<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
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
CONSECO, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Bowne of Chicago
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(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] 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:
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(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:(1)
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(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.:
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(3) Filing party:
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(4) Date filed:
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(1)Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE> 2
CONSECO LOGO
CONSECO, INC.
11825 NORTH PENNSYLVANIA STREET
CARMEL, INDIANA 46032
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 26, 1999
NOTICE IS HEREBY GIVEN THAT THE Annual Meeting of Shareholders of Conseco,
Inc. (the "Company"), will be held at the Conseco Conference Center, 530 College
Drive, Carmel, Indiana, at 11:00 a.m., local time, on May 26, 1999, for the
following purposes:
1. To elect four directors for terms ending in 2002; and
2. To consider such other matters as may properly come before the meeting.
Holders of record of outstanding shares of the common stock ("Common
Stock") of the Company as of the close of business on April 15, 1999, are
entitled to notice of and to vote at the meeting. Holders of Common Stock have
one vote for each share held of record.
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
JOHN J. SABL
John J. Sabl, Secretary
April 21, 1999
Carmel, Indiana
<PAGE> 3
CONSECO LOGO
CONSECO, INC.
11825 NORTH PENNSYLVANIA STREET
CARMEL, INDIANA 46032
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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
Conseco Conference Center, 530 College Drive, Carmel, Indiana on May 26, 1999,
at 11:00 a.m., local time. It is expected that this Proxy Statement will be
mailed to the shareholders on or about April 21, 1999. 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 $18,000 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 relating 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 proxy holders 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 shares of Conseco's common stock ("Common Stock")
as of the close of business on April 15, 1999, will be entitled to vote at the
meeting. On such record date, Conseco had 323,477,718 shares of Common Stock
outstanding and entitled to vote. Each share of Common Stock 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 Common Stock entitled to cast a
majority of the votes 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 four nominees who receive the greatest number of votes
cast will be elected as Directors of the Company. 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. Shares present which are properly
withheld as to voting, 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 for any purpose other than determining the presence of a quorum at
the Annual Meeting. As a result, abstentions from voting or broker non-votes
will have no effect on any matter submitted to the shareholders for a vote at
the Annual Meeting.
1
<PAGE> 4
SECURITIES OWNERSHIP
The following table sets forth information as of April 15, 1999, regarding
ownership of Common Stock (excluding shares held by subsidiaries not entitled to
vote) by the only persons known to own beneficially more than 5 percent thereof,
by the Directors individually, by the executive officers named in the Summary
Compensation Table on page 12 individually, and by all Directors and executive
officers of Conseco 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 Director or executive officer 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 15, 1999 providing for the right to purchase an aggregate of
7,627,210 shares of Common Stock; and (ii) an aggregate of 2,807,617 units (each
representing one share of Common Stock) under Conseco's Amended and Restated
Stock Bonus and Deferred Compensation Program (the "Deferred Compensation
Program") and the Conseco 1994 Stock and Incentive Plan (the "1994 Stock Plan").
See footnote (2) to the Summary Compensation Table and Executive Compensation,
Related Party Transactions and Other Information -- Compensation of Directors.
<TABLE>
<CAPTION>
SHARES OWNED AND
NATURE OF OWNERSHIP
-----------------------
TITLE OF CLASS NAME AND ADDRESS(1) NUMBER PERCENT
- -------------- ------------------- ------ -------
<S> <C> <C> <C>
5-Percent Owners:
Common Stock Oppenheimer Capital...................................... 27,218,492(2) 8.4%
Oppenheimer Tower
World Financial Center
New York, NY 10281
Common Stock Bankers Trust Corporation................................ 17,600,623(3) 5.4%
Bankers Trust Company
BT Holdings (New York), Inc.
BT Alex. Brown Incorporated
130 Liberty Street
New York, NY 10006
Alex. Brown Investment Management
One South Street
Baltimore, MD 21202
Directors and Executive Officers:
Common Stock Maxwell E. Bublitz....................................... 560,340(4) *
Common Stock Lawrence M. Coss......................................... 7,107,504(5) 2.2%
Common Stock Ngaire E. Cuneo.......................................... 2,223,140(6) *
Common Stock David R. Decatur, M.D.................................... 449,710(7) *
Common Stock Rollin M. Dick........................................... 5,118,203(8) 1.6%
Common Stock Donald F. Gongaware...................................... 3,373,748(9) 1.0%
Common Stock M. Phil Hathaway......................................... 160,793(10) *
Common Stock Stephen C. Hilbert....................................... 13,248,222(11) 4.1%
Common Stock Thomas J. Kilian......................................... 540,607(12) *
Common Stock James D. Massey.......................................... 349,000(13) *
Common Stock Dennis E. Murray, Sr..................................... 3,069,710(14) 1.0%
Common Stock John M. Mutz............................................. 36,800(15) *
Common Stock Robert S. Nickoloff...................................... 119,498(16) *
Common Stock John J. Sabl............................................. 120,076(17) *
Common Stock Directors and executive officers as a group (16 36,403,552(18) 11.0%
persons)...............................................
</TABLE>
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(1) Address given for 5-percent owners only.
2
<PAGE> 5
(2) According to a Schedule 13G dated February 9, 1999, filed with the SEC,
Oppenheimer Capital is an investment advisor registered under Section 203
of the Investment Advisors Act of 1940. The Schedule 13G indicates that it
was filed on behalf of Oppenheimer Capital, a Delaware general partnership
and/or certain investment advisory clients or discretionary accounts
relating to their collective beneficial ownership of Common Stock. The
Schedule 13G indicates that Oppenheimer Capital has the sole power to
dispose of the shares and to vote the shares under its written guidelines
established by its Management Board.
(3) According to a Schedule 13G filed with the SEC on February 16, 1999, the
entities listed had in the aggregate (as of December 31, 1998) sole voting
power with respect to 7,352,515 of such shares, sole dispositive power with
respect to 17,600,074 of such shares and shared dispositive power with
respect to 549 of such shares. The Schedule 13G indicates that BT Holdings
(New York), Inc. and Bankers Trust Company are wholly owned subsidiaries,
BT Alex. Brown Incorporated is an indirect wholly owned subsidiary, and
Alex. Brown Investment Management is an indirect 50 percent-owned affiliate
of Bankers Trust Corporation.
(4) Includes 106,585 shares subject to options which are exercisable currently
or within 60 days of April 15, 1999, 76,000 shares held by a limited
partnership of which Mr. Bublitz is the general partner and 13,680 shares
attributable to his account under the ConsecoSave Plan, a 401(k) savings
plan.
(5) Includes 2,237,659 shares subject to options which are exercisable
currently or within 60 days of April 15, 1999, 79,918 shares held by Mr.
