FORM PRE 14A
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Filed by the Registrant
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Filed by a Party other than the Registrant o |
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Check the appropriate box: |
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x Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2)) |
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o Definitive Proxy Statement |
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o Definitive Additional Materials |
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Soliciting Material Pursuant to §240.14a-12 |
CONSECO, INC.
(Name of Registrant as Specified In Its Charter)
Conseco, Inc.
(Name of Person(s) Filing Proxy
Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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x No fee required. |
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Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11. |
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1) Title of each class of securities to which transaction applies: |
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2) Aggregate number of securities to which transaction applies: |
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined): |
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4) Proposed maximum aggregate value of transaction: |
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o Fee paid previously with preliminary materials. |
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o 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. |
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1) Amount Previously Paid: |
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2) Form, Schedule or Registration Statement No.: |
Conseco,
Inc.
11825 North Pennsylvania Street
Carmel, Indiana 46032
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 12, 2009
Notice Is Hereby Given
That the Annual Meeting of Shareholders of Conseco, Inc.
(the Company), will be held at the Conseco
Conference Center, 11825 North Pennsylvania Street, Carmel,
Indiana, at 8:00 a.m., Eastern Daylight Time, on
May 12, 2009, for the following purposes:
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1.
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To elect nine directors, each for a one-year term ending in 2010;
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2.
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To approve the adoption of a Section 382 Stockholders
Rights Plan;
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3.
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To approve the Companys Amended and Restated Long-Term
Incentive Plan;
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4.
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To ratify the appointment of PricewaterhouseCoopers LLP as the
Companys independent registered public accounting firm for
2009; and
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5.
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To consider such other matters, if any, as may properly come
before the meeting.
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Holders of record of outstanding shares of the common stock of
the Company as of the close of business on March 16, 2009,
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
Karl W. Kindig, Secretary
April , 2009
Carmel, Indiana
TABLE OF
CONTENTS
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Pension Benefits in 2008
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Section 382 Stockholders Rights Plan
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Annex A
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Amended and Restated Long-Term Incentive Plan
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Annex B
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Conseco,
Inc.
11825 North Pennsylvania Street
Carmel, Indiana 46032
PROXY
STATEMENT
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of Conseco,
Inc. (Conseco or the Company) for the
Annual Meeting of Shareholders (the Annual Meeting)
to be held at the Conseco Conference Center, 11825 North
Pennsylvania Street, Carmel, Indiana on May 12, 2009, at
8:00 a.m., Eastern Daylight Time. It is expected that this
Proxy Statement and proxy will be mailed to the shareholders on
or about April 17, 2009. The enclosed proxy is solicited
by our Board of Directors. Proxies are being solicited
principally by mail. Directors, officers and regular employees
of Conseco may also solicit proxies in person, through the mail
or by telecommunications. All expenses relating to the
preparation and mailing to the shareholders of the Notice, this
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 for each of the boards nominees for director
(Proposal 1), for the approval of the Section 382
Stockholders Rights Plan (Proposal 2), for the approval of
the Amended and Restated Long-term Incentive Plan
(Proposal 3) and for the ratification of the
appointment of PricewaterhouseCoopers LLP as the Companys
independent registered public accounting firm for 2009
(Proposal 4). 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 Consecos common stock
as of the close of business on March 16, 2009, will be
entitled to vote at the meeting. On such record date, Conseco
had 184,753,758 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 a
majority of the outstanding shares of common stock entitled to
vote at the Annual Meeting is necessary to constitute a quorum.
If you hold your shares in street name (that is, if you hold
your shares through a broker, bank or other holder of record),
you may be able to vote by telephone or via the Internet. Please
refer to the information on the voting instruction form
forwarded to you by your bank, broker or other holder of record
to see which voting options are available to you.
You may receive proxy solicitation materials from Otter Creek
Partners I, L.P. (Otter Creek) in connection
with its nomination of R. Keith Long to be a director of
Conseco. The Board of Directors recommends that you not
sign or return the proxy card that may be sent to you by
Otter Creek.
If you want to vote in person at the Annual Meeting and you hold
your shares in street name, you must obtain a legal proxy from
your bank, broker or other holder of record authorizing you to
vote. You must then bring the legal proxy to the Annual Meeting.
The election of directors (Proposal 1), because it is a
contested election, will be determined by the plurality of the
votes cast by the holders of shares represented (in person or by
proxy) and entitled to vote at the Annual Meeting provided a
quorum is present. Consequently, the nine nominees who receive
the greatest number of votes cast will be elected as directors
of the Company. The vote required to approve the
Section 382
1
Stockholders Rights Plan and the Amended and Restated Long-term
Incentive Plan (Proposals 2 and 3) is the affirmative
vote of the holders of a majority of the shares represented and
entitled to vote at the Annual Meeting. The vote required to
approve the ratification of the appointment of our independent
registered public accounting firm (Proposal 4) is the
affirmative vote of the holders of a majority of the shares
represented and entitled to vote at the Annual Meeting. 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. Abstentions from
voting will have the same legal effect as voting against
Proposal 2, Proposal 3 and Proposal 4.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY
MATERIALS FOR THE SHAREHOLDER MEETING TO BE HELD ON MAY 12,
2009
Under new Securities and Exchange Commission rules, you are
receiving this notice that the proxy materials for the Annual
Meeting are available on the Internet. The proxy statement and
the annual report to shareholders are available at
www.proxyvote.com.
2
SECURITIES
OWNERSHIP
The following table sets forth certain information concerning
the beneficial ownership of our common stock as of
March 16, 2009 (except as otherwise noted) by each person
known to us who beneficially owns more than 5% of the
outstanding shares of our common stock, each of our directors,
each of our current executive officers that are named in the
Summary Compensation Table on page 23 and all of our
current directors and executive officers as a group.
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Shares Beneficially Owned
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Title of Class
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Name of Beneficial Owner
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Number
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Percentage
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Common stock
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Columbia Wanger Asset Management, L.P.(1)
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26,489,000
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14.3
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Common stock
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Steel Partners II, L.P.(2)
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14,801,460
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8.0
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Common stock
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Hotchkis and Wiley Capital Management, LLC(3)
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12,024,641
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6.5
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Common stock
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R. Glenn Hilliard(4)
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1,565,294
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*
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Common stock
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Donna A. James
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10,807
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*
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Common stock
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Debra J. Perry(5)
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40,381
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*
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Common stock
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C. James Prieur(6)
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795,000
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*
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Common stock
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Philip R. Roberts(5)
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43,907
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*
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Common stock
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Neal C. Schneider(5)
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41,407
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*
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Common stock
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Michael S. Shannon(5)
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126,866
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*
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Common stock
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Michael T. Tokarz(5)
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38,907
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*
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Common stock
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John G. Turner(5)
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46,907
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*
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Common stock
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Doreen A. Wright
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12,307
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*
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Common stock
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Edward J. Bonach(7)
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97,000
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*
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Common stock
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Eric R. Johnson(8)
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242,237
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*
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Common stock
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Scott R. Perry(9)
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142,898
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*
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Common stock
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Steven M. Stecher(10)
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92,975
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Common stock
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All directors and executive officers as a group
(19 persons)(11)
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3,721,571
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2.0
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Less than 1%. |
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(1) |
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Based solely on the Amendment No. 3 to Schedule 13G
filed with the SEC on January 27, 2009 by Columbia Wanger
Asset Management, L.P. The Amendment No. 3 to
Schedule 13G reports sole power to vote or direct the vote
of 26,104,000 shares and sole power to dispose or direct
the disposition of 26,489,000 shares. The business address
for Columbia Wanger Asset Management, L.P. is 227
West Monroe Street, Suite 3000, Chicago, IL 60606. |
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Based solely on the Amendment No. 7 to Schedule 13D
filed with the SEC on January 5, 2009 by Steel Partners II,
L.P. The business address for Steel Partners II, L.P. is 590
Madison Avenue, 32nd Floor, New York, NY 10022. |
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Based solely on the Amendment No. 3 to Schedule 13G
filed with the SEC on February 13, 2009 by Hotchkis and
Wiley Capital Management, LLC. The Amendment No. 3 to
Schedule 13G reports sole power to vote or direct the vote
of 8,168,541 shares and sole power to dispose or to direct
the disposition of 12,024,641 shares. The business address
for Hotchkis and Wiley Capital Management, LLC is
725 S. Figueroa Street, 39th Floor, Los Angeles, CA
90017. |
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Includes 98,119 shares held by a family charitable
foundation, of which Mr. Hilliard is a trustee. He
disclaims beneficial ownership of such shares. Also includes
options, exercisable currently or within 60 days of
March 16, 2009, to purchase 755,000 shares of common
stock. |
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Includes options, exercisable currently or within 60 days
of March 16, 2009, to purchase 15,400 shares of common
stock. |
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Includes options, exercisable currently or within 60 days
of March 16, 2009, to purchase 325,000 shares of
common stock. |
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Includes options, exercisable currently or within 60 days
of March 16, 2009, to purchase 40,000 shares of common
stock. |
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Includes options, exercisable currently or within 60 days
of March 16, 2009, to purchase 194,000 shares of
common stock. |
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(9) |
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Includes options, exercisable currently or within 60 days
of March 16, 2009, to purchase 105,500 shares of
common stock. |
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Includes options, exercisable currently or within 60 days
of March 16, 2009, to purchase 77,500 shares of common
stock. |
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Includes options, exercisable currently or within 60 days
of March 16, 2009, to purchase an aggregate of
1,925,900 shares of common stock held by directors and
executive officers. |
4
PROPOSAL 1
ELECTION
OF DIRECTORS
Nine individuals will be elected to the board of directors for
one-year terms expiring at the 2010 annual meeting of
shareholders. The nominees listed below are currently members of
the board of directors. One current director, Michael Shannon,
has informed the board that he will be stepping down as a
director on May 11, 2009. The board has elected not to fill
his seat on the board and has agreed to reduce the number of
directors to nine after his resignation. All directors will
serve until their successors are duly elected and qualified.
Board
Nominees
Unless authority is specifically withheld, the shares of common
stock represented by the enclosed form of proxy will be voted in
favor of all board nominees identified below. 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.
Set forth below is information regarding each person nominated
by the board of directors for election as a director.
Nominees for Election as Directors:
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Donna A. James, 51, has been a director of Conseco
since May 2007. Since 2006 Ms. James has been President and
managing director of Lardon & Associates, a business and
executive advisory services firm. Before retiring in 2006, Ms.
James worked in various capacities with Nationwide Mutual
Insurance Company and its public company subsidiary, Nationwide
Financial Services, Inc., beginning in 1981, including
President, Nationwide Strategic Investments (2003-2006),
Executive Vice President and Chief administrative Officer
(2000-2003) and Senior Vice President and Chief Human Resources
Officer (1998-2000). She is also a director of Coca-Cola
Enterprises, Inc. and Limited Brands, Inc.
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Debra J. Perry, 57, has served as a director of
Conseco since June 2004. Since 2008 Ms. Perry has been the
managing member of Perry Consulting LLC. From 1992-2004, she was
a senior executive at Moodys Investors Service and
Moodys Corporation. During her career there, she served as
Chief Administrative Officer and Chief Credit Officer, and had
responsibility for several ratings groups, including Americas
Corporate Finance, Leverage Finance, Public Finance, and
Finance, Securities and Insurance. Until recently, Ms. Perry
served on the board of MBIA Inc., the largest financial guaranty
insurance company. At the request of the MBIA board, she became
a consultant to its Credit Risk Committee to refine and
implement the companys risk strategy as part of a
five-year transformation plan. Ms. Perry is also a director of
Korn/Ferry International.
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C. James Prieur, 57, has been chief executive
officer and a director since September 2006. Before joining
Conseco, Mr. Prieur had been with Sun Life Financial since 1979.
He began his career in private placements, then equity and fixed
income portfolio management, rising to vice president of
investments for Canada in 1988, and then vice president of
investments for the U.S. in 1992. In 1997 he was named senior
vice president and general manager for all U.S. operations, and
became corporate president and chief operating officer in 1999.
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Philip R. Roberts, 67, joined our board of
directors in September 2003. Mr. Roberts is retired. From 2000
until 2007, Mr. Roberts was principal of Roberts Ventures
L.L.C., consultant for merger and acquisition and product
development for investment management firms. From 1996 until
2000, Mr. Roberts served as chief investment officer of trust
business for Mellon Financial Corporation and headed its
institutional asset management businesses from 1990 to 1996.
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Michael T. Tokarz, 59, joined our board of
directors in September 2003. Mr. Tokarz is the chairman of MVC
Capital, Inc. (a registered investment company). In addition, he
has been a managing member of the Tokarz Group, LLC (venture
capital investments) since 2002. He was a general partner with
Kohlberg Kravis Roberts & Co. from 1985 until he retired in
2002. Mr. Tokarz is chairman of Walter Industries, Inc. and is
also a director of Idex Corp. and Dakota Growers Pasta
Companies, Inc.
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R. Glenn Hilliard, 66, has served as chairman of
our board of directors since September 2003. During the period
from August 2004 until September 2005, he served as executive
chairman and at all other times since September 2003 he has
served as non-executive Chairman. Mr. Hilliard has been chairman
and chief executive officer of Hilliard Group, LLC, an
investment and consulting firm, since 2003. From 1999 until his
retirement in 2003, Mr. Hilliard served as chairman, chief
executive officer and a member of the executive committee for
ING Americas. From 1994 to 1999 he was chairman and CEO of ING
North America. Mr. Hilliard is a Trustee of Columbia Funds
Series Trust, Columbia Funds Master Investment Trust, Columbia
Funds Variable Insurance Trust I (formerly Nations Separate
Account Trust) and Banc of America Funds Trust.
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Neal C. Schneider, 64, joined our board of
directors in September 2003. Between 2002 and 2003, Mr.
Schneider was a partner of Smart and Associates, LLP, a business
advisory and accounting firm. Between 2000 and 2002, he was an
independent consultant. Until his retirement in 2000, Mr.
Schneider spent 34 years with Arthur Andersen & Co.,
including service as partner in charge of the Worldwide
Insurance Industry Practice and the North American Financial
Service Practice. Mr. Schneider has been chairman of the board
of PMA Capital Corporation since 2003.
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John G. Turner, 69, joined our board of directors
in September 2003. Mr. Turner has been chairman of Hillcrest
Capital Partners, a private equity investment firm since 2002.
Mr. Turner served as chairman and CEO of ReliaStar Financial
Corp. from 1991 until it was acquired by ING in 2000. After the
acquisition he became vice chairman and a member of the
executive committee for ING Americas until his retirement in
2002. Mr. Turner is a director of Hormel Foods Corporation and
ING Funds.
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Doreen A. Wright, 52, joined our board of
directors in May 2007. Ms. Wright was Senior Vice President and
Chief Information Officer of Campbell Soup Company from 2001
until her retirement in 2008. Prior to joining Campbell Soup
Company, she was Executive Vice President and Chief Information
Officer at Nabisco, Inc. from 1999-2001. From 1995 through 1998,
Ms. Wright was Senior Vice President, Operations and Systems for
Prudential Insurance Companys Prudential Investment Group.
From 1984 until 1994, she held various leadership positions at
Bankers Trust Company as a Managing Director and Senior Vice
President of numerous large-scale institutional customer service
and technology groups. Ms. Wright serves on the board of
directors of The Riverside Symphonia, is a trustee of the
Campbell Soup Foundation and previously served on the board of
directors of The Yankee Candle Company.
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THE BOARD RECOMMENDS THAT YOU VOTE FOR THE
ELECTION TO THE BOARD OF EACH OF THE COMPANYS DIRECTOR
NOMINEES LISTED ABOVE
Otter
Creek Nominee
On March 20, 2009, Conseco received notice from Otter Creek
Partners I, L.P., by its General Partner, Otter Creek
Management, Inc. of its nomination of R. Keith Long to stand for
election to the Conseco Board of Directors. If you receive proxy
solicitation materials from Otter Creek, the Board of Directors
unanimously recommends that you NOT return the proxy card or
otherwise vote for Mr. Long. If you have returned a proxy
card to Otter Creek, you can revoke it by properly executing and
returning the Companys proxy card, or, if you hold your
shares in street name, then by following the voting instruction
form that was forwarded to you.
Board
Committees
Audit and Enterprise Risk Committee. The
Audit and Enterprise Risk Committees functions, among
others, are to recommend the appointment of independent
accountants; review the arrangements for and scope of the audit
by the independent accountants; review the independence of the
independent accountants; consider the adequacy of the system of
internal accounting controls and review any proposed corrective
actions; review and monitor the Companys compliance with
legal and regulatory requirements; and discuss with management
7
and the independent accountants our draft annual and quarterly
financial statements and key accounting
and/or
reporting matters. The Audit and Enterprise Risk Committee
currently consists of Mr. Schneider, Mr. Roberts,
Mr. Turner and Ms. Wright, with Mr. Schneider
serving as chairman of the committee and as audit
committee financial expert, as defined under Securities
and Exchange Commission rules promulgated under the
Sarbanes-Oxley Act. All current members of the Audit and
Enterprise Risk Committee are independent within the
meaning of the regulations adopted by the Securities and
Exchange Commission and the listing requirements adopted by the
New York Stock Exchange regarding audit committee membership.
The current members also satisfy the financial literacy
qualifications of the New York Stock Exchange listing standards.
The committee met on 18 occasions in 2008. A copy of the Audit
and Enterprise Risk Committees charter is available on our
website at www.conseco.com.
Governance and Strategy Committee. The
Governance and Strategy Committee is responsible for, among
other things, establishing criteria for board membership;
considering, recommending and recruiting candidates to fill new
positions on the board; reviewing candidates recommended by
shareholders; and considering questions of possible conflicts of
interest involving board members, executive officers and key
employees. It is also responsible for developing principles of
corporate governance and recommending them to the board for its
approval and adoption, and reviewing periodically these
principles of corporate governance to insure that they remain
relevant and are being complied with. The Governance and
Strategy Committee currently consists of Mr. Tokarz,
Mr. Shannon and Ms. Perry, with Mr. Tokarz
serving as chairman of the committee. All current members of the
Governance and Strategy Committee are independent
within the meaning of the listing requirements adopted by the
New York Stock Exchange regarding nominating committee
membership. The committee held four meetings during 2008. A copy
of the Governance and Strategy Committees charter is
available on our website at www.conseco.com. The
Governance and Strategy Committee does not have a written policy
regarding shareholder nominations for director candidates. The
Governance and Strategy Committee will, however, consider
candidates for director nominees put forward by shareholders.
See Shareholder Proposals for 2009 Annual Meeting
for a description of the advance notice procedures for
shareholder nominations for directors.
Human Resources and Compensation
Committee. The Human Resources and Compensation
Committee is responsible for, among other things, approving
overall compensation policy; recommending to the board the
compensation of the chief executive officer and other senior
officers; and reviewing and administering our incentive
compensation and equity award plans. The Human Resources and
Compensation Committee currently consists of Ms. Perry,
Ms. James, Mr. Tokarz and Mr. Shannon, with
Ms. Perry serving as committee chair. All current members
of the Human Resources and Compensation Committee are
independent within the meaning of the listing
requirements adopted by the New York Stock Exchange regarding
compensation committee membership. The committee met on seven
occasions in 2008. A copy of the Human Resources and
Compensation Committees charter is available on our
website at www.conseco.com.
Investment Committee. The Investment
Committee is responsible for, among other things, reviewing
investment policies, strategies and programs; reviewing the
procedures which Conseco utilizes in determining that funds are
invested in accordance with policies and limits approved by it;
and reviewing the quality and performance of our investment
portfolios and the alignment of asset duration to liabilities.
The Investment Committee currently consists of Mr. Prieur,
Mr. Schneider, Mr. Roberts and Mr. Turner, with
Mr. Roberts serving as chairman of the committee. The
committee met on three occasions in 2008. A copy of the
Investment Committees charter is available on our website
at www.conseco.com.
Executive Committee. Subject to the
requirements of applicable law, including our certificate of
incorporation and bylaws, the Executive Committee is responsible
for exercising, as necessary, the authority of the board of
directors in the management of our business affairs during
intervals between board meetings. The Executive Committee
currently consists of Mr. Hilliard, Mr. Prieur and
Mr. Turner, with Mr. Turner serving as chairman of the
committee. A copy of the Executive Committees charter is
available on our website at www.conseco.com.
8
Director
Compensation
For serving as Non-Executive Chairman, Mr. Hilliard
receives a fee equal to 175% of the base cash fees and equity
awards paid to the other non-employee directors. Our
non-employee directors currently receive an annual cash retainer
of $70,000. The chairs of the Audit and Enterprise Risk
Committee and the Human Resources and Compensation Committee
each currently receive an additional annual cash fee of $30,000,
and directors who chair one of our other board committees
receive an additional annual cash fee of $20,000. Each member of
the Audit and Enterprise Risk Committee (including the chairman)
receives an additional annual cash retainer of $15,000. Cash
fees are paid quarterly in advance. Our non-employee directors
have also been entitled to receive $70,000 in annual equity
awards. The amount of fees paid to our non-employee directors
has not changed since it was first set in September 2003, except
for a $10,000 increase implemented in 2007 in the additional fee
paid to the chair of the Human Resources and Compensation
Committee. The Boards policy is to review and set the
compensation of the non-employee directors each year at the
annual Board meeting and to make equity awards to those
directors at that time. Directors are reimbursed for
out-of-pocket expenses, including first-class airfare, incurred
in connection with the performance of their responsibilities as
directors. The compensation paid in 2008 to our non-employee
directors is summarized in the table below:
DIRECTOR
COMPENSATION IN 2008
|
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|
|
|
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|
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Fees
|
|
|
|
|
|
|
|
|
|
earned or
|
|
|
|
|
|
|
|
|
|
paid in
|
|
|
Stock
|
|
|
|
|
Name
|
|
cash(1)
|
|
|
awards(2)
|
|
|
Total
|
|
|
R. Glenn Hilliard
|
|
$
|
122,500
|
|
|
$
|
122,385
|
|
|
$
|
244,885
|
|
Donna A. James
|
|
|
70,000
|
|
|
|
69,938
|
|
|
|
139,938
|
|
Debra J. Perry
|
|
|
100,000
|
|
|
|
69,938
|
|
|
|
169,938
|
|
Philip R. Roberts
|
|
|
105,000
|
|
|
|
69,938
|
|
|
|
174,938
|
|
Neal C. Schneider
|
|
|
115,000
|
|
|
|
69,938
|
|
|
|
184,938
|
|
Michael S. Shannon
|
|
|
70,000
|
|
|
|
69,938
|
|
|
|
139,938
|
|
Michael T. Tokarz
|
|
|
90,000
|
|
|
|
69,938
|
|
|
|
159,938
|
|
John G. Turner
|
|
|
105,000
|
|
|
|
69,938
|
|
|
|
174,938
|
|
Doreen A. Wright
|
|
|
85,000
|
|
|
|
69,938
|
|
|
|
154,938
|
|
|
|
|
(1) |
|
This column represents the amount of cash compensation paid in
2008 for Board service, for service on the Audit and Enterprise
Risk Committee and for chairing a committee. |
|
(2) |
|
This column represents the dollar amount recognized for
financial statement reporting purposes with respect to the fair
value of stock awards, in accordance with Statement of Financial
Accounting Standards No. 123 (revised
2004) Share-Based Payment
(SFAS 123R). Set forth below is the grant date
fair value of each stock award to the non-employee directors in
2008, computed in accordance with SFAS 123R. |
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Stock
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|
|
|
|
|
|
|
|
|
Awards:
|
|
|
Grant Date
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|
|
|
|
|
|
Number
|
|
|
Fair Value
|
|
|
|
Grant
|
|
|
of Shares
|
|
|
of Stock
|
|
Name
|
|
Date
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|
|
of Stock
|
|
|
Awards
|
|
|
R. Glenn Hilliard
|
|
|
5/21/08
|
|
|
|
10,937
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|
|
$
|
122,385
|
|
Donna A. James
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|
|
5/21/08
|
|
|
|
6,250
|
|
|
|
69,938
|
|
Debra J. Perry
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|
|
5/21/08
|
|
|
|
6,250
|
|
|
|
69,938
|
|
Philip R. Roberts
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|
|
5/21/08
|
|
|
|
6,250
|
|
|
|
69,938
|
|
Neal C. Schneider
|
|
|
5/21/08
|
|
|
|
6,250
|
|
|
|
69,938
|
|
Michael S. Shannon
|
|
|
5/21/08
|
|
|
|
6,250
|
|
|
|
69,938
|
|
Michael T. Tokarz
|
|
|
5/21/08
|
|
|
|
6,250
|
|
|
|
69,938
|
|
John G. Turner
|
|
|
5/21/08
|
|
|
|
6,250
|
|
|
|
69,938
|
|
Doreen A. Wright
|
|
|
5/21/08
|
|
|
|
6,250
|
|
|
|
69,938
|
|
9
|
|
|
|
|
The directors have the following number of options outstanding
at December 31, 2008 Mr. Hilliard
(755,000); Ms. Perry (15,400), Mr. Roberts (15,400),
Mr. Schneider (15,400), Mr. Shannon (15,400),
Mr. Tokarz (15,400) and Mr. Turner (15,400). The
average exercise price for the options held by the directors is
$ . |
Board
Meetings and Attendance
During 2008, the board of directors met on 14 occasions. Of the
nine directors nominated for re-election, eight had perfect
attendance at the meetings of the board and the meetings of the
committees on which they served. The other director attended 21
of 25 meetings during the year. The independent directors
regularly meet in executive session without the CEO or any other
member of management. Mr. Hilliard presides at such
executive sessions.
Director
Independence
The Board annually determines the independence of directors
based on a review by the directors. Although the board of
directors has not adopted categorical standards of materiality
for independence purposes, no director is considered independent
unless the board has determined that he or she has no material
relationship with Conseco, either directly or as an officer,
shareholder or partner of an organization that has a material
relationship with Conseco. Material relationships can include
commercial, industrial, banking, consulting, legal, accounting,
charitable and familial relationships, among others. The board
considers the New York Stock Exchange guidelines in making
its determination regarding independence and the materiality of
any relationships with Conseco. Under the NYSE corporate
governance standards, a director is not independent if he or she
has been an employee or executive officer of the Company within
the last three years. Because Mr. Hilliard was employed by
Conseco and served as Executive Chairman from August 2004 until
September 2005, the board had previously determined that
Mr. Hilliard was not independent at this time, consistent
with rules of the New York Stock Exchange. In October 2008 the
board reconsidered Mr. Hilliards status and
relationship with the Company and determined that due to the
passage of more than three years since his brief employment by
the Company and the absence of any material relationship with
the Company that he should be considered an independent
director. The board has determined that all current directors
other than Mr. Prieur are independent.
Approval
of Related Party Transactions
Transactions and agreements with related persons (directors and
executive officers or members of their immediate families or
shareholders owning five percent or more of the Companys
outstanding stock) that meet the minimum threshold for
disclosure in the proxy statement under applicable SEC rules
(generally transactions involving amounts exceeding $120,000 in
which a related person has a direct or indirect material
interest) must be approved by the board of directors or a
committee comprised solely of independent directors. In
considering the transaction or agreement, the board or committee
will consider all relevant factors including the business reason
for the transaction, available alternatives on comparable terms,
actual or apparent conflicts of interest and the overall
fairness of the transaction to the Company. Any proposed
transactions that might be considered a related person
transaction are to be raised with the Chairman of the Board or
the Chairman of the Governance and Strategy Committee. They will
jointly determine whether the proposed transaction should be
considered by the full board (recusing any directors with
conflicts) or by a board committee of independent directors.
Related person transactions are to be approved in advance
whenever practicable, but if not approved in advance are to be
ratified (if the board or committee considers it appropriate to
do so) as soon as practicable after the transaction.
Various Company policies and procedures, including the Code of
Business Conduct and Ethics and annual questionnaires completed
by all company directors, officers and employees, require
disclosure of transactions or relationships that may constitute
conflicts of interest or otherwise require disclosure under
applicable SEC rules. Any related person transactions that are
identified under these additional policies and procedures are to
be considered under the policy and procedures described above.
10
Code of
Ethics
We have adopted a Code of Business Conduct and Ethics that
applies to all officers, directors and employees regarding their
obligations in the conduct of the Companys affairs. A copy
of the Code of Business Conduct and Ethics is available on our
website at www.conseco.com. Within the time period
specified by the SEC and the New York Stock Exchange, we will
post on our website any amendment to our Code of Business
Conduct and Ethics and any waiver applicable to our principal
executive officer, principal financial officer or principal
accounting officer.
Corporate
Governance Guidelines
Conseco is committed to best practices in corporate governance.
Upon the recommendation of the Governance and Strategy
Committee, Conseco adopted a set of Conseco Board Governance
Operating Guidelines. A copy of the Conseco Board Governance
Operating Guidelines is available on our website at
www.conseco.com.
Communications
with Directors
Shareholders and other interested parties wishing to communicate
directly with Consecos board of directors or any one or
more individual members (including the presiding director or the
non-management directors as a group) are welcome to do so by
writing to the Conseco Corporate Secretary, 11825 North
Pennsylvania Street, Carmel, Indiana, 46032. The Corporate
Secretary will forward any communications to the director or
directors specified by the shareholder.
In addition, Conseco has a policy that all directors attend the
annual meeting of shareholders. All of our directors attended
the annual meeting of shareholders held in 2008.
Compensation
Committee Interlocks and Insider Participation
Ms. James, Mr. Shannon, Mr. Tokarz and
Ms. Perry served on the Human Resources and Compensation
Committee throughout 2008. Mr. Hilliard was added to the
committee on January 20, 2009. None of the members of the
Human Resources and Compensation Committee is or has been one of
our officers or employees, except for Mr. Hilliard as
described above. None of our executive officers serves, or
served during 2008, as a member of the board of directors or
compensation committee of any entity that has one or more
executive officers serving on our board of directors or Human
Resources and Compensation Committee.
Copies of
Corporate Documents
In addition to being available on our website at
www.conseco.com, we will provide to any person, without
charge, a printed copy of our committee charters, Code of Ethics
and Board of Governance Operating Guidelines upon request to
Conseco Investor Relations, 11825 N. Pennsylvania
Street, Carmel, Indiana 46032; telephone
(317) 817-2893
or email ir@conseco.com.
11
EXECUTIVE
COMPENSATION
COMPENSATION
DISCUSSION AND ANALYSIS
Compensation
Objectives
Consecos executive compensation program is designed to
reinforce our commitment to our mission and core values by
embedding them in all that we do. Our values of Integrity and
Customer Focus are essential to all of our customer
interactions, and our values of Excellence and Teamwork are
essential to how we work. These values, along with the results
and behaviors that drive our individual performance, provide the
foundation for all our people policies and practices, including
our compensation philosophy and programs. Specifically, the
following are goals of our program:
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Align the interests of our executive officers with those of our
shareholders through focusing on shareholder value creation.
|
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|
Promote a pay-for-performance culture that rewards both overall
Company performance and individual accountability.
|
Strategy
The Human Resources and Compensation Committee (the
Committee) of the Board of Directors,
which is comprised solely of independent, non-employee Directors
of Conseco, has developed a comprehensive compensation and
benefits strategy that rewards Company and individual
performance which will drive our long-term success. The strategy
is designed to:
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|
|
|
Place a significant amount of total compensation at risk in the
form of variable pay. This means that for executive officers, a
major portion of their total compensation is tied to either
financial or stock price performance. As illustrated in our
Summary Compensation Table on page 23, base salaries for
our named executive officers (NEOs)
represent between 25% and 45% of their target total
compensation, with the remaining amount comprised of at-risk
variable pay in the forms of the annual incentive plan and the
long-term incentive programs.
|
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|
|
Provide target compensation opportunities commensurate with the
market, and actual compensation earned commensurate with Company
and the individuals performance. This means that the
executives relative pay opportunities are assessed
vis-à-vis relative performance. If performance goals are
met or exceeded, pay should be at or above target. Similarly, if
performance targets are not satisfied, total actual compensation
earned could trail targeted levels.
|
|
|
|
Focus on attracting and retaining top talent. This means that
while we believe compensation should have a strong performance
link, we also believe the Company benefits from creating a team
of tenured, seasoned professionals with significant industry
experience. To encourage this long-term commitment, we
historically have granted awards of stock options that vest over
three to four years, and performance shares and restricted stock
which are eligible for delivery after no less than two years.
|
Role of
the Compensation Committee
The Committee determines the elements and amount of compensation
for our executive officers and provides overall guidance for our
employee compensation policies and programs. Five members of our
Board of Directors sit on the Committee, each of whom is an
independent director under the New York Stock Exchange listing
requirements, the exchange upon which our stock trades. Other
Board members may also participate in our consideration of how
we pay our employees. The Committees function is more
fully described in its charter which has been approved by our
full Board of Directors, and can be found on our website at
www.conseco.com.
In making executive compensation decisions, the Committee
receives advice from its independent compensation consultant;
Pearl Meyer & Partners
(PM&P) was hired by and reported
directly to the Committee until October 2008. At that time,
Hewitt Associates was hired by the Committee and replaced
12
PM&P. Both independent consultants perform all services for
our Company at the Committees direction and may be
terminated without notice by the Committee at any time. Neither
PM&P nor Hewitt Associates had a prior relationship with
the CEO or any of our Companys executive officers at the
time of their hiring.
Though retained directly by the Committee, the compensation
consultant often interacts with our executive officers,
specifically the CEO, EVP of Human Resources, General Counsel
and CFO, and their staffs to provide the Committee with relevant
compensation and performance data for our executives and the
Company. In addition, the consultant may seek direct input and
feedback from management in preparing their consulting work
product prior to presentation to the Committee to confirm
information, identify data questions, exchange ideas or other
similar issues.
As requested by the Committee, in 2008, the independent
consultants services to the Committee included:
|
|
|
|
|
Providing competitive analysis of executive officer, including
NEO, total compensation elements;
|
|
|
|
Conducting equity grant market studies;
|
|
|
|
Reviewing NEO promotion packages; and
|
|
|
|
Attending Committee meetings, in person and telephonically.
|
The Committee received advice from PM&P regarding 2008
executive compensation issues, plans, and competitive
compensation levels. Hewitt Associates LLC provided advice
leading to decisions regarding 2009 compensation.
In making its decisions, the Committee collects and considers
input from multiple sources. The Committee may ask senior
executive officers or non-Committee Board members to attend
Committee meetings where executive compensation and Company and
individual performance are discussed and evaluated. During these
meetings, executives provide insight, suggestions or
recommendations regarding executive compensation. Deliberations
generally occur with input from the compensation advisor,
members of management and other Board members. However, only the
independent Committee members vote on decisions made regarding
executive compensation, which is typically done in executive
session, with no members of management present.
Compensation
Program Design / Pay for Performance Objectives
The Committee strives to provide a clear, understandable reward
design that allows the Company to attract and retain the
executive talent required to continue to improve the
Companys performance and build long-term shareholder
value. To achieve this, our programs are designed to:
|
|
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|
|
Reward sustainable operational and productivity performance.
This means that (i) we set performance goals under our Pay
for Performance (P4P ) plan at levels
that represent targeted performance levels on key financial
metrics , and (ii) we set multi-year performance goals for
our Performance Share
(P-Share
) awards;
|
|
|
|
Integrate with the company wide annual performance management
program of goal setting and formal evaluation;
|
|
|
|
Consider internal equity among colleagues in determining
compensation levels, in addition to the objective review of
external factors. This means that while the Committee examines
competitive pay data for specific positions, market data is not
the sole factor considered in setting pay levels. The Committee
also considers factors such as Consecos organizational
structure, and the relative roles and responsibilities of
individuals. The Committee believes that this approach fosters
an environment of cooperation among executives that improves
sales growth, profitability, and customer satisfaction;
|
|
|
|
Provide for discretion to make adjustments and modifications
based on how well individual associates meet our performance
standards for expected achievement of business results, as well
as upholding our values and behaviors; and
|
13
|
|
|
|
|
Offer the opportunity to earn above-market pay when Company and
individual performance exceed expectations.
|
In setting target executive compensation opportunities, our
Committee looks at Total Annual Cash Compensation (TAC),
which is comprised of base salary and target incentive; and
Total Direct Compensation (TDC), which is the sum of TAC
and long-term incentives. Our long-term incentives include
annual stock option awards as well as P-Share awards. Our
Committee intends to compensate our executive group at
approximately the 50th percentile (meaning within a range
of +/- 15% of the 50th percentile) for the achievement of
target performance, with additional compensation opportunities
up to the 75th percentile of the market for the achievement
of superior results.
The following tables provide information about the level of 2008
Total Annual Cash (TAC) and Total Direct Compensation (TDC)
opportunities for our NEOs.
Fiscal
2008 Base Salary and Target Total Annual Cash Compensation
(TAC)
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
|
|
|
Percent Increase
|
|
|
|
|
|
Fiscal Year 2008
|
|
|
Percent Increase
|
|
|
|
Year
|
|
|
in Fiscal 2008
|
|
|
Annual Incentive
|
|
|
Total Target
|
|
|
in Fiscal 2008
|
|
|
|
2008 Base
|
|
|
Base Salary
|
|
|
Target Percent
|
|
|
Annual Cash
|
|
|
Total Annual Cash
|
|
Named Executive Officer
|
|
Salary
|
|
|
Over Fiscal 2007
|
|
|
for Fiscal 2008
|
|
|
Compensation
|
|
|
Over Fiscal 2007
|
|
|
James Prieur
Chief Executive Officer
|
|
$
|
900,000
|
|
|
|
0
|
%
|
|
|
125
|
%
|
|
$
|
2,025,000
|
|
|
|
0
|
%
|
Edward Bonach
Executive Vice President, Chief Financial Officer
|
|
|
472,500
|
|
|
|
5
|
%
|
|
|
100
|
%
|
|
|
945,000
|
|
|
|
5
|
%
|
Eric Johnson
President, 40 / 86 Advisors
|
|
|
500,000
|
|
|
|
0
|
%
|
|
|
100
|
%
|
|
|
1,000,000
|
|
|
|
0
|
%
|
Scott Perry
President, Bankers Life & Casualty
|
|
|
441,324
|
|
|
|
4
|
%
|
|
|
100
|
%
|
|
|
882,648
|
|
|
|
4
|
%
|
Steven Stecher
President, Conseco Insurance Group
|
|
|
412,000
|
|
|
|
3
|
%
|
|
|
100
|
%
|
|
|
824,000
|
|
|
|
3
|
%
|
Summary
of Total Direct Compensation (TDC) Opportunities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2008
|
|
|
Fiscal 2008
|
|
|
Fiscal 2008
|
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
Named Executive Officer
|
|
TDC
|
|
|
TDC
|
|
|
TDC
|
|
|
James Prieur
|
|
$
|
2,339,000
|
|
|
$
|
3,239,000
|
|
|
$
|
6,228,010
|
|
Edward Bonach
|
|
|
848,925
|
|
|
|
1,203,300
|
|
|
|
1,808,800
|
|
Eric Johnson
|
|
|
754,150
|
|
|
|
1,129,150
|
|
|
|
1,748,400
|
|
Scott Perry
|
|
|
758,295
|
|
|
|
1,089,288
|
|
|
|
1,679,200
|
|
Steven Stecher
|
|
|
712,980
|
|
|
|
1,021,980
|
|
|
|
1,438,980
|
|
Notwithstanding the Companys stated position, based on the
Companys stock price performance and the number of
available shares, the Committee made a purposeful decision to
provide lower-than-competitive equity grants. Threshold TDC
opportunity includes base salary, plus threshold annual
incentive award plus the value of stock options. Target TDC
opportunity includes base salary plus target annual incentive
award plus stock options. Maximum TDC opportunity includes base
salary plus 150% of target annual incentive award plus the value
of stock options and Performance Shares.
Compensation
Peer Companies
The Committee assesses competitive market
compensation using a number of sources. The primary data source
used in setting 2008 competitive market levels for our NEOs is
the information publicly disclosed by the companies in the
S&P Life and Health Insurance Index and the Russell 3000
Life Insurance Industry Index
14
(together, the Peer Group ). As of
December 31, 2008, the Peer Group consisted of the
17 companies listed below; however, if changes are made to
the indices, the Committee anticipates that the Peer Group will
reflect those changes. The Committee periodically reviews the
Peer Group to ensure the companies are appropriate for both pay
and performance comparisons. The Committee chose these publicly
disclosed indices because they include organizations which best
represent our Companys business mix, and which compete
with our Company for shareholder investment. Furthermore, the
makeup of these indices will self-adjust as consolidation occurs
in the industry.
Peer company information is supplemented with general and
industry specific survey data from Towers Perrin that provides
position-based compensation levels across broad industry
segments. For corporate staff positions, such as the EVP, Human
Resources, we consider survey data based on companies of similar
size, with less emphasis on industry specific data. However, for
industry specific positions, such as a Chief Actuary, we
consider insurance industry survey data for positions with
similar size.
S&P
Supercomposite Life & Health and the Russell 3000 Life
Insurance Indices
AFLAC Incorporated
American Equity Investment Life Holding Company
Citizens Inc.
Delphi Financial Group, Inc.
Kansas City Life Insurance Company
Lincoln National Corporation
Life Partners Holdings MetLife, Inc.
National Western Life Insurance Company
The Phoenix Companies, Inc.
Presidential Life Corporation
Principal Financial Group, Inc.
Protective Life Corporation
Prudential Financial, Inc.
StanCorp Financial Group, Inc.
Torchmark Corporation
Universal American Financial Corp.
