<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 [X]
Filed by a party other than the registrant [ ]
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)
- --------------------------------------------------------------------------------
(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:
- --------------------------------------------------------------------------------
(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:
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(5) Total fee paid:
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[ ] 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 JUNE 23, 2000
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 June 23, 2000, for the
following purposes:
1. To elect four directors for terms ending in 2003; and
2. To consider such other matters, including shareholder proposals, as may
properly come before the meeting.
Holders of record of outstanding shares of the common stock ("Common
Stock") and Series F Common-Linked Convertible Preferred Stock ("Preferred
Stock") of the Company as of the close of business on May 17, 2000, are entitled
to notice of and to vote at the meeting. Holders of Common Stock and Preferred
Stock will vote together as a single class at the meeting. Holders of Common
Stock have one vote for each share held of record, and holders of Preferred
Stock have 10 votes 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, Secretary
May 23, 2000
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 June 23, 2000,
at 11:00 a.m., local time. It is expected that this Proxy Statement will be
mailed to the shareholders on or about May 23, 2000. Proxies are being solicited
principally by mail. Georgeson Shareholder Communications, 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 nominees for director (Proposal 1) and
against the shareholder proposal (Proposal 2). 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")
and shares of Conseco's Series F Common-Linked Convertible Preferred Stock
("Preferred Stock" and, together with the Common Stock, the "Conseco Voting
Stock") as of the close of business on May 17, 2000, will be entitled to vote at
the meeting. On such record date, Conseco had 325,264,121 shares of Common Stock
and 2,617,631 shares of Preferred Stock outstanding and entitled to vote.
Holders of Common Stock and Preferred Stock will vote together as a single class
at the Annual Meeting. Each share of Common Stock will be entitled to one vote
with respect to each matter submitted to a vote at the meeting. Each share of
Preferred Stock will be entitled to 10 votes with respect to each matter
submitted to a vote at the meeting. The presence in person or by proxy of the
holders of Conseco Voting 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 May 17, 2000 (except as
otherwise noted) regarding ownership of Common Stock (excluding shares held by
subsidiaries of the Company not entitled to vote) and Preferred Stock 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 current 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. See Executive Compensation, Related Party Transactions and
Other Information.
<TABLE>
<CAPTION>
SHARES OWNED AND
NATURE OF OWNERSHIP
---------------------------
TITLE OF CLASS NAME AND ADDRESS(1) NUMBER PERCENT
- -------------- ------------------- ------ -------
<S> <C> <C> <C>
5-Percent Owners:
Preferred
Stock Thomas H. Lee Equity Fund IV, L.P. (2)............... 2,617,631(2) 100%
75 State Street
Boston, MA 02109
Common Stock Thomas H. Lee Equity Fund IV, L.P.................... 26,176,310(2)(3) 7.4%
75 State Street
Boston, MA 02109
Common Stock Oppenheimer Capital.................................. 21,317,567(4) 6.5%
1345 Avenue of the Americas
New York, NY 10105
Common Stock Alex. Brown Investment Management.................... 16,802,968(5) 5.1%
One South Street
Baltimore, MD 21202
Directors and Executive Officers:
Common Stock Maxwell E. Bublitz................................... 810,458(6) *
Common Stock Lawrence M. Coss..................................... 7,330,123(7) 2.2%
Common Stock Ngaire E. Cuneo...................................... 3,006,535(8) *
Common Stock David R. Decatur, M.D................................ 563,214(9) *
Common Stock Rollin M. Dick....................................... 6,579,997(10) 2.0%
Common Stock Donald F. Gongaware.................................. 3,344,800(11) 1.0%
Common Stock Thomas M. Hagerty.................................... 23,315,020(12) 6.7%
Common Stock David V. Harkins..................................... 23,335,126(13) 6.7%
Common Stock M. Phil Hathaway..................................... 180,151(14) *
Common Stock Stephen C. Hilbert................................... 18,968,252(15) 5.7%
Common Stock Thomas J. Kilian..................................... 952,720(16) *
Common Stock James D. Massey...................................... 579,261(17) *
Common Stock Dennis E. Murray, Sr................................. 4,013,710(18) 1.2%
Common Stock John M. Mutz......................................... 47,300(19) *
Common Stock Robert S. Nickoloff.................................. 120,498(20) *
Common Stock Directors and executive officers as a group (17 46,162,550(21) 13.1%
persons).............................................
</TABLE>
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(1) Address given for 5-percent owners only.
(2) The shareholder listed, together with certain affiliates and other entities
and individuals (including Messrs. Hagerty and Harkins), jointly filed a
Schedule 13D on December 22, 1999 relating to the purchase of an aggregate
of 2,597,403 shares of Preferred Stock, each share of which is convertible
into 10 shares of Common Stock. The amount listed in the table reflects
additional shares of Preferred Stock which have been issued in payment of
dividends since the date of the Schedule 13D filing.
(3) Represents shares of Common Stock that may be acquired upon conversion of
Preferred Stock.
2
<PAGE> 5
(4) According to a Schedule 13G dated February 11, 2000, 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 partner-
ship 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.
(5) According to a Schedule 13G filed with the SEC on February 18, 2000, Alex.
Brown Investment Management had (as of December 31, 1999) sole voting power
with respect to 5,372,702 of such shares and sole dispositive power with
respect to 16,781,772 of such shares.
(6) Includes 184,032 shares subject to options which are exercisable currently
or within 60 days of May 17, 2000, 76,000 shares held by a limited
partnership of which Mr. Bublitz is the general partner, 10,000 shares
subject to a currently exerciseable warrant held by him and 14,556 shares
attributable to his account under the ConsecoSave Plan, a 401(k) savings
plan.
