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AGREEMENT AND PLAN OF MERGER
DATED AS OF DECEMBER 15, 1996
By and Among
CONSECO, INC.,
ROCK ACQUISITION COMPANY
and
PIONEER FINANCIAL SERVICES, INC.
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TABLE OF CONTENTS
Page
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ARTICLE I
THE MERGER.................................................................................... 1
1.1 The Merger........................................................................... 1
1.2 Closing............................................................................... 1
1.3 Effective Time....................................................................... 2
1.4 Certificate of Incorporation......................................................... 2
1.5 By-Laws.............................................................................. 2
1.6 Directors............................................................................ 2
1.7 Officers............................................................................. 2
1.8 Conversion of RAC Shares............................................................. 2
1.9 Conversion of Shares ................................................................ 2
1.10 Exchange of Certificates............................................................. 3
1.11 Treatment of Convertible Subordinated Notes.......................................... 6
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY................................................. 6
2.1 Organization, Standing and Corporate Power........................................... 6
2.2 Capital Structure.................................................................... 6
2.3 Authority; Noncontravention.......................................................... 7
2.4 SEC Documents........................................................................ 8
2.5 Absence of Certain Changes or Events................................................. 9
2.6 Absence of Changes in Benefit Plans.................................................. 10
2.7 Benefit Plans........................................................................ 10
2.8 Taxes................................................................................ 11
2.9 No Excess Parachute Payments; Section 162(m) of
the Code............................................................................. 12
2.10 Voting Requirements.................................................................. 12
2.11 Compliance with Applicable Laws...................................................... 12
2.12 Opinion of Financial Advisor......................................................... 14
2.13 Brokers.............................................................................. 14
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF CONSECO AND RAC............................................. 14
3.1 Organization, Standing and Corporate Power........................................... 14
3.2 Conseco Capital Structure............................................................ 15
3.3 Authority; Noncontravention.......................................................... 15
3.4 SEC Documents........................................................................ 17
3.5 Absence of Certain Changes or Events................................................. 17
3.6 Compliance with Applicable Laws...................................................... 18
3.7 No Prior Activities.................................................................. 19
3.8 Brokers.............................................................................. 19
3.9 Voting Requirements.................................................................. 19
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ARTICLE IV
ADDITIONAL AGREEMENTS......................................................................... 20
4.1 Preparation of Form S-4 and the Proxy Statement;
Information Supplied................................................................. 20
4.2 Meeting of Stockholders.............................................................. 21
4.3 Letter of the Company's Accountants.................................................. 21
4.4 Letter of Conseco's Accountants...................................................... 21
4.5 Access to Information; Confidentiality............................................... 22
4.6 Commercially Reasonable Efforts...................................................... 22
4.7 Public Announcements................................................................. 22
4.8 Acquisition Proposals................................................................ 22
4.9 Fiduciary Duties..................................................................... 23
4.10 Consents, Approvals and Filings...................................................... 24
4.11 Certain Fees......................................................................... 24
4.12 Affiliates and Certain Stockholders.................................................. 25
4.13 NYSE Listing......................................................................... 26
4.14 Stockholder Litigation............................................................... 26
4.15 Indemnification...................................................................... 26
4.16 Stock Options ....................................................................... 27
4.17 Officers' Certificates Relating to Tax Treatment. ................................... 27
4.18 Severance and Other Payments ........................................................ 28
4.19 Employment Agreement................................................................. 28
4.20 Existing Employment Agreements....................................................... 28
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS PRIOR TO MERGER..................................... 28
5.1 Conduct of Business by the Company................................................... 28
5.2 Conduct of Business by Conseco....................................................... 31
5.3 Other Actions ....................................................................... 31
5.4 Conduct of Business of RAC........................................................... 31
ARTICLE VI
CONDITIONS PRECEDENT.......................................................................... 32
6.1 Conditions to Each Party's Obligation To Effect
the Merger........................................................................... 32
6.2 Conditions to Obligations of Conseco and RAC......................................... 33
6.3 Conditions to Obligation of the Company.............................................. 34
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER............................................................. 35
7.1 Termination.......................................................................... 35
7.2 Effect of Termination................................................................ 35
7.3 Amendment............................................................................ 36
7.4 Extension; Waiver.................................................................... 36
7.5 Procedure for Termination, Amendment, Extension
or Waiver............................................................................ 36
ARTICLE VIII
SURVIVAL OF PROVISIONS........................................................................ 36
8.1 Survival............................................................................. 36
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ARTICLE IX
NOTICES....................................................................................... 36
9.1 Notices.............................................................................. 36
ARTICLE X
MISCELLANEOUS................................................................................. 37
10.1 Entire Agreement.................................................................... 37
10.2 Expenses............................................................................ 38
10.3 Counterparts ....................................................................... 38
10.4 No Third Party Beneficiary.......................................................... 38
10.5 Governing Law....................................................................... 38
10.6 Assignment; Binding Effect.......................................................... 38
10.7 Enforcement..........................................................................38
10.8 Headings, Gender, etc............................................................... 38
10.9 Invalid Provisions.................................................................. 39
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made and entered
into as of December 15, 1996 by and among CONSECO, INC., an Indiana corporation
("Conseco"), ROCK ACQUISITION COMPANY, a Delaware corporation and wholly-owned
subsidiary of Conseco ("RAC"), and PIONEER FINANCIAL SERVICES, INC., a Delaware
corporation (the "Company").
PREAMBLE
WHEREAS, the respective Boards of Directors of Conseco, RAC and the
Company have approved the merger of RAC with and into the Company, upon the
terms and subject to the conditions set forth herein; and
WHEREAS, Conseco, RAC and the Company desire to make certain
representations, warranties, covenants and agreements in connection with such
merger and also to prescribe various conditions to such merger;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Subject to the terms and conditions of this Agreement,
at the Effective Time (as such term is defined in Section 1.3 hereof), RAC shall
be merged with and into the Company (the "Merger"), in a transaction intended to
qualify as a tax-free reorganization under Section 368(a)(2)(E) of the Internal
Revenue Code of 1986, as amended (the "Code"), in accordance with the Delaware
General Corporation Law (the "DGCL"), and the separate corporate existence of
RAC shall cease and the Company shall continue as the surviving corporation
under the laws of the State of Delaware (the "Surviving Corporation") with all
the rights, privileges, immunities and powers, and subject to all the duties and
liabilities, of a corporation organized under the DGCL.
1.2 Closing. Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to Section
7.1, and subject to the satisfaction or waiver of the conditions set forth in
Article VI, the closing of the Merger (the "Closing") will take place at 9:00
a.m. on the second business day following the date on which the last to be
fulfilled or waived of the conditions set forth in Article VI shall be fulfilled
or waived in accordance with this Agreement (the "Closing Date"), at the office
of Conseco in Carmel, Indiana, unless another date, time or place is agreed to
in writing by the parties hereto.
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1.3 Effective Time. The parties hereto will file with the Secretary of
State of the State of Delaware (the "Delaware Secretary of State") on the
Closing Date (or on such other date as Conseco and the Company may agree) a
certificate of merger executed in accordance with the relevant provisions of the
DGCL and make all other filings or recordings required under the DGCL in
connection with the Merger. The Merger shall become effective upon the filing of
the certificate of merger with the Delaware Secretary of State, or at such later
time as is specified in the certificate of merger (the "Effective Time").
1.4 Certificate of Incorporation. The Certificate of Incorporation of
the Company, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided by law.
1.5 By-Laws. The By-Laws of the Company, as in effect immediately prior
to the Effective Time, shall be the By-Laws of the Surviving Corporation until
thereafter amended as provided by law.
1.6 Directors. The directors of RAC at the Effective Time
shall be the directors of the Surviving Corporation.
1.7 Officers. The officers of RAC at the Effective Time
shall be the officers of the Surviving Corporation.
1.8 Conversion of RAC Shares. Each share of common stock of RAC issued
and outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into and become one validly issued, fully paid and nonassessable share of common
stock of the Surviving Corporation.
1.9 Conversion of Shares. (a) Outstanding Shares. Each of the shares of
common stock, $1.00 par value, of the Company (the "Shares") issued and
outstanding immediately prior to the Effective Time (other than Shares held as
treasury shares by the Company) shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into a right to receive
(i) if the Conseco Share Price (as defined below) is greater than or equal to
$56.00 per share and less than or equal to $62.75 per share, 0.4464 of a validly
issued, fully paid and nonassessable share of common stock, without par value,
of Conseco ("Conseco Common Stock"), (ii) if the Conseco Share Price is less
than $56.00 per share, the fraction (rounded to the nearest ten- thousandth) of
a share of Conseco Common Stock determined by dividing $25.00 by the Conseco
Share Price or (iii) if the Conseco Share Price is greater than $62.75 per
share, the fraction (rounded to the nearest ten-thousandth) of a share of
Conseco Common Stock determined by dividing $28.01 by the Conseco Share Price.
The "Conseco Share Price" shall be equal to the average of the closing prices of
the Conseco Common Stock on the New York Stock Exchange ("NYSE") Composite
Transactions Reporting System,
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as reported in The Wall Street Journal, for the 10 trading days immediately
preceding the second trading day prior to the Effective Time. The Conseco Common
Stock to be issued to holders of Shares in accordance with this Section and any
cash to be paid in accordance with Section 1.10 in lieu of fractional shares of
Conseco Common Stock are referred to collectively as the "Merger Consideration".
(b) Treasury Shares. Each Share issued and outstanding immediately
prior to the Effective Time which is then held as a treasury share by the
Company immediately prior to the Effective Time shall, by virtue of the Merger
and without any action on the part of the Company, be canceled and retired and
cease to exist, without any conversion thereof.
(c) Impact of Stock Splits, etc. In the event of any change in Conseco
Common Stock between the date of this Agreement and the Effective Time of the
Merger by reason of any stock split, stock dividend, subdivision,
reclassification, recapitalization, combination, exchange of shares or the like,
the number and class of shares of Conseco Common Stock to be issued and
delivered in the Merger in exchange for each outstanding Share as provided in
this Agreement and the calculation of all share prices provided for in this
Agreement shall be proportionately adjusted.
(d) Treatment of Company Stock Options. From and after the Effective
Time, each outstanding unexpired stock option ("Company Stock Option") to
purchase Shares which has been granted pursuant to the Company's Nonqualified
Stock Option Plan, as amended to the date hereof, or the Company's 1994 Omnibus
Stock Incentive Program, as amended to the date hereof (collectively, the
"Company Stock Plans"), shall be fully vested and exercisable, for the same
aggregate consideration payable to exercise such Company Stock Option, for the
number of shares of Conseco Common Stock which the holder would have been
entitled to receive at the Effective Time if such Company Stock Option had been
fully vested and exercised for Shares prior to the Effective Time, and otherwise
on the same terms and conditions as were applicable under the Company Stock
Plans and the underlying stock option agreement.
1.10 Exchange of Certificates. (a) Exchange Agent. As of the Effective
Time, Conseco shall deposit with its transfer agent and registrar (the "Exchange
Agent"), for the benefit of the holders of Shares, certificates representing the
shares of Conseco Common Stock to be issued to holders of Shares pursuant to
Section 1.9(a) (such certificates, together with any dividends or distributions
with respect to such certificates, being hereinafter referred to as the "Payment
Fund").
(b) Exchange Procedures. As soon as practicable after the Effective
Time, each holder of an outstanding certificate or certificates which prior
thereto represented Shares shall, upon surrender to the Exchange Agent of such
certificate or certificates and acceptance thereof by the Exchange Agent, be
entitled to a certificate representing that number of whole shares
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of Conseco Common Stock (and cash in lieu of fractional shares of Conseco Common
Stock as contemplated by this Section 1.10) which the aggregate number of Shares
previously represented by such certificate or certificates surrendered shall
have been converted into the right to receive pursuant to Section 1.9(a) of this
Agreement. The Exchange Agent shall accept such certificates upon compliance
with such reasonable terms and conditions as the Exchange Agent may impose to
effect an orderly exchange thereof in accordance with normal exchange practices.
