<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant / /
Filed by a Party other than the Registrant /X/
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
CONSECO, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
BOWNE OF DETROIT
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
[CONSECO LOGO]
11825 NORTH PENNSYLVANIA STREET
CARMEL, INDIANA 46032
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 30, 1995
NOTICE IS HEREBY GIVEN THAT the Annual Meeting of the shareholders of
Conseco, Inc. (the "Company"), will be held at the Des Moines Marriott, 700
Grand Avenue, Des Moines, Iowa, at 10:00 a.m., local time, on May 30, 1995, for
the following purposes:
1. To elect three directors for terms ending in 1998;
2. To approve the Conseco, Inc. Amended and Restated Deferred
Compensation Plan; and
3. To consider such other matters as may properly come before the
meeting.
Holders of record of outstanding shares of the common stock of the Company
as of the close of business on April 19, 1995, are entitled to notice of and to
vote at the meeting.
Whether or not you plan to be present at the meeting, please complete, sign
and return the enclosed form of proxy. No postage is required to return the form
of proxy in the enclosed envelope. The proxies of shareholders who attend the
meeting in person may be withdrawn and such shareholders may vote personally at
the meeting.
By Order of The Board of Directors
[SIG]
Lawrence W. Inlow, Secretary
April 26, 1995
Carmel, Indiana
<PAGE> 3
[CONSECO LOGO]
11825 NORTH PENNSYLVANIA STREET
CARMEL, INDIANA 46032
- --------------------------------------------------------------------------------
PROXY STATEMENT
- --------------------------------------------------------------------------------
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Conseco, Inc. ("Conseco" or the "Company"),
for the Annual Meeting of Shareholders (the "Annual Meeting") to be held at the
Des Moines Marriott, 700 Grand Avenue, Des Moines, Iowa, on May 30, 1995, at
10:00 a.m., local time. It is expected that this Proxy Statement will be mailed
to the shareholders on or about April 26, 1995. Proxies are being solicited
principally by mail. Georgeson and Company, Inc. has been engaged to solicit
proxies and provide certain investor analysis services for the Company for a fee
of $8,000 plus reasonable out-of-pocket expenses. Directors, officers and
regular employees of Conseco may also solicit proxies personally by telephone,
telegraph or special letter. All expenses incident to the preparation and
mailing to the shareholders of the Notice, Proxy Statement and form of proxy are
to be paid by Conseco.
If the enclosed form of proxy is properly executed and returned in time for
the meeting, the named proxyholders will vote the shares represented by the
proxy in accordance with the instructions marked on the proxy. Proxies returned
unmarked will be voted in favor of the proposals referred to in the Notice of
Annual Meeting of Shareholders. A shareholder may revoke a proxy at any time
before it is exercised by mailing or delivering to Conseco a written notice of
revocation or a later-dated proxy, or by attending the meeting and voting in
person.
Only holders of record of Conseco's common stock ("Common Stock") as of the
close of business on April 19, 1995, will be entitled to vote at the meeting. On
such record date, Conseco had 20,207,979 shares of Common Stock outstanding and
entitled to vote. Each share will be entitled to one vote with respect to each
matter submitted to a vote at the meeting. The presence in person or by proxy of
the holders of a majority of the outstanding shares entitled to vote at the
Annual Meeting is necessary to constitute a quorum.
The election of Directors will be determined by the plurality of the votes
cast by the holders of shares present in person or by proxy and entitled to
vote. Consequently, the three nominees who receive the greatest number of votes
cast for election as Directors will be elected as Directors of the Company.
Shares present which are properly withheld as to voting with respect to any one
or more nominees, and shares present with respect to which a broker indicates
that it does not have authority to vote ("broker non-votes"), will not be
counted. Action on any matter, other than the election of directors, is approved
if the votes cast in favor of the action exceed the votes cast against it.
Abstention from voting or broker non-votes will have no effect since such
actions do not represent votes cast by shareholders. However, solely for
purposes of Section 16 of the Securities Exchange Act of 1934, abstentions will
be counted as votes cast against the Conseco, Inc. Amended and Restated Deferred
Compensation Plan.
1
<PAGE> 4
SECURITIES OWNERSHIP
OWNERSHIP OF COMMON STOCK
The following table sets forth information as of April 19, 1995, regarding
ownership of the Common Stock (excluding shares held by subsidiaries not
entitled to vote) by the only persons known to own beneficially more than five
percent thereof, by the Directors individually, by the executive officers named
in the Summary Compensation Table on page 11 individually, and by all executive
officers and Directors as a group. Where any footnote indicates that shares
included in the table are owned by, or jointly with, family members or by an
affiliate of such person, the executive officer or Director may be deemed to
exercise shared voting and investment power with respect to those shares, unless
otherwise indicated. The amounts shown below for the Directors and executive
officers do not include (i) stock options which are not exercisable within 60
days of April 19, 1995 providing for the right to purchase an aggregate of
3,769,875 shares of Common Stock and (ii) an aggregate of 660,485 units (each
representing one share of Common Stock) under the Amended and Restated Stock
Bonus and Deferred Compensation Program (the "Deferred Compensation Program")
and the Conseco, Inc. 1994 Stock and Incentive Plan (the "Stock Plan"). See
footnote (2) to the Summary Compensation Table and EXECUTIVE COMPENSATION,
RELATED PARTY TRANSACTIONS AND OTHER INFORMATION -- Compensation of Directors.
The Company's executive officers and Directors do not own any shares of any
other class of equity securities of the Company.
<TABLE>
<CAPTION>
SHARES OWNED AND
NATURE OF OWNERSHIP
------------------------
NAME AND ADDRESS(1) NUMBER PERCENT
- --------------------------------------------------------------------- ---------- -------
<S> <C> <C>
Five-Percent Owners:
Alex. Brown Investment Management.................................. 3,903,770(2) 19.3%
135 East Baltimore Street
Baltimore, Maryland 21202
Directors and Executive Officers:
Michael G. Browning................................................ 131,780(3) *
Ngaire E. Cuneo.................................................... 10,775(4) *
Rollin M. Dick..................................................... 490,276(5) 2.4
Louis P. Ferrero................................................... 1,000(6) *
Donald F. Gongaware................................................ 546,235(7) 2.7
M. Phil Hathaway................................................... 21,298(8) *
Stephen C. Hilbert................................................. 832,930(9) 4.1
Lawrence W. Inlow.................................................. 431,636(10) 2.1
James D. Massey.................................................... 2,000(11) *
Dennis E. Murray, Sr. ............................................. 276,500(12) 1.4
All executive officers and Directors as a group (10 persons)....... 2,744,430(13) 13.2
</TABLE>
- ------------
(1) Address given for five-percent owners only.
(2) According to a Schedule 13G dated February 27, 1995, filed with the
Securities and Exchange Commission, the holder is an investment adviser
registered under Section 203 of the Investment Advisers Act of 1940. The
holder has indicated that it has sole voting power with respect to 541,428
of such shares and has the sole power to direct the disposition of all of
such shares.
(3) Of these shares, 65,690 are owned by Mr. Browning's wife, and 1,000 are
subject to options held by Mr. Browning which are exercisable within 60
days. Mr. Browning expressly disclaims beneficial ownership of all shares
owned by his wife.
(4) Of these shares, 5,625 are subject to options held by Ms. Cuneo which are
exercisable within 60 days.
(5) Of these shares, 99,180 are owned by Mr. Dick's wife, 92,831 are owned by a
charitable foundation as to which shares he shares voting and investment
power, 8,800 are owned by irrevocable trusts as to which Mr. Dick's wife
has sole voting and investment power, 65,625 are subject to options held by
Mr. Dick which are exercisable within 60 days and 135 are attributable to
Mr. Dick's account under the ConsecoSave Plan, a 401(k) savings plan. Mr.
Dick expressly disclaims beneficial ownership of all shares owned by his
wife, the charitable foundation and the trusts.
(6) All of these shares are subject to options held by Mr. Ferrero which are
exercisable within 60 days.
(7) Of these shares, 31,000 are owned by Mr. Gongaware's wife, 70,000 are owned
by a charitable trust as to which he shares voting and investment power,
18,000 are owned by irrevocable trusts as to which Mr. Gongaware's wife has
sole voting and investment power, 135,625 are subject to options held by
Mr. Gongaware which are exercisable within 60 days and 135 are attributable
to
2
<PAGE> 5
Mr. Gongaware's account under the ConsecoSave Plan. Mr. Gongaware expressly
disclaims beneficial ownership of all shares owned by his wife and the
trusts as to which she has sole voting and investment power.
(8) Of these shares, 4,000 are owned by Mr. Hathaway's wife, and 1,000 are
subject to options held by Mr. Hathaway which are exercisable within 60
days. Mr. Hathaway expressly disclaims beneficial ownership of all shares
owned by his wife.
(9) Of these shares, 205,625 are subject to options held by Mr. Hilbert which
are exercisable within 60 days.
(10) Of these shares, 185,625 are subject to options held by Mr. Inlow which are
exercisable within 60 days and 135 are attributable to Mr. Inlow's account
under the ConsecoSave Plan.
(11) Of these shares, 1,000 are subject to options held by Mr. Massey which are
exercisable within 60 days.
(12) Of these shares, 152,125 are owned by retirement plan trusts as to which
Mr. Murray shares voting and investment power, and 1,000 are subject to
options held by Mr. Murray which are exercisable within 60 days.
(13) Includes 603,125 shares subject to outstanding stock options which are
exercisable within 60 days.
* Less than 1%
OWNERSHIP OF BANKERS LIFE HOLDING CORPORATION COMMON STOCK
The following table sets forth information as of April 19, 1995 regarding
ownership of the common stock of Bankers Life Holding Corporation ("Bankers
Common Stock"), a majority owned subsidiary of Conseco, by the Directors of
Conseco individually, by the executive officers named in the Summary
Compensation Table on page 11 individually, and by all executive officers and
Directors as a group.
<TABLE>
<CAPTION>
SHARES OF BANKERS
COMMON STOCK OWNED
AND NATURE OF
OWNERSHIP
---------------------
NUMBER PERCENT
------- -------
<S> <C> <C>
Michael G. Browning..................................................... 25,000(1) *
Ngaire E. Cuneo......................................................... 4,000 *
Rollin M. Dick.......................................................... 28,500(2) *
Louis P. Ferrero........................................................ -- --
Donald F. Gongaware..................................................... 10,000 *
M. Phil Hathaway........................................................ -- --
Stephen C. Hilbert...................................................... 200,000 *
Lawrence W. Inlow....................................................... -- --
James D. Massey......................................................... -- --
Dennis E. Murray, Sr. .................................................. 1,500(3) *
All executive officers and Directors as a group (10 persons)............ 269,000 *
</TABLE>
- ------------
(1) Of these shares, 9,000 are owned by Mr. Browning's wife. Mr. Browning
expressly disclaims beneficial ownership of all shares owned by his wife.
(2) These shares are owned by Mr. Dick's wife. Mr. Dick expressly disclaims
ownership of such shares.
(3) This amount includes 1,000 shares owned by Mr. Murray's wife. Mr. Murray
expressly disclaims beneficial ownership of all shares owned by his wife.
* Less than 1%.
3
<PAGE> 6
BOARD MEETINGS AND COMMITTEES
During 1994, the Board of Directors held seven meetings. All Directors
attended at least 75% of the aggregate meetings of the Board and the committees
on which they served.
The Board has a Compensation Committee which held two meetings during 1994.
The Compensation Committee reviews and approves compensation plans in which the
Company's officers and directors are entitled to participate, the terms of
employment contracts with the Company's executive officers and the annual cash
bonuses paid to the Company's executive vice presidents. The Compensation
Committee also administers the Company's stock option and other incentive plans.