Unum Group
While aggregate pay levels are consistent with the compensation
philosophy stated above, it is possible that pay levels for
specific individuals may be above or below the targeted
competitive benchmark based on a number of factors. While
competitive market data is used as a reference point, we avoid
automatic adjustments based on annual competitive benchmarking
data, since we believe a given executives compensation
should also reflect Company-specific factors such as the
importance of the role within the organization, the compensation
for other positions at the same level, and individual factors
such as experience, expertise, personal performance and tenure.
Realized total compensation in any year may be significantly
above or below the target compensation levels depending on
whether our incentive goals were attained and whether
shareholder value was created. In some cases, the amount and
structure of compensation results from negotiations with
executives at the time they were hired, which may reflect
competitive pressures to attract and hire quality managerial
talent in the insurance industry. To help attract and retain
such talent, the Committee also seeks to provide a level of
benefits in line with those of comparable publicly traded
companies, though avoids matching such benefits item by item.
Pay
Levels
All employees target total compensation, including our
NEOs, is determined based on a number of factors, including each
individuals role and responsibilities within our Company,
the individuals experience and expertise, the pay levels
for peers within the Company, the pay levels for similar job
functions in the marketplace, the individuals business
unit, and our Company as a whole. The Committee is responsible
for approving all compensation programs for our executive
officers. In determining executive compensation, the Committee
considers all forms of compensation and benefits, and uses
appropriate tools such as tally sheets and market
studies to review the value delivered to each
executive through each element of pay.
Tally sheets provide a vehicle for the Committee to examine the
external market practices and compare them to our internal
evaluations and decisions.
15
Our tally sheets capture and report:
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|
Competitive external market data on a base salary, total annual
cash and total remuneration basis;
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Individual total annual cash compensation including annual
salary, target bonus opportunity, and actual bonus paid;
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|
Long-term equity grants, the vesting status, and their current
value at a hypothetical established price; and
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Employment contract terms and conditions.
|
Pay
Elements
Total
Annual Cash Compensation
Base
Salaries
In establishing base salaries, the Committee begins by targeting
the 50th percentile, and adjusts upwards or downwards as
appropriate to reflect each positions responsibilities,
individuals experience level, unique skills or
competencies. Base salaries generally range from as low as
25th percentile (for recently promoted employees or those
who otherwise lack experience) to as high as the
75th percentile (for a high performer with best in class
industry experience). While salaries outside this range may
occur, they are few. Annual review of employees base pay
levels are determined based upon numerous factors, including
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Job responsibilities;
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Impact on the development and achievement of our strategic
initiatives;
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Competitive labor market pressures;
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Company performance for the prior 12 months;
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Individual performance for the prior 12 months, as
expressed on the employees performance review; and
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Salaries paid for comparable positions within our identified
compensation peer group.
|
No specific weighting of these factors is used. However, given
our desire for a performance-based culture the Committees
use of its discretion generally results in increases for our top
performers, and little or no increases for average or lower
performing employees.
Annual
Incentive Program
Our annual incentive plan, the P4P Plan, was approved by our
shareholders in 2005, and is designed to focus on and reward
achievement of annual performance goals. It is the broadest of
our management incentive programs, covering approximately
625 employees in 2008, including all of our executive
officers, and payable in cash. Senior executives including NEOs
are assigned to one of two incentive opportunities (expressed as
a percentage of base salary). Consistent with our Companys
pay level strategy, these annual incentive levels are set to
generate target annual cash compensation (i.e., the sum
of base salary plus target annual incentive amount) at
competitive market median levels.
Set forth below are the threshold, target and maximum payouts
for each of our NEOs under the P4P Plan.
16
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Maximum
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Threshold Payout
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Target Payout
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Payout
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Named Executive Officer
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(as% of Salary)
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(as% of Salary)
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(as% of Salary)
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James Prieur
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31.25
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%
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125
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%
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250
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%
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Edward Bonach
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25
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%
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100
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%
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200
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%
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Eric Johnson
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25
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%
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100
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%
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200
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%
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Scott Perry
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25
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%
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100
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%
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200
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%
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Steven Stecher
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25
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%
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100
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%
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200
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%
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In 2008, our P4P payout was based on weighted scorecard
tabulation across a variety of performance metrics that focused
on profitable growth, managing expenses and utilization of
capital. The financial metrics measured were earnings per share,
EBIT, value of new business, combined operating expense and
additional business unit financial measurements. Limiting the
number of metrics to four enhances simplicity and effectiveness
of the incentive plan. The program is designed to pay above
market-median levels when the Company exceeds target performance.
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Named Executive
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Officer
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Metric - Weighting
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Metric - Weighting
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Metric - Weighting
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Metric - Weighting
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James Prieur
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EPS - 40%
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Combined Value of
New Business - 20%
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Combined Operating
Expense - 20%
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Combined EBIT - 20%
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Edward Bonach
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EPS - 40%
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Combined Value of
New Business - 20%
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|
Combined Operating
Expense - 20%
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Combined EBIT - 20%
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Eric Johnson
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EPS - 40%
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GAAP Yield - 30%
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Investment Income - 30%
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Scott Perry
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EPS - 40%
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Business Unit Value of
New Business - 20%
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Business Unit EBIT - 20%
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Business Unit
Operating ROE - 20%
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Steven Stecher
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EPS - 40%
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Business Unit Value of
New Business - 20%
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|
Business Unit EBIT - 20%
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|
Business Unit
Operating ROE - 20%
|
2008 Performance targets for our corporate plan metrics
included EPS of $1.25, Combined Value of New Business (VNB) of
$77.9 million, Combined Operating Expense of
$633.1 million, and Combined EBIT of $104.0 million.
In addition, performance targets for our 40 / 86
business unit included GAAP Yield of 5.79% and
GAAP Investment Income of $1.416 billion. VNB
calculates the present value of expected profits from product
sales. The selection of VNB is based on the Companys
desire to have an increased focus on product profitability as
opposed to top-line sales.
Aggregate awards for 2008 were below target, as performance
during this period, including EPS and combined operating
expense, did not meet target performance levels established by
the Committee at the beginning of the year.
Though our Company has a large net operating loss carry forward
(as a result of our emergence from bankruptcy in 2003), the
Committee continues to administer the P4P and Long Term
Incentive Plans so that payments qualify as
performance-based compensation under
Section 162(m) of the Internal Revenue Code. However, the
Committee does reserve the right to make discretionary awards to
the extent it deems it necessary or advisable to do so.
We believe that our annual incentive plan meets the requirements
of section 162(m) of the Internal Revenue Code.
Fiscal
2008 P4P Actual Bonuses
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Named Executive Officer
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Amount
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James Prieur(1)
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$
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0
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Edward Bonach
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263,040
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|
Eric Johnson
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141,223
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|
Scott Perry
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126,868
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|
Steven Stecher
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|
170,172
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|
17
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|
(1) |
|
Mr. Prieur requested to the Committee that he not receive
his 2008 P4P calculated bonus. |
Total
Direct Compensation
Long-Term
Incentive Program
As previously discussed, Total Direct Compensation is comprised
of Total Annual Cash Compensation and long-term incentives. The
Committee uses long-term incentives to balance the short-term
focus of the P4P program by tying rewards to performance
achieved over multi-year periods. Under the 2003 Amended and
Restated Long-Term Incentive Plan (the LTIP
), the Committee may grant a variety of long-term
incentive vehicles, including stock options, stock appreciation
rights, restricted stock or restricted stock units, and
performance shares or units, settled in cash or stock. The
Company is progressively migrating away from a long-term
compensation scheme that relied on grants of stock options and
restricted stock to a current program which will continue to use
stock options (or other appreciation rights), and performance
share use, and substantially decrease use of restricted stock
grants, except in special circumstances. In 2008 the NEOs
received only stock options and P-Shares except for an
inducement grant made to Mr. Stecher in connection with his
promotion.
Our Committee believes that combining these two types of awards
(i.e., options and performance shares) provides significant
incentive to perform while retaining our key executives. Also,
using multi-year awards settled in stock helps balance the
cash-based focus of our short-term pay programs (i.e., base
salary and annual incentives).
This provides for a competitive award program and adopts a
market-recognized best practice for the Company to attract and
retain executive talent. Stock option grants vest in equal
installments over three to four years, and performance shares
are measured over a three-year performance period at which time
they will vest only if the financial goals have been achieved.
Unless otherwise noted, grants to our NEOs have vesting
schedules identical to other executives. To receive the awards,
employees must continue to work for the Company through the
vesting dates.
Our current granting process involves developing option grant
ranges (by position level) for groups of executives. Within
these general grant guidelines, individual awards may be
adjusted up or down to reflect the performance of the executive
and his or her potential to contribute to the success of our
initiatives to create shareholder value and other individual
considerations. The Committee also assesses aggregate share
usage and dilution levels in comparison to the peer group
companies and general industry norms. Through this method, the
Committee believes it is mindful of total cost, competitive
within the market, promoting internal equity among colleagues,
and reinforcing our philosophy of pay for performance.
As with base salaries and annual incentive targets, target
long-term incentive award levels are set to fall in a range
between market median and 75th percentile levels. Stock
option awards in combination with TAC are intended to deliver a
Total Direct Compensation opportunity that approximates median
competitive
18
compensation. The following table shows the number of options
granted to our NEOs in 2008 and compares the value of their
total target annual cash plus options to median competitive
compensation.
Fiscal
2008 Stock Option Awards: Comparison of Target Total Direct
Compensation Opportunity
(TAC plus Options) with 50th Percentile Market
Position
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|
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|
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Percentage That Target
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|
Total Direct
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|
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|
Compensation (TAC
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|
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|
plus Options) is
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|
Number of Options
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|
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Above or Below the
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|
Named Executive Officer
|
|
Granted
|
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|
50th Percentile
|
|
|
James Prieur
|
|
|
470,000
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|
|
|
(9
|
)%
|
Edward Bonach(1)
|
|
|
100,000
|
|
|
|
13
|
%
|
Eric Johnson
|
|
|
50,000
|
|
|
|
(39
|
)%
|
Scott Perry
|
|
|
80,000
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|
|
|
(34
|
)%
|
Steven Stecher(2)
|
|
|
80,000
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|
|
|
(38
|
)%
|
|
|
|
(1) |
|
The variation represented a broader scope of responsibilities
than other CFOs in the peer group. |
|
(2) |
|
Mr. Stecher also received a one-time inducement grant of
40,000 restricted shares not included in the analysis above. |
As noted earlier, due to the Companys stock price
performance and the number of available shares, the Committee
made a conscious decision to provide lower-than-competitive
equity grants in fiscal 2008.
P-Share vesting is based on the achievement of one-year
Operating Return on Equity (ROE) in year three of the
performance period and Total Shareholder Return (TSR) results
over a three-year performance period. We believe that ROE and
TSR are good measures of long term performance and performance
relative to our peer companies and appropriately align
management incentives with shareholder returns.
In order to receive the entire award, the Company must achieve a
12% ROE or greater, and a TSR ranking at the
75th percentile or above relative to the Peer Group. The
ROE hurdle is not directly linked to an industry percentile.
However, if achieved it does represent a material and meaningful
improvement for our Company. If minimum company thresholds are
not achieved over the three-year term, no shares will be vested.
We believe that the ROE and TSR hurdles will only be achieved
with superior performance on the part of our management team.
As previously discussed, our Committees intent is to
reward superior performance at approximately the
75th percentile of market compensation. We therefore
structure P-Share grants so that our executives can earn this
higher compensation level if the ROE and TSR hurdles are
achieved and the grants vest. The table below shows the number
of P-shares awarded to our NEOs in 2008 and the value of their
TDC relative to the 75th Percentile compensation assuming
that the P-shares are earned.
19
Fiscal
2008 Performance Share Awards: Comparison of Maximum Total
Direct Compensation Opportunity
(TAC plus Options and P-Shares) with 75th Percentile Market
Position
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage That
|
|
|
|
|
|
|
Maximum Total Direct
|
|
|
|
|
|
|
Compensation (TAC
|
|
|
|
|
|
|
plus Options and
|
|
|
|
Number of
|
|
|
P-Shares)(1) is Above
|
|
|
|
P-Shares That
|
|
|
or Below 75th
|
|
Named Executive Officer
|
|
May Be Earned
|
|
|
Percentile
|
|
|
James Prieur
|
|
|
230,000
|
|
|
|
(15
|
)%
|
Edward Bonach
|
|
|
35,000
|
|
|
|
(13
|
)%
|
Eric Johnson
|
|
|
35,000
|
|
|
|
(48
|
)%
|
Scott Perry
|
|
|
35,000
|
|
|
|
(44
|
)%
|
Steven Stecher
|
|
|
20,000
|
|
|
|
(52
|
)%
|
|
|
|
(1) |
|
In the event that all performance shares vest, it is expected
that a corresponding outstanding level of performance would be
reflected in the annual incentive program. Therefore the Total
Annual Cash Compensation portion of Total Direct Compensation
has been adjusted to reflect this level of performance. |
As noted previously, due to the Companys stock price
performance and the number of available shares, the Committee
made a conscious decision to provide lower-than-competitive
equity grants in fiscal 2008.
The Committee reviews and approves individual grants for the
NEOs as well as all stock options,
P-Shares and
restricted stock grants made to other employees. The annual
grants are reviewed and approved at the Committees
scheduled meeting at approximately the same time each year and
may be granted only with an exercise price at or above the
closing market price of the Companys common stock on the
date of grant. Interim or off cycle grants are reviewed and
approved by the Committee and granted at the closing market
price of the Companys common stock on the date of
approval. Administration of all equity awards is managed by the
human resources department.
In 2005, the Committee approved a policy to conform to Risk
Metrics Group (RMG), formerly known as Institutional
Shareholder Services or ISS ,
burn rate guidelines (as they existed at that time)
which limit annual equity grant levels. Under the agreement with
RMG, our average annual burn rate for the three-year period from
January 1, 2005 through December 31, 2007 was not to
exceed the greater of two percent of the Companys shares
outstanding or the mean of its Global Industry Classification
Standards Peer Group (4030 Insurance). This policy applied to
shares we issued under the LTIP Plan. Using RMG
methodology, our burn rate is calculated as (i) the number
of shares granted in each fiscal year by the Committee and
reported in the Companys periodic reports filed with the
Securities and Exchange Commission, and includes (a) stock
options, (b) stock-settled stock appreciation rights,
(c) restricted stock (or units) and (d) performance
shares (actually earned or deferred during this time frame), to
employees and directors divided by (ii) the fiscal year-end
basic shares outstanding. Stock appreciation rights, full value
shares settled in cash and performance shares or units settled
in cash will not be included in the burn rate calculation. For
purposes of performing the calculation consistent with RMG
methodology, one full value share (such as a share of restricted
stock) may equal up to as many as four option shares. The actual
conversion rate is determined by RMG based upon recent
volatility of Consecos common stock, which may change
during the commitment period. Our burn rates for 2005, 2006 and
2007 were .81%, 1.59% and 1.10%, respectively, using RMGs
calculation methodology. As a result, the Company met its
commitment to RMG with respect to the burn rate. In addition,
our burn rate for 2008 was 1.01%.
Other
Benefits and Perquisites
As employees of the Company, our NEOs are eligible to
participate in all of the broad-based Company-sponsored benefits
programs on the same basis as other full-time employees. These
include the Companys health and welfare benefits (e.g.,
medical/dental plans, disability plans, life insurance, etc.).
The Company does not have any supplemental executive health and
welfare programs. Executives may also participate in the
Companys 401(k) Plan. During 2006, the Committee approved
the adoption of a non-qualified deferred compensation plan. This
plan is primarily intended as a restoration plan,
giving participants the ability to defer their own compensation
above
20
the IRS limits imposed on the 401(k) plan. At present, the
Company does not make any contribution to the non-qualified
deferred compensation plan.
Compensation
of Chief Executive Officer
Mr. Prieurs base salary, target incentive, and equity
compensation awards for fiscal 2008 were determined in
accordance with the compensation philosophy described above,
including the policy of targeting our compensation within our
peer group. In setting his salary, target incentive and equity
compensation, the Committee relied on market competitive pay
data and the strong belief that the CEO significantly and
directly influences the Companys overall performance.
Based on the competitive placement of his base salary relative
to his peers in the market, Mr. Prieur did not receive a
base salary increase or change to his target annual incentive
opportunity in 2008. Through the delivery of equity, the
Committee strengthened the alignment with the shareholders.
Mr. Prieur further demonstrated alignment with shareholders
by acquiring 230,000 additional shares of Conseco stock in the
open market during 2008. The additional shares brought his total
number of shares purchased to 470,000.
Based on the achievement of VNB and operating expense goals,
Mr. Prieurs incentive payment for 2008 was calculated
at $633,800. However, Mr. Prieur proposed to the Committee
that he not receive an incentive payment for 2008 in light of
the very difficult operating environment and its impact on
Conseco. The Committee accepted his proposal.
Claw Back
Rights
Our LTIP contains a Claw Back provision relating to our
long-term equity awards: stock options, performance shares and
restricted stock awards. Under this claw back provision, if our
financial statements are required to be restated as a result of
errors, omissions, or fraud, the Committee may, at its
discretion, based on the facts and circumstances surrounding the
restatement, direct the recovery of all or a portion of an
equity award from one or more executives with respect to any
fiscal year in which our financial results are negatively
affected by such restatement. To do this, we may pursue various
ways to recover from one or more executives: (i) seek
repayment from the executive; (ii) reduce the amount that
would otherwise be payable to the executive under another
Company benefit plan; (iii) withhold future equity grants,
bonus awards, or salary increases; or (iv) take any
combination of these actions.
Impact of
Tax and Accounting on Compensation Decisions
As a general matter, the Committee considers the various tax and
accounting implications of compensation vehicles employed by the
Company.
When determining amounts of Long-Term Incentive grants to
executives and employees, the Committee considers the accounting
cost associated with the grants. Under SFAS 123R, grants of
stock options, restricted stock, restricted stock units and
other share-based payments result in an accounting charge for
the Company. The accounting charge is based on the grant date
fair value of the instruments being issued as determined under
SFAS 123R. This expense is amortized over the requisite
service or vesting period. However, if the award is subject to a
performance condition as determined under SFAS 123R, the
cost will vary based on our estimate of the number (and
ultimately the actual number) of shares that will vest.
Section 162(m) of the Internal Revenue Code generally
prohibits any publicly held corporation from taking a federal
income tax deduction for compensation paid in excess of
$1 million in any taxable year to the chief executive
officer and the next four highest compensated officers.
Exceptions are made for qualified performance-based
compensation, among other things. It is the Committees
policy to maximize the effectiveness of our executive
compensation plans in this regard. However, the Committee
believes that compensation and benefits decisions should be
primarily driven by the needs of the business, rather than by
tax policy. Therefore, the Committee may make pay decisions
(such as the determination of the CEOs base salary) that
result in compensation expense that is not fully deductible
under Section 162(m).
21
Termination
and Change in Control Arrangements
Under the terms of our equity-based compensation plans and our
employment agreements, the CEO and the other NEOs are entitled
to payments and benefits upon the occurrence of specified events
including termination of employment for various reasons. The
specific terms of these arrangements, as well as an estimate of
the compensation that would have been payable had they been
triggered as of fiscal year-end, are described in detail in the
section entitled Potential Payments Upon Termination or
Change in Control Arrangements on page 28 . In the
case of each employment agreement, the terms of these
arrangements were set through the course of negotiations with
each of the NEOs, with an eye to internal consistency. In
addition, as part of these negotiations, the Compensation
Committee also analyzed the terms of the same or similar
arrangements for comparable executives employed by companies in
our peer group.
The termination of employment provisions of the employment
agreements were entered into in order to address competitive
concerns when the NEOs were recruited, by providing those
individuals with a fixed amount of compensation that would
offset the potential risk of leaving their prior employer or
foregoing other opportunities in order to join the Company. At
the time of entering into these arrangements, the Committee
considered the aggregate potential obligations of the Company in
the context of the desirability of hiring the individual and the
expected compensation upon joining us.
Report of
the Human Resources and Compensation Committee
The Human Resources and Compensation Committee has reviewed the
Compensation Discussion and Analysis and has discussed it with
management. Based on the Committees review and discussions
with management, the Committee recommended to our Board of
Directors that the Compensation Discussion and Analysis be
included in this proxy statement. This report is provided by the
following independent directors, who comprise the Committee:
Debra J. Perry, Chair
Donna A. James
Michael S. Shannon
Michael T. Tokarz
R. Glenn Hilliard
22
Summary
Compensation Table for 2008
The following Summary Compensation Table sets forth compensation
paid to (i) our chief executive officer during 2008,
(ii) our chief financial officer during 2008 and
(iii) the other three most highly compensated individuals
who served as executive officers of Conseco in 2008
(collectively, the named executive officers) for
services rendered during 2008.
SUMMARY
COMPENSATION TABLE FOR 2008
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
|
|
and Principal
|
|
|
|
|
|
|
|
Stock
|
|
Option
|
|
Incentive Plan
|
|
All Other
|
|
|
Position
|
|
Year
|
|
Salary
|
|
Bonus(1)
|
|
Awards(2)
|
|
Awards(3)
|
|
Compensation(4)
|
|
Compensation(5)
|
|
Total
|
|
James Prieur(6)
|
|
|
2008
|
|
|
$
|
900,000
|
|
|
|
|
|
|
$
|
126,231
|
|
|
$
|
1,131,782
|
|
|
|
|
|
|
$
|
12,236
|
|
|
$
|
2,170,249
|
|
Chief Executive Officer
|
|
|
2007
|
|
|
|
900,000
|
|
|
|
|
|
|
|
154,103
|
|
|
|
921,318
|
|
|
$
|
562,500
|
|
|
|
109,187
|
|
|
|
2,647,108
|
|
|
|
|
2006
|
|
|
|
270,000
|
|
|
$
|
357,534
|
|
|
|
|
|
|
|
226,153
|
|
|
|
|
|
|
|
28,114
|
|
|
|
881,801
|
|
Edward Bonach(7)
|
|
|
2008
|
|
|
|
468,750
|
|
|
|
|
|
|
|
197,999
|
|
|
|
133,280
|
|
|
|
263,040
|
|
|
|
7,866
|
|
|
|
1,070,935
|
|
Chief Financial Officer
|
|
|
2007
|
|
|
|
296,827
|
|
|
|
553,288
|
|
|
|
213,574
|
|
|
|
57,704
|
|
|
|
|
|
|
|
49,295
|
|
|
|
1,170,688
|
|
Eric Johnson
|
|
|
2008
|
|
|
|
500,000
|
|
|
|
|
|
|
|
3,957
|
|
|
|
116,936
|
|
|
|
141,223
|
|
|
|
630
|
|
|
|
762,746
|
|
President,
|
|
|
2007
|
|
|
|
500,000
|
|
|
|
|
|
|
|
118,664
|
|
|
|
269,632
|
|
|
|
392,250
|
|
|
|
630
|
|
|
|
1,281,176
|
|
40 / 86 Advisors, Inc.
|
|
|
2006
|
|
|
|
500,000
|
|
|
|
316,667
|
|
|
|
416,846
|
|
|
|
236,056
|
|
|
|
607,500
|
|
|
|
630
|
|
|
|
2,077,699
|
|
Scott Perry
|
|
|
2008
|
|
|
|
438,495
|
|
|
|
|
|
|
|
218,215
|
|
|
|
256,268
|
|
|
|
126,868
|
|
|
|
25,330
|
|
|
|
1,065,176
|
|
President, Bankers
|
|
|
2007
|
|
|
|
421,958
|
|
|
|
|
|
|
|
391,232
|
|
|
|
239,425
|
|
|
|
270,808
|
|
|
|
28,415
|
|
|
|
1,351,838
|
|
Life and Casualty Company
|
|
|
2006
|
|
|
|
408,333
|
|
|
|
100,000
|
|
|
|
290,206
|
|
|
|
132,153
|
|
|
|
366,010
|
|
|
|
22,322
|
|
|
|
1,319,024
|
|
Steven Stecher(8)
|
|
|
2008
|
|
|
|
410,000
|
|
|
|
|
|
|
|
62,659
|
|
|
|
228,319
|
|
|
|
170,172
|
|
|
|
12,517
|
|
|
|
883,667
|
|
President, Conseco
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance Group
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The amounts shown in this column are for bonus payments
specified by the terms of the individual employment agreements.
Amounts paid under the Companys Pay for Performance
Incentive Plan are included in the column Non-Equity
Incentive Plan Compensation.
|
|
(2)
|
This column represents the dollar amount recognized during the
year for financial statement reporting purposes for the fair
value of restricted stock and performance units, in accordance
with SFAS 123R. Pursuant to SEC rules, the amounts shown
exclude the impact of estimated forfeitures related to
service-based vesting conditions. For restricted stock, fair
value is calculated using the closing price of Conseco common
stock on the date of grant. For additional information, see
note 11 to the Conseco financial statements in the
Form 10-K
for the year ended December 31, 2008, as filed with the
SEC. See the Grants of Plan-Based Awards table for information
on awards made in 2008. The amounts in this column reflect the
Companys accounting expense for these awards, and do not
necessarily correspond to the actual value that will be
recognized by the named executive officers.
|
|
(3)
|
This column represents the dollar amount recognized during the
year for financial statement reporting purposes with respect to
2008 for the fair value of stock options granted to each of the
named executive officers, in accordance with SFAS 123R.
Pursuant to SEC rules, the amounts shown exclude the impact of
estimated forfeitures related to service-based vesting
conditions. For additional information on the valuation
assumptions with respect to the 2008 grants, refer to
note 11 of the Conseco financial statements in the
Form 10-K
for the year ended December 31, 2008, as filed with the
SEC. For information on the valuation assumptions with respect
to grants made prior to 2008, refer to the note on
stockholders equity and stock-related information to the
Conseco financial statements in the
Form 10-K
for the respective year-end. See the Grants of Plan-Based Awards
table for information on options granted in 2008. The amounts in
this column reflect the Companys accounting expense for
these awards, and do not necessarily correspond to the actual
value that will be recognized by the named executive officers.
|
|
(4)
|
This column represents the dollar amount of payments to be made
in April 2009 to the named executive officers based on 2008
performance with respect to the targets established under the
Companys 2005 Pay for Performance (P4P) Incentive Plan.
Mr. Prieur requested of the Compensation Committee that he
receive no payment under the P4P Plan for 2008. Based on his
targets for 2008 and the Companys performance,
Mr. Prieurs incentive payment for 2008 was calculated
at $633,800.
|
23
|
|
(5) |
For 2008, the amounts reported in this column represent the
amounts paid for: (i) group life insurance premiums,
(ii) Company contributions to the 401(k) Plan,
(iii) spousal travel benefits, and (iv) amounts paid
as reimbursement for taxes paid on taxable income associated
with spousal travel.
|
The table below shows such amounts for each named executive
officer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Group
|
|
|
|
|
|
|
|
|
|
|
|
|
Life Insurance
|
|
|
401(k) Plan
|
|
|
Spousal
|
|
|
Tax
|
|
Name
|
|
Premiums
|
|
|
Contributions
|
|
|
Travel
|
|
|
Reimbursement
|
|
|
James Prieur
|
|
$
|
1,806
|
|
|
$
|
6,900
|
|
|
$
|
2,490
|
|
|
$
|
1,040
|
|
Edward Bonach
|
|
|
966
|
|
|
|
6,900
|
|
|
|
|
|
|
|
|
|
Eric Johnson
|
|
|
630
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scott Perry
|
|
|
630
|
|
|
|
6,900
|
|
|
|
12,558
|
|
|
|
5,242
|
|
Steven Stecher
|
|
|
630
|
|
|
|
6,900
|
|
|
|
3,449
|
|
|
|
1,538
|
|
|
|
(6)
|
Mr. Prieur became Chief Executive Officer on
September 7, 2006.
|
|
(7)
|
Mr. Bonach became Chief Financial Officer on May 11,
2007.
|
|
(8)
|
Mr. Stecher became President of Conseco Insurance Group on
July 31, 2008.
|
Employment
Agreements
Chief Executive Officer. Effective
September 7, 2006, we entered into an employment agreement
with C. James Prieur, pursuant to which he would serve as our
Chief Executive Officer for an initial term ending
December 31, 2009. The agreement provides for an annual
base salary of $900,000, an annual performance-based bonus with
a target of 125% of base salary and a maximum of 200% of his
Target Bonus, and a minimum bonus for 2006 equal to a pro rata
portion of his Target Bonus. Under the agreement, we provided
Mr. Prieur with an initial equity award comprised of
options to purchase 350,000 shares of common stock, with an
exercise price equal to the fair market value on the date of
grant, pursuant to the LTIP. The agreement also provided for an
award of 50,000 performance shares, which were granted in March
2007. Mr. Prieur is subject to a non-solicitation and
non-competition clause throughout the term of the agreement and
for one year thereafter.
Chief Financial Officer. We entered into an
employment agreement, effective April 23, 2007, with Edward
J. Bonach pursuant to which he would serve as our Executive Vice
President and Chief Financial Officer for a term of three years.
The agreement provides for an annual base salary of $450,000 and
an annual performance-based bonus with a target of 100% of base
salary. Under the agreement, we provided Mr. Bonach with an
initial equity award comprised of options to purchase
80,000 shares of common stock and 40,000 shares of
restricted stock, pursuant to the LTIP. Mr. Bonach is
subject to a non-solicitation and non-competition clause
throughout the term of the agreement and for one year thereafter.
President, 40 / 86 Advisors,
Inc. 40 / 86 Advisors, Inc., a
wholly-owned investment management subsidiary of Conseco, Inc.
that manages the investment portfolios of our insurance
subsidiaries, entered into an amended employment agreement,
effective September 10, 2008, with Eric R. Johnson pursuant
to which he would continue to serve as
40 / 86 Advisors President for an
additional term of one year. The agreement provides for an
annual base salary of $500,000 and an annual performance-based
bonus with a target of 100% of base salary and a maximum of 200%
of base salary. Mr. Johnson is subject to a
non-solicitation and non-competition clause throughout the term
of the agreement and for one year thereafter.
President, Bankers Life and Casualty
Company. Effective October 1, 2004, Scott R.
Perry entered into an employment agreement with Conseco
Services, LLC to be Executive Vice President of Bankers Life for
an initial term of four years and effective October 1, 2008
Mr. Perry entered into an amended and restated employment
agreement that expires September 30, 2010.
Mr. Perrys employment agreement provides for a
minimum annual salary of $441,000 and an annual
performance-based bonus with a target of 100% of base salary and
a maximum of 200% of base salary. Mr. Perry is subject to a
non-solicitation and non-competition clause throughout the term
of his agreement and for a period of up to two years thereafter.
24
President, Conseco Insurance Group. Effective
May 27, 2008, Steven M. Stecher entered into an amended
employment agreement with our with our subsidiary, Conseco
Services, LLC with a term that expires on May 27, 2010. In
July 2008 Mr. Stecher was promoted to the position of
President of Conseco Insurance Group. The amended employment
agreement provided for an annual salary of $412,000 and an
annual
performance-based
bonus with a target of 100% of base salary and a minimum of 200%
of base salary. Mr. Stecher is subject to a
non-solicitation and non-competition clause throughout the term
of the agreement and for one year thereafter.
Grants of
Plan-Based Awards in 2008
The following table shows certain information concerning grants
of plan-based awards in 2008 to the named executive officers.
GRANTS OF
PLAN-BASED AWARDS IN 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Option
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future Payouts
|
|
|
Awards:
|
|
|
Awards:
|
|
|
Exercise
|
|
|
Grant Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in Shares of Common Stock)
|
|
|
Number
|
|
|
Number of
|
|
|
or Base
|
|
|
Fair Value
|
|
|
|
|
|
|
Estimated Future Payouts Under
|
|
|
Under Equity Incentive
|
|
|
of Shares
|
|
|
Securities
|
|
|
Price of
|
|
|
of Stock and
|
|
|
|
Grant
|
|
|
Non-Equity Incentive Plan Awards(1)
|
|
|
Plan Awards(2)
|
|
|
of Stock
|
|
|
Underlying
|
|
|
Option
|
|
|
Option
|
|
Name
|
|
Date
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
or Units(3)
|
|
|
Options(4)
|
|
|
Awards(5)
|
|
|
Awards(6)
|
|
|
James Prieur
|
|
|
|
|
|
$
|
281,250
|
|
|
$
|
1,125,000
|
|
|
$
|
2,250,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4-1-08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
69,000
|
|
|
|
N/A
|
|
|
|
138,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4-1-08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,600
|
|
|
|
46,000
|
|
|
|
92,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4-1-08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
470,000
|
|
|
$
|
10.55
|
|
|
$
|
1,076,300
|
|
Edward Bonach
|
|
|
|
|
|
|
118,125
|
|
|
|
472,500
|
|
|
|
945,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4-1-08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,500
|
|
|
|
N/A
|
|
|
|
21,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4-1-08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
700
|
|
|
|
7,000
|
|
|
|
14,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4-1-08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
|
|
|
10.55
|
|
|
|
229,000
|
|
Eric Johnson
|
|
|
|
|
|
|
125,000
|
|
|
|
500,000
|
|
|
|
1,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4-1-08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,550
|
|
|
|
N/A
|
|
|
|
23,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4-1-08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
770
|
|
|
|
7,700
|
|
|
|
15,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4-1-08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
10.55
|
|
|
|
114,500
|
|
Scott Perry
|
|
|
|
|
|
|
110,331
|
|
|
|
441,324
|
|
|
|
882,648
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4-1-08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,500
|
|
|
|
N/A
|
|
|
|
21,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4-1-08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
700
|
|
|
|
7,000
|
|
|
|
14,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4-1-08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
80,000
|
|
|
|
10.55
|
|
|
|
183,200
|
|
Steven Stecher
|
|
|
|
|
|
|
103,000
|
|
|
|
412,000
|
|
|
|
824,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4-1-08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,000
|
|
|
|
N/A
|
|
|
|
12,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4-1-08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
400
|
|
|
|
4,000
|
|
|
|
8,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4-1-08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,000
|
|
|
|
10.55
|
|
|
|
137,400
|
|
|
|
|
8-20-08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000
|
|
|
|
|
|
|
|
|
|
|
|
44,550
|
|
|
|
|
8-20-08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
|
8.91
|
|
|
|
43,800
|
|
|
|
|
(1) |
|
These amounts represent the threshold, target and maximum
amounts that would have been payable for 2008 if the
performance-based metrics under the Conseco Pay for Performance
Incentive Plan had been achieved. The amounts paid for 2008
performance under the Pay for Performance Incentive Plan are
listed in the summary compensation table on page 23 of this
proxy statement under the column heading Non-Equity
Incentive Plan Compensation. |
|
(2) |
|
These amounts represent the threshold, target and maximum number
of shares that the named executive officers can receive under
the terms of the performance share awards made in 2008. For each
officer, the first line of information in these three columns is
for the performance share award that is tied to total
shareholder return, and the second line of information is for
the performance share award that is tied to operating return on
equity. See also footnote (3) to the Outstanding
Equity Awards at 2008 Fiscal Year-end table below for
additional information regarding the 2008 performance share
awards. |
25
|
|
|
(3) |
|
The amounts in this column represent the number of shares of
restricted stock that were awarded to the named executive
officers during 2008 under the LTIP. |
|
(4) |
|
The amounts in this column represent the number of stock options
granted to the named executive officers during 2008 under the
LTIP. |
|
(5) |
|
The exercise price equals the closing sales price of Conseco
common stock on the New York Stock Exchange on the date of grant. |
|
(6) |
|
A description of the assumptions used in calculating these
values may be found in Note 11 to our 2008 audited
financial statements included in our 2008 Annual Report, which
report accompanies this proxy statement. |
Outstanding
Equity Awards at 2008 Fiscal Year-End
The following table sets forth certain information concerning
outstanding equity awards held by the named executive officers
as of December 31, 2008.
OUTSTANDING
EQUITY AWARDS AT 2008 FISCAL YEAR-END
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCK AWARDS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
Plan Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
Market or
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan Awards:
|
|
|
Payout
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
|
|
|
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market
|
|
|
of
|
|
|
of
|
|
|
|
|
|
|
OPTION AWARDS
|
|
|
|
|
|
Value of
|
|
|
Unearned
|
|
|
Unearned
|
|
|
|
|
|
|
Number of
|
|
|
Number of
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Shares or
|
|
|
Shares,
|
|
|
Shares,
|
|
|
|
|
|
|
Securities
|
|
|
Securities
|
|
|
|
|
|
|
|
|
Shares or
|
|
|
Units of
|
|
|
Units or
|
|
|
Units or
|
|
|
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
Units of
|
|
|
Stock
|
|
|
Other Rights
|
|
|
Other Rights
|
|
|
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Option
|
|
|
Option
|
|
|
Stock That
|
|
|
That Have
|
|
|
That Have
|
|
|
That Have
|
|
|
|
Award
|
|
|
Options
|
|
|
Options
|
|
|
Exercise
|
|
|
Expiration
|
|
|
Have Not
|
|
|
Not
|
|
|
Not
|
|
|
Not
|
|
Name
|
|
Date
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
Price
|
|
|
Date(1)
|
|
|
Vested
|
|
|
Vested(2)
|
|
|
Vested(3)
|
|
|
Vested(4)
|
|
|
James Prieur
|
|
|
9-7-06
|
(5)
|
|
|
150,000
|
|
|
|
150,000
|
|
|
$
|
20.91
|
|
|
|
9-7-16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9-7-06
|
|
|
|
50,000
|
|
|
|
|
|
|
|
20.91
|
|
|
|
9-7-16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3-26-07
|
(6)
|
|
|
|
|
|
|
250,000
|
|
|
|
17.75
|
|
|
|
3-26-12
|
|
|
|
|
|
|
|
|
|
|
|
16,000
|
|
|
$
|
82,880
|
|
|
|
|
4-1-08
|
(7)
|
|
|
|
|
|
|
470,000
|
|
|
|
10.55
|
|
|
|
4-1-13
|
|
|
|
|
|
|
|
|
|
|
|
73,600
|
|
|
|
381,248
|
|
Edward Bonach
|
|
|
5-11-07
|
(8)
|
|
|
|
|
|
|
80,000
|
|
|
|
18.35
|
|
|
|
5-11-12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5-11-07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,000
|
|
|
$
|
207,200
|
|
|
|
11,200
|
|
|
|
58,016
|
|
|
|
|
4-1-08
|
(7)
|
|
|
|
|
|
|
50,000
|
|
|
|
10.55
|
|
|
|
4-1-13
|
|
|
|
|
|
|
|
|
|
|
|
11,200
|
|
|
|
58,016
|
|
Eric Johnson
|
|
|
6-1-04
|
(9)
|
|
|
150,000
|
|
|
|
|
|
|
|
21.00
|
|
|
|
6-1-14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3-26-07
|
(6)
|
|
|
|
|
|
|
88,000
|
|
|
|
17.75
|
|
|
|
3-26-12
|
|
|
|
|
|
|
|
|
|
|
|
12,320
|
|
|
|
63,818
|
|
|
|
|
4-1-08
|
(7)
|
|
|
|
|
|
|
|
|
|
|
10.55
|
|
|
|
4-1-13
|
|
|
|
|
|
|
|
|
|
|
|
11,200
|
|
|
|
58,016
|
|
Scott Perry
|
|
|
6-1-04
|
|
|
|
18,000
|
|
|
|
|
|
|
|
21.00
|
|
|
|
6-1-14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6-27-05
|
|
|
|
25,000
|
|
|
|
|
|
|
|
21.67
|
|
|
|
6-27-15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6-30-06
|
(9)
|
|
|
22,500
|
|
|
|
22,500
|
|
|
|
23.10
|
|
|
|
6-30-16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3-26-07
|
(6)
|
|
|
|
|
|
|
80,000
|
|
|
|
17.75
|
|
|
|
3-26-12
|
|
|
|
|
|
|
|
|
|
|
|
11,200
|
|
|
|
140,672
|
|
|
|
|
4-1-08
|
(7)
|
|
|
|
|
|
|
80,000
|
|
|
|
10.55
|
|
|
|
4-1-13
|
|
|
|
|
|
|
|
|
|
|
|
11,200
|
|
|
|
58,016
|
|
Steven Stecher
|
|
|
9-17-04
|
|
|
|
10,000
|
|
|
|
|
|
|
|
17.87
|
|
|
|
9-17-14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6-27-05
|
(10)
|
|
|
22,500
|
|
|
|
7,500
|
|
|
|
21.67
|
|
|
|
6-27-15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6-30-06
|
(9)
|
|
|
18,000
|
|
|
|
18,000
|
|
|
|
23.10
|
|
|
|
6-30-16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3-26-07
|
(6)
|
|
|
|
|
|
|
54,000
|
|
|
|
17.75
|
|
|
|
3-26-12
|
|
|
|
|
|
|
|
|
|
|
|
5,760
|
|
|
|
29,837
|
|
|
|
|
4-1-08
|
(7)
|
|
|
|
|
|
|
30,000
|
|
|
|
10.55
|
|
|
|
4-1-13
|
|
|
|
|
|
|
|
|
|
|
|
6,400
|
|
|
|
33,152
|
|
|
|
|
8-18-08
|
(11)
|
|
|
|
|
|
|
20,000
|
|
|
|
8.91
|
|
|
|
8-18-13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8-18-08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000
|
|
|
|
25,900
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
All options in this table that were granted in 2006 or prior
years have a 10 year expiration date, while options granted
beginning in 2007 have a five year expiration date. All options
are subject to acceleration for certain events. |
|
(2) |
|
Based on the closing sales price of Conseco common stock ($5.18)
on December 31, 2008. |
26
|
|
|
(3) |
|
In accordance with SEC rules, the amounts included in this
column represent the number of shares of Conseco common stock to
which the named executive officer will be entitled if the
Company achieves the threshold performance level with respect to
the performance share awards made in 2007 and 2008 and covering
the years 2007 2009 and 2008 2010,
respectively. Sixty percent (60%) of the 2007 and 2008
performance awards made to the named executive officers are tied
to the cumulative return on the Companys common stock with
dividends reinvested (total shareholder return or
TSR) compared to the total shareholder return of a
group of Consecos peers (represented by the companies
comprising the Standard & Poors Life and Health
Index and the Russell 3000 Health and Life Index) over the
applicable three-year periods. If Consecos performance is
below the 50th percentile, then no portion of that award is
earned. If Consecos performance is at the 50th percentile,
or threshold level, one-half of the total number of TSR
performance shares will vest and the number of shares in this
column includes that 50% amount. (The maximum TSR payout will
occur if the Companys total shareholder return exceeds the
75th percentile.) The balance of the performance share awards
are tied to Consecos operating return on equity for the
year ending December 31, 2009 and December 31, 2010,
respectively. For that portion of the award, no portion will be
earned if the Company operating return on equity is less than
10%, and payouts begin with a 5% payout at the threshold level
of 10.1%. Accordingly, the number of shares in this column
includes 5% of the total number of ROE performance shares
granted to the named executive officer. |
|
(4) |
|
The dollar amounts in this column equal the number of threshold
level performance shares, calculated as described in footnote
(3) above, multiplied by the closing sales price of Conseco
common stock on December 31, 2008 ($5.18). |
|
(5) |
|
These options vest and become exercisable in four equal annual
installments, commencing September 7, 2007. |
|
(6) |
|
One-half of these options vest on March 26, 2009 and the
balance vests on March 26, 2010. |
|
(7) |
|
One-half of these options vest on April 1, 2010 and the
balance vests on April 1, 2011. |
|
(8) |
|
One-half of these options vest on May 11, 2009 and the
balance vests on May 11, 2010. |
|
(9) |
|
These options vest and become exercisable in four equal annual
installments, commencing June 30, 2007. |
|
(10) |
|
These options vest and become exercisable in four equal annual
installments, commencing June 27, 2006. |
|
(11) |
|
One-half of these options vest on August 18, 2010 and the
balance vests on August 18, 2011. |
Option
Exercises and Stock Vested in 2008
The following table provides information, for the named
executive officers, concerning (i) stock option exercises
during 2008 (of which there were none) and (ii) the number
of shares acquired upon the vesting of restricted stock awards
and the value realized (before payment of any applicable
withholding tax).