(7) Includes 2,238,659 shares subject to options which are exercisable
currently or within 60 days of May 17, 2000, 79,918 shares held by his
spouse, 14,663 shares held by minor children and 73,320 shares held by LVC
Investment Company, Inc.
(8) Includes 106,000 shares which are held by trusts for the benefit of Ms.
Cuneo's children, 1,024,640 shares subject to options which are exercisable
currently or within 60 days of May 17, 2000, 10,000 shares subject to a
currently exercisable warrant held by her and 960 shares attributable to
her account under the ConsecoSave Plan.
(9) Includes 14,000 shares subject to options which are exercisable currently
or within 60 days of May 17, 2000 and 710 shares held by a partnership of
which Dr. Decatur is a general partner.
(10) Includes 721,041 shares owned by Mr. Dick's wife, 545,923 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,
2,485,040 shares owned by limited partnerships of which Mr. Dick is the
general partner, 1,812,899 shares subject to options which are exercisable
currently or within 60 days of May 17, 2000, 317,900 shares owned by trusts
as to which Mr. Dick's wife has sole voting and investment power and 1,576
shares attributable to Mr. Dick's account under the ConsecoSave Plan. Share
ownership information is as of April 28, 2000. 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.
(11) 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, 718,425 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, 3,000 shares subject to options held by Mr. Gongaware
which are exercisable within 60 days of May 17, 2000 and 1,442 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.
(12) The address for Mr. Hagerty is c/o Thomas H. Lee Company, 75 State Street,
Boston, MA 02109. Represents shares of Common Stock that may be acquired
upon conversion of the Preferred Stock. Of those shares of Common Stock,
20,554,246 shares are beneficially owned by the Thomas H. Lee Equity Fund
IV, L.P., 704,131 shares are beneficially owned by Thomas H. Lee Foreign
Fund IV, L.P. and 1,996,297 shares are beneficially owned by Thomas H. Lee
Foreign Fund IV-B, L.P. Mr. Hagerty disclaims beneficial ownership of such
shares except to the extent of his pecuniary interest.
(13) The address for Mr. Harkins is c/o Thomas H. Lee Company, 75 State Street,
Boston, MA 02109. Represents shares of Common Stock that may be acquired
upon conversion of Preferred Stock. Of those shares of Common Stock, 8,102
shares are beneficially owned by the 1995 Harkins Gift Trust,
3
<PAGE> 6
20,554,246 shares are beneficially owned by the Thomas H. Lee Equity Fund
IV, L.P., 704,131 shares are beneficially owned by Thomas H. Lee Foreign
Fund IV, L.P. and 1,996,297 shares are beneficially owned by Thomas H. Lee
Foreign Fund IV-B, L.P. Mr. Harkins disclaims beneficial ownership of all
shares except to the extent of his pecuniary interest.
(14) Includes 16,000 shares owned by Mr. Hathaway's wife and 54,000 shares
subject to options which are exercisable currently or within 60 days of May
17, 2000.
(15) The address for Mr. Hilbert is c/o P.O. Box 90198, Indianapolis, IN
46290-0198. Includes 5,689,132 shares subject to options which are
exercisable currently or within 60 days of May 17, 2000, 3,732,183 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 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 16 shares attributable to his account under
the ConsecoSave Plan. Share ownership information is as of April 28, 2000.
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.
(16) Includes 186,823 shares subject to options which are exercisable currently
or within 60 days of May 17, 2000 and 3,434 shares attributable to Mr.
Kilian's account under the ConsecoSave Plan.
(17) Includes 54,000 shares subject to options which are exercisable currently
or within 60 days of May 17, 2000.
(18) Includes 796 shares owned by Mr. Murray's wife, 1,724,828 shares owned by a
limited partnership of which Mr. Murray is general partner, 631,408 shares
owned by retirement plans as to which Mr. Murray has sole voting and
investment power and 54,000 shares subject to options which were
exercisable currently or within 60 days of May 17, 2000. Mr. Murray
expressly disclaims beneficial ownership of the shares held by his wife.
(19) Includes 6,000 shares subject to options which are exercisable currently or
within 60 days of May 17, 2000 and 1,300 shares held by Mr. Mutz's wife.
Mr. Mutz expressly disclaims beneficial ownership of the shares held by his
wife.
(20) Includes 55,990 shares subject to options which are exercisable currently.
(21) Includes 23,395,472 shares of Common Stock which may be acquired upon
conversion of Preferred Stock and 4,603,637 shares subject to outstanding
stock options and warrants which are exercisable currently or within 60
days of May 17, 2000.
* Less than 1%.
4
<PAGE> 7
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors consists of 12 members (including one vacancy),
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
2003. All Directors will serve until their successors are duly elected and
qualified.
In December 1999, the Board of Directors was increased from 11 members to
12 members and Mr. Harkins was added to the Board under the terms of a
securities purchase agreement pursuant to which Thomas H. Lee Equity Fund IV,
L.P. and certain other purchasers acquired an aggregate of $500 million of
Preferred Stock. On April 28, 2000, Messrs. Hilbert and Dick resigned as
directors and officers of Conseco. Mr. Hagerty was elected by the Board to fill
the vacancy which resulted from Mr. Dick's resignation. The Board has not yet
filled the vacancy resulting from the resignation of Mr. Hilbert, whose term as
a Director had been scheduled to expire in 2001.
Unless authority is specifically withheld, the shares of Conseco Voting
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:
Lawrence M. Coss, 61................ 1998 Private Investor. Founder, Chief Executive 2003
Officer and Director of Green Tree
Financial Corporation (now known as
Conseco Finance Corp.) from 1975 to 1998.
Thomas M. Hagerty, 37............... 2000 Since 1999, Managing Director of Thomas H. 2003
Lee Partners, and, since 1993, Managing
Director of Thomas H. Lee Company. Also a
Director of Metris Companies, Inc., ARC
Holdings, Cott Corp., Freedom Securities
Corporation and Syratech Corp.
