STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of April 6, 1998 (the
"Agreement"), between Conseco, Inc., an Indiana corporation ("Parent"), and
Green Tree Financial Corporation, a Delaware corporation (the "Company").
W I T N E S S E T H:
WHEREAS, simultaneously with the execution and delivery of
this Agreement, Parent, Marble Acquisition Corp., a newly formed Delaware
corporation and a direct wholly owned subsidiary of Parent ("Sub"), and the
Company are entering into an Agreement and Plan of Merger, dated as of the date
hereof (the "Merger Agreement"), which provides for the merger of Sub with and
into the Company;
WHEREAS, as a condition to Parent's willingness to enter into
the Merger Agreement, Parent has requested that the Company grant to Parent an
option to purchase up to 26,668,399 authorized and unissued shares of Company
Common Stock, upon the terms and subject to the conditions hereof; and
WHEREAS, in order to induce Parent to enter into the Merger
Agreement, the Company has agreed to grant Parent the requested option.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements set forth herein, the parties hereto agree as
follows:
1. The Option; Exercise; Adjustments. The Company hereby
grants to Parent an irrevocable option (the "Option") to purchase from time to
time up to 26,668,399 authorized and unissued shares of common stock, par value
$.01 per share, of the Company (the "Company Common Stock") upon the terms and
subject to the conditions set forth herein (the "Optioned Shares"). Subject to
the conditions set forth in Section 2, the Option may be exercised by Parent in
whole or from time to time in part, at any time after the date hereof and prior
to the termination of the Option in accordance with Section 19. In the event
Parent wishes to exercise the Option, Parent shall send a written notice to the
Company (the "Stock Exercise Notice") specifying the total number of Optioned
Shares it wishes to purchase and a date (not later than 20 business days and not
earlier than two business days from the date such notice is given) for the
closing of such purchase (the "Closing Date"). Parent may revoke an exercise of
the Option at any time prior to the Closing Date by written notice to the
Company. In the event of any change in the number of issued and outstanding
shares of Company Common Stock by reason of any stock dividend, stock split,
split-up, recapitalization, merger or other change in the corporate or capital
structure of the Company, the number of Optioned Shares subject to the Option
and the Exercise Price (as hereinafter defined) per Optioned Share shall be
appropriately adjusted. In the event that any additional shares of Company
Common Stock are issued
after the date of this Agreement (other than pursuant to an event described in
the preceding sentence or pursuant to this Agreement), the number of Optioned
Shares subject to the Option shall be adjusted so that, after such issuance, it
equals at least 19.9% of the number of shares of Company Common Stock then
issued and outstanding (without considering any shares subject to or issued
pursuant to the Option).
2. Conditions to Exercise of Option and Delivery of Optioned
Shares. (a) Parent's right to exercise the Option is subject to the following
conditions that:
(i) Neither Parent nor Sub shall have breached any of its
material obligations under the Merger Agreement or have terminated
the Merger Agreement in violation of its terms;
(ii) No preliminary or permanent injunction or other order
issued by any federal or state court of competent jurisdiction in
the United States invalidating the grant or prohibiting the
exercise of the Option shall be in effect; and
(iii) One or more of the following events shall have occurred
on or after the date hereof or Parent shall have become aware on or
after the date hereof of the occurrence of any of the following:
(A) any person, corporation, partnership, limited liability
company, or other entity or group (such person, corporation,
partnership or other entity or group being referred to hereinafter,
singularly or collectively, as a "Person"), other than Parent or
its affiliates, acquires or becomes the beneficial owner of 20% or
more of the outstanding shares of Company Common Stock; (B) any new
group is formed which beneficially owns 20% or more of the
outstanding shares of Company Common Stock (other than a group
which includes or may reasonably be deemed to include Parent or any
of its affiliates); (C) any Person (other than Parent or its
affiliates) shall have commenced a tender or exchange offer for 20%
or more of the then outstanding shares of Company Common Stock or
publicly proposed any bona fide merger, consolidation or
acquisition of all or substantially all the assets of the Company,
or other similar business combination involving the Company; (D)
the Company enters into, or announces that it proposes to enter
into, an agreement, including, without limitation, an agreement in
principle, providing for a merger or other business combination
involving the Company or a "significant subsidiary" of the Company
(as defined in Rule 1.02(v) of Regulation S-X as promulgated by the
Securities and Exchange Commission (the "SEC")) or the acquisition
of a substantial interest in, or a substantial portion of the
assets, business or operations of the Company or a significant
subsidiary (other than the transactions contemplated by the Merger
Agreement); (E) any Person (other than Parent or its affiliates) is
granted any option or right, conditional or otherwise, to acquire
or otherwise become the beneficial owner of shares of Company
Common Stock which, together with all shares of Company Common
Stock beneficially owned by such Person, results or would result in
such Person being the beneficial owner of 20% or more of the
outstanding shares of Company Common Stock; or (F) there is a
public announcement with respect to a plan or intention by the
Company or any Person, other than Parent or its affiliates, to
effect any of the foregoing transactions. For purposes of this
subparagraph (iii), the terms "group" and "beneficial owner" shall
be defined by reference to Section 13(d) of the Securities Exchange
Act of 1934, as amended, and
the rules and regulations promulgated thereunder (the "Exchange Act").
