IN RE CONSECO, INC. (Bankr.N.D.Ill. 2002)

Case No. 02-49671, Jointly AdministeredUnited States Bankruptcy Court, N.D. Illinois, Eastern Division
December 18, 2002

INTERIM ORDER UNDER 11 U.S.C. § 105(a), 362(a)(3) AND 541 (A) LIMITING CERTAIN TRANSFERS OF, AND TRADING IN, EQUITY INTERESTS OF THE HOLDING COMPANY DEBTORS AND (B) APPROVING RELATED NOTIFICATION PROCEDURES
CAROL A. DOYLE, United States Bankruptcy Judge

Upon the motion (the “Motion”)[1b] of the debtors and debtors in possession (collectively, the “Holding Company Debtors”), seeking entry of an order (a) limiting certain transfers of and trading in, equity interests of the Holding Company Debtors and (b) approving related notification procedures; and it appearing that this Court has jurisdiction over this matter pursuant to 28 U.S.C. § 157 and 1334; and it appearing that this proceeding is a core proceeding within the meaning of 28 U.S.C. § 157(b)(2); and it appearing that venue is proper in this district pursuant to 28 U.S.C. § 1408 and 1409; the Court having reviewed the Motion; all parties in interest having been heard or having had the opportunity to be heard; and it appearing that good and sufficient notice of the Motion having been given and that no other or further notice of the Motion need be provided; and after due deliberation and sufficient cause appearing therefore, the Court hereby finds that:

1. The Court has jurisdiction over the Motion pursuant to 28 U.S.C. § 157 and 1334;

2. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2);

3, Venue for proceedings on the Motion is proper in this district pursuant to 28 U.S.C. § 1408 and 1409;

4. Notice of the Motion and the Hearing was sufficient;

5. Cause exists for the granting of the relief requested in the Motion;

6. Unrestricted trading in equity securities of the Holding Company Debtors prior to emergence from chapter 11 could cause violations of state insurance holding company statutes, as set forth in the Motion;

7. The holding Company Debtors’ consolidated net operating losses (“NOLs”) are property of the Holding Company Debtors’ estate under section 541 of the Bankruptcy Code and are protected by the automatic stay prescribed in section 362(a)(3) of the Bankruptcy Code;

8. Unrestricted trading in equity securities of the Holding Company Debtors prior to the Holding Company Debtors’ emergence from chapter 11 could severely limit the Holding Company Debtors’ ability to utilize their NOLs for federal income tax purposes, as set forth in the Motion;

9. Giving notice in the form and manner set forth in the Motion and implementing the procedures with respect to trading of equity securities of the Holding Company Debtors’ as set forth in the Motion are necessary and proper in order to avoid the inadvertent violation of state insurance statutes and to preserve the Holding Company Debtors’ NOLs and are therefore in the best interests of the Holding Company Debtors, their estate and their creditors; and

10. The relief requested in the Motion is authorized under sections 105(a), 362(a)(3) and 541 of the Bankruptcy Code.

IT IS HEREBY ORDERED THAT:

(a) The Motion is granted and approved, as of 12:01 a.m. on December 19, 2002, on an interim basis. Further hearing on this Motion will be held at 11:00 a.m. on January 14, 2003. Any objection to the Motion must be filed and served (pursuant to the Case Management Order entered this date) by January 10, 2003 at 4:00 p.m., prevailing central time.
(b) The Debtors shall issue an 8-K attaching the Motion and this Interim Order.
(c) Any purchase, sale or other transfer of equity securities of the Holding Company Debtors in violation of the procedures set forth herein shall be null and void ab initio as an act in violation of the automatic stay prescribed in section 362(a)(3) of the Bankruptcy Code and shall confer no rights on the transferee unless this case is hereafter dismissed or convened to a case under Chapter 7 of the Bankruptcy Code.
(d) The following procedure shall apply to trading in equity securities of the Holding Company Debtors:

(1) Procedure for Trading in Equity Securities

(A) Any person or entity who currently is or who becomes a Substantial Equityholder (as defined in paragraph (E) below) shall file with the Court and serve upon the Holding Company Debtors and counsel to the Holding Company Debtors a notice of such status in the form attached hereto as Exhibit 1,
on or before the later of (a) forty (40) days after the effective date of the notice of entry of the Order or (b) ten (10) days alter becoming a Substantial Equityholder.
(B) Any person, entity or Substantial Equityholder who intends to effect any acquisition of equity securities (including options to acquire stock, as defined below) that would result in (a) an increase in the amount of equity securities beneficially owned by a Substantial Equityholder or (b) a person or entity becoming a Substantial Equityholder (an “Equity Transferee”) shall, prior to effecting such an acquisition (the “Proposed Acquisition”), file with the Court and serve on the Holding Company Debtors and counsel to the Holding Company Debtors advance written notice of the Proposed Acquisition in the form attached hereto as Exhibit 2,[2a]
(C) Any person, entity or Substantial Equityholder who intends to effect any disposition of equity securities (including options to acquire stock, as defined below) that would result in (a) a decrease in the amount of equity securities beneficially owned by a Substantial Equityholder or (h) a person or entity ceasing to be a Substantial Equityholder (an “Equity Transferor”) shall, prior to effecting such a disposition (the “Proposed Disposition”), file with the Court and serve on the Holding Company Debtors and counsel to the Holding Company Debtors advance written notice of the Proposed Disposition in the form attached hereto as Exhibit 3,[3a]
(D) The Holding Company Debtors shall have thirty (30) calendar days after receipt of a Notice of Proposed Transfer[4a] to file with the Court and serve on the Equity Transferor or Equity Transferee an objection to the Proposed Acquisition or Disposition on the grounds that the Proposed Acquisition or Disposition may adversely affect the Holding Company Debtors’ ability to utilize their NOLs or cause violations of various state insurance statutes, If the Holding Company Debtors file an objection, the Proposed Acquisition or Disposition will not be effective unless approved by a Final and nonappealable order of this Court. If the holding Company Debtors do not object within such thirty (30) day period, then the Proposed Acquisition or Disposition may proceed solely as set forth in the Notice of Proposed Transfer. Further transactions within the scope of this paragraph must be the subject of additional notices as set forth herein, each such transaction having an additional thirty day waiting period.
(E) For purposes of this Order: (a) a “Substantial Equityholder” is any person or entity that beneficially owns at least 5% of the Holding Company Debtors’ equity securities; (b) “beneficial ownership” of equity securities includes direct and indirect ownership (e.g., a holding company would be considered to beneficially own all shares owned or acquired by its subsidiaries), ownership by such holder’s family members and persons acting in concert with such holder to make a coordinated acquisition of stock and ownership of shares which such holder has an option to acquire and (C) an “option” to acquire stock includes any contingent purchase, warrant, convertible debt, put, stock subject to risk of forfeiture, contract to acquire stock or similar interest, regardless of whether it is contingent or otherwise not currently exercisable. (2) Procedure for Notification by Holding Company Debtors
(A) The Holding Company Debtors shall serve a notice of the entry of this Order setting forth the procedures authorized herein substantially in the form annexed hereto as Exhibit 4 (the “Notice”) on (i) The Office of the United States Trustee for the Northern District of Illinois; (ii) any committee appointed under section 1102 of the Bankruptcy Code; (iii) counsel for the agents of the Holding Company Debtors’ pre-petition lenders; (iv) all scheduled creditors and shareholders; and (v) the indenture trustees or transfer agents for any class of equity securities of the Holding Company Debtors. Upon receipt of such Notice, any indenture trustee(s) or transfer agent(s) for any equity securities of Holding Company Debtors will be required, on at least a quarterly basis, to send such Notice to all holders of such equity securities registered with such indenture trustee or transfer agent. Any such registered holder must, in turn, provide such Notice to any holder for whose account such registered holder holds such equity securities, and so on down the chain of ownership. Additionally, any person or entity or broker or agent acting on their behalf who sells 5% or more of the holding Company Debtors’ equity securities to another person or entity must provide such Notice to such purchaser of equity securities or any broker or agent acting on their behalf. Additionally, the Holding Company Debtors will publish the Notice in the Wall Street Journal, National Edition.
(c) The requirements set forth in this Order are in addition to the requirements of applicable securities, corporate and other laws, and do not excuse compliance therewith.
(f) Any of the Holding Company Debtors may waive in writing any and all restrictions, stays and notification procedures contained in this Order.
(g) All objections to the Motion have been resolved and withdrawn.
(h) This Court retains jurisdiction with respect to all matters arising from or related to the implementation of this Order.
(i) Notwithstanding the possible applicability of F.R.Bankr.P. 6004(g), 7062, 9014 or otherwise, the terms and conditions of this Order shall be immediately effective and enforceable upon its entry.
(j) All time periods set forth in this Order shall be calculated in accordance with Fed.R. Bankr, P. 9006(a).