The Board also has an Audit Committee which held three meetings in 1994. The
Audit Committee oversees the Company's accounting and financial reporting
activities, including meeting with the Company's independent auditors and its
Chief Financial Officer to review the scope, cost and results of the independent
audit and to review internal accounting controls, policies and procedures. The
Board selects the independent auditors, upon recommendation of the Audit
Committee. The members of these committees are identified in the table below.
See ELECTION OF DIRECTORS below.
The Board of Directors does not have a nominating committee. The Board
reviews and approves all nominees for Directors and will consider candidates
whose names are submitted in writing by shareholders. See SHAREHOLDER PROPOSALS
below.
COMPLIANCE WITH SECTION 16(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 (the "1934 Act")
requires the Company's Directors and executive officers, and each person who is
the beneficial owner of more than ten percent of the Company's outstanding
equity securities, to file with the Securities and Exchange Commission ("SEC")
and the New York Stock Exchange ("NYSE") initial reports of ownership and
reports of changes in ownership of common stock and other equity securities of
the Company. Specific due dates for these reports have been established by the
SEC, and the Company is required to disclose in this Proxy Statement any failure
by such persons to file such reports for fiscal year 1994 by the prescribed
dates. Officers, Directors and greater than ten percent beneficial owners are
required by SEC regulations to furnish the Company with copies of all reports
filed with the SEC pursuant to Section 16(a) of the 1934 Act. To the Company's
knowledge, based solely on review of the copies of reports furnished to the
Company and written representations that no other reports were required, all
filings required pursuant to Section 16(a) of the 1934 Act applicable to the
Company's officers, Directors and greater than ten percent beneficial owners
were made for the year ended December 31, 1994, except for (i) the filing of two
late reports by Arthur M. Gerber (after his retirement from the Board of
Directors) relating to the sale in two separate transactions of an aggregate of
800 shares of Common Stock, and (ii) the filing of two late reports by Walter T.
Kirkbride (after his resignation as an officer of the Company) relating to a
total of four transactions involving the grant, exercise and termination of
various stock options and the termination of stock units which had not vested at
the date of his resignation.
4
<PAGE> 7
ELECTION OF DIRECTORS
The Board of Directors consists of nine members, divided into three classes
containing three members each. The three Directors elected at the 1995 annual
meeting will be elected to serve a term of three years expiring in 1998 or will
serve until their successors are duly elected and qualified. One of the current
Directors, Michael G. Browning, whose term expires at the 1995 annual meeting,
is retiring as a Director and is not a nominee for re-election. Another current
Director, Ngaire E. Cuneo, who was elected last year to a two-year term, has
consented to be a nominee again this year to replace Mr. Browning in the class
of Directors whose term will expire in 1998. This allows the Company additional
time to find a qualified candidate to join the class of Directors to be elected
by the shareholders at the 1996 annual meeting for a three-year term expiring in
1999.
Unless authority is specifically withheld, the shares represented by the
enclosed form of proxy will be voted in favor of all nominees. Should any of the
nominees become unable to accept election, the persons named in the proxy will
exercise their voting power in favor of such person or persons as the management
of Conseco may recommend. All of the nominees have consented to being named in
this Proxy Statement and to serve if elected. The Board of Directors knows of no
reason why any of its nominees would be unable to accept election.
THE BOARD RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF EACH OF THE NOMINEES
FOR DIRECTOR.
The following information regarding each person nominated for election as
Director, and each person whose term will continue after the meeting, includes
such person's age, positions with Conseco, principal occupation and business
experience for the last five years, and tenure as a Director of Conseco:
<TABLE>
<CAPTION>
DIRECTOR POSITIONS WITH CONSECO, PRINCIPAL TERM
NAME AND AGE SINCE OCCUPATION AND BUSINESS EXPERIENCE EXPIRING
- ----------------------------------- -------- --------------------------------------- --------
<S> <C> <C> <C>
Nominees for Election as Directors:
Stephen C. Hilbert, 49............. 1979 Since 1979, Chairman of the Board and 1998
Chief Executive Officer, and since
1988, President of Conseco. Also a
Director of CCP Insurance, Inc.,
Bankers Life Holding Corporation, The
Statesman Group, Inc. and American
Life Holding Company.
Ngaire E. Cuneo, 44................ 1994 Since 1992, Executive Vice President of 1998
Corporate Development of Conseco.
From 1986 to 1992, Senior Vice
President and Corporate Officer of
General Electric Capital Corporation.
Also a Director of Bankers Life
Holding Corporation, The Statesman
Group, Inc. and American Life Holding
Company.
M. Phil Hathaway, 65(1), (2)....... 1984 Retired. Formerly, Treasurer of Cook 1998
Group, Inc. (medical equipment,
property and casualty insurance, and
real estate development operations).
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
DIRECTOR POSITIONS WITH CONSECO, PRINCIPAL TERM
NAME AND AGE SINCE OCCUPATION AND BUSINESS EXPERIENCE EXPIRING
- ----------------------------------- -------- --------------------------------------- --------
<S> <C> <C> <C>
Directors Whose Terms of Office
Will Continue After the Meeting:
Louis P. Ferrero, 52(1), (2),
(3).............................. 1988 Chairman of the Board and Chief 1996
Executive Officer of Anacomp, Inc.
(computer-based information storage
and management).
Donald F. Gongaware, 59............ 1985 Since 1985, Executive Vice President of 1996
Conseco. Also a Director of CCP
Insurance, Inc., Bankers Life Holding
Corporation, The Statesman Group,
Inc. and American Life Holding
Company.
Rollin M. Dick, 63................. 1986 Since 1986, Executive Vice President 1997
and Chief Financial Officer of Conseco.
Also a Director of CCP Insurance,
Inc., Bankers Life Holding
Corporation, The Statesman Group,
Inc., American Life Holding Company,
General Acceptance Corporation and
Wholesale Cellular USA, Inc.
James D. Massey, 60(1), (2)........ 1994 Retired. From 1986 to June 1992 1997
President and Deputy Chief Executive
Officer of Merchants National Corp.
and Chairman, President and Chief
Executive Officer of Merchants
National Bank (banking).
Dennis E. Murray, Sr., 55(1),
(2).............................. 1994 Since 1964, partner and or principal of 1997
the Ohio law firm of Murray & Murray
Co., L.P.A. and its predecessor.
</TABLE>
- ------------
(1) Member of Compensation Committee.
(2) Member of Audit Committee.
(3) On March 7, 1991, in response to a complaint filed by the SEC in the United
States District Court in Indianapolis, Indiana, against Mr. Ferrero and
three other individuals, Mr. Ferrero, without admitting or denying the
allegations made in the complaint, consented to the entry of a judgment
permanently enjoining him from engaging in transactions, acts, practices or
courses of business which would constitute violations of Section 17(a) of
the Securities Act of 1933, as amended, or Sections 10(b) or 14(e) of the
1934 Act or Rules 10b-5 or 14e-3 thereunder, and requiring him to pay a
civil penalty of $277,750. The amount of the penalty represented alleged
profits realized and losses avoided in securities trading by the other
defendants, for whom Mr. Ferrero was allegedly a source of material
nonpublic information concerning a pending transaction involving Anacomp,
Inc. It was not alleged that Mr. Ferrero or any member of his family used
the information to profit from securities trading in any of their own
accounts.
6
<PAGE> 9
Company's long-term growth and profitability. Options have been granted annually
to the Company's officers below the EVP level, based on a formula which relates
the value of the options granted to a percentage of the recipient's annual cash
compensation. Options have been granted on a less-frequent basis to the Named
Officers as a reward for contributing to the achievement of a specific project
or transaction or exceptional performance relative to targeted profit goals, or
as an incentive to future growth and profitability.
In February 1994, the Compensation Committee approved a program to induce
the CEO and four of the EVPs, at such time, to exercise outstanding vested stock
options held by them to purchase approximately 3.6 million shares of the Common
Stock. Such program did not involve any amendments to the stock options. Because
the options were exercised at this time, the Company was able to realize a tax
deduction to offset taxable income of the Company, including the gain resulting
from the sale in February 1994 by the Company of 60 percent of its interest in
Western National Corporation and the subsequent sale in December 1994 by the
Company of its remaining 40 percent interest in Western National Corporation.
The Company withheld shares to cover federal and state taxes owed by the
executives as a result of the exercise transaction. In order to cover a portion
of such federal and state taxes, the Company used the cash it would have
otherwise been required to use to pay taxes on the gain from the sale of the
Company's interest in Western National Corporation. The withholding of the
shares also allowed the Company to reduce the number of shares that would have
otherwise been outstanding. Net of withheld shares, the Company issued
approximately 1.8 million shares of common stock to the executives. As part of
the inducement to exercise the options, the Compensation Committee also granted
new options to the executive officers under the Stock Plan equal to the number
of shares withheld for taxes and exercise prices from this exercise program and
other exercises of options by them in 1993. These so-called "re-load" options
were designed so that the affected executives had the same percentage interest
in the Company's fully diluted shares prior to and after the early exercise of
the options and, because of the three-to-five-year vesting schedule placed on
the "re-load" options, to act as a material inducement for them to remain with
the Company.
The Named Officers were also granted options in 1994 beyond the "re-load"
options. The number of options granted to the Named Officers in 1994 was
intended to give them, in conjunction with the options already held by each of
them, a material incentive to further enhance the Company's stock price from its
level at the time of the grant, as well as a material inducement for them to
remain with the Company, in light of the three-to-five-year vesting schedule.
The number of options granted to the CEO and the EVPs is not based on a
formula such as the one which is used to determine the number of options granted
to the other officers of the Company. The Compensation Committee determined the
number of options granted to the CEO and the EVPs in February 1994 based on the
recommendation of the CEO. In deciding to adopt the CEO's recommendation, the
Compensation Committee considered the Company's performance during 1993 and
early 1994 including the achievement of record operating earnings during 1993;
the initial public offering of Western National Corporation in February 1994;
and the formation of Partnership II. The Compensation Committee considered the
significant increase in the market capitalization of Conseco that had been
realized during the period since the first grant of the options which were
exercised in February 1994. The Compensation Committee believes the options
previously granted provided appropriate incentives to the CEO and the EVPs to
make significant contributions to such increase in market value. The
Compensation Committee desired to continue such incentives.
For 1994 and future years, the CEO, EVPs and outside Directors are eligible
to receive annual stock unit awards under the Stock Plan. The total amount
awarded by the Company in any year, together with all prior stock unit awards
under the Stock Plan and all similar awards under the Deferred Compensation
Program since January 1, 1989, may not exceed the Company's consolidated total
net gains from the sale of investments since January 1, 1989. The Company's
total award for a year is allocated pro rata among the participants based on
their relative salary, fee and bonus compensation for the year. However, the
amount awarded to a participant in any year may not exceed the greater of
$15,000 or 10% of his or her salary and bonus compensation for such year, unless
the Company's earnings per share from operations for such year exceed 110% of
its earnings per share from operations for the preceding year, in which case the
amount awarded may not exceed the greater of $30,000 or 20% of the participant's
salary, fee and bonus compensation
8
<PAGE> 10
PERFORMANCE GRAPH
The Performance Graph compares the Company's cumulative total shareholder
return on its Common Stock for a five year period (December 31, 1989 to December
31, 1994) with the cumulative total return of the Standard & Poor's 500 Stock
Index and the Dow Jones Life Insurance Index. The comparison for each of the
periods assumes that $100 was invested on December 31, 1989 in each of the
Common Stock, the stocks included in the S&P 500 Index and the stocks included
in the Dow Jones Life Insurance Index.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG CONSECO, S&P 500 INDEX AND DOW JONES LIFE INSURANCE INDEX
<TABLE>
<CAPTION>
MEASUREMENT PERIOD DJ LIFE
(FISCAL YEAR COVERED) CONSECO, INC. S&P 500 INDEX INSURANCE INDEX
<S> <C> <C> <C>
1989 100 100 100
1990 105 97 85
1991 462 126 127
1992 696 136 166
1993 835 150 165
1994 655 152 148
FIVE-YEAR AVERAGE
ANNUAL TOTAL RETURN 45.6% 8.7% 8.2%
</TABLE>
10
<PAGE> 11
SUMMARY COMPENSATION TABLE
The following Summary Compensation Table sets forth the cash compensation
and certain other components of the compensation of Stephen C. Hilbert, the
Chairman of the Board, President and Chief Executive Officer of the Company, and
the other four most highly compensated executive officers of the Company in 1994
(the "Named Officers").