If the consideration to be paid in the Merger (or any portion thereof) is to be
delivered to any person other than the person in whose name the certificate
representing Shares surrendered in exchange therefor is registered, it shall be
a condition to such exchange that the certificate so surrendered shall be
properly endorsed or otherwise be in proper form for transfer and that the
person requesting such exchange shall pay to the Exchange Agent any transfer or
other taxes required by reason of the payment of such consideration to a person
other than the registered holder of the certificate surrendered, or shall
establish to the satisfaction of the Exchange Agent that such tax has been paid
or is not applicable. After the Effective Time, there shall be no further
transfer on the records of the Company or its transfer agent of certificates
representing Shares and if such certificates are presented to the Company for
transfer, they shall be canceled against delivery of the Merger Consideration as
hereinabove provided. Until surrendered as contemplated by this Section 1.10(b),
each certificate representing Shares (other than certificates representing
Shares to be canceled in accordance with Section 1.9(b)), shall be deemed at any
time after the Effective Time to represent only the right to receive upon such
surrender the Merger Consideration payable with respect to such Shares, without
any interest thereon, as contemplated by Section 1.9. No interest will be paid
or will accrue on any cash payable as Merger Consideration.
(c) Letter of Transmittal. Promptly after the Effective Time (but in no
event more than five business days thereafter), the Surviving Corporation shall
require the Exchange Agent to mail to each record holder of certificates that
immediately prior to the Effective Time represented Shares which have been
converted pursuant to Section 1.9, a form of letter of transmittal and
instructions for use in surrendering such certificates and receiving the
consideration to which such holder shall be entitled therefor pursuant to
Section 1.9.
(d) Distributions with Respect to Unexchanged Shares. No
dividends or other distributions with respect to Conseco Common Stock with a
record date after the Effective Time shall be paid to the holder of any
certificate that immediately prior to the Effective Time represented Shares
which have been converted pursuant to Section 1.9, until the surrender for
exchange of such certificate in accordance with this Article I. Following
surrender for exchange of any such certificate, there shall be paid to the
holder of such certificate, without interest, (i) at the time of such surrender,
the amount of dividends or other
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distributions with a record date after the Effective Time theretofore paid with
respect to the number of whole shares of Conseco Common Stock into which the
Shares represented by such certificate immediately prior to the Effective Time
were converted pursuant to Section 1.9, and (ii) at the appropriate payment
date, the amount of dividends or other distributions with a record date after
the Effective Time, but prior to such surrender, and with a payment date
subsequent to such surrender, payable with respect to such whole shares of
Conseco Common Stock.
(e) No Further Ownership Rights in Shares. The Merger Consideration
paid upon the surrender for exchange of certificates representing Shares in
accordance with the terms of this Article I shall be deemed to have been issued
and paid in full satisfaction of all rights pertaining to the Shares theretofore
represented by such certificates, subject, however, to the Surviving
Corporation's obligation (if any) to pay any dividends or make any other
distributions with a record date prior to the Effective Time which may have been
declared by the Company on such Shares in accordance with the terms of this
Agreement or prior to the date of this Agreement and which remain unpaid at the
Effective Time.
(f) No Fractional Shares. (i) No certificates or scrip representing
fractional shares of Conseco Common Stock shall be issued upon the surrender for
exchange of certificates that immediately prior to the Effective Time
represented Shares which have been converted pursuant to Section 1.9, and such
fractional share interests will not entitle the owner thereof to vote or to any
rights of a shareholder of Conseco.
(ii) Notwithstanding any other provisions of this Agreement, each
holder of Shares who would otherwise have been entitled to receive a fraction of
a share of Conseco Common Stock (after taking into account all certificates
delivered by such holder) shall receive, in lieu thereof, cash (without
interest) in an amount equal to such fractional part of a share of Conseco
Common Stock multiplied by the Conseco Share Price.
(g) Termination of Payment Fund. Any portion of the Payment Fund which
remains undistributed to the holders of the certificates representing Shares for
120 days after the Effective Time shall be delivered to Conseco, upon demand,
and any holders of Shares who have not theretofore complied with this Article I
shall thereafter look only to Conseco and only as general creditors thereof for
payment of their claim for the cash portion of any Merger Consideration and any
dividends or distributions with respect to Conseco Common Stock.
(h) No Liability. Neither Conseco nor the Exchange Agent shall be
liable to any person in respect of any cash, shares, dividends or distributions
payable from the Payment Fund delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law. If any certificates
representing Shares shall not have been surrendered prior to five years after
the Effective Time (or immediately prior to such
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earlier date on which any Merger Consideration in respect of such certificate
would otherwise escheat to or become the property of any Governmental Entity (as
defined in Section 2.3)), any such cash, shares, dividends or distributions
payable in respect of such certificate shall, to the extent permitted by
applicable law, become the property of the Surviving Corporation, free and clear
of all claims or interest of any person previously entitled thereto.
1.11 Treatment of Convertible Subordinated Notes. In accordance with
Section 10.9 of the Indenture dated as of March 27, 1996 with respect to the
Company's 6-1/2% Convertible Subordinated Notes due 2003 (the "Convertible
Notes"), at the Effective Time each Convertible Note shall automatically become
convertible into the number of shares of Conseco Common Stock which the holder
of such Convertible Note would have been entitled to receive in the Merger if
the holder had converted the Convertible Note into Shares immediately before the
Effective Time.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Conseco and RAC as
follows:
2.1 Organization, Standing and Corporate Power. The Company and each
subsidiary of the Company is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction in which it is incorporated
and has the requisite corporate power and authority to carry on its business as
now being conducted. The Company and each subsidiary of the Company is duly
qualified or licensed to do business and is in good standing in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification or licensing necessary. The Company has
delivered to Conseco complete and correct copies of its Certificate of
Incorporation and Bylaws, as amended to the date of this Agreement.
2.2 Capital Structure. The authorized capital stock of the Company
consists of (i) 30,000,000 Shares and (ii) 5,000,000 shares of preferred stock,
no par value (the "Preferred Stock"). At the close of business on December 13,
1996: (i) 12,733,467 Shares were issued and outstanding, 1,863,190 Shares were
reserved for issuance pursuant to outstanding Company Stock Options, and
4,312,500 Shares were reserved for issuance upon conversion of the outstanding
Convertible Notes and (ii) no shares of Preferred Stock were outstanding and
18,909,157 shares of Series A Junior Preferred Stock were reserved for issuance
under the Rights Agreement dated as of December 12, 1990 between the Company and
First Chicago Trust Company of New York (the "Rights Agreement"). Except as set
forth above, at the close of business on December 13, 1996, no shares of capital
stock or other equity securities of
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the Company were issued, reserved for issuance or outstanding. All outstanding
shares of capital stock of the Company are, and all shares which may be issued
pursuant to the Company Stock Plan or any outstanding Company Stock Options will
be, when issued, duly authorized, validly issued, fully paid and nonassessable
and not subject to preemptive rights. Except for $86,250,000 principal amount of
Convertible Notes, no bonds, debentures, notes or other indebtedness of the
Company or any subsidiary of the Company having the right to vote (or
convertible into, or exchangeable for, securities having the right to vote) on
any matters on which the stockholders of the Company or any subsidiary of the
Company may vote are issued or outstanding. Except as disclosed in Section 2.2
of the Disclosure Schedule dated the date hereof and delivered by the Company to
Conseco concurrently herewith (the "Disclosure Schedule"), all the outstanding
shares of capital stock of each subsidiary of the Company have been validly
issued and are fully paid and nonassessable and are owned by the Company, by one
or more subsidiaries of the Company or by the Company and one or more such
subsidiaries, free and clear of all pledges, claims, liens, charges,
encumbrances and security interests of any kind or nature whatsoever
(collectively, "Liens") except as may be provided by law. Except as set forth
above or in Section 2.2 of the Disclosure Schedule, neither the Company nor any
subsidiary of the Company has any outstanding option, warrant, subscription or
other right, agreement or commitment which either (i) obligates the Company or
any subsidiary of the Company to issue, sell or transfer, repurchase, redeem or
otherwise acquire or vote any shares of the capital stock of the Company or any
subsidiary of the Company or (ii) restricts the transfer of Shares. Except as
disclosed in Section 2.2 of the Disclosure Schedule, no issued and outstanding
Shares are owned by the Company's subsidiaries.
2.3 Authority; Noncontravention. The Company has the requisite
corporate power and authority to enter into this Agreement and, subject to the
approval of its stockholders as set forth in Section 6.1(a) with respect to the
consummation of the Merger, to consummate the transactions contemplated by this
Agreement. The execution and delivery of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of the Company,
subject, in the case of the Merger, to the approval of its stockholders as set
forth in Section 6.1(a). This Agreement has been duly executed and delivered by
the Company and, assuming that this Agreement constitutes the valid and binding
agreement of Conseco, constitutes a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except that the
enforcement thereof may be limited by (a) bankruptcy, insolvency,
reorganization, moratorium or similar laws now or hereafter in effect relating
to creditor's rights generally and (b) general principles of equity (regardless
of whether enforceability is considered in a proceeding at law or in equity).
Except as disclosed in Section 2.3 of the Disclosure Schedule, the execution and
delivery of this Agreement do not, and the
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consummation of the transactions contemplated by this Agreement and compliance
with the provisions hereof will not, (i) conflict with any of the provisions of
the Certificate of Incorporation or Bylaws of the Company or the comparable
documents of any subsidiary of the Company, (ii) subject to the governmental
filings and other matters referred to in the following sentence, conflict with,
result in a breach of or default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of a material benefit under, or require
the consent of any person under, any indenture or other agreement, permit,
concession, franchise, license or similar instrument or undertaking to which the
Company or any of its subsidiaries is a party or by which the Company or any of
its subsidiaries or any of their assets is bound or affected, (iii) give rise to
any rights under the Rights Agreement or entitle any holder of rights under the
Rights Agreement to exercise such rights or (iv) subject to the governmental
filings and other matters referred to in the following sentence, contravene any
law, rule or regulation of any state or of the United States or any political
subdivision thereof or therein, or any order, writ, judgment, injunction,
decree, determination or award currently in effect. No consent, approval or
authorization of, or declaration or filing with, or notice to, any governmental
agency or regulatory authority (a "Governmental Entity") which has not been
received or made, is required to be made by the Company or with respect to the
Company or any of its subsidiaries in connection with the execution and delivery
of this Agreement by the Company or the consummation by the Company of the
transactions contemplated hereby, except for (i) the filing of premerger
notification and report forms under the Xxxx-Xxxxx- Xxxxxx Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), with respect to the
Merger, (ii) the filings and/or notices required under the insurance laws of the
jurisdictions set forth in Section 2.3 of the Disclosure Schedule, (iii) the
filing with the SEC of (x) a proxy statement relating to the approval by the
stockholders of the Company of the Merger (such proxy statement, as amended or
supplemented from time to time, the "Proxy Statement"), and (y) such reports
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as
may be required in connection with this Agreement and the transactions
contemplated by this Agreement, (iv) the filing of the certificate of merger
with the Delaware Secretary of State and appropriate documents with the relevant
authorities of other states in which the Company is qualified to do business,
(v) such other consents, approvals, authorizations, filings or notices as are
set forth in Section 2.3 of the Disclosure Schedule and (vi) any applicable
filings under state anti-takeover laws.