Coss' wife, 14,663 shares held by his minor children and 73,320 shares held
by LVC Investment Company, Inc.
(6) Includes 106,000 shares which are held by trusts for the benefit of Ms.
Cuneo's children, 794,826 shares subject to options which are exercisable
currently or within 60 days of April 15, 1999, 10,000 shares subject to a
currently exercisable warrant held by her and 618 shares attributable to
her account under the ConsecoSave Plan.
(7) Includes 9,000 shares subject to options which are exercisable currently or
within 60 days of April 15, 1999, and 710 shares held by a partnership of
which Dr. Decatur is a general partner.
(8) Includes 774,386 shares owned by Mr. Dick's wife, 521,578 shares (including
20,000 subject to a currently exercisable warrant) owned by a charitable
foundation as to which shares he shares voting and investment power,
1,600,000 shares owned by limited partnerships of which Mr. Dick is the
general partner, 1,195,087 shares subject to options which are exercisable
currently or within 60 days of April 15, 1999, 317,900 shares owned by
trusts as to which Mr. Dick's wife has sole voting and investment power,
200,000 shares owned by a trust as to which Mr. Dick has sole voting and
investment power and 1,534 shares attributable to Mr. Dick's account under
the ConsecoSave Plan. Mr. Dick expressly disclaims beneficial ownership of
all shares owned by his wife, the trusts as to which she has sole voting
and investment power, and the charitable foundation.
(9) Includes 75,600 shares (including 20,000 subject to a currently exercisable
warrant) owned by a charitable foundation as to which Mr. Gongaware shares
voting and investment power, 749,425 shares owned by charitable trusts as
to which he shares voting and investment power, 131,747 shares owned by
irrevocable trusts as to which Mr. Gongaware's wife has sole voting and
investment power, 1,000 shares subject to options held by Mr. Gongaware
which are exercisable within 60 days of April 15, 1999 and 1,390 shares
attributable to Mr. Gongaware's account under the ConsecoSave Plan. Mr.
Gongaware expressly disclaims beneficial ownership of all shares owned by
the trusts as to which his wife has sole voting and investment power and
the charitable foundation.
(10) Includes 16,000 shares owned by Mr. Hathaway's wife and 45,000 shares
subject to options which are exercisable currently or within 60 days of
April 15, 1999.
(11) Includes 3,633,689 shares subject to options which are exercisable
currently or within 60 days of April 15, 1999, 2,685,922 shares owned by
trusts as to which he has voting and investment power, 60,000 shares owned
by a trust as to which Mr. Hilbert's wife has sole voting and investment
power, 975,000
3
<PAGE> 6
shares (including 20,000 subject to a currently exercisable warrant) held
by a charitable foundation as to which he shares voting and investment
power and 15 shares attributable to his account under the ConsecoSave Plan.
Mr. Hilbert expressly disclaims beneficial ownership of all shares owned by
the trust as to which his wife has sole voting and investment power and the
charitable foundation.
(12) Includes 107,376 shares subject to options which are exercisable currently
or within 60 days of April 15, 1999 and 3,310 shares attributable to Mr.
Kilian's account under the ConsecoSave Plan.
(13) Includes 45,000 shares subject to options which are exercisable currently
or within 60 days of April 15, 1999.
(14) Includes 796 shares owned by Mr. Murray's wife, 978,075 shares owned by a
limited partnership of which Mr. Murray is general partner, 1,184,000
shares owned by retirement plans as to which Mr. Murray has sole voting and
investment power, 5,914 shares owned by a charitable foundation as to which
he shares voting and investment power and 45,000 shares subject to options
which are exercisable currently or within 60 days of April 15, 1999. Mr.
Murray expressly disclaims beneficial ownership of the shares held by his
wife and the charitable foundation.
(15) Includes 3,000 shares subject to options which are exercisable currently or
within 60 days of April 15, 1999 and 1,300 shares held by Mr. Mutz's wife.
Mr. Mutz expressly disclaims beneficial ownership of the shares held by his
wife.
(16) Includes 54,990 shares subject to options which are exercisable currently.
(17) Includes 40,000 shares subject to options which are exercisable currently
and 76 shares attributable to Mr. Sabl's account under the ConsecoSave
Plan.
(18) Includes 8,897,258 shares subject to outstanding stock options and warrants
which are exercisable currently or within 60 days of April 15, 1999.
* Less than 1%.
4
<PAGE> 7
ELECTION OF DIRECTORS
The Board of Directors consists of 11 members, divided into three classes.
Each of the four Directors to be elected at the Annual Meeting has been
nominated to serve a term of three years expiring in 2002. All Directors will
serve until their successors are duly elected and qualified.
Unless authority is specifically withheld, the shares of Common Stock
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 Board of Directors 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 a
Director, and each person whose term will continue after the Annual 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:
David R. Decatur, M.D., 60............. 1995 Since 1967, a physician practicing in 2002
Indianapolis, Indiana. Since 1997,
President and Medical Director of
Decatur Medical Center (family practice
medicine).
Donald F. Gongaware, 63................ 1985 Retired. From 1985 to 1998, Executive 2002
Vice President of Conseco.
John M. Mutz, 63(1).................... 1997 President of PSI Energy, Inc. (electric 2002
utility) since 1993. From 1989 to 1993,
President of Lilly Endowment Inc.
(charitable foundation). From 1980 to
1988, Lieutenant Governor of the State
of Indiana.
Robert S. Nickoloff, 70................ 1998 Since 1996, general partner of Medical 2002
Innovation Partners (medical venture
capital). From 1986 to 1998, Chairman
of Medical Innovation Capital, Inc.
(medical venture capital). From 1993 to
present, Chairman of KMN, Inc. (medical
venture capital). Also a Director of
Integ Incorporated. Former Director of
Green Tree Financial Corporation.
Directors Whose Terms of Office will
Continue After the Meeting:
Lawrence M. Coss, 60................... 1998 Retired. Founder, Chief Executive Officer 2000
and Director of Green Tree Financial
Corporation from 1975 to 1998.
Rollin M. Dick, 67..................... 1986 Since 1986, Executive Vice President and 2000
Chief Financial Officer of Conseco.
Also a Director of Brightpoint, Inc.
</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>
James D. Massey, 64(1)(2).............. 1994 Retired. Formerly, President and Deputy 2000
Chief Executive Officer of Merchants
National Corp. and Chairman, President
and Chief Executive Officer of
Merchants National Bank (banking).
Dennis E. Murray, Sr., 59(1)(2)........ 1994 Since 1964, partner or principal of the 2000
Ohio law firm of Murray & Murray Co.,
L.P.A. and its predecessor. Also a
Certified Public Accountant.
