UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
Form 10-K
[ X ] Annual report pursuant to Section
13 or 15(d) of the Securities Exchange Act
of 1934 For the fiscal year ended December
31, 2000 or
[ ] Transition report pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 [No Fee Required]
For the transition period from _______ to _______

                         Commission file number: 1-9250

                                  Conseco, Inc.

                 Indiana                            No. 35-1468632
         ----------------------            ------------------------------
         State of Incorporation            IRS Employer Identification No.

     11825 N. Pennsylvania Street
       Carmel, Indiana  46032                     (317) 817-6100
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Address of principal executive offices               Telephone	

Securities registered pursuant to Section 12(b) of the Act:

                                                  Name of each exchange
      Title of each class                          on which registered
      -------------------                          -------------------

    Common Stock, No Par Value                New York Stock Exchange, Inc.
    8-1/8% Senior Notes due 2003              New York Stock Exchange, Inc.
    10-1/2% Senior Notes due 2004             New York Stock Exchange, Inc.
9.16% Trust Originated Preferred Securities   New York Stock Exchange, Inc.
8.70% Trust Originated Preferred Securities   New York Stock Exchange, Inc.
   9% Trust Originated Preferred Securities   New York Stock Exchange, Inc.
9.44% Trust Originated Preferred Securities   New York Stock Exchange, Inc.	

Securities registered pursuant to Section 12(g) of the Act:
Common Stock, No Par Value
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days: Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ]
Aggregate market value of common stock held by nonaffiliates (computed as of March 27, 2001): $4,266,010,577
Shares of common stock outstanding as of March 27, 2001: 337, 584,736
DOCUMENTS INCORPORATED BY REFERENCE: Portions of the Registrant's definitive proxy statement for the 2001 annual meeting of shareholders are incorporated by reference into Part III of this Report.

PART I
ITEM 1. BUSINESS OF CONSECO.
Conseco, Inc. ("we", "Conseco", or the "Company") is a financial services holding company with subsidiaries operating throughout the United States. Our insurance subsidiaries develop, market and administer supplemental health insurance, annuity, individual life insurance and other insurance products. Our finance subsidiaries originate, securitize and service manufactured housing, home equity, retail credit and floorplan loans. Conseco's operating strategy is to grow its business by focusing its resources on the development and expansion of profitable products and strong distribution channels, to seek to achieve superior investment returns through active asset management and to control expenses.
During 2000, we announced several courses of action with respect to Conseco Finance Corp. ("Conseco Finance"), a wholly owned subsidiary of Conseco, as well as our intent to sell our individual and group major medical insurance lines and certain non-strategic assets held at the parent company level. These actions are designed to reduce parent company debt over time and are an integral part of the restructuring of the bank debt which occurred during the third quarter of 2000. The actions with respect to Conseco Finance include: (i) the sale, closing or runoff of five units (i.e., asset-based lending, vendor leasing, bankcards, transportation and park construction); (ii) efforts to better utilize existing assets so as to increase cash; and (iii) cost savings and restructuring of ongoing businesses such as the streamlining of loan origination operations in the manufactured housing and home equity lending divisions. The actions with respect to the sale of certain non-strategic assets include the sales of our investment in the wireless communication company, TeleCorp PCS Inc. ("TeleCorp"), our interest in the riverboat casino in Lawrenceberg, Indiana, and our subprime auto loan portfolio.
Several elements of the plans we previously announced have already been completed:
(i) We completed the restructuring of the operations of Conseco Finance;
(ii) We completed the restructuring of our bank debt;
(iii) We have made significant progress in achieving our asset liquidation and monetization transaction goals. Through March 1, 2001, we have completed transactions which generated cash proceeds in excess of $1.5 billion; and
(iv) On November 7, 2000, A.M. Best upgraded the financial strength ratings of our principal life insurance subsidiaries to A- (Excellent) from B++ (Very Good). The return of these ratings to A- (Excellent) satisfies a covenant in the amended bank credit facilities, well before the required date of March 31, 2001.
The Company believes that additional courses of action to be completed in 2001 will generate additional cash proceeds of $.7 billion during 2001 (in addition to the $.5 billion already completed in 2001). The course of actions described above had a significant effect on the Company's operating results during 2000.
In recent years, Conseco has been active in efforts to increase the familiarity and overall preference for our brand. We believe that in a competitive marketplace like financial services, companies that can differentiate themselves through a familiar brand can obtain full value for their products; sell more efficiently and command greater customer loyalty; recruit and retain talent more easily; better withstand and weather inevitable business crises; and have better access to the financial markets and the capital they need in order to grow. Our advertising campaign is designed to introduce consumers to the Conseco brand, to our product line and to the benefits of doing business with Conseco.
Conseco was organized in 1979 as an Indiana corporation and commenced operations in 1982. Our executive offices are located at 11825 N. Pennsylvania Street, Carmel, Indiana 46032, and our telephone number is (317) 817-6100.
Data in Item 1 are provided as of December 31, 2000, or for the year then ended (as the context implies), unless otherwise described.
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MARKETING AND DISTRIBUTION
Insurance
Our insurance products are sold through three primary distribution channels - career agents, professional independent producers and direct marketing.
Conseco seeks to retain the loyalty of its agency force by providing marketing and sales support; electronic and automated access to account and commission information; and marketing and training tools. We also have introduced new products like equity-indexed annuities (1996) and multibucket flexible premium annuities (which provide for various earnings strategies under one product) (1999). We are also seeking to reduce our agents' administrative burden, increase their productive sales time and get them the information they need faster and more reliably. The Conseco Online Information System ("COINS") enables agents to track policy and commission information and order materials at their convenience. Many of our marketing companies and agents use COINS.
Our insurance subsidiaries collectively hold licenses to market our insurance products in all fifty states, the District of Columbia, and certain protectorates of the United States. Sales to residents of the following states accounted for at least 6 percent of our 2000 collected premiums: California (9.6 percent), Illinois (8.0 percent), Florida (8.0 percent), and Texas (6.8 percent).
We believe that people purchase most types of life insurance, accident and health insurance and annuity products only after being contacted and solicited by an insurance agent. Accordingly, the success of our distribution system is largely dependent on our ability to attract and retain agents who are experienced and highly motivated.
A description of the primary distribution channels follows:
Career Agents. This agency force of approximately 5,300 agents working from 172 branch offices, permits one-on- one contacts with potential policyholders and promotes strong personal relationships with existing policyholders. The career agents sell primarily Medicare supplement and long-term care insurance policies, senior life insurance and annuities. In 2000, this distribution channel accounted for $1,528.1 million, or 24 percent, of our total collected premiums. These agents sell only Conseco policies and typically visit the prospective policyholder's home to conduct personalized "kitchen- table" sales presentations. After the sale of an insurance policy, the agent serves as a contact person for policyholder questions, claims assistance and additional insurance needs.
Professional Independent Producers. This distribution channel consists of a general agency and insurance brokerage distribution system comprised of approximately 130,000 independent licensed agents doing business in all fifty states. In 2000, this channel accounted for $4,648.3 million, or 73 percent, of our total collected premiums.
Professional independent producers are a diverse network of independent agents, insurance brokers and marketing organizations. Marketing companies typically recruit agents for Conseco by advertising our products and commission structure through direct mail advertising or through seminars for insurance agents and brokers. These organizations bear most of the costs incurred in marketing our products. We compensate the marketing organizations by paying them a percentage of the commissions earned on new sales generated by the agents recruited by such organizations. Certain of these marketing organizations are specialty organizations that have a marketing expertise or a distribution system relating to a particular product, such as flexible-premium annuities for educators. During 1999 and 2000, Conseco purchased four organizations that specialize in marketing and distributing supplemental health products. In 2000, these four organizations accounted for $228.5 million, or 3.6 percent, of our total collected premiums.
Direct Marketing. This distribution channel is engaged primarily in the sale of "graded benefit life" insurance policies. In 2000, this channel accounted for $188.0 million, or 3 percent, of our total collected premiums. During 2000, we reacquired the name "Colonial Penn" (the former brand name these products were sold under prior to our acquisition of this business), which will be used to market these products in the future.
Finance
Our finance group, with nationwide operations and managed finance receivables of $46.6 billion at December 31, 2000, is one of America's largest consumer finance companies, with leading market positions in retail home equity mortgages, home improvement loans, private label credit cards and manufactured housing lending. Originations to
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customers in the following states accounted for at least 5.0 percent of our 2000 originations: Texas (9.0 percent), California (7.4 percent), Florida (5.2 percent), Illinois (5.1 percent) and Michigan (5.0 percent).
During 2000, 61 percent of our finance products were marketed indirectly to customers through intermediary channels such as dealers, contractors, retailers and correspondents. The remaining products were marketed directly to our customers through our regional offices and service centers. A description of the primary distribution channels follows:
Dealers, Contractors, Retailers and Correspondents. Manufactured housing, home improvement and home equity receivables are purchased from and originated by selected dealers and contractors after being underwritten and analyzed via one of the Company's automated credit scoring systems at one of our regional service centers. During 2000, these marketing channels accounted for the following percentages of total loan originations: 86 percent of manufactured housing, 57 percent of home improvement, 24 percent of home equity, 97 percent of consumer finance and 100 percent of equipment finance.
Regional Service Centers, Retail Satellite Offices and Telemarketing Center. We market and originate manufactured housing loans through 33 regional offices and 3 origination and processing centers. We originate home equity loans through a system of 128 retail satellite offices and 6 regional centers. We also market private label retail credit products through selected retailers and process the contracts through Conseco Bank, Inc. ("Conseco Bank"), a Utah industrial loan company, and through Green Tree Retail Services Bank, Inc. ("Retail Bank"), a South Dakota limited purpose credit card bank, both of which are wholly owned subsidiaries of the Company. We also utilize direct mail to originate home improvement loans and home equity loans. During 2000, these marketing channels accounted for the following percentages of total loan originations: 14 percent of manufactured housing, 43 percent of home improvement, 76 percent of home equity, 3 percent of consumer finance and 100 percent of retail credit contracts.
Insurance Products
Supplemental Health
Supplemental health products include Medicare supplement, long-term care and specified-disease insurance products distributed through our career agency force and professional independent producers. During 2000, we collected Medicare supplement premiums of $931.0 million, long-term care premiums of $836.0 million, specified-disease premiums of $371.1 million and other supplemental health premiums of $125.8 million. Medicare supplement, long-term care, specified disease and other supplemental health premiums represented 15 percent, 13 percent, 6 percent and 2 percent, respectively, of our total premiums collected in 2000.
The following describes the major supplemental health products:
Medicare supplement. Medicare is a two-part federal health insurance program for disabled persons and senior citizens (age 65 and older). Part A of the program provides protection against the costs of hospitalization and related hospital and skilled nursing home care, subject to an initial deductible, related coinsurance amounts and specified maximum benefit levels. The deductible and coinsurance amounts are subject to change each year by the federal government. Part B of Medicare covers doctors bills and a number of other medical costs not covered by Part A, subject to deductible and coinsurance amounts for "approved" charges.
Medicare supplement policies provide coverage for many of the medical expenses which the Medicare program does not cover, such as deductibles, coinsurance costs (in which the insured and Medicare share the costs of medical expenses) and specified losses which exceed the federal program's maximum benefits. Our Medicare supplement plans automatically adjust coverage to reflect changes in Medicare benefits. In marketing these products, we concentrate on individuals who have recently become eligible for Medicare by reaching the age of 65. We offer a higher first-year commission for sales to these policyholders and competitive premium pricing. Approximately 35 percent of new sales of Medicare supplement policies are to individuals who are reaching the age of 65.
Long-term care. Long-term care products provide coverage, within prescribed limits, for nursing home, home healthcare, or a combination of both nursing home and home healthcare expenses. The long-term care plans are sold primarily to retirees and, to a lesser degree, to older self-employed individuals and others in middle-income levels.
Current nursing home care policies cover incurred and daily fixed-dollar benefits available with an elimination period (which, similar to a deductible, requires the insured to pay for a certain number of days of nursing home care before the insurance coverage begins), subject to a maximum benefit. Home healthcare policies cover the usual and customary
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charges after a deductible and are subject to a daily or weekly maximum dollar amount, and an overall benefit maximum. We monitor the loss experience on our long-term care products and, when necessary, apply for rate increases in the states in which we sell such products.
Specified-disease products. These policies generally provide fixed or limited benefits. Cancer insurance and heart/stroke products are guaranteed renewable individual accident and health insurance policies. Payments under cancer insurance policies are generally made directly to, or at the direction of, the policyholder following diagnosis of, or treatment for, a covered type of cancer. Heart/stroke policies provide for payments directly to the policyholder for treatment of a covered heart disease, heart attack or stroke. The benefits provided under the specified-disease policies do not necessarily reflect the actual cost incurred by the insured as a result of the illness; benefits are not reduced by any other medical insurance payments made to or on behalf of the insured.
Approximately 76 percent of our specified-disease policies in force (based on a count of policies) are sold with return of premium or cash value riders. The return of premium rider generally provides that after a policy has been in force for a specified number of years or upon the policyholder reaching a specified age, the Company will pay to the policyholder, or a beneficiary under the policy, the aggregate amount of all premiums paid under the policy, without interest, less the aggregate amount of all claims incurred under the policy.
Annuities
Annuity products include equity-indexed annuity, variable annuity, traditional fixed rate annuity and market value- adjusted annuity products sold through both career agents and professional independent producers. During 2000, we collected annuity premiums of $2,255.7 million, or 35 percent of our total premiums collected.
The following describes the major annuity products:
Equity-indexed annuity products. These products accounted for $643.5 million, or 10 percent, of our total premiums collected in 2000. The accumulation value of these annuities is credited with interest at an annual minimum guaranteed average rate over the term of the contract of 3 percent (or, including the effect of applicable sales loads, a 1.7 percent compound average interest rate over the term of the contracts), but the annuities provide for potentially higher returns based on a percentage (the "participation rate") of the change in the Standard & Poor's Corporation ("S&P") 500 Index during each year of their term. The Company has the discretionary ability to annually change the participation rate which currently ranges from 55 percent to 70 percent and may include a first-year "bonus", similar to the bonus interest described below for traditional fixed rate annuity products, which generally ranges from 20 percent to 55 percent. The minimum guaranteed values are equal to: (i) 90 percent of premiums collected for annuities for which premiums are received in a single payment (single premium deferred annuities "SPDAs"), or 75 percent of first year and 87.5 percent of renewal premiums collected for annuities which allow for more than one payment (flexible premium deferred annuities "FPDAs"); plus (ii) interest credited on such percentage of the premiums collected at an annual rate of 3 percent. The annuity provides for penalty-free withdrawals of up to 10 percent of premium in each year after the first year of the annuity's term. Other withdrawals from SPDA products are generally subject to a surrender charge of 9 percent over the eight year contract term at which time the contract must be renewed or withdrawn. Other withdrawals from FPDA products are subject to a surrender charge of 12 percent to 20 percent in the first year, declining 1.2 percent to 1.3 percent each year, to zero over a 10 to 15 year period, depending on issue age. We purchase S&P 500 Index Call Options ("S&P 500 Call Options") in an effort to hedge potential increases to policyholder benefits resulting from increases in the S&P 500 Index to which the product's return is linked.
Other fixed rate annuity products. These products include SPDAs, FPDAs (excluding the equity-indexed products) and single-premium immediate annuities ("SPIAs"). These products accounted for $740.7 million, or 11 percent, of our total collected premiums in 2000. Our SPDAs and FPDAs typically have an interest rate (the "crediting rate") that is guaranteed by the Company for the first policy year, after which, we have the discretionary ability to change the crediting rate to any rate not below a guaranteed minimum rate. The guaranteed rate on annuities written recently ranges from 3.0 percent to 4.5 percent, and the rate on all policies in force ranges from 2.5 percent to 6.0 percent. The initial crediting rate is largely a function of: (i) the interest rate we can earn on invested assets acquired with the new annuity fund deposits; (ii) the costs related to marketing and maintaining the annuity products; and (iii) the rates offered on similar products by our competitors. For subsequent adjustments to crediting rates, we take into account the yield on our investment portfolio, annuity surrender assumptions, competitive industry pricing and the crediting rate history for particular groups of annuity policies with similar characteristics.
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Approximately 52 percent of our new annuity sales have been "bonus" products. The initial crediting rate on these products specifies a bonus crediting rate ranging from 1 percent to 5 percent of the annuity deposit for the first policy year only. After the first year, the bonus interest portion of the initial crediting rate is automatically discontinued, and the renewal crediting rate is established. As of December 31, 2000, crediting rates on our outstanding traditional annuities were at an average rate, excluding bonuses, of 4.4 percent.
The policyholder is typically permitted to withdraw all or part of the premium paid plus the accumulated interest credited to his or her account (the "accumulation value"), subject in virtually all cases to the assessment of a surrender charge for withdrawals in excess of specified limits. Most of our traditional annuities provide for penalty-free withdrawals of up to 10 percent of the accumulation value each year, subject to limitations. Withdrawals in excess of allowable penalty- free amounts are assessed a surrender charge during a penalty period which generally ranges from five to 12 years after the date a policy is issued. The initial surrender charge is generally 6 percent to 12 percent of the accumulation value and generally decreases by approximately 1 to 2 percentage points per year during the penalty period. Surrender charges are set at levels to protect the Company from loss on early terminations and to reduce the likelihood of policyholders terminating their policies during periods of increasing interest rates. This practice lengthens the effective duration of policy liabilities and enables the Company to maintain profitability on such policies.
SPIAs accounted for $60.8 million, or 1.0 percent, of our total collected premiums in 2000. SPIAs are designed to provide a series of periodic payments for a fixed period of time or for life, according to the policyholder's choice at the time of issue. Once the payments begin, the amount, frequency and length of time for which they are payable are fixed. SPIAs often are purchased by persons at or near retirement age who desire a steady stream of payments over a future period of years. The single premium is often the payout from a terminated annuity contract. The implicit interest rate on SPIAs is based on market conditions when the policy is issued. The implicit interest rate on the Company's outstanding SPIAs averaged 6.9 percent at December 31, 2000.
Recently, the Company introduced its multibucket annuity product which provides for different rates of cash value growth based on the experience of a particular market strategy. Earnings are credited to this product based on the market activity of a given strategy, less management fees, and funds may be moved between cash value strategies. Portfolios available include high-yield bond, investment-grade bond, convertible bond and guaranteed-rate portfolios. During 2000, this product accounted for $139.8 million, or 2.2 percent, of our total collected premiums.
Variable annuity products. Variable annuities accounted for $871.5 million, or 14 percent, of our total premiums collected in 2000. Variable annuities, sold on a single-premium or flexible-premium basis, differ from fixed annuities in that the principal value may fluctuate, depending on the performance of assets allocated pursuant to various investment options chosen by the contract owner. Variable annuities offer contract owners a fixed or variable rate of return based upon the specific investment portfolios into which premiums may be directed.
Life
Life products include traditional, universal life and other life insurance products. These products are currently sold through career agents, professional independent producers and direct response marketing. During 2000, we collected $934.2 million, or 15 percent, of our total collected premiums from life products.
Interest-sensitive life products. These products include universal life products that provide whole life insurance with adjustable rates of return related to current interest rates. They accounted for $483.5 million, or 7.6 percent, of our total collected premiums in 2000 and are marketed through professional independent producers and, to a lesser extent, career agents. The principal differences between universal life products and other interest-sensitive life insurance products are policy provisions affecting the amount and timing of premium payments. Universal life policyholders may vary the frequency and size of their premium payments, and policy benefits may also fluctuate according to such payments. Premium payments under other interest-sensitive policies may not be varied by the policyholders, and as a result, are designed to reduce the administrative costs typically associated with monitoring universal life premium payments and policy benefits.
Traditional life. These products accounted for $450.7 million, or 7.1 percent, of our total collected premiums in 2000. Traditional life policies, including whole life, graded benefit life and term life products, are marketed through professional independent producers, career agents and direct response marketing. Under whole life policies, the policyholder generally pays a level premium over an agreed period or the policyholder's lifetime. The annual premium in a whole life policy is generally higher than the premium for comparable term insurance coverage in the early years of the policy's life, but is generally lower than the premium for comparable term insurance coverage in the later years of the
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policy's life. These policies, which continue to be marketed by the Company on a limited basis, combine insurance protection with a savings component that increases in amount gradually over the life of the policy. The policyholder may borrow against the savings generally at a rate of interest lower than that available from other lending sources. The policyholder may also choose to surrender the policy and receive the accumulated cash value rather than continuing the insurance protection. Term life products offer pure insurance protection for a specified period of time - typically 5, 10 or 20 years.
Traditional life products also include graded benefit life insurance products. Graded benefit life products accounted for $66.2 million, or 1.0 percent, of our total collected premiums in 2000. Graded benefit life insurance products are offered on an individual basis primarily to persons age 50 to 80, principally in face amounts of $350 to $10,000, without medical examination or evidence of insurability. Premiums are paid as frequently as monthly. Benefits paid are less than the face amount of the policy during the first two years, except in cases of accidental death. Graded benefit life policies are marketed using direct response marketing techniques. New policyholder leads are generated primarily from television and print advertisements.
Individual and Group Major Medical
Sales of our individual and group major medical health insurance products are targeted to self-employed individuals, small business owners, large employers and early retirees. Various deductible and coinsurance options are available, and most policies require certain utilization review procedures. The profitability of this business depends largely on the overall persistency of the business in force, claim experience and expense management. We have previously announced our intent to sell these lines of business. During 2000, we collected $910.6 million, or 14 percent, of our total collected premiums from these products.
Finance Products
Manufactured Housing. Our finance subsidiaries provide financing for consumer purchases of manufactured housing. During 2000, we originated $4.4 billion of contracts for manufactured housing purchases, or 26 percent of our total originations. At December 31, 2000, our managed receivables included $26.3 billion of contracts for manufactured housing purchases, or 56 percent of total managed receivables. Manufactured housing or a manufactured home is a structure, transportable in one or more sections, which is designed to be a dwelling with or without a permanent foundation. Manufactured housing does not include either modular housing (which typically involves more sections, greater assembly and a separate means of transporting the sections) or recreational vehicles.
The majority of sales contracts for manufactured home purchases are financed on a conventional basis. Federal Housing Administration and Veterans' Administration contracts represent less than 1 percent of our manufactured housing originations and 1 percent of our total servicing portfolio. Manufactured housing contracts are generally subject to minimum down payments of at least 5 percent of the amount financed and have terms of up to 30 years.
Through our regional service centers, we purchase manufactured housing contracts from dealers located throughout the United States. Our regional service center personnel solicit dealers in their region. If the dealer wishes to utilize our financing, the dealer completes an application. Upon approval, a dealer agreement is executed. We also originate manufactured housing installment loan agreements directly with customers. For the year ended December 31, 2000, 86 percent of our manufactured housing loan originations were purchased from dealers and 14 percent were originated directly by us.
Customers' credit applications for new manufactured homes are reviewed in our service centers. If the application meets our guidelines, we generally purchase the contract after the customer has moved into the manufactured home. We use a proprietary automated credit scoring system to evaluate manufactured housing contracts. The scoring system is statistically based, quantifying information using variables obtained from customer credit applications and credit reports.
Mortgage Services. Products within this category include home equity and home improvement loans. During 2000, we originated $4.4 billion of contracts for these products, or 26 percent of our total originations. At December 31, 2000, our managed receivables included $13.3 billion of contracts for home equity and home improvement loans, or 29 percent of total managed receivables.
We originate home equity loans through 128 retail satellite offices and 6 regional centers, and through a network of correspondent lenders throughout the United States. The satellite offices are responsible for originating, processing, underwriting and funding the loan transaction. Subsequently, loans are re-underwritten on a test basis by a third party to
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ensure compliance with our credit policy. After the loan has closed, the loan documents are forwarded to our loan servicing center. The servicing center is responsible for handling customer service and performing document handling, custodial, quality control and collection functions.
During 2000, approximately 76 percent of our home equity finance loans were originated directly with the borrower. The remaining finance volume was originated through approximately 220 correspondent lenders. The Company ceased using the correspondent channel in September 2000. However, from time to time, the Company may make whole-loan portfolio purchases.
Typically, home equity loans are secured by first or second liens. Homes used for collateral in securing home equity loans may be either residential or investor owned, one-to-four-family properties having a minimum appraised value of $25,000. During 2000, approximately 76 percent of the loans originated were secured by first liens. The average loan to value for loans originated in 2000 was approximately 91 percent. The majority of our home equity loans are fixed rate closed-end loans. We periodically purchase adjustable rate loans from our correspondent network. Adjustable rate loans accounted for 19 percent of our home equity finance volume during 2000.
We originate the majority of our home improvement loan contracts indirectly through a network of home improvement contractors located throughout the United States. We review the financial condition, business experience and qualifications of all contractors through which we obtain loans.
We finance both conventional home improvement contracts and contracts insured through the Federal Housing Administration Title I program. Such contracts are generally secured by first, second or, to a lesser extent, third liens on the improved real estate. We also implemented an unsecured conventional home improvement lending program for certain customers which generally allows for loans of $2,500 to $15,000. Unsecured loans account for less than 2 percent of our home improvement servicing portfolio.
Typically, an approved contractor submits the customer's credit application and construction contract to our centralized service center where an analysis of the creditworthiness of the customer is made using a proprietary credit scoring system. If it is determined that the application meets our underwriting guidelines, we typically purchase the contract from the contractor when the customer verifies satisfactory completion of the work.
We also originate home improvement loans directly with borrowers. After receiving a mail solicitation, the customer calls our telemarketing center and our sales representative explains the available financing plans, terms and rates depending on the customer's needs. The majority of the loans are secured by a second or third lien on the real estate of the customer. Direct distribution accounted for approximately 43 percent of the home improvement finance originations during 2000.
The types of home improvements we finance include exterior renovations (such as windows, siding and roofing); pools and spas; kitchen and bath remodeling; and room additions and garages. We may also extend additional credit beyond the purchase price of the home improvement for the purpose of debt consolidation.
Private Label Credit Card. During 2000, we originated $2.6 billion of private label credit card receivables through our bank subsidiaries, or 15 percent of our total originations. At December 31, 2000, our managed receivables included $1.8 billion of contracts for credit card loans, or 4 percent of total managed receivables.
Private label credit card programs are offered to select retailers. We review the credit of individual customers seeking credit cards utilizing an automated credit scoring system administered in one of our processing centers.
ACQUISITIONS
Since 1982, Conseco has acquired 19 insurance groups and related businesses and two finance companies. We continue to regularly investigate acquisition opportunities in the industries in which we operate. These acquisitions have been responsible for the Company's growth in recent years. The Company's current plans are to grow and improve the profitability of its businesses, rather than growing through acquisitions.
INVESTMENTS
Conseco Capital Management, Inc. ("CCM"), a registered investment adviser wholly owned by Conseco, manages the investment portfolios of Conseco's subsidiaries. CCM had approximately $31.2 billion of assets (at fair value) under management at December 31, 2000, of which $23.7 billion were assets of Conseco's subsidiaries and $7.5 billion were
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assets owned by other parties. Our investment philosophy is to maintain a largely investment-grade fixed-income portfolio, provide adequate liquidity for expected liability durations and other requirements and maximize total return through active investment management.
Investment activities are an integral part of our business; investment income is a significant component of our total revenues. Profitability of many of our insurance products is significantly affected by spreads between interest yields on investments and rates credited on insurance liabilities. Although substantially all credited rates on SPDAs and FPDAs may be changed annually, changes in crediting rates may not be sufficient to maintain targeted investment spreads in all economic and market environments. In addition, competition and other factors, including the impact of the level of surrenders and withdrawals, may limit our ability to adjust or to maintain crediting rates at levels necessary to avoid narrowing of spreads under certain market conditions. As of December 31, 2000 the average yield, computed on the cost basis of our investment portfolio, was 7.2 percent, and the average interest rate credited or accruing to our total insurance liabilities (excluding interest rate bonuses for the first policy year only and excluding the effect of credited rates attributable to variable or equity-indexed products) was 4.9 percent.
We manage the equity-based risk component of our equity-indexed annuity products by: (i) purchasing S&P 500 Call Options in an effort to hedge such risk; and (ii) adjusting the participation rate to reflect the change in the cost of such options (such cost varies based on market conditions). Accordingly, we are able to focus on managing the interest rate spread component of these products.
We seek to balance the duration of our invested assets with the expected duration of benefit payments arising from our insurance liabilities. At December 31, 2000, the adjusted modified duration of fixed maturities and short-term investments was approximately 6.4 years and the duration of our insurance liabilities was approximately 6.5 years.
For information regarding the composition and diversification of the investment portfolio of our subsidiaries, see "Management's Discussion and Analysis of Consolidated Financial Condition and Results of Operations - Investments" and the notes to our consolidated financial statements.
COMPETITION
Our businesses operate in a highly competitive environment. The financial services industry consists of a large number of companies, some of which are larger and have greater financial resources, broader and more diversified product lines and larger staffs than those of Conseco. An expanding number of banks, securities brokerage firms and other financial intermediaries also market insurance products or offer competing products, such as mutual fund products, traditional bank investments and other investment and retirement funding alternatives. We also compete with many of these companies and others in providing services for fees. In most areas, competition is based on a number of factors, including pricing, service provided to distributors and policyholders and ratings. Conseco's subsidiaries must also compete with their competitors to attract and retain the allegiance of dealers, vendors, contractors, manufacturers, retailers and agents.
In the finance industry, operations are affected by consumer demand which is influenced by regional trends, economic conditions and personal preferences. Competition in the finance industry is primarily among banks, finance companies (or finance divisions of manufacturers), savings and loan associations and credit unions. Competition is based on a number of factors, including service, the credit review process, the integration of financing programs and the ability to manage the servicing portfolio in changing economic environments.
In the individual health insurance business, insurance companies compete primarily on the basis of marketing, service and price. The provisions of the Omnibus Budget Reconciliation Act of 1984 and the work of the National Association of Insurance Commissioners ("NAIC") (an association of state regulators and their staffs) have resulted in standardized policy features for Medicare supplement products. This increases the comparability of such policies and may intensify competition based on factors other than product features. See "Underwriting" and "Governmental Regulation." In addition to the products of other insurance companies, our health insurance products compete with health maintenance organizations, preferred provider organizations and other health care-related institutions which provide medical benefits based on contractual agreements.
Marketing companies, agents who market insurance products, school districts, financial institutions and policyholders use the financial strength ratings assigned to an insurer by independent rating agencies as one factor in determining which insurer's products to market or purchase. As of December 31, 2000, all of our primary life insurance companies had an "A- (Excellent)" rating by A.M. Best Company ("A.M. Best"). A.M. Best ratings for the industry currently range from "A++ (Superior)" to "F (In Liquidation)." Publications of A.M. Best indicate that the "A" and "A-" ratings are assigned to those
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companies that, in A.M. Best's opinion, have, on balance, excellent financial strength, operating performance and market profile when compared to the standards established by A.M. Best and have demonstrated a strong ability to meet their ongoing obligations to policyholders. A.M. Best ratings consider the financial strength of the rated company and are not a rating of the investment worthiness of the rated company.
We believe that we are able to compete effectively because: (i) we emphasize a number of specialized distribution channels, where the ability to respond rapidly to changing customer needs yields a competitive edge; (ii) we are experienced in establishing and cultivating relationships with the unique distribution networks and the independent marketing companies operating in these specialized markets; (iii) we can offer competitive rates as a result of our operating efficiencies and higher-than-average investment yields achieved by applying active investment portfolio management techniques; and (iv) we have reliable policyholder administrative services, supported by customized information technology systems.
INSURANCE UNDERWRITING
Under regulations promulgated by the NAIC and adopted as a result of the Omnibus Budget Reconciliation Act of 1990, we are prohibited from underwriting our Medicare supplement policies for certain first-time purchasers. If a person applies for insurance within six months after becoming eligible by reason of age, or disability in certain limited circumstances, the application may not be rejected due to medical conditions. Some states prohibit underwriting of all Medicare supplement policies. For other prospective Medicare supplement policyholders, such as senior citizens who are transferring to Conseco's products, the underwriting procedures are relatively limited, except for policies providing prescription drug coverage.
Before issuing long-term care or comprehensive major medical products to individuals and groups, we generally apply detailed underwriting procedures designed to assess and quantify the insurance risks. We require medical examinations of applicants (including blood and urine tests, where permitted) for certain health insurance products and for life insurance products which exceed prescribed policy amounts. These requirements are graduated according to the applicant's age and may vary by type of policy or product. We also rely on medical records and the potential policyholder's written application. In recent years, there have been significant regulatory changes with respect to underwriting individual and group major medical plans. An increasing number of states prohibit underwriting and/or charging higher premiums for substandard risks. We monitor changes in state regulation that affect our products, and consider these regulatory developments in determining where we market our products.
Most of our life insurance policies are underwritten individually, although standardized underwriting procedures have been adopted for certain low face-amount life insurance coverages. After initial processing, insurance underwriters review each file and obtain the information needed to make an underwriting decision (such as medical examinations, doctors' statements and special medical tests). After collecting and reviewing the information, the underwriter either: (i) approves the policy as applied for, or with an extra premium charge because of unfavorable factors; or (ii) rejects the application. We underwrite group insurance policies based on the characteristics of the group and its past claim experience. Graded benefit life insurance policies are issued without medical examination or evidence of insurability. There is minimal underwriting on annuities.
REINSURANCE
Consistent with the general practice of the life insurance industry, our subsidiaries enter into both facultative and treaty agreements of indemnity reinsurance with other insurance companies in order to reinsure portions of the coverage provided by our insurance products. Indemnity reinsurance agreements are intended to limit a life insurer's maximum loss on a large or unusually hazardous risk or to diversify its risk. Indemnity reinsurance does not discharge the original insurer's primary liability to the insured. The Company's reinsured business is ceded to numerous reinsurers. We believe the assuming companies are able to honor all contractual commitments, based on our periodic review of their financial statements, insurance industry reports and reports filed with state insurance departments.
As of December 31, 2000, the policy risk retention limit was generally $.8 million or less on the policies of our subsidiaries. Reinsurance ceded by Conseco represented 21 percent of gross combined life insurance in force and reinsurance assumed represented 5.0 percent of net combined life insurance in force. At December 31, 2000, the total ceded business in force of $27.5 billion was primarily ceded to insurance companies rated "A- (Excellent)" or better by
A.M. Best. Our principal reinsurers at December 31, 2000 were General & Cologne Life Insurance Company, Connecticut General Life Insurance Company, Employers Reassurance Corporation, Life Reassurance Corporation of America, Lincoln National Life Insurance Company, Reliance Standard Life Insurance Company, RGA Reinsurance Company, Security Life
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of Denver and Swiss Re Life and Health America. No other single reinsurer assumes greater than 3 percent of the total ceded business in force.
EMPLOYEES
At December 31, 2000, Conseco, Inc. and its subsidiaries had approximately 14,300 employees, including: (i) 7,000 employees supporting our insurance operations; and (ii) 7,300 employees supporting our finance operations. None of our employees is covered by a collective bargaining agreement. We believe that we have excellent relations with our employees.
GOVERNMENTAL REGULATION
On November 12, 1999, President Clinton signed into law the Gramm-Leach-Bliley Act (the "Financial Modernization Act"), which significantly modifies the regulation of financial services companies. The Financial Modernization Act allows full affiliations among banks, insurance companies, securities firms and other financial services companies, that could result in increased consolidation of, and competition among, these firms. In addition, the Financial Modernization Act contains privacy provisions relating to the protection, transfer and use of the nonpublic personal information of consumers. Consumer privacy laws containing expanded provisions also have been adopted, or are under consideration, in a number of states.
Insurance
Our insurance subsidiaries are subject to regulation and supervision by the insurance regulatory agencies of the states in which they transact business. State laws generally establish supervisory agencies with broad regulatory authority, including the power to: (i) grant and revoke business licenses; (ii) regulate and supervise trade practices and market conduct; (iii) establish guaranty associations; (iv) license agents; (v) approve policy forms; (vi) approve premium rates for some lines of business; (vii) establish reserve requirements; (viii) prescribe the form and content of required financial statements and reports; (ix) determine the reasonableness and adequacy of statutory capital and surplus; (x) perform financial, market conduct and other examinations; (xi) define acceptable accounting principles; (xii) regulate the type and amount of permitted investments; and (xiii) limit the amount of dividends and surplus debenture payments that can be paid without obtaining regulatory approval. Our insurance subsidiaries are subject to periodic examinations by state regulatory authorities. We do not expect the results of any ongoing examinations to have a material effect on the Company's financial condition.
Most states have also enacted regulations on the activities of insurance holding company systems, including acquisitions, extraordinary dividends, the terms of surplus debentures, the terms of affiliate transactions and other related matters. Currently, the Company and its insurance subsidiaries have registered as holding company systems pursuant to such legislation in the domiciliary states of the insurance subsidiaries (Arizona, Illinois, Indiana, New York, Pennsylvania and Texas), and they routinely report to other jurisdictions.
Most states have either enacted legislation or adopted administrative regulations which affect the acquisition of control of insurance companies as well as transactions between insurance companies and persons controlling them. The nature and extent of such legislation and regulations vary from state to state. Most states, however, require administrative approval of: (i) the acquisition of 10 percent or more of the outstanding shares of an insurance company domiciled in the state; or (ii) the acquisition of 10 percent or more of the outstanding stock of an insurance holding company whose insurance subsidiary is domiciled in the state. The acquisition of 10 percent of such shares is generally deemed to be the acquisition of control for the purpose of the holding company statutes. These regulations require the acquirer to file detailed information concerning the acquiring parties and the plan of acquisition, and to obtain administrative approval prior to the acquisition. In many states, however, an insurance authority may determine that control does not exist, even in circumstances in which a person owns or controls 10 percent or a greater amount of securities.
The NAIC revised the Accounting Practices and Procedures Manual in a process referred to as Codification. The revised manual is effective January 1, 2001. The domiciliary states of our insurance subsidiaries have adopted the provisions of the revised manual or, with respect to some states, adopted the manual with certain modifications. The revised manual has changed, to some extent, prescribed statutory accounting practices and will result in changes to the accounting practices that our insurance subsidiaries use to prepare their statutory-basis financial statements. However, we believe the impact of these changes to our insurance subsidiaries' statutory-based capital and surplus as of January 1, 2001, will not be significant.
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The federal government does not directly regulate the insurance business. However, federal legislation and administrative policies in several areas, including pension regulation, age and sex discrimination, financial services regulation, securities regulation, privacy laws and federal taxation, do affect the insurance business. Legislation has been introduced from time to time in Congress that could result in the federal government assuming some role in regulating the companies or allowing combinations between insurance companies, banks and other entities.
On the basis of statutory statements filed with state regulators annually, the NAIC calculates certain financial ratios to assist state regulators in monitoring the financial condition of insurance companies. A "usual range" of results for each ratio is used as a benchmark. In the past, variances in certain ratios of our insurance subsidiaries have resulted in inquiries from insurance departments to which we have responded. Such inquiries did not lead to any restrictions affecting our operations.
In recent years, the NAIC has developed several model laws and regulations including: (i) investment reserve requirements; (ii) risk-based capital ("RBC") standards; (iii) codification of insurance accounting principles; (iv) additional investment restrictions; (v) restrictions on an insurance company's ability to pay dividends; and (vi) product illustrations. The NAIC is currently developing new model laws or regulations, including product design standards and reserve requirements.
The RBC standards establish capital requirements for insurance companies based on the ratio of the company's total adjusted capital (defined as the total of its statutory capital, surplus, asset valuation reserve and certain other adjustments) to its RBC (such ratio is referred to herein as the "RBC ratio"). The standards are designed to help identify companies which are under capitalized and require specific regulatory actions in the event an insurer's RBC ratio falls below specified levels. Each of our life insurance subsidiaries has more than enough statutory capital to meet the standards as of December 31, 2000. The aggregate RBC ratio for our insurance subsidiaries was greater than 240 percent at December 31, 2000.
The NAIC has adopted model long-term care policy language providing nonforfeiture benefits and has proposed a rate stabilization standard for long-term care policies. Various bills are proposed from time to time in the U.S. Congress which would provide for the implementation of certain minimum consumer protection standards for inclusion in all long- term care policies, including guaranteed renewability, protection against inflation and limitations on waiting periods for pre- existing conditions. Federal legislation permits premiums paid for qualified long-term care insurance to be treated as tax- deductible medical expenses and for benefits received on such policies to be excluded from taxable income.
In addition, our insurance subsidiaries are required under guaranty fund laws of most states in which we transact business, to pay assessments up to prescribed limits to fund policyholder losses or liabilities of insolvent insurance companies. Assessments can be partially recovered through a reduction in future premium taxes in some states.
Most states mandate minimum benefit standards and loss ratios for accident and health insurance policies. We are generally required to maintain, with respect to our individual long-term care policies, minimum anticipated loss ratios over the entire period of coverage of not less than 60 percent. With respect to our Medicare supplement policies, we are generally required to attain and maintain an actual loss ratio, after three years, of not less than 65 percent. We provide, to the insurance departments of all states in which we conduct business, annual calculations that demonstrate compliance with required minimum loss ratios for both long-term care and Medicare supplement insurance. These calculations are prepared utilizing statutory lapse and interest rate assumptions. In the event that we fail to maintain minimum mandated loss ratios, our insurance subsidiaries could be required to provide retrospective refunds and/or prospective rate reductions. We believe that our insurance subsidiaries currently comply with all applicable mandated minimum loss ratios.
NAIC model regulations, adopted in substantially all states, created 10 standard Medicare supplement plans (Plans A through J). Plan A provides the least extensive coverage, while Plan J provides the most extensive coverage. Under NAIC regulations, Medicare insurers must offer Plan A, but may offer any of the other plans at their option. Our insurance subsidiaries currently offer nine of the model plans. We have declined to offer Plan J, due in part to its high benefit levels and, consequently, high costs to the consumer.
Numerous proposals to reform the current health care system (including Medicare) have been introduced in Congress and in various state legislatures. Proposals have included, among other things, modifications to the existing employer-based insurance system, a quasi-regulated system of "managed competition" among health plans, and a single-payer, public program. Changes in health care policy could significantly affect our business. For example, Federal comprehensive major medical or long-term care programs, if proposed and implemented, could partially or fully replace some of Conseco's current products.
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A number of states have passed or are considering legislation that would limit the differentials in rates that insurers could charge for health care coverages between new business and renewal business for similar demographic groups. State legislation has also been adopted or is being considered that would make health insurance available to all small groups by requiring coverage of all employees and their dependents, by limiting the applicability of pre-existing conditions exclusions, by requiring insurers to offer a basic plan exempt from certain benefits as well as a standard plan, or by establishing a mechanism to spread the risk of high risk employees to all small group insurers. Congress and various state legislators have from time to time proposed changes to the health care system that could affect the relationship between health insurers and their customers, including external review.
We cannot predict with certainty the effect that any proposals, if adopted, or legislative developments could have on our insurance businesses and operations.
Finance
The Company's finance operations are subject to regulation by certain federal and state regulatory authorities. A substantial portion of the Company's consumer loans and assigned sales contracts are originated or purchased by finance subsidiaries licensed under applicable state law. The licensed entities are subject to examination by and reporting requirements of the state administrative agencies issuing such licenses. The finance subsidiaries are subject to state laws and regulations which in certain states: limit the amount, duration and charges for such loans and contracts; require disclosure of certain loan terms and regulate the content of documentation; place limitations on collection practices; and govern creditor remedies. The licenses granted are renewable and may be subject to revocation by the respective issuing authority for violation of such state's laws and regulations. Some states have adopted or are considering the adoption of consumer protection laws or regulations that impose requirements or restrictions on lenders who make certain types of loans secured by real estate.
In addition to the finance companies licensed under state law, both Conseco Bank and Retail Bank, both of which are wholly owned subsidiaries of Conseco, are under the supervision of, and subject to examination by, the Federal Deposit Insurance Corporation. Conseco Bank is also supervised and examined by the Utah Department of Financial Institutions. Retail Bank is supervised and examined by the South Dakota Department of Banking. The ownership of these entities does not subject the Company to regulation by the Federal Reserve Board as a bank holding company. Conseco Bank has the authority to engage generally in the banking business and may accept all types of deposits, other than demand deposits. Retail Bank is limited by its charter to engage in the credit card business and may issue only certificates of deposit in denominations of $100,000 or greater. Conseco Bank and Retail Bank are subject to regulations relating to capital adequacy, leverage, loans, loss reserves, deposits, consumer protection, community reinvestment, payment of dividends and transactions with affiliates.
A number of states have usury and other consumer protection laws which may place limitations on the amount of interest charged on loans originated in such state. Generally, state law has been preempted by federal law under the Depositary Institutions Deregulation and Monetary Control Act of 1980 ("DIDA") which deregulates the rate of interest, discount points and finance charges with respect to first lien residential loans, including manufactured home loans and real estate secured mortgage loans. As permitted under DIDA, a number of states enacted legislation timely opting out of coverage of either or both of the interest rate and/or finance charge provisions of the Act. States may no longer opt out of the interest rate provisions of the Act, but could in the future opt out of the finance charge provisions. To be eligible for federal preemption for manufactured home loans, the Company's licensed finance companies must comply with certain restrictions providing protection to consumers. In addition, another provision of DIDA applicable to state-chartered insured depository institutions permits both Conseco Bank and Retail Bank to export interest rates, finance charges and certain fees from the states where they are located to all other states, with the exception of Iowa which opted out of the Act during the permitted time period. Interest rates, finance charges and fees in Utah and South Dakota are, for the most part, deregulated.
The Company's operations are subject to Federal regulation under other applicable federal laws and regulations, the more significant of which include:
the Truth in Lending Act ("TILA"); the Equal Credit Opportunity Act ("ECOA"); the Fair Credit Reporting Act ("FCRA"); the Real Estate Settlement and Procedures Act ("RESPA"); the Home Mortgage Disclosure Act ("HMDA"); the Home Owner Equity Protection Act ("HOEPA"); DIDA; and certain rules and regulations of the Federal Trade Commission ("FTC Rules").
TILA and Regulation Z promulgated thereunder contain certain disclosure requirements designed to provide consumers with uniform, understandable information with respect to the terms and conditions of extensions of credit and the ability to compare credit terms. TILA also provides consumers with a three day right to cancel certain credit transactions, including certain of the loans originated by the Company.
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ECOA requires certain disclosures to applicants for credit concerning information that is used as a basis for denial of credit and prohibits discrimination against applicants with respect to any aspect of a credit transaction on the basis of sex, race, color, religion, national origin, age, marital status, derivation of income from a public assistance program or the good faith exercise of a right under TILA. ECOA also requires that adverse action notices be given to applicants who are denied credit.
FCRA regulates the process of obtaining, using and reporting of credit information on consumers. This Act also regulates the use of credit information among affiliates.
RESPA regulates the disclosure of information to consumers on loans involving a mortgage on real estate. The Act and related regulations also govern payment for and disclosure of payments for settlement services in connection with mortgage loans and prohibits the payment of referral fees for the referral of a loan or related services.
HMDA requires reporting of certain information to the Department of Housing and Urban Development, including the race and sex of applicants in connection with mortgage loan applications. A lender is required to obtain and report such information if the application is made in person, but is not required to obtain such information if the application is taken over the telephone.
HOEPA provides for additional disclosure and regulation of certain consumer mortgage loans which are defined by the Act as "Covered Loans." A Covered Loan is a mortgage loan (other than a mortgage loan to finance the initial purchase of a dwelling) which (1) has total origination fees in excess of the greater of eight percent of the loan amount, or $451, or (2) has an annual percentage rate of more than ten percent higher than comparably maturing United States treasury obligations. A number of the Company's home equity and home improvement loans are Covered Loans under the Act.
The FTC Rules provide, among other things, that in connection with the purchase of consumer sales finance contracts from dealers, the holder of the contract is subject to all claims and defenses which the consumer could assert against the dealer, but the consumer's recovery under such provisions cannot exceed the amount paid under the sales contract.
In the judgment of the Company, existing federal and state law and regulations have not had a material adverse effect on the finance operations of the Company. There can, however, be no assurance that future law and regulatory changes will not occur and will not place additional burdens on the Company's finance operations.
The Company's commercial lending operations are not subject to material regulation in most states, although certain states do require licensing. In addition, certain provisions of ECOA apply to commercial loans to small businesses.
FEDERAL INCOME TAXATION
The annuity and life insurance products marketed and issued by our insurance subsidiaries generally provide the policyholder with an income tax advantage, as compared to other savings investments such as certificates of deposit and bonds, in that income taxation on the increase in value of the product is deferred until it is received by the policyholder. With other savings investments, the increase in value is taxed as earned. Annuity benefits and life insurance benefits, which accrue prior to the death of the policyholder, are generally not taxable until paid. Life insurance death benefits are generally exempt from income tax. Also, benefits received on immediate annuities (other than structured settlements) are recognized as taxable income ratably, as opposed to the methods used for some other investments which tend to accelerate taxable income into earlier years. The tax advantage for annuities and life insurance is provided in the Internal Revenue Code (the "Code"), and is generally followed in all states and other United States taxing jurisdictions. In addition, the interest paid on home equity and home improvement loans by customers of Conseco Finance are generally tax deductible for individuals who itemize their tax deductions.
From time to time, various tax law changes have been proposed that could have an adverse effect on our business, including elimination of all or a portion of the income tax advantage of certain insurance products and changes in how life insurance companies are taxed; such changes could affect the marketability of our products and increase the Company's current tax liability. In addition, from time to time, various tax law changes have been proposed that could increase the attractiveness of our products to certain consumers.
Our insurance company subsidiaries are taxed under the life insurance company provisions of the Code. Provisions in the Code require a portion of the expenses incurred in selling insurance products to be deducted over a period of years, as opposed to immediate deduction in the year incurred. This provision increases the tax for statutory accounting purposes,
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which reduces statutory earnings and surplus and, accordingly, decreases the amount of cash dividends that may be paid by the life insurance subsidiaries.
In certain securitization transactions, Conseco Finance utilizes a special tax structure referred to as a Real Estate Mortgage Investment Conduit ("REMIC"). When this tax structure is used, the Company is required to account for the transfer of the finance receivables into the securitization trust as a sale (although for GAAP reporting purposes such transfers are accounted for as collateralized borrowings). Additionally, since the Company retains the residual interests of the REMIC, the REMIC tax rules require the Company to pay a minimum amount of tax each year based on the taxable income of the retained residual interest.
The Company has tax loss carryforwards ("NOLs") at December 31, 2000, of approximately $1.1 billion. Such NOLs expire as follows: $41.4 million in the next five years; $74.3 million in 2006 through 2011; $129.7 million in 2012; $280.9 million in 2018; $165.3 million in 2019; and $431.9 million in 2020. These NOLs are not eligible to offset the majority of the income of the Company's life insurance subsidiaries, and certain of these NOLs may only offset income from specific subsidiaries. Additionally, certain of these NOLs are limited to an aggregate deductible amount in any one year. We, however, believe that the Company will be able to fully utilize substantially all NOLs before they expire.
ITEM 2. PROPERTIES.
Headquarters. Our headquarters is located on a 180-acre corporate campus in Carmel, Indiana, immediately north of Indianapolis. The 12 buildings on the campus (all but one of which are owned) contain approximately 956,000 square feet of space and house Conseco's executive offices and certain administrative operations of its subsidiaries.
Insurance operations. Our career agent operations are primarily administered from a single facility of 300,000 square feet in downtown Chicago, Illinois, leased under an agreement having a remaining life of eight years. We also lease approximately 130,000 square feet of warehouse space in a second Chicago facility; this lease has a remaining life of three years. Conseco owns an office building in Kokomo, Indiana (93,000 square feet), and two office buildings in Rockford, Illinois (total of 169,000 square feet), which serve as administrative centers for portions of our insurance operations. Conseco owns one office building in Philadelphia, Pennsylvania (127,000 square feet), which serves as the administrative center for our direct response life insurance operations; approximately 60 percent of this space is occupied by the Company, with the remainder leased to tenants. Conseco also leases 244 sales offices in various states totaling approximately 508,100 square feet; these leases are short-term in length, with remaining lease terms ranging from one to five years.
Finance operations. Conseco Finance Corp. headquarters are based in St. Paul, Minnesota occupying approximately 120,000 square feet in a building owned by the Company. In addition, the Mortgage Services division, including part of its private label credit card, is housed in 185,000 square feet in a leased facility in downtown St. Paul. The Company also owns a 131,000 square foot building in Rapid City, South Dakota, where it houses part of their Manufactured Housing Services units and leases an additional 75,000 square feet to accommodate part of the servicing units of the private label credit cards and retail bank operations. The Company also leases buildings in Tempe, Arizona and Duluth, Georgia. Tempe has approximately 200,000 square feet where the Manufactured Housing, Mortgage Services and Retail Credit Card divisions operate their collections and service centers. Duluth, Georgia, has two buildings of approximately 48,000 square feet each where the Manufactured Housing division operates its eastern service center. The Manufactured Housing Division has 33 regional offices that are leased from three to five years. The Mortgage Services Division leases 127 branch offices around the country, also on short term (3 - 5 year) leases. The Company leases offices in Alpharetta, Georgia and Clayton, Missouri, for its Commercial Lending Division and a small office in Salt Lake City for its Conseco Bank operations.
ITEM 3. LEGAL PROCEEDINGS.
Conseco Finance was served with various related lawsuits filed in the United States District Court for the District of Minnesota. These lawsuits were generally filed as purported class actions on behalf of persons or entities who purchased common stock or options to purchase common stock of Conseco Finance during alleged class periods that generally run from February 1995 to January 1998. One action (Florida State Board of Admin. v. Green Tree Financial Corp., Case No. 98-1162) did not include class action claims. In addition to Conseco Finance, certain current and former officers and directors of Conseco Finance are named as defendants in one or more of the lawsuits. Conseco Finance and other defendants obtained an order consolidating the lawsuits seeking class action status into two actions, one of which pertains to a purported class of common stockholders (In re Green Tree Financial Corp. Stock Litig., Case No. 97-2666) and the other which pertains to a purported class action of stock option traders (In re Green Tree Financial Corp. Options Litig., Case No. 97-2679). Plaintiffs in the lawsuits assert claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. In each case, plaintiffs allege that Conseco Finance and the other defendants violated federal securities laws by,
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among other things, making false and misleading statements about the current state and future prospects of Conseco Finance (particularly with respect to prepayment assumptions and performance of certain loan portfolios of Conseco Finance) which allegedly rendered Conseco Finance's financial statements false and misleading. On August 24, 1999, the United States District Court for the District of Minnesota issued an order to dismiss with prejudice all claims alleged in the lawsuits. The plaintiffs subsequently appealed the decision to the U.S. Court of Appeals for the 8th Circuit, and the appeal is currently pending. The Company believes that the lawsuits are without merit and intends to continue to defend them vigorously. The ultimate outcome of these lawsuits cannot be predicted with certainty.
A total of forty-five suits were filed against the Company in the United States District Court for the Southern District of Indiana. Nineteen of these cases were putative class actions on behalf of persons or entities that purchased the Company's common stock during alleged class periods that generally run from April 1999 through April 2000. Two cases were putative class actions on behalf of persons or entities that purchased the Company's bonds during the same alleged class periods. Three cases were putative class actions on behalf of persons or entities that purchased or sold option contracts, not issued by the Company, on the Company's common stock during the same alleged class periods. One case was a putative class action on behalf of persons or entities that purchased the Company's "FELINE PRIDE" convertible preferred stock instruments during the same alleged class periods. With four exceptions, in each of these twenty-five cases two former officers/directors of the Company are named as defendants. In each case, the plaintiffs assert claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. In each case, plaintiffs allege that the Company and the individual defendants violated the federal securities laws by, among other things, making false and misleading statements about the current state and future prospects of Conseco Finance (particularly with respect to performance of certain loan portfolios of Conseco Finance) which allegedly rendered the Company's financial statements false and misleading. The Company believes that these lawsuits are without merit and intends to defend them vigorously. The ultimate outcome of these lawsuits cannot be predicted with certainty.
Eleven of the cases in the United States District Court were filed as purported class actions on behalf of persons or entities that purchased preferred securities issued by various Conseco Financing Trusts, including Conseco Financing Trust V, Conseco Financing Trust VI, and Conseco Financing Trust VII. Each of these complaints named as defendants the Company, the relevant trust (with two exceptions), two former officers/directors of the Company, and underwriters for the particular issuance (with one exception). One complaint also named an officer and all of the Company's directors at the time of issuance of the preferred stock by Conseco Financing Trust VII. In each case, plaintiffs assert claims under Section 11 and Section 15 of the Securities Act of 1933, and the eight complaints also asserted claims under Section 12(a)(2) of that Act. Two complaints also asserted claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and one complaint also asserted a claim under Section 10(b) of that Act. In each case, plaintiffs alleged that the defendants violated the federal securities laws by, among other things, making false and misleading statements, in Prospectuses and/or Registration Statements related to the issuance of preferred securities by the Trust involved, regarding the current state and future prospects of Conseco Finance (particularly with respect to performance of certain loan portfolios of Conseco Finance) which allegedly rendered the disclosure documents false and misleading.
All of the securities cases have now been consolidated into one case in the United States District Court for the Southern District of Indiana, captioned: "In Re Conseco, Inc. Securities Litigation", cause number IP00-585-C-Y/S. An amended complaint was filed on January 12, 2001. The Company intends to defend this lawsuit vigorously. The ultimate outcome cannot be predicted with certainty.
Nine shareholder derivative suits were filed in United States District Court. The complaints named as defendants the current directors, certain former directors, certain non-director officers of the Company (in one case), and, alleging aiding and abetting liability, certain banks which allegedly made loans in relation to the Company's "Stock Purchase Plan" (in these cases). The Company is also named as a nominal defendant in each complaint. Plaintiffs allege that the defendants breached their fiduciary duties by, among other things, intentionally disseminating false and misleading statements concerning the acquisition, performance and proposed sale of Conseco Finance, and engaged in corporate waste by causing the Company to guarantee loans that certain officers, directors and key employees of the Company used to purchase stock under the Stock Purchase Plan. These cases have now been consolidated into one case in the United States District Court for the Southern District of Indiana, captioned:
"In Re Conseco, Inc. Derivative Litigation", cause number IP00655-C-Y/S. An amended complaint is expected to be filed in April 2001. Three similar cases have been filed in the Hamilton County Superior Court in Indiana. Schweitzer v. Hilbert, et al., Cause No. 29001-0004CP251; Evans v. Hilbert, et al., Cause No. 29001-0005CP308 (both Schweitzer and Evans name as defendants certain non-director officers); Gintel v. Hilbert, et al., Cause No. 29003-0006CP393 (naming as defendants, and alleging aiding and abetting liability as to, banks which allegedly made loans in relation to the Stock Purchase Plan). The Company believes that these lawsuits are without merit and intends to defend them vigorously. The ultimate outcome of these lawsuits cannot be predicted with certainty.
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Conseco, Inc. and its subsidiaries, Conseco Services, LLC, Washington National Insurance Company and United Presidential Life Insurance Company are currently named defendants in a lawsuit filed in the Circuit Court of Claiborne County, Mississippi, Cause No. CV-99-0106, and captioned "Carla Beaugez, Lois Dearing, Lee Eaton and all other persons identified in the lawsuit v. Conseco, Inc., Conseco Services, Inc., Washington National Company, United Presidential Life Insurance Company and Larry Ratcliff." The claims of the eighty-seven plaintiffs arise out of allegedly wrongful increases of the cost of insurance and decrease in the credited interest rates on universal life policies issued to the plaintiffs by United Presidential Life. The plaintiffs asserted claims including negligent and intentional misrepresentation, fraudulent concealment, fraudulent inducement, common law fraud, and deceptive sales practices. The Company believes this lawsuit is without merit and is defending it vigorously. The ultimate outcome of this lawsuit cannot be predicted with certainty.
Conseco Finance is a defendant in two arbitration proceedings in South Carolina (Lackey v. Green Tree Financial Corporation, n/k/a Conseco Finance Corp. and Bazzle v. Green Tree Financial Corporation, n/k/a Conseco Finance Corp.) where the arbitrator, over Conseco Finance's objection, allowed the plaintiffs to pursue purported class action claims in arbitration. The two purported arbitration classes consist of South Carolina residents who obtained real estate secured credit from Conseco Finance's Manufactured Housing Division (Lackey) and Home Improvement Division (Bazzle) in the early and mid 1990s, and did not receive a South Carolina specific disclosure form relating to selection of attorneys in connection with the credit transactions. The arbitrator, in separate awards issued on July 24, 2000, awarded a total of $26.8 million in penalties and attorneys' fees. The awards were confirmed as judgements in both Lackey and Bazzle. These matters are currently on appeal at the South Carolina Supreme Court. Conseco Finance intends to vigorously challenge the awards and believes that the arbitrator erred by, among other things, conducting class action arbitrations without the authority to do so and misapplying South Carolina law when awarding the penalties. The ultimate outcome of these proceedings cannot be predicted with certainty.
In addition, the Company and its subsidiaries are involved on an ongoing basis in other lawsuits related to their operations. Although the ultimate outcome of certain of such matters cannot be predicted, such lawsuits currently pending against the Company or its subsidiaries are not expected, individually or in the aggregate, to have a material adverse effect on the Company's consolidated financial condition, cash flows or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
17
Optional Item. Executive Officers of the Registrant.

      Officer                                              Positions with Conseco, Principal
    Name and Age (a)                  Since             Occupation and Business Experience (b)
    ------------                      -----             ----------------------------------

    Gary C. Wendt, 59...............  2000           Since June 2000, Chairman and Chief Executive Officer of Conseco
                                                     from 1999 to 2000, associated with Global Opportunity Advisors
                                                     (a private equity investment fund); from 1986 to 1998, Chairman
                                                     and Chief Executive Officer of GE Capital Services; from 1984 to
                                                     1986, President and Chief Operations Officer of GE Credit Corp.

    Charles B. Chokel, 47...........  2001           Since March 2001, Executive Vice President and Chief Financial
                                                     Officer of Conseco; from 1999 to 2000, Co-Chief Executive Officer
                                                     OF Progressive Corporation; from 1991 to 1998, Chief Financial
                                                     Officer of Progressive Corporation.

    David K. Herzog, 45.............  2000           Since September 2000, Executive Vice President, General Counsel
                                                     and Secretary of Conseco; from  1980 to 2000 attorney with Baker
                                                     & Daniels (law firm).

    Thomas J. Kilian, 50............  1998           Since February 2000, President of Conseco; from 1998 to February
                                                     2000, Executive Vice President and Chief Operations Officer of
                                                     Conseco; since 1996, President of Conseco Services, LLC (responsible
                                                     for insurance operations, data processing, human resources and
                                                     administrative services for various Conseco subsidiaries); from 1989 to
                                                     1996, Senior Vice President of data processing for various Conseco
                                                     subsidiaries.

    James S. Adams, 41..............  1997           Since 1997, Senior Vice President, Chief Accounting Officer and
                                                     Treasurer of Conseco; from 1989 to present, Senior Vice President and
                                                     Treasurer of various Conseco subsidiaries.

    Edward M. Berube, 53............  1999           Since 2000, President and Chief Executive Officer of Bankers Life and
                                                     Casualty Company, a subsidiary of Conseco; from 1999 to 2000, Senior
                                                     Vice President and President-Insurance Group of Conseco; from 1997 to
                                                     1999, President and Chief Operating Officer of American Life Insurance
                                                     Company; from 1992 to 1997, President of CIGNA Financial Advisors
                                                     and Life Brokerage.

    Maxwell E. Bublitz, 45..........  1998           Since 1998, Senior Vice President, Investments of Conseco; from 1994
                                                     to present, President and Chief Executive Officer of Conseco Capital
                                                     Management, Inc., a subsidiary of Conseco.

    Bruce A. Crittenden, 49.........  1999           Since 1999, Senior Vice President and President-Finance Group of
                                                     Conseco; from 2000 to present, President; from 1996 to 2000, Executive
                                                     Vice President, from 1997 to 2000, President, Retail/Mortgage Services
                                                     and Home Improvement Divisions, from 1995 to 1996, Senior Vice
                                                     President of Conseco Finance Corp., a subsidiary of Conseco.

    David Gubbay, 48................  2001           Since March 2001, Executive Vice President-Strategic Business
                                                     Development of Conseco; from 1999 to 2000, Executive Vice President-
                                                     Operations for Norwegian Cruise Line Ltd.; from 1997 to 1998, Senior
                                                     Vice President-Corporate Development/Mergers and Acquisitions for
                                                     Fortis, Inc.; from 1989 to 1996, Chairman and Chief Executive Officer of
                                                     Whitehall Group.

                                       18	

-------------------
    (a) The executive  officers  serve as such at the discretion of the Board
        of Directors and are elected annually.

    (b) Business experience is given for at least the last five years.	

19
 
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS.
MARKET INFORMATION
The common stock of Conseco (trading symbol "CNC") has been listed for trading on the New York Stock Exchange (the "NYSE") since 1986. The following table sets forth the quarterly dividends paid per share and the ranges of high and low sales prices per share on the NYSE for the last two fiscal years, based upon information supplied by the NYSE.

Period                                                             Market price
------                                                      ------------------------         Dividend
                                                               High           Low              paid
                                                               ----           ---              ----

1999:
    First Quarter.........................................    $37.81          $26.81          $.1400
    Second Quarter........................................     35.31           28.00           .1400
    Third Quarter.........................................     31.94           19.00           .1400
    Fourth Quarter........................................     24.75           16.56           .1500

2000:
    First Quarter.........................................    $18.50          $10.31          $.1500
    Second Quarter........................................     10.81            4.50           .0500
    Third Quarter.........................................     11.69            7.00           .0500
    Fourth Quarter........................................     13.38            4.94           .0000	

As of March 13, 2001, there were approximately 170,200 holders of the outstanding shares of common stock, including individual participants in securities position listings.
DIVIDENDS
As part of our plan to strengthen our capital structure, the Board of Directors suspended the cash dividend on our common stock subsequent to the dividend paid in July of 2000. The amended bank credit facilities prohibit the payment of cash dividends on our common stock until the Company has received investment grade ratings on its outstanding public debt and the bank credit facilities maturing in December 2001 are paid in full.
Our general policy is to retain most of our earnings. Retained earnings have been used: (i) to finance the growth and development of the Company's business through acquisitions or otherwise; (ii) to pay preferred stock dividends; (iii) to pay distributions on the Company-obligated mandatorily redeemable preferred securities of subsidiary trusts; (iv) to reduce corporate debt outstanding; (v) to repurchase common stock on those occasions when we have determined that our shares were undervalued in the market and that the use of funds for stock repurchases would not interfere with other cash needs; and (vi) to pay dividends on common stock prior to their suspension in 2000.
We have paid all cumulative dividends on our preferred stock and distributions on our Company-obligated mandatorily redeemable preferred securities of subsidiary trusts when due. We are prohibited from paying common stock dividends if such payments are not current. Certain Conseco financing agreements require the Company to maintain financial ratios which could also limit our ability to pay dividends. Such financing agreements also restrict our ability to repurchase common stock.
Our ability to pay dividends depends primarily on the receipt of cash dividends and other cash payments from our finance and life insurance company subsidiaries. Our life insurance companies are organized under state laws and are subject to regulation by state insurance departments. These laws and regulations limit the ability of insurance subsidiaries to make cash dividends, loans or advances to a holding company such as Conseco. However, these laws generally permit the payment out of the subsidiary's earned surplus, without prior approval, of dividends for any 12-month period which in the aggregate do not exceed the greater of (or in a few states, the lesser of): (i) the subsidiary's prior year net gain from operations; or (ii) 10 percent of surplus attributable to policyholders at the prior year-end, both computed on the statutory basis of accounting prescribed for insurance companies.
20
 
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA (a).

                                                                                  Years ended December 31,
                                                                 ---------------------------------------------------------
                                                                 2000          1999         1998         1997         1996
                                                                 ----          ----         ----         ----         ----
                                                                       (Amounts in millions, except per share data)
STATEMENT OF OPERATIONS DATA
Insurance policy income.....................................  $ 4,220.3    $4,040.5     $3,948.8     $3,410.8     $1,654.2
Gain on sale of finance receivables (b).....................        7.5       550.6        745.0        779.0        400.6
Net investment income.......................................    3,920.4     3,411.4      2,506.5      2,171.5      1,505.3
Net investment gains (losses) from the sale of investments..     (358.3)     (156.2)       208.2        266.5         60.8
Total revenues..............................................    8,296.4     8,335.7      7,760.2      6,872.2      3,789.8
Interest expense:
  Corporate.................................................      438.4       249.1        182.2        109.4        108.1
  Finance and investment borrowings.........................    1,014.7       312.6        258.3        202.9         92.1
Total benefits and expenses.................................    9,658.2     7,184.8      6,714.5      5,386.5      2,974.0
Income (loss) before income taxes, minority interest,
  extraordinary charge and cumulative effect of
  accounting change.........................................   (1,361.8)    1,150.9      1,045.7      1,485.7        815.8
Extraordinary charge on extinguishment of debt, net of tax..        5.0         -           42.6          6.9         26.5
Cumulative effect of accounting change, net of tax..........       55.3         -            -             -           -
Net income (loss) (c).......................................   (1,191.2)      595.0        467.1        866.4        452.2
Preferred stock dividends ..................................       11.0         1.5          7.8         21.9         27.4
Net income (loss) applicable to common stock................   (1,202.2)      593.5        459.3        844.5        424.8

PER SHARE DATA (d)
Net income (loss), basic....................................     $(3.69)      $1.83        $1.47        $2.72        $1.85
Net income (loss), diluted..................................      (3.69)       1.79         1.40         2.52         1.69
Dividends declared per common share.........................       .100        .580         .530         .313         .083
Book value per common share outstanding.....................      11.95       15.50        16.37        16.45        13.47
Shares outstanding at year-end..............................      325.3       327.7        315.8        310.0        293.4
Weighted average shares outstanding for diluted earnings....      326.0       332.9        332.7        338.7        267.7

BALANCE SHEET DATA - PERIOD END
Total assets................................................  $58,589.2   $52,185.9    $43,599.9    $40,679.8    $28,724.0
Notes payable and commercial paper:
  Corporate.................................................    5,055.0     4,624.2      3,809.9      2,354.9      1,094.9
  Finance...................................................    2,810.9     2,540.1      1,511.6      1,863.0        762.5
  Related to securitized finance receivables structured
     as collateralized borrowings...........................   12,100.6     4,641.8          -            -            -
Total liabilities...........................................   51,810.9    43,990.6     36,229.4     34,082.0     23,810.2
Minority interests in consolidated subsidiaries:
  Company-obligated mandatorily redeemable
     preferred securities of subsidiary trusts..............    2,403.9     2,639.1      2,096.9      1,383.9        600.0
  Other equity interests in subsidiaries....................        -           -            -            -           97.0
Shareholders' equity .......................................    4,374.4     5,556.2      5,273.6      5,213.9      4,216.8

OTHER FINANCIAL DATA (d) (e)
Premium and asset accumulation product collections (f)......  $ 7,158.6    $6,986.0     $6,051.3     $5,075.6     $3,280.2
Operating earnings (g)......................................      135.2       749.2        841.1        991.8        467.5
Managed finance receivables.................................   46,585.9    45,791.4     37,199.8     27,957.1     20,072.7
Total managed assets (at fair value) (h)....................   95,720.6    98,561.8     87,247.4     70,259.8     59,084.8
Shareholders' equity, excluding accumulated other
  comprehensive income (loss)...............................    5,025.4     6,327.8      5,302.0      5,013.3      4,180.2
Book value per common share outstanding, excluding
  accumulated other comprehensive income (loss).............      13.95       17.85        16.46        15.80        13.34
Delinquencies greater than 60 days as a percentage of
  managed finance receivables...............................      1.76%       1.42%        1.19%        1.08%        1.08%
Net credit losses as a percentage of average managed
  finance receivables.......................................      1.79%       1.31%        1.03%        1.05%         .74%

                                       21	

--------------------
  (a)  Comparison of selected supplemental consolidated financial data in the
       table above is significantly affected by the following business
       combinations accounted for as purchases: Washington National Corporation
       (effective December 1, 1997); Colonial Penn Life Insurance Company and
       Providential Life Insurance Company (September 30, 1997); Pioneer
       Financial Services, Inc. (April 1, 1997); Capitol American Financial
       Corporation (January 1, 1997); Transport Holdings Inc. (December 31,
       1996); American Travellers Corporation (December 31, 1996); FINOVA
       Acquisition I, Inc. (December 1, 1996); and Life Partners Group, Inc.
       (July 1, 1996). All financial data have been restated to give retroactive
       effect to the merger with Conseco Finance accounted for as a pooling of
       interests.

  (b)  Subsequent to September 8, 1999, we no longer structure the
       securitizations of the loans we originate in a manner that results in
       gain-on-sale revenues. The gain recognized in 2000 was realized on the
       sale of whole loans (with no interest retained by the Company). For more
       information on this change, see "Management's Discussion and Analysis of
       Consolidated Financial Condition and Results of Operations - Finance
       Segment - General."

  (c)  Net income (loss) includes the following:

                                                                2000          1999         1998         1997         1996
                                                                ----          ----         ----         ----         ----
                                                                                   (Dollars in millions)

       Net investment gains (losses), net of tax and
          other items.......................................    $(198.1)    $(111.9)     $ (32.8)    $   44.1     $   11.2
       Impairment charge, net of tax........................     (324.9)     (349.2)      (355.8)      (117.8)         -
       Special charges, net of tax..........................     (518.3)        -         (148.0)         -            -
       Provision for losses related to loan guarantees,
          net of tax........................................     (150.0)      (11.9)         -            -            -
       Venture capital income (loss), net of amortization,
          expenses and taxes................................      (99.4)      170.0          -            -            -
       Amounts related to major medical lines of business
          we intend to sell and other non-recurring items,
          net of tax........................................       13.6       147.3        205.2        (44.8)        17.4
       Cumulative effect of accounting change, net of tax...      (55.3)        -            -            -            -
       Extraordinary charge on extinguishment of debt,
          net of tax........................................       (5.0)        -          (42.6)        (6.9)       (26.5)

       Refer to "Management's Discussion and Analysis of Consolidated Financial
       Condition and Results of Operations" and the notes to the consolidated
       financial statements for additional discussion of the above items.

   (d) All share and per-share amounts have been restated to reflect the
       two-for-one stock splits paid on February 11, 1997 and April 1, 1996.

   (e) Amounts under this heading are included to assist the reader in analyzing
       the Company's financial position and results of operations. Such amounts
       are not intended to, and do not, represent insurance policy income, net
       income, shareholders' equity or book value per share prepared in
       accordance with generally accepted accounting principles ("GAAP").

   (f) Includes premiums received from universal life products and products
       without mortality or morbidity risk. Such premiums are not reported as
       revenues under GAAP and were $2,731.1 million in 2000; $3,023.3 million
       in 1999; $2,585.7 million in 1998; $2,099.4 million in 1997; and $1,881.3
       million in 1996. Also includes deposits in mutual funds totaling $794.2
       million in 2000; $479.3 million in 1999; $87.1 million in 1998; and $19.9
       million in 1997.

   (g) Represents net income excluding the items described in note (c) above.

   (h) Includes: (i) all of the Company's assets; (ii) the total finance
       receivables managed by Conseco Finance applicable to the holders of
       asset-backed securities sold by Conseco Finance in securitizations
       structured in a manner that resulted in gain-on-sale revenue (adjusted
       for the interests retained by the Company); and (iii) the total market
       value of the investment portfolios managed by the Company for others of
       $7.5 billion, $11.4 billion, $11.2 billion, $5.1 billion and $12.6
       billion at December 31, 2000, 1999, 1998, 1997 and 1996, respectively.	

22
 
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
In this section, we review the consolidated financial condition of Conseco at December 31, 2000 and 1999, the consolidated results of operations for the three years ended December 31, 2000, and where appropriate, factors that may affect future financial performance. Please read this discussion in conjunction with the accompanying consolidated financial statements, notes and selected consolidated financial data.
All statements, trend analyses and other information contained in this report and elsewhere (such as in filings by Conseco with the Securities and Exchange Commission, press releases, presentations by Conseco or its management or oral statements) relative to markets for Conseco's products and trends in Conseco's operations or financial results, as well as other statements including words such as "anticipate," "believe," "plan," "estimate," "expect," "intend," "should," "could," "goal," "target," "on track," "comfortable with," "optimistic" and other similar expressions, constitute forward-looking statements under the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to known and unknown risks, uncertainties and other factors which may cause actual results to be materially different from those contemplated by the forward-looking statements. Such factors include, among other things: (i) general economic conditions and other factors, including prevailing interest rate levels, stock and credit market performance and health care inflation, which may affect (among other things) Conseco's ability to sell its products, its ability to make loans and access capital resources and the costs associated therewith, the market value of Conseco's investments, the lapse rate and profitability of policies, and the level of defaults and prepayments of loans made by Conseco; (ii) Conseco's ability to achieve anticipated synergies and levels of operational efficiencies; (iii) customer response to new products, distribution channels and marketing initiatives; (iv) mortality, morbidity, usage of health care services and other factors which may affect the profitability of Conseco's insurance products; (v) performance of our investments; (vi) changes in the Federal income tax laws and regulations which may affect the relative tax advantages of some of Conseco's products; (vii) increasing competition in the sale of insurance and annuities and in the finance business; (viii) regulatory changes or actions, including those relating to regulation of financial services affecting (among other things) bank sales and underwriting of insurance products, regulation of the sale, underwriting and pricing of products, and health care regulation affecting health insurance products; (ix) the outcome of Conseco's efforts to sell assets and reduce, refinance or modify indebtedness and the availability and cost of capital in connection with this process; (x) actions by rating agencies and the effects of past or future actions by these agencies on Conseco's business; and (xi) the risk factors or uncertainties listed from time to time in Conseco's filings with the Securities and Exchange Commission.
Consolidated results and analysis
The net loss applicable to common stock of $1,202.2 million in 2000, or $3.69 per diluted share, included: (i) net investment losses (net of related costs, amortization and taxes) of $198.1 million, or 61 cents per share; (ii) an impairment charge of $324.9 million (net of an income tax benefit of $190.8 million), or $1.00 per share, related to the Company's interest-only securities and servicing rights; (iii) special charges of $518.3 million (net of an income tax benefit of $181.0 million), or $1.59 per share, as summarized in note 9 to the consolidated financial statements entitled "Special Charges"; (iv) the provision for loss of $150.0 million (net of an income tax benefit of $80.5 million), or 46 cents per share, related to the Company's guarantee of bank loans made to directors, officers and key employees to purchase shares of Conseco common stock; (v) a loss of $99.4 million, or 31 cents per share, related to our venture capital investment in TeleCorp; (vi) net income of $13.6 million, or 4 cents per share, related to the major medical lines of business which we intend to sell and other non- recurring items; (vii) the cumulative effect of an accounting change of $55.3 million (net of an income tax benefit of $29.8 million), or 17 cents per share, related to new requirements for the valuation of interest-only securities; and (viii) an extraordinary charge of $5.0 million (net of an income tax benefit of $2.7 million), or 1 cent per share, related to the early retirement of debt.
Net income applicable to common stock of $593.5 million in 1999, or $1.79 per diluted share, included: (i) net investment losses (net of related costs, amortization and taxes) of $111.9 million, or 34 cents per share; (ii) an impairment charge of $349.2 million (net of an income tax benefit of $205.1 million), or $1.05 per share, to reduce the value of interest- only securities and servicing rights; (iii) the provision for loss of $11.9 million (net of an income tax benefit of $7.0 million), or 3 cents per share, related to the aforementioned guarantee of bank loans; (iv) a gain of $170.0 million, or 51 cents per share, related to our venture capital investment in TeleCorp; and (v) the net income of $147.3 million, or 44 cents per share, related to the major medical lines of business we intend to sell and other non-recurring items. The aforementioned special and impairment charges are explained in more detail in the notes to the accompanying consolidated financial statements.
23
Net income applicable to common stock of $459.3 million in 1998, or $1.40 per diluted share, included: (i) net investment losses (net of related costs, amortization and taxes) of $32.8 million, or 10 cents per share; (ii) an impairment charge (net of an income tax benefit of $193.6 million) of $355.8 million, or $1.08 per share, to reduce the value of interest- only securities and servicing rights; (iii) special charges (net of taxes) of $148.0 million, or 44 cents per share, related primarily to costs incurred in conjunction with the merger with Conseco Finance (the "Merger") accounted for as a pooling of interests; (iv) income of $205.2 million, or 62 cents per share, related to the major medical lines of business we intend to sell and other non-recurring items; and (v) an extraordinary charge (net of taxes) of $42.6 million, or 13 cents per share, related to the early retirement of debt.
Total revenues included net investment losses of $358.3 million and $156.2 million in 2000 and 1999, respectively, and net investment gains of $208.2 million in 1998. Total revenues, excluding net investment gains (losses), were up 1.9 percent in 2000 over 1999, and up 12 percent in 1999 over 1998.
We evaluate the performance and determine future earnings goals based on operating earnings which are defined as income before: (i) net investment gains (losses)(less that portion of amortization of cost of policies purchased and cost of policies produced and income taxes relating to such gains (losses));
(ii) the venture capital income (loss) related to our investment in TeleCorp;
(iii) special items not related to the continuing operations of our businesses (including impairment charges to reduce the value of interest-only securities and servicing rights, special charges and the provision for losses related to loan guarantees); and (iv) the net income (loss) related to the major medical lines of business we intend to sell. The criteria used by management to identify the items excluded from operating earnings include whether the item:
(i) relates to other than the continuing operations of our businesses; (ii) is infrequent; (iii) is material to net income (loss); (iv) results from restructuring activities; (v) results from a change in the regulatory environment; and/or (vi) relates to the sale of an investment or the change in estimated market value of our venture capital investments. The non-operating items may vary from period to period and since these items are determined based on management's discretion, inconsistencies in the application of the criteria may exist. Operating earnings are determined by adjusting GAAP net income for the above mentioned items. While these items may be significant components in understanding and assessing our consolidated financial performance, we believe that the presentation of operating earnings enhances the understanding of our results of operations by highlighting net income attributable to the normal, recurring operations of the business and by excluding events that materially distort trends in net income. However, operating earnings are not a substitute for net income determined in accordance with GAAP.
Results of operations by segment for the three years ended December 31, 2000:
The following tables and narratives summarize our operating results by business segment.

                                                                                  2000           1999              1998
                                                                                  ----           ----              ----
                                                                                         (Dollars in millions)
Operating earnings from continuing  operations before goodwill
   amortization and taxes:
     Insurance and fee-based segment operating earnings..............         $   818.1        $1,187.6          $1,310.2
     Finance segment operating earnings..............................             156.8           588.3             584.0
                                                                              ---------        --------          --------

     Subtotal........................................................             974.9         1,775.9           1,894.2
                                                                              ---------        --------          --------

Holding company activities:
   Corporate expenses................................................             (67.5)          (64.4)           (123.8)
   Interest and dividends, net of corporate investment income........            (651.8)         (451.6)           (329.1)
   Allocation of interest and dividends to finance segment...........             126.9            63.1              16.8
                                                                              ---------        --------          --------

     Operating earnings from continuing operations before taxes and
       goodwill amortization.........................................             382.5         1,323.0           1,458.1

Taxes  ..............................................................            (141.6)         (476.9)           (527.7)
                                                                              ---------        --------          --------

       Operating earnings from continuing operations before
         goodwill amortization.......................................             240.9           846.1             930.4

Goodwill amortization................................................            (105.7)          (96.9)            (97.1)
                                                                              ---------        --------          --------

       Operating earnings from continuing operations
         applicable to common stock..................................             135.2           749.2             833.3

Non-operating items, net of tax:
     Net realized losses.............................................            (198.1)         (111.9)            (32.8)
     Venture capital income (loss)...................................             (99.4)          170.0               -
     Impairment charge...............................................            (324.9)         (349.2)           (355.8)
     Provision for losses related to loan guarantees.................            (150.0)          (11.9)              -
     Special charges.................................................            (518.3)            -              (148.0)
     Cumulative effect of accounting change..........................             (55.3)            -                 -
     Extraordinary charge on extinguishment of debt .................              (5.0)            -               (42.6)
     Discontinued lines and other non-recurring items................              13.6           147.3             205.2
                                                                              ---------        --------          --------

Net income (loss) applicable to common stock.........................         $(1,202.2)       $  593.5          $  459.3
                                                                              =========        ========          ========	

24
Insurance and fee-based operations:

                                                                                      2000         1999          1998
                                                                                      ----         ----          ----
                                                                                             (Dollars in millions)
Premiums and asset accumulation product collections:
   Annuities......................................................................   $ 2,255.7    $ 2,473.7   $  1,999.1
   Supplemental health............................................................     2,263.9      2,206.6      2,158.1
   Life...........................................................................       934.2        970.7        928.8
                                                                                     ---------    ---------    ---------

       Collections on insurance products from continuing operations...............     5,453.8      5,651.0      5,086.0

   Major medical..................................................................       910.6        855.7        878.2
                                                                                     ---------    ---------    ---------

       Total collections on insurance products....................................     6,364.4      6,506.7      5,964.2

   Mutual funds...................................................................       794.2        479.3         87.1
                                                                                     ---------    ---------    ---------

       Total premiums and asset accumulation product collections..................   $ 7,158.6    $ 6,986.0    $ 6,051.3
                                                                                     =========    =========    =========

Average  liabilities for insurance and asset  accumulation  products
   (excluding major medical lines):
     Annuities:
       Mortality based............................................................   $   454.6    $   600.3    $   689.5
       Equity-linked..............................................................     2,550.6      1,710.1        902.5
       Deposit based..............................................................     9,618.1     10,864.7     11,649.6
     Separate accounts and investment trust liabilities...........................     2,684.1      1,717.4        913.7
     Health.......................................................................     4,753.9      4,326.1      4,043.6
     Life:
       Interest sensitive.........................................................     4,264.0      4,121.6      4,131.4
       Non-interest sensitive.....................................................     2,682.8      2,799.9      2,762.9
                                                                                     ---------    ---------    ---------

       Total average liabilities for insurance and asset accumulation products,
         net of reinsurance ceded.................................................   $27,008.1    $26,140.1    $25,093.2
                                                                                     =========    =========    =========

Revenues:
   Insurance policy income........................................................   $ 3,315.0    $ 3,174.3   $  3,059.6
   Net investment income:
     General account invested assets..............................................     1,882.7      1,959.6      1,920.2
     Equity-indexed products based on S&P 500 Index...............................        12.9        142.3        103.9
     Amortization of cost of S&P 500 Call Options.................................      (123.9)       (96.3)       (52.0)
     Separate account assets......................................................       246.0        172.7         51.0
   Fee revenue and other income...................................................       129.0        111.7         86.1
                                                                                     ---------    ---------    ---------

       Total revenues (a).........................................................     5,461.7      5,464.3      5,168.8
                                                                                     ---------    ---------    ---------

Expenses:
   Insurance policy benefits......................................................     2,440.9      2,176.0      2,071.7
   Amounts added to policyholder account balances:
     Annuity products and interest-sensitive life products other than those
       listed below...............................................................       615.2        666.5        728.6
     Equity-indexed products based on S&P 500 Index...............................        11.4        141.3         96.1
     Separate account liabilities.................................................       246.0        172.7         51.0
   Amortization related to operations.............................................       621.6        495.1        358.2
   Interest expense on investment borrowings......................................        18.6         57.9         65.3
   Other operating costs and expenses.............................................       689.9        567.2        487.7
                                                                                     ---------    ---------    ---------

       Total benefits and expenses (a)............................................     4,643.6      4,276.7      3,858.6
                                                                                     ---------    ---------    ---------

       Operating income before goodwill amortization, income taxes and
         minority interest........................................................       818.1      1,187.6      1,310.2

Goodwill amortization.............................................................      (105.7)       (96.9)       (97.1)
Net investment losses, including related costs and amortization...................      (304.9)      (172.1)       (28.3)
                                                                                     ---------    ---------    ---------

       Income before income taxes and minority interest...........................   $   407.5    $   918.6    $ 1,184.8
                                                                                     =========    =========    =========

                                   (continued)

                                       25	

                                                                                        2000          1999         1998
                                                                                        ----          ----         ----
                                                                                             (Dollars in millions)
                                              (continued from previous page)
Ratios:
   Investment income,  net of interest  credited on annuities and universal life
     products and interest expense on investment borrowings,  as a percentage of
     average liabilities for insurance and asset accumulation
     products (b)...................................................................      4.59%        4.52%        4.35%
   Operating costs and expenses (excluding amortization of cost of policies
     produced and cost of policies purchased) as a percentage of average
     liabilities for insurance and asset accumulation products......................      2.66%        2.36%        2.20%

Health loss ratios:
   All health lines:
     Insurance policy benefits......................................................  $1,741.1     $1,502.5     $1,387.5
     Loss ratio.....................................................................     76.21%       68.61%       65.55%

   Medicare supplement:
     Insurance policy benefits......................................................    $675.5       $638.1       $604.2
     Loss ratio.....................................................................     71.60%       68.95%       68.30%

   Long-term care:
     Insurance policy benefits......................................................    $691.5       $545.0       $477.1
     Loss ratio.....................................................................     84.17%       71.98%       66.88%

   Specified disease:
     Insurance policy benefits......................................................    $256.4       $232.9       $212.7
     Loss ratio.....................................................................     69.00%       62.03%       55.57%

   Other:
     Insurance policy benefits......................................................    $117.7        $86.5        $93.5
     Loss ratio.....................................................................     79.53%       65.58%       68.78%
--------------------
(a)  Revenues  exclude net  investment  gains  (losses);  benefits  and expenses
     exclude amortization related to realized gains and goodwill amortization
(b)  Investment income includes income from general account assets only. Average
     insurance  liabilities  exclude  liabilities  related to separate accounts,
     investment trust and reinsurance ceded.	

General: Conseco's life insurance subsidiaries develop, market and administer annuity, supplemental health, individual life insurance and other insurance products. We distribute these products through a career agency force, professional independent producers and direct response marketing. This segment excludes our major medical lines, which the Company intends to sell.
Collections on insurance products from continuing operations in 2000 were $5.5 billion, down 3.5 percent from 1999. Rating actions during a portion of 2000 adversely affected the marketing of our insurance products. On November 7, 2000, A.M. Best upgraded the financial strength ratings of our principal life insurance subsidiaries to A- (Excellent) from B++ (Very Good). Such collections in 1999 were $5.7 billion, up 11 percent over 1998. These increases were primarily due to increased production and premium rate increases in 1999.
See "Premium and Asset Accumulation Product Collections" for further analysis.
Average insurance liabilities for insurance and asset accumulation products, net of reinsurance receivables, were $27.0 billion in 2000, up 3.3 percent over 1999, and $26.1 billion in 1999, up 4.2 percent over 1998.
Insurance policy income is comprised of: (i) premiums earned on policies which provide mortality or morbidity coverage; and (ii) fees and other charges made against other policies. See "Premium and Asset Accumulation Product Collections" for further analysis.
26
Net investment income on general account invested assets (which excludes income on separate account assets related to variable annuities; the income, cost and change in the fair value of S&P 500 Call Options related to equity-indexed products; and the income related to our venture capital investment in TeleCorp) decreased by 3.9 percent, to $1,882.7 million, in 2000, and increased by 2.1 percent, to $1,959.6 million, in 1999. The average balance of general account invested assets decreased by 1.3 percent in 2000 to $25.5 billion and increased by 2.0 percent in 1999 to $25.8 billion. The yield on these assets was 7.4 percent in 2000, and 7.6 percent in both 1999 and 1998. The 2000 decrease reflects general decreases in investment interest rates during the period.
Net investment income related to equity-indexed products based on the S&P 500 Index is substantially offset by a corresponding charge to amounts added to policyholder account balances for equity-indexed products. Such income and related charge fluctuated based on the policyholder account balances subject to this provision and the performance of the S&P 500 Index to which the returns on such products are linked. During 2000, we recorded income from the S&P 500 Options of $12.9 million and added amounts to policyholders' account balances of the equity-indexed products of $11.4 million.
Amortization of cost of S&P 500 Call Options represents the amortization of the premiums paid to purchase S&P 500 Call Options related to our equity-linked products. We amortize these amounts over the terms of the options. Such amortization has increased because of the increase in our equity-linked product business, changes in the participation rate of such business in the S&P 500 Index and the cost of the options. Our equity-indexed products are designed in an effort to have the investment income spread earned on the related insurance liabilities be more than adequate to cover the cost of the S&P 500 Call Options and other costs related to these policies.
Net investment income from separate account assets is offset by a corresponding charge to amounts added to policyholder account balances for separate account liabilities. Such income and related charge fluctuated in relationship to total separate account assets and the return earned on such assets.
Fee revenue and other income includes: (i) revenues we receive for managing investments for other companies; and (ii) fees received for marketing insurance products of other companies. This amount increased in 2000 primarily due to the revenues of an insurance marketing company purchased in 2000. This amount increased in 1999 as a result of growth in both of the aforementioned businesses.
Insurance policy benefits increased in both 2000 and 1999 as a result of the factors summarized in the explanations for loss ratio fluctuations related to specific products which follows.
The loss ratio for Medicare supplement products increased in 2000, for the following reasons: (i) our year end reserves developed adversely; (ii) the mix of our Medicare supplement business in 2000 includes a higher percent of less profitable standard Medicare supplement policies than the prior year (and a lower percent of more profitable nonstandard policies that we are no longer able to offer to new policyholders); and (iii) Medicare supplement business has recently experienced higher persistency among older blocks of business. While the Company benefits from the additional profits earned on the larger blocks of business, the loss ratio will generally increase since the older policies have higher claim costs. Governmental regulations generally require us to attain and maintain a loss ratio, after three years, of not less than 65 percent.
The loss ratios for long-term care products increased in 2000, reflecting: (i) unfavorable claims experience; (ii) refinements made to the reserve estimation process; and (iii) the effects of the asset accumulation phase of these products. The net cash flows from our long-term care products generally result in the accumulation of amounts in the early policy years of a policy (accounted for as reserve increases) which will be paid out as benefits in later policy years (accounted for as reserve decreases). Accordingly, during the asset accumulation phase of these policies, the loss ratio will increase, but the increase in the change in reserve will be partially offset by investment income earned on the assets which have accumulated. In order to improve the profitability of the long-term care product line, we are currently selling products with higher margins and we have continued to apply for appropriate rate increases on older blocks of business. As a result of recent unfavorable claim experience in our long-term care insurance lines, we reviewed our reserving methodologies for several blocks of business. Certain changes in estimates were made that adversely affected the loss ratio in 2000. The increase in the loss ratio in 1999 also reflects unfavorable claims experience, partially offset by the effects of the asset accumulation phase of these products.
The 2000 loss ratio for specified disease products reflects refinements we made to the reserve estimation process during the first quarter of 2000 and changes in estimates of period end claim liabilities. Our general expectation is for this
27
loss ratio to be approximately 65 percent. The 1999 ratio was within our expectations. The 1998 ratio benefited from favorable claim developments which were not expected to continue.
The loss ratios on our other products will fluctuate more than other lines due to the smaller size of these blocks of business. While the increase in 2000 reflects worse than expected experience, the loss ratios on this business have generally been within our expectations.
Amounts added to policyholder account balances for annuity products decreased by 7.7 percent, to $615.2 million, in 2000, and 8.5 percent, to $666.5 million, in 1999. These decreases reflect a smaller block of this type of annuity business in force, on the average, compared to 1998. The weighted average crediting rates for these annuity liabilities were 4.4 percent, 4.5 percent and 4.6 percent during 2000, 1999 and 1998, respectively.
Amounts added to equity indexed products and separate account liabilities correspond to the related investment income accounts described above.
Amortization related to operations includes amortization of: (i) the cost of policies produced; and (ii) the cost of policies purchased. Amortization has increased in relationship to the total account balances subject to amortization. In addition, amortization increased in 2000 as a result of adjustments to the surrender and lapse assumptions to reflect our current estimate of future experience related to certain blocks of business.
Interest expense on investment borrowings decreased along with our investment borrowing activities. Average investment borrowings were $324.4 million during 2000, compared to $1,081.1 million during 1999. The weighted average interest rate on such borrowings was 5.7 percent and 5.4 percent during 2000 and 1999, respectively.
Other operating costs and expenses increased in 2000 primarily as a result of our increased business and marketing initiatives. Such increased expenses are consistent with the increase in the ratio of operating expenses (excluding amortization of cost of policies produced and cost of policies purchased) as a percentage of average liabilities for insurance and asset accumulation products (2.66 percent for 2000, compared to 2.36 percent and 2.20 percent for 1999 and 1998, respectively).
Net investment gains (losses), including related costs and amortization fluctuate from period to period. We recorded writedowns of fixed maturity securities and other invested assets of $189.3 million, $27.8 million and $32.4 million during 2000, 1999 and 1998, respectively, as a result of conditions which caused us to conclude a decline in fair value of the investment was other than temporary. In addition, we realized a $59.2 million loss related to the termination of certain swap agreements during 2000.
When we sell securities at a gain (loss) and reinvest the proceeds at a different yield, we increase (reduce) the amortization of cost of policies purchased and cost of policies produced in order to reflect the change in future yields. Sales of fixed maturity investments resulted in a reduction in the amortization of the cost of policies purchased and the cost of policies produced of $53.4 million in 2000 and an increase in such amortization in 1999 of $15.9 million and in 1998 of $236.5 million.
28
Finance operations:

                                                                                      2000         1999          1998
                                                                                      ----         ----          ----
                                                                                            (Dollars in millions)
Contract originations:
   Manufactured housing............................................................. $ 4,395.8    $ 6,607.3    $ 6,077.5
   Mortgage services................................................................   4,448.3      6,745.8      5,215.8
   Consumer/credit card.............................................................   3,345.6      3,241.3      2,727.9
   Commercial.......................................................................   4,700.6      8,514.6      7,400.8
                                                                                     ---------    ---------    ---------

     Total.......................................................................... $16,890.3    $25,109.0    $21,422.0
                                                                                     =========    =========    =========

Sales of finance receivables:
   Manufactured housing.............................................................$    600.7    $ 5,598.2    $ 5,556.4
   Home equity/home improvement.....................................................     913.1      3,748.4      5,038.5
   Consumer/equipment...............................................................     599.9        600.0      2,022.4
   Leases...........................................................................       -            -          379.9
   Commercial and retail revolving credit...........................................     575.0        117.7        741.0
   Retained bonds...................................................................       -         (405.2)      (364.6)
                                                                                     ---------    --------     ----------

     Total.......................................................................... $ 2,688.7    $ 9,659.1    $13,373.6
                                                                                     =========    =========    =========

Managed receivables (average):
   Manufactured housing............................................................. $25,700.4    $22,899.2    $19,478.2
   Mortgage services................................................................  13,254.6     10,237.5      6,425.3
   Consumer/credit card.............................................................   3,910.9      3,324.1      2,388.6
   Commercial.......................................................................   4,555.9      5,303.0      4,082.2
                                                                                     ---------    ---------    ---------

     Total.......................................................................... $47,421.8    $41,763.8    $32,374.3
                                                                                     =========    =========    =========

Revenues:
   Net investment income:
     Finance receivables and other.................................................. $ 1,933.8    $   647.1    $   295.5
     Interest-only securities.......................................................     106.6        185.1        132.9
   Gain on sale:
     Securitization transactions....................................................       -          550.6        745.0
     Whole-loan sales...............................................................       7.5          -            -
   Fee revenue and other income.....................................................     369.0        372.7        260.4
                                                                                     ----------   ---------    ---------

     Total revenues.................................................................   2,416.9      1,755.5      1,433.8
                                                                                     ----------   ---------    ---------

Expenses:
   Provision for losses.............................................................     354.2        128.7         44.2
   Finance interest expense.........................................................   1,152.4        341.3        213.7
   Other operating costs and expenses...............................................     753.5        697.2        591.9
                                                                                     ----------   ---------    ---------

     Total expenses.................................................................   2,260.1      1,167.2        849.8
                                                                                     ---------    ---------    ---------

     Operating income before impairment charges, special charges, income
       taxes and extraordinary charge...............................................     156.8        588.3        584.0

Impairment charges..................................................................     515.7        554.3        549.4
Special charges.....................................................................     394.3          -          148.0
                                                                                     ---------    ---------    ----------

     Income (loss) before income taxes and extraordinary charge..................... $  (753.2)   $    34.0    $  (113.4)
                                                                                     =========    =========    =========	

29
General: Conseco's finance subsidiaries provide financing for manufactured housing, home equity, home improvements, consumer products and equipment, and provide consumer and commercial revolving credit. Finance products include both fixed-term and revolving loans and leases. Conseco also markets physical damage and term mortgage life insurance and other credit protection relating to the loans it services.
After September 8, 1999, we no longer structure our securitizations in a manner that results in recording a sale of the loans. Instead, new securitization transactions are being structured to include provisions that entitle the Company to repurchase assets transferred to the special purpose entity when the aggregate unpaid principal balance reaches a specified level. Until these assets are repurchased, however, the assets are the property of the special purpose entity and are not available to satisfy the claims of creditors of the Company. Pursuant to Financial Accounting Standards Board Statement No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities", such securitization transactions are accounted for as secured borrowings whereby the loans and securitization debt remain on the balance sheet, rather than as sales.
The change to the structure of our new securitizations has no effect on the total profit we recognize over the life of each new loan, but it changes the timing of profit recognition. Under the portfolio method (the accounting method required for our securitizations which are structured as secured borrowings), we recognize: (i) earnings over the life of new loans as interest revenues are generated; (ii) interest expense on the securities which are sold to investors in the loan securitization trusts; and (iii) provisions for losses. As a result, our reported earnings from new loans securitized in transactions accounted for under the portfolio method are lower in the period in which the loans are securitized (compared to our historical method) and higher in later periods, as interest spread is earned on the loans.
During 2000, we announced several courses of action with respect to Conseco Finance, including: (i) the sale, closing or runoff of five units (i.e., asset-based lending, vendor finance, bankcards, transportation and park construction); (ii) efforts to better utilize existing assets so as to increase cash; and (iii) cost savings and restructuring of ongoing businesses such as streamlining of the field force in the manufactured housing and home equity divisions.
These courses of action and the change to the portfolio method of accounting have caused significant fluctuations in account balances as further described below.
Loan originations in 2000 were $16.9 billion, down 33 percent from 1999. Loan originations in 1999 were $25.1 billion, up 17 percent over 1998. The primary reason for the decrease was our decision to no longer originate certain lines and to manage our growth consistent with our revised business plan. The significant decrease in new loan originations allowed the finance segment to enhance net interest margins, to reduce the amount of cash required for new loan originations, and to transfer cash to the parent company. The following table summarizes our loan originations in 2000 and 1999 summarized by product and whether part of our continuing or discontinued lines:

                                                                               December 31,
                                                                           2000             1999
                                                                           ----             ----
                                                                            (Dollars in millions)
Continuing lines:
   Manufacturing housing.............................................   $ 4,395.8        $ 6,607.3
   Mortgage services.................................................     4,448.3          6,745.8
   Retail credit.....................................................     2,582.1          2,056.2
   Floorplan.........................................................     3,950.4          5,559.1
                                                                        ---------        ---------

       Total continuing lines........................................    15,376.6         20,968.4
                                                                        ---------        ---------

Discontinued lines:
   Consumer finance (1)..............................................       544.6            770.5
   Bankcard..........................................................       218.9            414.5
   Vendor finance....................................................       396.5            533.0
   Transportation....................................................       138.7          1,054.0
   Park construction and asset-based loans...........................       215.0          1,368.6
                                                                        ---------        ---------

       Total discontinued lines......................................     1,513.7          4,140.6
                                                                        ---------        ---------

       Total.........................................................   $16,890.3        $25,109.0
                                                                       =========        =========

                                       30	

-------------------
(1)  Represents closed-ended sales contracts originated through dealers. The
     Company continues to originate revolving credit agreements through many of
     the same dealers.	

Sales of finance receivables decreased as a result of the change in the structure of our securitizations. We no longer structure our securitizations in a manner that results in recording a sale of the loans. Sales of finance receivables in 2000 represent the sale of whole loans (with no interest retained by the Company).
Managed receivables include finance receivables recorded on our consolidated balance sheet and those managed by us but applicable to holders of asset-backed securities sold in securitizations structured in a manner that resulted in gain-on- sale revenue. Average managed receivables increased to $47.4 billion in 2000, up 14 percent over 1999, and to $41.8 billion in 1999, up 29 percent over 1998.
The following table summarizes our average managed receivables at December 31, 2000 and 1999 summarized by product and whether part of our continuing or discontinued lines:

                                                                               December 31,
                                                                               ------------
                                                                           2000             1999
                                                                           ----             ----
                                                                           (Dollars in millions)
Continuing lines:
   Manufactured housing..............................................   $25,700.4        $22,899.2
   Mortgage services.................................................    13,254.6         10,237.5
   Retail credit.....................................................     1,523.0            937.9
   Floorplan.........................................................     2,070.4          2,098.4
                                                                        ---------        ---------

     Total continuing lines..........................................    42,548.4         36,173.0
                                                                        ---------        ---------

Discontinued lines:
   Consumer finance..................................................     2,173.1          2,121.6
   Bankcard..........................................................       214.8            264.6
   Vendor finance....................................................       972.9            942.5
   Transportation....................................................     1,112.0          1,570.3
   Park construction and asset-based loans...........................       400.6            691.8
                                                                        ---------        ---------

     Total discontinued lines........................................     4,873.4          5,590.8
                                                                        ---------        ---------

         Total.......................................................   $47,421.8        $41,763.8
                                                                        =========        =========	

Net investment income on finance receivables and other consists of: (i) interest earned on finance receivables; and (ii) interest income on short-term and other investments. Such income increased by 199 percent, to $1,933.8 million, in 2000 and by 119 percent, to $647.1 million, in 1999, consistent with the increases in average on-balance sheet finance receivables. The weighted average yields earned on finance receivables and other investments were 13.0 percent, 11.1 percent and 10.8 percent during 2000, 1999 and 1998, respectively. As a result of the change in the structure of our securitizations, future interest earned on finance receivables should increase as our average on-balance sheet finance receivables increase.
Net investment income on interest-only securities is the accretion recognized on the interest-only securities we retain after we sell finance receivables. Such income decreased by 42 percent, to $106.6 million, in 2000 and increased by 39 percent, to $185.1 million, in 1999. These fluctuations are consistent with the change in the average balance of interest- only securities. The weighted average yields earned on interest-only securities were 13.4 percent, 14.6 percent and 13.2 percent during 2000, 1999 and 1998, respectively. As a result of the change in the structure of our securitizations, our new securitizations are accounted for as secured borrowings and we do not recognize gain-on-sale revenue or additions to interest-only securities from such transactions. Accordingly, future investment income accreted on the interest-only security will decrease, as cash remittances from the prior gain-on-sale securitizations reduce the interest-only security balances. In addition, the balance of the interest-only securities was reduced by $544.4 million in 1998, $533.8 million in 1999 and $504.3 million during 2000 (including $70.2 million due to the accounting change described in note 1 to the accompanying consolidated financial statements) due to impairment charges which have caused a reduction in interest income accreted to this security. We regularly analyze future expected cash flows from this security to determine whether an impairment has occurred. Under current accounting principles, we are required to recognize declines in value of our interest-only securities in earnings when: (i) the fair value of the security is less than its carrying value; and (ii) the timing and/or amount of cash expected to be received from the security has changed adversely from the previous valuation which determined the carrying value of the security.
31
Gain on sale related to securitization transactions was nil in 2000, reflecting our decision to no longer structure our securitizations as sales. Our new securitizations are being structured as secured borrowings and no gain on sale is recognized. The gain recognized for our previous securitizations fluctuated when changes occurred in: (i) the amount of loans sold; (ii) market conditions (such as the market interest rates available on securities sold in these securitizations); (iii) the amount and type of interest we retained in the receivables sold; and (iv) assumptions used to calculate the gain.
Conditions in the credit markets during the past several years have resulted in less-attractive pricing of certain lower- rated securities in our securitization structures. As a result, we have chosen to hold rather than sell some of the securities in the securitization trusts, particularly securities having corporate guarantee provisions. Prior to our September 8, 1999, announcement, the securities that we held were treated as retained interests in the securitization trusts. We recognized no gain on the portion of the assets related to such securities, but we expect to recognize greater interest income, net of related interest expense, over the term we hold them. At December 31, 2000 and 1999 we held $494.6 million and $694.3 million, respectively, of such securities which are classified as actively managed fixed maturities.
Gain on whole-loan sales totaled $7.5 million in 2000. During 2000, we sold approximately $147.1 million of finance receivables in whole-loan sales. Gain on whole-loan sales excludes the gain realized on the sale of our bankcard portfolio which is included in special charges.
Fee revenue and other income includes servicing income, commissions earned on insurance policies written in conjunction with financing transactions, and other income from late fees. Such income decreased by 1.0 percent, to $369.0 million, in 2000 and increased by 43 percent, to $372.7 million, in 1999. As a result of the change in the structure of our future securitizations announced on September 8, 1999, we no longer record an asset for servicing rights at the time of our securitizations, nor do we record servicing fee revenue; instead, the entire amount of interest income is recorded as investment income. Accordingly, the amount of servicing income has decreased to $108.2 million in 2000 from $165.3 million in 1999 and $140.0 million in 1998, and will decline further in future periods. In 2000, the decrease in servicing income was partially offset by higher commissions and late fee income. In 1999, such income increased as our servicing portfolio and our net written insurance premiums both grew along with managed receivables.
Provision for losses related to finance operations increased by 175 percent, to $354.2 million, in 2000 and by 191 percent, to $128.7 million, in 1999. The increase is principally due to the increase in loans held on our balance sheet. Under the portfolio method (which is used for securitizations structured as collateralized borrowings), we recognize the credit losses on the loans on our balance sheet as the losses are incurred. For loans previously recorded as sales, the anticipated discounted credit losses are reflected through a reduction in the gain-on-sale revenue recorded at the time of securitization.
Finance interest expense increased by 238 percent, to $1,152.4 million, in 2000 and by 60 percent, to $341.3 million, in 1999. Our borrowings grew in order to fund the increase in finance receivables. Our average borrowing rate was 7.7 percent, 5.8 percent and 7.2 percent during 2000, 1999 and 1998, respectively.
Under the portfolio method, we recognize interest expense on the securities issued to investors in the securitization trusts. Since these securities typically have higher interest rates than our other debt, our average borrowing rate increased as compared to prior periods.
The average borrowing rate during 1999 was favorably impacted by the use of relatively lower rate borrowings from the parent company to fund finance receivables of Conseco Finance.
Other operating costs and expenses include the costs associated with servicing our managed receivables, and non- deferrable costs related to originating new loans. Such expense increased by 8.1 percent, to $753.5 million, in 2000 and by 18 percent, to $697.2 million, in 1999. Such costs increased consistent with the prior business plans for the segment, partially offset in 2000 by cost savings from the restructuring of Conseco Finance. Other operating costs and expenses decreased $62.5 million to $345.5 million in the second half of 2000, as compared to the first half of 2000.
Impairment charges represent reductions in the value of interest-only securities and servicing rights recognized as a loss in the statement of operations. We carry interest-only securities at estimated fair value, which is determined by discounting the projected cash flows over the expected life of the receivables sold using current prepayment, default, loss and interest rate assumptions. When declines in value considered to be other than temporary occur, we reduce the amortized cost to estimated fair value and recognize a loss in the statement of operations. The assumptions used to determine new values are based on our internal evaluations and consultation with external advisors having significant experience in valuing these securities. We record any unrealized gain or loss determined to be temporary, net of tax, as a
32
component of shareholders' equity. We adopted EITF Issue No. 99-20, "Recognition of Interest Income and Impairment on Purchased and Retained Beneficial Interests in Securitized Financial Assets "("EITF 99-20") during the third quarter of 2000, which affects when impairments are considered to be other than temporary and, therefore, are recognized in earnings (see note 1 to the accompanying consolidated financial statements).
During 2000, actual default and loss trends were worse than our previous estimates. In light of these trends, management analyzed the assumptions used to determine the estimated fair value of the interest-only securities and made changes to the credit loss assumptions and the discount rate used to determine the value of our securities. These changes also reflected other economic factors and further methodology enhancements made by the Company. As a result, the expected future cash flows from interest-only securities changed adversely from previous estimates. Pursuant to the requirements of EITF 99-20, the effect of these changes was reflected immediately in earnings as an impairment charge. The effect of the impairment charge and adjustments to the value of our interest-only securities and servicing rights totaled $515.7 million ($324.9 million after the income tax benefit) for 2000 (in addition to the cumulative effect of adopting EITF 99-20 of $70.2 million ($45.5 million after the income tax benefit)).
In addition, during 1999 and early 2000, the Company reevaluated its interest-only securities and servicing rights, including the underlying assumptions, in light of loss experience exceeding previous expectations. The principal change in the revised assumptions resulting from this process was an increase in expected future credit losses, relating primarily to reduced assumptions as to future housing price inflation, recent loss experience and refinements to the methodology of the valuation process. The effect of this change was offset somewhat by a revision to the estimation methodology to incorporate the value associated with the cleanup call rights held by the Company in securitizations. We recognized a $554.3 million impairment charge ($349.2 million after tax) in 1999 to reduce the book value of the interest-only securities and servicing rights.
During the second quarter of 1998, prepayments on securitized loan contracts exceeded our expectations and management concluded that such prepayments were likely to continue to be higher than expected in future periods as well. As a result of these developments, we concluded that the value of the interest-only securities and servicing rights had been impaired, and we determined a new value using then current assumptions. In addition, the market yields of publicly traded securities similar to our interest-only securities also increased during the second quarter of 1998. The assumptions used to determine the new value at that time were based on our internal evaluations and consultation with external investment managers having significant experience in valuing these securities. Such assumptions reflected the following changes from the assumptions previously used: (i) an increase in prepayment rates; (ii) an increase in the discount rate used to determine the present value of future cash flows; and (iii) an increase in anticipated default rates. We recognized a $549.4 million ($355.8 million after tax) impairment charge in 1998 to reduce the carrying value of the interest-only securities and servicing rights.
Special charges in 2000 include: (i) the $103.3 million adjustment to the value of finance receivables identified for sale; (ii) the $53.0 million loss on the sale of asset-based loans; (iii) $29.5 million of costs related to closing offices and streamlining businesses; (iv) $35.8 million related to the abandonment of computer processing systems; (v) $30.3 million of fees paid to Lehman including a $25.0 million fee paid in conjunction with the sale of $1.3 billion of finance receivables to Lehman; (vi) the issuance of a warrant valued at $48.1 million related to the modification of the Lehman master repurchase financing facilities; (vii) the $51.0 million loss on sale of transportation loans and vendor services financing business; (viii) a $48.0 million increase in the allowance for loan losses at our bank subsidiary; and (ix) $4.7 million of net gains related to the sale of certain lines of business, net of other items. These charges are described in greater detail in note 9 to the accompanying consolidated financial statements. Special charges of $148.0 million were recognized in 1998 and include: $45.0 million of transaction costs; $71.0 million of severance and other employment related costs; and $32.0 million of other costs. Transaction costs included expenses related to the Merger such as fees paid for investment bankers, attorneys, accountants and printers. Severance and other employment related costs included contractual severance and other benefits due to certain executives. Other costs included the write-off of computer equipment and related software that will no longer be used, losses for facilities to be vacated, increases to legal expense accruals, and various other costs.
33
Corporate operations

                                                                                    December 31
                                                                          ------------------------------
                                                                          2000        1999          1998
                                                                          ----        ----          ----
                                                                               (Dollars in millions)
Corporate operations:
   Venture capital income (loss) related to investment in
     TeleCorp, net of related expenses.................................  $  (152.8)   $ 261.5     $   -
   Interest expense on corporate debt..................................     (310.7)    (182.8)     (165.4)
   Investment income...................................................       51.8       32.3        26.9
   Other items.........................................................      (16.6)      67.9         4.5
                                                                         ---------    -------     -------

       Operating  income  (loss) before  provision for loss on loan
         guarantees, special charges, income taxes and
         minority interest.............................................     (428.3)     178.9      (134.0)

   Provision for loss on loan guarantees...............................     (231.5)     (18.9)        -
   Major medical lines, which the Company intends to sell..............      (51.3)      38.3       108.3
   Special charges.....................................................     (305.0)       -           -
                                                                         ---------    --------    -------

       Income (loss) before income taxes and minority interest.........  $(1,016.1)   $ 198.3     $ (25.7)
                                                                         =========    =======     =======	

Venture capital income (loss) relates to our investment in TeleCorp, a company in the wireless communication business. Our investment in TeleCorp is carried at estimated fair value, with changes in fair value recognized as investment income. The market values of many companies in this sector have been subject to volatility in recent periods.
Interest expense on corporate debt fluctuated due to the increase in the average balance and interest rate on outstanding debt. The average debt outstanding (net of the intercompany note with the finance segment) was $3.8 billion, $3.0 billion and $2.8 billion in 2000, 1999 and 1998, respectively. The average interest rate on such debt was 8.2 percent, 6.0 percent and 6.0 percent in 2000, 1999 and 1998, respectively. General levels of interest rates have increased over the last twelve months. In addition, as a result of recent rating agency actions, the interest rates on our bank credit facilities have increased (see note 1 to the consolidated financial statements). Such interest expense includes affiliated interest expense (which is eliminated in consolidation) of $26.2 million, $13.2 million for 2000 and 1999, respectively. There was no such affiliated interest expense in 1998.
Investment income includes the income from our investment in a riverboat casino and miscellaneous other income.
Other items include general corporate expenses, net of amounts charged to subsidiaries for services provided by the corporate operations.
Provision for loss on loan guarantees represents the noncash provision we established in connection with our guarantees of bank loans to approximately 160 directors, officers and key employees and our related loans for interest. The funds from the bank loans were used by the participants to purchase approximately 18.4 million shares of Conseco common stock. In 2000 and 1999, we established a provision of $231.5 million and $18.9 million, respectively, in connection with these guarantees and loans. At December 31, 2000, the total reserve for losses on the loan guarantees was $250.4 million.
Major medical lines represent the results of our individual and group major medical health insurance products, which we intend to sell. These lines have experienced adverse loss ratios during 2000.
Special charges in corporate operations for 2000 include: (i) advisory and professional fees related to debt restructuring of $9.9 million; (ii) a portion of the loss on the sale of asset-backed loans (excluding loss related to loans held by the finance segment) of $15.2 million; (iii) advisory fees paid to investment banks of $44.0 million; (iv) the loss related to our exit from the subprime automobile business of $71.6 million; (v) the amount paid to terminated executive pursuant to his employment agreement of $72.5 million; (vi) the amount paid to newly hired Chief Executive Officer of $45.0 million; (vii) the value of warrants issued to release newly hired Chief Executive Officer from a noncompete provision of a prior agreement of $21.0 million; and (viii) other charges of $25.8 million. These charges are described in greater detail in the note to the accompanying consolidated financial statements entitled "Special Charges".
34
PREMIUM AND ASSET ACCUMULATION PRODUCT COLLECTIONS
In accordance with GAAP, insurance policy income as shown in our consolidated statement of operations consists of premiums earned for policies that have life contingencies or morbidity features. For annuity and universal life contracts without such features, premiums collected are not reported as revenues, but as deposits to insurance liabilities. We recognize revenues for these products over time in the form of investment income and surrender or other charges.
Marketing companies, agents who market insurance products, school districts, financial institutions and policyholders use the financial strength ratings assigned to an insurer by independent rating agencies as one factor in determining which insurer's products to market or purchase. Following several recent events described in note 9 to the consolidated financial statements entitled "Special Charges" and elsewhere herein, rating agencies lowered their financial strength ratings, and many were placed on review as the agencies analyze the impact of the developing events. Such rating actions adversely affected the marketing and persistency of our insurance products and other asset accumulation products. On November 7, 2000, A.M. Best upgraded the financial strength ratings of our principal life insurance subsidiaries to A- (Excellent) from B++ (Very Good).
35
Total premiums and accumulation product collections were as follows:

                                                                                      2000         1999          1998
                                                                                      ----         ----          ----
                                                                                             (Dollars in millions)
Premiums collected by our insurance subsidiaries:
   Annuities:
     Equity-indexed (first-year)....................................................  $  602.9     $  871.9    $   783.2
     Equity-indexed (renewal).......................................................      40.6         39.9         15.0
                                                                                      --------     --------    ---------
       Subtotal - equity-indexed annuities..........................................     643.5        911.8        798.2
                                                                                      --------     --------    ---------
     Other fixed (first-year).......................................................     679.4        896.4        804.3
     Other fixed (renewal)..........................................................      61.3         62.1         64.0
                                                                                      --------     --------    ---------
       Subtotal - other fixed annuities.............................................     740.7        958.5        868.3
                                                                                      --------     --------    ---------
     Variable (first-year)..........................................................     747.8        519.1        267.2
     Variable (renewal).............................................................     123.7         84.3         65.4
                                                                                      --------     --------    ---------
       Subtotal - variable annuities................................................     871.5        603.4        332.6
                                                                                      --------     --------    ---------

         Total annuities............................................................   2,255.7      2,473.7      1,999.1
                                                                                      --------     --------    ---------

   Supplemental health:
     Medicare supplement (first-year)...............................................     101.9        106.8        106.6
     Medicare supplement (renewal)..................................................     829.1        808.8        810.1
                                                                                      --------     --------    ---------
       Subtotal - Medicare supplement...............................................     931.0        915.6        916.7
                                                                                      --------     --------    ---------
     Long-term care (first-year)....................................................     119.2        127.1        122.6
     Long-term care (renewal).......................................................     716.8        666.4        605.8
                                                                                      --------     --------    ---------
       Subtotal - long-term care....................................................     836.0        793.5        728.4
                                                                                      --------     --------    ---------
     Specified disease (first-year).................................................      39.1         39.0         41.5
     Specified disease (renewal)....................................................     332.0        337.3        350.8
                                                                                      --------     --------    ---------
       Subtotal - specified disease.................................................     371.1        376.3        392.3
                                                                                      --------     --------    ---------
     Other health (first-year)......................................................      29.9         23.8         12.6
     Other health (renewal).........................................................      95.9         97.4        108.1
                                                                                      --------     --------    ---------
         Total - other health.......................................................     125.8        121.2        120.7
                                                                                      --------     --------    ---------

         Total supplemental health..................................................   2,263.9      2,206.6      2,158.1
                                                                                      --------     --------    ---------

   Life insurance:
     First-year.....................................................................     186.6        211.5        154.0
     Renewal........................................................................     747.6        759.2        774.8
                                                                                      --------     --------    ---------
       Total life insurance.........................................................     934.2        970.7        928.8
                                                                                      --------     --------    ---------
       Collections on insurance products from continuing operations.................   5,453.8      5,651.0      5,086.0
                                                                                      --------     --------    ---------

   Individual and group major medical:
     Individual (first-year)........................................................     161.1         96.4         95.5
     Individual (renewal)...........................................................     246.2        233.3        228.3
                                                                                      --------     --------    ---------
       Subtotal - individual........................................................     407.3        329.7        323.8
                                                                                      --------     --------    ---------
     Group (first-year).............................................................      80.1         53.0         48.0
     Group (renewal)................................................................     423.2        473.0        506.4
                                                                                      --------     --------    ---------
       Subtotal - group.............................................................     503.3        526.0        554.4
                                                                                      --------     --------    ---------

         Total major medical........................................................     910.6        855.7        878.2
                                                                                      --------     --------    ---------

   Total first-year premium collections on insurance products.......................   2,748.0      2,945.0      2,435.5
   Total renewal premium collections on insurance products..........................   3,616.4      3,561.7      3,528.7
                                                                                      --------     --------    ---------

         Total collections on insurance products....................................  $6,364.4     $6,506.7    $ 5,964.2
                                                                                      ========     ========    =========

Mutual funds (excludes variable annuities).......................................... $   794.2    $   479.3    $    87.1
                                                                                     =========    =========    =========	

36
Annuities include equity-indexed annuities, other fixed annuities and variable annuities sold through both career agents and professional independent producers.
We introduced our first equity-indexed annuity product in 1996. The accumulation value of these annuities is credited with interest at an annual guaranteed minimum rate of 3 percent (or, including the effect of applicable sales loads, a 1.7 percent compound average interest rate over the term of the contracts). These annuities provide for potentially higher returns based on a percentage of the change in the S&P 500 Index during each year of their term. We purchase S&P 500 Call Options in an effort to hedge increases to policyholder benefits resulting from increases in the S&P 500 Index. Total collected premiums for this product decreased by 29 percent, to $643.5 million, in 2000 and increased by 14 percent, to $911.8 million, in 1999.
Other fixed rate annuity products include single-premium deferred annuities ("SPDAs"), flexible-premium deferred annuities ("FPDAs") and single-premium immediate annuities ("SPIAs"), which are credited with a declared rate. The demand for traditional fixed-rate annuity contracts has decreased in recent years, as relatively low interest rates have made other investment products more attractive. SPDA and FPDA policies typically have an interest rate that is guaranteed for the first policy year, after which we have the discretionary ability to change the crediting rate to any rate not below a guaranteed rate. The interest rate credited on SPIAs is based on market conditions existing when a policy is issued and remains unchanged over the life of the SPIA. Annuity premiums on these products decreased by 23 percent, to $740.7 million, in 2000 and increased by 10 percent, to $958.5 million, in 1999. Fixed annuity collections in 1999 included $208.8 million of premiums on reinsurance contracts entered into during the year.
Variable annuities offer contract holders the ability to direct premiums into specific investment portfolios; rates of return are based on the performance of the portfolio. Such annuities have become increasingly popular recently as a result of the desire of investors to invest in common stocks. In 1996, we began to offer more investment options for variable annuity deposits, and we expanded our marketing efforts, resulting in increased collected premiums. Our profits on variable annuities come from the fees charged to contract holders. Variable annuity collected premiums increased by 44 percent, to $871.5 million, in 2000 and by 81 percent, to $603.4 million, in 1999.
Supplemental health products include Medicare supplement, long-term care, specified disease and other insurance products distributed through a career agency force and professional independent producers. Our profits on supplemental health policies depend on the overall level of sales, persistency of in-force business, investment yields, claim experience and expense management.
Collected premiums on Medicare supplement policies increased by 1.7 percent, to $931.0 million, in 2000 and decreased by .1 percent, to $915.6 million, in 1999. Sales of Medicare supplement policies have been affected by steps taken to improve profitability by increasing premium rates and changing our commission structure and underwriting criteria.
Premiums collected on long-term care policies increased by 5.4 percent, to $836.0 million, in 2000 and by 8.9 percent, to $793.5 million, in 1999 due to increases in premium rates and increased sales volume.
Premiums collected on specified disease products were $371.1 million, $376.3 million and $392.3 million in 2000, 1999 and 1998, respectively. Such decreases were the result of steps taken to improve the profitability of these products. In addition, during 1999, we curtailed sales of these products in one state due to adverse regulatory decisions, which accounts for most of the decrease.
Other health products include: (i) various health insurance products that are not currently being actively marketed; and (ii) in 1999 and 1998, certain specialty health insurance products sold to educators. Premiums collected in 2000 were $125.8 million, up 3.8 percent over 1999. Premiums collected in 1999 were $121.2 million, up .4 percent over 1998. Since we no longer actively market these products, we expect collected premiums to decrease in future years. The in-force business continues to be profitable.
Life products are sold through career agents, professional independent producers and direct response distribution channels. Life premiums collected in 2000 were $934.2 million, down 3.8 percent from 1999. Life premiums collected in 1999 were $970.7 million, up 4.5 percent over 1998. Collections in 1999 included $49.2 million of premiums on reinsurance contracts entered into during the year.
Individual and group major medical products include major medical health insurance products sold to individuals and groups. We have previously announced our intent to sell these lines of business. In recent periods, we have emphasized the sale of more profitable individual major medical products and are de-emphasizing the sale of group
37
products. With respect to group major medical products, we are: (i) seeking rate increases; (ii) converting the members of groups to individual policies; or
(iii) opting not to renew the group policies. Group premiums decreased by 4.3 percent, to $503.3 million, in 2000 and decreased by 5.1 percent, to $526.0 million, in 1999. Individual health premiums increased by 24 percent, to $407.3 million, in 2000 and increased by 1.8 percent, to $329.7 million, in 1999.
Mutual fund sales increased 66 percent, to $794.2 million in 2000, and increased 450 percent, to $479.3 million, in 1999, reflecting our expanded distribution and new marketing programs. We also believe that these sales were positively impacted by the recent strong investment performance of our funds. Recently, mutual fund sales have been adversely affected by the resignation of certain equity portfolio managers. The Company engaged Frank Russell Company to transition its equity portfolio management.
INVESTMENTS
Our investment strategy is to: (i) maintain a predominately investment-grade fixed income portfolio; (ii) provide adequate liquidity to meet our cash obligations to policyholders and others; and (iii) maximize current income and total investment return through active investment management. Consistent with this strategy, investments in fixed maturity securities, mortgage loans and policy loans made up 94 percent of our $25.0 billion investment portfolio at December 31, 2000. The remainder of the invested assets were interest-only securities, equity securities, venture capital investments and other invested assets.
Insurance statutes regulate the type of investments that our insurance subsidiaries are permitted to make and limit the amount of funds that may be used for any one type of investment. In light of these statutes and regulations and our business and investment strategy, we generally seek to invest in United States government and government-agency securities and corporate securities rated investment grade by established nationally recognized rating organizations or in securities of comparable investment quality, if not rated.
The following table summarizes investment yields earned over the past three years on the general account invested assets of our insurance subsidiaries (excluding revenues from major medical lines, which the Company intends to sell). General account investments exclude our venture capital investment in TeleCorp, separate account assets, the value of S&P 500 call options and the investments held by our finance segment.

                                                                                        2000          1999        1998
                                                                                        ----          ----        ----
                                                                                              (Dollars in millions)
Weighted average general account invested assets as defined:
       As reported ................................................................. $24,009.7     $24,986.2   $25,598.4
       Excluding unrealized appreciation (depreciation) (a).........................  25,461.3      25,785.6    25,273.2
Net investment income on general account invested assets............................   1,882.7       1,959.6     1,920.2

Yields earned:
       As reported..................................................................       7.8%          7.8%        7.5%
       Excluding unrealized appreciation (depreciation) (a) ........................       7.4%          7.6%        7.6%

--------------------
(a)    Excludes the effect of reporting fixed maturities at fair value as
       described in note 1 to the consolidated financial statements.	

Although investment income is a significant component of total revenues, the profitability of certain of our insurance products is determined primarily by the spreads between the interest rates we earn and the rates we credit or accrue to our insurance liabilities. At December 31, 2000, the average yield, computed on the cost basis of our actively managed fixed maturity portfolio, was 7.2 percent, and the average interest rate credited or accruing to our total insurance liabilities (excluding interest rate bonuses for the first policy year only and excluding the effect of credited rates attributable to variable or equity-indexed products) was 4.9 percent.
Actively managed fixed maturities
Our actively managed fixed maturity portfolio at December 31, 2000, included primarily debt securities of the United States government, public utilities and other corporations, and mortgage-backed securities.
Mortgage-backed securities included collateralized mortgage obligations ("CMOs") and mortgage-backed pass-through securities.
38
At December 31, 2000, our fixed maturity portfolio had $147.1 million of unrealized gains and $1,322.2 million of unrealized losses, for a net unrealized loss of $1,175.1 million. Estimated fair values for fixed maturity investments were determined based on: (i) estimates from nationally recognized pricing services (85 percent of the portfolio); (ii) broker- dealer market makers (1 percent of the portfolio); and (iii) internally developed methods (14 percent of the portfolio).
At December 31, 2000, approximately 7.6 percent of our invested assets (8.7 percent of fixed maturity investments) were fixed maturities rated below-investment grade by nationally recognized statistical rating organizations (or, if not rated by such firms, with ratings below Class 2 assigned by the NAIC). We plan to maintain approximately the present level of below-investment-grade fixed maturities. These securities generally have greater risks than other corporate debt investments, including risk of loss upon default by the borrower, and are often unsecured and subordinated to other creditors. Below-investment-grade issuers usually have higher levels of indebtedness and are more sensitive to adverse economic conditions, such as recession or increasing interest rates, than are investment-grade issuers. We are aware of these risks and monitor our below-investment-grade securities closely. At December 31, 2000, our below-investment-grade fixed maturity investments had an amortized cost of $2,407.7 million and an estimated fair value of $1,887.9 million.
We periodically evaluate the creditworthiness of each issuer whose securities we hold. We pay special attention to those securities whose market values have declined materially for reasons other than changes in interest rates or other general market conditions. We evaluate the realizable value of the investment, the specific condition of the issuer and the issuer's ability to comply with the material terms of the security. Information reviewed may include the recent operational results and financial position of the issuer, information about its industry, recent press releases and other information. Conseco employs a staff of experienced securities analysts in a variety of specialty areas. Among their responsibilities, this staff is charged with compiling and reviewing such information. If evidence does not exist to support a realizable value equal to or greater than the carrying value of the investment, and such decline in market value is determined to be other than temporary, we reduce the carrying amount to its net realizable value, which becomes the new cost basis; we report the amount of the reduction as a realized loss. We recognize any recovery of such reductions in the cost basis of an investment only upon the sale, repayment or other disposition of the investment. In 2000, we recorded writedowns of fixed maturity investments, equity securities and other invested assets totaling $189.3 million. Our investment portfolio is subject to the risks of further declines in realizable value. However, we attempt to mitigate this risk through the diversification and active management of our portfolio.
As of December 31, 2000, our fixed maturity investments in substantive default (i.e., in default due to nonpayment of interest or principal) or technical default (i.e., in default, but not as to the payment of interest or principal) had an amortized cost of $162.7 million and a carrying value of $102.8 million. There were no other fixed maturity investments about which we had serious doubts as to the ability of the issuer to comply on a timely basis with the material terms of the instrument.
When a security defaults, our policy is to discontinue the accrual of interest and eliminate all previous interest accruals, if we determine that such amounts will not be ultimately realized in full. Investment income forgone due to defaulted securities was $15.3 million and $8.7 million for the years ended December 31, 2000 and 1999, respectively.
At December 31, 2000, fixed maturity investments included $7.3 billion of mortgage-backed securities (or 34 percent of all fixed maturity securities). CMOs are backed by pools of mortgages that are segregated into sections or "tranches" that provide for reprioritizing of retirement of principal. Pass-through securities receive principal and interest payments through their regular pro rata share of the payments on the underlying mortgages backing the securities. The yield characteristics of mortgage-backed securities differ from those of traditional fixed-income securities. Interest and principal payments for mortgage-backed securities occur more frequently, often monthly. Mortgage-backed securities are subject to risks associated with variable prepayments. Prepayment rates are influenced by a number of factors that cannot be predicted with certainty, including: the relative sensitivity of the underlying mortgages backing the assets to changes in interest rates; a variety of economic, geographic and other factors; and the repayment priority of the securities in the overall securitization structures.
In general, prepayments on the underlying mortgage loans and the securities backed by these loans increase when prevailing interest rates decline significantly relative to the interest rates on such loans. The yields on mortgage-backed securities purchased at a discount to par will increase when the underlying mortgages prepay faster than expected. The yields on mortgage-backed securities purchased at a premium will decrease when they prepay faster than expected. When interest rates decline, the proceeds from the prepayment of mortgage-backed securities are likely to be reinvested at lower rates than we were earning on the prepaid securities. When interest rates increase, prepayments on mortgage-backed securities decrease, as fewer underlying mortgages are refinanced. When this occurs, the average maturity and duration of the mortgage-backed securities increase, which decreases the yield on mortgage-backed securities purchased at a discount,
39
because the discount is realized as income at a slower rate, and increases the yield on those purchased at a premium as a result of a decrease in the annual amortization of the premium.
The following table sets forth the par value, amortized cost and estimated fair value of mortgage-backed securities, summarized by interest rates on the underlying collateral at December 31, 2000:

                                                                                  Par        Amortized      Estimated
                                                                                 value         cost        fair value
                                                                                 -----         ----        ----------
                                                                                       (Dollars in millions)

Below 7 percent..............................................................   $4,366.5      $4,331.2      $4,290.0
7 percent - 8 percent........................................................    1,936.6       1,926.0       1,944.4
8 percent - 9 percent........................................................      445.1         445.9         451.3
9 percent and above..........................................................      884.5         835.1         612.3
                                                                                --------      --------      --------

          Total mortgage-backed securities (a)...............................   $7,632.7      $7,538.2      $7,298.0
                                                                                ========      ========      ========

--------------------
(a)    Includes below-investment grade mortgage-backed securities with an
       amortized cost and estimated fair value of $744.0 million and $521.3
       million, respectively.	

The amortized cost and estimated fair value of mortgage-backed securities at December 31, 2000, summarized by type of security, were as follows:

                                                                                               Estimated Fair Value
                                                                                               --------------------
                                                                                                               % of
                                                                                Amortized                      Fixed
Type                                                                              Cost         Amount       Maturities
----                                                                              ----         ------       ----------
                                                                                 (Dollars in millions)

Pass-throughs and sequential and targeted amortization  classes..............   $3,855.1       $3,848.2           18%
Planned amortization classes and accretion-directed bonds....................    2,081.4        2,066.1           10
Commercial mortgage-backed securities........................................      712.5          714.0            3
Subordinated classes and mezzanine tranches..................................      851.0          631.0            3
Other........................................................................       38.2           38.7            -
                                                                              ----------     ----------          ---

       Total mortgage-backed securities (a)..................................   $7,538.2       $7,298.0           34%
                                                                                ========       ========           ==

--------------------
(a)  Includes below-investment grade mortgage-backed securities with an
     amortized cost and estimated fair value of $744.0 million and $521.3
     million, respectively.	

Pass-throughs and sequential and targeted amortization classes have similar prepayment variability. Pass-throughs historically provide the best liquidity in the mortgage-backed securities market. Pass-throughs are also used frequently in the dollar roll market and can be used as the collateral when creating collateralized mortgage obligations. Sequential classes are a series of tranches that return principal to the holders in sequence. Targeted amortization classes offer slightly better structure in return of principal than sequentials when prepayment speeds are close to the speed at the time of creation.
Planned amortization classes and accretion-directed bonds are some of the most stable and liquid instruments in the mortgage-backed securities market. Planned amortization class bonds adhere to a fixed schedule of principal payments as long as the underlying mortgage collateral experiences prepayments within a certain range. Changes in prepayment rates are first absorbed by support or companion classes. This insulates the planned amortization class from the consequences of both faster prepayments (average life shortening) and slower prepayments (average life extension).
Commercial mortgage-backed securities ("CMBS") are bonds secured by commercial real estate mortgages. Commercial real estate encompasses income producing properties that are managed for economic profit. Property types include multi-family dwellings including apartments, retail centers, hotels, restaurants, hospitals, nursing homes, warehouses, and office buildings. The CMBS market currently offers high yields, strong credits, and call protection compared to similar rated corporate bonds. Most CMBS have strong call protection features where borrowers are locked out from prepaying their mortgages for a stated period of time. If the borrower does prepay any or all of the loan, they will be required to pay prepayment penalties.
40
Subordinated and mezzanine tranches are classes that provide credit enhancement to the senior tranches. The rating agencies require that this credit enhancement not deteriorate due to prepayments for a period of time, usually five years of complete lockout followed by another period of time where prepayments are shared pro rata with senior tranches. The credit risk of subordinated and mezzanine tranches is derived from owning a small percentage of the mortgage collateral, while bearing a majority of the risk of loss due to property owner defaults. Subordinated bonds can be rated "AA" or lower. We typically do not buy subordinated or mezzanine bonds that are rated lower than "BB". This class also includes our investments in other asset-backed securities that are mortgage related (manufactured housing and home equity loans). The amortized cost and estimated fair value of these other asset-backed securities was $716.8 million and $494.6 million, respectively, at December 31, 2000.
During 2000, we sold $7.0 billion of investments (primarily fixed maturities), resulting in $140.5 million of investment gains and $205.8 million of investment losses (both before related expenses, amortization and taxes). Such securities were sold in response to changes in the investment environment, which created opportunities to enhance the total return of the investment portfolio without adversely affecting the quality of the portfolio or the matching of expected maturities of assets and liabilities. As discussed in the notes to the consolidated financial statements, the realization of gains and losses affects the timing of the amortization of the cost of policies produced and the cost of policies purchased related to universal life and investment products.
Venture capital investment in TeleCorp
Our venture capital investment in TeleCorp was made by our subsidiary which engages in venture capital investment activity. TeleCorp is a company in the wireless communication business. At the time we purchased this investment, we believed it had high growth or appreciation potential. Our investment in TeleCorp is carried at estimated fair value, with changes in fair value recognized as investment income. Since there are restrictions on our ability to sell this investment , we adjust the quoted market price to produce an estimate of the attainable fair value. At December 31, 2000, we held 17.2 million common shares of TeleCorp. The market values of many companies in TeleCorp's business sector have been subject to market valuation volatility in recent periods. We recognized venture capital investment income (loss) of $(199.5) million in 2000 and $354.8 million in 1999, primarily related to this investment.
Other investments
At December 31, 2000, we held mortgage loan investments with a carrying value of $1,238.6 million (or 5.0 percent of total invested assets) and a fair value of $1,197.7 million. Mortgage loans were substantially comprised of commercial loans. Noncurrent mortgage loans were insignificant at December 31, 2000. Realized losses on mortgage loans were not significant in any of the past three years. At December 31, 2000, we had a mortgage loan loss reserve of $3.8 million. Approximately 8 percent of the mortgage loans were on properties located in Ohio, 8 percent in New York, 7 percent in Florida, 7 percent in Pennsylvania, 7 percent in Texas and 6 percent in California. No other state accounted for more than 5 percent of the mortgage loan balance.
At December 31, 2000, we held $15.0 million of trading securities; they are included in other invested assets. Trading securities are investments we intend to sell in the near term. We carry trading securities at estimated fair value; changes in fair value are reflected in the statement of operations.
Other invested assets also include: (i) S&P 500 Call Options; and (ii) certain nontraditional investments, including investments in limited partnerships, mineral rights and promissory notes.
As part of our investment strategy, we enter into reverse repurchase agreements and dollar-roll transactions to increase our return on investments and improve our liquidity. Reverse repurchase agreements involve a sale of securities and an agreement to repurchase the same securities at a later date at an agreed-upon price. Dollar rolls are similar to reverse repurchase agreements except that the repurchase involves securities that are only substantially the same as the securities sold. We enhance our investment yield by investing the proceeds from the sales in short-term securities pending the contractual repurchase of the securities at discounted prices in the forward market. We are able to engage in such transactions due to the market demand for mortgage-backed securities to form CMOs. Such investment borrowings averaged $324.4 million during 2000 and were collateralized by investment securities with fair values approximately equal to the loan value. The weighted average interest rate on such borrowings was 5.7 percent in 2000. The primary risk associated with short-term collateralized borrowings is that the counterparty might be unable to perform under the terms of the contract. Our exposure is limited to the excess of the net replacement cost of the securities over the value of the short- term investments (which was not material at December 31, 2000). We believe that the counterparties to our reverse repurchase and dollar-roll agreements are financially responsible and that counterparty risk is minimal.
41
 
FINANCE RECEIVABLES, INTEREST-ONLY SECURITIES AND SERVICING RIGHTS OF
FINANCE SUBSIDIARIES
Finance receivables
Finance receivables, including receivables which serve as collateral for the notes issued to investors in securitization trusts of $12,622.8 million and $4,730.5 million at December 31, 2000 and 1999, respectively, summarized by type, were as follows:

                                                                                                  December 31,
                                                                                           ---------------------
                                                                                           2000             1999
                                                                                           ----             ----
                                                                                           (Dollars in millions)
Continuing lines:
   Manufactured housing...............................................................   $ 5,865.1        $1,748.8
   Mortgage services..................................................................     6,499.1         3,354.3
   Retail credit......................................................................     1,763.9           867.8
   Floorplan..........................................................................       637.0         1,239.7
                                                                                         ---------        --------

                                                                                          14,765.1         7,210.6
   Less allowance for credit losses...................................................       261.9            43.2
                                                                                         ---------        --------

     Net finance receivables - for continuing lines...................................    14,503.2         7,167.4
                                                                                         ---------        --------

Discontinued lines:
   Consumer finance...................................................................       822.4           421.1
   Transportation.....................................................................       137.8           919.7
   Vendor finance.....................................................................       862.3           639.4
   Park construction..................................................................       131.2           188.7
   Other..............................................................................        75.8           543.5
                                                                                         ---------        --------

                                                                                           2,029.5         2,712.4
   Less allowance for credit losses...................................................        44.9            45.2
                                                                                         ---------        --------

     Net finance receivables - for discontinued lines.................................     1,984.6         2,667.2
                                                                                         ---------        --------

     Total finance receivables........................................................   $16,487.8        $9,834.6
                                                                                         =========        ========	

Subsequent to September 8, 1999, we no longer structure our securitizations in a manner that results in recording a sale of the loans. Instead, we are using the portfolio method (the accounting method required for securitizations which are structured as secured borrowings) to account for securitization transactions structured after that date. Our securitizations are now structured in a manner that requires them to be accounted for under the portfolio method, whereby the loans and securitization debt are held on our balance sheet, pursuant to Financial Accounting Standards Board Statement No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities" ("SFAS 125").
For loans we finance through securitizations, this change, and the resulting use of the portfolio method of accounting, has no effect on the total profit we recognize over the life of each new loan, but does change the timing of profit recognition. Under the portfolio method, we recognize earnings over the life of a new loan as it generates interest. As a result, our reported earnings from each new loan under the portfolio method are lower in the period it is securitized (compared to our historical method) and higher in later periods, as interest is earned on the loan.
The Financial Accounting Standards Board recently issued Statement of Financial Accounting Standards No. 140, "Accounting for the Transfer and Servicing of Financial Assets and Extinguishments of Liabilities" ("SFAS 140") which is a replacement of SFAS 125, and a related implementation guide. SFAS 140 and the implementation guide have changed the criteria that must be met for securitization transactions to be recorded under the portfolio method. We do not believe we will need to make any significant changes to our securitization structures to meet the new criteria which are effective for securitization transactions completed after March 31, 2001.
The securitizations structured prior to our September 8, 1999, announcement met the applicable criteria to be accounted for as sales. At the time the loans were securitized and sold, we recognized a gain and recorded our retained
42
interest represented by the interest-only security. The interest-only security represents the right to receive, over the life of the pool of receivables: (i) the excess of the principal and interest received on the receivables transferred to the special purpose entity over the principal and interest paid to the holders of other interests in the securitization; and (ii) contractual servicing fees. In some of those securitizations, we also retained certain lower-rated securities that are senior in payment priority to the interest-only securities. Such retained securities had a par value, fair market value and amortized cost of $769.8 million, $494.6 million and $716.8 million, respectively, at December 31, 2000, and were classified as actively managed fixed maturity securities.
During 1999 and 1998, the Company sold $9.7 billion and $13.4 billion, respectively, of finance receivables in various securitized transactions and recognized gains of $550.6 million and $745.0 million, respectively. During 2000, we recognized no gain on sale related to securitized transactions. The gains recognized were dependent in part on the previous carrying amount of the finance receivables included in the securitization transactions, allocated between the assets sold and our retained interests based on their relative fair value at the date of transfer. To obtain fair values, quoted market prices are used if available. However, quotes are generally not available for retained interests, so we estimated the fair values based on the present value of future expected cash flows using our best estimates of the key assumptions - credit losses, prepayment speeds, forward yield curves, and discount rates commensurate with the risks involved.
We service for a fee all of the finance receivables we previously sold in securitization transactions accounted for as sales. We collect, in the special purpose securitization entity, loan payments, and where applicable, other payments from borrowers and remit principal and interest payments to holders of the securities backed by the finance receivables we have sold. The cash applicable to the servicing fee and residual interest is remitted from the special purpose entity to the Company, after payment of all required principal and interest.
Managed finance receivables by loan type were as follows:

                                                                                   December 31,
                                                                                ------------------
                                                                                2000           1999
                                                                                ----           ----
                                                                               (Dollars in millions)
Continuing lines:
   Fixed term............................................................    $39,837.4     $37,012.9
   Revolving credit......................................................      3,030.7       3,892.8
Discontinued lines.......................................................      3,717.8       4,885.7
                                                                            ----------     ---------

     Total...............................................................    $46,585.9     $45,791.4
                                                                             =========     =========

Number of contracts serviced:
   Fixed term contracts - continuing lines...............................    1,108,000     1,095,000
   Revolving credit accounts - continuing lines..........................      972,000     1,626,000
   Discontinued lines....................................................      463,000       687,000
                                                                             ---------     ---------

     Total...............................................................    2,543,000     3,408,000
                                                                             =========     =========	

At December 31, 2000, no single state accounted for more than 8 percent of the contracts we serviced. In addition, no single contractor, dealer or vendor accounted for more than one percent of the total contracts we originated.
Credit quality of managed finance receivables was as follows:

                                                                                        December 31,
                                                                                  ---------------------
                                                                                  2000             1999
                                                                                  ----             ----
60-days-and-over delinquencies as a percentage of managed finance
   receivables at period end:
     Manufactured housing....................................................     2.20%             1.57%
     Mortgage services.......................................................      .93              1.00
     Retail credit...........................................................     3.04              3.02
     Floorplan...............................................................      .31               .07
       Total continuing lines................................................     1.78              1.36
     Total discontinued lines................................................     1.47              1.72
       Total.................................................................     1.76%             1.42%

                                       43	

Net credit  losses  incurred  during the last twelve  months as a  percentage
   of average managed finance receivables during the period:
     Manufactured housing....................................................     1.61%             1.25%
     Mortgage services.......................................................     1.17               .99
     Retail credit...........................................................     5.30              4.33
     Floorplan...............................................................      .31               .17
       Total continuing lines................................................     1.55              1.20
     Total discontinued lines................................................     3.89              1.97
       Total.................................................................     1.79%             1.31%

Repossessed collateral  inventory as a percentage of managed finance
   receivables at period end:
     Manufactured housing....................................................     1.73%             1.09%
     Mortgage services.......................................................     2.97              2.29
     Floorplan...............................................................      .44               .07
       Total continuing lines................................................     2.00              1.36
     Total discontinued lines................................................     2.96              1.18
       Total.................................................................     2.08%             1.34%	

These ratios increased during 2000 primarily as a result of: (i) the increases in delinquencies and credit losses as the portfolios age; (ii) changes in the mix of managed receivables; and (iii) underlying loss experience. Such underlying delinquency and loss experience deteriorated after the proposed sale of our finance segment was announced. We believe that our employees' concerns about their future significantly affected the collection function. Our delinquency rates have leveled off in January 2001 and decreased in February 2001.
Interest-only securities
Interest-only securities represent interests we retained in securitization transactions structured prior to September 8, 1999, and are carried at estimated fair value. On a quarterly basis, we estimate the fair value of these securities by discounting the projected future cash flows using current assumptions. If we determine that the differences between the estimated fair value and the book value of these securities is a temporary difference we adjust shareholders' equity. At December 31, 2000, this adjustment increased the carrying value of the interest-only securities by $1.7 million to $432.9 million. Declines in value are considered to be other than temporary when: (i) the fair value of the security is less than its carrying value; and (ii) the timing and/or amount of cash expected to be received from the security has changed adversely from the previous valuation which determined the carrying value of the security. When both occur, the security is written down to fair value.
We recognized impairment charges of $515.7 million ($324.9 million after tax) in 2000, $554.3 million ($349.2 million after tax) in 1999 and $549.4 million ($355.8 million after tax) in 1998 to reduce the book value of interest-only securities and servicing rights as described above under "Finance Operations."
Based on our current assumptions and expectations as to future events related to the loans underlying our interest- only securities, we estimate receiving cash from these securities of $15 million in 2001, $115 million in 2002, $140 million in 2003, $85 million in 2004, $65 million in 2005, and $630 million in all years thereafter. We have projected lower cash flows from our interest-only securities in 2001, reflecting our assumption that the adverse loss experience in 2000 will continue into 2001 and then improve over time. As a result of these assumptions, we project that payments related to guarantees issued in conjunction with the sales of certain finance receivables will exceed the amounts paid in previous periods. These projected payments are considered in the projected cash flows we use to value our interest-only securities. See note 8 to the consolidated financial statements for additional information about the guarantees.
CONSOLIDATED FINANCIAL CONDITION
Changes in the consolidated balance sheet of 2000 compared with 1999
Changes in the consolidated balance sheet at December 31, 2000, compared to 1999, reflect: (i) our operating results; (ii) our origination of finance receivables; (iii) the transfer of finance receivables to securitization trusts and sale of notes to investors in transactions accounted for as secured borrowings; (iv) the sale of finance receivables to Lehman; (v) the sale of assets of our subprime automobile, bankcard and transportation businesses; (vi) changes in the fair value of actively managed fixed maturity securities and interest-only securities; and (vii) various financing and restructuring transactions described in the notes to the consolidated financial statements.
In accordance with GAAP, we record our actively managed fixed maturity investments, interest-only securities, equity securities and certain other invested assets at estimated fair value with any unrealized gain or loss, net of tax and related adjustments, recorded as a component of shareholders' equity. At December 31, 2000, we decreased the carrying
44
value of such investments by $1,241.9 million as a result of this fair value adjustment. The fair value adjustment resulted in a $1,504.3 million decrease in carrying value at year-end 1999.
Total capital shown below excludes debt of the finance segment used to fund finance receivables. Total capital, before the fair value adjustment recorded in accumulated other comprehensive loss, decreased $1,106.8 million, or 8.1 percent, to $12.5 billion. The decrease is primarily due to our operating results for 2000.

                                                                           2000            1999
                                                                           ----            ----
                                                                            (Dollars in millions)
Total capital, excluding accumulated other comprehensive loss:
    Corporate notes payable and commercial paper....................... $ 5,055.0      $ 4,624.2

    Company-obligated mandatorily redeemable preferred
       securities of subsidiary trusts.................................   2,403.9        2,639.1

    Shareholders' equity:
       Preferred stock.................................................     486.8          478.4
       Common stock and additional paid-in capital.....................   2,911.8        2,987.1
       Retained earnings...............................................   1,626.8        2,862.3
                                                                        ---------      ---------

          Total shareholders' equity, excluding accumulated
             other comprehensive loss..................................   5,025.4        6,327.8
                                                                        ---------      ---------

          Total capital, excluding accumulated other
             comprehensive loss........................................  12,484.3       13,591.1

       Accumulated other comprehensive loss............................    (651.0)        (771.6)
                                                                        ---------      ---------

          Total capital................................................ $11,833.3      $12,819.5
                                                                        =========      =========	

Corporate notes payable and commercial paper increased $430.8 million during 2000. Increases were primarily due to: (i) the settlement of a forward contract described in note 10 to the accompanying consolidated financial statements; (ii) the redemption of $250 million par value of Company-obligated mandatorily redeemable preferred securities of subsidiary trusts; (iii) the acquisition of a long-term care insurance marketing organization for $32.9 million; (iv) cash required for special charges of $216.3 million; and (v) an increase in cash and cash equivalents held at the parent company of approximately $374 million. These increases were reduced by the actions completed during 2000 to generate cash in order to reduce corporate debt. Through December 31, 2000, we have completed transactions which generated cash proceeds in excess of $1.0 billion (see note 1 to the consolidated financial statements).
Shareholders' equity, excluding accumulated other comprehensive loss, decreased by $1.3 billion in 2000, to $5.0 billion. Significant components of the decrease included: (i) our net loss of $1,191.2 million; (ii) the settlement of the forward contract and repurchases of common stock of $102.9 million; and
(iii) $44.3 million of common and preferred stock dividends. These decreases were partially offset by the issuance of warrants of $21.0 million. The accumulated other comprehensive loss decreased by $120.6 million principally related to the increase in the fair value of our insurance companies' investment portfolio.
Book value per common share outstanding decreased to $11.95 at December 31, 2000, from $15.50 a year earlier. Such change was primarily attributable to the factors discussed in the previous paragraph. Excluding accumulated other comprehensive loss, book value per common share outstanding decreased to $13.95 at December 31, 2000, from $17.85 a year earlier.
Goodwill (representing the excess of the amounts we paid to acquire companies over the fair value of net assets acquired in transactions accounted for as purchases) was $3,800.8 million and $3,927.8 million at December 31, 2000 and 1999, respectively. Goodwill as a percentage of shareholders' equity was 87 percent and 71 percent at December 31, 2000 and 1999, respectively. Goodwill as a percentage of total capital, excluding other comprehensive loss, was 30 percent and 29 percent at December 31, 2000 and 1999, respectively. We believe that the life of our goodwill is indeterminable and, therefore, have generally amortized its balance over 40 years as permitted by generally accepted accounting principles. Amortization of goodwill totaled $112.5 million, $110.1 million, and $106.2 million during 2000, 1999 and 1998,
45
respectively. If we had determined the estimated useful life of our goodwill was less than 40 years, amortization expense would have been higher.
We continually monitor the value of our goodwill based on our best estimates of future earnings considering all available evidence. We determine whether goodwill is fully recoverable from projected undiscounted net cash flows from earnings of the business acquired over the remaining amortization period. At December 31, 2000, goodwill is also recoverable from projected net cash flows from estimated earnings (including earnings on projected amounts of new business consistent with the Company's business plan), discounted at rates we believe are appropriate for the business. If we were to determine that changes in undiscounted projected cash flows no longer support the recoverability of goodwill over the remaining amortization period, we would reduce its carrying value with a corresponding charge to expense or shorten the amortization period. Cash flows considered in such an analysis are those of the business acquired, if separately identifiable, or the product line of the business acquired, if such earnings are not separately identifiable. During 2000, we recognized a special charge and reduced goodwill by $20.3 million, representing the difference between: (i) the carrying value of the net assets of the vendor services financing business; and (ii) the anticipated proceeds from the sale of such business, which was completed in the first quarter of 2001.
46
Financial ratios

                                                                        2000       1999       1998       1997      1996
                                                                        ----       ----       ----       ----      ----
Book value per common share:
   As reported.........................................................$11.95     $15.50     $16.37     $16.45    $13.47
   Excluding accumulated other comprehensive income (loss) (a)......... 13.95      17.85      16.46      15.80     13.34

Ratio of earnings to fixed charges:
   As reported.........................................................   (f)       2.98x      3.30x      5.55x     4.85x
   Excluding interest expense on direct third party debt of
     Conseco Finance and investment borrowings (b).....................   (f)       5.27x      6.30x     13.00x     7.80x

Ratio of operating earnings to fixed charges (c):
     As reported.......................................................  1.26x      4.26x      4.89x      6.09x     4.73x
     Excluding interest expense on direct third party
       debt of Conseco Finance and investment borrowings (b)...........  1.84x      8.04x      9.98x     14.43x     7.60x

Ratio of earnings to fixed  charges,  preferred  dividends
     and distributions on Company-obligated mandatorily redeemable
     preferred securities of subsidiary trusts:
       As reported.....................................................   (g)       2.20x      2.47x      4.10x     3.74x
       Excluding interest expense on direct third party
         debt of Conseco Finance and investment borrowings (b).........   (g)       2.98x      3.55x      6.72x     5.11x

Ratio of  operating   earnings  to  fixed   charges,   preferred
     preferred securities of subsidiary distributions  on
     Company-obligated   mandatorily   redeemable  preferred securities
      of subsidiary trusts (c):
       As reported..............................................         1.09x      3.14x      3.66x      4.49x     3.65x
       Excluding interest expense on debt direct third party
         debt of Conseco Finance and investment borrowings (b).........  1.21x      4.55x      5.62x      7.45x     4.98x

Rating agency ratios (a) (d) (e):
   Corporate debt to total capital.....................................    40%        34%        34%        27%       18%
   Corporate debt and Company-obligated mandatorily redeemable
     preferred securities of subsidiary trusts to total capital........    60%        54%        53%        43%       28%

---------------
(a)  Excludes accumulated other comprehensive income (loss).

(b)  We include these ratios to assist you in analyzing the impact of interest
     expense on debt related to finance receivables and other investments (which
     is generally offset by interest earned on finance receivables and other
     investments financed by such debt). Such ratios are not intended to, and do
     not, represent the following ratios prepared in accordance with GAAP: the
     ratio of earnings and operating earnings to fixed charges; and the ratio of
     earnings and operating earnings to fixed charges, preferred dividends and
     distributions on Company-obligated mandatorily redeemable preferred
     securities of subsidiary trusts.

(c)  Such ratios exclude the following items from earnings: (i) net investment
     gains (losses)(less that portion of amortization of cost of policies
     purchased and cost of policies produced and income taxes relating to such
     gains (losses)); (ii) the venture capital income (loss) related to our
     investment in TeleCorp; (iii) special items not related to the continuing
     operations of our businesses (including impairment charges to reduce the
     value of interest-only securities and servicing rights, special charges and
     the provision for losses related to loan guarantees); and (iv) the net
     income (loss) related to the major medical lines of business we intend to
     sell. Operating earnings are determined by adjusting GAAP net income for
     the above mentioned items. While these items may be significant components
     in understanding and assessing our consolidated financial performance, we
     believe that the presentation of operating earnings enhances the
     understanding of our results of operations by highlighting net income
     attributable to the normal, recurring operations of the business and by
     excluding events that materially distort trends in net income.

     These ratios are not intended to, and do not, represent the following
     ratios prepared in accordance with GAAP: the ratio of earnings to fixed
     charges; and the ratio of earnings to fixed charges, preferred dividends
     and distributions on Company-obligated mandatorily redeemable preferred
     securities of subsidiary trusts.

                                       47	

(d)  Excludes direct debt of the finance segment used to fund finance
     receivables and investment borrowings of the insurance segment.

(e)  These ratios are calculated in a manner discussed with rating agencies.

(f)  For such ratios, adjusted earnings were $1,361.8 million less than fixed
     charges. Adjusted earnings for the year ended December 31, 2000, included:
     (i) special and impairment charges of $1,215.0 million; and (ii) provision
     for losses related to loan guarantees of $231.5 million, as described in
     greater detail in the notes to the accompanying consolidated financial
     statements.

(g)  For such ratios, adjusted earnings were $1,602.4 million less than fixed
     charges. Adjusted earnings for the year ended December 31, 2000, included:
     (i) special and impairment charges of $1,215.0 million; and (ii) provision
     for losses related to loan guarantees of $231.5 million, as described in
     greater detail in the notes to the accompanying consolidated financial
     statements.	

Liquidity for insurance and fee-based operations
Our insurance operating companies generally receive adequate cash flow from premium collections and investment income to meet their obligations. Life insurance and annuity liabilities are generally long-term in nature. Policyholders may, however, withdraw funds or surrender their policies, subject to any applicable surrender and withdrawal penalty provisions. We seek to balance the duration of our invested assets with the estimated duration of benefit payments arising from contract liabilities.
Only a small portion of our insurance liabilities have a time for contractual payment; the majority of such liabilities are payable upon occurrence of the insured event or upon surrender. Of our total insurance liabilities at December 31, 2000, approximately 19 percent could be surrendered by the policyholder without a penalty. Approximately 60 percent could be surrendered by the policyholder subject to penalty or the release of an insurance liability in excess of surrender benefits paid. The remaining 21 percent do not provide a surrender benefit.
Approximately 45 percent of insurance liabilities were subject to interest rates that may be reset annually; 30 percent have a fixed explicit interest rate for the duration of the contract; 20 percent have credited rates which approximate the income earned by the Company; and the remainder have no explicit interest rate.
Insurance liabilities for interest-sensitive products by credited rate (excluding interest rate bonuses for the first policy year only) at December 31, 2000 were as follows (dollars in millions):

       Below 4.00 percent.............................................................   $ 5,292.6  (a)
       4.00 percent - 4.50 percent....................................................     2,430.1
       4.50 percent - 5.00 percent....................................................     4,828.8
       5.00 percent - 5.50 percent....................................................     2,098.8
       5.50 percent and above.........................................................     1,472.9
                                                                                         ---------

             Total insurance liabilities on interest-sensitive products...............   $16,123.2
                                                                                         =========
--------------------
(a)  Includes liabilities related to our equity-indexed annuity product of
     $2,642.5 million. The accumulation value of these annuities is credited
     with interest at an annual guaranteed minimum rate of 3 percent (or,
     including the effect of applicable sales loads, a 1.7 percent compound
     average interest rate over the term of the contract). These annuities
     provide for potentially higher returns based on a percentage of the change
     in the S&P 500 Index during each year of their term. We purchase S&P 500
     Call Options in an effort to hedge increases to insurance liabilities
     resulting from increases in the S&P 500 Index.	

We believe that the diversity of our investment portfolio and the concentration of investments in high-quality, liquid securities provide sufficient liquidity to meet foreseeable cash requirements. At December 31, 2000, we held $.6 billion of cash and cash equivalents and $16.8 billion of publicly traded investment grade bonds. Although there is no present need or intent to dispose of such investments, our life insurance subsidiaries could readily liquidate portions of their investments, if such a need arose. In addition, investments could be used to facilitate borrowings under reverse-repurchase agreements or dollar-roll transactions. Such borrowings have been used by the life companies from time to time to increase their return on investments and to improve liquidity.
48
Liquidity for finance operations
Our finance operations require cash to originate finance receivables. Our primary sources of cash are: (i) the collection of receivable balances; (ii) proceeds from the issuance of debt, certificate of deposits and securitization of loans; and (iii) cash provided by operations. During the last six months of 2000, the finance segment significantly slowed the origination of finance receivables to enhance net interest margins, to reduce the amount of cash required for new loan originations, and to transfer cash to the parent company.
The most significant source of liquidity for our finance operations has been our ability to finance the receivables we originate in the secondary markets through loan securitizations. Under certain securitization structures, we have provided a variety of credit enhancements, which have taken the form of corporate guarantees (although we have not provided such guarantees during the last six months of 2000), but have also included bank letters of credit, surety bonds, cash deposits and over-collateralization or other equivalent collateral. When choosing the appropriate structure for a securitization of loans, we analyze the cash flows unique to each transaction, as well as its marketability and projected economic value. The structure of each securitized transaction depends, to a great extent, on conditions in the fixed-income markets at the time the transaction is completed, as well as on cost considerations and the availability and effectiveness of the various enhancement methods.
During 2000, we completed fourteen transactions, securitizing over $8.9 billion of finance receivables. We continue to be able to finance loans through:
(i) our warehouse and bank credit facilities; (ii) the sale of securities through securitization transactions; and (iii) whole-loan sales.
The market for securities backed by receivables is a cost-effective source of funds. Conditions in the credit markets during the last several years resulted in less-attractive pricing of certain lower rated securities typically included in loan securitization transactions. As a result, we chose to hold rather than sell some of the securities in the securitization trusts, particularly securities having corporate guarantee provisions.
Market conditions in the credit markets for loan securitizations and loan sales change from time to time. For example, during certain periods of 1999, the general levels of interest rates had increased on securities issued in securitizations, causing us to incur higher interest costs on securitizations completed during those periods. Changes in market conditions could affect the interest rate spreads we earn on the loans we originate and the cash provided by our finance operations. We adjust interest rates on our lending products to strive to maintain our targeted spread in the current interest rate environment.
At December 31, 2000, we had $3.5 billion in master repurchase agreements, commercial paper conduit facilities and other facilities with various banking and investment banking firms for the purpose of financing our consumer and commercial finance loan production. These facilities typically provide financing of a certain percentage of the underlying collateral and are subject to the availability of eligible collateral and, in many cases, the willingness of the banking firms to continue to provide financing. Some of these agreements provide for annual terms which are extended either quarterly or semi-annually by mutual agreement of the parties for an additional annual term based upon receipt of updated quarterly financial information. At December 31, 2000, we had borrowed $1.8 billion of the $3.5 billion available under such agreements. The average interest rate incurred under such agreements during 2000 was 7.4 percent.
We continually investigate and pursue alternative and supplementary methods to finance our lending operations. In late 1998, we began issuing certificates of deposit through our bank subsidiary. At December 31, 2000, we had $1,873.3 million of such deposits outstanding which are recorded as liabilities related to certificates of deposit. The average annual rate paid on these deposits was 6.7 percent during 2000.
Our finance segment generated cash flows from operating activities of $472.9 million during 2000, compared to $624.0 million in 1999. Such cash flows include cash received from the securitization trusts of $311.4 million in 2000 and $618.3 million in 1999, representing distribution of excess interest and servicing fees.
Although we plan to continue to finance the receivables we originate through loan securitizations subsequent to September 8, 1999, we will no longer structure future securitizations in a manner that results in gain-on-sale revenues. This change has not had any material effect on the amount or timing of cash flows we receive, but the change required us to classify certain activities differently on our cash flow statement (e.g., certain cash flows recorded as "operating cash flows" under the gain-on-sale method must be recorded as "investing activities" under the portfolio method and vice versa).
49
Independent rating agencies, financial institutions, analysts and other interested parties monitor the leverage ratio of our finance segment. Such ratio (calculated, as discussed with independent rating agencies, as the ratio of debt to equity of our finance subsidiary calculated on a pro forma basis as if we had accounted for the securitizations of our finance receivables as financing transactions throughout the Company's history) was 21-to-1 at December 31, 2000 and 22-1 at December 31, 1999.
Liquidity of Conseco (parent company)
The parent company is a legal entity, separate and distinct from its subsidiaries, and has no business operations. The parent company uses cash for:
(i) principal and interest payments on debt; (ii) dividends on mandatorily redeemable preferred stock of subsidiary trusts; (iii) payments to subsidiary trusts to be used for distributions on the Company-obligated mandatorily redeemable preferred securities of subsidiary trusts; (iv) holding company administrative expenses; (v) income taxes; and (vi) investments in subsidiaries and other investments. The primary sources of cash to meet these obligations are payments from our subsidiaries, including the statutorily permitted payments from our life insurance subsidiaries in the form of: (i) fees for services provided; (ii) tax sharing payments; (iii) dividend payments; and (iv) surplus debenture interest and principal payments.
During 2000, the Company restructured its bank credit facilities. The amended facilities include: (i) a $1.5 billion five year facility (the "$1.5 billion facility"); and (ii) other bank credit facilities due December 31, 2001 (the "near-term facilities"). The $1.5 billion facility is due December 31, 2003; however, subject to the absence of any default, the Company may further extend its maturity to March 31, 2005, provided that: (i) Conseco pays an extension fee of 3.5 percent of the amount extended; and (ii) cumulative principal payments of at least $150 million have been paid by September 30, 2002 and at least $300 million by September 30, 2003.
The maturities of the direct debt of the parent company at December 31, 2000 (assuming the Company elects to extend the maturity date of $1.2 billion of bank debt) were as follows (dollars in millions):

2001.........................................................    $1,221.2
2002.........................................................       601.9
2003.........................................................       463.5
2004.........................................................       812.5
2005.........................................................     1,450.0
Thereafter...................................................       551.1
                                                                 --------

      Total par value at December 31, 2000...................    $5,100.2
                                                                 ========	

In amending our bank credit facilities, we agreed to the manner in which the proceeds from asset sales and refinancing transactions would be used. Through December 31, 2000, the $1,005.6 million of proceeds from such transactions were used as follows: (i) $257.1 million was used to repay the notes payable due 2003; (ii) $131.5 million was used to repay the 7.875% notes due December 2000; (iii) $419.8 million was used to reduce the total borrowings under our near-term facilities; (iv) $81.9 million was transferred to a segregated cash account for the payment of debt; and (v) $115.3 million was added to the general cash balance of the Company. Additional amounts have been added to the segregated cash account for the payment of debt through March 1, 2001; its balance is now $402.3 million.
Pursuant to the amendment of our bank credit facilities, we have agreed that any amounts received from asset sales or refinancing transactions occurring after December 31, 2000 (with certain exceptions), would be used as follows: (i) the first $13 million received may be retained by Conseco until we have cash on hand of $330 million; (ii) of the next $512 million received, $73 million would be used to reduce our near-term facilities and $439 million would be added to the segregated cash account for the payment of public debt maturing in 2001;
(iii) the next $200 million received would be added to the segregated cash account for the payment of debt maturing in 2001; (iv) the next available proceeds would be applied 80 percent to reduce our near-term facilities, with the remaining 20 percent retained by Conseco until we have cash on hand of $330 million, and then 100 percent to our near-term facilities until such facilities have been paid in full; and (v) any subsequent proceeds would be applied: (a) 50 percent to repay the $1.5 billion facility and to fund a segregated cash account to provide collateral for Conseco's guarantee related to the directors, officers and key employee stock purchase program (based on the relative balance due under each facility); and (b) the remaining 50 percent would be retained by Conseco. No assurance can be provided as to the timing, proceeds, or other terms related to any potential asset sale or financing transaction.
50
During 2000, the Company amended an agreement with Lehman related to certain master repurchase agreements and a collateralized credit facility. Such amendment significantly reduced the restrictions on intercompany payments from Conseco Finance to Conseco as required by the previous agreement. In conjunction with the amendment, Conseco agreed to convert $750 million principal balance of its intercompany note due from Conseco Finance to $750 million stated value of Conseco Finance 9 percent redeemable cumulative preferred stock (the "intercompany preferred stock"). After such conversion and prepayments made during 2000, the intercompany note had a balance of $786.7 million.
Pursuant to the amended agreement, Conseco Finance may make the following payments to Conseco: (i) interest on the intercompany note; (ii) payments for products and services provided by Conseco; and (iii) intercompany tax sharing payments. Conseco Finance may also make the following payments to Conseco provided the minimum liquidity requirements defined in the amended agreement are met and the cash payments are applied in the order summarized: (i) unpaid interest on the intercompany note; (ii) prepayments of principal on the intercompany note or repayments of any increase to the intercompany receivable balance; (iii) dividends on the intercompany preferred stock; (iv) redemption of the intercompany preferred stock; and (v) common stock dividends. The liquidity test of the amended agreement requires Conseco Finance to have minimum levels of liquidity immediately both before and after giving effect to such payments to Conseco. Liquidity, as defined, includes unrestricted cash and may include up to $150 million of liquidity available at Conseco Finance's bank subsidiaries and the aggregate amount available to be drawn under Conseco Finance's credit facilities (where applicable, based on eligible excess collateral pledged to the lender multiplied by the appropriate advance rate). The minimum liquidity must equal or exceed $250 million, plus: (i) 50 percent of cash up to $100 million generated by Conseco Finance subsequent to September 21, 2000; and (ii) 25 percent of cash generated by Conseco Finance in excess of $100 million, provided the total minimum cash liquidity shall not exceed $350 million and the cash generated by Conseco Finance (used in the calculation to increase the minimum) will exclude operating cash flows and the net proceeds received from certain asset sales and other events listed in the amended agreement (which are consistent with the courses of actions we have previously announced).
The ability of our insurance subsidiaries to pay dividends is subject to state insurance department regulations. These regulations generally permit dividends to be paid from earned surplus of the insurance company for any 12-month period in amounts equal to the greater of (or in a few states, the lesser of): (i) net gain from operations for the prior year; or (ii) 10 percent of surplus as of the end of the preceding year. Any dividends in excess of these levels require the approval of the director or commissioner of the applicable state insurance department. After a deduction of $264.4 million of fees and interest paid to Conseco in 2000, the remaining statutory earnings of our insurance subsidiaries permit distributions to Conseco in 2001 of approximately $162.3 million without the permission of regulatory authorities. During 2000, our insurance subsidiaries paid dividends to Conseco totaling $178.0 million.
The ratings assigned to Conseco's senior debt, trust preferred securities and commercial paper are important factors in determining the Company's ability to access the public capital markets for additional liquidity. Following our March 31, 2000, announcement that we planned to explore the sale of Conseco Finance and other events described in note 9 the accompanying consolidated financial statements entitled "Special Charges" and elsewhere herein, rating agencies lowered their ratings on Conseco's senior debt, trust preferred securities and commercial paper. As of November 7, 2000, the rating agencies had assigned the following ratings: (i) Standard & Poor's has assigned a "BB-" rating to Conseco's senior debt and a "B-" rating to trust preferred securities;
(ii) Fitch Rating Company has assigned a "BB-" rating to Conseco's senior debt and a "B" rating to trust preferred securities; and (iii) Moody's Investor Services has assigned a "B1" rating to Conseco's senior debt and a "caa" rating to trust preferred securities. These ratings make it difficult for the Company to issue additional securities in the public markets, although the Company does not believe additional issuances will be necessary in the near future.
INFLATION
Inflation does not have a significant effect on our balance sheet; we have minimal investments in property, equipment or inventories. To the extent that interest rates may change to reflect inflation or inflation expectations, there would be an effect on our balance sheet and operations. Lower interest rates experienced in periods prior to 1999 have increased the value of our investment in fixed maturities and may have increased the amount of new finance receivables originated. These lower rates may also have made it more difficult to issue new fixed rate annuities and may have accelerated prepayments of finance receivables. Rising interest rates experienced in 2000 decreased the value of our investments in fixed maturities and may have slowed the issuance of new finance receivables and the prepayment of existing finance receivables. Changes in interest rates can also affect the value of the finance receivables we hold.
Medical cost inflation has had a significant impact on our supplemental health operations. Generally, these costs have increased more rapidly than the Consumer Price Index. Medical costs will likely continue to rise. The impact of
51
medical cost inflation on our operations depends on our ability to increase premium rates. Such increases are subject to approval by state insurance departments. We seek to price our new standardized supplement plans to reflect the impact of these filings and the lengthening of the period required to implement rate increases.
MARKET-SENSITIVE INSTRUMENTS AND RISK MANAGEMENT
Insurance and fee-based
We seek to invest our available funds in a manner that will maximize shareholder value and fund future obligations to policyholders and debtors, subject to appropriate risk considerations. We seek to meet this objective through investments that: (i) have similar characteristics to the liabilities they support; (ii) are diversified among industries, issuers and geographic locations; and (iii) make up a predominantly investment-grade fixed maturity securities portfolio. Many of our products incorporate surrender charges, market interest rate adjustments or other features to encourage persistency.
We seek to maximize the total return on our investments through active investment management. Accordingly, we have determined that our entire portfolio of fixed maturity securities is available to be sold in response to: (i) changes in market interest rates; (ii) changes in relative values of individual securities and asset sectors; (iii) changes in prepayment risks; (iv) changes in credit quality outlook for certain securities; (v) liquidity needs; and (vi) other factors. From time to time, we invest in securities for trading purposes, although such investments account for a relatively small portion of our total portfolio.
The profitability of many of our products depends on the spreads between the interest yield we earn on investments and the rates we credit on our insurance liabilities. In addition, changes in competition and other factors, including the impact of the level of surrenders and withdrawals, may limit our ability to adjust or to maintain crediting rates at levels necessary to avoid narrowing of spreads under certain market conditions. Approximately 45 percent of our insurance liabilities were subject to interest rates that may be reset annually; 30 percent have a fixed explicit interest rate for the duration of the contract; 20 percent have credited rates which approximate the income earned by the Company; and the remainder have no explicit interest rates. As of December 31, 2000, the average yield, computed on the cost basis of our investment portfolio, was 7.2 percent, and the average interest rate credited or accruing to our total insurance liabilities (excluding interest rate bonuses for the first policy year only and excluding the effect of credited rates attributable to variable or equity-indexed products) was 4.9 percent.
We use computer models to simulate the cash flows expected from our existing insurance business under various interest rate scenarios. These simulations help us to measure the potential gain or loss in fair value of our interest rate- sensitive financial instruments. With such estimates, we seek to closely match the duration of our assets to the duration of our liabilities. When the estimated durations of assets and liabilities are similar, exposure to interest rate risk is minimized because a change in the value of assets should be largely offset by a change in the value of liabilities. At December 31, 2000, the adjusted modified duration of our fixed maturity securities and short-term investments was approximately 6.4 years and the duration of our insurance liabilities was approximately 6.5 years. We estimate that our fixed maturity securities and short-term investments (net of corresponding changes in the value of cost of policies purchased, cost of policies produced and insurance liabilities) would decline in fair value by approximately $590 million if interest rates were to increase by 10 percent from their December 31, 2000 levels. This compares to a decline in fair value of $605 million based on amounts and rates at December 31, 1999. The calculations involved in our computer simulations incorporate numerous assumptions, require significant estimates and assume an immediate change in interest rates without any management of the investment portfolio in reaction to such change. Consequently, potential changes in value of our financial instruments indicated by the simulations will likely be different from the actual changes experienced under given interest rate scenarios, and the differences may be material. Because we actively manage our investments and liabilities, our net exposure to interest rates can vary over time.
The operations of the Company are subject to risk resulting from fluctuations in market prices of our equity securities and venture-capital investments. In general, these investments have more year-to-year price variability than our fixed maturity investments. However, returns over longer time frames have been consistently higher. We manage this risk by limiting our equity securities and venture-capital investments to a relatively small portion of our total investments.
Our investment in S&P 500 Call Options is closely matched with our obligation to equity-indexed annuity holders. Market value changes associated with that investment are substantially offset by an increase or decrease in the amounts added to policyholder account balances for equity-indexed products.
52
Finance
We substantially reduce interest rate risk of our finance operations by funding most of the loans we make through securitization transactions. The finance receivables transferred in these transactions and the asset-backed securities purchased by investors generally both have fixed rates. Principal payments on the assets are passed through to investors in the securities as received, thereby reducing interest rate exposure in these transactions that might otherwise arise from maturity mismatches between debt instruments and assets.
Subsequent to September 8, 1999, we no longer structure the securitizations of the loans we originate in a manner that results in gain-on-sale revenues. Our new securitizations are being structured as secured borrowings. Prior to September 8, 1999, we retained interests in the finance receivables sold through investments in interest-only securities that are subordinated to the rights of other investors. Interest-only securities do not have a stated maturity or amortization period. The expected amount of the cash flow as well as the timing depends on the performance of the underlying collateral supporting each securitization. The actual cash flow of these instruments could vary substantially if performance is different from our assumptions. We develop assumptions to value these investments by analyzing past portfolio performance, current loan characteristics, current and expected market conditions and the expected effect of our actions to mitigate adverse performance. Assumptions used as of December 31, 2000, are summarized in the notes to the consolidated financial statements.
We use computer models to simulate the cash flows expected from our interest-only securities under various interest rate scenarios. These simulations help us to measure the potential gain or loss in fair value of these financial instruments, including the effects of changes in interest rates on prepayments. We estimate that our interest-only securities would decline in fair value by approximately $30 million if interest rates were to decrease by 10 percent from their December 31, 2000 levels. This compares to a decline in fair value of $72.4 million based on amounts and rates at December 31, 1999. The calculations involved in our computer simulations incorporate numerous assumptions, require significant estimates and assume an immediate change in interest rates without any management of the interest-only securities in reaction to such change. Consequently, potential changes in value of our interest-only securities indicated by the simulations will likely be different from the actual changes experienced under given interest rate scenarios, and the differences may be material. See the note to the consolidated financial statement entitled "Finance Receivables and Interest-Only Securities" for a summary of the Key economic assumptions used to determine the estimated fair value of all of our retained interests in securitizations and the sensitivity of the current fair value of cash flows to immediate 10 percent and 20 percent changes in those assumptions.
We estimate that our finance receivables (including both "finance receivables" and "finance receivables-securitized") would decline in fair value by approximately $308.8 million if interest rates were to increase by 10 percent from their December 31, 2000 levels. This compares to a decline in fair value of $128.8 million based on amounts and rates at December 31, 1999. The increase in the estimated decline corresponds with the increase to our finance receivable balances.
Our finance receivables are primarily funded with the fixed rate asset-backed securities purchased by investors in our securitizations and floating-rate debt. Such borrowings included bank credit facilities, master repurchase agreements and the notes payable related to securitized finance receivables structured as collateralized borrowings ($9.8 billion of which was at fixed rates and $5.1 billion of which was at floating rates). Based on the interest rate exposure and prevalent rates at December 31, 2000, a relative 10 percent decrease in interest rates would increase the fair value of the finance segment's fixed-rate borrowed capital by approximately $244.9 million. The interest expense on this segment's floating-rate debt will fluctuate as prevailing interest rates change.
Corporate
We manage the ratio of borrowed capital to total capital and the portion of our outstanding capital subject to fixed and variable rates, taking into consideration the current interest rate environment and other market conditions. Our borrowed capital at December 31, 2000, included notes payable and Company-obligated mandatorily redeemable preferred securities of subsidiary trusts totaling $7.5 billion ($5.5 billion of which is at fixed rates and $2.0 billion of which is at floating rates). Based on the interest rate exposure and prevalent rates at December 31, 2000, a relative 10 percent decrease in interest rates would increase the fair value of our fixed-rate borrowed capital by approximately $38 million. This compares to a $47 million increase based on our borrowed capital and prevalent rates at December 31, 1999. Our interest expense on floating-rate debt will fluctuate as prevailing interest rates change.
The fair value of our borrowed capital also varies with credit ratings and other conditions in the capital markets. Following the events that occurred during 2000 concerning plans to explore the sale of Conseco Finance and other events
53
described elsewhere herein, the capital markets reacted by lowering the value of our publicly traded securities. In addition, the capital markets have also lowered the value of the securities issued in previous securitization transactions of Conseco Finance.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The information included under the caption "Market-Sensitive Instruments and Risk Management" in "Item 7. Management's Discussion and Analysis of Consolidated Financial Condition and Results of Operations" is incorporated herein by reference.
54
 
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Index to Consolidated Financial Statements

                                                                                                                       Page

Report of Independent Accountants.......................................................................................56

Consolidated Balance Sheet at December 31, 2000 and 1999................................................................57

Consolidated Statement of Operations for the years ended
    December 31, 2000, 1999 and 1998....................................................................................59

Consolidated Statement of Shareholders' Equity
    for the years ended December 31, 2000, 1999 and 1998................................................................60

Consolidated Statement of Cash Flows for the years ended
    December 31, 2000, 1999 and 1998....................................................................................63

Notes to Consolidated Financial Statements..............................................................................64	

55
 
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Shareholders of
Conseco, Inc.
In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of operations, shareholders' equity and cash flows present fairly, in all material respects, the financial position of Conseco, Inc. and subsidiaries at December 31, 2000 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
As discussed in note 1 to the consolidated financial statements, the Company adopted EITF Issue No. 99-20, "Recognition of Interest Income and Impairment on Purchased and Retained Beneficial Interests in Securitized Financial Assets" in 2000.