2.4 SEC Documents. (i) The Company has filed all required reports,
schedules, forms, statements and other documents with the SEC since January 1,
1995 (such reports, schedules, forms, statements and other documents, including
the exhibits thereto and documents incorporated therein by reference, are
hereinafter referred to as the "SEC Documents"); (ii) as of their respective
dates, the SEC Documents complied with the requirements of the
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Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act,
as the case may be, and the rules and regulations of the SEC promulgated
thereunder applicable to such SEC Documents, and none of the SEC Documents as of
such dates contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading; and (iii) the consolidated financial statements of the Company
included in the SEC Documents comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto or, in the case of
unaudited statements, as permitted by Rule 10-01 of Regulation S-X) and fairly
present, in all material respects, the consolidated financial position of the
Company and its consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited quarterly statements, to normal
year-end audit adjustments).
2.5 Absence of Certain Changes or Events. Except as disclosed in the
SEC Documents filed and publicly available prior to the date of this Agreement
(the "Filed SEC Documents") or in Section 2.5 of the Disclosure Schedule, since
the date of the most recent audited financial statements included in the Filed
SEC Documents, the Company and its subsidiaries have conducted their business
only in the ordinary course, and there has not been (i) any change which would
have a material adverse effect on the business, financial condition or results
of operations of the Company and its subsidiaries taken as a whole, (ii) any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to any of the Company's
outstanding capital stock, (iii) any split, combination or reclassification of
any of its outstanding capital stock or any issuance or the authorization of any
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its outstanding capital stock, (iv) (x) any granting by the
Company or any of its subsidiaries to any executive officer or other employee of
the Company or any of its subsidiaries of any increase in compensation, except
in the ordinary course of business consistent with prior practice or as was
required under employment agreements or employee, director or agent benefit
plans in effect as of the date of the most recent audited financial statements
included in the Filed SEC Documents, (y) any granting by the Company or any of
its subsidiaries to any such executive officer or other employee of any increase
in severance or termination pay, except in the ordinary course of business
consistent with prior practice or as was required under any employment,
severance or termination agreements in effect as of the date of the most recent
audited financial statements included in the Filed SEC Documents or (z) any
entry by the Company or any of its subsidiaries into any employment, severance
or termination
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9
agreement with any such executive officer or other employee or (v) any change in
accounting methods, principles or practices by the Company or any of its
subsidiaries materially affecting its assets, liability or business, except
insofar as may have been required by a change in generally accepted accounting
principles.
2.6 Absence of Changes in Benefit Plans. Except as disclosed in the
Filed SEC Documents or in Section 2.6 of the Disclosure Schedule, since the date
of the most recent audited financial statements included in the Filed SEC
Documents, there has not been any adoption or amendment in any material respect
by the Company or any of its subsidiaries of any collective bargaining agreement
or any Benefit Plan (as defined in Section 2.7). Except as disclosed in the
Filed SEC Documents or in Section 2.6 of the Disclosure Schedule, there exist no
employment, consulting, severance, termination or indemnification agreements
between the Company or any of its subsidiaries and any current or former
employee, officer or director of the Company or any of its subsidiaries.
2.7 Benefit Plans. (i) Each "employee pension benefit plan" (as defined
in Section 3(2) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")) (hereinafter a "Pension Plan"), "employee welfare benefit
plan" (as defined in Section 3(1) of ERISA) (hereinafter a "Welfare Plan"), and
each other plan, arrangement or policy (written or oral) relating to stock
options, stock purchases, bonus or incentive compensation, deferred compensation
or severance, in each case maintained or contributed to, or required to be
maintained or contributed to, by the Company and its subsidiaries for the
benefit of any present or former officers, employees, agents, directors or
independent contractors of the Company or any of its subsidiaries (all the
foregoing being herein called "Benefit Plans") has been administered in all
material respects in accordance with its terms and all applicable laws and
regulations. All required contributions to the Benefit Plans have been made. The
Company, its subsidiaries and all the Benefit Plans are in compliance in all
material respects with the applicable provisions of ERISA, the Code, all other
applicable laws applicable to the Company's Benefit Plans and all applicable
collective bargaining agreements.
(ii) None of the Company or any other person or entity that together
with the Company is treated as a single employer under Section 414(b), (c), (m)
or (o) of the Code (each a "Commonly Controlled Entity") has incurred any
liability to a Pension Plan covered by Title IV of ERISA (other than for
contributions not yet due) or to the Pension Benefit Guaranty Corporation (other
than for the payment of premiums not yet due) which liability has not been fully
paid as of the date hereof.
(iii) No Commonly Controlled Entity is required to contribute to any
"multiemployer plan" (as defined in Section 4001(a)(3) of ERISA) or has
withdrawn from any multiemployer plan where such withdrawal has resulted or
would result in any "withdrawal liability" (within the meaning of Section 4201
of ERISA) that has not been fully paid.
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2.8 Taxes. Except as disclosed in Section 2.8 of the
Disclosure Schedule,
(i) Each of the Company and its subsidiaries has filed all tax returns
and reports required to be filed by it or requests for extensions to file such
returns or reports have been timely filed, granted and have not expired, except
to the extent that such failures to file or to have extensions granted that
remain in effect individually and in the aggregate would not have a material
adverse effect on the business, financial condition or results of operations of
the Company and its subsidiaries taken as a whole. All tax returns filed by the
Company and each of its subsidiaries are complete and accurate except to the
extent that such failure to be complete and accurate would not have a material
adverse effect on the business, financial condition or results of operations of
the Company and its subsidiaries taken as a whole. The Company and each of its
subsidiaries has paid (or the Company has paid on the subsidiaries' behalf) all
taxes shown as due on such returns, and the most recent financial statements
contained in the Filed SEC Documents reflect reserves which are adequate in all
material respects for all taxes payable by the Company and its subsidiaries for
all taxable periods and portions thereof accrued through the date of such
financial statements.
(ii) No deficiencies for any taxes have been proposed, asserted or
assessed against the Company or any of its subsidiaries that are not adequately
reserved for, except for deficiencies that individually or in the aggregate
would not have a material adverse effect on the business, financial condition or
results of operations of the Company and its subsidiaries taken as a whole, and,
except as set forth on Section 2.8 of the Disclosure Schedule, no requests for
waivers of the time to assess any such taxes have been granted or are pending.
The Federal income tax returns of the Company and each of its subsidiaries
consolidated in such returns have been examined by and settled with the United
States Internal Revenue Service, or the statute of limitations on assessment or
collection of any Federal income taxes due from the Company or any of its
subsidiaries has expired, through such taxable years as are set forth in Section
2.8 of the Disclosure Schedule.
(iii) As used in this Agreement, "taxes" shall include all Federal,
state, local and foreign income, property, premium, sales, excise, employment,
payroll, withholding and other taxes, tariffs or governmental charges of any
nature whatsoever and any interest, penalties and additions to taxes relating
thereto. As used in this Agreement, "tax returns" shall include any return,
report, information return, or other document (including any related or
supporting information) filed or required to be filed with any governmental
agency, department, commission, board, bureau, or instrumentality in connection
with the determination, assessment, collection, or administration of any taxes.
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2.9 No Excess Parachute Payments; Section 162(m) of the Code. (i)
Except as disclosed in Section 2.9 of the Disclosure Schedule, any amount that
could be received (whether in cash or property or the vesting of property) as a
result of any of the transactions contemplated by this Agreement by any
employee, officer or director of the Company or any of its affiliates who is a
"disqualified individual" (as such term is defined in proposed Treasury
Regulation Section 1.280G-1) under any employment, severance or termination
agreement, other compensation arrangement or Benefit Plan currently in effect
would not be characterized as an "excess parachute payment" (as such term is
defined in Section 280G(b)(1) of the Code).
(ii) Except as disclosed in Section 2.9 of the Disclosure Schedule, the
disallowance of a deduction under Section 162(m) of the Code for employee
remuneration will not apply to any amount paid or payable by the Company or any
subsidiary of the Company under any contract, Benefit Plan, program, arrangement
or understanding currently in effect.
2.10 Voting Requirements. The affirmative vote of a majority of the
votes cast by the holders of the Shares and Preferred Shares entitled to vote
thereon at the Stockholders Meeting with respect to the approval of the Merger
is the only vote of the holders of any class or series of the Company's capital
stock necessary to approve this Agreement and the transactions contemplated by
this Agreement.
2.11 Compliance with Applicable Laws. (i) Each of the Company and its
subsidiaries has in effect all Federal, state, local and foreign governmental
approvals, authorizations, certificates, filings, franchises, licenses, notices,
permits and rights ("Permits") necessary for it to own, lease or operate its
properties and assets and to carry on its business as now conducted, and there
has occurred no default under any such Permit. Except as disclosed in the Filed
SEC Documents and except with respect to matters covered by Section 2.11(iii),
the Company and its subsidiaries are in compliance in all material respects with
all applicable statutes, laws, ordinances, rules, orders and regulations of any
Governmental Entity. Except as disclosed in the Filed SEC Documents or Section
2.11 of the Disclosure Schedule and except for routine examinations by state
Governmental Entities charged with supervision of insurance companies
("Insurance Regulators") and except with respect to matters covered by Section
2.11(iii), as of the date of this Agreement, to the knowledge of the Company, no
investigation by any Governmental Entity with respect to the Company or any of
its subsidiaries is pending or threatened.
(ii) The Annual Statements (including without limitation the Annual
Statements of any separate accounts) for the year ended December 31, 1995,
together with all exhibits and schedules thereto, and financial statements
relating thereto, and any actuarial opinion, affirmation or certification filed
in connection therewith, and the Quarterly Statements for the periods
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12
ended after January 1, 1996, together with all exhibits and schedules thereto,
with respect to each subsidiary of the Company that is a regulated insurance
company (an "Insurance Company"), in each case as filed with the applicable
Insurance Regulator of its jurisdiction of domicile, were prepared in conformity
with statutory accounting practices prescribed or permitted by such Insurance
Regulator applied on a consistent basis ("SAP"), present fairly, in all material
respects, to the extent required by and in conformity with SAP, the statutory
financial condition of such Insurance Company at their respective dates and the
results of operations, changes in capital and surplus and cash flow of such
Insurance Company for each of the periods then ended, and were correct in all
material respects when filed and there were no material omissions therefrom when
filed. No deficiencies or violations material to the financial condition or
operations of any Insurance Company have been asserted in writing by any
Insurance Regulator which have not been cured or otherwise resolved to the
satisfaction of such Insurance Regulator and which have not been disclosed in
writing to Conseco prior to the date of this Agreement.
(iii) Except as set forth in Section 2.11(iii) of the Disclosure
Schedule, (a) the Company and its subsidiaries (exclusive of their agents) and,
to the knowledge of the Company (without independent inquiry), their agents have
marketed, sold and issued Company products in compliance, in all material
respects, with all statutes, laws, ordinances, rules, orders and regulations of
any Governmental Entity applicable to the business of the Company and its
subsidiaries ("Laws") in the respective jurisdictions in which such products
have been sold, except where the failure to do so, individually or in the
aggregate, has not had or would not reasonably be expected to have, a material
adverse effect on the business, financial condition or results of operations of
the Company and its subsidiaries, taken as a whole, (b) there are (x) to the
knowledge of the Company, no claims asserted, (y) no actions, suits,
investigations or proceedings by or before any court or other Governmental
Entity or (z) no investigations by or on behalf of the Company (other than
routine investigations in connection with the Company's hiring practices) ((x),
(y) and (z) being collectively referred to as "Actions") pending or, to the
knowledge of the Company, threatened, against or directly involving the Company,
any of its subsidiaries or, to the knowledge of the Company (without independent
inquiry), any of its agents that include allegations that the Company, any of
its subsidiaries or any of its agents were in violation of or failed to comply
with such Laws, and, to the knowledge of the Company, no facts exist which would
reasonably be expected to result in the filing or commencement of any such
Action, which Actions, individually or in the aggregate, would reasonably be
expected to have a material adverse effect on the business, financial condition
or results of operations of the Company and its subsidiaries, taken as a whole,
and (c) the Company and its subsidiaries are in compliance, in all material
respects, with and have performed, in all material respects, all obligations
required to be performed by each of them under any cease-and-desist or
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13
other order issued by any Insurance Regulator or other Governmental Entity to
the Company or any of its subsidiaries or under any written agreement, consent
agreement, memorandum of understanding or commitment letter or similar
undertaking entered into between any Insurance Regulator or other Governmental
Entity and the Company or any of its subsidiaries ("Regulatory Agreement"),
which Regulatory Agreement remains in effect on the date hereof, except where
the failure to do so, individually or in the aggregate, has not had or would not
reasonably be expected to have, a material adverse effect on the business,
financial condition or results of operations of the Company and its
subsidiaries, taken as a whole.