Exhibit 1 IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

Conseco, Inc., et al.,[1c] ))
Case No. 02 B___________
Debtors. ) (Jointly Administered))
Honorable _________)
)
Docket under 02 B_________

NOTICE OF STATUS AS A SUBSTANTIAL EQUITYHOLDER[2b]
PLEASE TAKE NOTICE that [name of equity holder] is/has become a Substantial Equityholder with respect to the equity securities (the “Equity Securities”) of [name of debtor(s)], a debtor and debtor in possession in Case No. [______] pending in the United States Bankruptcy Court for the Northern District of Illinois, Eastern Division.

PLEASE TAKE FURTHER NOTICE that, as of [date], [name of equity holder] beneficially owns __________________ shares of the Equity Securities of[name of debtor], The Following table sets forth the date(s) on which[name of equityholder] acquired or otherwise became the beneficial owner of such Equity Securities:

___________________________________________________________ Number of Shares Type of Equity Security Date Acquired ____________________________________________________________

_____________________________________________________________

_____________________________________________________________

_____________________________________________________________

_____________________________________________________________ (Attach additional page if necessary)

PLEASE TAKE FURTHER NOTICE that the taxpayer identification number of[name of equityholder] is _________________.

PLEASE TAKE FURTHER NOTICE that, under penalties of perjury, [name ofequityholder] hereby declares that it has examined this Notice and accompanying attachments (if any), and, to the best of its knowledge and belief, this Notice and any attachments which purport to be part of this Notice are true, correct and complete.

PLEASE TAKE FURTHER NOTICE that, pursuant to that certain Order (A) Limiting Certain Transfers of, and Trading in, Equity Interests of the Holding Company Debtors and (B) Approving Related Notification Procedures, this Notice is being (A) filed with the United States Bankruptcy Court for the Northern District of Illinois, and (B) served upon (i) the Holding Company Debtors and (ii) Kirkland Ellis, counsel to the Holding Company Debtors, 200 E. Randolph Drive, Chicago, IL 60601, Attn. Maria Yapan.

Chicago, Illinois

Dated: ______, 2002 Respectfully submitted,

[Name of Acquirer/Seller] [Address] [Telephone and facsimile]

Exhibit 2 IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

Conseco, Inc, et al.,[1d] ))
Case No. 02 B___________
Debtors. ) (Jointly Administered))
Honorable ____________)
)
Docket under 02 B__________

NOTICE OF PROPOSED ACQUISITION
PLEASE TAKE NOTICE THAT [name of prospective acquirer] hereby provides notice of its intention to purchase, acquire or otherwise accumulate one or more shares of the equity securities (the “Equity Securities”) of[name of debtor] or an option with respect thereto (the “Proposed Transfer”).

PLEASE TAKE FURTHER NOTICE THAT, if applicable, on [prior date(s)],[name of prospective acquirer] filed a Notice of Status as a Substantial Equityholder[2c] with the Court and served copies thereof on the Holding Company Debtors and the Holding Company Debtors’ counsel.