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
--------------------------------- -----------------------------------------------
AWARDS PAYOUTS
---------------------------------- ----------
NUMBER OF
RESTRICTED SECURITIES UNDERLYING
NAME AND PRINCIPAL STOCK OPTIONS/SARs LTIP ALL OTHER
POSITION YEAR SALARY BONUS OTHER(1) AWARDS(2) (IN SHARES)(3) PAYOUTS COMPENSATION(4)
- -------------------- ---- -------- ----------- -------- ---------- --------------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Stephen C.
Hilbert........... 1994 $250,000 $ 9,481,116 $166,649 $ 768,371 1,422,000 $ -- $ 4,134
Chairman of the
Board, 1993 250,000 14,107,372 152,103 2,244,645 250,000 -- 4,011
President and 1992 250,000 8,287,674 186,886 2,413,657 -- -- 3,684
Chief Executive
Officer
Ngaire E.
Cuneo(5).......... 1994 250,000 2,504,608 217,506 150,000 -- 752
Executive Vice
President, 1993 250,000 3,750,000 784,021 100,000 -- 38,899
Corporate
Development 1992 91,346 283,654 73,503 50,000 -- 9,091
Rollin M. Dick...... 1994 250,000 2,504,608 217,506 422,000 -- 11,057
Executive Vice
President and 1993 250,000 3,750,000 625,363 100,000 -- 12,905
Chief Financial
Officer 1992 250,000 1,750,000 565,415 -- 2,652,722 6,792
Donald F.
Gongaware......... 1994 250,000 2,504,608 217,506 382,000 -- 9,170
Executive Vice
President and 1993 250,000 3,750,000 625,363 100,000 -- 10,282
Chief Operations
Officer 1992 250,000 1,750,000 565,415 -- -- 5,010
Lawrence W. Inlow... 1994 250,000 2,504,608 217,506 322,000 -- 4,332
Executive Vice
President and 1993 250,000 3,750,000 625,363 100,000 -- 5,775
General Counsel 1992 250,000 1,450,000 480,603 -- -- 1,147
</TABLE>
- ------------
(1) Amounts for 1994, 1993 and 1992 include $116,470, $120,429 and $162,450,
respectively, which represent imputed interest on a $1.9 million
interest-free loan made to Mr. Hilbert in 1988. The other Named Officers did
not have other annual compensation for 1994, 1993 or 1992 which is required
to be listed under SEC rules concerning executive officer and director
compensation disclosure.
(2) The amounts shown for 1994 in this column represent the market value of
stock units awarded for 1994 under the Stock Plan at March 31, 1995. For the
four-year period ended December 31, 1994, the provisional awards for 1991,
1992 and 1993 were converted to units representing shares of Common Stock
based on a formula which utilized the average market prices of the Common
Stock for the applicable periods. Such average market prices resulted in
increases or decreases in the market value of the provisional awards upon
conversion to stock units at February 3, 1995. The stock units awarded at
February 3, 1995 resulting from such conversions were valued using the
closing price of a share of Common Stock on the NYSE of $47.00 at such date.
Accordingly, for the years indicated, the following positive (negative)
adjustments were made to the amounts of the provisional awards previously
disclosed for the Named Officers: Mr. Hilbert for 1991 -- $1,553,964, 1992
-- $706,122 and 1993 -- $(626,829); Ms. Cuneo for 1992 -- $(1,497) and 1993
-- $(15,979); Mr. Dick for 1991 -- $319,934, 1992 -- $165,415 and 1993 --
$(174,637); Mr. Gongaware for 1991 -- $319,934, 1992 -- $165,415 and 1993 --
$(174,637); and Mr. Inlow for 1991 -- $289,456, 1992 -- $140,603 and 1993 --
$(174,637). Such amounts for 1991 are not disclosed in the Summary
Compensation Table because the table does not include 1991 compensation
information. Dividends are paid on the stock units. The table below shows
the aggregate holdings of stock units as if outstanding on December 31,
1994, the aggregate value of such stock units as of December 31, 1994 for
each Named Officer and the number of such stock units vested (although in
each case the distribution of the Common Stock represented by such units has
been deferred at the election of the Named Officer).
<TABLE>
<CAPTION>
AGGREGATE
UNITS IN AGGREGATE
PARTICIPANT'S VALUE AT VESTED
ACCOUNT 12/31/94 UNITS
------------- ---------- ---------
<S> <C> <C> <C>
Stephen C. Hilbert...................................... 371,771.0 $16,032,624 126,204.1
Ngaire E. Cuneo......................................... 23,699.8 1,022,054 --
Rollin M. Dick.......................................... 42,375.8 1,827,456 42,375.8
Donald F. Gongaware..................................... 101,100.2 4,359,946 33,688.8
Lawrence W. Inlow....................................... 85,605.6 3,691,742 25,914.3
</TABLE>
11
<PAGE> 12
All of the stock units awarded to Mr. Gongaware will vest on December
20, 1995 upon his attainment of age 60 conditioned upon continued employment
with the Company. Stock units previously awarded to Messrs. Hilbert and
Inlow and Ms. Cuneo will vest in the next three years as follows
(conditioned upon continued employment with the Company):
<TABLE>
<CAPTION>
12/31/95 12/31/96 12/31/97
-------- -------- --------
<S> <C> <C> <C>
Stephen C. Hilbert.......................................... 72,419.4 54,765.2 51,354.4
Ngaire E. Cuneo............................................. -- -- 1,563.9
Lawrence W. Inlow........................................... 20,504.2 10,201.2 10,225.6
</TABLE>
(3) No stock appreciation rights have been granted under the Company's Stock
Option Plan or the Stock Plan.
(4) For 1994, the amounts reported in this column represent amounts paid for the
Named Officers for individual and group life insurance premiums and the
employer contribution under the ConsecoSave 401(k) Plan. The table below
shows such amounts for each Named Officer. The life insurance premiums shown
for Mr. Hilbert represent reportable income related to a split-dollar life
insurance policy.
<TABLE>
<CAPTION>
LIFE INSURANCE GROUP LIFE
PREMIUMS INSURANCE 401(K) CONTRIBUTION
----------------- -------------- -------------------
<S> <C> <C> <C>
Stephen C. Hilbert............................. $ 3,960 $174 $ --
Ngaire E. Cuneo................................ 650 102 --
Rollin M. Dick................................. 7,355 702 3,000
Donald F. Gongaware............................ 5,720 450 3,000
Lawrence W. Inlow.............................. 1,230 102 3,000
</TABLE>
(5) Ms. Cuneo joined the Company in September 1992.
EMPLOYMENT CONTRACTS AND CHANGE-IN-CONTROL ARRANGEMENTS
Mr. Hilbert is employed pursuant to an employment agreement dated January
1, 1987 which provides for an annual base salary of $250,000, an annual bonus
equal to 3% of Conseco's annual pre-tax net profits, and certain insurance and
other fringe benefits. This agreement renews annually for a five-year period,
unless either party notifies the other, in which case the agreement expires five
years from the last renewal date. In February 1988, as a reward for
extraordinary efforts in accomplishing the acquisition of Western National Life
Insurance Company in 1987, in recognition of enhanced responsibilities as a
result of such acquisition, and in consideration of his agreeing to enter into a
covenant not to compete with the Company, the Company made a $1,900,000
interest-free loan to Mr. Hilbert. See Certain Relationships and Related
Transactions.
Effective July 1, 1991, the Company entered into employment agreements with
Messrs. Dick, Gongaware and Inlow for terms ending December 31, 1996, and,
effective September 1, 1992, the Company entered into an employment agreement
with Ms. Cuneo for a term ending December 31, 1997. Each employment agreement
provides for a minimum annual salary of $250,000, annual bonuses in the
discretion of the Board of Directors, and certain insurance and other fringe
benefits.
Each of the employment agreements described above includes provisions
pursuant to which the employee may elect to receive, in the event of a
termination of the agreement following a change in control of the Company (a
"Control Termination"), a severance allowance equal to 60 months of his or her
monthly rate of salary, bonus and other benefits. For such purposes a Control
Termination includes a termination by the employee if his or her duties or
responsibilities are changed following a change in control. The employee also
may elect to have the Company purchase all Company stock and all options to
purchase Company stock, without deduction of the applicable exercise prices,
held by such person at a price per share equal to the highest market price in
the preceding six months.
As defined in the employment agreement for Mr. Hilbert, "change in control"
means a change in 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
1934 Act. A "change in control" shall be deemed to have occurred if and when:
(i) any person is or becomes a beneficial owner, directly or indirectly, of
securities of the Company representing 25% or more of the combined voting power
of the Company's then outstanding securities; or (ii) individuals who were
members of the Board of Directors of the Company immediately prior to a meeting
of the shareholders of the Company involving a contest for the election of
directors shall not constitute a majority of the Board of Directors following
such election. The employment agreements for the remaining Named Officers
contain the same "change in control" definition except no change in control
shall have occurred pursuant to: (i) a Rule 13e-3 transaction under the 1934
Act; or (ii) any person becoming, with the
12
<PAGE> 13
approval of the Board of Directors of the Company, the beneficial owner of 25%
or more but less than 50% of the combined voting power of the Company's then
outstanding securities entitled to vote with respect to the election of the
Company's Board of Directors and such person's ownership is for investment
purposes.
See the discussion under the table headed Option Grants in 1994 concerning
change in control provisions related to stock options. The stock units disclosed
in footnote (2) to the Summary Compensation Table must be paid out following a
change in control. For stock units under the Stock Plan, the definition of
change in control is the same as that disclosed below for the options granted in
1994. For stock units awarded under the Deferred Compensation Program, a change
in control will be deemed to have occurred if: (i) any "person," including a
"group" as determined in accordance with Section 13(d)(3) of the 1934 Act, is or
becomes the beneficial owner, directly or indirectly, of securities of the
Company representing 30% or more of the combined voting power of the Company's
then outstanding securities; (ii) as a result of, or in connection with, any
tender offer or exchange offer, merger or other business combination, sale of
assets or contested election, or any combination of the foregoing transactions
(a "Transaction"), the persons who were directors of the Company before the
Transaction shall cease to constitute a majority of the Board of Directors of
the Company or any successor to the Company; (iii) the Company is merged or
consolidated with another corporation and, as a result of the merger or
consolidation, less than 70% of the outstanding voting securities of the
surviving or resulting corporation shall then be owned, in the aggregate, by the
former stockholders of the Company, other than (a) affiliates within the meaning
of the 1934 Act or (b) any party to the merger or consolidation; (iv) a tender
offer or exchange offer is made and consummated for the ownership of securities
of the Company representing 30% or more of the combined voting power of the
Company's then outstanding voting securities; or (v) the Company transfers
substantially all of its assets to another corporation which is not a wholly
owned subsidiary of the Company.
STOCK OPTIONS
The following table sets forth certain information concerning the exercise
in 1994 of options to purchase Common Stock by the five Named Officers and the
unexercised options to purchase Common Stock held by such individuals at
December 31, 1994.