Stephen C. Hilbert, 53................. 1979 Since 1979, Chairman of the Board and 2001
Chief Executive Officer, and since 1988
President, of Conseco. Also a Director
of Vail Resorts Inc.
Ngaire E. Cuneo, 48.................... 1994 Since 1992, Executive Vice President, 2001
Corporate Development of Conseco. Also
a Director of Duke Realty Investments,
Inc.
M. Phil Hathaway, 69(1)(2)............. 1984 Retired. Formerly, Treasurer of Cook 2001
Group, Inc. (medical equipment, property
and casualty insurance, and real estate
development operations). Also a
Certified Public Accountant.
</TABLE>
- ------------
(1) Member of Audit Committee.
(2) Member of Compensation Committee.
6
<PAGE> 9
EXECUTIVE COMPENSATION, RELATED PARTY TRANSACTIONS
AND OTHER INFORMATION
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is authorized to set
the compensation of Conseco's officers and to act with respect to the
compensation, option and other benefit plans of the Company. The Compensation
Committee seeks to align the interests of senior executive management with the
interests of shareholders by providing for a substantial portion of the
compensation paid to such officers to be tied directly to the financial results
of the Company and the performance of the Common Stock. The Compensation
Committee administers the 1994 Stock Plan, the 1997 Non-Qualified Stock Option
Plan (the "1997 Plan"), the Deferred Compensation Program, the Executive Officer
Plan and other incentive plans. The Compensation Committee is currently composed
of three independent, non-employee members of the Board.
CEO Compensation
In 1998 Conseco and Mr. Hilbert entered into a new employment agreement
(the "CEO Contract"). The CEO Contract provides for an annual salary of $1
million. In addition, Mr. Hilbert is entitled to receive an annual bonus equal
to the lesser of a non-discretionary amount ($13.5 million for 1998) or 3
percent of Net Profits. Mr. Hilbert is entitled to receive an additional bonus
for any year in excess of this amount only if payment of that additional bonus
amount would not cause the total bonus to exceed 3 percent of the annual Net
Profits and the Company's return on equity ("ROE") for such year after giving
effect to such bonus would be at least 15 percent. In addition, the Compensation
Committee has the authority under the CEO Contract to reduce any such additional
bonus. The Company's ROE for 1998 was less than 15%, reflecting certain charges
taken relating to Green Tree Financial Corporation which was acquired on June
30, 1998. Consequently, Mr. Hilbert's bonus for 1998 was $13.5 million. "Net
Profits" means the Company's Income from Continuing Operations, as adjusted to
add back or deduct, in each case to the extent such items were deducted in the
computation of Income from Continuing Operations, (x) income taxes and (y)
bonuses to Mr. Hilbert and the executive officers of the Company. "Income from
Continuing Operations" means the Company's income from continuing operations,
excluding for this computation the effect (in each case net of tax) of (i)
extraordinary items, (ii) discontinued operations and (iii) the cumulative
effect of changes in accounting principles.
As provided in the CEO Contract, Mr. Hilbert received an option grant for
1.5 million shares of Common Stock on May 14, 1998 at a price of $50.69 per
share, the market value of the Common Stock on the date of grant. Such options
vest 50 percent at the end of three years from the date of grant, 25 percent at
the end of four years from the date of grant and 25 percent at the end of five
years from the date of grant.
Compensation of Other Executive Officers
Bonuses for the executive officers other than the Chief Executive Officer
(the "Executive Officers") are paid pursuant to the Conseco Performance-Based
Compensation Plan for Executive Officers (the "Executive Officer Plan") which
was approved by the shareholders at their 1998 annual meeting. The
performance-based criteria contained in the Executive Officer Plan are similar
to those contained in the bonus provision of the CEO Contract. The Executive
Officer Plan provides that the maximum bonus (the "Maximum Bonus") payable to
one of the Executive Officers per year is 1% of Net Profits under this plan
(defined in substantially the same manner as under the CEO Contract).
A separate calculation is then made in accordance with the Executive
Officer Plan to determine what portion, if any, of the Maximum Bonus in excess
of a specified base amount ($4.5 million for 1998) could be paid per Executive
Officer and still permit the Company's ROE for such year to be at least 15
percent (such amount exceeding the base amount and meeting such 15 percent ROE
test for such fiscal year is referred to as the "Additional Potential Bonus");
provided that no Executive Officer shall receive a bonus pursuant to this plan
for a fiscal year in excess of such base amount to the extent such total bonus
would exceed one-third of the total bonus paid to Conseco's chief executive
officer for such year. For 1998 there was no Additional Potential Bonus.
7
<PAGE> 10
Further, upon the recommendation of Conseco's chief executive officer, the
Compensation Committee may reduce the amount of the bonus that would have been
payable to any of the Executive Officers. The Executive Officer Plan provides
that such reduction shall be at the sole discretion of the Compensation
Committee after taking into account such subjective factors or other matters as
it believes are appropriate in the best interests of Conseco and its
shareholders. For 1998, the chief executive officer recommended a reduction in
the bonuses payable to the Executive Officers listed in the Summary Compensation
Table on page 12 from the maximum amount payable of $4.5 million to the amounts
listed on the table. The Compensation Committee determined that the bonuses
recommended by the chief executive officer were appropriate based on the results
of the Company's operations during 1998 and the responsibilities which each
Executive Officer assumed during 1998.
Stock Options
The Compensation Committee views the grant of stock options to be a key
long-term incentive reward program for the Company's officers, including the
Named Officers. The Committee believes that because options are granted with an
exercise price equal to the market value of the Common Stock on the date of
grant, they are an effective incentive for officers to create value for the
Company's shareholders and are an excellent means of rewarding executives who
are in a position to contribute to the Company's long-term growth and
profitability. Options have been granted annually to the Company's officers
below the Executive Officer 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 periodically 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. The number of options granted to the chief
executive officer and the other Executive Officers 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.
In May 1998, the Compensation Committee granted options to the Company's
Executive Officers as shown in the table on page 15. The Compensation Committee
made such grants after receiving a recommendation from the chief executive
officer and after consideration of the size and frequency of prior grants to
such officers, the Company's performance and the contributions made by such
officers.
In February 1998 and November 1998, the Board of Directors approved option
exercise reload programs under which Mr. Hilbert and certain Executive Officers
exercised outstanding vested stock options to purchase 4,191,713 shares of
Common Stock. The options exercised would otherwise have remained exercisable
until the years 1998 through 2005. As a result of these exercises, the Company
will be able to realize a tax deduction of approximately $125 million, equal to
the aggregate tax gain recognized by the executives as a result of the exercise
plus Company payroll taxes. No cash was either received or paid by the
participants in the program; participants paid for the exercised options and a
portion of the taxes associated with the exercises by tendering 1,189,644
previously owned shares and Conseco withheld 1,347,974 shares from the exercise
proceeds to cover required federal and state tax withholding for the exercise
transactions. As part of the inducement to exercise the options, the
Compensation Committee also granted new options at the current market price to
Mr. Hilbert and the Executive Officers who participated in the reload programs
equal to the number of shares surrendered and withheld for the exercise prices
and taxes.
