EXHIBIT 4.2
SECOND AMENDMENT TO 364-DAY CREDIT AGREEMENT
AND AMENDMENT AND RESTATEMENT OF THE
$50,000,000 EXTENDIBLE COMMERCIAL NOTES
THIS SECOND AMENDMENT TO 364-DAY CREDIT AGREEMENT AND AMENDMENT AND
RESTATEMENT OF THE $50,000,000 EXTENDIBLE COMMERCIAL NOTES, dated as of
September 22, 2000 (this "Amendment"), is made by and among Conseco, Inc., an
---------
Indiana corporation (the" Company"), the various financial institutions
-------
signatory hereto (the "Banks") and Bank of America, N.A. formerly known as Bank
-----
of America National Trust and Savings Association, a national banking
association, individually and as agent for the Banks (the "Agent").
-----
W I T N E S S E T H:
WHEREAS, the Company, the Banks and the Agent are party to that certain
364-Day Credit Agreement, dated as of September 25, 1998, as amended (as
heretofore amended, the Credit Agreement) and the Loan Documents referred to
----------------
in the Credit Agreement;
WHEREAS, the Company and ▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇ Incorporated
(Merrill) are party to that certain ECN Dealer Agreement dated as of September
27, 1999, pursuant to which the Company issued $50,000,000 of Extendible
Commercial Notes (the Merrill Notes) dated September 28, 1999.
WHEREAS, the Company and Merrill wish to restate the Merrill Notes, as
hereinafter set forth; and
WHEREAS, the Company and the Banks have agreed to amend the Credit
Agreement on the terms and conditions herein set forth.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Definitions. Capitalized terms used but not otherwise defined herein
-----------
shall have the meanings assigned to such terms in the Credit Agreement (as
amended hereby).
2. Certain Amendments to Credit Agreement. The Credit Agreement is hereby
--------------------------------------
amended, effective on the date this Amendment becomes effective in accordance
with Section 3 hereof, as follows:
2.1 Section 1.01 - Amended Definitions.
----------------------------------
(1) The definition of "Applicable Offshore Rate Margin" in Section
1.01 of the Credit Agreement is hereby amended by deleting such definition
in its entirety and replacing it with the following:
"Applicable Offshore Rate Margin" means 2.50% per annum.
(2) The definition of "Current Commitment Termination Date" in Section
1.01 of the Credit Agreement is hereby amended by deleting such definition
in its entirety and replacing it with the following:
"Current Commitment Termination Date" means the earlier to occur of:
-----------------------------------
(a) December 31, 2001; or (b) the date on which the Loans are accelerated
in accordance with the provisions of this Agreement.
2.2 Additional Definitions. The following definitions are added to
----------------------
Section 1.01 of the Credit Agreement in proper alphabetical order:
"Appendix" means the Appendix attached as Schedule A to the Second
-------- ----------
Amendment, which is hereby incorporated by reference into the Credit
Agreement, as from time to time amended in accordance with the terms of
this Agreement.
"CIHC" means CIHC, Incorporated, a Delaware corporation.
----
"CIHC Guaranty" means a guaranty of CIHC substantially in the form
-------------
attached as Schedule B to the Second Amendment hereto.
-----------
"Second Amendment" means that certain Second Amendment to the
----------------
Agreement dated September 22, 2000.
2.3 Additional Definitions - Appendix. The definitions set forth in
---------------------------------
Section 1.01 of the Appendix are hereby incorporated by reference and added to
Section 1.01 of the Credit Agreement in proper alphabetical order. To the extent
Section 1.01 of the Credit Agreement contains defined terms that are also
defined in Section 1.01 of the Appendix, each such definition in the Credit
Agreement shall be deemed deleted and the Appendix definition substituted in
lieu thereof except that the term "Taxes", "Required Banks," "Business Day" and
"Loan Documents" as used in the Credit Agreement (but not the Appendix) shall
retain the meanings set forth in Section 1.01 of the Credit Agreement.
2.4 Commitment. Notwithstanding any provisions of the Credit
----------
Agreement to the contrary, including without limitation Section 2.01 thereof,
the Banks shall have no obligation to make, and shall not make, any additional
Loans, including, without limitation, Bid Loans. The aggregate Commitments shall
equal the outstanding principal amount of the Loans and shall be reduced
permanently by any payment of the principal of the Loans.
2.5 Interest. Sections 2.10(a) and (c) of the Credit Agreement are
-------- ---------------- ---
hereby amended to state in their entirety as follows:
-2-
"(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 plus 1.50%, as the case may be (and subject to the
Company's right to convert to other Types of Loans under Section 2.04).
------------
(1) Notwithstanding Section 2.04 or subsection (a) of this Section
------------ -------------- -------
2.10, upon the occurrence and during the continuance of an Event of Default
----
under Section 5.01(a) of the Appendix, 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 3.00%
(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 5.01(c) of the Appendix with respect to the Company's failure to
---------------
perform or observe any term, covenant or agreement contained in Section
-------
4.13, 4.14, 4.15, 4.16 or 4.17 of the Appendix as well as under Section-
---- ---- ---- ---- ---- --------
5.01(a) of the Appendix."
-------
2.6 Fees. Section 2.11(b) (Facility Fee) and 2.11(c) (Utilization
---- --------------- -------
Fees) of the Credit Agreement are hereby deleted in their entirety.
2.7 Mandatory Prepayments. Section 2.16 of the Credit Agreement is
--------------------- ------------
hereby amended and restated in its entirety to read as follows:
"2.18 Mandatory Prepayments. The Company agrees to perform all its
---------------------
obligations under Article II of the Appendix, which is hereby incorporated
by reference."
2.8 Affirmative Covenants. Article VI of the Credit Agreement is
---------------------
hereby amended and restated in its entirety to read as set forth in Article III
of the Appendix.
2.9 Negative Covenants. Article VII of the Credit Agreement is
------------------
hereby amended and restated in its entirety to read as set forth in Article IV
of the Appendix.
2.10 Events of Default. Section 8.01 of the Credit Agreement is
hereby amended and restated in its entirety to read as set forth in Section 5.01
------------
of the Appendix.
2.11 Schedule 2.01. Schedule 2.01 of the Credit Agreement shall be
-------------
amended to read as set forth in Schedule 2.01 hereof.
-------------
2.12 Renumbering. Any amendment of the Credit Agreement herein that
-----------
incorporates Articles, Sections, Schedules or Exhibits from the Appendix shall
be deemed to automatically renumber any Article, Section, Schedule or Exhibit
references therein to correspond to those of the Credit Agreement as amended.
-3-
3. Merrill Notes. The Merrill Notes are hereby exchanged, after giving
-------------
effect to repayments on the date hereof, for Loans under the Credit Agreement,
as hereby amended in an aggregate principal amount of $24,972,464. Merrill shall
be deemed to be a Bank, as defined under the Credit Agreement, as hereby
amended, with all rights, duties and obligations of such a Bank with a
Commitment of $24,972,464.
4. Conditions to Effectiveness of this Amendment. This Amendment shall
---------------------------------------------
become effective upon the satisfaction of the following conditions:
4.1 Executed Amendment. Receipt by the Agent of duly executed
------------------
counterparts of this Amendment from the Company and the Banks.
4.2 Restructuring. The other Relevant Facilities shall have been
-------------
amended in a form reasonably satisfactory to the Required Banks and the Reserve
required under the Appendix shall have been established and funded to the extent
required under the Appendix.
4.3 Resolutions; Incumbency. Receipt by the Agent of the following
-----------------------
documents:
(1) copies of the resolutions of the board of directors of the
Company authorizing the transactions contemplated hereby, certified as of
the date hereof by the Secretary or an Assistant Secretary of the Company;
and
(2) a certificate of the Secretary or an Assistant Secretary of the
Company, dated as of the date hereof, certifying the names and true
signatures of the officers of the Company authorized to execute, deliver
and perform, as applicable, this Amendment, and all other documents to be
delivered by the Company hereunder.
4.4 Organizational Documents; Good Standing. Receipt by the Agent of
---------------------------------------
(i) a certificate of the Secretary or an Assistant Secretary of the Company,
dated as of the date hereof, certifying as to the form of the articles of
incorporation and bylaws of the Company and (ii) a good standing certificate of
the Company from its state of incorporation.
4.5 CIHC Guaranty. Receipt by the Agent of the duly executed CIHC
-------------
Guaranty.
4.6 Resolutions; Incumbency - CIHC. Receipt by the Agent of the
------------------------------
following documents:
(1) copies of the resolutions of the board of directors of CIHC
authorizing the CIHC Guaranty, certified as of the date hereof by the
Secretary or an Assistant Secretary of CIHC; and
(2) a certificate of the Secretary or an Assistant Secretary of CIHC,
dated as of the date hereof, certifying the names and true signatures of
the officers of CIHC authorized
-4-
to execute, deliver and perform, as applicable, the CIHC Guaranty, and all
other documents to be delivered by CIHC hereunder.
4.7 Organizational Documents; Good Standing. Receipt by the Agent of
---------------------------------------
(i) a certificate of the Secretary or an Assistant Secretary of CIHC, dated as
of the date hereof, certifying as to the form of the articles of incorporation
and bylaws of CIHC and (ii) a good standing certificate as to CIHC from its
state of incorporation.
4.8 Opinion of Counsel. Receipt by the Agent of an opinion of counsel
------------------
to the Company and CIHC in form reasonably satisfactory to the Agent.
4.9 Prepayments.
-----------
(1) The Company shall have complied with its obligations under
Section 2.01(a) of the Appendix. The outstanding Loans under the Credit
Agreement to each Bank shall equal the amount of its Commitments set forth
in the attached Schedule 2.01; and
-------------
(2) On or before the effective date hereof, $50,000,000 shall have
been pledged as cash collateral to support the Specified D&O Facilities.
4.10 Fee. Receipt by the Agent for the benefit of the Banks of an
---
amendment fee in an amount equal to 1% of the outstanding principal amount of
the Loans under the Credit Agreement on the effective date hereof after giving
effect to the prepayments received on the effective date hereof.
4.11 Certificate. Receipt by the Agent of a certificate signed by a
-----------
Responsible Officer, dated as of the date hereof, stating that:
(1) no Default or Event of Default will exist after giving effect to
this Amendment; and
(2) since June 30, 2000, there has been no Material Adverse Effect
(except for changes in or adverse effects upon, the business, properties,
condition (financial or otherwise) of the Company and its Subsidiaries as
disclosed in press releases, public filings or otherwise in writing to the
Agent).
4.12 CFC. The Company shall have disclosed to the Banks in writing
---
any contractual restrictions on the ability of Conseco Finance Company to
distribute Available Net Proceeds to the Company and the Banks shall be
reasonably satisfied with such restrictions including, without limitation, any
such restrictions under the ▇▇▇▇▇▇ Agreement.
4.13 Miscellaneous. Receipt by the Agent of such other documents,
-------------
certificates, instruments or opinions as may reasonably be requested by the
Agent or the Banks.
-5-
5. Certain Representations and Warranties by the Company. In order to
-----------------------------------------------------
induce the Banks and the Agent to enter into this Amendment, the Company
represents and warrants to the Banks and the Agent that:
5.1 Authority. The Company has the right, power and capacity and has
---------
been duly authorized and empowered by all requisite corporate and required
shareholder action, if any, to enter into, execute, deliver and perform this
Amendment.
5.2 Validity. This Amendment has been duly and validly executed and
--------
delivered by the Company and constitutes its legal, valid and binding
obligation, enforceable against the Company in accordance with its terms, except
as enforcement thereof may be subject to the effect of any applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally and general principles of equity (regardless of
whether such enforcement is sought in a proceeding in equity or at law or
otherwise).
5.3 No Conflicts. The Company's execution, delivery and performance
------------
of this Amendment do not and will not violate (i) its certificate or articles of
incorporation or by laws, (ii) any law, rule, regulation, order, writ, judgment,
decree or award applicable to the Company, or (iii) any contractual obligation
to which the Company is a party or to which the Company or any of its properties
are subject, except to the extent that any violations as set forth in clauses
(ii) or (iii) would not result in a Material Adverse Effect.
5.4 Approvals. No authorization or approval or other action by, and
---------
no notice to or filing or registration with, any Governmental Authority or
regulatory body (other than those which have been obtained and are in force and
effect) is required in connection with the Company's execution, delivery and
performance of this Amendment.
5.5 CIHC Authority. CIHC has the right, power and capacity and has
--------------
been duly authorized and empowered by all requisite corporate and required
shareholder action, if any, to enter into, execute, deliver and perform the CIHC
Guaranty.
5.6 CIHC Guaranty Validity. The CIHC Guaranty has been duly and
----------------------
validly executed and delivered by CIHC and constitutes its legal, valid and
binding obligation, enforceable against CIHC in accordance with its terms,
except as enforcement thereof may be subject to the effect of any applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally and general principles of equity (regardless of
whether such enforcement is sought in a proceeding in equity or at law or
otherwise).
5.7 No Conflicts - CIHC. CIHC's execution, delivery and performance
-------------------
of the CIHC Guaranty do not and will not violate (i) its certificate or articles
of incorporation or by-laws, (ii) any law, rule, regulation, order, writ,
judgment, decree of award applicable to CIHC or (iii) any contractual obligation
to which CIHC is a party or to which CIHC or any of its properties are subject,
-6-
except to the extent any violations as set forth in clauses (ii) or (iii) would
not result in a Material Adverse Effect..
5.8 Approvals - CIHC. No authorization or approval or other action
----------------
by, and no notice to or filing or registration with, any Governmental Authority
or regulatory body (other than those which have been obtained and are in force
and effect) is required in connection with CIHC's execution, delivery and
performance of the CIHC Guaranty.
5.9 Incorporated Representations and Warranties. All representations
-------------------------------------------
and warranties contained in the Loan Documents are true and correct in all
material respects with the same effect as though such representations and
warranties had been made on and as of the date hereof and the effective date
hereof, except (i) as to any representations or warranties which expressly
related to an earlier date, in which event, such representations and warranties
are true in all material respects as of such date and (ii) except that (A)
Schedule 5.05 (Litigation), Schedule 5.13 (Investment Companies), Schedule 5.14
(Subsidiaries), Schedule 7.02(c) (Liens), and Schedule 7.02(g) (Permitted
Indentures) of the Credit Agreement are hereby amended to read in their entirety
as set forth in Schedule C to this Amendment, (B) the reference in Section 5.05
to the Credit Agreement to "September 1, 1998" shall be amended to be a
reference to "September 1, 2000", (C) all references in Section 5.11 of the
Credit Agreement to "December 31, 1997"shall be amended to be references to
"December 31, 1999", (D) Section 5.07(c) of the Credit Agreement is hereby
amended by the addition of the word "not" in the first line between the words
"could" and "reasonably", (E) all references in Section 5.11 of the Credit
Agreement to "June 30, 1998" shall be amended to be references to "June 30,
2000", and (F) Section 5.16 of the Credit Agreement shall be amended and
restated in its entirety to read as follows:
"5.16 Material Adverse Effect. Since June 30, 2000, there has been no
Material Adverse Effect (except for changes in or adverse effects upon, the
business, properties, condition (financial or otherwise) of the Company and
its Subsidiaries as disclosed in press releases, public filings or
otherwise in writing to the Agent on or before the effective date of the
Second Amendment."