OPTION
EXERCISES AND STOCK VESTED IN 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPTION AWARDS
|
|
|
STOCK AWARDS
|
|
|
|
Number of
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
Shares
|
|
|
Value
|
|
|
Shares
|
|
|
Value
|
|
|
|
Acquired
|
|
|
Realized
|
|
|
Acquired on
|
|
|
Realized on
|
|
Name
|
|
On Exercise
|
|
|
Upon Exercise
|
|
|
Vesting
|
|
|
Vesting
|
|
|
James Prieur
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Edward Bonach
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eric Johnson
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scott Perry
|
|
|
|
|
|
|
|
|
|
|
31,250
|
|
|
$
|
125,000
|
|
Steven Stecher
|
|
|
|
|
|
|
|
|
|
|
5,000
|
|
|
|
49,550
|
|
27
Non-qualified
Deferred Compensation in 2008
The following table shows certain information concerning
non-qualified deferred compensation activity in 2008 for our
named executive officers.
NON-QUALIFIED
DEFERRED COMPENSATION IN 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
|
|
|
Conseco
|
|
|
Aggregate
|
|
|
Aggregate
|
|
|
Aggregate
|
|
|
|
Contributions
|
|
|
Contributions
|
|
|
Earnings (Loss)
|
|
|
Withdrawals/
|
|
|
Balance at
|
|
Name
|
|
in 2008(1)
|
|
|
in 2008
|
|
|
in 2008(2)
|
|
|
Distributions
|
|
|
12/31/08
|
|
|
James Prieur
|
|
$
|
1,192,500
|
|
|
|
|
|
|
$
|
(171,340
|
)
|
|
|
|
|
|
$
|
1,687,327
|
|
Edward Bonach
|
|
|
|
|
|
|
|
|
|
|
(108,657
|
)
|
|
|
|
|
|
|
151,353
|
|
Eric Johnson
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scott Perry
|
|
|
13,155
|
|
|
|
|
|
|
|
(9,905
|
)
|
|
|
|
|
|
|
25,267
|
|
Steven Stecher
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Amounts in this column are included in the Salary,
Bonus and/or Non-Equity Incentive Plan
Compensation column in the Summary Compensation Table. |
|
(2) |
|
Amounts in this column are not included in the Summary
Compensation Table on page 24 of this Proxy Statement. |
The 2008 Nonqualified Deferred Compensation table presents
amounts deferred under our Deferred Compensation Plan.
Participants may defer up to 100% of their base salary and
annual incentive plan payments under the Deferred Compensation
Plan. Deferred Amounts are credited with earnings or losses
based on the return of mutual funds selected by the executive,
which the executive may change at any time. We do not make
contributions to participants accounts under the Deferred
Compensation Plan. Distributions are made in either a lump sum
or an annuity as chosen by the executive at the time of deferral.
Potential
Payments Upon Termination or Change in Control
Each of the named executive officers listed below has an
employment agreement with the Company or one of its
subsidiaries. Each such employment agreement provides for
certain payments to be made upon termination of employment for
various reasons. Those payments are to be made either as a lump
sum or over a period not to exceed two years. The following
table estimates the amounts that would have been payable to the
named executive officers upon termination of employment under
each of the identified circumstances as of December 31,
2008:
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|
|
|
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|
|
|
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|
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Involuntary or
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Good Reason
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Termination
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Voluntary or
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Without
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upon or within
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For Cause
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|
|
|
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Cause/Good
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2 years after
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Name
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Termination
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|
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Disability
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Death
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Reason
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Change In Control
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James Prieur
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$
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2,025,000
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$
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900,000
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$
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2,025,000
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$
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4,278,241
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Edward Bonach
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752,286
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752,286
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1,697,286
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2,169,786
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Eric Johnson
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500,000
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500,000
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1,500,000
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2,077,423
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Scott Perry
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441,324
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441,324
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1,323,972
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1,617,220
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Steven Stecher
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|
|
|
|
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412,000
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|
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412,000
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1,236,000
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|
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1,506,614
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28
PROPOSAL 2
PROPOSAL TWO: APPROVAL OF SECTION 382 STOCKHOLDERS
RIGHTS PLAN
On January 20, 2009, the Board of Directors adopted a Section
382 Stockholders Rights Plan (the Rights Plan). The
Rights Plan approval proposal is an opportunity for stockholders
to approve the decision by the Board of Directors to adopt the
Rights Plan. If the shareholders do not approve the Rights Plan
at the Annual Meeting, the Rights Plan will expire on that date.
Purpose
of the Rights Plan
The Rights Plan is designed to prevent certain transfers of our
common stock which could adversely affect our ability to use our
tax net operating losses (NOLs). As of
December 31, 2008, we had approximately $4.8 billion
of (pre-tax) NOLs, which we estimate could save us as much as
$1 billion in taxes over the next 20 years. Our NOLs
expire over the period between 2009 and 2028. To the extent that
we have future taxable income, the unexpired balance of our NOLs
can be used to offset future tax on our income. Because the
amount and timing of our future taxable income cannot be
accurately predicted, we cannot predict the amount of NOLs that
will ultimately be used to reduce the Companys income tax
liability. Although we are unable to quantify an exact value, we
believe that the NOLs are a valuable asset and the Board of
Directors believes it is in the Companys best interests to
attempt to prevent the imposition of limitations on their use by
adopting the Rights Plan.
The benefit of the NOLs to the Company would be significantly
reduced or eliminated if we were to experience an
ownership change as defined in Section 382 of
the Internal Revenue Code. An ownership change can
occur through one or more acquisitions of our stock, whether
occurring contemporaneously or pursuant to a single plan, by
which our shareholders or groups of shareholders, each of whom
owns or is deemed to own directly or indirectly at least 5% of
our stock, increase their ownership of our stock by more than
50 percentage points over their lowest percentage ownership
interest within a rolling three-year period. If that were to
happen, we would only be allowed to use a limited amount of our
NOLs and credits to offset our taxable income subsequent to an
ownership change. The annual limit is obtained by
multiplying (i) the aggregate value of our outstanding
equity immediately prior to the ownership change
(reduced by certain capital contributions made during the
immediately preceding two years and certain other items) by
(ii) the federal long-term tax-exempt interest rate in
effect for the month of the ownership change. In
calculating this annual limit, numerous special rules and
limitations apply, including provisions dealing with
built-in gains and losses. If we were to experience
an ownership change at our current stock price
levels, we believe that we would be subject to an annual NOL
limitation which would result in a material amount of NOLs
expiring unused, resulting in a significant impairment to the
Companys NOL assets and likely causing a default under our
secured secured credit facility.
Currently, we do not believe that we have experienced an
ownership change since our recapitalization in 2004,
but calculating whether an ownership change has
occurred is subject to inherent uncertainty. This uncertainty
results from the complexity and ambiguity of the
Section 382 provisions, as well as limitations on the
knowledge that any publicly traded company can have about the
ownership of and transactions in its securities. We and our
advisors have analyzed the information available, along with
various scenarios of possible future changes of ownership. In
light of this analysis, our current stock price and daily
trading volume, we believed that if no action was taken it is
possible that we would undergo a Section 382
ownership change.
The Rights Plan, as it may be amended and restated, is not
designed to protect stockholders against the possibility of a
hostile takeover. Instead, it is meant to protect stockholder
value by attempting to preserve our ability to use the NOLs.
Because of the value of the NOLs to the Company, your Board of
Directors believes it is in the best interest of us and our
shareholders to approve the adoption of the Rights Plan. Your
Board of Directors has unanimously approved the Rights Plan and
is unanimously recommending that stockholders approve the plan
at the Annual Meeting.
29
The following description of the Rights Plan is qualified in its
entirety by reference to the text of the Rights Plan, which is
attached to this proxy statement as Annex A. You are
urged to read carefully the Rights Plan in its entirety as the
discussion below is only a summary.
Description
of Rights Plan
The Rights Plan is intended to act as a deterrent to any person
or group acquiring 5% or more of our outstanding Common Stock
(an Acquiring Person) without the approval of your
Board of Directors. Stockholders who own 5% or more of the
Companys outstanding Common Stock as of the close of
business on January 20, 2009 will not trigger the Rights
Plan so long as they do not (i) acquire additional shares
of Common Stock that equal more than 1% of the shares then
outstanding or (ii) fall under 5% ownership of Common Stock
and then re-acquire 5% or more of the Common Stock. Any rights
held by an Acquiring Person are void and may not be exercised.
Your Board of Directors may, in its sole discretion, exempt any
person or group from being deemed an Acquiring Person for
purposes of the Rights Plan.
The Rights. Our Board of Directors authorized
the issuance of one right per each outstanding share of Common
Stock payable to our stockholders of record as of
January 30, 2009. Subject to the terms, provisions and
conditions of the Rights Plan, if the rights become exercisable,
each right would initially represent the right to purchase from
us one ten-thousandth of a share of our Series A Junior
Preferred Stock for a purchase price of $20.00 (the
Purchase Price). If issued, each fractional share of
preferred stock would give the stockholder approximately the
same dividend, voting and liquidation rights as does one share
of Common Stock. However, prior to exercise, a right does not
give its holder any rights as a stockholder, including without
limitation any dividend, voting or liquidation rights.
Exercisability. The rights will not be
exercisable until the earlier of (i) 10 business days after
a public announcement by us that a person or group has become an
Acquiring Person and (ii) 10 business days after the
commencement of a tender or exchange offer by a person or group
for 5% of the Common Stock. We refer to the date that the rights
become exercisable as the Distribution Date. Until
the Distribution Date, Common Stock certificates will evidence
the rights and may contain a notation to that effect. Any
transfer of shares of Common Stock prior to the Distribution
Date will constitute a transfer of the associated rights. After
the Distribution Date, the rights may be transferred other than
in connection with the transfer of the underlying shares of
Common Stock.
After the Distribution Date, each holder of a right, other than
rights beneficially owned by any Acquiring Person (which will
thereupon become void), will thereafter have the right to
receive upon exercise of a right and payment of the Purchase
Price, that number of shares of Common Stock having a market
value of two times the Purchase Price.
Exchange. After the Distribution Date, your
Board of Directors may exchange the rights (other than rights
owned by an Acquiring Person which will have become void), in
whole or in part, at an exchange ratio of one share of Common
Stock or a fractional share of Series B Preferred Stock (or
of a share of a similar class or series of our preferred stock
having similar rights, preferences and privileges) of equivalent
value, per right (subject to adjustment).
Expiration. The rights and the Rights Plan
will expire on the earliest of (i) January 20, 2012,
(ii) the time at which the rights are redeemed pursuant to
the Rights Agreement (as described below), (iii) the time
at which the rights are exchanged pursuant to the Rights
Agreement, (iv) your Board of Directors determination
that the Rights Plan is no longer necessary for the preservation
of the NOLs because of the repeal of Section 382 or any
successor statute, (v) the beginning of a taxable year of
the Company to which your Board of Directors determines that no
tax benefits may be carried forward and (vi) at the
conclusion of the Annual Meeting if stockholder approval of the
Rights Plan has not been obtained.
Redemption. At any time prior to the time an
Acquiring Person becomes such, your Board of Directors may
redeem the rights in whole, but not in part, at a price of $0.01
per right (the Redemption Price). The
redemption of the rights may be made effective at such time, on
such basis and with such conditions as your Board of Directors
in its sole discretion may establish. Immediately upon any
redemption of the rights, the
30
right to exercise the rights will terminate and the only right
of the holders of rights will be to receive the
Redemption Price.
Anti-Dilution Provisions. The purchase price
of the preferred shares, the number of preferred shares issuable
and the number of outstanding rights are subject to adjustment
to prevent dilution that may occur as a result of certain
events, including among others, a stock dividend, a stock split
or a reclassification of the preferred shares or Common Stock.
No adjustments to the purchase price of less than 1% will be
made.
Amendments. Before the Distribution Date,
your Board of Directors may amend or supplement the Rights Plan
without the consent of the holders of the rights. After the
Distribution Date, your Board of Directors may amend or
supplement the Rights Plan only to cure an ambiguity, to alter
time period provisions, to correct inconsistent provisions, or
to make any additional changes to the Rights Plan, but only to
the extent that those changes do not impair or adversely affect
any rights holder.
Vote
Needed for Approval
Approval of the Rights Plan requires the affirmative vote of the
majority in voting power of all outstanding common stock
entitled to vote and that are present, or represented by proxy,
and are voted on the proposal to approve the Rights Plan. With
respect to the vote on the Rights Plan, the holders of record,
present in person or by proxy, of a majority of the votes of the
Companys issued and outstanding capital stock shall
constitute a quorum for the transaction of business.
In determining whether the proposal has received the requisite
number of affirmative votes, abstentions and broker non-votes
will have no impact on such matter because shares for which the
holder abstains from voting or are the subject of broker
non-votes are not shares voted.
Recommendation
of your Board of Directors
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS VOTE FOR THE APPROVAL OF THE RIGHTS
PLAN.
PROPOSAL 3
PROPOSAL 3
APPROVAL OF AMENDED AND RESTATED LONG-TERM INCENTIVE
PLAN
On March 31, 2009, the Board of Directors unanimously
approved the Amended and Restated Long-Term Incentive Plan (the
Plan), to be effective upon the approval thereof by
the shareholders of the Company at the Annual Meeting. The 2003
Long-Term Incentive Plan was initially adopted and approved in
connection with the Companys emergence from bankruptcy.
Such plan was previously amended and restated on July 22,
2005 to provide for a broader range of awards and to reflect
applicable regulatory developments.
This amendment and restatement of the Plan incorporates the
provisions of the Plan as currently in effect and includes the
following key modifications:
Increase in the Number of Authorized
Shares. An increase in the number of shares
authorized to be issued under the Plan by
15,846,268 shares, for a total number of authorized shares
under the Plan of 25,846,268. As of December 31, 2008,
1,153,732 shares remained available for issuance under the
Plan. Shareholder approval of the authorized share increase
would bring the total amount of shares authorized and available
to be issued under the Plan to 17,000,000. The Compensation
Committee believes that this additional share reserve will allow
the Company to provide the necessary incentives to employees for
future years.
Limits on Full-Value Awards. In order to
minimize shareholder dilution, a provision is included which
provides that the number of shares available for issuance under
the Plan will be reduced by 1.25 shares for each share of
common stock subject to a full-value award (which is any award
other than an option, stock appreciation right
(SAR), or award required to be settled in cash).
31
Eliminating Liberal Share Counting
Provisions. The Plan provides that only shares
covering awards that are cancelled, expired, forfeited, settled
in cash, or otherwise terminated without delivery of shares will
again be available for issuance under the Plan. The following
shares will not be added back to the aggregate plan limit:
(i) shares not issued or delivered as a result of the net
settlement of outstanding stock options or SARs;
(ii) shares surrendered or withheld as payment of either
the exercise price of an award
and/or
withholding taxes related to an outstanding award; and
(iii) shares repurchased on the open market with the
proceeds from the exercise of stock options.
Shareholders Re-Approval of Performance
Goals. In addition to the foregoing, our
shareholders are being asked to approve the performance goals
under the Plan so that certain incentive awards granted under
the Plan to executive officers of the Company may continue to
qualify as exempt performance-based compensation under
Section 162(m) of the Code, which otherwise generally
disallows a corporate tax deduction for certain compensation
paid in excess of $1 million annually to each of the chief
executive officer and certain other named executive officers
(covered employees). We are asking our shareholders
to re-approve the original performance goals as well as the
addition of a Value of New Business (VNB) metric, which is an
important measure for gauging the profitability of new business.
Code Section 162(m) generally requires such performance
goals to be approved by the Companys shareholders every
five years.
Clarifying and Conforming Amendments. Last,
the amendment and restatement of the Plan would adopt certain
other minor clarifying and conforming amendments to the Plan to
reflect recent developments in applicable law and equity
compensation practices, including:
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|
Adding provisions to give the Compensation Committee, at its
discretion, the ability to delegate to one or more officers or
employees of the Company the authority to make grants of awards
to officers (other than any officer subject to Section 16
of the Exchange Act) and employees (including any prospective
officer or employee) subject to an annual limit as determined
and approved at the Compensation Committees discretion.
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|
Removing any provisions that previously allowed for the use of
any unused portion of a Participants annual Award Limit in
a prior year to be available for use in a future year;
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|
Adding provisions to specifically prohibit the cancellation of
underwater stock options or SARs in exchange for cash without
shareholder approval;
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|
Adding provisions to specifically prohibit the granting of
dividend equivalents with respect to awards of stock options
(including incentive stock options (ISOs)) and SARs;
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|
Adding provisions to specifically prohibit the payout of any
dividends or dividend equivalents on unvested performance awards.
|
The Plan originally provided for an authorization of
10,000,000 shares, of which 1,976,437 restricted shares and
stock options have vested
and/or been
exercised. As of December 31, 2008, the Company had total
outstanding awards of 5,864,451 options with a weighed average
exercise price of $16.94 and weighted average remaining term of
4.82 years, as well as 1,005,380 restricted and performance
shares. As of December 31, 2008, the Plan had 1,153,732
total shares of common stock remaining available for issuance
out of the original authorization of 10,000,000 shares.
The limited number of shares remaining would preclude the
company from continuing to award equity, an essential component
of our pay-for-performance compensation philosophy. Provided
that we continue with current granting practices, the remaining
pool of shares available are insufficient to make a typical
annual grant, and it is estimated that the pool would be fully
depleted by May 2009. The company is requesting an additional
15,846,268 shares, when combined with the 1,153,732
remaining shares, will provide 17,000,000 shares for equity
awards in 2009 and subsequent years. This new share pool
represents
32
approximately 9.2% of the shares outstanding as of
December 31, 2008. The shareholder approved equity is
designed to help the Company:
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|
Attract, retain, motivate, and reward officers, employees and
directors of the Company and its subsidiaries and consultants
and advisors to the Company and its subsidiaries (collectively,
participants);
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Provide equitable and competitive compensation
opportunities; and
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Promote creation of long-term value for shareholders by closely
aligning the interests of participants with the interests of
shareholders.
|
The Board and the Compensation Committee believe that awards
linked to common stock and awards with terms tied to Company
performance can provide incentives for the achievement of
important performance objectives and promote the long-term
success of the Company. Therefore, they view the Plan as a key
element of the Companys overall compensation program.
Reasons
for Seeking Shareholder Approval
The Company seeks approval of the Plan by shareholders to meet
requirements of the New York Stock Exchange and to satisfy
requirements of tax law to help preserve the Companys
ability to claim tax deductions for compensation to executive
officers. In addition, the board regards shareholder approval of
the Plan as desirable and consistent with corporate governance
best practices.
Section 162(m) of the Code limits the deductions a publicly
held company can claim for compensation in excess of
$1 million in a given year paid to the chief executive
officer or any of its three other most highly compensated
executive officers other than the chief financial officer
serving on the last day of the fiscal year (generally referred
to as the named executive officers).
Performance-based compensation that meets certain
requirements is not counted against the $1 million
deductibility cap, and therefore remains fully deductible. For
purposes of Section 162(m), approval of the Plan will be
deemed to include approval of the general business criteria upon
which performance objectives for Restricted Awards are based,
described below under the caption Performance-Based
Awards and Annual Incentive Awards.
Shareholder approval of general business criteria, without
specific targeted levels of performance, will permit
qualification of incentive awards for full tax deductibility for
a period of five years under Section 162(m). Shareholder
approval of the performance goal inherent in stock options and
SARs (increases in the market price of stock) is not subject to
a time limit under Section 162(m).
The amendments to the Plan will not go into effect if
shareholder approval is not obtained. If such approval is not
obtained, the Company may continue to grant awards under the
Plan in accordance with its terms and the current share reserve
as they existed prior to the amendments.
The following is a summary of the Plan as amended and restated.
It is qualified in its entirety by reference to the full text of
the Plan, which is attached as Annex B to this proxy
statement. Shareholders are encouraged to review the Plan
carefully.
Summary
Description of the Plan
Shares Available. The number of shares that
may be issued under the Plan has been increased from 10,000,000
to 25,846,268 shares of common stock. This amount includes
the 1,153,732 shares remaining available for grant under
the Plan as of December 31, 2008, plus 15,846,268 new
shares added to the share authorization and available for awards
granted after the Annual Meeting, subject to adjustment in the
event of a reorganization, stock split, merger or similar change
in the corporate structure of the Company. Shares used for
awards assumed in an acquisition do not count against the shares
reserved under the Plan.
The issuance of shares pursuant to an award will reduce the
total number of shares available under the Plan except that each
full-value share awarded and distributed will reduce the total
number of shares available under the Plan by 1.25 shares.
Also, the full number of shares of common stock subject to an
option or SAR will count against the number of shares remaining
available for issuance pursuant to awards granted under the
33
plan, even if fewer shares are actually delivered to a
participant as a result of a net settlement. Further, any shares
tendered or withheld to satisfy the exercise price or tax
withholding obligations of an outstanding award shall no longer
be available for issuance under the plan. Notwithstanding,
shares will remain available for new awards if an award is
cancelled, expired, forfeited, settled in cash, or otherwise
terminated without delivery of the shares. Shares delivered
under the Plan may be either newly issued or treasury shares.
Per-Person Award Limitations. The Plan
includes a limitation on the amount of awards that may be
granted to any one participant in a given year in order to
qualify awards as performance-based compensation not
subject to the limitation on deductibility under
Section 162(m) of the Code. Under this annual per-person
limitation, no participant may in any year be granted
share-denominated awards under the Plan relating to more than
his or her Annual Limit. The Annual Limit equals
1,000,000 shares, subject to adjustment for splits and
other extraordinary corporate events. In the case of
cash-denominated Awards, the Plan limits performance Awards that
may be earned by a participant to the participants defined
Annual Limit, which for this purpose equals $4 million. The
per-person limit for cash-denominated performance Awards does
not operate to limit the amount of share-based Awards, and vice
versa. These limits apply only to awards under the Plan, and do
not limit the Companys ability to enter into compensation
arrangements outside of the Plan.
Adjustments. Adjustments to the number and
kind of shares subject to the share limitations and specified in
the share-based Annual Limit are authorized in the event of a
large, special or non-recurring dividend or distribution,
recapitalization, stock split, stock dividend, reorganization,
business combination, or other similar corporate transaction or
event affecting the common stock. The Company is also obligated
to adjust outstanding awards upon the occurrence of these types
of events to preserve, without enlarging, the rights of
participants with respect to such awards. The Compensation
Committee may adjust performance conditions and other terms of
Awards in response to these kinds of events or to changes in
applicable laws, regulations, or accounting principles, except
that adjustments to Awards intended to qualify as
performance-based generally must conform to
requirements imposed by Section 162(m).
Eligibility. Executive officers and other
employees of the Company and its subsidiaries, and
non-employee directors, consultants and others who provide
substantial services to the Company and its subsidiaries, are
eligible to be granted Awards under the Plan. In addition, any
person who has been offered employment by the Company or a
subsidiary may be granted Awards, but such prospective grantee
may not receive any payment or exercise any right relating to
the Award until he or she has commenced employment or the
providing of services.
Administration. The Plan is administered by
the Compensation Committee, except that the Board may itself act
to administer the Plan. (References to the Compensation
Committee here mean the Compensation Committee or the full
Board exercising authority with respect to a given Award.)
Subject to the terms and conditions of the Plan, the
Compensation Committee is authorized to select participants,
determine the type and number of Awards to be granted and the
number of shares to which Awards will relate or the amount of a
performance award, specify times at which Awards will be
exercisable or settled, including performance conditions that
may be required as a condition thereof, set other terms and
conditions of such Awards, prescribe forms of Award agreements,
interpret and specify rules and regulations relating to the
Plan, and make all other determinations which may be necessary
or advisable for the administration of the Plan. Nothing in the
Plan precludes the Compensation Committee from authorizing
payment of other compensation, including bonuses based upon
performance, to officers and employees, including the executive
officers, outside of the Plan. The Plan provides that members of
the Compensation Committee and the Board shall not be personally
liable, and shall be fully indemnified, in connection with any
action, determination, or interpretation taken or made in good
faith under the Plan.
Stock Options and SARs. The Compensation
Committee is authorized to grant stock options, including both
qualified ISOs, which can result in potentially favorable tax
treatment to the participant, and non-qualified stock options.
SARs may also be granted, entitling the participant to receive
the excess of the fair market value of a share on the date of
exercise over the SARs designated base price.
The exercise price of an option and the base price of an SAR are
determined by the Compensation Committee, but generally may not
be less than the fair market value of the shares on the date of
grant (except as described below under
34
Other Terms of Awards). The maximum term of each
option or SAR will be ten years. Subject to this limit, the
times at which each option or SAR will be exercisable and
provisions requiring forfeiture of unexercised options (and in
some cases gains realized upon an earlier exercise) at or
following termination of employment or upon the occurrence of
other events generally are fixed by the Compensation Committee.
Options may be exercised by payment of the exercise price in
cash, shares having a fair market value equal to the exercise
price or surrender of outstanding awards or other property
having a fair market value equal to the exercise price, as the
Compensation Committee may determine. This may include
withholding of option shares to pay the exercise price if that
would not result in additional accounting expense. The
Compensation Committee also is permitted to establish procedures
for broker-assisted cashless exercises. Methods of exercise and
settlement and other terms of SARs will be determined by the
Compensation Committee. SARs may be exercisable for shares or
for cash, as determined by the Compensation Committee. Options
and SARs may be granted on terms that cause such awards not to
be subject to Code Section 409A
(Section 409A). Alternatively, such awards and
cash SARs may have terms that cause those awards to be deemed
deferral arrangements subject to Section 409A. The
Compensation Committee can require that outstanding options be
surrendered in exchange for a grant of SARs with economically
matching terms.
Restricted and Deferred Stock/Restricted Stock
Units. The Compensation Committee is authorized to
grant restricted stock and deferred stock. Prior to the end of
the restricted period, shares granted as restricted stock may
not be sold, and will be forfeited in the event of termination
of employment in specified circumstances. The Compensation
Committee will establish the length of the restricted period for
awards of restricted stock. Aside from the risk of forfeiture
and non-transferability, an award of restricted stock entitles
the participant to the rights of a shareholder of the Company,
including the right to vote the shares and to receive dividends
(which may be forfeitable or non-forfeitable), unless otherwise
determined by the Compensation Committee.
Deferred stock gives a participant the right to receive shares
at the end of a specified deferral period. Deferred stock
subject to forfeiture conditions may be denominated as an award
of restricted stock units. The Compensation
Committee will establish any vesting requirements for deferred
stock/restricted stock units granted for continuing services.
One advantage of restricted stock units, as compared to
restricted stock, is that the period during which the award is
deferred as to settlement can be extended past the date the
award becomes non-forfeitable, so the Compensation Committee can
require or permit a participant to continue to hold an interest
tied to common stock on a tax-deferred basis. Prior to
settlement, deferred stock awards, including restricted stock
units, carry no voting or dividend rights or other rights
associated with stock ownership, but dividend equivalents (which
may be forfeitable or non-forfeitable) will be paid or accrue if
authorized by the Compensation Committee.
Other Stock-Based Awards, Stock Bonus Awards, and Awards
in Lieu of Other Obligations. The Plan authorizes
the Compensation Committee to grant awards that are denominated
or payable in, valued in whole or in part by reference to, or
otherwise based on or related to common stock. The Compensation
Committee will determine the terms and conditions of such
awards, including the consideration to be paid to exercise
awards in the nature of purchase rights, the periods during
which awards will be outstanding, and any forfeiture conditions
and restrictions on awards. In addition, the Compensation
Committee is authorized to grant shares as a bonus free of
restrictions, or to grant shares or other awards in lieu of
obligations under other plans or compensatory arrangements,
subject to such terms as the Compensation Committee may specify.
Performance-Based Awards. The Compensation
Committee may grant performance awards, which may be
cash-denominated awards or share-based awards. Generally,
performance awards require satisfaction of pre-established
performance goals, consisting of one or more business criteria
and a targeted performance level with respect to such criteria
as a condition of awards being granted or becoming exercisable
or settled, or as a condition to accelerating the timing of such
events. Performance may be measured over a period of any length
specified by the Compensation Committee. If so determined by the
Compensation Committee, to avoid the limitations on tax
deductibility under Section 162(m) of the Code, the
business criteria used by the
35
Compensation Committee in establishing performance goals
applicable to performance awards to the named executive officers
will be selected from among the following:
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Gross or net revenue, premiums collected, new annualized
premiums, and investment income;
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Any earnings or net income measure, including earnings from
operations, earnings before taxes, earnings before interest
and/or taxes
and/or
depreciation, statutory earnings before realized gains (losses),
or net income available to common shareholders;
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Operating earnings per common share (either basic or diluted);
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Return on assets, return on investment, return on capital,
return on equity, or return on tangible equity;
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Economic value created including the value of new business;
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Operating margin or profit margin;
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Net interest margin;
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Asset quality;
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Stock price or total stockholder return; and
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Strategic business criteria, consisting of one or more
objectives based on meeting specified market penetration, total
market capitalization, business retention, new product
generation, rate increase actions, geographic business expansion
goals, cost targets (including cost of capital), investment
portfolio yield, risk-based capital, statutory capital, Best
Capital Adequacy Ratio, tax net operating loss utilization,
customer satisfaction, employee satisfaction, agency ratings,
management of employment practices and employee benefits,
supervision of litigation and information technology, and goals
relating to acquisitions or divestitures of subsidiaries,
affiliates or joint ventures.
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The Compensation Committee retains discretion to set the level
of performance for a given business criteria that will result in
the earning of a specified amount under a performance award.
These goals may be set with fixed, quantitative targets, targets
relative to past Company performance, or targets compared to the
performance of other companies, such as a published or special
index or a group of companies selected by the Compensation
Committee for comparison. The Compensation Committee may specify
that these performance measures will be determined before
payment of bonuses, capital charges, non-recurring or
extraordinary income or expense, or other financial and general
and administrative expenses for the performance period, if so
specified by the Compensation Committee.
Annual Incentive Awards. One type of
performance award that may be granted under the Plan is annual
incentive awards that may be settled in cash or in shares upon
achievement of pre-established performance objectives achieved
during a specified period of up to one year. The Compensation
Committee generally must establish the terms of annual incentive
awards, including the applicable performance goals and the
corresponding amounts payable (subject to per-person limits),
and other terms of settlement, and all other terms of these
awards, not later than 90 days after the beginning of the
fiscal year. As stated above, annual incentive awards granted to
named executive officers are intended to constitute
performance-based compensation not subject to the
limitation on deductibility under Code Section 162(m). In
order for such an annual incentive award to be earned, one or
more of the performance objectives described in the preceding
paragraph will have to be achieved. The Compensation Committee
may specify additional requirements for the earning of such
awards.
Other Terms of Awards. Awards may be settled
in cash, shares, other awards or other property, in the
discretion of the Compensation Committee. The Compensation
Committee may require or permit participants to defer the
settlement of all or part of an award, including shares issued
upon exercise of an option subject to compliance with Code
Section 409A, in accordance with such terms and conditions
as the Compensation Committee may establish, including payment
or crediting of interest or dividend equivalents on any deferred
amounts. The Plan allows vested but deferred awards to be paid
out to the participant in the event of an unforeseeable
emergency. The Compensation Committee is authorized to place
cash, shares or other property in trusts or make other
arrangements to provide for payment of the Companys
obligations under the Plan. The
36
Compensation Committee may condition awards on the payment of
taxes, and may provide for mandatory or elective withholding of
a portion of the shares or other property to be distributed in
order to satisfy tax obligations. Awards granted under the Plan
generally may not be pledged or otherwise encumbered and are not
transferable except by will or by the laws of descent and
distribution, or to a designated beneficiary upon the
participants death, except that the Compensation Committee
may permit transfers of awards other than incentive stock
options on a
case-by-case
basis. This flexibility can allow for estate planning or other
limited transfers consistent with the incentive purpose of the
Plan.
The Compensation Committee is authorized to impose
non-competition, non-solicitation, confidentiality,
non-disparagement and other requirements as a condition on the
participants right to retain an award or gains realized by
exercise or settlement of an award. Awards under the Plan may be
granted without a requirement that the participant pay
consideration in the form of cash or property for the grant (as
distinguished from the exercise), except to the extent required
by law. The Compensation Committee may, however, grant awards in
substitution for, exchange for or as a buyout of other awards
under the Plan, awards under other Company plans, or other
rights to payment from the Company, and may exchange or buy out
outstanding awards for cash or other property. The Compensation
Committee also may grant awards in addition to and in tandem
with other awards or rights. In granting a new award, the
Compensation Committee may determine that the in-the-money value
or fair value of any surrendered award may be applied to reduce
the exercise price of any option, base price of any SAR, or
purchase price of any other award.
Dividend Equivalents. The Compensation
Committee may grant dividend equivalents with respect to awards
other than stock options (including ISOs) or SARs. These are
rights to receive payments equal in value to the amount of
dividends paid on a specified number of shares of common stock
while an award is outstanding. These amounts may be in the form
of cash or rights to receive additional Awards or additional
shares of common stock having a value equal to the cash amount.
The awards may be granted on a stand-alone basis or in
conjunction with another award, and the Compensation Committee
may specify whether the dividend equivalents will be forfeitable
or non-forfeitable. However, the payout of dividends or dividend
equivalents on unvested performance-based awards is prohibited.
Typically, rights to dividend equivalents are granted in
connection with restricted stock units or deferred stock, so
that the participant can earn amounts equal to dividends paid on
the number of shares covered by the award while the award is
outstanding.
Vesting, Forfeitures, and Related Award
Terms. The Compensation Committee may in its
discretion determine the vesting schedule of options and other
awards, the circumstances that will result in forfeiture of the
awards, the post-termination exercise periods of options and
similar awards, and the events that will result in acceleration
of the ability to exercise and the lapse of restrictions, or the
expiration of any deferral period, on any Award.
In addition, the Plan provides that following a Change in
Control, the Compensation Committee may take any of the
following actions with respect to an Award: provide for its full
vesting, provide for its termination beyond the date of full
vesting, deem performance goals to have been met, provide for
the settlement of an award in cash or for termination of the
Award or cause the Award to be assumed as part of the
transaction. A Change in Control generally includes
(A) a merger, reorganization, consolidation, or similar
transaction in which the stockholders of the Company immediately
prior to the transaction do not own more than 51% of the voting
power of the surviving corporation, (B) any
person becomes the owner, directly or indirectly of
shares representing at least 51% of the Companys voting
power, and (C) certain changes of more than half of the
membership of the Board of Directors.
Change-in-control
provisions are limited, however, by applicable restrictions
under Code Section 409A.
Amendment and Termination of the Plan. The
Board may amend, suspend, discontinue, or terminate the Plan or
the Compensation Committees authority to grant awards
hereunder without shareholder approval, except as required by
law or regulation or under the New York Stock Exchange rules,
which require shareholder approval of any material amendment to
plans such as the Plan. Under these rules, however, shareholder
approval will not necessarily be required for all amendments
which might increase the cost of the Plan or broaden
eligibility. Unless earlier terminated, the authority of the
Compensation Committee to make grants under the Plan will
terminate ten years after the latest shareholder approval of the
Plan, and the Plan
37
will terminate when no shares remain available and the Company
has no further obligation with respect to any outstanding award.
Federal
Income Tax Implications of the Plan
The Company believes that under current law the following
federal income tax consequences generally would arise with
respect to awards under the Plan.
Options and SARs that are not deemed to be deferral arrangements
under Section 409A would have the following tax
consequences: The grant of an option or an SAR will create no
federal income tax consequences for the participant or the
Company. A participant will not have taxable income upon
exercising an option which is an ISO, except that the
alternative minimum tax may apply. Upon exercising an option
which is not an ISO, the participant generally must recognize
ordinary income equal to the difference between the exercise
price and the fair market value of the freely transferable and
nonforfeitable shares acquired on the date of exercise. Upon
exercising an SAR, the participant must generally recognize
ordinary income equal to the cash or the fair market value of
the shares received. Upon a disposition of shares acquired upon
exercise of an ISO before the end of the applicable ISO holding
periods, the participant must generally recognize ordinary
income equal to the lesser of: (i) the fair market value of
the ISO shares at the date of exercise minus the exercise price,
or (ii) the amount realized upon the disposition of the ISO
shares minus the exercise price. Otherwise, a participants
sale of shares acquired by exercise of an option generally will
result in short-term or long-term capital gain or loss measured
by the difference between the sale price and the
participants tax basis in such shares. The tax
basis normally is the exercise price plus any amount
he or she recognized as ordinary income in connection with the
options exercise. A participants sale of shares
acquired by exercise of an SAR generally will result in
short-term or long-term capital gain or loss measured by the
difference between the sale price and the tax basis
in the shares, which generally is the amount he or she
recognized as ordinary income in connection with the SARs
exercise.
The Company normally can claim a tax deduction equal to the
amount recognized as ordinary income by a participant in
connection with an option or SAR, but no tax deduction relating
to a participants capital gains. Accordingly, the Company
will not be entitled to any tax deduction with respect to an ISO
if the participant holds the shares for the applicable ISO
holding periods before selling the shares.
Some options and SARs, such as those with deferral features, and
an SAR that is settled in cash, may be subject to Code
Section 409A, which regulates deferral arrangements. In
such case, the distribution to the participant of shares or cash
relating to the award would have to meet certain restrictions in
order for the participant not to be subject to tax and a tax
penalty at the time of vesting. One significant restriction
would be a requirement that the distribution not be controlled
by the participants discretionary exercise of the option
or SAR (subject to limited exceptions). If the distribution and
other award terms meet applicable requirements under Code
Section 409A, the participant would realize ordinary income
at the time of distribution rather than earlier, with the amount
of ordinary income equal to the distribution date value of the
shares less any exercise price actually paid. The Company would
not be entitled to a tax deduction at the time of exercise, but
would become entitled to a tax deduction at the time shares are
delivered at the end of the deferral period.
Awards other than options and SARs that result in a transfer to
the participant of cash or shares or other property generally
will be structured under the Plan to meet applicable
requirements under Code Section 409A. If no restriction on
transferability or substantial risk of forfeiture applies to
amounts distributed to a participant, the participant generally
must recognize ordinary income equal to the cash or the fair
market value of shares actually received. Thus, for example, if
the Company grants an award of deferred stock that has vested or
requires or permits deferral of receipt of cash or shares under
a vested award, the participant should not become subject to
income tax until the time at which shares are actually
delivered, and the Companys right to claim a tax deduction
will be deferred until that time. On the other hand, if a
restriction on transferability and substantial risk of
forfeiture applies to shares or other property actually
distributed to a participant under an award (such as, for
example, a grant of restricted stock), the participant generally
must recognize ordinary income equal to the fair market value of
the transferred amounts at the earliest time either the
transferability restriction or risk of forfeiture lapses. In all
cases, the Company can claim a tax deduction
38
in an amount equal to the ordinary income recognized by the
participant, except as discussed below. A participant may elect
to be taxed at the time of grant of restricted stock or other
property rather than upon lapse of restrictions on
transferability or the risk of forfeiture, but if the
participant subsequently forfeits such shares or property he or
she would not be entitled to any tax deduction, including as a
capital loss, for the value of the shares or property on which
he or she previously paid tax.
