38
|
| | | | | | | | |
Name | Perquisites and Other Personal Benefits (1) |
| Relocation Tax Reimbursement |
| Company Contributions to Defined Contribution Plans |
| Dividend Equivalents Paid on RSUs and Certain PSUs (2) |
|
Joseph P. Lacher, Jr. | 45,360 |
| — |
| 35,750 |
| 30,025 |
|
James J. McKinney | 19,107 |
| — |
| 20,250 |
| 15,652 |
|
John M. Boschelli | 19,482 |
| — |
| 36,000 |
| 4,912 |
|
Mark A. Green | 19,400 |
| — |
| 19,450 |
| 5,644 |
|
Duane A. Sanders | 129,614 |
| 67,361 |
| 8,250 |
| 2,637 |
|
| |
(1) | The amounts in this column include the costs of financial planning services for each NEO and, for each NEO other than Mr. Sanders, also an executive physical. For Mr. Lacher, the value also includes the incremental costs for his use of the Company aircraft and reimbursement of his travel expenses to attend board meetings of an outside non-profit organization for which he serves as a director. For Mr. Sanders, the value also includes reimbursement of relocation expenses in the amount of $112,908 and the cost for his spouse’s required attendance at a Company event. |
|
| | |
| | Executive Officer Compensation & Benefits |
(2) The amounts shown are dividend equivalents paid on RSUs and PSUs based on Three-Year Adjusted ROE, which are not factored into their grant date fair values reported in the Stock Awards column of the Summary Compensation Table. Dividend equivalents paid on PSUs based on Relative TSR are factored into such grant date fair values.
|
|
Grants of Plan-Based Awards |
Restricted Stock UnitsPSU Awards
The performance-based RSUs (“PBRSUs”)PSUs awarded to the NEOs under the Omnibus Plan onin February 4, 20152018 are subject to forfeiture and transfer restrictions until their vesting date following the third anniversary of the grant datethree-year performance period in accordance with the terms of the award agreements. Determination of the number of shares of Common Stock that will vest or be forfeited, and of any Additional Shares that will be granted, will be based, for half of the PSUs, on the Company’s total shareholder return over a three-year performance period ending on December 31, 2017Relative TSR relative to the Peer Group, and for the other half of the PSUs, on the Company’s Three-Year Adjusted ROE, each based on a three-year performance period as described in more detail above in the Compensation Discussion and Analysissection captionedunder the heading Performance-Based RSUPSU Awards Granted in 20152018, beginning on page 32. The time-based RSUs (“TBRSUs”) awarded to Ms. Lynch on February 4, 2015 were subject to forfeiture and transfer restrictions until the vesting date on the second anniversary of the grant date.31.
Stock Options
The stock options awarded to the NEOs in 2015 were granted under the Omnibus Plan. Each of these awards is aFebruary 2018 are non-qualified optionoptions for federal income tax purposes, hashave an exercise price that isequal to the closing price of a share of Common Stock on the grant date and expiresexpire on the tenth anniversary of the grant date. The stock options awarded to the NEOs were coupled with tandem stock appreciation rights (“SARs”)SARs and become exercisable in fourthree equal, annual installments beginning on the six-monthone-year anniversary of the grant date. References to stock options in this proxy statement generally include tandem SARs.
Incentive Plan Awards
Annual incentive compensation award payouts for 2018 were approved and Multi-Year PIP Awards were grantedmade under the PerformanceCompany’s EPP and Annual Incentive Plan toProgram in February 2019. The maximum potential amount for awards under the NEOs on February 4, 2015. The 2015 Annual PIP Awards were granted subject to vesting provisions relating to performance criteria measured over calendar year 2015, and payouts dueEPP shown in the table below is the maximum provided under these awards were made in March 2016. The 2015 Multi-Year PIP Awards were granted subject to vesting provisions related to performance criteria measured over a three-year period ending December 31, 2017, and determination asthe EPP for an annual award to any payouts under these awards will be made in early 2018. For each of these awards, the Compensation Committee established payout amounts for specified threshold, target and maximum performance levels.participant. The performance criteria and process of determining payouts under these awards are described in more detail in the Compensation Discussion and Analysis section under the heading ExecutivePerformance Incentive Plan sectionbeginning on page 28.26.
Forfeited Awards
The RSUs, stock options and Multi-Year PIP Awards granted to Ms. Lynch in 2015 were forfeited upon her departure from the Company on February 10, 2016.
|
| | |
| | Executive Officer Compensation & Benefits |
The following table shows each grant to the NEOs in 20152018 under the Company plans as described above:
|
| | | | | | | | | | | | | | | | | |
GRANTS OF PLAN-BASED AWARDS IN 2018 |
| | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards (2) | | Estimated Future Payouts Under Equity Incentive Plan Awards (3) | | | |
Name | Grant Date (1) |
Award Type |
Maximum ($) |
| |
Threshold (#) |
|
Target (#) |
|
Maximum (#) |
| All Other Option Awards: Number of Securities Underlying Options (#)(4) |
| Exercise or Base Price of Option Awards ($/Sh) (5) |
| Grant Date Fair Value of Stock and Option Awards ($)(6) |
|
Joseph P. Lacher, Jr. | 2/6/2018 | Stock Options | — |
| | — |
| — |
| — |
| 116,667 |
| 60.00 |
| 1,755,329 |
|
| 2/6/2018 | PSU | — |
| | 7,292 |
| 14,584 |
| 29,168 |
| — |
| — |
| 901,875 |
|
| 2/6/2018 | PSU | — |
| | 7,292 |
| 14,583 |
| 29,166 |
| — |
| — |
| 874,980 |
|
| | Annual Incentive | 6,000,000 |
| | — |
| — |
| — |
| — |
| — |
| — |
|
James J. McKinney | 2/6/2018 | Stock Options | — |
| | — |
| — |
| — |
| 27,000 |
| 60.00 |
| 406,232 |
|
| 2/6/2018 | PSU | — |
| | 1,688 |
| 3,375 |
| 6,750 |
| — |
| — |
| 208,710 |
|
| 2/6/2018 | PSU | — |
| | 1,688 |
| 3,375 |
| 6,750 |
| — |
| — |
| 202,500 |
|
| | Annual Incentive | 6,000,000 |
| | — |
| — |
| — |
| — |
| — |
| — |
|
John M. Boschelli | 2/6/2018 | Stock Options | — |
| | — |
| — |
| — |
| 24,000 |
| 60.00 |
| 361,095 |
|
| 2/6/2018 | PSU | — |
| | 1,500 |
| 3,000 |
| 6,000 |
| — |
| — |
| 185,520 |
|
| 2/6/2018 | PSU | — |
| | 1,500 |
| 3,000 |
| 6,000 |
| — |
| — |
| 180,000 |
|
| | Annual Incentive | 6,000,000 |
| | — |
| — |
| — |
| — |
| — |
| — |
|
Mark A. Green | 2/6/2018 | Stock Options | — |
| | — |
| — |
| — |
| 25,200 |
| 60.00 |
| 379,150 |
|
| 2/6/2018 | PSU | — |
| | 1,575 |
| 3,150 |
| 6,300 |
| — |
| — |
| 194,796 |
|
| 2/6/2018 | PSU | — |
| | 1,575 |
| 3,150 |
| 6,300 |
| — |
| — |
| 189,000 |
|
| | Annual Incentive | 6,000,000 |
| | — |
| — |
| — |
| — |
| — |
| — |
|
Duane A. Sanders | 2/1/2018 | Stock Options | — |
| | — |
| — |
| — |
| 15,699 |
| 63.70 |
| 250,767 |
|
| 2/1/2018 | PSU | — |
| | 1,374 |
| 2,748 |
| 5,496 |
| — |
| — |
| 169,936 |
|
| 2/1/2018 | PSU | — |
| | 1,374 |
| 2,747 |
| 5,494 |
| — |
| — |
| 174,984 |
|
| 2/6/2018 | Stock Options | — |
| | — |
| — |
| — |
| 29,100 |
| 60.00 |
| 437,828 |
|
| 2/6/2018 | PSU | — |
| | 1,819 |
| 3,638 |
| 7,276 |
| — |
| — |
| 224,974 |
|
| 2/6/2018 | PSU | — |
| | 1,819 |
| 3,637 |
| 7,274 |
| — |
| — |
| 218,220 |
|
| 2/5/2019 | Annual Incentive | 6,000,000 |
|
| — |
| — |
| — |
| — |
| — |
| — |
|
GRANTS OF PLAN-BASED AWARDS IN 2015 (1) The grant date is also the date of approval for all awards shown in the table with the exception of the February 1, |
| | | | | | | | | | | | | | | | | | | | | | | | |
|
Name |
Grant Date |
Award Type | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | All Other Stock Awards: Number of Securities Under-lying Stock Awards(#) |
| All Other Option Awards: Number of Securities Underlying Options($)(3) |
| Exercise or Base Price of Option Awards($/Sh) (4) |
| Grant Date Fair Value ($)(5) |
|
|
|
Threshold ($) |
|
Target ($) |
|
Maximum ($) |
| |
Threshold (#) |
|
Target (#) |
|
Maximum (#) |
|
| Joseph P. Lacher, Jr. | 11/19/15 | Stock Options | — |
| — |
| — |
| | — |
| — |
| — |
| — |
| 98,280 |
| 40.70 |
| 736,633 |
|
| Frank J. Sodaro | 2/4/15 | PBRSU | — |
| — |
| — |
| | 2,000 |
| 4,000 |
| 8,000 |
| — |
| — |
| — |
| 172,200 |
|
| | 2/4/15 | Stock Options | — |
| — |
| — |
| | — |
| — |
| — |
| — |
| 20,000 |
| 36.17 |
| 160,393 |
|
| | 2/4/15 | Annual PIP | 61,875 |
| 247,500 |
| 495,000 |
| | — |
| — |
| — |
| — |
| — |
| — |
| — |
|
| | 2/4/15 | Multi-Year PIP | 61,875 |
| 247,500 |
| 495,000 |
| | — |
| — |
| — |
| — |
| — |
| — |
| — |
|
| John M. Boschelli | 2/4/15 | PBRSU | — |
| — |
| — |
| | 1,500 |
| 3,000 |
| 6,000 |
| — |
| — |
| — |
| 129,150 |
|
| | 2/4/15 | Stock Options | — |
| — |
| — |
| | — |
| — |
| — |
| — |
| 15,000 |
| 36.17 |
| 120,295 |
|
| | 2/4/15 | Annual PIP | 55,000 |
| 220,000 |
| 440,000 |
| | — |
|
|
| — |
| — |
| — |
| — |
| — |
|
| | 2/4/15 | Multi-Year PIP | 55,000 |
| 220,000 |
| 440,000 |
| | — |
| — |
| — |
| — |
| — |
| — |
| — |
|
| Denise I. Lynch | 2/4/15 | PBRSU | — |
| — |
| — |
| | 2,000 |
| 4,000 |
| 8,000 |
| — |
| — |
| — |
| 172,200 |
|
| | 2/4/15 | TBRSU | — |
| — |
| — |
| | — |
| — |
| — |
| 15,000 |
| — |
| — |
| 542,550 |
|
| | 2/4/15 | Stock Options | — |
| — |
| — |
| | — |
| — |
| — |
| — |
| 20,000 |
| 36.17 |
| 160,393 |
|
| | 2/4/15 | Annual PIP | 66,000 |
| 264,000 |
| 528,000 |
| | — |
| — |
| — |
| — |
| — |
| — |
| — |
|
| | 2/4/15 | Multi-Year PIP | 66,000 |
| 264,000 |
| 528,000 |
| | — |
| — |
| — |
| — |
| — |
| — |
| — |
|
| Richard Roeske | 2/4/15 | PBRSU | — |
| — |
| — |
| | 800 |
| 1,600 |
| 3,200 |
| — |
| — |
| — |
| 68,880 |
|
| | 2/4/15 | Stock Options | — |
| — |
| — |
| | — |
| — |
| — |
| — |
| 8,000 |
| 36.17 |
| 64,157 |
|
| | 2/4/15 | Annual PIP | 37,100 |
| 148,400 |
| 296,800 |
| | — |
| — |
| — |
| — |
| — |
| — |
| — |
|
| | 2/4/15 | Multi-Year PIP | 37,100 |
| 148,400 |
| 296,800 |
| | — |
| — |
| — |
| — |
| — |
| — |
| — |
|
| Donald G. Southwell | 2/4/15 | PBRSU | — |
| — |
| — |
| | 7,500 |
| 15,000 |
| 30,000 |
| — |
| — |
| — |
| 645,750 |
|
| | 2/4/15 | Stock Options | — |
| — |
| — |
| | — |
| — |
| — |
| — |
| 80,000 |
| 36.17 |
| 641,572 |
|
| | 2/4/15 | Annual PIP | 187,500 |
| 750,000 |
| 1,500,000 |
| | — |
|
|
| — |
| — |
| — |
| — |
| — |
|
| | 2/4/15 | Multi-Year PIP | 187,500 |
| 750,000 |
| 1,500,000 |
| | — |
| — |
| — |
| — |
| — |
| — |
| — |
|
2018 grants to Mr. Sanders, which were approved as of January 31, 2018. | |
(1)(2) | These columns showNo threshold or target amounts are provided under the rangeEPP or the Annual Incentive Program. The amounts shown represent the annual maximum incentive to any participant under the terms of payoutsthe EPP because the amounts determined by the Compensation Committee at its meeting on February 5, 2019 based on the previously-approved formula and allocation percentages exceeded the maximum. The maximum amounts payable to each participant could not have been determined at the beginning of the performance period. The process for determining the awards for the NEOs and the amounts of the awards that were possibleapproved by the Compensation Committee for Annual PIP Awards2018 are detailed in the narrative descriptions about the EPP and Multi-Year PIP Awards granted in 2015, which represent the percentages of the respective officer’s annual base salary applicable to specified performance levels. The amounts estimated for Multi-Year PIP Awards are based on an average of their annual base salaries for 2015, 2016 and 2017. Base salaries for 2017 were estimated at their 2016 rates. The “Threshold” level is the minimum level of performance that must be met before any payout may occur. The amounts actually paid out under the Annual PIP Awards granted on February 4, 2015 and the Multi-Year PIP Awards granted on February 4, 2013 are includedIncentive Program in the Summary Compensation TableDiscussion and Analysis above undersection on pages 26-30 and the “Non-Equitytable captioned Annual Incentive Plan Compensation” column. Because the 2015Payouts - 2018 Annual and Multi-Year PIPEPP Awards granted to the NEOs are based on multiple components, with portions of each award based on varying performance criteria, the amounts shown in the “Threshold” columnpage 30.