Net of withheld and tendered shares, the participants received 1,654,095
shares of Common Stock in the reload programs. As a result of such exercise, the
number of shares owned by executives increased and the dilution attributable to
stock options decreased. The reload programs also made it possible for the
executives to avoid having to sell a large number of shares in the open market
to pay the tax obligations generated by the option exercises, thereby
eliminating a potentially adverse effect on the market price of the Common
Stock.
The Compensation Committee believes options previously granted provided
incentives to the Executive Officers to make significant contributions to
increases in the market capitalization of Conseco. The Compensation Committee
desired to continue such incentives by making the reload option grants.
8
<PAGE> 11
Stock Units
The executive officers and outside Directors of Conseco are eligible to
receive annual stock unit awards under the 1994 Stock Plan. The total amount
awarded by Conseco in any year, together with all prior stock unit awards under
the 1994 Stock Plan and all similar awards under the Deferred Compensation
Program since January 1, 1989, may not exceed Conseco's consolidated total net
gains from the sale of investments since January 1, 1989. Conseco'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 percent of
his or her salary and bonus compensation for such year, unless Conseco's
earnings per share (reduced by the earnings per share attributable to gains or
losses from the sale of investments) for such year exceed 110 percent of such
earnings per share for the preceding year, in which case the amount awarded may
not exceed the greater of $30,000 or 20 percent of the participant's salary, fee
and bonus compensation for the year. The awards are converted each year to units
representing shares of Common Stock by dividing the amount of the awards by the
average market price per share for the Common Stock for the year. Each award
becomes vested only if the participant remains employed with Conseco for five
years after the award or dies, becomes disabled or attains age 60 while so
employed, or upon a change of control of Conseco. See Employment Contracts and
Change-In-Control Arrangements for the definition of change of control for this
purpose.
COMPENSATION COMMITTEE
James D. Massey, Chairman
M. Phil Hathaway
Dennis E. Murray, Sr.
9
<PAGE> 12
FIVE-YEAR PERFORMANCE GRAPH
The Performance Graph below compares Conseco's cumulative total shareholder
return on its Common Stock for a five-year period (December 31, 1993 to December
31, 1998) with the cumulative total return of (i) the Standard & Poor's 500
Composite Stock Price Index (the "S&P 500 Index"), (ii) the Dow Jones Life
Insurance Index and (iii) the Standard & Poor's Financial Index (the "S&P
Financial Index"). The S&P Financial Index was selected to replace the Dow Jones
Life Insurance Index to reflect the broader financial services business of
Conseco after its acquisition of Green Tree Financial Corporation in June 1998.
The comparison for each of the periods assumes that $100 was invested on
December 31, 1993 in each of the Common Stock, the stocks included in the S&P
500 Index, the stocks included in the Dow Jones Life Insurance Index and the
stocks included in the S&P Financial Index and that all dividends were
reinvested. Conseco has been included in the S&P 500 Index and the S&P Financial
Index since January 15, 1997, and in the Dow Jones Life Insurance Index since
July 1, 1996.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG CONSECO, S&P 500 INDEX, DOW JONES LIFE INSURANCE INDEX AND S&P FINANCIAL
INDEX
PERFORMANCE GRAPH
<TABLE>
<CAPTION>
DJ LIFE INSURANCE
CONSECO, INC. S&P 500 INDEX INDEX* S&P FINANCIAL INDEX
------------- ------------- ----------------- -------------------
<S> <C> <C> <C> <C>
1993 100 100 100 100
1994 78 101 90 96
1995 114 139 125 149
1996 234 171 165 201
1997 336 229 244 297
1998 229 294 306 331
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Five-Year
Average Annual
1993 1994 1995 1996 1997 1998 Total Return
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Conseco, Inc. $100 $ 78 $114 $234 $336 $229 18%
- -------------------------------------------------------------------------------------------------------
S&P 500 Index $100 $101 $139 $171 $229 $294 24%
- -------------------------------------------------------------------------------------------------------
DJ Life Insurance Index $100 $ 90 $125 $165 $244 $306 25%
- -------------------------------------------------------------------------------------------------------
S&P Financial Index $100 $ 96 $149 $201 $297 $331 27%
- -------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE> 13
13-YEAR PERFORMANCE GRAPH
The Performance Graph below compares Conseco's cumulative total shareholder
return since December 31, 1985 (the year in which Conseco completed its initial
public offering) to the same indices shown on the five-year graph. As with the
five-year graph, this comparison assumes that $100 was invested in Conseco and
each index at the start of the period and that all dividends were reinvested.
COMPARISON OF 13-YEAR CUMULATIVE TOTAL RETURN
AMONG CONSECO, S&P 500 INDEX, DOW JONES LIFE INSURANCE INDEX AND S&P FINANCIAL
INDEX
PERFORMANCE GRAPH
<TABLE>
<CAPTION>
DJ LIFE INSURANCE
CONSECO, INC. S&P 500 INDEX INDEX* S&P FINANCIAL INDEX
------------- ------------- ----------------- -------------------
<S> <C> <C> <C> <C>
1985 100.00 100.00 100.00 100.00
1986 160.00 119.00 112.00 103.00
1987 161.00 125.00 91.00 86.00
1988 157.00 145.00 119.00 100.00
1989 389.00 191.00 190.00 127.00
1990 407.00 185.00 162.00 100.00
1991 1796.00 242.00 241.00 150.00
1992 2706.00 260.00 316.00 185.00
1993 3246.00 287.00 316.00 206.00
1994 2547.00 290.00 283.00 198.00
1995 3716.00 399.00 394.00 305.00
1996 7593.00 491.00 522.00 413.00
1997 10901.00 655.00 771.00 611.00
1998 7437.00 842.00 968.00 681.00
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Conseco, Inc. $100 $160 $161 $157 $389 $407 $1,796 $2,706 $3,246 $2,547 $3,716 $7,593 $10,901
- ------------------------------------------------------------------------------------------------------------------------------
S&P 500 Index $100 $119 $125 $145 $191 $185 $ 242 $ 260 $ 287 $ 290 $ 399 $ 491 $ 655
- ------------------------------------------------------------------------------------------------------------------------------
DJ Life Insurance
Index* $100 $112 $ 91 $119 $190 $162 $ 241 $ 316 $ 316 $ 283 $ 394 $ 522 $ 968
- ------------------------------------------------------------------------------------------------------------------------------
S&P Financial Index $100 $103 $ 86 $100 $127 $100 $ 150 $ 185 $ 206 $ 198 $ 305 $ 413 $ 611
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- --------------------- ---------------------------
Thirteen-Year
Average Annual
1998 Total Return
- --------------------- ---------------------------
<S> <C> <C>
Conseco, Inc. $7,437 41%
- ---------------------
S&P 500 Index $ 842 18%
- ---------------------
DJ Life Insurance
Index* $ 771 19%
- ---------------------
S&P Financial Index $ 681 16%
- ---------------------
</TABLE>
* Dow Jones Life Insurance Index total return estimated for 1986 and 1987.
