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Exhibit 10.3
November 6, 1996
Conseco, Inc.
00000 X. Xxxxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxx 00000
Gentlemen:
We make reference to that certain Credit Agreement, dated as of August
31, 1995, as amended and restated as of April 12, 1996 (the "Credit
Agreement"), among Conseco, Inc. ("the Borrower"), the financial institutions
party thereto (the "Banks"), the documentation agents party thereto
(collectively, the "Documentation Agents"), the managing agents party thereto
(collectively, the "Managing Agents") and Bank of America National Trust and
Savings Association, as Administrative Agent for the Banks (the "Administrative
Agent"). Capitalized terms used herein and not otherwise defined herein shall
have the meanings provided in the Credit Agreement.
We understand that:
(a) pursuant to a form of Amended and Restated Declaration of Trust
(the "Declaration"), the Borrower, as sponsor, contemplates creating from time
to time one or more Delaware business trusts (collectively, the "Trusts") to
issue up to $1,000,000,000 of Trust Originated Preferred Securities
(collectively, the "Preferred Securities") pursuant to a registration statement
to be filed with the Securities and Exchange Commission in compliance with the
Securities Act of 1933, as amended, which Preferred Securities when issued will
accrue a maximum cash distribution per annum of up to ten and one-half percent
(10-1/2%) of the liquidation amount of $25 per Preferred Security;
(b) pursuant to the Declaration, the Borrower will acquire all of the
common stock of each of the Trusts (collectively, the "Common Securities" and
together with the Preferred Securities called the "Trust Securities"), for a
purchase price equal to at least 3% of the capital of each of the Trusts on the
date of issuance of the Preferred Securities by such Trust, at the same time as
the Preferred Securities are sold by such Trust;
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(c) the Borrower contemplates issuing up to $1,000,000,000 aggregate
principal amount of Subordinated Deferrable Interest Debentures (collectively,
the "Subordinated Debentures") pursuant to supplemental indentures executed from
time to time (collectively, the "Supplemental Indentures") to the Borrower's
existing form of indenture dated ___________, 1995, whereby the Subordinated
Debentures will be subordinated and junior in right of payment to the prior
payment in full of all senior indebtedness of the Borrower (including, without
limitation, the Liabilities and the Additional Secured Borrower Obligations)
whether now existing or hereafter incurred and the maximum amount of interest
payable on such Subordinated Debentures will not exceed 10-1/2%;
(d) the Trusts, with the Net Proceeds from the issuance of the
Preferred Securities, contemplate purchasing all of the Subordinated Debentures
from the Borrower for the benefit of the holders of the Trust Securities; and
(e) concurrently with the issuance of the Trust Securities, the
Borrower contemplates entering into a Preferred Securities Guarantee Agreement
dated ___________, 1996 (the "Preferred Securities Guarantee") and a Common
Securities Guarantee Agreement dated ___________, 1996 (the "Common Securities
Guarantee"), whereby the Borrower will guarantee the payment of certain amounts
to the holders of the Preferred Securities and the Common Securities,
respectively, upon nonpayment of such amounts by the Trusts; provided that upon
the occurrence and during the continuance of an Event of Default (as defined in
the Declaration), the rights of the holders of the Common Securities to receive
any payments under the Common Securities Guarantee are subordinated to the
rights of the holders of Preferred Securities to receive payments under the
Preferred Securities Guarantee; and provided, further, that the rights of the
holders of the Trust Securities to receive any payments under either the
Preferred Securities Guarantee or the Common Securities Guarantee; as
applicable, shall be subordinate to the rights of Bank of America National Trust
and Savings Association, as administrative agent, to receive payments from the
Borrower under that certain Guaranty, dated as of May 13, 1996 (the "O&D
Guaranty").
(f) the Borrower, as sponsor of the Trusts, may elect at any time after
the Closing Date (as defined in the Declaration) to dissolve the Trusts in
accordance with the terms of the Trust Securities.