|
|
| | |
| | Executive Officer Compensation & Benefits |
represent the portion of their 2015 annual base salaries that would have been paid out for performance at the “Threshold” level if actual performance reached the “Threshold” level for each component of their awards.
| |
(2)(3) | These columns show thea range of payouts possible under the performance-based RSUPSU awards granted in 2015.2018 under the Omnibus Plan. The amount shown in the “Target” column for each individualaward represents 100 percent of the RSUsPSUs granted, which equals the number of units that would vest if the “Target” performance level is achieved. The “Threshold” level is the minimum level of performance that must be met before any payout may occur, and the amount shown in the “Threshold” column is 50%50 percent of the “Target” payout amount. The amount shown in the “Maximum” column is 200 percent of the “Target” payout amount. Further information about these awards is provided in the Compensation Discussion and Analysis section under the captionheading Performance-Based RSUPSU Awards Granted in 20152018 on page 32.31. |
| |
(3)(4) | These are non-qualified stock option awards granted on the date the awards were approved by the Compensation Committee. All options granted in 2015 were non-qualified options for federal income tax purposes.under the Omnibus Plan. |
| |
(4)(5) | The exercise price of the stock option awards is equal to the closing price of a share of Common Stock on the grant date. |
| |
(5)(6) | The amounts shown represent the aggregate grant date fair values of the 20152018 stock option and RSUPSU awards. For stock options, the grant date fair values were estimated based on the Black-Scholes option pricing model. For performance-based RSUs,PSUs based on Relative TSR, the grant date fair values were estimated using the Monte Carlo simulation method. BasedFor PSUs based on the Monte Carlo simulation,ROE, the grant date fair values were based on the closing price of a share of Common Stock on the performance-based RSUs granted on February 4, 2015 was determined to be $43.05 per share.grant date. For a discussion of valuation assumptions, see Note 10, “Long-term Equity-based Compensation,” to the consolidated financial statements included in the Company’s 20152018 Annual Report on Form 10-K.Report. |
|
|
Outstanding Equity Awards at 20152018 Fiscal Year-End |
The following table shows the unexercised stock option awards and unvested restricted stock/RSU and PSU awards for each NEO that were outstanding as of December 31, 2015. The awards were granted under the Company’s Omnibus Plan and its predecessor plans.
OUTSTANDING EQUITY AWARDS AT 2015 FISCAL YEAR-END plan that were outstanding as of December 31, 2018:
| | OUTSTANDING EQUITY AWARDS AT 2018 FISCAL YEAR-END | | OUTSTANDING EQUITY AWARDS AT 2018 FISCAL YEAR-END |
| | Option Awards | | Stock Awards |
Name | | Number of Securities Underlying Unexercised Options Exercisable (#) |
| Number of Securities Underlying Unexercised Options Unexercisable (#) |
| | Option Exercise Price ($) |
| Option Expiration Date |
| | Number of Shares or Units of Stock That Have Not Vested (#) |
| | Market Value of Shares or Units of Stock that Have Not Vested ($) |
| Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested(#) |
| | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units of Other Rights That Have Not Vested($) |
|
Joseph P. Lacher, Jr. | | 73,710 |
| 24,570 |
| (1) | 40.70 |
| 11/19/2025 |
|
| — |
|
| — |
| — |
|
| — |
|
| | 72,176 |
| 24,059 |
| (2) | 27.71 |
| 3/1/2026 |
|
| — |
|
| — |
| — |
|
| — |
|
| | | | | | | | | | | | | | | | | | 86,605 |
| 86,606 |
| (3) | 43.30 |
| 2/7/2027 |
|
| — |
|
| — |
| — |
|
| — |
|
| Option Awards | | Stock Awards | — |
| 116,667 |
| (4) | 60.00 |
| 2/6/2028 |
|
| — |
|
| — |
| — |
|
| — |
|
Name | Number of Securities Underlying Unexercised Options (#) Exercisable |
| Number of Securities Underlying Unexercised Options (#) Unexercisable |
| | Option Exercise Price ($) |
| Option Expiration Date |
| | Number of Shares or Units of Stock That Have Not Vested (#) | | Market Value of Shares or Units of Stock that Have Not Vested ($) |
| Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) |
| | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units of Other Rights That Have Not Vested($) |
| |
Joseph P. Lacher, Jr. | — |
| 98,280 |
| (1) | 40.70 |
| 11/19/2025 |
| | — | | — |
| — |
| | — |
| |
Frank J. Sodaro | 6,000 |
| — |
| | 47.86 |
| 2/1/2016 |
| | — | | — |
| — |
| | — |
| |
| | — |
| — |
|
| — |
| — |
|
| — |
|
| — |
| 48,118 |
| (5) | 3,194,073 |
|
| | — |
| — |
|
| — |
| — |
|
| — |
|
| — |
| 48,118 |
| (6) | 3,194,073 |
|
| | — |
| — |
|
| — |
| — |
|
| — |
|
| — |
| 14,436 |
| (7) | 958,262 |
|
| | — |
| — |
|
| — |
| — |
|
| — |
|
| — |
| 14,434 |
| (8) | 958,129 |
|
| | — |
| — |
|
| — |
| — |
|
| — |
|
| — |
| 29,168 |
| (9) | 1,936,172 |
|
| | — |
| — |
|
| — |
| — |
|
| — |
|
| — |
| 29,166 |
| (10) | 1,936,039 |
|
James J. McKinney | | 5,038 |
| 10,075 |
| (11) | 40.20 |
| 11/17/2026 |
|
| — |
|
| — |
| — |
|
| — |
|
| 6,000 |
| — |
| | 49.79 |
| 2/6/2017 |
| | — | | — |
| — |
| | — |
| 6,236 |
| 12,472 |
| (3) | 43.30 |
| 2/7/2027 |
|
| — |
|
| — |
| — |
|
| — |
|
| 4,000 |
| — |
| | 37.15 |
| 2/5/2018 |
| | — | | — |
| — |
| | — |
| — |
| 27,000 |
| (4) | 60.00 |
| 2/6/2028 |
|
| — |
|
| — |
| — |
|
| — |
|
| 10,000 |
| 10,000 |
| (2) | 36.47 |
| 2/4/2024 |
| | — | | — |
| — |
| | — |
| — |
| — |
|
| — |
| — |
|
| 10,667 |
| (12) | 708,075 |
| — |
|
| — |
|
| 5,000 |
| 15,000 |
| (3) | 36.17 |
| 2/4/2025 |
| | — | | — |
| — |
| | — |
| — |
| — |
|
| — |
| — |
|
| — |
|
| — |
| 5,038 |
| (5) | 334,422 |
|
| — |
| — |
| | — |
| — |
| | 375 | (4) | 13,969 |
| — |
| | — |
| — |
| — |
|
| — |
| — |
|
| — |
|
| — |
| 5,038 |
| (6) | 334,422 |
|
| — |
| — |
| | — |
| — |
| | — | | — |
| 1,500 |
| (5) | 55,875 |
| — |
| — |
|
| — |
| — |
|
| — |
|
| — |
| 6,236 |
| (7) | 413,946 |
|
| — |
| — |
| | — |
| — |
| | — | | — |
| 4,000 |
| (6) | 149,000 |
| — |
| — |
|
| — |
| — |
|
| — |
|
| — |
| 6,236 |
| (8) | 413,946 |
|
| — |
| — |
| | — |
| — |
| | — | | — |
| 4,000 |
| (7) | 149,000 |
| — |
| — |
|
| — |
| — |
|
| — |
|
| — |
| 6,750 |
| (9) | 448,065 |
|
| | | | | | | | — |
| — |
| | — |
| — |
| | — |
| | — |
| 6,750 |
| (10) | 448,065 |
|
| | | | | | | | | | | | | | | | |
| | | | | | | | |
|
| | |
| | Executive Officer Compensation & Benefits |
|
| | | | | | | | | | | | | | | | | | | |
| Option Awards | | Stock Awards |
Name | Number of Securities Underlying Unexercised Options (#) Exercisable |
| Number of Securities Underlying Unexercised Options (#) Unexercisable |
| | Option Exercise Price ($) |
| Option Expiration Date |
| | Number of Shares or Units of Stock That Have Not Vested (#) | | Market Value of Shares or Units of Stock that Have Not Vested ($) |
| Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) |
| | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units of Other Rights That Have Not Vested($) |
|
John M. Boschelli | 10,000 |
| — |
| | 47.86 |
| 2/1/2016 |
| | — | | — |
| — |
| | — |
|
| 10,000 |
| — |
| | 49.79 |
| 2/6/2017 |
| | — | | — |
| — |
| | — |
|
| 10,000 |
| — |
| | 37.15 |
| 2/5/2018 |
| | — | | — |
| — |
| | — |
|
| 7,500 |
| 2,500 |
| (8) | 33.45 |
| 2/4/2023 |
| | — | | — |
| — |
| | — |
|
| 7,500 |
| 7,500 |
| (2) | 36.47 |
| 2/4/2024 |
| | — | | — |
| — |
| | — |
|
| 3,750 |
| 11,250 |
| (3) | 36.17 |
| 2/4/2025 |
| | — | | — |
| — |
| | — |
|
| — |
| — |
| | — |
| — |
| | — | | — |
| 2,000 |
| (5) | 74,500 |
|
| — |
| — |
| | — |
| — |
| | — | | — |
| 3,000 |
| (6) | 111,750 |
|
| — |
| — |
| | — |
| — |
| | — | | — |
| 3,000 |
| (7) | 111,750 |
|
Denise I. Lynch | 15,000 |
| 5,000 |
| (8)(9) | 33.45 |
| 2/4/2023 |
| | — | | — |
| — |
| | — |
|
| 10,000 |
| 10,000 |
| (2)(9) | 36.47 |
| 2/4/2024 |
| | — | | — |
| — |
| | — |
|
| 5,000 |
| 15,000 |
| (3)(9) | 36.17 |
| 2/4/2025 |
| | — | | — |
| — |
| | — |
|
| — |
| — |
| | — |
| — |
| | 15,000 | (10) | 558,750 |
| — |
| | — |
|
| — |
| — |
| | — |
| — |
| | — | | — |
| 4,000 |
| (5) | 149,000 |
|
| — |
| — |
| | — |
| — |
| | — | | — |
| 4,000 |
| (6)(9) | 149,000 |
|
| — |
| — |
| | — |
| — |
| | — | | — |
| 4,000 |
| (7)(9) | 149,000 |
|
Richard Roeske | 15,000 |
| — |
| | 47.86 |
| 2/1/2016 |
| | — | | — |
| — |
| | — |
|
| 15,000 |
| — |
| | 49.79 |
| 2/6/2017 |
| | — | | — |
| — |
| | — |
|
| 15,000 |
| — |
| | 37.15 |
| 2/5/2018 |
| | — | | — |
| — |
| | — |
|
| 7,500 |
| — |
| | 23.65 |
