Exhibit 10.8.31
FIRST STAGE AMENDMENT AND AGREEMENT
Re: Non-Refinanced 1998 D&O Loans
THIS FIRST STAGE AMENDMENT AND AGREEMENT, dated as of March20, 2002
(this "Agreement"), among Conseco, Inc. ("Conseco"), CDOC, Inc. ("CDOC"), CIHC,
Incorporated ("CIHC"), Bank of America, N.A., as administrative agent (in such
capacity, the "Administrative Agent"), as Collateral Agent (in such capacity,
the "Collateral Agent") and as Depositary Bank (in such capacity, the
"Depositary Bank"), the various financial institutions parties hereto (each a
"Bank" and collectively, the "Banks").
W I T N E S S E T H:
WHEREAS, Conseco, the Banks and the Administrative Agent are parties
to that certain Agreement, dated as of September 22, 2000, relating to the 1998
Director and Officer Loan Credit Agreement (the "September 22, 2000 Agreement");
WHEREAS, Conseco has requested that the Administrative Agent and the
Banks amend the September 22, 2000 Agreement as more fully described herein;
WHEREAS, CDOC, the Collateral Agent and the Depositary Bank are
parties to that certain Amended and Restated Cash Collateral Pledge Agreement,
dated as of November 22, 2000 (the "Cash Collateral Agreement");
WHEREAS, CDOC has requested that the Administrative Agent and the
Banks amend the Cash Collateral Agreement as more fully described herein;
WHEREAS, Conseco, pursuant to a Guaranty, dated as of August 21, 1998
(the "Conseco Guaranty") has guaranteed the obligations of the borrowers under
the Credit Agreement, dated as of August 21, 1998, among the persons listed on
the signature pages thereto as Borrowers, the Banks, and the Administrative
Agent (the "Credit Agreement");
WHEREAS, Conseco has requested that the Administrative Agent and the
Banks amend the Conseco Guaranty as more fully described herein;
WHEREAS, CIHC, pursuant to a Guaranty and Subordination Agreement,
dated as of September 22, 2000 (the "CIHC Guaranty"), has, among other things,
guaranteed the obligations Conseco under the Conseco Guaranty;
WHEREAS, CIHC has requested that the Administrative Agent and the
Banks amend the CIHC Guaranty as more fully described herein;
WHEREAS, Articles II, III and IV to the Appendix to that certain
Five-Year Credit Agreement, dated as of September 25, 1998, as amended (the
"Five-Year Credit Agreement"), were incorporated by reference into the September
22, 2000 Agreement;
WHEREAS, the parties to the Five-Year Credit Agreement now wish to
amend the Appendix and the parties hereto wish to consent to the amendment of
the Appendix; and
WHEREAS, Conseco will agree to pay certain fees as more fully
described below;
NOW, THEREFORE, in consideration of the mutual promises herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
Section 1. DEFINITIONS. Capitalized terms used and not otherwise
defined in this Agreement shall have the meanings assigned thereto in the Credit
Agreement. As used herein, the following terms shall have the following
meanings:
"A.M. Best A- Status" shall have the meaning set forth in Section 1.01
of the Appendix.
"Agreement Fee" shall have the meaning set forth in Section 7.1(a)
hereof.
"Appendix" shall have the meaning set forth in Section 6.1 hereof.
"Appendix Amendment" shall have the meaning set forth in Section 6.1
hereof.
"D&O Facilities" shall have the meaning set forth in Section 1.01 of
the Appendix.
"Effective Date" shall have the meaning set forth in Section 8 hereof.
"Exchange Offer" shall have the meaning set forth in Section 1.01 of
the Appendix.
"Fees" shall have the meaning set forth in Section 7.1 hereof.
"Specified D&O Facilities" shall have the meaning set forth in Section
1.01 of the Appendix.
"Trust Preferred Securities" shall have the meaning set forth in
Section 1.01 of the Appendix.
Section 2. AMENDMENTS TO SEPTEMBER 22, 2000 AGREEMENT.
2.1 Section 1.1 of the September 22, 2000 Agreement is hereby amended
as follows:
(a) The definition of "CDOC" is hereby added to Section 1.1 of
the September 22, 2000 Agreement in its proper alphabetical order and
reads as follows:
"CDOC" shall mean CDOC, Inc., a Delaware corporation.
(b) The definition of "Required Banks" is hereby added to Section
1.1 of the September 22, 2000 Agreement in its proper alphabetical
order and reads as follows:
"Required Banks" shall have (a) with respect to the Loans, the meaning
assigned thereto in the Loan Documents and (b) with respect to the New
Loans, the meaning assigned thereto in the New Loan Documents.
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(c) The definition of "Regulation U" is hereby added to Section
1.1 of the September 22, 2000 Agreement in its proper alphabetical
order and reads as follows:
"Regulation U" shall have the meaning set forth in the Existing
Guaranty.
2.2 Section 3 of the September 22, 2000 Agreement is hereby amended
by:
(a) deleting "No Default Acknowledgment" appearing therein and
substituting in lieu thereof "No Default Acknowledgments";
(b) inserting "(a)" immediately prior to the first sentence of
such section; and
(c) inserting a new clause (b) to read as follows:
"(b) The Administrative Agent and the Banks hereby
acknowledge that the Guarantor will not be in default of Section
3.4 or Section 4.3 of the Existing Guaranty (and CIHC will not be
in default of the CIHC Guaranty) if the Guarantor, in furtherance
of its rights set forth in Section 5(e) of this Agreement in
respect of the Existing Loans, takes possession of any Borrower's
"margin stock" (as defined in Regulation U) so long as Guarantor
complies with the provisions of Regulation U in connection
therewith."
