AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 5, 2002
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
CONSECO, INC.
(Exact Name of Registrant as Specified in Its Charter)
INDIANA 6321 35-1468632
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
11825 N. PENNSYLVANIA STREET
CARMEL, INDIANA 46032
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
DAVID K. HERZOG, ESQ.
CONSECO, INC.
11825 N. PENNSYLVANIA STREET
CARMEL, INDIANA 46032
(317) 817-6000
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent For Service)
---------------------
INFORMATION REGARDING THE ADDITIONAL REGISTRANT APPEARS IN A SEPARATE TABLE
BELOW
---------------------
WITH COPIES TO:
JEREMY W. DICKENS, ESQ.
WEIL, GOTSHAL & MANGES LLP
767 FIFTH AVENUE
NEW YORK, NEW YORK 10153-0119
(212) 310-8000
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after the effective date of this Registration
Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT (1) OFFERING PRICE (1) REGISTRATION FEE(2)
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8.5% Guaranteed Senior Notes due 2003... $ 991,000 100% $ 991,000 $ 92
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6.4% Guaranteed Senior Notes due 2004... 14,936,000 100% 14,936,000 1,375
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8.75% Guaranteed Senior Notes due
2006.................................. 364,294,000 100% 364,294,000 33,515
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6.8% Guaranteed Senior Notes due 2007... 150,783,000 100% 150,783,000 13,872
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9% Guaranteed Senior Notes due 2008..... 399,200,000 100% 399,200,000 36,727
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10.75% Guaranteed Senior Notes due
2009.................................. 362,433,000 100% 362,433,000 33,344
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Total................................... $1,292,637,000 $1,292,637,000 $118,925
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(1) Estimated solely for the purposes of calculating the registration fee
pursuant to Rule 457(f)(2) under the Securities Act of 1933, as amended.
(2) The Additional Registrant will guarantee the payment of the Securities.
Pursuant to Rule 457(n) under the Securities Act, no additional filing fee
is required.
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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ADDITIONAL REGISTRANT
PRIMARY
STANDARD ADDRESS, INCLUDING ZIP CODE
STATE OR OTHER INDUSTRIAL AND TELEPHONE NUMBER,
JURISDICTION OF CLASSIFICATION I.R.S. EMPLOYER INCLUDING AREA CODE,
EXACT NAME OF REGISTRANT INCORPORATION CODE IDENTIFICATION OF REGISTRANT'S PRINCIPAL
AS SPECIFIED IN ITS CHARTER OR ORGANIZATION NUMBER NUMBER EXECUTIVE OFFICE* REGISTRATION NO.
--------------------------- --------------- -------------- --------------- --------------------------- ----------------
CIHC, Incorporated Delaware 6321 51-0356511 1201 Orange Street 333-
Suite 789
Wilmington, DE 19801
David Hill
(302) 884-6703
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* Name, address, including zip code and telephone number, including area code,
for agent of service of process for Additional Registrant.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL OR OFFER THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN
OFFER TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED JUNE 5, 2002
PROSPECTUS
[CONSECO LOGO]
$1,292,637,000
CONSECO, INC.
We are offering to exchange, upon the terms and subject to the conditions
set forth in this prospectus, each series of our outstanding, unregistered
guaranteed notes for newly-issued, registered notes described below. The terms
of each series of registered notes are identical in all material respects to the
terms of the corresponding series of unregistered guaranteed notes, except that
the registered notes generally will not be subject to transfer restrictions
under the Securities Act of 1933, as amended, which we refer to as the
Securities Act.
OUTSTANDING
AGGREGATE
FOR EACH $1,000 PRINCIPAL AMOUNT OF PRINCIPAL THE EXCHANGING HOLDERS WILL RECEIVE $1,000 PRINCIPAL
THE FOLLOWING UNREGISTERED GUARANTEED NOTES: AMOUNT AMOUNT OF THE CORRESPONDING REGISTERED NOTES:
-------------------------------------------- ------------ ----------------------------------------------------
8.5% Guaranteed Senior Notes due 2003 $ 991,000 8.5% Guaranteed Senior Notes due 2003
6.4% Guaranteed Senior Notes due 2004 14,936,000 6.4% Guaranteed Senior Notes due 2004
8.75% Guaranteed Senior Notes due 2006 364,294,000 8.75% Guaranteed Senior Notes due 2006
6.8% Guaranteed Senior Notes due 2007 150,783,000 6.8% Guaranteed Senior Notes due 2007
9% Guaranteed Senior Notes due 2008 399,200,000 9% Guaranteed Senior Notes due 2008
10.75% Guaranteed Senior Notes due 2009 362,433,000 10.75% Guaranteed Senior Notes due 2009
In this document, we refer to the unregistered guaranteed notes issued in
connection with a private exchange offer we completed on April 24, 2002 as the
unregistered or existing guaranteed notes, and to the registered guaranteed
notes to be issued in connection with this exchange offer as the registered
notes. We refer to the private exchange offer as the April exchange offer. We
refer to the unregistered guaranteed notes and the registered notes together as
the guaranteed notes. We refer to the original notes for which the unregistered
guaranteed notes were exchanged in the April exchange offer as the senior notes.
After giving effect to the consummation of the April exchange offer and
this exchange offer, as if each had occurred on March 31, 2002, CIHC would have
had outstanding up to $2,288.5 million of guarantees senior to the registered
note guarantees (including $545.2 million of guarantees that Conseco, Inc. has
also made), $1,823.5 million of debt and guarantees ranking equally with the
registered note guarantees and $710.8 million of debt ranking junior to the
registered note guarantees. The registered notes and any unregistered guaranteed
notes remaining outstanding after the conclusion of this exchange offer will
also be effectively junior to all the indebtedness, policy reserves and other
liabilities of CIHC's subsidiaries, which totaled $50.2 billion at March 31,
2002.
---------------------
THE EXCHANGE OFFER
- THE EXCHANGE OFFER EXPIRES AT 5:00 P.M., NEW YORK CITY TIME, ON
, 2002, UNLESS EXTENDED.
- The material conditions to completing the exchange offer are that (i) the
exchange offer does not violate applicable law or applicable
interpretations of the staff of the Securities and Exchange Commission,
which we refer to as the SEC or the Commission, and (ii) no injunction,
order or decree has been issued which would prohibit, prevent or
materially impair our ability to proceed with the exchange offer. As more
fully described in this prospectus, the exchange offer is also subject to
certain other conditions, all of which we may waive in our sole
discretion.
- All unregistered guaranteed notes that are validly tendered and not
validly withdrawn will be exchanged for registered notes.
- Tenders of unregistered guaranteed notes may be withdrawn at any time
prior to 5:00 p.m., New York City time, on , 2002, the
withdrawal deadline.
- We will not receive any cash proceeds from the exchange offer.
---------------------
YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS BEGINNING ON PAGE 10 OF THIS
PROSPECTUS
BEFORE PARTICIPATING IN THE EXCHANGE OFFER.
---------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------, 2002
TABLE OF CONTENTS
PAGE
----
Incorporation of Certain Documents by
Reference........................... i
Forward-Looking Statements............ i
Prospectus Summary.................... 1
Risk Factors.......................... 10
Use of Proceeds....................... 18
Selected Consolidated Financial
Data................................ 19
The Exchange Offer.................... 24
PAGE
----
Description of the Registered Notes... 33
Certain Material United States Federal
Income Tax Considerations........... 40
Plan of Distribution.................. 41
Legal Matters......................... 42
Experts............................... 42
Where You Can Find More Information... 42
Unless otherwise stated, in this prospectus, "Conseco," the "Company,"
"we," "us" and "our" refer to Conseco, Inc. and its subsidiaries, unless the
context requires otherwise. "CIHC" or the "guarantor" refers to CIHC,
Incorporated, the guarantor of the registered notes and the unregistered
guaranteed notes and the holding company of our principal operating
subsidiaries.
Each broker-dealer that receives registered notes for its own account
pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of such registered notes. The letter of
transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of registered notes. We have agreed that, during a period starting
on the expiration date of this exchange offer and ending on the close of
business one year after the expiration date, we will make this prospectus
available to any broker-dealer for use in connection with any such resale. See
"Plan of Distribution."
This prospectus does not constitute an offer to sell, or a solicitation of
an offer to buy, any of the notes offered hereby by any person in any
jurisdiction in which it is unlawful for such person to make such an offering or
solicitation.
i
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
We are "incorporating by reference" certain documents we file with the SEC,
which means that by referring you to those documents, we are disclosing to you
important business and financial information about us that is not included in or
delivered with this prospectus. The information in the documents incorporated by
reference is considered to be part of this prospectus. We incorporate by
reference the documents listed below and any future filings we may make with the
SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of
1934, as amended (other than current reports filed under item 9 of Form 8-K),
which we refer to as the Exchange Act, prior to the termination or completion of
this offering:
- Our annual report on Form 10-K for the fiscal year ended December 31,
2001, filed with the SEC on April 1, 2002;
- Our quarterly report on Form 10-Q for the period ended March 31, 2002,
filed with the SEC on May 15, 2002;
- Our current reports on Form 8-K filed with the SEC on February 8, 2002,
February 21, 2002 and March 18, 2002;
- The sections entitled "Description of the Notes" contained in each of our
prospectus supplements or pricing supplements relating to our senior
notes (but not the unregistered guaranteed notes) filed with the SEC on
February 6, 1998 (with respect to the 6.4% notes), June 5, 1998 (with
respect to the 6.8% notes), October 19, 1999 (with respect to the 8.5%
and 9% notes), February 3, 2000 (with respect to the 8.75% notes) and
June 27, 2001 (with respect to the 10.75% notes); and
- The sections entitled "Securities Ownership," "Election of Directors,"
"Executive Compensation, Related Party Transactions and Other
Information," "Board Meetings and Committees," and "Section 16(a)
Beneficial Ownership Reporting Compliance" contained in our definitive
proxy statement filed with the SEC on April 30, 2002, relating to our
2002 annual meeting of stockholders.
We filed a registration statement on Form S-4 to register with the SEC the
securities described in this prospectus. This prospectus is part of that
registration statement. As permitted by the SEC rules, this prospectus does not
contain all the information contained in the registration statement or the
exhibits to the registration statement. You may refer to the registration
statement and accompanying exhibits for more information about us and our
securities.
Information contained in this prospectus modifies or supersedes, as
applicable, the information contained in the earlier-dated documents
incorporated by reference. Information in documents that we file with the SEC
after the date of this prospectus will automatically update and supersede
information in this prospectus or in earlier-dated documents incorporated by
reference.
We will provide you with copies of the documents we incorporate by
reference in this prospectus, including the indentures governing the registered
notes and other material agreements that we summarize in this prospectus, at no
cost. To request a copy of any or all of these documents, you should write or
telephone us at: 11825 North Pennsylvania Street, Carmel, Indiana 46032, (317)
817-2893, Attention: Tammy H. Hill, Senior Vice President, Investor Relations NO
LATER THAN FIVE BUSINESS DAYS PRIOR TO THE EXPIRATION DATE.
FORWARD-LOOKING STATEMENTS
Some of the statements in this prospectus (including the information
incorporated by reference) may constitute "forward-looking statements" within
the meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act. When used in this prospectus or in documents incorporated by reference in
this prospectus, the words "believe," "anticipate," "estimate," "project,"
"intend," "expect," "may," "will," "plan," "should," "would," "contemplate,"
"possible," "attempts," "seeks" and similar expressions are intended to identify
forward-looking statements. Forward-looking statements are subject to known and
unknown risks, uncertainties and other factors that may cause our actual
results, performance or achievements to be materially different from the future
results, performance or achievements expressed or implied by our
i
forward-looking statements. Assumptions and other important factors that could
cause our actual results to differ materially from those anticipated in our
forward-looking statements include, but are not limited to:
- the factors described in this prospectus under "Risk Factors";
- general economic conditions and other factors, including prevailing
interest rate levels, stock and credit market performance, and health
care inflation, which may affect (among other things) our ability to sell
our products, our ability to make loans and access capital resources and
the costs associated therewith, the market value of our investments, the
lapse rate and profitability of policies, and the level of defaults and
prepayments of loans we made;
- our ability to achieve anticipated synergies and levels of operational
efficiencies, including from our "Process Excellence" initiatives;
- customer response to new products, distribution channels, and marketing
initiatives;
- mortality, morbidity, usage of health care services and other factors
that may affect the profitability of our insurance products;
- the performance of our investments;
- changes in tax laws and regulations that may affect the relative tax
advantages of some of our products;
- increasing competition in the sale of insurance and annuities and in the
finance business;
- regulatory changes or actions, including those relating to regulation of
financial services affecting (among other things) bank sales and
underwriting of insurance products, regulation of the sale, underwriting
and pricing of products, and health care regulation affecting health
insurance products;
- the outcome of our efforts to sell assets and reduce, refinance or modify
indebtedness and the availability and cost of capital in connection with
this process;
- actions by rating agencies and the effects of past or future actions by
these agencies on our business; and
- the risk factors or uncertainties listed from time to time in our filings
with the SEC.
Other factors not currently known to us or not currently considered
material by us may also be relevant to our forward-looking statements and could
also cause actual results to differ materially from those projected.
All written or oral forward-looking statements attributable to us are
expressly qualified in their entirety by the foregoing cautionary statement. Our
forward-looking statements speak only as of the date made. Except as required by
law, we assume no obligation to update or to publicly announce the results of
any revisions to any of our forward-looking statements to reflect actual
results, future events or developments, changes in assumptions or changes in
other factors affecting the forward-looking statements.
ii
PROSPECTUS SUMMARY
This summary may not contain all of the information that may be important
to you. You should carefully read the entire prospectus, including the other
documents to which it refers, and the financial data and related notes
incorporated by reference in the prospectus, before making an investment
decision.
CONSECO
We are a financial services holding company with subsidiaries operating in
the insurance and finance businesses, predominantly in the United States. Our
insurance subsidiaries develop, market and administer supplemental health
insurance, annuities, individual life insurance, and other insurance products.
Our finance subsidiaries originate, securitize and service manufactured housing,
home equity, retail credit, and floor plan loans.
We have a recent history of net losses. For the three months ended March
31, 2002, on a consolidated basis, we had a net loss of $95.9 million, cash
flows from operations of $263.0 million and interest expense of $368.7 million.
For 2001, on a consolidated basis, we had a net loss of $405.9 million, cash
flows from operations of $1,324.7 million and interest expense of $1,609.2
million. Our earnings before fixed charges were inadequate to cover our fixed
charges by $148.5 million and $623.1 million for the three months ended March
31, 2002 and fiscal year 2001, respectively. Rating agencies have recently
downgraded our credit rating for our debt, including the senior notes, and our
company-obligated mandatorily redeemable preferred securities of subsidiary
trusts. On May 28, 2002, Moody's Investor Services downgraded our credit rating
for the senior notes to "Caa1" from "B2", and said its ratings outlook for us is
negative. Our senior debt remains on credit watch for further downgrade at
Standard & Poor's, which currently rates our senior unsecured debt at "B." At
April 22, 2002, our senior debt, including the unregistered guaranteed notes,
was rated "B-" and on Rating Watch Negative by Fitch IBCA.
We were organized in 1979 as an Indiana corporation and commenced
operations in 1982. Our executive offices are located at 11825 N. Pennsylvania
Street, Carmel, Indiana 46032, and our telephone number is (317) 817-6100. Our
common stock trades on the New York Stock Exchange under the ticker symbol
"CNC."
INSURANCE
We are one of the largest life and health insurance companies in America,
with over $5.5 billion of annual premium and asset accumulation product
collections during 2001 and $1.4 billion collected during the three months ended
March 31, 2002 (excluding discontinued lines of business). Our investment
portfolio included more than $24 billion of insurance-related investments at
March 31, 2002. We sell our insurance products through three primary
distribution channels -- career agents, independent producers (many of whom sell
one or more of our product lines exclusively), and direct marketing.
Supplemental health products include Medicare supplement, long-term care
and specified-disease insurance products. During 2001, we collected Medicare
supplement premiums of $975.1 million, long-term care premiums of $888.3
million, specified-disease premiums of $371.8 million, and other supplemental
health premiums of $109.3 million. During the three months ended March 31, 2002,
proceeds from Medicare supplement premiums were $261.9 million, long-term care
premiums were $225.7 million, specified-disease premiums were $93.1 million, and
other supplemental health premiums were $29.4 million. Supplemental health
premiums represented 48% and 50% of our total premiums collected from continuing
lines of business in 2001 and the first three months of 2002, respectively.
Annuity products include equity-indexed annuity, variable annuity,
traditional fixed rate annuity and market value-adjusted annuity products.
During 2001 and the three months ended March 31, 2002, we collected annuity
premiums of $1,637.9 million (or 34% of our total premiums collected from
continuing lines of business) and $391.1 million (or 32% of our premiums
collected from continuing lines of business), respectively.
1
Life products include traditional, universal life and other life insurance
products. During 2001, we collected life product premiums of $872.2 million, or
18% of our total premiums collected from continuing lines of business. During
the three months ended March 31, 2002, we collected life product premiums of
$214.2 million, or 18% of our total premiums collected from continuing lines of
business.
FINANCE
Conseco Finance Corp., or "Conseco Finance", our subsidiary, is one of
America's largest consumer finance companies, with leading market positions in
manufactured housing lending, retail home equity mortgages, home improvement
loans, and private label credit cards. At March 31, 2002, we had managed
receivables of $41.5 billion.
Conseco Finance provides financing for consumer purchases of manufactured
housing and floor plan loans to manufactured housing dealers. A manufactured
home is a structure, transportable in one or more sections, designed to be a
dwelling with or without a permanent foundation. During 2001, we originated $2.5
billion of consumer contracts for manufactured housing purchases, or 22% of our
total originations. At March 31, 2002, our managed receivables included $25.1
billion of contracts for manufactured housing purchases, or 60% of total managed
receivables, and $.7 billion of floor plan loans. Conseco Finance offers its
manufactured housing financing products through 33 regional offices and
approximately 3,200 dealers.
Mortgage services products include home equity and home improvement loans.
During 2001, we originated $3.0 billion of contracts for these products, or 27
percent of our total originations. At March 31, 2002, our managed receivables
included $11.4 billion of contracts for home equity and home improvement loans,
or 27% of total managed receivables. During 2001, we originated $3.6 billion of
private label credit card receivables, primarily through our bank subsidiaries,
or 32% of our total originations. At March 31, 2002, our managed receivables
included $2.6 billion of contracts for credit card loans, or 6% of total managed
receivables. Private label credit card programs are offered to select retailers
with a core focus on the home improvement industry. We offer consumer finance
products through 123 home equity offices, approximately 1,300 home improvement
dealers and approximately 3,500 private label retail outlets.
CIHC
CIHC is our direct subsidiary and the holding company of our principal
operating subsidiaries, including the subsidiaries that engage in our insurance
and finance businesses. CIHC has no direct operations. As permitted by SEC
Regulation S-X, we consolidate CIHC's financial statements and reports in our
annual and quarterly reports filed with the SEC. Separate financial information
relating to CIHC is included in a note to our 2001 audited condensed financial
information in Schedule II to our annual report on Form 10-K for the period
ended December 31, 2001, filed with the SEC on April 1, 2002, and in a note to
our quarterly report on Form 10-Q for the period ended March 31, 2002, filed
with the SEC on May 15, 2002, which are incorporated by reference in this
prospectus.
PURPOSE OF THE EXCHANGE OFFER
On April 24, 2002, we exchanged $1,292,637,000 aggregate principal amount
of our then outstanding senior notes for a corresponding aggregate principal
amount of our unregistered guaranteed notes, which we refer to as the April
exchange offer. The April exchange offer was only made, and the unregistered
guaranteed notes were only offered and issued, (i) in the United States, to
"qualified institutional buyers," as that term is defined in Rule 144A under the
Securities Act, and institutional "Accredited Investors" as that term is defined
in Rule 501(a)(1), (2), (3) or (7) under the Securities Act, in a private
transaction in reliance upon an exemption from the registration requirements of
the Securities Act, and (ii) outside the United States, to persons other than
"U.S. persons," as that term is defined in Rule 902 under the Securities Act, in
offshore transactions in reliance upon Regulation S under the Securities Act.
The April exchange offer was not registered under the Securities Act.
2
The terms of the unregistered guaranteed notes are substantially identical
to those of the senior notes, except that the unregistered guaranteed notes have
longer maturities and are guaranteed by CIHC, Incorporated, our direct
subsidiary and the holding company of our principal operating subsidiaries. The
purpose of the April exchange offer was to extend the maturity profile of our
senior notes in order to improve our financial flexibility and to enhance our
future ability to refinance public debt. Following the April exchange offer,
$1,247,662,000 in aggregate principal amount of senior notes remained
outstanding (and without the benefit of the CIHC guarantee).
Simultaneously with the April exchange offer, we and the guarantor entered
into a registration rights agreement with Banc of America Securities LLC, J.P.
Morgan Securities Inc. and Lehman Brothers Inc., the dealer managers for the
April exchange offer. Pursuant to that agreement, we have filed the registration
statement of which this prospectus is a part. You should read the discussion
under the headings " -- Summary of the Terms of the Registered Notes", "The
Exchange Offer" and "Description of the Registered Notes" for further
information regarding the registered notes.
Because we did not register the unregistered guaranteed notes under the
Securities Act, those notes may only be transferred in limited circumstances
under the federal securities laws. If the holders of the unregistered guaranteed
notes do not exchange their notes in the exchange offer, they will not have the
right to have their unregistered guaranteed notes registered under the
Securities Act. Any holder who does not participate in this exchange offer will
be unable to publicly offer or sell the unregistered guaranteed notes and,
therefore, may only offer and sell such notes in transactions exempt from
registration under the Securities Act.
In exchange for tendering $1,000 principal amount of your unregistered
guaranteed notes, you will receive a corresponding principal amount of
registered notes, which have identical terms and conditions to the unregistered
guaranteed notes. The only difference between the unregistered guaranteed notes
and the registered notes is that the offer and sale of the registered notes have
been registered under the Securities Act and the registered notes will not bear
legends restricting their transfer. Unless you are a broker-dealer, we believe
that the registered notes to be issued in the exchange offer may be resold by
you without compliance with the registration and prospectus delivery
requirements of the Securities Act. You should read the discussions under the
headings "The Exchange Offer" and "Description of the Registered Notes" for
further information regarding the registered notes.
The Exchange Offer............ We are offering to exchange the registered
notes described below for any and up to all of
the unregistered guaranteed notes described
below:
FOR EACH $1,000 PRINCIPAL AMOUNT OF THE
FOLLOWING UNREGISTERED GUARANTEED NOTES:
8.5% Guaranteed Senior Notes due 2003
6.4% Guaranteed Senior Notes due 2004
8.75% Guaranteed Senior Notes due 2006
6.8% Guaranteed Senior Notes due 2007
9% Guaranteed Senior Notes due 2008
10.75% Guaranteed Senior Notes due 2009
THE EXCHANGING HOLDERS WILL RECEIVE $1,000
PRINCIPAL AMOUNT OF THE CORRESPONDING REGISTERED
NOTES:
8.5% Guaranteed Senior Notes due 2003
6.4% Guaranteed Senior Notes due 2004
8.75% Guaranteed Senior Notes due 2006
6.8% Guaranteed Senior Notes due 2007
9% Guaranteed Senior Notes due 2008
10.75% Guaranteed Senior Notes due 2009
For further information relating to the terms
of the registered notes, see "Description of
the Registered Notes" below.