| 2/2/2020 |
| | — | | — |
| — |
| | — |
|
| 8,000 |
| — |
| | 27.89 |
| 2/1/2021 |
| | — | | — |
| — |
| | — |
|
| 8,000 |
| — |
| | 29.77 |
| 1/31/2022 |
| | — | | — |
| — |
| | — |
|
| 6,000 |
| 2,000 |
| (8) | 33.45 |
| 2/4/2023 |
| | — | | — |
| — |
| | — |
|
| 4,000 |
| 4,000 |
| (2) | 36.47 |
| 2/4/2024 |
| | — | | — |
| — |
| | — |
|
| 2,000 |
| 6,000 |
| (3) | 36.17 |
| 2/4/2025 |
| | — | | — |
| — |
| | — |
|
| — |
| — |
| | — |
| — |
| | — | | — |
| 1,600 |
| (5) | 59,600 |
|
| — |
| — |
| | — |
| — |
| | — | | — |
| 1,600 |
| (6) | 59,600 |
|
| — |
| — |
| | — |
| — |
| | — | | — |
| 1,600 |
| (7) | 59,600 |
|
Donald G. Southwell | 100,000 |
| — |
| | 47.86 |
| 2/1/2016 |
| | — | | — |
| — |
| | — |
|
| 100,000 |
| — |
| | 49.79 |
| 2/6/2017 |
| | — | | — |
| — |
| | — |
|
| 60,000 |
| 20,000 |
| (8) | 33.45 |
| 2/4/2023 |
| | — | | — |
| — |
| | — |
|
| 40,000 |
| 40,000 |
| (2) | 36.47 |
| 2/4/2024 |
| | — | | — |
| — |
| | — |
|
| 20,000 |
| 60,000 |
| (3) | 36.17 |
| 2/4/2025 |
| | — | | — |
| — |
| | — |
|
| — |
| — |
| | — |
| — |
| | — | | — |
| 15,000 |
| (5) | 558,750 |
|
| — |
| — |
| | — |
| — |
| | — | | — |
| 15,000 |
| (6) | 558,750 |
|
| — |
| — |
| | — |
| — |
| | — | | — |
| 15,000 |
| (7) | 558,750 |
|
|
| | | | | | | | | | | | | | | | | | | | |
OUTSTANDING EQUITY AWARDS AT 2018 FISCAL YEAR-END (continued) |
| Option Awards | | Stock Awards |
Name | Number of Securities Underlying Unexercised Options Exercisable (#) |
| Number of Securities Underlying Unexercised Options Unexercisable (#) |
| | Option Exercise Price ($) |
| Option Expiration Date |
| | Number of Shares or Units of Stock That Have Not Vested (#) |
| | Market Value of Shares or Units of Stock that Have Not Vested ($) |
| Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested(#) |
| | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units of Other Rights That Have Not Vested($) |
|
John M. Boschelli | 4,691 |
| 4,692 |
| (2) | 27.71 |
| 3/1/2020 |
|
| — |
|
| — |
| — |
|
| — |
|
| 11,085 |
| 11,086 |
| (3) | 43.30 |
| 2/7/2027 |
|
| — |
|
| — |
| — |
|
| — |
|
| — |
| 24,000 |
| (4) | 60.00 |
| 2/6/2028 |
|
| — |
|
| — |
| — |
|
| — |
|
| — |
| — |
|
| — |
| — |
|
| — |
|
| — |
| 4,692 |
| (5) | 311,455 |
|
| — |
| — |
|
| — |
| — |
|
| — |
|
| — |
| 4,692 |
| (6) | 311,455 |
|
| — |
| — |
|
| — |
| — |
|
| — |
|
| — |
| 5,544 |
| (7) | 368,011 |
|
| — |
| — |
|
| — |
| — |
|
| — |
|
| — |
| 5,542 |
| (8) | 367,878 |
|
| — |
| — |
|
| — |
| — |
|
| — |
|
| — |
| 6,000 |
| (9) | 398,280 |
|
| — |
| — |
|
| — |
| — |
|
| — |
|
| — |
| 6,000 |
| (10) | 398,280 |
|
Mark A. Green | 17,814 |
| 5,938 |
| (13) | 31.83 |
| 6/3/2026 |
|
| — |
|
| — |
| — |
|
| — |
|
| 11,250 |
| 3,750 |
| (14) | 32.20 |
| 6/15/2026 |
|
| — |
|
| — |
| — |
|
| — |
|
| 11,640 |
| 11,640 |
| (3) | 43.30 |
| 2/7/2027 |
|
| — |
|
| — |
| — |
|
| — |
|
| — |
| 25,200 |
| (4) | 60.00 |
| 2/6/2028 |
|
| — |
|
| — |
| — |
|
| — |
|
| — |
| — |
|
| — |
| — |
|
| — |
|
| — |
| 5,938 |
| (5) | 394,164 |
|
| — |
| — |
|
| — |
| — |
|
| — |
|
| — |
| 5,938 |
| (6) | 394,164 |
|
| — |
| — |
|
| — |
| — |
|
| — |
|
| — |
| 5,820 |
| (7) | 386,332 |
|
| — |
| — |
|
| — |
| — |
|
| — |
|
| — |
| 5,820 |
| (8) | 386,332 |
|
| — |
| — |
|
| — |
| — |
|
| — |
|
| — |
| 6,300 |
| (9) | 418,194 |
|
| — |
| — |
|
| — |
| — |
|
| — |
|
| — |
| 6,300 |
| (10) | 418,194 |
|
Duane A. Sanders | — |
| 15,699 |
| (15) | 63.70 |
| 2/1/2028 |
|
| — |
|
| — |
| — |
|
| — |
|
| — |
| 29,100 |
| (4) | 60.00 |
| 2/6/2028 |
|
| — |
|
| — |
| — |
|
| — |
|
| — |
| — |
|
| — |
| — |
|
| — |
|
| — |
| 5,496 |
| (7) | 364,824 |
|
| — |
| — |
|
| — |
| — |
|
| — |
|
| — |
| 5,494 |
| (8) | 364,692 |
|
| — |
| — |
|
| — |
| — |
|
| — |
|
| — |
| 7,276 |
| (9) | 482,981 |
|
| — |
| — |
|
| — |
| — |
|
| — |
|
| — |
| 7,274 |
| (10) | 482,848 |
|
| |
(1) | These options are scheduled to vest ratably in equal increments on 5/19/2016, 5/19/2017, 5/19/2018 and 5/19/2019. |
| |
(2) | These options are scheduled to vest ratably in equal increments on 8/4/2016 and 8/4/2017.9/1/2019. |
| |
(3) | These options are scheduled to vest ratably in equal increments on 8/4/2016, 8/4/20177/2019 and 8/4/2018.7/2020. |
| |
(4) | These options are time-based restricted stock awardsscheduled to vest ratably in equal increments on 2/6/2019, 2/6/2020 and 2/6/2021. |
| |
(5) | These PSUs vested on March 6, 2019, the date performance results were certified following completion of the three-year performance period for the 2016 PSU Awards based on Relative TSR that ended on February 28, 2019. The number shown represents the maximum number of PSUs that could be earned (because the performance results for the performance period through fiscal year 2018 were granted to Mr. Sodaro before heabove the target level). Market value was elected Chief Financial Officer anddetermined using the closing price of $66.38 per share of Common Stock on December 31, 2018, the last trading day of 2018. |
| |
(6) | These PSUs vested on March 6, 2019, the date performance results were certified following completion of the three-year performance period for the 2016 PSU Awards based on Three-Year Adjusted ROE that ended on December 31, 2018. The number shown represents the maximum number of PSUs that could be earned (because the performance results for the performance period through fiscal year 2018 were above the target level). Market value was determined using the closing price of $66.38 per share of Common Stock on December 31, 2018. |
| |
(7) | These PSUs are scheduled to vest on 8/4/2016.the date performance results are certified following completion of the three-year performance period for the 2017 PSU Awards based based on Relative TSR that ends on January 31, 2020. The number |
|
| | |
| | Executive Officer Compensation & Benefits |
shown represents the maximum number of PSUs that could be earned (because the performance results for the performance period through fiscal year 2018 were above the target level). Market value was determined using the closing price of $66.38 per share of Common Stock on December 31, 2018.
| |
(5)(8) | These performance-based restricted stock shares werePSUs are scheduled to vest on 2/4/16. These shares were forfeited as of the vesting date as described underperformance results are certified for the caption Performance Resultsthree-year performance period for 2013 Performance-Based Restricted Stockthe 2017 PSU Awards based on page 33.Three-Year Adjusted ROE that ends on December 31, 2019. The number of shares shown represents the targetmaximum number of sharesPSUs that could be earned (because the performance results for the performance period through fiscal year 2018 were granted.above the target level). Market value of these shares was determined using the closing price of $37.25$66.38 per share of Common Stock on December 31, 2015. 2018. |
| |
(6)(9) | These performance-based RSUsPSUs are scheduled to vest on 2/4/2017.the date performance results are certified following completion of the three-year performance period for the 2018 PSU Awards based on Relative TSR that ends on January 31, 2021 based on Relative TSR. The number shown represents the targetmaximum number of RSUsPSUs that were granted becausecould be earned (because the estimated performance results for the performance period through fiscal year 2018 were belowabove the target levels for the portion of the three-year performance period ending on December 31, 2016 that was completed as of December 31, 2015.level). Market value of these RSUs was determined using the closing price of $37.25$66.38 per share of Common Stock on December 31, 2015.2018. |
| |
(7)(10) | These performance-based RSUsPSUs are scheduled to vest on 2/4/2018.the date performance results are certified following completion of the three-year performance period for the 2018 PSU Awards based on Three-Year Adjusted ROE that ends on December 31, 2020. The number shown represents the targetmaximum number of RSUsPSUs that were granted becausecould be earned (because the estimated performance results for the performance period through fiscal year 2018 were belowabove the target levels for the portion of the three-year performance period ending on December 31, 2017 that was completed as of December 31, 2015.level). Market value of these RSUs was determined using the closing price of $37.25$66.38 per share of Common Stock on December 31, 2015.2018. |
(11) These options are scheduled to vest ratably in equal increments on 5/17/2019 and 5/17/2020.