AGGREGATED OPTION EXERCISES IN 1994 AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS (IN SHARES) AT IN-THE-MONEY OPTIONS AT
NUMBER OF DECEMBER 31, 1994 DECEMBER 31, 1994(2)
SHARES ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------- --------------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Stephen C. Hilbert..... 1,942,000 $106,970,930 203,750 1,868,250 $ 7,375,000 $ 7,375,000
Ngaire E. Cuneo........ -- -- 3,750 296,250 -- 887,500
Rollin M. Dick......... 485,000 26,711,092 63,750 578,250 2,212,500 2,212,500
Donald F. Gongaware.... 460,000 25,303,124 133,750 538,250 5,016,875 2,212,500
Lawrence W. Inlow...... 340,000 18,558,750 183,750 478,250 7,042,500 2,212,500
</TABLE>
- ------------
(1) The value realized equals the aggregate amount of the excess of the fair
market value on the date of exercise of $59.25 (the closing sale price of
the Common Stock as reported by the NYSE for the exercise date) over the
relevant exercise prices which ranged from $2.875 to $6.25 per share, the
market value on the date the options were originally granted. The options
exercised were granted from 1987 to 1990.
(2) The value is calculated based on the aggregate amount of the excess of
$43.125 (the closing sale price of the Common Stock as reported by the NYSE
for December 31, 1994) over the relevant exercise prices.
13
<PAGE> 14
The following table sets forth certain information concerning options to
purchase Common Stock granted in 1994 to the five Named Officers.
OPTION GRANTS IN 1994
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- --------------------------------------------------------------------------------------------
% OF TOTAL
NUMBER OF OPTIONS GRANTED PER SHARE
OPTIONS TO EMPLOYEES EXERCISE EXPIRATION GRANT DATE
NAME GRANTED(1) IN 1994 PRICE(2) DATE PRESENT VALUE(3)
- ---------------------------------- --------- --------------- --------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Stephen C. Hilbert................ 1,172,000(4) 37.0% $ 59.25 2/16/04 $ 24,944,000
250,000 7.9 59.25 2/16/04 5,320,000
Ngaire E. Cuneo................... 150,000 4.7 59.25 2/16/04 3,192,000
Rollin M. Dick.................... 272,000(4) 8.6 59.25 2/16/04 5,789,000
150,000 4.7 59.25 2/16/04 3,192,000
Donald F. Gongaware............... 232,000(4) 7.4 59.25 2/16/04 4,938,000
150,000 4.7 59.25 2/16/04 3,192,000
Lawrence W. Inlow................. 172,000(4) 5.4 59.25 2/16/04 3,661,000
150,000 4.7 59.25 2/16/04 3,192,000
</TABLE>
- ------------
(1) The options reported in this table are non-qualified stock options which
vest over a five year period, with 25% of such shares becoming exercisable
on the third and fourth anniversaries of the date of grant and an
additional 50% of such shares becoming exercisable on the fifth anniversary
of the date of grant.
(2) Exercise price is the closing sale price as reported by the NYSE for the
date of grant.
(3) Valued using a modified Black-Scholes option pricing model. The exercise
price of each option is equal to the fair market value of the underlying
Common Stock on the date of grant. The assumptions used in the model were:
51.1% volatility (which was the volatility of the Common Stock for the 36
month period preceding the date of grant); a 5.6% risk-free rate of return
(which was the yield as of the date of grant on a U.S. Strip Treasury
zero-coupon bond expiring in February 1999); a .84% dividend yield (which
was the dividend yield on the date of grant); and a five-year average life
for the options (which was the approximate average life of all previously
issued options that became vested prior to April 14, 1995). A discount of
25% was applied to the option value yielded by the model to reflect the
non-transferability and the possibility of forfeiture of employee options.
The Company's use of this model does not constitute an acknowledgement that
the resulting values are accurate or reasonable. The actual gain executives
will realize on the options will depend on the future price of the Common
Stock and cannot be accurately forecasted by application of an option
pricing model.
(4) These options were granted to restore, or "reload," options originally
granted and reported in 1987 to 1990. Under the restoration feature, options
are granted to replace shares used in satisfaction of (i) the purchase price
of shares being acquired through the exercise of a stock option or (ii) tax
withholding obligations. Because restored options are granted at an exercise
price which is equal to the market price of the Common Stock on the day of
grant, their exercise price is higher than the exercise price of the
original grant. Restored options are exercisable only after a three-to-five
year vesting period. These reload options were used, as described more fully
in the Report of the Compensation Committee on Executive Compensation, to
encourage the executives to exercise the options prior to their expiration
date. The reload options were designed so that the affected executives had
the same percentage interest in the Company's fully diluted shares, and
therefore the same opportunity for long-term benefit from an increase in
market value of the Common Stock, prior to and after the early exercise of
the options.
The options granted in 1994 were under the Stock Plan. All outstanding
options under the Stock Plan immediately vest and become exercisable or
satisfiable upon the occurrence of a Change of Control. The Compensation
Committee, in its discretion, may determine that upon the occurrence of such a
transaction, each option outstanding shall terminate within a specified number
of days after notice to the holder thereof,
14
<PAGE> 15
and such holder shall receive, with respect to each share of Common Stock
subject to such option, cash in an amount equal to the excess of: (i) the higher
of (x) the Fair Market Value (as defined in the Stock Plan) of such shares of
Common Stock immediately prior to the occurrence of such transaction or (y) the
value of the consideration to be received in such transaction for one share of
Common Stock; over (ii) the price per share, if applicable, of Common Stock set
forth in such option. If the consideration offered to shareholders of the
Company in any transaction described in this paragraph consists of anything
other than cash, the Compensation Committee shall determine the fair cash
equivalent of the portion of the consideration offered which is other than cash.
These provisions will not terminate any rights of a holder to further payments
pursuant to any agreement between the Company and such holder following a Change
of Control. A "Change of Control" of the Company is deemed to occur under the
Stock Plan if: (i) any person, becomes the beneficial owner, directly or
indirectly, of securities of the Company representing 25% or more of the
combined voting power of the Company's outstanding securities then entitled to
vote for the election of directors; or (ii) 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 where
members of the Board of Directors of the Company immediately prior to any such
transaction or event shall not constitute a majority of the Board of Directors
following such transaction or event. However, no Change of Control shall be
deemed to have occurred if and when either: (i) 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 (ii) any such person
becomes, with the approval of the Board of Directors of the Company, the
beneficial owner of securities of the Company representing 25% or more but less
that 50% 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 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 Company, nor in
connection with or as a participant in any transaction having such purpose or
effect," or words of comparable meaning and import.
In the event of a Control Termination of the employment agreement of a
Named Officer (see Employment Contracts and Change-in-Control Arrangements) each
Named Officer may elect, within sixty (60) days after such Control Termination,
to receive a lump sum payment from the Company in return for surrender by the
Named Officer of all or any portion of the options then outstanding held by the
Named Officer to purchase shares of Common Stock ("Unexercised Options").
Unexercised Options include all outstanding options whether or not then
exercisable. For each Unexercised Option to purchase one share of common stock,
the Company must pay to the Named Officer an amount equal to the highest per
share fair market value of the Common Stock on any day during the period
beginning six (6) months prior to the date of the Named Officer's election
pursuant to his or her employment agreement. To compensate the Named Officer for
loss of the potential future speculative value of the Unexercised Options, no
deduction may be made for the exercise price per share for each Unexercised
Option from the amount to be received by the Named Officer.
COMPENSATION OF DIRECTORS
Directors who are not also employees of Conseco are entitled to receive an
annual fee of $25,000, a fee of $500 for each Board or committee meeting they
attend, and an annual fee of $3,000 for serving as chairman of a Board
committee. For 1993 and prior years, the Directors were eligible to participate
in and receive annual awards of up to $30,000 under the Deferred Compensation
Program. Beginning in 1994, the Directors were eligible to participate in and
receive similar annual awards under the Stock Plan and received under such plan
options to purchase 5,000 shares of Common Stock on the date of the 1994 annual
meeting of shareholders at a price equal to the market price of the Common Stock
on the date of grant. Additional options to purchase 5,000 shares of Common
Stock will be granted on the date of each annual meeting. Awards under the
Deferred Compensation Program for 1991, 1992 and 1993 were converted to units
representing shares of Common Stock based on a formula which utilizes the
average market prices of the Common Stock for the applicable periods. Based upon
such conversion Messrs. Browning, Ferrero and Hathaway received stock units of
3,275.3, 3,187.3 and 3,018.3, respectively, having market values of $153,939,
$149,803 and $141,860,
15
<PAGE> 16
respectively, on the date of grant, February 3, 1995. Additionally, five
separate awards of 297 stock units under the Stock Plan for services rendered in
1994 were made to Messrs. Browning, Ferrero, Hathaway, Massey and Murray each
having a market value of $11,843 based upon the March 31, 1995 (the date of
award) closing price of the Common Stock on the NYSE ($39.875). All such stock
unit awards vest (assuming the Director continues in office) upon the earlier of
(i) the Director attaining the age of 60; (ii) the total and permanent
disability of the Director; (iii) the death of the Director; (iv) the occurrence
of a Change of Control (see the definition at page 15 applicable to the Stock
Plan); or (v) the fifth anniversary of the end of the fiscal year for which the
award was made.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
The current members of the Compensation Committee are Messrs. Browning,
Ferrero, Hathaway, Massey and Murray. Messrs. Browning, Ferrero and Hathaway
served on the Compensation Committee throughout 1994 and Messrs. Massey and
Murray were appointed to the Compensation Committee in June 1994 after their
election to the Board. Arthur M. Gerber, a retired director of the Company,
served on the Compensation Committee until his retirement on March 31, 1994. Mr.
Browning served as the Chairman of the Compensation Committee.
In January 1994, Messrs. Browning, Ferrero and Murray made personal
commitments to invest in Conseco Capital Partners II, L.P. ("Partnership II"),
the Delaware limited partnership organized by the Company as its second
acquisition fund to invest in privately-negotiated acquisitions of annuity, life
and accident and health insurance companies. All of the Named Officers also made
personal commitments to invest in Partnership II. See Certain Relationships and
Related Transactions.
Mr. Browning is the President and sole stockholder of Browning Investments,
Inc. and Carmel Drive Realty, Inc., and he is the majority stockholder of
Browning Construction, Inc. From October 1990 through December 30, 1994, Mr.
Browning was President of Browning Real Estate, Inc. Browning Real Estate, Inc.
is the general partner of Browning Real Estate Partnership, L.P. ("BRP"). BRP
is, and Mr. Browning was formerly, the general partner of Meridian Mile
Associates, L.P. Mr. Browning is the general partner of Pierson Street
Associates, L.P. ("PSA").
Bankers National Life Insurance Company ("Bankers National"), a wholly
owned subsidiary of the Company, is the successor by merger to Lincoln Income
Life Insurance Company ("Lincoln Income"), which also was a wholly owned
subsidiary of the Company prior to December 31, 1992, the effective date of the
merger.
On September 9, 1988, Lincoln Income made a loan in the amount of
$9,000,000 to PSA, an Indiana limited partnership which owns two office
buildings located in downtown Indianapolis, Indiana (the "PSA Loan"). The PSA
Loan was repayable in nine equal annual installments of $1,000,000 each,
together with accrued interest payable semiannually on the unpaid balance at the
rate of 1% over the prime rate, adjusted daily, of NBD Bank, N.A. (formerly INB
National Bank) ("NBD Prime"). The entire balance of unpaid principal and
interest was due August 1, 1997. The PSA Loan was secured by the pledge of Mr.
Browning's 42% economic interest in PSA as its general partner and by his
personal unconditional guaranty.
On August 31, 1989, Lincoln Income accepted the personal promissory note of
Mr. Browning in the principal amount of $8,000,000 (the "Browning Note") as
payment in full of the $8,000,000 balance of the PSA Loan. The Browning Note,
with interest at 1% per annum over NBD Prime, adjusted daily, was due and
payable in full on December 29, 1989. Effective January 1, 1990, Lincoln Income
accepted a second promissory note of Mr. Browning in the principal amount of
$8,000,000 (the "Amended Browning Note") in return for cancellation of the
Browning Note. The principal of the Amended Browning Note is payable in eight
equal annual installments due June 30 of each year commencing in 1990, and
accrued interest of 1% per annum over NBD Prime, adjusted daily, is payable
semiannually. Payment of the Amended Browning Note was secured by a pledge of
securities owned by Mr. Browning having an estimated value of more than
$9,500,000. Since January 1, 1993, Mr. Browning has made principal payments of
$6,000,000 on the Amended Browning Note and Bankers National has released a
portion of the collateral held as security. The Amended Browning Note was
purchased by Conseco from Bankers National in January 1993 for an amount
16
<PAGE> 17
equal to the outstanding principal balance plus accrued interest. As of April 1,
1995, the remaining principal balance of the Amended Browning Note was $2
million, and the securities still held as collateral had an estimated value of
approximately $2.8 million.