PLEASE TAKE FURTHER NOTICE THAT [name of prospective acquirer] currently beneficially owns __________________ shares of the Equity Securities ([type of equity security]) of[name of debtor].

PLEASE TAKE FURTHER NOTICE THAT, pursuant to the Proposed Transfer,[name of prospective acquirer] proposes to purchase, acquire or otherwise accumulate _____ shares of Equity Securities or an option with respect to ______ shares of Equity Securities. If the Proposed Transfer is permitted to occur, [name of prospective acquirer] will beneficially own _________ shares of Equity Securities after the transfer.

PLEASE TAKE FURTHER NOTICE THAT the taxpayer identification number of [name of prospective acquirer] is ______________________________

PLEASE TAKE FURTHER NOTICE that, under penalties of perjury, [name ofprospective acquirer] hereby declares it has examined this Notice and accompanying attachments (if any), and, to the best of its knowledge and belief, this Notice and any attachments which purport to be part of this Notice are true, correct and complete.

PLEASE TAKE FURTHER NOTICE that, pursuant to that certain Order (A) Limiting Certain Transfers of, and Trading in Equity interests of the Holding Company Debtors and (B) Approving Related Notification Procedures, this Notice is being (A) filed with the United States Bankruptcy Court for the Northern District of Illinois, and (B) served upon (i) the Holding Company Debtors and (ii) Kirkland Ellis, counsel to the Holding Company Debtors, 200 E. Randolph Drive, Chicago, IL 60601, Attn. Maria Yapan.

PLEASE TAKE FURTHER NOTICE that the Holding Company Debtors have thirty (30) calendar days after receipt of this Notice to object to the Proposed Transfer described herein. If the Holding Company Debtors file an objection, such Proposed Transfer will not be effective unless approved by a final and nonappealable order of the Court. If the holding Company Debtors do not object within such thirty (30) day period, then after expiration of such period the Proposed Transfer may proceed solely as set forth in the Notice.

The undersigned Prospective Acquirer understands that any further transactions that may result in [name of prospective acquirer] purchasing, acquiring or otherwise accumulating additional shares of Equity Securities (or an option with respect thereto) will each require an additional notice filed with the Court to be served in the same manner as this Notice.

Chicago, Illinois

Dated: __________, 2002 Respectfully submitted,

[Name of Acquirer/Seller] [Address] [Telephone and facsimile]

Exhibit 3 IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

)
Conseco, Inc., et al.,[1e] )
)Case No. 02 B____________
Debtors. )(Jointly Administered))
)Honorable ____________)
)
Docket under 02 B_________

NOTICE OF PROPOSED DISPOSITION
PLEASE TAKE NOTICE THAT [name of prospective seller] hereby provides notice of its intention to sell, trade or otherwise transfer one or more shares of the equity securities (the “Equity Securities”) of [name ofdebtor] or an option with respect thereto (the “Proposed Transfer”).

PLEASE TAKE FURTHER NOTICE THAT, if applicable, on [prior date(s)],[name of prospective seller] files a Notice of Status as a Substantial Equityholder[2d] with the Court and served copies thereof on the Holding Company Debtors and the Holding Company Debtors’ counsel.

PLEASE TAKE FURTHER NOTICE THAT [name of prospective seller] currently beneficially owns _____________ shares of Equity Securities ([type ofequity security])of [name of debtor].

PLEASE TAKE FURTHER NOTICE THAT, pursuant to the Proposed Transfer,[name of prospective seller] proposes to sell, trade or otherwise transfer ____ shares of Equity Securities or an option with respect to ____________ shares of Equity Securities. If the Proposed Transfer is permitted to occur, [name of prospective seller] will beneficially own _____________ shares of Equity Securities after the transfer.