                                                /s/ PricewaterhouseCoopers LLP
                                                -------------------------------
                                                PricewaterhouseCoopers LLP

Indianapolis, Indiana
March 26, 2001	

56

                         CONSECO, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEET
                           December 31, 2000 and 1999
                              (Dollars in millions)

                                     ASSETS

                                                                                           2000              1999
                                                                                           ----              ----
Investments:
    Actively managed fixed maturities at fair value (amortized cost:
       2000 - $22,930.2; 1999 - $23,690.4).............................................  $21,755.1         $22,203.8
    Interest-only securities at fair value (amortized cost: 2000 - $431.2;
       1999 - $916.2)..................................................................      432.9             905.0
    Equity securities at fair value (cost: 2000 - $286.8; 1999 - $323.7)...............      248.3             312.7
    Mortgage loans.....................................................................    1,238.6           1,274.5
    Policy loans.......................................................................      647.2             664.1
    Venture capital investment in TeleCorp PCS, Inc.
       (cost: 2000 and 1999 - $53.2)...................................................      258.6             430.1
    Other invested assets .............................................................      436.9             641.4
                                                                                         ---------         ---------

          Total investments............................................................   25,017.6          26,431.6

Cash and cash equivalents:
    Held by the parent company.........................................................      294.0               1.9
    Held by the parent company for the payment of debt.................................       81.9               -
    Held by subsidiaries...............................................................    1,287.7           1,685.0
Accrued investment income..............................................................      467.1             436.0
Finance receivables....................................................................    3,865.0           5,104.1
Finance receivables - securitized......................................................   12,622.8           4,730.5
Cost of policies purchased.............................................................    1,954.8           2,258.5
Cost of policies produced..............................................................    2,480.5           2,087.4
Reinsurance receivables................................................................      669.4             728.6
Goodwill...............................................................................    3,800.8           3,927.8
Income tax assets......................................................................      647.2             209.8
Assets held in separate accounts and investment trust..................................    2,610.1           2,231.4
Cash held in segregated accounts for investors.........................................      551.3             853.0
Cash held in segregated accounts related to servicing agreements and
    securitization transactions........................................................      866.7             270.6
Other assets...........................................................................    1,372.3           1,229.7
                                                                                         ---------         ---------

          Total assets.................................................................  $58,589.2         $52,185.9
                                                                                         =========         =========

                            (continued on next page)

                   The accompanying notes are an integral part
                    of the consolidated financial statements.

                                       57	

                         CONSECO, INC. AND SUBSIDIARIES

                     CONSOLIDATED BALANCE SHEET (Continued)
                           December 31, 2000 and 1999
                              (Dollars in millions)

                      LIABILITIES AND SHAREHOLDERS' EQUITY

                                                                                            2000              1999
                                                                                            ----              ----
Liabilities:
    Liabilities for insurance and asset accumulation products:
       Interest-sensitive products.....................................................  $16,123.2         $17,322.4
       Traditional products............................................................    7,875.1           7,537.3
       Claims payable and other policyholder funds.....................................    1,026.1           1,042.3
       Liabilities related to separate accounts and investment trust...................    2,610.1           2,231.4
       Liabilities related to certificates of deposit..................................    1,873.3             870.5
    Investor payables..................................................................      551.3             853.0
    Other liabilities..................................................................    1,565.5           1,498.7
    Investment borrowings..............................................................      219.8             828.9
    Notes payable and commercial paper:
       Direct corporate obligations....................................................    5,055.0           4,624.2
       Direct finance obligations:
          Master repurchase agreements.................................................    1,802.4           1,620.9
          Credit facility collateralized by retained interests in securitizations......      590.0             499.0
          Other borrowings.............................................................      418.5             420.2
       Related to securitized finance receivables structured as collateralized
          borrowings...................................................................   12,100.6           4,641.8
                                                                                         ---------         ---------

            Total liabilities..........................................................   51,810.9          43,990.6
                                                                                         ---------         ---------

Minority interest:
    Company-obligated mandatorily redeemable preferred securities
       of subsidiary trusts............................................................    2,403.9           2,639.1

Shareholders' equity:
    Preferred stock....................................................................      486.8             478.4
    Common stock and additional paid-in capital (no par value, 1,000,000,000 shares
       authorized, shares issued and outstanding: 2000 - 325,318,457;
       1999 - 327,678,638).............................................................    2,911.8           2,987.1
    Accumulated other comprehensive loss...............................................     (651.0)           (771.6)
    Retained earnings..................................................................    1,626.8           2,862.3
                                                                                         ---------         ---------

            Total shareholders' equity.................................................    4,374.4           5,556.2
                                                                                         ---------         ---------

            Total liabilities and shareholders' equity.................................  $58,589.2         $52,185.9
                                                                                         =========         =========	

The accompanying notes are an integral part of the consolidated financial statements.
58

                         CONSECO, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENT OF OPERATIONS
              for the years ended December 31, 2000, 1999 and 1998
                  (Dollars in millions, except per share data)

                                                                           2000              1999             1998
                                                                           ----              ----             ----
Revenues:
    Insurance policy income............................................ $ 4,220.3         $4,040.5          $3,948.8
    Net investment income..............................................   3,920.4          3,411.4           2,506.5
    Gain on sale of finance receivables................................       7.5            550.6             745.0
    Net investment gains (losses)......................................    (358.3)          (156.2)            208.2
    Fee revenue and other income.......................................     506.5            489.4             351.7
                                                                        ---------         --------          --------

            Total revenues.............................................   8,296.4          8,335.7           7,760.2
                                                                        ---------         --------          --------

Benefits and expenses:
    Insurance policy benefits..........................................   4,071.0          3,815.9           3,580.5
    Provision for losses...............................................     585.7            147.6              44.2
    Interest expense...................................................   1,453.1            561.7             440.5
    Amortization.......................................................     687.2            752.1             733.0
    Other operating costs and expenses.................................   1,646.2          1,353.2           1,218.9
    Special charges....................................................     699.3              -               148.0
    Impairment charges.................................................     515.7            554.3             549.4
                                                                        ---------         --------          --------

           Total benefits and expenses.................................   9,658.2          7,184.8           6,714.5
                                                                        ---------         --------          --------

           Income (loss) before income taxes, minority interest,
              extraordinary charge and cumulative effect of
              accounting change........................................  (1,361.8)         1,150.9           1,045.7

Income tax expense (benefit)...........................................    (376.2)           423.1             445.6
                                                                        ---------         --------          --------

           Income (loss) before minority interest, extraordinary
              charge and cumulative effect of accounting change........    (985.6)           727.8             600.1

Minority interest:
    Distributions on Company-obligated mandatorily redeemable
       preferred securities of subsidiary trusts, net of taxes.........     145.3            132.8              90.4
                                                                        ---------         --------          --------

           Income (loss) before extraordinary charge and
              cumulative effect of accounting change ..................  (1,130.9)           595.0             509.7

Extraordinary charge on extinguishment of
    debt, net of taxes.................................................       5.0              -                42.6
Cumulative effect of accounting change, net of taxes...................      55.3              -                 -
                                                                        ---------         --------          --------

           Net income (loss)...........................................  (1,191.2)           595.0             467.1

Preferred stock dividends..............................................      11.0              1.5               7.8
                                                                        ---------         --------          --------

           Net income (loss) applicable to common stock................ $(1,202.2)        $  593.5          $  459.3
                                                                        =========         ========          ========

Earnings per common share:
    Basic:
       Weighted average shares outstanding........................... 325,953,000      324,635,000       311,785,000
       Income (loss) before extraordinary charge and cumulative
         effect of accounting change ................................      $(3.51)           $1.83             $1.61
       Extraordinary charge on extinguishment of debt................        (.01)             -                (.14)
       Cumulative effect of accounting change........................        (.17)             -                  -
                                                                          -------            -----             -----

         Net income (loss)...........................................      $(3.69)           $1.83             $1.47
                                                                           ======            =====             =====

    Diluted:
       Weighted average shares outstanding........................... 325,953,000      332,893,000       332,701,000
       Income (loss) before extraordinary charge and cumulative
         effect of accounting change.................................      $(3.51)           $1.79             $1.53
       Extraordinary charge on extinguishment of debt ...............        (.01)             -                (.13)
       Cumulative effect of accounting change........................        (.17)             -                 -
                                                                           ------            -----             -----

         Net income (loss)...........................................      $(3.69)           $1.79             $1.40
                                                                           ======            =====             =====	

The accompanying notes are an integral part of the consolidated financial statements.
59

                         CONSECO, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
              for the years ended December 31, 2000, 1999 and 1998
                              (Dollars in millions)

                                                                                   Common stock     Accumulated other
                                                                       Preferred  and additional      comprehensive   Retained
                                                              Total      stock    paid-in capital     income (loss)   earnings
                                                              -----      -----    ---------------     -------------   --------

Balance, January 1, 1998 .................................  $5,213.9    $115.8       $2,619.8           $ 200.6        $2,277.7

Comprehensive income, net of tax:
   Net income.............................................     467.1       -             -                 -              467.1
   Change in unrealized depreciation of investments
     (net of applicable income tax benefit of $124.7).....    (229.0)      -             -               (229.0)            -
                                                            --------

         Total comprehensive income.......................     238.1

   Conversion of preferred stock into common shares.......       -       (10.3)          10.3               -               -
   Issuance of common shares for stock options and for
     employee benefit plans...............................     158.1        -           158.1               -               -
   Tax benefit related to issuance of shares under
     stock option plans...................................      63.1        -            63.1               -               -
   Conversion of convertible debentures into
     common shares........................................      67.4        -            67.4               -               -
   Issuance of warrants in conjunction with
     financing transaction................................       7.7        -             7.7               -               -
   Cost of shares acquired................................    (308.4)       -          (189.9)              -            (118.5)
   Dividends on preferred stock...........................      (7.8)       -             -                 -              (7.8)
   Dividends on common stock..............................    (158.5)       -             -                 -            (158.5)
                                                            --------    ------       --------           -------       ---------

Balance, December 31, 1998................................  $5,273.6    $105.5       $2,736.5           $ (28.4)       $2,460.0

                          (continued on following page)

                   The accompanying notes are an integral part
                 part of the consolidated financial statements.

                                       60	

                         CONSECO, INC. AND SUBSIDIARIES

            CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY, continued
              for the years ended December 31, 2000, 1999 and 1998
                              (Dollars in millions)

                                                                                   Common stock     Accumulated other
                                                                       Preferred  and additional      comprehensive   Retained
                                                              Total      stock    paid-in capital     income (loss)   earnings
                                                              -----      -----    ---------------     -------------   --------

Balance, December 31, 1998 (carried forward
   from prior page).......................................  $5,273.6     $105.5      $2,736.5          $  (28.4)      $2,460.0

   Comprehensive loss, net of tax:
     Net income...........................................     595.0                                                     595.0
     Change in unrealized depreciation
       of investments (net of applicable income tax
       benefit of $427.4).................................    (743.2)       -             -              (743.2)           -
                                                            --------

         Total comprehensive loss.........................    (148.2)

   Issuance of common shares..............................     209.6        -           209.6               -              -
   Issuance of convertible preferred shares...............     478.4      478.4           -                 -
   Tax benefit related to issuance of shares under
     stock option plans...................................      25.0        -            25.0               -              -
   Conversion of preferred stock into common
     shares...............................................       -       (105.5)        105.5               -              -
   Cost of shares acquired................................     (89.5)       -           (89.5)              -              -
   Dividends on preferred stock...........................      (1.5)       -             -                 -             (1.5)
   Dividends on common stock..............................    (191.2)       -             -                 -           (191.2)
                                                            --------    -------      --------           -------       --------

Balance, December 31, 1999................................  $5,556.2    $ 478.4      $2,987.1           $(771.6)      $2,862.3	

(continued on following page)
The accompanying notes are an integral part of the consolidated financial statements.
61

                         CONSECO, INC. AND SUBSIDIARIES

            CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY, continued
              for the years ended December 31, 2000, 1999 and 1998
                              (Dollars in millions)

                                                                                   Common stock     Accumulated other
                                                                       Preferred  and additional      comprehensive   Retained
                                                              Total      stock    paid-in capital     income (loss)   earnings
                                                              -----      -----    ---------------     -------------   --------
Balance, December 31, 1999 (carried forward
   from prior page).......................................$ 5,556.2      $478.4      $2,987.1          $(771.6)     $ 2,862.3

   Comprehensive loss, net of tax:
     Net loss............................................. (1,191.2)         -             -                -        (1,191.2)
     Change in unrealized depreciation
       of investments (net of applicable income tax
       expense of $72.0)..................................    120.6          -             -             120.6             -
                                                          ---------

         Total comprehensive loss......................... (1,070.6)

   Issuance of common shares for stock options and for
     employee benefit plans...............................      6.6          -            6.6               -              -
   Issuance of convertible preferred shares...............      8.4         8.4            -                -              -
   Issuance of warrants...................................     21.0          -           21.0               -              -
   Settlement of forward contract.........................    (90.5)         -          (90.5)              -              -
   Cost of shares acquired................................    (12.4)         -          (12.4)              -              -
   Dividends on preferred stock...........................    (11.0)         -             -                -           (11.0)
   Dividends on common stock..............................    (33.3)         -             -                -           (33.3)
                                                          ---------      ------       -------          -------      ---------

Balance, December 31, 2000................................$ 4,374.4      $486.8      $2,911.8          $(651.0)     $ 1,626.8
                                                          =========      ======      ========          =======      =========	

The accompanying notes are an integral part of the consolidated financial statements.
62

                         CONSECO, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENT OF CASH FLOWS
              for the years ended December 31, 2000, 1999 and 1998
                             (Dollars in millions)

                                                                                             2000          1999         1998
                                                                                             ----          ----         ----
Cash flows from operating activities:
   Insurance policy income.............................................................  $  3,886.6     $  3,635.4   $  3,378.5
   Net investment income...............................................................     4,169.9        3,090.7      2,658.3
   Points and origination fees.........................................................         -            390.0        298.3
   Fee revenue and other income........................................................       522.1          499.9        371.6
   Insurance policy benefits...........................................................    (3,197.6)      (2,894.5)    (2,932.4)
   Interest expense....................................................................    (1,331.6)        (533.6)      (453.6)
   Policy acquisition costs............................................................      (794.2)        (819.4)      (790.3)
   Special charges.....................................................................      (216.3)         (20.9)       (93.7)
   Other operating costs...............................................................    (1,792.0)      (1,306.3)    (1,161.4)
   Taxes...............................................................................       (41.6)        (252.7)      (295.7)
                                                                                         -----------    ----------   ----------

       Net cash provided by operating activities.......................................     1,205.3        1,788.6        979.6
                                                                                         ----------     ----------   ----------

Cash flows from investing activities:
   Sales of investments................................................................     6,987.5       15,811.6     30,708.4
   Maturities and redemptions of investments...........................................       825.5        1,056.8      1,541.2
   Purchases of investments............................................................    (7,952.6)     (18,957.4)   (32,040.0)
   Cash received from the sale of finance receivables, net of expenses.................     2,501.2        9,516.6     13,303.6
   Principal payments received on finance receivables..................................     8,490.1        7,402.4      6,065.9
   Finance receivables originated......................................................   (18,515.9)     (24,650.5)   (21,261.6)
   Other...............................................................................      (165.2)          36.8        (78.2)
                                                                                         ----------     ----------   ----------

       Net cash used by investing activities ..........................................    (7,829.4)      (9,783.7)    (1,760.7)
                                                                                         ----------     ----------   ----------

Cash flows from financing activities:
   Amounts received for deposit products...............................................     4,966.7        3,935.0      3,127.4
   Withdrawals from deposit products...................................................    (4,545.9)      (3,029.6)    (2,763.2)
   Issuance of notes payable and commercial paper......................................    22,548.9       21,219.7     16,630.9
   Payments on notes payable and commercial paper......................................   (14,416.2)     (14,657.5)   (15,522.5)
   Change in cash held in restricted accounts for settlement of borrowings.............      (689.7)         (76.8)         -
   Investment borrowings...............................................................      (609.1)        (127.3)      (433.3)
   Issuance of Company-obligated mandatorily redeemable preferred securities of
     subsidiary trusts.................................................................         -            534.3        710.8
   Repurchase of Company-obligated mandatorily redeemable preferred
     securities of subsidiary trusts...................................................      (250.0)           -            -
   Issuance of common and convertible preferred shares.................................          .8          588.4        121.3
   Payments for settlement of forward contract and to repurchase equity securities.....      (102.6)         (29.5)      (257.4)
   Dividends and distributions on Company-obligated mandatorily redeemable
     preferred securities of subsidiary trusts.........................................      (302.1)        (379.4)      (282.9)
                                                                                         ----------     ----------   ----------

       Net cash provided by financing activities.......................................     6,600.8        7,977.3      1,331.1
                                                                                         ----------     ----------   ----------

       Net increase (decrease) in cash and cash equivalents............................       (23.3)         (17.8)       550.0

Cash and cash equivalents, beginning of year...........................................     1,686.9        1,704.7      1,154.7
                                                                                         ----------     ----------   ----------

Cash and cash equivalents, end of year.................................................  $  1,663.6     $  1,686.9   $  1,704.7
                                                                                         ==========     ==========   ==========	

The accompanying notes are an integral part of the consolidated financial statements.
63
CONSECO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES:
Description of Business
Conseco, Inc. ("we", "Conseco" or the "Company") is a financial services holding company with subsidiaries operating throughout the United States. Our insurance subsidiaries develop, market and administer supplemental health insurance, annuity, individual life insurance and other insurance products. Our finance subsidiaries originate, securitize and service manufactured housing, home equity, retail credit and floorplan loans. Conseco's operating strategy is to grow its business by focusing its resources on the development and expansion of profitable products and strong distribution channels, to seek to achieve superior investment returns through active asset management and to control expenses.
During 2000, we announced several courses of action with respect to Conseco Finance Corp. ("Conseco Finance", formerly Green Tree Financial Corporation prior to its name change in November 1999), a wholly owned subsidiary of Conseco, as well as our intent to sell our individual and group major medical insurance lines and certain non-strategic assets held at the parent company level. These actions are designed to reduce parent company debt over time and are an integral part of the restructuring of the bank debt which occurred during the third quarter of 2000. The actions with respect to Conseco Finance include: (i) the sale, closing or runoff of five units (i.e., asset-based lending, vendor leasing, bankcards, transportation and park construction); (ii) efforts to better utilize existing assets so as to increase cash; and (iii) cost savings and restructuring of ongoing businesses such as the streamlining of loan origination operations in the manufactured housing and home equity lending divisions. The actions with respect to the sale of certain non-strategic assets include the sales of our investment in the wireless communication company, TeleCorp PCS Inc. ("TeleCorp"), our interest in the riverboat casino in Lawrenceberg, Indiana, and our subprime auto loan portfolio. These actions had a significant effect on the Company's operating results during 2000.
Several elements of the plans we previously announced have already been completed:
(i) We completed the restructuring of the operations of Conseco Finance;
(ii) We completed the restructuring of our bank debt;
(iii) We have made significant progress in achieving our asset liquidation and monetization transaction goals. Through December 31, 2000, we have completed transactions which generated cash proceeds in excess of $1.0 billion including the sale of our subprime auto, asset-based, bankcard and transportation lending businesses;
(iv) On November 7, 2000, A.M. Best upgraded the financial liquidation ratings of our principal life insurance subsidiaries to A- (Excellent) from B++ (Very Good). The return of these ratings to A- (Excellent) satisfies a covenant in the amended bank credit facilities, well before the required date of March 31, 2001;
(v) On January 31, 2001, we completed the sale of the vendor leasing business of Conseco Finance, generating cash proceeds of approximately $180 million; and
(vi) On February 22, 2001, we completed the sale of our interest in the Argosy Riverboat Casino in Lawrenceberg, Indiana, generating cash proceeds of $260 million.
Basis of Presentation
The following summary explains the significant accounting policies we use to prepare our financial statements. We prepare our financial statements in accordance with generally accepted accounting principles ("GAAP"). We follow the accounting standards established by the Financial Accounting Standards Board ("FASB"), the American Institute of Certified Public Accountants and the Securities and Exchange Commission.
Consolidation issues. The consolidated financial statements give retroactive effect to the merger (the "Merger") with Conseco Finance on June 30, 1998, in a transaction accounted for as a pooling of interests (see note 2, "Acquisitions"). The pooling of interests method of accounting requires the restatement of all periods presented as if Conseco and Conseco Finance had always been combined. The consolidated statement of shareholders' equity therefore reflects the accounts of
64
CONSECO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
the Company as if additional shares of Conseco common stock issued in the Merger had been outstanding during all periods presented. We have eliminated intercompany transactions prior to the Merger and we have made certain reclassifications to Conseco Finance's financial statements to conform to Conseco's presentations. See note 2 for additional discussion of the Merger.
Our consolidated financial statements exclude the results of material transactions between us and our consolidated affiliates, or among our consolidated affiliates. We reclassified certain amounts in our 1999 and 1998 consolidated financial statements and notes to conform with the 2000 presentation. These reclassifications have no effect on net income or shareholders' equity.
Investments
Fixed maturities are securities that mature more than one year after issuance and include bonds, certain notes receivable and redeemable preferred stock. Fixed maturities that we may sell prior to maturity are classified as actively managed and are carried at estimated fair value, with any unrealized gain or loss, net of tax and related adjustments, recorded as a component of shareholders' equity. Fixed maturity securities that we intend to sell in the near term are classified as trading and included in other invested assets. We include any unrealized gain or loss on trading securities in net investment gains.
Interest-only securities represent the right to receive certain future cash flows from securitization transactions structured prior to our September 8, 1999 announcement (see "Revenue Recognition for Sales of Finance Receivables and Amortization of Servicing Rights" below). Such cash flows generally are equal to the value of the principal and interest to be collected on the underlying financial contracts of each securitization in excess of the sum of the principal and interest to be paid on the securities sold and contractual servicing fees. We carry interest-only securities at estimated fair value. We determine fair value by discounting the projected cash flows over the expected life of the receivables sold using current prepayment, default, loss and interest rate assumptions. Estimates for prepayments, defaults, and losses for manufactured housing loans are determined based on a macroeconomic model developed by the Company with the assistance of outside experts and refined to reflect Company-specific experience and trends. We record any unrealized gain or loss determined to be temporary, net of tax, as a component of shareholders' equity. With the adoption of EITF Issue No. 99-20, "Recognition of Interest Income and Impairment on Purchased and Retained Beneficial Interests in Securitized Financial Assets" ("EITF 99-20") on July 1, 2000, declines in value are considered to be other than temporary when: (i) the fair value of the security is less than its carrying value; and (ii) the timing and/or amount of cash expected to be received from the security has changed adversely from the previous valuation which determined the carrying value of the security. When declines in value considered to be other than temporary occur, we reduce the amortized cost to estimated fair value and recognize a loss in the statement of operations. The assumptions used to determine new values are based on our internal evaluations and consultation with external advisors having significant experience in valuing these securities. See note 4 for additional discussion of gain on sale of receivables and interest-only securities.
Equity securities include investments in common stocks and non-redeemable preferred stock. We carry these investments at estimated fair value. We record any unrealized gain or loss, net of tax and related adjustments, as a component of shareholders' equity.
Mortgage loans held in our investment portfolio are carried at amortized unpaid balances, net of provisions for estimated losses.
Policy loans are stated at their current unpaid principal balances.
Venture capital investment in TeleCorp was made by our subsidiary which engages in venture capital investment activity. TeleCorp is a company in the wireless communication business. Our investment in TeleCorp is carried at estimated fair value, with changes in fair value recognized as investment income. Since there are restrictions in our ability to sell this investment, we adjust the quoted market price to produce an estimate of the attainable fair value.
At December 31, 2000, we held 17.2 million common shares of TeleCorp. The market values of many companies in TeleCorp's business sector have been subject to volatility in recent periods. We recognized venture capital investment
65
CONSECO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
income (loss) of $(199.5) million in 2000 and $354.8 million in 1999, primarily related to this investment.
Other invested assets include: (i) trading securities; (ii) Standard & Poor's 500 Call Options ("S&P 500 Call Options"); and (iii) certain non-traditional investments. We carry the S&P 500 Call Options at estimated fair value as further described below under "Standard & Poor's 500 Index Call Options and Interest Rate Swap Agreements". Non- traditional investments include investments in certain limited partnerships, mineral rights and promissory notes; we account for them using either the cost method, or for investments in partnerships over whose operations the Company exercises significant influence, the equity method.
We defer any fees received or costs incurred when we originate investments. We amortize fees, costs, discounts and premiums as yield adjustments over the contractual lives of the investments. We consider anticipated prepayments on mortgage-backed securities in determining estimated future yields on such securities.
When we sell a security (other than trading securities, venture capital investments or S&P 500 Call Options), we report the difference between the sale proceeds and amortized cost (determined based on specific identification) as an investment gain or loss.
We regularly evaluate all of our investments based on current economic conditions, credit loss experience and other investee-specific developments. If there is a decline in a security's net realizable value that is other than temporary, we treat it as a realized loss and reduce the cost basis of the security to its estimated fair value.
Cash and Cash Equivalents
Cash and cash equivalents include commercial paper, invested cash and other investments purchased with original maturities of less than three months. We carry them at amortized cost, which approximates estimated fair value.
Finance Receivables
Finance receivables include manufactured housing, home equity, home improvement, retail credit and floorplan loans. We carry finance receivables at amortized cost, net of an allowance for credit losses.
We defer fees received and costs incurred when we originate finance receivables. We amortize deferred fees, costs, discounts and premiums over the estimated lives of the receivables. We include such deferred fees or costs in the amortized cost of finance receivables.
We generally stop accruing investment income on finance receivables after three consecutive months of contractual delinquency.
Finance receivables transferred to securitization trusts in transactions structured as securitized borrowings are classified as finance receivables - securitized. These receivables are held as collateral for the notes issued to investors in the securitization trusts. Finance receivables held by us that have not been securitized are classified as finance receivables.
Provision for Losses
The provision for credit losses charged to expense is based upon an assessment of current and historical loss experience, loan portfolio trends, prevailing economic and business conditions, and other relevant factors. In management's opinion, the provision is sufficient to maintain the allowance for credit losses at a level that adequately provides for losses inherent in the portfolio.
We reduce the carrying value of finance receivables to net realizable value after six months of contractual delinquency.
In addition, during 1999 and 2000, we established a provision for losses related to our guarantees of bank loans and the related interest loans to approximately 160 current and former directors, officers and key employees for the purchase of
66
CONSECO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Conseco common stock (see note 8 for additional information on this provision).
Cost of Policies Produced
The costs that vary with, and are primarily related to, producing new insurance business are referred to as cost of policies produced. We amortize these costs using the interest rate credited to the underlying policy: (i) in relation to the estimated gross profits for universal life-type and investment-type products; or (ii) in relation to future anticipated premium revenue for other products.
When we realize a gain or loss on investments backing our universal life or investment-type products, we adjust the amortization to reflect the change in estimated gross profits from the products due to the gain or loss realized and the effect of the event on future investment yields. We also adjust the cost of policies produced for the change in amortization that would have been recorded if actively managed fixed maturity securities had been sold at their stated aggregate fair value and the proceeds reinvested at current yields. We include the impact of this adjustment in accumulated other comprehensive income (loss) within shareholders' equity.
When we replace an existing insurance contract with another insurance contract with substantially different terms, all unamortized cost of policies produced related to the replaced contract is immediately written off. When we replace an existing insurance contract with another insurance contract with substantially similar terms, we continue to defer the cost of policies produced associated with the replaced contract. Such costs related to the replaced contracts which continue to be deferred were $5.6 million, $8.6 million and $9.1 million in 2000, 1999 and 1998, respectively.
Each year, we evaluate the recoverability of the unamortized balance of the cost of policies produced. We consider estimated future gross profits or future premiums, expected mortality or morbidity, interest earned and credited rates, persistency and expenses in determining whether the balance is recoverable. If we determine a portion of the unamortized balance is not recoverable, it is charged to amortization expense.
Cost of Policies Purchased
The cost assigned to the right to receive future cash flows from contracts existing at the date of an acquisition is referred to as the cost of policies purchased. We also defer renewal commissions paid in excess of ultimate commission levels related to the purchased policies in this account. The balance of this account is amortized, evaluated for recovery, and adjusted for the impact of unrealized gains (losses) in the same manner as the cost of policies produced described above.
The discount rate we use to determine the value of the cost of policies purchased is the rate of return we need to earn in order to invest in the business being acquired. In determining this required rate of return, we consider many factors including: (i) the magnitude of the risks associated with each of the actuarial assumptions used in determining expected future cash flows; (ii) the cost of our capital required to fund the acquisition; (iii) the likelihood of changes in projected future cash flows that might occur if there are changes in insurance regulations and tax laws; (iv) the acquired company's compatibility with other Conseco activities that may favorably affect future cash flows; (v) the complexity of the acquired company; and (vi) recent prices (i.e., discount rates used in determining valuations) paid by others to acquire similar blocks of business.
Goodwill
Goodwill is the excess of the amount we paid to acquire a company over the fair value of its net assets. Our analysis of acquired businesses indicates that the anticipated ongoing cash flows from the earnings of the purchased businesses extend beyond the maximum 40-year period allowed for goodwill amortization. Accordingly, we amortize goodwill on the straight-line basis generally over a 40-year period. The total accumulated amortization of goodwill was $503.7 million and $391.2 million at December 31, 2000 and 1999, respectively. We continually monitor the value of our goodwill based on our estimates of future earnings. We determine whether goodwill is fully recoverable from projected undiscounted net cash flows from earnings of the subsidiaries over the remaining amortization period. At December 31, 2000, goodwill is also recoverable from projected net cash flows from estimated earnings (including earnings on projected amounts of new
67
CONSECO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
business consistent with the Company's business plan), discounted at rates we believe are appropriate for the business. If we were to determine that changes in undiscounted projected cash flows no longer support the recoverability of goodwill over the remaining amortization period, we would reduce its carrying value with a corresponding charge to expense or shorten the amortization period. Cash flows considered in such an analysis are those of the business acquired, if separately identifiable, or the product line that acquired the business, if such earnings are not separately identifiable. See note 9 regarding the reduction in goodwill related to the sale of the vendor services financing business.
Assets Held in Separate Accounts and Investment Trust
Separate accounts are funds on which investment income and gains or losses accrue directly to certain policyholders. The assets of these accounts are legally segregated. They are not subject to the claims that may arise out of any other business of Conseco. We report separate account assets at market value; the underlying investment risks are assumed by the contract holders. We record the related liabilities at amounts equal to the market value of the underlying assets. We record the fees earned for administrative and contractholder services performed for the separate accounts in insurance policy income.
In addition, we hold investments in a trust for the benefit of the purchasers of certain products of our asset management subsidiary; this amount is offset by a corresponding liability account, the value of which fluctuates in relation to changes in the values of these investments. Because we hold the residual interests in the cash flows from the trust and actively manage its investments, we are required to include the accounts of the trust in our consolidated financial statements. We record the fees earned for investment management and other services provided to the trust as fee revenue.
Recognition of Insurance Policy Income and Related Benefits and Expenses on Insurance Contracts
Generally, we recognize insurance premiums for traditional life and accident and health contracts as earned over the premium-paying periods. We establish reserves for future benefits on a net-level premium method based upon assumptions as to investment yields, mortality, morbidity, withdrawals and dividends. We record premiums for universal life-type and investment-type contracts that do not involve significant mortality or morbidity risk as deposits to insurance liabilities. Revenues for these contracts consist of mortality, morbidity, expense and surrender charges. We establish reserves for the estimated present value of the remaining net costs of all reported and unreported claims.
Liabilities Related to Certificates of Deposit
These liabilities relate to the certificates of deposits issued by our bank subsidiary. The liability and interest expense account are also increased for the interest which accrues on the deposits. The weighted average interest crediting rate on these deposits was 6.7 percent and 5.8 percent during 2000 and 1999, respectively.
Reinsurance
In the normal course of business, we seek to limit our exposure to loss on any single insured or to certain groups of policies by ceding reinsurance to other insurance enterprises. We currently retain no more than $.8 million of mortality risk on any one policy. We diversify the risk of reinsurance loss by using a number of reinsurers that have strong claims-paying ratings. If any reinsurer could not meet its obligations, the Company would assume the liability. The likelihood of a material loss being incurred as a result of the failure of one of our reinsurers is considered remote. The cost of reinsurance is recognized over the life of the reinsured policies using assumptions consistent with those used to account for the underlying policy. The cost of reinsurance ceded totaled $248.3 million, $418.6 million and $541.3 million in 2000, 1999 and 1998, respectively. A receivable is recorded for the reinsured portion of insurance policy benefits paid and liabilities for insurance products. Reinsurance recoveries netted against insurance policy benefits totaled $283.2 million, $392.0 million and $484.3 million in 2000, 1999 and 1998, respectively.
From time-to-time, we assume insurance from other companies. Any costs associated with the assumption of insurance are amortized consistent with the method used to amortize the cost of policies produced described above. Reinsurance premiums assumed totaled $305.4 million, $547.8 million and $316.0 million in 2000, 1999 and 1998 respectively.
68
CONSECO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Income Taxes
Our income tax expense includes deferred income taxes arising from temporary differences between the tax and financial reporting bases of assets and liabilities. In assessing the realization of deferred income tax assets, we consider whether it is more likely than not that the deferred income tax assets will be realized. The ultimate realization of deferred income tax assets depends upon generating future taxable income during the periods in which temporary differences become deductible. If future income is not generated as expected, deferred income tax assets may need to be written off (no such write-offs have occurred).
Investment Borrowings
As part of our investment strategy, we may enter into reverse repurchase agreements and dollar-roll transactions to increase our investment return or to improve our liquidity. We account for these transactions as collateral borrowings, where the amount borrowed is equal to the sales price of the underlying securities. Reverse repurchase agreements involve a sale of securities and an agreement to repurchase the same securities at a later date at an agreed-upon price. Dollar rolls are similar to reverse repurchase agreements except that, with dollar rolls, the repurchase involves securities that are only substantially the same as the securities sold. Such borrowings averaged $324.4 million during 2000 and $1,081.1 million during 1999. These borrowings were collateralized by investment securities with fair values approximately equal to the loan value. The weighted average interest rate on short-term collateralized borrowings was 5.7 percent and 5.4 percent in 2000 and 1999, respectively. The primary risk associated with short-term collateralized borrowings is that a counterparty will be unable to perform under the terms of the contract. Our exposure is limited to the excess of the net replacement cost of the securities over the value of the short-term investments (such excess was not material at December 31, 2000). We believe the counterparties to our reverse repurchase and dollar-roll agreements are financially responsible and that the counterparty risk is minimal.
Use of Estimates
When we prepare financial statements in conformity with GAAP, we are required to make estimates and assumptions that significantly affect various reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reporting periods. For example, we use significant estimates and assumptions in calculating values for the cost of policies produced, the cost of policies purchased, interest-only securities, certain investments, servicing rights, goodwill, liabilities for insurance and asset accumulation products, liabilities related to litigation, guaranty fund assessment accruals, liabilities related to guarantees of securitized debt issued in conjunction with certain sales of finance receivables and liabilities related to guarantees of bank loans and the related interest loans to certain current and former directors, officers and key employees, gain on sale of finance receivables, allowance for credit losses on finance receivables and deferred income taxes. If our future experience differs materially from these estimates and assumptions, our financial statements could be affected.
Standard & Poor's 500 Index Call Options and Interest Rate Swap Agreements
Our equity-indexed annuity products provide a guaranteed base rate of return and a higher potential return linked to the performance of the Standard & Poor's 500 Index ("S&P 500 Index"). We buy S&P 500 Call Options in an effort to hedge potential increases to policyholder benefits resulting from increases in the S&P 500 Index to which the product's return is linked. We include the cost of the S&P 500 Call Options in the pricing of these products. Policyholder account balances for these annuities fluctuate in relation to changes in the values of these options. We reflect changes in the value of these options in net investment income. During 2000, 1999 and 1998, net investment income included $12.9 million, $142.3 million and $103.9 million, respectively, related to these changes. Such investment income was substantially offset by increases to policyholder account balances. The value of the S&P 500 Call Options was $30.4 million and $129.2 million at December 31, 2000 and 1999, respectively. We classify such instruments as other invested assets. We defer the premiums paid to purchase the S&P 500 Call Options and amortize them to investment income over their terms. Such amortization was $123.9 million, $96.3 million and $52.0 million during 2000, 1999 and 1998, respectively. The unamortized premium of the S&P 500 Call Options was $63.0 million and $59.5 million at December 31, 2000 and 1999, respectively.
69
CONSECO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
If the counterparties for the S&P 500 Call Options of these financial instruments fail to meet their obligations, Conseco may have to recognize a loss. Conseco limits its exposure to such a loss by diversifying among several counterparties believed to be strong and creditworthy. At December 31, 2000, all of the counterparties were rated "A" or higher by Standard & Poor's Corporation.
In the past, we have used interest-rate swaps to hedge the interest rate risk associated with our borrowed capital. These agreements were terminated during 2000. We realized a net investment loss of $38.6 million (net of an income tax benefit of $20.6 million) related to such terminations during 2000.
Revenue Recognition for Sales of Finance Receivables and Amortization of Servicing Rights
Subsequent to September 8, 1999, we are using the portfolio method (the accounting method required for securitizations which are now structured as secured borrowings) to account for securitization transactions. Our securitizations are now structured in a manner that requires them to be accounted for under the portfolio method, whereby the loans and securitization debt remain on our balance sheet, pursuant to Financial Accounting Standards Board Statement No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities" ("SFAS 125").
For securitizations structured prior to September 8, 1999, we accounted for the transfer of finance receivables as sales in accordance with SFAS 125. In applying SFAS 125 to our securitized sales, we recognized a gain, representing the difference between the proceeds from the sale (net of related sale costs) and the carrying value of the component of the finance receivable sold. We determined such carrying amount by allocating the carrying value of the finance receivables between the portion we sold and the interests we retained (generally interest-only securities, servicing rights and, in some instances, other securities), based on each portion's relative fair values on the date of the sale.
During 1999 and 1998, the Company sold $9.7 billion and $13.4 billion, respectively, of finance receivables in securitizations structured as sales and recognized gains of $550.6 million and $745.0 million, respectively. The gains recognized were dependent in part on the previous carrying amount of the finance receivables included in the securitization transactions, allocated between the assets sold and our retained interests based on their relative fair value at the date of transfer. To obtain fair values, quoted market prices were used if available. However, quotes were generally not available for retained interests, so we estimated the fair values based on the present value of future expected cash flows using our best estimates of the key assumptions - credit losses, prepayment speeds, forward yield curves, and discount rates commensurate with the risks involved.
We amortize the servicing rights (classified as other assets) we retain after the sale of finance receivables, in proportion to, and over the estimated period of, net servicing income.
We evaluate servicing rights for impairment on an ongoing basis, stratified by product type and origination period. To the extent that the recorded amount exceeds the fair value, we establish a valuation allowance through a charge to earnings. If we determine, upon subsequent measurement of the fair value of these servicing rights, that the fair value equals or exceeds the amortized cost, any previously recorded valuation allowance would be deemed unnecessary and restored to earnings.
70
CONSECO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Fair Values of Financial Instruments
We use the following methods and assumptions to determine the estimated fair values of financial instruments:
Investment securities. For fixed maturity securities (including redeemable preferred stocks) and for equity and trading securities, we use quotes from independent pricing services, where available. For investment securities for which such quotes are not available, we use values obtained from broker-dealer market makers or by discounting expected future cash flows using a current market rate appropriate for the yield, credit quality, and (for fixed maturity securities) the maturity of the investment being priced.
Interest-only securities. We discount future expected cash flows over the expected life of the receivables sold using prepayment, default, loss severity and interest rate assumptions that we believe market participants would use to value such securities.
Venture capital investment in TeleCorp. We carry this investment at estimated fair value based on quoted market prices adjusted to produce an estimate of attainable fair value due to the restrictions on our ability to sell this investment.
Cash and cash equivalents. The carrying amount for these instruments approximates their estimated fair value.
Mortgage loans and policy loans. We discount future expected cash flows for loans included in our investment portfolio based on interest rates currently being offered for similar loans to borrowers with similar credit ratings. We aggregate loans with similar characteristics in our calculations. The market value of policy loans approximates their carrying value.
Other invested assets. We use quoted market prices, where available. When quotes are not available, we estimate the fair value based on: (i) discounted future expected cash flows; or (ii) independent transactions which establish a value for our investment. When we are unable to estimate a fair value, we assume a market value equal to carrying value.
Finance receivables. The estimated fair value of finance receivables, including those that have been securitized, is determined based on general market transactions which establish values for similar loans.
Insurance liabilities for interest-sensitive products. We discount future expected cash flows based on interest rates currently being offered for similar contracts with similar maturities.
Liabilities related to certificates of deposit. We estimate the fair value of these liabilities using discounted cash flow analyses based on current crediting rates. Since crediting rates are generally not guaranteed beyond one year, market value approximates carrying value.
Investment borrowings and notes payable. For publicly traded debt, we use current market values. For other notes, we use discounted cash flow analyses based on our current incremental borrowing rates for similar types of borrowing arrangements.
Company-obligated mandatorily redeemable preferred securities of subsidiary trusts. We use quoted market prices.
71
 
CONSECO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Here are the estimated fair values of our financial instruments:

                                                                        2000                             1999
                                                              -------------------------        ------------------------
                                                               Carrying            Fair        Carrying           Fair
                                                                Amount            Value         Amount            Value
                                                                ------            -----         ------            -----
                                                                                 (Dollars in millions)
Financial assets:
   Actively managed fixed maturities.......................... $21,755.1        $21,755.1       $22,203.8       $22,203.8
   Interest-only securities...................................     432.9            432.9           905.0           905.0
   Equity securities .........................................     248.3            248.3           312.7           312.7
   Mortgage loans.............................................   1,238.6          1,197.7         1,274.5         1,188.0
   Policy loans...............................................     647.2            647.2           664.1           664.1
   Venture capital investment in TeleCorp.....................     258.6            258.6           430.1           430.1
   Other invested assets......................................     436.9            626.9           641.4           917.4
   Cash and cash equivalents..................................   1,663.6          1,663.6         1,686.9         1,686.9
   Finance receivables (including finance
     receivables-securitized).................................  16,487.8         17,108.7         9,834.6        10,183.0

Financial liabilities:
   Insurance liabilities for interest-sensitive products (1)..  16,123.2         16,123.2        17,322.4        17,322.4
   Liabilities related to certificates of deposit.............   1,873.3          1,873.3           870.5           870.5
   Investment borrowings......................................     219.8            219.8           828.9           828.9
   Notes payable and commercial paper:
     Corporate................................................   5,055.0          4,394.9         4,624.2         4,573.5
     Finance..................................................   2,810.9          2,734.0         2,540.1         2,539.3
     Related to securitized finance receivables structured
       as collateralized borrowings...........................  12,100.6         12,323.8         4,641.8         4,636.8
   Company-obligated mandatorily redeemable
     preferred securities of subsidiary trusts................   2,403.9          1,290.3         2,639.1         2,135.3
--------------------

(1)  The estimated fair value of the liabilities for interest-sensitive products
     was approximately equal to its carrying value at December 31, 2000 and
     1999. This was because interest rates credited on the vast majority of
     account balances approximate current rates paid on similar products and
     because these rates are not generally guaranteed beyond one year. We are
     not required to disclose fair values for insurance liabilities, other than
     those for interest-sensitive products. However, we take into consideration
     the estimated fair values of all insurance liabilities in our overall
     management of interest rate risk. We attempt to minimize exposure to
     changing interest rates by matching investment maturities with amounts due
     under insurance contracts.	

Cumulative Effect of Accounting Change
During the third quarter of 2000, the Emerging Issues Task Force of the Financial Accounting Standards Board issued EITF 99-20, a new accounting requirement for the recognition of impairment on interest-only securities and other retained beneficial interests in securitized finance assets.
Under the prior accounting rule, declines in the value of our interest-only securities and other retained beneficial interests in securitized financial assets were recognized in the statement of operations when the present value of estimated cash flows discounted at a risk-free rate using current assumptions was less than the carrying value of the interest-only security.
Under the new accounting rule, declines in value are recognized when: (i) the fair value of the security is less than its carrying value; and (ii) the timing and/or amount of cash expected to be received from the security has changed adversely from the previous valuation which determined the carrying value of the security. When both occur, the security is written down to fair value.
72
CONSECO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
We adopted the new accounting rule on July 1, 2000. The cumulative effect of the accounting change for periods prior to July 1, 2000 was a decrease to net income of $55.3 million (net of an income tax benefit of $29.9 million), or $.17 per diluted share. The cumulative effect of the accounting change includes: (i) $45.5 million (net of an income tax benefit of $24.7 million) related to interest-only securities; and (ii) $9.8 million (net of an income tax benefit of $5.2 million) related to other retained beneficial interests in securitized financial assets held by our insurance segment.
Impairment Charge
During 2000, actual default and loss trends were worse than our previous estimates. In light of these trends, management analyzed the assumptions used to determine the estimated fair value of the interest-only securities and made changes to the credit loss assumptions and the discount rate used to determine the value of our securities. These changes also reflected other economic factors and further methodology enhancements made by the Company. As a result, the expected future cash flows from interest-only securities changed adversely from previous estimates. Pursuant to the requirements of EITF 99-20, the effect of these changes was reflected immediately in earnings as an impairment charge. The effect of the impairment charge and adjustments to the value of our interest-only securities and servicing rights totaled $515.7 million ($324.9 million after the income tax benefit) for 2000 (in addition to the cumulative effect of adopting EITF 99-20 of $70.2 million ($45.5 million after the income tax benefit)).
In addition, during 1999 and early 2000, the Company reevaluated its interest-only securities and servicing rights, including the underlying assumptions, in light of loss experience exceeding previous expectations. The principal change in the revised assumptions resulting from this process was an increase in expected future credit losses, relating primarily to reduced assumptions as to future housing price inflation, recent loss experience and refinements to the methodology of the valuation process. The effect of this change was offset somewhat by a revision to the estimation methodology to incorporate the value associated with the cleanup call rights held by the Company in securitizations. We recognized a $554.3 million impairment charge ($349.2 million after tax) in 1999 to reduce the book value of the interest-only securities and servicing rights.
During the second quarter of 1998, prepayments on securitized loan contracts exceeded our expectations and management concluded that such prepayments were likely to continue to be higher than expected in future periods as well. As a result of these developments, we concluded that the value of the interest-only securities and servicing rights had been impaired, and we determined a new value using then current assumptions. In addition, the market yields of publicly traded securities similar to our interest-only securities also increased during the second quarter of 1998. The assumptions used to determine the new value at that time were based on our internal evaluations and consultation with external investment managers having significant experience in valuing these securities. Such assumptions reflected the following changes from the assumptions previously used: (i) an increase in prepayment rates; (ii) an increase in the discount rate used to determine the present value of future cash flows; and (iii) an increase in anticipated default rates. We recognized a $549.4 million ($355.8 million after tax) impairment charge in 1998 to reduce the carrying value of the interest-only securities and servicing rights.
Accounting Changes
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"), as amended by Statement of Financial Accounting Standards No. 137, "Deferral of the Effective Date of FASB Statement No. 133" and Statement of Financial Accounting Standards No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities" ("SFAS 138") requires all derivative instruments to be recorded on the balance sheet at estimated fair value. Changes in the fair value of derivative instruments are to be recorded each period either in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and, if it is, on the type of hedge transaction. We will adopt SFAS 133 as of January 1, 2001. Because of our minimal use of derivatives, other than the S&P 500 Call Options and embedded derivatives associated with our equity-indexed annuities, we do not anticipate that the adoption of the new standard and implementation guidance approved by FASB prior to December 31, 2000, will have a material impact on the Company's financial position or results of operations. On March 14, 2001, FASB approved additional SFAS 133 implementation guidance regarding derivatives associated with equity-indexed annuity products. We are still finalizing the actual impact of complying with the provisions of the recently approved implementation guidance, which was initially issued as draft guidance by FASB's Derivative
73
CONSECO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Implementation Group in December 2000.
The Financial Accounting Standards Board recently issued Statement of Financial Accounting Standards No. 140, "Accounting for the Transfer and Servicing of Financial Assets and Extinguishments of Liabilities" ("SFAS 140") which is a replacement for SFAS 125; and a related implementation guide. SFAS 140 and the implementation guide have changed the criteria that must be met for securitization transactions to be recorded under the portfolio method. We do not believe we will need to make any significant changes to our securitization structures to meet the new criteria which are effective for securitization transactions completed after March 31, 2001.
SFAS 140 also requires additional disclosures regarding securitization transactions, which are reflected in these notes to the consolidated financial statements.
2. ACQUISITIONS
Merger accounted for as a pooling of interests
On June 30, 1998, we completed the Merger. We issued a total of 128.7 million shares of Conseco common stock (including 5.0 million common equivalent shares issued in exchange for Conseco Finance's outstanding options), exchanging .9165 of a share of Conseco common stock for each share of Conseco Finance common stock. The Merger constituted a tax-free exchange and was accounted for under the pooling of interests method. We restated all prior period consolidated financial statements to include Conseco Finance as though it had always been a subsidiary of Conseco.
The revenues and net income (loss) for Conseco and Conseco Finance, separately and combined, for periods prior to the Merger were as follows:

                                                                                           Six months ended
                                                                                             June 30, 1998
                                                                                             -------------
Revenues:
   Conseco..............................................................................         $3,232.1
   Conseco Finance......................................................................            581.9
   Less elimination of intercompany revenues............................................              (.8)
                                                                                                 --------

     Combined...........................................................................         $3,813.2
                                                                                                 ========

Net income (loss):
   Conseco..............................................................................         $  274.7
   Conseco Finance......................................................................           (358.9)
   Less elimination of intercompany net income..........................................             (2.8)
                                                                                                 --------

     Combined...........................................................................         $  (87.0)
                                                                                                 ========	

74
 
CONSECO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
3. INVESTMENTS:
At December 31, 2000, the amortized cost and estimated fair value of actively managed fixed maturities and equity securities were as follows:

                                                                                        Gross         Gross      Estimated
                                                                         Amortized   unrealized    unrealized      fair
                                                                           cost         gains        losses        value
                                                                           ----         -----        ------        -----
                                                                                         (Dollars in millions)
Investment grade:
   Corporate securities................................................ $13,098.9      $ 72.6     $  715.5     $12,456.0
   United States Treasury securities and obligations of
     United States government corporations and agencies................     303.4        11.4           .5         314.3
   States and political subdivisions...................................     142.9         2.1          2.6         142.4
   Debt securities issued by foreign governments.......................     183.1         1.3          6.6         177.8
   Mortgage-backed securities .........................................   6,794.2        53.5         71.0       6,776.7
Below-investment grade (primarily corporate securities)................   2,407.7         6.2        526.0       1,887.9
                                                                        ---------      ------     --------     ---------

     Total actively managed fixed maturities........................... $22,930.2      $147.1     $1,322.2     $21,755.1
                                                                        =========      ======     ========     =========

Equity securities......................................................    $286.8        $6.2        $44.7        $248.3
                                                                           ======        ====        =====        ======	

At December 31, 1999, the amortized cost and estimated fair value of actively managed fixed maturities and equity securities were as follows:

                                                                                        Gross         Gross      Estimated
                                                                         Amortized   unrealized    unrealized      fair
                                                                           cost         gains        losses        value
                                                                           ----         -----        ------        -----
                                                                                        (Dollars in millions)
Investment grade:
   Corporate securities................................................ $13,570.6       $37.7     $  965.9     $12,642.4
   United States Treasury securities and obligations of
     United States government corporations and agencies................     317.4         1.7          8.0         311.1
   States and political subdivisions...................................     151.5          .1         10.1         141.5
   Debt securities issued by foreign governments.......................     124.1          .8         11.0         113.9
   Mortgage-backed securities .........................................   7,587.1         6.4        362.4       7,231.1
Below-investment grade (primarily corporate securities)................   1,939.7        30.3        206.2       1,763.8
                                                                        ---------       -----     --------     ---------

     Total actively managed fixed maturities........................... $23,690.4       $77.0     $1,563.6     $22,203.8
                                                                        =========       =====     ========     =========

Equity securities...................................................... $   323.7       $22.8     $   33.8     $   312.7
                                                                        =========       =====     ========     =========	

Accumulated other comprehensive loss is primarily comprised of unrealized losses on actively managed fixed maturity investments. Such amounts, included in shareholders' equity as of December 31, 2000 and 1999, were as follows:

                                                                                                        2000       1999
                                                                                                        ----       ----
                                                                                                      (Dollars in millions)

Unrealized losses on investments.................................................................    $(1,241.9)  $(1,504.3)
Adjustments to cost of policies purchased and cost of policies produced..........................        219.7       291.2
Deferred income tax benefit......................................................................        371.4       443.4
Other............................................................................................          (.2)       (1.9)
                                                                                                     ---------   ---------

       Accumulated other comprehensive loss......................................................    $  (651.0)  $  (771.6)
                                                                                                     =========   =========	

75
 
CONSECO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The following table sets forth the amortized cost and estimated fair value of actively managed fixed maturities at December 31, 2000, by contractual maturity. Actual maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Most of the mortgage-backed securities shown below provide for periodic payments throughout their lives.

                                                                                                                 Estimated
                                                                                                 Amortized         fair
                                                                                                   cost            value
                                                                                                   ----            -----
                                                                                                    (Dollars in millions)

Due in one year or less........................................................................  $   305.0     $   304.6
Due after one year through five years..........................................................    2,491.7       2,434.8
Due after five years through ten years.........................................................    4,039.6       3,798.8
Due after ten years............................................................................    8,555.7       7,918.9
                                                                                                 ---------     ---------

    Subtotal...................................................................................   15,392.0      14,457.1
Mortgage-backed securities (a).................................................................    7,538.2       7,298.0
                                                                                                 ---------     ---------

        Total actively managed fixed maturities ...............................................  $22,930.2     $21,755.1
                                                                                                 =========     =========

--------------------
(a)  Includes  below-investment  grade  mortgage-backed   securities  with  an
     amortized cost and estimated fair value of $744.0 million and $521.3
     million, respectively.	

Net investment income consisted of the following:

                                                                                          2000         1999         1998
                                                                                          ----         ----         ----
                                                                                               (Dollars in millions)
Insurance and fee-based operations:
    Fixed maturities.................................................................  $1,647.6      $1,641.0    $1,628.5
    Venture capital investment income (loss).........................................    (199.5)        354.8         -
    Equity securities................................................................      37.3          85.1        27.4
    Mortgage loans...................................................................     105.1         106.4        96.4
    Policy loans.....................................................................      38.4          44.5        44.1
    Equity-indexed products..........................................................      12.9         142.3       103.9
    Other invested assets............................................................      93.7          91.5       139.5
    Cash and cash equivalents........................................................      63.4          60.2        57.0
    Separate accounts................................................................     246.0         172.8        51.0
                                                                                       --------      --------    --------

       Gross investment income.......................................................   2,044.9       2,698.6     2,147.8
Amortization of the cost of S&P 500 Call Options and other investment expenses.......     138.0         104.9        69.7
                                                                                       --------      --------    --------

       Net investment income earned by insurance and fee-based operations............   1,906.9       2,593.7     2,078.1

Finance operations:
    Finance receivables and other....................................................   1,906.9         632.6       295.5
    Interest-only securities.........................................................     106.6         185.1       132.9
                                                                                       --------      --------    --------

          Net investment income......................................................  $3,920.4      $3,411.4    $2,506.5
                                                                                       ========      ========    ========	

The carrying value of fixed maturity investments and mortgage loans not accruing investment income totaled $98.4 million, $48.3 million and $50.1 million at December 31, 2000, 1999 and 1998, respectively.
76
 
CONSECO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Investment gains (losses), net of investment gain expenses, were included in revenue as follows:

                                                                                           2000         1999         1998
                                                                                           ----         ----         ----
                                                                                                (Dollars in millions)
Fixed maturities:
    Gross gains........................................................................ $  89.2      $ 121.1      $ 458.0
    Gross losses.......................................................................  (166.9)      (168.4)      (138.6)
    Other than temporary decline in fair value.........................................  (143.6)       (24.1)       (11.7)
                                                                                        -------      -------      -------

         Net investment gains (losses) from fixed maturities before expenses...........  (221.3)       (71.4)       307.7

Equity securities......................................................................    17.6         10.2         (9.1)
Mortgages..............................................................................    (3.2)         (.8)        (2.1)
Other than temporary decline in fair value of equity securities and
    other invested assets..............................................................   (45.7)        (3.7)       (20.7)
Loss related to termination of interest rate swap agreements...........................   (59.2)         -            -
Other..................................................................................    (2.1)       (20.7)         1.9
                                                                                        -------      -------      -------

         Net investment gains (losses) before expenses.................................  (313.9)       (86.4)       277.7
Investment expenses....................................................................    44.4         69.8         69.5
                                                                                        -------      -------      -------

         Net investment gains (losses)................................................. $(358.3)     $(156.2)     $ 208.2
                                                                                        =======      =======      =======	

At December 31, 2000, the mortgage loan balance was primarily comprised of commercial loans. Approximately 8 percent, 8 percent, 7 percent, 7 percent, 7 percent and 6 percent of the mortgage loan balance were on properties located in Ohio, New York, Florida, Pennsylvania, Texas and California, respectively. No other state comprised greater than 5 percent of the mortgage loan balance. Less than 1 percent of the mortgage loan balance was noncurrent at December 31, 2000. Our allowance for loss on mortgage loans was $3.8 million at both December 31, 2000 and 1999.
Life insurance companies are required to maintain certain investments on deposit with state regulatory authorities. Such assets had an aggregate carrying value of $225.0 million at December 31, 2000.
Conseco had no investments in any single entity in excess of 10 percent of shareholders' equity at December 31, 2000, other than investments issued or guaranteed by the United States government or a United States government agency.
4. FINANCE RECEIVABLES AND INTEREST-ONLY SECURITIES:
Subsequent to September 8, 1999, we are using the portfolio method to account for new securitization transactions. Our new securitizations are structured in a manner that requires them to be accounted for under the portfolio method, whereby the loans and securitization debt remain on our balance sheet, rather than as sales, pursuant to SFAS 125.
We classify the finance receivables transferred to the securitization trusts and held as collateral for the notes issued to investors as "finance receivables-securitized". The average interest rate earned on these receivables was 12.2 percent and 11.7 percent at December 31, 2000 and 1999, respectively. We classify the notes issued to investors in the securitization trusts as "notes payable related to securitized finance receivables structured as collateralized borrowings".
77
 
CONSECO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The following table summarizes our finance receivables - securitized by business line and categorized as either: (i) a part of our continuing lines; or
(ii) a part of the business units we have decided to sell, close or runoff (the "discontinued lines"):

                                                                                               December 31,
                                                                                           ---------------------
                                                                                           2000             1999
                                                                                           ----             ----
                                                                                             (Dollars in millions)
Continuing lines:
   Manufactured housing............................................................... $ 5,602.1          $  953.0
   Mortgage services..................................................................   5,126.0           2,077.3
   Retail credit......................................................................     653.8               -
   Floorplan..........................................................................     637.0             637.0
                                                                                       ---------          --------

                                                                                        12,018.9           3,667.3
   Less allowance for credit losses...................................................     166.4               4.4
                                                                                       ---------          --------

     Net finance receivables - securitized for continuing lines.......................  11,852.5           3,662.9
                                                                                       ---------          --------

Discontinued lines:
   Consumer finance...................................................................     247.3             278.9
   Transportation.....................................................................       -               581.9
   Vendor finance.....................................................................     531.0             216.1
                                                                                       ---------          --------

                                                                                           778.3           1,076.9
   Less allowance for credit losses...................................................       8.0               9.3
                                                                                       ---------          --------

     Net finance receivables - securitized for discontinued lines.....................     770.3          1,067.6
                                                                                       ---------         --------

     Total finance receivables - securitized.......................................... $12,622.8          $4,730.5
                                                                                       =========          ========	

The following table summarizes our other finance receivables by business line and categorized as either: (i) a part of our continuing lines; or (ii) a part of our discontinued lines:

                                                                                                December 31,
                                                                                           ---------------------
                                                                                           2000             1999
                                                                                           ----             ----
                                                                                            (Dollars in millions)

Continuing lines:
   Manufactured housing...............................................................  $  263.0         $   795.8
   Mortgage services..................................................................   1,373.1           1,277.0
   Retail credit......................................................................   1,110.1             867.8
   Floorplan..........................................................................         -             602.7
                                                                                        ----------       ---------

                                                                                         2,746.2           3,543.3
   Less allowance for credit losses...................................................      95.5              38.8
                                                                                        --------         ---------

     Net other finance receivables for continuing lines...............................   2,650.7           3,504.5
                                                                                        --------         ---------

Discontinued lines:
   Consumer finance...................................................................     575.1             142.2
   Transportation.....................................................................     137.8             337.8
   Vendor finance.....................................................................     331.3             423.3
   Park construction..................................................................     131.2             188.7
   Other  ............................................................................      75.8             543.5
                                                                                        --------         ---------

                                                                                         1,251.2           1,635.5
   Less allowance for credit losses...................................................      36.9              35.9
                                                                                        --------         ---------

     Net other finance receivables for discontinued lines.............................   1,214.3           1,599.6
                                                                                        --------         ---------

     Total other finance receivables..................................................  $3,865.0          $5,104.1
                                                                                        ========          ========	

78
 
CONSECO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The changes in the allowance for credit losses included in finance receivables were as follows:

                                                                                   2000          1999         1998
                                                                                   ----          ----         ----
                                                                                         (Dollars in millions)
Allowance for credit losses, beginning of year..................................  $  88.4       $  43.0       $ 19.8
Additions to the allowance (a)..................................................    472.8         128.7         44.2
Credit losses, net..............................................................   (254.4)        (83.3)       (21.0)
                                                                                  -------       -------       ------

Allowance for credit losses, end of year........................................  $ 306.8       $  88.4       $ 43.0
                                                                                  =======       =======       ======
--------------------
(a)  Additions to the allowance for 2000 include: (i) $48.0 million related to
     regulatory changes related to our bank subsidiary and classified as a
     component of "special charges" (see note 9); (ii) $45.9 million related to
     discontinued lines and classified as a component of "special charges" (see
     note 9); and (iii) $24.7 million related to a block of finance receivables
     repurchased during 2000. (Such block was previously sold to unaffiliated
     parties in securitization transactions.)	

The securitizations structured prior to September 8, 1999, met the applicable criteria to be accounted for as sales. At the time the loans were securitized and sold, we recognized a gain and recorded our retained interest represented by the interest-only security. The interest-only security represents the right to receive, over the life of the pool of receivables: (i) the excess of the principal and interest received on the receivables transferred to the special purpose entity over the principal and interest paid to the holders of other interests in the securitization; and (ii) contractual servicing fees. In some of those securitizations, we also retained certain lower-rated securities that are senior in payment priority to the interest- only securities. Such retained securities (classified as actively managed fixed maturity securities) had a par value, fair market value and amortized cost of $769.8 million, $494.6 million and $716.8 million, respectively, at December 31, 2000, and had a par value, fair market value and amortized cost of $769.8 million, $694.3 million and $712.6 million, respectively, at December 31, 1999.
During 1999 and 1998, the Company sold $9.7 billion and $13.4 billion, respectively, of finance receivables in various securitized transactions and recognized gains of $550.6 million and $745.0 million, respectively. During 2000, we recognized no gain on sale related to securitized transactions.
The interest-only securities on our balance sheet represent an allocated portion of the cost basis of the finance receivables in the securitization transactions accounted for as sales related to transactions structured prior to September 8, 1999. Our interest-only securities and other retained interests in those securitization transactions are subordinate to the interests of other investors. Their values are subject to credit, prepayment, and interest rate risk on the securitized finance receivables. We include the difference between estimated fair value and the amortized cost of the interest-only securities (after adjustments for impairments required to be recognized in earnings) in "accumulated other comprehensive loss, net of taxes".
As described in note 1 under the caption entitled "Cumulative Effect of Accounting Change", the Company adopted the requirements of EITF 99-20 effective July 1, 2000. During 2000, management analyzed the assumptions used to determine the estimated fair value of the interest-only securities and made changes to the credit loss assumptions and the discount rate used to determine the value of several securities. These changes were made considering recent adverse default and loss trends and other economic factors. As a result of these changes, the cash flows from interest-only securities changed adversely from previous estimates. Pursuant to the requirements of EITF 99-20, the effect of these changes were reflected immediately in earnings as an impairment charge. The effect of the impairment charge and adjustments to the value of our interest-only securities and servicing rights totaled $515.7 million ($324.9 million after the income tax benefit) for 2000 (in addition to the cumulative effect of adopting EITF 99-20 of $70.2 million ($45.5 million after the income tax benefit)).
At December 31, 2000, key economic assumptions used to determine the estimated fair value of our retained interests in securitizations and the sensitivity of the current fair value of residual cash flows to immediate 10 percent and 20 percent
79
 
CONSECO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
changes in those assumptions are as follows:

                                                            Manufactured      Home equity/       Consumer/
                                                               housing      home improvement     equipment       Total
                                                               -------      ----------------     ---------       -----
                                                                                (Dollars in millions)
Carrying amount/fair value of retained interests:

     Interest-only securities...............................   $245.4          $177.5             $10.0         $432.9
     Servicing assets (liabilities).........................     14.7             2.0              (1.9)          14.8
     Bonds..................................................    249.5           227.1              18.0          494.6
                                                               ------          ------             -----         ------

         Total retained interests...........................   $509.6          $406.6             $26.1         $942.3
                                                               ======          ======             =====         ======

Cumulative principal balance of sold finance
     receivables............................................$20,256.4        $6,489.7          $1,936.3      $28,682.4
Weighted average life in years..............................      6.8             3.8               2.5            5.9
Weighted average stated customer interest rate
     on sold finance receivables............................      9.9%           11.6%             10.8%
Assumptions to determine estimated fair value
     and impact of favorable and adverse changes:

Expected prepayment speed as a percentage
     of principal balance of sold finance receivables (a)...      7.9%           18.5%             19.7%          11.1%

     Impact on fair value of 10 percent favorable change....    $21.8           $29.4              $2.0          $53.2

     Impact on fair value of 20 percent favorable change....     46.2            60.2               3.9          110.3

     Impact on fair value of 10 percent adverse change......     23.9            24.8               1.5           50.2

     Impact on fair value of 20 percent adverse change......     45.2            46.7               2.9           94.8

Expected future nondiscounted credit losses as a
     percentage of principal of related finance
       receivables (a)......................................     10.2%            6.5%              6.5%           9.1%

     Impact on fair value of 10 percent favorable change....   $138.9           $34.4              $9.6         $182.9

     Impact on fair value of 20 percent favorable change....    275.7            69.9              18.9          364.5

     Impact on fair value of 10 percent adverse change......    145.9            24.8               6.4          181.1

     Impact on fair value of 20 percent adverse change......    290.4            47.9              12.7          351.0

Residual cash flow discount rate (annual)...................     15.0%           15.0%             15.0%          15.0%

     Impact on fair value of 10 percent favorable change....    $37.2           $26.5              $2.4          $66.1

     Impact on fair value of 20 percent favorable change....     74.2            54.3               4.4          132.9

     Impact on fair value of 10 percent adverse change......     38.9            25.0               2.0           65.9

     Impact on fair value of 20 percent adverse change......     70.3            48.4               3.8          122.5

                                       80	

                         CONSECO, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                           --------------------------

--------------------
(a)  The valuation of interest-only securities is affected not only by the
     projected level of prepayments of principal and net credit losses, but also
     by the projected timing of such prepayments and net credit losses. Should
     such timing differ materially from our projections, it could have a
     material effect on the valuation of our interest-only securities.
     Additionally, such valuation is determined by discounting cash flows over
     the entire expected life of the receivables sold.	

These sensitivities are hypothetical and should be used with caution. As the figures indicate, changes in fair value based on a 10 percent variation in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, in this table, the effect of a variation in a particular assumption on the fair value of the retained interest is calculated without changing any other assumption; in reality, changes in one factor may result in changes in another (for example, increases in market interest rates may result in lower prepayments and increased credit losses), which might magnify or counteract the sensitivities.
The following table summarizes certain cash flows received from and paid to the securitization trusts during 2000 (dollars in millions):

Servicing fees received.............................     $123.8
Cash flows from interest-only securities............      187.6
Cash flows from retained bonds......................       69.9
Purchases of delinquent or foreclosed assets........      (23.9)
Servicing advances..................................   (1,056.1)
Repayment of servicing advances.....................    1,063.5	

We have projected lower cash flows from our interest-only securities in 2001, reflecting our assumption that the adverse loss experience in 2000 will continue into 2001 and then improve over time. As a result of these assumptions, we project that payments related to guarantees issued in conjunction with the sales of certain finance receivables will exceed the amounts paid in previous periods. These projected payments are considered in the projected cash flows we use to value our interest-only securities. See note 8 to the consolidated financial statements for additional information about the guarantees.
81
 
CONSECO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The following table summarizes quantitative information about delinquencies, net credit losses, and components of managed finance receivables:

                                                                            Principal balance
                                                                             60 days or more             Net Credit
                                              Principal balance                 past due                   Losses
                                           ------------------------          ----------------        for the year ended
                                                                at December 31,                          December 31,
                                           --------------------------------------------------------   -----------------
                                                2000           1999           2000        1999        2000         1999
                                                ----           ----           ----        ----        ----         ----
                                                                            (Dollars in millions)
Type of finance receivables

Manufactured housing......................   $26,314.4       $24,650.1       $569.3      $381.9      $413.9       $285.8
Home equity/home improvement..............    13,307.0        12,174.1        120.5       118.8       154.6        101.3
Consumer..................................     3,887.4         3,836.0         76.4        85.1       181.0         99.9
Commercial................................     3,077.1         5,131.2         35.2        54.9        95.5         52.4
                                             ---------       ---------       ------      ------      ------      -------

Total managed receivables.................    46,585.9        45,791.4        801.4       640.7       845.0        539.4

Less finance receivables securitized......    29,636.0        35,686.8        536.6       541.9       590.6        456.1

Less allowance for credit losses..........       306.8            88.4          -           -           -            -

Less deferred points and other, net.......       155.3           181.6          -           -           -            -
                                             ---------       ---------       ------     -------      ------       ------

Finance receivables held on
   balance sheet..........................   $16,487.8       $ 9,834.6       $264.8     $  98.8      $254.4       $ 83.3
                                             =========       =========       ======     =======      ======       ======	

Activity in the interest-only securities account during 2000, 1999 and 1998 is as follows:

                                                                                  2000         1999         1998
                                                                                  ----         ----         ----
                                                                                       (Dollars in millions)

Balance, beginning of year...................................................   $ 905.0        $1,305.4     $1,398.7
   Additions resulting from securitizations during the period................       -             393.9        719.6
   Additions resulting from clean-up calls (a)...............................     100.3             -            -
   Investment income.........................................................     106.6           185.1        132.9
   Cash received, net........................................................    (187.6)         (442.6)      (358.0)
   Impairment charge to reduce carrying value................................    (434.1)         (533.8)      (544.4)
   Cumulative effect of change in accounting principle.......................     (70.2)            -            -
   Change in unrealized depreciation charged to shareholders' equity.........      12.9            (3.0)       (43.4)
                                                                              ---------      ----------   ----------

Balance, end of year.........................................................   $ 432.9       $   905.0     $1,305.4
                                                                                =======       =========     ========
--------------------
(a)  During 2000, clean-up calls were exercised for ten securitizations that
     were previously recognized as sales. The interest-only securities related
     to these securitizations had previously been separately securitized with
     other interest- only securities in transactions recognized as sales. The
     repurchase of the collateral underlying the ten securitizations triggered a
     requirement for the Company to repurchase a portion of the interest-only
     securities.	

82
 
CONSECO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
5. LIABILITIES FOR INSURANCE AND ASSET ACCUMULATION PRODUCTS:
These liabilities consisted of the following:

                                                                                    Interest
                                                         Withdrawal    Mortality      rate
                                                         assumption   assumption   assumption      2000            1999
                                                         ----------   ----------   ----------      ----            ----
                                                                                                   (Dollars in millions)
   Future policy benefits:
     Interest-sensitive products:
       Investment contracts............................      N/A          N/A          (c)      $11,502.9      $12,641.0
       Universal life-type contracts...................      N/A          N/A          N/A        4,620.3        4,681.4
                                                                                                ---------      ---------

         Total interest-sensitive products.............                                          16,123.2       17,322.4
                                                                                                ---------      ---------
     Traditional products:
       Traditional life insurance contracts............    Company        (a)          6%         2,082.4        1,972.3
                                                          experience

       Limited-payment contracts.......................    Company        (b)          7%           877.2          985.3
                                                          experience,
                                                         if applicable

       Individual and group accident and health .......    Company     Company         6%         4,915.5        4,579.7
                                                         experience   experience                ---------      ---------

         Total traditional products....................                                           7,875.1        7,537.3
                                                                                                ---------      ---------

   Claims payable and other policyholder funds ........      N/A          N/A          N/A        1,026.1        1,042.3
   Liabilities related to separate accounts and
     investment trust..................................      N/A          N/A          N/A        2,610.1        2,231.4
   Liabilities related to certificates of deposit......      N/A          N/A          N/A        1,873.3          870.5
                                                                                                ---------      ---------

       Total...........................................                                         $29,507.8      $29,003.9
                                                                                                =========      =========
--------------------

(a)  Principally, modifications of the 1965 - 70 and 1975 - 80 Basic, Select
     and Ultimate Tables.
(b)  Principally, the 1984 United States Population Table and the NAIC 1983
     Individual Annuitant Mortality Table.
(c)  In both 2000 and 1999: (i) approximately 96 percent of this liability
     represented account balances where future benefits are not guaranteed; and
     (ii) approximately 4 percent represented the present value of guaranteed
     future benefits determined using an average interest rate of approximately
     6 percent.	

6. INCOME TAXES:
Income tax assets (liabilities) were comprised of the following:

                                                                                                      2000           1999
                                                                                                      ----           ----
                                                                                                     (Dollars in millions)
Deferred income tax assets (liabilities):
    Actively managed fixed maturities..........................................................  $    70.3      $     1.9
    Interest-only securities...................................................................       32.2         (282.4)
    Venture capital investment in TeleCorp.....................................................      (67.9)        (127.9)
    Cost of policies purchased and cost of policies produced...................................   (1,128.0)      (1,086.0)
    Insurance liabilities......................................................................    1,031.8        1,137.6
    Allowance for loan losses..................................................................      116.6           33.6
    Reserve for losses on loan guarantees......................................................       87.6            7.0
    Unrealized depreciation....................................................................      371.4          443.4
    Net operating loss carryforward............................................................      393.2          269.9
    Other......................................................................................     (293.6)        (242.1)
                                                                                                  --------      ---------

         Deferred income tax assets (liabilities)..............................................      613.6          155.0
Current income tax assets (liabilities)........................................................       33.6           54.8
                                                                                                 ---------      ---------

         Income tax assets (liabilities).......................................................  $   647.2      $   209.8
                                                                                                 =========      =========	

83
 
CONSECO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Income tax expense was as follows:

                                                                                               2000       1999       1998
                                                                                               ----       ----       ----
                                                                                                  (Dollars in millions)

Current tax provision.....................................................................  $   70.9     $270.3     $235.7
Deferred tax provision (benefit)..........................................................    (447.1)     152.8      209.9
                                                                                             -------     ------     ------

         Income tax expense (benefit).....................................................   $(376.2)    $423.1     $445.6
                                                                                             =======     ======     ======	

A reconciliation of the U.S. statutory corporate tax rate to the effective rate reflected in the consolidated statement of operations is as follows:

                                                                                                2000       1999       1998
                                                                                                ----       ----       ----

U.S. statutory corporate rate.............................................................       (35.0)%   35.0%      35.0%
Nondeductible goodwill amortization.......................................................         2.9      3.3        3.6
Other nondeductible expenses..............................................................         2.2       -          -
State taxes...............................................................................          .4       .9        1.4
Settlement of tax issues..................................................................          -      (2.6)         -
Provision for tax issues and other........................................................         1.9       .2        2.6
                                                                                                 -----     ----       ----
         Income tax expense (benefit).....................................................       (27.6)%   36.8%      42.6%
                                                                                                 =====     ====       ====	

At December 31, 2000, Conseco had federal income tax loss carryforwards of $1,123.5 million available (subject to various statutory restrictions) for use on future tax returns. Portions of these carryforwards begin expiring in 2002. The following restrictions exist with respect to the utilization of portions of the loss carryforwards: (i) $52.0 million may be used only to offset income from our non-life insurance companies; (ii) $107.0 million (attributable to acquired companies) may be used only to offset the income from those companies; and (iii) $964.5 million is available to offset income from certain life insurance subsidiaries, our finance subsidiaries and other non-life insurance subsidiaries. None of the carryforwards are available to reduce the future tax provision for financial reporting purposes.
84
 
CONSECO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
7. NOTES PAYABLE AND COMMERCIAL PAPER:
Direct Corporate Obligations
Notes payable and commercial paper, representing direct corporate obligations at December 31, 2000 and 1999, were as follows (interest rates as of December 31, 2000):

                                                                                  2000             1999
                                                                                  ----             ----
                                                                                   (Dollars in millions)

$1.5 billion bank credit facility (9.2%).....................................  $1,500.0           $1,032.0
Other bank credit facilities (9.2%)..........................................     551.2                -
Commercial paper.............................................................       -                898.4
7.875% notes due December 2000...............................................       -                150.0
7.6% senior notes due 2001...................................................     118.9              118.9
6.4% notes due 2001 to 2003..................................................     800.0              800.0
8.5% notes due 2002..........................................................     450.0              450.0
Notes payable due 2003.......................................................       -                250.0
8.75% notes due 2004.........................................................     788.0                -
6.8% senior notes due 2005...................................................     250.0              250.0
9.0% notes due 2006..........................................................     550.0              550.0
Other........................................................................      92.1              143.5
                                                                               --------           --------

     Total principal amount..................................................   5,100.2            4,642.8
Unamortized net discount.....................................................      45.2               18.6
                                                                               --------           --------

     Direct corporate obligations............................................  $5,055.0           $4,624.2
                                                                               ========           ========	

During 2000, the Company restructured its bank credit facilities. The amended facilities include: (i) a $1.5 billion five year facility (the "$1.5 billion facility"); and (ii) other bank credit facilities due December 31, 2001 (the "near-term facilities"). The $1.5 billion facility is due December 31, 2003; however, subject to the absence of any default, the Company may further extend its maturity to March 31, 2005, provided that: (i) Conseco pays an extension fee of 3.5 percent of the amount extended; and (ii) cumulative principal payments of at least $150 million have been paid by September 30, 2002 and at least $300 million by September 30, 2003.
In amending our bank credit facilities, we agreed to the manner in which the proceeds from asset sales and refinancing transactions would be used. Through December 31, 2000, the $1,005.6 million of proceeds from such transactions were used as follows: (i) $257.1 million was used to repay the notes payable due 2003; (ii) $131.5 million was used to repay the 7.875% notes due December 2000; (iii) $419.8 million was used to reduce the total borrowings under our near-term facilities; (iv) $81.9 million was transferred to a segregated cash account for the payment of debt; and (v) $115.3 million was added to the general cash balance of the Company. Additional amounts have been added to the segregated cash account for the payment of debt through March 1, 2001; its balance is now $402.3 million.
Pursuant to the amendment of our bank credit facilities, we have agreed that any amounts received from asset sales or refinancing transactions occurring after December 31, 2000 (with certain exceptions), would be used as follows: (i) the first $13 million received may be retained by Conseco until we have cash on hand held by the parent company of $330 million; (ii) of the next $512 million received, $73 million would be used to reduce our near-term facilities and $439 million would be added to the segregated cash account for the payment of public debt maturing in 2001; (iii) the next $200 million received would be added to the segregated cash account for the payment of debt maturing in 2001; (iv) the next available proceeds would be applied 80 percent to reduce our near-term facilities, with the remaining 20 percent retained by Conseco until we have cash on hand of $330 million held by the parent company, and then 100 percent to our near-term facilities until such facilities have been paid in full; and (v) any subsequent proceeds would be applied: (a) 50 percent to repay the $1.5 billion facility and to fund a segregated cash account to provide collateral for Conseco's guarantee related to the directors, officers and key employee stock purchase program (based on the relative balance due under each facility); and
85
CONSECO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(b) the remaining 50 percent would be retained by Conseco. No assurance can be provided as to the timing, proceeds, or other terms related to any potential asset sale or financing transaction.
The amended bank credit facilities require the Company to maintain various financial ratios and balances, as defined in the agreement including:
(i) a debt-to-total capitalization ratio to be less than .450:1.0 at December 31, 2000 and decreasing over time, as defined in the agreement, to 0.30:1.0 at March 31, 2004 and thereafter (such ratio was .41:1.0 at December 31, 2000);
(ii) an interest coverage ratio greater than 1.00:1.0 for the quarter ending December 31, 2000 and increasing over time, as defined in the agreement, to 2.00:1.0 for the four quarters ending December 31, 2003 and thereafter (such ratio was 1.11:1.0 at December 31, 2000); (iii) adjusted earnings, as defined in the agreement, of at least $650 million for the six months ending March 31, 2001 and increasing over time, as defined in the agreement, to $2,175.0 million for the year ending December 31, 2004 (the adjusted earnings for the fourth quarter of 2000 exceed one-half of the requirement for the six months ended March 31, 2001); (iv) Conseco Finance tangible net worth, as defined in the agreement, of at least $950.0 million at December 31, 2000; $1.2 billion at December 31, 2001; $1.4 billion at December 31, 2002; $1.65 billion at December 31, 2003; and $2.0 billion at December 31, 2004 (such tangible net worth was in excess of $1.2 billion at December 31, 2000); and (v) an aggregate risk-based capital ratio with respect to our insurance subsidiaries of at least 200 percent (such ratio was greater than 240 percent at December 31, 2000).
The amended bank credit facilities require the Company's principal insurance subsidiaries to achieve a financial strength rating of A- (Excellent) from A.M. Best by March 31, 2001. On November 7, 2000, A.M. Best upgraded the financial strength rating of our principal life insurance subsidiaries to A- (Excellent) from B++ (Very Good), satisfying the covenant requirement. The amended bank credit facilities also prohibit the payment of cash dividends on our common stock until the Company has received investment grade ratings on its outstanding public debt and all amounts due under the near-term facilities have been paid. The amended bank credit agreements also limit the issuance of additional debt, contingent obligations, liens, asset dispositions, other restrictive agreements, affiliate transactions, change in business and modification of terms of debt or preferred stock, all as defined in the agreements. The obligations under the amended bank credit facilities are guaranteed by CIHC, Incorporated, a wholly owned subsidiary of Conseco, and the ultimate holding company for Conseco's principal operating subsidiaries. In addition, $151.5 million of our near-term facilities are collateralized by most of Conseco's assets.
The interest rate on our amended bank credit facilities is based on an IBOR rate plus a margin of 2.5 percent. Borrowings under the former and amended bank credit facilities averaged $1,787.3 million during 2000, at a weighted average interest rate of 7.6 percent.
Borrowings under our commercial paper program averaged $337.3 million, at a weighted average interest rate of 6.1 percent during 2000. Such borrowings averaged $1,058.3 million, at a weighted average interest rate of 5.3 percent during 1999. The actions by rating agencies which occurred after March 31, 2000 affected our ability to issue commercial paper.
On February 7, 2000, the Company completed the public offering of $800.0 million of 8.75 percent notes due February 9, 2004. The notes are unsecured and rank equally with all other unsecured senior indebtedness of Conseco. Proceeds from the offering of approximately $794.3 million (after underwriting discounts and estimated offering expenses) were used to repay outstanding indebtedness.
During 2000, we repurchased: (i) $18.5 million par value of the 7.875 percent notes due 2000 for $16.7 million; and (ii) $12 million par value of the 8.75 percent notes due 2004 for $8.7 million. We recognized an extraordinary gain of $3.2 million (net of income taxes of $1.7 million) related to these repurchases. In addition, during 2000, the Company repurchased $250 million of notes payable due 2003. We recognized an extraordinary loss of $4.9 million (net of income taxes of $2.6 million) related to this repurchase.
During 1998, we repurchased various senior and senior subordinated debt with: (i) par value of $343.5 million; (ii) interest rates of 8.125 percent to 11.25 percent; and (iii) maturity dates of 2002 to 2004. We recognized an extraordinary charge of $42.6 million (net of income taxes of $24.1 million).
86
CONSECO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Notes payable, representing direct finance obligations (excluding notes payable related to securitized finance receivables structured as collateralized borrowings)
Notes payable, representing direct finance obligations (excluding notes payable related to securitized finance receivables structured as collateralized borrowings) at December 31, 2000 and 1999, were as follows (interest rates as of December 31, 2000):

                                                                                  2000             1999
                                                                                  ----             ----
                                                                                  (Dollars in millions)
Master repurchase agreements due on various dates in
   2001 and 2002 (7.83%).....................................................  $1,806.9           $1,620.9
Credit facility collateralized by retained interests in securitizations
   due 2003 (8.71%)..........................................................     590.0              499.0
Medium term notes due September 2002 and April 2003 (6.52%)..................     223.7              226.7
10.25% senior subordinated notes due 2002....................................     193.6              193.6
Other........................................................................       3.2                3.1
                                                                               --------           --------

     Total principal amount..................................................   2,817.4            2,543.3

Unamortized net discount and deferred fees...................................       6.5                3.2
                                                                               --------           --------

     Direct finance obligations..............................................  $2,810.9           $2,540.1
                                                                               ========           ========	

Amounts borrowed under master repurchase agreements have increased as the balance of finance receivables eligible as collateral for these agreements has increased. At December 31, 2000, we had $3.5 billion in master repurchase agreements, commercial paper conduit facilities and other facilities with various banking and investment banking firms for the purpose of financing our consumer and commercial finance loan production. These facilities typically provide financing of a certain percentage of the underlying collateral and are subject to the availability of eligible collateral and, in some cases, the willingness of the banking firms to continue to provide financing. Some of these agreements provide for annual terms which are extended either quarterly or semi-annually by mutual agreement of the parties for an additional annual term based upon receipt of updated quarterly financial information. At December 31, 2000, we had borrowed $1.8 billion of the $3.5 billion available under such agreements.
During 2000, the Company amended an agreement with Lehman related to certain master repurchase agreements and the collateralized credit facility. Such amendment significantly reduced the restrictions on intercompany payments from Conseco Finance to Conseco as required by the previous agreement. In conjunction with the amendment, Conseco agreed to convert $750 million principal balance of its intercompany note due from Conseco Finance to $750 million stated value of Conseco Finance 9 percent redeemable cumulative preferred stock (the "intercompany preferred stock"). After such conversion and prepayments made during 2000, the intercompany note had a balance of $786.7 million.
Pursuant to the amended agreement, Conseco Finance may make the following payments to Conseco: (i) interest on the intercompany note; (ii) payments for products and services provided by Conseco; and (iii) intercompany tax sharing payments. Conseco Finance may also make the following payments to Conseco provided the minimum liquidity requirements defined in the amended agreement are met and the cash payments are applied in the order summarized: (i) unpaid interest on the intercompany note; (ii) prepayments of principal on the intercompany note or repayments of any increase to the intercompany receivable balance; (iii) dividends on the intercompany preferred stock; (iv) redemption of the intercompany preferred stock; and (v) common stock dividends. The liquidity test of the amended agreement requires Conseco Finance to have minimum levels of liquidity both before and after giving effect to such payments to Conseco. Liquidity, as defined, includes unrestricted cash and may include up to $150 million of liquidity available at Conseco Finance's bank subsidiaries and the aggregate amount available to be drawn under Conseco Finance's credit facilities (where applicable, based on eligible excess collateral pledged to the lender multiplied by the appropriate advance rate). The minimum liquidity must equal or exceed $250 million, plus: (i) 50 percent of cash up to $100 million generated by Conseco Finance subsequent to September 21, 2000; and (ii) 25 percent of cash generated by Conseco Finance in excess of $100 million, provided the total minimum cash liquidity shall not exceed $350 million and the cash generated by Conseco
87
CONSECO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Finance (used in the calculation to increase the minimum) will exclude operating cash flows and the net proceeds received from certain asset sales and other events listed in the amended agreement (which are consistent with the courses of actions we have previously announced).
The amended agreement requires Conseco Finance to maintain various financial ratios, commencing December 31, 2000, as defined in the agreement. These ratios include: (i) an adjusted tangible net worth of at least $1.95 billion (such amount was $2.1 billion at December 31, 2000); (ii) a fixed charge coverage ratio of not less than 1.0:1.0 for the three- month period ending December 31, 2000, and defined periods thereafter (such ratio was 1.15:1.0 for the quarter ended December 31, 2000); (iii) a ratio of net worth to total managed receivables of not less than 4:100 (such ratio was 4.41:100 at December 31, 2000); and (iv) a ratio of total non-warehouse debt (excluding master repurchase agreements and the collateralized credit facility) to net worth of less than 1.0:2.0 (such ratio was .08:2.0 at December 31, 2000).
The maturities of notes payable (excluding notes payable related to securitized finance receivables structured as collateralized borrowings) at December 31, 2000, were as follows (dollars in millions):

                                                                               Direct         Direct
                                                                              corporate       finance
                                                                             obligations    obligations     Total
                                                                             -----------    -----------     -----

Bank  credit  facilities,   master  repurchase  agreements and
   similar credit facilities that are used for short-term funding:
     2001................................................................    $  551.2       $1,806.9        $2,358.1
     2002................................................................       150.0            -             150.0
     2003................................................................       150.0          590.0           740.0
     2005................................................................     1,200.0            -           1,200.0

Term debt:
     2001................................................................       670.0            1.9           671.9
     2002................................................................       451.9          413.7           865.6
     2003................................................................       313.5            4.9           318.4
     2004................................................................       812.5            -             812.5
     2005................................................................       250.0            -             250.0
     Thereafter..........................................................       551.1            -             551.1
                                                                             --------       --------        --------

           Total par value at December 31, 2000..........................    $5,100.2       $2,817.4        $7,917.6
                                                                             ========       ========        ========	

Notes Payable Related to Securitized Finance Receivables Structured as Collateralized Borrowings
Notes payable related to securitized finance receivables structured as collateralized borrowings were $12,100.6 million and $4,641.8 million at December 31, 2000 and 1999, respectively. The principal and interest on these notes are paid using the cash flows from the underlying finance receivables which serve as collateral for the notes. Accordingly, the timing of the principal payments on these notes is dependent on the payments received on the underlying finance receivables which back the notes. The average interest rate on these notes was 7.7 percent and 7.6 percent at December 31, 2000 and 1999, respectively.
88
 
CONSECO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
8. OTHER DISCLOSURES:
Leases
The Company rents office space, equipment and computer software under noncancellable operating leases. Rental expense was $70.6 million in 2000, $61.5 million in 1999 and $50.6 million in 1998. Future required minimum rental payments as of December 31, 2000, were as follows (dollars in millions):

2001   ....................................................................    $ 55.4
2002   ....................................................................      45.4
2003   ....................................................................      35.6
2004   ....................................................................      24.7
2005   ....................................................................      19.7
Thereafter.................................................................      28.0
                                                                               ------

        Total..............................................................    $208.8
                                                                               ======	

Pension and Postretirement Plans
The Company provides certain pension, health care and life insurance benefits for certain eligible retired employees under partially funded and unfunded plans in existence at the date on which certain subsidiaries were acquired. Certain postretirement benefit plans are contributory, with participants' contributions adjusted annually. Amounts related to the pension and postretirement benefit plans were as follows:

                                                                                     Postretirement
                                                         Pension benefits               benefits
                                                        -----------------           ----------------
                                                        2000         1999           2000        1999
                                                        ----         ----           ----        ----
                                                                       (Dollars in millions)

Benefit obligation, beginning of year..............    $20.6       $ 88.5        $ 21.9       $ 25.9
    Service cost...................................      -            7.3           -            -
    Interest cost..................................      1.4          3.0           1.5          1.6
    Plan participants' contributions...............      -            -             1.3          1.9
    Amendments to plan.............................      -            -              .4          -
    Actuarial loss (gain)..........................      1.8        (40.6)         (1.2)        (2.6)
    Settlement and curtailment gains...............      -          (15.8)          -            -
    Benefits paid..................................     (5.9)       (21.8)         (2.8)        (4.9)
                                                       -----       ------        ------       ------

Benefit obligation, end of year....................    $17.9       $ 20.6        $ 21.1       $ 21.9
                                                       =====       ======        ======       ======

Fair value of plan assets, beginning of year.......    $18.8       $ 15.1        $  4.3       $  5.1
    Actual return on plan assets...................      (.4)         2.5            .4           .3
    Employer contributions.........................      6.9          3.7           -            -
    Plan participants' contributions...............      -            -             -             .4
    Benefits paid..................................     (5.4)        (2.5)         (1.7)        (1.5)
                                                       -----       ------        ------       ------

Fair value of plan assets, end of year.............    $19.9       $ 18.8        $  3.0       $  4.3
                                                       =====       ======        ======       ======

Funded status......................................    $ 2.0       $ (1.8)       $(18.1)      $(17.6)
Unrecognized net actuarial loss (gain).............      4.6           .4         (12.1)       (12.5)
Unrecognized prior service cost....................      -            -            (1.8)         -
                                                       -----       ------        ------       ------

       Prepaid (accrued) benefit cost..............    $ 6.6       $ (1.4)       $(32.0)      $(30.1)
                                                       =====       ======        ======       ======	

We used the following weighted average assumptions to calculate benefit obligations for our 2000 and 1999 valuations: discount rate of approximately 7.1 percent and 6.9 percent, respectively; an expected return on plan assets of approximately 8.4 percent and 8.2 percent, respectively; and an assumed rate of compensation increase of 5.5 percent in
89
CONSECO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
1999. Beginning in 2000, as a result of plan amendments, no assumption for compensation increases was required. For measurement purposes, we assumed an 8.6 percent annual rate of increase in the per capita cost of covered health care benefits for 2001, decreasing gradually to 5.0 percent in 2010 and remaining level thereafter. During 2000 and 1999, we amended the pension plans of recently acquired companies to reduce future benefits accruing under such plans. These changes resulted in the actuarial, settlement and curtailment gains summarized above.
Components of the cost we recognized related to pension and postretirement plans were as follows:

                                                                                              Postretirement
                                                             Pension benefits                     benefits
                                                        --------------------------      --------------------------
                                                        2000       1999       1998      2000       1999       1998
                                                        ----       ----       ----      ----       ----       ----
                                                                       (Dollars in millions)

Service cost.......................................   $ -        $ 7.3      $ 7.3       $ -       $ -         $ -
Interest cost......................................     1.4        3.0        5.0        1.5        1.6         1.8
Expected return of plan assets.....................    (1.7)      (1.4)       (.9)       (.2)       (.2)        (.2)
Amortization of prior service cost.................     -          -           .2        (.9)       (.8)       (1.6)
Settlement gain....................................     (.3)       -          -           -         -           -
Recognized net actuarial loss......................     -          1.0        2.2         -         -           (.2)
                                                      -----      -----      -----       ----     ------        ----

       Net periodic cost (benefit).................   $ (.6)     $ 9.9      $13.8       $ .4       $ .6        $(.2)
                                                      =====      =====      =====       ====       ====        ====	

A one-percentage-point change in the assumed health care cost trend rates would have an insignificant effect on the net periodic benefit cost of our postretirement benefit obligation.
The Company has qualified defined contribution plans for which substantially all employees are eligible. Company contributions, which match certain voluntary employee contributions to the plan, totaled $9.1 million in 2000, $10.3 million in 1999, and $6.2 million in 1998. Matching contributions are required to be made either in cash or in Conseco common stock.
Litigation
Conseco Finance was served with various related lawsuits filed in the United States District Court for the District of Minnesota. These lawsuits were generally filed as purported class actions on behalf of persons or entities who purchased common stock or options to purchase common stock of Conseco Finance during alleged class periods that generally run from February 1995 to January 1998. One action (Florida State Board of Admin. v. Green Tree Financial Corp., Case No. 98-1162) did not include class action claims. In addition to Conseco Finance, certain current and former officers and directors of Conseco Finance are named as defendants in one or more of the lawsuits. Conseco Finance and other defendants obtained an order consolidating the lawsuits seeking class action status into two actions, one of which pertains to a purported class of common stockholders (In re Green Tree Financial Corp. Stock Litig., Case No. 97-2666) and the other which pertains to a purported class action of stock option traders (In re Green Tree Financial Corp. Options Litig., Case No. 97-2679). Plaintiffs in the lawsuits assert claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. In each case, plaintiffs allege that Conseco Finance and the other defendants violated federal securities laws by, among other things, making false and misleading statements about the current state and future prospects of Conseco Finance (particularly with respect to prepayment assumptions and performance of certain loan portfolios of Conseco Finance) which allegedly rendered Conseco Finance's financial statements false and misleading. On August 24, 1999, the United States District Court for the District of Minnesota issued an order to dismiss with prejudice all claims alleged in the lawsuits. The plaintiffs subsequently appealed the decision to the U.S. Court of Appeals for the 8th Circuit, and the appeal is currently pending. The Company believes that the lawsuits are without merit and intends to continue to defend them vigorously. The ultimate outcome of these lawsuits cannot be predicted with certainty.
A total of forty-five suits were filed against the Company in the United States District Court for the Southern District of Indiana. Nineteen of these cases were putative class actions on behalf of persons or entities that purchased the Company's common stock during alleged class periods that generally run from April 1999 through April 2000. Two cases were
90
CONSECO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
putative class actions on behalf of persons or entities that purchased the Company's bonds during the same alleged class periods. Three cases were putative class actions on behalf of persons or entities that purchased or sold option contracts, not issued by the Company, on the Company's common stock during the same alleged class periods. One case was a putative class action on behalf of persons or entities that purchased the Company's "FELINE PRIDES" convertible preferred stock instruments during the same alleged class periods. With four exceptions, in each of these twenty-five cases two former officers/directors of the Company are named as defendants. In each case, the plaintiffs assert claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. In each case, plaintiffs allege that the Company and the individual defendants violated the federal securities laws by, among other things, making false and misleading statements about the current state and future prospects of Conseco Finance (particularly with respect to performance of certain loan portfolios of Conseco Finance) which allegedly rendered the Company's financial statements false and misleading. The Company believes that these lawsuits are without merit and intends to defend them vigorously. The ultimate outcome of these lawsuits cannot be predicted with certainty.
Eleven of the cases in the United States District Court were filed as purported class actions on behalf of persons or entities that purchased preferred securities issued by various Conseco Financing Trusts, including Conseco Financing Trust V, Conseco Financing Trust VI, and Conseco Financing Trust VII. Each of these complaints named as defendants the Company, the relevant trust (with two exceptions), two former officers/directors of the Company, and underwriters for the particular issuance (with one exception). One complaint also named an officer and all of the Company's directors at the time of issuance of the preferred stock by Conseco Financing Trust VII. In each case, plaintiffs assert claims under Section 11 and Section 15 of the Securities Act of 1933, and the eight complaints also asserted claims under Section 12(a)(2) of that Act. Two complaints also asserted claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and one complaint also asserted a claim under Section 10(b) of that Act. In each case, plaintiffs alleged that the defendants violated the federal securities laws by, among other things, making false and misleading statements, in Prospectuses and/or Registration Statements related to the issuance of preferred securities by the Trust involved, regarding the current state and future prospects of Conseco Finance (particularly with respect to performance of certain loan portfolios of Conseco Finance) which allegedly rendered the disclosure documents false and misleading.
All of the securities cases have now been consolidated into one case in the United States District Court for the Southern District of Indiana, captioned: "In Re Conseco, Inc. Securities Litigation", cause number IP00-585-C-Y/S. An amended complaint was filed on January 12, 2001. The Company intends to defend this lawsuit vigorously. The ultimate outcome cannot be predicted with certainty.
Nine shareholder derivative suits were filed in United States District Court. The complaints named as defendants the current directors, certain former directors, certain non-director officers of the Company (in one case), and, alleging aiding and abetting liability, certain banks which allegedly made loans in relation to the Company's "Stock Purchase Plan" (in these cases). The Company is also named as a nominal defendant in each complaint. Plaintiffs allege that the defendants breached their fiduciary duties by, among other things, intentionally disseminating false and misleading statements concerning the acquisition, performance and proposed sale of Conseco Finance, and engaged in corporate waste by causing the Company to guarantee loans that certain officers, directors and key employees of the Company used to purchase stock under the Stock Purchase Plan. These cases have now been consolidated into one case in the United States District Court for the Southern District of Indiana, captioned:
"In Re Conseco, Inc. Derivative Litigation", cause number IP00655-C-Y/S. An amended complaint is expected to be filed in April 2001. Three similar cases have been filed in the Hamilton County Superior Court in Indiana. Schweitzer v. Hilbert, et al., Cause No. 29001-0004CP251; Evans v. Hilbert, et al., Cause No. 29001-0005CP308 (both Schweitzer and Evans name as defendants certain non-director officers); Gintel v. Hilbert, et al., Cause No. 29003-0006CP393 (naming as defendants, and alleging aiding and abetting liability as to, banks which allegedly made loans in relation to the Stock Purchase Plan). The Company believes that these lawsuits are without merit and intends to defend them vigorously. The ultimate outcome of these lawsuits cannot be predicted with certainty.
Conseco, Inc. and its subsidiaries, Conseco Services, LLC, Washington National Insurance Company and United Presidential Life Insurance Company are currently named defendants in a lawsuit filed in the Circuit Court of Claiborne County, Mississippi, Cause No. CV-99-0106, and captioned "Carla Beaugez, Lois Dearing, Lee Eaton and all other persons identified in the lawsuit v. Conseco, Inc., Conseco Services, Inc., Washington National Company, United Presidential Life Insurance Company and Larry Ratcliff." The claims of the eighty-seven plaintiffs arise out of allegedly wrongful increases of the cost of insurance and decrease in the credited interest rates on universal life policies issued to the plaintiffs by United
91
CONSECO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Presidential Life. The plaintiffs asserted claims including negligent and intentional misrepresentation, fraudulent concealment, fraudulent inducement, common law fraud, and deceptive sales practices. The Company believes this lawsuit is without merit and is defending it vigorously. The ultimate outcome of this lawsuit cannot be predicted with certainty.
Conseco Finance is a defendant in two arbitration proceedings in South Carolina (Lackey v. Green Tree Financial Corporation, n/k/a Conseco Finance Corp. and Bazzle v. Green Tree Financial Corporation, n/k/a Conseco Finance Corp.) where the arbitrator, over Conseco Finance's objection, allowed the plaintiffs to pursue purported class action claims in arbitration. The two purported arbitration classes consist of South Carolina residents who obtained real estate secured credit from Conseco Finance's Manufactured Housing Division (Lackey) and Home Improvement Division (Bazzle) in the early and mid 1990s, and did not receive a South Carolina specific disclosure form relating to selection of attorneys in connection with the credit transactions. The arbitrator, in separate awards issued on July 24, 2000, awarded a total of $26.8 million in penalties and attorneys' fees. The awards were confirmed as judgements in both Lackey and Bazzle. These matters are currently on appeal at the South Carolina Supreme Court. Conseco Finance intends to vigorously challenge the awards and believes that the arbitrator erred by, among other things, conducting class action arbitrations without the authority to do so and misapplying South Carolina law when awarding the penalties. The ultimate outcome of these proceedings cannot be predicted with certainty.
In addition, the Company and its subsidiaries are involved on an ongoing basis in other lawsuits related to their operations. Although the ultimate outcome of certain of such matters cannot be predicted, such lawsuits currently pending against the Company or its subsidiaries are not expected, individually or in the aggregate, to have a material adverse effect on the Company's consolidated financial condition, cash flows or results of operations.
Guaranty Fund Assessments
The balance sheet at December 31, 2000, includes: (i) accruals of $20.4 million, representing our estimate of all known assessments that will be levied against the Company's insurance subsidiaries by various state guaranty associations based on premiums written through December 31, 2000; and (ii) receivables of $11.9 million that we estimate will be recovered through a reduction in future premium taxes as a result of such assessments. At December 31, 1999, such guaranty fund assessment related accruals were $29.2 million and such receivables were $13.1 million. These estimates are subject to change when the associations determine more precisely the losses that have occurred and how such losses will be allocated among the insurance companies. We recognized expense for such assessments of $8.4 million in 2000, $5.0 million in 1999 and $16.2 million in 1998.
Guarantees
In conjunction with certain sales of finance receivables, we provided guarantees aggregating approximately $1.5 billion at December 31, 2000. We consider any potential payments related to these guarantees in the projected net cash flows used to determine the value of our interest-only securities. During 2000, advances of interest and principal payments related to such guarantees totaled $23.2 million.
We have guaranteed bank loans totaling $552.9 million to approximately 160 current and former directors, officers and key employees. The funds were used by the participants to purchase approximately 18.4 million shares of Conseco common stock in open market or negotiated transactions with independent parties. Such shares are held by the bank as collateral for the loans. In addition, Conseco has provided loans to participants for interest on the bank loans totaling $96.8 million. During the third quarter of 2000, the Company negotiated a new guarantee with the banks which expires on December 31, 2003, and is available to participants who qualify and choose to participate in a new lending program. A key goal of the program is to reduce the balance of each participant's bank and interest loans to $25 per share of stock purchased through the program. Such reductions are to occur through cash payments and pay for performance programs. In order to receive the pay for performance program benefits, participants in the new program are required to put to the Company, 75 percent of the value in excess of $25 per share of the shares purchased through this program, as determined on December 31, 2003. A subsidiary of Conseco has pledged $50 million of cash collateral in conjunction with the guarantee of a portion of the bank loans. Conseco also granted a security interest in most of its assets in conjunction with the guarantee of a portion of the bank loans. At December 31, 2000, the guaranteed bank loans and interest loans exceeded the value of the common stock collateralizing the loans by approximately $450 million. All participants have agreed to
92
CONSECO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
indemnify Conseco for any loss incurred on their loans. We regularly evaluate these guarantees and loans in light of the collateral and the creditworthiness of the participants. We established an additional noncash provision in connection with these guarantees and loans of $231.5 million ($150.0 million after the income tax benefit) during 2000. Such provision is included as a component of the provision for losses. At December 31, 2000, the total reserve for losses on the loan guarantees was $250.4 million.
Company-Obligated Mandatorily Redeemable Preferred Securities of Subsidiary Trusts
Certain wholly owned subsidiary trusts have issued preferred securities in public offerings. The trusts used the proceeds from these offerings to purchase subordinated debentures from Conseco. The terms of the preferred securities parallel the terms of the debentures, which account for substantially all trust assets. The preferred securities are to be redeemed on a pro rata basis, to the same extent as the debentures are repaid. Under certain circumstances involving a change in law or legal interpretation, the debentures may be distributed to the holders of the preferred securities. Our obligations under the debentures and related agreements, taken together, provide a full and unconditional guarantee of payments due on the preferred securities. The debentures issued to the subsidiary trusts and the common securities purchased by Conseco from the subsidiary trusts are eliminated in the consolidated financial statements.
In April 2000, the Company and the holder of the Redeemable Hybrid Income Overnight Shares ("RHINOS") issued in 1999 agreed to the repurchase by the Company of the RHINOS at their $250 million par value. The Company recognized an extraordinary loss of $3.3 million (net of income taxes of $1.8 million) in the second quarter of 2000 related to the redemption.
Company-obligated mandatorily redeemable preferred securities of subsidiary trusts at December 31, 2000, were as follows:

                                                        Year                  Carrying   Distribution     Earliest/mandatory
                                                       issued     Par value     value        rate          redemption dates
                                                       ------     ---------     -----        ----          ----------------
                                                            (Dollars in millions)
Trust Originated Preferred Securities................   1999     $  300.0      $  292.6     9.44%          2004/2029  (c)
Trust Originated Preferred Securities ...............   1998        500.0         490.0     8.70           2003/2028  (c)
Trust Originated Preferred Securities................   1998        230.0         225.1     9.00           2003/2028  (c)
Capital Securities (a)...............................   1997        300.0         300.0     8.80                2027
FELINE PRIDES (b)....................................   1997        503.6         496.2     6.75                2003
Trust Originated Preferred Securities................   1996        275.0         275.0     9.16           2001/2026  (c)
Capital Trust Pass-through Securities (a)............   1996        325.0         325.0     8.70                2026
                                                                 --------      --------

                                                                 $2,433.6      $2,403.9
                                                                 ========      ========
---------------
(a)  These securities may be redeemed anytime at: (i) the principal balance;
     plus (ii) a premium equal to the excess, if any, of the sum of the
     discounted present value of the remaining scheduled payments of principal
     and interest using a current market interest rate over the principal amount
     of securities to be redeemed.

(b)  Each FELINE PRIDES includes: (a) a stock purchase contract under which the
     holder: (i) will purchase a number of shares of Conseco common stock on
     February 16, 2001 (ranging from .9363 to 1.1268 shares per FELINE PRIDES
     equivalent to $44.38 to $53.40 per common share) under the terms specified
     in the stock purchase contract; and (ii) will receive a contract adjustment
     payment equal to .25 percent of the value of the security; and (b) a
     beneficial ownership of a 6.75 percent trust originated preferred security.
     Each holder received aggregate cumulative cash distributions at the annual
     rate of 7 percent of the $50 stated amount per security, payable quarterly.
     On February 16, 2001, the trust preferred securities component of the
     FELINE PRIDES were retained by the Company (and subsequently retired) as
     payment under the stock purchase contract in accordance with their terms
     and, as a result, we issued 11.4 million shares of Conseco common stock to
     the holders of the FELINE PRIDES.

(c)  The mandatory redemption dates of these securities may be extended for up
     to 19 years.	

93
CONSECO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Reclassification Adjustments Included in Comprehensive Income
The changes in unrealized appreciation (depreciation) included in comprehensive income are net of reclassification adjustments for after-tax net gains (losses) from the sale of investments included in net income of approximately $220 million, $(25) million and $475 million for the years ended December 31, 2000, 1999 and 1998, respectively.
9. SPECIAL CHARGES
Special Charges Incurred in 2000
The Company incurred significant special charges during 2000, primarily related to the restructuring of our debt, restructuring of our finance business and payments made pursuant to employment contracts. The following table summarizes the special charges, which are further described in the paragraphs which follow (dollars in millions):

Advisory and professional fees related to debt restructuring................     $  9.9

Restructuring of finance business:
     Lower of cost or market adjustment for finance receivables
       identified for sale..................................................      103.3
     Loss on sale of transportation loans and vendor services
       financing business...................................................       51.0
     Loss on sale of asset-based loans......................................       68.2
     Loss on sale of subprime automobile and bankcard business, net.........       61.9
     Costs related to closing offices and streamlining businesses...........       31.2
     Abandonment of computer processing systems.............................       35.8
     Advisory fees and warrant paid and/or issued to Lehman
       and other investment banks...........................................      122.4

Executive contracts:
     Executive termination payment .........................................       72.5
     Chief Executive Officer signing payment................................       45.0
     Warrants issued to General Electric Company............................       21.0

Reserve methodology change at bank subsidiary...............................       48.0
Other items.................................................................       29.1
                                                                                 ------

         Special charges before income tax benefit..........................      699.3

Income tax benefit related to special charges...............................      181.0
                                                                                 ------

         Special charges, net of income tax benefit.........................     $518.3
                                                                                 ======	

Advisory and professional fees related to debt restructuring
During 2000, we incurred $9.9 million of non-deferrable advisory and professional fees primarily related to the restructuring of our bank credit facilities.
Lower of cost or market adjustment for finance receivables identified for sale
On July 27, 2000, we announced several courses of action to restructure our finance business, including the sale or runoff of the finance receivables of several business lines. The carrying value of the loans held for sale has been reduced to the lower of cost or market, consistent with our accounting policy for such loans. The reduction in value of these loans of $103.3 million
(including a $45.9 million increase to the allowance for credit losses)
primarily relates to transportation finance receivables (primarily loans for the purchase of trucks and buses). These loans have experienced a significant decrease in value as a result of the adverse economic effect that the recent increases in oil prices and competition have had on borrowers in the transportation business.
94
CONSECO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Loss on sale of transportation loans and vendor services financing business
During the fourth quarter of 2000, we sold transportation loans with a carrying value of $566.0 million (after the market adjustment described above) in whole loan sale transactions. We recognized an additional loss of $30.7 million on the sale. During 2000, we recognized a special charge and reduced goodwill by $20.3 million, representing the difference between: (i) the carrying value of the net assets of the vendor services financing business; and (ii) the anticipated proceeds from the sale of such business, which was completed in the first quarter of 2001.
Loss on sale of asset-based loans
During the third quarter of 2000, we sold asset-based loans with a carrying value of $216.1 million in whole loan sale transactions. We recognized a loss of $68.2 million on these sales.
Loss on sale of subprime automobile and bankcard business
During the second quarter of 2000, we sold all of the finance receivables of our subprime automobile financing and servicing companies and terminated their operations. In addition, we sold substantially all of our bankcard (Visa and Mastercard) portfolio. We recognized a net loss on these sales of $61.9 million.
Costs related to closing offices and streamlining businesses
Our restructuring activities included the closing of several branch offices and streamlining our businesses. These activities included a reduction in the work force of approximately 1,700 employees. The Company incurred a charge of $8.6 million related to severance costs paid to terminated employees in 2000. The Company also incurred lease termination and direct closing costs of $12.3 million associated with the branch offices closed in conjunction with the restructuring activities. In addition, fixed assets and leasehold improvements of $10.3 million were abandoned when the branch offices were closed.
Abandonment of computer processing systems
We recorded a $35.8 million charge in 2000 to write off the carrying value of capitalized computer software costs for projects that have been abandoned in conjunction with our restructuring. These costs are primarily associated with: (i) computer processing systems under development that would require significant additional expenditures to complete and that are inconsistent with our current business plan; and (ii) computer systems related to the lines of business discontinued by the Company and therefore are no longer required.
Advisory fees and warrant paid and/or issued to Lehman and other investment banks
In May 2000, we sold approximately $1.3 billion of finance receivables to Lehman and its affiliates for cash and a right to share in future profits from a subsequent sale or securitization of the assets sold. We paid a $25.0 million transaction fee to Lehman in conjunction with the sale, which was included in special charges. Such loans were sold to Lehman at a value which approximated net book value, less the fee paid to Lehman.
During the second and third quarters of 2000, we repurchased a significant portion of the finance receivables sold to Lehman. These finance receivables were subsequently included in securitization transactions structured as financings. The cost of the finance receivables purchased from Lehman did not differ materially from the book value of the loans prior to their sale to Lehman.
Lehman has also amended its master repurchase financing facilities with our finance operations to expand the types of assets financed. As partial consideration for the financing transaction, Lehman received a warrant, with a nominal exercise price, for five percent of the common stock of Conseco Finance. The warrant has a five-year term. After three years, the holder of the warrant or Conseco Finance may cause the warrant and any stock issued upon its exercise to be purchased for cash at an appraised value. Since the warrant permits cash settlement at fair value at the option of the holder of the warrant, it has been classified as a liability measured at fair value, with changes in its value reported in earnings.
95
CONSECO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The warrant would be cancelled in certain circumstances in the event the holder thereof or an affiliate participates in a group that purchases Conseco Finance. The initial $48.1 million estimated value of the warrant was recognized as an expense during the second quarter of 2000. The estimated fair value of the warrant did not change materially during 2000.
We also paid Lehman $20.0 million in fees for its efforts to form an investor group to purchase Conseco Finance. In addition, the Company paid other investment banks and financial institutions $24.0 million in advisory fees related to the potential sale of Conseco Finance and consultation regarding various other transactions.
We also paid Lehman $5.3 million in advisory fees related to the finance business and debt restructuring.
Executive Terminations
On April 28, 2000, Conseco and Stephen C. Hilbert, the Company's former Chairman and Chief Executive Officer, entered into an agreement pursuant to which Mr. Hilbert's employment was terminated. As contemplated by the terms of his employment agreement, Mr. Hilbert received: (i) $72.5 million (prior to required withholdings for taxes), an amount equal to five times his salary and the non-discretionary bonus amount (as defined in his employment agreement) for this year; less (ii) the amount due under a secured loan of $23 million, plus accrued interest, made to Mr. Hilbert on April 6, 2000. Mr. Hilbert also received the bonus of $3,375,000 payable under his employment agreement for the first quarter of 2000. Conseco agreed to continue to treat Mr. Hilbert as though he was an employee/participant for purposes of the guaranteed bank loans and the loans for interest on such loans pursuant to the stock purchase program. Conseco also entered into a consulting agreement with Mr. Hilbert pursuant to which Mr. Hilbert has agreed to provide consulting services up to an average of 25 hours per month for a period of three years. Mr. Hilbert also agreed not to compete with Conseco during the term of the consulting agreement. On April 27, 2000, Mr. Hilbert was granted options to purchase an aggregate of 2,000,000 shares of Conseco common stock at a price of $5.75 per share (the average of the high and low sales prices on the New York Stock Exchange on such date). The options expire on April 26, 2003.
On April 28, 2000, Conseco and Rollin M. Dick, the Company's former Chief Financial Officer, entered into an agreement pursuant to which Mr. Dick's employment was terminated. As contemplated by the terms of his employment agreement, Conseco agreed to pay Mr. Dick his salary of $250,000 per year through December 31, 2001, and he also received the bonus of $187,500 payable under his employment agreement for the first quarter of 2000. Conseco also agreed to continue to treat Mr. Dick as though he was an employee/participant for purposes of the guaranteed bank loans and the loans for interest on such loans pursuant to the stock purchase program. Conseco also entered into a consulting agreement with Mr. Dick pursuant to which Mr. Dick has agreed to provide consulting services up to an average of 25 hours per month for a period of three years. Mr. Dick also agreed not to compete with Conseco during the term of the consulting agreement. On April 27, 2000, Mr. Dick was granted options to purchase an aggregate of 600,000 shares of Conseco common stock at a price of $5.75 per share. The options expire on April 26, 2003.
Executive Hiring
On June 28, 2000, the Company hired Gary C. Wendt as its Chief Executive Officer. Pursuant to the terms of his employment agreement, Mr. Wendt received a payment of $45 million (prior to required withholdings for taxes) and was granted options to purchase an aggregate of 10,000,000 shares of Conseco common stock at a price of $5.875 per share (the average of the high and low sales price on the New York Stock Exchange on the date on which the substantial terms of Mr. Wendt's employment were agreed to). The options vest over the next five years and expire on June 28, 2010. The Company also issued 3,200,000 shares of restricted stock to Mr. Wendt. The restrictions on the stock lapse if Mr. Wendt remains employed by Conseco through June 30, 2002, or upon a "change in control" of the Company. The value of the restricted shares ($18.8 million) will be recognized as an expense to the Company over the two year period ending June 30, 2002. Mr. Wendt is also being provided certain supplemental retirement, insurance and other benefits under the terms of his employment agreement.
Warrants issued to General Electric Company
In conjunction with Mr. Wendt's hiring and his release from noncompete provisions of a prior agreement, the Company issued a warrant to a subsidiary of General Electric Company to purchase 10,500,000 shares of Conseco common
96
CONSECO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
stock at a purchase price of $5.75 per share. The estimated value of the warrant at the date of issuance ($21.0 million) was recognized as a special charge.
Reserve Methodology Change at Bank Subsidiary
During the fourth quarter of 2000, we increased the allowance for credit losses related to credit card receivables held by our bank subsidiary. We implemented a more conservative approach pursuant to a recent regulatory examination, which resulted in this special charge.
Special Charges Incurred in 1998
During 1998, we recognized special charges of $148.0 million related to the Merger including: $45.0 million transaction costs; $71.0 million severance and other employment related costs; and $32.0 million other costs. Transaction costs included expenses related to the Merger such as fees paid for investment bankers, attorneys, accountants and printers. Severance and other employment related costs included contractual severance and other benefits due to certain executives. Other costs included the write-off of computer equipment and related software that will no longer be used, losses for facilities to be vacated, increases to legal expense accruals, and various other costs.
10. SHAREHOLDERS' EQUITY:
We are authorized to issue up to 20 million shares of preferred stock. On December 15, 1999, we issued $500.0 million (2.6 million shares) of Series F Common-Linked Convertible Preferred Stock (the "Series F Preferred Stock") to Thomas H. Lee Company and affiliated investors. The Series F Preferred Stock is convertible into Conseco common stock at a common equivalent rate of $19.25 per share. The Series F Preferred Stock pays a 4 percent dividend, of which an amount at least equal to the common dividend will be payable in cash, and the remainder may be paid in additional Series F shares valued at $19.25 per share. In September 2000, we suspended the payment of common stock dividends, so the entire third and fourth quarter dividends on the Series F shares were paid in additional Series F shares. The Series F Preferred Stock ranks senior to the common stock outstanding and has a liquidation preference of $192.50 per share plus all declared and unpaid dividends.
In February 1999, we redeemed all $105.5 million (carrying value) of outstanding shares of Preferred Redeemable Increased Dividend Equity Securities, 7% PRIDES Convertible Preferred Stock ("PRIDES") in exchange for 5.9 million shares of Conseco common stock.
97
 
CONSECO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Changes in the number of shares of common stock outstanding during the years ended December 31, 2000, 1999 and 1998 were as follows:

                                                                                       2000           1999          1998
                                                                                       ----           ----          ----
                                                                                              (Shares in thousands)
Balance, beginning of year..........................................................  327,679        315,844       310,012
    Stock options exercised.........................................................       94          5,130         9,125
    Stock warrants exercised........................................................      -              -             862
    Issuance of shares..............................................................      -            3,582           -
    Common shares converted from convertible subordinated debentures................      -              -           2,246
    Common shares converted from PRIDES.............................................      -            5,904           578
    Shares issued under employee benefit compensation plans:
       Deferred compensation plan of former Chairman and Chief
          Executive Officer.........................................................    1,491            -             -
       Other........................................................................      301            126            46
    Settlement of forward contract and common stock acquired........................   (4,247)        (2,907)       (7,025)
                                                                                      --------       --------      --------

Balance, end of year................................................................  325,318        327,679       315,844
                                                                                      =======        =======       =======	

Dividends declared on common stock for 2000, 1999 and 1998, were $.10, $.580 and $.530 per common share, respectively. As part of our plan to strengthen our capital structure, the Board of Directors reduced the cash dividend on our common stock to a quarterly rate of 5 cents per share, which was paid in April and July of 2000. In September 2000, cash dividend payments on our common stock were suspended. The amended bank credit facilities prohibit the payment of cash dividends on our common stock until the Company has received investment grade ratings on its outstanding public debt and the bank credit facilities maturing in December 2001 are paid in full.
During 1999, we sold 3.6 million shares of our common stock to an unaffiliated party (the "Buyer"). Simultaneous with the issuance of the common stock, we entered into a forward transaction with the Buyer to be settled at $29.0625 per share in a method of our choosing (i.e., cash settlement, transfer of net shares to or from the Buyer, or transfer of net cash to or from the Buyer). We settled the contract in March 2000 by repurchasing 3.6 million shares held by the Buyer.
Conseco's 1994 Stock and Incentive Plan authorizes the granting of options to employees and directors of the Company to purchase up to 24 million shares of Conseco common stock at a price not less than its market value on the date the option is granted. In 1997, the Company adopted the 1997 Non-qualified Stock Option Plan, which authorizes the granting of non-qualified options to employees of the Company to purchase shares of Conseco common stock. The aggregate number of shares of common stock for which options may be granted under the 1997 plan, when added to all outstanding, unexpired options under the Company's employee benefit plans, shall not exceed 20 percent of the total of shares of common stock outstanding plus the number of shares issuable upon conversion of any outstanding convertible security on the date of grant (calculated in the manner set forth in the 1997 plan). The options may become exercisable immediately or over a period of time. The plans also permit granting of stock appreciation rights and certain other awards.
98
 
CONSECO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The stock option activity and related information includes the combined activity and information of both Conseco and Conseco Finance for all periods. A summary of the Company's stock option activity and related information for the years ended December 31, 2000, 1999 and 1998, is presented below (shares in thousands):

                                                   2000                       1999                     1998
                                          ---------------------     ----------------------    ----------------------
                                                        Weighted                  Weighted                  Weighted
                                                         average                   average                   average
                                                        exercise                  exercise                  exercise
                                          Shares          price      Shares         price      Shares         price
                                          ------          -----      ------         -----      ------         -----

Outstanding at the beginning of year....  33,750       $32.15       32,085       $30.91        33,511        $24.78

Options granted (a).....................  18,404         7.10        7,725        26.37        12,685         38.35

Exercised...............................     (95)        8.15       (5,130)       15.83        (9,125)        19.36
Forfeited or terminated................. (15,952)       34.56         (930)       30.37        (4,986)        29.78
                                         -------                    -------                    -------

Outstanding at the end of the year......  36,107        18.38       33,750        32.15        32,085         30.91
                                          ======                    ======                     ======

Options exercisable at year-end.........  13,905                    19,937                     16,213
                                          ======                    ======                     ======

Available for future grant............    34,853                    37,290                     32,873
                                          ======                    ======                     ======
--------------------
(a)  Options granted during 2000 included: (i) options to purchase 2,000,000
     shares of Conseco common stock at a price of $5.75 per share issued to the
     former Chairman and Chief Executive Officer, expiring in April 2003; (ii)
     options to purchase 600,000 shares of Conseco common stock at a price of
     $5.75 per share issued to the former Chief Financial Officer, expiring in
     April 2003; and (iii) options to purchase 10,000,000 shares of Conseco
     common stock at a price of $5.875 per share issued to the new Chief
     Executive officer, expiring June 2010.	

The following table summarizes information about stock options outstanding at December 31, 2000 (shares in thousands):

                                                      Options outstanding                  Options exercisable
                                            ----------------------------------------    ------------------------
                                                            Weighted        Weighted                    Weighted
                                                             average         average                     average
Range of                                      Number        remaining       exercise      Number        exercise
exercise prices                             outstanding  life (in years)      price     exercisable       price
---------------                             -----------  ---------------      -----     -----------       -----

  $5.00-      16.57......................   19,466            7.6            $ 7.53        4,702        $ 8.95
  17.63-      26.19......................    6,664            7.0             23.57        3,765         24.30
  27.19-      30.41......................    2,103           12.0             30.11          806         29.72
  30.73  -    45.84.....................     6,640            6.0             35.33        4,452         35.64
  46.71  -    51.28.....................     1,234            7.3             50.41          180         48.76
                                            ------                                        ------

                                            36,107                                        13,905
                                            ======                                        ======	

99
CONSECO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
We apply Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" and related interpretations in accounting for our stock option plans. Since the amount an employee must pay to acquire the stock is equal to the market price of the stock on the grant date, no compensation cost has been recognized for our stock option plans. Had compensation cost been determined based on the fair value at the grant dates for awards granted after January 1, 1995, consistent with the method of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation", the Company's pro forma net income and pro forma earnings per share for the years ended December 31, 2000, 1999 and 1998 would have been as follows:

                                                   2000                        1999                          1998
                                         -------------------------   -------------------------     ------------------------
                                         As reported     Pro forma   As reported     Pro forma     As reported    Pro forma
                                         -----------     ---------   -----------     ---------     -----------    ---------
                                                            (Dollars in millions, except per share amounts)

Net income (loss)..................... $(1,191.2)     $(1,218.3)       $595.0          $559.9        $467.1        $389.9
Basic earnings (loss) per share.......     (3.69)         (3.77)         1.83            1.73          1.47          1.23
Diluted earnings (loss) per share.....     (3.69)         (3.77)         1.79            1.69          1.40          1.17	

We estimated the fair value of each option grant used to determine the pro forma amounts summarized above using the Black-Scholes option valuation model with the following weighted average assumptions for 2000, 1999 and 1998:

                                                     2000 Grants               1999 Grants               1998 Grants
                                                     -----------               -----------               -----------

Weighted average risk-free interest rates......           6.3%                       5.6%                   5.4%
Weighted average dividend yields...............           2.4%                       2.2%                   1.2%
Volatility factors.............................            40%                        35%                    35%
Weighted average expected life.................     6.1 years                    4 years                4 years
Weighted average fair value per share..........         $2.84                      $7.34                 $12.16	

At December 31, 2000, a total of 125 million shares of common stock were reserved for issuance under stock options, stock bonus and deferred compensation plans, Series F Preferred Stock, warrants to buy 700,000 shares of Conseco common stock for $19.71 per share at anytime through September 29, 2006 and warrants to buy 10,500,000 shares of Conseco common stock for $5.75 at any time through June 2005.
100
 
CONSECO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
A reconciliation of income and shares used to calculate basic and diluted earnings per share is as follows:

                                                                                 2000          1999           1998
                                                                                 ----          ----           ----
                                                                           (Dollars in millions and shares in thousands)
Income (loss):
   Net income (loss)...................................................     $(1,191.2)        $595.0          $467.1
   Preferred stock dividends...........................................          11.0            1.5             7.8
                                                                            ---------         ------          ------

     Income (loss) applicable to common ownership for basic
       earnings per share..............................................      (1,202.2)         593.5           459.3

   Effect of dilutive securities:
     Preferred stock dividends.........................................           -              1.5             7.8
                                                                            ---------         ------          ------

     Income (loss) applicable to common ownership and assumed
       conversions for diluted earnings per share......................     $(1,202.2)        $595.0          $467.1
                                                                            =========         ======          ======

Shares:
   Weighted average shares outstanding for basic earnings per share....       325,953        324,635         311,785
   Effect of dilutive securities on weighted average shares:
     Stock options.....................................................          -             2,231           8,317
     Employee benefit plans............................................          -             2,064           1,942
     PRIDES............................................................          -             1,643           6,141
     Convertible securities............................................          -             1,959           4,516
     Forward purchase agreement........................................          -               361             -
                                                                            ---------         ------          ------

       Dilutive potential common shares................................          -             8,258          20,916
                                                                            ---------         ------          ------

         Weighted average shares outstanding for diluted earnings
           per share...................................................       325,953        332,893         332,701
                                                                              =======        =======         =======	

There were no dilutive common stock equivalents during 2000 because of the net loss realized by the Company.
101
 
CONSECO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
11. OTHER OPERATING STATEMENT DATA:
Insurance policy income consisted of the following:

                                                                                           2000         1999         1998
                                                                                           ----         ----         ----
                                                                                                (Dollars in millions)
Traditional products:
    Direct premiums collected.........................................................  $6,307.3     $ 6,377.5   $ 6,189.5
    Reinsurance assumed...............................................................     305.4         547.8       316.0
    Reinsurance ceded.................................................................    (248.3)       (418.6)     (541.3)
                                                                                        --------     ---------   ---------

          Premiums collected, net of reinsurance......................................   6,364.4       6,506.7     5,964.2
    Change in unearned premiums.......................................................       1.1          (3.9)       29.5
    Less premiums on universal life and products
       without mortality and morbidity risk which are
       recorded as additions to insurance liabilities ................................  (2,731.1)     (3,023.3)   (2,585.7)
                                                                                        --------     ---------   ---------
          Premiums on traditional products with mortality or morbidity risk,
             recorded as insurance policy income......................................   3,634.4       3,479.5     3,408.0
Fees and surrender charges on interest-sensitive products.............................     585.9         561.0       540.8
                                                                                        --------     ---------   ---------

          Insurance policy income.....................................................  $4,220.3     $ 4,040.5   $ 3,948.8
                                                                                        ========     =========   =========	

The four states with the largest shares of 2000 collected premiums were California (9.6 percent), Illinois (8.0 percent), Florida (8.0 percent) and Texas (6.8 percent). No other state accounted for more than 6 percent of total collected premiums.
Other operating costs and expenses were as follows:

                                                                                           2000        1999          1998
                                                                                           ----        ----          ----
                                                                                                (Dollars in millions)
Commission expense..................................................................    $  273.6     $  249.2     $  229.5
Salaries and wages..................................................................       715.8        542.0        423.4
Other...............................................................................       656.8        562.0        566.0
                                                                                        --------     --------     --------

       Total other operating costs and expenses.......................................  $1,646.2     $1,353.2     $1,218.9
                                                                                        ========     ========     ========	

102
 
CONSECO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Changes in the cost of policies purchased were as follows:

                                                                                           2000         1999         1998
                                                                                           ----         ----         ----
                                                                                                (Dollars in millions)

Balance, beginning of year............................................................  $2,258.5     $2,425.2    $2,466.4
    Additional acquisition expense on acquired policies...............................      14.6         17.9        75.0
    Amortization......................................................................    (275.4)      (437.2)     (369.2)
    Amounts related to fair value adjustment of actively managed fixed maturities          (78.9)       203.3       167.7
    Balance sheet reclassification adjustments........................................      49.3          -           -
    Other.............................................................................     (13.3)        49.3        85.3
                                                                                        --------     --------    --------

Balance, end of year..................................................................  $1,954.8     $2,258.5    $2,425.2
                                                                                        ========     ========    ========	

Based on current conditions and assumptions as to future events on all policies in force, the Company expects to amortize approximately 13 percent of the December 31, 2000, balance of cost of policies purchased in 2001, 11 percent in 2002, 9 percent in 2003, 8 percent in 2004 and 7 percent in 2005. The discount rates used to determine the amortization of the cost of policies purchased averaged 7 percent in each of the three years ended December 31, 2000.
Changes in the cost of policies produced were as follows:

                                                                                           2000         1999         1998
                                                                                           ----         ----         ----
                                                                                                (Dollars in millions)

Balance, beginning of year............................................................  $2,087.4     $1,453.9    $  915.2
   Additions..........................................................................     779.7        799.0       707.0
   Amortization.......................................................................    (286.8)      (242.1)     (219.5)
   Amounts related to fair value adjustment of actively managed fixed maturities             7.4         77.4        50.0
   Balance sheet reclassification adjustments.........................................     (87.9)         -           -
   Reinsurance and other..............................................................     (19.3)         (.8)        1.2
                                                                                        --------     --------    --------

Balance, end of year..................................................................  $2,480.5     $2,087.4    $1,453.9
                                                                                        ========     ========    ========	

12. CONSOLIDATED STATEMENT OF CASH FLOWS:
The following disclosures supplement our consolidated statement of cash flows:

                                                                                           2000         1999         1998
                                                                                           ----         ----         ----
                                                                                                (Dollars in millions)

Non-cash items not reflected in the investing and financing  activities  section
   of the consolidated statement of cash flows:
     Issuance of common stock under stock option and employee benefit plans.............   $ 5.8       $ 28.2        $ 9.2
     Issuance of convertible preferred shares...........................................     8.4          -            -
     Issuance of warrants to Lehman.....................................................    48.1          -            -
     Issuance of warrants to General Electric Corporation...............................    21.0          -            -
     Tax benefit related to the issuance of common stock under employee benefit plans        -           25.0         63.1
     Conversion of preferred stock and convertible debentures into common stock              -          105.5         77.7
     Shares returned by former executive due to recomputation of bonus..................     -            -           23.4	

103
 
CONSECO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The following reconciles net income to net cash provided by operating activities:

                                                                                             2000          1999         1998
                                                                                             ----          ----         ----
                                                                                                   (Dollars in millions)
Cash flows from operating activities:
   Net income (loss)...................................................................   $(1,191.2)      $  595.0      $ 467.1
   Adjustments to reconcile net income (loss) to net cash provided by
     operating activities:
       Gain on sale of finance receivables.............................................        (7.5)        (550.6)      (745.0)
       Points and origination fees received............................................         -            390.0        298.3
       Interest-only securities investment income......................................      (106.6)        (185.1)      (132.9)
       Cash received from interest-only securities, net................................       187.6          442.6        358.0
       Servicing income................................................................      (108.2)        (165.3)      (140.0)
       Cash received from servicing activities.........................................       123.8          175.7        159.9
       Provision for losses............................................................       585.7          147.6         44.2
       Amortization and depreciation...................................................       745.9          844.3        775.9
       Income taxes....................................................................      (528.4)         191.3         86.7
       Insurance liabilities...........................................................       539.7          516.3         77.8
       Accrual and amortization of investment income...................................       168.5         (578.2)       (73.3)
       Deferral of cost of policies produced and purchased.............................      (794.3)        (816.9)      (782.0)
       Impairment charges..............................................................       515.7          554.3        549.4
       Special charges.................................................................       483.1           (7.6)        54.3
       Cumulative effect of change in accounting.......................................        85.2            -            -
       Minority interest...............................................................       223.5          204.2        137.5
       Extraordinary charge on extinguishment of debt..................................         -              -           66.4
       Net investment (gains) losses...................................................       358.3          156.2       (208.2)
       Other...........................................................................       (75.5)         (40.1)       (14.5)
       Payment of taxes in settlement of prior years...................................          -           (85.1)          -
                                                                                          ----------      --------      -------

         Net cash provided by operating activities.....................................   $ 1,205.3       $1,788.6      $ 979.6
                                                                                          =========       ========      =======	

13. STATUTORY INFORMATION:
Statutory accounting practices prescribed or permitted by regulatory authorities for the Company's insurance subsidiaries differ from GAAP. Our insurance subsidiaries reported the following amounts to regulatory agencies, after appropriate elimination of intercompany accounts:

                                                                                                      2000          1999
                                                                                                      ----          ----
                                                                                                     (Dollars in millions)

Statutory capital and surplus....................................................................   $1,881.8     $2,170.5
Asset valuation reserve..........................................................................      266.8        362.8
Interest maintenance reserve.....................................................................      381.0        504.3
Portion of surplus debenture carried as a liability .............................................         -          33.4
                                                                                                    ---------    --------

      Total......................................................................................   $2,529.6     $3,071.0
                                                                                                    ========     ========	

104
 
CONSECO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The statutory capital and surplus shown above included investments in up-stream affiliates, all of which were eliminated in the consolidated financial statements prepared in accordance with GAAP, as follows:

                                                                                                      2000          1999
                                                                                                      ----          ----
                                                                                                     (Dollars in millions)

Securitization  debt issued by special  purpose  entities and  guaranteed by our
   finance subsidiary,  all of which was purchased by our insurance subsidiaries
   prior to the acquisition of Conseco Finance (a).................................................   $ 72.1       $ 72.6

Preferred and common stock of intermediate holding company.........................................    192.7        201.8

Common stock of Conseco (39.8 million shares)......................................................     44.1         59.6

Other..............................................................................................      2.5          2.5
                                                                                                      ------       ------

      Total........................................................................................   $311.4       $336.5
                                                                                                      ======       ======
--------------------
(a)  Total par value, amortized cost and fair value of securities issued by
     special purpose entities which hold loans originated by our finance
     subsidiary (including the securities that are not guaranteed by Conseco
     Finance, and therefore are not considered affiliated investments) were
     $283.7 million, $278.9 million and $261.1 million, respectively.	

The statutory net income (loss) of our life insurance subsidiaries was $(70.8) million, $181.1 million and $276.0 million in 2000, 1999 and 1998, respectively. Included in such net income (loss) are net realized capital gains
(losses), net of income taxes, of $(200.8) million, $1.2 million and $(6.5)
million in 2000, 1999 and 1998, respectively. In addition, the insurance subsidiaries pay fees and interest to Conseco or its non-life subsidiaries; such amounts totaled $264.4 million, $274.3 million and $205.1 million in 2000, 1999 and 1998, respectively.
State insurance laws generally restrict the ability of insurance companies to pay dividends or make other distributions. In 2001, our insurance subsidiaries may pay dividends to Conseco of $162.3 million without permission from state regulatory authorities. During 2000, our insurance subsidiaries paid dividends to Conseco totaling $178.0 million.
In 1998, the National Association of Insurance Commissioners adopted codified statutory accounting principles in a process referred to as codification. Such principles are summarized in the Accounting Practices and Procedures Manual. The revised manual is effective January 1, 2001. The domiciliary states of our insurance subsidiaries have adopted the provisions of the revised manual or, with respect to some states, adopted the manual with certain modifications. The revised manual has changed, to some extent, prescribed statutory accounting practices and will result in changes to the accounting practices that our insurance subsidiaries use to prepare their statutory-basis financial statements. However, we believe the impact of these changes to our insurance subsidiaries' statutory-based capital and surplus as of January 1, 2001, will not be significant.
14. BUSINESS SEGMENTS:
We manage our business operations through two segments, based on the products offered in addition to the corporate segment.
Finance segment. Our finance segment provides a variety of finance products including: loans for the purchase of manufactured housing, home improvements and various consumer products, home equity loans, private label credit card programs, and floorplan financing. These products are primarily marketed through intermediary channels such as dealers, vendors, contractors and retailers.
Insurance and fee-based segment. Our insurance and fee-based segment provides supplemental health, annuity and life insurance products to a broad spectrum of customers through multiple distribution channels, each focused on a specific market segment. These products are primarily marketed through career agents, professional independent producers and direct
105
CONSECO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
marketing. Fee-based activities include services performed for other companies, including: (i) investment management; and (ii) insurance product marketing.
Corporate and other segment. Our corporate segment includes certain investment activities, such as our venture capital investment in the wireless communication company, TeleCorp, and our ownership interest in the riverboat casino in Lawrenceberg, Indiana. In addition, the corporate segment includes interest expense related to the Company's corporate debt, special corporate charges, income from the major medical lines of business which we intend to sell and other income and expenses. Corporate expenses are net of charges to our subsidiaries for services provided by the corporate operations.
106
 
CONSECO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Segment operating information was as follows:

                                                                                  2000         1999         1998
                                                                                  ----         ----         ----
                                                                                       (Dollars in millions)
Revenues:
   Insurance and fee-based segment:
     Insurance policy income:
       Annuities.............................................................  $  137.5     $  102.5      $   98.7
       Supplemental health...................................................   2,136.6      2,058.1       1,980.9
       Life  ................................................................     892.8        881.7         844.1
       Other.................................................................     148.1        132.0         135.9
     Net investment income (a)...............................................   2,017.7      2,178.3       2,023.1
     Fee and other revenue (a)...............................................     129.0        111.7          86.1
     Net gains (losses) from the sale of investments (a).....................    (358.3)      (156.2)        208.2
                                                                               --------     --------      --------

       Total insurance and fee-based segment revenues........................   5,103.4      5,308.1       5,377.0
                                                                               --------     --------      --------

   Finance segment:
     Net investment income:
       Interest-only securities (a)..........................................     106.6        185.1         132.9
       Manufactured housing..................................................     538.6        101.1          21.1
       Mortgage services.....................................................     672.1        158.7          62.6
       Consumer/credit card..................................................     365.2        199.6          98.2
       Commercial............................................................     261.4        112.3          62.0
       Other (a).............................................................      96.5         75.4          51.6
     Gain on sale:
       Securitization transactions:
         Manufactured housing................................................       -          307.8         294.8
         Mortgage services...................................................       -          196.2         332.5
         Consumer/credit card................................................       -           13.6          47.7
         Commercial..........................................................       -           27.2          44.7
         Other...............................................................       -            5.8          25.3
       Whole-loan sales......................................................       7.5          -             -
     Fee revenue and other income............................................     369.0        372.7         260.4
                                                                               --------     --------      --------

       Total finance segment revenues........................................   2,416.9      1,755.5       1,433.8
                                                                               --------     --------      --------

   Corporate and other:
     Net investment income...................................................      51.8         32.3          26.9
     Venture capital income (loss) related to investment in TeleCorp.........    (199.5)       354.8           -
     Revenue from major medical lines, which the Company intends to sell          946.3        900.4         920.6
     Other income............................................................       6.7          6.1           5.7
                                                                               --------     --------      --------

       Total corporate segment revenues......................................     805.3      1,293.6         953.2
                                                                               --------     --------      --------

   Eliminations..............................................................     (29.2)       (21.5)         (3.8)
                                                                               --------     --------      --------

       Total revenues........................................................   8,296.4      8,335.7       7,760.2
                                                                               --------     --------      --------

Expenses:
   Insurance and fee-based segment:
     Insurance policy benefits...............................................   3,313.5      3,156.5       2,947.4
     Amortization............................................................     673.9        607.9         691.8
     Interest expense........................................................      18.6         57.9          65.3
     Other operating costs and expenses......................................     689.9        567.2         487.7
                                                                               --------     --------      --------

       Total insurance and fee-based segment expenses........................   4,695.9      4,389.5       4,192.2
                                                                               --------     --------      --------

                          (continued on following page)

                                       107	

                         CONSECO, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                           --------------------------

                                                                                  2000         1999         1998
                                                                                  ----         ----         ----
                                                                                       (Dollars in millions)
                                                                                   (continued from previous page)
   Finance segment:
     Provision for losses....................................................     354.2        128.7          44.2
     Interest expense........................................................   1,152.4        341.3         213.7
     Special charges.........................................................     394.3          -           148.0
     Impairment charges......................................................     515.7        554.3         549.4
     Other operating costs and expenses......................................     753.5        697.2         591.9
                                                                              ---------     --------      --------

       Total finance segment expenses........................................   3,170.1      1,721.5       1,547.2
                                                                              ---------     --------      --------

Corporate and other:
   Interest expense on corporate debt........................................     310.7        182.8         165.4
   Provision for losses......................................................     231.5         18.9           -
   Expenses from major medical lines, which the Company intends to sell           997.6        862.1         812.3
   Special charges and other corporate expenses, less charges to
     subsidiaries for services provided......................................     281.6         31.5           1.2
                                                                              ----------    --------      --------

       Total corporate segment expenses......................................   1,821.4      1,095.3         978.9
                                                                              ---------     --------      --------

   Eliminations..............................................................     (29.2)       (21.5)         (3.8)
                                                                              ---------     --------      --------

       Total expenses........................................................   9,658.2      7,184.8       6,714.5
                                                                              ---------     --------      --------

Income (loss) before income taxes, minority interest and extraordinary charge:
     Insurance and fee-based operations......................................     407.5        918.6       1,184.8
     Finance operations......................................................    (753.2)        34.0        (113.4)
     Corporate interest and other expenses...................................  (1,016.1)       198.3         (25.7)
                                                                              ---------     --------      --------

       Income (loss) before income taxes, minority interest,
         extraordinary charge and cumulative
         effect of accounting change......................................... $(1,361.8)    $1,150.9      $1,045.7
                                                                              =========     ========      ========	

Segment balance sheet information was as follows:

                                                                                    2000         1999
                                                                                    ----         ----
                                                                                  (Dollars in millions)

Assets:
   Insurance and fee-based.................................................        $36,943.4    $37,382.5
   Finance.................................................................         20,819.4     14,454.7
   Corporate...............................................................         12,641.5     13,334.9
   Eliminate intercompany amounts..........................................        (11,815.1)   (12,986.2)
                                                                                   ---------    ---------

        Total assets.......................................................       $ 58,589.2    $52,185.9
                                                                                  ==========    =========

Liabilities:
   Insurance and fee-based.................................................       $ 27,629.2    $27,160.4
   Finance.................................................................         18,730.2     12,019.7
   Corporate...............................................................          5,863.2      5,139.6
   Eliminate intercompany amounts..........................................           (411.7)      (329.1)
                                                                                  ----------    ---------

        Total liabilities..................................................       $ 51,810.9    $43,990.6
                                                                                  ==========    =========

                                       108	

                         CONSECO, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                           --------------------------

--------------------
(a)  It is not practicable to provide additional components of revenue by
     product or services.	

This segment information is prepared in conformity with Financial Accounting Standards Board Statement No. 131 "Disclosures about Segments of an Enterprise and Related Information" which we adopted in 1998. We restated certain previously reported segment information to comply with the new standard.
15. QUARTERLY FINANCIAL DATA (UNAUDITED):
We compute earnings per common share for each quarter independently of earnings per share for the year. The sum of the quarterly earnings per share may not equal the earnings per share for the year because of: (i) transactions affecting the weighted average number of shares outstanding in each quarter; and
(ii) the uneven distribution of earnings during the year.

                                                                           1stQtr.(a)  2nd Qtr.(a)  3rd Qtr.(a)  4th Qtr.(a)
                                                                           ----------  -----------  -----------  -----------
                                                                             (Dollars in millions, except per share data)

2000
----
   Revenues.................................................................$2,205.9    $1,965.2     $1,955.3     $2,170.0
   Income (loss) before income taxes, minority interest, extraordinary
     charge and cumulative effect of accounting change .....................   191.8      (477.2)      (571.6)      (504.8)
   Net income (loss)........................................................    77.4      (404.7)      (487.3)      (376.6)

   Net income (loss) per common share:
     Basic:
       Income (loss) before extraordinary charge and cumulative effect
          of accounting change .............................................    $.22      $(1.25)      $(1.32)      $(1.16)
       Extraordinary charge.................................................     -           -           (.01)         -
       Cumulative effect of accounting change...............................     -           -           (.17)         -
                                                                                ----      ------       ------       ------

          Net income (loss).................................................    $.22      $(1.25)      $(1.50)      $(1.16)
                                                                                ====      ======       ======       ======

     Diluted:
       Income (loss) before extraordinary charge and cumulative effect
          of accounting change..............................................    $.22      $(1.25)      $(1.32)      $(1.16)
       Extraordinary charge.................................................     -           -           (.01)         -
       Cumulative effect of accounting change...............................     -           -           (.17)         -
                                                                                ----      ------       ------       ------

          Net income (loss).................................................    $.22      $(1.25)      $(1.50)      $(1.16)
                                                                                ====      ======       ======       ======

                                                                    1st Qtr.(b)    2nd Qtr.(b)      3rd Qtr.(b)     4th Qtr.(b)
                                                                    -----------    -----------      -----------     -----------
                                                                             (Dollars in millions, except per share data)

1999
----
   Revenues......................................................   $1,986.6        $2,023.7          $1,889.7       $2,435.7
   Income (loss) before income taxes and minority interest ......      492.8           373.5             311.1          (26.5)
   Net income (loss).............................................      287.8           213.3             155.6          (61.7)

   Net income per common share:
     Basic:
          Net income (loss)......................................       $.90            $.66              $.48          $(.19)
                                                                        ====            ====              ====          =====

     Diluted:
          Net income (loss)......................................       $.87            $.64              $.47          $(.19)
                                                                        ====            ====              ====          ======

                                       109	

                         CONSECO, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                           --------------------------

--------------------
(a)    Included in the first, second, third and fourth quarters of 2000 are the following items:

                                                                                   2000
                                                              ------------------------------------------------
                                                              1st Qtr.      2nd Qtr.     3rd Qtr.     4th Qtr.
                                                              --------      --------     --------     --------
                                                                              (Dollars in millions)

      Impairment charges:
         Before tax.........................................    $  2.5       $  9.6       $205.0       $298.6
         After tax..........................................       1.6          6.0        129.2        188.1

       Special charges:
         Before tax.........................................       -          327.2        253.3        118.8
         After tax..........................................       -          254.0        178.7         85.6

       Provision for losses related to loan guarantees:
         Before tax.........................................      23.4         68.6         19.5        120.0
         After tax..........................................      14.7         44.6         12.7         78.0

       Venture capital (income) loss, net of amortization
         and expenses:
           Before tax.......................................     (76.1)        75.5        165.5        (12.0)
           After tax........................................     (47.9)        47.5        107.6         (7.8)

(b)  Included in the first, second, third and fourth quarters of 1999 are
     impairment charges of $12.2 million ($7.7 million after tax), $71.6 million
     ($45.1 million after tax), $100.1 million ($63.1 million after tax) and
     $370.4 million ($233.3 million after tax), respectively. Also included in
     the fourth quarter of 1999 is: (i) a provision for losses related to loan
     guarantees of $18.9 million ($11.9 million after tax); and (ii) venture
     capital income, net of amortization and expenses, of $261.5 million ($170.0
     million after tax).	

110
 
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
The information required by Part III is hereby incorporated by reference from the Registrant's definitive proxy statement to be filed with the Commission pursuant to Regulation 14A within 120 days after December 31, 2000 except that the information required by Item 10 regarding Executive Officers is included herein under a separate caption at the end of Part I.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) 1. Financial Statements. See Index to Consolidated Financial Statements on page 55 for a list of financial statements included in this Report.
2. Financial Statement Schedules. The following financial statement schedules are included as part of this Report immediately following the signature page:
Schedule II -- Condensed Financial Information of Registrant
 (Parent Company)
Schedule IV -- Reinsurance
All other schedules are omitted, either because they are not applicable, not required, or because the information they contain is included elsewhere in the consolidated financial statements or notes.
3. Exhibits. See Exhibit Index immediately preceding the Exhibits filed with this report
(b) Reports on Form 8-K
A report on Form 8-K dated December 8, 2000, was filed with the Commission to report under Item 5, that the Registrant had executed a definitive agreement to sell substantially all of the "Vendor Services" business of its subsidiary, Conseco Finance Corp. to Wells Fargo Financial Leasing, Inc.
111
 
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, this 30th day of March, 2001.
CONSECO, INC.

By:  /s/ CHARLES B. CHOKEL
     ---------------------------------
       Charles B. Chokel, Executive Vice
         President and Chief Financial
         Officer (authorized officer and
         principal financial officer)	

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:

Signature                                        Title (Capacity)                                Date
---------                                        ----------------                                ----

/s/ GARY C. WENDT                                Chairman of the Board,                          March 30, 2001
----------------------------                     Chief Executive Officer and
Gary C. Wendt                                    Director (Principal Executive
                                                 Officer)

/s/ JAMES S. ADAMS                               Senior Vice President, Chief                    March 30, 2001
----------------------------                     Accounting Officer and Treasurer
James S. Adams                                   (Principal Accounting Officer)

/s/ LAWRENCE M. COSS                             Director                                        March 30, 2001
-----------------------------
Lawrence M. Coss

/s/ THOMAS M. HAGERTY                            Director                                        March 30, 2001
-----------------------------
Thomas M. Hagerty

/s/ M. PHIL HATHAWAY                             Director                                        March 30, 2001
-----------------------------
M. Phil Hathaway

/s/ JOHN M. MUTZ                                 Director                                        March 30, 2001
----------------------------
John M. Mutz

/s/ ROBERT S. NICKOLOFF                          Director                                        March 30, 2001
----------------------------
Robert S. Nickoloff

/s/ DAVID V. HARKINS                             Director                                        March 30, 2001
----------------------------
David V. Harkins

/s/ CHARLES B. CHOKEL                            Executive Vice President                        March 30, 2001
-----------------------------                    and Chief Financial Officer
Charles B. Chokel                                (Principal Financial Officer)	

112
 
REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULES
To the Shareholders and
Board of Directors
Conseco, Inc.
Our report on the consolidated financial statements of Conseco, Inc. and Subsidiaries is included on page 56 of this Form 10-K. In connection with our audits of such financial statements, we have also audited the related financial statement schedules listed in the index on page 111 of this Form 10-K. In our opinion, the financial statement schedules referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information required to be included therein.
As discussed in note 1 to the consolidated financial statements, the Company adopted EITF Issue No. 99-20, "Recognition of Interest Income and Impairment on Purchased and Retained Beneficial Interests in Securitized Financial Assets" in 2000.

                                                /s/ PricewaterhouseCoopers LLP
                                                -------------------------------
                                                PricewaterhouseCoopers LLP

Indianapolis, Indiana
March 26, 2001	

113

                         CONSECO, INC. AND SUBSIDIARIES

                                   SCHEDULE II

         Condensed Financial Information of Registrant (Parent Company)
                                  Balance Sheet
                        as of December 31, 2000 and 1999
                              (Dollars in millions)

                                     ASSETS
                                                                                                  2000           1999
                                                                                                  ----           ----

Cash and cash equivalents.................................................................      $   294.0    $     1.9
Cash held in segregated accounts for the payment of debt..................................           81.9          -
Other invested assets.....................................................................          102.5        111.2
Investment in wholly owned subsidiaries (eliminated in consolidation).....................        9,825.7      9,838.4
Notes receivable related to finance (eliminated in consolidation).........................          786.7      2,142.4
Receivable from subsidiaries (eliminated in consolidation)................................        1,202.7      1,005.4
Income taxes..............................................................................          301.4        210.7
Other assets..............................................................................           46.6         24.9
                                                                                                ---------    ---------

          Total assets....................................................................      $12,641.5    $13,334.9
                                                                                                =========    =========

                      LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities:
    Notes payable and commercial paper....................................................      $ 5,055.0    $ 4,624.2
    Notes and other payables due to subsidiaries (eliminated in consolidation)............          411.7        329.1
    Other liabilities.....................................................................          396.5        186.3
                                                                                                ---------    ---------

          Total liabilities...............................................................        5,863.2      5,139.6
                                                                                                ---------    ---------

Company-obligated mandatorily redeemable preferred securities of subsidiary trusts                2,403.9      2,639.1

Shareholders' equity:
    Preferred stock.......................................................................          486.8        478.4
    Common stock and additional paid-in capital (no par value, 1,000,000,000
       shares authorized, shares issued and outstanding: 2000 - 325,318,457; 1999 -
          327,678,638) ...................................................................        2,911.8      2,987.1
    Accumulated other comprehensive loss..................................................         (651.0)      (771.6)
    Retained earnings.....................................................................        1,626.8      2,862.3
                                                                                                ---------    ---------

          Total shareholders' equity......................................................        4,374.4      5,556.2
                                                                                                ---------    ---------

          Total liabilities and shareholders' equity......................................      $12,641.5    $13,334.9
                                                                                                =========    =========	

The accompanying note is an integral part of the condensed financial information.
114

                         CONSECO, INC. AND SUBSIDIARIES

                                   SCHEDULE II
         Condensed Financial Information of Registrant (Parent Company)
                             Statement of Operations
              for the years ended December 31, 2000, 1999 and 1998
                              (Dollars in millions)

                                                                                        2000          1999         1998
                                                                                        ----          ----         ----
Revenues:
   Net investment income..........................................................  $    77.3       $ 65.6        $ 74.3
   Dividends from subsidiaries (eliminated in consolidation)......................      178.0        294.7         173.4
   Fee and interest income from subsidiaries (eliminated in consolidation)........      347.3        242.3         111.0
   Net investment losses..........................................................      (66.8)        (5.4)        (15.3)
   Other income...................................................................        7.6          7.5          14.5
                                                                                    ----------      ------        ------

       Total revenues.............................................................      543.4        604.7         357.9
                                                                                    ---------       ------        ------

Expenses:
   Interest expense on notes payable..............................................      286.1        169.6         165.4
   Provision for loss.............................................................      231.5         18.9           -
   Intercompany expenses (eliminated in consolidation)............................      182.7        118.9          47.0
   Operating costs and expenses...................................................       34.6         13.2          22.1
   Special charges................................................................      281.6          -             -
                                                                                    ---------       ------        ------

       Total expenses.............................................................    1,016.5        320.6         234.5
                                                                                    ---------       ------        ------

       Income (loss) before income taxes,  equity in  undistributed  earnings of
         subsidiaries, distributions on Company-obligated mandatorily redeemable
         preferred securities of subsidiary trusts and extraordinary charge.......     (473.1)       284.1         123.4

Income tax expense (benefit)......................................................     (131.8)        (2.6)         18.9
                                                                                    ---------       ------        ------

       Income (loss) before equity in  undistributed  earnings of  subsidiaries,
         distributions on Company-obligated mandatorily redeemable preferred
         securities of subsidiary trusts and extraordinary charge.................     (341.3)       286.7         104.5

Equity in undistributed earnings of subsidiaries (eliminated in consolidation)....     (699.6)       441.1         495.6
                                                                                    ----------      -------       ------

       Income (loss) before distributions on Company-obligated mandatorily
         preferred securities of subsidiary trusts and extraordinary charge.......   (1,040.9)       727.8         600.1

Distributions on Company-obligated mandatorily redeemable preferred securities
   of subsidiary trusts...........................................................      145.3        132.8          90.4
                                                                                    ---------       ------        ------

       Income (loss) before extraordinary charge..................................   (1,186.2)       595.0         509.7

Extraordinary charge on extinguishment of debt, net of tax........................        5.0          -            42.6
                                                                                    ---------       ------        ------

       Net income (loss)..........................................................   (1,191.2)       595.0         467.1

Preferred stock dividends.........................................................       11.0          1.5           7.8
                                                                                    ---------       ------        ------

       Earnings (loss) applicable to common stock.................................  $(1,202.2)      $593.5        $459.3
                                                                                    =========       ======        ======	

The accompanying note is an integral part of the condensed financial information.
115

                         CONSECO, INC. AND SUBSIDIARIES

                                   SCHEDULE II

         Condensed Financial Information of Registrant (Parent Company)

                             Statement of Cash Flows
              for the years ended December 31, 2000, 1999 and 1998
                              (Dollars in millions)

                                                                                           2000         1999         1998
                                                                                           ----         ----         ----
Cash flows from operating activities:
     Net income (loss)..............................................................   $(1,191.2)   $   595.0    $   467.1
     Adjustments to reconcile net income to net cash
       provided by operating activities:
         Equity in undistributed earnings of consolidated subsidiaries *............       699.6       (441.1)      (495.6)
         Provision for loss on loan guarantees......................................       231.5         18.9          -
         Net investment losses......................................................        66.8          5.4         15.3
         Income taxes ..............................................................      (265.2)       (78.9)       (79.7)
         Extraordinary charge on extinguishment of debt.............................         -            -           65.3
         Distributions on Company-obligated mandatorily redeemable preferred
           securities of subsidiary trusts..........................................       223.5        204.2        137.5
         Special charges............................................................       112.1          -            -
         Other......................................................................       (14.9)       (20.7)        53.1
                                                                                       ---------    ---------    ---------
         Net cash provided (used) by operating activities...........................      (137.8)       282.8        163.0
                                                                                       ---------    ---------    ---------

Cash flows from investing activities:
   Sales and maturities of investments..............................................       228.2        187.9         68.8
   Investments and advances to consolidated subsidiaries *..........................    (1,427.2)    (1,806.3)    (1,176.8)
   Purchases of investments.........................................................      (220.0)      (203.3)       (72.4)
   Payments from subsidiaries *.....................................................     2,218.0         62.1         63.7
                                                                                       ---------    ----------   ---------

         Net cash provided (used) by investing activities...........................       799.0     (1,759.6)    (1,116.7)
                                                                                        --------    ---------    ----------

Cash flows from financing activities:
   Issuance of common and convertible preferred shares..............................          .8        588.4        121.3
   Issuance of Company-obligated mandatorily redeemable preferred securities
     of subsidiary trusts...........................................................         -          534.3        710.8
   Repurchase of Company-obligated mandatorily redeemable preferred
     securities of subsidiary trusts................................................      (250.0)         -            -
   Issuance of notes payable and commercial paper...................................     3,537.2      4,090.2      4,122.0
   Payments on notes payable........................................................    (3,114.6)    (3,279.0)    (3,401.1)
   Payments on notes payable to affiliates *........................................        (3.1)         -            -
   Payments to repurchase equity securities of Conseco, Inc.........................      (102.6)       (29.5)      (257.4)
   Dividends to subsidiaries *......................................................       (52.8)       (66.0)       (56.7)
   Dividends and distributions on Company-obligated mandatorily redeemable
     preferred securities of subsidiary trusts......................................      (302.1)      (379.4)      (282.9)
                                                                                       ---------    ----------   ---------

         Net cash provided (used) by financing activities...........................      (287.2)     1,459.0        956.0
                                                                                       ---------    ---------    ---------

         Net increase (decrease) in cash and cash equivalents.......................       374.0        (17.8)         2.3

   Cash and cash equivalents, beginning of year.....................................         1.9         19.7         17.4
                                                                                       ---------    ---------    ---------

   Cash and cash equivalents, end of year...........................................   $   375.9    $     1.9    $    19.7
                                                                                       =========    =========    =========
*    Eliminated in consolidation	

The accompanying note is an integral part of the condensed financial information.
116
CONSECO, INC. AND SUBSIDIARIES
SCHEDULE II
Note to Condensed Financial Information
Basis of Presentation
The condensed financial information should be read in conjunction with the consolidated financial statements of Conseco, Inc. The condensed financial information includes the accounts and activity of the parent company and its wholly owned non- insurance subsidiaries which act as the holding companies for the Company's life insurance subsidiaries.
117

                         CONSECO, INC. AND SUBSIDIARIES

                                   SCHEDULE IV

                                   Reinsurance
              for the years ended December 31, 2000, 1999 and 1998
                              (Dollars in millions)

                                                                         2000              1999             1998
                                                                         ----              ----             ----
Life insurance in force:
   Direct............................................................  $123,713.6       $126,826.7        $132,546.5
   Assumed...........................................................     5,097.2          5,414.2           1,992.7
   Ceded.............................................................   (27,530.2)       (27,687.5)        (30,768.1)
                                                                       ----------       ----------        ----------

         Net insurance in force......................................  $101,280.6       $104,553.4        $103,771.1
                                                                       ==========       ==========        ==========

         Percentage of assumed to net................................         5.0%             5.2%              1.9%
                                                                              ===              ===               ===

Premiums recorded as revenue for generally accepted accounting
  principles:
    Direct..........................................................     $3,577.3         $3,350.3          $3,633.3
     Assumed.........................................................       305.4            547.8             316.0
     Ceded...........................................................      (248.3)          (418.6)           (541.3)
                                                                         --------         --------          --------

         Net premiums................................................    $3,634.4         $3,479.5          $3,408.0
                                                                         ========         ========          ========

         Percentage of assumed to net................................         8.4%            15.7%              9.3%
                                                                              ===             ====               ===	

118

Exhibit
No.                                         Document
-------                                     --------
3.1            Amended and Restated Articles of Incorporation and Articles of
               Amendment thereto of the Registrant were filed with the
               Commission as Exhibit 3.1 to the Registrant's Registration
               Statement on Form S-3 (No. 333-94683), and are incorporated
               herein by this reference.

3.2            Amended and Restated By-Laws of the Registrant.

4.30.1         Warrant No. 2000-2, dated September 5, 2000, issued to GE Capital
               Equity Investments, Limited.

4.30.2         Warrant No. 2000-3, dated September 5, 2000, issued to Westport
               Insurance Corporation.

4.31.1         First Amendment to the Five-Year Credit Agreement dated as of
               September 22, 2000 was filed with the Commission as Exhibit 4.1
               to the Registrant's Report on Form 8-K/A, dated September 28,
               2000, and is incorporated herein by this reference.

4.31.2         Second Amendment to the 364-Day Credit Agreement and Amendment
               and Restatement of the $50,000,000 Extendible Commercial Notes
               dated as of September 22, 2000 was filed with the Commission as
               Exhibit 4.2 to the Registrant's Report on Form 8-K/A, dated
               September 28, 2000, and is incorporated herein by this reference.

4.31.3         Second Amendment to the $155 Million Credit Agreement dated as of
               September 22, 2000 was filed with the Commission as Exhibit 4.3
               to the Registrant's Report on Form 8-K/A, dated September 28,
               2000, and is incorporated herein by this reference.

4.31.4         Agreement dated as of September 22, 2000 relating to the 1997
               Director and Officer Loan Credit Agreement was filed with the
               Commission as Exhibit 4.4 to the Registrant's Report on Form
               8-K/A, dated September 28, 2000, and is incorporated herein by
               this reference.

4.31.5         Agreement dated as of September 22, 2000 relating to the 1998
               Director and Officer Loan Credit Agreement was filed with the
               Commission as Exhibit 4.5 to the Registrant's Report on Form
               8-K/A, dated September 28, 2000, and is incorporated herein by
               this reference.

4.31.6         Agreement dated as of September 22, 2000 relating to the 1999
               Director and Officer Loan Credit Agreement was filed with the
               Commission as Exhibit 4.6 to the Registrant's Report on Form
               8-K/A, dated September 28, 2000, and is incorporated herein by
               this reference.

4.31.7         Guaranty and Subordination Agreement dated as of September 22,
               2000 under the Senior Secured Revolving Credit Agreement dated as
               of May 30, 2000 was filed with the Commission as Exhibit 4.7 to
               the Registrant's Report on Form 8-K/A, dated September 28, 2000,
               and is incorporated herein by this reference.	

4.31.8         Guaranty and Subordination Agreement dated as of September 22,
               2000 under the Credit Agreement dated as of May 30, 2000 was
               filed with the Commission as Exhibit 4.8 to the Registrant's
               Report on Form 8-K/A, dated September 28, 2000, and is
               incorporated herein by this reference.

4.31.9         Guaranty and Subordination Agreement dated as of September 22,
               2000 under the Amended and Restated Credit Agreement dated as of
               August 26, 1997 was filed with the Commission as Exhibit 4.9 to
               the Registrant's Report on Form 8-K/A, dated September 28, 2000,
               and is incorporated herein by this reference.

4.31.10        Guaranty and Subordination Agreement dated as of September 22,
               2000 under the 364-Day Credit Agreement dated as of September 25,
               1998 was filed with the Commission as Exhibit 4.10 to the
               Registrant's Report on Form 8-K/A, dated September 28, 2000, and
               is incorporated herein by this reference.

4.31.11        Guaranty and Subordination Agreement dated as of September 22,
               2000 under the Five-Year Credit Agreement dated as of September
               25, 1998 was filed with the Commission as Exhibit 4.11 to the
               Registrant's Report on Form 8-K/A, dated September 28, 2000, and
               is incorporated herein by this reference.

4.31.12        Guaranty and Subordination Agreement dated as of September 22,
               2000 under the Credit Agreement dated as of August 28, 1998 was
               filed with the Commission as Exhibit 4.12 to the Registrant's
               Report on Form 8-K/A, dated September 28, 2000, and is
               incorporated herein by this reference.

There have not been filed as exhibits to this Form 10-K certain long-term debt
instruments, none of which relates to authorized indebtedness that exceeds 10%
of the consolidated assets of the Registrant. The Registrant agrees to furnish
the Commission upon its request a copy of any instrument defining the rights of
holders of long-term debt of the Company and its consolidated subsidiaries.

10.1.2         Employment Agreement, amended and restated as of April 6, 2000,
               between the Registrant and Stephen C. Hilbert was filed with the
               Commission as Exhibit 10.1.2 to the Registrant's Annual Report on
               Form 10-K/A for the year ended December 31, 2000 and is
               incorporated herein by this reference.

10.1.9         Unsecured Promissory Note of Stephen C. Hilbert dated May 13,
               1996 was filed with the Commission as Exhibit 10.1.9 to the
               Registrant's Annual Report on Form 10-K for the year ended
               December 31, 1996, and is incorporated herein by this reference.	

10.1.11        Employment Agreement, amended and restated as of December 15,
               1999, between the Registrant and John J. Sabl was filed with the
               Commission as Exhibit 10.1.11 to the Registrant's Report on Form
               10-K for the year ended December 31, 1999 and is incorporated
               herein by this reference; and Amendment to Employment Agreement,
               dated as of July 25, 2000, between Registrant and John J. Sabl is
               filed herewith.

10.1.12        Employment Agreement, amended and restated as of December 15,
               1999, between the Registrant and Thomas J. Kilian was filed with
               the Commission as Exhibit 10.1.12 to the Registrant's Report on
               Form 10-K for the year ended December 31, 1999 and is
               incorporated herein by this reference.

10.1.13        Employment Agreement, dated February 9, 1996 between Green Tree
               and Lawrence Coss and related Noncompetition agreement dated
               February 9, 1996, as amended by the Amendment Agreement dated
               April 6, 1998 were filed with the Commission as an exhibit to
               Green Tree's Registration Statement on Form S-3, and are
               incorporated herein by this reference.