On January 7, 1994, Bankers National purchased for $1,065,870 a 7.3-acre
tract of land in the Meridian Technology Center adjacent to the Company's office
complex in Carmel, Indiana (the "Conseco Complex") from two unaffiliated
sellers. The purchase agreement had been negotiated by Carmel Drive Realty, Inc.
and assigned to Bankers National. Browning Investments, Inc. received a
commission of $31,976 from the seller in connection with such purchase. On
January 7, 1994, Bankers National also purchased for $248,000 a 1.6-acre tract
of land, which is adjacent to the 7.3-acre parcel and the Conseco Complex, from
Meridian Mile Associates, L.P. Browning Investments, Inc. received a brokerage
fee of $14,880 from the seller in connection with this transaction. On January
7, 1994, Bankers National entered into a Development Agreement with Browning
Investments, Inc. pursuant to which Browning Investments, Inc. has agreed to
direct and coordinate the future development of 63 acres in the Conseco Complex,
including the two parcels described in this paragraph. Browning Investments,
Inc. received a fee of $75,000 for agreeing to provide such services.
On February 7, 1994, the Company entered into a Construction Agreement with
Browning Construction, Inc. for expansion of the Company's aircraft hangar
facilities at the Indianapolis International Airport. During 1994, the Company
paid $1,964,148 to Browning Construction, Inc. under that agreement.
Bankers National paid $11,913 to Browning Construction, Inc. in 1994 for
building repairs and $29,119 for zoning and development activities for the
Conseco Complex. On September 30, 1994, Bankers National entered into a
Construction Agreement with Browning Construction, Inc. for construction
activities on the Conseco Complex. Bankers National paid $1,535,700 to Browning
Construction, Inc. through April 3, 1995 pursuant to such contract.
The Company paid $256,955 to Anacomp, Inc. in 1994 for microfiche and
related supplies. Mr. Ferrero, a Director of the Company and a member of the
Compensation Committee, is the Chairman of the Board and Chief Executive Officer
of Anacomp, Inc.
Conseco believes that all of the foregoing agreements and transactions are
on terms at least as favorable to Conseco as would have been available from
nonaffiliated persons. The Company's policy is that all material contracts
between the Company and any of its officers, directors or principal
shareholders, or their affiliates, are approved by a majority of the independent
and disinterested directors.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In February 1994, as part of its ongoing stock repurchase program, the
Company purchased from the marital estate of Mr. Hilbert and his ex-wife 683,545
shares of Common Stock for a purchase price of $40,500,000, or $59.25 per share.
The price paid equalled the closing price for the common stock on the date of
purchase as reported on the NYSE. The Compensation Committee authorized the
purchase to permit the liquidation of a portion of the stock holdings of the
marital estate, as part of the settlement of the Hilberts' divorce proceeding,
without adversely affecting the market for the Common Stock.
In January 1994, the Named Officers and three of the Company's current
independent directors (Messrs. Browning, Ferrero and Murray) made personal
commitments to invest in Partnership II. Organization of Partnership II was
completed in February 1994 with total capital commitments of $623.8 million from
investors. The Company itself and its corporate affiliates, at that time,
committed a total of $200 million to Partnership II. The Company believes that
the personal commitments from the Named Officers and Directors were instrumental
in helping to market Partnership II to institutional investors. The Named
Officers and Directors subscribed for Partnership II commitments in the
following amounts: Mr. Hilbert, $15 million; Mr. Murray, $5.3 million (includes
amounts of which Mr. Murray disclaims beneficial ownership); Mr. Dick, $4
million; Mr. Gongaware, $4 million; Mr. Inlow, $4 million; Mr. Browning, $2
million; Ms. Cuneo, $2 million; and Mr. Ferrero, $1 million. Pursuant to these
commitments and in connection with the acquisition of Statesman by Partnership
II on September 29, 1994, the Named Officers and Directors made capital
contributions in the following approximate amounts: Mr. Hilbert, $1.1 million;
Mr. Murray, $.4 million
17
<PAGE> 18
(including amounts of which Mr. Murray disclaims beneficial ownership); Mr.
Dick, $.3 million; Mr. Gongaware, $.3 million; Mr. Inlow, $.3 million; Mr.
Browning, $.2 million; Ms. Cuneo, $.2 million; and Mr. Ferrero, $.1 million. As
part of the financing for the Statesman acquisition, Messrs. Browning and
Ferrero and a charitable foundation of which Mr. Dick is a trustee purchased for
$183,000, $91,000 and $500,000, respectively, (i) 183, 91 and 500 shares,
respectively, of Statesman's payment-in-kind preferred stock ($1,000 liquidation
preference per share) and (ii) 14,511, 7,216 and 39,646 shares, respectively, of
common stock of Statesman.
Effective January 19, 1994, the Company's wholly owned subsidiary, CNC Real
Estate, Inc. ("CNC"), purchased from Mr. Hilbert a residential condominium unit
located in New York City for a purchase price of $6,000,000. CNC also paid real
estate transfer taxes of approximately $110,000 and other costs customarily
payable by the seller in connection with such a transaction. Mr. Hilbert had
purchased such unit in November 1993 for the same price from an unaffiliated
seller. The Company previously intended to use the condominium unit for
corporate receptions, business entertainment and overnight accommodations for
senior executives of the Company in connection with business purposes related to
its New York office, but the Company now intends to sell the condominium unit.
In February 1988, as a reward for extraordinary efforts in accomplishing
the acquisition of Western National Life Insurance Company in 1987, in
recognition of enhanced responsibilities as a result of such acquisition, and in
consideration of his agreeing to enter into a covenant not to compete with the
Company, the Company made a $1,900,000 interest-free loan to Mr. Hilbert. The
loan is evidenced by a secured promissory note which does not bear interest
prior to maturity and is payable in one installment due two years after
termination of Mr. Hilbert's employment agreement with the Company. The note
includes a covenant not to compete which continues in effect until maturity or
until the note is paid in full, if earlier. The note is secured by the pledge of
100,000 shares of Common Stock held by Mr. Hilbert.
In November 1993, the Company asked Ms. Cuneo, the Company's Executive Vice
President of Corporate Development, to work primarily out of the Company's New
York office, which required that she and her family relocate their residence
from Indiana to the New York metropolitan area. In that connection, the Company
purchased Ms. Cuneo's Indiana residence for $1,025,000, the same price paid by
her a year earlier when she joined the Company and moved to Indiana. The Company
subsequently resold the residence for net proceeds of approximately $850,000,
after deduction of sales costs and expenses.
See Compensation Committee Interlocks and Insider Participation in
Compensation Decisions for a discussion of transactions involving Mr. Browning
and purchases of services from Anacomp, Inc. of which Mr. Ferrero is the
Chairman of the Board and Chief Executive Officer.
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<PAGE> 19
APPROVAL OF THE CONSECO, INC.
AMENDED AND RESTATED DEFERRED COMPENSATION PLAN
BACKGROUND
The Board of Directors has adopted, and the shareholders are asked to
approve, the Conseco, Inc. Amended and Restated Deferred Compensation Plan (the
"Deferred Compensation Plan"). The purpose of the Deferred Compensation Plan is
to provide incentives to increase the personal financial identification of key
personnel with the long-term growth of the Company and the interest of the
Company's shareholders through the ownership and performance of the Company's
Common Stock, to enhance the Company's ability to retain key personnel and to
attract outstanding prospective employees. The Deferred Compensation Plan gives
eligible employees an opportunity to defer receipt, and therefore the
recognition as income for federal income tax purposes under current law, of a
portion of their annual compensation payable for their services as an employee
by Conseco or a subsidiary designated by the Board of Directors of Conseco.
The Omnibus Budget Reconciliation Act of 1993 ("OBRA") restricts the
ability of public companies to deduct for tax purposes compensation in excess of
$1,000,000 per year paid to its five most highly compensated officers, the
shareholders are asked to approve the material terms of the Deferred
Compensation Plan, in part, to satisfy the requirements of OBRA with respect to
the deductibility of this compensation. The material terms consist of (i) the
individuals eligible to participate in the Deferred Compensation Plan, (ii) the
business criteria on which awards under the Deferred Compensation Plan are
based, and (iii) the maximum amount of compensation permitted under the Deferred
Compensation Plan. The shareholders' approval of the Deferred Compensation Plan
includes approval of the performance formula under the Deferred Compensation
Plan including the Class in which the executive officers are placed and the
business criteria for the Company performance goals under the Deferred
Compensation Plan. Such approval is requested in connection with the exemption
from the OBRA deductibility limits.
A copy of the Deferred Compensation Plan is attached as Exhibit A hereto,
and the summary of the Deferred Compensation Plan below is qualified in its
entirety by reference to such exhibit.
ADMINISTRATION AND AMENDMENT
The Deferred Compensation Plan is administered by a committee of the Board
of Directors (the "Committee"), (i) appointed by the Board; (ii) constituted so
as to permit the Deferred Compensation Plan to comply with Rule 16b-3 of the
SEC; and (iii) constituted solely of "outside directors," within the meaning of
Section 162(m) of the Code. The Committee determines all matters involving
discretion. The Committee interprets and regulates the Deferred Compensation
Plan as deemed desirable or necessary in connection with the operation of the
Deferred Compensation Plan and to resolve questions of ambiguities of the
various provisions of the Deferred Compensation Plan. The Board may amend the
Deferred Compensation Plan if benefits accrued under the Deferred Compensation
Plan prior to the amendment are not adversely affected. Conseco shall also have
the right to terminate the Deferred Compensation Plan at any time and
immediately distribute all benefits accrued in a single lump sum payment.
ELIGIBILITY AND ELECTION TO PARTICIPATE
In order to be eligible to participate in the Deferred Compensation Plan,
an employee must have received compensation of at least an amount determined
annually by the Committee (which amount will be no less than $100,000) for the
year prior to enrollment in the Deferred Compensation Plan or be designated
eligible to participate by the Committee of the Deferred Compensation Plan.
However, all persons eligible for stock unit awards under the Stock Plan
(currently the CEO and the EVPs) will be excluded from participating in the
Deferred Compensation Plan. An eligible employee may elect to participate in the
Deferred Compensation Plan by delivering to the Company written notice of such
election prior to the beginning of a fiscal year. The notice may specify an
election to defer any whole percentage of the participant's compensation for the
calendar year. The election must be made every year, is irrevocable and may not
be changed during the year. For 1995, the Deferred Compensation Plan has
approximately 60 participants.
19
<PAGE> 20
SALARY DEFERRAL ACCOUNT
The amount of compensation deferred will be credited to a Salary Deferral
Account (as defined in the Deferred Compensation Plan) at the end of the month
in which such amount otherwise would have become payable to the employee. For
purposes of the Deferred Compensation Plan, compensation is defined as base
salary plus cash bonuses. A participant's Salary Deferral Account will be
credited monthly with interest at a rate of interest determined by the Committee
for each year.
CONSECO CONTRIBUTIONS
The Company contributions will be reflected in an Employer Contribution
Account (as defined in the Deferred Compensation Plan) for each participant. The
amount in such account shall be converted to stock units as of the last day of
the calendar year for which the contributions are made by dividing such amount
by the average price of one share of Common Stock for the calendar year. Such
average price shall be determined by averaging the closing price of the Common
Stock each day to obtain a monthly average price and averaging the monthly
average prices to obtain an annual average price. The Deferred Compensation Plan
provides for a maximum of 300,000 stock units each representing one share of
Common Stock.