2.3 The following sentence is hereby added to the end of Section 5(a)
of the September 22, 2000 Agreement to read as follows: "For purposes of this
Section 5(a), in making any calculation to determine Cash Collateral Deposits
required to be made or held, such required amounts will be reduced by the amount
of any application of cash collateral under Section 5(e) hereof."
2.4 Section 5(e) is hereby added to the September 22, 2000 Agreement
to read as follows:
"(e) The Guarantor may, at its option, direct the Administrative
Agent to apply the cash collateral provided by CDOC in respect of
the Specified D&O Facilities as follows: (i) to the payment of
the Specified D&O Facilities (or to all the D&O Facilities, as
applicable under Article II of the Appendix), pro rata as to the
Specified D&O Facilities (or to all the D&O Facilities, as
applicable under Article II of the Appendix), but such allocation
thereof need not be pro rata as to the underlying borrowers; (ii)
to the payment under the Existing Guaranty or the New Conseco
Guaranty of the Specified D&O Facilities (or to all the D&O
Facilities, as applicable under Article II of the Appendix), pro
rata as to the Specified D&O Facilities (or to all the D&O
Facilities, as applicable under Article II of the Appendix), but
such allocation thereof need not be pro rata as to the underlying
borrowers or (iii) to the Guarantor's purchase of Borrowers'
loans, subject to intercreditor rights satisfactory to the
Required Banks and the Guarantor, provided that the Guarantor may
only purchase an individual Borrower's loans if the Guarantor
simultaneously purchases all loans under the D&O Facilities of
such Borrower. To the extent the Guarantor purchases an
individual Borrower's loans pursuant to clause (iii) of the
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preceding sentence, each Bank hereby consents to the
Administrative Agent (in its sole discretion) entering into an
amendment of the Credit Agreement with such Borrower subsequent
to the Effective Date which (x) amends the definition of
"Eligible Assignee" in the New Loan Documents to include the
Guarantor and (y) provides for any other amendments of any other
provisions of the New Loan Documents necessary to provide that
the purchase of such Borrower's loans may be non-pro-rata as to
the assigning Bank and the other underlying Borrowers."
2.5 Section 5(f) is hereby added to the September 22, 2000 Agreement
to read as follows:
"(c) If for any reason the Guarantor believes that any
payment made by it pursuant to Section 5(e) of this Agreement in
respect of the Existing Loans would not be subject to subrogation
rights under Section 2.6 of the Existing Guaranty, the Guarantor
and the Required Banks in their sole discretion, may agree to an
alternative procedure to preserve substantially equivalent
economic rights to the Guarantor and substantially equivalent
economic results for the Banks. Without limiting the foregoing,
if the Guarantor is paying all of the Existing Loans of a
particular Borrower, the Banks will assign their rights in
respect of said Existing Loans to the Guarantor, subject to
intercreditor rights satisfactory to the Required Banks and the
Guarantor."
Section 3. AMENDMENTS TO CASH COLLATERAL AGREEMENT. The following
sentence shall be added at the end of Section 4.5 of the Cash Collateral
Agreement: "The Grantor shall have the right to make withdrawals to the extent
such withdrawals are simultaneously applied as set forth in Section 5(e) of the
Agreements Re: Specified D&O Facilities."
Section 4. RESERVED.
Section 5. AMENDMENT TO CIHC GUARANTY. Section 5.14 of the CIHC
Guaranty is hereby deleted.
Section 6. CONSENT.
6.1 The parties hereto consent to the amendment of the Appendix as
attached hereto as Exhibit A (the "Appendix Amendment"). The parties hereto
further agree that all references in the September 22, 2000 Agreement and the
Conseco Guaranty to the Appendix shall mean the Appendix as so amended by the
Appendix Amendment (the "Appendix").
6.2 Conseco may, at its option, make payments or purchases under the
Specified D&O Facilities (or to all the D&O Facilities, as applicable under
Article II of the Appendix or the related Conseco guaranty), pro rata as to the
Specified D&O Facilities (or to all the D&O Facilities, as applicable under
Article II of the Appendix), but such allocation thereof need not be pro rata as
to the underlying borrowers.
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Section 7. FEES.
7.1 Conseco hereby agrees that, upon the effectiveness of this
Agreement pursuant to the provisions of Section 8 hereof, Conseco shall be
obligated to pay, and shall pay, to the Administrative Agent, for the pro rata
benefit of the Banks, the following fees (the "Fees"):
(a) On the Effective Date, an agreement fee (the "Agreement Fee")
in immediately available funds equal 0.50% of the principal amount of
the Loans outstanding on such date, net of a proportionate share
(which share shall equal the share of the Loans payable to such Bank
divided by the outstanding Loans under all the Specified D&O
Facilities) of the cash collateral then on deposit securing Conseco's
obligations relating to the Credit Agreement; provided that the
Agreement Fee shall only be payable to those Banks that execute and
deliver this Agreement by March 20, 2002; and
(b) From and after the Effective Date and until all Loans are
paid in full, a continuing per annum fee equal to 0.75% of all Loans
then outstanding, payable quarterly in arrears, quarterly on the last
Business Day of each calendar quarter, with payment commencing on
March 31, 2002.
7.2 Conseco's obligation to pay each of the Fees shall be irrevocable,
unconditional, and absolute and, consistent therewith, shall not terminate in
the event that this Agreement shall otherwise be terminated pursuant to its
provisions. Such fees shall be in addition to any fees provided for under the
September 22, 2000 Agreement or the Credit Agreement.