James D. Massey, 65(1)(2)........... 1994 Retired. Formerly, President and Deputy 2003
Chief Executive Officer of Merchants
National Corp. and Chairman, President
and Chief Executive Officer of Merchants
National Bank (banking).
Dennis E. Murray, Sr., 60(1)(2)..... 1994 Since 1964, partner or principal of the 2003
Ohio law firm of Murray & Murray Co.,
L.P.A. and its predecessor. Also a
Certified Public Accountant.
</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:
David R. Decatur, M.D., 61.......... 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, 64............. 1985 Retired. From 1985 to 1998, Executive Vice 2002
President of Conseco.
John M. Mutz, 64(2)................. 1997 Since 1999, investor and consultant. 2002
President of PSI Energy, Inc. (electric
utility) from 1994 to 1999. 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, 71............. 1998 From 1993 to present, Chairman of KMN, Inc. 2002
(medical venture capital). From 1999 to
present, General Counsel of Venturi Group
LLC (medical venture capital). Also a
Director of Integ Incorporated. Former
Director of Green Tree Financial
Corporation.
Ngaire E. Cuneo, 49................. 1994 Since 1992, Executive Vice President, 2001
Corporate Development of Conseco. Also a
Director of Duke Realty Investments, Inc.
David V. Harkins, 59................ 1999 Since April 28, 2000, interim Chairman of 2001
the Board and Chief Executive Officer of
Conseco. Since 1999, President of Thomas
H. Lee Partners and since its founding in
1974 has been affiliated with the Thomas
H. Lee Company, currently serving as
Senior Managing Director. Also a Director
of Metris Companies, Inc., Cott Corp.,
Fisher Scientific International Inc.,
Freedom Securities Corporation, Stanley
Furniture Company, Inc. and Syratech
Corp.
M. Phil Hathaway, 70(1)(2).......... 1984 Retired. Formerly, Treasurer of Cook Group, 2001
Inc. (medical equipment, property and
casualty insurance, and real estate
development operations). Also a Certified
Public Accountant.
</TABLE>
- ------------
(1) Member of Compensation Committee
(2) Member of Audit 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 and Incentive Plan (the "1994 Plan"), the
1997 Non-Qualified Stock Option Plan (the "1997 Plan") and other incentive
plans. The Compensation Committee is currently composed of three 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 provided for an annual salary of $1
million. In addition, Mr. Hilbert was entitled to receive an annual bonus equal
to the lesser of a non-discretionary amount ($13.5 million for 1999 prior to the
revision described below) or 3 percent of Net Profits. Mr. Hilbert was 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 had the authority under the CEO
Contract to reduce any such additional bonus. The Company's ROE for 1999 was
less than 15%. Consequently, Mr. Hilbert's bonus for 1999 would have been $13.5
million, but Mr. Hilbert agreed that his bonus, after reduction for cash to pay
taxes, relating to the last three quarters of 1999, was to be paid in shares of
Common Stock valued at the higher of $50 per share or market. Consequently his
bonus for 1999 consisted of 108,221 shares of Common Stock and $5,466,056 in
cash. "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.
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 deterimine what portion, if any, of the Maximum Bonus in excess
of a specified base amount ($4.5 million for 1999) 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 1999 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 1999, the chief executive officer recommended a reduction in
the bonuses payable to certain 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 1999 and the responsibilities which
each Executive Officer assumed during 1999.
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
Executive 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 Executive 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 February 1999, the Board of Directors approved an option exercise reload
program under which Mr. Hilbert and the Named Officers exercised outstanding
vested stock options to purchase 4,031,200 shares of Common Stock. The options
exercised would otherwise have remained exercisable until the years 2004 through
2005. As a result of these exercises, the Company will be able to realize a tax
deduction of approximately $64 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 2,183,598 previously owned shares and
Conseco withheld 706,365 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 Named Officers who
participated in the reload program equal to the number of shares surrendered and
withheld for the exercise prices and taxes.
Net of withheld and tendered shares, the participants received 1,141,237
shares of Common Stock in the reload program. As a result of such exercise, the
number of shares owned by executives increased and the dilution attributable to
stock options decreased. The reload program 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 exercise, 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
Conseco. The Compensation Committee desired to continue such incentives by
making the reload option grants.
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
8
<PAGE> 11
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, 1994 to December
31, 1999) 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 Conseco Finance Corp. in June 1998. The
comparison for each of the periods assumes that $100 was invested on December
31, 1994 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 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>
1994 100 100 100 100
1995 146 138 139 154
1996 298 169 184 208
1997 428 226 272 308
1998 292 290 342 344
1999 175 351 299 357
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Five-Year Average
1994 1995 1996 1997 1998 1999 Annual Total Return
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Conseco, Inc. $100 $146 $298 $428 $292 $175 12%
- -------------------------------------------------------------------------------------------------------------------
S&P 500 Index $100 $138 $169 $226 $290 $351 29%
- -------------------------------------------------------------------------------------------------------------------
DJ Life Insurance Index $100 $139 $184 $272 $342 $299 24%
- -------------------------------------------------------------------------------------------------------------------
S&P Financial Index $100 $154 $208 $308 $344 $357 29%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE> 13
14-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 14-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 100 100 100 100
1986 160 119 112 103
1987 161 125 91 86
1988 157 145 119 100
1989 389 191 190 127
1990 407 185 162 100
1991 1796 242 241 150
1992 2706 260 316 185
1993 3246 287 316 206
1994 2547 290 283 198
1995 3716 399 394 305
1996 7593 491 522 413
1997 10901 655 771 611
1998 7437 842 968 681
1999 4453 1019 846 709
</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 $ 771
- ---------------------------------------------------------------------------------------------------------------------------------
S&P Financial Index* $100 $103 $86 $100 $127 $100 $ 150 $ 185 $ 206 $ 198 $ 305 $ 413 $ 611
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------ ---------------------------------------
Fourteen-Year Average
1998 1999 Annual Total Return
- ------------------------ ---------------------------------------
<S> <C> <C> <C>
Conseco, Inc. $7,437 $4,453 31%
- ------------------------
S&P 500 Index $ 842 $1,019 18%
- ------------------------
DJ Life Insurance
Index* $ 968 $ 846 16%
- ------------------------
S&P Financial Index* $ 681 $ 709 15%
- ------------------------
</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.