Amounts will be credited to the Employer Contribution Account as of the end
of the plan year based upon various percentages of compensation for that year.
Each participant will receive a fixed contribution of the deferred compensation
not to exceed 3% of each participant's compensation for the applicable year. The
remainder of the contributions depend upon targets established by the Board and
the class a participant has been placed in by the Committee.
Each year the Committee will establish two targets, referred to as Target I
and Target II in the Deferred Compensation Plan. Upon obtaining Target I,
participants will be entitled to an additional match of up to the amount of
compensation deferred equal to a percentage of their total compensation for the
applicable year. Likewise, upon obtaining Target II, additional amounts will be
contributed by Conseco. The percentage of the compensation to be contributed
upon obtaining such targets depends upon whether a participant is in Class 1, 2
or 3. Class 1 participants will be entitled to an additional company
contribution in an amount equal to their deferrals up to 5% of their total
compensation for obtaining each of the targets. The percentages for the Class 2
and 3 participants are 2.5% and 3.75%, respectively. Additional contributions
may be made at the sole discretion of the Company.
Accordingly, each participant may be eligible for four levels of
contributions by the Company: (i) the fixed contribution; (ii) the Target I
contribution; (iii) the Target II contribution; and (iv) contributions at the
sole discretion of the Company. The participants may receive up to the following
percentage of their compensation (salary plus cash bonuses) assuming achievement
of Target I and II, no discretionary contribution, and a participant's
contributions are at least equal to the applicable performance match for his or
her class: Class 1, 13%; Class 2, 10.5%; and Class 3, 8%. Nobody is currently in
Class 1. Class 1 may include the CEO and EVPs in future years at the discretion
of the Committee.
The following table sets forth the estimated dollar amount of the Company's
fixed contributions pursuant to the Deferred Compensation Plan for 1995 for the
individuals and groups indicated assuming continuation of the current deferral
amounts throughout 1995. The amounts shown in the table and the footnote to the
table are not converted to stock units because the average market price of the
Common Stock for 1995 can not
20
<PAGE> 21
currently be determined. However, the conversion could result in awards that are
greater or smaller than the estimates shown below.
NEW PLAN BENEFITS
CONSECO, INC. AMENDED AND RESTATED DEFERRED COMPENSATION PLAN
<TABLE>
<CAPTION>
DOLLAR AMOUNT OF
NAME AND POSITION COMPANY CONTRIBUTION
----------------------------------------------------------- --------------------
<S> <C>
Stephen C. Hilbert, Chairman of the Board,
Chief Executive Officer and President.................... $ --
Ngaire E. Cuneo, Executive Vice President
of Corporate Development................................. --
Rollin M. Dick, Executive Vice President
and Chief Financial Officer.............................. --
Donald F. Gongaware, Executive Vice President
and Chief Operations Officer............................. --
Lawrence W. Inlow, Executive Vice President
and General Counsel...................................... --
All executive officers as a group.......................... --
Non-executive Director group............................... --
Non-executive officer employees as a group................. 340,000*
</TABLE>
- ---------------
* In addition to this estimated fixed contribution, the estimated amounts of the
Company's contributions for achievement of Targets I and II are both
approximately $350,000 assuming current deferrals are maintained throughout
1995.
DIVIDEND EQUIVALENCE
The units allocated to each participant's Employer Contribution Account
will not confer upon an employee any rights as a shareholder of Conseco (such as
the right to vote and the right to receive dividends). However, on each dividend
payment date, each participant will be credited in his or her Employer
Contribution Account with an amount equivalent to the dividend per share for the
applicable dividend payment times the number of units in the account. Such
amounts will be converted to units based upon the value of a share of Common
Stock on the date the cash dividend is paid.
VESTING
The participant's Salary Deferral Account shall be vested 100% at all
times. The employer contribution shall vest on the earlier of the following: (i)
the participant's death; (ii) the participant's total and permanent disability;
(iii) the participant's retirement; or (iv) the fourth anniversary of the last
day of the calendar year for which a contribution was made. The participant must
be an employee of Conseco continuously from the date when the contribution was
made until the date such contributions are fully vested. Retirement includes
early retirement (termination of employment following attainment of age
fifty-five and completion of five years of service) or normal retirement
(termination of employment following attainment of age sixty (60)).
DISTRIBUTION
The amount of a participant's Salary Deferral Account shall be distributed
to the participant in cash as soon as administratively feasible following the
earlier of the severance of a participant's employment with the employer for any
reason, including retirement, disability or death ("separation from service") or
the fourth anniversary of the last day of the plan year in which deferrals were
made. However, a participant who is an employee may elect to defer such payment
for additional four year deferral periods by making a deferral election prior to
the expiration of each four-year deferral period. One-half of the employer
contributions shall be eligible for distribution in Common Stock or in cash at
the option of Conseco at the same time or deferred pursuant to an election for
an additional four-year deferral. The remainder of a participant's vested
employer
21
<PAGE> 22
contribution shall be distributed in Common Stock or in cash at the option of
Conseco following the later of a separation of service or attainment of age 60.
At the times and in the amounts specified above, a participant will receive
a lump sum distribution unless the participant irrevocably elects equal annual
installments over a period of up to 10 years for distributions of the
participant's Salary Deferral Account following a separation from service. The
same election may be made for the distribution of the employer's contributions
that have vested. Such elections must be made prior to a separation from service
or in the case of distributions of the employer's contribution prior to
attaining age 59. Early retirement distributions will be paid in a lump sum
distribution unless the participant makes an election for payments in
installments over a period of not less than five years and not more than ten
years. Additionally, if an early retiree obtains a position with a competing
company or with a company in a competing industry prior to such participant's
attaining age 60, the participant shall forfeit that portion of his employer
contribution account which would not have been vested upon the separation from
service but for early retirement. Early retirement means the participant's
termination of employment following attaining age 55 but prior to age 60 and
completion of five years of service with Conseco.
PARTICIPATION BY NAMED OFFICERS
Named Officers of Conseco were not eligible to participate in the Deferred
Compensation Plan for 1995 and such persons will be excluded from participation
in future years if they are eligible for stock unit awards under the Stock Plan.
Currently all of the Named Officers are eligible for stock unit awards under the
Stock Plan. However, if any Named Officer in future years is a participant in
the Deferred Compensation Plan, the tax deduction for benefits paid to that
participant would be subject to Section 162(m). As noted above, under OBRA, the
allowable federal income tax deduction for compensation paid or accrued with
respect to the CEO and as many as four other officers of the Company will be
limited to no more than $1,000,000 per year. However, Section 162(m) of the Code
provides an exception to the deductibility limitation. The Deferred Compensation
Plan is intended to comply with Section 162(m) of the Code, thereby preserving
the Company's deduction for any compensation paid to its executive officers.
Section 162(m) provides that income received by the five most highly compensated
officers of a publicly-traded company in excess of $1,000,000 will not be
deductible by that company unless such income is derived from a
performance-based plan within the meaning of Section 162(m).
The stock units awarded under the Deferred Compensation Plan are intended
to comply with the performance-based exception provided for in Section 162(m).
The number of stock units awarded will be pursuant to an objective formula.
Accordingly, upon shareholder approval, the Company will be entitled to a
deduction for distributions of stock units under the Deferred Compensation Plan.
Upon approval of the Deferred Compensation Plan, shareholders are also approving
the potential classification of Named Officers in Class 1 under the Deferred
Compensation Plan. Such a classification would make Named Officers eligible for
a maximum employer contribution of 13% of their salary and cash compensation
based upon a deferral of 5% of such compensation and the attainment of Targets I
and II. The amount of compensation for each of the CEO and the EVPs is fixed at
$250,000 per year plus a performance based bonus determined by the CEO Contract,
in the case of the CEO, and, in the case of the EVPs, by each of their
employment agreements and the Bonus Plan.
Because the Committee retains the flexibility to choose Target I and Target
II prior to the beginning of each performance cycle based upon operating results
of the Company such as return on equity or sales, the Deferred Compensation Plan
must be resubmitted for shareholder approval every five years pursuant to the
regulations promulgated by the Internal Revenue Service under Section 162(m).
Additionally, the targets established by the Committee for the Named Officers
will specify that such targets preclude discretion to increase the amount of
compensation payable that would otherwise be due upon attainment of the targets.
FEDERAL TAX CONSEQUENCES
Under current law, no income will be recognized by an employee at the time
that cash or units are credited to his or her accounts. At the time of
distributions, the employee generally will be required to include
22
<PAGE> 23
as taxable ordinary income an amount equal to the amount of cash received and
the fair market value of any Common Stock received. Conseco will recognize a
deduction equal to the amount of cash and the fair market value of any Common
Stock distributed. Deferred amounts will be subject to FICA taxes at the time
such amounts would have otherwise been earned.
There can be no assurance that the current tax law in this area will remain
the same or that the Internal Revenue Service will not take a position adverse
to the Deferred Compensation Plan and the Participants.
The Deferred Compensation Plan is not subject to the provisions of the
Employee Retirement Income Security Act of 1974, as amended, and is not
qualified under Section 401(a) of the Code.
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL OF
THE CONSECO, INC. AMENDED AND RESTATED DEFERRED COMPENSATION PLAN.
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
Coopers & Lybrand served as the independent accountants to audit the
financial statements of Conseco for 1994 and have been selected by the Board of
Directors to serve as such for 1995. Representatives of Coopers & Lybrand are
expected to be present at the Annual Meeting, will have the opportunity to make
a statement if they so desire, and will be available to respond to appropriate
questions from the shareholders.
SHAREHOLDER PROPOSALS
Any proper proposal which a shareholder wishes to have included in the
Board's proxy statement and form of proxy for the 1996 Annual Meeting must be
received by Conseco by December 28, 1995.
ANNUAL REPORT
Conseco's Annual Report for 1994 is being mailed to the shareholders with
this Proxy Statement, but is not part of the proxy solicitation material.
OTHER MATTERS
Management knows of no other matters which may be presented at the Annual
Meeting. If any other matters should properly come before the meeting, the
persons named in the enclosed form of proxy will vote in accordance with their
best judgment on such matters.
By Order of the Board of Directors
[Signature]
Lawrence W. Inlow, Secretary
April 26, 1995
23
<PAGE> 24
EXHIBIT A
CONSECO, INC. AMENDED AND RESTATED DEFERRED COMPENSATION PLAN
EFFECTIVE AS OF JANUARY 1, 1995
ARTICLE I.
INTRODUCTION AND PURPOSE OF PLAN
1.1 Establishment of the Plan. Conseco, Inc., an Indiana corporation (the
"Company") hereby establishes a deferred compensation plan for certain of its
eligible Employees known as the "CONSECO, INC. DEFERRED COMPENSATION PLAN" (the
"Plan"), which Plan is effective for the Plan Year beginning January 1, 1995 and
for each Plan Year thereafter until termination of the Plan.
1.2 Purpose. The purpose of the Plan is to provide a Participant with a
retirement income based on Employer contributions and Participant salary
deferrals. The Plan is intended to provide unfunded, deferred compensation
benefits to a select group of management or highly compensated employees within
the meaning of Section 201(2) of the Employee Retirement Income Security Act of
1974, as amended.
1.3 Application of the Plan. The provisions of this Plan are applicable
only for Participants who are in the active employ of an Employer on or after
January 1, 1995.
ARTICLE II.
DEFINITIONS
Whenever used in the Plan, the following terms shall have the meanings as
set forth in this Article II.
2.1 "Administrator" means a committee consisting of the Chief Financial
Officer, Chief Operations Officer and General Counsel of the Company or such
other directors or officers of the Company who may be appointed by the
Committee.
2.2 "Beneficiary" means the person, persons, or legal entity entitled to
receive benefits under this Plan which become payable in the event of the
Participant's death, as provided in Article VIII.
2.3 "Board" means the Board of Directors of the Company.