Any award that is deemed to be a deferral arrangement (excluding
certain exempted short-term deferrals) will be subject to Code
Section 409A. Certain participant elections and the timing
of distributions relating to such awards must meet requirements
under Code Section 409A for income taxation to be deferred
and tax penalties avoided by the participant upon vesting of the
award.
As discussed above, compensation that qualifies as
performance-based compensation is excluded from the
$1 million deductibility cap of Code Section 162(m),
and therefore remains fully deductible by the company that pays
it. Under the Plan, options and SARs granted with an exercise
price or base price at least equal to 100% of fair market value
of the underlying stock at the date of grant, annual incentive
awards to employees the Compensation Committee expects to be
named executive officers at the time compensation is received,
and certain other awards which are conditioned upon achievement
of performance goals are intended to qualify as such
performance-based compensation. A number of
requirements must be met in order for particular compensation to
so qualify, however, so there can be no assurance that such
compensation under the Plan will be fully deductible under all
circumstances. In addition, other awards under the Plan
generally will not so qualify, so that compensation paid to
named executive officers in connection with such awards may, to
the extent it and other compensation subject to Code
Section 162(m)s deductibility cap exceed
$1 million in a given year, not be deductible by the
Company as a result of Code Section 162(m).
The foregoing provides only a general description of the
application of federal income tax laws to certain awards under
the Plan. This discussion is intended for the information of
shareholders considering how to vote at the Annual Meeting and
not as tax guidance to participants in the Plan, as the
consequences may vary with the types of awards made, the
identity of the recipients and the method of payment or
settlement. Different tax rules may apply, including in the case
of variations in transactions that are permitted under the Plan
(such as payment of the exercise price of an option by surrender
of previously acquired shares). The summary does not address the
effects of other federal taxes (including possible golden
parachute excise taxes) or taxes imposed under state,
local, or foreign tax laws.
Required
Vote
Approval of the Plan will require the affirmative vote of the
holders of a majority of the shares of Common Stock present, or
represented, and entitled to vote on the proposal at the Annual
Meeting.
THE BOARD
RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE
AMENDED AND RESTATED LONG-TERM INCENTIVE PLAN.
39
PROPOSAL 4
RATIFICATION
OF THE APPOINTMENT OF OUR INDEPENDENT
REGISTERED
PUBLIC ACCOUNTING FIRM
PricewaterhouseCoopers LLP served as our independent registered
public accounting firm for 2008 and has been selected by the
Audit and Enterprise Risk Committee to serve as our independent
registered public accounting firm for the fiscal year ending
December 31, 2009. 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.
THE BOARD RECOMMENDS THAT YOU VOTE FOR
RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS
OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL
YEAR ENDING DECEMBER 31, 2009.
Fees Paid
to PricewaterhouseCoopers LLP
Aggregate fees billed to the Company in the years ended
December 31, 2008 and 2007, by PricewaterhouseCoopers LLP
were as follows (dollars in millions):
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Year Ended
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December 31,
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2008
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2007
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Audit fees(a)
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$
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5.3
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$
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4.7
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Audit-related fees(b)
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.3
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.2
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Tax fees
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All other fees
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Total
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$
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5.6
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$
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4.9
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(a) |
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Audit fees were for professional services rendered for the
audits of Consecos consolidated financial statements,
statutory and subsidiary audits, issuance of comfort letters,
and assistance with review of documents filed with the
Securities and Exchange Commission. |
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(b) |
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Audit-related fees primarily include services provided for
employee benefit plan audits and other assurance-related
services. |
Pre-Approval
Policy
The Audit and Enterprise Risk Committee has adopted a policy
requiring pre-approval of all audit and permissible non-audit
services provided by our independent registered public
accounting firm. These services may include audit services,
audit-related services, tax services and other services.
In 2007 and 2008, all new engagements of PricewaterhouseCoopers
LLP were pre-approved by the Audit and Enterprise Risk Committee
for all audit, audit-related, tax and other services.
40
Report of
the Audit and Enterprise Risk Committee
In accordance with its written charter adopted by the Board of
Directors, the Audit and Enterprise Risk Committee provides
assistance to the Board of Directors in fulfilling its
responsibilities for oversight of the integrity of the financial
statements, public disclosures and financial reporting practices
of the Company. The Audit and Enterprise Risk Committee is
comprised entirely of independent directors meeting the
requirements of applicable rules of the Securities and Exchange
Commission and the New York Stock Exchange.
In order to discharge its oversight function, the Audit and
Enterprise Risk Committee works closely with management and with
Consecos independent registered public accounting firm,
PricewaterhouseCoopers LLP. Management is responsible for the
preparation and fair presentation of the Companys
financial statements and for maintaining effective internal
controls. Management is also responsible for assessing and
maintaining the effectiveness of internal controls over the
financial reporting process in compliance with the requirements
of Section 404 of the Sarbanes-Oxley Act. The independent
registered public accounting firm is responsible for auditing
the Companys annual financial statements and expressing an
opinion as to whether the statements are fairly stated in
conformity with generally accepted accounting principles. In
addition, the independent registered public accounting firm is
responsible for auditing the Companys internal controls
over financial reporting and for expressing opinions on both the
effectiveness of the controls and managements assertion as
to this effectiveness.
The Audit and Enterprise Risk Committee has implemented
procedures to ensure that during the course of each fiscal year
it devotes the attention that it deems necessary or appropriate
to each of the matters assigned to it under the Committees
charter. To carry out its responsibilities, the Audit and
Enterprise Risk Committee met 18 times during 2008.
Mr. Schneider, Mr. Roberts, Mr. Turner and
Ms. Wright have served throughout 2008 and 2009.
In overseeing the preparation of the Companys financial
statements, the Audit and Enterprise Risk Committee has met with
management and the Companys independent registered public
accounting firm to review and discuss the consolidated financial
statements prior to their issuance and to discuss significant
accounting issues. The Audit and Enterprise Risk Committee also
discussed with the independent registered public accounting firm
all communications required by generally accepted auditing
standards, including those described in Statement on Auditing
Standards No. 61, as amended, Communications with
Audit Committees.
The Audit and Enterprise Risk Committee obtained from the
independent registered public accounting firm a formal written
statement consistent with Independence Standards Board Standard
No. 1, Independence Discussions with Audit
Committees and has discussed with such firm their
independence.
Based on the reviews and discussions referenced above, the Audit
and Enterprise Risk Committee recommended to the Board of
Directors that the Companys audited financial statements
be included in its Annual Report on
Form 10-K
for the year ended December 31, 2008 for filing with the
Securities and Exchange Commission.
Submitted by the Audit and Enterprise Risk Committee:
Neal C. Schneider, Chair
Philip R. Roberts
John G. Turner
Doreen A. Wright
41
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934
requires Consecos directors and executive officers, and
each person who is the beneficial owner of more than
10 percent of any class of Consecos outstanding
equity securities, to file with the Securities and Exchange
Commission 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 Securities and Exchange Commission, and
Conseco is required to disclose any failure by such persons to
file such reports for fiscal year 2008 by the prescribed dates.
Officers, directors and greater than 10 percent beneficial
owners are required to furnish Conseco with copies of all
reports filed with the Securities and Exchange Commission
pursuant to Section 16(a). To Consecos knowledge,
based solely on review of the copies of the reports furnished to
Conseco and written representations that no other reports were
required, all filings required pursuant to Section 16(a) of
the Securities Exchange Act of 1934 applicable to Consecos
officers, directors and greater than 10 percent beneficial
owners were timely made by each such person during the year
ended December 31, 2008, with the exception of one report
by Mr. Bostick (filed one day late relating to the purchase
of 5,000 shares).
SHAREHOLDER
PROPOSALS FOR 2010 ANNUAL MEETING
Any proper proposal which a shareholder wishes to have included
in the Boards proxy statement and form of proxy for the
2010 Annual Meeting must be received by Conseco by
December 18, 2009. Such proposals must meet the
requirements set forth in the rules and regulations of the
Securities and Exchange Commission in order to be eligible for
inclusion in the proxy statement for the 2010 Annual Meeting. In
addition to the Securities and Exchange Commission rules
concerning shareholder proposals, the Companys Bylaws
establish advance notice procedures with regard to certain
matters, including shareholder nominations for directors, to be
brought before a meeting of shareholders at which directors are
to be elected. In the case of an annual meeting, notice must be
received by the Secretary of the Company not less than
60 days nor more than 90 days prior to the first
anniversary of the preceding years annual meeting. In the
case of a special meeting of stockholders at which directors are
to be elected, notice of a stockholder nomination must be
received by the Secretary of the Company no later than the close
of business on the 10th day following the earlier of the
day on which notice of the date of the meeting was mailed or
public disclosure of the meeting was made. A nomination will not
be considered if it does not comply with these notice procedures
and the additional requirements set forth in our Bylaws. Please
note that these bylaw requirements are separate from the
Securities and Exchange Commissions requirements to have a
shareholder nomination or other proposal included in our proxy
statement. Any shareholder who wishes to submit a proposal to be
acted upon at the 2010 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
Consecos Annual Report for 2008 (which includes its annual
report on
Form 10-K
as filed with the Securities and Exchange Commission) is being
mailed with this proxy statement to all holders of common stock
as of March 16, 2009. The Annual Report is not part of the
proxy solicitation material. If you wish to receive an
additional copy of the Annual Report for 2008 or the
Form 10-K
without charge, please contact Conseco Investor Relations, 11825
North Pennsylvania Street, Carmel, Indiana 46032; telephone
(317) 817-2893
or email ir@conseco.com.
42
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
Karl W. Kindig
Secretary
April , 2009
43
ANNEX A
SECTION 382
RIGHTS AGREEMENT
CONSECO,
INC.
and
AMERICAN STOCK TRANSFER & TRUST COMPANY, LLC
as Rights Agent
Dated as of January 20, 2009
TABLE
OF CONTENTS
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Page
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Section 1.
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Certain Definitions
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A-1
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Section 2.
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Appointment of Rights Agent
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A-3
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Section 3.
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Issuance of Right Certificates
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A-3
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Section 4.
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Form of Right Certificates
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A-5
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Section 5.
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Countersignature and Registration
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A-5
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Section 6.
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Transfer, Split Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen Right
Certificates
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A-5
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Section 7.
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Exercise of Rights, Purchase Price; Expiration Date of Rights
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A-6
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Section 8.
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Cancellation and Destruction of Right Certificates
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A-7
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Section 9.
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Availability of Shares of Preferred Stock
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A-7
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Section 10.
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Preferred Stock Record Date
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A-8
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Section 11.
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Adjustment of Purchase Price, Number and Kind of Shares and
Number of Rights
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A-8
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Section 12.
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Certificate of Adjusted Purchase Price or Number of Shares
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A-13
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Section 13.
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Consolidation, Merger or Sale or Transfer of Assets or Earnings
Power
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A-14
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Section 14.
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Fractional Rights and Fractional Shares
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A-16
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Section 15.
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Rights of Action
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A-17
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Section 16.
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Agreement of Right Holders
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A-17
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Section 17.
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Right Certificate Holder Not Deemed a Stockholder
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A-18
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Section 18.
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Concerning the Rights Agent
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A-18
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Section 19.
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Merger or Consolidation or Change of Name of Rights Agent
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A-18
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Section 20.
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Duties of Rights Agent
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A-19
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Section 21.
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Change of Rights Agent
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A-20
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Section 22.
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Issuance of New Right Certificates
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A-21
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Section 23.
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Redemption
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A-21
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Section 24.
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Exchange
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A-22
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Section 25.
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Notice of Certain Events
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A-23
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Section 26.
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Notices
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A-23
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Section 27.
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Supplements and Amendments
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A-24
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Section 28.
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Successors
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A-24
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Section 29.
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Benefits of this Rights Agreement
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A-24
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Section 30.
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Determinations and Actions by the Board of Directors
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A-24
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Section 31.
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Severability
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A-24
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Section 32.
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Governing Law
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A-25
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Section 33.
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Counterparts
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A-25
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Section 34.
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Descriptive Headings
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A-25
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A-i
INDEX
OF DEFINED TERMS
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|
|
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Page
|
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5% Shareholder
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1
|
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Acquiring Person
|
|
|
1
|
|
Affiliate
|
|
|
1
|
|
Associate
|
|
|
1
|
|
Authorized Officer
|
|
|
19
|
|
Beneficial Owner
|
|
|
1
|
|
Beneficial Ownership
|
|
|
1
|
|
beneficially own
|
|
|
1
|
|
Book Entry
|
|
|
1
|
|
Business Day
|
|
|
2
|
|
close of business
|
|
|
2
|
|
Code
|
|
|
2
|
|
Common Stock
|
|
|
2
|
|
Common Stock equivalents
|
|
|
9
|
|
Company
|
|
|
1
|
|
Current Value
|
|
|
9
|
|
Distribution Date
|
|
|
3
|
|
equivalent preferred shares
|
|
|
10
|
|
Exchange Act
|
|
|
2
|
|
Exchange Ratio
|
|
|
22
|
|
Exempted Entity
|
|
|
2
|
|
Expiration Date
|
|
|
6
|
|
Final Expiration Date
|
|
|
2
|
|
Grandfathered Person
|
|
|
2,39
|
|
invalidation time
|
|
|
9
|
|
NOLs
|
|
|
2
|
|
NYSE
|
|
|
2
|
|
Percentage Stock Ownership
|
|
|
2
|
|
Person
|
|
|
2
|
|
Preferred Stock
|
|
|
2
|
|
Principal Party
|
|
|
15
|
|
Purchase Price
|
|
|
6
|
|
Record Date
|
|
|
1
|
|
Redemption Date
|
|
|
6
|
|
Redemption Price
|
|
|
21
|
|
Right
|
|
|
1
|
|
Right Certificate
|
|
|
4
|
|
Rights Agent
|
|
|
1
|
|
Rights Agreement
|
|
|
1
|
|
Section 11(a)(ii) Trigger Date
|
|
|
9
|
|
Section 382
|
|
|
3
|
|
Securities Act
|
|
|
3
|
|
Security
|
|
|
11
|
|
A-ii
|
|
|
|
|
|
|
Page
|
|
Spread
|
|
|
9
|
|
Stock Acquisition Date
|
|
|
3
|
|
Subsidiary
|
|
|
3
|
|
Substitution Period
|
|
|
10
|
|
Summary of Rights
|
|
|
4
|
|
Tax Benefits
|
|
|
3
|
|
Trading Day
|
|
|
11
|
|
Treasury Regulations
|
|
|
3
|
|
Trust
|
|
|
22
|
|
Trust Agreement
|
|
|
22
|
|
A-iii
SECTION 382
RIGHTS AGREEMENT
This Section 382 Rights Agreement, dated as of
January 20, 2009 (as amended, supplemented or otherwise
modified from time to time, the Rights
Agreement) between CONSECO, INC., a Delaware
corporation (the Company), and American Stock
Transfer & Trust Company, LLC (the
Rights Agent).
WHEREAS, (a) the Company and certain of its Subsidiaries
have generated net operating losses for United States federal
income tax purposes (NOLs); (b) such NOLs may
potentially provide valuable Tax Benefits (as defined below) to
the Company; (c) the Company desires to avoid an
ownership change within the meaning of
Section 382 (as defined below), and thereby preserve the
ability to utilize such NOLs; and (d) in furtherance of
such objective, the Company desires to enter into this Rights
Agreement; and
WHEREAS, the Board of Directors of the Company has on
January 20, 2009 authorized and declared a dividend of one
preferred share purchase right (a Right) for
each share of Common Stock (as defined below) of the Company
outstanding as of the close of business (as defined below) on
January 30, 2009 (the Record Date), each
Right representing the right to purchase one one-thousandth
(subject to adjustment) of a share of Preferred Stock (as
defined below), upon the terms and subject to the conditions
herein set forth, and the Board of Directors has further
authorized and directed the issuance of one Right (subject to
adjustment as provided herein) with respect to each share of
Common Stock that shall become outstanding between the Record
Date and the earlier of the Distribution Date and the Expiration
Date (as such terms are hereinafter defined); provided,
however, that Rights may be issued with respect to shares
of Common Stock that shall become outstanding after the
Distribution Date and prior to the Expiration Date in accordance
with Section 22.
NOW THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain
Definitions. For purposes of this Rights
Agreement, the following terms have the meaning indicated:
(a) 5% Shareholder shall mean a
Person or group of Persons that is a 5-percent
shareholder of the Corporation pursuant to Treasury
Regulation § 1.382-2T(g).
(b) Acquiring Person shall mean
any Person (as defined below) who is or shall have become a 5%
Shareholder, whether or not such Person continues to be a 5%
Shareholder, but shall not include (i) an Exempted Entity
(as defined below), or (ii) any Grandfathered Person (as
defined below); provided, however, that a Person
will not be deemed to have become an Acquiring Person solely as
a result of (x) a reduction in the number of shares of
Common Stock outstanding, (y) the exercise of any options,
warrants, rights or similar interests (including restricted
stock) granted by the Company to its directors, officers and
employees, or (z) any unilateral grant of any security by
the Company, unless and until such time as such Person
thereafter acquires beneficial ownership of any additional
shares of Common Stock. Notwithstanding the foregoing, the Board
may, in its sole discretion, determine that any Person shall not
be deemed to be an Acquiring Person for any purposes
of this Agreement.
(c) Affiliate and
Associate shall have the respective
meanings ascribed to such terms in
Rule 12b-2
of the General Rules and Regulations under the Exchange Act, and
to the extent not included within the foregoing clause of this
Section 1(c), shall also include, with respect to
any Person, any other Person whose Common Stock would be deemed
constructively owned by such first Person pursuant to the
provisions of Section 382 and the Treasury Regulations
promulgated thereunder; provided, however, that no
Exempted Entity shall be deemed an Affiliate or an Associate.
(d) Except as may expressly be set forth elsewhere herein,
a Person shall be deemed the Beneficial Owner
of, shall be deemed to have Beneficial
Ownership of and shall be deemed to
beneficially own any securities which such
Person directly owns, or would be deemed to constructively own,
pursuant to Section 382 and the Treasury Regulations
promulgated thereunder.
(e) Book Entry shall mean an
uncertificated book entry for the shares of Common Stock.
A-1
(f) Business Day shall mean any
day other than a Saturday, a Sunday, or a day on which banking
institutions in the State of Indiana, or the State in which the
principal office of the Rights Agent is located, are authorized
or obligated by law or executive order to close.
(g) close of business on any
given date shall mean 5:00 P.M., New York, New York time,
on such date; provided, however, that if such date
is not a Business Day it shall mean 5:00 P.M., New York,
New York time, on the next succeeding Business Day.
(h) Code shall mean the Internal
Revenue Code of 1986, as amended.
(i) Common Stock when used with
reference to the Company shall mean the common stock, par value
$0.01 per share, of the Company. Common Stock when
used with reference to any Person other than the Company shall
mean the capital stock (or, in the case of an entity other than
a corporation, the equivalent equity interest) with the greatest
voting power of such other Person or, if such other Person is a
subsidiary of another Person, the Person or Persons which
ultimately control such first-mentioned Person.
(j) Exchange Act shall mean the
Securities Exchange Act of 1934, as amended.
(k) Exempted Entity shall mean
(1) the Company, (2) any Subsidiary (as defined below)
of the Company, (in the case of subclauses (1) and (2)
including, without limitation, in its fiduciary capacity),
(3) any employee benefit plan of the Company or of any
Subsidiary of the Company (4) any entity or trustee holding
Common Stock for or pursuant to the terms of any such plan or
for the purpose of funding any such plan or funding other
employee benefits for employees of the Company or of any
Subsidiary of the Company or (5) any Person (together with
its Affiliates and Associates) whose status as a 5% Shareholder
will, in the sole judgment of the Board of Directors, not
jeopardize or endanger the availability to the Company of its
net operating loss carryforwards to be used to offset its
taxable income in such year or future years (but in the case of
any Person determined by the Board of Directors to be an
Exempted Entity pursuant to this subparagraph (k)(5) only for so
long as such Persons status as a 5% Shareholder continues
not to jeopardize or endanger the availability of such net
operating loss carryforwards, as determined by the Board of
Directors in its good faith discretion).
(l) Final Expiration Date shall
mean the earliest to occur of (i) the close of business on
January 20, 2012, (ii) the first anniversary of
adoption of this Rights Agreement if stockholder approval of
this Rights Agreement has not been received by or on such date,
(iii) the adjournment of the first annual meeting of the
stockholders of the Company following the date hereof if
stockholder approval of this Rights Agreement has not been
received prior to such time, (iv) the repeal of
Section 382 or any successor statute if the Board of
Directors determines that this Rights Agreement is no longer
necessary for the preservation of Tax Benefits or (v) the
beginning of a taxable year of the Company to which the Board of
Directors determines that no Tax Benefits may be carried forward.
(m) Grandfathered Person shall
mean any Person who would otherwise qualify as an Acquiring
Person as of the date of this Rights Agreement, unless and until
such time as such Person after the date of this Rights Agreement
acquires beneficial ownership of additional shares of Common
Stock representing more than 1% of the shares of Common Stock
then outstanding.
(n) NOLs shall have the meaning
set forth in the recitals to this Rights Agreement.
(o) NYSE shall mean the New York
Stock Exchange, Inc.
(p) Percentage Stock Ownership
shall mean the percentage stock ownership interest as determined
in accordance with Treasury Regulation § 1.382-2T(g),
(h), (j) and (k).
(q) Person shall mean any
individual, firm, corporation, business trust, joint stock
company, partnership, trust association, limited liability
company, limited partnership, or other entity, or any group of
Persons making a coordinated acquisition of shares
or otherwise treated as an entity within the meaning of Treasury
Regulation § 1.382-3(a)(1), or otherwise and shall
include any successor (by merger or otherwise) of any such
entity.
A-2
(r) Preferred Stock shall mean
the Series A Junior Participating Preferred Stock, par
value $0.01 per share, of the Company having the rights and
preferences set forth in the Form of Certificate of Designations
attached to this Rights Agreement as Exhibit A and,
to the extent that there is a not sufficient number of shares of
the Series A Junior Participating Preferred Stock
authorized to permit the full exercise of the Rights, any other
series of preferred stock of the Company designated for such
purpose containing terms substantially similar to the terms of
the Series A Junior Participating Preferred Stock.
(s) Section 382 shall mean
Section 382 of the Code, or any comparable successor
provision.
(t) Securities Act shall mean the
Securities Act of 1933, as amended.
(u) Stock Acquisition Date shall
mean the first date of public announcement (which for purposes
of this definition shall include, without limitation, a report
filed pursuant to Section 13(d) of the Exchange Act) by the
Company or an Acquiring Person that an Acquiring Person has
become such or such earlier date as a majority of the Board of
Directors shall become aware of the existence of an Acquiring
Person.
(v) Subsidiary of any Person
shall mean any corporation or other entity of which securities
or other ownership interests having ordinary voting power
sufficient to elect a majority of the board of directors or
other persons performing similar functions are beneficially
owned, directly or indirectly, by such Person, and any
corporation or other entity that is otherwise controlled by such
Person.
(w) Tax Benefits shall mean the
net operating loss carryovers, capital loss carryovers, general
business credit carryovers, alternative minimum tax credit
carryovers and foreign tax credit carryovers, as well as any
loss or deduction attributable to a net unrealized
built-in loss within the meaning of Section 382, and
the Treasury Regulations promulgated thereunder, of the Company
or any of its Subsidiaries.
(x) Treasury Regulations shall
mean any income tax regulations promulgated under the Code,
including any amendments thereto.
Any determination required by the definitions in this Agreement
shall be made by the Board of Directors in its good faith
judgment, which determination shall be binding on the Rights
Agent and the holders of Rights.
Section 2. Appointment
of Rights Agent. The Company hereby appoints
the Rights Agent to act as agent for the Company and the holders
of the Rights (who, in accordance with Section 3
hereof, shall prior to the Distribution Date also be the holders
of Common Stock) in accordance with the terms and conditions
hereof, and the Rights Agent hereby accepts such appointment.
The Company may from time to time appoint such co-Rights Agents
as it may deem necessary or desirable upon ten
(10) days prior notice to the Rights Agent. The
Rights Agent shall have no duty to supervise, and shall in no
event be liable for the acts or omissions of any such co-Rights
Agent.
Section 3. Issuance
of Right Certificates. (a) Until the
close of business on the earlier of (i) the tenth Business
Day after the Stock Acquisition Date (or, if the Stock
Acquisition Date occurs before the Record Date, the close of
business on the Record Date) or (ii) the tenth Business Day
(or such later date as may be determined by action of the Board
of Directors prior to such time as any Person becomes an
Acquiring Person) after the date of the commencement by any
Person (other than an Exempted Entity) of, or of the first
public announcement of the intention of such Person (other than
an Exempted Entity) to commence, a tender or exchange offer the
consummation of which would result in any Person (other than an
Exempted Entity) becoming an Acquiring Person (irrespective of
whether any shares are actually purchased pursuant to any such
offer) (including, in the case of both clause (i) and (ii),
any such date which is after the date of this Rights Agreement
and prior to the issuance of the Rights) (the earlier of such
dates being herein referred to as the Distribution
Date), (x) the Rights will be evidenced (subject
to the provisions of Section 3(b) hereof) by the
certificates for Common Stock registered in the names of the
holders thereof, and not by separate Right Certificates (as
defined below), and (y) the Rights will be transferable
only in connection with the transfer of Common Stock. As soon as
practicable after the Distribution Date, the Company will
prepare and execute, the
A-3
Rights Agent will countersign, and the Company will send or
cause to be sent (and the Rights Agent will, if requested, send)
by first-class, postage-prepaid mail, to each record holder of
Common Stock as of the close of business on the Distribution
Date (other than any Acquiring Person or any Associate or
Affiliate of an Acquiring Person), at the address of such holder
shown on the records of the Company, a Right Certificate, in
substantially the form of Exhibit B hereto (a
Right Certificate), evidencing one Right
(subject to adjustment as provided herein) for each share of
Common Stock so held. In the event that an adjustment in the
number of Rights per share of Common Stock has been made
pursuant to Section 11 or 13 hereof, at the
time of distribution of the Rights Certificates, the Company
shall make the necessary and appropriate rounding adjustments
(in accordance with Section 14(a) hereof), so that
Rights Certificates representing only whole numbers of Rights
are distributed and cash is paid in lieu of any fractional
Rights. As of and after the Distribution Date, the Rights will
be evidenced solely by such Right Certificates.
(b) As promptly as practicable following the Record Date,
the Company will send a copy of a Summary of Rights to Purchase
Shares of Preferred Stock, in substantially the form of
Exhibit C hereto (the Summary of
Rights), by first-class, postage-prepaid mail, to each
record holder of Common Stock and holder of Book Entry shares as
of the close of business on the Record Date, at the address of
such holder shown on the records of the Company as the address
at which such holder has consented to receive notice. With
respect to shares of Common Stock outstanding as of the Record
Date, until the Distribution Date, the Rights associated with
such shares will be evidenced by the share certificate for such
shares of Common Stock registered in the names of the holders
thereof or the Book Entry shares, in each case together with the
Summary of Rights. Until the Distribution Date (or, if earlier,
the Expiration Date), the surrender for transfer of any
certificate for Common Stock or Book Entry shares outstanding on
the Record Date, with or without a copy of the Summary of
Rights, shall also constitute the transfer of the Rights
associated with the shares of Common Stock represented by such
certificate or Book Entry shares.
(c) Rights shall be issued in respect of all shares of
Common Stock issued or disposed of (including, without
limitation, upon disposition of Common Stock out of treasury
stock or issuance or reissuance of Common Stock out of
authorized but unissued shares) after the Record Date but prior
to the earlier of the Distribution Date and the Expiration Date,
or in certain circumstances provided in Section 22
hereof, after the Distribution Date. Certificates issued for
Common Stock (including, without limitation, upon transfer of
outstanding Common Stock, disposition of Common Stock out of
treasury stock or issuance or reissuance of Common Stock out of
authorized but unissued shares) after the Record Date but prior
to the earlier of the Distribution Date and the Expiration Date
shall have impressed on, printed on, written on or otherwise
affixed to them the following legend:
This certificate also evidences and entitles the holder hereof
to certain rights as set forth in a Section 382 Rights
Agreement between Conseco, Inc. and American Stock
Transfer & Trust Company, LLC, as Rights Agent,
dated as of January 20, 2009 as the same may be amended,
supplemented or otherwise modified from time to time (the
Rights Agreement), the terms of which are
hereby incorporated herein by reference and a copy of which is
on file at the principal executive offices of Conseco, Inc.
Under certain circumstances, as set forth in the Rights
Agreement, such Rights will be evidenced by separate
certificates and will no longer be evidenced by this
certificate. Conseco, Inc. will mail to the holder of this
certificate a copy of the Rights Agreement without charge after
receipt of a written request therefor. Under certain
circumstances, as set forth in the Rights Agreement, Rights
owned by or transferred to any Person who is or becomes an
Acquiring Person (as defined in the Rights Agreement) and
certain transferees thereof will become null and void and will
no longer be transferable.
With respect to any Book Entry shares of Common Stock, such
legend shall be included in a notice to the registered holder of
such shares in accordance with applicable law. With respect to
such certificates containing the foregoing legend, or any notice
of the foregoing legend delivered to holders of Book Entry
shares, until the Distribution Date, the Rights associated with
the Common Stock represented by such certificates or Book Entry
shares shall be evidenced by such certificates or Book Entry
shares alone, and the surrender for transfer of any such
certificate or Book Entry share, except as otherwise provided
herein, shall also constitute the transfer of the Rights
associated with the Common Stock represented thereby. In the
event that the Company purchases or otherwise acquires any
Common Stock after the Record Date but prior to the
A-4
Distribution Date, any Rights associated with such Common Stock
shall be deemed cancelled and retired so that the Company shall
not be entitled to exercise any Rights associated with the
shares of Common Stock which are no longer outstanding.
Notwithstanding this paragraph (c), neither the omission of a
legend nor the failure to deliver the notice of such legend
required hereby shall affect the enforceability of any part of
this Rights Agreement or the rights of any holder of the Rights.
Section 4. Form
of Right Certificates. The Right Certificates
(and the forms of election to purchase shares and of assignment
to be printed on the reverse thereof) shall be substantially in
the form set forth in Exhibit B hereto and may have
such marks of identification or designation and such legends,
summaries or endorsements printed thereon as the Company may
deem appropriate and as are not inconsistent with the provisions
of this Rights Agreement, or as may be required to comply with
any applicable law or with any rule or regulation made pursuant
thereto or with any rule or regulation of the NYSE or of any
other stock exchange or automated quotation system on which the
Rights may from time to time be listed, or to conform to usage.
Subject to the provisions of this Agreement, the Right
Certificates shall entitle the holders thereof to purchase such
number of one one-thousandths of a share of Preferred Stock as
shall be set forth therein at the Purchase Price (as determined
pursuant to Section 7), but the amount and type of
securities purchasable upon the exercise of each Right and the
Purchase Price thereof shall be subject to adjustment as
provided herein.
Section 5. Countersignature
and Registration . (a) The Right
Certificates shall be executed on behalf of the Company by the
Chief Executive Officer, the President, any of the Vice
Presidents or the Treasurer of the Company, either manually or
by facsimile signature, shall have affixed thereto the
Companys seal or a facsimile thereof and shall be attested
by the Secretary or an Assistant Secretary of the Company,
either manually or by facsimile signature. The Right
Certificates shall be countersigned by the Rights Agent, either
manually or by facsimile signature, and shall not be valid for
any purpose unless countersigned. In case any officer of the
Company who shall have signed any of the Right Certificates
shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery
by the Company, such Right Certificates, nevertheless, may be
countersigned by the Rights Agent and issued and delivered by
the Company with the same force and effect as though the Person
who signed such Right Certificates had not ceased to be such
officer of the Company; and any Right Certificate may be signed
on behalf of the Company by any Person who, at the actual date
of the execution of such Right Certificate, shall be a proper
officer of the Company to sign such Right Certificate, although
at the date of the execution of this Rights Agreement any such
Person was not such an officer.
(a) Following the Distribution Date, the Rights Agent will
keep or cause to be kept, at an office or agency designated for
such purpose, books for registration and transfer of the Right
Certificates issued hereunder. Such books shall show the names
and addresses of the respective holders of the Right
Certificates, the number of Rights evidenced on its face by each
of the Right Certificates and the date of each of the Right
Certificates.
Section 6. Transfer,
Split Up, Combination and Exchange of Right Certificates;
Mutilated, Destroyed, Lost or Stolen Right
Certificates. (a) Subject to the
provisions of this Rights Agreement, at any time after the close
of business on the Distribution Date, and prior to the close of
business on the Expiration Date, any Right Certificate or Right
Certificates may be transferred, split up, combined or exchanged
for another Right Certificate or Right Certificates, entitling
the registered holder to purchase a like number of one
one-thousandths of a share of Preferred Stock (or, following
such time, other securities, cash or assets as the case may be)
as the Right Certificate or Right Certificates surrendered then
entitled such holder to purchase. Any registered holder desiring
to transfer, split up, combine or exchange any Right Certificate
or Right Certificates shall make such request in writing
delivered to the Rights Agent, and shall surrender the Right
Certificate or Right Certificates to be transferred, split up,
combined or exchanged at the office or agency of the Rights
Agent designated for such purpose. Thereupon the Rights Agent,
subject to the provisions of this Rights Agreement, shall
countersign and deliver to the Person entitled thereto a Right
Certificate or Right Certificates, as the case may be, as so
requested. The Company may require payment of a sum sufficient
to cover any tax
A-5
or governmental charge that may be imposed in connection with
any transfer, split up, combination or exchange of Right
Certificates.
(b) Subject to the provisions of this Rights Agreement, at
any time after the Distribution Date and prior to the Expiration
Date, upon receipt by the Company and the Rights Agent of
evidence reasonably satisfactory to them of the loss, theft,
destruction or mutilation of a Right Certificate, and, in case
of loss, theft or destruction, of indemnity or security
reasonably satisfactory to them, and, at the Companys
request, reimbursement to the Company and the Rights Agent of
all reasonable expenses incidental thereto, and upon surrender
to the Rights Agent and cancellation of the Right Certificate if
mutilated, the Company will make and deliver a new Right
Certificate of like tenor to the Rights Agent for delivery to
the registered holder in lieu of the Right Certificate so lost,
stolen, destroyed or mutilated.
Section 7. Exercise
of Rights, Purchase Price; Expiration Date of
Rights. (a) Except as otherwise provided
herein, the Rights shall become exercisable on the Distribution
Date, and thereafter the registered holder of any Right
Certificate may, subject to Section 11(a)(ii) hereof
and except as otherwise provided herein, exercise the Rights
evidenced thereby in whole or in part upon surrender of the
Right Certificate, with the form of election to purchase on the
reverse side thereof duly executed, to the Rights Agent at the
office or agency of the Rights Agent designated for such
purpose, together with payment of the Purchase Price for each
one-thousandth of a share of Preferred Stock (or other
securities, cash or assets, as the case may be) as to which the
Rights are exercised, at any time which is both after the
Distribution Date and prior to the time (the Expiration
Date) that is the earliest of (i) the Final
Expiration Date, (ii) the time at which the Rights are
redeemed as provided in Section 23 hereof (the
Redemption Date) or (iii) the time
at which such Rights are exchanged as provided in
Section 24 hereof.
(b) The purchase price (the Purchase
Price) shall be initially $20.00 for each
one-thousandth of a share of Preferred Stock purchasable upon
the exercise of a Right. The Purchase Price and the number of
shares of Preferred Stock or other securities or property to be
acquired upon exercise of a Right shall be subject to adjustment
from time to time as provided in Sections 11 and
13 hereof and shall be payable in lawful money of the
United States of America in accordance with paragraph (c)
of this Section 7.
(c) Except as otherwise provided herein, upon receipt of a
Right Certificate representing exercisable Rights, with the form
of election to purchase duly executed, accompanied by payment of
the aggregate Purchase Price for the number of shares of
Preferred Stock to be purchased and an amount equal to any
applicable transfer tax required to be paid by the holder of
such Right Certificate in accordance with Section 6
hereof, in cash or by certified check, cashiers check or
money order payable to the order of the Company, the Rights
Agent shall thereupon promptly (i) (A) requisition from any
transfer agent of the Preferred Stock, or make available if the
Rights Agent is the transfer agent for the Preferred Stock,
certificates for the number of shares of Preferred Stock to be
purchased (and the Company hereby irrevocably authorizes its
transfer agent to comply with all such requests), or
(B) requisition from the depositary agent appointed by the
Company depositary receipts representing interests in such
number of shares of Preferred Stock as are to be purchased, in
which case certificates for the Preferred Stock represented by
such receipts shall be deposited by the transfer agent with the
depositary agent (and the Company hereby directs the depositary
agent to comply with such request), (ii) when appropriate,
requisition from the Company the amount of cash to be paid in
lieu of issuance of fractional shares in accordance with
Section 14 hereof, (iii) promptly after receipt
of such certificates or depositary receipts, cause the same to
be delivered to or upon the order of the registered holder of
such Right Certificate, registered in such name or names as may
be designated by such holder and (iv) when appropriate,
after receipt of the cash requisitioned from the Company,
promptly deliver such cash to or upon the order of the
registered holder of such Right Certificate.
(d) Except as otherwise provided herein, in case the
registered holder of any Right Certificate shall exercise less
than all the Rights evidenced thereby, a new Right Certificate
evidencing Rights equivalent to the exercisable Rights remaining
unexercised shall be issued by the Rights Agent to the
registered holder of such Right Certificate or to his duly
authorized assigns, subject to the provisions of Section
14 hereof.
(e) Notwithstanding anything in this Rights Agreement to
the contrary, neither the Rights Agent nor the Company shall be
obligated to undertake any action with respect to a registered
holder of Rights upon the
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occurrence of any purported transfer or exercise of Rights
pursuant to Section 6 hereof or this
Section 7 unless such registered holder shall have
(i) completed and signed the certificate contained in the
form of assignment or election to purchase set forth on the
reverse side of the Right Certificate surrendered for such
transfer or exercise and (ii) provided such additional
evidence of the identity of the Beneficial Owner (for the
purposes of this Section 7(e), as such term is defined in
Rule 13d-3
or 13d-5 of
the General Rules and Regulations under the Exchange Act, former
Beneficial Owner
and/or
Affiliates or Associates thereof as the Company shall reasonably
request.
Section 8. Cancellation
and Destruction of Right Certificates. All
Right Certificates surrendered for the purpose of exercise,
transfer, split up, combination or exchange shall, if
surrendered to the Company or to any of its agents, be delivered
to the Rights Agent for cancellation or in cancelled form, or,
if surrendered to the Rights Agent, shall be cancelled by it,
and no Right Certificates shall be issued in lieu thereof except
as expressly permitted by any of the provisions of this Rights
Agreement. The Company shall deliver to the Rights Agent for
cancellation and retirement, and the Rights Agent shall so
cancel and retire, any other Right Certificate purchased or
acquired by the Company otherwise than upon the exercise
thereof. The Rights Agent shall deliver all cancelled Right
Certificates to the Company, or shall, at the written request of
the Company, destroy or cause to be destroyed such cancelled
Right Certificates, and in such case shall deliver a certificate
of destruction thereof to the Company.
Section 9. Availability
of Shares of Preferred Stock. (a) The
Company covenants and agrees that it will cause to be reserved
and kept available out of its authorized and unissued shares of
Preferred Stock or any shares of Preferred Stock held in its
treasury, the number of shares of Preferred Stock that will be
sufficient to permit the exercise in full of all outstanding
Rights.
(b) So long as the shares of Preferred Stock (and,
following the time that a Person becomes an Acquiring Person,
shares of Common Stock and other securities) issuable upon the
exercise of Rights may be listed or admitted to trading on the
NYSE or listed on any other national securities exchange or
quotation system, the Company shall use its best efforts to
cause, from and after such time as the Rights become
exercisable, all shares reserved for such issuance to be listed
or admitted to trading on the NYSE or listed on any other
national securities exchange or quotation system upon official
notice of issuance upon such exercise.
(c) From and after such time as the Rights become
exercisable, the Company shall use its best efforts, if then
necessary to permit the issuance of shares of Preferred Stock
(and following the time that a Person first becomes an Acquiring
Person, shares of Common Stock and other securities) upon the
exercise of Rights, to register and qualify such shares of
Preferred Stock (and following the time that a Person first
becomes an Acquiring Person, shares of Common Stock and other
securities) under the Securities Act and any applicable state
securities or Blue Sky laws (to the extent
exemptions therefrom are not available), cause such registration
statement and qualifications to become effective as soon as
possible after such filing and keep such registration and
qualifications effective until the earlier of (x) the date
as of which the Rights are no longer exercisable for such
securities and (y) the Expiration Date. The Company may
temporarily suspend, for a period of time not to exceed ninety
(90) days, the exercisability of the Rights in order to
prepare and file a registration statement under the Securities
Act and permit it to become effective. Upon any such suspension,
the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as
well as a public announcement at such time as the suspension is
no longer in effect. Notwithstanding any provision of this
Rights Agreement to the contrary, the Rights shall not be
exercisable in any jurisdiction unless the requisite
qualification or exemption in such jurisdiction shall have been
obtained and until a registration statement under the Securities
Act (if required) shall have been declared effective.
(d) The Company covenants and agrees that it will take all
such action as may be necessary to ensure that all shares of
Preferred Stock (and, following the time that a Person becomes
an Acquiring Person, shares of Common Stock and other
securities) delivered upon exercise of Rights shall, at the time
of delivery of the certificates therefor (subject to payment of
the Purchase Price), be duly and validly authorized and issued
and fully paid and nonassessable shares.
