Exhibit 99.2
CONSECO, INC.
$675 NEW SENIOR SECURED TERM LOAN FACILITY(1)
SUMMARY OF TERMS AND CONDITIONS
BORROWER: Conseco, Inc., a Delaware corporation (the
"Borrower").
GUARANTORS: The Subsidiary Guarantors (as defined in the
Credit Agreement). All guarantees will be
guarantees of payment and not of collection.
ADMINISTRATIVE AND
COLLATERAL AGENT: Bank of placecountry-regionAmerica, N.A. ("Bank
of America"), as sole and exclusive
administrative and collateral agent (the
"Agent").
SYNDICATION AGENT: JPMorgan Chase Bank, N.A.
JOINT LEAD
ARRANGERS AND
JOINT BOOKRUNNING
MANAGER: Banc of America Securities LLC ("BAS") and J.P.
Morgan Securities Inc. ("JP Morgan") will act as
joint lead Arrangers and joint bookrunning
managers (the "Lead Arrangers") for the New Term
Loan Facility.
LENDERS: A syndicate of banks, financial institutions and
institutional lenders (the "Lenders") acceptable
to the Lead Arrangers and the Agent and, in the
case of any bank, financial institution or
institutional lender that is not already party
to the Credit Agreement, consented to by the
Borrower (which consent shall not be
unreasonably withheld or delayed).
NEW TERM LOAN
FACILITY: A new $675.0 million term loan facility to be
used to refinance in full the aggregate
principal amount all Term Loans outstanding on
the Amendment Effective Date (as defined below)
under the Credit Agreement, for general
corporate purposes, and to pay related
transaction fees and expenses, all of which will
be drawn on the Amendment Effective Date (the
"New Term Loan Facility").
INCREMENTAL FACILITY: Same as the Existing Credit Agreement, except
that the maximum amount of such Incremental
Facility shall be increased to $330.0 million.
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(1) Note that, except with respect to the Mandatory Prepayment section and
Selected Financial Covenants, which are summarized herein, the terms and
conditions of the Revolving Credit Facility under the Credit Agreement
remain unchanged unless specifically noted.
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AMENDMENT EFFECTIVE
DATE: The date on or before October 31, 2006 on which
the conditions to the making of the initial
advances under the New Term Loan Facility shall
have been satisfied (or waived) (the "Amendment
Effective Date").
INTEREST RATES;
CALCULATION OF
INTEREST AND FEES: The Applicable Margin for the New Term Loan
Facility shall be (a) 2.00% per annum, in the
case of Eurodollar Rate Loans, and (b) 1.00% per
annum, in the case of Base Rate Loans. Each
Interest Period in effect in respect of the Term
Loans shall be terminated on the Amendment
Effective Date and the Borrower shall reimburse
each existing Lender for actual losses and
expenses incurred pursuant to Section 3.04(d) of
the Credit Agreement.
MATURITY: The New Term Loan Facility will mature on the
date that is the seventh anniversary of the
Amendment Effective Date (the "Maturity Date").
SCHEDULED
AMORTIZATION: Quarterly amortization of principal (in equal
installments), with 0.25% of the initial
aggregate amount of loans under the New Term
Loan Facility to be payable at the end of each
March, June, September and December and the
balance due and payable on the Maturity Date
(collectively, the "Scheduled Amortization").
OPTIONAL
PREPAYMENTS AND
COMMITMENT
REDUCTIONS: Same as in the Credit Agreement. Optional
prepayments will be applied as directed by the
Borrower.
MANDATORY
PREPAYMENTS: Based on the existing Credit Agreement (the
terms of which are summarized below), except (i)
as specifically noted below, and (ii) that the
requirement that the Borrower's Insurance
Subsidiaries (other than Conseco Senior Health
Insurance Company, Bankers Life Insurance
Company of Illinois, Conseco Life Insurance
Company of Texas and Bankers Conseco Life
Insurance Company) have a financial strength
rating of not less than A- from A.M. Best
Company, in each case at the time such
prepayment is required to be made, shall be
amended to apply to the recapture of excess cash
flows generated in 2008 (excess cash flow
payments for Fiscal Years 2006 and 2007 shall be
eliminated) or thereafter (and payment shall be
due in the following year).