10.1.14        Employment Agreement, amended and restated as of December 15,
               1999, between the Registrant and Maxwell E. Bublitz was filed
               with the Commission as Exhibit 10.1.14 to the Registrant's Report
               on Form 10-K for the year ended December 31, 1999 and is
               incorporated herein by this reference.

10.1.15        Employment Agreement, amended and restated as of December 15,
               1999, between the Registrant and James S. Adams was filed with
               the Commission as Exhibit 10.1.15 to the Registrant's Report on
               Form 10-K for the year ended December 31, 1999 and is
               incorporated herein by this reference.

10.1.16        Description of incentive compensation and severance arrangement
               with Edward M. Berube.

10.1.17        Promissory Note of Stephen C. Hilbert dated April 6, 2000 was
               filed with the Commission as Exhibit 10.1.17 to the Registrant's
               Report on Form 10-K/A for the year ended December 31, 1999, and
               is incorporated herein by this reference.

10.1.18        Pledge Agreement between the Registrant and Stephen C. Hilbert
               dated April 6, 2000 was filed with the commission as Exhibit
               10.1.18 to the Registrant's Report on Form 10-K/A for the year
               ended December 31, 1999, and is incorporated herein by this
               reference.

10.1.19        Collateral Assignment between the Registrant and Stephen C.
               Hilbert dated April 6, 2000 was filed with the commission as
               Exhibit 10.1.19 to the Registrant's Report on Form 10-K/A for the
               year ended December 31, 1999, and is incorporated herein by this
               reference.	

10.1.20        Agreement, dated as of April 28, 2000, between the Registrant and
               Stephen C. Hilbert was filed with the Commission as Exhibit
               10.1.20 to the Registrant's Report on Form 10-K/A for the year
               ended December 31, 1999, and is incorporated herein by this
               reference.

10.1.21        Consulting Agreement, dated as of April 28, 2000, between the
               Registrant and Stephen C. Hilbert was filed with the commission
               as Exhibit 10.1.21 to the Registrant's Report on Form 10-K/A for
               the year ended December 31, 1999, and is incorporated herein by
               this reference.

10.1.24        Second Amendment Agreement, dated as of November 1, 1999, between
               Conseco Finance Corp. and Lawrence M. Coss was filed with the
               commission as Exhibit 10.1.24 to the Registrant's Report on Form
               10-K/A for the year ended December 31, 1999, and is incorporated
               herein by this reference.

10.1.25        Promissory Note of Bruce A. Crittenden, dated as of November 29,
               2000.

10.1.26        Promissory Note of Bruce A. Crittenden, dated as of November 20,
               1997 was filed with the commission as Exhibit 10.1.26 to the
               Registrant's Report on Form 10-K/A for the year ended December
               31, 1999, and is incorporated herein by this reference.

10.1.27        Employment Agreement by and between Gary C. Wendt and Conseco,
               Inc., dated as of June 28, 2000 was filed as Exhibit 10.1.27 to
               the Registrant's Report on Form 8-K, dated July 10, 2000, and is
               incorporated herein by this reference.

10.1.28        Nonqualified Stock Option Agreement by and between Gary C. Wendt
               and Conseco, Inc., dated as of June 28, 2000 was filed as Exhibit
               10.1.28 to the Registrant's Report on Form 8-K, dated July 10,
               2000, and is incorporated herein by this reference.

10.1.29        Restricted Stock Agreement by and between Gary C. Wendt and
               Conseco, Inc., dated as of June 28, 2000 was filed as Exhibit
               10.1.29 to the Registrant's Report on Form 8-K, dated July 10,
               2000, and is incorporated herein by this reference.

10.1.30        Employment Agreement by and between David K. Herzog and Conseco,
               Inc., dated as of August 11, 2000, was filed as Exhibit 10.1.11
               to the Registrant's Report on Form 10-Q for the quarter ended
               September 30, 2000 and is incorporated herein by this reference.

10.1.31        Supplemental Retirement Agreement dated as of August 16, 2000,
               between Conseco, Inc. and Gary C. Wendt was filed as Exhibit
               10.1.31 to the Registrant's Report on Form 10-Q for the quarter
               ended September 30, 2000 and is incorporated herein by this
               reference.	

10.1.32        Guaranty dated as of August 16, 2000, between Bankers Life and
               Casualty Company as Guarantor, and Gary C. Wendt was filed as
               Exhibit 10.1.32 to the Registrant's Report on Form 10-Q for the
               quarter ended September 30, 2000 and is incorporated herein by
               this reference.

10.1.33        Employment Agreement dated as of November 29, 2000 between
               Conseco Finance Corp. and Bruce A. Crittenden.

10.8           The Registrant's Stock Option Plan was filed with the Commission
               as Exhibit B to its definitive Proxy Statement dated December 10,
               1983; Amendment No. 1 thereto was filed with the Commission as
               Exhibit 10.8.1 to its Report on Form 10-Q for the quarter ended
               June 30, 1985; Amendment No. 2 thereto was filed with the
               Commission as Exhibit 10.8.2 to its Registration Statement on
               Form S-1, No. 33-4367; Amendment No. 3 thereto was filed with the
               Commission as Exhibit 10.8.3 to the Registrant's Annual Report on
               Form 10-K for 1986; Amendment No. 4 thereto was filed with the
               Commission as Exhibit 10.8 to the Registrant's Annual Report on
               Form 10-K for 1987; Amendment No. 5 thereto was filed with the
               Commission as Exhibit 10.8 to the Registrant's Report on Form
               10-Q for the quarter ended September 30, 1991; and are
               incorporated herein by this reference.

10.8.3         The Registrant's Cash Bonus Plan was filed with the Commission as
               Exhibit 10.8.3 to the Registrant's Report on Form 10-Q for the
               quarter ended March 31, 1989, and is incorporated herein by this
               reference.

10.8.4         Amended and Restated Conseco Stock Bonus and Deferred
               Compensation Program was filed with the Commission as Exhibit
               10.8.4 to the Registrant's Annual Report on Form 10-K for 1992,
               and is incorporated herein by this reference.

10.8.6         Conseco Performance-Based Compensation Plan for Executive
               Officers was filed with the Commission as Exhibit 10.8.15 to the
               Registrant's Report on Form 10-Q for the quarter ended March 31,
               1998, and is incorporated herein by this reference.

10.8.7         Conseco, Inc. Amended and Restated Deferred Compensation Plan was
               filed with the Commission as Exhibit A to the Registrant's
               definitive Proxy Statement dated April 26, 1995, and is
               incorporated herein by this reference.

10.8.8         Amendment to the Amended and Restated Conseco Stock Bonus and
               Deferred Compensation Program was filed with the Commission as
               Exhibit 10.8.8 to the Registrant's Annual Report on Form 10-K for
               1994, and is incorporated herein by this reference.

10.8.9         Conseco 1994 Stock and Incentive Plan was filed as Exhibit A to
               the Registrant's definitive Proxy Statement dated April 29, 1994
               and is incorporated herein by this reference.	

10.8.10        Amendment Number 2 to the Amended and Restated Conseco Stock
               Bonus and Deferred Compensation Program was filed with the
               Commission as Exhibit 10.8.10 to the Registrant's Annual Report
               on Form 10-K for 1995 and is incorporated herein by reference.

10.8.11        Amended and Restated Director, Officer and Key Employee Stock
               Purchase Plan of Conseco was filed with the Commission as Exhibit
               10.8.11 to the Registrant's Report on Form 10-Q for the quarter
               ended September 30, 1999, and is incorporated herein by this
               reference.

10.8.12        Guaranty dated as of August 21, 1998 regarding Director, Officer
               and Key Employee Stock Purchase Plan was filed with the
               Commission as Exhibit 10.8.12 to the Registrant's Report on Form
               10-Q for the quarter ended March 31, 1999, and is incorporated
               herein by this reference.

10.8.13        Form of Promissory Note payable to the Registrant relating to the
               Registrant's Director, Officer and Key Employee Stock Purchase
               Plan was filed with the Commission as Exhibit 10.8.13 to the
               Registrant's Annual Report on Form 10-K for the year ended
               December 31, 1998, and is incorporated herein by reference.

10.8.14        Conseco, Inc. Amended and Restated 1997 Non-qualified Stock
               Option Plan was filed with the Commission as Exhibit 10.8.14 to
               the Registrant's Annual Report on Form 10-K for 1997, and is
               incorporated herein by this reference.

10.8.15        Green Tree Financial Corporation 1987 Stock Option Plan was filed
               with the Commission as an exhibit to Green Tree's Registration
               Statement on Form S-4 (File No. 33- 42249) and is incorporated
               herein by this reference.

10.8.16        Green Tree Financial Corporation Key Executive Stock Bonus Plan
               was filed with the Commission as an exhibit to Green Tree's
               Registration Statement on Form S-4 (File No. 33-42249) and is
               incorporated herein by this reference.

10.8.17        Green Tree Financial Corporation Restated 1992 Supplemental Stock
               Option Plan was filed with the Commission as Exhibit 10.8.17 to
               the Registrant's Report on Form 10-Q for the quarter ended June
               30, 1992, and is incorporated herein by this reference.

10.8.18        Green Tree Financial Corporation Chief Executive Cash Bonus and
               Stock Option Plan and related Stock Option Agreement dated
               February 9, 1996 were filed with the Commission as an exhibit to
               Green Tree's Report on Form 10-Q for the quarter ended June 30,
               1996, and are incorporated herein by this reference.

10.8.19        Green Tree Financial Corporation 1996 restated	

               Supplemental Pension Plan dated May 15, 1996 was filed with the
               Commission as an exhibit to Green Tree's Annual Report on Form
               10-K for 1997, and is incorporated herein by this reference.

10.8.21        Amended and Restated 1999 Director and Executive Officer Stock
               Purchase Plan of Conseco was filed with the Commission as Exhibit
               10.8.21 to the Registrant's Report on Form 10-Q for the quarter
               ended September 30, 1999 and is incorporated herein by this
               reference.

10.8.22        Guaranty regarding 1999 Director and Executive Officer Stock
               Purchase Plan was filed with the Commission as Exhibit 10.8.22 to
               the Registrant's Report on Form 10-Q for the quarter ended
               September 30, 1999 and is incorporated herein by this reference.

10.8.23        Form of Borrower Pledge Agreement dated as of September 15, 1999
               with The Chase Manhattan Bank relating to the 1999 Director and
               Executive Officer Stock Purchase Plan was filed with the
               Commission as Exhibit 10.8.23 to the Registrant's Report on Form
               10-Q for the quarter ended September 30, 1999 and is incorporated
               herein by this reference.

10.8.24        Form of note payable to the Registrant relating to the 1999
               Director and Executive Officer Stock Purchase Plan was filed with
               the Commission as Exhibit 10.8.24 to the Registrant's Report on
               Form 10-Q for the quarter ended September 30, 1999 and is
               incorporated herein by this reference.

10.8.25        Conseco, Inc. 2000 Employee Stock Purchase Program Work-Down
               Plan.

10.8.26        Conseco, Inc. 2000 Non-Employee Stock Purchase Program Work-Down
               Plan.

10.8.27        Guaranty, dated as of November 22, 2000 between Conseco, Inc., as
               Guarantor, and Bank of America, National Association, as
               Administrative Agent; Guaranty and Subordination Agreement, dated
               as of November 22, 2000, made by CIHC, Incorporated, as Guarantor
               and Subordinated Borrower, and Conseco, Inc., as Obligor and
               Subordinated Lender, in favor of Bank of America, National
               Association, as Administrative Agent under the Credit Agreement
               dated as of November 22, 2000; Amended and Restated Cash
               Collateral Pledge Agreement among CDOC, Inc., Bank of America,
               National Association, as Collateral Agent and as Depositary Bank,
               dated as of November 22, 2000; and Form of Credit Agreement,
               dated as of November 22, 2000 among the Borrowers, the other
               financial institutions party thereto and Bank of America,
               National Association, as Administrative Agent (Relating to
               Refinancing of certain Loans under that certain Credit Agreement,
               dated as of August 21, 1998).

10.8.28        Guaranty, dated as of November 22, 2000, between	

               Conseco, Inc.,as Guarantor,and Bank of America, National
               Association,as Administrative Agent; Guaranty and Subordination
               Agreement, dated as of November 22, 2000 made by CIHC,
               Incorporated,as Guarantor and Subordinated Borrower, and Conseco,
               Inc., as Obligor and Subordinated Lender, in favor of Bank of
               America, National Association, as Administrative Agent under the
               Credit Agreement dated as of November 22, 2000; Amended and
               Restated Cash Collateral Pledge Agreement among CDOC, Inc., Bank
               of America, National Association, as Collateral Agent and as
               Depositary Bank, dated as of November 22, 2000; and the Form of
               Credit Agreement, dated as of November 22, 2000, among the
               Borrowers, the other financial institutions party thereto and
               Bank of America, National Association, as Administrative Agent
               (Relating to the Refinancing of Certain Loans under that certain
               Amended and Restated Credit Agreement, dated as of August 26,
               1997).

10.8.29        Guaranty, dated as of November 22, 2000, between Conseco, Inc.,as
               Guarantor, and The Chase Manhattan Bank,as Administrative Agent;
               Guaranty and Subordination Agreement, dated as of November 22,
               2000 made by CIHC, Incorporated, as Guarantor and Subordinated
               Borrower, and Conseco, Inc., as Obligor and Subordinated Lender,
               in favor of The Chase Manhattan Bank, as Administrative Agent
               under the Credit Agreement dated as of November 22, 2000;
               Collateral Agreement, dated May 30, 2000, First Amendment to
               Collateral Agreement, dated September 22, 2000, and Second
               Amendment to Collateral Agreement, dated November 22, 2000, all
               among Conseco, Inc. and CIHC, Incorporated in favor of The Chase
               Manhattan Bank, as Collateral Agent; and the Form of Credit
               Agreement, dated as of November 22, 2000, among the Borrowers,
               the other financial institutions party thereto and The Chase
               Manhattan Bank, as Administrative Agent (Relating to the
               Refinancing of Certain Loans under that certain Credit Agreement,
               dated as of September 15, 1999, as terminated and replaced by
               that certain Termination and Replacement Agreement, dated as of
               May 30, 2000).

10.8.30        Forms of note payable to Conseco Services, LLC regarding the 2000
               Work-Down Plans, Form of Unconditional Guarantee and Form of
               Indemnification Agreement.

10.39          Split-Dollar Agreement dated December 18, 1998 among the
               Registrant, Stephen C. Hilbert and Rollin M. Dick, Trustee was
               filed with the Commission as Exhibit 10.39 to the Registrant's
               Annual Report on Form 10-K for the year ended December 31, 1998
               and is incorporated herein by this reference.	

10.40          Split-Dollar Agreement dated December 18, 1998 among the
               Registrant, Stephen C. Hilbert and Rollin M. Dick, Trustee was
               filed with the Commission as Exhibit 10.40 to the Registrant's
               Annual Report on Form 10-K for the year ended December 31, 1998
               and is incorporated herein by this reference.

10.41          Split-Dollar Agreement among the Registrant, Stephen C. Hilbert
               and Rollin M. Dick, Trustee was filed with the Commission as
               Exhibit 10.41 to the Registrant's Annual Report on Form 10-K for
               the year ended December 31, 1998 and is incorporated herein by
               this reference.

10.42          Split-Dollar Agreement among the Registrant, Stephen C. Hilbert
               and Rollin M. Dick, Trustee was filed with the Commission as
               Exhibit 10.42 to the Registrant's Annual Report on Form 10-K for
               the year ended December 31, 1998 and is incorporated herein by
               this reference.

10.43          Amended and Restated Securities Purchase Agreement dated as of
               December 15, 1999 between the Registrant and the purchasers named
               therein was filed with the Commission as Exhibit 10.43 to the
               Registrant's Report on Form 8-K dated December 15, 1999, and is
               incorporated herein by this reference.

10.45          Warrant to Purchase Common Stock of Conseco Finance Corp., dated
               May 11, 2000, by and between Conseco Finance Corp. and Lehman
               Brothers Holdings Inc. was filed with the Commission as Exhibit
               10.45 to the Registrant's Report on Form 10-Q for the quarter
               ended June 30, 2000 and is incorporated herein by this reference.

10.46          Amended and Restated Agreement dated September 22, 2000, by and
               among Conseco Finance Corp., CIHC, Incorporated, Green Tree
               Residual Finance Corp. I, Green Tree Finance Corp. - Five and
               Lehman Brothers Holdings, Inc. was filed with the Commission as
               Exhibit 10.46 to the Registrant's Report on Form 10-Q for the
               quarter ended September 30, 2000 and is incorporated herein by
               this reference.

10.47          Insurance Agreement by and between Registrant and Gary C. Wendt
               2000 Irrevocable Insurance Trust dated 11/22/00 ("Wendt Trust"),
               dated December 1, 2000 and Collateral Assignment by Wendt Trust
               in favor of Registrant dated December 1, 2000.

10.48          Insurance Agreement by and between Registrant and Wendt Trust,
               dated January 16, 2001 and Collateral Assignment by Wendt Trust
               in favor of Registrant dated January 16, 2001.

10.49          Insurance Agreement by and between Registrant and Wendt Trust,
               dated January 16, 2001 and Collateral Assignment by Wendt Trust
               in favor of Registrant dated January 16, 2001.	

12.1           Computation of Ratio of Earnings to Fixed Charges, Preferred
               Dividends and Distributions on Company- Obligated Mandatorily
               Redeemable Preferred Securities of Subsidiary Trusts.

21             List of Subsidiaries.

23.1           Consent of PricewaterhouseCoopers LLP with respect to the
               financial statements of Conseco, Inc.

27             Financial data schedule for Conseco, Inc. dated December 31,
               2000.

COMPENSATION PLANS AND ARRANGEMENTS.

10.1.2         Employment Agreement, amended and restated as of April 6, 2000,
               between the Registrant and Stephen C. Hilbert was filed with the
               Commission as Exhibit 10.1.2 to the Registrant's Annual Report on
               Form 10-K/A for the year ended December 31, 2000 and is
               incorporated herein by this reference.

10.1.9         Unsecured Promissory Note of Stephen C. Hilbert dated May 13,
               1996 was filed with the Commission as Exhibit 10.1.9 to the
               Registrant's Annual Report on Form 10-K for the year ended
               December 31, 1996, and is incorporated herein by this reference.

10.1.11        Employment Agreement, amended and restated as of December 15,
               1999, between the Registrant and John J. Sabl was filed with the
               Commission as Exhibit 10.1.11 to the Registrant's Report on Form
               10-K for the year ended December 31, 1999 and is incorporated
               herein by this reference; and Amendment to Employment Agreement,
               dated as of July 25, 2000, between Registrant and John J. Sabl is
               filed herewith.

10.1.12        Employment Agreement, amended and restated as of December 15,
               1999, between the Registrant and Thomas J. Kilian was filed with
               the Commission as Exhibit 10.1.12 to the Registrant's Report on
               Form 10-K for the year ended December 31, 1999 and is
               incorporated herein by this reference.

10.1.13        Employment Agreement, dated February 9, 1996 between Green Tree
               and Lawrence Coss and related Noncompetition agreement dated
               February 9, 1996, as amended by the Amendment Agreement dated
               April 6, 1998 were filed with the Commission as an exhibit to
               Green Tree's Registration Statement on Form S-3, and are
               incorporated herein by this reference.

10.1.14        Employment Agreement, amended and restated as of	

               December 15, 1999, between the Registrant and Maxwell E. Bublitz
               was filed with the Commission as Exhibit 10.1.14 to the
               Registrant's Report on Form 10-K for the year ended December 31,
               1999 and is incorporated herein by this reference.

10.1.15        Employment Agreement, amended and restated as of December 15,
               1999, between the Registrant and James S. Adams was filed with
               the Commission as Exhibit 10.1.15 to the Registrant's Report on
               Form 10-K for the year ended December 31, 1999 and is
               incorporated herein by this reference.

10.1.16        Description of incentive compensation and severance arrangement
               with Edward M. Berube.

10.1.17        Promissory Note of Stephen C. Hilbert dated April 6, 2000 was
               filed with the Commission as Exhibit 10.1.17 to the Registrant's
               Report on Form 10-K/A for the year ended December 31, 1999, and
               is incorporated herein by this reference.

10.1.18        Pledge Agreement between the Registrant and Stephen C. Hilbert
               dated April 6, 2000 was filed with the commission as Exhibit
               10.1.18 to the Registrant's Report on Form 10-K/A for the year
               ended December 31, 1999, and is incorporated herein by this
               reference.

10.1.19        Collateral Assignment between the Registrant and Stephen C.
               Hilbert dated April 6, 2000 was filed with the commission as
               Exhibit 10.1.19 to the Registrant's Report on Form 10-K/A for the
               year ended December 31, 1999, and is incorporated herein by this
               reference.

10.1.20        Agreement, dated as of April 28, 2000, between the Registrant and
               Stephen C. Hilbert was filed with the Commission as Exhibit
               10.1.20 to the Registrant's Report on Form 10-K/A for the year
               ended December 31, 1999, and is incorporated herein by this
               reference.

10.1.21        Consulting Agreement, dated as of April 28, 2000, between the
               Registrant and Stephen C. Hilbert was filed with the commission
               as Exhibit 10.1.21 to the Registrant's Report on Form 10-K/A for
               the year ended December 31, 1999, and is incorporated herein by
               this reference.

10.1.24        Second Amendment Agreement, dated as of November 1, 1999, between
               Conseco Finance Corp. and Lawrence M. Coss was filed with the
               commission as Exhibit 10.1.24 to the Registrant's Report on Form
               10-K/A for the year ended December 31, 1999, and is incorporated
               herein by this reference.

10.1.25        Promissory Note of Bruce A. Crittenden, dated as of November 29,
               2000.

10.1.26        Promissory Note of Bruce A. Crittenden, dated as of November 20,
               1997 was filed with the commission as Exhibit 10.1.26 to the
               Registrant's Report on Form 10-K/A for the year ended December
               31, 1999, and is incorporated herein by this reference.	

10.1.27        Employment Agreement by and between Gary C. Wendt and Conseco,
               Inc., dated as of June 28, 2000 was filed as Exhibit 10.1.27 to
               the Registrant's Report on Form 8-K, dated July 10, 2000, and is
               incorporated herein by this reference.

10.1.28        Nonqualified Stock Option Agreement by and between Gary C. Wendt
               and Conseco, Inc., dated as of June 28, 2000 was filed as Exhibit
               10.1.28 to the Registrant's Report on Form 8-K, dated July 10,
               2000, and is incorporated herein by this reference.

10.1.29        Restricted Stock Agreement by and between Gary C. Wendt and
               Conseco, Inc., dated as of June 28, 2000 was filed as Exhibit
               10.1.29 to the Registrant's Report on Form 8-K, dated July 10,
               2000, and is incorporated herein by this reference.

10.1.30        Employment Agreement by and between David K. Herzog and Conseco,
               Inc., dated as of August 11, 2000, was filed as Exhibit 10.1.11
               to the Registrant's Report on Form 10-Q for the quarter ended
               September 30, 2000 and is incorporated herein by this reference.

10.1.31        Supplemental Retirement Agreement dated as of August 16, 2000,
               between Conseco, Inc. and Gary C. Wendt was filed as Exhibit
               10.1.31 to the Registrant's Report on Form 10-Q for the quarter
               ended September 30, 2000 and is incorporated herein by this
               reference.

10.1.32        Guaranty dated as of August 16, 2000, between Bankers Life and
               Casualty Company as Guarantor, and Gary C. Wendt was filed as
               Exhibit 10.1.32 to the Registrant's Report on Form 10-Q for the
               quarter ended September 30, 2000 and is incorporated herein by
               this reference.

10.1.33        Employment Agreement dated as of November 29, 2000 between
               Conseco Finance Corp. and Bruce A. Crittenden.

10.8           The Registrant's Stock Option Plan was filed with the Commission
               as Exhibit B to its definitive Proxy Statement dated December 10,
               1983; Amendment No. 1 thereto was filed with the Commission as
               Exhibit 10.8.1 to its Report on Form 10-Q for the quarter ended
               June 30, 1985; Amendment No. 2 thereto was filed with the
               Commission as Exhibit 10.8.2 to its Registration Statement on
               Form S-1, No. 33-4367; Amendment No. 3 thereto was filed with the
               Commission as Exhibit 10.8.3 to the Registrant's Annual Report on
               Form 10-K for 1986; Amendment No. 4 thereto was filed with the
               Commission as Exhibit 10.8 to the Registrant's Annual Report on
               Form 10-K for 1987; Amendment No. 5 thereto was filed with the
               Commission as Exhibit 10.8 to the Registrant's Report on Form
               10-Q for the quarter ended September 30, 1991; and are
               incorporated herein by this reference.	

10.8.3         The Registrant's Cash Bonus Plan was filed with the Commission as
               Exhibit 10.8.3 to the Registrant's Report on Form 10-Q for the
               quarter ended March 31, 1989, and is incorporated herein by this
               reference.

10.8.4         Amended and Restated Conseco Stock Bonus and Deferred
               Compensation Program was filed with the Commission as Exhibit
               10.8.4 to the Registrant's Annual Report on Form 10-K for 1992,
               and is incorporated herein by this reference.

10.8.6         Conseco Performance-Based Compensation Plan for Executive
               Officers was filed with the Commission as Exhibit 10.8.15 to the
               Registrant's Report on Form 10-Q for the quarter ended March 31,
               1998, and is incorporated herein by this reference.

10.8.7         Conseco, Inc. Amended and Restated Deferred Compensation Plan was
               filed with the Commission as Exhibit A to the Registrant's
               definitive Proxy Statement dated April 26, 1995, and is
               incorporated herein by this reference.

10.8.8         Amendment to the Amended and Restated Conseco Stock Bonus and
               Deferred Compensation Program was filed with the Commission as
               Exhibit 10.8.8 to the Registrant's Annual Report on Form 10-K for
               1994, and is incorporated herein by this reference.

10.8.9         Conseco 1994 Stock and Incentive Plan was filed as Exhibit A to
               the Registrant's definitive Proxy Statement dated April 29, 1994
               and is incorporated herein by this reference.

10.8.10        Amendment Number 2 to the Amended and Restated Conseco Stock
               Bonus and Deferred Compensation Program was filed with the
               Commission as Exhibit 10.8.10 to the Registrant's Annual Report
               on Form 10-K for 1995 and is incorporated herein by reference.

10.8.11        Amended and Restated Director, Officer and Key Employee Stock
               Purchase Plan of Conseco was filed with the Commission as Exhibit
               10.8.11 to the Registrant's Report on Form 10-Q for the quarter
               ended September 30, 1999, and is incorporated herein by this
               reference.

10.8.12        Guaranty dated as of August 21, 1998 regarding Director, Officer
               and Key Employee Stock Purchase Plan was filed with the
               Commission as Exhibit 10.8.12 to the Registrant's Report on Form
               10-Q for the quarter ended March 31, 1999, and is incorporated
               herein by this reference.

10.8.13        Form of Promissory Note payable to the Registrant relating to the
               Registrant's Director, Officer and Key Employee Stock Purchase
               Plan was filed with the Commission as Exhibit 10.8.13 to the
               Registrant's Annual Report on Form 10-K for the year ended
               December 31, 1998, and is incorporated herein by reference.	

10.8.14        Conseco, Inc. Amended and Restated 1997 Non-qualified Stock
               Option Plan was filed with the Commission as Exhibit 10.8.14 to
               the Registrant's Annual Report on Form 10-K for 1997, and is
               incorporated herein by this reference.

10.8.15        Green Tree Financial Corporation 1987 Stock Option Plan was filed
               with the Commission as an exhibit to Green Tree's Registration
               Statement on Form S-4 (File No. 33- 42249) and is incorporated
               herein by this reference.

10.8.16        Green Tree Financial Corporation Key Executive Stock Bonus Plan
               was filed with the Commission as an exhibit to Green Tree's
               Registration Statement on Form S-4 (File No. 33-42249) and is
               incorporated herein by this reference.

10.8.17        Green Tree Financial Corporation Restated 1992 Supplemental Stock
               Option Plan was filed with the Commission as Exhibit 10.8.17 to
               the Registrant's Report on Form 10-Q for the quarter ended June
               30, 1992, and is incorporated herein by this reference.

10.8.18        Green Tree Financial Corporation Chief Executive Cash Bonus and
               Stock Option Plan and related Stock Option Agreement dated
               February 9, 1996 were filed with the Commission as an exhibit to
               Green Tree's Report on Form 10-Q for the quarter ended June 30,
               1996, and are incorporated herein by this reference.

10.8.19        Green Tree Financial Corporation 1996 restated Supplemental
               Pension Plan dated May 15, 1996 was filed with the Commission as
               an exhibit to Green Tree's Annual Report on Form 10-K for 1997,
               and is incorporated herein by this reference.

10.8.21        Amended and Restated 1999 Director and Executive Officer Stock
               Purchase Plan of Conseco was filed with the Commission as Exhibit
               10.8.21 to the Registrant's Report on Form 10-Q for the quarter
               ended September 30, 1999 and is incorporated herein by this
               reference.

10.8.22        Guaranty regarding 1999 Director and Executive Officer Stock
               Purchase Plan was filed with the Commission as Exhibit 10.8.22 to
               the Registrant's Report on Form 10-Q for the quarter ended
               September 30, 1999 and is incorporated herein by this reference.

10.8.23        Form of Borrower Pledge Agreement dated as of September 15, 1999
               with The Chase Manhattan Bank relating to the 1999 Director and
               Executive Officer Stock Purchase Plan was filed with the
               Commission as Exhibit 10.8.23 to the Registrant's Report on Form
               10-Q for the quarter ended September 30, 1999 and is incorporated
               herein by this reference.

10.8.24        Form of note payable to the Registrant relating to the 1999
               Director and Executive Officer Stock Purchase Plan	

               was filed with the Commission as Exhibit 10.8.24 to the
               Registrant's Report on Form 10-Q for the quarter ended September
               30, 1999 and is incorporated herein by this reference.

10.8.25        Conseco, Inc. 2000 Employee Stock Purchase Program Work-Down
               Plan.

10.8.26        Conseco, Inc. 2000 Non-Employee Stock Purchase Program Work-Down
               Plan.

10.8.27        Guaranty, dated as of November 22, 2000 between Conseco, Inc., as
               Guarantor, and Bank of America, National Association, as
               Administrative Agent; Guaranty and Subordination Agreement, dated
               as of November 22, 2000, made by CIHC, Incorporated, as Guarantor
               and Subordinated Borrower, and Conseco, Inc., as Obligor and
               Subordinated Lender, in favor of Bank of America, National
               Association, as Administrative Agent under the Credit Agreement
               dated as of November 22, 2000; Amended and Restated Cash
               Collateral Pledge Agreement among CDOC, Inc., Bank of America,
               National Association, as Collateral Agent and as Depositary Bank,
               dated as of November 22, 2000; and Form of Credit Agreement,
               dated as of November 22, 2000 among the Borrowers, the other
               financial institutions party thereto and Bank of America,
               National Association, as Administrative Agent (Relating to
               Refinancing of certain Loans under that certain Credit Agreement,
               dated as of August 21, 1998).

10.8.28        Guaranty, dated as of November 22, 2000, between Conseco, Inc.,as
               Guarantor,and Bank of America, National Association,as
               Administrative Agent; Guaranty and Subordination Agreement, dated
               as of November 22, 2000 made by CIHC, Incorporated,as Guarantor
               and Subordinated Borrower, and Conseco, Inc., as Obligor and
               Subordinated Lender, in favor of Bank of America, National
               Association, as Administrative Agent under the Credit Agreement
               dated as of November 22, 2000; Amended and Restated Cash
               Collateral Pledge Agreement among CDOC, Inc., Bank of America,
               National Association, as Collateral Agent and as Depositary Bank,
               dated as of November 22, 2000; and the Form of Credit Agreement,
               dated as of November 22, 2000, among the Borrowers, the other
               financial institutions party thereto and Bank of America,
               National Association, as Administrative Agent (Relating to the
               Refinancing of Certain Loans under that certain Amended and
               Restated Credit Agreement, dated as of August 26, 1997).

10.8.29        Guaranty, dated as of November 22, 2000, between Conseco, Inc.,as
               Guarantor, and The Chase Manhattan Bank,as Administrative Agent;
               Guaranty and Subordination Agreement, dated as of November 22,
               2000 made by CIHC, Incorporated, as Guarantor and	

               Subordinated Borrower, and Conseco, Inc., as Obligor and
               Subordinated Lender, in favor of The Chase Manhattan Bank, as
               Administrative Agent under the Credit Agreement dated as of
               November 22, 2000; Collateral Agreement, dated May 30, 2000,
               First Amendment to Collateral Agreement, dated September 22,
               2000, and Second Amendment to Collateral Agreement, dated
               November 22, 2000, all among Conseco, Inc. and CIHC, Incorporated
               in favor of The Chase Manhattan Bank, as Collateral Agent; and
               the Form of Credit Agreement, dated as of November 22, 2000,
               among the Borrowers, the other financial institutions party
               thereto and The Chase Manhattan Bank, as Administrative Agent
               (Relating to the Refinancing of Certain Loans under that certain
               Credit Agreement, dated as of September 15, 1999, as terminated
               and replaced by that certain Termination and Replacement
               Agreement, dated as of May 30, 2000).

10.8.30        Forms of note payable to Conseco Services, LLC regarding the 2000
               Work-Down Plans, Form of Unconditional Guarantee and Form of
               Indemnification Agreement.

10.39          Split-Dollar Agreement dated December 18, 1998 among the
               Registrant, Stephen C. Hilbert and Rollin M. Dick, Trustee was
               filed with the Commission as Exhibit 10.39 to the Registrant's
               Annual Report on Form 10-K for the year ended December 31, 1998
               and is incorporated herein by this reference.

10.40          Split-Dollar Agreement dated December 18, 1998 among the
               Registrant, Stephen C. Hilbert and Rollin M. Dick, Trustee was
               filed with the Commission as Exhibit 10.40 to the Registrant's
               Annual Report on Form 10-K for the year ended December 31, 1998
               and is incorporated herein by this reference.

10.41          Split-Dollar Agreement among the Registrant, Stephen C. Hilbert
               and Rollin M. Dick, Trustee was filed with the Commission as
               Exhibit 10.41 to the Registrant's Annual Report on Form 10-K for
               the year ended December 31, 1998 and is incorporated herein by
               this reference.

10.42          Split-Dollar Agreement among the Registrant, Stephen C. Hilbert
               and Rollin M. Dick, Trustee was filed with the Commission as
               Exhibit 10.42 to the Registrant's Annual Report on Form 10-K for
               the year ended December 31, 1998 and is incorporated herein by
               this reference.

10.47          Insurance Agreement by and between Registrant and Gary C. Wendt
               2000 Irrevocable Insurance Trust dated 11/22/00 ("Wendt Trust"),
               dated December 1, 2000 and Collateral Assignment by Wendt Trust
               in favor of Registrant dated December 1, 2000.

10.48          Insurance Agreement by and between Registrant and Wendt Trust,
               dated January 16, 2001 and Collateral Assignment by Wendt Trust
               in favor of Registrant dated January 16, 2001.	

10.49          Insurance Agreement by and between Registrant and Wendt Trust,
               dated January 16, 2001 and Collateral Assignment by Wendt Trust
               in favor of Registrant dated January 16, 2001.	

AMENDED AND RESTATED
BYLAWS OF CONSECO, INC.
Effective December 12, 2000

                                TABLE OF CONTENTS
                                -----------------

                                                                                                               PAGE
                                                                                                               ----

ARTICLE 1 - Shares................................................................................................1

         Section 1.1.      Certificate for Shares.................................................................1
         Section 1.2.      Transfer of Shares.....................................................................1
         Section 1.3.      Regulations............................................................................1
         Section 1.4.      Lost, Stolen or Destroyed Certificates.................................................2
         Section 1.5.      Redemption of Shares Acquired in Control Share Acquisitions............................2

ARTICLE 2 - Shareholders..........................................................................................2

         Section 2.1.      Place of Meetings......................................................................2
         Section 2.2.      Annual Meetings........................................................................2
         Section 2.3.      Special Meetings.......................................................................3
         Section 2.4.      Notice of Meeting......................................................................3
         Section 2.5.      Addresses of Shareholders..............................................................3
         Section 2.6.      Quorum.................................................................................3
         Section 2.7.      Voting.................................................................................3
         Section 2.8.      Voting Lists...........................................................................4
         Section 2.9.      Fixing of Record Date..................................................................4
         Section 2.10.     Organization...........................................................................4
         Section 2.11.     Shareholder Proposals and Board Nominations............................................4

ARTICLE 3- Board of Directors.....................................................................................6

         Section 3.1.      Number, Election and Term of Office....................................................6
         Section 3.2.      Vacancies..............................................................................6
         Section 3.3.      Quorum; Action.........................................................................6
         Section 3.4.      Action by Consent......................................................................6
         Section 3.5.      Telephonic Meetings....................................................................7
         Section 3.6.      Attendance and Failure to Object or Abstain............................................7
         Section 3.7.      Annual Meeting.........................................................................7
         Section 3.8.      Regular Meetings.......................................................................7
         Section 3.9.      Special Meetings.......................................................................7
         Section 3.10.     Place of Meeting.......................................................................8
         Section 3.11.     Compensation of Directors..............................................................8

                                        i	

                          TABLE OF CONTENTS (continued)
                          -----------------------------

                                                                                                               PAGE
                                                                                                               ----

ARTICLE 4 - Committees............................................................................................8

         Section 4.1.      Committees.............................................................................8
         Section 4.2.      Quorum and Manner of Acting............................................................8
         Section 4.3.      Committee Chairman, Books and Records, Etc.............................................8
         Section 4.4.      Executive Committee....................................................................8
         Section 4.5.      Compensation Committee.................................................................8
         Section 4.6.      Audit Committee........................................................................9

ARTICLE 5 - Officers..............................................................................................9

         Section 5.1.      Officers, General Authority and Duties.................................................9
         Section 5.2.      Election, Term of Office, Qualifications...............................................9
         Section 5.3.      Other Officers, Elections or Appointment...............................................9
         Section 5.4.      Resignation...........................................................................10
         Section 5.5.      Removal...............................................................................10
         Section 5.6.      Vacancies.............................................................................10
         Section 5.7.      The Chairman of the Board.............................................................10
         Section 5.8.      The President.........................................................................10
         Section 5.9.      The Vice Presidents...................................................................10
         Section 5.10.     Second or Assistant Vice Presidents...................................................11
         Section 5.11.     The Secretary.........................................................................11
         Section 5.12.     The Assistant Secretaries.............................................................11
         Section 5.13.     The Treasurer.........................................................................12
         Section 5.14.     The Assistant Treasurers..............................................................12
         Section 5.15.     The Chief Accounting Officer..........................................................12
         Section 5.16.     The Salaries..........................................................................13

ARTICLE 6 - Corporate Instruments, Loans and Funds...............................................................13

         Section 6.1.      Execution of Instruments Generally....................................................13
         Section 6.2.      Execution and Endorsement of Negotiable Instruments...................................13
         Section 6.3.      Opening of Bank Accounts..............................................................13
         Section 6.4.      Voting of Stock Owned by Corporation..................................................13

                                       ii	

                          TABLE OF CONTENTS (continued)
                          -----------------------------

                                                                                                               PAGE
                                                                                                               ----

ARTICLE 7 - Indemnification......................................................................................14

         Section 7.1.      Indemnification of Officers, Directors and Other Eligible Persons.....................14
         Section 7.2.      Definition of Claim...................................................................14
         Section 7.3.      Definition of Eligible Person.........................................................15
         Section 7.4.      Definitions of Liability and Expense..................................................15
         Section 7.5.      Definition of Wholly Successful.......................................................15
         Section 7.6.      Definition of Change of Control.......................................................15
         Section 7.7.      Procedure for Determination of Entitlement to Indemnification.........................16
         Section 7.8.      Application to Court for Determination................................................17
         Section 7.9.      Nonexclusivity........................................................................17
         Section 7.10.     Advancement of Expenses...............................................................17
         Section 7.11.     Insurance, Contracts and Funding......................................................18
         Section 7.12.     Nature of Provisions..................................................................18
         Section 7.13.     Applicability of Provisions...........................................................18

ARTICLE 8 - Miscellaneous........................................................................................18

         Section 8.1.      Amendments............................................................................18
         Section 8.2.      Seal..................................................................................18
         Section 8.3.      Fiscal Year...........................................................................18	

iii
ARTICLE 1
Shares
Section 1.1. Certificate for Shares. Shares of the Corporation may be issued in book-entry form or evidenced by certificates. However, unless otherwise specified in the provisions of the Articles of Incorporation relating to the class of shares, every holder of shares of the Corporation shall be entitled upon request to have a certificate evidencing the shares owned by the shareholder, signed in the name of the Corporation by the Chairman of the Board, the President or a Vice President and the Secretary or an Assistant Secretary, certifying the number of shares owned by the shareholder in the Corporation. The signatures of the Chairman of the Board, the President, Vice President, Secretary and Assistant Secretary, the signature of the transfer agent and registrar, and the seal of the Corporation may be facsimiles. In case any officer or employee who shall have signed, or whose facsimile signature or signatures shall have been used on, any certificate shall cease to be an officer or employee of the Corporation before the certificate shall have been issued and delivered by the Corporation, the certificate may nevertheless be adopted by the Corporation and be issued and delivered as though the person or persons who signed the certificate or whose facsimile signature or signatures have been used thereon had not ceased to be such officer or employee of the Corporation; and the issuance and delivery by the Corporation of any such certificate shall constitute an adoption thereof.
Subject to the foregoing provisions, certificates representing shares of the Corporation shall be in such form as shall be approved by the Board of Directors. There shall be entered upon the stock books of the Corporation at the time of the issuance or transfer of each share the number of the certificate representing such share (if any), the name of the person owning the shares represented thereby, the class of such share and the date of the issuance or transfer thereof.
Section 1.2. Transfer of Shares. Shares of the Corporation shall be transferable only on the books of the Corporation and if the shares are evidenced by certificates, upon surrender of the certificate or certificates representing the same properly endorsed by the registered holder or by his or her duly authorized attorney, such endorsement or endorsements to be witnessed by one witness. The requirement for such witnessing may be waived in writing upon the form of endorsement by the Chairman of the Board, the President, a Vice President or the Secretary of the Corporation.
The Corporation and its transfer agents and registrars shall be entitled to treat the holder of record of any shares the absolute owner thereof for all purposes, and accordingly shall not be bound to recognize any legal, equitable or other claim to or interest in such shares on the part of any other person whether or not it or they shall have express or other notice thereof, except as otherwise expressly provided by statute. Shareholders shall notify the Corporation in writing of any changes in their addresses from time to time.
Section 1.3. Regulations. Subject to the provisions of this Article 1 the Board of Directors may make such rules and regulations as it may deem expedient concerning the issuance, transfer and regulation of certificates for shares or book-entry shares of the Corporation.
1
Section 1.4. Lost, Stolen or Destroyed Certificates. The Corporation may issue a new certificate for shares of the Corporation in the place of any certificate theretofore issued and alleged to have been lost, stolen or destroyed, but the Board of Directors may require the owner of such lost, stolen or destroyed certificate, or such holder's legal representative, to furnish affidavit as to such loss, theft, or destruction, and to give a bond in such form and substance, and with such surety or sureties, with fixed or open penalty, as it may direct, to indemnify the Corporation and its transfer agents and registrars against any claim that may be made on account of the alleged loss, theft or destruction of such certificate or the issuance of such new certificate.
Section 1.5. Redemption of Shares Acquired in Control Share Acquisitions. Any or all control shares acquired in a control share acquisition shall be subject to Corporation's right to redeem, if either:
(a) No acquiring person statement has been filed with the Corporation with respect to the control share acquisition; or
(b) The control shares are not accorded full voting rights by the Corporation's shareholders as provided in IC 23-1-42-9.
A redemption pursuant to Section 1.5(a) may be made at any time during the period ending sixty (60) days after the date of the last acquisition of control shares by the acquiring person. A redemption pursuant to Section 1.5(b) may be made at any time during the period ending two (2) years after the date of the shareholder vote with respect to the voting rights of the control shares in question. Any redemption pursuant to this Section 1.5 shall be made at the fair value of the control shares and pursuant to such procedures for the redemption as may be set forth in these Bylaws or adopted by resolution of the Board of Directors.
As used in this Section 1.5, the terms "control shares," "control share acquisition," "acquiring person statement" and "acquiring person" shall have the meanings ascribed to them in IC 23-1-42.
ARTICLE 2
Shareholders
Section 2.1. Place of Meetings. Meetings of shareholders of the Corporation shall be held at the place within or without the State of Indiana, specified in the notices for such meetings.
Section 2.2. Annual Meetings. The annual meeting of the shareholders of the Corporation for the election of directors and for the transaction of such other business as properly may come before the meeting shall be held prior to June 30 of each year on such date as the Board of Directors shall determine by resolution. The failure to hold an annual meeting in any year shall not affect otherwise valid corporate acts or work any forfeiture or a dissolution of the Corporation.
2
Section 2.3. Special Meetings. Special meetings of shareholders of the Corporation may be called by the Board of Directors, the Chairman of the Board or the President. The business transacted at a special meeting of shareholders shall be limited to the purpose or purposes specified in the notice for such meeting.
Section 2.4. Notice of Meeting. A written or printed notice, stating the place, day and hour of the meeting, and in case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered or mailed by the Secretary of the Corporation, or by the officers or persons calling the meeting, to each shareholder of record entitled to vote on the business proposed to be transacted at such meeting, at such address as appears upon the records of the Corporation, at least ten (10) days, and not more than sixty (60) days, before the date of the meeting. Notice of any such meeting may be waived in writing by any shareholder before or after the meeting. Attendance at any meeting in person, or by proxy when the instrument of proxy sets forth in reasonable detail the purpose or purposes for which the meeting is called, shall constitute a waiver of notice of such meeting. Notice of any adjourned meeting of the shareholders of the Corporation shall not be required to be given unless required by statute.
Section 2.5. Addresses of Shareholders. The address of any shareholder appearing upon the records of the Corporation shall be deemed to be the same address as the latest address of such shareholder appearing on the records maintained by the transfer agent for the class of shares held by such shareholder.
Section 2.6. Quorum. At any meeting of the shareholders a majority of the outstanding shares entitled to vote on a matter at such meeting, represented in person or by proxy, shall constitute a quorum for action on that matter. In the absence of a quorum, the holders of a majority of the shares entitled to vote present in person or by proxy, or, if no shareholder entitled to vote is present in person or by proxy, any officer entitled to preside at or act as Secretary of such meeting, may adjourn such meeting from time to time, until a quorum shall be present. At any such adjourned meeting at which a quorum may be present any business may be transacted which might have been transacted at the meeting as originally called.
Section 2.7. Voting. Except as otherwise provided by statute or by the Articles of Incorporation, at each meeting of the shareholders each holder of shares entitled to vote shall have the right to one vote for each share standing in the shareholder's name on the books of the Corporation on the record date fixed for the meeting under Section 2.9. Each shareholder entitled to vote shall be entitled to vote in person or by proxy executed in writing (which shall include telegraphing, cabling, facsimile, or electronic transmission) by the shareholder or a duly authorized attorney in fact. The vote of shareholders approving any matter to which the Articles of Incorporation, or any applicable statute, specifies a different percentage of affirmative vote shall require such percentage of affirmative vote. All other matters, except the election of directors, shall require that the votes cast in favor of the matter exceed the votes cast opposing the matter at a meeting at which a quorum is present. In the event that the Articles of Incorporation or any applicable statute shall require one or more classes of shares to vote as a separate voting class, the vote of each class shall be considered and decided separately.
3
Section 2.8. Voting Lists. The Secretary shall make or cause to be made after a record date for a meeting of shareholders has been fixed under Section 2.9 and at least five (5) business days before such meeting, a complete list of the shareholders entitled to vote at such meeting, arranged in alphabetical order, with the address of each such shareholder and the number of shares so entitled to vote held by each which list shall be on file at the principal office of the Corporation and subject to inspection by any shareholder entitled to vote at the meeting. Such list shall be produced and kept open at the time and place of the meeting and subject to the inspection of any such shareholder during the holding of such meeting or any adjournment. Except as otherwise required by law, such list shall be the only evidence as to who are the shareholders entitled to vote at any meeting of the shareholders. In the event that more than one group of shares is entitled to vote as a separate voting group at the meeting, there shall be a separate listing of the shareholders of each group.
Section 2.9. Fixing of Record Date. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or entitled to receive payment of any dividend, or in order to make a determination of the shareholders for any other proper purpose, the Board of Directors shall fix in advance a date as the record date for any such determination of shareholders, not more than seventy (70) days prior to the date on which the particular action requiring this determination of shareholders is to be taken. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this section, the determination shall, to the extent permitted by law, apply to any adjournment thereof.
Section 2.10. Organization. Meetings of shareholders shall be presided over by the Chairman of the Board, or in his or her absence, by the President, or in his or her absence, by a chairman designated by the Board of Directors, or in the absence of such designation by a chairman chosen at the meeting. The Secretary shall act as secretary of the meeting, but in his or her absence, the chairman of the meeting may appoint any person or act as secretary of the meeting.
Section 2.11. Shareholder Proposals and Board Nominations.
(a) At any annual meeting of the Corporation's shareholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be (i) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (ii) otherwise properly brought before the meeting by or at the direction of the Board of Directors, or (iii) otherwise properly brought before the meeting by a shareholder in accordance with these Bylaws. Business may be properly brought before an annual meeting by a shareholder only if written notice of the shareholder's intent to propose such business has been delivered, either by personal delivery, United States mail, first class postage prepaid, or other similar means, to the Secretary of the Corporation not later than ninety (90) calendar days in advance of the anniversary date of the release of the Corporation's proxy statement to shareholders in connection with the preceding year's annual meeting of shareholders, except that if no annual meeting was held in the previous year or the date of the annual meeting has been changed by more than thirty (30) calendar days from the anniversary of the annual meeting date stated in the previous year's proxy statement, a shareholder proposal shall be received by the Corporation a reasonable time before the solicitation is made.
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(b) Each notice of new business must set forth: (i) the name and address of the shareholder who intends to raise the new business; (ii) the business desired to be brought forth at the meeting and the reasons for conducting such business at the meeting; (iii) a representation that the shareholder is a holder of record of shares of the Corporation entitled to vote with respect to such business and intends to appear in person or by proxy at the meeting to move the consideration of such business; (iv) such shareholder's total beneficial ownership of the Corporation's voting shares; and (v) such shareholder's interest in such business. The chairman of the meeting may refuse to acknowledge a motion to consider any business that he or she determines was not made in compliance with the foregoing procedures.
(c) An adjourned meeting, if notice of the adjourned meeting is not required to be given to shareholders, shall be regarded as a continuation of the original meeting, and any notice of new business must have met the foregoing requirements as of the date of the original meeting. In the event of an adjourned meeting where notice of the adjourned meeting is required to be given to shareholders, any notice of new business made by a shareholder with respect to the adjourned meeting must meet the foregoing requirements based upon the date on which notice of the date of the adjourned meeting was given.
(d) Nominations for the election of directors may be made by the Board of Directors or a committee appointed by the Board of Directors or by any shareholder entitled to vote in the election of directors generally. However, any shareholder entitled to vote in the election of directors may nominate one or more person for election as director(s) at a meeting only if written notice of such shareholder's intent to make such nomination or nominations has been delivered, either by personal delivery, United States mail, first class postage prepaid, or other similar means, to the Secretary of the Corporation not later than (i) with respect to an election to be held at an annual meeting of shareholders, ninety (90) calendar days in advance of the anniversary date of the release of the Corporation's proxy statement to shareholders in connection with the preceding year's annual meeting of shareholders, except that if no annual meeting was held in the previous year or the date of the annual meeting has been changed by more than thirty (30) calendar days from the anniversary of the annual meeting date stated in the previous year's proxy statement, a nominee proposal shall be received by the Corporation a reasonable time before the solicitation is made, and (ii) with respect to an election to be held at a special meeting of shareholders for the election of directors, the close of business on the tenth day following the date on which notice of such meeting is first given to shareholders.
(e) Each such notice shall set forth: (i) the name and address of the shareholder who intends to make the nomination and of the person or persons to be nominated; (ii) a representation that the shareholder is a holder of record of shares of the Corporation entitled to vote at such meeting to nominate the person or persons specified in the notice; (iii) a description of all relationships, arrangements or understandings between the shareholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the shareholder; (iv) such other information regarding each nominee proposed by such shareholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission had the nominee been nominated, or intended to be nominated, by the Board of Directors; and (v) the consent of each nominee to serve as a director of the Corporation if so elected. The chairman of the meeting may determine and declare to the meeting that a nomination was not made in compliance with the foregoing procedures in which case the nomination shall be disregarded.
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ARTICLE 3
Board of Directors
Section 3.1. Number, Election and Term of Office. The business of the Corporation shall be managed by a Board of Directors consisting of eight (8) members, which number may be increased or diminished by not less than a majority of the Directors then in office; provided that the number may not be increased to more than fourteen (14) and may not be diminished below five (5) and no reduction in number shall have the effect of shortening the term of any incumbent Director. Directors need not be shareholders of the Corporation. Except as otherwise provided by law, the Articles of Incorporation or by these Bylaws, the Directors of the Corporation shall be elected at the annual meeting of shareholders in each year by a plurality of the votes cast by shareholders entitled to vote in the election at the meeting, provided a quorum is present. The Board of Directors shall be divided into three classes, as nearly equal in number as the then total number of Directors constituting the whole Board permits, with the term of office of one class expiring each year.
At each annual meeting of shareholders the successors to the class of Directors whose term shall then expire shall be elected and each Director so elected shall hold office until such Director's successor is elected and qualified, or until his or her earlier resignation or removal. If the number of Directors is changed, any increase or decrease in the number of Directors shall be apportioned among the three classes so as to make all classes as nearly equal in number as possible. Notwithstanding the foregoing, whenever holders of any Preferred Stock, or any series thereof, shall be entitled, voting separately as a class, to elect any Directors, all Directors so elected shall be allocated, each time they are so elected, to the class whose term expires at the next succeeding annual meeting of shareholders and the terms of all Directors so elected by such holders shall expire at the next succeeding annual meeting of shareholders, in each case except to the extent otherwise provided in the Articles of Incorporation.
Section 3.2. Vacancies. Except as may be otherwise provided in the Articles of Incorporation, any vacancy which may occur in the Board of Directors caused by resignation, death or other incapacity, or increase in the number of Directors shall be filled by a majority vote of the remaining members of the Board of Directors. Each replacement or new Director shall serve for the balance of the term of the class of the Director he or she succeeds or, in the event of an increase in the number of directors, of the class to which he or she is assigned.
Section 3.3. Quorum; Action. A majority of the actual number of Directors elected and qualified, from time to time, shall be necessary to constitute a quorum for the transaction of any business, except for any matters which the Articles of Incorporation, these Bylaws or any applicable statute specifies may be approved by a lesser number. If a quorum is present when a vote is taken, the affirmative vote of a majority of the Directors present is the act of the Board of Directors, unless the Articles of Incorporation or these Bylaws provide otherwise.
Section 3.4. Action by Consent. Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting, if taken by all members of the Board of Directors, as the case may be, evidenced by one or more written consents signed by all such members and effective on the date, either prior or subsequent to the date of the consent, specified in the written consent, or if no effective date is specified
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in the written consent, the date on which the consent is filed with the minutes of proceedings of the Board of Directors.
Section 3.5. Telephonic Meetings. Directors, or any committee of Directors designated by the Board of Directors, may participate in a meeting of the Board of Directors or such committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this
Section 3.5 shall constitute presence in person at such meeting.
Section 3.6. Attendance and Failure to Object or Abstain. A Director who is present at a meeting of the Board of Directors or a committee of the Board of Directors when corporate action is taken is deemed to have assented to the action taken unless:
(a) The Director objects at the beginning of the meeting (or promptly upon the Director's arrival) to holding it or transacting business at the meeting;
(b) The Director's dissent or abstention from the action taken is entered in the minutes of the meeting; or
(c) The Director delivers written notice of the Director's dissent or abstention to the presiding officer of the meeting before its adjournment or to the Secretary of the Corporation immediately after adjournment of the meeting. The right of dissent or abstention is not available to a Director who votes in favor of the action taken.
Section 3.7. Annual Meeting. Unless otherwise provided by resolution of the Board of Directors, the Board of Directors shall meet each year immediately after the annual meeting of the shareholders, at the place where such meeting of the shareholders has been held, for the purpose of appointment of committees, election of officers, and consideration of any other business that may properly be brought before the meeting. No notice of any kind to either old or new members of the Board of Directors for such annual meeting shall be necessary.
Section 3.8. Regular Meetings. Regular meetings of the Board of Directors may be held without any notice whatever at such places and times, as may be fixed from time to time by resolution of the Board of Directors.
Section 3.9. Special Meetings. Special meetings of the Board of Directors may be called at any time by the Chairman of the Board or the President, and shall be called on the written request of any two Directors. Notice of the date, time and place of such a special meeting shall be sent by the Secretary or an Assistant Secretary to each Director at his or her residence or usual place of business by letter, telegram or facsimile, at such time that, in regular course, such notice would reach such place not later than during the day immediately preceding the day for such meeting; or may be delivered by the Secretary or an Assistant Secretary to a Director personally at any time during such preceding day. The notice need not describe the purpose of the special meeting. In lieu of such notice, a Director may sign a written waiver of notice either before the time of the meeting, at the time of the meeting, or after the time of the meeting.
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Any meeting of the Board of Directors for which notice is required shall be a legal meeting, without notice thereof having been given, if all the Directors, who do not waive notice thereof in writing, shall be present in person.
Section 3.10. Place of Meeting. The Directors may hold their meetings, within and without the State of Indiana.
Section 3.11. Compensation of Directors. The Board of Directors is empowered and authorized to fix and determine the compensation of Directors for attendance at meetings of the Board and additional compensation for such additional services any of such Directors may perform for the Corporation.
ARTICLE 4
Committees
Section 4.1. Committees. The Board of Directors may from time to time, in its discretion, by resolution passed by a majority of the entire Board of Directors, designate committees of the Board of Directors consisting of such number of directors as the Board of Directors shall determine, which shall have and may exercise such lawfully delegable powers and duties of the Board of Directors as shall be conferred or authorized by such resolution. The Board of Directors shall have the power to change at any time the members of any such committee, to fill vacancies and to dissolve any such committee.
Section 4.2. Quorum and Manner of Acting. A majority of the members of any committee of the Board of Directors shall constitute a quorum for the transaction of business at any meeting of such committee, and the act of a majority of the members present at any meeting at which a quorum is present shall be the act of such committee.
Section 4.3. Committee Chairman, Books and Records, Etc. The chairman of each committee of the Board of Directors shall be selected from among the members of such committee by the Board of Directors. Each committee shall keep a record of its acts and proceedings, and all actions of each committee shall be reported to the Board of Directors when required. Except to the extent inconsistent with the resolutions of the Board of Directors creating a committee, the provisions of these Bylaws concerning meetings of the Board of Directors, actions without meetings, notice and waiver of notice and telephonic participation apply to each committee.
Section 4.4. Executive Committee. Two or more Directors of the Corporation shall be appointed by the Board of Directors to act as an Executive Committee. The Executive Committee shall have and exercise all power and authority of the Board of Directors in the management of the Corporation to the fullest extent permitted by statute.
Section 4.5. Compensation Committee. Two or more Directors of the Corporation shall be appointed by the Board of Directors to act as a Compensation Committee, each of whom shall be a director who is not an employee of the Corporation or any subsidiary thereof. The Compensation Committee shall have the power and authority to set the compensation of the officers of the Corporation and to act with respect to the compensation, option and other benefit plans of the Corporation.
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Section 4.6. Audit Committee. Two or more Directors of the Corporation shall be appointed by the Board of Directors to act as an Audit Committee, each of whom shall be a director who is not an employee of the Corporation or any subsidiary thereof. The Audit Committee shall have general oversight responsibility with respect to the Corporation's accounting and financial reporting activities, including meeting with the Corporation's independent auditors and its chief financial and accounting officers to review the scope, cost and results of the independent audit and to review internal accounting controls, policies and procedures. The Audit Committee also shall make recommendations to the Board of Directors as to the selection of independent auditors. In addition, the Audit Committee shall oversee the compliance programs of the Corporation and its subsidiaries where such oversight is delegated to the Audit Committee by either the Board of Directors or embodied in an agreement executed by the Corporation or the applicable subsidiary. In undertaking the foregoing responsibilities, the Audit Committee shall have unrestricted access, if necessary, to the Corporation's personnel and documents and shall be provided with the resources and assistance necessary to discharge its responsibilities, including periodic reports from management assessing the impact of regulation, accounting, and reporting of other significant matters that may affect the Corporation.
ARTICLE 5
Officers
Section 5.1. Officers, General Authority and Duties. The officers of the Corporation shall be a Chairman of the Board, a President, one (1) or more Vice Presidents, a Secretary, a Treasurer, a Chief Accounting Officer, and such other officers as may be elected or appointed in accordance with the provisions of Section 5.3. One (1) or more of the Vice Presidents may be designated by the Board to serve as an Executive Vice President. Any two (2) or more offices may be held by the same person. All officers and agents of the Corporation, as between themselves and the Corporation, shall have such authority and perform such duties in the management of the Corporation as may be provided in these Bylaws or as may be determined by resolution of the Board of Directors not inconsistent with these Bylaws.
Section 5.2. Election, Term of Office, Qualifications. Each officer (except such officers as may be appointed in accordance with the provisions of
Section 5.3) shall be elected by the Board of Directors. Each such officer (whether elected at an annual meeting of the Board of Directors or to fill a vacancy or otherwise) shall hold office until the officer's successor is chosen and qualified, or until death, or until the officer shall resign in the manner provided in Section 5.4 or be removed in the manner provided in Section 5.5. The Chairman of the Board shall be chosen from among the Directors. Any other officer may but need not be a Director of the Corporation. Election or appointment of an officer shall not of itself create contract rights.
Section 5.3. Other Officers, Election or Appointment. The Board of Directors from time to time may elect such other officers or agents (including one or more Second or Assistant Vice Presidents, one or more Assistant Secretaries and one or more Assistant Treasurers) as it may deem necessary or advisable. The Board of Directors may delegate to any officer the power to appoint any such officers or agents and to prescribe their respective terms of office, powers and duties.
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Section 5.4. Resignation. Any officer may resign at any time by giving written notice of such resignation to the Board of Directors, the Chairman of the Board, the President or the Secretary of the Corporation. Unless otherwise specified in such written notice, such resignation shall take effect upon receipt thereof and unless otherwise specified in it, the acceptance of the resignation shall not be necessary to make it effective.
Section 5.5. Removal. The officers specifically designated in Section 5.1 may be removed, either for or without cause, at any meeting of the Board of Directors called for such purpose, by the vote of a majority of the actual number of Directors elected and qualified. The officers and agents elected or appointed in accordance with the provisions of Section 5.3 may be removed, either for or without cause, at any meeting of the Board of Directors at which a quorum be present, by the vote of a majority of the Directors present at such meeting, by any superior officer upon whom such power of removal shall have been conferred by the Board of Directors, or by any officer to whom the power to appoint such officer has been delegated by the Board of Directors pursuant to
Section 5.3. Any removal shall be without prejudice to the contract rights, if any, of the person so removed.
Section 5.6. Vacancies. A vacancy in any office by reason of death, resignation, removal, disqualification or any other cause, may be filled by the Board of Directors or by an officer authorized under Section 5.3 to appoint to such office.
Section 5.7. The Chairman of the Board. The Chairman of the Board, who shall be chosen from among the Directors, shall have general supervision and direction over the business and affairs of the Corporation and shall exercise executive management of the day-to-day operations of the Corporation, subject however to the control of the Board of Directors, shall preside at all meetings of the Board of Directors and the shareholders, and shall perform such other duties as, from time to time, may be assigned to him or her by the Board of Directors. The Chairman of the Board shall be the Chief Executive Officer.
Section 5.8. The President. The President shall perform all the duties ordinarily connected with the office of President and shall perform such other duties as, from time to time, may be assigned to him or her by the Board of Directors. In the case of the absence or inability to act of the Chairman of the Board, the President shall perform the duties of the Chairman of the Board, and, when so acting, shall have all the powers of the Chairman of the Board.
Section 5.9. The Vice Presidents. Each Vice President shall have such powers and perform such duties as the Board of Directors may from time to time prescribe or as the Chairman of the Board or the President may from time to time delegate to him or her. The Board of Directors may designate certain Vice Presidents as being in charge of designated divisions or functions of the Corporation's business and add appropriate descriptions to their titles. At the request of the President, any Executive Vice President may, in the case of the absence or inability to act of the President, temporarily act in such officer's place, and, when so acting, shall have all the powers of the President. In the case of the death of the President, or in the case of his or her absence or inability to act without having designated an Executive Vice President to act temporarily in his or her place, the Executive Vice President so to perform the duties of the President shall be designated by the Board of Directors.
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Section 5.10. Second or Assistant Vice Presidents. Each Second or Assistant Vice President (if one or more Second or Assistant Vice Presidents be elected or appointed) shall perform such other duties as are from time to time delegated to him or her by the Chairman of the Board, the President, a Vice President, or the Board of Directors. At the request of one of the Vice Presidents, or in his or her absence or inability to act, a Second or Assistant Vice President designated by the Vice President shall perform the duties of such Vice President, and when so acting shall have all the powers of the Vice President. In the case of the death of a Vice President, or in the case of his or her absence or inability to act without having designated a Second or Assistant Vice President to act temporarily in his or her place, the Second or Assistant Vice President so to perform the duties of the Vice President shall be designated by the Board of Directors, the Chairman of the Board or the President.
Section 5.11. The Secretary. The Secretary shall:
(a) record all the proceedings of the meetings of the shareholders and of the Board of Directors in books to be kept for such purposes;
(b) cause all notices to be duly given in accordance with the provisions of these Bylaws and as required by statute;
(c) be custodian of the seal of the Corporation, and cause the seal to be affixed to all certificates representing shares of the Corporation prior to the issuance thereof (subject, however, to the provisions of Article 1) and to all instruments the execution of which on behalf of the Corporation under its seal shall have been duly authorized in accordance with these Bylaws;
(d) subject to the provisions of Article 1, sign certificates representing shares of the Corporation the issuance of which shall have been authorized by the Board of Directors; and,
(e) in general, perform all duties incident to the office of Secretary and such other duties as may, from time to time, be given to him or her by these Bylaws, the Board of Directors, the Chairman of the Board, the President or any Vice President.
Section 5.12. The Assistant Secretaries. Each Assistant Secretary (if one or more Assistant Secretaries be elected or appointed) shall assist the Secretary in his or her duties, and shall perform such other duties as the Board of Directors may from time to time prescribe or the Chairman of the Board, the President, any Vice President or the Secretary may from time to time delegate to him or her. At the request of the Secretary, any Assistant Secretary may, in the case of the absence or inability to act of the Secretary, temporarily act in the Secretary's place. In the case of the death of the Secretary, or in the case of his or her absence or inability to act without having designated an Assistant Secretary to act temporarily in his or her place, the Assistant Secretary so to perform the duties of the Secretary shall be designated by the Board of Directors, Chairman of the Board or the President.
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Section 5.13. The Treasurer. The Treasurer shall:
(a) have charge of the funds, securities, receipts and disbursements of the Corporation;
(b) cause the moneys and other valuable effects of the Corporation to be deposited or invested in the name and to the credit of the Corporation in such banks or trust companies or with such bankers or other depositories or investments as shall be selected in accordance with resolutions adopted by the Board of Directors;
(c) cause the funds of the Corporation to be disbursed from the authorized depositories of the Corporation, and cause to be taken and preserved proper records of all moneys disbursed; and,
(d) in general, shall perform all the duties incident to the office of Treasurer and such other duties as, from time to time, may be assigned to him by the Board of Directors, the Chairman of the Board, the President or any Vice President.
Section 5.14. The Assistant Treasurers. Each Assistant Treasurer (if one or more Assistant Treasurers be elected or appointed) shall assist the Treasurer in his or her duties, and shall perform such other duties as the Board of Directors, the Chairman of the Board, the President, any Vice President or Treasurer may from time to time delegate to him or her. At the request of the Treasurer, any Assistant Treasurer may, in the case of the absence or inability to act of the Treasurer, temporarily act in his or her place. In the case of the death of the Treasurer, or in the case of his or her absence or inability to act without having designated an Assistant Treasurer to act temporarily in his or her place, the Assistant Treasurer so to perform the duties of the Treasurer shall be designated by the Board of Directors, the Chairman of the Board or the President.
Section 5.15. The Chief Accounting Officer. The Chief Accounting Officer shall:
(a) keep or cause to be kept full and accurate accounts of all assets, liabilities, commitments, receipts, disbursements, costs and expenses and other financial transactions of the Corporation in books belonging to the Corporation, and conform them to sound accounting principles with adequate internal control;
(b) cause regular audits of such books and records to be made;
(c) see that all expenditures are made in accordance with procedures duly established, from time to time, by the Corporation;
(d) render financial statements upon the request of the Board of Directors, and a full financial report prior to the annual meeting of shareholders, as well as such other financial statements as are required by law or regulation; and
(e) in general, perform all the duties ordinarily connected with the office of Chief Accounting Officer and such other duties as, from time to time, may be assigned to him or her by the Board of Directors, the Chairman of the Board, the President or any Vice President.
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Section 5.16. Salaries. The salaries of the officers shall be fixed, from time to time, by the Board of Directors or the Compensation Committee. No officer shall be prevented from receiving such salary by reason of the fact he is also a Director of the Corporation.
ARTICLE 6
Corporate Instruments, Loans and Funds
Section 6.1. Execution of Instruments Generally. All deeds, contracts, notes, bonds and other instruments requiring execution by the Corporation may be signed by the Chairman of the Board, the President, any Vice President, Treasurer or the Secretary. Authority to sign any deed, contract, note, bond or other instrument requiring execution by the Corporation may be conferred by the Board of Directors upon any person or person whether or not such person or persons be officers of the Corporation. Such person or person may delegate, from time to time, by instrument in writing, all or any part of such authority to any other person or persons if authorized so to do by the Board of Directors.
Section 6.2. Execution and Endorsement of Negotiable Instruments. All checks, drafts, bills of exchange and orders for the payment of money of the Corporation shall, unless otherwise directed by the Board of Directors, or unless otherwise required by law, be signed or endorsed for deposit in its behalf by any one of the following officers: the Chairman of the Board, the President, any Vice President, the Treasurer, any Assistant Treasurer or the Secretary. Checks payable to the Corporation may also be endorsed for deposit in one of the bank accounts of the Corporation by the affixation of a rubber stamp bearing the legend "For Deposit Only -- CONSECO, INC.". Authority to sign any checks, drafts, bills of exchange and orders for payment of money requiring execution by the Corporation may be conferred by the Board of Directors upon any person or persons whether or not such person or persons be officers of the Corporation. Such person or persons may delegate, from time to time, by instrument in writing, all or any part of such authority to any other person or persons if authorized to do so by the Board of Directors.
Section 6.3. Opening of Bank Accounts. Bank accounts shall be opened in the name of the Corporation by any one of the following officers: The Chairman of the Board, the President, any Vice President, the Chief Accounting Officer, the Treasurer or any Assistant Treasurer of the Corporation. Each of such officers shall have power to open bank accounts in the name of the Corporation, singly, without necessity of countersignature. The Board of Directors may designate officers and employees of the Corporation, other than those named above, who may open bank accounts in the name of the Corporation. The term "bank accounts" shall include, without limiting the generality thereof, accounts with banks, banking associations, trust companies, building and loan associations, savings and loan associations, cooperative banks, investment bankers and brokerage firms.
Section 6.4. Voting of Stock Owned by Corporation. Subject always to the further orders and directions of the Board of Directors, any share or shares of stock issued by any other corporation and owned or controlled by the Corporation may be voted at any shareholders' meeting of such other corporation by the Chairman of the Board, the President, any Vice President or the Treasurer of the
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Corporation. Whenever, in the judgment of the Chairman of the Board, the President or Treasurer, of the it is desirable for the Corporation to execute a proxy or give a stockholders' consent in respect to any share or shares of stock issued by any other corporation and owned by the Corporation, such proxy or consent shall be executed in the name of the Corporation by the Chairman of the Board, the President, any Vice President or the Treasurer. Any person or persons designated in the manner above stated as the proxy or proxies of the Corporation shall have full right, power and authority to vote shares of stock issued by such other corporation and owned by the Corporation the same as such shares might be voted by the Corporation.
ARTICLE 7
Indemnification
Section 7.1. Indemnification of Officers, Directors and Other Eligible Persons. To the fullest extent not inconsistent with applicable law, every Eligible Person shall be indemnified by the Corporation against all Liability and Expense that may be incurred by him or her in connection with or resulting from any Claim, (a) if such Eligible Person is Wholly Successful with respect to the Claim, or (b) if not Wholly Successful, then if such Eligible Person is determined, as provided in either Section 7.7 or 7.8, to have acted in good faith, in what he or she reasonably believed to be the best interests of the Corporation or at least not opposed to its best interests and, in addition, with respect to any criminal claim, is determined to have had reasonable cause to believe that his or her conduct was lawful or had no reasonable cause to believe that his or her conduct was unlawful. The termination of any Claim, by judgment, order, settlement (whether with or without court approval), or conviction or upon a plea of guilty or of nolo contendere, or its equivalent, shall not create a presumption that an Eligible Person did not meet the standards of conduct set forth in clause (b) of this Section 7.1. The actions of an Eligible Person with respect to an employee benefit plan shall be deemed to have been taken in what the Eligible Person reasonably believed to be the best interests of the Corporation or at least not opposed to its best interests if the Eligible Person acted in good faith and in a manner he or she reasonably believed to be in the interest of the participants or beneficiaries of the employee benefit plan.
To the extent an Eligible Person has the right to receive indemnity from another entity (including, but not limited to, a subsidiary of the Corporation), the indemnity obligations of the Corporation under this Article 7 to the Eligible Person are (as between the Corporation and such other entity) subordinate and junior to the indemnity obligations of such entity to the Eligible Person. If the Corporation indemnifies an Eligible Person entitled to indemnity from another entity (including, but not limited to, a subsidiary of the Corporation), the Corporation shall have the right of subrogation to be reimbursed from such other entity the amount of indemnity payments the Eligible Person was otherwise entitled to receive from such other entity.
Section 7.2. Definition of Claim. The term "Claim" as used in this Article 7 shall include every pending, threatened or completed claim, action, suit or proceeding and all appeals thereof (whether brought by or in the right of the Corporation or any other corporation or otherwise, and whether civil, criminal, administrative or investigative, formal or informal), in which an Eligible Person may become involved, as a party or otherwise (including, without limitation, as a witness):
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(a) by reasons of his or her being or having been an Eligible Person, or
(b) by reason of any action taken or not taken by such Eligible Person in his or her capacity as an Eligible Person, whether or not such Eligible Person continued in such capacity at the time any Liability or Expense related to such Claim shall have been incurred.
Section 7.3. Definition of Eligible Person. The term "Eligible Person" as used in this Article 7 shall mean every person (and the estate, heirs and personal representatives of such person) who is or was a director, officer or employee of the Corporation or a wholly-owned subsidiary of the Corporation (including, but not limited to, Conseco Services, LLC) or who, while a director, officer or employee of the Corporation or a wholly-owned subsidiary of the Corporation, is or was serving at the request of the Corporation or a wholly-owned subsidiary of the Corporation as a director, officer, employee, partner, member, manager, trustee or fiduciary of another foreign or domestic corporation, partnership, joint venture, limited liability company, trust, employee benefit plan or other organization or entity, whether for profit or not. An Eligible Person shall also be considered to have been serving an employee benefit plan at the request of the Corporation or a wholly-owned subsidiary of the Corporation if his or her duties to the Corporation or a wholly-owned subsidiary of the Corporation also imposed duties on, or otherwise involved services by, him or her to the plan or to participants in or beneficiaries of the plan. The Corporation shall not be required to indemnify a person in connection with a proceeding initiated by such person, including a counterclaim or cross claim, unless the proceeding was authorized by the Board of Directors or commenced following a Change of Control with respect to actions or failure to act prior to such Change of Control.
Section 7.4. Definitions of Liability and Expense. The Terms "Liability" and "Expense" as used in this Article 7 shall include, but shall not be limited to, reasonable counsel fees and disbursements and amounts of judgments, fines or penalties against (including excise taxes assessed with respect to an employee benefit plan), and amounts paid in settlement by or on behalf of, an Eligible Person.
Section 7.5. Definition of Wholly Successful. The term "Wholly Successful" as used in this Article 7 shall mean (i) termination of any Claim against the Eligible Person in question without any finding of liability or guilt against him or her, (ii) approval by a court, with knowledge of the indemnity herein provided, of a settlement of any Claim, or (iii) the expiration of a reasonable period of time after the making or threatened making of any Claim without the institution of the same, without any payment or promise made to induce a settlement.
Section 7.6. Definition of Change of Control. The term "Change of Control" as used in this Article 7 shall mean a change of control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities and Exchange Act of 1934 (the "1934 Act") as revised effective January 20, 1987, or, if Item 6(e) is no longer in effect, any regulations issued by the Securities and Exchange Commission pursuant to the 1934 Act which serve similar purposes; provided, that, without limitation, (x) such a change of control shall be deemed to have occurred if and when either (A) except as provided in (y) below, any "person" (as such term is used in Sections 13(d) and 14(d) of the 1934 Act) is or becomes a
15
"beneficial owner" (as such term is defined in Rule 13d-3 promulgated under the 1934 Act), directly or indirectly, of securities of the Corporation representing 25% or more of the combined voting power of the Corporation's then outstanding securities entitled to vote with respect to the election of its Board of Directors or (B) as the result of a tender offer, merger, consolidation, sale of assets, or contest for election of directors, or any combination of the foregoing transactions or events, individuals who were members of the Board of Directors of the Corporation immediately prior to any such transaction or event shall not constitute a majority of the Board of Directors following such transaction or event, and (y) no such change of control shall be deemed to have occurred if and when either (A) any such change is the result of a transaction which constitutes a "Rule 13e-3 transaction" as such term is defined in Rule 13e-3 promulgated under the 1934 Act or (B) any such person becomes, with the approval of the Board of Directors of the Corporation, the beneficial owner of securities of the Corporation representing 25% or more but less than 50% of the combined voting power of the Corporation's then outstanding securities entitled to vote with respect to the election of its Board of Directors and in connection therewith represents, and at all times continues to represent, in a filing, as amended, with the Securities and Exchange Commission on Schedule 13D or Schedule 13G (or any successor Schedule thereto) that "such person has acquired such securities for investment and not with the purpose nor with the effect of changing or influencing the control of the Corporation, nor in connection with or as a participant in any transaction having such purpose or effect," or words of comparable meaning and import. The designation by any such person, with the approval of the Board of Directors of the Corporation, of a single individual to serve as a member of, or observer at meetings of, the Corporation's Board of Directors, shall not be considered "changing or influencing the control of the Corporation" within the meaning of the meaning of the immediately preceding clause (B), so long as such individual does not constitute at any time more than one-third of the total number of directors serving on such Board.
Section 7.7. Procedure for Determination of Entitlement to Indemnification. The determination of whether an Eligible Person who is or at the time of Claim was a Director (other than one who has been Wholly Successful with respect to any Claim or one who has requested indemnification following a Change of Control with respect to actions or failure to act prior to such Change of Control) is entitled to indemnification shall be made by any one of the following methods, such method to be selected by the Board of Directors:
(a) by the Board of Directors by a majority vote of a quorum consisting of Directors who are not and have not been parties to the Claim;
(b) if a quorum cannot be obtained under (a), by the majority vote of a committee duly designated by the Board of Directors (in which designation Directors who are or who have been parties to the Claim may participate), consisting solely of two or more Directors who are not and have not been parties to the Claim;
(c) by special legal counsel (which may be regular counsel of the Corporation) (i) selected by the Board of Directors or a committee thereof in the manner prescribed in (a) or (b); or (ii) if a quorum of the Board of Directors cannot be obtained under (a) and a committee cannot be designated under (b), selected by a majority vote of the full Board of Directors (in which selection Directors who are or who have been parties to the Claim may participate).
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If a Change in Control shall have occurred, the Eligible Person who is or at the time of Claim was a Director shall be presumed to be entitled to indemnification (with respect to actions or failures to act occurring prior to such Change in Control) upon submission of a request for indemnification, and thereafter the Corporation shall have the burden of proof to overcome that presumption in reaching a contrary determination. The method for determining entitlement to indemnification shall be by special legal counsel selected by the Eligible Person, but only such special legal counsel to which a majority of the Directors who are not and have not been parties to the Claim do not object.
In the case of Eligible Persons who are not or were not Directors of the Corporation, the determination of whether the Eligible Person (other than one who has been Wholly Successful with respect to any Claim) is entitled to indemnification shall be made (a) by the Chairman of the Board or (b) if the Chairman of the Board so directs or in his or her absence, in the manner such determination would have been made if the Eligible Person was a Director of the Corporation.
Section 7.8. Application to Court for Determination. If an Eligible Person claiming indemnification pursuant to Section 7.7 is found not to be entitled thereto, the Eligible Person may apply for indemnification with respect to a Claim to a court of competent jurisdiction, including a court in which the Claim is pending against the Eligible Person. On receipt of an application, the court, after giving notice to the Corporation and giving the Corporation opportunity to present to the court any information or evidence relating to the claim for indemnification that the Corporation deems appropriate, may order indemnification if it determines that the Eligible Person is entitled to indemnification with respect to the Claim because such Eligible Person met the standards of conduct set forth in Section 7.1(b). If the court determines that the Eligible Person is entitled to indemnification, the court shall also determine the reasonableness of the Eligible Person's Expenses.
Section 7.9. Nonexclusivity. The rights of indemnification provided in this Article 7 shall be in addition to any rights to which any Eligible Person may otherwise be entitled. Irrespective of the provisions of this Article 7, the Board of Directors may, at any time and from time to time, (a) approve indemnification of any Eligible Person to the fullest extent permitted by the provisions of applicable law at the time in effect, whether on account of past or future transactions, and (b) authorize the Corporation to purchase and maintain insurance on behalf of any Eligible Person against any Liability asserted against him or her and incurred by him or her in any such capacity, or arising out of his or her status as such, whether or not the Corporation would have the power to indemnify him or her against such Liability.
Section 7.10. Advancement of Expenses. The Corporation shall advance to an Eligible Person who is a director or officer of the Corporation the Expenses incurred by such Eligible Person with respect to any Claim. The Corporation may advance to an Eligible Person who is not a director or officer of the Corporation the Expenses incurred by such Eligible Person with respect to any Claim. The Corporation shall advance such Expenses within sixty (60) days after the receipt by the Corporation of a statement or statements from the Eligible Person requesting such advance or advances from time to time, whether prior to or after final disposition of such Claim unless a determination has been made pursuant to Section 7.1 that such Eligible Person is not entitled to indemnification. Any such statement or statements shall reasonably evidence the expenses incurred by the Eligible Person and shall include a written affirmation or undertaking to repay advances if it
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is ultimately determined that the Eligible Person is not entitled to indemnification under this Article.
Section 7.11. Insurance, Contracts and Funding. The Corporation may purchase and maintain insurance to protect itself and any Eligible Person against any expense, judgments, fines and amounts relating to any Claim or incurred by any Eligible Person in connection with any Claim, to the fullest extent permitted by applicable law now or hereafter in effect. The Corporation may enter into agreements with any Eligible Person supplemental to or in furtherance of the provisions of this Article and may create a trust fund or use other means (including, without limitation, a letter of credit) to ensure the payment of such amounts as may be necessary to effect indemnification and advancement of expenses as provided in this Article.
Section 7.12. Nature of Provisions. The provisions of this Article 7 shall be deemed to be a contract between the Corporation and each Eligible Person, and an Eligible Person's rights hereunder shall not be diminished or otherwise adversely affected by any repeal, amendment or modification of this Article 7 that occurs subsequent to such person becoming an Eligible Person with respect to acts occurring prior to such repeal, amendment or modification.
Section 7.13. Applicability of Provisions. The provisions of this Article 7 shall be applicable to Claims made or commenced after the adoption hereof, whether arising from acts or omissions to act occurring before or after the adoption hereof.
ARTICLE 8
Miscellaneous
Section 8.1. Amendments. The power to make, alter, amend, or repeal these Bylaws is vested in the Board of Directors, but the affirmative vote of a majority of the actual number of Directors elected and qualified, from time to time, shall be necessary to effect any alteration, amendment or repeal of these Bylaws.
Section 8.2. Seal. The seal of the Corporation shall be circular in form and mounted on a metal die, suitable for impressing the same upon paper. About the upper periphery of the seal shall appear the words "CONSECO, INC.," and about the lower periphery thereof, the word "Indiana." In the center of the seal shall appear the word "Seal."
Section 8.3. Fiscal Year. The fiscal year of the Corporation shall begin on the first day of January of each year and end upon the last day of December in the same year.
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THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN VIOLATION OF SUCH ACT, THE RULES AND REGULATIONS THEREUNDER, OR THE PROVISIONS OF THIS WARRANT.
WARRANT
To Purchase Common Stock of
CONSECO, INC.
 Warrant No. 2000-2
No. of Shares of Common Stock: 5,250,000
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                                TABLE OF CONTENTS
                                                                                                                Page
                                                                                                                ----
                                    ARTICLE I
                                   DEFINITIONS

                                   ARTICLE II
                               EXERCISE OF WARRANT
2.1      Exercise.................................................................................................7
2.2      Exercise Notice; Delivery of Certificates................................................................7
2.3      Payment of Warrant Price; Net Issue Exercise.............................................................8
2.4      Payment of Taxes.........................................................................................9
2.5      Fractional Shares........................................................................................9

                                   ARTICLE III
                       TRANSFER, DIVISION AND COMBINATION

3.1      Transfer.................................................................................................9
3.2      Division and Combination.................................................................................9
3.3      Maintenance of Books....................................................................................10

                                   ARTICLE IV
                                   ADJUSTMENTS

4.1      Stock Dividends, Stock Splits, Subdivisions and Combinations............................................10
4.2      Dividends and Certain Other Distributions...............................................................10
4.3      Repurchase of Shares of Common Stock by Company.........................................................11
4.4      Issuance of Additional Shares of Common Stock...........................................................11
4.5      Issuance of Convertible Securities or Other Rights......................................................12
4.6      Other Provisions Applicable to Adjustments under Article IV.............................................12
4.7      Organic Change..........................................................................................13

                                    ARTICLE V
                           NOTICES TO WARRANT HOLDERS

5.1      Notice of Adjustments...................................................................................14
5.2      Notice of Corporate Action..............................................................................14

                                        i	

                                TABLE OF CONTENTS
                                   (continued)
                                                                                                                Page

                                   ARTICLE VI
                                  NO IMPAIRMENT

                                   ARTICLE VII
                  RESERVATION AND AUTHORIZATION OF COMMON STOCK

                                  ARTICLE VIII
              TAKING OF RECORD; STOCK AND WARRANT TRANSFER OF BOOKS

                                   ARTICLE IX
                     RESTRICTIONS ON TRANSFER; REGISTRATION

9.1      Restrictive Legends.....................................................................................16
9.2      Notice of Proposed Transfers............................................................................17
9.3      Termination of Restrictions.............................................................................17
9.4      Registration Statement..................................................................................17
9.5      Suspension Notice.......................................................................................19
9.6      Expenses................................................................................................19
9.7      Obtaining Stock Exchange Listings.......................................................................20

                                   ARTICLE X
                             SUPPLYING INFORMATION

                                   ARTICLE XI
                               LOSS OR MUTILATION

                                  ARTICLE XII
                NO STOCKHOLDERS RIGHTS; LIMITATION OF LIABILITY

                                  ARTICLE XIII
                   REPRESENTATIONS AND WARRANTIES OF COMPANY

13.1     Corporate Organization and Authority....................................................................21
13.2     Corporate Power.........................................................................................21

                                       ii	

                                TABLE OF CONTENTS
                                   (continued)
                                                                                                                Page

13.3     Authorization; Enforceability...........................................................................21
13.4     Valid Issuance of Warrant and Warrant Stock.............................................................21
13.5     No Conflict with Other Instruments......................................................................21
13.6     Capitalization..........................................................................................22
13.7     Governmental Consents...................................................................................22
13.8     Company SEC Reports.....................................................................................22

                                   ARTICLE XIV
                                  MISCELLANEOUS

14.1     Nonwaiver and Expenses..................................................................................23
14.2     Notices.................................................................................................23
14.3     Successors and Assigns..................................................................................24
14.4     Amendment...............................................................................................24
14.5     Severability............................................................................................24
14.6     Section and Other Headings..............................................................................24
14.7     Governing Law...........................................................................................24
14.8     Remedies................................................................................................24
14.9     Counterparts............................................................................................25

EXHIBITS

EXHIBIT A            SUBSCRIPTION FORM

EXHIBIT B            ASSIGNMENT FORM	

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THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN VIOLATION OF SUCH ACT, THE RULES AND REGULATIONS THEREUNDER, OR THE PROVISIONS OF THIS WARRANT.
No. of Shares of Common Stock: 5,250,000 Warrant No. 2000-2
WARRANT
To Purchase Common Stock of
CONSECO, INC.
GE Capital Equity Investments, Limited, a company organized under the laws of the Cayman Islands, or its successors and registered assigns ("Holder"), in exchange for consideration the receipt and sufficiency of which are hereby acknowledged, is entitled, at any time during the Exercise Period (as hereinafter defined), to purchase from Conseco, Inc., an Indiana corporation ("Company"), 5,250,000 shares of Common Stock (as hereinafter defined and subject to adjustment as provided herein), in whole or in part, at a purchase price of $5.75 per share (subject to adjustment as provided herein) (as so adjusted, the "Exercise Price") on the terms and conditions set forth herein.
ARTICLE I
DEFINITIONS
The following terms have the meanings set forth below:
"Additional Shares of Common Stock" means all shares of Common Stock issued by Company after the date of this Warrant other than Warrant Stock.
"Aggregate Purchase Price" means the Weighted Average Purchase Price multiplied by the number of shares of Common Stock repurchased by Company in a manner giving rise to an adjustment of the Exercise Price pursuant to
Section 4.3.
"Board" means the Board of Directors of Company.
"Business Day" means any day that is not a Saturday, a Sunday or a day on which commercial banks in the State of Indiana are required or permitted by law or executive order to be closed.
"Common Stock" means (except where the context otherwise indicates) the Common Stock, no par value, of Company as constituted on the date of this Warrant, and any capital stock into which such Common Stock may thereafter be reclassified or otherwise changed, and shall also include (i) capital stock of Company of any other class (regardless of how
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denominated), other than capital stock entitled to a liquidation preference and
(ii) shares of capital stock of the successor or acquiring corporation received by or distributed to the holders of Common Stock of Company in the circumstances contemplated by Section 4.6.
"Company" has the meaning set forth in the recitals.
"Convertible Security" means any option, warrant or share of preferred stock of Company or any other security or instrument, including without limitation any debt security, in any case, which is convertible directly or indirectly into or exchangeable for Additional Shares of Common Stock, either immediately or upon the occurrence of a specified date or a specified event.
"Current Market Price" means, in respect of a share of Common Stock on any date of determination, either (a) if there shall then be a public market for the Common Stock, then the volume weighted average of the daily market prices over the twenty (20) consecutive trading days commencing thirty (30) days immediately before such date of determination, or (b) if there shall not then be a public market for the Common Stock, then the fair market value of the Common Stock as at such date. For purposes of clause (a), the "daily market price" for any trading day shall be: (i) the volume weighted average sale price of all sales of the Common Stock during the principal trading session on such day on the New York Stock Exchange or, if no sale occurred on the New York Stock Exchange on such day, on the national stock exchange that experienced the highest volume of trades in the Common Stock, or, if no sale was made on any such exchange on such day, on the National Market of the NASDAQ; (ii) if the Common Stock is not then listed or admitted to trading on any national stock exchange or National Market of NASDAQ, the average of the last reported closing bid and ask prices on such day in the over-the-counter market as furnished by the National Quotation Bureau, Incorporated (or similar organization or agency succeeding to its functions of reporting security prices); or (iii) if there is no such firm, the average of the last reported closing bid and ask prices on such day as furnished by any member of the NASD or the New York Stock Exchange selected by the Required Holders and Company or, if they cannot agree upon such selection, as selected by two such members of the NASD or New York Stock Exchange, one of which shall be selected by the Required Holders and one of which shall be selected by Company. For purposes of clause (b), "fair market value" shall be the price that would reflect the value of such shares in a sale by a willing seller under no compulsion to sell and a willing buyer under no compulsion to buy, without any premium or discount related to control or illiquidity, as agreed upon by Company and the Required Holders; provided, however, that if Company and the Required Holders cannot agree on such fair market value, then Company shall engage an investment banking firm of nationally recognized standing mutually acceptable to and selected by Company and the Required Holders within ten (10) days after the date of the event or notice giving rise to the need to determine fair market value to determine fair market value in accordance with the preceding provisions; provided, further, if Company and the Required Holders cannot agree on a mutually acceptable investment banking firm within such ten (10) day period, Company and the Required Holders shall, within such ten (10) day period, each choose one investment banking firm of recognized standing and the
2
respective chosen firms shall, within five (5) days after the later of such firms is chosen, agree on another investment banking firm which shall be engaged to make the determination of the fair market value in accordance with the preceding provisions. The determination by the engaged firm shall be made as soon as practicable, but not later than thirty (30) days after the date such firm is engaged. The cost of the investment banking firm or firms selected shall be borne by Company.
"Determination Date" has the meaning set forth in Section 4.3.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and all rules and regulations promulgated thereunder.
"Exercise Period" has the meaning set forth in Section 2.1.
"Exercise Price" has the meaning set forth in the first paragraph of this Warrant.
"Expiration Date" means June 28, 2005; provided that such date shall be extended by the total number of days during which a Suspension Notice has been outstanding throughout the Exercise Period.
"Governmental Authority" means any nation or government, any state or other political subdivision thereof, and any agency, department or other entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.
"Holder" has the meaning set forth in the first paragraph of this Warrant.
"NASD" means the National Association of Securities Dealers, Inc., or any successor thereto.
"NASDAQ" means the automated quotation system of the NASD.
"Organic Change" means (a) any sale, lease, exchange or other transfer of all or substantially all of the property, assets or business of Company, (b) any liquidation, dissolution or winding up of Company, whether voluntary or involuntary, (c) any merger or consolidation to which Company is a party and pursuant to which either (i) the holders of the voting securities of Company immediately prior thereto own less than 60% of the outstanding voting securities of the surviving entity immediately following such transaction or
(ii) the holders of the voting securities of Company immediately prior thereto do not have the ability to elect a majority of the members of the board of directors (or Persons performing similar functions) of the surviving entity immediately following such transaction, or (d) any Person or group (as such term is used in Section 13(d) of the Exchange Act) of Persons, shall either (i) beneficially own (as defined in Rule 13d-3 under the Exchange Act) securities of Company representing 50% or more of the voting securities of Company then outstanding or (ii) have the ability to elect a majority of the members of the board of directors (or Persons performing similar functions) of the surviving entity. For purposes of the preceding sentence, "voting securities" shall mean securities, the holders of which are ordinarily entitled to elect the members of the board of directors (or Persons performing similar functions).
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"Outstanding" means, when used with reference to Common Stock, on any date, all issued shares of Common Stock on such date, except shares then owned or held by or for the account of Company or any Subsidiary thereof, and shall include all shares issuable in respect of outstanding scrip or any certificates representing fractional interests in shares of Common Stock.
"Permitted Distributions" means dividends or distributions paid in any fiscal year to Company shareholders in the ordinary course of business and having an aggregate fair value (determined as set forth in paragraphs (b) and
(c) of the definition of "Weighted Average Purchase Price" in Article I) per share of not more than 20% of Company's Net Income (as reported in the Company's audited financial statements) for the immediately preceding fiscal year.
"Permitted Issuances" means (a) the issuance by Company after June 21, 2000, of options or restricted stock to existing and future employees and directors of Company, and the subsequent exercise of any such options; provided that the aggregate number of shares of Common Stock so issued together with the number of shares of Common Stock subject to issuance upon exercise of options so granted shall at no time exceed 30,000,000 (such number and all other share numbers in this definition being appropriately adjusted from time to time for transactions of the type described in Section 4.1); and provided further that the issuance of any such restricted stock, or any such option with an exercise price that is lower than the "fair market value" of the Common Stock (as defined for purposes of ss.422 of the United States Internal Revenue Code as of the date of issuance), shall be a "Permitted Issuance" only to the extent that the total number of shares of Common Stock issued below such "fair market value" or covered by options with an exercise price below such "fair market value" at the time of issuance shall not exceed 18,200,000 (of which 13,200,000 shares are issuable to Gary Wendt); (b) the issuance of up to an aggregate of 79,808,413 shares of Common Stock upon conversion of Company's presently outstanding Convertible Securities in accordance with their terms as of June 21, 2000; (c) any issuance of Common Stock or Convertible Securities (i) in connection with a bona fide financing at a price (before deducting customary underwriters' discounts and commissions) that is not more than 1% below the closing price of the Common Stock on the New York Stock Exchange or other principal trading market on the day of pricing of the offering or (ii) in connection with an arms-length acquisition by Company of control over, or the business and assets of, another company and (d) the issuance by Company of up to 2,000,000 shares of Common Stock to Mr. Wendt at a price of not less than $6.00 per share.
"Person" means any individual, sole proprietorship, partnership, limited liability company, joint venture, trust, unincorporated organization, association, corporation, institution, public benefit corporation, entity or government (whether federal, state, county, city, municipal or otherwise, including, without limitation, any instrumentality, division, agency, body or department thereof).
"Prospectus" means the prospectus included in a Registration Statement at the time such Registration Statement is declared effective, as amended or supplemented by any prospectus supplement and by all other amendments thereto, including post-effective amendments, and all material incorporated by reference into such Prospectus.
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"Recommencement Date" has the meaning set forth in Section 9.2 hereof.
"Registration Statement" means the Registration Statement of the Company, to be filed in accordance with the Registration Rights Agreement dated the date hereof within 15 days of the date hereof, relating to resales of the Warrant by Holder and the issuance of the Warrant Shares upon exercise of the Warrant, including the Prospectus included therein, all amendments and supplements thereto (including post-effective amendments) and all exhibits and material incorporated by reference therein, or any other registration statement filed by Company for the purpose of registering the Warrant or the Warrant Stock.
"Required Holders" means the holders of Warrants exercisable for in excess of 50% of the aggregate number of Warrant Stock then purchasable upon exercise of all Warrants.
"SEC" means the U.S. Securities and Exchange Commission, or any successor thereto.
"Securities Act" means the Securities Act of 1933, as amended, and all rules and regulations promulgated thereunder.
"Subsidiary" means, with respect to any Person, (a) any corporation of which an aggregate of more than 50% of the outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation is at the time, directly or indirectly, owned legally or beneficially by such Person or one or more Subsidiaries of such Person, and (b) any partnership, limited liability company or other entity in which such Person or one or more Subsidiaries of such Person shall have an interest (whether in the form of voting or participation in profits or capital contribution) of more than 50%.
"Suspension Notice" has the meaning set forth in Section 9.2.
"Transfer" means any disposition of any Warrant or Warrant Stock or of any interest in either thereof, which would constitute a sale thereof within the meaning of the Securities Act.
"Warrant" means this Warrant and all warrants issued upon transfer, division or combination of, or in substitution for, this Warrant. All Warrants shall at all times be identical as to terms and conditions and date, except as to the number of shares of Common Stock for which they may be exercised.
"Warrant Price" means an amount equal to (i) the number of shares of Common Stock being purchased upon exercise of this Warrant pursuant to
Section 2.1, multiplied by (i) the Exercise Price as of the date of such exercise.
"Warrant Stock" means the shares of Common Stock issued or issuable upon the exercise of this Warrant.
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"Weighted Average Purchase Price" means the volume-weighted average price paid by Company for all shares of Common Stock repurchased in any manner giving rise to an adjustment of the Exercise Price pursuant to Section 4.3. For purposes of the foregoing sentence, the "price paid" by Company for shares of Common Stock shall be: (a) in the event of cash, the amount of cash paid by Company for such Common Stock, including all expenses associated therewith; (b) in the event of securities or other property for which a public market exists, the volume weighted average of the daily trading price of such securities or other property over the twenty (20) consecutive trading days commencing thirty
(30) days immediately before the Date of Determination; or (c) in the event of securities or other property for which no public market exists, the fair asset value of such securities or other property as at the Date of Determination. For purposes of clause (b), the "daily trading price" for any trading day shall be:
(i) the volume weighted average sale price of all sales of such securities or other property during the principal trading session on such day on the principal market on which such securities or other property are then listed or admitted to trading; or (ii) if the information necessary to determine the volume weighted average sale price under clause (i) above is unavailable, then the average of the closing bid and ask prices on such day as furnished by any member of such market selected by the Required Holders and Company or, if they cannot agree upon such selection, as selected by two such members, one of which shall be selected by the Required Holders and one of which shall be selected by Company. For purposes of clause (c), "fair asset value" shall be the price that would reflect the value of such securities or other property on a fully distributed basis (that is, as if such securities or other property were traded on a free and active market on an exchange or over the counter) in a sale by a willing seller under no compulsion to sell and a willing buyer under no compulsion to buy, without any premium or discount for any reason, including but not limited to any discount related to the offering of such securities or other property, any premium for control or any discount for illiquidity, as agreed upon by Company and the Required Holders; provided, however, that if Company and the Required Holders cannot agree on such fair asset value, then Company shall engage an investment banking firm or other appropriate professional valuation firm of nationally recognized standing mutually acceptable to and selected by Company and the Required Holders within ten (10) days after the date of the event or notice giving rise to the need to determine fair asset value to determine fair asset value in accordance with the preceding provisions; provided, further, if Company and the Required Holders cannot agree on a mutually acceptable valuation firm within such ten (10) day period, Company and the Required Holders shall, within such ten (10) day period, each choose one such firm of recognized standing and the respective chosen firms shall, within five (5) days after the later of such firms is chosen, agree on another valuation firm which shall be engaged to make the determination of the fair asset value in accordance with the preceding provisions. The determination by the engaged firm shall be made as soon as practicable, but not later than thirty
(30) days after the date such firm is engaged. The cost of the valuation firm or firms selected shall be borne by Company.
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ARTICLE II
EXERCISE OF WARRANT
SECTION 2.1 Exercise.
From and after the date of this Warrant and until 5:00 P.M., Central Standard time, on the Expiration Date, subject to extension pursuant to Section
2.2(e) (the "Exercise Period"), Holder may exercise this Warrant from time to time in whole or in part, on any Business Day, to purchase from Company up to a total of 5,250,000 shares of Common Stock (subject to adjustment as provided herein) at the Exercise Price.
SECTION 2.2 Exercise Notice; Delivery of Certificates.
(a) In order to exercise this Warrant, Holder shall deliver (which such delivery may, at Holder's option, be by facsimile) to Company at its principal office designated by Company in Section 14.2, a duly executed written notice of Holder's election to exercise this Warrant, specifying the number of shares of Warrant Stock to be purchased, in substantially the form attached hereto as Exhibit A (the "Subscription Notice").
(b) Upon receipt of a Subscription Notice, Company shall, as promptly as practicable thereafter, and in any event within five (5) Business Days after receipt of any necessary regulatory approvals (including expiration of any applicable waiting period), deliver to Holder a duly executed certificate or certificates representing the aggregate number of full shares of Warrant Stock issuable upon such exercise, together with cash in lieu of any fraction of a share, as hereinafter provided. Such stock certificate or certificates shall be in such denominations and registered in the name designated in the Subscription Notice.
(c) In addition, as soon as practicable after the delivery of a Subscription Notice, but subject to the receipt of any necessary regulatory approvals (including expiration of any applicable waiting period), Holder shall deliver in person, by certified mail or courier, to Company at the aforementioned address, (i) if Holder has elected pursuant to the applicable Subscription Notice to make payment of the Warrant Price pursuant to Section 2.3(a), such payment and (ii) this Warrant.
(d) Upon the later of the date required for issuance of the applicable shares of Warrant Stock pursuant to Section 2.2(b) and the date on which any payment required pursuant to Section 2.2(c) is received, Holder or any other Person so designated in the applicable Subscription Notice shall be deemed to have become a holder of record of the applicable Warrant Stock for all purposes. If this Warrant shall have been exercised in part, Company shall deliver to Holder a new Warrant evidencing the rights of Holder to purchase the remaining shares of Warrant Stock issuable upon exercise of this Warrant, which new Warrant shall in all other respects be identical with this Warrant, or appropriate notation may be made on this Warrant and the same returned to Holder.
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(e) If in connection with the exercise of a Warrant or acquisition of Warrant Stock by Holder, any regulatory approval shall be required, including expiration of any applicable waiting period, then, if the Warrant is exercised prior to such approval, the Expiration Date shall be extended while any such regulatory approval or waiting period is pending. Without limiting the foregoing, Company hereby acknowledges that the exercise of this Warrant by Holder may subject Company or Holder to the filing requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"). If on or before the Expiration Date, Holder has sent the Subscription Notice to Company and Holder has not been able to complete the exercise of this Warrant prior to the Expiration Date because of restrictions under the HSR Act, Holder shall be entitled to complete the process of exercising this Warrant in accordance with the procedures contained herein notwithstanding the fact that completion of the exercise of this Warrant would take place after the Expiration Date.
SECTION 2.3 Payment of Warrant Price; Net Issue Exercise.
(a) Payment of the Warrant Price shall be made at the option of Holder by (i) cash, by check or by wire transfer or (ii) cancellation by Holder of indebtedness of Company to Holder; or (iii) any combination thereof.
(b) In lieu of the payment methods set forth in Section 2.3(a) above, Holder may elect to exchange all or part of the Warrant for such number of shares of Warrant Stock as could be purchased with the difference between the Current Market Price and the Exercise Price for the amount of the Warrant being exchanged on the date of exchange. All references in this Warrant to an "exercise" of the Warrant shall include a net issue exercise pursuant to this
Section 2.3(b). If Holder elects to exchange all or part of the Warrant as provided in this Section 2.3(b), Holder shall tender to Company the Warrant, along with a Subscription Notice indicating Holder's election to exchange all or part of the Warrant and the amount being exchanged, and Company shall issue to Holder the number of shares of Warrant Stock computed using the following formula:
X = Y(A-B)

A
Where
X = number of shares of Warrant Stock to be issued to Holder upon exercise;
Y = total number of shares of Warrant Stock purchasable under the Warrant (or, if only a portion, the amount of Warrant Stock for which the Warrant is being exchanged);
A = Current Market Price of one share of Warrant Stock; and
B = Exercise Price (as adjusted to the date of such calculation).
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SECTION 2.4 Payment of Taxes.
Company shall pay all expenses, taxes and other governmental charges with respect to the issue or delivery of the Warrant Stock. Company shall not be required, however, to pay any transfer tax or other similar charge imposed in connection with the issue of any certificate for shares of Warrant Stock in any name other than that of Holder, and in such case Company shall not be required to issue or deliver any stock certificate until such tax or other charge has been paid or it has been established to the reasonable satisfaction of Company that no such tax or other charge is due.
SECTION 2.5 Fractional Shares.
Company shall not be required to issue a fractional share of Warrant Stock upon exercise of any Warrant. As to any fraction of a share which Holder of one or more Warrants would otherwise be entitled to purchase upon such exercise, Company shall pay a cash adjustment in respect of such fractional share in an amount equal to the same fraction of the Current Market Price per share of Warrant Stock on the date of exercise.
ARTICLE III
TRANSFER, DIVISION AND COMBINATION
SECTION 3.1 Transfer.
Company shall register any Transfer of this Warrant and all rights hereunder, in whole or in part, on the books of Company to be maintained for such purpose, upon surrender by Holder of this Warrant at the principal office of Company referred to in Section 14.2, together with a duly executed written assignment of this Warrant substantially in the form of Exhibit B hereto and funds sufficient to pay any transfer taxes payable upon the making of such Transfer. Promptly following such surrender and, if required, such payment, Company shall at its expense execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. A Warrant may be exercised by a new Holder for the purchase of shares of Common Stock without having a new Warrant issued.
SECTION 3.2 Division and Combination.
This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office or agency of Company, together with a duly executed written notice specifying the names and denominations in which new Warrants are to be issued. Subject to compliance with Section 3.1 as to any Transfer which may be involved in such division or combination, Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice.
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SECTION 3.3 Maintenance of Books.
Company agrees to maintain, at its office referred to in Section 14.2, books for the registration of Transfer of the Warrants.
IV
ADJUSTMENTS
The number of shares of Warrant Stock for which this Warrant is exercisable, and the Exercise Price at which such shares may be purchased upon exercise of this Warrant, shall be subject to adjustment from time to time as set forth in this Article IV. The adjustments to the Exercise Price and the number of Warrant Shares set forth in this Article IV shall be applicable to all triggering events specified therein that occur subsequently to June 21, 2000.
SECTION 4.1 Stock Dividends, Stock Splits, Subdivisions and Combinations. If at any time Company shall:
(a) take a record of the holders of Common Stock for the purpose of entitling them to receive a dividend payable in, or other distribution of, Common Stock,
(b) subdivide or split its Outstanding shares of Common Stock into a larger number of shares of Common Stock, or
(c) combine or reclassify its Outstanding shares of Common Stock into a smaller number of shares of Common Stock;
then, in each of cases (a), (b) and (c) above, (i) the number of shares of Warrant Stock for which this Warrant is exercisable immediately after the occurrence of any such event shall be adjusted to equal the number of shares of Warrant Stock which a record holder of the same number of shares of Warrant Stock for which this Warrant is exercisable immediately prior to the occurrence of such event or the record date therefor, whichever is earlier, would own or be entitled to receive after the happening of such event, and (ii) the Exercise Price shall be adjusted to equal (A) the Exercise Price multiplied by the number of shares of Warrant Stock for which this Warrant is exercisable immediately prior to the adjustment divided by (B) the number of shares of Warrant Stock for which this Warrant is exercisable immediately after such adjustment.
SECTION 4.2 Dividends and Certain Other Distributions.
If at any time Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or other distribution, or shall in any manner declare, order, pay or make a dividend or other distribution (including, without limitation, any distribution of stock or other securities, cash, debt or property or rights or warrants to subscribe for securities of Company or any of its Subsidiaries by way of dividend or spin-off or any other assets) on its Common Stock, other than dividends or distributions of shares of Common Stock which are referred to in Section 4.1 and other than Permitted Distributions, then and in each such case, the Exercise Price to be in effect after such record date shall be determined by subtracting
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(a) the fair value (determined as set forth in paragraphs (b) and (c) of the definition of "Weighted Average Purchase Price" in Article I) of such dividend or distribution per share of Common Stock from (b) the Exercise Price in effect immediately prior to such record date.
SECTION 4.3 Repurchase of Shares of Common Stock by Company.
If at any time Company or any subsidiary thereof shall repurchase, by self tender offer or otherwise, any shares of Common Stock at a Weighted Average Purchase Price in excess of the Current Market Price as of the earliest of the date of such repurchase, the commencement of an offer to repurchase or the public announcement of either (such date being referred to as the "Determination Date"), the Exercise Price in effect as of such Determination Date shall be reduced by multiplying such Exercise Price by a fraction, the numerator of which shall be (a) the product of (x) the number of shares of Common Stock Outstanding on such Determination Date and (y) the Current Market Price of the Common Stock on such Determination Date minus (b) the Aggregate Purchase Price of such repurchase and the denominator of which shall be the product of (i) the number of shares of Common Stock Outstanding on such Determination Date minus the number of shares of Common Stock repurchased by the Company or any subsidiary thereof in such repurchase and (ii) the Current Market Price of the Common Stock on such Determination Date. An adjustment made pursuant to this Section 4.3 shall become effective immediately after the effective date of such repurchase.
SECTION 4.4 Issuance of Additional Shares of Common Stock.
(a) If at any time Company shall issue or sell any Additional Shares of Common Stock, other than Permitted Issuances or as referred to in Section 4.1 or 4.2, for consideration in an amount per Additional Share of Common Stock less than the Current Market Price, then (i) the number of shares of Warrant Stock for which this Warrant is exercisable shall be adjusted to equal the product obtained by multiplying the number of shares of Warrant Stock for which this Warrant is exercisable immediately prior to such issuance or sale by a fraction (A) the numerator of which shall be the number of shares of Common Stock Outstanding immediately after such issuance or sale, and (B) the denominator of which shall be the sum of (x) the number of shares of Common Stock Outstanding immediately prior to such issuance or sale and (y) the number of shares of Common Stock which the aggregate consideration, if any, received by Company upon such issuance or sale would purchase at the then Current Market Price; and (ii) the Exercise Price as to the number of shares of Warrant Stock for which this Warrant is exercisable prior to such adjustment shall be adjusted by multiplying such Exercise Price by a fraction (A) the numerator of which shall be the number of shares of Warrant Stock for which this Warrant is exercisable immediately prior to such issuance or sale; and (B) the denominator of which shall be the number of shares of Warrant Stock for which this Warrant is exercisable immediately after such issuance or sale.
(b) The provisions of paragraph (a) of this Section 4.4 shall not apply to (i) any issuance of Additional Shares of Common Stock for which an adjustment is provided under Section 4.1 or Section 4.2 or (ii) any issuance of any Additional Shares of Common Stock pursuant to any Convertible Security, if and only to the extent that such adjustment shall
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previously have been made upon the issuance of such Convertible Security pursuant to Section 4.5.
SECTION 4.5 Issuance of Convertible Securities or Other Rights.
(a) If at any time Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a distribution of, or shall in any manner (whether directly or by assumption in a merger in which Company is the surviving corporation) issue or sell, any Convertible Securities or other rights to subscribe for or purchase any Additional Shares of Common Stock or any Convertible Securities, other than Permitted Issuances or as referred to in Section 4.1 or 4.2, whether or not the rights to exchange or convert thereunder are immediately exercisable, and the price per share together with any consideration received by Company upon issuance of the Convertible Security, for which Common Stock is issuable upon the exercise of such Convertible Securities shall be less than the Current Market Price in effect immediately prior to the time of such record, issuance or sale, then the number of shares of Warrant Stock and the Exercise Price shall be adjusted as provided in Section 4.4 on the basis that the maximum number of Additional Shares of Common Stock issuable pursuant to all such Convertible Securities shall be deemed to have been issued and outstanding and Company shall be deemed to have received all of the consideration payable therefor, if any, as of the date of the issuance of such Convertible Securities or other rights.
(b) On the repayment, expiration or termination of any Convertible Securities, the granting or issuance of which resulted in an adjustment under paragraph (a), the Exercise Price shall forthwith be readjusted to such amount as would have obtained had the adjustment made upon the granting or issuance of such Convertible Securities been made upon the basis of the granting or issuance of only such Convertible Securities as were actually exercised, converted or exchanged for Common Stock prior to their repayment, expiration or termination.
SECTION 4.6 Other Provisions Applicable to Adjustments under Article IV.
The following provisions shall be applicable to the making of adjustments of the number of shares of Warrant Stock for which this Warrant is exercisable and the Exercise Price provided for in this Article IV:
(a) Computation of Consideration. To the extent that any Additional Shares of Common Stock or any Convertible Securities or any rights to acquire Convertible Securities shall be issued for cash consideration, the consideration received by Company therefor shall be the amount of the cash received by Company therefor, or, if such Additional Shares of Common Stock or Convertible Securities are offered by Company for subscription, the subscription price, or, if such Additional Shares of Common Stock or Convertible Securities are sold to underwriters or dealers for public offering without a subscription offering, the public offering price (in any such case subtracting any amounts paid or receivable for accrued interest or accrued dividends and subtracting any compensation, discounts or expenses paid or incurred by Company for and in the underwriting of, or otherwise in connection with, the issuance thereof). To the extent that such issuance shall be for a consideration other than cash, then, except as herein otherwise
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expressly provided, the amount of such consideration shall be determined as set forth in paragraphs (b) and (c) of the definition of "Weighted Average Purchase Price" in Article I. The consideration for any Additional Shares of Common Stock issuable pursuant to any warrants or other rights to subscribe for or purchase the same shall be the consideration received by Company for issuing such warrants or other rights plus the additional consideration payable to Company upon exercise of such warrants or other rights. The consideration for any Additional Shares of Common Stock issuable pursuant to the terms of any Convertible Securities shall be the consideration received by Company for issuing warrants or other rights to subscribe for or purchase such Convertible Securities, plus the consideration paid or payable to Company in respect of the subscription for or purchase of such Convertible Securities, plus the additional consideration, if any, payable to Company upon the exercise of the right of conversion or exchange in such Convertible Securities. In case of the issuance at any time of any Additional Shares of Common Stock or Convertible Securities in payment or satisfaction of any dividends upon any class of stock other than Common Stock, Company shall be deemed to have received for such Additional Shares of Common Stock or Convertible Securities a consideration equal to the amount of such dividend so paid or satisfied.
(b) When Adjustments to be Made. Except as otherwise provided, the adjustments required by this Article IV shall be made whenever and as often as any specified event requiring an adjustment shall occur.
(c) Fractional Interests. In computing adjustments under this Article IV, fractional interests in Common Stock shall be taken into account to the nearest 1/10th of a share.
(d) Rounding. In computing adjustments under this Article IV, figures may be rounded to the eighth decimal place.
(e) When Adjustment Not Required. If Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or distribution or subscription or purchase rights and shall, thereafter and before the distribution to stockholders thereof, legally abandon its plan to pay or deliver such dividend, distribution, subscription or purchase rights, then thereafter no adjustment shall be required by reason of the taking of such record and any such adjustment previously made in respect thereof shall be rescinded and annulled.
SECTION 4.7 Organic Change.
In case of any Organic Change, Holder shall have the right thereafter to receive, upon exercise of the Warrant and at its option, in lieu of the Warrant Stock issuable upon such exercise prior to consummation of such Organic Change, the kind and amount of shares of stock, other securities, cash and property receivable (including cash, and including any right to select the consideration so receivable) upon the consummation of such Organic Change by a holder of that number of shares of Warrant Stock into which the Warrant was exercisable immediately prior to such Organic Change (including, on a pro rata basis, the cash, securities or property received by holders of Common Stock in any tender or exchange offer that is a step in such Organic Change),
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assuming such holder of Common Stock is not a Person with which Company consolidated or into which Company merged or which merged into Company or to which such sale or transfer was made, as the case may be, or an affiliate of such a Person. In case securities or property other than Common Stock shall be issuable or deliverable upon conversion as aforesaid, then all references in this Article IV shall be deemed to apply, so far as appropriate and nearly as may be, to such other securities or property. In case of any Organic Change, the successor or acquiring corporation (if other than Company) shall expressly assume the due and punctual observance and performance of each covenant and condition of this Warrant to be performed and observed by Company and all the obligations and liabilities hereunder, subject to such modifications as may be deemed appropriate (as determined by resolution of the Board) in order to provide for adjustments of shares of Warrant Stock for which this Warrant is exercisable which shall be as nearly equivalent as practicable to the adjustments provided for in this Article IV. The foregoing provisions of this
Section 4.7 shall similarly apply to successive Organic Changes.
ARTICLE V
NOTICES TO WARRANT HOLDERS
SECTION 5.1 Notice of Adjustments.
Whenever an adjustment to this Warrant is made pursuant to Article IV, Company shall promptly deliver to Holder (by facsimile and by either first class mail, postage prepaid or overnight delivery) a certificate executed by the chief financial officer or chief accounting officer of the Company setting forth, in reasonable detail, the event requiring the adjustment and the method by which such adjustment was calculated, specifying the number of shares of Warrant Stock for which this Warrant is exercisable and (if such adjustment was made pursuant to Section 4.7) describing the number and kind of any other shares of stock or other securities or property for which this Warrant is exercisable, and any change in Exercise Price, after giving effect to such adjustment or change. Company shall keep at the office or agency designated pursuant to
Section 14.2 copies of all such certificates and cause the same to be available for inspection at said office during normal business hours by any Holder or any prospective purchaser of a Warrant designated by a Holder thereof. Any adjustment to this Warrant pursuant to Article IV shall be automatic and shall occur without any action on the part of Company or Holder, and any failure by Company to comply with the terms of this Section 5.1 (including any error made by Company in the calculations described above) shall have no effect on such automatic adjustment. Notwithstanding any other provision of this Section 5.1, Holder shall retain the right to contest the adjustment calculations provided by Company described above, and such calculations shall not be entitled to any presumption of accuracy in any case, action or other proceeding to determine the actual amount of adjustment required by Article IV.
SECTION 5.2 Notice of Corporate Action.
If at any time:
(a) Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or other distribution, or any right to subscribe for or
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purchase any evidences of its indebtedness, any shares of stock of any class or any other securities or property, or to receive any other right;
(b) there shall be approved by the Board any capital reorganization of Company, any reclassification or recapitalization of the capital stock of Company or any consolidation or merger of Company with, or any sale, transfer or other disposition of all or substantially all the property, assets or business of Company to, another corporation, including without limitation any such event constituting an Organic Change; or
(c) there shall be a voluntary or involuntary dissolution, liquidation or winding up of Company;
then Company shall give to Holder (i) in the case of any event described in (a) above, at least fifteen (15) days' prior written notice of the date on which a record date shall be selected in respect of such event and (ii) in the case of any event described in (b) or (c) above, at least thirty (30) days' prior written notice of the date when such event shall take place. Such notice shall also specify (i) the date on which the holders of Common Stock shall be entitled to any such dividend, distribution or right, and the amount and character thereof and (ii) the date on which any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up is to take place and the time, if any such time is to be fixed, as of which the holders of Common Stock shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such event.
ARTICLE VI
NO IMPAIRMENT
Company shall not by any action, including, without limitation, amending its articles of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issuance or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith promptly assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder against impairment. Without limiting the generality of the foregoing, Company will promptly take all such action as may be necessary or appropriate in order that Company may upon the exercise of this Warrant validly and legally issue fully paid and nonassessable shares of Common Stock that are not subject to preemptive rights, including taking such action as is necessary for the Exercise Price to be not less than the par value of the shares of Common Stock issuable upon exercise of this Warrant. Company will promptly obtain all such authorizations, exemptions or consents from any Governmental Authority having jurisdiction thereof, or any other Person, as may be necessary to enable Company to perform its obligations under this Warrant. Without limiting the foregoing, Company will cooperate with Holder in making, and promptly make, any filings under the HSR Act or any other law required in order to perform its obligations under this Warrant or required to permit Holder to exercise this Warrant.
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ARTICLE VII
RESERVATION AND AUTHORIZATION OF COMMON STOCK
From and after the date of this Warrant, Company shall at all times reserve and keep available for issue upon the exercise of Warrants such number of its authorized but unissued shares of Common Stock as will be sufficient to permit the exercise in full of all outstanding Warrants. All shares of Warrant Stock which shall be so issuable, when issued upon exercise of any Warrant and payment therefor in accordance with the terms of such Warrant, shall be duly and validly issued, fully paid and nonassessable, and free from all preemptive rights, restrictions on transfer, taxes, liens, charges and security interests.
ARTICLE VIII
TAKING OF RECORD; STOCK AND WARRANT TRANSFER OF BOOKS
In the case of all dividends or other distributions by Company to the holders of its Common Stock with respect to which any provision of Article IV refers to the taking of a record of such holders, Company will take such record as of the close of business on a Business Day. Company will not at any time, except upon dissolution, liquidation or winding up of Company, close its stock transfer books or Warrant transfer books so as to prevent or delay the exercise or transfer of any Warrant.
ARTICLE IX
RESTRICTIONS ON TRANSFER; REGISTRATION
SECTION 9.1 Restrictive Legends.
(a) Except as otherwise provided in this Article IX, each certificate for Common Stock initially issued upon the exercise of this Warrant, and each certificate for Common Stock issued to any subsequent transferee of any such certificate, shall be stamped or otherwise imprinted with a legend in substantially the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN VIOLATION OF SUCH ACT OR THE RULES AND REGULATIONS THEREUNDER."
(b) Except as otherwise provided in this Article IX, each Warrant shall be stamped or otherwise imprinted with a legend in substantially the following form:
"THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE
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TRANSFERRED IN VIOLATION OF SUCH ACT, THE RULES AND REGULATIONS
THEREUNDER OR THE PROVISIONS OF THIS WARRANT."
SECTION 9.2 Notice of Proposed Transfers.
Prior to or promptly following any Transfer of any Warrants or any shares of restricted Warrant Stock, the holder of such Warrants or restricted Warrant Stock shall give written notice to Company of such Transfer. Each certificate, if any, evidencing such shares of restricted Warrant Stock issued upon such Transfer shall bear the restrictive legend set forth in Section 9.1(a), and each Warrant issued upon such Transfer shall bear the restrictive legend set forth in Section 9.1(b), unless in the opinion of counsel to such holder such legend is not required in order to ensure compliance with the Securities Act.
SECTION 9.3 Termination of Restrictions.
The restrictions and requirements imposed by Sections 9.1 and 9.2 shall terminate as to any particular Warrant or share of Warrant Stock (a) when and so long as such security shall have been effectively registered under the Securities Act, (b) when Company shall have received an opinion of counsel (which may be Holder's inside corporate counsel) that such security may be transferred without registration thereof under the Securities Act or (c) a sale of such security is made pursuant to SEC Rule 144. Whenever the restrictions imposed by Sections 9.1 and 9.2 shall terminate as to this Warrant, as hereinabove provided, Holder shall be entitled to receive from Company, at the expense of Company, a new Warrant without the restrictive legend set forth in
Section 9.1(b). Whenever the restrictions imposed by Sections 9.1 and 9.2 shall terminate as to any share of Warrant Stock, as hereinabove provided, the holder thereof shall be entitled to receive from Company, at the expense of Company, a new certificate representing such Common Stock not bearing the restrictive legend set forth in Section 9.1(a).
SECTION 9.4 Registration Statement.
Upon Holder's exercise of the Warrant, Company shall issue the Warrant Stock (in the amount specified in the Exercise Notice) pursuant to the Registration Statement. To ensure that Company can issue such Warrant Stock pursuant to the Registration Statement without violation of the Securities Act, and that Holder, upon exercise of the Warrant, shall receive Common Stock that is registered under the Securities Act and subject to no restrictions on transfer whatever, Company shall, upon effectiveness of the Registration Statement and for so long as the Warrant shall remain exercisable:
(a) use its best efforts to keep the Registration Statement continuously effective and provide all requisite financial statements. Upon the occurrence of any event that would cause the Registration Statement or the Prospectus contained therein (i) to contain an untrue statement of material fact or omit to state any material fact necessary to make the statements therein not misleading or (ii) not to be effective and usable for an exercise of the Warrant, the Company shall promptly file an appropriate amendment to the Registration Statement curing such defect,
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and, if SEC review is required, use its best efforts to cause such amendment to be declared effective as soon as practicable;
(b) prepare and file with the SEC such amendments and post-effective amendments to the Registration Statement as may be necessary to keep such Registration Statement effective; cause the Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 under the Securities Act, and to comply fully with Rules 424, 430A and 462, as applicable, under the Securities Act in a timely manner; and comply with the provisions of the Securities Act with respect to the disposition of all securities covered by the Registration Statement during the applicable period in accordance with the intended method or methods of distribution set forth in such Registration Statement or supplement to the Prospectus;
(c) advise Holder promptly and, if requested by Holder, confirm such advice in writing, (i) when any Prospectus supplement or post-effective amendment has been filed, and, with respect to any successor Registration Statement or any post-effective amendment thereto, when the same has become effective, (ii) of any request by the SEC for amendments to the Registration Statement or amendments or supplements to the Prospectus or for additional information relating thereto, (iii) of the issuance by the SEC of any stop order suspending the effectiveness of the Registration Statement under the Securities Act or of the suspension by any state securities commission of the qualification of the Warrant or the Common Stock for offering or sale in any jurisdiction, or the initiation of any proceeding for any of the preceding purposes, (iv) of the existence of any fact or the happening of any event that makes any statement of a material fact made in the Registration Statement, the Prospectus, any amendment or supplement thereto or any document incorporated by reference therein untrue, or that requires the making of any additions to or changes in the Registration Statement in order to make the statements therein not misleading, or that requires the making of any additions to or changes in the Prospectus in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. If at any time the Commission shall issue any stop order suspending the effectiveness of the Registration Statement, or any state securities commission or other regulatory authority shall issue an order suspending the qualification or exemption from qualification of the Warrant or the Common Stock under state securities or Blue Sky laws, Company shall use its best efforts to obtain the withdrawal or lifting of such order at the earliest possible time or, failing that, to promptly file another Registration Statement covering the Warrant Stock; in the event of an event or circumstance of the kind described in clause (iv) above, Company shall use its best efforts to cure such inaccuracy at the earliest possible time, and in any event within 90 days of the occurrence of such event or circumstance;
(d) subject to paragraph (a) above, if any fact or event contemplated by paragraph (c)(iii) above shall exist or have occurred, prepare a supplement or post-effective amendment to the Registration Statement or related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to Holder, the Prospectus will not contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading;
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(e) furnish to Holder in connection with each exercise of the Warrant, without charge, at least one copy of the Registration Statement, as first filed with the SEC, and of each amendment thereto, including all documents incorporated by reference therein and all exhibits (including exhibits incorporated therein by reference);
(f) otherwise use its best efforts to comply with all applicable rules and regulations of the Commission; and
(g) provide promptly to Holder, upon request, each document filed with the SEC pursuant to the requirements of Section 13 or Section 15(d) of the Exchange Act.
SECTION 9.5 Suspension Notice.
Holder agrees by acquisition of the Warrant that, upon receipt of the notice referred to in Section 9.4(c)(iii) or any notice from the Company of the existence of any fact of the kind described in Section 9.4(c)(iv) hereof (in each case, a "Suspension Notice"), Holder shall refrain from exercising the Warrant, other than through a net issue exercise pursuant to Section 2.3(b) if the Warrant is not a "restricted security" under SEC Rule 144, until (i) Holder has received copies of the supplemented or amended Prospectus contemplated by clause 9.4(d) hereof, or (ii) Holder is advised in writing by Company that the Prospectus is again accurate in all material respects, and has received copies of any additional or supplemental filings that are incorporated by reference in the Prospectus (in each case, the "Recommencement Date"); provided that Company shall deliver not more than one Suspension Notice during any given 365-day period; and provided further that Company shall not permit more than 90 days to elapse from the date of delivery of any Suspension Notice to the Recommencement Date revoking such Suspension Notice.
SECTION 9.6 Expenses.
All costs, fees and expenses incident to the Company's performance of or compliance with this Agreement shall be borne by Company, including without limitation: (i) all registration and filing fees and expenses; (ii) all fees and expenses of compliance with federal securities and state Blue Sky or securities laws; (iii) all expenses of printing (including printing certificates for the Common Stock to be issued upon exercise of the Warrant and printing of Prospectuses), messenger and delivery services and telephone; (iv) all fees and disbursements of counsel for Company; (v) all application and filing fees in connection with listing the Common Stock on a national securities exchange or automated quotation system pursuant to the requirements hereof; and (vi) all fees and disbursements of independent certified public accountants of Company (including the expenses of any special audit and comfort letters required by or incident to such performance).
Company shall, in any event, bear its internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expenses of any annual audit and the fees and expenses of any Person, including special experts, retained by Company.
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SECTION 9.7 Obtaining Stock Exchange Listings.
Company shall from time to time take all action which may be necessary so that the Warrant Shares, immediately upon their issuance upon the exercise of the Warrant, will be listed on the principal securities exchanges, automated quotation systems or other markets within the United States of America, if any, on which other shares of Common Stock are then listed, if any.
ARTICLE X
SUPPLYING INFORMATION
Company shall cooperate with Holder in supplying such information as may be reasonably necessary for Holder to complete and file any information reporting forms presently or hereafter required by the SEC or any other governmental entity in connection with any Warrant or share of Warrant Stock. Company shall also supply such information as may be reasonably necessary for Holder to comply with tax and other applicable laws and applicable accounting standards. Holder shall cooperate with Company in supplying such information as may be reasonably necessary for Company to comply with its obligations hereunder.
ARTICLE XI
LOSS OR MUTILATION
Upon receipt by Company from Holder of evidence reasonably satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of this Warrant and indemnity reasonably satisfactory to it (it being understood that the written agreement of General Electric Company or any of its Affiliates shall be sufficient indemnity), and in case of mutilation upon surrender and cancellation hereof, Company shall execute and deliver in lieu hereof a new Warrant of like tenor to such Holder; provided, in the case of mutilation, no indemnity shall be required if this Warrant in identifiable form is surrendered to Company for cancellation.
ARTICLE XII
NO STOCKHOLDER RIGHTS; LIMITATION OF LIABILITY
No provision hereof shall be deemed to impose any rights or obligations upon Holder as a stockholder in Company prior to Holder's exercise of this Warrant and the issuance to Holder of Warrant Shares. Without limiting the foregoing, no provision hereof and no enumeration herein of the rights or privileges of Holder hereof, shall give rise to any liability of such Holder for the purchase price of any Warrant Stock or as a stockholder of Company, whether such liability is asserted by Company, by creditors of Company or by any third party.
ARTICLE XIII
REPRESENTATIONS AND WARRANTIES OF COMPANY
Company hereby represents and warrants to Holder that the statements in the following paragraphs of this Article XIII are true and correct (a) as of June 28, 2000 and (b) except where any such representation and warranty relates specifically to an earlier date, as of the date of any exercise of this Warrant.
20
SECTION 13.1 Corporate Organization and Authority.
Company (a) is a corporation duly organized, validly existing, and in good standing in its jurisdiction of incorporation, (b) has the corporate power and authority to own and operate its properties and to carry on its business as now conducted and as proposed to be conducted; and (c) is qualified as a foreign corporation in all jurisdictions where such qualification is material to Company'sbusiness, financial condition or results of operations.
SECTION 13.2 Corporate Power.
Company has all requisite legal and corporate power and authority to execute, issue and deliver the Warrant, to issue the Common Stock issuable upon exercise or conversion of the Warrant, and to carry out and perform its obligations under the terms of the Warrant.
SECTION 13.3 Authorization; Enforceability.
All corporate action on the part of Company, its officers, directors and shareholders necessary for the authorization, execution, delivery and performance of its obligations under this Warrant and for the authorization, issuance and delivery of the Warrant and the Warrant Stock issuable upon exercise of the Warrant has been taken and this Warrant constitutes the legally binding and valid obligation of Company enforceable in accordance with its terms.
SECTION 13.4 Valid Issuance of Warrant and Warrant Stock.
The Warrant has been duly and validly issued and is free of restrictions on transfer. The Warrant Stock issuable upon conversion of this Warrant, when issued, sold and delivered in accordance with the terms of this Warrant for the consideration expressed herein, will be duly and validly issued, fully paid and nonassessable, and will, when issued, be free of any restrictions on transfer. The issuance and delivery of the Warrant and the Warrant Stock issuable upon conversion of the Warrant are not subject to any preemptive or other similar rights or any liens or encumbrances.
SECTION 13.5 No Conflict with Other Instruments.
The execution, delivery, and performance of this Warrant will not result in any violation of, be in conflict with, or constitute a default under, with or without the passage of time or the giving of notice (a) any provision of Company's Certificate of Incorporation or by-laws; (b) any provision of any judgment, decree, or order to which Company is a party or by which it is bound or an event which results in the creation of any material lien, charge or encumbrance upon any material assets of Company; (c) any contract, obligation, or commitment to which Company is a party or by which it is bound; or (d) any statute, rule, or governmental regulation applicable to Company.
21
SECTION 13.6 Capitalization.
The authorized capital stock of Company consists of 1,000,000,000 shares of Common Stock, of which 325,258,309 were issued and outstanding, and 20,000,000 shares of Preferred Stock, of which 2,617,631 shares of Series F Common-Linked Convertible Preferred Stock were issued and outstanding. The outstanding shares have been duly authorized and validly issued (including, without limitation, issued in compliance with applicable federal and state securities laws), and are fully paid and nonassessable. Company has reserved 31,200,000 shares of Common Stock for issuance upon conversion of the Series F Common-Linked Convertible Preferred Stock. Company has reserved 48,608,413 shares of Common Stock for issuance upon the conversion of its currently outstanding Convertible Securities (excluding the Series F Preferred Stock). Company is currently authorized to issue options on up to an additional 36,991,661 shares of Common Stock to its employees and directors under its 1994 Stock and Incentive Plan and the 1997 Non-qualified Stock Option Plan. Except as set forth herein, there are no outstanding warrants, options, conversion privileges, preemptive rights or other rights or agreements to purchase or otherwise acquire or issue any equity securities or Convertible Securities of Company, nor has the issuance of any of the aforesaid rights to acquire securities of Company been authorized. The outstanding shares of the capital stock of Company are duly and validly issued, fully paid and nonassessable, and such shares of such capital stock, and all outstanding securities of Company have been issued in compliance with the registration and prospectus delivery requirements of the Securities Act and the registration and qualification requirements of all applicable state securities laws, or in compliance with applicable exemptions therefrom. The share figures in this Section 13.6 do not include options on 10,000,000 shares of Common Stock and 3,200,000 shares of restricted Common Stock currently issuable to Mr. Wendt.
SECTION 13.7 Governmental Consents.
No consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any federal, state or local governmental authority on the part of Company is required in connection with the offer, sale or issuance of the Warrant (and the Warrant Stock issuable upon conversion of the Shares), or the consummation of any other transaction contemplated hereby, except for the following: (a) the filing of a prospectus supplement to the Registration Statement in accordance with Rule 424(b) under the Securities Act; b) the compliance with other applicable state securities laws, which compliance will have occurred within the appropriate time periods therefore; and (c) the filing of a notification under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
SECTION 13.8 Company SEC Reports.
Company has filed all forms, reports and documents required to be filed by it with the SEC since January 1, 1999 through the date of this Agreement. As of the respective dates they were filed, (i) the forms, reports and documents filed by Company since January 1, 2000 (collectively, the "Company SEC Reports") were prepared, and all forms, reports and documents filed with the SEC after this Agreement and prior to the Expiration Date will be prepared, in all
22
material respects in accordance with the requirements of the Securities Act or the Exchange Act, as the case may be, and (ii) none of the Company SEC Reports contained, nor will any forms, reports and documents filed after the date of this Agreement and prior to the Expiration Date contain, any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading.
XIV
MISCELLANEOUS
SECTION 14.1 Nonwaiver and Expenses.
No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice Holder's rights, powers or remedies. If Company fails to make, when due, any payments provided for under this Warrant, or fails to comply with any other provision of this Warrant, Company shall pay to Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys' fees, including those of appellate proceedings, incurred by Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.
SECTION 14.2 Notices.
All notices and communications to be given or made under this Warrant shall be in writing and delivered by hand-delivery, registered first class mail (return receipt requested), facsimile, or air courier guaranteeing overnight delivery, addressed as follows, or to such other Person or address as the party named below may designate by notice:
(a) If to any Holder or holder of Warrant Stock, at its last known address appearing on the books of Company maintained for such purpose and any other address sent by such Holder to Company in compliance with this Section 14.2.
(b) If to Company at
Conseco, Inc.
11825 North Pennsylvania Street Carmel, Indiana 46032
Facsimile: (317) 817-6327
Attn: General Counsel
Each such notice or other communication shall be deemed to have been duly given or served on the date on which personally delivered, with receipt acknowledged, telecopied and confirmed by telecopy answerback, or delivered by air courier, or three Business Days after the same shall have been deposited, appropriate postage prepaid, in the United States mail.
23
SECTION 14.3 Successors and Assigns.
Subject to the provisions of Section 3.1 and Article IX, this Warrant and the rights evidenced hereby shall inure to the benefit of and be binding upon the successors of Company and the successors and assigns of Holder. The provisions of this Warrant are intended to be for the benefit of all Holders from time to time of this Warrant and shall be enforceable by any such Holder. No other Person shall have any right, benefit or obligation under this Warrant.
SECTION 14.4 Amendment.
No amendment or waiver of any provision of this Warrant or any other Warrant shall be effective without the written consent of Company and all Holders.
SECTION 14.5 Severability.
If one or more provisions of this Warrant are held to be unenforceable to any extent under applicable law, such provision shall be interpreted as if it were written so as to be enforceable to the maximum extent permitted by law so as to effectuate the parties' intent to the maximum extent, and the balance of this Warrant shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms to the maximum extent permitted by law.
SECTION 14.6 Section and Other Headings.
The section and headings contained in this Warrant are for the convenience only and shall not affect the meaning or interpretation of this Warrant.
SECTION 14.7 Governing Law.
This Warrant shall be governed by, construed and enforced in accordance with the laws of the State of New York, without regard to the conflict of law principles of such state.
SECTION 14.8 Remedies.
Each Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate. In any action or proceeding brought to enforce any provision of this Warrant or where any provision hereof is validly asserted as a defense, the successful party shall be entitled to recover reasonable attorneys' fees in addition to any other available remedy.
24
SECTION 14.9 Counterparts.
For the convenience of the parties, any number of counterparts of this Warrant may be executed by the parties hereto and each such executed counterpart shall be, and shall be deemed to be, an original instrument.
[SIGNATURES BEGIN ON NEXT PAGE]
25
IN WITNESS WHEREOF, Company has caused this Warrant to be duly executed and attested by its Secretary or an Assistant Secretary.
Dated: September 5, 2000
CONSECO, INC.

/s/ Gary C. Wendt
----------------------------------------------
Name:  Gary C. Wendt
Title: Chairman and Chief Executive Officer	

In presence of

/s/ David K. Herzog
----------------------------------------------
Name:  David K. Herzog
Title: Executive Vice President, General
         Counsel and Secretary	

26
EXHIBIT A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant No. ___ irrevocably exercises the attached Warrant for the purchase of ______ Shares of Common Stock of CONSECO, INC. and herewith makes payment therefor, all at the price and on the terms and conditions specified in this Warrant (including without limitation the conditions set forth in Section 2.1 hereof relating to required regulatory approvals) and requests that certificates for the shares of Common Stock hereby purchased (and any securities or other property issuable upon such exercise, including any cash in lieu of fractional shares) be issued in the name of and delivered to _____________ whose address is _________________ and, if such shares of Common Stock shall not include all of the shares of Common Stock issuable as provided in this Warrant, that a new Warrant of like tenor and date for the balance of the shares of Common Stock issuable hereunder be delivered to the undersigned.
[___] The undersigned shall tender payment in the following form:_______________________.
[____] The undersigned hereby elects the net issue exercise option pursuant to Section 2.3(b) of the Warrant, and accordingly requests delivery of a net of ___________ shares of Common Stock.

(Name of Registered Owner)

By: ____________________________
Name:
Title:

(Street Address)

(City) (State)(Zip Code)

NOTICE:    The signature on this subscription must correspond with the name as
           written upon the face of the within Warrant in every particular,
           without alteration or enlargement or any change whatsoever.	

27
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of the attached Warrant No. ___ hereby sells, assigns and transfers unto the Assignee named below the rights of the undersigned under this Warrant, with respect to the number of shares of Common Stock set forth below:
Name and Address of Assignee No. of Shares of Common Stock
and does hereby irrevocably constitute and appoint ___________________________ attorney-in-fact to register such transfer on the books of CONSECO, INC. maintained for the purpose, with full power of substitution in the premises.

Dated:__________________               Print Name:___________________

                                       By:__________________________
                                       Name:
                                       Title:

                                       Witness:______________________

NOTICE:     The signature on this assignment must correspond with the name as
            written upon the face of the within Warrant in every particular,
            without alteration or enlargement or any change whatsoever.	

28
 
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN VIOLATION OF SUCH ACT, THE RULES AND REGULATIONS THEREUNDER, OR THE PROVISIONS OF THIS WARRANT.
WARRANT
To Purchase Common Stock of
CONSECO, INC.
 Warrant No. 2000-3
No. of Shares of Common Stock: 5,250,000
TABLE OF CONTENTS

                                                                                                                Page
                                                                                                                ----
                                    ARTICLE I
                                   DEFINITIONS

                                   ARTICLE II
                               EXERCISE OF WARRANT

2.1      Exercise.................................................................................................7
2.2      Exercise Notice; Delivery of Certificates................................................................7
2.3      Payment of Warrant Price; Net Issue Exercise.............................................................8
2.4      Payment of Taxes.........................................................................................9
2.5      Fractional Shares........................................................................................9

                                   ARTICLE III
                       TRANSFER, DIVISION AND COMBINATION

3.1      Transfer.................................................................................................9
3.2      Division and Combination.................................................................................9
3.3      Maintenance of Books....................................................................................10

                                   ARTICLE IV
                                   ADJUSTMENTS

4.1      Stock Dividends, Stock Splits, Subdivisions and Combinations............................................10
4.2      Dividends and Certain Other Distributions...............................................................10
4.3      Repurchase of Shares of Common Stock by Company.........................................................11
4.4      Issuance of Additional Shares of Common Stock...........................................................11
4.5      Issuance of Convertible Securities or Other Rights......................................................12
4.6      Other Provisions Applicable to Adjustments under Article IV.............................................12
4.7      Organic Change..........................................................................................13

                                    ARTICLE V
                           NOTICES TO WARRANT HOLDERS

5.1      Notice of Adjustments...................................................................................14
5.2      Notice of Corporate Action..............................................................................14

                                        i	

                                TABLE OF CONTENTS
                                   (continued)

                                                                                                                Page
                                                                                                                ----

                                   ARTICLE VI
                                  NO IMPAIRMENT

                                   ARTICLE VII
                  RESERVATION AND AUTHORIZATION OF COMMON STOCK

                                  ARTICLE VIII
              TAKING OF RECORD; STOCK AND WARRANT TRANSFER OF BOOKS

                                   ARTICLE IX
                     RESTRICTIONS ON TRANSFER; REGISTRATION

9.1      Restrictive Legends.....................................................................................16
9.2      Notice of Proposed Transfers............................................................................17
9.3      Termination of Restrictions.............................................................................17
9.4      Registration Statement..................................................................................17
9.5      Suspension Notice.......................................................................................19
9.6      Expenses................................................................................................19
9.7      Obtaining Stock Exchange Listings.......................................................................20

                                    ARTICLE X
                              SUPPLYING INFORMATION

                                   ARTICLE XI
                               LOSS OR MUTILATION

                                   ARTICLE XII
                 NO STOCKHOLDER RIGHTS; LIMITATION OF LIABILITY

                                  ARTICLE XIII
                    REPRESENTATIONS AND WARRANTIES OF COMPANY

13.1     Corporate Organization and Authority....................................................................21
13.2     Corporate Power.........................................................................................21

                                       ii	

                                TABLE OF CONTENTS
                                   (continued)
                                                                                                                Page
                                                                                                                ----

13.3     Authorization; Enforceability...........................................................................21
13.4     Valid Issuance of Warrant and Warrant Stock.............................................................21
13.5     No Conflict with Other Instruments......................................................................21
13.6     Capitalization..........................................................................................22
13.7     Governmental Consents...................................................................................22
13.8     Company SEC Reports.....................................................................................22

                                   ARTICLE XIV

                                  MISCELLANEOUS

14.1     Nonwaiver and Expenses..................................................................................23
14.2     Notices.................................................................................................23
14.3     Successors and Assigns..................................................................................24
14.4     Amendment...............................................................................................24
14.5     Severability............................................................................................24
14.6     Section and Other Headings..............................................................................24
14.7     Governing Law...........................................................................................24
14.8     Remedies................................................................................................24
14.9     Counterparts............................................................................................25

EXHIBITS
--------

EXHIBIT A     SUBSCRIPTION FORM

EXHIBIT B     ASSIGNMENT FORM	

iii
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN VIOLATION OF SUCH ACT, THE RULES AND REGULATIONS THEREUNDER, OR THE PROVISIONS OF THIS WARRANT.
No. of Shares of Common Stock: 5,250,000 Warrant No. 2000-3
WARRANT
To Purchase Common Stock of
CONSECO, INC.
Westport Insurance Corporation, a Missouri insurance corporation, or its successors and registered assigns ("Holder"), in exchange for consideration the receipt and sufficiency of which are hereby acknowledged, is entitled, at any time during the Exercise Period (as hereinafter defined), to purchase from Conseco, Inc., an Indiana corporation ("Company"), 5,250,000 shares of Common Stock (as hereinafter defined and subject to adjustment as provided herein), in whole or in part, at a purchase price of $5.75 per share (subject to adjustment as provided herein) (as so adjusted, the "Exercise Price") on the terms and conditions set forth herein.
ARTICLE I
DEFINITIONS
The following terms have the meanings set forth below:
"Additional Shares of Common Stock" means all shares of Common Stock issued by Company after the date of this Warrant other than Warrant Stock.
"Aggregate Purchase Price" means the Weighted Average Purchase Price multiplied by the number of shares of Common Stock repurchased by Company in a manner giving rise to an adjustment of the Exercise Price pursuant to
Section 4.3.
"Board" means the Board of Directors of Company.
"Business Day" means any day that is not a Saturday, a Sunday or a day on which commercial banks in the State of Indiana are required or permitted by law or executive order to be closed.
"Common Stock" means (except where the context otherwise indicates) the Common Stock, no par value, of Company as constituted on the date of this Warrant, and any capital stock into which such Common Stock may thereafter be reclassified or otherwise
1
changed, and shall also include (i) capital stock of Company of any other class (regardless of how denominated), other than capital stock entitled to a liquidation preference and (ii) shares of capital stock of the successor or acquiring corporation received by or distributed to the holders of Common Stock of Company in the circumstances contemplated by Section 4.6.
"Company" has the meaning set forth in the recitals.
"Convertible Security" means any option, warrant or share of preferred stock of Company or any other security or instrument, including without limitation any debt security, in any case, which is convertible directly or indirectly into or exchangeable for Additional Shares of Common Stock, either immediately or upon the occurrence of a specified date or a specified event.
"Current Market Price" means, in respect of a share of Common Stock on any date of determination, either (a) if there shall then be a public market for the Common Stock, then the volume weighted average of the daily market prices over the twenty (20) consecutive trading days commencing thirty (30) days immediately before such date of determination, or (b) if there shall not then be a public market for the Common Stock, then the fair market value of the Common Stock as at such date. For purposes of clause (a), the "daily market price" for any trading day shall be: (i) the volume weighted average sale price of all sales of the Common Stock during the principal trading session on such day on the New York Stock Exchange or, if no sale occurred on the New York Stock Exchange on such day, on the national stock exchange that experienced the highest volume of trades in the Common Stock, or, if no sale was made on any such exchange on such day, on the National Market of the NASDAQ; (ii) if the Common Stock is not then listed or admitted to trading on any national stock exchange or National Market of NASDAQ, the average of the last reported closing bid and ask prices on such day in the over-the-counter market as furnished by the National Quotation Bureau, Incorporated (or similar organization or agency succeeding to its functions of reporting security prices); or (iii) if there is no such firm, the average of the last reported closing bid and ask prices on such day as furnished by any member of the NASD or the New York Stock Exchange selected by the Required Holders and Company or, if they cannot agree upon such selection, as selected by two such members of the NASD or New York Stock Exchange, one of which shall be selected by the Required Holders and one of which shall be selected by Company. For purposes of clause (b), "fair market value" shall be the price that would reflect the value of such shares in a sale by a willing seller under no compulsion to sell and a willing buyer under no compulsion to buy, without any premium or discount related to control or illiquidity, as agreed upon by Company and the Required Holders; provided, however, that if Company and the Required Holders cannot agree on such fair market value, then Company shall engage an investment banking firm of nationally recognized standing mutually acceptable to and selected by Company and the Required Holders within ten (10) days after the date of the event or notice giving rise to the need to determine fair market value to determine fair market value in accordance with the preceding provisions; provided, further, if Company and the Required Holders cannot agree on a mutually acceptable investment banking firm within such ten (10) day period, Company and the Required Holders shall, within such ten (10) day period, each choose one investment banking firm of recognized standing and the
2
respective chosen firms shall, within five (5) days after the later of such firms is chosen, agree on another investment banking firm which shall be engaged to make the determination of the fair market value in accordance with the preceding provisions. The determination by the engaged firm shall be made as soon as practicable, but not later than thirty (30) days after the date such firm is engaged. The cost of the investment banking firm or firms selected shall be borne by Company.
"Determination Date" has the meaning set forth in Section 4.3.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and all rules and regulations promulgated thereunder.
"Exercise Period" has the meaning set forth in Section 2.1.
"Exercise Price" has the meaning set forth in the first paragraph of this Warrant.
"Expiration Date" means June 28, 2005; provided that such date shall be extended by the total number of days during which a Suspension Notice has been outstanding throughout the Exercise Period.
"Governmental Authority" means any nation or government, any state or other political subdivision thereof, and any agency, department or other entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.
"Holder" has the meaning set forth in the first paragraph of this Warrant.
"NASD" means the National Association of Securities Dealers, Inc., or any successor thereto.
"NASDAQ" means the automated quotation system of the NASD.
"Organic Change" means (a) any sale, lease, exchange or other transfer of all or substantially all of the property, assets or business of Company, (b) any liquidation, dissolution or winding up of Company, whether voluntary or involuntary, (c) any merger or consolidation to which Company is a party and pursuant to which either (i) the holders of the voting securities of Company immediately prior thereto own less than 60% of the outstanding voting securities of the surviving entity immediately following such transaction or
(ii) the holders of the voting securities of Company immediately prior thereto do not have the ability to elect a majority of the members of the board of directors (or Persons performing similar functions) of the surviving entity immediately following such transaction, or (d) any Person or group (as such term is used in Section 13(d) of the Exchange Act) of Persons, shall either (i) beneficially own (as defined in Rule 13d-3 under the Exchange Act) securities of Company representing 50% or more of the voting securities of Company then outstanding or (ii) have the ability to elect a majority of the members of the board of directors (or Persons performing similar functions) of the surviving entity. For purposes of the preceding sentence, "voting securities" shall mean securities, the holders of which are ordinarily entitled to elect the members of the board of directors (or Persons performing similar functions).
3
"Outstanding" means, when used with reference to Common Stock, on any date, all issued shares of Common Stock on such date, except shares then owned or held by or for the account of Company or any Subsidiary thereof, and shall include all shares issuable in respect of outstanding scrip or any certificates representing fractional interests in shares of Common Stock.
"Permitted Distributions" means dividends or distributions paid in any fiscal year to Company shareholders in the ordinary course of business and having an aggregate fair value (determined as set forth in paragraphs (b) and
(c) of the definition of "Weighted Average Purchase Price" in Article I) per share of not more than 20% of Company's Net Income (as reported in the Company's audited financial statements) for the immediately preceding fiscal year.
"Permitted Issuances" means (a) the issuance by Company after June 21, 2000, of options or restricted stock to existing and future employees and directors of Company, and the subsequent exercise of any such options; provided that the aggregate number of shares of Common Stock so issued together with the number of shares of Common Stock subject to issuance upon exercise of options so granted shall at no time exceed 30,000,000 (such number and all other share numbers in this definition being appropriately adjusted from time to time for transactions of the type described in Section 4.1); and provided further that the issuance of any such restricted stock, or any such option with an exercise price that is lower than the "fair market value" of the Common Stock (as defined for purposes of ss.422 of the United States Internal Revenue Code as of the date of issuance), shall be a "Permitted Issuance" only to the extent that the total number of shares of Common Stock issued below such "fair market value" or covered by options with an exercise price below such "fair market value" at the time of issuance shall not exceed 18,200,000 (of which 13,200,000 shares are issuable to Gary Wendt); (b) the issuance of up to an aggregate of 79,808,413 shares of Common Stock upon conversion of Company's presently outstanding Convertible Securities in accordance with their terms as of June 21, 2000; (c) any issuance of Common Stock or Convertible Securities (i) in connection with a bona fide financing at a price (before deducting customary underwriters' discounts and commissions) that is not more than 1% below the closing price of the Common Stock on the New York Stock Exchange or other principal trading market on the day of pricing of the offering or (ii) in connection with an arms-length acquisition by Company of control over, or the business and assets of, another company and (d) the issuance by Company of up to 2,000,000 shares of Common Stock to Mr. Wendt at a price of not less than $6.00 per share.
"Person" means any individual, sole proprietorship, partnership, limited liability company, joint venture, trust, unincorporated organization, association, corporation, institution, public benefit corporation, entity or government (whether federal, state, county, city, municipal or otherwise, including, without limitation, any instrumentality, division, agency, body or department thereof).
"Prospectus" means the prospectus included in a Registration Statement at the time such Registration Statement is declared effective, as amended or supplemented by any prospectus supplement and by all other amendments thereto, including post-effective amendments, and all material incorporated by reference into such Prospectus.
4
"Recommencement Date" has the meaning set forth in Section 9.2 hereof.
"Registration Statement" means the Registration Statement of the Company, to be filed in accordance with the Registration Rights Agreement dated the date hereof within 15 days of the date hereof, relating to resales of the Warrant by Holder and the issuance of the Warrant Shares upon exercise of the Warrant, including the Prospectus included therein, all amendments and supplements thereto (including post-effective amendments) and all exhibits and material incorporated by reference therein, or any other registration statement filed by Company for the purpose of registering the Warrant or the Warrant Stock.
"Required Holders" means the holders of Warrants exercisable for in excess of 50% of the aggregate number of Warrant Stock then purchasable upon exercise of all Warrants.
"SEC" means the U.S. Securities and Exchange Commission, or any successor thereto.
"Securities Act" means the Securities Act of 1933, as amended, and all rules and regulations promulgated thereunder.
"Subsidiary" means, with respect to any Person, (a) any corporation of which an aggregate of more than 50% of the outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation is at the time, directly or indirectly, owned legally or beneficially by such Person or one or more Subsidiaries of such Person, and (b) any partnership, limited liability company or other entity in which such Person or one or more Subsidiaries of such Person shall have an interest (whether in the form of voting or participation in profits or capital contribution) of more than 50%.
"Suspension Notice" has the meaning set forth in Section 9.2.
"Transfer" means any disposition of any Warrant or Warrant Stock or of any interest in either thereof, which would constitute a sale thereof within the meaning of the Securities Act.
"Warrant" means this Warrant and all warrants issued upon transfer, division or combination of, or in substitution for, this Warrant. All Warrants shall at all times be identical as to terms and conditions and date, except as to the number of shares of Common Stock for which they may be exercised.
"Warrant Price" means an amount equal to (i) the number of shares of Common Stock being purchased upon exercise of this Warrant pursuant to
Section 2.1, multiplied by (i) the Exercise Price as of the date of such exercise.
"Warrant Stock" means the shares of Common Stock issued or issuable upon the exercise of this Warrant.
5
"Weighted Average Purchase Price" means the volume-weighted average price paid by Company for all shares of Common Stock repurchased in any manner giving rise to an adjustment of the Exercise Price pursuant to Section 4.3. For purposes of the foregoing sentence, the "price paid" by Company for shares of Common Stock shall be: (a) in the event of cash, the amount of cash paid by Company for such Common Stock, including all expenses associated therewith; (b) in the event of securities or other property for which a public market exists, the volume weighted average of the daily trading price of such securities or other property over the twenty (20) consecutive trading days commencing thirty
(30) days immediately before the Date of Determination; or (c) in the event of securities or other property for which no public market exists, the fair asset value of such securities or other property as at the Date of Determination. For purposes of clause (b), the "daily trading price" for any trading day shall be:
(i) the volume weighted average sale price of all sales of such securities or other property during the principal trading session on such day on the principal market on which such securities or other property are then listed or admitted to trading; or (ii) if the information necessary to determine the volume weighted average sale price under clause (i) above is unavailable, then the average of the closing bid and ask prices on such day as furnished by any member of such market selected by the Required Holders and Company or, if they cannot agree upon such selection, as selected by two such members, one of which shall be selected by the Required Holders and one of which shall be selected by Company. For purposes of clause (c), "fair asset value" shall be the price that would reflect the value of such securities or other property on a fully distributed basis (that is, as if such securities or other property were traded on a free and active market on an exchange or over the counter) in a sale by a willing seller under no compulsion to sell and a willing buyer under no compulsion to buy, without any premium or discount for any reason, including but not limited to any discount related to the offering of such securities or other property, any premium for control or any discount for illiquidity, as agreed upon by Company and the Required Holders; provided, however, that if Company and the Required Holders cannot agree on such fair asset value, then Company shall engage an investment banking firm or other appropriate professional valuation firm of nationally recognized standing mutually acceptable to and selected by Company and the Required Holders within ten (10) days after the date of the event or notice giving rise to the need to determine fair asset value to determine fair asset value in accordance with the preceding provisions; provided, further, if Company and the Required Holders cannot agree on a mutually acceptable valuation firm within such ten (10) day period, Company and the Required Holders shall, within such ten (10) day period, each choose one such firm of recognized standing and the respective chosen firms shall, within five (5) days after the later of such firms is chosen, agree on another valuation firm which shall be engaged to make the determination of the fair asset value in accordance with the preceding provisions. The determination by the engaged firm shall be made as soon as practicable, but not later than thirty
(30) days after the date such firm is engaged. The cost of the valuation firm or firms selected shall be borne by Company.
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ARTICLE II
EXERCISE OF WARRANT
SECTION 2.1 Exercise.
From and after the date of this Warrant and until 5:00 P.M., Central Standard time, on the Expiration Date, subject to extension pursuant to Section
2.2(e) (the "Exercise Period"), Holder may exercise this Warrant from time to time in whole or in part, on any Business Day, to purchase from Company up to a total of 5,250,000 shares of Common Stock (subject to adjustment as provided herein) at the Exercise Price.
SECTION 2.2 Exercise Notice; Delivery of Certificates.
(a) In order to exercise this Warrant, Holder shall deliver (which such delivery may, at Holder's option, be by facsimile) to Company at its principal office designated by Company in Section 14.2, a duly executed written notice of Holder's election to exercise this Warrant, specifying the number of shares of Warrant Stock to be purchased, in substantially the form attached hereto as Exhibit A (the "Subscription Notice").
(b) Upon receipt of a Subscription Notice, Company shall, as promptly as practicable thereafter, and in any event within five (5) Business Days after receipt of any necessary regulatory approvals (including expiration of any applicable waiting period), deliver to Holder a duly executed certificate or certificates representing the aggregate number of full shares of Warrant Stock issuable upon such exercise, together with cash in lieu of any fraction of a share, as hereinafter provided. Such stock certificate or certificates shall be in such denominations and registered in the name designated in the Subscription Notice.
(c) In addition, as soon as practicable after the delivery of a Subscription Notice, but subject to the receipt of any necessary regulatory approvals (including expiration of any applicable waiting period), Holder shall deliver in person, by certified mail or courier, to Company at the aforementioned address, (i) if Holder has elected pursuant to the applicable Subscription Notice to make payment of the Warrant Price pursuant to Section 2.3(a), such payment and (ii) this Warrant.
(d) Upon the later of the date required for issuance of the applicable shares of Warrant Stock pursuant to Section 2.2(b) and the date on which any payment required pursuant to Section 2.2(c) is received, Holder or any other Person so designated in the applicable Subscription Notice shall be deemed to have become a holder of record of the applicable Warrant Stock for all purposes. If this Warrant shall have been exercised in part, Company shall deliver to Holder a new Warrant evidencing the rights of Holder to purchase the remaining shares of Warrant Stock issuable upon exercise of this Warrant, which new Warrant shall in all other respects be identical with this Warrant, or appropriate notation may be made on this Warrant and the same returned to Holder.
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(e) If in connection with the exercise of a Warrant or acquisition of Warrant Stock by Holder, any regulatory approval shall be required, including expiration of any applicable waiting period, then, if the Warrant is exercised prior to such approval, the Expiration Date shall be extended while any such regulatory approval or waiting period is pending. Without limiting the foregoing, Company hereby acknowledges that the exercise of this Warrant by Holder may subject Company or Holder to the filing requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"). If on or before the Expiration Date, Holder has sent the Subscription Notice to Company and Holder has not been able to complete the exercise of this Warrant prior to the Expiration Date because of restrictions under the HSR Act, Holder shall be entitled to complete the process of exercising this Warrant in accordance with the procedures contained herein notwithstanding the fact that completion of the exercise of this Warrant would take place after the Expiration Date.
SECTION 2.3 Payment of Warrant Price; Net Issue Exercise.
(a) Payment of the Warrant Price shall be made at the option of Holder by (i) cash, by check or by wire transfer or (ii) cancellation by Holder of indebtedness of Company to Holder; or (iii) any combination thereof.
(b) In lieu of the payment methods set forth in Section 2.3(a) above, Holder may elect to exchange all or part of the Warrant for such number of shares of Warrant Stock as could be purchased with the difference between the Current Market Price and the Exercise Price for the amount of the Warrant being exchanged on the date of exchange. All references in this Warrant to an "exercise" of the Warrant shall include a net issue exercise pursuant to this
Section 2.3(b). If Holder elects to exchange all or part of the Warrant as provided in this Section 2.3(b), Holder shall tender to Company the Warrant, along with a Subscription Notice indicating Holder's election to exchange all or part of the Warrant and the amount being exchanged, and Company shall issue to Holder the number of shares of Warrant Stock computed using the following formula:
X = Y(A-B)

A
Where
X = number of shares of Warrant Stock to be issued to Holder upon exercise;
Y = total number of shares of Warrant Stock purchasable under the Warrant (or, if only a portion, the amount of Warrant Stock for which the Warrant is being exchanged);
A = Current Market Price of one share of Warrant Stock; and
B = Exercise Price (as adjusted to the date of such calculation).
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SECTION 2.4 Payment of Taxes.
Company shall pay all expenses, taxes and other governmental charges with respect to the issue or delivery of the Warrant Stock. Company shall not be required, however, to pay any transfer tax or other similar charge imposed in connection with the issue of any certificate for shares of Warrant Stock in any name other than that of Holder, and in such case Company shall not be required to issue or deliver any stock certificate until such tax or other charge has been paid or it has been established to the reasonable satisfaction of Company that no such tax or other charge is due.
SECTION 2.5 Fractional Shares.
Company shall not be required to issue a fractional share of Warrant Stock upon exercise of any Warrant. As to any fraction of a share which Holder of one or more Warrants would otherwise be entitled to purchase upon such exercise, Company shall pay a cash adjustment in respect of such fractional share in an amount equal to the same fraction of the Current Market Price per share of Warrant Stock on the date of exercise.
ARTICLE III
TRANSFER, DIVISION AND COMBINATION
SECTION 3.1 Transfer.
Company shall register any Transfer of this Warrant and all rights hereunder, in whole or in part, on the books of Company to be maintained for such purpose, upon surrender by Holder of this Warrant at the principal office of Company referred to in Section 14.2, together with a duly executed written assignment of this Warrant substantially in the form of Exhibit B hereto and funds sufficient to pay any transfer taxes payable upon the making of such Transfer. Promptly following such surrender and, if required, such payment, Company shall at its expense execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. A Warrant may be exercised by a new Holder for the purchase of shares of Common Stock without having a new Warrant issued.
SECTION 3.2 Division and Combination.
This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office or agency of Company, together with a duly executed written notice specifying the names and denominations in which new Warrants are to be issued. Subject to compliance with Section 3.1 as to any Transfer which may be involved in such division or combination, Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice.
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SECTION 3.3 Maintenance of Books.
Company agrees to maintain, at its office referred to in Section 14.2, books for the registration of Transfer of the Warrants.
ARTICLE IV
ADJUSTMENTS
The number of shares of Warrant Stock for which this Warrant is exercisable, and the Exercise Price at which such shares may be purchased upon exercise of this Warrant, shall be subject to adjustment from time to time as set forth in this Article IV. The adjustments to the Exercise Price and the number of Warrant Shares set forth in this Article IV shall be applicable to all triggering events specified therein that occur subsequently to June 21, 2000.
SECTION 4.1 Stock Dividends, Stock Splits, Subdivisions and Combinations. If at any time Company shall:
(a) take a record of the holders of Common Stock for the purpose of entitling them to receive a dividend payable in, or other distribution of, Common Stock,
(b) subdivide or split its Outstanding shares of Common Stock into a larger number of shares of Common Stock, or
(c) combine or reclassify its Outstanding shares of Common Stock into a smaller number of shares of Common Stock;
then, in each of cases (a), (b) and (c) above, (i) the number of shares of Warrant Stock for which this Warrant is exercisable immediately after the occurrence of any such event shall be adjusted to equal the number of shares of Warrant Stock which a record holder of the same number of shares of Warrant Stock for which this Warrant is exercisable immediately prior to the occurrence of such event or the record date therefor, whichever is earlier, would own or be entitled to receive after the happening of such event, and (ii) the Exercise Price shall be adjusted to equal (A) the Exercise Price multiplied by the number of shares of Warrant Stock for which this Warrant is exercisable immediately prior to the adjustment divided by (B) the number of shares of Warrant Stock for which this Warrant is exercisable immediately after such adjustment.
SECTION 4.2 Dividends and Certain Other Distributions.
If at any time Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or other distribution, or shall in any manner declare, order, pay or make a dividend or other distribution (including, without limitation, any distribution of stock or other securities, cash, debt or property or rights or warrants to subscribe for securities of Company or any of its Subsidiaries by way of dividend or spin-off or any other assets) on its Common Stock, other than dividends or distributions of shares of Common Stock which are referred to in Section 4.1 and other than Permitted Distributions, then and in each such case, the Exercise Price to be in effect after such record date shall be determined by subtracting
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(a) the fair value (determined as set forth in paragraphs (b) and (c) of the definition of "Weighted Average Purchase Price" in Article I) of such dividend or distribution per share of Common Stock from (b) the Exercise Price in effect immediately prior to such record date.
SECTION 4.3 Repurchase of Shares of Common Stock by Company.
If at any time Company or any subsidiary thereof shall repurchase, by self tender offer or otherwise, any shares of Common Stock at a Weighted Average Purchase Price in excess of the Current Market Price as of the earliest of the date of such repurchase, the commencement of an offer to repurchase or the public announcement of either (such date being referred to as the "Determination Date"), the Exercise Price in effect as of such Determination Date shall be reduced by multiplying such Exercise Price by a fraction, the numerator of which shall be (a) the product of (x) the number of shares of Common Stock Outstanding on such Determination Date and (y) the Current Market Price of the Common Stock on such Determination Date minus (b) the Aggregate Purchase Price of such repurchase and the denominator of which shall be the product of (i) the number of shares of Common Stock Outstanding on such Determination Date minus the number of shares of Common Stock repurchased by the Company or any subsidiary thereof in such repurchase and (ii) the Current Market Price of the Common Stock on such Determination Date. An adjustment made pursuant to this Section 4.3 shall become effective immediately after the effective date of such repurchase.
SECTION 4.4 Issuance of Additional Shares of Common Stock.
(a) If at any time Company shall issue or sell any Additional Shares of Common Stock, other than Permitted Issuances or as referred to in Section 4.1 or 4.2, for consideration in an amount per Additional Share of Common Stock less than the Current Market Price, then (i) the number of shares of Warrant Stock for which this Warrant is exercisable shall be adjusted to equal the product obtained by multiplying the number of shares of Warrant Stock for which this Warrant is exercisable immediately prior to such issuance or sale by a fraction (A) the numerator of which shall be the number of shares of Common Stock Outstanding immediately after such issuance or sale, and (B) the denominator of which shall be the sum of (x) the number of shares of Common Stock Outstanding immediately prior to such issuance or sale and (y) the number of shares of Common Stock which the aggregate consideration, if any, received by Company upon such issuance or sale would purchase at the then Current Market Price; and (ii) the Exercise Price as to the number of shares of Warrant Stock for which this Warrant is exercisable prior to such adjustment shall be adjusted by multiplying such Exercise Price by a fraction (A) the numerator of which shall be the number of shares of Warrant Stock for which this Warrant is exercisable immediately prior to such issuance or sale; and (B) the denominator of which shall be the number of shares of Warrant Stock for which this Warrant is exercisable immediately after such issuance or sale.
(b) The provisions of paragraph (a) of this Section 4.4 shall not apply to (i) any issuance of Additional Shares of Common Stock for which an adjustment is provided under Section 4.1 or Section 4.2 or (ii) any issuance of any Additional Shares of Common Stock pursuant to any Convertible Security, if and only to the extent that such adjustment shall
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previously have been made upon the issuance of such Convertible Security pursuant to Section 4.5.
SECTION 4.5 Issuance of Convertible Securities or Other Rights.
(a) If at any time Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a distribution of, or shall in any manner (whether directly or by assumption in a merger in which Company is the surviving corporation) issue or sell, any Convertible Securities or other rights to subscribe for or purchase any Additional Shares of Common Stock or any Convertible Securities, other than Permitted Issuances or as referred to in Section 4.1 or 4.2, whether or not the rights to exchange or convert thereunder are immediately exercisable, and the price per share together with any consideration received by Company upon issuance of the Convertible Security, for which Common Stock is issuable upon the exercise of such Convertible Securities shall be less than the Current Market Price in effect immediately prior to the time of such record, issuance or sale, then the number of shares of Warrant Stock and the Exercise Price shall be adjusted as provided in Section 4.4 on the basis that the maximum number of Additional Shares of Common Stock issuable pursuant to all such Convertible Securities shall be deemed to have been issued and outstanding and Company shall be deemed to have received all of the consideration payable therefor, if any, as of the date of the issuance of such Convertible Securities or other rights.
(b) On the repayment, expiration or termination of any Convertible Securities, the granting or issuance of which resulted in an adjustment under paragraph (a), the Exercise Price shall forthwith be readjusted to such amount as would have obtained had the adjustment made upon the granting or issuance of such Convertible Securities been made upon the basis of the granting or issuance of only such Convertible Securities as were actually exercised, converted or exchanged for Common Stock prior to their repayment, expiration or termination.
SECTION 4.6 Other Provisions Applicable to Adjustments under Article IV.
The following provisions shall be applicable to the making of adjustments of the number of shares of Warrant Stock for which this Warrant is exercisable and the Exercise Price provided for in this Article IV:
(a) Computation of Consideration. To the extent that any Additional Shares of Common Stock or any Convertible Securities or any rights to acquire Convertible Securities shall be issued for cash consideration, the consideration received by Company therefor shall be the amount of the cash received by Company therefor, or, if such Additional Shares of Common Stock or Convertible Securities are offered by Company for subscription, the subscription price, or, if such Additional Shares of Common Stock or Convertible Securities are sold to underwriters or dealers for public offering without a subscription offering, the public offering price (in any such case subtracting any amounts paid or receivable for accrued interest or accrued dividends and subtracting any compensation, discounts or expenses paid or incurred by Company for and in the underwriting of, or otherwise in connection with, the issuance thereof). To the extent that such issuance shall be for a consideration other than cash, then, except as herein otherwise
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expressly provided, the amount of such consideration shall be determined as set forth in paragraphs (b) and (c) of the definition of "Weighted Average Purchase Price" in Article I. The consideration for any Additional Shares of Common Stock issuable pursuant to any warrants or other rights to subscribe for or purchase the same shall be the consideration received by Company for issuing such warrants or other rights plus the additional consideration payable to Company upon exercise of such warrants or other rights. The consideration for any Additional Shares of Common Stock issuable pursuant to the terms of any Convertible Securities shall be the consideration received by Company for issuing warrants or other rights to subscribe for or purchase such Convertible Securities, plus the consideration paid or payable to Company in respect of the subscription for or purchase of such Convertible Securities, plus the additional consideration, if any, payable to Company upon the exercise of the right of conversion or exchange in such Convertible Securities. In case of the issuance at any time of any Additional Shares of Common Stock or Convertible Securities in payment or satisfaction of any dividends upon any class of stock other than Common Stock, Company shall be deemed to have received for such Additional Shares of Common Stock or Convertible Securities a consideration equal to the amount of such dividend so paid or satisfied.
(b) When Adjustments to be Made. Except as otherwise provided, the adjustments required by this Article IV shall be made whenever and as often as any specified event requiring an adjustment shall occur.
(c) Fractional Interests. In computing adjustments under this Article IV, fractional interests in Common Stock shall be taken into account to the nearest 1/10th of a share.
(d) Rounding. In computing adjustments under this Article IV, figures may be rounded to the eighth decimal place.
(e) When Adjustment Not Required. If Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or distribution or subscription or purchase rights and shall, thereafter and before the distribution to stockholders thereof, legally abandon its plan to pay or deliver such dividend, distribution, subscription or purchase rights, then thereafter no adjustment shall be required by reason of the taking of such record and any such adjustment previously made in respect thereof shall be rescinded and annulled.
SECTION 4.7 Organic Change.
In case of any Organic Change, Holder shall have the right thereafter to receive, upon exercise of the Warrant and at its option, in lieu of the Warrant Stock issuable upon such exercise prior to consummation of such Organic Change, the kind and amount of shares of stock, other securities, cash and property receivable (including cash, and including any right to select the consideration so receivable) upon the consummation of such Organic Change by a holder of that number of shares of Warrant Stock into which the Warrant was exercisable immediately prior to such Organic Change (including, on a pro rata basis, the cash, securities or property received by holders of Common Stock in any tender or exchange offer that is a step in such Organic Change),
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assuming such holder of Common Stock is not a Person with which Company consolidated or into which Company merged or which merged into Company or to which such sale or transfer was made, as the case may be, or an affiliate of such a Person. In case securities or property other than Common Stock shall be issuable or deliverable upon conversion as aforesaid, then all references in this Article IV shall be deemed to apply, so far as appropriate and nearly as may be, to such other securities or property. In case of any Organic Change, the successor or acquiring corporation (if other than Company) shall expressly assume the due and punctual observance and performance of each covenant and condition of this Warrant to be performed and observed by Company and all the obligations and liabilities hereunder, subject to such modifications as may be deemed appropriate (as determined by resolution of the Board) in order to provide for adjustments of shares of Warrant Stock for which this Warrant is exercisable which shall be as nearly equivalent as practicable to the adjustments provided for in this Article IV. The foregoing provisions of this
Section 4.7 shall similarly apply to successive Organic Changes.
ARTICLE V
NOTICES TO WARRANT HOLDERS
SECTION 5.1 Notice of Adjustments.
Whenever an adjustment to this Warrant is made pursuant to Article IV, Company shall promptly deliver to Holder (by facsimile and by either first class mail, postage prepaid or overnight delivery) a certificate executed by the chief financial officer or chief accounting officer of the Company setting forth, in reasonable detail, the event requiring the adjustment and the method by which such adjustment was calculated, specifying the number of shares of Warrant Stock for which this Warrant is exercisable and (if such adjustment was made pursuant to Section 4.7) describing the number and kind of any other shares of stock or other securities or property for which this Warrant is exercisable, and any change in Exercise Price, after giving effect to such adjustment or change. Company shall keep at the office or agency designated pursuant to
Section 14.2 copies of all such certificates and cause the same to be available for inspection at said office during normal business hours by any Holder or any prospective purchaser of a Warrant designated by a Holder thereof. Any adjustment to this Warrant pursuant to Article IV shall be automatic and shall occur without any action on the part of Company or Holder, and any failure by Company to comply with the terms of this Section 5.1 (including any error made by Company in the calculations described above) shall have no effect on such automatic adjustment. Notwithstanding any other provision of this Section 5.1, Holder shall retain the right to contest the adjustment calculations provided by Company described above, and such calculations shall not be entitled to any presumption of accuracy in any case, action or other proceeding to determine the actual amount of adjustment required by Article IV.
SECTION 5.2 Notice of Corporate Action.
If at any time:
(a) Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or other distribution, or any right to subscribe for or
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purchase any evidences of its indebtedness, any shares of stock of any class or any other securities or property, or to receive any other right;
(b) there shall be approved by the Board any capital reorganization of Company, any reclassification or recapitalization of the capital stock of Company or any consolidation or merger of Company with, or any sale, transfer or other disposition of all or substantially all the property, assets or business of Company to, another corporation, including without limitation any such event constituting an Organic Change; or
(c) there shall be a voluntary or involuntary dissolution, liquidation or winding up of Company;
then Company shall give to Holder (i) in the case of any event described in (a) above, at least fifteen (15) days' prior written notice of the date on which a record date shall be selected in respect of such event and (ii) in the case of any event described in (b) or (c) above, at least thirty (30) days' prior written notice of the date when such event shall take place. Such notice shall also specify (i) the date on which the holders of Common Stock shall be entitled to any such dividend, distribution or right, and the amount and character thereof and (ii) the date on which any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up is to take place and the time, if any such time is to be fixed, as of which the holders of Common Stock shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such event.
ARTICLE VI
NO IMPAIRMENT
Company shall not by any action, including, without limitation, amending its articles of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issuance or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith promptly assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder against impairment. Without limiting the generality of the foregoing, Company will promptly take all such action as may be necessary or appropriate in order that Company may upon the exercise of this Warrant validly and legally issue fully paid and nonassessable shares of Common Stock that are not subject to preemptive rights, including taking such action as is necessary for the Exercise Price to be not less than the par value of the shares of Common Stock issuable upon exercise of this Warrant. Company will promptly obtain all such authorizations, exemptions or consents from any Governmental Authority having jurisdiction thereof, or any other Person, as may be necessary to enable Company to perform its obligations under this Warrant. Without limiting the foregoing, Company will cooperate with Holder in making, and promptly make, any filings under the HSR Act or any other law required in order to perform its obligations under this Warrant or required to permit Holder to exercise this Warrant.
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ARTICLE VII
RESERVATION AND AUTHORIZATION OF COMMON STOCK
From and after the date of this Warrant, Company shall at all times reserve and keep available for issue upon the exercise of Warrants such number of its authorized but unissued shares of Common Stock as will be sufficient to permit the exercise in full of all outstanding Warrants. All shares of Warrant Stock which shall be so issuable, when issued upon exercise of any Warrant and payment therefor in accordance with the terms of such Warrant, shall be duly and validly issued, fully paid and nonassessable, and free from all preemptive rights, restrictions on transfer, taxes, liens, charges and security interests.
ARTICLE VIII
TAKING OF RECORD; STOCK AND WARRANT TRANSFER OF BOOKS
In the case of all dividends or other distributions by Company to the holders of its Common Stock with respect to which any provision of Article IV refers to the taking of a record of such holders, Company will take such record as of the close of business on a Business Day. Company will not at any time, except upon dissolution, liquidation or winding up of Company, close its stock transfer books or Warrant transfer books so as to prevent or delay the exercise or transfer of any Warrant.
ARTICLE IX
RESTRICTIONS ON TRANSFER; REGISTRATION
SECTION 9.1 Restrictive Legends.
(a) Except as otherwise provided in this Article IX, each certificate for Common Stock initially issued upon the exercise of this Warrant, and each certificate for Common Stock issued to any subsequent transferee of any such certificate, shall be stamped or otherwise imprinted with a legend in substantially the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN VIOLATION OF SUCH ACT OR THE RULES AND REGULATIONS THEREUNDER."
(b) Except as otherwise provided in this Article IX, each Warrant shall be stamped or otherwise imprinted with a legend in substantially the following form:
"THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE
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TRANSFERRED IN VIOLATION OF SUCH ACT, THE RULES AND REGULATIONS
THEREUNDER OR THE PROVISIONS OF THIS WARRANT."
SECTION 9.2 Notice of Proposed Transfers.
Prior to or promptly following any Transfer of any Warrants or any shares of restricted Warrant Stock, the holder of such Warrants or restricted Warrant Stock shall give written notice to Company of such Transfer. Each certificate, if any, evidencing such shares of restricted Warrant Stock issued upon such Transfer shall bear the restrictive legend set forth in Section 9.1(a), and each Warrant issued upon such Transfer shall bear the restrictive legend set forth in Section 9.1(b), unless in the opinion of counsel to such holder such legend is not required in order to ensure compliance with the Securities Act.
SECTION 9.3 Termination of Restrictions.
The restrictions and requirements imposed by Sections 9.1 and 9.2 shall terminate as to any particular Warrant or share of Warrant Stock (a) when and so long as such security shall have been effectively registered under the Securities Act, (b) when Company shall have received an opinion of counsel (which may be Holder's inside corporate counsel) that such security may be transferred without registration thereof under the Securities Act or (c) a sale of such security is made pursuant to SEC Rule 144. Whenever the restrictions imposed by Sections 9.1 and 9.2 shall terminate as to this Warrant, as hereinabove provided, Holder shall be entitled to receive from Company, at the expense of Company, a new Warrant without the restrictive legend set forth in
Section 9.1(b). Whenever the restrictions imposed by Sections 9.1 and 9.2 shall terminate as to any share of Warrant Stock, as hereinabove provided, the holder thereof shall be entitled to receive from Company, at the expense of Company, a new certificate representing such Common Stock not bearing the restrictive legend set forth in Section 9.1(a).
SECTION 9.4 Registration Statement.
Upon Holder's exercise of the Warrant, Company shall issue the Warrant Stock (in the amount specified in the Exercise Notice) pursuant to the Registration Statement. To ensure that Company can issue such Warrant Stock pursuant to the Registration Statement without violation of the Securities Act, and that Holder, upon exercise of the Warrant, shall receive Common Stock that is registered under the Securities Act and subject to no restrictions on transfer whatever, Company shall, upon effectiveness of the Registration Statement and for so long as the Warrant shall remain exercisable:
(a) use its best efforts to keep the Registration Statement continuously effective and provide all requisite financial statements. Upon the occurrence of any event that would cause the Registration Statement or the Prospectus contained therein (i) to contain an untrue statement of material fact or omit to state any material fact necessary to make the statements therein not misleading or (ii) not to be effective and usable for an exercise of the Warrant, the Company shall promptly file an appropriate amendment to the Registration Statement curing such defect,
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and, if SEC review is required, use its best efforts to cause such amendment to be declared effective as soon as practicable;
(b) prepare and file with the SEC such amendments and post-effective amendments to the Registration Statement as may be necessary to keep such Registration Statement effective; cause the Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 under the Securities Act, and to comply fully with Rules 424, 430A and 462, as applicable, under the Securities Act in a timely manner; and comply with the provisions of the Securities Act with respect to the disposition of all securities covered by the Registration Statement during the applicable period in accordance with the intended method or methods of distribution set forth in such Registration Statement or supplement to the Prospectus;
(c) advise Holder promptly and, if requested by Holder, confirm such advice in writing, (i) when any Prospectus supplement or post-effective amendment has been filed, and, with respect to any successor Registration Statement or any post-effective amendment thereto, when the same has become effective, (ii) of any request by the SEC for amendments to the Registration Statement or amendments or supplements to the Prospectus or for additional information relating thereto, (iii) of the issuance by the SEC of any stop order suspending the effectiveness of the Registration Statement under the Securities Act or of the suspension by any state securities commission of the qualification of the Warrant or the Common Stock for offering or sale in any jurisdiction, or the initiation of any proceeding for any of the preceding purposes, (iv) of the existence of any fact or the happening of any event that makes any statement of a material fact made in the Registration Statement, the Prospectus, any amendment or supplement thereto or any document incorporated by reference therein untrue, or that requires the making of any additions to or changes in the Registration Statement in order to make the statements therein not misleading, or that requires the making of any additions to or changes in the Prospectus in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. If at any time the Commission shall issue any stop order suspending the effectiveness of the Registration Statement, or any state securities commission or other regulatory authority shall issue an order suspending the qualification or exemption from qualification of the Warrant or the Common Stock under state securities or Blue Sky laws, Company shall use its best efforts to obtain the withdrawal or lifting of such order at the earliest possible time or, failing that, to promptly file another Registration Statement covering the Warrant Stock; in the event of an event or circumstance of the kind described in clause (iv) above, Company shall use its best efforts to cure such inaccuracy at the earliest possible time, and in any event within 90 days of the occurrence of such event or circumstance;
(d) subject to paragraph (a) above, if any fact or event contemplated by paragraph (c)(iii) above shall exist or have occurred, prepare a supplement or post-effective amendment to the Registration Statement or related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to Holder, the Prospectus will not contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading;
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(e) furnish to Holder in connection with each exercise of the Warrant, without charge, at least one copy of the Registration Statement, as first filed with the SEC, and of each amendment thereto, including all documents incorporated by reference therein and all exhibits (including exhibits incorporated therein by reference);
(f) otherwise use its best efforts to comply with all applicable rules and regulations of the Commission; and
(g) provide promptly to Holder, upon request, each document filed with the SEC pursuant to the requirements of Section 13 or Section 15(d) of the Exchange Act.
SECTION 9.5 Suspension Notice.
Holder agrees by acquisition of the Warrant that, upon receipt of the notice referred to in Section 9.4(c)(iii) or any notice from the Company of the existence of any fact of the kind described in Section 9.4(c)(iv) hereof (in each case, a "Suspension Notice"), Holder shall refrain from exercising the Warrant, other than through a net issue exercise pursuant to Section 2.3(b) if the Warrant is not a "restricted security" under SEC Rule 144, until (i) Holder has received copies of the supplemented or amended Prospectus contemplated by clause 9.4(d) hereof, or (ii) Holder is advised in writing by Company that the Prospectus is again accurate in all material respects, and has received copies of any additional or supplemental filings that are incorporated by reference in the Prospectus (in each case, the "Recommencement Date"); provided that Company shall deliver not more than one Suspension Notice during any given 365-day period; and provided further that Company shall not permit more than 90 days to elapse from the date of delivery of any Suspension Notice to the Recommencement Date revoking such Suspension Notice.
SECTION 9.6 Expenses.
All costs, fees and expenses incident to the Company's performance of or compliance with this Agreement shall be borne by Company, including without limitation: (i) all registration and filing fees and expenses; (ii) all fees and expenses of compliance with federal securities and state Blue Sky or securities laws; (iii) all expenses of printing (including printing certificates for the Common Stock to be issued upon exercise of the Warrant and printing of Prospectuses), messenger and delivery services and telephone; (iv) all fees and disbursements of counsel for Company; (v) all application and filing fees in connection with listing the Common Stock on a national securities exchange or automated quotation system pursuant to the requirements hereof; and (vi) all fees and disbursements of independent certified public accountants of Company (including the expenses of any special audit and comfort letters required by or incident to such performance).
Company shall, in any event, bear its internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expenses of any annual audit and the fees and expenses of any Person, including special experts, retained by Company.
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SECTION 9.7 Obtaining Stock Exchange Listings.
Company shall from time to time take all action which may be necessary so that the Warrant Shares, immediately upon their issuance upon the exercise of the Warrant, will be listed on the principal securities exchanges, automated quotation systems or other markets within the United States of America, if any, on which other shares of Common Stock are then listed, if any.
ARTICLE X
SUPPLYING INFORMATION
Company shall cooperate with Holder in supplying such information as may be reasonably necessary for Holder to complete and file any information reporting forms presently or hereafter required by the SEC or any other governmental entity in connection with any Warrant or share of Warrant Stock. Company shall also supply such information as may be reasonably necessary for Holder to comply with tax and other applicable laws and applicable accounting standards. Holder shall cooperate with Company in supplying such information as may be reasonably necessary for Company to comply with its obligations hereunder.
ARTICLE XI
LOSS OR MUTILATION
Upon receipt by Company from Holder of evidence reasonably satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of this Warrant and indemnity reasonably satisfactory to it (it being understood that the written agreement of General Electric Company or any of its Affiliates shall be sufficient indemnity), and in case of mutilation upon surrender and cancellation hereof, Company shall execute and deliver in lieu hereof a new Warrant of like tenor to such Holder; provided, in the case of mutilation, no indemnity shall be required if this Warrant in identifiable form is surrendered to Company for cancellation.
ARTICLE XII
NO STOCKHOLDER RIGHTS; LIMITATION OF LIABILITY
No provision hereof shall be deemed to impose any rights or obligations upon Holder as a stockholder in Company prior to Holder's exercise of this Warrant and the issuance to Holder of Warrant Shares. Without limiting the foregoing, no provision hereof and no enumeration herein of the rights or privileges of Holder hereof, shall give rise to any liability of such Holder for the purchase price of any Warrant Stock or as a stockholder of Company, whether such liability is asserted by Company, by creditors of Company or by any third party.
ARTICLE XIII
REPRESENTATIONS AND WARRANTIES OF COMPANY
Company hereby represents and warrants to Holder that the statements in the following paragraphs of this Article XIII are true and correct (a) as of June 28, 2000 and (b) except where any such representation and warranty relates specifically to an earlier date, as of the date of any exercise of this Warrant.
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SECTION 13.1 Corporate Organization and Authority.
Company (a) is a corporation duly organized, validly existing, and in good standing in its jurisdiction of incorporation, (b) has the corporate power and authority to own and operate its properties and to carry on its business as now conducted and as proposed to be conducted; and (c) is qualified as a foreign corporation in all jurisdictions where such qualification is material to Company's business, financial condition or results of operations.
SECTION 13.2 Corporate Power.
Company has all requisite legal and corporate power and authority to execute, issue and deliver the Warrant, to issue the Common Stock issuable upon exercise or conversion of the Warrant, and to carry out and perform its obligations under the terms of the Warrant.
SECTION 13.3 Authorization; Enforceability.
All corporate action on the part of Company, its officers, directors and shareholders necessary for the authorization, execution, delivery and performance of its obligations under this Warrant and for the authorization, issuance and delivery of the Warrant and the Warrant Stock issuable upon exercise of the Warrant has been taken and this Warrant constitutes the legally binding and valid obligation of Company enforceable in accordance with its terms.
SECTION 13.4 Valid Issuance of Warrant and Warrant Stock.
The Warrant has been duly and validly issued and is free of restrictions on transfer. The Warrant Stock issuable upon conversion of this Warrant, when issued, sold and delivered in accordance with the terms of this Warrant for the consideration expressed herein, will be duly and validly issued, fully paid and nonassessable, and will, when issued, be free of any restrictions on transfer. The issuance and delivery of the Warrant and the Warrant Stock issuable upon conversion of the Warrant are not subject to any preemptive or other similar rights or any liens or encumbrances.
SECTION 13.5 No Conflict with Other Instruments.
The execution, delivery, and performance of this Warrant will not result in any violation of, be in conflict with, or constitute a default under, with or without the passage of time or the giving of notice (a) any provision of Company's Certificate of Incorporation or by-laws; (b) any provision of any judgment, decree, or order to which Company is a party or by which it is bound or an event which results in the creation of any material lien, charge or encumbrance upon any material assets of Company; (c) any contract, obligation, or commitment to which Company is a party or by which it is bound; or (d) any statute, rule, or governmental regulation applicable to Company.
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SECTION 13.6 Capitalization.
The authorized capital stock of Company consists of 1,000,000,000 shares of Common Stock, of which 325,258,309 were issued and outstanding, and 20,000,000 shares of Preferred Stock, of which 2,617,631 shares of Series F Common-Linked Convertible Preferred Stock were issued and outstanding. The outstanding shares have been duly authorized and validly issued (including, without limitation, issued in compliance with applicable federal and state securities laws), and are fully paid and nonassessable. Company has reserved 31,200,000 shares of Common Stock for issuance upon conversion of the Series F Common-Linked Convertible Preferred Stock. Company has reserved 48,608,413 shares of Common Stock for issuance upon the conversion of its currently outstanding Convertible Securities (excluding the Series F Preferred Stock). Company is currently authorized to issue options on up to an additional 36,991,661 shares of Common Stock to its employees and directors under its 1994 Stock and Incentive Plan and the 1997 Non-qualified Stock Option Plan. Except as set forth herein, there are no outstanding warrants, options, conversion privileges, preemptive rights or other rights or agreements to purchase or otherwise acquire or issue any equity securities or Convertible Securities of Company, nor has the issuance of any of the aforesaid rights to acquire securities of Company been authorized. The outstanding shares of the capital stock of Company are duly and validly issued, fully paid and nonassessable, and such shares of such capital stock, and all outstanding securities of Company have been issued in compliance with the registration and prospectus delivery requirements of the Securities Act and the registration and qualification requirements of all applicable state securities laws, or in compliance with applicable exemptions therefrom. The share figures in this Section 13.6 do not include options on 10,000,000 shares of Common Stock and 3,200,000 shares of restricted Common Stock currently issuable to Mr. Wendt.
SECTION 13.7 Governmental Consents.
No consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any federal, state or local governmental authority on the part of Company is required in connection with the offer, sale or issuance of the Warrant (and the Warrant Stock issuable upon conversion of the Shares), or the consummation of any other transaction contemplated hereby, except for the following: (a) the filing of a prospectus supplement to the Registration Statement in accordance with Rule 424(b) under the Securities Act; b) the compliance with other applicable state securities laws, which compliance will have occurred within the appropriate time periods therefore; and (c) the filing of a notification under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
SECTION 13.8 Company SEC Reports.
Company has filed all forms, reports and documents required to be filed by it with the SEC since January 1, 1999 through the date of this Agreement. As of the respective dates they were filed, (i) the forms, reports and documents filed by Company since January 1, 2000 (collectively, the "Company SEC Reports") were prepared, and all forms, reports and documents filed with the SEC after this Agreement and prior to the Expiration Date will be prepared, in all
22
material respects in accordance with the requirements of the Securities Act or the Exchange Act, as the case may be, and (ii) none of the Company SEC Reports contained, nor will any forms, reports and documents filed after the date of this Agreement and prior to the Expiration Date contain, any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading.
ARTICLE XIV
MISCELLANEOUS
SECTION 14.1 Nonwaiver and Expenses.
No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice Holder's rights, powers or remedies. If Company fails to make, when due, any payments provided for under this Warrant, or fails to comply with any other provision of this Warrant, Company shall pay to Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys' fees, including those of appellate proceedings, incurred by Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.
SECTION 14.2 Notices.
All notices and communications to be given or made under this Warrant shall be in writing and delivered by hand-delivery, registered first class mail (return receipt requested), facsimile, or air courier guaranteeing overnight delivery, addressed as follows, or to such other Person or address as the party named below may designate by notice:
(a) If to any Holder or holder of Warrant Stock, at its last known address appearing on the books of Company maintained for such purpose and any other address sent by such Holder to Company in compliance with this Section 14.2.
(b) If to Company at
Conseco, Inc.
11825 North Pennsylvania Street Carmel, Indiana 46032
Facsimile: (317) 817-6327
Attn: General Counsel
Each such notice or other communication shall be deemed to have been duly given or served on the date on which personally delivered, with receipt acknowledged, telecopied and confirmed by telecopy answerback, or delivered by air courier, or three Business Days after the same shall have been deposited, appropriate postage prepaid, in the United States mail.
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SECTION 14.3 Successors and Assigns.
Subject to the provisions of Section 3.1 and Article IX, this Warrant and the rights evidenced hereby shall inure to the benefit of and be binding upon the successors of Company and the successors and assigns of Holder. The provisions of this Warrant are intended to be for the benefit of all Holders from time to time of this Warrant and shall be enforceable by any such Holder. No other Person shall have any right, benefit or obligation under this Warrant.
SECTION 14.4 Amendment.
No amendment or waiver of any provision of this Warrant or any other Warrant shall be effective without the written consent of Company and all Holders.
SECTION 14.5 Severability.
If one or more provisions of this Warrant are held to be unenforceable to any extent under applicable law, such provision shall be interpreted as if it were written so as to be enforceable to the maximum extent permitted by law so as to effectuate the parties' intent to the maximum extent, and the balance of this Warrant shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms to the maximum extent permitted by law.
SECTION 14.6 Section and Other Headings.
The section and headings contained in this Warrant are for the convenience only and shall not affect the meaning or interpretation of this Warrant.
SECTION 14.7 Governing Law.
This Warrant shall be governed by, construed and enforced in accordance with the laws of the State of New York, without regard to the conflict of law principles of such state.
SECTION 14.8 Remedies.
Each Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate. In any action or proceeding brought to enforce any provision of this Warrant or where any provision hereof is validly asserted as a defense, the successful party shall be entitled to recover reasonable attorneys' fees in addition to any other available remedy.
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SECTION 14.9 Counterparts.
For the convenience of the parties, any number of counterparts of this Warrant may be executed by the parties hereto and each such executed counterpart shall be, and shall be deemed to be, an original instrument.
[SIGNATURES BEGIN ON NEXT PAGE]
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IN WITNESS WHEREOF, Company has caused this Warrant to be duly executed and attested by its Secretary or an Assistant Secretary.
Dated: September 5, 2000
CONSECO, INC.