(e) The Company further covenants and agrees that it will
pay when due and payable any and all federal and state transfer
taxes and charges which may be payable in respect of the
issuance or delivery of the Right
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Certificates or of any shares of Preferred Stock (or shares of
Common Stock or other securities) upon the exercise of Rights.
The Company shall not, however, be required to pay any transfer
tax or charge which may be payable in respect of any transfer or
delivery of Right Certificates to a Person other than, or the
issuance or delivery of certificates or depositary receipts for
the Preferred Stock (or shares of Common Stock or other
securities) in a name other than that of, the registered holder
of the Right Certificate evidencing Rights surrendered for
exercise or to issue or deliver any certificates or depositary
receipts for Preferred Stock (or shares of Common Stock or other
securities) upon the exercise of any Rights until any such tax
or charge shall have been paid (any such tax or charge being
payable by that holder of such Right Certificate at the time of
surrender) or until it has been established to the
Companys reasonable satisfaction that no such tax or
charge is due.
Section 10. Preferred
Stock Record Date. Each Person in whose name
any certificate for Preferred Stock is issued upon the exercise
of Rights shall for all purposes be deemed to have become the
holder of record of the shares of Preferred Stock represented
thereby on, and such certificate shall be dated, the date upon
which the Right Certificate evidencing such Rights was duly
surrendered and payment of the Purchase Price (and any
applicable transfer taxes or charges) was made; provided,
however, that if the date of such surrender and payment
is a date upon which the Preferred Stock transfer books of the
Company are closed, such Person shall be deemed to have become
the record holder of such shares on, and such certificate shall
be dated, the next succeeding Business Day on which such
transfer books are open. Prior to the exercise of the Rights
evidenced thereby, the holder of a Right Certificate shall not
be entitled to any rights of a holder of Preferred Stock for
which the Rights shall be exercisable, including, without
limitation, the right to vote or to receive dividends or other
distributions, and shall not be entitled to receive any notice
of any proceedings of the Company, except as provided herein.
Section 11. Adjustment
of Purchase Price, Number and Kind of Shares and Number of
Rights. The Purchase Price, the number of
shares of Preferred Stock or other securities or property
purchasable upon exercise of each Right and the number of Rights
outstanding are subject to adjustment from time to time as
provided in this Section 11.
(a) (i) In the event the Company shall at any time
after the date of this Agreement (A) declare a dividend on
the Preferred Stock payable in shares of Preferred Stock,
(B) subdivide the outstanding shares of Preferred Stock,
(C) combine the outstanding shares of Preferred Stock into
a smaller number of shares of Preferred Stock or (D) issue
any shares of its capital stock in a reclassification of the
shares of Preferred Stock (including any such reclassification
in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation), except as
otherwise provided in this Section 11(a), the
Purchase Price in effect at the time of the record date for such
dividend or of the effective date of such subdivision,
combination or reclassification, as the case may be, and the
number and kind of shares of capital stock issuable on such
date, shall be proportionately adjusted so that the holder of
any Right exercised after such time shall be entitled to receive
the aggregate number and kind of shares of capital stock which,
if such Right had been exercised immediately prior to such date
and at a time when the Preferred Stock transfer books of the
Company were open, the holder would have owned upon such
exercise and been entitled to receive by virtue of such
dividend, subdivision, combination or reclassification;
provided, however, that in no event shall the
consideration to be paid upon the exercise of one Right be less
than the aggregate par value of the shares of capital stock of
the Company issuable upon exercise of one Right.
(ii) Subject to Section 24 of this Rights
Agreement and except as otherwise provided in this
Section 11(a)(ii) and
Section 11(a)(iii), in the event that any Person
becomes an Acquiring Person, each holder of a Right shall
thereafter have the right to receive, upon exercise thereof at a
price equal to the then-current Purchase Price, in accordance
with the terms of this Rights Agreement and in lieu of shares of
Preferred Stock, such number of shares of Common Stock (or at
the option of the Company, such number of one-thousandths of a
share of Preferred Stock) as shall equal the result obtained by
(x) multiplying the then-current Purchase Price by the
number of one-thousandths of a share of Preferred Stock for
which a Right is then exercisable and dividing that product by
(y) 50% of the then-current per share market price of the
Companys Common Stock (determined pursuant to
Section 11(d) hereof) on the date of the occurrence
of such event; provided, however, that the
Purchase Price (as so adjusted) and the number of shares of
Common Stock so
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receivable upon exercise of a Right shall thereafter be subject
to further adjustment as appropriate in accordance with this
Section 11. Notwithstanding anything in this Rights
Agreement to the contrary, however, from and after the time (the
Invalidation Time) when any Person first
becomes an Acquiring Person, any Rights that are beneficially
owned by (x) any Acquiring Person (or any Affiliate or
Associate of any Acquiring Person), (y) a transferee of any
Acquiring Person (or any such Affiliate or Associate) who
becomes a transferee after the Invalidation Time or (z) a
transferee of any Acquiring Person (or any such Affiliate or
Associate) who became a transferee prior to or concurrently with
the Invalidation Time pursuant to either (I) a transfer
from the Acquiring Person to holders of its equity securities or
to any Person with whom it has any continuing agreement,
arrangement or understanding, written or otherwise, regarding
the transferred Rights or (II) a transfer that the Board of
Directors has determined is part of a plan, arrangement or
understanding, written or otherwise, which has the purpose or
effect of avoiding the provisions of this paragraph, and
subsequent transferees of such Persons, shall be void without
any further action and any holder of such Rights shall
thereafter have no rights whatsoever with respect to such Rights
under any provision of this Rights Agreement. The Company shall
use all reasonable efforts to ensure that the provisions of this
Section 11(a)(ii) are complied with, but shall have no
liability to any holder of Right Certificates or other Person as
a result of its failure to make any determinations with respect
to an Acquiring Person or its Affiliates, Associates or
transferees hereunder. From and after the Invalidation Time, no
Right Certificate shall be issued pursuant to
Section 3 or Section 6 hereof that
represents Rights that are or have become void pursuant to the
provisions of this paragraph, and any Right Certificate
delivered to the Rights Agent that represents Rights that are or
have become void pursuant to the provisions of this paragraph
shall be cancelled. From and after the occurrence of an event
specified in Section 13(a) hereof, any Rights that
theretofore have not been exercised pursuant to this
Section 11(a)(ii) shall thereafter be exercisable
only in accordance with Section 13 and not pursuant
to this Section 11(a)(ii).
(iii) The Company may at its option substitute for a share
of Common Stock issuable upon the exercise of Rights in
accordance with the foregoing subparagraph (ii) such number
or fractions of shares of Preferred Stock having an aggregate
current market value equal to the current per share market price
of a share of Common Stock. In the event that there shall be an
insufficient number of shares of Common Stock authorized but
unissued (and unreserved) to permit the exercise in full of the
Rights in accordance with the foregoing subparagraph (ii), the
Board of Directors shall, with respect to such deficiency, to
the extent permitted by applicable law and any material
agreements then in effect to which the Company is a party
(A) determine the excess of (x) the value of the
shares of Common Stock issuable upon the exercise of a Right in
accordance with the foregoing subparagraph (ii) (the
Current Value) over (y) the then-current
Purchase Price multiplied by the number of one-thousandths of a
share of Preferred Stock for which a Right was exercisable
immediately prior to the time that the Acquiring Person became
such (such excess, the Spread), and
(B) with respect to each Right (other than Rights which
have become void pursuant to Section 11(a)(ii)),
make adequate provision to substitute for the shares of Common
Stock issuable in accordance with subparagraph (ii) upon
exercise of the Right and payment of the applicable Purchase
Price, (1) cash, (2) a reduction in such Purchase
Price, (3) shares of Preferred Stock or other equity
securities of the Company (including, without limitation, shares
or fractions of shares of preferred stock which, by virtue of
having dividend, voting and liquidation rights substantially
comparable to those of the shares of Common Stock, are deemed in
good faith by the Board of Directors to have substantially the
same value as the shares of Common Stock (such shares of
preferred stock and shares or fractions of shares of preferred
stock are hereinafter referred to as Common Stock
equivalents)), (4) debt securities of the
Company, (5) other assets or (6) any combination of
the foregoing, having a value which, when added to the value of
the shares of Common Stock actually issued upon exercise of such
Right, shall have an aggregate value equal to the Current Value
(less the amount of any reduction in such Purchase Price), where
such aggregate value has been determined by the Board of
Directors upon the advice of a nationally recognized investment
banking firm selected in good faith by the Board of Directors;
provided, however, if the Company shall not make
adequate provision to deliver value pursuant to clause (B)
above within thirty (30) days following the date that the
Acquiring Person became such (the
Section 11(a)(ii) Trigger Date), then
the Company shall be obligated to deliver, to the extent
permitted by applicable law and any material agreements then in
effect to which the Company is a party, upon the surrender for
exercise of a Right and without requiring payment of the
Purchase Price, shares of Common Stock (to the extent
available),
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and then, if necessary, such number or fractions of shares of
Preferred Stock (to the extent available) and then, if
necessary, cash, which shares
and/or cash
have an aggregate value equal to the Spread. If within the
thirty (30) day period referred to above the Board of
Directors shall determine in good faith that it is likely that
sufficient additional shares of Common Stock could be authorized
for issuance upon exercise in full of the Rights, then, if the
Board of Directors so elects, such thirty (30) day period
may be extended to the extent necessary, but not more than
ninety (90) days after the Section 11(a)(ii)
Trigger Date, in order that the Company may seek stockholder
approval for the authorization of such additional shares (such
thirty (30) day period, as it may be extended, is
hereinafter called the Substitution Period).
To the extent that the Company determines that some action need
be taken pursuant to the second
and/or third
sentence of this Section 11(a)(iii), the Company
(x) shall provide, subject to Section 11(a)(ii)
hereof and the last sentence of this
Section 11(a)(iii) hereof, that such action shall
apply uniformly to all outstanding Rights and (y) may
suspend the exercisability of the Rights until the expiration of
the Substitution Period in order to seek any authorization of
additional shares
and/or to
decide the appropriate form of distribution to be made pursuant
to such second sentence and to determine the value thereof. In
the event of any such suspension, the Company shall issue a
public announcement stating that the exercisability of the
Rights has been temporarily suspended, as well as a public
announcement at such time as the suspension is no longer in
effect. For purposes of this Section 11(a)(iii), the
value of the shares of Common Stock shall be the current per
share market price (as determined pursuant to
Section 11(d)(i)) on the
Section 11(a)(ii) Trigger Date and the per share or
fractional value of any Common Stock equivalent shall be deemed
to equal the current per share market price of the Common Stock
on such date. The Board of Directors of the Company may, but
shall not be required to, establish procedures to allocate the
right to receive shares of Common Stock upon the exercise of the
Rights among holders of Rights pursuant to this
Section 11(a)(iii).
(b) In case the Company shall fix a record date for the
issuance of rights, options or warrants to all holders of
Preferred Stock entitling them (for a period expiring within 45
calendar days after such record date) to subscribe for or
purchase Preferred Stock (or shares having similar rights,
privileges and preferences as the Preferred Stock
(equivalent preferred shares)) or securities
convertible into Preferred Stock or equivalent preferred shares
at a price per share of Preferred Stock or equivalent preferred
shares (or having a conversion price per share, if a security
convertible into shares of Preferred Stock or equivalent
preferred shares) less than the then-current per share market
price of the Preferred Stock (determined pursuant to
Section 11(d) hereof) on such record date, the
Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the
numerator of which shall be the number of shares of Preferred
Stock and equivalent preferred shares outstanding on such record
date plus the number of shares of Preferred Stock and equivalent
preferred shares which the aggregate offering price of the total
number of such shares so to be offered (and/or the aggregate
initial conversion price of the convertible securities so to be
offered) would purchase at such current market price, and the
denominator of which shall be the number of shares of Preferred
Stock and equivalent preferred shares outstanding on such record
date plus the number of additional shares of Preferred Stock
and/or
equivalent preferred shares to be offered for subscription or
purchase (or into which the convertible securities so to be
offered are initially convertible); provided,
however, that in no event shall the consideration to be
paid upon the exercise of one Right be less than the aggregate
par value of the shares of capital stock of the Company issuable
upon exercise of one Right. In case such subscription price may
be paid in a consideration part or all of which shall be in a
form other than cash, the value of such consideration shall be
as determined in good faith by the Board of Directors of the
Company, whose determination shall be described in a statement
filed with the Rights Agent and which shall be binding on the
Rights Agent. Shares of Preferred Stock and equivalent preferred
shares owned by or held for the account of the Company shall not
be deemed outstanding for the purpose of any such computation.
Such adjustment shall be made successively whenever such a
record date is fixed; and in the event that such rights, options
or warrants are not so issued, the Purchase Price shall be
adjusted to be the Purchase Price which would then be in effect
if such record date had not been fixed.
(c) In case the Company shall fix a record date for the
making of a distribution to all holders of the Preferred Stock
(including any such distribution made in connection with a
consolidation or merger in which the Company is the continuing
or surviving corporation) of evidences of indebtedness or assets
(other than a regular quarterly cash dividend or a dividend
payable in Preferred Stock) or subscription rights or warrants
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(excluding those referred to in Section 11(b)
hereof), the Purchase Price to be in effect after such record
date shall be determined by multiplying the Purchase Price in
effect immediately prior to such record date by a fraction, the
numerator of which shall be the then-current per share market
price of the Preferred Stock (determined pursuant to
Section 11(d) hereof) on such record date, less the
fair market value (as determined in good faith by the Board of
Directors of the Company whose determination shall be described
in a statement filed with the Rights Agent and shall be binding
on the Rights Agent) of the portion of such assets or evidences
of indebtedness so to be distributed or of such subscription
rights or warrants applicable to one share of Preferred Stock,
and the denominator of which shall be such current per share
market price of the Preferred Stock; provided,
however, that in no event shall the consideration to be
paid upon the exercise of one Right be less than the aggregate
par value of the shares of capital stock of the Company to be
issued upon exercise of one Right. Such adjustments shall be
made successively whenever such a record date is fixed; and in
the event that such distribution is not so made, the Purchase
Price shall again be adjusted to be the Purchase Price that
would then be in effect if such record date had not been fixed.
(d) (i) Except as otherwise provided herein, for the
purpose of any computation hereunder, the current per
share market price of any security (a
Security for the purpose of this
Section 11(d)(i)) on any date shall be deemed to be
the average of the daily closing prices per share of such
Security for the 30 consecutive Trading Days (as such term is
hereinafter defined) immediately prior to such date;
provided, however, that in the event that the
current per share market price of the Security is determined
during a period following the announcement by the issuer of such
Security of (A) a dividend or distribution on such Security
payable in shares of such Security or securities convertible
into such shares, or (B) any subdivision, combination or
reclassification of such Security, and prior to the expiration
of 30 Trading Days after the ex-dividend date for such dividend
or distribution, or the record date for such subdivision,
combination or reclassification, then, and in each such case,
the current per share market price shall be appropriately
adjusted to reflect the current market price per share
equivalent of such Security. The closing price for each day
shall be the last sale price, regular way, or, in case no such
sale takes place on such day, the average of the closing bid and
asked prices, regular way, in either case as reported by
(w) the principal consolidated transaction reporting system
with respect to securities listed or admitted to trading on the
NYSE or, (x) if the Security is not listed or admitted to
trading on the NYSE, as reported in the principal consolidated
transaction reporting system with respect to securities listed
on the principal national securities exchange on which the
Security is listed or admitted to trading or, (y) if the
Security is not listed or admitted to trading on any national
securities exchange, the last quoted price or, if not so quoted,
the average of the high bid and low asked prices in the
over-the-counter market, as reported by the system then in use,
or, (z) if on any such date the Security is not so quoted
or reported, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in the
Security selected by the Board of Directors of the Company. The
term Trading Day shall mean a day on which
the principal national securities exchange on which the Security
is listed or admitted to trading is open for the transaction of
business or, if the Security is not listed or admitted to
trading on any national securities exchange, a Business Day.
(ii) For the purpose of any computation hereunder, if the
Preferred Stock is publicly traded, the current per share
market price of the Preferred Stock shall be determined in
accordance with the method set forth in
Section 11(d)(i). If the Preferred Stock is not
publicly traded but the Common Stock is publicly traded, the
current per share market price of the Preferred
Stock shall be conclusively deemed to be the current per share
market price of the Common Stock, as determined pursuant to
Section 11(d)(i), multiplied by one thousand
(appropriately adjusted to reflect any stock split, stock
dividend or similar transaction occurring after the date
hereof). If neither the Common Stock nor the Preferred Stock is
publicly traded, current per share market price
shall mean the fair value per share as determined in good faith
by the Board of Directors of the Company, whose determination
shall be described in a statement filed with the Rights Agent
and shall be binding on the Rights Agent.
(e) No adjustment in the Purchase Price shall be required
unless such adjustment would require an increase or decrease of
at least 1% in the Purchase Price; provided,
however, that any adjustments not required to be made by
reason of this Section 11(e) shall be carried
forward and taken into account in any subsequent adjustment. All
calculations under this Section 11 shall be made to
the nearest cent or to the nearest one ten-
A-11
thousandth of a share of Preferred Stock or share of Common
Stock or other share or security as the case may be.
Notwithstanding the first sentence of this
Section 11(e), any adjustment required by this
Section 11 shall be made no later than the earlier
of (i) three years from the date of the transaction which
requires such adjustment or (ii) the Expiration Date. If as
a result of an adjustment made pursuant to
Section 11(a) hereof, the holder of any Right
thereafter exercised shall become entitled to receive any shares
of capital stock of the Company other than the Preferred Stock,
thereafter the Purchase Price and the number of such other
shares so receivable upon exercise of a Right shall be subject
to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with respect
to the Preferred Stock contained in Sections 11(a),
11(b), 11(c), 11(e), 11(h),
11(i) and 11(m) and the provisions of
Sections 7, 9, 10, 13 and
14 hereof with respect to the Preferred Stock shall apply
on like terms to any such other shares.
(f) All Rights originally issued by the Company subsequent
to any adjustment made to the Purchase Price hereunder shall
evidence the right to purchase, at the adjusted Purchase Price,
the number of one-thousandths of a share of Preferred Stock
purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.
(g) Unless the Company shall have exercised its election as
provided in Section 11(i), upon each adjustment of
the Purchase Price as a result of the calculations made in
Section 11(b) and (c), each Right outstanding
immediately prior to the making of such adjustment shall
thereafter evidence the right to purchase, at the adjusted
Purchase Price, that number of one one-thousandths of a share of
Preferred Stock (calculated to the nearest ten-thousandth of a
share of Preferred Stock) obtained by (i) multiplying
(x) the number of one-thousandths of a share of Preferred
Stock purchasable upon the exercise of a Right immediately prior
to such adjustment by (y) the Purchase Price in effect
immediately prior to such adjustment of the Purchase Price and
(ii) dividing the product so obtained by the Purchase Price
in effect immediately after such adjustment of the Purchase
Price.
(h) The Company may elect on or after the date of any
adjustment of the Purchase Price or any adjustment to the number
of shares of Preferred Stock for which a Right may be exercised
made pursuant to Section 11(a)(i), 11(b) or
11(c) hereof to adjust the number of Rights, in
substitution for any adjustment in the number of one
one-thousandths of a share of Preferred Stock purchasable upon
the exercise of a Right. Each of the Rights outstanding after
such adjustment of the number of Rights shall be exercisable for
the number of one-thousandths of a share of Preferred Stock for
which a Right was exercisable immediately prior to such
adjustment. Each Right held of record prior to such adjustment
of the number of Rights shall become that number of Rights
(calculated to the nearest ten-thousandth) obtained by dividing
the Purchase Price in effect immediately prior to adjustment of
the Purchase Price by the Purchase Price in effect immediately
after adjustment of the Purchase Price. The Company shall make a
public announcement of its election to adjust the number of
Rights, indicating the record date for the adjustment, and, if
known at the time, the amount of the adjustment to be made. This
record date may be the date on which the Purchase Price is
adjusted or any day thereafter, but, if the Right Certificates
have been issued, shall be at least 10 days later than the
date of the public announcement. If Right Certificates have been
issued, upon each adjustment of the number of Rights pursuant to
this Section 11(i), the Company may, as promptly as
practicable, cause to be distributed to holders of record of
Right Certificates on such record date Right Certificates
evidencing, subject to Section 14 hereof, the
additional Rights to which such holders shall be entitled as a
result of such adjustment, or, at the option of the Company,
shall cause to be distributed to such holders of record in
substitution and replacement for the Right Certificates held by
such holders prior to the date of adjustment, and upon surrender
thereof, if required by the Company, new Right Certificates
evidencing all the Rights to which such holders shall be
entitled as a result of such adjustment. Right Certificates so
to be distributed shall be issued, executed and countersigned in
the manner provided for herein and shall be registered in the
names of the holders of record of Right Certificates on the
record date specified in the public announcement.
(i) Irrespective of any adjustment or change in the
Purchase Price or the number of one-thousandths of a share of
Preferred Stock issuable upon the exercise of the Rights, the
Right Certificates theretofore and thereafter issued may
continue to express the Purchase Price and the number of
one-thousandths of a share of Preferred Stock which were
expressed in the initial Right Certificates issued hereunder.
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(j) Before taking any action that would cause an adjustment
reducing the Purchase Price below the then par value, if any, of
the shares of Preferred Stock or other shares of capital stock
issuable upon exercise of the Rights, the Company shall take any
corporate action which may, in the opinion of its counsel, be
necessary in order that the Company may validly and legally
issue fully paid and nonassessable shares of Preferred Stock or
other such shares at such adjusted Purchase Price.
(k) In any case in which this Section 11 shall
require that an adjustment in the Purchase Price be made
effective as of a record date for a specified event, the Company
may elect to defer until the occurrence of such event the
issuing to the holder of any Right exercised after such record
date the Preferred Stock, Common Stock or other capital stock or
securities of the Company, if any, issuable upon such exercise
over and above the Preferred Stock, Common Stock or other
capital stock or securities of the Company, if any, issuable
upon such exercise on the basis of the Purchase Price in effect
prior to such adjustment; provided, however, that
the Company shall deliver to such holder a due bill or other
appropriate instrument evidencing such holders right to
receive such additional shares upon the occurrence of the event
requiring such adjustment.
(l) Notwithstanding anything in this Section 11
to the contrary, the Company shall be entitled to make such
adjustments in the Purchase Price, in addition to those
adjustments expressly required by this Section 11,
as and to the extent that the Board of Directors in its sole
discretion shall determine to be advisable in order that any
consolidation or subdivision of the Preferred Stock, issuance
(wholly for cash) of any shares of Preferred Stock at less than
the current market price, issuance (wholly for cash) of
Preferred Stock or securities which by their terms are
convertible into or exchangeable for Preferred Stock, dividends
on Preferred Stock payable in shares of Preferred Stock or
issuance of rights, options or warrants referred to hereinabove
in Section 11(b), hereafter made by the Company to
holders of its Preferred Stock shall not be taxable to such
stockholders.
(m) Notwithstanding anything in this Rights Agreement to
the contrary, in the event that at any time after the date of
this Rights Agreement and prior to the Distribution Date, the
Company shall (i) declare or pay any dividend on the Common
Stock payable in Common Stock or (ii) effect a subdivision,
combination or consolidation of the Common Stock (by
reclassification or otherwise than by payment of a dividend
payable in Common Stock) into a greater or lesser number of
shares of Common Stock, then in any such case, the number of
Rights associated with each share of Common Stock then
outstanding, or issued or delivered thereafter, shall be
proportionately adjusted so that the number of Rights thereafter
associated with each share of Common Stock following any such
event shall equal the result obtained by multiplying the number
of Rights associated with each share of Common Stock immediately
prior to such event by a fraction the numerator of which shall
be the total number of shares of Common Stock outstanding
immediately prior to the occurrence of the event and the
denominator of which shall be the total number of shares of
Common Stock outstanding immediately following the occurrence of
such event.
(n) The Company agrees that, after the earlier of the
Distribution Date or the Stock Acquisition Date, it will not,
except as permitted by Section 23, 24 or
27 hereof, take (or permit any Subsidiary to take) any
action if at the time such action is taken it is reasonably
foreseeable that such action will diminish substantially or
eliminate the benefits intended to be afforded by the Rights.
Section 12. Certificate
of Adjusted Purchase Price or Number of
Shares. Whenever an adjustment is made as
provided in Section 11 or 13 hereof, the
Company shall promptly (a) prepare a certificate setting
forth such adjustment, and a brief statement of the facts
accounting for such adjustment, (b) file with the Rights
Agent and with each transfer agent for the Common Stock or the
Preferred Stock a copy of such certificate and (c) mail a
brief summary thereof to each holder of a Right Certificate (or
if prior to the Distribution Date, to each holder of a
certificate representing shares of Common Stock) in accordance
with Section 26 hereof. Notwithstanding the
foregoing sentence, the failure of the Company to give such
notice shall not affect the validity of or the force or effect
of or the requirement for such adjustment. The Rights Agent
shall be fully protected in relying on any such certificate and
on any adjustment therein contained and shall not be deemed to
have knowledge of any such adjustment unless and until it shall
have received such certificate. Any adjustment to be made
pursuant to Section 11 or 13 hereof shall be
effective as of the date of the event giving rise to such
adjustment.
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Section 13. Consolidation,
Merger or Sale or Transfer of Assets or Earnings
Power. (a) In the event, directly or
indirectly, at any time after any Person has become an Acquiring
Person, (i) the Company shall merge with and into any other
Person (other than one or more of its wholly-owned
Subsidiaries), (ii) any Person (other than one or more of
its wholly-owned Subsidiaries) shall consolidate with the
Company, or any Person (other than one or more of its
wholly-owned Subsidiaries) shall merge with and into the Company
and the Company shall be the continuing or surviving corporation
of such merger and, in connection with such merger, all or part
of the Common Stock shall be changed into or exchanged for stock
or other securities of any other Person (or of the Company) or
cash or any other property, or (iii) the Company shall sell
or otherwise transfer (or one or more of its Subsidiaries shall
sell or otherwise transfer), in one or more transactions, assets
or earning power aggregating to 50% or more of the assets or
earning power of the Company and its Subsidiaries (taken as a
whole) to any other Person (other than the Company or one or
more of its wholly-owned Subsidiaries), then, and in each such
case, proper provision shall be made so that:
(A) each holder of record of a Right (other than Rights
which have become void pursuant to
Section 11(a)(ii)) shall thereafter have the right
to receive, upon the exercise thereof at a price equal to the
then-current Purchase Price multiplied by the number of
one-thousandths of a share of Preferred Stock for which a Right
was exercisable (whether or not such Right was then exercisable)
immediately prior to the time that any Person first became an
Acquiring Person (each as subsequently adjusted thereafter
pursuant to Sections 11(a)(i), 11(b),
11(c), 11(f), 11(h), 11(i) and
11(m)), in accordance with the terms of this Rights
Agreement and in lieu of Preferred Stock, such number of validly
issued, fully paid and non-assessable and freely tradeable
shares of Common Stock of the Principal Party (as defined below)
not subject to any liens, encumbrances, rights of first refusal
or other adverse claims, as shall be equal to the result
obtained by (1) multiplying the then-current Purchase Price
by the number of one one-thousandths of a share of Preferred
Stock for which a Right was exercisable immediately prior to the
time that any Person first became an Acquiring Person (as
subsequently adjusted thereafter pursuant to
Sections 11(a)(i), 11(b), 11(c),
11(f), 11(h), 11(i) and 11(m)) and
(2) dividing that product by 50% of the then-current per
share market price of the Common Stock of such Principal Party
(determined pursuant to Section 11(d)(i) hereof) on
the date of consummation of such consolidation, merger, sale or
transfer; provided, that the Purchase Price and the
number of shares of Common Stock of such Principal Party
issuable upon exercise of each Right shall be further adjusted
as provided in Section 11(f) of this Rights
Agreement to reflect any events occurring in respect of such
Principal Party after the date of such consolidation, merger,
sale or transfer;
(B) such Principal Party shall thereafter be liable for,
and shall assume, by virtue of such consolidation, merger, sale
or transfer, all the obligations and duties of the Company
pursuant to this Rights Agreement;
(C) the term Company as used herein shall
thereafter be deemed to refer to such Principal Party; and
(D) such Principal Party shall take such steps (including,
but not limited to, the reservation of a sufficient number of
its shares of its Common Stock) in connection with such
consummation of any such transaction as may be necessary to
assure that the provisions hereof shall thereafter be
applicable, as nearly as reasonably may be, in relation to the
shares of its Common Stock thereafter deliverable upon the
exercise of the Rights; provided, that upon the
subsequent occurrence of any consolidation, merger, sale or
transfer of assets or other extraordinary transaction in respect
of such Principal Party, each holder of a Right shall thereupon
be entitled to receive, upon exercise of a Right and payment of
the Purchase Price as provided in this
Section 13(a), such cash, shares, rights, warrants
and other property which such holder would have been entitled to
receive had such holder, at the time of such transaction, owned
the Common Stock of the Principal Party receivable upon the
exercise of a Right pursuant to this Section 13(a),
and such Principal Party shall take such steps (including, but
not limited to, reservation of shares of stock) as may be
necessary to permit the subsequent exercise of the Rights in
accordance with the terms hereof for such cash, shares, rights,
warrants and other property.
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(b) Principal Party shall mean:
(i) in the case of any transaction described in
clauses (i) or (ii) of the first sentence of
Section 13(a) hereof: (A) the Person that is
the issuer of the securities into which the shares of Common
Stock are converted in such merger or consolidation, or, if
there is more than one such issuer, the issuer of the shares of
Common Stock of which have the greatest aggregate market value
of shares outstanding, or (B) if no securities are so
issued, (x) the Person that is the other party to the
merger, if such Person survives said merger, or, if there is
more than one such Person, the Person the shares of Common Stock
of which have the greatest aggregate market value of shares
outstanding or (y) if the Person that is the other party to
the merger does not survive the merger, the Person that does
survive the merger (including the Company if it survives) or
(z) the Person resulting from the consolidation; and
(ii) in the case of any transaction described in
clause (iii) of the first sentence in
Section 13(a) hereof, the Person that is the party
receiving the greatest portion of the assets or earning power
transferred pursuant to such transaction or transactions, or, if
each Person that is a party to such transaction or transactions
receives the same portion of the assets or earning power so
transferred or if the Person receiving the greatest portion of
the assets or earning power cannot be determined, whichever of
such Persons is the issuer of Common Stock having the greatest
aggregate market value of shares outstanding;
provided, however, that in any such case described
in the foregoing clause (b)(i) or (b)(ii), if the Common Stock
of such Person is not at such time or has not been continuously
over the preceding
12-month
period registered under Section 12 of the Exchange
Act, then (1) if such Person is a direct or indirect
Subsidiary of another Person the Common Stock of which is and
has been so registered, the term Principal Party
shall refer to such other Person, or (2) if such Person is
a Subsidiary, directly or indirectly, of more than one Person,
and the Common Stock of all of such persons have been so
registered, the term Principal Party shall refer to
whichever of such Persons is the issuer of Common Stock having
the greatest aggregate market value of shares outstanding, or
(3) if such Person is owned, directly or indirectly, by a
joint venture formed by two or more Persons that are not owned,
directly or indirectly, by the same Person, the rules set forth
in clauses (1) and (2) above shall apply to each of
the owners having an interest in the venture as if the Person
owned by the joint venture was a Subsidiary of both or all of
such joint venturers, and the Principal Party in each such case
shall bear the obligations set forth in this
Section 13 in the same ratio as its interest in such
Person bears to the total of such interests.
(c) The Company shall not consummate any consolidation,
merger, sale or transfer referred to in
Section 13(a) hereof unless prior thereto the
Company and the Principal Party involved therein shall have
executed and delivered to the Rights Agent an agreement
confirming that the requirements of Sections 13(a)
and (b) hereof shall promptly be performed in accordance
with their terms and that such consolidation, merger, sale or
transfer of assets shall not result in a default by the
Principal Party under this Rights Agreement as the same shall
have been assumed by the Principal Party pursuant to
Sections 13(a) and (b) hereof and providing
that, as soon as practicable after executing such agreement
pursuant to this Section 13, the Principal Party
will:
(i) prepare and file a registration statement under the
Securities Act, if necessary, with respect to the Rights and the
securities purchasable upon exercise of the Rights on an
appropriate form, use its best efforts to cause such
registration statement to become effective as soon as
practicable after such filing and use its best efforts to cause
such registration statement to remain effective (with a
prospectus at all times meeting the requirements of the
Securities Act) until the Expiration Date, and similarly comply
with applicable state securities laws;
(ii) use its best efforts, if the Common Stock of the
Principal Party shall be listed or admitted to trading on the
NYSE or on another national securities exchange, to list or
admit to trading (or continue the listing of) the Rights and the
securities purchasable upon exercise of the Rights on the NYSE
or such securities exchange, or, if the Common Stock of the
Principal Party shall not be listed or admitted to trading on
the NYSE or a national securities exchange, to cause the Rights
and the securities receivable upon exercise of the Rights to be
reported by such other system then in use;
A-15
(iii) deliver to holders of the Rights historical financial
statements for the Principal Party which comply in all respects
with the requirements for registration on Form 10 (or any
successor form) under the Exchange Act; and
(iv) obtain waivers of any rights of first refusal or
preemptive rights in respect of the Common Stock of the
Principal Party subject to purchase upon exercise of outstanding
Rights.
In the event that any of the transactions described in
Section 13(a) hereof shall occur at any time after
the occurrence of a transaction described in
Section 11(a)(ii) hereof, the Rights which have not
theretofore been exercised shall thereafter be exercisable in
the manner described in Section 13(a).
(d) In case the Principal Party has a provision in any of
its authorized securities or in its certificate of incorporation
or by-laws or other instrument governing its affairs, which
provision would have the effect of (i) causing such
Principal Party to issue (other than to holders of Rights
pursuant to this Section 13), in connection with, or
as a consequence of, the consummation of a transaction referred
to in this Section 13, shares of Common Stock or
Common Stock equivalents of such Principal Party at less than
the then-current market price per share thereof (determined
pursuant to Section 11(d) hereof) or securities
exercisable for, or convertible into, Common Stock or Common
Stock equivalents of such Principal Party at less than such
then-current market price, or (ii) providing for any
special payment, tax or similar provision in connection with the
issuance of the Common Stock of such Principal Party pursuant to
the provisions of Section 13, then, in such event,
the Company hereby agrees with each holder of Rights that it
shall not consummate any such transaction unless prior thereto
the Company and such Principal Party shall have executed and
delivered to the Rights Agent a supplemental agreement providing
that the provision in question of such Principal Party shall
have been canceled, waived or amended, or that the authorized
securities shall be redeemed, so that the applicable provision
will have no effect in connection with, or as a consequence of,
the consummation of the proposed transaction.
(e) The Company covenants and agrees that it shall not, at
any time after a Person first becomes an Acquiring Person, enter
into any transaction of the type contemplated by
Sections 13(a)(i)-(iii)
hereof if (x) at the time of or immediately after such
consolidation, merger, sale, transfer or other transaction there
are any rights, warrants or other instruments or securities
outstanding or agreements in effect which would substantially
diminish or otherwise eliminate the benefits intended to be
afforded by the Rights, (y) prior to, simultaneously with
or immediately after such consolidation, merger, sale, transfer
or other transaction, the stockholders of the Person who
constitutes, or would constitute, the Principal Party for
purposes of Section 13(b) hereof shall have received
a distribution of Rights previously owned by such Person or any
of its Affiliates or Associates or (z) the form or nature
of organization of the Principal Party would preclude or limit
the exercisability of the Rights.
Section 14. Fractional
Rights and Fractional Shares. (a) The
Company shall not be required to issue fractions of Rights
(except prior to the Distribution Date in accordance with
Section 11(n) hereof) or to distribute Right
Certificates which evidence fractional Rights. In lieu of such
fractional Rights, there shall be paid to the registered holders
of the Right Certificates with regard to which such fractional
Rights would otherwise be issuable, an amount in cash equal to
the same fraction of the current market value of a whole Right.
For the purposes of this Section 14(a), the current
market value of a whole Right shall be the closing price of the
Rights for the Trading Day immediately prior to the date on
which such fractional Rights would have been otherwise issuable.
The closing price for any day shall be the last sale price,
regular way, or, in case no such sale takes place on such day,
the average of the closing bid and asked prices, regular way, in
either case as reported by (w) the principal consolidated
transaction reporting system with respect to securities listed
or admitted to trading on the NYSE or, (x) if the Rights
are not listed or admitted to trading on the NYSE, as reported
in the principal consolidated transaction reporting system with
respect to securities listed on the principal national
securities exchange on which the Rights are listed or admitted
to trading or, (y) if the Rights are not listed or admitted
to trading on any national securities exchange, the last quoted
price or, if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market, as reported by such
system then in use or, (z) if on any such date the Rights
are not so quoted or reported, the average of the closing bid
and asked prices as furnished by a professional market maker
making a market in the Rights
A-16
selected by the Board of Directors of the Company. If on any
such date no such market maker is making a market in the Rights,
the fair value of the Rights on such date as determined in good
faith by the Board of Directors of the Company shall be used.
(b) The Company shall not be required to issue fractions of
shares of Preferred Stock (other than fractions which are
integral multiples of one one-thousandth of a share of Preferred
Stock) upon exercise of the Rights or to distribute certificates
which evidence fractional shares of Preferred Stock (other than
fractions which are integral multiples of one one-thousandth of
a share of Preferred Stock). Interests in fractions of Preferred
Stock in integral multiples of one one-thousandth of a share of
Preferred Stock may, at the election of the Company, be
evidenced by depositary receipts, pursuant to an appropriate
agreement between the Company and a depositary selected by it;
provided, that such agreement shall provide that the
holders of such depositary receipts shall have all the rights,
privileges and preferences to which they are entitled as
beneficial owners(for the purposes of this Section 14(b),
as such term is defined in
Rule 13d-3
or 13d-5 of
the General Rules and Regulations under the Exchange Act) of the
Preferred Stock represented by such depositary receipts. In lieu
of fractional shares of Preferred Stock that are not integral
multiples of one one-thousandth of a share of Preferred Stock,
the Company shall pay to the registered holders of Right
Certificates at the time such Rights are exercised for shares of
Preferred Stock as herein provided an amount in cash equal to
the same fraction of the current market value of one share of
Preferred Stock. For the purposes of this
Section 14(b), the current market value of a share
of Preferred Stock shall be the closing price of a share of
Preferred Stock (as determined pursuant to
Section 11(d)(ii) hereof) for the Trading Day
immediately prior to the date of such exercise.
(c) The Company shall not be required to issue fractions of
shares of Common Stock or to distribute certificates which
evidence fractional shares of Common Stock upon the exercise or
exchange of Rights. In lieu of such fractional shares of Common
Stock, the Company shall pay to the registered holders of the
Right Certificates at the time such Rights are exercised or
exchanged for shares of Common Stock as herein provided an
amount in cash equal to the same fraction of the current market
value of a whole share of Common Stock (as determined in
accordance with Section 11(d)(i) hereof) for the
Trading Day immediately prior to the date of such exercise or
exchange.
(d) The holder of a Right by the acceptance of the Right
expressly waives the right to receive any fractional Rights or
any fractional shares upon exercise or exchange of a Right
(except as provided above).
Section 15. Rights
of Action. All rights of action in respect of
this Rights Agreement, excepting the rights of action given to
the Rights Agent under Section 18 hereof, are vested
in the respective registered holders of the Right Certificates
(and, prior to the Distribution Date, the registered holders of
the Common Stock); and any registered holder of any Right
Certificate (or, prior to the Distribution Date, of the Common
Stock), without the consent of the Rights Agent or of the holder
of any other Right Certificate (or, prior to the Distribution
Date, of the Common Stock), on such holders own behalf and
for such holders own benefit, may enforce, and may
institute and maintain any suit, action or proceeding against
the Company to enforce, or otherwise act in respect of, such
holders right to exercise the Rights evidenced by such
Right Certificate (or, prior to the Distribution Date, such
Common Stock) in the manner provided in such Right Certificate
and in this Rights Agreement. Without limiting the foregoing or
any remedies available to the holders of Rights, it is
specifically acknowledged that the holders of Rights would not
have an adequate remedy at law for any breach of this Rights
Agreement and will be entitled to specific performance of the
obligations under, and injunctive relief against actual or
threatened violations of the obligations of any Person subject
to, this Rights Agreement.
Section 16. Agreement
of Right Holders. Every holder of a Right, by
accepting the same, consents and agrees with the Company and the
Rights Agent and with every other holder of a Right that:
(i) prior to the Distribution Date, the Rights will not be
evidenced by a Right Certificate and will be transferable only
in connection with the transfer of the Common Stock;
A-17
(ii) after the Distribution Date, the Right Certificates
are transferable only on the registry books of the Rights Agent
if surrendered at the office or agency of the Rights Agent
designated for such purpose, duly endorsed or accompanied by a
proper instrument of transfer;
(iii) the Company and the Rights Agent may deem and treat
the Person in whose name the Right Certificate (or, prior to the
Distribution Date, the Common Stock (or Book Entry shares of
Common Stock)) is registered as the absolute owner thereof and
of the Rights evidenced thereby (notwithstanding any notations
of ownership or writing on the Right Certificates or the Common
Stock certificate (or notices provided to holders of Book Entry
shares of Common Stock) made by anyone other than the Company or
the Rights Agent) for all purposes whatsoever, and neither the
Company nor the Rights Agent, subject to
Section 7(e) hereof, shall be affected by any notice
to the contrary; and
(iv) notwithstanding anything in this Rights Agreement to
the contrary, neither the Company nor the Rights Agent shall
have any liability to any holder of a Right or other Person as a
result of its inability to perform any of its obligations under
this Rights Agreement by reason of any preliminary or permanent
injunction or other order, judgment, decree or ruling (whether
interlocutory or final) issued by a court or by a governmental,
regulatory, self-regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order
promulgated or enacted by any governmental authority,
prohibiting or otherwise restraining performance of such
obligation; provided, however, that the Company
must use its reasonable best efforts to have any such
injunction, order, judgment, decree or ruling lifted or
otherwise overturned as soon as possible.