Official Dow Jones Life Insurance Index total return data unavailable prior to
September 30, 1987.
11
<PAGE> 14
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 Conseco, and the
other four most highly compensated executive officers of Conseco in 1998
(collectively, the "Named Officers").
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
----------------------------------
ANNUAL COMPENSATION AWARDS
----------------------------------- ----------------------------------
NUMBER OF SECURITIES
RESTRICTED UNDERLYING
STOCK OPTIONS/SARS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OTHER(1) AWARDS(2) (IN SHARES)(3) COMPENSATION(4)
--------------------------- ---- ------ ----- -------- ---------- -------------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Stephen C. Hilbert............ 1998 $1,000,000 $13,500,000 $130,714 $1,275,891 2,571,897 $754,568
Chairman of the Board, 1997 250,000 15,000,000 163,240 4,156,373 2,561,792 4,297
President
and Chief Executive Officer 1996 250,000 13,576,436 135,594 2,345,556 819,240 3,498
Rollin M. Dick................ 1998 250,000 3,816,000 302,094 741,635 554,510
Executive Vice President and 1997 250,000 3,816,000 1,108,184 853,452 20,669
Chief Financial Officer 1996 250,000 4,714,040 842,114 245,800 19,825
John J. Sabl(5)............... 1998 1,000,000 1,000,000 133,380 250,000 3,896
Executive Vice President, 1997 303,205 236,302 83,293 200,000 29
General Counsel and
Secretary
Maxwell E. Bublitz(5)......... 1998 250,000 1,400,000 28,558 201,785 3,608
Senior Vice President,
Investments
Thomas J. Kilian(5)........... 1998 237,148 1,262,852 56,520 352,576 3,896
Executive Vice President and
Chief Operations Officer
</TABLE>
- ------------
(1) Amounts for all years include imputed interest on a $1.9 million
interest-free loan made to Mr. Hilbert in 1988 ($107,413 in 1998 and
$116,470 in both 1997 and 1996). The other Named Officers did not have other
annual compensation for 1998, 1997 or 1996 which is required to be listed
under SEC rules concerning executive officer and director compensation
disclosure.
(2) The amounts shown for 1998 in this column represent the value of units (each
unit represents one share of Common Stock) awarded for 1998 under the 1994
Stock Plan based on the market value of the Common Stock at March 31, 1999,
the date of award. The amounts shown for 1997 in this column represent the
value of stock units awarded for 1997 under the 1994 Stock Plan based on the
market value of the Common Stock at March 31, 1998, the date of award. The
amounts shown for 1996 in this column represent the value of stock units
awarded for 1996 under the 1994 Stock Plan based on the market value of the
Common Stock at March 31, 1997, the date of the award. Dividends are paid on
the stock units. Units awarded to Mr. Dick vest immediately pursuant to the
terms of the 1994 Stock Plan. The table below shows the aggregate holdings
of stock units at March 31, 1999 as if outstanding on December 31, 1998, the
aggregate value of such stock units as of December 31, 1998 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 12/31/98 UNITS
------------- --------- ------
<S> <C> <C> <C>
Stephen C. Hilbert....................................... 1,807,629 $54,793,754 1,410,006
Rollin M. Dick........................................... 273,504 8,290,590 273,504
John J. Sabl............................................. 5,822 176,479 --
Maxwell E. Bublitz....................................... 2,064 62,565 --
Thomas J. Kilian......................................... 2,468 74,811 --
</TABLE>
Stock units previously awarded to Messrs. Hilbert, Bublitz and Kilian will
vest in the next three years conditioned upon continued employment with
Conseco as follows (none of the units awarded to Mr. Sabl will vest in the
next three years):
<TABLE>
<CAPTION>
12/31/99 12/31/00 12/31/01
-------- -------- --------
<S> <C> <C> <C>
Stephen C. Hilbert.......................................... 77,078 130,166 65,840
Maxwell E. Bublitz.......................................... 570 -- --
Thomas J. Kilian............................................ 319 -- --
</TABLE>
(3) No stock appreciation rights have been granted.
12
<PAGE> 15
(4) For 1998, the amounts reported in this column represent amounts paid for the
Named Officers for (i) the value of premiums paid for split-dollar life
insurance, (ii) individual life insurance premiums; (iii) group life
insurance premiums; and (iv) the employer contribution under the ConsecoSave
Plan. The table below shows such amounts for each Named Officer. The amounts
listed in the first column below represent the estimated value of the
portion of insurance premiums paid by Conseco pursuant to split-dollar
insurance agreements. Such premiums are expected to be repaid to Conseco
(without interest) from the death benefits paid pursuant to the terms of the
insurance policies. The estimated value is calculated as if the 1998
premiums were advanced to the executive officers without interest until the
time the Company expects to recover the premiums.
<TABLE>
<CAPTION>
VALUE OF PREMIUMS INDIVIDUAL GROUP LIFE
PAID FOR SPLIT- LIFE INSURANCE INSURANCE CONSECOSAVE PLAN
DOLLAR LIFE INSURANCE PREMIUMS PREMIUMS CONTRIBUTIONS
--------------------- -------------- ---------- ----------------
<S> <C> <C> <C> <C>
Stephen C. Hilbert............... $749,600 $ 3,720 $1,248 $ --
Rollin M. Dick................... 527,200 18,860 5,250 3,200
John J. Sabl..................... -- -- 696 3,200
Maxwell E. Bublitz............... -- -- 408 3,200
Thomas J. Kilian................. -- -- 696 3,200
</TABLE>
(5) No compensation information is reported for years prior to the year in which
the Named Officer became an executive officer of the Company. Mr. Sabl
joined Conseco in September 1997.