| |
(12) | These RSUs are scheduled to vest in equal increments on 4/1/2019 and 4/1/2020. Market value was determined using the closing price of $66.38 per share of Common Stock on December 31, 2018. |
| |
(8)(13) | These options are scheduled to vest on 8/4/2016.12/3/2019. |
| |
(9)(14) | These options and performance-based RSUs were forfeitedare scheduled to vest on February 10, 2016 when Ms. Lynch left the Company.12/15/2019. |
| |
(10)(15) | These time-based RSUs were originallyoptions are scheduled to vest ratably in equal increments on 2/4/2017, but were forfeited on February 10, 2016 when Ms. Lynch left the Company.1/2019, 2/1/2020 and 2/1/2021. |
OPTION EXERCISES AND STOCK VESTED IN 20152018
|
| | | | | | | | | | | | | |
| | Option Awards | | Stock Awards |
Name | | Number of Shares Acquired on Exercise (#)(1) |
| | | Value Realized on Exercise ($)(2) |
| | Number of Shares Acquired on Vesting (#)(3) |
| | Value Realized on Vesting ($)(4) |
|
Joseph P. Lacher, Jr. | | — |
| | | — |
| | — |
| | — |
|
Frank J. Sodaro | | — |
| | | — |
| | 750 |
| | 28,879 |
|
John M. Boschelli | | 20,000 |
| | | 205,900 |
| | — |
| | — |
|
Denise I. Lynch | | 11,250 |
| | | 123,413 |
| | — |
| | — |
|
Richard Roeske | | 7,500 |
| | | 177,000 |
| | — |
| | — |
|
Donald G. Southwell | | 292,500 |
| (5) | | 2,014,350 |
| | — |
| | — |
|
|
| | | | | | | | | |
| Option Awards | | Stock Awards |
Name | Number of Shares Acquired on Exercise (#)(1) | Value Realized on Exercise ($)(2) | | Number of Shares Acquired on Vesting (#)(3) | Value Realized on Vesting ($)(4) |
Joseph P. Lacher, Jr. | — |
| — |
| | — |
| — |
|
James J. McKinney | 11,272 |
| 365,610 |
| | 5,333 |
| 303,981 |
|
John M. Boschelli | 15,942 |
| 567,906 |
| | 6,000 |
| 375,900 |
|
Mark A. Green | — |
| — |
| | — |
| — |
|
Duane A. Sanders | — |
| — |
| | — |
| — |
|
| |
(1) | This is the grosstotal number of shares subject to the exercise transactions without deduction of any shares surrendered or withheld to satisfy the exercise price and/or tax withholding obligations related thereto. |
| |
(2) | This is the difference between the exercise price of the shares acquired and the market price of such shares on the date of exercise, without regard to any related tax obligations. |
| |
(3) | This is the gross number of shares issuedthat vested without deduction for any shares withheld to satisfy tax withholding obligations. |
| |
(4) | This is the market value on the vesting date of the shares acquired on the date of vesting,that vested, without regard to any related tax obligations. Market value was determined using the closing price per share of Common Stock on the vesting date. |
| |
(5) | This includes 190,000 shares exercised by Mr. Southwell after he stepped down from the Board and his positions as President and CEO and was no longer an executive officer. |
|
| | |
| | Executive Officer Compensation & Benefits |
The Company sponsors two tax-qualified retirement plans, the Pension Plan and the DC Plan (as defined on page 35 above), that cover certain employees meeting minimum age401(k) and service-based eligibility requirements.Retirement Plan. In general,addition to be eligible for such plans, employees must be at least 21 years old with at least one year of service with the Company (as defined in the respective plan). In addition,other requirements, eligibility for the Pension Plan also requireshad required a hire date prior to January 1, 2006. Those employees hired on or after January 1, 2006 are insteadEffective June 30, 2016, the Pension Plan was frozen and its participants, which included Mr. Boschelli, became eligible to participate infor the DCretirement portion of the 401(k) and Retirement Plan. Based onThe other NEOs were not eligible for the Pension Plan due to their hire dates, the NEOs other than Mr. Lacher and Ms. Lynch participate in the Pension Plan. Ms. Lynch was eligible to participate in the DC Plan, and Mr. Lacher will be eligible to participate in the DC Plan after he completes one year of service with the Company. The NEOs are also eligible to participate in a voluntary 401(k) plan that includes a Company-matching contribution feature offered to all employees meeting age and service-based eligibility requirements.dates.
Under the Pension Plan, a participant earnsearned a benefit in an amount equal to a specified percentage of “Average Monthly Compensation” plus an additional specified percentage of “Average Monthly Compensation” above the monthly “Social Security Covered Compensation,” multiplied by the participant’s eligible years of service, up to a maximum of 30 years. “Average Monthly Compensation” is generally equal to the average of a participant’s highest monthly compensation over a 60-consecutive-month period during the 120-month period that ends three calendar months prior to a participant’s termination date.date, or for 2016, the date the Pension Plan was frozen. The “Social Security Covered Compensation” amount is determined from tables published by the Internal Revenue Service and changes each year. For 2015, the annual Social Security Covered Compensation used was $72,636. All participating NEOs areMr. Boschelli is vested underin the Pension Plan, as participants arewere vested after completing five years of service with the Company.
UnderEmployees hired on or after January 1, 2006 were eligible to participate in the DCretirement portion of the 401(k) and Retirement Plan, as were employees hired prior to 2006 after the Company will make anPension Plan was frozen, as noted above. As a result, until 2019, each of the NEOs were participants in the retirement portion of the 401(k) and Retirement Plan. Effective January 1, 2019, the 401(k) and Retirement Plan was amended to discontinue the retirement portion in favor of a better matching contribution for all employees under the 401(k) portion, and all employee retirement accounts were fully vested. In March 2019, a final annual contribution was made under the 401(k) and Retirement Plan on behalf of each participant with a participantretirement account in an amount equal to the participant’s “Annual Compensation” multiplied by a specified contribution percentage based on the participant’s years of vesting service with the Company (as such terms are defined in the plan). Ms. Lynch is vested under the DC Plan, as participants are vested after completing three years of service with the Company.
Compensation covered by both the Pension Plan and DCthe retirement portion of the 401(k) and Retirement Plan includes the participant’s base salary and annual bonus. TheAge 65 is the normal retirement age under the qualified retirement plans is age 65.plans. The normal form of distribution under the Pension Plan is a life annuity for a single retiree, or a joint and fifty-percent50-percent survivor annuity for a married retiree. Other forms of annuity are available to participants, but all forms of payment are actuarially equivalent in value. The normal form of distribution under the DCretirement portion of the 401(k) and Retirement Plan is a lump-sum payout.
Messrs. Southwell and Roeske are the NEOs currently eligible for early retirement under theThe Pension Plan. A participant is eligible for early retirement benefits upon attaining age 55 with five years of service with the Company. The early retirement benefit payable to a participant under the Pension Plan is the retirement benefit that would have been payable at the normal retirement age of 65 actuarially reduced to give effect to the participant’s age at the time of early retirement.
The SERP and DCRetirement SERP (as defined on page 35 above)38 above in the Compensation Discussion and Analysis section) were established to provide benefits to certain individuals in excess of the limitations imposed on the Pension Plan and DCthe retirement portion of the 401(k) and Retirement Plan, respectively, under the Internal Revenue Code. The Pension SERP or DCwas effectively frozen as of June 30, 2016 when the Pension Plan was frozen. The Retirement SERP benefit is, and the Pension SERP benefit previously was, computed using the same formula used for the respective tax-qualified retirement plan, without regard to the limits imposed under the Internal Revenue Code. An employee who earns compensation over the qualified plan limitation may be eligible to participate in the Retirement SERP, or DCpreviously the Pension SERP, by designation of the Board of Directors. For 2015,2018, compensation to determine the benefit under the Pension Plan and the DCretirement portion of the 401(k) and Retirement Plan was limited to $265,000.$275,000. As noted above, the retirement portion of the 401(k) and Retirement Plan was discontinued. As a result of this change, the Retirement SERP was also discontinued as of January 1, 2019.
The NEOs are also eligible to defer on a voluntary basis a portion of their salaries under the 401(k) portion of the 401(k) and Retirement Plan that includes a matching contribution feature offered by the Company to all employees meeting the age and service-based eligibility requirements.
As noted above, only Mr. Boschelli was eligible to participate in the Pension Plan and Pension SERP due to his date of hire.
|
| | |
| | Executive Officer Compensation & Benefits |
The following table shows the years of credited service and the present values of the accumulated benefits under the Pension Plan and Pension SERP for each participating NEO as of December 31, 2015. As noted above, Mr. Lacher and Ms. Lynch were not eligible to participate in the Pension Plan and SERP due to their dates of hire.
PENSION BENEFITS2018:
|
| | | | | | | | | | | |
Name | | Plan Name | | Number of Years Credited Service (#)(1) |
| | Present Value of Accumulated Benefit ($)(2) |
| | Payments During Last Fiscal Year ($) |
|
Joseph P. Lacher, Jr. | | Pension Plan | | — |
| | — |
| | — |
|
| | SERP | | — |
| | — |
| | — |
|
Frank J. Sodaro | | Pension Plan | | 19 |
| | 445,650 |
| | — |
|
| | SERP | | 19 |
| | 368,254 |
| | — |
|
John M. Boschelli | | Pension Plan | | 18 |
| | 412,465 |
| | — |
|
| | SERP | | 18 |
| | 401,534 |
| | — |
|
Denise I. Lynch | | Pension Plan | | — |
| | — |
| | — |
|
| | SERP | | — |
| | — |
| | — |
|
Richard Roeske | | Pension Plan | | 24 |
| | 769,000 |
| | — |
|
| | SERP | | 24 |
| | 620,748 |
| | — |
|
Donald G. Southwell | | Pension Plan | | 19 |
| | 930,315 |
| | — |
|
| | SERP | | 19 |
| | 4,541,697 |
| | — |
|
|
| | | | | | | |
PENSION BENEFITS |
Name | Plan Name | Number of Years Credited Service (#)(1) |
| Present Value of Accumulated Benefit ($)(2) |
| Payments During Last Fiscal Year ($) |
|
Joseph P. Lacher, Jr. | Pension Plan | — |
| — |
| — |
|
| Pension SERP | — |
| — |
| — |
|
James J. McKinney | Pension Plan | — |
| — |
| — |
|
| Pension SERP | — |
| — |
| — |
|
John M. Boschelli | Pension Plan | 18.5 |
| 449,562 |
| — |
|
| Pension SERP | 18.5 |
| 498,349 |
| — |
|
Mark A. Green | Pension Plan | — |
| — |
| — |
|
| Pension SERP | — |
| — |
| — |
|
Duane A. Sanders | Pension Plan | — |
| — |
| — |
|
| Pension SERP | — |
| — |
| — |
|
| |
(1) | As aA participant’s initial year of service as an employee is not used to determine credited service under the Pension Plan and SERP,Pension SERP. In addition, benefits for all participants under the numbers shown differ from each participant’s actualPension Plan were frozen as of June 30, 2016. The number of years of credited service by one year. Forshown for Mr. Boschelli the number shown also differs fromare less than his actual years of service by an additionalnine years and six years because ofmonths due to the Pension Plan freeze date and a lump-sum payout of six-years of accrued benefits that he received in connection withbecause of a break in his service with the Company in 1997. |
| |
(2) | These accumulated benefit values are based on the years of credited service shown and the Average Monthly Compensation (as defined in the Pension Plan) as of December 31, 2015,June 30, 2016, as described above in the narrative about the Pension Plan preceding this table. These present value amounts were determined on the assumption that distribution of benefits under the NEOs have been orplans will remain in servicenot begin until age 65, the age at which retirement may occur under the Pension Plan and Pension SERP without any reduction in benefits, using the same measurement date, discount rate and actuarial assumptions described in Note 16, “Pension Benefits,” toto the consolidated financial statements included in the Company’s 20152018 Annual Report on Form 10-K.Report. The discount rate assumption was 4.47derived from the Aon Hewitt AA Bond Universe Curve as of December 31, 2018 with a single equivalent rate of 4.21 percent for 2015 and the mortality assumptions were based on the RP-2006 Healthy Annuitant Table for MalesEmployees and Healthy Annuitants, Projected to 2041. Generationally with Scale MP-2018. |
|
|
Nonqualified Deferred Compensation |
Deferred Compensation Plan
The Deferred Compensation Plan was established to allow certain executives who are designated by the Board of Directors, as well as the non-employee members of the Board of Directors, to elect to defer a portion of their current yearcurrent-year compensation to a future period. The NEOs are eligible to participate in the Deferred Compensation Plan, but none elected to defer any of their 2018 compensation. The Deferred Compensation Plan is unfunded and exempt from certain provisions of the Employee Retirement Income Security Act of 1974, as amended. The Company does not fund or make profit-sharing or matching contributions under the Deferred Compensation Plan, and participants have an unsecured contractual commitment by the Company to pay the amounts deferred, adjusted to recognize earnings or losses determined in accordance with their elections under the plan.