Key Mandatory Repayment Provisions in Credit
Agreement. Section 2.08(b) of the Credit
Agreement provides for mandatory repayments as
set forth in clauses (i) through (vi) below,
unless (x) the Debt to Total Capitalization
Ratio is equal to or less than 20% and (y) with
respect to Excess Cash Flow generated in 2008 or
thereafter, each of the Company's Insurance
Subsidiaries (other than Conseco Senior Health
Insurance Company, Bankers Life Insurance
Company of Illinois, Conseco Life Insurance
Company of Texas and Bankers Conseco Life
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Insurance Company) has a financial strength
rating of not less than A- from A.M. Best
Company, in each case at the time such
prepayment is required to be made; provided,
however, that the foregoing exclusion from the
obligation to make mandatory prepayments will
not apply to prepayments required in respect of
the Net Proceeds of unsecured Indebtedness
permitted under Section 7.01(a)(xiv) in excess
of $100.0 million in the aggregate and Permitted
Convertible Indebtedness.
(i) 100% of all Net Proceeds of Indebtedness
incurred by the Borrower or any
Subsidiary, with exceptions for certain
Indebtedness permitted under Section 7.01
of the Credit Agreement;
(ii) 50% of all Net Proceeds from issuances of
Capital Stock or other equity in the
Borrower or any Subsidiary, with certain
permitted exceptions (the same as in the
current Credit Agreement);
(iii) 100% of the Net Proceeds from Assets
Sales, subject to an aggregate threshold
of $5.0 million, as well as reinvestment
provisions;
(iv) 100% of the Net Proceeds from Casualty
Events, subject to an increased aggregate
threshold of $10.0 million (previously
$5.0 million in Section 2.08(b)(iv) of the
Credit Agreement) as well as replacement
provisions (including an amendment to
increase in the permissible reinvestment
period in Section 2.98(b)(iv) from 180
days and 270 days to one year);
(v) 50% of the Excess Cash Flow for each
Excess Cash Calculation Period, subject to
reductions for amounts required to be
returned to or invested in any Insurance
Subsidiary and voluntary prepayments of
Loans made during the relevant Calculation
Period; and
(vi) If the Total Revolving Credit Outstandings
exceed the availability limit under the
Revolving Credit Facility at any time,
repayment of the amount equal to such
excess.
Each prepayment shall be applied first to the
Term Loans for application to the next 4
scheduled principal payments thereof after the
occurrence of the event giving rise to such
prepayment in direct order of maturity, second,
to the Term Loans for application ratably to the
remaining principal repayment installments
thereof until paid in full and, third, to the
Revolving Credit Facility in the manner set
forth in Section 2.08(d).
SECURITY: Same as in the Credit Agreement.
CONDITIONS PRECEDENT
TO CLOSING: The initial extension of credit under the New
Term Loan Facility will be subject to
satisfaction (or waiver) of usual and customary
conditions precedent for a transaction of this
type, and others reasonably deemed appropriate
by the Lead Arrangers, including but not limited
to: (a) satisfactory documentation for the
Amendment executed by the Lenders
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and the Borrower, and, in each case, consented
to by each Subsidiary Guarantor; (b) all of the
representations and warranties in the Amendment
and the Loan Documents shall be true and correct
in all material respects (inclusive of all
materiality qualifiers); (c) no Defaults or
Events of Default shall have occurred and be
continuing; (d) absence of any change,
occurrence or development that could have a
Material Adverse Effect; (e) satisfactory
opinions of counsel in respect of the New Term
Loan Facility, corporate resolutions,
certificates and other documents and continuing
perfection of security interests in the
Collateral; (f) compliance with margin
regulations; (g) payment of the fees set forth
in the Fee Letters attached hereto and other
reasonable invoiced expenses required to be paid
pursuant to the terms of the Commitment Letter
and the losses and expenses of each existing
Lender pursuant to Section 3.04(d) of the Credit
Agreement; and (h) proceeds from the New Term
Loan Facility shall be applied to refinance in
full the aggregate principal amount all Term
Loans outstanding on the Amendment Effective
Date under the Credit Agreement and to pay
related transaction fees and costs.
REPRESENTATIONS AND
WARRANTIES: Same as in the Credit Agreement, except that,
with respect to the representations and
warranties in Sections 5.11(a) and (c) of the
Credit Agreement, (x) references to December 31,
2004 shall be amended to refer to December 31,
2005, and (y) references to June 30 and March 31
2005 shall be amended to refer to June 30 and
March 31, 2006, respectively.
AFFIRMATIVE
COVENANTS: Same as in the Credit Agreement.