2.4 "Code" means the Internal Revenue Code of 1986, as amended. Reference
in the Plan to any section of the Code shall be deemed to include any amendments
or successor provisions to such section and any regulations under such section.
2.5 "Committee" means a committee of the Board which shall be (i)
appointed by the Board; (ii) constituted so as to permit the Plan to comply with
Rule 16b-3; and (iii) constituted solely of "outside directors," within the
meaning of Section 162(m) of the Code and applicable interpretive authority
thereunder. No member of the Committee shall be eligible to be a Participant
under the Plan or shall have been granted or awarded equity securities pursuant
to any other plan of the Company or any of its affiliates in the preceding year
from the date of any service on such committee unless Rule 16b-3 permits
disinterested directors to participate in such plans. The Committee may exercise
any and all authority of the Administrator provided for herein and take any and
all action the Administrator is permitted to take hereunder.
2.6 "Company Stock" means the shares of common stock of the Company.
2.7 "Compensation" means the total amount of authorized base salary plus
cash bonuses earned by an Employee for personal services rendered to an Employer
for the calendar year.
2.8 "Deferral" means the annual amount of Compensation that a Participant
elects to defer pursuant to a properly executed Voluntary Salary Deferral
Agreement.
2.9 "Disability" means a Participant's total and permanent disability, as
determined in accordance with the long term disability plan applicable to the
Participant; provided, however, that in no event shall disability
A-1
<PAGE> 25
be deemed to have occurred if it results from a Participant's engagement in a
criminal activity, habitual drunkenness, addiction to narcotics, or from an
intentionally self-inflicted injury.
2.10 "Early Retirement" means the Participant's termination of employment
following attainment of age fifty-five (55) and completion of five (5) years of
service with an Employer.
2.11 "Employee" means any common law employee of an Employer.
2.12 "Employer" means the Company and such Subsidiaries of the Company as
are named as Employers by the Committee and have adopted the Plan.
2.13 "Employer Contribution Account" means an account established for
bookkeeping purposes only to reflect Employer Contributions for each Participant
pursuant to Section 5.1 of this Plan. Employer Contributions for each
Participant for each Plan Year shall be converted to Units as of the last day of
such Plan Year by dividing the total amount of Employer Contributions for the
calendar year by the average price of one share of Company Stock for the
calendar year. Such average price shall be determined by averaging the closing
price of one share of Company Stock each day to obtain a monthly average price,
and averaging the monthly average prices to obtain an annual average price. Such
Employer Contributions shall thereafter be accounted for solely in Units. In the
event the Company declares cash dividends with respect to Company Stock, the
Employer Contribution Account for each Participant shall be credited with
additional Units equal to the number determined by dividing the dollar value of
the cash dividend that would have been attributable to the number of Units in
the Employer Contribution Account for such Participant had the Units in fact
been Company Stock by the value of the Company Stock on the date the cash
dividend was paid.
2.14 "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time.
2.15 "Normal Retirement" means the Participant's termination of employment
following attainment of age sixty (60).
2.16 "Participant" means an Employee or former Employee who has been
enrolled in this Plan and who has an account under the Plan.
2.17 "Plan" means the Conseco, Inc. Deferred Compensation Plan as set
forth herein and as it may be amended from time to time.
2.18 "Plan Year" means the period from January 1 through December 31.
2.19 "Retirement" means Early Retirement or Normal Retirement.
2.20 "Rule 16b-3" means Securities and Exchange Commission Rule 16b-3
promulgated under the Exchange Act, as such may be amended from time to time,
and any successor rule, regulation or statute fulfilling the same or a similar
function.
2.21 "Salary Deferral Account" means an account established for bookkeeping
purposes only to reflect each Participant's Deferrals under this Plan. Each
Participant's Salary Deferral Account will earn a rate of return each calendar
year which is determined with reference to an index to be selected by the
Committee prior to the beginning of that year. Such interest will be credited to
each Participant's Salary Deferral Account monthly.
2.22 "Subsidiary" means any entity that is more than fifty percent (50%)
owned, directly or indirectly, by the Company.
2.23 "Units" means an amount of deferred compensation having reference to
Company Stock with one Unit referencing one share of Company Stock. The maximum
number of Units that may be allocated to the Employer Contribution Account of
all Participants under the Plan in the aggregate shall be 300,000 Units. Such
maximum number shall be adjusted as appropriate to reflect any stock dividend,
stock split, recapitalization, merger or other similar event affecting the
Company.
2.24 "Voluntary Salary Deferral Agreement" means the agreement between a
Participant and an Employer to defer receipt by the Participant of Compensation
not yet earned. Such agreement shall state the
A-2
<PAGE> 26
Deferral amount to be withheld from a Participant's pay and shall become
effective no earlier than the first day of the Plan Year following the execution
of such agreement except as otherwise designated by the Administrator.
ARTICLE III.
PARTICIPATION IN THE PLAN
3.1 Eligibility. Each Employee who received Compensation in the prior Plan
Year in excess of an amount determined prior to the beginning of each Plan Year
by the Committee, in its complete discretion, (provided, however, that such
amount shall not be less than $100,000) shall be eligible to participate in the
Plan on the first day of the Plan Year. Notwithstanding the forgoing, any
Employee designated by the Committee shall be eligible to participate in the
Plan on such date as is designated by the Committee.
3.2 Enrollment. An eligible person under Section 3.1 of the Plan may
enroll in the Plan by completing an annual Voluntary Salary Deferral Agreement
and submitting it to the Administrator. Except as specifically so designated by
the Administrator, each annual Voluntary Salary Deferral Agreement must be
submitted prior to the first day of the Plan Year to which it relates in order
to be effective for that year, and shall be irrevocable for such Plan Year, once
made.
3.3 Duration of Participation. An Employee who becomes a Participant shall
be eligible to continue to actively participate in the Plan and elect to make
Deferrals until such person's termination of employment, or until the first day
of any Plan Year following a Plan Year in which the Participant does not receive
Compensation in excess of $100,000 (or such other figure as is determined by the
Committee prior to the beginning of any Plan Year); provided, however, the
Committee may continue eligibility to participate at its discretion.
ARTICLE IV.
DEFERRAL OF COMPENSATION
4.1 Deferrals. By completing a Voluntary Salary Deferral Agreement, an
eligible Participant may defer any whole percentage of Compensation for the Plan
Year. Amounts deferred shall be allocated to the Participant's Salary Deferral
Account on the last day of each month.
4.2 Modifications to Amount Deferred. A Participant may change Deferrals
with respect to Compensation for the next Plan Year by submitting a new properly
executed Voluntary Salary Deferral Agreement to the Administrator prior to the
first day of that Plan Year.
ARTICLE V.
EMPLOYER CONTRIBUTIONS
5.1 Employer Contributions.
(a) Fixed Contribution.
The Employer shall make a matching contribution on behalf of each
Participant for the Plan Year equal to one hundred percent (100%) of the
Participant's Deferrals not in excess of three percent (3%) of the Participant's
Compensation for that year.
(b) Profit Sharing Contribution.
Prior to the first day of each Plan Year, the Committee shall establish two
performance goals (hereinafter sometimes referred to as Target I and Target II)
for that year based on the Company's targeted operating results. Once
established, the Committee, in its sole discretion, may revise such performance
goals at any time to take into account occurrences other than those occurrences
in the ordinary course of business for the year.
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<PAGE> 27
If a performance goal for a Plan Year is reached, the Employer shall make a
matching contribution on behalf of each Participant for the Plan Year as
follows:
(1) For each such Class 1 Participant, a matching contribution equal
to one hundred percent (100%) of the Participant's Deferrals not in excess
of five percent (5%) of the Participant's Compensation for that year if
Target I is reached and an additional matching contribution of one hundred
percent (100%) of the Participant's Deferrals not in excess of five percent
(5%) of the Participant's Compensation for that year if Target II is
reached.
(2) For each such Class 2 Participant, a matching contribution equal
to one hundred percent (100%) of the Participant's Deferrals not in excess
of three and three-fourths percent (3.75%) of the Participant's
Compensation for that year if Target I is reached and an additional
matching contribution of one hundred percent (100%) of the Participant's
Deferrals not in excess of three and three-fourths percent (3.75%) of the
Participant's Compensation for that year if Target II is reached.
(3) For each such Class 3 Participant, a matching contribution of one
hundred percent (100%) of the Participant's Deferrals not in excess of two
and one-half percent (2.5%) of the Participant's Compensation for that year
if Target I is reached and an additional matching contribution of one
hundred percent (100%) of the Participant's Deferrals not in excess of two
and one-half percent (2.5%) of the Participant's Compensation for that year
if Target II is reached.
Participants shall be assigned to Classes 1-3 by the Committee in its sole
discretion prior to the beginning of each Plan Year, subject to modification at
any time by the Committee in its sole discretion.
(c) Discretionary Contributions.
Notwithstanding anything herein to the contrary, the Employer shall make
additional Employer Contributions in such amounts, if any, as the Committee
shall determine in its sole discretion. Such additional Employer Contributions
shall be allocated in such manner as the Committee shall determine.
(d) Timing of Allocation of Contributions.
Employer Contributions shall be allocated to each eligible Participant's
Employer Contribution Account effective as of the last day of the Plan Year to
which the contributions relate.
ARTICLE VI.
VESTING
The value of each Employer Contribution made on behalf of a Participant
pursuant to Section 5.1 shall vest on the earlier of the following: (i) the
Participant's death, (ii) the Participant's Disability, (iii) the Participant's
Retirement, or (iv) the fourth anniversary of the last day of the Plan Year for
which that contribution was made, provided that the Participant has been an
Employee of the Employer or an affiliate of the Employer continuously from the
date when the contribution was made until that date. Each Participant's Salary
Deferral Account shall be one hundred percent (100%) vested at all times.
ARTICLE VII.
DISTRIBUTION OF BENEFITS
7.1 Commencement of Payment.
(a) Distribution of a Participant's Salary Deferral Account shall be made
in cash beginning as soon as administratively feasible following the earlier of
(i) Separation from Service, or (ii) the fourth anniversary of the last day of
the Plan Year in which the Deferrals were made unless the Participant elects an
additional four (4)-year deferral in writing prior to that date and immediately
preceding each subsequent four (4)-year anniversary of that date thereafter.
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(b) Distribution of one-half ( 1/2) of each Employer Contribution shall be
made in Company Stock and cash in lieu of fractional shares (or all in cash if
so determined by the Administrator in its complete discretion or in the event no
exemption from registration has been obtained or no registration has been made
of the Company Stock under applicable federal or any state securities laws)
beginning as soon as administratively feasible following the earlier of (i) the
later of the Participant's Separation from Service or attainment of age sixty
(60), or (ii) the fourth anniversary of the last day of the Plan Year for which
the Employer Contribution was made unless the Participant elects an additional
four (4)-year deferral in writing prior to that date and immediately preceding
each subsequent four (4)-year anniversary of that date thereafter.
(c) Distribution of the vested portion of a Participant's Employer
Contribution Account not distributed pursuant to Section 7.1(b) shall be made in
Company Stock and cash in lieu of fractional shares (or all in cash if so
determined by the Administrator in its complete discretion or in the event no
exemption from registration has been obtained or no registration has been made
of the Company Stock under applicable federal or any state securities laws)
beginning as soon as administratively feasible following the later of the
Participant's Separation from Service or attainment of age sixty (60).
(d) "Separation from Service" means the severance of a Participant's
employment with the Employer for any reason, including Retirement, Disability or
death. The non-vested portion of a Participant's Employer Contribution Account
shall be forfeited upon a Participant's Separation from Service for reasons
other than the Participant's Retirement, Disability or death.
7.2 Manner of Distributions.
(a) Distribution of a Participant's Salary Deferral Account from the Plan
shall be made in a lump sum; provided, however, that if distribution is made as
a result of a Participant's Separation from Service, the Participant may
irrevocably elect equal annual installments over a period of up to ten (10)
years in writing prior to the Participant's Separation from Service.