S&P Financial total return estimated for 1986, 1987 and 1988. Official S&P
Financial total return data unavailable prior to 12/31/88.
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 and Chief Executive Officer of Conseco during 1999, and
the other four most highly compensated executive officers of Conseco in 1999
(collectively, the "Named Officers").
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
----------------------------------
ANNUAL COMPENSATION AWARDS
---------------------------------- ----------------------------------
NUMBER OF
RESTRICTED SECURITIES 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 (5)......... 1999 $1,000,000 $7,895,391(6) $123,254 $1,192,369 2,047,443 $835,974
Chairman of the Board, 1998 1,000,000 13,500,000 130,714 1,275,891 2,571,897 754,568
President
and Chief Executive Officer 1997 250,000 15,000,000 163,240 4,156,373 2,561,792 4,297
Ngaire E. Cuneo................ 1999 250,000 4,500,000 390,635 221,814 4,745
Executive Vice President, 1998.. 250,000 1,235,000 109,718 422,967 4,991
Corporate Development 1997 250,000 2,612,000 780,035 621,859 4,983
Rollin M. Dick (5)............. 1999 250,000 3,800,000 333,041 609,812 592,360
Executive Vice President 1998 250,000 3,816,000 302,094 741,635 554,510
and Chief Financial Officer 1997 250,000 3,816,000 1,108,184 853,452 20,669
Thomas J. Kilian (5) (7)....... 1999 250,000 2,000,000 185,023 5,447 3,570
Executive Vice President 1998 237,148 1,262,852 56,520 352,576 3,896
and Chief Operations Officer
Maxwell E. Bublitz(7).......... 1999.. 250,000 1,800,000 168,576 5,447 3,227
Senior Vice President, 1998 250,000 1,400,000 28,558 201,785 3,608
Investments
</TABLE>
- -------------------------
(1) Amounts for all years include imputed interest on a $1.9 million
interest-free loan made to Mr. Hilbert in 1988 ($106,590 in 1999, $107,413
in 1998 and $116,470 in 1997). The other Named Officers did not have other
annual compensation for 1999, 1998 or 1997 which is required to be listed
under SEC rules concerning executive officer and director compensation
disclosure.
(2) The amounts shown for 1999 in this column represent the value of units (each
unit represents one share of Common Stock) awarded for 1999 under the 1994
Stock Plan based on the market value of the Common Stock at March 31, 2000,
the date of award. The amounts shown for 1998 in this column represent the
value of stock units 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 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, 2000 as if outstanding on December 31, 1999, the
aggregate value of such stock units as of December 31, 1999 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 12/31/99 UNITS
------------- --------- ------
<S> <C> <C> <C>
Stephen C. Hilbert.......................................... 425,680 $ 7,502,610 0
Ngaire E. Cuneo............................................. 224,412 3,955,262 96,134
Rollin M. Dick.............................................. 306,397 5,400,247 306,397
Thomas J. Kilian............................................ 20,168 355,461 0
Maxwell E. Bublitz.......................................... 19,070 336,109 0
</TABLE>
Mr. Hilbert's unvested stock units were forfeited upon termination of his
employment. Stock units previously awarded to Ms. Cuneo will vest in the next
three years conditioned upon continued employment with Conseco as follows (none
of the units awarded to Messrs. Kilian or Bublitz will vest in the next three
years):
<TABLE>
<CAPTION>
12/31/00 12/31/01 12/31/02
-------- -------- --------
<S> <C> <C> <C>
Ngaire E. Cuneo............................................. 47,782 23,638 13,814
</TABLE>
(3) No stock appreciation rights have been granted.
(4) For 1999, 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
12
<PAGE> 15
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 1999 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................... $835,122 $ -- $ 852 $ --
Ngaire E. Cuneo...................... -- 1,175 528 3,042
Rollin M. Dick....................... 562,421 22,770 4,127 3,042
Thomas J. Kilian..................... -- -- 528 3,042
Maxwell E. Bublitz................... -- -- 366 2,861
</TABLE>
(5) The titles shown were those held throughout 1999. Mr. Kilian succeeded Mr.
Hilbert as President in February 2000. Mr. Hilbert and Mr. Dick resigned as
Directors and officers of Conseco on April 28, 2000.
(6) Mr. Hilbert agreed that his bonus, after reduction for cash to pay taxes,
relating to the last three quarters of 1999, was to be paid in shares of
Common Stock valued at the higher of $50 per share or market. Consequently,
his bonus for 1999 consisted of 108,221 shares of Common Stock (which are
reflected in the table at the values at the respective dates of issuance)
and $5,466,056 in cash.
(7) No compensation information is reported for years prior to the year in which
the Named Officer became an executive officer of the Company.
EMPLOYMENT CONTRACTS AND CHANGE-IN-CONTROL ARRANGEMENTS
Conseco has an employment agreement with Ms. Cuneo 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 also has an employment agreement with Mr. Kilian
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, a severance allowance upon termination of employment and certain
insurance and other fringe benefits. Conseco also has an employment agreement
with Mr. Bublitz 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 1999
and 2000), 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 or her 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 or her duties, a reduction in his or her
total compensation or the employee giving a notice of termination to Conseco
during the six-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 options to purchase Common Stock or successor securities
(in the case of Ms. Cuneo without deduction of the applicable exercise prices)
held by such person at a price per share equal to the greater of (i) the price
of the Common Stock at the time of the change of control (or in the case of a
change of control effected through a series of related transactions or in a
single transaction in which less than all outstanding shares of common stock are
acquired, the highest price paid to holders of Common Stock in any such
transaction) and (ii) the market price (based on a 20-trading day average) on
the day prior to the time the executive exercises this election (collectively,
the "Put Price").