EMPLOYMENT CONTRACTS AND CHANGE-IN-CONTROL ARRANGEMENTS
Mr. Hilbert currently is employed pursuant to the CEO Contract, which
provides for an annual base salary of $1,000,000, an annual bonus of up to three
percent of Conseco's annual pre-tax net profits (subject to certain
adjustments), severance payments upon termination of employment 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. See Report of the
Compensation Committee for a discussion of the terms of the bonus provisions of
Mr. Hilbert's employment agreement. 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 Conseco, Conseco made a $1,900,000 interest-free
loan to Mr. Hilbert. See Certain Relationships and Related Transactions.
Conseco has an employment agreement with Mr. Dick for a term ending
December 31, 2001, with a minimum annual salary of $250,000, annual bonuses in
the discretion of the Compensation Committee or the Board of Directors, a
severance allowance upon termination of employment and certain insurance and
other fringe benefits. Conseco has an employment agreement with Mr. Sabl for a
term ending December 31, 2002, with a minimum annual salary of $1,000,000, a
minimum annual bonus of $750,000, a severance allowance upon termination of
employment and certain insurance and other benefits. The employment agreement
between Conseco and Mr. Kilian is for a term ending December 31, 2002, with a
minimum annual salary of $250,000, annual bonuses in the discretion of the
Compensation Committee or Board of Directors (but not less than $750,000 for the
years 1998 and 1999), a severance allowance upon termination of employment 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 in anticipation of or following a change in control
of Conseco (a "Control Termination"), a severance allowance equal to 60 months
of his monthly rate of salary, bonus and other benefits. Such severance
allowance is to be grossed-up to cover any applicable excise taxes. For such
purposes a Control Termination includes, among other things, a significant
change in the nature or scope of his duties, a reduction in his total
compensation or his giving a notice of termination to Conseco during the 6-month
period commencing six months after the change in control. In the event of a
Control Termination, the employee also may elect to have Conseco purchase all
Common Stock and all options to purchase Common Stock (in the case of Messrs.
Hilbert, Dick and Sabl 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 agreements for Messrs. Hilbert and Dick,
"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 Securities Exchange Act of 1934 (the "Exchange Act") as
revised effective January 20, 1987; provided that, without limitation, a "change
in control" shall be deemed to have
13
<PAGE> 16
occurred if and when: (i) any person is or becomes a beneficial owner, directly
or indirectly, of securities of Conseco representing 25 percent or more of the
combined voting power of Conseco's then outstanding securities; or (ii) in
connection with or as a result of a tender offer, merger, consolidation, sale of
assets or contest for election of directors, or any combination of the foregoing
transactions or events, individuals who were members of the Board of Directors
immediately prior to any such transaction or event shall not constitute a
majority of the Board of Directors following such transaction or event. The
employment agreements for Messrs. Sabl and Kilian contain the same "change in
control" definition except that no change in control shall be deemed to have
occurred upon any person becoming, with the approval of the Board of Directors
of Conseco, the beneficial owner of 25 percent or more but less than 50 percent
of the combined voting power of Conseco's then outstanding securities entitled
to vote with respect to the election of Conseco's Board of Directors and such
person's ownership is for investment purposes.
See the discussion under the table headed Option Grants in 1998 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 1994 Stock Plan, the definition of
change in control is the same as that disclosed below for the options granted in
1998. 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 Exchange Act,
is or becomes the beneficial owner, directly or indirectly, of securities of
Conseco representing 30 percent or more of the combined voting power of
Conseco'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 Conseco before
the Transaction shall cease to constitute a majority of the Board of Directors
of Conseco or any successor to Conseco; (iii) Conseco is merged or consolidated
with another corporation and, as a result of the merger or consolidation, less
than 70 percent of the outstanding voting securities of the surviving or
resulting corporation shall then be owned, in the aggregate, by the former
stockholders of Conseco, other than (a) affiliates within the meaning of the
Exchange 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 Conseco representing 30 percent or more of the combined voting power of
Conseco's then outstanding voting securities; or (v) Conseco transfers
substantially all of its assets to another corporation which is not a
wholly-owned subsidiary of Conseco.
STOCK OPTIONS
The following table sets forth certain information concerning the exercise
in 1998 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, 1998.
AGGREGATED OPTION EXERCISES IN 1998 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, 1998 DECEMBER 31, 1998(2)
SHARES ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Stephen C. Hilbert........ 1,705,748 $53,887,916 3,459,343 4,534,346 $ -- $44,374,000
Rollin M. Dick............ 555,748 17,114,478 1,119,814 1,335,273 -- 13,374,000
John J. Sabl.............. -- -- 40,000 410,000 -- --
Maxwell E. Bublitz........ 174,388 4,017,419 14,400 809,385 172,125 3,168,375
Thomas J. Kilian.......... 179,216 4,212,250 14,400 764,176 172,125 3,241,375
</TABLE>
- ------------
(1) The value realized equals the aggregate amount of the excess of the fair
market value on the dates of exercise over the relevant exercise prices,
which in each case were equal to the market values on the dates the options
were originally granted.
14
<PAGE> 17
(2) The value is calculated based on the aggregate amount of the excess of
$30.3125 (the average of the high and low sale prices of the Common Stock as
reported by the New York Stock Exchange ("NYSE") for the last business day
of 1998) over the relevant exercise prices, excluding grants for which such
difference is equal to or less than zero.
The following table sets forth certain information concerning options to
purchase Common Stock granted in 1998 to the five Named Officers.
OPTION GRANTS IN 1998
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------------------------------
% OF TOTAL
NUMBER OF OPTIONS GRANTED PER SHARE GRANT DATE
OPTIONS TO EMPLOYEES IN EXERCISE EXPIRATION PRESENT
NAME GRANTED 1998 PRICE(1) DATE VALUE(2)
---- --------- --------------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Stephen C. Hilbert.......... 897,551(3) 10.2% $48.19 2/17/08 $10,408,091
1,500,000(4) 17.1 50.69 5/13/08 18,296,400
174,346(3) 2.0 35.97 11/03/08 1,509,087
Rollin M. Dick.............. 266,362(3) 3.0 48.19 2/17/08 3,088,760
400,000(4) 4.5 50.69 5/13/08 4,879,040
75,273(3) .9 35.97 11/03/08 651,541
John J. Sabl................ 250,000(4) 2.8 50.69 5/13/08 3,049,400
Maxwell E. Bublitz.......... 100,000(4) 1.1 50.69 5/13/08 1,219,760
101,785(3) 1.2 35.97 11/03/08 881,020
Thomas J. Kilian............ 250,000(4) 2.8 50.69 5/13/08 3,049,400
102,576(3) 1.2 35.97 11/03/08 887,867
</TABLE>
- ------------
(1) Exercise price is the average of the high and low sales prices as reported
by the NYSE for the date of grant.