(b) Distribution of the vested portion of a Participant's Employer
Contribution Account shall be made in a lump sum at the times and in the amounts
specified in Section 7.1; provided, however, that if distribution is made as a
result of a Participant's Separation from Service, the Participant may
irrevocably elect equal annual installments over a period of up to ten (10)
years in writing prior to the Participant's Separation from Service or, for a
Participant whose Separation from Service occurs for reasons other than
Retirement or Disability, prior to the later of: (i) the Participant's
Separation from Service, or (ii) the Participant's fifty-ninth (59th) birthday.
However, notwithstanding anything herein to the contrary, distributions
resulting from Early Retirement shall be made in a lump sum at age sixty (60)
unless the Participant irrevocably elects equal annual installments over a
period of not less than five (5) years nor more than ten (10) years in writing
prior to the Participant's Early Retirement; provided, however, that if the
Participant shall obtain a position with a competing company or with a company
in a competing industry prior to the Participant's attainment of age sixty (60),
the Participant shall forfeit that portion of his Employer Contribution Account
which would not have been vested upon the Participant's Separation from Service
but for the Participant's Early Retirement.
7.3 Death Distributions. In the event a Participant dies prior to
distribution of his or her benefit pursuant to Section 7.2, the Participant's
Salary Deferral Account and the Participant's Employer Contribution Account
shall be distributed to the Participant's Beneficiary in a lump sum as soon as
administratively feasible following the Participant's death. Distribution of the
Participant's Salary Deferral Account shall be made in cash while the vested
portion of the Participant's Employer Contribution Account shall be distributed
in Company Stock and cash in lieu of fractional shares (or all in cash if so
determined by the Administrator in its complete discretion or in the event no
exemption from registration has been obtained or no registration has been made
of the Company Stock under applicable federal or any state securities laws) as
soon as administratively feasible.
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ARTICLE VIII.
BENEFICIARY INFORMATION
8.1 Designation. A Participant shall have the right to designate a
Beneficiary and amend or revoke such designation at any time, in writing. Such
designation, amendment or revocation shall be effective upon receipt by the
Administrator. If no Beneficiary is designated as provided above, the person,
persons or legal entity designated by the Participant to receive benefits under
the ConsecoSave Plan shall be considered the designated Beneficiary.
8.2 Failure to Designate a Beneficiary. If no designated Beneficiary
survives the Participant and benefits are payable following the Participant's
death, the Administrator shall direct that payment of benefits be made to the
person or persons in the first of the following classes of successive preference
Beneficiaries.
The Participant's:
(a) spouse,
(b) children, per stirpes,
(c) parents,
(d) brothers and sisters,
(e) estate.
ARTICLE IX.
ADMINISTRATION AND GENERAL PROVISIONS.
9.1 Administration. The Administrator shall be charged with the
administration and interpretation of the Plan but may delegate the ministerial
duties hereunder to such persons as it determines. The Administrator may adopt
such rules as may be necessary or appropriate for the proper administration of
the Plan. The decision of the Administrator in all matters involving the
interpretation and application of the Plan shall be final and shall be given the
maximum possible deference allowed by law.
9.2 Funding of the Plan. Benefits under the Plan shall be paid out of the
general assets of the Employer employing or that employed the Participant.
Benefits payable under the Plan shall be reflected on the account records of the
Employer but shall not be construed to create or require the creation of a
trust, custodial, or escrow account. No Employee or Participant shall have any
right, title, or interest whatever in or to any investment reserves, accounts,
or funds that the Employer may purchase, establish, or accumulate to aid in
providing benefits under the Plan. Nothing contained in the Plan, and no action
taken pursuant to its provisions, shall create a trust or fiduciary relationship
of any kind between the Employer and an Employee or any other person. Neither a
Participant nor survivor or beneficiary of a Participant shall acquire any
interest greater than that of an unsecured creditor of the Employer employing or
that employed the Participant.
9.3 Payment of Expenses. The expenses of administering the Plan shall be
paid by the Employer
employing or that employed the Participant.
9.4 Indemnity for Liability. The Company shall indemnify members of the
committee comprising the Administrator, and each other person acting at the
direction of the Administrator, against any and all claims, losses, damages,
expenses, including counsel fees, incurred by such persons and any liability,
including any amounts paid in settlement with the Administrator's approval,
arising from such person's action or failure to act, except when the same is
judicially determined to be attributable to the gross negligence or willful
misconduct of such person.
9.5 Incompetence. Every person receiving or claiming benefits under the
Plan shall be conclusively presumed to be mentally competent until the date on
which the Administrator receives a written notice, in a form and manner
acceptable to the Administrator, that such person is incompetent, and that a
guardian, conservator, or other person legally vested with the care of such
person's person or estate has been appointed; provided, however, that if the
Administrator shall find that any person to whom a benefit is payable under the
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<PAGE> 30
Plan is unable to care for such person's affairs because of incompetency, any
payment due (unless a prior claim therefor shall have been made by a duly
appointed legal representative) may be paid as provided in the ConsecoSave Plan.
Any such payment so made shall be a complete discharge of liability therefor
under the Plan.
9.6 Nonalienation. No benefit payable at any time under the Plan shall be
subject in any manner to alienation, sale, transfer, assignment, pledge,
attachment, garnishment, or encumbrance of any kind, and shall not be subject to
or reached by any legal or equitable process (including execution, garnishment,
attachment, pledge, or bankruptcy) in satisfaction of any debt, liability, or
obligation, prior to receipt. Any attempt to alienate, sell, transfer, assign,
pledge, or otherwise encumber any such benefit, whether presently or thereafter
payable, shall be void.
9.7 Employer-Employee Relationship. The establishment of this Plan shall
not be construed as conferring any legal or other rights upon any Employee or
any person for a continuation of employment, nor shall it interfere with the
rights of the Employer to discharge any Employee or otherwise act with relation
to the Employee. The Employer may take any action (including discharge) with
respect to any Employee or other person and may treat such person without regard
to the effect which such action or treatment might have upon such person as a
Participant of this Plan.
9.8 Tax Liability. The Employer may withhold from any payment of benefits
hereunder any taxes required to be withheld and such sum as the Employer may
reasonably estimate to be necessary to cover any taxes for which the Employer
may be liable and which may be assessed with regard to such payment except the
Employer's portion of Federal Insurance Contributions Act ("FICA") taxes.
9.9 Adjustment in Number of Units. In the event of any stock dividend of
the Company Stock or any split-up or combination of shares of the Company Stock,
appropriate adjustment shall be made by the Administrator in the number of Units
standing to the credit of each Participant in the Employer Contribution Account.
9.10 Section 16 Compliance. With respect to persons subject to Section 16
of the Exchange Act, transactions under the Plan are intended to comply with all
applicable conditions of Rule 16b-3 or its successors under the Exchange Act. To
the extent any provision of the Plan or action by the Administrator or the
Committee fails to so comply, it shall be deemed null and void, to the extent
permitted by law and deemed advisable by the Committee.
9.11 Section 162(m). It is intended that the Plan comply fully with and
meet all the requirements of Section 162(m) of the Code so that Employer
contributions and distributions of Company Stock and cash in lieu thereof shall
constitute "performance-based" compensation within the meaning of such section.
If any provision of the Plan would disqualify the Plan or would not otherwise
permit the Plan to comply with Section 162(m) as so intended, such provision
shall be construed or deemed amended to conform with Section 162(m); provided
that no such construction or amendment shall have an adverse effect on the
economic value to a Participant of any benefit previously accrued hereunder.
ARTICLE X.
AMENDMENT AND TERMINATION
10.1 Amendment and Termination. The Company reserves the right to change
or discontinue this Plan by action of the Board in its discretion; provided,
however, that in the case of any person to whom benefits under this Plan had
accrued upon termination of employment prior to such Board action, or in the
case of any Participant who would have been entitled to benefits under this Plan
had the Participant's employment ceased prior to such change or discontinuance,
the benefits such person had accrued under this Plan prior to such change or
discontinuance shall not be adversely affected thereby (unless such change is
required in order to cause the benefits under the Plan to qualify as
performance-based compensation within the meaning of
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<PAGE> 31
Section 162(m) of the Code and applicable interpretive authority thereunder);
and provided, further, that the Board may not, without approval of the
shareholders of the Company, amend the Plan:
(a) to increase the maximum number of shares which may be issued
pursuant to the Plan;
(b) to materially modify the requirements as to eligibility for
participation in the Plan or materially increase the benefits accruing to
Participants under the Plan; or
(c) to decrease any authority granted to the Administrator hereunder
in contravention of Rule 16b-3.
Notwithstanding anything herein to the contrary, nothing contained herein
shall restrict the Company's right to terminate the Plan and immediately
distribute all benefits accrued hereunder in a single lump sum payment.
IN WITNESS WHEREOF, the Company and the Employers have caused this Plan to
be signed by their respective duly authorized officers effective as of January
1, 1995.
CONSECO, INC.
By: /s/ STEPHEN C. HILBERT
Stephen C. Hilbert,
Chairman of the Board,
President and Chief
Executive Officer
BANKERS NATIONAL LIFE INSURANCE
COMPANY
By: /s/ DONALD F.
GONGAWARE
Donald F. Gongaware,
President and Chief
Operating Officer
CONSECO CAPITAL MANAGEMENT, INC.
By: /s/ MAXWELL E. BUBLITZ
Maxwell E. Bublitz,
President and Chief
Executive Officer
CONSECO RISK MANAGEMENT, INC.
By: /s/ DONALD M. COLLINS
Donald M. Collins,
President
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<PAGE> 32
CONSECO MORTGAGE CAPITAL, INC.
By: /s/ THOMAS A. MEYERS
Thomas A. Meyers, Senior
Vice President
MDS OF NEW JERSEY, INC.
By: /s/ ROBERT C. LEONARD
Robert C. Leonard,
President and Chief
Executive Officer
CBC INSURANCE AGENCY SERVICES, INC.
By: /s/ ROBERT C. LEONARD
Robert C. Leonard,
President and Chief
Executive Officer
A-9
<PAGE> 33
CONSECO, INC.
11825 NORTH PENNSYLVANIA STREET, CARMEL, IN 46832
PROXY FOR 1995 ANNUAL MEETING OF SHAREHOLDERS
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Each person signing this card on the reverse side hereby appoints as proxies
Rollin M. Dick, Donald F. Gongaware and Lawrence W. Inlow, or any of them, with
full power of substitution, to vote all shares of common stock which such
person is entitled to vote at the Annual Meeting of Shareholders of Conseco,
Inc., to be held at the Des Moines Marriott, 700 Grand Avenue, Des Moines,
Iowa, at 10:00 a.m. local time on May 30, 1995, and any adjournment thereof.
The proxies are hereby authorized to vote as follows:
1. Election of Stephen C. Hilbert, Ngaire E. Cuneo and M. Phil Hathaway as
Directors for three-year terms expiring in 1998.
[ ] FOR (except as shown on the line) [ ] WITHHOLD (as to all nominees)
(To withhold authority to vote for any single nominee, write that nominee's
name on this line):
_______________________________________________________________________________
2. Approval of the Conseco, Inc. Amended and Restated Deferred Compensation
Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
(PLEASE DATE AND SIGN ON REVERSE SIDE)
THE SHARES REPRESENTED BY THIS PROXY, UNLESS OTHERWISE SPECIFIED, SHALL BE
VOTED FOR ITEMS 1 AND 2.
Please sign below exactly as your name
appears on the label. When signing as
attorney, corporate officer or
fiduciary, please give full title as
such. The undersigned hereby
acknowledges receipt of the Notice of
the Annual Meeting and Proxy
Statement dated April 26, 1995.
Date __________________________, 1995
Signature(s) ________________________
_____________________________________
PLEASE DATE, SIGN, AND RETURN THIS PROXY PROMPTLY.