3
Outstanding unregistered guaranteed notes may
be exchanged only in minimum denominations of
$1,000 principal amount and integral multiples
of $1,000.
Subject to the satisfaction or waiver of
specified conditions, we will exchange the
registered notes for any and up to all of the
unregistered guaranteed notes that are validly
tendered and not withdrawn prior to the
withdrawal deadline.
We will issue the registered notes promptly
after the expiration of the exchange offer.
Resales of the Registered
Notes; Letter of
Transmittal................... We believe that the registered notes to be
issued in the exchange offer may be offered for
resale, resold and otherwise transferred (other
than by broker-dealers participating in the
exchange offer) without compliance with the
registration and prospectus delivery provisions
of the Securities Act if you meet the following
conditions:
(1) the registered notes to be issued to you in
the exchange offer are acquired by you in
the ordinary course of your business;
(2) you have no arrangement or understanding
with any person to participate in the
distribution of the unregistered guaranteed
notes or the registered notes to be issued
to you in the exchange offer; and
(3) you are not an affiliate of Conseco's or
CIHC's.
The letter of transmittal accompanying this
prospectus requires you to confirm your
eligibility to participate in the exchange
offer.
Our belief is based on interpretations by the
staff of the Commission, as set forth in
no-action letters issued to third parties
unrelated to us. The staff has not considered
the exchange offer in the context of a
no-action letter, and we cannot assure you that
the staff would make a similar determination
with respect to the exchange offer.
If you do not meet the above conditions, you
may incur liability under the Securities Act if
you transfer any registered note without
delivering a prospectus meeting the
requirements of the Securities Act. We do not
assume or indemnify you against that liability.
Each broker-dealer that receives registered
notes in the exchange offer for its own account
in exchange for unregistered guaranteed notes
must deliver a prospectus meeting the
requirements of the Securities Act in
connection with any resales of such registered
notes. By signing the letter of transmittal (or
agreeing to its terms through the Depository
Trust Company's, or DTC's, procedures for
book-entry tenders), each broker-dealer
participating in the exchange offer will agree
to comply with its prospectus delivery
obligations. See "Plan of Distribution."
Expiration Date............... The exchange offer will expire at 5;00 p.m.,
New York City time, on , 2002, unless
extended. We do not presently intend to extend
the exchange offer, although we reserve the
right to do so.
4
The exchange offer is subject to certain
general conditions, which we may assert or
waive in our sole discretion. These conditions
include the absence of:
- any initiation or worsening of a material
suit or proceeding;
- any governmental or regulatory pronouncement
or enactment which might have a material
adverse effect on the exchange offer or our
business;
- anything that, in our sole judgment, would or
might prohibit or delay the exchange offer or
impair us from realizing the anticipated
benefits of the exchange offer; and
- any event that would have a material adverse
effect on the United States financial or
securities markets, the trading prices of the
registered notes or our business, operations,
condition, properties or prospects.
We also may postpone or terminate the offer if
(i) the exchange offer is found to violate
applicable law or applicable interpretations of
the staff of the SEC and (ii) any injunction,
order or decree has been issued which would
prohibit, prevent or materially impair our
ability to proceed with the exchange offer. See
Conditions to Exchange "The Exchange
Offer -- Conditions Offer to the Exchange
Offer."
Withdrawal.................... You may withdraw the tender of your
unregistered guaranteed notes at any time prior
to 5:00 p.m., New York City time, on
, 2002, the withdrawal deadline. Note
that we may extend the expiration date of the
offering without correspondingly extending the
withdrawal deadline.
Certain Material United States
Federal Income Tax
Considerations................ The exchange of unregistered guaranteed notes
for registered notes should not be a taxable
event for United States federal income tax
purposes. See "Certain Material United States
Federal Income Tax Considerations."
Procedures for Tendering...... The unregistered guaranteed notes were issued
as global securities in fully registered form
without coupons. Beneficial interests in the
unregistered guaranteed notes which are held by
direct or indirect participants in DTC, as
shown on, and transfers of the unregistered
guaranteed notes can be made only through,
records maintained in book-entry form by DTC
with respect to its participants.
If you are a holder of unregistered guaranteed
notes held in the form of a book-entry interest
and you wish to tender your notes pursuant to
the exchange offer, you must transmit to State
Street Bank and Trust Company, as exchange
agent, on or prior to the expiration of the
exchange offer either:
- a written or facsimile copy of a properly
completed and executed letter of transmittal
and all other required documents to the
address set forth on the cover page of the
letter of transmittal; or
- a computer-generated message transmitted by
means of DTC's Automated Tender Offer Program
system, or ATOP, and form-
5
ing a part of a confirmation of book-entry transfer in which you acknowledge and
agree to be bound by the terms of the letter of transmittal.
The exchange agent must also receive on or
prior to the expiration of the exchange offer a
timely confirmation of the book-entry transfer
of your notes into the exchange agent's account
at DTC, in accordance with the procedure for
book-entry transfers described in this
prospectus under the heading "The Exchange
Offer -- Procedures for Tendering."
Special Procedures for
Beneficial Owners............. If you are the beneficial owner of unregistered
guaranteed notes and they are registered in the
name of a broker, dealer, commercial bank,
trust company or other nominee, and you wish to
tender your notes, you should promptly contact
the person in whose name your notes are
registered and instruct that person to tender
on your behalf. If you wish to tender on your
own behalf, you must, prior to completing and
executing the letter of transmittal and
delivering your notes, either make appropriate
arrangements to register ownership of the notes
in your name or obtain a properly completed
bond power from the person in whose name your
notes are registered. The transfer of
registered ownership may take considerable
time. See "The Exchange Offer -- Procedures for
Tendering."
Acceptance of Notes and
Delivery of Registered
Notes......................... Except under the circumstances described above
under "Exchange Offer -- Conditions to the
Exchange Offer," we will accept for exchange
any and all unregistered guaranteed notes which
are properly tendered prior to 5:00 p.m., New
York City time, on the expiration date and not
validly withdrawn. The registered notes to be
issued to you will be delivered promptly
following the expiration date for the exchange
offer. See "The Exchange Offer -- Terms of the
Exchange Offer."
For a description of the consequences of a
failure to exchange the unregistered guaranteed
notes, see "Risk Factors -- Risks Related to
Continuing Ownership of the Unregistered
Guaranteed Notes."
Exchange Agent................ State Street Bank and Trust Company is serving
as the exchange agent in connection with the
exchange offer.
Information Agent............. Georgeson Shareholder Communications Inc. is
the information agent for the exchange offer.
The address and telephone number of the
information agent are on the back cover page of
this prospectus.
6
SUMMARY OF THE TERMS OF THE REGISTERED NOTES
ISSUER........................ Conseco, Inc.
Maturity...................... The maturity dates of the registered notes are
as follows:
- for the 8.5% Guaranteed Senior Notes due
2003, October 15, 2003;
- for the 6.4% Guaranteed Senior Notes due
2004, February 10, 2004;
- for the 8.75% Guaranteed Senior Notes due
2006, August 9, 2006;
- for the 6.8% Guaranteed Senior Notes due
2007, June 15, 2007;
- for the 9% Guaranteed Senior Notes due 2008,
April 15, 2008; and
- for the 10.75% Guaranteed Senior Notes due
2009, June 15, 2009.
Interest...................... For each series of registered notes, interest
will be payable at the same annual rate, on the
same interest payment dates and upon the same
terms as the corresponding series of
unregistered guaranteed notes. Interest on each
registered note will accrue from the last
interest payment date on which interest was
paid on the corresponding unregistered
guaranteed note tendered or such other date, if
any, from which interest was stated to accrue
for each series of unregistered guaranteed
notes.
Indentures.................... We have entered into two new indentures, which
are sometimes referred to as the "exchange
offer indentures," under which we issued the
unregistered guaranteed notes in the April
exchange offer. The registered notes will also
be issued pursuant to, and entitled to the
benefits of, the exchange offer indentures. One
of the exchange offer indentures governs the
issuance of the registered 10.75% Guaranteed
Senior Notes due 2009, which we refer to as the
registered 10.75% notes and the other indenture
will govern the issuance of the remaining
registered notes.
Guarantees.................... The registered notes will be guaranteed by
CIHC, Incorporated, our domestic subsidiary and
the holding company for our principal operating
subsidiaries. If we cannot make interest or
principal payments on the registered notes when
they are due, CIHC, as the guarantor of the
registered notes, must make them instead,
subject to the rights of holders of senior
debt.
Ranking....................... The registered notes will be our general,
unsecured senior debt and will rank equally
with our other unsecured senior obligations,
including our credit agreement and any
unregistered guaranteed notes not tendered in
the exchange offer. The registered notes and
any unregistered guaranteed notes remaining
outstanding after the exchange offer will be
structurally senior to our other senior notes
because those senior notes are not guaranteed
by CIHC.
The registered note guarantees will be general,
unsecured senior subordinated debt of CIHC and
will rank:
7
- junior to all of CIHC's senior debt,
including its guarantee of our bank credit
facilities, bank loans to certain of our
current and former directors, officers and
key employees, which we refer to as the D&O
loans, and certain of the obligations of
Conseco Finance;
- on parity with all of CIHC's senior
subordinated, unsecured debt, including
intercompany notes in favor of Conseco
Finance and CFIHC, Inc., a CIHC subsidiary,
and its guarantee of any remaining
unregistered guaranteed notes; and
- senior to any of CIHC's debt that expressly
provides that it is subordinate to the
registered note guarantees.
Because we are a holding company, all of our
debt is effectively junior to the liabilities
of our subsidiaries. Accordingly, in the event
of a bankruptcy of us and our subsidiaries, the
guaranteed notes (whether or not registered)
will be effectively senior to our other senior
notes and will be effectively junior to all of
the liabilities of all of our subsidiaries and
the senior debt of CIHC.
After giving effect to the consummation of the
April exchange offer and this exchange offer,
as if each had occurred on March 31, 2002:
- Conseco, Inc., the parent company, would have
had outstanding approximately $6.6 billion of
debt and guarantees, of which $231.8 million
would have been secured;
- CIHC would have had outstanding up to
$2,288.5 million of guarantees senior to the
registered note guarantees (including $545.2
million of guarantees that Conseco, Inc. has
also made), $1,823.5 million of debt and
guarantees ranking equally with the
registered note guarantees and $710.8 million
of debt ranking junior to the registered note
guarantees; and
- CIHC's subsidiaries would have had $50.2
billion of indebtedness, policy reserves and
other liabilities.
Separate financial information relating to CIHC
is included in a note to our 2001 audited
condensed financial information in Schedule II
to our annual report on Form 10-K and in the
notes to our quarterly report on Form 10-Q for
the period ended March 31, 2002, which we
incorporate by reference in this prospectus.
Restrictive Covenants and
Event of Default.............. The exchange offer indentures governing the
registered notes will contain the same
restrictive covenants and events of default
that are in effect for the corresponding series
of unregistered guaranteed notes.
Use of Proceeds............... We will not receive any cash proceeds upon the
completion of the exchange offer.
Form of Registered Notes...... The registered notes to be issued in the
exchange offer will be represented by one or
more global securities. Beneficial interests in
the registered notes will be shown on, and
transfer of these interests will be effected
only through, records maintained in book-entry
8
form by DTC with respect to its participants.
See "Description of the Registered
Notes -- Book-Entry, Delivery and Form." Each
global note will be deposited with the trustee
for the registered notes for the benefit of
DTC, in each case for credit to the account of
a direct or indirect participant of DTC.
Investors in the global notes who are
participants in DTC may hold their interests in
the global notes directly through DTC.
Investors in the global notes who are not
participants in DTC may hold their interests
indirectly through organizations that are
participants in DTC. Interests in the global
notes will be shown on, and transfers thereof
will be effected only through, records
maintained by DTC and its participants,
including Euroclear and Clearstream.
Except as set forth under "Description of the
Registered Notes -- Exchange of Global Notes
for Certificated Notes," participants and
indirect participants will not be entitled to
receive physical delivery of definitive
registered notes or to have registered notes
issued and registered in their names and will
not be considered the owners or holders of the
registered notes under their governing
indentures.
Interests in the global notes and the
definitive registered notes, if any, will be
issued in minimum denominations of $1,000
principal amount and integral multiples of
$1,000.
Risk Factors.................. You should refer to the section entitled "Risk
Factors" beginning on page 10 for an
explanation of the material risks of
participating in the exchange offer and
investing in the registered notes.
9
RISK FACTORS
You should carefully consider all information included or incorporated by
reference in this prospectus, including the information in our annual report on
Form 10-K for the fiscal year ended December 31, 2001, which we filed with the
SEC on April 1, 2002 and our quarterly report on Form 10-Q for the period ended
March 31, 2002, which we filed with the SEC on May 15, 2002. These are not the
only risks and uncertainties we face. Additional risks and uncertainties
described elsewhere herein or in the documents incorporated by reference may
also impair our financial condition, results of operations or prospects.
RISKS RELATED TO CONTINUING OWNERSHIP OF THE UNREGISTERED GUARANTEED NOTES
THE UNREGISTERED GUARANTEED NOTES ARE NOT REGISTERED FOR PUBLIC RESALE UNDER
THE SECURITIES ACT.
We expect that a substantial majority of holders of unregistered guaranteed
notes issued in the April exchange offer will tender their notes for registered
notes. Following the completion of the exchange offer, the registered notes
generally may be resold without compliance with the registration and prospectus
delivery requirements of the Securities Act, except as described elsewhere in
this prospectus with respect to broker-dealers participating in the exchange
offer. The unregistered guaranteed notes, in contrast, are not and will not be
registered under the Securities Act. Consequently, you may not be able to
publicly sell your unregistered guaranteed notes and may therefore only sell
such notes to persons in transactions exempt from registration under the
Securities Act. This means you may only be able to sell your notes to qualified
institutional buyers, certain sophisticated, accredited investors or in other
negotiated transactions and you may not be able to obtain the prevailing public
trading price of the registered notes in your transactions.
THERE WILL BE NO ACTIVE TRADING MARKET FOR THE UNREGISTERED GUARANTEED NOTES.
We expect that a substantial majority of holders of unregistered guaranteed
notes issued in the April exchange offer will tender their notes for registered
notes. As a result, we believe there will be far fewer holders of unregistered
guaranteed notes, whom we believe have a greater appetite for unregistered
guaranteed notes than the general investing community, to whom you can sell your
unregistered guaranteed notes following the exchange offer. You may be forced to
sell your unregistered guaranteed notes for a lower price than the prevailing
market price of the registered notes. Furthermore, under the registration rights
agreement we executed in connection with the April exchange offer, we are under
no obligation following the exchange offer to register the untendered
unregistered guaranteed notes. Therefore, failure to exchange your unregistered
guaranteed notes in the exchange offer is likely to leave you with an illiquid
security with no active trading market.
RISKS RELATED TO OUR BUSINESS AND FINANCIAL CONDITION
OUR DEGREE OF LEVERAGE MAY LIMIT OUR FINANCIAL AND OPERATING ACTIVITIES.
As of March 31, 2002 we had substantial outstanding indebtedness. See
"Prospectus Summary -- Summary of the Terms of the Registered Notes -- Ranking."
With respect to the ratio of earnings to fixed charges, preferred stock
dividends and distributions on company-obligated mandatorily redeemable
preferred securities of subsidiary trusts for the three months ended March 31,
2002, adjusted earnings were $148.5 million less than fixed charges. For the
year 2001, adjusted earnings were $623.1 million less than fixed charges.
Consummation of the exchange offer will have no effect on our financial
leverage.
This degree of leverage could have material adverse consequences to us and
the holders of the guaranteed notes (whether or not registered), including the
following: (i) our ability to obtain additional financing in the future for
working capital, capital expenditures or other purposes may be impaired; (ii) a
substantial portion of our cash flow from operations will be required to be
dedicated to the payment of interest expense and principal repayment
obligations; (iii) higher interest rates will cause the interest expense on our
variable rate debt to be higher; (iv) we may be more highly leveraged than other
companies with which we compete, and this may place us at a competitive
disadvantage; (v) our degree of leverage will make us more vulnerable to a
downturn in our business or in the general economy; and (vi) our degree of
leverage may adversely affect the ratings of
10
our insurance company subsidiaries, which in turn may adversely affect their
competitive position and ability to sell products.
Our cash flow may be affected by a variety of factors, many of which are
outside of our control, including insurance regulatory issues, competition,
financial markets and other general business conditions. Although we believe
that amounts required for us to meet our financial and operating obligations
will be available from our subsidiaries, our results for future periods beyond
2002 are subject to numerous uncertainties. Consequently, we cannot assure you
that we will possess sufficient cash flow and liquidity to meet all of our
long-term debt service requirements beyond 2002, including with respect to the
guaranteed notes (whether or not registered) and our other obligations.
A NEGATIVE CHANGE IN THE CLAIMS-PAYING ABILITY RATINGS OF OUR INSURANCE
CORPORATIONS COULD NEGATIVELY IMPACT OUR INSURANCE SUBSIDIARIES.
An important competitive factor for life insurance companies is the ratings
they receive from nationally recognized rating organizations. Agents, insurance
brokers and marketing companies who market our products and prospective
purchasers of our products use the ratings of our insurance subsidiaries as one
factor in determining which insurer's products to market or purchase. Ratings
have the most impact on our annuity and interest-sensitive life insurance
products. Our insurance subsidiaries are currently rated "A- (Excellent)" by
A.M. Best Company, and Standard & Poor's Corporation has given our insurance
subsidiaries a claims-paying ability rating of "BB+(Marginal)." A.M. Best
ratings for the industry currently range from "A++ (Superior)" to "F (In
Liquidation)" and some companies are not rated. A.M. Best's ratings and Standard
& Poor's claims-paying ability ratings are based upon factors relevant to
policyholders, agents and intermediaries and are not directed toward the
protection of investors. Such ratings are not recommendations to buy, sell or
hold securities. A.M. Best and Standard & Poor's each reviews its ratings from
time to time. As of March 31, 2002, the A- (Excellent) financial strength
ratings of our primary insurance subsidiaries remained "under review with
negative implications". We cannot provide any assurance that the ratings of our
insurance subsidiaries will remain at their current level. If those ratings are
downgraded, sales of our insurance products could fall significantly and
existing policy holders may redeem or lapse their policies, causing a material
and adverse impact on our financial results and liquidity.
WE FACE SIGNIFICANT CONTINGENT OBLIGATIONS ASSOCIATED WITH THE D&O LOANS.
We have guaranteed bank loans totaling $545.2 million as of March 31, 2002
to approximately 155 current and former directors, officers and key employees,
which we refer to as the D&O loans. The funds were used by the participants to
purchase approximately 18.0 million shares of our common stock in open market or
negotiated transactions with independent parties. Such shares are held by the
banks as collateral for the loans. In addition, we have provided loans to
participants for interest on the bank loans totaling $151.3 million. The bank
loans which we and CIHC have each guaranteed mature on December 31, 2003. We
have established a non-cash reserve for the exposure we have in connection with
such guarantees. At March 31, 2002, our reserve for losses on the loan
guarantees totaled $460.0 million based upon the value of the collateral and the
creditworthiness of the participants. If we are required to pay on the
guarantees, it could have a material adverse impact on our liquidity position.
THE COVENANTS IN OUR BANK CREDIT AGREEMENTS ALSO RESTRICT OUR ACTIVITIES.
In the first quarter of 2002, we amended the credit agreements related to
our bank debt. We agreed to a number of covenants and other provisions that
restrict our ability to borrow money and pursue some operating activities
without the prior consent of the lenders under the credit agreements. Those
provisions restrict our ability to use the proceeds of asset sales. We agreed to
meet or maintain various financial ratios and balances. Our ability to meet
these financial tests and maintain ratings may be affected by events beyond our
control. The credit agreement also limits our ability to issue additional debt,
incur additional contingent obligations, grant liens, dispose of assets, enter
into transactions with affiliates, make certain investments, including in
existing and new businesses, change our businesses, and modify our outstanding
debt and preferred stock. Although we were in compliance with these provisions
as of March 31, 2002, these provisions represent
11
significant restrictions on the manner in which we may operate our business. If
we default under any of these provisions, the lenders could declare all
outstanding borrowings, accrued interest and fees to be due and payable. If that
were to occur, no assurance can be given that we would have sufficient liquidity
to repay our bank indebtedness in full or any of our other debts. The $1.5
billion facility is due December 31, 2003; however, subject to the absence of
any default, we may further extend its maturity to March 31, 2005, provided
that: (i) we pay an extension fee of 3.5% of the amount extended; (ii)
cumulative principal payments of at least $200.0 million have been paid by
September 30, 2002 and at least $500.0 million have been paid by September 30,
2003 and (iii) our interest coverage ratio for the four quarters ending
September 30, 2003 is greater than or equal to 2.25 to 1.
WE ARE A HOLDING COMPANY AND DEPEND ON OUR SUBSIDIARIES FOR CASH.
We are a holding company with no business operations of our own; we depend
on our operating subsidiaries for cash to make principal and interest payments
on our debt (including payments to subsidiary trusts to be used for
distributions on company-obligated mandatorily redeemable preferred securities),
and to pay administrative expenses and income taxes. The cash we receive from
our subsidiaries consists of fees for services, tax sharing payments, dividends
and surplus debenture interest and principal payments. A deterioration in any of
our material subsidiaries' financial condition, earnings or cash flow for any
reason could limit such subsidiary's ability to pay cash dividends or other
payments to us, which, in turn, would limit our ability to meet our debt service
requirements and satisfy our other financial obligations.
The ability of our insurance subsidiaries to pay dividends is subject to
state insurance department regulations. These regulations generally permit
dividends to be paid from earned surplus of the insurance company for any
12-month period in amounts equal to the greater of (or in a few states, the
lesser of): (i) net gain from operations for the prior year; or (ii) 10% of
surplus as of the end of the preceding year. Any dividends in excess of these
levels require the approval of the director or commissioner of the applicable
state insurance department. In March 2002, we received approval from various
insurance regulatory authorities to pay dividends to Conseco of $225.0 million,
of which $100.0 million was paid in April 2002. In addition, during the first
quarter of 2002, we requested permission to pay dividends to Conseco of $15.0
million which request was approved by regulatory authorities in early April
2002. During the remainder of 2002, we expect to request permission from the
regulatory authorities to pay additional extraordinary dividends, substantially
all of which are related to anticipated reinsurance transactions. Although we
believe that amounts required for us to meet our financial and operating
obligations will be available from our subsidiaries, our results for future
periods beyond 2002 are subject to numerous uncertainties. We may encounter
liquidity problems, which could affect our ability to meet our obligations while
attempting to meet competitive pressures or adverse economic conditions. In that
event, the value of the notes could be materially adversely affected.
THE GUARANTEED NOTES ARE UNSECURED AND STRUCTURALLY SUBORDINATED TO THE
OBLIGATIONS OF OUR SUBSIDIARIES.
Because our operations are conducted through subsidiaries, claims of the
creditors of those subsidiaries (including policyholders) will rank senior to
claims to distributions from the subsidiaries, which we depend on to make
payments on the guaranteed notes (whether or not registered). CIHC's
subsidiaries had indebtedness for borrowed money (including capitalized lease
obligations but excluding indebtedness to affiliates), policy reserves and other
liabilities of $50.2 billion at March 31, 2002. The guaranteed notes will rank
effectively junior to these liabilities. If an insurance company subsidiary were
to be liquidated, that liquidation would be conducted under the insurance law of
its state of domicile by such state's insurance regulator as the receiver with
respect to such insurer's property and business. In the event of a default on
our debt or our insolvency, liquidation or other reorganization, our creditors
and stockholders will not have the right to proceed against the assets of our
subsidiaries or to cause their liquidation under federal and state bankruptcy
laws.
