall exclude (i) replevin bonds, surety bonds and other similar bonds (including, without limitation, bonds issued in connection with litigation and repossession activities) issued by an Insurance Subsidiary, a Green Tree Entity or a Sub-Prime Auto Loan Company in the ordinary course of business and (ii) the obligations of any Person under letters of credit (whether or not drawn), bankers' acceptances and swap contracts issued or entered into in connection with any Asset Backed Security. "Indemnified Liabilities" has the meaning specified in Section 10.05. "Indemnified Person" has the meaning specified in Section 10.05. "Independent Auditor" has the meaning specified in subsection 6.01(a). -14- "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 engaged in the business of underwriting insurance products. "Interest Coverage Ratio" means, for any Calculation Period, the ratio of (a) the sum of (i) Amounts Available for Dividends directly to the Company from its Insurance Subsidiaries as of the end of such Calculation Period, plus (ii) interest paid to the Company with respect to the Surplus Debentures, plus (iii) Net Cash Available from the Non-Insurance Subsidiaries, plus (iv) the amount of Taxes paid or, without duplication, accrued but unpaid to the Company under the Tax Sharing Agreement, plus (v) management and other fees received by the Company under servicing agreements or otherwise, plus (vi) the Company's Investment Income received in cash, minus (vii) the amount of Taxes paid or, without duplication, accrued but unpaid by the Company, minus (viii) cash operating expenses of the Company, minus (ix) capital expenditures of the Company, minus (x) interest payments made or, without duplication, interest accrued but unpaid on intercompany loans by the Company and its Subsidiaries, minus (xi) dividends paid, in cash, to Bankers National Life Insurance Company, a Texas stock insurance corporation, by the Company on the Conseco Series E Preferred Stock to the extent permitted by this Agreement, minus (xii) payments made by the Company or any Subsidiary under guaranties in respect of Asset Backed Securities, all calculated (except as otherwise indicated) for such Calculation Period, to (b) Fixed Interest Charges for such Calculation Period. "Interest Only Security" means any interest, including servicing fees, retained by a Green Tree Entity or Sub-Prime Auto Loan Company relating to the sale or securitization of loans, leases, receivables or installment contracts, which constitutes either an interest only security or a servicing right asset in accordance with GAAP. "Interest Payment Date" means (a) as to any Loan other than a Base Rate Committed Loan or a Swing Line Loan, the last day of each Interest Period applicable to such Loan, (b) as to any Base Rate Committed Loan, the last Business Day of each calendar quarter; provided, however, that (i) if any Interest Period for an Offshore Rate Committed Loan exceeds three months, the date that falls three months 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 clauses (a) and (b) of the definition of "Interest Period"), and (ii) as to any Bid Loan, such intervening dates prior to the maturity thereof as may be specified by the Company and agreed to by the applicable Bid Loan Lender in the applicable Competitive Bid shall also be Interest Payment Dates and (c) as to any Swing Line Loan, the maturity date thereof. -15- "Interest Period" means (a) as to any Offshore Rate Loan, the period commencing on the Borrowing Date of such Loan or (in the case of any Offshore Rate Committed Loan) on the Conversion/Continuation Date on which the Loan is converted into or continued as an Offshore Rate Committed Loan, and ending on the date one, two, three or six months (or, if consented to by each Bank in the case of any Offshore Rate Committed Loan, nine or twelve months) thereafter as selected by the Company in its Notice of Borrowing or Notice of Conversion/Continuation or Competitive Bid Request, as the case may be, and (b) as to any Absolute Rate Bid Loan, a period of not less than 7 days and not more than 180 days as selected by the Company in the applicable Competitive Bid Request; 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; (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 Loan shall extend beyond the Termination Date. "Investment" means any investment in any Person, whether by means of share purchase, capital contribution, loan, time deposit, or otherwise. "Investment Income" means, (a) as to any Person which is an Insurance Subsidiary as of any date, the amount reported on line 4, page 4, column 1 of the Annual Statement, or an amount determined in a consistent manner for any date other than one as of which an Annual Statement is prepared but exclusive of earnings of any Insurance Subsidiaries of such Person and, (b) as to any Person which is not an Insurance Subsidiary, the amount of earnings of such Person on Investments, net of expenses actually incurred in connection with such Investments and taking into account realized gains and losses on such Investments. "Invitation for Competitive Bids" means a solicitation for Competitive Bids, substantially in the form of Exhibit G. "IRS" means the Internal Revenue Service or any Governmental Authority succeeding to any of its principal functions under the Code. "LALI" means Lincoln American Life Insurance Company, a Tennessee insurance corporation. "Lending Office" means, as to any Bank, the office or offices of such Bank specified as its "Lending Office" or "Domestic Lending -16- Office" or "Offshore Lending Office", as the case may be, on Schedule 10.02, or such other office or offices as such Bank may from time to time notify the Company and the Agent. "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. "Litigation" means any litigation (including, without limitation, any governmental proceeding or arbitration proceeding), tax audit or investigative proceeding, claim, lawsuit, and/or investigation pending or threatened against or involving the Company or any of its Subsidiaries or any of its or their businesses or operations. "Loan" means an extension of credit by a Bank to the Company under Article II, and may be a Committed Loan, a Bid Loan or a Swing Line Loan. "Loan Documents" means this Agreement, all Notes, the Fee Letter and all other documents executed and delivered by the Company to the Agent or any Bank in connection herewith. "Margin Stock" means "margin stock" as such term is defined in Regulation T, U or X of the FRB. "Material Adverse Effect" means (a) a material adverse change in, or a material adverse effect upon, the business, properties, 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 the Company to perform under any Loan Document; or (c) a material adverse effect upon the legality, validity, binding effect or enforceability against the Company of any Loan Document. "Material Insurance Subsidiary" means an Insurance Subsidiary having Capital and Surplus of $50,000,000 or more. "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 -17- 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 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. "Net Cash Available" means, without duplication, for any direct Non-Insurance Subsidiary of the Company for any Calculation Period (a) Net Income of such Subsidiary during such Calculation Period plus (b) any non-cash expenses of such Subsidiary deducted in determining Net Income for such Calculation Period less (c) any noncash income of such Subsidiary included in determining such Net Income for such Calculation Period. "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 Disposition by any Person, the aggregate amount of cash and readily marketable Cash Equivalents received by such Person in respect of such Disposition minus the sum of (a) reasonable costs and expenses (including costs of discontinuance (including, without limitation, any reasonable severance payments) and Taxes other than Income Taxes) incurred in connection with such Disposition and required to be paid in cash, (b) the estimated Income Tax to be paid by such Person in connection with such Disposition and (c) for an Insurance Subsidiary, the Statutory Carrying Value of the assets which were the subject of such Disposition plus any amounts which the Department will not permit such Insurance Subsidiary to pay out as a result of such Disposition. Upon calculation of Net Proceeds, the Borrower shall deliver to the Agent an accounting of the items deducted from the cash or Cash Equivalents related to such Disposition pursuant to clauses (a), (b) and (c). 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 readily marketable 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 that were not theretofore deducted in computing Net Proceeds. "NGLIC" means National Group Life Insurance Company. "Non-Finance Subsidiary" means any Subsidiary which is not a Sub-Prime Auto Loan Company or a Green Tree Entity. -18- "Non-Insurance Subsidiary" means any Subsidiary which is not an Insurance Subsidiary. "Notes" means the Committed Loan Notes and the Swing Line Note. "Notice of Borrowing" means a notice in substantially the form of Exhibit B. "Notice of Conversion/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 any Bank, the Agent, 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. "Offshore Rate" means, for any Interest Period, with respect to Offshore Rate Loans comprising part of the same Borrowing, the rate of interest per annum (rounded upward to the next 1/100th of 1%, if not a multiple of 1/16th of 1%) determined by the Agent as follows: Offshore Rate = IBOR --------------- 1.00 - Eurodollar Reserve Percentage Where, "Eurodollar Reserve Percentage" means for any day for any Interest Period the maximum reserve percentage (expressed as a decimal, rounded upward to the next 1/100th of 1%, if not a multiple of 1/16th of 1%) 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"); and "IBOR" means the rate of interest per annum determined by the Agent as the rate at which dollar deposits in the approximate amount of, in the case of Offshore Rate Bid Loans, the Offshore Rate Bid Loans to be borrowed in such Bid Loan Borrowing, and, in the case of Offshore Rate Committed Loans, the Offshore Rate Committed Loan to be made by the Agent, would be offered by BofA's Grand Cayman Branch, Grand Cayman B.W.I. (or such other office as may be designated for such purpose by BofA) to prime international banks in the offshore dollar market at their request at approximately 10:00 a.m. (Chicago time) two Business Days prior to the commencement of such Interest Period. The Offshore Rate shall be adjusted automatically as to all Offshore Rate Loans then outstanding as of the effective date of any change in the Eurodollar Reserve Percentage. -19- "Offshore Rate Auction" means a solicitation of Competitive Bids setting forth an Offshore Rate Bid Margin pursuant to Section 2.08. "Offshore Rate Bid Loan" means any Bid Loan that bears interest at a rate based upon the Offshore Rate. "Offshore Rate Bid Margin" has the meaning specified in subsection 2.08(c)(ii)(C). "Offshore Rate Committed Loan" means any Committed Loan that bears interest based on the Offshore Rate. "Offshore Rate Loan" means any Offshore Rate Bid Loan or any Offshore Rate Committed Loan. "Organization Documents" means, for 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. "Originator" has the meaning specified in subsection 10.08(d). "Other Taxes" means any present or future stamp, court or documentary taxes or any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or from the execution, delivery, performance, enforcement or registration of, or otherwise with respect to, this Agreement or any other Loan Documents. "Participant" has the meaning specified in subsection 10.08(d). "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 (5) plan years. "Permitted Liens" has the meaning specified in Section 7.02. "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 -20- 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, (e) transactions in which a federal home loan mortgage bank (a "FHLMB") makes loans to the Company, which are sufficiently secured by appropriate assets of the Company consisting of government agency mortgage-backed securities, in accordance with the rules, regulations and guidelines of such FHLMB for its loan programs, (f) financing transactions in which a Green Tree Entity or a Sub-Prime Auto Loan Company sells or transfers as collateral loans, leases, receivables or installment contracts to a third party while simultaneously contracting to repurchase or reacquire substantially the same assets and (g) the issuance of any Asset Backed Securities by any Green Tree Entity or any Sub-Prime Auto Loan Company. "Person" means an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture or Governmental Authority. "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. "PLIC" means Pioneer Life Insurance Company. "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 (other than Swing Line Loans and Bid Loans) divided by the aggregate principal amount of the outstanding Loans (other than Swing Line Loans and Bid Loans) of all the Banks. "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 -21- or financier thereof has taken or retained a Lien therein, provided that any such Lien attaches to such assets concurrently with or within one hundred twenty (120) days after the purchase thereof by 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. "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 a policy or policies of insurance or under a reinsurance agreement assumed by it. 