2.12 Opinion of Financial Advisor. The Company has received
the opinion of Xxxxxxxxx, Xxxxxx & Xxxxxxxx Securities Corp.
("DLJ"), dated the date hereof, to the effect that, as of such
date, the consideration to be received in the Merger by the
Company's stockholders is fair, from a financial point of view, to
the Company's stockholders.
2.13 Brokers. Except with respect to DLJ, all negotiations on behalf of
the Company relative to this Agreement and the transactions contemplated hereby
have been carried out by the Company directly with Conseco, without the
intervention of any person on behalf of the Company in such manner as to give
rise to any valid claim by any person against Conseco, the Company or any
subsidiary for a finder's fee, brokerage commission, transaction fee, investment
banking fee, or similar payment. The Company has provided Conseco with a true
and complete copy of the agreement between the Company and DLJ, and the Company
has no other agreements or understandings (written or oral) with respect to such
services.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF CONSECO AND RAC
Conseco and RAC hereby represent and warrant to the Company as follows:
3.1 Organization, Standing and Corporate Power. Each of Conseco, RAC
and each Significant Subsidiary of Conseco (as hereinafter defined) is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction in which it is incorporated and has the requisite corporate
power and authority to carry on its business as now being conducted. Each of
Conseco, RAC and each Significant Subsidiary of Conseco is duly qualified or
licensed to do business and is in good standing in each jurisdiction in which
the nature of its business or the ownership or leasing of its properties makes
such qualification or licensing necessary. Conseco has delivered to the Company
complete and correct copies of its Articles of Incorporation and By-laws, as
amended to the date of this Agreement. For purposes of this Agreement, a
"Significant Subsidiary" of Conseco means any subsidiary of Conseco that would
constitute a Significant Subsidiary within the meaning of Rule 1-02 of
Regulation S-X promulgated under the Exchange Act.
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14
3.2 Conseco Capital Structure. The authorized capital stock of Conseco
consists of 500,000,000 shares of Conseco Common Stock and 20,000,000 shares of
preferred stock, without par value. At the close of business on December 13,
1996, (i) 67,001,181 shares of Conseco Common Stock and 4,369,700 shares of
Preferred Redeemable Increased Dividend Equity Securities of Conseco (the
"Conseco PRIDES") were issued and outstanding (net of treasury shares or shares
held by subsidiaries), (ii) 13,403,557 shares of Conseco Common Stock were
reserved for issuance pursuant to outstanding options to purchase shares of
Conseco Common Stock and other benefits granted under Conseco's benefit plans
(the "Conseco Stock Plans") and (iii) 8,739,400 shares of Conseco Common Stock
were reserved for issuance upon conversion of the Conseco PRIDES. Except (x) as
set forth above, (y) for outstanding options to purchase an aggregate of
1,039,690 shares of Bankers Life Holding Corporation under its Stock Option Plan
and with respect to stock units awarded under the Conseco Stock Plans, at the
close of business on December 13, 1996, and (z) as set forth in the Filed
Conseco SEC Documents (as defined in Section 3.5), no shares of capital stock or
other voting securities of Conseco were issued, reserved for issuance or
outstanding. All outstanding shares of capital stock of Conseco are, and all
shares which may be issued pursuant to this Agreement will be, when issued, duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights. The authorized capital stock of RAC consists of 1,000 shares
of capital stock, $.001 par value, all of which have been validly issued, are
fully paid and nonassessable and are owned by Conseco free and clear of any
Lien. As of the date of this Agreement, no bonds, debentures, notes or other
indebtedness of Conseco or any Significant Subsidiary of Conseco having the
right to vote (or convertible into, or exchangeable for, securities having the
right to vote) on any matters on which the stockholders of Conseco or any
Significant Subsidiary of Conseco may vote are issued or outstanding. All the
outstanding shares of capital stock of each Significant Subsidiary of Conseco
have been validly issued and are fully paid and nonassessable and, except as set
forth in the Filed Conseco SEC Documents, are owned by Conseco, free and clear
of all Liens as of the date of this Agreement. Except as set forth above or in
the Filed Conseco SEC Documents, neither Conseco nor any Significant Subsidiary
of Conseco has any outstanding option, warrant, subscription or other right,
agreement or commitment which either (i) obligates Conseco or any Significant
Subsidiary of Conseco to issue, sell or transfer, repurchase, redeem or
otherwise acquire or vote any shares of the capital stock of Conseco or any
Significant Subsidiary of Conseco or (ii) restricts the transfer of Conseco
Common Stock.
3.3 Authority; Noncontravention. Conseco and RAC have all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated by this Agreement. The execution and delivery of this
Agreement by Conseco and RAC and the consummation by Conseco and RAC of the
transactions contemplated by this Agreement have been duly authorized by all
necessary corporate action on the part of
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Conseco and RAC. This Agreement has been duly executed and delivered by and,
assuming this Agreement constitutes the valid and binding agreement of the
Company, constitutes a valid and binding obligation of Conseco and RAC,
enforceable against such party in accordance with its terms except that the
enforcement thereof may be limited by (a) bankruptcy, insolvency,
reorganization, moratorium or similar laws now or hereafter in effect relating
to creditor's rights generally and (b) general principles of equity (regardless
of whether enforceability is considered in a proceeding at law or in equity).
The execution and delivery of this Agreement do not, and the consummation of the
transactions contemplated by this Agreement and compliance with the provisions
of this Agreement will not (i) conflict with any of the provisions of the
Articles of Incorporation or Bylaws of Conseco, the Certificate of Incorporation
or Bylaws of RAC, or the comparable documents of any Significant Subsidiary of
Conseco, (ii) subject to the governmental filings and other matters referred to
in the following sentence, conflict with, result in a breach of or default (with
or without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of a
material benefit under, or require the consent of any person under, any
indenture, or other agreement, permit, concession, franchise, license or similar
instrument or undertaking to which Conseco or any of its subsidiaries is a party
or by which Conseco or any of its subsidiaries or any of their assets is bound
or affected, or (iii) subject to the governmental filings and other matters
referred to in the following sentence, contravene any law, rule or regulation of
any state or of the United States or any political subdivision thereof or
therein, or any order, writ, judgment, injunction, decree, determination or
award currently in effect. No consent, approval or authorization of, or
declaration or filing with, or notice to, any Governmental Entity which has not
been received or made is required by or with respect to Conseco or RAC in
connection with the execution and delivery of this Agreement by Conseco or RAC
or the consummation by Conseco or RAC, as the case may be, of any of the
transactions contemplated by this Agreement, except for (i) the filing of
premerger notification and report forms under the HSR Act with respect to the
Merger, (ii) the filings and/or notices required under the insurance laws of the
jurisdictions set forth in Section 2.3 of the Disclosure Schedule, (iii) the
filing with the SEC of the registration statement on Form S-4 to be filed with
the SEC by Conseco in connection with the issuance of Conseco Common Stock in
the Merger (the "Form S- 4") and such reports under the Exchange Act as may be
required in connection with this Agreement and the transactions contemplated
hereby, (iv) the filing of the certificate of merger with the Delaware Secretary
of State, and appropriate documents with the relevant authorities of the other
states in which the Company is qualified to do business, (v) such other
consents, approvals, authorizations, filings or notices as are set forth in
Section 2.3 of the Disclosure Schedule and (vi) any applicable filings under
state anti-takeover laws.
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3.4 SEC Documents. Conseco and its subsidiaries have filed all required
reports, schedules, forms, statements and other documents with the SEC since
January 1, 1995 (such documents and the exhibits thereto and documents
incorporated therein by reference are hereinafter referred to as the "Conseco
SEC Documents"). As of their respective dates, the Conseco SEC Documents
complied with the requirements of the Securities Act or the Exchange Act, as the
case may be, and the rules and regulations of the SEC promulgated thereunder
applicable to such Conseco SEC Documents, and none of the Conseco SEC Documents
as of such dates contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements of Conseco included in the
Conseco SEC Documents comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto or, in the case of unaudited
statements, as permitted by Rule 10-01 of Regulation S-X) and fairly present, in
all material respects, the consolidated financial statements of Conseco and its
consolidated subsidiaries as of the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended (subject, in the
case of unaudited quarterly statements, to normal year-end audit adjustments).
3.5 Absence of Certain Changes or Events. Except as disclosed in the
Conseco SEC Documents filed and publicly available prior to the date of this
Agreement (the "Filed Conseco SEC Documents"), since the date of the most recent
audited financial statements included in the Filed Conseco SEC Documents,
Conseco has conducted its business only in the ordinary course, and there has
not been (i) any change which would have a material adverse effect on the
business, financial condition or results of operations of Conseco and its
subsidiaries, taken as a whole, (ii) any declaration, setting aside or payment
of any dividend or distribution (whether in cash, stock or property) with
respect to any of Conseco's outstanding capital stock (other than the
declaration of a cash dividend payable January 2, 1997 of $.0625 per share on
Conseco Common Stock and regular cash dividends on the Conseco PRIDES, in
accordance with usual record and payment dates and in accordance with Conseco's
dividend policy and Articles of Incorporation at the date of such payment),
(iii) any split, combination or reclassification of any of its outstanding
capital stock or any issuance or the authorization of any issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock, or (iv) any change in accounting methods, principles or practices
by Conseco materially affecting its assets, liabilities or business, except as
may have been required by a change in generally accepted accounting principles.
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3.6 Compliance with Applicable Laws. (i) Each of Conseco and its
subsidiaries has in effect all Permits necessary for it to own, lease or operate
its properties and assets and to carry on its business as now conducted, and
there has occurred no default under any such Permit. Except as disclosed in the
Filed Conseco SEC Documents and except with respect to matters covered by
Section 3.6(iii), Conseco and its subsidiaries are in compliance in all material
respects with all applicable statutes, laws, ordinances, rules, orders and
regulations of any Governmental Entity. Except as disclosed in the Filed Conseco
SEC Documents and except for routine examinations by Insurance Regulators and
except with respect to matters covered by Section 3.6(iii), as of the date of
this Agreement, to the knowledge of Conseco, no investigation by any
Governmental Entity with respect to Conseco or any of its subsidiaries is
pending or threatened.
(ii) The Annual Statements (including without limitation the Annual
Statements of any separate accounts) for the year ended December 31, 1995,
together with all exhibits and schedules thereto, and any actuarial opinion,
affirmation or certification filed in connection therewith, and the Quarterly
Statements for the periods ended after January 1, 1996, together with all
exhibits and schedules thereto, with respect to each subsidiary of Conseco that
is an Insurance Company, in each case as filed with the applicable Insurance
Regulator of its jurisdiction of domicile, were prepared in conformity with,
present fairly, in all material respects, to the extent required by and in
conformity with SAP, the statutory financial condition of such Insurance Company
at their respective dates and the results of operations, changes in capital and
surplus and cash flow of such Insurance Company for each of the periods then
ended, and were correct in all material respects when filed and there were no
material omissions therefrom when filed. No deficiencies or violations material
to the financial condition or operations of any Insurance Company have been
asserted in writing by any Insurance Regulator which have not been cured or
otherwise resolved to the satisfaction of such Insurance Regulator and which
have not been disclosed in writing to the Company prior to the date of this
Agreement.