5.10 No Defaults. No Default or Event of Default will exist after
-----------
giving effect to this Amendment.
6. Miscellaneous. The parties hereto hereby further agree as follows:
-------------
6.1 Further Assurances. Each of the parties hereto hereby agrees to
------------------
do such further acts and things and to execute, deliver and acknowledge such
additional agreements, powers and instruments as any other party hereto may
reasonably request which are required to carry into effect the purposes of this
Amendment and the Credit Agreement, as amended hereby.
-7-
6.2 Payment of Costs and Expenses. The Company agrees to pay on demand all
-----------------------------
expenses of the Agent (including the fees and out-of-pocket expenses of counsel
to the Agent) in connection with the negotiation, preparation, execution and
delivery of this Amendment.
6.3 Governing Law. THIS AMENDMENT SHALL BE DEEMED TO BE A CONTRACT MADE
-------------
UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF ILLINOIS.
6.4 Counterparts. This Amendment may be executed in one or more
-------------
counterparts, each of which, when executed and delivered, shall be deemed to be
an original and all of which counterparts, taken together, shall constitute but
one and the same document with the same force and effect as if the signatures of
all of the parties were on a single counterpart, and it shall not be necessary
in making proof of this Amendment to produce more than one such counterpart.
6.5 Headings. Headings used in this Amendment are for convenience of
--------
reference only and shall not affect the construction of this Amendment.
-8-
IN WITNESS WHEREOF, this Amendment has been duly executed and
delivered as of the date first above written.
CONSECO, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------
Title: Acting Chief Financial Officer
-----------------------------------
BANK OF AMERICA, N.A., as Agent
By: ______________________________________
Title: ____________________________________
BANK OF AMERICA, N.A., as a Bank
By: ______________________________________
Title: ___________________________________
[TO SECOND AMENDMENT TO CREDIT AGREEMENT]
S-1
THE CHASE MANHATTAN BANK, as a Bank
By: ______________________________________
Title: ___________________________________
[TO SECOND AMENDMENT TO CREDIT AGREEMENT]
S-2
FIRST UNION NATIONAL BANK, as a Bank
By: ______________________________________
Title: ___________________________________
[TO SECOND AMENDMENT TO CREDIT AGREEMENT]
S-3
▇▇▇▇▇▇ GUARANTY TRUST COMPANY OF NEW YORK, as a
Bank
By: ______________________________________
Title: ___________________________________
[TO SECOND AMENDMENT TO CREDIT AGREEMENT]
S-4
THE BANK OF NEW YORK, as a Bank
By: ______________________________________
Title: ___________________________________
[TO SECOND AMENDMENT TO CREDIT AGREEMENT]
S-5
BANK ONE, NA (Main Office Chicago), as a Bank
By: ______________________________________
Title: ___________________________________
[TO SECOND AMENDMENT TO CREDIT AGREEMENT]
S-6
SUNTRUST BANK, CENTRAL FLORIDA, N.A., as a Bank
By: ______________________________________
Title: ___________________________________
[TO SECOND AMENDMENT TO CREDIT AGREEMENT]
S-7
U.S. BANK NATIONAL ASSOCIATION, as a Bank
By: ______________________________________
Title: ___________________________________
[TO SECOND AMENDMENT TO CREDIT AGREEMENT]
S-8
THE BANK OF TOKYO-MITSUBISHI, LTD., as a Bank
By: ______________________________________
Title: ___________________________________
[TO SECOND AMENDMENT TO CREDIT AGREEMENT]
S-9
CREDIT SUISSE FIRST BOSTON, as a Bank
By: ______________________________________
Title: ___________________________________
By: ______________________________________
Title: ___________________________________
[TO SECOND AMENDMENT TO CREDIT AGREEMENT]
▇-▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇, ▇▇▇ ▇▇▇▇ and/or Cayman Islands
Branches, as a Bank
By: ______________________________________
Title: ___________________________________
By: ______________________________________
Title: ___________________________________
[TO SECOND AMENDMENT TO CREDIT AGREEMENT]
S-11
SOCIETE GENERALE (New York Branch), as a
Bank
By: ______________________________________
Title: ___________________________________
[TO SECOND AMENDMENT TO CREDIT AGREEMENT]
S-12
NATIONAL CITY BANK OF INDIANA, as a
Bank
By: ______________________________________
Title: ___________________________________
[TO SECOND AMENDMENT TO CREDIT AGREEMENT]
S-13
FIRSTAR BANK, N.A. (f/k/a Star Bank, N.A.), as
a Bank
By: ______________________________________
Title: ___________________________________
[TO SECOND AMENDMENT TO CREDIT AGREEMENT]
S-14
UBS AG, Stamford Branch, as a Bank
By: ______________________________________
Title: ___________________________________
[TO SECOND AMENDMENT TO CREDIT AGREEMENT]
S-15
COMERICA BANK, as a Bank
By: ______________________________________
Title: ___________________________________
[TO SECOND AMENDMENT TO CREDIT AGREEMENT]
S-16
KEYBANK NATIONAL ASSOCIATION, as a Bank
By: ______________________________________
Title: ___________________________________
[TO SECOND AMENDMENT TO CREDIT AGREEMENT]
S-17
NORDDEUTSCHE LANDESBANK GIROZENTRALE,
New York Branch and/or
Cayman Islands Branch, as a Bank
By: ______________________________________
Title: ___________________________________
[TO SECOND AMENDMENT TO CREDIT AGREEMENT]
S-18
SYNDICATED LOAN FUNDING TRUST
By: ______________________________________
Title:____________________________________
[TO SECOND AMENDMENT TO CREDIT AGREEMENT]
S-19
▇▇▇▇▇ FARGO BANK, NA, as a Bank
By: ______________________________________
Title:____________________________________
[TO SECOND AMENDMENT TO CREDIT AGREEMENT]
S-20
▇▇▇▇▇▇▇ LYNCH, PIERCE, ▇▇▇▇▇▇ & ▇▇▇▇▇
INCORPORATED, as a Bank
By: ______________________________________
Title:____________________________________
[TO SECOND AMENDMENT TO CREDIT AGREEMENT]
S-21
Schedule A - Appendix
================================================================================
APPENDIX
CONSECO, INC.
$3,028,576,848 CREDIT FACILITIES
DATED AS OF SEPTEMBER 22, 2000
BANK OF AMERICA, N.A. AND THE CHASE MANHATTAN BANK,
AS JOINT LEAD ARRANGERS AND JOINT BOOK MANAGERS
================================================================================
TABLE OF CONTENTS
Page
ARTICLE IDEFINITIONS....................................................................................................1
-----------
1.01 Certain Defined Terms..............................................................................1
---------------------
1.02 Other Interpretive Provisions.....................................................................20
-----------------------------
1.03 Accounting Principles.............................................................................21
---------------------
ARTICLE IIMANDATORY CASH APPLICATIONS..................................................................................21
---------------------------
2.01 General Application of Available Net Proceeds.....................................................21
---------------------------------------------
2.02 Application of Available Net Proceeds Allocated to Facilities.....................................22
-------------------------------------------------------------
2.03 Exempt Covenant/Waterfall Amounts.................................................................22
---------------------------------
ARTICLE IIIAFFIRMATIVE COVENANTS.......................................................................................23
---------------------
3.01 Financial Statements..............................................................................23
--------------------
3.02 Certificates; Other Information...................................................................24
-------------------------------
3.03 Notices...........................................................................................24
-------
3.04 Preservation of Corporate Existence, Etc. ........................................................26
-----------------------------------------
3.05 Insurance.........................................................................................26
---------
3.06 Payment of Obligations............................................................................26
----------------------
3.07 Compliance with Laws..............................................................................26
--------------------
3.08 Compliance with ERISA.............................................................................26
---------------------
3.09 Inspection of Property and Books and Records; Expense Reimbursement...............................26
-------------------------------------------------------------------
3.10 Tritel Disposition................................................................................27
------------------
3.11 Conversion of FELINE PRIDES.......................................................................27
---------------------------
ARTICLE IVNEGATIVE COVENANTS...........................................................................................27
------------------
4.01 Limitation on Indebtedness........................................................................27
--------------------------
4.02 Liens.............................................................................................28
-----
4.03 Disposition of Assets.............................................................................30
---------------------
4.04 Other Agreements..................................................................................31
----------------
4.05 Transactions with Affiliates......................................................................31
----------------------------
4.06 Change in Business................................................................................31
------------------
4.07 Fundamental Changes...............................................................................31
-------------------
4.08 Restricted Payments...............................................................................32
-------------------
4.09 Investments.......................................................................................32
-----------
4.10 Optional Payments; Modifications of Certain Agreements; Synthetic Purchase Agreements.............33
-------------------------------------------------------------------------------------
4.11 Negative Pledge on Tritel and Argosy Riverboat....................................................33
----------------------------------------------
4.12 Reserve Account...................................................................................34
---------------
4.13 Debt to Capitalization Ratio......................................................................34
----------------------------
4.14 Interest Coverage Ratio...........................................................................34
-----------------------
4.15 Conseco Adjusted Earnings.........................................................................35
-------------------------
4.16 Conseco Finance Tangible Net Worth................................................................35
----------------------------------
4.17 Risk-Based Capital Ratio..........................................................................35
------------------------
ARTICLE VEVENTS OF DEFAULT.............................................................................................36
-----------------
5.01 Events of Default.................................................................................36
-----------------
SCHEDULES
Schedule 1.01A Certain Material Insurance Subsidiaries
Schedule 1.01B Specified Cash Events
Schedule 1.01C Changes in Future Loss Reserves
Schedule 1.01D Persons Not Subsidiaries
Schedule 2.02 Exposure on Effective Date
Schedule 4.01(c) Indebtedness
Schedule 4.02(c) Existing Liens
Schedule 4.02(g) Permitted Indentures
Schedule 4.03(m) Dispositions of Investments
Schedule 4.06 Business Activities
Schedule 4.09(b) Proposed Investments
EXHIBITS
Exhibit A Form of Compliance Certificate
Exhibit B Form of Reserve Account Agreement
ARTICLE I
DEFINITIONS
I.1 Certain Defined Terms. The following terms, when used
in this Appendix, have the following meanings:
"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 any "Relevant Agent" under and as defined in
the documents governing any Facility.
"A.M. Best" means A.M. Best Company, together with any
Person succeeding thereto by merger, consolidation or acquisition of
all or substantially all of its assets, including substantially all
of its business of rating insurance companies.
"A.M. Best A- Status" means the circumstance that each
Material Insurance Subsidiary listed on Schedule 1.01A has a claims
paying rating of at least A- from A.M. Best.
"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.
"Appendix" means this Appendix as amended, restated,
supplemented or otherwise modified from time to time.
"Asset Backed Security" means a security of a Conseco
Finance Entity that is collateralized by loans, leases, receivables,
installment contracts or interests in or components of Interest Only
Securities.
"Asset Sale" means any Disposition of property or series of
related Dispositions of property, excluding any such Disposition
permitted by clauses (a) through (m) and clause (o) of Section 4.03
(but in any event including (whether or not permitted by any of the
foregoing clauses) any direct or indirect (a) Disposition of all or
any part of the Capital Stock issued by Conseco Finance, Tritel,
Inc., Conseco Entertainment, Inc. or CNC Entertainment LLC, (b)
Disposition of all or any part of the assets of Tritel, Inc. or CNC
Entertainment LLC and (c) receipt of cash proceeds in respect of any
Specified Cash Event (each, a "Disposition Transaction") that yields
gross proceeds to Conseco and its Subsidiaries in excess of
$10,000,000, provided that, once the aggregate gross proceeds from
Disposition Transactions received during any Proceeds Test Period
yielding gross proceeds between $2,000,000 and $10,000,000 exceeds
$20,000,000, the first reference to $10,000,000 in this definition
shall automatically be deemed to be changed to $2,000,000 for the
remainder of such Proceeds Test Period. As used in this definition,
"Proceeds Test Period" means (i) the period from the Effective Date
through the Near-Term Facilities Termination Date and (ii) each
subsequent one-year period commencing on the Near-Term Facilities
Termination Date or an anniversary thereof.
"Available Basket Amount" means, at any time, an amount
equal to (a) ten percent (10%) of Total Shareholders' Equity at such
time minus (b) the aggregate then outstanding amount of Indebtedness
secured by Liens, without duplication, pursuant to Section
4.02(i)(i), (ii) (of Conseco or any "Significant Subsidiary" (as
defined in the Public Debt)), (iii) or (iv).
"Available Net Proceeds" means any Net Proceeds received by
Conseco or any of its Subsidiaries in connection with any Prepayment
Event other than Exempt Covenant/Waterfall Amounts and Exempt
Waterfall Amounts applied in the manner described in clause (b) of
the definition of "Exempt Waterfall Amounts".
"B-Share Financings" means the financing of fees or
commissions related to B-Shares.
"B-Shares" means those shares of ownership representing a
mutual interest in a pool of assets on which l2b-1 fees or contingent
deferred sales commissions (CDSC), as defined under the Investment
Company Act of 1940, are applicable.
"Bank" means each "Relevant Bank" under and as defined in
the documents governing any Facility.
"Bankruptcy Code" means the Federal Bankruptcy Reform Act
of 1978 (11 U.S.C.ss.101, et seq.).
"Business Day" means any day other than a Saturday, Sunday
or other day on which commercial banks in Chicago or New York City
are authorized or required by law to close.
"Calculation Period" means, with respect to any ratio or
calculation, the period for which such ratio or calculation is being
calculated.
"Capital and Surplus" means, as to any Insurance
Subsidiary, as of any date, the total amount shown on line 38, page
3, column I 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
Appendix, 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.
2
"Capital Stock" means any and all shares, interests,
participations or other equivalents (however designated) of capital
stock of a corporation, any and all equivalent ownership interests in
a Person (other than a corporation) and any and all warrants, rights
or options to purchase any of the foregoing.