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. "Replacement Bank" has the meaning specified in Section 3.07. "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 (other than Defaulted Banks) then holding at least 50.1% of the aggregate amount of the Commitments (calculated excluding the Commitments of Defaulted Banks), 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 and participation interests in Swing Line Loans under Section 2.06(d) (calculated excluding the Loans of Defaulted Banks). "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, chief operating officer, chief financial officer or treasurer of the Company, or any other officer having substantially the same authority and responsibility including, with respect to Section 6.01, any vice-president with responsibility for or knowledge of financial matters of the Company. "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. -22- "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 Person for the preparation of annual statements and other financial reports by insurance companies of the same type as such Person, which are applicable to the circumstances as of the date of determination. "SEC" means the Securities and Exchange Commission, or any Governmental Authority succeeding to any of its principal functions. "Significant Subsidiary" means any Subsidiary of the Company with, after the elimination of intercompany accounts, (a) assets which constituted at least 10% of the Company's consolidated total assets, or (b) revenues which constituted at least 10% of the Company's consolidated total revenues, or (c) net earnings which constituted at least 10% of the Company's consolidated total net earnings, all as determined as of the date of the Company's most recently prepared quarterly financial statements for the 12-month period then ended. "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 Carrying Value" means, as to an asset of any Insurance Subsidiary, the value of such asset to be reflected in line 25, page 2, column 1 of the Annual Statement, or an amount determined in a consistent manner for any date other than one as of which an Annual Statement is prepared. "Statutory Net Income" means, for any period, the net income of an Insurance Subsidiary determined in accordance with SAP. "Sub-Prime Auto Loan Company" means any Person (a) engaged primarily in the business of making, purchasing and/or selling sub-prime automobile loans or (b) which is a holding company engaged primarily in owning Persons described in clause (a) of this definition. "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 capital interest or partnership interest, 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, with respect to any Investment made by the Company in any Person in the ordinary course of business -23- solely for investment purposes, such Person shall not be considered a Subsidiary of the Company for the purposes of this Agreement if such Person is not integral to the business or operations of the Company or any Significant Subsidiary and, by way of illustration only, Schedule 1.01 sets forth a non-exclusive list of such Persons who are not Subsidiaries of the Company because of the operation of this clause. "Surety Instruments" means all letters of credit (including standby and commercial), banker's acceptances, bank guaranties, shipside bonds, surety bonds and similar instruments. "Surplus Debentures" means, as to any Insurance Subsidiary, debt securities of such Insurance 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, 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). "Swing Line Commitment" means at any time, the obligation of the Swing Line Bank to make Swing Line Loans pursuant to Section 2.05. "Swing Line Bank" means BofA, in its capacity as provider of the Swing Line Loans. "Swing Line Loan" means a Loan made by the Swing Line Bank pursuant to Section 2.05. "Swing Line Note" has the meaning specified in subsection 2.02(b). "Swing Line Rate" means, for any day, a rate per annum equal to the Federal Funds Rate for such day plus the Applicable Offshore Rate Margin. -24- "Syndication Agents" has the meaning specified in the introduction to this Agreement. "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 on or measured by its net income or receipts with respect to payments received hereunder by the jurisdiction (or any political subdivision thereof) under the laws of which such Bank or the Agent, as the case may be, is organized or maintains a lending office. "Tax Sharing Agreement" means the tax sharing agreement dated February 29, 1989, as amended, among the Company and certain of its Subsidiaries. "Termination Date" means September 30, 2003 or such earlier date on which the Commitments are terminated pursuant to Section 8.02. "364-Day Credit Agreement" has the meaning specified in Section 10.08. "Total Capitalization" means, without duplication, (a) principal and accrued and unpaid interest on all Indebtedness for borrowed money of the Company or any Subsidiary for which the Company or any such Subsidiary, respectively, is directly liable and which is neither a Contingent Obligation nor Indebtedness arising out of a Permitted Transaction plus (b) the Total Shareholders' Equity of the Company plus (c) the minority interests in Subsidiaries recorded on the balance sheet of the Company, determined in accordance with GAAP (but only to the extent such interests are not included in the calculation of amounts specified in clause (a) or (b) immediately above), plus (d) the current market value of debt securities that are convertible into shares of the Company's common stock and have a current market value equal to at least 125% of the principal amount of such convertible securities; provided that (i) the Company or a Wholly-Owned Subsidiary of the Company owns 100% of the Voting Shares of any such Subsidiary or (ii) in the event that less than 100% of the Voting Shares of any such Subsidiary are owned by the Company or one of its Wholly-Owned Subsidiaries, the Company or such Wholly-Owned Subsidiary has guaranteed the Indebtedness of such Subsidiary; provided, further, that "Total Capitalization" shall not include principal and accrued and unpaid interest on (i) Indebtedness of Sub-Prime Auto Loan Companies or (ii) the obligations of any Person in connection with its guaranty of Asset Backed Securities. "Total Shareholders' Equity" means the sum of (a) total shareholders' equity of the Company as determined in accordance with GAAP (calculated excluding unrealized gains (losses) of securities as determined in accordance with FAS 115) and (b) the redemption value or liquidation preference (or if less, the purchase price), as applicable, of the Trust Preferred Securities and the Unit Securities. "Trust Preferred Securities" means mandatorily redeemable preferred securities (a) issued by one or more Delaware business trusts formed by the Company and (b) guaranteed by the Company, including specifically, "MIPS," "QuIPS," "TOPrS" and -25- "TruPS", provided that the aggregate face amount of all Trust Preferred Securities does not exceed the greater of $1,903,745,000 or 15% of Total Capitalization at any time. "Type" means a denomination of a Loan as a Base Rate Committed Loan, an Offshore Rate Committed Loan, an Offshore Rate Bid Loan, an Absolute Rate Bid Loan or a Swing Line Loan. "Unfunded Pension Liability" means the excess of a Plan's benefit liabilities under Section 4001(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. "Unit Securities" means investment units comprised of (a) mandatorily redeemable preferred securities (i) issued by one or more Delaware business trusts formed by the Company and (ii) guaranteed by the Company, including specifically, "MIPS," "QuIPS," "TOPrS" and "TruPS," and (b) equity forward contracts for the purchase of common stock of the Company (which forward contracts shall have a settlement date that is earlier than the stated maturity of such preferred securities) collateralized by such preferred securities or government securities in lieu thereof (including, without limitation, principal and interest strips thereof). "Voting Shares" means, with respect to any Person, capital stock issued by such Person, the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of directors (or persons performing similar functions) of such Person, even though the right so to vote has been suspended by the happening of any such contingency. "Wholly-Owned Subsidiary" means any corporation in which (other than directors' 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. "WLI" means Wabash Life Insurance Company, a Kentucky insurance corporation. 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. -26- (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, (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, and (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. (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. 1.03 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, consistently applied. (b) References herein to "fiscal year" and "fiscal quarter" refer to such fiscal periods of the Company. (c) References hereto in 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 referenced herein are changed or renumbered from the columns, lines and sections applicable to the 1997 Annual Statement, all such references shall be deemed references to such column, line or section as so renumbered or changed. -27- ARTICLE II THE CREDITS 2.01 Amounts and Terms of Commitments. Each Bank severally agrees, on the terms and conditions set forth herein, to make loans to the Company from time to time on any Business Day during the period from the Closing Date to the Termination Date, in an aggregate amount not to exceed at any time outstanding the amount set forth on Schedule 2.01 (such amount, as the same may be reduced under Section 2.09 or as a result of one or more assignments under Section 10.08, the Bank's "Commitment"); provided, however, that, after giving effect to any Committed Borrowing, the aggregate principal amount of all outstanding Loans, including Swing Line Loans and Bid Loans, shall not at any time exceed the combined Commitments. Within the limits of each Bank's Commitment, and subject to the other terms and conditions hereof, the Company may borrow under this Section 2.01, prepay under Section 2.10 and reborrow under this Section 2.01. 2.02 Notes; Loan Accounts. (a) The Loans 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 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 Committed Loans made by each Bank may be evidenced by one or more notes in substantially the form of Exhibit E hereto ("Committed Loan Notes") and the Swing Line Loans made by the Swing Line Bank may be evidenced by a note in substantially the form of Exhibit D hereto (the "Swing Line Note"). Each Bank shall endorse on the schedules annexed to its Note(s) the date, amount and maturity of each Loan 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 Committed Loan Note(s) or Swing Line Note, as applicable, 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 Committed Loan Note or Swing Line Note to such Bank. 2.03 Procedure for Committed Borrowing. (a) Each Committed Borrowing shall be made upon the Company's irrevocable written notice (or telephonic notice followed promptly by facsimile transmission) delivered to the Agent in the form of a Notice of Borrowing (which notice must be received by the Agent prior to (i) 10:00 a.m. (Chicago time) three Business Days prior to the requested Borrowing Date, in the case of Offshore Rate Committed Loans, and (ii) 9:00 a.m. (Chicago time) on the requested Borrowing Date, in the case of Base Rate Committed Loans), signed by a Responsible Officer and specifying: (A) the amount of the Committed Borrowing, which shall be (i) in an aggregate minimum amount of $5,000,000 or any multiple of $1,000,000 in -28- excess thereof for Base Rate Committed Loans and (ii) in an aggregate amount of $10,000,000 or in multiples of $1,000,000 in excess thereof for Offshore Rate Committed Loans; (B) the requested Borrowing Date, which shall be a Business Day; (C) the Type of Loans comprising the Committed Borrowing; and (D) the duration of the Interest Period applicable to such Committed Loans included in such notice. If the Notice of Committed Borrowing fails to specify the duration of the Interest Period for any Committed Borrowing comprised of Offshore Rate Committed Loans, such Interest Period shall be three months. (b) The Agent will promptly notify each Bank of its receipt of any Notice of Borrowing and of the amount of such Bank's Pro Rata Share of that Committed Borrowing. (c) Each Bank will make the amount of its Pro Rata Share of each Committed Borrowing available to the Agent for the account of the Company at the Agent's Payment Office by 1:00 p.m. (Chicago time) on the Borrowing Date requested by the Company in funds immediately available to the Agent. The proceeds of all such Committed Loans will then be made available to the Company by the Agent at such office by wire transfer of such proceeds to such account as the Company may designate in writing in like funds as received by the Agent. (d) After giving effect to any Committed Borrowing, unless the Agent shall otherwise consent, there may not be more than twenty (20) different Interest Periods in effect in respect of all Committed Loans and Bid Loans and all "Committed Loans" and "Bid Loans" (as such terms are defined in the 364-Day Credit Agreement) together then outstanding. 2.04 Conversion and Continuation Elections for Committed Borrowings. (a) The Company may, upon irrevocable written notice to the Agent in accordance with subsection 2.04(b): (i) elect, as of any Business Day, in the case of Base Rate Committed Loans, or as of the last day of the applicable Interest Period, in the case of Offshore Rate Committed Loans, to convert any such Committed Loans (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) into Committed Loans of any other Type; or (ii) elect, as of the last day of the applicable Interest Period, to continue any Committed Loans 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); provided, that if at any time the aggregate amount of Offshore Rate Committed Loans in respect of any Committed Borrowing is reduced, by payment, prepayment, or conversion of part thereof -29- to be less than $5,000,000, such Offshore Rate Committed Loans may, upon written notice by the Company delivered to the Agent and the Swing Line Bank concurrent with its notice of prepayment and compliance with Section 2.06, be converted into Swing Line Loans, or, in the absence of such a conversion, shall automatically convert into Base Rate Committed Loans, and on and after such date the right of the Company to continue such Committed Loans as, and convert such Committed Loans into, Offshore Rate Committed Loans shall terminate. (b) The Company shall deliver a written Notice of Conversion/Continuation (which notice must be received by the Agent not later than (i) 12:00 noon (Chicago time) three Business Days in advance of the Conversion/Continuation Date, if the Committed Loans are to be converted into or continued as Offshore Rate Committed Loans and (ii) one Business Day in advance of the Conversion/Continuation Date, if the Loans are to be converted into Base Rate Committed Loans) signed by a Responsible Officer and specifying: (A) the proposed Conversion/Continuation Date; (B) the aggregate amount of Committed Loans to be converted or continued; (C) the Type of Committed Loans resulting from the proposed conversion or continuation; and (D) in the case of conversions into Offshore Rate Committed Loans, the duration of the requested Interest Period. (c) Subject to the following sentence, if by 12:00 noon (Chicago time) on the third Business Day prior to the expiration of any Interest Period applicable to Offshore Rate Committed Loans, the Company has failed to select a new Interest Period to be applicable to such Offshore Rate Committed Loans, or if any Default or Event of Default then exists, the Company shall be deemed to have elected to convert such Offshore Rate Committed Loans into Base Rate Committed Loans effective as of the expiration date of such Interest Period. (d) The Agent will promptly notify each Bank of its receipt of a Notice of Conversion/Continuation, or, if no timely notice is provided by the Company, the Agent will promptly notify each Bank of the details of any automatic conversion. All conversions and continuations shall be made ratably according to the respective outstanding principal amounts of the Committed Loans with respect to which the notice was given by each Bank. (e) Unless the Required Banks otherwise consent, during the existence of a Default or Event of Default, the Company may not elect to have a Committed Loan converted into or continued as an Offshore Rate Committed Loan. (f) After giving effect to any conversion or continuation of Committed Loans, unless the Agent shall otherwise consent, there may not be more than twenty (20) different Interest Periods in effect in respect of all Committed Loans and Bid Loans and all "Committed Loans" and "Bid Loans" (as such terms are defined in the 364-Day Credit Agreement) together then outstanding. -30- 2.05 The Swing Line Loans. Subject to the terms and conditions hereof, the Swing Line Bank agrees to make Swing Line Loans to the Company from time to time prior to the Termination Date in an aggregate principal amount at any one time outstanding not to exceed $100,000,000; provided that, after giving effect to any such Swing Line Loan, the aggregate principal amount of all outstanding Loans at such time would not exceed the combined Commitments at such time. Prior to the Termination Date, the Company may use the Swing Line Commitment by borrowing, prepaying the Swing Line Loans in whole or in part, and reborrowing, all in accordance with the terms and conditions hereof. Each Swing Line