Section 17. Right
Certificate Holder Not Deemed a
Stockholder. No holder, as such, of any Right
Certificate shall be entitled to vote, receive dividends or be
deemed for any purpose the holder of the Preferred Stock or any
other securities of the Company which may at any time be
issuable on the exercise or exchange of the Rights represented
thereby, nor shall anything contained herein or in any Right
Certificate be construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a stockholder of the
Company or any right to vote for the election of directors or
upon any matter submitted to stockholders at any meeting
thereof, or to give or withhold consent to any corporate action,
or to receive notice of meetings or other actions affecting
stockholders (except as provided in this Rights Agreement), or
to receive dividends or subscription rights, or otherwise, until
the Rights evidenced by such Right Certificate shall have been
exercised or exchanged in accordance with the provisions hereof.
Section 18. Concerning
the Rights Agent. (a) The Company agrees
to pay to the Rights Agent reasonable compensation for all
services rendered by it hereunder and, from time to time, on
demand of the Rights Agent, its reasonable expenses and counsel
fees and other disbursements incurred in the administration and
execution of this Rights Agreement and the exercise and
performance of its duties hereunder. The Company also agrees to
indemnify the Rights Agent for, and to hold it harmless against,
any loss, liability or expense, incurred without gross
negligence, bad faith or willful misconduct on the part of the
Rights Agent, for anything done or omitted by the Rights Agent
in connection with the acceptance and administration of this
Rights Agreement, including the costs and expenses of defending
against any claim of liability arising therefrom, directly or
indirectly.
(b) The Rights Agent shall be protected and shall incur no
liability for, or in respect of any action taken, suffered or
omitted by it in connection with, its administration of this
Rights Agreement in reliance upon any Right Certificate or
certificate for the Preferred Stock or Common Stock or for other
securities of the Company, instrument of assignment or transfer,
power of attorney, endorsement, affidavit, letter, notice,
direction, consent, certificate, statement, or other paper or
document reasonably believed by it to be genuine and to be
signed, executed and, where necessary, verified or acknowledged,
by the proper Person or Persons, or otherwise upon the advice of
counsel as set forth in Section 20 hereof.
Section 19. Merger
or Consolidation or Change of Name of Rights
Agent. (a) Any corporation or entity
into which the Rights Agent or any successor Rights Agent may be
merged or with which it may be consolidated, or any corporation
or entity resulting from any merger or consolidation to which
the Rights Agent or any successor Rights Agent shall be a party,
or any corporation or entity succeeding to the stock transfer or
corporate trust powers of the Rights Agent or any successor
Rights Agent, shall be the successor to
A-18
the Rights Agent under this Rights Agreement without the
execution or filing of any paper or any further act on the part
of any of the parties hereto; provided, that such
corporation or entity would be eligible for appointment as a
successor Rights Agent under the provisions of
Section 21 hereof. In case at the time such
successor Rights Agent shall succeed to the agency created by
this Rights Agreement, any of the Right Certificates shall have
been countersigned but not delivered, such successor Rights
Agent may adopt the countersignature of the predecessor Rights
Agent and deliver such Right Certificates so countersigned; and
in case at that time any of the Right Certificates shall not
have been countersigned, any successor Rights Agent may
countersign such Right Certificates either in the name of the
predecessor Rights Agent or in the name of such successor Rights
Agent; and in all such cases such Right Certificates shall have
the full force provided in the Right Certificates and in this
Rights Agreement.
(b) In case at any time the name of the Rights Agent shall
be changed and at such time any of the Right Certificates shall
have been countersigned but not delivered the Rights Agent may
adopt the countersignature under its prior name and deliver
Right Certificates so countersigned; and in case at that time
any of the Right Certificates shall not have been countersigned,
the Rights Agent may countersign such Right Certificates either
in its prior name or in its changed name and in all such cases
such Right Certificates shall have the full force provided in
the Right Certificates and in this Rights Agreement.
Section 20. Duties
of Rights Agent. The Rights Agent undertakes
the duties and obligations imposed by this Rights Agreement upon
the following terms and conditions, by all of which the Company
and the holders of Right Certificates, by their acceptance
thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who
may be legal counsel for the Company), and the opinion of such
counsel shall be full and complete authorization and protection
to the Rights Agent as to any action taken or omitted by it in
good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this
Rights Agreement the Rights Agent shall deem it necessary or
desirable that any fact or matter be proved or established by
the Company prior to taking or suffering any action hereunder,
such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively
proved and established by a certificate signed by any one of the
Chief Executive Officer, President, any Vice President, the
Treasurer or the Secretary of the Company (each, an
Authorized Officer) and delivered to the
Rights Agent; and such certificate shall be full authorization
to the Rights Agent for any action taken or suffered in good
faith by it under the provisions of this Rights Agreement in
reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder to the
Company and any other Person only for its own gross negligence,
bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason
of any of the statements of fact or recitals contained in this
Rights Agreement or in the Right Certificates (except its
countersignature thereof) or be required to verify the same, but
all such statements and recitals are and shall be deemed to have
been made by the Company only.
(e) The Rights Agent shall not be under any responsibility
in respect of the validity of this Rights Agreement or the
execution and delivery hereof (except the due execution hereof
by the Rights Agent) or in respect of the validity or execution
of any Right Certificate (except its countersignature thereof);
nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Rights Agreement or in
any Right Certificate; nor shall it be responsible for any
change in the exercisability of the Rights (including the Rights
becoming void pursuant to Section 11(a)(ii) hereof)
or any adjustment in the terms of the Rights (including the
manner, method or amount thereof) provided for in
Sections 3, 11, 13, 23 and
24, or the ascertaining of the existence of facts that
would require any such change or adjustment (except with respect
to the exercise of Rights evidenced by Right Certificates after
receipt of a certificate furnished pursuant to
Section 12, describing such change or adjustment);
nor shall it by any act hereunder be deemed to make any
representation or warranty as to the authorization or
reservation of any shares of Preferred Stock or other securities
to be issued pursuant to this Rights
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Agreement or any Right Certificate or as to whether any shares
of Preferred Stock or other securities will, when issued, be
validly authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed,
acknowledged and delivered all such further and other acts,
instruments and assurances as may reasonably be required by the
Rights Agent for the carrying out or performing by the Rights
Agent of the provisions of this Rights Agreement.
(g) The Rights Agent is hereby authorized and directed to
accept instructions with respect to the performance of its
duties hereunder from any person reasonably believed by the
Rights Agent to be one of the Authorized Officers, and to apply
to such Authorized Officers for advice or instructions in
connection with its duties, and it shall not be liable for any
action taken or suffered by it in good faith in accordance with
instructions of any such Authorized Officer or for any delay in
acting while waiting for those instructions. Any application by
the Rights Agent for written instructions from the Company may,
at the option of the Rights Agent, set forth in writing any
action proposed to be taken or omitted by the Rights Agent under
this Rights Agreement and the date on
and/or after
which such action shall be taken or such omission shall be
effective. The Rights Agent shall not be liable for any action
taken by, or omission of, the Rights Agent in accordance with a
proposal included in any such application on or after the date
specified in such application (which date shall not be less than
five Business Days after the date any Authorized Officer of the
Company actually receives such application, unless any such
Authorized Officer shall have consented in writing to an earlier
date) unless, prior to taking any such action (or the effective
date in the case of an omission), the Rights Agent shall have
received written instructions in response to such application
specifying the action to be taken or omitted.
(h) The Rights Agent and any stockholder, director, officer
or employee of the Rights Agent may buy, sell or deal in any of
the Rights or other securities of the Company or become
pecuniarily interested in any transaction in which the Company
may be interested, or contract with or lend money to the Company
or otherwise act as fully and freely as though it were not
Rights Agent under this Rights Agreement. Nothing herein shall
preclude the Rights Agent from acting in any other capacity for
the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty
hereunder either itself or by or through its attorneys or
agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any
such attorneys or agents or for any loss to the Company
resulting from any such act, default, neglect or misconduct,
provided, that reasonable care was exercised in the
selection and continued employment thereof.
(j) If, with respect to any Right Certificate surrendered
to the Rights Agent for exercise or transfer, the certificate
contained in the form of assignment or the form of election to
purchase set forth on the reverse thereof, as the case may be,
has not been completed to certify the holder is not an Acquiring
Person (or an Affiliate or Associate thereof) or a transferee
thereof, the Rights Agent shall not take any further action with
respect to such requested exercise or transfer without first
consulting with the Company.
Section 21. Change
of Rights Agent. The Rights Agent or any
successor Rights Agent may resign and be discharged from its
duties under this Rights Agreement upon 30 days
notice in writing mailed to the Company and to each transfer
agent of the Common Stock or Preferred Stock by registered or
certified mail, and, following the Distribution Date, to the
holders of the Right Certificates by first-class mail. The
Company may remove the Rights Agent or any successor Rights
Agent upon 30 days notice in writing, mailed to the
Rights Agent or successor Rights Agent, as the case may be, and
to each transfer agent of the Common Stock or Preferred Stock by
registered or certified mail, and, following the Distribution
Date, to the holders of the Right Certificates by first-class
mail. If the Rights Agent shall resign or be removed or shall
otherwise become incapable of acting, the Company shall appoint
a successor to the Rights Agent. If the Company shall fail to
make such appointment within a period of 30 days after
giving notice of such removal or after it has been notified in
writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder of a Right
Certificate (who shall, with such notice, submit his Right
Certificate for inspection by the
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Company), then the registered holder of any Right Certificate
may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent,
whether appointed by the Company or by such a court, shall be
(A) a corporation or other entity organized and doing
business under the laws of the United States or any State
thereof, which is authorized under such laws to exercise
corporate trust or stock transfer powers and is subject to
supervision or examination by federal or state authority and
which has at the time of its appointment as Rights Agent a
combined capital and surplus of at least $50 million or
(B) an affiliate of a corporation or entity described in
clause (A) of this sentence. After appointment, the
successor Rights Agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally
named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the
successor Rights Agent any property at the time held by it
hereunder, and execute and deliver any further assurance,
conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment the Company
shall file notice thereof in writing with the predecessor Rights
Agent and each transfer agent of the Common Stock or Preferred
Stock, and, following the Distribution Date, mail a notice
thereof in writing to the registered holders of the Right
Certificates. Failure to give any notice provided for in this
Section 21, however, or any defect therein, shall
not affect the legality or validity of the resignation or
removal of the Rights Agent or the appointment of the successor
Rights Agent, as the case may be.
Section 22. Issuance
of New Right Certificates. Notwithstanding
any of the provisions of this Rights Agreement or of the Rights
to the contrary, the Company may, at its option, issue new Right
Certificates evidencing Rights in such forms as may be approved
by its Board of Directors to reflect any adjustment or change in
the Purchase Price and the number or kind or class of shares or
other securities or property purchasable under the Right
Certificates made in accordance with the provisions of this
Rights Agreement. In addition, in connection with the issuance
or sale of Common Stock following the Distribution Date and
prior to the Expiration Date, the Company may with respect to
shares of Common Stock so issued or sold pursuant to
(i) the exercise of stock options, (ii) under any
employee plan or arrangement, (iii) the exercise,
conversion or exchange of securities, notes or debentures issued
by the Company or (iv) a contractual obligation of the
Company, in each case existing prior to the Distribution Date,
issue Right Certificates representing the appropriate number of
Rights in connection with such issuance or sale.
Section 23. Redemption. (a) The
Board of Directors of the Company may, at any time prior to such
time as any Person first becomes an Acquiring Person, redeem all
but not less than all the then-outstanding Rights at a
redemption price of $0.01 per Right, appropriately adjusted to
reflect any stock split, stock dividend or similar transaction
occurring after the date hereof (the
Redemption Price). The redemption of the
Rights may be made effective at such time, on such basis and
with such conditions as the Board of Directors in its sole
discretion may establish. The Company may, at its option, pay
the Redemption Price in cash, shares of Common Stock (based
on the current market price of the Common Stock at the time of
redemption as determined pursuant to
Section 11(d)(i) hereof) or any other form of
consideration deemed appropriate by the Board of Directors.
(b) Immediately upon the action of the Board of Directors
ordering the redemption of the Rights pursuant to paragraph
(a) of this Section 23 (or at such later time
as the Board of Directors may establish for the effectiveness of
such redemption), and without any further action and without any
notice, the right to exercise the Rights will terminate and the
only right thereafter of the holders of Rights shall be to
receive the Redemption Price. The Company shall promptly
give public notice of any such redemption; provided,
however, that the failure to give, or any defect in, any
such notice shall not affect the validity of such redemption.
Within 10 days after such action of the Board of Directors
ordering the redemption of the Rights (or such later time as the
Board of Directors may establish for the effectiveness of such
redemption), the Company shall mail a notice of redemption to
all the holders of the then-outstanding Rights at their last
addresses as they appear upon the registry books of the Rights
Agent or, prior to the Distribution Date, on the registry books
of the transfer agent for the Common Stock. Any notice which is
mailed in the manner herein provided shall be deemed given,
whether or not the holder receives the notice. Each such notice
of redemption shall state the method by which the payment of the
Redemption Price will be made. The failure to give notice
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required by this Section 23(b) or any defect therein
shall not affect the validity of the action taken by the Company.
(c) In the case of a redemption under
Section 23(a) hereof, the Company may, at its
option, discharge all of its obligations with respect to the
Rights by (i) issuing a press release announcing the manner
of redemption of the Rights and (ii) mailing payment of the
Redemption Price to the registered holders of the Rights at
their last addresses as they appear on the registry books of the
Rights Agent or, prior to the Distribution Date, on the registry
books of the transfer agent of the Common Stock, and upon such
action, all outstanding Right Certificates shall be void without
any further action by the Company.
Section 24. Exchange. (a) The
Board of Directors of the Company may, at its option, at any
time after any Person first becomes an Acquiring Person,
exchange all or part of the then-outstanding Rights (which shall
not include Rights that have not become effective or that have
become void pursuant to the provisions of
Section 11(a)(ii) hereof) for shares of Common Stock
at an exchange ratio of one share of Common Stock (or
one-thousandth of a share of Preferred Stock) per Right,
appropriately adjusted to reflect any stock split, stock
dividend or similar transaction occurring after the date hereof
(such amount per Right being hereinafter referred to as the
Exchange Ratio). Notwithstanding the
foregoing, the Board of Directors shall not be empowered to
effect such exchange at any time after an Acquiring Person
becomes the Beneficial Owner of shares of Common Stock
aggregating 50% or more of the shares of Common Stock then
outstanding. From and after the occurrence of an event specified
in Section 13(a) hereof, any Rights that theretofore
have not been exchanged pursuant to this
Section 24(a) shall thereafter be exercisable only
in accordance with Section 13 and may not be
exchanged pursuant to this Section 24(a). The
exchange of the Rights by the Board of Directors may be made
effective at such time, on such basis and with such conditions
as the Board of Directors in its sole discretion may establish.
Prior to effecting an exchange pursuant to this Section 24,
the Board of Directors may direct the Company to enter into a
Trust Agreement in such form and with such terms as the
Board of Directors shall then approve (the
Trust Agreement). If the Board of
Directors so directs, the Company shall enter into the
Trust Agreement and shall issue to the trust created by
such agreement (the Trust) all of the shares
of Common Stock issuable pursuant to the exchange, and all
stockholders entitled to receive shares pursuant to the exchange
shall be entitled to receive such shares (and any dividends or
distributions made thereon after the date on which such shares
are deposited in the Trust) only from the Trust and solely upon
compliance with the relevant terms and provisions of the
Trust Agreement.
(b) Immediately upon the effectiveness of the action of the
Board of Directors of the Company ordering the exchange of any
Rights pursuant to paragraph (a) of this
Section 24 and without any further action and
without any notice, the right to exercise such Rights shall
terminate and the only right thereafter of a holder of such
Rights shall be to receive that number of shares of Common Stock
equal to the number of such Rights held by such holder
multiplied by the Exchange Ratio. The Company shall promptly
give public notice of any such exchange and shall promptly mail
a notice of any such exchange to all of the holders of the
Rights so exchanged at their last addresses as they appear upon
the registry books of the Rights Agent; provided,
however, that the failure to give, or any defect in, such
notice shall not affect the validity of such exchange. Any
notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice.
Each such notice of exchange will state the method by which the
exchange of the shares of Common Stock for Rights will be
effected and, in the event of any partial exchange, the number
of Rights which will be exchanged. Any partial exchange shall be
effected pro rata based on the number of Rights (other than
Rights which have become void pursuant to the provisions of
Section 11(a)(ii) hereof) held by each holder of
Rights.
(c) The Company may at its option substitute and, in the
event that there shall not be sufficient shares of Common Stock
issued but not outstanding or authorized but unissued (and
unreserved) to permit an exchange of Rights as contemplated in
accordance with this Section 24, the Company shall
substitute to the extent of such insufficiency, for each share
of Common Stock that would otherwise be issuable upon exchange
of a Right, a number of shares of Preferred Stock or fractions
thereof (or equivalent preferred shares as such term is defined
in Section 11(b)) such that the current per share
market price (determined pursuant to Section 11(d)
hereof) of one share of Preferred Stock (or equivalent preferred
share) multiplied by such number or fraction
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is equal to the current per share market price of one share of
Common Stock (determined pursuant to Section 11(d)
hereof) as of the date of such exchange.
Section 25. Notice
of Certain Events. (a) In case the
Company shall at any time after the earlier of the Distribution
Date or the Stock Acquisition Date propose (i) to pay any
dividend payable in stock of any class to the holders of its
Preferred Stock or to make any other distribution to the holders
of its Preferred Stock (other than a regular quarterly cash
dividend), (ii) to offer to the holders of its Preferred
Stock rights or warrants to subscribe for or to purchase any
additional shares of Preferred Stock or shares of stock of any
class or any other securities, rights or options, (iii) to
effect any reclassification of its Preferred Stock (other than a
reclassification involving only the subdivision or combination
of outstanding Preferred Stock), (iv) to effect the
liquidation, dissolution or winding up of the Company, or
(v) to declare or pay any dividend on the Common Stock
payable in Common Stock or to effect a subdivision, combination
or consolidation of the Common Stock (by reclassification or
otherwise than by payment of dividends in Common Stock), then,
in each such case, the Company shall give to each holder of a
Right Certificate, in accordance with Section 26
hereof, a notice of such proposed action, which shall specify
the record date for the purposes of such stock dividend, or
distribution or offering of rights or warrants, or the date on
which such liquidation, dissolution, reclassification,
subdivision, combination, consolidation or winding up is to take
place and the date of participation therein by the holders of
the Common Stock
and/or
Preferred Stock, if any such date is to be fixed, and such
notice shall be so given in the case of any action covered by
clause (i) or (ii) above at least 10 days prior
to the record date for determining holders of the Preferred
Stock for purposes of such action, and in the case of any such
other action, at least 10 days prior to the date of the
taking of such proposed action or the date of participation
therein by the holders of the Common Stock
and/or
Preferred Stock, whichever shall be the earlier.
(b) In case any event described in
Section 11(a)(ii) or Section 13 shall
occur then the Company shall as soon as practicable thereafter
give to each holder of a Right Certificate (or if occurring
prior to the Distribution Date, the holders of the Common Stock)
in accordance with Section 26 hereof, a notice of
the occurrence of such event, which notice shall describe such
event and the consequences of such event to holders of Rights
under Section 11(a)(ii) and Section 13
hereof.
(c) The failure to give notice required by this
Section 25 or any defect therein shall not affect
the validity of the action taken by the Company or the vote upon
any such action.
Section 26. Notices. Notices
or demands authorized by this Rights Agreement to be given or
made by the Rights Agent or by the holder of any Right
Certificate to or on the Company shall be sufficiently given or
made if sent by first-class mail, postage prepaid, addressed
(until another address is filed in writing with the Rights
Agent) as follows:
Conseco, Inc.
11825 North Pennsylvania Street
Carmel, Indiana 46032
Attn: Chief Financial Officer
Subject to the provisions of Section 21 hereof, any
notice or demand authorized by this Rights Agreement to be given
or made by the Company or by the holder of any Right Certificate
to or on the Rights Agent shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until
another address is filed in writing with the Company) as follows:
American Stock Transfer & Trust Company, LLC
59 Maiden Lane,
New York, NY 10038
Attn: Corporate Trust Department
Notices or demands authorized by this Rights Agreement to be
given or made by the Company or the Rights Agent to the holder
of any Right Certificate shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed to such
holder at the address of such holder as shown on the registry
books of the Company.
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Section 27. Supplements
and Amendments. Except as otherwise provided
in this Section 27, for so long as the Rights are
then redeemable, the Company may in its sole and absolute
discretion, and the Rights Agent shall if the Company so
directs, supplement or amend any provision of this Rights
Agreement in any respect without the approval of any holders of
the Rights. At any time when the Rights are no longer
redeemable, except as otherwise provided in this
Section 27, the Company may, and the Rights Agent
shall, if the Company so directs, supplement or amend this
Rights Agreement without the approval of any holders of Rights
in order to (i) cure any ambiguity, (ii) correct or
supplement any provision contained herein which may be defective
or inconsistent with any other provisions herein,
(iii) shorten or lengthen any time period hereunder, or
(iv) change or supplement the provisions hereunder in any
manner which the Company may deem necessary or desirable;
provided, however, that no such supplement or
amendment shall adversely affect the interests of the holders of
Rights as such (other than an Acquiring Person or an Affiliate
or Associate of an Acquiring Person), and no such amendment may
cause the Rights again to become redeemable or cause this Rights
Agreement again to become amendable other than in accordance
with this sentence. Notwithstanding anything contained in this
Rights Agreement to the contrary, no supplement or amendment
shall be made which decreases the Redemption Price. Upon
the delivery of a certificate from an appropriate officer of the
Company which states that the supplement or amendment is in
compliance with the terms of this Section 27, the
Rights Agent shall execute such supplement or amendment;
provided, that any supplement or amendment that does not
amend Section 18, 19, 20 or 21
hereof in a manner adverse to the Rights Agent shall become
effective immediately upon execution by the Company, whether or
not also executed by the Rights Agent.
Section 28. Successors. All
the covenants and provisions of this Rights Agreement by or for
the benefit of the Company or the Rights Agent shall bind and
inure to the benefit of their respective successors and assigns
hereunder.
Section 29. Benefits
of this Rights Agreement. Nothing in this
Rights Agreement shall be construed to give to any Person other
than the Company, the Rights Agent and the registered holders of
the Right Certificates (and, prior to the Distribution Date, the
Common Stock) any legal or equitable right, remedy or claim
under this Rights Agreement; but this Rights Agreement shall be
for the sole and exclusive benefit of the Company, the Rights
Agent and the registered holders of the Right Certificates (and,
prior to the Distribution Date, the Common Stock).
Section 30. Determinations
and Actions by the Board of Directors. The
Board of Directors of the Company shall have the exclusive power
and authority to administer this Rights Agreement and to
exercise the rights and powers specifically granted to the Board
of Directors of the Company or to the Company, or as may be
necessary or advisable in the administration of this Rights
Agreement, including, without limitation, the right and power to
(i) interpret the provisions of this Rights Agreement and
(ii) make all determinations deemed necessary or advisable
for the administration of this Rights Agreement (including,
without limitation, a determination to redeem or not redeem the
Rights or to amend this Rights Agreement). All such actions,
calculations, interpretations and determinations that are done
or made by the Board of Directors of the Company in good faith,
shall be final, conclusive and binding on the Company, the
Rights Agent, the holders of the Rights, as such, and all other
parties.
Section 31. Severability. If
any term, provision, covenant or restriction of this Rights
Agreement or applicable to this Rights Agreement is held by a
court of competent jurisdiction or other authority to be
invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Rights Agreement
shall remain in full force and effect and shall in no way be
affected, impaired or invalidated; provided,
however, that notwithstanding anything in this Agreement
to the contrary, if any such term, provision, covenant or
restriction is held by such court or authority to be invalid,
void or unenforceable and the Board determines in its good faith
judgment that severing the invalid language from this Agreement
would adversely affect the purpose or effect of this Agreement,
the right of redemption set forth in Section 23
hereof shall be reinstated (with prompt notice to the Rights
Agent) and shall not expire until the close of business on the
tenth Business Day following the date of such determination by
the Board. Without limiting the foregoing, if any provision
requiring a specific group of Directors of the Company to act is
held by any court of competent jurisdiction or other authority
to be invalid, void or unenforceable, such determination shall
then be
A-24
made by the Board in accordance with applicable law and the
Companys Certificate of Incorporation and Bylaws.
Section 32. Governing
Law. This Rights Agreement and each Right
Certificate issued hereunder shall be deemed to be a contract
made under the laws of the State of Delaware and for all
purposes shall be governed by and construed in accordance with
the laws of such State applicable to contracts to be made and
performed entirely within such State.
Section 33. Counterparts. This
Rights Agreement may be executed in any number of counterparts
and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together
constitute but one and the same instrument.
Section 34. Descriptive
Headings. Descriptive headings of the several
sections of this Rights Agreement are inserted for convenience
only and shall not control or affect the meaning or construction
of any of the provisions hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Rights
Agreement to be duly executed and attested, all as of the day
and year first above written.
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CONSECO, INC.
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Attest:
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/s/ Karl
W. Kirdig
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By:
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/s/ Thomas
D. Barta
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Secretary
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Name:
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Thomas D. Barta
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Title:
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Senior Vice President
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AMERICAN STOCK TRANSFER & TRUST COMPANY, LLC
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Attest:
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/s/ Susan
Silber
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By:
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/s/ Herbert
J. Lemmer
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Assistant Secretary
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Name:
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Herbert J. Lemmer
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Title:
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Vice President
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A-26
EXHIBIT A
FORM
OF
CERTIFICATE OF DESIGNATIONS
OF
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
OF
CONSECO, INC.
(Pursuant to Section 151 of the
General Corporation Law of the State of Delaware)
Conseco, Inc., a corporation organized and existing under the
General Corporation Law of the State of Delaware (the
Company), hereby certifies that the following
resolution was duly adopted by the Board of Directors of the
Company (hereinafter being referred to as the Board of
Directors or the Board) as required
by Section 151 of the General Corporation Law of the State
of Delaware on January 20, 2009:
RESOLVED, that pursuant to the authority vested in the Board of
Directors of the Company in accordance with the provisions of
the Companys Amended and Restated Certificate of
Incorporation, (hereinafter being referred to as the
Certificate of Incorporation), the Board of
Directors hereby creates a series of preferred stock, par value
$0.01 per share, of the Company, to be designated the
Series A Junior Participating Preferred Stock
and hereby adopts the resolution establishing the designations,
number of shares, preferences, voting powers and other rights,
and the restrictions and limitations thereof, of the shares of
such series as set forth below:
Section 1. Designation
and Amount. The shares of such series shall
be designated as Series A Junior Participating
Preferred Stock (the Series A Preferred
Stock) and the number of shares constituting the
Series A Preferred Stock shall be 1,000,000. Such number of
shares may be increased or decreased by resolution of the Board
of Directors; provided, that no decrease shall reduce the
number of shares of Series A Preferred Stock to a number
less than the number of shares then outstanding plus the number
of shares reserved for issuance upon the exercise of outstanding
options, rights or warrants or upon the conversion of any
outstanding securities issued by the Company convertible into
Series A Preferred Stock.
Section 2. Dividends
and Distributions
(A) Subject to the rights of the holders of any shares of
any series of Preferred Stock of the Company (the
Preferred Stock) (or any similar stock)
ranking prior and superior to the Series A Preferred Stock
with respect to dividends, the holders of shares of
Series A Preferred Stock, in preference to the holders of
Common Stock, par value $0.01 per share, of the Company (the
Common Stock) and of any other stock of the
Company ranking junior to the Series A Preferred Stock,
shall be entitled to receive, when, as and if declared by the
Board of Directors out of funds legally available for the
purpose, quarterly dividends payable in cash on the last day of
January, April, July, and October in each year (each such date
being referred to herein as a Dividend Payment
Date), commencing on the first Dividend Payment Date
after the first issuance of a share or fraction of a share of
Series A Preferred Stock (the Issue
Date), in an amount per share (rounded to the nearest
cent) equal to the greater of (a) $1 or (b) subject to
the provision for adjustment hereinafter set forth, 1,000 times
the aggregate per share amount of all cash dividends, and 1,000
times the aggregate per share amount (payable in kind) of all
non-cash dividends or other distributions other than a dividend
payable in shares of Common Stock, declared on the Common Stock
since the immediately preceding Dividend Payment Date or, with
respect to the first Dividend Payment Date, since the first
issuance of any share or fraction of a share of Series A
Preferred Stock. In the event the Company shall at any time
after the Issue Date declare and pay any dividend on the Common
Stock payable in shares of Common Stock, or effect a subdivision
or combination or consolidation of the outstanding shares of
Common Stock (by reclassification or otherwise than by payment
of a dividend in shares of Common Stock) into a greater or
lesser number of shares of Common Stock, then in each such case
the amount to which holders of shares of Series A Preferred
Stock were entitled immediately prior to such event under
clause (b) of the preceding sentence shall be
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adjusted by multiplying such amount by a fraction, the numerator
of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding
immediately prior to such event.
(B) The Company shall declare a dividend or distribution on
the Series A Preferred Stock as provided in paragraph
(A) of this Section immediately after it declares a
dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock); provided
that, in the event no dividend or distribution shall have been
declared on the Common Stock during the period between any
Dividend Payment Date and the next subsequent Dividend Payment
Date, a dividend of $1 per share on the Series A Preferred
Stock shall nevertheless be payable, when, as and if declared,
on such subsequent Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative,
whether or not earned or declared, on outstanding shares of
Series A Preferred Stock from the Dividend Payment Date
next preceding the date of issue of such shares, unless the date
of issue of such shares is prior to the record date for the
first Dividend Payment Date, in which case dividends on such
shares shall begin to accrue from the date of issue of such
shares, or unless the date of issue is a Dividend Payment Date
or is a date after the record date for the determination of
holders of shares of Series A Preferred Stock entitled to
receive a quarterly dividend and before such Dividend Payment
Date, in either of which events such dividends shall begin to
accrue and be cumulative from such Dividend Payment Date.
Accrued but unpaid dividends shall not bear interest. Dividends
paid on the shares of Series A Preferred Stock in an amount
less than the total amount of such dividends at the time accrued
and payable on such shares shall be allocated pro rata on a
share-by-share
basis among all such shares at the time outstanding. The Board
of Directors may fix a record date for the determination of
holders of shares of Series A Preferred Stock entitled to
receive payment of a dividend or distribution declared thereon,
which record date shall be not more than 60 days prior to
the date fixed for the payment thereof.
Section 3. Voting
Rights. The holders of shares of
Series A Preferred Stock shall have the following voting
rights:
(A) Subject to the provision for adjustment hereinafter set
forth and except as otherwise provided in the Certificate of
Incorporation or required by law, each share of Series A
Preferred Stock shall entitle the holder thereof to 1,000 votes
on all matters upon which the holders of the Common Stock of the
Company are entitled to vote. In the event the Company shall at
any time after the Issue Date declare or pay any dividend on the
Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding
shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater
or lesser number of shares of Common Stock, then in each such
case the number of votes per share to which holders of shares of
Series A Preferred Stock were entitled immediately prior to
such event shall be adjusted by multiplying such number by a
fraction, the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.
(B) Except as otherwise provided herein, in the Certificate
of Incorporation or in any other Certificate of Designations
creating a series of Preferred Stock or any similar stock, and
except as otherwise required by law, the holders of shares of
Series A Preferred Stock and the holders of shares of
Common Stock and any other capital stock of the Company having
general voting rights shall vote together as one class on all
matters submitted to a vote of stockholders of the Company.
(C) Except as set forth herein, or as otherwise provided by
law, holders of Series A Preferred Stock shall have no
special voting rights and their consent shall not be required
(except to the extent they are entitled to vote with holders of
Common Stock as set forth herein) for taking any corporate
action.
(D) If, at the time of any annual meeting of stockholders
for the election of directors, the equivalent of six quarterly
dividends (whether or not consecutive) payable on any share or
shares of Series A Preferred Stock are in default, the
number of directors constituting the Board of Directors of the
Company shall be increased by two. In addition to voting
together with the holders of Common Stock for the election of
other directors of the Company, the holders of record of the
Series A Preferred Stock,
A-28
voting separately as a class to the exclusion of the holders of
Common Stock shall be entitled at said meeting of stockholders
(and at each subsequent annual meeting of stockholders), unless
all dividends in arrears on the Series A Preferred Stock
have been paid or declared and set apart for payment prior
thereto, to vote for the election of two directors of the
Company, the holders of any Series A Preferred Stock being
entitled to cast a number of votes per share of Series A
Preferred Stock as is specified in paragraph (A) of this
Section 3. Each such additional director shall serve until
the next annual meeting of stockholders for the election of
directors, or until his successor shall be elected and shall
qualify, or until his right to hold such office terminates
pursuant to the provisions of this Section 3(D). Until the
default in payments of all dividends which permitted the
election of said directors shall cease to exist, any director
who shall have been so elected pursuant to the provisions of
this Section 3(D) may be removed at any time, without
cause, only by the affirmative vote of the holders of the shares
of Series A Preferred Stock at the time entitled to cast a
majority of the votes entitled to be cast for the election of
any such director at a special meeting of such holders called
for that purpose, and any vacancy thereby created may be filled
by the vote of such holders. If and when such default shall
cease to exist, the holders of the Series A Preferred Stock
shall be divested of the foregoing special voting rights,
subject to revesting in the event of each and every subsequent
like default in payments of dividends. Upon the termination of
the foregoing special voting rights, the terms of office of all
persons who may have been elected directors pursuant to said
special voting rights shall forthwith terminate, and the number
of directors constituting the Board of Directors shall be
reduced by two. The voting rights granted by this
Section 3(D) shall be in addition to any other voting
rights granted to the holders of the Series A Preferred
Stock in this Section 3.
Section 4. Certain
Restrictions.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Preferred Stock as
provided in Section 2 are in arrears, thereafter and until
all accrued and unpaid dividends and distributions, whether or
not earned or declared, on shares of Series A Preferred
Stock outstanding shall have been paid in full, the Company
shall not:
(i) declare or pay dividends, or make any other
distributions, on any shares of stock ranking junior (either as
to dividends or upon liquidation, dissolution or winding up) to
the Series A Preferred Stock;
(ii) declare or pay dividends, or make any other
distributions, on any shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or
winding up) with the Series A Preferred Stock, except
dividends paid ratably on the Series A Preferred Stock and
all such parity stock on which dividends are payable or in
arrears in proportion to the total amounts to which the holders
of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Series A Preferred Stock, provided that the Company may at
any time redeem, purchase or otherwise acquire shares of any
such junior stock in exchange for shares of any stock of the
Company ranking junior (as to dividends and upon dissolution,
liquidation or winding up) to the Series A Preferred Stock
or rights, warrants or options to acquire such junior
stock; or
(iv) redeem or purchase or otherwise acquire for
consideration any shares of Series A Preferred Stock, or
any shares of stock ranking on a parity (either as to dividends
or upon liquidation, dissolution or winding up) with the
Series A Preferred Stock, except in accordance with a
purchase offer made in writing or by publication (as determined
by the Board of Directors) to all holders of such shares upon
such terms as the Board of Directors, after consideration of the
respective annual dividend rates and other relative rights and
preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable
treatment among the respective series or classes.
(B) The Company shall not permit any subsidiary of the
Company to purchase or otherwise acquire for consideration any
shares of stock of the Company unless the Company could, under
paragraph (A) of this Section 4, purchase or otherwise
acquire such shares at such time and in such manner.
A-29
Section 5. Reacquired
Shares. Any shares of Series A Preferred
Stock purchased or otherwise acquired by the Company in any
manner whatsoever shall be retired and cancelled promptly after
the acquisition thereof. All such shares shall upon their
retirement become authorized but unissued shares of Preferred
Stock and may be reissued as part of a new series of Preferred
Stock to be created by resolution or resolutions of the Board of
Directors, subject to any conditions and restrictions on
issuance set forth herein.
Section 6. Liquidation,
Dissolution or Winding Up. Upon any
liquidation, dissolution or winding up of the Company, no
distribution shall be made (A) to the holders of the Common
Stock or of shares of any other stock of the Company ranking
junior, upon liquidation, dissolution or winding up, to the
Series A Preferred Stock unless, prior thereto, the holders
of shares of Series A Preferred Stock shall have received
$1,000 per share, plus an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not earned or
declared, to the date of such payment, provided that the holders
of shares of Series A Preferred Stock shall be entitled to
receive an aggregate amount per share, subject to the provision
for adjustment hereinafter set forth, equal to 1,000 times the
aggregate amount to be distributed per share to holders of
shares of Common Stock, or (B) to the holders of shares of
stock ranking on a parity upon liquidation, dissolution or
winding up with the Series A Preferred Stock, except
distributions made ratably on the Series A Preferred Stock
and all such parity stock in proportion to the total amounts to
which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up. In the event, however,
that there are not sufficient assets available to permit payment
in full of the Series A liquidation preference and the
liquidation preferences of all other classes and series of stock
of the Company, if any, that rank on a parity with the
Series A Preferred Stock in respect thereof, then the
assets available for such distribution shall be distributed
ratably to the holders of the Series A Preferred Stock and
the holders of such parity shares in the proportion to their
respective liquidation preferences. In the event the Company
shall at any time after the Issue Date declare or pay any
dividend on the Common Stock payable in shares of Common Stock,
or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common
Stock, then in each such case the aggregate amount to which
holders of shares of Series A Preferred Stock were entitled
immediately prior to such event under the proviso in
clause (A) of the preceding sentence shall be adjusted by
multiplying such amount by a fraction the numerator of which is
the number of shares of Common Stock outstanding immediately
after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior
to such event.
Neither the merger or consolidation of the Company into or with
another entity nor the merger or consolidation of any other
entity into or with the Company (nor the sale of all or
substantially all of the assets of the Company) shall be deemed
to be a liquidation, dissolution or winding up of the Company
within the meaning of this Section 6.
Section 7. Consolidation,
Merger, etc. In case the Company shall enter
into any consolidation, merger, combination or other transaction
in which the shares of Common Stock are converted into,
exchanged for or changed into other stock or securities, cash
and/or any
other property, then in any such case each share of
Series A Preferred Stock shall at the same time be
similarly converted into, exchanged for or changed into an
amount per share (subject to the provision for adjustment
hereinafter set forth) equal to 1,000 times the aggregate amount
of stock, securities, cash
and/or any
other property (payable in kind), as the case may be, into which
or for which each share of Common Stock is converted, exchanged
or converted. In the event the Company shall at any time after
the Issue Date declare or pay any dividend on the Common Stock
payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a
dividend in shares of Common Stock) into a greater or lesser
number of shares of Common Stock, then in each such case the
amount set forth in the preceding sentence with respect to the
conversion, exchange or change of shares of Series A
Preferred Stock shall be adjusted by multiplying such amount by
a fraction, the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.
Section 8. No
Redemption. The shares of Series A
Preferred Stock shall not be redeemable from any holder.
A-30
Section 9. Rank. The
Series A Preferred Stock shall rank, with respect to the
payment of dividends and the distribution of assets upon
liquidation, dissolution or winding up of the Company, junior to
all other series of Preferred Stock and senior to the Common
Stock.
Section 10. Amendment. If
any proposed amendment to the Certificate of Incorporation
(including this Certificate of Designations) would alter, change
or repeal any of the preferences, powers or special rights given
to the Series A Preferred Stock so as to affect the
Series A Preferred Stock adversely, then the holders of the
Series A Preferred Stock shall be entitled to vote
separately as a class upon such amendment, and the affirmative
vote of two-thirds of the outstanding shares of the
Series A Preferred Stock, voting separately as a class,
shall be necessary for the adoption thereof, in addition to such
other vote as may be required by the General Corporation Law of
the State of Delaware.
Section 11. Fractional
Shares. Series A Preferred Stock may be
issued in fractions of a share that shall entitle the holder, in
proportion to such holders fractional shares, to exercise
voting rights, receive dividends, participate in distributions
and to have the benefit of all other rights of holders of
Series A Preferred Stock.
A-31
IN WITNESS WHEREOF, this Certificate of Designations is executed
on behalf of the Company by its and attested by its Secretary
this 20th day of January, 2009.
Name:
Attest:
Secretary
A-32
EXHIBIT B
FORM OF
RIGHT CERTIFICATE
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Certificate
No. R-
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Rights
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NOT EXERCISABLE AFTER JANUARY 20, 20012, OR SUCH EARLIER DATE AS
PROVIDED BY THE RIGHTS AGREEMENT OR IF REDEMPTION OR
EXCHANGE OCCURS. THE RIGHTS ARE SUBJECT TO REDEMPTION AT
$0.01 PER RIGHT AND TO EXCHANGE ON THE TERMS SET FORTH IN THE
RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN
THE RIGHTS AGREEMENT, RIGHTS OWNED BY OR TRANSFERRED TO ANY
PERSON WHO IS OR BECOMES AN ACQUIRING PERSON (AS DEFINED IN THE
RIGHTS AGREEMENT) AND CERTAIN TRANSFEREES THEREOF WILL BECOME
NULL AND VOID AND WILL NO LONGER BE TRANSFERABLE.