(iii) Except as set forth in the Filed Conseco SEC Documents, (a)
Conseco and its subsidiaries (exclusive of their agents) and, to the knowledge
of Conseco (without independent inquiry), their agents have marketed, sold and
issued Conseco products in compliance, in all material respects, with all
statutes, laws, ordinances, rules, orders and regulations of any Governmental
Entity applicable to the business of Conseco and its subsidiaries ("Conseco
Laws") in the respective jurisdictions in which such products have been sold,
except where the failure to do so, individually or in the aggregate, has not had
or would not reasonably be expected to have, a material adverse effect on the
business, financial condition or results of operations of Conseco and its
subsidiaries, taken as a whole, (b) there are (x) to the knowledge of Conseco,
no claims asserted, (y) no actions, suits, investigations or proceedings by or
before any court or other
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18
Governmental Entity or (z) no investigations by or on behalf of Conseco (other
than routine investigations in connection with Conseco's hiring practices) ((x),
(y) and (z) being collectively referred to as "Conseco Actions") pending or, to
the knowledge of Conseco, threatened, against or involving Conseco, any of its
subsidiaries or, to the knowledge of Conseco (without independent inquiry), any
of its agents that include allegations that Conseco, any of its subsidiaries or
any of its agents were in violation of or failed to comply with such Conseco
Laws, and, to the knowledge of Conseco, no facts exist which would reasonably be
expected to result in the filing or commencement of any such Conseco Action,
which Conseco Actions, individually or in the aggregate, would reasonably be
expected to have a material adverse effect on the business, financial condition
or results of operations of Conseco and its subsidiaries, taken as a whole, and
(c) Conseco and its subsidiaries are in compliance, in all material respects,
with and have performed, in all material respects, all obligations required to
be performed by each of them under any cease-and-desist or other order issued by
any Insurance Regulator or other Governmental Entity to Conseco or any of its
subsidiaries or under any written agreement, consent agreement, memorandum of
understanding or commitment letter or similar undertaking entered into between
any Insurance Regulator or other Governmental Entity and Conseco or any of its
subsidiaries ("Conseco Regulatory Agreement"), which Conseco Regulatory
Agreement remains in effect on the date hereof, except where the failure to do
so, individually or in the aggregate, has not had or would not reasonably be
expected to have, a material adverse effect on the business, financial condition
or results of operations of Conseco and its subsidiaries, taken as a whole.
3.7 No Prior Activities. RAC has not incurred, and will not incur,
directly or through any subsidiary, any liabilities or obligations for borrowed
money or otherwise, except incidental liabilities or obligations not for
borrowed money incurred in connection with its organization and except in
connection with obtaining financing in connection with the Merger. Except as
contemplated by this Agreement, RAC (i) has not engaged, directly or through any
subsidiary, in any business activities of any type or kind whatsoever, (ii) has
not entered into any agreements or arrangements with any person or entity, and
(iii) is not subject to or bound by any obligation or undertaking.
3.8 Brokers. All negotiations on behalf of Conseco relative to this
Agreement and the transactions contemplated hereby have been carried out by
Conseco directly with the Company, without the intervention of any person on
behalf of Conseco in such manner as to give rise to any valid claim by any
person against the Company or any of its subsidiaries for a finder's fee,
brokerage commission, transaction fee, investment banking fee, or similar
payment.
3.9 Voting Requirements. No authorization or approval by
the holders of any class or series of Conseco's capital stock is necessary to
approve this Agreement or the transactions contemplated by this Agreement.
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ARTICLE IV
ADDITIONAL AGREEMENTS
4.1 Preparation of Form S-4 and the Proxy Statement;
Information Supplied.
(a) As soon as practicable following the date of this Agreement, the
Company and Conseco shall prepare and file with the SEC the Proxy Statement and
Conseco shall prepare and file with the SEC the Form S-4, in which the Proxy
Statement will be included as a prospectus. Each of the Company and Conseco
shall use commercially reasonable efforts to have the Form S-4 declared
effective under the Securities Act as promptly as practicable after such filing.
The Company will use commercially reasonable efforts to cause the Proxy
Statement to be mailed to the Company's stockholders as promptly as practicable
after the Form S-4 is declared effective under the Securities Act. Conseco shall
also take any action (other than qualifying to do business in any jurisdiction
in which it is not now so qualified) required to be taken under any applicable
state securities laws in connection with the issuance of Conseco Common Stock in
the Merger and the Company shall furnish all information concerning the Company
and the holders of the Common Stock as may be reasonably requested in connection
with any such action.
(b) The Company agrees that none of the information supplied or to be
supplied by the Company specifically for inclusion or incorporation by reference
in (i) the Form S-4, as then amended or supplemented, will, at the time the Form
S-4 is filed with the SEC, at any time it is amended or supplemented or at the
time it becomes effective under the Securities Act, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading or (ii) the
Proxy Statement will, at the date it is first mailed to the Company's
stockholders or at the time of the Stockholders Meeting (as defined in Section
4.2), contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading. The Company agrees that the Proxy Statement will comply as to form
in all material respects with the requirements of the Exchange Act and the rules
and regulations thereunder, except with respect to statements made or
incorporated by reference therein based on information supplied by Conseco or
RAC specifically for inclusion or incorporation by reference in the Proxy
Statement.
(c) Conseco agrees that none of the information supplied or to be
supplied by Conseco or RAC specifically for inclusion or incorporation by
reference in (i) the Form S-4 will, at the time the Form S-4 is filed with the
SEC, at any time it is amended or supplemented or at the time it becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
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necessary to make the statements therein not misleading or (ii) the Proxy
Statement will, at the date it is first mailed to the Company's stockholders or
at the time of the Stockholders Meeting (as defined in Section 4.2), contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading. Conseco
agrees that the Form S-4 will comply as to form in all material respects with
the requirements of the Securities Act and the rules and regulations promulgated
thereunder, except with respect to statements made or incorporated by reference
based on information supplied by the Company specifically for inclusion or
incorporation by reference therein.
4.2 Meeting of Stockholders. The Company will take all action necessary
in accordance with applicable law and its Certificate of Incorporation and
By-laws to convene a meeting of its stockholders (the "Stockholders Meeting") to
consider and vote upon the approval of the Merger. Subject to Section 4.9
hereof, the Company will, through its Board of Directors, recommend to its
stockholders approval of this Agreement and the Merger. Without limiting the
generality of the foregoing, the Company agrees that, subject to its right to
terminate this Agreement pursuant to Section 4.9, its obligations pursuant to
the first sentence of this Section 4.2 shall not be affected by (i) the
commencement, public proposal, public disclosure or communication to the Company
of any Acquisition Proposal (as defined in Section 4.8) or (ii) the withdrawal
or modification by the Board of Directors of the Company of its approval or
recommendation of this Agreement or the Merger. The Company will use
commercially reasonable efforts to hold the Stockholders Meeting and (subject to
Section 4.9 hereof) to obtain the favorable vote of its stockholders as soon as
practicable after the date hereof.
4.3 Letter of the Company's Accountants. The Company shall use
commercially reasonable efforts to cause to be delivered to Conseco a letter of
Ernst & Young LLP, the Company's independent public accountants, dated a date
within two business days before the date on which the Form S-4 shall become
effective and a letter of Ernst & Young LLP, dated a date within two business
days before the Closing Date, addressed to Conseco, in form and substance
reasonably satisfactory to Conseco and customary in scope and substance for
letters delivered by independent public accountants in connection with
registration statements similar to the Form S-4.
4.4 Letter of Conseco's Accountants. Conseco shall use commercially
reasonable efforts to cause to be delivered to the Company a letter of Coopers &
Xxxxxxx L.L.P., Conseco's independent public accountants, dated a date within
two business days before the date on which the Form S-4 shall become effective
and a letter of Coopers & Xxxxxxx L.L.P., dated a date within two business days
before the Closing Date, each addressed to the Company, in form and substance
reasonably satisfactory to the Company and customary in scope and substance for
letters delivered by independent public accountants in connection with
registration statements similar to the Form S-4.
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4.5 Access to Information; Confidentiality. Upon reasonable notice,
each of the Company and Conseco shall, and shall cause each of its respective
subsidiaries to, afford to the other party and to the officers, employees,
counsel, financial advisors and other representatives of such other party
reasonable access during normal business hours during the period prior to the
Effective Time to all its properties, books, contracts, commitments, personnel
and records and, during such period, each of the Company and Conseco shall, and
shall cause each of its respective subsidiaries to, furnish as promptly as
practicable to the other party such information concerning its business,
properties, financial condition, operations and personnel as such other party
may from time to time reasonably request. Except as required by law, Conseco
will hold, and will cause its respective directors, officers, partners,
employees, accountants, counsel, financial advisors and other representatives
and affiliates to hold, any nonpublic information obtained from the Company in
confidence to the extent required by, and in accordance with, the provisions of
the letter dated November 14, 1996, between Conseco and the Company (the
"Confidentiality Agreement"). Except as required by law, the Company will hold,
and will cause its directors, officers, partners, employees, accountants,
counsel, financial advisors and other representatives and affiliates to hold,
any nonpublic information obtained from Conseco in confidence to the extent
required by, and in accordance with, the Confidentiality Agreement.
4.6 Commercially Reasonable Efforts. Upon the terms and subject to the
conditions and other agreements set forth in this Agreement, each of the parties
agrees to use commercially reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, and to assist and cooperate with the
other parties in doing, all things necessary, proper or advisable to consummate
and make effective, in the most expeditious manner practicable, the Merger and
the other transactions contemplated by this Agreement.
4.7 Public Announcements. Conseco and the Company will consult and make
a good faith effort to agree with each other before issuing, and provide each
other the opportunity to review and comment upon, any press release or other
public statements with respect to the transactions contemplated by this
Agreement, including the Merger, and shall not issue any such press release or
make any such public statement prior to such consultation, except as may be
required by applicable law, court process or by obligations pursuant to any
listing agreement with any national securities exchange.
4.8 Acquisition Proposals. The Company shall not, nor shall it permit
any of its subsidiaries to, nor shall it authorize or permit any officer,
director or employee of, or any investment banker, attorney or other advisor or
representative of, the Company or any of its subsidiaries to, directly or
indirectly, (i) solicit, initiate or encourage the submission of any Acquisition
Proposal (as hereinafter defined) or (ii) participate in any
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discussions or negotiations regarding, or furnish to any person any information
with respect to, or take any other action to facilitate any inquiries or the
making of any proposal that constitutes, or may reasonably be expected to lead
to, any Acquisition Proposal; provided, however, that nothing contained in this
Section 4.8 shall prohibit the Board of Directors of the Company from furnishing
information to, or entering into discussions or negotiations with, any person or
entity that makes an unsolicited Acquisition Proposal if, and only to the extent
that (A) the Board of Directors of the Company, after consultation with and
based upon the advice of outside counsel, determines in good faith that in order
for the Board of Directors of the Company to comply with its fiduciary duties to
stockholders under applicable law it should take such action and (B) prior to
taking such action, the Company (x) provides reasonable notice to Conseco to the
effect that it is taking such action and (y) receives from such person or entity
an executed confidentiality agreement in reasonably customary form.