Loan shall be due and payable with accrued interest upon the earlier of the Termination Date and the date seven Business Days from the date of advance thereof. All Swing Line Loans shall bear interest at the Swing Line Rate and shall not be entitled to be converted into Loans that bear interest at any other rate. 2.06 Procedure for Swing Line Loans. (a) The Company may borrow under the Swing Line Commitment on any Business Day until the Termination Date; provided that the Company shall give the Swing Line Bank irrevocable written notice (or telephonic notice followed promptly by facsimile transmission) signed by a Responsible Officer (which notice must be received by the Swing Line Bank prior to 11:00 a.m. (Chicago time)) with a copy to the Agent specifying the amount of the requested Swing Line Loan, which shall be in a minimum amount of $1,000,000 or a whole multiple of $500,000 in excess thereof. The proceeds of the Swing Line Loan will be made available by the Swing Line Bank to the Company in immediately available funds at the office of the Swing Line Bank by 2:00 p.m. (Chicago time) on the date of such notice. The Company may at any time and from time to time, prepay any Swing Line Loan (together with accrued interest thereon) in whole or in part, without premium or penalty, by notifying the Swing Line Bank prior to 11:00 a.m. (Chicago time) on any Business Day of the date and amount of prepayment with a copy to the Agent. If any such notice is given, the amount specified in such notice shall be due and payable on the date specified therein. Partial prepayments shall be in an aggregate principal amount of $1,000,000 or a whole multiple of $500,000 in excess thereof. (b) If any Swing Line Loan shall remain outstanding at 9:00 a.m. (Chicago time) on the seventh Business Day following the date of such Swing Line Loan and if by such time on such seventh Business Day the Agent shall have received neither (i) a Notice of Borrowing delivered by the Company pursuant to Section 2.03 requesting that Loans be made pursuant to Section 2.01 on the immediately succeeding Business Day in an amount at least equal to the principal amount of such Swing Line Loan nor (ii) any other notice satisfactory to the Agent indicating the Company's intent to repay such Swing Line Loan on or before the immediately succeeding Business Day with funds obtained from other sources, then on such seventh Business Day, the Swing Line Bank shall (and on any Business Day the Swing Line Bank in its sole discretion may), on behalf of the Company (which hereby irrevocably directs the Swing Line Bank to act on its behalf) request the Agent to notify each Bank to make a Base Rate Committed Loan in an amount equal to such Bank's Pro Rata Share of (A) in the case of such a request which is required to be made, the amount of the relevant Swing Line Loan and (B) in the case of such a discretionary request, the aggregate principal amount of the Swing Line Loans outstanding on the date such notice is given. Unless any of the events described in subsection 8.01(f) or (g) shall have occurred with respect to the Company (in which event the procedures of paragraph (d) of this Section 2.06 shall apply) each Bank shall make the proceeds -31- of its Loan available to the Agent for the account of the Swing Line Bank at the Agent's Payment Office in funds immediately available prior to 11:00 a.m. (Chicago time) on the Business Day next succeeding the date such notice is given. The proceeds of such Loans shall be immediately applied to repay the outstanding Swing Line Loans. Effective on the day such Loans are made, the portion of the Swing Line Loans so paid shall no longer be outstanding as Swing Line Loans and shall no longer be due under the Swing Line Note. The Company shall pay to the Swing Line Bank, promptly following the Swing Line Bank's demand, the amount of its outstanding Swing Line Loans to the extent amounts received from the Banks are not sufficient to repay in full such outstanding Swing Line Loans. (c) Notwithstanding anything herein to the contrary, the Swing Line Bank (i) shall not be obligated to make any Swing Line Loan if the conditions set forth in Article IV (treating Swing Line Loans as Borrowings) have not been satisfied and (ii) shall not make any requested Swing Line Loan if, prior to 1:00 p.m. (Chicago time) on the date of such requested Swing Line Loan, it has received a written notice from the Agent or any Bank directing it not to make further Swing Line Loans because one or more of the conditions specified in Article IV (treating Swing Line Loans as Borrowings) are not then satisfied. (d) If prior to the making of a Loan required to be made by subsection 2.06(b) an Event of Default described in subsection 8.01(f) or 8.01(g) shall have occurred and be continuing with respect to the Company, each Bank will, on the date such Loan was to have been made pursuant to the notice described in subsection 2.06(b), purchase an undivided participating interest in the outstanding Swing Line Loans in an amount equal to its Pro Rata Share of the aggregate principal amount of Swing Line Loans then outstanding. Each Bank will immediately transfer to the Agent for the benefit of the Swing Line Bank, in immediately available funds, the amount of its participation. (e) Whenever, at any time after a Bank has purchased a participating interest in a Swing Line Loan, the Swing Line Bank receives any payment on account thereof, the Swing Line Bank will distribute to the Agent for delivery to each Bank its participating interest in such amount (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Bank's participating interest was outstanding and funded); provided, however, that in the event that such payment received by the Swing Line Bank is required to be returned, such Bank will return to the Agent for delivery to the Swing Line Bank any portion thereof previously distributed by the Swing Line Bank to it. (f) Each Bank's obligation to make the Loans referred to in subsection 2.06(b) and to purchase participating interests pursuant to subsection 2.06(d) shall be absolute and unconditional and shall not be affected by any circumstance including, without limitation, (i) any set-off, counterclaim, recoupment, defense or other right which such Bank or the Company may have against the Swing Line Bank, the Company or any other Person for any reason whatsoever, (ii) the occurrence or continuance of a Default or an Event of Default, (iii) any adverse change in the condition (financial or otherwise) of the Company, (iv) any breach of this Agreement or any other Loan Document by the Company, any Subsidiary or any other Bank except for a breach by the Swing Line Bank of Section 2.06(c), or (v) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. -32- 2.07 Bid Borrowings. In addition to Committed Borrowings pursuant to Section 2.01, each Bank severally agrees that the Company may, as set forth in Section 2.08, from time to time prior to the Termination Date request the Banks to submit offers to make Bid Loans to the Company; provided, however, that the Banks may, but shall have no obligation to, submit such offers and the Company may, but shall have no obligation to, accept any such offers; and provided, further, that at no time shall (a) the outstanding aggregate principal amount of all Bid Loans made by all Banks, plus the outstanding aggregate principal amount of all Committed Loans made by all Banks, plus the outstanding aggregate principal amount of all Swing Line Loans made by the Swing Line Bank exceed the combined Commitments; or (b) the number of Interest Periods for Bid Loans, Committed Loans, "Bid Loans" (as defined in the 364-Day Credit Agreement) and "Committed Loans" (as defined in the 364-Day Credit Agreement) then outstanding exceeds twenty (20). 2.08 Procedure for Bid Borrowings. (a) When the Company wishes to request the Banks to submit offers to make Bid Loans hereunder, it shall transmit to the Agent by telephone call followed promptly by facsimile transmission a notice in substantially the form of Exhibit H (a "Competitive Bid Request") so as to be received no later than 11:00 a.m. (Chicago time) (x) four Business Days prior to the date of a proposed Bid Borrowing in the case of an Offshore Rate Auction, or (y) two Business Days prior to the date of a proposed Bid Borrowing in the case of an Absolute Rate Auction, specifying: (i) the date of such Bid Borrowing, which shall be a Business Day; (ii) the aggregate amount of such Bid Borrowing, which shall be a minimum amount of $10,000,000 or in multiples of $1,000,000 in excess thereof; (iii) whether the Competitive Bids requested are to be for Offshore Rate Bid Loans or Absolute Rate Bid Loans or both; and (iv) the duration of the Interest Period applicable thereto, subject to the provisions of the definition of "Interest Period" herein. Subject to subsection 2.08(c), the Company may not request Competitive Bids for more than four Interest Periods in a single Competitive Bid Request and may not request Competitive Bids more than once in any period of five Business Days. (b) Upon receipt of a Competitive Bid Request, the Agent will promptly send to the Banks by facsimile transmission an Invitation for Competitive Bids, which shall constitute an invitation by the Company to each Bank to submit Competitive Bids offering to make the Bid Loans to which such Competitive Bid Request relates in accordance with this Section 2.08. (c) (i) Each Bank may at its discretion submit a Competitive Bid containing an offer or offers to make Bid Loans in response to any Invitation for Competitive Bids. Each Competitive Bid must comply with the requirements of this subsection 2.08(c) and must be submitted to the Agent by facsimile transmission at the Agent's office for notices set forth on the signature pages hereto not later than (1) 8:30 a.m. (Chicago time) three Business Days prior to the proposed date of Borrowing, in the case of an Offshore Rate Auction or (2) 8:30 a.m. (Chicago time) on the proposed date of Borrowing, in the case of an Absolute Rate -33- Auction; provided that Competitive Bids submitted by the Agent (or any Affiliate of the Agent) in the capacity of a Bank may be submitted, and may only be submitted, if the Agent or such Affiliate notifies the Company of the terms of the offer or offers contained therein not later than (A) 8:15 a.m. (Chicago time) three Business Days prior to the proposed date of Borrowing, in the case of an Offshore Rate Auction or (B) 8:15 a.m. (Chicago time) on the proposed date of Borrowing, in the case of an Absolute Rate Auction. (ii) Each Competitive Bid shall be in substantially the form of Exhibit I, specifying therein: (A) the proposed date of Borrowing; (B) the principal amount of each Bid Loan for which such Competitive Bid is being made, which principal amount (x) may be equal to, greater than or less than the Commitment of the quoting Bank, (y) must be $10,000,000 or in multiples of $1,000,000 in excess thereof, and (z) may not exceed the principal amount of Bid Loans for which Competitive Bids were requested; (C) in case the Company elects an Offshore Rate Auction, the margin above or below Offshore Rate (the "Offshore Rate Bid Margin") offered for each such Bid Loan, expressed in multiples of 1/1000th of one basis point to be added to or subtracted from the applicable Offshore Rate and the Interest Period applicable thereto; (D) in case the Company elects an Absolute Rate Auction, the rate of interest per annum expressed in multiples of 1/1000th of one basis point (the "Absolute Rate") offered for each such Bid Loan; and (E) the identity of the quoting Bank. A Competitive Bid may contain up to three separate offers by the quoting Bank with respect to each Interest Period specified in the related Invitation for Competitive Bids. (iii) Any Competitive Bid shall be disregarded if it: (A) is not substantially in conformity with Exhibit I or does not specify all of the information required by subsection (c)(ii) of this Section; (B) contains qualifying, conditional or similar language; (C) proposes terms other than or in addition to those set forth in the applicable Invitation for Competitive Bids; or (D) arrives after the time set forth in subsection (c)(i) of this Section. (d) Promptly on receipt and not later than 9:00 a.m. (Chicago time) three Business Days prior to the proposed date of Borrowing in the case of an Offshore Rate Auction, or 9:00 a.m. (Chicago time) on the proposed date of Borrowing, in the case of an Absolute Rate -34- Auction, the Agent will notify the Company of the terms (i) of any Competitive Bid submitted by a Bank that is in accordance with subsection 2.08(c), and (ii) of any Competitive Bid that amends, modifies or is otherwise inconsistent with a previous Competitive Bid submitted by such Bank with respect to the same Competitive Bid Request. Any such subsequent Competitive Bid shall be disregarded by the Agent unless such subsequent Competitive Bid is submitted solely to correct a manifest error in such former Competitive Bid and only if received within the times set forth in subsection 2.08(c). The Agent's notice to the Company shall specify (1) the aggregate principal amount of Bid Loans for which offers have been received for each Interest Period specified in the related Competitive Bid Request; and (2) the respective principal amounts and Offshore Rate Bid Margins or Absolute Rates, as the case may be, so offered. Subject only to the provisions of Sections 3.02, 3.05 and 4.02 hereof and the provisions of this subsection 2.08(d), any Competitive Bid shall be irrevocable except with the written consent of the Agent given on the written instructions of the Company. (e) Not later than 9:30 a.m. (Chicago time) three Business Days prior to the proposed date of Borrowing, in the case of an Offshore Rate Auction, or 9:30 a.m. (Chicago time) on the proposed date of Borrowing, in the case of an Absolute Rate Auction, the Company shall notify the Agent of its acceptance or non-acceptance of the offers so notified to it pursuant to subsection 2.08(d). The Company shall be under no obligation to accept any offer and may choose to reject all offers. In the case of acceptance, such notice shall specify the aggregate principal amount of offers for each Interest Period that is accepted. The Company may accept any Competitive Bid in whole or in part; provided that: (i) the aggregate principal amount of each Bid Borrowing may not exceed the applicable amount set forth in the related Competitive Bid Request; (ii) the principal amount of each Bid Borrowing must be $10,000,000 or in any multiple of $1,000,000 in excess thereof; (iii) acceptance of offers may only be made on the basis of ascending Offshore Rate Bid Margins or Absolute Rates within each Interest Period, as the case may be; and (iv) the Company may not accept any offer that is described in subsection 2.08(c)(iii) or that otherwise fails to comply with the requirements of this Agreement. (f) If offers are made by two or more Banks with the same Offshore Rate Bid Margins or Absolute Rates, as the case may be, for a greater aggregate principal amount than the amount in respect of which such offers are accepted for the related Interest Period, the principal amount of Bid Loans in respect of which such offers are accepted shall be allocated by the Agent among such Banks as nearly as possible (in such multiples, not less than $1,000,000, as the Agent may deem appropriate) in proportion to the aggregate principal amounts of such offers. Determination by the Agent of the amounts of Bid Loans to be allocated among such Banks shall be conclusive in the absence of demonstrable error. -35- (g) (i) The Agent will promptly notify each Bank having submitted a Competitive Bid if its offer has been accepted and, if its offer has been accepted, of the amount of the Bid Loan or Bid Loans to be made by it on the date of the Bid Borrowing. (ii) If, on or prior to the proposed date of Borrowing, the Commitments have not been terminated and if, on such proposed date of Borrowing all applicable conditions to funding referenced in Sections 3.02, 3.05 and 4.02 hereof are satisfied, each Bank which has received notice pursuant to subsection 2.08(g)(i) that its Competitive Bid has been accepted shall make the amounts of such Bid Loans available to the Agent for the account of the Company at the Agent's Payment Office, by 2:00 p.m. (Chicago time) on such date of Bid Borrowing, in funds immediately available to the Agent for the account of the Company at the Agent's Payment Office. (iii) Promptly following each Bid Borrowing, the Agent shall notify each Bank of the ranges of bids submitted and the highest and lowest Bids accepted for each Interest Period requested by the Company and the aggregate amount borrowed pursuant to such Bid Borrowing. (iv) From time to time, the Company and the Banks shall furnish such information to the Agent as the Agent may request relating to the making of Bid Loans, including the amounts, interest rates, dates of borrowings and maturities thereof, for purposes of the allocation of amounts received from the Company for payment of all amounts owing hereunder. (h) Nothing in this Section 2.08 shall be construed as a right of first offer in favor of the Banks or to otherwise limit the ability of the Company to request and accept credit facilities from any Person (including any of the Banks), provided that no Default or Event of Default would otherwise arise or exist as a result of the Company executing, delivering or performing under such credit facilities. 