Right
Certificate
CONSECO,
INC.
This certifies that
[ ]
or registered assigns, is the registered owner of the number of
Rights set forth above, each of which entitles the owner
thereof, subject to the terms, provisions and conditions of the
Section 382 Rights Agreement, dated as of January 20,
2009, as the same may be amended from time to time (the
Rights Agreement), between Conseco, Inc., a
Delaware corporation (the Company), and
American Stock Transfer & Trust Company, LLC (the
Rights Agent), to purchase from the Company
at any time after the Distribution Date (as such term is defined
in the Rights Agreement) and prior to 5:00 P.M., New York
City time, on January 20, 2012, or such earlier date as
provided by the Rights Agreement at the office or agency of the
Rights Agent designated for such purpose, or of its successor as
Rights Agent, one-thousandth of a fully paid non-assessable
share of Junior Participating Preferred Stock, par value $0.01
per share (the Preferred Stock), of the
Company, at a purchase price of $20.00 per one-thousandth of a
share of Preferred Stock (the Purchase
Price), upon presentation and surrender of this Right
Certificate with the Form of Election to Purchase duly executed.
The number of Rights evidenced by this Rights Certificate (and
the number of one one-thousandths of a share of Preferred Stock
which may be purchased upon exercise hereof) set forth above,
and the Purchase Price set forth above, are the number and
Purchase Price as of January 30, 2009, based on the
Preferred Stock as constituted at such date. As provided in the
Rights Agreement, the Purchase Price, the number of one
one-thousandths of a share of Preferred Stock (or other
securities or property) which may be purchased upon the exercise
of the Rights and the number of Rights evidenced by this Right
Certificate are subject to modification and adjustment upon the
happening of certain events.
This Right Certificate is subject to all of the terms,
provisions and conditions of the Rights Agreement, which terms,
provisions and conditions are hereby incorporated herein by
reference and made a part hereof and to which Rights Agreement
reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities
hereunder of the Rights Agent, the Company and the holders of
the Right Certificates. Copies of the Rights Agreement are on
file at the principal executive offices of the Company. The
Company will mail to the holder of this Right Certificate a copy
of the Rights Agreement without charge after receipt of a
written request therefor.
This Right Certificate, with or without other Right
Certificates, upon surrender at the office or agency of the
Rights Agent designated for such purpose, may be exchanged for
another Right Certificate or Right Certificates of like tenor
and date evidencing Rights entitling the holder to purchase a
like aggregate number of shares of Preferred Stock as the Rights
evidenced by the Right Certificate or Right Certificates
surrendered shall have entitled such holder to purchase. If this
Right Certificate shall be exercised in part, the holder shall
be entitled to receive upon surrender hereof another Right
Certificate or Right Certificates for the number of whole Rights
not exercised.
A-33
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate (i) may be redeemed by the
Company at a redemption price of $0.01 per Right or
(ii) may be exchanged in whole or in part for shares of
Preferred Stock or shares of the Companys Common Stock,
par value $0.01 per share.
No fractional shares of Preferred Stock or Common Stock will be
issued upon the exercise or exchange of any Right or Rights
evidenced hereby (other than fractions of Preferred Stock which
are integral multiples of one one-thousandth of a share of
Preferred Stock, which may, at the election of the Company, be
evidenced by depositary receipts), but in lieu thereof a cash
payment will be made, as provided in the Rights Agreement.
No holder of this Right Certificate, as such, shall be entitled
to vote or receive dividends or be deemed for any purpose the
holder of the Preferred Stock or of any other securities of the
Company which may at any time be issuable on the exercise or
exchange hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder
hereof, as such, any of the rights of a stockholder of the
Company or any right to vote for the election of directors or
upon any matter submitted to stockholders at any meeting
thereof, or to give or withhold consent to any corporate action,
or to receive notice of meetings or other actions affecting
stockholders (except as provided in the Rights Agreement) or to
receive dividends or subscription rights, or otherwise, until
the Right or Rights evidenced by this Right certificate shall
have been exercised or exchanged as provided in the Rights
Agreement.
This Right Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights
Agent.
WITNESS the facsimile signature of the proper officers of the
Company and its corporate seal. Dated as
of , .
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ATTEST:
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CONSECO, INC.
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By:
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By:
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Countersigned:
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,
as Rights Agent
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By:
Authorized
Signatory
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A-34
Form of
Reverse Side of Right Certificate
FORM OF
ASSIGNMENT
(To be
executed by the registered holder if such
holder desires to transfer the Right Certificate)
FOR VALUE
RECEIVED
hereby sells, assigns and transfer
unto
(Please print name and address of transferee)
Rights represented by this Right Certificate, together with all
right, title and interest therein, and does hereby irrevocably
constitute and
appoint
Attorney, to transfer said Rights on the books of the
within-named Company, with full power of substitution.
Dated: ,
Signature
Signature Guaranteed:
Signatures must be guaranteed by a bank, trust company, broker,
dealer or other eligible institution participating in a
recognized signature guarantee medallion program.
The undersigned hereby certifies that the Rights evidenced by
this Right Certificate are not beneficially owned by, were not
acquired by the undersigned from, and are not being sold,
assigned or transferred to, an Acquiring Person or an Affiliate
or Associate thereof (as defined in the Rights Agreement).
Signature
A-35
Form of
Reverse Side of Right
Certificate continued
FORM OF
ELECTION TO PURCHASE
(To be
executed if holder desires to exercise
Rights represented by the Rights Certificate)
To the Rights Agent:
The undersigned hereby irrevocably elects to
exercise
Rights represented by this Right Certificate to purchase the
shares of Preferred Stock (or other securities or property)
issuable upon the exercise of such Rights and requests that
certificates for such shares of Preferred Stock (or such other
securities) be issued in the name of:
(Please print name and address)
If such number of Rights shall not be all the Rights evidenced
by this Right Certificate, a new Right Certificate for the
balance remaining of such Rights shall be registered in the name
of and delivered to:
Please insert social security
or other identifying
number:
(Please print name and address)
Dated: ,
Signature
(Signature must conform to holder
specified on Right Certificate)
Signature Guaranteed:
Signatures must be guaranteed by a bank, trust company, broker,
dealer or other eligible institution participating in a
recognized signature guarantee medallion program.
The undersigned hereby certifies that the Rights evidenced by
this Right Certificate are not beneficially owned by, were not
acquired by the undersigned from, and are not being sold,
assigned or transferred to, an Acquiring Person or an Affiliate
or Associate thereof (as defined in the Rights Agreement).
Signature
A-36
Form of
Reverse Side of Right
Certificate continued
NOTICE
The signature in the Form of Assignment or Form of Election to
Purchase, as the case may be, must conform to the name as
written upon the face of this Right Certificate in every
particular, without alteration or enlargement or any change
whatsoever.
In the event the certification set forth above in the Form of
Assignment or the Form of Election to Purchase, as the case may
be, is not completed, such Assignment or Election to Purchase
will not be honored.
A-37
EXHIBIT C
UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS
AGREEMENT, RIGHTS OWNED BY OR TRANSFERRED TO ANY PERSON WHO IS
OR BECOMES AN ACQUIRING PERSON (AS DEFINED IN THE RIGHTS
AGREEMENT) AND CERTAIN TRANSFEREES THEREOF WILL BECOME NULL AND
VOID AND WILL NO LONGER BE TRANSFERABLE.
SUMMARY
OF RIGHTS TO PURCHASE
Shares of Preferred Stock
On January 20, 2009 the Board of Directors of Conseco, Inc.
(the Company) declared a dividend of one
preferred share purchase right (a Right) for
each outstanding share of Common Stock, par value $0.01 per
share, of the Company (the Common Stock). The
dividend is payable on January 30, 2009 (the
Record Date) to the stockholders of record as
of the close of business on that date. Each Right entitles the
registered holder to purchase from the Company one
one-thousandth of a share of Series A Junior Participating
Preferred Stock, par value $0.01 per share (the
Preferred Stock) of the Company at a price of
$20.00 per one one-thousandth of a share of Preferred Stock (as
the same may be adjusted, the Purchase
Price). The description and terms of the Rights are
set forth in a Section 382 Rights Agreement dated as of
January 20, 2009 (as the same may be amended from time to
time, the Rights Agreement), between the
Company and American Stock Transfer &
Trust Company, LLC, as Rights Agent (the Rights
Agent).
The Rights Agreement is intended to help protect the
Companys tax net operating loss carryforwards. The Board
of Directors may redeem the Rights, as discussed more fully
below. The Rights Agreement is intended to act as a deterrent to
any person (other than an Exempted Entity (as defined below) or
any person who has the status of a 5% Shareholder (as defined
below) on the date of the Rights Agreement so long as such
person does not increase its ownership above an additional 1% of
Common Stock then outstanding) from becoming or obtaining the
right to become, a 5-percent shareholder (as such
term is used in Section 382 of the Internal Revenue Code of
1986, as amended (the Code), and the Treasury
Regulations promulgated thereunder) (a 5%
Shareholder), without the approval of the Board of
Directors.
Until the close of business on the earlier of (i) the tenth
business day after the first date of a public announcement that
a person (other than an Exempted Entity (as defined below) or
Grandfathered Persons (as defined below)) or group of affiliated
or associated persons (an Acquiring Person)
has become a 5% Shareholder or (ii) the tenth business day
(or such later date as may be determined by action of the Board
of Directors prior to such time as any person or group of
affiliated persons becomes an Acquiring Person) after the date
of commencement of, or the first public announcement of an
intention to commence, a tender offer or exchange offer, the
consummation of which would result in any Person (other than an
Exempted Entity) becoming an Acquiring Person (the earlier of
such dates being herein referred to as the Distribution
Date), the Rights will be evidenced by the shares of
Common Stock represented by the certificates for Common Stock or
uncertificated book entry shares outstanding as of the Record
Date, together with a copy of the summary of rights disseminated
in connection with the original dividend of Rights.
Exempted Entity shall mean
(1) the Company, (2) any Subsidiary (as defined below)
of the Company, (in the case of subclauses (1) and
(2) including, without limitation, in its fiduciary
capacity), (3) any employee benefit plan of the Company or
of any Subsidiary of the Company, (4) any entity or trustee
holding Common Stock for or pursuant to the terms of any such
plan or for the purpose of funding any such plan or funding
other employee benefits for employees of the Company or of any
Subsidiary of the Company or (5) any Person (together with
its Affiliates and Associates) whose status as a 5% Shareholder
will, in the sole judgment of the Board of Directors, not
jeopardize or endanger the availability to the Company of its
net operating loss carryforwards to be used to offset its
taxable income in such year or future years (but in the case of
any Person determined by the Board of Directors to be an
Exempted Entity pursuant to this subparagraph (5) only for
so long as such Persons status as a 5% Shareholder
continues not to jeopardize or endanger the availability of such
net operating loss carryforwards, as determined by the Board of
Directors in its good faith discretion).
A-38
Grandfathered Person shall mean any
Person who would otherwise qualify as an Acquiring Person as of
the date of this Rights Agreement, unless and until such time as
such Person after the date of this Rights Agreement acquires
beneficial ownership of additional shares of Common Stock
representing more than 1% of the shares of Common Stock then
outstanding.
The Rights Agreement provides that, until the Distribution Date
(or earlier expiration of the Rights), new Common Stock
certificates issued after the Record Date will contain a
notation incorporating the Rights Agreement by reference and,
with respect to any uncertificated book entry shares issued
after the Record Date, proper notice will be provided that
incorporates the Rights Agreement by reference. Until the
Distribution Date (or earlier redemption or expiration of the
Rights), the Rights will be transferable only in connection with
the transfer of Common Stock. Until the Distribution Date (or
earlier redemption or expiration of the Rights), the surrender
for transfer of any certificates for shares of Common Stock (or
uncertificated book entry shares) outstanding as of the Record
Date, even without a notation incorporating the Rights Agreement
by reference (or such notice, in the case of uncertificated book
entry shares) or a copy of this Summary of Rights, will also
constitute the transfer of the Rights associated with the shares
of Common Stock represented by such certificate or
uncertificated book entry shares, as the case may be. As soon as
practicable following the Distribution Date, separate
certificates evidencing the Rights (Right
Certificates) will be mailed to holders of record of
the Common Stock as of the close of business on the Distribution
Date and such separate Right Certificates alone will evidence
the Rights.
The Rights are not exercisable until the Distribution Date and
will expire at the earlier of (i) the close of business on
January 20, 2012, (ii) the first anniversary of
adoption of the Rights Agreement if shareholder approval of the
Rights Agreement has not been received by or on such date,
(iii) at the adjournment of the first annual meeting of the
stockholders of the Company following the date hereof if
stockholder approval of the Rights Agreement has not been
received prior to such time, (iv) the repeal of
Section 382 or any successor statute if the Board
determines that the Rights Agreement is no longer necessary for
the preservation of tax benefits or (v) the beginning of a
taxable year of the Company to which the Board determines that
no tax benefits may be carried forward (the Final
Expiration Date), subject to (x) the extension of
Rights Agreement by the Board of Directors by the amendment of
the Rights Agreement or (y) the redemption or exchange of
the Rights by the Company, as described below.
The Purchase Price payable, and the number of shares of
Preferred Stock or other securities or property issuable, upon
exercise of the Rights are subject to adjustment from time to
time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification
of, the Preferred Stock, (ii) upon the grant to holders of
the Preferred Stock of certain rights or warrants to subscribe
for or purchase Preferred Stock at a price, or securities
convertible into Preferred Stock with a conversion price, less
than the then-current market price of the Preferred Stock or
(iii) upon the distribution to holders of the Preferred
Stock of evidences of indebtedness or assets (excluding regular
periodic cash dividends or dividends payable in Preferred Stock)
or of subscription rights or warrants (other than those referred
to above).
The Rights are also subject to adjustment in the event of a
stock dividend on the Common Stock payable in shares of Common
Stock or subdivisions, consolidations or combinations of the
Common Stock occurring, in any such case, prior to the
Distribution Date.
Shares of Preferred Stock purchasable upon exercise of the
Rights will not be redeemable. Each share of Preferred Stock
will be entitled, when, as and if declared, to a minimum
preferential quarterly dividend payment of the greater of
(a) $1 per share and (b) an amount equal to 1,000
times the dividend declared per share of Common Stock. In the
event of liquidation, dissolution or winding up of the Company,
the holders of the Preferred Stock will be entitled to a minimum
preferential liquidation payment of $1,000 per share (plus any
accrued but unpaid dividends) but will be entitled to an
aggregate 1,000 times the payment made per share of Common
Stock. Each share of Preferred Stock will have 1,000 votes,
voting together with the Common Stock. Finally, in the event of
any merger, consolidation or other transaction in which shares
of Common Stock are converted or exchanged, each share of
Preferred Stock will be entitled to receive 1,000 times the
amount received per share of Common Stock. These rights are
protected by customary antidilution provisions.
A-39
Because of the nature of the Preferred Stocks dividend,
liquidation and voting rights, the value of the one
one-thousandth interest in a share of Preferred Stock
purchasable upon exercise of each Right should approximate the
value of one share of Common Stock.
In the event that any person or group of affiliated or
associated persons becomes an Acquiring Person, each holder of a
Right, other than Rights beneficially owned by the Acquiring
Person (which will thereupon become void), will thereafter have
the right to receive upon exercise of a Right and payment of the
Purchase Price, that number of shares of Common Stock having a
market value of two times the Purchase Price.
In the event that, after a person or group has become an
Acquiring Person, the Company is acquired in a merger or other
business combination transaction or 50% or more of its
consolidated assets or earning power are sold, proper provision
will be made so that each holder of a Right (other than Rights
beneficially owned by an Acquiring Person which will have become
void) will thereafter have the right to receive, upon the
exercise thereof at the then-current exercise price of the
Right, that number of shares of common stock of the person with
whom the Company has engaged in the foregoing transaction (or
its parent), which number of shares at the time of such
transaction will have a market value of two times the Purchase
Price.
At any time after any person or group becomes an Acquiring
Person and prior to the acquisition by such person or group of
50% or more of the outstanding shares of Common Stock or the
occurrence of an event described in the prior paragraph, the
Board of Directors of the Company may exchange the Rights (other
than Rights owned by such person or group which will have become
void), in whole or in part, at an exchange ratio of one share of
Common Stock, or a fractional share of Preferred Stock (or of a
share of a similar class or series of the Companys
preferred stock having similar rights, preferences and
privileges) of equivalent value, per Right (subject to
adjustment).
With certain exceptions, no adjustment in the Purchase Price
will be required until cumulative adjustments require an
adjustment of at least 1% in such Purchase Price. No fractional
shares of Preferred Stock will be issued (other than fractions
which are integral multiples of one one-thousandth of a share of
Preferred Stock, which may, at the election of the Company, be
evidenced by depositary receipts) and in lieu thereof, an
adjustment in cash will be made based on the market price of the
Preferred Stock on the last trading day prior to the date of
exercise.
At any time prior to the time an Acquiring Person becomes such,
the Board of Directors of the Company may redeem the Rights in
whole, but not in part, at a price of $0.01 per Right,
appropriately adjusted to reflect any stock split, stock
dividend or similar transaction occurring after the date of
adoption of the Rights Agreement (the
Redemption Price). The redemption of the
Rights may be made effective at such time, on such basis and
with such conditions as the Board of Directors in its sole
discretion may establish. Immediately upon any redemption of the
Rights, the right to exercise the Rights will terminate and the
only right of the holders of Rights will be to receive the
Redemption Price.
For so long as the Rights are then redeemable, the Company may,
except with respect to the Redemption Price, amend the
Rights Agreement in any manner. After the Rights are no longer
redeemable, the Company may, except with respect to the
Redemption Price, amend the Rights Agreement in any manner
that does not adversely affect the interests of holders of the
Rights.
Until a Right is exercised or exchanged, the holder thereof, as
such, will have no rights as a stockholder of the Company,
including, without limitation, the right to vote or to receive
dividends.
A copy of the Rights Agreement has been filed with the
Securities and Exchange Commission as an Exhibit to a
Registration Statement on
Form 8-A
dated January 20, 2009. A copy of the Rights Agreement is
available free of charge from the Company. This summary
description of the Rights does not purport to be complete and is
qualified in its entirety by reference to the Rights Agreement,
as the same may be amended from time to time, which is hereby
incorporated herein by reference.
A-40
Annex B
CONSECO,
INC.
AMENDED
AND RESTATED LONG-TERM INCENTIVE PLAN
(as Amended and Restated Effective March 31,
2009)
CONSECO,
INC.
AMENDED AND RESTATED LONG-TERM INCENTIVE PLAN
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Page
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1.
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Purpose
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B-1
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2.
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Definitions
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B-1
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3.
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Administration
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4.
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Stock Subject to Plan
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B-3
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5.
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Eligibility; Per-Person Award Limitations
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B-4
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6.
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Specific Terms of Awards
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B-5
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7.
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Performance-Based Compensation
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B-8
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8.
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Certain Provisions Applicable to Awards
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B-10
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9.
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Change in Control
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B-11
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10.
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Additional Award Forfeiture Provisions
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B-11
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11.
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General Provisions
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B-13
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B-i
CONSECO,
INC.
AMENDED AND RESTATED LONG-TERM INCENTIVE PLAN
1. Purpose. The purpose of this Amended
and Restated Long-Term Incentive Plan (the
Plan) is to aid Conseco Inc., a Delaware
corporation (together with its successors and assigns, the
Company), in attracting, retaining,
motivating and rewarding certain employees and non-employee
directors of the Company or its subsidiaries or affiliates, to
provide for equitable and competitive compensation
opportunities, to recognize individual contributions and reward
achievement of Company goals, and promote the creation of
long-term value for stockholders by closely aligning the
interests of Participants with those of stockholders. The Plan
authorizes stock based incentives for Participants. The Plan
was initially established as the Conseco, Inc. 2003 Long-Term
Incentive Plan, has been amended from time to time thereafter,
and is hereby amended and restated effective March 31,
2009.
2. Definitions. In addition to the terms
defined in Section 1 above and elsewhere in the Plan, the
following capitalized terms used in the Plan have the respective
meanings set forth in this Section:
(a) Annual Limit shall have the meaning
specified in Section 5(b).
(b) Award means any Option, SAR,
Restricted Stock, Restricted Stock Unit, Stock granted as a
bonus or in lieu of another award, Dividend Equivalent, Other
Stock-Based Award or Performance Award, together with any
related right or interest, granted to a Participant under the
Plan.
(c) Beneficiary means the legal
representatives of the Participants estate entitled by
will or the laws of descent and distribution to receive the
benefits under a Participants Award upon a
Participants death, provided that, if and to the extent
authorized by the Committee, a Participant may be permitted to
designate a Beneficiary, in which case the
Beneficiary instead will be the person, persons,
trust or trusts (if any are then surviving) which have been
designated by the Participant in his or her most recent written
and duly filed beneficiary designation to receive the benefits
specified under the Participants Award upon such
Participants death.
(d) Board means the Companys Board
of Directors.
(e) Code means the Internal Revenue Code
of 1986, as amended. References to any provision of the Code or
regulation thereunder shall include any successor provisions and
regulations, and reference to regulations includes any
applicable guidance or pronouncement of the Department of the
Treasury and Internal Revenue Service.
(f) Committee means the Human Resources
and Compensation Committee of the Board, the composition and
governance of which is established in the Committees
Charter as approved from time to time by the Board and subject
to Section 303A.05 of the Listed Company Manual of the New
York Stock Exchange, and other corporate governance documents of
the Company. No action of the Committee shall be void or deemed
to be without authority due to the failure of any member, at the
time the action was taken, to meet any qualification standard
set forth in the Committee Charter or the Plan. The full Board
may perform any function of the Committee hereunder except to
the extent limited under Section 303A.05 of the Listed
Company Manual, in which case the term Committee
shall refer to the Board.
(g) Covered Employee means an Eligible
Person who is a Covered Employee as specified in
Section 11(j).
(h) Dividend Equivalent means a right,
granted under this Plan, to receive cash, Stock, other Awards or
other property equal in value to all or a specified portion of
the dividends paid with respect to a specified number of shares
of Stock.
(i) Effective Date means the effective
date specified in Section 11(q).
(j) Eligible Person has the meaning
specified in Section 5.
B-1
(k) Exchange Act means the Securities
Exchange Act of 1934, as amended. References to any provision of
the Exchange Act or rule (including a proposed rule) thereunder
shall include any successor provisions and rules.
(l) Fair Market Value means the fair
market value of Stock, Awards or other property as determined in
good faith by the Committee or under procedures established by
the Committee. Unless otherwise determined by the Committee, the
Fair Market Value of Stock shall be the officially-quoted
closing selling price of the Stock on the principal stock
exchange or market on which Stock is traded on the day as of
which such value is being determined or, if there is no sale on
that day, then on the last previous day on which a sale was
reported. Fair Market Value relating to the exercise price or
base price of any Non-409A Option or SAR shall conform to
requirements under Code Section 409A.
(m) 409A Awards means Awards that
constitute a deferral of compensation under Code
Section 409A and regulations thereunder. Non-409A
Awards means Awards other than 409A Awards. Although
the Committee retains authority under the Plan to grant Options,
SARs and Restricted Stock on terms that will qualify those
Awards as 409A Awards, Options, SARs exercisable for Stock, and
Restricted Stock will be Non-409A Awards unless otherwise
expressly specified by the Committee.
(n) Incentive Stock Option or
ISO means any Option designated as an
incentive stock option within the meaning of Code
Section 422 and qualifying thereunder.
(o) Option means a right, granted under
the Plan, to purchase Stock.
(p) Other Stock-Based Awards means
Awards granted to a Participant under Section 6(h).
(q) Participant means a person who has
been granted an Award under the Plan which remains outstanding,
including a person who is no longer an Eligible Person.
(r) Performance Award means a
conditional right, granted to a Participant under
Sections 6(i) and 7, to receive cash, Stock or other Awards
or payments.
(s) Restricted Stock means Stock granted
under the Plan which is subject to certain restrictions and to a
risk of forfeiture.
(t) Restricted Stock Unit or
RSU means a right, granted under the
Plan, to receive Stock, cash or other Awards or a combination
thereof at the end of a specified deferral period.
(u) Retirement means, unless otherwise
stated in an applicable Award agreement, Participants
voluntary termination of employment after achieving
65 years of age
(v) Rule 16b-3
means
Rule 16b-3,
as from time to time in effect and applicable to Participants,
promulgated by the Securities and Exchange Commission under
Section 16 of the Exchange Act.
(w) Stock means the Companys
Common Stock, par value $0.01 per share, and any other equity
securities of the Company that may be substituted or
resubstituted for Stock pursuant to Section 11(c).
(x) Stock Appreciation Rights or
SAR means a right granted to a Participant under
Section 6(c).
3. Administration.
(a) Authority of the Committee. The Plan
shall be administered by the Committee, which shall have full
and final authority, in each case subject to and consistent with
the provisions of the Plan, to select Eligible Persons to become
Participants; to grant Awards; to determine the type and number
of Awards, the dates on which Awards may be exercised and on
which the risk of forfeiture or deferral period relating to
Awards shall lapse or terminate, the acceleration of any such
dates, the expiration date of any Award, whether, to what
extent, and under what circumstances an Award may be settled, or
the exercise price of an Award may be paid, in cash, Stock,
other Awards, or other property, and other terms and conditions
of, and all other matters relating to, Awards; to prescribe
documents evidencing or setting terms of Awards (such Award
documents need not be identical for each Participant),
amendments thereto, and rules and regulations for the
administration of the Plan and amendments thereto (including
outstanding Awards); to construe and interpret the Plan
B-2
and Award documents and correct defects, supply omissions or
reconcile inconsistencies therein; and to make all other
decisions and determinations as the Committee may deem necessary
or advisable for the administration of the Plan. Decisions of
the Committee with respect to the administration and
interpretation of the Plan shall be final, conclusive, and
binding upon all persons interested in the Plan, including
Participants, Beneficiaries, transferees under
Section 11(b) and other persons claiming rights from or
through a Participant, and stockholders.
(b) Manner of Exercise of Committee
Authority. The express grant of any specific
power to the Committee, and the taking of any action by the
Committee, shall not be construed as limiting any power or
authority of the Committee. The Committee may act through
subcommittees, including for purposes of perfecting exemptions
under
Rule 16b-3
or qualifying Awards under Code Section 162(m) as
performance-based compensation, in which case the subcommittee
shall be subject to and have authority under the charter
applicable to the Committee, and the acts of the subcommittee
shall be deemed to be acts of the Committee hereunder. The
Committee may delegate the administration of the Plan to one or
more officers or employees of the Company, and such
administrator(s) may have the authority to execute and
distribute Award agreements or other documents evidencing or
relating to Awards granted by the Committee under this Plan, to
maintain records relating to Awards, to process or oversee the
issuance of Stock under Awards, to interpret and administer the
terms of Awards, to make grants of Awards to officers (other
than any officer subject to Section 16 of the Exchange Act)
and employees of the Company (including any prospective officer
(other than any such officer who is expected to be subject to
Section 16 of the Exchange Act) or employee) subject to an
individual maximum annual Award limit as determined and approved
at the Compensation Committees discretion, and all
necessary and appropriate decisions and determinations with
respect thereto and to take such other actions as may be
necessary or appropriate for the administration of the Plan and
of Awards under the Plan, provided that in no case shall any
such administrator be authorized (i) to take any action
that would result in the loss of an exemption under
Rule 16b-3
for Awards granted to or held by Participants who at the time
are subject to Section 16 of the Exchange Act in respect of
the Company or that would cause Awards intended to qualify as
performance-based compensation under Code
Section 162(m) to fail to so qualify, (ii) to take any
action inconsistent with Section 157 and other applicable
provisions of the Delaware General Corporation Law, or
(iii) to make any determination required to be made by the
Committee under the New York Stock Exchange corporate governance
standards applicable to listed company compensation committees
(currently, Rule 303A.05). Any action by any such
administrator within the scope of its delegation shall be deemed
for all purposes to have been taken by the Committee and, except
as otherwise specifically provided, references in this Plan to
the Committee shall include any such administrator. The
Committee (and, to the extent it so provides, any subcommittee)
shall have sole authority to determine whether to review any
actions
and/or
interpretations of any such administrator, and if the Committee
shall decide to conduct such a review, any such actions
and/or
interpretations of any such administrator shall be subject to
approval, disapproval or modification by the Committee.
(c) Limitation of Liability. The
Committee and each member thereof, and any person acting
pursuant to authority delegated by the Committee, shall be
entitled, in good faith, to rely or act upon any report or other
information furnished by any executive officer, other officer or
employee of the Company or a subsidiary or affiliate, the
Companys independent auditors, consultants or any other
agents assisting in the administration of the Plan. Members of
the Committee, any person acting pursuant to authority delegated
by the Committee, and any officer or employee of the Company or
a subsidiary or affiliate acting at the direction or on behalf
of the Committee or a delegee shall not be personally liable for
any action or determination taken or made in good faith with
respect to the Plan, and shall, to the extent permitted by law,
be fully indemnified and protected by the Company with respect
to any such action or determination.
4. Stock Subject to Plan.
(a) Overall Number of Shares Available for
Delivery. The total number of shares of Stock
reserved for delivery in connection with Awards under this Plan
shall be 25,846,268 shares. The total number of shares
available is subject to adjustment as provided in
Section 11(c). Any shares of Stock delivered under the Plan
shall consist of authorized and unissued shares or treasury
shares. No more than 10,000,000 shares may be delivered
hereunder as ISOs.
B-3
(b) Share Counting Rules. The Committee
may adopt reasonable counting procedures to ensure appropriate
counting, avoid double counting (as, for example, in the case of
tandem or substitute awards) and make adjustments in accordance
with this Section 4(b). Shares shall be counted against
those reserved to the extent such shares have been delivered and
are no longer subject to a risk of forfeiture; provided,
however, that notwithstanding the above, the number of shares
available for issuance under the Plan shall be reduced by
1.25 shares of Stock for every one share of Stock issued in
respect of an Award other than an Award of an Option, SAR, or
Award that must be settled in cash. To the extent that an Award
under the Plan is canceled, expired, forfeited, settled in cash,
or otherwise terminated without delivery of shares to the
Participant, the shares retained by or returned to the Company
will be available under the Plan. The preceding sentence shall
not be applicable with respect to (i) the cancellation of
an SAR granted in tandem with an Option upon the exercise of the
Option or (ii) the cancellation of an Option granted in
tandem with an SAR upon the exercise of the SAR. The following
shares, however, may not be made available for issuance as
Awards under this Plan: (a) shares not issued or delivered
as a result of the net settlement of an outstanding Option or
SAR, (b) shares used to pay the exercise price or
withholding taxes related to an outstanding Award, or
(c) shares repurchased on the open market with the proceeds
from the exercise of an Option. In addition, in the case of any
Award granted in assumption of or in substitution for an award
of a company or business acquired by the Company or a subsidiary
or affiliate or with which the Company or a subsidiary or
affiliate combines, shares issued or issuable in connection with
such substitute Award shall not be counted against the number of
shares reserved under the Plan.
5. Eligibility; Per-Person Award
Limitations.
(a) Eligibility. Awards may be granted
under the Plan only to Eligible Persons. For purposes of the
Plan, an Eligible Person means (i) an employee
of the Company or any subsidiary or affiliate, including any
person who has been offered employment by the Company or a
subsidiary or affiliate, provided that such prospective employee
may not receive any payment or exercise any right relating to an
Award until such person has commenced employment with the
Company or a subsidiary or affiliate, (ii) any non-employee
directors of the Company or (iii) other individuals who
perform services for the Company or any subsidiary or affiliate.
An employee on leave of absence may be considered as still in
the employ of the Company or a subsidiary or affiliate for
purposes of eligibility for participation in the Plan, if so
determined by the Committee. For purposes of the Plan, a joint
venture in which the Company or a subsidiary has a substantial
direct or indirect equity investment shall be deemed an
affiliate, if so determined by the Committee. Holders of awards
who will become Eligible Persons granted by a company or
business acquired by the Company or a subsidiary or affiliate,
or with which the Company or a subsidiary or affiliate combines,
are eligible for grants of substitute awards granted in
assumption of or in substitution for such outstanding awards
previously granted under the Plan in connection with such
acquisition or combination transaction, if so determined by the
Committee.
(b) Per-Person Award Limitations. In each
calendar year during any part of which the Plan is in effect, an
Eligible Person may be granted Awards under each of
Section 6(b) through (i) relating to up to his or her
Annual Limit (such Annual Limit to apply separately to the type
of Award authorized under each specified subsection). A
Participants Annual Limit, in any year during any part of
which the Participant is then eligible under the Plan, shall
equal 1,000,000 shares, subject to adjustment as provided
in Section 11(c). In the case of an Award which is not
valued in a way in which the limitation set forth in the
preceding sentence would operate as an effective limitation
satisfying applicable law (including Treasury
Regulation 1.162-27(e)(4)),
an Eligible Person may not be granted Awards authorizing the
earning during any calendar year of an amount that exceeds the
Eligible Persons Annual Limit, which for this purpose
shall equal $4 million (this limitation is separate and not
affected by the number of Awards granted during such calendar
year subject to the limitation in the preceding sentence). For
this purpose, (i) earning means satisfying
performance conditions so that an amount becomes payable,
without regard to whether it is to be paid currently or on a
deferred basis or continues to be subject to any service
requirement or other non-performance condition, and (ii) a
Participants Annual Limit is used to the extent an amount
or number of shares may be potentially earned or paid under an
Award, regardless of whether such amount or shares are in fact
earned or paid.
B-4
6. Specific Terms of Awards.
(a) General. Awards may be granted on the
terms and conditions set forth in this Section 6. In
addition, the Committee may impose on any Award or the exercise
thereof, at the date of grant or thereafter (subject to
Sections 11(e) and 11(k)), such additional terms and
conditions, not inconsistent with the provisions of the Plan, as
the Committee shall determine, including terms requiring
forfeiture of Awards in the event of termination of employment
or service by the Participant and terms permitting a Participant
to make elections relating to his or her Award. The Committee
shall retain full power and discretion with respect to any term
or condition of an Award that is not mandatory under the Plan,
subject to Section 11(k). The Committee shall require the
payment of lawful consideration for an Award to the extent
necessary to satisfy the requirements of the Delaware General
Corporation Law, and may otherwise require payment of
consideration for an Award except as limited by the Plan.
(b) Options. The Committee is authorized
to grant Options to Participants on the following terms and
conditions:
(i) Exercise Price. The exercise price
per share of Stock purchasable under an Option (including both
ISOs and non-qualified Options) shall be determined by the
Committee, provided that, notwithstanding anything contained
herein to the contrary such exercise price shall be
(A) fixed as of the grant date, and (B) not less than
the Fair Market Value of a share of Stock on the grant date.
Notwithstanding the foregoing, any substitute award granted in
assumption of or in substitution for an outstanding award
granted by a company or business acquired by the Company or a
subsidiary or affiliate, or with which the Company or a
subsidiary or affiliate combines, may be granted with an
exercise price per share of Stock other than as required above.
(ii) No Repricing. Except for adjustments
as permitted by Section 11(c), without the approval of
stockholders, the Committee will not amend, replace, substitute
or exchange previously granted Options in a transaction that
constitutes a repricing, which means any of the
following: (i) changing the terms of an Option to lower its
exercise price; (ii) any other action that is treated as a
repricing under generally accepted accounting
principles; (iii) repurchasing for cash or canceling an
Option at a time when its exercise price is greater than the
Fair Market Value of the underlying shares of Stock in exchange
for another Award; or (iv) as such term is used in
Section 303A.08 of the Listed Company Manual of the New
York Stock Exchange.
(iii) Option Term; Time and Method of
Exercise. The Committee shall determine the term
of each Option, provided that in no event shall the term of any
Option exceed a period of ten years from the date of grant. The
Committee shall determine the time or times at which or the
circumstances under which an Option may be exercised in whole or
in part. In addition, the Committee shall determine the methods
by which such exercise price may be paid or deemed to be paid
and the form of such payment (subject to Sections 11(k) and
11(l)), including, without limitation, cash, Stock (including by
withholding Stock deliverable upon exercise), other Awards or
awards granted under other plans of the Company or any
subsidiary or affiliate, or other property (including through
broker-assisted cashless exercise arrangements, to
the extent permitted by applicable law), and the methods by or
forms in which Stock will be delivered or deemed to be delivered
in satisfaction of Options to Participants.
(iv) ISOs. Notwithstanding anything to
the contrary in this Section 6, in the case of the grant of
an Option intending to qualify as an ISO: (i) if the
Participant owns stock possessing more than 10 percent of
the combined voting power of all classes of stock of the Company
(a 10% Shareholder), the purchase price of such
Option must be at least 110 percent of the fair market
value of the Common Stock on the date of grant and the Option
must expire within a period of not more than five (5) years
from the date of grant, and (ii) termination of employment
will occur when the person to whom an Award was granted ceases
to be an employee (as determined in accordance with
Section 3401(c) of the Code and the regulations promulgated
thereunder) of the Company and its subsidiaries. Notwithstanding
anything in this Section 6 to the contrary, Options
designated as ISOs shall not be eligible for treatment under the
Code as ISOs to the extent that either (iii) the aggregate
fair market value of shares of Common Stock (determined as of
the time of grant) with respect to which such Options are
exercisable for the first time by the Participant during any
calendar year (under all plans of the Company and any
Subsidiary) exceeds $100,000, taking Options into account in the
order in which they were granted, and (iv) such Options
B-5
otherwise remain exercisable but are not exercised within three
(3) months of termination of employment (or such other
period of time provided in Section 422 of the Code).
(c) Stock Appreciation Rights. The
Committee is authorized to grant SARs to Participants on the
following terms and conditions:
(i) Right to Payment. An SAR shall confer
on the Participant to whom it is granted a right to receive,
upon exercise thereof, shares of Stock having a value equal to
the excess of (A) the Fair Market Value of one share of
Stock on the date of exercise (or, in the case of a
Limited SAR, the Fair Market Value determined by
reference to the change in control price, as defined under the
applicable award agreement) over (B) the exercise or
settlement price of the SAR as determined by the Committee.
Stock Appreciation Rights may be granted to Participants from
time to time either in tandem with or as a component of other
Awards granted under the Plan (tandem SARs) or not
in conjunction with other Awards (freestanding SARs)
and may, but need not, relate to a specific Option granted under
Section 6(b). The per share price for exercise or
settlement of SARs (including both tandem SARs and freestanding
SARs) shall be determined by the Committee, but in the case of
SARs that are granted in tandem to an Option shall not be less
than the exercise price of the Option and in the case of
freestanding SARs shall be (A) fixed as of the grant date,
and (B) not less than the Fair Market Value of a share of
Stock on the grant date.
(ii) No Repricing. Except for adjustments
as permitted by Section 11(c), without the approval of
stockholders, the Committee will not amend, replace, substitute
or exchange previously granted SARs in a transaction that
constitutes a repricing, which means any of the
following (i) changing the terms of an SAR to lower its
exercise or settlement price; (ii) any other action that is
treated as a repricing under generally accepted
accounting principles; (iii) repurchasing for cash or
canceling an SAR at a time when its exercise or settlement price
is greater than the Fair Market Value of the underlying shares
of Stock in exchange for another Award; or (iv) as such
term is used in Section 303A.08 of the Listed Company
Manual of the New York Stock Exchange.
(iii) Other Terms. The Committee shall
determine the term of each SAR, provided that in no event shall
the term of an SAR exceed a period of ten years from the date of
grant. The Committee shall determine at the date of grant or
thereafter, the time or times at which and the circumstances
under which a SAR may be exercised in whole or in part
(including based on future service requirements), the method of
exercise, method of settlement, method by or forms in which
Stock will be delivered or deemed to be delivered to
Participants, and whether or not a SAR shall be free-standing or
in tandem or combination with any other Award. Limited SARs that
may only be exercised in connection with a change in control or
termination of service following a change in control as
specified by the Committee may be granted on such terms, not
inconsistent with this Section 6(c), as the Committee may
determine. The Committee may require that an outstanding Option
be exchanged for an SAR exercisable for Stock having vesting,
expiration, and other terms substantially the same as the
Option, so long as such exchange will not result in additional
accounting expense to the Company.
(d) Restricted Stock. The Committee is
authorized to grant Restricted Stock to Participants on the
following terms and conditions:
(i) Award and Restrictions. Subject to
Section 6(d)(ii), Restricted Stock shall be subject to such
restrictions on transferability, risk of forfeiture and other
restrictions, if any, as the Committee may impose, which
restrictions may lapse separately or in combination at such
times, under such circumstances, in such installments or
otherwise and under such other circumstances as the Committee
may determine at the date of grant or thereafter. Except to the
extent restricted under the terms of the Plan and any Award
document relating to the Restricted Stock, a Participant granted
Restricted Stock shall have all of the rights of a stockholder,
including the right to vote the Restricted Stock and the right
to receive dividends thereon (subject to any mandatory
reinvestment or other requirement imposed by the Committee).
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(ii) Forfeiture. Except as otherwise
determined by the Committee, upon termination of employment or
service during the applicable restriction period, Restricted
Stock that is at that time subject to restrictions shall be
forfeited and reacquired by the Company; provided that the
Committee may provide, by rule or regulation or in any Award
document, or may determine in any individual case, that
restrictions or forfeiture conditions relating to Restricted
Stock will lapse in whole or in part, including in the event of
terminations resulting from specified causes.