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Borrower has requested that the undersigned waive such Events of Default and
each of the undersigned hereby agree to waive the following:
(a) any Default under Section 4.3 (b) of the Credit Agreement
relating to (i) any of the Trusts' failure to make a mandatory prepayment
of the Loans from the Net Proceeds received by any of the Trusts in
connection with the issuance of the Preferred Securities; provided that
the aggregate gross proceeds of the issuance of such Preferred
Securities does not exceed $500,000,000, the Net Proceeds of such
issuance are used to purchase the Subordinated Debentures and the
maximum per annum cash distribution accrued on the Preferred Securities
does not exceed ten and one-half percent (10-1/2%) of the liquidation
amount of $25 per Preferred Security and (ii) the Borrower's failure to
make a mandatory prepayment of the Loans from the Net Proceeds received
by the Borrower in connection with the issuance of the Subordinated
Debentures, provided that the aggregate gross proceeds of the issuance
of such Subordinated Debentures shall not exceed $500,000,000.
(b) any Default under Section 9.1 of the Credit Agreement relating
to (i) the issuance of the Subordinated Debentures to the Trusts;
provided that (A) the Indebtedness evidenced by the Subordinated
Debentures shall not exceed an aggregate principal amount of
$500,000,000, (B) the interest rate per annum payable on such
Subordinated Debentures shall not exceed 10-1/2% and (C) the
Subordinated Debentures shall subordinated to the Liabilities and the
Additional Secured Borrower Obligations on terms satisfactory to the
Administrative Agent and (ii) the Contingent Obligations evidenced by
the Preferred Securities Guarantee and the common Securities Guarantee;
provided that the aggregate principal amount of such indebtedness shall
not exceed $500,000,000; and provided, further, that such Contingent
Obligations are subordinated to the payment of the obligations of the
Borrower under the O & D Guaranty on terms satisfactory to the
administrative agent party thereto;
(c) any Default under Section 9.3(c) of the Credit Agreement
relating (i) the Borrower's failure to meet the .35:1 Debt to Total
Capitalization in connection with the Acquisition of the Common
Securities of the Trusts and (ii) the Borrower's failure to pledge the
Common Securities to the Administrative Agent, for the benefit of the
Banks, in connection with the Acquisition of the Trusts; and
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(d) any Default under Section 9.10 of the Credit
Agreement relating to the Borrower's Investment in the Common
Securities.
In addition to the foregoing, the undersigned agree that the
for purposes of determining the Borrower's compliance with the financial
covenants set forth in Sections 10.2, 10.3 and 10.5 of the Credit Agreement,
the Indebtedness evidenced by the Subordinated Debentures shall be deemed to
constitute equity of the Borrower so long as such Indebtedness is held by the
Trusts for the benefit of the holders of the Trust Securities and the Trust
Securities remain outstanding and the Trusts remain in effect in accordance
with the terms of the Declaration as reviewed to date.
In consideration of the foregoing waivers and agreements by the
undersigned Banks, the Borrower agrees that it will not, and will not permit
any of its Subsidiaries to
(a) make any payment (whether of principal, interest or
otherwise) on any Subordinated Debentures on any day other
than the stated scheduled date for such payment set forth in the
Supplemental Indenture reviewed by the Administrative Agent to date;
(b) prepay, redeem, purchase, defease or transfer its
obligations under any Subordinated Debentures, or make any
deposit for any of the foregoing; or
(c) amend or modify the Declaration, any Supplemental
Indenture, the terms of the Trust Securities, the Preferred
Securities Guarantee or the Common Securities Guarantee if such
amendment or modification could have an adverse effect on the Banks or
any material provision of the Loan Documents.
Furthermore, the Borrower agrees, as sponsor under the
Declaration, the notwithstanding anything contained herein or in the
Declaration it will not liquidate, dissolve or otherwise terminate any of the
Trusts without the prior written consent of the Required Banks (which consent
shall not be unreasonably withheld).
The waivers granted hereunder will not in any way operate as an
amendment or modification of the Credit Agreement or any other Loan Document or
a waiver or consent with respect to any existing or future Default not
specifically enumerated above.