2.09 Voluntary Termination or Reduction of Commitments. (a) The Company may, upon not less than three (3) Business Days' prior notice to the Agent, terminate the Commitments, or permanently reduce the Commitments by an aggregate minimum amount of $10,000,000 or any multiple of $1,000,000 in excess thereof unless, after giving effect thereto and to any prepayments of Loans made on the effective date thereof, the then-outstanding principal amount of all Loans would exceed the amount of the combined Commitments then in effect. Once reduced in accordance with this Section 2.09, the Commitments may not be increased. Any reduction of the Commitments shall be applied to each Bank according to its Pro Rata Share. All facility fees relating to the reduced Commitments which accrued to, but not including the effective date of any reduction or termination of Commitments, shall be paid on the effective date of such reduction or termination. (b) At no time shall the Swing Line Commitment exceed the combined Commitments, and any reduction of the combined Commitments which reduces the combined Commitments below the then-current amount of the Swing Line Commitment shall result in an automatic corresponding reduction of the Swing Line Commitment to the amount of the combined Commitments, as so reduced, without any action on the part of the Swing Line Bank. -36- At no time shall the Swing Line Commitment exceed the Commitment of the Swing Line Bank, and any reduction of the combined Commitments which reduces the Commitment of the Swing Line Bank below the then-current amount of the Swing Line Commitment shall result in an automatic corresponding reduction of the Swing Line Commitment to the amount of the Commitment of the Swing Line Bank, as so reduced, without any action on the part of the Swing Line Bank. 2.10 Optional Prepayments. (a) Subject to Section 3.04, the Company may, at any time or from time to time, upon not less than three (3) Business Days' irrevocable notice to the Agent, in respect of Offshore Rate Committed Loans, and in respect of Base Rate Committed Loans, by not later than 11:00 a.m. (Chicago time) on the prepayment date, ratably prepay Committed Loans in whole or in part, in minimum amounts of $3,000,000 or any multiple of $1,000,000 in excess thereof. Such notice of prepayment shall specify the date and amount of such prepayment and the Type(s) of Committed Loans to be prepaid. The Agent will promptly notify each Bank of its receipt of any such notice, and of such Bank's Pro Rata Share of such prepayment. If such notice is given by the Company, the Company shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein, together, in the case of Offshore Rate Loans, with accrued interest to each such date on the amount prepaid and any amounts required pursuant to Section 3.04. (b) Bid Loans may not be voluntarily prepaid other than with the consent of the applicable Bid Loan Lender. 2.11 Repayment. (a) Committed Loans. The Company shall repay to the Banks on the Termination Date the aggregate principal amount of Committed Loans outstanding on such date. (b) Bid Loans. The Company shall repay each Bid Loan on the last day of the relevant Interest Period for such Bid Loan. (c) Swing Line Loans. Swing Line Loans shall be repaid in accordance with Section 2.05. 2.12 Interest. (a) Each Committed Loan shall bear interest on the outstanding principal amount thereof from the applicable Borrowing Date at a rate per annum equal to the Offshore Rate plus the Applicable Offshore Rate Margin or the Base Rate, as the case may be (and subject to the Company's right to convert to other Types of Loans under Section 2.04). Each Bid Loan shall bear interest on the outstanding principal amount thereof from the relevant Borrowing Date at a rate per annum equal to the Offshore Rate plus the Offshore Rate Bid Margin, or at the Absolute Rate, as the case may be. (b) Interest on each Loan shall be paid in arrears on each Interest Payment Date. Interest shall also be paid on the date of any prepayment of Offshore Rate Committed Loans pursuant to Section 2.10 for the portion of the Committed Loans so prepaid and upon payment (including prepayment) in full thereof and, during the existence of any Event of Default, interest shall be paid on demand of the Agent at the request or with the consent of the Required Banks. -37- (c) Notwithstanding Section 2.04 or subsection (a) of this Section 2.12, upon the occurrence and during the continuance of an Event of Default under Section 8.01(a) hereof, the Company agrees to pay interest on such unpaid principal or other amount, from the date such amount becomes due until the date such amount is paid in full, and after as well as before any entry of judgment thereon to the extent permitted by law, payable on demand, at a fluctuating rate per annum equal to the Base Rate plus 2.0% (the "Default Rate"); provided, however, that the Company agrees to pay interest on the principal amount of all outstanding Obligations at the Default Rate on any date on which an Event of Default continues under Section 8.01(c) with respect to the Company's failure to perform or observe any term, covenant or agreement contained in Section 7.08 or 7.09 hereof as well as under Section 8.01(a). (d) 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. 2.13 Fees. (a) Agency Fees. The Company shall pay such fees to BofA, the Agent, and the Arranger, as are required by the letter agreement ("Fee Letter") among the Company, the Arranger and the Agent dated July 21, 1998. (b) Facility Fees. The Company shall pay to the Agent for the account of each Bank a facility fee on the amount of such Bank's Commitment (regardless of usage) in an amount equal to the Applicable Facility Fee Rate times such Commitment amount, as calculated by the Agent. Such facility fee shall accrue from the Closing Date to the Termination Date and shall be due and payable quarterly in arrears on the last Business Day of each calendar quarter commencing on September 30, 1998 through the Termination Date, with the final payment to be made on the Termination Date. The facility fees provided in this subsection shall accrue at all times after the above-mentioned commencement date, including at any time during which one or more conditions in Article IV are not met. (c) Utilization Fees. The Company shall pay to the Agent for the account of each Bank a utilization fee for each day Utilization is greater than 50%, payable in arrears on the last Business Day of each calendar quarter based on the Utilization for each day during such quarter as calculated by the Agent. The utilization fee for any day shall be an amount equal to 0.05% per annum times the actual outstanding principal balance of such Bank's Committed Loans on such day. For the purposes hereof, "Utilization" means, for any day, a percentage equal to the actual aggregate principal amount of Loans under this Agreement and under the 364-Day Credit Agreement (including Bid Loans and Swing Line Loans for the purposes of determining if Utilization is greater than 50% for a particular day, but excluding Bid Loans and Swing Line Loans for the purposes of determining the amount of any utilization fee to be paid) outstanding during each day, divided by the combined Commitments under this Agreement and under the 364-Day Credit Agreement as of the end of such day. -38- (d) Bid Auction Fee. The Company shall pay to the Agent for its own account a bid auction fee of $2,000 upon each submission to the Agent of a Competitive Bid Request. 2.14 Computation of Fees and Interest. (a) All computations of interest for Base Rate Committed Loans when the Base Rate is determined by BofA's "reference 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. 2.15 Payments by the Company. (a) All payments to be made by the Company shall be made without set-off, recoupment or counterclaim. Except as otherwise expressly provided herein, all payments by the Company shall be made to the Agent for the account of the Banks at the Agent's Payment Office, and shall be made in dollars and in immediately available funds, no later than 2:00 p.m. (Chicago time) on the date specified herein. 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. (Chicago 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 Agent receives notice from the Company prior to the date on which any payment is due to the Banks that the Company will not make such payment in full as and when required, the Agent may assume that the Company has made such payment in full to the Agent on such date in immediately available funds and the Agent may (but shall not be so required), in reliance upon such assumption, distribute to each Bank on such due date an amount equal to the amount then due such Bank. If and to the extent the Company has not made such payment in full to the Agent, each Bank shall repay to the Agent on demand such amount distributed to such Bank, together with interest thereon at the Federal Funds Rate for each day from the date such amount is distributed to such Bank until the date repaid. 2.16 Payments by the Banks to the Agent. (a) Unless the Agent receives notice from a Bank on or prior to the Closing Date or, with respect to any Committed Borrowing after the Closing Date, at least one Business Day prior to the date of such Committed Borrowing, that such Bank will not make available as and when required hereunder to the Agent for the account -39- of the Company the amount of that Bank's Pro Rata Share of the Committed Borrowing, the Agent may assume that each Bank has made such amount available to the Agent in immediately available funds on the Borrowing Date and the Agent may (but shall not be so required), in reliance upon such assumption, make available to the Company on such date a corresponding amount. If and to the extent any Bank shall not have made its full amount available to the Agent in immediately available funds and the Agent in such circumstances has made available to the Company such amount, that Bank shall on the Business Day following such Borrowing Date make such amount available to the Agent, together with interest at the Federal Funds Rate for each day during such period. A notice of the Agent submitted to any Bank with respect to amounts owing under this subsection (a) shall be conclusive, absent demonstrable error. If such amount is so made available, such payment to the Agent shall constitute such Bank's Loan on the date of Borrowing for all purposes of this Agreement. If such amount is not made available to the Agent on the Business Day following the Borrowing Date, the Agent will notify the Company of such failure to fund and, upon demand by the Agent, the Company shall pay such amount to the Agent for the Agent's account, together with interest thereon for each day elapsed since the date of such Committed Borrowing, at a rate per annum equal to the interest rate applicable at the time to the Committed Loans comprising such Committed Borrowing. (b) The failure of any Bank to make any Committed Loan on any Borrowing Date shall not relieve any other Bank of any obligation hereunder to make a Committed Loan on such Borrowing Date, but no Bank shall be responsible for the failure of any other Bank to make the Committed Loan to be made by such other Bank on any Borrowing Date. 2.17 Sharing of Payments, Etc. If, other than as expressly provided elsewhere herein, any Bank shall obtain on account of the Committed Loans made by it any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) in excess of its ratable share (or other share contemplated hereunder), such Bank shall immediately (a) notify the Agent of such fact, and (b) purchase from the other Banks such participations in the Committed 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, but subject to Section 10.10) 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 2.17 and will in each case notify the Banks following any such purchases or repayments. -40- ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY 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, then: (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 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 -41- Governmental Authority. Nothing contained herein shall require any Bank to disclose its tax records to the Company except for such tax records as relate 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 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. 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 (including in respect of any Offshore Rate Bid Loan as to which the Company has accepted such Bank's Competitive Bid, but as to which the Borrowing Date has not arrived) 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 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 Committed Loan. (c) If the obligation of any Bank to make or maintain Offshore Rate Committed 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 made by the Bank as Offshore Rate Committed Loans shall be instead Base Rate Committed 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. -42- 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 Committed 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 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. 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 borrow, continue or convert a Committed Loan after the Company has given (or is deemed to have given) a Notice of Borrowing or a Notice of Conversion/Continuation; (c) the failure of the Company to make any prepayment of any Committed Loan in accordance with any notice delivered under Section 2.10; (d) the failure of the Company to borrow any Bid Loan as to which a notice of acceptance has been given pursuant to Section 2.08(g)(i); (e) the prepayment (including pursuant to Section 2.10) or other payment (including after acceleration thereof) of an Offshore Rate Loan or Absolute Rate Bid Loan on a day that is not the last day of the relevant Interest Period; or -43- (f) the automatic conversion under Section 2.04 of any Offshore Rate Committed Loan to a Base Rate Committed 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 IBOR 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. 