/s/ Gary C. Wendt
----------------------------------------------
Name:  Gary C. Wendt
Title: Chairman and Chief Executive Officer	

In presence of

/s/ David K. Herzog
----------------------------------------------
Name:  David K. Herzog
Title: Executive Vice President, General
           Counsel and Secretary	

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EXHIBIT A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant No. ___ irrevocably exercises the attached Warrant for the purchase of ______ Shares of Common Stock of CONSECO, INC. and herewith makes payment therefor, all at the price and on the terms and conditions specified in this Warrant (including without limitation the conditions set forth in Section 2.1 hereof relating to required regulatory approvals) and requests that certificates for the shares of Common Stock hereby purchased (and any securities or other property issuable upon such exercise, including any cash in lieu of fractional shares) be issued in the name of and delivered to _____________ whose address is _________________ and, if such shares of Common Stock shall not include all of the shares of Common Stock issuable as provided in this Warrant, that a new Warrant of like tenor and date for the balance of the shares of Common Stock issuable hereunder be delivered to the undersigned.
[___] The undersigned shall tender payment in the following form:_______________________.
[____] The undersigned hereby elects the net issue exercise option pursuant to Section 2.3(b) of the Warrant, and accordingly requests delivery of a net of ___________ shares of Common Stock.

(Name of Registered Owner)
By: ____________________________
Name:
Title:

(Street Address)

(City) (State) (Zip Code)

NOTICE:      The signature on this subscription must correspond with the name as
             written upon the face of the within Warrant in every particular,
             without alteration or enlargement or any change whatsoever.	

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EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of the attached Warrant No. ___ hereby sells, assigns and transfers unto the Assignee named below the rights of the undersigned under this Warrant, with respect to the number of shares of Common Stock set forth below:
Name and Address of Assignee No. of Shares of Common Stock
and does hereby irrevocably constitute and appoint ___________________________ attorney-in-fact to register such transfer on the books of CONSECO, INC. maintained for the purpose, with full power of substitution in the premises.
Dated:__________________ Print Name:___________________

                                       By:__________________________
                                       Name:
                                       Title:

                                       Witness:______________________

NOTICE:      The signature on this assignment must correspond with the name as
             written upon the face of the within Warrant in every particular,
             without alteration or enlargement or any change whatsoever.	

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AMENDMENT TO EMPLOYMENT AGREEMENT
AMENDMENT TO EMPLOYMENT AGREEMENT ("Amendment"), dated as of July 25, 2000, between CONSECO, INC., an Indiana corporation (the"Company"), and JOHN J. SABL ("Executive").
RECITALS
WHEREAS, Executive has previously expressed his intention to return to the private practice of law;
WHEREAS, the Company has requested Executive to remain in the employment of the Company until his successor has been employed and to provide certain other services; and
WHEREAS, the parties desire to specify the financial obligations of the Company to Executive if Executive remains an employee as provided in this Amendment;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants contained herein, the parties agree as follows:
1. Amendment. The terms of this Amendment amend and supersede any inconsistent terms of the Employment Agreement dated September 9, 1997, as amended and restated as of May 26, 1999 and as further amended and restated as of December 15, 1999 (the "Employment Agreement"). Except as expressly amended or superseded by this Amendment, the terms of the Employment Agreement remain in full force and effect.
2. Separation of Employment. Either party may terminate the employment of Executive in accordance with the terms and conditions of the Employment Agreement. If not terminated earlier, the parties agree that the employment of Executive shall terminate on the earlier of: (a) the date on which the Company appoints another person as general counsel or chief legal officer; or (b) September 11, 2000 (the earlier of such dates is referred to as the "Separation Date"). If his employment is not terminated earlier, Executive will retain the titles of Executive Vice President, General Counsel and Secretary through the Separation Date. Executive's responsibilities will remain those which Executive has historically performed. Executive also agrees that, when his employment terminates, Executive will be deemed to have resigned all offices, directorships and other positions in any form, with the Company and all of its subsidiaries, affiliates, financing trusts, employee benefit plans and trusts of any of the foregoing and related entities.
3. Compensation and Benefits. If Executive's employment is terminated prior to the Separation Date, Executive shall be entitled to the severance and other benefits provided by the Employment Agreement. If Executive remains an employee of the Company through the Separation Date, the Company will continue to pay Executive his Base Salary at the rate contemplated in the Employment Agreement of One Million Dollars ($1,000,000) per annum during the period from the Separation Date through December 31, 2000, payable at regular intervals in accordance with the Company's normal payroll practices, notwithstanding that Executive has ceased to be an employee of the Company as of the Separation Date. In addition, the Company will continue to pay Executive a cash bonus of Seven Hundred Fifty Thousand Dollars ($750,000) for the year 2000 payable in quarterly installments of $187,500 each, payable as follows: the first installment has been paid, the second
installment on or before July 31, 2000, the third installment on or before October 31, 2000 and the fourth installment on or before January 31, 2001. In addition, Executive will continue to receive all other employment benefits he is now receiving under the Employment Agreement through September 11, 2000. The parties expect that Executive will take up to two (2) weeks of paid vacation time (such weeks shall not be taken consecutively) prior to the Separation Date.
4. Rights to Indemnification. Any of Executive's rights and any obligations of Company with regard to indemnification that are not dependent upon his continued employment or holding an office with the Company and the indemnification rights under Article 7 of the Company's Amended and Restated By-Laws as in effect on the date of this Amendment ("Article 7") shall continue and will not be amended to the prejudice of his rights thereunder. The Company agrees it will use reasonable efforts to cause Executive to be included at all times as an insured at the Company's cost under any Company officer and director liability insurance policies with regard to any acts, actions, facts, circumstances, errors or omissions performed or occurring prior to the Separation Date.
5. Transition of Responsibilities and Post-Termination Consulting. Executive agrees that he will, as reasonably requested by his successor after the Separation Date and through December 31, 2000, assist in the transition of his responsibilities to his successor. Executive shall not be expected to devote more than ten (10) hours per month in this regard and the Company will reimburse Executive for all reasonable out-of-pocket expenses incurred by him in connection therewith. If after the Separation Date Executive is asked to consult with the Company or its representatives regarding any matter which relates to his employment by the Company and Executive cooperates with or otherwise responds to such request whether or not before December 31, 2000, then Executive will be considered an "Eligible Person" entitled to indemnification from the Company in accordance with Article 7 with respect to such matters. In addition to the rights under Article 7, the Company agrees to indemnify Executive and hold him harmless to the fullest extent permitted by applicable law with respect to any actions taken by Executive pursuant to this paragraph 5.
6. Advice of Counsel. Each party to this Amendment represents and agrees that such party has been advised to consult with an attorney prior to executing this amendment and that such party has done so.
IN WITNESS WHEREOF, the parties have executed this amendment as of the date first above written.
CONSECO, INC.

By: /s/ Gary C. Wendt
    -------------------------------------
    Gary C. Wendt, Chairman of the Board
      and Chief Executive Officer

    /s/ John J. Sabl
    -------------------------------------
    John J. Sabl	

2
 
Description of Incentive Compensation and Severance Arrangement with Edward M. Berube
In connection with recruiting Mr. Berube to join the Company and his subsequent appointment as the President of Bankers Life and Casualty Company, a subsidiary of the Company, the Company agreed to compensate him for the loss of certain incentive compensation which would have been otherwise available from his prior employer. Pursuant to this arrangement, Conseco has agreed that Mr. Berube will have accumulated incentive compensation in 2004 with a value of at least $1,234,000.
In addition, Conseco agreed that it would provide Mr. Berube a severance benefit of the greater of two year's salary and bonus or $2,320,000 in the event of a change of control or major change in strategy resulting in the elimination of his role or material reduction in his responsibilities (but not a termination of employment due to cause or lack of performance).
 
PROMISSORY NOTE
$1,000,000.00 Saint Paul, Minnesota November 29, 2000
FOR VALUE RECEIVED, I hereby promise to pay to Conseco Finance Corp. ("Conseco Finance"), a Delaware corporation, the sum of One Million and 00/1000 Dollars ($1,000,000.00) plus all accrued interest under the Promissory Note, dated July 1, 1999, issued by the undersigned to Conseco Finance. This Note supersedes and replaces such July 1, 1999 Promissory Note. Interest on the unpaid balance of this note shall accrue at the rate of 7% per annum. All accrued interest shall be due and payable on or before December 31, 2000. The unpaid principal amount of this note together with interest thereon at the rate of 7% per annum, shall be due and payable upon the earlier of (i) December 31, 2003; and (ii) the date of the undersigned's voluntary termination of employment with Conseco Finance.
Payments made hereunder shall be made at 1100 Landmark Towers, Saint Paul, Minnesota. This note, together with accrued interest, may be paid in full or in part at any time without premium or penalty.

/s/Bruce A. Crittenden
----------------------------------------
Bruce A. Crittenden	

EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of the 29th day of November, 2000, between CONSECO FINANCE CORP., a Delaware corporation (hereinafter called the "Company"), and Bruce A. Crittenden (hereinafter called "Executive").
RECITALS
WHEREAS, the services of Executive, and his managerial and professional experience, are of great value to the Company;
WHEREAS, the Company deems it to be essential for it to have the benefit and advantage of the services of the Executive for an extended period; and
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants contained herein, the parties agree as follows:
1. Employment. The Company hereby employs Executive and Executive hereby accepts employment upon the terms and conditions hereinafter set forth.
2. Term. The effective date of this Agreement shall be October 31, 2000. Subject to the provisions for termination as provided in Section 10 hereof, the term of this Agreement shall be the period beginning October 31, 2000, and ending December 31, 2003, and it shall be automatically renewed for an additional one year period on January 1, 2004 unless either party elects not to renew this Agreement by serving written notice of such intention not to renew on the other party at least 180 days prior to such January 1. If such an election is made, this Agreement shall remain in full force and effect for the remaining original term ending December 31, 2003, subject to the provisions for termination as provided in Section 10 hereof. The Basic Employment Period as used in this Agreement shall mean the original term ending December 31, 2003 or, if this Agreement has been renewed, December 31, 2004.
3. Duties. Executive is engaged by the Company as its President and Chief Executive Officer. Executive shall be subject to, and shall discharge his executive duties in accordance with, the direction and control of the Board of Directors of the Company (sometimes referred to herein as the "Board") and shall report regarding the performance of his duties to the Board or the Chief Executive Officer of Conseco, Inc. (the "Conseco Chairman") (provided that the Company is then a subsidiary of Conseco).
4. Extent of Services. Executive, subject to the direction and control of the Board, and if applicable, the Conseco Chairman, shall have the power and authority commensurate with his status as the President and Chief Executive Officer of the Company and necessary to perform his duties hereunder. The Company agrees to provide to Executive such assistance and work accommodations as are suitable to the character of his positions with the Company and adequate for the performance of his duties. Executive shall devote his entire employable time, attention and best
1
efforts to the business of the Company, and shall not, without the consent of the Company, during the term of this Agreement be actively engaged in any other business activity, whether or not such business activity is pursued for gain, profit or other pecuniary advantage; but this shall not be construed as preventing Executive from serving on boards of professional, community, civic, educational or charitable organizations or from investing his assets in such form or manner as will not require any services on the part of Executive in the operation of the affairs of the companies in which such investments are made. For purposes of this Agreement, full-time employment shall be the normal work week for individuals in comparable executive positions with the Company.
5. Compensation.
(a) As compensation for services hereunder rendered during the term hereof, Executive shall receive a base salary ("Base Salary") of Six Hundred Thousand Dollars ($600,000) per year payable in equal installments in accordance with the Company's payroll procedure for its salaried employees. Salary payments and other payments under this Agreement shall be subject to withholding of taxes and other appropriate and customary amounts. Executive may receive increases in his Base Salary from time to time, based upon his performance in his executive and management capacity. The amounts of any such salary increases shall be approved by the Board or the Compensation Committee of the Board.
(b) In addition to Base Salary, Executive shall receive a bonus determined as follows. For the calendar year ending December 31, 2000, Executive shall receive a bonus of not less than Nine Hundred Thousand Dollars ($900,000). For calendar years ending on or after December 31, 2001, during the Basic Employment Period, Executive shall receive a bonus payable within 120 days of the end of the calendar year equal to .20% of the Company's Pretax Income (as defined below) for such calendar year. Such bonus shall be calculated from the books and records of the Company which shall be kept in accordance with generally accepted accounting principles applied by the Company in the preparation of its financial statements. "Pretax Income" shall mean the Company's net income available to common shareholders as adjusted to add back income taxes (to the extent deducted in computing net income). "Pretax Income" shall exclude the effect (in each case net of applicable tax) of (i) extraordinary items, (ii) discontinued operations and (iii) the cumulative effects of changes in accounting principles. In making such calculation, the expenses of Conseco allocated to the Company shall not exceed the percentage of the Company's operating expenses that such allocated expenses represented during calendar year 2000; provided, however, that if certain functions of the Company's business that are currently being provided by the Company are transferred in the future to Conseco or one of its other subsidiaries, the expenses associated with such transferred function shall be treated as allocated expenses only to the extent of any increase in the expenses associated with such transferred functions.
(c) In the event that the Company sells a subsidiary or other portion of its business (other than sales of assets in the ordinary course of business or sales, including without limitation Vendor Services, that were identified as "discontinued lines" in the Company's Form 10-Q for the period ended September 30, 2000) or purchases a company or portion of the assets or business of a company and the business purchased or sold would constitute a "significant subsidiary" of the Company under Regulation S-X of the Securities and Exchange Commission as in effect on the date of this Agreement, the bonus formula set forth in the previous paragraph shall be adjusted to reflect such sale or purchase. In the event of
2
such a sale, the bonus percentage in Section 5(b) shall be multiplied by a fraction (i) the numerator of which is one plus the percentage of the Company's net income which the subsidiary or business sold represented of the total net income of the Company for the last two full calendar years prior to such sale and (ii) the denominator of which is one. In the event of such a purchase, the bonus percentage in
Section 5 (b) shall be multiplied by a fraction (i) the numerator of which is one and (ii) the denominator of which is one plus the percentage of the Company's net income which such company or business would have represented for the last two years if the results of the operations of such company or business had been included with that of the Company during such period. No adjustment of the bonus shall be made if the business that was purchased or sold had a net loss for the two year period prior to its purchase or sale.
6. Fringe Benefits.
(a) Executive shall be entitled to participate in such existing employee benefit plans and insurance programs offered by the Company, or which it may adopt from time to time, for its executive management or supervisory personnel generally, in accordance with the eligibility requirements for participation therein. Nothing herein shall be construed so as to prevent the Company from modifying or terminating any employee benefit plans or programs, or employee fringe benefits, it may adopt from time to time.
(b) During the term of this Agreement, the Company shall pay Executive a monthly automobile allowance in the amount of Six Hundred Dollars ($600), and the Company shall pay directly or shall reimburse Executive for the cost of fuel that he incurs in using his automobile.
(c) Executive shall be entitled to four (4) weeks vacation with pay for each year during the term hereof.
(d) Executive may incur reasonable expenses for promoting the Company's business, including expenses for entertainment, travel, and similar items. The Company shall reimburse Executive for all such reasonable expenses upon Executive's periodic presentation of an itemized account of such expenditures.
(e) The Company shall, upon periodic presentation of satisfactory evidence and to a maximum of Ten Thousand Dollars ($10,000) per each year of this Agreement, reimburse Executive for reasonable medical expenses incurred by Executive and his dependents which are not otherwise covered by health insurance provided to Executive under
Section 6(a).
(f) During the term of this Agreement, the Company shall at its expense maintain a term life insurance policy or policies on the life of Executive in the face amount of Five Hundred Thousand Dollars ($500,000), payable to such beneficiaries as Executive may designate.
7. Disability. If Executive shall become physically or mentally disabled during the term of this Agreement to the extent that his ability to perform his duties and services hereunder is materially and adversely impaired, his Base Salary, bonus and other compensation provided herein shall continue while he remains employed by the Company; provided, that if such disability (as
3
confirmed by competent medical evidence) continues for at least nine (9) consecutive months, the Company may terminate Executive's employment hereunder in which case the Company shall immediately pay Executive a lump sum payment equal to one-quarter of the sum of his annual salary and bonus with respect to the most recent fiscal year then ended and, provided further, that no such lump sum payment shall be required if such disability arises primarily from: (a) chronic depressive use of intoxicants, drugs or narcotics, or (b) intentionally self-inflicted injury or intentionally self- induced sickness; or (c) a proven unlawful act or enterprise on the part of Executive.
8. Disclosure of Information. Executive acknowledges that in and as a result of his employment with the Company, he has been and will be making use of, acquiring and/or adding to confidential information of the Company of a special and unique nature and value. As a material inducement to the Company to enter into this Agreement and to pay to Executive the compensation stated in
Section 5, as well as any additional benefits stated herein, Executive covenants and agrees that he shall not, at any time during or following the term of his employment, directly or indirectly, divulge or disclose for any purpose whatsoever, any confidential information that has been obtained by or disclosed to him as a result of his employment with the Company, except to the extent that such confidential information (a) becomes a matter of public record or is published in a newspaper, magazine or other periodical available to the general public, other than as a result of any unauthorized act or omission of Executive,
(b) is required to be disclosed by any law, regulation or order of any court or regulatory commission, department or agency, provided that Executive gives prompt notice of such requirement to the Company to enable the Company to seek an appropriate protective order or confidential treatment, or (c) is necessary to perform properly Executive's duties under this Agreement. Upon the termination of this Agreement, Executive shall return all materials belonging to the Company which he may have in his possession or control.
9. Covenants Against Competition and Solicitation. Executive acknowledges that the services he is to render to the Company are of a special and unusual character, with a unique value to the Company, the loss of which cannot adequately be compensated by damages or an action at law. In view of the unique value to the Company of the services of Executive for which the Company has contracted hereunder, because of the confidential information to be obtained by, or disclosed to, Executive as herein above set forth, and as a material inducement to the Company to enter into this Agreement and to pay to Executive the compensation stated in Section 5, as well as any additional benefits stated herein, and other good and valuable consideration, Executive covenants and agrees that throughout the period Executive remains employed hereunder and for one year (two years with respect to clauses (ii) and (iii) of this sentence) thereafter , Executive shall not, directly or indirectly, anywhere in the United States of America (i) render any services, as an agent, independent contractor, consultant or otherwise, or become employed or compensated by, any other corporation, person or entity engaged in the business of selling or providing any lending or other financial products or services that are competitive with the lending or other financial products or services sold or provided by the Company or its subsidiaries in the manufactured housing industry (a "Competing Business"); provided, however, that Executive may provide such services or have such relationship with a Competing Business but only if Executive has no involvement with the portion of the Competing Business that provides lending or other financial products or services that are competitive with those products or services of the Company relating to the manufactured housing industry; (ii) solicit or attempt to convert to any other Competing Business, any customers of the Company or any of its subsidiaries with respect to the manufactured housing industry; or (iii) solicit for employment or employ any non-exempt employee of Conseco, Inc. ("Conseco"), the
4
Company or any of their respective subsidiaries. During the term of this Agreement and for one year thereafter, Executive agrees not to engage in conduct that is injurious to the Company, Conseco or any of their business operations. For purposes of this provision, "conduct by Executive that is injurious to the Company, Conseco or any of their business operations" is defined as: (i) any statements, whether written or oral, which are defamatory of the Company, Conseco or any of their officers or directors; or (ii) deliberate misrepresentation of the affairs, practices, or financial condition of the Company, Conseco or any of their officers or directors. Should any particular covenant or provision of this Section 9 be held unreasonable or contrary to public policy for any reason, including, without limitation, the time period, geographical area, or scope of activity covered by any restrictive covenant or provision, the Company and Executive acknowledge and agree that such covenant or provision shall automatically be deemed modified such that the contested covenant or provision shall have the closest effect permitted by applicable law to the original form and shall be given effect and enforced as so modified to whatever extent would be reasonable and enforceable under applicable law. The provisions of this Section 9 supersede any other agreements or documents to which the Company and/or Executive are parties or signatories regarding the subject matter of this Section 9, and such other agreements or documents shall be of no force and effect with respect to the subject matter of this Section 9.
10. Termination; Change in Control.
(a) Either the Company or Executive may terminate this Agreement at any time for any reason upon written notice to the other. This Agreement shall also terminate upon (i) the death of Executive or (ii) termination by the Company pursuant to Section 7.
(b) In the event (A) this Agreement is terminated by the Company and such termination is not pursuant to the last sentence of (a) above or for "just cause" as defined in (f) below and does not constitute a Control Termination as defined in (e) below or (B) this Agreement is terminated by Executive with "good reason", Executive shall be entitled to receive (i) Executive's Base Salary, as determined pursuant to
Section 5(a) hereof, for a period of two years from the date of such termination, (ii) an amount equal to the bonus paid or payable pursuant to Section 5(b) with respect to the calendar year immediately preceding the year of such termination, and (iii) all other unpaid amounts previously accrued or awarded pursuant to any other provision of this Agreement. For purposes of this Agreement "good reason" shall mean: (i) causing or requiring Executive to report to anyone other than the Board or the Chairman of the Board of Conseco, or (ii) requiring Executive's primary work location to be at a place other than metropolitan St. Louis, Missouri, or metropolitan Minneapolis/St. Paul, Minnesota.
(c) In the event this Agreement is terminated by the death of Executive, is terminated by the Company for "just cause" as defined in
(f) below or is terminated by Executive and such termination does not constitute a Control Termination as defined in (e) below or is not a termination by Executive for "good reason," Executive shall be entitled to receive Executive's Base Salary as provided in Section 5(a) accrued but unpaid as of the date of termination, and all other unpaid amounts previously accrued or awarded pursuant to any other provision of this Agreement.
(d) (i) In the event of a change in control of Conseco as defined in
(e) below and in exchange for Executive's Program Stock (as defined in the Conseco, Inc. 2000 Employee
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Stock Purchase Program Work-Down Plan (the "2000 Plan")), Executive shall be entitled to receive an amount equal to the greater of (a) the purchase price of Executive's Program Stock plus all accrued but unpaid interest on the Program Loans (as defined in the 2000 Plan)(excluding accrued interest on the Interest Loans), or (b) the value of the total consideration to be paid for Executive's Program Stock in any transaction relating to such change in control of Conseco (as defined below).
(ii) In the event of a Control Termination as defined in (e) below, Executive shall be entitled to receive a lump sum payment not later than 60 days following such Control Termination equal to the sum of (i) two times the amount of Executive's Base Salary, as determined pursuant to Section 5(a) hereof, (ii) an amount (the "Additional Payment") in lieu of bonus to Executive with respect to the remainder of the term of this Agreement, calculated as follows: (1) for calendar year 2001 - $875,000, (2) for calendar year 2002 - $1,287,500, (3) for calendar year 2003 - $1,700,000 and (4) for calendar year 2004 - $2,000,000, and
(iii) all other unpaid amounts previously accrued or awarded pursuant to any other provision of this Agreement. The Additional Payment shall be prorated based on the date of the Control Termination. For example, if the Control Termination occurs on November 30, 2003, and assuming neither party elected not to renew this Agreement under Section 2 hereof, then the Additional Payment would equal $2,000,000 + $144,383 ($1,700,000 x 31 / 365). No Additional Payment with respect to calendar year 2004 shall be made if the Company is obligated to make the payment provided by Section 10(g) hereof.
(e) The term "Control Termination" as used herein shall mean (A) termination of this Agreement by the Company in anticipation of or not later than two years following a "change in control" (as defined below), or (B) termination of this Agreement by Executive following a "change in control" (as defined below) upon the occurrence of any of the following events:
(i) a significant reduction in the nature or scope of Executive's authorities or duties from those in existence immediately prior to the change in control, a reduction in his total compensation from that in existence immediately prior to the change in control or a breach by the Company of any other provision of this Agreement; or
(ii) the reasonable determination by Executive that, as a result of a change in circumstances significantly affecting his position, he is unable to exercise Executive's authorities, powers, functions or duties in existence immediately prior to the change in control.
The term "change in control" shall mean (x) the acquisition by any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "1934 Act")) of "beneficial ownership" (as such term is defined in Rule 13d-3 promulgated under the 1934 Act), directly or indirectly, of securities of Conseco representing 51% or more of the combined voting power of the then outstanding securities of Conseco entitled to vote with respect to the election of Conseco's Board of Directors or (y) the acquisition by any person other than Conseco or an affiliate of Conseco of securities of the Company representing 51% or more of the combined voting power of the then outstanding securities of the Company entitled to vote with respect to the election of the Company's Board of Directors.
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Upon the occurrence of a change in control, the Company shall promptly notify Executive in writing of the occurrence of such event (such notice, the "Change in Control Notice"). If the Change in Control Notice is not given within 10 days after the occurrence of a change in control the period specified in clause
(e)(A) of this Section 10 shall be extended until the second anniversary of the date such Change in Control Notice is given.
(f) For purposes of this Agreement "just cause" shall mean:
(i) a material breach by Executive of this Agreement, the commission of gross negligence, or willful malfeasance, misrepresentation or fraud or dishonesty of a substantial nature in performing Executive's services on behalf of the Company, which is in each case (A) willful and deliberate on Executive's part and committed in bad faith or without reasonable belief that such breach is in the best interests of the Company and Conseco and (B) not remedied by Executive in a reasonable period of time after receipt of written notice from the Company specifying such breach;
(ii) Executive's use of alcohol or drugs which interferes with the performance of his duties hereunder or which compromises the integrity and reputation of the Company or Conseco, their employees, and products;
(iii) Executive's conviction by a court of law, or admission that he is guilty, of a felony, intentional violation of a law involving moral turpitude or theft or embezzlement of assets of the Company or Conseco; or
(iv) Executive's failure to report to work other than on approved vacation days or due to bona fide illness, bereavement or similar family emergency, or the continued failure by Executive to attempt in good faith to perform his duties as reasonably assigned to Executive by the Company (such continued failure to continue for a period of ten business days after notice given by the Company after a written demand for such performance which specifically identifies the manner in which it is alleged Employee has not attempted in good faith to perform such duties).
(g) In the event the Company elects not to renew this Agreement for an additional one year period as provided in Section 2 hereof and there has been no Control Termination prior to the date of such election, then the Company shall pay Executive the sum of Five Million Five Hundred Thousand Dollars ($5,500,000) as compensation with respect to calendar year 2004, such sum to be payable in equal installments on the last business day of each calendar quarter during 2004.
11. Tax Indemnity Payments.
(a) Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment or distribution by the Company or its affiliated companies to or for the benefit of Executive, whether paid or payable or distributed or distributable pursuant to the terms of the Agreement or otherwise but determined without regard to any additional payments required under this Section
11 (a "Payment"), would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986 (as
7
amended the "Code"), or any successor provision (collectively, "Section 4999"), or any interest or penalties are incurred by Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any Federal, state or local income and employment taxes and Excise Tax (and any interest and penalties imposed with respect to any such taxes) imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 11(c), all determinations required to be made under this Section 11, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by the Company's public accounting firm (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and Executive within fifteen (15) business days of the receipt of notice from Executive that there has been a Payment, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change in Control, Executive may appoint another nationally recognized public accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 11, shall be paid by the Company to Executive within five (5) days of the receipt of the Accounting Firm's determination. If the Accounting Firm determines that no Excise Tax is payable by Executive, it shall furnish Executive with a written opinion that failure to report the Excise Tax on Executive's applicable federal income tax return would not result in the imposition of a negligence or similar penalty. Any determination by the Accounting Firm shall be binding upon the Company and Executive. As a result of the uncertainty in the application of Section 4999 at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made by the Company ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 11(c) and Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of Executive.
(c) Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require a payment by the Company, or a change in the amount of the payment by the Company of, the Gross-Up Payment. Such notification shall be given as soon as practicable after Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid; provided that the failure to give any notice pursuant to this Section 11(c) shall not impair Executive's rights under this Section 11 except to the extent the Company is materially prejudiced thereby. Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which Executive gives such notice to the Company
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(or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies Executive in writing prior to the expiration of such period that it desires to contest such claim, Executive shall:
(1) give the Company any information reasonably requested by the Company relating to such claim,
(2) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company,
(3) cooperate with the Company in good faith in order effectively to contest such claim, and
(4) permit the Company to participate in any proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold Executive harmless, on an after-tax basis, for any Excise Tax or income, employment or other tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 11(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided further, that if the Company directs Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to Executive on an interest-free basis and shall indemnify and hold Executive harmless, on an after-tax basis, from any Excise Tax or income, employment or other tax (including interest or penalties with respect to any such taxes) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and provided further, that any extension of the statute of limitations relating to payment of taxes for the taxable year of Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by Executive of an amount advanced by the Company pursuant to Section 11(c), Executive becomes entitled to receive, and receives, any refund with respect to such claim, Executive shall (subject to the Company's complying with the requirements of
Section 11(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by Executive of an amount advanced by the Company pursuant to Section 11(c),
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a determination is made that Executive shall not be entitled to any refund with respect to such claim and the Company does not notify Executive in writing of its intent to contest such denial of refund prior to the expiration of thirty (30) days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid.
12. Character of Termination Payments. The amounts payable to Executive upon any termination of this Agreement shall be considered severance pay in consideration of past services rendered on behalf of the Company and his continued service from the date hereof to the date he becomes entitled to such payments. Executive shall have no duty to mitigate his damages by seeking other employment and, should Executive actually receive compensation from any such other employment, the payments required hereunder shall not be reduced or offset by any such other compensation.
13. Arbitration of Disputes; Injunctive Relief.
(a) Except as provided in paragraph (b) below, any controversy or claim arising out of or relating to this Agreement or the breach thereof, shall be settled by binding arbitration in the City of Indianapolis, Indiana, in accordance with the laws of the State of Indiana by three arbitrators, one of whom shall be appointed by the Company, one by Executive and the third of whom shall be appointed by the first two arbitrators. If the first two arbitrators cannot agree on the appointment of a third arbitrator, then the third arbitrator shall be appointed by the Chief Judge of the United States District Court for the Southern District of Indiana. The arbitration shall be conducted in accordance with the rules of the American Arbitration Association, except with respect to the selection of arbitrators which shall be as provided in this Section. Judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof. In the event that it shall be necessary or desirable for Executive to retain legal counsel and/or incur other costs and expenses in connection with the enforcement of any and all of his rights under this Agreement, the Company shall pay (or Executive shall be entitled to recover from the Company, as the case may be) his reasonable attorneys' fees and costs and expenses in connection with the enforcement of any arbitration award in court, regardless of the final outcome, unless the arbitrators shall determine that under the circumstances recovery by Executive of all or a part of any such fees and costs and expenses would be unjust.
(b) Executive acknowledges that a breach or threatened breach by Executive of Sections 8 or 9 of this Agreement will give rise to irreparable injury to the Company and that money damages will not be adequate relief for such injury. Notwithstanding paragraph (a) above, the Company and Executive agree that the Company may seek and obtain injunctive relief, including, without limitation, temporary restraining orders, preliminary injunctions and/or permanent injunctions, in a court of proper jurisdiction to restrain or prohibit a breach or threatened breach of Section 8 or 9 of this Agreement. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies available to the Company for such breach or threatened breach, including the recovery of damages from Executive.
14. Notices. Any notice required or permitted to be given under this Agreement shall be
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sufficient if in writing and if sent by certified or registered mail to his residence, in the case of Executive, or to the business office of its Chief Executive Officer, in the case of the Company.
15. Waiver of Breach and Severability. The waiver by either party of a breach of any provision of this Agreement by the other party shall not operate or be construed as a waiver of any subsequent breach by either party. In the event any provision of this Agreement is found to be invalid or unenforceable, it may be severed from the Agreement and the remaining provisions of the Agreement shall continue to be binding and effective.
16. Entire Agreement. This instrument contains the entire agreement of the parties and supersedes all prior agreements between them relating to the subject matter of this Agreement (other than the terms of a letter dated November 21, 2000 from Executive and executed by Gary C. Wendt). This Agreement may not be changed orally, but only by an instrument in writing signed by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought.
17. Binding Agreement and Governing Law; Assignment Limited. This Agreement shall be binding upon and shall inure to the benefit of the parties and their lawful successors in interest and shall be construed in accordance with and governed by the laws of the State of Indiana. This Agreement is personal to each of the parties hereto, and neither party may assign nor delegate any of its rights or obligations hereunder without the prior written consent of the other.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.
CONSECO FINANCE CORP.

By:  /s/ Brian F. Corey
     ------------------------------------
     Brian F. Corey
     Senior Vice President, General
     Counsel and Secretary	

"Company"

/s/ Bruce A. Crittenden
------------------------------------
Bruce A. Crittenden	

"Executive"
11
 
11-13-00 
CONSECO, INC.
2000 EMPLOYEE STOCK PURCHASE PROGRAM WORK-DOWN PLAN
1. Plan Purpose. The purpose of this Plan is to promote the long-term interests of the Company and its shareholders by providing a means for certain participants in the Company's Stock Purchase Programs to meet their financial obligations and to align better their interests with those of the Company and the shareholders.
2. Definitions. The following definitions are applicable to the Plan:
"Affiliate" means any direct or indirect subsidiary of the Company.
"Banks" means the financial institutions that will make the Program Loans.
"Bonus Points" means the points that may be awarded to and earned by Participants under Section 7 of this Plan.
"Cause" means, in connection with a Participant's Termination of Service, theft or embezzlement from the Company or any Affiliate, violation of a material term or condition of employment, disclosure of confidential information of the Company or any Affiliate, conviction of the Participant of a crime of moral turpitude, stealing of trade secrets or intellectual property owned by the Company or any Affiliate, or any act or omission by or of the Participant that in the opinion of the Company is adverse to the best interests of the Company or any Affiliate.
"Change of Control" of the Company means the acquisition prior to December 31, 2003 by any "person" (as such term is used in Sections 13(d) and 14(d) of the 1934 Act) of "beneficial ownership" (as such term is defined in Rule 13d-3 promulgated under the 1934 Act), directly or indirectly, of securities of the Company representing 51% or more of the combined voting power of the Company's then outstanding securities entitled to vote with respect to the election of its Board of Directors.
"Change of Control Benefits" mean an amount equal to the greater of
(a) the purchase price of a Participant's Program Stock plus all accrued but unpaid interest on the Program Loans (excluding accrued interest on the Interest Loans), or (b) the value of the total consideration to be paid for the Participant's Program Stock in any transaction relating to the Change of Control.
"CIHC" means CIHC, Incorporated, a Delaware corporation.
"Collateral" means any real or personal property reasonably acceptable to the Committee (other than Program Stock) in which a Participant hereafter grants a security interest to the Banks or the Company (as directed by the Committee) to secure repayment of such Participant's Program Loans or Interest Loans and for which an appropriate pledge or security agreement has been delivered to the Banks or the Company, as the case may be. Notwithstanding the foregoing, no security interest may be granted to the Company in Collateral which represents "margin stock" securing a "purpose credit" in each case as defined by Regulation U promulgated by the Board of Governors of the Federal Reserve System, 12 C.F.R. Section 221.1 et seq.
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"Collateral Value" means the value that the Committee determines is the realizable value of the Collateral.
"Commitment Termination Date" means October 31, 2000 unless extended by the Company with the consent of Bank of America, N.A., as to certain Program Loans.
"Committee" means the committee of the Board of Directors of the Company appointed to administer this Plan.
"Company" means Conseco, Inc., an Indiana corporation.
"Consultant" means the person or firm appointed by the Committee to provide financial consulting services to Participants and to advise the Committee.
"Current Loan Amount" means the amount owed by a Participant for such Participant's Existing Program Loans and Interest Loans as of September 30, 2000.
"Director and Executive Officer Stock Purchase Plan" means the Amended and Restated 1999 Director and Executive Officer Stock Purchase Plan of Conseco, Inc. effective September 7, 1999 and amended and restated November 2, 1999.
"Director, Officer and Key Employee Stock Purchase Plan" means the Amended and Restated Director, Officer and Key Employee Stock Purchase Plan of Conseco, Inc. effective July 30, 1998 and amended and restated November 2, 1999.
"Down Payment" means the amount of cash paid to the Banks or Collateral Value to be provided to the Banks or to the Company (as directed by the Committee) on the Program Loans pursuant to Section 6 of this Plan.
"Down Payment Interest" has the meaning set forth in Section 6(c) of this Plan.
"Employee" means any Participant who is actively employed by the Company or an Affiliate.
"Excess Amount" means the amount by which the Market Value exceeds $25.00.
"Executive Officer" means any of the following persons: James S. Adams, Maxwell E. Bublitz, Bruce A. Crittenden, Ngaire E. Cuneo (and related trusts) and Thomas J. Kilian.
"Existing Program Loans" mean the loans made by the financial institutions for whom Bank of America, N.A. or The Chase Manhattan Bank is acting as agent to a Participant or such Participant's designee under the Stock Purchase Programs to purchase Program Stock.
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"Former CF Employee" means any Participant who was an employee of Conseco Finance Corp., a Delaware corporation, as of July 1, 2000 and who on or after that date and before October 31, 2000, experienced a Termination of Service for any reason other than action by Conseco Finance Corp. with Cause or voluntary action by the employee.
"Guaranty Fee" means the quarterly fee equal to 0.5% of the principal amount of the Existing Program Loans or the Program Loans, as the case may be, payable to the Company under the Stock Purchase Programs or this Plan.
"Interest Loans" mean the loans made or to be made by Conseco Services, LLC, an Affiliate of the Company, to pay interest to, and fees and other charges of, the Banks on the Existing Program Loans and the Program Loans, as the case may be.
"Market Value" means the closing price of a share of common stock of the Company as reported by the New York Stock Exchange on the last trading day preceding December 31, 2003.
"Maturity Date" means December 31, 2003.
"New Interest Rate" means the variable rate of interest from time to time payable on the Program Loans.
"Participant" means a participant in the Stock Purchase Programs, including any "Participant Designee" of such person as defined in the Stock Purchase Programs, who is eligible to and elects to participate in this Plan.
"Plan" means the Conseco, Inc. 2000 Employee Stock Purchase Program Work-Down Plan.
"Program Guaranties" has the meaning set forth in Section 5(a).
"Program Loans" mean the new loans to be made by the Banks to refinance the Existing Program Loans.
"Program Stock" means the shares of common stock of the Company or other securities acquired by a Participant under the Stock Purchase Programs.
"Retirement" means a voluntary Termination of Service on the part of an Employee after attaining the age of sixty (60) years.
"Stock Purchase Programs" mean the Director, Officer and Key Employee Stock Purchase Plan and the Director and Executive Officer Stock Purchase Plan.
"Termination of Service" means a termination of the employment relationship between the Employee and the Company and all Affiliates.
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"Work-Down Amount" means the amount by which: (a) the sum of (i) the outstanding balance of a Participant's Program Loans as of the Maturity Date,
(ii) any cash Down Payment made by such Participant through the Maturity Date,
(iii) the amounts paid by the Company to the Banks under Section 6(c), and (iv) the outstanding balance of such Participant's Interest Loans as of the Maturity Date exceeds (b) the number of shares of Program Stock owned by such Participant on September 30, 2000 multiplied by $25.00.
"1934 Act" means the Securities and Exchange Act of 1934, as amended.
3. Administration. This Plan shall be administered by the Committee, which shall consist of three or more members of the Board of Directors, none of whom have any outstanding obligations under the Stock Purchase Programs or the Existing Program Loans. A majority of the members of the Committee shall constitute a quorum, and the acts of a majority of the members present at any meeting at which a quorum is present, or acts approved in writing by all members of the Committee without a meeting, shall be acts of the Committee. Except as expressly limited by the Plan, the Committee shall have all powers and discretion necessary or appropriate to administer the Plan and control its operation, including, but not limited to, the power to interpret the Plan and to adopt rules and procedures for the administration, interpretation and operation of the Plan. All determinations and decisions made by the Committee pursuant to the provisions of the Plan shall be final, conclusive and binding on all persons, and shall be given the maximum deference permitted by law.
4. Election to Participate. To participate in this Plan, a Participant must have been an Employee as of October 31, 2000, or a Former CF Employee in either case who has an Existing Program Loan with an outstanding principal balance and must, on or before November 10, 2000:
(a) elect in writing to participate in this Plan, accept the terms and conditions of this Plan and cooperate fully with the Committee, the Company, the Consultant and the Banks in connection with the administration of the Plan and the Program Loans; and
(b) execute all documents reasonably required by the Company, the Committee and the Banks in connection with the Existing Program Loans, the Program Loans, the Interest Loans and this Plan, including but not limited to, promissory notes, loan agreements, pledge or security agreements, financing statements, stock powers, releases of liability, personal financial statements, powers of attorney, and letters of instruction to brokers, transfer agents and banks.
5. Program Loans and Interest Loans.
(a) The Company has arranged for each Participant to obtain a Program Loan with a maturity equal to the Maturity Date. Each Participant is responsible for satisfying all of the lending requirements specified by the Banks to qualify for the Program Loans, including all collateral requirements. Each Participant acknowledges and agrees that he or she is fully obligated to repay to the Banks all principal, interest, and any prepayment or other fees on the Program Loans when due and payable. It is a condition to the Program
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Loans that the Company and CIHC guarantee to the Banks repayment of 100% of the principal, interest, prepayment fees and other fees or obligations of each Participant under the Program Loans (the "Program Guaranties"). The terms and conditions of the Program Guaranties are as agreed by the Company, CIHC and the Banks, and such parties may amend, modify, waive or otherwise change the Program Guaranties as they may from time to time agree. Each Participant agrees to reimburse and to cause its Participant Designee (if applicable) to reimburse the Company and/or CIHC for any and all payments made under either of the Program Guaranties and all loss, cost and expenses of any kind which the Company or CIHC may incur in connection therewith or arising thereunder. The Company may take any action relating to the Participant and her or his assets, which the Committee deems reasonable and necessary (including but not limited to offsetting amounts owed to the Company or CIHC against wages, fees or other amounts owed to the Participant from the Company or its Affiliates) to obtain full reimbursement for amounts the Company or CIHC pays to the Banks under either of the Program Guaranties. Each Participant agrees that the principal amount of its Interest Loans will be increased by (i) one percent (1%) of such Participant's Existing Program Loans reflecting the origination fee paid by the Company to the Banks as of September 22, 2000, and (ii) an amount payable to the Company, equal to 1.625% per annum from September 22, 2000 through and until the Commitment Termination Date on such Participant's Existing Program Loans that were scheduled to mature August 26, 2001.
(b) For all Participants who remain Employees and comply with the terms of this Plan, the Company will: (i) cause Conseco Services, LLC to continue to extend the Interest Loans to such Participants and to make advancements automatically on behalf of such Participants to the Banks for the payment of interest on the Program Loans and (ii) not require any payments on the Interest Loans from such Participants prior to the Maturity Date. The Interest Loans shall accrue interest at the New Interest Rate commencing October 31, 2000.
(c) In the case of any Former CF Employee or any Participant who experiences a Termination of Service after October 31, 2000, either by reason of action by the Company without Cause or because of Retirement:
(i) such Participant will continue to be treated as provided in subsection (b) of this Section 5 and (ii) at such Participant's request, the Company will refund to such Participant any cash Down Payment previously made by such Participant under Section 6 upon the Participant's execution of a promissory note to the Company or one of its Affiliates in an amount equal to the amount of any cash refunded to the Participant, return any Collateral provided to the Company and request the Banks to return any Collateral provided to them pursuant to
Section 6. The form and terms of the promissory note shall be substantially similar to those of the promissory note for the Interest Loan. Any cash Down Payment refunded to the Participant will no longer accrue Down Payment Interest after the date of such refund.
(d) Participants who experience a Termination of Service by reason of either action by the Company with Cause or voluntary action by the Participant (other than Retirement) after October 31, 2000, must from and after the last day of the first full calendar
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quarter ending after the Termination of Service occurs pay to the Company the Guaranty Fee and commence paying interest on the Program Loans to the Banks and interest on the Interest Loans to Conseco Services, LLC on a current basis at the rates specified therein.
(e) The Program Loans shall be paid in full prior to any payment by the Participants to the Company on the Interest Loans. Any cash dividends paid on the Program Stock shall be paid to the Banks on the Program Loans. If the Company or any Affiliate receives any payment from a Participant relating to the Interest Loans while such Participant's Programs Loans are still outstanding, the Company shall turn over and pay (or cause any Affiliate to turn over and pay) the appropriate amount to the Banks to be applied to the Program Loans designated by such Participant at the time of such payment and, in the absence of such designation, pro rata to all Program Loans of such Participant.
6. Down Payment.
(a) Each Participant other than a Former CF Employee shall make a Down Payment in the form of cash and/or Collateral on his or her Program Loans based on the Current Loan Amount. The minimum amount of the Down Payment shall be: (a) five percent (5%) if the Current Loan Amount is $500,000 or less; (b) six percent (6%) if the Current Loan Amount is more than $500,000 and less than or equal to $600,000; (c) seven percent (7%) if the Current Loan Amount is more than $600,000 and less than or equal to $700,000; (d) eight percent (8%) if the Current Loan Amount is more than $700,000 and less than or equal to $800,000;
(e) nine percent (9%) if the Current Loan Amount is more than $800,000 and less than or equal to $900,000; and (f) ten percent (10%) if the Current Loan Amount is more than $900,000. A Former CF Employee may voluntarily make a Down Payment in any amount. The Down Payment shall be made as soon as possible after electing to participate in this Plan and no later than December 31, 2000, unless otherwise approved by the Committee as provided in subsection (b) of this Section. A Participant may credit against his or her required Down Payment any principal or interest payments made by such Participant from its own funds on the Existing Program Loans prior to the date such Participant elects to participate in this Plan.
(b) If a Participant believes that he or she is not able to make the Down Payment required by subsection (a) on or before December 31, 2000, the Participant shall accept the assistance of, and cooperate fully with, the Consultant. The Consultant shall be required to report to the Committee what it believes the form, amount(s) and due date(s) of such Participant's Down Payment should be. The Committee shall ultimately determine the form, amount(s) and due date(s) of such Participant's Down Payment. If a Participant fails to comply with the Committee's final decisions regarding the Down Payment, the Company may take the actions provided in Section 10.
(c) Each Participant's cash Down Payment will accrue interest at the New Interest Rate from the date(s) paid through and to December 31, 2003, unless otherwise specified in this Plan (the "Down Payment Interest"). On each February 15th, commencing in 2002, the Company will pay one-third (1/3) of a Participant's accrued but unpaid Down Payment
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Interest to the Participant and two-thirds (2/3) of such Participant's accrued but unpaid Down Payment Interest to the Banks as a prepayment of such Participant's Program Loans. The Company's payment of Down Payment Interest to the Banks will be considered a further cash Down Payment by the Participant.
7. Bonus Point Program.
(a) Participants who remain Employees will participate in a program under which they will have an opportunity to be awarded up to 40 Bonus Points in any calendar year, commencing in 2001, up to a maximum cumulative amount of 100 Bonus Points by December 31, 2003. Each point will have a value for purposes of this Plan, net of applicable taxes, equal to one percent (1%) of a Participant's Work-Down Amount. Awards of Bonus Points will be tied to the achievement of goals set by the Company in its sole discretion. In general, and with such modifications as the Committee may approve from time to time, fifty percent (50%) of the available points in a given year will be tied to the achievement of Company goals; twenty-five percent (25%) to the achievement of business unit goals; and twenty-five (25%) to the achievement of individual goals. Former CF Employees will have an opportunity to be awarded up to 20 Bonus Points in any calendar year which will be tied only to the achievement of Company goals. The goals for each calendar year shall be communicated to the Participants no later than March 31 of such year.
(b) If a Participant experiences a Termination of Service by reason of action by the Company without Cause or because of Retirement prior to December 31, 2003, such Participant will be eligible to be awarded up to a maximum of forty (40) Bonus Points for the year in which the Termination of Service occurs and, thereafter, only those Bonus Points (up to 20 per year) that are tied to the Company's achieving its goals.
(c) If a Participant experiences a Termination of Service by reason of either action by the Company with Cause or voluntary action by the Participant (other than Retirement) prior to December 31, 2003, such Participant will forfeit any previously awarded Bonus Points and, thereafter, will not be eligible to receive any further Bonus Points.
(d) At the election of a Participant on December 31, 2003, the Company will on that date or as soon as possible thereafter redeem all Bonus Points awarded to such Participant and apply the value thereof determined in accordance with clause (a) above in the following order and manner: (i) reduce the amount then owed by such Participant on the Program Loans on a dollar for dollar basis; (ii) if the Program Loans of such Participant are repaid in full, reduce the amount then owed by such Participant on the Interest Loans on a dollar for dollar basis; and (iii) if the Program Loans, the Interest Loans and all other obligations of such Participant under this Plan are paid in full, pay the remaining balance in cash to the Participant. In addition, any such Participant shall be obligated to pay to the Company an amount equal to seventy-five percent (75%) of the Excess Amount multiplied by the total number of shares of Program Stock which such Participant owned on September 22, 2000. To the extent that the value of such Participant's Bonus Points is characterized as compensation, the amount so characterized will not include the amount
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payable by such Participant pursuant to the preceding sentence. The Participant shall pay the Company the seventy-five percent (75%) of the Excess Amount on such date or dates as the Committee may determine; provided, however, that the Committee may not require payment sooner than June 30, 2004. Beginning on January 1, 2004 and continuing until the date the Participant pays the Company the seventy-five percent (75%) of the Excess Amount owed to the Company pursuant to this clause
(d), interest will accrue on such amount at the New Interest Rate. If a Participant does not elect to have the Bonus Points redeemed as provided in this subsection, the Bonus Points of such Participant will expire.
(e) The Company may cancel any Bonus Points awarded to any Participant who asserts any claim in litigation against the Company with regard to any Stock Purchase Programs or who takes any other action that the Company believes is detrimental to its interests.
8. Provisions Regarding Consultant.
(a) The Company will appoint and pay all expenses of the Consultant. The Consultant will be instructed to maintain the confidentiality of all information provided to it by Participants, except that the Consultant shall report to the Committee what it believes the form, amount(s) and date(s) of the Participant's Down Payment should be. Each Participant who is required to consult with the Consultant agrees to use his or her best efforts to provide the Consultant with all information that the Consultant may request as soon as reasonably practicable.
(b) All Participants, including those who experience a Termination of Service, will have the right to obtain financial counseling services from the Consultant on any matters relating to their obligations under the Stock Purchase Programs and this Plan.
9. Right to Sell Program Stock. All Participants shall retain the right to repay all or any part of their Program Loans at any time or to sell all or any part of their Program Stock, subject to the terms and conditions of any agreements between the Participants and the Banks respecting the Program Loans and the Program Stock. Such repayment or sale prior to December 31, 2003, will not disqualify a Participant from participating in the Bonus Point program.
10. Failure to Comply. The Committee may declare any Participant who fails to fulfill any of his or her obligations under this Plan ineligible to further participate in the Plan, in which event the Company may cease advancing interest on the Program Loans and Interest Loans for the benefit of such Participant, declare his or her Interest Loans immediately due and payable (in which event such Interest Loans shall be immediately due and payable), declare that the Participant is ineligible to receive the benefits described in Sections 11 and 12 of this Plan (in which event such Participant shall no longer be eligible to receive such benefits at any time) and take any other action it deems appropriate.
11. Change of Control. If a Change of Control of the Company occurs, a Participant other than an Executive Officer may elect to receive the Change of Control Benefits in exchange for
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his or her Program Stock and terminate all other benefits and obligations under this Plan (including but not limited to those set forth in Section 7 of this Plan). A Participant must notify the Company in writing within thirty (30) days after the occurrence of the Change in Control of his or her election to receive the Change of Control Benefits. Each Participant hereby waives his or her right to any benefits set forth in Section 12 of the Director, Officer and Key Employee Stock Purchase Plan, and a Participant's election to participate in this Plan shall constitute the written consent of such Participant to have the provisions of Section 12 of the Director, Officer and Key Employee Stock Purchase Plan not apply to such Participant.
12. Death or Disability. Upon a Participant's death or total and permanent disability (as defined in Section 8 of the Stock Purchase Programs) prior to December 31, 2003, the estate of such Participant (in the case of death) or the Participant or his or her representative (in the case of disability) may affirmatively elect to receive the benefits set forth in Section 8 of the Stock Purchase Programs and to terminate all benefits and obligations under this Plan (including, but not limited to, those set forth in Section 7 of this Plan). For the purposes of this Section 12, (a) "Loans" of a Participant shall refer to the Program Loans of such Participant; (b)"Interest Payment Loan" of a Participant shall refer to the Interest Loans of such Participant; and (c) the date set forth in the last sentence of Section 8 of the Stock Purchase Programs is hereby deemed to be amended to read "December 31, 2003" rather than "January 1, 2001." A Participant's estate or the Participant or his or her representative, as the case may be, must notify the Company in writing within ninety (90) days after the Participant's death or total and permanent disability of his, her or its election to receive the benefits set forth in Section 8 of the Stock Purchase Programs (as amended hereby) and to terminate all benefits and obligations under this Plan. If the election is not made pursuant to the preceding sentence, the deceased or disabled Participant will be deemed to have a Termination of Service resulting from Retirement for the purposes of this Plan.
13. Participant Rights Limited. Neither participation in the Plan nor any action taken pursuant to the Plan shall be construed as giving any person any right to be retained in the employ or service of the Company or any Affiliate.
14. Amendment and Modification of Plan. The Company may, at any time, amend or modify this Plan except that no such amendment or modification unless otherwise consented to by a Participant may: (a) accelerate the Maturity Date;
(b) decrease the value of the Bonus Points for Participants; (c) increase the percentage of the Excess Amount the Participant is required to pay the Company pursuant to Section 7(d) of this Plan; or (d) modify Sections 11 or 12 of this Plan in any manner adverse to the Participants.
15. Successors and Assigns. This Plan shall be binding upon and inure to the benefit of the successors, assigns and heirs of the Participants and the Company. In no event may any Participant assign any of its rights or obligations under the Plan without the prior consent of the Company.
16. Governing Law. This Plan shall be construed in accordance with and governed by the laws of the State of Indiana.
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17. Adjustments Upon Changes in Capitalization. In the event of any change in the outstanding shares of common stock of the Company by reason of any reorganization, recapitalization, stock split, stock dividend, combination or exchange of shares, merger, consolidation or any change in corporate structure of the Company, the Excess Amount and the Work-Down Amount will be proportionately adjusted by the Committee and the Committee's determination shall be conclusive.
10
 
11/13/00
CONSECO, INC.
2000 NON-EMPLOYEE STOCK PURCHASE PROGRAM WORK-DOWN PLAN
1. Plan Purpose. The purpose of this Plan is to promote the long-term interests of the Company and its shareholders by providing a means for certain participants in the Company's Stock Purchase Programs to meet their financial obligations and to align better their interests with those of the Company and the shareholders.
2. Definitions. The following definitions are applicable to the Plan:
"Affiliate" means any direct or indirect subsidiary of the Company.
"Banks" means the financial institutions that will make the Program Loans.
"CIHC" means CIHC, Incorporated, a Delaware corporation.
"Collateral" means any real or personal property reasonably acceptable to the Committee (other than Program Stock) in which a Participant hereafter grants a security interest to the Banks or to the Company (as directed by the Committee) to secure repayment of such Participant's Program Loans or Interest Loans and for which an appropriate pledge or security agreement has been delivered to the Banks or the Company, as the case may be. Notwithstanding the foregoing, no security interest may be granted to the Company in Collateral which represents "margin stock" securing "purpose credit" in each case as defined by Regulation U promulgated by the Board of Governors of the Federal Reserve System, 12 C.F.R. Section 221.1 et seq.
"Collateral Value" means the value that the Committee determines is the realizable value of the Collateral.
"Committee" means the committee of the Board of Directors of the Company which is appointed to administer this Plan.
"Commitment Termination Date" means October 31, 2000 unless extended by the Company with the consent of Bank of America, N.A., as to certain Program Loans.
"Company" means Conseco, Inc., an Indiana corporation.
"Consultant" means the person or firm appointed by the Committee to provide financial consulting services to Participants and to advise the Committee.
"Director" means a member of the Company's Board of Directors.
"Existing Program Loans" mean the loans made by the financial institutions for whom Bank of America, N.A. or The Chase Manhattan Bank is acting as agent to a Participant or such Participant's designee under the Stock Purchase Programs to purchase Program Stock.
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"Guaranty Fee" means the quarterly fee equal to 0.5% of the principal amount of the Existing Program Loans or the Program Loans, as the case may be, payable to the Company under the Stock Purchase Programs or this Plan.
"Interest Loans" mean the loans made or to be made by Conseco Services, LLC, an Affiliate of the Company, to pay interest to, and origination fees and other charges of, the Banks on the Existing Program Loans and the Program Loans, as the case may be.
"Maturity Date" means December 31, 2003.
"New Interest Rate" means the variable rate of interest payable from time to time on the Program Loans.
"Non-Employee" means any Participant who is a Director, was previously a Director or was previously an employee of the Company or any of its Affiliates and who is not eligible to participate in the Conseco, Inc. 2000 Employee Stock Purchase Program Work-Down Plan.
"Participant" means a participant in the Stock Purchase Programs including any "participant designee" of such person as defined in the Stock Purchase Programs who is eligible to and elects to participate in this Plan.
"Plan" means the Conseco, Inc. 2000 Non-Employee Stock Purchase Program Work- Down Plan.
"Program Guaranties" has the meaning set forth in Section 6(a).
"Program Loans" mean the new loans to be made by the Banks to refinance the Existing Program Loans.
"Program Stock" means the shares of common stock of the Company or other securities acquired by a Participant under the Stock Purchase Programs.
"Stock Purchase Programs" mean the Amended and Restated Director, Officer and Key Employee Stock Purchase Plan of Conseco, Inc. effective July 30, 1998 and amended and restated November 2, 1999 and the Amended and Restated 1999 Director and Executive Officer Stock Purchase Plan of Conseco, Inc. effective September 7, 1999 and amended and restated November 2, 1999.
3. Administration. This Plan shall be administered by the Committee, which shall consist of three or more members of the Board of Directors, none of whom have any outstanding obligations under the Stock Purchase Programs or the Existing Program Loans. A majority of the members of the Committee shall constitute a quorum, and the acts of a majority of the members present at any meeting at which a quorum is present, or acts approved in writing by all members of the Committee without a meeting, shall be acts of the Committee. Except as expressly limited by
2
the Plan, the Committee shall have all powers and discretion necessary or appropriate to administer the Plan and control its operation, including, but not limited to, the power to interpret the Plan and to adopt rules and procedures for the administration, interpretation and operation of the Plan. All determinations and decisions made by the Committee pursuant to the provisions of the Plan shall be final, conclusive and binding on all persons, and shall be given the maximum deference permitted by law.
4. Election to Participate. To participate in this Plan, a Participant must, on or before November 22, 2000:
(a) elect in writing to participate in this Plan, accept the terms and conditions of this Plan and cooperate fully with the Committee, the Company, the Consultant and the Banks in connection with the administration of the Plan and the Program Loans; and
(b) execute all documents reasonably required by the Company, the Committee and the Banks in connection with the Existing Program Loans, the Program Loans, the Interest Loans and this Plan, including, but not limited to, promissory notes, loan agreements, pledge or security agreements, financing statements, stock powers, releases of liability, personal financial statements, powers of attorney, and letters of instruction to brokers, transfer agents and banks.
5. Eligibility Provisions.
(a) Directors may elect to participate in this Plan only if the following conditions are met: (i) the principal amount of his or her Existing Program Loans is less than or equal to $300,000 on the date such election is made; (ii) the aggregate amount of his or her Interest Loans is less than $300,000 on the date such election is made; and
(iii) the Existing Program Loans and the Interest Loans have been fully secured by Collateral having a Collateral Value not less than the sum of the outstanding and unpaid Existing Program Loans and Interest Loans.
(b) Other Non-Employees, including former Directors, may elect to participate in this Plan only if the following conditions are met: (i) subject to Section 7, such Participant must begin paying interest on his or her Program Loans and Interest Loans on a quarterly basis at the New Interest Rate; and (ii) subject to Section 7, such Participant must begin making principal reductions of his or her Program Loans or providing Collateral as security for the Program Loans no later than December 15, 2000 in such amounts and forms and on such dates as established in the sole discretion of the Committee such that it is reasonably expected that the unsecured balance of his or her Program Loans as of December 31, 2003 will be less than or equal to $25.00 per share of Program Stock under each of the Program Loans.
6. Program Loans and Interest Loans.
(a) The Company has arranged for each Participant to obtain a Program Loan with a maturity equal to the Maturity Date. Each Participant is responsible for satisfying all
3
of the lending requirements specified by the Banks to qualify for the Program Loans, including all collateral requirements. Each Participant acknowledges and agrees that he or she is fully obligated to repay to the Banks all principal, interest, and any prepayment fees on the Program Loans when due and payable. It is a condition to the Program Loans that the Company and CIHC guarantee to the Banks repayment of 100% of the principal, interest, prepayment fees and other fees or obligations of each Participant under the Program Loans (the "Program Guaranties"). The terms and conditions of the Program Guaranties are as agreed by the Company, CIHC and the Banks, and such parties may amend, modify, waive or otherwise change the Program Guaranties as they may from time to time agree. Each Participant agrees to reimburse and to cause its Participant Designee (if applicable) to reimburse the Company and/or CIHC for any and all payments made under either of the Program Guaranties and all loss, cost and expenses of any kind which the Company or CIHC may incur in connection therewith or arising thereunder. The Company may take any action relating to the Participant and her or his assets, which the Committee deems reasonable and necessary (including but not limited to offsetting amounts owed to the Company or CIHC against wages, fees or other amounts owed to the Participant from the Company or its Affiliates) to obtain full reimbursement for amounts the Company or CIHC pays to the Banks under either of the Program Guaranties. Each Participant agrees that the principal amount of its Interest Loans will be increased by (i) one percent (1%) of such Participant's Existing Program Loans reflecting the origination fee paid by the Company to the Banks as of September 22, 2000 and (ii) an amount payable to Conseco, equal to 1.625% per annum from September 22, 2000 through and until the Commitment Termination Date on such Participant's Existing Program Loans that were scheduled to mature August 26, 2001.
(b) Participants shall not be required to pay the Guaranty Fee except as provided in Section 10.
(c) The Program Loans shall be paid in full prior to any payment by the Participants to the Company on the Interest Loans. Any cash dividends paid on the Program Stock shall be paid to the Banks on the Program Loans. If the Company or any Affiliate receives any payment from a Participant relating to the Interest Loans while such Participant's Program Loans are still outstanding, the Company shall turn over and pay (or cause any Affiliate to turnover and pay) the appropriate amount to the Banks to be applied to the Program Loans designated by such Participant at the time of payment and, in the absence of such designation, pro rata to all Program Loans of such Participant.
7. Modification of Obligations. If a Participant does not believe he or she is able to make the interest payments or principal reduction or provide the Collateral provided for in Section 5(b), such Participant shall accept the assistance of, and cooperate fully with, the Consultant. The Consultant shall report to the Committee what it believes the form, amount(s) and due date(s) of such Participant's obligations should be. The Committee shall ultimately determine the form, amount(s) and due date(s) of such obligations. If a Participant fails to comply with the Committee's final decision, the Company may take the actions provided in Section 10.
8. Provisions Regarding Consultant.
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(a) The Company will appoint and pay all expenses of the Consultant. The Consultant will be instructed to maintain the confidentiality of all information provided to it by Participants, except that the Consultant shall report to the Committee what it believes the form, amount(s) and due date(s) of the Participant's obligations should be. Each Participant who is required to consult with the Consultant agrees to use his or her best efforts to provide the Consultant with all information that the Consultant may request as soon as reasonably practicable.
(b) All Participants will have the right to obtain financial counseling services from the Consultant on any matters relating to their obligations under the Stock Purchase Programs and this Plan.
9. Right to Sell Program Stock. All Participants shall retain the right to repay all or any part of their Program Loans and Interest Loans at any time or to sell all or any part of their Program Stock, subject to the terms and conditions of any agreements between the Participants and the Banks respecting the Program Loans and the Program Stock.
10. Failure to Comply. The Committee may declare any Participant who fails to fulfill any of his or her obligations under this Plan ineligible to further participate in the Plan, in which event the Company may cease advancing interest on the Program Loans and Interest Loans for the benefit of such Participant (if the Company is then doing so), declare his or her Interest Loans immediately due and payable (in which event such Interest Loans shall be immediately due and payable), require such Participant to begin paying the Guaranty Fee and take any other action it deems appropriate.
11. Participant Rights Limited. Neither participation in the Plan nor any action taken pursuant to the Plan shall be construed as giving any person any right to be retained in the employ or service of the Company or any Affiliate.
12. Amendment and Modification of Plan. The Company may, at any time, amend or modify this Plan except that no such amendment or modification may accelerate the Maturity Date.
13. Governing Law. This Plan shall be construed in accordance with and governed by the laws of the State of Indiana.
14. Successors and Assigns. This Plan shall be binding upon and inure to the benefit of the successors, assigns and heirs of the Participants, the Company and CIHC. In no event may any Participant assign any of its rights or obligations under the Plan without the prior consent of the Company.
15. Entire Agreement. This Plan and the Stock Purchase Programs constitute the entire agreement between the Company and the Participants and supersede and cancel any and all prior discussions, negotiations, undertakings or other understandings between them relating to the subject matter hereof.
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16. Adjustments Upon Changes in Capitalization. In the event of any change in the outstanding shares of common stock of the Company by reason of any reorganization, recapitalization, stock split, stock dividend, combination or exchange of shares, merger, consolidation or any change in the corporate structure of the Company, the maximum unsecured balance of the Participant's Program Loans on December 31, 2003 as described in Section 5(b), shall be proportionately adjusted by the Committee and the Committee's determination shall be conclusive.
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GUARANTY
Dated as of November 22, 2000
between
CONSECO, INC.,
 as Guarantor,
and
BANK OF AMERICA, NATIONAL ASSOCIATION,
as Administrative Agent
GUARANTY
THIS GUARANTY (this "Guaranty") is entered into as of November 22, 2000 by CONSECO, INC., an Indiana corporation ("Guarantor"), in favor of BANK OF AMERICA, National Association, as administrative agent (the "Administrative Agent") for the financial institutions (the "Banks" and together with Administrative Agent, collectively, the "Guaranteed Parties") who are or from time to time may become party to the Credit Agreement (as hereinafter defined). Unless otherwise defined herein, capitalized terms used herein shall have the meanings assigned to such terms pursuant to Article I hereof.
W I T N E S S E T H:
WHEREAS, certain individuals (herein, collectively called, the "Existing Borrowers" and each individually, an "Existing Borrower") entered into that certain Credit Agreement, dated as of August 21, 1998 (as from time to time, in whole or in part, the same was amended, modified, supplemented, restated, refinanced, refunded or renewed, the "Existing Credit Agreement"), among the Existing Borrowers, the Banks and the Administrative Agent, whereby the Banks made term loans to the Existing Borrowers in an aggregate original principal amount of $180,000,000 (the "Existing Loans") on the terms and subject to the conditions contained in the Existing Credit Agreement;
WHEREAS, as a condition to the Administrative Agent and the Banks entering into the Existing Credit Agreement, Guarantor was required to and did execute and deliver to the Administrative Agent that certain Guaranty, dated as of August 21, 1998 (as amended or modified through the date hereof, the "Existing Guaranty"), whereby Guarantor absolutely, unconditionally and irrevocably agreed to pay in full all Obligations (as defined in the Existing Guaranty) of the Existing Borrowers under the Existing Credit Agreement;
WHEREAS, Guarantor has established a program to allow for certain of the Existing Borrowers to refinance the Existing Loans;
WHEREAS, the Administrative Agent and the Banks have agreed to refinance the Existing Loans pursuant to that certain Credit Agreement, dated as of November 22, 2000 (as from time to time, in whole or in part, the same may be amended, modified, supplemented, restated, refinanced, refunded or renewed, the "Credit Agreement"), among the certain of the Existing Borrowers (the "Borrowers"), the Banks and the Administrative Agent, on the terms and subject to the conditions contained in the Credit Agreement;
WHEREAS, as a condition precedent to the Banks executing and delivering the Credit Agreement and making the Loans thereunder, Guarantor is required to execute and deliver this Guaranty; and
WHEREAS, Guarantor has been duly authorized to execute, deliver and perform this Guaranty;
WHEREAS, Guarantor will derive substantial direct and indirect benefits from the Loans made to the Borrowers by the Banks pursuant to the Credit Agreement;
NOW THEREFORE, for good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, and in order to induce the Banks to refinance the Existing Loans to the Borrowers pursuant to the Credit Agreement, Guarantor agrees, for the benefit of each Guaranteed Party, as follows:
ARTICLE I.
DEFINITIONS
SECTION 1.1. Certain Terms. Capitalized terms used herein, unless otherwise defined herein, shall have the respective meanings assigned thereto in the Credit Agreement; provided that such definitions shall survive any termination of the Credit Agreement. In addition, when used herein the following terms shall have the following meanings (such definitions to be equally applicable to the singular and plural forms thereof):
"Administrative Agent" has the meaning set forth in the Preamble.
"Appendix" means the Appendix attached to the Revolving Credit Agreement, which is hereby incorporated by reference.
"Banks" or "Bank" has the meaning set forth in the Preamble.
"Borrowers" or "Borrower" has the meaning set forth in the fourth recital.
"Borrower Default" has the meaning set forth in Section 6.1(a).
"Credit Agreement" has the meaning set forth in the fourth recital.
"Credit Documents" has the meaning set forth in Section 2.3(a).
"Existing Borrowers" has the meaning set forth in the first recital.
"Existing Credit Agreement" has the meaning set forth in the first recital.
"Existing Guaranty" has the meaning set forth in the second recital.
"Existing Loans" has the meaning set forth in the first recital.
"Guaranteed Obligations" has the meaning set forth in Section 2.1.
"Guaranteed Party" has the meaning set forth in the Preamble.
"Guarantor" has the meaning set forth in the Preamble.
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"Guaranty" has the meaning set forth in the Preamble.
"Indemnified Liabilities" has the meaning set forth in Section 6.2(c).
"Indemnified Parties" has the meaning set forth in Section 7.2.
"Relevant Agent" shall have the meaning set forth in the Appendix.
"Relevant Banks" shall have the meaning set forth in the Appendix.
"Relevant Facility" shall have the meaning set forth in the Appendix.
"Revolving Credit Agreement" shall mean the Five-Year Credit Agreement dated as of September 25, 1998, between Guarantor, the financial institutions party thereto and Administrative Agent, as amended by the First Amendment to Five-Year Credit Agreement, dated as of September 22, 2000, as the same may be further amended, modified or supplemented from time to time.
"September 22, 2000 Agreement" means that Agreement dated as of September 22, 2000 among Guarantor, the Agent, and the Banks, as the same may be further amended, modified, or supplemented from time to time.
"Subrogation Rights" has the meaning set forth in Section 2.6.
"Termination Event" shall have the meaning set forth in the September 22, 2000 Agreement; provided that, for purposes of this Guaranty, (i) the term "Existing Guaranty" as used in each of clause (d) and clause (g) of
Section 9 of the September 22, 2000 Agreement, shall be deemed to also include this Guaranty (and, as a result, and without limiting the generality of the foregoing, any event of default by Guarantor hereunder (including, without limitation, any default under Section 4.4 hereof and any Event of Default under
Section 4.5 hereof) shall constitute a Termination Event under clause (g) of
Section 9 of the September 22, 2000 Agreement), (ii) the term "CIHC Guaranty" as used in each of clause (d) and clause (h) of Section 9 of the September 22, 2000 Agreement, which originally related only to the Existing CIHC Guaranty, shall be deemed to also include the CIHC Guaranty, (iii) the term "Existing Credit Agreement" as used in clause (f) of the September 22, 2000 Agreement shall be deemed to also include the Credit Agreement, and (iv) the term "Plan" as used in clause (e) of the September 22, 2000 Agreement shall be deemed to also include the Plan.
ARTICLE II.
GUARANTY PROVISIONS
SECTION 2.1. Guaranty. Guarantor hereby absolutely, unconditionally and irrevocably:
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(a) guaranties to the Guaranteed Parties the full and punctual payment (i) of all obligations of each Borrower to the Guaranteed Parties for the payment of principal upon the earlier to occur of (A) December 31, 2003 and (B) the occurrence of a Termination Event, and
(ii) of all obligations other than principal of each Borrower to the Guaranteed Parties when due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise, and at all times thereafter, in each case, howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent, or now or hereafter existing, or due or to become due under the Credit Agreement, whether for principal, interest, fees, expenses or otherwise (including all such amounts which would become due but for the operation of the automatic stay provisions under Section 362(a) of the United States Bankruptcy Code, 11 U.S.C. ss.362(a), and the operation of Sections 502(b) and 506(b) of the United States Bankruptcy Code, 11 U.S.C. ss.502(b) and ss.506(b)) (all such obligations hereinafter collectively called the "Guaranteed Obligations"); and
(b) indemnifies and holds harmless each Guaranteed Party or any holder of any Loan for any and all costs and expenses (including, without limitation, reasonable attorneys' fees and expenses) incurred by such Guaranteed Party or such holder, as the case may be, in enforcing any rights under this Guaranty;
This Guaranty constitutes a guaranty of payment (x) on or after the date set forth in clause (a) (i) above with respect to principal and (y) of all other amounts when due, and not of collection, and Guarantor specifically agrees that it shall not be necessary or required that any Guaranteed Party or any other holder of any Loan exercise any right, assert any claim or demand or enforce any remedy whatsoever against any Borrower or any other obligor (or any other Person) before the performance of, or as a condition to, the obligations of Guarantor hereunder.
SECTION 2.2. Acceleration of Guaranty. Guarantor agrees that, in the event of the insolvency of Guarantor or the inability or failure of Guarantor to pay debts as they become due, or an assignment by Guarantor for the benefit of creditors, or the commencement of any case or proceeding in respect of any Borrower, any other obligor or Guarantor under any bankruptcy, insolvency or similar federal or state laws, and if such event shall occur at a time when any of the Guaranteed Obligations of such Borrower or such other obligor may not then be due and payable, Guarantor will pay to the Banks forthwith (a) if such event relates to such Borrower or any other obligor with respect to the Guaranteed Obligations of such Borrower, the full amount which would be payable hereunder by Guarantor if all Guaranteed Obligations of such Borrower were then due and payable and (b) if such event relates to Guarantor or any other obligor with respect to the obligations of Guarantor, the full amount which would be payable hereunder by Guarantor if all the Guaranteed Obligations of all Borrowers were then due and payable.
SECTION 2.3. Guaranty Absolute, etc. This Guaranty shall in all respects be a continuing, absolute, unconditional and irrevocable guaranty of payment, and shall remain in full force and effect until all Guaranteed Obligations of the Borrowers and each other obligor have been paid in full, and all obligations of Guarantor hereunder shall have been paid in full.
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Guarantor guarantees that the Guaranteed Obligations of the Borrowers and each other obligor and their respective Subsidiaries, if any, will be paid strictly in accordance with the terms of the Credit Agreement and each other Loan Document under which they arise, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of any Guaranteed Party or any holder of the Note(s) of any Borrower with respect thereto. Consistent with (but not in limitation of) the other provisions of this Section 2.3, the liability of Guarantor under this Guaranty shall be absolute, unconditional and irrevocable irrespective of:
(a) any lack of validity, legality or enforceability of the Existing Credit Agreement, the Existing Guaranty, any other loan document relating to the Existing Credit Agreement or the Existing Guaranty, the September 22, 2000 Agreement, the Plan, the Credit Agreement, any Note or any other Loan Document (the "Credit Documents");
(b) the failure of any Guaranteed Party or any holder of any Note:
(i) to assert any claim or demand or to enforce any right or remedy against any Borrower, any other obligor or any other Person under the provisions of the Credit Documents or otherwise; or
(ii) to exercise any right or remedy against any other guarantor of, or collateral securing, any Guaranteed Obligations of any Borrower or any other obligor;
(c) any change in the time, manner or place of payment of, or in any other term of, all or any of the Guaranteed Obligations of any Borrower or any other obligor, or any other extension, compromise or renewal of any Guaranteed Obligations of any Borrower or any other obligor;
(d) any reduction, limitation, impairment or termination of the Guaranteed Obligations of any Borrower or any other obligor for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to (and Guarantor hereby waives any right to or claim of) any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality, nongenuineness, irregularity, compromise, unenforceability of, or any other event or occurrence affecting, the Guaranteed Obligations of any Borrower, any other obligor or otherwise;
(e) any amendment to, rescission, waiver, or other modification of, or any consent to any departure from, any of the terms of the Credit Documents;
(f) any addition, exchange, release, surrender or non-perfection of any collateral, or any amendment to or waiver or release or addition of, or consent to any
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departure from, any other guaranty, held by any Guaranteed Party or any holder of any note securing any of the Guaranteed Obligations of any Borrower or any other obligor; or
(g) any other circumstance which might otherwise constitute a defense available to, or a legal or equitable discharge of, any Borrower, any other obligor, any surety or any guarantor.
SECTION 2.4. Reinstatement, etc. Guarantor agrees that this Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment (in whole or in part) of any of the Guaranteed Obligations is rescinded or must otherwise be restored by any Guaranteed Party or any holder of any Note, upon the insolvency, bankruptcy or reorganization of any Borrower, any other obligor or otherwise, all as though such payment had not been made.
SECTION 2.5. Waiver, etc. Guarantor hereby waives promptness, diligence, notice of acceptance and any other notice with respect to any of the Guaranteed Obligations of the Borrower or any other obligor, and this Guaranty and any requirement that the Administrative Agent, any other Guaranteed Party or any holder of any Note protect, secure, perfect or insure any security interest or Lien, or any property subject thereto, or exhaust any right or take any action against any Borrower, any other obligor or any other Person (including any other guarantor) or entity or any collateral securing the Guaranteed Obligations of any Borrower or any other obligor, as the case may be.
SECTION 2.6. Waiver of Subrogation; Subordination. Guarantor hereby irrevocably waives with respect to any Borrower, until the prior indefeasible payment in full in cash of all Guaranteed Obligations of such Borrower under the Loan Documents, any claim or other rights which it may now or hereafter acquire against such Borrower or any other obligor that arises from the existence, payment, performance or enforcement of Guarantor's obligations under this Guaranty or otherwise, including any right of subrogation, reimbursement, exoneration, or indemnification, any right to participate in any claim or remedy of the Guaranteed Parties against such Borrower or any other obligor or any collateral which the Administrative Agent now has or hereafter acquires, whether or not such claim, remedy or right (all such claims, remedies and rights being collectively called "Subrogation Rights") arises in equity, or under contract, statute or common law, including the right to take or receive from such Borrower or any other obligor, directly or indirectly, in cash or other property or by set-off or in any manner, payment or security on account of such claim or other rights. If any amount shall be paid to Guarantor in violation of the preceding sentence and the Guaranteed Obligations shall not have been paid in cash, in full, such amount shall be deemed to have been paid to Guarantor for the benefit of, and held in trust for, the Guaranteed Parties, and shall forthwith be paid to the Guaranteed Parties to be credited and applied upon the Guaranteed Obligations of such Borrower, whether matured or unmatured. Guarantor acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by the Credit Agreement and that the waiver set forth in this Section 2.6 is knowingly made in contemplation of such benefits.
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SECTION 2.7. Successors, Transferees and Assigns; Transfers of Notes, etc. This Guaranty shall:
(a) be binding upon Guarantor, and its successors, transferees and assigns; and
(b) inure to the benefit of and be enforceable by the Administrative Agent and each other Guaranteed Party.
Without limiting the generality of clause (b), any Bank may assign or otherwise transfer (in whole or in part) any Note or Loan held by it to any other Person, and such other Person shall thereupon become vested with all rights and benefits in respect thereof granted to such Bank under any Loan Document (including this Guaranty) or otherwise. Notwithstanding anything contained in this Section 2.7 to the contrary, this Section 2.7 shall not be deemed to enlarge or create additional rights with respect to any Bank's ability to assign any portion of its Loans or rights under any Note or any other Loan Document pursuant to
Section 12 of the Credit Agreement, and this Section 2.7 is expressly made subject thereto.
SECTION 2.8. Payments Free and Clear of Taxes, etc. Guarantor hereby agrees that:
(a) any and all payments made by Guarantor hereunder shall be made in accordance with Section 4.5 of the Credit Agreement free and clear of, and without deduction for, any and all Charges, to the same extent as if Guarantor were a Borrower;
(b) Guarantor hereby indemnifies and holds harmless each Guaranteed Party and each other holder of a Loan for the full amount of any Charges paid by such Guaranteed Party or such holder, as the case may be, and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto; and
(c) without prejudice to the survival of any other agreement of Guarantor hereunder, the agreements and obligations of Guarantor contained in this Section 2.8 shall survive the payment in full of the principal of and interest on the Loans.
SECTION 2.9. Right of Offset. In addition to and not in limitation of all rights of offset that any Guaranteed Party or other holder of a Note may have under applicable law or any other Loan Document, subject to the terms of the Credit Agreement, each Guaranteed Party or other holder of a Note shall during the continuance of any Termination Event and whether or not such Guaranteed Party or such holder has made any demand or Guarantor's obligations are matured, have the right to appropriate and apply to the payment of Guarantor's obligations hereunder all deposits (general or special, time or demand, provisional or final) then or thereafter held by, and other indebtedness or property then or thereafter owing to, such Guaranteed Party or other holder, whether or not related to this Guaranty or any transaction hereunder.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES;
INCORPORATION BY REFERENCE
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To induce the Guaranteed Parties to enter into the Credit Agreement and to make the Loans thereunder, Guarantor represents and warrants to each Guaranteed Party that:
SECTION 3.1. Organization, etc. Guarantor and each of its Subsidiaries is a corporation, partnership or limited liability company duly organized or formed, validly existing and in good standing under the laws of the state of its incorporation or formation and each of Guarantor and its Subsidiaries is duly qualified to transact business and in good standing as a foreign corporation, partnership or limited liability company authorized to do business in each jurisdiction where the nature of its business makes such qualification necessary and failure to so qualify could reasonably be expected to have a Material Adverse Effect.
SECTION 3.2. Authorization. Guarantor (a) has the power to execute, deliver and perform this Guaranty and the other Loan Documents to which it is a party, and (b) has taken all necessary action to authorize the execution, delivery and performance by it of this Guaranty and the other Loan Documents to which it is a party.
SECTION 3.3. No Conflict. The execution, delivery and performance by Guarantor of this Guaranty and the other Loan Documents to which it is a party does not and will not (a) contravene or conflict with any provision of any law, statute, rule or regulation, (b) contravene or conflict with, result in any breach of, or constitute a default under, any material agreement or instrument binding on Guarantor or any of its Subsidiaries (including, without limitation, any writ, judgment, injunction or other similar court order), (c) result in the creation or imposition of or the obligation to create or impose any lien (except for liens permitted by Section 4.02 of the Appendix) upon any of the property or assets of Guarantor or any of its Subsidiaries or (d) contravene or conflict with any provision of the articles of incorporation or bylaws of Guarantor.
SECTION 3.4. Margin Regulations.
(a) None of the transactions contemplated hereunder or in connection herewith will in any way violate, contravene or conflict with any of the provisions of Regulation U;
(b) None of the obligations of any Borrower to Guarantor is or will be directly or indirectly secured by "margin stock" (as defined in Regulation U);
(c) Neither Guarantor nor any third party acting on behalf of Guarantor has taken or will take possession of any Borrower's "margin stock" to secure, directly or indirectly, any of the Guaranteed Obligations of such Borrower or the obligations of Guarantor under this Guaranty;
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(d) Guarantor does not and will not have any right to prohibit any Borrower from selling, pledging, encumbering or otherwise disposing of any margin stock owned by such Borrower so long as this Guaranty is in effect or any of the Guaranteed Obligations of such Borrower or the obligations of Guarantor under this Guaranty remain outstanding;
(e) None of the Borrowers have granted or will grant Guarantor or any third party acting on behalf of Guarantor the right to accelerate repayment of any of the Guaranteed Obligations of such Borrower if any of the margin stock owned by such Borrower is sold by such Borrower or otherwise; and
(f) There is no agreement or other arrangement between any Borrower and Guarantor or any third party acting on behalf of Guarantor (and no such agreement or arrangement shall be entered into so long as this Guaranty is in effect or any of the Guaranteed Obligations of such Borrower or the obligations of Guarantor under this Guaranty remain outstanding) under which the margin stock of such Borrower would be made more readily available as security to Guarantor than to other creditors of such Borrower.
SECTION 3.5. No Termination Event. No Termination Event has occurred and is continuing.
ARTICLE IV
COVENANTS AND EVENTS OF DEFAULT SECTION
4.1. Appendix Covenants. Guarantor agrees that, on and after the date hereof for so long thereafter as any of the Guaranteed Obligations remain unpaid or outstanding, Guarantor will comply with the covenants set forth in Articles II, III and IV of the Appendix and the terms and provisions set forth therein shall be incorporated by reference in this Section 4.1 in their entirety as if fully set forth herein with the same effect as if applied to this
Section 4.1. All capitalized terms set forth in Articles II, III and IV of the Appendix shall have the meanings provided in the Appendix. Such covenants shall not be affected in any manner by the termination of the Revolving Credit Agreement.
Notwithstanding the foregoing, if Articles II, III and IV of the Appendix or any definitions set forth or used therein are amended or modified in accordance with the terms of the Revolving Credit Agreement either as the result of an amendment or modification to such section in the Appendix or Guarantor's execution and delivery of a new credit facility in replacement, restatement or substitution for the Revolving Credit Agreement, this Section 4.1 shall be deemed to be amended and modified to the extent set forth in the Revolving Credit Agreement (as amended or modified) or any new credit facility entered into in replacement, restatement or substitution for the Revolving Credit Agreement.
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SECTION 4.2. Margin Regulations. Guarantor shall take such actions and execute and deliver such instruments or documents from time to time as the Administrative Agent shall reasonably request to maintain continuous compliance with Regulation U.
SECTION 4.3. Limitation on Additional Purpose Credit. Notwithstanding any other provision of this Guaranty, the Credit Agreement or the Revolving Credit Agreement to the contrary, Guarantor will not, and will not permit any of its Wholly-Owned Subsidiaries and/or Significant Subsidiaries to incur or assume any Indebtedness which constitutes "purpose credit" secured "directly or indirectly" (as defined in Regulation U) by Margin Stock.
SECTION 4.4. Provision of Collateral Ratio Information. Guarantor shall provide to the Administrative Agent and the Banks such information as may be reasonably requested from time to time by the Administrative Agent or the Required Banks to permit the Administrative Agent or the Required Banks, as the case may be, to determine the "maximum good faith loan value" (as defined in Regulation U) of the Indirect Collateral and do such other acts and execute such other documentation to continue to comply with Regulation U.
SECTION 4.5. Events of Default. The Events of Default set forth in Section 5.01 of the Appendix are hereby incorporated by this reference.
ARTICLE V.
CONDITIONS AND EFFECTIVENESS OF THIS AGREEMENT
The obligation of the Banks to make the Loans is (in addition to the conditions precedent set forth in Section 9 of the Credit Agreement) subject to the performance by Guarantor of all of the obligations under this Guaranty and to the satisfaction of the following conditions precedent:
SECTION 5.1. Loans. Prior to or concurrent with the making of the Loans under the Credit Agreement, the Administrative Agent shall have received all of the following, each, except to the extent otherwise specified below, duly executed by a Responsible Officer of Guarantor, dated the date of the Loans, in form and substance reasonably satisfactory to the Administrative Agent, each in sufficient number of signed counterparts or copies to provide one for each Bank and the Administrative Agent:
5.1.1. An opinion of David K. Herzog, counsel of Guarantor and its Subsidiaries, addressing such legal matters as the Administrative Agent may reasonably require;
5.1.2. An opinion of Weil, Gotshal & Manges LLP, outside counsel to Guarantor and its Subsidiaries, addressing such legal matters as the Administrative Agent may reasonably require;
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5.1.3. An officer's certificate of Guarantor, dated as of the Closing Date, signed by a Responsible Officer of Guarantor, and attested to by the secretary thereof, together with certified copies of Guarantor's articles of incorporation, bylaws and directors resolutions;
5.1.4. Evidence of the good standing or certificates of compliance of Guarantor in the jurisdiction in which Guarantor was incorporated as of the Closing Date;
5.1.5. Evidence that Guarantor paid to the Administrative Agent the fees and expenses provided for herein;
5.1.6. Evidence reasonably satisfactory to the Administrative Agent of compliance by Guarantor with Regulation U; and
5.1.7. Such other information and documents as may reasonably be required by the Administrative Agent and the Administrative Agent's counsel.
ARTICLE VI.
SALE AND RELEASE OF PLEDGED SHARES; CASH COLLATERAL
SECTION 6.1. Sale of Pledged Shares. Notwithstanding any provision set forth in any of the Loan Documents to the contrary, the Administrative Agent agrees that after the occurrence and during the continuance of any Event of Default with respect to any Borrower, the effect of which is to cause the Guaranteed Obligations of such Borrower to be due and payable under the Credit Agreement (a "Borrower Default"), subject to the provisions of
Section 2.1 and Sections 6.2 and 6.4 below, it will not demand that Guarantor pay the Guaranteed Obligations of such Borrower until after the Administrative Agent has used its reasonable best efforts, in good faith, to sell the Pledged Shares of such Borrower, such sale to be consummated in one or a series of open market transactions through one or more reputable broker-dealers at the then fair market value of such Pledged Shares.
SECTION 6.2. Conditions to Sale of Pledged Shares. The obligation of the Administrative Agent not to demand payment hereunder pursuant to Section 6.1 is subject to the following conditions:
(a) none of the following has occurred at the time of such Borrower Default or shall occur thereafter:
(i) a suspension or material limitation in trading in securities generally or trading in the common stock of Guarantor on the New York Stock Exchange or any other exchange upon which the common stock of Guarantor may then be traded;
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(ii) a general moratorium on commercial banking activities in New York is declared by any Federal or New York State authorities;
(iii) the Administrative Agent is prohibited or materially limited from selling the Pledged Shares as a result of any federal or state securities laws (including, without limitation, the rules promulgated thereunder relating to the disclosure of material information); or
(iv) any other event (including, without limitation, commencement of any suit, action or litigation, filing of any claim or any other similar proceeding or any change in any applicable law) has occurred which, in the reasonable opinion of the Administrative Agent, would prohibit, have a material adverse effect on, or materially limit the Administrative Agent's ability to sell the Pledged Shares as contemplated by the terms of
Section 6.1.
(b) Guarantor agrees that in any sale of any of the Pledged Shares, the Administrative Agent is authorized to comply with any limitation or restriction in connection with such sale as counsel may advise the Administrative Agent is necessary, in the reasonable opinion of such counsel, in order to avoid any violation of applicable law (including, without limitation, compliance with such procedures as may restrict the number of prospective bidders and purchasers, require that such prospective bidders and purchasers have certain qualifications, and restrict such prospective bidders and purchasers to persons who will represent and agree that they are purchasing for their own account for investment and not with a view to the distribution or resale of such Collateral), or in order to obtain any required approval of the sale or of the purchaser by any governmental regulatory authority or official, and Guarantor further agrees that such compliance shall not result in such sale being considered or deemed not to have been made in a commercially reasonable manner, nor shall the Administrative Agent be liable or accountable to Guarantor for any discount allowed by reason of the fact that such Pledged Shares are sold in compliance with any such limitation or restriction.
(c) Guarantor further agrees to indemnify and hold harmless the Administrative Agent and the Banks and each of their respective officers, directors, employees, agents, successors and assigns, and any Person in control of any thereof, from and against any loss, liability, claim, damage and expense, including, without limitation, reasonable attorneys' fees actually incurred (in this paragraph collectively called the "Indemnified Liabilities"), under federal and state securities laws or otherwise resulting from the action or failure to act by Guarantor or any Borrower; provided that no such Person shall have the right to be indemnified hereunder for its own gross negligence or willful misconduct as determined by a court of competent jurisdiction.
SECTION 6.3. Release of Pledged Shares. The Administrative Agent agrees that, so long as none of the events set forth in Section 6.2(a) has occurred, it shall not release any of the Pledged Shares of any Borrower from the Lien granted under the Pledge Agreement until the
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payment in full of all obligations of such Borrower. Notwithstanding the foregoing, the Administrative Agent shall be entitled to (i) release the Pledged Shares of such Borrower if such Pledged Shares are replaced by additional common stock of Guarantor and (ii) sell the Pledged Shares pursuant to Section 6.1 hereof or the Pledge Agreement.
SECTION 6.4. Borrower Termination Event. Guarantor hereby acknowledges and agrees that Sections 6.1 and 6.3 shall not apply to any Termination Event relating to Guarantor or any of its Subsidiaries and, upon the occurrence of a Termination Event relating to Guarantor or any of its Subsidiaries, the Administrative Agent expressly reserves its rights and remedies under this Guaranty to demand payment hereunder to satisfy the Guaranteed Obligations of all Borrowers and the obligations of Guarantor hereunder whether or not the Administrative Agent has sold or attempted to sell the Pledged Shares of any Borrower or otherwise exercised its rights and remedies under the Pledge Agreement or any other Loan Document. Furthermore nothing contained herein shall be deemed to prohibit or limit in any way whatsoever the Administrative Agent's or any Bank's right or ability to receive its portion of the assets of Guarantor upon the exercise by any other Relevant Agent or any other Relevant Banks of their rights and remedies under any other Relevant Facility or any other creditor of Guarantor.
ARTICLE VII.
MISCELLANEOUS
SECTION 7.1. Costs and Expenses. Guarantor agrees to pay on demand all reasonable expenses of the Administrative Agent (including the non-duplicative fees and reasonable expenses of counsel (including expenses of in-house counsel) and of local counsel, if any, who may be retained by such counsel) in connection with:
(i) the negotiation, preparation, execution, syndication and delivery of the Credit Agreement, this Guaranty and the other Loan Documents, including schedules and exhibits, and any amendments, waivers, consents, supplements or other modifications to the Credit Agreement, this Guaranty or the other Loan Documents as may from time to time hereafter be required, whether or not the transactions contemplated hereby or thereby are consummated; and
(ii) the preparation and/or review of the form of any document or instrument relevant to the Credit Agreement, this Guaranty or any other Loan Document.
Guarantor further agrees to pay, and to save the Administrative Agent and the Banks, and their respective Affiliates, harmless from all liability for, any stamp or other Taxes (other than income taxes of the Administrative Agent or the Banks) which may be payable in connection with the execution or delivery of the Credit Agreement, any Borrowing thereunder, the issuance of the Notes, if any, this Guaranty or any other Loan Document. Guarantor also agrees to reimburse the Administrative Agent and each Bank upon demand for all reasonable expenses (including attorneys' fees and legal expenses) incurred by the Administrative Agent or such Bank in
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connection with the enforcement of any Guaranteed Obligations or obligations hereunder and the consideration of legal issues relevant hereto and thereto whether or not such expenses are incurred by the Administrative Agent on its own behalf or on behalf of the Banks. All obligations of Guarantor provided for in this Section 7.1 shall survive termination of this Guaranty. Notwithstanding the foregoing, the Administrative Agent or a Bank shall not have the right to reimbursement under this Section 7.1 for amounts determined by a court of competent jurisdiction to have arisen from the gross negligence or willful misconduct of the Administrative Agent or a Bank.
SECTION 7.2. Indemnity. Guarantor agrees to indemnify the Administrative Agent, each Bank, their Affiliates and their respective directors, officers, employees, persons controlling or controlled by any of them or their respective agents, consultants, attorneys and advisors (the "Indemnified Parties") and hold each Indemnified Party harmless from and against any and all liabilities, losses, claims, damages, costs and expenses of any kind to which any of the Indemnified Parties may become subject, whether directly or indirectly (including, without limitation, the reasonable fees and disbursements of counsel for any Indemnified Party), relating to or arising out of the Credit Agreement, this Guaranty, the other Loan Documents, or any actual or proposed use of the proceeds of the Loans hereunder; provided that no Indemnified Party shall have the right to be indemnified hereunder for its own gross negligence or willful misconduct as determined by a court of competent jurisdiction. All obligations of the Guarantor provided for in this Section 7.2 shall survive termination of the Credit Agreement and this Guaranty.
SECTION 7.3. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including bank wire, telex, facsimile or similar writing) and shall be given to such party at its address, facsimile or telex number set forth on the signature or acknowledgment pages hereof or such other address, facsimile or telex number as such party may hereafter specify for the purpose by written notice to the Administrative Agent and Guarantor. Each such notice, request or other communication shall be effective (a) if given by facsimile or telex, when such facsimile or telex is transmitted to the facsimile or telex number specified in this Section 7.3 and, in each case, the appropriate answerback or other confirmation is received, (b) if given by mail, seventy-two (72) hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid or (c) if given by any other means, when delivered at the address specified in this
Section 7.3.
SECTION 7.4. Successors and Assigns. This Guaranty, and the terms, covenants and conditions hereof, shall be binding upon and inure to the benefit of the parties hereto, and their respective successors and assigns, except Guarantor shall not be permitted to assign this Guaranty nor any interest herein nor in the Collateral, nor any part thereof, except in accordance with the terms of the Credit Agreement.
SECTION 7.5. SUBMISSION TO JURISDICTION, ETC. EACH OF GUARANTOR AND THE ADMINISTRATIVE AGENT (I) HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY ILLINOIS STATE OR FEDERAL
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COURT SITTING IN THE NORTHERN DISTRICT OF ILLINOIS OVER ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY OR THE OTHER LOAN DOCUMENTS, AND EACH OF GUARANTOR AND THE ADMINISTRATIVE AGENT HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH ILLINOIS STATE OR FEDERAL COURT, AND (II) AGREES NOT TO INSTITUTE ANY LEGAL ACTION OR PROCEEDING AGAINST THE OTHER PARTY HERETO OR THE DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR PROPERTY OF ANY THEREOF, ARISING OUT OF OR RELATING TO THIS GUARANTY, IN ANY COURT OTHER THAN AS HEREINABOVE SPECIFIED IN THIS SECTION 7.5. EACH OF GUARANTOR AND THE ADMINISTRATIVE AGENT HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE IN ANY ACTION OR PROCEEDING (WHETHER BROUGHT BY GUARANTOR, ANY OF ITS SUBSIDIARIES, THE ADMINISTRATIVE AGENT, ANY BANK OR OTHERWISE) IN ANY COURT HEREINABOVE SPECIFIED IN THIS SECTION
7.5 AS WELL AS ANY RIGHT IT MAY NOW OR HEREAFTER HAVE TO REMOVE ANY SUCH ACTION OR PROCEEDING, ONCE COMMENCED, TO ANOTHER COURT ON THE GROUNDS OF FORUM NON CONVENIENS OR OTHERWISE. EACH OF GUARANTOR AND THE ADMINISTRATIVE AGENT AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.
SECTION 7.6. Amendments; Release. Notwithstanding anything to the contrary contained in the Credit Agreement, the provisions of this Guaranty may from time to time be amended, modified or waived, if such amendment, modification or waiver is in writing and consented to by Guarantor and by the Administrative Agent (with the consent of the Required Banks), and then any such amendment, modification, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided that no such amendment, modification or waiver which would permit the release or termination of all or a substantial portion of Guarantor's obligations under this Guaranty shall be effective without the consent of each Bank.
SECTION 7.7. Section Headings. The section headings in this Guaranty are inserted for convenience of reference and shall not be considered a part of this Guaranty or used in its interpretation.
SECTION 7.8. Acknowledgments. No action of the Administrative Agent permitted hereunder shall in any way affect or impair the rights of the Administrative Agent and the obligations of Guarantor under this Guaranty. Guarantor hereby acknowledges that there are no conditions to the effectiveness of this Guaranty. Guarantor hereby acknowledges and agrees
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to make such deliveries as are required of it and comply with the other provisions applicable to it pursuant to the provisions of the Credit Agreement.
SECTION 7.9. Obligations Not Limited. All obligations of Guarantor and rights of the Administrative Agent or obligation expressed in this Guaranty shall be in addition to and not in limitation of those provided in applicable law or in any other written instrument or agreement relating to any of the Guaranteed Obligations.
SECTION 7.10. GOVERNING LAW. THIS GUARANTY SHALL BE A CONTRACT MADE UNDER AND GOVERNED BY THE LAWS OF THE STATE OF ILLINOIS. ALL OBLIGATIONS OF THE BORROWERS AND GUARANTOR AND RIGHTS OF THE ADMINISTRATIVE AGENT AND THE BANKS IN RESPECT OF THE GUARANTEED OBLIGATIONS AND THE OBLIGATIONS OF GUARANTOR EXPRESSED HEREIN OR IN THE OTHER LOAN DOCUMENTS SHALL BE IN ADDITION TO AND NOT IN LIMITATION OF THOSE PROVIDED BY APPLICABLE LAW.
SECTION 7.11. Counterparts. This Guaranty may be executed in any number of counterparts, each of which shall for all purposes be deemed an original, but all such counterparts shall constitute but one and the same agreement. Guarantor hereby acknowledges receipt of a true, correct and complete counterpart of this Guaranty.
SECTION 7.12. Agent. The Administrative Agent acts herein as agent for itself, the Banks and any and all future holders of the Guaranteed Obligations.
SECTION 7.13. WAIVER OF TRIAL BY JURY. EACH OF GUARANTOR AND THE ADMINISTRATIVE AGENT HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM CONCERNING ANY RIGHTS UNDER THIS GUARANTY, ANY OTHER LOAN DOCUMENT OR ANY OTHER DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH, OR ARISING FROM ANY BANKING RELATIONSHIP EXISTING IN CONNECTION WITH THIS GUARANTY AND AGREES THAT ANY SUCH ACTION, PROCEEDING OR COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY; THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES ENTERING INTO THIS GUARANTY.
***
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IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written.
CONSECO, INC.

By: /s/ Thomas M. Hagerty
    ----------------------------------
Name: Thomas M. Hagerty
      --------------------------------
Title: Senior Vice President and
         Acting Chief Financial Officer
       -------------------------------	

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GUARANTY AND SUBORDINATION AGREEMENT
Dated as of November 22, 2000
made by
CIHC, INCORPORATED,
 as Guarantor and Subordinated Borrower,
and
CONSECO, INC.,
 as Obligor and Subordinated Lender,
in favor of
BANK OF AMERICA, NATIONAL ASSOCIATION,
 as Administrative Agent
under the Credit Agreement
dated as of November 22, 2000
GUARANTY AND SUBORDINATION AGREEMENT
This Guaranty and Subordination Agreement (this "Agreement") is entered into as of November 22, 2000 by CIHC, INCORPORATED and CONSECO, INC. in favor of BANK OF AMERICA, NATIONAL ASSOCIATION, as administrative agent (in such capacity, the "Agent") for the financial institutions (the "Banks" and together with the Agent, collectively, the "Guarantied Parties") who are or from time to time may become party to the Credit Agreement, dated as of November 22, 2000 (as the same may be amended, supplemented, restated or otherwise modified from time to time, the "Credit Agreement"), among the individual borrowers party thereto, the Banks and the Agent. Unless otherwise defined herein, capitalized terms used herein shall have the meanings assigned to such terms pursuant to Article I hereof.
W I T N E S S E T H:
WHEREAS, pursuant to an Agreement, dated as of September 22, 2000, relating to 1998 Director & Officer Loan Agreement (the "Restructuring Document") with respect to the Existing Credit Agreement (as such term is defined in the Restructuring Document) and the existing guaranty of Conseco, Inc. referred to in the Existing Credit Agreement (as the same may be amended, supplemented, restated or otherwise modified from time to time, the "Existing Conseco Guaranty"), the Banks agreed, among other things, to refrain from exercising certain remedies in respect of the Existing Conseco Guaranty;
WHEREAS, it was a condition precedent to the obligation of the Banks to enter into the Restructuring Document that the Agreement Parties execute and deliver, and the Agreement Parties did execute and deliver, that certain Guaranty and Subordination Agreement dated as of September 22, 2000 (the "Existing Agreement");
WHEREAS, Conseco has established a program to allow for certain of the Borrowers to refinance the Existing Loans;
WHEREAS, the Administrative Agent and the Banks have agreed to refinance the Existing Loans pursuant to the Credit Agreement on the terms and subject to the conditions contained in the Credit Agreement;
WHEREAS, as a condition precedent to the Administrative Agent and the Banks executing and delivering the Credit Agreement and making the Loans thereunder, Conseco is required to execute and deliver a Guaranty of the obligations of the Borrowers thereunder (as the same may be amended, supplemented, restated or otherwise modified from time to time, the "Conseco Guaranty")
WHEREAS, as a condition precedent to the Banks executing and delivering the Credit Agreement and making the Loans thereunder, the Agreement Parties are required to execute and deliver this Agreement; and
WHEREAS, the Agreement Parties have been duly authorized to execute, deliver and perform this Agreement;
WHEREAS, the Agreement Parties will derive substantial direct and indirect benefits from the Loans made to the Borrowers by the Banks pursuant to the Credit Agreement;
NOW THEREFORE, for good and valuable consideration the receipt and sufficiency of which is hereby acknowledged and to induce the Administrative Agent and the Banks to enter into the Credit Agreement and accept the Conseco Guaranty in connection therewith, each Agreement Party agrees, for the benefit of each Guarantied Party, as follows:
ARTICLE I.
DEFINITIONS
SECTION 1.1. Certain Terms. Capitalized terms used herein, unless otherwise defined herein, shall have the respective meanings assigned thereto in the Credit Agreement or the New Conseco Guaranty Documents; provided that such definitions shall survive any termination of the Credit Agreement or any New Conseco Guaranty Document. In addition, when used herein the following terms shall have the following meanings (such definitions to be equally applicable to the singular and plural forms thereof):
"Agreement" has the meaning set forth in the Preamble.
"Agreement Party" means each of Obligor, Guarantor, Subordinated Lender and Subordinated Borrower.
"Appendix" has the meaning assigned to such term in the Conseco Guaranty.
"Charges" has the meaning assigned to such term in the Credit Agreement.
"CIHC Guaranty" means each of (a) this Agreement, (b) the Guaranty and Subordination Agreements dated as of the date hereof by CIHC and Conseco relating to (i) the Guaranty of Conseco dated as of the date hereof with respect to a credit agreement dated as of the date hereof refinancing obligations under an Amended and Restated Credit Agreement dated as of August 26, 1997 and (ii) the Guaranty of Conseco dated as of the date hereof with respect to a credit agreement dated as of the dated hereof refinancing obligations under a Termination and Replacement Agreement dated as of May 30, 2000, and (c) the Guaranty and Subordination Agreements dated September 22, 2000 by CIHC and Conseco relating to the obligations of Conseco in respect of (i) the Five-Year Credit Agreement dated as of September 25, 1998 among Conseco, certain financial institutions and Bank of America, N.A., as agent, as amended (ii) the 364-Day Credit Agreement dated as of September 25, 1998 among Conseco, certain financial institutions and Bank of America, N.A., as agent, as amended, (iii) the Senior Secured Revolving Credit Agreement, dated as of May 30, 2000 among Conseco, certain financial institutions and
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The Chase Manhattan Bank, as administrative agent, as amended (iv) the Guaranty dated August 26, 1997 by Conseco with respect to an Amended and Restated Credit Agreement, dated as of August 26, 1997, among certain individual borrowers, certain financial institutions and Bank of America, N.A., as administrative agent, as amended, (v) the Guaranty dated as of August 21, 1998 by Conseco with respect to the Credit Agreement, dated as of August 21, 1998, among certain financial institutions and Bank of America, N.A., as administrative agent, as amended and (vi) the Amended and Restated Guaranty dated as of September 22, 2000 by Conseco with respect to the Termination and Replacement Agreement, dated as of May 30, 2000, among certain financial institutions and The Chase Manhattan Bank, as administrative agent, as amended, as each of the foregoing may be amended, modified or supplemented from time to time.
"Conseco" means Conseco, Inc.
"Conseco Guaranty" has the meaning set forth in the fifth Recital.
"Conseco Guaranty Documents" means the collective reference to the Conseco Guaranty and any other agreement entered into by Obligor in connection therewith.
"Credit Agreement" has the meaning set forth in the Preamble.
"Default" has the meaning assigned to such term in the Appendix.
"Event of Default" has the meaning assigned to such term in the Appendix.
"Existing Agreement" shall have the meaning set forth in the second Recital.
"Existing Conseco Guaranty" shall have the meaning set forth in the first Recital.
"Existing Conseco Guaranty Documents" means the collective reference to the Existing Conseco Guaranty, the Restructuring Document and any other agreement entered into by Obligor in connection therewith.
"Existing Credit Agreement" shall have the meaning set forth in the first Recital.
"Existing Loans" shall have the meaning assigned to such term in the Restructuring Agreement.
"Guarantied Obligations" has the meaning set forth in Section 2.1.
"Guarantied Parties" has the meaning set forth in the Preamble.
"Guarantor" means CIHC, Incorporated, in its capacity as guarantor of the Guarantied Obligations.
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"Indemnified Parties" has the meaning set forth in Section 5.1.
"Investment Grade Status" has the meaning assigned to such term in the Appendix.
"Lehman Agreement" has the meaning assigned to such term in the Appendix.
"Near-Term Facilities Termination Date" has the meaning assigned to such term in the Appendix.
"Obligations" means all debts, liabilities, obligations, covenants and duties for the payment of money owing by Obligor pursuant to any Conseco Guaranty Document, whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising.
"Obligor" means Conseco, Inc., in its capacity as obligor in respect of the Obligations.
"Reorganization" has the meaning set forth in Section 3.2(a).
"Restructuring Document" has the meaning set forth in the first Recital.
"Senior Creditors" means any holder or beneficiary of any Senior Debt, or any authorized representative thereof.
"Senior Debt" means (a) all obligations of Guarantor under Article II, (b) all "Senior Debt" under and as defined in any other CIHC Guaranty, (c) all "Senior Debt" under and as defined in the Guaranty and Subordination Agreement entered into in connection with the Lehman Agreement and
(d) all other "Senior Debt" (or comparable concept) under and as defined in any subordination provision or agreement relating to or entered into in connection with any Contingent Obligation of CIHC pursuant to Section 4.01(d)(i) or (d)(iv) of the Appendix.
"Subordinated Borrower" means CIHC, Incorporated, in its capacity as obligor in respect of the Subordinated Debt.
"Subordinated Debt" means the principal amount of any Indebtedness owing by Subordinated Borrower to Subordinated Lender from time to time outstanding and unpaid, together with accrued and unpaid interest thereon.
"Subordinated Lender" means Conseco, Inc., in its capacity as holder of the Subordinated Debt.
"Subrogation Rights" has the meaning set forth in Section 2.6.
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ARTICLE II.
GUARANTY PROVISIONS
SECTION 2.1. Guaranty. Guarantor hereby absolutely, unconditionally and irrevocably:
(a) guaranties to the Guarantied Parties the full and punctual payment when due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise, and at all times thereafter, of all Obligations (including all such amounts which would become due but for the operation of the automatic stay provisions under Section 362(a) of the United States Bankruptcy Code, 11 U.S.C. ss.362(a), and the operation of Sections 502(b) and 506(b) of the United States Bankruptcy Code, 11 U.S.C. ss.502(b) and ss.506(b)) (all such Obligations collectively called the "Guarantied Obligations"); and
(b) indemnifies and holds harmless each Guarantied Party or any other holder of any Guarantied Obligations for any and all costs and expenses (including, without limitation, reasonable attorneys' fees and expenses) incurred by such Guarantied Party or such holder, as the case may be, in enforcing any rights under this Agreement;
The guaranty set forth in this Article II constitutes a guaranty of payment when due and not of collection, and Guarantor specifically agrees that it shall not be necessary or required that any Guarantied Party or any other holder of any Guarantied Obligations exercise any right, assert any claim or demand or enforce any remedy whatsoever against Obligor or any other Person before the performance of, or as a condition to, the obligations of Guarantor hereunder. Anything herein or in any other Loan Document to the contrary notwithstanding, the maximum liability of Guarantor hereunder shall in no event exceed the amount which can be guaranteed by Guarantor under applicable federal and state laws relating to the insolvency of debtors.
SECTION 2.2. Acceleration of Guaranty. Guarantor agrees that, in the event of the insolvency of Guarantor, or the inability or failure of Guarantor to pay debts as they become due, or an assignment by Guarantor for the benefit of creditors, or the commencement of any case or proceeding in respect of Obligor or Guarantor under any bankruptcy, insolvency or similar federal or state laws, and if such event shall occur at a time when any of the Guarantied Obligations may not then be due and payable, Guarantor will pay to the Banks forthwith the full amount which would be payable hereunder by Guarantor if all the Guarantied Obligations were then due and payable.
SECTION 2.3. Guaranty Absolute, etc. This Agreement shall in all respects be a continuing, absolute, unconditional and irrevocable guaranty of payment, and shall remain in full force and effect until all Guarantied Obligations have been paid in full and all obligations of Guarantor hereunder shall have been paid in full. Guarantor guarantees that the Guarantied Obligations will be paid strictly in accordance with the terms of the Conseco Guaranty Documents and each other Loan Document under which they arise, regardless of any law,
5
regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of any Guarantied Party or any holder of any Guarantied Obligations. The liability of Guarantor under this Agreement shall be absolute, unconditional and irrevocable irrespective of:
(a) any lack of validity, legality or enforceability of the Restructuring Document, the Existing Credit Agreement, any Existing Conseco Guaranty Document, the Existing Agreement, the Credit Agreement, any Conseco Guaranty Document, or any other Loan Document;
(b) the failure of any Guarantied Party:
(i) to assert any claim or demand or to enforce any right or remedy against Obligor or any other Person under the provisions of the Credit Agreement, any Conseco Guaranty Document, any other Loan Document or otherwise; or
(ii) to exercise any right or remedy against any other guarantor of, or collateral securing, any Guarantied Obligations;
(c) any change in the time, manner or place of payment of, or in any other term of, all or any of the Guarantied Obligations, or any other extension, compromise or renewal of any Guarantied Obligations;
(d) any reduction, limitation, impairment or termination of the Guarantied Obligations for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to (and Guarantor hereby waives any right to or claim of) any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality, nongenuineness, irregularity, compromise, unenforceability of, or any other event or occurrence affecting, the Guarantied Obligations;
(e) any amendment to, rescission, waiver, or other modification of, or any consent to any departure from, any of the terms of the Credit Agreement, any Conseco Guaranty Document or any other Loan Document;
(f) any addition, exchange, release, surrender or non-perfection of any collateral, or any amendment to or waiver or release or addition of, or consent to any departure from, any other guaranty held by any Guarantied Party or any other holder of the Guarantied Obligations; or
(g) any other circumstance which might otherwise constitute a defense available to, or a legal or equitable discharge of, Obligor, any surety or any guarantor.
SECTION 2.4. Reinstatement, etc. Guarantor agrees that this Agreement shall continue to be effective or be reinstated, as the case may be, if at any time any payment (in whole or in part) of any of the Guarantied Obligations is rescinded or must otherwise be restored by any
6
Guarantied Party or any other holder of any Guarantied Obligations, upon the insolvency, bankruptcy or reorganization of Obligor, all as though such payment had not been made.
SECTION 2.5. Waiver, etc. Guarantor hereby waives promptness, diligence, notice of acceptance and any other notice with respect to any of the Guarantied Obligations, and this Agreement and any requirement that the Agent, any other Guarantied Party or any other holder of Guarantied Obligations protect, secure, perfect or insure any security interest or Lien, or any property subject thereto, or exhaust any right or take any action against Obligor or any other Person (including any other guarantor) or entity or any collateral securing the Guarantied Obligations.
SECTION 2.6. Waiver of Subrogation; Subordination. Guarantor hereby irrevocably waives with respect to Obligor, until the prior indefeasible payment in full in cash of all Guarantied Obligations, any claim or other rights which it may now or hereafter acquire against Obligor that arises from the existence, payment, performance or enforcement of Guarantor's obligations under this Article II, including any right of subrogation, reimbursement, exoneration, or indemnification, any right to participate in any claim or remedy of the Guarantied Parties against Obligor or any collateral which the Agent now has or hereafter acquires, whether or not such claim, remedy or right (all such claims, remedies and rights being collectively called "Subrogation Rights") arises in equity, or under contract, statute or common law, including the right to take or receive from Obligor, directly or indirectly, in cash or other property or by set-off or in any manner, payment or security on account of such claim or other rights. If any amount shall be paid to Guarantor in violation of the preceding sentence and the Guarantied Obligations shall not have been paid in cash, in full, such amount shall be deemed to have been paid to Guarantor for the benefit of, and held in trust for, the Guarantied Parties, and shall forthwith be paid to the Guarantied Parties to be credited and applied upon the Guarantied Obligations, whether matured or unmatured. Guarantor acknowledges that it will receive direct and indirect benefits from the Restructuring Document, the Conseco Guaranty, and the Credit Agreement and that the waiver set forth in this
Section 2.6 is knowingly made in contemplation of such benefits.
SECTION 2.7. Successors, Transferees and Assigns; Transfers of Guarantied Obligations, etc. This Agreement shall:
(a) be binding upon Guarantor, and its successors, transferees and assigns; and
(b) inure to the benefit of and be enforceable by the Agent and each other Guarantied Party.
Without limiting the generality of clause (b), any Bank may assign or otherwise transfer (in whole or in part) any Guarantied Obligation held by it to any other Person upon the terms and conditions set forth in the Credit Agreement, and such other Person shall thereupon become vested with all rights and benefits in respect thereof granted to such Bank under any Loan Document (including this Agreement) or otherwise.
SECTION 2.8. Payments Free and Clear of Taxes, etc. Guarantor hereby agrees
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that:
(a) any and all payments made by Guarantor hereunder shall be made in accordance with Section 4.5 of the Credit Agreement free and clear of, and without deduction for, any and all Charges, to the same extent as if Guarantor were a "Borrower" thereunder;
(b) Guarantor hereby indemnifies and holds harmless each Guarantied Party and each other holder of any Guarantied Obligation for the full amount of any Charges paid by such Guarantied Party or such holder, as the case may be, and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto; and
(c) without prejudice to the survival of any other agreement of Guarantor hereunder, the agreements and obligations of Guarantor contained in this Section 2.8 shall survive the payment in full of the Guarantied Obligations.
SECTION 2.9. Right of Offset. In addition to and not in limitation of all rights of offset that any Guarantied Party or any other holder of any Guarantied Obligation may have under applicable law or any other Loan Document, subject to the terms of the Credit Agreement, each Guarantied Party or other holder of any Guarantied Obligation shall, during the continuance of any Event of Default and whether or not such Guarantied Party or such holder has made any demand or whether or not Guarantor's obligations are matured, have the right to appropriate and apply to the payment of Guarantor's obligations hereunder all deposits (general or special, time or demand, provisional or final) then or thereafter held by, and other indebtedness or property then or thereafter owing to, such Guarantied Party or other holder, whether or not related to this Agreement or any transaction hereunder.
ARTICLE III.
SUBORDINATION
SECTION 3.1. Payments on Subordinated Debt. Notwithstanding anything to the contrary in the terms or arrangements governing the Subordinated Debt, no payment or prepayment of principal of or interest on the Subordinated Debt may be made, directly or indirectly, at any time after (a) (i) any Guarantied Party has made a claim under the Conseco Guaranty in respect of the principal amount of any of the Loans under the Credit Agreement or (ii) Obligor's obligations under the Conseco Guaranty shall have been accelerated (including, without limitation, pursuant to the provision in the Conseco Guaranty that is the equivalent of Section 2.2 of this Agreement) or (b) a Reorganization (including any proceeding in respect thereof) shall have been commenced.
SECTION 3.2. Subordination. (a) Subject to Section 3.1, payment of the Subordinated Debt is and shall be expressly subordinate and junior in right of payment to the prior payment in full in cash of the Senior Debt to the extent and in the manner set forth herein, and the Subordinated Debt is hereby so subordinated as a claim against Subordinated Borrower
8
or any of the assets of Subordinated Borrower, whether such claim be (i) in the event of any distribution of the assets of Subordinated Borrower upon any voluntary or involuntary dissolution, winding-up, total or partial liquidation or reorganization, or bankruptcy, insolvency, receivership or other statutory or common law proceedings or arrangements involving Subordinated Borrower or the readjustment of its liabilities or any assignment for the benefit of creditors or any marshaling of its assets or liabilities (collectively called a "Reorganization"), or (ii) other than in connection with a Reorganization, to the prior payment in full in cash of the Senior Debt.
(b) If Subordinated Lender shall receive any payment in violation of the terms hereof, it shall hold such payment in trust for the benefit of the Senior Creditors and forthwith pay it over to the Senior Creditors, ratably according to the aggregate amounts remaining unpaid on account of the Senior Debt, for application to and payment of the Senior Debt.
(c) In the event of any Reorganization relative to Subordinated Borrower or its properties, then all of the Senior Debt shall first be paid in full in cash before any payment is made upon the Subordinated Debt, and in any such proceedings any payment or distribution of any kind or character, whether in cash or property or securities, which may be payable or deliverable in respect of the Subordinated Debt shall be paid or delivered directly to the Senior Creditors, ratably according to the aggregate amounts remaining unpaid on account of the Senior Debt, for application in payment of the Senior Debt, unless and until all the Senior Debt is paid in full in cash, and Subordinated Lender hereby irrevocably authorizes the Agent, as attorney-in- fact for Subordinated Lender, to vote any claim or proof of claim in such proceedings in respect of the Subordinated Debt, to file or prove any claim in such proceedings in respect of the Subordinated Debt, to demand, sue for, collect and receive any such payment or distribution, to apply such payment or distribution to the payment of the Senior Debt, and to take such other action (including acceptance or rejection of any plan of Reorganization) in the name of Subordinated Lender or of the relevant Senior Creditors as the Agent may deem necessary or advisable for the enforcement of the provisions hereof. Subordinated Lender shall execute and deliver such other and further powers of attorney, assignments, proofs of claim or other instruments, and take such other actions, as may be requested by the Agent in order to enable the Agent to accomplish any of the foregoing, but only with respect to Subordinated Lender's capacity as a holder hereof and not in respect of any other relationship between Subordinated Lender and Subordinated Borrower. Consistent with, but not in limitation of, the foregoing, in such an event, the Agent shall be deemed to be the assigned (and thus the holder) of such claims or proof of claims and shall have the right to assert and vote such claims in any Reorganization, including, without limitation, through the filing of any proof of claim therein and the casting of any ballots to accept or reject any plan of reorganization proposed by, for, or with respect to any such Reorganization.
(d) In the event that, notwithstanding the foregoing, upon any such Reorganization, any payment or distribution of the assets of Subordinated Borrower of any kind or character, whether in cash, property or securities, shall be received by Subordinated Lender in respect of the Subordinated Debt before all Senior Debt is paid in full in cash, such payment or distribution shall be held in trust for the Senior Creditors and shall forthwith be paid over to the
9
Senior Creditors, ratably according to the aggregate amounts remaining unpaid on account of the Senior Debt, for application to the payment of the Senior Debt until all Senior Debt shall have been paid in full in cash.
(e) Subordinated Lender agrees that, until the Senior Debt has been paid in full in cash, except as expressly provided by Section 3.1, it will not take, demand or receive, or take any action to accelerate or collect, any payment of all or any part of the Subordinated Debt.
(f) The Senior Creditors, or any of them, may, at any time and from time to time, without the consent of or notice to Subordinated Lender, without incurring any responsibility to Subordinated Lender, and without impairing or releasing any of the rights of any Senior Creditor, or any of the obligations of Subordinated Lender:
(i) change the amount or terms of or renew or extend any Senior Debt or enter into or amend in any manner any agreement relating to any Senior Debt;
(ii) sell, exchange, release or otherwise deal with any property at any time pledged or mortgaged to secure any Senior Debt;
(iii) release anyone liable in any manner for the payment or collection of any Senior Debt; and
(iv) exercise or refrain from exercising any rights against Subordinated Borrower and others (including Subordinated Lender).
(g) Subordinated Lender hereby waives notice of or proof of reliance by any Senior Creditor upon the provisions hereof, and the Senior Debt shall conclusively be deemed to have been created, contracted, incurred or maintained in reliance upon the provisions hereof.
(h) Each Senior Creditor shall be a third-party beneficiary of the provisions of this Section 3.2.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
Each Agreement Party represents and warrants to each Guarantied Party that:
SECTION 4.1. Authorization. Such Agreement Party (a) has the power to execute, deliver and perform this Agreement and (b) has taken all necessary action to authorize the execution, delivery and performance by it of this Agreement.
SECTION 4.2. No Conflict. The execution, delivery and performance by such Agreement Party of this Agreement does not and will not (a) contravene or conflict with any
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provision of any law, statute, rule or regulation, (b) contravene or conflict with, result in any breach of, or constitute a default under, any material agreement or instrument binding on such Agreement Party or any of its Subsidiaries (including, without limitation, any writ, judgment, injunction or other similar court order), (c) result in the creation or imposition of or the obligation to create or impose any Lien upon any of the property or assets of such Agreement Party or any of its Subsidiaries or (d) contravene or conflict with any provision of the articles of incorporation or bylaws of such Agreement Party.
SECTION 4.3. Binding Effect. This Agreement constitutes the legal, valid and binding obligations of such Agreement Party, enforceable against such Agreement Party in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, or similar laws affecting the enforcement of creditors' rights generally or by equitable principles relating to enforceability.
ARTICLE V.
MISCELLANEOUS
SECTION 5.1. Indemnity. Each Agreement Party agrees to indemnify the Agent, each Bank, their Affiliates and their respective directors, officers, employees, persons controlling or controlled by any of them or their respective agents, consultants, attorneys and advisors (the "Indemnified Parties") and hold each Indemnified Party harmless from and against any and all liabilities, losses, claims, damages, costs and expenses of any kind to which any of the Indemnified Parties may become subject, whether directly or indirectly (including, without limitation, the reasonable fees and disbursements of counsel for any Indemnified Party), relating to or arising out of this Agreement; provided, that no Indemnified Party shall have the right to be indemnified hereunder for its own gross negligence or willful misconduct as determined by a court of competent jurisdiction. All obligations of each Agreement Party provided for in this Section 5.1 shall survive termination of the Credit Agreement, any Conseco Guaranty Document and this Agreement.
SECTION 5.2. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including facsimile or similar writing) and shall be given to such party at its address or facsimile number set forth on the signature pages hereof or such other address or facsimile number as such party may hereafter specify for the purpose by written notice to the Agent. Each such notice, request or other communication shall be effective (a) if given by facsimile, when such facsimile is transmitted to the facsimile number specified in this Section 5.2, (b) if given by mail, seventy-two (72) hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid or (c) if given by any other means, when delivered at the address specified in this Section 5.2.
SECTION 5.3. Successors and Assigns. This Agreement, and the terms, covenants and conditions hereof, shall be binding upon and inure to the benefit of the parties hereto, and their respective successors and assigns, except no Agreement Party shall be permitted to assign
11
this Agreement nor any interest or obligation herein without the consent of the Agent.
SECTION 5.4. SUBMISSION TO JURISDICTION, ETC. EACH AGREEMENT PARTY AND THE AGENT HEREBY IRREVOCABLY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE CIRCUIT COURT OF THE STATE OF ILLINOIS SITTING IN COOK COUNTY AND OF THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS OVER ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND EACH AGREEMENT PARTY AND THE AGENT HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH ILLINOIS STATE OR TO THE EXTENT PERMITTED BY LAW, FEDERAL COURT. EACH AGREEMENT PARTY AND THE AGENT HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE IN ANY ACTION OR PROCEEDING (WHETHER BROUGHT BY ANY AGREEMENT PARTY OR ANY OF THEIR RESPECTIVE SUBSIDIARIES, THE AGENT, ANY BANK OR OTHERWISE) IN ANY COURT HEREIN ABOVE SPECIFIED IN THIS SECTION 5.4 AS WELL AS ANY RIGHT IT MAY NOW OR HEREAFTER HAVE TO REMOVE ANY SUCH ACTION OR PROCEEDING, ONCE COMMENCED, TO ANOTHER COURT ON THE GROUNDS OF FORUM NON CONVENIENS OR OTHERWISE. EACH AGREEMENT PARTY AND THE AGENT AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.
SECTION 5.5. Amendments; Release. Notwithstanding anything to the contrary contained in the Credit Agreement, the provisions of this Agreement may from time to time be amended, modified or waived, if such amendment, modification or waiver is in writing and consented to by each affected Agreement Party and the Agent (with the consent of the Required Banks), and then any such amendment, modification, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided that, except as set forth in Section 5.14 of this Agreement, no such amendment, modification or waiver which would permit the release or termination of all or a material portion of Guarantor's obligations under this Agreement shall be effective without the consent of each Bank.
SECTION 5.6. Section Headings. The section headings in this Agreement are inserted for convenience of reference and shall not be considered a part of this Agreement or used in its interpretation.
SECTION 5.7. Acknowledgments. No action of the Agent permitted hereunder shall in any way affect or impair the rights of the Agent and the obligations of each Agreement Party under this Agreement. Each Agreement Party hereby acknowledges that there are no conditions to the effectiveness of this Agreement. Each Agreement Party hereby further acknowledges and agrees to make such deliveries as are required of it and comply with the other
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provisions applicable to it pursuant to the provisions of the Credit Agreement.
SECTION 5.8. Obligations Not Limited. All obligations of the Guarantor and rights of the Guarantied Parties in respect of the Guarantied Obligations expressed in this Agreement shall be in addition to and not in limitation of those provided in applicable law or in any other written instrument or agreement relating to any of the Guarantied Obligations.
SECTION 5.9. GOVERNING LAW. THIS AGREEMENT SHALL BE A CONTRACT MADE UNDER AND GOVERNED BY THE LAWS OF THE STATE OF ILLINOIS.
SECTION 5.10. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall for all purposes be deemed an original, but all such counterparts shall constitute but one and the same agreement. Each Agreement Party hereby acknowledges receipt of a true, correct and complete counterpart of this Agreement.
SECTION 5.11. Agent. The Agent acts herein as agent for itself, the Banks and any and all future holders of the Guarantied Obligations.
SECTION 5.12. WAIVER OF TRIAL BY JURY. EACH AGREEMENT PARTY AND THE AGENT HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM CONCERNING ANY RIGHTS UNDER THIS AGREEMENT OR ANY OTHER DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH, OR ARISING FROM ANY BANKING RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT AND AGREES THAT ANY SUCH ACTION, PROCEEDING OR COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY; THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE GUARANTIED PARTIES ENTERING INTO THE RESTRUCTURING DOCUMENT.
SECTION 5.13. No Limitation on Remedies. No failure to exercise and no delay in exercising, on the part of the Agent or any other Guarantied Party, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.
SECTION 5.14. Release of This Agreement. This Agreement shall be terminated and Guarantor shall be released from all of its obligations hereunder on the first date after the Near-Term Facilities Termination Date on which Conseco has Investment Grade Ratings Status, as long as no Default or Event of Default shall have occurred and be continuing on such date.
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[Signature Pages Follow]
IN WITNESS WHEREOF, each Agreement Party has caused this Guaranty and Subordination Agreement to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written.
CIHC, INCORPORATED, as Guarantor and Subordinated Borrower

By: /s/ David A. Hill
    ------------------------------
    Name: David A. Hill
    Title: Vice President	

Address for Notices:
11825 North Pennsylvania Street
Carmel, Indiana 46032
Attention: David K. Herzog
Telephone: 317-817-5031
Fax: 317-817-6327
CONSECO, INC., as Obligor and Subordinated
Lender

By: /s/ Thomas M. Hagerty
    --------------------------------
    Name: Thomas M. Hagerty
    Title: Senior Vice President and Acting
             Chief Financial Officer	

Address for Notices:
11825 North Pennsylvania Street
Carmel, Indiana 46032
Attention: David K. Herzog
Telephone: 317-817-5031
Fax: 317-817-6327
AMENDED AND RESTATED
CASH COLLATERAL
PLEDGE AGREEMENT
among
CDOC, INC.,
BANK OF AMERICA, NATIONAL ASSOCIATION,
as Collateral Agent
and
BANK OF AMERICA, NATIONAL ASSOCIATION,
as Depositary Bank
Dated as of November 22, 2000

                       TABLE OF CONTENTS
                       -----------------

                                                                                                      Page
                                                                                                      ----
SECTION 1.  DEFINED TERMS..............................................................................-2-
                  1.1      Definitions.................................................................-2-
                  1.2      Other Definitional Provisions...............................................-7-

SECTION 2.   ESTABLISHMENT OF CASH COLLATERAL ACCOUNT;
                  DEFINITION OF "COLLATERAL"...........................................................-7-
                  2.1      Cash Collateral Account/Deposit of Initial Cash Collateral
                           Deposit.....................................................................-7-
                  2.2      Definition of Collateral....................................................-7-
                  2.3      The Account.................................................................-7-

SECTION 3.  GRANT OF SECURITY INTEREST BY GRANTOR......................................................-8-
                  3.1      Grant.......................................................................-8-
                  3.2      Intercreditor Relationship Regarding Collateral.............................-8-
                  3.3      Continuing Security Interest................................................-8-

SECTION 4.   ALLOCATION BETWEEN 1997 AND 1998
                  D&O OBLIGATIONS/WITHDRAWALS BY CONSECO...............................................-9-
                  4.1      The Initial Cash Collateral Deposit.........................................-9-
                  4.2      Subsidiary Deposits.........................................................-9-
                  4.3      Waterfall Deposits..........................................................-9-
                  4.4      Deposits do not Secure any Particular Borrower's Loan.......................-9-
                  4.5      Withdrawal Rights...........................................................-9-
                  4.6      Allocations................................................................-10-

SECTION 5.  INVESTMENTS...............................................................................-10-
                  5.1      Investments; Losses........................................................-10-
                  5.2      No Obligation to Make or Track Investments Based on
                           Collateral Allocation......................................................-10-

SECTION 6.  COMPENSATION/EXPENSES/INDEMNITY...........................................................-10-
                  6.1      Compensation/Expenses......................................................-10-
                  6.2      Indemnity..................................................................-11-
                  6.3      Survival...................................................................-11-

SECTION 7.  REMEDIAL PROVISIONS.......................................................................-11-
                  7.1      Remedies...................................................................-11-
                  7.2      Collateral Agent's Calculations............................................-11-

SECTION 8.   REPRESENTATIONS AND WARRANTIES
                  OF GRANTOR..........................................................................-12-

                               i	

                  8.1      Title; No Other Liens......................................................-12-
                  8.2      Perfected First Priority Liens.............................................-12-

SECTION 9.  COVENANTS.................................................................................-12-
                  9.1      Maintenance of Perfected Security Interest; Further
                           Documentation..............................................................-12-

SECTION 10.  AUTHORITY OF COLLATERAL AGENT............................................................-13-
                  10.1     General Authority of the Collateral Agent..................................-13-
                  10.2     Execution of Financing Statements..........................................-13-
                  10.3     Further Assurances.........................................................-14-
                  10.4     Exculpatory Provisions.....................................................-14-
                  10.5     Delegation of Duties.......................................................-15-
                  10.6     Reliance by Collateral Agent...............................................-15-
                  10.7     Moneys to be Held in Trust.................................................-16-
                  10.8     Resignation and Removal of the Collateral Agent............................-16-
                  10.9     Status of Successor Collateral Agent.......................................-17-
                  10.10    Merger of the Collateral Agent.............................................-17-

SECTION 11.  ABSOLUTE OBLIGATIONS.....................................................................-17-
                  11.1  Absolute, etc.................................................................-17-
                  11.2  Reinstatement, etc............................................................-18-
                  11.3  Waiver, etc...................................................................-19-
                  11.4   Waiver of Subrogation; Subordination.........................................-19-

SECTION 12.  MISCELLANEOUS............................................................................-19-
                  12.1     Amendments.................................................................-19-
                  12.2     Notices....................................................................-19-
                  12.3     No Waiver by Course of Conduct; Cumulative Remedies........................-20-
                  12.4     Successors and Assigns.....................................................-20-
                  12.5     Counterparts...............................................................-20-
                  12.6     Severability...............................................................-20-
                  12.7     Section Headings...........................................................-20-
                  12.8     Integration................................................................-20-
                  12.9     Depository Bank's Location.................................................-21-
                  12.10    Replacement of Existing Cash Collateral Agreement..........................-21-
                  12.11    GOVERNING LAW..............................................................-21-	

ii
AMENDED AND RESTATED CASH COLLATERAL PLEDGE AGREEMENT
AMENDED AND RESTATED CASH COLLATERAL PLEDGE AGREEMENT, dated as of November 22, 2000, among CDOC, Inc., a Delaware corporation (together with any other entity that may become a party hereto as provided herein, the "Grantors"), BANK OF AMERICA, NATIONAL ASSOCIATION ("BofA"), as Collateral Agent (in such capacity, the "Collateral Agent") for the Secured Parties (as defined below) and BANK OF AMERICA, NATIONAL ASSOCIATION, as Depositary Bank (in such capacity, the "Depositary Bank").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Agreement, dated as of September 22, 2000, Relating to 1997 Director and Officer Loan Credit Agreement (as amended, supplemented or otherwise modified from time to time, the "Agreement Re 1997 D&O Loans"), among Conseco, Inc. ("Conseco"), as Guarantor, the other financial institutions parties thereto (the "1997 D&O Banks"), and BofA, as Administrative Agent (in such capacity, the "1997 D&O Administrative Agent"), the 1997 D&O Administrative Agent and the 1997 D&O Banks agreed, subject to the terms and conditions set forth therein, to commit to extend loans to any borrower (a "1997 D&O Borrower") to refinance loans ("1997 D&O Loans") under that certain Amended and Restated Credit Agreement, dated as of August 26, 1997 (the "1997 D&O Credit Agreement"), with such loans to have a stated maturity of December 31, 2003, and to acknowledge certain matters as to Conseco's Amended and Restated Guaranty, dated August 26, 1997 (the "1997 D&O Guaranty") relating to the 1997 D&O Loans and the 1997 D&O Credit Agreement and other loan documents;
WHEREAS, pursuant to that certain Agreement, dated as of September 22, 2000, Relating to 1998 Director and Officer Loan Credit Agreement (as amended, supplemented or otherwise modified from time to time, the "Agreement Re 1998 D&O Loans"; together with the Agreement Re 1997 D&O Loans, the "Agreements Re Specified D&O Facilities"), among Conseco, as Guarantor, the other financial institutions parties thereto (the "1998 D&O Banks"), and BofA, as Administrative Agent (in such capacity, the "1998 D&O Administrative Agent"), the 1998 D&O Administrative Agent and the 1998 D&O Banks agreed, subject to the terms and conditions set forth therein, to commit to extend loans to any borrower (a "1998 D&O Borrower") to refinance loans ("1998 D&O Loans") under that certain Credit Agreement, dated as of August 21, 1998 (the "1998 D&O Credit Agreement"), with such loans to have a stated maturity of December 31, 2003, and to acknowledge certain matters as to Conseco's Guaranty, dated August 21, 1998 (the "1998 D&O Guaranty");
WHEREAS, the Grantor derived substantial direct and indirect benefits from the Agreements Re Specified D&O Facilities;
WHEREAS, it was a condition precedent to the obligation of the D&O Administrative Agents and the D&O Banks to enter into the Agreements Re Specified D&O Facilities that the
1
Grantors execute and deliver a Cash Collateral Agreement dated as of September 22, 2000 (the "Existing Cash Collateral Agreement") to the Collateral Agent for the benefit of the Secured Parties;
WHEREAS, certain of the 1997 D&O Borrowers (the "1997 Refinancing Borrowers") want to refinance their 1997 D&O Loans pursuant to a Credit Agreement (the "1997 Refinancing Credit Agreement") dated as of November 22, 2000 among the 1997 Refinancing Borrowers, certain financial institutions (the "1997 Refinancing Banks") and Bank of America, National Association, as administrative agent (the "1997 Refinancing Agent");
WHEREAS, certain of the 1998 D&O Borrowers (the "1998 Refinancing Borrowers") want to refinance their 1998 D&O Loans pursuant to a Credit Agreement (the "1998 Refinancing Credit Agreement", together with the 1997 Refinancing Credit Agreement, the "2000 D&O Credit Agreements") dated as of November 22, 2000 among the 1998 Refinancing Borrowers, certain financial institutions (the "1998 Refinancing Banks") and Bank of America (the "1998 Refinancing Agent"); and
WHEREAS, it is a condition precedent to the obligation of the 1997 Refinancing Banks, the 1997 Refinancing Agent, the 1998 Refinancing Banks and the 1998 Refinancing Agent, to enter into the 2000 D&O Credit Agreements that this Amended and Restated Cash Collateral Pledge Agreement be executed and delivered to the Collateral Agent.
NOW, THEREFORE, in consideration of the premises and to induce the 1997 Refinancing Agent, the 1997 Refinancing Banks, the 1998 Refinancing Banks and the 1998 Refinancing Agent to enter into the 2000 D&O Credit Agreements, the Grantor, the Collateral Agent and the Depositary Bank hereby agree, for the benefit of the Secured Parties that the Existing Cash Collateral Agreement shall be amended and restated to state in its entirety, as set forth herein:
SECTION 1. DEFINED TERMS
1.1 Definitions. (a) Unless otherwise defined herein, terms defined in the Agreements Re Specified D&O Facilities and used herein shall have the meanings given to them in the Agreements Re Specified D&O Facilities.
(b) The following terms shall have the following meanings:
"1997 D&O Administrative Agent" shall have the meaning set forth in the first Recital.
"1997 D&O Borrowers" shall have the meaning set forth in the first Recital.
"1997 D&O Banks" shall have the meaning set forth in the first Recital.
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"1997 D&O Credit Agreement" shall have the meaning set forth in the first Recital.
"1997 D&O Creditors" shall mean the 1997 D&O Administrative Agent, the 1997 D&O Banks, the 1997 Refinancing Banks and the 1997 Refinancing Agent.
"1997 D&O Guaranty" shall have the meaning set forth in the first Recital.
"1997 D&O Loans" shall have the meaning set forth in the first Recital.
"1997 D&O Obligations" shall mean all obligations and liabilities of whatever nature or type of Conseco that may arise under or in connection with the 1997 D&O Guaranty, the Agreement Re 1997 D&O Loans, this Agreement , the 1997 Refinancing Guaranty or any other agreement to which Conseco is a party relating in any manner to the 1997 D&O Loans or the 1997 Refinancing Loans, in each case whether on account of guarantee obligations, fees, indemnities, costs, expenses or otherwise (including, without limitation, all reasonable fees and disbursements of counsel to the Collateral Agent, the D&O Administrative Agents that are required to be paid pursuant to the terms of this Agreement or any other agreement).
"1997 Refinancing Agent" shall have the meaning set forth in the fifth Recital.
"1997 Refinancing Banks" shall have the meaning set forth in the fifth Recital.
"1997 Refinancing Borrowers" shall have the meaning set forth in the fifth Recital.
"1997 Refinancing Credit Agreement" shall have the meaning set forth in the fifth Recital.
"1997 Refinancing Guaranty" means the Guaranty of Conseco dated the date hereof with respect to the obligations of the 1997 Refinancing Borrowers under the 1997 Refinancing Credit Agreement.
"1997 Refinancing Loans" shall mean the loans made pursuant to the 1997 Refinancing Credit Agreement.
"1998 D&O Administrative Agent" shall have the meaning set forth in the second Recital.
"1998 D&O Banks" shall have the meaning set forth in the second Recital.
"1998 D&O Borrower" shall have the meaning set forth in the second Recital.
3
"1998 D&O Credit Agreement" shall have the meaning set forth in the second Recital.
"1998 D&O Creditors" shall mean the 1998 D&O Administrative Agent, the 1998 D&O Banks, the 1998 Refinancing Agent and the 1998 Refinancing Banks.
"1998 D&O Loans" shall have the meaning set forth in the second Recital.
"1998 D&O Guaranty" shall have the meaning set forth in the second Recital.
"1998 D&O Obligations" shall mean all obligations and liabilities of whatever nature or type of Conseco that may arise under or in connection with the 1998 D&O Guaranty, the Agreement Re 1998 D&O Loans, this Agreement, the 1998 Refinancing Guaranty or any other agreement to which Conseco is a party relating in any manner to the 1998 D&O Loans or the 1998 Refinancing Loans, in each case whether on account of guarantee obligations, fees, indemnities, costs, expenses or otherwise (including, without limitation, all reasonable fees and disbursements of counsel to the Collateral Agent, the D&O Administrative Agents that are required to be paid pursuant to the terms of this Agreement or any other agreement).
"1998 Refinancing Agent" shall have the meaning set forth in the sixth Recital.
"1998 Refinancing Banks" shall have the meaning set forth in the sixth Recital.
"1998 Refinancing Borrowers" shall have the meaning set forth in the sixth Recital.
"1998 Refinancing Credit Agreement" shall have the meaning set forth in the sixth Recital.
"1998 Refinancing Guaranty" shall mean the Guaranty of Conseco dated the date hereof with respect to the obligations of the 1998 Refinancing Borrowers under the 1998 Refinancing Credit Agreement.
"1998 Refinancing Loans" shall mean the loans made pursuant to the 1998 Refinancing Credit Agreement.
"2000 D&O Credit Agreements" shall have the meaning set forth in the sixth Recital.
"Account Agreement" shall have the meaning set forth in
Section 2.1.
"Agreement" shall mean this Cash Collateral Pledge Agreement, as the same may be amended, supplemented or otherwise modified from time to time.
4
"Agreement Re 1997 D&O Loans" shall have the meaning set forth in the first Recital.
"Agreements Re Specified D&O Facilities" shall have the meaning set forth in the second recital.
"Agreement Re 1998 D&O Loans" shall have the meaning set forth in the second Recital.
"BofA" shall have the meaning set forth in the preamble.
"Cash Collateral Account" shall have the meaning set forth in
Section 2.1 hereof.
"Cash Equivalents": (i) marketable direct obligations issued by, or unconditionally guaranteed by, the United States Government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within one year from the date of acquisition; (ii) commercial paper of a bank or other financial institution rated at least AA- by Standard & Poor's Ratings Services ("S&P") or P-1 by Moody's Investors Service, Inc. ("Moody's"), or carrying an equivalent rating by a nationally recognized rating agency, if both of the two named rating agencies cease publishing ratings of commercial paper issuers generally, and maturing within six months from the date of acquisition; and (iii) securities with maturities of one year or less from the date of acquisition issued by a foreign or domestic bank or other financial institution and rated at least AA- by S&P or P-1 by Moody's.
"Collateral"shall have the meaning as set forth in Section 2.2.
"Collateral Agent" shall have the meaning set forth in the Preamble.
"Collateral Agent Fees" shall have the meaning set forth in
Section 6.1.
"Conseco" shall have the meaning set forth in the first Recital.
"Conseco Secured Obligations"shall mean the collective reference to (a) the Grantor Obligations of each Grantor, (b) the 1993 Indenture Obligations, (c) the 1994 Indenture Obligations and
(d) the Collateral Agent Fees (as defined in the Cash Collateral Sharing Agreement).
"Depositary Bank" shall have the meaning set forth in the Preamble.
"D&O Administrative Agents" means the 1997 D&O Administrative Agent, the 1998 D&O Administrative Agent, the 1997 Refinancing Agent and the 1998 Refinancing Agent.
5
"D&O Banks" means the 1997 D&O Banks, the 1998 D&O Banks, the 1997 Refinancing Banks and the 1998 Refinancing Banks.
"D&O Borrowers" means a 1997 D&O Borrower, a 1998 D&O Borrower, a 1997 Refinancing Borrower or a 1998 Refinancing Borrower.
"D&O Credit Agreement" means the 1997 D&O Credit Agreement, the 1998 D&O Credit Agreement, the 1997 Refinancing Credit Agreement or the 1998 Refinancing Credit Agreement.
"D&O Documents" shall have the meaning set forth in Section 11.1.
"Existing Cash Collateral Agreement" shall have the meaning set forth in the fourth Recital.
"Grantors" shall have the meaning set forth in the preamble.
"Proceeds"shall mean all "proceeds" as such term is defined in
Section 9-306(1) of the UCC and, in any event, shall include, without limitation, all dividends or other income from the Investment Property, collections thereon or distributions or payments with respect thereto.
"Securities Act"shall mean the Securities Act of 1933, as amended.
"Secured Obligations" shall mean the collective reference to
(a) the 1997 D&O Obligations, (b) the 1998 D&O Obligations, and (c) the Collateral Agent Fees.
"Secured Parties": the collective reference to (a) the 1997 D&O Banks, (b) the 1997 D&O Administrative Agent, (c) the 1998 D&O Banks, (d) the 1998 D&O Administrative Agent, (e) the 1997 Refinancing Banks, (f) the 1997 Refinancing Agent, (g) the 1998 Refinancing Banks, (h) the 1998 Refinancing Agent and (i) the Collateral Agent.
"Specified D&O Facilities" means the credit facilities under the D&O Credit Agreements.
"Specified D&O Guarantees" means the 1997 D&O Guaranty, the 1998 D&O Guaranty, the 1997 Refinancing Guaranty and the 1998 Refinancing Guaranty.
"Subrogation Rights" shall have the meaning set forth in
Section 11.4.
"UCC"shall mean the Uniform Commercial Code as from time to time in effect in the State of New York.
6
1.2 Other Definitional Provisions. (a) The words "hereof," "herein", "hereto" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section and Schedule references are to this Agreement unless otherwise specified.
(b) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.
(c) Where the context requires, terms relating to the Collateral or any part thereof, when used in relation to a Grantor, shall refer to such Grantor's Collateral or the relevant part thereof.
SECTION 2. ESTABLISHMENT OF CASH COLLATERAL ACCOUNT; DEFINITION OF "COLLATERAL"
2.1 Cash Collateral Account/Deposit of Initial Cash Collateral Deposit. Pursuant to the Existing Cash Collateral Agreement, the Grantor entered into an account agreement (the "Account Agreement") with the Depositary Bank, and the Grantor deposited the Initial Cash Collateral Deposit in immediately available funds into an investment account maintained by BofA pursuant to the Account Agreement (hereinafter the "Cash Collateral Account") in the name of the Collateral Agent. The Cash Collateral Account shall be subject to the exclusive dominion and control of the Collateral Agent. The Grantor, the Depository Bank and the Collateral Agent agree that the Cash Collateral Account is a securities account under Article 8 of the UCC and all assets held in the account shall be treated as financial assets under Article 8 of the UCC. Depositary Bank agrees that it shall at all times be a "securities intermediary" within the meaning of Section 8-102 of the UCC.
2.2 Definition of Collateral. The "Collateral" shall be the Initial Cash Collateral Deposit, the December, 2000 Cash Collateral Deposit, any C-T Borrower Cash Collateral Deposit, and any other Cash Collateral Deposit required to be deposited pursuant to Section 5 of each Agreement Re Specified D&O Facility, all funds, items, instruments, investments, securities, and other things of value at any time deposited with or held by (whether for collection, provisionally or otherwise), the Depositary Bank (solely in its capacity as Depositary Bank), the Collateral Agent (solely in its capacity as Collateral Agent), or any agent, bailee or custodian therefor, in each case, for deposit in the Cash Collateral Account, all Cash Equivalents referred to in Section 5 hereof, and all Proceeds of any and all of the foregoing, including, without limitation, any of the foregoing from time to time paid to, deposited in, credited to or held in the Cash Collateral Account.
2.3 The Account. The parties hereby agree and represent that (a) the Cash Collateral Account has been established in the name of Collateral Agent as recited above, (b) the Cash Collateral Account does not hold any financial assets which are registered in
7
the name of Grantor, payable to its order or specially endorsed to it, which have not been endorsed to the Collateral Agent or in blank, (c) the security entitlements arising out of the financial assets carried in the Cash Collateral Account and any free credit balance are valid and legally binding obligations of the Depository Bank, and (d) except for the claims and interests of Grantor and the Collateral Agent in the Cash Collateral Account, the Collateral Agent does not know of any claim to or interest in the Cash Collateral Account or in any financial asset carried therein.
SECTION 3. GRANT OF SECURITY INTEREST BY GRANTOR
3.1 Grant. Grantor hereby assigns and transfers to the Collateral Agent, and hereby grants to the Collateral Agent, for the benefit of the Secured Parties, a security interest in, the Collateral and in the Cash Collateral Account, as collateral security for the Secured Obligations, including for the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise, but in all instances subject to the provisions of the Agreements Re Specified D&O Facilities) of the Secured Obligations.
3.2 Intercreditor Relationship Regarding Collateral. The Collateral shall be held for the ratable benefit of the Secured Parties; provided, however, that as between the 1997 D&O Obligations, on the one hand, and the 1998 D&O Obligations, on the other hand, the portion of the Collateral allocated to the 1997 D&O Obligations pursuant to Section 4 hereof shall first secure the 1997 D&O Obligations (and shall then secure, on a basis junior and subordinate to the 1997 D&O Obligations, the 1998 D&O Obligations), and the portion of the Cash Collateral allocated to the 1998 D&O Obligations pursuant to Section 4 hereof shall first secure 1998 D&O Obligations (and shall then secure, on a basis junior and subordinate to the 1998 D&O Loan Obligations, the 1997 D&O Obligations). As between the 1997 D&O Creditors and the 1998 D&O Creditors, the priorities set forth in this Section 3.2, as a matter of contractual subordination, are applicable irrespective of the manner or order of creation, attachment or perfection of any such liens or priority that might otherwise be available to such parties, or any of them, pursuant to contract or under applicable law.
3.3 Continuing Security Interest. This Pledge Agreement shall create a continuing security interest in the Collateral and shall: (a) remain in full force and effect until the payment in full of all Secured Obligations, (b) be binding upon Grantor and its successors, transferees, and assigns, and (c) inure, together with the rights and benefits of the Collateral Agent hereunder, to the benefit of each of the Secured Parties.
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SECTION 4. ALLOCATION BETWEEN 1997 AND 1998 D&O OBLIGATIONS/WITHDRAWALS BY CONSECO
4.1 The Initial Cash Collateral Deposit. The Initial Cash Collateral Deposit shall be allocated between the 1997 D&O Obligations, on the one hand, and the 1998 D&O Obligations, on the other hand, as set forth in Schedule I hereto.
4.2 Subsidiary Deposits. To the extent made by the Grantor, the December, 2000 Cash Collateral Deposit and any C-T Borrower Cash Collateral Deposit, shall be allocated between the 1997 D&O Obligations and the 1998 D&O Obligations as necessary to be consistent with the manner in which the pertinent Aggregate $25 Benchmark Deficiency for the Director Borrowers is calculated and the pertinent $25 Benchmark Deficiency for D&O C-T Borrowers, has been calculated.
4.3 Waterfall Deposits. To the extent made by the Grantor, Cash Collateral Deposits made pursuant to Section 5(b) of the Agreements Re Specified D&O Facilities shall be allocated between the 1997 D&O Obligations and the 1998 D&O Obligations ratably.
4.4 Deposits do not Secure any Particular Borrower's Loan. The allocations to be undertaken pursuant to Sections 4.2 and 4.3 hereof are solely for purposes of allocating the Collateral between the 1997 D&O Obligations and the 1998 D&O Obligations. Consistent with the nature of this Agreement as a third party pledge in support of the Specified D&O Guaranties (and, not the loans of any particular Borrower), the Collateral once it is so allocated to the 1997 D&O Obligations or the 1998 D&O Obligations, as the case may be, shall secure and apply to all of such obligations and not to any particular portion of those obligations such as securing only the loans of a particular Borrower, even if such loans may have factored into the calculation of the Aggregate $25 Benchmark Deficiency for Director Borrowers or the Aggregate $25 Benchmark Deficiency for C-T Borrowers and thus, affected or even determined such allocation.
4.5 Withdrawal Rights. Pending payment in full of the Secured Obligations, the Grantor shall not have any right to withdraw or otherwise have access to any Cash Collateral deposited in the Collateral Account except to the extent that the Grantor delivers to the Collateral Agent a certificate in a form reasonably satisfactory to the Collateral Agent: (i) certifying that either Grantor or Conseco is entitled to withdraw the funds pursuant to Section 5(c) of the Agreements Re Specified D&O Facilities, (ii) stating the amount of the withdrawal, (iii) describing the Director Borrower Paydowns giving rise to such right of withdrawal including the Specified D&O Facility to which such funds were applied, (iv) stating the amount of Cash Collateral Deposits allocated to such Director Borrower's loan(s) under that Specified D&O Facility, and (v) directing that the
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amount so withdrawn be wired transferred directly to BofA as the administrative agent under the $1.5 Billion Facility for application against Conseco's principal obligations thereunder in inverse order of maturity. The Grantor shall deliver such certificate to the D&O Administrative Agents contemporaneously with its delivery to the Collateral Agent, and the Collateral Agent shall make such distribution within two Business Days of its receipt of such certificates. In all instances, the Collateral Agent shall be entitled to rely upon the authenticity, accuracy and validity of any such certificate it receives. At any time after the Depository Bank shall have received written notice from the D&O Administrative Agents that a Termination Event has occurred, the Depository Bank will follow instructions from the D&O Administrative Agents and not the Grantor with respect to the Cash Collateral Accounts, including the withdrawal of assets therefrom.
4.6 Allocations. Any allocation of Collateral, or payment or distribution to be applied to the 1997 D&O Obligations shall be applied to the 1997 D&O Obligations ratably. Any allocation of Collateral, or payment or distribution to be applied to the 1998 D&O Obligations shall be applied to the 1998 D&O Obligations ratably.
SECTION 5. INVESTMENTS
5.1 Investments; Losses. The Cash Collateral Account shall be invested pursuant to the Account Agreement, but only in investments of Cash Equivalents in which the Collateral Agent has a perfected security interest as Grantor may from time to time direct. All investments shall be made in the name of the Collateral Agent. All income from such investments shall be retained in the Cash Collateral Account, and be maintained and applied in the same manner as other balances. All such investments shall be at risk of Grantor and the Collateral Agent shall not be liable to any person or entity with respect to any loss with respect to such investments in the absence of its gross negligence or wilful misconduct. All income from investments in the Cash Collateral Account shall be taxable to Grantor, and the Collateral Agent shall prepare and distribute to Grantor, as required, Form 1099 or other appropriate federal and state income tax forms with respect to such income. Grantor shall pay when due all such taxes on such income.
5.2 No Obligation to Make or Track Investments Based on Collateral Allocation. Consistent with the foregoing, the Collateral Agent shall have no obligation to make, track, or otherwise account for investment gains or losses with respect to the Collateral based upon the intercreditor relationship and agreement set forth in Section 3.2 hereof.
SECTION 6. COMPENSATION/EXPENSES/INDEMNITY
6.1 Compensation/Expenses. The Grantor hereby agrees to pay to the Depositary Bank's and the Collateral Agent's usual and customary fees, charges and all other related expenses with regard to the Cash Collateral Account and all services
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performed in connection therewith, and, in addition, each of the Grantor agrees to pay on demand all reasonable costs and expenses
(including without limitation reasonable legal fees and expenses)
incurred in connection with the administration, work-out or enforcement of this Agreement or any Collateral (collectively, "Collateral Agent's Fees").
6.2 Indemnity. (a) The Grantor agrees to pay, and to save the Collateral Agent and the other Secured Parties harmless from, any and all liabilities with respect to, or resulting from any delay in paying, any and all stamp, excise, sales or other taxes which may be payable or determined to be payable with respect to any of the Collateral or in connection with any of the transactions contemplated by this Agreement.
(b) The Grantor agrees to pay, and to save the Collateral Agent and the other Secured Parties harmless from, any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Agreement except with respect to the gross negligence or wilful misconduct of the Collateral Agent or any such Secured Party.
6.3 Survival. The obligations of the Grantor under this Section 6 shall survive termination of this Agreement.
SECTION 7. REMEDIAL PROVISIONS
7.1 Remedies. If any Termination Event shall have occurred and is continuing, the Collateral Agent may, and upon instruction as provided as described in Section 7.2 below, shall from time to time (i) if the Collateral Agent concludes in its sole and absolute discretion that such action is warranted, apply any of the moneys in the Cash Collateral Account to the payment of due and unpaid Collateral Agent Fees, (ii) distribute any part or all of the remaining Cash Collateral to the D&O Administrative Agents for application against the Secured Obligations, with such distribution to be made ratably except, as between the 1997 D&O Creditors, on the one hand, and the 1998 D&O Creditors, on the other hand, such distributions must be adjusted to reflect the allocations set forth in Section 4 hereof, and (iii) after payment in full, including interest and expenses, of the Secured Obligations, distribution of any surplus to the Grantor. In addition to the foregoing, the Collateral Agent shall have and expressly reserves the ability to exercise any and all rights and remedies of a secured party under the UCC and other applicable law upon the occurrence of a Termination Event. In connection with the foregoing, the Collateral Agent may liquidate any investment included in the Collateral prior to the maturity thereof and shall not be liable for any losses incurred in connection with such liquidation.
7.2 Collateral Agent's Calculations. In making the determinations and allocations required by Section 4.6, the Collateral Agent may conclusively rely upon
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information supplied by the D&O Administrative Agents as to the amounts of unpaid principal and interest and other amounts outstanding with respect to the Specified D&O Facilities, and the Collateral Agent shall have no liability to any of the Secured Parties for actions taken in reliance on such information absent its gross negligence or wilful misconduct, provided that nothing in this sentence shall prevent any Grantor from contesting any amounts claimed by any Secured Party in any information so supplied. All distributions made by the Collateral Agent pursuant to Section 7.1 shall be (subject to any decree of any court of competent jurisdiction) final (absent manifest error), and the Collateral Agent shall have no duty to inquire as to the application by the D&O Administrative Agents or any D&O Bank of any amounts distributed to them.
SECTION 8. REPRESENTATIONS AND WARRANTIES OF GRANTOR
Grantor hereby represents and warrants to the Collateral Agent that:
8.1 Title; No Other Liens. Except for the security interest granted to the Collateral Agent for the ratable benefit of the Secured Parties pursuant to this Agreement, the Grantor owns each item of the Cash Collateral free and clear of any and all liens or claims of others. No financing statement or other public notice with respect to all or any part of the Cash Collateral is on file or of record in any public office, except as may have been filed in favor of the Collateral Agent, for the benefit of the Secured Parties, pursuant to this Agreement.
8.2 Perfected First Priority Liens. The security interests granted pursuant to this Agreement (a) upon deposit of any Collateral in the Cash Collateral Account, will constitute valid perfected security interests in all of the Collateral (subject to applicable bankruptcy and insolvency laws) in favor of the Collateral Agent, for the benefit of the Secured Parties, as Collateral security for the Secured Obligations, enforceable in accordance with the terms hereof against all creditors of such Grantor and any Persons purporting to purchase any Collateral from such Grantor and (b) are prior to all other Liens on the Collateral in existence on the date hereof.
SECTION 9. COVENANTS
The Grantor covenants and agrees with the Collateral Agent that, from and after the date of this Agreement until the Secured Obligations shall have been paid in full:
9.1 Maintenance of Perfected Security Interest; Further Documentation. (a) Such Grantor shall maintain the security interest created by this Agreement as a perfected security interest having the priority described in Section 8.2 and shall defend such security interest against the claims and demands of all Persons whomsoever.
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(b) At any time and from time to time, upon the written request of the Collateral Agent, and at the sole expense of such Grantor, such Grantor will promptly and duly execute and deliver, and have recorded, such further instrument and documents and take such further actions as the Collateral Agent may reasonably request for the purpose of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted, including, without limitation, filing and financing or continuation statements under the UCC (or other similar laws) in effect in any jurisdiction with respect to the security interests created.
SECTION 10. AUTHORITY OF COLLATERAL AGENT
10.1 General Authority of the Collateral Agent. (a) Each Grantor herein irrevocably constitutes and appoints the Collateral Agent and any officer or agent thereof, with full power of substitution, during the continuance of a Termination Event, as its true and lawful attorney-in-fact with full power and authority in its or his own name, from time to time in the Collateral Agent's discretion to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to carry out the terms of this Agreement and accomplish the purposes hereof and thereof. All powers, authorizations and agencies contained in this Agreement are coupled with an interest and are irrevocable until this Agreement is terminated and the security interests created hereby are released.
(b) By acceptance of the benefits of this Agreement each Secured Party shall be deemed irrevocably (i) to consent to the appointment of the Collateral Agent as its agent hereunder, (ii) to confirm that the Collateral Agent shall have the authority to act as the exclusive agent of such Secured Party for enforcement of any provisions of this Agreement against any Grantor or the exercise of remedies hereunder or thereunder, (iii) to agree that such Secured Party shall not take any action to enforce any provisions of this Agreement against any Grantor or to exercise any remedy hereunder or thereunder and (iv) to agree to be bound by the terms of this Agreement.
(c) Other than as provided to the contrary herein, the Collateral Agent will follow any written instructions provided by the representatives of 60% or more of the aggregate amount of the Secured Obligations, although if it should reasonably conclude that any requested action would subject it to unacceptable risk of liability it may request a sufficient indemnity from the D&O Banks before being required to proceed with such instructions.
10.2 Execution of Financing Statements. Pursuant to Section 9-402 of the UCC and any other applicable law, each Grantor authorizes the Collateral Agent to file or record financing statements and other filings or recording documents or instruments with
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respect to the Collateral without the signature of such Grantor in such form and in such offices as the Collateral Agent determines appropriate to perfect the security interests of the Collateral Agent under this Agreement. A photographic or other reproduction of this Agreement shall be sufficient as a financing statement or other filing or recording document or instrument for filing or recording in any jurisdiction.
10.3 Further Assurances. At any time and from time to time, upon the written request of the D&O Administrative Agents or the Collateral Agent, and at the expense of Conseco, each Grantor will promptly execute and deliver any and all such further instruments and documents and take such further action as is necessary or reasonably requested further to perfect, or to protect the perfection of, the liens and security interests granted hereunder including, without limitation, the filing of any financing or continuation statements under the UCC in effect in any jurisdiction. In addition to the foregoing, at any time and from time to time, upon the written request of the Collateral Agent, and at the expense of the Grantor, each Grantor will promptly execute and deliver any and all such further instruments and documents and take such further action as the Collateral Agent determines is necessary or reasonably requested to obtain the full benefits of this Agreement and of the rights and powers herein. Notwithstanding the foregoing, in no event shall the Collateral Agent have any obligation to monitor the perfection or continuation of perfection or the sufficiency or validity of any security interest in or related to the Collateral.
10.4 Exculpatory Provisions. (a) The Collateral Agent shall not be responsible in any manner whatsoever for the correctness of any recitals, statements, representations or warranties herein, all of which are made solely by the Grantor. The Collateral Agent makes no representations as to the value or condition of the Collateral or any part thereof, or as to the title of the Grantor thereto or as to the security afforded by this Agreement or as to the validity, execution (except its execution), enforceability, legality or sufficiency of this Agreement, or the Secured Obligations, and the Collateral Agent shall incur no liability or responsibility in respect of any such matters.
(b) The Collateral Agent shall not be required to ascertain or inquire as to the performance by the Grantors of any of the covenants or agreements contained herein.
(c) The Collateral Agent shall have the same rights with respect to any Secured Obligation held by it as any other Secured Party and may exercise such rights as though it were not the Collateral Agent hereunder, and may accept deposits from, lend money to, and generally engage in any kind of banking or trust business with, any Grantors or Conseco or any of Conseco's other affiliates as if it were not the Collateral Agent.
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(d) The Collateral Agent shall not be liable for any action taken or omitted to be taken in accordance with the Agreement except for its own gross negligence or willful misconduct.
10.5 Delegation of Duties. The Collateral Agent may execute any of the powers hereof and perform any duty hereunder either directly or by or through agents or attorneys-in-fact. The Collateral Agent shall be entitled to advice of counsel concerning all matters pertaining to such powers and duties. The Collateral Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it without gross negligence or willful misconduct.
10.6 Reliance by Collateral Agent. (a) Whenever in the administration of this Agreement the Collateral Agent shall deem it necessary or desirable that a factual matter be proved or established in connection with the Collateral Agent taking, suffering or omitting any action hereunder or thereunder, such matter (unless other evidence in respect thereof is herein specifically prescribed) may be deemed to be conclusively proved or established by a certificate of a Responsible Officer of the Grantor delivered to the Collateral Agent, and such certificate shall be full warrant to the Collateral Agent for any action taken, suffered or omitted in reliance thereon, subject, however, to the provisions of Section 10.4(d).
(b) The Collateral Agent may consult with counsel, and any opinion of counsel shall be full and complete authorization and protection in respect of any action taken or suffered by it hereunder. The Collateral Agent shall have the right at any time to seek instructions concerning the administration of this Agreement from any court of competent jurisdiction.
(c) The Collateral Agent may rely, and shall be fully protected in acting, upon any resolution, statement, certificate, instrument, opinion, report, notice, request, consent, order, bond or other paper or document which it has no reason to believe to be other than genuine and to have been signed or presented by the proper party or parties or, in the case of cables, telecopies and telexes, to have been sent by the proper party or parties. In the absence of its own gross negligence or willful misconduct, the Collateral Agent may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Collateral Agent and conforming to the requirements of this Agreement.
(d) The Collateral Agent shall not be under any obligation to exercise any of the rights or powers vested in the Collateral Agent by this Agreement unless the Collateral Agent shall have been provided adequate security and indemnity against the costs, expenses and liabilities which may be incurred by the Collateral
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Agent, including such reasonable advances as may be requested by the Collateral Agent.
(e) Any opinion of counsel may be based, insofar as it relates to factual matters, upon a certificate of a responsible officer of the Grantor or representations made by a responsible officer of the Grantor in a writing filed with the Collateral Agent.
10.7 Moneys to be Held in Trust. All moneys received by the Collateral Agent under or pursuant to any provision of this Agreement shall be held in trust for the purposes for which they were paid or are held.
10.8 Resignation and Removal of the Collateral Agent. (a) The Collateral Agent may at any time, by giving written notice to Grantor, each of the D&O Administrative Agents and each of the D&O Banks, resign and be discharged of the responsibilities hereby created, such resignation to become effective upon (i) the appointment of a successor Collateral Agent, (ii) the acceptance of such appointment by such successor Collateral Agent and (iii) the approval of such successor Collateral Agent evidenced by one or more instruments signed by each of the D&O Administrative Agents and Grantor. If no successor Collateral Agent shall be appointed and shall have accepted such appointment within 90 days after the Collateral Agent gives the aforesaid notice of resignation, the Collateral Agent, the Grantor, either of the D&O Administrative Agents, or any other Secured Party may apply to any court of competent jurisdiction to appoint a successor Collateral Agent to act until such time, if any, as a successor Collateral Agent shall have been appointed as provided in this Section 10.8. Any successor so appointed by such court shall immediately and without further act be superseded by any successor Collateral Agent appointed by the D&O Administrative Agents as provided herein. The D&O Administrative Agents (acting in concert) may, at any time upon giving 30 days' prior written notice thereof to the Collateral Agent, remove the Collateral Agent and appoint a successor Collateral Agent, such removal to be effective upon the acceptance of such appointment by the successor. The Collateral Agent shall be entitled to Collateral Agent Fees to the extent incurred or arising, or relating to events occurring, before such resignation or removal.
(b) If at any time the Collateral Agent shall resign or be removed or otherwise become incapable of acting, or if at any time a vacancy shall occur in the office of the Collateral Agent for any other cause, a successor Collateral Agent may be appointed by the D&O Administrative Agents and the Grantor (acting in concert). The powers, duties, authority and title of the predecessor Collateral Agent shall be terminated and cancelled without procuring the resignation of such predecessor and without any other formality (except as be required by applicable law) than appointment and designation of a successor in writing duly acknowledged and delivered to the predecessor and the Grantor. Such
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appointment and designation shall be full evidence of the right and authority to make the same and of all the facts therein recited, and this Agreement shall vest in such successor, without any further act, deed or conveyance, all the estates, properties, rights, powers, duties, authority and title of its predecessor; but such predecessor shall, nevertheless, on the written request of the D&O Administrative Agents (acting in concert), the Grantor, or the successor, execute and deliver an instrument transferring to such successor all the estates, properties, rights, powers, duties, authority and title of such predecessor hereunder and shall deliver all Collateral held by it or its agents to such successor. Should any deed, conveyance or other instrument in writing from any Grantor be required by any successor Collateral Agent for more fully and certain vesting in such successor the estates, properties, rights, powers, duties, authority and title vested or intended to be vested in the predecessor Collateral Agent, any and all such deeds, conveyances and other instruments in writing shall, on request of such successor, be executed, acknowledged and delivered by such Grantor. If such Grantor shall not have executed and delivered any such deed, conveyance or other instrument within 10 days after it receives a written request from the successor Collateral Agent to do so, or if a Termination Event shall have occurred and be continuing, the predecessor Collateral Agent may execute the same on behalf of such Grantor. Such Grantor hereby appoints any predecessor Collateral Agent as its agent and attorney to act of it as provided in the next preceding sentence.
10.9 Status of Successor Collateral Agent. Every successor Collateral Agent appointed pursuant to Section 10.8 shall be a bank or trust company in good standing and having power to act as Collateral Agent hereunder, incorporated under the laws of the United States of America or any State thereof or the District of Columbia and having its principal office within the 48 contiguous States and shall also have capital, surplus and undivided profits of not less than $500,000,000, if there be such an institution with such capital, surplus and undivided profits willing, qualified and able to accept the powers and duties hereunder upon reasonable or customary terms.
10.10 Merger of the Collateral Agent. Any corporation into which the Collateral Agent may be merged, or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Collateral Agent shall be a party, shall be the Collateral Agent under this Agreement without the execution or filing of any paper or any further act on the part of the parties hereto.
SECTION 11. ABSOLUTE OBLIGATIONS
SECTION 11.1 Absolute, etc. This Agreement shall in all respects be a continuing, absolute, unconditional and irrevocable obligation, and shall remain in full force and effect until all Secured Obligations have been paid in full and all obligations of Grantors hereunder shall have
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been paid in full. The liability of Grantors under this Agreement shall be absolute, unconditional and irrevocable irrespective of:
(a) any lack of validity, legality or enforceability of the D&O Credit Agreements or any other document delivered in connection therewith (the "D&O Documents");
(b) the failure of any D&O Administrative Agent or D&O Bank:
(i) to assert any claim or demand or to enforce any right or remedy against any D&O Borrower or any other Person under the provisions of any D & O Credit Agreement, any other D&O Document or otherwise; or
(ii) to exercise any right or remedy against any other guarantor of, or collateral securing, any Secured Obligations;
(c) any change in the time, manner or place of payment of, or in any other term of, all or any of the Secured Obligations, or any other extension, compromise or renewal of any Secured Obligations;
(d) any reduction, limitation, impairment or termination of the Secured Obligations for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to (and the Grantors hereby waive any right to or claim of) any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality, nongenuineness, irregularity, compromise, unenforceability of, or any other event or occurrence affecting, the Secured Obligations;
(e) any amendment to, rescission, waiver, or other modification of, or any consent to any departure from, any of the terms of any D&O Credit Agreement or any other D&O Document;
(f) any addition, exchange, release, surrender or non-perfection of any collateral, or any amendment to or waiver or release or addition of, or consent to any departure from, any other guaranty held by any D&O Administrative Agent or D&O Bank or any other holder of the Secured Obligations; or
(g) any other circumstance which might otherwise constitute a defense available to, or a legal or equitable discharge of, a D&O Borrower, any surety or any guarantor.
SECTION 11.2 Reinstatement, etc. Each Grantor agrees that this Agreement shall continue to be effective or be reinstated, as the case may be, if at any time any payment (in whole or in part) of any of the Secured Obligations is rescinded or must otherwise be restored by any D&O Administrative Agent or D&O Bank or any other holder of any Secured Obligations, upon
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the insolvency, bankruptcy or reorganization of any D&O Borrower, all as though such payment had not been made.
SECTION 11.3 Waiver, etc. Each Grantor hereby waives promptness, diligence, notice of acceptance and any other notice with respect to any of the Secured Obligations, and this Agreement and any requirement that the Collateral Agent, any D&O Administrative Agent or any D&O Bank or any other holder of Secured Obligations protect, secure, perfect or insure any security interest or lien, or any property subject thereto, or exhaust any right or take any action against any D&O Borrower or any other Person (including any other guarantor) or entity or any collateral securing the Secured Obligations.
SECTION 11.4 Waiver of Subrogation; Subordination. Each Grantor hereby irrevocably waives with respect to any D&O Borrower, until the prior indefeasible payment in full in cash of all Secured Obligations, any claim or other rights which it may now or hereafter acquire against any D&O Borrower that arises from the existence, payment, performance or enforcement of any Grantor's obligations hereunder, including any right of subrogation, reimbursement, exoneration, or indemnification, any right to participate in any claim or remedy of the D&O Banks and D&O Administrative Agents against any D&O Borrower or any collateral which the Collateral Agent now has or hereafter acquires, whether or not such claim, remedy or right (all such claims, remedies and rights being collectively called "Subrogation Rights") arises in equity, or under contract, statute or common law, including the right to take or receive from any D&O Borrower, directly or indirectly, in cash or other property or by set-off or in any manner, payment or security on account of such claim or other rights. If any amount shall be paid to any Grantor in violation of the preceding sentence and the Secured Obligations shall not have been paid in cash, in full, such amount shall be deemed to have been paid to such Grantor for the benefit of, and held in trust for, the D&O Banks and D&O Administrative Agents, and shall forthwith be paid to the D&O Banks and D&O Administrative Agents to be credited and applied upon the Secured Obligations, whether matured or unmatured. Each Grantor acknowledges that it will receive direct and indirect benefits from the Agreements Re Specified D&O Facilities and that the waiver set forth in this
Section 11.4 is knowingly made in contemplation of such benefits.
SECTION 12. MISCELLANEOUS
12.1 Amendments. None of the terms or provisions of this Agreement may be waived, amended, supplemented or otherwise modified except in a writing signed by the parties hereto.
12.2 Notices. All notices, requests and demands to or upon the Collateral Agent or any Grantor hereunder shall be effected in the manner provided for in the Agreements Re Specified D&O Facilities; provided that any such notice, request or demand to or upon any Grantor shall be addressed to such Grantor at its notice address set forth on Schedule II and that any such notice, request or demand to or upon the
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Collateral Agent shall be addressed to the Collateral Agent at its notice address set forth in Schedule II.
12.3 No Waiver by Course of Conduct; Cumulative Remedies. Neither the Collateral Agent nor any other Secured Party shall by any act (except by a written instrument), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Termination Event. No failure to exercise, nor any delay in exercising, on the part of the Collateral Agent or any other Secured Party, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by the Collateral Agent or any other Secured Party of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Collateral Agent or such Secured Party would otherwise have on any future occasion. The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any other rights or remedies provided by law.
12.4 Successors and Assigns. This Agreement shall be binding upon the successors and assigns of each Grantor and shall inure to the benefit of the Collateral Agent and the other Secured Parties and their successors and assigns; provided that no Grantor may assign, transfer or delegate any of its rights or obligations under this Agreement without the prior written consent of the Collateral Agent.
12.5 Counterparts. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts (including by telecopy), and all of said counterparts taken together shall be deemed to constitute one and the same instrument.
12.6 Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
12.7 Section Headings. The Section headings used in this Agreement are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof.
12.8 Integration. This Agreement represent the agreement of the Grantors, the Collateral Agent and the other Secured Parties with respect to the subject matter hereof and thereof, and there are no promises, undertakings, representations or warranties by the
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Collateral Agent or any other Secured Party relative to subject matter hereof and thereof not expressly set forth or referred to herein.
12.9 Depository Bank's Location. New York shall be deemed to be the Depository Bank's location for the purposes of this Agreement and the perfection and priority of the Collateral Agent's security interest in the Cash Collateral Account.
12.10 Replacement of Existing Cash Collateral Agreement. This Agreement amends and restates, and thus replaces and supersedes in its entirety, the Existing Cash Collateral Agreement.
12.11 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, each of the undersigned has caused this Amended and Restated Cash Collateral Agreement to be duly executed and delivered as of the date first above written.
CDOC, INC.