Notwithstanding anything in this Agreement to the contrary, the Company shall
(i) promptly advise Conseco orally and in writing of (A) the receipt by it (or
any of the other entities or persons referred to above) after the date hereof of
any Acquisition Proposal, or any inquiry which could lead to any Acquisition
Proposal, (B) the material terms and conditions of such Acquisition Proposal or
inquiry, and (C) the identity of the person making any such Acquisition Proposal
or inquiry, and (ii) keep Conseco fully informed of the status and details of
any such Acquisition Proposal or inquiry. Notwithstanding the immediately
preceding sentence, the Company may delay providing any of the information
described in clause (i) (B), (i) (C) or (ii) of such sentence if, and for so
long as, the Board of Directors of the Company, after consultation with outside
counsel, determines and continues to believe in good faith that in order to
comply with its fiduciary duties to stockholders under applicable law it should
not provide such information. For purposes of this Agreement, "Acquisition
Proposal" means any bona fide proposal with respect to a merger, consolidation,
share exchange or similar transaction involving the Company or any subsidiary of
the Company, or any purchase of all or any significant portion of the assets of
the Company or any subsidiary of the Company, or any equity interest in the
Company or any subsidiary of the Company, other than the transactions
contemplated hereby.
4.9 Fiduciary Duties. The Board of Directors of the Company shall not
(i) withdraw or modify, in a manner materially adverse to Conseco or RAC, the
approval or recommendation by such Board of Directors of this Agreement or the
Merger, or (ii) enter into any agreement with respect to any Acquisition
Proposal, unless the Company receives an Acquisition Proposal and the Board of
Directors of the Company determines in good faith, following consultation with
outside counsel, that in order to comply with its fiduciary duties to
stockholders under applicable law the Board of Directors should withdraw or
modify, in a manner materially adverse to Conseco or RAC, its approval or
recommendation of this Agreement or the Merger, or enter into an
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agreement with respect to such Acquisition Proposal or terminate this Agreement.
In the event the Board of Directors of the Company takes any of the foregoing
actions, the Company shall, concurrently with the taking of any such action, pay
to Conseco the Section 4.11 Fee pursuant to Section 4.11. Subject to the
provisions of the first sentence of this Section 4.9, nothing contained in this
Section 4.9 shall prohibit the Company from taking and disclosing to its
stockholders a position contemplated by Rule 14e-2(a) promulgated under the
Exchange Act or from making any disclosure to the Company's stockholders which,
in the good faith reasonable judgment of the Board of Directors of the Company
after consultation with outside counsel, should be made under applicable law.
Notwithstanding anything contained in this Agreement to the contrary, (x) any
action by the Board of Directors permitted by this Section 4.9 shall not
constitute a breach of this Agreement by the Company and (y) a "stop-look-and-
listen" communication with respect to the Merger or this Agreement of the nature
contemplated in Rule 14d-9 under the Exchange Act made by the Company as a
result of an Acquisition Proposal shall in no event be deemed a withdrawal or
modification by the Board of Directors of the Company of its approval or
recommendation of this Agreement or the Merger.
4.10 Consents, Approvals and Filings. The Company and Conseco will make
and cause their respective subsidiaries to make all necessary filings, as soon
as practicable, including, without limitation, those required under the HSR Act,
the Securities Act, the Exchange Act, and applicable state insurance laws in
order to facilitate prompt consummation of the Merger and the other transactions
contemplated by this Agreement. In addition, the Company and Conseco will each
use commercially reasonable efforts, and will cooperate fully with each other
(i) to comply as promptly as practicable with all governmental requirements
applicable to the Merger and the other transactions contemplated by this
Agreement and (ii) to obtain as promptly as practicable all necessary permits,
orders or other consents of Governmental Entities and consents of all third
parties necessary for the consummation of the Merger and the other transactions
contemplated by this Agreement. Each of the Company and Conseco shall use
commercially reasonable efforts to promptly provide such information and
communications to Governmental Entities as such Governmental Entities may
reasonably request. Each of the parties shall provide to the other party copies
of all applications in advance of filing or submission of such applications to
Governmental Entities in connection with this Agreement and shall make such
revisions thereto as reasonably requested by such other party. Each party shall
provide to the other party the opportunity to attend all meetings and
participate in all material conversations with Governmental Entities.
4.11 Certain Fees. (a) The Company shall pay to Conseco upon demand
$8.0 million (the "Section 4.11 Fee"), payable in same-day funds, if a bona fide
Acquisition Proposal is commenced, publicly proposed, publicly disclosed or
communicated to the Company (or the willingness of any person to make such an
Acquisition Proposal
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is publicly disclosed or communicated to the Company) and the Board of Directors
of the Company, in accordance with Section 4.9, withdraws or modifies in a
manner materially adverse to Conseco its approval or recommendation of this
Agreement or the Merger or enters into an agreement with respect to such
Acquisition Proposal (other than a confidentiality agreement as contemplated by
Section 4.8), or terminates this Agreement; provided, however, that no such fee
shall be payable if this Agreement shall have been terminated in accordance with
any of the provisions of Section 7.1 (other than Section 7.1(b)(iv)).
(b) Unless Conseco is materially in breach of this Agreement or is
unable to satisfy the condition of Section 6.3(a) hereof, the Company shall pay
to Conseco upon demand an amount, not to exceed $1,000,000, to reimburse Conseco
for its Expenses (as such term is defined in subparagraph (c) of this Section
4.11), payable in same-day funds, if the requisite approval of the Company's
stockholders for the Merger is not obtained (other than the circumstances
specified in Section 4.11(a) hereof) and all other conditions contained in
Section 6.1 of this Agreement have been satisfied, waived or, with respect to
any condition not then satisfied, it is substantially likely that such condition
will be satisfied on or before May 31, 1997, through the exercise of
commercially reasonable efforts to procure the satisfaction thereof.
(c) For purposes of this Section 4.11, "Expenses" shall mean all
documented, reasonable out-of-pocket fees and expenses incurred or paid by or on
behalf of Conseco to third parties in connection with the Merger or the
consummation of any of the transactions contemplated by this Agreement,
including all printing costs and reasonable fees and expenses of counsel,
investment banking firms, accountants, experts and consultants.
4.12 Affiliates and Certain Stockholders. Prior to the Closing Date,
the Company shall deliver to Conseco a letter identifying all persons who are,
at the time the Merger is submitted for approval to the stockholders of the
Company, "affiliates" of the Company for purposes of Rule 145 under the
Securities Act. The Company shall use commercially reasonable efforts to cause
each such person to deliver to Conseco on or prior to the Closing Date a written
agreement substantially in the form attached as Exhibit A to the Disclosure
Schedule. Conseco shall maintain the effectiveness of the Form S-4 subsequent to
the Closing Date for the purpose of resales of Conseco Common Stock by such
affiliates, but shall not thereafter be required to file any post-effective
amendment thereto in accordance with Item 512(a) of Regulation S-K under the
Securities Act. Subject to the remainder of this Section 4.12, Conseco shall not
otherwise be required to maintain the effectiveness of the Form S-4 or any other
registration statement under the Securities Act for the purposes of resale of
Conseco Common Stock by such affiliates and the certificates representing
Conseco Common Stock received by such affiliates in the Merger shall bear a
customary legend regarding applicable Securities Act restrictions and the
provisions of this Section 4.12.
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In the case of the Form S-4 to be maintained effective following the
Closing Date with respect to affiliate resales in accordance with the third
sentence of this Section 4.12, Conseco shall (i) provide to such affiliate such
reasonable number of copies of the registration statement, the prospectus, and
such other documents as the affiliates may reasonably request in order to
facilitate the public offering of such securities; (ii) pay all expenses of such
registration other than underwriting or sales commissions; and (iii) indemnify
such affiliates, each of their officers and directors and partners, and each
person controlling such affiliates within the meaning of Section 15 of the
Securities Act, against all expenses, claims, losses, damages or liabilities (or
actions in respect thereof), including any of the foregoing incurred in
settlement of any litigation, commenced or threatened, arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in such registration statement or prospectus, or any amendment or
supplement thereto, incident to any such registration, or based on any omission
(or alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of circumstances
in which they were made, not misleading, or any violation by Conseco of the
Securities Act or any rule or regulation in connection with such registration,
and reimburse each such person for any legal and any other expenses reasonably
incurred (as they are incurred) in connection with investigating, preparing or
defending any such claim, loss, damage, liability or action.
4.13 NYSE Listing. Conseco shall use commercially reasonable efforts to
cause the shares of Conseco Common Stock to be issued in the Merger to be
approved for listing on the NYSE, subject to official notice of issuance, prior
to the Closing Date.
4.14 Stockholder Litigation. The Company shall give Conseco the
opportunity to participate in the defense or settlement of any stockholder
litigation against the Company and its directors relating to the transactions
contemplated by this Agreement; provided, however, that no such settlement shall
be agreed to without Conseco's consent, which consent shall not be unreasonably
withheld.
4.15 Indemnification. (a) The certificate of incorporation and by-laws
of the Company and each of the Company's subsidiaries shall contain the
provisions with respect to indemnification set forth therein on the date of this
Agreement, and such provisions shall not be amended, repealed or otherwise
modified for a period of six years after the Effective Time in any manner that
would adversely affect the rights thereunder of individuals who at any time
prior to the Effective Time were directors or officers of the Company or any of
its subsidiaries (the "Indemnified Parties") in respect of actions or omissions
occurring at or prior to the Effective Time (including, without limitation, the
transactions contemplated by this Agreement), unless such modification is
required by law.
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(b) On or before the Effective Time, Conseco shall enter into
indemnification agreements as set forth in Section 4.15 of the Disclosure
Schedule.
(c) The provisions of this Section 4.15 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party and the heirs
and personal representatives of such Indemnified Party and shall be binding on
all successors and assigns of Conseco and the Company.
4.16 Stock Options. (a) As soon as practicable following the date of
this Agreement, the Board of Directors of the Company (or, if appropriate, any
committee administering a Company Stock Plan) shall adopt such resolutions or
take such actions as may be required to adjust the terms of all outstanding
Company Stock Options in accordance with Section 1.9(d) and shall make such
other changes to the Company Stock Plan as it deems appropriate to give effect
to the Merger (subject to the approval of Conseco, which shall not be
unreasonably withheld). The parties agree that after the date hereof, except for
the Company Stock Options outstanding on the date hereof and any changes thereto
described in or contemplated by this Agreement and except as set forth in
Section 4.16 of the Disclosure Schedule, no options, warrants or other rights of
any kind to purchase capital stock of the Company shall be granted or made,
under the Company Stock Plan or otherwise, and no amendment, repricing or other
change to the outstanding Company Stock Options shall be made, without the prior
written consent of Conseco, and any such grant, issuance, amendment, repricing
or other change without Conseco's consent shall be null, void and unenforceable
against Conseco.
(b) Conseco shall take all corporate action necessary to reserve and
maintain as reserved for issuance a sufficient number of shares of Conseco
Common Stock for delivery upon exercise of the Company Stock Options and
warrants. Prior to the Effective Time, Conseco shall have filed a registration
statement on Form S- 8 (or any successor form) or another appropriate form with
respect to the shares of Conseco Common Stock subject to the Company Stock
Options and shall use its best efforts to maintain the effectiveness of such
registration statement or registration statements (and maintain the current
status of the prospectus or prospectuses contained therein) for so long as
Company Stock Options remain outstanding.
4.17 Officers' Certificates Relating to Tax Treatment. Conseco shall
provide to the Tax Opinion Provider (as defined in Section 6.3(c) hereof), a
certificate in the form agreed to by Conseco, which agreement shall not be
unreasonably withheld, dated the Closing Date and signed on behalf of Conseco by
the chief executive officer and the chief financial officer of Conseco. The
Company shall provide to the Tax Opinion Provider a certificate in the form
agreed to by the Company, which agreement shall not be unreasonably withheld,
dated the Closing Date and signed on behalf of the Company by the chief
executive officer and the chief financial officer of the Company.