Section 8. CONDITIONS PRECEDENT. This Agreement shall become effective
on such date (the "Effective Date") when each of the conditions precedent set
forth in this Section 8 shall have been satisfied, and notice thereof shall have
been given by the Administrative Agent to Conseco and the Banks.
8.1 Receipt of Documents. The Administrative Agent shall have received
all of the following documents duly executed, dated the date hereof or such
other date as shall be acceptable to the Administrative Agent, and in form and
substance satisfactory to the Administrative Agent:
(a) This Agreement, duly executed by Conseco, CDOC, CIHC, the
Administrative Agent and the Required Banks;
(b) A certificate of the Secretary or Assistant Secretary of
Conseco (i) certifying the names and true signatures of the officers
of Conseco authorized to execute, deliver and performance, as
applicable, this Agreement, and all other documents to be delivered by
it hereunder and (ii) attaching copies of the resolutions of the board
of directors of Conseco authorizing the transactions contemplated
hereby;
(c) A certificate of the Secretary or Assistant Secretary of CIHC
(i) certifying the names and true signatures of the officers of CIHC
authorized to execute, deliver and perform, as applicable, all
documents to be delivered by it hereunder and (ii) attaching copies of
the resolutions of the board of directors of CIHC authorizing the
transactions contemplated hereby;
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(d) A certificate of the Secretary or Assistant Secretary of CDOC
(i) certifying the names and true signatures of the officers of CDOC
authorized to execute, deliver and perform, as applicable, all
documents to be delivered by it hereunder and (ii) attaching copies of
the resolutions of the board of directors of CDOC authorizing the
transactions contemplated hereby;
(e) The Reaffirmation of (i) the Conseco Guaranty, (ii) the CIHC
Guaranty and (iii) the Amended and Restated Cash Collateral Agreement,
in the form of Exhibit B attached hereto;
(f) The opinion of Xxxxx X. Xxxxxx, counsel of Conseco and CIHC,
substantially in the form of Exhibit C, and addressing such
other legal matters as the Administrative Agent may reasonably
require;
(g) The opinion of Weil, Gotshal & Xxxxxx LLP, outside counsel to
Conseco and CIHC, substantially in the form of Exhibit D, and
addressing such other legal matters as the Administrative Agent may
reasonably require;
(h) Duly authorized, executed and delivered copies of (i) the
First Stage Amendment and Agreement Re: 1997 D&O Loans, dated as of
Xxxxx 00, 0000, (xx) the First Stage Amendment and Agreement Re: 1998
D&O Loans, dated as of March 20, 2002, and (iii) the First Stage
Amendment and Agreement Re: 1999 D&O Loans, dated as of March 20,
2002, substantially in the form hereof;
(i) A duly authorized, executed and delivered copy of Third
Amendment to Five-Year Credit Agreement, dated as of March 20, 2002,
among Conseco, the various financial institutions party thereto, and
Bank of America, N.A. as agent thereunder; and
(j) Receipt by the Administrative Agent of a letter to the Banks
evidencing Conseco's understanding if scheduled payments are not made
on or before the date that such scheduled payments become due and
payable in respect of all Trust Preferred Securities, a downgrade from
A.M. Best A- Status would occur.
8.2 Additional Conditions. The effectiveness of this Agreement and the
consent of the Banks are subject to the following further conditions precedent:
(a) With respect to Conseco, no Default exists and no Event of
Default will exist after giving effect to this Agreement;
(b) The representations and warranties of Conseco contained in
Article III of the Conseco Guaranty, are true and correct in all
material respects with the same effect as though made on the Effective
Date, except, to the extent that any such representations and
warranties relate expressly to an earlier date, such representations
and warranties shall have been true and correct in all material
respects as of such earlier date;
(c) No Material Litigation exists other than the litigation
described in Schedule I attached hereto;
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(d) No Material Adverse Change has occurred with respect to
Conseco or CIHC since September 30, 2001 (except for changes in or
adverse effects upon, the business, properties, condition (financial
or otherwise) of Conseco and CIHC as disclosed in press releases,
public filings or otherwise in writing to the Administrative Agent);
(e) Conseco shall have paid all accrued and unpaid fees, costs,
expenses and other disbursements to date, including attorneys' fees
and costs, including those to be incurred in connection, negotiation,
and execution of this Agreement. Conseco shall remain liable and shall
promptly reimburse the Administrative Agent for such future fees,
costs expenses and other disbursements as provided for in the existing
Loan Documents;
(f) The Banks, with the approval of Conseco, shall have hired
Ernst & Young LLP as a financial advisor to review the financial
condition and performance of Conseco and its Subsidiaries, and the
Administrative Agent shall be satisfied as to the duration and scope
of such review; and
(g) The Exchange Offer and the disclosures made in connection
therewith (including, without limitation, pursuant to the related
offering memorandum) shall be on terms and conditions satisfactory to
the Administrative Agent.
Section 9. MISCELLANEOUS.
9.1 Severability. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such provision and such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this Agreement
or affecting the validity or enforceability of such provision in any other
jurisdiction.
9.2 Headings. The various headings of this Agreement are inserted for
convenience only and shall not affect the meaning or interpretation of this
Agreement or any provisions hereof.
9.3 Execution in Counterparts. This Agreement may be executed by the
parties hereto in several counterparts, each of which shall be deemed to be an
original and all of which shall constitute together but one and the same
agreement.