To participate in the Deferred Compensation Plan, an eligible individual must make an annual irrevocable election. The form and timing of the distribution of deferrals made during a particularany given year is chosen when a participant elects to participate for that year and generally cannot be altered or revoked. The distribution for a particular year may be in the form of annual or quarterly installments payable up to a maximum of ten10 years or a single lump-sum payment. All payments begin on January 1 of the year chosen by the participant when the election is made. A participant may elect to defer up to 60 percent of his or her regular annual base salary and up to 85 percent of each award earned under any annual or multi-year incentive plan award or annual discretionary bonus regardless of amount. Withdrawals are not permitted under the Deferred Compensation Plan other
|
| | |
| | Executive Officer Compensation & Benefits |
than regularly scheduled distributions or upon Death or Disability if so chosen by the participant at the time of the annual election.
Each participant’s bookkeeping account is deemed to be invested in the hypothetical investment choice(s) selected by the participant from the choices made available by the Company. Investment choices may be changed by participants on a quarterlydaily basis. Generally, the hypothetical investment alternatives offered by the Company include a range of retail mutual funds selected by the Plan Administrator,plan administrator, which is the Compensation Committee of the Company’s Board of Directors. Investment choices selected by a participant are used only to determine the value of the participant’s account. The Company is not required to follow these investment selections in making actual investments of amounts deferred under the plan.
As employees designated by the Board of Directors, the NEOs are eligible to elect deferral of their cash salary and bonus under the Deferred Compensation Plan. Mr. Roeske is the only current NEO participant in the Deferred Compensation Plan, and he did not elect to defer any 2015 compensation under the plan. The fund selected for hypothetical investments in 2015 that would apply to Mr. Roeske’s balance under the Deferred Compensation Plan from prior deferrals (and the 2015 annual gain on investment) was the Wells Fargo Index Admin Fund (1.16 percent).
DCRetirement SERP
The DCRetirement SERP is discussed above in the narrative captioned Retirement Plans beginning on page 44. Ms. Lynch is a participant47. As noted in that narrative, the Retirement SERP was discontinued at the end of 2018. Contribution credits for 2018 were made in March 2019 to the Retirement SERP accounts for the NEOs other than Mr. Sanders, who was not eligible for the Retirement SERP prior to its discontinuance due to his hire date in 2018. The amounts of these contributions are shown in the DC SERP; Mr. Lacher will be eligible to participate when he completes one year of service with the Company.table below.
The following table shows the aggregate earnings in 20152018 and the balances as of December 31, 20152018 for Ms. Lynch under the DC SERP and Mr. RoeskeNEOs under the Deferred Compensation Plan. The other NEOs did not participate in either plan in 2015.
NONQUALIFIED DEFERRED COMPENSATIONPlan and Retirement SERP:
|
| | | | | | | | | | | |
Name | | Plan Name | | Aggregate Earnings in Last Fiscal Year ($) |
| | Aggregate Withdrawals/Distributions ($) |
| | Aggregate Balance at Last Fiscal Year End ($)(1) |
|
Joseph P. Lacher, Jr. | | Deferred Compensation Plan | | — |
| | — |
| | — |
|
| | DC SERP | | — |
| | — |
| | — |
|
Frank J. Sodaro | | Deferred Compensation Plan | | — |
| | — |
| | — |
|
| | DC SERP | | — |
| | — |
| | — |
|
John M. Boschelli | | Deferred Compensation Plan | | — |
| | — |
| | — |
|
| | DC SERP | | — |
| | — |
| | — |
|
Denise I. Lynch | | Deferred Compensation Plan | | — |
| | — |
| | — |
|
| | DC SERP | | 96 |
| | — |
| | 20,739 |
|
Richard Roeske | | Deferred Compensation Plan | | 1,624 |
| | — |
| | 141,303 |
|
| | DC SERP | | — |
| | — |
| | — |
|
Donald G. Southwell | | Deferred Compensation Plan | | — |
| | — |
| | — |
|
| | DC SERP | | — |
| | — |
| | — |
|
|
| | | | | | | |
NONQUALIFIED DEFERRED COMPENSATION |
Name | Plan Name | Registrant Contributions in Last Fiscal Year ($) |
| Aggregate Earnings in Last Fiscal Year ($) |
| Aggregate Balance at Last Fiscal Year End ($) |
|
Joseph P. Lacher, Jr. | Deferred Compensation Plan | — |
| — |
| — |
|
| Retirement SERP | 24,750 |
| (916 | ) | 38,634 |
|
James J. McKinney | Deferred Compensation Plan | — |
| — |
| — |
|
| Retirement SERP | 9,250 |
| — |
| 9,250 |
|
John M. Boschelli | Deferred Compensation Plan | — |
| — |
| — |
|
| Retirement SERP | 19,500 |
| (1,254 | ) | 40,111 |
|
Mark A. Green | Deferred Compensation Plan | — |
| — |
| — |
|
| Retirement SERP | 8,450 |
| (127 | ) | 10,373 |
|
Duane A. Sanders | Deferred Compensation Plan | — |
| — |
| — |
|
| Retirement SERP | — |
| — |
| — |
|
| |
(1) | The amounts shown in this column represent the aggregate balance for Ms. Lynch in the DC SERP and for Mr. Roeske in the Deferred Compensation Plan, and are based on prior deferrals plus earnings or losses accrued through December 31, 2015. |
|
|
Potential Payments Upon Termination or Change in Control |
The following narrative describes the applicable terms of the agreements or plans that would provide benefits to the NEOs if their employment had terminated on December 31, 2015.2018. The table below shows benefits that would have been payable to the NEOs as a direct result of either a change in control of the Company or the death or disability of the individual officer, had such an event occurred on December 31, 2015.2018. The amounts shown in the table would have been payable pursuant to individual severance agreements (“Severance Agreements”Agreements”) between the NEOs and the Company in connection withthe context of a “change in control” of the Company, as described below, or individual grant agreements executed with the Company in connection with cash bonus,incentive, stock option, PSU and/or restricted stock/RSU awards they received. None of the NEOs shown in
the table on page 49 below is a party to any other agreement with the Company that would entitlehave entitled him or her to receive any severance payments or other termination benefits from the Company as of December 31, 2015. As previously noted, the Company entered into a Separation Agreement with Ms. Lynch on March 2, 2016 that provided for certain severance benefits described in the Compensation Discussion and Analysis section above under the heading Changes to NEO Compensation for 2016 on page 33. 2018.
Retirement Plans
In addition to the amounts shown in the table on page 4948 below, the NEOs would have been entitled to receive benefits to which they have vested rights upon retirement under the Pension Plan and Pension SERP (or DC401(k) and Retirement Plan and DCRetirement SERP), as described and/or quantified above under the heading Retirement Plans and in the Pension Benefits and Nonqualified Deferred Compensation tables and corresponding footnotes, as applicable. Any NEOs who had participated
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| | Executive Officer Compensation & Benefits |
in the Deferred Compensation Plan might have been entitled to receive distributions in accordance with their previously chosen elections under the plan, as described above under the caption Nonqualified Deferred Compensation. In addition, the NEOs would have been entitled to receive benefits that are generally available to employees of the Company and do not discriminate in scope, terms or operation in favor of executive officers. These include benefits payable: (i)(a) upon termination of employment, such as payments of 401(k) and Retirement Plan distributions and accrued paid time off; and (ii)(b) upon death or disability, under life, business travel or long-term disability insurance.
In None of the case of Mr. Southwell, a voluntary early retirement election effective December 31, 2015 would have entitled him to receive vested benefits under the Pension Plan and SERP, actuarially reduced to give effect to his age on such date. The specific retirement benefit amounts that would have been paid would have been determined in accordance with the form of distribution he had elected based on the present values shown above in the Pension Benefits table. Messrs. Sodaro, Boschelli and Roeske had not reached early retirement age as of December 31, 2015 and so would not have beenNEOs were eligible to begin receiving early retirement benefits as of December 31, 2015. Ms. Lynch was vested in the DC Plan and DC SERP as of December 31, 2105 and so was entitled to receive distributions thereunder in accordance with the plan terms. Mr. Lacher was not eligible to participate in the DC Plan or DC SERP as of December 31, 2015 because he had not completed one year of service with the Company.2018.
Severance Agreements
The Severance Agreements would provide various severance benefits to the NEOs in the event their employment terminates under certain circumstances within two years after a “change in control.” Such benefits are also payable to such officers in the event their employment is involuntarily terminated (other than for cause, disability or death) or voluntarily terminated with “good reason,” in either case in anticipation of a change in control. Under the Severance Agreements, a “change in control” is deemed to occur if any person (excluding certain defined persons) is or becomes, directly or indirectly, the beneficial owner of 25%25 percent or more of the voting power of the Common Stock, or the individuals who comprised the Company’s Board of Directors on the date of the Severance Agreement, or any of the individuals they nominate, cease to comprise a majority of the Board, or if, under the circumstances specified in the Severance Agreements, a merger or consolidation of the Company or sale of substantially all of the Company’s assets is consummated or a liquidation or dissolution plan is approved by the Company’s shareholders.
If applicable, each NEO would be entitled under the Severance Agreements to: (i) to receive the following, subject to execution of a release and other specified requirements:
a lump-sum severance payment based on a multiple of three (for Messrs. Lacher and Southwell)Mr. Lacher) or two (for the other NEOs) of such officer’s annualized salary; (ii) salary and annual incentive, determined as of the higher of such officer’s prior-year annual incentive or a percentage of such officer’s salary (150 percent for Mr. Lacher or 110 percent for the other NEOs) (“Annual Incentive”) plus a pro-rata portion of the Annual Incentive based on the number of months such officer was employed during the year in which the change in control occurred;
continuation for up to three years (in the case of Messrs. Lacher and Southwell)(for Mr. Lacher) or two years (for the other NEOs) of the life and health insurance benefits that were being provided by the Company to such officerNEO and his dependents immediately prior to termination;
a lump-sum payment equal to the excess of cost for COBRA coverage over the employee-cost for health insurance benefits for 36 months (for Mr. Lacher) or her24 months (for the other NEOs) being provided by the Company to such NEO and his family immediately prior to termination;termination, regardless of whether COBRA coverage is elected by the NEO; and (iii)
outplacement services at the Company’s expense for up to fifty-two52 weeks.
Performance Incentive Plan Awards
Had there beenThe Severance Agreements include a provision related to potential excise taxes payable by the NEOs under Sections 4999 and 280G of the Code that would entitle them to receive either (a) the full benefits payable as a result of a qualifying termination related to a change inof control, of the Company (as definedwhether under the Severance Agreements, equity award agreements or other applicable award agreements) as of December 31, 2015,provisions (subject to such potential excise taxes), or (b) a reduced amount that falls below the applicable performance period for any outstanding Annual PIP Award or Multi-Year PIP Award would have ended on such date. Thesafe harbor provided under Section 280G, whichever amount of the payout due under each such award would have beenprovides the greater of the payout due: (a) based on the actual results for the revised performance period relativeafter-tax value to the applicable performance goal(s) for the award; or (b) at the target performance level for the award.