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4.18 Severance and Other Payments. If, after the Effective Time, the
employment of employees of the Company is terminated, the Employee Severance Pay
Plan of Conseco shall be applicable to such employees giving credit for service
to the Company as service to Conseco; provided, however, that employees who as
of the date of this Agreement either (i) have a contract with the Company or one
of its subsidiaries which provides for a greater payment upon termination of
employment or (ii) are covered by the Company's severance policy for officers
shall be entitled to the payments specified by such contract or policy in lieu
of any amounts under the Employee Severance Pay Plan of Conseco. Section 4.18 of
the Disclosure Schedule identifies all contracts and Benefit Plans of the
Company or any of its subsidiaries which obligate the Company to make payments
to any employee upon termination of employment. In addition, an aggregate of up
to $5 million of additional payments may be paid within twelve months after the
Closing Date to employees of the Company in such manner and in such proportions
as shall be determined from time to time by the Company's present chief
executive officer after consultation with the Chief Operations Officer of
Conseco or his designee.
4.19 Employment Agreement. The Company shall enter into the employment
agreement with Xxxxx X. Xxxxxx described in Section 4.19 of the Disclosure
Schedule. Such employment agreement shall be subject to the approval of Conseco,
which shall not be unreasonably withheld.
4.20 Existing Employment Agreements. The existing employment agreements
between the Company and Xxxxxx X. Xxxxxx and Xxxxxxx X. Xxxxxxx, respectively,
will be terminated at the Effective Time and such individuals will be entitled
to receive from the Company on the Closing Date an amount equal to the aggregate
of the remaining amounts payable under such employment agreements. The
employment agreement between the Company and Xxxxx X. Xxxxxx will be terminated
at the Effective Time and Xx. Xxxxxx will be entitled to receive $4.5 million
from the Company on the Closing Date.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS PRIOR TO
MERGER
5.1 Conduct of Business by the Company. Except as contemplated by this
Agreement or as set forth in Section 5.1 of the Disclosure Schedule, during the
period from the date of this Agreement to the Effective Time, the Company shall,
and shall cause its subsidiaries to, act and carry on their respective
businesses in the ordinary course of business and, to the extent consistent
therewith, use reasonable efforts to preserve intact their current business
organizations, keep available the services of their current key officers and
employees and preserve the goodwill of those engaged in material business
relationships with them. In addition, the Company agrees to allow
representatives of Conseco to have access to the management and other personnel
of
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the Company so that Conseco can be fully informed at all times as to significant
executive, legal, financial, marketing and other operational matters involving
the Company, its subsidiaries or their businesses. Without limiting the
generality of the foregoing, during the period from the date of this Agreement
to the Effective Time, the Company shall not, and shall not permit any of its
subsidiaries to, without the prior consent of Conseco:
(i) (x) declare, set aside or pay any dividends on, or make
any other distributions (whether in cash, stock or property) in respect
of, any of the Company's outstanding capital stock (other than regular
quarterly cash dividends not in excess of $0.055 per Share, with usual
record and payment dates and in accordance with the Company's present
dividend policy), (y) split, combine or reclassify any of its
outstanding capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for
shares of its outstanding capital stock, or (z) purchase, redeem or
otherwise acquire any shares of outstanding capital stock or any
rights, warrants or options to acquire any such shares;
(ii) issue, sell, grant, pledge or otherwise encumber any
shares of its capital stock, any other voting securities or any
securities convertible into, or any rights, warrants or options to
acquire, any such shares, voting securities or convertible securities
other than upon the exercise of Company Stock Options outstanding on
the date of this Agreement or as set forth in Section 4.16 of the
Disclosure Schedule;
(iii) amend its certificate of incorporation, by-laws or
other comparable charter or organizational documents;
(iv) acquire, form or commence the operations of any business
or any corporation, partnership, joint venture, association or other
business organization or division thereof;
(v) sell, mortgage or otherwise encumber or subject to any
Lien or otherwise dispose of any of its properties or assets that are
material to the Company and its subsidiaries taken as a whole, except
in the ordinary course of business;
(vi)(x) incur any indebtedness for borrowed money or guarantee
any such indebtedness of another person, other than indebtedness under
any credit agreement in effect on the date of this Agreement or
indebtedness owing to or guarantees of indebtedness owing to the
Company or any direct or indirect wholly-owned subsidiary of the
Company or (y) make any loans or advances to any other person, other
than to the Company, or to any direct or indirect wholly-owned
subsidiary of the Company and other than routine advances to agents and
employees;
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(vii) make any tax election or settle or compromise any income
tax liability that would reasonably be expected to be material to the
Company and its subsidiaries taken as a whole;
(viii) pay, discharge, settle or satisfy any material claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or
satisfaction, in the ordinary course of business consistent with past
practice or in accordance with their terms, of liabilities reflected or
reserved against in, or contemplated by, the most recent consolidated
financial statements (or the notes thereto) of the Company included in
the Filed SEC Documents or incurred since the date of such financial
statements in the ordinary course of business consistent with past
practice;
(ix) invest its future cash flow, any cash from matured and
maturing investments, any cash proceeds from the sale of its assets and
properties, and any cash funds currently held by it, in any investments
other than cash equivalent assets or in short-term investments
(consisting of United States government issued or guaranteed
securities, or commercial paper rated A-1 or P-1), except (i) as
otherwise required by law, (ii) as required to provide cash (in the
ordinary course of business and consistent with past practice) to meet
its actual or anticipated obligations or (iii) publicly-traded
corporate bonds that are rated investment grade by at least two
nationally recognized statistical rating organizations;
(x) except as may be required by law,
(i) make any representation or promise, oral or
written, to any employee or former director, officer or
employee of the Company or any subsidiary which is
inconsistent with the terms of any Benefit Plan;
(ii) make any change to, or amend in any way, the
contracts, salaries, wages, or other compensation of any
employee or any agent or consultant of the Company or any
subsidiary other than (a) changes or amendments that are
required under existing contracts, (b) individual, routine
changes with respect to employees that are made in the
ordinary course of business and consistent with past practice
and do not exceed 6% or (c) changes with respect to agents or
consultants that are made in the ordinary course of business
and consistent with past practice;
(iii) adopt, enter into, amend, alter or terminate,
partially or completely, any Benefit Plan or any election made
pursuant to the provisions of any Benefit Plan, to accelerate
any payments, obligations or vesting schedules under any
Benefit Plan; or
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(iv) approve any general or company-wide pay
increases for employees;
(xi) except in the ordinary course of business, materially
modify, amend or terminate any material agreement, permit, concession,
franchise, license or similar instrument to which the Company or any
subsidiary is a party or waive, release or assign any material rights
or claims thereunder;
(xii) hold any meeting of the board of directors of the
Company or any subsidiary or any committee of any such board, or take
any action by written consent of any such board or committee, without
providing to Conseco (i) notice of any such meeting no later than the
date notice is given to the board of directors or in advance of the
date of any proposed action by written consent and (ii) with such
notice, an agenda of the specific matters intended to be considered at
such meeting or a copy of the proposed written consent, unless, in the
reasonable good faith judgment of the President or Chairman of the
Company, providing prior notice of any agenda item or any item of such
written consent will prejudice the ability of the board of directors or
any committee of the board of directors to discharge its duties, in
which case such item may be omitted from the agenda or written consent
provided to Conseco; or
(xiii) authorize any of, or commit or agree to take any
of, the foregoing actions.
5.2 Conduct of Business by Conseco. During the period from the date of
this Agreement to the Effective Time, Conseco shall, and shall cause its
subsidiaries to, use all reasonable efforts to preserve intact their current
business organizations, keep available the services of their current officers
and employees and preserve their relationships with customers, suppliers,
licensors, licensees, distributors and others having business dealings with them
to the end that their goodwill and ongoing businesses shall be unimpaired at the
Effective Time.
5.3 Other Actions. The Company and Conseco shall not, and shall not
permit any of their respective subsidiaries to, take any action that would, or
that could reasonably be expected to, result in (i) any of the representations
and warranties of such party set forth in this Agreement becoming untrue in any
material respect or (ii) any of the conditions of the Merger set forth in
Article VI not being satisfied.
5.4 Conduct of Business of RAC. During the period from the date of this
Agreement to the Effective Time, RAC shall not engage in any activities of any
nature except as provided in or contemplated by this Agreement.
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ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions to Each Party's Obligation To Effect the Merger.
The respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Stockholder Approval. This Agreement and the Merger shall
have been approved and adopted by the affirmative vote of the
stockholders of the Company in the manner contemplated in Section 2.10
hereof.
(b) Governmental and Regulatory Consents. All required
consents, approvals, permits and authorizations to the consummation of
the transactions contemplated hereby by the Company, Conseco and RAC
shall be obtained, in each case without the material abrogation or
diminishment of the authority or license of any Insurance Company
subsidiary of the Company or the imposition of significant restrictions
upon the transactions contemplated hereby, from (i) the Insurance
Regulators in the jurisdictions set forth in Section 6.1(b) of the
Disclosure Schedule, and (ii) any other Governmental Entity whose
consent, approval, permission or authorization is required by reason of
a change in law after the date of this Agreement, unless the failure to
obtain such consent, approval, permission or authorization would not
reasonably be expected to have a material adverse effect on the
business, financial condition or results of operations of the Company
and its subsidiaries, taken as a whole, or on the validity or
enforceability of this Agreement. Notwithstanding the foregoing, in the
event that all governmental and regulatory consents required hereunder
shall have been obtained except the approval of the Insurance Regulator
of any life insurance subsidiary of the Company which does not
constitute a "significant subsidiary" (within the meaning of Rule 1-02
of Regulation S-X of the SEC) of the Company (a "Non-Significant Life
Subsidiary") to the transfer of control of such Non-Significant Life
Subsidiary, then, subject to Article VII hereof, at any time thereafter
at the option of Conseco, the parties shall take one of the following
actions with respect to such Non-Significant Life Subsidiary and
otherwise proceed to consummate the Merger in accordance with this
Agreement: (a) place into escrow, pursuant to an escrow agreement
reasonably acceptable to the parties, the outstanding shares of capital
stock of such Non-Significant Life Subsidiary; such escrow agreement
shall contain customary provisions concerning duties and
responsibilities of the escrow agent and payment of the fees and
expenses of the escrow agent and shall provide that (i) pending
transfer of control of the Non-Significant Life Subsidiary to Conseco,
its current Board of Directors shall retain all power to vote its
shares of capital stock and to direct its business not inconsistent
with this Agreement, (ii) promptly following
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receipt of the approval of the Insurance Regulator, control of the
capital stock of such Non-Significant Life Subsidiary shall be
transferred to Conseco and (iii) at any time following June 30, 1997
and prior to receipt of the Insurance Regulator's approval, Conseco may
elect to terminate the escrow agreement, in which event such
Non-Significant Life Subsidiary shall be liquidated and dissolved and
the proceeds thereof shall be paid to Conseco; (b) cause such Non-
Significant Life Subsidiary to surrender its certificate of authority
to do business in its state of domicile; (c) cause such Non-Significant
Life Subsidiary to commence proceedings for its liquidation and
dissolution; (d) enter into an agreement for the sale and transfer of
the Non-significant Life Subsidiary to a third party; or (e) take such
other action as may be mutually agreeable to the Company and Conseco.
(c) HSR Act. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated
or shall have otherwise expired.