WE DEPEND ON KEY MANAGEMENT PERSONNEL.
The development and implementation of our business strategies is dependent
upon certain of our key management personnel, in particular Gary Wendt, our
chief executive officer. The loss of any of our executive
12
officers could have a material adverse effect on us. We have multi-year
employment agreements with Mr. Wendt and certain other key managers. Mr. Wendt's
employment agreement expires in 2005 and provides for vesting of certain
financial benefits on June 30, 2002.
DELINQUENCIES AND COLLATERAL RECOVERY RATES EXPERIENCED BY OUR CONSUMER
FINANCE SUBSIDIARY CAN BE ADVERSELY IMPACTED BY A VARIETY OF FACTORS, MANY OF
WHICH ARE OUTSIDE OUR CONTROL.
Conseco Finance provided approximately 34% of our revenues for the three
months ended March 31, 2002. Delinquencies on loans held in our loan portfolio
and our ability to recover collateral and mitigate loan losses can be adversely
impacted by a variety of factors, many of which are outside our control. For
example, proposed changes to the federal bankruptcy laws applicable to
individuals would make it more difficult for borrowers to seek bankruptcy
protection, and the prospect of these changes may encourage certain borrowers to
seek bankruptcy protection before the law changes, thereby increasing
delinquencies. When loans are delinquent and Conseco Finance forecloses on the
loan, its ability to sell collateral to recover or mitigate its losses is
subject to the market value of such collateral. In manufactured housing, those
values may be affected by the available inventory of manufactured homes on the
market, a factor over which we have no control. It is also dependent upon demand
for new homes, which is tied to economic factors in the general economy. In
addition, repossessed collateral is generally in poor condition, which reduces
its value.
Recently, many consumer lenders have stopped or significantly scaled back
their consumer finance operations in the manufactured housing sector. These
lenders began to foreclose on collateral pledged to secure loans at a more
aggressive rate. Conseco Finance may face increased competition from such
lenders in disposing of collateral pledged to secure its loans. Often collateral
is in similar forms. There is a limited number of collateral buyers and the
exiting consumer lenders may be willing to sell their foreclosed collateral at
prices significantly below fair market value. As a result, collateral recovery
rates for Conseco Finance may fall, which could have a material adverse effect
on the financial position and results of Conseco Finance, and reduces the funds
available for distribution to CIHC and us for the benefit of its and our
creditors.
AN ECONOMIC DOWNTURN MAY LEAD TO A DETERIORATION IN OUR ASSET QUALITY AND
ADVERSELY AFFECT OUR FINANCE BUSINESS EARNINGS AND CASH FLOW.
The risks associated with our finance business become more acute in any
economic slowdown or recession. Periods of economic slowdown or recession may be
accompanied by decreased demand for consumer credit and declining asset values.
In the home equity mortgage and manufactured housing businesses, any material
decline in real estate values reduces the ability of borrowers to use home
equity to support borrowing and increases the loan-to-value ratios of loans
previously made, thereby weakening collateral coverage and increasing the
possibility of a loss in the event of a default. Delinquencies, foreclosures and
losses generally increase during economic slowdowns or recessions. For our
finance customers, loss of employment, increases in cost-of-living or other
adverse economic conditions would impair their ability to meet their payment
obligations. In addition, in an economic slowdown or recession, our servicing
and litigation costs increase. Any sustained period of increased delinquencies,
foreclosures, losses or increased costs would adversely affect our financial
condition and results of operations.
OUR NET INTEREST INCOME AND SERVICING FEES FROM OUR FINANCE OPERATIONS ARE
SUBJECT TO PREPAYMENT RISK.
At March 31, 2002, we had $41.5 billion of managed receivables on which we
earn net interest income and servicing fees. Prepayments of our managed
receivables, whether due to refinancing, repayments or foreclosures, in excess
of management's estimates could adversely affect our future cash flow at our
finance subsidiary due to the resulting loss of servicing fee revenue and net
interest income on such prepaid receivables. Prepayments can result from a
variety of factors, many of which are beyond our control, including changes in
interest rates and general economic conditions.
13
WE DEPEND UPON SECURITIZATION PROGRAMS TO FUND OUR FINANCE OPERATIONS.
The most significant source of liquidity for our finance operations has
been our ability to finance the receivables we originate through loan
securitizations. Accordingly, adverse changes in the securitization market could
impair our ability to originate, purchase and sell loans or other assets on a
favorable or timely basis. Any such impairment could have a material adverse
effect upon our business and results of operations. The securitization market is
sensitive to the credit ratings of Conseco Finance in connection with our
securitization program. A negative change in the credit ratings of Conseco
Finance could have a material adverse effect on our ability to access capital
through the securitization market. In addition, the securitization market for
many types of assets is relatively undeveloped and may be more susceptible to
market fluctuations or other adverse changes than more developed capital
markets. Although we have alternative sources of funding, principally warehouse
and bank credit facilities as well as loan sales, these alternatives may not be
sufficient for us to continue to originate loans at our current origination
levels.
At May 28, 2002, we had $1.9 billion of committed (and an additional $1.9
billion of uncommitted) capacity under our warehouse and bank credit facilities
to fund our finance operations, subject to certain conditions. At March 31,
2002, we had borrowed $2.0 billion under these agreements, leaving $1.8 billion
available to borrow (of which approximately $0.3 billion is committed). If we
are unable to securitize our asset portfolios, our loan originations will
significantly decrease and our liquidity will be negatively affected.
Although we expect to be able to obtain replacement financing when our
current securitization facilities expire, there can be no assurance that
financing will be obtainable on favorable terms, if at all. To the extent that
we are unable to arrange any third party or other financing, our loan
origination activities would be adversely affected, which could have a material
adverse effect on our operations, financial results and cash position.
WE MAY EXPERIENCE FURTHER DOWNGRADES IN OUR CREDIT RATING, WHICH COULD AFFECT
OUR ABILITY TO REPAY OR REFINANCE THE REGISTERED NOTES.
We have most recently experienced two consecutive years of net losses.
Rating agencies have recently downgraded our credit rating for our debt,
including the senior notes, and our Company-obligated mandatorily redeemable
preferred securities of subsidiary trusts. On May 28, 2002, our credit rating
for the senior notes was downgraded to "Caa1" from "B2" by Moody's, which said
its ratings outlook for us is negative. Our senior debt remains on credit watch
for further downgrade at Standard & Poor's, which currently rates our senior
unsecured debt at "B." At April 22, 2002, our senior debt, including the
guaranteed unregistered notes, was rated "B-" and on Rating Watch Negative by
Fitch IBCA. A downgrade in our credit rating affects our cost of borrowing and
our ability to borrow from lenders. Accordingly, for future periods beyond 2002,
we can make no assurances that we will have, or will be able to obtain,
sufficient funds to repay the registered notes when they become due.
OUR FINANCIAL PERFORMANCE MAY BE SUBJECT TO VOLATILITY DUE TO POSSIBLE
IMPAIRMENT CHARGES RELATING TO THE VALUATION OF INTEREST-ONLY SECURITIES.
Conseco Finance holds substantial residual interests in securitization
transactions executed prior to September 1999, which we refer to as
interest-only securities. We carry these securities at estimated fair value,
which we determine by discounting the projected cash flows over the expected
life of the loan receivables sold using prepayment, default, loss and interest
rate assumptions. Since September 1999, we have securitized our loan receivables
using the portfolio method resulting in balance sheet financing treatment. As a
result, we are no longer creating interests in interest-only securities.
We are required to recognize declines in the value of our interest-only
securities, and resulting charges to earnings, when: (i) their fair value is
less than their carrying value, and (ii) the timing and/or amount of cash
expected to be received from these securities has changed adversely from the
previous valuation that determined the carrying value. The assumptions we use to
determine new values are based on our internal evaluations and consultation with
external advisors having significant experience in valuing these securities.
Although we believe our methodology is reasonable, many of the assumptions and
expectations underlying our
14
determinations may prove wrong, in which case there may be an adverse effect on
our financial results. Largely as a result of adverse changes in the underlying
assumptions, we recognized impairment charges of $386.9 million in 2001, $515.7
million in 2000, $554.3 million in 1999 and $549.4 million in 1998 to reduce the
book value of our interest-only securities and servicing rights. At March 31,
2002, the carrying value of our interest-only securities, net of servicing
liabilities was $148.3 million (including unrealized gains of $25.1 million).
No assurances can be given that our current valuation of interest-only
securities will prove accurate in future periods. In addition, in the
securitizations to which these interest-only securities relate, we have retained
certain contingent risks in the form of guarantees of residual interests. At
March 31, 2002, the total amount of these guarantees by Conseco Finance was $1.5
billion. If we have to make more payments on these guarantees than anticipated,
or we experience higher than anticipated rates of loan repayment, including due
to foreclosures or charge-offs, or any adverse changes in our other assumptions
used for valuation (such as interest rates), we could be forced to recognize
additional impairment charges which could have a material adverse effect on our
financial condition or results of operations.
OUR INSURANCE BUSINESS PERFORMANCE MAY DECLINE IF OUR PREMIUM RATES ARE NOT
ADEQUATE.
We set the premium rates on our health insurance policies based on facts
and circumstances known at the time we issue the policies and on assumptions
about numerous variables, including the actuarial probability of a policyholder
incurring a claim, the severity, and the interest rate earned on our investment
of premiums. In setting premium rates, we consider historical claims
information, industry statistics, the rates of our competitors and other
factors. If our actual claims experience proves to be less favorable than we
assumed and we are unable to raise our premium rates, our financial results may
be adversely affected. We generally cannot raise our premiums in any state
unless we first obtain the approval of the insurance regulator in that state. We
review the adequacy of our premium rates regularly and file rate increases on
our products when we believe existing premium rates are too low. It is possible
that we will not be able to obtain approval for premium rate increases from
currently pending requests or requests filed in the future. If we are unable to
raise our premium rates because we fail to obtain approval for a rate increase
in one or more states, our net income may decrease. If we are successful in
obtaining regulatory approval to raise premium rates due to unfavorable actual
claims experience, the increased premium rates may reduce the volume of our new
sales and cause existing policyholders to allow their policies to lapse. This
would reduce our premium income in future periods. Increased lapse rates also
could require us to expense all or a portion of the deferred policy costs
relating to lapsed policies in the period in which those policies lapse,
adversely affecting our financial results in that period.
OUR RESERVES FOR FUTURE INSURANCE POLICY BENEFITS AND CLAIMS MAY PROVE TO BE
INADEQUATE, REQUIRING US TO INCREASE LIABILITIES AND RESULTING IN REDUCED NET
INCOME AND SHAREHOLDERS' EQUITY.
We calculate and maintain reserves for the estimated future payment of
claims to our policyholders using the same actuarial assumptions that we use to
set our premiums. For our health insurance business, we establish an active life
reserve plus a liability for due and unpaid claims, claims in the course of
settlement, and incurred but not reported claims, as well as a reserve for the
present value of amounts not yet due on claims. Many factors can affect these
reserves and liabilities, such as economic and social conditions, inflation,
hospital and pharmaceutical costs, changes in doctrines of legal liability, and
extracontractual damage awards. Therefore, the reserves and liabilities we
establish are necessarily based on extensive estimates, assumptions and prior
years' statistics. Establishing reserves is an uncertain process, and it is
possible that actual claims will materially exceed our reserves and have a
material adverse effect on our results of operations and financial condition.
Our financial performance depends significantly upon the extent to which our
actual claims experience is consistent with the assumptions we used in setting
our reserves and pricing our policies. If our assumptions with respect to future
claims are incorrect, and our reserves are insufficient to cover our actual
losses and expenses, we would be required to increase our liabilities resulting
in an adverse effect to our financial results and financial position.
15
WE ARE SUBJECT TO EXTENSIVE REGULATION.
Our finance and insurance businesses are subject to extensive regulation
and supervision in the jurisdictions in which we operate, which is primarily for
the benefit and protection of our customers, and not for the benefit of our
investors or creditors. Our finance operations are subject to regulation by
federal, state and local government authorities, as well as to various laws and
judicial and administrative decisions, that impose requirements and restrictions
affecting, among other things, our loan originations, credit activities, maximum
interest rates, finance and other charges, disclosure to customers, the terms of
secured transactions, collection, repossession and claims-handling procedures,
multiple qualification and licensing requirements for doing business in various
jurisdictions, and other trade practices. Although we believe that we are in
compliance in all material respects with applicable local, state and federal
laws, rules and regulations, it is possible that more restrictive laws, rules or
regulations will be adopted in the future that could make compliance more
difficult or expensive, restrict our ability to originate or sell loans, further
limit or restrict the amount of interest and other charges earned on loans
originated by us, further limit or restrict the terms of loan agreements, or
otherwise adversely affect our business or prospects.
Our insurance subsidiaries are subject to state insurance laws that
establish supervisory agencies with broad administrative powers relative to
granting and revoking licenses to transact business, regulating sales and other
practices, licensing agents, approving policy forms, setting reserve and
solvency requirements, determining the form and content of required statutory
financial statements, limiting dividends and prescribing the type and amount of
investments.
RECENTLY ENACTED AND PENDING OR FUTURE LEGISLATION COULD ALSO AFFECT THE
FINANCIAL PERFORMANCE OF OUR INSURANCE OPERATIONS.
During recent years, the health insurance industry has experienced
substantial changes, primarily caused by healthcare legislation. Recent federal
and state legislation and legislative proposals relating to healthcare reform
contain features that could severely limit or eliminate our ability to vary our
pricing terms or apply medical underwriting standards with respect to
individuals which could have the effect of increasing our loss ratios and have
an adverse effect on our financial results. In particular, Medicare reform and
legislation concerning prescription drugs could affect our ability to price or
sell our products.
In addition, proposals currently pending in Congress and some state
legislatures may also affect our financial results. These proposals include the
implementation of minimum consumer protection standards for inclusion in all
long term care policies, including: guaranteed premium rates; protection against
inflation; limitations on waiting periods for pre-existing conditions; setting
standards for sales practices for long term care insurance; and guaranteed
consumer access to information about insurers, including lapse and replacement
rates for policies and the percentage of claims denied. Enactment of any of
these proposals could adversely affect our financial results.
CHANGING INTEREST RATES MAY ADVERSELY AFFECT OUR RESULTS OF OPERATIONS.
Profitability may be directly affected by the level of and fluctuations in
interest rates which affect our ability to earn a spread between interest
received on loans and the costs of liabilities. While we monitor the interest
rate environment and employ hedging strategies designed to mitigate the impact
of changes in interest rates, our financial results could be adversely affected
by changes in interest rates. During periods of increasing interest rates, we
generally experience market pressure to reduce servicing spreads in our
financing operations. In addition, an increase in interest rates may decrease
the demand for consumer credit. A substantial and sustained increase in interest
rates could, among other things: (i) adversely affect our ability to purchase or
originate loans or other assets; (ii) reduce the average size of loans
underwritten; and (iii) increase securitization funding costs. A significant
decline in interest rates could decrease the size of our loan servicing
portfolio by increasing the level of loan prepayments, thereby shortening the
life and impairing the value of our interest-only securities. Fluctuating
interest rates also may affect our net interest income earned resulting from the
difference between the yield to us on loans held pending securitization and the
cost of funds obtained by us to finance such loans.
16
Our spread-based insurance business is subject to several inherent risks
arising from movements in interest rates, especially if we fail to anticipate or
respond to such movements. First, interest rate changes can cause compression of
our net spread between interest earned on investments and interest credited on
customer deposits, thereby adversely affecting our results. Second, if interest
rate changes produce an unanticipated increase in surrenders of our spread-based
products, we may be forced to sell investment assets at a loss in order to fund
such surrenders. At December 31, 2001, approximately 19% of our total insurance
liabilities (or approximately $4.8 billion) could be surrendered by the
policyholder without penalty. Finally, changes in interest rates can have
significant effects on the performance of our mortgage-backed securities
portfolio, including collateralized mortgage obligations, as a result of changes
in the prepayment rate of the loans underlying such securities. We follow
asset/liability strategies that are designed to mitigate the effect of interest
rate changes on our profitability. However, there can be no assurance that
management will be successful in implementing such strategies and achieving
adequate investment spreads.
WE ARE SUBJECT TO LITIGATION CLAIMS WHICH COULD BE MATERIAL.
We and our subsidiaries are involved on an ongoing basis in lawsuits
relating to our operations, including with respect to sales practices, and we
and current and former officers and directors are defendants in pending class
action lawsuits asserting claims under the securities laws and derivative
claims. The ultimate outcome of these lawsuits cannot be predicted with
certainty. Director and officer liability insurance against certain liabilities,
including liabilities under the securities laws, was in force at the time the
securities and derivative litigation was commenced. The outcome of these
lawsuits may have a material adverse effect on our financial performance and
liquidity.
THE MARKETS IN WHICH WE COMPETE ARE HIGHLY COMPETITIVE.
Each of the markets in which we operate is highly competitive. Competitors
include, in the finance segment, finance companies, commercial banks, thrifts,
other financial institutions, credit unions and manufacturers and vendors, and
in the insurance segment, other life insurers, commercial banks, thrifts, mutual
funds and broker-dealers. Many of our competitors in different segments and
regions are larger companies that have greater capital, technological and
marketing resources, and have access to capital at a lower cost. Because the
actual cost of products is unknown when they are sold, we are subject to
competitors who may sell a product at a price that does not cover its actual
cost. In the insurance business, claims paying ability ratings can be a key
competitive factor in marketing products and in attracting and retaining agents.
Should the claims paying ability rating of one or more of our insurance
subsidiaries decline, we may not be able to compete successfully.
TAX LAW CHANGES COULD ADVERSELY AFFECT OUR INSURANCE PRODUCT SALES AND
PROFITABILITY.
We sell deferred annuities and some forms of life insurance products which
are attractive to purchasers, in part, because policyholders generally are not
subject to United States federal income tax on increases in policy values until
some form of distribution is made. Recently, Congress enacted legislation to
lower marginal tax rates, reduce the federal estate tax gradually over a
ten-year period, with total elimination of the federal estate tax in 2010 and
increase contributions which may be made to individual retirement accounts and
401(k) accounts. While these tax law changes will sunset at the beginning of
2011 absent future congressional action, they could in the interim diminish the
appeal of our annuity and life insurance products. Additionally, Congress has
considered, from time to time, other possible changes to the U.S. tax laws,
including elimination of the tax deferral on the accretion of value within
certain annuities and life insurance products. There can be no assurance that
further tax legislation will not be enacted which would contain provisions with
possible adverse effects on our annuity and life insurance products.
17
USE OF PROCEEDS
This exchange offer is intended to satisfy certain of our obligations under
the registration rights agreement entered into in connection with the April
exchange offer. We will not receive any cash proceeds from the issuance of the
registered notes. We have agreed to bear the expenses of the exchange offer.
18
SELECTED CONSOLIDATED FINANCIAL DATA
Our selected consolidated financial data are based on and derived from, and
should be read in conjunction with, our quarterly report on Form 10-Q for the
quarter ended March 31, 2002, and our annual report on Form 10-K for the year
ended December 31, 2001, and the related notes thereto. Our consolidated balance
sheets at December 31, 2001 and 2000, and the consolidated statements of
operations, shareholders' equity and cash flows for each of the three years
ended December 31, 2001, 2000 and 1999, and notes thereto were audited by
PricewaterhouseCoopers LLP, independent accountants. Our consolidated financial
statements as of December 31, 2001 and 2000, and for each of the three years
ended December 31, 2001, are included in our annual report on Form 10-K for the
year ended December 31, 2001, which is incorporated by reference herein. The
selected consolidated financial data set forth for the three months ended March
31, 2002 and 2001 are unaudited; however, in the opinion of our management, the
accompanying selected financial data contain all adjustments, consisting only of
normal recurring items, necessary to present fairly the selected financial data
for such periods. The results of operations for the three months ended March 31,
2002, may not be indicative of the results of operations to be expected for a
full year. See "Incorporation of Certain Documents by Reference" on page i of
this prospectus.
The comparison of selected consolidated financial data is significantly
affected by the following business combinations accounted for as purchases:
Washington National Corporation (effective December 1, 1997); Colonial Penn Life
Insurance Company and Providential Life Insurance Company (September 30, 1997);
Pioneer Financial Services, Inc. (April 1, 1997); and Capitol American Financial
Corporation (January 1, 1997). All financial data have been restated to give
retroactive effect to the merger (completed on June 30, 1998) with Conseco
Finance accounted for as a pooling of interests.