By: /s/ David A. Hill
    ------------------------
    Name: David A. Hill
    Title: Vice President	

BANK OF AMERICA, NATIONAL
ASSOCIATION, as Depositary Bank

By: /s/
    -------------------------
    Name:
    Title:	

BANK OF AMERICA, NATIONAL
ASSOCIATION, as Collateral Agent

By: /s/
    --------------------------
    Name:
    Title:	

-21-
CONSENT
The undersigned hereby consents to the above amendment and restatement.
BANK OF AMERICA, NATIONAL ASSOCIATION,
 as 1997 D&O Administrative
Agent, 1998 D&O
Administrative Agent, 1997
Refinancing Agent, and 1998
Refinancing Agent

By: /s/
    -------------------------
    Name:
    Title:	

22
CREDIT AGREEMENT
Dated as of November 22, 2000
among
THE PERSONS LISTED ON THE SIGNATURE PAGES HERETO,
 as Borrowers,
THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO,
and
BANK OF AMERICA, NATIONAL ASSOCIATION
as Administrative Agent
(Relating to Refinancing of certain Loans under that certain Credit Agreement, dated as of August 21, 1998)
The following Table of Contents has been inserted for convenience only and does not constitute a part of this Agreement.

                                TABLE OF CONTENTS

                                                                                                            PAGE
                                `                                                                            ---
SECTION 1. DEFINITIONS AND ACCOUNTING TERMS...................................................................1
     1.1  Certain Defined Terms...............................................................................1
     1.2  Other Definitional Provisions......................................................................14
     1.3  Accounting and Financial Determinations............................................................15

SECTION 2.  THE LOANS........................................................................................15
     2.1  Commitment.........................................................................................15
     2.2  Procedure for Borrowings...........................................................................15
     2.3  Conversion and Continuation Elections..............................................................16
     2.4  Repayment of Loans.................................................................................18
     2.5  Loan Accounts; Record Keeping......................................................................18

SECTION 3.  INTEREST AND FEES................................................................................18
     3.1  Interest Rates.....................................................................................18
     3.2  Default Interest Rate..............................................................................19
     3.3  Interest Payment Dates.............................................................................19
     3.4  Setting and Notice of Rates........................................................................19
     3.5  Computation of Interest and Fees...................................................................19

SECTION 4.  PAYMENTS AND PREPAYMENTS.........................................................................20
     4.1  Prepayments........................................................................................20
     4.2  Payments by the Borrowers..........................................................................20
     4.3  Sharing of Payments................................................................................21
     4.4  Setoff.............................................................................................22
     4.5  Net Payments.......................................................................................22

SECTION 5.  CHANGES IN CIRCUMSTANCES.........................................................................24
     5.1  Increased Costs....................................................................................24
     5.2  Change in Rate of Return...........................................................................25
     5.3  Basis for Determining Interest Rate Inadequate or Unfair...........................................25
     5.4  Changes in Law Rendering Certain Loans Unlawful....................................................26
     5.5  Funding Losses.....................................................................................26
     5.6  Right of Banks to Fund Through Other Offices.......................................................27
     5.7  Discretion of Banks as to Manner of Funding........................................................27	

     5.8  Replacement of Banks...............................................................................27
     5.9  Conclusiveness of Statements; Survival of Provisions...............................................28
     5.10 Avoidance of Certain Costs.........................................................................28

SECTION 6.  COLLATERAL AND OTHER SECURITY....................................................................28
     6.1  Collateral Documents...............................................................................28
     6.2  Pledge of Additional Collateral....................................................................29
     6.3  Application of Proceeds from Collateral............................................................30
     6.4  Further Assurances.................................................................................31

SECTION 7.  REPRESENTATIONS AND WARRANTIES OF BORROWERS......................................................31
     7.1  No Conflict........................................................................................31
     7.2  Validity...........................................................................................31
     7.3  Litigation and Contingent Obligations..............................................................32
     7.4  Liens..............................................................................................32
     7.5  Taxes..............................................................................................32
     7.6  Accuracy of Information............................................................................32
     7.7  Proceeds...........................................................................................32
     7.8  Securities Laws....................................................................................32
     7.9  No Default.........................................................................................33
     7.10 Organization, etc..................................................................................33
     7.11 Authorization......................................................................................33
     7.12 Margin Regulations.................................................................................33
     7.13 Principal Residence................................................................................34
     7.14 No Default or Event of Default.....................................................................34

SECTION 8.  COVENANTS OF BORROWERS...........................................................................34
     8.1  Reports, Certificates and Other Information........................................................34
     8.2  Taxes and Liabilities..............................................................................35
     8.3  Compliance with Laws...............................................................................35
     8.4  Other Agreements...................................................................................35

SECTION 9. CONDITIONS AND EFFECTIVENESS OF
THIS AGREEMENT...............................................................................................36
     9.1  Receipt of Documents...............................................................................36
     9.2  Additional Conditions..............................................................................38

SECTION 10.  EVENTS OF DEFAULT AND THEIR EFFECT..............................................................39
     10.1  Events of Default.................................................................................39
     10.2  Effect of Event of Default........................................................................41

SECTION 11.  THE AGENT.......................................................................................42	

     11.1  Authorization and Action..........................................................................42
     11.2  Liability of the Administrative Agent.............................................................42
     11.3  Administrative Agent and Affiliates...............................................................42
     11.4  Bank Credit Decision..............................................................................43
     11.5  Indemnification...................................................................................43
     11.6  Successor Agent...................................................................................43

SECTION 12.  ASSIGNMENTS AND PARTICIPATIONS..................................................................44
     12.1  Assignments.......................................................................................44
     12.2  Participations....................................................................................45
     12.3  Disclosure of Information.........................................................................46
     12.4  Foreign Transferees...............................................................................47

SECTION 13.  MISCELLANEOUS...................................................................................47
     13.1  Waivers and Amendments............................................................................47
     13.2  Failure to Consent................................................................................48
     13.3  Notices...........................................................................................49
     13.4  Indemnity.........................................................................................49
     13.5  D&O Agreements....................................................................................50
     13.6  Subsidiary References.............................................................................50
     13.7  Captions..........................................................................................50
     13.8  GOVERNING LAW.....................................................................................50
     13.9  Counterparts......................................................................................50
     13.10 SUBMISSION TO JURISDICTION; WAIVER OF VENUE.......................................................50
     13.11 Successors and Assigns............................................................................51
     13.12 Power of Attorney.................................................................................51
     13.13 No Waiver; Cumulative Remedies....................................................................51
     13.14 WAIVER OF JURY TRIAL..............................................................................52

                             SCHEDULES AND EXHIBITS

SCHEDULES

SCHEDULE 1.1      Existing Litigation
SCHEDULE 2.1      Banks and Percentages
SCHEDULE 2.2      Borrower Loan Percentage

EXHIBITS

EXHIBIT A         Form of Note	

EXHIBIT B         Form of Notice of Borrowing
EXHIBIT C         Form of Notice of Conversion/Continuation
EXHIBIT D         Form of Pledge Agreement
EXHIBIT E         Form of Conseco Guaranty
EXHIBIT F-1       Form of Opinion of David K. Herzog, counsel to Guarantor
EXHIBIT F-2       Form of Opinion of Weil, Gotshal & Manges LLP, outside counsel to
                  Guarantor
EXHIBIT G         Form of Confidentiality Letter
EXHIBIT H         Form of Assignment Agreement
EXHIBIT I         Funding Loss Formula
EXHIBIT J         Form of CIHC Guaranty
EXHIBIT K         Form of Pledge Agreement (Additional Collateral)
EXHIBIT L         Form of Amended and Restated Cash Collateral Agreement
EXHIBIT M         Form of Subordinated Pledge Agreement Re 1997 Shares
EXHIBIT N         Form of Borrower Acknowledgment and Release
EXHIBIT O         Form of Conseco Officer's Certificate
EXHIBIT P         Form of Subordinated Pledge Agreement Re 1999 Shares	

CREDIT AGREEMENT
THIS CREDIT AGREEMENT is entered into as of November 22, 2000, among the persons listed as borrowers on the signature pages hereto (herein, collectively called the "Borrowers" and each individually, a "Borrower"), the several financial institutions from time to time party to this Agreement (herein, together with any Eligible Assignees thereof, collectively called the "Banks" and each individually, a "Bank"), and BANK OF AMERICA, N.A. ("BofA"), as administrative agent for the Banks (herein in such capacity, together with any successors thereto in such capacity, called the "Administrative Agent").
RECITALS
WHEREAS, the Borrowers, certain other borrowers, the Banks and the Administrative Agent are parties to that certain Credit Agreement, dated as of August 21, 1998 (as amended or modified through the date hereof, the "Existing Credit Agreement"), whereby the Banks party thereto made term loans to the borrowers party thereto (including the Borrowers), on the terms and subject to the conditions set forth in the Existing Credit Agreement;
WHEREAS, the Borrowers have requested that the Banks agree to make term loans in the principal amount for each Borrower set forth on Schedule 2.2 hereto to refinance the outstanding loans to the Borrowers under the Existing Credit Agreement;
WHEREAS, the Banks are willing, on the terms and conditions hereinafter set forth, to make the term loans to the Borrowers;
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 AND ACCOUNTING TERMS
SECTION 1.1 Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined):
"AC Collateral Agent" shall mean BofA (and its successors) as collateral agent under the AC Pledge Agreement.
"AC Pledge Agreement" shall mean the Pledge Agreement (Additional Collateral), substantially in the form of Exhibit K, as the same may be amended, modified, or supplemented from time to time.
1
"AC Pledge Borrowers" shall mean the Borrowers, if any, who have elected to pledge Additional Collateral pursuant to the terms of the Plan.
"Additional Collateral" shall mean, for any Borrower, marketable securities pledged by such Borrower to secure the repayment of such Borrower's obligations under the New Credit Agreements Re D&O Loans as required by Conseco pursuant to the Plan.
"Administrative Agent" - see Preamble.
"Administrative Agent's Office" shall mean 231 South LaSalle Street, Chicago, Illinois 60697, or such other address designated by the Administrative Agent (or any successor agent) to the Borrowers and the Banks from time to time.
"Affected Bank" - see Section 5.4.
"Affiliate" shall mean, as to any Person, any other Person which, directly or indirectly, owns, holds, controls, is controlled by or is under common control with such Person (including all beneficial control as a trustee, guardian or other fiduciary). A Person shall be deemed to be "controlled by" any other Person if such other Person possesses, directly or indirectly, power (a) to vote 10% or more of the securities (on a fully diluted basis) having ordinary voting power for the election of directors, managing general partners or managers; or (b) to direct or cause the direction of the management and policies of such Person whether through the ownership of voting securities, membership interests, by contract or otherwise.
"Agent-Related Persons" shall mean BofA in any agent capacity or any successor agent arising under Section 11.6, together with its respective Affiliates (including, in the case of BofA, the Arranger), and the officers, directors, employees, agents and attorneys-in-fact of such Persons and Affiliates.
"Agreement" shall mean this Credit Agreement, as amended, modified, or supplemented from time to time.
"Amended and Restated Cash Collateral Agreement" shall mean the Amended and Restated Cash Collateral Agreement in substantially the form of Exhibit L, as the same may be amended, modified or supplemented from time to time.
"Arranger" shall mean Banc of America Securities LLC, a Delaware limited liability company.
"Assignment Agreement" - see Section 12.1(a)
"Bank" or "Banks" - see Preamble.
2
"Base Rate" shall mean, for any day, the higher of (a) 0.50% per annum above the latest Federal Funds Rate and (b) the rate of interest in effect for such day as publicly announced from time to time by BofA as its "prime rate." (The "prime rate" is a rate set by BofA based upon various factors including BofA's costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate.) Any change in the prime rate announced by BofA shall take effect at the opening of business on the date specified in the public announcement of such change.
"Base Rate Loan" shall mean a Loan bearing interest at the Base Rate.
"BofA" - see Preamble.
"Borrower" or "Borrowers" - see Preamble.
"Borrower Acknowledgment and Release" shall mean an Acknowledgment and Release executed and delivered by each Borrower in favor of the Administrative Agent and the Banks, substantially in the form of Exhibit N.
"Borrower Collateral Percentage" shall mean, as to any Borrower, a fraction, the numerator of which is equal to the principal amount of the Loans to such Borrower then outstanding hereunder and the denominator of which is equal to the aggregate principal amount of the Loans to all Borrowers then outstanding hereunder.
"Business Day" shall mean any day other than a Saturday, Sunday or other day on which commercial banks in Chicago, New York City or Dallas are authorized or required by law to close and, if the applicable Business Day relates to any Offshore Rate Loan, means such a day on which dealings are carried on in the applicable offshore dollar interbank market.
"Capitalized Lease Liabilities" shall mean, with respect to any Person, all monetary obligations of such Person under any leasing or similar arrangement which, in accordance with GAAP, would be classified as a capitalized lease, and, for purposes of this Agreement, the amount of such obligations shall be the capitalized amount thereof, determined in accordance with GAAP, and the stated maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a penalty.
"CCPA Collateral" shall mean the "Collateral" from time to time delivered pursuant to the Amended and Restated Cash Collateral Agreement.
"CCPA Pledgor" shall mean CDOC, Inc., a Delaware corporation and any other "Grantor" from time to time a party to the Amended and Restated Cash Collateral Agreement.
3
"Charges" - see Section 4.5.
"CIHC" shall mean CIHC, Incorporated, a Delaware corporation.
"CIHC Guaranty" shall mean the Guaranty and Subordination Agreement, dated as of the date hereof, executed and delivered by CIHC and Conseco in favor of the Administrative Agent, for the benefit of the Banks, in substantially the form of Exhibit J, as the same may be amended, modified, or supplemented from time to time.
"Closing Date" shall mean the date on which all conditions precedent set forth in Section 9 are satisfied or waived by all Banks or, with respect to any payment to be made hereunder, waived by the Person entitled to receive such payment.
"Collateral Ratio" shall mean, as to any Borrower, the ratio of (a) the sum of the Loan Value of Direct Collateral of such Borrower plus the Borrower Collateral Percentage of the Loan Value of Indirect Collateral to (b) the aggregate principal amount of the Loans of such Borrower then outstanding.
"Conseco" shall mean Conseco, Inc., an Indiana corporation.
"Conseco Guaranty" shall mean the Guaranty of Conseco, dated as of the date hereof, executed and delivered in favor of the Administrative Agent, for the benefit of the Banks, in substantially the form of Exhibit E, as the same may be amended, modified, or supplemented from time to time.
"Contingent Obligation" shall mean, without duplication, any agreement, undertaking or arrangement by which any Person guarantees, endorses or otherwise becomes or is contingently liable upon (by direct or indirect agreement, contingent or otherwise, to provide funds for payment, to supply funds to, or otherwise to invest in, a debtor, or otherwise to assure a creditor against loss) the debt, obligation or other liability of any other Person (other than by endorsements of instruments in the course of collection), or guarantees the payment of dividends or other distributions upon the shares of any other Person. The amount of any Person's liability with respect to any Contingent Obligation shall (subject to any limitation set forth therein) be deemed to be the outstanding principal amount (or maximum outstanding principal amount, if larger) of the debt, obligation or other liability outstanding thereunder or, if not stated or if indeterminable, the maximum reasonably anticipated liability in respect thereof at the time of determination.
"Conversion/Continuation Date" shall mean any date on which, under
Section 2.3, Conseco (on behalf of the Borrowers) (a) converts Loans of one Type to another Type, or (b) continues as Loans of the same Type, but with a new Interest Period, Loans having Interest Periods expiring on such date.
4
"D&O Agreements" shall mean the Existing Credit Agreement, the 1997 D & O Credit Agreement, the September 22, 2000 Agreements, the 1999 D & O Credit Agreement, the New Credit Agreements Re D & O Loans, all other agreements or documents (including, without limitation, guaranties such as (without limitation) the Existing Conseco Guaranty, the Existing CIHC Guaranty, the Conseco Guaranty, and the CIHC Guaranty) relating to any of the foregoing, and any reaffirmed, amended, modified, or supplemented version of any of the foregoing.
"Default" shall mean any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default.
"Direct Collateral" shall mean, with respect to any Borrower, all property, assets and/or rights on or in which a Lien is now or hereafter granted by such Borrower to the Administrative Agent (or to any agent, trustee or other party acting on behalf of the Administrative Agent) for the benefit of the Banks, pursuant to the Pledge Agreement, the Subordinated Pledge Agreement Re 1997 Shares, the AC Pledge Agreement, the Subordinated Pledge Agreement Re 1999 Shares, and any other instruments or documents provided for herein or therein or delivered hereunder or thereunder or in connection herewith or therewith.
"Dollars" and the sign "$" shall mean lawful money of the United States of America.
"Eligible Assignee" shall mean any bank, pension fund, mutual fund, investment fund or other financial institution (other than an insurance company or any Affiliate of an insurance company except those to which the Borrowers consent).
"Eurodollar Reserve Percentage" has the meaning specified in the definition of "Offshore Rate."
"Event of Default" - see Section 10.1.
"Existing CIHC Guaranty" shall mean the Guaranty and Subordination Agreement entered into by CIHC and Conseco dated September 22, 2000 in respect of the Existing Credit Agreement.
"Existing Conseco Guaranty" shall mean the Guaranty dated as of August 21, 1998 of Conseco with respect to the Existing Credit Agreement.
"Existing Credit Agreement" - see first recital.
"Existing Litigation" shall mean the litigation described in Schedule
l.1 hereto.
5
"Existing Loans" shall mean loans extended to a Borrower by the Banks under the Existing Credit Agreement.
"Federal Funds Rate" means, for any day, the rate per annum (rounded upwards to the nearest 1/100 of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank on the Business Day next succeeding such day; provided that
(a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate charged to BofA on such day on such transactions as determined by the Administrative Agent.
"FRB" shall mean the Board of Governors of the Federal Reserve System, and any Governmental Authority succeeding to any of its principal functions.
"Funding Loss Formula" has the meaning set forth on Exhibit I.
"GAAP" shall mean generally accepted accounting principles in the United States of America as from time to time in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the U.S. accounting profession), which are applicable to the circumstances as of the date of determination.
"Governmental Authority" shall mean any nation or government, any state or other political subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing.
"Hedging Obligations" shall mean obligations in respect of any agreement (including any master agreement and any agreement, whether or not in writing, relating to any single transaction) that is an interest rate swap agreement, basis swap, forward rate agreement, commodity swap, commodity option, equity or equity index swap or option, bond option, interest rate option, forward foreign exchange agreement, rate cap, collar or floor agreement, currency swap agreement, cross-currency rate swap agreement, swaption, currency option or any other, similar agreement (including any option to enter into any of the foregoing).
"IBOR" has the meaning set forth in the definition of Offshore Rate.
6
"Indebtedness" shall mean, with respect to any Person at any date, without duplication: (a) all obligations of such Person for borrowed money or in respect of loans or advances; (b) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; (c) all obligations in respect of letters of credit, whether or not drawn, and bankers' acceptances issued for the account or upon the application or request of such Person; (d) all Capitalized Lease Liabilities of such Person; (e) all Hedging Obligations of such Person; (f) all obligations of such Person to pay the deferred purchase price of property or services which are included as liabilities in accordance with GAAP (other than trade payables entered into in the ordinary course of business on ordinary terms), and all obligations secured by a Lien on property owned or being purchased by such Person (including Indebtedness arising under conditional sales or other title retention agreements); (g) any obligations described in clauses (a) through (f) above or clause (h) immediately following this clause (g) of a partnership in which such Person is a general partner; and
(h) all Contingent Obligations of such Person in connection with the foregoing.
"Indemnified Parties" - see Section 13.4.
"Indirect Collateral" shall mean any assets of Conseco or CIHC which, as determined by the Administrative Agent in its sole discretion exercised in good faith, shall be deemed to "indirectly secure" the Liabilities pursuant to Regulation U as a result of the negative pledge agreement of Conseco and CIHC set forth in the Conseco Guaranty.
"Interest Payment Date" shall mean, as to any Offshore Rate Loan, the last day of each Interest Period applicable to such Loan and, as to any Base Rate Loan, the last Business Day of each calendar quarter and each date such Loan is converted into another Type of Loan, provided, however, that if any Interest Period for an Offshore Rate Loan exceeds three months, the date that falls three months (as the case may be) after the beginning of such Interest Period and after each Interest Payment Date thereafter is also an Interest Payment Date.
"Interest Period" shall mean, as to any Offshore Rate Loan, the period commencing on the date of such Loan or on the Conversion/Continuation Date on which the Loan is converted into or continued as an Offshore Rate Loan, and ending on the date one, two, three or six months thereafter as selected by Conseco (on behalf of the Borrowers) in its Notice of Borrowing or Notice of Conversion/Continuation;
provided that:
(a) if any Interest Period would otherwise end on a day that is not a Business Day, that Interest Period shall be extended to the following Business Day unless, in the case of an Offshore Rate Loan, the result of such extension would be to carry such Interest Period into another calendar month, in which event such Interest Period shall end on the preceding Business Day;
7
(b) any Interest Period pertaining to an Offshore Rate Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period; and
(c) no Interest Period for any Loan shall extend beyond the Termination Date.
"Lending Office" shall mean, with respect to any Bank, any office designated by such Bank in its sole discretion beneath its signature hereto (or in an Assignment Agreement) or otherwise from time to time by written notice to the Borrowers and the Administrative Agent, as a Lending Office for purposes hereunder. A Bank may designate separate Lending Offices for the purposes of making and maintaining Loans.
"Liabilities" shall mean, as to any Borrower, all obligations of such Borrower to the Banks or the Administrative Agent, howsoever created, arising or evidenced, whether direct or indirect, joint or several, absolute or contingent, or now or hereafter existing, or due or to become due, which arise out of or in connection with this Agreement, the Notes, if any, or the other Loan Documents.
"Lien" shall mean any security interest, mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other) or other priority or preferential arrangement of any kind or nature whatsoever.
"Litigation" shall mean any litigation (including, without limitation, any governmental proceeding or arbitration proceeding), tax audit or investigative proceeding, claim, lawsuit, and/or investigation pending or threatened against or involving any Borrower, or Conseco or any of its Subsidiaries or any of its or their businesses or operations.
"Loan(s)" shall have the meaning set forth in Section 2.1 and may be a Base Rate Loan or an Offshore Rate Loan (each, a "Type of Loan").
"Loan Documents" shall mean, collectively, this Agreement, the Notes, if any, the Conseco Guaranty, the Pledge Agreement, the Subordinated Pledge Agreement Re 1997 Shares, the Subordinated Pledge Agreement Re 1999 Shares, the AC Pledge Agreement, the Borrower Acknowledgment and Release, the CIHC Guaranty, the Amended and Restated Cash Collateral Agreement, and any and all other documents or instruments furnished or required to be furnished in connection with any of the foregoing, as the same may be amended or modified in accordance with this Agreement.
8
"Loan Value of Direct Collateral" shall mean, with respect to any Borrower, (a) the current market value of the common stock of Conseco pledged by such Borrower to the Administrative Agent, for the benefit of the Banks, under the Pledge Agreement, plus (b) without duplication, the current market value of any other Direct Collateral constituting Margin Stock pledged by such Borrower to the Administrative Agent, for the benefit of the Banks, under any Loan Document, plus (c) without duplication, the maximum loan value of all Direct Collateral of such Borrower not constituting Margin Stock, it being understood that the maximum loan value of Direct Collateral shall be its good faith loan value (i.e., the value of such Direct Collateral as determined from time to time by the Administrative Agent (with the concurrence of the Required Lenders) exercising sound banking judgment) without regard to such Borrower's assets securing any unrelated transactions. The Administrative Agent and/or the Required Lenders shall have the right at any time in their sole discretion to recompute the Loan Value of Direct Collateral.
"Loan Value of Indirect Collateral" shall mean, with respect to any Borrower, the sum of the maximum loan value of Indirect Collateral under Regulation U, after taking into account any other Indebtedness of Conseco directly or "indirectly secured" (as set forth in Regulation U and the interpretations thereof) by the assets of Conseco and CIHC, it being understood that (a) the maximum loan value of Indirect Collateral constituting Margin Stock shall be 50% of its current market value and (b) the maximum loan value of Indirect Collateral not constituting Margin Stock shall be its good faith loan value (i.e., the value of such Indirect Collateral as determined from time to time by the Administrative Agent (with the concurrence of the Required Lenders) exercising sound banking judgment), in each case without regard to Conseco's assets securing any unrelated transactions. Until further notice from the Administrative Agent to the Borrower, the Loan Value of Indirect Collateral shall be deemed to be $506,100,000, it being understood that the Administrative Agent and/or the Required Lenders shall have the right at any time in their sole discretion to recompute the Loan Value of Indirect Collateral.
"Margin Stock" shall mean "margin stock" as such term is defined in Regulation U.
"Material Adverse Change" or "Material Adverse Effect" shall mean any change, event, action, condition or effect which individually or in the aggregate (a) impairs the validity or enforceability of this Agreement or any other Loan Document, or (b) materially and adversely affects the consolidated business, operations, financial prospects or condition of Conseco and its Subsidiaries taken as a whole, or (c) materially and adversely impairs the ability of any Borrower or Conseco to perform his, hers or its obligations under this Agreement or any of the other Loan Documents to which he, she or it is a party, or (d) materially and adversely affects the perfection or priority of any Lien granted under any of the Loan Documents.
"Material Litigation" or "Material Litigation Development" shall mean any Litigation, or development in any Litigation, as the case may be, which (a) seeks to enjoin, prohibit, discontinue or otherwise impacts the validity or enforceability of this Agreement or any of the
9
other Loan Documents or other transactions contemplated hereby or thereby, or
(b) could be reasonably expected to have a Material Adverse Effect.
"New Credit Agreements Re D&O Loans" shall mean, collectively, this Agreement, the New Credit Agreement Re 1997 D&O Loans, and the New Credit Agreement Re 1999 D&O Loans.
"New Credit Agreement Re 1997 D & O Loans" shall mean that certain credit agreement dated as of the date hereof with certain borrowers, certain banks, and BofA, as administrative agent, refinancing certain of the loans under the 1997 D & O Credit Agreement, as the same may be amended, modified or supplemented from time to time.
"New Credit Agreement Re 1999 D & O Loans" shall mean that certain credit agreement dated as of the date hereof with certain borrowers, certain banks and The Chase Manhattan Bank, as administrative agent, refinancing certain of the loans under the 1999 D & O Credit Agreement, as the same may be amended, modified or supplemented from time to time.
"1997 D & O Credit Agreement " shall mean the Amended and Restated Credit Agreement, dated as of August 26, 1997, among certain borrowers, certain banks, and BofA, as administrative agent.
"1999 D & O Credit Agreement" shall mean the Termination and Replacement Agreement, dated as of May 30, 2000, among certain borrowers, certain banks, and The Chase Manhattan Bank, as administrative agent.
"Non-Consenting Bank" - see Section 13.2.
"Note" shall mean a promissory note, substantially in the form of Exhibit A with blanks appropriately completed in conformity herewith, evidencing the aggregate Loan of the Banks, or any promissory note or promissory notes issued in substitution or replacement therefor.

         "Notice of Borrowing" shall mean a notice in substantially  the form of
Exhibit B.

         "Notice   of   Conversion/Continuation"   shall   mean  a   notice   in
substantially the form of Exhibit C.	

"Offshore Rate" shall mean, for any Interest Period, with respect to Offshore Rate Loans comprising part of the same Borrowing, the rate of interest per annum (rounded upward to the next 1/100th of 1%) determined by the Administrative Agent as follows:
Offshore Rate = IBOR

1.00 - Eurodollar Reserve Percentage

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Where,
"Eurodollar Reserve Percentage" means for any day for any Interest Period the maximum reserve percentage (expressed as a decimal, rounded upward to the next 1/100th of 1%) in effect on such day (whether or not applicable to any Bank) under regulations issued from time to time by the FRB for determining the maximum reserve requirement (including any emergency, supplemental or other marginal reserve requirement) with respect to Eurocurrency funding (currently referred to as "Eurocurrency liabilities"); and
"IBOR" shall mean, for an applicable Interest Period:
(a) the rate per annum (carried out to the fifth decimal place) equal to the rate determined by Administrative Agent to the offered rate that appears on the page of the Telerate Screen that displays an average British Bankers Association Interest Settlement Rate for deposits in Dollars (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period, determined as of approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, or
(b) in the event the rate referenced in the preceding subsection
(a) does not appear on such page or service or such page or service shall cease to be available, the rate per annum (carried out to the fifth decimal place) equal to the rate determined by Administrative Agent to be the offered rate on such other page or other service that displays an average British Bankers Association Interest Settlement Rate for deposits in Dollars (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period, determined as of approximately 11:00 am. (London time) two Business Days prior to the first day of such Interest Period, or
(c) in the event the rates referenced in the preceding subsections
(a) and (b) are not available, the rate per annum determined by the Administrative Agent as the rate of interest at which Dollars deposits (for delivery on the first day of such Interest Period) in same day funds in the approximate amount of the application Offshore Rate Loan and with a term equivalent to such Interest Period would be offered by its London Branch to major banks in the offshore Dollar market at their request approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period.
The Offshore Rate shall be adjusted automatically as to all Offshore Rate Loans then outstanding as of the effective date of any change in the Eurodollar Reserve Percentage.
"Offshore Rate Loan" shall mean a Loan that bears interest based on the Offshore Rate.
"Other D&O Agreements" shall mean any D&O Agreement other than this Agreement.
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"Percentage" shall mean, relative to any Bank, the percentage set forth opposite such Bank's name on Schedule 2.1 (or set forth in an Assignment Agreement), as such Percentage may be adjusted from time to time pursuant to Assignment Agreement(s) executed by such Bank and its Eligible Assignee and delivered pursuant to Section 12.1.
"Person" means an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture or Governmental Authority.
"Plan" shall mean a plan made available to certain Borrowers by Conseco substantially in the form to be attached as an appendix to the certificate to be delivered pursuant to Section 9.1.15 hereof, as amended, modified or supplemented from time to time, but only to the extent permitted pursuant to the provisions of the pertinent D&O Agreements.
"Plan Rights" shall mean any Borrower's rights and interests in and to payments of "Bonus Points" (or any amended or successor payment concept) under the Plan, but expressly excluding any amounts dedicated under the Plan to the payment of any related tax obligations owing or to be owing by such Borrower.
"Pledge Agreement" shall mean the Borrower Pledge Agreement, dated as of the date hereof, substantially in the form of Exhibit D, as the same may be amended, modified, or supplemented from time to time.
"Pledged Shares" shall have the meaning as assigned to such term in the Pledge Agreement.
"Reaffirmation of Existing CIHC Guaranty" shall mean a writing reaffirming the Existing CIHC Guaranty in form and substance satisfactory to the Administrative Agent, dated as of the date hereof, as the same may be amended, modified or supplemented from time to time.
"Reaffirmation of Existing Conseco Guaranty" shall mean a writing reaffirming the Existing Conseco Guaranty in form and substance satisfactory to the Administrative Agent, dated as of the date hereof, as the same may be amended, modified, or supplemented from time to time.
"Regulation "D" and "U" shall mean Regulation D and Regulation U, respectively, or any successor regulation thereto, promulgated by the FRB as from time to time in effect.
"Replaced Bank" - see Section 5.8.
"Replacement Bank" - see Section 5.8.
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"Required Banks" shall mean Banks having more than 50% of the aggregate principal amount of the Loans outstanding at such time.
"Responsible Officer" shall mean, in the case of any Person, any of the following officers of such Person: the chief executive officer; the president; the chief financial officer; the chief operating officer; the chief investment officer; the general counsel; the secretary; the treasurer or any senior or executive vice president. If any of the titles of the preceding officers of such corporate Person are changed after the date hereof, the term "Responsible Officer" shall thereafter mean any officer performing substantially the same functions as are presently performed by one or more of the officers listed in the first sentence of this definition.
"Revolving Credit Agreement" shall mean that certain Five-Year Credit Agreement, dated as of September 25, 1998, among Conseco, certain financial institutions, BofA, as agent, First Union National Bank and The Chase Manhattan Bank, as syndication agents, and Morgan Guaranty Trust Company of New York, as documentation agent, as amended by the First Amendment to Five-Year Credit Agreement, dated as of September 22, 2000, as the same may be hereafter amended, modified, or supplemented from time to time.
"September 22, 2000 Agreements" shall mean, collectively, that certain Agreement, dated as of September 22, 2000, among Conseco, certain banks, and BofA as administrative agent, relating to the 1997 D&O Credit Agreement, that certain Agreement, dated as of September 22, 2000, among Conseco, certain banks, and BofA, as administrative agent, relating to the Existing Credit Agreement, and that certain Agreement, dated as of September 22, 2000, among Conseco, certain banks, and The Chase Manhattan Bank, as administrative agent, relating to the 1999 D&O Credit Agreement, as any of the foregoing may be amended, modified, or supplemented from time to time.
"Significant Subsidiary" shall have the meaning provided in the Revolving Credit Agreement as in effect on the Closing Date.
"Subordinated Pledge Agreement Re 1997 Shares" shall mean a Subordinated Pledge Agreement Re 1997 Shares substantially in the form attached as Exhibit M hereto, as the same may be amended, modified, or supplemented from time to time.
"Subordinated Pledge Agreement Re 1999 Shares" shall mean the Subordinated Pledge Agreement Re 1999 Shares substantially in the form attached as Exhibit P hereto, as the same may be amended, modified, or supplemented from time to time.
"Subsidiary" shall have the meaning provided in the Revolving Credit Agreement as in effect on the Closing Date.
"Substitute Bank" - see Section 13.2.
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"Swap Termination Value" means, in respect of any one or more Hedging Obligations, after taking into account the effect of any legally enforceable netting agreement relating to such Hedging Obligations, (a) for any date on or after the date such Hedging Obligations have been closed out and termination value(s) determined in accordance therewith, such termination value(s), and (b) for any date prior to the date referenced in clause (a) the amount(s) determined as the mark-to-market value(s) for such Hedging Obligations, as determined by Conseco or any of its Subsidiaries based upon one or more mid-market or other readily available quotations provided by any recognized dealer in such Hedging Obligations (which may include any Bank).
"Taxes" or "Tax" shall mean all taxes of any nature whatsoever and howsoever denominated, including, without limitation, retaliatory, income, premium, withholding, guaranty fund or similar assessments, excise, import, governmental fees, duties and all other charges, as well as additions to tax, penalties and interest thereon, imposed by any Governmental Authority.
"Termination Date" shall mean December 31, 2003.
"Termination Event" shall have the meaning as assigned to such term in the Conseco Guaranty.
"Transferee" - see Section 12.3.
"Type" or "Type of Loan" has the meaning specified in the definition of "Loan."
"UCC" shall mean the Uniform Commercial Code or comparable statute or any successor statutes thereto, as in effect from time to time in the relevant jurisdiction.
"United States" and "U.S." each means the United States of America.
SECTION 1.2 Other Definitional Provisions.
(a) All terms defined in this Agreement shall have the above-defined meanings when used in any Loan Document, or any certificate, report or other document made or delivered pursuant to this Agreement, unless the context therein shall clearly otherwise require.
(b) The words "hereof," "herein," "hereunder" and similar terms when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement; and subsection, Section, Schedule and Exhibit references are to this Agreement unless otherwise specified.
(c) The words "amended or modified" when used in any Loan Document shall mean with respect to such Loan Document as from time to time, in whole or
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in part, amended, modified, supplemented, restated, refinanced, refunded or renewed.
(d) In the computation of periods of time in this Agreement from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each means "to but excluding."
(e) This Agreement and the other Loan Documents are the result of negotiations among and have been reviewed by counsel to the Administrative Agent, the Borrowers and the other parties, and are the products of all parties. Accordingly, they shall not be construed against the Banks or the Administrative Agent merely because of the Administrative Agent's or Banks' involvement in their preparation.
SECTION 1.3 Accounting and Financial Determinations. For purposes of this Agreement, unless otherwise specified or the context otherwise requires, all accounting terms used in any Loan Document shall be interpreted, all accounting determinations and computations hereunder or thereunder shall be made, and all financial statements required to be delivered hereunder or thereunder shall be prepared, in accordance with GAAP.
SECTION 2. THE LOANS
Subject to the terms and conditions of this Agreement and relying on the representations and warranties herein set forth:
SECTION 2.1 Commitment. Each of the Banks, severally and for itself alone, agrees, on the terms and conditions set forth herein, to make a term loan (herein collectively called the "Loans" and individually called a "Loan") to each of the Borrowers in its Percentage of the amounts set forth on Schedule 2.2 on the Closing Date for the sole purpose of refinancing the Existing Loans. The Loans to any Borrower shall be disbursed in accordance with Section 2.2 and once repaid may not thereafter be reborrowed.
SECTION 2.2 Procedure for Borrowings.
(a) The Loans shall be deemed to have been made to each Borrower upon irrevocable written notice (or by telephone promptly confirmed in writing) of Conseco (on behalf of the Borrowers) delivered to the Administrative Agent in the form of a Notice of Borrowing (which notice must be received by the Administrative Agent prior to 11:00 A.M. (Chicago time) (i) three Business Days prior to the Closing Date, in the case of Offshore Rate Loans and (ii) on the Closing Date, in the case of Base Rate Loans, specifying:
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(i) the Closing Date, which shall be a Business Day and the same Business Day for each Borrower;
(ii) the amount of the Loans deemed to have been made to each Borrower, which shall not exceed the aggregate amount set forth on Schedule 2.2 for such Borrower;
(iii) the Type of Loans being requested; and
(iv) with respect to the Loans, if comprised of Offshore Rate Loans, the duration of the Interest Period applicable to such Offshore Rate Loan included in such notice. If the Notice of Borrowing fails to specify the duration of the Interest Period for any Loans comprised of Offshore Rate Loans, such Interest Period shall be three (3) months.
(b) The Administrative Agent will promptly notify each Bank of its receipt of the Notice of Borrowing and of the amount of such Bank's Percentage of the related Loans.
(c) Each Bank will make the amount of its Percentage of the Loans available to the Administrative Agent for the account of each Borrower requesting a Loan at the Administrative Agent's Office by 1:00 P.M. (Chicago time) on the Closing Date in funds immediately available to the Administrative Agent. The proceeds of each such Loan will be applied to repay in full each Borrower's Existing Loans, notwithstanding receipt by the Administrative Agent of any other directions to the contrary, and such repayment is intended to, and shall, occur simultaneously with the making of the Loans.
(d) There may not be more than one (1) Interest Period in effect for all Loans then outstanding.
SECTION 2.3 Conversion and Continuation Elections. (a) Conseco (on behalf of the Borrowers) may, upon irrevocable written notice to the Agent in accordance with Section 2.3(b):
(i) elect, as of any Business Day, in the case of Base Rate Loans, or as of the last day of the applicable Interest Period, in the case of Offshore Rate Loans, to convert any such Loans into Loans of any other Type; or
(ii) elect as of the last day of the applicable Interest Period, to continue any Offshore Rate Loans having Interest Periods expiring on such day;
provided, that if at any time the aggregate amount of Offshore Rate Loans to all Borrowers is reduced, by payment or prepayment, to be less than $5,000,000, such Offshore Rate Loans shall automatically convert into Base Rate Loans, and on and after such date the right of Conseco (on
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behalf of the Borrowers) to continue such Loans as, or convert such as into, Offshore Rate Loans, as the case may be, shall terminate.
(b) Conseco (on behalf of the Borrowers) shall deliver a Notice of Conversion/ Continuation to be received by the Agent not later than 11:00 A.M. (Chicago time) at least (i) three Business Days in advance of the Conversion/Continuation Date, if the Loans are to be converted into or continued as Offshore Rate Loans; and (ii) one Business Day in advance of the Conversion/Continuation Date, if the Loans are to be converted into Base Rate Loans, specifying:
(A) the proposed Conversion/Continuation Date;
(B) the aggregate amount of Loans to be converted or continued;
(C) the Type of Loans resulting from the proposed conversion or continuation; and
(D) in the case of conversions into Offshore Rate Loans, the duration of the requested Interest Period.
(c) If, upon the expiration of any Interest Period applicable to Offshore Rate Loans, Conseco (on behalf of the Borrowers) has failed to select timely a new Interest Period to be applicable to such Offshore Rate Loans (and if no Default or Event of Default relating to Conseco is then continuing), Conseco (on behalf of the Borrowers) shall be deemed to have selected the continuation of such Offshore Rate Loans, with the new Interest Period to be identical in length to the expired period. If, upon the expiration of any Interest Period applicable to Offshore Rate Loans, any Default or Event of Default relating to Conseco is then continuing, Conseco (on behalf of the Borrowers) shall be deemed to have elected to convert such Offshore Rate Loans into Base Rate Loans effective as of the expiration date of such Interest Period.
(d) The Administrative Agent will promptly notify each Bank of its receipt of a Notice of Conversion/Continuation, or, if no timely notice is provided by Conseco (on behalf of the Borrowers), the Administrative Agent will promptly notify each Bank of the details of any automatic conversion. All conversions and continuations shall be made ratably according to the respective outstanding principal amounts of the Loans with respect to which the notice was given held by each Bank.
(e) Unless the Required Banks otherwise consent, during the continuance of a Default or Event of Default relating to Conseco, Conseco (on behalf of the Borrowers) may not elect to have a Loan converted into or continued as an Offshore Rate Loan.
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(f) After giving effect to any conversion or continuation of Loans, unless the Administrative Agent shall otherwise consent, there may not be more than one (1) Interest Period in effect for all Loans hereunder.
SECTION 2.4 Repayment of Loans. Subject to the provisions of Section 4.1, the Loans of each Bank shall be payable in full (and each Borrower agrees to pay such Loans) on the Termination Date.
SECTION 2.5 Loan Accounts; Record Keeping.
(a) The Loans made by each Bank shall be evidenced by one or more loan accounts or records maintained by such Bank in the ordinary course of business and the Administrative Agent. The loan accounts or records maintained by the Administrative Agent and each Bank shall be conclusive absent manifest error of the amount of the Loans made by the Banks to the Borrowers and the interest and payments thereon; provided, that in the event of a conflict between information recorded by the Administrative Agent and any Bank as to such Bank's Loans, the records of the Administrative Agent absent manifest error shall control. Any failure to so record or any error in doing so shall not, however, limit or otherwise affect the obligations of any Borrower hereunder or to pay any amount owing with respect to the Loans.
(b) The Loans made by the Banks to each Borrower shall, upon the request of the Administrative Agent, be evidenced by a Note executed and delivered by such Borrower payable to the Administrative Agent, for the benefit of the Banks, in an aggregate principal amount equal to the aggregate Loans to such Borrower instead of or in addition to loan accounts. The Administrative Agent shall endorse on the schedules annexed to each Note the amount of each payment of principal made by such Borrower with respect thereto. The Administrative Agent is irrevocably authorized by each Borrower to endorse the Note of such Borrower and the Administrative Agent's record shall be conclusive absent manifest error; provided, however, that the failure of the Administrative Agent to make, or an error in making, a notation thereon with respect to any Loan shall not limit or otherwise affect the obligations of any Borrower hereunder or under any such Note to any Bank.
SECTION 3. INTEREST AND FEES
SECTION 3.1 Interest Rates. With respect to each Loan made to any Borrower hereunder, such Borrower hereby promises to pay interest on the unpaid principal amount thereof for the period commencing on the Closing Date of such Loan until such Loan is paid in full as follows:
(a) at all times while such Loan or any portion thereof is a Base Rate Loan, at a rate per annum equal to the Base Rate from time to time in effect plus 1.50%.
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(b) at all times while such Loan or any portion thereof is an Offshore Rate Loan, at a rate per annum equal to the Offshore Rate, plus 2.50%.
SECTION 3.2 Default Interest Rate. Notwithstanding the provisions of
Section 3.1, in the event that any Default under Section 10.1.2 or any Event of Default shall occur with respect to any Borrower, such Borrower hereby promises to pay, automatically in the case of a Default under Section 10.1.2 or upon demand therefor by the Administrative Agent for any Event of Default (other than pursuant to Section 10.1.2), interest on the unpaid principal amount of the Loans of such Borrower (and interest thereon to the extent permitted by law) for the period commencing on the date of such Default or demand until such Loans are paid in full or such Default or Event of Default is cured or waived in accordance with Sections 10.2 and 13.1 at a rate per annum equal to the applicable interest rate from time to time in effect (but not less than the applicable interest rate as at such date of demand), plus three percent (3%) per annum.
SECTION 3.3 Interest Payment Dates. Interest on each Loan shall be paid in arrears on each Interest Payment Date. Interest shall also be paid on the date of any prepayment of Loans under Section 4.1 for the portion of the Loans so prepaid and upon payment (including prepayment) in full thereof and during the continuance of any Event of Default, interest shall be paid on demand of the Administrative Agent at the request or with the consent of the Required Banks. After maturity, accrued interest on the Loans shall be payable on demand.
SECTION 3.4 Setting and Notice of Rates. The applicable Offshore Rate shall be determined by the Administrative Agent. Each determination of the applicable Offshore Rate shall be conclusive and binding upon the parties hereto, in the absence of manifest error. If the Administrative Agent is unable to determine such a rate, the provisions of Section 5.3 shall apply. The Administrative Agent shall, upon written request of Conseco (on behalf of the Borrowers) or a Bank, deliver to Conseco (on behalf of the Borrowers) or such Bank a statement showing the computations used by the Administrative Agent in determining any applicable Offshore Rate hereunder.
SECTION 3.5 Computation of Interest and Fees. Interest on Offshore Rate Loans shall be computed for the actual number of days elapsed on the basis of a 360-day year, and interest on Base Rate Loans shall be computed for the actual number of days elapsed on the basis of a 365/366-day year. Each determination of an interest rate by the Administrative Agent shall be conclusive and binding on the Borrowers and the Banks in the absence of manifest error. Notwithstanding anything contained herein to the contrary interest on the Loans shall not exceed the maximum interest permitted by applicable law.
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SECTION 4. PAYMENTS AND PREPAYMENTS
SECTION 4.1 Prepayments.
(a) Mandatory Prepayments. So long as Loans are outstanding, each Borrower shall be obligated to cause all amounts to which such Borrower is entitled under the Plan (other than amounts expressly designated for the payment of taxes relating thereto) to be paid to reduce permanently, on a pro rata basis, such Borrower's obligations under the New Credit Agreements Re D&O Loans. Each Borrower further acknowledges that, so long as Loans are outstanding, any payments made by such Borrower to Conseco on account of any loans made to such Borrower by Conseco to fund the payment of interest on the Existing Loans or the Loans are to be turned over by Conseco and paid to reduce permanently, on a pro rata basis, such Borrower's obligations under the New Credit Agreements Re D&O Loans. So long as Loans are outstanding, each Borrower shall cause all cash dividends declared and paid on the Pledged Shares (as such term is defined in the Pledge Agreement) to be paid in permanent reduction of such Borrower's Loans and other Liabilities. Consistent with, but not in limitation of, the foregoing, each of the Borrowers hereby irrevocably authorizes and directs Conseco to wire transfer to the Administrative Agent any and all such dividends so declared and paid on a quarterly basis so long as the affected Borrower's Liabilities have not been paid in full.
(b) Optional Prepayments. Each Borrower may, at any time or from time to time, upon not less than three (3) Business Day's irrevocable written notice with respect to such Borrower's Loans to the Administrative Agent by 11:00 A.M. (Chicago time), ratably prepay such Loans in whole or in part, in minimum amounts of $10,000 or any integral multiple of $1,000 in excess thereof (unless such Borrower is prepaying the total amount of the Loans then outstanding with respect to such Borrower). Such notice of prepayment shall specify the date, the amount of such prepayment and the Types of Loans to be prepaid. The Administrative Agent will promptly notify each Bank of its receipt of any such notice, and of such Bank's Percentage of such prepayment. If such notice is given by such Borrower, such Borrower shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein, together with accrued interest to each such date on the amount prepaid and any amounts required pursuant to Section 5.5.
SECTION 4.2 Payments by the Borrowers.
(a) All payments to be made by any Borrower hereunder shall be made without set-off, recoupment or counterclaim. Except as otherwise expressly provided herein, all payments by such Borrower shall be made to the Administrative Agent for the account of the Banks at the Administrative Agent's Office, and shall be made in Dollars and in immediately available funds, no later than 12:30 P.M. (Chicago time) on the date specified herein. The Administrative Agent will promptly distribute to each Bank its Percentage (or other applicable share as expressly provided herein) of such payment in like funds as received. Any payment
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received by the Administrative Agent later than 12:30 P.M. (Chicago time) shall be deemed to have been received on the following Business Day and any applicable interest or fee shall continue to accrue.
(b) Subject to the provisions set forth in the definition of Interest Period, whenever any payment is due on a day other than a Business Day, such payment shall be made on the following Business Day, and such extension of time shall in such case be included in the computation of interest or fees, as the case may be.
(c) Unless the Administrative Agent receives notice from the applicable Borrower prior to the date on which any payment is due to the Banks that such Borrower will not make such payment in full as and when required, the Administrative Agent may assume that such Borrower has made such payment in full to the Administrative Agent on such date in immediately available funds and the Administrative Agent may (but shall not be so required), in reliance upon such assumption, distribute to each Bank on such due date an amount equal to the amount then due such Bank. If and to the extent such Borrower has not made such payment in full to the Administrative Agent, each Bank shall repay to the Administrative Agent on demand such amount distributed to such Bank, together with interest thereon at the Federal Funds Rate for each day from the date such amount is distributed to such Bank until the date repaid.
SECTION 4.3 Sharing of Payments.
(a) If any Bank shall obtain any payment or other recovery (whether voluntary, involuntary, by application of offset or otherwise) on account of the Loans (other than pursuant to the terms of Sections 5, 12.1 and 13.2) in excess of its pro rata share (based on its Percentage) of payments and other recoveries obtained by all Banks of the Loans on account of principal of and interest on the Loans, such Bank shall purchase from the other Banks such participation in the Loans as shall be necessary to cause such purchasing Bank to share the excess payment or other recovery ratably with each of them; provided, however, that if all or any portion of the excess payment or other recovery is thereafter recovered from such purchasing Bank, the purchase shall be rescinded and each Bank which has sold a participation to the purchasing Bank shall repay to the purchasing Bank the purchase price to the ratable extent of such recovery together with an amount equal to such selling Bank's ratable share (according to the proportion of (i) the amount of such selling Bank's required repayment to the purchasing Bank to (ii) the total amount so recovered from the purchasing Bank) of any interest or other amount paid or payable by the purchasing Bank in respect of the total amount so recovered.
(b) Each Borrower agrees that any Bank so purchasing a participation from another Bank pursuant to Section 4.3(a) may, to the fullest extent permitted
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by law, exercise all its rights of payment (including pursuant to
Section 4.4) with respect to such participation as fully as if such Bank were the direct creditor of such Borrower in the amount of such participation. If under any applicable bankruptcy, insolvency or other similar law, any Bank receives a secured claim in lieu of a setoff to which this Section 4.3 applies, such Bank shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the Banks entitled under this
Section 4.3(b) to share in the benefits of any recovery of such secured claim.
SECTION 4.4 Setoff. Each Bank shall, during the continuance of any Event of Default under Section 10.1.1, the continuance of an Event of Default under Section 10.1.2, or, with the consent of the Required Banks, during the continuance of any other Event of Default, have the right to appropriate and apply to the payment of the Liabilities owing to it (whether or not then due), and (as security for such Liabilities) each Borrower hereby grants to each Bank a continuing security interest in, any and all balances, credits, deposits, accounts or moneys of such Borrower then or thereafter maintained with such Bank. Any such appropriation and application shall be subject to the provisions of Section 4.3. Each Bank agrees promptly to notify such Borrower and the Administrative Agent after any such setoff and application made by such Bank; provided, however, that the failure to give such notice shall not affect the validity of such setoff and application. The rights of each Bank under this
Section 4.4 are in addition to other rights and remedies (including other rights of setoff under applicable law or otherwise) which such Bank may have.
SECTION 4.5 Net Payments.
(a) All payments by any Borrower of principal of, and interest on, the Loans and all other amounts payable hereunder shall be made free and clear of and without deduction for any present or future income, stamp or other Taxes, fees, duties, withholdings or other charges of any nature whatsoever imposed by any taxing authority, other than Taxes imposed on or measured by any Bank's net income or receipts with respect to payments received hereunder (such non-excluded items being called "Charges"). In the event that any withholding or deduction from any payment to be made by any Borrower hereunder is required in respect of any Charges pursuant to any applicable law, rule or regulation, then such Borrower will, upon notice from the Bank so affected:
(i) pay directly to the relevant authority the full amount required to be so withheld or deducted;
(ii) promptly forward to the Administrative Agent an official receipt or other documentation satisfactory to the Administrative Agent evidencing such payment to such authority;
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(iii) pay to the Administrative Agent for the account of the Banks such additional amount or amounts as are necessary to ensure that the net amount actually received by each Bank will equal the full amount such Bank would have received had no such withholding or deduction been required; and
(iv) if any Bank receives a refund in respect of any Taxes as to which it has been indemnified by any Borrower or with respect to which any Borrower (or any Person acting on behalf of such Borrower) has paid additional amounts pursuant to this Section 4.5, it shall promptly repay such refund (but only to the extent of indemnity payments made, or additional amounts paid, by such Borrower (or such Person acting on behalf of such Borrower) under this Section 4.5 with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses of such Bank or the Administrative Agent, as the case may be; provided, that such Borrower, upon the request of such Bank or the Administrative Agent, agrees to return such refund (together with any penalties, interest or other charges due in connection therewith to the appropriate taxing authority or other Governmental Authority) to such Bank or the Administrative Agent in the event such Bank or the Administrative Agent is required to pay or to return such refund to the relevant taxing authority or other Governmental Authority.
(b) Each Bank that is organized under the laws of a jurisdiction other than the United States shall, prior to the due date of any payments under the Loans, execute and deliver to the Borrowers, on or about the first scheduled payment date in each calendar year, a United States Internal Revenue Service Form W-BEN, Form W-ECI or Form W- 8IMY, as may be applicable (or any successor form), appropriately completed.
(c) Notwithstanding anything to the contrary in this Section 4, each Borrower shall not be required to compensate any Bank for Charges pursuant to Section 4(a) to the extent such Bank's compliance with
Section 4(b) at the time such Bank becomes a party to this Agreement fails to establish a complete exemption for such Bank from such Charges or to the extent such failure to establish a complete exemption from such Charges thereafter is attributable to the action or inaction of such Bank.
(d) Notwithstanding anything to the contrary contained in this
Section 4 to the extent any notice required by Section 4(a) is given by any Bank to any Borrower more than 90 days after such Bank has knowledge of the occurrence of the event giving rise to such Charges, such Bank shall not be entitled to compensation under such Section 4(a) for any such Charges incurred or accruing prior to the giving of such notice to such Borrower.
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(e) Each Bank agrees that, upon the occurrence of any event giving rise to the operation of Section 4(a) with respect to such Bank it will, if requested by any Borrower, use reasonable efforts (subject to overall policy considerations of such Bank) to take any actions available to it (including the designation of another Lending Office for any Loans affected by such event) with the object of avoiding the consequences of such event; provided that such designation is made on terms that in the reasonable judgment of such Bank cause such Bank and its Lending Office to suffer no economic, legal or regulatory disadvantages.
(f) Without prejudice to the survival of any other agreement of the Borrowers hereunder or any other document, the agreements of the Borrowers contained in this Section 4.5 shall survive satisfaction of the Liabilities and termination of this Agreement.
SECTION 5. CHANGES IN CIRCUMSTANCES
SECTION 5.1 Increased Costs. If (a) Regulation D, or (b) after the Closing Date, the adoption of any applicable law, rule or regulation, or any change therein, or any change in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or any Lending Office of such Bank) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency,
(i) shall subject any Bank (or any Lending Office of such Bank) to any tax, duty or other charge or shall change the basis of taxation of payments to any Bank of the principal of, or interest on, any other amounts due under this Agreement in respect of its Loans or its obligation to make Loans (except for changes in the rate of Tax, other than Taxes covered by Section 4.5, measured on the overall gross or net income of such Bank or its Lending Office); or
(ii) shall impose, modify or deem applicable any reserve (including, without limitation, any reserve imposed by the FRB, but excluding any reserve included in the determination of interest rates pursuant to Section 3), special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Bank (or any Lending Office of such Bank); or
(iii) shall impose on any Bank (or its Lending Office) any other condition affecting its Loans;
and the result of any of the foregoing is to increase the cost to (or in the case of Regulation D referred to above, to impose a cost on) such Bank (or any Lending Office of such Bank) of making or maintaining Offshore Rate Loans to reduce the amount of any sum received or receivable by such Bank (or the Lending Office of such Bank) under this Agreement or under its Loans with respect thereto, then within thirty (30) days after demand by such Bank (which
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demand shall be accompanied by a statement setting forth in reasonable detail the basis of such demand and the calculation of such additional amount), the relevant Borrowers shall pay directly to such Bank such additional amount or amounts as will compensate such Bank for such increased cost or such reduction. Each Bank shall promptly, but in no event more than ninety (90) days after it has knowledge thereof, notify such Borrower of any event occurring after the date hereof, which will entitle such Bank to compensation pursuant to this
Section 5.1. In the event such notice is not given within the time frame specified in the immediately preceding sentence, such Bank shall not be entitled to compensation under this Section 5.1 for any such additional costs or charges incurred or accruing prior to the giving of such notice to such Borrower.
SECTION 5.2 Change in Rate of Return. If any change in, or the introduction, adoption, effectiveness, interpretation, reinterpretation or phase-in of, any law or regulation, directive, guideline, decision or request (whether or not having the force of law) of any court, central bank, regulator or other Governmental Authority affects or would affect the amount of capital required or expected to be maintained by any Bank or any Person controlling such Bank, and such Bank reasonably determines that the rate of return on its or such controlling Person's capital as a consequence of the Loans made by such Bank (or any participating interest therein held by such Bank) is reduced to a level below that which such Bank or such controlling Person could have achieved but for the occurrence of any such circumstance, then, in any such case the relevant Borrowers shall, within thirty (30) days after written demand by such Bank to such Borrowers, pay directly to such Bank additional amounts sufficient to compensate such Bank or such controlling Person for such reduction in rate of return. A statement of such Bank as to any such additional amount or amounts (including calculations thereof in reasonable detail) shall, in the absence of manifest error, be conclusive and binding on such Borrowers. In determining such amount, such Bank may use any method of averaging and attribution that it shall deem reasonably applicable. Each Bank shall promptly, but in no event more than ninety (90) days after it has knowledge thereof, notify such Borrowers of any event occurring after the Closing Date, which will entitle such Bank to compensation pursuant to this Section 5.2. In the event such notice is not given within the timeframe specified in the immediately preceding sentence, such Bank shall not be entitled to compensation under this Section 5.2 for any such additional costs or charges incurred or accruing prior to the giving of such notice to such Borrower.
SECTION 5.3 Basis for Determining Interest Rate Inadequate or Unfair. If with respect to any Interest Period:
(a) deposits in Dollars (in the applicable amounts) are not being offered to the Administrative Agent in the offshore dollar interbank market for such Interest Period, or the Administrative Agent otherwise determines (which determination shall be conclusive and binding on all parties) that by reason of circumstances affecting the offshore dollar interbank market adequate and reasonable means do not exist for ascertaining the applicable Offshore Rate; or
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(b) any Bank advises the Administrative Agent that the Offshore Rate as determined by the Administrative Agent, will not adequately and fairly reflect the cost to such Bank of maintaining or funding such Loan for such Interest Period, or that the making or funding of Offshore Rate Loans has become impracticable as a result of an event occurring after the Closing Date which in the opinion of such Bank materially changes such Loans;
then, so long as such circumstances shall continue:
(i) the Administrative Agent shall promptly notify Conseco (on behalf of the Borrowers) and the Banks thereof,
(ii) no Bank shall be under any obligation to make or continue or convert into Offshore Rate Loans so affected, and
(iii) on the last day of the then current Interest Period for Offshore Rate Loans so affected, such Offshore Rate Loans shall, unless then repaid in full, automatically convert to Base Rate Loans.
SECTION 5.4 Changes in Law Rendering Certain Loans Unlawful. In the event that any change in (including the adoption of any new) applicable laws or regulations, or any change in the interpretation of applicable laws or regulations by any governmental or other regulatory body charged with the administration thereof, should make it unlawful for a Bank or the Lending Office of such Bank ("Affected Bank") to make, maintain or fund Offshore Rate Loans, then (a) the Affected Bank shall promptly notify each of the other parties hereto, (b) the obligation of all Banks to make or continue or convert into Offshore Rate Loans or make Offshore Rate Loans made unlawful for the Affected Bank shall, upon the effectiveness of such event, be suspended for the duration of such unlawfulness, and (c) on the last day of the current Interest Period for Offshore Rate Loans (or, in any event, if the Affected Bank so requests, on such earlier date as may be required by the relevant law, regulation or interpretation), the Offshore Rate Loans shall, unless then repaid in full, automatically convert to Base Rate Loans.
SECTION 5.5 Funding Losses. Each Borrower hereby agrees that upon demand by any Bank to the Administrative Agent (which demand shall be made within three (3) Business Days after receipt of notice of any payment or proposed payment by such Borrower under this Agreement giving rise to indemnification under this Section 5.5 and shall be accompanied by a statement setting forth in reasonable detail using the Funding Loss Formula set forth in Exhibit I) such Borrower will indemnify such Bank against any loss or expense which such Bank may sustain or incur (including, without limitation, any loss or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Bank to fund or maintain Offshore Rate Loans), as reasonably determined by such Bank, as a result of (a) any payment or prepayment or conversion of any Offshore Rate Loans of such Bank on a date other
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than the last day of an Interest Period for such Offshore Rate Loan, or (b) any failure of such Borrower to borrow Offshore Rate Loans on the date of any Borrowing set forth in any Notice of Borrowing or (c) any failure of such Borrower to convert or continue any portion of the Loans as Offshore Rate Loans on a date specified therefor in the Notice of Continuation/Conversion delivered pursuant to this Agreement. For this purpose, all notices to the Administrative Agent pursuant to this Agreement shall be deemed to be irrevocable.
SECTION 5.6 Right of Banks to Fund Through Other Offices. Each Bank may, if it so elects, fulfill its commitment as to any Offshore Rate Loans by causing any of its Lending Offices to make such Offshore Rate Loans; provided, that in such event for the purposes of this Agreement, such Loan shall be deemed to have been made by such Bank and the obligation of the Borrower to repay such Offshore Rate Loan shall nevertheless be to such Bank and shall be deemed held by it, to the extent of such Offshore Rate Loan, for the account of such branch or affiliate.
SECTION 5.7 Discretion of Banks as to Manner of Funding.
Notwithstanding any provision of this Agreement to the contrary, each Bank shall be entitled to fund and maintain its funding of all or any part of its Loans in any manner it sees fit, it being understood, however, that for the purposes of this Agreement all determinations hereunder shall be made as if such Bank had actually funded and maintained each Offshore Rate Loan during each Interest Period for such Loan through the purchase of deposits having a maturity corresponding to such Interest Period and bearing an interest rate equal to the Offshore Rate, as the case may be, for such Interest Period.
SECTION 5.8 Replacement of Banks. If any Bank shall (i) become affected by any of the changes or events described in Section 4.5, 5.1, 5.2, 5.3(b), or 5.4 above and such Bank shall petition the relevant Borrowers for any increased cost or amounts thereunder or (ii) become insolvent and its assets become subject to a receiver, liquidator, trustee, custodian or such other Person having similar powers (any such Bank, in either instance, being hereinafter referred to as a "Replaced Bank"), then in each such case, Conseco (on behalf of the Borrowers) may, upon at least five (5) Business Days' notice to the Administrative Agent and such Replaced Bank, designate a replacement bank (a "Replacement Bank") acceptable to the Administrative Agent in its reasonable discretion, to which such Replaced Bank shall, subject to its receipt (unless a later date for the remittance thereof shall be agreed upon by the relevant Borrowers and the Replaced Bank) of all amounts owed to such Replaced Bank under
Section 4.5, 5.1, 5.2, 5.3(b), or 5.4 above, assign all (but not less than all) of its rights, obligations and Loans hereunder and execute an Assignment Agreement with such Replacement Bank; provided, that all Liabilities (except Liabilities which by the terms hereof survive the payment in full of the Loans and termination of this Agreement) due and payable to the Replaced Bank shall be paid in full as of the date of such assignment. Upon any assignment by any Bank pursuant to this Section 5.8 becoming effective, the Replacement Bank shall thereupon be deemed to be a "Bank" for all purposes of this
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Agreement and such Replaced Bank shall thereupon cease to be a "Bank" for all purposes of this Agreement and shall have no further rights or obligations hereunder (other than pursuant to Sections 4.5, 5.1, 5.2, 5.5, 11.5 and 13.4, and Sections 7.1 and 7.2 of the Conseco Guaranty while such Replaced Bank was a Bank). Notwithstanding any Replaced Bank's failure or refusal to assign its rights, obligations and Loans under this Section 5.8, the Replaced Bank shall cease to be a "Bank" for all purposes of this Agreement and the Replacement Bank substituted therefor upon payment to the Replaced Bank by the Replacement Bank of all amounts set forth in this Section 5.8 without any further action of the Replaced Bank.
SECTION 5.9 Conclusiveness of Statements; Survival of Provisions. Determinations and statements of the Administrative Agent or any Bank pursuant to Sections 5.1, 5.2, 5.3, 5.4 and Section 5.5 shall be conclusive absent demonstrable error. The provisions of Sections 5.1, 5.2, 5.5 and this Section 5.9 shall survive termination of this Agreement.
SECTION 5.10 Avoidance of Certain Costs. The Administrative Agent and each Bank agrees that, notwithstanding the provisions of Sections 5.1-5.4 hereof to the contrary, the Administrative Agent and each Bank shall take reasonable actions available to it (including designation of a different Lending Office), consistent with legal and regulatory restrictions, that will avoid the need to take the steps described in any such Section, which will not, in the reasonable judgment of the Administrative Agent or such Bank, be disadvantageous to the Administrative Agent or such Bank.
SECTION 6. COLLATERAL AND OTHER SECURITY
SECTION 6.1 Collateral Documents. Concurrently with or prior to the Closing Date:
(a) Pledge Agreement (Conseco Stock). The Borrowers shall execute and deliver to the Administrative Agent, for the benefit of the Banks, the Pledge Agreement, whereby each of the Borrowers shall pledge all of the issued and outstanding common stock of Conseco owned by each Borrower and acquired with the proceeds of the Existing Loans and shall direct the administrative agent under the Existing Credit Agreement to deliver to the Administrative Agent all stock certificates pledged pursuant thereto and all related stock powers.
(b) Conseco Guaranty. Conseco shall execute and deliver to the Administrative Agent the Conseco Guaranty, covering the payment and performance of all of the Liabilities.
(c) CIHC Guaranty. CIHC shall execute and deliver to the Administrative Agent the CIHC Guaranty, covering the payment and performance of all the Liabilities.
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(d) Reaffirmation of Existing Conseco Guaranty. Conseco shall execute and deliver to the Administrative Agent the Reaffirmation of Existing Conseco Guaranty.
(e) Reaffirmation of Existing CIHC Guaranty. CIHC shall execute and deliver to the Administrative Agent the Reaffirmation of Existing CIHC Guaranty.
(f) Amended and Restated Cash Collateral Agreement. An Amended and Restated Cash Collateral Agreement shall be executed and delivered to the Administrative Agent confirming that the obligations of Conseco under the Conseco Guaranty shall be secured thereby.
(g) Subordinated Pledge Agreement Re 1997 Shares. A Subordinated Pledge Agreement Re 1997 Shares, executed by the pledgors thereunder, and acknowledged by the administrative agent under the New Credit Agreement Re 1997 Loans, shall be delivered to BofA as administrative or collateral agent.
(h) Subordinated Pledge Agreement Re 1999 Shares. A Subordinated Pledge Agreement Re 1999 Shares, executed by the pledgors thereunder, and acknowledged by the administrative agent under the New Credit Agreement Re 1999 D & O Loans, shall be executed and delivered to BofA as administrative or collateral agent.
SECTION 6.2 Pledge of Additional Collateral. On or before December 31, 2000 (or such later date as permitted to any AC Pledge Borrowers to pledge Additional Collateral pursuant to the provisions of the Plan), the AC Pledge Borrowers, if any, shall grant to the AC Collateral Agent, for the benefit of the banks under New Credit Agreements Re D&O Loans, a first, perfected security interest in the Additional Collateral. Specifically, on or before such date, the AC Collateral Agent shall have received: (i) the AC Pledge Agreement, (ii) all stock certificates pledged pursuant thereto, (iii) appropriate stock powers for such shares endorsed in blank, (iv) appropriate evidence of the perfection and first priority of such collateral agent's Lien, including UCC financing statements and/or registration or acknowledgments of the Lien of such collateral agent on any applicable brokerage account of each AC Pledge Borrower, and (v) a certificate from Conseco, in form reasonably satisfactory to the Administrative Agent, signed by a Responsible Officer, identifying the AC Pledge Borrowers by name and describing the Additional Collateral to be pledged by each such Borrower. Consistent with (but not in limitation of) the foregoing and the other provisions of this Agreement and the other Loan Documents, (a) the delivery of any Additional Collateral to the AC Collateral Agent, to be held and disposed of pursuant to the provisions of the AC Pledge Agreement, shall constitute a collateral pledge of such property and shall not constitute a paydown on the Loans or otherwise entitle the AC Pledge Borrower to any reduction in the amount of such Borrower's Loans unless and until the AC Collateral Agent disposes of such property and applies the proceeds thereof as provided
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pursuant to the provisions of the AC Pledge Agreement, (b) none of the AC Collateral Agent, the Administrative Agent, and the Banks shall have or otherwise incur any liability in favor of the AC Pledge Borrower, Conseco, or any other Person with respect to the AC Pledge Agreement and/or the Additional Collateral except solely to the extent expressly set forth in the AC Pledge Agreement, and (c) consistent with (but not in limitation of) the preceding clause (b), the AC Pledge Borrowers and Conseco shall bear (and thus reimburse the AC Collateral Agent promptly for) any and all reasonable costs and expenses of the AC Collateral Agent's accepting, maintaining, and realizing on the pledge of the Additional Collateral. If there are to be no AC Pledge Borrowers on or before December 31, 2000, Conseco shall provide the Administrative Agent with a certificate to such effect, signed by a Responsible Officer. If on or before such date, there are no AC Pledge Borrowers but, pursuant to the provisions of the Plan, such deadline has been extended as to various Borrowers, such certificate shall identify such Borrowers and the extended deadlines as to such Borrowers.
SECTION 6.3 Application of Proceeds from Collateral. As to each Borrower, all proceeds received by the Administrative Agent from the sale or disposition of any of the Direct Collateral furnished by such Borrower pursuant to this Agreement or Indirect Collateral furnished by Conseco pursuant to the Conseco Guaranty shall be applied by the Administrative Agent in the following order after receipt thereof:
First: to the payment of all of the reasonable costs and expenses of the Administrative Agent in connection with (a) the administration, sale or disposition of such Direct Collateral or Indirect Collateral, as the case may be, and (b) the administration and enforcement of this Agreement and the other Loan Documents, to the extent that such costs and expenses shall not have been reimbursed to the Administrative Agent and relate to such Borrower's Loans;
Second: to the payment in full of all accrued and unpaid interest on the Loans of such Borrower, then to the payment in full of all unpaid principal of the Loans of such Borrower, and then to any remaining Liabilities of such Borrower;
Third: the balance, if any, of such proceeds shall be paid to such Borrower, to such Borrower's heirs and assigns, or as a court of competent jurisdiction may direct.
Notwithstanding the foregoing, (w) the proceeds of CCPA Collateral shall be applied as set forth in the Amended and Restated Cash Collateral Agreement, (x) the proceeds of the Additional Collateral shall be applied as set forth in the AC Pledge Agreement, (y) the proceeds of any collateral pledged pursuant to the Subordinated Pledge Agreement Re 1997 Shares shall be applied as set forth therein, and (z) the proceeds of the Subordinated Pledge Agreement Re 1999 Shares shall be
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applied as set forth therein.
SECTION 6.4 Further Assurances. Each Borrower agrees that upon request of the Administrative Agent (a) such Borrower shall promptly deliver or cause to be delivered to the Administrative Agent, in due form for transfer, all chattel paper, instruments, securities and documents of title, if any, at any time representing all or any of the Direct Collateral, and (b) such Borrower shall forthwith execute and deliver or cause to be executed and delivered to the Administrative Agent, in due form for filing or recording (and pay the cost of filing or recording the same in all public offices deemed necessary by the Administrative Agent), such further assignment agreements, security agreements, pledge agreements, instruments, consents, waivers, financing statements, stock or bond powers, searches, releases, and other documents, and do such other acts and things, all as the Administrative Agent may from time to time reasonably request to establish and maintain to the satisfaction of the Administrative Agent a valid perfected Lien on all Direct Collateral (free of all other Liens except those permitted pursuant to Section 7.4 hereof) to secure payment of the Liabilities.
SECTION 7. REPRESENTATIONS AND WARRANTIES OF BORROWERS
To induce the Administrative Agent and the Banks to enter into this Agreement and to make the Loans hereunder, each Borrower represents and warrants to the Administrative Agent and to each of the Banks that:
SECTION 7.1 No Conflict. The execution, delivery and performance by such Borrower of this Agreement and the other Loan Documents to which such Borrower is a party does not and will not (a) contravene or conflict with any provision of any law, statute, rule or regulation applicable to such Borrower,
(b) contravene or conflict with, result in any breach of, or constitute a default under, any material agreement or instrument binding on such Borrower (including, without limitation, any writ, judgment, injunction or other similar court order) or (c) result in the creation or imposition of or the obligation to create or impose any Lien upon any of the property or assets of such Borrower (except for (i) the Lien of the Administrative Agent pursuant to the Pledge Agreement, (ii) the Liens under any Subordinated Pledge Agreements in favor of the administrative agent under any Other D&O Agreement, and (iii) the Lien of the AC Collateral Agent under the AC Pledge Agreement).
SECTION 7.2 Validity. This Agreement and the other Loan Documents to which such Borrower is a party constitute or upon execution and delivery will constitute the legal, valid and binding obligation of such Borrower enforceable in accordance with its terms subject to (a) applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting creditors' rights generally and (b) general equitable principles, including without limitation,
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concepts of good faith and fair dealing, materiality, fraudulent transfer and reasonableness (regardless of whether considered in a proceeding in equity or at law).
SECTION 7.3 Litigation and Contingent Obligations. No Material Litigation, other than the Existing Litigation, is pending as to such Borrower or, to the best of such Borrower's knowledge, threatened as to such Borrower, and such Borrower has no material Contingent Obligations.
SECTION 7.4 Liens. None of the Direct Collateral pledged by such Borrower is subject to any Lien (except for (a) the Lien of the Administrative Agent pursuant to the Pledge Agreement, (b) the Liens under any subordinated pledge agreement in favor of the administrative agent under any Other D&O Agreement, and (c) the Lien of the AC Collateral Agent under the AC Pledge Agreement). Such Borrower shall not be able or entitled to grant any Liens in favor of any Person in and to the Plan Rights.
SECTION 7.5 Taxes. Such Borrower has filed all material federal and state tax returns and related reports required by law to have been filed by such Borrower and has paid Taxes thereby shown to be owing, except any such Taxes which are being diligently contested in good faith by appropriate proceedings and Taxes with respect to which the failure to pay could not reasonably be expected to have a Material Adverse Effect. There is no ongoing audit or, to the best of such Borrower's knowledge, other governmental investigation of the tax liability of such Borrower and there is no unresolved claim by a taxing authority concerning such Borrower's tax liability, for any period for which returns have been filed or were due.
SECTION 7.6 Accuracy of Information. All factual information furnished as of the Closing Date by or on behalf of such Borrower in writing to the Administrative Agent or any Bank for purposes of or in connection with this Agreement or any transaction contemplated hereby is, and all other such factual information furnished after the Closing Date by or on behalf of such Borrower to the Administrative Agent or any Bank will be, true and accurate in every material respect on the date as of which such information is dated or certified and, except as such information speaks solely as of a particular date, such information is not, or shall not be, as the case may be, incomplete by omitting to state any material fact necessary to make such information not misleading.
SECTION 7.7 Proceeds. The proceeds of the Loans will be used solely to refinance the loans of such Borrower under the Existing Credit Agreement.
SECTION 7.8 Securities Laws. Neither such Borrower nor, to the best of such Borrower's knowledge, any of its Affiliates, nor anyone acting on behalf of any such Person, has directly or indirectly offered any interest in the Loans or any other Liabilities for sale to, or solicited any offer to acquire any such interest from, or has sold any such interest to, any Person
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that would subject the making of the Loans or any other Liabilities to registration under the Securities Act of 1933, as amended.
SECTION 7.9 No Default. Such Borrower is not in default under any agreement or instrument to which such Borrower is a party or by which any of its properties or assets is bound or affected, which default could reasonably be expected to have a Material Adverse Effect.
SECTION 7.10 Organization, etc. Each Borrower (other than any Borrower which is an individual) is a corporation, partnership or irrevocable trust duly organized, validly existing and, with respect to any corporation or partnership, in good standing under the laws of the state of its incorporation or formation and each corporate or partnership Borrower is duly qualified to transact business as a foreign corporation or partnership authorized to do business in each jurisdiction where the nature of its business makes such qualification necessary and failure to so qualify could reasonably be expected to have a Material Adverse Effect.
SECTION 7.11 Authorization. Each Borrower (other than any Borrower which is an individual) (a) has the power to execute, deliver and perform this Agreement and the other Loan Documents to which it is a party, and (b) has taken all necessary action to authorize the execution, delivery and performance by it of this Agreement and the other Loan Documents to which it is a party.
SECTION 7.12 Margin Regulations.
(a) None of the obligations of such Borrower to Conseco is or will be secured, directly or indirectly, by Margin Stock;
(b) Neither Conseco nor any third party acting on behalf of Conseco has taken or will take possession of such Borrower's Margin Stock to secure, directly or indirectly, any of the obligations of such Borrower to Conseco;
(c) Conseco does not and will not have any right to prohibit such Borrower from selling, pledging, encumbering or otherwise disposing of any Margin Stock owned by such Borrower so long as the Conseco Guaranty is in effect or any of the obligations of such Borrower or the obligations of Conseco under the this Agreement, the Conseco Guaranty or any of the Loan Documents remain outstanding;
(d) Such Borrower has not granted and will not grant Conseco or any third party acting on behalf of Conseco the right to accelerate repayment of any of the obligations under this Agreement of such Borrower if any of the Margin Stock owned by such Borrower is sold by such Borrower or otherwise; and
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(e) There is no agreement or other arrangement between such Borrower and Conseco or any third party acting on behalf of Conseco (and no such agreement or arrangement shall be entered into so long as this Agreement or the Conseco Guaranty is in effect or any of the obligations of such Borrower or the obligations of Conseco under the Conseco Guaranty or any of the Loan Documents remain outstanding) under which the Margin Stock of such Borrower would be made more readily available as security to Conseco than to other creditors of such Borrower.
SECTION 7.13 Principal Residence. The address set forth on each Borrower's signature page hereof correctly sets forth such Borrower's place of principal residence. Each Borrower shall promptly (but in no event later than thirty days after changing such principal place of residence) inform the Administrative Agent of any and each change in such Borrower's principal place of residence and provide the Administrative Agent with the Borrower's new, correct address.
SECTION 7.14 No Default or Event of Default. No Default or Event of Default as to such Borrower shall exist on the date of the execution and delivery of this Agreement or on the Closing Date.
SECTION 8. COVENANTS OF BORROWERS
Each Borrower agrees that, on and after the Closing Date and for so long thereafter as any of the Liabilities remain unpaid or outstanding (except Liabilities which by the terms hereof survive the payment in full of the Loans and termination of this Agreement), such Borrower will:
SECTION 8.1 Reports, Certificates and Other Information. Unless otherwise provided herein, furnish or cause to be furnished to the Administrative Agent and each Bank:
8.1.1 Borrower Financials. Upon the request of the Administrative Agent, a financial statement of such Borrower in a form acceptable to the Required Banks;
8.1.2 Tax Returns and Reports. If requested by the Administrative Agent or the Required Banks, copies of all federal, state, local and foreign Tax Returns and Reports filed by such Borrower;
8.1.3 Notice of Default and Litigation. Promptly upon learning of the occurrence of any of the following, written notice thereof, describing the same and the steps being taken by such Borrower with respect thereto:
(a) the occurrence of a Default;
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(b) the institution of any Material Litigation or the occurrence of any Material Litigation Development as to such Borrower;
(c) the commencement of any dispute which might reasonably be expected to lead to the material modification, transfer, revocation, suspension or termination of any Loan Document; or
(d) any Material Adverse Change as to such Borrower;
8.1.4 Collateral Ratio. Upon the request of the Administrative Agent or the Required Banks, cause Conseco (on behalf of the Borrowers) to provide to the Administrative Agent, for the benefit of the Banks, a computation of the Collateral Ratio certified by its chief financial officer or a senior vice president with responsibility for or knowledge of financial matters of Conseco. Nothing contained in this Section 8.1.4 shall be deemed to limit in any way whatsoever the Administrative Agent's right, on behalf of the Banks, to calculate the Loan Value of Direct Collateral or the Loan Value of Indirect Collateral or the Collateral Ratio at any time it deems appropriate or necessary. If after making such calculation, the Administrative Agent or the Required Banks determine that the amount of such Collateral Ratio is different from the Collateral Ratio most recently provided by Conseco or the Administrative Agent, as the case may be, the Administrative Agent shall deliver written notice of such amount to Conseco (on behalf of the Borrowers); provided that the Administrative Agent's failure to deliver such notice shall not prejudice the rights of the Administrative Agent and the Banks or the obligations of the Borrowers under this Agreement or the other Loan Documents; and
8.1.5 Other Information. From time to time, such other information concerning such Borrower as the Administrative Agent or a Bank may reasonably request.
SECTION 8.2 Taxes and Liabilities. Pay when due all of his, her, or its Taxes and other material liabilities, except as contested in good faith and by appropriate proceedings and except Taxes with respect to which the failure to pay could not reasonably be expected to have a Material Adverse Effect.
SECTION 8.3 Compliance with Laws. Comply with all federal, state and local laws, rules and regulations related to such Borrower, except where such failure to comply could not reasonably be expected to have a Material Adverse Effect.
SECTION 8.4 Other Agreements. Not enter into any agreement containing any provision which (a) would be violated or breached by the performance of its obligations hereunder or under any instrument or document delivered or to be delivered by such Borrower hereunder or in connection herewith, (b) prohibits or restricts the ability of such Borrower to amend or otherwise modify this Agreement, any other Loan Document or any other document executed in connection
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herewith or (c) constitutes an agreement to a limitation or restriction of the type described in clauses (a) and (b) with respect to any other Indebtedness.
SECTION 9. CONDITIONS AND EFFECTIVENESS OF THIS AGREEMENT
The obligation of the Banks to make the Loans and the effectiveness of this Agreement is subject to the performance by a Borrower of all of the obligations under this Agreement and to the satisfaction of the following conditions precedent:
SECTION 9.1 Receipt of Documents. Prior to or concurrent with the making of the Loans, the Administrative Agent shall have received all of the following, each, except to the extent otherwise specified below, duly executed by such Borrower dated the Closing Date (or such earlier date as shall be satisfactory to the Administrative Agent), in form and substance satisfactory to the Administrative Agent, each in sufficient number of signed counterparts or copies to provide one for each Bank and the Administrative Agent:
9.1.1 If requested by the Administrative Agent, an appropriately completed Note from each Borrower, payable to the order of the Administrative Agent evidencing the aggregate Loans to such Borrower;
9.1.2 The Pledge Agreement;
9.1.3 The Administrative Agent's receipt of all common stock of Conseco owned by each Borrower which have been purchased with proceeds of the Existing Loans or any of the foregoing relating thereto as required by the Pledge Agreement, together with appropriate stock powers for such shares endorsed in blank and/or other appropriate evidence of the perfection of the Administrative Agent's Lien, including UCC financing statements and/or registrations or acknowledgments of the Lien of the Administrative Agent on any applicable brokerage account of each Borrower;
9.1.4 The Conseco Guaranty, together with the documents provided in Article V thereof;
9.1.5 The CIHC Guaranty;
9.1.6 The Reaffirmation of Existing Conseco Guaranty;
9.1.7 The Reaffirmation of Existing CIHC Guaranty;
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9.1.8 The Subordinated Pledge Agreement Re 1997 Shares, executed by the pledgors thereunder, and acknowledged by the administrative agent under the New Credit Agreement Re 1997 Loans.
9.1.9 The Subordinated Pledge Agreement Re 1999 Shares, executed by the pledgors thereunder, and acknowledged by the administrative agent under the New Credit Agreement Re 1999 D&O Loans;
9.1.10 The Amended and Restated Cash Collateral Agreement;
9.1.11 The Borrower Acknowledgment and Release executed by each Borrower.
9.1.12 An opinion of David K. Herzog, counsel of Conseco and CIHC, substantially in the form of Exhibit F-1, and addressing such other legal matters as the Administrative Agent may reasonably require;
9.1.13 An opinion of Weil, Gotshal & Manges LLP, outside counsel to Conseco and CIHC, substantially in the form of Exhibit F-2, and addressing such other legal matters as the Administrative Agent may reasonably require;
9.1.14 Certified copies of each material consent, license and approval required in connection with the execution, delivery, performance, validity and enforceability of this Agreement and the other Loan Documents; such consents, licenses and approvals shall be in full force and effect, shall be reasonably satisfactory in form and substance to the Administrative Agent and shall be all of the material consents required to be obtained or made on or before the consummation of the financing contemplated by this Agreement;
9.1.15 A certificate of Conseco in the form attached as Exhibit O hereto;
9.1.16 Schedules and Exhibits satisfactory to the Administrative Agent and the Banks;
9.1.17 Evidence satisfactory to the Administrative Agent of compliance by each Borrower and Conseco with Regulation U in connection with the financing transactions contemplated hereby;
9.1.18 Evidence of each filing, registration or recordation (and payment of any necessary fee, Tax or expense relating thereto) with respect to each document (including, without limitation, any UCC financing statement) required by the Loan Documents or under law or requested by the Administrative Agent to be filed, registered or recorded in order to create, in favor of the Administrative Agent, for the benefit of the Banks a valid
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perfected Lien on all Direct Collateral (free of all other Liens other than the junior and subordinate Liens to be granted to the administrative agents under the Other D&O Agreements) other than UCC financing statements to be filed in connection with the Loan Documents which will be delivered for filing on the Closing Date;
9.1.19 Evidence satisfactory to the Administrative Agent that each of the Loan Documents has been duly executed and delivered and is in full force and effect without modification;
9.1.20 Certified copies of any indemnification or similar agreements or arrangements between any Borrower and Conseco relating to the reimbursement by such Borrower of any payments made by Conseco under the Conseco Guaranty; and
9.1.21 A Federal Reserve Form U-1 for the benefit of the Banks, duly executed by each Borrower, the statements made in which shall be such, in the opinion of the Administrative Agent, as to permit the transactions contemplated by this Agreement in accordance with Regulation U.
SECTION 9.2 Additional Conditions. The obligation of the Banks to make Loans to any Borrower hereunder is subject to the following further conditions precedent:
9.2.1 The Administrative Agent shall have received a duly executed Notice of Borrowing;
9.2.2 No Default exists or will result from the making of the Loans, and no Event of Default (as defined under the Revolving Credit Agreement) has occurred and is continuing; provided, however, that a Default relating solely to another Borrower will not relieve the Banks of their obligations to make Loans to other Borrowers subject to the satisfaction of the other provisions of this Agreement.
9.2.3 The representations and warranties of and as to such Borrower contained in Section 7, and 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 Closing 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;
9.2.4 No Material Litigation exists other than the Existing Litigation;
9.2.5 No Material Adverse Change has occurred with respect to Conseco or CIHC since September 22, 2000;
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9.2.6 The Collateral Ratio for such Borrower, after giving effect to such Loan, is at least 2.0 to 1.0.
9.2.7 Conseco shall have paid all accrued and unpaid fees, costs and expenses, including reasonable attorneys' fees and costs, with respect to all credit arrangements with the Administrative Agent.
SECTION 10. EVENTS OF DEFAULT AND THEIR EFFECT
SECTION 10.1 Events of Default. An "Event of Default" shall exist with respect to a Borrower if any one or more of the following events (herein collectively called "Events of Default") shall occur and be continuing:
10.1.1 Non-Payment of Loans, etc.
(a) Default by such Borrower in the payment or prepayment when due of any principal on the Loans made to such Borrower, or
(b) Default by such Borrower in the payment within five (5) days of when due of any interest on the Loans made to such Borrower or any other amount owing by such Borrower pursuant to this Agreement.
10.1.2 Bankruptcy, Insolvency, etc. Any CCPA Pledgor (not consisting of Conseco or any Significant Subsidiary) becomes insolvent or generally fails to pay, or admits in writing its inability to pay, debts as they become due; or such Borrower or any such CCPA Pledgor applies for, consents to, or acquiesces in the appointment of, a trustee, receiver or other custodian for such Borrower, such CCPA Pledgor or any property thereof, or makes a general assignment for the benefit of creditors; or, in the absence of such application, consent or acquiescence, a trustee, receiver or other custodian is appointed for such Borrower or such CCPA Pledgor or for a substantial part of the property of such Borrower or such CCPA Pledgor and is not discharged within sixty (60) days; or any bankruptcy, reorganization, debt arrangement, or other case or proceeding under any bankruptcy or similar insolvency law is commenced in respect of such Borrower or such CCPA Pledgor and if such case or proceeding is not commenced by such Borrower or such CCPA Pledgor, it is consented to or acquiesced in by such Borrower or such CCPA Pledgor or remains for sixty (60) days undismissed.
10.1.3 Defaults Under this Agreement. Failure by such Borrower to comply with or perform any of the covenants or agreements of such Borrower set forth in this Agreement or the other Loan Documents applicable to such Borrower (other than those constituting an Event of Default under any of the other
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provisions of this Section 10) and continuance of such failure for thirty (30) days with respect to such Borrower, in each case after notice thereof to such Borrower, from the Administrative Agent.
10.1.4 Representations and Warranties. Any representation or warranty made by such Borrower or by any CCPA Pledgor (other than a CCPA Pledgor consisting of Conseco or any Significant Subsidiary) in any of the Loan Documents is false or misleading in any material respect as of the date hereof or as of the date hereafter certified, or any schedule, certificate, financial statement, report, notice, or other writing furnished by such Borrower or by such CCPA Pledgor to the Administrative Agent or any Bank is false or misleading in any material respect on the date as of which the facts therein set forth are stated or certified.
10.1.5 Collateral Ratio. The Collateral Ratio for such Borrower is less than 1.5 to 1.0.
10.1.6 Defaults under the Conseco Guaranty. An event of default shall have occurred and be continuing under the Conseco Guaranty.
10.1.7 Defaults Under Any of the Other D&O Agreements. An Event of Default or Termination Event in respect of Conseco, any of its Subsidiaries or such Borrower shall have occurred and be continuing under any of the Other D&O Agreements.
10.1.8 CCPA Pledgors. (i) Any CCPA Pledgor (other than Conseco or any Significant Subsidiary) (A) fails to make any payment in respect of any Indebtedness or Contingent Obligation (other than in respect of Hedging Obligations), having an aggregate principal amount (including undrawn committed or available amounts and including amounts owing to all creditor under any combined or syndicated credit arrangement) of more than $1,000,000, when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) and such failure continues after the applicable grace or notice period, if any, specified in the relevant document on the date of such failure; or (B) fails to perform or observe any other condition or covenant, or any other event shall occur or condition exist (other than an alleged breach which such CCPA Pledgor is contesting in good faith and which does not relate to a payment default or a breach of a financial convent), under any agreement or instrument relating to any such Indebtedness or Contingent Obligation, and such failure continues after the applicable grace or notice period, if any, specified in the relevant document on the date of such failure if the effect of such failure, event or condition is to cause, or to permit the holder or holder of such Indebtedness or beneficiary or beneficiaries of such Indebtedness (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause such Indebtedness to be declared to be due and payable prior to its stated maturity, or such Contingent Obligation to become payable or cash collateral in respect thereof to be demanded; or (ii) there occurs under any Hedging Obligation an early termination date (as defined in the
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agreement evidencing such Hedging Obligation) resulting from (A) any event of default under such Hedging Obligation as to which any such CCPA Pledgor is the Defaulting Party (as defined in the agreement evidencing such Hedging Obligation) or (B) any termination event (as so defined in the agreement evidencing such Hedging Obligations) as to which any CCPA Pledgor is an Affected Party (as so defined in the agreement evidencing such Hedging Obligations), and, in either event, the Swap Termination Value owed by such CCPA Pledgor as a result thereof is greater than $1,000,000.
SECTION 10.2 Effect of Event of Default. If any Event of Default described in Section 10.1.2 shall occur and be continuing, all Liabilities of such Borrower, or if such Event of Default relates to any CCPA Pledgor (not consisting of Conseco or any Significant Subsidiary) (or if any Event of Default under subsection (f) or (g) of Section 5.01 of the Appendix (as such term is defined in the Conseco Guaranty), made applicable to Conseco, CIHC or any other Significant Subsidiary pursuant to Sections 10.1.6 and 10.1.7 hereof, shall occur and be continuing as to Conseco, CIHC or any CCPA Pledgor consisting of any Significant Subsidiary), all Liabilities of all Borrowers, shall become immediately due and payable, all without presentment, demand, protest or notice of any kind; and, in the case of any other Event of Default, the Administrative Agent may (or shall, upon the written request of the Required Banks) declare all Liabilities with respect to such Borrower, or if such Event of Default relates to Conseco, CIHC, or any CCPA Pledgor, all Liabilities of all Borrowers, to be due and payable, whereupon all Liabilities with respect to such Borrower or all Borrowers, as the case may be, shall become immediately due and payable, all without presentment, demand, protest or notice of any kind. The Administrative Agent shall promptly advise such Borrower or all Borrowers, as the case may be, and each Bank of any such declaration, but failure to do so shall not impair the effect of such declaration. Notwithstanding the foregoing or any provision of Section 13.1, the effect of an Event of Default of any event described in Section 10.1.2 may be waived by the written concurrence of the Banks holding 100% of the aggregate unpaid principal amount of the Loans, and the effect of an Event of Default of any other event described in this Section 10 may be waived as provided in Section 13.1. In any such circumstance where the Liabilities of any Borrower or all Borrowers (as the case may be) have become immediately due and payable, whether automatically or upon any such declaration (as the case may be), the Administrative Agent may (or shall, upon the written request of the Required Banks) exercise or not exercise, as it deems appropriate, on behalf of itself and the Banks, any and all other rights and remedies available (including after taking into account, as to Conseco and CIHC only, the restrictions set forth in Sections 2.1 and 6.1 of the Conseco Guaranty (except with respect to said Section 6.1, if the restrictions set forth in
Section 6.1 of the Conseco Guaranty have been rendered inoperative or have been otherwise qualified pursuant to Section 6.2 or Section 6.4 of the Conseco Guaranty)) to it and the Banks under the Loan Documents and/or applicable law against such Borrower or all Borrowers or any combination thereof (as the case may be), Conseco, CIHC, and/or any CCPA Pledgor and their respective property.
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SECTION 11. THE AGENT
SECTION 11.1 Authorization and Action. Each Bank hereby appoints and authorizes the Administrative Agent to take such action as administrative agent on its behalf and to exercise such powers to the extent provided herein or in any document or instrument delivered hereunder or in connection herewith, together with such other action as may be reasonably incidental thereto. As to matters not expressly provided for by this Agreement (including, without limitation, enforcement or collection of this Agreement or any other Loan Document) the Administrative Agent shall not be required to exercise any discretion, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Required Banks and such instructions shall be binding upon all Banks. Under no circumstances shall the Administrative Agent have any fiduciary duties to any Bank or be required to take any action which exposes the Administrative Agent to personal liability or which is contrary to this Agreement or to the other Loan Documents or applicable law.
SECTION 11.2 Liability of the Administrative Agent. None of the Administrative Agent or any Agent-Related Person shall be liable for any action taken or omitted to be taken by it or them under or in connection with this Agreement and the other Loan Documents, except for its own gross negligence or willful misconduct. Without limiting the generality of the foregoing, the Administrative Agent: (a) may treat a Bank as such until the Administrative Agent receives an executed Assignment Agreement entered into between a Bank and an Eligible Assignee pursuant to Section 12.1 hereof; (b) may consult with legal counsel (including counsel for any Borrower), independent public accountants and other experts or consultants selected by it; (c) shall not be liable for any action taken or omitted to be taken in good faith by the Administrative Agent in accordance with the advice of counsel, accountants, consultants or experts; (d) shall make no warranty or representation to any Bank and shall not be responsible to any Bank for any recitals, statements, warranties or representations, whether written or oral, made in or in connection with this Agreement or the other Loan Documents; (e) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, obligations, covenants or conditions of this Agreement on the part of any Borrower or to inspect the property (including, without limitation, any books and records) of any Borrower; (f) shall not be responsible to any Bank for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other Loan Document or other support or security (including the validity, priority or perfection of any Lien), or any other document furnished in connection with any of the foregoing; and (g) shall incur no liability under or in respect of this Agreement or any other Loan Document by action upon any written notice, statement, certificate, order, telephone message, facsimile or other document which the Administrative Agent believes in good faith to be genuine and correct and to have been signed, sent or made by the proper Person.
SECTION 11.3 Administrative Agent and Affiliates. With respect to the Loans made by it, BofA shall have the same rights and powers under this Agreement and the other Loan Documents as any other Bank and may exercise the same as though it were not the Administrative Agent; and the term "Bank" or "Banks" shall, unless otherwise expressly indicated, include BofA
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in its individual capacity. BofA and its Affiliates may accept deposits from, lend money to, act as trustee under indentures of, and generally engage in any kind of business with, any Borrower, Conseco and any of its Subsidiaries and any Person who may do business with or own securities of Conseco or any such Subsidiary, all as if BofA was not the Administrative Agent and without any duty to account therefor to the Banks.
SECTION 11.4 Bank Credit Decision. Each Bank acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Bank and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Bank also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement.
SECTION 11.5 Indemnification. The Banks agree to indemnify the Administrative Agent and each Agent-Related Person (to the extent not reimbursed by the Borrower), ratably according to their Percentages, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by, or assessed against the Administrative Agent in any way relating to or arising out of this Agreement, the other Loan Documents, the Other D & O Agreements or the Existing Litigation, or any action taken or omitted by the Administrative Agent under this Agreement, the other Loan Documents, the Other D & O Agreements or the Existing Litigation; provided, that no Bank shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Administrative Agent's gross negligence or willful misconduct. Without limiting any of the foregoing, each Bank agrees to reimburse the Administrative Agent promptly upon demand for their Percentage of any expenses (including reasonable counsel fees) incurred by the Administrative Agent (in its individual capacity as agent or in its capacity as representative of the Banks) in connection with the preparation, execution, delivery, administration, modification, amendment, waiver or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under this Agreement or the other Loan Documents, the Other D & O Agreements, or the Existing Litigation to the extent that the Administrative Agent is not reimbursed for such expenses by the Borrowers or Conseco. All obligations provided for in this Section 11.5 shall survive termination of this Agreement.
SECTION 11.6 Successor Agent. The Administrative Agent may, and at the request of the Required Banks shall, resign as Administrative Agent upon 30 days' notice to the Banks. If the Administrative Agent resigns under this Agreement, the Required Banks shall appoint from among the Banks a successor agent for the Banks which successor agent shall be approved by a majority of the Borrowers (which consent shall not be unreasonably withheld). If no successor agent is appointed prior to the effective date of the resignation of the Administrative Agent, the Administrative Agent may appoint, after consulting with the Banks and the Borrowers, a successor agent from among the Banks. Upon the acceptance of its appointment as successor
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agent hereunder, such successor agent shall succeed to all the rights, powers and duties of the retiring Administrative Agent and the term "Administrative Agent" shall mean such successor agent and the retiring Administrative Agent's appointment, powers and duties as Administrative Agent shall be terminated. After any retiring Administrative Agent's resignation hereunder as Administrative Agent, the provisions of this Section 11 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement. If no successor agent has accepted appointment as Administrative Agent by the date which is 30 days following a retiring Administrative Agent's notice of resignation, the retiring Administrative Agent's resignation shall nevertheless thereupon become effective and the Banks shall perform all of the duties of the Administrative Agent hereunder until such time, if any, as the Required Banks appoint a successor agent as provided for above.
SECTION 12. ASSIGNMENTS AND PARTICIPATIONS
SECTION 12.1 Assignments.
(a) Each Bank shall have the right at any time to assign with the consent of Conseco (on behalf of the Borrowers) and the Administrative Agent (which consent, in each case, will not unreasonably be withheld), to any Eligible Assignee, all or any part of such Bank's rights and obligations under this Agreement and each other Loan Document including its rights in respect of its Loans and Notes, if any; provided, however, that no such consent of Conseco (on behalf of the Borrowers) shall be required where any Event of Default as to Conseco, CIHC, or any CCPA Pledgor has occurred and shall be continuing. Any such assignment shall be pursuant to an assignment agreement, substantially in the form of Exhibit H (an "Assignment Agreement"), duly executed by such Bank and the Eligible Assignee, and acknowledged by the Administrative Agent. Notwithstanding the foregoing, each Bank may make assignments to its Affiliates or to any Federal Reserve Bank without obtaining consent of the Administrative Agent.
(b) Each assignment shall be pro rata with respect to all rights and obligations of the assigning Bank including the Loans and the Notes, if any. Each assignment shall be in an amount equal to or in excess of $5,000,000 (except for assignments of the entire unpaid balance, if less than $5,000,000, of the Loans of a Bank or assignments to existing Banks). In the case of any such assignment, upon the fulfillment of the conditions in Section 12.1(c), this Agreement shall be deemed to be amended to the extent, and only to the extent, necessary to reflect the addition of such Eligible Assignee, and such Eligible Assignee shall for all purposes be a Bank party hereto and shall have, to the extent of such assignment, the same rights and obligations as a Bank hereunder.
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(c) An assignment shall become effective hereunder when all of the following shall have occurred:
(i) the Assignment Agreement shall have been executed by the assigning Bank and the Eligible Assignee,
(ii) the Assignment Agreement shall have been acknowledged by the Administrative Agent and, where applicable, by Conseco (on behalf of the Borrowers),
(iii) either the assigning Bank or the Eligible Assignee shall have paid a processing fee of $3,000 to the Administrative Agent for its own account; provided that the Eligible Assignee shall be solely responsible for such processing fee with respect to any assignment pursuant to Sections 5.8 and 13.2, and
(iv) the assigning Bank and the Administrative Agent shall have agreed upon a date upon which such assignment shall become effective. Upon such assignment becoming effective, the Administrative Agent shall forward all payments of interest, principal, fees and other amounts that would have been made to the assigning Bank, in proportion to the percentage of the assigning Bank's rights transferred, to the Eligible Assignee.
(d) Upon the effectiveness of any assignment, the assigning Bank shall be relieved from its obligations hereunder to the extent of the obligations so assigned (except to the extent, if any, that any Borrower, any other Bank or the Administrative Agent have rights against such assigning Bank as a result of any default by such Bank under this Agreement). Promptly following the effectiveness of each assignment, the Administrative Agent shall furnish to the Borrowers and each Bank a revised Schedule 2.1, revised to reflect such assignment.
SECTION 12.2 Participations.
(a) Each Bank may grant participations in all or any part of its Loans and, if applicable, the Notes to any commercial bank or other financial institution (other than insurance companies and Affiliates thereof unless consented to by Conseco). A participant shall not have any rights under this Agreement or any other document delivered in connection herewith (the participant's rights against such Bank in respect of such participation to be those set forth in the agreement executed by such Bank in favor of the participant relating thereto, which agreement with respect to such participation shall not restrict such Bank's ability to make any modification, amendment or waiver to this Agreement without the consent of the participant except that the consent of such participant may be required in connection with matters requiring the consent of all of the Banks under
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Section 13.1). Notwithstanding the foregoing, each participant shall have the rights of a Bank pursuant to Section 4.3. All amounts payable by any Borrower under this Agreement shall be determined as if the Bank had not sold such participation. In the event of any such sale by a Bank of participating interests to a participant, such Bank's obligations under this Agreement shall remain unchanged, such Bank shall remain solely responsible for the performance thereof, such Bank shall remain the holder of any obligation for all purposes under this Agreement, and the Borrowers and the Administrative Agent shall continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations under this Agreement.
(b) Limitation of Rights of any Participant. Notwithstanding anything in the foregoing to the contrary,
(i) no participant shall have any direct rights hereunder,
(ii) the Borrowers, the Administrative Agent and the Banks, other than the selling Bank, shall deal solely with the selling Bank and shall not be obligated to extend any rights or make any payment to, or seek any consent of, the participant,
(iii) no participation shall relieve the selling Bank of any of its other obligations hereunder and such Bank shall remain solely responsible for the performance thereof, and
(iv) no participant, other than an affiliate of the selling Bank, shall be entitled to require such Bank to take or omit to take any action hereunder, except that such Bank may agree with such participant that such Bank will not, without participant's consent, take any action which requires the consent of all of the Banks under Section 13.1.
SECTION 12.3 Disclosure of Information. Each Borrower authorizes each Bank to disclose to any participant, assignee or Eligible Assignee (each, a "Transferee") and any prospective Transferee any and all financial and other information in such Bank's possession concerning such Borrower, Conseco and its Subsidiaries which has been delivered to such Bank by such Borrower and/or Conseco in connection with such Bank's credit evaluation of such Borrower prior to entering into this Agreement or which has been delivered to such Bank by such Borrower and/or Conseco pursuant to this Agreement; provided, however, that each Bank, participant, assignee and Eligible Assignee shall execute a confidentiality agreement substantially in the form of Exhibit G in which it agrees that it shall hold all non-public, confidential and proprietary information obtained pursuant to the requirements of this Agreement in accordance with safe and sound banking and business practices and may make disclosure reasonably required by any bona fide participant, assignee or Eligible Assignee in connection with the contemplated
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transfer of any portion of the Loans or as required or requested by any Governmental Authority or representative thereof or pursuant to legal process. For the purposes of this Section 12.3, by execution of this Agreement each of the Banks shall be deemed to have agreed to and executed the confidentiality agreement contained in Exhibit G.
SECTION 12.4 Foreign Transferees. If, pursuant to this Section 12, any interest in this Agreement or any Loans or the Note is transferred to any Transferee which is organized under the laws of any jurisdiction other than the United States or any state thereof or upon the request of the Administrative Agent, the transferor Bank shall cause such Transferee (other than any participant), and may cause any participant, concurrently with the effectiveness of such transfer,
(a) to represent to the transferor Bank (for the benefit of the transferor Bank, the Administrative Agent and the Borrowers) that under applicable law and treaties no Taxes will be required to be withheld by the Administrative Agent,
(b) to represent to the Borrowers or the transferor Bank that under applicable law and treaties no Taxes will be required to be withheld with respect to any payments to be made to such Transferee in respect of the Loans or, if applicable, the Notes,
(c) to furnish to the transferor Bank, the Administrative Agent and the Borrowers either U.S. Internal Revenue Service Form W-BEN, Form W-ECI or Form W-8IMY (wherein such Transferee claims entitlement to complete exemption from U.S. federal withholding tax on all interest payments hereunder), and
(d) to agree (for the benefit of the transferor Bank, the Administrative Agent and the Borrowers) to provide the transferor Bank, the Administrative Agent and the Borrowers a new Form W-BEN, Form W-ECI or Form W-8IMY upon the obsolescence of any previously delivered form and comparable statements in accordance with applicable U.S. laws and regulations and amendments duly executed and completed by such Transferee, and to comply from time to time with all applicable U.S. laws and regulations with regard to such withholding tax exemption.
SECTION 13. MISCELLANEOUS
SECTION 13.1 Waivers and Amendments. The provisions of this Agreement and of each other Loan Document may from time to time be amended, modified or waived, if such amendment, modification or waiver is in writing and consented to by each Borrower directly affected by such amendment, modification, or waiver and the Required Banks; provided, that no such amendment, modification or waiver:
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(a) which would modify any requirement hereunder that any particular action be taken by all Banks or by the Required Banks, shall be effective without the consent of each Bank;
(b) which would modify this Section 13.1, change the definition of "Required Banks," change any Percentage for any Bank (except pursuant to an Assignment Agreement), reduce any fees, extend the maturity date of any Loan, reduce any rate of interest payable on the Loans or subject any Bank to any additional obligations, shall be effective without the consent of each Bank;
(c) which would permit the release of all or any material portion of the Direct Collateral, Indirect Collateral or CCPA Collateral or the release or termination of Conseco's or CIHC's obligations in the aggregate, or any material obligation individually, under the Conseco Guaranty or the CIHC Guaranty shall be effective without the consent of each Bank; provided, however, that such consent shall not be required for the termination of the CIHC Guaranty pursuant to Section 5.14 thereof;
(d) which would extend the due date for, or reduce the amount of, any payment or prepayment of principal of or interest on the Loans, shall be effective without the consent of each Bank; or
(e) which would affect adversely the interests, rights or obligations of the Administrative Agent (in such capacity) other than removal in accordance with Section 11.6, shall be effective without consent of the Administrative Agent;
provided, further that, consistent with (but not in limitation of) the foregoing, (x) at any time that Liabilities of a particular Borrower shall be due and owing, but unpaid, amendments, modifications and waivers may be made applicable to such Borrower without the approval of other Borrowers (but with the approval of each Bank) and amendments, modifications and waivers may be made applicable to other Borrowers without such approval of such Borrower (but with the approval of each Bank), (y) any guarantor and the Administrative Agent may enter into an amendment, modification or waiver of such guarantor's or guaranty without the consent of any Borrower, and (z) any portion of the CCPA Collateral may be released or the Amended and Restated Cash Collateral Agreement may be amended without the consent of any Borrower.
SECTION 13.2 Failure to Consent. If any Bank shall fail to consent to any amendment, modification or waiver described in Section 13.1 (any such Bank being hereinafter referred to as a "Non-Consenting Bank") then in such case, Conseco (on behalf of the Borrowers) may, upon at least five (5) Business Days' written notice to the Administrative Agent and such Non-Consenting Bank, designate a substitute lender (a "Substitute Bank") acceptable to the Administrative Agent in its sole discretion, to which such Non-Consenting Bank shall assign all (but not less than all) of its rights and obligations under the Loans hereunder. Upon any assignment by any Bank pursuant
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to this Section 13.2 becoming effective, the Substitute Bank shall thereupon be deemed to be a "Bank" for all purposes of this Agreement and the assigning Bank shall thereupon cease to be a "Bank" for all purposes of this Agreement and shall have no further rights or obligations hereunder (other than pursuant to Sections 5.1, 5.2, 5.5, 11.5 and 13.4 hereof, and Sections 7.1 and 7.2 of the Conseco Guaranty or Section 5.1 of the CIHC Guaranty while such Non- Consenting Bank was a Bank); provided, that all Liabilities (except Liabilities which by the terms hereof survive the payment in full of the Loans and termination of this Agreement) due and payable to the Non-Consenting Bank shall be paid in full as of the date of such assignment. Notwithstanding the foregoing, in the event that in connection with any amendment, modification or waiver more than one Bank is a Non-Consenting Bank, the Borrowers may not require one Bank to assign its rights and obligations to a Substitute Bank unless all Non-Consenting Banks are required to make such an assignment. Notwithstanding any Non-Consenting Bank's failure or refusal to assign its rights, obligations and Loans under this
Section 13.2, the Non-Consenting Bank shall cease to be a "Bank" for all purposes of this Agreement and the Substitute Bank substituted therefor upon payment to the Non-Consenting Bank by the Substitute Bank of all amounts set forth in this Section 13.2 without any further action of the Non-Consenting Bank.
SECTION 13.3 Notices. All notices, requests and other communications to any party hereunder shall be in writing (including bank wire, telex, facsimile or similar writing) and shall be given to such party at its address, facsimile or telex number set forth on the signature or acknowledgment pages hereof or such other address, facsimile or telex number as such party may hereafter specify for the purpose by written notice to the Administrative Agent, the Borrowers and Conseco. Each such notice, request or other communication shall be effective (a) if given by facsimile or telex, when such facsimile or telex is transmitted to the facsimile or telex number specified in this Section 13.3 and, in the case of telex or facsimile, the appropriate answerback or confirmation is received, (b) if given by mail, seventy-two (72) hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid or (c) if given by any other means, when delivered at the address specified in this Section 13.3, provided, that notices to the Administrative Agent under Sections 2, 3, 4 and 10 shall not be effective until received by the Administrative Agent.
SECTION 13.4 Indemnity. The Borrowers agree, jointly and severally, to indemnify each Bank, its Affiliates and each of their respective directors, officers, employees, persons controlling or controlled by any of them or their respective agents, consultants, attorneys and advisors (the "Indemnified Parties") and hold each Indemnified Party harmless from and against any and all liabilities, losses, claims, damages, costs and expenses of any kind to which any of the Indemnified Parties may become subject, whether directly or indirectly (including, without limitation, the reasonable fees and disbursements of counsel for any Indemnified Party), relating to or arising out of this Agreement, the other Loan Documents, the Other D&O Agreements, the Existing Litigation or any actual or proposed use of the proceeds of the Loans hereunder; provided, that no Indemnified Party shall have the right to be indemnified hereunder for its own gross negligence or willful misconduct as determined by a court of competent jurisdiction. All obligations of the Borrowers provided for in this Section 13.4 shall survive termination of this Agreement.
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SECTION 13.5 D&O Agreements. Except to the extent the Loans hereunder shall have refinanced Existing Loans, the D&O Agreements (including, without limitation, the Existing Credit Agreement) shall remain in full force and effect and shall not be superseded by this Agreement, and consistent with (but not in limitation of) the foregoing, nothing contained herein is intended in any manner whatsoever to amend, modify, or otherwise alter the provisions of the Existing Credit Agreement (or of any related loan document) as to any borrower thereunder who is not a party to this Agreement. Where the Loans have refinanced Existing Loans, the Existing Credit Agreement shall have been superseded by this Agreement as to the Borrowers, but only as to the Borrowers (and specifically, not as to the other borrowers under the Existing Credit Agreement who are not parties to this Agreement); provided, however, that provisions of the Existing Credit Agreement that expressly survive the payment in full of the Existing Loans shall continue to survive; provided further, however, in the event of any conflict between the provisions of this Agreement and the surviving provisions of the Existing Credit Agreement, the provisions of this Agreement shall control as to the Borrowers.
SECTION 13.6 Subsidiary References. The provisions of this Agreement relating to Subsidiaries shall apply only during such times as a Person referenced in such a provision has one or more Subsidiaries.
SECTION 13.7 Captions. Section captions used in this Agreement are for convenience only, and shall not affect the construction of this Agreement.
SECTION 13.8 GOVERNING LAW. THIS AGREEMENT, THE NOTES, IF ANY, AND THE LOANS SHALL BE A CONTRACT MADE UNDER AND GOVERNED BY THE LAWS OF THE STATE OF ILLINOIS, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES. ALL OBLIGATIONS OF THE BORROWERS AND RIGHTS OF THE ADMINISTRATIVE AGENT AND THE BANKS IN RESPECT OF THE LIABILITIES EXPRESSED HEREIN OR IN THE OTHER LOAN DOCUMENTS SHALL BE IN ADDITION TO AND NOT IN LIMITATION OF THOSE PROVIDED BY APPLICABLE LAW.
SECTION 13.9 Counterparts. This Agreement may be executed in any number of counterparts and by the different parties on separate counterparts and each such counterpart shall be deemed to be an original, but all such counterparts shall together constitute but one and the same agreement. When counterparts executed by all the parties shall have been lodged with the Administrative Agent (or, in the case of any Bank as to which an executed counterpart shall not have been so lodged, the Administrative Agent shall have received telegraphic, facsimile, telex or other written confirmation from such Bank of execution of a counterpart hereof by such Bank), this Agreement shall become effective as of the Closing Date hereof, and at such time the Administrative Agent shall notify the Borrowers and each Bank.
SECTION 13.10 SUBMISSION TO JURISDICTION; WAIVER OF VENUE. THE ADMINISTRATIVE AGENT, EACH BANK AND EACH BORROWER
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(A) HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY ILLINOIS STATE OR FEDERAL COURT SITTING IN THE NORTHERN DISTRICT OF ILLINOIS OVER ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS, AND THE ADMINISTRATIVE AGENT, EACH BANK AND EACH BORROWER HEREBY IRREVOCABLY AGREE THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH ILLINOIS STATE OR FEDERAL COURT, AND (B) AGREE NOT TO INSTITUTE ANY LEGAL ACTION OR PROCEEDING AGAINST ANOTHER PARTY OR THE DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR PROPERTY OF ANY THEREOF, ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENTS, IN ANY COURT OTHER THAN AS HEREINABOVE SPECIFIED IN THIS SECTION 13.10. THE ADMINISTRATIVE AGENT, EACH BANK AND EACH BORROWER HEREBY IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION IT OR THEY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE IN ANY ACTION OR PROCEEDING (WHETHER BROUGHT BY ANY BORROWER, THE ADMINISTRATIVE AGENT, ANY BANK, OR OTHERWISE) IN ANY COURT HEREINABOVE SPECIFIED IN THIS SECTION 13.10 AS WELL AS ANY RIGHT IT OR THEY MAY NOW OR HEREAFTER HAVE TO REMOVE ANY SUCH ACTION OR PROCEEDING, ONCE COMMENCED, TO ANOTHER COURT ON THE GROUNDS OF FORUM NON CONVENIENS OR OTHERWISE. THE ADMINISTRATIVE AGENT, EACH BANK AND EACH BORROWER AGREE THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.
SECTION 13.11 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; provided, however, that the Borrowers may not assign or transfer their rights or obligations under this Agreement or any other Loan Document without the prior written consent of all Banks, and the rights of the Banks to make assignments or grant participations are subject to the provisions of Section 12.
SECTION 13.12 Power of Attorney. Each Borrower hereby irrevocably constitutes and appoints Conseco as such Borrower's attorney-in-fact, with full power of substitution and transfer, to take any and all actions, including, without limitation, giving consents, notices, and approvals, specified to be taken or executed by Conseco under this Agreement and to execute all documents in furtherance thereof. The power of attorney hereby granted shall be coupled with an interest and shall be irrevocable until payment in full of the Loans.
SECTION 13.13 No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of the Administrative Agent or any Bank, any right, remedy, power or privilege under this Agreement, any other Loan Document or any of the other D&O Agreements,
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and/or applicable law shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. Consistent with (but not in limitation of) the foregoing, the rights, powers, and/or remedies provided in this Agreement or any other Loan Document shall be cumulative and shall not preclude the assertion or exercise of any other rights or remedies available under law, in equity or otherwise except solely with respect to Conseco and CIHC to the extent expressly set forth in Sections 2.1 and 6.1 of the Conseco Guaranty (except with respect to said
Section 6.1, if the restrictions set forth in Section 6.1 of the Conseco Guaranty have been rendered inoperative or have been otherwise qualified pursuant to Section 6.2 or Section 6.4 of the Conseco Guaranty).
SECTION 13.14 WAIVER OF JURY TRIAL. EACH BORROWER, THE ADMINISTRATIVE AGENT AND EACH BANK HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM CONCERNING ANY RIGHTS UNDER THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR ANY OTHER DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH, OR ARISING FROM ANY BANKING RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREE THAT ANY SUCH ACTION, PROCEEDING OR COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY; THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES ENTERING INTO THIS AGREEMENT.
Executed as of the day and year first above written at Chicago, Illinois.
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GUARANTY
Dated as of November 22, 2000
between
CONSECO, INC.,
 as Guarantor,
and
BANK OF AMERICA, NATIONAL ASSOCIATION,
as Administrative Agent
GUARANTY
THIS GUARANTY (this "Guaranty") is entered into as of November 22, 2000 by CONSECO, INC., an Indiana corporation ("Guarantor"), in favor of BANK OF AMERICA, National Association, as administrative agent (the "Administrative Agent") for the financial institutions (the "Banks" and together with Administrative Agent, collectively, the "Guaranteed Parties") who are or from time to time may become party to the Credit Agreement (as hereinafter defined). Unless otherwise defined herein, capitalized terms used herein shall have the meanings assigned to such terms pursuant to Article I hereof.
W I T N E S S E T H:
WHEREAS, certain individuals (herein, collectively called, the "Existing Borrowers" and each individually, an "Existing Borrower") entered into that certain Credit Agreement, dated as of May 13, 1996, which has been amended and restated pursuant to that certain Amended and Restated Credit Agreement, dated as of August 26, 1997 (as from time to time, in whole or in part, the same was amended, modified, supplemented, restated, refinanced, refunded or renewed, the "Existing Credit Agreement"), among the Existing Borrowers, the Banks and the Administrative Agent, whereby the Banks made term loans to the Existing Borrowers in an aggregate original principal amount of $180,000,000 (the "Existing Loans") on the terms and subject to the conditions contained in the Existing Credit Agreement;
WHEREAS, as a condition to the Administrative Agent and the Banks entering into the Existing Credit Agreement, Guarantor was required to and did execute and deliver to the Administrative Agent that certain Guaranty, dated as of May 13, 1996, and as a condition to the Administrative Agent and the Banks entering into the Existing Credit Agreement, Guarantor was required to and did execute and deliver its Amended and Restated Guaranty, dated as of August 26, 1997 (as amended or modified through the date hereof, the "Existing Guaranty"), whereby Guarantor absolutely, unconditionally and irrevocably agreed to pay in full all Obligations (as defined in the Existing Guaranty) of the Existing Borrowers under the Existing Credit Agreement;
WHEREAS, Guarantor has established a program to allow for certain of the Existing Borrowers to refinance the Existing Loans;
WHEREAS, the Administrative Agent and the Banks have agreed to refinance the Existing Loans pursuant to that certain Credit Agreement, dated as of November 22, 2000 (as from time to time, in whole or in part, the same may be amended, modified, supplemented, restated, refinanced, refunded or renewed, the "Credit Agreement"), among the certain of the Existing Borrowers (the "Borrowers"), the Banks and the Administrative Agent, on the terms and subject to the conditions contained in the Credit Agreement;
WHEREAS, as a condition precedent to the Banks executing and delivering the Credit Agreement and making the Loans thereunder, Guarantor is required to execute and deliver this Guaranty; and
WHEREAS, Guarantor has been duly authorized to execute, deliver and perform this Guaranty;
WHEREAS, Guarantor will derive substantial direct and indirect benefits from the Loans made to the Borrowers by the Banks pursuant to the Credit Agreement;
NOW THEREFORE, for good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, and in order to induce the Banks to refinance the Existing Loans to the Borrowers pursuant to the Credit Agreement, Guarantor agrees, for the benefit of each Guaranteed Party, as follows:
ARTICLE I.
DEFINITIONS
SECTION 1.1. Certain Terms. Capitalized terms used herein, unless otherwise defined herein, shall have the respective meanings assigned thereto in the Credit Agreement; provided that such definitions shall survive any termination of the Credit Agreement. In addition, when used herein the following terms shall have the following meanings (such definitions to be equally applicable to the singular and plural forms thereof):
"Administrative Agent" has the meaning set forth in the Preamble.
"Appendix" means the Appendix attached to the Revolving Credit Agreement, which is hereby incorporated by reference.
"Banks" or "Bank" has the meaning set forth in the Preamble.
"Borrowers" or "Borrower" has the meaning set forth in the fourth recital.
"Borrower Default" has the meaning set forth in Section 6.1(a).
"Credit Agreement" has the meaning set forth in the fourth recital.
"Credit Documents" has the meaning set forth in Section 2.3(a).
"Existing Borrowers" has the meaning set forth in the first recital.
"Existing Credit Agreement" has the meaning set forth in the first recital.
"Existing Guaranty" has the meaning set forth in the second recital.
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"Existing Loans" has the meaning set forth in the first recital.
"Guaranteed Obligations" has the meaning set forth in Section 2.1.
"Guaranteed Party" has the meaning set forth in the Preamble.
"Guarantor" has the meaning set forth in the Preamble.
"Guaranty" has the meaning set forth in the Preamble.
"Indemnified Liabilities" has the meaning set forth in Section 6.2(c).
"Indemnified Parties" has the meaning set forth in Section 7.2.
"Relevant Agent" shall have the meaning set forth in the Appendix.
"Relevant Banks" shall have the meaning set forth in the Appendix.
"Relevant Facility" shall have the meaning set forth in the Appendix.
"Revolving Credit Agreement" shall mean the Five-Year Credit Agreement dated as of September 25, 1998, between Guarantor, the financial institutions party thereto and Administrative Agent, as amended by the First Amendment to Five-Year Credit Agreement, dated as of September 22, 2000, as the same may be further amended, modified or supplemented from time to time.
"September 22, 2000 Agreement" means that Agreement dated as of September 22, 2000 among Guarantor, the Agent, and the Banks, as the same may be further amended, modified, or supplemented from time to time.
"Subrogation Rights" has the meaning set forth in Section 2.6.
"Termination Event" shall have the meaning set forth in the September 22, 2000 Agreement; provided that, for purposes of this Guaranty, (i) the term "Existing Guaranty" as used in each of clause (d) and in clause (g) of
Section 9 of the September 22, 2000 Agreement, shall be deemed to also include this Guaranty (and, as a result, and without limiting the generality of the foregoing, any event of default by Guarantor hereunder (including, without limitation, any default under Section 4.4 hereof and any Event of Default under
Section 4.5 hereof) shall constitute a Termination Event under clause (g) of
Section 9 of the September 22, 2000 Agreement), (ii) the term "CIHC Guaranty" as used in each clause (d) and in clause (h) of Section 9 of the September 22, 2000 Agreement, which originally related only to the Existing CIHC Guaranty, shall be deemed to also include the CIHC Guaranty, (iii) the term "Existing Credit Agreement" as used in clause (f) of the September 22, 2000 Agreement shall be deemed to
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also include the Credit Agreement, and (iv) the term "Plan" as used in clause
(e) of the September 22, 2000 Agreement shall be deemed to also include the Plan.
ARTICLE II.
GUARANTY PROVISIONS
SECTION 2.1. Guaranty. Guarantor hereby absolutely, unconditionally and irrevocably:
(a) guaranties to the Guaranteed Parties the full and punctual payment (i) of all obligations of each Borrower to the Guaranteed Parties for the payment of principal upon the earlier to occur of (A) December 31, 2003 and (B) the occurrence of a Termination Event, and
(ii) of all obligations other than principal of each Borrower to the Guaranteed Parties when due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise, and at all times thereafter, in each case, howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent, or now or hereafter existing, or due or to become due under the Credit Agreement, whether for principal, interest, fees, expenses or otherwise (including all such amounts which would become due but for the operation of the automatic stay provisions under Section 362(a) of the United States Bankruptcy Code, 11 U.S.C. ss.362(a), and the operation of Sections 502(b) and 506(b) of the United States Bankruptcy Code, 11 U.S.C. ss.502(b) and ss.506(b)) (all such obligations hereinafter collectively called the "Guaranteed Obligations"); and
(b) indemnifies and holds harmless each Guaranteed Party or any holder of any Loan for any and all costs and expenses (including, without limitation, reasonable attorneys' fees and expenses) incurred by such Guaranteed Party or such holder, as the case may be, in enforcing any rights under this Guaranty;
This Guaranty constitutes a guaranty of payment (x) on or after the date set forth in clause (a) (i) above with respect to principal and (y) of all other amounts when due, and not of collection, and Guarantor specifically agrees that it shall not be necessary or required that any Guaranteed Party or any other holder of any Loan exercise any right, assert any claim or demand or enforce any remedy whatsoever against any Borrower or any other obligor (or any other Person) before the performance of, or as a condition to, the obligations of Guarantor hereunder.
SECTION 2.2. Acceleration of Guaranty. Guarantor agrees that, in the event of the insolvency of Guarantor or the inability or failure of Guarantor to pay debts as they become due, or an assignment by Guarantor for the benefit of creditors, or the commencement of any case or proceeding in respect of any Borrower, any other obligor or Guarantor under any bankruptcy, insolvency or similar federal or state laws, and if such event shall occur at a time when any of the Guaranteed Obligations of such Borrower or such other obligor may not then be
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due and payable, Guarantor will pay to the Banks forthwith (a) if such event relates to such Borrower or any other obligor with respect to the Guaranteed Obligations of such Borrower, the full amount which would be payable hereunder by Guarantor if all Guaranteed Obligations of such Borrower were then due and payable and (b) if such event relates to Guarantor or any other obligor with respect to the obligations of Guarantor, the full amount which would be payable hereunder by Guarantor if all the Guaranteed Obligations of all Borrowers were then due and payable.
SECTION 2.3. Guaranty Absolute, etc. This Guaranty shall in all respects be a continuing, absolute, unconditional and irrevocable guaranty of payment, and shall remain in full force and effect until all Guaranteed Obligations of the Borrowers and each other obligor have been paid in full, and all obligations of Guarantor hereunder shall have been paid in full. Guarantor guarantees that the Guaranteed Obligations of the Borrowers and each other obligor and their respective Subsidiaries, if any, will be paid strictly in accordance with the terms of the Credit Agreement and each other Loan Document under which they arise, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of any Guaranteed Party or any holder of the Note(s) of any Borrower with respect thereto. Consistent with (but not in limitation of) the other provisions of this Section 2.3, the liability of Guarantor under this Guaranty shall be absolute, unconditional and irrevocable irrespective of:
(a) any lack of validity, legality or enforceability of the Existing Credit Agreement, the Existing Guaranty, any other loan document relating to the Existing Credit Agreement or the Existing Guaranty, the September 22, 2000 Agreement, the Plan, the Credit Agreement, any Note or any other Loan Document (the "Credit Documents");
(b) the failure of any Guaranteed Party or any holder of any Note:
(i) to assert any claim or demand or to enforce any right or remedy against any Borrower, any other obligor or any other Person under the provisions of the Credit Documents or otherwise; or
(ii) to exercise any right or remedy against any other guarantor of, or collateral securing, any Guaranteed Obligations of any Borrower or any other obligor;
(c) any change in the time, manner or place of payment of, or in any other term of, all or any of the Guaranteed Obligations of any Borrower or any other obligor, or any other extension, compromise or renewal of any Guaranteed Obligations of any Borrower or any other obligor;
(d) any reduction, limitation, impairment or termination of the Guaranteed Obligations of any Borrower or any other obligor for any reason, including any claim of
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waiver, release, surrender, alteration or compromise, and shall not be subject to (and Guarantor hereby waives any right to or claim of) any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality, nongenuineness, irregularity, compromise, unenforceability of, or any other event or occurrence affecting, the Guaranteed Obligations of any Borrower, any other obligor or otherwise;
(e) any amendment to, rescission, waiver, or other modification of, or any consent to any departure from, any of the terms of the Credit Documents;
(f) any addition, exchange, release, surrender or non-perfection of any collateral, or any amendment to or waiver or release or addition of, or consent to any departure from, any other guaranty, held by any Guaranteed Party or any holder of any note securing any of the Guaranteed Obligations of any Borrower or any other obligor; or
(g) any other circumstance which might otherwise constitute a defense available to, or a legal or equitable discharge of, any Borrower, any other obligor, any surety or any guarantor.
SECTION 2.4. Reinstatement, etc. Guarantor agrees that this Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment (in whole or in part) of any of the Guaranteed Obligations is rescinded or must otherwise be restored by any Guaranteed Party or any holder of any Note, upon the insolvency, bankruptcy or reorganization of any Borrower, any other obligor or otherwise, all as though such payment had not been made.
SECTION 2.5. Waiver, etc. Guarantor hereby waives promptness, diligence, notice of acceptance and any other notice with respect to any of the Guaranteed Obligations of the Borrower or any other obligor, and this Guaranty and any requirement that the Administrative Agent, any other Guaranteed Party or any holder of any Note protect, secure, perfect or insure any security interest or Lien, or any property subject thereto, or exhaust any right or take any action against any Borrower, any other obligor or any other Person (including any other guarantor) or entity or any collateral securing the Guaranteed Obligations of any Borrower or any other obligor, as the case may be.
SECTION 2.6. Waiver of Subrogation; Subordination. Guarantor hereby irrevocably waives with respect to any Borrower, until the prior indefeasible payment in full in cash of all Guaranteed Obligations of such Borrower under the Loan Documents, any claim or other rights which it may now or hereafter acquire against such Borrower or any other obligor that arises from the existence, payment, performance or enforcement of Guarantor's obligations under this Guaranty or otherwise, including any right of subrogation, reimbursement, exoneration, or indemnification, any right to participate in any claim or remedy of the Guaranteed Parties against such Borrower or any other obligor or any collateral which the
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Administrative Agent now has or hereafter acquires, whether or not such claim, remedy or right (all such claims, remedies and rights being collectively called "Subrogation Rights") arises in equity, or under contract, statute or common law, including the right to take or receive from such Borrower or any other obligor, directly or indirectly, in cash or other property or by set-off or in any manner, payment or security on account of such claim or other rights. If any amount shall be paid to Guarantor in violation of the preceding sentence and the Guaranteed Obligations shall not have been paid in cash, in full, such amount shall be deemed to have been paid to Guarantor for the benefit of, and held in trust for, the Guaranteed Parties, and shall forthwith be paid to the Guaranteed Parties to be credited and applied upon the Guaranteed Obligations of such Borrower, whether matured or unmatured. Guarantor acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by the Credit Agreement and that the waiver set forth in this
Section 2.6 is knowingly made in contemplation of such benefits.
SECTION 2.7. Successors, Transferees and Assigns; Transfers of Notes, etc. This Guaranty shall:
(a) be binding upon Guarantor, and its successors, transferees and assigns; and
(b) inure to the benefit of and be enforceable by the Administrative Agent and each other Guaranteed Party.
Without limiting the generality of clause (b), any Bank may assign or otherwise transfer (in whole or in part) any Note or Loan held by it to any other Person, and such other Person shall thereupon become vested with all rights and benefits in respect thereof granted to such Bank under any Loan Document (including this Guaranty) or otherwise. Notwithstanding anything contained in this Section 2.7 to the contrary, this Section 2.7 shall not be deemed to enlarge or create additional rights with respect to any Bank's ability to assign any portion of its Loans or rights under any Note or any other Loan Document pursuant to
Section 12 of the Credit Agreement, and this Section 2.7 is expressly made subject thereto.
SECTION 2.8. Payments Free and Clear of Taxes, etc. Guarantor hereby agrees that:
(a) any and all payments made by Guarantor hereunder shall be made in accordance with Section 4.5 of the Credit Agreement free and clear of, and without deduction for, any and all Charges, to the same extent as if Guarantor were a Borrower;
(b) Guarantor hereby indemnifies and holds harmless each Guaranteed Party and each other holder of a Loan for the full amount of any Charges paid by such Guaranteed Party or such holder, as the case may be, and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto; and
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(c) without prejudice to the survival of any other agreement of Guarantor hereunder, the agreements and obligations of Guarantor contained in this Section 2.8 shall survive the payment in full of the principal of and interest on the Loans.
SECTION 2.9. Right of Offset. In addition to and not in limitation of all rights of offset that any Guaranteed Party or other holder of a Note may have under applicable law or any other Loan Document, subject to the terms of the Credit Agreement, each Guaranteed Party or other holder of a Note shall during the continuance of any Termination Event and whether or not such Guaranteed Party or such holder has made any demand or Guarantor's obligations are matured, have the right to appropriate and apply to the payment of Guarantor's obligations hereunder all deposits (general or special, time or demand, provisional or final) then or thereafter held by, and other indebtedness or property then or thereafter owing to, such Guaranteed Party or other holder, whether or not related to this Guaranty or any transaction hereunder.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES;
INCORPORATION BY REFERENCE
To induce the Guaranteed Parties to enter into the Credit Agreement and to make the Loans thereunder, Guarantor represents and warrants to each Guaranteed Party that:
SECTION 3.1. Organization, etc. Guarantor and each of its Subsidiaries is a corporation, partnership or limited liability company duly organized or formed, validly existing and in good standing under the laws of the state of its incorporation or formation and each of Guarantor and its Subsidiaries is duly qualified to transact business and in good standing as a foreign corporation, partnership or limited liability company authorized to do business in each jurisdiction where the nature of its business makes such qualification necessary and failure to so qualify could reasonably be expected to have a Material Adverse Effect.
SECTION 3.2. Authorization. Guarantor (a) has the power to execute, deliver and perform this Guaranty and the other Loan Documents to which it is a party, and (b) has taken all necessary action to authorize the execution, delivery and performance by it of this Guaranty and the other Loan Documents to which it is a party.
SECTION 3.3. No Conflict. The execution, delivery and performance by Guarantor of this Guaranty and the other Loan Documents to which it is a party does not and will not (a) contravene or conflict with any provision of any law, statute, rule or regulation, (b) contravene or conflict with, result in any breach of, or constitute a default under, any material agreement or instrument binding on Guarantor or any of its Subsidiaries (including, without limitation, any writ, judgment, injunction or other similar court order), (c) result in the creation or imposition of or the obligation to create or impose any lien (except for liens permitted by Section 4.02 of the Appendix) upon any of the property or assets of Guarantor or any of its
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Subsidiaries or (d) contravene or conflict with any provision of the articles of incorporation or bylaws of Guarantor.
SECTION 3.4. Margin Regulations.
(a) None of the transactions contemplated hereunder or in connection herewith will in any way violate, contravene or conflict with any of the provisions of Regulation U;
(b) None of the obligations of any Borrower to Guarantor is or will be directly or indirectly secured by "margin stock" (as defined in Regulation U);
(c) Neither Guarantor nor any third party acting on behalf of Guarantor has taken or will take possession of any Borrower's "margin stock" to secure, directly or indirectly, any of the Guaranteed Obligations of such Borrower or the obligations of Guarantor under this Guaranty;
(d) Guarantor does not and will not have any right to prohibit any Borrower from selling, pledging, encumbering or otherwise disposing of any margin stock owned by such Borrower so long as this Guaranty is in effect or any of the Guaranteed Obligations of such Borrower or the obligations of Guarantor under this Guaranty remain outstanding;
(e) None of the Borrowers have granted or will grant Guarantor or any third party acting on behalf of Guarantor the right to accelerate repayment of any of the Guaranteed Obligations of such Borrower if any of the margin stock owned by such Borrower is sold by such Borrower or otherwise; and
(f) There is no agreement or other arrangement between any Borrower and Guarantor or any third party acting on behalf of Guarantor (and no such agreement or arrangement shall be entered into so long as this Guaranty is in effect or any of the Guaranteed Obligations of such Borrower or the obligations of Guarantor under this Guaranty remain outstanding) under which the margin stock of such Borrower would be made more readily available as security to Guarantor than to other creditors of such Borrower.
SECTION 3.5. No Termination Event. No Termination Event has occurred and is continuing.
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ARTICLE IV
COVENANTS AND EVENTS OF DEFAULT
SECTION 4.1. Appendix Covenants. Guarantor agrees that, on and after the date hereof for so long thereafter as any of the Guaranteed Obligations remain unpaid or outstanding, Guarantor will comply with the covenants set forth in Articles II, III and IV of the Appendix and the terms and provisions set forth therein shall be incorporated by reference in this Section 4.1 in their entirety as if fully set forth herein with the same effect as if applied to this Section 4.1. All capitalized terms set forth in Articles II, III and IV of the Appendix shall have the meanings provided in the Appendix. Such covenants shall not be affected in any manner by the termination of the Revolving Credit Agreement.
Notwithstanding the foregoing, if Articles II, III and IV of the Appendix or any definitions set forth or used therein are amended or modified in accordance with the terms of the Revolving Credit Agreement either as the result of an amendment or modification to such section in the Appendix or Guarantor's execution and delivery of a new credit facility in replacement, restatement or substitution for the Revolving Credit Agreement, this Section 4.1 shall be deemed to be amended and modified to the extent set forth in the Revolving Credit Agreement (as amended or modified) or any new credit facility entered into in replacement, restatement or substitution for the Revolving Credit Agreement.
SECTION 4.2. Margin Regulations. Guarantor shall take such actions and execute and deliver such instruments or documents from time to time as the Administrative Agent shall reasonably request to maintain continuous compliance with Regulation U.
SECTION 4.3. Limitation on Additional Purpose Credit. Notwithstanding any other provision of this Guaranty, the Credit Agreement or the Revolving Credit Agreement to the contrary, Guarantor will not, and will not permit any of its Wholly-Owned Subsidiaries and/or Significant Subsidiaries to incur or assume any Indebtedness which constitutes "purpose credit" secured "directly or indirectly" (as defined in Regulation U) by Margin Stock.
SECTION 4.4. Provision of Collateral Ratio Information. Guarantor shall provide to the Administrative Agent and the Banks such information as may be reasonably requested from time to time by the Administrative Agent or the Required Banks to permit the Administrative Agent or the Required Banks, as the case may be, to determine the "maximum good faith loan value" (as defined in Regulation U) of the Indirect Collateral and do such other acts and execute such other documentation to continue to comply with Regulation U.
SECTION 4.5. Events of Default. The Events of Default set forth in Section 5.01 of the Appendix are hereby incorporated by this reference.
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ARTICLE V.
CONDITIONS AND EFFECTIVENESS OF THIS AGREEMENT
The obligation of the Banks to make the Loans is (in addition to the conditions precedent set forth in Section 9 of the Credit Agreement) subject to the performance by Guarantor of all of the obligations under this Guaranty and to the satisfaction of the following conditions precedent:
SECTION 5.1. Loans. Prior to or concurrent with the making of the Loans under the Credit Agreement, the Administrative Agent shall have received all of the following, each, except to the extent otherwise specified below, duly executed by a Responsible Officer of Guarantor, dated the date of the Loans, in form and substance reasonably satisfactory to the Administrative Agent, each in sufficient number of signed counterparts or copies to provide one for each Bank and the Administrative Agent:
5.1.1. An opinion of David K. Herzog, counsel of Guarantor and its Subsidiaries, addressing such legal matters as the Administrative Agent may reasonably require;
5.1.2. An opinion of Weil, Gotshal & Manges LLP, outside counsel to Guarantor and its Subsidiaries, addressing such legal matters as the Administrative Agent may reasonably require;
5.1.3. An officer's certificate of Guarantor, dated as of the Closing Date, signed by a Responsible Officer of Guarantor, and attested to by the secretary thereof, together with certified copies of Guarantor's articles of incorporation, bylaws and directors resolutions;
5.1.4. Evidence of the good standing or certificates of compliance of Guarantor in the jurisdiction in which Guarantor was incorporated as of the Closing Date;
5.1.5. Evidence that Guarantor paid to the Administrative Agent the fees and expenses provided for herein;
5.1.6. Evidence reasonably satisfactory to the Administrative Agent of compliance by Guarantor with Regulation U; and
5.1.7. Such other information and documents as may reasonably be required by the Administrative Agent and the Administrative Agent's counsel.
ARTICLE VI.
SALE AND RELEASE OF PLEDGED SHARES; CASH COLLATERAL
SECTION 6.1. Sale of Pledged Shares. Notwithstanding any provision set forth in any of the Loan Documents to the contrary, the Administrative Agent agrees that after the occurrence and during the continuance of any Event of Default with respect to any Borrower, the
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effect of which is to cause the Guaranteed Obligations of such Borrower to be due and payable under the Credit Agreement (a "Borrower Default"), subject to the provisions of Section 2.1 and Sections 6.2 and 6.4 below, it will not demand that Guarantor pay the Guaranteed Obligations of such Borrower until after the Administrative Agent has used its reasonable best efforts, in good faith, to sell the Pledged Shares of such Borrower, such sale to be consummated in one or a series of open market transactions through one or more reputable broker-dealers at the then fair market value of such Pledged Shares.
SECTION 6.2. Conditions to Sale of Pledged Shares. The obligation of the Administrative Agent not to demand payment hereunder pursuant to Section 6.1 is subject to the following conditions:
(a) none of the following has occurred at the time of such Borrower Default or shall occur thereafter:
(i) a suspension or material limitation in trading in securities generally or trading in the common stock of Guarantor on the New York Stock Exchange or any other exchange upon which the common stock of Guarantor may then be traded;
(ii) a general moratorium on commercial banking activities in New York is declared by any Federal or New York State authorities;
(iii) the Administrative Agent is prohibited or materially limited from selling the Pledged Shares as a result of any federal or state securities laws (including, without limitation, the rules promulgated thereunder relating to the disclosure of material information); or
(iv) any other event (including, without limitation, commencement of any suit, action or litigation, filing of any claim or any other similar proceeding or any change in any applicable law) has occurred which, in the reasonable opinion of the Administrative Agent, would prohibit, have a material adverse effect on, or materially limit the Administrative Agent's ability to sell the Pledged Shares as contemplated by the terms of Section 6.1.
(b) Guarantor agrees that in any sale of any of the Pledged Shares, the Administrative Agent is authorized to comply with any limitation or restriction in connection with such sale as counsel may advise the Administrative Agent is necessary, in the reasonable opinion of such counsel, in order to avoid any violation of applicable law (including, without limitation, compliance with such procedures as may restrict the number of prospective bidders and purchasers, require that such prospective bidders and purchasers have certain qualifications, and restrict such prospective bidders and purchasers to persons who will represent and agree that they are purchasing for their own
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account for investment and not with a view to the distribution or resale of such Collateral), or in order to obtain any required approval of the sale or of the purchaser by any governmental regulatory authority or official, and Guarantor further agrees that such compliance shall not result in such sale being considered or deemed not to have been made in a commercially reasonable manner, nor shall the Administrative Agent be liable or accountable to Guarantor for any discount allowed by reason of the fact that such Pledged Shares are sold in compliance with any such limitation or restriction.
(c) Guarantor further agrees to indemnify and hold harmless the Administrative Agent and the Banks and each of their respective officers, directors, employees, agents, successors and assigns, and any Person in control of any thereof, from and against any loss, liability, claim, damage and expense, including, without limitation, reasonable attorneys' fees actually incurred (in this paragraph collectively called the "Indemnified Liabilities"), under federal and state securities laws or otherwise resulting from the action or failure to act by Guarantor or any Borrower; provided that no such Person shall have the right to be indemnified hereunder for its own gross negligence or willful misconduct as determined by a court of competent jurisdiction.
SECTION 6.3. Release of Pledged Shares. The Administrative Agent agrees that, so long as none of the events set forth in Section 6.2(a) has occurred, it shall not release any of the Pledged Shares of any Borrower from the Lien granted under the Pledge Agreement until the payment in full of all obligations of such Borrower. Notwithstanding the foregoing, the Administrative Agent shall be entitled to (i) release the Pledged Shares of such Borrower if such Pledged Shares are replaced by additional common stock of Guarantor and
(ii) sell the Pledged Shares pursuant to Section 6.1 hereof or the Pledge Agreement.
SECTION 6.4. Borrower Termination Event. Guarantor hereby acknowledges and agrees that Sections 6.1 and 6.3 shall not apply to any Termination Event relating to Guarantor or any of its Subsidiaries and, upon the occurrence of a Termination Event relating to Guarantor or any of its Subsidiaries, the Administrative Agent expressly reserves its rights and remedies under this Guaranty to demand payment hereunder to satisfy the Guaranteed Obligations of all Borrowers and the obligations of Guarantor hereunder whether or not the Administrative Agent has sold or attempted to sell the Pledged Shares of any Borrower or otherwise exercised its rights and remedies under the Pledge Agreement or any other Loan Document. Furthermore nothing contained herein shall be deemed to prohibit or limit in any way whatsoever the Administrative Agent's or any Bank's right or ability to receive its portion of the assets of Guarantor upon the exercise by any other Relevant Agent or any other Relevant Banks of their rights and remedies under any other Relevant Facility or any other creditor of Guarantor.
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ARTICLE VII.
MISCELLANEOUS
SECTION 7.1. Costs and Expenses. Guarantor agrees to pay on demand all reasonable expenses of the Administrative Agent (including the non-duplicative fees and reasonable expenses of counsel (including expenses of in-house counsel) and of local counsel, if any, who may be retained by such counsel) in connection with:
(i) the negotiation, preparation, execution, syndication and delivery of the Credit Agreement, this Guaranty and the other Loan Documents, including schedules and exhibits, and any amendments, waivers, consents, supplements or other modifications to the Credit Agreement, this Guaranty or the other Loan Documents as may from time to time hereafter be required, whether or not the transactions contemplated hereby or thereby are consummated; and
(ii) the preparation and/or review of the form of any document or instrument relevant to the Credit Agreement, this Guaranty or any other Loan Document.
Guarantor further agrees to pay, and to save the Administrative Agent and the Banks, and their respective Affiliates, harmless from all liability for, any stamp or other Taxes (other than income taxes of the Administrative Agent or the Banks) which may be payable in connection with the execution or delivery of the Credit Agreement, any Borrowing thereunder, the issuance of the Notes, if any, this Guaranty or any other Loan Document. Guarantor also agrees to reimburse the Administrative Agent and each Bank upon demand for all reasonable expenses (including attorneys' fees and legal expenses) incurred by the Administrative Agent or such Bank in connection with the enforcement of any Guaranteed Obligations or obligations hereunder and the consideration of legal issues relevant hereto and thereto whether or not such expenses are incurred by the Administrative Agent on its own behalf or on behalf of the Banks. All obligations of Guarantor provided for in this Section 7.1 shall survive termination of this Guaranty. Notwithstanding the foregoing, the Administrative Agent or a Bank shall not have the right to reimbursement under this Section 7.1 for amounts determined by a court of competent jurisdiction to have arisen from the gross negligence or willful misconduct of the Administrative Agent or a Bank.
SECTION 7.2. Indemnity. Guarantor agrees to indemnify the Administrative Agent, each Bank, their Affiliates and their respective directors, officers, employees, persons controlling or controlled by any of them or their respective agents, consultants, attorneys and advisors (the "Indemnified Parties") and hold each Indemnified Party harmless from and against any and all liabilities, losses, claims, damages, costs and expenses of any kind to which any of the Indemnified Parties may become subject, whether directly or indirectly (including, without limitation, the reasonable fees and disbursements of counsel for any Indemnified Party), relating to or arising out of the Credit Agreement, this Guaranty, the other Loan Documents, or any actual or proposed use of the proceeds of the Loans hereunder; provided that no Indemnified Party shall have the right to be indemnified hereunder for its own gross negligence or willful misconduct as determined by a court of competent jurisdiction. All obligations of the Guarantor
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provided for in this Section 7.2 shall survive termination of the Credit Agreement and this Guaranty.
SECTION 7.3. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including bank wire, telex, facsimile or similar writing) and shall be given to such party at its address, facsimile or telex number set forth on the signature or acknowledgment pages hereof or such other address, facsimile or telex number as such party may hereafter specify for the purpose by written notice to the Administrative Agent and Guarantor. Each such notice, request or other communication shall be effective (a) if given by facsimile or telex, when such facsimile or telex is transmitted to the facsimile or telex number specified in this Section 7.3 and, in each case, the appropriate answerback or other confirmation is received, (b) if given by mail, seventy-two (72) hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid or (c) if given by any other means, when delivered at the address specified in this
Section 7.3.
SECTION 7.4. Successors and Assigns. This Guaranty, and the terms, covenants and conditions hereof, shall be binding upon and inure to the benefit of the parties hereto, and their respective successors and assigns, except Guarantor shall not be permitted to assign this Guaranty nor any interest herein nor in the Collateral, nor any part thereof, except in accordance with the terms of the Credit Agreement.
SECTION 7.5. SUBMISSION TO JURISDICTION, ETC. EACH OF GUARANTOR AND THE ADMINISTRATIVE AGENT (I) HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY ILLINOIS STATE OR FEDERAL COURT SITTING IN THE NORTHERN DISTRICT OF ILLINOIS OVER ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY OR THE OTHER LOAN DOCUMENTS, AND EACH OF GUARANTOR AND THE ADMINISTRATIVE AGENT HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH ILLINOIS STATE OR FEDERAL COURT, AND (II) AGREES NOT TO INSTITUTE ANY LEGAL ACTION OR PROCEEDING AGAINST THE OTHER PARTY HERETO OR THE DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR PROPERTY OF ANY THEREOF, ARISING OUT OF OR RELATING TO THIS GUARANTY, IN ANY COURT OTHER THAN AS HEREINABOVE SPECIFIED IN THIS SECTION 7.5. EACH OF GUARANTOR AND THE ADMINISTRATIVE AGENT HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE IN ANY ACTION OR PROCEEDING (WHETHER BROUGHT BY GUARANTOR, ANY OF ITS SUBSIDIARIES, THE ADMINISTRATIVE AGENT, ANY BANK OR OTHERWISE) IN ANY COURT HEREINABOVE SPECIFIED IN THIS SECTION 7.5 AS WELL AS ANY RIGHT IT MAY NOW OR HEREAFTER HAVE TO REMOVE ANY SUCH ACTION OR PROCEEDING, ONCE COMMENCED, TO ANOTHER COURT ON THE
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GROUNDS OF FORUM NON CONVENIENS OR OTHERWISE. EACH OF GUARANTOR AND THE ADMINISTRATIVE AGENT AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.
SECTION 7.6. Amendments; Release. Notwithstanding anything to the contrary contained in the Credit Agreement, the provisions of this Guaranty may from time to time be amended, modified or waived, if such amendment, modification or waiver is in writing and consented to by Guarantor and by the Administrative Agent (with the consent of the Required Banks), and then any such amendment, modification, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided that no such amendment, modification or waiver which would permit the release or termination of all or a substantial portion of Guarantor's obligations under this Guaranty shall be effective without the consent of each Bank.
SECTION 7.7. Section Headings. The section headings in this Guaranty are inserted for convenience of reference and shall not be considered a part of this Guaranty or used in its interpretation.
SECTION 7.8. Acknowledgments. No action of the Administrative Agent permitted hereunder shall in any way affect or impair the rights of the Administrative Agent and the obligations of Guarantor under this Guaranty. Guarantor hereby acknowledges that there are no conditions to the effectiveness of this Guaranty. Guarantor hereby acknowledges and agrees to make such deliveries as are required of it and comply with the other provisions applicable to it pursuant to the provisions of the Credit Agreement.
SECTION 7.9. Obligations Not Limited. All obligations of Guarantor and rights of the Administrative Agent or obligation expressed in this Guaranty shall be in addition to and not in limitation of those provided in applicable law or in any other written instrument or agreement relating to any of the Guaranteed Obligations.
SECTION 7.10. GOVERNING LAW. THIS GUARANTY SHALL BE A CONTRACT MADE UNDER AND GOVERNED BY THE LAWS OF THE STATE OF ILLINOIS. ALL OBLIGATIONS OF THE BORROWERS AND GUARANTOR AND RIGHTS OF THE ADMINISTRATIVE AGENT AND THE BANKS IN RESPECT OF THE GUARANTEED OBLIGATIONS AND THE OBLIGATIONS OF GUARANTOR EXPRESSED HEREIN OR IN THE OTHER LOAN DOCUMENTS SHALL BE IN ADDITION TO AND NOT IN LIMITATION OF THOSE PROVIDED BY APPLICABLE LAW.
SECTION 7.11. Counterparts. This Guaranty may be executed in any number of counterparts, each of which shall for all purposes be deemed an original, but all such counterparts
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shall constitute but one and the same agreement. Guarantor hereby acknowledges receipt of a true, correct and complete counterpart of this Guaranty.
SECTION 7.12. Agent. The Administrative Agent acts herein as agent for itself, the Banks and any and all future holders of the Guaranteed Obligations.
SECTION 7.13. WAIVER OF TRIAL BY JURY. EACH OF GUARANTOR AND THE ADMINISTRATIVE AGENT HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM CONCERNING ANY RIGHTS UNDER THIS GUARANTY, ANY OTHER LOAN DOCUMENT OR ANY OTHER DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH, OR ARISING FROM ANY BANKING RELATIONSHIP EXISTING IN CONNECTION WITH THIS GUARANTY AND AGREES THAT ANY SUCH ACTION, PROCEEDING OR COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY; THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES ENTERING INTO THIS GUARANTY.
***
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IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written.
CONSECO, INC.