9.4 Governing Law. THIS AGREEMENT SHALL BE DEEMED TO BE A CONTRACT
MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF ILLINOIS.
9.5 Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns.
[signatures follow]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized as of the day
and year first above written.
CONSECO, INC.
By: /s/ Xxxxx X. Xxxxx
----------------------------------
Name: Xxxxx X. Xxxxx
Title: Senior Vice President, Chief
Accounting Officer and Treasurer
CIHC, INCORPORATED
By: /s/ Xxxxxxx X. Xxxxxxxx, Xx.
----------------------------------
Name: Xxxxxxx X. Xxxxxxxx, Xx.
Title: Senior Vice President, Corporate Taxes
CDOC, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx, Xx.
----------------------------------
Name: Xxxxxxx X. Xxxxxxxx, Xx.
Title: Senior Vice President, Corporate Taxes
BANK OF AMERICA, N.A., as Administrative
Agent, as a Bank, as Collateral Agent
and as Depositary Bank
By: /s/ Xxxxxxx Xxxxxxxxx
----------------------------------
Name: Xxxxxxx Xxxxxxxxx
Title: Managing Director
JPMORGAN CHASE BANK
By: /s/ Xxxxx X. Xxxxxxx
----------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Vice President
DEUTSCHE BANK AG, New York and/or
Cayman Island Branches
By: /s/ Xxxxxx X. Xxxx, Xx.
----------------------------------
Name: Xxxxxx X. Xxxx, Xx.
Title: Director
By: /s/ Xxxx X. Xxxxx
----------------------------------
Name: Xxxx X. Xxxxx
Title: Managing Director
THE BANK OF NEW YORK
By: /s/ Xxxxxxx X. Xxxxxxx
----------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Vice President
Schedule I
Material Litigation
Litigation described in Form 10-Q of Conseco, Inc. for the quarterly
period ended September 30, 2001.
Xxxxxx X. Xxxxx v. Conseco, Inc., et al.
Exhibit A
Appendix Amendment
AMENDMENT, dated as of March 20, 2002 (this "Amendment"), to the
Conseco, Inc. Appendix, dated as of September 22, 2000 (the "Appendix").
1. Definitions. Unless otherwise defined herein, terms defined in the
Appendix and used herein shall have the meanings given to them in the Appendix.
Amendment to Section 1.01. Section 1.01 is hereby amended as follows:
(i) (a) by deleting in its entirety the definition of "Cash on
Hand Target".
(b) by amending the definition of "Conseco Adjusted Earnings" as
follows:
(i) by deleting the term "non-cash" each time it appears in
clauses (f) and (g) thereof;
(ii) by deleting the phrase "(provided that the after tax amounts
described in clauses (f) and (g) shall not exceed in the aggregate
$500,000,000 for any Calculation Period ending on or before September
30, 2001, and $50,000,000 for any Calculation Period ending
thereafter)" where it appears after clause (g) thereof and inserting
in lieu thereof the following:
"(provided that the after tax amounts described in clauses (f)
and (g) shall not exceed (i) more than $500,000,000 in the
aggregate accrued or incurred during Fiscal Year 2002 (provided
that no more than $50,000,000 (accrued or incurred during Fiscal
Year 2002) of such expenses, losses or other charges in the
aggregate may be in cash), and (ii) more than $50,000,000 in the
aggregate accrued or incurred for any Fiscal Year thereafter)";
and
(iii) by inserting the following sentence at the end thereof:
"Notwithstanding the foregoing, Conseco Adjusted Earnings shall
exclude any income or gain, or expense, loss or charge, (x)
associated with Conseco's ownership of AT&T Wireless Stock, (y)
resulting from any impairment of the D&O Facilities or (z) set
forth on Annex II attached hereto, provided that the amounts set
forth for the fiscal periods on such Annex may be excluded in the
applicable Calculation Period prior to the date of the Amendment
as well as any Calculation Period after the date of the Amendment
that includes such fiscal period(s)."
(c) by amending the definition of "Conseco Finance Tangible Net Worth"
by deleting the text of clause (b) where it occurs in the definition thereof and
inserting in lieu thereof the following:
"(b) any charges specified in clause (f) or (g) of the definition of
Conseco Adjusted Earnings; provided that such charges shall not be
permitted to exceed $150,000,000 on an after tax basis in the
aggregate and no more than $15,000,000 of such $150,000,000 of charges
on an after-tax basis may be in cash"
(d) by amending the definition of "Interest Coverage Ratio" by
inserting the following sentence at the end thereof:
"For purposes of determining the Interest Coverage Ratio, the term
"Conseco Available Cash Flow" shall exclude the amount of (i) Net
Proceeds received by Conseco in connection with any Disposition of any
right or interest of Conseco or any of its Subsidiaries in the General
Motors Building less (ii) the statutory carrying value of Conseco and
its Subsidiaries in respect of the General Motors Building (the amount
of clause (i) less the amount of clause (ii), the "GM Gain");
provided, that in connection with determining the Interest Coverage
Ratio for purposes of compliance with any conditions precedent to an
extension of the maturity date of the $1.5 Billion Facility or any of
the D&O Facilities, only the first $250,000,000 of any such GM Gain
may be included in such determination."
(e) by amending the definition of "Relevant CIHC Guaranty" by deleting
the second sentence thereof.
(f) by deleting in its entirety the definition of "$144 Million D&O
Credit Agreement" and inserting in lieu thereof the following:
"$144 Million D&O Credit Agreement" means the Credit Agreement, dated
as of November 22, 2000, as amended, supplemented or otherwise
modified or refinanced, among the individual borrowers parties
thereto, the banks parties thereto and JPMorgan Chase Bank as
administrative agent (relating to all of the then-existing loans under
the $144 Million D&O Facility).