(iii) Limitation on Vesting. The grant,
issuance, retention, vesting
and/or
settlement of Restricted Stock shall occur at such time and in
such installments as determined by the Committee or under
criteria established by the Committee. Subject to
Section 10, the Committee shall have the right to make the
timing of the grant
and/or the
issuance, ability to retain, vesting
and/or
settlement of Restricted Stock subject to continued employment,
passage of time
and/or such
performance conditions as deemed appropriate by the Committee;
provided that the grant, issuance, retention, vesting
and/or
settlement of a Restricted Stock Award that is based in whole or
in part on performance conditions
and/or the
level of achievement versus such performance conditions shall be
subject to a performance period of not less than one year, and
any Award based solely upon continued employment or the passage
of time shall vest over a period not less than three years from
the date the Award is made, provided that such vesting may occur
ratably over the three-year period. The foregoing minimum
vesting conditions need not apply (A) in the case of the
death, disability or Retirement of the Participant or
termination in connection with a Change in Control,
(B) with respect to up to an aggregate of five percent of
the shares of Stock authorized under the Plan, which may be
granted (or regranted upon forfeiture) as Restricted Stock or
RSUs without regard to such minimum vesting requirements and
(C) with respect to non-employee director awards.
(iv) Certificates for Stock. Restricted
Stock granted under the Plan may be evidenced in such manner as
the Committee shall determine. If certificates representing
Restricted Stock are registered in the name of the Participant,
the Committee may require that such certificates bear an
appropriate legend referring to the terms, conditions and
restrictions applicable to such Restricted Stock, that the
Company retain physical possession of the certificates, and that
the Participant deliver a stock power to the Company, endorsed
in blank, relating to the Restricted Stock.
(v) Dividends and Splits. As a condition
to the grant of an Award of Restricted Stock, the Committee may
require that any dividends paid on a share of Restricted Stock
shall be either (A) paid with respect to such Restricted
Stock at the dividend payment date in cash, in kind, or in a
number of shares of unrestricted Stock having a Fair Market
Value equal to the amount of such dividends, or
(B) automatically reinvested in additional Restricted Stock
or held in kind, which shall be subject to the same terms as
applied to the original Restricted Stock to which it relates.
Unless otherwise determined by the Committee, Stock distributed
in connection with a Stock split or Stock dividend, and other
property distributed as a dividend, shall be subject to
restrictions and a risk of forfeiture to the same extent as the
Restricted Stock with respect to which such Stock or other
property has been distributed.
(e) Restricted Stock Units. The Committee
is authorized to grant RSUs to Participants, subject to the
following terms and conditions:
(i) Award and Restrictions. Subject to
Section 6(e)(ii), RSUs shall be subject to such
restrictions on transferability, risk of forfeiture and other
restrictions, if any, as the Committee may impose, which
restrictions may lapse separately or in combination at such
times, under such circumstances (including based on achievement
of performance conditions
and/or
future service requirements), in such installments or otherwise
and under such other circumstances as the Committee may
determine at the date of grant or thereafter. A Participant
granted RSUs shall not have any of the rights of a stockholder,
including the right to vote, until Stock shall have been issued
in the Participants name pursuant to the RSUs, except that
the Committee may provide for dividend equivalents pursuant to
Section 6(e)(iii) below.
(ii) Limitation on Vesting. The grant,
issuance, retention, vesting
and/or
settlement of RSUs shall occur at such time and in such
installments as determined by the Committee or under criteria
established by the Committee. Subject to Section 10, the
Committee shall have the right to make the timing of the grant
and/or the
issuance, ability to retain, vesting
and/or
settlement of RSUs subject to continued
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employment, passage of time
and/or such
performance conditions as deemed appropriate by the Committee;
provided that the grant, issuance, retention, vesting
and/or
settlement of an RSU that is based in whole or in part on
performance conditions
and/or the
level of achievement versus such performance conditions shall be
subject to a performance period of not less than one year, and
any Award based solely upon continued employment or the passage
of time shall vest over a period not less than three years from
the date the Award is made, provided that such vesting may occur
ratably over the three-year period. The foregoing minimum
vesting conditions need not apply (A) in the case of the
death, disability or Retirement of the Participant or
termination in connection with a Change in Control, and
(B) with respect to up to an aggregate of five percent of
the shares of Stock authorized under the Plan, which may be
granted (or regranted upon forfeiture) as Restricted Stock or
RSUs without regard to such minimum vesting requirements.
(iii) Dividend Equivalents. Unless
otherwise determined by the Committee, dividend equivalents on
the specified number of shares of Stock covered by an Award of
RSUs shall be either (A) paid with respect to such RSUs at
the dividend payment date in cash or in shares of unrestricted
Stock having a Fair Market Value equal to the amount of such
dividends, or (B) deferred with respect to such RSUs,
either as a cash deferral or with the amount or value thereof
automatically deemed reinvested in additional RSUs, other Awards
or other investment vehicles having a Fair Market Value equal to
the amount of such dividends, as the Committee shall determine
or permit a Participant to elect.
(f) Bonus Stock and Awards in Lieu of
Obligations. The Committee is authorized to grant
Stock as a bonus, or to grant Stock or other Awards in lieu of
obligations of the Company or a subsidiary or affiliate to pay
cash or deliver other property under the Plan or under other
plans or compensatory arrangements, subject to such terms as
shall be determined by the Committee.
(g) Dividend Equivalents. The Committee
is authorized to grant Dividend Equivalents to a Participant,
which may be awarded on a free-standing basis or in connection
with another Award other than an Option, ISO, or SAR. The
Committee may provide that Dividend Equivalents shall be paid or
distributed when accrued or shall be deemed to have been
reinvested in additional Stock, Awards, or other investment
vehicles, and subject to restrictions on transferability, risks
of forfeiture and such other terms as the Committee may specify.
Notwithstanding the foregoing, the Committee may not payout any
dividends or Dividend Equivalents with respect to any unvested
Performance Award.
(h) Other Stock-Based Awards. The
Committee is authorized, subject to limitations under applicable
law, to grant to Participants such other Awards that may be
denominated or payable in, valued in whole or in part by
reference to, or otherwise based on, or related to, Stock or
factors that may influence the value of Stock, including,
without limitation, convertible or exchangeable debt securities,
other rights convertible or exchangeable into Stock, purchase
rights for Stock, Awards with value and payment contingent upon
performance of the Company or business units thereof or any
other factors designated by the Committee, and Awards valued by
reference to the book value of Stock or the value of securities
of or the performance of specified subsidiaries or affiliates or
other business units. The Committee shall determine the terms
and conditions of such Awards. Stock delivered pursuant to an
Award in the nature of a purchase right granted under this
Section 6(h) shall be purchased for such consideration,
paid for at such times, by such methods, and in such forms,
including, without limitation, cash, Stock, other Awards, notes,
or other property, as the Committee shall determine. Cash
awards, as an element of or supplement to any other Award under
the Plan, may also be granted pursuant to this Section 6(h).
(i) Performance Awards. Performance
Awards, denominated in cash or in Stock or other Awards, may be
granted by the Committee in accordance with Section 7.
7. Performance-Based Compensation.
(a) Performance Awards
Generally. Performance Awards may be denominated
as a cash amount, number of shares of Stock, or specified number
of other Awards (or a combination) which may be earned upon
achievement or satisfaction of performance conditions specified
by the Committee. In addition, the Committee may specify that
any other Award shall constitute a Performance Award by
conditioning the right
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of a Participant to exercise the Award or have it settled, and
the timing thereof, upon achievement or satisfaction of such
performance conditions as may be specified by the Committee. The
Committee may use such business criteria and other measures of
performance as it may deem appropriate in establishing any
performance conditions, and may exercise its discretion to
reduce or increase the amounts payable under any Award subject
to performance conditions, except as limited under
Sections 7(b) and 7(c) in the case of a Performance Award
intended to qualify as performance-based
compensation under Section 162(m).
(b) Performance Awards Granted to Covered
Employees. If the Committee determines that a
Performance Award to be granted to an Eligible Person who is
designated by the Committee as likely to be a Covered Employee
should qualify as performance-based compensation for
purposes of Section 162(m), the grant, exercise
and/or
settlement of such Performance Award shall be contingent upon
achievement of a pre-established performance goal and other
terms set forth in this Section 7(b).
(i) Performance Goal Generally. The
performance goal for such Performance Awards shall consist of
one or more business criteria and a targeted level or levels of
performance with respect to each of such criteria, as specified
by the Committee consistent with this Section 7(b). The
performance goal shall be objective and shall otherwise meet the
requirements of Code Section 162(m) and regulations
thereunder, including the requirement that the level or levels
of performance targeted by the Committee result in the
achievement of performance goals being substantially
uncertain. The Committee may determine that such
Performance Awards shall be granted, exercised
and/or
settled upon achievement of any one performance goal or that two
or more of the performance goals must be achieved as a condition
to grant, exercise
and/or
settlement of such Performance Awards. Performance goals may
differ for Performance Awards granted to any one Participant or
to different Participants.
(ii) Business Criteria. For purposes of
this Plan, a performance goal shall mean any one or
more of the following business criteria, in each case as
specified by the Committee: (1) gross or net revenue,
premiums collected, new annualized premiums, and investment
income, (2) any earnings or net income measure, including
earnings from operations, earnings before taxes, earnings before
interest
and/or taxes
and/or
depreciation, statutory earnings before realized gains (losses),
or net income available to common shareholders,
(3) operating earnings per common share (either basic or
diluted); (4) return on assets, return on investment,
return on capital, return on equity, or return on tangible
equity; (5) economic value created including the value of
new business; (6) operating margin or profit margin;
(7) net interest margin; (8) asset quality;
(9) stock price or total stockholder return; and
(10) strategic business criteria, consisting of one or more
objectives based on meeting specified market penetration, total
market capitalization, business retention, new product
generation, rate increase actions, geographic business expansion
goals, cost targets (including cost of capital), investment
portfolio yield, risk-based capital, statutory capital, Best
Capital Adequacy Ratio, tax net operating loss utilization,
customer satisfaction, employee satisfaction, agency ratings,
management of employment practices and employee benefits,
supervision of litigation and information technology, and goals
relating to acquisitions or divestitures of subsidiaries,
affiliates or joint ventures. The targeted level or levels of
performance with respect to such business criteria may be
established at such levels and in such terms as the Committee
may determine, in its discretion, including in absolute terms,
on a per share basis (either basic or diluted), as a goal
relative to performance in prior periods, or as a goal compared
to the performance of one or more comparable companies or an
index covering multiple companies.
(iii) Performance Period; Timing for Establishing
Performance Goals. Achievement of performance
goals in respect of such Performance Awards shall be measured
over a performance period of up to one year or more than one
year, as specified by the Committee. A performance goal shall be
established not later than the earlier of (A) 90 days
after the beginning of any performance period applicable to such
Performance Award or (B) the time twenty-five percent of
such performance period has elapsed.
(iv) Performance Award Pool. The
Committee may establish a Performance Award pool, which shall be
an unfunded pool, for purposes of measuring performance of the
Company in connection with Performance Awards. The amount of
such Performance Award pool shall be based upon the achievement
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of a performance goal or goals based on one or more of the
business criteria set forth in Section 7(b)(ii) during the given
performance period, as specified by the Committee in accordance
with Section 7(b)(iv). The Committee may specify the amount
of the Performance Award pool as a percentage of any of such
business criteria, a percentage thereof in excess of a threshold
amount, or as another amount which need not bear a strictly
mathematical relationship to such business criteria.
(v) Settlement of Performance Awards; Other
Terms. Settlement of Performance Awards shall be
in cash, Stock, other Awards or other property, in the
discretion of the Committee. The Committee may, in its
discretion, increase or reduce the amount of a settlement
otherwise to be made in connection with such Performance Awards,
but may not exercise discretion to increase any such amount
payable to a Covered Employee in respect of a Performance Award
subject to this Section 7(b). Any settlement which changes
the form of payment from that originally specified shall be
implemented in a manner such that the Performance Award and
other related Awards do not, solely for that reason, fail to
qualify as performance-based compensation for
purposes of Section 162(m). The Committee shall specify the
circumstances in which such Performance Awards shall be paid or
forfeited in the event of termination of employment by the
Participant or other event (including a change in control) prior
to the end of a performance period or settlement of such
Performance Awards.
(vi) Recapture Rights. If at any time
after the date on which a Participant has been granted or
becomes vested in an Award pursuant to the achievement of a
performance goal under Section 7, the Committee determines
that the earlier determination as to the achievement of the
performance goal was based on incorrect data and that in fact
the performance goal had not been achieved or had been achieved
to a lesser extent than originally determined and a portion of
an Award would not have been granted, vested or paid, given the
correct data, then (i) such portion of the Award that was
granted shall be forfeited and any related shares (or if such
shares were disposed of the cash equivalent) shall be returned
to the Company as provided by the Committee, (ii) such
portion of the Award that became vested shall be deemed to be
not vested and any related shares (or if such shares were
disposed of the cash equivalent) shall be returned to the
Company as provided by the Committee, and (iii) such
portion of the Award paid to the Participant shall be paid by
the Participant to the Company upon notice from the Company as
provided by the Committee.
(c) Written
Determinations. Determinations by the Committee
as to the establishment of performance goals, the amount
potentially payable in respect of Performance Awards, the level
of actual achievement of the specified performance goals shall
be recorded in writing in the case of Performance Awards
intended to qualify under Section 162(m). Specifically, the
Committee shall certify in writing, in a manner conforming to
applicable regulations under Section 162(m), prior to
settlement of each such Award granted to a Covered Employee,
that the performance objective relating to the Performance Award
and other material terms of the Award upon which settlement of
the Award was conditioned have been satisfied.
8. Certain Provisions Applicable To
Awards.
(a) Stand-Alone, Additional, Tandem, and Substitute
Awards. Subject to the provisions of
Sections 6(b)(ii) and 6(c)(ii), Awards granted under the
Plan may, in the discretion of the Committee, be granted either
alone or in addition to, in tandem with, or in substitution or
exchange for, any other Award or any award granted under another
plan of the Company, any subsidiary or affiliate, or any
business entity to be acquired by the Company or a subsidiary or
affiliate, or any other right of a Participant to receive
payment from the Company or any subsidiary or affiliate;
provided, however, that a 409A Award may not be granted in
tandem with a Non-409A Award. Awards granted in addition to or
in tandem with other Awards or awards may be granted either as
of the same time as or a different time from the grant of such
other Awards or awards. Subject to Sections 11(k) and (l),
the Committee may determine that, in granting a new Award, the
in-the-money value or fair value of any surrendered Award or
award or the value of any other right to payment surrendered by
the Participant may be applied to reduce the exercise price of
any Option, grant price of any SAR, or purchase price of any
other Award.
(b) Term of Awards. The term of each
Award shall be for such period as may be determined by the
Committee, subject to the express limitations set forth in the
Plan.
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(c) Form and Timing of Payment under Awards;
Deferrals. Subject to the terms of the Plan
(including Sections 11(k) and (l)) and any applicable Award
document, payments to be made by the Company or a subsidiary or
affiliate upon the exercise of an Option or other Award or
settlement of an Award may be made in such forms as the
Committee shall determine, including, without limitation, cash,
Stock, other Awards or other property, and may be made in a
single payment or transfer, in installments, or on a deferred
basis. The settlement of any Award may be accelerated, and cash
paid in lieu of Stock in connection with such settlement, in the
discretion of the Committee or upon occurrence of one or more
specified events, subject to Sections 11(k) and (l).
Subject to Section 11(k), installment or deferred payments
may be required by the Committee (subject to Section 11(e))
or permitted at the election of the Participant on terms and
conditions established by the Committee. Payments may include,
without limitation, provisions for the payment or crediting of
reasonable interest on installment or deferred payments or the
grant or crediting of Dividend Equivalents or other amounts in
respect of installment or deferred payments denominated in
Stock. In the case of any 409A Award that is vested and no
longer subject to a risk of forfeiture (within the meaning of
Code Section 83), such Award will be distributed to the
Participant, upon application of the Participant, if the
Participant has had an unforeseeable emergency within the
meaning of Code Sections 409A(a)(2)(A)(vi) and
409A(a)(2)(B)(ii), in accordance with
Section 409A(a)(2)(B)(ii).
(d) Limitation on Vesting of Certain
Awards. Subject to Section 8, Restricted
Stock will vest over a minimum period of three years except in
the event of a Participants death, disability, or
retirement, or in the event of a change in control or other
special circumstances. The foregoing notwithstanding, Restricted
Stock as to which either the grant or vesting is based on, among
other things, the achievement of one or more performance
conditions generally will vest over a minimum period of one year
except in the event of a Participants death, disability,
or retirement, or in the event of a change in control or other
special circumstances, and provided further up to five percent
of the shares of Stock authorized under the Plan as well as
non-employee director awards may be granted as Restricted Stock
without any minimum vesting requirements. For purposes of this
Section 8(d), a performance period that precedes the grant
of the Restricted Stock will be treated as part of the vesting
period if the participant has been notified promptly after the
commencement of the performance period that he or she has the
opportunity to earn the Award based on performance and continued
service, and vesting over a three-year period or one-year period
will include periodic vesting over such period if the rate of
such vesting is proportional (or less rapid) throughout such
period.
(e) Cash Settlement of Awards. To the
extent permitted by the Committee at the time of grant or
thereafter, the Company may deliver cash in full or partial
satisfaction, payment
and/or
settlement upon exercise, cancellation, forfeiture or surrender
of any Award.
9. Change in Control. The
Committee may set forth in any Award agreement the effect, if
any, that a change in control or other, similar transaction
shall have on any awards granted under this Plan.
10. Additional Award Forfeiture
Provisions.
(a) Forfeiture of Options and Other Awards and Gains
Realized Upon Prior Option Exercises or Award
Settlements. Unless otherwise determined by the
Committee, each Award granted hereunder, other than Awards
granted to non-employee directors, shall be subject to the
following additional forfeiture conditions, to which the
Participant, by accepting an Award hereunder, agrees. If any of
the events specified in Section 10(b)(i), (ii), or
(iii) occurs (a Forfeiture Event), all
of the following forfeitures will result:
(i) The unexercised portion of each Option held by the
Participant, whether or not vested, and any other Award not then
settled will be immediately forfeited and canceled upon the
occurrence of the Forfeiture Event; and
(ii) The Participant will be obligated to repay to the
Company, in cash, within five business days after demand is made
therefore by the Company, the total amount of Award Gain (as
defined herein) realized by the Participant upon each exercise
of an Option or settlement of an Award that occurred on or after
(A) the date that is six months prior to the occurrence of
the Forfeiture Event, if the Forfeiture Event occurred while the
Participant was employed by the Company or a subsidiary or
affiliate, or
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(B) the date that is six months prior to the date the
Participants employment by the Company or a subsidiary or
affiliate terminated, if the Forfeiture Event occurred after the
Participant ceased to be so employed. For purposes of this
Section, the term Award Gain shall mean (i), in
respect of a given Option exercise, the product of (X) the
Fair Market Value per share of Stock at the date of such
exercise (without regard to any subsequent change in the market
price of shares) minus the exercise price times (Y) the
number of shares as to which the Option was exercised at that
date, and (ii), in respect of any other settlement of an Award
granted to the Participant, the Fair Market Value of the cash or
Stock paid or payable to Participant (regardless of any elective
deferral) less any cash or the Fair Market Value of any Stock or
property (other than an Award or award which would have itself
then been forfeitable hereunder and excluding any payment of tax
withholding) paid by the Participant to the Company as a
condition of or in connection such settlement.
(b) Events Triggering Forfeiture. The
forfeitures specified in Section 10(a) will be triggered upon
the occurrence of any one of the following Forfeiture Events at
any time during Participants employment by the Company or
a subsidiary or affiliate, or during the one-year period
following termination of such employment:
(i) Participant, acting alone or with others, directly or
indirectly, (A) engages, either as employee, employer,
consultant, advisor, or director, or as an owner, investor,
partner, or stockholder unless Participants interest is
insubstantial, in any business in an area or region in which the
Company conducts business at the date the event occurs, which is
directly in competition with a business then conducted by the
Company or a subsidiary or affiliate; (B) induces any
customer or supplier of the Company or a subsidiary or
affiliate, with which the Company or a subsidiary or affiliate
has a business relationship, to curtail, cancel, not renew, or
not continue his or her or its business with the Company or any
subsidiary or affiliate; or (C) induces, or attempts to
influence, any employee of or service provider to the Company or
a subsidiary or affiliate to terminate such employment or
service. The Committee shall, in its discretion, determine which
lines of business the Company conducts on any particular date
and which third parties may reasonably be deemed to be in
competition with the Company. For purposes of this
Section 10(b)(i), a Participants interest as a
stockholder is insubstantial if it represents beneficial
ownership of less than five percent of the outstanding class of
stock, and a Participants interest as an owner, investor,
or partner is insubstantial if it represents ownership, as
determined by the Committee in its discretion, of less than five
percent of the outstanding equity of the entity;
(ii) Participant discloses, uses, sells, or otherwise
transfers, except in the course of employment with or other
service to the Company or any subsidiary or affiliate, any
confidential or proprietary information of the Company or any
subsidiary or affiliate, including but not limited to
information regarding the Companys current and potential
customers, organization, employees, finances, and methods of
operations and investments, so long as such information has not
otherwise been disclosed to the public or is not otherwise in
the public domain (other than by Participants breach of
this provision), except as required by law or pursuant to legal
process, or Participant makes statements or representations, or
otherwise communicates, directly or indirectly, in writing,
orally, or otherwise, or takes any other action which may,
directly or indirectly, disparage or be damaging to the Company
or any of its subsidiaries or affiliates or their respective
officers, directors, employees, advisors, businesses or
reputations, except as required by law or pursuant to legal
process; or
(iii) Participant fails to cooperate with the Company or
any subsidiary or affiliate in any way, including, without
limitation, by making himself or herself available to testify on
behalf of the Company or such subsidiary or affiliate in any
action, suit, or proceeding, whether civil, criminal,
administrative, or investigative, or otherwise fails to assist
the Company or any subsidiary or affiliate in any way,
including, without limitation, in connection with any such
action, suit, or proceeding by providing information and meeting
and consulting with members of management of, other
representatives of, or counsel to, the Company or such
subsidiary or affiliate, as reasonably requested.
(c) Agreement Does Not Prohibit Competition or Other
Participant Activities. Although the conditions
set forth in this Section 10 shall be deemed to be
incorporated into an Award, a Participant is not thereby
prohibited from engaging in any activity, including but not
limited to competition with the Company and its
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subsidiaries and affiliates. Rather, the non-occurrence of the
Forfeiture Events set forth in Section 10(b) is a condition to
the Participants right to realize and retain value from
his or her compensatory Options and Awards, and the consequence
under the Plan if the Participant engages in an activity giving
rise to any such Forfeiture Event are the forfeitures specified
herein. The Company and Participant shall not be precluded by
this provision or otherwise from entering into other agreements
concerning the subject matter of Sections 10(a) and 10(b).
(d) Committee Discretion. The Committee
may, in its discretion, waive in whole or in part the
Companys right to forfeiture under this Section, but no
such waiver shall be effective unless evidenced by a writing
signed by a duly authorized officer of the Company. In addition,
the Committee may impose additional conditions on Awards, by
inclusion of appropriate provisions in the document evidencing
or governing any such Award.
11. General Provisions.
(a) Compliance with Legal and Other
Requirements. The Company may, to the extent
deemed necessary or advisable by the Committee and subject to
Section 11(k), postpone the issuance or delivery of Stock
or payment of other benefits under any Award until completion of
such registration or qualification of such Stock or other
required action under any federal or state law, rule or
regulation, listing or other required action with respect to any
stock exchange or automated quotation system upon which the
Stock or other securities of the Company are listed or quoted,
or compliance with any other obligation of the Company, as the
Committee may consider appropriate, and may require any
Participant to make such representations, furnish such
information and comply with or be subject to such other
conditions as it may consider appropriate in connection with the
issuance or delivery of Stock or payment of other benefits in
compliance with applicable laws, rules, and regulations, listing
requirements, or other obligations.
(b) Limits on Transferability;
Beneficiaries. No Award or other right or
interest of a Participant under the Plan shall be pledged,
hypothecated or otherwise encumbered or subject to any lien,
obligation or liability of such Participant to any party (other
than the Company or a subsidiary or affiliate thereof), or
assigned or transferred by such Participant otherwise than by
will or the laws of descent and distribution or to a Beneficiary
upon the Participants death, and such Awards or rights
that may be exercisable shall be exercised during the lifetime
of the Participant only by the Participant or his or her
guardian or legal representative. A Beneficiary, transferee, or
other person claiming any rights under the Plan from or through
any Participant shall be subject to all terms and conditions of
the Plan and any Award document applicable to such Participant,
except as otherwise determined by the Committee, and to any
additional terms and conditions deemed necessary or appropriate
by the Committee.
(c) Adjustments. In the event of any
large, special and non-recurring dividend or other distribution
(whether in the form of cash or property other than Stock),
recapitalization, forward or reverse split, Stock dividend,
reorganization, merger, consolidation, spin-off, combination,
repurchase, share exchange, liquidation, dissolution or other
similar corporate transaction or event, the Committee, in order
to prevent dilution or enlargement of a Participants
rights under this Plan shall, in an equitable manner as
determined by the Committee, adjust any or all of (i) the
number and kind of shares of Stock or other securities of the
Company or other issuer which are subject to the Plan,
(ii) the number and kind of shares of Stock or other
securities of the Company or other issuer by which annual
per-person Award limitations are measured under Section 5,
including the share limits applicable to non-employee director
Awards under Section 5(c), (iii) the number and kind
of shares of Stock or other securities of the Company or other
issuer subject to or deliverable in respect of outstanding
Awards and (iv) the exercise price, settlement price or
purchase price relating to any Award or, if deemed appropriate,
the Committee may make provision for a payment of cash or
property to the holder of an outstanding Option (subject to
Section 11(l)) or other Award. In addition, the Committee
is authorized to make adjustments in the terms and conditions
of, and the criteria included in, Awards (including
performance-based Awards and performance goals and any
hypothetical funding pool relating thereto) in recognition of
unusual or nonrecurring events (including, without limitation,
events described in the preceding sentence, as well as
acquisitions and dispositions of businesses and assets, or in
response to changes in applicable laws, regulations, or
accounting principles) affecting any performance conditions;
provided that no such adjustment
B-13
shall be authorized or made if and to the extent that the
existence of such authority (i) would cause Options, SARs,
or Performance Awards granted under the Plan to Participants
designated by the Committee as Covered Employees and intended to
qualify as performance-based compensation under Code
Section 162(m) and regulations thereunder to otherwise fail
to qualify as performance-based compensation under
Code Section 162(m) and regulations thereunder, or
(ii) would cause the Committee to be deemed to have
authority to change the targets, within the meaning of Treasury
Regulation 1.162-27(e)(4)(vi),
under the performance goals relating to Options or SARs granted
to Covered Employees and intended to qualify as
performance-based compensation under Code
Section 162(m) and regulations thereunder.
(d) Tax Provisions.
(i) Withholding. The Company and any
subsidiary or affiliate is authorized to withhold from any Award
granted, any payment relating to an Award under the Plan,
including from a distribution of Stock, or any payroll or other
payment to a Participant, amounts of withholding and other taxes
due or potentially payable in connection with any transaction or
event involving an Award, or to require a Participant to remit
to the Company an amount in cash or other property (including
Stock) to satisfy such withholding before taking any action with
respect to an Award, and to take such other action as the
Committee may deem advisable to enable the Company and
Participants to satisfy obligations for the payment of
withholding taxes and other tax obligations relating to any
Award. This authority shall include authority to withhold or
receive Stock or other property and to make cash payments in
respect thereof in satisfaction of a Participants
withholding obligations, either on a mandatory or elective basis
in the discretion of the Committee, or in satisfaction of other
tax obligations. The Company can delay the delivery to a
Participant of Stock under any Award to the extent necessary to
allow the Company to determine the amount of withholding to be
collected and to collect and process such withholding.
(ii) Required Consent to and Notification of Code
Section 83(b) Election. No election under
Section 83(b) of the Code (to include in gross income in
the year of transfer the amounts specified in Code
Section 83(b)) or under a similar provision of the laws of
a jurisdiction outside the United States may be made unless
expressly permitted by the terms of the Award document or by
action of the Committee in writing prior to the making of such
election. In any case in which a Participant is permitted to
make such an election in connection with an Award, the
Participant shall notify the Company of such election within ten
days of filing notice of the election with the Internal Revenue
Service or other governmental authority, in addition to any
filing and notification required pursuant to regulations issued
under Code Section 83(b) or other applicable provision.
(iii) Requirement of Notification Upon Disqualifying
Disposition Under Code Section 421(b). If
any Participant shall make any disposition of shares of Stock
delivered pursuant to the exercise of an ISO under the
circumstances described in Code Section 421(b) (i.e., a
disqualifying disposition), such Participant shall notify the
Company of such disposition within ten days thereof.
(e) Changes to the Plan. The Board may
amend, suspend or terminate the Plan or the Committees
authority to grant Awards under the Plan without the consent of
stockholders or Participants; provided, however, that any
amendment to the Plan shall be submitted to the Companys
stockholders for approval not later than the earliest annual
meeting for which the record date is at or after the date of
such Board action:
(i) If such stockholder approval is required by any federal
or state law or regulation or the rules of the New York Stock
Exchange or any other stock exchange or automated quotation
system on which the Stock may then be listed or quoted; or
(ii) If such amendment would materially increase the number
of shares reserved for issuance and delivery under the
Plan; or
(iii) If such amendment would alter the provisions of the
Plan restricting the Companys ability to grant Options or
SARs with an exercise price that is not less than the Fair
Market Value of Stock; or
(iv) In connection with any action to amend or replace
previously granted Options or SARs in a transaction that
constitutes a repricing, as such term defined herein
under Sections 6(b)(ii) and 6(c)(ii).
B-14
The Board may otherwise, in its discretion, determine to submit
other amendments to the Plan to stockholders for approval; and
provided further, that, without the consent of an affected
Participant, no such Board (or any Committee) action may
materially and adversely affect the rights of such Participant
under any outstanding Award (for this purpose, actions that
alter the timing of federal income taxation of a Participant
will not be deemed material unless such action results in an
income tax penalty on the Participant). With regard to other
terms of Awards, the Committee shall have no authority to waive
or modify any such Award term after the Award has been granted
to the extent the waived or modified term would be mandatory
under the Plan for any Award newly granted at the date of the
waiver or modification.
(f) Right of Setoff. The Company or any
subsidiary or affiliate may, to the extent permitted by
applicable law, deduct from and set off against any amounts the
Company or a subsidiary or affiliate may owe to the Participant
from time to time (including amounts payable in connection with
any Award, owed as wages, fringe benefits, or other compensation
owed to the Participant), such amounts as may be owed by the
Participant to the Company, including but not limited to amounts
owed under Section 10(a), although the Participant shall remain
liable for any part of the Participants payment obligation
not satisfied through such deduction and setoff. By accepting
any Award granted hereunder, the Participant agrees to any
deduction or setoff under this Section 11(f).
(g) Unfunded Status of Awards; Creation of
Trusts. To the extent that any Award is deferred
compensation, the Plan is intended to constitute an
unfunded plan for deferred compensation with respect
to such Award. With respect to any payments not yet made to a
Participant or obligation to deliver Stock pursuant to an Award,
nothing contained in the Plan or any Award shall give any such
Participant any rights that are greater than those of a general
creditor of the Company; provided that the Committee may
authorize the creation of trusts and deposit therein cash,
Stock, other Awards or other property, or make other
arrangements to meet the Companys obligations under the
Plan. Such trusts or other arrangements shall be consistent with
the unfunded status of the Plan unless the Committee
otherwise determines with the consent of each affected
Participant.
(h) Nonexclusivity of the Plan. Neither
the adoption of the Plan by the Board nor its submission to the
stockholders of the Company for approval shall be construed as
creating any limitations on the power of the Board or a
committee thereof to adopt such other incentive arrangements,
apart from the Plan, as it may deem desirable, including
incentive arrangements and awards which do not qualify under
Code Section 162(m), and such other arrangements may be
either applicable generally or only in specific cases.
(i) Payments in the Event of Forfeitures; Fractional
Shares. No fractional shares of Stock shall be
issued or delivered pursuant to the Plan or any Award. The
Committee shall determine whether cash, other Awards or other
property shall be issued or paid in lieu of such fractional
shares or whether such fractional shares or any rights thereto
shall be forfeited or otherwise eliminated.
(j) Compliance with Code
Section 162(m). It is the intent of the
Company that Options and SARs granted to Covered Employees and
other Awards designated as Awards to Covered Employees subject
to Section 7 shall constitute qualified
performance-based compensation within the meaning of
Code Section 162(m) and regulations thereunder, unless
otherwise determined by the Committee at the time of allocation
of an Award. Accordingly, the terms of Sections 7(b) and
(c), including the definitions of Covered Employee and other
terms used therein, shall be interpreted in a manner consistent
with Code Section 162(m) and regulations thereunder. The
foregoing notwithstanding, because the Committee cannot
determine with certainty whether a given Participant will be a
Covered Employee with respect to a fiscal year that has not yet
been completed, the term Covered Employee as used herein shall
mean only a person designated by the Committee as likely to be a
Covered Employee with respect to a specified fiscal year. If any
provision of the Plan or any Award document relating to a
Performance Award that is designated as intended to comply with
Code Section 162(m) does not comply or is inconsistent with
the requirements of Code Section 162(m) or regulations
thereunder, such provision shall be construed or deemed amended
to the extent necessary to conform to such requirements, and no
provision shall be deemed to confer upon the Committee or any
other person discretion to increase the amount of compensation
otherwise payable in connection with any such Award upon
attainment of the applicable performance objectives.
B-15
(k) Certain Limitations on Awards to Ensure Compliance
with Code Section 409A. For purposes of this
Plan, references to an award term or event (including any
authority or right of the Company or a Participant) being
permitted under Section 409A mean, for a 409A
Award, that the term or event will not cause the Participant to
be liable for payment of interest or a tax penalty under
Section 409A and, for a Non-409A Award, that the term or
event will not cause the Award to be treated as subject to
Section 409A. Other provisions of the Plan notwithstanding,
the terms of any 409A Award and any Non-409A Award, including
any authority of the Company and rights of the Participant with
respect to the Award, shall be limited to those terms permitted
under Section 409A, and any terms not permitted under
Section 409A shall be automatically modified and limited to
the extent necessary to conform with Section 409A. For this
purpose, other provisions of the Plan notwithstanding, the
Company shall have no authority to accelerate distributions
relating to 409A Awards in excess of the authority permitted
under Section 409A, and any distribution subject to
Section 409A(a)(2)(A)(i) (separation from service) to a
key employee as defined under
Section 409A(a)(2)(B)(i), shall not occur earlier than the
earliest time permitted under Section 409A(a)(2)(B)(i).
(l) Certain Limitations Relating to Accounting Treatment
of Awards. Other provisions of the Plan
notwithstanding, the Committees authority under the Plan
(including under Sections 8(c), 11(c) and 11(d)) is limited
to the extent necessary to ensure that any Option or other Award
of a type that the Committee has intended to be subject to fixed
accounting shall not become subject to variable
accounting solely due to the existence of such authority, unless
the Committee specifically determines that the Award shall
remain outstanding despite such variable accounting.
(m) Governing Law. The validity,
construction, and effect of the Plan, any rules and regulations
relating to the Plan and any Award document shall be determined
in accordance with the laws of the State of Delaware, without
giving effect to principles of conflicts of laws, and applicable
provisions of federal law.
(n) Awards to Participants Outside the United
States. The Committee may modify the terms of any
Award under the Plan made to or held by a Participant who is
then resident or primarily employed outside of the United States
in any manner deemed by the Committee to be necessary or
appropriate in order that such Award shall conform to laws,
regulations, and customs of the country in which the Participant
is then resident or primarily employed, or so that the value and
other benefits of the Award to the Participant, as affected by
foreign tax laws and other restrictions applicable as a result
of the Participants residence or employment abroad shall
be comparable to the value of such an Award to a Participant who
is resident or primarily employed in the United States. An Award
may be modified under this Section 11(n) in a manner that
is inconsistent with the express terms of the Plan, so long as
such modifications will not contravene any applicable law or
regulation or result in actual liability under
Section 16(b) for the Participant whose Award is modified.
(o) Limitation on Rights Conferred under
Plan. Neither the Plan nor any action taken
hereunder shall be construed as (i) giving any Eligible
Person or Participant the right to continue as an Eligible
Person or Participant or in the employ or service of the Company
or a subsidiary or affiliate, (ii) interfering in any way
with the right of the Company or a subsidiary or affiliate to
terminate any Eligible Persons or Participants
employment or service at any time (subject to the terms and
provisions of any separate written agreements),
(iii) giving an Eligible Person or Participant any claim to
be granted any Award under the Plan or to be treated uniformly
with other Participants and employees, or (iv) conferring
on a Participant any of the rights of a stockholder of the
Company unless and until the Participant is duly issued or
transferred shares of Stock in accordance with the terms of an
Award or an Option is duly exercised. Except as expressly
provided in the Plan and an Award document, neither the Plan nor
any Award document shall confer on any person other than the
Company and the Participant any rights or remedies thereunder.
(p) Severability; Entire Agreement. If
any of the provisions of the Plan or any Award document is
finally held to be invalid, illegal or unenforceable (whether in
whole or in part), such provision shall be deemed modified to
the extent, but only to the extent, of such invalidity,
illegality or unenforceability, and the remaining provisions
shall not be affected thereby; provided, that, if any of such
provisions is finally held to be invalid, illegal, or
unenforceable because it exceeds the maximum scope determined to
be acceptable to permit such provision to be enforceable, such
provision shall be deemed to be modified to the minimum extent
B-16
necessary to modify such scope in order to make such provision
enforceable hereunder. The Plan and any agreements or documents
designated by the Committee as setting forth the terms of an
Award contain the entire agreement of the parties with respect
to the subject matter thereof and supersede all prior
agreements, promises, covenants, arrangements, communications,
representations and warranties between them, whether written or
oral with respect to the subject matter thereof.
(q) Plan Effective Date and
Termination. The Plan as hereby amended shall
become effective if, and at such time as, the stockholders of
the Company have approved it in accordance with applicable law
and stock exchange requirements. Unless earlier terminated by
action of the Board of Directors, the authority of the Committee
to make grants under the Plan shall terminate on the date that
is ten years after the latest date upon which stockholders of
the Company have approved the Plan, and the Plan will remain in
effect until such time as no Stock remains available for
delivery under the Plan or as set forth above and the Company
has no further rights or obligations under the Plan with respect
to outstanding Awards under the Plan.
B-17
CONSECO, INC.
Annual Meeting of Shareholders To Be Held on May 12, 2009
This Proxy is Solicited on Behalf of the Board of Directors
Each person signing this card on the reverse side hereby appoints, as proxies, Edward J. Bonach,
John R. Kline, and Eric R. Johnson, 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, 11825 N. Pennsylvania St., Carmel,
Indiana at 8:00 a.m. EDT on May 12, 2009, and any adjournments thereof.
This proxy card will be voted as directed. If no instructions are specified, the shares represented
by this proxy shall be voted FOR the election of all directors listed in Item 1, FOR the approval
of the Section 382 Shareholders Rights Plan in Item 2, FOR approval of the Amended and Restated
Long-Term Incentive Plan in Item 3, and FOR the ratification of the appointment of the independent
registered public accounting firm in Item 4.
This proxy is continued on the reverse side.
Please sign on the reverse side and return promptly.
Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to be
held on May 12, 2009. The proxy statement and the annual report to shareholders are available at
www.proxyvote.com
ANNUAL MEETING OF SHAREHOLDERS OF
CONSECO, INC.
May 12, 2009
Please date, sign and mail
your proxy card in the
envelope provided as soon
as possible.
¯
Please detach along perforated line and mail in the envelope
provided. ¯
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PLEASE
SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK
YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE
x
THE BOARD OF DIRECTORS RECOMMENDS A
VOTE FOR ALL
NOMINEES LISTED BELOW.
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Election of Directors: Election of the nominees named below as
directors for one-year terms expiring in 2010. |
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NOMINEES: |
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FOR ALL NOMINEES
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Donna A. James
Debra J. Perry
C. James Prieur |
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WITHHOLD AUTHORITY
FOR ALL NOMINEES
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Philip R. Roberts
Michael T. Tokarz |
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R. Glenn Hilliard
Neal C. Schneider |
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FOR ALL EXCEPT
(See Instructions below)
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John G. Turner
Doreen A. Wright |
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 2, 3 AND 4.
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FOR
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AGAINST
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2.
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Approval of the Section 382
Shareholder Rights Plan.
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3.
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Approval of the Amended and Restated
Long-Term Incentive Plan.
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4.
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Ratification of the appointment of
PricewaterhouseCoopers LLP as
independent registered public
accounting firm of Conseco for the
fiscal year ending December 31, 2009.
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In their discretion, the proxies are authorized to vote upon such other matters as
may properly come before the meeting.
The undersigned hereby acknowledges receipt of the Notice of the Annual Meeting and
Proxy Statement dated April ___, 2009.
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INSTRUCTION:
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To withhold authority to vote for any individual nominee(s), mark FOR ALL EXCEPT and fill in the circle next to each
nominee you wish to withhold, as shown here:l
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MARK X HERE IF YOU PLAN TO ATTEND THE MEETING. |
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To change the address on your account, please check the box at right and indicate your new address in the address
space above. Please note that changes to the registered name(s) on the account may not be submitted via this method.
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Signature of Shareholder
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Date:
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Signature of Shareholder
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Date: |
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Note:
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Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator,
attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full
title as such. If signer is a partnership, please sign in partnership name by authorized person. |
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