By:     /s/ THOMAS M. HAGERTY
        ----------------------------
Name:   Thomas M. Hagerty
Title:  Senior Vice President and Acting
          Chief Financial Officer	

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GUARANTY AND SUBORDINATION AGREEMENT
Dated as of November 22, 2000
made by
CIHC, INCORPORATED,
 as Guarantor and Subordinated Borrower,
and
CONSECO, INC.,
 as Obligor and Subordinated Lender,
in favor of
BANK OF AMERICA, NATIONAL ASSOCIATION,
 as Administrative Agent
under the Credit Agreement
dated as of November 22, 2000
GUARANTY AND SUBORDINATION AGREEMENT
This Guaranty and Subordination Agreement (this "Agreement") is entered into as of November 22, 2000 by CIHC, INCORPORATED and CONSECO, INC. in favor of BANK OF AMERICA, NATIONAL ASSOCIATION, as administrative agent (in such capacity, the "Agent") for the financial institutions (the "Banks" and together with the Agent, collectively, the "Guarantied Parties") who are or from time to time may become party to the Credit Agreement, dated as of November 22, 2000 (as the same may be amended, supplemented, restated or otherwise modified from time to time, the "Credit Agreement"), among the individual borrowers party thereto, the Banks and the Agent. Unless otherwise defined herein, capitalized terms used herein shall have the meanings assigned to such terms pursuant to Article I hereof.
W I T N E S S E T H:
WHEREAS, pursuant to an Agreement, dated as of September 22, 2000, relating to 1997 Director & Officer Loan Agreement (the "Restructuring Document") with respect to the Existing Credit Agreement (as such term is defined in the Restructuring Document) and the existing guaranty of Conseco, Inc. referred to in the Existing Credit Agreement (as the same may be amended, supplemented, restated or otherwise modified from time to time, the "Existing Conseco Guaranty"), the Banks agreed, among other things, to refrain from exercising certain remedies in respect of the Existing Conseco Guaranty;
WHEREAS, it was a condition precedent to the obligation of the Banks to enter into the Restructuring Document that the Agreement Parties execute and deliver, and the Agreement Parties did execute and deliver, that certain Guaranty and Subordination Agreement dated as of September 22, 2000 (the "Existing Agreement");
WHEREAS, Conseco has established a program to allow for certain of the Borrowers to refinance the Existing Loans;
WHEREAS, the Administrative Agent and the Banks have agreed to refinance the Existing Loans pursuant to the Credit Agreement on the terms and subject to the conditions contained in the Credit Agreement;
WHEREAS, as a condition precedent to the Administrative Agent and the Banks executing and delivering the Credit Agreement and making the Loans thereunder, Conseco is required to execute and deliver a Guaranty of the obligations of the Borrowers thereunder (as the same may be amended, supplemented, restated or otherwise modified from time to time, the "Conseco Guaranty")
WHEREAS, as a condition precedent to the Banks executing and delivering the Credit Agreement and making the Loans thereunder, the Agreement Parties are required to execute and deliver this Agreement; and
WHEREAS, the Agreement Parties have been duly authorized to execute, deliver
and perform this Agreement;
WHEREAS, the Agreement Parties will derive substantial direct and indirect benefits from the Loans made to the Borrowers by the Banks pursuant to the Credit Agreement;
NOW THEREFORE, for good and valuable consideration the receipt and sufficiency of which is hereby acknowledged and to induce the Administrative Agent and the Banks to enter into the Credit Agreement and accept the Conseco Guaranty in connection therewith, each Agreement Party agrees, for the benefit of each Guarantied Party, as follows:
ARTICLE I.
DEFINITIONS
SECTION 1.1. Certain Terms. Capitalized terms used herein, unless otherwise defined herein, shall have the respective meanings assigned thereto in the Credit Agreement or the New Conseco Guaranty Documents; provided that such definitions shall survive any termination of the Credit Agreement or any New Conseco Guaranty Document. In addition, when used herein the following terms shall have the following meanings (such definitions to be equally applicable to the singular and plural forms thereof):
"Agreement" has the meaning set forth in the Preamble.
"Agreement Party" means each of Obligor, Guarantor, Subordinated Lender and Subordinated Borrower.
"Appendix" has the meaning assigned to such term in the Conseco Guaranty.
"Charges" has the meaning assigned to such term in the Credit Agreement.
"CIHC Guaranty" means each of (a) this Agreement, (b) the Guaranty and Subordination Agreements dated as of the date hereof by CIHC and Conseco relating to (i) the Guaranty of Conseco dated as of the date hereof with respect to a credit agreement dated as of the date hereof refinancing obligations under a Credit Agreement dated as of August 21, 1998 and (ii) the Guaranty of Conseco dated as of the date hereof with respect to a credit agreement dated as of the dated hereof refinancing obligations under a Termination and Replacement Agreement dated as of May 30, 2000, and (c) the Guaranty and Subordination Agreements dated September 22, 2000 by CIHC and Conseco relating to the obligations of Conseco in respect of (i) the Five-Year Credit Agreement dated as of September 25, 1998 among Conseco, certain financial institutions and Bank of America, N.A., as agent, as amended (ii) the 364-Day Credit Agreement dated as of September 25, 1998 among Conseco, certain financial institutions and Bank of America, N.A., as agent, as amended, (iii) the Senior Secured Revolving Credit Agreement, dated as of May 30, 2000 among Conseco, certain financial institutions and The Chase Manhattan Bank, as
administrative agent, as amended (iv) the Guaranty dated August 26, 1997 by Conseco with respect to an Amended and Restated Credit Agreement, dated as of August 26, 1997, among certain individual borrowers, certain financial institutions and Bank of America, N.A., as administrative agent, as amended, (v) the Guaranty dated as of August 21, 1998 by Conseco with respect to the Credit Agreement, dated as of August 21, 1998, among certain financial institutions and Bank of America, N.A., as administrative agent, as amended and (vi) the Amended and Restated Guaranty dated as of September 22, 2000 by Conseco with respect to the Termination and Replacement Agreement, dated as of May 30, 2000, among certain financial institutions and The Chase Manhattan Bank, as administrative agent, as amended, as each of the foregoing may be amended, modified or supplemented from time to time.
"Conseco" means Conseco, Inc.
"Conseco Guaranty" has the meaning set forth in the fifth Recital.
"Conseco Guaranty Documents" means the collective reference to the Conseco Guaranty and any other agreement entered into by Obligor in connection therewith.
"Credit Agreement" has the meaning set forth in the Preamble.
"Default" has the meaning assigned to such term in the Appendix.
"Event of Default" has the meaning assigned to such term in the Appendix.
"Existing Agreement" shall have the meaning set forth in the second Recital.
"Existing Conseco Guaranty" shall have the meaning set forth in the first Recital.
"Existing Conseco Guaranty Documents" means the collective reference to the Existing Conseco Guaranty, the Restructuring Document and any other agreement entered into by Obligor in connection therewith.
"Existing Credit Agreement" shall have the meaning set forth in the first Recital.
"Existing Loans" shall have the meaning assigned to such term in the Restructuring Agreement.
"Guarantied Obligations" has the meaning set forth in Section 2.1.
"Guarantied Parties" has the meaning set forth in the Preamble.
"Guarantor" means CIHC, Incorporated, in its capacity as guarantor of the Guarantied Obligations.
"Indemnified Parties" has the meaning set forth in Section 5.1.
"Investment Grade Status" has the meaning assigned to such term in the Appendix.
"Lehman Agreement" has the meaning assigned to such term in the Appendix.
"Near-Term Facilities Termination Date" has the meaning assigned to such term in the Appendix.
"Obligations" means all debts, liabilities, obligations, covenants and duties for the payment of money owing by Obligor pursuant to any Conseco Guaranty Document, whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising.
"Obligor" means Conseco, Inc., in its capacity as obligor in respect of the Obligations.
"Reorganization" has the meaning set forth in Section 3.2(a).
"Restructuring Document" has the meaning set forth in the first Recital.
"Senior Creditors" means any holder or beneficiary of any Senior Debt, or any authorized representative thereof.
"Senior Debt" means (a) all obligations of Guarantor under Article II,
(b) all "Senior Debt" under and as defined in any other CIHC Guaranty, (c) all "Senior Debt" under and as defined in the Guaranty and Subordination Agreement entered into in connection with the Lehman Agreement and (d) all other "Senior Debt" (or comparable concept) under and as defined in any subordination provision or agreement relating to or entered into in connection with any Contingent Obligation of CIHC pursuant to Section 4.01(d)(i) or (d)(iv) of the Appendix.
"Subordinated Borrower" means CIHC, Incorporated, in its capacity as obligor in respect of the Subordinated Debt.
"Subordinated Debt" means the principal amount of any Indebtedness owing by Subordinated Borrower to Subordinated Lender from time to time outstanding and unpaid, together with accrued and unpaid interest thereon.
"Subordinated Lender" means Conseco, Inc., in its capacity as holder of the Subordinated Debt.
"Subrogation Rights" has the meaning set forth in Section 2.6.
ARTICLE II.
GUARANTY PROVISIONS
SECTION 2.1. Guaranty. Guarantor hereby absolutely, unconditionally and irrevocably:
a. guaranties to the Guarantied Parties the full and punctual payment when due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise, and at all times thereafter, of all Obligations (including all such amounts which would become due but for the operation of the automatic stay provisions under Section 362(a) of the United States Bankruptcy Code, 11 U.S.C. ss.362(a), and the operation of Sections 502(b) and 506(b) of the United States Bankruptcy Code, 11 U.S.C. ss.502(b) and ss.506(b)) (all such Obligations collectively called the "Guarantied Obligations"); and
b. indemnifies and holds harmless each Guarantied Party or any other holder of any Guarantied Obligations for any and all costs and expenses
(including, without limitation, reasonable attorneys' fees and expenses) incurred by such Guarantied Party or such holder, as the case may be, in enforcing any rights under this Agreement;
The guaranty set forth in this Article II constitutes a guaranty of payment when due and not of collection, and Guarantor specifically agrees that it shall not be necessary or required that any Guarantied Party or any other holder of any Guarantied Obligations exercise any right, assert any claim or demand or enforce any remedy whatsoever against Obligor or any other Person before the performance of, or as a condition to, the obligations of Guarantor hereunder. Anything herein or in any other Loan Document to the contrary notwithstanding, the maximum liability of Guarantor hereunder shall in no event exceed the amount which can be guaranteed by Guarantor under applicable federal and state laws relating to the insolvency of debtors.
SECTION 2.2. Acceleration of Guaranty. Guarantor agrees that, in the event of the insolvency of Guarantor, or the inability or failure of Guarantor to pay debts as they become due, or an assignment by Guarantor for the benefit of creditors, or the commencement of any case or proceeding in respect of Obligor or Guarantor under any bankruptcy, insolvency or similar federal or state laws, and if such event shall occur at a time when any of the Guarantied Obligations may not then be due and payable, Guarantor will pay to the Banks forthwith the full amount which would be payable hereunder by Guarantor if all the Guarantied Obligations were then due and payable.
SECTION 2.3. Guaranty Absolute, etc. This Agreement shall in all respects be a continuing, absolute, unconditional and irrevocable guaranty of payment, and shall remain in full force and effect until all Guarantied Obligations have been paid in full and all obligations of Guarantor hereunder shall have been paid in full. Guarantor guarantees that the Guarantied Obligations will be paid strictly in accordance with the terms of the Conseco Guaranty Documents and each other Loan Document under which they arise, regardless of any law,
regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of any Guarantied Party or any holder of any Guarantied Obligations. The liability of Guarantor under this Agreement shall be absolute, unconditional and irrevocable irrespective of:
a. any lack of validity, legality or enforceability of the Restructuring Document, the Existing Credit Agreement, any Existing Conseco Guaranty Document, the Existing Agreement, the Credit Agreement, any Conseco Guaranty Document, or any other Loan Document;
b. the failure of any Guarantied Party:
(i) to assert any claim or demand or to enforce any right or remedy against Obligor or any other Person under the provisions of the Credit Agreement, any Conseco Guaranty Document, any other Loan Document or otherwise; or
(ii) to exercise any right or remedy against any other guarantor of, or collateral securing, any Guarantied Obligations;
c. any change in the time, manner or place of payment of, or in any other term of, all or any of the Guarantied Obligations, or any other extension, compromise or renewal of any Guarantied Obligations;
d. any reduction, limitation, impairment or termination of the Guarantied Obligations for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to (and Guarantor hereby waives any right to or claim of) any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality, nongenuineness, irregularity, compromise, unenforceability of, or any other event or occurrence affecting, the Guarantied Obligations;
e. any amendment to, rescission, waiver, or other modification of, or any consent to any departure from, any of the terms of the Credit Agreement, any Conseco Guaranty Document or any other Loan Document;
f. any addition, exchange, release, surrender or non-perfection of any collateral, or any amendment to or waiver or release or addition of, or consent to any departure from, any other guaranty held by any Guarantied Party or any other holder of the Guarantied Obligations; or
g. any other circumstance which might otherwise constitute a defense available to, or a legal or equitable discharge of, Obligor, any surety or any guarantor.
SECTION 2.4. Reinstatement, etc. Guarantor agrees that this Agreement shall continue to be effective or be reinstated, as the case may be, if at any time any payment (in whole or in part) of any of the Guarantied Obligations is rescinded or must otherwise be restored by any
Guarantied Party or any other holder of any Guarantied Obligations, upon the insolvency, bankruptcy or reorganization of Obligor, all as though such payment had not been made.
SECTION 2.5. Waiver, etc. Guarantor hereby waives promptness, diligence, notice of acceptance and any other notice with respect to any of the Guarantied Obligations, and this Agreement and any requirement that the Agent, any other Guarantied Party or any other holder of Guarantied Obligations protect, secure, perfect or insure any security interest or Lien, or any property subject thereto, or exhaust any right or take any action against Obligor or any other Person (including any other guarantor) or entity or any collateral securing the Guarantied Obligations.
SECTION 2.6. Waiver of Subrogation; Subordination. Guarantor hereby irrevocably waives with respect to Obligor, until the prior indefeasible payment in full in cash of all Guarantied Obligations, any claim or other rights which it may now or hereafter acquire against Obligor that arises from the existence, payment, performance or enforcement of Guarantor's obligations under this Article II, including any right of subrogation, reimbursement, exoneration, or indemnification, any right to participate in any claim or remedy of the Guarantied Parties against Obligor or any collateral which the Agent now has or hereafter acquires, whether or not such claim, remedy or right (all such claims, remedies and rights being collectively called "Subrogation Rights") arises in equity, or under contract, statute or common law, including the right to take or receive from Obligor, directly or indirectly, in cash or other property or by set-off or in any manner, payment or security on account of such claim or other rights. If any amount shall be paid to Guarantor in violation of the preceding sentence and the Guarantied Obligations shall not have been paid in cash, in full, such amount shall be deemed to have been paid to Guarantor for the benefit of, and held in trust for, the Guarantied Parties, and shall forthwith be paid to the Guarantied Parties to be credited and applied upon the Guarantied Obligations, whether matured or unmatured. Guarantor acknowledges that it will receive direct and indirect benefits from the Restructuring Document, the Conseco Guaranty, and the Credit Agreement and that the waiver set forth in this
Section 2.6 is knowingly made in contemplation of such benefits.
SECTION 2.7. Successors, Transferees and Assigns; Transfers of Guarantied Obligations, etc. This Agreement shall:
a. be binding upon Guarantor, and its successors, transferees and assigns; and
b. inure to the benefit of and be enforceable by the Agent and each other Guarantied Party.
Without limiting the generality of clause (b), any Bank may assign or otherwise transfer (in whole or in part) any Guarantied Obligation held by it to any other Person upon the terms and conditions set forth in the Credit Agreement, and such other Person shall thereupon become vested with all rights and benefits in respect thereof granted to such Bank under any Loan Document (including this Agreement) or otherwise.
SECTION 2.8. Payments Free and Clear of Taxes, etc. Guarantor hereby agrees
that:
a. any and all payments made by Guarantor hereunder shall be made in accordance with Section 4.5 of the Credit Agreement free and clear of, and without deduction for, any and all Charges, to the same extent as if Guarantor were a "Borrower" thereunder;
b. Guarantor hereby indemnifies and holds harmless each Guarantied Party and each other holder of any Guarantied Obligation for the full amount of any Charges paid by such Guarantied Party or such holder, as the case may be, and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto; and
c. without prejudice to the survival of any other agreement of Guarantor hereunder, the agreements and obligations of Guarantor contained in this Section 2.8 shall survive the payment in full of the Guarantied Obligations.
SECTION 2.9. Right of Offset. In addition to and not in limitation of all rights of offset that any Guarantied Party or any other holder of any Guarantied Obligation may have under applicable law or any other Loan Document, subject to the terms of the Credit Agreement, each Guarantied Party or other holder of any Guarantied Obligation shall, during the continuance of any Event of Default and whether or not such Guarantied Party or such holder has made any demand or whether or not Guarantor's obligations are matured, have the right to appropriate and apply to the payment of Guarantor's obligations hereunder all deposits (general or special, time or demand, provisional or final) then or thereafter held by, and other indebtedness or property then or thereafter owing to, such Guarantied Party or other holder, whether or not related to this Agreement or any transaction hereunder.
ARTICLE III.
SUBORDINATION
SECTION 3.1. Payments on Subordinated Debt. Notwithstanding anything to the contrary in the terms or arrangements governing the Subordinated Debt, no payment or prepayment of principal of or interest on the Subordinated Debt may be made, directly or indirectly, at any time after (a) (i) any Guarantied Party has made a claim under the Conseco Guaranty in respect of the principal amount of any of the Loans under the Credit Agreement or (ii) Obligor's obligations under the Conseco Guaranty shall have been accelerated (including, without limitation, pursuant to the provision in the Conseco Guaranty that is the equivalent of Section 2.2 of this Agreement) or (b) a Reorganization (including any proceeding in respect thereof) shall have been commenced.
SECTION 3.2. Subordination. (a) Subject to Section 3.1, payment of the Subordinated Debt is and shall be expressly subordinate and junior in right of payment to the prior payment in full in cash of the Senior Debt to the extent and in the manner set forth herein, and the Subordinated Debt is hereby so subordinated as a claim against Subordinated Borrower
or any of the assets of Subordinated Borrower, whether such claim be (i) in the event of any distribution of the assets of Subordinated Borrower upon any voluntary or involuntary dissolution, winding-up, total or partial liquidation or reorganization, or bankruptcy, insolvency, receivership or other statutory or common law proceedings or arrangements involving Subordinated Borrower or the readjustment of its liabilities or any assignment for the benefit of creditors or any marshaling of its assets or liabilities (collectively called a "Reorganization"), or (ii) other than in connection with a Reorganization, to the prior payment in full in cash of the Senior Debt.
(b) If Subordinated Lender shall receive any payment in violation of the terms hereof, it shall hold such payment in trust for the benefit of the Senior Creditors and forthwith pay it over to the Senior Creditors, ratably according to the aggregate amounts remaining unpaid on account of the Senior Debt, for application to and payment of the Senior Debt.
(c) In the event of any Reorganization relative to Subordinated Borrower or its properties, then all of the Senior Debt shall first be paid in full in cash before any payment is made upon the Subordinated Debt, and in any such proceedings any payment or distribution of any kind or character, whether in cash or property or securities, which may be payable or deliverable in respect of the Subordinated Debt shall be paid or delivered directly to the Senior Creditors, ratably according to the aggregate amounts remaining unpaid on account of the Senior Debt, for application in payment of the Senior Debt, unless and until all the Senior Debt is paid in full in cash, and Subordinated Lender hereby irrevocably authorizes the Agent, as attorney-in- fact for Subordinated Lender, to vote any claim or proof of claim in such proceedings in respect of the Subordinated Debt, to file or prove any claim in such proceedings in respect of the Subordinated Debt, to demand, sue for, collect and receive any such payment or distribution, to apply such payment or distribution to the payment of the Senior Debt, and to take such other action (including acceptance or rejection of any plan of Reorganization) in the name of Subordinated Lender or of the relevant Senior Creditors as the Agent may deem necessary or advisable for the enforcement of the provisions hereof. Subordinated Lender shall execute and deliver such other and further powers of attorney, assignments, proofs of claim or other instruments, and take such other actions, as may be requested by the Agent in order to enable the Agent to accomplish any of the foregoing, but only with respect to Subordinated Lender's capacity as a holder hereof and not in respect of any other relationship between Subordinated Lender and Subordinated Borrower. Consistent with, but not in limitation of, the foregoing, in such an event, the Agent shall be deemed to be the assigned (and thus the holder) of such claims or proof of claims and shall have the right to assert and vote such claims in any Reorganization, including, without limitation, through the filing of any proof of claim therein and the casting of any ballots to accept or reject any plan of reorganization proposed by, for, or with respect to any such Reorganization.
(d) In the event that, notwithstanding the foregoing, upon any such Reorganization, any payment or distribution of the assets of Subordinated Borrower of any kind or character, whether in cash, property or securities, shall be received by Subordinated Lender in respect of the Subordinated Debt before all Senior Debt is paid in full in cash, such payment or distribution shall be held in trust for the Senior Creditors and shall forthwith be paid over to the
Senior Creditors, ratably according to the aggregate amounts remaining unpaid on account of the Senior Debt, for application to the payment of the Senior Debt until all Senior Debt shall have been paid in full in cash.
(e) Subordinated Lender agrees that, until the Senior Debt has been paid in full in cash, except as expressly provided by Section 3.1, it will not take, demand or receive, or take any action to accelerate or collect, any payment of all or any part of the Subordinated Debt.
(f) The Senior Creditors, or any of them, may, at any time and from time to time, without the consent of or notice to Subordinated Lender, without incurring any responsibility to Subordinated Lender, and without impairing or releasing any of the rights of any Senior Creditor, or any of the obligations of Subordinated Lender:
(i) change the amount or terms of or renew or extend any Senior Debt or enter into or amend in any manner any agreement relating to any Senior Debt;
(ii) sell, exchange, release or otherwise deal with any property at any time pledged or mortgaged to secure any Senior Debt;
(iii) release anyone liable in any manner for the payment or collection of any Senior Debt; and
(iv) exercise or refrain from exercising any rights against Subordinated Borrower and others (including Subordinated Lender).
(g) Subordinated Lender hereby waives notice of or proof of reliance by any Senior Creditor upon the provisions hereof, and the Senior Debt shall conclusively be deemed to have been created, contracted, incurred or maintained in reliance upon the provisions hereof.
(h) Each Senior Creditor shall be a third-party beneficiary of the provisions of this Section 3.2.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
Each Agreement Party represents and warrants to each Guarantied Party that:
SECTION 4.1. Authorization. Such Agreement Party (a) has the power to execute, deliver and perform this Agreement and (b) has taken all necessary action to authorize the execution, delivery and performance by it of this Agreement.
SECTION 4.2. No Conflict. The execution, delivery and performance by such Agreement Party of this Agreement does not and will not (a) contravene or conflict with any
provision of any law, statute, rule or regulation, (b) contravene or conflict with, result in any breach of, or constitute a default under, any material agreement or instrument binding on such Agreement Party or any of its Subsidiaries (including, without limitation, any writ, judgment, injunction or other similar court order), (c) result in the creation or imposition of or the obligation to create or impose any Lien upon any of the property or assets of such Agreement Party or any of its Subsidiaries or (d) contravene or conflict with any provision of the articles of incorporation or bylaws of such Agreement Party.
SECTION 4.3. Binding Effect. This Agreement constitutes the legal, valid and binding obligations of such Agreement Party, enforceable against such Agreement Party in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, or similar laws affecting the enforcement of creditors' rights generally or by equitable principles relating to enforceability.
ARTICLE V.
MISCELLANEOUS
SECTION 5.1. Indemnity. Each Agreement Party agrees to indemnify the Agent, each Bank, their Affiliates and their respective directors, officers, employees, persons controlling or controlled by any of them or their respective agents, consultants, attorneys and advisors (the "Indemnified Parties") and hold each Indemnified Party harmless from and against any and all liabilities, losses, claims, damages, costs and expenses of any kind to which any of the Indemnified Parties may become subject, whether directly or indirectly (including, without limitation, the reasonable fees and disbursements of counsel for any Indemnified Party), relating to or arising out of this Agreement; provided, that no Indemnified Party shall have the right to be indemnified hereunder for its own gross negligence or willful misconduct as determined by a court of competent jurisdiction. All obligations of each Agreement Party provided for in this Section 5.1 shall survive termination of the Credit Agreement, any Conseco Guaranty Document and this Agreement.
SECTION 5.2. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including facsimile or similar writing) and shall be given to such party at its address or facsimile number set forth on the signature pages hereof or such other address or facsimile number as such party may hereafter specify for the purpose by written notice to the Agent. Each such notice, request or other communication shall be effective (a) if given by facsimile, when such facsimile is transmitted to the facsimile number specified in this Section 5.2, (b) if given by mail, seventy-two (72) hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid or (c) if given by any other means, when delivered at the address specified in this Section 5.2.
SECTION 5.3. Successors and Assigns. This Agreement, and the terms, covenants and conditions hereof, shall be binding upon and inure to the benefit of the parties hereto, and their respective successors and assigns, except no Agreement Party shall be permitted to assign
this Agreement nor any interest or obligation herein without the consent of the Agent.
SECTION 5.4. SUBMISSION TO JURISDICTION, ETC. EACH AGREEMENT PARTY AND THE AGENT HEREBY IRREVOCABLY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE CIRCUIT COURT OF THE STATE OF ILLINOIS SITTING IN COOK COUNTY AND OF THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS OVER ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND EACH AGREEMENT PARTY AND THE AGENT HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH ILLINOIS STATE OR TO THE EXTENT PERMITTED BY LAW, FEDERAL COURT. EACH AGREEMENT PARTY AND THE AGENT HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE IN ANY ACTION OR PROCEEDING (WHETHER BROUGHT BY ANY AGREEMENT PARTY OR ANY OF THEIR RESPECTIVE SUBSIDIARIES, THE AGENT, ANY BANK OR OTHERWISE) IN ANY COURT HEREIN ABOVE SPECIFIED IN THIS
SECTION 5.4 AS WELL AS ANY RIGHT IT MAY NOW OR HEREAFTER HAVE TO REMOVE ANY SUCH ACTION OR PROCEEDING, ONCE COMMENCED, TO ANOTHER COURT ON THE GROUNDS OF FORUM NON CONVENIENS OR OTHERWISE. EACH AGREEMENT PARTY AND THE AGENT AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.
SECTION 5.5. Amendments; Release. Notwithstanding anything to the contrary contained in the Credit Agreement, the provisions of this Agreement may from time to time be amended, modified or waived, if such amendment, modification or waiver is in writing and consented to by each affected Agreement Party and the Agent (with the consent of the Required Banks), and then any such amendment, modification, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided that, except as set forth in Section 5.14 of this Agreement, no such amendment, modification or waiver which would permit the release or termination of all or a material portion of Guarantor's obligations under this Agreement shall be effective without the consent of each Bank.
SECTION 5.6. Section Headings. The section headings in this Agreement are inserted for convenience of reference and shall not be considered a part of this Agreement or used in its interpretation.
SECTION 5.7. Acknowledgments. No action of the Agent permitted hereunder shall in any way affect or impair the rights of the Agent and the obligations of each Agreement Party under this Agreement. Each Agreement Party hereby acknowledges that there are no conditions to the effectiveness of this Agreement. Each Agreement Party hereby further acknowledges and agrees to make such deliveries as are required of it and comply with the other
provisions applicable to it pursuant to the provisions of the Credit Agreement.
SECTION 5.8. Obligations Not Limited. All obligations of the Guarantor and rights of the Guarantied Parties in respect of the Guarantied Obligations expressed in this Agreement shall be in addition to and not in limitation of those provided in applicable law or in any other written instrument or agreement relating to any of the Guarantied Obligations.
SECTION 5.9. GOVERNING LAW. THIS AGREEMENT SHALL BE A CONTRACT MADE UNDER AND GOVERNED BY THE LAWS OF THE STATE OF ILLINOIS.
SECTION 5.10. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall for all purposes be deemed an original, but all such counterparts shall constitute but one and the same agreement. Each Agreement Party hereby acknowledges receipt of a true, correct and complete counterpart of this Agreement.
SECTION 5.11. Agent. The Agent acts herein as agent for itself, the Banks and any and all future holders of the Guarantied Obligations.
SECTION 5.12. WAIVER OF TRIAL BY JURY. EACH AGREEMENT PARTY AND THE AGENT HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM CONCERNING ANY RIGHTS UNDER THIS AGREEMENT OR ANY OTHER DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH, OR ARISING FROM ANY BANKING RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT AND AGREES THAT ANY SUCH ACTION, PROCEEDING OR COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY; THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE GUARANTIED PARTIES ENTERING INTO THE RESTRUCTURING DOCUMENT.
SECTION 5.13. No Limitation on Remedies. No failure to exercise and no delay in exercising, on the part of the Agent or any other Guarantied Party, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.
SECTION 5.14. Release of This Agreement. This Agreement shall be terminated and Guarantor shall be released from all of its obligations hereunder on the first date after the Near-Term Facilities Termination Date on which Conseco has Investment Grade Ratings Status, as long as no Default or Event of Default shall have occurred and be continuing on such date.
[Signature Pages Follow]
IN WITNESS WHEREOF, each Agreement Party has caused this Guaranty and Subordination Agreement to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written.
CIHC, INCORPORATED, as Guarantor and Subordinated Borrower

By: /s/ DAVID A. HILL
    ---------------------------------
Name:  David A. Hill
Title:  Vice President	

Address for Notices:
11825 North Pennsylvania Street
Carmel, Indiana 46032
Attention: David K. Herzog
Telephone: 317-817-5031
Fax: 317-817-6327
CONSECO, INC., as Obligor and Subordinated
Lender

By: /s/ THOMAS M. HAGERTY
    ---------------------------------
Name:  Thomas M. Hagerty
Title:  Senior Vice President and Acting
          Chief Financial Officer	

Address for Notices:
11825 North Pennsylvania Street
Carmel, Indiana 46032
Attention: David K. Herzog
Telephone: 317-817-5031
Fax: 317-817-6327
AMENDED AND RESTATED
CASH COLLATERAL
PLEDGE AGREEMENT
among
CDOC, INC.,
BANK OF AMERICA, NATIONAL ASSOCIATION,
as Collateral Agent
and
BANK OF AMERICA, NATIONAL ASSOCIATION,
as Depositary Bank
Dated as of November 22, 2000

                                TABLE OF CONTENTS

                                                                                                               Page

SECTION 1.  DEFINED TERMS.........................................................................................2
                  1.1      Definitions............................................................................2
                  1.2      Other Definitional Provisions..........................................................7

SECTION 2.   ESTABLISHMENT OF CASH COLLATERAL ACCOUNT; DEFINITION OF
                   "COLLATERAL"...................................................................................7
                  2.1      Cash Collateral Account/Deposit of Initial Cash Collateral Deposit.....................7
                  2.2      Definition of Collateral...............................................................7
                  2.3      The Account............................................................................7

SECTION 3.  GRANT OF SECURITY INTEREST BY GRANTOR.................................................................8
                  3.1      Grant..................................................................................8
                  3.2      Intercreditor Relationship Regarding Collateral........................................8
                  3.3      Continuing Security Interest...........................................................8

SECTION 4.   ALLOCATION BETWEEN 1997 AND 1998 D&O
                  OBLIGATIONS/WITHDRAWALS BY CONSECO..............................................................9
                  4.1      The Initial Cash Collateral Deposit....................................................9
                  4.2      Subsidiary Deposits....................................................................9
                  4.3      Waterfall Deposits.....................................................................9
                  4.4      Deposits do not Secure any Particular Borrower's Loan..................................9
                  4.5      Withdrawal Rights......................................................................9
                  4.6      Allocations...........................................................................10

SECTION 5.  INVESTMENTS..........................................................................................10
                  5.1      Investments; Losses...................................................................10
                  5.2      No Obligation to Make or Track Investments Based on
                           Collateral Allocation.................................................................10

SECTION 6.  COMPENSATION/EXPENSES/INDEMNITY......................................................................10
                  6.1      Compensation/Expenses.................................................................10
                  6.2      Indemnity.............................................................................11
                  6.3      Survival..............................................................................11

SECTION 7.  REMEDIAL PROVISIONS..................................................................................11
                  7.1      Remedies..............................................................................11
                  7.2      Collateral Agent's Calculations.......................................................12

SECTION 8.   REPRESENTATIONS AND WARRANTIES OF GRANTOR...........................................................12
                  8.1      Title; No Other Liens.................................................................12
                  8.2      Perfected First Priority Liens........................................................12

                                        i	

SECTION 9.  COVENANTS............................................................................................12
                  9.1      Maintenance of Perfected Security Interest; Further Documentation.....................12

SECTION 10.  AUTHORITY OF COLLATERAL AGENT.......................................................................13
                  10.1     General Authority of the Collateral Agent.............................................13
                  10.2     Execution of Financing Statements.....................................................13
                  10.3     Further Assurances....................................................................14
                  10.4     Exculpatory Provisions................................................................14
                  10.5     Delegation of Duties..................................................................15
                  10.6     Reliance by Collateral Agent..........................................................15
                  10.7     Moneys to be Held in Trust............................................................16
                  10.8     Resignation and Removal of the Collateral Agent.......................................16
                  10.9     Status of Successor Collateral Agent..................................................17
                  10.10    Merger of the Collateral Agent........................................................17

SECTION 11.  ABSOLUTE OBLIGATIONS................................................................................17
                  11.1  Absolute, etc............................................................................17
                  11.2  Reinstatement, etc.......................................................................18
                  11.3  Waiver, etc..............................................................................19
                  11.4   Waiver of Subrogation; Subordination....................................................19

SECTION 12.  MISCELLANEOUS.......................................................................................19
                  12.1     Amendments............................................................................19
                  12.2     Notices...............................................................................19
                  12.3     No Waiver by Course of Conduct; Cumulative Remedies...................................20
                  12.4     Successors and Assigns................................................................20
                  12.5     Counterparts..........................................................................20
                  12.6     Severability..........................................................................20
                  12.7     Section Headings......................................................................20
                  12.8     Integration...........................................................................20
                  12.9     Depository Bank's Location............................................................21
                  12.10    Replacement of Existing Cash Collateral Agreement.....................................21
                  12.11    GOVERNING LAW.........................................................................21	

ii
AMENDED AND RESTATED CASH COLLATERAL PLEDGE AGREEMENT
AMENDED AND RESTATED CASH COLLATERAL PLEDGE AGREEMENT, dated as of November 22, 2000, among CDOC, Inc., a Delaware corporation (together with any other entity that may become a party hereto as provided herein, the "Grantors"), BANK OF AMERICA, NATIONAL ASSOCIATION ("BofA"), as Collateral Agent (in such capacity, the "Collateral Agent") for the Secured Parties (as defined below) and BANK OF AMERICA, NATIONAL ASSOCIATION, as Depositary Bank (in such capacity, the "Depositary Bank").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Agreement, dated as of September 22, 2000, Relating to 1997 Director and Officer Loan Credit Agreement (as amended, supplemented or otherwise modified from time to time, the "Agreement Re 1997 D&O Loans"), among Conseco, Inc. ("Conseco"), as Guarantor, the other financial institutions parties thereto (the "1997 D&O Banks"), and BofA, as Administrative Agent (in such capacity, the "1997 D&O Administrative Agent"), the 1997 D&O Administrative Agent and the 1997 D&O Banks agreed, subject to the terms and conditions set forth therein, to commit to extend loans to any borrower (a "1997 D&O Borrower") to refinance loans ("1997 D&O Loans") under that certain Amended and Restated Credit Agreement, dated as of August 26, 1997 (the "1997 D&O Credit Agreement"), with such loans to have a stated maturity of December 31, 2003, and to acknowledge certain matters as to Conseco's Amended and Restated Guaranty, dated August 26, 1997 (the "1997 D&O Guaranty") relating to the 1997 D&O Loans and the 1997 D&O Credit Agreement and other loan documents;
WHEREAS, pursuant to that certain Agreement, dated as of September 22, 2000, Relating to 1998 Director and Officer Loan Credit Agreement (as amended, supplemented or otherwise modified from time to time, the "Agreement Re 1998 D&O Loans"; together with the Agreement Re 1997 D&O Loans, the "Agreements Re Specified D&O Facilities"), among Conseco, as Guarantor, the other financial institutions parties thereto (the "1998 D&O Banks"), and BofA, as Administrative Agent (in such capacity, the "1998 D&O Administrative Agent"), the 1998 D&O Administrative Agent and the 1998 D&O Banks agreed, subject to the terms and conditions set forth therein, to commit to extend loans to any borrower (a "1998 D&O Borrower") to refinance loans ("1998 D&O Loans") under that certain Credit Agreement, dated as of August 21, 1998 (the "1998 D&O Credit Agreement"), with such loans to have a stated maturity of December 31, 2003, and to acknowledge certain matters as to Conseco's Guaranty, dated August 21, 1998 (the "1998 D&O Guaranty");
WHEREAS, the Grantor derived substantial direct and indirect benefits from the Agreements Re Specified D&O Facilities;
WHEREAS, it was a condition precedent to the obligation of the D&O Administrative Agents and the D&O Banks to enter into the Agreements Re Specified D&O Facilities that the
1
Grantors execute and deliver a Cash Collateral Agreement dated as of September 22, 2000 (the "Existing Cash Collateral Agreement") to the Collateral Agent for the benefit of the Secured Parties;
WHEREAS, certain of the 1997 D&O Borrowers (the "1997 Refinancing Borrowers") want to refinance their 1997 D&O Loans pursuant to a Credit Agreement (the "1997 Refinancing Credit Agreement") dated as of November 22, 2000 among the 1997 Refinancing Borrowers, certain financial institutions (the "1997 Refinancing Banks") and Bank of America, National Association, as administrative agent (the "1997 Refinancing Agent");
WHEREAS, certain of the 1998 D&O Borrowers (the "1998 Refinancing Borrowers") want to refinance their 1998 D&O Loans pursuant to a Credit Agreement (the "1998 Refinancing Credit Agreement", together with the 1997 Refinancing Credit Agreement, the "2000 D&O Credit Agreements") dated as of November 22, 2000 among the 1998 Refinancing Borrowers, certain financial institutions (the "1998 Refinancing Banks") and Bank of America (the "1998 Refinancing Agent"); and
WHEREAS, it is a condition precedent to the obligation of the 1997 Refinancing Banks, the 1997 Refinancing Agent, the 1998 Refinancing Banks and the 1998 Refinancing Agent, to enter into the 2000 D&O Credit Agreements that this Amended and Restated Cash Collateral Pledge Agreement be executed and delivered to the Collateral Agent.
NOW, THEREFORE, in consideration of the premises and to induce the 1997 Refinancing Agent, the 1997 Refinancing Banks, the 1998 Refinancing Banks and the 1998 Refinancing Agent to enter into the 2000 D&O Credit Agreements, the Grantor, the Collateral Agent and the Depositary Bank hereby agree, for the benefit of the Secured Parties that the Existing Cash Collateral Agreement shall be amended and restated to state in its entirety, as set forth herein:
SECTION 1. DEFINED TERMS
1.1 Definitions. (a) Unless otherwise defined herein, terms defined in the Agreements Re Specified D&O Facilities and used herein shall have the meanings given to them in the Agreements Re Specified D&O Facilities.
(b) The following terms shall have the following meanings:
"1997 D&O Administrative Agent" shall have the meaning set forth in the first Recital.
"1997 D&O Borrowers" shall have the meaning set forth in the first Recital.
"1997 D&O Banks" shall have the meaning set forth in the first Recital.
2
"1997 D&O Credit Agreement" shall have the meaning set forth in the first Recital.
"1997 D&O Creditors" shall mean the 1997 D&O Administrative Agent, the 1997 D&O Banks, the 1997 Refinancing Banks and the 1997 Refinancing Agent.
"1997 D&O Guaranty" shall have the meaning set forth in the first Recital.
"1997 D&O Loans" shall have the meaning set forth in the first Recital.
"1997 D&O Obligations" shall mean all obligations and liabilities of whatever nature or type of Conseco that may arise under or in connection with the 1997 D&O Guaranty, the Agreement Re 1997 D&O Loans, this Agreement , the 1997 Refinancing Guaranty or any other agreement to which Conseco is a party relating in any manner to the 1997 D&O Loans or the 1997 Refinancing Loans, in each case whether on account of guarantee obligations, fees, indemnities, costs, expenses or otherwise (including, without limitation, all reasonable fees and disbursements of counsel to the Collateral Agent, the D&O Administrative Agents that are required to be paid pursuant to the terms of this Agreement or any other agreement).
"1997 Refinancing Agent" shall have the meaning set forth in the fifth Recital.
"1997 Refinancing Banks" shall have the meaning set forth in the fifth Recital.
"1997 Refinancing Borrowers" shall have the meaning set forth in the fifth Recital.
"1997 Refinancing Credit Agreement" shall have the meaning set forth in the fifth Recital.
"1997 Refinancing Guaranty" means the Guaranty of Conseco dated the date hereof with respect to the obligations of the 1997 Refinancing Borrowers under the 1997 Refinancing Credit Agreement.
"1997 Refinancing Loans" shall mean the loans made pursuant to the 1997 Refinancing Credit Agreement.
"1998 D&O Administrative Agent" shall have the meaning set forth in the second Recital.
"1998 D&O Banks" shall have the meaning set forth in the second Recital.
"1998 D&O Borrower" shall have the meaning set forth in the second Recital.
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"1998 D&O Credit Agreement" shall have the meaning set forth in the second Recital.
"1998 D&O Creditors" shall mean the 1998 D&O Administrative Agent, the 1998 D&O Banks, the 1998 Refinancing Agent and the 1998 Refinancing Banks.
"1998 D&O Loans" shall have the meaning set forth in the second Recital.
"1998 D&O Guaranty" shall have the meaning set forth in the second Recital.
"1998 D&O Obligations" shall mean all obligations and liabilities of whatever nature or type of Conseco that may arise under or in connection with the 1998 D&O Guaranty, the Agreement Re 1998 D&O Loans, this Agreement, the 1998 Refinancing Guaranty or any other agreement to which Conseco is a party relating in any manner to the 1998 D&O Loans or the 1998 Refinancing Loans, in each case whether on account of guarantee obligations, fees, indemnities, costs, expenses or otherwise (including, without limitation, all reasonable fees and disbursements of counsel to the Collateral Agent, the D&O Administrative Agents that are required to be paid pursuant to the terms of this Agreement or any other agreement).
"1998 Refinancing Agent" shall have the meaning set forth in the sixth Recital.
"1998 Refinancing Banks" shall have the meaning set forth in the sixth Recital.
"1998 Refinancing Borrowers" shall have the meaning set forth in the sixth Recital.
"1998 Refinancing Credit Agreement" shall have the meaning set forth in the sixth Recital.
"1998 Refinancing Guaranty" shall mean the Guaranty of Conseco dated the date hereof with respect to the obligations of the 1998 Refinancing Borrowers under the 1998 Refinancing Credit Agreement.
"1998 Refinancing Loans" shall mean the loans made pursuant to the 1998 Refinancing Credit Agreement.
"2000 D&O Credit Agreements" shall have the meaning set forth in the sixth Recital.
"Account Agreement" shall have the meaning set forth in Section 2.1.
"Agreement" shall mean this Cash Collateral Pledge Agreement, as the same may be amended, supplemented or otherwise modified from time to time.
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"Agreement Re 1997 D&O Loans" shall have the meaning set forth in the first Recital.
"Agreements Re Specified D&O Facilities" shall have the meaning set forth in the second recital.
"Agreement Re 1998 D&O Loans" shall have the meaning set forth in the second Recital.
"BofA" shall have the meaning set forth in the preamble.
"Cash Collateral Account" shall have the meaning set forth in
Section 2.1 hereof.
"Cash Equivalents": (i) marketable direct obligations issued by, or unconditionally guaranteed by, the United States Government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within one year from the date of acquisition; (ii) commercial paper of a bank or other financial institution rated at least AA- by Standard & Poor's Ratings Services ("S&P") or P-1 by Moody's Investors Service, Inc. ("Moody's"), or carrying an equivalent rating by a nationally recognized rating agency, if both of the two named rating agencies cease publishing ratings of commercial paper issuers generally, and maturing within six months from the date of acquisition; and (iii) securities with maturities of one year or less from the date of acquisition issued by a foreign or domestic bank or other financial institution and rated at least AA- by S&P or P-1 by Moody's.
"Collateral"shall have the meaning as set forth in Section 2.2.
"Collateral Agent" shall have the meaning set forth in the Preamble.
"Collateral Agent Fees" shall have the meaning set forth in Section 6.1.
"Conseco" shall have the meaning set forth in the first Recital.
"Conseco Secured Obligations"shall mean the collective reference to
(a) the Grantor Obligations of each Grantor, (b) the 1993 Indenture Obligations, (c) the 1994 Indenture Obligations and (d) the Collateral Agent Fees (as defined in the Cash Collateral Sharing Agreement).
"Depositary Bank" shall have the meaning set forth in the Preamble.
"D&O Administrative Agents" means the 1997 D&O Administrative Agent, the 1998 D&O Administrative Agent, the 1997 Refinancing Agent and the 1998 Refinancing Agent.
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"D&O Banks" means the 1997 D&O Banks, the 1998 D&O Banks, the 1997 Refinancing Banks and the 1998 Refinancing Banks.
"D&O Borrowers" means a 1997 D&O Borrower, a 1998 D&O Borrower, a 1997 Refinancing Borrower or a 1998 Refinancing Borrower.
"D&O Credit Agreement" means the 1997 D&O Credit Agreement, the 1998 D&O Credit Agreement, the 1997 Refinancing Credit Agreement or the 1998 Refinancing Credit Agreement.
"D&O Documents" shall have the meaning set forth in Section 11.1.
"Existing Cash Collateral Agreement" shall have the meaning set forth in the fourth Recital.
"Grantors" shall have the meaning set forth in the preamble.
"Proceeds"shall mean all "proceeds" as such term is defined in
Section 9-306(1) of the UCC and, in any event, shall include, without limitation, all dividends or other income from the Investment Property, collections thereon or distributions or payments with respect thereto.
"Securities Act"shall mean the Securities Act of 1933, as amended.
"Secured Obligations" shall mean the collective reference to (a) the 1997 D&O Obligations, (b) the 1998 D&O Obligations, and (c) the Collateral Agent Fees.
"Secured Parties": the collective reference to (a) the 1997 D&O Banks, (b) the 1997 D&O Administrative Agent, (c) the 1998 D&O Banks,
(d) the 1998 D&O Administrative Agent, (e) the 1997 Refinancing Banks,
(f) the 1997 Refinancing Agent, (g) the 1998 Refinancing Banks, (h) the 1998 Refinancing Agent and (i) the Collateral Agent.
"Specified D&O Facilities" means the credit facilities under the D&O Credit Agreements.
"Specified D&O Guarantees" means the 1997 D&O Guaranty, the 1998 D&O Guaranty, the 1997 Refinancing Guaranty and the 1998 Refinancing Guaranty.
"Subrogation Rights" shall have the meaning set forth in Section 11.4.
"UCC"shall mean the Uniform Commercial Code as from time to time in effect in the State of New York.
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1.2 Other Definitional Provisions. (a) The words "hereof," "herein", "hereto" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section and Schedule references are to this Agreement unless otherwise specified.
(b) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.
(c) Where the context requires, terms relating to the Collateral or any part thereof, when used in relation to a Grantor, shall refer to such Grantor's Collateral or the relevant part thereof.
SECTION 2. ESTABLISHMENT OF CASH COLLATERAL ACCOUNT; DEFINITION OF "COLLATERAL"
2.1 Cash Collateral Account/Deposit of Initial Cash Collateral Deposit. Pursuant to the Existing Cash Collateral Agreement, the Grantor entered into an account agreement (the "Account Agreement") with the Depositary Bank, and the Grantor deposited the Initial Cash Collateral Deposit in immediately available funds into an investment account maintained by BofA pursuant to the Account Agreement (hereinafter the "Cash Collateral Account") in the name of the Collateral Agent. The Cash Collateral Account shall be subject to the exclusive dominion and control of the Collateral Agent. The Grantor, the Depository Bank and the Collateral Agent agree that the Cash Collateral Account is a securities account under Article 8 of the UCC and all assets held in the account shall be treated as financial assets under Article 8 of the UCC. Depositary Bank agrees that it shall at all times be a "securities intermediary" within the meaning of Section 8-102 of the UCC.
2.2 Definition of Collateral. The "Collateral" shall be the Initial Cash Collateral Deposit, the December, 2000 Cash Collateral Deposit, any C-T Borrower Cash Collateral Deposit, and any other Cash Collateral Deposit required to be deposited pursuant to
Section 5 of each Agreement Re Specified D&O Facility, all funds, items, instruments, investments, securities, and other things of value at any time deposited with or held by (whether for collection, provisionally or otherwise), the Depositary Bank (solely in its capacity as Depositary Bank), the Collateral Agent (solely in its capacity as Collateral Agent), or any agent, bailee or custodian therefor, in each case, for deposit in the Cash Collateral Account, all Cash Equivalents referred to in Section 5 hereof, and all Proceeds of any and all of the foregoing, including, without limitation, any of the foregoing from time to time paid to, deposited in, credited to or held in the Cash Collateral Account.
2.3 The Account. The parties hereby agree and represent that
(a) the Cash Collateral Account has been established in the name of Collateral Agent as recited above, (b) the Cash Collateral Account does not hold any financial assets which are registered in
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the name of Grantor, payable to its order or specially endorsed to it, which have not been endorsed to the Collateral Agent or in blank, (c) the security entitlements arising out of the financial assets carried in the Cash Collateral Account and any free credit balance are valid and legally binding obligations of the Depository Bank, and (d) except for the claims and interests of Grantor and the Collateral Agent in the Cash Collateral Account, the Collateral Agent does not know of any claim to or interest in the Cash Collateral Account or in any financial asset carried therein.
SECTION 3. GRANT OF SECURITY INTEREST BY GRANTOR
3.1 Grant. Grantor hereby assigns and transfers to the Collateral Agent, and hereby grants to the Collateral Agent, for the benefit of the Secured Parties, a security interest in, the Collateral and in the Cash Collateral Account, as collateral security for the Secured Obligations, including for the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise, but in all instances subject to the provisions of the Agreements Re Specified D&O Facilities) of the Secured Obligations.
3.2 Intercreditor Relationship Regarding Collateral. The Collateral shall be held for the ratable benefit of the Secured Parties; provided, however, that as between the 1997 D&O Obligations, on the one hand, and the 1998 D&O Obligations, on the other hand, the portion of the Collateral allocated to the 1997 D&O Obligations pursuant to Section 4 hereof shall first secure the 1997 D&O Obligations (and shall then secure, on a basis junior and subordinate to the 1997 D&O Obligations, the 1998 D&O Obligations), and the portion of the Cash Collateral allocated to the 1998 D&O Obligations pursuant to Section 4 hereof shall first secure 1998 D&O Obligations (and shall then secure, on a basis junior and subordinate to the 1998 D&O Loan Obligations, the 1997 D&O Obligations). As between the 1997 D&O Creditors and the 1998 D&O Creditors, the priorities set forth in this
Section 3.2, as a matter of contractual subordination, are applicable irrespective of the manner or order of creation, attachment or perfection of any such liens or priority that might otherwise be available to such parties, or any of them, pursuant to contract or under applicable law.
3.3 Continuing Security Interest. This Pledge Agreement shall create a continuing security interest in the Collateral and shall: (a) remain in full force and effect until the payment in full of all Secured Obligations, (b) be binding upon Grantor and its successors, transferees, and assigns, and (c) inure, together with the rights and benefits of the Collateral Agent hereunder, to the benefit of each of the Secured Parties.
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SECTION 4. ALLOCATION BETWEEN 1997 AND 1998 D&O OBLIGATIONS/WITHDRAWALS BY CONSECO
4.1 The Initial Cash Collateral Deposit. The Initial Cash Collateral Deposit shall be allocated between the 1997 D&O Obligations, on the one hand, and the 1998 D&O Obligations, on the other hand, as set forth in Schedule I hereto.
4.2 Subsidiary Deposits. To the extent made by the Grantor, the December, 2000 Cash Collateral Deposit and any C-T Borrower Cash Collateral Deposit, shall be allocated between the 1997 D&O Obligations and the 1998 D&O Obligations as necessary to be consistent with the manner in which the pertinent Aggregate $25 Benchmark Deficiency for the Director Borrowers is calculated and the pertinent $25 Benchmark Deficiency for D&O C-T Borrowers, has been calculated.
4.3 Waterfall Deposits. To the extent made by the Grantor, Cash Collateral Deposits made pursuant to Section 5(b) of the Agreements Re Specified D&O Facilities shall be allocated between the 1997 D&O Obligations and the 1998 D&O Obligations ratably.
4.4 Deposits do not Secure any Particular Borrower's Loan. The allocations to be undertaken pursuant to Sections 4.2 and 4.3 hereof are solely for purposes of allocating the Collateral between the 1997 D&O Obligations and the 1998 D&O Obligations. Consistent with the nature of this Agreement as a third party pledge in support of the Specified D&O Guaranties (and, not the loans of any particular Borrower), the Collateral once it is so allocated to the 1997 D&O Obligations or the 1998 D&O Obligations, as the case may be, shall secure and apply to all of such obligations and not to any particular portion of those obligations such as securing only the loans of a particular Borrower, even if such loans may have factored into the calculation of the Aggregate $25 Benchmark Deficiency for Director Borrowers or the Aggregate $25 Benchmark Deficiency for C-T Borrowers and thus, affected or even determined such allocation.
4.5 Withdrawal Rights. Pending payment in full of the Secured Obligations, the Grantor shall not have any right to withdraw or otherwise have access to any Cash Collateral deposited in the Collateral Account except to the extent that the Grantor delivers to the Collateral Agent a certificate in a form reasonably satisfactory to the Collateral Agent: (i) certifying that either Grantor or Conseco is entitled to withdraw the funds pursuant to
Section 5(c) of the Agreements Re Specified D&O Facilities, (ii) stating the amount of the withdrawal, (iii) describing the Director Borrower Paydowns giving rise to such right of withdrawal including the Specified D&O Facility to which such funds were applied, (iv) stating the amount of Cash Collateral Deposits allocated to such Director Borrower's loan(s) under that Specified D&O Facility, and
(v) directing that the
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amount so withdrawn be wired transferred directly to BofA as the administrative agent under the $1.5 Billion Facility for application against Conseco's principal obligations thereunder in inverse order of maturity. The Grantor shall deliver such certificate to the D&O Administrative Agents contemporaneously with its delivery to the Collateral Agent, and the Collateral Agent shall make such distribution within two Business Days of its receipt of such certificates. In all instances, the Collateral Agent shall be entitled to rely upon the authenticity, accuracy and validity of any such certificate it receives. At any time after the Depository Bank shall have received written notice from the D&O Administrative Agents that a Termination Event has occurred, the Depository Bank will follow instructions from the D&O Administrative Agents and not the Grantor with respect to the Cash Collateral Accounts, including the withdrawal of assets therefrom.
4.6 Allocations. Any allocation of Collateral, or payment or distribution to be applied to the 1997 D&O Obligations shall be applied to the 1997 D&O Obligations ratably. Any allocation of Collateral, or payment or distribution to be applied to the 1998 D&O Obligations shall be applied to the 1998 D&O Obligations ratably.
SECTION 5. INVESTMENTS
5.1 Investments; Losses. The Cash Collateral Account shall be invested pursuant to the Account Agreement, but only in investments of Cash Equivalents in which the Collateral Agent has a perfected security interest as Grantor may from time to time direct. All investments shall be made in the name of the Collateral Agent. All income from such investments shall be retained in the Cash Collateral Account, and be maintained and applied in the same manner as other balances. All such investments shall be at risk of Grantor and the Collateral Agent shall not be liable to any person or entity with respect to any loss with respect to such investments in the absence of its gross negligence or wilful misconduct. All income from investments in the Cash Collateral Account shall be taxable to Grantor, and the Collateral Agent shall prepare and distribute to Grantor, as required, Form 1099 or other appropriate federal and state income tax forms with respect to such income. Grantor shall pay when due all such taxes on such income.
5.2 No Obligation to Make or Track Investments Based on Collateral Allocation. Consistent with the foregoing, the Collateral Agent shall have no obligation to make, track, or otherwise account for investment gains or losses with respect to the Collateral based upon the intercreditor relationship and agreement set forth in Section 3.2 hereof.
SECTION 6. COMPENSATION/EXPENSES/INDEMNITY
6.1 Compensation/Expenses. The Grantor hereby agrees to pay to the Depositary Bank's and the Collateral Agent's usual and customary fees, charges and all other related expenses with regard to the Cash Collateral Account and all services
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performed in connection therewith, and, in addition, each of the Grantor agrees to pay on demand all reasonable costs and expenses
(including without limitation reasonable legal fees and expenses)
incurred in connection with the administration, work-out or enforcement of this Agreement or any Collateral (collectively, "Collateral Agent's Fees").
6.2 Indemnity. (a) The Grantor agrees to pay, and to save the Collateral Agent and the other Secured Parties harmless from, any and all liabilities with respect to, or resulting from any delay in paying, any and all stamp, excise, sales or other taxes which may be payable or determined to be payable with respect to any of the Collateral or in connection with any of the transactions contemplated by this Agreement.
(b) The Grantor agrees to pay, and to save the Collateral Agent and the other Secured Parties harmless from, any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Agreement except with respect to the gross negligence or wilful misconduct of the Collateral Agent or any such Secured Party.
6.3 Survival. The obligations of the Grantor under this
Section 6 shall survive termination of this Agreement.
SECTION 7. REMEDIAL PROVISIONS
7.1 Remedies. If any Termination Event shall have occurred and is continuing, the Collateral Agent may, and upon instruction as provided as described in Section 7.2 below, shall from time to time
(i) if the Collateral Agent concludes in its sole and absolute discretion that such action is warranted, apply any of the moneys in the Cash Collateral Account to the payment of due and unpaid Collateral Agent Fees, (ii) distribute any part or all of the remaining Cash Collateral to the D&O Administrative Agents for application against the Secured Obligations, with such distribution to be made ratably except, as between the 1997 D&O Creditors, on the one hand, and the 1998 D&O Creditors, on the other hand, such distributions must be adjusted to reflect the allocations set forth in Section 4 hereof, and (iii) after payment in full, including interest and expenses, of the Secured Obligations, distribution of any surplus to the Grantor. In addition to the foregoing, the Collateral Agent shall have and expressly reserves the ability to exercise any and all rights and remedies of a secured party under the UCC and other applicable law upon the occurrence of a Termination Event. In connection with the foregoing, the Collateral Agent may liquidate any investment included in the Collateral prior to the maturity thereof and shall not be liable for any losses incurred in connection with such liquidation.
7.2 Collateral Agent's Calculations. In making the determinations and allocations required by Section 4.6, the Collateral Agent may conclusively rely upon
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information supplied by the D&O Administrative Agents as to the amounts of unpaid principal and interest and other amounts outstanding with respect to the Specified D&O Facilities, and the Collateral Agent shall have no liability to any of the Secured Parties for actions taken in reliance on such information absent its gross negligence or wilful misconduct, provided that nothing in this sentence shall prevent any Grantor from contesting any amounts claimed by any Secured Party in any information so supplied. All distributions made by the Collateral Agent pursuant to Section 7.1 shall be (subject to any decree of any court of competent jurisdiction) final (absent manifest error), and the Collateral Agent shall have no duty to inquire as to the application by the D&O Administrative Agents or any D&O Bank of any amounts distributed to them.
SECTION 8. REPRESENTATIONS AND WARRANTIES OF GRANTOR
Grantor hereby represents and warrants to the Collateral Agent that:
8.1 Title; No Other Liens. Except for the security interest granted to the Collateral Agent for the ratable benefit of the Secured Parties pursuant to this Agreement, the Grantor owns each item of the Cash Collateral free and clear of any and all liens or claims of others. No financing statement or other public notice with respect to all or any part of the Cash Collateral is on file or of record in any public office, except as may have been filed in favor of the Collateral Agent, for the benefit of the Secured Parties, pursuant to this Agreement.
8.2 Perfected First Priority Liens. The security interests granted pursuant to this Agreement (a) upon deposit of any Collateral in the Cash Collateral Account, will constitute valid perfected security interests in all of the Collateral (subject to applicable bankruptcy and insolvency laws) in favor of the Collateral Agent, for the benefit of the Secured Parties, as Collateral security for the Secured Obligations, enforceable in accordance with the terms hereof against all creditors of such Grantor and any Persons purporting to purchase any Collateral from such Grantor and (b) are prior to all other Liens on the Collateral in existence on the date hereof.
SECTION 9. COVENANTS
The Grantor covenants and agrees with the Collateral Agent that, from and after the date of this Agreement until the Secured Obligations shall have been paid in full:
9.1 Maintenance of Perfected Security Interest; Further Documentation. (a) Such Grantor shall maintain the security interest created by this Agreement as a perfected security interest having the priority described in Section 8.2 and shall defend such security interest against the claims and demands of all Persons whomsoever.
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(b) At any time and from time to time, upon the written request of the Collateral Agent, and at the sole expense of such Grantor, such Grantor will promptly and duly execute and deliver, and have recorded, such further instrument and documents and take such further actions as the Collateral Agent may reasonably request for the purpose of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted, including, without limitation, filing and financing or continuation statements under the UCC (or other similar laws) in effect in any jurisdiction with respect to the security interests created.
SECTION 10. AUTHORITY OF COLLATERAL AGENT
10.1 General Authority of the Collateral Agent. (a) Each Grantor herein irrevocably constitutes and appoints the Collateral Agent and any officer or agent thereof, with full power of substitution, during the continuance of a Termination Event, as its true and lawful attorney-in-fact with full power and authority in its or his own name, from time to time in the Collateral Agent's discretion to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to carry out the terms of this Agreement and accomplish the purposes hereof and thereof. All powers, authorizations and agencies contained in this Agreement are coupled with an interest and are irrevocable until this Agreement is terminated and the security interests created hereby are released.
(b) By acceptance of the benefits of this Agreement each Secured Party shall be deemed irrevocably (i) to consent to the appointment of the Collateral Agent as its agent hereunder, (ii) to confirm that the Collateral Agent shall have the authority to act as the exclusive agent of such Secured Party for enforcement of any provisions of this Agreement against any Grantor or the exercise of remedies hereunder or thereunder, (iii) to agree that such Secured Party shall not take any action to enforce any provisions of this Agreement against any Grantor or to exercise any remedy hereunder or thereunder and (iv) to agree to be bound by the terms of this Agreement.
(c) Other than as provided to the contrary herein, the Collateral Agent will follow any written instructions provided by the representatives of 60% or more of the aggregate amount of the Secured Obligations, although if it should reasonably conclude that any requested action would subject it to unacceptable risk of liability it may request a sufficient indemnity from the D&O Banks before being required to proceed with such instructions.
10.2 Execution of Financing Statements. Pursuant to Section 9-402 of the UCC and any other applicable law, each Grantor authorizes the Collateral Agent to file or record financing statements and other filings or recording documents or instruments with
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respect to the Collateral without the signature of such Grantor in such form and in such offices as the Collateral Agent determines appropriate to perfect the security interests of the Collateral Agent under this Agreement. A photographic or other reproduction of this Agreement shall be sufficient as a financing statement or other filing or recording document or instrument for filing or recording in any jurisdiction.
10.3 Further Assurances. At any time and from time to time, upon the written request of the D&O Administrative Agents or the Collateral Agent, and at the expense of Conseco, each Grantor will promptly execute and deliver any and all such further instruments and documents and take such further action as is necessary or reasonably requested further to perfect, or to protect the perfection of, the liens and security interests granted hereunder including, without limitation, the filing of any financing or continuation statements under the UCC in effect in any jurisdiction. In addition to the foregoing, at any time and from time to time, upon the written request of the Collateral Agent, and at the expense of the Grantor, each Grantor will promptly execute and deliver any and all such further instruments and documents and take such further action as the Collateral Agent determines is necessary or reasonably requested to obtain the full benefits of this Agreement and of the rights and powers herein. Notwithstanding the foregoing, in no event shall the Collateral Agent have any obligation to monitor the perfection or continuation of perfection or the sufficiency or validity of any security interest in or related to the Collateral.
10.4 Exculpatory Provisions. (a) The Collateral Agent shall not be responsible in any manner whatsoever for the correctness of any recitals, statements, representations or warranties herein, all of which are made solely by the Grantor. The Collateral Agent makes no representations as to the value or condition of the Collateral or any part thereof, or as to the title of the Grantor thereto or as to the security afforded by this Agreement or as to the validity, execution (except its execution), enforceability, legality or sufficiency of this Agreement, or the Secured Obligations, and the Collateral Agent shall incur no liability or responsibility in respect of any such matters.
(b) The Collateral Agent shall not be required to ascertain or inquire as to the performance by the Grantors of any of the covenants or agreements contained herein.
(c) The Collateral Agent shall have the same rights with respect to any Secured Obligation held by it as any other Secured Party and may exercise such rights as though it were not the Collateral Agent hereunder, and may accept deposits from, lend money to, and generally engage in any kind of banking or trust business with, any Grantors or Conseco or any of Conseco's other affiliates as if it were not the Collateral Agent.
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(d) The Collateral Agent shall not be liable for any action taken or omitted to be taken in accordance with the Agreement except for its own gross negligence or willful misconduct.
10.5 Delegation of Duties. The Collateral Agent may execute any of the powers hereof and perform any duty hereunder either directly or by or through agents or attorneys-in-fact. The Collateral Agent shall be entitled to advice of counsel concerning all matters pertaining to such powers and duties. The Collateral Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it without gross negligence or willful misconduct.
10.6 Reliance by Collateral Agent. (a) Whenever in the administration of this Agreement the Collateral Agent shall deem it necessary or desirable that a factual matter be proved or established in connection with the Collateral Agent taking, suffering or omitting any action hereunder or thereunder, such matter (unless other evidence in respect thereof is herein specifically prescribed) may be deemed to be conclusively proved or established by a certificate of a Responsible Officer of the Grantor delivered to the Collateral Agent, and such certificate shall be full warrant to the Collateral Agent for any action taken, suffered or omitted in reliance thereon, subject, however, to the provisions of Section 10.4(d).
(b) The Collateral Agent may consult with counsel, and any opinion of counsel shall be full and complete authorization and protection in respect of any action taken or suffered by it hereunder. The Collateral Agent shall have the right at any time to seek instructions concerning the administration of this Agreement from any court of competent jurisdiction.
(c) The Collateral Agent may rely, and shall be fully protected in acting, upon any resolution, statement, certificate, instrument, opinion, report, notice, request, consent, order, bond or other paper or document which it has no reason to believe to be other than genuine and to have been signed or presented by the proper party or parties or, in the case of cables, telecopies and telexes, to have been sent by the proper party or parties. In the absence of its own gross negligence or willful misconduct, the Collateral Agent may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Collateral Agent and conforming to the requirements of this Agreement.
(d) The Collateral Agent shall not be under any obligation to exercise any of the rights or powers vested in the Collateral Agent by this Agreement unless the Collateral Agent shall have been provided adequate security and indemnity against the costs, expenses and liabilities which may be incurred by the Collateral
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Agent, including such reasonable advances as may be requested by the Collateral Agent.
(e) Any opinion of counsel may be based, insofar as it relates to factual matters, upon a certificate of a responsible officer of the Grantor or representations made by a responsible officer of the Grantor in a writing filed with the Collateral Agent.
10.7 Moneys to be Held in Trust. All moneys received by the Collateral Agent under or pursuant to any provision of this Agreement shall be held in trust for the purposes for which they were paid or are held.
10.8 Resignation and Removal of the Collateral Agent. (a) The Collateral Agent may at any time, by giving written notice to Grantor, each of the D&O Administrative Agents and each of the D&O Banks, resign and be discharged of the responsibilities hereby created, such resignation to become effective upon (i) the appointment of a successor Collateral Agent, (ii) the acceptance of such appointment by such successor Collateral Agent and (iii) the approval of such successor Collateral Agent evidenced by one or more instruments signed by each of the D&O Administrative Agents and Grantor. If no successor Collateral Agent shall be appointed and shall have accepted such appointment within 90 days after the Collateral Agent gives the aforesaid notice of resignation, the Collateral Agent, the Grantor, either of the D&O Administrative Agents, or any other Secured Party may apply to any court of competent jurisdiction to appoint a successor Collateral Agent to act until such time, if any, as a successor Collateral Agent shall have been appointed as provided in this Section 10.8. Any successor so appointed by such court shall immediately and without further act be superseded by any successor Collateral Agent appointed by the D&O Administrative Agents as provided herein. The D&O Administrative Agents (acting in concert) may, at any time upon giving 30 days' prior written notice thereof to the Collateral Agent, remove the Collateral Agent and appoint a successor Collateral Agent, such removal to be effective upon the acceptance of such appointment by the successor. The Collateral Agent shall be entitled to Collateral Agent Fees to the extent incurred or arising, or relating to events occurring, before such resignation or removal.
(b) If at any time the Collateral Agent shall resign or be removed or otherwise become incapable of acting, or if at any time a vacancy shall occur in the office of the Collateral Agent for any other cause, a successor Collateral Agent may be appointed by the D&O Administrative Agents and the Grantor (acting in concert). The powers, duties, authority and title of the predecessor Collateral Agent shall be terminated and cancelled without procuring the resignation of such predecessor and without any other formality (except as be required by applicable law) than appointment and designation of a successor in writing duly acknowledged and delivered to the predecessor and the Grantor. Such
16
appointment and designation shall be full evidence of the right and authority to make the same and of all the facts therein recited, and this Agreement shall vest in such successor, without any further act, deed or conveyance, all the estates, properties, rights, powers, duties, authority and title of its predecessor; but such predecessor shall, nevertheless, on the written request of the D&O Administrative Agents (acting in concert), the Grantor, or the successor, execute and deliver an instrument transferring to such successor all the estates, properties, rights, powers, duties, authority and title of such predecessor hereunder and shall deliver all Collateral held by it or its agents to such successor. Should any deed, conveyance or other instrument in writing from any Grantor be required by any successor Collateral Agent for more fully and certain vesting in such successor the estates, properties, rights, powers, duties, authority and title vested or intended to be vested in the predecessor Collateral Agent, any and all such deeds, conveyances and other instruments in writing shall, on request of such successor, be executed, acknowledged and delivered by such Grantor. If such Grantor shall not have executed and delivered any such deed, conveyance or other instrument within 10 days after it receives a written request from the successor Collateral Agent to do so, or if a Termination Event shall have occurred and be continuing, the predecessor Collateral Agent may execute the same on behalf of such Grantor. Such Grantor hereby appoints any predecessor Collateral Agent as its agent and attorney to act of it as provided in the next preceding sentence.
10.9 Status of Successor Collateral Agent. Every successor Collateral Agent appointed pursuant to Section 10.8 shall be a bank or trust company in good standing and having power to act as Collateral Agent hereunder, incorporated under the laws of the United States of America or any State thereof or the District of Columbia and having its principal office within the 48 contiguous States and shall also have capital, surplus and undivided profits of not less than $500,000,000, if there be such an institution with such capital, surplus and undivided profits willing, qualified and able to accept the powers and duties hereunder upon reasonable or customary terms.
10.10 Merger of the Collateral Agent. Any corporation into which the Collateral Agent may be merged, or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Collateral Agent shall be a party, shall be the Collateral Agent under this Agreement without the execution or filing of any paper or any further act on the part of the parties hereto.
SECTION 11. ABSOLUTE OBLIGATIONS
SECTION 11.1 Absolute, etc. This Agreement shall in all respects be a continuing, absolute, unconditional and irrevocable obligation, and shall remain in full force and effect until all Secured Obligations have been paid in full and all obligations of Grantors hereunder shall have
17
been paid in full. The liability of Grantors under this Agreement shall be absolute, unconditional and irrevocable irrespective of:
(a) any lack of validity, legality or enforceability of the D&O Credit Agreements or any other document delivered in connection therewith (the "D&O Documents");
(b) the failure of any D&O Administrative Agent or D&O Bank:
(i) to assert any claim or demand or to enforce any right or remedy against any D&O Borrower or any other Person under the provisions of any D & O Credit Agreement, any other D&O Document or otherwise; or
(ii) to exercise any right or remedy against any other guarantor of, or collateral securing, any Secured Obligations;
(c) any change in the time, manner or place of payment of, or in any other term of, all or any of the Secured Obligations, or any other extension, compromise or renewal of any Secured Obligations;
(d) any reduction, limitation, impairment or termination of the Secured Obligations for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to (and the Grantors hereby waive any right to or claim of) any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality, nongenuineness, irregularity, compromise, unenforceability of, or any other event or occurrence affecting, the Secured Obligations;
(e) any amendment to, rescission, waiver, or other modification of, or any consent to any departure from, any of the terms of any D&O Credit Agreement or any other D&O Document;
(f) any addition, exchange, release, surrender or non-perfection of any collateral, or any amendment to or waiver or release or addition of, or consent to any departure from, any other guaranty held by any D&O Administrative Agent or D&O Bank or any other holder of the Secured Obligations; or
(g) any other circumstance which might otherwise constitute a defense available to, or a legal or equitable discharge of, a D&O Borrower, any surety or any guarantor.
SECTION 11.2 Reinstatement, etc. Each Grantor agrees that this Agreement shall continue to be effective or be reinstated, as the case may be, if at any time any payment (in whole or in part) of any of the Secured Obligations is rescinded or must otherwise be restored by any D&O Administrative Agent or D&O Bank or any other holder of any Secured Obligations, upon
18
the insolvency, bankruptcy or reorganization of any D&O Borrower, all as though such payment had not been made.
SECTION 11.3 Waiver, etc. Each Grantor hereby waives promptness, diligence, notice of acceptance and any other notice with respect to any of the Secured Obligations, and this Agreement and any requirement that the Collateral Agent, any D&O Administrative Agent or any D&O Bank or any other holder of Secured Obligations protect, secure, perfect or insure any security interest or lien, or any property subject thereto, or exhaust any right or take any action against any D&O Borrower or any other Person (including any other guarantor) or entity or any collateral securing the Secured Obligations.
SECTION 11.4 Waiver of Subrogation; Subordination. Each Grantor hereby irrevocably waives with respect to any D&O Borrower, until the prior indefeasible payment in full in cash of all Secured Obligations, any claim or other rights which it may now or hereafter acquire against any D&O Borrower that arises from the existence, payment, performance or enforcement of any Grantor's obligations hereunder, including any right of subrogation, reimbursement, exoneration, or indemnification, any right to participate in any claim or remedy of the D&O Banks and D&O Administrative Agents against any D&O Borrower or any collateral which the Collateral Agent now has or hereafter acquires, whether or not such claim, remedy or right (all such claims, remedies and rights being collectively called "Subrogation Rights") arises in equity, or under contract, statute or common law, including the right to take or receive from any D&O Borrower, directly or indirectly, in cash or other property or by set-off or in any manner, payment or security on account of such claim or other rights. If any amount shall be paid to any Grantor in violation of the preceding sentence and the Secured Obligations shall not have been paid in cash, in full, such amount shall be deemed to have been paid to such Grantor for the benefit of, and held in trust for, the D&O Banks and D&O Administrative Agents, and shall forthwith be paid to the D&O Banks and D&O Administrative Agents to be credited and applied upon the Secured Obligations, whether matured or unmatured. Each Grantor acknowledges that it will receive direct and indirect benefits from the Agreements Re Specified D&O Facilities and that the waiver set forth in this
Section 11.4 is knowingly made in contemplation of such benefits.
SECTION 12. MISCELLANEOUS
12.1 Amendments. None of the terms or provisions of this Agreement may be waived, amended, supplemented or otherwise modified except in a writing signed by the parties hereto.
12.2 Notices. All notices, requests and demands to or upon the Collateral Agent or any Grantor hereunder shall be effected in the manner provided for in the Agreements Re Specified D&O Facilities; provided that any such notice, request or demand to or upon any Grantor shall be addressed to such Grantor at its notice address set forth on Schedule II and that any such notice, request or demand to or upon the
19
Collateral Agent shall be addressed to the Collateral Agent at its notice address set forth in Schedule II.
12.3 No Waiver by Course of Conduct; Cumulative Remedies. Neither the Collateral Agent nor any other Secured Party shall by any act (except by a written instrument), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Termination Event. No failure to exercise, nor any delay in exercising, on the part of the Collateral Agent or any other Secured Party, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by the Collateral Agent or any other Secured Party of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Collateral Agent or such Secured Party would otherwise have on any future occasion. The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any other rights or remedies provided by law.
12.4 Successors and Assigns. This Agreement shall be binding upon the successors and assigns of each Grantor and shall inure to the benefit of the Collateral Agent and the other Secured Parties and their successors and assigns; provided that no Grantor may assign, transfer or delegate any of its rights or obligations under this Agreement without the prior written consent of the Collateral Agent.
12.5 Counterparts. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts (including by telecopy), and all of said counterparts taken together shall be deemed to constitute one and the same instrument.
12.6 Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
12.7 Section Headings. The Section headings used in this Agreement are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof.
12.8 Integration. This Agreement represent the agreement of the Grantors, the Collateral Agent and the other Secured Parties with respect to the subject matter hereof and thereof, and there are no promises, undertakings, representations or warranties by the
20
Collateral Agent or any other Secured Party relative to subject matter hereof and thereof not expressly set forth or referred to herein.
12.9 Depository Bank's Location. New York shall be deemed to be the Depository Bank's location for the purposes of this Agreement and the perfection and priority of the Collateral Agent's security interest in the Cash Collateral Account.
12.10 Replacement of Existing Cash Collateral Agreement. This Agreement amends and restates, and thus replaces and supersedes in its entirety, the Existing Cash Collateral Agreement.
12.11 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, each of the undersigned has caused this Amended and Restated Cash Collateral Agreement to be duly executed and delivered as of the date first above written.
CDOC, INC.

By: /s/ David A. Hill
    ----------------------------
    Name: David A. Hill
    Title: Vice President	

BANK OF AMERICA, NATIONAL
ASSOCIATION, as Depositary Bank

By: /s/
    ---------------------------
    Name:
    Title:	

BANK OF AMERICA, NATIONAL
ASSOCIATION, as Collateral Agent

By: /s/
    ----------------------------
    Name:
    Title:	

BANK OF AMERICA, NATIONAL
ASSOCIATION, as Collateral Agent
21
CONSENT
The undersigned hereby consents to the above amendment and restatement.
BANK OF AMERICA, NATIONAL
ASSOCIATION,
 as 1997 D&O Administrative
Agent, 1998 D&O
Administrative Agent, 1997
Refinancing Agent, and 1998
Refinancing Agent

By: /s/
    -------------------------------
    Name:
    Title:	

22
CREDIT AGREEMENT
Dated as of November 22, 2000
among
THE PERSONS LISTED ON THE SIGNATURE PAGES HERETO,
 as Borrowers,
THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO,
and
BANK OF AMERICA, NATIONAL ASSOCIATION
as Administrative Agent
(Relating to the Refinancing of Certain Loans under that certain Amended and Restated Credit Agreement, dated as of August 26, 1997)
The following Table of Contents has been inserted for convenience only and does not constitute a part of this Agreement.

                                TABLE OF CONTENTS

                                                                                                                 PAGE
                                                                                                                 ----

SECTION 1. DEFINITIONS AND ACCOUNTING TERMS.......................................................................1
         1.1  Certain Defined Terms...............................................................................1
         1.2  Other Definitional Provisions......................................................................14
         1.3  Accounting and Financial Determinations............................................................15

SECTION 2.  THE LOANS............................................................................................15
         2.1  Commitment.........................................................................................15
         2.2  Procedure for Borrowings...........................................................................15
         2.3  Conversion and Continuation Elections..............................................................16
         2.4  Repayment of Loans.................................................................................18
         2.5  Loan Accounts; Record Keeping......................................................................18

SECTION 3.  INTEREST AND FEES....................................................................................18
         3.1  Interest Rates.....................................................................................18
         3.2  Default Interest Rate..............................................................................19
         3.3  Interest Payment Dates.............................................................................19
         3.4  Setting and Notice of Rates........................................................................19
         3.5  Computation of Interest and Fees...................................................................19

SECTION 4.  PAYMENTS AND PREPAYMENTS.............................................................................19
         4.1  Prepayments........................................................................................19
         4.2  Payments by the Borrowers..........................................................................20
         4.3  Sharing of Payments................................................................................21
         4.4  Setoff.............................................................................................22
         4.5  Net Payments.......................................................................................22

SECTION 5.  CHANGES IN CIRCUMSTANCES.............................................................................24
         5.1  Increased Costs....................................................................................24
         5.2  Change in Rate of Return...........................................................................25
         5.3  Basis for Determining Interest Rate Inadequate or Unfair...........................................25
         5.4  Changes in Law Rendering Certain Loans Unlawful....................................................26
         5.5  Funding Losses.....................................................................................26
         5.6  Right of Banks to Fund Through Other Offices.......................................................27

                                        i	

         5.7  Discretion of Banks as to Manner of Funding........................................................27
         5.8  Replacement of Banks...............................................................................27
         5.9  Conclusiveness of Statements; Survival of Provisions...............................................28
         5.10 Avoidance of Certain Costs.........................................................................28

SECTION 6.  COLLATERAL AND OTHER SECURITY........................................................................28
         6.1  Collateral Documents...............................................................................28
         6.2  Pledge of Additional Collateral....................................................................29
         6.3  Application of Proceeds from Collateral............................................................30
         6.4  Further Assurances.................................................................................31

SECTION 7.  REPRESENTATIONS AND WARRANTIES OF BORROWERS..........................................................31
         7.1  No Conflict........................................................................................31
         7.2  Validity...........................................................................................31
         7.3  Litigation and Contingent Obligations..............................................................32
         7.4  Liens..............................................................................................32
         7.5  Taxes..............................................................................................32
         7.6  Accuracy of Information............................................................................32
         7.7  Proceeds...........................................................................................32
         7.8  Securities Laws....................................................................................32
         7.9  No Default.........................................................................................33
         7.10  Organization, etc.................................................................................33
         7.11  Authorization.....................................................................................33
         7.12  Margin Regulations................................................................................33
         7.13  Principal Residence...............................................................................34
         7.14  No Default or Event of Default....................................................................34

SECTION 8.  COVENANTS OF BORROWERS...............................................................................34
         8.1  Reports, Certificates and Other Information........................................................34
         8.2  Taxes and Liabilities..............................................................................35
         8.3  Compliance with Laws...............................................................................35
         8.4  Other Agreements...................................................................................35

SECTION 9. CONDITIONS AND EFFECTIVENESS OF
THIS AGREEMENT...................................................................................................36
         9.1  Receipt of Documents...............................................................................36
         9.2  Additional Conditions..............................................................................38

SECTION 10.  EVENTS OF DEFAULT AND THEIR EFFECT..................................................................39
         10.1  Events of Default.................................................................................39
         10.2  Effect of Event of Default........................................................................41

                                       ii	

SECTION 11.  THE AGENT...........................................................................................42
         11.1  Authorization and Action..........................................................................42
         11.2  Liability of the Administrative Agent.............................................................42
         11.3  Administrative Agent and Affiliates...............................................................43
         11.4  Bank Credit Decision..............................................................................43
         11.5  Indemnification...................................................................................43
         11.6  Successor Agent...................................................................................44

SECTION 12.  ASSIGNMENTS AND PARTICIPATIONS......................................................................44
         12.1  Assignments.......................................................................................44
         12.2  Participations....................................................................................46
         12.3  Disclosure of Information.........................................................................47
         12.4  Foreign Transferees...............................................................................47

SECTION 13.  MISCELLANEOUS.......................................................................................48
         13.1  Waivers and Amendments............................................................................48
         13.2  Failure to Consent................................................................................49
         13.3  Notices...........................................................................................49
         13.4  Indemnity.........................................................................................50
         13.5  D&O Agreements....................................................................................50
         13.6  Subsidiary References.............................................................................51
         13.7  Captions..........................................................................................51
         13.8  GOVERNING LAW.....................................................................................51
         13.9  Counterparts......................................................................................51
         13.10  SUBMISSION TO JURISDICTION; WAIVER OF VENUE......................................................51
         13.11  Successors and Assigns...........................................................................52
         13.12 Power of Attorney.................................................................................52
         13.13 No Waiver; Cumulative Remedies....................................................................52
         13.14  WAIVER OF JURY TRIAL.............................................................................52

                             SCHEDULES AND EXHIBITS

SCHEDULES

SCHEDULE 1.1      Existing Litigation
SCHEDULE 2.1      Banks and Percentages
SCHEDULE 2.2      Borrower Loan Percentage

EXHIBITS

                                       iii	

EXHIBIT A         Form of Note
EXHIBIT B         Form of Notice of Borrowing
EXHIBIT C         Form of Notice of Conversion/Continuation
EXHIBIT D         Form of Pledge Agreement
EXHIBIT E         Form of Conseco Guaranty
EXHIBIT F-1       Form of Opinion of David K. Herzog, counsel to Guarantor
EXHIBIT F-2       Form of Opinion of Weil, Gotshal & Manges LLP, outside counsel to
                  Guarantor
EXHIBIT G         Form of Confidentiality Letter
EXHIBIT H         Form of Assignment Agreement
EXHIBIT I         Funding Loss Formula
EXHIBIT J         Form of CIHC Guaranty
EXHIBIT K         Form of Pledge Agreement (Additional Collateral)
EXHIBIT L         Form of Amended and Restated Cash Collateral Agreement
EXHIBIT M         Form of Subordinated Pledge Agreement Re 1998 Shares
EXHIBIT N         Form of Borrower Acknowledgment and Release
EXHIBIT O         Form of Conseco Officer's Certificate
EXHIBIT P         Form of Subordinated Pledge Agreement Re 1999 Shares	

iv
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is entered into as of November 22, 2000, among the persons listed as borrowers on the signature pages hereto (herein, collectively called the "Borrowers" and each individually, a "Borrower"), the several financial institutions from time to time party to this Agreement (herein, together with any Eligible Assignees thereof, collectively called the "Banks" and each individually, a "Bank"), and BANK OF AMERICA, N.A. ("BofA"), as administrative agent for the Banks (herein in such capacity, together with any successors thereto in such capacity, called the "Administrative Agent").
RECITALS
WHEREAS, the Borrowers, certain other borrowers, the Banks and the Administrative Agent are parties to that certain Credit Agreement, dated as of May 13, 1996, which has been amended and restated pursuant to that certain Amended and Restated Credit Agreement dated as of August 26, 1997 (as amended or modified through the date hereof, the "Existing Credit Agreement"), whereby the Banks party thereto made term loans to the borrowers party thereto (including the Borrowers), on the terms and subject to the conditions set forth in the Existing Credit Agreement;
WHEREAS, the Borrowers have requested that the Banks agree to make term loans in the principal amount for each Borrower set forth on Schedule 2.2 hereto to refinance the outstanding loans to the Borrowers under the Existing Credit Agreement;
WHEREAS, the Banks are willing, on the terms and conditions hereinafter set forth, to make the term loans to the Borrowers;
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 AND ACCOUNTING TERMS
SECTION 1.1 Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined):
"AC Collateral Agent" shall mean BofA (and its successors) as collateral agent under the AC Pledge Agreement.
"AC Pledge Agreement" shall mean the Pledge Agreement (Additional Collateral), substantially in the form of Exhibit K, as the same may be amended, modified, or supplemented from time to time.
"AC Pledge Borrowers" shall mean the Borrowers, if any, who have elected to pledge Additional Collateral pursuant to the terms of the Plan.
"Additional Collateral" shall mean, for any Borrower, marketable securities pledged by such Borrower to secure the repayment of such Borrower's obligations under the New Credit Agreements Re D&O Loans as required by Conseco pursuant to the Plan.
"Administrative Agent" - see Preamble.
"Administrative Agent's Office" shall mean 231 South LaSalle Street, Chicago, Illinois 60697, or such other address designated by the Administrative Agent (or any successor agent) to the Borrowers and the Banks from time to time.
"Affected Bank" - see Section 5.4.
"Affiliate" shall mean, as to any Person, any other Person which, directly or indirectly, owns, holds, controls, is controlled by or is under common control with such Person (including all beneficial control as a trustee, guardian or other fiduciary). A Person shall be deemed to be "controlled by" any other Person if such other Person possesses, directly or indirectly, power (a) to vote 10% or more of the securities (on a fully diluted basis) having ordinary voting power for the election of directors, managing general partners or managers; or (b) to direct or cause the direction of the management and policies of such Person whether through the ownership of voting securities, membership interests, by contract or otherwise.
"Agent-Related Persons" shall mean BofA in any agent capacity or any successor agent arising under Section 11.6, together with its respective Affiliates (including, in the case of BofA, the Arranger), and the officers, directors, employees, agents and attorneys-in-fact of such Persons and Affiliates.
"Agreement" shall mean this Credit Agreement, as amended, modified, or supplemented from time to time.
"Amended and Restated Cash Collateral Agreement" shall mean the Amended and Restated Cash Collateral Agreement in substantially the form of Exhibit L, as the same may be amended, modified or supplemented from time to time.
"Arranger" shall mean Banc of America Securities LLC, a Delaware limited liability company.
2
"Assignment Agreement" - see Section 12.1(a)
"Bank" or "Banks" - see Preamble.
"Base Rate" shall mean, for any day, the higher of (a) 0.50% per annum above the latest Federal Funds Rate and (b) the rate of interest in effect for such day as publicly announced from time to time by BofA as its "prime rate." (The "prime rate" is a rate set by BofA based upon various factors including BofA's costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate.) Any change in the prime rate announced by BofA shall take effect at the opening of business on the date specified in the public announcement of such change.
"Base Rate Loan" shall mean a Loan bearing interest at the Base Rate.
"BofA" - see Preamble.
"Borrower" or "Borrowers" - see Preamble.
"Borrower Acknowledgment and Release" shall mean an Acknowledgment and Release executed and delivered by each Borrower in favor of the Administrative Agent and the Banks, substantially in the form of Exhibit N.
"Borrower Collateral Percentage" shall mean, as to any Borrower, a fraction, the numerator of which is equal to the principal amount of the Loans to such Borrower then outstanding hereunder and the denominator of which is equal to the aggregate principal amount of the Loans to all Borrowers then outstanding hereunder.
"Business Day" shall mean any day other than a Saturday, Sunday or other day on which commercial banks in Chicago, New York City or Dallas are authorized or required by law to close and, if the applicable Business Day relates to any Offshore Rate Loan, means such a day on which dealings are carried on in the applicable offshore dollar interbank market.
"Capitalized Lease Liabilities" shall mean, with respect to any Person, all monetary obligations of such Person under any leasing or similar arrangement which, in accordance with GAAP, would be classified as a capitalized lease, and, for purposes of this Agreement, the amount of such obligations shall be the capitalized amount thereof, determined in accordance with GAAP, and the stated maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a penalty.
"CCPA Collateral" shall mean the "Collateral" from time to time delivered pursuant to the Amended and Restated Cash Collateral Agreement.
3
"CCPA Pledgor" shall mean CDOC, Inc., a Delaware corporation and any other "Grantor" from time to time a party to the Amended and Restated Cash Collateral Agreement.
"Charges" - see Section 4.5.
"CIHC" shall mean CIHC, Incorporated, a Delaware corporation.
"CIHC Guaranty" shall mean the Guaranty and Subordination Agreement, dated as of the date hereof, executed and delivered by CIHC and Conseco in favor of the Administrative Agent, for the benefit of the Banks, in substantially the form of Exhibit J, as the same may be amended, modified, or supplemented from time to time.
"Closing Date" shall mean the date on which all conditions precedent set forth in Section 9 are satisfied or waived by all Banks or, with respect to any payment to be made hereunder, waived by the Person entitled to receive such payment.
"Collateral Ratio" shall mean, as to any Borrower, the ratio of (a) the sum of the Loan Value of Direct Collateral of such Borrower plus the Borrower Collateral Percentage of the Loan Value of Indirect Collateral to (b) the aggregate principal amount of the Loans of such Borrower then outstanding.
"Conseco" shall mean Conseco, Inc., an Indiana corporation.
"Conseco Guaranty" shall mean the Guaranty of Conseco, dated as of the date hereof, executed and delivered in favor of the Administrative Agent, for the benefit of the Banks, in substantially the form of Exhibit E, as the same may be amended, modified, or supplemented from time to time.
"Contingent Obligation" shall mean, without duplication, any agreement, undertaking or arrangement by which any Person guarantees, endorses or otherwise becomes or is contingently liable upon (by direct or indirect agreement, contingent or otherwise, to provide funds for payment, to supply funds to, or otherwise to invest in, a debtor, or otherwise to assure a creditor against loss) the debt, obligation or other liability of any other Person (other than by endorsements of instruments in the course of collection), or guarantees the payment of dividends or other distributions upon the shares of any other Person. The amount of any Person's liability with respect to any Contingent Obligation shall (subject to any limitation set forth therein) be deemed to be the outstanding principal amount (or maximum outstanding principal amount, if larger) of the debt, obligation or other liability outstanding thereunder or, if not stated or if indeterminable, the maximum reasonably anticipated liability in respect thereof at the time of determination.
4
"Conversion/Continuation Date" shall mean any date on which, under
Section 2.3, Conseco (on behalf of the Borrowers) (a) converts Loans of one Type to another Type, or (b) continues as Loans of the same Type, but with a new Interest Period, Loans having Interest Periods expiring on such date.
"D&O Agreements" shall mean the Existing Credit Agreement, the 1998 D & O Credit Agreement, the September 22, 2000 Agreements, the 1999 D & O Credit Agreement, the New Credit Agreements Re D & O Loans, all other agreements or documents (including, without limitation, guaranties such as (without limitation) the Existing Conseco Guaranty, the Existing CIHC Guaranty, the Conseco Guaranty, and the CIHC Guaranty) relating to any of the foregoing, and any reaffirmed, amended, modified, or supplemented version of any of the foregoing.
"Default" shall mean any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default.
"Direct Collateral" shall mean, with respect to any Borrower, all property, assets and/or rights on or in which a Lien is now or hereafter granted by such Borrower to the Administrative Agent (or to any agent, trustee or other party acting on behalf of the Administrative Agent) for the benefit of the Banks, pursuant to the Pledge Agreement, the Subordinated Pledge Agreement Re 1998 Shares, the AC Pledge Agreement, the Subordinated Pledge Agreement Re 1999 Shares, and any other instruments or documents provided for herein or therein or delivered hereunder or thereunder or in connection herewith or therewith.
"Dollars" and the sign "$" shall mean lawful money of the United States of America.
"Eligible Assignee" shall mean any bank, pension fund, mutual fund, investment fund or other financial institution (other than an insurance company or any Affiliate of an insurance company except those to which the Borrowers consent).
"Eurodollar Reserve Percentage" has the meaning specified in the definition of "Offshore Rate."
"Event of Default" - see Section 10.1.
"Existing CIHC Guaranty" shall mean the Guaranty and Subordination Agreement entered into by CIHC and Conseco dated September 22, 2000 in respect of the Existing Credit Agreement.
"Existing Conseco Guaranty" shall mean the Amended and Restated Guaranty dated as of August 26, 1997 of Conseco with respect to the Existing Credit Agreement.
5
"Existing Credit Agreement" - see first recital.
"Existing Litigation" shall mean the litigation described in Schedule
l.1 hereto.
"Existing Loans" shall mean loans extended to a Borrower by the Banks under the Existing Credit Agreement.
"Federal Funds Rate" means, for any day, the rate per annum (rounded upwards to the nearest 1/100 of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank on the Business Day next succeeding such day; provided that
(a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate charged to BofA on such day on such transactions as determined by the Administrative Agent.
"FRB" shall mean the Board of Governors of the Federal Reserve System, and any Governmental Authority succeeding to any of its principal functions.
"Funding Loss Formula" has the meaning set forth on Exhibit I.
"GAAP" shall mean generally accepted accounting principles in the United States of America as from time to time in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the U.S. accounting profession), which are applicable to the circumstances as of the date of determination.
"Governmental Authority" shall mean any nation or government, any state or other political subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing.
"Hedging Obligations" shall mean obligations in respect of any agreement (including any master agreement and any agreement, whether or not in writing, relating to any single transaction) that is an interest rate swap agreement, basis swap, forward rate agreement, commodity swap, commodity option, equity or equity index swap or option, bond option, interest rate option, forward foreign exchange agreement, rate cap, collar or floor agreement, currency swap agreement, cross-currency rate swap agreement, swaption, currency option or any other, similar agreement (including any option to enter into any of the foregoing).
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"IBOR" has the meaning set forth in the definition of Offshore Rate.
"Indebtedness" shall mean, with respect to any Person at any date, without duplication: (a) all obligations of such Person for borrowed money or in respect of loans or advances; (b) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; (c) all obligations in respect of letters of credit, whether or not drawn, and bankers' acceptances issued for the account or upon the application or request of such Person; (d) all Capitalized Lease Liabilities of such Person; (e) all Hedging Obligations of such Person; (f) all obligations of such Person to pay the deferred purchase price of property or services which are included as liabilities in accordance with GAAP (other than trade payables entered into in the ordinary course of business on ordinary terms), and all obligations secured by a Lien on property owned or being purchased by such Person (including Indebtedness arising under conditional sales or other title retention agreements); (g) any obligations described in clauses (a) through (f) above or clause (h) immediately following this clause (g) of a partnership in which such Person is a general partner; and
(h) all Contingent Obligations of such Person in connection with the foregoing.
"Indemnified Parties" - see Section 13.4.
"Indirect Collateral" shall mean any assets of Conseco or CIHC which, as determined by the Administrative Agent in its sole discretion exercised in good faith, shall be deemed to "indirectly secure" the Liabilities pursuant to Regulation U as a result of the negative pledge agreement of Conseco and CIHC set forth in the Conseco Guaranty.
"Interest Payment Date" shall mean, as to any Offshore Rate Loan, the last day of each Interest Period applicable to such Loan and, as to any Base Rate Loan, the last Business Day of each calendar quarter and each date such Loan is converted into another Type of Loan, provided, however, that if any Interest Period for an Offshore Rate Loan exceeds three months, the date that falls three months (as the case may be) after the beginning of such Interest Period and after each Interest Payment Date thereafter is also an Interest Payment Date.
"Interest Period" shall mean, as to any Offshore Rate Loan, the period commencing on the date of such Loan or on the Conversion/Continuation Date on which the Loan is converted into or continued as an Offshore Rate Loan, and ending on the date one, two, three or six months thereafter as selected by Conseco (on behalf of the Borrowers) in its Notice of Borrowing or Notice of Conversion/Continuation;
provided that:
(a) if any Interest Period would otherwise end on a day that is not a Business Day, that Interest Period shall be extended to the following Business Day unless, in the case of an Offshore Rate Loan, the result of such extension
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would be to carry such Interest Period into another calendar month, in which event such Interest Period shall end on the preceding Business Day;
(b) any Interest Period pertaining to an Offshore Rate Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period; and
(c) no Interest Period for any Loan shall extend beyond the Termination Date.
"Lending Office" shall mean, with respect to any Bank, any office designated by such Bank in its sole discretion beneath its signature hereto (or in an Assignment Agreement) or otherwise from time to time by written notice to the Borrowers and the Administrative Agent, as a Lending Office for purposes hereunder. A Bank may designate separate Lending Offices for the purposes of making and maintaining Loans.
"Liabilities" shall mean, as to any Borrower, all obligations of such Borrower to the Banks or the Administrative Agent, howsoever created, arising or evidenced, whether direct or indirect, joint or several, absolute or contingent, or now or hereafter existing, or due or to become due, which arise out of or in connection with this Agreement, the Notes, if any, or the other Loan Documents.
"Lien" shall mean any security interest, mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other) or other priority or preferential arrangement of any kind or nature whatsoever.
"Litigation" shall mean any litigation (including, without limitation, any governmental proceeding or arbitration proceeding), tax audit or investigative proceeding, claim, lawsuit, and/or investigation pending or threatened against or involving any Borrower, or Conseco or any of its Subsidiaries or any of its or their businesses or operations.
"Loan(s)" shall have the meaning set forth in Section 2.1 and may be a Base Rate Loan or an Offshore Rate Loan (each, a "Type of Loan").
"Loan Documents" shall mean, collectively, this Agreement, the Notes, if any, the Conseco Guaranty, the Pledge Agreement, the Subordinated Pledge Agreement Re 1998 Shares, the Subordinated Pledge Agreement Re 1999 Shares, the AC Pledge Agreement, the Borrower Acknowledgment and Release, the CIHC Guaranty, the Amended and Restated Cash Collateral Agreement, and any and all other documents or instruments furnished or required to be furnished
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in connection with any of the foregoing, as the same may be amended or modified in accordance with this Agreement.
"Loan Value of Direct Collateral" shall mean, with respect to any Borrower, (a) the current market value of the common stock of Conseco pledged by such Borrower to the Administrative Agent, for the benefit of the Banks, under the Pledge Agreement, plus (b) without duplication, the current market value of any other Direct Collateral constituting Margin Stock pledged by such Borrower to the Administrative Agent, for the benefit of the Banks, under any Loan Document, plus (c) without duplication, the maximum loan value of all Direct Collateral of such Borrower not constituting Margin Stock, it being understood that the maximum loan value of Direct Collateral shall be its good faith loan value (i.e., the value of such Direct Collateral as determined from time to time by the Administrative Agent (with the concurrence of the Required Lenders) exercising sound banking judgment) without regard to such Borrower's assets securing any unrelated transactions. The Administrative Agent and/or the Required Lenders shall have the right at any time in their sole discretion to recompute the Loan Value of Direct Collateral.
"Loan Value of Indirect Collateral" shall mean, with respect to any Borrower, the sum of the maximum loan value of Indirect Collateral under Regulation U, after taking into account any other Indebtedness of Conseco directly or "indirectly secured" (as set forth in Regulation U and the interpretations thereof) by the assets of Conseco and CIHC, it being understood that (a) the maximum loan value of Indirect Collateral constituting Margin Stock shall be 50% of its current market value and (b) the maximum loan value of Indirect Collateral not constituting Margin Stock shall be its good faith loan value (i.e., the value of such Indirect Collateral as determined from time to time by the Administrative Agent (with the concurrence of the Required Lenders) exercising sound banking judgment), in each case without regard to Conseco's assets securing any unrelated transactions. Until further notice from the Administrative Agent to the Borrower, the Loan Value of Indirect Collateral shall be deemed to be $574,000,000, it being understood that the Administrative Agent and/or the Required Lenders shall have the right at any time in their sole discretion to recompute the Loan Value of Indirect Collateral.
"Margin Stock" shall mean "margin stock" as such term is defined in Regulation U.
"Material Adverse Change" or "Material Adverse Effect" shall mean any change, event, action, condition or effect which individually or in the aggregate (a) impairs the validity or enforceability of this Agreement or any other Loan Document, or (b) materially and adversely affects the consolidated business, operations, financial prospects or condition of Conseco and its Subsidiaries taken as a whole, or (c) materially and adversely impairs the ability of any Borrower or Conseco to perform his, hers or its obligations under this Agreement or any of the other Loan Documents to which he, she or it is a party, or (d) materially and adversely affects the perfection or priority of any Lien granted under any of the Loan Documents.
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"Material Litigation" or "Material Litigation Development" shall mean any Litigation, or development in any Litigation, as the case may be, which (a) seeks to enjoin, prohibit, discontinue or otherwise impacts the validity or enforceability of this Agreement or any of the other Loan Documents or other transactions contemplated hereby or thereby, or (b) could be reasonably expected to have a Material Adverse Effect.
"New Credit Agreements Re D&O Loans" shall mean, collectively, this Agreement, the New Credit Agreement Re 1998 D&O Loans, and the New Credit Agreement Re 1999 D&O Loans.
"New Credit Agreement Re 1998 D & O Loans" shall mean that certain credit agreement dated as of the date hereof with certain borrowers, certain banks, and BofA, as administrative agent, refinancing certain of the loans under the 1998 D & O Credit Agreement, as the same may be amended, modified or supplemented from time to time.
"New Credit Agreement Re 1999 D & O Loans" shall mean that certain credit agreement dated as of the date hereof with certain borrowers, certain banks and The Chase Manhattan Bank, as administrative agent, refinancing certain of the loans under the 1999 D & O Credit Agreement, as the same may be amended, modified or supplemented from time to time.
"1998 D & O Credit Agreement " shall mean the Credit Agreement, dated as of August 21, 1998, among certain borrowers, certain banks, and BofA, as administrative agent.
"1999 D & O Credit Agreement" shall mean the Termination and Replacement Agreement, dated as of May 30, 2000, among certain borrowers, certain banks, and The Chase Manhattan Bank, as administrative agent.
"Non-Consenting Bank" - see Section 13.2.
"Note" shall mean a promissory note, substantially in the form of Exhibit A with blanks appropriately completed in conformity herewith, evidencing the aggregate Loan of the Banks, or any promissory note or promissory notes issued in substitution or replacement therefor.
"Notice of Borrowing" shall mean a notice in substantially the form of Exhibit B.
"Notice of Conversion/Continuation" shall mean a notice in substantially the form of Exhibit C.
"Offshore Rate" shall mean, for any Interest Period, with respect to Offshore Rate Loans comprising part of the same Borrowing, the rate of interest per annum (rounded upward to the next 1/100th of 1%) determined by the Administrative Agent as follows:
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Offshore Rate = IBOR

1.00 - Eurodollar Reserve Percentage
Where,
"Eurodollar Reserve Percentage" means for any day for any Interest Period the maximum reserve percentage (expressed as a decimal, rounded upward to the next 1/100th of 1%) in effect on such day (whether or not applicable to any Bank) under regulations issued from time to time by the FRB for determining the maximum reserve requirement (including any emergency, supplemental or other marginal reserve requirement) with respect to Eurocurrency funding (currently referred to as "Eurocurrency liabilities"); and
"IBOR" shall mean, for an applicable Interest Period:
(a) the rate per annum (carried out to the fifth decimal place) equal to the rate determined by Administrative Agent to the offered rate that appears on the page of the Telerate Screen that displays an average British Bankers Association Interest Settlement Rate for deposits in Dollars (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period, determined as of approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, or
(b) in the event the rate referenced in the preceding subsection
(a) does not appear on such page or service or such page or service shall cease to be available, the rate per annum (carried out to the fifth decimal place) equal to the rate determined by Administrative Agent to be the offered rate on such other page or other service that displays an average British Bankers Association Interest Settlement Rate for deposits in Dollars (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period, determined as of approximately 11:00 am. (London time) two Business Days prior to the first day of such Interest Period, or
(c) in the event the rates referenced in the preceding subsections
(a) and (b) are not available, the rate per annum determined by the Administrative Agent as the rate of interest at which Dollars deposits (for delivery on the first day of such Interest Period) in same day funds in the approximate amount of the application Offshore Rate Loan and with a term equivalent to such Interest Period would be offered by its London Branch to major banks in the offshore Dollar market at their request approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period.
The Offshore Rate shall be adjusted automatically as to all Offshore Rate Loans then outstanding as of the effective date of any change in the Eurodollar Reserve Percentage.
"Offshore Rate Loan" shall mean a Loan that bears interest based on the Offshore Rate.
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"Other D&O Agreements" shall mean any D&O Agreement other than this Agreement.
"Percentage" shall mean, relative to any Bank, the percentage set forth opposite such Bank's name on Schedule 2.1 (or set forth in an Assignment Agreement), as such Percentage may be adjusted from time to time pursuant to Assignment Agreement(s) executed by such Bank and its Eligible Assignee and delivered pursuant to Section 12.1.
"Person" means an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture or Governmental Authority.
"Plan" shall mean a plan made available to certain Borrowers by Conseco substantially in the form to be attached as an appendix to the certificate to be delivered pursuant to Section 9.1.15 hereof, as amended, modified or supplemented from time to time, but only to the extent permitted pursuant to the provisions of the pertinent D&O Agreements.
"Plan Rights" shall mean any Borrower's rights and interests in and to payments of "Bonus Points" (or any amended or successor payment concept) under the Plan, but expressly excluding any amounts dedicated under the Plan to the payment of any related tax obligations owing or to be owing by such Borrower.
"Pledge Agreement" shall mean the Borrower Pledge Agreement, dated as of the date hereof, substantially in the form of Exhibit D, as the same may be amended, modified, or supplemented from time to time.
"Pledged Shares" shall have the meaning as assigned to such term in the Pledge Agreement.
"Reaffirmation of Existing CIHC Guaranty" shall mean a writing reaffirming the Existing CIHC Guaranty in form and substance satisfactory to the Administrative Agent, dated as of the date hereof, as the same may be amended, modified or supplemented from time to time.
"Reaffirmation of Existing Conseco Guaranty" shall mean a writing reaffirming the Existing Conseco Guaranty in form and substance satisfactory to the Administrative Agent, dated as of the date hereof, as the same may be amended, modified, or supplemented from time to time.
"Regulation "D" and "U" shall mean Regulation D and Regulation U, respectively, or any successor regulation thereto, promulgated by the FRB as from time to time in effect.
"Replaced Bank" - see Section 5.8.
"Replacement Bank" - see Section 5.8.
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"Required Banks" shall mean Banks having more than 50% of the aggregate principal amount of the Loans outstanding at such time.
"Responsible Officer" shall mean, in the case of any Person, any of the following officers of such Person: the chief executive officer; the president; the chief financial officer; the chief operating officer; the chief investment officer; the general counsel; the secretary; the treasurer or any senior or executive vice president. If any of the titles of the preceding officers of such corporate Person are changed after the date hereof, the term "Responsible Officer" shall thereafter mean any officer performing substantially the same functions as are presently performed by one or more of the officers listed in the first sentence of this definition.
"Revolving Credit Agreement" shall mean that certain Five-Year Credit Agreement, dated as of September 25, 1998, among Conseco, certain financial institutions, BofA, as agent, First Union National Bank and The Chase Manhattan Bank, as syndication agents, and Morgan Guaranty Trust Company of New York, as documentation agent, as amended by the First Amendment to Five-Year Credit Agreement, dated as of September 22, 2000, as the same may be hereafter amended, modified, or supplemented from time to time.
"September 22, 2000 Agreements" shall mean, collectively, that certain Agreement, dated as of September 22, 2000, among Conseco, certain banks, and BofA as administrative agent, relating to the 1998 D&O Credit Agreement, that certain Agreement, dated as of September 22, 2000, among Conseco, certain banks, and BofA, as administrative agent, relating to the Existing Credit Agreement, and that certain Agreement, dated as of September 22, 2000, among Conseco, certain banks, and The Chase Manhattan Bank, as administrative agent, relating to the 1999 D&O Credit Agreement, as any of the foregoing may be amended, modified, or supplemented from time to time.
"Significant Subsidiary" shall have the meaning provided in the Revolving Credit Agreement as in effect on the Closing Date.
"Subordinated Pledge Agreement Re 1998 Shares" shall mean a Subordinated Pledge Agreement Re 1997 Shares substantially in the form attached as Exhibit M hereto, as the same may be amended, modified, or supplemented from time to time.
"Subordinated Pledge Agreement Re 1999 Shares" shall mean the Subordinated Pledge Agreement Re 1999 Shares substantially in the form attached as Exhibit P hereto, as the same may be amended, modified, or supplemented from time to time.
"Subsidiary" shall have the meaning provided in the Revolving Credit Agreement as in effect on the Closing Date.
"Substitute Bank" - see Section 13.2.
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"Swap Termination Value" means, in respect of any one or more Hedging Obligations, after taking into account the effect of any legally enforceable netting agreement relating to such Hedging Obligations, (a) for any date on or after the date such Hedging Obligations have been closed out and termination value(s) determined in accordance therewith, such termination value(s), and (b) for any date prior to the date referenced in clause (a) the amount(s) determined as the mark-to-market value(s) for such Hedging Obligations, as determined by Conseco or any of its Subsidiaries based upon one or more mid-market or other readily available quotations provided by any recognized dealer in such Hedging Obligations (which may include any Bank).
"Taxes" or "Tax" shall mean all taxes of any nature whatsoever and howsoever denominated, including, without limitation, retaliatory, income, premium, withholding, guaranty fund or similar assessments, excise, import, governmental fees, duties and all other charges, as well as additions to tax, penalties and interest thereon, imposed by any Governmental Authority.
"Termination Date" shall mean December 31, 2003.
"Termination Event" shall have the meaning as assigned to such term in the Conseco Guaranty.
"Transferee" - see Section 12.3.
"Type" or "Type of Loan" has the meaning specified in the definition of "Loan."
"UCC" shall mean the Uniform Commercial Code or comparable statute or any successor statutes thereto, as in effect from time to time in the relevant jurisdiction.
"United States" and "U.S." each means the United States of America.
SECTION 1.2 Other Definitional Provisions.
(a) All terms defined in this Agreement shall have the above-defined meanings when used in any Loan Document, or any certificate, report or other document made or delivered pursuant to this Agreement, unless the context therein shall clearly otherwise require.
(b) The words "hereof," "herein," "hereunder" and similar terms when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement; and subsection, Section, Schedule and Exhibit references are to this Agreement unless otherwise specified.
(c) The words "amended or modified" when used in any Loan Document shall mean with respect to such Loan Document as from time to time, in whole or
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in part, amended, modified, supplemented, restated, refinanced, refunded or renewed.
(d) In the computation of periods of time in this Agreement from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each means "to but excluding."
(e) This Agreement and the other Loan Documents are the result of negotiations among and have been reviewed by counsel to the Administrative Agent, the Borrowers and the other parties, and are the products of all parties. Accordingly, they shall not be construed against the Banks or the Administrative Agent merely because of the Administrative Agent's or Banks' involvement in their preparation.
SECTION 1.3 Accounting and Financial Determinations. For purposes of this Agreement, unless otherwise specified or the context otherwise requires, all accounting terms used in any Loan Document shall be interpreted, all accounting determinations and computations hereunder or thereunder shall be made, and all financial statements required to be delivered hereunder or thereunder shall be prepared, in accordance with GAAP.
SECTION 2. THE LOANS
Subject to the terms and conditions of this Agreement and relying on the representations and warranties herein set forth:
SECTION 2.1 Commitment. Each of the Banks, severally and for itself alone, agrees, on the terms and conditions set forth herein, to make a term loan (herein collectively called the "Loans" and individually called a "Loan") to each of the Borrowers in its Percentage of the amounts set forth on Schedule 2.2 on the Closing Date for the sole purpose of refinancing the Existing Loans. The Loans to any Borrower shall be disbursed in accordance with Section 2.2 and once repaid may not thereafter be reborrowed.
SECTION 2.2 Procedure for Borrowings.
(a) The Loans shall be deemed to have been made to each Borrower upon irrevocable written notice (or by telephone promptly confirmed in writing) of Conseco (on behalf of the Borrowers) delivered to the Administrative Agent in the form of a Notice of Borrowing (which notice must be received by the Administrative Agent prior to 11:00 A.M. (Chicago time) (i) three Business Days prior to the Closing Date, in the case of Offshore Rate Loans and (ii) on the Closing Date, in the case of Base Rate Loans, specifying:
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(i) the Closing Date, which shall be a Business Day and the same Business Day for each Borrower;
(ii) the amount of the Loans deemed to have been made to each Borrower, which shall not exceed the aggregate amount set forth on Schedule 2.2 for such Borrower;
(iii) the Type of Loans being requested; and
(iv) with respect to the Loans, if comprised of Offshore Rate Loans, the duration of the Interest Period applicable to such Offshore Rate Loan included in such notice. If the Notice of Borrowing fails to specify the duration of the Interest Period for any Loans comprised of Offshore Rate Loans, such Interest Period shall be three (3) months.
(b) The Administrative Agent will promptly notify each Bank of its receipt of the Notice of Borrowing and of the amount of such Bank's Percentage of the related Loans.
(c) Each Bank will make the amount of its Percentage of the Loans available to the Administrative Agent for the account of each Borrower requesting a Loan at the Administrative Agent's Office by 1:00 P.M. (Chicago time) on the Closing Date in funds immediately available to the Administrative Agent. The proceeds of each such Loan will be applied to repay in full each Borrower's Existing Loans, notwithstanding receipt by the Administrative Agent of any other directions to the contrary, and such repayment is intended to, and shall, occur simultaneously with the making of the Loans.
(d) There may not be more than one (1) Interest Period in effect for all Loans then outstanding.
SECTION 2.3 Conversion and Continuation Elections. (a) Conseco (on behalf of the Borrowers) may, upon irrevocable written notice to the Agent in accordance with Section 2.3(b):
(i) elect, as of any Business Day, in the case of Base Rate Loans, or as of the last day of the applicable Interest Period, in the case of Offshore Rate Loans, to convert any such Loans into Loans of any other Type; or
(ii) elect as of the last day of the applicable Interest Period, to continue any Offshore Rate Loans having Interest Periods expiring on such day;
provided, that if at any time the aggregate amount of Offshore Rate Loans to all Borrowers is reduced, by payment or prepayment, to be less than $5,000,000, such Offshore Rate Loans shall automatically convert into Base Rate Loans, and on and after such date the right of Conseco (on
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behalf of the Borrowers) to continue such Loans as, or convert such as into, Offshore Rate Loans, as the case may be, shall terminate.
(b) Conseco (on behalf of the Borrowers) shall deliver a Notice of Conversion/Continuation to be received by the Agent not later than 11:00 A.M. (Chicago time) at least (i) three Business Days in advance of the Conversion/Continuation Date, if the Loans are to be converted into or continued as Offshore Rate Loans; and (ii) one Business Day in advance of the Conversion/Continuation Date, if the Loans are to be converted into Base Rate Loans, specifying:
(A) the proposed Conversion/Continuation Date;
(B) the aggregate amount of Loans to be converted or continued;
(C) the Type of Loans resulting from the proposed conversion or continuation; and
(D) in the case of conversions into Offshore Rate Loans, the duration of the requested Interest Period.
(c) If, upon the expiration of any Interest Period applicable to Offshore Rate Loans, Conseco (on behalf of the Borrowers) has failed to select timely a new Interest Period to be applicable to such Offshore Rate Loans (and if no Default or Event of Default relating to Conseco is then continuing), Conseco (on behalf of the Borrowers) shall be deemed to have selected the continuation of such Offshore Rate Loans, with the new Interest Period to be identical in length to the expired period. If, upon the expiration of any Interest Period applicable to Offshore Rate Loans, any Default or Event of Default relating to Conseco is then continuing, Conseco (on behalf of the Borrowers) shall be deemed to have elected to convert such Offshore Rate Loans into Base Rate Loans effective as of the expiration date of such Interest Period.
(d) The Administrative Agent will promptly notify each Bank of its receipt of a Notice of Conversion/Continuation, or, if no timely notice is provided by Conseco (on behalf of the Borrowers), the Administrative Agent will promptly notify each Bank of the details of any automatic conversion. All conversions and continuations shall be made ratably according to the respective outstanding principal amounts of the Loans with respect to which the notice was given held by each Bank.
(e) Unless the Required Banks otherwise consent, during the continuance of a Default or Event of Default relating to Conseco, Conseco (on behalf of the Borrowers) may not elect to have a Loan converted into or continued as an Offshore Rate Loan.
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(f) After giving effect to any conversion or continuation of Loans, unless the Administrative Agent shall otherwise consent, there may not be more than one (1) Interest Period in effect for all Loans hereunder.
SECTION 2.4 Repayment of Loans. Subject to the provisions of Section 4.1, the Loans of each Bank shall be payable in full (and each Borrower agrees to pay such Loans) on the Termination Date.
SECTION 2.5 Loan Accounts; Record Keeping.
(a) The Loans made by each Bank shall be evidenced by one or more loan accounts or records maintained by such Bank in the ordinary course of business and the Administrative Agent. The loan accounts or records maintained by the Administrative Agent and each Bank shall be conclusive absent manifest error of the amount of the Loans made by the Banks to the Borrowers and the interest and payments thereon; provided, that in the event of a conflict between information recorded by the Administrative Agent and any Bank as to such Bank's Loans, the records of the Administrative Agent absent manifest error shall control. Any failure to so record or any error in doing so shall not, however, limit or otherwise affect the obligations of any Borrower hereunder or to pay any amount owing with respect to the Loans.
(b) The Loans made by the Banks to each Borrower shall, upon the request of the Administrative Agent, be evidenced by a Note executed and delivered by such Borrower payable to the Administrative Agent, for the benefit of the Banks, in an aggregate principal amount equal to the aggregate Loans to such Borrower instead of or in addition to loan accounts. The Administrative Agent shall endorse on the schedules annexed to each Note the amount of each payment of principal made by such Borrower with respect thereto. The Administrative Agent is irrevocably authorized by each Borrower to endorse the Note of such Borrower and the Administrative Agent's record shall be conclusive absent manifest error; provided, however, that the failure of the Administrative Agent to make, or an error in making, a notation thereon with respect to any Loan shall not limit or otherwise affect the obligations of any Borrower hereunder or under any such Note to any Bank.
SECTION 3. INTEREST AND FEES
SECTION 3.1 Interest Rates. With respect to each Loan made to any Borrower hereunder, such Borrower hereby promises to pay interest on the unpaid principal amount thereof for the period commencing on the Closing Date of such Loan until such Loan is paid in full as follows:
(a) at all times while such Loan or any portion thereof is a Base Rate Loan, at a rate per annum equal to the Base Rate from time to time in effect plus 1.50%.
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(b) at all times while such Loan or any portion thereof is an Offshore Rate Loan, at a rate per annum equal to the Offshore Rate, plus 2.50%.
SECTION 3.2 Default Interest Rate. Notwithstanding the provisions of
Section 3.1, in the event that any Default under Section 10.1.2 or any Event of Default shall occur with respect to any Borrower, such Borrower hereby promises to pay, automatically in the case of a Default under Section 10.1.2 or upon demand therefor by the Administrative Agent for any Event of Default (other than pursuant to Section 10.1.2), interest on the unpaid principal amount of the Loans of such Borrower (and interest thereon to the extent permitted by law) for the period commencing on the date of such Default or demand until such Loans are paid in full or such Default or Event of Default is cured or waived in accordance with Sections 10.2 and 13.1 at a rate per annum equal to the applicable interest rate from time to time in effect (but not less than the applicable interest rate as at such date of demand), plus three percent (3%) per annum.
SECTION 3.3 Interest Payment Dates. Interest on each Loan shall be paid in arrears on each Interest Payment Date. Interest shall also be paid on the date of any prepayment of Loans under Section 4.1 for the portion of the Loans so prepaid and upon payment (including prepayment) in full thereof and during the continuance of any Event of Default, interest shall be paid on demand of the Administrative Agent at the request or with the consent of the Required Banks. After maturity, accrued interest on the Loans shall be payable on demand.
SECTION 3.4 Setting and Notice of Rates. The applicable Offshore Rate shall be determined by the Administrative Agent. Each determination of the applicable Offshore Rate shall be conclusive and binding upon the parties hereto, in the absence of manifest error. If the Administrative Agent is unable to determine such a rate, the provisions of Section 5.3 shall apply. The Administrative Agent shall, upon written request of Conseco (on behalf of the Borrowers) or a Bank, deliver to Conseco (on behalf of the Borrowers) or such Bank a statement showing the computations used by the Administrative Agent in determining any applicable Offshore Rate hereunder.
SECTION 3.5 Computation of Interest and Fees. Interest on Offshore Rate Loans shall be computed for the actual number of days elapsed on the basis of a 360-day year, and interest on Base Rate Loans shall be computed for the actual number of days elapsed on the basis of a 365/366-day year. Each determination of an interest rate by the Administrative Agent shall be conclusive and binding on the Borrowers and the Banks in the absence of manifest error. Notwithstanding anything contained herein to the contrary interest on the Loans shall not exceed the maximum interest permitted by applicable law.
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SECTION 4. PAYMENTS AND PREPAYMENTS
SECTION 4.1 Prepayments.
(a) Mandatory Prepayments. So long as Loans are outstanding, each Borrower shall be obligated to cause all amounts to which such Borrower is entitled under the Plan (other than amounts expressly designated for the payment of taxes relating thereto) to be paid to reduce permanently, on a pro rata basis, such Borrower's obligations under the New Credit Agreements Re D&O Loans. Each Borrower further acknowledges that, so long as Loans are outstanding, any payments made by such Borrower to Conseco on account of any loans made to such Borrower by Conseco to fund the payment of interest on the Existing Loans or the Loans are to be turned over by Conseco and paid to reduce permanently, on a pro rata basis, such Borrower's obligations under the New Credit Agreements Re D&O Loans. So long as Loans are outstanding, each Borrower shall cause all cash dividends declared and paid on the Pledged Shares (as such term is defined in the Pledge Agreement) to be paid in permanent reduction of such Borrower's Loans and other Liabilities. Consistent with, but not in limitation of, the foregoing, each of the Borrowers hereby irrevocably authorizes and directs Conseco to wire transfer to the Administrative Agent any and all such dividends so declared and paid on a quarterly basis so long as the affected Borrower's Liabilities have not been paid in full.
(b) Optional Prepayments. Each Borrower may, at any time or from time to time, upon not less than three (3) Business Day's irrevocable written notice with respect to such Borrower's Loans to the Administrative Agent by 11:00 A.M. (Chicago time), ratably prepay such Loans in whole or in part, in minimum amounts of $10,000 or any integral multiple of $1,000 in excess thereof (unless such Borrower is prepaying the total amount of the Loans then outstanding with respect to such Borrower). Such notice of prepayment shall specify the date, the amount of such prepayment and the Types of Loans to be prepaid. The Administrative Agent will promptly notify each Bank of its receipt of any such notice, and of such Bank's Percentage of such prepayment. If such notice is given by such Borrower, such Borrower shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein, together with accrued interest to each such date on the amount prepaid and any amounts required pursuant to Section 5.5.
SECTION 4.2 Payments by the Borrowers.
(a) All payments to be made by any Borrower hereunder shall be made without set-off, recoupment or counterclaim. Except as otherwise expressly provided herein, all payments by such Borrower shall be made to the Administrative Agent for the account of the Banks at the Administrative Agent's Office, and shall be made in Dollars and in immediately available funds, no later than 12:30 P.M. (Chicago time) on the date specified herein. The Administrative Agent will promptly distribute to each Bank its Percentage (or other applicable share as expressly provided herein) of such payment in like funds as received. Any payment
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received by the Administrative Agent later than 12:30 P.M. (Chicago time) shall be deemed to have been received on the following Business Day and any applicable interest or fee shall continue to accrue.
(b) Subject to the provisions set forth in the definition of Interest Period, whenever any payment is due on a day other than a Business Day, such payment shall be made on the following Business Day, and such extension of time shall in such case be included in the computation of interest or fees, as the case may be.
(c) Unless the Administrative Agent receives notice from the applicable Borrower prior to the date on which any payment is due to the Banks that such Borrower will not make such payment in full as and when required, the Administrative Agent may assume that such Borrower has made such payment in full to the Administrative Agent on such date in immediately available funds and the Administrative Agent may (but shall not be so required), in reliance upon such assumption, distribute to each Bank on such due date an amount equal to the amount then due such Bank. If and to the extent such Borrower has not made such payment in full to the Administrative Agent, each Bank shall repay to the Administrative Agent on demand such amount distributed to such Bank, together with interest thereon at the Federal Funds Rate for each day from the date such amount is distributed to such Bank until the date repaid.
SECTION 4.3 Sharing of Payments.
(a) If any Bank shall obtain any payment or other recovery (whether voluntary, involuntary, by application of offset or otherwise) on account of the Loans (other than pursuant to the terms of Sections 5, 12.1 and 13.2) in excess of its pro rata share (based on its Percentage) of payments and other recoveries obtained by all Banks of the Loans on account of principal of and interest on the Loans, such Bank shall purchase from the other Banks such participation in the Loans as shall be necessary to cause such purchasing Bank to share the excess payment or other recovery ratably with each of them; provided, however, that if all or any portion of the excess payment or other recovery is thereafter recovered from such purchasing Bank, the purchase shall be rescinded and each Bank which has sold a participation to the purchasing Bank shall repay to the purchasing Bank the purchase price to the ratable extent of such recovery together with an amount equal to such selling Bank's ratable share (according to the proportion of (i) the amount of such selling Bank's required repayment to the purchasing Bank to (ii) the total amount so recovered from the purchasing Bank) of any interest or other amount paid or payable by the purchasing Bank in respect of the total amount so recovered.
(b) Each Borrower agrees that any Bank so purchasing a participation from another Bank pursuant to Section 4.3(a) may, to the fullest extent permitted
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by law, exercise all its rights of payment (including pursuant to
Section 4.4) with respect to such participation as fully as if such Bank were the direct creditor of such Borrower in the amount of such participation. If under any applicable bankruptcy, insolvency or other similar law, any Bank receives a secured claim in lieu of a setoff to which this Section 4.3 applies, such Bank shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the Banks entitled under this
Section 4.3(b) to share in the benefits of any recovery of such secured claim.
SECTION 4.4 Setoff. Each Bank shall, during the continuance of any Event of Default under Section 10.1.1, the continuance of an Event of Default under Section 10.1.2, or, with the consent of the Required Banks, during the continuance of any other Event of Default, have the right to appropriate and apply to the payment of the Liabilities owing to it (whether or not then due), and (as security for such Liabilities) each Borrower hereby grants to each Bank a continuing security interest in, any and all balances, credits, deposits, accounts or moneys of such Borrower then or thereafter maintained with such Bank. Any such appropriation and application shall be subject to the provisions of Section 4.3. Each Bank agrees promptly to notify such Borrower and the Administrative Agent after any such setoff and application made by such Bank; provided, however, that the failure to give such notice shall not affect the validity of such setoff and application. The rights of each Bank under this
Section 4.4 are in addition to other rights and remedies (including other rights of setoff under applicable law or otherwise) which such Bank may have.
SECTION 4.5 Net Payments.
(a) All payments by any Borrower of principal of, and interest on, the Loans and all other amounts payable hereunder shall be made free and clear of and without deduction for any present or future income, stamp or other Taxes, fees, duties, withholdings or other charges of any nature whatsoever imposed by any taxing authority, other than Taxes imposed on or measured by any Bank's net income or receipts with respect to payments received hereunder (such non-excluded items being called "Charges"). In the event that any withholding or deduction from any payment to be made by any Borrower hereunder is required in respect of any Charges pursuant to any applicable law, rule or regulation, then such Borrower will, upon notice from the Bank so affected:
(i) pay directly to the relevant authority the full amount required to be so withheld or deducted;
(ii) promptly forward to the Administrative Agent an official receipt or other documentation satisfactory to the Administrative Agent evidencing such payment to such authority;
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(iii) pay to the Administrative Agent for the account of the Banks such additional amount or amounts as are necessary to ensure that the net amount actually received by each Bank will equal the full amount such Bank would have received had no such withholding or deduction been required; and
(iv) if any Bank receives a refund in respect of any Taxes as to which it has been indemnified by any Borrower or with respect to which any Borrower (or any Person acting on behalf of such Borrower) has paid additional amounts pursuant to this Section 4.5, it shall promptly repay such refund (but only to the extent of indemnity payments made, or additional amounts paid, by such Borrower (or such Person acting on behalf of such Borrower) under this Section 4.5 with respect to the Taxes giving rise to such refund), net of all out-of- pocket expenses of such Bank or the Administrative Agent, as the case may be; provided, that such Borrower, upon the request of such Bank or the Administrative Agent, agrees to return such refund (together with any penalties, interest or other charges due in connection therewith to the appropriate taxing authority or other Governmental Authority) to such Bank or the Administrative Agent in the event such Bank or the Administrative Agent is required to pay or to return such refund to the relevant taxing authority or other Governmental Authority.
(b) Each Bank that is organized under the laws of a jurisdiction other than the United States shall, prior to the due date of any payments under the Loans, execute and deliver to the Borrowers, on or about the first scheduled payment date in each calendar year, a United States Internal Revenue Service Form W-BEN, Form W-ECI or Form W- 8IMY, as may be applicable (or any successor form), appropriately completed.
(c) Notwithstanding anything to the contrary in this Section 4, each Borrower shall not be required to compensate any Bank for Charges pursuant to Section 4(a) to the extent such Bank's compliance with
Section 4(b) at the time such Bank becomes a party to this Agreement fails to establish a complete exemption for such Bank from such Charges or to the extent such failure to establish a complete exemption from such Charges thereafter is attributable to the action or inaction of such Bank.
(d) Notwithstanding anything to the contrary contained in this
Section 4 to the extent any notice required by Section 4(a) is given by any Bank to any Borrower more than 90 days after such Bank has knowledge of the occurrence of the event giving rise to such Charges, such Bank shall not be entitled to compensation under such Section 4(a) for any such Charges incurred or accruing prior to the giving of such notice to such Borrower.
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(e) Each Bank agrees that, upon the occurrence of any event giving rise to the operation of Section 4(a) with respect to such Bank it will, if requested by any Borrower, use reasonable efforts (subject to overall policy considerations of such Bank) to take any actions available to it (including the designation of another Lending Office for any Loans affected by such event) with the object of avoiding the consequences of such event; provided that such designation is made on terms that in the reasonable judgment of such Bank cause such Bank and its Lending Office to suffer no economic, legal or regulatory disadvantages.
(f) Without prejudice to the survival of any other agreement of the Borrowers hereunder or any other document, the agreements of the Borrowers contained in this Section 4.5 shall survive satisfaction of the Liabilities and termination of this Agreement.
SECTION 5. CHANGES IN CIRCUMSTANCES
SECTION 5.1 Increased Costs. If (a) Regulation D, or (b) after the Closing Date, the adoption of any applicable law, rule or regulation, or any change therein, or any change in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or any Lending Office of such Bank) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency,
(i) shall subject any Bank (or any Lending Office of such Bank) to any tax, duty or other charge or shall change the basis of taxation of payments to any Bank of the principal of, or interest on, any other amounts due under this Agreement in respect of its Loans or its obligation to make Loans (except for changes in the rate of Tax, other than Taxes covered by Section 4.5, measured on the overall gross or net income of such Bank or its Lending Office); or
(ii) shall impose, modify or deem applicable any reserve (including, without limitation, any reserve imposed by the FRB, but excluding any reserve included in the determination of interest rates pursuant to Section 3), special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Bank (or any Lending Office of such Bank); or
(iii) shall impose on any Bank (or its Lending Office) any other condition affecting its Loans;
and the result of any of the foregoing is to increase the cost to (or in the case of Regulation D referred to above, to impose a cost on) such Bank (or any Lending Office of such Bank) of making or maintaining Offshore Rate Loans to reduce the amount of any sum received or receivable by such Bank (or the Lending Office of such Bank) under this Agreement or under its Loans with respect thereto, then within thirty (30) days after demand by such Bank (which
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demand shall be accompanied by a statement setting forth in reasonable detail the basis of such demand and the calculation of such additional amount), the relevant Borrowers shall pay directly to such Bank such additional amount or amounts as will compensate such Bank for such increased cost or such reduction. Each Bank shall promptly, but in no event more than ninety (90) days after it has knowledge thereof, notify such Borrower of any event occurring after the date hereof, which will entitle such Bank to compensation pursuant to this
Section 5.1. In the event such notice is not given within the time frame specified in the immediately preceding sentence, such Bank shall not be entitled to compensation under this Section 5.1 for any such additional costs or charges incurred or accruing prior to the giving of such notice to such Borrower.
SECTION 5.2 Change in Rate of Return. If any change in, or the introduction, adoption, effectiveness, interpretation, reinterpretation or phase-in of, any law or regulation, directive, guideline, decision or request (whether or not having the force of law) of any court, central bank, regulator or other Governmental Authority affects or would affect the amount of capital required or expected to be maintained by any Bank or any Person controlling such Bank, and such Bank reasonably determines that the rate of return on its or such controlling Person's capital as a consequence of the Loans made by such Bank (or any participating interest therein held by such Bank) is reduced to a level below that which such Bank or such controlling Person could have achieved but for the occurrence of any such circumstance, then, in any such case the relevant Borrowers shall, within thirty (30) days after written demand by such Bank to such Borrowers, pay directly to such Bank additional amounts sufficient to compensate such Bank or such controlling Person for such reduction in rate of return. A statement of such Bank as to any such additional amount or amounts (including calculations thereof in reasonable detail) shall, in the absence of manifest error, be conclusive and binding on such Borrowers. In determining such amount, such Bank may use any method of averaging and attribution that it shall deem reasonably applicable. Each Bank shall promptly, but in no event more than ninety (90) days after it has knowledge thereof, notify such Borrowers of any event occurring after the Closing Date, which will entitle such Bank to compensation pursuant to this Section 5.2. In the event such notice is not given within the timeframe specified in the immediately preceding sentence, such Bank shall not be entitled to compensation under this Section 5.2 for any such additional costs or charges incurred or accruing prior to the giving of such notice to such Borrower.
SECTION 5.3 Basis for Determining Interest Rate Inadequate or Unfair. If with respect to any Interest Period:
(a) deposits in Dollars (in the applicable amounts) are not being offered to the Administrative Agent in the offshore dollar interbank market for such Interest Period, or the Administrative Agent otherwise determines (which determination shall be conclusive and binding on all parties) that by reason of circumstances affecting the offshore dollar interbank market adequate and reasonable means do not exist for ascertaining the applicable Offshore Rate; or
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(b) any Bank advises the Administrative Agent that the Offshore Rate as determined by the Administrative Agent, will not adequately and fairly reflect the cost to such Bank of maintaining or funding such Loan for such Interest Period, or that the making or funding of Offshore Rate Loans has become impracticable as a result of an event occurring after the Closing Date which in the opinion of such Bank materially changes such Loans;
then, so long as such circumstances shall continue:
(i) the Administrative Agent shall promptly notify Conseco (on behalf of the Borrowers) and the Banks thereof,
(ii) no Bank shall be under any obligation to make or continue or convert into Offshore Rate Loans so affected, and
(iii) on the last day of the then current Interest Period for Offshore Rate Loans so affected, such Offshore Rate Loans shall, unless then repaid in full, automatically convert to Base Rate Loans.
SECTION 5.4 Changes in Law Rendering Certain Loans Unlawful. In the event that any change in (including the adoption of any new) applicable laws or regulations, or any change in the interpretation of applicable laws or regulations by any governmental or other regulatory body charged with the administration thereof, should make it unlawful for a Bank or the Lending Office of such Bank ("Affected Bank") to make, maintain or fund Offshore Rate Loans, then (a) the Affected Bank shall promptly notify each of the other parties hereto, (b) the obligation of all Banks to make or continue or convert into Offshore Rate Loans or make Offshore Rate Loans made unlawful for the Affected Bank shall, upon the effectiveness of such event, be suspended for the duration of such unlawfulness, and (c) on the last day of the current Interest Period for Offshore Rate Loans (or, in any event, if the Affected Bank so requests, on such earlier date as may be required by the relevant law, regulation or interpretation), the Offshore Rate Loans shall, unless then repaid in full, automatically convert to Base Rate Loans.
SECTION 5.5 Funding Losses. Each Borrower hereby agrees that upon demand by any Bank to the Administrative Agent (which demand shall be made within three (3) Business Days after receipt of notice of any payment or proposed payment by such Borrower under this Agreement giving rise to indemnification under this Section 5.5 and shall be accompanied by a statement setting forth in reasonable detail using the Funding Loss Formula set forth in Exhibit I) such Borrower will indemnify such Bank against any loss or expense which such Bank may sustain or incur (including, without limitation, any loss or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Bank to fund or maintain Offshore Rate Loans), as reasonably determined by such Bank, as a result of (a) any payment or prepayment or conversion of any Offshore Rate Loans of such Bank on a date other
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than the last day of an Interest Period for such Offshore Rate Loan, or (b) any failure of such Borrower to borrow Offshore Rate Loans on the date of any Borrowing set forth in any Notice of Borrowing or (c) any failure of such Borrower to convert or continue any portion of the Loans as Offshore Rate Loans on a date specified therefor in the Notice of Continuation/Conversion delivered pursuant to this Agreement. For this purpose, all notices to the Administrative Agent pursuant to this Agreement shall be deemed to be irrevocable.
SECTION 5.6 Right of Banks to Fund Through Other Offices. Each Bank may, if it so elects, fulfill its commitment as to any Offshore Rate Loans by causing any of its Lending Offices to make such Offshore Rate Loans; provided, that in such event for the purposes of this Agreement, such Loan shall be deemed to have been made by such Bank and the obligation of the Borrower to repay such Offshore Rate Loan shall nevertheless be to such Bank and shall be deemed held by it, to the extent of such Offshore Rate Loan, for the account of such branch or affiliate.
SECTION 5.7 Discretion of Banks as to Manner of Funding.
Notwithstanding any provision of this Agreement to the contrary, each Bank shall be entitled to fund and maintain its funding of all or any part of its Loans in any manner it sees fit, it being understood, however, that for the purposes of this Agreement all determinations hereunder shall be made as if such Bank had actually funded and maintained each Offshore Rate Loan during each Interest Period for such Loan through the purchase of deposits having a maturity corresponding to such Interest Period and bearing an interest rate equal to the Offshore Rate, as the case may be, for such Interest Period.
SECTION 5.8 Replacement of Banks. If any Bank shall (i) become affected by any of the changes or events described in Section 4.5, 5.1, 5.2, 5.3(b), or 5.4 above and such Bank shall petition the relevant Borrowers for any increased cost or amounts thereunder or (ii) become insolvent and its assets become subject to a receiver, liquidator, trustee, custodian or such other Person having similar powers (any such Bank, in either instance, being hereinafter referred to as a "Replaced Bank"), then in each such case, Conseco (on behalf of the Borrowers) may, upon at least five (5) Business Days' notice to the Administrative Agent and such Replaced Bank, designate a replacement bank (a "Replacement Bank") acceptable to the Administrative Agent in its reasonable discretion, to which such Replaced Bank shall, subject to its receipt (unless a later date for the remittance thereof shall be agreed upon by the relevant Borrowers and the Replaced Bank) of all amounts owed to such Replaced Bank under
Section 4.5, 5.1, 5.2, 5.3(b), or 5.4 above, assign all (but not less than all) of its rights, obligations and Loans hereunder and execute an Assignment Agreement with such Replacement Bank; provided, that all Liabilities (except Liabilities which by the terms hereof survive the payment in full of the Loans and termination of this Agreement) due and payable to the Replaced Bank shall be paid in full as of the date of such assignment. Upon any assignment by any Bank pursuant to this Section 5.8 becoming effective, the Replacement Bank shall thereupon be deemed to be a "Bank" for all purposes of this Agreement and such Replaced Bank shall thereupon cease to be a "Bank" for all purposes of this
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Agreement and shall have no further rights or obligations hereunder (other than pursuant to Sections 4.5, 5.1, 5.2, 5.5, 11.5 and 13.4, and Sections 7.1 and 7.2 of the Conseco Guaranty while such Replaced Bank was a Bank). Notwithstanding any Replaced Bank's failure or refusal to assign its rights, obligations and Loans under this Section 5.8, the Replaced Bank shall cease to be a "Bank" for all purposes of this Agreement and the Replacement Bank substituted therefor upon payment to the Replaced Bank by the Replacement Bank of all amounts set forth in this Section 5.8 without any further action of the Replaced Bank.
SECTION 5.9 Conclusiveness of Statements; Survival of Provisions. Determinations and statements of the Administrative Agent or any Bank pursuant to Sections 5.1, 5.2, 5.3, 5.4 and Section 5.5 shall be conclusive absent demonstrable error. The provisions of Sections 5.1, 5.2, 5.5 and this Section 5.9 shall survive termination of this Agreement.
SECTION 5.10 Avoidance of Certain Costs. The Administrative Agent and each Bank agrees that, notwithstanding the provisions of Sections 5.1-5.4 hereof to the contrary, the Administrative Agent and each Bank shall take reasonable actions available to it (including designation of a different Lending Office), consistent with legal and regulatory restrictions, that will avoid the need to take the steps described in any such Section, which will not, in the reasonable judgment of the Administrative Agent or such Bank, be disadvantageous to the Administrative Agent or such Bank.
SECTION 6. COLLATERAL AND OTHER SECURITY
SECTION 6.1 Collateral Documents. Concurrently with or prior to the Closing Date:
(a) Pledge Agreement (Conseco Stock). The Borrowers shall execute and deliver to the Administrative Agent, for the benefit of the Banks, the Pledge Agreement, whereby each of the Borrowers shall pledge all of the issued and outstanding common stock of Conseco owned by each Borrower and acquired with the proceeds of the Existing Loans and shall direct the administrative agent under the Existing Credit Agreement to deliver to the Administrative Agent all stock certificates pledged pursuant thereto and all related stock powers.
(b) Conseco Guaranty. Conseco shall execute and deliver to the
Administrative Agent the Conseco Guaranty, covering the payment and performance of all of the Liabilities.
(c) CIHC Guaranty. CIHC shall execute and deliver to the Administrative Agent the CIHC Guaranty, covering the payment and performance of all the Liabilities.
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(d) Reaffirmation of Existing Conseco Guaranty. Conseco shall execute and deliver to the Administrative Agent the Reaffirmation of Existing Conseco Guaranty.
(e) Reaffirmation of Existing CIHC Guaranty. CIHC shall execute and deliver to the Administrative Agent the Reaffirmation of Existing CIHC Guaranty.
(f) Amended and Restated Cash Collateral Agreement. An Amended and Restated Cash Collateral Agreement shall be executed and delivered to the Administrative Agent confirming that the obligations of Conseco under the Conseco Guaranty shall be secured thereby.
(g) Subordinated Pledge Agreement Re 1998 Shares. A Subordinated Pledge Agreement Re 1998 Shares, executed by the pledgors thereunder, and acknowledged by the administrative agent under the New Credit Agreement Re 1998 Loans, shall be delivered to BofA as administrative or collateral agent.
(h) Subordinated Pledge Agreement Re 1999 Shares. A Subordinated Pledge Agreement Re 1999 Shares, executed by the pledgors thereunder, and acknowledged by the administrative agent under the New Credit Agreement Re 1999 D & O Loans, shall be executed and delivered to BofA as administrative or collateral agent.
SECTION 6.2 Pledge of Additional Collateral. On or before December 31, 2000 (or such later date as permitted to any AC Pledge Borrowers to pledge Additional Collateral pursuant to the provisions of the Plan), the AC Pledge Borrowers, if any, shall grant to the AC Collateral Agent, for the benefit of the banks under New Credit Agreements Re D&O Loans, a first, perfected security interest in the Additional Collateral. Specifically, on or before such date, the AC Collateral Agent shall have received: (i) the AC Pledge Agreement, (ii) all stock certificates pledged pursuant thereto, (iii) appropriate stock powers for such shares endorsed in blank, (iv) appropriate evidence of the perfection and first priority of such collateral agent's Lien, including UCC financing statements and/or registration or acknowledgments of the Lien of such collateral agent on any applicable brokerage account of each AC Pledge Borrower, and (v) a certificate from Conseco, in form reasonably satisfactory to the Administrative Agent, signed by a Responsible Officer, identifying the AC Pledge Borrowers by name and describing the Additional Collateral to be pledged by each such Borrower. Consistent with (but not in limitation of) the foregoing and the other provisions of this Agreement and the other Loan Documents, (a) the delivery of any Additional Collateral to the AC Collateral Agent, to be held and disposed of pursuant to the provisions of the AC Pledge Agreement, shall constitute a collateral pledge of such property and shall not constitute a paydown on the Loans or otherwise entitle the AC Pledge Borrower to any reduction in the amount of such Borrower's Loans unless and until the AC Collateral Agent disposes of such property and applies the proceeds thereof as provided
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pursuant to the provisions of the AC Pledge Agreement, (b) none of the AC Collateral Agent, the Administrative Agent, and the Banks shall have or otherwise incur any liability in favor of the AC Pledge Borrower, Conseco, or any other Person with respect to the AC Pledge Agreement and/or the Additional Collateral except solely to the extent expressly set forth in the AC Pledge Agreement, and (c) consistent with (but not in limitation of) the preceding clause (b), the AC Pledge Borrowers and Conseco shall bear (and thus reimburse the AC Collateral Agent promptly for) any and all reasonable costs and expenses of the AC Collateral Agent's accepting, maintaining, and realizing on the pledge of the Additional Collateral. If there are to be no AC Pledge Borrowers on or before December 31, 2000, Conseco shall provide the Administrative Agent with a certificate to such effect, signed by a Responsible Officer. If on or before such date, there are no AC Pledge Borrowers but, pursuant to the provisions of the Plan, such deadline has been extended as to various Borrowers, such certificate shall identify such Borrowers and the extended deadlines as to such Borrowers.
SECTION 6.3 Application of Proceeds from Collateral. As to each Borrower, all proceeds received by the Administrative Agent from the sale or disposition of any of the Direct Collateral furnished by such Borrower pursuant to this Agreement or Indirect Collateral furnished by Conseco pursuant to the Conseco Guaranty shall be applied by the Administrative Agent in the following order after receipt thereof:
First: to the payment of all of the reasonable costs and expenses of the Administrative Agent in connection with (a) the administration, sale or disposition of such Direct Collateral or Indirect Collateral, as the case may be, and (b) the administration and enforcement of this Agreement and the other Loan Documents, to the extent that such costs and expenses shall not have been reimbursed to the Administrative Agent and relate to such Borrower's Loans;
Second: to the payment in full of all accrued and unpaid interest on the Loans of such Borrower, then to the payment in full of all unpaid principal of the Loans of such Borrower, and then to any remaining Liabilities of such Borrower;
Third: the balance, if any, of such proceeds shall be paid to such Borrower, to such Borrower's heirs and assigns, or as a court of competent jurisdiction may direct.
Notwithstanding the foregoing, (w) the proceeds of CCPA Collateral shall be applied as set forth in the Amended and Restated Cash Collateral Agreement, (x) the proceeds of the Additional Collateral shall be applied as set forth in the AC Pledge Agreement, (y) the proceeds of any collateral pledged pursuant to the Subordinated Pledge Agreement Re 1998 Shares shall be
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applied as set forth therein, and (z) the proceeds of the Subordinated Pledge Agreement Re 1999 Shares shall be applied as set forth therein.
SECTION 6.4 Further Assurances. Each Borrower agrees that upon request of the Administrative Agent (a) such Borrower shall promptly deliver or cause to be delivered to the Administrative Agent, in due form for transfer, all chattel paper, instruments, securities and documents of title, if any, at any time representing all or any of the Direct Collateral, and (b) such Borrower shall forthwith execute and deliver or cause to be executed and delivered to the Administrative Agent, in due form for filing or recording (and pay the cost of filing or recording the same in all public offices deemed necessary by the Administrative Agent), such further assignment agreements, security agreements, pledge agreements, instruments, consents, waivers, financing statements, stock or bond powers, searches, releases, and other documents, and do such other acts and things, all as the Administrative Agent may from time to time reasonably request to establish and maintain to the satisfaction of the Administrative Agent a valid perfected Lien on all Direct Collateral (free of all other Liens except those permitted pursuant to Section 7.4 hereof) to secure payment of the Liabilities.
SECTION 7. REPRESENTATIONS AND WARRANTIES OF BORROWERS
To induce the Administrative Agent and the Banks to enter into this Agreement and to make the Loans hereunder, each Borrower represents and warrants to the Administrative Agent and to each of the Banks that:
SECTION 7.1 No Conflict. The execution, delivery and performance by such Borrower of this Agreement and the other Loan Documents to which such Borrower is a party does not and will not (a) contravene or conflict with any provision of any law, statute, rule or regulation applicable to such Borrower,
(b) contravene or conflict with, result in any breach of, or constitute a default under, any material agreement or instrument binding on such Borrower (including, without limitation, any writ, judgment, injunction or other similar court order) or (c) result in the creation or imposition of or the obligation to create or impose any Lien upon any of the property or assets of such Borrower (except for (i) the Lien of the Administrative Agent pursuant to the Pledge Agreement, (ii) the Liens under any Subordinated Pledge Agreements in favor of the administrative agent under any Other D&O Agreement, and (iii) the Lien of the AC Collateral Agent under the AC Pledge Agreement).
SECTION 7.2 Validity. This Agreement and the other Loan Documents to which such Borrower is a party constitute or upon execution and delivery will constitute the legal, valid and binding obligation of such Borrower enforceable in accordance with its terms subject to (a) applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting creditors' rights generally and (b) general equitable principles, including without limitation,
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concepts of good faith and fair dealing, materiality, fraudulent transfer and reasonableness (regardless of whether considered in a proceeding in equity or at law).
SECTION 7.3 Litigation and Contingent Obligations. No Material Litigation, other than the Existing Litigation, is pending as to such Borrower or, to the best of such Borrower's knowledge, threatened as to such Borrower, and such Borrower has no material Contingent Obligations.
SECTION 7.4 Liens. None of the Direct Collateral pledged by such Borrower is subject to any Lien (except for (a) the Lien of the Administrative Agent pursuant to the Pledge Agreement, (b) the Liens under any subordinated pledge agreement in favor of the administrative agent under any Other D&O Agreement, and (c) the Lien of the AC Collateral Agent under the AC Pledge Agreement). Such Borrower shall not be able or entitled to grant any Liens in favor of any Person in and to the Plan Rights.
SECTION 7.5 Taxes. Such Borrower has filed all material federal and state tax returns and related reports required by law to have been filed by such Borrower and has paid Taxes thereby shown to be owing, except any such Taxes which are being diligently contested in good faith by appropriate proceedings and Taxes with respect to which the failure to pay could not reasonably be expected to have a Material Adverse Effect. There is no ongoing audit or, to the best of such Borrower's knowledge, other governmental investigation of the tax liability of such Borrower and there is no unresolved claim by a taxing authority concerning such Borrower's tax liability, for any period for which returns have been filed or were due.
SECTION 7.6 Accuracy of Information. All factual information furnished as of the Closing Date by or on behalf of such Borrower in writing to the Administrative Agent or any Bank for purposes of or in connection with this Agreement or any transaction contemplated hereby is, and all other such factual information furnished after the Closing Date by or on behalf of such Borrower to the Administrative Agent or any Bank will be, true and accurate in every material respect on the date as of which such information is dated or certified and, except as such information speaks solely as of a particular date, such information is not, or shall not be, as the case may be, incomplete by omitting to state any material fact necessary to make such information not misleading.
SECTION 7.7 Proceeds. The proceeds of the Loans will be used solely to refinance the loans of such Borrower under the Existing Credit Agreement.
SECTION 7.8 Securities Laws. Neither such Borrower nor, to the best of such Borrower's knowledge, any of its Affiliates, nor anyone acting on behalf of any such Person, has directly or indirectly offered any interest in the Loans or any other Liabilities for sale to, or solicited any offer to acquire any such interest from, or has sold any such interest to, any Person
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that would subject the making of the Loans or any other Liabilities to registration under the Securities Act of 1933, as amended.
SECTION 7.9 No Default. Such Borrower is not in default under any agreement or instrument to which such Borrower is a party or by which any of its properties or assets is bound or affected, which default could reasonably be expected to have a Material Adverse Effect.
SECTION 7.10 Organization, etc. Each Borrower (other than any Borrower which is an individual) is a corporation, partnership or irrevocable trust duly organized, validly existing and, with respect to any corporation or partnership, in good standing under the laws of the state of its incorporation or formation and each corporate or partnership Borrower is duly qualified to transact business as a foreign corporation or partnership authorized to do business in each jurisdiction where the nature of its business makes such qualification necessary and failure to so qualify could reasonably be expected to have a Material Adverse Effect.
SECTION 7.11 Authorization. Each Borrower (other than any Borrower which is an individual) (a) has the power to execute, deliver and perform this Agreement and the other Loan Documents to which it is a party, and (b) has taken all necessary action to authorize the execution, delivery and performance by it of this Agreement and the other Loan Documents to which it is a party.
SECTION 7.12 Margin Regulations.
(a) None of the obligations of such Borrower to Conseco is or will be secured, directly or indirectly, by Margin Stock;
(b) Neither Conseco nor any third party acting on behalf of Conseco has taken or will take possession of such Borrower's Margin Stock to secure, directly or indirectly, any of the obligations of such Borrower to Conseco;
(c) Conseco does not and will not have any right to prohibit such Borrower from selling, pledging, encumbering or otherwise disposing of any Margin Stock owned by such Borrower so long as the Conseco Guaranty is in effect or any of the obligations of such Borrower or the obligations of Conseco under the this Agreement, the Conseco Guaranty or any of the Loan Documents remain outstanding;
(d) Such Borrower has not granted and will not grant Conseco or any third party acting on behalf of Conseco the right to accelerate repayment of any of the obligations under this Agreement of such Borrower if any of the Margin Stock owned by such Borrower is sold by such Borrower or otherwise; and
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(e) There is no agreement or other arrangement between such Borrower and Conseco or any third party acting on behalf of Conseco (and no such agreement or arrangement shall be entered into so long as this Agreement or the Conseco Guaranty is in effect or any of the obligations of such Borrower or the obligations of Conseco under the Conseco Guaranty or any of the Loan Documents remain outstanding) under which the Margin Stock of such Borrower would be made more readily available as security to Conseco than to other creditors of such Borrower.
SECTION 7.13 Principal Residence. The address set forth on each Borrower's signature page hereof correctly sets forth such Borrower's place of principal residence. Each Borrower shall promptly (but in no event later than thirty days after changing such principal place of residence) inform the Administrative Agent of any and each change in such Borrower's principal place of residence and provide the Administrative Agent with the Borrower's new, correct address.
SECTION 7.14 No Default or Event of Default. No Default or Event of Default as to such Borrower shall exist on the date of the execution and delivery of this Agreement or on the Closing Date.
SECTION 8. COVENANTS OF BORROWERS
Each Borrower agrees that, on and after the Closing Date and for so long thereafter as any of the Liabilities remain unpaid or outstanding (except Liabilities which by the terms hereof survive the payment in full of the Loans and termination of this Agreement), such Borrower will:
SECTION 8.1 Reports, Certificates and Other Information. Unless otherwise provided herein, furnish or cause to be furnished to the Administrative Agent and each Bank:
8.1.1 Borrower Financials. Upon the request of the Administrative Agent, a financial statement of such Borrower in a form acceptable to the Required Banks;
8.1.2 Tax Returns and Reports. If requested by the Administrative Agent or the Required Banks, copies of all federal, state, local and foreign Tax Returns and Reports filed by such Borrower;
8.1.3 Notice of Default and Litigation. Promptly upon learning of the occurrence of any of the following, written notice thereof, describing the same and the steps being taken by such Borrower with respect thereto:
(a) the occurrence of a Default;
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(b) the institution of any Material Litigation or the occurrence of any Material Litigation Development as to such Borrower;
(c) the commencement of any dispute which might reasonably be expected to lead to the material modification, transfer, revocation, suspension or termination of any Loan Document; or
(d) any Material Adverse Change as to such Borrower;
8.1.4 Collateral Ratio. Upon the request of the Administrative Agent or the Required Banks, cause Conseco (on behalf of the Borrowers) to provide to the Administrative Agent, for the benefit of the Banks, a computation of the Collateral Ratio certified by its chief financial officer or a senior vice president with responsibility for or knowledge of financial matters of Conseco. Nothing contained in this Section 8.1.4 shall be deemed to limit in any way whatsoever the Administrative Agent's right, on behalf of the Banks, to calculate the Loan Value of Direct Collateral or the Loan Value of Indirect Collateral or the Collateral Ratio at any time it deems appropriate or necessary. If after making such calculation, the Administrative Agent or the Required Banks determine that the amount of such Collateral Ratio is different from the Collateral Ratio most recently provided by Conseco or the Administrative Agent, as the case may be, the Administrative Agent shall deliver written notice of such amount to Conseco (on behalf of the Borrowers); provided that the Administrative Agent's failure to deliver such notice shall not prejudice the rights of the Administrative Agent and the Banks or the obligations of the Borrowers under this Agreement or the other Loan Documents; and
8.1.5 Other Information. From time to time, such other information concerning such Borrower as the Administrative Agent or a Bank may reasonably request.
SECTION 8.2 Taxes and Liabilities. Pay when due all of his, her, or its Taxes and other material liabilities, except as contested in good faith and by appropriate proceedings and except Taxes with respect to which the failure to pay could not reasonably be expected to have a Material Adverse Effect.
SECTION 8.3 Compliance with Laws. Comply with all federal, state and local laws, rules and regulations related to such Borrower, except where such failure to comply could not reasonably be expected to have a Material Adverse Effect.
SECTION 8.4 Other Agreements. Not enter into any agreement containing any provision which (a) would be violated or breached by the performance of its obligations
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hereunder or under any instrument or document delivered or to be delivered by such Borrower hereunder or in connection herewith, (b) prohibits or restricts the ability of such Borrower to amend or otherwise modify this Agreement, any other Loan Document or any other document executed in connection herewith or (c) constitutes an agreement to a limitation or restriction of the type described in clauses (a) and (b) with respect to any other Indebtedness.
SECTION 9. CONDITIONS AND EFFECTIVENESS OF THIS AGREEMENT
The obligation of the Banks to make the Loans and the effectiveness of this Agreement is subject to the performance by a Borrower of all of the obligations under this Agreement and to the satisfaction of the following conditions precedent:
SECTION 9.1 Receipt of Documents. Prior to or concurrent with the making of the Loans, the Administrative Agent shall have received all of the following, each, except to the extent otherwise specified below, duly executed by such Borrower dated the Closing Date (or such earlier date as shall be satisfactory to the Administrative Agent), in form and substance satisfactory to the Administrative Agent, each in sufficient number of signed counterparts or copies to provide one for each Bank and the Administrative Agent:
9.1.1 If requested by the Administrative Agent, an appropriately completed Note from each Borrower, payable to the order of the Administrative Agent evidencing the aggregate Loans to such Borrower;
9.1.2 The Pledge Agreement;
9.1.3 The Administrative Agent's receipt of all common stock of Conseco owned by each Borrower which have been purchased with proceeds of the Existing Loans or any of the foregoing relating thereto as required by the Pledge Agreement, together with appropriate stock powers for such shares endorsed in blank and/or other appropriate evidence of the perfection of the Administrative Agent's Lien, including UCC financing statements and/or registrations or acknowledgments of the Lien of the Administrative Agent on any applicable brokerage account of each Borrower;
9.1.4 The Conseco Guaranty, together with the documents provided in Article V thereof;
9.1.5 The CIHC Guaranty;
9.1.6 The Reaffirmation of Existing Conseco Guaranty;
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9.1.7 The Reaffirmation of Existing CIHC Guaranty;
9.1.8 The Subordinated Pledge Agreement Re 1998 Shares, executed by the pledgors thereunder, and acknowledged by the administrative agent under the New Credit Agreement Re 1998 Loans.
9.1.9 The Subordinated Pledge Agreement Re 1999 Shares, executed by the pledgors thereunder, and acknowledged by the administrative agent under the New Credit Agreement Re 1999 D&O Loans;
9.1.10 The Amended and Restated Cash Collateral Agreement;
9.1.11 The Borrower Acknowledgment and Release executed by each Borrower.
9.1.12 An opinion of David K. Herzog, counsel of Conseco and CIHC, substantially in the form of Exhibit F-1, and addressing such other legal matters as the Administrative Agent may reasonably require;
9.1.13 An opinion of Weil, Gotshal & Manges LLP, outside counsel to Conseco and CIHC, substantially in the form of Exhibit F-2, and addressing such other legal matters as the Administrative Agent may reasonably require;
9.1.14 Certified copies of each material consent, license and approval required in connection with the execution, delivery, performance, validity and enforceability of this Agreement and the other Loan Documents; such consents, licenses and approvals shall be in full force and effect, shall be reasonably satisfactory in form and substance to the Administrative Agent and shall be all of the material consents required to be obtained or made on or before the consummation of the financing contemplated by this Agreement;
9.1.15 A certificate of Conseco in the form attached as Exhibit O hereto;
9.1.16 Schedules and Exhibits satisfactory to the Administrative Agent and the Banks;
9.1.17 Evidence satisfactory to the Administrative Agent of compliance by each Borrower and Conseco with Regulation U in connection with the financing transactions contemplated hereby;
9.1.18 Evidence of each filing, registration or recordation (and payment of any necessary fee, Tax or expense relating thereto) with respect to each document (including,
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without limitation, any UCC financing statement) required by the Loan Documents or under law or requested by the Administrative Agent to be filed, registered or recorded in order to create, in favor of the Administrative Agent, for the benefit of the Banks a valid perfected Lien on all Direct Collateral (free of all other Liens other than the junior and subordinate Liens to be granted to the administrative agents under the Other D&O Agreements) other than UCC financing statements to be filed in connection with the Loan Documents which will be delivered for filing on the Closing Date;
9.1.19 Evidence satisfactory to the Administrative Agent that each of the Loan Documents has been duly executed and delivered and is in full force and effect without modification;
9.1.20 Certified copies of any indemnification or similar agreements or arrangements between any Borrower and Conseco relating to the reimbursement by such Borrower of any payments made by Conseco under the Conseco Guaranty; and
9.1.21 A Federal Reserve Form U-1 for the benefit of the Banks, duly executed by each Borrower, the statements made in which shall be such, in the opinion of the Administrative Agent, as to permit the transactions contemplated by this Agreement in accordance with Regulation U.
SECTION 9.2 Additional Conditions. The obligation of the Banks to make Loans to any Borrower hereunder is subject to the following further conditions precedent:
9.2.1 The Administrative Agent shall have received a duly executed Notice of Borrowing;
9.2.2 No Default exists or will result from the making of the Loans, and no Event of Default (as defined under the Revolving Credit Agreement) has occurred and is continuing; provided, however, that a Default relating solely to another Borrower will not relieve the Banks of their obligations to make Loans to other Borrowers subject to the satisfaction of the other provisions of this Agreement.
9.2.3 The representations and warranties of and as to such Borrower contained in Section 7, and 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 Closing 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;
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9.2.4 No Material Litigation exists other than the Existing Litigation;
9.2.5 No Material Adverse Change has occurred with respect to Conseco or CIHC since September 22, 2000;
9.2.6 The Collateral Ratio for such Borrower, after giving effect to such Loan, is at least 2.0 to 1.0.
9.2.7 Conseco shall have paid all accrued and unpaid fees, costs and expenses, including reasonable attorneys' fees and costs, with respect to all credit arrangements with the Administrative Agent.
SECTION 10. EVENTS OF DEFAULT AND THEIR EFFECT
SECTION 10.1 Events of Default. An "Event of Default" shall exist with respect to a Borrower if any one or more of the following events (herein collectively called "Events of Default") shall occur and be continuing:
10.1.1 Non-Payment of Loans, etc.
(a) Default by such Borrower in the payment or prepayment when due of any principal on the Loans made to such Borrower, or
(b) Default by such Borrower in the payment within five (5) days of when due of any interest on the Loans made to such Borrower or any other amount owing by such Borrower pursuant to this Agreement.
10.1.2 Bankruptcy, Insolvency, etc. Any CCPA Pledgor (not consisting of Conseco or any Significant Subsidiary) becomes insolvent or generally fails to pay, or admits in writing its inability to pay, debts as they become due; or such Borrower or any such CCPA Pledgor applies for, consents to, or acquiesces in the appointment of, a trustee, receiver or other custodian for such Borrower, such CCPA Pledgor or any property thereof, or makes a general assignment for the benefit of creditors; or, in the absence of such application, consent or acquiescence, a trustee, receiver or other custodian is appointed for such Borrower or such CCPA Pledgor or for a substantial part of the property of such Borrower or such CCPA Pledgor and is not discharged within sixty (60) days; or any bankruptcy, reorganization, debt arrangement, or other case or proceeding under any bankruptcy or similar insolvency law is commenced in respect of such Borrower or such CCPA Pledgor and if such case or proceeding is not commenced by such Borrower or such CCPA Pledgor, it is consented to or
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acquiesced in by such Borrower or such CCPA Pledgor or remains for sixty (60) days undismissed.
10.1.3 Defaults Under this Agreement. Failure by such Borrower to comply with or perform any of the covenants or agreements of such Borrower set forth in this Agreement or the other Loan Documents applicable to such Borrower (other than those constituting an Event of Default under any of the other provisions of this Section 10) and continuance of such failure for thirty (30) days with respect to such Borrower, in each case after notice thereof to such Borrower, from the Administrative Agent.
10.1.4 Representations and Warranties. Any representation or warranty made by such Borrower or by any CCPA Pledgor (other than a CCPA Pledgor consisting of Conseco or any Significant Subsidiary) in any of the Loan Documents is false or misleading in any material respect as of the date hereof or as of the date hereafter certified, or any schedule, certificate, financial statement, report, notice, or other writing furnished by such Borrower or by such CCPA Pledgor to the Administrative Agent or any Bank is false or misleading in any material respect on the date as of which the facts therein set forth are stated or certified.
10.1.5 Collateral Ratio. The Collateral Ratio for such Borrower is less than 1.5 to 1.0.
10.1.6 Defaults under the Conseco Guaranty. An event of default shall have occurred and be continuing under the Conseco Guaranty.
10.1.7 Defaults Under Any of the Other D&O Agreements. An Event of Default or Termination Event in respect of Conseco, any of its Subsidiaries or such Borrower shall have occurred and be continuing under any of the Other D&O Agreements.
10.1.8 CCPA Pledgors. (i) Any CCPA Pledgor (other than Conseco or any Significant Subsidiary) (A) fails to make any payment in respect of any Indebtedness or Contingent Obligation (other than in respect of Hedging Obligations), having an aggregate principal amount (including undrawn committed or available amounts and including amounts owing to all creditor under any combined or syndicated credit arrangement) of more than $1,000,000, when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) and such failure continues after the applicable grace or notice period, if any, specified in the relevant document on the date of such failure; or (B) fails to perform or observe any other condition or covenant, or any other event shall occur or condition exist (other than an alleged breach which such CCPA Pledgor is contesting in good faith and which does not relate to a payment default
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or a breach of a financial convent), under any agreement or instrument relating to any such Indebtedness or Contingent Obligation, and such failure continues after the applicable grace or notice period, if any, specified in the relevant document on the date of such failure if the effect of such failure, event or condition is to cause, or to permit the holder or holder of such Indebtedness or beneficiary or beneficiaries of such Indebtedness (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause such Indebtedness to be declared to be due and payable prior to its stated maturity, or such Contingent Obligation to become payable or cash collateral in respect thereof to be demanded; or (ii) there occurs under any Hedging Obligation an early termination date (as defined in the agreement evidencing such Hedging Obligation) resulting from (A) any event of default under such Hedging Obligation as to which any such CCPA Pledgor is the Defaulting Party (as defined in the agreement evidencing such Hedging Obligation) or (B) any termination event (as so defined in the agreement evidencing such Hedging Obligations) as to which any CCPA Pledgor is an Affected Party (as so defined in the agreement evidencing such Hedging Obligations), and, in either event, the Swap Termination Value owed by such CCPA Pledgor as a result thereof is greater than $1,000,000.
SECTION 10.2 Effect of Event of Default. If any Event of Default described in Section 10.1.2 shall occur and be continuing, all Liabilities of such Borrower, or if such Event of Default relates to any CCPA Pledgor (not consisting of Conseco or any Significant Subsidiary) (or if any Event of Default under subsection (f) or (g) of Section 5.01 of the Appendix (as such term is defined in the Conseco Guaranty), made applicable to Conseco, CIHC or any other Significant Subsidiary pursuant to Sections 10.1.6 and 10.1.7 hereof, shall occur and be continuing as to Conseco, CIHC or any CCPA Pledgor consisting of any Significant Subsidiary), all Liabilities of all Borrowers, shall become immediately due and payable, all without presentment, demand, protest or notice of any kind; and, in the case of any other Event of Default, the Administrative Agent may (or shall, upon the written request of the Required Banks) declare all Liabilities with respect to such Borrower, or if such Event of Default relates to Conseco, CIHC, or any CCPA Pledgor, all Liabilities of all Borrowers, to be due and payable, whereupon all Liabilities with respect to such Borrower or all Borrowers, as the case may be, shall become immediately due and payable, all without presentment, demand, protest or notice of any kind. The Administrative Agent shall promptly advise such Borrower or all Borrowers, as the case may be, and each Bank of any such declaration, but failure to do so shall not impair the effect of such declaration. Notwithstanding the foregoing or any provision of
Section 13.1, the effect of an Event of Default of any event described in
Section 10.1.2 may be waived by the written concurrence of the Banks holding 100% of the aggregate unpaid principal amount of the Loans, and the effect of an Event of Default of any other event described in this Section 10 may be waived as provided in Section 13.1. In any such circumstance where the Liabilities of any Borrower or all Borrowers (as the case may be) have become immediately due and payable, whether automatically or upon any such declaration (as the case may be), the Administrative Agent may (or shall, upon the written request of the Required Banks) exercise or not exercise, as
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it deems appropriate, on behalf of itself and the Banks, any and all other rights and remedies available (including after taking into account, as to Conseco and CIHC only, the restrictions set forth in Sections 2.1 and 6.1 of the Conseco Guaranty (except with respect to said Section 6.1, if the restrictions set forth in Section 6.1 of the Conseco Guaranty have been rendered inoperative or have been otherwise qualified pursuant to Section 6.2 or Section 6.4 of the Conseco Guaranty)) to it and the Banks under the Loan Documents and/or applicable law against such Borrower or all Borrowers or any combination thereof (as the case may be), Conseco, CIHC, and/or any CCPA Pledgor and their respective property.
SECTION 11. THE AGENT
SECTION 11.1 Authorization and Action. Each Bank hereby appoints and authorizes the Administrative Agent to take such action as administrative agent on its behalf and to exercise such powers to the extent provided herein or in any document or instrument delivered hereunder or in connection herewith, together with such other action as may be reasonably incidental thereto. As to matters not expressly provided for by this Agreement (including, without limitation, enforcement or collection of this Agreement or any other Loan Document) the Administrative Agent shall not be required to exercise any discretion, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Required Banks and such instructions shall be binding upon all Banks. Under no circumstances shall the Administrative Agent have any fiduciary duties to any Bank or be required to take any action which exposes the Administrative Agent to personal liability or which is contrary to this Agreement or to the other Loan Documents or applicable law.
SECTION 11.2 Liability of the Administrative Agent. None of the Administrative Agent or any Agent-Related Person shall be liable for any action taken or omitted to be taken by it or them under or in connection with this Agreement and the other Loan Documents, except for its own gross negligence or willful misconduct. Without limiting the generality of the foregoing, the Administrative Agent: (a) may treat a Bank as such until the Administrative Agent receives an executed Assignment Agreement entered into between a Bank and an Eligible Assignee pursuant to Section 12.1 hereof; (b) may consult with legal counsel (including counsel for any Borrower), independent public accountants and other experts or consultants selected by it; (c) shall not be liable for any action taken or omitted to be taken in good faith by the Administrative Agent in accordance with the advice of counsel, accountants, consultants or experts; (d) shall make no warranty or representation to any Bank and shall not be responsible to any Bank for any recitals, statements, warranties or representations, whether written or oral, made in or in connection with this Agreement or the other Loan Documents; (e) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, obligations, covenants or conditions of this Agreement on the part of any Borrower or to inspect the property (including, without limitation, any books and records) of any Borrower; (f) shall not be responsible to any Bank for the due execution, legality, validity, enforceability, genuineness,
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sufficiency or value of this Agreement or any other Loan Document or other support or security (including the validity, priority or perfection of any Lien), or any other document furnished in connection with any of the foregoing; and (g) shall incur no liability under or in respect of this Agreement or any other Loan Document by action upon any written notice, statement, certificate, order, telephone message, facsimile or other document which the Administrative Agent believes in good faith to be genuine and correct and to have been signed, sent or made by the proper Person.
SECTION 11.3 Administrative Agent and Affiliates. With respect to the Loans made by it, BofA shall have the same rights and powers under this Agreement and the other Loan Documents as any other Bank and may exercise the same as though it were not the Administrative Agent; and the term "Bank" or "Banks" shall, unless otherwise expressly indicated, include BofA in its individual capacity. BofA and its Affiliates may accept deposits from, lend money to, act as trustee under indentures of, and generally engage in any kind of business with, any Borrower, Conseco and any of its Subsidiaries and any Person who may do business with or own securities of Conseco or any such Subsidiary, all as if BofA was not the Administrative Agent and without any duty to account therefor to the Banks.
SECTION 11.4 Bank Credit Decision. Each Bank acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Bank and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Bank also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement.
SECTION 11.5 Indemnification. The Banks agree to indemnify the Administrative Agent and each Agent-Related Person (to the extent not reimbursed by the Borrower), ratably according to their Percentages, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by, or assessed against the Administrative Agent in any way relating to or arising out of this Agreement, the other Loan Documents, the Other D & O Agreements or the Existing Litigation, or any action taken or omitted by the Administrative Agent under this Agreement, the other Loan Documents, the Other D & O Agreements or the Existing Litigation; provided, that no Bank shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Administrative Agent's gross negligence or willful misconduct. Without limiting any of the foregoing, each Bank agrees to reimburse the Administrative Agent promptly upon demand for their Percentage of any expenses (including reasonable counsel fees) incurred by the Administrative Agent (in its individual capacity as agent or in its capacity as representative of the Banks) in connection with the preparation, execution, delivery, administration, modification, amendment, waiver or enforcement (whether through
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negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under this Agreement or the other Loan Documents, the Other D & O Agreements, or the Existing Litigation to the extent that the Administrative Agent is not reimbursed for such expenses by the Borrowers or Conseco. All obligations provided for in this Section 11.5 shall survive termination of this Agreement.
SECTION 11.6 Successor Agent. The Administrative Agent may, and at the request of the Required Banks shall, resign as Administrative Agent upon 30 days' notice to the Banks. If the Administrative Agent resigns under this Agreement, the Required Banks shall appoint from among the Banks a successor agent for the Banks which successor agent shall be approved by a majority of the Borrowers (which consent shall not be unreasonably withheld). If no successor agent is appointed prior to the effective date of the resignation of the Administrative Agent, the Administrative Agent may appoint, after consulting with the Banks and the Borrowers, a successor agent from among the Banks. Upon the acceptance of its appointment as successor agent hereunder, such successor agent shall succeed to all the rights, powers and duties of the retiring Administrative Agent and the term "Administrative Agent" shall mean such successor agent and the retiring Administrative Agent's appointment, powers and duties as Administrative Agent shall be terminated. After any retiring Administrative Agent's resignation hereunder as Administrative Agent, the provisions of this Section 11 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement. If no successor agent has accepted appointment as Administrative Agent by the date which is 30 days following a retiring Administrative Agent's notice of resignation, the retiring Administrative Agent's resignation shall nevertheless thereupon become effective and the Banks shall perform all of the duties of the Administrative Agent hereunder until such time, if any, as the Required Banks appoint a successor agent as provided for above.
SECTION 12. ASSIGNMENTS AND PARTICIPATIONS
SECTION 12.1 Assignments.
(a) Each Bank shall have the right at any time to assign with the consent of Conseco (on behalf of the Borrowers) and the Administrative Agent (which consent, in each case, will not unreasonably be withheld), to any Eligible Assignee, all or any part of such Bank's rights and obligations under this Agreement and each other Loan Document including its rights in respect of its Loans and Notes, if any; provided, however, that no such consent of Conseco (on behalf of the Borrowers) shall be required where any Event of Default as to Conseco, CIHC, or any CCPA Pledgor has occurred and shall be continuing. Any such assignment shall be pursuant to an assignment agreement, substantially in the form of Exhibit H (an "Assignment Agreement"), duly executed by such Bank and the Eligible Assignee, and acknowledged by the Administrative Agent.
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Notwithstanding the foregoing, each Bank may make assignments to its Affiliates or to any Federal Reserve Bank without obtaining consent of the Administrative Agent.
(b) Each assignment shall be pro rata with respect to all rights and obligations of the assigning Bank including the Loans and the Notes, if any. Each assignment shall be in an amount equal to or in excess of $5,000,000 (except for assignments of the entire unpaid balance, if less than $5,000,000, of the Loans of a Bank or assignments to existing Banks). In the case of any such assignment, upon the fulfillment of the conditions in Section 12.1(c), this Agreement shall be deemed to be amended to the extent, and only to the extent, necessary to reflect the addition of such Eligible Assignee, and such Eligible Assignee shall for all purposes be a Bank party hereto and shall have, to the extent of such assignment, the same rights and obligations as a Bank hereunder.
(c) An assignment shall become effective hereunder when all of the following shall have occurred:
(i) the Assignment Agreement shall have been executed by the assigning Bank and the Eligible Assignee,
(ii) the Assignment Agreement shall have been acknowledged by the Administrative Agent and, where applicable, by Conseco (on behalf of the Borrowers),
(iii) either the assigning Bank or the Eligible Assignee shall have paid a processing fee of $3,000 to the Administrative Agent for its own account; provided that the Eligible Assignee shall be solely responsible for such processing fee with respect to any assignment pursuant to Sections 5.8 and 13.2, and
(iv) the assigning Bank and the Administrative Agent shall have agreed upon a date upon which such assignment shall become effective. Upon such assignment becoming effective, the Administrative Agent shall forward all payments of interest, principal, fees and other amounts that would have been made to the assigning Bank, in proportion to the percentage of the assigning Bank's rights transferred, to the Eligible Assignee.
(d) Upon the effectiveness of any assignment, the assigning Bank shall be relieved from its obligations hereunder to the extent of the obligations so assigned (except to the extent, if any, that any Borrower, any other Bank or the Administrative Agent have rights against such assigning Bank as a result of any
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default by such Bank under this Agreement). Promptly following the effectiveness of each assignment, the Administrative Agent shall furnish to the Borrowers and each Bank a revised Schedule 2.1, revised to reflect such assignment.
SECTION 12.2 Participations.
(a) Each Bank may grant participations in all or any part of its Loans and, if applicable, the Notes to any commercial bank or other financial institution (other than insurance companies and Affiliates thereof unless consented to by Conseco). A participant shall not have any rights under this Agreement or any other document delivered in connection herewith (the participant's rights against such Bank in respect of such participation to be those set forth in the agreement executed by such Bank in favor of the participant relating thereto, which agreement with respect to such participation shall not restrict such Bank's ability to make any modification, amendment or waiver to this Agreement without the consent of the participant except that the consent of such participant may be required in connection with matters requiring the consent of all of the Banks under Section 13.1). Notwithstanding the foregoing, each participant shall have the rights of a Bank pursuant to Section 4.3. All amounts payable by any Borrower under this Agreement shall be determined as if the Bank had not sold such participation. In the event of any such sale by a Bank of participating interests to a participant, such Bank's obligations under this Agreement shall remain unchanged, such Bank shall remain solely responsible for the performance thereof, such Bank shall remain the holder of any obligation for all purposes under this Agreement, and the Borrowers and the Administrative Agent shall continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations under this Agreement.
(b) Limitation of Rights of any Participant. Notwithstanding anything in the foregoing to the contrary,
(i) no participant shall have any direct rights hereunder,
(ii) the Borrowers, the Administrative Agent and the Banks, other than the selling Bank, shall deal solely with the selling Bank and shall not be obligated to extend any rights or make any payment to, or seek any consent of, the participant,
(iii) no participation shall relieve the selling Bank of any of its other obligations hereunder and such Bank shall remain solely responsible for the performance thereof, and
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(iv) no participant, other than an affiliate of the selling Bank, shall be entitled to require such Bank to take or omit to take any action hereunder, except that such Bank may agree with such participant that such Bank will not, without participant's consent, take any action which requires the consent of all of the Banks under
Section 13.1.
SECTION 12.3 Disclosure of Information. Each Borrower authorizes each Bank to disclose to any participant, assignee or Eligible Assignee (each, a "Transferee") and any prospective Transferee any and all financial and other information in such Bank's possession concerning such Borrower, Conseco and its Subsidiaries which has been delivered to such Bank by such Borrower and/or Conseco in connection with such Bank's credit evaluation of such Borrower prior to entering into this Agreement or which has been delivered to such Bank by such Borrower and/or Conseco pursuant to this Agreement; provided, however, that each Bank, participant, assignee and Eligible Assignee shall execute a confidentiality agreement substantially in the form of Exhibit G in which it agrees that it shall hold all non-public, confidential and proprietary information obtained pursuant to the requirements of this Agreement in accordance with safe and sound banking and business practices and may make disclosure reasonably required by any bona fide participant, assignee or Eligible Assignee in connection with the contemplated transfer of any portion of the Loans or as required or requested by any Governmental Authority or representative thereof or pursuant to legal process. For the purposes of this
Section 12.3, by execution of this Agreement each of the Banks shall be deemed to have agreed to and executed the confidentiality agreement contained in Exhibit G.
SECTION 12.4 Foreign Transferees. If, pursuant to this Section 12, any interest in this Agreement or any Loans or the Note is transferred to any Transferee which is organized under the laws of any jurisdiction other than the United States or any state thereof or upon the request of the Administrative Agent, the transferor Bank shall cause such Transferee (other than any participant), and may cause any participant, concurrently with the effectiveness of such transfer,
(a) to represent to the transferor Bank (for the benefit of the transferor Bank, the Administrative Agent and the Borrowers) that under applicable law and treaties no Taxes will be required to be withheld by the Administrative Agent,
(b) to represent to the Borrowers or the transferor Bank that under applicable law and treaties no Taxes will be required to be withheld with respect to any payments to be made to such Transferee in respect of the Loans or, if applicable, the Notes,
(c) to furnish to the transferor Bank, the Administrative Agent and the Borrowers either U.S. Internal Revenue Service Form W-BEN, Form W-ECI or Form W-8IMY (wherein such Transferee claims entitlement to complete
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exemption from U.S. federal withholding tax on all interest payments hereunder), and
(d) to agree (for the benefit of the transferor Bank, the Administrative Agent and the Borrowers) to provide the transferor Bank, the Administrative Agent and the Borrowers a new Form W-BEN, Form W-ECI or Form W-8IMY upon the obsolescence of any previously delivered form and comparable statements in accordance with applicable U.S. laws and regulations and amendments duly executed and completed by such Transferee, and to comply from time to time with all applicable U.S. laws and regulations with regard to such withholding tax exemption.
SECTION 13. MISCELLANEOUS
SECTION 13.1 Waivers and Amendments. The provisions of this Agreement and of each other Loan Document may from time to time be amended, modified or waived, if such amendment, modification or waiver is in writing and consented to by each Borrower directly affected by such amendment, modification, or waiver and the Required Banks; provided, that no such amendment, modification or waiver:
(a) which would modify any requirement hereunder that any particular action be taken by all Banks or by the Required Banks, shall be effective without the consent of each Bank;
(b) which would modify this Section 13.1, change the definition of "Required Banks," change any Percentage for any Bank (except pursuant to an Assignment Agreement), reduce any fees, extend the maturity date of any Loan, reduce any rate of interest payable on the Loans or subject any Bank to any additional obligations, shall be effective without the consent of each Bank;
(c) which would permit the release of all or any material portion of the Direct Collateral, Indirect Collateral or CCPA Collateral or the release or termination of Conseco's or CIHC's obligations in the aggregate, or any material obligation individually, under the Conseco Guaranty or the CIHC Guaranty shall be effective without the consent of each Bank; provided, however, that such consent shall not be required for the termination of the CIHC Guaranty pursuant to Section 5.14 thereof;
(d) which would extend the due date for, or reduce the amount of, any payment or prepayment of principal of or interest on the Loans, shall be effective without the consent of each Bank; or
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(e) which would affect adversely the interests, rights or obligations of the Administrative Agent (in such capacity) other than removal in accordance with Section 11.6, shall be effective without consent of the Administrative Agent;
provided, further that, consistent with (but not in limitation of) the foregoing, (x) at any time that Liabilities of a particular Borrower shall be due and owing, but unpaid, amendments, modifications and waivers may be made applicable to such Borrower without the approval of other Borrowers (but with the approval of each Bank) and amendments, modifications and waivers may be made applicable to other Borrowers without such approval of such Borrower (but with the approval of each Bank), (y) any guarantor and the Administrative Agent may enter into an amendment, modification or waiver of such guarantor's or guaranty without the consent of any Borrower, and (z) any portion of the CCPA Collateral may be released or the Amended and Restated Cash Collateral Agreement may be amended without the consent of any Borrower.
SECTION 13.2 Failure to Consent. If any Bank shall fail to consent to any amendment, modification or waiver described in Section 13.1 (any such Bank being hereinafter referred to as a "Non-Consenting Bank") then in such case, Conseco (on behalf of the Borrowers) may, upon at least five (5) Business Days' written notice to the Administrative Agent and such Non- Consenting Bank, designate a substitute lender (a "Substitute Bank") acceptable to the Administrative Agent in its sole discretion, to which such Non-Consenting Bank shall assign all (but not less than all) of its rights and obligations under the Loans hereunder. Upon any assignment by any Bank pursuant to this Section 13.2 becoming effective, the Substitute Bank shall thereupon be deemed to be a "Bank" for all purposes of this Agreement and the assigning Bank shall thereupon cease to be a "Bank" for all purposes of this Agreement and shall have no further rights or obligations hereunder (other than pursuant to Sections 5.1, 5.2, 5.5, 11.5 and 13.4 hereof, and Sections 7.1 and 7.2 of the Conseco Guaranty or
Section 5.1 of the CIHC Guaranty while such Non-Consenting Bank was a Bank); provided, that all Liabilities (except Liabilities which by the terms hereof survive the payment in full of the Loans and termination of this Agreement) due and payable to the Non-Consenting Bank shall be paid in full as of the date of such assignment. Notwithstanding the foregoing, in the event that in connection with any amendment, modification or waiver more than one Bank is a Non-Consenting Bank, the Borrowers may not require one Bank to assign its rights and obligations to a Substitute Bank unless all Non-Consenting Banks are required to make such an assignment. Notwithstanding any Non-Consenting Bank's failure or refusal to assign its rights, obligations and Loans under this
Section 13.2, the Non-Consenting Bank shall cease to be a "Bank" for all purposes of this Agreement and the Substitute Bank substituted therefor upon payment to the Non-Consenting Bank by the Substitute Bank of all amounts set forth in this Section 13.2 without any further action of the Non-Consenting Bank.
SECTION 13.3 Notices. All notices, requests and other communications to any party hereunder shall be in writing (including bank wire, telex, facsimile or similar writing) and shall be given to such party at its address, facsimile or telex number set forth on the signature or
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acknowledgment pages hereof or such other address, facsimile or telex number as such party may hereafter specify for the purpose by written notice to the Administrative Agent, the Borrowers and Conseco. Each such notice, request or other communication shall be effective (a) if given by facsimile or telex, when such facsimile or telex is transmitted to the facsimile or telex number specified in this Section 13.3 and, in the case of telex or facsimile, the appropriate answerback or confirmation is received, (b) if given by mail, seventy-two (72) hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid or (c) if given by any other means, when delivered at the address specified in this Section 13.3, provided, that notices to the Administrative Agent under Sections 2, 3, 4 and 10 shall not be effective until received by the Administrative Agent.
SECTION 13.4 Indemnity. The Borrowers agree, jointly and severally, to indemnify each Bank, its Affiliates and each of their respective directors, officers, employees, persons controlling or controlled by any of them or their respective agents, consultants, attorneys and advisors (the "Indemnified Parties") and hold each Indemnified Party harmless from and against any and all liabilities, losses, claims, damages, costs and expenses of any kind to which any of the Indemnified Parties may become subject, whether directly or indirectly (including, without limitation, the reasonable fees and disbursements of counsel for any Indemnified Party), relating to or arising out of this Agreement, the other Loan Documents, the Other D&O Agreements, the Existing Litigation or any actual or proposed use of the proceeds of the Loans hereunder; provided, that no Indemnified Party shall have the right to be indemnified hereunder for its own gross negligence or willful misconduct as determined by a court of competent jurisdiction. All obligations of the Borrowers provided for in this Section 13.4 shall survive termination of this Agreement.
SECTION 13.5 D&O Agreements. Except to the extent the Loans hereunder shall have refinanced Existing Loans, the D&O Agreements (including, without limitation, the Existing Credit Agreement) shall remain in full force and effect and shall not be superseded by this Agreement, and consistent with (but not in limitation of) the foregoing, nothing contained herein is intended in any manner whatsoever to amend, modify, or otherwise alter the provisions of the Existing Credit Agreement (or of any related loan document) as to any borrower thereunder who is not a party to this Agreement. Where the Loans have refinanced Existing Loans, the Existing Credit Agreement shall have been superseded by this Agreement as to the Borrowers, but only as to the Borrowers (and specifically, not as to the other borrowers under the Existing Credit Agreement who are not parties to this Agreement); provided, however, that provisions of the Existing Credit Agreement that expressly survive the payment in full of the Existing Loans shall continue to survive; provided further, however, in the event of any conflict between the provisions of this Agreement and the surviving provisions of the Existing Credit Agreement, the provisions of this Agreement shall control as to the Borrowers.
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SECTION 13.6 Subsidiary References. The provisions of this Agreement relating to Subsidiaries shall apply only during such times as a Person referenced in such a provision has one or more Subsidiaries.
SECTION 13.7 Captions. Section captions used in this Agreement are for convenience only, and shall not affect the construction of this Agreement.
SECTION 13.8 GOVERNING LAW. THIS AGREEMENT, THE NOTES, IF ANY, AND THE LOANS SHALL BE A CONTRACT MADE UNDER AND GOVERNED BY THE LAWS OF THE STATE OF ILLINOIS, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES. ALL OBLIGATIONS OF THE BORROWERS AND RIGHTS OF THE ADMINISTRATIVE AGENT AND THE BANKS IN RESPECT OF THE LIABILITIES EXPRESSED HEREIN OR IN THE OTHER LOAN DOCUMENTS SHALL BE IN ADDITION TO AND NOT IN LIMITATION OF THOSE PROVIDED BY APPLICABLE LAW.
SECTION 13.9 Counterparts. This Agreement may be executed in any number of counterparts and by the different parties on separate counterparts and each such counterpart shall be deemed to be an original, but all such counterparts shall together constitute but one and the same agreement. When counterparts executed by all the parties shall have been lodged with the Administrative Agent (or, in the case of any Bank as to which an executed counterpart shall not have been so lodged, the Administrative Agent shall have received telegraphic, facsimile, telex or other written confirmation from such Bank of execution of a counterpart hereof by such Bank), this Agreement shall become effective as of the Closing Date hereof, and at such time the Administrative Agent shall notify the Borrowers and each Bank.
SECTION 13.10 SUBMISSION TO JURISDICTION; WAIVER OF VENUE. THE ADMINISTRATIVE AGENT, EACH BANK AND EACH BORROWER (A) HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY ILLINOIS STATE OR FEDERAL COURT SITTING IN THE NORTHERN DISTRICT OF ILLINOIS OVER ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS, AND THE ADMINISTRATIVE AGENT, EACH BANK AND EACH BORROWER HEREBY IRREVOCABLY AGREE THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH ILLINOIS STATE OR FEDERAL COURT, AND (B) AGREE NOT TO INSTITUTE ANY LEGAL ACTION OR PROCEEDING AGAINST ANOTHER PARTY OR THE DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR PROPERTY OF ANY THEREOF, ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENTS, IN ANY COURT OTHER THAN AS HEREINABOVE SPECIFIED IN THIS SECTION 13.10. THE ADMINISTRATIVE AGENT, EACH BANK AND EACH BORROWER HEREBY IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
51
OBJECTION IT OR THEY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE IN ANY ACTION OR PROCEEDING (WHETHER BROUGHT BY ANY BORROWER, THE ADMINISTRATIVE AGENT, ANY BANK, OR OTHERWISE) IN ANY COURT HEREINABOVE SPECIFIED IN THIS SECTION 13.10 AS WELL AS ANY RIGHT IT OR THEY MAY NOW OR HEREAFTER HAVE TO REMOVE ANY SUCH ACTION OR PROCEEDING, ONCE COMMENCED, TO ANOTHER COURT ON THE GROUNDS OF FORUM NON CONVENIENS OR OTHERWISE. THE ADMINISTRATIVE AGENT, EACH BANK AND EACH BORROWER AGREE THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.
SECTION 13.11 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; provided, however, that the Borrowers may not assign or transfer their rights or obligations under this Agreement or any other Loan Document without the prior written consent of all Banks, and the rights of the Banks to make assignments or grant participations are subject to the provisions of Section 12.
SECTION 13.12 Power of Attorney. Each Borrower hereby irrevocably constitutes and appoints Conseco as such Borrower's attorney-in-fact, with full power of substitution and transfer, to take any and all actions, including, without limitation, giving consents, notices, and approvals, specified to be taken or executed by Conseco under this Agreement and to execute all documents in furtherance thereof. The power of attorney hereby granted shall be coupled with an interest and shall be irrevocable until payment in full of the Loans.
SECTION 13.13 No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of the Administrative Agent or any Bank, any right, remedy, power or privilege under this Agreement, any other Loan Document or any of the other D&O Agreements, and/or applicable law shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. Consistent with (but not in limitation of) the foregoing, the rights, powers, and/or remedies provided in this Agreement or any other Loan Document shall be cumulative and shall not preclude the assertion or exercise of any other rights or remedies available under law, in equity or otherwise except solely with respect to Conseco and CIHC to the extent expressly set forth in Sections 2.1 and 6.1 of the Conseco Guaranty (except with respect to said Section 6.1, if the restrictions set forth in Section 6.1 of the Conseco Guaranty have been rendered inoperative or have been otherwise qualified pursuant to Section 6.2 or Section 6.4 of the Conseco Guaranty).
SECTION 13.14 WAIVER OF JURY TRIAL. EACH BORROWER, THE ADMINISTRATIVE AGENT AND EACH BANK HEREBY KNOWINGLY,
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VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM CONCERNING ANY RIGHTS UNDER THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR ANY OTHER DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH, OR ARISING FROM ANY BANKING RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREE THAT ANY SUCH ACTION, PROCEEDING OR COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY; THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES ENTERING INTO THIS AGREEMENT.
Executed as of the day and year first above written at Chicago, Illinois.
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GUARANTY
Dated as of November 22, 2000
between
CONSECO, INC.,
 as Guarantor,
and
THE CHASE MANHATTAN BANK,
as Administrative Agent
AMENDED AND RESTATED GUARANTY
THIS GUARANTY (this "Guaranty") is entered into as of November 22, 2000 by CONSECO, INC., an Indiana corporation ("Guarantor"), in favor of THE CHASE MANHATTAN BANK, as administrative agent (the "Administrative Agent") for the financial institutions (the "Banks" and together with Administrative Agent, collectively, the "Guaranteed Parties") who are or from time to time may become party to the Credit Agreement (as hereinafter defined). Unless otherwise defined herein, capitalized terms used herein shall have the meanings assigned to such terms pursuant to Article I hereof.
W I T N E S S E T H:
WHEREAS, certain individuals (each individually, an "Existing Borrower" and collectively, the "Existing Borrowers") entered into that certain Credit Agreement, dated as of May 30, 2000 (as was amended, supplemented, restated, refinanced, refunded, renewed or otherwise modified from time to time, the "Existing Credit Agreement"), among the Existing Borrowers, the Banks and the Administrative Agent, whereby the parties thereto amended the provisions of the term loans previously made to the Existing Borrowers (the "Existing Loans") on the terms and subject to the conditions set forth in the Existing Credit Agreement;
WHEREAS, as a condition to the Administrative Agent and the Banks entering into the Existing Credit Agreement, Guarantor was required to and did execute and deliver to the Administrative Agent that certain Guaranty, dated as of May 30, 2000, which was amended and restated pursuant to an Amended and Restated Guaranty dated as of September 22, 2000 (as amended, supplemented or otherwise modified from time to time prior to the date hereof, the "Existing Guaranty"), whereby Guarantor absolutely, unconditionally and irrevocably agreed to pay in full all Obligations (as therein defined) of the Existing Borrowers under the Existing Credit Agreement;
WHEREAS, Guarantor has established a program to allow for certain of the Existing Borrowers to refinance the Existing Loans;
WHEREAS, the Administrative Agent and the Banks have agreed to refinance the Existing Loans pursuant to that certain Credit Agreement, dated as of November 22, 2000 (as amended, supplemented, restated, refinanced, refunded, renewed or otherwise modified from time to time, the "Credit Agreement"), among certain of the Existing Borrowers (the "Borrowers), the Banks and the Administrative Agent, on the terms and subject to the conditions contained in the Credit Agreement;
WHEREAS, as a condition precedent to the Banks executing and delivering the Credit Agreement and making the Loans thereunder, Guarantor is required to execute and deliver this Guaranty;
WHEREAS, Guarantor has been duly authorized to execute, deliver and perform this Guaranty; and
WHEREAS, Guarantor will derive substantial direct and indirect benefit from the Loans made to the Borrowers by the Banks pursuant to the Credit Agreement;
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WHEREAS, to the extent any of the Existing Loans outstanding on the date hereof are not refinanced pursuant to the Credit Agreement, such Existing Loans will remain outstanding pursuant to the Existing Credit Agreement and continue to be guaranteed pursuant to the Existing Guaranty;
NOW THEREFORE, for good and valuable consideration the receipt and sufficiency of which is hereby acknowledged and to induce the Banks to refinance Existing Loans to the Borrowers pursuant to the Credit Agreement, Guarantor agrees, for the benefit of each Guaranteed Party, as follows:
ARTICLE I.
DEFINITIONS
SECTION 1.1. Certain Terms. Capitalized terms used herein, unless otherwise defined herein, shall have the respective meanings assigned thereto in the Credit Agreement; provided that such definitions shall survive any termination of the Credit Agreement. In addition, when used herein the following terms shall have the following meanings (such definitions to be equally applicable to the singular and plural forms thereof):
"Administrative Agent" has the meaning set forth in the Preamble.
"Appendix" shall mean the Appendix attached to the Revolving Credit Agreement, which is hereby incorporated by reference.
"Banks" or "Bank" has the meaning set forth in the Preamble.
"Borrower" or "Borrowers" has the meaning set forth in the fourth recital.
"Borrower Default" has the meaning set forth in Section 6.1(a).
"Credit Agreement" has the meaning set forth in the fourth recital.
"Credit Documents" has the meaning set forth in Section 2.3(a).
"Existing Borrowers" has the meaning set forth in the first recital.
"Existing Credit Agreement" has the meaning set forth in the first recital.
"Existing Guaranty" has the meaning set forth in the second recital.
"Existing Loans" has the meaning set forth in the first recital.
"Guaranteed Party" has the meaning set forth in the Preamble.
"Guarantee Payment" has the meaning set forth in Section 6.1(a).
"Guarantor" has the meaning set forth in the Preamble.
"Guaranty" has the meaning set forth in the Preamble.
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"Indemnified Liabilities" has the meaning set forth in
Section 6.1(c).
"Indemnified Parties" has the meaning set forth in Section 7.2.
"Obligations" has the meaning set forth in Section 2.1.
"Permitted Liens" has the meaning set forth in the Appendix.
"Relevant Agent" shall have the meaning set forth in the Appendix.
"Relevant Banks" shall have the meaning set forth in the Appendix.
"Relevant Facility" shall have the meaning set forth in the Appendix.
"Revolving Credit Agreement" shall mean the Five-Year Credit Agreement dated as of September 25, 1998, between Guarantor, the financial institutions party thereto and the Administrative Agent, as amended by the First Amendment to the Five-Year Credit Agreement, dated as of September 22, 2000, as the same may be further amended, modified or supplemented from time to time.
"September 22 2000 Agreement" shall mean that Agreement dated as of September 22, 2000 among the Guarantor, the Administrative Agent and the Banks, as the same may be amended, supplemented or otherwise modified from time to time.
"Subrogation Rights" has the meaning set forth in Section 2.6.
"Termination Event" shall have the meaning set forth in the September 22, 2000 Agreement; provided that for purposes of this Guaranty (i) the term "Amended and Restated Guaranty" as used in each of clause (b) and clause (e) of Section 8 of the September 22, 2000 Agreement shall be deemed to also include this Guaranty (and, as a result, and without limiting the generality of the foregoing, any event of default by Guarantor hereunder (including, without limitation, any default under Section 4.4 hereof and any Event of Default under Section 4.5 hereof) shall constitute a Termination Event under clause (e) of Section 8 of the September 22, 2000 Agreement), (ii) the term "CIHC Guaranty" as used in each of clause (b) and clause (f) of Section 8 of the September 22, 2000 Agreement, which originally related only to the Existing CIHC Guaranty, shall be deemed to also include the CIHC Guaranty, (iii) the term "Existing Credit Agreement" as used in clause (d) of the September 22, 2000 Agreement shall be deemed to also include the Credit Agreement, and (iv) the term "Plan" as used in clause (e) of the September 22, 2000 Agreement shall be deemed to also include the Plan.
ARTICLE II.
GUARANTY PROVISIONS
SECTION 2.1. Guaranty. Guarantor hereby absolutely, unconditionally and irrevocably:
(a) guaranties to the Guaranteed Parties the full and punctual payment (i) of all obligations of each Borrower to the Guaranteed Parties for the payment of principal upon the earlier to occur of (A) December 31, 2003 and (B) the occurrence of a Termination Event, and
(ii) of all obligations other than principal of each Borrower to the Guaranteed Parties when due,
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whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise and at all times thereafter, in each case, howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent, or now or hereafter existing, or due or to become due under the Credit Agreement, whether for principal, interest, fees, expenses or otherwise (including all such amounts which would become due but for the operation of the automatic stay provisions under Section 362(a) of the United States Bankruptcy Code, 11 U.S.C. ss.362(a), and the operation of Sections 502(b) and 506(b) of the United States Bankruptcy Code, 11 U.S.C. ss.502(b) and ss.506(b)) (all such obligations hereinafter collectively called the "Obligations"); and
(b) indemnifies and holds harmless each Guaranteed Party or any holder of any Loan for any and all costs and expenses (including, without limitation, reasonable attorneys' fees and expenses) incurred by such Guaranteed Party or such holder, as the case may be, in enforcing any rights under this Guaranty;
This Guaranty constitutes a guaranty of payment (x) on or after the date set forth in clause (a)(i) above with respect to principal and (y) of all other amounts when due, and not of collection, and Guarantor specifically agrees that it shall not be necessary or required that any Guaranteed Party or any holder of any Loan exercise any right, assert any claim or demand or enforce any remedy whatsoever against any Borrower or any other obligor (or any other Person) before the performance of, or as a condition to, the obligations of Guarantor hereunder.
SECTION 2.2. Acceleration of Guaranty. Guarantor agrees that, in the event of the insolvency of Guarantor, or the inability or failure of Guarantor to pay debts as they become due, or an assignment by Guarantor for the benefit of creditors, or the commencement of any case or proceeding in respect of any Borrower, any other obligor with respect to the Obligations of such Borrower, or Guarantor under any bankruptcy, insolvency or similar federal or state laws, and if such event shall occur at a time when any of the Obligations of such Borrower or such other obligor may not then be due and payable, Guarantor will pay to the Banks forthwith (a) if such event relates to such Borrower or any other obligor with respect to the Obligations of such Borrower, the full amount which would be payable hereunder by Guarantor if all Obligations of such Borrower were then due and payable and (b) if such event relates to Guarantor or any other obligor with respect to the obligations of Guarantor, the full amount which would be payable hereunder by Guarantor if all the Obligations of all Borrowers were then due and payable.
SECTION 2.3. Guaranty Absolute, etc. This Guaranty shall in all respects be a continuing, absolute, unconditional and irrevocable guaranty of payment, and shall remain in full force and effect until all Obligations of the Borrowers and each other obligor have been paid in full and all obligations of Guarantor hereunder shall have been paid in full. Guarantor guarantees that the Obligations of the Borrowers and each other obligor and their respective Subsidiaries, if any, will be paid strictly in accordance with the terms of the Credit Agreement and each other Loan Document under which they arise, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of any Guaranteed Party or any holder of the Note(s) of any Borrower with respect thereto. Consistent with (but not in limitation of) the other provisions of this Section 2.3, the liability of Guarantor under this Guaranty shall be absolute, unconditional and irrevocable irrespective of:
(a) any lack of validity, legality or enforceability of the Existing Credit Agreement, the Existing Guaranty, any other loan document relating to the Existing Credit Agreement or the
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Existing Guaranty, the September 22, 2000 Agreement, the Plan, the Credit Agreement, any Note or any other Loan Document (the "Credit Documents");
(b) the failure of any Guaranteed Party or any holder of any Note:
(i) to assert any claim or demand or to enforce any right or remedy against any Borrower, any other obligor or any other Person under the provisions of the Credit Documents or otherwise; or
(ii) to exercise any right or remedy against any other guarantor of, or collateral securing, any Obligations of any Borrower or any other obligor;
(c) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations of any Borrower or any other obligor, or any other extension, compromise or renewal of any Obligations of any Borrower or any other obligor;
(d) any reduction, limitation, impairment or termination of the Obligations of any Borrower or any other obligor for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to (and Guarantor hereby waives any right to or claim of) any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality, nongenuineness, irregularity, compromise, unenforceability of, or any other event or occurrence affecting, the Obligations of any Borrower, any other obligor or otherwise;
(e) any amendment to, rescission, waiver, or other modification of, or any consent to any departure from, any of the terms of the Credit Documents;
(f) any addition, exchange, release, surrender or non-perfection of any collateral, or any amendment to or waiver or release or addition of, or consent to any departure from, any other guaranty, held by any Guaranteed Party or any holder of any note securing any of the Obligations of any Borrower or any other obligor; or
(g) any other circumstance which might otherwise constitute a defense available to, or a legal or equitable discharge of, any Borrower, any other obligor, any surety or any guarantor.
SECTION 2.4. Reinstatement, etc. Guarantor agrees that this Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment (in whole or in part) of any of the Obligations is rescinded or must otherwise be restored by any Guaranteed Party or any holder of any Note, upon the insolvency, bankruptcy or reorganization of any Borrower, any other obligor or otherwise, all as though such payment had not been made.
SECTION 2.5. Waiver, etc. Guarantor hereby waives promptness, diligence, notice of acceptance and any other notice with respect to any of the Obligations of the Borrower or any other obligor, and this Guaranty and any requirement that the Administrative Agent, any other Guaranteed Party or any holder of any Note protect, secure, perfect or insure any security interest or Lien, or any property subject thereto, or exhaust any right or take any action against any Borrower, any other obligor or any other Person (including any other guarantor) or entity or any collateral securing the Obligations of any Borrower or any other obligor, as the case may be.
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SECTION 2.6. Waiver of Subrogation; Subordination. Guarantor hereby irrevocably waives with respect to any Borrower, until the prior indefeasible payment in full in cash of all Obligations of such Borrower under the Loan Documents, any claim or other rights which it may now or hereafter acquire against such Borrower or any other obligor that arises from the existence, payment, performance or enforcement of Guarantor's obligations under this Guaranty or any other Loan Document (but not rights with respect to Guarantor Loans), including any right of subrogation, reimbursement, exoneration, or indemnification, any right to participate in any claim or remedy of the Guaranteed Parties against such Borrower or any other obligor or any collateral which the Administrative Agent now has or hereafter acquires, whether or not such claim, remedy or right (all such claims, remedies and rights being collectively called "Subrogation Rights") arises in equity, or under contract, statute or common law, including the right to take or receive from such Borrower or any other obligor, directly or indirectly, in cash or other property or by set-off or in any manner, payment or security on account of such claim or other rights. If any amount shall be paid to Guarantor in violation of the preceding sentence and the Obligations shall not have been paid in cash, in full, such amount shall be deemed to have been paid to Guarantor for the benefit of, and held in trust for, the Guaranteed Parties, and shall forthwith be paid to the Guaranteed Parties to be credited and applied upon the Obligations of such Borrower, whether matured or unmatured. Guarantor acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by the Credit Agreement and that the waiver set forth in this
Section 2.6 is knowingly made in contemplation of such benefits.
SECTION 2.7. Successors, Transferees and Assigns; Transfers of Notes, etc. This Guaranty shall:
(a) be binding upon Guarantor, and its successors, transferees and assigns; and
(b) inure to the benefit of and be enforceable by the Administrative Agent and each other Guaranteed Party.
Without limiting the generality of clause (b), any Bank may assign or otherwise transfer (in whole or in part) any Note or Loan held by it to any other Person, and such other Person shall thereupon become vested with all rights and benefits in respect thereof granted to such Bank under any Loan Document (including this Guaranty) or otherwise. Notwithstanding anything contained in this Section 2.7 to the contrary, this Section 2.7 shall not be deemed to enlarge or create additional rights with respect to any Bank's ability to assign any portion of its Loans or rights under any Note or any other Loan Document pursuant to
Section 12 of the Credit Agreement, and this Section 2.7 is expressly made subject thereto.
SECTION 2.8. Payments Free and Clear of Taxes, etc. Guarantor hereby agrees that:
(a) any and all payments made by Guarantor hereunder shall be made in accordance with Section 4.5 of the Credit Agreement free and clear of, and without deduction for, any and all Charges, to the same extent as if Guarantor were a Borrower;
(b) Guarantor hereby indemnifies and holds harmless each Guaranteed Party and each holder of a Loan for the full amount of any Charges paid by such Guaranteed Party or such holder, as the case may be, and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto; and
(c) without prejudice to the survival of any other agreement of Guarantor hereunder, the agreements and obligations of Guarantor contained in this Section 2.8 shall survive the payment in full of the principal of and interest on the Loans.
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SECTION 2.9. Right of Offset. In addition to and not in limitation of all rights of offset that any Guaranteed Party or other holder of a Note may have under applicable law or any other Loan Document, subject to the terms of the Credit Agreement, each Guaranteed Party or other holder of a Note shall, during the continuance of any Termination Event and whether or not such Guaranteed Party or such holder has made any demand or whether or not Guarantor's obligations are matured, have the right to appropriate and apply to the payment of Guarantor's obligations hereunder all deposits (general or special, time or demand, provisional or final) then or thereafter held by, and other indebtedness or property then or thereafter owing to, such Guaranteed Party or other holder, whether or not related to this Guaranty or any transaction hereunder.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES;
INCORPORATION BY REFERENCE
Guarantor represents and warrants to each Guaranteed Party that:
SECTION 3.1. Organization, etc. Guarantor and each of its Subsidiaries is a corporation, partnership or limited liability company duly organized or formed, validly existing and in good standing under the laws of the state of its incorporation or formation and each of Guarantor and its Subsidiaries is duly qualified to transact business and in good standing as a foreign corporation, partnership or limited liability company authorized to do business in each jurisdiction where the nature of its business makes such qualification necessary and failure to so qualify could reasonably be expected to have a Material Adverse Effect.
SECTION 3.2. Authorization. Guarantor (a) has the power to execute, deliver and perform this Guaranty and the other Loan Documents to which it is a party, and (b) has taken all necessary action to authorize the execution, delivery and performance by it of this Guaranty and the other Loan Documents to which it is a party.
SECTION 3.3. No Conflict. The execution, delivery and performance by Guarantor of this Guaranty and the other Loan Documents to which it is a party does not and will not (a) contravene or conflict with any provision of any law, statute, rule or regulation, (b) contravene or conflict with, result in any breach of, or constitute a default under, any material agreement or instrument binding on Guarantor or any of its Subsidiaries (including, without limitation, any writ, judgment, injunction or other similar court order), (c) result in the creation or imposition of or the obligation to create or impose any Lien (except for Permitted Liens) upon any of the property or assets of Guarantor or any of its Subsidiaries or (d) contravene or conflict with any provision of the articles of incorporation or bylaws of Guarantor.
SECTION 3.4. Margin Regulations.
(a) None of the transactions contemplated hereunder or in connection herewith will in any way violate, contravene or conflict with any of the provisions of Regulation U;
(b) None of the obligations of any Borrower to Guarantor is or will be directly or indirectly secured by "margin stock" (as defined in Regulation U);
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(c) Neither Guarantor nor any third party acting on behalf of Guarantor has taken or will take possession of any Borrower's "margin stock" to secure, directly or indirectly, any of the Obligations of such Borrower or the obligations of Guarantor under this Guaranty or any of the Loan Documents;
(d) Guarantor does not and will not have any right to prohibit any Borrower from selling, pledging, encumbering or otherwise disposing of any margin stock owned by such Borrower so long as this Guaranty is in effect or any of the Obligations of such Borrower or the obligations of Guarantor under this Guaranty or any of the Loan Documents remain outstanding;
(e) None of the Borrowers have granted or will grant Guarantor or any third party acting on behalf of Guarantor the right to accelerate repayment of any of the Obligations of such Borrower if any of the margin stock owned by such Borrower is sold by such Borrower or otherwise; and
(f) There is no agreement or other arrangement between any Borrower and Guarantor or any third party acting on behalf of Guarantor (and no such agreement or arrangement shall be entered into so long as this Guaranty is in effect or any of the Obligations of such Borrower or the obligations of Guarantor under this Guaranty or any of the Loan Documents remain outstanding) under which the margin stock of such Borrower would be made more readily available as security to Guarantor than to other creditors of such Borrower.
SECTION 3.5. No Termination Event. No Termination Event has occurred and is continuing.
ARTICLE IV.
COVENANTS AND EVENTS OF DEFAULT
SECTION 4.1. Covenants. Guarantor agrees that, on and after the date hereof for so long thereafter as any of the Obligations remain unpaid or outstanding, Guarantor will comply with the covenants set forth in Articles II, III and IV of the Appendix and the terms and provisions set forth therein shall be incorporated by reference in this Section 4.1 in their entirety as if fully set forth herein with the same effect as if applied to this Section 4.1. All capitalized terms set forth in Articles II, III and IV of the Appendix shall have the meanings provided in the Appendix. Such covenants shall not be affected in any manner by the termination of the Revolving Credit Agreement.
Notwithstanding the foregoing, if Articles II, III and IV of the Appendix or any definitions set forth or used therein are amended or modified in accordance with the terms of the Revolving Credit Agreement either as the result of an amendment or modification to such section in the Appendix or Guarantor's execution and delivery of a new credit facility in replacement, restatement or substitution for the Revolving Credit Agreement, this Section 4.1 shall be deemed to be amended and modified to the extent set forth in the Revolving Credit Agreement (as amended or modified) or any new credit facility entered into in replacement, restatement or substitution for the Revolving Credit Agreement.
SECTION 4.2. Margin Regulations. Guarantor shall take such actions and execute and deliver such instruments or documents from time to time as the Administrative Agent shall reasonably request to maintain continuous compliance with Regulation U.
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SECTION 4.3. Limitation on Additional Purpose Credit. Notwithstanding any other provision of this Guaranty, the Credit Agreement or the Revolving Credit Agreement to the contrary, Guarantor will not, and will not permit any of its Wholly-Owned Subsidiaries and/or Significant Subsidiaries to incur or assume any Indebtedness which constitutes "purpose credit" secured "directly or indirectly" (as defined in Regulation U) by Margin Stock.
SECTION 4.4. Provision of Collateral Ratio Information. Guarantor shall provide to the Administrative Agent and the Banks such information as may be reasonably requested from time to time by the Administrative Agent or the Required Banks to permit the Administrative Agent or the Required Banks, as the case may be, to determine the "maximum good faith loan value" (as defined in Regulation U) of the Indirect Collateral and do such other acts and execute such other documentation to continue to comply with Regulation U.
SECTION 4.5. Events of Default. The Events of Default set forth in Section 5.01 of the Appendix are hereby incorporated by this reference.
ARTICLE V.
CONDITIONS
The obligation of the Banks to make the Loans is (in addition to the conditions precedent set forth in Section 9 of the Credit Agreement) subject to the performance by Guarantor of all of the obligations under this Guaranty and to the satisfaction of the following conditions precedent:
SECTION 5.1. Consent and Loans. Prior to or concurrent with the making of the Loans under the Credit Agreement, the Administrative Agent shall have received all of the following, each, except to the extent otherwise specified below, duly executed and delivered by a Responsible Officer of Guarantor, dated the date of the Loans, in form and substance satisfactory to the Administrative Agent, each in sufficient number of signed counterparts or copies to provide one for each Bank and the Administrative Agent:
5.1.1. An opinion of David K. Herzog, counsel of Guarantor and its Subsidiaries, addressing such legal matters as the Administrative Agent may reasonably require;
5.1.2. An opinion of Weil, Gotshal & Manges LLP, outside counsel to Guarantor and its Subsidiaries, addressing such legal matters as the Administrative Agent may reasonably require;
5.1.3. An officer's certificate of Guarantor, dated as of the Closing Date, signed by a Responsible Officer of Guarantor, and attested to by the secretary thereof, together with certified copies of Guarantor's articles of incorporation, bylaws and directors' resolutions;
5.1.4. Evidence of the good standing or certificate of compliance of Guarantor in the jurisdiction in which Guarantor was incorporated as of the Closing Date;
5.1.5. Evidence that Guarantor paid to the Administrative Agent the fees and expenses provided for herein;
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5.1.6. Evidence reasonably satisfactory to the Administrative Agent of compliance by Guarantor with Regulation U; and
5.1.7. Such other information and documents as may reasonably be required by the Administrative Agent and the Administrative Agent's counsel.
ARTICLE VI.
CERTAIN REMEDIAL AND PAYMENT MATTERS
SECTION 6.1. Sale of Pledged Shares. (a) The Administrative Agent agrees that after the occurrence and during the continuance any Event of Default with respect to any Borrower, the effect of which is to cause the Obligations of such Borrower to be due and payable under the Credit Agreement (a "Borrower Default"), subject to the provisions of Section 2.1 and Section 6.3 below, it will provide Guarantor the opportunity to purchase the Pledged Shares pledged by such Borrower at a price reasonably satisfactory to the Administrative Agent, and any payment for such Pledged Shares made by Guarantor on or prior to the date on which any payment (a "Guarantee Payment") is required to be made by Guarantor pursuant to Article II shall be credited against such Guarantee Payment.
(b) Guarantor agrees that in any such sale of any of the Pledged Shares, the Administrative Agent is authorized to comply with any limitation or restriction in connection with such sale as counsel may advise the Administrative Agent is necessary, in the reasonable opinion of such counsel, in order to avoid any violation of applicable law.
(c) Guarantor further agrees to indemnify and hold harmless the Administrative Agent and the Banks and each of their respective officers, directors, employees, agents, successors and assigns, and any Person in control of any thereof, from and against any loss, liability, claim, damage and expense, including, without limitation, reasonable attorneys' fees actually incurred (in this paragraph collectively called the "Indemnified Liabilities"), under federal and state securities laws or otherwise resulting from the action or failure to act by Guarantor or any Borrower; provided, that no such Person shall have the right to be indemnified hereunder for its own gross negligence or willful misconduct as determined by a court of competent jurisdiction.
Section 6.2. Release of Pledged Shares. The Administrative Agent agrees that it shall not release any of the Pledged Shares of any Borrower from the Lien granted under the Pledge Agreement until the payment in full of all obligations of such Borrower. Notwithstanding the foregoing, the Administrative Agent shall be entitled to (i) release the Pledged Shares of such Borrower if such Pledged Shares are replaced by additional common stock of Guarantor and (ii) sell the Pledged Shares pursuant to Section 6.1 hereof or the Pledge Agreement.
SECTION 6.3. Borrower Termination Event. Guarantor hereby acknowledges and agrees that Sections 6.1 and 6.2 shall not apply to any Termination Event relating to Guarantor or any of its Subsidiaries and, upon the occurrence of a Termination Event relating to Guarantor or any of its Subsidiaries, the Administrative Agent expressly reserves its rights and remedies under this Guaranty to demand payment hereunder to satisfy the Obligations of all Borrowers and the obligations of Guarantor hereunder whether or not the Administrative Agent has sold or attempted to sell the Pledged Shares of any Borrower or otherwise exercised its rights and remedies under the Pledge Agreement or any other Loan Document. Furthermore nothing contained herein shall be deemed to prohibit or limit in any way whatsoever the Administrative Agent's or any Bank's right or ability to receive its portion of the assets of
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Guarantor upon the exercise by any other Relevant Agent or any other Relevant Banks of their rights and remedies under any other Relevant Facility or any other creditor of Guarantor.
ARTICLE VII.
MISCELLANEOUS
SECTION 7.1. Costs and Expenses. Guarantor agrees to pay on demand all reasonable expenses of the Administrative Agent (including the non-duplicative fees and reasonable expenses of counsel (including expenses of in-house counsel) and of local counsel, if any, who may be retained by such counsel) in connection with:
(i) the negotiation, preparation, execution, syndication and delivery of the Credit Agreement, this Guaranty and the other Loan Documents, including schedules and exhibits, and any amendments, waivers, consents, supplements or other modifications to the Credit Agreement, this Guaranty or the other Loan Documents as may from time to time hereafter be required, whether or not the transactions contemplated hereby or thereby are consummated; and
(ii) the preparation and/or review of the form of any document or instrument relevant to the Credit Agreement, this Guaranty or any other Loan Document.
Guarantor further agrees to pay, and to save the Administrative Agent and the Banks, and their respective Affiliates, harmless from all liability for, any stamp or other Taxes (other than income taxes of the Administrative Agent or the Banks) which may be payable in connection with the execution or delivery of the Credit Agreement, any Borrowing thereunder, the issuance of the Notes, if any, this Guaranty or any other Loan Document. Guarantor also agrees to reimburse the Administrative Agent and each Bank upon demand for all reasonable expenses (including attorneys' fees and legal expenses) incurred by the Administrative Agent or such Bank in connection with the enforcement of any Obligations or obligations hereunder and the consideration of legal issues relevant hereto and thereto whether or not such expenses are incurred by the Administrative Agent on its own behalf or on behalf of the Banks. All obligations of Guarantor provided for in this Section 7.1 shall survive termination of this Agreement. Notwithstanding the foregoing, the Administrative Agent or a Bank shall not have the right to reimbursement under this Section 7.1 for amounts determined by a court of competent jurisdiction to have arisen from the gross negligence or willful misconduct of the Administrative Agent or a Bank.
SECTION 7.2. Indemnity. Guarantor agrees to indemnify the Administrative Agent, each Bank, their Affiliates and their respective directors, officers, employees, persons controlling or controlled by any of them or their respective agents, consultants, attorneys and advisors (the "Indemnified Parties") and hold each Indemnified Party harmless from and against any and all liabilities, losses, claims, damages, costs and expenses of any kind to which any of the Indemnified Parties may become subject, whether directly or indirectly (including, without limitation, the reasonable fees and disbursements of counsel for any Indemnified Party), relating to or arising out of the Credit Agreement, this Guaranty, the other Loan Documents, or any actual or proposed use of the proceeds of the Loans hereunder; provided, that no Indemnified Party shall have the right to be indemnified hereunder for its own gross negligence or willful misconduct as determined by a court of competent jurisdiction. All obligations of the Guarantor provided for in this Section 7.2 shall survive termination of the Credit Agreement and this Guaranty.
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SECTION 7.3. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including bank wire, telex, facsimile or similar writing) and shall be given to such party at its address, facsimile or telex number set forth on the signature or acknowledgment pages hereof or such other address, facsimile or telex number as such party may hereafter specify for the purpose by written notice to the Administrative Agent and Guarantor. Each such notice, request or other communication shall be effective (a) if given by facsimile or telex, when such facsimile or telex is transmitted to the facsimile or telex number specified in this Section 7.3 and, in each case, the appropriate answerback or other confirmation is received, (b) if given by mail, seventy-two (72) hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid or (c) if given by any other means, when delivered at the address specified in this
Section 7.3.
SECTION 7.4. Successors and Assigns. This Guaranty, and the terms, covenants and conditions hereof, shall be binding upon and inure to the benefit of the parties hereto, and their respective successors and assigns, except Guarantor shall not be permitted to assign this Guaranty nor any interest herein nor in the Collateral, nor any part thereof, except in accordance with the terms of the Credit Agreement.
SECTION 7.5. SUBMISSION TO JURISDICTION, ETC. EACH OF THE GUARANTOR AND THE ADMINISTRATIVE AGENT HEREBY IRREVOCABLY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE SUPREME COURT OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK OVER ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY OR THE OTHER LOAN DOCUMENTS, AND EACH OF GUARANTOR AND THE ADMINISTRATIVE AGENT HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE OR TO THE EXTENT PERMITTED BY LAW, FEDERAL COURT. EACH OF GUARANTOR AND THE ADMINISTRATIVE AGENT HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE IN ANY ACTION OR PROCEEDING (WHETHER BROUGHT BY GUARANTOR, ANY OF ITS SUBSIDIARIES, THE ADMINISTRATIVE AGENT, ANY BANK OR OTHERWISE) IN ANY COURT HEREIN ABOVE SPECIFIED IN THIS SECTION 7.5 AS WELL AS ANY RIGHT IT MAY NOW OR HEREAFTER HAVE TO REMOVE ANY SUCH ACTION OR PROCEEDING, ONCE COMMENCED, TO ANOTHER COURT ON THE GROUNDS OF FORUM NON CONVENIENS OR OTHERWISE. EACH OF GUARANTOR AND THE ADMINISTRATIVE AGENT AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.
SECTION 7.6. Amendments and Release. Notwithstanding anything to the contrary contained in the Credit Agreement, the provisions of this Guaranty may from time to time be amended, modified or waived, if such amendment, modification or waiver is in writing and consented to by Guarantor and by the Administrative Agent (with the consent of the Required Banks), and then any such amendment, modification, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided that no such amendment, modification or waiver which would permit the release or termination of all or a substantial portion of Guarantor's obligations under this Guaranty shall be effective without the consent of each Bank.
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SECTION 7.7. Section Headings. The section headings in this Guaranty are inserted for convenience of reference and shall not be considered a part of this Guaranty or used in its interpretation.
SECTION 7.8. Acknowledgments. No action of the Administrative Agent permitted hereunder shall in any way affect or impair the rights of the Administrative Agent and the obligations of Guarantor under this Guaranty. Guarantor hereby acknowledges that there are no conditions to the effectiveness of this Guaranty. Guarantor hereby acknowledes and agrees to make such deliveries as are required of it and comply with the other provisions applicable to it pursuant to the provisions of the Credit Agreement.
SECTION 7.9. Obligations Not Limited. All obligations of Guarantor and rights of the Administrative Agent or obligation expressed in this Guaranty shall be in addition to and not in limitation of those provided in applicable law or in any other written instrument or agreement relating to any of the Obligations.
SECTION 7.10. GOVERNING LAW. THIS GUARANTY SHALL BE A CONTRACT MADE UNDER AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. ALL OBLIGATIONS OF THE BORROWERS AND GUARANTOR AND RIGHTS OF THE ADMINISTRATIVE AGENT AND THE BANKS IN RESPECT OF THE OBLIGATIONS AND THE OBLIGATIONS OF GUARANTOR EXPRESSED HEREIN OR IN THE OTHER LOAN DOCUMENTS SHALL BE IN ADDITION TO AND NOT IN LIMITATION OF THOSE PROVIDED BY APPLICABLE LAW.
SECTION 7.11. Counterparts. This Guaranty may be executed in any number of counterparts (including by facsimile transmission), each of which shall for all purposes be deemed an original, but all such counterparts shall constitute but one and the same agreement. Guarantor hereby acknowledges receipt of a true, correct and complete counterpart of this Guaranty.
SECTION 7.12. Agent. The Administrative Agent acts herein as agent for itself, the Banks and any and all future holders of the Obligations.
SECTION 7.13. WAIVER OF TRIAL BY JURY. EACH OF GUARANTOR AND THE ADMINISTRATIVE AGENT HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM CONCERNING ANY RIGHTS UNDER THIS GUARANTY, ANY OTHER LOAN DOCUMENT OR ANY OTHER DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH, OR ARISING FROM ANY BANKING RELATIONSHIP EXISTING IN CONNECTION WITH THIS GUARANTY AND AGREES THAT ANY SUCH ACTION, PROCEEDING OR COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY; THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES ENTERING INTO THIS GUARANTY.
SECTION 7.14. No Limitation on Remedies. No failure to exercise and no delay in exercising, on the part of the Administrative Agent or any Bank, any right, remedy, power or privilege hereunder or under the other Loan Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.
IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written.
CONSECO, INC.