3.05 Inability to Determine Rates. If the Agent determines 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 applicable pursuant to subsection 2.12 for any requested Interest Period with respect to a proposed Offshore Rate Loan does not adequately and fairly reflect the cost to the 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, as the case may be, hereunder shall be suspended until the Agent revokes such notice in writing. Upon receipt of such notice, the Company may revoke any Notice of Borrowing or Notice of Conversion/Continuation then submitted by it. If the Company does not revoke such Notice, the Banks shall make, convert or continue the Committed Loans, as proposed by the Company, in the amount specified in the applicable notice submitted by the Company, but such Committed Loans shall be made, converted or continued as Base Rate Committed Loans instead of Offshore Rate Loans. 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 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. 3.06 Certificates of Banks. Any Bank claiming reimbursement or compensation under this Article III 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 J hereto with respect to Offshore Rate Loans and in a form reasonably determined by the applicable Bank with respect to Base Rate Committed Loans) the methodology used in determining the amount payable to the Bank. 3.07 Substitution of Banks. If a Bank becomes a Defaulted Bank or the Company receives notice from any Bank of a claim for compensation under Section 3.01, 3.02 or 3.03 (each such Bank being referred to as an "Affected Bank"), the Company may: (i) request the Affected Bank to use its best efforts to obtain a replacement bank or financial institution -44- satisfactory to the Company to acquire and assume all or a ratable part of all of such Affected Bank's Loans and Commitment (a "Replacement Bank"); (ii) request one or more of the other Banks to acquire and assume all or part of such Affected Bank's Loans and Commitment; or (iii) designate a Replacement Bank. Any such designation of a Replacement Bank under clause (i) or (iii) shall be subject to the prior written consent of the Agent (which consent shall not be unreasonably withheld). 3.08 Survival. The agreements and obligations of the Company in this Article III shall survive the termination of this Agreement and the payment of all other Obligations for a period of one year. ARTICLE IV CONDITIONS PRECEDENT 4.01 Conditions of Loan Availability. The obligation of each Bank to make its initial Committed Loan, Bid Loan or Swing Line Loan hereunder (including in respect of any Offshore Rate Bid Loan as to which the Company has accepted such Bank's Competitive Bid, but as to which the Borrowing Date has not arrived) is subject to the condition that the Agent shall have received on or before the Closing Date all of the following, in form and substance satisfactory to the Agent and each Bank, and in sufficient copies for each Bank: (a) Credit Agreement and Notes. This Agreement executed by each party thereto and any Note requested by any Bank pursuant to Section 2.02(b) executed by the Company; (b) Resolutions; Incumbency. (i) Copies of the resolutions of the board of directors of the Company authorizing the transactions contemplated hereby, certified as of the Closing Date by the Secretary or an Assistant Secretary of the Company; and (ii) A certificate of the Secretary or Assistant Secretary of the Company certifying the names and true signatures of the officers of the Company authorized to execute, deliver and perform, as applicable, this Agreement, and all other Loan Documents to be delivered by it hereunder; (c) Organization Documents; Good Standing. Each of the following documents: (i) the articles or certificate of incorporation of the Company as in effect on the Closing Date, certified by the Secretary of State of its state of incorporation; (ii) the bylaws of the Company as in effect on the Closing Date, certified by the Secretary or Assistant Secretary of the Company as of the Closing Date; -45- (iii) a certificate of existence for the Company from the Secretary of State (or similar, applicable Governmental Authority) of its state of incorporation as of a recent date; and (iv) a compliance certificate for each Insurance Subsidiary which is a Significant Subsidiary from the Department of its jurisdiction of domicile as of a recent date. (d) Legal Opinions. An opinion of counsel to the Company and addressed to the Agent and the Banks, in form and substance acceptable to the Agent. (e) Payment of Fees. Evidence of payment by the Company of all accrued and unpaid fees, costs and expenses related to this Agreement to the extent then due and payable on the Closing Date, together with Attorney Costs of BofA to the extent invoiced prior to or on the Closing Date, plus such additional amounts of reasonable Attorney Costs as shall constitute BofA'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 BofA); including any such costs, fees and expenses arising under or referenced in Sections 2.13 and 10.04; (f) Certificate. A certificate signed by a Responsible Officer on behalf of the Company, dated as of the Closing Date, stating that: (i) the representations and warranties contained in Article V are true and correct on and as of such date, as though made on and as of such date; (ii) no Default or Event of Default exists or would result from the making of any Loan hereunder; and (iii) no event or circumstance has occurred since December 31, 1997 that has resulted or could reasonably be expected to result in a Material Adverse Effect. (g) Approvals. Evidence of the receipt by the Company of any required approvals of the transactions contemplated hereby and by the other Loan Documents from each applicable Governmental Authority; (h) Year 2000. The Company shall have delivered to the Agent such information with respect to the Company's efforts to address the year 2000 problem as the Agent may have reasonably requested; (i) Existing Indebtedness. The Agent shall have received evidence of repayment of all Indebtedness evidenced by, and termination of all commitments to lend under: (i) that certain Credit Agreement, dated as of November 22, 1996, as amended, among the Company, the financial institutions party thereto (the "Existing Lenders"), BofA, as Syndication Agent for the Existing Lenders, First Union National Bank of North Carolina, as Documentation Agent for the Existing Lenders, and NationsBank, N.A. (South), as Administrative Agent for the Existing Lenders; -46- (ii) that certain Credit Agreement, dated as of March 25, 1998, between the Company and BofA; (iii) that certain Term Loan Promissory Note, dated July 13, 1998, executed by the Company in favor of NationsBank, N.A.; and (iv) that certain Credit Agreement, dated as of April 28, 1998, as amended, among Green Tree, the financial institutions party thereto and Morgan Guaranty Trust Company of New York, as Administrative Agent; and (j) Other Documents. Such other approvals, opinions, documents or materials as the Agent or any Bank may reasonably request. 4.02 Conditions to All Loans. The obligation of each Bank to make any Loan to be made by it, and the obligation of any Bank to make any Bid Loan as to which the Company has accepted the relevant Competitive Bid (including its initial Loan) is subject to the satisfaction of the following conditions precedent on the relevant Borrowing Date: (a) Notice of Borrowing. As to any Committed Loan, the Agent shall have received a Notice of Borrowing; (b) Continuation of Representations and Warranties. The representations and warranties in Article V shall be true and correct on and as of such Borrowing Date with the same effect as if made on and as of such Borrowing Date (except to the extent such representations and warranties expressly refer to an earlier date, in which case they shall be true and correct as of such earlier date); and (c) No Existing Default. No Default or Event of Default shall exist or shall result from such Loan or the related Borrowing. Each Notice of Borrowing, Competitive Bid Request and request for a Swing Line Loan submitted by the Company hereunder shall constitute a representation and warranty by the Company hereunder, as of the date of each such notice and as of each Borrowing Date, that the conditions in this Section 4.02 are satisfied. ARTICLE V REPRESENTATIONS AND WARRANTIES The Company represents and warrants to the Agent and each Bank that: 5.01 Corporate Existence and Power. The Company and each of its Subsidiaries: (a) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation; -47- (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 as a foreign corporation 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; and (d) is in compliance with all Requirements of Law; except, in each case referred to in clauses (a) and (b)(i) (with respect to Subsidiaries other than Significant Subsidiaries) clause (c) or clause (d), to the extent that the failure to do so could not reasonably be expected to have a Material Adverse Effect. 5.02 Corporate Authorization; No Contravention. The execution, delivery and performance by the Company of this Agreement and each other Loan Document have been duly authorized by all necessary corporate action, and do not and will not: (a) contravene the terms of any of the Company's Organization Documents; (b) conflict with or result in any breach or contravention of, or the creation of any Lien under, any document evidencing any Contractual Obligation to which the Company is a party or any order, injunction, writ or decree of any Governmental Authority to which the Company or its property is subject; or (c) violate any Requirement of Law. except, in each case referred to in clause (b) or clause (c), to the extent that the failure to do so could not reasonably be expected to have a Material Adverse Effect. 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 execution, delivery or performance by, or enforcement against, the Company of this Agreement or any other Loan Document. 5.04 Binding Effect. This Agreement and the other Loan Documents to which the Company is a party constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their respective 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. 5.05 Litigation. Except as set forth on Schedule 5.05 or disclosed in the Company's public filings with the SEC made prior to September 1, 1998, 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 contemplated hereby or thereby; or (b) could reasonably be expected to have a Material Adverse Effect. No -48- injunction, writ, temporary restraining order or any order of any nature has been issued by any court or other Governmental Authority purporting to enjoin or restrain the execution, delivery or performance of this Agreement or any other Loan Document, or directing that the transactions provided for herein or therein not be consummated as herein or therein provided. 5.06 No Default. No Default or Event of Default exists or would result from the incurring of any Obligations by the Company. As of the Closing 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 Closing Date, create an Event of Default under subsection 8.01(e). 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 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 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) 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 could reasonably be expected to have a Material Adverse Effect, (i) no ERISA Event has occurred or is reasonably expected to occur; (ii) 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. -49- 5.08 Use of Proceeds; Margin Regulations. The proceeds of the Loans are to be used solely for the purposes set forth in and permitted by Section 6.10 and Section 7.06. 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, without limitation, 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 Securities Exchange Act of 1934, as amended, or regulations issued pursuant thereto, or Regulation T, U or X. 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 Closing Date, the property of the Company and its Subsidiaries is subject to no Liens, other than Permitted Liens. 5.10 Taxes. The Company and its Subsidiaries have filed all federal tax, 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, assessments, fees and other governmental charges 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, have a Material Adverse Effect and for which adequate reserves in accordance with GAAP are not being maintained by the Company or such Subsidiary. 5.11 Financial Condition. Each of (a) the audited consolidated financial statements of the Company and its Subsidiaries dated December 31, 1997, and the related consolidated statements of income, shareholders' equity and cash flows for the Fiscal Year ended on that date, (b) the unaudited consolidated financial statements of the Company and its Subsidiaries dated June 30, 1998, and the related consolidated statements of income, shareholders' equity and cash flows for the period ended on that date, (c) the December 31, 1997 Annual Statement of each Insurance Subsidiary and (d) the June 30, 1998 Quarterly Statement of each Insurance Subsidiary: (i) 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 audit adjustments; (ii) fairly present the financial condition of the Company and its Subsidiaries as of the date thereof and results of operations for the period covered thereby; and -50- (iii) 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. 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 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 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 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 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 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 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, -51- 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 be reasonably expected to have a Material Adverse Effect. 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 the Investment Company Act of 1940. The Company is not 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. 5.14 Subsidiaries. As of the Closing Date, the Company has no Subsidiaries other than those disclosed in Schedule 5.14 hereto and such Subsidiaries of the Company with, after the elimination of intercompany accounts, assets which constitute less than 1% of the Company's consolidated total assets. 5.15 Insurance Licenses. No License of the Company or any Insurance Subsidiary, the loss of which 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 no sustainable basis for such suspension or revocation, and no such suspension or revocation has been threatened by any Governmental Authority. 5.16 Material Adverse Effect. Since December 31, 1997, there has been no Material Adverse Effect. 5.17 Year 2000 Compliance. The Company has conducted a comprehensive review and assessment of its computer applications with respect to the year 2000 problem (that is, the risk that computer applications may not be able to properly perform date sensitive functions after December 31, 1999). Based on the foregoing review, assessment and inquiry, the Company believes the year 2000 problem will not result in a Material Adverse Effect. 