(g) by deleting in its entirety the definition of "$181 Million D&O
Credit Agreement" and inserting in lieu thereof the following:
"$181 Million D&O Credit Agreement" means collectively (i) the Credit
Agreement, dated as of August 21, 1998, among the individual borrowers
parties thereto, the banks parties thereto and Bank of America, N.A.,
as administrative agent, as amended, supplemented or otherwise
modified or refinanced, and (ii) the Credit Agreement, dated as of
November 22, 2000, as amended, supplemented or otherwise modified or
refinanced, (relating to certain but not all of the then-existing
loans under the $181 Million D&O Facility) pursuant to which Bank of
America, N.A. is the administrative agent.
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(h) by deleting in its entirety the definition of "$245 Million D&O
Credit Agreement" and inserting in lieu thereof the following:
"$245 Million D&O Credit Agreement" means the Credit Agreement, dated
as of November 22, 2000, as amended, supplemented or otherwise
modified or refinanced, among the individual borrowers parties
thereto, the banks parties thereto and Bank of America, N.A., as
administrative agent (relating to all of the then-existing loans under
the $245 Million D&O Facility).
(i) by adding thereto the following new definitions in the appropriate
alphabetical order:
"Amendment" means this Amendment, dated as of March 20, 2002, in
respect of the Appendix.
"Amendment Effective Date" means the "Effective Date" as defined in
the Amendment.
"AT&T Wireless Stock" means 10,319,050 shares of AT&T Wireless
Services, Inc. common stock par value $.01 per share.
"Exchange Offer" means the exchange offer pursuant to the Offering
Memorandum dated as of March 18, 2002, pursuant to which Conseco offered to
exchange Specified Existing Public Debt for New Exchange Offer Public Debt in
accordance with the terms of such Offering Memorandum, any exchange offer in
connection with the registration of the New Exchange Offer Public Debt with the
Securities and Exchange Commission and any exchange offer on terms substantially
similar to the foregoing exchange offers.
"General Motors Building" means the building located at 000 0xx
Xxxxxx, Xxx Xxxx, XX 00000.
"New Exchange Offer Public Debt" means the senior notes issued
pursuant to an Exchange Offer in exchange for Specified Existing Public Debt or
other New Exchange Offer Public Debt.
"Specified Existing Public Debt" means collectively Conseco's 8.5%
Senior Notes due October 15, 2002, 6.4% Senior Notes due February 10, 2003,
8.75% Senior Notes due February 9, 2004, 6.8% Senior Notes due June 15, 2005, 9%
Senior Notes due October 15, 2006 and 10.75% Senior Notes due June 15, 2008.
"Trigger Date" means (i) in the case of the sale of Sufficient Assets,
the Reduction Date and (ii) in the case of any other Approved Strategic
Alternative, the date such Approved Strategic Alternative is approved by the
Required Banks.
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2. Amendment to Section 1.03. Section 1.03 of the Appendix is hereby
amended by inserting at the end thereof a new Section 1.03(c):
"(c) For purposes of calculating any financial covenants or related
definitions hereunder, any charges taken to writeoff goodwill to the
extent required by the Financial Accounting Standards Board of the
American Institute of Certified Public Accountants Statement No. 142
shall be excluded."
(a) Amendment to Section 2.01. (a) Section 2.01(a) of the Appendix is
hereby amended by deleting such Section in its entirety and substituting in lieu
thereof the following:
"(a) [Intentionally Omitted.]"
(b) Section 2.01(b) of the Appendix is hereby amended by deleting such
Section 2.01(b) in its entirety and substituting in lieu thereof the following:
"(b) On the Amendment Effective Date and thereafter, within three
Business Days after Conseco or any of its Subsidiaries receives any
Available Net Proceeds, such Available Net Proceeds shall be applied
as follows: first, the first $352,000,000 shall be retained by
Conseco; second, the next $313,000,000 shall be applied pro rata to
the $1.5 Billion Facility and the Specified D&O Facilties (in the
manner contemplated by Section 2.02(c)); third, following the
application of $313,000,000 pursuant to clause second above and
thereafter until the earlier of (i) December 31, 2003 and (ii) the
application of an additional $250 million pursuant to this clause, 50%
per transaction of any Available Net Proceeds shall be retained by
Conseco and 50% per transaction of any Available Net Proceeds shall be
applied pro rata to the $1.5 Billion Facility and the Specified D&O
Facilities (in the manner contemplated by Section 2.02(c)); fourth,
after the earlier of (i) December 31, 2003 and (ii) the application of
an additional $250 million pursuant to clause third above, 25% per
transaction of any Available Net Proceeds shall be retained by Conseco
and 75% per transaction of any Available Net Proceeds shall be applied
pro rata to the $1.5 Billion Facility and the Specified D&O Facilities
(in the manner contemplated by Section 2.02(c)); and fifth, after
March 31, 2004, 50% per transaction of any Available Net Proceeds
shall be retained by Conseco and 50% per transaction of any Available
Net Proceeds shall be applied pro rata to the $1.5 Billion Facility
and the Specified D&O Facilities (in the manner contemplated by
Section 2.02(c)); provided that in the event that the Relevant Banks
under the D&O Facilities agree to grant Conseco an option to extend
the date by which Conseco is required to pay, purchase or cash
collateralize in full the D&O Facilities or the related Conseco
Guaranty from December 31, 2003 until March 31, 2005, the application
of Available Net Proceeds pursuant to this Section 2.01(b) to the $1.5
Billion Facility and the D&O Facilities shall be as follows: (i) in
clause second above, after $50,000,000 of Available Net Proceeds have
been applied to the Specified D&O Facilities, the remainder shall be
applied pro rata to the $1.5 Billion Facility and the D&O Facilities
(in the manner contemplated by Section 2.02(c)); and (ii) in clauses
third, fourth and fifth above, the references to the Specified D&O
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Facilities shall be deemed to be references to the D&O Facilities. Any
Available Net Cash Proceeds referred to in this paragraph as being
available for retention by Conseco (A) must, if received by a
Subsidiary, be distributed to Conseco for such purpose if such
distribution is not prohibited by law, rule or regulation or the
Xxxxxx Agreement and (B) may be used by Conseco for any purpose
permitted by this Appendix.