If the employment of one of the NEOs had terminated as of December 31, 2015 due to death or disability, the applicable performance period for any outstanding Annual PIP Award or Multi-Year PIP Award would have ended on such date. The amount of the payout due under each such award would have been the amount due at the target performance level for such award, reduced pro-rata based on the number of months remaining in the performance period as of the date of termination.
For awards granted beginning in 2014, if the employment of one of the NEOs had terminated as of December 31, 2015 and, as of such date, such officer was Retirement Eligible, the determination of any payouts under any outstanding Annual PIP Award or Multi-Year PIP Award would have been based on the actual performance results determined at the end of the original performance period for the award, but the amount due would have been prorated based on the ratio of the number of months that such officer was employed during the performance period to the total number months in the performance period. The amount due would have been paid at the same time as the payouts under the respective Annual and Multi-Year PIP Awards to active plan participants.
If the employment of an NEO had terminated as of December 31, 2015 for any other reason, any outstanding Multi-Year PIP Award would have been forfeited on the termination date.NEO.
Equity-Based Awards
Stock Option Awards
If the employment of an NEO had terminated as of December 31, 20152018 due to death or disability or due to a change in control of the Company, any outstanding unvested stock option award would have vested on the termination date. For awards granted beginning in 2014, if the employment of an NEO had terminated as of December 31, 20152018 and, as of such date, such officer was Retirement Eligible, any outstanding unvested stock option award would remain outstanding and continue to vest in accordance with the original vesting terms. If the employment of an NEO had terminated as of December 31, 20152018 for any other reason, such outstanding unvested stock option awards would have been forfeited on the termination date.
Time-Based Restricted Stock/ |
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| | Executive Officer Compensation & Benefits |
RSU Awards
If the employment of an NEO had terminated as of December 31, 20152018 due to death or disability or due to a change in control of the Company, any outstanding unvested time-based restricted stock/RSU awards would have vested on the termination date. For awards granted beginning in 2014, if the employment of an NEO had terminated as of December 31, 20152018 and, as of such date, such officer was Retirement Eligible, any outstanding unvested time-based restricted stock/RSU awards would remain outstanding and continue to vest in accordance with the original vesting terms. If the employment of an NEO had terminated as of December 31, 20152018 for any other reason, such outstanding unvested time-based restricted stock/RSU awards would have been forfeited on the termination date.
Performance-Based Restricted Stock/RSUPSU Awards
If the employment of an NEO had terminated as of December 31, 20152018 due to a change in control of the Company, the performance period for any outstanding performance-based restricted stock/RSU awards held by such officer would have ended on the termination date. The shares granted under each award would have vested in an amount equal to the number of shares that would vest based on the greater of the target performance level or actual performance results for the truncated performance period.
If the employment of an NEO had terminated as of December 31, 20152018 due to death or disability, the performance period for any outstanding performance-based restricted stock/RSUPSU awards held by such officer would have ended on the termination date. The shares granted under each award would have vested in an amount equal to the number of shares that would vest at the target performance level, reduced pro-rata based on the ratio of the number of months in the truncated performance period to the total number months in the original performance period.
For awards granted beginning in 2014, ifIf the employment of an NEO had terminated as of December 31, 20152018 and, as of such date, such officer was Retirement Eligible, any outstanding performance-based restricted stock/RSUPSU awards would remain outstanding until the end of the original performance period and then vest or be forfeited as determined based on actual performance results, but reduced pro-rata based on the ratio of the number of months that such officer was employed during the performance period to the total number months in the performance period. If, as of such termination date, such
officer was not Retirement Eligible, any outstanding unvested performance-based restricted stock/RSUPSU awards would have been forfeited on the termination date.
The following table shows amounts that would have become payable to the NEOs in connection with their termination of employment as of December 31, 20152018 resulting from a change in control of the Company or the death or disability of the individual officer.officer:
POTENTIAL PAYMENTS UPON TERMINATION
FROM A CHANGE IN CONTROL (“CIC”)
OR DEATH/DISABILITY AT DECEMBER 31, 20152018 |
| | | | | | | | | | | | |
Name | Lump-Sum Severance Payments (1) |
| Accelerated Stock Options (2) |
| Accelerated RSUs (2)(3) |
| Accelerated PSUs (2)(4)(5) |
| Services and Payments related to Welfare Benefits and Out-placement (6) |
| Total |
|
Joseph P. Lacher, Jr. |
|
|
|
|
|
|
Termination due to Change in Control | 12,250,000 |
| 4,304,521 |
| — |
| 11,305,470 |
| 112,284 |
| 27,972,275 |
|
Death or Disability | — |
| 4,304,521 |
| — |
| 6,088,374 |
| — |
| 10,392,895 |
|
Other Termination | — |
| — |
| — |
| — |
| — |
| — |
|
James J. McKinney |
|
|
|
|
|
|
Termination due to Change in Control | 3,600,000 |
| 723,877 |
| 708,076 |
| 2,191,237 |
| 56,707 |
| 7,279,897 |
|
Death or Disability | — |
| 723,877 |
| 708,076 |
| 1,196,433 |
| — |
| 2,628,386 |
|
Other Termination | — |
| — |
| — |
| — |
| — |
| — |
|
|
| | |
| | Executive Officer Compensation & Benefits |
|
| | | | | | | | | | | | |
| Joseph P. Lacher, Jr. |
| Frank J. Sodaro
|
| John M. Boschelli |
| Denise I. Lynch |
| Richard Roeske |
| Donald G. Southwell |
|
Change In Control | | | | | | |
Lump-Sum Severance Payments(1) | 2,250,000 |
| 900,000 |
| 800,000 |
| 960,000 |
| 742,000 |
| 3,000,000 |
|
Accelerated Stock Options(2) | — |
| 24,000 |
| 27,500 |
| 43,000 |
| 17,200 |
| 172,000 |
|
Accelerated Time-Based Restricted Stock/RSUs(2) | — |
| 13,969 |
| — |
| 558,750 |
| — |
| — |
|
Accelerated Performance-Based Restricted Stock/RSUs(2)(3) | — |
| 353,875 |
| 298,000 |
| 447,000 |
| 178,800 |
| 1,676,250 |
|
Annual PIP Awards(4) | — |
| 130,206 |
| — |
| 139,999 |
| 54,746 |
| 500,625 |
|
Multi-Year PIP Awards(5) | — |
| 484,421 |
| 418,213 |
| 617,430 |
| 304,325 |
| 1,566,750 |
|
Life Insurance Continuation Premium(6) | 25,968 |
| 17,880 |
| 17,880 |
| 18,960 |
| 22,802 |
| 63,888 |
|
Health Insurance Continuation Premium(6) | — |
| 38,969 |
| 38,969 |
| 38,969 |
| 10,259 |
| 35,162 |
|
Outplacement Services(6) | 14,400 |
| 14,400 |
| 14,400 |
| 14,400 |
| 14,400 |
| 14,400 |
|
280G Reduction of Benefits(7) | (648,590 | ) | (787,183 | ) | — |
| — |
| — |
| — |
|
Total | 1,641,778 |
| 1,190,537 |
| 1,614,962 |
| 2,838,508 |
| 1,344,532 |
| 7,029,075 |
|
Death or Disability | | | | | | |
Accelerated Stock Options(8) | — |
| 24,000 |
| 27,500 |
| 43,000 |
| 17,200 |
| 172,000 |
|
Accelerated Time-Based Restricted Stock/RSUs(8) | — |
| 13,969 |
| — |
| 558,750 |
| — |
| — |
|
Accelerated Performance-Based Restricted Stock/RSUs(8)(9) | — |
| 204,875 |
| 186,250 |
| 298,000 |
| 119,200 |
| 1,117,500 |
|
Annual PIP Awards(10) | — |
| 247,500 |
| 220,000 |
| 264,000 |
| 148,400 |
| 750,000 |
|
Multi-Year PIP Awards(11) | — |
| 432,500 |
| 387,500 |
| 478,000 |
| 255,150 |
| 1,500,000 |
|
Total | — |
| 922,844 |
| 821,250 |
| 1,641,750 |
| 539,950 |
| 3,539,500 |
|
|
| | | | | | | | | | | | |
POTENTIAL PAYMENTS UPON TERMINATION FROM A CHANGE IN CONTROL (“CIC”) OR DEATH/DISABILITY AT DECEMBER 31, 2018 (continued) |
Name | Lump-Sum Severance Payments (1) |
| Accelerated Stock Options (2) |
| Accelerated RSUs (2)(3) |
| Accelerated PSUs (2)(4)(5) |
| Services and Payments related to Welfare Benefits and Out-placement (6) |
| Total |
|
John M. Boschelli | | | | | | |
Termination due to Change in Control | 2,600,000 |
| 590,386 |
| — |
| 1,976,133 |
| 62,802 |
| 5,229,321 |
|
Death or Disability | — |
| 590,386 |
| — |
| 1,077,679 |
| — |
| 1,668,065 |
|
Other Termination | — |
| — |
| — |
| — |
| — |
| — |
|
Mark A. Green | | | | | | |
Termination due to Change in Control | 2,340,000 |
| 762,760 |
| — |
| 2,209,193 |
| 54,727 |
| 5,366,680 |
|
Death or Disability | — |
| 762,760 |
| — |
| 1,198,690 |
| — |
| 1,961,450 |
|
Other Termination | — |
| — |
| — |
| — |
| — |
| — |
|
Duane A. Sanders | | | | | | |
Termination due to Change in Control | 3,886,667 |
| 227,731 |
| — |
| 1,313,833 |
| 88,574 |
| 5,516,805 |
|
Death or Disability | — |
| 227,731 |
| — |
| 847,673 |
| — |
| 1,075,404 |
|
Other Termination | — |
| — |
| — |
| — |
| — |
| — |
|
(1) The amounts shown represent cash severance payable under the Severance Agreements.
| |
(1) | The amounts shown represent cash severance payable under the Severance Agreements assuming no reduction would be made under the provision in the agreements related to potential excise taxes payable by the NEOs under Sections 4999 and 280G of the Code. Any such reduction would have been determined based on the specific facts of the actual termination event. |
| |
(2) | The amounts shown for a hypothetical termination due to a change in control assume that the Boardacceleration of Directors elected to accelerate the vesting of outstanding stock options, PSUs and restricted stock/RSU sharesRSUs as of December 31, 2015.2018. Acceleration of the vesting would occur automatically upon the death or disability of the NEO pursuant to the terms of the applicable plans and grant agreements. The amounts shown represent the “in-the-money” value of the stock options and market value of restricted stock/PSUs and RSUs that would have been subject to accelerated vesting as of December 31, 2015. The value shown for accelerated “underwater” stock options is zero.2018. The total numbers and market values of unvested restricted stock/RSU awardsPSUs and RSUs and the numbers of shares subject to unvestedoutstanding stock options, and the exercise prices thereof, are set forth in the Outstanding Equity Awards at 20152018 Fiscal Year-End table.table on page 44. The accelerated stock option and restricted stock/RSU values shown were calculated using the closing price of $37.25$66.38 per share of Common Stock on December 31, 2015.2018. |
| |
(3) | The amounts shown represent the values included inof outstanding RSUs that would automatically vest from the table representhypothetical termination event. |
| |
(4) | The amounts shown for a payout at the target performance level. In the event ofhypothetical termination due to a change in control represent estimated values of payouts under the 2016, 2017 and 2018 PSUs resulting from such event as of December 31, 2018. In such event, the payout under outstanding performance-based restricted stock/RSUsPSUs would be based on the greater of performance at the target level or actual performance results for a truncated performance period ending on the date of the change in control. |
| |
(4) | The amounts shown Except for the 2018 PSUs based on Relative TSR, the values included in the table represent estimated values of payouts undera payout at the 2015 Annual PIP Awards resulting from a hypothetical termination event as of December 31, 2015. The amount of the payout would have been the greater of the payout due based onmaximum performance level because the actual performance results or atfor the targettruncated period exceed the performance level.level necessary to obtain a maximum payout. For the NEOs other than Mr. Lacher (who did not receive a 2015 award) and Mr. Boschelli, the payout due2018 PSUs based on actual performance results was lower thanRelative TSR, the payout atvalues included in the target performance level. Accordingly, the excess of thetable represent a payout at the target performance level overbecause the payout due based on actual performance results is included infor the table for such NEOs.truncated period were below the target performance level necessary to obtain a maximum payout. |
For Mr. Boschelli, the payout due based on actual performance results exceeded the payout at the target performance level, entitling him to receive the payout whether there was or was not a termination event on December 31, 2015. Accordingly, no additional payout is included in the table for Mr. Boschelli. The processes for determining Annual PIP Award payouts under possible termination events are described in the narrative preceding this table.