5.18 Full Disclosure. None of the representations or warranties made by the Company in the Loan Documents as of the date such representations and warranties are made or deemed made, and none of the statements contained in any exhibit, report, statement or certificate furnished by or on behalf of the Company or any Subsidiary pursuant to the Loan Documents (including the offering and disclosure materials delivered by or on behalf of the Company to the Banks prior to the Closing Date) 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. -52- ARTICLE VI AFFIRMATIVE COVENANTS So long as any Bank shall have any Commitment hereunder, or any Loan or other Obligation shall remain unpaid or unsatisfied, unless the Required Banks waive compliance in writing: 6.01 Financial Statements. The Company shall deliver to the Agent and each Bank: (a) as soon as available, but not later than 120 days after the end of each Fiscal Year, copies of the audited consolidated balance sheet of the Company and its Subsidiaries and the unaudited consolidating balance sheet of the Company and its Subsidiaries as at the end of such year and the related consolidated statements of earnings, 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 or another nationally-recognized independent public accounting firm ("Independent Auditor"), which report shall state that such audited consolidated financial statements present fairly 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 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) as soon as available, 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 statements of earnings, shareholders' equity and cash flows for the period commencing on the first day and ending on the last day of such quarter, and certified by a Responsible Officer as fairly presenting, in accordance with GAAP (subject to 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 after the close of each Fiscal Year of each Insurance Subsidiary, copies of the unaudited Annual Statement of such Insurance Subsidiary, 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; (d) As soon as available but not later than 60 days after the close of each of the first three (3) Fiscal Quarters of each Fiscal Year of each Insurance Subsidiary which is a significant Subsidiary (as determined by Agent in its sole discretion), copies of the Quarterly Statement of each of the Insurance Subsidiaries, 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 herein; -53- (e) Within fifteen days after being delivered to any Insurance Subsidiary constituting a Significant Subsidiary, any draft or final Triennial Examination Report issued by the applicable Department or the NAIC that results in material adjustments to the financial statements referred to in subsection (a), (b) or (c); 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. 6.02 Certificates; Other Information. The Company shall furnish to the Agent, with sufficient copies for each Bank: (a) concurrently with the delivery of the financial statements referred to in subsections 6.01(a) and (b), a Compliance Certificate executed by a Responsible Officer; (b) promptly, copies of all Forms 10-K and 10-Q that the Company or any Subsidiary may file with the SEC, and promptly upon the Agent's request, 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; (c) 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 DCR in respect of the Company's senior unsecured Indebtedness; and (d) promptly, such additional information regarding the business, financial or corporate affairs of the Company or any Subsidiary as the Agent, at the request of any Bank, may from time to time reasonably request. 6.03 Notices. The Company shall promptly notify the Agent: (a) of the occurrence of any Default or Event of Default; (b) of any matter that has resulted 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 affecting the Company or any Subsidiary, including pursuant to any applicable Environmental Laws; (c) the commencement of, or the occurrence of any development in, any litigation or proceeding (i) which seeks to enjoin, prohibit, discontinue or otherwise impacts the validity or enforceability of this Agreement or any of the other Loan Documents or other transactions contemplated hereby or thereby, or (ii) which could be reasonably expected to have a Material Adverse Effect. -54- (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 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 of more than $65,000,000 or any liability to any ERISA Affiliate of more than $20,000,000. (e) of any material change in accounting policies or financial reporting practices by the Company or any of its Subsidiaries; (f) 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 and the expiration, revocation or suspension of which could reasonably be expected to have a Material Adverse Effect; (g) 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 which, if adversely determined, could reasonably be expected to have a Material Adverse Effect; (h) 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 and which has had, or which 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 -55- time. Each notice under subsection 6.03(a) shall describe with particularity any and all clauses or provisions of this Agreement or other Loan Document that have been (or reasonably foreseeably will be) breached or violated. 6.04 Preservation of Corporate Existence, Etc. The Company shall, and shall cause each Significant Subsidiary to (except as permitted by Section 7.03): (a) preserve and maintain in full force and effect its corporate existence and good standing under the laws of its state or jurisdiction of incorporation; (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 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. 6.05 Insurance. The Company shall maintain, and shall cause each Significant 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. 6.06 Payment of Obligations. The Company shall, and shall cause each Significant Subsidiary to, pay and discharge as the same shall become due and payable, all of the following: (a) all material tax liabilities, assessments and governmental charges or levies upon it or its material properties or assets, unless the same 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 (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. 6.07 Compliance with Laws. The Company shall comply, and shall cause each Subsidiary to comply, in all material respects 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), the noncompliance with which could reasonably be expected to have a Material Adverse Effect, except such as may be contested in good faith or as to which a bona fide dispute may exist. 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 -56- to maintain as set forth in (a) or (b) or to make contributions as set forth in (c) could not be reasonably expected to have a Material Adverse Effect. 6.09 Inspection of Property and Books and Records. The Company shall maintain and shall cause each Significant Subsidiary and Wholly-Owned 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 Significant Subsidiary and Wholly-Owned 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 the expense of the Company at any time during normal business hours and without advance notice. 6.10 Use of Proceeds. The Company shall use the proceeds of the Loans solely: (a) to refinance existing Indebtedness of the Company; (b) for general corporate purposes not in contravention of any Requirement of Law or of any Loan Document (including the lending of such proceeds to Subsidiaries for working capital purposes); and (c) to support the issuance of the Company's commercial paper. ARTICLE VII NEGATIVE COVENANTS So long as any Bank shall have any Commitment hereunder, or any Loan or other Obligation shall remain unpaid or unsatisfied, unless the Required Banks waive compliance in writing: 7.01 Limitation on Indebtedness. 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 which is or constitutes: (a) a Swap Contract in respect of obligations other than Permitted Swap Obligations; (b) Indebtedness incurred in connection with the issuance of commercial paper by the Company to the extent that Indebtedness of this type in the aggregate exceeds at any time the aggregate amount of the unutilized portion of the Commitments and the "Commitments" (as defined in the 364-Day Credit Agreement) at such time; (c) Indebtedness with respect to Contingent Obligations to the extent the amount of Indebtedness of this type in the aggregate exceeds at any time ten percent (10%) of -57- Total Shareholders' Equity of the Company at such time; provided that Contingent Obligations of (i) Sub-Prime Auto Loan Companies relating to sub-prime automobile loans and (ii) any Green Tree Entity relating to loans, leases, receivables, installment contracts and other financial products originated, acquired or sold by such Green Tree Entity or any other Green Tree Entity shall be excluded from the determination of Contingent Obligations for purposes of this subsection 7.01(c); (d) (i) recourse Indebtedness of Subsidiaries other than recourse Indebtedness of a Subsidiary that is also a Sub-Prime Auto Loan Company or a Green Tree Entity to the extent that (A) neither the Company nor any Non-Finance Subsidiary is directly liable thereon, and (B) neither the Company nor any Non-Finance Subsidiary has any Contingent Obligation in respect of such Indebtedness; or (ii) nonrecourse Indebtedness of Subsidiaries resulting from the sale or securitization of assets (other than (1) non-admitted assets, policy loans, B-Share Financings, CBOs, CMOs and sub-prime automobile loans and (2) loans, leases, receivables, installment contracts and other financial products originated, acquired, sold or securitized by a Green Tree Entity) other than non-recourse Indebtedness of a Sub-Prime Auto Loan Company or Green Tree Entity with respect to Interest Only Securities; or (e) any secured Indebtedness (excluding secured Indebtedness not prohibited by clause (d)(ii) immediately above), including, without limitation, Capitalized Lease Liabilities and Purchase Money Debt, to the extent Indebtedness of this type in the aggregate exceeds at any time ten percent (10%) of Total Shareholders' Equity at such time. 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 asset now owned or hereafter acquired by it, except for the following (collectively called "Permitted Liens"): (a) Liens in connection with Permitted Transactions; (b) Liens for current Taxes not delinquent 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; (c) Liens shown on Schedule 7.02(c); (d) 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; (e) Liens of mechanics, carriers, and materialmen and other like Liens arising in the ordinary course of business in respect of obligations which are not delinquent 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; (f) 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 -58- 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; (g) Liens in favor of the trustee on sums required to be deposited with the trustee under the indentures described on Schedule 7.02(g); (h) Liens incurred on assets of Subsidiaries that are Sub-Prime Auto Loan Companies or Green Tree Entities securing Indebtedness which is expressly excluded from the prohibitions on Indebtedness set forth in subsection 7.01(d)(i) and (ii); or (i) Liens securing Indebtedness permitted by subsection 7.01(e). 7.03 Disposition of Assets. The Company shall not, and shall not permit any of its Wholly-Owned Subsidiaries and/or Significant 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) or enter into any agreement to do any of the foregoing, except: (a) Dispositions of inventory or equipment (including, without limitation, repossessed and/or off lease property of Green Tree), all in the ordinary course of business; (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 (other than Investments in Persons engaged in insurance lines of business) in the ordinary course of business; (d) Dispositions of (i) sub-prime automobile loans held by such Person in connection with the securitization of such sub-prime automobile loans, (ii) in the case of any Green Tree Entity, loans, leases, receivables, installment contracts and other financial products originated, acquired, sold or securitized by such Green Tree Entity or (iii) interests in or components of Interest Only Securities; (e) Dispositions not otherwise permitted hereunder, provided that (i) the Net Proceeds of such Disposition are reinvested within 270 days after disposition (A) with respect to insurance lines of business, in insurance lines of business similar to the insurance lines of business of the Company and the Subsidiaries at such time or (B) with respect to non-insurance lines of business, in business lines similar to the business lines of the Company and its Subsidiaries at such time, (ii) the aggregate cumulative GAAP gain since the Closing Date arising out of such Dispositions, the proceeds of which are not reinvested in business lines similar to the business lines of the assets disposed of do not at any time exceed 25% of Total Shareholders' Equity at such time or (iii) the Company applies the Net Proceeds of such Disposition to the Obligations and permanently reduces the Commitments by the amount of the Net Proceeds of such Disposition in accordance with Section 2.09(a). -59- 7.04 Other Agreements. The Company shall not, and shall not permit any of its Subsidiaries to, enter into any agreement (other than agreements with insurance regulators) containing any provision which (a) would be violated or breached by the performance of its obligations hereunder or under any instrument or document delivered or to be delivered by it hereunder or in connection herewith or (b) prohibits or restricts the ability of the Company to amend or otherwise modify this Agreement or any other document executed in connection herewith. 7.05 Transactions with Affiliates. The Company shall not, and shall not suffer or permit any Significant Subsidiary to, enter into any material transaction with any Affiliate of the Company (other than the Company or a Wholly-Owned Subsidiary), except upon fair and reasonable terms no less favorable to the Company or such Subsidiary than would obtain in a comparable arm's-length transaction with a Person not an Affiliate of the Company or such Subsidiary and except for insurance transactions, intercompany pooling and other reinsurance transactions entered into in the ordinary course of business and consistent with past practice. 7.06 Use of Proceeds. The Company shall not, and shall not suffer or permit any Subsidiary to, use any portion of the Loan proceeds, directly or indirectly, (i) to purchase or carry Margin Stock unless at all times less than 25% of the value of the assets of the Company and its Subsidiaries which are subject to any limitation on sale, pledge, or other restriction hereunder, taken as a whole, will be represented by Margin Stock, (ii) to repay or otherwise refinance indebtedness of the Company or others incurred to purchase or carry Margin Stock, (iii) to extend credit for the purpose of purchasing or carrying any Margin Stock, or (iv) to acquire any security in any transaction that is subject to Section 13 or 14 of the Exchange Act, in each case in violation of Regulation T, U or X of the FRB. 7.07 Change in Business. The Company shall not, and shall not suffer or permit any Significant Subsidiary to, fundamentally change the type of business in which it is presently engaged as listed on Schedule 7.07. 7.08 Debt to Capitalization Ratio. The Company shall not permit the Debt to Total Capitalization Ratio to exceed 0.45:1.00 as of the end of any Fiscal Quarter. 