(d) No Injunctions or Restraints. No temporary restraining
order, preliminary or permanent injunction or other order issued by any
court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Merger shall be in effect; provided,
however, that the parties invoking this condition shall use
commercially reasonable efforts to have any such order or injunction
vacated.
(e) NYSE Listing. The shares of Conseco Common Stock issuable
to the Company's stockholders pursuant to this Agreement shall have
been approved for listing on the NYSE, subject to official notice of
issuance.
(f) Form S-4. The Form S-4 shall have become effective under
the Securities Act and shall not be the subject of any stop order or
proceedings seeking a stop order.
6.2 Conditions to Obligations of Conseco and RAC. The
obligations of Conseco and RAC to effect the Merger are further subject to the
following conditions:
(a) Representations and Warranties. The
representations and warranties of the Company contained in this
Agreement shall have been true and correct on the date of this
Agreement and as of the Closing Date (except to the extent that they
expressly relate only to an earlier time, in which case they shall have
been true and correct as of such earlier time and except for actions
contemplated by this Agreement), other than such breaches of
representations and warranties which in the aggregate would not
reasonably be expected to have a material adverse effect on the
business, financial condition or results of operations of the Company
and its subsidiaries taken as a whole. The Company shall
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have delivered to Conseco a certificate dated as of the Closing Date,
signed by its Chief Executive Officer and its Chief Financial Officer,
in their capacities as officers of the Company, to the effect set forth
in this Section 6.2(a).
(b) Performance of Obligations of the Company. The
Company shall have performed in all material respects all obligations
required to be performed by it under this Agreement at or prior to the
Closing Date and shall not have willfully or intentionally (i) breached
any of its representations or warranties herein or (ii) failed to
perform or satisfy any of its obligations or covenants hereunder, and
Conseco shall have received a certificate dated as of the Closing Date
signed on behalf of the Company by its Chief Executive Officer and its
Chief Financial Officer to such effect.
6.3 Conditions to Obligation of the Company. The obligation
of the Company to effect the Merger is further subject to the following
conditions:
(a) Representations and Warranties. The representations and
warranties of Conseco and RAC contained in this Agreement shall have
been true and correct on the date of this Agreement and as of the
Closing Date (except to the extent that they expressly relate only to
an earlier time, in which case they shall have been true and correct as
of such earlier time), other than such breaches of representations and
warranties which in the aggregate would not reasonably be expected to
have a material adverse effect on the business, financial condition or
results of operations of Conseco and its subsidiaries taken as a whole.
Conseco shall have delivered to the Company a certificate dated as of
the Closing Date, signed by its Chief Executive Officer and its Chief
Financial Officer, in their capacities as officers of Conseco, to the
effect set forth in this Section 6.3(a).
(b) Performance of Obligations of Conseco. Conseco and RAC
shall have performed in all material respects all obligations required
to be performed by them under this Agreement at or prior to the Closing
Date and shall not have willfully or intentionally (i) breached any of
their representations or warranties herein or (ii) failed to perform or
satisfy any of their obligations or covenants hereunder, and the
Company shall have received a certificate dated as of the Closing Date
signed on behalf of Conseco by its Chief Executive Officer and its
Chief Financial Officer to such effect.
(c) Opinion of Counsel. The Company shall have received the
opinion dated the Closing Date of XxXxxxxxx, Will & Xxxxx, counsel to
the Company, or such other legal counsel reasonably acceptable to the
Company and Conseco (the "Tax Opinion Provider") to the effect that the
Merger will be treated as a reorganization under Section 368(a)(2)(E)
of the
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Code as a result of which the stockholders of the Company will not be
subject to federal income tax on the receipt of shares of Conseco
Common Stock in exchange for Shares pursuant to the Merger.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated and abandoned at any
time prior to the Effective Time, whether before or after approval of matters
presented in connection with the Merger by the stockholders of the Company:
(a) by mutual written consent of Conseco and the
Company; or
(b) by either Conseco or the Company:
(i) if, upon a vote at a duly held Stockholders
Meeting or any adjournment thereof, any required approval of
the stockholders of the Company shall not have been obtained;
(ii) at any time after March 31, 1997, if the Merger
shall not have been consummated by such date, unless the
failure to consummate the Merger is the result of a willful
and material breach of this Agreement by the party seeking to
terminate this Agreement; provided, however, that either party
may by notice to the other extend such date to May 31, 1997
unless the condition to closing set forth in Section 6.1(d) is
not satisfied as of March 31, 1997;
(iii) if any Governmental Entity shall have issued an
order, decree or ruling or taken any other action permanently
enjoining, restraining or otherwise prohibiting the Merger and
such order, decree, ruling or other action shall have become
final and nonappealable; or
(iv) if the Board of Directors of the Company shall
have exercised its rights set forth in Section 4.9 of this
Agreement.
7.2 Effect of Termination. In the event of termination of this
Agreement by either the Company or Conseco as provided in Section 7.1, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Conseco, RAC or the Company, other than the last
two sentences of Section 4.5 and Sections 2.13, 3.8, 4.11, 7.2 and 10.2. Nothing
contained in this Section shall relieve any party from any liability resulting
from any material breach of the representations, warranties, covenants or
agreements set forth in this Agreement.
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7.3 Amendment. Subject to the applicable provisions of the DGCL, at any
time prior to the Effective Time, the parties hereto may modify or amend this
Agreement, by written agreement executed and delivered by duly authorized
officers of the respective parties; provided, however, that after approval of
the Merger by the stockholders of the Company, no amendment shall be made which
reduces the consideration payable in the Merger or adversely affects the rights
of the Company's stockholders hereunder without the approval of such
stockholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties.
7.4 Extension; Waiver. At any time prior to the Effective Time, each
party may (a) extend the time for the performance of any of the obligations or
other acts of the other party, (b) waive any inaccuracies in the representations
and warranties of the other party contained in this Agreement or in any document
delivered pursuant to this Agreement or (c) subject to Section 7.3, waive
compliance with any of the agreements or conditions of the other party contained
in this Agreement. Any agreement on the part of a party to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party. The failure of any party to this Agreement to assert any
of its rights under this Agreement or otherwise shall not constitute a waiver of
such rights.
7.5 Procedure for Termination, Amendment, Extension or Waiver. A
termination of this Agreement pursuant to Section 7.1, an amendment of this
Agreement pursuant to Section 7.3 or an extension or waiver pursuant to Section
7.4 shall, in order to be effective, require in the case of Conseco, RAC or the
Company, action by its Board of Directors or the duly authorized designee of its
Board of Directors.
ARTICLE VIII
SURVIVAL OF PROVISIONS
8.1 Survival. The representations and warranties respectively required
to be made by the Company, Conseco and RAC in this Agreement, or in any
certificate, respectively, delivered by the Company or Conseco pursuant to
Section 6.2 or Section 6.3 hereof will not survive the Closing.
ARTICLE IX
NOTICES
9.1 Notices. All notices and other communications under this Agreement
must be in writing and will be deemed to have been duly given if delivered,
telecopied or mailed, by certified mail, return receipt requested, first-class
postage prepaid, to the parties at the following addresses:
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If to the Company, to:
Pioneer Financial Services, Inc.
0000 Xxxx Xxxx Xxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxx, Xx.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
with a copy to:
XxXxxxxxx, Will & Xxxxx
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, P.C.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
If to Conseco or RAC, to:
Conseco, Inc.
00000 X. Xxxxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxx 00000
Attention: Xxxxxxxx X. Xxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
All notices and other communications required or permitted under this Agreement
that are addressed as provided in this Article IX will, if delivered personally,
be deemed given upon delivery, will, if delivered by telecopy, be deemed
delivered when confirmed and will, if delivered by mail in the manner described
above, be deemed given on the third Business Day after the day it is deposited
in a regular depository of the United States mail. Any party from time to time
may change its address for the purpose of notices to that party by giving a
similar notice specifying a new address, but no such notice will be deemed to
have been given until it is actually received by the party sought to be charged
with the contents thereof.
ARTICLE X
MISCELLANEOUS
10.1 Entire Agreement. Except for documents executed by the Company,
Conseco and RAC pursuant hereto, this Agreement supersedes all prior discussions
and agreements between the parties with respect to the subject matter of this
Agreement, and this Agreement (including the exhibits hereto, the Disclosure
Schedule, the Conseco Disclosure Schedule and other documents delivered in
connection herewith) and the Confidentiality
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Agreement contain the sole and entire agreement between the parties hereto with
respect to the subject matter hereof. The parties agree that any item disclosed
in any section of the Disclosure Schedule or the Conseco Disclosure Schedule
shall be deemed to be disclosed for all purposes of this Agreement,
notwithstanding the fact that such item was not disclosed in any other section
of the Disclosure Schedule or the Conseco Disclosure Schedule.
10.2 Expenses. Except as otherwise expressly provided in Section 4.11,
whether or not the Merger is consummated, each of the Company, Conseco and RAC
will pay its own costs and expenses incident to preparing for, entering into and
carrying out this Agreement and the consummation of the transactions
contemplated hereby.
10.3 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original, but all of which will
constitute one and the same instrument and shall become effective when one or
more counterparts have been signed by each of the parties and delivered to the
other parties.
10.4 No Third Party Beneficiary. Except as otherwise provided herein,
the terms and provisions of this Agreement are intended solely for the benefit
of the parties hereto, and their respective successors or assigns, and it is not
the intention of the parties to confer third-party beneficiary rights upon any
other person.
10.5 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, regardless of the laws
that might otherwise govern under applicable principles of conflicts of laws
thereof.
10.6 Assignment; Binding Effect. Neither this Agreement nor any of the
rights, interests or obligations under this Agreement shall be assigned, in
whole or in part, by operation of law or otherwise by any of the parties without
the prior written consent of the other parties, and any such assignment that is
not consented to shall be null and void. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by,
the parties and their respective successors and assigns.
10.7 Enforcement. The parties agree that irreparable damage would occur
in the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement, this being in addition to any other
remedy to which they are entitled at law or in equity.
10.8 Headings, Gender, etc. The headings used in this Agreement have
been inserted for convenience and do not constitute
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matter to be construed or interpreted in connection with this Agreement. Unless
the context of this Agreement otherwise requires, (a) words of any gender are
deemed to include each other gender; (b) words using the singular or plural
number also include the plural or singular number, respectively; (c) the terms
"hereof," "herein," "hereby," "hereto," and derivative or similar words refer to
this entire Agreement; (d) the terms "Article" or "Section" refer to the
specified Article or Section of this Agreement; (e) all references to "dollars"
or "$" refer to currency of the United States of America; and (f) the term
"person" shall include any natural person, corporation, limited liability
company, general partnership, limited partnership, or other entity, enterprise,
authority or business organization.
10.9 Invalid Provisions. If any provision of this Agreement is held to
be illegal, invalid, or unenforceable under any present or future law, and if
the rights or obligations of the Company or Conseco under this Agreement will
not be materially and adversely affected thereby, (a) such provision will be
fully severable; (b) this Agreement will be construed and enforced as if such
illegal, invalid, or unenforceable provision had never comprised a part hereof;
and (c) the remaining provisions of this Agreement will remain in full force and
effect and will not be affected by the illegal, invalid, or unenforceable
provision or by its severance herefrom.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the duly authorized officers of Conseco and the Company, effective as of the
date first written above.
CONSECO, INC.
By: /s/ XXXXXXX X. XXXXXXX
-----------------------
Xxxxxxx X. Xxxxxxx,
Chairman of the Board
ROCK ACQUISITION COMPANY
By: /s/ XXXXXXX X. XXXXXXX
-----------------------
Xxxxxxx X. Xxxxxxx, President
PIONEER FINANCIAL SERVICES, INC.
By: /s/ XXXXX X. XXXXXX
----------------------
Xxxxx X. Xxxxxx,
Chairman of the Board
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