As defined in the employment agreements for Ms. Cuneo and Messrs. Kilian
and Bublitz, "change in control" generally 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 in effect on May 26, 1999; provided that, without limitation,
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 Conseco representing 25 percent or more of the combined voting power of
Conseco's
13
<PAGE> 16
then outstanding securities; (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 or (iii) any reorganization, merger or consolidation (or issuance of
shares of Common Stock in connection therewith) has occurred unless immediately
after any such reorganization, merger or consolidation, (A) more than 60 percent
of the outstanding shares of common stock and voting power of the outstanding
securities of the surviving or resulting corporation are then beneficially
owned, directly or indirectly, by all of the individuals or entities who
beneficially owned the outstanding common stock and voting securities of the
Company immediately prior thereto in substantially the same proportions relative
to each other as their ownership immediately prior thereto and (B) at least a
majority of the members of the board of directors of the surviving or resulting
corporation were members of the Company's Board of Directors at the time of the
execution of the initial agreement or action of the Board of Directors providing
for such reorganization, merger or consolidation or issuance of shares;
provided, however, that no change in control shall be deemed to have occurred
under such employment agreements 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 1999 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
1999. For stock units awarded under the Company's 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.
14
<PAGE> 17
STOCK OPTIONS
The following table sets forth certain information concerning the exercise
in 1999 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, 1999.
AGGREGATED OPTION EXERCISES IN 1999 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, 1999(2) DECEMBER 31, 1999(3)
SHARES ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Stephen C. Hilbert........ 2,852,000 $45,654,000 5,681,132 1,508,000 $ -- $ 44,500
Ngaire E. Cuneo........... 308,000 4,950,000 1,016,640 258,000 -- 44,500
Rollin M. Dick............ 852,000 13,654,000 1,804,899 408,000 -- 44,500
Thomas J. Kilian.......... 9,600 176,925 186,823 587,600 273,325 450,850
Maxwell E. Bublitz........ 9,600 176,925 184,032 635,600 262,200 439,725
</TABLE>
- ------------
(1) The value realized equals the aggregate amount of the excess of the fair
market value on the date of exercise ($30.81) over the relevant exercise
prices, which in each case were equal to the market values on the dates the
options were originally granted. These stock option exercises occurred in
February 1999 as part of an option exercise reload program approved by the
Board of Directors. As a result of these exercises, the Company will be able
to realize a tax deduction of approximately $64 million. 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
exercise by tendering approximately 2,183,598 previously owned shares and by
having Conseco withhold 706,365 shares from the exercise proceeds to cover
required federal and state tax withholding. The Common Stock received by the
Named Officers as a result of such stock option exercises was as follows:
Mr. Hilbert, 804,557 shares; Ms. Cuneo, 86,186 shares; Mr. Dick, 242,188
shares; Mr. Kilian, 4,153 shares; and Mr. Bublitz, 4,153 shares.
(2) The average exercise price for the unexercised options listed below is as
follows: Mr. Hilbert, $37.59; Ms. Cuneo, $38.20; Mr. Dick, $37.58; Mr.
Kilian, $33.58; and Mr. Bublitz, $29.78.
(3) The value is calculated based on the aggregate amount of the excess of
$17.625 (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 1999) 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 1999 to the five Named Officers.
15
<PAGE> 18
OPTION GRANTS IN 1999
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------------------------------
% OF TOTAL
NUMBER OF OPTIONS GRANTED PER SHARE GRANT DATE
OPTIONS TO EMPLOYEES IN EXERCISE EXPIRATION PRESENT
NAME GRANTED 1999 PRICE(1) DATE VALUE(2)
---- --------- --------------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Stephen C. Hilbert.......... 2,047,443(3) 26.5% $30.81 2/23/09 $14,055,491
Ngaire E. Cuneo............. 221,814(3) 2.9 30.81 2/23/09 1,522,731
Rollin M. Dick.............. 609,812(3) 7.9 30.81 2/23/09 4,186,298
Thomas J. Kilian............ 5,447(3) .1 30.81 2/23/09 37,393
Maxwell E. Bublitz.......... 5,447(3) .1 30.81 2/23/09 37,393
</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 5.6 percent,
expected life of 4 years and a dividend rate of 2.2 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 exerciseable
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.
The options granted to the Named Officers in 1999 were under the 1997 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 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
16
<PAGE> 19
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.
Ms. Cuneo and Messrs. Kilian and Bublitz have employment agreements with
Conseco (see Employment Contracts and Change-in-Control Agreements). In the
event of a Control Termination of any such employment agreement 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 such Named Officer of
all or any portion of the options then outstanding held by such Named Officer to
purchase shares of Common Stock or successor securities ("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 Put Price. The
employment agreement with Ms. Cuneo provides that, to compensate her 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 her. Amounts to be paid to Mr. Kilian or Mr.
Bublitz 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 are eligible to participate in and receive
annual awards of up to $30,000 under the 1994 Stock Plan. For 1999, 1,093 stock
units were awarded under the 1994 Stock Plan to each of Dr. Decatur and Messrs.
Coss, Gongaware, Harkins, Hathaway, Massey, Murray, Mutz and Nickoloff for his
service as a Director. The Common Stock represented by the stock unit awards for
1999 had a market value of $12,330 on March 31, 2000 (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. Dr. Decatur and Messrs. Coss,
Gongaware, Hathaway, Massey, Murray, Mutz and Nickoloff each received such a
grant in 1999. 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.