7.09 Interest Coverage Ratio. The Company shall not permit the Interest Coverage Ratio as of the end of each Fiscal Quarter set forth below for the four Fiscal Quarters then ended (or, in the case of the Fiscal Quarters ending before September 30, 1999, for the period from and including October 1, 1998, to and including the last day of such Fiscal Quarter), to be less than the ratio set forth below for such date: Fiscal Quarter Ending Ratio --------------------- ----- December 31, 1998 2.00:1.0 March 31, 1999 2.00:1.0 June 30, 1999 2.00:1.0 September 30, 1999 2.00:1.0 December 31, 1999 2.25:1.0 March 31, 2000 2.25:1.0 -60- June 30, 2000 2.25:1.0 September 30, 2000 2.25:1.0 December 31, 2000 2.25:1.0 March 31, 2001 2.25:1.0 June 30, 2001 2.25:1.0 September 30, 2001 2.25:1.0 December 31, 2001 2.50:1.0 March 31, 2002 2.50:1.0 June 30, 2002 2.50:1.0 September 30, 2002 2.50:1.0 December 31, 2002 2.50:1.0 March 31, 2003 2.50:1.0 June 30, 2003 2.50:1.0 September 30, 2003 2.50:1.0 ARTICLE VIII EVENTS OF DEFAULT 8.01 Event 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, 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 made or, pursuant to Section 4.02, deemed made herein or in any other Loan Document, 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, 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 Section 6.03(a), or in Section 7.01, 7.02, 7.03, 7.04, 7.06, 7.07, 7.08 or 7.09; or (d) Other Defaults. The Company fails to perform or observe any other term or covenant contained in this Agreement or 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 Significant 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 -61- syndicated credit arrangement) of more than $75,000,000, when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) and such failure continues after the applicable grace or notice period, if any, specified in the relevant document on the date of such failure; or (B) fails to perform or observe any other condition or covenant, or any other event shall occur or condition exist (other than an alleged breach which the Company or such Significant Subsidiary is contesting in good faith and which does not relate to a payment default or a breach of a financial covenant), under any agreement or instrument relating to any such Indebtedness or Contingent Obligation, and such failure continues after the applicable grace or notice period, if any, specified in the relevant document on the date of such failure if the effect of such failure, event or condition is to cause, or to 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 such Contingent Obligation 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 (1) 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 (2) 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 $75,000,000; or (f) Insolvency; Voluntary Proceedings. The Company or any Significant 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; or (iv) takes any action to effectuate or authorize any of the foregoing; or (g) Involuntary Proceedings. (i) Any involuntary Insolvency Proceeding is commenced or filed against the Company or any Significant 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 Significant 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, any Significant Subsidiary or any Material Insurance 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, any Significant Subsidiary or any Material Insurance 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 Material Insurance Subsidiary shall become subject to any conservation, rehabilitation or liquidation order, directive or mandate issued by any Governmental Authority; (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 a deficiency of more than $20,000,000 as to any ERISA Affiliate (other than the Company) or $65,000,000 as to the Company in the Pension Plan assets available to satisfy the -62- benefits guaranteeable under ERISA with respect to such Pension Plan, 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 any ERISA Affiliate (other than the Company) in excess of $20,000,000 or $65,000,000 as to the Company or any Reportable Event with respect to such Pension Plan has occurred which could result in the incurrence of liability by any ERISA Affiliate (other than the Company) in excess of $20,000,000 or $65,000,000 as to the Company or steps are taken to terminate any Multiemployer Plan and such termination may result in any liability of any ERISA Affiliate (other than the Company) in excess of $20,000,000 or $65,000,000 as to the Company shall occur; or (i) Monetary Judgments. One or more final non-interlocutory judgments, final non-interlocutory orders, final decrees or final arbitration awards is entered against the Company or any Significant Subsidiary involving in the aggregate a liability other than a liability of an Insurance Subsidiary in the ordinary course of business (to the extent not covered by independent third-party insurance as to which the insurer does not dispute coverage) as to any single or related series of transactions, incidents or conditions, of $60,000,000 or more, and the same shall remain unsatisfied, unvacated, unstayed and not bonded, if required by law, pending appeal for a period of 30 days after the entry thereof; or (j) Change of Control. There occurs any Change of Control. 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 make Committed 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, 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 subsection (f) or (g) of Section 8.01 (in the case of clause (i) of subsection (g) upon the expiration of the 60-day period mentioned therein), the obligation of each Bank to make 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 further act of the Agent or any Bank. 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. -63- ARTICLE IX THE AGENT 9.01 Appointment and Authorization; "Agent". Each Bank hereby irrevocably (subject to Section 9.09) 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 in this Agreement 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, 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" in this Agreement 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. 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 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 with reasonable care. 9.03 Liability of Agent. None of the Agent-Related Persons 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), or (b) be responsible in any manner to any of the Banks for any recital, statement, representation or warranty made by the Company or any Subsidiary or Affiliate of the Company, or any officer thereof, contained in this Agreement 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 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 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 of the Company's Subsidiaries or Affiliates. 9.04 Reliance by Agent. (a) The Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone 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 -64- Company), independent accountants and other experts selected by the Agent. The Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other 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 Banks and such request and any action taken or failure to act pursuant thereto shall be binding upon all of the Banks. (b) For purposes of determining compliance with the conditions specified in Section 4.01, each Bank that has executed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter either sent by the Agent to such Bank for consent, approval, acceptance or satisfaction, or required thereunder to be consented to or approved by or acceptable or satisfactory to the Bank. 9.05 Notice of Default. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of 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 or Event of 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 or Event of Default as may be requested by the Required Banks in accordance with Article VIII; provided, however, that unless and until the Agent has received any such request, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable or in the best interest of the Banks. 9.06 Credit Decision. Each Bank acknowledges that none of the Agent-Related Persons has made any representation or warranty to it, and that no act by the Agent hereinafter taken, including any review of the affairs of the Company and its Subsidiaries, shall be deemed to constitute any representation or warranty by any Agent-Related Person to any Bank. 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 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 business, prospects, operations, property, financial and other condition and creditworthiness of the Company. Except for notices, reports and other documents expressly herein required to be furnished to the Banks by the Agent, 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 credit -65- worthiness of the Company which may come into the possession of any of the Agent-Related Persons. 9.07 Indemnification of Agent. Whether or not the transactions contemplated hereby are consummated, the Banks shall indemnify upon demand the Agent-Related Persons (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 based upon its Pro Rata Share, from and against any and all Indemnified Liabilities; provided, however, that no Bank shall be liable for the payment to the Agent-Related Persons of any portion of such Indemnified Liabilities resulting from such Person's gross negligence or willful misconduct. Without limitation of the foregoing, each Bank shall reimburse the Agent upon demand for its Pro Rata 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 Obligations hereunder and the resignation or replacement of the Agent. 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 and its Subsidiaries and 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 Affiliates (including information that may be subject to confidentiality obligations in favor of the Company or such Subsidiary) 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 the same as though it were not the Agent, and the terms "Bank" and "Banks" include BofA in its individual capacity. 9.09 Successor Agent. The Agent may, and at the request of the Required Banks shall, 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 agent for the Banks which successor agent shall be approved by the Company (which consent shall not be unreasonably withheld). If no successor 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 agent from among the Banks. Upon the acceptance of its appointment as successor agent hereunder, such successor agent shall succeed to all the rights, powers and duties of the retiring Agent and the term "Agent" shall mean such successor 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 IX and Sections 10.04 and 10.05 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. If no successor 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 -66- duties of the Agent hereunder until such time, if any, as the Required Banks appoint a successor agent as provided for above. 9.10 Withholding Tax. (a) If any Bank (including, without limitation, a Bank that becomes a party to this Agreement by assignment in accordance with Section 10.08) is a "foreign corporation, partnership or trust" within the meaning of the Code and such Bank claims exemption 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 1001 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 4224 before the payment of any interest is due in the first taxable year of such Bank and in each 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 IRS Form 1001 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 1001 as no longer valid. (c) If any Bank claiming exemption from United States withholding tax by filing IRS Form 4224 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 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 -67- 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 9.10, shall not be subject to indemnification under Section 3.01, Section 10.05 or otherwise. 9.10 Syndication Agent; Documentation Agents. None of the Syndication Agents or Documentation Agent shall have any right, power, obligation, liability, responsibility or duty under this Agreement other than those applicable to all Banks as such. Without limiting the foregoing, none of the Syndication Agents or the Documentation Agent shall have or be deemed to have any fiduciary relationship with any Bank. Each Bank acknowledges that it has not relied, and will not rely, on the Syndication Agents or the Documentation Agent in deciding to enter into this Agreement or in taking or not taking action hereunder. ARTICLE X MISCELLANEOUS 10.01 Amendments and Waivers. No amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent with respect to any departure by the Company therefrom, shall be effective unless the same shall be in writing and signed by the Required Banks (or by the Agent at the written request of the Required Banks) and the Company and acknowledged by the Agent, and then any 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 waiver, amendment, or consent shall, unless in writing and signed by all the Banks and the Company and acknowledged by the Agent, do any of the following: -68- (a) increase or extend the Commitment of any Bank (or reinstate any Commitment terminated pursuant to Section 8.02); (b) postpone or delay any date fixed by this Agreement or any other Loan Document for any payment of principal, interest, fees or other amounts due to the Banks (or any of them) hereunder or under any other Loan Document; (c) reduce or forgive the principal of, or the rate of interest specified herein on any Loan, or (subject to clause (iii) below) any fees or other amounts payable hereunder or under any other Loan Document; (d) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Loans which is required for the Banks or any of them to take any action hereunder; or (e) amend this Section 10.01, or Section 2.17, or any provision herein providing for consent or other action by all Banks; and, provided further, that (i) no amendment, waiver or consent shall, unless in writing and signed by the Agent in addition to the Required Banks or all the Banks, as the 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) no amendment, waiver or consent shall, unless in writing and signed by the Swing Line Bank in addition to the Required Banks or all the Banks, as the case may be, affect the rights or duties of the Swing Line Bank under this Agreement or any other Loan Document, and (iii) the Fee Letter may be amended, or rights or privileges thereunder waived, in a writing executed by the parties thereto. 10.02 Notices. (a) All notices, requests, consents, approvals, waivers and other communications shall be in writing (including, unless the context expressly otherwise provides, by facsimile transmission, provided that any matter transmitted by the Company by facsimile (i) shall be immediately confirmed by a telephone call to the recipient at the number specified on Schedule 10.02, and (ii) shall be followed promptly by delivery of a hard copy original thereof) and mailed, faxed or delivered, to the address or facsimile number specified for notices on Schedule 10.02; or, as directed to the Company or the Agent, to such other address as shall be designated by such party in a written notice to the other parties, and as directed to any other party, at such other address as shall be designated by such party in a written notice to the Company and the Agent. (b) All such notices, requests and communications shall, when transmitted by overnight delivery, or faxed, be effective when delivered for overnight (next-day) delivery, or transmitted in legible form by facsimile machine, respectively, or if mailed, upon the third Business Day after the date deposited into the U.S. mail, or if delivered, upon delivery, except that notices pursuant to Article II or IX to the Agent shall not be effective until actually received by the Agent. (c) Any agreement of the Agent and the Banks herein to receive certain notices by telephone or facsimile is solely for the convenience and at the request of the Company. The Agent and the Banks shall be entitled to rely on the authority of any Person -69- purporting to be a Person authorized by the Company to give such notice and the Agent and the Banks shall not have any liability to the Company or other Person on account of any action taken or not taken by the Agent or the Banks in reliance upon such telephonic or facsimile notice. The obligation of the Company to repay the Loans shall not be affected in any way or to any extent by any failure by the Agent and the Banks to receive written confirmation of any telephonic or facsimile notice or the receipt by the Agent and the Banks of a confirmation which is at variance with the terms understood by the Agent and the Banks to be contained in the telephonic or facsimile notice. 