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
--------------------- ---------------------------------------------------------
2002 2001 2001 2000 1999 1998 1997
--------- --------- --------- --------- --------- --------- ---------
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA
Insurance policy income......... $ 957.2 $ 1,029.2 $ 4,065.7 $ 4,220.3 $ 4,040.5 $ 3,948.8 $ 3,410.8
Gain on sale of finance
receivables(a)................ 7.2 8.9 26.9 7.5 550.6 745.0 779.0
Net investment income........... 856.7 897.8 3,778.1 3,914.3 3,411.4 2,506.5 2,171.5
Net realized investment gains
(losses)...................... (52.2) (113.3) (413.7) (358.3) (156.2) 208.2 266.5
Impairment charge related to
retained interests in
securitization transactions... -- (7.9) (386.9) (515.7) (554.3) (549.4) (190.0)
Total revenues.................. 1,859.3 2,123.0 7,695.2 7,771.2 7,781.4 7,210.8 6,682.2
Interest expense:
Corporate..................... 74.4 105.1 369.6 438.4 249.1 182.2 109.4
Finance and investment
borrowings.................. 294.3 313.9 1,239.6 1,014.7 312.6 258.3 202.9
Total benefits and expenses..... 1,961.4 1,948.7 8,114.6 9,133.0 6,630.5 6,165.1 5,196.5
Income (loss) before
extraordinary gain (loss) and
cumulative effect of
accounting change............. (99.9) 83.8 (423.1) (1,130.9) 595.0 509.7 873.3
Adjusted income (loss) before
extraordinary gain (loss) and
cumulative effect of
accounting change(h).......... (99.9) 111.3 (313.5) (1,018.4) 705.1 619.9 957.8
Extraordinary gain (loss) on
extinguishment of debt, net of
income tax.................... 4.0 .3 17.2 (5.0) -- (42.6) (6.9)
Cumulative effect of accounting
change, net of income tax..... -- -- -- 55.3 -- -- --
19
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
--------------------- ---------------------------------------------------------
2002 2001 2001 2000 1999 1998 1997
--------- --------- --------- --------- --------- --------- ---------
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA)
Net income (loss)(b)............ (95.9) 84.1 (405.9) (1,191.2) 595.0 467.1 866.4
Adjusted net income (loss)(h)... (95.9) 111.6 (296.3) (1,078.7) 705.1 577.3 950.9
Preferred stock dividends....... 1.0 3.9 12.8 11.0 1.5 7.8 21.9
Net income (loss) applicable to
common stock.................. (96.9) 80.2 (418.7) (1,202.2) 593.5 459.3 844.5
Adjusted net income (loss)
applicable to common
stock(h)...................... (96.9) 107.7 (309.1) (1,089.7) 703.6 569.5 929.0
PER SHARE DATA(C)
Net income (loss), basic........ $ (.28) $ .24 $ (1.24) $ (3.69) $ 1.83 $ 1.47 $ 2.72
Adjusted net income (loss),
basic(h)...................... (.28) .32 (.92) (3.34) 2.17 1.82 2.99
Net income (loss), diluted...... (.28) .23 (1.24) (3.69) 1.79 1.40 2.52
Adjusted net income (loss),
diluted(h).................... (.28) .30 (.92) (3.34) 2.12 1.73 2.77
Dividends declared per common
share......................... -- -- -- .100 .580 .530 .313
Book value per common share
outstanding................... 11.88 14.00 12.34 11.95 15.50 16.37 16.45
Shares outstanding at
period-end.................... 346.0 337.6 344.7 325.7 327.7 315.8 310.0
Weighted average shares
outstanding for diluted
earnings...................... 345.2 372.7 338.1 326.0 332.9 332.7 338.7
BALANCE SHEET DATA -- PERIOD END
Total investments............... $24,999.7 $25,581.1 $25,027.2 $25,017.6 $26,431.6 $26,073.0 $26,699.2
Goodwill........................ 3,695.4 3,744.7 3,695.4 3,800.8 3,927.8 3,960.2 3,693.4
Total assets.................... 61,490.8 58,459.4 61,392.3 58,589.2 52,185.9 43,599.9 40,679.8
Notes payable and commercial
paper:
Corporate..................... 4,092.8 4,925.0 4,087.6 5,055.0 4,624.2 3,809.9 2,354.9
Finance....................... 2,202.8 2,000.2 2,527.9 2,810.9 2,540.1 1,511.6 1,863.0
Related to securitized finance
receivables structured as
collateralized borrowings... 15,048.7 12,396.1 14,484.5 12,100.6 4,641.8 -- --
Total liabilities............... 54,962.3 51,334.0 54,724.8 51,810.9 43,990.6 36,229.4 34,082.0
Company-obligated mandatorily
redeemable preferred
securities of subsidiary
trusts........................ 1,916.2 1,909.4 1,914.5 2,403.9 2,639.1 2,096.9 1,383.9
Shareholders' equity............ 4,612.3 5,216.0 4,753.0 4,374.4 5,556.2 5,273.6 5,213.9
OTHER FINANCIAL DATA(C)(D)
Premium and asset accumulation
product collections(e)........ $ 1,520.5 $ 1,620.6 $ 6,247.1 $ 7,158.6 $ 6,986.0 $ 6,051.3 $ 5,075.6
Operating earnings(f)........... 39.9 54.0 218.0 151.8 749.2 841.1 991.8
Managed finance receivables..... 41,532.2 44,776.9 43,002.3 46,585.9 45,791.4 37,199.8 27,957.1
Total managed assets (at fair
value)(g)..................... 93,112.0 93,603.2 94,567.7 95,471.7 98,561.8 87,247.4 70,259.8
Shareholders' equity, excluding
accumulated other
comprehensive income (loss)... 5,108.0 5,612.9 5,192.0 5,025.4 6,327.8 5,302.0 5,013.3
Book value per common share
outstanding, excluding
accumulated other
comprehensive income (loss)... 13.32 15.17 13.61 13.95 17.85 16.46 15.80
20
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
--------------------- ---------------------------------------------------------
2002 2001 2001 2000 1999 1998 1997
--------- --------- --------- --------- --------- --------- ---------
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA)
Delinquencies greater than 60
days as a percentage of
managed finance receivables... 1.99% 1.72% 2.10% 1.76% 1.42% 1.19% 1.08%
---------------
(a) Subsequent to September 8, 1999, we no longer structure the securitizations
of the loans we originate in a manner that results in gain-on-sale revenues.
After that date, the gains we recognize are generally related to the sale of
the entire loan (with no interests retained by the Company). For more
information on this change, refer to our annual report on Form 10-K for the
fiscal year ended December 31, 2001 and our quarterly report on Form 10-Q
for the period ended March 31, 2002, both of which are incorporated by
reference herein.
(b) Net income (loss) includes the following:
THREE MONTHS
ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
--------------- -----------------------------------------------
2002 2001 2001 2000 1999 1998 1997
------ ------ ------- ------- ------- ------- -------
(DOLLARS IN MILLIONS)
Net investment gains
(losses), net of income
tax and other items....... $(34.1) $(59.1) $(242.8) $(198.1) $(111.9) $ (32.8) $ 44.1
Impairment charge, net of
income tax................ -- (5.0) (250.4) (324.9) (349.2) (355.8) (117.8)
Special charges and
additional amortization,
net of income tax......... (45.2) (10.0) (123.5) (534.9) -- (148.0) --
Gain on sale of interest in
riverboat, net of income
tax....................... -- 122.6 122.6 -- -- -- --
Provision for losses related
to loan guarantees, net of
income tax................ (26.0) -- (110.2) (150.0) (11.9) -- --
Venture capital income
(loss), net of expenses
and taxes................. (35.5) (17.5) (15.2) (99.4) 170.0 -- --
Amounts related to
discontinued businesses
and other non-recurring
items, net of income
tax....................... -- (5.1) (34.4) 13.6 147.3 205.2 (44.8)
Cumulative effect of
accounting change, net of
income tax................ -- -- -- (55.3) -- -- --
Extraordinary gain (loss) on
extinguishment of debt,
net of income tax......... 4.0 .3 17.2 (5.0) -- (42.6) (6.9)
---------------
For additional discussion of the above items refer to our annual report on Form
10-K for the fiscal year ended December 31, 2001 and our quarterly report on
Form 10-Q for the period ended March 31, 2002, both of which are incorporated by
reference herein.
(c) All share and per-share amounts have been restated to reflect the
two-for-one stock split paid on February 11, 1997.
(d) Amounts under this heading are included to assist the reader in analyzing
the Company's financial position and results of operations. Such amounts are
not intended to, and do not, represent insurance
21
policy income, net income, shareholders' equity or book value per share prepared
in accordance with generally accepted accounting principles.
(e) Includes premiums received from universal life products and products without
mortality or morbidity risk. Such premiums are not reported as revenues
under generally accepted accounting principles and were $585.5 million and
$610.5 million for the three months ended March 31, 2002 and 2001,
respectively; $2,267.2 million in 2001; $2,731.1 million in 2000; $3,023.3
million in 1999; $2,585.7 million in 1998; and $2,099.4 million in 1997.
Also includes deposits in mutual funds totaling $88.5 million and $111.3
million for the three months ended March 31, 2002 and 2001, respectively;
$468.7 million in 2001; $794.2 million in 2000; $479.3 million in 1999;
$87.1 million in 1998; and $19.9 million in 1997. Also includes premiums
related to our discontinued major medical business, totaling $134.8 million
and $209.5 million for the three months ended March 31, 2002 and 2001,
respectively; $737.1 million in 2001; $910.6 million in 2000; $855.7 million
in 1999; $878.2 million in 1998; and $744.0 million in 1997.
(f) Represents net income excluding the items described in note (b) above. For
additional discussion of the criteria we use to identify the items excluded
from operating earnings refer to our annual report on Form 10-K for the
fiscal year ended December 31, 2001 and our quarterly report on Form 10-Q
for the period ended March 31, 2002, both of which are incorporated by
reference herein.
(g) Includes: (i) all of the Company's assets; (ii) the total finance
receivables managed by Conseco Finance applicable to the holders of
asset-backed securities sold by Conseco Finance in securitizations
structured in a manner that resulted in gain-on-sale revenue (adjusted for
the interests retained by the Company); and (iii) the total market value of
the investment portfolios managed by the Company for others of $8.3 billion
and $6.9 billion at March 31, 2002 and 2001, respectively, $8.3 billion,
$7.2 billion, $11.4 billion, 11.2 billion and $5.1 billion at December 31,
2001, 2000, 1999, 1998 and 1997, respectively.
(h) The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS
142") in June 2001. Under the new rules, intangible assets with an
indefinite life are no longer amortized in periods subsequent to December
31, 2001, but are subject to annual impairment tests (or more frequent under
certain circumstances), effective January 1, 2002. Conseco has determined
that all of its goodwill has an indefinite life and is therefore subject to
the new rules. For additional discussion of our adoption of SFAS 142 refer
to our annual report on Form 10-K for the fiscal year ended December 31,
2001 and our quarterly report on Form 10-Q for the period ended March 31,
2002, both of which are incorporated by reference herein. A reconciliation
of reported net income (loss) to adjusted net income (loss) before the
extraordinary gain (loss) on extinguishment of debt and cumulative effect of
accounting change is as follows assuming that the nonamortization provisions
of SFAS 142 were applied in all periods presented:
THREE MONTHS
ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
---------------- ----------------------------------------------------
2002 2001 2001 2000 1999 1998 1997
------ ------ ------- --------- ---- ------ ------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
Net income (loss), as reported...... $(95.9) $ 84.1 $(405.9) $(1,191.2) $595.0 $467.1 $866.4
Add: amortization of goodwill, net
of income taxes................... -- 27.5 109.6 112.5 110.1 110.2 84.5
------ ------ ------- --------- ------ ------ ------
Adjusted net income (loss).......... (95.9) 111.6 (296.3) (1,078.7) 705.1 577.3 950.9
Less: extraordinary (gain) loss on
extinguishment of debt, net of
income taxes...................... (4.0) (.3) (17.2) 5.0 -- 42.6 6.9
Add: cumulative effect of accounting
change, net of income taxes....... -- -- -- 55.3 -- -- --
------ ------ ------- --------- ------ ------ ------
Adjusted net income (loss) before
extraordinary (gain) loss on
extinguishment of debt and
cumulative effect of accounting
change.......................... $(99.9) $111.3 $(313.5) $(1,018.4) $705.1 $619.9 $957.8
====== ====== ======= ========= ====== ====== ======
22
THREE MONTHS
ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
---------------- ----------------------------------------------------
2002 2001 2001 2000 1999 1998 1997
------ ------ ------- --------- ---- ------ ------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
Income (loss) per common share:
Basic:
Net income (loss) as reported... $ (.28) $ .24 $ (1.24) $ (3.69) $ 1.83 $ 1.47 $ 2.72
Add: amortization of goodwill,
net of income taxes.......... -- .08 .32 .35 .34 .35 .27
------ ------ ------- --------- ------ ------ ------
Adjusted net income (loss)...... (.28) .32 (.92) (3.34) 2.17 1.82 2.99
Less: extraordinary (gain) loss
on extinguishment of debt,
net of income taxes.......... (.01) -- (.05) .01 -- .14 .02
Add: cumulative effect of
accounting change, net of
income taxes................. -- -- -- .17 -- -- --
------ ------ ------- --------- ------ ------ ------
Adjusted net income (loss)
before extraordinary (gain)
loss on extinguishment of
debt and cumulative effect
of accounting change....... $ (.29) $ .32 $ (.97) $ (3.16) $ 2.17 $ 1.96 $ 3.01
====== ====== ======= ========= ====== ====== ======
Diluted:
Net income (loss) as reported... $ (.28) $ .23 $ (1.24) $ (3.69) $ 1.79 $ 1.40 $ 2.52
Add: amortization of goodwill,
net of income taxes.......... -- .07 .32 .35 .33 .33 .25
------ ------ ------- --------- ------ ------ ------
Adjusted net income (loss)...... (.28) .30 (.92) (3.34) 2.12 1.73 2.77
Less: extraordinary (gain) loss
on extinguishment of debt,
net of income taxes.......... (.01) -- (.05) .01 -- .13 .02
Add: cumulative effect of
accounting change, net of
income taxes................. -- -- -- .17 -- -- --
------ ------ ------- --------- ------ ------ ------
Adjusted net income (loss)
before extraordinary (gain)
loss on extinguishment of
debt and cumulative effect
of accounting change....... $ (.29) $ .30 $ (.97) $ (3.16) $ 2.12 $ 1.86 $ 2.79
====== ====== ======= ========= ====== ====== ======
23
THE EXCHANGE OFFER
PURPOSE AND EFFECT
On April 24, 2002, we exchanged $1,292,637,000 aggregate principal amount
of our senior notes for a corresponding amount of our unregistered guaranteed
notes. The April exchange offer was only made, and the unregistered guaranteed
notes were only offered and issued (i) in the United States, to "qualified
institutional buyers," as that term is defined in Rule 144A under the Securities
Act, and institutional "Accredited Investors" as that term is defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act, in a private transaction in
reliance upon an exemption from the registration requirements of the Securities
Act, and (ii) outside the United States, to persons other than "U.S. persons,"
as that term is defined in Rule 902 under the Securities Act, in offshore
transactions in reliance upon Regulation S under the Securities Act. The April
exchange offer was not registered under the Securities Act.
The terms of the unregistered guaranteed notes are substantially identical
to those of the tendered senior notes, except that the unregistered guaranteed
notes have longer maturities and are guaranteed by CIHC, Incorporated, our
direct subsidiary and the holding company of our principal operating
subsidiaries. The purpose of the April exchange offer was to extend the maturity
profile of our debt in order to improve our financial flexibility and to enhance
our future ability to refinance public debt. Following the April exchange offer,
an aggregate of $1,247,662,000 principal amount of senior notes remained
outstanding (and without the benefit of the CIHC guarantee).
Simultaneously with the April exchange offer, we and the guarantor entered
into a registration rights agreement with the Banc of America Securities LLC,
J.P. Morgan Securities Inc. and Lehman Brothers Inc., the dealer managers for
the April exchange offer. Under the agreement, we have filed the registration
statement of which this prospectus is a part and we are making this exchange
offer. You should read the discussion under the headings "Prospectus
Summary -- Summary of the Terms of the Registered Notes," "The Exchange Offer"
and "Description of the Registered Notes" for further information regarding the
registered notes.
Because we did not register the unregistered guaranteed notes issued in the
April exchange offer under the Securities Act, they may only be transferred in
limited circumstances under the federal securities laws. If the holders of the
unregistered guaranteed notes do not exchange their notes in the exchange offer,
they will not have the further right to have their unregistered guaranteed notes
registered under the Securities Act. Anyone who still holds unregistered
guaranteed notes after the exchange offer therefore may not be able to publicly
sell his or her unregistered guaranteed notes and may therefore only sell such
notes to persons in transactions exempt from registration under the Securities
Act.
The registered notes will be issued without a restrictive legend under the
Securities Act. Based on an interpretation by the staff of the Commission set
forth in no-action letters issued to third parties, if you are not our
"affiliate" within the meaning of Rule 405 under the Securities Act or a
broker-dealer referred to in the next paragraph, we believe that the registered
notes to be issued to you in the exchange offer may be offered for resale,
resold and otherwise transferred by you without compliance with the registration
and prospectus delivery provisions of the Securities Act. This interpretation,
however, is based on your representation to us (which you will be deemed to make
by delivering a completed letter of transmittal or agent's message if you tender
through DTC) that:
(1) you are acquiring the registered notes to be issued to you in the
exchange offer in the ordinary course of your business;
(2) you have no arrangement or understanding with any person to
participate in the distribution of the unregistered guaranteed notes or the
registered notes to be issued to you in the exchange offer; and
(3) you are not an affiliate of Conseco's or CIHC's.
If you tender your notes in the exchange offer for the purpose of
participating in a distribution of the registered notes, you cannot rely on this
interpretation by the staff of the Commission. Under those
24
circumstances, you must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction. Each broker-dealer that receives registered notes in the exchange
offer for its own account must acknowledge (by delivering a completed letter of
transmittal or agent's message) that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resales of those
registered notes. We have agreed that, during a period starting on the
expiration date of this exchange offer and ending on the close of business one
year after the expiration date, we will make this prospectus available to any
broker-dealer for use in connection with any such resale. See "Plan of
Distribution."
CONSEQUENCES OF FAILURE TO EXCHANGE
Consummation of the exchange offer may have adverse consequences to holders
of unregistered guaranteed notes who elect not to tender their notes in the
exchange offer. After we complete the exchange offer, if you have not tendered
your unregistered guaranteed notes, you will not have any further registration
rights. Your unregistered guaranteed notes will continue to be subject to
restrictions on transfer. Therefore, the liquidity of the market for untendered
unregistered guaranteed notes likely will be adversely affected upon completion
of the exchange offer. See "Risk Factors -- Risks Related to Continuing
Ownership of the Unregistered Guaranteed Notes."
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth herein and in the
letter of transmittal, we are offering to exchange:
FOR EACH $1,000 PRINCIPAL AMOUNT OF
THE FOLLOWING UNREGISTERED OUTSTANDING AGGREGATE THE EXCHANGING HOLDERS WILL RECEIVE $1,000 PRINCIPAL
GUARANTEED NOTES: PRINCIPAL AMOUNT AMOUNT OF THE CORRESPONDING REGISTERED NOTES:
----------------------------------- --------------------- ----------------------------------------------------
8.5% Guaranteed Senior Notes due
2003......................... $ 991,000 8.5% Guaranteed Senior Notes due 2003
6.4% Guaranteed Senior Notes due
2004......................... 14,936,000 6.4% Guaranteed Senior Notes due 2004
8.75% Guaranteed Senior Notes due
2006......................... 364,294,000 8.75% Guaranteed Senior Notes due 2006
6.8% Guaranteed Senior Notes due
2007......................... 150,783,000 6.8% Guaranteed Senior Notes due 2007
9% Guaranteed Senior Notes due
2008......................... 399,200,000 9% Guaranteed Senior Notes due 2008
10.75% Guaranteed Senior Notes due
2009......................... 362,433,000 10.75% Guaranteed Senior Notes due 2009
The registered notes will be issued in exchange for unregistered guaranteed
notes validly tendered and not withdrawn in the exchange offer, if consummated,
on the settlement date, which will be approximately three business days
following the expiration date of the exchange offer, or as soon as practicable
thereafter. Interest on each registered note will accrue from the last interest
payment date on which interest was paid on the corresponding unregistered
guaranteed note tendered or from such earlier date from which interest is stated
to accrue on such notes.
Outstanding unregistered guaranteed notes may be exchanged only in minimum
denominations of $1,000 principal amount and integral multiples of $1,000.
The form and terms of the registered notes are substantially the same as
the form and terms of the unregistered guaranteed notes, except that the
registered notes will not bear legends restricting their transfer. See
"Description of the Registered Notes." The registered notes will be issued
pursuant to, and entitled to the benefits of, the exchange offer indentures. One
of the exchange offer indentures will govern the issuance of the registered
10.75% notes and the other indenture will govern the issuance of the remaining
registered notes.
25
This prospectus, together with the letter of transmittal, is being sent to
all registered holders of the unregistered guaranteed notes. We will conduct the
exchange offer in accordance with the applicable requirements of the Securities
Act and the Exchange Act and the related rules and regulations of the
Commission.
We will be deemed to have accepted validly tendered unregistered guaranteed
notes when, as, and if we have given oral or written notice of our acceptance to
the exchange agent. The exchange agent will act as our agent for the tendering
holders for the purpose of receiving the registered notes from us. If we do not
accept any tendered unregistered guaranteed notes because of an invalid tender,
the occurrence of certain other events set forth in this prospectus or
otherwise, we will return certificates for any unaccepted unregistered
guaranteed notes, without expense, to the tendering holder as promptly as
practicable after the expiration date.
You will not be required to pay brokerage commissions or fees or, except as
set forth below under "-- Transfer Taxes," transfer taxes with respect to the
exchange of your notes in the exchange offer. We will pay all charges and
expenses, if any, other than certain applicable taxes, in connection with the
exchange offer. See "-- Fees and Expenses" below.
EXPIRATION DATE; AMENDMENTS
The exchange offer will expire at 5:00 p.m., New York City time, on
, 2002, unless we determine, in our sole discretion, to extend the
exchange offer in respect of any series of unregistered guaranteed notes, in
which case, it will expire at the later date and time to which it is extended
with respect to such series. We do not intend to extend the exchange offer,
although we reserve the right, in our absolute discretion, to do so. If the
exchange offer is amended in a manner we determine constitutes a material
change, we will extend the exchange offer with respect to the applicable series
for a period of five to ten business days, depending upon the significance of
the amendment and the manner of disclosure to the holders, if the exchange offer
would otherwise have expired during the five to ten business day period.
We also reserve the right, in our sole discretion,
(1) to delay accepting any unregistered guaranteed notes or, if any
of the conditions set forth below under "-- Conditions to the Exchange
Offer" have not been satisfied or waived at the expiration date, to
terminate the exchange offer by giving oral or written notice of such delay
or termination to the exchange agent, or
(2) to amend the terms of the exchange offer in respect of any series
of unregistered guaranteed notes, in any manner, by giving oral or written
notice of such delay, extension, termination or amendment to the exchange
agent.
We will promptly announce any extension, amendment or termination of the
exchange offer by issuing a press release to the Dow Jones News Service or other
similar media outlet. We will announce any extension of the expiration date no
later than 9:00 a.m., New York City time, on the first business day after the
previously scheduled expiration date. We have no other obligation to publish,
advertise or otherwise communicate any information about any extension,
amendment or termination.
LETTER OF TRANSMITTAL; REPRESENTATIONS, WARRANTIES AND COVENANTS OF HOLDERS OF
UNREGISTERED GUARANTEED NOTES
Upon the submission of the letter of transmittal, or agreement to the terms
of the letter of transmittal pursuant to an agent's message, as to a series of
unregistered guaranteed notes, a holder, or the beneficial holder of such notes
on behalf of which the holder has tendered, will, subject to the terms and
conditions of the exchange offer generally, be deemed, among other things, to:
(1) irrevocably exchange, assign and transfer to or upon our order or
the order of our nominee, all right, title and interest in and to, and any
and all claims in respect of or arising or having arisen as a result of
such holder's status as a holder of, all unregistered guaranteed notes
tendered thereby, such that thereafter it shall have no contractual or
other rights or claims in law or equity against us or any fiduciary,
26
trustee, fiscal agent or other person connected with the unregistered
guaranteed notes arising under, from or in connection with such notes;
(2) to the extent permitted by law, waive any and all rights with
respect to the unregistered guaranteed notes tendered thereby (including,
without limitation, any existing or past defaults and their consequences in
respect of such notes); and
(3) to the extent permitted by law, release and discharge us and the
trustee from any and all claims such holder may have, now or in the future,
arising out of or related to the unregistered guaranteed notes tendered
thereby, including, without limitation, any claims that such holder is
entitled to receive additional principal or interest payments with respect
to the unregistered guaranteed notes tendered thereby (other than as
expressly provided in this prospectus and in the letter of transmittal) or
to participate in any redemption or defeasance of the unregistered
guaranteed notes tendered thereby.
In addition to those representations, warranties and agreements described
under "--Purpose and Effect" above, the tendering holder will be deemed to
represent, warrant and agree that:
(1) it has received and has had the opportunity to review this
prospectus;
(2) it is the beneficial owner (as defined below) of, or a duly
authorized representative of one or more such beneficial owners of, the
unregistered guaranteed notes tendered thereby and it has full power and
authority to execute the letter of transmittal;
(3) the unregistered guaranteed notes being tendered thereby were
owned as of the date of tender, free and clear of any liens, charges,
claims, encumbrances, interests and restrictions of any kind, and
acknowledges that we will acquire good, indefeasible and unencumbered title
to such notes, free and clear of all liens, charges, claims, encumbrances,
interests and restrictions of any kind, when we accept the same;
(4) it will not sell, pledge, hypothecate or otherwise encumber or
transfer any unregistered guaranteed notes tendered thereby from the date
of the letter of transmittal and agrees that any purported sale, pledge,
hypothecation or other encumbrance or transfer will be void and of no
effect;
(5) the execution and delivery of the letter of transmittal shall
constitute an undertaking to execute any further documents and give any
further assurances that may be required in connection with any of the
foregoing, in each case on and subject to the terms and conditions set out
or referred to in this prospectus;
(6) the submission of the letter of transmittal to the exchange agent
shall, subject to a holder's ability to withdraw its tender and subject to
the terms and conditions of the exchange offer generally, constitute the
irrevocable appointment of the exchange agent as its attorney and agent,
and an irrevocable instruction to such attorney and agent to complete and
execute all or any form(s) of transfer and other document(s) at the
discretion of such attorney and agent in relation to the unregistered
guaranteed notes tendered thereby in favor of us or such other person or
persons as we may direct and to deliver such form(s) of transfer and other
document(s) in the attorney's and agent's discretion and/or the
certificate(s) and other document(s) of title relating to such senior
notes' registration and to execute all such other documents and to do all
such other acts and things as may be in the opinion of such attorney or
agent necessary or expedient for the purpose of, or in connection with, the
acceptance of the exchange offer, and to vest in us or our nominees such
notes; and
(7) that the terms and conditions of the exchange offer shall be
deemed to be incorporated in, and form a part of, the letter of
transmittal, which shall be read and construed accordingly.