(b) Parent's obligation to purchase the Optioned Shares
following the exercise of the Option, and the Company's obligation
to deliver the Optioned Shares, are subject to the conditions that:
(i) No preliminary or permanent injunction or other order
issued by any federal or state court of competent jurisdiction in
the United States prohibiting the delivery of the Optioned Shares
shall be in effect;
(ii) The purchase of the Optioned Shares will not violate Rule
10b-13 promulgated under the Exchange Act; and
(iii) All applicable waiting periods under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended
(the "HSR Act"), shall have expired or been terminated.
3. Exercise Price for Optioned Shares. At any Closing Date,
the Company will deliver to Parent a certificate or certificates representing
the Optioned Shares in the denominations designated by Parent in its Stock
Exercise Notice and Parent will purchase the Optioned Shares from the Company at
a price per Optioned Share equal to $52.93 (the "Exercise Price"), payable in
Common Stock, no par value, of Parent (the "Parent Common Stock"), cash or a
combination of Parent Common Stock or cash, in each case at Parent's option, as
specified in the Stock Exercise Notice. Any cash payment made by Parent to the
Company pursuant to this Agreement shall be made by wire transfer of federal
funds to a bank designated by the Company or a check payable in immediately
available funds. If Parent elects to pay the Exercise Price or a portion thereof
in Parent Common Stock, the Parent Common Stock shall be valued at the average
of the closing prices of the Parent Common Stock on the New York Stock Exchange
for the five trading days immediately prior to the Closing Date. After payment
of the Exercise Price for the Optioned Shares covered by the Stock Exercise
Notice, the Option shall be deemed exercised to the extent of the Optioned
Shares specified in the Stock Exercise Notice as of the date such Stock Exercise
Notice is given to the Company. Notwithstanding anything to the contrary herein,
the Exercise Price shall from time to time be adjusted so that in no event shall
the Aggregate Spread Value, together with the Termination Fee (as defined in
Section 5.7(c) of the Merger Agreement and as may be adjusted pursuant thereto),
exceed $295,000,000 (it being understood that, if the Exercise Price has been
increased from time to time as a result of this sentence, the Exercise Price
shall from time to time be adjusted downward to the extent of any decrease in
the price of the Company Common Stock). "Spread Value" with respect to an
Optioned Share means the product obtained by multiplying (x) the excess, if any,
of (i) the average of the closing prices on the New York Stock Exchange of the
Company Common Stock during the five trading days immediately preceding the
written notice of exercise (in the case of an Optioned Share previously
exercised) or the date of determination (in the case of an Optioned Share as to
which the Option has not yet been exercised) over (ii) the Exercise Price. The
Aggregate Spread Value shall be the sum of the Spread Value of all Optioned
Shares.
4. Representations and Warranties of the Company. The Company
represents
and warrants to Parent that (a) the execution and delivery of this Agreement by
the Company and the consummation by it of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part of the
Company and this Agreement has been duly executed and delivered by the Company
and constitutes a valid and binding obligation of the Company enforceable
against the Company in accordance with its terms; (b) the Company has taken all
necessary corporate action to authorize and reserve the Optioned Shares for
issuance upon exercise of the Option, and the Optioned Shares, when issued and
delivered by the Company to Parent upon exercise of the Option, will be duly
authorized, validly issued, fully paid and nonassessable and free of preemptive
rights; (c) except as otherwise required by the HSR Act, except for routine
filings and subject to Section 7, the execution and delivery of this Agreement
by the Company and the consummation by it of the transactions contemplated
hereby do not require the consent, approval or authorization of, or filing with,
any person or public authority and will not violate or conflict with the
Company's Certificate of Incorporation or Restated Bylaws, or result in the
acceleration or termination of, or constitute a default under, any indenture,
license, approval, agreement, understanding or other instrument, or any statute,
rule, regulation, judgment, order or other restriction binding upon or
applicable to the Company or any of its subsidiaries or any of their respective
properties or assets; (d) the Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all requisite corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby; and (e) the
Company has taken all appropriate actions so that the restrictions on business
combinations contained in Section 203 of the General Corporation Law of the
State of Delaware, as amended, and neither Article 8 nor Article 9 of its
Certificate of Incorporation will apply with respect to or as a result of the
transactions contemplated hereby.