Mr. Harkins is serving as interim Chairman of the Board and Chief Executive
Officer without additional compensation and is entitled to reimbursement of
expenses incurred in such capacity.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
The current members of the Compensation Committee are Messrs. Massey,
Murray and Hathaway. Mr. Massey serves as the Chairman of the Compensation
Committee. Each of the members of the Compensation Committee is a participant in
the Purchase Plans described below. See Certain Relationships and Related
Transactions.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Conseco has adopted stock purchase plans (the "Purchase Plans") to
encourage direct, long-term ownership of Common Stock by Directors, executive
officers and certain key employees. Purchases of Common Stock under the Purchase
Plans were financed by personal loans made to the participants from banks. Such
loans are collateralized by the Common Stock purchased. Approximately 170
Directors, officers and key employees of Conseco and its subsidiaries
participated in the Purchase Plans and purchased an
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<PAGE> 20
aggregate of approximately 19.0 million shares of Common Stock under the
Purchase Plans. Conseco has guaranteed the bank loans but has recourse to the
participants if it incurs a loss under the guarantees. The aggregate number of
shares of Common Stock purchased by each Director and executive officer (or by
affiliated trusts or limited partnerships) and the largest aggregate amount owed
on the guaranteed bank loans during 1999 were as follows: Mr. Hilbert -
5,792,635 shares and $162,541,688; Ms. Cuneo -1,353,149 shares and $41,087,459;
Mr. Dick - 2,485,040 shares and $70,018,551; Mr. Coss - 421,261 shares and
$12,562,830; Dr. Decatur - 548,504 shares and $19,838,559; Mr. Gongaware -
800,000 shares and $24,871,750; Mr. Hathaway - 30,000 shares and $1,039,239; Mr.
Massey - 521,261 shares and $15,288,747; Mr. Murray - 3,303,506 shares and
$99,670,606; Mr. Mutz - 40,000 shares and $1,317,539; Mr. Bublitz - 420,631
shares and $13,666,130; Mr. Kilian - 651,891 shares and $19,654,918; James S.
Adams - 651,891 shares and $19,977,609; Bruce A. Crittenden - 210,631 shares and
$6,281,427; and John J. Sabl - 90,000 shares and $3,657,029. The dollar amounts
disclosed in the preceding sentence also represent the outstanding principal
balances as of May 8, 2000, except for Mr. Mutz, whose bank loan balance as of
May 8, 2000 was $1,217,539. As a result of declines in the price of the Common
Stock, the value of the shares of Common Stock pledged as collateral for the
bank loans is substantially less than the amount of such loans. In addition,
Conseco has agreed to provide loans to the participants for the interest
payments payable on the guaranteed bank loans. The largest aggregate amounts
owed on the interest-payment loans during 1999 were as follows: Mr. Hilbert
$13,001,321; Ms. Cuneo $3,294,825; Mr. Dick $6,466,069; Mr. Coss $545,887; Dr.
Decatur $1,660,468; Mr. Gongaware $2,857,253; Mr. Hathaway $52,815; Mr. Massey
$1,171,727; Mr. Murray $7,101,024; Mr. Mutz $123,362; Mr. Bublitz $945,622; Mr.
Kilian $1,140,364; Mr. Adams $1,172,264; Mr. Crittenden $273,129; and Mr. Sabl
$384,351. As of May 8, 2000, the outstanding principal balances of the
interest-payment loans were as follows: Mr. Hilbert $16,821,098; Ms. Cuneo
$4,282,893; Mr. Dick $8,131,823; Mr. Coss $837,259; Dr. Decatur $2,154,217; Mr.
Gongaware $3,465,925; Mr. Hathaway $78,135; Mr. Massey $1,534,943; Mr. Murray
$9,477,278; Mr. Mutz $155,199; Mr. Bublitz $1,277,257; Mr. Kilian $1,604,205;
Mr. Adams $1,645,968; Mr. Crittenden $418,819; and Mr. Sabl $479,497. The
interest payment loans bear interest at a 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 May 8, 2000, the interest rate was 6.54% per
annum.
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.
In connection with a Retention Agreement between Conseco Finance Corp. and
Mr. Crittenden, Conseco Finance Corp. made a $1,000,000 interest-free loan to
Mr. Crittenden in July 1998. In July 1999 such loan was converted to a loan
bearing interest at the rate of 7% per annum, which is due and payable upon the
earlier of June 30, 2000 or the date of Mr. Crittenden's voluntary termination
of employment with Conseco Finance Corp. In 1997 Conseco Finance Corp. (prior to
its acquisition by Conseco) made loans to Mr. Crittenden and certain other of
its executive officers in connection with their purchase of Conseco Finance
Corp. 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 1999 was $201,693, and such
note is due and payable upon the earlier of November 19, 2000 or 30 days after
the date of his resignation or other termination of employment with Conseco
Finance Corp.
Under the noncompetition agreement between Mr. Coss and Conseco Finance
Corp., he was entitled to the use of office space and secretarial and security
services through February 2002. In November 1999, Mr. Coss and Conseco Finance
Corp. agreed to discontinue these services in exchange for payments of $19,000
in 1999 and $171,600 in each of 2000, 2001 and 2002.
On April 6, 2000, Conseco made a loan of $23 million to Mr. Hilbert,
secured by a pledge of one million shares of Common Stock and the assignment of
the rights to receive bonus, severance and other payments under his Employment
Agreement with the Company. Such loan was due on April 5, 2001 and bore interest
at
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<PAGE> 21
an annual rate of 8.5 percent, payable quarterly. Such loan, together with
accrued interest, was repaid in full on April 28, 2000. This loan was approved
by the Board of Directors (with Mr. Hilbert abstaining). This loan reflected a
variety of circumstances, including (i) the depressed market price for the
Common Stock and margin calls resulting therefrom, (ii) the potential concerns
that could be created by sales of Common Stock from margin of Mr. Hilbert,
especially prior to the time the Company released its audited results for 1999
and (iii) the lack of opportunity for Mr. Hilbert to obtain alternate financing
on an expedited basis to avoid such sales.