"Cash Collateral Agreement" means any cash collateral
agreement provided to secure obligations of Conseco or any of its
Subsidiaries pursuant to any D&O Facility.
"Cash Equivalents" means (a) marketable direct obligations
issued by, or unconditionally guaranteed by, the United States
government or issued by any agency thereof and backed by the full
faith and credit of the United States, in each case maturing within
one year from the date of acquisition; (b) certificates of deposit,
time deposits, eurodollar time deposits or overnight bank deposits
having maturities of six months or less from the date of acquisition
issued by any commercial bank organized under the laws of the United
States or any state thereof having combined capital and surplus of
not less than $500,000,000 and a short term deposit rating of at
least A-1 by S&P and P-1 by ▇▇▇▇▇'▇, or carrying an equivalent rating
by a nationally recognized rating agency, if both of the two named
rating agencies cease publishing ratings of commercial paper issuers
generally; (c) commercial paper of an issuer rated at least A-1 by
S&P and P-1 by ▇▇▇▇▇'▇, or carrying an equivalent rating by a
nationally recognized rating agency, if both of the two named rating
agencies cease publishing ratings of commercial paper issuers
generally, and maturing within six months from the date of
acquisition; (d) repurchase obligations of any Relevant Bank or of
any commercial bank satisfying the requirements of clause (b) of this
definition, having a term of not more than 30 days, with respect to
securities issued or fully guaranteed or insured by the United States
government; (e) securities with maturities of one year or less from
the date of acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States, by any political
subdivision or taxing authority of any such state, commonwealth or
territory or by any foreign government, the securities of which
state, commonwealth, territory, political subdivision, taxing
authority or foreign government (as the case may be) are rated at
least A by S&P and A2 by ▇▇▇▇▇'▇; (f) securities with maturities of
six months or less from the date of acquisition backed by standby
letters of credit issued by any Relevant Bank or any commercial bank
satisfying the requirements of clause (b) of this definition; or (g)
shares of money market mutual or similar funds which invest
exclusively in assets satisfying the requirements of clauses (a)
through (f) of this definition.
"Cash on Hand Target" has the meaning set forth in Section
2.01(b).
"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.
3
"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 l3d-3 of the Securities and
Exchange Commission under the Exchange Act) of 30% or more of the
outstanding shares of voting stock of Conseco (other than an
acquisition by any Person or Persons who are officers or directors of
Conseco on the Effective Date or any Affiliate thereof controlled by
the relevant officer or director); or (b) during any period of 25
consecutive calendar months, commencing on the Effective Date, the
ceasing of those individuals who were not borrowers under any of the
D&O Facilities (the "Continuing Directors") who (i) were directors of
Conseco on the first day of each such period or (ii) subsequently
became directors of Conseco 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 Conseco, to constitute a majority of the board of directors of
Conseco; or (c) ▇▇▇▇ ▇▇▇▇▇ or such other Person as shall be
reasonably satisfactory to the Required Banks shall cease to be the
Chief Executive Officer of Conseco (other than by reason of death or
disability) at any time prior to the Near-Term Facilities Termination
Date.
"CIHC" means CIHC, Incorporated, a Delaware corporation,
and a direct Wholly-Owned Subsidiary of Conseco.
"CIHC Guaranty" means any "Relevant CIHC Guaranty" under
and as defined in the documents governing any Facility.
"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, as amended,
and regulations promulgated thereunder.
"Collateral Agreement" means the Collateral Agreement,
dated as of May 30, 2000, made by Conseco and CIHC in favor of the
Collateral Agent named therein.
"Compliance Certificate" means a certificate substantially
in the form of Exhibit A.
"Conseco" means Conseco, Inc., an Indiana corporation.
"Conseco Adjusted Earnings" means, for any Calculation
Period, the consolidated Net Income of Conseco for such period plus,
without duplication and to the extent reflected as a charge in the
statement of such Net Income for such period, the sum of (a) income
tax expense, (b) interest expense, amortization or writeoff of debt
discount and debt issuance costs and commissions, discounts and other
fees and charges associated with Indebtedness, (c) depreciation and
amortization expense, (d) amortization of intangibles (including, but
not limited to, goodwill, deferred acquisition costs, the present
value of future profits and changes in future loss reserves described
on Schedule 1.01C) and organization costs, (e) net changes in
Interest Only Securities, (f) any extraordinary, unusual or
non-recurring non-cash expenses or losses (including, whether or not
otherwise includable as a separate item in the statement of such Net
Income for such period, non-cash losses on sales of assets outside of
the ordinary course of business), (g) any other non-cash charges
(provided that the after tax amounts described in clauses (f) and (g)
shall not exceed in the aggregate$500,000,000 for any Calculation
Period ending on or before September 30, 2001, and $50,000,000 for
any Calculation Period ending thereafter), and (h) realized or
unrealized losses on Investments of Insurance Subsidiaries, and
minus, to the extent included in the statement of such Net Income for
such period, the sum of (a) any extraordinary, unusual or
non-recurring income or gains (including, whether or not otherwise
includable as a separate item in the statement of such Net Income for
such period, gains on the sales of assets outside of the ordinary
course of business) and (b) realized or unrealized gains on
Investments of Insurance Subsidiaries, all as determined on a
consolidated basis.
4
"Conseco Available Cash Flow" means, for any Calculation
Period, the sum, without duplication, of (a) dividends paid in cash
to Conseco by any Subsidiary, plus (b) interest paid in cash to
Conseco by any Subsidiary pursuant to any intercompany Indebtedness
owing by such Subsidiary to Conseco, plus (c) interest or principal
paid in cash to Conseco with respect to the Surplus Debentures, plus
(d) amounts paid in cash to Conseco under the Tax Sharing Agreement,
plus (e) management and other similar fees received by Conseco under
servicing agreements or otherwise from any Subsidiary, plus (f)
amounts paid in cash to Conseco pursuant to a loan made to it by any
Subsidiary, plus (g) amounts paid in cash to Conseco by Conseco
Finance pursuant to the redemption by Conseco Finance of preferred
equity issued by Conseco Finance and owned by Conseco plus (h)
Conseco's Investment Income received in cash, plus (i) in respect of
any Fiscal Quarter ended on or prior to December 31, 2000, amounts
paid by Conseco in closing out swaps in an amount not to exceed
$15,000,000 less the value of the collateral attributable to the
relevant swaps, minus (j) cash operating expenses of Conseco, minus
(k) capital expenditures of Conseco, minus (l) any amounts paid by
Conseco in repayment of any loan referred to in clause (f) above.
Amounts received by Conseco or any of its Subsidiaries in respect of
any Specified Cash Event shall be excluded from this calculation.
"Conseco Finance" means Conseco Finance Corp., a Delaware
corporation.
"Conseco Finance Entities" means, collectively, Conseco
Finance and its consolidated Subsidiaries and "Conseco Finance
Entity" means any one of them individually.
"Conseco Finance Tangible Net Worth" means, at any date,
all amounts that would, in conformity with GAAP, be included on a
consolidated balance sheet of Conseco Finance and its Subsidiaries
under stockholders' equity at such date, as adjusted by the following
items to the extent increasing or reducing, as the case may be, such
amounts: plus (a) unrealized losses (or, if applicable, minus
unrealized gains), plus (b) any non-cash charges specified in clause
(f) or (g) of the definition of Conseco Adjusted Earnings (subject to
the limits applicable thereto) minus (c) goodwill, minus (d) Interest
Only Securities, minus (e) servicing rights plus (f) the amount of
any cash dividends paid by Conseco Finance to Conseco (directly or
indirectly). If all or any portion of any intercompany Indebtedness
owing to Conseco or any of its Subsidiaries by Conseco Finance or any
of its Subsidiaries is converted into equity, no positive impact of
such conversion shall be included in determining Conseco Finance
Tangible Net Worth.
"Conseco Guaranty" means any "Relevant Conseco Guaranty"
under and as defined in the documents governing any Facility.
"Conseco Series F Preferred Stock" means $500,000,000
stated value of Conseco's Series F Common Linked Convertible
Preferred Stock, without par value and any replacement thereof,
except to the extent held by any Person (other than ▇▇▇▇▇▇ ▇. ▇▇▇ or
any Person, fund or individual affiliated therewith) that acquires
such stock pursuant to a bona fide arm's length transaction.
"Conseco's Cash On Hand" means, on any date of
determination, the aggregate amount of cash and Cash Equivalents then
held by (a) Conseco or (b) Conseco Finance or any of its Subsidiaries
in connection with Investments made pursuant to Section 4.09(a)(i)(y)
or (z), excluding amounts in the Reserve and amounts required on such
date to be distributed pursuant to Section 2.01(b).
5
"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, (b) the obligations of Conseco in
connection with its guaranty of the Trust Preferred Securities, the
Unit Securities and the FELINE PRIDES 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
Conseco, 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.
"D&O Facilities" means the collective reference to the $144
Million D&O Facility, the $181 Million D&O Facility and the $245
Million D&O Facility.
"Debt to Total Capitalization Ratio" means, as of any date
of determination, without duplication, the ratio of (a) the sum of
(i) the principal amount of and accrued but unpaid interest on all
Indebtedness for borrowed money of Conseco (including, without
limitation, (x) any Indebtedness evidenced by bonds, debentures,
notes or other similar instruments and (y) any Indebtedness resulting
from any conversion of preferred stock) for which Conseco is directly
liable on such date and which is neither a Contingent Obligation
(except that Contingent Obligations of Conseco in respect of
Indebtedness of the type described in clause (a) or (b) of the
definition thereof (other than in respect of the D&O Facilities)
shall nevertheless be included in such calculation) nor Indebtedness
arising out of a Permitted Transaction and (ii) dividends on Trust
Preferred Securities that are accrued but unpaid; 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 preferred securities issued by
business trusts formed by Conseco, guaranteed by Conseco and related
to guarantees and intercompany notes.
"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.
"Department" means, with respect to any Insurance
Subsidiary, the Governmental Authority of such Insurance Subsidiary's
state of domicile with which such Insurance Subsidiary is required to
file its Annual Statement.
"Disposition" means the sale, assignment, leasing,
transfer, contribution, conveyance, issuance or other disposal of or
granting of options, warrants or other rights with respect to any of
a Person's assets (including any transaction pursuant to a
Reinsurance Agreement and, in the case of any Subsidiary, the
issuance or sale of its Capital Stock). The terms "Dispose" and
"Disposed of" shall have correlative meanings.
"Disposition Transaction" has the meaning specified in the
definition of "Asset Sale".
6
"Dollars", "dollars" and "$" each mean lawful money of the
United States.
"Effective Date" September 22, 2000.
"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, 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 Conseco 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 Conseco 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 Conseco 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 (e) the imposition of any liability under Title IV of ERISA, other
than PBGC premiums due but not delinquent under Section 4007 of
ERISA, upon Conseco or any ERISA Affiliate.
"Event of Default" means any of the events or circumstances
specified in Section 5.01.
"Exchange Act" means the Securities Exchange Act of 1934
and the regulations promulgated thereunder.
"Exempt Covenant/Waterfall Amounts" means up to
$500,000,000 of Net Proceeds from the issuance of Specified Junior
Securities received after the Near-Term Facilities Termination Date.
"Exempt Waterfall Amounts" means Net Proceeds of Specified
Junior Securities (not designated as "Exempt Covenant/Waterfall
Amounts") which are applied either (a) (i) prior to the Near-Term
Facilities Termination Date, to the Near-Term Facilities (in the
manner contemplated by Section 2.02(b)) and (ii) thereafter, to the
$1.5 Billion Facility and the Specified D&O Facilities (in the manner
contemplated by Section 2.02(c)) or (b) to make investments in
Conseco's Subsidiaries to support their operations.
7
"Exposure" means, with respect to each Bank, (a) in the
case of the $155 Million Facility, the $766 Million Facility and the
$1.5 Billion Facility, any outstanding "Loans" made by such Bank
thereunder and (b) in the case of the D&O Facilities, any outstanding
"Loans" made by such Bank thereunder minus such Bank's pro rata share
of any cash collateral provided pursuant to the applicable Cash
Collateral Agreement.
"Facilities" means the collective reference to the
Near-Term Facilities, the D&O Facilities and the $1.5 Billion
Facility.
"FELINE PRIDES" means the units consisting of (a) 6.75%
Trust Originated Preferred Securities issued by Conseco Financing
Trust IV (the "PRIDES Preferred Securities") and (b) a purchase
contract to purchase shares of common stock from Conseco (the "PRIDES
Purchase Contracts").
"Fiscal Quarter" means any fiscal quarter of a Fiscal Year.
"Fiscal Year" means any period of twelve consecutive
calendar months ending on December 31.
"Fixed Interest Charges" means, for any Calculation Period,
(without duplication) (a) interest paid or, without duplication,
accrued but unpaid on the Exposure under any Facility (other than the
D&O Facilities) with respect to such Calculation Period, plus (b)
interest paid or, without duplication, accrued but unpaid on any
Indebtedness of Conseco set forth in clause (a), (b) or (d) of the
definition thereof during such Calculation Period, minus (c) to the
extent included in clause (b) above, interest paid or, without
duplication, accrued but unpaid on any Indebtedness which has been
eliminated from the balance sheet liabilities of Conseco on a
consolidated basis in accordance with GAAP, minus (d) to the extent
included in clause (b) above, interest paid or, without duplication,
accrued but unpaid on any Indebtedness of any Conseco Finance Entity
or any Insurance Subsidiary. Interest paid, or accrued and unpaid, in
respect of Indebtedness related to the Trust Preferred Securities or
the FELINE PRIDES shall be excluded from the above calculation.
"FRB" means the Board of Governors of the Federal Reserve
System, and any Governmental Authority succeeding to any of its
principal functions.
"FY 2000 Adjustments" has the meaning specified in the
definition of "Total Capitalization".
"GAAP" means generally accepted accounting principles set
forth from time to time in the opinions and pronouncements of the
Accounting Principles Board and the American Institute of Certified
Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board (or agencies with similar functions of
comparable stature and authority within the U.S. accounting
profession), which are applicable to the circumstances as of the date
of determination.
"Governmental Authority" means any nation or government,
any state or other political subdivision thereof, any central bank
(or similar monetary or regulatory authority) thereof, any entity
exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, and any
corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing, including
any board of insurance, insurance department or insurance
commissioner.
"Income Taxes" means any Taxes based upon net income.
8
"Indebtedness" means, with respect to any Person, without
duplication: (a) all obligations of such Person for borrowed money or
in respect of loans or advances; (b) all obligations of such Person
evidenced by bonds, debentures, notes or other similar instruments;
(c) all obligations in respect of letters of credit, whether or not
drawn, and bankers' acceptances 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 of the kind referred to in clauses (a)
through (f) above or clause (h) below in which such Person is a
general partner, and (h) all Contingent Obligations of such Person in
connection with indebtedness or obligations of others of the kinds
referred to in clauses (a) through (g) above; provided, however,
that, except for the purpose of the proviso of Section 4.01(d), 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 or a Conseco Finance Entity 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.