(2) 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:
expected volatility of 35 percent, risk free rate of return of 5.4 percent,
expected life of 4 years and a dividend rate of 1.2 percent. A discount of
25 percent was applied to the option value yielded by the model to reflect
the non-transferability and the possibility of forfeiture of employee
options. Conseco'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
Common Stock and cannot be accurately forecasted by application of an option
pricing model.
(3) The options reported are non-qualified stock options which are exercisable
in full beginning six months after the date of grant. The options were
granted as part of the Company's option exercise reload program. See Report
of the Compensation Committee on Executive Compensation.
(4) The options reported are non-qualified stock options, of which one-half vest
three years from the date of the grant (May 14, 1998), one-fourth vest four
years from the date of grant and the remaining one-fourth vest five years
from the date of grant.
The options granted to the Named Officers in 1998 were under the 1997 Plan
except for 500,000 stock options received by Mr. Hilbert which were granted
under the 1994 Stock Plan. All outstanding options under the 1994 Stock Plan and
the 1997 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, 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
1994 Stock Plan and the 1997 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
15
<PAGE> 18
forth in such option. If the consideration offered to shareholders of Conseco 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 Conseco and such holder following a Change of Control. A
"Change of Control" of Conseco is deemed to occur under the 1994 Stock Plan and
the 1997 Plan if: (i) any person, becomes the beneficial owner, directly or
indirectly, of securities of Conseco representing 25 percent or more of the
combined voting power of Conseco'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 were
members of the Board of Directors of Conseco 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 Exchange Act; or (ii) any such
person becomes, with the approval of the Board of Directors of Conseco, the
beneficial owner of securities of Conseco representing 25 percent or more but
less than 50 percent of the combined voting power of Conseco'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 SEC 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 Conseco, nor in connection with or as a
participant in any transaction having such purpose or effect," or words of
comparable meaning and import.
Each of the Named Officers other than Mr. Bublitz has an employment
agreement with Conseco (see Employment Contracts and Change-in-Control
Agreements). In the event of a Control Termination of the employment agreement
of a Named Officer such Named Officer may elect, within 60 days after such
Control Termination, to receive a lump sum payment from Conseco 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, Conseco must pay to the Named Officer an amount equal to
the highest per share fair market value of Common Stock on any day during the
period beginning six months prior to the date of the Named Officer's election
pursuant to his employment agreement. The employment agreements with Messrs.
Hilbert, Dick and Sabl provide that, 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. Amounts to be paid to Mr. Kilian
for Unexercised Options in the event of a Control Termination of his employment
agreement are to be reduced by the exercise price of his Unexercised Options.
COMPENSATION OF DIRECTORS
Directors who are not also employees of Conseco are entitled to receive an
annual fee of $50,000, 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. Non-employee Directors also are eligible to participate in and
receive annual awards of up to $30,000 under the 1994 Stock Plan. For 1998, 357
stock units were awarded under the 1994 Stock Plan to each of Dr. Decatur and
Messrs. Coss, Hathaway, Massey, Murray, Mutz and Nickoloff, and 94 stock units
were awarded to Mr. Gongaware for his service as a Director. The Common Stock
represented by the stock unit awards for 1998 had a market value of $11,078 on
March 31, 1999 (the date of award). 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 (as
defined in the second preceding paragraph); or (v) the fifth anniversary of the
end of the fiscal year for which the award was made. The 1994 Stock Plan also
provides for an annual grant to each non-employee director of options to
purchase 5,000 shares of Common Stock on the date of the annual meeting of
shareholders at a price equal to the market price of Common Stock on the date of
grant.
16
<PAGE> 19
Dr. Decatur and Messrs. Gongaware, Hathaway, Massey, Murray and Mutz each
received such a grant in 1998. The options vest 20 percent per year on each of
the first five anniversary dates of grant, subject to acceleration upon a Change
of Control.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
The current members of the Compensation Committee are Messrs. Hathaway,
Massey and Murray, each of whom served on the Compensation Committee throughout
1998. Mr. Massey serves as the Chairman of the Compensation Committee. Each of
the members of the Compensation Committee is a participant in the Stock Purchase
Plan described below. See Certain Relationships and Related Transactions.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 1996, Conseco adopted a Stock Purchase Plan (the "Purchase Plan") to
encourage direct, long-term ownership of Conseco stock by Directors, executive
officers and certain senior officers. Under the original Purchase Plan, up to 4
million shares of Common Stock could be purchased in open market or negotiated
transactions with independent parties. In 1997, the Purchase Plan was expanded
to permit the purchase of an additional 4 million shares. In 1998, the Purchase
Plan was expanded to permit an additional 4.5 million shares. Purchases were
financed by personal loans to the participants from a bank. Such loans are
collateralized by the Common Stock purchased. Conseco guarantees the loans, but
has recourse to the participants if it incurs a loss under the guarantee. In
addition, Conseco has agreed to provide loans to the participants for the
interest payments under the bank loans. Approximately 180 Directors, officers
and key employees of Conseco and its subsidiaries elected to participate in the
Purchase Plan and have purchased all 12.5 million shares of Common Stock offered
under the Purchase Plan. At December 31, 1998, the bank loans guaranteed by
Conseco exceeded the value of the Common Stock collateralizing the loans by
$74.6 million. As of December 31, 1998, the outstanding principal balances of
the interest-payment loans provided by Conseco to the Directors and the
Executive Officers (or to trusts or limited partnerships established by them)
were as follows: Mr. Hilbert, $7,190,481; Ms. Cuneo, $1,730,131; Mr. Dick,
$3,810,583; Mr. Coss, $140,479; Dr. Decatur, $814,110; Mr. Gongaware,
$1,764,465; Mr. Hathaway, $13,110; Mr. Massey, $614,669; Mr. Murray, $3,480,280;
Mr. Mutz, $63,265; Mr. Sabl, $207,830; Mr. Bublitz, $421,534; Mr. Kilian,
$459,670; James S. Adams (an executive officer), $472,998; and Bruce A.
Crittenden (an executive officer), $70,240. Such loans bear interest at the
variable rate per annum equal to the lowest interest rate per annum being paid
by Conseco under its most senior borrowing facility, and as of December 31,
1998, the interest rate on such loans was 6.0%. As of December 31, 1998, the
outstanding principal balances of the bank loans to the Directors and Executive
Officers (or to trusts or limited partnerships established by them) which are
guaranteed by Conseco were as follows: Mr. Hilbert, $106,982,175; Ms. Cuneo,
$29,362,942; Mr. Dick, $51,259,296; Mr. Coss, $7,872,996; Dr. Decatur,
$17,539,752; Mr. Gongaware, $24,871,750; Mr. Hathaway, $826,655; Mr. Massey,
$10,598,914; Mr. Murray, $68,014,339; Mr. Mutz, $1,358,097; Mr. Sabl,
$3,444,445; Mr. Bublitz, $10,258,279; Mr. Kilian, $12,620,177; Mr. Adams,
$12,942,868; and Mr. Crittenden, $3,936,499.