NEGATIVE COVENANTS: Same as in the Credit Agreement with:
(a) The following modifications to Article 7:
(i) the Capitalized Lease Liabilities and
Purchase Money Debt limit in Section
7.01(a)(viii)(A) shall be increased
from $40.0 million to $50.0 million;
(ii) the intercompany Indebtedness limit
in Section 7.01(a)(x) shall be
increased from $30.0 million to $40.0
million;
(iii) the other unsecured Indebtedness
limit in Section 7.01(a)(xiv) shall
be increased from $100.0 million to
$150.0 million;
(iv) the cash collateral securing
Permitted Swap Obligations limit in
Section 7.02(c) shall be increased
from $35.0 million to $60.0 million;
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(v) the cash collateral securing letters
of credit issued in respect of
obligations to insurers limit in
Section 7.02(f)(ii) shall be
increased from $15.0 million to $20.0
million;
(vi) the Restricted Payments basket in
Section 7.08(g)(i) shall be increased
from $50.0 million to $150.0 million;
(vii) the addition of new Restricted
Payment Provisions in Section 7.08
permitting the payment of the cash
amount to be paid upon conversion of
(A) any Permitted Convertible
Indebtedness by the holder thereof,
and/or (B) any of the Borrower's 3
1/2% convertible debentures (the
"Convertible Debentures"), in each
case only so long as, after giving
pro forma effect to such payment and
conversion, the Debt to Total
Capitalization Ratio is equal to or
less than 25%;
(viii)the Acquisitions (other than
Acquisitions constituting
Investments) limit in Section
7.09(l)(i) shall be increased from
$100.0 million per Fiscal Year and
$300.0 million aggregate shall be
increased to $150.0 million per
Fiscal Year and $450.0 million
aggregate; and
(ix) the Acquisitions (other than
Acquisitions constituting
Investments) limit in Section
7.09(l)(ii) (which is also dependent
on certain other tests being met)
shall be increased from $250.0
million per Fiscal Year and $500.0
million aggregate shall be increased
to $500.0 million per Fiscal Year and
$1,000.0 million aggregate;
(b) Changes to the definition of "Pro Forma
Basis" to include reasonably identifiable
and factually supportable cost savings
certified by an agreed-upon financial
officer;
(c) Changes to the definition of "Conseco
Available Cash Flow" to provide add-backs
for recently disclosed litigation expenses,
not to exceed an amount to be determined;
and
(d) Changes to the Credit Agreement provide
that, following the conversion into common
equity of the Permitted Convertible
Indebtedness in May 2007, all calculations
for determining compliance with the
Interest Coverage Ratio set forth in
Section 7.12 of the Credit Agreement shall
include payment of cash dividends, on a pro
forma basis after giving effect to such
conversion, as if such conversion had
occurred at the beginning of the period
being measured for such pro forma
calculation.
SPECIFIC FINANCIAL
COVENANTS: Same as in the Credit Agreement, unless
otherwise noted (each section as summarized
below):
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7.11 Debt to Total Capitalization Ratio. The
Borrower shall maintain at all times a
Debt to Total Capitalization Ratio of not
more than 30% (previously 25%).
7.12 Interest Coverage Ratio. The Borrower
shall not permit the Interest Coverage
Ratio as of the end of any Fiscal Quarter
ending during each period set forth below
for the four Fiscal Quarters then ended
(or, if less, the number of full Fiscal
Quarters commencing after the Effective
Date) to be less than 2.00 to 1
(eliminating the increase to 2.50 to 1 in
July 2007 presently in the Credit
Agreement).
7.14 Aggregate RBC Ratio. The Borrower shall
not permit the Aggregate RBC Ratio as of
the end of any Fiscal Quarter to be less
than 250% (there was previously an
increase from 245% to 250% in April 2006
under the Credit Agreement).
7.15 Combined Statutory Capital and Surplus
Level. The Borrower shall not permit the
Combined Statutory Capital and Surplus of
the Insurance Subsidiaries as of the end
of any Fiscal Quarter to be less than
$1,270.0 million.
EVENTS OF DEFAULT/
ASSIGNMENTS AND
PARTICIPATIONS/
WAIVERS AND
AMENDMENTS: Same as in the Credit Agreement, except with an
increase in the threshold amounts set forth in
Section 8.01(e) (Cross Default, including with
respect to Swap Termination Value) and Section
8.01(i) (Judgments) from $40.0 million to $50.0
million.
INDEMNIFICATION: Same as in the Credit Agreement.
GOVERNING LAW: New York.
EXPENSES: Same as in the Credit Agreement.
COUNSEL TO THE
AGENT: Shearman & Sterling LLP.
MISCELLANEOUS: This term sheet is intended as an outline only
and does not purport to summarize all the
conditions, covenants, representations,
warranties and other provisions that would be
contained in the Amendment or the Credit
Agreement, as amended by the Amendment. Each of
the parties shall (i) waive its right to a trial
by jury and (ii) submit to New York
jurisdiction.