| |
(5) | The amounts shown for a hypothetical death or disability represent estimated values of payouts under the 2013, 20142016, 2017 and 2015 Multi-Year PIP Awards2018 PSU awards resulting from a hypothetical terminationsuch event as of December 31, 2015. The amount of the payout for each award would have been the greater of the payout due based on the actual performance results or at the target performance level. For the 2013 Multi-Year PIP Awards, for all NEOs other than Mr. Lacher (who did not receive2018. In such an award) and Mr. Boschelli, the payout due based on actual performance results was lower than the payout at the target performance level. Accordingly, the excess of the payout at the target performance level over the payout due based on actual performance results is included in the table for such NEOs. For Mr. Boschelli, the payout due based on actual performance results exceeded the payout at the target performance level, entitling him to receive the payout whether or not a termination event, occurred on December 31, 2015. Accordingly, no additional payout is included in the table for Mr. Boschelli for the 2013 Multi-Year PIP awards. For all NEOs except Mr. Lacher (who did not receive such awards), the amounts included in the table for the 2014 and 2015 Multi-Year PIP Awards represent the amount of the payout for such awards at the greater of target or estimated actual performance level for the truncated performance period ending on December 31, 2015. The processes for determining Multi-Year PIP Award payouts under possible termination events are described in the narrative preceding this table. |
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(6) | The amounts shown are the estimated costs to the Company to provide continuation of life and health insurance benefits for up to three years (in the case of Messrs. Lacher and Southwell) or two years (for the other NEOs) and outplacement services for fifty-two weeks pursuant to the Severance Agreements. |
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(7) | The amounts shown are reductions in the payments to Messrs. Lacher and Sodaro estimated to result from a hypothetical change in control as of December 31, 2015 pursuant to a provision in each Severance Agreement that would require such reductions to ensure that the payments would not be subject to excise taxes under Sections 4999 and 280G of the Internal Revenue Code. These estimates were determined using safe harbors contained in regulations to Section 280G; however, the determination of whether the actual payment would be subject to Sections 4999 and 280G of the Internal Revenue Code would have been based on the specific facts of the actual transaction resulting in a change of control. |
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(8) | The amounts shown represent the in-the-money value of the stock options and the market value of restricted stock/RSUs that would have been subject to accelerated vesting as of December 31, 2015. The accelerated stock options and restricted stock/RSU values shown were calculated using the closing price of $37.25 per share of Common Stock on December 31, 2015. Acceleration of the vesting of stock options and restricted stock/RSUs would occur automatically upon the death or disability of the NEO pursuant to the terms of the applicable plans and grant agreements. The total numbers and market values of shares subject to unvested stock options, and the exercise prices thereof, and of unvested restricted stock/RSU awards are set forth in the Outstanding Equity Awards at 2015 Fiscal Year-End table on page 41.
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(9) | For the three-year performance period ending on December 31, 2015, the value included in the table represents 100 percent of a payout at the target performance level. For the three-year performance period ending on December 31, 2016, the value included in the table represents two-thirds of a payout at the target performance level. For the three-year performance period ending on December 31, 2017, the value included in the table represents one-third of a payout at the target performance level. |
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(10) | The amounts shown represent estimated values of payouts under the 2015 Annual PIP Awards resulting from a hypothetical death or disability as of December 31, 2015. The value included in the table is the amount of a payout at the target performance level. No pro-rata reduction would be made since the event would have occurred on the last day of the performance period. |
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(11) | The amounts shown represent estimated values of payouts under the 2013, 2014 and 2015 Multi-Year PIP Awards resulting from a hypothetical death or disability as of December 31, 2015. Under these circumstances, the amount of the payout for each award would have been determined at the target level but reduced pro-rata based on the number of full months in the Performance Period during which the NEO was an active Employeeemployee for at least fifteen days divided by the total number of months in the original Performance Period. |
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| | Executive Officer Compensation & Benefits |
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(6) | The amounts shown are the estimated costs to the Company to provide continuation of life insurance benefits for up to three years (in the case of Mr. Lacher) or two years (for the other NEOs), lump-sum payments related to health insurance, and outplacement services for fifty-two weeks pursuant to the Severance Agreements, as described in the narrative preceding this table. The lump-sum payment related to health insurance is equal to the amount the COBRA-rate would exceed the active-employee rate for the officer’s coverage for 36 months for Mr. Lacher and 24 months for all other NEOs regardless of whether such officer would elect to continue coverage under COBRA. |
Pay Ratio Disclosure
The Company determined our median employee from our entire employee population to provide a ratio comparison of monthsthe total compensation of Mr. Lacher, our CEO, with the total compensation of the median employee for 2018. In doing so, the Company annualized the compensation of all full-time and part-time employees. The median employee’s compensation was determined as of October 1, 2018, in accordance with the methodology and components used in the original Performance Period. ForSummary Compensation Table for our NEOs. The 2018 total compensation was determined to be $68,193 for our median employee, ($48,035 base salary plus employer-paid health, life and retirement benefit costs of $20,158), and $6,905,879 for Mr. Lacher. Based on this information, the three-year performance period ending on December 31, 2015,ratio of the value included inannual total compensation of Mr. Lacher to that of the table represents 100 percent ofmedian employee is estimated to be 101 to 1. The applicable SEC rules for identifying the median employee and calculating the pay ratio allow companies to use different methodologies and assumptions, and as a payout atresult, our estimated pay ratio may not be comparable to the target performance level. For the three-year performance period ending on December 31, 2016, the value included in the table represents two-thirds of a payout at the target performance level. For the three-year performance period ending on December 31, 2017, the value included in the table represents one-third of a payout at the target performance level. The processes for determining Multi-Year PIP Award payouts under possible termination events are described in the narrative preceding this table.pay ratios disclosed by other companies.
Proposal 3: Consider andAdvisory Vote on Approvalto Approve the Compensation of the Material Terms of Performance GoalsCompany’s Named Executive Officers
under the Company's 2011 Omnibus Equity Plan
The Omnibus Plan was adopted
This proposal provides you with the opportunity to vote, on a non-binding, advisory basis, to approve the compensation of the NEOs as disclosed in this Proxy Statement in accordance with the applicable compensation disclosure rules (the “Say-On-Pay Vote”). At the Company’s 2018 Annual Meeting, the Company’s shareholders approved the Company’s Say-On-Pay Vote by 97.8 percent of the Boardvotes cast on February 2, 2011, and approved bythe proposal.
In voting on Proposal 3, you will be voting whether to approve the following resolution:
“RESOLVED, that, the Company’s shareholders on May 4, 2011, for all future awards of equity-basedapprove the compensation paid to the Company’s employees and non-employee directors. AtNamed Executive Officers, as disclosed pursuant to Item 402 of SEC Regulation S-K in the 2016Proxy Statement for the 2019 Annual Meeting of Shareholders, are being askedincluding the section captioned Compensation Discussion and Analysis, the compensation tables and related narrative discussions.”
This proposal is not intended to re-approveaddress any specific element of compensation; rather, the material termsvote relates to the compensation of performance goals under the Omnibus Plan,NEOs as described below, in orderthis Proxy Statement in accordance with the compensation disclosure rules of the SEC. The vote is advisory, which means the vote is not binding on the Company, the Board of Directors or the Compensation Committee. However, the Compensation Committee will take into account the outcome of the vote when considering future executive compensation arrangements.
The Compensation Discussion and Analysis section of this Proxy Statement that begins on page 20 above provides an Executive Summary and detailed information on the executive compensation program and amounts paid to preserve the Company’s federal income tax deductionNEOs for such awards.2018. The Company is not seeking approvalencourages you to review the Compensation Discussion and Analysis in considering whether to vote in favor of additional shares or other changesthis proposal. The Company believes the 2018 executive compensation program has served as an effective means of attracting and retaining the new members of its leadership teamand that the program’s components, including the Company’s Annual Incentive Program, serves as a key supporting mechanism to the Omnibus Plan.
Section 162(m) of the Internal Revenue Code imposes an annual limit of $1 million on the federal corporate tax deduction by a publicly-held corporation on compensation paid to each of its “Covered Employees,” who are defined as the company’s chief executive officer and executive officers (except for its chiefCompany’s improved financial officer) as of the end of the applicable year, whose compensation is required under SEC rules to be disclosed in the company’s proxy statement tables. The $1 million limitation does not apply to “performance-based compensation” that satisfies the requirements of Section 162(m).
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Purpose of Proposal: Approval of the Material Terms of Performance Goals under Omnibus Plan |
The requirements of Section 162(m) include obtaining shareholder approval of the following material terms of the Omnibus Plan at least every five years: (1) the class of employees eligible to receive compensation upon achievement of performance goals applicable to awards under the plan; (2) the business criteria on which such performance goals may be based; and (3) the maximum amount that could be paid to any Covered Employee upon the achievement of the performance goal(s) applicable to an award under the plan.performance.
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Eligibility: The ClassRecommendation of Employees Eligible to Receive Compensation upon Achievementthe Board of Performance Goals
Applicable to Awards under the Omnibus Plan Directors |
Eligible participants in the Omnibus Plan include all employeesThe Board of the Company’s subsidiaries and affiliates and non-employee directors of the Company, and, by specific designation of the Compensation Committee, other key individuals who provide certain consulting or advisory services to the Company or its subsidiaries. The selection of actual grant recipients from among individuals eligible to participate (“Participants”) in the Omnibus Plan will be determined from time to time in the discretion of the Compensation Committee (or by an authorized Company officer or Board committee as described the Directors recommends that you vote “AdministrationFOR section below).” Proposal 3.
As of December 31, 2015, approximately 3,000 employees and six non-employee directors were eligible to receive grants under the Omnibus Plan. Grants under the Omnibus Plan are expected to be utilized primarily for grants to a selective group of managerial-level employees and the Company’s non-employee directors.
