has awarded generous severance packages to Stephen Hilbert, its former chief executive and chairman, and former finance chief Rollin Dick, who both left the company last week after presiding over a disastrous slump in its stock price and earnings.
Details of the packages are in an amended 1999 annual report filed Monday with the
Securities and Exchange Commission
. This document also includes key information about $576 million of possibly at-risk stock-purchase loans made to Hilbert and Dick as well as other high-ranking Conseco executives.
The Carmel, Ind.-based lender and insurer, which Friday
released first-quarter operating earnings that were nearly 70% below those of the year-earlier period, said Hilbert will be leaving with a cash payment of $49.4 million as well as a $3.4 million bonus for the year's first quarter. He also gets options, expiring April 2003, to purchase 2 million Conseco shares at $5.75.
Conseco stock rallied 1 3/8, or 24%, to close at 7 Monday. The shares are 80% off their 52-week high.
Hilbert's $49.4 million golden parachute is equivalent to five times his 2000 salary minus an emergency $23 million loan made in early April. The loan was effectively repaid at the end of April when the severance package was drawn up. Hilbert borrowed the $23 million so that he didn't have to sell Conseco stock to meet margin calls, according to the filing.
Also, Hilbert is allowed to take as much as 20 trips a year on Conseco's jet "subject to availability and the obligation to reimburse Conseco for such use."
Dick will receive $250,000 per year through Dec. 31, 2001. He, too, has a first-quarter bonus -- of $187,500. Conseco has granted Dick 600,000 options, with the same purchase price and expiration date as Hilbert's. Dick has been allotted 10 round trips on the jet.
Conseco is now controlled by executives from Boston-based buyout firm
Thomas H. Lee Partners
, which invested $500 million in the company late last year. The size of the severance packages would suggest Hilbert and Dick drove a hard bargain when agreeing to terminate their positions.
The filing says Hilbert and Dick are still liable for the sizable loans made to them by Conseco to buy its stock. As of March 31, Hilbert owed $162.5 million and Dick $70 million. With a loan totaling $99.7 million, Conseco director Dennis Murray, principal of Ohio law firm Murray & Murray, has borrowed the second largest sum under the stock-purchase program.
At the end of March, when Conseco shares were trading at a much higher $11.44, the total value of the stock purchased with the loans was $358.4 million, or around 62%, below the value of the loans outstanding.
The company also lent money to executives to pay interest on the stock-purchase loans. As of March 31, Hilbert, Murray and Dick owed $15.9 million, $8.8 million and $7.8 million, respectively, in interest loans.
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