The representations and warranties and agreements of a holder tendering
unregistered guaranteed notes shall be deemed to be repeated and reconfirmed on
and as of the expiration date and the settlement date. For purposes of this
prospectus, the "beneficial owner" of any unregistered guaranteed notes shall
mean any holder that exercises investment discretion with respect to such notes.
27
PROCEDURES FOR TENDERING
A holder of unregistered guaranteed notes who wishes to accept the exchange
offer, and whose notes are held by a custodial entity such as a bank, broker,
dealer, trust company or other nominee, must instruct that custodial entity to
tender with respect to such holder's notes on the holder's behalf pursuant to
the procedures of the custodial entity.
To tender in the exchange offer, a holder of unregistered guaranteed notes
must either (i) complete, sign and date the letter of transmittal (or a
facsimile thereof) in accordance with its instructions (including guaranteeing
the signature(s) to the letter of transmittal, if required), and mail or
otherwise deliver such letter of transmittal or such facsimile, together with
the certificates representing the unregistered guaranteed notes specified
therein, to the exchange agent at the address set forth in the letter of
transmittal for receipt on or prior to the expiration date, or (ii) comply with
the ATOP procedures for book-entry transfer described below on or prior to the
expiration date.
The exchange agent and DTC have confirmed that the exchange offer is
eligible for ATOP. The letter of transmittal (or facsimile thereof), with any
required signature guarantees, or (in the case of book entry transfer) an
agent's message in lieu of the letter of transmittal, and any other required
documents, must be transmitted to and received by the exchange agent on or prior
to the expiration date of the exchange offer at one of its addresses set forth
on the back cover page of this prospectus. Unregistered guaranteed notes will
not be deemed surrendered until the letter of transmittal and signature
guarantees, if any, or agent's message, are received by the exchange agent.
The method of delivery of unregistered guaranteed notes, the letter of
transmittal, and all other required documents to the exchange agent is at the
election and risk of the holder. Instead of delivery by mail, holders should use
an overnight or hand delivery service, properly insured. In all cases,
sufficient time should be allowed to assure delivery to and receipt by the
exchange agent on or before the expiration date. You must not send the letter of
transmittal or any unregistered guaranteed notes to anyone other than the
exchange agent.
All registered notes will be delivered only in book-entry form through DTC.
Accordingly, if you anticipate tendering other than through DTC, you are urged
to contact promptly a bank, broker or other intermediary (that has the
capability to hold securities custodially through DTC) to arrange for receipt of
any registered notes to be delivered to you pursuant to the exchange offer and
to obtain the information necessary to provide the required DTC participant with
account information for the letter of transmittal.
BOOK-ENTRY DELIVERY PROCEDURES FOR TENDERING UNREGISTERED GUARANTEED NOTES
HELD WITH DTC
If you wish to tender unregistered guaranteed notes held on your behalf by
a nominee with DTC, you must (i) inform your nominee of your interest in
tendering such notes pursuant to the exchange offer, and (ii) instruct your
nominee to tender all notes you wish to be tendered in the exchange offer into
the exchange agent's account at DTC on or prior to the expiration date. Any
financial institution that is a nominee in DTC, including Euroclear and
Clearstream, must tender unregistered guaranteed notes by effecting a book-entry
transfer of the unregistered guaranteed notes to be tendered in the exchange
offer into the account of the exchange agent at DTC by electronically
transmitting its acceptance of the exchange offer through the ATOP procedures
for transfer. DTC will then verify the acceptance, execute a book-entry delivery
to the exchange agent's account at DTC, and send an agent's message to the
exchange agent. An "agent's message" is a message, transmitted by DTC to and
received by the exchange agent and forming part of a book-entry confirmation,
which states that DTC has received an express acknowledgement from an
organization that participates in DTC (a "participant") tendering unregistered
guaranteed notes that the participant has received and agrees to be bound by the
terms of the letter of transmittal and that we may enforce the agreement against
the participant. A letter of transmittal need not accompany tenders effected
through ATOP.
28
PROPER EXECUTION AND DELIVERY OF LETTER OF TRANSMITTAL
Signatures on a letter of transmittal or notice of withdrawal described
below (see "-- Withdrawal Rights"), as the case may be, must be guaranteed by an
eligible institution unless the notes tendered pursuant to the letter of
transmittal are tendered (i) by a holder who has not completed the box entitled
"Special Delivery Instructions" on the letter of transmittal or (ii) for the
account of an eligible institution. If signatures on a letter of transmittal, or
notice of withdrawal are required to be guaranteed, such guarantee must be made
by an eligible institution.
If the letter of transmittal is signed by the holder(s) of unregistered
guaranteed notes tendered thereby, the signature(s) must correspond with the
name(s) as written on the face of the unregistered guaranteed notes without
alteration, enlargement or any change whatsoever. If any of the unregistered
guaranteed notes tendered thereby are held by two or more holders, all such
holders must sign the letter of transmittal. If any of the unregistered
guaranteed notes tendered thereby are registered in different names on different
unregistered guaranteed notes, it will be necessary to complete, sign and submit
as many separate letters of transmittal, and any accompanying documents, as
there are different registrations of certificates.
If unregistered guaranteed notes that are not tendered for exchange
pursuant to the exchange offer are to be returned to a person other than the
holder thereof, certificates for such notes must be endorsed or accompanied by
an appropriate instrument of transfer, signed exactly as the name of the
registered owner appears on the certificates, with the signatures on the
certificates or instruments of transfer guaranteed by an eligible institution.
If the letter of transmittal is signed by a person other than the holder of
any unregistered guaranteed notes listed therein, such unregistered guaranteed
notes must be properly endorsed or accompanied by a properly completed bond
power, signed by such holder exactly as such holder's name appears on such
unregistered guaranteed notes. If the letter of transmittal or any unregistered
guaranteed notes, bond powers or other instruments of transfer are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and, unless waived by us, evidence
satisfactory to us of their authority to so act must be submitted with the
letter of transmittal.
No alternative, conditional, irregular or contingent tenders will be
accepted. By executing the letter of transmittal (or facsimile thereof), the
tendering holders of unregistered guaranteed notes waive any right to receive
any notice of the acceptance for exchange of their unregistered guaranteed
notes. Tendering holders should indicate in the applicable box in the letter of
transmittal the name and address to which substitute certificates evidencing
unregistered guaranteed notes for amounts not tendered or not exchanged are to
be issued or sent, if different from the name and address of the person signing
the letter of transmittal. If no such instructions are given, unregistered
guaranteed notes not tendered or exchanged will be returned to such tendering
holder.
All questions as to the validity, form, eligibility (including time of
receipt), and acceptance and withdrawal of tendered unregistered guaranteed
notes will be determined by us in our absolute discretion, which determination
will be final and binding. We reserve the absolute right to reject any and all
tendered unregistered guaranteed notes determined by us not to be in proper form
or not to be properly tendered or any tendered unregistered guaranteed notes our
acceptance of which would, in the opinion of our counsel, be unlawful. We also
reserve the right to waive, in our absolute discretion, any defects,
irregularities or conditions of tender as to particular unregistered guaranteed
notes, whether or not waived in the case of other unregistered guaranteed notes.
Our interpretation of the terms and conditions of the exchange offer (including
the instructions in the letter of transmittal) will be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of unregistered guaranteed notes must be cured within such time as we shall
determine.
Although we intend to notify holders of defects or irregularities with
respect to tenders of unregistered guaranteed notes, neither we, the exchange
agent, nor the information agent, nor any other person will be under any duty to
give such notification or shall incur any liability for failure to give any such
notification.
29
Tenders of unregistered guaranteed notes will not be deemed to have been made
until such defects or irregularities have been cured or waived.
Any holder whose unregistered guaranteed notes have been mutilated, lost,
stolen or destroyed will be responsible for obtaining replacement securities or
for arranging for indemnification with the trustee of the unregistered
guaranteed notes. Holders may contact the information agent for assistance with
such matters.
WITHDRAWAL RIGHTS
You may withdraw tenders of unregistered guaranteed notes of any series at
any time prior to the withdrawal deadline, 5:00 p.m., New York City time on
, 2002. You may not withdraw your tenders of unregistered guaranteed
notes subsequent to that time, even if we extend the expiration date of the
exchange offer.
For a withdrawal of a tender to be effective, a written or facsimile
transmission notice of withdrawal must be received by the exchange agent prior
to the withdrawal deadline at one of its addresses set forth on the back cover
page of this prospectus. The withdrawal notice must specify the name of the
person who tendered the unregistered guaranteed notes to be withdrawn; must
contain a description of the unregistered guaranteed notes to be withdrawn, the
certificate numbers shown on the particular certificates evidencing such
unregistered guaranteed notes and the aggregate principal amount represented by
such unregistered guaranteed notes; and must be signed by the holder of such
unregistered guaranteed notes in the same manner as the original signature on
the letter of transmittal (including any required signature guarantees) or be
accompanied by evidence satisfactory to us that the person withdrawing the
tender has succeeded to the beneficial ownership of the unregistered guaranteed
notes. In addition, the notice of withdrawal must specify, in the case of
unregistered guaranteed notes tendered by delivery of certificates for such
notes, the name of the registered holder (if different from that of the
tendering holder) or, in the case of unregistered guaranteed notes tendered by
book-entry transfer, the name and number of the account at DTC to be credited
with the withdrawn unregistered guaranteed notes. The signature on the notice of
withdrawal must be guaranteed by an eligible institution unless the unregistered
guaranteed notes have been tendered for the account of an eligible institution.
Withdrawal of tenders of unregistered guaranteed notes may not be
rescinded, and any unregistered guaranteed notes properly withdrawn will
thereafter be deemed not validly tendered for purposes of the exchange offer.
Properly withdrawn unregistered guaranteed notes may, however, be retendered by
again following one of the procedures described in "-- Procedures for Tendering"
prior to the expiration date.
CONDITIONS TO THE EXCHANGE OFFER
The completion of the exchange offer is subject to certain conditions
including (1) that the exchange offer not violate applicable law or applicable
interpretations of the staff of the SEC or (2) that no injunction, order or
decree has been issued which would prohibit, prevent or materially impair our
ability to proceed with the exchange offer. Notwithstanding any other provisions
of the exchange offer, or any extension of the exchange offer, we will not be
required to issue registered notes, and we may terminate the exchange offer or,
at our option, modify, extend or otherwise amend the exchange offer, if any of
the following conditions has not been satisfied or waived, prior to or
concurrently with the expiration of the exchange offer, as extended:
(1) nothing shall have occurred or been threatened, no action shall
have been taken, and no statute, rule, regulation, judgment, order, stay,
decree or injunction shall have been promulgated, enacted, entered,
enforced or deemed applicable to the exchange offer, or the exchange of
registered notes for unregistered guaranteed notes under the exchange
offer, by or before any court or governmental regulatory or administrative
agency, authority or tribunal, that either:
(a) challenges the making of the exchange offer or the exchange of
registered notes for unregistered guaranteed notes under the exchange
offer, or might, directly or indirectly, prohibit, prevent, restrict or
delay consummation of, or might otherwise adversely affect in any
material
30
manner, the exchange offer or the exchange of registered notes for
unregistered guaranteed notes under the exchange offer; or
(b) in our reasonable judgment, could materially adversely affect
our business, condition (financial or otherwise), income, operations,
properties, assets, liabilities or prospects and those of our
subsidiaries, individually or taken as a whole, or materially impair the
contemplated benefits to us of the exchange offer or the exchange of
registered notes for unregistered guaranteed notes under the exchange
offer;
(2) there shall not have occurred any of the following: (a) trading in
securities generally on the New York Stock Exchange or the American Stock
Exchange or in the over-the-counter market, or trading in any securities of
the Company on any exchange or in the over-the-counter market, shall have
been suspended or the settlement of such trading generally shall have been
materially disrupted or minimum prices shall have been established on any
such exchange or such market by the Commission, by such exchange or by any
other regulatory body or governmental authority having jurisdiction, (b) a
banking moratorium shall have been declared by Federal or state
authorities, (c) the United States shall have become engaged in
hostilities, there shall have been an escalation in hostilities involving
the United States or there shall have been a declaration of a national
emergency or war by the United States, (d) there shall have occurred such a
material adverse change in general economic, political or financial
conditions, including, without limitation, as a result of terrorist
activities after the date hereof (or the effect of international conditions
on the financial markets in the United States shall be such) as to make it,
in the judgment of our board of directors, impracticable or inadvisable to
proceed with the exchange offer on the terms and in the manner contemplated
in this prospectus or (e) in the case of any of the foregoing existing at
the time of the commencement of the exchange offer, a material acceleration
or worsening thereof; and
(3) one or more of the trustees with respect to the indentures for
the registered notes shall not have objected in any respect, or taken any
action that could, in our reasonable judgment, adversely affect the
consummation of, the exchange offer or the exchange of registered notes for
unregistered guaranteed notes under the exchange offer, nor shall any
trustee have taken any action that challenges the validity or effectiveness
of the procedures used by us in making the exchange offer or the exchange
of the unregistered guaranteed notes under the exchange offer.
The foregoing conditions are for our sole benefit and may be waived by us
in whole or in part, and with respect to any or all series of unregistered
guaranteed notes, at our absolute discretion. Any determination made by us
concerning an event, development or circumstance described or referred to above
shall be conclusive and binding.
If any of the foregoing conditions are not satisfied with respect to any
series of unregistered guaranteed notes, we may, at any time before or
concurrently with the expiration date for the exchange offer:
(1) terminate the exchange offer with respect to that series of
unregistered guaranteed notes and return all tendered unregistered
guaranteed notes of that series to the holders thereof;
(2) modify, extend or otherwise amend the exchange offer with respect
to that series of unregistered guaranteed notes and retain all unregistered
guaranteed notes of that series tendered and not withdrawn until the
expiration date of the modified, extended or amended exchange offer with
respect to such series (see "-- Withdrawal Rights" and "-- Letter of
Transmittal; Representations, Warranties and Covenants of Holders of
Unregistered Guaranteed Notes"); or
(3) waive the unsatisfied conditions with respect to the exchange
offer and accept all unregistered guaranteed notes of that series tendered
and not previously withdrawn.
We reserve the right, in our absolute discretion, to purchase or make
offers to purchase any senior notes, to the extent permitted by applicable law,
in the open market, in privately negotiated transactions or otherwise. The terms
of any such purchases or offers could differ from the terms of the exchange
offer. Any purchase or offer to purchase will not be made except in accordance
with applicable law.
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EXCHANGE AGENT
State Street Bank and Trust Company has been appointed the exchange agent
for the exchange offer. Letters of transmittal and all correspondence in
connection with the exchange offer should be sent or delivered by each holder of
unregistered guaranteed notes, or by a beneficial owner's commercial bank,
broker, dealer, trust company or other nominee, to the exchange agent at the
addresses and telephone numbers set forth on the back cover page of this
prospectus. We will pay the exchange agent reasonable and customary fees for its
services and will reimburse it for its reasonable, out-of-pocket expenses in
connection therewith.
The exchange agent also acts as trustee under the exchange offer
indentures.
INFORMATION AGENT
Georgeson Shareholder Communications Inc. has been appointed as the
information agent for the exchange offer and will receive customary compensation
for its services. Questions concerning tender procedures and requests for
additional copies of this prospectus or the letter of transmittal should be
directed to the information agent at the address and telephone numbers set forth
on the back cover page of this prospectus. Holders of senior notes may also
contact their commercial bank, broker, dealer, trust company or other nominee
for assistance concerning the exchange offer.
FEES AND EXPENSES
We will bear the expenses of soliciting tenders of the unregistered
guaranteed notes. The principal solicitation is being made by mail; additional
solicitations may, however, be made by telegraph, facsimile transmission,
telephone, electronic mail or in person by the information agent, as well as by
our officers and other employees and those of our affiliates.
If a tendering holder handles the transaction through its broker, dealer,
commercial bank, trust company or other institution, such holder may be required
to pay brokerage fees or commissions.
TRANSFER TAXES
You will not be obligated to pay any transfer taxes in connection with a
tender of your unregistered guaranteed notes for exchange unless you instruct us
to register registered notes in the name of, or request that unregistered
guaranteed notes not tendered or not accepted in the exchange offer be returned
to, a person other than the registered tendering holder, in which event the
registered tendering holder will be responsible for the payment of any
applicable transfer tax.
ACCOUNTING TREATMENT
We will not recognize any gain or loss for accounting purposes upon the
consummation of the exchange offer and the costs associated with the exchange
offer will be expensed as incurred.
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DESCRIPTION OF THE REGISTERED NOTES
We issued the unregistered guaranteed notes and will issue the registered
notes under two new indentures by and among us, CIHC and State Street Bank and
Trust Company, as trustee. We sometimes refer to these new indentures as the
"exchange offer indentures". The terms of the registered notes include those
stated in the exchange offer indentures and those made part of the exchange
offer indentures by reference to the Trust Indenture Act of 1939, as amended.
One of the exchange offer indentures governs the issuance of the registered
10.75% notes, under which we issued the 10.75% unregistered guaranteed notes in
the April exchange offer and the other exchange offer indenture governs the
issuance of the remaining registered notes, under which we issued the remaining
unregistered guaranteed notes in the April exchange offer. The terms of an
exchange offer indenture will only apply to the registered notes issued by that
indenture.
The terms and conditions of the registered notes are identical to the terms
and conditions of the unregistered guaranteed notes, with the exception of any
restrictive legends applicable to the unregistered guaranteed notes.
We incorporate by reference in this prospectus the description of our
senior notes in the various prospectuses and prospectus supplements used in
connection with the original issuance and sale of the senior notes, in exchange
for which the unregistered guaranteed notes were issued in the April exchange
offer. We describe below only those terms of the registered notes that differ
from the terms of the senior notes. This description does not purport to restate
the exchange offer indentures in their entirety. We urge you to read the
exchange offer indentures because they, and not this description, define your
rights as holders of the registered notes. Georgeson Shareholder Communications
Inc., the information agent for the exchange offer, will provide a copy of the
exchange offer indentures governing the registered notes, at no cost, to any
holder requesting a copy. To request a copy of any or all of these documents,
you should call Georgeson at the telephone number on the back cover of this
prospectus.
GUARANTEES AND RELATED PROVISIONS
The registered notes will be guaranteed by CIHC on an unsecured senior
subordinated basis. The guarantees will be subordinated to the prior payment in
full of all Obligations under the Credit Agreements and all other Senior Debt of
CIHC and equal in right of payment to the unregistered guaranteed notes.
CERTAIN DEFINITIONS RELATING TO THE GUARANTEES SUBSECTIONS
Except as defined below, all capitalized terms used in the above Guarantees
and Related Provisions and Subordination subsections in this Description of
Registered Notes shall have the same meanings ascribed to such terms in the
relevant exchange offer indentures.
"Credit Agreements" means:
(1) the $1,500,000,000 Five-Year Credit Agreement dated as of
September 25, 1998, as amended, among us, Bank of America National Trust
and Savings Association, as Agent, First Union National Bank and JPMorgan
Chase Bank, as Syndication Agents, Morgan Guaranty Company of New York, as
Documentation Agent, and the other financial institutions party thereto, as
such Agreement may be amended, restated, modified, renewed, refunded,
replaced or refinanced from time to time thereafter, including any
appendices, exhibits or schedules to any of the foregoing, as the same may
be in effect from time to time, in each case, including any amendment,
modification, supplement, renewal, refunding, replacement, refinancing,
extension or restatement thereof (any of the foregoing being a
"Refinancing") from time to time (whether with the original agents and
lenders or other agents and lenders or otherwise, and whether provided
under the original credit agreement or other credit agreements or
otherwise), including any appendices, exhibits or schedules to any of the
foregoing; and
(2) (a) a Credit Agreement, dated as of August 21, 1998, among
certain individuals, certain banks and Bank of America National Trust and
Savings Association, as administrative agent, including any
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appendices, exhibits or schedules thereto, as the same may be in effect
from time to time, including any Refinancing thereof from time to time
(whether with the original agents and lenders or other agents and lenders
or otherwise, and whether provided under the original Credit Agreement or
other credit agreements or otherwise), including any appendices, exhibits
or schedules to any of the foregoing, (b) the Credit Agreement, dated as of
November 22, 2000, among certain individuals, certain banks and Bank of
America N.A., as administrative agent, refinancing the obligations under an
Amended and Restated Credit Agreement, dated as of August 26, 1997,
including any appendices, exhibits or schedules thereto, as the same may be
in effect from time to time, including any Refinancing thereof from time to
time (whether with the original agents and lenders or other agents and
lenders or otherwise, and whether provided under the original Credit
Agreement or other credit agreements or otherwise), including any
appendices, exhibits or schedules to any of the foregoing, (c) a Credit
Agreement, dated as of November 22, 2000, among certain individuals,
certain banks and Bank of America N.A., as administrative agent,
refinancing certain of the obligations described under the credit agreement
in clause (a), including any appendices, exhibits or schedules thereto, as
the same may be in effect from time to time, including any Refinancing
thereof from time to time (whether with the original agents and lenders or
other agents and lenders or otherwise, and whether provided under the
original Credit Agreement or other credit agreements or otherwise),
including any appendices, exhibits or schedules to any of the foregoing,
and (d) a Credit Agreement, dated as of November 22, 2000, among certain
individuals, certain banks and JPMorgan Chase Bank, refinancing the
obligations under the Credit Agreement, dated as of September 15, 1999
including any appendices, exhibits or schedules thereto, as the same may be
in effect from time to time, including any Refinancing thereof from time to
time (whether with the original agents and lenders or other agents and
lenders or otherwise, and whether provided under the original Credit
Agreement or other credit agreements or otherwise), including any
appendices, exhibits or schedules to any of the foregoing;
provided that the principal amount of any Refinancing Indebtedness with
respect to any of the foregoing clauses shall not exceed the amount of the
Indebtedness subject to such Refinancing, immediately prior to such
Refinancing.
"Equity Interests" means capital stock and all warrants, options or other
rights to acquire capital stock (but excluding any debt security that is
convertible into, or exchangeable for, capital stock).
"Guarantee" means: a guarantee other than by endorsement of negotiable
instruments for collection in the ordinary course of business, direct or
indirect, in any manner including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof, of all or any part of any Indebtedness.
"Hedging Obligations" means: with respect to any specified Person, the
obligations of such Person incurred in the normal course of business and
consistent with past practices and not for speculative purposes under:
(1) interest rate swap agreements, interest rate cap agreements and
interest rate collar agreements;
(2) foreign exchange contracts and currency protection agreements
entered into with one or more financial institutions designed to protect
the person or entity entering into the agreement against fluctuations in
interest rates or currency exchanges rates with respect to Indebtedness
incurred and not for purposes of speculation;
(3) any commodity futures contract, commodity option or other similar
agreement or arrangement designed to protect against fluctuations in the
price of commodities used by that entity at the time;
(4) other agreements designed to hedge against market risks associated
with the issuance of insurance products; and
(5) other agreements or arrangements designed to protect such person
against fluctuations in interest rates or currency exchange rates.