"Independent Auditor" has the meaning specified in Section
3.01(a).
"Insignificant Subsidiary" means any Subsidiary of Conseco
that is not a Significant Subsidiary.
"Insolvency Proceeding" means, with respect to any Person,
(a) any case, action or proceeding with respect to such Person before
any court or other Governmental Authority relating to bankruptcy,
reorganization, insolvency, liquidation, conservation,
rehabilitation, receivership, dissolution, winding-up or relief of
debtors, or (b) any general assignment for the benefit of creditors,
composition, marshalling of assets for creditors, or other, similar
arrangement in respect of its creditors generally or any substantial
portion of its creditors, in any case, undertaken under U.S. Federal,
state or foreign law, including the Bankruptcy Code.
"Insurance Subsidiary" means any Subsidiary which is
required to be licensed as an insurer or reinsurer.
"Interest Coverage Ratio" means, for any Calculation
Period, the ratio of (a) Conseco Available Cash Flow for such
Calculation Period to (b) Fixed Interest Charges for such Calculation
Period.
"Interest Only Security" means any interest, including
servicing fees, retained by a Conseco Finance Entity 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.
"Investment" means any advance, loan, extension of credit
(by way of guaranty or otherwise) or capital contribution to, or
purchase of any Capital Stock, bonds, notes, debentures or other debt
securities of, or any assets constituting a business unit of, or any
other investment in, any Person.
9
"Investment Grade Ratings Status" means the circumstance
that Conseco has a senior unsecured non-credit enhanced long-term
debt rating of at least BBB- from S&P and at least Baa3 from Moody's.
"Investment Income" means the amount of earnings of Conseco
on Investments, net of expenses actually incurred in connection with
such Investments and taking into account realized gains and losses on
such Investments.
"IRS" means the Internal Revenue Service or any
Governmental Authority succeeding to any of its principal functions
under the Code.
"▇▇▇▇▇▇" means ▇▇▇▇▇▇ Brothers Holdings Inc., and any
successors.
"▇▇▇▇▇▇ Agreement" means, collectively, (a) the Amended and
Restated Agreement, dated as of September 22, 2000, by and among
Conseco Finance Corp., Conseco, CIHC, Green Tree Residual Finance
Corp. I, Green Tree Finance Corp. - Five and ▇▇▇▇▇▇, (b) Amendment to
the Warehouse Debt Facility, dated as of September 22, 2000, by and
among ▇▇▇▇▇▇ Commercial Paper Inc. and Green Tree Finance Corp. -
Five and acknowledged and consented to by Conseco Finance Corp. and
CIHC, (c) Amendment to the First Residual Facility (Asset Assignment
Agreement), dated as of September 22, 2000, by and among ▇▇▇▇▇▇ ▇▇▇
Inc. and Green Tree Residual Finance Corp. I and (d) Amendment to the
Second Residual Facility (Master Repurchase Agreement), dated as of
September 22, 2000, by and among ▇▇▇▇▇▇ Brothers Inc. and Green Tree
Residual Finance Corp. I, in each case, as amended, supplemented or
otherwise modified from time to time, and any related document or
agreement (including the agreements amended or modified by the
agreements specified above).
"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
or the contingent obligation to equally and ratably secure the Public
Debt.
"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 Conseco or
any of its Subsidiaries or any of its or their businesses or
operations.
"Loan Documents" means the "Loan Documents" under and as
defined in the documents governing the Relevant Facility, including,
in any event, this Appendix and the Relevant CIHC Guaranty.
10
"Longer-Term Public Debt" means Conseco's 8.5% Notes due
October 15, 2002, 6.4% Notes due February 10, 2003, 8-1/8% Senior
Notes due February 15, 2003, 10.5% Senior Notes due December 15,
2004, 8.75% Notes due February 9, 2004, 6.8% Notes due June 15, 2005
and 9% Notes due October 15, 2006.
"Material Adverse Effect" means (a) a material adverse
change in, or a material adverse effect upon, the business,
properties, condition (financial or otherwise) of Conseco or Conseco
and its Subsidiaries taken as a whole; (b) a material impairment of
the ability of Conseco to perform under any Loan Document; or (c) a
material adverse effect upon the legality, validity, binding effect
or enforceability against Conseco of any Loan Document.
"Material Insurance Subsidiary" means an Insurance
Subsidiary having Capital and Surplus of $50,000,000 or more.
"Moody's" means ▇▇▇▇▇'▇ 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 Conseco or any
ERISA Affiliate makes, is making, or is obligated to make
contributions or, during the preceding three calendar years, has
made, or been obligated to make, contributions.
"NAIC" means the National Association of Insurance
Commissioners or any successor thereto, or in 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.
"Near-Term Facilities" means the collective reference to
the $155 Million Facility and the $766 Million Facility.
"Near-Term Facilities Termination Date" means the date on
which all "Obligations" under and as defined in the documents
governing the $155 Million Facility and the $766 Million Facility
have, in both cases, been paid in full in cash.
"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.
11
"Net Proceeds" means (a) with respect to any Disposition by
any Person, the aggregate amount of cash and Cash Equivalents
received by such Person in respect of such Disposition (including any
such amounts received by way of deferred payment of principal
pursuant to a note or installment receivable or purchase price
adjustment receivable or otherwise, but only as and when received)
minus the sum of (i) costs and expenses (including legal fees,
notarial fees, accountants fees, investment banking fees, survey
costs, title insurance premiums, amounts applied to the repayment of
Indebtedness (other than under a Facility) secured by a Lien
expressly permitted hereunder on any asset that is the subject of
such Disposition, costs of discontinuance (including, without
limitation, any reasonable severance payments), Taxes other than
Income Taxes (after taking into account any available tax credits or
deductions and any tax sharing arrangements) and other customary fees
and expenses) incurred in connection with such Disposition and
required to be paid in cash or deducted from the proceeds of such
Disposition, (ii) the estimated Income Tax actually required to be
paid in cash by such Person in connection with such Disposition
(after taking into account any available tax credits or deductions
and any tax sharing arrangements), (iii) purchase price adjustments
reasonably expected to be payable in connection therewith (not to
exceed 10% of the purchase price for the relevant Disposition) so
long as, if any such amount ceases to be payable, it shall then
become "Net Proceeds", (iv) for an Insurance Subsidiary, any amounts
which the Department will not permit such Insurance Subsidiary to pay
out as a result of such Disposition and (v) for a Conseco Finance
Entity, any amounts which the ▇▇▇▇▇▇ Agreement will not permit such
Conseco Finance Entity to distribute to CIHC or Conseco as a result
of such Disposition, so long as, if any such amount becomes so
distributable under the ▇▇▇▇▇▇ Agreement, it shall then become "Net
Proceeds", and (b) with respect to any issuance of Capital Stock of
Conseco, any incurrence of Indebtedness by Conseco or any of its
Subsidiaries, the occurrence of any Specified Cash Event or the
receipt of any amount pursuant to any Permitted Tritel Hedge
Transaction, the proceeds thereof in the form of cash and Cash
Equivalents minus the costs and expenses incurred in connection
therewith (including legal fees, notarial fees, accountants fees,
investment banking fees, underwriting discounts and commissions and
other customary fees and expenses incurred in connection therewith)
and required to be paid in cash or deducted from the proceeds of such
Disposition. For purposes of this definition, the Net Proceeds
received by any Person in respect of any Disposition shall include
such cash or Cash Equivalents as may be received ("subsequent cash
proceeds") by such Person at any time or from time to time in
connection with the sale, transfer, lease or other disposition, or
otherwise in respect of, any consideration other than cash or Cash
Equivalents received by such Person in respect of such Disposition,
less the estimated Income Tax to be paid in connection with the
receipt of such subsequent cash proceeds (after taking into account
any available tax credits or deductions and any tax sharing
arrangements) that was not theretofore deducted in computing Net
Proceeds.
"Ninety-Percent Owned Subsidiary" means any Person in which
(other than directors' qualifying shares required by law) at least
90% of the Capital Stock of each class having ordinary voting power
(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,
directly or indirectly, by Conseco, or by one or more Wholly-Owned
Subsidiaries, or both.
"Non-Finance Subsidiary" means any Subsidiary which is not
a Conseco Finance Entity.
"Non-Insurance Subsidiary" means any Subsidiary which is
not an Insurance Subsidiary.
"Obligations" means all advances, debts, liabilities,
obligations, covenants and duties for the payment of money arising
under any Loan Document owing by Conseco to the Relevant Banks (or,
if such defined term is included in the documents governing the
Relevant Facility, 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.
To the extent that any of the foregoing have been cash
collateralized, such amounts shall nevertheless be deemed to remain
outstanding for the purposes of this Appendix.
"PBGC" means the Pension Benefit Guaranty Corporation, or
any Governmental Authority succeeding to any of its principal
functions under ERISA.
12
"Pension Plan" means a pension plan (as defined in Section
3(2) of ERISA) subject to Title IV of ERISA which Conseco 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 Lien" has the meaning specified in Section 4.02.
"Permitted Nonrecourse Indebtedness" means (a) nonrecourse
Indebtedness of Subsidiaries of Conseco resulting from the sale or
securitization of (i) non-admitted assets, policy loans, B-Share
Financings, CBOs and CMOs and (ii) loans, leases, receivables,
installment contracts and other financial products originated,
acquired, sold or securitized by a Conseco Finance Entity and (b)
nonrecourse Indebtedness of a Conseco Finance Entity with respect to
Interest Only Securities.
"Permitted Swap Obligations" means all obligations
(contingent or otherwise) of Conseco or any Subsidiary existing or
arising under Swap Contracts, provided that each of the following
criteria is satisfied: (a) such obligations are (or were) entered
into by such Person in the ordinary course of business for the
purpose of directly mitigating risks associated with liabilities,
commitments or assets held by such Person, or changes in the value of
securities issued by such Person in conjunction with a securities
repurchase program not otherwise prohibited hereunder, and not for
purposes of speculation or taking a "market view;" and (b) such Swap
Contracts do not contain any provision ("walk-away" provision)
exonerating the non-defaulting Party from its obligation to make
payments on outstanding transactions to the defaulting party.
"Permitted Transactions" means (a) mortgage-backed security
transactions in which an investor sells mortgage collateral, such as
securities issued by the Government National Mortgage Association and
the Federal Home Loan Mortgage Corporation for delivery in the
current month while simultaneously contracting to repurchase
"substantially the same" (as determined by the Public Securities
Association and GAAP) collateral for a later settlement, (b)
transactions in which an investor lends cash to a primary dealer and
the primary dealer collateralizes the borrowing of the cash with
certain securities, (c) transactions in which an investor lends
securities to a primary dealer and the primary dealer collateralizes
the borrowing of the securities with cash collateral, (d)
transactions in which an investor makes loans of securities to a
broker-dealer under an agreement requiring such loans to be
continuously secured by cash collateral or United States government
securities, (e) transactions in which a federal home loan mortgage
bank (a "FHLMB") makes loans, which are sufficiently secured by
appropriate assets 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 Conseco Finance Entity 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 Conseco Finance Entity.
"Permitted Tritel Hedge Transaction" has the meaning
specified in Section 4.11.
"Person" means an individual, partnership, corporation,
limited liability company, business trust, joint stock company,
trust, unincorporated association, joint venture or Governmental
Authority or other entity of whatever nature.
"Plan" means an employee benefit plan (as defined in
Section 3(3) of ERISA) which Conseco sponsors or maintains or to
which Conseco makes, is making, or is obligated to make contributions
and includes any Pension Plan.
13
"prepay" means, when used with respect to Public Debt,
prepay, repurchase, redeem or otherwise optionally or voluntarily
defease or segregate funds with respect thereto; and "prepaid" and
"prepayment" shall have correlative meanings.
"Prepayment Events" means (a) the occurrence of any
Specified Cash Event or the consummation of any other Asset Sale, (b)
the incurrence by Conseco or any of its Subsidiaries of any
Indebtedness of the type described in clause (a) or (b) of the
definition thereof, excluding Indebtedness permitted by Section 4.01
other than as set forth in Section 4.01(b) (to the extent required to
be applied as a Prepayment Event as set forth in the definition of
"Exempt Waterfall Amounts"), (c) the issuance of any Capital Stock by
Conseco and (d) any receipt of Net Proceeds in connection with any
Permitted Tritel Hedge Transaction.
"PRIDES Documents" means the PRIDES Purchase Contracts, the
PRIDES Preferred Securities, the Subordinated Indenture dated as of
December 8, 1997 between Conseco and The First National Bank of
Chicago, as amended by the First Supplemental Indenture, dated as of
December 8, 1997, the 6.75% Debentures issued to the PRIDES Trust
pursuant to such Indenture, the Amended and Restated Declaration of
Trust of the PRIDES Trust, the Preferred Securities Guarantee dated
as of December 12, 1997 executed by Conseco, the Common Securities
Guarantee dated as of December 12, 1997 executed by Conseco, and the
other documents, agreements, schedules, exhibits and instruments
referenced in the foregoing agreements and instruments.
"PRIDES Preferred Securities" has the meaning set forth in
the definition of FELINE PRIDES.
"PRIDES Purchase Contracts" has the meaning set forth in
the definition of FELINE PRIDES.
"PRIDES Trust" means Conseco Financing Trust IV, a Delaware
business trust.
"Public Debt" means the collective reference to the 2000
Public Debt, the 2001 Public Debt and the Longer-Term Public Debt.
"Purchase Money Debt" means Indebtedness incurred by a
Person in connection with the purchase of fixed or capital assets by
such Person, in which such assets the seller or financier thereof has
taken or retained a Lien therein, provided that any such Lien
attaches to such asset 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.
14
"Reinsurance Agreements" means any agreement, contract,
treaty, certificate or other arrangement by which any Insurance
Subsidiary agrees to transfer or cede to another insurer all or part
of the liability assumed or assets held by it under one or more
insurance, annuity, reinsurance or retrocession policies, agreements,
contracts, treaties, certificates or similar arrangements.
Reinsurance Agreements shall include, but not be limited to, any
agreement, contract, treaty, certificate or other arrangement which
is treated as such by the applicable Department.
"Relevant Agent" means the "Agent" or "Administrative
Agent", as applicable, under the Relevant Facility.
"Relevant Banks" means any Bank to which Obligations are
owing under the Relevant Facility.