5. Representations and Warranties of Parent. Parent represents
and warrants to the Company that (a) the execution and delivery of this
Agreement by Parent and the consummation by it of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Parent and this Agreement has been duly executed and delivered by Parent and
constitutes a valid and binding agreement of Parent; and (b) Parent is acquiring
the Option and, if and when it exercises the Option, will be acquiring the
Optioned Shares issuable upon the exercise thereof, for its own account and not
with a view to distribution or resale in any manner which would be in violation
of the Securities Act of 1933, as amended (the "Securities Act"), and will not
sell or otherwise dispose of the Optioned Shares except pursuant to an effective
registration statement under the Securities Act or a valid exemption from
registration under the Securities Act.
6. The Closing. Any closing hereunder shall take place on the
Closing Date specified by Parent in its Stock Exercise Notice pursuant to
Section 1 at 10:00 A.M., local time, or the first business day thereafter on
which all of the conditions in Section 2 are met, at the principal executive
office of the Company, or at such other time and place as the parties hereto may
agree.
7. Filings Related to Optioned Shares. The Company will make
such filings with the SEC and the National Association of Securities Dealers,
Inc. as are required by the Exchange Act, and will use its best efforts to
effect all necessary filings by the Company
under the HSR Act and to list the Optioned Shares on the New York Stock
Exchange.
8. Registration Rights. (a) If the Company effects any
registration or registrations of shares of Company Common Stock under the
Securities Act for its own account or for any other stockholder of the Company
at any time after the exercise of the Option (other than a registration on Form
X-0, Xxxx X-0 or any successor forms), it will allow Parent to participate in
such registration or registrations with respect to any or all of the Optioned
Shares acquired upon the exercise of the Option; provided, however, that if the
managing underwriters in such offering advise the Company that, in their written
opinion, the number of Optioned Shares requested by Parent to be included in
such registration exceeds the number of shares of Company Common Stock which can
be sold in such offering, the Company may exclude from such registration all or
a portion, as may be appropriate, of the Optioned Shares requested for inclusion
by Parent.
(b) At any time after the exercise of the Option, upon the
request of Parent, the Company will promptly file and use its best efforts to
cause to be declared effective a registration statement under the Securities Act
(and applicable Blue Sky statutes) with respect to any or all of the Optioned
Shares acquired upon the exercise of the Option; provided, however, that the
Company shall not be required to have declared effective more than two
registration statements hereunder and shall be entitled to delay the
effectiveness of each such registration statement, for a period not to exceed 90
days in the aggregate, if the commencement of such offering would, in the
reasonable good faith judgment of the Board of Directors of the Company, require
premature disclosure of any material corporate development or otherwise
materially interfere with or materially adversely affect any pending or proposed
offering of securities of the Company. In connection with any such registration
requested by Parent, the costs of such registration shall be borne by the
Company, and the Company and Parent each shall provide the other and any
underwriters with customary indemnification and contribution agreements.
9. Optional Put. Prior to the termination of the Option in
accordance with Section 19, if a Put Event has occurred, Parent shall have the
right, upon three business days' prior written notice to the Company, to require
the Company to purchase the Option from Parent (the "Put Right") at a cash
purchase price (the "Put Price") equal to the product determined by multiplying
(A) the number of Optioned Shares as to which the Option has not yet been
exercised by (B) the Spread (as defined below). As used herein, "Put Event"
means the occurrence on or after the date hereof or Parent becoming aware on or
after the date hereof of any of the following: (i) any Person (other than Parent
or its affiliates) acquires or becomes the beneficial owner of 30% or more of
the outstanding shares of Company Common Stock or (ii) the Company consummates a
merger or other business combination involving the Company or a "significant
subsidiary" of the Company (as defined in Rule 1.02(v) of Regulation S-X as
promulgated by the SEC) or the acquisition of a substantial interest in, or a
substantial portion of the assets, business or operations of the Company or a
significant subsidiary (other than the transactions contemplated by the Merger
Agreement). As used herein, the term "Spread" shall mean the excess, if any, of
(i) the greater of (x) the highest price (in cash or fair market value of
securities or other property) per share of Company Common Stock paid or to be
paid within 12 months preceding the date of exercise of the Put Right for any
shares of Company Common Stock beneficially owned by any Person who shall have
acquired or become the beneficial owner of
30% or more of the outstanding shares of Company Common Stock after the date
hereof or (y) the average of the closing prices on the New York Stock Exchange
of the Company Common Stock during the five trading days immediately preceding
the written notice of exercise of the Put Right over (ii) the Exercise Price.