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"Indebtedness" means, with respect to any specified Person: any
indebtedness of such Person, whether or not contingent:
(1) in respect of borrowed money;
(2) evidenced by bonds, notes, debentures or similar instruments or
letters of credit (or reimbursement agreements in respect thereof);
(3) in respect of banker's acceptances;
(4) representing the amount of liability in respect of a capital lease
that would, at the time of determination, be required to be capitalized on
a balance sheet in accordance with GAAP;
(5) representing the balance deferred and unpaid of the purchase price
of any property, except any such balance that constitutes an accrued
expense or trade payable; or
(6) representing any Hedging Obligations;
if and to the extent of any of the preceding items (other than letters of credit
and Hedging Obligations) would appear as a liability upon a balance sheet of the
specified Person prepared in accordance with GAAP. In addition, the term
"Indebtedness" includes all Indebtedness of others secured by a Lien on any
asset of the specified Person (whether or not such Indebtedness is assumed by
the specified Person) and, to the extent not otherwise included, the Guarantee
by the specified Person of any Indebtedness of any other Person.
The amount of any Indebtedness outstanding as of any date will be:
(1) the accreted value of the Indebtedness, in the case of any
Indebtedness issued with original issue discount; and
(2) the principal amount of the Indebtedness, together with any
interest on the Indebtedness that is more than 30 days past due, in the
case of any other Indebtedness.
"Investments" means, with respect to any Person: all direct or indirect
investments by such Person in other Persons (including affiliates) in the forms
of loans (including Guarantees or other obligations), advances or capital
contributions (excluding commission, travel and similar advances to officers and
employees made in the ordinary course of business), purchases or other
acquisitions for consideration of Indebtedness, Equity Interests or other
securities, together with all items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP.
"Lien" means: with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or, otherwise perfected under applicable law,
including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction.
"Obligations" means: any principal, premium, if any, interest (including
interest accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to Conseco or its Subsidiaries whether or not a claim
for post-filing interest is allowed in such proceeding), penalties, fees,
shares, expenses, indemnifications, reimbursement obligations, damages
(including liquidated damages), guarantees and other liabilities or amounts
payable under the documentation governing any Indebtedness or in respect
thereof.
"Person" means: any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, limited
liability company or government or any agency of political subdivision thereof.
"Senior Debt" means:
(1) all Indebtedness of CIHC outstanding under the Credit Agreements
and guarantees by CIHC of Indebtedness thereunder and all Hedging
Obligations with respect thereto;
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(2) any Indebtedness of CIHC outstanding as of the date hereof (other
than promissory notes outstanding by CIHC in favor of Conseco Finance,
CFIHC, Inc. and Conseco, Inc.) and any Refinancing thereof under a credit
agreement, unless the instrument under which such Indebtedness is incurred
expressly provides that it is on parity with or subordinated in right of
payment to the registered notes; provided that the aggregate principal
amount of Indebtedness outstanding pursuant to clauses (1) and (2) does not
at any time exceed the aggregate principal amount of the existing Senior
Debt under clauses (1) and (2) on the date hereof;
(3) up to an aggregate of $100 million of other Indebtedness at any
time outstanding; and
(4) all Obligations with respect to the items listed in the preceding
clauses (1), (2) and (3).
Notwithstanding anything to the contrary in the preceding, Senior Debt will
not include:
(1) any liability for federal, state, local or other taxes owed or
owing by CIHC;
(2) any Indebtedness of CIHC to any of its subsidiaries or other
affiliates;
(3) any guarantee by CIHC of the unregistered guaranteed notes;
(4) any trade payables;
(5) the portion of any Indebtedness that is incurred in violation of
the indentures; or
(6) any Indebtedness the terms of which provide that it is on a parity
with or subordinated in right of payment to the registered notes.
"Significant Subsidiary" means: any Subsidiary of us with, after the
elimination of intercompany accounts, (a) assets which constituted at least 5%
of our consolidated total assets, or (b) revenues which constituted at least 5%
of our consolidated total revenue or (c) net earnings which constituted at least
5% of our consolidated total net earnings, but not less than $10,000,000, all as
determined as of the date of our most recently prepared quarterly financial
statements for the 12-month period then ended.
"Subsidiary" means, with respect to any specified Person:
(1) any corporation, association or other business entity of which
more than 50% of the total voting power of Equity Interests entitled
(without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees of the corporation, association
or other business entity is at the time owned or controlled, directly or
indirectly, by that Person or one or more of the other Subsidiaries of that
Person (or a combination thereof);
(2) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or
(b) the only general partners of which are that Person or one or more
Subsidiaries of that Person (or any combination thereof);
(3) any limited liability company of which more than 50% of the
membership interest is owned or controlled by that Person or a Subsidiary
of such Person; and
(4) a trust, association or other unincorporated organization of which
more than 50% of the beneficial interest is owned or controlled by such
Person or a Subsidiary of such Person; provided, that, with respect to any
Investment made by us in any Person in the ordinary course of business
solely for investment purposes, such Person shall not be considered our
Subsidiary for the purposes of the indentures if such Person is not
integral to business or operations of or any Significant Subsidiary.
For each series of registered notes, interest will be payable at the same
annual rate, on the same interest payment dates and upon the same terms as the
corresponding series of unregistered guaranteed notes. Interest on each
registered note will accrue from the last interest payment date on which
interest was paid on the corresponding unregistered guaranteed note tendered or
such earlier date, if any, from which interest was stated to accrue for such
unregistered guaranteed notes.
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BOOK-ENTRY, DELIVERY AND FORM
GLOBAL NOTES
The unregistered guaranteed notes were, and the registered notes will be,
issued in the form of one or more registered notes in global form, without
interest coupons. The Global Notes will be deposited on the date of issuance
with, or on behalf of, DTC and registered in the name of Cede & Co., as nominee
of DTC, or will remain in the custody of the trustee pursuant to the FAST
Balance Certificate Agreement between DTC and the trustee.
DEPOSITORY PROCEDURES
The following description of the operations of DTC, Euroclear and
Clearstream are provided solely as a matter of convenience. These operations and
procedures are solely within the control of the respective settlement systems
and are subject to changes by them. We take no responsibility for these
operations and procedures and urge you to contact the system or their
participants directly to discuss these matters.
DTC has advised us that it is (i) a limited purpose trust company organized
under the laws of the State of New York, (ii) a "banking organization" within
the meaning of the New York Banking Law, (iii) a member of the Federal Reserve
System, (iv) a "clearing corporation" within the meaning of the Uniform
Commercial Code, as amended, and (v) a "clearing agency" registered pursuant to
Section 17A of the Exchange Act. DTC was created to hold securities for its
participants and facilitates the clearance and settlement of securities
transactions between participants through electronic book-entry changes to the
accounts of its participants, thereby eliminating the need for physical transfer
and delivery of certificates. DTC's participants include securities brokers and
dealers (including the initial purchasers), banks and trust companies, clearing
corporations and certain other organizations. Indirect access to DTC's system is
also available to other entities such as banks, brokers, dealers and trust
companies (collectively, the "Indirect Participants") that clear through or
maintain a custodial relationship with a participant, either directly or
indirectly. Investors who are not participants may beneficially own securities
held by or on behalf of DTC only through participants or Indirect Participants.
We expect that pursuant to procedures established by DTC (i) upon deposit
of each Global Note, DTC will credit the accounts of participants designated by
the holders of unregistered guaranteed notes who exchange their unregistered
guaranteed notes in the exchanger offer with an interest in the Global Note and
(ii) ownership of the notes will be shown on, and the transfer of ownership
thereof will be effected only through, records maintained by DTC (with respect
to the interests of participants) and the records of participants and the
Indirect Participants (with respect to the interests of persons other than
participants).
The laws of some jurisdictions may require that certain purchasers of
securities take physical delivery of such securities in definitive form.
Accordingly, the ability to transfer interests in the notes represented by a
Global Note to such persons may be limited. In addition, because DTC can act
only on behalf of its participants, who in turn act on behalf of persons who
hold interests through participants, the ability of a person having an interest
in notes represented by a Global Note to pledge or transfer such interest to
persons or entities that do not participate in DTC's system, or to otherwise
take actions in respect of such interest, may be affected by the lack of a
physical definitive security in respect of such interest.
So long as DTC or its nominee is the registered owner of a Global Note, DTC
or such nominee, as the case may be, will be considered the sole owner or holder
of the notes represented by the Global Note for all purposes under the
indenture. Except as provided below, owners of beneficial interests in a Global
Note will not be entitled to have notes represented by such Global Note
registered in their names, will not receive or be entitled to receive physical
delivery of Certificated Notes, and will not be considered the owners or holders
thereof under the indenture for any purpose, including with respect to the
giving of any direction, instruction or approval to the trustee thereunder.
Accordingly, each holder owning a beneficial interest in a Global Note must rely
on the procedures of DTC and, if such holder is not a participant or an Indirect
Participant, on the procedures of the participant through which such holder owns
its interest, to exercise any rights of a holder of notes under the indenture or
such Global Note. We understand that under existing industry practice, in the
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event that we request any action of holders of registered notes, or a holder
that is an owner of a beneficial interest in a Global Note desires to take any
action that DTC, as the holder of such Global Note, is entitled to take, DTC
would authorize the participants to take such action and the participants would
authorize holders owning through such participants to take such action or would
otherwise act upon the instruction of such holders. Neither we nor the trustee
will have any responsibility or liability for any aspect of the records relating
to or payments made on account of registered notes by DTC, or for maintaining,
supervising or reviewing any records of DTC relating to such registered notes.
Payments with respect to the principal of, and premium, if any, additional
interest, if any, and interest on, any registered notes represented by a Global
Note registered in the name of DTC or its nominee on the applicable record date
will be payable by the trustee to or at the direction of DTC or its nominee in
its capacity as the registered holder of the Global Note representing such
registered notes under the indenture. Under the terms of the Indenture, we and
the trustee may treat the persons in whose names the registered notes, including
the Global Notes, are registered as the owners thereof for the purpose of
receiving payment thereon and for any and all other purposes whatsoever.
Accordingly, neither we nor the trustee has or will have any responsibility or
liability for the payment of such amounts to owners of beneficial interests in a
Global Note (including principal, premium, if any, additional interest, if any,
and interest). Payments by the participants and the Indirect Participants to the
owners of beneficial interests in a Global Note will be governed by standing
instructions and customary industry practice and will be the responsibility of
the participants or the Indirect Participants and DTC.
Transfers between participants in DTC will be effected in accordance with
DTC's procedures, and will be settled in same-day funds. Transfers between
participants in Euroclear or Clearstream will be effected in the ordinary way in
accordance with their respective rules and operating procedures.
Cross-market transfers between the participants in DTC, on the one hand,
and Euroclear or Clearstream participants, on the other hand, will be effected
through DTC in accordance with DTC's rules on behalf of Euroclear or
Clearstream, as the case may be, by its respective depositary; however, such
cross-market transactions will require delivery of instructions to Euroclear or
Clearstream, as the case may be, by the counterparty in such system in
accordance with the rules and procedures and within the established deadlines
(Brussels time) of such system. Euroclear or Clearstream, as the case may be,
will, if the transaction meets its settlement requirements, deliver instructions
to its respective depositary to take action to effect final settlement on its
behalf by delivering or receiving interests in the relevant Global Notes in DTC,
and making or receiving payment in accordance with normal procedures for
same-day funds settlement applicable to DTC. Euroclear participants and
Clearstream participants may not deliver instructions directly to the
depositaries for Euroclear or Clearstream.
Because of time zone differences, the securities account of a Euroclear or
Clearstream participant purchasing an interest in a Global Note from a
participant in DTC will be credited, and any such crediting will be reported to
the relevant Euroclear or Clearstream participant, during the securities
settlement processing day (which must be a business day for Euroclear and
Clearstream) immediately following the settlement date of DTC. Cash received in
Euroclear or Clearstream as a result of sales of interest in a Global Note by or
through a Euroclear or Clearstream participant to a participant in DTC will be
received with value on the settlement date of DTC but will be available in the
relevant Euroclear or Clearstream cash account only as of the business day for
Euroclear or Clearstream following DTC "s settlement date.
Although DTC, Euroclear and Clearstream have agreed to the foregoing
procedures to facilitate transfers of interests in the Global Notes among
participants in DTC, Euroclear and Clearstream, they are under no obligation to
perform or to continue to perform such procedures, and such procedures may be
discontinued at any time. Neither we nor the trustee will have any
responsibility for the performance by DTC, Euroclear or Clearstream or their
respective participants or indirect participants of their respective obligations
under the rules and procedures governing their operations.
EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN THE GLOBAL NOTES WILL NOT HAVE
REGISTERED NOTES REGISTERED IN THEIR NAME, WILL NOT RECEIVE PHYSICAL DELIVERY OF
REGISTERED NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED
OWNERS OR "HOLDERS" THEREOF UNDER THE EXCHANGE OFFER INDENTURES FOR ANY PURPOSE.
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EXCHANGE OF GLOBAL NOTES FOR CERTIFICATED NOTES
A Global Note is exchangeable for definitive registered notes in registered
certificated form ("Certificated Notes") if:
(1) DTC (a) notifies us that it is unwilling or unable to continue as
depositary for the Global Notes, and we fail to appoint a successor
depositary, or (b) has ceased to be a clearing agency registered under the
Exchange Act;
(2) at our option, we notify the trustee in writing that we elect to
cause the issuance of the Certificated Notes; or
(3) there has occurred and is continuing a default or event of default
with respect to the registered notes.
In all cases, Certificated Notes delivered in exchange for any Global Note
or beneficial interests in Global Notes will be registered in the names, and
issued in any approved denominations, requested by or on behalf of the
depositary (in accordance with its customary procedures).
SAME DAY SETTLEMENT AND PAYMENT
We will make payments in respect of the notes represented by the Global
Notes (including principal, premium, if any, interest and liquidated damages, if
any) by wire transfer of immediately available funds to the accounts specified
by the Global Note holder. We will make all payments of principal, interest and
premium and liquidated damages, if any, with respect to Certificated Notes by
wire transfer of immediately available funds to the accounts specified by the
holders thereof or, if no account is specified, by mailing a check to that
holder's registered address. The registered notes represented by the Global
Notes are expected to trade in DTC's Same Day Funds Settlement System, and any
permitted secondary market trading activity in the registered notes will,
therefore, be required by DTC to be settled in immediately available funds. We
expect that secondary trading in any Certificated Notes will also be settled in
immediately available funds.
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CERTAIN MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of the material U.S. federal income tax
considerations relating to the exchange of unregistered guaranteed notes for
registered notes in the exchange offer. It does not contain a complete analysis
of all the potential tax considerations relating to the exchange. This summary
is limited to holders of unregistered guaranteed notes who hold the unregistered
guaranteed notes as "capital assets" (in general, assets held for investment).
Special situations, such as the following, are not addressed:
- tax consequences to holders who may be subject to special tax treatment,
such as tax-exempt entities, dealers in securities or currencies, banks,
other financial institutions, insurance companies, regulated investment
companies, and traders in securities that elect to use a mark-to-market
method of accounting for their securities holdings;
- tax consequences to persons holding notes as part of a hedging,
integrated, constructive sale or conversion transaction or a straddle or
other risk reduction transaction;
- tax consequences to holders whose "functional currency" is not the U.S.
dollar;
- tax consequences to persons who hold notes through a partnership or
similar pass-through entity;
- any U.S. federal gift, estate or alternative minimum tax consequences; or
- any state, local or foreign tax consequences.
The discussion below is based upon the provisions of the Internal Revenue
Code of 1986, as amended, existing and proposed Treasury regulations promulgated
thereunder, and rulings, judicial decisions and administrative interpretations
thereunder, as of the date hereof. Those authorities may be changed, perhaps
retroactively, so as to result in U.S. federal income tax consequences different
from those discussed below.
CONSEQUENCES OF TENDERING NOTES
The exchange of your unregistered guaranteed notes for registered notes in
the exchange offer should not constitute an exchange for U.S. federal income tax
purposes. Accordingly, the exchange offer should have no U.S. federal income tax
consequences to you and you should not recognize gain or loss if you exchange
your unregistered notes for registered notes. For example, there should be no
change in your tax basis and your holding period should carry over to the
registered notes. In addition, the U.S. federal income tax consequences of
holding and disposing of your registered notes should be the same as those
applicable to your unregistered guaranteed notes.
THE PRECEDING DISCUSSION OF CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
OF THE EXCHANGE OFFER IS FOR GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE.
ACCORDINGLY, EACH INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR AS TO PARTICULAR
TAX CONSEQUENCES TO IT OF EXCHANGING UNREGISTERED GUARANTEED NOTES FOR
REGISTERED NOTES, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR
FOREIGN TAX LAWS, AND OF ANY PROPOSED CHANGES IN APPLICABLE LAWS.
40
PLAN OF DISTRIBUTION
Each broker-dealer that receives registered notes for its own account
pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of such registered notes. This
prospectus, as it may be amended or supplemented from time to time, may be used
by all persons subject to the prospectus delivery requirements of the Securities
Act, including broker-dealers, in connection with resales of registered notes.
We have agreed that, starting on the expiration date and ending on the close of
business one year after the expiration date, we will make this prospectus, as
amended or supplemented, available to any broker-dealer for use in connection
with any such resale.
We reserve the right in our sole discretion to purchase or make offers for,
or to offer registered notes for, any unregistered guaranteed notes that remain
outstanding subsequent to the expiration of the exchange offer pursuant to this
prospectus or otherwise and, to the extent permitted by applicable law, purchase
unregistered guaranteed notes in the open market, in privately negotiated
transactions or otherwise.
We will not receive any proceeds from any sale of registered notes by
broker-dealers. Registered notes received by broker-dealers for their own
account pursuant to the exchange offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the registered notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or negotiated prices. Any such resale
may be made directly to purchasers or to or through brokers or dealers who may
receive compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such registered notes. Any
broker-dealer that resells registered notes that were received by it for its own
account pursuant to the exchange offer and any broker or dealer that
participates in a distribution of such registered notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit of any
such resale of registered notes and any commissions or concessions received by
any such persons may be deemed to be underwriting compensation under the
Securities Act. The letter of transmittal states that by acknowledging that it
will deliver and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
For a period of one year after the expiration date, we will promptly send
additional copies of this prospectus and any amendment or supplement to this
prospectus to any broker-dealer that requests such documents in the letter of
transmittal. We have agreed to pay all expenses incident to the exchange offer
other than commissions or concessions of any brokers or dealers and will
indemnify the holders of the registered notes (including any broker-dealers)
against certain liabilities, including liabilities under the Securities Act.
41
LEGAL MATTERS
Certain legal maters on behalf of the Company will be passed upon for us by
David K. Herzog, our Executive Vice President, General Counsel and Secretary.
Mr. Herzog is a full-time employee and officer of ours and holds shares and
options to purchase shares of our common stock. Certain legal matters relating
to the registered notes offered hereby will be passed upon for us by Weil,
Gotshal & Manges LLP.
EXPERTS
The consolidated financial statements of Conseco, Inc. and subsidiaries as
of December 31, 2001 and 2000, and for the three years ended December 31, 2001,
incorporated in this prospectus by reference to the Annual Report on Form 10-K
for the year ended December 31, 2001, have been so incorporated in reliance on
the report of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
Conseco files annual, quarterly and current reports, proxy statements and
other information with the Commission. You can inspect and copy these reports,
proxy statements and other information at the public reference facilities of the
Commission, in Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549. You
can also obtain copies of these materials from the public reference section of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. Please call the Commission at 1-800-SEC-0330 for further information on
its public reference room. The Commission also maintains a web site that
contains reports, proxy statements and other information regarding registrants
that file electronically with the Commission (http://www.sec.gov). You can
inspect reports and other information we file at the office of the New York
Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.
42
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The exchange agent for the exchange offer is:
[STATE STREET BANK LOGO]
By Mail: By Hand or Overnight Express Delivery:
State Street Bank and Trust Company State Street Bank and Trust Company
P.O. Box 778 Two Avenue de Lafayette
Boston, MA 02102-0078 5th Floor, Corporate Trust Window
Attn: Ralph Jones Boston, MA 02111-1724
Attn: Ralph Jones
By Facsimile (for Eligible Institutions only):
(617) 662-1452
Confirm by Telephone:
(617) 662-1548
Questions, requests for assistance and requests for additional copies of the
offering memorandum
and
related letter of transmittal may be directed to the information agent at the
address set forth below.
The information agent for the exchange offer is:
[GEORGESON SHAREHOLDER LOGO]
17 State Street, 10th Floor
New York, NY 10004
Banks and Brokers call: (212) 440-9800
All Others Call Toll Free: (866) 867-0999
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Indiana Business Corporation Law grants authorization to Indiana
corporations to indemnify officers and directors for their conduct provided such
conduct was in good faith and was for a purpose the person reasonably believed
to be in or not opposed to the best interests of the corporation, and permits
the purchase of insurance in this regard. In addition, the shareholders of a
corporation may approve the inclusion of other or additional indemnification
provisions in the articles of incorporation and by-laws.
The By-laws of Conseco, Inc. (the "Company") provide for the
indemnification of any person made a party to any action, suit or proceeding by
reason of the fact that he is a director, officer or employee of the Company, if
(a) such person is wholly successful with respect to such action, suit or
proceeding or (b) if such person is determined to have acted in good faith, in
what he or she reasonably believed to be the best interests of the Company or at
least not opposed to its best interests and, in addition, with respect to any
criminal claim, is determined to have had reasonable cause to believe that his
or her conduct was lawful or had no reasonable cause to believe that his or her
conduct was unlawful. Such indemnification shall be against the reasonable
expenses, including attorneys' fees, incurred by such person in connection with
the defense of such action, suit or proceeding and amounts paid in settlement.
If such person was not wholly successful, the determination of entitlement to
indemnification shall be made by one of the following methods, such method to be
selected by the board of directors: (a) by the board of directors by a majority
vote of a quorum consisting of directors who are not and have not been parties
to the claim; (b) by the majority vote of a committee duly designated by the
board of directors, consisting solely of two or more directors who are not and
have not been parties to the claim; and (c) by special legal counsel.
The above discussion of Company's By-laws and the Indiana Business
Corporation law is not intended to be exhaustive and is qualified in its
entirety by such By-laws and the Indiana Business Corporation Law.
We have purchased director and officer liability insurance which would
provide coverage against certain liabilities, including liabilities under the
securities laws.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE
EXHIBIT
NO. EXHIBIT DESCRIPTION
------- -------------------
3.1 Amended and Restated Certificate of Incorporation of
Conseco, Inc.(2)
3.2 By-Laws of Conseco, Inc.(3)
3.3* Certificate of Incorporation of CIHC, Incorporated.
3.4** By-Laws of CIHC, Incorporated.
4.1* First Senior Supplemental Indenture, dated as of April 24,
2002 to Second Senior Indenture for the 10.75% Guaranteed
Senior Notes dated as of April 24, 2002 between Conseco,
Inc., CIHC, Incorporated and State Street Bank and Trust
Company.
4.2* Second Senior Indenture, dated as of April 24, 2002 for
10.75% Guaranteed Senior Notes, between Conseco, Inc., CIHC,
Incorporated and State Street Bank and Trust Company.