PLEASE TAKE FURTHER NOTICE that the taxpayer identification number of[name of prospective seller] is _______________________

PLEASE TAKE FURTHER NOTICE that, under penalties of perjury, [name ofprospective seller] hereby declares that it has examined this Notice and accompanying attachments (if any), and, to the best of its knowledge and belief, this Notice and any attachments which purport to be part of this Notice are true, correct and complete.

PLEASE TAKE FURTHER NOTICE that, pursuant to that certain Order (A) Limiting Certain Transfers of, and Trading in Equity Interests of the Holding Company Debtors and (B) Approving Related Notification Procedures, this Notice is being (A) filed with the United States Bankruptcy Court for the Northern District of Illinois, and (B) served upon (i) the Holding Company Debtors and (ii) Kirkland Ellis, counsel to the Holding Company Debtors, 200 E. Randolph Drive, Chicago, IL 60601, Attn. Maria Yapan.

PLEASE TAKE FURTHER NOTICE that the Holding Company Debtors have thirty (30) calendar days after receipt of this Notice to object to the Proposed Transfer described herein. If the holding Company Debtors file an objection, such Proposed Transfer will not be effective unless approved by a final and nonappealable order of the Court. If the Holding Company Debtors do not object within such thirty (30) day period, then after expiration of such period the Proposed Transfer may proceed solely as set forth in the Notice.

The undersigned Prospective Seller understands that any further transactions that may result in [name of prospective seller] selling, trading or otherwise transferring shares of Equity Securities (or an option with respect thereto) will each require an additional notice filed with the Court to be served in the same manner as this Notice.

Chicago, Illinois

Dated: ___________, 2002 Respectfully submitted,

[Name of Acquirer/Seller] [Address] [Telephone and facsimile]

Exhibit 4 IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

Conseco, Inc., et al.,[1f] ))
Case No. 02 B___________
Debtors. ) (Jointly Administered))
Honorable ___________)
)
Docket under 02B___________

NOTICE OF (A) NOTIFICATION PROCEDURES APPLICABLE TO SUBSTANTIAL HOLDERS OF EQUITY SECURITIES AND (B) NOTIFICATION AND HEARING PROCEDURES FOR TRADING IN EQUITY INTERESTSTO ALL PERSONS OR ENTITIES WITH EQUITY INTERESTS IN THE HOLDING COMPANYDEBTORS:

PLEASE TAKE NOTICE that on [_____________________] (“Petition Date”), C onseco, Inc., CIHC, Incorporated and CTIHC Inc., Partners Health Group, Inc. (collectively, the “Holding Company Debtors”) commenced cases under chapter 11 of title 11 of the United States Code (as amended, the “Bankruptcy Code”).

PLEASE TAKE FURTHER NOTICE THAT on _________, the United States Bankruptcy Court for the Northern District of Illinois (the “Bankruptcy Court”) entered a final order approving the procedures set forth below in order to prevent the Holding Company Debtors from inadvertently violating state insurance statutes and to preserve the Holding Company Debtors’ net operating losses (“NOLs”). Any sale or other transfer of equity securitiesin the Holding Company Debtors in violation of the procedures set forthbelow shall be null and void and shall confer no rights on the transfereeunless the Holding Company Debtors’ cases are hereafter dismissed orconverted to Chapter 7.

PLEASE TAKE FURTHER NOTICE THAT, pursuant to the Order, the following procedures shall apply to holding and trading in EQUITY SECURITIES OF THE HOLDING COMPANY DEBTORS:

(A) Any person or entity who currently is or who becomes a Substantial Equityholder (as defined in paragraph (E) below) shall file with the Court and serve upon the Holding Company Debtors and counsel to the holding Company Debtors a notice of such status in the form attached hereto as Exhibit 1,
on or before the later of (a) forty (40) days after the effective date of the notice of entry of the Order or (b) ten (10) days after becoming a Substantial Equityholder.
(B) Any person, entity or Substantial Equityholder who intends to effect any acquisition of equity securities (including options to acquire stock, as defined below) that would result in (a) an increase in the amount of equity securities beneficially owned by a Substantial Equityholder or (b) a person or entity becoming a Substantial Equityholder (an “Equity Transferee”) shall, prior to effecting such an acquisition (the “Proposed Acquisition”), file with the Court and serve on the Holding Company Debtors and counsel to the Holding Company Debtors advance written notice of the Proposed Acquisition in the form attached hereto as Exhibit 2.[2e]
(C) Any person, entity or Substantial Equityholder who intends to effect any disposition of equity securities (including options to acquire stock, as defined below) that would result in (a) a decrease in the amount of equity securities beneficially owned by a Substantial Equityholder or (h) a person or entity ceasing to be a Substantial Equityholder (an “Equity Transferor”) shall, prior to effecting such a disposition (the “Proposed Disposition”), file with the Court and serve on the Holding Company Debtors and counsel to the Holding Company Debtors advance written notice of the Proposed Disposition in the Form attached hereto as Exhibit 3.[3b]
(D) The Holding Company Debtors shall have thirty (30) calendar days after receipt of a Notice of Proposed Transfer[4b] to file with the Court and serve on the Equity Transferor or Equity Transferee an objection to the Proposed Acquisition or Disposition on the grounds that the Proposed Acquisition or Disposition may adversely affect the Holding Company Debtors’ ability to utilize their NOLs or cause violations of various state insurance statutes. If the Holding Company Debtors file an objection, the Proposed Acquisition or Disposition will not be effective unless approved by a final and nonappealable order of this Court. If the Holding Company Debtors do not object within such thirty (30) day period, then the Proposed Acquisition or Disposition may proceed solely as set forth in the Notice of Proposed Transfer. Further transactions within the scope of this paragraph must be the subject of additional notices as set forth herein, each such transaction having an additional thirty day waiting period.
(E) For purposes of this Notice: (a) a “Substantial Equityholder” is any person or entity that beneficially owns at least 5% of the Holding Company Debtors’ equity securities; (b) “beneficial ownership” of equity securities includes direct and indirect ownership (e.g., a holding company would be considered to beneficially own all shares owned or acquired by its subsidiaries), ownership by such holder’s family members and persons acting in concert with such holder to make a coordinated acquisition of stock and ownership of shares which such holder has an option to acquire and (e) an “option” to acquire stock includes any contingent purchase, warrant, convertible debt, put, stock subject to risk of forfeiture, contract to acquire stock or similar interest, regardless of whether it is contingent or otherwise not currently exercisable.

PLEASE TAKE FURTHER NOTICE that, upon the request of any person, Kirkland Ellis, counsel to the Holding Company Debtors, 200 E. Randolph Drive, Chicago, IL 60601, Attn. Maria Yapan, will provide a form of each of the required notices described above.

ANY PROHIBITED PURCHASE, SALE, TRADE OR OTHER TRANSFER OF EQUITY SECURITIES IN THE HOLDING COMPANY DEBTORS IN VIOLATION OF THE ORDER WILL BE NULL AND VOID AND MAY RESULT IN THE IMPOSITION OF SANCTIONS BY THE BANKRUPTCY COURT.

PLEASE TAKE FURTHER NOTICE that the requirements set forth in this Notice are in addition to the requirements of applicable securities, corporate and other laws, and do not excuse compliance therewith.

Chicago, Illinois Respectfully submitted,

Dated: December ___, 2002 KIRKLAND ELLIS

_______________________________________________ James H.M. Sprayregen, P.C. (ARDC. No. 6190206) Richard L. Wynne (to be admitted pro hac vice) Anne Marrs Huber (ARDC No, 6226828) Anup Sathy (ARDC No. 6230191) Stephanie D. Simon (ARDC No. 6257197) Kirkland Ellis 200 East Randolph Drive Chicago, IL 60601-6636 (312) 861-2000 (telephone) (312) 861-2200 (facsimile)
[Proposed] Counsel for the Debtors and Debtors in Possession