"Relevant Cash Collateral Agreement" means, if the Relevant
Facility is a D&O Facility, any cash collateral agreement entered
into by Conseco or any of its Subsidiaries in favor of the Agent
thereunder in order to cash collateralize the Conseco Guaranty
relating to such Facility.
"Relevant CIHC Guaranty" means the Guaranty and
Subordination Agreement, dated as of the Effective Date, made by CIHC
in favor of the Relevant Agent and the Relevant Banks. It is agreed
that the Relevant CIHC Guaranty shall be terminated and CIHC shall be
released from all of its obligations thereunder on the first date
after the Near-Term Facilities Termination Date on which Conseco has
Investment Grade Ratings Status, so long as no Default or Event of
Default shall have occurred and be continuing on such date.
"Relevant Conseco Guaranty" means, if the Relevant Facility
is a D&O Facility, any guaranty issued by Conseco in favor of the
Agent thereunder in order to guaranty the obligations of the
individual borrowers under such Facility.
"Relevant Facility" means the Facility being amended
pursuant to the amendment to which this Appendix is attached.
"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 the "Required Banks" under and as
defined in the documents governing the Relevant Facility.
"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.
"Reserve" means the collective reference to one or more
restricted accounts opened by Conseco with any one or more Banks, on
terms and conditions substantially as set forth on Exhibit B hereto.
It is understood that any contractual right of setoff contained in
the documents governing any Facility will not apply to any Reserve.
"Responsible Officer" means the chief executive officer,
chief operating officer, chief financial officer or treasurer of
Conseco, or any other officer having substantially the same authority
and responsibility including, with respect to Section 3.01, any
vice-president with responsibility for or knowledge of financial
matters of Conseco.
"Restricted Payments" has the meaning set forth in Section
4.08.
15
"Risk-Based Capital Ratio" means, with respect to the
Insurance Subsidiaries (other than Conseco Direct Life Insurance
Company) taken as a whole, on any date of determination, the ratio
(expressed as a percentage) of (a) the aggregate Total Adjusted
Capital (as defined by the NAIC) for such Insurance Subsidiaries to
(b) the aggregate Authorized Control Level Risk-Based Capital (as
defined by the NAIC) for such Insurance Subsidiaries.
"S&P" means Standard & Poor's Ratings Services, together
with any Person succeeding thereto by merger, consolidation or
acquisition of all or substantially all of its assets, including
substantially all of its business of rating securities.
"SAP" means, with respect to any Insurance Subsidiary, the
statutory accounting practices prescribed or permitted by the
insurance commissioner (or other similar authority) in the
jurisdiction of domicile 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 filing of such statement or report.
"SEC" means the Securities and Exchange Commission, or any
Governmental Authority succeeding to any of its principal functions.
"Significant Subsidiary" means any Subsidiary of Conseco
with, after the elimination of intercompany accounts, (a) assets
which constituted at least 5% of Conseco's consolidated total assets,
or (b) revenues which constituted at least 5% of Conseco's
consolidated total revenue or (c) net earnings which constituted at
least 5% of Conseco's consolidated total net earnings, but not less
than $10,000,000, all as determined as of the date of Conseco'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 Conseco 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.
"Specified Cash Events" means the receipt of cash by
Conseco or any of its Subsidiaries in connection with the events
described on Schedule 1.01B, whether or not in connection with a
Disposition.
"Specified D&O Facilities" means the collective reference
to the $181 Million D&O Facility and the $245 Million D&O Facility.
"Specified Junior Securities" means (a) common stock of
Conseco and (b) preferred stock of Conseco and subordinated
Indebtedness of Conseco that, in each case, does not require cash
dividend or cash interest payments prior to September 30, 2005 (other
than any requirement that is limited to payments with the proceeds of
available Exempt Covenant/Waterfall Amounts received and held aside
or otherwise identified prior to the date such preferred stock or
subordinated Indebtedness is issued or incurred) or scheduled
redemption or principal payments prior to March 31, 2006 and, in the
case of subordinated Indebtedness, having subordination and related
terms satisfactory to each Agent.
"Statutory Net Income" means, for any period, the net
income of an Insurance Subsidiary determined in accordance with SAP.
16
"Subordinated Obligations" shall be the collective
reference to the unpaid principal of and accrued and unpaid interest
on any subordinated Indebtedness and all other subordinated
obligations and liabilities of Conseco to the lenders thereof
(including, without limitation, interest accruing at the then
applicable rate provided in the applicable loan documents for such
Indebtedness or obligations after the maturity of the subordinated
loans and interest accruing at the then applicable rate provided in
such loan documents after the filing of any petition in bankruptcy,
or the commencement of any insolvency, reorganization or like
proceeding, relating to Conseco, whether or not a claim for
post-filing or post-petition interest is allowed in such proceeding),
whether direct or indirect, absolute or contingent, due or to become
due, or now existing or hereafter incurred, which may arise under,
out of, or in connection with, this Appendix, or such loan documents
for such subordinated Indebtedness, in each case whether on account
of principal, interest, reimbursement obligations, fees, indemnities,
costs, expenses or otherwise (including, without limitation, all fees
and disbursements of counsel to the lenders thereof that are required
to be paid by Conseco pursuant to the terms of the loan documents
therefor or this Appendix).
"Subsidiary" of a Person means any corporation,
partnership, limited liability company, limited liability
partnership, joint venture, trust, association or other
unincorporated organization of which or in which such Person and such
Person's Subsidiaries own directly or indirectly more than 50% of (a)
the combined voting power of all classes of stock having general
voting power under ordinary circumstances to elect a majority of the
board of directors, if it is a corporation, (b) the voting or
managing interests (which shall mean the general partner in the case
of a partnership), if it is a partnership, joint venture or similar
entity, (c) the beneficial interest, if it is a trust, association or
other unincorporated organization or (d) the membership interest, if
it is a limited liability company; provided, that, with respect to
any Investment made by Conseco in any Person in the ordinary course
of business solely for investment purposes, such Person shall not be
considered a Subsidiary of Conseco for the purposes of this Appendix
if such Person is not integral to the business or operations of
Conseco or any Significant Subsidiary and, by way of illustration
only, Schedule 1.01D, sets forth a nonexclusive list of such Persons
who are not Subsidiaries of Conseco because of the operation of this
clause.
"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 ▇▇▇▇ 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.
17
"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 ▇▇▇▇-to-market value(s) for such Swap Contracts, as determined
by Conseco 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 Relevant Bank).
"Synthetic Purchase Agreement" means any agreement pursuant
to which Conseco or any of its Subsidiaries is or may become
obligated to make (a) any payment in connection with the purchase by
any third party from a Person other than Conseco or any of its
Subsidiaries (other than any Subsidiary that is a Subsidiary of an
Insurance Subsidiary but is not itself an Insurance Subsidiary) of
any Capital Stock or Indebtedness of Conseco or any of its
Subsidiaries (other than any Subsidiary that is a Subsidiary of an
Insurance Subsidiary but is not itself an Insurance Subsidiary) or
(b) any payment the amount of which is determined by reference to the
price or value at any time of any such Capital Stock or Indebtedness;
provided, that (i) no phantom stock or similar plan providing for
payments only to current or former directors, officers or employees
of Conseco or any of its Subsidiaries (or to their heirs or estates),
(ii) no such agreement in respect of any Public Debt that is
permitted to be prepaid at such time pursuant to Section 4.10 and
(iii) no such agreement in respect of any Disposition of any Capital
Stock of a Subsidiary of Conseco that is permitted by Section 4.03
shall be deemed to be a Synthetic Purchase 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.
"Tax Sharing Agreement" means the tax sharing agreement
dated February 29, 1989, as amended, among Conseco and certain of its
Subsidiaries.
"Total Capitalization" means, without duplication, (a) the
amount described in clause (a) of the definition of "Debt to Total
Capitalization Ratio", plus (b) the Total Shareholders' Equity of
Conseco, minus (c) the carrying value of Interest Only Securities and
servicing rights. Total Capitalization shall be determined without
giving effect to (a) the impact of charges or writedowns taken in the
third or fourth Fiscal Quarter of the Fiscal Year ending December 31,
2000 ("FY 2000 Adjustments") so long as the aggregate after-tax
amount thereof does not exceed $500,000,000 and (b) the impact of any
on balance sheet treatment of the D&O Facilities.
"Total Shareholders' Equity" means the sum of, without
duplication, (a) total common and preferred shareholders' equity of
Conseco 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, the FELINE PRIDES and the Unit Securities.
"Trust Preferred Securities" mean preferred securities (a)
issued by one or more Delaware business trusts formed by Conseco and
(b) guaranteed by Conseco, including specifically, "MIPS," "QuIPS,"
"TOPrS" and "TruPS", provided that the aggregate face amount of all
Trust Preferred Securities does not exceed the greater of
$1,930,000,000 or 15% of Total Capitalization at any time.
"2000 Public Debt" means Conseco's $150,000,000 7-7/8%
Notes due December 15, 2000.
"2001 Public Debt" means Conseco's 7.6% Senior Notes due
June 21, 2001 and 6.4% Mandatory Par Put Remarketed Securities due
June 15, 2011.
18
"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 Conseco and (ii) guaranteed by
Conseco, including specifically, "MIPS," QuIPS," "TOPrS" and "TruPS,"
and (b) equity forward contracts for the purchase of common stock of
Conseco (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 Conseco, or by one or
more of the other Wholly-Owned Subsidiaries, or both.
"$50 Million Credit Agreement" means the ECN Dealer
Agreement between Conseco and ▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇
Incorporated dated September 28, 1999 and the letter dated September
28, 1999 addressed by ▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇
Incorporated to Conseco, including the Extendible Commercial Notes
Memorandum attached thereto.
"$144 Million D&O Credit Agreement" means the Termination
and Replacement Agreement, dated as of May 30, 2000, among the
individual borrowers parties thereto, the banks parties thereto,
Chase, as administrative agent and Chase Securities Inc. and Banc of
America Securities LLC as co-lead arrangers and co-lead book
managers.
"$155 Million Credit Agreement" means the Senior Secured
Revolving Credit Agreement, dated as of May 30, 2000, among Conseco,
the banks parties thereto, Chase, as administrative agent and Chase
Securities Inc. and Banc of America Securities LLC as co-lead
arrangers and co-lead book managers.
"$181 Million D&O Credit Agreement" means the Credit
Agreement, dated as of August 21, 1998, among the individual
borrowers parties thereto, the banks parties thereto and BofA, as
administrative agent.
"$245 Million D&O Credit Agreement" means the Amended and
Restated Credit Agreement, dated as of August 26, 1997, among the
individual borrowers parties thereto, the banks parties thereto and
BofA, as administrative agent.
19
"$766 Million Credit Agreement" means the 364-Day Credit
Agreement, dated as of September 25, 1998, among Conseco, the banks
parties thereto, the syndication agents and documentation agent named
therein and BofA, as agent, as amended on the Effective Date to
incorporate the obligations of Conseco under the $50 Million Credit
Agreement.
"$1.5 Billion Credit Agreement" means the Five-Year Credit
Agreement, dated as of September 25, 1998, among Conseco, the banks
parties thereto, the syndication agents and documentation agent named
therein and BofA, as agent.
"$144 Million D&O Facility" means the credit facility
evidenced by the $144 Million D&O Credit Agreement and the documents
related thereto.
"$155 Million Facility" means the credit facility evidenced
by the $155 Million Credit Agreement and the documents related
thereto.
"$181 Million D&O Facility" means the credit facility
evidenced by the $181 Million D&O Credit Agreement and the documents
related thereto.
"$245 Million D&O Facility" means the credit facility
evidenced by the $245 Million D&O Credit Agreement and the documents
related thereto.
"$766 Million Facility" means the credit facility evidenced
by the $766 Million Credit Agreement and the documents related
thereto.
"$1.5 Billion Facility" means the credit facility evidenced
by the $1.5 Billion Credit Agreement and the documents related
thereto.
I.2 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 Appendix as a whole and not to any particular provision of
this Appendix; and subsection, Section, Schedule and Exhibit references are to
this Appendix unless otherwise specified.
(c) (i) The term "including" is not limiting and means
"including without limitation."
(ii) 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 Appendix) 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 Appendix are for
convenience of reference only and shall not affect the interpretation of this
Appendix.
20
(f) This Appendix and other Loan Documents may use several
different limitations, tests or measurements to regulate the same or similar
matters. Unless otherwise expressly provided, any reference to any action of the
Relevant Agent or the Relevant Banks by way of consent, approval or waiver shall
be deemed modified by the phrase "in its/their sole and reasonable discretion.
(g) This Appendix and the other Loan Documents are the
result of negotiations among and have been reviewed by counsel to the Relevant
Agent, Conseco and the other parties to the Loan Documents, and are the products
of all parties. Accordingly, they shall not be construed against the Relevant
Banks or the Relevant Agent merely because of the Relevant Agent's or the
Relevant Banks' involvement in their preparation.
I.3 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 Appendix shall be
made, in accordance with GAAP, consistently applied.
(b) 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 column , lines or sections of the Annual Statement
referenced herein are changed or renumbered from the columns, lines and sections
applicable to the 1999 Annual Statement, all such references shall be deemed
references to such column, line or section as so renumbered or changed.
ARTICLE II
MANDATORY CASH APPLICATIONS
II.1 General Application of Available Net Proceeds. (a) On
the Effective Date, Available Net Proceeds in the aggregate amount of
$392,861,025 shall be applied to the Facilities in the manner specified in
Section 2.02(a).
21
(b) On the Effective Date and thereafter, within three
Business Days after Conseco or any of its Subsidiaries receives any Available
Net Proceeds (other than as described in paragraph (a) above), such Available
Net Proceeds shall be applied as follows: first, the first $100,000,000 (or such
lesser amount as is necessary to increase the amount of Conseco's Cash on Hand
to the Cash on Hand Target) shall be retained by Conseco; second, the next
$700,000,000 shall be applied 1/7th per transaction to the Near-Term Facilities
and 6/7ths per transaction to fund the Reserve; third, the next $200,000,000
shall be applied to fund the Reserve; fourth, all subsequent Available Net
Proceeds until the occurrence of the Near-Term Facilities Termination Date shall
be applied 80% per transaction to the Near-Term Facilities, with the remainder
being retained by Conseco until it has Cash on Hand equal to the Cash on Hand
Target at the time of such transaction, and then 100% to the Near-Term
Facilities until the occurrence of the Near-Term Facilities Termination Date;
and fifth, all Available Net Proceeds received after the occurrence of the
Near-Term Facilities Termination Date shall be applied 50% per transaction to
the $1.5 Billion Facility and the Specified D&O Facilities (in the manner
contemplated by Section 2.02(c)), with the remainder being retained by Conseco.