If the foregoing is in accordance with your understanding and
is acceptable to you, please so indicate by
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executing this letter in the space provided below and returning it to the
Administrative Agent for the benefit of the Banks.
Very truly yours,
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as
Administrative Agent
By:__________________________________
Name: /s/____________________________
Title:_______________________________
BANK OF AMERICA ILLINOIS
By: _________________________________
Name: /s/____________________________
Title:_______________________________
BANK OF MONTREAL
By: _________________________________
Name: /s/____________________________
Title:_______________________________
THE BANK OF NEW YORK
By: _________________________________
Name: /s/____________________________
Title:_______________________________
THE BANK OF TOKYO - MITSUBISHI
TRUST COMPANY
By: _________________________________
Name: /s/____________________________
Title:_______________________________
BANK ONE TEXAS, N.A.
By: _________________________________
Name: /s/____________________________
Title:_______________________________
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BANQUE NATIONALE DE PARIS
By: _________________________________
Name: /s/____________________________
Title:_______________________________
By: _________________________________
Name: /s/____________________________
Title:_______________________________
BANQUE PARIBAS
By: _________________________________
Name: /s/____________________________
Title:_______________________________
By: _________________________________
Name: /s/____________________________
Title:_______________________________
THE CHASE MANHATTAN BANK, N.A.
By: _________________________________
Name: /s/____________________________
Title:_______________________________
COMERICA BANK
By: _________________________________
Name: /s/____________________________
Title:_______________________________
CORESTATES BANK, NA
By: _________________________________
Name: /s/____________________________
Title:_______________________________
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CREDIT LYONNAIS CAYMAN ISLAND
BRANCH
By:______________________________
Name:/s/_________________________
Title:___________________________
DEUTSCHE BANK AG,
NEW YORK AND/OR
CAYMAN ISLANDS BRANCH
By:______________________________
Name:/s/_________________________
Title:___________________________
By:______________________________
Name:/s/_________________________
Title:___________________________
DRESDNER BANK AG, NEW YORK BRANCH
By:______________________________
Name:/s/_________________________
Title:___________________________
By:______________________________
Name:/s/_________________________
Title:___________________________
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA
By:______________________________
Name:/s/_________________________
Title:___________________________
FLEET NATIONAL BANK
By:______________________________
Name:/s/_________________________
Title:___________________________
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THE FUJI BANK LIMITED
By:________________________________
Name:/s/___________________________
Title:_____________________________
ING CAPITAL CORPORATION
By:________________________________
Name:/s/___________________________
Title:_____________________________
THE LONG-TERM CREDIT BANK OF JAPAN,
LTD., CHICAGO BRANCH
By:________________________________
Name:/s/___________________________
Title:_____________________________
THE MITSUBISHI TRUST & BANKING CORP.
By:________________________________
Name:/s/___________________________
Title:_____________________________
NATIONSBANK, N.A. (SOUTH)
By:________________________________
Name:/s/___________________________
Title:_____________________________
ROYAL BANK OF SCOTLAND
By:________________________________
Name:/s/___________________________
Title:_____________________________
THE SANWA BANK LTD., CHICAGO BRANCH
By:________________________________
Name:/s/___________________________
Title:_____________________________
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SOCIETE GENERALE
By:__________________________________
Name:/s/_____________________________
Title:_______________________________
STAR BANK, N.A.
By:__________________________________
Name:/s/_____________________________
Title:_______________________________
THE SUMITOMO BANK, LIMITED
By:__________________________________
Name:/s/_____________________________
Title:_______________________________
By:__________________________________
Name:/s/_____________________________
Title:_______________________________
XXX XXXXXX AMERICAN CAPITAL PRIME RATE
By:__________________________________
Name:/s/_____________________________
Title:_______________________________
THE YASUDA TRUST & BANKING CO., LTD.
By:__________________________________
Name:/s/_____________________________
Title:_______________________________
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Agreed and Accepted this 6th day
November, 1996:
CONSECO, INC.
By: /s/ Xxxxxx X. Xxxx
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Name: Xxxxxx X. Xxxx
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Title: Executive Vice President
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