4.3* First Senior Indenture, dated as of April 24, 2002 among
Conseco, Inc., CIHC, Incorporated and State Street Bank and
Trust Company.
4.4* Terms Resolution, dated as of April 24, 2002 with respect to
the 6.4% Guaranteed Senior Notes, due February 10, 2004.
4.5* Terms Resolution, dated as of April 24, 2002 with respect to
the 8.5% Guaranteed Senior Notes due October 15, 2003.
4.6* Terms Resolution, dated as of April 24, 2002 with respect to
the 6.8% Guaranteed Senior Notes due June 15, 2007.
EXHIBIT
NO. EXHIBIT DESCRIPTION
------- -------------------
4.7* Terms Resolution, dated as of April 24, 2002 with respect to
the 9% Guaranteed Senior Notes due April 15, 2008.
4.8* Terms Resolution, dated as of April 24, 2002 with respect to
the 8.75% Guaranteed Senior Notes due August 9, 2006.
4.9* Registration Rights Agreement, dated as of April 24, 2002
among Conseco, Inc., CIHC, Incorporated and Banc of America
Securities LLC, J.P. Morgan Securities Inc. and Lehman
Brothers Inc., as Dealer Managers.
4.10 Senior Indenture, dated November 13, 1997, by and between
the Registrant and Bank of New York as successor in interest
to LTCB Trust Company, as Trustee.(6)
4.11** Five-Year Credit Agreement, dated as of September 25, 1998,
among Conseco, Inc., Bank of America National Trust and
Savings Association, as Agent, First Union National Bank and
JPMorgan Chase Bank, as Syndication Agents, Morgan Guaranty
Company of New York, as Documentation Agent, and the other
financial institutions party thereto.
4.12 First Amendment to the Five-Year Credit Agreement, dated as
of September 22, 2000, among Conseco, Inc., the various
financial institutions parties thereto and Bank of America,
N.A.(7)
4.13 Second Amendment to Five-Year Credit Agreement, dated as of
May 30, 2001, by and among Conseco, Inc., the various
financial institutions signatory thereto and Bank of
America, N.A.(1)
4.14 Third Amendment to Five-Year Credit Agreement, dated as of
March 20, 2002, by and among Conseco, Inc., the various
financial institutions signatory thereto and Bank of
America, N.A.(1)
5.1** Opinion of Weil, Gotshal & Manges LLP.
5.2** Opinion of David K. Herzog.
10.1.13 Employment Agreement, dated February 9, 1996 between Green
Tree and Lawrence Coss and related Noncompetition agreement
dated February 9, 1996, as amended by the Amendment
Agreement dated April 6, 1998.(8)
10.1.14 Employment Agreement, amended and restated as of December
15, 1999, between the Conseco, Inc. and Maxwell E.
Bublitz.(9)
10.1.15 Employment Agreement, amended and restated as of December
15, 1999, between Conseco, Inc. and James S. Adams.(9)
10.1.16 Description of incentive compensation and severance
arrangement with Edward M. Berube.(10)
10.1.24 Second Amendment Agreement , dated as of November 1, 1999,
between Conseco Finance Corp. and Lawrence M. Coss.(11)
10.1.27 Employment Agreement by and between Gary C. Wendt and
Conseco, Inc., dated as of June 28, 2000.(12)
10.1.28 Nonqualified Stock Option Agreement by and between Gary C.
Wendt and Conseco, Inc. dated as of June 28, 2000.(12)
10.1.29 Restricted Stock Agreement by and between Gary C. Wendt and
Conseco, Inc., dated as of June 28, 2000.(12)
10.1.30 Employment Agreement by and between David K. Herzog and
Conseco, Inc., dated as of August 11, 2000.(13)
10.1.31 Supplemental Retirement Agreement dated as of August 16,
2000, between Conseco, Inc. and Gary C. Wendt.(13)
10.1.32 Guaranty dated as of August 16, 2000, between Bankers Life
and Casualty Company as Guarantor, and Gary C. Wendt.(13)
II-ii
EXHIBIT
NO. EXHIBIT DESCRIPTION
------- -------------------
10.1.34 Employment Agreement by and between David Gubbay and
Conseco, Inc., dated as of February 21, 2001.(14)
10.1.35 Restricted Stock Agreement by and between David Gubbay and
Conseco, Inc., dated as of March 13, 2001.(14)
10.1.36 Employment Agreement by and between Charles B. Chokel and
Conseco, Inc., dated as of March 16, 2001.(14)
10.1.37 Restricted Stock Agreement by and between Charles B. Chokel
and Conseco, Inc., dated as of March 16, 2001.(14)
10.1.38 Employment Agreement between William J. Shea and Conseco,
Inc., dated as of September 10, 2001.(15)
10.1.39 Restricted Stock Agreement dated as of September 17, 2001
between Conseco, Inc. and William J. Shea.(15)
10.8 Conseco, Inc.'s Stock Option Plan(16); Amendment No. 1
thereto(17); Amendment No. 2 thereto(18); Amendment No. 3
thereto(19); Amendment No. 4 thereto(20); Amendment No. 5
thereto(21)
10.8.3 Conseco, Inc.'s Cash Bonus Plan.(22)
10.8.4 Amended and Restated Conseco Stock Bonus and Deferred
Compensation Program.(23)
10.8.6 Conseco Performance-Based Compensation Plan for Executive
Officers.(24)
10.8.7 Conseco, Inc. Amended and Restated Deferred Compensation
Plan.(25)
10.8.8 Amendment to the Amended and Restated Conseco Stock Bonus
and Deferred Compensation Program.(26)
10.8.9 Conseco Amended and Restated 1994 Stock and Incentive
Plan.(1)
10.8.10 Amendment No. 2 to the Amended and Restated Conseco Stock
Bonus and Deferred Compensation Program.(27)
10.8.11 Amended and Restated Director, Officer and Key Employee
Stock Purchase Plan of Conseco, Inc.(28)
10.8.13 Form of Promissory Note payable to Conseco, Inc. relating to
Conseco, Inc.'s Director, Officer and Key Employee Stock
Purchase Plan.(29)
10.8.14 Conseco, Inc. Amended and Restated 1997 Non-qualified Stock
Option Plan.(1)
10.8.21 Amended and Restated 1999 Director and Executive Officer
Stock Purchase Plan of Conseco, Inc.(28)
10.8.22 Guaranty regarding 1999 Director and Executive Officer Stock
Purchase Plan.(28)
10.8.23 Form of Borrower Pledge Agreement dated as of September 15,
1999 with The Chase Manhattan Bank relating to the 1999
Director and Executive Officer Stock Purchase Plan.(28)
10.8.24 Form of note payable to Conseco, Inc. relating to the 1999
Director and Executive Officer Stock Purchase Plan.(28)
10.8.25 Conseco, Inc. 2000 Employee Stock Purchase Program Work-Down
Plan.(10)
10.8.26 Conseco, Inc. 2000 Non-Employee Stock Purchase Program
Work-Down Plan.(10)
II-iii
EXHIBIT
NO. EXHIBIT DESCRIPTION
------- -------------------
10.8.27 Guaranty, dated as of November 22, 2000 between Conseco,
Inc. as Guarantor, and Bank of America, National
Association, as Administrative Agent; Guaranty and
Subordination Agreement, dated as of November 22, 2000, made
by CIHC, Incorporated, as Guarantor and Subordinated
Borrower, and Conseco, Inc., as Obligor and Subordinated
Lender, in favor of Bank of America, National Association,
as Administrative Agent under the Credit Agreement dated as
of November 22, 2000; and Form of Credit Agreement, dated as
of November 22, 2000 among the Borrowers, the other
financial institutions party thereto and Bank of America,
National Association, as Administrative Agent (Relating to
Refinancing of certain Loans under that certain Credit
Agreement, dated as of August 21, 1998).(10)
10.8.28 Guaranty, dated as of November 22, 2000 between Conseco,
Inc. as Guarantor, and Bank of America, National
Association, as Administrative Agent; Guaranty and
Subordination Agreement, dated as of November 22, 2000, made
by CIHC, Incorporated, as Guarantor and Subordinated
Borrower, and Conseco, Inc., as Obligor and Subordinated
Lender, in favor of Bank of America, National Association,
as Administrative Agent under the Credit Agreement dated as
of November 22, 2000; and Form of Credit Agreement, dated as
of November 22, 2000 among the Borrowers, the other
financial institutions party thereto and Bank of America,
National Association, as Administrative Agent (Relating to
the Refinancing of Certain Loans under that certain Amended
and Restated Credit Agreement, dated as of August 26,
1997).(10)
10.8.29 Guaranty, dated as of November 22, 2000, between Conseco,
Inc., as Guarantor, and The Chase Manhattan Bank, as
Administrative Agent; Guaranty and Subordination Agreement,
dated as of November 22, 2000 made by CIHC, Incorporated, as
Guarantor and Subordinated Borrower, and Conseco, Inc., as
Obligor and Subordinated Lender, in favor of The Chase
Manhattan Bank, as Administrative Agent under the Credit
Agreement dated as of November 22, 2000; and the Form of
Credit Agreement, dated as of November 22, 2000, among the
Borrowers, the other financial institutions party thereto
and the Chase Manhattan Bank, as Administrative Agent
(Relating to the Refinancing of Certain Loans under that
certain Credit Agreement, dated as of September 15, 1999, as
terminated an replaced by that certain Termination and
Replacement Agreement, dated as of May 30, 2000).(10)
10.8.30 Forms of note payable to Conseco Services, LLC regarding the
2000 Work-Down Plans, Form of Unconditional Guarantee and
Form of Indemnification Agreement.(10)
10.8.31 First Stage Amendment and Agreement re: Non-Refinanced 1998
D&O Loans, dated as of March 20, 2002, among Conseco, Inc.,
CDOC, Inc., CIHC, Incorporated, Bank of America, N.A. and
the various financial institutions parties thereto.(1)
10.8.32 First Stage Amendment and Agreement re: Non-Refinanced 1997
D&O Loans, dated as of March 20, 2002, among Conseco, Inc.,
CDOC, Inc., CIHC, Incorporated, Bank of America, N.A. and
the various financial institutions parties thereto.(1)
10.8.33 Cash Collateral Pledge Agreement among CDOC, Inc. and JP
Morgan Chase Bank, dated as of March 20, 2002.(1)
10.8.34 First Stage Amendment and Agreement Re: 1998 D&O Loans,
dated as of March 20, 2002, among Conseco, Inc., CDOC, Inc.,
CIHC Incorporated, Bank of America, N.A. and various
financial institutions parties thereto.(1)
10.8.35 Amended and Restated Collateral Agreement made by Conseco,
Inc. and CIHC, Incorporated in form of JP Morgan Chase Bank,
dated as of March 20, 2002.(1)
10.8.36 First Stage Amendment and Agreement re: 1999 D&O Loans,
dated as of March 20, 2002, among Conseco, Inc., CDOC, Inc.,
CIHC, Incorporated, JPMorgan Chase Bank and the various
financial institutions parties thereto.(1)
II-iv
EXHIBIT
NO. EXHIBIT DESCRIPTION
------- -------------------
10.43 Amended and Restated Securities Purchase Agreement dated as
of December 15, 1999 between Conseco, Inc. and the
purchasers named therein.(30)
10.45.1 Warrant to Purchase Common Stock of Conseco Finance Corp.,
dated May 11, 2000, by and between Conseco Finance Corp. and
Lehman Brothers Holdings Inc.(31)
10.45.2 Exchange Agreement by and between Lehman Brothers Holdings
Inc. and Conseco, Inc., dated January 30, 2002.(1)
10.46.1 Amended and Restated Agreement dated January 30, 2002, by
and among Conseco Finance Corp., Conseco, Inc., CIHC,
Incorporated, Green Tree Residual Finance Corp. I, Green
Tree Finance Corp. -- Five and Lehman Brothers Holdings
Inc.(1)
10.46.2 Amended and Restated Master Repurchase Agreement dated as of
April 5, 2001 between Merrill Lynch Mortgage Capital Inc.
and Green Tree Finance Corp. -- Three.(32)
10.46.3 Second Amended and Restated Master Repurchase Agreement
dated January 30, 2002 between Lehman Commercial Paper Inc.
and Green Tree Finance Corp. -- Five.(32)
10.46.4 Asset Assignment Agreement dated as of February 13, 1998
between Green Tree Residual Finance Corp. I and Lehman
Commercial Paper, Inc.(33); Amendment to the First Residual
Facility, dated as of September 22, 2000, by and among
Lehman ALI Inc. and Green Tree Residual Finance Corp. I(34);
Amendment, dated January 30, 2002, by and between Lehman ALI
Inc. and Green Tree Residual Finance Corp.(33)
10.46.5 Insurance Agreement by and between Conseco, Inc. and Gary C.
Wendt 2000 Irrevocable Insurance Trust dated 11/22/00
("Wendt Trust"), dated December 1, 2000 and Collateral
Assignment by Wendt Trust in favor of Conseco, Inc. dated
December 1, 2000.(10)
10.48 Insurance Agreement by and between Conseco, Inc. and Wendt
Trust, dated January 16, 2001 and Collateral Assignment by
Wendt Trust in favor of Registrant dated January 16,
2001.(10)
10.49 Insurance Agreement by and between Registrant and Wendt
Trust, dated January 16, 2001 and Collateral Assignment by
Wendt Trust in favor of Registrant dated January 16,
2001.(10)
10.50 Agreement and Plan of Merger dated as of July 27, 2001 by
and among Conseco, Inc., Noida Acquisition Corp. and
ExlService.com, Inc.(35)
10.51 Restricted Stock Agreement dated as of July 31, 2001,
between Conseco, Inc., Gary Wendt and Rosemarie Wendt.(35)
12.1 Computation of Ratio of Earnings to Fixed Charges, Preferred
Dividends and Distributions on Company-Obligated Mandatorily
Redeemable Preferred Securities of Subsidiary Trusts.(1)(41)
21 Subsidiaries of Conseco, Inc.(1)
23.1* Consent of PricewaterhouseCoopers LLP.
23.2** Consent of Weil, Gotshal & Manges LLP (included in Exhibit
5.1 hereto).
23.3** Consent of David K. Herzog (included in Exhibit 5.2 hereto).
24.1* Power of Attorney (included on signature page).
25.1* Form T-1 statement of eligibility under the Trust Indenture
Act of 1939, as amended, of State Street Bank and Trust, as
trustee.
99.1* Form of Letter of Transmittal.
99.2 Prospectus Supplement dated February 4, 1998 to Prospectus
dated June 24, 1997.(36)
99.3 Pricing Supplement dated June 4, 1998 to Prospectus dated
June 24, 1997 and Prospectus Supplement dated February 23,
1998.(37)
99.4 Prospectus Supplement dated October 18, 1999 to Prospectus
dated October 1, 1999.(38)
II-v
EXHIBIT
NO. EXHIBIT DESCRIPTION
------- -------------------
99.5 Prospectus Supplement dated February 2, 2000 to Prospectus
dated October 1, 1999.(39)
99.6 Prospectus Supplement dated June 27, 2001 to Prospectus
dated October 1, 1999.(40)
---------------
* Filed herewith.
** To be filed by amendment.
(1) Incorporated by reference to Conseco, Inc.'s Annual Report on Form 10-K
(No. 001-09250) for the period ended December 31, 2001.
(2) Incorporated by reference to Conseco, Inc.'s Registration Statement on Form
S-3 (No. 333-94683), dated January 14, 2000.
(3) Incorporated by reference to Conseco, Inc.'s Current Report on Form 8-K
(No. 001-09250), dated June 29, 2001.
(4) Incorporated by reference to Conseco, Inc.'s Current Report on Form 8-K
(No. 001-09250), dated October 21, 1999.
(5) Incorporated by reference to Conseco, Inc.'s Current Report on Form 8-K
(No. 001-09250), dated June 10, 1998.
(6) Incorporated by reference to Conseco, Inc.'s Post-Effective Amendment No. 1
to the Registrant's Registration Statement on Form S-3 (No. 333-27803),
dated
(7) Incorporated by reference to Conseco, Inc.'s Current Report on Form 8-K/A
(No. 001-09250), dated September 28, 2000.
(8) Incorporated by reference to Conseco Finance Corp's (f/h/a Green Tree
Financial Corp) Registration Statement Amendment on Form S-3/A (No.
333-52233), dated June 16, 1998.
(9) Incorporated by reference to Conseco, Inc.'s Annual Report on Form 10-K
(No. 001-09250) for the period ended December 31, 1999.
(10) Incorporated by reference to Conseco, Inc.'s Annual Report on Form 10-K
(No. 001-09250) for the period ended December 31, 2000.
(11) Incorporated by reference to Conseco, Inc.'s Amended Annual Report on Form
10-K/A (No. 001-09250) for the period ended December 31, 1999.
(12) Incorporated by reference to Conseco, Inc.'s Current Report on Form 8-K
(No. 001-09250), dated July 10, 2000.
(13) Incorporated by reference to Conseco, Inc.'s Quarterly Report on Form 10-Q
(No. 001-09250), for the period ended September 30, 2000.
(14) Incorporated by reference to Conseco, Inc.'s Quarterly Report on Form 10-Q
(No. 001-09250), for the period ended March 31, 2001.
(15) Incorporated by reference to Conseco, Inc.'s Quarterly report on Form 10-Q
(No. 001-09250), for the period ended September 30, 2001.
(16) Incorporated by reference to Exhibit B of Conseco, Inc.'s definitive proxy
statement dated December 10, 1983 relating to the Conseco, Inc.'s 1983
annual meeting of stockholders.
(17) Incorporated by reference to Exhibit 10.8.1 to Conseco, Inc.'s Quarterly
Report on Form 10-Q for the period ended June 30, 1985.
(18) Incorporated by reference to Exhibit 10.8.2 to Conseco, Inc.'s registration
statement on Form S-1 (No. 33-4367).
(19) Incorporated by reference to Exhibit 10.8.3 to Conseco, Inc.'s Annual
Report on Form 10-K for the period ended December 31, 1986.
(20) Incorporated by reference to Exhibit 10.8 to Conseco, Inc.'s Annual Report
on Form 10-K for the period ended December 31, 1987.
II-vi
(21) Incorporated by reference to Exhibit 10.8 to Conseco, Inc.'s Quarterly
Report on Form 10-Q for the period ended September 30, 1991.
(22) Incorporated by reference to Exhibit 10.8.3 to Conseco, Inc.'s Quarterly
Report on Form 10-Q for the period ended March 31, 1989.
(23) Incorporated by reference to Exhibit 10.8.4 to Conseco, Inc.'s Annual
Report on Form 10-K for the period ended December 31, 1992.
(24) Incorporated by reference to Conseco, Inc.'s Quarterly Report on Form 10-Q
(No. 001-09250), for the period ended March 31, 1998.
(25) Incorporated by reference to Exhibit A to Conseco, Inc.'s definitive proxy
statement dated April 26, 1995 relating to Conseco, Inc.'s 1995 annual
meeting of stockholders.
(26) Incorporated by reference to Conseco, Inc.'s Annual Report on Form 10-K
(No. 001-09250), for the period ended December 31, 1994.
(27) Incorporated by reference to Conseco, Inc.'s Annual Report on Form 10-K
(No. 001-09250), for the period ended December 31, 1995.
(28) Incorporated by reference to Conseco, Inc.'s Quarterly Report on Form 10-Q
(No. 001-09250) for the period ended September 30, 1999.
(29) Incorporated by reference to Conseco, Inc.'s Annual Report on Form 10-K
(No. 001-09250) for the period ended December 31, 1998.
(30) Incorporated by reference to Conseco, Inc.'s Current Report on Form 8-K
(No. 001-09250), dated December 15, 1999.
(31) Incorporated by reference to Conseco, Inc.'s Quarterly Report on Form 10-Q
(No. 001-09250), for the period ended June 30, 2000.
(32) Incorporated by reference to Conseco Finance Corp.'s Annual Report on Form
10-K (No. 001-08916), for the period ended December 31, 2001.
(33) Incorporated by reference to Conseco Finance Corp.'s Quarterly Report on
From 10-Q (No. 001-08916), for the period ended March 31, 1998.
(34) Incorporated by reference to Conseco Finance Corp/'s Annual Report on Form
10-K (No. 001-08916), for the period ended December 31, 2000.
(35) Incorporated by reference to Conseco, Inc.'s Quarterly Report on Form 10-Q
(No. 001-09250), for the period ended June 30, 2001.
(36) Previously filed pursuant to Rule 424(b)(2) on February 4, 1998 (No.
333-27803).
(37) Previously filed pursuant to Rule 424(b)(5) on June 6, 1998 (No.
333-27803).
(38) Previously filed pursuant to Rule 424(b)(5) on October 19, 1999 (No.
333-83465)
(39) Previously filed pursuant to Rule 424(b)(2) on February 3, 2000 (No.
333-83465).
(40) Previously filed pursuant to Rule 424(b)(2) on June 27, 2001 (No.
333-83465).
(41) Incorporated by reference to Conseco, Inc.'s Quarterly Report on Form 10-Q
(No. 001-09250) for the period ended March 31, 2002.
ITEM 22. UNDERTAKINGS.
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by a Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled
II-vii
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
(b) The Registrant hereby undertakes to respond to requests for information
that is incorporated by reference into the Prospectus pursuant to Items 4,
10(b), 11 or 13 of this form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the Registration Statement through the date
of responding to the request.
(c) Prior to any public reoffering of the securities registered hereunder
through use of a prospectus which is a part of this registration statement, by
any person or party who is deemed to be an underwriter within the meaning of
Rule 145(c), the issuer undertakes that such reoffering prospectus will contain
the information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
(d) The Registrant hereby undertakes that every prospectus: (i) that is
filed pursuant to paragraph (c) immediately preceding, or (ii) that purports to
meet the requirements of Section 10(a)(3) of the Act and is used in connection
with an offering of securities subject to Rule 415, will be filed as a part of
an amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(e) The Registrant hereby undertakes to supply by means of post- effective
amendment all information concerning a transaction, and the company being
acquired involved therein, that was not the subject of and included in the
registration statement when it became effective.
II-viii
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, each registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-4 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Carmel, state of Indiana, on this fifth day of June,
2002.
CONSECO, INC.
By: /s/ WILLIAM J. SHEA
------------------------------------
William J. Shea,
President, Chief Operating Officer
and Acting Chief Financial Officer
CIHC, INCORPORATED
By: /s/ DAVID A. HILL
------------------------------------
David A. Hill,
Vice President and Assistant
Secretary
Each of the undersigned whose signature appears below hereby constitutes
and appoints each of William J. Shea, David K. Herzog and Richard R. Dykhouse or
any of them, each acting alone, his true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution, for such person and in his
or her name, place and stead, in any and all capacities, to sign this
Registration Statement on Form S-4 (including all pre-effective and
post-effective amendments), and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, each acting alone,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming that any such attorney-in-fact and agent, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons on June 5, 2002
in the capacities indicated.