Notwithstanding the foregoing, the first $30,000,000 of Available Net Proceeds
received by Conseco or any of its Subsidiaries on or after the Effective Date
after giving effect to Section 2.01(a) may be retained by Conseco. Any Available
Net Proceeds referred to in this paragraph as being available for retention by
Conseco (i) must, if received by a Subsidiary, be distributed to Conseco for
such purpose if such distribution is not prohibited by law, rule or regulation
or the ▇▇▇▇▇▇ Agreement and (ii) may be used by Conseco for any purpose
permitted by this Appendix. Notwithstanding anything to the contrary in this
Section 2.01(b), in the event that, in the case of Available Net Proceeds
received at any time when clause second or third is applicable, if Conseco's
Cash on Hand is less than the Cash on Hand Target, such Available Net Proceeds
may be applied to increase Conseco's Cash on Hand (but not above the Cash on
Hand Target), provided, that in no event shall the aggregate amount applied to
increase Conseco's Cash on Hand pursuant to clause first and this sentence
exceed $100,000,000. As used in this paragraph, "Cash on Hand Target" means
$330,000,000 minus the amount of any Investment made by Conseco pursuant to
Section 4.09(a)(i)(x) (except to the extent such amount was paid back to
Conseco, directly or indirectly).
(c) After the Reserve has been funded in an amount
sufficient to pay the remaining maturities for the 2000 Public Debt and the 2001
Public Debt, if any such Public Debt is, or has been, repurchased at a discount
with amounts from the Reserve, an amount from the Reserve equal to the
difference between the face amount of the relevant Public Debt and the
repurchase price of the relevant Public Debt shall be applied to the Near-Term
Facilities or, after the Near-Term Facilities Termination Date, to the $1.5
Billion Facility and the Specified D&O Facilities (in the manner contemplated by
Section 2.02(c)).
II.2 Application of Available Net Proceeds Allocated to
Facilities. (a) The application of Available Net Proceeds described in Section
2.01(a) shall be allocated to the Near-Term Facilities, and to the Exposure of
the Banks thereunder, such that, after giving effect thereto, the respective
Exposures of the Banks thereunder shall be as set forth on Schedule 2.02 (and
any inconsistent provision in the Relevant Facility shall not apply).
(b) Any application of Available Net Proceeds allocated to
the Near-Term Facilities pursuant to Section 2.01(b) or (c) (and any application
of Net Proceeds pursuant to clause (a)(i) of the definition of "Exempt Waterfall
Amounts") shall be allocated to each Bank on a pro rata basis based on the
percentage of the aggregate then outstanding amount of Exposure under such
Facilities held by such Bank. In the case of any Bank having Exposure under more
than one Near-Term Facility, such Bank may, by notice to Conseco and the
applicable Agent, allocate its reduction in Exposure to one or more such
Facilities in such respective amounts as it shall select in its sole discretion
(and any inconsistent provision in the Relevant Facility shall not apply).
(c) Any application of Available Net Proceeds allocated to
the $1.5 Billion Facility and the Specified D&O Facilities pursuant to Section
2.01(b) or (c) (and any application of Net Proceeds pursuant to clause (a)(ii)
of the definition of "Exempt Waterfall Amounts") shall be allocated ratably to
each such Facility based on the aggregate Exposure then outstanding under such
Facilities, and ratably to the Exposure of each Bank under each such Facility.
The Available Net Proceeds so allocated to each Specified D&O Facility, at the
discretion of Conseco, shall be either (i) deposited in a cash collateral
account pursuant to the applicable Cash Collateral Agreement or (ii) applied to
repay "Loans" made to the individual borrowers pursuant to the applicable
Specified D&O Facility.
II.3 Exempt Covenant/Waterfall Amounts. Notwithstanding
anything to the contrary in Article IV, Conseco and its Subsidiaries shall be
permitted to use Exempt Covenant/Waterfall Amounts for any purpose that would
otherwise be prohibited by Article IV (other than to redeem, pay dividends on or
otherwise make Restricted Payments in respect of Conseco's common stock or the
Conseco Series F Preferred Stock), and any such use shall not constitute a
violation of any of the covenants contained in Article IV or usage of any of the
basket amounts described therein.
22
ARTICLE III
AFFIRMATIVE COVENANTS
So long as any Exposure or other Obligation shall remain
unpaid or unsatisfied under the Relevant Facility, unless the Required Banks
waive compliance in writing:
III.1 Financial Statements Conseco shall deliver to the
Relevant Agent and each Relevant 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
Conseco and its Subsidiaries and the unaudited consolidating balance sheet of
Conseco 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 Conseco 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 Conseco'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
Conseco 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 the absence of footnotes and ordinary, good
faith year-end and audit adjustments), the financial position and the results of
operations of Conseco 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, 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;
(e) within 15 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
23
(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.
III.2 Certificates; Other Information. Conseco shall
furnish to the Relevant Agent, with sufficient copies for each Relevant Bank
(other than in the case of clause (e)):
(a) concurrently with the delivery of the financial
statements referred to in Sections 3.01(a) and (b), a Compliance Certificate
executed by a Responsible Officer,
(b) promptly, (i) copies of all Forms 10-K and 10-Q that
Conseco or any Subsidiary may file with the SEC or (ii) copies of the
certificate and related financial information provided pursuant to the Lehman
Agreement in connection with evidencing periodic compliance with financial
covenants therein, and promptly upon the Relevant Agents' request, financial
statements and reports that Conseco sends to its shareholders and copies of all
other financial statements and regular, periodic or special reports (including
Form 8-K) that Conseco 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 ▇▇▇▇▇'▇ in respect of Conseco's senior unsecured
Indebtedness or by A.M. Best in respect of the Insurance Subsidiaries;
(d) (i) concurrently with the consummation of any
Disposition Transaction yielding gross proceeds in excess of $2,000,000, (x) a
description of such transaction and (y) a calculation of the gross proceeds
thereof and (ii) concurrently with the occurrence of any Prepayment Event or the
issuance of any Specified Junior Securities, (i) a description of the relevant
transaction, (ii) a calculation of the Net Proceeds (including an accounting of
the items deducted from the cash or Cash Equivalents received in connection with
such transaction) thereof and (iii) if applicable its intention to treat such
Net Proceeds of the type described in the definition of either (i) Exempt
Covenant/Waterfall Amount or (ii) Exempt Waterfall Amount as an Exempt
Covenant/Waterfall Amount or an Exempt Waterfall Amount, respectively
(including, if an Exempt Waterfall Amount, whether the Net Proceeds will be
applied under clause (a) or (b) of such definition); and
(e) promptly, such additional information regarding the
business, financial or corporate affairs of Conseco or any Subsidiary as the
Relevant Agent, at the request of any Relevant Bank, may from time to time
reasonably request.
III.3 Notices. Conseco shall promptly notify the Relevant
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 Conseco or any Subsidiary; (ii) any dispute,
litigation, investigation, proceeding or suspension between Conseco or any
Subsidiary and any Governmental Authority; or (iii) the commencement of, or any
material development in, any Litigation affecting Conseco or any Subsidiary,
including pursuant to any applicable Environmental Laws;
24
(c) of 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 Appendix 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.
(d) of the occurrence of any of the following events
affecting Conseco or any ERISA Affiliate (but in no event more than 10 days
after such event) and deliver to the Relevant Agent and each Relevant 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 Conseco 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 Conseco 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
3.03(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 Conseco 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 Conseco or any of its Subsidiaries;
(f) of the receipt of any notice from any Governmental
Authority of the expiration without renewal, revocation, suspension or
restriction of or the institution of any proceedings to revoke, suspend or
restrict, any License now or hereafter held by any Insurance Subsidiary which is
required to conduct insurance business in compliance with all applicable laws
and regulations and the expiration, revocation or suspension of which could
reasonably be expected to have a Material Adverse Effect;
(g) of the receipt of any notice from any Governmental
Authority of the institution of any disciplinary proceedings against or in
respect of any Insurance Subsidiary, or the issuance of any order, the taking of
any action or any request for an extraordinary audit for cause by any
Governmental Authority which could reasonably be expected to have a Material
Adverse Effect;
(h) of any judicial or administrative order limiting or
controlling the insurance business of any Insurance Subsidiary (and not the
insurance industry generally) which has been issued or adopted 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 Conseco or any affected
Subsidiary proposes to take with respect thereto and at what time. Each notice
under Section 3.03(a) shall describe with particularity any and all clauses or
provisions of this Appendix or other Loan Document that have been (or reasonably
foreseeably will be) breached or violated.
25
III.4 Preservation of Corporate Existence, Etc. Conseco
shall, and shall cause each Significant Subsidiary to (except as permitted by
Section 4.03 or 4.07):
(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.
III.5 Insurance. Conseco 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.
III.6 Payment of Obligations. Conseco 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 not overdue for a period of more than 60 days or are being
contested in good faith by appropriate proceedings and adequate reserves in
accordance with GAAP are being maintained by Conseco 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.
III.7 Compliance with Laws. Conseco 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.
III.8 Compliance with ERISA. Conseco shall, and shall cause
each of its ERISA Affiliates to: (a) maintain each Plan in compliance in all
material respects with the applicable provisions of ERISA, the Code and other
federal or state law; (b) cause each Plan which is qualified under Section
401(a) of the Code to maintain such qualification; and (c) make all required
contributions to any Plan subject to Section 412 of the Code, except where such
failure to maintain as set forth in (a) or (b) or to make contributions as set
forth in (c) could not be reasonably expected to have a Material Adverse Effect.
26
III.9 Inspection of Property and Books and Records; Expense
Reimbursement. Conseco shall maintain and shall cause each Subsidiary to
maintain proper books of record and account, in which full, true and correct
entries in all material respects in conformity with GAAP or SAP, as applicable,
consistently applied (except as stated therein) shall be made of all financial
transactions and matters involving the assets and business of Conseco and such
Subsidiary. Conseco shall permit, and shall cause each Subsidiary to permit,
representatives and independent contractors of the Relevant Agent or any
Relevant 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
Conseco, provided, however, when an Event of Default exists the Relevant Agent
or any Relevant Bank may do any of the foregoing at any time during normal
business hours and without advance notice.
III.10 Tritel Disposition. Conseco shall use commercially
reasonable efforts to Dispose of all or substantially all of its interest in
Tritel, Inc. prior to March 31, 2001.
III.11 Conversion of FELINE PRIDES. Conseco shall issue
shares of common stock to holders of FELINE PRIDES in accordance with the terms
of the PRIDES Documents. Otherwise, and except as required by the terms of the
PRIDES Documents, Conseco shall, and shall cause its Affiliates to, refrain from
purchasing or redeeming any FELINE PRIDES, PRIDES Purchase Contracts or PRIDES
Preferred Securities, whether in the open market or otherwise. Nothing in this
provision shall have the effect of preventing Conseco or the PRIDES Trust from
complying with the terms and conditions set forth in the PRIDES Documents.
ARTICLE IV
NEGATIVE COVENANTS
So long as any Exposure or other Obligation shall remain
unpaid or unsatisfied under the Relevant Facility, unless the Required Banks
waive compliance in writing:
IV.1 Limitation on Indebtedness. Conseco shall not, and
shall not permit any of its Subsidiaries to, incur or at any time be liable with
respect to, any Indebtedness, except:
(a Permitted Swap Obligations and Permitted Transactions;
(b Specified Junior Securities;
(c Indebtedness of Conseco or any Subsidiary pursuant to
(i) the items set forth on Schedule 4.01(c) and (ii) extensions, renewals or
replacements thereof, provided that no such extension, renewal or replacement
shall increase the principal amount thereof, except to the extent the increase
would otherwise be permitted under this Section 4.01;
27
(d Contingent Obligations of: (i) CIHC in respect of (A)
Conseco's obligations under any Facility, and (B) obligations of one or more
Conseco Finance Entities (I) in an aggregate amount not to exceed $125,000,000
in respect of obligations to Lehman or an Affiliate thereof, (II) in an
aggregate amount not to exceed $125,000,000 in respect of cash management or a
swing line credit facility for the general corporate purposes of one or more of
the Conseco Finance Entities and (III) in an aggregate amount not to exceed
$50,000,000 incurred for general corporate purposes (so long as, in each case,
the documentation governing any such Contingent Obligation (including any
related subordination arrangement) is not at any time materially more favorable
to the beneficiaries thereof than the Relevant CIHC Guaranty); (ii) Conseco in
respect of any individual borrower's obligations under any D&O Facility; (iii)
any Conseco Finance Entity relating to loans, leases, receivables, installment
contracts and other financial products originated, acquired or sold by such
Conseco Finance Entity or any other Conseco Finance Entity; and (iv) Conseco or
any Subsidiary in the ordinary course of business not otherwise described above
in an aggregate amount not to exceed at any time (A) ten percent (10%) of Total
Shareholders' Equity minus (B) the aggregate amount of Conseco's Contingent
Obligations under clause (ii) of this paragraph at any time, provided that (I)
Contingent Obligations in respect of Indebtedness of the type described in
clause (a) or (b) of the definition thereof shall not be permitted by this
clause (iv) and (II) the documentation governing any Contingent Obligation of
CIHC pursuant to this clause (iv) (including any related subordination
arrangement) shall not at any time be materially more favorable to the
beneficiaries thereof than the Relevant CIHC Guaranty; provided, that in no
event shall Conseco or any of its Subsidiaries (other than a Conseco Finance
Entity) have any Contingent Obligations (including obligations as an account
party) pursuant to this paragraph (d) in respect of any Indebtedness incurred by
or for the benefit of any Conseco Finance Entity other than as specifically
permitted in clause (i)(B) above;
(e Indebtedness (including Contingent Obligations) of any
Conseco Finance Entity to the extent that (i) neither Conseco nor any
Non-Finance Subsidiary is directly liable thereon, and (ii) neither Conseco nor
any Non-Finance Subsidiary has any Contingent Obligation in respect of such
Indebtedness (other than a Contingent Obligation of CIHC permitted by Section
4.01(d)(i) above);
(f Permitted Nonrecourse Indebtedness;
(g secured Indebtedness, including, without limitation,
Capitalized Lease Liabilities and Purchase Money Debt, provided, that (i) the
aggregate outstanding principal amount of Indebtedness of this type does not
exceed at any time ten percent (10%) of Total Shareholders' Equity at such time
and (ii) such Indebtedness shall not be secured by any Lien other than a Lien
expressly permitted by Section 4.02(i);
(h Indebtedness among Conseco and its Subsidiaries (other
than Conseco Finance Entities);
(i Indebtedness owing by any Conseco Finance Entity to the
extent the related Investment is permitted under Section 4.09(a);
(j Indebtedness (other than for borrowed money) subject to
Liens permitted under Section 4.02(b), (d), (e) or (f);
(k Indebtedness in respect of Surplus Debentures entered
into by an Insurance Subsidiary;
(l unsecured Indebtedness of Conseco in an aggregate
principal amount not to exceed $100,000,000 at any time outstanding; and
(m Indebtedness in respect of the Facilities.