(c) Section 2.01(c) is hereby amended by deleting such Section in its
entirety and substituting in lieu thereof the following:
"(c) [Intentionally Omitted]."
(d) Amendment to Section 2.02. (a) Section 2.02(a) is hereby amended
by deleting such Section in its entirety and substituting in lieu thereof the
following:
"(a) [Intentionally Omitted]."
(e) Section 2.02(b) is hereby amended by deleting such Section in its
entirety and substituting in lieu thereof the following:
"(b) [Intentionally Omitted]."
(f) Section 2.02(c) is hereby amended by deleting such Section in its
entirety and substituting in lieu thereof the following:
"(c) Any application of Available Net Proceeds allocated to the $1.5
Billion Facility and the Specified D&O Facilities or the D&O
Facilities, as applicable, pursuant to Section 2.01(b) (and any
application of Net Proceeds pursuant to clause (a)(ii) of the
definition of "Exempt Waterfall Amounts") shall be allocated ratably
to each such Facility based on the aggregate Exposure then outstanding
under such Facilities, and ratably to the Exposure of each Bank under
each such Facility. The Available Net Proceeds so allocated to each
Specified D&O Facility and D&O Facility, as applicable, at the
discretion of Conseco, shall be either (i) deposited in a cash
collateral account pursuant to the applicable Cash Collateral
Agreement or (ii) applied to purchase or repay "Loans" made to the
individual borrowers pursuant to the applicable Specified D&O Facility
or D&O Facility, as applicable or (iii) applied to pay the related
Conseco Guaranty."
(g) Amendment to Article III. Article III of the Appendix is hereby
amended by adding at the end thereof the following new Sections 3.12 and 3.13:
"3.12. Hiring of Ernst & Young. Conseco hereby agrees to (i) the
hiring by the Banks of Ernst & Young LLP as a financial advisor to review the
financial condition and performance of Conseco and its Subsidiaries, the
duration and scope of such review to be at the direction and under the control
of Conseco and the Agents (and Conseco agrees to use reasonable best efforts to
facilitate such review) and (ii) paying all fees, costs and expenses incurred
from time to time in connection with such review promptly upon receipt of an
invoice for such services.
A-5
3.13. A.M. Best Rating Reduction Remedy. If on any date (the
"Reduction Date") the rating from A.M. Best Company is reduced to less than B+
on Bankers Life and Casualty Company, Conseco Annuity Assurance Company, Conseco
Health Insurance Company, Conseco Life Insurance Company or Conseco Senior
Health Insurance Company, Conseco shall be obligated to retain an investment
banker of national recognition (the "Investment Banker") reasonably satisfactory
to the Agents to explore strategic alternatives ("Strategic Alternatives") to
repaying in full in cash all Obligations under the $1.5 Billion Facility and
each of the D&O Facilities (or, in the case of the D&O Facilities, cash
collateralize such Facilities), which Strategic Alternatives shall include
either (i) the sale of one or more of its Subsidiaries ("Sufficient Assets") the
value of which will be sufficient to repay in full in cash all such Obligations,
(ii) such other Strategic Alternative(s) approved by the Required Banks or (iii)
both the sale of Sufficient Assets and one or more other Strategic Alternatives
approved by the Required Banks (clauses (i), (ii) or (iii), individually, an
"Approved Strategic Alternative"). At any time, the Required Banks may amend,
supplement or otherwise modify the requirements of this Section 3.13, including
amending the terms and/or conditions of an Approved Strategic Alternative,
releasing Conseco from its obligations to proceed with the sale of Sufficient
Assets or otherwise. Conseco and its Subsidiaries shall diligently pursue and
take material steps toward achieving each Approved Strategic Alternative,
including, to the extent applicable, the preparation and distribution of
offering materials with respect to each Approved Strategic Alternative,
facilitating advisors of Conseco in making contact with potential purchasers or
other relevant parties in their due diligence processes, using reasonable best
efforts to prepare, negotiate and execute transaction documents with respect
thereto and consummate such transactions.
Conseco shall provide the Agents with bi-weekly written reports (in
form and scope acceptable to the Agents), describing the status of its progress
in pursuing, and actions it has taken and is planning on taking toward achieving
each Approved Strategic Alternative. Without limiting the generality of
Conseco's obligations set forth above, Conseco shall have:
(A) Engaged the Investment Banker to explore Strategic Alternatives no
later than 30 days after the Reduction Date;
(B) Distributed offering materials, and provided copies thereof to the
Agents, with respect to any Approved Strategic Alternative, no later than 90
days after the Trigger Date;
(C) Used reasonable best efforts to receive written expressions of
interest, and provided copies thereof to the Agents, with respect to each
Approved Strategic Alternative, no later than 120 days after the Trigger Date;
(D) Used reasonable best efforts to sign the appropriate transaction
documents with respect to any Approved Strategic Alternative no later than 180
days after the Trigger Date, unless the Required Banks have agreed to extend
such date; and
(E) Used reasonable best efforts to consummate any Approved Strategic
Alternative no later than 270 days after the Trigger Date, unless the Required
Banks have agreed to extend such date."