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. 10.04 Costs and Expenses. The Company shall: (a) whether or not the transactions contemplated hereby are consummated, pay or reimburse BofA (including in its capacity as Agent) and the Arranger within five Business Days after demand (subject to subsection 4.01(e)) for all reasonable out-of-pocket costs and expenses incurred by BofA (including in its capacity as Agent) and the Arranger in connection with the development, preparation, delivery, administration, syndication and execution of, and any amendment, supplement, waiver or modification to (in each case, whether or not consummated), this Agreement, any Loan Document and any other documents prepared in connection herewith or therewith, and the consummation of the transactions contemplated hereby and thereby, including reasonable Attorney Costs incurred by BofA (including in its capacity as Agent) and the Arranger with respect thereto; and (b) pay or reimburse the Agent, the Arranger and each Bank within five Business Days after demand (subject to subsection 4.01(e)) for all reasonable out-of-pocket costs and expenses (including Attorney Costs) incurred by them in connection with the enforcement, attempted enforcement, or preservation of any rights or remedies under this Agreement or any other Loan Document during the existence of an Event of Default or after acceleration of the Loans (including in connection with any "workout" or restructuring regarding the Loans, and including in any Insolvency Proceeding or appellate proceeding). 10.05 Company Indemnification. Whether or not the transactions contemplated hereby are consummated, the Company shall indemnify, defend and hold the Agent-Related Persons, and each Bank and each of its respective officers, directors, employees, counsel, agents and attorneys-in-fact (each, an "Indemnified Person") harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, charges and reasonable out-of pocket costs, expenses and disbursements (including Attorney Costs) of any kind or nature whatsoever (collectively, "Costs and Expenses") which may at any time (including at any time following repayment of the Loans and the termination, resignation or replacement of the Agent or replacement of any Bank) be imposed on, incurred by or asserted against any such Person in any way relating to or arising out of this Agreement or any document contemplated by or referred to herein, or the transactions contemplated hereby, or any action -70- taken or omitted by any such Person under or in connection with any of the foregoing, including with respect to any investigation, litigation or proceeding (including any Insolvency Proceeding or appellate proceeding) related to or arising out of this Agreement or the Loans or the use of the proceeds thereof, whether or not any Indemnified Person is a party thereto (all the foregoing, collectively, the "Indemnified Liabilities"); provided, that the Company shall have no obligation hereunder to any Indemnified Person with respect to (i) Indemnified Liabilities resulting from the gross negligence or willful misconduct of such Indemnified Person and (ii) a claim by any Bank against the Company, or by the Company against any Bank, that is found in a final nonappealable judgment by a court of competent jurisdiction in favor of the Company (it being understood and agreed that this clause (ii) shall not affect or limit any amount the Company may owe to any Bank as a result of any such claim pursuant to Section 10.04). The agreements in this Section shall survive payment of all other Obligations. 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. 10.07 Successors and Assigns. The provisions of this Agreement (including, without limitation, any provisions relating solely to BofA) shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Company may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of the Agent and each Bank. 10.08 Assignments, Participations, etc. (a) Any Bank may, with the written consent of the Company (at all times other than during the existence of an Event of Default), the Agent and the Swing Line Bank, which consents shall not be unreasonably withheld (it being understood that it is not unreasonable for the Company to withhold consent with respect to an assignment to a Direct Competitor), at any time assign and delegate to one or more Eligible Assignees (provided that no written consent of the Company, the Agent or the Swing Line Bank shall be required in connection with any assignment and delegation by a Bank to an Eligible Assignee that is an Affiliate of such Bank) (each an "Assignee") all, or any ratable part of all, of the Loans, the Commitments and the other rights and obligations of such Bank hereunder, in a minimum amount which, when added to the amount of any concurrent assignment being made by such Bank to the same assignee pursuant to Section 10.08 of the Company's September 25, 1998 $1,000,000,000 364-Day Credit Agreement, as from time to time amended (the "364-Day Credit Agreement"), is at least equal to $10,000,000 (or, if less, the entire amount of its Commitments and Loans); provided, however, that the Company and the Agent may continue to deal solely and directly with such Bank in connection with the interest so assigned to an Assignee until (i) written notice of such assignment, together with payment instructions, addresses and related information with respect to the Assignee, shall have been given to the Company and the Agent -71- by such Bank and the Assignee; (ii) such Bank and its Assignee shall have delivered to the Company and the Agent an Assignment and Acceptance in the form of Exhibit F ("Assignment and Acceptance") together with any Note or Notes subject to such assignment and (iii) the assignor Bank or Assignee has paid to the Agent a processing fee (in respect of any assignment under this Section 10.08 and any concurrent assignment by such assignor Bank to such Assignee under Section 10.08 of the 364-Day Credit Agreement) in the amount of $3,500. (b) From and after the date that the Agent notifies the assignor Bank that it has received (and provided its consent with respect to) an executed Assignment and Acceptance and payment of the above-referenced processing fee, (i) the Assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, shall have the rights and obligations of a Bank under the Loan Documents, and (ii) the assignor Bank shall, to the extent that rights and obligations hereunder and under the other Loan Documents have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under the Loan Documents. (c) Within five Business Days after its receipt of notice by the Agent that it has received an executed Assignment and Acceptance and payment of the processing fee (and provided that it consents to such assignment in accordance with subsection 10.08(a) to the extent required thereby), the Company shall, to the extent required by the Agent or requested by the Agent or the applicable Banks, execute and deliver to the Agent new Notes evidencing such Assignee's assigned Loans and Commitment and, if the assignor Bank has retained a portion of its Loans and its Commitment, replacement Notes in the principal amount of the Loans retained by the assignor Bank (such Notes to be in exchange for, but not in payment of, the Notes held by such Bank). Immediately upon each Assignee's making its processing fee payment under the Assignment and Acceptance, this Agreement shall be deemed to be amended to the extent, but only to the extent, necessary to reflect the addition of the Assignee and the resulting adjustment of the Commitments arising therefrom. The Commitment allocated to each Assignee shall reduce such Commitments of the assigning Bank pro tanto. (d) Any Bank may at any time sell to one or more commercial banks or other Persons not Affiliates of the Company (a "Participant") participating interests in any Loans, the Commitment of that Bank and the other interests of that Bank (the "Originator") hereunder and under the other Loan Documents; provided, however, that (i) the Originator's obligations under this Agreement shall remain unchanged, (ii) the Originator shall remain solely responsible for the performance of such obligations, (iii) the Company and the Agent shall continue to deal solely and directly with the Originator in connection with the Originator's rights and obligations under this Agreement and the other Loan Documents, and (iv) no Bank shall transfer or grant any participating interest under which the Participant has rights to approve any amendment to, or any consent or waiver with respect to, this Agreement or any other Loan, except to the extent such amendment, consent or waiver would require unanimous consent of the Banks as described in the first proviso to Section 10.01. In the case of any such participation, the Participant shall be entitled to the benefit of Sections 3.01, 3.03 and 10.05 as though it were also a Bank hereunder; provided, that the Participant shall not receive any amount thereunder in excess of what would have been payable to the participating Bank. If amounts outstanding under this Agreement are due and unpaid, or shall have been declared or shall have become due and payable upon the -72- occurrence of an Event of Default, each Participant shall be deemed to have the right of set-off in respect of its participating interest in amounts owing under this Agreement to the same extent as if the amount of its participating interest were owing directly to it as a Bank under this Agreement. (e) Notwithstanding any other provision in this Agreement, any Bank may at any time create a security interest in, or pledge, all or any portion of its rights under and interest in this Agreement and the Note held by it in favor of any Federal Reserve Bank in accordance with Regulation A of the FRB or U.S. Treasury Regulation 31 CFR ss.203.14, and such Federal Reserve Bank may enforce such pledge or security interest in any manner permitted under applicable law. 10.09 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 other than in connection with or in enforcement of this Agreement and the other Loan Documents or in connection with other business now or hereafter existing or contemplated with the Company or any Subsidiary 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 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; and (I) to its Affiliates, provided that such Affiliates are neither Direct Competitors nor insurance companies. 10.10 Set-off. In addition to any rights and remedies of the Banks provided by law, if an Event of Default under Section 8.01(a) exists or the Loans have been accelerated, each Bank 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 Bank 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 -73- unmatured. 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. 10.11 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. 10.12 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. 10.13 Severability. The illegality or unenforceability of any provision of this Agreement or any instrument or agreement required hereunder shall not in any way affect or impair the legality or enforceability of the remaining provisions of this Agreement or any instrument or agreement required hereunder. 10.14 No Third Parties Benefited. This Agreement is made and entered into for the sole protection and legal benefit of the Company, the Banks, the Agent and the Agent-Related Persons, and their permitted successors and assigns, and no other Person shall be a direct or indirect legal beneficiary of, or have any direct or indirect cause of action or claim in connection with, this Agreement or any of the other Loan Documents. 10.15 Governing Law and Jurisdiction. (a) THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF ILLINOIS (WITHOUT GIVING EFFECT TO CONFLICTS OF LAWS PROVISIONS THEREOF); PROVIDED, THAT THE AGENT AND THE BANKS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW. (b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF ILLINOIS OR OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF ILLINOIS AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE COMPANY, THE AGENT AND THE BANKS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE COMPANY, THE AGENT AND THE BANKS IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. 10.16 Waiver of Jury Trial. THE COMPANY, THE BANKS AND THE AGENT EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS -74- AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE COMPANY, THE BANKS AND THE AGENT EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS. 10.17 Entire Agreement. This Agreement, together with the other Loan Documents, 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] -75- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered in Chicago, Illinois by their proper and duly authorized officers as of the day and year first above written. CONSECO, INC. By: --------------------------- Title: --------------------------- BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent By: --------------------------- Title: --------------------------- BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as a Bank and Swing Line Bank By: --------------------------- Title: --------------------------- -76- SCHEDULE 2.01 ------------- COMMITMENTS ----------- AND PRO RATA SHARES -------------------
Pro Rata Bank Commitment Share ---- ---------- ----- Bank of America National Trust and Savings Association $__________ ____% TOTAL $1,500,000,000 100%
-77- SCHEDULE 10.02 -------------- OFFSHORE AND DOMESTIC LENDING OFFICES, -------------------------------------- ADDRESSES FOR NOTICES --------------------- CONSECO, INC. - ------------- Conseco, Inc. 11825 North Pennsylvania Street Carmel, Indiana 46032 Attention: James S. Adams Telephone: (317) 817-6166 Facsimile: (317) 817-2161 With a copy to: Conseco, Inc. 11825 North Pennsylvania Street Carmel, Indiana 46032 Attention: John J. Sabl Telephone: (317) 817-6092 Facsimile: (317) 817-6327 BANK OF AMERICA NATIONAL TRUST - ------------------------------ AND SAVINGS ASSOCIATION, - ------------------------ as Agent Bank of America National Trust and Savings Association 231 South LaSalle Street Chicago, Illinois 60697 Attention: Denise Christy Telephone: (312) 828-4184 Facsimile: (312) 974-9524 AGENT'S PAYMENT OFFICE: - ---------------------- Bank of America National Trust and Savings Association Agency Administrative Services #5596 1850 Gateway Boulevard, Fifth Floor -78- Concord, California 94520 Attention: Sang Lee Agency Administrative Officer Telephone: (925) 675-8416 Facsimile: (925) 675-8500 BANK OF AMERICA NATIONAL TRUST - ------------------------------ AND SAVINGS ASSOCIATION, - ----------------------- as a Bank Domestic and Offshore Lending Office: 231 South LaSalle Street Chicago, Illinois 60697 Notices (other than Borrowing notices and Notices of Conversion/Continuation): Bank of America National Trust and Savings Association 231 South LaSalle Street Chicago, Illinois 60697 Attention: Debra L. Basler Telephone: (312) 828-3734 Facsimile: (312) 987-0889 -79- -----END PRIVACY-ENHANCED MESSAGE-----