IV.2 Liens. Conseco 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 Taxes which are not overdue for more than 60
days or for Taxes being contested in good faith and by appropriate proceedings
and with respect to which adequate reserves are being maintained in accordance
with GAAP;
28
(c Liens shown on Schedule 4.02(c), including extensions,
renewals and replacements of such Liens; provided that (i) no such Lien is
spread to cover any additional property (other than after acquired title in or
on such property and proceeds of the existing collateral in accordance with the
document creating such Lien) and (ii) the Indebtedness secured thereby is not
increased by more than 10% (of the aggregate principal amount of such
Indebtedness outstanding on the Effective Date) except as otherwise permitted
under Section 4.01 (in which case the portion representing any additional
increase must be permitted by another paragraph of this Section 4.02);
(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 overdue for more than 60 days or which are being contested in good
faith and by appropriate proceedings and with respect to which adequate reserves
are being maintained in accordance with GAAP;
(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 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 4.02(g);
(h Liens incurred on assets of Subsidiaries that are
Conseco Finance Entities securing Indebtedness which is expressly permitted by
Section 4.01(e) or (f);
(i Liens securing Indebtedness permitted by Section
4.01(g); provided that such Liens consist exclusively of: (i) Liens securing the
Relevant Facility, (ii) Liens pursuant to any Cash Collateral Agreement (and a
Lien may be incurred on the collateral under the Cash Collateral Agreement in
favor of the Public Debt secured by the Collateral Agreement), (iii) Liens on
"Collateral" as defined in the Collateral Agreement, (iv) Liens on Conseco's
interest in Tritel, Inc. in existence of the Effective Date securing $25,000,000
of notes payable to Ericsson, Inc., and (v) Liens on other assets that (1) are
not subject to a Lien incurred pursuant to clause (i), (ii), (iii) or (iv) above
and (2) are not described on Schedule 1.01B securing Indebtedness in an
aggregate principal amount not to exceed (x) 25% of the Available Basket Amount
at any time prior to the Near-Term Facilities Termination Date or (y) 50% of the
Available Basket Amount at any time thereafter;
(j easements, rights-of-way, zoning restrictions,
restrictions and other similar encumbrances incurred in the ordinary course of
business and which do not materially interfere with the ordinary course of
business of Conseco and its Subsidiaries;
(k Liens on property of Conseco and its Subsidiaries in
favor of landlords securing licenses, subleases or leases of property permitted
hereunder;
(l licenses, leases or subleases permitted hereunder
granted to others not materially interfering in any material respect in the
business of Conseco and its Subsidiaries;
29
(m attachment or judgment Liens not constituting an Event
of Default under Section 5.01(i);
(n Liens arising from precautionary Uniform Commercial Code
financing statement filings with respect to operating leases or consignment
arrangements entered into by Conseco and its Subsidiaries in the ordinary course
of business; and
(o Liens in connection with a Permitted Tritel Hedge
Transaction.
None of the Permitted Liens shall be permitted on the
Reserve or any of the Reserve Amounts (as defined in the relevant agreement
governing the Reserve).
IV.3 Disposition of Assets. Conseco shall not and shall not
permit any of its Subsidiaries to, sell, assign, lease, transfer or otherwise
Dispose of (whether in one or a series of transactions) any property (including
accounts and notes receivable with or without recourse and Capital Stock of any
Subsidiary whether newly issued or otherwise) or enter into any agreement to do
any of the foregoing, except:
(a Dispositions of inventory or equipment (including,
without limitation, repossessed and/or off lease property of Conseco Finance),
all in the ordinary course of business consistent with past practices;
(b the sale of equipment to the extent that such equipment
is exchanged for credit against the purchase price of similar replacement
equipment, or the proceeds of such sale are reasonably promptly applied to the
purchase price of such replacement equipment;
(c Dispositions of Investments by Insurance Subsidiaries
(other than any of their respective Investments in Persons engaged in insurance
lines of business) in the ordinary course of business consistent with past
practices;
(d Dispositions of (i) in the case of any Conseco Finance
Entity, loans, leases, receivables, installment contracts and other financial
products originated, acquired, sold or securitized by such Conseco Finance
Entity or (ii) interests in or components of Interest Only Securities;
(e intercompany Dispositions made between or among Conseco
and its Subsidiaries (or Subsidiaries of Conseco with other Subsidiaries of
Conseco or Conseco), in each case, in the ordinary course of business;
(f (i) any Disposition pursuant to a Reinsurance Agreement
so long as such Disposition is entered into in the ordinary course of business
for the purpose of managing insurance risk consistent with industry practice and
(ii) any other Disposition pursuant to a Reinsurance Agreement so long as (x)
the proceeds therefrom are retained by an Insurance Subsidiary, (y) such
proceeds are used for the general corporate purposes of the Insurance
Subsidiaries (including for reinvestment within insurance lines of business
similar to Conseco's insurance lines of business at the time of the relevant
transaction) and (z) the aggregate statutory profit and/or gains on insurance
policy sales or other portfolio transfers resulting from all Dispositions
described in this clause (ii) consummated after August 25, 2000 shall not exceed
$250,000,000;
(g obsolete or worn out property disposed of by Conseco or
any of its Subsidiaries in the ordinary course of business and consistent with
past practices of Conseco and its Subsidiaries;
30
(h transfers resulting from any casualty or condemnation of
property or assets;
(i licenses or sublicenses of intellectual property and
general intangibles and licenses, leases or subleases of other property in the
ordinary course of business and consistent with the past practices of Conseco
and its Subsidiaries and which do not materially interfere with the business of
Conseco and its Subsidiaries;
(j any consignment arrangements or similar arrangements for
the sale of assets in the ordinary course of business and consistent with the
past practices of Conseco and its Subsidiaries;
(k the sale or discount of overdue accounts receivable
arising in the ordinary course of business and consistent with the past
practices of Conseco and its Subsidiaries, but only in connection with the
compromise or collection thereof;
(l Dispositions permitted by Section 4.07(a);
(m Dispositions of Investments set forth on Schedule
4.03(m);
(n Dispositions not otherwise permitted hereunder, provided
that, in the case of Dispositions constituting Asset Sales, (i) 75% of the
consideration received in connection therewith shall consist of cash, Cash
Equivalents and/or readily marketable securities that are immediately saleable
and (ii) 100% of the Net Proceeds thereof shall consist of Available Net
Proceeds and shall be applied as described in Article II; and
(o the exercise of the put rights set forth in the PRIDES
Documents in connection with a remarketing thereunder in accordance with such
documents and Section 3.11.
Notwithstanding anything to the contrary in this Section
4.03, no issuance or sale of Capital Stock of any Subsidiary of Conseco (other
than any Insignificant Subsidiary) shall be permitted if, after giving effect
thereto, Conseco owns, directly or indirectly, 50% or less (but greater than 0%)
of the voting Capital Stock of such Subsidiary.
IV.4 Other Agreements. Conseco 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 Conseco to
amend or otherwise modify this Appendix or any other document executed in
connection herewith.
IV.5 Transactions with Affiliates. Conseco shall not, and
shall not suffer or permit any Significant Subsidiary to, enter into any
material transaction with any Affiliate of Conseco (other than Conseco or a
Ninety-Percent Owned Subsidiary), except upon fair and reasonable terms no less
favorable to Conseco or such Subsidiary than would be obtained in a comparable
arm's-length transaction with a Person not an Affiliate of Conseco 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.
IV.6 Change in Business. Conseco 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 4.06.
31
IV.7 Fundamental Changes. Unless the Obligations shall be
paid in full concurrently therewith, Conseco shall not enter into any merger,
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or Dispose of, all or substantially all
of its property or business, other than any merger, consolidation or
amalgamation (a) of any Subsidiary of Conseco into Conseco, (b) solely for the
purpose of reincorporating Conseco in a different State of the United States or
(c) solely for the purpose of consummating an investment permitted by Section
4.09(b)(iii) or (iv).
IV.8 Restricted Payments. Conseco shall not declare or pay
any dividend (other than dividends payable solely in common stock, or the same
class of capital stock as to which the dividend is paid, of the Person making
such dividend) on (or make any payment to a related trust for the purpose of
paying a dividend), or make any payment on account of, or set apart assets for a
sinking or other analogous fund for, the purchase, redemption, defeasance,
retirement or other acquisition of, any Capital Stock of Conseco (or any related
trust), whether now or hereafter outstanding, or make any other distribution in
respect thereof, either directly or indirectly, whether in cash or property or
in obligations of Conseco (collectively, "Restricted Payments"), except that (a)
Conseco may declare and pay dividends on its common stock so long as, at the
time of declaration of the relevant dividend, Conseco has Investment Grade
Ratings Status and the Near-Term Facilities Termination Date has occurred, (b)
Conseco may declare and pay regularly scheduled dividends on its preferred stock
(and permit any related trust to do the same) so long as, at the time of
declaration of the relevant dividend, Conseco has Investment Grade Ratings
Status and the Near-Term Facilities Termination Date has occurred, (c) Conseco
may declare and pay regularly scheduled payments of interest and principal on
its debentures underlying the Trust Preferred Securities and the FELINE PRIDES
(and the related trusts may pay regularly scheduled dividends under such Trust
Preferred Securities and such FELINE PRIDES) so long as (i) Conseco's Cash on
Hand on average for the 90 days prior to the date of such declaration is equal
to or greater than $100,000,000, (ii) Conseco's Cash on Hand on the date of such
payment, after giving effect to the payment of said dividend on such date, is
equal to or greater than $100,000,000 and (iii) no Event of Default shall have
occurred and be continuing at the time of such payment, (d) Conseco may make
cash payments in respect of fractional shares of its preferred stock in an
aggregate amount not to exceed $10,000,000 and (e) Conseco may pay dividends to
Bankers National Life Insurance Company in respect of its Preferred Series E
Capital Stock in an amount not to exceed $36,000,000 per year.
IV.9 Investments. (a) Conseco and its Subsidiaries (other
than Conseco Finance and its Subsidiaries) shall not, directly or indirectly,
make any Investment in Conseco Finance or any of its Subsidiaries after the
Effective Date, except (i) intercompany Investments in the ordinary course of
business in an aggregate amount not to exceed $250,000,000 at any time
outstanding of which (x) $50,000,000 may be made on a permanent basis, (y)
$100,000,000 may be made so long as each such Investment pursuant to this clause
(y) is repaid within three months of the date of Investment and within each
three month period there shall be a three Business Day period during which no
Investment pursuant to clause (y) of this clause (i) shall be outstanding, and
(z) $100,000,000 may be made so long as each such Investment pursuant to this
clause (z) is repaid within six months of the date of Investment and within each
six month period there shall be a three Business Day period during which no
Investment pursuant to clause (z) of this clause (i) shall be outstanding, and
(ii) additional Investments made at any time after the Near-Term Facilities
Termination Date in an aggregate amount not to exceed $150,000,000 at any time
outstanding.
32
(b) Conseco and CIHC shall not, directly or indirectly,
make any Investment in any Person (other than a Subsidiary of Conseco to support
its operations in the ordinary course of business) except: (i) Investments made
with common stock issued by Conseco, (ii) Investments agreed to but not made
prior to the date hereof and set forth on Schedule 4.09(b), (iii) Investments
not otherwise permitted hereby in an aggregate amount expended not to exceed
$25,000,000 in any Fiscal Year, (iv) Investments made in connection with a sale
of assets permitted by Section 4.03 to the extent of the non-cash consideration
received by Conseco or a Subsidiary, (v) as permitted by Section 4.09(a) and
(vi) Conseco may repurchase its 6.4% Mandatory Par Put Remarketed Securities due
June 15, 2011 if required to do so pursuant to the terms and conditions thereof,
which repurchase (if so required) shall be conducted in accordance with the
terms and conditions of such instruments. It is understood that Investments of
the type described in Section 4.09(a) may not be made pursuant to clauses (i)
through (iii) of this paragraph (b).
IV.10 Optional Payments; Modifications of Certain
Agreements; Synthetic Purchase Agreements. (a) Conseco shall not, and shall not
permit any of its Subsidiaries (other than Conseco Finance or any of its
Subsidiaries) to make any optional or voluntary payment, prepayment, repurchase
or redemption of or otherwise optionally or voluntarily defease or segregate
funds with respect to Indebtedness (other than the Reserve), other than (i)
prepayments of Indebtedness of a Subsidiary of Conseco owed to Conseco or
another Subsidiary of Conseco or of Conseco owed to a Subsidiary of Conseco, in
each case to the extent prepaid or repaid in the ordinary course of business,
which Indebtedness is (A) not related to the Trust Preferred Securities and (B)
not a prepayment of loans referred to in clause (f) of the definition of
"Conseco Available Cash Flow" unless, in the case of this clause (B), at the
time of, and after giving pro forma effect to, such prepayment, Conseco is in
compliance with Section 4.14, (ii) prepayments of the 2000 Public Debt, (iii)
prepayments of the 2001 Public Debt so long as on the date of such prepayment
(or, if earlier, the date on which Conseco enters into an obligation to make
such prepayment), Conseco has A.M. Best A- Status, (iv) prepayments of the
Longer-Term Public Debt made after the Near-Term Facilities Termination Date so
long as the scheduled maturity of the Public Debt being prepaid is earlier than
the earliest scheduled maturity then in effect with respect to the remaining
Facilities, (v) prepayments of Capital Lease Liabilities in connection with the
Disposition of the related asset or property and (vi) prepayments not otherwise
permitted by the foregoing clauses so long as the aggregate amount expended in
connection therewith does not exceed $25,000,000.
(b) Conseco shall not, and shall not permit any of its
Subsidiaries (other than Conseco Finance or any of its Subsidiaries) to amend,
modify, waive or otherwise change, or consent or agree to any amendment,
modification, waiver or other change to, any of the material terms of any
subordinated Indebtedness of Conseco or any of its Subsidiaries (other than
Conseco Finance or any of its Subsidiaries) the aggregate principal amount of
which exceeds $10,000,000 (other than any such amendment, modification, waiver
or other change that (i) would extend the maturity or reduce the amount of any
payment of principal thereof or reduce the rate or extend any date for payment
of interest thereon and (ii) does not involve the payment of a consent fee that
is not customary under the circumstances).