By:/s/ Thomas M. Hagerty
   ----------------------------
   Name: Thomas M. Hagerty
   Title: Senior Vice President and
            Acting Chief Financial
            Officer	

GUARANTY AND SUBORDINATION AGREEMENT
Dated as of November 22, 2000
made by
CIHC, INCORPORATED,
as Guarantor and Subordinated Borrower,
and
CONSECO, INC.,
as Obligor and Subordinated Lender,
in favor of
THE CHASE MANHATTAN BANK,
 as Administrative Agent
under the Credit Agreement, dated as of November 22, 2000
GUARANTY AND SUBORDINATION AGREEMENT
This Guaranty and Subordination Agreement (this "Agreement") is entered into as of November 22, 2000 by CIHC, INCORPORATED and CONSECO, INC. in favor of THE CHASE MANHATTAN BANK, as administrative agent (in such capacity, the "Agent") for the financial institutions (the "Banks" and together with the Agent, collectively, the "Guarantied Parties") who are or from time to time may become party to the Credit Agreement, dated as of November 22, 2000 (as the same may be amended, supplemented, restated or otherwise modified from time to time, the "Credit Agreement"), among the individual borrowers party thereto, the Banks and the Agent. Unless otherwise defined herein, capitalized terms used herein shall have the meanings assigned to such terms pursuant to Article I hereof.
W I T N E S S E T H:
WHEREAS, pursuant to an Agreement, dated as of September 22, 2000 (the "Restructuring Document") relating to the 1999 Director & Officer Loan Agreement with respect to the Existing Credit Agreement (as such term is defined in the Restructuring Document) and the existing guaranty of Conseco, Inc., executed and delivered as a condition to the effectiveness of the Existing Credit Agreement (as the same may be amended, supplemented, restated or otherwise modified from time to time, the "Existing Conseco Guaranty"), the Banks agreed, among other things, to refrain from exercising certain remedies in respect of the Existing Conseco Guaranty;
WHEREAS, it was a condition precedent to the obligation of the Banks to enter into the Restructuring Document that the Agreement Parties execute and deliver, and the Agreement Parties did execute and deliver, that certain Guaranty and Subordination Agreement, dated as of September 22, 2000 (the "Existing Agreement");
WHEREAS, Conseco has established a program to allow for certain of the Borrowers to refinance the Existing Loans;
WHEREAS, the Administrative Agent and the Banks have agreed to refinance the Existing Loans pursuant to the Credit Agreement on the terms and subject to the conditions contained in the Credit Agreement;
WHEREAS, as a condition precedent to the Administrative Agent and the Banks executing delivering the Credit Agreement and making the Loans thereunder, Conseco is required to execute and deliver a Guaranty of the obligations of the Borrowers thereunder (as the same may be amended, supplemented, restated or otherwise modified from time to time, the "Conseco Guaranty");
WHEREAS, as a condition precedent to the Banks executing and delivering the Credit Agreement and making the Loans thereunder, the Agreement Parties are required to execute and deliver this Agreement;
WHEREAS, the Agreement Parties have been duly authorized to execute, deliver and perform this Agreement; and
WHEREAS, the Agreement Parties will derive substantial direct and indirect benefits from the Loans made to the Borrowers by the Banks pursuant to the Credit Agreement;
NOW THEREFORE, for good and valuable consideration the receipt and sufficiency of which is hereby acknowledged and to induce the Administrative Agent and the Banks to enter into the
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Credit Agreement and accept the Conseco Guaranty in connection therewith, each Agreement Party agrees, for the benefit of each Guarantied Party, as follows:
ARTICLE I.
DEFINITIONS
SECTION 1.1. Certain Terms . Capitalized terms used herein, unless otherwise defined herein, shall have the respective meanings assigned thereto in the Credit Agreement or the Conseco Guaranty Documents; provided that such definitions shall survive any termination of the Credit Agreement or any Conseco Guaranty Document. In the event that any such capitalized term is defined both in the Appendix and any other document referred to above, the definition contained in the Appendix shall govern. In addition, when used herein the following terms shall have the following meanings (such definitions to be equally applicable to the singular and plural forms thereof):
"Agent" has the meaning set forth the in Preamble.
"Agreement" has the meaning set forth in the Preamble.
"Agreement Party" means each of Obligor, Guarantor, Subordinated Lender and Subordinated Borrower.
"Appendix" has the meaning assigned to such term in the Conseco Guaranty.
"Banks" has the meaning set forth in the Preamble.
"Charges" has the meaning assigned to such term in the Credit Agreement.
"CIHC Guaranty" means each of (a) this Agreement, (b) the Guaranty and Subordination Agreements dated as of the date hereof by CIHC and Conseco relating to (i) the Guaranty of Conseco dated as of the date hereof with respect to a credit agreement dated as of the date hereof refinancing obligations under an Amended and Restated Credit Agreement dated as of August 26, 1997 and (ii) the Guaranty of Conseco dated as of the date hereof with respect to a credit agreement dated as of the date hereof refinancing obligations under a Credit Agreement dated as of August 21, 1998, and (c) the Guaranty and Subordination Agreements dated September 22, 2000 by CIHC and Conseco relating to the obligations of Conseco in respect of (i) the Five-Year Credit Agreement dated as of September 25, 1998 among Conseco, certain financial institutions and Bank of America, N.A., as agent, as amended, (ii) the 364-Day Credit Agreement dated as of September 25, 1998 among Conseco, certain financial institutions and Bank of America, N.A., as agent, as amended, (iii) the Senior Secured Revolving Credit Agreement, dated as of May 30, 2000 among Conseco, certain financial institutions and The Chase Manhattan Bank, as administrative agent, as amended, (iv) the Amended and Restated Guaranty dated August 26, 1997 by Conseco with respect to an Amended and Restated Credit Agreement, dated as of August 26, 1997, among certain individual borrowers, certain financial institutions and Bank of America, N.A., as administrative agent, as amended, (v) the Guaranty dated as of August 21, 1998 by Conseco with respect to the Credit Agreement, dated as of August 21, 1998, among certain financial institutions and Bank of America, N.A., as administrative agent, as amended, and (vi) the Amended and Restated Guaranty, dated as of September 22, 2000 by Conseco with respect to the Existing Credit Agreement, as amended, as each of the foregoing may be amended, modified or supplemented from time to time.
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"Conseco" means Conseco, Inc.
"Conseco Guaranty" has the meaning set forth in the fifth Recital.
"Conseco Guaranty Documents" means the collective reference to the Conseco Guaranty and any other agreement entered into by Obligor in connection therewith.
"Credit Agreement" has the meaning set forth in the Preamble.
"Default" has the meaning assigned to such term in the Appendix.
"Event of Default" has the meaning assigned to such term in the Appendix.
"Existing Agreement" shall have the meaning set forth in the second Recital.
"Existing Conseco Guaranty" shall have the meaning set forth in the first Recital.
"Existing Conseco Guaranty Documents" means the collective reference to the Existing Conseco Guaranty, the Restructuring Document and any other agreement entered into by Obligor in connection therewith.
"Existing Credit Agreement" shall have the meaning set forth in the first Recital.
"Existing Loans" shall have the meaning assigned to such term in the Credit Agreement.
"Guarantied Obligations" has the meaning set forth in Section 2.1.
"Guarantied Parties" has the meaning set forth in the Preamble.
"Guarantor" means CIHC, Incorporated, in its capacity as guarantor of the Guarantied Obligations.
"Indemnified Parties" has the meaning set forth in Section 5.1.
"Investment Grade Status" has the meaning assigned to such term in the Appendix.
"Lehman Agreement" has the meaning assigned to such term in the Appendix.
"Near-Term Facilities Termination Date" has the meaning assigned to such term in the Appendix.
"Obligations" means all debts, liabilities, obligations, covenants and duties for the payment of money owing by Obligor pursuant to any Conseco Guaranty Document, whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising.
"Obligor" means Conseco, Inc., in its capacity as obligor in respect of the Obligations.
"Reorganization" has the meaning set forth in Section 3.2(a).
"Restructuring Document" has the meaning set forth in the first Recital.
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"Senior Creditors" means any holder or beneficiary of any Senior Debt, or any authorized representative thereof.
"Senior Debt" means (a) all obligations of Guarantor under Article II, (b) all "Senior Debt" under and as defined in any other CIHC Guaranty, (c) all "Senior Debt" under and as defined in the Guaranty and Subordination Agreement entered into in connection with the Lehman Agreement and (d) all other "Senior Debt" (or comparable concept) under and as defined in any subordination provision or agreement relating to or entered into in connection with any Contingent Obligation of CIHC pursuant to Section 4.01(d)(i) or (d)(iv) of the Appendix.
"Subordinated Borrower" means CIHC, Incorporated, in its capacity as obligor in respect of the Subordinated Debt.
"Subordinated Debt" means the principal amount of any Indebtedness owing by Subordinated Borrower to Subordinated Lender from time to time outstanding and unpaid, together with accrued and unpaid interest thereon.
"Subordinated Lender" means Conseco, Inc., in its capacity as holder of the Subordinated Debt.
"Subrogation Rights" has the meaning set forth in Section 2.6.
ARTICLE II.
GUARANTY PROVISIONS
SECTION 2.1. Guaranty . Guarantor hereby absolutely, unconditionally and irrevocably:
(a) guaranties to the Guarantied Parties the full and punctual payment when due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise, and at all times thereafter, of all Obligations (including all such amounts which would become due but for the operation of the automatic stay provisions under
Section 362(a) of the United States Bankruptcy Code, 11 U.S.C. ss.362(a), and the operation of Sections 502(b) and 506(b) of the United States Bankruptcy Code, 11 U.S.C. ss.502(b) and ss.506(b)) (all such Obligations collectively called the "Guarantied Obligations"); and
(b) indemnifies and holds harmless each Guarantied Party or any other holder of any Guarantied Obligations for any and all costs and expenses (including, without limitation, reasonable attorneys' fees and expenses) incurred by such Guarantied Party or such holder, as the case may be, in enforcing any rights under this Agreement;
The guaranty set forth in this Article II constitutes a guaranty of payment when due and not of collection, and Guarantor specifically agrees that it shall not be necessary or required that any Guarantied Party or any other holder of any Guarantied Obligations exercise any right, assert any claim or demand or enforce any remedy whatsoever against Obligor or any other Person before the performance of, or as a condition to, the obligations of Guarantor hereunder. Anything herein or in any other Loan Document to the contrary notwithstanding, the maximum liability of Guarantor hereunder shall in no event exceed the amount which can be guaranteed by Guarantor under applicable federal and state laws relating to the insolvency of debtors.
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SECTION 2.2. Acceleration of Guaranty . Guarantor agrees that, in the event of the insolvency of Guarantor, or the inability or failure of Guarantor to pay debts as they become due, or an assignment by Guarantor for the benefit of creditors, or the commencement of any case or proceeding in respect of Obligor or Guarantor under any bankruptcy, insolvency or similar federal or state laws, and if such event shall occur at a time when any of the Guarantied Obligations may not then be due and payable, Guarantor will pay to the Banks forthwith the full amount which would be payable hereunder by Guarantor if all the Guarantied Obligations were then due and payable.
SECTION 2.3. Guaranty Absolute, etc . This Agreement shall in all respects be a continuing, absolute, unconditional and irrevocable guaranty of payment, and shall remain in full force and effect until all Guarantied Obligations have been paid in full and all obligations of Guarantor hereunder shall have been paid in full. Guarantor guarantees that the Guarantied Obligations will be paid strictly in accordance with the terms of the Conseco Guaranty Documents and each other Loan Document under which they arise, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of any Guarantied Party or any holder of any Guarantied Obligations. The liability of Guarantor under this Agreement shall be absolute, unconditional and irrevocable irrespective of:
(a) any lack of validity, legality or enforceability of the Restructuring Document, the Existing Credit Agreement, any Existing Conseco Guaranty Document, the Existing Agreement, the Credit Agreement, any Conseco Guaranty Document or any other Loan Document;
(b) the failure of any Guarantied Party:
(i) to assert any claim or demand or to enforce any right or remedy against Obligor or any other Person under the provisions of the Credit Agreement, any Conseco Guaranty Document, any other Loan Document or otherwise; or
(ii) to exercise any right or remedy against any other guarantor of, or collateral securing, any Guarantied Obligations;
(c) any change in the time, manner or place of payment of, or in any other term of, all or any of the Guarantied Obligations, or any other extension, compromise or renewal of any Guarantied Obligations;
(d) any reduction, limitation, impairment or termination of the Guarantied Obligations for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to (and Guarantor hereby waives any right to or claim of) any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality, nongenuineness, irregularity, compromise, unenforceability of, or any other event or occurrence affecting, the Guarantied Obligations;
(e) any amendment to, rescission, waiver, or other modification of, or any consent to any departure from, any of the terms of the Credit Agreement, any Conseco Guaranty Document or any other Loan Document;
(f) any addition, exchange, release, surrender or non-perfection of any collateral, or any amendment to or waiver or release or addition of, or consent to any departure from, any other guaranty held by any Guarantied Party or any other holder of the Guarantied Obligations; or
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(g) any other circumstance which might otherwise constitute a defense available to, or a legal or equitable discharge of, Obligor, any surety or any guarantor.
SECTION 2.4. Reinstatement, etc . Guarantor agrees that this Agreement shall continue to be effective or be reinstated, as the case may be, if at any time any payment (in whole or in part) of any of the Guarantied Obligations is rescinded or must otherwise be restored by any Guarantied Party or any other holder of any Guarantied Obligations, upon the insolvency, bankruptcy or reorganization of Obligor, all as though such payment had not been made.
SECTION 2.5. Waiver, etc. Guarantor hereby waives promptness, diligence, notice of acceptance and any other notice with respect to any of the Guarantied Obligations, and this Agreement and any requirement that the Agent, any other Guarantied Party or any other holder of Guarantied Obligations protect, secure, perfect or insure any security interest or Lien, or any property subject thereto, or exhaust any right or take any action against Obligor or any other Person (including any other guarantor) or entity or any collateral securing the Guarantied Obligations.
SECTION 2.6. Waiver of Subrogation; Subordination . Guarantor hereby irrevocably waives with respect to Obligor, until the prior indefeasible payment in full in cash of all Guarantied Obligations, any claim or other rights which it may now or hereafter acquire against Obligor that arises from the existence, payment, performance or enforcement of Guarantor's obligations under this Article II, including any right of subrogation, reimbursement, exoneration, or indemnification, any right to participate in any claim or remedy of the Guarantied Parties against Obligor or any collateral which the Agent now has or hereafter acquires, whether or not such claim, remedy or right (all such claims, remedies and rights being collectively called "Subrogation Rights") arises in equity, or under contract, statute or common law, including the right to take or receive from Obligor, directly or indirectly, in cash or other property or by set-off or in any manner, payment or security on account of such claim or other rights. If any amount shall be paid to Guarantor in violation of the preceding sentence and the Guarantied Obligations shall not have been paid in cash, in full, such amount shall be deemed to have been paid to Guarantor for the benefit of, and held in trust for, the Guarantied Parties, and shall forthwith be paid to the Guarantied Parties to be credited and applied upon the Guarantied Obligations, whether matured or unmatured. Guarantor acknowledges that it will receive direct and indirect benefits from the Restructuring Document, the Conseco Guaranty, and the Credit Agreement and that the waiver set forth in this Section 2.6 is knowingly made in contemplation of such benefits.
SECTION 2.7. Successors, Transferees and Assigns; Transfers of Guarantied Obligations, etc . This Agreement shall:
(a) be binding upon Guarantor, and its successors, transferees and assigns; and
(b) inure to the benefit of and be enforceable by the Agent and each other Guarantied Party.
Without limiting the generality of clause (b), any Bank may assign or otherwise transfer (in whole or in part) any Guarantied Obligation held by it to any other Person upon the terms and conditions set forth in the Credit Agreement, and such other Person shall thereupon become vested with all rights and benefits in respect thereof granted to such Bank under any Loan Document (including this Agreement) or otherwise.
SECTION 2.8. Payments Free and Clear of Taxes, etc . Guarantor hereby agrees that:
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(a) any and all payments made by Guarantor hereunder shall be made in accordance with Section 4.5 of the Credit Agreement free and clear of, and without deduction for, any and all Charges, to the same extent as if Guarantor were a "Borrower" thereunder;
(b) Guarantor hereby indemnifies and holds harmless each Guarantied Party and each other holder of any Guarantied Obligation for the full amount of any Charges paid by such Guarantied Party or such holder, as the case may be, and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto; and
(c) without prejudice to the survival of any other agreement of Guarantor hereunder, the agreements and obligations of Guarantor contained in this Section 2.8 shall survive the payment in full of the Guarantied Obligations.
SECTION 2.9. Right of Offset . In addition to and not in limitation of all rights of offset that any Guarantied Party or any other holder of any Guarantied Obligation may have under applicable law or any other Loan Document, subject to the terms of the Credit Agreement, each Guarantied Party or other holder of any Guarantied Obligation shall, during the continuance of any Event of Default and whether or not such Guarantied Party or such holder has made any demand or whether or not Guarantor's obligations are matured, have the right to appropriate and apply to the payment of Guarantor's obligations hereunder all deposits (general or special, time or demand, provisional or final) then or thereafter held by, and other indebtedness or property then or thereafter owing to, such Guarantied Party or other holder, whether or not related to this Agreement or any transaction hereunder.
ARTICLE III.
SUBORDINATION
SECTION 3.1. Payments on Subordinated Debt. Notwithstanding anything to the contrary in the terms or arrangements governing the Subordinated Debt, no payment or prepayment of principal of or interest on the Subordinated Debt may be made, directly or indirectly, at any time after (a) (i) any Guarantied Party has made a claim under the Conseco Guaranty in respect of the principal amount of any of the Loans under the Credit Agreement or (ii) Obligor's obligations under the Conseco Guaranty shall have been accelerated (including, without limitation, pursuant to the provision in the Conseco Guaranty that is the equivalent of Section 2.2 of this Agreement) or (b) a Reorganization (including any proceeding in respect thereof) shall have been commenced.
SECTION 3.2. Subordination. (a) Subject to Section 3.1, payment of the Subordinated Debt is and shall be expressly subordinate and junior in right of payment to the prior payment in full in cash of the Senior Debt to the extent and in the manner set forth herein, and the Subordinated Debt is hereby so subordinated as a claim against Subordinated Borrower or any of the assets of Subordinated Borrower, whether such claim be (i) in the event of any distribution of the assets of Subordinated Borrower upon any voluntary or involuntary dissolution, winding-up, total or partial liquidation or reorganization, or bankruptcy, insolvency, receivership or other statutory or common law proceedings or arrangements involving Subordinated Borrower or the readjustment of its liabilities or any assignment for the benefit of creditors or any marshaling of its assets or liabilities (collectively called a "Reorganization"), or (ii) other than in connection with a Reorganization, to the prior payment in full in cash of the Senior Debt.
(b) If Subordinated Lender shall receive any payment in violation of the terms hereof, it shall hold such payment in trust for the benefit of the Senior Creditors and forthwith pay it over to
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the Senior Creditors, ratably according to the aggregate amounts remaining unpaid on account of the Senior Debt, for application to and payment of the Senior Debt.
(c) In the event of any Reorganization relative to Subordinated Borrower or its properties, then all of the Senior Debt shall first be paid in full in cash before any payment is made upon the Subordinated Debt, and in any such proceedings any payment or distribution of any kind or character, whether in cash or property or securities, which may be payable or deliverable in respect of the Subordinated Debt shall be paid or delivered directly to the Senior Creditors, ratably according to the aggregate amounts remaining unpaid on account of the Senior Debt, for application in payment of the Senior Debt, unless and until all the Senior Debt is paid in full in cash, and Subordinated Lender hereby irrevocably authorizes the Agent, as attorney-in-fact for Subordinated Lender, to vote any claim or proof of claim in such proceedings in respect of the Subordinated Debt, to file or prove any claim in such proceedings in respect of the Subordinated Debt, to demand, sue for, collect and receive any such payment or distribution, to apply such payment or distribution to the payment of the Senior Debt, and to take such other action (including acceptance or rejection of any plan of Reorganization) in the name of Subordinated Lender or of the relevant Senior Creditors as the Agent may deem necessary or advisable for the enforcement of the provisions hereof. Subordinated Lender shall execute and deliver such other and further powers of attorney, assignments, proofs of claim or other instruments, and take such other actions, as may be requested by the Agent in order to enable the Agent to accomplish any of the foregoing, but only with respect to Subordinated Lender's capacity as a holder hereof and not in respect of any other relationship between Subordinated Lender and Subordinated Borrower. Consistent with, but not in limitation of, the foregoing, in such an event, the Agent shall be deemed to be the assigned (and thus the holder) of such claims or proof of claims and shall have the right to assert and vote such claims in any Reorganization, including, without limitation, through the filing of any proof of claim therein and the casting of any ballots to accept or reject any plan of reorganization proposed by, for, or with respect to any such Reorganization.
(d) In the event that, notwithstanding the foregoing, upon any such Reorganization, any payment or distribution of the assets of Subordinated Borrower of any kind or character, whether in cash, property or securities, shall be received by Subordinated Lender in respect of the Subordinated Debt before all Senior Debt is paid in full in cash, such payment or distribution shall be held in trust for the Senior Creditors and shall forthwith be paid over to the Senior Creditors, ratably according to the aggregate amounts remaining unpaid on account of the Senior Debt, for application to the payment of the Senior Debt until all Senior Debt shall have been paid in full in cash.
been paid in full in cash, except as expressly provided by Section 3.1, it will not take, demand or receive, or take any action to accelerate or collect, any payment of all or any part of the Subordinated Debt.
(f) The Senior Creditors, or any of them, may, at any time and from time to time, without the consent of or notice to Subordinated Lender, without incurring any responsibility to Subordinated Lender, and without impairing or releasing any of the rights of any Senior Creditor, or any of the obligations of Subordinated Lender:
(i) change the amount or terms of or renew or extend any Senior Debt or enter into or amend in any manner any agreement relating to any Senior Debt;
(ii) sell, exchange, release or otherwise deal with any property at any time pledged or mortgaged to secure any Senior Debt;
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(iii) release anyone liable in any manner for the payment or collection of any Senior Debt; and
(iv) exercise or refrain from exercising any rights against Subordinated Borrower and others (including Subordinated Lender).
(g) Subordinated Lender hereby waives notice of or proof of reliance by any Senior Creditor upon the provisions hereof, and the Senior Debt shall conclusively be deemed to have been created, contracted, incurred or maintained in reliance upon the provisions hereof.
(h) Each Senior Creditor shall be a third-party beneficiary of the provisions of this Section 3.2.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
Each Agreement Party represents and warrants to each Guarantied Party that:
SECTION 4.1. Authorization. Such Agreement Party (a) has the power to execute, deliver and perform this Agreement and (b) has taken all necessary action to authorize the execution, delivery and performance by it of this Agreement.
SECTION 4.2. No Conflict. The execution, delivery and performance by such Agreement Party of this Agreement does not and will not (a) contravene or conflict with any provision of any law, statute, rule or regulation, (b) contravene or conflict with, result in any breach of, or constitute a default under, any material agreement or instrument binding on such Agreement Party or any of its Subsidiaries (including, without limitation, any writ, judgment, injunction or other similar court order), (c) result in the creation or imposition of or the obligation to create or impose any Lien upon any of the property or assets of such Agreement Party or any of its Subsidiaries or (d) contravene or conflict with any provision of the articles of incorporation or bylaws of such Agreement Party.
SECTION 4.3. Binding Effect . This Agreement constitutes the legal, valid and binding obligations of such Agreement Party, enforceable against such Agreement Party in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, or similar laws affecting the enforcement of creditors' rights generally or by equitable principles relating to enforceability.
SECTION 4.4. Solvent . After giving effect to this Agreement, Guarantor and its Subsidiaries, taken as a whole, are Solvent. As used in this
Section 4.4, "Solvent" shall mean, with respect to any Person on a particular date, that on such date: (a) the fair value of the property of such Person is greater than the amount of such Person's liabilities (including disputed, contingent and unliquidated liabilities) as such value is established and liabilities evaluated for purposes of Section 101(31) of the Bankruptcy Code and, in the alternative, for purposes of the Uniform Fraudulent Transfer Act or Uniform Fraudulent Conveyance Act; (b) the present fair saleable value of the property of such Person is not less than the amount that will be required to pay the probably liability of such Person on its debts as they become absolute and matured; (c) such Person is able to realize is able to realize upon its property and pay its debts and other liabilities (including disputed, contingent and unliquidated liabilities) as they mature in the normal course of business; (d) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay as such debts and liabilities
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mature; and (e) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person's property would constitute unreasonably small capital.
ARTICLE V.
MISCELLANEOUS
SECTION 5.1. Indemnity. Each Agreement Party agrees to indemnify the Agent, each Bank, their Affiliates and their respective directors, officers, employees, persons controlling or controlled by any of them or their respective agents, consultants, attorneys and advisors (the "Indemnified Parties") and hold each Indemnified Party harmless from and against any and all liabilities, losses, claims, damages, costs and expenses of any kind to which any of the Indemnified Parties may become subject, whether directly or indirectly (including, without limitation, the reasonable fees and disbursements of counsel for any Indemnified Party), relating to or arising out of this Agreement; provided, that no Indemnified Party shall have the right to be indemnified hereunder for its own gross negligence or willful misconduct as determined by a court of competent jurisdiction. All obligations of each Agreement Party provided for in this Section 5.1 shall survive termination of the Credit Agreement, any Conseco Guaranty Document and this Agreement.
SECTION 5.2. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including facsimile or similar writing) and shall be given to such party at its address or facsimile number set forth on the signature pages hereof or such other address or facsimile number as such party may hereafter specify for the purpose by written notice to the Agent. Each such notice, request or other communication shall be effective (a) if given by facsimile, when such facsimile is transmitted to the facsimile number specified in this Section 5.2, (b) if given by mail, seventy-two (72) hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid or (c) if given by any other means, when delivered at the address specified in this Section 5.2.
SECTION 5.3. Successors and Assigns. This Agreement, and the terms, covenants and conditions hereof, shall be binding upon and inure to the benefit of the parties hereto, and their respective successors and assigns, except no Agreement Party shall be permitted to assign this Agreement nor any interest or obligation herein without the consent of the Agent.
SECTION 5.4. SUBMISSION TO JURISDICTION, ETC . EACH AGREEMENT PARTY AND THE AGENT HEREBY IRREVOCABLY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE SUPREME COURT OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK OVER ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND EACH AGREEMENT PARTY AND THE AGENT HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE OR TO THE EXTENT PERMITTED BY LAW, FEDERAL COURT. EACH AGREEMENT PARTY AND THE AGENT HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE IN ANY ACTION OR PROCEEDING (WHETHER BROUGHT BY ANY AGREEMENT PARTY OR ANY OF THEIR RESPECTIVE SUBSIDIARIES, THE AGENT, ANY BANK OR OTHERWISE) IN ANY COURT HEREIN ABOVE SPECIFIED IN THIS SECTION 5.4 AS WELL AS ANY RIGHT IT MAY NOW OR HEREAFTER HAVE TO REMOVE ANY SUCH ACTION OR PROCEEDING, ONCE COMMENCED, TO ANOTHER COURT ON THE GROUNDS OF FORUM NON CONVENIENS OR OTHERWISE. EACH AGREEMENT PARTY AND THE AGENT AGREES THAT A FINAL
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JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.
SECTION 5.5. Amendments; Release . Notwithstanding anything to the contrary contained in the Credit Agreement, the provisions of this Agreement may from time to time be amended, modified or waived, if such amendment, modification or waiver is in writing and consented to by each affected Agreement Party and the Agent (with the consent of the Required Banks), and then any such amendment, modification, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided that, except as set forth in Section 5.14 of this Agreement, no such amendment, modification or waiver which would permit the release or termination of all or a material portion of Guarantor's obligations under this Agreement shall be effective without the consent of each Bank.
SECTION 5.6. Section Headings . The section headings in this Agreement are inserted for convenience of reference and shall not be considered a part of this Agreement or used in its interpretation.
SECTION 5.7. Acknowledgments . No action of the Agent permitted hereunder shall in any way affect or impair the rights of the Agent and the obligations of each Agreement Party under this Agreement. Each Agreement Party hereby acknowledges that there are no conditions to the effectiveness of this Agreement. Each Agreement Party hereby further acknowledges and agrees to make such deliveries as are required of it and comply with the other provisions applicable to it pursuant to the provisions of the Credit Agreement.
SECTION 5.8. Obligations Not Limited . All obligations of the Guarantor and rights of the Guarantied Parties in respect of the Guarantied Obligations expressed in this Agreement shall be in addition to and not in limitation of those provided in applicable law or in any other written instrument or agreement relating to any of the Guarantied Obligations.
SECTION 5.9. GOVERNING LAW . THIS AGREEMENT SHALL BE A CONTRACT MADE UNDER AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
SECTION 5.10. Counterparts . This Agreement may be executed in any number of counterparts, each of which shall for all purposes be deemed an original, but all such counterparts shall constitute but one and the same agreement. Each Agreement Party hereby acknowledges receipt of a true, correct and complete counterpart of this Agreement.
SECTION 5.11. Agent . The Agent acts herein as agent for itself, the Banks and any and all future holders of the Guarantied Obligations.
SECTION 5.12. WAIVER OF TRIAL BY JURY . EACH AGREEMENT PARTY AND THE AGENT HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM CONCERNING ANY RIGHTS UNDER THIS AGREEMENT OR ANY OTHER DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH, OR ARISING FROM ANY BANKING RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT AND AGREES THAT ANY SUCH ACTION, PROCEEDING OR COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY; THIS PROVISION IS A MATERIAL
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INDUCEMENT FOR THE GUARANTIED PARTIES ENTERING INTO THE RESTRUCTURING DOCUMENT.
SECTION 5.13. No Limitation on Remedies . No failure to exercise and no delay in exercising, on the part of the Agent or any other Guarantied Party, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.
SECTION 5.14. Release of This Agreement . This Agreement shall be terminated and Guarantor shall be released from all of its obligations hereunder on the first date after the Near-Term Facilities Termination Date on which Conseco, Inc. has Investment Grade Ratings Status, as long as no Default or Event of Default shall have occurred and be continuing on such date.
IN WITNESS WHEREOF, each Agreement Party has caused this Guaranty and Subordination Agreement to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written.
CIHC, INCORPORATED, as Guarantor and Subordinated Borrower

By: /s/ David A. Hill
    ---------------------------------------
    Name: David A. Hill
    Title: Vice President	

Address for Notices:

11825 North Pennsylvania Street
Carmel, Indiana 46032
Attention: David K. Herzog
Fax: 317-817-6327
CONSECO, INC., as Obligor and Subordinated Lender

By: /s/ Thomas M. Hagerty
    ---------------------------------------
    Name: Thomas M. Hagerty
    Title:  Senior Vice President and Acting
               Chief Financial Officer	

Address for Notices:

11825 North Pennsylvania Street
Carmel, Indiana 46032
Attention: David K. Herzog
Fax: 317-817-6327
COLLATERAL AGREEMENT
made by
CONSECO, INC.
and
CIHC, INCORPORATED
in favor of
THE CHASE MANHATTAN BANK,
as Collateral Agent
Dated as of May 30, 2000

                                TABLE OF CONTENTS

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SECTION 1.  DEFINED TERMS....................................................................................1
     1.1  Definitions........................................................................................1
     1.2  Other Definitonal Provisions.......................................................................5

SECTION 2. GRANT OF SECURITY INTEREST .......................................................................5

SECTION 3.  REPRESENTATIONS AND WARRANTIES...................................................................6
     3.1  Title; No Other Liens..............................................................................6
     3.2  Perfected First Priority Liens.....................................................................6
     3.3  Investment Property................................................................................6

SECTION 4.  COVENANTS........................................................................................7
     4.1  Delivery of Instruments and Certificated Securities................................................7
     4.2  Payment of Obligations.............................................................................7
     4.3  Maintenance of Perfected Security Interest; Further Documentation..................................7
     4.4  Investment Property................................................................................7

SECTION 5.  REMEDIAL PROVISIONS..............................................................................9
     5.1  Investment Property................................................................................9
     5.2  Proceeds to be Turned Over To Collateral Agent.....................................................10
     5.3  Application of Proceeds............................................................................10
     5.4  Code and Other Remedies............................................................................11
     5.5  Registration Rights................................................................................11
     5.6  Waiver; Deficiency.................................................................................12

SECTION 6.  THE COLLATERAL AGENT.............................................................................13
     6.1  Collateral Agent's Appointment as Attorney-in-Fact, etc............................................13
     6.2  Duty of Collateral Agent...........................................................................14
     6.3  Execution of Financing Statements..................................................................15
     6.4  Authority of Collateral Agent......................................................................15

SECTION 7.  MISCELLANEOUS....................................................................................15
     7.1  Amendments.........................................................................................15
     7.2  Notices............................................................................................15
     7.3  No Waiver by Course of Conduct; Cumulative Remedies................................................16
     7.4  Enforcement Expenses; Indemnification..............................................................16
     7.5  Successors and Assigns.............................................................................16
     7.6  Counterparts.......................................................................................17
     7.7  Severability.......................................................................................17
     7.8  Section Headings...................................................................................17
     7.9  Integration........................................................................................17
     7.10 GOVERNING LAW......................................................................................17
     7.11 Acknowledgments....................................................................................17

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     7.12  Releases..........................................................................................17

SCHEDULES

Schedule 1   Notice Addresses
Schedule 2   Investment Property
Schedule 3   Perfection Matters	

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COLLATERAL AGREEMENT
COLLATERAL AGREEMENT, dated as of May 30, 2000, made by each of the signatories hereto (together with any other entity that may become a party hereto as provided herein, the "Grantors"), in favor of THE CHASE MANHATTAN BANK, as collateral agent (in such capacity, the "Collateral Agent") for the Secured Parties (as defined below).
W I T N E S S E T H:
WHEREAS, pursuant to the Credit Agreement, dated as of May 30, 2000 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the individual borrowers thereunder (the "Borrowers"), the banks and other financial institutions (the "Lenders") from time to time party thereto, and The Chase Manhattan Bank, as Administrative Agent (in such capacity, the "Administrative Agent"), the Lenders extended the maturity date of term loans made to the Borrowers thereunder;
WHEREAS, pursuant to the Senior Secured Revolving Credit Agreement (the "May 2000 Credit Agreement"), dated as of May 30, 2000, among Conseco, Inc. ("Conseco"), the banks and other financial institutions (the "May 2000 Lenders") from time to time party thereto, and The Chase Manhattan Bank, as administrative agent (in such capacity, the "May 2000 Administrative Agent"), the May 2000 Lenders have agreed to make revolving credit loans to Conseco on the terms and conditions set forth therein;
WHEREAS, each Grantor will derive substantial direct and indirect benefit from the Credit Agreement and the May 2000 Credit Agreement;
WHEREAS, it is a condition precedent to the obligation of the Lenders to enter into the Credit Agreement and the May 2000 Credit Agreement that the Grantors shall have executed and delivered this Agreement to the Collateral Agent for the ratable benefit of the Secured Parties; and
WHEREAS, it is a requirement under each of the Indentures that the assets in which a security interest is created hereunder must secure the Public Debt Securities issued thereunder equally and ratably with all other obligations secured hereby;
NOW, THEREFORE, in consideration of the premises and to induce the Administrative Agent and the Lenders to enter into the Credit Agreement and the May 2000 Credit Agreement and to satisfy the requirement referred to in the preceding paragraph, each Grantor hereby agrees with the Collateral Agent, for the ratable benefit of the Secured Parties, as follows:
SECTION 1. DEFINED TERMS
1.1 Definitions. (a) Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement, and
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the following terms are used herein as defined in the New York UCC: Certificated Security and Instruments.
(b) The following terms shall have the following meanings:
"Agreement": this Collateral Agreement, as the same may be amended,supplemented or otherwise modified from time to time.
"Capital Stock": any and all Shares, interests, participations or other equivalent (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation) and any and all warrants, rights or options to purchase any of the foregoing.
"CIHC": CIHC, Incorporated, a Delaware corporation, and a direct wholly owned Subsidiary of Conseco.
"Collateral": as defined in Section 2.
"Collateral Account": any collateral account established by the Collateral Agent as provided in Section 5.2.
"Default" as defined in either the Credit Agreement or the May 2000 Credit Agreement.
"D & O Grantor Obligations": with respect to any Grantor, all obligations and liabilities of such Grantor which may arise under or in connection with Guaranty, this Agreement or any other Loan Document to which such Grantor is a party, in each case whether on account of guarantee obligations, fees, indemnities, costs, expenses or otherwise (including, without limitation, all fees and disbursements of counsel to the Collateral Agent, the Administrative Agent or the Lenders that are required to be paid by such Grantor pursuant to the terms of this Agreement or any other Loan Document).
"Event of Default" as defined in the Credit Agreement or the May 2000 Credit Agreement.
"Grantor Obligations" collectively, (i) the D & O Grantor Obligations and (ii) the May 2000 Grantor Obligations.
"Holder Representative": (i) in respect of the D & O Grantor Obligations, the Administrative Agent, (ii) in respect of the May 2000 Grantor Obligations, the May 2000 Administrative Agent, (iii) in respect of the 1993 Indenture Obligations, the 1993 Indenture Trustee and (iv) in respect of the 1994 Indenture Obligations, the 1994 Indenture Trustee.
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"Holders": collectively, (i) the holders of the 1993 Indenture Obligations (including, when the context permits, the 1993 Indenture Trustee acting on behalf of such holders) and (ii) the holders of the 1994 Indenture Obligations (including, when the context permits, the 1994 Indenture Trustee acting on behalf of such holders).
"Indentures": the collective reference to the 1993 Indenture and the 1994 Indenture.
"Investment Property": the collective reference to all Pledged Obligations and all Pledged Stock.
"Issuers": the collective reference to each issuer of any Investment Property.
"May 2000 Grantor Obligations": with respect to any Grantor, all obligations and liabilities of such Grantor which may arise under or in connection with the May 2000 Credit Agreement or any other Loan Document (as defined in the May 2000 Credit Agreement) to which such Grantor is a party, in each case whether on account of guarantee obligations, fees, indemnities, costs, expenses or otherwise (including, without limitation, all fees and disbursements of counsel to the Collateral Agent, the May 2000 Administrative Agent or the May 2000 Lenders that are required to be paid by such Grantor pursuant to the terms of the May 2000 Credit Agreement or any other Loan Document (as defined in the May 2000 Credit Agreement)).
"New York UCC": the Uniform Commercial Code as from time to time in effect in the State of New York.
"Pledged Obligations": all pledged notes listed on Schedule 2, and Indebtedness owing by CIHC to any Grantor together with any interest, fees and other amounts owing by CIHC to such Grantor in respect thereof.
"Pledged Stock": the shares of Capital Stock listed on Schedule 2, together with any other shares, stock certificates, options or rights of any nature whatsoever in respect of the Capital Stock of CIHC, Conseco Finance or Conseco Capital Management, Inc. that may be issued or granted to, or directly held by, any Grantor while this Agreement is in effect.
"Proceeds": all "proceeds" as such term is defined in Section 9-306(1) of the New York UCC and, in any event, shall include, without limitation, all dividends or other income from the Investment Property, collections thereon or distributions or payments with respect thereto.
"Public Debt Securities": collectively, (i) the 1993 Indenture Securities and (ii) the 1994 Indenture Securities.
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"Public Debt Trustees": collectively, (i) the 1993 Indenture Trustee and (ii) the 1994 Indenture Trustee.
"Secured Obligations": the collective reference to (a) the Grantor Obligations of each Grantor, (b) the 1993 Indenture Obligations, (c) the 1994 Indenture Obligations and (d) the Collateral Agent Fees (as defined in the Collateral Sharing Agreement).
"Secured Parties": the collective reference to (a) the Lenders, (b) the May 2000 Lenders, (c) the Holders, (d) the Administrative Agent, (e) the May 2000 Administrative Agent and (f) the Collateral Agent.
"Securities Act": the Securities Act of 1933, as amended.
"Shared Collateral" shall mean the collective reference to (i) "Collateral" under and as defined in this Agreement and (ii) unless otherwise expressly provided therein, all other collateral under any other Shared Collateral Security Document.
"Shared Collateral Security Documents" shall mean (i) this Agreement and (ii) any other security document entered into by any Grantor in favor of the Collateral Agent that expressly provides that all or any portion of the collateral thereunder shall constitute "Shared Collateral" for the purposes of this Agreement.
"1993 Indenture Obligations": the unpaid principal of, and premium, if any, and interest on, the 1993 Indenture Securities (including, without limitation, interest accruing at the then applicable rate provided in the instruments governing the 1993 Indenture Securities after the maturity of the 1993 Indenture Securities and interest accruing at the then applicable rate provided in such instruments after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding).
"1993 Indenture Securities": the securities issued pursuant to the 1993 Indenture.
"1993 Indenture Trustee": Shawmut Bank Connecticut, National Association, in its capacity as trustee under the 1993 Indenture, and any successor trustee appointed under the 1993 Indenture.
"1994 Indenture Obligations": the unpaid principal of, and premium, if any, and interest on, the 1994 Indenture Securities (including, without limitation, interest accruing at the then applicable rate provided in the instruments governing the 1994 Indenture Securities after the maturity of the 1994 Indenture Securities and interest accruing at the then applicable rate provided in such instruments after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding,
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whether or not a claim for post-filing or post-petition interest is allowed in such proceeding).
"1994 Indenture Securities": the securities issued pursuant to the 1994 Indenture.
"1994 Indenture Trustee": The Bank of New York (who assumed the responsibilities of LTCB Trust Company as of June 1, 1999), in its capacity as trustee under the 1994 Indenture, and any successor trustee appointed under the Indenture.
1.2 Other Definitional Provisions. (a) The words "hereof," "herein", "hereto" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section and Schedule references are to this Agreement unless otherwise specified.
(b) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.
(c) Where the context requires, terms relating to the Collateral or any part thereof, when used in relation to a Grantor, shall refer to such Grantor's Collateral or the relevant part thereof.
SECTION 2. GRANT OF SECURITY INTEREST
Each Grantor hereby assigns and transfers to the Collateral Agent, and hereby grants to the Collateral Agent, for the ratable benefit of the Secured Parties, a security interest in, all of the following property now owned or at any time hereafter acquired by such Grantor or in which such Grantor now has or at any time in the future may acquire any right, title or interest (collectively, the "Collateral"), as collateral security for the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of the Secured Obligations:
(a) all Investment Prtoperty;
(b) all books and records pertaining to the Collateral referred to in clauses (a) and (c) of this paragraph; and
(c) to the extent not otherwise included, all Proceeds and products of any and all of the foregoing and all collateral security and guarantees given by any Person with respect to any of the foregoing.
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SECTION 3. REPRESENTATIONS AND WARRANTIES
Each Grantor hereby represents and warrants to the Collateral Agent that:
3.1 Title; No Other Liens. Except for the security interest granted to the Collateral Agent for the ratable benefit of the Secured Parties pursuant to this Agreement, such Grantor owns each item of the Collateral free and clear of any and all Liens or claims of others. No financing statement or other public notice with respect to all or any part of the Collateral is on file or of record in any public office, except such as have been filed in favor of the Collateral Agent, for the ratable benefit of the Secured Parties, pursuant to this Agreement.
3.2 Perfected First Priority Liens. The security interests granted pursuant to this Agreement (a) upon completion of the filings and other actions specified on Schedule 3 (which, in the case of all filings and other documents referred to on said Schedule, have been delivered to the Collateral Agent in completed and duly executed form) will constitute valid perfected security interests in all of the Collateral in favor of the Collateral Agent, for the ratable benefit of the Secured Parties, as collateral security for the Secured Obligations, enforceable in accordance with the terms hereof against all creditors of such Grantor and any Persons purporting to purchase any Collateral from such Grantor and (b) are prior to all other Liens on the Collateral in existence on the date hereof.
3.3 Investment Property. (a) The shares of Pledged Stock pledged by such Grantor hereunder constitute all the issued and outstanding shares of all classes of the Capital Stock of each Issuer owned by the Grantor.
(b) All the shares of the Pledged Stock have been duly and validly issued and are fully paid and nonassessable.
(c) Each of the Pledged Obligations constitutes the legal, valid and binding obligation of the obligor with respect thereto, enforceable in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing.
(d) Such Grantor is the record and beneficial owner of, and has good and marketable title to, the Investment Property pledged by it hereunder, free of any and all Liens or options in favor of, or claims of, any other Person, except the security interest created by this Agreement.
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SECTION 4. COVENANTS
Each Grantor covenants and agrees with the Collateral Agent that, from and after the date of this Agreement until the Grantor Obligations shall have been paid in full:
4.1 Delivery of Instruments and Certificated Securities. If any amount payable under or in connection with any of the Collateral shall be or become evidenced by any Instrument or Certificated Security, such Instrument or Certificated Security shall be immediately delivered to the Collateral Agent, duly indorsed in a manner satisfactory to the Collateral Agent, to be held as Collateral pursuant to this Agreement.
4.2 Payment of Obligations. Such Grantor will pay and discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all taxes, assessments and governmental charges or levies imposed upon the Collateral or in respect of income or profits therefrom, as well as all claims of any kind (including, without limitation, claims for labor, materials and supplies) against or with respect to the Collateral, except that no such charge need be paid if the amount or validity thereof is currently being contested in good faith by appropriate proceedings, reserves in conformity with GAAP with respect thereto have been provided on the books of such Grantor and such proceedings could not reasonably be expected to result in a Material Adverse Effect.
4.3 Maintenance of Perfected Security Interest; Further Documentation. (a) Such Grantor shall maintain the security interest created by this Agreement as a perfected security interest having the priority described in
Section 3.2 and shall defend such security interest against the claims and demands of all Persons whomsoever.
(b) At any time and from time to time, upon the written request of the Collateral Agent, and at the sole expense of such Grantor, such Grantor will promptly and duly execute and deliver, and have recorded, such further instruments and documents and take such further actions as the Collateral Agent may reasonably request for the purpose of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted, including, without limitation, (i) filing any financing or continuation statements under the Uniform Commercial Code (or other similar laws) in effect in any jurisdiction with respect to the security interests created hereby and (ii) in the case of Investment Property and any other relevant Collateral, taking any actions necessary to enable the Collateral Agent to obtain "control" (within the meaning of the applicable Uniform Commercial Code) with respect thereto.
4.4 Investment Property. (a) If such Grantor shall become entitled to receive or shall receive any stock certificate (including, without limitation, any certificate representing a stock dividend or a distribution in connection with any reclassification, increase or reduction of capital or any certificate issued in connection with any reorganization), option or rights in respect of the Capital Stock of any Issuer, whether in addition to, in substitution of, as a conversion of, or in exchange for, any shares of the Pledged Stock, or otherwise in respect thereof, such Grantor
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shall accept the same as the agent of the Collateral Agent and the other Secured Parties, hold the same in trust for the Collateral Agent and the other Secured Parties and deliver the same forthwith to the Collateral Agent in the exact form received, duly indorsed by such Grantor to the Collateral Agent, if required, together with an undated stock power covering such certificate duly executed in blank by such Grantor and with, if the Collateral Agent so requests, signature guaranteed, to be held by the Collateral Agent, subject to the terms hereof, as additional collateral security for the Secured Obligations. Any sums paid upon or in respect of the Investment Property upon the liquidation or dissolution of any Issuer shall be paid over to the Collateral Agent to be held by it hereunder as additional collateral security for the Secured Obligations, and in case any distribution of capital shall be made on or in respect of the Investment Property or any property shall be distributed upon or with respect to the Investment Property pursuant to the recapitalization or reclassification of the capital of any Issuer or pursuant to the reorganization thereof, the property so distributed shall, unless otherwise subject to a perfected security interest in favor of the Collateral Agent, be delivered to the Collateral Agent to be held by it hereunder as additional collateral security for the Secured Obligations. If any sums of money or property so paid or distributed in respect of the Investment Property shall be received by such Grantor, such Grantor shall, until such money or property is paid or delivered to the Collateral Agent, hold such money or property in trust for the Collateral Agent and the other Secured Parties, segregated from other funds of such Grantor, as additional collateral security for the Secured Obligations.
(b) Without the prior written consent of the Collateral Agent, such Grantor will not (i) vote to enable, or take any other action to permit, any Issuer to issue any stock or other equity securities of any nature or to issue any other securities convertible into or granting the right to purchase or exchange for any stock or other equity securities of any nature of any Issuer, excluding any issuance (A) for fair value as determined by the Board of Directors of such Grantor and (B) pursuant to the warrant issued on May 11, 2000 to Lehman Brothers Holdings Inc. in respect of up to 5% of the common stock of Conseco Finance, (ii) sell, assign, transfer, exchange, or otherwise dispose of, or grant any option or waive any rights with respect to, the Investment Property or Proceeds thereof (except pursuant to a transaction expressly permitted by the Loan Documents or pursuant to the warrant issued on May 11, 2000 to Lehman Brothers Holdings Inc. in respect of up to 5% of the common stock of Conseco Finance), (iii) create, incur or permit to exist any Lien or option in favor of, or any claim of any Person with respect to, any of the Investment Property or Proceeds thereof, or any interest therein, except for the security interests created by this Agreement or any security interest securing additional indebtedness of Conseco or any of its Subsidiaries sharing equally and ratably in the Shared Collateral at the request of Conseco and consented to by the Collateral Agent in accordance with Section 6.3 of the Collateral Sharing Agreement or (iv) enter into any agreement or undertaking restricting the right or ability of such Grantor or the Collateral Agent to sell, assign or transfer any of the Investment Property or Proceeds thereof.
(c) In the case of each Grantor which is an Issuer, such Issuer agrees that (i) it will be bound by the terms of this Agreement relating to the Investment Property issued by it and will comply with such terms insofar as such terms are applicable to it, (ii) it will notify the
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Collateral Agent promptly in writing of the occurrence of any of the events described in Section 4.4(a) with respect to the Investment Property issued by it and (iii) the terms of Sections 5.1(c) and 5.5 shall apply to it, mutatis mutandis, with respect to all actions that may be required of it pursuant to
Section 5.1(c) or 5.5 with respect to the Investment Property issued by it.
SECTION 5. REMEDIAL PROVISIONS
5.1 Investment Property. (a) Unless an Event of Default shall have occurred and be continuing and the Collateral Agent shall have given notice to the Grantor of the Collateral Agent's intent to exercise its corresponding rights pursuant to Section 5.1(b), each Grantor shall be permitted to receive all cash dividends paid in respect of the Pledged Stock and all payments (other than payments or prepayments of principal) made in respect of the Pledged Obligations, in each case paid in the normal course of business of the relevant Issuer, to the extent permitted by the Loan Documents and the Loan Documents (as defined in the May 2000 Credit Agreement) (any such dividends or payments, "Excluded Payments"), and to exercise all voting and corporate rights with respect to the Investment Property; provided, however, that no vote shall be cast or corporate right exercised or other action taken which could reasonably be expected to impair the Collateral or which would be inconsistent with or result in any violation of any provision of this Agreement or any other Loan Document or the Loan Documents (as defined in the May 2000 Credit Agreement).
(b) If an Event of Default shall occur and be continuing and the Collateral Agent shall give notice of its intent to exercise such rights to the relevant Grantor or Grantors, (i) the Collateral Agent shall have the right to receive any and all cash dividends, payments or other Proceeds paid in respect of the Investment Property and make application thereof to the Secured Obligations in the order specified in the Collateral Sharing Agreement, and (ii) any or all of the Investment Property shall be registered in the name of the Collateral Agent or its nominee, and the Collateral Agent or its nominee may thereafter exercise (x) (if, in addition, all of the Liabilities shall be due and payable) all voting, corporate and other rights pertaining to such Investment Property at any meeting of shareholders of the relevant Issuer or Issuers or otherwise and (y) any and all rights of conversion, exchange and subscription and any other rights, privileges or options pertaining to such Investment Property as if it were the absolute owner thereof (including, without limitation, the right to exchange at its discretion any and all of the Investment Property upon the merger, consolidation, reorganization, recapitalization or other fundamental change in the corporate structure of any Issuer, or upon the exercise by any Grantor or the Collateral Agent of any right, privilege or option pertaining to such Investment Property, and in connection therewith, the right to deposit and deliver any and all of the Investment Property with any committee, depositary, transfer agent, registrar or other designated agency upon such terms and conditions as the Collateral Agent may determine), all without liability except to account for property actually received by it, but the Collateral Agent shall have no duty to any Grantor to exercise any such right, privilege or option and shall not be responsible for any failure to do so or delay in so doing.
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(c) Each Grantor hereby authorizes and instructs each Issuer of any Investment Property pledged by such Grantor hereunder to (i) comply with any instruction received by it from the Collateral Agent in writing that (x) states that an Event of Default has occurred and is continuing and (y) is otherwise in accordance with the terms of this Agreement, without any other or further instructions from such Grantor, and each Grantor agrees that each Issuer shall be fully protected in so complying, and (ii) unless otherwise expressly permitted hereby, pay any dividends or other payments with respect to the Investment Property directly to the Collateral Agent.
(d) Notwithstanding the foregoing, neither Collateral Agent nor its nominee may exercise any voting, corporate or other rights of control pertaining to such Investment Property at any meeting of shareholders of the relevant Issuer or Issuers (or any of their respective Subsidiaries or affiliates) or otherwise (i) unless and until it has received any and all material consents or approvals required for such exercise from any regulatory or governmental agency (including, but not limited to, insurance, banking and gaming commissions or agencies) having jurisdiction with respect to the Grantor or the Issuer (or any of their respective Subsidiaries or affiliates) or (ii) if to do so would violate any material statute, law, rule or regulation governing the ownership, change of ownership, control, or change of control of such Grantor or Issuer (or any of their respective Subsidiaries or affiliates).
5.2 Proceeds to be Turned Over To Collateral Agent. If an Event of Default shall occur and be continuing or, in the case of any Proceeds other than Excluded Payments (without duplication of any funds used to purchase loans pursuant to Section 6.4(b) of the Guaranty or prepay loans pursuant to
Section 2.6(b)(ii) of the May 2000 Credit Agreement), whether or not an Event of Default shall have occurred and be continuing, all Proceeds received by any Grantor consisting of cash, checks and other near-cash items shall be held by such Grantor in trust for the Collateral Agent and the other Secured Parties, segregated from other funds of such Grantor, and shall, forthwith upon receipt by such Grantor, be turned over to the Collateral Agent in the exact form received by such Grantor (duly indorsed by such Grantor to the Collateral Agent, if required). All Proceeds received by the Collateral Agent hereunder shall be held by the Collateral Agent in a Collateral Account maintained under its sole dominion and control. All Proceeds while held by the Collateral Agent in a Collateral Account (or by such Grantor in trust for the Collateral Agent and the other Secured Parties) shall continue to be held as collateral security for all the Secured Obligations and shall not constitute payment thereof until applied as provided in Section 5.3.
5.3 Application of Proceeds. At such intervals as may be agreed upon by Conseco and the Collateral Agent, the Collateral Agent may, or, if an Event of Default shall have occurred and be continuing or in connection with a mandatory purchase of Loans pursuant to Section 6.4(a) or 6.4(b) of the Guaranty, the Collateral Agent shall, promptly apply all or any part of Proceeds held in any Collateral Account in payment of the Secured Obligations in the order specified in the Collateral Sharing Agreement.
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5.4 Code and Other Remedies. If an Event of Default shall occur and be continuing, the Collateral Agent, on behalf of the Secured Parties, may exercise, in addition to all other rights and remedies granted to them in this Agreement and in any other instrument or agreement securing, evidencing or relating to the Secured Obligations, all rights and remedies of a secured party under the New York UCC or any other applicable law. Without limiting the generality of the foregoing, the Collateral Agent, without demand of performance or other demand, presentment, protest, advertisement or notice of any kind (except any notice required by law referred to below) to or upon any Grantor or any other Person (all and each of which demands, defenses, advertisements and notices are hereby waived), may in such circumstances forthwith collect, receive, appropriate and realize upon the Collateral, or any part thereof, and/or may forthwith sell, lease, assign, give option or options to purchase, or otherwise dispose of and deliver the Collateral or any part thereof (or contract to do any of the foregoing), in one or more parcels at public or private sale or sales, at any exchange, broker's board or office of the Collateral Agent or any other Secured Party or elsewhere upon such terms and conditions as it may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk. The Collateral Agent or any other Secured Party shall have the right upon any such public sale or sales, and, to the extent permitted by law, upon any such private sale or sales, to purchase the whole or any part of the Collateral so sold, free of any right or equity of redemption in any Grantor, which right or equity is hereby waived and released. Each Grantor further agrees, at the Collateral Agent's request, to assemble the Collateral and make it available to the Collateral Agent at places which the Collateral Agent shall reasonably select, whether at such Grantor's premises or elsewhere. The Collateral Agent shall apply the net proceeds of any action taken by it pursuant to this Section 5.4, after deducting all reasonable costs and expenses of every kind incurred in connection therewith or incidental to the care or safekeeping of any of the Collateral or in any way relating to the Collateral or the rights of the Collateral Agent and the other Secured Parties hereunder, including, without limitation, reasonable attorneys' fees and disbursements, to the payment in whole or in part of the Secured Obligations, in the order specified in the Collateral Sharing Agreement, and only after such application and after the payment by the Collateral Agent of any other amount required by any provision of law, including, without limitation, Section 9-504(1)(c) of the New York UCC, need the Collateral Agent account for the surplus, if any, to any Grantor. To the extent permitted by applicable law, each Grantor waives all claims, damages and demands it may acquire against the Collateral Agent or any other Secured Party arising out of the exercise by them of any rights hereunder. A notice of a proposed sale or other disposition of a substantial portion of the Collateral shall be required, and such notice shall be deemed reasonable and proper if given at least 20 days before such sale or other disposition.
5.5 Registration Rights. (a) If the Collateral Agent shall determine to exercise its right to sell any or all of the Pledged Stock pursuant to Section 5.4, and if in the opinion of the Collateral Agent it is necessary or advisable to have the Pledged Stock, or that portion thereof to be sold, registered under the provisions of the Securities Act, the relevant Grantor will cause the Issuer thereof to (i) execute and deliver, and cause the directors and officers of such Issuer to execute and deliver, all such instruments and documents, and do or cause to be done all such
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other acts as may be, in the opinion of the Collateral Agent, necessary or advisable to register the Pledged Stock, or that portion thereof to be sold, under the provisions of the Securities Act, (ii) use its best efforts to cause the registration statement relating thereto to become effective and to remain effective for a period of one year from the date of the first public offering of the Pledged Stock, or that portion thereof to be sold, and (iii) make all amendments thereto and/or to the related prospectus which, in the opinion of the Collateral Agent, are necessary or advisable, all in conformity with the requirements of the Securities Act and the rules and regulations of the Securities and Exchange Commission applicable thereto. Each Grantor agrees to cause such Issuer to comply with the provisions of the securities or "Blue Sky" laws of any and all jurisdictions which the Collateral Agent shall designate and to make available to its security holders, as soon as practicable, an earnings statement (which need not be audited) which will satisfy the provisions of
Section 11(a) of the Securities Act.
(b) Each Grantor recognizes that the Collateral Agent may be unable to effect a public sale of any or all the Pledged Stock, by reason of certain prohibitions contained in the Securities Act and applicable state securities laws or otherwise, and may be compelled to resort to one or more private sales thereof to a restricted group of purchasers which will be obliged to agree, among other things, to acquire such securities for their own account for investment and not with a view to the distribution or resale thereof. Each Grantor acknowledges and agrees that any such private sale may result in prices and other terms less favorable than if such sale were a public sale and, notwithstanding such circumstances, agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner. The Collateral Agent shall be under no obligation to delay a sale of any of the Pledged Stock for the period of time necessary to permit the Issuer thereof to register such securities for public sale under the Securities Act, or under applicable state securities laws, even if such Issuer would agree to do so.
(c) Each Grantor agrees to use its best efforts to do or cause to be done all such other acts as may be necessary to make such sale or sales of all or any portion of the Pledged Stock pursuant to this Section 5.5 valid and binding and in compliance with any and all other applicable laws, rules or regulations. Each Grantor further agrees that a breach of any of the covenants contained in this Section 5.5 will cause irreparable injury to the Collateral Agent and the other Secured Parties, that the Collateral Agent and the other Secured Parties have no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained in this Section 5.5 shall be specifically enforceable against such Grantor, and such Grantor hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants. In exercising its rights hereunder, the Collateral Agent will make a good faith effort to share access to the books and records that constitute Collateral with the applicable Grantor to the extent necessary to enable the Grantor to continue to conduct its business.
5.6 Waiver; Deficiency. Each Grantor waives and agrees not to assert any rights or privileges which it may acquire under Section 9-112 of the New York UCC. The obligors under the Loan Documents and the Loan Documents (as defined under the May 2000 Credit
13
Agreement) shall remain liable for any deficiency if the proceeds of any sale or other disposition of the Collateral are insufficient to pay the Secured Obligations and the fees and disbursements of any attorneys employed by the Collateral Agent or any other Secured Party to collect such deficiency.
SECTION 6. THE COLLATERAL AGENT
6.1 Collateral Agent's Appointment as Attorney-in-Fact, etc.
(a) Each Grantor hereby irrevocably constitutes and appoints the Collateral Agent and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of such Grantor and in the name of such Grantor or in its own name, for the purpose of carrying out the terms of this Agreement, to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish the purposes of this Agreement, and, without limiting the generality of the foregoing, each Grantor hereby gives the Collateral Agent the power and right, on behalf of such Grantor, without notice to or assent by such Grantor, to do any or all of the following:
(i) in the name of such Grantor or its own name, or otherwise, take possession of and indorse and collect any checks, drafts, notes, acceptances or other instruments for the payment of moneys due with respect to any Collateral and file any claim or take any other action or proceeding in any court of law or equity or otherwise deemed appropriate by the Collateral Agent for the purpose of collecting any and all such moneys due with respect to any Collateral whenever payable;
(ii) pay or discharge taxes and Liens levied or placed on or threatened against the Collateral, effect any repairs or any insurance called for by the terms of this Agreement and pay all or any part of the premiums therefor and the costs thereof;
(iii) execute, in connection with any sale provided for in
Section 5.4 or 5.5, any indorsements, assignments or other instruments of conveyance or transfer with respect to the Collateral; and
(iv) (1) direct any party liable for any payment under any of the Collateral to make payment of any and all moneys due or to become due thereunder directly to the Collateral Agent or as the Collateral Agent shall direct; (2) ask or demand for, collect, and receive payment of and receipt for, any and all moneys, claims and other amounts due or to become due at any time in respect of or arising out of any Collateral; (3) commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Collateral or any portion thereof and to enforce any other right in respect of any Collateral; (4) defend any suit, action or proceeding brought against such Grantor with respect to any Collateral; (5) settle, compromise or adjust any such suit, action or proceeding and, in connection therewith, give such discharges or releases as the
14
Collateral Agent may deem appropriate; and (7) generally, sell, transfer, pledge and make any agreement with respect to or otherwise deal with any of the Collateral as fully and completely as though the Collateral Agent were the absolute owner thereof for all purposes, and do, at the Collateral Agent's option and such Grantor's expense, at any time, or from time to time, all acts and things which the Collateral Agent deems necessary to protect, preserve or realize upon the Collateral and the Collateral Agent's and the other Secured Parties' security interests therein and to effect the intent of this Agreement, all as fully and effectively as such Grantor might do.
Anything in this Section 6.1(a) to the contrary notwithstanding, the Collateral Agent agrees that it will not exercise any rights under the power of attorney provided for in this Section 6.1(a) unless an Event of Default shall have occurred and be continuing.
(b) If any Grantor fails to perform or comply with any of its agreements contained herein, the Collateral Agent, at its option, but without any obligation so to do, may perform or comply, or otherwise cause performance or compliance, with such agreement.
(c) The expenses of the Collateral Agent incurred in connection with actions undertaken as provided in this Section 6.1, together with interest thereon at a rate per annum equal to the rate per annum at which interest would then be payable on past due Base Rate Loans under the Credit Agreement, from the date of payment by the Collateral Agent to the date reimbursed by the relevant Grantor, shall be payable by such Grantor to the Collateral Agent on demand.
(d) Each Grantor hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue hereof. All powers, authorizations and agencies contained in this Agreement are coupled with an interest and are irrevocable until this Agreement is terminated and the security interests created hereby are released.
6.2 Duty of Collateral Agent. The Collateral Agent's sole duty with respect to the custody, safekeeping and physical preservation of the Collateral in its possession, under Section 9- 207 of the New York UCC or otherwise, shall be to deal with it in the same manner as the Collateral Agent deals with similar property for its own account. Neither the Collateral Agent, any other Secured Party nor any of their respective officers, directors, employees or agents shall be liable for failure to demand, collect or realize upon any of the Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the request of any Grantor or any other Person or to take any other action whatsoever with regard to the Collateral or any part thereof. The powers conferred on the Collateral Agent and the other Secured Parties hereunder are solely to protect the Collateral Agent's and the other Secured Parties' interests in the Collateral and shall not impose any duty upon the Collateral Agent or any other Secured Party to exercise any such powers. The Collateral Agent and the other Secured Parties shall be accountable only for amounts that they actually receive as a result of the exercise of such powers, and neither they nor any of their officers, directors, employees or agents shall be
15
responsible to any Grantor for any act or failure to act hereunder, except for their own gross negligence or willful misconduct. The Collateral Agent will act in good faith towards each of the Holder Representatives in carrying out its duties and responsibilities under this Agreement and any Shared Collateral Security Document, including executing and delivering any documents reasonably requested to be so executed and delivered pursuant to either Indenture.
6.3 Execution of Financing Statements. Pursuant to Section 9-402 of the New York UCC and any other applicable law, each Grantor authorizes the Collateral Agent to file or record financing statements and other filing or recording documents or instruments with respect to the Collateral without the signature of such Grantor in such form and in such offices as the Collateral Agent determines appropriate to perfect the security interests of the Collateral Agent under this Agreement. A photographic or other reproduction of this Agreement shall be sufficient as a financing statement or other filing or recording document or instrument for filing or recording in any jurisdiction.
6.4 Authority of Collateral Agent. Each Grantor and each Secured Party by accepting the benefits of this Agreement acknowledges that the rights and responsibilities of the Collateral Agent under this Agreement with respect to any action taken by the Collateral Agent or the exercise or non-exercise by the Collateral Agent of any option, voting right, request, judgment or other right or remedy provided for herein or resulting or arising out of this Agreement shall, as between the Collateral Agent and the other Secured Parties, be governed by the Credit Agreement, the May 2000 Credit Agreement, the Collateral Sharing Agreement and such other agreements with respect thereto as may exist from time to time among them, but, as between the Collateral Agent and the Grantors, the Collateral Agent shall be conclusively presumed to be acting as agent for the Secured Parties with full and valid authority so to act or refrain from acting, and no Grantor or Secured Party shall be under any obligation, or entitlement, to make any inquiry respecting such authority.
SECTION 7. MISCELLANEOUS
7.1 Amendments. None of the terms or provisions of this Agreement may be waived, amended, supplemented or otherwise modified except in accordance with Section 6.3 of the Collateral Sharing Agreement.
7.2 Notices. All notices, requests and demands to or upon the Collateral Agent or any Grantor hereunder shall be effected in the manner provided for in Section 6.1 of the Collateral Sharing Agreement; provided that any such notice, request or demand to or upon any Grantor shall be addressed to such Grantor at its notice address set forth on Schedule 1 and that any such notice, request or demand to or upon the Collateral Agent shall be addressed to the Collateral Agent at its notice address set forth in the Collateral Sharing Agreement.
16
7.3 No Waiver by Course of Conduct; Cumulative Remedies. Neither the Collateral Agent nor any other Secured Party shall by any act (except by a written instrument pursuant to Section 7.1), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Default or Event of Default. No failure to exercise, nor any delay in exercising, on the part of the Collateral Agent or any other Secured Party, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by the Collateral Agent or any other Secured Party of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Collateral Agent or such Secured Party would otherwise have on any future occasion. The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any other rights or remedies provided by law.
7.4 Enforcement Expenses; Indemnification. (a) Each Grantor agrees to pay or reimburse the Collateral Agent for all its costs and expenses incurred in enforcing or preserving any rights under this Agreement and the other Loan Documents to which such Grantor is a party, including, without limitation, the fees and disbursements of counsel (including the allocated fees and expenses of in-house counsel) to the Collateral Agent.
(b) Each Grantor agrees to pay, and to save the Collateral Agent and the other Secured Parties harmless from, any and all liabilities with respect to, or resulting from any delay in paying, any and all stamp, excise, sales or other taxes which may be payable or determined to be payable with respect to any of the Collateral or in connection with any of the transactions contemplated by this Agreement.
(c) Each Grantor agrees to pay, and to save the Collateral Agent and the other Secured Parties harmless from, any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Agreement to the extent provided in Sections 7.1 and 7.2 of the Guaranty.
(d) The agreements in this Section 7.4 shall survive repayment of the Secured Obligations and all other amounts payable under (i) the Credit Agreement and the other Loan Documents and (ii) the May 2000 Credit Agreement and the Loan Documents (as defined therein).
7.5 Successors and Assigns. This Agreement shall be binding upon the successors and assigns of each Grantor and shall inure to the benefit of the Collateral Agent and the other Secured Parties and their successors and assigns; provided that no Grantor may assign, transfer or delegate any of its rights or obligations under this Agreement without the prior written consent of the Collateral Agent.
17
7.6 Counterparts. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts (including by telecopy), and all of said counterparts taken together shall be deemed to constitute one and the same instrument.
7.7 Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
7.8 Section Headings. The Section headings used in this Agreement are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof.
7.9 Integration. This Agreement and the other Loan Documents represent the agreement of the Grantors, the Collateral Agent and the other Secured Parties with respect to the subject matter hereof and thereof, and there are no promises, undertakings, representations or warranties by the Collateral Agent or any other Secured Party relative to subject matter hereof and thereof not expressly set forth or referred to herein or in the other Loan Documents as defined in each of the Credit Agreement and the May 2000 Credit Agreement.
7.10 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
7.11 Acknowledgments. Each Grantor hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Loan Documents to which it is a party;
(b) neither the Collateral Agent nor any other Secured Party has any fiduciary relationship with or duty to any Grantor arising out of or in connection with this Agreement or any of the other Loan Documents, and the relationship between the Grantors, on the one hand, and the Collateral Agent and the other Secured Parties, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan Documents or otherwise exists by virtue of the transactions contemplated hereby among the Secured Parties or among the Grantors and the Secured Parties.
7.12 Releases. (a) At such time as (i) Guarantor has delivered to the Collateral Agent a written request to do so and Guarantor or a designee shall have purchased all of the Loans and all Liabilities owed to the Lenders (excluding Guarantor or its designee) have been
18
paid in full in cash and the "Obligations" (as defined in the May 2000 Credit Agreement) have been paid in full in cash and the commitments under the May 2000 Credit Agreement have been terminated or (ii) the Grantor Obligations and any fees and other amounts owed to the Collateral Agent shall have been paid in full in cash (so long as at such time (A) the payment of any of the other Secured Obligations has not been accelerated and (B) a payment default in respect of the principal or interest of such Secured Obligations shall not have occurred and be continuing are not due and payable), and (1) the Administrative Agent on behalf of the Lenders and (2) the May 2000 Administrative Agent on behalf of the May 2000 Lenders, in each case has so instructed the Collateral Agent in writing, the Collateral shall be released from the Liens created hereby, and this Agreement and all obligations (other than those expressly stated to survive such termination) of the Collateral Agent and each Grantor hereunder shall terminate, all without delivery of any instrument or performance of any act by any party, and all rights to the Collateral shall revert to the Grantors. At the request and sole expense of any Grantor following any such termination, the Collateral Agent shall deliver to such Grantor any Collateral held by the Collateral Agent hereunder, and execute and deliver to such Grantor such documents as such Grantor shall reasonably request to evidence such termination. In addition, the Collateral Agent shall release the Collateral upon directions from the Administrative Agent and the May 2000 Administrative Agent as provided in
Section 6.9 of the Collateral Sharing Agreement.
(b) If any of the Collateral shall be sold, transferred or otherwise disposed of by any Grantor in a transaction permitted by the Loan Documents and the Loan Documents (as defined in the May 2000 Credit Agreement), then the Collateral Agent, at the request and sole expense of such Grantor, shall execute and deliver to such Grantor all releases or other documents reasonably necessary or desirable for the release of the Liens created hereby on such Collateral.
(c) The Collateral Agent will, at any time, upon the written instruction of the Administrative Agent and the May 2000 Administrative Agent, at the sole expense of the relevant Grantor, execute and deliver to the relevant Grantor all releases or other documents reasonably necessary or desirable for the release of the Liens created hereby on the Collateral specified by the Administrative Agents in such instruction.
(d) By acceptance of the benefits hereof, each Secured Party acknowledges and consents to the provisions of this Section 7.13, agrees that the Collateral Agent shall incur no liability whatsoever to any Secured Party for any release effected by the Collateral Agent in accordance with this Section 7.13 and agrees that the Administrative Agent and the May 2000 Administrative Agent shall incur no liability whatsoever to any Secured Party for any release directed or consented to by it, other than as otherwise expressly agreed to in writing.
IN WITNESS WHEREOF, each of the undersigned has caused this Collateral Agreement to be duly executed and delivered as of the date first above written.
CONSECO, INC.

By: /s/ Thomas M. Hagerty
    -------------------------------
    Title: Senior Vice President and
             Acting Chief Financial
             Officer	

STATE OF INDIANA     )
                     ) ss:
COUNTY OF HAMILTON   )

                  On the __ day of May in the year 2000, before me, the	

undersigned, personally appeared ______________, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he/she executed the same in his/her capacity, and that by his/her signature on the instrument, the individual, or the person upon behalf of which the individual acted, executed the instrument.

Notary Public
My Commission Expires:
CIHC, INCORPORATED

By: /s/ David A. Hill
    ------------------------
     Name: David A. Hill
     Title: Vice President	

STATE OF             )
                     ) ss:
COUNTY OF            )

                  On the __ day of May in the year 2000, before me, the	

undersigned, personally appeared ______________, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he/she executed the same in his/her capacity, and that by his/her signature on the instrument, the individual, or the person upon behalf of which the individual acted, executed the instrument.
Notary Public
My Commission Expires:
 
Schedule 2

                                             DESCRIPTION OF INVESTMENT PROPERTY

Pledged Stock:

                                                                          Stock             Number          Percent of
                                                         Class of        Certificate          of           Outstanding
       Issuer                   Holder                   Stock             Number            Shares           Shares
-----------------------    ----------------         -----------------   -------------        ------         ----------

CIHC, Incorporated            Conseco Inc.         Common                    2               1,000              99.9%

                                                   1994 Series               002            963.61                .9%
                                                   Preferred                 007           125.269                .1%

                                                   $2.32                     P-2           940,000                78%
                                                   Redeemable
                                                   Cumulative
                                                   Preferred

Conseco Finance               CIHC,                Common                    005               1.5               1.5%
Corp.                         Incorporated                                   006             101.5              98.5%

Conseco Capital
Management, Inc.              Conseco Inc.         Common                      2               100               100%	

Pledged Obligations:

                                                      Stated Principal       Approximate
                                                      Amount of              Amount
Payor                            Payee                Note                   Outstanding             Date of Note
-----                            -----                ---------------------  -----------             ------------
CIHC, Incorporated (as           Conseco, Inc.        $400,000,000           $365,000,000            Nov. 27, 1996
successor to Bankers
Life Holding
Corporation)

CIHC, Incorporated (as           Conseco, Inc.        $79,798,865.71         $74,600,000             Jan. 1, 1998
successor to American
Life Holding Company)

CIHC, Incorporated (as           Conseco, Inc.        $36,000,000            $36,000,000             May 26, 2000
successor to American
Life Holding Company)

CIHC, Incorporated               Conseco, Inc.        $4,000,000,000         $1,961,200,000          May 26, 2000

Conseco Finance Corp.            Conseco, Inc.        $1,750,799,080         $1,750,799,080          May 26, 2000	

Schedule 3
FILINGS AND OTHER ACTIONS
REQUIRED TO PERFECT SECURITY INTERESTS
Actions with respect to Pledged Stock and Pledged Obligations
By (i) delivery of any certificates in respect of the Pledged Stock and Pledged Obligations together with undated stock powers, in respect of the Pledged Stock, and, note powers, in respect of the Pledged Obligations, in each case, undated and executed in blank and (ii) possession by the Administrative Agent of the same.
UCC filings:
Conseco, Inc.
Secretary of State, Indiana
CIHC, Incorporated
Secretary of State, Delaware
FIRST AMENDMENT TO COLLATERAL AGREEMENT
THIS FIRST AMENDMENT TO THE COLLATERAL AGREEMENT, dated as of September 22, 2000 (this "Amendment"), is made by Conseco, Inc., an Indiana corporation ("Conseco"), and CIHC, Incorporated, a Delaware corporation ("CIHC"; together with Conseco, the "Grantors"), in favor of The Chase Manhattan Bank, as collateral agent (the "Collateral Agent") for the Secured Parties (as defined in the Collateral Agreement referred to below).
W I T N E S S E T H:
WHEREAS, Conseco, the banks and other financial institutions from time to time party thereto, and The Chase Manhattan Bank, as administrative agent, are party to that certain Senior Secured Revolving Credit Agreement, dated as of May 30, 2000 (as amended, the "May 2000 Credit Agreement");
WHEREAS, certain individuals listed as borrowers on the signature pages thereto, the banks and other financial institutions from time to time party thereto, and The Chase Manhattan Bank, as administrative agent, are party to that certain Credit Agreement, dated as of May 30, 2000 (the "Credit Agreement");
WHEREAS, as a condition precedent to the obligation of the banks to enter into the May 2000 Credit Agreement and the Credit Agreement, the Grantors executed and delivered the Collateral Agreement, dated as of May 30, 2000 (the "Collateral Agreement"), to the Collateral Agent for the benefit of the Secured Parties;
WHEREAS, (i) the parties thereto have agreed to amend the May 2000 Credit Agreement on the terms and conditions set forth in the Second Amendment, dated as of the date hereof (the "Second Amendment"), and (ii) the parties thereto have entered into an Agreement relating to the Credit Agreement, dated as of the date hereof (the "D&O Agreement"); and
WHEREAS, in connection with the Second Amendment and the D&O Agreement, the Grantors and the Collateral Agent have agreed to amend the Collateral Agreement on the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the premises, the parties hereto hereby agree as follows:
2
1. Definitions. Capitalized terms used but not otherwise defined herein shall have the meanings assigned to such terms in the Collateral Agreement.
2. Amendments to Collateral Agreement. The Collateral Agreement is hereby amended by (i) adding the words "or Conseco Finance" after each of the references to "CIHC" in the definition of "Pledged Obligations" and
(ii) replacing Schedule 2 thereto with the form of Schedule 2 attached hereto as Annex I (and hereinafter, all Pledged Obligations and Pledged Stock referred to on such revised Schedule 2 shall include all replacements, substitutions and refinancings of the Investment Property described therein). It is understood that any capitalized terms used in the Collateral Agreement or the Collateral Sharing Agreement that are defined by reference to the May 2000 Credit Agreement or the Credit Agreement shall be supplemented or (to the extent of any conflict) replaced, as applicable, by the definitions assigned to such terms in the Appendix delivered in connection with the Second Amendment or the D&O Agreement, as the case may be.
3. Conditions to Effectiveness of this Amendment. This Amendment shall become effective upon the (i) receipt by the Collateral Agent of duly executed counterparts of this Amendment from the parties hereto, (ii) effectiveness of the Second Amendment in accordance with the terms thereof,
(iii) effectiveness of the D&O Agreement in accordance with the terms thereof,
(iv) execution of UCC-3 filings to provide for the amendment to the Collateral under the Collateral Agreement set forth herein and (v) delivery to the Collateral Agent of the Investment Property referred to on revised Schedule 2 not previously delivered to the Collateral Agent, together with corresponding executed and undated stock powers and note powers, as applicable.
4. Certain Representations and Warranties by the Grantors. In order to induce the Collateral Agent to enter into this Amendment, the Grantors represent and warrant that as of the date hereof and after giving effect to this Amendment (a) the representations and warranties made by each of the Grantors in the Collateral Agreement are true and correct in all material respects (except to the extent that such representations and warranties are expressly stated to relate to an earlier date, in which case such representations and warranties shall have been true and correct in all material respects on and as of such earlier date) and (b) no Default or Event of Default has occurred and is continuing as of the date hereof; provided, that each reference to the Agreement therein shall be deemed to be a reference to the Agreement after giving effect to this Amendment.
5. Miscellaneous. The parties hereto hereby further agree as follows:
5.1. Further Assurances. Each of the parties hereto hereby agrees to do such further acts and things and to execute, deliver and acknowledge such additional agreements, powers and instruments as the Collateral Agent may reasonably request which are required to carry into effect the purposes of this Amendment and the Collateral Agreement, as amended hereby.
5.2.Payment of Costs and Expenses. Conseco agrees to pay on demand all expenses of the Collateral Agent (including the fees and out-of-pocket expenses of counsel to the Collateral Agent) in connection with the negotiation, preparation, execution and delivery of this Amendment.
5.3. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
3
5.4. Counterparts. This Amendment may be executed in one or more counterparts (including by facsimile transmission), each of which, when executed and delivered, shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same document with the same force and effect as if the signatures of all of the parties were on a single counterpart, and it shall not be necessary in making proof of this Amendment to produce more than one such counterpart.
5.5. Headings. Headings used in this Amendment are for convenience of reference only and shall not affect the construction of this Amendment.
5.6. Effect of Amendment. The parties hereto acknowledge and agree that the Liens and security interests as granted under the Collateral Agreement are in all respects continuing and in full force and effect and secure the Secured Obligations.
IN WITNESS WHEREOF, this Amendment has been duly executed and delivered as of the date first above written.
CONSECO, INC.

By: /s/ Thomas M. Hagerty
    ------------------------------
    Title: Senior Vice President and
             Acting Chief Financial Officer	

CIHC, INCORPORATED

By: /s/ David A. Hill
    -------------------------------
    Title: Vice President	

THE CHASE MANHATTAN BANK, as Collateral Agent

By: /s/
    --------------------------------
    Title:	

Consented to:
THE CHASE MANHATTAN BANK,
as Administrative Agent and as a Bank

By: /s/
    ----------------------
    Title:	

BANK OF AMERICA, N.A., as a Bank

By: /s/
    ----------------------
    Title:	

Annex I
Schedule 2

                                     DESCRIPTION OF INVESTMENT PROPERTY
Pledged Stock:

                                                                     Stock                              Percent of
                                                Class of          Certificate         Number of         Outstanding
           Issuer             Holder              Stock             Number             Shares             Shares
           ------             ------              -----             ------             ------             ------

CIHC, Incorporated           Conseco,            Common              2                  1,000              99.9%
                             Inc.
                                                 1994 Series         002               963.61                .9%
                                                 Preferred           007              125.269                .1%

                                                 $2.32               P-2              940,000                78%
                                                 Redeemable
                                                 Cumulative
                                                 Preferred

Conseco Finance              CIHC,               Common              005                  1.5               1.5%
Corp.                        Incorporated                            006                101.5              98.5%

Conseco Capital              Conseco,            Common              2                    100               100%
Management, Inc.             Inc.

Conseco Finance              Conseco,            9%                  1A                   750               100%
Corp.                        Inc.                Redeemable
                                                 Cumulative
                                                 Preferred	

Annex I
Schedule 2

Pledged Obligations:

                                                                                Approximate
                                                       Stated Principal            Amount
         Payor                       Payee              Amount of Note          Outstanding            Date of Note
         -----                       -----              --------------          -----------            ------------

CIHC, Incorporated             Conseco, Inc.              $400,000,000           $365,000,000           Nov. 27, 1996
(as successor to
Bankers Life Holding
Corporation)

CIHC, Incorporated             Conseco, Inc.               $79,798,865.71        $74,600,000            Jan. 1, 1998
(as successor to
American Life
Holding Company)

CIHC, Incorporated             Conseco, Inc.               $36,000,000           $36,000,000            May 26, 2000
(as successor to
American Life
Holding Company)

CIHC, Incorporated             Conseco, Inc.               $4,000,000,000        $1,961,200,000         May 26, 2000

Conseco Finance                CIHC,                       $1,460,799,080        $1,460,799,080         Sept. 22, 2000
Corp.                          Incorporated	

SECOND AMENDMENT TO COLLATERAL AGREEMENT
THIS SECOND AMENDMENT, dated as of November 22, 2000 (this "Amendment"), to the Collateral Agreement, dated as of May 30, 2000 (the "Collateral Agreement") among Conseco, Inc., an Indiana corporation ("Conseco"), and CIHC, Incorporated, a Delaware corporation ("CIHC"; together with Conseco, the "Grantors"), in favor of The Chase Manhattan Bank, as collateral agent (the "Collateral Agent") for the Secured Parties (as defined in the Collateral Agreement).
W I T N E S S E T H:
WHEREAS, pursuant to the Termination and Replacement Agreement, dated as of May 30, 2000 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the individual borrowers thereunder (the "Borrowers"), the banks and other financial institutions (the "Lenders") from time to time party thereto, and The Chase Manhattan Bank, as Administrative Agent (in such capacity, the "Administrative Agent"), the Lenders extended the maturity date of term loans made to the Borrowers under the Credit Agreement dated as of September 30, 1999 among the Borrowers, the Lenders and the Administrative Agent;
WHEREAS, pursuant to the Senior Secured Revolving Credit Agreement (the "May 2000 Credit Agreement"), dated as of May 30, 2000, among Conseco, Inc. ("Conseco"), the banks and other financial institutions (the "May 2000 Lenders") from time to time party thereto, and The Chase Manhattan Bank, as administrative agent (in such capacity, the "May 2000 Administrative Agent"), the May 2000 Lenders agreed to make revolving credit loans to Conseco on the terms and conditions set forth therein;
WHEREAS, pursuant to the Credit Agreement (the "November 2000 Credit Agreement"), dated as of November 22, 2000, among some or all of the Borrowers, the banks and other financial institutions from time to time party thereto (the "November 2000 Lenders") and The Chase Manhattan Bank, as administrative agent (in such capacity, the "November 2000 Administrative Agent"), the November 2000 Lenders have agreed to refinance the outstanding loans to some or all of the Borrowers under the Credit Agreement;
WHEREAS, as a condition precedent to the obligation of the November 2000 Lenders to enter into the November 2000 Credit Agreement, the Grantors and the Collateral Agent have agreed to amend the Collateral Agreement on the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the premises, the parties hereto hereby agree as follows:
2
1. Definitions. Capitalized terms used but not otherwise defined herein shall have the meanings assigned to such terms in the Collateral Agreement.
2. Amendments to Section 1.1. Section 1.1 of the Collateral Agreement is hereby amended as follows:
2.1. The definition of "Default" is hereby deleted in its entirety, and the following new definition is substituted in lieu thereof:
"'Default' either (i) a "Default" as defined in the May 2000 Credit Agreement, (ii) any event or circumstance which, with the giving of notice, the lapse of time, or both, would (if not cured or otherwise remedied during such time) constitute a "Termination Event" as defined in the Existing Conseco Guaranty (as defined in the November 2000 Credit Agreement) or (iii) any event or circumstance which, with the giving of notice, the lapse of time, or both, would (if not cured or otherwise remedied during such time) constitute a "Termination Event" as defined in the November Guaranty."
2.2. The definition of "D & O Grantor Obligations" is hereby amended by inserting the following after the language "this Agreement" in the third line thereof: ", the Existing CIHC Guaranty (as defined in the November 2000 Credit Agreement), the Existing Conseco Guaranty (as defined in the November 2000 Credit Agreement)".
2.3. The definition of "Event of Default" is hereby deleted in its entirety, and the following new definition is substituted in lieu thereof:
"'Event of Default' either (i) an "Event of Default" as defined in the May 2000 Credit Agreement, (ii) a "Termination Event" as defined in the Existing Conseco Guaranty (as defined in the November 2000 Credit Agreement) or
(iii) a "Termination Event" as defined in the November Guaranty."
2.4. The definition of "Grantor Obligations" is hereby deleted in its entirety, and the following new definition is substituted in lieu thereof:
"'Grantor Obligations' collectively, (i) the D & O Grantor Obligations, (ii) the May 2000 Grantor Obligations and (iii) the November 2000 Grantor Obligations."
2.5. The definition of "Holder Representative" is hereby deleted in its entirety, and the following new definition is substituted in lieu thereof:
"'Holder Representative': (i) in respect of the D & O Grantor Obligations, the Administrative Agent, (ii) in respect of the May 2000 Grantor Obligations, the May 2000 Administrative Agent, (iii) in respect of the November 2000 Grantor Obligations, the November 2000 Administrative Agent, (iv) in respect of the 1993 Indenture Obligations, the 1993 Indenture Trustee and (v) in respect of the 1994 Indenture Obligations, the 1994 Indenture Trustee."
3
2.6. The definition of "May 2000 Grantor Obligations" is hereby amended by inserting the following after the language "May 2000 Credit Agreement" in the third line thereof: ", the Existing CIHC Guaranty (as defined in the November 2000 Credit Agreement)".
2.7. The definition of "Secured Parties" is hereby deleted in its entirety, and the following new definition is substituted in lieu thereof:
"'Secured Parties': the collective reference to (a) the Lenders,
(b) the May 2000 Lenders, (c) the November 2000 Lenders, (d) the Administrative Agent, (e) the May 2000 Administrative Agent, (f) the November 2000 Administrative Agent and (g) the Collateral Agent."
3. Additions to Section 1.1. The following definitions are hereby added to Section 1.1 in the appropriate alphabetical order:
"'November Guaranty' shall mean the Guaranty, dated as of November 22, 2000, between Conseco, Inc., as Guarantor, and The Chase Manhattan Bank, as Administrative Agent as amended, supplemented or otherwise modified from time to time.
'November 2000 Administrative Agent' as defined in the second whereas clause in the Second Amendment, dated as of November 22, 2000, to this Agreement.
'November 2000 Credit Agreement' as defined in the second whereas clause in the Second Amendment, dated as of November 22, 2000, to this Agreement.
'November 2000 Grantor Obligations': with respect to any Grantor, all obligations and liabilities of such Grantor which may arise under or in connection with the November Guaranty, this Agreement, the CIHC Guaranty (as defined in the November 2000 Credit Agreement) or any other Loan Document (as defined in the November 2000 Credit Agreement) to which such Grantor is a party, in each case whether on account of guarantee obligations, fees, indemnities, costs, expenses or otherwise (including, without limitation, all fees and disbursements of counsel to the Collateral Agent, the November 2000 Administrative Agent or the November 2000 Lenders that are required to be paid by such Grantor pursuant to the terms of the November 2000 Credit Agreement or any other Loan Document (as defined in the November 2000 Credit Agreement)).
'November 2000 Lenders' as defined in the second whereas clause in the Second Amendment, dated as of November 22, 2000, to this Agreement."
4
4. Amendment to Section 5.1(a). Section 5.1(a) is hereby amended by
(i) inserting the following language after the language "(as defined in the May 2000 Credit Agreement)" in the seventh line thereof: "and the Loan Documents (as defined in the November 2000 Credit Agreement)" and (ii) inserting the following language before the period at the end thereof: "or the Loan Documents (as defined in the November 2000 Credit Agreement)".
5. Amendment to Section 5.2. Section 5.2 is hereby amended by deleting the following language from line three therein: "purchase loans pursuant to Section 6.4(b) of the Guaranty or".
6. Amendment to Section 5.3. Section 5.3 is hereby amended by deleting the following language on the third and fourth lines thereof "or in connection with a mandatory purchase of Loans pursuant to Section 6.4(a) or 6.4(b) of the Guaranty".
7. Amendment to Section 5.6. Section 5.6 is hereby amended by inserting the following language after the language "(as defined under the May 2000 Credit Agreement)" in the fourth line thereof: "and the Loan Documents (as defined in the November 2000 Credit Agreement)".
8. Amendment to Section 6.4. Section 6.4 is hereby amended by inserting the following language after the language "the May 2000 Credit Agreement," in the seventh line thereof: "the November 2000 Credit Agreement,".
9. Amendments to Section 7.4.
9.1. Section 7.4(a) is hereby amended by (i) deleting the word "and" after the language "any rights under this Agreement" in the third line thereof and substituting in lieu thereof the following: "," and (ii) inserting the following language after the language "Loan Documents" in the third line thereof: ", the Loan Documents (as defined in the May 2000 Credit Agreement) and the Loan Documents (as defined in the November 2000 Credit Agreement)".
9.2. Section 7.4(d) is hereby deleted in its entirety, and the following new section is substituted in lieu thereof:
"(d) The agreements in this Section 7.4 shall survive repayment of the Secured Obligations and all other amounts payable under (i) the Credit Agreement and the other Loan Documents, (ii) the May 2000 Credit Agreement and the Loan Documents (as defined therein) and (iii) the November 2000 Credit Agreement and the Loan Documents (as defined therein)."
10. Amendment to Section 7.9. Section 7.9 is hereby amended by adding the following language before the period at the end thereof: "and the November 2000 Credit Agreement".
11. Amendments to Section 7.11.
11.1. Section 7.11(a) is hereby deleted in its entirety and the following new section is substituted in lieu thereof:
5
"(a) it has been advised by counsel in the negotiation, execution and delivery of this Agreement, the other Loan Documents, the Loan Documents (as defined in the May 2000 Credit Agreement) and the Loan Documents (as defined in the November 2000 Credit Agreement) to which it is party;"
11.2. Section 7.11(b) is hereby amended by (i) deleting the word "or" after the language "in connection with this Agreement" in the third line thereof and substituting in lieu thereof the following: "," and (ii) inserting the following after the language "Loan Documents" in the third line thereof: ", the Loan Documents (as defined in the May 2000 Credit Agreement) or the Loan Documents (as defined in the November 2000 Credit Agreement)".
11.3. Section 7.11(c) is hereby deleted in its entirety and the following new section is substituted in lieu thereof:
"(c) no joint venture is created hereby, by the other Loan Documents, the Loan Documents (as defined in the May 2000 Credit Agreement) or the Loan Documents (as defined in the November 2000 Credit Agreement) or otherwise exists by virtue of the transactions contemplated hereby or thereby among the Secured Parties or among the Grantors and the Secured Parties."
12. Amendments to Section 7.12.
12.1. Section 7.12(a) is hereby amended by (A) inserting the following new clause after the language "(2) the May 2000 Administrative Agent on behalf of the May 2000 Lenders" in clause (ii)(B) thereof: "and (3) the November 2000 Administrative Agent on behalf of the November 2000 Lenders,"; and (B) inserting the following language after the language "and the May 2000 Administrative Agent" in the last sentence thereof: "and the November 2000 Administrative Agent".
12.2. Section 7.12(b) is hereby amended by inserting the following language after the language "(as defined in the May 2000 Credit Agreement)" therein: "and the Loan Documents (as defined in the November 2000 Credit Agreement)".
12.3. Section 7.12(c) is hereby amended by inserting the following language after the language "the May 2000 Administrative Agent" therein: "and the November 2000 Administrative Agent".
12.4. Section 7.12(d) is hereby amended by inserting the following language after the language "the May 2000 Administrative Agent" therein: "and the November 2000 Administrative Agent".
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13. Conditions to Effectiveness of this Amendment. This Amendment shall become effective upon the (i) receipt by the Collateral Agent of duly executed counterparts of this Amendment from the parties hereto, (ii) effectiveness of the November 2000 Credit Agreement in accordance with the terms thereof, and (iii) execution of UCC-3 filings to provide for the amendment to the Collateral under the Collateral Agreement set forth herein.
14. Certain Representations and Warranties by the Grantors. In order to induce the Collateral Agent to enter into this Amendment, the Grantors represent and warrant that as of the date hereof and after giving effect to this Amendment (a) the representations and warranties made by each of the Grantors in the Collateral Agreement are true and correct in all material respects (except to the extent that such representations and warranties are expressly stated to relate to an earlier date, in which case such representations and warranties shall have been true and correct in all material respects on and as of such earlier date) and (b) no Default or Event of Default has occurred and is continuing as of the date hereof; provided, that each reference to the Agreement therein shall be deemed to be a reference to the Agreement after giving effect to this Amendment.
15. Miscellaneous. The parties hereto hereby further agree as follows:
15.1. Further Assurances. Each of the parties hereto hereby agrees to do such further acts and things and to execute, deliver and acknowledge such additional agreements, powers and instruments as the Collateral Agent may reasonably request which are required to carry into effect the purposes of this Amendment and the Collateral Agreement, as amended hereby.
15.2. Payment of Costs and Expenses. Conseco agrees to pay on demand all expenses of the Collateral Agent (including the reasonable fees and out-of-pocket expenses of counsel to the Collateral Agent) in connection with the negotiation, preparation, execution and delivery of this Amendment.
15.3. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
15.4. Counterparts. This Amendment may be executed in one or more counterparts (including by facsimile transmission), each of which, when executed and delivered, shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same document with the same force and effect as if the signatures of all of the parties were on a single counterpart, and it shall not be necessary in making proof of this Amendment to produce more than one such counterpart.
15.5. Headings. Headings used in this Amendment are for convenience of reference only and shall not affect the construction of this Amendment.
15.6. Effect of Amendment. The parties hereto acknowledge and agree that the Liens and security interests as granted under the Collateral Agreement are in all respects continuing and in full force and effect and secure the Secured Obligations.
IN WITNESS WHEREOF, this Amendment has been duly executed and delivered as of the date first above written.
CONSECO, INC.

By: /s/ Thomas M. Hagerty
    --------------------------------
    Title: Senior Vice President and Acting
             Chief Financial Officer	

CIHC, INCORPORATED

By: /s/ David A. Hill
    --------------------------------
    Title: Vice President	

THE CHASE MANHATTAN BANK, as Collateral Agent

By: /s/
    ---------------------------------
    Title:	

Consented to:
THE CHASE MANHATTAN BANK,
as Administrative Agent and as a Bank

By: /s/
    -------------------------
    Title:	

BANK OF AMERICA, N.A., as a Bank

By: /s/
    -------------------------
    Title:	

CREDIT AGREEMENT
Dated as of November 22, 2000
among
THE PERSONS LISTED ON THE SIGNATURE PAGES HERETO,
as Borrowers,
THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO,
and
THE CHASE MANHATTAN BANK
as Administrative Agent
(Relating to Refinancing of certain Loans under that certain Credit Agreement, dated as of September 15, 1999, as terminated and replaced by that certain Termination and Replacement Agreement, dated as of May 30, 2000)
The following Table of Contents has been inserted for convenience only and does not constitute a part of this Agreement.