Notwithstanding anything herein to the contrary, in no event shall the aggregate
Put Price, together with the Aggregate Spread Value of any Optioned Shares
previously exercised and the amount of the Termination Fee (as defined in
Section 5.7(c) of the Merger Agreement and as may be adjusted pursuant thereto)
then payable, exceed $295,000,000.
10. Expenses. Each party hereto shall pay its own expenses
incurred in connection with this Agreement, except as otherwise provided in
Section 8 or as specified in the Merger Agreement.
11. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state thereof having jurisdiction, this being in addition to any
other remedy to which they are entitled at law or in equity.
12. Notice. All notices, requests, demands and other
communications hereunder shall be deemed to have been duly given and made if in
writing and if served by personal delivery upon the party for whom it is
intended or if sent by telex or telecopier (and also confirmed in writing) to
the person at the address set forth below, or such other address as may be
designated in writing hereafter, in the same manner, by such person:
(a) if to Parent or Sub, to
Conseco, Inc.
00000 Xxxxx Xxxxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
Facsimile No.: (000) 000-0000
with copies to:
Conseco, Inc.
00000 Xxxxx Xxxxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxx 00000
Attention: Xxxx X. Xxxx, Esq.
Facsimile No.: (000) 000-0000
and
Sidley & Austin
Xxx Xxxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxx, Esq.
Xxxx X. Xxxx, Esq.
Facsimile No.: (000) 000-0000
(b) if to the Company, to
Green Tree Financial Corporation
1100 Landmark Towers
000 Xx. Xxxxx Xxxxxx
Xx. Xxxx, Xxxxxxxxx 00000
Attention: Xxxxxxxx X. Xxxx
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxxx & Whitney LLP
Pillsbury Center South
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
Facsimile No.: (000) 000-0000
13. Parties in Interest. This Agreement shall inure to the
benefit of and be binding upon the parties named herein and their respective
successors and assigns. Nothing in this Agreement, expressed or implied, is
intended to confer upon any Person other than Parent or the Company, or their
permitted successors or assigns, any rights or remedies under or by reason of
this Agreement.
14. Entire Agreement; Amendments. This Agreement, together
with the Merger Agreement and the other documents referred to therein, contains
the entire agreement between the parties hereto with respect to the subject
matter hereof and supersedes all prior and contemporaneous agreements and
understandings, oral or written, with respect to such transactions. This
Agreement may not be changed, amended or modified orally, but only by an
agreement in writing signed by the party against whom any waiver, change,
amendment, modification or discharge may be sought.
15. Assignment. No party to this Agreement may assign any of
its rights or delegate any of its obligations under this Agreement (whether by
operation of law or otherwise) without the prior written consent of the other
party hereto, except that Parent may, without a written consent, assign its
rights and delegate its obligations hereunder in whole or in part to one or more
of its direct or indirect wholly owned subsidiaries.
16. Headings. The section headings herein are for convenience
only and shall not affect the construction of this Agreement.
17. Counterparts. This Agreement may be executed in one or
more counterparts, each of which, when executed, shall be deemed to be an
original and all of which together shall constitute one and the same document.
18. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without giving
effect to the principles of conflicts of laws thereof.
19. Termination. This Agreement and the Option shall terminate
upon the earlier of (i) the Effective Time (as defined in the Merger Agreement)
and (ii) the termination of the Merger Agreement in accordance with its terms;
provided, however, the Option shall not terminate pursuant to clause (ii)
immediately above if (A) the Merger Agreement is terminated by Parent pursuant
to Section 7.1(b) or (c) thereof or (B) the Merger Agreement is terminated by
Parent or the Company pursuant to Section 7.1(e), (g), or (h) thereof.
20. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic and legal
substance of the transactions contemplated hereby are not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the transactions contemplated by this Agreement may be consummated as
originally contemplated to the fullest extent possible.
IN WITNESS WHEREOF, Parent and the Company have caused this
Agreement to be duly executed and delivered on the day and year first above
written.
CONSECO, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Chairman, President and
Chief Executive Officer
GREEN TREE FINANCIAL CORPORATION
By: /s/ Xxxxxxxx X. Xxxx
-------------------------------
Name: Xxxxxxxx X. Xxxx
Title: Chairman and Chief
Executive Officer