(c) Conseco shall not, and shall not permit any of its
Subsidiaries (other than Conseco Finance or any of its Subsidiaries) to amend,
modify, waive or otherwise change, or consent or agree to any amendment,
modification, waiver or other change to, any of the material terms of any
preferred stock issued by Conseco or any of its Subsidiaries or any related
trust (other than any such amendment, modification, waiver or other change that
(i) would extend the scheduled redemption date or reduce the amount of any
scheduled redemption payment or reduce the rate or extend any date for payment
of dividends thereon and (ii) does not involve the payment of a consent fee that
is not customary under the circumstances).
(d) Conseco shall not, and shall not permit any of its
Subsidiaries to enter into or be party to, or make any payment under, any
Synthetic Purchase Agreement.
33
IV.11 Negative Pledge on Tritel and Argosy Riverboat.
Conseco shall not, and shall not permit any of its Subsidiaries to, pledge or
create any security interest or Lien upon (a) any of the Capital Stock of
Tritel, Inc. (or any successor thereto) directly or indirectly owned by it
(other than (i) any such Lien described in Section 4.02(i)(iv) and (ii) Liens
securing obligations under hedging transactions relating to the value of such
Capital Stock with counterparties having a senior unsecured non-credit enhanced
long-term debt rating of at least A2 from ▇▇▇▇▇'▇ and A from S&P (a "Permitted
Tritel Hedge Transaction")) or (b) the Capital Stock or assets of Conseco
Entertainment Inc. or CNC Entertainment LLC.
IV.12 Reserve Account. Conseco shall not permit the amounts
in the Reserve (a) to be invested in anything other than Cash Equivalents or (b)
to be used for any purpose other than to prepay or repay the 2000 Public Debt,
the 2001 Public Debt or Exposure under the Facilities, except that, with the
prior written consent of each of the Agents, Conseco may use up to 20% of the
amounts in the Reserve at any time (but in an aggregate amount not to exceed
$160,000,000) for other general corporate purposes permitted by the Loan
Documents, including this Appendix.
IV.13 Debt to Capitalization Ratio. Conseco shall not
permit the Debt to Total Capitalization Ratio as of the end of each Fiscal
Quarter set forth below to be greater than the ratio set forth below for such
date:
---------------------------------------------------------- ---------------
Fiscal Quarter Ending Ratio
---------------------------------------------------------- ---------------
December 31, 2000 0.450:1.0
---------------------------------------------------------- ---------------
March 31, 2001 0.435:1.0
---------------------------------------------------------- ---------------
June 30, 2001 0.425:1.0
---------------------------------------------------------- ---------------
September 30, 2001 0.425:1.0
---------------------------------------------------------- ---------------
December 31, 2001 0.400:1.0
---------------------------------------------------------- ---------------
March 31, 2002 0.400:1.0
---------------------------------------------------------- ---------------
June 30, 2002 0.400:1.0
---------------------------------------------------------- ---------------
September 30, 2002 0.375:1.0
---------------------------------------------------------- ---------------
December 31, 2002 0.375:1.0
---------------------------------------------------------- ---------------
March 31, 2003 0.350:1.0
---------------------------------------------------------- ---------------
June 30, 2003 0.350:1.0
---------------------------------------------------------- ---------------
September 30, 2003 0.350:1.0
---------------------------------------------------------- ---------------
December 31, 2003 0.350:1.0
---------------------------------------------------------- ---------------
March 31, 2004 0.300:1.0
---------------------------------------------------------- ---------------
June 30, 2004 0.300:1.0
---------------------------------------------------------- ---------------
September 30, 2004 0.300:1.0
---------------------------------------------------------- ---------------
December 31, 2004 and thereafter 0.300:1.0
---------------------------------------------------------- ---------------
For each $2,830,000 by which the aggregate amount of the FY 2000 Adjustments is
less than $500,000,000, each ratio set forth above for periods ending on or
prior to September 30, 2001 shall be reduced by 0.01%.
IV.14 Interest Coverage Ratio. Conseco 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, if less, the number of full Fiscal
Quarters commencing after the Effective Date) to be less than the ratio set
forth below for such date:
---------------------------------------------------------- ----------------
Fiscal Quarter Ending Ratio
---------------------------------------------------------- ----------------
---------------------------------------------------------- ----------------
December 31, 2000 1.00:1.0
---------------------------------------------------------- ----------------
---------------------------------------------------------- ----------------
March 31, 2001 1.00:1.0
---------------------------------------------------------- ----------------
---------------------------------------------------------- ----------------
June 30, 2001 1.10:1.0
---------------------------------------------------------- ----------------
---------------------------------------------------------- ----------------
September 30, 2001 1.10:1.0
---------------------------------------------------------- ----------------
---------------------------------------------------------- ----------------
December 31, 2001 1.20:1.0
---------------------------------------------------------- ----------------
---------------------------------------------------------- ----------------
March 31, 2002 1.25:1.0
---------------------------------------------------------- ----------------
---------------------------------------------------------- ----------------
June 30, 2002 1.30:1.0
---------------------------------------------------------- ----------------
---------------------------------------------------------- ----------------
September 30, 2002 1.40:1.0
---------------------------------------------------------- ----------------
---------------------------------------------------------- ----------------
December 31, 2002 1.40:1.0
---------------------------------------------------------- ----------------
---------------------------------------------------------- ----------------
March 31, 2003 1.60:1.0
---------------------------------------------------------- ----------------
---------------------------------------------------------- ----------------
June 30, 2003 1.75:1.0
---------------------------------------------------------- ----------------
---------------------------------------------------------- ----------------
September 30, 2003 1.90:1.0
---------------------------------------------------------- ----------------
---------------------------------------------------------- ----------------
December 31, 2003 2.00:1.0
---------------------------------------------------------- ----------------
---------------------------------------------------------- ----------------
March 31, 2004 2.00:1.0
---------------------------------------------------------- ----------------
---------------------------------------------------------- ----------------
June 30, 2004 2.00:1.0
---------------------------------------------------------- ----------------
---------------------------------------------------------- ----------------
September 30, 2004 2.00:1.0
---------------------------------------------------------- ----------------
---------------------------------------------------------- ----------------
December 31, 2004 and thereafter 2.00:1.0
---------------------------------------------------------- ----------------
IV.15 Conseco Adjusted Earnings. Conseco shall not permit
the Conseco Adjusted Earnings for any period of four Fiscal Quarters (or, in the
case of the tests as at March 31, 2001, June 30, 2001 and September 30, 2001,
two Fiscal Quarters, two Fiscal Quarters and three Fiscal Quarters,
respectively) ended on any date set forth below to be less than the amount set
forth below for such date:
---------------------------------------------------------- -------------------
Fiscal Quarter Ending Amount
---------------------------------------------------------- -------------------
March 31, 2001 $650,000,000
---------------------------------------------------------- -------------------
June 30, 2001 $750,000,000
---------------------------------------------------------- -------------------
34
---------------------------------------------------------- -------------------
September 30, 2001 $1,150,000,000
---------------------------------------------------------- -------------------
December 31, 2001 $1,600,000,000
---------------------------------------------------------- -------------------
March 31, 2002 $1,600,000,000
---------------------------------------------------------- -------------------
June 30, 2002 $1,650,000,000
---------------------------------------------------------- -------------------
September 30, 2002 $1,700,000,000
---------------------------------------------------------- -------------------
December 31, 2002 $1,750,000,000
---------------------------------------------------------- -------------------
March 31, 2003 $1,800,000,000
---------------------------------------------------------- -------------------
June 30, 2003 $1,850,000,000
---------------------------------------------------------- -------------------
September 30, 2003 $1,925,000,000
---------------------------------------------------------- -------------------
December 31, 2003 $2,000,000,000
---------------------------------------------------------- -------------------
March 31, 2004 $2,025,000,000
---------------------------------------------------------- -------------------
June 30, 2004 $2,075,000,000
---------------------------------------------------------- -------------------
September 30, 2004 $2,125,000,000
---------------------------------------------------------- -------------------
December 31, 2004 and thereafter $2,175,000,000
---------------------------------------------------------- -------------------
IV.16 Conseco Finance Tangible Net Worth. Conseco shall not
permit Conseco Finance Tangible Net Worth as at the end of any Fiscal Quarter
ending during any Fiscal Year set forth below (commencing with the Fiscal
Quarter ending December 31, 2000) to be less than the relevant amount set forth
below:
---------------------------------------------------------- -----------------
Fiscal Quarter Ending During Amount
---------------------------------------------------------- -----------------
Fiscal Year Ending December 31, 2000 $950,000,000
---------------------------------------------------------- -----------------
Fiscal Year Ending December 31, 2001 $1,200,000,000
---------------------------------------------------------- -----------------
Fiscal Year Ending December 31, 2002 $1,400,000,000
---------------------------------------------------------- -----------------
Fiscal Year Ending December 31, 2003 $1,650,000,000
---------------------------------------------------------- -----------------
Fiscal Year Ending December 31, 2004 and thereafter $2,000,000,000
---------------------------------------------------------- -----------------
35
IV.17 Risk-Based Capital Ratio. Conseco shall not permit
the Risk-Based Capital Ratio as at the end of any Fiscal Quarter to be less than
200%.
ARTICLE V
EVENTS OF DEFAULT
V.1 Events of Default. Each of the following shall
constitute an "Event of Default":
(a Non Payment. Conseco 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 Conseco or any of its Subsidiaries made or deemed made herein or in
any other Loan Document, or contained in any certificate, document or financial
or other statement by Conseco, any Subsidiary or any Responsible Officer,
furnished at any time in connection with this Appendix 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. Conseco fails to perform or observe
any term, covenant or agreement contained in any of Section 3.03(a), 4.01, 4.02,
4.03, 4.04, 4.06, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.16 or
4.17; or
(d Other Defaults. Conseco or any of its Subsidiaries fails
to perform or observe any other term or covenant contained in this Appendix 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 Conseco
by the Relevant Agent or any Relevant Bank; or
36
(e Cross-Default. (i) Conseco 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) or any similar financing
arrangement related to the ▇▇▇▇▇▇ Agreement, having an aggregate principal
amount (including undrawn committed or available amounts and including amounts
owing to all creditors under any combined or syndicated credit arrangement) of
more than $50,000,000, 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 Conseco 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, 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 any similar financing arrangement related
to the ▇▇▇▇▇▇ Agreement (or a trustee or agent on behalf of such holder or
holders or beneficiary or beneficiaries) to cause, such Indebtedness to be
declared to be due and payable prior to its stated maturity, or, in the case of
any such Indebtedness consisting of Contingent Obligations, to become payable or
cash collateral in respect thereof to be demanded or, in the case of any similar
financing arrangement related to the ▇▇▇▇▇▇ Agreement, otherwise permit ▇▇▇▇▇▇
or an Affiliate thereof to terminate its obligations or commitments thereunder;
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 Conseco or any Subsidiary is the Defaulting Party
(as defined in such Swap Contract) or (2) any Termination Event (as so defined)
as to which Conseco or any Subsidiary is an Affected Party (as so defined), and,
in either event, the Swap Termination Value owed by Conseco or such Subsidiary
as a result thereof is greater than $50,000,000; or
(f Insolvency; Voluntary Proceedings. Conseco 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 Conseco or any Significant Subsidiary,
or any writ, judgment, warrant of attachment, execution or similar process, is
issued or levied against a substantial part of Conseco'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) Conseco, 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)
Conseco, 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; or
(h Pension Plans and Welfare Plans. With respect to any
Single Employer Pension Plan as to which Conseco 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 Conseco) or $65,000,000 as to Conseco in
the Pension Plan assets available to satisfy the 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 Conseco or any other ERISA
Affiliate withdraws from or institutes steps to withdraw from such Pension Plan,
or Conseco 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 Conseco) in excess of $20,000,000 or $65,000,000 as to
Conseco 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 Conseco) in excess of $20,000,000 or $65,000,000 as to Conseco or steps are
taken to terminate any Multiemployer Plan and such termination may result in any
liability of any ERISA Affiliate (other than Conseco) in excess of $20,000,000
or $65,000,000 as to Conseco shall occur; or
(i Material Judgments. One or more judgments or decrees
shall be entered against Conseco or any of its Subsidiaries involving in the
aggregate a liability (not paid or fully covered by insurance as to which the
relevant insurance company has not denied coverage) of $50,000,000 or more, and
all such judgments or decrees shall not have been vacated, discharged, stayed or
bonded pending appeal within 30 days from the entry thereof ; or
37
(j Material Regulatory Matters. (i) If an Insurance
Subsidiary shall not make a scheduled payment of interest or principal on any
surplus note or similar form of subordinated indebtedness (due to actions of any
Governmental Authority or otherwise), (ii) if at any time an Insurance
Subsidiary's ability to pay fees to its Affiliates under existing agreements (or
extensions of existing agreements) shall be restricted due to actions of any
Governmental Authority or otherwise or (iii) if in any Fiscal Year, an Insurance
Subsidiary's ability to pay dividends to its stockholders is restricted in any
manner (due to actions of any Governmental Authority or otherwise), other than
by restrictions under the insurance law of the Insurance Subsidiary's state of
domicile that apply generally to other insurance companies domiciled in the
state, and, in the case of clauses (i) through (iii) above, such event or
condition (x) was not in effect as of the date hereof and (y) such event or
condition, together with all other such events or conditions, could reasonably
be expected to have a Material Adverse Effect; or
(k Change of Control. There occurs any Change of Control;
or
(l A.M. Best A- Status. Conseco shall not have obtained
A.M. Best A- Status prior to March 31, 2001; or
(m CIHC Guarantee. The guarantee contained in the Relevant
CIHC Guaranty shall cease, for any reason, to be in full force and effect (other
than in accordance with the definition thereof or if released by the Relevant
Agent at the direction of each of the Relevant Banks) or Conseco or any
Subsidiary of Conseco shall so assert; or
(n Subordination to CIHC Obligations. Any "Subordinated
Debt" under and as defined in the Relevant CIHC Guaranty shall cease, for any
reason, to be validly subordinated to the obligations of CIHC under the Relevant
CIHC Guaranty as provided in the relevant provisions of the Relevant CIHC
Guaranty, or Conseco or any Subsidiary of Conseco shall so assert; or
(o Subordination to Obligations. Any Subordinated
Obligations or the guarantees thereof shall cease, for any reason, to be validly
subordinated to the Obligations or the obligations of Conseco under the Relevant
Conseco Guaranty, as the case may be, as provided in the documents governing
such Subordinated Obligations, or Conseco or any Subsidiary of Conseco or any
trustee or material holders of such Subordinated Obligations shall so assert.
38