On April 28, 2000, Conseco and Mr. Hilbert entered into an agreement
pursuant to which Mr. Hilbert's employment was terminated. As contemplated by
the terms of the Employment Agreement between Conseco and Mr. Hilbert, Mr.
Hilbert received $49,382,165 (prior to required withholding for taxes), an
amount equal to (i) five times his salary and the Non-Discretionary Amount (as
defined in his Employment Agreement) for this year, less (ii) the amount due
under the loan described in the preceding paragraph. Mr. Hilbert also received
the bonus of $3,375,000 payable under his Employment Agreement for the first
quarter of 2000. Conseco agreed to continue to treat Mr. Hilbert as though he
were an employee/participant for purposes of the Purchase Plans and all of his
loans relating to such plans remain outstanding.
Conseco also entered into a consulting agreement with Mr. Hilbert pursuant
to which Mr. Hilbert has agreed to provide consulting services up to an average
of 25 hours per month for a period of three years. Under the consulting
agreement, Mr. Hilbert is entitled to receive $1,000 per year, health and dental
insurance coverage for three years, continued security services at his home
through December 31, 2000 and use of Conseco's jet aircraft for up to 20 round
trips per year, subject to availability and the obligation to reimburse Conseco
for such use on the same basis as Conseco charges its executives for such use.
Mr. Hilbert also agreed not to compete with Conseco during the term of the
consulting agreement.
On April 27, 2000, Mr. Hilbert was granted options to purchase an aggregate
of 2,000,000 shares of Common Stock (1,000,000 each under the 1994 Stock Plan
and the 1997 Plan) at a price of $5.75 per share (the average of the high and
low sales prices on the NYSE on such date). The options expire April 26, 2003.
On April 28, 2000, Conseco and Mr. Dick entered into an agreement pursuant
to which Mr. Dick's employment was terminated. As contemplated by the terms of
the Employment Agreement between Conseco and Mr. Dick, Conseco agreed to pay Mr.
Dick his salary of $250,000 per year through December 31, 2001 and he also
received the bonus of $187,500 payable under his Employment Agreement for the
first quarter of 2000. Conseco also agreed to continue to treat Mr. Dick as
though he were an employee/participant for purposes of the Purchase Plans and
all of his loans relating to such plans remain outstanding.
Conseco also entered into a consulting agreement with Mr. Dick pursuant to
which Mr. Dick has agreed to provide consulting services up to an average of 25
hours per month for a period of three years. Under the consulting agreement, Mr.
Dick is entitled to receive $1,000 per year, health and dental coverage for
three years, and use of Conseco's jet aircraft for up to 10 round trips per
year, subject to availability and the obligation to reimburse Conseco for such
use on the same basis as Conseco charges its executives for such use. Mr. Dick
also agreed not to compete with Conseco during the term of the consulting
agreement.
On April 27, 2000, Mr. Dick was granted options to purchase an aggregate of
600,000 shares of Common Stock under the 1997 Plan at a price of $5.75 per
share. The options expire April 26, 2003.
19
<PAGE> 22
BOARD MEETINGS AND COMMITTEES
During 1999, the Board of Directors met or took action by written consent
on 18 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 10 occasions during 1999. 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 three meetings in 1999. 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 for 2001 Annual Meeting.
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 1999 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, 1999, except for Mr. Murray who filed two late reports covering a total of
ten transactions. Those transactions related to the issuance of an aggregate of
2,472 stock units (each representing one share of Common Stock) in lieu of the
cash payment of quarterly director fees.
PROPOSAL 2
SHAREHOLDER PROPOSAL
The American Federation of State, County and Municipal Employees, AFL-CIO,
Employees Pension Plan, 1625 L Street, N.W., Washington, DC 20036-5687,
beneficial owner of 4,500 shares of Common Stock, has submitted the following
proposal:
Resolved: That the shareholders of Conseco, Inc. ("Conseco" or the
"Company") hereby urge the Board of Directors to take the necessary steps to
eliminate the classification of the Board of Directors of the Company and to
require that all Directors stand for election annually. The Board
declassification shall be completed in a manner that does not affect the
unexpired terms of Directors previously elected.
We believe the election of Directors is the most powerful way Conseco
shareholders influence the strategic direction of our Company. Currently the
Board of Conseco is divided into three classes, one with
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<PAGE> 23
three members and two with four. Each class serves staggered three-year terms.
Because of this structure shareholders may only vote on roughly one third of the
Directors each year.
In December of last year Conseco announced a reduction of its quarterly
dividend and predicted lower operating earnings for this year. As of December
17th the stock price of our Company had reached a three-year low of $17.50, a
70% decline from its 1998 high. We believe much of this decline stems from
investors' concerns about the high price Conseco paid for Green Tree Financial
Corp. in 1998. We are not convinced that Green Tree's operations will contribute
consistent earnings in the future.
The staggered term structure of Conseco's Board is not in the best interest
of shareholders because it reduces accountability and is an unnecessary
anti-takeover device. Now is a prudent time to have all Directors annually
accountable to shareholders, given the strategic challenges and poor share price
performance outlined above.
We feel that annual accountability can serve to focus our Directors more
closely on the performance of top executives and on increasing shareholder
value. Annual elections of all Directors give shareholders the power to either
completely replace their Board, or replace a majority of Directors, if a
situation arises which warrants such drastic action. We do not believe
destaggering the Board of Conseco will be destabilizing to our Company or impact
the continuity of Director service. Our Directors, as well as the directors of
the overwhelming majority of other public companies, are routinely elected with
over 95% shareholder approval.