FOR CONSECO, INC.:
SIGNATURE CAPACITY DATE
--------- -------- ----
/s/ GARY C. WENDT Chairman of the Board, Chief June 5, 2002
------------------------------------------------ Executive Officer and Director
Gary C. Wendt (Principal Executive Officer)
/s/ WILLIAM J. SHEA President, Chief Operating Officer June 5, 2002
------------------------------------------------ and Acting Chief Financial Officer
William J. Shea (Principal Financial Officer)
II-ix
SIGNATURE CAPACITY DATE
--------- -------- ----
/s/ JAMES S. ADAMS Senior Vice President, Chief June 5, 2002
------------------------------------------------ Accounting Officer and Treasurer
James S. Adams (Principal Accounting Officer)
/s/ LAWRENCE M. CROSS Director June 5, 2002
------------------------------------------------
Lawrence M. Cross
/s/ THOMAS M. HAGERTY Director June 5, 2002
------------------------------------------------
Thomas M. Hagerty
/s/ M. PHIL HATHAWAY Director June 5, 2002
------------------------------------------------
M. Phil Hathaway
/s/ JOHN M. MUTZ Director June 5, 2002
------------------------------------------------
John M. Mutz
/s/ ROBERT S. NICOLOFF Director June 5, 2002
------------------------------------------------
Robert S. Nickoloff
/s/ DAVID V. HARKINS Director June 5, 2002
------------------------------------------------
David V. Harkins
/s/ JULIO A. BAREA Director June 5, 2002
------------------------------------------------
Julio A. Barea
/s/ CAROL BELLAMY Director June 5, 2002
------------------------------------------------
Carol Bellamy
/s/ SAMME THOMPSON Director June 5, 2002
------------------------------------------------
Samme Thompson
FOR CIHC, INCORPORATED:
SIGNATURE CAPACITY DATE
--------- -------- ----
/s/ WILLIAM J. SHEA Director June 5, 2002
------------------------------------------------
William J. Shea
/s/ DAVID A. HILL Vice President and Assistant June 5, 2002
------------------------------------------------ Secretary (Principal Executive,
David A. Hill Financial and Accounting Officer)
II-x
EXHIBIT INDEX
EXHIBIT
NO. EXHIBIT DESCRIPTION
------- -------------------
3.1 Amended and Restated Certificate of Incorporation of
Conseco, Inc.(2)
3.2 By-Laws of Conseco, Inc.(3)
3.3* Certificate of Incorporation of CIHC, Incorporated.
3.4** By-Laws of CIHC, Incorporated.
4.1* First Senior Supplemental Indenture, dated as of April 24,
2002 to Second Senior Indenture for the 10.75% Guaranteed
Senior Notes dated as of April 24, 2002 between Conseco,
Inc., CIHC, Incorporated and State Street Bank and Trust
Company.
4.2* Second Senior Indenture, dated as of April 24, 2002 for
10.75% Guaranteed Senior Notes, between Conseco, Inc., CIHC,
Incorporated and State Street Bank and Trust Company.
4.3* First Senior Indenture, dated as of April 24, 2002 among
Conseco, Inc., CIHC, Incorporated and State Street Bank and
Trust Company.
4.4* Terms Resolution, dated as of April 24, 2002 with respect to
the 6.4% Guaranteed Senior Notes, due February 10, 2004.
4.5* Terms Resolution, dated as of April 24, 2002 with respect to
the 8.5% Guaranteed Senior Notes due October 15, 2003.
4.6* Terms Resolution, dated as of April 24, 2002 with respect to
the 6.8% Guaranteed Senior Notes due June 15, 2007.
4.7* Terms Resolution, dated as of April 24, 2002 with respect to
the 9% Guaranteed Senior Notes due April 15, 2008.
4.8* Terms Resolution, dated as of April 24, 2002 with respect to
the 8.75% Guaranteed Senior Notes due August 9, 2006.
4.9* Registration Rights Agreement, dated as of April 24, 2002
among Conseco, Inc., CIHC, Incorporated and Banc of America
Securities LLC, J.P. Morgan Securities Inc. and Lehman
Brothers Inc., as Dealer Managers. Senior Indenture, dated
November 13, 1997, by and between the Registrant 4.10* and
Bank of New York as successor in interest to LTCB Trust
Company, as Trustee (the "Senior Indenture").(6)
4.10 Senior Indenture, dated November 13, 1997, by and between
the Registrant and Bank of New York as successor in interest
to LTCB Trust Company, as Trustee.(6)
4.11** Five-Year Credit Agreement, dated as of September 25, 1998,
among Conseco, Inc., Bank of America National Trust and
Savings Association, as Agent, First Union National Bank and
JPMorgan Chase Bank, as Syndication Agents, Morgan Guaranty
Company of New York, as Documentation Agent, and the other
financial institutions party thereto.
4.12 First Amendment to the Five-Year Credit Agreement, dated as
of September 22, 2000, among Conseco, Inc., the various
financial institutions parties thereto and Bank of America,
N.A..(7)
4.13 Second Amendment to Five-Year Credit Agreement, dated as of
May 30, 2001, by and among Conseco, Inc., the various
financial institutions signatory thereto and Bank of
America, N.A.(1)
4.14 Third Amendment to Five-Year Credit Agreement, dated as of
March 20, 2002, by and among Conseco, Inc., the various
financial institutions signatory thereto and Bank of
America, N.A.(1)
5.1** Opinion of Weil, Gotshal & Manges LLP.
5.2** Opinion of David K. Herzog.
II-xi
EXHIBIT
NO. EXHIBIT DESCRIPTION
------- -------------------
10.1.13 Employment Agreement, dated February 9, 1996 between Green
Tree and Lawrence Coss and related Noncompetition agreement
dated February 9, 1996, as amended by the Amendment
Agreement dated April 6, 1998.(8)
10.1.14 Employment Agreement, amended and restated as of December
15, 1999, between the Conseco, Inc. and Maxwell E.
Bublitz.(9)
10.1.15 Employment Agreement, amended and restated as of December
15, 1999, between Conseco, Inc. and James S. Adams.(9)
10.1.16 Description of incentive compensation and severance
arrangement with Edward M. Berube.(10)
10.1.24 Second Amendment Agreement , dated as of November 1, 1999,
between Conseco Finance Corp. and Lawrence M. Coss.(11)
10.1.27 Employment Agreement by and between Gary C. Wendt and
Conseco, Inc., dated as of June 28, 2000.(12)
10.1.28 Nonqualified Stock Option Agreement by and between Gary C.
Wendt and Conseco, Inc. dated as of June 28, 2000.(12)
10.1.29 Restricted Stock Agreement by and between Gary C. Wendt and
Conseco, Inc., dated as of June 28, 2000.(12)
10.1.30 Employment Agreement by and between David K. Herzog and
Conseco, Inc., dated as of August 11, 2000.(13)
10.1.31 Supplemental Retirement Agreement dated as of August 16,
2000, between Conseco, Inc. and Gary C. Wendt.(13)
10.1.32 Guaranty dated as of August 16, 2000, between Bankers Life
and Casualty Company as Guarantor, and Gary C. Wendt.(13)
10.1.34 Employment Agreement by and between David Gubbay and
Conseco, Inc., dated as of February 21, 2001.(14)
10.1.35 Restricted Stock Agreement by and between David Gubbay and
Conseco, Inc., dated as of March 13, 2001.(14)
10.1.36 Employment Agreement by and between Charles B. Chokel and
Conseco, Inc., dated as of March 16, 2001.(14)
10.1.37 Restricted Stock Agreement by and between Charles B. Chokel
and Conseco, Inc., dated as of March 16, 2001.(14)
10.1.38 Employment Agreement between William J. Shea and Conseco,
Inc., dated as of September 10, 2001.(15)
10.1.39 Restricted Stock Agreement dated as of September 17, 2001
between Conseco, Inc. and William J. Shea.(15)
10.8 Conseco, Inc.'s Stock Option Plan(16); Amendment No. 1
thereto(17); Amendment No. 2 thereto(18); Amendment No. 3
thereto(19); Amendment No. 4 thereto(20); Amendment No. 5
thereto(21)
10.8.3 Conseco, Inc.'s Cash Bonus Plan.(22)
10.8.4 Amended and Restated Conseco Stock Bonus and Deferred
Compensation Program.(23)
10.8.6 Conseco Performance-Based Compensation Plan for Executive
Officers.(24)
10.8.7 Conseco, Inc. Amended and Restated Deferred Compensation
Plan.(25)
10.8.8 Amendment to the Amended and Restated Conseco Stock Bonus
and Deferred Compensation Program.(26)
10.8.9 Conseco Amended and Restated 1994 Stock and Incentive
Plan.(1)
II-xii
EXHIBIT
NO. EXHIBIT DESCRIPTION
------- -------------------
10.8.10 Amendment No. 2 to the Amended and Restated Conseco Stock
Bonus and Deferred Compensation Program.(27)
10.8.11 Amended and Restated Director, Officer and Key Employee
Stock Purchase Plan of Conseco, Inc.(28)
10.8.13 Form of Promissory Note payable to Conseco, Inc. relating to
Conseco, Inc.'s Director, Officer and Key Employee Stock
Purchase Plan.(29)
10.8.14 Conseco, Inc. Amended and Restated 1997 Non-qualified Stock
Option Plan.(1)
10.8.21 Amended and Restated 1999 Director and Executive Officer
Stock Purchase Plan of Conseco, Inc.(28)
10.8.22 Guaranty regarding 1999 Director and Executive Officer Stock
Purchase Plan.(28)
10.8.23 Form of Borrower Pledge Agreement dated as of September 15,
1999 with The Chase Manhattan Bank relating to the 1999
Director and Executive Officer Stock Purchase Plan.(28)
10.8.24 Form of note payable to Conseco, Inc. relating to the 1999
Director and Executive Officer Stock Purchase Plan.(28)
10.8.25 Conseco, Inc. 2000 Employee Stock Purchase Program Work-Down
Plan.(10)
10.8.26 Conseco, Inc. 2000 Non-Employee Stock Purchase Program
Work-Down Plan.(10)
10.8.27 Guaranty, dated as of November 22, 2000 between Conseco,
Inc. as Guarantor, and Bank of America, National
Association, as Administrative Agent; Guaranty and
Subordination Agreement, dated as of November 22, 2000, made
by CIHC, Incorporated, as Guarantor and Subordinated
Borrower, and Conseco, Inc., as Obligor and Subordinated
Lender, in favor of Bank of America, National Association,
as Administrative Agent under the Credit Agreement dated as
of November 22, 2000; and Form of Credit Agreement, dated as
of November 22, 2000 among the Borrowers, the other
financial institutions party thereto and Bank of America,
National Association, as Administrative Agent (Relating to
Refinancing of certain Loans under that certain Credit
Agreement, dated as of August 21, 1998).(10)
10.8.28 Guaranty, dated as of November 22, 2000 between Conseco,
Inc. as Guarantor, and Bank of America, National
Association, as Administrative Agent; Guaranty and
Subordination Agreement, dated as of November 22, 2000, made
by CIHC, Incorporated, as Guarantor and Subordinated
Borrower, and Conseco, Inc., as Obligor and Subordinated
Lender, in favor of Bank of America, National Association,
as Administrative Agent under the Credit Agreement dated as
of November 22, 2000; and Form of Credit Agreement, dated as
of November 22, 2000 among the Borrowers, the other
financial institutions party thereto and Bank of America,
National Association, as Administrative Agent (Relating to
the Refinancing of Certain Loans under that certain Amended
and Restated Credit Agreement, dated as of August 26,
1997).(10)
10.8.29 Guaranty, dated as of November 22, 2000, between Conseco,
Inc., as Guarantor, and The Chase Manhattan Bank, as
Administrative Agent; Guaranty and Subordination Agreement,
dated as of November 22, 2000 made by CIHC, Incorporated, as
Guarantor and Subordinated Borrower, and Conseco, Inc., as
Obligor and Subordinated Lender, in favor of The Chase
Manhattan Bank, as Administrative Agent under the Credit
Agreement dated as of November 22, 2000; and the Form of
Credit Agreement, dated as of November 22, 2000, among the
Borrowers, the other financial institutions party thereto
and the Chase Manhattan Bank, as Administrative Agent
(Relating to the Refinancing of Certain Loans under that
certain Credit Agreement, dated as of September 15, 1999, as
terminated an replaced by that certain Termination and
Replacement Agreement, dated as of May 30, 2000).(10)
10.8.30 Forms of note payable to Conseco Services, LLC regarding the
2000 Work-Down Plans, Form of Unconditional Guarantee and
Form of Indemnification Agreement.(10)
II-xiii
EXHIBIT
NO. EXHIBIT DESCRIPTION
------- -------------------
10.8.31 First Stage Amendment and Agreement re: Non-Refinanced 1998
D&O Loans, dated as of March 20, 2002, among Conseco, Inc.,
CDOC, Inc., CIHC, Incorporated, Bank of America, N.A. and
the various financial institutions parties thereto.(1)
10.8.32 First Stage Amendment and Agreement re: Non-Refinanced 1997
D&O Loans, dated as of March 20, 2002, among Conseco, Inc.,
CDOC, Inc., CIHC, Incorporated, Bank of America, N.A. and
the various financial institutions parties thereto.(1)
10.8.33 Cash Collateral Pledge Agreement among CDOC, Inc. and JP
Morgan Chase Bank, dated as of March 20, 2002.(1)
10.8.34 First Stage Amendment and Agreement Re: 1998 D&O Loans,
dated as of March 20, 2002, among Conseco, Inc., CDOC, Inc.,
CIHC Incorporated, Bank of America, N.A. and various
financial institutions parties thereto.(1)
10.8.35 Amended and Restated Collateral Agreement made by Conseco,
Inc. and CIHC, Incorporated in form of JP Morgan Chase Bank,
dated as of March 20, 2002.(1)
10.8.36 First Stage Amendment and Agreement re: 1999 D&O Loans,
dated as of March 20, 2002, among Conseco, Inc., CDOC, Inc.,
CIHC, Incorporated, JPMorgan Chase Bank and the various
financial institutions parties thereto.(1)
10.43 Amended and Restated Securities Purchase Agreement dated as
of December 15, 1999 between Conseco, Inc. and the
purchasers named therein.(30)
10.45.1 Warrant to Purchase Common Stock of Conseco Finance Corp.,
dated May 11, 2000, by and between Conseco Finance Corp. and
Lehman Brothers Holdings Inc.(31)
10.45.2 Exchange Agreement by and between Lehman Brothers Holdings
Inc. and Conseco, Inc., dated January 30, 2002.(1)
10.46.1 Amended and Restated Agreement dated January 30, 2002, by
and among Conseco Finance Corp., Conseco, Inc., CIHC,
Incorporated, Green Tree Residual Finance Corp. I, Green
Tree Finance Corp. -- Five and Lehman Brothers Holdings
Inc.(1)
10.46.2 Amended and Restated Master Repurchase Agreement dated as of
April 5, 2001 between Merrill Lynch Mortgage Capital Inc.
and Green Tree Finance Corp. -- Three.(32)
10.46.3 Second Amended and Restated Master Repurchase Agreement
dated January 30, 2002 between Lehman Commercial Paper Inc.
and Green Tree Finance Corp.-Five.(32)
10.46.4 Asset Assignment Agreement dated as of February 13, 1998
between Green Tree Residual Finance Corp. I and Lehman
Commercial Paper, Inc.(33); Amendment to the First Residual
Facility, dated as of September 22, 2000, by and among
Lehman ALI Inc. and Green Tree Residual Finance Corp. I(34);
Amendment, dated January 30, 2002, by and between Lehman ALI
Inc. and Green Tree Residual Finance Corp.(33)
10.46.5 Insurance Agreement by and between Conseco, Inc. and Gary C.
Wendt 2000 Irrevocable Insurance Trust dated 11/22/00
("Wendt Trust"), dated December 1, 2000 and Collateral
Assignment by Wendt Trust in favor of Conseco, Inc. dated
December 1, 2000.(10)
10.48 Insurance Agreement by and between Conseco, Inc. and Wendt
Trust, dated January 16, 2001 and Collateral Assignment by
Wendt Trust in favor of Registrant dated January 16,
2001.(10)
10.49 Insurance Agreement by and between Registrant and Wendt
Trust, dated January 16, 2001 and Collateral Assignment by
Wendt Trust in favor of Registrant dated January 16,
2001.(10)
10.50 Agreement and Plan of Merger dated as of July 27, 2001 by
and among Conseco, Inc., Noida Acquisition Corp. and
ExlService.com, Inc.(35)
10.51 Restricted Stock Agreement dated as of July 31, 2001,
between Conseco, Inc., Gary Wendt and Rosemarie Wendt.(35)
II-xiv
EXHIBIT
NO. EXHIBIT DESCRIPTION
------- -------------------
12.1 Computation of Ratio of Earnings to Fixed Charges, Preferred
Dividends and Distributions on Company-Obligated Mandatorily
Redeemable Preferred Securities of Subsidiary Trusts.(1)(41)
21 Subsidiaries of Conseco, Inc.(1)
23.1* Consent of PricewaterhouseCoopers LLP.
23.2** Consent of Weil, Gotshal & Manges LLP (included in Exhibit
5.1 hereto).
23.3** Consent of David K. Herzog (included in Exhibit 5.2 hereto).
24.1* Power of Attorney (included on signature page).
25.1* Form T-1 statement of eligibility under the Trust Indenture
Act of 1939, as amended, of State Street Bank and Trust, as
trustee.
99.1* Form of Letter of Transmittal.
99.2 Prospectus Supplement dated February 4, 1998 to Prospectus
dated June 24, 1997.(36)
99.3 Pricing Supplement dated June 4, 1998 to Prospectus dated
June 24, 1997 and Prospectus Supplement dated February 23,
1998.(37)
99.4 Prospectus Supplement dated October 18, 1999 to Prospectus
dated October 1, 1999.(38)
99.5 Prospectus Supplement dated February 2, 2000 to Prospectus
dated October 1, 1999.(39)
99.6 Prospectus Supplement dated June 27, 2001 to Prospectus
dated October 1, 1999.(40)
---------------
* Filed herewith.
** To be filed by amendment.
(1) Incorporated by reference to Conseco, Inc.'s Annual Report
on Form 10-K (No. 001-09250) for the period ended December
31, 2001.
(2) Incorporated by reference to Conseco, Inc.'s Registration
Statement on Form S-3 (No. 333-94683), dated January 14,
2000.
(3) Incorporated by reference to Conseco, Inc.'s Current Report
on Form 8-K (No. 001-09250), dated June 29, 2001.
(4) Incorporated by reference to Conseco, Inc.'s Current Report
on Form 8-K (No. 001-09250), dated October 21, 1999.
(5) Incorporated by reference to Conseco, Inc.'s Current Report
on Form 8-K (No. 001-09250), dated June 10, 1998.
(6) Incorporated by reference to Conseco, Inc.'s Post-Effective
Amendment No. 1 to the Registrant's Registration Statement
on Form S-3 (No. 333-27803), dated
(7) Incorporated by reference to Conseco, Inc.'s Current Report
on Form 8-K/A (No. 001-09250), dated September 28, 2000.
(8) Incorporated by reference to Conseco Finance Corp's (f/h/a
Green Tree Financial Corp) Registration Statement Amendment
on Form S-3/A (No. 333-52233), dated June 16, 1998.
(9) Incorporated by reference to Conseco, Inc.'s Annual Report
on Form 10-K (No. 001-09250) for the period ended December
31, 1999.
(10) Incorporated by reference to Conseco, Inc.'s Annual Report
on Form 10-K (No. 001-09250) for the period ended December
31, 2000.
(11) Incorporated by reference to Conseco, Inc.'s Amended Annual
Report on Form 10-K/A (No. 001-09250) for the period ended
December 31, 1999.
(12) Incorporated by reference to Conseco, Inc.'s Current Report
on Form 8-K (No. 001-09250), dated July 10, 2000.
(13) Incorporated by reference to Conseco, Inc.'s Quarterly
Report on Form 10-Q (No. 001-09250), for the period ended
September 30, 2000.
II-xv
(14) Incorporated by reference to Conseco, Inc.'s Quarterly
Report on Form 10-Q (No. 001-09250), for the period ended
March 31, 2001.
(15) Incorporated by reference to Conseco, Inc.'s Quarterly
report on Form 10-Q (No. 001-09250), for the period ended
September 30, 2001.
(16) Incorporated by reference to Exhibit B of Conseco, Inc.'s
definitive proxy statement dated December 10, 1983 relating
to the Conseco, Inc.'s 1983 annual meeting of stockholders.
(17) Incorporated by reference to Exhibit 10.8.1 to Conseco,
Inc.'s Quarterly Report on Form 10-Q for the period ended
June 30, 1985.
(18) Incorporated by reference to Exhibit 10.8.2 to Conseco,
Inc.'s registration statement on Form S-1 (No. 33-4367).
(19) Incorporated by reference to Exhibit 10.8.3 to Conseco,
Inc.'s Annual Report on Form 10-K for the period ended
December 31, 1986.
(20) Incorporated by reference to Exhibit 10.8 to Conseco, Inc.'s
Annual Report on Form 10-K for the period ended December 31,
1987.
(21) Incorporated by reference to Exhibit 10.8 to Conseco, Inc.'s
Quarterly Report on Form 10-Q for the period ended September
30, 1991.
(22) Incorporated by reference to Exhibit 10.8.3 to Conseco,
Inc.'s Quarterly Report on Form 10-Q for the period ended
March 31, 1989.
(23) Incorporated by reference to Exhibit 10.8.4 to Conseco,
Inc.'s Annual Report on Form 10-K for the period ended
December 31, 1992.
(24) Incorporated by reference to Conseco, Inc.'s Quarterly
Report on Form 10-Q (No. 001-09250), for the period ended
March 31, 1998.
(25) Incorporated by reference to Exhibit A to Conseco, Inc.'s
definitive proxy statement dated April 26, 1995 relating to
Conseco, Inc.'s 1995 annual meeting of stockholders.
(26) Incorporated by reference to Conseco, Inc.'s Annual Report
on Form 10-K (No. 001-09250), for the period ended December
31, 1994.
(27) Incorporated by reference to Conseco, Inc.'s Annual Report
on Form 10-K (No. 001-09250), for the period ended December
31, 1995.
(28) Incorporated by reference to Conseco, Inc.'s Quarterly
Report on Form 10-Q (No. 001-09250) for the period ended
September 30, 1999.
(29) Incorporated by reference to Conseco, Inc.'s Annual Report
on Form 10-K (No. 001-09250) for the period ended December
31, 1998.
(30) Incorporated by reference to Conseco, Inc.'s Current Report
on Form 8-K (No. 001-09250), dated December 15, 1999.
(31) Incorporated by reference to Conseco, Inc.'s Quarterly
Report on Form 10-Q (No. 001-09250), for the period ended
June 30, 2000.
(32) Incorporated by reference to Conseco Finance Corp.'s Annual
Report on Form 10-K (No. 001-08916), for the period ended
December 31, 2001.
(33) Incorporated by reference to Conseco Finance Corp.'s
Quarterly Report on From 10-Q (No. 001-08916), for the
period ended March 31, 1998.
(34) Incorporated by reference to Conseco Finance Corp/'s Annual
Report on Form 10-K (No. 001-08916), for the period ended
December 31, 2000.
(35) Incorporated by reference to Conseco, Inc.'s Quarterly
Report on Form 10-Q (No. 001-09250), for the period ended
June 30, 2001.
(36) Previously filed pursuant to Rule 424(b)(2) on February 4,
1998 (No. 333-27803).
II-xvi
(37) Previously filed pursuant to Rule 424(b)(5) on June 6, 1998
(No. 333-27803).
(38) Previously filed pursuant to Rule 424(b)(5) on October 19,
1999 (No. 333-83465)
(39) Previously filed pursuant to Rule 424(b)(2) on February 3,
2000 (No 333-83465).
(40) Previously filed pursuant to Rule 424(b)(2) on June 27, 2001
(No. 333-83465).
(41) Incorporated by reference to Conseco, Inc.'s Quarterly
Report on Form 10-Q (No. 001-09250) for the period ended
March 31, 2002.
II-xvii