A-6
(h) Amendment to Section 4.01. Section 4.01 of the Appendix is hereby
amended by (i) deleting from Section 4.01(l) the word "and" where it appears at
the end of such Section 4.01, (ii) replacing in Section 4.01(m) the "." where it
appears at the end of such Section with a "; and" and (iii) adding at the end
thereof the following new subsection 4.01(n):
"(n) subordinated Contingent Obligations of CIHC in respect of the New
Exchange Offer Public Debt (the "Subordinated CIHC Guaranty"),
provided that (i) such Subordinated CIHC Guaranty shall contain terms
and conditions and shall be subordinated to any and all Obligations
under the $1.5 Billion Facility and each of the D&O Facilities, in
each case on terms and conditions satisfactory to the Agents and (ii)
the Exchange Offer and the disclosures made in connection therewith
(including, without limitation, pursuant to the Offering Memorandum)
shall be on terms and conditions satisfactory to the Agents.
3. Amendment to Section 4.08. Section 4.08(c) of the Appendix is
hereby amended by replacing the number "$100,000,000" where it appears in
Sections 4.08(c)(i) and 4.08(c)(ii) thereof with the number "$50,000,000".
4. Amendment to Section 4.14. Section 4.14 of the Appendix is hereby
amended by deleting the table contained therein in its entirety and inserting in
lieu thereof the following table:
"Fiscal Quarter
Ending Ratio
------ -----
December 31, 2001 1.20 to 1.0
March 31, 2002 1.25 to 1.0
June 30, 2002 1.25 to 1.0
September 30, 2002 1.10 to 1.0
December 31, 2002 1.10 to 1.0
March 31, 2003 1.30 to 1.0
June 30, 2003 1.75 to 1.0
September 30, 2003 1.90 to 1.0
December 31, 2003 2.15 to 1.0
March 31, 2004 2.25 to 1.0
June 30, 2004 2.50 to 1.0
September 30, 2004 2.50 to 1.0
December 31, 2004 and thereafter 2.50 to 1.0"
5. Amendment to Section 4.15. Section 4.15 of the Appendix is hereby
amended by (i) deleting the parenthetical contained therein and (ii) deleting
the table contained therein in its entirety and inserting in lieu thereof the
following table:
A-7
"Fiscal Quarter
Ending Amount
------ ------
December 31, 2001 $1,600,000,000
March 31, 2002 $1,200,000,000
June 30, 2002 $1,200,000,000
September 30, 2002 $1,200,000,000
December 31, 2002 $1,300,000,000
March 31, 2003 $1,300,000,000
June 30, 2003 $1,350,000,000
September 30, 2003 $1,400,000,000
December 31, 2003 $1,400,000,000
March 31, 2004 $1,500,000,000
June 30, 2004 $1,500,000,000
September 30, 2004 $1,700,000,000
December 31, 2004 and thereafter $1,700,000,000"
6. Amendment to Section 4.16. Section 4.16 of the Appendix is hereby
amended by deleting such Section in its entirety and inserting in lieu thereof
the following:
"4.16. Conseco Finance Tangible Net Worth. Conseco shall not
permit Conseco Finance Tangible Net Worth as at the end of any Fiscal Quarter
set forth below to be less than the relevant amount set forth below:
Fiscal Quarter
Ending Amount
------ ------
December 31, 2001 $1,200,000,000
March 31, 2002 $1,200,000,000
June 30, 2002 $1,200,000,000
September 30, 2002 $1,200,000,000
December 31, 2002 $1,200,000,000
March 31, 2003 $1,200,000,000
June 30, 2003 $1,200,000,000
September 30, 2003 $1,200,000,000
December 31, 2003 $1,300,000,000
March 31, 2004 $1,300,000,000
June 30, 2004 $1,300,000,000
September 30, 2004 $1,300,000,000
December 31, 2004 $1,300,000,000
March 31, 2005 and thereafter $1,600,000,000"
7. Amendment to Section 4.17. Section 4.17 is hereby amended by
replacing the percentage "200%" where it appears therein with the percentage
"250%".
8. Amendment to Section 5.01. Section 5.01(c) is hereby amended by
deleting the reference therein to "3.03(a), 4.01" and substituting in lieu
thereof a reference to "3.03(a), 3.12(i), 3.13(A), (B) or (E), 4.01".
A-8
ANNEX II
Consolidated Adjusted Earnings
Excluded Transactions
Conseco, Inc.