There are indications from studies that classified boards and other
anti-takeover devices have an adverse impact on shareholder value. A 1991 study
by Lilli Gordon of the Gordon Group and John Pound of Harvard University found
that companies with restrictive corporate governance structures, including those
with classified boards, are "significantly less likely to exhibit outstanding
long-term performance relative to their industry peers."
A growing number of shareholders appear to agree with our concerns. Last
year a majority of shareholders supported proposals asking their boards to
repeal classified board structures at a total of 23 companies, including Boeing,
Bristol-Myers Squibb, U.S. West, Eastman Kodak and Kimberly-Clark.
FOR A GREATER VOICE IN THE GOVERNANCE OF CONSECO AND ANNUAL ELECTIONS FOR
ALL DIRECTORS WE URGE SHAREHOLDERS TO VOTE YES ON THIS PROPOSAL!
STATEMENT IN OPPOSITION
The Board of Directors believes that this proposal is not in the best
interest of the Company or its shareholders.
The proponent suggests that a classified board reduces accountability and
is an unnecessary anti-takeover device. The Board does not agree. When
considered in the fuller context of the nature of the Company's business, its
strategy and its overall corporate governance, the classified board is important
to the Company's ability to enhance shareholder value by delivering on its
long-term goals.
The Company's method for electing directors, with the Board divided into
three classes of directors serving staggered three-year terms, was authorized by
the Company's shareholders in 1989. Similar procedures for the staggered
election of directors have been adopted by many major corporations and, in fact,
more than half of the other S&P 500 companies provide for the election of their
directors in this manner. The Board believes this method of electing directors
provides important benefits for the Company:
- It promotes continuity and stability of leadership on the Board.
Because at least two meetings of shareholders will be required to
replace a majority of the Board, a majority of directors will be
experienced and familiar with the Company's business operations and
strategies at any given time. Board classification also helps
prevent abrupt changes in policy or direction that might result if
the entire Board were elected each year. Such changes could impair
the Company's ability to achieve
21
<PAGE> 24
its long-term strategic goals, and thus might deprive the shareholders
of the ability to realize the maximum value of their investment.
- In an unsolicited takeover attempt, the classified Board structure
helps prevent a sudden change of control and gives the Board
critically needed time and bargaining power to negotiate a better
offer from the acquirer, to consider alternatives and to ensure that
shareholder value is maximized.
The classified Board serves the Company and its shareholders well by
fostering a strong, stable, informed and experienced Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP served as the independent accountants to audit
the financial statements of Conseco for 1999 and has been selected by the Board
of Directors to serve as such for 2000. 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 FOR 2001 ANNUAL MEETING
Any proper proposal which a shareholder wishes to have included in the
Board's proxy statement and form of proxy for the 2001 Annual Meeting must be
received by Conseco by January 23, 2001. 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 2001 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 2001 Annual Meeting or who wishes to nominate a candidate for election as
director should obtain a copy of these Bylaw provisions and may do so by written
request addressed to the Secretary of Conseco at 11825 North Pennsylvania
Street, Carmel, Indiana 46032.
ANNUAL REPORT
Conseco's Annual Report for 1999 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
May 23, 2000
22
<PAGE> 25
- --------------------------------------------------------------------------------
CONSECO, INC.
PROXY FOR 2000 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
James S. Adams, Thomas J. Kilian and Ngaire E. Cuneo, or any of them, with full
power of substitution, to vote all shares of Common Stock with 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 June 23, 2000, and any adjournments thereof.
The proxies are hereby authorized to vote as follows:
1. Election of Lawrence M. Coss, Thomas M. Hagerty, James D. Massey and Dennis
E. Murray, Sr. as Directors for three-year terms expiring in 2003.
[ ] 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. Shareholder proposal to eliminate the classification of the Board of
Directors.
[ ] 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)
<PAGE> 26
- --------------------------------------------------------------------------------
THE SHARES REPRESENTED BY THIS PROXY, UNLESS OTHERWISE SPECIFIED, SHALL BE
VOTED FOR THE ELECTION OF ALL DIRECTORS LISTED IN ITEM 1 AND AGAINST THE
SHAREHOLDER PROPOSAL LISTED IN ITEM 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 May 23, 2000.
Signature(s):
----------------------------------------
Dated:
--------------------------------- , 2000
PLEASE DATE, SIGN AND
RETURN THIS PROXY
PROMPTLY
<PAGE> 27
- --------------------------------------------------------------------------------
CONSECO, INC.
PROXY FOR 2000 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
James S. Adams, Thomas J. Kilian and Ngaire E. Cuneo, or any of them, with full
power of substitution, to vote all shares of Series F Common-Linked Convertible
Preferred Stock with 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 June 23, 2000, and
any adjournments thereof.
The proxies are hereby authorized to vote as follows:
1. Election of Lawrence M. Coss, Thomas M. Hagerty, James D. Massey and Dennis
E. Murray, Sr. as Directors for three-year terms expiring in 2003.
[ ] 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. Shareholder proposal to eliminate the classification of the Board of
Directors.
[ ] 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)
<PAGE> 28
- --------------------------------------------------------------------------------
THE SHARES REPRESENTED BY THIS PROXY, UNLESS OTHERWISE SPECIFIED, SHALL BE
VOTED FOR THE ELECTION OF ALL DIRECTORS LISTED IN ITEM 1 AND AGAINST THE
SHAREHOLDER PROPOSAL LISTED IN ITEM 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 May 23, 2000.
Signature(s):
----------------------------------------
Dated:
--------------------------------- , 2000
PLEASE DATE, SIGN AND
RETURN THIS PROXY
PROMPTLY