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 was evidenced by a secured promissory note. Such note was replaced with an
unsecured promissory note dated May 13, 1996 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 Company accepted the
new note because of Mr. Hilbert's increased net worth since February 1988. The
note includes a covenant not to compete which continues in effect until maturity
or until the note is paid in full, if earlier.
In connection with a Retention Agreement between Green Tree Financial
Corporation (a wholly owned subsidiary of Conseco) ("Green Tree") and Bruce A.
Crittenden, Green Tree made a $1,000,000 interest-free loan to Mr. Crittenden in
July 1998. The loan is due and payable on the earlier of July 1, 1999 and the
date of Mr. Crittenden's voluntary termination of employment with Green Tree. In
1997 Green Tree made loans to Mr. Crittenden and certain other executive
officers of Green Tree in connection with their purchase of Green
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Tree common stock in the open market. The loan to Mr. Crittenden is evidenced by
a note which bears interest payable annually at the rate of six percent. The
outstanding principal balance of his note throughout 1998 was $201,693.
Under the terms of the employment arrangements between Green Tree and Mr.
Coss, he had the right following termination of his employment to acquire from
Green Tree a Hawker 800XP aircraft and Green Tree's hangar at the Saint Paul
Airport. In December 1998, in connection with the termination of his employment,
Mr. Coss purchased from Green Tree a limited liability company (which was the
owner of the aircraft) for a purchase price of $7,098,000. Also in December
1998, his wife purchased from Green Tree a limited liability company (which was
the owner of the hangar and related equipment) for a purchase price of
$1,545,000. The hangar and related equipment had been constructed and acquired
by Green Tree in 1997 at a total cost of $1,734,421. The Company believes that
the terms of the transactions were comparable to those it would have received
from an unaffiliated third party.
BOARD MEETINGS AND COMMITTEES
During 1998, the Board of Directors met or took action by written consent
on 12 occasions. All Directors attended at least 75 percent of the aggregate
meetings of the Board and the committees on which they served.
The Board has a Compensation Committee which met or took action by written
consent on 12 occasions during 1998. The Compensation Committee is authorized to
set the compensation of the Company's officers and to act with respect to the
compensation, option and other benefit plans of the Company. The Board also has
an Audit Committee, which held two meetings in 1998. The Audit Committee has
general oversight responsibility with respect to Conseco's accounting and
financial reporting activities, including meeting with Conseco's independent
auditors and its chief financial and accounting officers to review the scope,
cost and results of the independent audit and to review internal accounting
controls, policies and procedures. The Board selects the independent auditors,
upon recommendation of the Audit Committee. The members of these committees are
identified in the table on pages 5 and 6. In addition, the Audit Committee
oversees compliance programs of Conseco and its subsidiaries where such
oversight is delegated by the Board of Directors or specified by contract. See
Election of Directors.
The Board of Directors does not have a nominating committee. Conseco's
Bylaws provide that nominations for the election of directors may be made by the
Board of Directors or a committee appointed by the Board of Directors or by any
shareholder entitled to vote in the election of directors generally. The Bylaws
specify the timing and content of the written notice that must be provided by
any shareholder wishing to make a nomination for the election of a director. See
Shareholder Proposals.
SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires Conseco's Directors and
executive officers, and each person who is the beneficial owner of more than 10
percent of any class of Conseco's outstanding equity securities, to file with
the SEC and the NYSE initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of Conseco. Specific due
dates for these reports have been established by the SEC, and Conseco is
required to disclose in this Proxy Statement any failure by such persons to file
such reports for fiscal year 1998 by the prescribed dates. Officers, Directors
and greater than ten percent beneficial owners are required by SEC regulations
to furnish Conseco with copies of all reports filed with the SEC pursuant to
Section 16(a) of the Exchange Act. To Conseco's knowledge, based solely on
review of the copies of reports furnished to Conseco and written representations
that no other reports were required, all filings required pursuant to Section
16(a) of the Exchange Act applicable to Conseco's officers, Directors and
greater than 10 percent beneficial owners were made for the year ended December
31, 1998, except for two late reports by Mr. Gongaware covering four
transactions and two late reports by Mr. Hilbert covering three transactions.
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RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP served as the independent accountants to audit
the financial statements of Conseco for 1998 and has been selected by the Board
of Directors to serve as such for 1999. Representatives of
PricewaterhouseCoopers LLP 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 2000 Annual Meeting must be
received by Conseco by December 22, 1999. Such proposals must meet the
requirements set forth in the rules and regulations of the SEC in order to be
eligible for inclusion in the proxy statement for the 2000 Annual Meeting. In
addition to the SEC rules concerning shareholder proposals, the Company's Bylaws
establish advance notice procedures as to: (i) business to be brought before an
annual meeting of shareholders other than by or at the direction of the Board of
Directors; and (ii) the nomination, other than by the Board of Directors or a
committee appointed by the Board of Directors, of candidates for election as
directors. Any shareholder who wishes to submit a proposal to be acted upon at
the 2000 Annual Meeting or who wishes to nominate a candidate for election as
director must deliver written notice of such shareholder's intent not later than
January 22, 2000 in accordance with the Bylaws. A copy of these Bylaw provisions
may be obtained by written request addressed to the Secretary of Conseco at
11825 North Pennsylvania Street, Carmel, Indiana 46032.
ANNUAL REPORT
Conseco's Annual Report for 1998 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
JOHN J. SABL
Secretary
April 21, 1999
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CONSECO, INC.
PROXY FOR 1999 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, Thomas J. Killan and Ngaire E. Cuneo, 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 Conseco Conference Center, 530 College Drive, Carmel, Indiana at
11:00 a.m. local time on May 28, 1999, and any adjournments thereof.
The proxies are hereby authorized to vote as follows:
1. Election of David R. Decatur, Donald F. Gongaware, John M. Mutz and Robert
S. Nickoloff as Directors for three-year terms expiring in 2002.
[ ] FOR (except as shown on the line) [ ] WITHHELD (as to all nominees)
(To withhold authority to vote for single nominee, write that nominee's name on
this line:)
- --------------------------------------------------------------------------------
2. 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)
<PAGE> 23
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THE SHARES REPRESENTED BY THIS PROXY, UNLESS OTHERWISE SPECIFIED, SHALL BE
VOTED FOR THE ELECTION OF ALL DIRECTORS LISTED IN ITEM 1.
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 21, 1999.
Signature(s):
----------------------------
Dated: , 1999
-----------------------------
PLEASE DATE, SIGN, AND RETURN THIS
PROXY PROMPTLY