Analysis of Special Charges
Four Quarters Ended December 31,
2001
1Q01 2Q01 3Q01 4Q01 2001
--------------------------------------------------------------------------------
Employment-Related (600,000) 4,968,600 4,745,126 2,350,000 11,463,726
Exit Costs/Restructuring 20,709,158 1,047,338 791,676 3,441,534 25,989,706
Advisory Fees 86,275 2,044,264 1,512,020 144,034 3,786,593
Legal Fees 4,382,435 3,100,000 - 26,748,986 34,231,421
Loss on Disposition of Asset 8,624,576 2,400,000 - - 11,024,576
Outsourcing - 2,454,000 4,372,000 3,798,000 10,624,000
Miscellaneous 401,045 178,636 124,516 (2,539,550) (1,835,353)
Amort. of deferred sales - - 3,176,576 - 3,176,576
Valuation Adjustments 6,000,000 - - (2,500,000) 3,500,000
--------------------------------------------------------------------------------
39,603,490 16,192,838 14,721,914 31,443,004 101,961,246
Less Cash Special Charges 46,475 (6,467,182) (5,852,042) - (12,272,749)
Cap on Special Charge Basket - - - (12,115,401) (12,115,401)
--------------------------------------------------------------------------------
Sub-total-Accrued Special Charges 39,649,965 9,725,656 8,869,872 19,327,603 77,573,096
Income Taxes on Accrued Special
Charges (14,300,000) (3,403,980) (3,104,455) (6,764,661) (27,573,096)
--------------------------------------------------------------------------------
Total Conseco, Inc. and
Subsidiaries Special Charges After
Tax 25,349,965 6,321,676 5,765,417 12,562,942 50,000,000
================================================================================
A-9
Exhibit B
Form of Reaffirmation
March ___, 2002
Bank of America, N.A., as Administrative Agent
000 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: ________________
Re: First Stage Amendment and Agreement, dated March 20, 2002 (the
"Agreement"), among Conseco, Inc. ("Conseco"), CDOC, Inc.
("CDOC"), CIHC, Incorporated ("CIHC"), the financial institutions
party thereto (collectively, the "Banks"), and Bank of America,
N.A., as Administrative Agent (the "Administrative Agent")
Ladies and Gentlemen:
Reference is made to the Agreement. Capitalized terms used herein,
unless otherwise defined herein, shall have the meaning assigned thereto in the
Agreement.
This letter is intended to constitute the reaffirmation (this
"Reaffirmation") of specified documents referenced in the Agreement, and, as
such, is being delivered to satisfy the condition of Section 8.1(e) of the
Agreement, which requires a reaffirmation of the agreements listed on Schedule I
hereto (the "Reaffirmed Agreements") as a condition to the effectiveness of the
Agreement. This letter is for the benefit of the Administrative Agent and the
Banks.
Each of the parties hereto hereby reaffirm the Reaffirmed Agreements
to which it is a party in each and every respect, including, without limitation,
the validity of any and all of its obligations under each of the Reaffirmed
Agreements including, without limitation, regardless of:
(a) any defense any borrower has, may have, or may otherwise
assert with respect to his, her, or its liability for any loans or
otherwise with respect to any other obligation any such borrower may
have under the Credit Agreement, dated as of August 21, 1998, among
the persons listed on the signature pages thereto, as Borrowers, the
Banks and the Administrative Agent (the "Credit Agreement"), or any
Loan Document relating thereto, including, without limitation, any
defense asserted or that might be asserted by any such borrower as
arising from:
(i) the execution, delivery and performance or
non-performance by any party under of the September 22, 2000
Agreement,
(ii) the execution, delivery, and performance or
non-performance by any party under the Credit Agreement,
(iii) the execution, delivery or non-performance by any
party under any other Loan Document and/or
(iv) any aspect of the Plan, and/or
(b) any past, present, or future exercise or non-exercise by the
Administrative Agent of any right, power and/or remedy against any
borrower under the Credit Agreement (and/ or his, her, or its
property), any Cash Collateral Deposits (as such term is defined in
the September 22, 2000 Agreement), or CIHC (and/or its property).
Furthermore, each of the parties hereto hereby (a) confirms that it
has requested the Administrative Agent and the Banks to enter into the Agreement
and (b) acknowledges that the Administrative Agent and the Banks would not enter
into the Agreement in the absence of its reaffirmation of the Reaffirmed
Agreements and that the Administrative Agent and the Banks are thus relying upon
such reaffirmation.
Each of the undersigned represents and warrants that he or she has
been properly authorized to execute and deliver this Reaffirmation on behalf of
Conseco, CIHC or CDOC, as applicable.
Finally, each of the undersigned acknowledge that each of the
Administrative Agent, the Banks, and their respective successors and assigns
shall be entitled to rely upon this Reaffirmation and that this Reaffirmation is
governed by Illinois law.
[signatures follow]
B-2
Very truly yours,
CONSECO, INC.
By: /s/ Xxxxx X. Xxxxx
------------------------------------
Name: Xxxxx X. Xxxxx
Title: Senior Vice President, Chief
Accounting Officer and Treasurer
CIHC, INCORPORATED
By: /s/ Xxxxxxx X. Xxxxxxxx, Xx.
------------------------------------
Name: Xxxxxxx X. Xxxxxxxx, Xx.
Title: Senior Vice President,
Corporate Taxes
CDOC, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx, Xx.
------------------------------------
Name: Xxxxxxx X. Xxxxxxxx, Xx.
Title: Senior Vice President,
Corporate Taxes
B-3
Schedule I
1. Guaranty, dated August 21, 1998, between Conseco, Inc. as Guarantor
and Bank of America, National Association as Administrative Agent
2. Guaranty and Subordination Agreement, dated as of September 22,
2000, made by CIHC, Incorporated, as Guarantor and Subordinated Borrower,
Conseco Inc. as Obligor and Subordinated Lender, in favor of Bank of America,
National Association as Administrative Agent
3. Amended and Restated Cash Collateral Pledge Agreement, dated as of
November 22, 2000, among CDOC, Inc, Bank of America , National Association as
Collateral Agent and Bank of America, National Association as Depositary Bank
B-4