                                TABLE OF CONTENTS
                                                                                                               Page
SECTION 1.             DEFINITIONS AND ACCOUNTING TERMS...........................................................1
SECTION 1.1            Certain Defined Terms......................................................................1
SECTION 1.2            Other Definitional Provisions.............................................................14
SECTION 1.3            Accounting and Financial Determinations...................................................14

SECTION 2.             THE COMMITMENTS AND THE LOANS.............................................................15
SECTION 2.1            Commitment................................................................................15
SECTION 2.2            Procedure for Borrowings..................................................................15
SECTION 2.3            Conversion and Continuation Elections.....................................................16
SECTION 2.4            Repayment of Loans........................................................................17
SECTION 2.5            Loan Accounts; Record Keeping.............................................................17

SECTION 3.             INTEREST AND FEES.........................................................................17
SECTION 3.1            Interest Rates............................................................................17
SECTION 3.2            Default Interest Rate.....................................................................18
SECTION 3.3            Interest Payment Dates....................................................................18
SECTION 3.4            Setting and Notice of Rates...............................................................18
SECTION 3.5            Computation of Interest and Fees..........................................................18

SECTION 4.             PAYMENTS AND PREPAYMENTS..................................................................18
SECTION 4.1            Prepayments...............................................................................18
SECTION 4.2            Payments by the Borrowers.................................................................19
SECTION 4.3            Sharing of Payments.......................................................................20
SECTION 4.4            Setoff....................................................................................20
SECTION 4.5            Net Payments..............................................................................20

SECTION 5.             CHANGES IN CIRCUMSTANCES..................................................................22
SECTION 5.1            Increased Costs...........................................................................22
SECTION 5.2            Change in Rate of Return..................................................................23
SECTION 5.3            Basis for Determining Interest Rate Inadequate or Unfair..................................23
SECTION 5.4            Changes in Law Rendering Certain Loans Unlawful...........................................24
SECTION 5.5            Funding Losses............................................................................24
SECTION 5.6            Right of Banks to Fund Through Other Offices..............................................24
SECTION 5.7            Discretion of Banks as to Manner of Funding...............................................25
SECTION 5.8            Replacement of Banks......................................................................25
SECTION 5.9            Conclusiveness of Statements; Survival of Provisions......................................25
SECTION 5.10           Avoidance of Certain Costs................................................................26

SECTION 6.             COLLATERAL AND OTHER SECURITY.............................................................26

                                        i	

SECTION 6.1            Collateral Documents......................................................................26
SECTION 6.2            Pledge of Additional Collateral...........................................................27
SECTION 6.3            Application of Proceeds from Collateral...................................................27
SECTION 6.4            Further Assurances........................................................................28

SECTION 7.             REPRESENTATIONS AND WARRANTIES OF BORROWERS...............................................28
SECTION 7.1            No Conflict...............................................................................28
SECTION 7.2            Validity..................................................................................29
SECTION 7.3            Litigation and Contingent Obligations.....................................................29
SECTION 7.4            Liens.....................................................................................29
SECTION 7.5            Taxes.....................................................................................29
SECTION 7.6            Accuracy of Information...................................................................29
SECTION 7.7            Proceeds..................................................................................29
SECTION 7.8            Securities Laws...........................................................................29
SECTION 7.9            No Default................................................................................30
SECTION 7.10           Organization, etc.........................................................................30
SECTION 7.11           Authorization.............................................................................30
SECTION 7.12           Margin Regulations........................................................................30
SECTION 7.13           Principal Residence.......................................................................31
SECTION 7.14           No Default or Event of Default............................................................31

SECTION 8.             COVENANTS OF BORROWERS....................................................................31
SECTION 8.1            Reports, Certificates and Other Information...............................................31
        8.1.1          Borrower Financials.......................................................................31
        8.1.2          Tax Returns and Reports...................................................................31
        8.1.3          Notice of Default and Litigation..........................................................31
        8.1.4          Collateral Ratio..........................................................................31
        8.1.5          Other Information.........................................................................32
SECTION 8.2            Taxes and Liabilities.....................................................................32
SECTION 8.3            Compliance with Laws......................................................................32
SECTION 8.4            Other Agreements..........................................................................32

SECTION 9.             CONDITIONS AND EFFECTIVENESS OF THIS AGREEMENT............................................32
SECTION 9.1            Receipt of Documents......................................................................32
SECTION 9.2            Additional Conditions.....................................................................34

SECTION 10.            EVENTS OF DEFAULT AND THEIR EFFECT........................................................35
SECTION 10.1           Events of Default.........................................................................35
        10.1.1         NonPayment of Loans, etc..................................................................35
        10.1.2         Bankruptcy, Insolvency, etc...............................................................35
        10.1.3         Defaults Under this Agreement.............................................................36
        10.1.4         Representations and Warranties............................................................36
        10.1.5         Collateral Ratio..........................................................................36
        10.1.6         Defaults under the Conseco Guaranty.......................................................36
        10.1.7         Defaults Under Any of the Other D&O Agreements............................................36
SECTION 10.2           Effect of Event of Default................................................................36

                                       ii	

                                                                                                                Page

SECTION 11.            THE AGENT.................................................................................37
SECTION 11.1           Authorization and Action..................................................................37
SECTION 11.2           Liability of the Administrative Agent.....................................................37
SECTION 11.3           Administrative Agent and Affiliates.......................................................38
SECTION 11.4           Bank Credit Decision......................................................................38
SECTION 11.5           Indemnification...........................................................................38
SECTION 11.6           Successor Agent...........................................................................38

SECTION 12.            ASSIGNMENTS AND PARTICIPATIONS............................................................39
SECTION 12.1           Assignments...............................................................................39
SECTION 12.2           Participations............................................................................40
SECTION 12.3           Disclosure of Information.................................................................41
SECTION 12.4           Foreign Transferees.......................................................................41

SECTION 13.            MISCELLANEOUS.............................................................................42
SECTION 13.1           Waivers and Amendments....................................................................42
SECTION 13.2           Failure to Consent........................................................................43
SECTION 13.3           Notices...................................................................................43
SECTION 13.4           Indemnity.................................................................................44
SECTION 13.5           D&O Agreements............................................................................44
SECTION 13.6           Subsidiary References.....................................................................44
SECTION 13.7           Captions..................................................................................44
SECTION 13.8           GOVERNING LAW.............................................................................44
SECTION 13.9           Counterparts..............................................................................45
SECTION 13.10          SUBMISSION TO JURISDICTION; WAIVER OF VENUE...............................................45
SECTION 13.11          Successors and Assigns....................................................................45
SECTION 13.12          Power of Attorney.........................................................................46
SECTION 13.13          No Waiver; Cumulative Remedies............................................................46
SECTION 13.14          WAIVER OF JURY TRIAL......................................................................46

                             SCHEDULES AND EXHIBITS
SCHEDULES

SCHEDULE 1.1      Existing Litigation
SCHEDULE 2.1      Banks and Percentages
SCHEDULE 2.2      Borrower Loan Percentage

EXHIBITS

EXHIBIT A         Form of Note
EXHIBIT B         Form of Notice of Borrowing
EXHIBIT C         Form of Notice of Conversion/Continuation
EXHIBIT D         Form of Pledge Agreement
EXHIBIT E         Form of Conseco Guaranty
EXHIBIT F - 1     Form of Opinion of David K. Herzog, counsel to Conseco

                                      iii	

EXHIBIT F - 2     Form of Opinion of Weil, Gotshal & Manges LLP, outside counsel to
                  Conseco
EXHIBIT G         Form of Confidentiality Letter
EXHIBIT H         Form of Assignment Agreement
EXHIBIT I         Funding Loss Formula
EXHIBIT J         Form of CIHC Guaranty
EXHIBIT K         Form of Pledge Agreement (Additional Collateral)
EXHIBIT L         Second Amendment to Collateral Agreement
EXHIBIT M         Form of Subordinated Pledge Agreement Re 1997 Shares
EXHIBIT N         Form of Borrower Acknowledgment and Release
EXHIBIT O         Form of Conseco Officer's Certificate
EXHIBIT P         Form of Subordinated Pledge Agreement Re 1998 Shares
EXHIBIT Q         First Amendment to Collateral Sharing Agreement	

iv
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is entered into as of November 22, 2000, among the persons listed as borrowers on the signature pages hereto (herein, collectively called the "Borrowers" and each individually, a "Borrower"), the several financial institutions from time to time party to this Agreement (herein, together with any Eligible Assignees thereof, collectively called the "Banks" and each individually, a "Bank"), and THE CHASE MANHATTAN BANK ("Chase"), as administrative agent for the Banks (herein in such capacity, together with any successors thereto in such capacity, called the "Administrative Agent").
Background
WHEREAS, the Borrowers, certain other borrowers, the Banks and the Administrative Agent are parties to that certain Credit Agreement, dated as of September 15, 1999, as terminated and replaced by that certain Termination and Replacement Agreement, dated as of May 30, 2000 (as amended or modified through the date hereof, the "Existing Credit Agreement"), whereby the Banks party thereto continued term loans to the borrowers party thereto (including the Borrowers), on the terms and subject to the conditions set forth in the Existing Credit Agreement;
WHEREAS, the Borrowers have requested that the Banks agree to make term loans in the principal amount for each Borrower set forth on Schedule 2.2 hereto to refinance the outstanding loans to the Borrowers under the Existing Credit Agreement; and
WHEREAS, the Banks are willing, on the terms and conditions hereinafter set forth, to make the term loans to the Borrowers;
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 AND ACCOUNTING TERMS
SECTION 1.1 Certain Defined Terms . As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined):
"AC Collateral Agent" shall mean BofA (and its successors) as collateral agent under the AC Pledge Agreement.
"AC Pledge Agreement" shall mean the Pledge Agreement (Additional Collateral), substantially in the form of Exhibit K, as the same may be amended, modified, or supplemented from time to time.
"AC Pledge Borrowers" shall mean the Borrowers, if any, who have elected to pledge Additional Collateral pursuant to the terms of the Plan.
2
"Additional Collateral" shall mean, for any Borrower, marketable securities pledged by such Borrower to secure the repayment of such Borrower's obligations under the New Credit Agreements Re D&O Loans as required by Conseco pursuant to the Plan.
"Administrative Agent" - see Preamble.
"Administrative Agent's Office" shall mean 270 Park Avenue, New York, New York 10017, or such other address designated by the Administrative Agent (or any successor agent) to the Borrowers and the Banks from time to time.
"Affected Bank" - see Section 5.4.
"Affiliate" shall mean, as to any Person, any other Person which, directly or indirectly, owns, holds, controls, is controlled by or is under common control with such Person (including all beneficial control as a trustee, guardian or other fiduciary). A Person shall be deemed to be "controlled by" any other Person if such other Person possesses, directly or indirectly, power (a) to vote 10% or more of the securities (on a fully diluted basis) having ordinary voting power for the election of directors, managing general partners or managers; or
(b) to direct or cause the direction of the management and policies of such Person whether through the ownership of voting securities, membership interests, by contract or otherwise.
"Agent Related Persons" shall mean Chase in any agent capacity or any successor agent arising under Section 11.6, together with its respective Affiliates (including, in the case of Chase, the Arranger), and the officers, directors, employees, agents and attorneys-in-fact of such Persons and Affiliates.
"Agreement" shall mean this Credit Agreement, as amended, modified or supplemented from time to time.
"Appendix" means the Appendix attached to the Revolving Credit Agreement which is hereby incorporated by reference.
"Arranger" shall mean Chase Securities Inc., solely in its capacity as arranger.
"Assignment Agreement" - see Section 12.1(a).
"Bank" or "Banks" - see Preamble.
"Base Rate" for any day, a rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the greatest of (a) the Prime Rate in effect on such day, (b) the Base CD Rate in effect on such day plus 1% and (c) the Federal Funds Rate for such day plus 1/2 of 1%. For purposes hereof: "Prime Rate" shall mean the rate of interest per annum publicly announced from time to time by Chase as its prime rate in effect at its principal office in New York City (the Prime Rate not being intended to be the lowest rate of interest charged by Chase in connection with extensions of credit to debtors); "Base CD Rate" shall mean the sum of (a) the product of (i) the Three-Month Secondary CD Rate and (ii) a fraction, the numerator of which
3
is one and the denominator of which is one minus the C/D Reserve Percentage and (b) the C/D Assessment Rate; "Three-Month Secondary CD Rate" shall mean, for any day, the secondary market rate for three-month certificates of deposit reported as being in effect on such day (or, if such day shall not be a Business Day, the next preceding Business Day) by the Board of Governors of the Federal Reserve System (the "Board") through the public information telephone line of the Federal Reserve Bank of New York (which rate will, under the current practices of the Board, be published in Federal Reserve Statistical Release H.15(519) during the week following such day), or, if such rate shall not be so reported on such day or such next preceding Business Day, the average of the secondary market quotations for three-month certificates of deposit of major money center banks in New York City received at approximately 10:00 A.M., New York City time, on such day (or, if such day shall not be a Business Day, on the next preceding Business Day) by the Administrative Agent from three New York City negotiable certificate of deposit dealers of recognized standing selected by it; and "Federal Funds Rate" shall mean, for any day, the rate at which U.S. Dollar deposits with an overnight maturity are offered by Chase in the Federal funds market at 11:00 a.m., New York City time, on such day. Any change in the Base Rate due to a change in the Prime Rate, the Three-Month Secondary CD Rate or the Federal Funds Rate shall be effective as of the opening of business on the effective day of such change in the Prime Rate, the Three-Month Secondary CD Rate or the Federal Funds Rate, respectively.
"Base Rate Loan" shall mean a Loan bearing interest at the Base Rate.
"BofA" shall mean Bank of America, N.A.
"Borrower" or "Borrowers" - see Preamble.
"Borrower Acknowledgment and Release" shall mean an Acknowledgment and Release executed and delivered by each Borrower in favor of the Administrative Agent and the Banks, substantially in the form of Exhibit N.
"Borrower Collateral Percentage" shall mean, as to any Borrower, a fraction, the numerator of which is equal to the principal amount of the Loans to such Borrower then outstanding hereunder and the denominator of which is equal to the aggregate principal amount of the Loans to all Borrowers then outstanding hereunder.
"Business Day" shall mean any day other than a Saturday, Sunday or other day on which commercial banks in Chicago, New York City or San Francisco are authorized or required by law to close and, if the applicable Business Day relates to any Offshore Rate Loan, means such a day on which dealings are carried on in the applicable offshore dollar interbank market.
"Capitalized Lease Liabilities" shall mean, with respect to any Person, all monetary obligations of such Person under any leasing or similar arrangement which, in accordance with GAAP, would be classified as a capitalized lease, and, for purposes of this Agreement, the amount of such obligations shall be the capitalized amount thereof, determined in accordance with GAAP, and the stated maturity thereof shall be the date of
4
the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a penalty.
"C/D Assessment Rate" for any day as applied to any Base Rate Loan, the annual assessment rate in effect on such day which is payable by a member of the Bank Insurance Fund maintained by the Federal Deposit Insurance Corporation (the "FDIC") classified as well-capitalized and within supervisory subgroup "B" (or a comparable successor assessment risk classification) within the meaning of 12 C.F.R. ss. 327.4 (or any successor provision) to the FDIC (or any successor) for the FDIC's (or such successor's) insuring time deposits at offices of such institution in the United States.
"C/D Reserve Percentage" for any day as applied to any Base Rate Loan, that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board, for determining the maximum reserve requirement for a Depositary Institution (as defined in Regulation D of the Board) in respect of new non-personal time deposits in Dollars having a maturity of 30 days or more.
"Charges" - see Section 4.5.
"Chase" - see Preamble.
"CIHC" shall mean CIHC, Incorporated, a Delaware corporation, and a direct wholly owned Subsidiary of Conseco.
"CIHC Guaranty" shall mean the Guaranty and Subordination Agreement, dated as of the date hereof, executed and delivered by CIHC and Conseco in favor of the Administrative Agent, for the benefit of the Banks, in substantially the form of Exhibit J, as the same may be amended, modified, or supplemented from time to time.
"Closing Date" shall mean the date on which all conditions precedent set forth in Section 9 are satisfied or waived by all Banks or, with respect to any payment to be made hereunder, waived by the Person entitled to receive such payment.
"Collateral Agent" see the preamble to the Collateral Agreement.
"Collateral Agreement" shall mean the Collateral Agreement, dated as of May 30, 2000, made by Conseco and CIHC in favor of the Collateral Agent, as amended, supplemented or otherwise modified from time to time.
"Collateral Ratio" shall mean, as to any Borrower, the ratio of (a) the sum of the Loan Value of Direct Collateral of such Borrower plus the Borrower Collateral Percentage of the Loan Value of Indirect Collateral to (b) the aggregate principal amount of the Loans of such Borrower then outstanding.
"Collateral Sharing Agreement" shall mean the Collateral Sharing Agreement, dated as of May 30, 2000, among Conseco, CIHC and the Collateral Agent, as amended, supplemented or otherwise modified from time to time.
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"Conseco" shall mean Conseco, Inc., an Indiana corporation.
"Conseco Guaranty" shall mean the Guaranty of Conseco, dated as of the date hereof, executed and delivered in favor of the Administrative Agent, for the benefit of the Banks, in substantially the form of Exhibit E, as the same may be amended, modified or supplemented from time to time.
"Contingent Obligation" shall mean, without duplication, any agreement, undertaking or arrangement by which any Person guarantees, endorses or otherwise becomes or is contingently liable upon (by direct or indirect agreement, contingent or otherwise, to provide funds for payment, to supply funds to, or otherwise to invest in, a debtor, or otherwise to assure a creditor against loss) the debt, obligation or other liability of any other Person (other than by endorsements of instruments in the course of collection), or guarantees the payment of dividends or other distributions upon the shares of any other Person. The amount of any Person's liability with respect to any Contingent Obligation shall (subject to any limitation set forth therein) be deemed to be the outstanding principal amount (or maximum outstanding principal amount, if larger) of the debt, obligation or other liability outstanding thereunder or, if not stated or if indeterminable, the maximum reasonably anticipated liability in respect thereof at the time of determination.
"Conversion/Continuation Date" shall mean any date on which, under Section 2.3, Conseco (on behalf of the Borrowers) (a) converts Loans of one Type to another Type, or (b) continues as Loans of the same Type, but with a new Interest Period, Loans having Interest Periods expiring on such date.
"D&O Agreements" shall mean the Existing Credit Agreement, the 1997 D&O Credit Agreement, the September 22, 2000 Agreements, the 1998 D&O Credit Agreement, the New Credit Agreements Re D&O Loans, all other agreements or documents (including, without limitation, guaranties such as (without limitation) the Existing Conseco Guaranty, the Existing CIHC Guaranty, the Conseco Guaranty and the CIHC Guaranty) relating to any of the foregoing, and any reaffirmed, amended, modified or supplemented version of any of the foregoing.
"Default"shall mean any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default.
"Direct Collateral" shall mean, with respect to any Borrower, all property, assets and/or rights on or in which a Lien is now or hereafter granted by such Borrower to the Administrative Agent (or to any agent, trustee or other party acting on behalf of the Administrative Agent) for the benefit of the Banks, pursuant to the Pledge Agreement, the AC Pledge Agreement, the Subordinated Pledge Agreement Re 1997 Shares, the Subordinated Pledge Agreement Re 1998 Shares, and any other instruments or documents provided for herein or therein or delivered hereunder or thereunder or in connection herewith or therewith.
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"Dollars"and the sign "$" shall mean lawful money of the United States of America.
"Eligible Assignee" shall mean any bank, pension fund, mutual fund, investment fund or other financial institution (other than an insurance company or any Affiliate of an insurance company except those to which the Borrowers consent).
"Eurodollar Reserve Percentage" has the meaning specified in the definition of "Offshore Rate."
"Event of Default" - see Section 10.1.
"Existing CIHC Guaranty" shall mean the Guaranty and Subordination Agreement entered into by CIHC and Conseco dated September 22, 2000 in respect of the Existing Credit Agreement.
"Existing Conseco Guaranty" shall mean the Amended and Restated Guaranty dated September 22, 2000 of Conseco with respect to the Existing Credit Agreement.
"Existing Credit Agreement" - see first recital.
"Existing Litigation" shall mean the litigation described in Schedule 1.1 hereto.
"Existing Loans" shall mean loans extended to a Borrower by the Banks under the Existing Credit Agreement.
"FRB" shall mean the Board of Governors of the Federal Reserve System, and any Governmental Authority succeeding to any of its principal functions.
"First Amendment to the Collateral Sharing Agreement" shall mean the First Amendment to the Collateral Sharing Agreement, dated as of the date hereof, executed and delivered in favor of the Administrative Agent, for the benefit of the Banks, in substantially the form of Exhibit Q, as the same may be amended, modified or supplemented from time to time.
"Funding Loss Formula" has the meaning set forth on Exhibit I.
"GAAP" shall mean generally accepted accounting principles in the United States of America as from time to time in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the U.S. accounting profession), which are applicable to the circumstances as of the date of determination.
"Governmental Authority" shall mean any nation or government, any state or other political subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, and any entity exercising executive, legislative, judicial, regulatory or
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administrative functions of or pertaining to government, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing.
"Hedging Obligations" shall mean obligations in respect of any agreement (including any master agreement and any agreement, whether or not in writing, relating to any single transaction) that is an interest rate swap agreement, basis swap, forward rate agreement, commodity swap, commodity option, equity or equity index swap or option, bond option, interest rate option, forward foreign exchange agreement, rate cap, collar or floor agreement, currency swap agreement, cross-currency rate swap agreement, swaption, currency option or any other, similar agreement (including any option to enter into any of the foregoing).
"IBOR" has the meaning set forth in the definition of Offshore Rate.
"Indebtedness" shall mean, with respect to any Person at any date, without duplication: (a) all obligations of such Person for borrowed money or in respect of loans or advances; (b) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; (c) all obligations in respect of letters of credit, whether or not drawn, and bankers' acceptances issued for the account or upon the application or request of such Person; (d) all Capitalized Lease Liabilities of such Person; (e) all Hedging Obligations of such Person; (f) all obligations of such Person to pay the deferred purchase price of property or services which are included as liabilities in accordance with GAAP (other than trade payables entered into in the ordinary course of business on ordinary terms), and all obligations secured by a Lien on property owned or being purchased by such Person (including Indebtedness arising under conditional sales or other title retention agreements); (g) any obligations described in clauses (a) through (f) above or clause (h) immediately following this clause (g) of a partnership in which such Person is a general partner; and (h) all Contingent Obligations of such Person in connection with the foregoing.
"Indemnified Parties" - see Section 13.4.
"IndirectCollateral" shall mean any assets of Conseco or CIHC which, as determined by the Administrative Agent in its sole discretion exercised in good faith, shall be deemed to "indirectly secure" the Liabilities pursuant to Regulation U as a result of the negative pledge agreement and/or other covenants of Conseco and CIHC set forth in the Conseco Guaranty.
"InterestPayment Date" shall mean, as to any Offshore Rate Loan, the last day of each Interest Period applicable to such Loan and, as to any Base Rate Loan, the last Business Day of each calendar quarter and each date such Loan is converted into another Type of Loan, provided, however, that if any Interest Period for an Offshore Rate Loan exceeds three months, the date that falls three months (as the case may be) after the beginning of such Interest Period and after each Interest Payment Date thereafter is also an Interest Payment Date.
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"InterestPeriod" shall mean, as to any Offshore Rate Loan, the period commencing on the date of such Loan or on the Conversion/Continuation Date on which the Loan is converted into or continued as an Offshore Rate Loan, and ending on the date one, two, three or six months thereafter as selected by Conseco (on behalf of the Borrowers) in its Notice of Borrowing or Notice of Conversion/Continuation;
provided that:
(a) if any Interest Period would otherwise end on a day that is not a Business Day, that Interest Period shall be extended to the following Business Day unless, in the case of an Offshore Rate Loan, the result of such extension would be to carry such Interest Period into another calendar month, in which event such Interest Period shall end on the preceding Business Day;
(b) any Interest Period pertaining to an Offshore Rate Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period;
(c) no Interest Period for any Loan shall extend beyond the Termination Date.
"Lending Office" shall mean, with respect to any Bank, any office designated by such Bank in its sole discretion beneath its signature hereto (or in an Assignment Agreement) or otherwise from time to time by written notice to the Borrowers and the Administrative Agent, as a Lending Office for purposes hereunder. A Bank may designate separate Lending Offices for the purposes of making and maintaining Loans.
"Liabilities" shall mean, as to any Borrower, all obligations of such Borrower to the Banks or the Administrative Agent, howsoever created, arising or evidenced, whether direct or indirect, joint or several, absolute or contingent, or now or hereafter existing, or due or to become due, which arise out of or in connection with this Agreement, the Notes, if any, or the other Loan Documents.
"Lien" shall mean any security interest, mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other) or other priority or preferential arrangement of any kind or nature whatsoever.
"Litigation" shall mean any litigation (including, without limitation, any governmental proceeding or arbitration proceeding), tax audit or investigative proceeding, claim, lawsuit, and/or investigation pending or threatened against or involving any Borrower, or Conseco or any of its Subsidiaries or any of its or their businesses or operations.
"Loan(s)"shall have the meaning set forth in Section 2.1 and may be a Base Rate Loan or an Offshore Rate Loan (each, a "Type of Loan").
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"Loan Documents" shall mean, collectively, this Agreement, the Notes, if any, the Conseco Guaranty, the Pledge Agreement, the Collateral Agreement, the Collateral Sharing Agreement, the Subordinated Pledge Agreement Re 1997 Shares, the Subordinated Pledge Agreement Re 1998 Shares, the AC Pledge Agreement, the Borrower Acknowledgment and Release, the CIHC Guaranty and any and all other documents or instruments furnished or required to be furnished in connection with any of the foregoing, as the same may be amended or modified in accordance with this Agreement.
"Loan Value of Direct Collateral" shall mean, with respect to any Borrower, (a) the current market value of the common stock of Conseco pledged by such Borrower to the Administrative Agent, for the benefit of the Banks, under the Pledge Agreement, plus (b) without duplication, the current market value of any other Direct Collateral constituting Margin Stock pledged by such Borrower to the Administrative Agent, for the benefit of the Banks, under any Loan Document, plus (c) without duplication, the maximum loan value of all Direct Collateral of such Borrower not constituting Margin Stock, it being understood that the maximum loan value of Direct Collateral shall be its good faith loan value (i.e., the value of such Direct Collateral as determined from time to time by the Administrative Agent (with the concurrence of the Required Lenders) exercising sound banking judgment) without regard to such Borrower's assets securing any unrelated transactions. The Administrative Agent and/or the Required Lenders shall have the right at any time in their sole discretion to recompute the Loan Value of Direct Collateral.
"Loan Value of Indirect Collateral" shall mean, with respect to any Borrower, the sum of the maximum loan value of Indirect Collateral under Regulation U, after taking into account any other Indebtedness of Conseco directly or "indirectly secured" (as set forth in Regulation U and the interpretations thereof) by the assets of Conseco and CIHC, it being understood that (a) the maximum loan value of Indirect Collateral constituting Margin Stock shall be 50% of its current market value and (b) the maximum loan value of Indirect Collateral not constituting Margin Stock shall be its good faith loan value (i.e., the value of such Indirect Collateral as determined from time to time by the Administrative Agent (with the concurrence of the Required Lenders) exercising sound banking judgment), in each case without regard to Conseco's assets securing any unrelated transactions. Until further notice from the Administrative Agent to the Borrower, the Loan Value of Indirect Collateral shall be deemed to be $478,600,000, it being understood that the Administrative Agent and/or the Required Lenders shall have the right at any time in their sole discretion to recompute the Loan Value of Indirect Collateral.
"Margin Stock" shall mean "margin stock" as such term is defined in Regulation U.
"Material Adverse Change" or "Material Adverse Effect" shall mean any change, event, action, condition or effect which individually or in the aggregate (a) impairs the validity or enforceability of this Agreement or any other Loan Document, or (b) materially and adversely affects the consolidated business, operations, financial prospects
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or condition of Conseco and its Subsidiaries taken as a whole, or (c) materially and adversely impairs the ability of any Borrower or Conseco to perform his, hers or its obligations under this Agreement or any of the other Loan Documents to which he, she or it is a party, or (d) materially and adversely affects the perfection or priority of any Lien granted under any of the Loan Documents.
"Material Litigation" or "Material Litigation Development" shall mean any Litigation, or development in any Litigation, as the case may be, which (a) seeks to enjoin, prohibit, discontinue or otherwise impacts the validity or enforceability of this Agreement or any of the other Loan Documents or other transactions contemplated hereby or thereby, or (b) could be reasonably expected to have a Material Adverse Effect.
"New Credit Agreements Re D&O Loans" shall mean, collectively, this Agreement, the New Credit Agreement Re 1997 D&O Loans, and the New Credit Agreement Re 1998 D&O Loans.
"New Credit Agreement Re 1997 D&O Loans" shall mean that certain credit agreement dated as of the date hereof with certain borrowers, certain banks, and BofA, as administrative agent, refinancing certain of the loans under the 1997 D&O Credit Agreement, as the same may be amended, modified or supplemented from time to time.
"New Credit Agreement Re 1998 D&O Loans" shall mean that certain credit agreement dated as of the date hereof with certain borrowers, certain banks, and BofA, as administrative agent, refinancing certain of the loans under the 1998 D&O Credit Agreement, as the same may be amended, modified or supplemented from time to time.
"1997 D&O Credit Agreement" shall mean the Amended and Restated Credit Agreement, dated as of August 26, 1997, among certain borrowers, certain banks, and BofA, as administrative agent.
"1998 D&O Credit Agreement" shall mean the Credit Agreement, dated as of August 21, 1998, among certain borrowers, certain banks, and BofA, as administrative agent.
"Non-Consenting Bank" - see Section 13.2.
"Note" shall mean a promissory note, substantially in the form of Exhibit A with blanks appropriately completed in conformity herewith, evidencing the aggregate Loans of the Banks, or any promissory note or promissory notes issued in substitution or replacement therefor.
"Notice of Borrowing" shall mean a notice in substantially the form of Exhibit B.
"Notice of Conversion/Continuation" shall mean a notice in substantially the form of Exhibit C.
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"Offshore Rate" shall mean, for any Interest Period, with respect to Offshore Rate Loans comprising part of the same Borrowing, the rate of interest per annum (rounded upward to the next 1/100th of 1%) determined by the Administrative Agent as follows:
Offshore Rate = _______________IBOR_______________
1.00 Eurodollar Reserve Percentage
Where,
"Eurodollar Reserve Percentage" means for any day for any Interest Period the maximum reserve percentage (expressed as a decimal, rounded upward to the next 1/100th of 1%) in effect on such day (whether or not applicable to any Bank) under regulations issued from time to time by the FRB for determining the maximum reserve requirement (including any emergency, supplemental or other marginal reserve requirement) with respect to Eurocurrency funding (currently referred to as "Eurocurrency liabilities"); and
"IBOR" shall mean the rate of interest per annum (computed for the actual number of days elapsed on the basis of a 360-day year) appearing on Page 3750 of the Telerate Service (or any successor or substitute page of such Service, or any successor to or substitute to such Service, providing rate quotations comparable to those currently provided on such page of such Service, as determined by the Administrative Agent from time to time for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market) at approximately 11:00 A.M. (London time) two (2) Business Days prior to the commencement of such Interest Period, provided that, for Interest Periods shorter than one month, IBOR shall be derived from such source as the Administrative Agent shall reasonably determine.
The Offshore Rate shall be adjusted automatically as to all Offshore Rate Loans then outstanding as of the effective date of any change in the Eurodollar Reserve Percentage.
"OffshoreRate Loan" shall mean a Loan that bears interest based on the Offshore Rate.
"Other D&O Agreements" shall mean any D&O Agreement other than this Agreement.
"Percentage" shall mean, relative to any Bank, the percentage set forth opposite such Bank's name on Schedule 2.1 (or set forth in an Assignment Agreement), as such Percentage may be adjusted from time to time pursuant to Assignment Agreement(s) executed by such Bank and its Eligible Assignee and delivered pursuant to Section 12.1.
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"Person" means an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture or Governmental Authority.
"Plan" shall mean a plan made available to certain Borrowers by Conseco substantially in the form to be attached as an appendix to the certificate to be delivered pursuant to Section 9.1.15 hereof, as amended, modified or supplemented from time to time, but only to the extent permitted pursuant to the provisions of the pertinent D & O Agreements.
"Plan Rights" shall mean any Borrower's rights and interests in and to payments of "Bonus Points" (or any amended or successor payment concept) under the Plan, but expressly excluding any amounts dedicated under the Plan to the payment of any related tax obligations owing or to be owing by such Borrower.
"Pledge Agreement" shall mean the Borrower Pledge Agreement, dated as of the date hereof, substantially in the form of Exhibit D, as the same may be amended, modified or supplemented from time to time.
"Pledged Shares" shall have the meaning as assigned to such term in the Pledge Agreement.
"Reaffirmation of Existing CIHC Guaranty" shall mean a writing reaffirming the Existing CIHC Guaranty in form and substance satisfactory to the Administrative Agent, dated as of the date hereof, as the same may be amended, modified, or supplemented from time to time. "Reaffirmation of Existing Conseco Guaranty" shall mean a writing reaffirming the Existing Conseco Guaranty in form and substance satisfactory to the Administrative Agent, dated as of the date hereof, as the same may be amended, modified, or supplemented from time to time.
"Regulation "D" and "U" shall mean Regulation D and Regulation U, respectively, or any successor regulation thereto, promulgated by the FRB as from time to time in effect.
"Replaced Bank" - see Section 5.8.
"Replacement Bank" - see Section 5.8.
"Required Banks" shall mean Banks having more than 50% of the aggregate principal amount of the Loans outstanding at such time.
"Responsible Officer" shall mean, in the case of any Person, any of the following officers of such Person: the chief executive officer; the president; the chief financial officer; the chief operating officer; the chief investment officer; the general counsel; the secretary; the treasurer or any senior or executive vice president; or, in the case of each such officer, the individual designated by such officer to act on its behalf hereunder. If
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any of the titles of the preceding officers of such corporate Person are changed after the date hereof, the term "Responsible Officer" shall thereafter mean any officer performing substantially the same functions as are presently performed by one or more of the officers listed in the first sentence of this definition.
"Revolving Credit Agreement" shall mean that certain Five-Year Credit Agreement, dated as of September 25, 1998, among Conseco, certain financial institutions, BofA, as agent, First Union National Bank and The Chase Manhattan Bank, as syndication agents, and Morgan Guaranty Trust Company of New York, as documentation agent, as amended by the First Amendment to Five-Year Credit Agreement, dated as of September 22, 2000, as the same may be hereafter amended, modified, or supplemented from time to time.
"Second Amendment to the Collateral Agreement" shall mean the Second Amendment to the Collateral Agreement, dated as of the date hereof, executed and delivered in favor of the Administrative Agent, for the benefit of the Banks, in substantially the form of Exhibit L, as the same may be amended, modified or supplemented from time to time.
"September 22, 2000 Agreements" shall mean, collectively, that certain Agreement, dated as of September 22, 2000, among Conseco, certain banks, and BofA as administrative agent, relating to the 1997 D&O Credit Agreement, that certain Agreement, dated as of September 22, 2000, among Conseco, certain banks, and BofA as administrative agent, relating to the 1998 D&O Credit Agreement, and that certain Agreement, dated as of September 22, 2000, among Conseco, certain banks, and Chase as administrative agent, relating to the Existing Credit Agreement, as any of the foregoing may be amended, modified or supplemented from time to time.
"Significant Subsidiary" shall have the meaning provided in the Revolving Credit Agreement as in effect on the Closing Date.
"Subordinated Pledge Agreement Re 1997 Shares" shall mean a Subordinated Pledge Agreement Re 1997 Shares substantially in the form attached as Exhibit M hereto, as the same may be amended, modified or supplemented from time to time.
"Subordinated Pledge Agreement Re 1998 Shares" shall mean a Subordinated Pledge Agreement Re 1998 Shares substantially in the form attached as Exhibit P hereto, as the same may be amended, modified or supplemented from time to time.
"Subsidiary" shall have the meaning provided in the Revolving Credit Agreement as in effect on the Closing Date.
"Substitute Bank" - see Section 13.2.
"Taxes" or "Tax" shall mean all taxes of any nature whatsoever and howsoever denominated, including, without limitation, retaliatory, income, premium, withholding, guaranty fund or similar assessments, excise, import, governmental fees, duties and all
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other charges, as well as additions to tax, penalties and interest thereon, imposed by any Governmental Authority.
"Termination Date" shall mean December 31, 2003.
"Termination Event" shall have the meaning as assigned to such term in the pertinent September 22, 2000 Agreement.
"Transferee" - see Section 12.3.
"Type" or "Type of Loan" has the meaning specified in the definition of "Loan."
"UCC" shall mean the Uniform Commercial Code or comparable statute or any successor statutes thereto, as in effect from time to time in the relevant jurisdiction.
"United States" and "U.S." each means the United States of America.
SECTION 1.2 Other Definitional Provisions . (a) All terms defined in this Agreement shall have the above defined meanings when used in any Loan Document, or any certificate, report or other document made or delivered pursuant to this Agreement, unless the context therein shall clearly otherwise require.
(b) The words "hereof," "herein," "hereunder" and similar terms when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement; and subsection, Section, Schedule and Exhibit references are to this Agreement unless otherwise specified.
(c) The words "amended or modified" when used in any Loan Document shall mean with respect to such Loan Document as from time to time, in whole or in part, amended, modified, supplemented, restated, refinanced, refunded or renewed.
(d) In the computation of periods of time in this Agreement from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each means "to but excluding."
(e) This Agreement and the other Loan Documents are the result of negotiations among and have been reviewed by counsel to the Administrative Agent, the Borrowers and the other parties, and are the products of all parties. Accordingly, they shall not be construed against the Banks or the Administrative Agent merely because of the Administrative Agent's or Banks' involvement in their preparation.
SECTION 1.3 Accounting and Financial Determinations . For purposes of this Agreement, unless otherwise specified or the context otherwise requires, all accounting terms used in any Loan Document shall be interpreted, all accounting determinations and computations hereunder or thereunder shall be made, and all financial statements required to be delivered hereunder or thereunder shall be prepared, in accordance with GAAP.
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SECTION 2.THE COMMITMENTS AND THE LOANS
Subject to the terms and conditions of this Agreement and relying on the representations and warranties herein set forth:
SECTION 2.1 Commitment . Each of the Banks, severally and for itself alone, agrees, on the terms and conditions set forth herein, to make term loans (herein collectively called the "Loans" and individually called a "Loan") to each of the Borrowers in its Percentage of the amounts set forth on Schedule 2.2 on the Closing Date for the sole purpose of refinancing the Existing Loans. The Loans to any Borrower shall be disbursed in accordance with Section 2.2 and once repaid may not thereafter be reborrowed.
SECTION 2.2 Procedure for Borrowings . (a) The Loans shall be deemed to have been made to each Borrower upon irrevocable written notice (or by telephone promptly confirmed in writing) of Conseco (on behalf of the Borrowers) delivered to the Administrative Agent in the form of a Notice of Borrowing (which notice must be received by the Administrative Agent prior to 12:00 Noon (New York City time) (i) three Business Days prior to the Closing Date, in the case of Offshore Rate Loans and (ii) on the Closing Date, in the case of Base Rate Loans, specifying:
(i) the Closing Date, which shall be a Business Day and the same Business Day for each Borrower;
(ii) the amount of the Loans deemed to have been made to each Borrower, which shall not exceed the aggregate amount set forth on Schedule 2.2 for such Borrower;
(iii) the Type of Loans being requested; and
(iv) with respect to the Loans, if comprised of Offshore Rate Loans, the duration of the Interest Period applicable to such Offshore Rate Loan included in such notice. If the Notice of Borrowing fails to specify the duration of the Interest Period for any Loans comprised of Offshore Rate Loans, such Interest Period shall be three (3) months.
(b) The Administrative Agent will promptly notify each Bank of its receipt of the Notice of Borrowing and of the amount of such Bank's Percentage of the related Loans.
(c) Each Bank will make the amount of its Percentage of the Loans available to the Administrative Agent for the account of each Borrower requesting a Loan at the Administrative Agent's Office by 2:00 P.M. (New York City time) on the Closing Date in funds immediately available to the Administrative Agent. The proceeds of each such Loan will be applied to repay in full each Borrower's Existing Loans, notwithstanding receipt by the Administrative Agent of any other directions to the contrary, and such repayment is intended to, and shall, occur simultaneously with the making of the Loans.
(d) There may not be more than five (5) Interest Periods in effect for all Loans then outstanding.
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SECTION 2.3 Conversion and Continuation Elections . (a) Conseco (on behalf of the Borrowers) may, upon irrevocable written notice to the Agent in accordance with Section 2.3(b):
(i) elect, as of any Business Day, in the case of Base Rate Loans, or as of the last day of the applicable Interest Period, in the case of Offshore Rate Loans, to convert any such Loans into Loans of any other Type; or
(ii) elect as of the last day of the applicable Interest Period, to continue any Offshore Rate Loans having Interest Periods expiring on such day;
provided, that if at any time the aggregate amount of Offshore Rate Loans to all Borrowers is reduced, by payment or prepayment, to be less than $5,000,000, such Offshore Rate Loans shall automatically convert into Base Rate Loans, and on and after such date the right of Conseco (on behalf of the Borrowers) to continue such Loans as, or convert such as into, Offshore Rate Loans, as the case may be, shall terminate.
(b) Conseco (on behalf of the Borrowers) shall deliver a Notice of Conversion/Continuation to be received by the Agent not later than 12:00 Noon (New York City time) at least (i) three Business Days in advance of the Conversion/Continuation Date, if the Loans are to be converted into or continued as Offshore Rate Loans; and (ii) one Business Day in advance of the Conversion/Continuation Date, if the Loans are to be converted into Base Rate Loans, specifying:
(A) the proposed Conversion/Continuation Date;
(B) the aggregate amount of Loans to be converted or continued;
(C) the Type of Loans resulting from the proposed conversion or continuation; and
(D) in the case of conversions into Offshore Rate Loans, the duration of the requested Interest Period.
(c) If, upon the expiration of any Interest Period applicable to Offshore Rate Loans, Conseco (on behalf of the Borrowers) has failed to select timely a new Interest Period to be applicable to such Offshore Rate Loans (and if no Default or Event of Default relating to Conseco is then continuing), Conseco (on behalf of the Borrowers) shall be deemed to have selected the continuation of such Offshore Rate Loans, with the new Interest Period to be identical in length to the expired period. If, upon the expiration of any Interest Period applicable to Offshore Rate Loans, any Default or Event of Default relating to Conseco is then continuing, Conseco (on behalf of the Borrowers) shall be deemed to have elected to convert such Offshore Rate Loans into Base Rate Loans effective as of the expiration date of such Interest Period.
(d) The Administrative Agent will promptly notify each Bank of its receipt of a Notice of Conversion/Continuation, or, if no timely notice is provided by Conseco (on behalf of the Borrowers), the Administrative Agent will promptly notify each Bank of the details of any automatic conversion. All conversions and continuations shall be made ratably according to the
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respective outstanding principal amounts of the Loans with respect to which the notice was given held by each Bank.
(e) Unless the Required Banks otherwise consent, during the continuance of a Default or Event of Default relating to Conseco, Conseco (on behalf of the Borrowers) may not elect to have a Loan converted into or continued as an Offshore Rate Loan.
(f) After giving effect to any conversion or continuation of Loans, unless the Administrative Agent shall otherwise consent, there may not be more than five (5) Interest Periods in effect for all Loans hereunder.
SECTION 2.4 Repayment of Loans . Subject to the provisions of Sections 4.1 and 10.2, the Loans of each Bank shall be payable in full (and each Borrower agrees to pay such Loans) on the Termination Date.
SECTION 2.5 Loan Accounts; Record Keeping . (a) The Loans made by each Bank shall be evidenced by one or more loan accounts or records maintained by such Bank in the ordinary course of business and the Administrative Agent. The loan accounts or records maintained by the Administrative Agent and each Bank shall be conclusive absent manifest error of the amount of the Loans made by the Banks to the Borrowers and the interest and payments thereon; provided, that in the event of a conflict between information recorded by the Administrative Agent and any Bank as to such Bank's Loans, the records of the Administrative Agent absent manifest error shall control. Any failure to so record or any error in doing so shall not, however, limit or otherwise affect the obligations of any Borrower hereunder or to pay any amount owing with respect to the Loans.
(b) The Loans made by the Banks to each Borrower shall, upon the request of the Administrative Agent, be evidenced by a Note executed and delivered by such Borrower payable to the Administrative Agent, for the benefit of the Banks, in an aggregate principal amount equal to the aggregate Loans to such Borrower instead of or in addition to loan accounts. The Administrative Agent shall endorse on the schedules annexed to each Note the amount of each payment of principal made by such Borrower with respect thereto. The Administrative Agent is irrevocably authorized by each Borrower to endorse the Note of such Borrower and the Administrative Agent's record shall be conclusive absent manifest error; provided, however, that the failure of the Administrative Agent to make, or an error in making, a notation thereon with respect to any Loan shall not limit or otherwise affect the obligations of any Borrower hereunder or under any such Note to any Bank.
SECTION 3.INTEREST AND FEES
SECTION 3.1 Interest Rates. With respect to each Loan made to any Borrower hereunder, such Borrower hereby promises to pay interest on the unpaid principal amount thereof for the period commencing on the Closing Date of such Loan until such Loan is paid in full as follows:
(a) at all times while such Loan or any portion thereof is a Base Rate Loan, at a rate per annum equal to the Base Rate from time to time in effect plus 1.50%.
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(b) at all times while such Loan or any portion thereof is an Offshore Rate Loan, at a rate per annum equal to the Offshore Rate, plus 2.50%.
SECTION 3.2 Default Interest Rate . Notwithstanding the provisions of Section 3.1, in the event that any Default under Section 10.1.2 or any Event of Default shall occur with respect to any Borrower, such Borrower hereby promises to pay, automatically in the case of a Default under Section 10.1.2 or upon demand therefor by the Administrative Agent for any Event of Default (other than pursuant to Section 10.1.2), interest on the unpaid principal amount of the Loans of such Borrower (and interest thereon to the extent permitted by law) for the period commencing on the date of such Default or demand until such Loans are paid in full or such Default or Event of Default is cured or waived in accordance with Sections 10.2 and 13.1 at a rate per annum equal to the applicable interest rate from time to time in effect (but not less than the applicable interest rate as at such date of demand), plus three percent (3%) per annum.
SECTION 3.3 Interest Payment Dates . Interest on each Loan shall be paid in arrears on each Interest Payment Date. Interest shall also be paid on the date of any prepayment of Loans under Section 4.1 for the portion of the Loans so prepaid and upon payment (including prepayment) in full thereof and during the continuance of any Event of Default, interest shall be paid on demand of the Administrative Agent at the request or with the consent of the Required Banks. After maturity, accrued interest on the Loans shall be payable on demand.
SECTION 3.4 Setting and Notice of Rates . The applicable Offshore Rate shall be determined by the Administrative Agent. Each determination of the applicable Offshore Rate shall be conclusive and binding upon the parties hereto, in the absence of manifest error. If the Administrative Agent is unable to determine such a rate, the provisions of Section 5.3 shall apply. The Administrative Agent shall, upon written request of Conseco (on behalf of the Borrowers) or a Bank, deliver to Conseco (on behalf of the Borrowers) or such Bank a statement showing the computations used by the Administrative Agent in determining any applicable Offshore Rate hereunder.
SECTION 3.5 Computation of Interest and Fees . Interest on Offshore Rate Loans shall be computed for the actual number of days elapsed on the basis of a 360-day year, and interest on Base Rate Loans shall be computed for the actual number of days elapsed on the basis of a 365/366-day year. Each determination of an interest rate by the Administrative Agent shall be conclusive and binding on the Borrowers and the Banks in the absence of manifest error. Notwithstanding anything contained herein to the contrary interest on the Loans shall not exceed the maximum interest permitted by applicable law.
SECTION 4.PAYMENTS AND PREPAYMENTS
SECTION 4.1 Prepayments. (a) Mandatory Prepayments. So long as Loans are outstanding, each Borrower shall be obligated to cause all amounts to which such Borrower is entitled under the Plan (other than amounts expressly designated for the payment of taxes relating thereto) to be paid to reduce permanently, on a pro rata basis, such Borrower's obligations under the New Credit Agreements Re D&O Loans. Each Borrower further acknowledges that, so long as Loans are outstanding, any payments made by such Borrower to Conseco on account of any loans made to such Borrower by Conseco to fund the payment of
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interest on the Existing Loans or the Loans are to be turned over by Conseco and paid to reduce permanently, on a pro rata basis, such Borrower's obligations under the New Credit Agreements Re D&O Loans. So long as Loans are outstanding, each Borrower shall cause all cash dividends declared and paid on the Pledged Shares (as such term is defined in the Pledge Agreement) to be paid in permanent reduction of such Borrower's Loans and other Liabilities. Consistent with, but not in limitation of, the foregoing, each of the Borrowers hereby irrevocably authorizes and directs Conseco to wire transfer to the Administrative Agent any and all such dividends so declared and paid on a quarterly basis so long as the affected Borrower's Liabilities have not been paid in full.
(b) Optional Prepayments . Each Borrower may, at any time or from time to time, upon not less than three (3) Business Day's irrevocable written notice with respect to such Borrower's Loans to the Administrative Agent by 12:00 Noon (New York City time), ratably prepay such Loans in whole or in part, in minimum amounts of $10,000 or any integral multiple of $1,000 in excess thereof (unless such Borrower is prepaying the total amount of the Loans then outstanding with respect to such Borrower). Such notice of prepayment shall specify the date, the amount of such prepayment and the Types of Loans to be prepaid. The Administrative Agent will promptly notify each Bank of its receipt of any such notice, and of such Bank's Percentage of such prepayment. If such notice is given by such Borrower, such Borrower shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein, together with accrued interest to each such date on the amount prepaid and any amounts required pursuant to Section 5.5.
SECTION 4.2 Payments by the Borrowers . (a) All payments to be made by any Borrower hereunder shall be made without setoff, recoupment or counterclaim. Except as otherwise expressly provided herein, all payments by such Borrower shall be made to the Administrative Agent for the account of the Banks at the Administrative Agent's Office, and shall be made in Dollars and in immediately available funds, no later than 1:30 P.M. (New York City time) on the date specified herein. The Administrative Agent will promptly distribute to each Bank its Percentage (or other applicable share as expressly provided herein) of such payment in like funds as received. Any payment received by the Administrative Agent later than 1:30 P.M. (New York City time) shall be deemed to have been received on the following Business Day and any applicable interest or fee shall continue to accrue.
(b) Subject to the provisions set forth in the definition of Interest Period, whenever any payment is due on a day other than a Business Day, such payment shall be made on the following Business Day, and such extension of time shall in such case be included in the computation of interest or fees, as the case may be.
(c) Unless the Administrative Agent receives notice from the applicable Borrower prior to the date on which any payment is due to the Banks that such Borrower will not make such payment in full as and when required, the Administrative Agent may assume that such Borrower has made such payment in full to the Administrative Agent on such date in immediately available funds and the Administrative Agent may (but shall not be so required), in reliance upon such assumption, distribute to each Bank on such due date an amount equal to the amount then due such Bank. If and to the extent such Borrower has not made such payment in full to the Administrative Agent, each Bank shall repay to the Administrative Agent on demand
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such amount distributed to such Bank, together with interest thereon at the Federal Funds Rate for each day from the date such amount is distributed to such Bank until the date repaid.
SECTION 4.3 Sharing of Payments. (a) If any Bank shall obtain any payment or other recovery (whether voluntary, involuntary, by application of offset or otherwise) on account of the Loans (other than pursuant to the terms of Sections 5, 12.1 and 13.2) in excess of its pro rata share (based on its Percentage) of payments and other recoveries obtained by all Banks of the Loans on account of principal of and interest on the Loans, such Bank shall purchase from the other Banks such participation in the Loans as shall be necessary to cause such purchasing Bank to share the excess payment or other recovery ratably with each of them; provided, however, that if all or any portion of the excess payment or other recovery is thereafter recovered from such purchasing Bank, the purchase shall be rescinded and each Bank which has sold a participation to the purchasing Bank shall repay to the purchasing Bank the purchase price to the ratable extent of such recovery together with an amount equal to such selling Bank's ratable share (according to the proportion of (i) the amount of such selling Bank's required repayment to the purchasing Bank to (ii) the total amount so recovered from the purchasing Bank) of any interest or other amount paid or payable by the purchasing Bank in respect of the total amount so recovered.
(b) Each Borrower agrees that any Bank so purchasing a participation from another Bank pursuant to Section 4.3(a) may, to the fullest extent permitted by law, exercise all its rights of payment (including pursuant to Section 4.4) with respect to such participation as fully as if such Bank were the direct creditor of such Borrower in the amount of such participation. If under any applicable bankruptcy, insolvency or other similar law, any Bank receives a secured claim in lieu of a setoff to which this Section 4.3 applies, such Bank shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the Banks entitled under this Section 4.3(b) to share in the benefits of any recovery of such secured claim.
SECTION 4.4 Setoff . Each Bank shall, during the continuance of any Event of Default under Section 10.1.1, the continuance of an Event of Default under Section 10.1.2, or, with the consent of the Required Banks, during the continuance of any other Event of Default, have the right to appropriate and apply to the payment of the Liabilities owing to it (whether or not then due), and (as security for such Liabilities) each Borrower hereby grants to each Bank a continuing security interest in, any and all balances, credits, deposits, accounts or moneys of such Borrower then or thereafter maintained with such Bank. Any such appropriation and application shall be subject to the provisions of Section 4.3. Each Bank agrees promptly to notify such Borrower and the Administrative Agent after any such setoff and application made by such Bank; provided, however, that the failure to give such notice shall not affect the validity of such setoff and application. The rights of each Bank under this
Section 4.4 are in addition to other rights and remedies (including other rights of setoff under applicable law or otherwise) which such Bank may have.
SECTION 4.5 Net Payments . (a) All payments by any Borrower of principal of, and interest on, the Loans and all other amounts payable hereunder shall be made free and clear of and without deduction for any present or future income, stamp or other Taxes, fees, duties, withholdings or other charges of any nature whatsoever imposed by any taxing authority,
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other than Taxes imposed on or measured by any Bank's net income or receipts with respect to payments received hereunder (such nonexcluded items being called "Charges"). In the event that any withholding or deduction from any payment to be made by any Borrower hereunder is required in respect of any Charges pursuant to any applicable law, rule or regulation, then such Borrower will, upon notice from the Bank so affected:
(i) pay directly to the relevant authority the full amount required to be so withheld or deducted;
(ii) promptly forward to the Administrative Agent an official receipt or other documentation satisfactory to the Administrative Agent evidencing such payment to such authority;
(iii) pay to the Administrative Agent for the account of the Banks such additional amount or amounts as are necessary to ensure that the net amount actually received by each Bank will equal the full amount such Bank would have received had no such withholding or deduction been required; and
(iv) if any Bank receives a refund in respect of any Taxes as to which it has been indemnified by any Borrower or with respect to which any Borrower (or any Person acting on behalf of such Borrower) has paid additional amounts pursuant to this Section 4.5, it shall promptly repay such refund (but only to the extent of indemnity payments made, or additional amounts paid, by such Borrower (or such Person acting on behalf of such Borrower) under this Section 4.5 with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses of such Bank or the Administrative Agent, as the case may be; provided, that such Borrower, upon the request of such Bank or the Administrative Agent, agrees to return such refund (together with any penalties, interest or other charges due in connection therewith to the appropriate taxing authority or other Governmental Authority) to such Bank or the Administrative Agent in the event such Bank or the Administrative Agent is required to pay or to return such refund to the relevant taxing authority or other Governmental Authority.
(b) Each Bank that is organized under the laws of a jurisdiction other than the United States shall, prior to the due date of any payments under the Loans, execute and deliver to the Borrowers, on or about the first scheduled payment date in each calendar year, a United States Internal Revenue Service Form W-BEN, Form W-ECI or Form W-8IMY, as may be applicable (or any successor form), appropriately completed.
(c) Notwithstanding anything to the contrary in this Section 4, each Borrower shall not be required to compensate any Bank for Charges pursuant to Section 4(a) to the extent such Bank's compliance with Section 4(b) at the time such Bank becomes a party to this Agreement fails to establish a complete exemption for such Bank from such Charges or to the extent such failure to establish a complete exemption from such Charges thereafter is attributable to the action or inaction of such Bank.
(d) Notwithstanding anything to the contrary contained in this
Section 4, to the extent any notice required by Section 4(a) is given by any Bank to any Borrower more than 90
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days after such Bank has knowledge of the occurrence of the event giving rise to such Charges, such Bank shall not be entitled to compensation under such Section 4(a) for any such Charges incurred or accruing prior to the giving of such notice to such Borrower.
(e) Each Bank agrees that, upon the occurrence of any event giving rise to the operation of Section 4(a) with respect to such Bank it will, if requested by any Borrower, use reasonable efforts (subject to overall policy considerations of such Bank) to take any actions available to it (including the designation of another Lending Office for any Loans affected by such event) with the object of avoiding the consequences of such event; provided that such designation is made on terms that in the reasonable judgment of such Bank cause such Bank and its Lending Office to suffer no economic, legal or regulatory disadvantages.
(f) Without prejudice to the survival of any other agreement of the Borrowers hereunder or any other document, the agreements of the Borrowers contained in this Section 4.5 shall survive satisfaction of the Liabilities and termination of this Agreement.
SECTION 5.CHANGES IN CIRCUMSTANCES
SECTION 5.1 Increased Costs. If (a) Regulation D, or (b) after the Closing Date, the adoption of any applicable law, rule or regulation, or any change therein, or any change in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or any Lending Office of such Bank) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency,
(i) shall subject any Bank (or any Lending Office of such Bank) to any tax, duty or other charge or shall change the basis of taxation of payments to any Bank of the principal of, or interest on, any other amounts due under this Agreement in respect of its Loans or its obligation to make Loans (except for changes in the rate of Tax, other than Taxes covered by Section 4.5, measured on the overall gross or net income of such Bank or its Lending Office); or
(ii) shall impose, modify or deem applicable any reserve (including, without limitation, any reserve imposed by the FRB, but excluding any reserve included in the determination of interest rates pursuant to Section 3), special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Bank (or any Lending Office of such Bank); or
(iii) shall impose on any Bank (or its Lending Office) any other condition affecting its Loans;
and the result of any of the foregoing is to increase the cost to (or in the case of Regulation D referred to above, to impose a cost on) such Bank (or any Lending Office of such Bank) of making or maintaining Offshore Rate Loans to reduce the amount of any sum received or receivable by such Bank (or the Lending Office of such Bank) under this Agreement or under its Loans with respect thereto, then within thirty (30) days after demand by such Bank (which demand shall be accompanied by a statement setting forth in reasonable detail the basis of such
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demand and the calculation of such additional amount), the relevant Borrowers shall pay directly to such Bank such additional amount or amounts as will compensate such Bank for such increased cost or such reduction. Each Bank shall promptly, but in no event more than ninety (90) days after it has knowledge thereof, notify such Borrower of any event occurring after the date hereof, which will entitle such Bank to compensation pursuant to this Section 5.1. In the event such notice is not given within the time frame specified in the immediately preceding sentence, such Bank shall not be entitled to compensation under this Section 5.1 for any such additional costs or charges incurred or accruing prior to the giving of such notice to such Borrower.
SECTION 5.2 Change in Rate of Return . If any change in, or the introduction, adoption, effectiveness, interpretation, reinterpretation or phase in of, any law or regulation, directive, guideline, decision or request (whether or not having the force of law) of any court, central bank, regulator or other Governmental Authority affects or would affect the amount of capital required or expected to be maintained by any Bank or any Person controlling such Bank, and such Bank reasonably determines that the rate of return on its or such controlling Person's capital as a consequence of the Loans made by such Bank (or any participating interest therein held by such Bank) is reduced to a level below that which such Bank or such controlling Person could have achieved but for the occurrence of any such circumstance, then, in any such case the relevant Borrowers shall, within thirty (30) days after written demand by such Bank to such Borrowers, pay directly to such Bank additional amounts sufficient to compensate such Bank or such controlling Person for such reduction in rate of return. A statement of such Bank as to any such additional amount or amounts (including calculations thereof in reasonable detail) shall, in the absence of manifest error, be conclusive and binding on such Borrowers. In determining such amount, such Bank may use any method of averaging and attribution that it shall deem reasonably applicable. Each Bank shall promptly, but in no event more than ninety (90) days after it has knowledge thereof, notify such Borrowers of any event occurring after the Closing Date, which will entitle such Bank to compensation pursuant to this Section 5.2. In the event such notice is not given within the time frame specified in the immediately preceding sentence, such Bank shall not be entitled to compensation under this Section 5.2 for any such additional costs or charges incurred or accruing prior to the giving of such notice to such Borrower.
SECTION 5.3 Basis for Determining Interest Rate Inadequate or Unfair . If with respect to any Interest Period:
(a) deposits in Dollars (in the applicable amounts) are not being offered to the Administrative Agent in the offshore dollar interbank market for such Interest Period, or the Administrative Agent otherwise determines (which determination shall be conclusive and binding on all parties) that by reason of circumstances affecting the offshore dollar interbank market adequate and reasonable means do not exist for ascertaining the applicable Offshore Rate; or
(b) any Bank advises the Administrative Agent that the Offshore Rate as determined by the Administrative Agent, will not adequately and fairly reflect the cost to such Bank of maintaining or funding such Loan for such Interest Period, or that the making or funding of Offshore Rate Loans has become impracticable as a result of
an
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event occurring after the Closing Date which in the opinion of such Bank materially changes such Loans; then, so long as such circumstances shall continue:
(i) the Administrative Agent shall promptly notify Conseco (on behalf of the Borrowers) and the Banks thereof,
(ii) no Bank shall be under any obligation to make or continue or convert into Offshore Rate Loans so affected, and
(iii) on the last day of the then current Interest Period for Offshore Rate Loans so affected, such Offshore Rate Loans shall, unless then repaid in full, automatically convert to Base Rate Loans.
SECTION 5.4 Changes in Law Rendering Certain Loans Unlawful . In the event that any change in (including the adoption of any new) applicable laws or regulations, or any change in the interpretation of applicable laws or regulations by any governmental or other regulatory body charged with the administration thereof, should make it unlawful for a Bank or the Lending Office of such Bank ("Affected Bank") to make, maintain or fund Offshore Rate Loans, then (a) the Affected Bank shall promptly notify each of the other parties hereto, (b) the obligation of all Banks to make or continue or convert into Offshore Rate Loans or make Offshore Rate Loans made unlawful for the Affected Bank shall, upon the effectiveness of such event, be suspended for the duration of such unlawfulness, and (c) on the last day of the current Interest Period for Offshore Rate Loans (or, in any event, if the Affected Bank so requests, on such earlier date as may be required by the relevant law, regulation or interpretation), the Offshore Rate Loans shall, unless then repaid in full, automatically convert to Base Rate Loans.
SECTION 5.5 Funding Losses . Each Borrower hereby agrees that upon demand by any Bank to the Administrative Agent (which demand shall be made within three (3) Business Days after receipt of notice of any payment or proposed payment by such Borrower under this Agreement giving rise to indemnification under this Section 5.5 and shall be accompanied by a statement setting forth in reasonable detail using the Funding Loss Formula set forth in Exhibit I) such Borrower will indemnify such Bank against any loss or expense which such Bank may sustain or incur (including, without limitation, any loss or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Bank to fund or maintain Offshore Rate Loans), as reasonably determined by such Bank, as a prepayment or conversion of any Offshore Rate Loans of such Bank on a date other than the last day of an Interest Period for such Offshore Rate Loan, or (b) any failure of such Borrower to borrow Offshore Rate Loans on the date of any Borrowing set forth in any Notice of Borrowing or (c) any failure of such Borrower to convert or continue any portion of the Loans as Offshore Rate Loans on a date specified therefor in the Notice of Continuation/Conversion delivered pursuant to this Agreement. For this purpose, all notices to the Administrative Agent pursuant to this Agreement shall be deemed to be irrevocable.
SECTION 5.6 Right of Banks to Fund Through Other Offices . Each Bank may, if it so elects, fulfill its commitment as to any Offshore Rate Loans by causing any of its Lending
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Offices to make such Offshore Rate Loans; provided, that in such event for the purposes of this Agreement, such Loan shall be deemed to have been made by such Bank and the obligation of the Borrower to repay such Offshore Rate Loan shall nevertheless be to such Bank and shall be deemed held by it, to the extent of such Offshore Rate Loan, for the account of such branch or affiliate.
SECTION 5.7 Discretion of Banks as to Manner of Funding . Notwithstanding any provision of this Agreement to the contrary, each Bank shall be entitled to fund and maintain its funding of all or any part of its Loans in any manner it sees fit, it being understood, however, that for the purposes of this Agreement all determinations hereunder shall be made as if such Bank had actually funded and maintained each Offshore Rate Loan during each Interest Period for such Loan through the purchase of deposits having a maturity corresponding to such Interest Period and bearing an interest rate equal to the Offshore Rate, as the case may be, for such Interest Period.
SECTION 5.8 Replacement of Banks . If any Bank shall (i) become affected by any of the changes or events described in Section 4.5, 5.1, 5.2, 5.3(b), or 5.4 above and such Bank shall petition the relevant Borrowers for any increased cost or amounts thereunder or (ii) become insolvent and its assets become subject to a receiver, liquidator, trustee, custodian or such other Person having similar powers (any such Bank, in either instance, being hereinafter referred to as a "Replaced Bank"), then in each such case, Conseco (on behalf of the Borrowers) may, upon at least five (5) Business Days' notice to the Administrative Agent and such Replaced Bank, designate a replacement bank (a "Replacement Bank") acceptable to the Administrative Agent in its reasonable discretion, to which such Replaced Bank shall, subject to its receipt (unless a later date for the remittance thereof shall be agreed upon by the relevant Borrowers and the Replaced Bank) of all amounts owed to such Replaced Bank under
Section 4.5, 5.1, 5.2, 5.3(b), or 5.4 above, assign all (but not less than all) of its rights, obligations, Loans and Commitment hereunder and execute an Assignment Agreement with such Replacement Bank; provided, that all Liabilities (except Liabilities which by the terms hereof survive the payment in full of the Loans and termination of this Agreement) due and payable to the Replaced Bank shall be paid in full as of the date of such assignment. Upon any assignment by any Bank pursuant to this Section 5.8 becoming effective, the Replacement Bank shall thereupon be deemed to be a "Bank" for all purposes of this Agreement and such Replaced Bank shall thereupon cease to be a "Bank" for all purposes of this Agreement and shall have no further rights or obligations hereunder (other than pursuant to Sections 4.5, 5.1, 5.2, 5.5, 11.5 and 13.4, and Sections 7.1 and 7.2 of the Conseco Guaranty while such Replaced Bank was a Bank). Notwithstanding any Replaced Bank's failure or refusal to assign its rights, obligations and Loans under this Section 5.8, the Replaced Bank shall cease to be a "Bank" for all purposes of this Agreement and the Replacement Bank substituted therefor upon payment to the Replaced Bank by the Replacement Bank of all amounts set forth in this Section 5.8 without any further action of the Replaced Bank.
SECTION 5.9 Conclusiveness of Statements; Survival of Provisions . Determinations and statements of the Administrative Agent or any Bank pursuant to Sections 5.1, 5.2, 5.3, 5.4 and Section 5.5 shall be conclusive absent demonstrable error. The provisions of Sections 5.1, 5.2, 5.5 and this
Section 5.9 shall survive termination of this Agreement.
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SECTION 5.10 Avoidance of Certain Costs . The Administrative Agent and each Bank agrees that, notwithstanding the provisions of Sections 5.1-5.4 hereof to the contrary, the Administrative Agent and each Bank shall take reasonable actions available to it (including designation of a different Lending Office), consistent with legal and regulatory restrictions, that will avoid the need to take the steps described in any such Section, which will not, in the reasonable judgment of the Administrative Agent or any such Bank, be disadvantageous to the Administrative Agent or such Bank.
SECTION 6.COLLATERAL AND OTHER SECURITY
SECTION 6.1 Collateral Documents . Concurrently with or prior to the Closing Date:
(a) Pledge Agreement (Conseco Stock). The Borrowers shall execute and deliver to the Administrative Agent, for the benefit of the Banks, the Pledge Agreement, whereby each of the Borrowers shall pledge all of the issued and outstanding common stock of Conseco owned by each Borrower and acquired with the proceeds of the Existing Loans and shall direct the administrative agent under the Existing Credit Agreement to deliver to the Administrative Agent all stock certificates pledged pursuant thereto and all related stock powers.
(b) Conseco Guaranty. Conseco shall execute and deliver to the Administrative Agent the Conseco Guaranty, covering the payment and performance of all of the Liabilities.
(c) CIHC Guaranty. CIHC shall execute and deliver to the Administrative Agent the CIHC Guaranty, covering the payment and performance of all the Liabilities.
(d) Reaffirmation of Existing Conseco Guaranty. Conseco shall execute and deliver to the Administrative Agent the Reaffirmation of Existing Conseco Guaranty.
(e) Reaffirmation of Existing CIHC Guaranty. CIHC shall execute and deliver to the Administrative Agent the Reaffirmation of Existing CIHC Guaranty.
(f) Subordinated Pledge Agreement Re 1997 Shares. A Subordinated Pledge Agreement Re 1997 Shares, executed by the pledgors thereunder, and acknowledged by the administrative agent under the New Credit Agreement Re 1997 Loans, shall be delivered to BofA as administrative or collateral agent.
(g) Subordinated Pledge Agreement Re 1998 Shares. A Subordinated Pledge Agreement Re 1998 Shares, executed by the pledgors thereunder, and acknowledged by the administrative agent under the New Credit Agreement Re 1998 Loans, shall be delivered to BofA as administrative or collateral agent.
(h) Second Amendment to the Collateral Agreement. Conseco and CIHC shall execute and deliver to the Administrative Agent the Second Amendment to the Collateral Agreement.
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(i) First Amendment to the Collateral Sharing Agreement. Conseco and CIHC shall execute and deliver to the Administrative Agent the First Amendment to the Collateral Sharing Agreement.
SECTION 6.2 Pledge of Additional Collateral . On or before December 31, 2000 (or such later date as permitted to any AC Pledge Borrowers to pledge Additional Collateral pursuant to the provisions of the Plan), the AC Pledge Borrowers, if any, shall grant to the AC Collateral Agent, for the benefit of the banks under New Credit Agreements Re D&O Loans, a first, perfected security interest in the Additional Collateral. Specifically, on or before such date, the AC Collateral Agent shall have received: (i) the AC Pledge Agreement, (ii) all stock certificates pledged pursuant thereto, (iii) appropriate stock powers for such shares endorsed in blank, (iv) appropriate evidence of the perfection and first priority of such collateral agent's Lien, including UCC financing statements and/or registration or acknowledgments of the Lien of such collateral agent on any applicable brokerage account of each AC Pledge Borrower, and (v) a certificate from Conseco, in form reasonably satisfactory to the Administrative Agent, signed by a Responsible Officer, identifying the AC Pledge Borrowers by name and describing the Additional Collateral to be pledged by each such Borrower. Consistent with (but not in limitation of) the foregoing and the other provisions of this Agreement and the other Loan Documents, (a) the delivery of any Additional Collateral to the AC Collateral Agent, to be held and disposed of pursuant to the provisions of the AC Pledge Agreement, shall constitute a collateral pledge of such property and shall not constitute a paydown on the Loans or otherwise entitle the AC Pledge Borrower to any reduction in the amount of such Borrower's Loans unless and until the AC Collateral Agent disposes of such property and applies the proceeds thereof as provided pursuant to the provisions of the AC Pledge Agreement, (b) none of the AC Collateral Agent, the Administrative Agent, and the Banks shall have or otherwise incur any liability in favor of the AC Pledge Borrower, Conseco, or any other Person with respect to the AC Pledge Agreement and/or the Additional Collateral except solely to the extent expressly set forth in the AC Pledge Agreement, and (c) consistent with (but not in limitation of) the preceding clause (b), the AC Pledge Borrowers and Conseco shall bear (and thus reimburse the AC Collateral Agent promptly for) any and all reasonable costs and expenses of the AC Collateral Agent's accepting, maintaining, and realizing on the pledge of the Additional Collateral. If there are to be no AC Pledge Borrowers, on or before December 31, 2000, Conseco shall provide the Administrative Agent with a certificate to such effect, signed by a Responsible Officer. If on or before such date, there are no AC Pledge Borrowers but, pursuant to the provisions of the Plan, such deadline has been extended as to various Borrowers, such certificate shall identify such Borrowers and the extended deadlines as to such Borrowers.
SECTION 6.3 Application of Proceeds from Collateral . As to each Borrower, all proceeds received by the Administrative Agent from the sale or disposition of any of the Direct Collateral furnished by such Borrower pursuant to this Agreement or Indirect Collateral furnished by Conseco pursuant to the Conseco Guaranty shall be applied by the Administrative Agent in the following order after receipt thereof:
First: to the payment of all of the reasonable costs and expenses of the Administrative Agent in connection with (a) the administration, sale or disposition of such Direct Collateral or Indirect Collateral, as the case may be, and (b) the administration and enforcement of this Agreement and the other Loan Documents, to the
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extent that such costs and expenses shall not have been reimbursed to the Administrative Agent and relate to such Borrower's Loans;
Second: to the payment in full of all accrued and unpaid interest on the Loans of such Borrower, then to the payment in full of all unpaid principal of the Loans of such Borrower, and then to any remaining Liabilities of such Borrower;
Third: the balance, if any, of such proceeds shall be paid to such Borrower, to such Borrower's heirs and assigns, or as a court of competent jurisdiction may direct.
Notwithstanding the foregoing, (x) the proceeds of the Additional Collateral shall be applied as set forth in the AC Pledge Agreement, (y) the proceeds of any collateral pledged pursuant to the Subordinated Pledge Agreement Re 1997 Shares shall be applied as set forth therein, and (z) the proceeds of the Subordinated Pledge Agreement Re 1998 Shares shall be applied as set forth therein.
SECTION 6.4 Further Assurances . Each Borrower agrees that upon request of the Administrative Agent (a) such Borrower shall promptly deliver or cause to be delivered to the Administrative Agent, in due form for transfer, all chattel paper, instruments, securities and documents of title, if any, at any time representing all or any of the Direct Collateral, and (b) such Borrower shall forthwith execute and deliver or cause to be executed and delivered to the Administrative Agent, in due form for filing or recording (and pay the cost of filing or recording the same in all public offices deemed necessary by the Administrative Agent), such further assignment agreements, security agreements, pledge agreements, instruments, consents, waivers, financing statements, stock or bond powers, searches, releases, and other documents, and do such other acts and things, all as the Administrative Agent may from time to time reasonably request to establish and maintain to the satisfaction of the Administrative Agent a valid perfected Lien on all Direct Collateral (free of all other Liens except those permitted pursuant to Section 7.4 hereof) to secure payment of the Liabilities.
SECTION 7.REPRESENTATIONS AND WARRANTIES OF BORROWERS
To induce the Administrative Agent and the Banks to enter into this Agreement and to make the Loans hereunder, each Borrower represents and warrants to the Administrative Agent and to each of the Banks that:
SECTION 7.1 No Conflict . The execution, delivery and performance by such Borrower of this Agreement and the other Loan Documents to which such Borrower is a party does not and will not (a) contravene or conflict with any provision of any law, statute, rule or regulation applicable to such Borrower, (b) contravene or conflict with, result in any breach of, or constitute a default under, any material agreement or instrument binding on such Borrower (including, without limitation, any writ, judgment, injunction or other similar court order) or (c) result in the creation or imposition of or the obligation to create or impose any Lien upon any of the property or assets of such Borrower (except for (i) the Lien of the Administrative Agent pursuant to the Pledge Agreement, (ii) the Liens under any subordinated pledge agreements in favor of the administrative agent under any Other D&O Agreement, and (iii) the Lien of the AC Collateral Agent under the AC Pledge Agreement.
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SECTION 7.2 Validity . This Agreement and the other Loan Documents to which such Borrower is a party constitute or upon execution and delivery will constitute the legal, valid and binding obligation of such Borrower enforceable in accordance with its terms subject to (a) applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting creditors' rights generally and (b) general equitable principles, including without limitation, concepts of good faith and fair dealing, materiality, fraudulent transfer and reasonableness (regardless of whether considered in a proceeding in equity or at law).
SECTION 7.3 Litigation and Contingent Obligations . No Material Litigation, other than the Existing Litigation, is pending as to such Borrower or, to the best of such Borrower's knowledge, threatened as to such Borrower, and such Borrower has no material Contingent Obligations.
SECTION 7.4 Liens . None of the Direct Collateral pledged by such Borrower is subject to any Lien (except for (a) the Lien of the Administrative Agent pursuant to the Pledge Agreement, (b) the Liens under any subordinated pledge agreement in favor of the administrative agent under any Other D&O Agreement, and (c) the Lien of the AC Collateral Agent under the AC Pledge Agreement). Such Borrower shall not be able or entitled to grant any Liens in favor of any Person in and to the Plan Rights.
SECTION 7.5 Taxes . Such Borrower has filed all material federal and state tax returns and related reports required by law to have been filed by such Borrower and has paid Taxes thereby shown to be owing, except any such Taxes which are being diligently contested in good faith by appropriate proceedings and Taxes with respect to which the failure to pay could not reasonably be expected to have a Material Adverse Effect. There is no ongoing audit or, to the best of such Borrower's knowledge, other governmental investigation of the tax liability of such Borrower and there is no unresolved claim by a taxing authority concerning such Borrower's tax liability, for any period for which returns have been filed or were due.
SECTION 7.6 Accuracy of Information . All factual information furnished as of the Closing Date by or on behalf of such Borrower in writing to the Administrative Agent or any Bank for purposes of or in connection with this Agreement or any transaction contemplated hereby is, and all other such factual information furnished after the Closing Date by or on behalf of such Borrower to the Administrative Agent or any Bank will be, true and accurate in every material respect on the date as of which such information is dated or certified and, except as such information speaks solely as of a particular date, such information is not, or shall not be, as the case may be, incomplete by omitting to state any material fact necessary to make such information not misleading.
SECTION 7.7 Proceeds . The proceeds of the Loans will be used solely to refinance the loans of such Borrower under the Existing Credit Agreement.
SECTION 7.8 Securities Laws . Neither such Borrower nor, to the best of such Borrower's knowledge, any of its Affiliates, nor anyone acting on behalf of any such Person, has directly or indirectly offered any interest in the Loans or any other Liabilities for sale to, or solicited any offer to acquire any such interest from, or has sold any such interest to, any Person
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that would subject the making of the Loans or any other Liabilities to registration under the Securities Act of 1933, as amended.
SECTION 7.9 No Default. Such Borrower is not in default under any agreement or instrument to which such Borrower is a party or by which any of its properties or assets is bound or affected, which default could reasonably be expected to have a Material Adverse Effect.
SECTION 7.10 Organization, etc. Each Borrower (other than any Borrower which is an individual) is a corporation, partnership or irrevocable trust duly organized, validly existing and, with respect to any corporation or partnership, in good standing under the laws of the state of its incorporation or formation and each corporate or partnership Borrower is duly qualified to transact business as a foreign corporation or partnership authorized to do business in each jurisdiction where the nature of its business makes such qualification necessary and failure to so qualify could reasonably be expected to have a Material Adverse Effect.
SECTION 7.11 Authorization. Each Borrower (other than any Borrower which is an individual) (a) has the power to execute, deliver and perform this Agreement and the other Loan Documents to which it is a party, and
(b) has taken all necessary action to authorize the execution, delivery and performance by it of this Agreement and the other Loan Documents to which it is a party.
SECTION 7.12 Margin Regulations. (a) None of the obligations of such Borrower to Conseco is or will be secured, directly or indirectly, by Margin Stock;
(b) Neither Conseco nor any third party acting on behalf of Conseco has taken or will take possession of such Borrower's Margin Stock to secure, directly or indirectly, any of the obligations of such Borrower to Conseco;
(c) Conseco does not and will not have any right to prohibit such Borrower from selling, pledging, encumbering or otherwise disposing of any Margin Stock owned by such Borrower so long as the Conseco Guaranty is in effect or any of the obligations of such Borrower or the obligations of Conseco under the this Agreement, the Conseco Guaranty or any of the Loan Documents remain outstanding;
(d) Such Borrower has not granted and will not grant Conseco or any third party acting on behalf of Conseco the right to accelerate repayment of any of the obligations under this Agreement of such Borrower if any of the Margin Stock owned by such Borrower is sold by such Borrower or otherwise; and
(e) There is no agreement or other arrangement between such Borrower and Conseco or any third party acting on behalf of Conseco (and no such agreement or arrangement shall be entered into so long as this Agreement or the Conseco Guaranty is in effect or any of the obligations of such Borrower or the obligations of Conseco under the Conseco Guaranty or any of the Loan Documents remain outstanding) under which the Margin Stock of such Borrower would be made more readily available as security to Conseco than to other creditors of such Borrower.
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SECTION 7.13 Principal Residence. The address set forth on each Borrower's signature page hereof correctly sets forth such Borrower's place of principal residence. Each Borrower shall promptly (but in no event later than thirty days after changing such principal place of residence) inform the Administrative Agent of any and each change in such Borrower's principal place of residence and provide the Administrative Agent with the Borrower's new, correct address.
SECTION 7.14 No Default or Event of Default. No Default or Event of Default as to such Borrower shall exist on the date of the execution and delivery of this Agreement on the Closing Date.
SECTION 8.COVENANTS OF BORROWERS
Each Borrower agrees that, on and after the Closing Date and for so long thereafter as any of the Liabilities remain unpaid or outstanding (except Liabilities which by the terms hereof survive the payment in full of the Loans and termination of this Agreement), such Borrower will:
SECTION 8.1 Reports, Certificates and Other Information . Unless otherwise provided herein, furnish or cause to be furnished to the Administrative Agent and each Bank:
8.1.1 Borrower Financials. Upon the request of the Administrative Agent, a financial statement of such Borrower in a form acceptable to the Required Banks;
8.1.2 Tax Returns and Reports. If requested by the Administrative Agent or the Required Banks, copies of all federal, state, local and foreign Tax Returns and Reports filed by such Borrower;
8.1.3 Notice of Default and Litigation. Promptly upon learning of the occurrence of any of the following, written notice thereof, describing the same and the steps being taken by such Borrower with respect thereto:
(a) the occurrence of a Default;
(b) the institution of any Material Litigation or the occurrence of any Material Litigation Development as to such Borrower;
(c) the commencement of any dispute which might reasonably be expected to lead to the material modification, transfer, revocation, suspension or termination of any Loan Document; or
(d) any Material Adverse Change as to such Borrower;
8.1.4 Collateral Ratio. Upon the request of the Administrative Agent or the Required Banks, cause Conseco (on behalf of the Borrowers) to provide to the Administrative Agent, for the benefit of the Banks, a computation of the Collateral Ratio certified by its chief financial officer or a senior vice president with responsibility for or knowledge of financial matters of Conseco. Nothing contained in this Section 8.1.4 shall
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be deemed to limit in any way whatsoever the Administrative Agent's right, on behalf of the Banks, to calculate the Loan Value of Direct Collateral or the Loan Value of Indirect Collateral or the Collateral Ratio at any time it deems appropriate or necessary. If after making such calculation, the Administrative Agent or the Required Banks determine that the amount of such Collateral Ratio is different from the Collateral Ratio most recently provided by Conseco or the Administrative Agent, as the case may be, the Administrative Agent shall deliver written notice of such amount to Conseco (on behalf of the Borrowers); provided that the Administrative Agent's failure to deliver such notice shall not prejudice the rights of the Administrative Agent and the Banks or the obligations of the Borrowers under this Agreement or the other Loan Documents; and
8.1.5 Other Information . From time to time, such other information concerning such Borrower as the Administrative Agent or a Bank may reasonably request.
SECTION 8.2 Taxes and Liabilities . Pay when due all of his, her or its Taxes and other material liabilities, except as contested in good faith and by appropriate proceedings and except Taxes with respect to which the failure to pay could not reasonably be expected to have a Material Adverse Effect.
SECTION 8.3 Compliance with Laws . Comply with all federal, state and local laws, rules and regulations related to such Borrower, except where such failure to comply could not reasonably be expected to have a Material Adverse Effect.
SECTION 8.4 Other Agreements . Not enter into any agreement containing any provision which (a) would be violated or breached by the performance of its obligations hereunder or under any instrument or document delivered or to be delivered by such Borrower hereunder or in connection herewith, (b) prohibits or restricts the ability of such Borrower to amend or otherwise modify this Agreement, any other Loan Document or any other document executed in connection herewith or (c) constitutes an agreement to a limitation or restriction of the type described in clauses (a) and (b) with respect to any other Indebtedness.
SECTION 9. CONDITIONS AND EFFECTIVENESS OF THIS AGREEMENT
The obligation of the Banks to make the Loans and the effectiveness of this Agreement is subject to the performance by a Borrower of all of the obligations under this Agreement and to the satisfaction of the following conditions precedent:
SECTION 9.1 Receipt of Documents . Prior to or concurrent with the making of the Loans, the Administrative Agent shall have received all of the following, each, except to the extent otherwise specified below, duly executed by such Borrower dated the Closing Date (or such earlier date as shall be satisfactory to the Administrative Agent), in form and substance satisfactory to the Administrative Agent, each in sufficient number of signed counterparts or copies to provide one for each Bank and the Administrative Agent:
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9.1.1 If requested by the Administrative Agent, an appropriately completed Note from each Borrower, payable to the order of the Administrative Agent evidencing the aggregate Loans to such Borrower;
9.1.2 The Pledge Agreement;
9.1.3 The Administrative Agent's receipt of all shares of common stock of Conseco owned by each Borrower which have been purchased with proceeds of the Existing Loans or any of the foregoing relating thereto as required by the Pledge Agreement, together with appropriate stock powers for such shares endorsed in blank and/or other appropriate evidence of the perfection of the Administrative Agent's Lien, including UCC financing statements and/or registrations or acknowledgments of the Lien of the Administrative Agent on any applicable brokerage account of each Borrower;
9.1.4 The Conseco Guaranty, together with the documents provided in Article V thereof;
9.1.5 The CIHC Guaranty;
9.1.6 The Reaffirmation of the Existing Conseco Guaranty;
9.1.7 The Reaffirmation of the Existing CIHC Guaranty;
9.1.8 The Subordinated Pledge Agreement Re 1997 Shares, executed by the pledgors thereunder, and acknowledged by the administrative agent under the New Credit Agreement Re 1997 Loans;
9.1.9 The Subordinated Pledge Agreement Re 1998 Shares, executed by the pledgors thereunder, and acknowledged by the administrative agent under the New Credit Agreement Re 1998 Loans;
9.1.10 The Borrower Acknowledgment and Release executed by each Borrower;
9.1.11 The Second Amendment to the Collateral Agreement;
9.1.12 The First Amendment to the Collateral Sharing Agreement;
9.1.13 An opinion of David K. Herzog, counsel of Conseco and CIHC, substantially in the form of Exhibit F-1, and addressing such other legal matters as the Administrative Agent may reasonably require;
9.1.14 An opinion of Weil, Gotshal & Manges LLP, outside counsel to Conseco and CIHC, substantially in the form of Exhibit F-2, and addressing such other legal matters as the Administrative Agent may reasonably require;
9.1.15 Certified copies of each material consent, license and approval required in connection with the execution, delivery, performance, validity and enforceability of this Agreement and the other Loan Documents; such consents, licenses and approvals shall be
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in full force and effect, shall be reasonably satisfactory in form and substance to the Administrative Agent and shall be all of the material consents required to be obtained or made on or before the consummation of the financing contemplated by this Agreement;
9.1.16 A certificate of Conseco in the form attached as Exhibit O hereto;
9.1.17 Schedules and Exhibits satisfactory to the Administrative Agent and the Banks;
9.1.18 Evidence satisfactory to the Administrative Agent of compliance by each Borrower and Conseco with Regulation U in connection with the financing transactions contemplated hereby;
9.1.19 Evidence of each filing, registration or recordation
(and payment of any necessary fee, Tax or expense relating thereto) with respect to each document (including, without limitation, any UCC financing statement) required by the Loan Documents or under law or requested by the Administrative Agent to be filed, registered or recorded in order to create, in favor of the Administrative Agent, for the benefit of the Banks a valid perfected Lien on all Direct Collateral (free of all other Liens other than the junior and subordinate Liens to be granted to the administrative agents under the Other D&O Agreements) other than UCC financing statements to be filed in connection with the Loan Documents which will be delivered for filing on the Closing Date;
9.1.20 Evidence satisfactory to the Administrative Agent that each of the Loan Documents has been duly executed and delivered and is in full force and effect without modification;
9.1.21 Certified copies of any indemnification or similar agreements or arrangements between any Borrower and Conseco relating to the reimbursement by such Borrower of any payments made by Conseco under the Conseco Guaranty; and
9.1.22 A Federal Reserve Form U-1 for the benefit of the Banks, duly executed by each Borrower, the statements made in which shall be such, in the opinion of the Administrative Agent, as to permit the transactions contemplated by this Agreement in accordance with Regulation U.
SECTION 9.2 Additional Conditions . The obligation of the Banks to make Loans to any Borrower hereunder is subject to the following further conditions precedent:
9.2.1 The Administrative Agent shall have received a duly executed Notice of Borrowing;
9.2.2 No Default exists or will result from the making of the Loans, and no Event of Default (as defined under the Revolving Credit Agreement) has occurred and is continuing; provided, however, that a Default relating solely to another Borrower will not relieve the Banks of their obligations to make Loans to other Borrowers subject to the satisfaction of the other provisions of this Agreement.
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9.2.3 The representations and warranties of and as to such Borrower contained in Section 7, and 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 Closing 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;
9.2.4 No Material Litigation exists other than the Existing Litigation;
9.2.5 No Material Adverse Change has occurred with respect to Conseco or CIHC since September 22, 2000;
9.2.6 The Collateral Ratio for such Borrower, after giving effect to such Loan, is at least 2.0 to 1.0; and
9.2.7 Conseco shall have paid all accrued and unpaid fees, costs and expenses, including reasonable attorney's fees and costs, with respect to all credit arrangements with the Administrative Agent.
SECTION 10.EVENTS OF DEFAULT AND THEIR EFFECT
SECTION 10.1 Events of Default . An "Event of Default" shall exist with respect to a Borrower if any one or more of the following events (herein collectively called "Events of Default") shall occur and be continuing:
10.1.1 NonPayment of Loans, etc.
(a) Default by such Borrower in the payment or prepayment when due of any principal on the Loans made to such Borrower, or
(b) Default by such Borrower in the payment within five
(5) days of when due of any interest on the Loans made to such Borrower or any other amount owing by such Borrower pursuant to this Agreement.
10.1.2 Bankruptcy, Insolvency, etc. Such Borrower becomes insolvent or generally fails to pay, or admits in writing its inability to pay, debts as they become due; or such Borrower applies for, consents to, or acquiesces in the appointment of, a trustee, receiver or other custodian for such Borrower or any property thereof, or makes a general assignment for the benefit of creditors; or, in the absence of such application, consent or acquiescence, a trustee, receiver or other custodian is appointed for such Borrower or for a substantial part of the property of such Borrower and is not discharged within sixty (60) days; or any bankruptcy, reorganization, debt arrangement, or other case or proceeding under any bankruptcy or similar insolvency law is commenced in respect of such Borrower and if such case or proceeding is not commenced by such Borrower, it is consented to or acquiesced in by such Borrower or remains for sixty (60) days undismissed.
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10.1.3 Defaults Under this Agreement . Failure by such Borrower to comply with or perform any of the covenants or agreements of such Borrower set forth in this Agreement or the other Loan Documents applicable to such Borrower (other than those constituting an Event of Default under any of the other provisions of this Section 10) and continuance of such failure for thirty (30) days with respect to such Borrower, in each case after notice thereof to such Borrower from the Administrative Agent.
10.1.4 Representations and Warranties . Any representation or warranty made by such Borrower in any of the Loan Documents is false or misleading in any material respect as of the date hereof or as of the date hereafter certified, or any schedule, certificate, financial statement, report, notice, or other writing furnished by such Borrower to the Administrative Agent or any Bank is false or misleading in any material respect on the date as of which the facts therein set forth are stated or certified.
10.1.5 Collateral Ratio . The Collateral Ratio for such Borrower is less than 1.5 to 1.0.
10.1.6 Defaults under the Conseco Guaranty . An event of default shall have occurred and be continuing under the Conseco Guaranty.
10.1.7 Defaults Under Any of the Other D&O Agreements . An Event of Default or Termination Event in respect of Conseco, any of its Subsidiaries or such Borrower shall have occurred and be continuing under any of the Other D&O Agreements.
SECTION 10.2 Effect of Event of Default . If any Event of Default described in Section 10.1.2 shall occur and be continuing, all Liabilities of such Borrower, or if any Event of Default under subsection (f) or
(g) of Section 5.01 of the Appendix (as such term is defined in the Conseco Guaranty), made applicable to Conseco, CIHC or any other Significant Subsidiary pursuant to Sections 10.1.6 and 10.1.7 hereof, shall occur and be continuing as to Conseco or CIHC, all Liabilities of all Borrowers, shall become immediately due and payable, all without presentment, demand, protest or notice of any kind; and, in the case of any other Event of Default, the Administrative Agent may (or shall, upon the written request of the Required Banks) declare all Liabilities with respect to such Borrower, or if such Event of Default relates to Conseco or CIHC, all Liabilities of all Borrowers, to be due and payable, whereupon all Liabilities with respect to such Borrower or all Borrowers, as the case may be, shall become immediately due and payable, all without presentment, demand, protest or notice of any kind. The Administrative Agent shall promptly advise such Borrower or all Borrowers, as the case may be, and each Bank of any such declaration, but failure to do so shall not impair the effect of such declaration. Notwithstanding the foregoing or any provision of Section 13.1, the effect of an Event of Default of any event described in Section 10.1.2 may be waived by the written concurrence of the Banks holding 100% of the aggregate unpaid principal amount of the Loans, and the effect as an Event of Default of any other event described in this Section 10 may be waived as provided in
Section 13.1. In any such circumstance where the Liabilities of any Borrower or all Borrowers (as the case may be) have become immediately due and payable, whether automatically or upon any such declaration (as the case may be), the Administrative Agent may (or shall, upon the written request of the Required Banks) exercise or not exercise, as it deems appropriate, on behalf of itself and the Banks, any and all other rights and remedies
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available (including after taking into account, as to Conseco and CIHC only, the restrictions set forth in Sections 2.1 and 6.1 of the Conseco Guaranty) to it and the Banks under the Loan Documents and/or applicable law against such Borrower or all Borrowers or any combination thereof (as the case may be), Conseco and/or CIHC and their respective property.
SECTION 11.THE AGENT
SECTION 11.1 Authorization and Action . Each Bank hereby appoints and authorizes the Administrative Agent to take such action as administrative agent on its behalf and to exercise such powers to the extent provided herein or in any document or instrument delivered hereunder or in connection herewith, together with such other action as may be reasonably incidental thereto. As to matters not expressly provided for by this Agreement (including, without limitation, enforcement or collection of this Agreement or any other Loan Document) the Administrative Agent shall not be required to exercise any discretion, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Required Banks and such instructions shall be binding upon all Banks. Under no circumstances shall the Administrative Agent have any fiduciary duties to any Bank or be required to take any action which exposes the Administrative Agent to personal liability or which is contrary to this Agreement or to the other Loan Documents or applicable law.
SECTION 11.2 Liability of the Administrative Agent . None of the Administrative Agent or any Agent Related Person shall be liable for any action taken or omitted to be taken by it or them under or in connection with this Agreement and the other Loan Documents, except for its own gross negligence or willful misconduct. Without limiting the generality of the foregoing, the Administrative Agent: (a) may treat a Bank as such until the Administrative Agent receives an executed Assignment Agreement entered into between a Bank and an Eligible Assignee pursuant to Section 12.1 hereof; (b) may consult with legal counsel (including counsel for any Borrower), independent public accountants and other experts or consultants selected by it; (c) shall not be liable for any action taken or omitted to be taken in good faith by the Administrative Agent in accordance with the advice of counsel, accountants, consultants or experts; (d) shall make no warranty or representation to any Bank and shall not be responsible to any Bank for any recitals, statements, warranties or representations, whether written or oral, made in or in connection with this Agreement or the other Loan Documents; (e) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, obligations, covenants or conditions of this Agreement on the part of any Borrower or to inspect the property (including, without limitation, any books and records) of any Borrower; (f) shall not be responsible to any Bank for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other Loan Document or other support or security (including the validity, priority or perfection of any Lien), or any other document furnished in connection with any of the foregoing; and (g) shall incur no liability under or in respect of this Agreement or any other Loan Document by action upon any written notice, statement, certificate, order, telephone message, facsimile or other document which the Administrative Agent believes in good faith to be genuine and correct and to have been signed, sent or made by the proper Person.
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SECTION 11.3 Administrative Agent and Affiliates . With respect to the Loans made by it, Chase shall have the same rights and powers under this Agreement and the other Loan Documents as any other Bank and may exercise the same as though it were not the Administrative Agent; and the term "Bank" or "Banks" shall, unless otherwise expressly indicated, include Chase in its individual capacity. Chase and its Affiliates may accept deposits from, lend money to, act as trustee under indentures of, and generally engage in any kind of business with, any Borrower, Conseco and any of its Subsidiaries and any Person who may do business with or own securities of Conseco or any such Subsidiary, all as if Chase was not the Administrative Agent and without any duty to account therefor to the Banks.
SECTION 11.4 Bank Credit Decision . Each Bank acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Bank and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Bank also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement.
SECTION 11.5 Indemnification . The Banks agree to indemnify the Administrative Agent and each Agent Related Person (to the extent not reimbursed by the Borrower), ratably according to their Percentages, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by, or assessed against the Administrative Agent in any way relating to or arising out of this Agreement, the other Loan Documents, the Other D&O Agreements or the Existing Litigation, or any action taken or omitted by the Administrative Agent under this Agreement, the other Loan Documents, the Other D&O Agreements or the Existing Litigation; provided, that no Bank shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Administrative Agent's gross negligence or willful misconduct. Without limiting any of the foregoing, each Bank agrees to reimburse the Administrative Agent promptly upon demand for their Percentage of any expenses (including reasonable counsel fees) incurred by the Administrative Agent (in its individual capacity as agent or in its capacity as representative of the Banks) in connection with the preparation, execution, delivery, administration, modification, amendment, waiver or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under this Agreement, the other Loan Documents, the Other D&O Agreements or the Existing Litigation, to the extent that the Administrative Agent is not reimbursed for such expenses by the Borrowers or Conseco. All obligations provided for in this Section 11.5 shall survive termination of this Agreement.
SECTION 11.6 Successor Agent . The Administrative Agent may, and at the request of the Required Banks shall, resign as Administrative Agent upon 30 days' notice to the Banks. If the Administrative Agent resigns under this Agreement, the Required Banks shall appoint from among the Banks a successor agent for the Banks which successor agent shall be approved by a majority of the Borrowers (which consent shall not be unreasonably withheld). If no successor agent is appointed prior to the effective date of the resignation of the Administrative Agent, the Administrative Agent may appoint, after consulting with the Banks
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and the Borrowers, a successor agent from among the Banks. Upon the acceptance of its appointment as successor agent hereunder, such successor agent shall succeed to all the rights, powers and duties of the retiring Administrative Agent and the term "Administrative Agent" shall mean such successor agent and the retiring Administrative Agent's appointment, powers and duties as Administrative Agent shall be terminated. After any retiring Administrative Agent's resignation hereunder as Administrative Agent, the provisions of this
Section 11 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement. If no successor agent has accepted appointment as Administrative Agent by the date which is 30 days following a retiring Administrative Agent's notice of resignation, the retiring Administrative Agent's resignation shall nevertheless thereupon become effective and the Banks shall perform all of the duties of the Administrative Agent hereunder until such time, if any, as the Required Banks appoint a successor agent as provided for above.
SECTION 12.ASSIGNMENTS AND PARTICIPATIONS
SECTION 12.1 Assignments . (a) Each Bank shall have the right at any time to assign with the consent of Conseco (on behalf of the Borrowers) and the Administrative Agent (which consent, in each case, will not unreasonably be withheld), to any Eligible Assignee, all or any part of such Bank's rights and obligations under this Agreement and each other Loan Document including its rights in respect of its Loans and Notes, if any; provided, however, that no such consent of Conseco (on behalf of the Borrowers) shall be required where any Event of Default as to Conseco or CIHC has occurred and shall be continuing. Any such assignment shall be pursuant to an assignment agreement, substantially in the form of Exhibit H (an "Assignment Agreement"), duly executed by such Bank and the Eligible Assignee, and acknowledged by the Administrative Agent. Notwithstanding the foregoing, each Bank may make assignments to its Affiliates or to any Federal Reserve Bank without obtaining consent of the Administrative Agent.
(b) Each assignment shall be pro rata with respect to all rights and obligations of the assigning Bank including the Loans and the Notes, if any. Each assignment shall be in an amount equal to or in excess of $5,000,000 (except for assignments of the entire unpaid balance, if less than $5,000,000, of the Loans of a Bank or assignments to existing Banks). In the case of any such assignment, upon the fulfillment of the conditions in Section 12.1(c), this Agreement shall be deemed to be amended to the extent, and only to the extent, necessary to reflect the addition of such Eligible Assignee, and such Eligible Assignee shall for all purposes be a Bank party hereto and shall have, to the extent of such assignment, the same rights and obligations as a Bank hereunder.
(c) An assignment shall become effective hereunder when all of the following shall have occurred:
(i) the Assignment Agreement shall have been executed by the assigning Bank and the Eligible Assignee,
(ii) the Assignment Agreement shall have been acknowledged by the Administrative Agent and, where applicable, by Conseco (on behalf of the Borrowers),
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(iii) either the assigning Bank or the Eligible Assignee shall have paid a processing fee of $3,000 to the Administrative Agent for its own account; provided that the Eligible Assignee shall be solely responsible for such processing fee with respect to any assignment pursuant to Sections 5.8 and 13.2, and
(iv) the assigning Bank and the Administrative Agent shall have agreed upon a date upon which such assignment shall become effective. Upon such assignment becoming effective, the Administrative Agent shall forward all payments of interest, principal, fees and other amounts that would have been made to the assigning Bank, in proportion to the percentage of the assigning Bank's rights transferred, to the Eligible Assignee.
(d) Upon the effectiveness of any assignment, the assigning Bank shall be relieved from its obligations hereunder to the extent of the obligations so assigned (except to the extent, if any, that any Borrower, any other Bank or the Administrative Agent have rights against such assigning Bank as a result of any default by such Bank under this Agreement). Promptly following the effectiveness of each assignment, the Administrative Agent shall furnish to the Borrowers and each Bank a revised Schedule 2.1, revised to reflect such assignment.
SECTION 12.2 Participations . (a) Each Bank may grant participations in all or any part of its Loans and, if applicable, the Notes to any commercial bank or other financial institution (other than insurance companies and Affiliates thereof unless consented to by Conseco). A participant shall not have any rights under this Agreement or any other document delivered in connection herewith (the participant's rights against such Bank in respect of such participation to be those set forth in the agreement executed by such Bank in favor of the participant relating thereto, which agreement with respect to such participation shall not restrict such Bank's ability to make any modification, amendment or waiver to this Agreement without the consent of the participant except that the consent of such participant may be required in connection with matters requiring the consent of all of the Banks under Section 13.1). Notwithstanding the foregoing, each participant shall have the rights of a Bank pursuant to Section 4.3. All amounts payable by any Borrower under this Agreement shall be determined as if the Bank had not sold such participation. In the event of any such sale by a Bank of participating interests to a participant, such Bank's obligations under this Agreement shall remain unchanged, such Bank shall remain solely responsible for the performance thereof, such Bank shall remain the holder of any obligation for all purposes under this Agreement, and the Borrowers and the Administrative Agent shall continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations under this Agreement.
(b) Limitation of Rights of any Participant. Notwithstanding anything in the foregoing to the contrary,
(i) no participant shall have any direct rights hereunder,
(ii) the Borrowers, the Administrative Agent and the Banks, other than the selling Bank, shall deal solely with the selling Bank and shall not be obligated to extend any rights or make any payment to, or seek any consent of, the participant,
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(iii) no participation shall relieve the selling Bank of any of its other obligations hereunder and such Bank shall remain solely responsible for the performance thereof, and
(iv) no participant, other than an affiliate of the selling Bank, shall be entitled to require such Bank to take or omit to take any action hereunder, except that such Bank may agree with such participant that such Bank will not, without participant's consent, take any action which requires the consent of all of the Banks under
Section 13.1.
SECTION 12.3 Disclosure of Information . Each Borrower authorizes each Bank to disclose to any participant, assignee or Eligible Assignee (each, a "Transferee") and any prospective Transferee any and all financial and other information in such Bank's possession concerning such Borrower, Conseco and its Subsidiaries which has been delivered to such Bank by such Borrower and/or Conseco in connection with such Bank's credit evaluation of such Borrower prior to entering into this Agreement or which has been delivered to such Bank by such Borrower and/or Conseco pursuant to this Agreement; provided, however, that each Bank, participant, assignee and Eligible Assignee shall execute a confidentiality agreement substantially in the form of Exhibit G in which it agrees that it shall hold all non-public, confidential and proprietary information obtained pursuant to the requirements of this Agreement in accordance with safe and sound banking and business practices and may make disclosure reasonably required by any bona fide participant, assignee or Eligible Assignee (or potential participant, assignee or Eligible Assignee) in connection with the contemplated transfer of any portion of the Loans or as required or requested by any Governmental Authority or representative thereof or pursuant to legal process. For the purposes of this Section 12.3, by execution of this Agreement each of the Banks shall be deemed to have agreed to and executed the confidentiality agreement contained in Exhibit G.
SECTION 12.4 Foreign Transferees . If, pursuant to this
Section 12, any interest in this Agreement or any Loans or the Note is transferred to any Transferee which is organized under the laws of any jurisdiction other than the United States or any state thereof or upon the request of the Administrative Agent, the transferor Bank shall cause such Transferee (other than any participant), and may cause any participant, concurrently with the effectiveness of such transfer,
(a) to represent to the transferor Bank (for the benefit of the transferor Bank, the Administrative Agent and the Borrowers) that under applicable law and treaties no Taxes will be required to be withheld by the Administrative Agent,
(b) to represent to the Borrowers or the transferor Bank that under applicable law and treaties no Taxes will be required to be withheld with respect to any payments to be made to such Transferee in respect of the Loans or, if applicable, the Notes,
(c) to furnish to the transferor Bank, the Administrative Agent and the Borrowers either U.S. Internal Revenue Service Form W-BEN, Form W-ECI or Form W- 8IMY (wherein such Transferee claims entitlement to complete exemption from U.S. federal withholding tax on all interest payments hereunder), and
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(d) to agree (for the benefit of the transferor Bank, the Administrative Agent and the Borrowers) to provide the transferor Bank, the Administrative Agent and the Borrowers a new Form W-BEN, Form W-ECI or Form W-8IMY upon the obsolescence of any previously delivered form and comparable statements in accordance with applicable U.S. laws and regulations and amendments duly executed and completed by such Transferee, and to comply from time to time with all applicable U.S. laws and regulations with regard to such withholding tax exemption.
SECTION 13.MISCELLANEOUS
SECTION 13.1 Waivers and Amendments . Except as otherwise specified herein or therein, the provisions of this Agreement and of each other Loan Document may from time to time be amended, modified or waived, if such amendment, modification or waiver is in writing and consented to by each Borrower directly affected by such amendment, modification or waiver and the Required Banks; provided, that no such amendment, modification or waiver:
(a) which would modify any requirement hereunder that any particular action be taken by all Banks or by the Required Banks, shall be effective without the consent of each Bank;
(b) which would modify this Section 13.1, change the definition of "Required Banks," change any Percentage for any Bank (except pursuant to an Assignment Agreement), reduce any fees, extend the maturity date of any Loan, reduce any rate of interest payable on the Loans or subject any Bank to any additional obligations, shall be effective without the consent of each Bank;
(c) which would permit the release of all or any material portion of the Direct Collateral or Indirect Collateral or the collateral under the Collateral Agreement or the subordination of any lien or security interest benefiting the Banks in the collateral under the Collateral Agreement to any other lien or security interest, or the release or termination of Conseco's or CIHC's obligations in the aggregate, or any material obligation individually, under the Conseco Guaranty or the CIHC Guaranty, shall be effective without the consent of each Bank; provided, however, that such consent shall not be required for the termination of the CIHC Guaranty pursuant to Section 5.14 thereof;
(d) which would extend the due date for, or reduce the amount of, any payment or prepayment of principal of or interest on the Loans, shall be effective without the consent of each Bank;
(e) which would affect adversely the interests, rights or obligations of the Administrative Agent (in such capacity) other than removal in accordance with Section 11.6, shall be effective without consent of the Administrative Agent; or
(f) which would increase the aggregate principal amount of the indebtedness (including the Loans) sharing in the collateral under the Collateral Agreement pursuant to
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the Collateral Sharing Agreement or otherwise to more than $600,000,000 shall be effective without the consent of each Bank;
provided,further that, consistent with (but not in limitation of) the foregoing, (y) at any time that Liabilities of a particular Borrower shall be due and owing, but unpaid, amendments, modifications and waivers may be made applicable to such Borrower without the approval of other Borrowers (but with the approval of each Bank) and amendments, modifications and waivers may be made applicable to other Borrowers without such approval of such Borrower (but with the approval of each Bank) and (z) any guarantor and the Administrative Agent may enter into an amendment modification or waiver of such guarantor's or guaranty without the consent of any Borrower.
The Administrative Agent shall not consent to any amendment, modification or waiver of the Collateral Agreement or the Collateral Sharing Agreement except with the consent of the Required Banks or, if such amendment, modification or waiver is of a type described in any of clauses (a) through (f) above, each Bank.
SECTION 13.2 Failure to Consent . If any Bank shall fail to consent to any amendment, modification or waiver described in Section 13.1 (any such Bank being hereinafter referred to as a "Non-Consenting Bank") then in such case, Conseco (on behalf of the Borrowers) may, upon at least five (5) Business Days' written notice to the Administrative Agent and such Non-Consenting Bank, designate a substitute lender (a "Substitute Bank") acceptable to the Administrative Agent in its sole discretion, to which such Non-Consenting Bank shall assign all (but not less than all) of its rights and obligations under the Loans hereunder. Upon any assignment by any Bank pursuant to this Section 13.2 becoming effective, the Substitute Bank shall thereupon be deemed to be a "Bank" for all purposes of this Agreement and the assigning Bank shall thereupon cease to be a "Bank" for all purposes of this Agreement and shall have no further rights or obligations hereunder (other than pursuant to Sections 5.1, 5.2, 5.5, 11.5 and 13.4 hereof, and Sections 7.1 and 7.2 of the Conseco Guaranty or
Section 5.1 of the CIHC Guaranty while such Non-Consenting Bank was a Bank); provided, that all Liabilities (except Liabilities which by the terms hereof survive the payment in full of the Loans and termination of this Agreement) due and payable to the Non-Consenting Bank shall be paid in full as of the date of such assignment. Notwithstanding the foregoing, in the event that in connection with any amendment, modification or waiver more than one Bank is a Non-Consenting Bank, the Borrowers may not require one Bank to assign its rights and obligations to a Substitute Bank unless all Non-Consenting Banks are required to make such an assignment. Notwithstanding any Non-Consenting Bank's failure or refusal to assign its rights, obligations and Loans under this
Section 13.2, the Non-Consenting Bank shall cease to be a "Bank" for all purposes of this Agreement and the Substitute Bank substituted therefor upon payment to the Non-Consenting Bank by the Substitute Bank of all amounts set forth in this Section 13.2 without any further action of the Non-Consenting Bank.
SECTION 13.3 Notices . All notices, requests and other communications to any party hereunder shall be in writing (including bank wire, telex, facsimile or similar writing) and shall be given to such party at its address, facsimile or telex number set forth on the signature or acknowledgment pages hereof or such other address, facsimile or telex number as such party may hereafter specify for the purpose by written notice to the Administrative Agent,
44
the Borrowers and Conseco. Each such notice, request or other communication shall be effective (a) if given by facsimile or telex, when such facsimile or telex is transmitted to the facsimile or telex number specified in this Section 13.3 and, in the case of telex or facsimile, the appropriate answerback or confirmation is received, (b) if given by mail, seventy-two (72) hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid or (c) if given by any other means, when delivered at the address specified in this Section 13.3, provided, that notices to the Administrative Agent under Sections 2, 3, 4 and 10 shall not be effective until received by the Administrative Agent.
SECTION 13.4 Indemnity . The Borrowers agree, jointly and severally, to indemnify each Bank, its Affiliates and each of their respective directors, officers, employees, persons controlling or controlled by any of them or their respective agents, consultants, attorneys and advisors (the "Indemnified Parties") and hold each Indemnified Party harmless from and against any and all liabilities, losses, claims, damages, costs and expenses of any kind to which any of the Indemnified Parties may become subject, whether directly or indirectly (including, without limitation, the reasonable fees and disbursements of counsel for any Indemnified Party), relating to or arising out of this Agreement, the other Loan Documents, the Other D&O Agreements, the Existing Litigation or any actual or proposed use of the proceeds of the Loans hereunder; provided, that no Indemnified Party shall have the right to be indemnified hereunder for its own gross negligence or willful misconduct as determined by a court of competent jurisdiction. All obligations of the Borrowers provided for in this Section 13.4 shall survive termination of this Agreement.
SECTION 13.5 D&O Agreements. Except to the extent the Loans hereunder shall have refinanced Existing Loans, the D&O Agreements (including, without limitation, the Existing Credit Agreement) shall remain in full force and effect and shall not be superseded by this Agreement, and consistent with (but not in limitation of) the foregoing, nothing contained herein is intended in any manner whatsoever to amend, modify, or otherwise alter the provisions of the Existing Credit Agreement (or of any related loan document) as to any borrower thereunder who is not a party to this Agreement. Where the Loans have refinanced Existing Loans, the Existing Credit Agreement shall have been superseded by this Agreement as to the Borrowers, but only as to the Borrowers (and specifically, not as to the other borrowers under the Existing Credit Agreement who are not parties to this Agreement); provided, however, that provisions of the Existing Credit Agreement that expressly survive the payment in full of the Existing Loans shall continue to survive; provided further, however, in the event of any conflict between the provisions of this Agreement and the surviving provisions of the Existing Credit Agreement, the provisions of this Agreement shall control as to the Borrowers.
SECTION 13.6 Subsidiary References . The provisions of this Agreement relating to Subsidiaries shall apply only during such times as a Person referenced in such a provision has one or more Subsidiaries.
SECTION 13.7 Captions . Section captions used in this Agreement are for convenience only, and shall not affect the construction of this Agreement.
SECTION 13.8 GOVERNING LAW . THIS AGREEMENT, THE NOTES, IF ANY, AND THE LOANS SHALL BE A CONTRACT MADE UNDER AND
45
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. ALL OBLIGATIONS OF THE BORROWERS AND RIGHTS OF THE ADMINISTRATIVE AGENT AND THE BANKS IN RESPECT OF THE LIABILITIES EXPRESSED HEREIN OR IN THE OTHER LOAN DOCUMENTS SHALL BE IN ADDITION TO AND NOT IN LIMITATION OF THOSE PROVIDED BY APPLICABLE LAW.
SECTION 13.9 Counterparts . This Agreement may be executed in any number of counterparts and by the different parties on separate counterparts and each such counterpart shall be deemed to be an original, but all such counterparts shall together constitute but one and the same agreement. When counterparts executed by all the parties shall have been lodged with the Administrative Agent (or, in the case of any Bank as to which an executed counterpart shall not have been so lodged, the Administrative Agent shall have received telegraphic, facsimile, telex or other written confirmation from such Bank of execution of a counterpart hereof by such Bank), this Agreement shall become effective as of the Closing Date hereof, and at such time the Administrative Agent shall notify the Borrowers and each Bank.
SECTION 13.10 SUBMISSION TO JURISDICTION; WAIVER OF VENUE . THE ADMINISTRATIVE AGENT, EACH BANK AND EACH BORROWER HEREBY IRREVOCABLY SUBMIT TO THE NONEXCLUSIVE JURISDICTION OF THE SUPREME COURT OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK OVER ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS, AND THE ADMINISTRATIVE AGENT, EACH BANK AND EACH BORROWER HEREBY IRREVOCABLY AGREE THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE OR, TO THE EXTENT PERMITTED BY LAW, FEDERAL COURT. THE ADMINISTRATIVE AGENT, EACH BANK AND EACH BORROWER HEREBY IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION IT OR THEY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE IN ANY ACTION OR PROCEEDING (WHETHER BROUGHT BY ANY BORROWER, THE ADMINISTRATIVE AGENT, ANY BANK, OR OTHERWISE) IN ANY COURT HEREINABOVE SPECIFIED IN THIS SECTION 13.10 AS WELL AS ANY RIGHT IT OR THEY MAY NOW OR HEREAFTER HAVE TO REMOVE ANY SUCH ACTION OR PROCEEDING, ONCE COMMENCED, TO ANOTHER COURT ON THE GROUNDS OF FORUM NON CONVENIENS OR OTHERWISE. THE ADMINISTRATIVE AGENT, EACH BANK AND EACH BORROWER AGREE THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.
SECTION 13.11 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; provided, however, that the Borrowers may not assign or transfer their rights or obligations under this Agreement or any other Loan Document without the prior written consent of all Banks, and the rights of the Banks to make assignments or grant participations are subject to the provisions of Section 12.
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SECTION 13.12 Power of Attorney. Each Borrower hereby irrevocably constitutes and appoints Conseco as such Borrower's attorney-in-fact, with full power of substitution and transfer, to take any and all actions, including, without limitation, giving consents, notices, and approvals, specified to be taken by Conseco under this Agreement and to execute all documents in furtherance thereof. The power of attorney hereby granted shall be coupled with an interest and shall be irrevocable until payment in full of the Loans.
SECTION 13.13 No Waiver; Cumulative Remedies . No failure to exercise and no delay in exercising, on the part of the Administrative Agent or any Bank, any right, remedy, power or privilege under this Agreement, any other Loan Document or any of the other D&O Agreements, and/or applicable law shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. Consistent with (but not in limitation of) the foregoing, the rights, powers, and/or remedies provided in this Agreement or any other Loan Document shall be cumulative and shall not preclude the assertion or exercise of any other rights or remedies available under law, in equity or otherwise except solely with respect to Conseco and CIHC, to the extent expressly set forth in Sections 2.1 and 6.1 of the Conseco Guaranty.
SECTION 13.14 WAIVER OF JURY TRIAL . EACH BORROWER, THE ADMINISTRATIVE AGENT AND EACH BANK HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM CONCERNING ANY RIGHTS UNDER THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR ANY OTHER DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH, OR ARISING FROM ANY BANKING RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREE THAT ANY SUCH ACTION, PROCEEDING OR COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY; THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES ENTERING INTO THIS AGREEMENT.
* * *
 
PROMISSORY NOTE
$_____amount Dated: November __, 2000
Carmel, Indiana
For value received, the undersigned, ___ (employee first/middle name) ___ (employee last name) ___ (spouse) ("Maker") promises to pay to the order of Conseco Services, L.L.C., an Indiana limited liability company (the "Company") or its assigns (the "Holder"), at such place as the Holder may from time to time designate in writing, in lawful money of the United States which shall be legal tender in payment of all debts and dues public and private at the time of payment, the principal sum of (a) $___ amount or, (b) if less, the sum of (i) the unpaid balance as of the date hereof of the Replaced Promissory Note(s) (as hereinafter defined) made by Maker to Holder, (ii) the aggregate unpaid principal amount of all advances made from and after the date hereof by Company (or Conseco, Inc. or any of its Affiliates) to or on behalf of Maker to pay interest, fees, and expenses under the Credit Agreement(s) (as hereinafter defined), (iii) the amount of an origination fee paid by Conseco, Inc. on behalf of Maker equaling 1% of Maker's Existing Program Loans paid to one or more of the Banks as of September 22, 2000, and (iv) an amount equal to 1.625% per annum accrued from September 22, 2000 through the date of this Note on the amount of Maker's Existing Program Loans that were scheduled to mature August 26, 2001. Maker also promises to pay interest on the unpaid principal balance of this Promissory Note (the "Note") at the rate and times hereinafter provided.
Maker has delivered this Note to Company in accordance with the "Conseco, Inc. 2000 ___ (employee/non employee) Stock Purchase Program Work-Down Plan" (the "Work-Down Plan"). Unless otherwise defined herein, capitalized terms defined in the Work-Down Plan and used herein shall have the meanings given to them in the Work-Down Plan.
Interest on the principal balance hereof from time to time remaining unpaid prior to maturity shall accrue at the variable rate per annum equal to the non-default interest rate applicable to the Maker from time to time pursuant to the Bank of America Credit Agreement (as hereinafter defined) and if the Bank of America Credit Agreement is no longer in existence, the last rate paid by Maker thereunder (the "Bank Rate"). However, after the Maturity Date (as hereinafter defined) or while there exists an Event of Default (as hereinafter defined), interest shall accrue at the Bank rate plus three percent (3%) per annum.
All unpaid principal and interest shall be due and payable on the same date (the "Maturity Date") as the principal amounts are due and payable by Maker with respect to any loan made to Maker under any of the following (collectively, the "Credit Agreements"):
___ credit agreements
Interest on the principal balance hereof shall be due and payable in arrears on March 31, June 30, September 30 and December 31 of each year, beginning December 31, 2000, except as
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otherwise provided in the Work-Down Plan. Interest shall also be paid on the date of any prepayment of this Note for the portion of this Note so prepaid.
Maker may prepay this Note in full at any time or in part from time to time without premium or penalty.
Notwithstanding any other provision of this Note, pursuant to one or more subordination agreements executed by the Company and the lenders under the Credit Agreements (the "Banks") and Section 5(e) of the Work-Down Plan, if Maker tenders to Company any payment of interest or principal (a "Payment") hereunder at a time when any of Maker's Program Loans are still outstanding then the Company will deliver the amount of the Payment to the Banks to be applied to the Program Loans designated by Maker at the time of such Payment or in the absence of such designation, pro rata to all Program Loans of the Maker. In such event the Payment will not reduce in any manner or serve as a credit against any of Maker's indebtedness to Company for principal or interest evidenced by this Note.
The occurrence of one or more of the following events shall constitute an event of default ("Event of Default") under this Note: (a) default is made in the payment of any installment hereof, either principal or interest, or in the payment of any other sum due hereunder, on the day when the same shall be due and payable hereunder and such default in payment continues for ten (10) days;
(b) any proceeding shall be commenced or any petition shall be filed seeking relief with respect to Maker under any bankruptcy, insolvency or similar law;
(c) a receiver, trustee, custodian, sequestrator or similar official shall be appointed with respect to maker or for a substantial part of its property; or
(d) the death, the dissolution or termination of existence, or business failure of Maker. Upon the occurrence of an Event of Default hereunder, the Holder hereof may, at its option, declare the entire unpaid principal of and accrued interest on this Note immediately due and payable, without notice, demand or presentment, all of which are hereby waived. Upon the occurrence of an Event of Default under Section (b), (c) or (d) above, the entire unpaid principal of and accrued interest on this Note shall become immediately due and payable, without notice, demand or presentment, all of which are hereby waived. The Holder may offset against this Note any sum or sums owed by the Holder hereof to Maker.
Maker agrees to pay immediately upon demand all reasonable costs and expenses of the Holder, including reasonable attorneys' fees, (i) if, after an Event of Default, this Note is placed in the hands of an attorney or attorneys for collection, or (ii) if the Holder attempts to have any stay or injunction prohibiting the enforcement or collection of the Note lifted by any bankruptcy or other court, and any subsequent proceedings or appeals from any order or judgment entered in any such proceeding.
The Maker, and any guarantors or endorsers of this Note jointly and severally waive presentment for payment, notice of protest, dishonor and demand, protest, and diligence in bringing suit.
This Note supersedes and replaces all of the currently outstanding promissory notes by ____ in favor of the Company executed in connection with Conseco Inc.'s
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stock purchase programs (collectively, the "Replaced Promissory Notes"). The Replaced Promissory Notes include, but are not limited to promissory notes dated as follows: ___ dated.
This Note shall be construed according to and governed by the laws of the State of Indiana.
Executed in ______________ __________________.
Signature:________________________________
Printed: _________________________________
___ 2nd signature block
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PROMISSORY NOTE
$___ amount Dated: November __, 2000
Carmel, Indiana
For value received, the undersigned, ___ (participant designee) ("Maker") promises to pay to the order of Conseco Services, L.L.C., an Indiana limited liability company (the "Company") or its assigns (the "Holder"), at such place as the Holder may from time to time designate in writing, in lawful money of the United States which shall be legal tender in payment of all debts and dues public and private at the time of payment, the principal sum of (a) $___ amount or, (b) if less, the sum of (i) the unpaid balance as of the date hereof of the Replaced Promissory Note(s) (as hereinafter defined) made by Maker to Holder, (ii) the aggregate unpaid principal amount of all advances made from and after the date hereof by Company (or Conseco, Inc. or any of its Affiliates) to or on behalf of Maker to pay interest, fees, and expenses under the Credit Agreement(s) (as hereinafter defined), (iii) the amount of an origination fee paid by Conseco, Inc. on behalf of Maker equaling 1% of Maker's Existing Program Loans paid to one or more of the Banks as of September 22, 2000, and (iv) an amount equal to 1.625% per annum accrued from September 22, 2000 through the date of this Note on the amount of Maker's Existing Program Loans that were scheduled to mature August 26, 2001. Maker also promises to pay interest on the unpaid principal balance of this Promissory Note (the "Note") at the rate and times hereinafter provided.
Maker has delivered this Note to Company in accordance with the "Conseco, Inc. 2000 ___employee/non employee Stock Purchase Program Work-Down Plan" (the "Work-Down Plan"). Unless otherwise defined herein, capitalized terms defined in the Work-Down Plan and used herein shall have the meanings given to them in the Work-Down Plan.
Interest on the principal balance hereof from time to time remaining unpaid prior to maturity shall accrue at the variable rate per annum equal to the non-default interest rate applicable to the Maker from time to time pursuant to the Bank of America Credit Agreement (as hereinafter defined) and if the Bank of America Credit Agreement is no longer in existence, the last rate paid by Maker thereunder (the "Bank Rate"). However, after the Maturity Date (as hereinafter defined) or while there exists an Event of Default (as hereinafter defined), interest shall accrue at the Bank rate plus three percent (3%) per annum.
All unpaid principal and interest shall be due and payable on the same date (the "Maturity Date") as the principal amounts are due and payable by Maker with respect to any loan made to Maker under any of the following (collectively, the "Credit Agreements"):
___ credit agreements
Interest on the principal balance hereof shall be due and payable in arrears on March 31, June 30, September 30 and December 31 of each year, beginning December 31, 2000, except as
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otherwise provided in the Work-Down Plan. Interest shall also be paid on the date of any prepayment of this Note for the portion of this Note so prepaid.
Maker may prepay this Note in full at any time or in part from time to time without premium or penalty.
Notwithstanding any other provision of this Note, pursuant to one or more subordination agreements executed by the Company and the lenders under the Credit Agreements (the "Banks") and Section 5(e) of the Work-Down Plan, if Maker tenders to Company any payment of interest or principal (a "Payment") hereunder at a time when any of Maker's Program Loans are still outstanding then the Company will deliver the amount of the Payment to the Banks to be applied to the Program Loans designated by Maker at the time of such Payment or in the absence of such designation, pro rata to all Program Loans of the Maker. In such event the Payment will not reduce in any manner or serve as a credit against any of Maker's indebtedness to Company for principal or interest evidenced by this Note.
The occurrence of one or more of the following events shall constitute an event of default ("Event of Default") under this Note: (a) default is made in the payment of any installment hereof, either principal or interest, or in the payment of any other sum due hereunder, on the day when the same shall be due and payable hereunder and such default in payment continues for ten (10) days;
(b) any proceeding shall be commenced or any petition shall be filed seeking relief with respect to Maker or the Guarantor (as defined below) under any bankruptcy, insolvency or similar law; (c) a receiver, trustee, custodian, sequestrator or similar official shall be appointed with respect to maker or for a substantial part of its property; or (d) the death, the dissolution or termination of existence, or business failure of Maker or the Guarantor. Upon the occurrence of an Event of Default hereunder, the Holder hereof may, at its option, declare the entire unpaid principal of and accrued interest on this Note immediately due and payable, without notice, demand or presentment, all of which are hereby waived. Upon the occurrence of an Event of Default under Section (b),
(c) or (d) above, the entire unpaid principal of and accrued interest on this Note shall become immediately due and payable, without notice, demand or presentment, all of which are hereby waived. The Holder may offset against this Note any sum or sums owed by the Holder hereof to Maker.
Maker agrees to pay immediately upon demand all reasonable costs and expenses of the Holder, including reasonable attorneys' fees, (i) if, after an Event of Default, this Note is placed in the hands of an attorney or attorneys for collection, or (ii) if the Holder attempts to have any stay or injunction prohibiting the enforcement or collection of the Note lifted by any bankruptcy or other court, and any subsequent proceedings or appeals from any order or judgment entered in any such proceeding.
The Maker, and any guarantors or endorsers of this Note jointly and severally waive presentment for payment, notice of protest, dishonor and demand, protest, and diligence in bringing suit. Payment of this Note is guaranteed pursuant to an Unconditional Guarantee dated as of the date hereof by ___ (employee first/middle name) (employee last name) ("Guarantor").
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This Note supersedes and replaces all of the currently outstanding promissory notes by Maker in favor of the Company executed in connection with Conseco Inc.'s stock purchase programs (collectively, the "Replaced Promissory Notes"). The Replaced Promissory Notes include, but are not limited to promissory notes dated as follows: ___ dated.
This Note shall be construed according to and governed by the laws of the State of Indiana.
Executed in ______________ __________________.
Signature:________________________________
Printed: _________________________________
___ 2nd signature block
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UNCONDITIONAL GUARANTEE
The undersigned, ___ 2 ___ 1 ("Guarantor"), in consideration of, and as a condition precedent to, the acceptance of the Promissory Note dated November __, 2000 (the "Note") by Conseco Services, L.L.C. ("Holder") made by ___ 3 (the "Maker"), hereby unconditionally guarantees the full and prompt payment of all amounts when due (i) pursuant to the Note and (ii) any and all extensions or renewals of or substitutions for the Note, plus interest, costs, reasonable attorneys' fees, or other obligations due in connection with or on account of such items (the "Liabilities"). In the event that Maker fails at any time to pay any part or all of the Liabilities guaranteed and such failure results in the occurrence of an Event of Default (as defined in the Note), Guarantor, upon written notice from Holder, will pay the Liabilities guaranteed, in the same manner as if they constituted the direct and primary obligation of Guarantor, and such obligation of Guarantor shall be due with reasonable attorneys' fees and without relief from valuation or appraisement laws. Guarantor agrees that any waivers or other agreements set forth in the Note as applicable to "Guarantor" are hereby expressly made by Guarantor. The Holder may offset against this Unconditional Guarantee any sum or sums owed by the Holder hereof to Guarantor including any amounts Holder may owe Guarantor as an employee or consultant, and Guarantor hereby authorizes Holder to withhold any such amounts from any payroll deposit or paycheck payable to Guarantor.
If any of the liabilities should be assigned by Holder, this Unconditional Guarantee will inure to the benefit of Holder's assignee to the extent of such assignment. Guarantor may not assign or otherwise transfer its obligations hereunder except by operation of law or with the prior written consent of Holder which shall not be unreasonably withheld.
The rights and remedies of Holder under this Unconditional Guarantee are cumulative and may be exercised singly or concurrently, and the exercise of any one or more of them will not be a waiver of any other. No act, delay, omission or course of dealing between Holder and Maker or Guarantor will be a waiver of any of Holder's rights or remedies under this Unconditional Guarantee, and no waiver, change, modification or discharge of this Unconditional Guarantee or any obligation created hereby will be effective unless in writing signed by Holder. The rights and obligations created by this Unconditional Guarantee shall inure for the benefit of and shall be binding upon the personal representatives, successors and assigns of the Guarantor and Holder, including, but not limited to, any subsequent holder or owners of the Notes and this Unconditional Guarantee.
Dated: November __, 2000.
GUARANTOR:
Signature: ________________________________
Printed: __________________________________
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT ("Indemnification") is executed as of the _____ day of November, 2000, by the undersigned, ("Indemnitor") in accordance with the Stock Purchase Programs and the Conseco, Inc. 2000 Stock Purchase Program Work-Down Plan (the "Work-Down Plan") (the Stock Purchase Programs and the Work-Down Plan are collectively referred to as, the "Plans").
Recitals
1. Unless otherwise defined herein, capitalized terms defined in the Work-Down Plan and used herein shall have the meanings given to them in the Work-Down Plan.
2. In order to be eligible to participate in one or more of the Stock Purchase Programs, an individual was required to be: (a) a non-employee director of Conseco, Inc. or its subsidiaries (the "Company") or an executive officer of the Company; or (b) an officer of or key employee of the Company selected by the Directors or by the Chief Executive Officer of Conseco, Inc. ("Conseco").
3. Indemnitor is a participant in or was eligible to participate under one or more of the Stock Purchase Programs. Indemnitor has elected to participate in the Work-Down Plan.
4. Indemnitor specified (collectively, the "Participant Designee") as his or her Participant Designee under one or more of the Stock Purchase Programs. In accordance with the Stock Purchase Programs, Indemnitor agreed to indemnify Conseco against, and hold it harmless from, any losses (including reasonable legal fees and expenses) for or on account of or arising from or in connection with or otherwise with respect to Conseco's guaranty of loans to Participant Designee pursuant to the Existing Program Loans.
5. Pursuant to the Work-Down Plan, the Existing Program Loans are being refinanced and replaced with the Program Loans. It is a condition to the Program Loans that they be guaranteed by Conseco and its subsidiary, CIHC, Incorporated ("CIHC") and it is a condition to Conseco and CIHC giving such guarantees that the Indemnitor indemnify Conseco and CIHC against, and hold each of them harmless from, any losses (including reasonable legal fees and expenses) for or on account of or arising from or in connection with or otherwise with respect to Conseco's and/or CIHC's guaranty of the Program Loans.
6. Indemnitor hereby reaffirms and acknowledges his or her indemnification obligations to Conseco and CIHC.
Agreement
NOW, THEREFORE, in exchange for valuable consideration, the sufficiency of which is hereby acknowledged, Indemnitor hereby agrees as follows:
1. The statements set forth above in the Recitals to this Indemnification are accurate and correct in all respects and are incorporated herein.
2. Indemnitor agrees that Indemnitor will indemnify Conseco and CIHC for any losses under Conseco's guaranty of the Existing Program Loans and Conseco's and CIHC's guarantees of the Programs Loans with respect to any Participant Designee.
IN WITNESS WHEREOF, Indemnitor has duly executed this Indemnification as of the date first above written.
INDEMNITOR
Signature:________________________________
Printed:__________________________________
 
CONSECO EXECUTIVE LIFE
INSURANCE AGREEMENT
THIS AGREEMENT made and entered into effective the 1st day of December, 2000, by and between Conseco, Inc. ("Employer"), and the Gary C. Wendt 2000 Irrevocable Insurance Trust dated 11/22/00 ("Owner");
WHEREAS, Gary C. Wendt ("Employee") is a valued employee of Employer and Employer wishes to retain him in its employ; and
WHEREAS, as an inducement to Employee=s continued employment, Employer wishes to assist Employee with his personal life insurance program by entering into the Conseco Executive Life Insurance Agreement with the Owner.
NOW, THEREFORE, the Employer and Owner agree as follows:
1. Identification of Policy. The policy number of the life insurance policy to which this Agreement relates ("Policy"), the name of the Company issuing such Policy ("Insurer"), and the Owner's death benefit payable in the event of the Employee's death shall be set forth on Exhibit A to this Agreement as determined by the Employer effective on the date hereof and at such other times as determined by Employer, in its discretion.
2. Ownership of Policy. Owner or his (or its) transferee shall be the owner of the Policy, and may exercise all ownership rights granted to the Owner by the terms of the Policy. Notwithstanding any other provisions of this Agreement or any form of policy assignment executed by Owner or his (or its) transferee in connection with this Agreement, it is the express intention of the parties to reserve to the Owner all rights in and to the Policy granted to the Owner by its terms, including, but not limited to, the right to assign the Owner=s interest in the Policy, the right to change the beneficiary of the Policy, the right to exercise settlement options, the right to borrow against the cash value of the Policy, and the right to surrender or cancel the Policy, in whole or in part. Employer shall neither have nor exercise any right in or to the Policy which could, in any way, endanger, defeat or impair any of the rights of the Owner in the Policy, including the right to collect the proceeds of the Policy in excess of the amount due the Employer, as provided in this Agreement. The only rights in and to the Policy granted to the Employer shall be limited to its security interest in the "cash surrender value or surrender value" of the Policy, which for all purposes of this Agreement shall be as defined in the Policy, and a portion of the death benefit of the Policy, as hereinafter provided. The Employer shall not assign any of its rights in the Policy to anyone other than the Owner (or the Owner's transferee, if the Owner has transferred his or its rights in the Policy).
3. Premium. The Owner shall contribute to the Employer an amount equal to the annual economic benefit derived by the Owner (as determined by the Employer in accordance with Revenue Rulings 64-328 and 66-110), or, if less, the premium for the year. The Owner shall pay the Owner's portion of the premium to the Employer in a lump sum at the beginning of each Policy year. The Employer shall pay the remainder of each total premium on the Policy. The total annual premium due on such Policy, effective December 1 of each year during the term of this Agreement, shall be determined by the Employer.
4. Collateral Assignment. Contemporaneously with this Agreement, the Owner has made a collateral assignment of the Policy to the Employer under the form of Assignment attached as Exhibit B, as it may be amended from time to time to reflect any modifications to Exhibit A with respect to the Insurer or policy number, which Assignment gives the Employer the right to recover the premiums it has paid on the Policy less amounts received under the Agreement from the Owner ("net premium outlay") from the surrender value of the Policy and to recover a portion of the death benefit of the Policy. The interest of the Employer in and to the Policy shall be specifically limited to the following rights:
a. The right to recover the lesser of its net premium outlay and the surrender value of the Policy in the event the Policy is totally surrendered or canceled by the Owner, or the right to receive the surrender proceeds to the extent of its net premium outlay in the event the Policy is partially surrendered by the Owner as provided in paragraph 5;
b. The right to recover its net premium outlay fro the death benefit proceeds;
c. The right to recover the lesser of its net premium outlay and the surrender value of the Policy, or to receive ownership of the Policy, in the event of termination of this Agreement, as provided in paragraphs
6(b), 6(c) and 6(d) below; and
d. The right to recover its net premium outlay to the extent a Policy loan made by the Owner in any year exceeds the lesser of the Owner=s portion of the premium for that year and the increase for that year in the surrender value of the Policy, as provided in paragraph 8.
5. Surrender or Cancellation. The Owner shall have the sol right to surrender or cancel the Policy, in whole or in part, and to receive his (or its) surrender value, subject to the provisions of this paragraph 5. In the event of any partial or complete surrender or cancellation, the Employer shall be provided with written notice of such surrender or cancellation by the Owner at least fifteen (15) days prior to a distribution from the Insurer. Subject to paragraph 6, in the event of any partial surrender, the Employer shall
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be entitled to recover the surrender proceeds to the extent of its net premium outlay. In the event of a complete surrender or cancellation, the Employer shall be entitled to recover the lesser of its net premium outlay and the surrender value of the Policy.
6. Termination of Agreement.
a. This Agreement shall terminate upon the date on which either party to the Agreement provides notice in writing to the other party of the desire to terminate.
b. Within thirty (30) days following the termination of this Agreement, the Owner shall pay to the Employer the lesser of the surrender value of the Policy and Employer=s net premium outlay. Upon receipt by the Employer of such amount, the Employer shall execute an appropriate instrument of release of the Assignment of the Policy.
c. If the Owner fails to pay such amount within such thirty (30) day period, the Owner shall execute any and all instruments that may be required to vest ownership of the Policy in the Employer. Thereafter, the Owner shall have no further interest in the Policy.
d. If the Owner fails to surrender the policy as specified in paragraph 6(b) or to execute the instruments required by paragraph 6(c) within such thirty (30) day period, the Employer may notify the Insurer that the Employer intends to exercise its rights under the Assignment. In such event, the Insurer shall pay to the Employer the amount specified in paragraph 6(b).
7. Death. Upon the death of Employee, the Employer shall receive the amount specified in paragraph 4(b). The balance of the death benefit provided under the Policy, if any, shall be paid directly to the beneficiary of the Policy.
8. Loans. The Owner shall have the sole right to borrow against the Policy, and the Employer shall have no right to obtain loans against the Policy, directly or indirectly, from the Insurer or from any other person, or to pledge or assign the Policy as security for any loan. If the Owner in any Policy year borrows from the Policy an amount in excess of the Owner=s portion of the annual premium for that year or the increase in the surrender value of the Policy for the year, whichever is less, the Employer shall be entitled to receive such excess amount, to the extent of its net premium outlay under this Agreement. The Owner shall pay any interest due on any Policy loan it obtains.
9. Transferee. In the event Owner shall transfer all of his (or its) interest in the Policy, then all of Owner's interest in the Policy and in this Agreement shall be vested in his (or its)
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transferee, who shall be substituted as a party under this Agreement, and the transferring Owner shall have no further interest in the Policy or in this Agreement.
10. Successors and Assigns. This Agreement shall bind Employer, its successors and assigns, and Employee and Owner and their heirs, executors, administrators and transferees, and any Policy beneficiary. The Employer agrees that it will not merge or consolidate with another employer, corporation, or organization, or permit its business and activities to be taken over by any other organization unless or until the succeeding or continuing employer, corporation or other organization shall expressly assume the rights and obligations of the Employer set forth in this Agreement.
11. Effect on Employment. This Agreement shall not be deeme to constitute a contract of employment between the parties, nor shall any provision restrict the right of Employee to terminate his employment, at any time not in contravention of any applicable employment agreement.
12. Insurer. The Insurer shall be bound only by the provisions of and endorsements on the Policy, and any payments made or action taken by it in accordance with the Policy shall fully discharge it from all claims, suits and demands of all persons whatsoever. Except as specifically provided by endorsement on the Policy and as provided in the Assignment, the Insurer shall in no way be bound by the provisions of this Agreement.
13. Payment. It is agreed that benefits may be paid under the Policy by the Insurer either by separate checks to the parties entitled thereto, or by joint check. In the latter instance, the Owner and the Employer agree that benefits shall be divided as provided herein.
14. Amendment. Except as provided in paragraph 6 and in A, this Agreement may not be canceled, amended, altered or modified, except by a written instrument signed by all of the parties.
15. Notices. Any notice, consent or demand required or permitted to be given under the provisions of this Agreement by one party to another shall be in writing, shall be signed by the party giving or making the same, and may be given either by delivering the same to such other party personally, or by mailing the same, by United States certified mail, postage prepaid, to such party, addressed to his, her or its last known address as shown on the records of the Employer. The date of such mailing shall be deemed the date of such mailed notice, consent or demand.
16. Gender and Number. Whenever any words are used herein i the masculine gender, they shall be construed as though they were also used in the feminine or neuter gender in all cases where they would so apply, and whenever any words are used herein in the singular
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or plural form, they shall be construed as though they were also used in the other form in all cases where they would so apply.
17. Controlling Law. This Agreement, and the rights of the parties hereunder, shall be governed by and construed pursuant to the laws of the State of Indiana except to the extent preempted by federal law.
IN WITNESS WHEREOF, the parties have executed this Agreement effective the day and year first above written.

Owner's Signature:

GARY C. WENDT 2000 IRREVOCABLE              CONSECO, INC.
INSURANCE TRUST DATED 11/22/00

By:    /s/ Thomas A. Roberts                By:    /s/ James S. Adams
       ---------------------                       ----------------------------
Name:  Thomas A. Roberts                    Name:  James S. Adams
Title: Trustee                              Title  Senior Vice President, Chief
                                                   Accounting Officer	

5
 
Exhibit A Conseco Executive Life Insurance Agreement

Policy #                    Insurer                             Death Benefit

58 934 332           The Manufacturers Life Insurance           $15,025,000
                        Company (U.S.A.)	

Exhibit B
COLLATERAL ASSIGNMENT
THIS ASSIGNMENT, made and entered into effective the 1st day of December, 2000, by the undersigned the Gary C. Wendt 2000 Irrevocable Insurance Trust dated 11/22/00, as owner ("Owner") of that certain Life Insurance Policy No. 58 934 332 issued by The Manufacturers Life Insurance Company (U.S.A.) ("Insurer") and any supplementary contracts issued in connection with such policy (said policy and contracts herein called "Policy"), upon the life of Gary C. Wendt ("Insured"), to Conseco, Inc., an Indiana corporation, ("Assignee").
WITNESSETH:
WHEREAS, the Insured is a valued employee of the Assignee, and the Assignee wishes to retain him in its employ;
WHEREAS, as an inducement to the Insured's continued employment, the Assignee desires to assist the Insured with his personal life insurance program by contributing a portion of the annual premium due on the Policy, as more specifically provided for in that certain Conseco Executive Life Insurance Agreement entered into between the Insured and the Assignee ("Agreement"); and
WHEREAS, in consideration of the Assignee's agreeing to pay a portion of the premiums pursuant to the Agreement, the Owner agrees to assign to the Assignee certain rights in the Policy as set forth in this Assignment.
NOW, THEREFORE, for value received, the undersigned Owner hereby assigns, transfers and sets over to the Assignee, its successors and Assigns, the following specific rights in the Policy subject to the following terms and conditions:
1. Assigned Rights. The Assignee's interest in the Policy shall be limited to:
a. In the event the Policy is surrendered or cancelled by the Owner, the right to recover the lesser of (i) the total premiums it has paid on the Policy less amounts received under the Agreement from the Owner ("net premium outlay") and (ii) the "cash surrender value or surrender value" of the Policy (as defined in the Policy for all purposes hereinafter), or, in the event the Policy is partially surrendered or cancelled by the Owner, the right to receive the surrender proceeds to the extent of its net premium outlay, as provided in paragraph 5 of the Agreement.
b. The right to recover the death benefit proceeds as provided in Paragraph 7 of the Agreement.
c. The right to recover the lesser of (i) its net premium outlay and (ii) the surrender value of the Policy or to receive ownership of the Policy, in the event of termination of the Agreement, as provided in paragraphs 6(b), 6(c) and 6(d) of the Agreement.
d. The right to recover its net premium outlay to the extent a policy loan made by the Owner in any year exceeds the lesser of the Owner's portion of the premium for that year and the increase for that year in the surrender value of the Policy, as provided in Paragraph 8 of the Agreement.
2. Incidents of Ownership. The Owner shall retain all incidents of ownership in the Policy, including, but not limited to, the sole and exclusive rights to:
borrow against the Policy; assign the Owner's interest in the Policy; change the beneficiary of the Policy; exercise settlement options; and, subject to paragraphs 5 and 6 of the Agreement, surrender or cancel the Policy (in whole or in part).
3. Endorsement of Policy. If the Assignee shall have possession of the Policy at any time while this Assignment is in force, then upon request and without unreasonable delay, the Assignee shall forward the Policy to the Insurer for endorsement of any designation or change of beneficiary, any election of optional mode of settlement, or the exercise of any other right reserved by the Owner hereunder.
4. Insurer.
a. The Insurer is hereby authorized to recognize the Assignee's claims to rights under this Agreement without investigating the reason for any action taken by the Assignee, the amount of its net premium outlay, the existence of any default, the giving of any required notice or the application to be made by the Assignee of any amounts to be paid to the Assignee. The signature of the Assignee shall be sufficient for the exercise of any of its rights under the Assignment for the Assignee's receipt for any sums received by it and shall be a full discharge and release of such sums to the Insurer.
b. The Insurer shall be fully protected in recognizing a request made by the Owner for surrender or cancellation of the Policy, in whole or in part, or in recognizing a request made by the Owner for any loans against the Policy permitted by the terms of the Policy, with or without the consent of the Assignee. In the event of any such request, the Insurer may pay the proceeds of such surrender, cancellation, or loans to the sole order of the Owner, or as the Owner shall direct, provided that the Owner has provided the requisite fifteen (15) days' notice to the Assignee required by paragraph 5 of the Agreement.
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5. Release. Upon the full payment of the liabilities of the Owner to the Assignee pursuant to the Agreement, the Assignee shall execute an appropriate instrument of release of this Collateral Assignment.
IN WITNESS WHEREOF, the undersigned Owner has executed this Assignment effective the day and year first above written.
Owner's Signature:
GARY C. WENDT 2000 IRREVOCABLE
INSURANCE TRUST DATED 11/22/00

By:
      ------------------------------                --------------------------
         Thomas A. Roberts, Trustee                 Witness	

Recorded and Filed at the Office of The Manufacturers Life Insurance Company
(U.S.A.)
The Company assumes no obligation as to the v alidity and sufficiency of this agreement, and does not pass upon its legality.
on

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COLLATERAL ASSIGNMENT
THIS ASSIGNMENT, made and entered into effective the 1st day of December, 2000, by the undersigned the Gary C. Wendt 2000 Irrevocable Insurance Trust dated 11/22/00, as owner ("Owner") of that certain Life Insurance Policy No. 58 934 332 issued by The Manufacturers Life Insurance Company (U.S.A.) ("Insurer") and any supplementary contracts issued in connection with such policy (said policy and contracts herein called "Policy"), upon the life of Gary C. Wendt ("Insured"), to Conseco, Inc., an Indiana corporation, ("Assignee").
WITNESSETH:
WHEREAS, the Insured is a valued employee of the Assignee, and the Assignee wishes to retain him in its employ;
WHEREAS, as an inducement to the Insured's continued employment, the Assignee desires to assist the Insured with his personal life insurance program by contributing a portion of the annual premium due on the Policy, as more specifically provided for in that certain Conseco Executive Life Insurance Agreement entered into between the Insured and the Assignee ("Agreement"); and
WHEREAS, in consideration of the Assignee's agreeing to pay a portion of the premiums pursuant to the Agreement, the Owner agrees to assign to the Assignee certain rights in the Policy as set forth in this Assignment.
NOW, THEREFORE, for value received, the undersigned Owner hereby assigns, transfers and sets over to the Assignee, its successors and Assigns, the following specific rights in the Policy subject to the following terms and conditions:
1. Assigned Rights. The Assignee's interest in the Policy shall be limited to:
a. In the event the Policy is surrendered or canceled by the Owner, the right to recover the lesser of (i) the total premiums it has paid on the Policy less amounts received under the Agreement from the Owner ("net premium outlay") and (ii) the "cash surrender value or surrender value" of the Policy (as defined in the Policy for all purposes hereinafter), or, in the event the Policy is partially surrendered or canceled by the Owner, the right to receive the surrender proceeds to the extent of its net premium outlay, as provided in paragraph 5 of the Agreement.
b. The right to recover the death benefit proceeds as provided in Paragraph 7 of the Agreement.
c. The right to recover the lesser of (i) its net premium outlay and (ii) the surrender value of the Policy or to receive ownership of the Policy, in the event of termination of the Agreement, as provided in paragraphs 6(b), 6(c) and 6(d) of the Agreement.
d. The right to recover its net premium outlay to the extent a policy loan made by the Owner in any year exceeds the lesser of the Owner's portion of the premium for that year and the increase for that year in the surrender value of the Policy, as provided in Paragraph 8 of the Agreement.
2. Incidents of Ownership. The Owner shall retain all incidents of ownership in the Policy, including, but not limited to, the sole and exclusive rights to:
borrow against the Policy; assign the Owner's interest in the Policy; change the beneficiary of the Policy; exercise settlement options; and, subject to paragraphs 5 and 6 of the Agreement, surrender or cancel the Policy (in whole or in part).
3. Endorsement of Policy. If the Assignee shall have possession of the Policy at any time while this Assignment is in force, then upon request and without unreasonable delay, the Assignee shall forward the Policy to the Insurer for endorsement of any designation or change of beneficiary, any election of optional mode of settlement, or the exercise of any other right reserved by the Owner hereunder.
4. Insurer.
a. The Insurer is hereby authorized to recognize the Assignee's claims to rights under this Agreement without investigating the reason for any action taken by the Assignee, the amount of its net premium outlay, the existence of any default, the giving of any required notice or the application to be made by the Assignee of any amounts to be paid to the Assignee. The signature of the Assignee shall be sufficient for the exercise of any of its rights under the Assignment for the Assignee's receipt for any sums received by it and shall be a full discharge and release of such sums to the Insurer.
b. The Insurer shall be fully protected in recognizing a request made by the Owner for surrender or cancellation of the Policy, in whole or in part, or in recognizing a request made by the Owner for any loans against the Policy permitted by the terms of the Policy, with or without the consent of the Assignee. In the event of any such request, the Insurer may pay the proceeds of such surrender, cancellation, or loans to the sole order of the Owner, or as the Owner shall direct, provided that the Owner has provided the requisite fifteen (15) days' notice to the Assignee required by paragraph 5 of the Agreement.
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5. Release. Upon the full payment of the liabilities of the Owner to the Assignee pursuant to the Agreement, the Assignee shall execute an appropriate instrument of release of this Collateral Assignment.
IN WITNESS WHEREOF, the undersigned Owner has executed this Assignment effective the day and year first above written.
Owner's Signature:
GARY C. WENDT 2000 IRREVOCABLE
INSURANCE TRUST DATED 11/22/00

By:   /s/ Thomas A. Roberts                       /s/ Mary Alice Roberts
      -------------------------                   ------------------------------
      Thomas A. Roberts,                          Witness
      Trustee	

Recorded and Filed at the Office of The Manufacturers Life Insurance Company
(U.S.A.)
The Company assumes no obligation as to the validity and sufficiency of this agreement, and does not pass upon its legality.
on

3
 
CONSECO EXECUTIVE LIFE
INSURANCE AGREEMENT
THIS AGREEMENT made and entered into effective the 16th day of January, 2001, by and between Conseco, Inc. ("Employer"), and the Gary C. Wendt 2000 Irrevocable Insurance Trust dated 11/22/00 ("Owner");
WHEREAS, Gary C. Wendt ("Employee") is a valued employee of Employer and Employer wishes to retain him in its employ; and
WHEREAS, as an inducement to Employee's continued employment, Employer wishes to assist Employee with his personal life insurance program by entering into the Conseco Executive Life Insurance Agreement with the Owner.
NOW, THEREFORE, the Employer and Owner agree as follows:
1. Identification of Policy. The policy number of the life insurance policy to which this Agreement relates ("Policy"), the name of the Company issuing such Policy ("Insurer"), and the Owner's death benefit payable in the event of the Employee's death shall be set forth on Exhibit A to this Agreement as determined by the Employer effective on the date hereof and at such other times as determined by Employer, in its discretion.
2. Ownership of Policy. Owner or his (or its) transferee shall be the owner of the Policy, and may exercise all ownership rights granted to the Owner by the terms of the Policy. Notwithstanding any other provisions of this Agreement or any form of policy assignment executed by Owner or his (or its) transferee in connection with this Agreement, it is the express intention of the parties to reserve to the Owner all rights in and to the Policy granted to the Owner by its terms, including, but not limited to, the right to assign the Owner's interest in the Policy, the right to change the beneficiary of the Policy, the right to exercise settlement options, the right to borrow against the cash value of the Policy, and the right to surrender or cancel the Policy, in whole or in part. Employer shall neither have nor exercise any right in or to the Policy which could, in any way, endanger, defeat or impair any of the rights of the Owner in the Policy, including the right to collect the proceeds of the Policy in excess of the amount due the Employer, as provided in this Agreement. The only rights in and to the Policy granted to the Employer shall be limited to its security interest in the "cash surrender value or surrender value" of the Policy, which for all purposes of this Agreement shall be as defined in the Policy, and a portion of the death benefit of the Policy, as hereinafter provided. The Employer shall not assign any of its rights in the Policy to anyone other than the Owner (or the Owner's transferee, if the Owner has transferred his or its rights in the Policy).
3. Premium. The Owner shall contribute to the Employer an amount equal to the annual economic benefit derived by the Owner (as determined by the Employer in accordance with Revenue Rulings 64-328 and 66-110), or, if less, the premium for the year. The Owner shall pay the Owner's portion of the premium to the Employer in a lump sum at the beginning of each Policy year. The Employer shall pay the remainder of each total premium on the Policy. The total annual premium due on such Policy, effective December 1 of each year during the term of this Agreement, shall be determined by the Employer.
4. Collateral Assignment. Contemporaneously with this Agreement, the Owner has made a collateral assignment of the Policy to the Employer under the form of Assignment attached as Exhibit B, as it may be amended from time to time to reflect any modifications to Exhibit A with respect to the Insurer or policy number, which Assignment gives the Employer the right to recover the premiums it has paid on the Policy including reimbursement of premiums previously paid by General Electric Company ("GE") less amounts received under the Agreement from the Owner ("net premium outlay") from the surrender value of the Policy and to recover a portion of the death benefit of the Policy. The interest of the Employer in and to the Policy shall be specifically limited to the following rights:
a. The right to recover the lesser of its net premium outlay and the surrender value of the Policy in the event the Policy is totally surrendered or canceled by the Owner, or the right to receive the surrender proceeds to the extent of its net premium outlay in the event the Policy is partially surrendered by the Owner as provided in paragraph 5;
b. The right to recover its net premium outlay fro the death benefit proceeds;
c. The right to recover the lesser of its net premium outlay and the surrender value of the Policy, or to receive ownership of the Policy, in the event of termination of this Agreement, as provided in paragraphs 6(b), 6(c) and 6(d) below; and
d. The right to recover its net premium outlay to the extent a Policy loan made by the Owner in any year exceeds the lesser of the Owner's portion of the premium for that year and the increase for that year in the surrender value of the Policy, as provided in paragraph 8.
5. Surrender or Cancellation. The Owner shall have the sol right to surrender or cancel the Policy, in whole or in part, and to receive his (or its) surrender value, subject to the provisions of this paragraph 5. In the event of any partial or complete surrender or cancellation, the Employer shall be provided with written notice of such surrender or cancellation by the Owner at least fifteen (15) days prior to a distribution from the Insurer. Subject to paragraph 6, in the event of any partial surrender, the Employer shall
2
be entitled to recover the surrender proceeds to the extent of its net premium outlay. In the event of a complete surrender or cancellation, the Employer shall be entitled to recover the lesser of its net premium outlay and the surrender value of the Policy.
6. Termination of Agreement.
a. This Agreement shall terminate upon the date on which either party to the Agreement provides notice in writing to the other party of the desire to terminate.
b. Within thirty (30) days following the termination of this Agreement, the Owner shall pay to the Employer the lesser of the surrender value of the Policy and Employer's net premium outlay. Upon receipt by the Employer of such amount, the Employer shall execute an appropriate instrument of release of the Assignment of the Policy.
c. If the Owner fails to pay such amount within such thirty (30) day period, the Owner shall execute any and all instruments that may be required to vest ownership of the Policy in the Employer. Thereafter, the Owner shall have no further interest in the Policy.
d. If the Owner fails to surrender the policy as specified in paragraph 6(b) or to execute the instruments required by paragraph 6(c) within such thirty (30) day period, the Employer may notify the Insurer that the Employer intends to exercise its rights under the Assignment. In such event, the Insurer shall pay to the Employer the amount specified in paragraph 6(b).
7. Death. Upon the death of Employee, the Employer shall receive the amount specified in paragraph 4(b). The balance of the death benefit provided under the Policy, if any, shall be paid directly to the beneficiary of the Policy.
8. Loans. The Owner shall have the sole right to borrow against the Policy, and the Employer shall have no right to obtain loans against the Policy, directly or indirectly, from the Insurer or from any other person, or to pledge or assign the Policy as security for any loan. If the Owner in any Policy year borrows from the Policy an amount in excess of the Owner's portion of the annual premium for that year or the increase in the surrender value of the Policy for the year, whichever is less, the Employer shall be entitled to receive such excess amount, to the extent of its net premium outlay under this Agreement. The Owner shall pay any interest due on any Policy loan it obtains.
9. Transferee. In the event Owner shall transfer all of his (or its) interest in the Policy, then all of Owner's interest in the Policy and in this Agreement shall be vested in his (or its)
3
transferee, who shall be substituted as a party under this Agreement, and the transferring Owner shall have no further interest in the Policy or in this Agreement.
10. Successors and Assigns. This Agreement shall bind Employer, its successors and assigns, and Employee and Owner and their heirs, executors, administrators and transferees, and any Policy beneficiary. The Employer agrees that it will not merge or consolidate with another employer, corporation, or organization, or permit its business and activities to be taken over by any other organization unless or until the succeeding or continuing employer, corporation or other organization shall expressly assume the rights and obligations of the Employer set forth in this Agreement.
11. Effect on Employment. This Agreement shall not be deeme to constitute a contract of employment between the parties, nor shall any provision restrict the right of Employee to terminate his employment, at any time not in contravention of any applicable employment agreement.
12. Insurer. The Insurer shall be bound only by the provisions of and endorsements on the Policy, and any payments made or action taken by it in accordance with the Policy shall fully discharge it from all claims, suits and demands of all persons whatsoever. Except as specifically provided by endorsement on the Policy and as provided in the Assignment, the Insurer shall in no way be bound by the provisions of this Agreement.
13. Payment. It is agreed that benefits may be paid under the Policy by the Insurer either by separate checks to the parties entitled thereto, or by joint check. In the latter instance, the Owner and the Employer agree that benefits shall be divided as provided herein.
14. Amendment. Except as provided in paragraph 6 and in A, this Agreement may not be canceled, amended, altered or modified, except by a written instrument signed by all of the parties.
15. Notices. Any notice, consent or demand required or permitted to be given under the provisions of this Agreement by one party to another shall be in writing, shall be signed by the party giving or making the same, and may be given either by delivering the same to such other party personally, or by mailing the same, by United States certified mail, postage prepaid, to such party, addressed to his, her or its last known address as shown on the records of the Employer. The date of such mailing shall be deemed the date of such mailed notice, consent or demand.
16. Gender and Number. Whenever any words are used herein i the masculine gender, they shall be construed as though they were also used in the feminine or neuter gender in all cases where they would so apply, and whenever any words are used herein in the singular
4
or plural form, they shall be construed as though they were also used in the other form in all cases where they would so apply.
17. Controlling Law. This Agreement, and the rights of the parties hereunder, shall be governed by and construed pursuant to the laws of the State of Indiana except to the extent preempted by federal law.
IN WITNESS WHEREOF, the parties have executed this Agreement effective the day and year first above written.

Owner's Signature:

GARY C. WENDT 2000 IRREVOCABLE              CONSECO, INC.
INSURANCE TRUST DATED 11/22/00

By:    /s/ Thomas A. Roberts                By:    /s/ James S. Adams
       ---------------------                       ----------------------------
Name:  Thomas A. Roberts                    Name:  James S. Adams
Title: Trustee                              Title  Senior Vice President, Chief
                                                   Accounting Officer	

5
Exhibit A Conseco Executive Life Insurance Agreement
Policy # Insurer Death Benefit
917590672U Metropolitan Life Insurance Company $3,179,959
Exhibit B
COLLATERAL ASSIGNMENT
THIS ASSIGNMENT, made and entered into effective the ---day of -----, 2001, by the undersigned the Gary C. Wendt 2000 Irrevocable Insurance Trust dated 11/22/00, as owner ("Owner") of that certain Life Insurance Policy No. 917590672U issued by Metropolitan Life Insurance Company ("Insurer") and any supplementary contracts issued in connection with such policy (said policy and contracts herein called "Policy"), upon the life of Gary C. Wendt ("Insured"), to Conseco, Inc., an Indiana corporation, ("Assignee").
WITNESSETH:
WHEREAS, the Insured is a valued employee of the Assignee, and the Assignee wishes to retain him in its employ;
WHEREAS, as an inducement to the Insured's continued employment, the Assignee desires to assist the Insured with his personal life insurance program by contributing a portion of the annual premium due on the Policy and reimbursing General Electric Company ("GE"), one of Insured's previous employers, for premiums previously paid by GE, as more specifically provided for in that certain Conseco Executive Life Insurance Agreement entered into between the Insured and the Assignee ("Agreement"); and
WHEREAS, in consideration of the Assignee's agreeing to pay a portion of the premiums pursuant to the Agreement, the Owner agrees to assign to the Assignee certain rights in the Policy as set forth in this Assignment.
NOW, THEREFORE, for value received, the undersigned Owner hereby assigns, transfers and sets over to the Assignee, its successors and assigns, the following specific rights in the Policy subject to the following terms and conditions:
1. Assigned Rights. The Assignee's interest in the Policy shall be limited to:
a. In the event the Policy is surrendered or cancelled by the Owner, the right to recover the lesser of (i) the total premiums it has paid on the Policy and premiums it has reimbursed to GE less amounts received under the Agreement from the Owner ("net premium outlay") and (ii) the "cash surrender value or surrender value" of the Policy (as defined in the Policy for all purposes hereinafter), or, in the event the Policy is partially surrendered or cancelled by the Owner, the right to receive the surrender proceeds to the extent of its net premium outlay, as provided in paragraph 5 of the Agreement.
b. The right to recover the death benefit proceeds as provided in Paragraph 7 of the Agreement.
c. The right to recover the lesser of (i) its net premium outlay and (ii) the surrender value of the Policy or to receive ownership of the Policy, in the event of termination of the Agreement, as provided in paragraphs 6(b), 6(c) and 6(d) of the Agreement.
d. The right to recover its net premium outlay to the extent a policy loan made by the Owner in any year exceeds the lesser of the Owner's portion of the premium for that year and the increase for that year in the surrender value of the Policy, as provided in Paragraph 8 of the Agreement.
2. Incidents of Ownership. The Owner shall retain all incidents of ownership in the Policy, including, but not limited to, the sole and exclusive rights to:
borrow against the Policy; assign the Owner's interest in the Policy; change the beneficiary of the Policy; exercise settlement options; and, subject to paragraphs 5 and 6 of the Agreement, surrender or cancel the Policy (in whole or in part).
3. Endorsement of Policy. If the Assignee shall have possession of the Policy at any time while this Assignment is in force, then upon request and without unreasonable delay, the Assignee shall forward the Policy to the Insurer for endorsement of any designation or change of beneficiary, any election of optional mode of settlement, or the exercise of any other right reserved by the Owner hereunder.
4. Insurer.
a. The Insurer is hereby authorized to recognize the Assignee's claims to rights under this Agreement without investigating the reason for any action taken by the Assignee, the amount of its net premium outlay, the existence of any default, the giving of any required notice or the application to be made by the Assignee of any amounts to be paid to the Assignee. The signature of the Assignee shall be sufficient for the exercise of any of its rights under the Assignment for the Assignee's receipt for any sums received by it and shall be a full discharge and release of such sums to the Insurer.
b. The Insurer shall be fully protected in recognizing a request made by the Owner for surrender or cancellation of the Policy, in whole or in part, or in recognizing a request made by the Owner for any loans against the Policy permitted by the terms of the Policy, with or without the consent of the Assignee. In the event of any such request, the Insurer may pay the proceeds of such surrender, cancellation, or loans to the sole order of the Owner, or as the Owner shall direct, provided that the Owner has provided the requisite fifteen (15) days' notice to the Assignee required by paragraph 5 of the Agreement.
-2-
5. Release. Upon the full payment of the liabilities of the Owner to the Assignee pursuant to the Agreement, the Assignee shall execute an appropriate instrument of release of this Collateral Assignment.
IN WITNESS WHEREOF, the undersigned Owner has executed this Assignment effective the day and year first above written.
Owner's Signature:
GARY C. WENDT 2000 IRREVOCABLE
INSURANCE TRUST DATED 11/22/00

By:
      ------------------------------                --------------------------
         Thomas A. Roberts, Trustee                 Witness	

Recorded and Filed at the Office of Metropolitan The Company assumes no obligation as to the v alidity and sufficiency of this agreement, and does not pass upon its legality.
on

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COLLATERAL ASSIGNMENT
THIS ASSIGNMENT, made and entered into effective the 16th day of January, 2001, by the undersigned the Gary C. Wendt 2000 Irrevocable Insurance Trust dated 11/22/00, as owner ("Owner") of that certain Life Insurance Policy No. 917590672U issued by Metropolitan Life Insurance Company ("Insurer") and any supplementary contracts issued in connection with such policy (said policy and contracts herein called "Policy"), upon the life of Gary C. Wendt ("Insured"), to Conseco, Inc., an Indiana corporation, ("Assignee").
WITNESSETH:
WHEREAS, the Insured is a valued employee of the Assignee, and the Assignee wishes to retain him in its employ;
WHEREAS, as an inducement to the Insured's continued employment, the Assignee desires to assist the Insured with his personal life insurance program by contributing a portion of the annual premium due on the Policy and reimbursing General Electric Company ("GE"), one of Insured's previous employers, for premiums previously paid by GE, as more specifically provided for in that certain Conseco Executive Life Insurance Agreement entered into between the Insured and the Assignee ("Agreement"); and
WHEREAS, in consideration of the Assignee's agreeing to pay a portion of the premiums pursuant to the Agreement, the Owner agrees to assign to the Assignee certain rights in the Policy as set forth in this Assignment.
NOW, THEREFORE, for value received, the undersigned Owner hereby assigns, transfers and sets over to the Assignee, its successors and assigns, the following specific rights in the Policy subject to the following terms and conditions:
1. Assigned Rights. The Assignee's interest in the Policy shall be limited to:
a. In the event the Policy is surrendered or cancelled by the Owner, the right to recover the lesser of (i) the total premiums it has paid on the Policy and premiums it has reimbursed to GE less amounts received under the Agreement from the Owner ("net premium outlay") and (ii) the "cash surrender value or surrender value" of the Policy (as defined in the Policy for all purposes hereinafter), or, in the event the Policy is partially surrendered or cancelled by the Owner, the right to receive the surrender proceeds to the extent of its net premium outlay, as provided in paragraph 5 of the Agreement.
b. The right to recover the death benefit proceeds as provided in Paragraph 7 of the Agreement.
c. The right to recover the lesser of (i) its net premium outlay and (ii) the surrender value of the Policy or to receive ownership of the Policy, in the event of termination of the Agreement, as provided in paragraphs 6(b), 6(c) and 6(d) of the Agreement.
d. The right to recover its net premium outlay to the extent a policy loan made by the Owner in any year exceeds the lesser of the Owner's portion of the premium for that year and the increase for that year in the surrender value of the Policy, as provided in Paragraph 8 of the Agreement.
2. Incidents of Ownership. The Owner shall retain all incidents of ownership in the Policy, including, but not limited to, the sole and exclusive rights to:
borrow against the Policy; assign the Owner's interest in the Policy; change the beneficiary of the Policy; exercise settlement options; and, subject to paragraphs 5 and 6 of the Agreement, surrender or cancel the Policy (in whole or in part).
3. Endorsement of Policy. If the Assignee shall have possession of the Policy at any time while this Assignment is in force, then upon request and without unreasonable delay, the Assignee shall forward the Policy to the Insurer for endorsement of any designation or change of beneficiary, any election of optional mode of settlement, or the exercise of any other right reserved by the Owner hereunder.
4. Insurer.
a. The Insurer is hereby authorized to recognize the Assignee's claims to rights under this Agreement without investigating the reason for any action taken by the Assignee, the amount of its net premium outlay, the existence of any default, the giving of any required notice or the application to be made by the Assignee of any amounts to be paid to the Assignee. The signature of the Assignee shall be sufficient for the exercise of any of its rights under the Assignment for the Assignee's receipt for any sums received by it and shall be a full discharge and release of such sums to the Insurer.
b. The Insurer shall be fully protected in recognizing a request made by the Owner for surrender or cancellation of the Policy, in whole or in part, or in recognizing a request made by the Owner for any loans against the Policy permitted by the terms of the Policy, with or without the consent of the Assignee. In the event of any such request, the Insurer may pay the proceeds of such surrender, cancellation, or loans to the sole order of the Owner, or as the Owner shall direct, provided that the Owner has provided the requisite fifteen (15) days' notice to the Assignee required by paragraph 5 of the Agreement.
-2-
5. Release. Upon the full payment of the liabilities of the Owner to the Assignee pursuant to the Agreement, the Assignee shall execute an appropriate instrument of release of this Collateral Assignment.
IN WITNESS WHEREOF, the undersigned Owner has executed this Assignment effective the day and year first above written.
Owner's Signature:
GARY C. WENDT 2000 IRREVOCABLE
INSURANCE TRUST DATED 11/22/00

By:  /s/ Thomas A. Roberts                   /s/ Mary Alice Roberts
     ------------------------------          --------------------------------
     Thomas A. Roberts, Trustee              Witness	

Recorded and Filed at the Office of Metropolitan
The Company assumes no obligation as to the validity and sufficiency of this agreement, and does not pass upon its legality.
on

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CONSECO EXECUTIVE LIFE
INSURANCE AGREEMENT
THIS AGREEMENT made and entered into effective the 16th day of January, 2001, by and between Conseco, Inc. ("Employer"), and the Gary C. Wendt 2000 Irrevocable Insurance Trust dated 11/22/00 ("Owner");
WHEREAS, Gary C. Wendt ("Employee") is a valued employee of Employer and Employer wishes to retain him in its employ; and
WHEREAS, as an inducement to Employee's continued employment, Employer wishes to assist Employee with his personal life insurance program by entering into the Conseco Executive Life Insurance Agreement with the Owner.
NOW, THEREFORE, the Employer and Owner agree as follows:
1. Identification of Policy. The policy number of the life insurance policy to which this Agreement relates ("Policy"), the name of the Company issuing such Policy ("Insurer"), and the Owner's death benefit payable in the event of the Employee's death shall be set forth on Exhibit A to this Agreement as determined by the Employer effective on the date hereof and at such other times as determined by Employer, in its discretion.
2. Ownership of Policy. Owner or his (or its) transferee shall be the owner of the Policy, and may exercise all ownership rights granted to the Owner by the terms of the Policy. Notwithstanding any other provisions of this Agreement or any form of policy assignment executed by Owner or his (or its) transferee in connection with this Agreement, it is the express intention of the parties to reserve to the Owner all rights in and to the Policy granted to the Owner by its terms, including, but not limited to, the right to assign the Owner's interest in the Policy, the right to change the beneficiary of the Policy, the right to exercise settlement options, the right to borrow against the cash value of the Policy, and the right to surrender or cancel the Policy, in whole or in part. Employer shall neither have nor exercise any right in or to the Policy which could, in any way, endanger, defeat or impair any of the rights of the Owner in the Policy, including the right to collect the proceeds of the Policy in excess of the amount due the Employer, as provided in this Agreement. The only rights in and to the Policy granted to the Employer shall be limited to its security interest in the "cash surrender value or surrender value" of the Policy, which for all purposes of this Agreement shall be as defined in the Policy, and a portion of the death benefit of the Policy, as hereinafter provided. The Employer shall not assign any of its rights in the Policy to anyone other than the Owner (or the Owner's transferee, if the Owner has transferred his or its rights in the Policy).
3. Premium. The Owner shall contribute to the Employer an amount equal to the annual economic benefit derived by the Owner (as determined by the Employer in accordance with Revenue Rulings 64-328 and 66-110), or, if less, the premium for the year. The Owner shall pay the Owner's portion of the premium to the Employer in a lump sum at the beginning of each Policy year. The Employer shall pay the remainder of each total premium on the Policy. The total annual premium due on such Policy, effective December 1 of each year during the term of this Agreement, shall be determined by the Employer.
4. Collateral Assignment. Contemporaneously with this Agreement, the Owner has made a collateral assignment of the Policy to the Employer under the form of Assignment attached as Exhibit B, as it may be amended from time to time to reflect any modifications to Exhibit A with respect to the Insurer or policy number, which Assignment gives the Employer the right to recover the premiums it has paid on the Policy including reimbursement of premiums previously paid by General Electric Company ("GE") less amounts received under the Agreement from the Owner ("net premium outlay") from the surrender value of the Policy and to recover a portion of the death benefit of the Policy. The interest of the Employer in and to the Policy shall be specifically limited to the following rights:
a. The right to recover the lesser of its net premium outlay and the surrender value of the Policy in the event the Policy is totally surrendered or canceled by the Owner, or the right to receive the surrender proceeds to the extent of its net premium outlay in the event the Policy is partially surrendered by the Owner as provided in paragraph 5;
b. The right to recover its net premium outlay fro the death benefit proceeds;
c. The right to recover the lesser of its net premium outlay and the surrender value of the Policy, or to receive ownership of the Policy, in the event of termination of this Agreement, as provided in paragraphs
6(b), 6(c) and 6(d) below; and
d. The right to recover its net premium outlay to the extent a Policy loan made by the Owner in any year exceeds the lesser of the Owner's portion of the premium for that year and the increase for that year in the surrender value of the Policy, as provided in paragraph 8.
5. Surrender or Cancellation. The Owner shall have the sol right to surrender or cancel the Policy, in whole or in part, and to receive his (or its) surrender value, subject to the provisions of this paragraph 5. In the event of any partial or complete surrender or cancellation, the Employer shall be provided with written notice of such surrender or cancellation by the Owner at least fifteen (15) days prior to a distribution from the Insurer. Subject to paragraph 6, in the event of any partial surrender, the Employer shall
2
be entitled to recover the surrender proceeds to the extent of its net premium outlay. In the event of a complete surrender or cancellation, the Employer shall be entitled to recover the lesser of its net premium outlay and the surrender value of the Policy.
6. Termination of Agreement.
a. This Agreement shall terminate upon the date on which either party to the Agreement provides notice in writing to the other party of the desire to terminate.
b. Within thirty (30) days following the termination of this Agreement, the Owner shall pay to the Employer the lesser of the surrender value of the Policy and Employer's net premium outlay. Upon receipt by the Employer of such amount, the Employer shall execute an appropriate instrument of release of the Assignment of the Policy.
c. If the Owner fails to pay such amount within such thirty (30) day period, the Owner shall execute any and all instruments that may be required to vest ownership of the Policy in the Employer. Thereafter, the Owner shall have no further interest in the Policy.
d. If the Owner fails to surrender the policy as specified in paragraph 6(b) or to execute the instruments required by paragraph 6(c) within such thirty (30) day period, the Employer may notify the Insurer that the Employer intends to exercise its rights under the Assignment. In such event, the Insurer shall pay to the Employer the amount specified in paragraph 6(b).
7. Death. Upon the death of Employee, the Employer shall receive the amount specified in paragraph 4(b). The balance of the death benefit provided under the Policy, if any, shall be paid directly to the beneficiary of the Policy.
8. Loans. The Owner shall have the sole right to borrow against the Policy, and the Employer shall have no right to obtain loans against the Policy, directly or indirectly, from the Insurer or from any other person, or to pledge or assign the Policy as security for any loan. If the Owner in any Policy year borrows from the Policy an amount in excess of the Owner's portion of the annual premium for that year or the increase in the surrender value of the Policy for the year, whichever is less, the Employer shall be entitled to receive such excess amount, to the extent of its net premium outlay under this Agreement. The Owner shall pay any interest due on any Policy loan it obtains.
9. Transferee. In the event Owner shall transfer all of his (or its) interest in the Policy, then all of Owner's interest in the Policy and in this Agreement shall be vested in his (or its)
3
transferee, who shall be substituted as a party under this Agreement, and the transferring Owner shall have no further interest in the Policy or in this Agreement.
10. Successors and Assigns. This Agreement shall bind Employer, its successors and assigns, and Employee and Owner and their heirs, executors, administrators and transferees, and any Policy beneficiary. The Employer agrees that it will not merge or consolidate with another employer, corporation, or organization, or permit its business and activities to be taken over by any other organization unless or until the succeeding or continuing employer, corporation or other organization shall expressly assume the rights and obligations of the Employer set forth in this Agreement.
11. Effect on Employment. This Agreement shall not be deeme to constitute a contract of employment between the parties, nor shall any provision restrict the right of Employee to terminate his employment, at any time not in contravention of any applicable employment agreement.
12. Insurer. The Insurer shall be bound only by the provisions of and endorsements on the Policy, and any payments made or action taken by it in accordance with the Policy shall fully discharge it from all claims, suits and demands of all persons whatsoever. Except as specifically provided by endorsement on the Policy and as provided in the Assignment, the Insurer shall in no way be bound by the provisions of this Agreement.
13. Payment. It is agreed that benefits may be paid under the Policy by the Insurer either by separate checks to the parties entitled thereto, or by joint check. In the latter instance, the Owner and the Employer agree that benefits shall be divided as provided herein.
14. Amendment. Except as provided in paragraph 6 and in paragraph 1 pertaining to Exhibit A, this Agreement may not be canceled, amended, altered or modified, except by a written instrument signed by all of the parties.
15. Notices. Any notice, consent or demand required or permitted to be given under the provisions of this Agreement by one party to another shall be in writing, shall be signed by the party giving or making the same, and may be given either by delivering the same to such other party personally, or by mailing the same, by United States certified mail, postage prepaid, to such party, addressed to his, her or its last known address as shown on the records of the Employer. The date of such mailing shall be deemed the date of such mailed notice, consent or demand.
16. Gender and Number. Whenever any words are used herein in the masculine gender, they shall be construed as though they were also used in the feminine or neuter gender in all cases where they would so apply, and whenever any words are used herein in the singular
4
or plural form, they shall be construed as though they were also used in the other form in all cases where they would so apply.
17. Controlling Law. This Agreement, and the rights of the parties hereunder, shall be governed by and construed pursuant to the laws of the State of Indiana except to the extent preempted by federal law.
IN WITNESS WHEREOF, the parties have executed this Agreement effective the day and year first above written.

Owner's Signature:
GARY C. WENDT 2000 IRREVOCABLE                  CONSECO, INC.
INSURANCE TRUST DATED 11/22/00

By: /s/ Thomas A. Roberts                       By:  /s/ James S. Adams
    ---------------------------------                --------------------------
Name:  Thomas A. Roberts                        Name:  James S. Adams
Title: Trustee                                  Title: Senior President, Chief
                                                       Accounting Officer	

Exhibit A Conseco Executive Life Insurance Agreement
Policy # Insurer Death Benefit
883215087U Metropolitan Life Insurance Company $1,684,898
Exhibit B
COLLATERAL ASSIGNMENT
THIS ASSIGNMENT, made and entered into effective the --- day of ----, 2001, by the undersigned the Gary C. Wendt 2000 Irrevocable Insurance Trust dated 11/22/00, as owner ("Owner") of that certain Life Insurance Policy No. 883215087U issued by Metropolitan Life Insurance Company ("Insurer") and any supplementary contracts issued in connection with such policy (said policy and contracts herein called "Policy"), upon the life of Gary C. Wendt ("Insured"), to Conseco, Inc., an Indiana corporation, ("Assignee").
WITNESSETH:
WHEREAS, the Insured is a valued employee of the Assignee, and the Assignee wishes to retain him in its employ;
WHEREAS, as an inducement to the Insured's continued employment, the Assignee desires to assist the Insured with his personal life insurance program by contributing a portion of the annual premium due on the Policy and reimbursing General Electric Company ("GE"), one of Insured's previous employers, for premiums previously paid by GE, as more specifically provided for in that certain Conseco Executive Life Insurance Agreement entered into between the Insured and the Assignee ("Agreement"); and
WHEREAS, in consideration of the Assignee's agreeing to pay a portion of the premiums pursuant to the Agreement, the Owner agrees to assign to the Assignee certain rights in the Policy as set forth in this Assignment.
NOW, THEREFORE, for value received, the undersigned Owner hereby assigns, transfers and sets over to the Assignee, its successors and assigns, the following specific rights in the Policy subject to the following terms and conditions:
1. Assigned Rights. The Assignee's interest in the Policy shall be limited to:
a. In the event the Policy is surrendered or cancelled by the Owner, the right to recover the lesser of (i) the total premiums it has paid on the Policy and premiums it has reimbursed to GE less amounts received under the Agreement from the Owner ("net premium outlay") and (ii) the "cash surrender value or surrender value" of the Policy (as defined in the Policy for all purposes hereinafter), or, in the event the Policy is partially surrendered or cancelled by the Owner, the right to receive the surrender proceeds to the extent of its net premium outlay, as provided in paragraph 5 of the Agreement.
b. The right to recover the death benefit proceeds as provided in Paragraph 7 of the Agreement.
c. The right to recover the lesser of (i) its net premium outlay and (ii) the surrender value of the Policy or to receive ownership of the Policy, in the event of termination of the Agreement, as provided in paragraphs 6(b), 6(c) and 6(d) of the Agreement.
d. The right to recover its net premium outlay to the extent a policy loan made by the Owner in any year exceeds the lesser of the Owner's portion of the premium for that year and the increase for that year in the surrender value of the Policy, as provided in Paragraph 8 of the Agreement.
2. Incidents of Ownership. The Owner shall retain all incidents of ownership in the Policy, including, but not limited to, the sole and exclusive rights to:
borrow against the Policy; assign the Owner's interest in the Policy; change the beneficiary of the Policy; exercise settlement options; and, subject to paragraphs 5 and 6 of the Agreement, surrender or cancel the Policy (in whole or in part).
3. Endorsement of Policy. If the Assignee shall have possession of the Policy at any time while this Assignment is in force, then upon request and without unreasonable delay, the Assignee shall forward the Policy to the Insurer for endorsement of any designation or change of beneficiary, any election of optional mode of settlement, or the exercise of any other right reserved by the Owner hereunder.
4. Insurer.
a. The Insurer is hereby authorized to recognize the Assignee's claims to rights under this Agreement without investigating the reason for any action taken by the Assignee, the amount of its net premium outlay, the existence of any default, the giving of any required notice or the application to be made by the Assignee of any amounts to be paid to the Assignee. The signature of the Assignee shall be sufficient for the exercise of any of its rights under the Assignment for the Assignee's receipt for any sums received by it and shall be a full discharge and release of such sums to the Insurer.
b. The Insurer shall be fully protected in recognizing a request made by the Owner for surrender or cancellation of the Policy, in whole or in part, or in recognizing a request made by the Owner for any loans against the Policy permitted by the terms of the Policy, with or without the consent of the Assignee. In the event of any such request, the Insurer may pay the proceeds of such surrender, cancellation, or loans to the sole order of the Owner, or as the Owner shall direct, provided that the Owner has provided the requisite fifteen (15) days' notice to the Assignee required by paragraph 5 of the Agreement.
2
5. Release. Upon the full payment of the liabilities of the Owner to the Assignee pursuant to the Agreement, the Assignee shall execute an appropriate instrument of release of this Collateral Assignment.
IN WITNESS WHEREOF, the undersigned Owner has executed this Assignment effective the day and year first above written.
Owner's Signature:
GARY C. WENDT 2000 IRREVOCABLE
INSURANCE TRUST DATED 11/22/00

By:
   -------------------------------------          ------------------------------
      Thomas A. Roberts, Trustee                     Witness	

Recorded and Filed at the Office of Metropolitan The Company assumes no obligation as to the validity and sufficiency of this agreement, and does not pass upon its legality.
on

3
COLLATERAL ASSIGNMENT
THIS ASSIGNMENT, made and entered into effective the 16th day of January, 2001, by the undersigned the Gary C. Wendt 2000 Irrevocable Insurance Trust dated 11/22/00, as owner ("Owner") of that certain Life Insurance Policy No. 883215087U issued by Metropolitan Life Insurance Company ("Insurer") and any supplementary contracts issued in connection with such policy (said policy and contracts herein called "Policy"), upon the life of Gary C. Wendt ("Insured"), to Conseco, Inc., an Indiana corporation, ("Assignee").
WITNESSETH:
WHEREAS, the Insured is a valued employee of the Assignee, and the Assignee wishes to retain him in its employ;
WHEREAS, as an inducement to the Insured's continued employment, the Assignee desires to assist the Insured with his personal life insurance program by contributing a portion of the annual premium due on the Policy and reimbursing General Electric Company ("GE"), one of Insured's previous employers, for premiums previously paid by GE, as more specifically provided for in that certain Conseco Executive Life Insurance Agreement entered into between the Insured and the Assignee ("Agreement"); and
WHEREAS, in consideration of the Assignee's agreeing to pay a portion of the premiums pursuant to the Agreement, the Owner agrees to assign to the Assignee certain rights in the Policy as set forth in this Assignment.
NOW, THEREFORE, for value received, the undersigned Owner hereby assigns, transfers and sets over to the Assignee, its successors and assigns, the following specific rights in the Policy subject to the following terms and conditions:
1. Assigned Rights. The Assignee's interest in the Policy shall be limited to:
a. In the event the Policy is surrendered or cancelled by the Owner, the right to recover the lesser of (i) the total premiums it has paid on the Policy and premiums it has reimbursed to GE less amounts received under the Agreement from the Owner ("net premium outlay") and (ii) the "cash surrender value or surrender value" of the Policy (as defined in the Policy for all purposes hereinafter), or, in the event the Policy is partially surrendered or cancelled by the Owner, the right to receive the surrender proceeds to the extent of its net premium outlay, as provided in paragraph 5 of the Agreement.
b. The right to recover the death benefit proceeds as provided in Paragraph 7 of the Agreement.
c. The right to recover the lesser of (i) its net premium outlay and (ii) the surrender value of the Policy or to receive ownership of the Policy, in the event of termination of the Agreement, as provided in paragraphs 6(b), 6(c) and 6(d) of the Agreement.
d. The right to recover its net premium outlay to the extent a policy loan made by the Owner in any year exceeds the lesser of the Owner's portion of the premium for that year and the increase for that year in the surrender value of the Policy, as provided in Paragraph 8 of the Agreement.
2. Incidents of Ownership. The Owner shall retain all incidents of ownership in the Policy, including, but not limited to, the sole and exclusive rights to:
borrow against the Policy; assign the Owner's interest in the Policy; change the beneficiary of the Policy; exercise settlement options; and, subject to paragraphs 5 and 6 of the Agreement, surrender or cancel the Policy (in whole or in part).
3. Endorsement of Policy. If the Assignee shall have possession of the Policy at any time while this Assignment is in force, then upon request and without unreasonable delay, the Assignee shall forward the Policy to the Insurer for endorsement of any designation or change of beneficiary, any election of optional mode of settlement, or the exercise of any other right reserved by the Owner hereunder.
4. Insurer.
a. The Insurer is hereby authorized to recognize the Assignee's claims to rights under this Agreement without investigating the reason for any action taken by the Assignee, the amount of its net premium outlay, the existence of any default, the giving of any required notice or the application to be made by the Assignee of any amounts to be paid to the Assignee. The signature of the Assignee shall be sufficient for the exercise of any of its rights under the Assignment for the Assignee's receipt for any sums received by it and shall be a full discharge and release of such sums to the Insurer.
b. The Insurer shall be fully protected in recognizing a request made by the Owner for surrender or cancellation of the Policy, in whole or in part, or in recognizing a request made by the Owner for any loans against the Policy permitted by the terms of the Policy, with or without the consent of the Assignee. In the event of any such request, the Insurer may pay the proceeds of such surrender, cancellation, or loans to the sole order of the Owner, or as the Owner shall direct, provided that the Owner has provided the requisite fifteen (15) days' notice to the Assignee required by paragraph 5 of the Agreement.
-2-
5. Release. Upon the full payment of the liabilities of the Owner to the Assignee pursuant to the Agreement, the Assignee shall execute an appropriate instrument of release of this Collateral Assignment.
IN WITNESS WHEREOF, the undersigned Owner has executed this Assignment effective the day and year first above written.
Owner's Signature:
GARY C. WENDT 2000 IRREVOCABLE
INSURANCE TRUST DATED 11/22/00

By:   /s/ Thomas A. Roberts               /s/ Mary Alice Roberts
      --------------------------          ----------------------
      Thomas A. Roberts, Trustee          Witness	

Recorded and Filed at the Office of Metropolitan
The Company assumes no obligation as to the validity and sufficiency of this agreement, and does not pass upon its legality.
on

-3-
  
                         CONSECO, INC. AND SUBSIDIARIES

               Computation of Ratio of Earnings to Fixed Charges,
     Preferred Dividends and Distributions on Company-Obligated Mandatorily
                  Redeemable Preferred Securities of Subsidiary
                       Trusts - Consolidated Basis for the
                  years ended December 31, 2000, 1999 and 1998
                              (Dollars in millions)

                                                                                        2000          1999         1998
                                                                                        ----          ----         ----
Pretax income (loss) from operations:
    Net income (loss)...............................................................  $(1,191.2)   $  595.0     $  467.1
    Add income tax expense (benefit)................................................     (376.2)      423.1        445.6
    Add extraordinary charge on extinguishment of debt..............................        5.0         -           42.6
    Add minority interest...........................................................      145.3       132.8         90.4
    Add cumulative effect of accounting change......................................       55.3         -            -
                                                                                      ---------    --------     --------

       Pretax income (loss) from operations.........................................   (1,361.8)    1,150.9      1,045.7
                                                                                      ---------    --------     --------
Add fixed charges:
    Interest expense on corporate debt, including amortization......................      438.4       249.1        182.2
    Interest expense on finance debt................................................      996.1       254.7        193.0
    Interest expense on investment borrowings.......................................       18.6        57.9         65.3
    Other...........................................................................        -           -             .5
    Portion of rental (1)...........................................................       23.5        20.3         14.6
                                                                                      ---------    --------     --------

       Fixed charges................................................................    1,476.6       582.0        455.6
                                                                                      ---------    --------     --------

       Adjusted earnings............................................................  $   114.8    $1,732.9     $1,501.3
                                                                                      =========    ========     ========

          Ratio of earnings to fixed charges........................................         (2)      2.98X        3.30X
                                                                                              =       =====        =====

          Ratio of earnings to fixed charges, excluding interest expense on
              finance debt and investment borrowings................................         (2)      5.27X        6.30X
                                                                                              =       =====        =====

Fixed charges.......................................................................  $ 1,476.6    $  582.0     $  455.6
Add dividends on preferred stock, including dividends on preferred
    stock of subsidiaries (divided by the ratio of income before minority
    interest and extraordinary charge to pretax income).............................       17.0         2.4         13.6
Add distributions on Company-obligated mandatorily redeemable
    preferred securities of subsidiary trusts.......................................      223.6       204.3        139.1
                                                                                      ---------    --------     --------

       Fixed charges................................................................  $ 1,717.2    $  788.7     $  608.3
                                                                                      =========    ========     ========

       Adjusted earnings............................................................  $   114.8    $1,732.9     $1,501.3
                                                                                      =========    ========     ========

          Ratio of earnings to fixed charges, preferred dividends and
              distributions on Company-obligated mandatorily redeemable
              preferred securities of subsidiary trusts.............................         (3)      2.20X        2.47X
                                                                                              =       =====        =====

          Ratio of earnings to fixed charges, preferred dividends and
              distributions on Company-obligated  mandatorily redeemable
              preferred securities of subsidiary trusts, excluding interest
              expense on finance debt and investment borrowings.....................         (3)      2.98X        3.55X
                                                                                              =       =====        =====

---------------------
    (1)   Interest portion of rental is estimated to be 33 percent.
    (2)   For such ratios, adjusted earnings were $1,361.8 million less than
          fixed charges. Adjusted earnings for the year ended December 31, 2000,
          included: (i) special and impairment charges of $1,215.0 million; and
          (ii) provision for losses related to loan guarantees of $231.5
          million, as described in greater detail in the notes to the
          accompanying consolidated financial statements.
    (3)   For such ratios, adjusted earnings were $1,602.4 million less than
          fixed charges. Adjusted earnings for the year ended December 31, 2000,
          included: (i) special and impairment charges of $1,215.0 million; and
          (ii) provision for losses related to loan guarantees of $231.5
          million, as described in greater detail in the notes to the
          accompanying consolidated financial statements.

  
                              LIST OF SUBSIDIARIES

        NAME (1)                                                       JURISDICTION
-----------------------                                                ------------
CDOC, Inc.                                                             Delaware
Conseco Entertainment, Inc.                                            Indiana
     Conseco Entertainment, LLC                                        Indiana
Conseco Equity Sales, Inc.                                             Texas
Conseco Risk Management, Inc.                                          Indiana
Conseco Capital Management, Inc.                                       Pennsylvania
CIHC, Incorporated                                                     Indiana
     Conseco Securities, Inc.                                          Delaware
     Conseco Life Insurance (Bermuda) Limited                          Bermuda
     Conseco Life Insurance Company of Texas                           Texas
         Conseco Direct Life Insurance Company                         Pennsylvania
         Conseco Annuity Assurance Company                             Illinois
              Vulcan Life Insurance Company                            Indiana
         Conseco Senior Health Insurance Company                       Pennsylvania
              Conseco Life Insurance Company of New York               New York
         Conseco Variable Insurance Company                            Texas
         Washington National Insurance Company                         Illinois
              United Presidential Life Insurance Company               Indiana
         Pioneer Life Insurance Company                                Illinois
              Manhattan National Life Insurance Company                Illinois
                  Conseco Medical Insurance Company                    Illinois
         Conseco Health Insurance Company                              Arizona
              Frontier National Life Insurance Company                 Ohio
         Wabash Life Insurance Company                                 Indiana
              Conseco Life Insurance Company                           Indiana
         Bankers Life Insurance Company of Illinois                    Illinois
              Bankers Life and Casualty Company                        Illinois
                  Carmel Fifth LLC                                     Delaware
     Bankers National Life Insurance Company                           Texas
     Conseco Management Services Company                               Texas
     Conseco Services, LLC                                             Indiana
     CFIHC, Inc.                                                       Delaware
         Conseco Private Capital Group, Inc.                           Indiana
         Performance Matters Associates, Inc.                          Delaware	

         Performance Matters Associates of Texas, Inc.                 Texas
         Performance Matters Associates of Kansas, Inc.                Kansas
         Performance Matters Associates of Ohio, Inc.                  Ohio
Conseco Finance Corp.                                                  Delaware
     Conseco Financing Servicing Corp.                                 Delaware
         P Financial Services, Inc.                                    Minnesota
         Green Tree Retail Services Bank, Inc.                         South Dakota
         Conseco Finance Loan Company                                  Minnesota
              Green Tree Titling Holding Company I                     Delaware
                  G.T. Titling, LLC I                                  Delaware
                  G.T. Titling, LLC II                                 Delaware
                  Green Tree Titling Limited Partnership I             Delaware
                  Green Tree Titling Limited Partnership II            Delaware
                      Conseco Finance Leasing Trust                    Delaware
     Conseco Finance Vendor Services Corporation                       Delaware
         Green Tree Lease Finance I, Inc.                              Minnesota
         Green Tree Lease Finance I, LLC                               Delaware
         Green Tree Lease Finance II, Inc.                             Minnesota
              Green Tree Lease Finance 1997-1, LLC                     Delaware
              Green Tree Lease Finance 1998-1, LLC                     Delaware
              Conseco Finance Lease 2000-1, LLC                        Delaware
              Green Tree Warehouse I, LLC                              Delaware
     Conseco Agency, Inc.                                              Minnesota
         Conseco Agency of Alabama, Inc.                               Alabama
         Conseco Agency of Kentucky, Inc.                              Kentucky
         Crum-Reed General Agency, Inc.                                Texas
         Dealer Service Trust Corporation                              Minnesota
         Conseco Agency Reinsurance Limited                            Turks and Calicos Islands
     Consolidated Acceptance Corporation                               Nevada
         Woodgate Consolidated Incorporated                            Texas
              Woodgate Utilities, Inc.                                 Texas
              Woodgate Place Owners Association                        Texas
     Conseco Finance Canada Holding Company                            Delaware
         Conseco Finance Canada Company                                Nova Scotia
     MaHCS Guaranty Corporation                                        Delaware
     Conseco Finance Corp. - Alabama                                   Delaware
     Conseco Agency of Nevada, Inc.                                    Nevada
     Conseco Agency of New York, Inc.                                  New York
     Green Tree Floorplan Funding Corp.                                Delaware
     Conseco Bank, Inc.                                                Utah
     Green Tree Financial Corp. - Texas                                Delaware
     Green Tree Residual Finance Corp. I                               Minnesota
     Conseco Finance Securitizations Corp.                             Minnesota
     Conseco Finance Vehicle Securitizations Corp.                     Minnesota
     Green Tree Manufactured Housing Net Interest Margin Finance Corp. Delaware
     Green Tree Manufactured Housing Net Interest Margin Finance Corp. Delaware
     Green Tree Finance Corp. - One                                    Minnesota
     Green Tree Finance Corp. - Two                                    Minnesota	

     Green Tree Finance Corp. - Three                                  Minnesota
     Green Tree Finance Corp. - Five                                   Minnesota
     Green Tree Finance Corp. - Six                                    Minnesota
     Green Tree RECS Guaranty Corporation                              Minnesota
     Green Tree RECS II Guaranty Corporation                           Minnesota
     Conseco Finance Credit Corp.                                      New York
     Conseco Finance Consumer Discount Company                         Pennsylvania
     Green Tree First GP Inc.                                          Minnesota
     Green Tree Second GP Inc.                                         Minnesota
     Rice Park Properties Corporation                                  Minnesota
     Green Tree Retail Services Funding Corp.                          Minnesota
     BizGuild, Inc.                                                    Minnesota
     HIRC, Inc.                                                        Minnesota

------------------

(1)   Except otherwise indicated, each company is a direct or indirect wholly
      owned subsidiary of the indicated parent.	

CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of Conseco, Inc. (File Nos. 33-57079, 33-56901, 33-57931, 33-40556, 33-58710, 33-58712, 333-10297, 333-18037, 333-18581, 333-19783, 333-23251, 333-28305, 333-32615, 333- 32617, 333-32621, 333-83607, 333-51123, 333-83465, 333-85825, 333-94683 and 333-41114) of our report dated March 26, 2001, on our audits of the consolidated financial statements and financial statement schedules of Conseco, Inc. as of December 31, 2000 and 1999, and for the years ended December 31, 2000, 1999 and 1998, which report is included in this Annual Report on Form 10-K.

                                        /s/ PRICEWATERHOUSECOOPERS LLP
                                        ------------------------------
                                        PricewaterhouseCoopers LLP

Indianapolis, Indiana
March 26, 2001	

ARTICLE 7	
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.	
MULTIPLIER: 1,000	

		
PERIOD TYPE	YEAR		
FISCAL YEAR END	DEC 31 2000		
PERIOD END	DEC 31 2000		
DEBT HELD FOR SALE	21,755,100		
DEBT CARRYING VALUE	0		
DEBT MARKET VALUE	0		
EQUITIES	248,300		
MORTGAGE	1,238,600		
REAL ESTATE	0		
TOTAL INVEST	25,017,600		
CASH	1,663,600		
RECOVER REINSURE	669,400		
DEFERRED ACQUISITION	4,435,300	1	
TOTAL ASSETS	58,589,200		
POLICY LOSSES	23,998,300		
UNEARNED PREMIUMS	0		
POLICY OTHER	764,800		
POLICY HOLDER FUNDS	261,300		
NOTES PAYABLE	19,966,500	2	
PREFERRED MANDATORY	2,403,900		
PREFERRED	486,800		
COMMON	2,911,800		
OTHER SE	975,800	3	
TOTAL LIABILITY AND EQUITY	58,589,200		
PREMIUMS	4,220,300		
INVESTMENT INCOME	3,920,400		
INVESTMENT GAINS	(358,300)		
OTHER INCOME	514,000	4	
BENEFITS	4,071,000		
UNDERWRITING AMORTIZATION	561,400	5	
UNDERWRITING OTHER	872,700		
INCOME PRETAX	(1,361,800)		
INCOME TAX	(376,200)		
INCOME CONTINUING	(985,600)		
DISCONTINUED	0		
EXTRAORDINARY	(5,000)		
CHANGES	(55,300)		
NET INCOME	(1,191,200)		
EPS BASIC	(3.69)		
EPS DILUTED	(3.69)		
RESERVE OPEN	0		
PROVISION CURRENT	0		
PROVISION PRIOR	0		
PAYMENTS CURRENT	0		
PAYMENTS PRIOR	0		
RESERVE CLOSE	0		
CUMULATIVE DEFICIENCY	0		
		
1	Includes $1,954,800 of cost of policies purchased.	
2	Includes $2,810,900 related to finance debt and $12,100,600 related to securitized finance receivables.	
3	Includes retained earnings of $1,626,800 and accumulated other comprehensive losses of $651,000.	
4	Includes gain on sale of finance receivables of $7,500 and fee revenue and other income of $506,500.	
5	Includes amortization of cost of policies purchased of $275,400 and amortization of cost of policies produced of $286,000.