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Performance Measures: The Business Criteria on Which Such Performance Goals May be Based |
For grants intended to qualify as Performance-Based Compensation, the Compensation Committee is required to approve the performance goals for the applicable performance period no later than the latest date permitted under Section 162(m). The performance goals will be based on one or more of the following performance measures that are set forth in the plan:
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(a) | Measures of profitability including, but not limited to, net income, operating earnings, and earnings before or after any one or more of the following: taxes, interest, depreciation, amortization and other non-cash charges; |
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(b) | Measures of revenue including, but not limited to, earned premiums, written premiums, investment income, investment gains, and any other revenue measures reported by the Company in its financial statements; |
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(c) | Measures of return including, but not limited to, return on assets, capital, invested capital, equity, earned premiums, written premiums, revenues, and returns and yields with respect to investment portfolio performance; |
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(d) | Cash flow including, but not limited to, operating cash flow, free cash flow, and cash flow return on equity; |
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(e) | Measures related to insurance policy retention, operating efficiencies, and productivity; |
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(f) | The Company’s share price including, but not limited to, share appreciation measures and measures of total shareholder return; |
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(g) | Measures based on cost or expense targets; |
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(i) | Customer satisfaction; |
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(k) | Economic value added or EVA® [net operating profit after tax] less [cost of equity capital];
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(l) | Insurance underwriting income, combined ratios, loss ratios or expense ratios; and |
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(m) | Recovery of capital or capital efficiency. |
Determination of Award Payouts
In accordance withProposal 4: Vote to Approve the Company’s procedures, after each performance period, the Company will provide the data and calculations necessary to assess the results and achievement of performance goals applicable to grants for such performance period, and the Compensation Committee will make a determination as to the degree of achievement of each performance goal based on such results.In its evaluation of performance, the Compensation Committee may include or exclude unusual events that occur during the applicable performance period as permitted by the plan. The Compensation Committee has the discretion to adjust these awards downward, either on a formula or discretionary basis or any combination, and to grant awards with different vesting terms that do not qualify as Performance-Based Compensation.2019 Employee Stock Purchase Plan
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Participant Award Limits: The Maximum Amount that Could be Paid to any Covered EmployeeOverview and other Participants
upon the Achievement of the Performance Goal(s) Applicable to an Award under the
Omnibus Plan Reason for Proposal |
The Omnibus
On February 6, 2019, the Board approved the Company’s 2019 Employee Stock Purchase Plan imposes(“ESPP”), subject to shareholder approval at the following annual aggregate limits onAnnual Meeting. If approved by the number ofshareholders, 1,300,000 shares of Common Stock that maywill be issued pursuantreserved for issuance under the ESPP, and the ESPP will be effective on June 1, 2019 for a term of ten years. The Company intends to register the shares reserved for issuance under the ESPP on a Form S-8 following award types to any Participant other than a non-employee director:
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Award Type | Annual Share Limit |
Stock Options/SARs | 1,500,000 |
Restricted Stock and RSUs | 500,000 |
Performance Shares and Performance Units | 500,000 |
Other Stock-Based Awards | 500,000 |
approval by the shareholders.The Omnibus Plan imposespurpose of the following limits onESPP is to provide eligible employees of the aggregate number ofCompany and its subsidiaries with the opportunity to purchase shares of Common Stock that mayat a discounted price through payroll deductions, with the goal of enhancing their sense of participation in the Company and further aligning their interests with those of the Company’s shareholders. If approved, the ESPP will be issued pursuantan important part of the Company’s overall strategy to Awards to non-employee directors:attract and retain highly qualified and motivated employees and will facilitate alignment of employee interest with the growth and success of the Company and the interests of its shareholders.
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Category | Share Limit |
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Aggregate maximum shares to any one director annually | 20,000 |
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Aggregate maximum to all non-employee directors during the termSummary Description of the plan | 1,000,000 | ESPP |
If
The following is a summary of the numberprincipal provisions of outstanding sharesthe ESPP, and is qualified in its entirety by reference to the ESPP document, which is attached to this proxy statement as Appendix B and incorporated herein by reference. Shareholders are urged to read the actual text of Common Stock is increased or decreased through a reorganization, recapitalization, reclassification, special cash dividend, stock dividend, stock split, reverse stock split or other similar transaction, the number
53ESPP in its entirety.
Administration
The Board, or a committee designated by the Board (“ESPP Committee”) will administer the ESPP and will have full discretionary power to interpret the ESPP, issue rules for administering the ESPP, change, alter, amend or rescind such rules, and make all other determinations necessary or appropriate for the administration of the ESPP. The ESPP Committee may also delegate its responsibilities to employees of the Company or its subsidiaries.
Eligibility
All employees of the Company or a subsidiary who customarily work a minimum of 20 hours per week will be eligible to participate in the ESPP, with the exception of any employee who (i) immediately after the end of an offering period, would be deemed for purposes of Section 423(b)(3) of the Code to possess five percent or more of the total combined voting power or value of all classes of stock of the Company or any subsidiary, or (ii) is an executive officer of the Company subject to the reporting requirements under Section 16 of the Exchange Act. A subsidiary must be approved for participation in the ESPP by the Company’s CEO.
Offering Periods
Unless the ESPP Committee determines otherwise, the ESPP will be administered with four offering periods annually, each three months in duration, commencing, respectively, on January 1, April 1, July 1, and October 1 (or the next trading day, if such date is not a trading day). If approved by the shareholders at the Annual Meeting, the Company anticipates the first offering period to commence on July 1, 2019 and continue until September 30, 2019.
Payroll Deductions
To participate in an offering period, an eligible employee must authorize contributions to be collected through payroll deductions in whole number percentages of not less than one percent or more than 10 percent of such employee’s eligible compensation. Eligible compensation is an employee’s fixed salary, base hourly wage or commissions (with respect to commissioned employees). A participant may not increase the deduction during an offering period, but may decrease the deduction no more than once per offering period no more than once per offering period. A participant may change the
of shares of Common Stock that may be issued or subject to outstanding awards, the option price or grant price applicable to outstanding awards, the annual per-Participant award limits, and other value determinations are subject to adjustment by the Compensation Committee. The Compensation Committee may also make adjustments to reflect other unusual or nonrecurring events affecting the Company or changes in applicable laws, rules, regulations or accounting principles.
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Description of the Omnibus Plan4 |
The following is a description of the other terms of the Omnibus Plan not described on the preceding pages. These descriptions are only summaries and are qualified by reference
percentage deduction for any subsequent offering period prior to the actual plan document, the current version ofdate on which was filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the third quarter of 2013 filed with the SEC on October 31, 2013. You may access the plan document from the SEC’s website at www.sec.gov or from the Company’s website at kemper.com, or you may obtain a copy from the Company at no charge by contacting Kemper Investor Relations by telephone at 312.661.4930, by e-mail at investors@kemper.com, or by mail to One East Wacker Drive, Chicago, Illinois 60601, Attention: Investor Relations.
The Omnibus Plan became effective on May 4, 2011, upon shareholder approval (“Effective Date”), for a term of ten years, unless terminated soonersuch period commences in accordance with its terms.the ESPP and procedures adopted by the ESPP Committee. In addition to the percentage limit on compensation, a participant may not have more than $25,000 in payroll deductions during any calendar year for purposes pf purchasing shares under the ESPP. Any amount remaining in a participant’s account after the purchase of shares will be refunded without interest; provided that any amounts remaining in a participant’s account that were insufficient to acquire a full share will be carried forward to the next offering period.
The Omnibus Plan incorporates
Unless the following features:
offers a rangeESPP Committee determines otherwise prior to the beginning of award types, including stock options, SARs, restricted stock, RSUs, performance shares, performance units and other stock-based awards (including DSUs);
providesan offering period, the abilitypurchase price per Company share sold to include performance-based conditions on awards to tie compensation directly to performance by award recipients and the Company and its business units;
provides the ability to include “clawback” provisions in award agreements to effect the forfeiture or recoupmentparticipants will be 85 percent of the benefits payable under such awards as a result of specified events such as termination for substantial cause or misconduct resulting in an accounting restatement;
prohibits granting of options with an exercise price less than the fair market value of asuch share of Common Stock;
prohibits repricing of outstanding stock options or SARs;
prohibits “liberal”on the purchase date with respect to an offering period; provided, however, that in no event will the purchase price per share counting provisions, such as adding back shares withheld to satisfy tax obligations upon vesting or option exercise or tendered to paybe less than the exercise pricepar value of a stock option or counting onlyshare. The purchase date will be the netlast trading day of the offering period.
Purchase Limitations
No employee may purchase Common Stock in any offering period which exceed the number of shares issued upon exercise of a stock appreciation right;
prohibits paying dividends on unvested performance shares;
does not provide for the issuance of restorative options;
limits the term of the Omnibus Planequal to ten years.
Share Authorization and Fungible Design
Share Authorization
A maximum number of ten million shares of Common Stock (“Share Authorization”) may be issued pursuant to the Omnibus Plan, and may include new shares or treasury shares.
Fungible Plan Design
The design of the Omnibus Plan provides for fungible use of shares, with a fungible conversion factor of 3 to 1, so that the Share Authorization will be reduced at two different rates, depending upon the type of award granted. Each share of Common Stock issued upon the exercise of stock options or SARs will reduce the Share Authorization$25,000 divided by one share, while each share
of Common Stock issued pursuant to “full value awards” will reduce the Share Authorization by three shares. “Full value awards” are awards other than stock options or SARs that are settled by the issuance of shares of Common Stock, e.g., restricted stock, RSUs, performance shares, performance units if settled with stock, and other stock-based awards.
No Liberal Share Counting
Shares are counted against the Share Authorization only to the extent they are actually issued. Therefore, shares subject to awards granted under the Omnibus Plan which terminate by expiration, forfeiture, cancellation or settlement in cash in lieu of shares will again be available for grant under the Omnibus Plan. However, shares subject to outstanding awards granted under the Prior Plans that so terminate after the Effective Date will not become available for grant under the Omnibus Plan, and shares subject to the exercise or vesting of an award granted under the Omnibus Plan will be counted against the Share Authorization and will not be available again for grant under the Omnibus Plan, even if fewer shares are actually issued as result of the award recipient’s tender of existing shares to satisfy tax withholding requirements or to pay the exercise price of an option, or the exercise of a SAR.
Administration
The Compensation Committee is responsible for administering the Omnibus Plan and has the power and discretion to interpret the terms and intent of the plan and any related documentation, to adopt forms, rules and guidelines for administering the plan, to select award recipients and establish the terms and conditions of awards, and to modify and amend the plan and any award agreement as permitted under the terms of the plan. The Compensation Committee may delegate administrative duties and powers to one or more of its members or to one or more officers of the Company, agents or advisors, and the Board may authorize one or more Company officers or a Board Committee (in addition to the Compensation Committee) to designate employees to be recipients of awards and to determine the size and terms of such awards, with limitations as required by the plan.
Types of Awards
The Omnibus Plan provides the Compensation Committee with authority to grant the following types of awards and to determine the restrictions and conditions applicable to each award.
Restricted Stock and Restricted Stock Units (RSUs)
Restricted stock awards consist of shares of Common Stock that are issued to the Participant subject to conditions or specified restrictions that may result in forfeiture if not satisfied. RSU awards are similar to restricted stock awards but do not involve the issuance of shares of Common Stock until after specified conditions are satisfied.
Stock Options
The Committee may grant both incentive stock options and nonqualified stock options under the Omnibus Plan. The exercise price for stock options cannot be less than the fair market value of a share of Common Stock on the grant date, which is the closing price as reportedfirst day of such offering period reduced by the New Yorknumber of any shares purchased by the employee in any prior offering period in the same calendar year. No right under the ESPP will be granted to an employee to purchase Common Stock Exchangeunder all employee stock purchase plans of the Company or its affiliates which (“Fair Market Value”Company Stock Purchase Plans”), and re-pricing would, in the aggregate, have a fair market value (determined as of the date of grant) in excess of $25,000 for each calendar year in which the right is prohibited.outstanding at any time. The termCompany’s Omnibus Plan or a similar Company plan involving stock options is not deemed to be a Company Stock Purchase Plan.
Termination of Eligibility; Transferability
If a stock option canparticipant ceases to be no longer than ten years (subjecteligible to a limited extensionparticipate in the ESPP, the dollar amount in such participant’s account will be refunded or distributed to to the participant, or in the event that the expiration date falls withinof death of a trading blackout applicableparticipant, distributed to the Participant).participant’s designated beneficiary or estate. A participant’s rights to purchase shares under the ESPP are not transferable and may be exercisable only by the participant.
Stock Appreciation Rights (SARs)
The Compensation Committee may grant either freestanding or tandem SARs. Tandem SARs are issuedAdjustment for Changes in connection with a stock option award. The exercise price of an SAR cannot be less than the Fair Market Value of a share of Common Stock on the grant date, and re-pricing is prohibited. The exercise price and expiration date of a tandem SAR will be the same as for the tandem option. The term of a stock appreciation right can be no longer than ten years (subject to a limited extension inShares
In the event that adjustments are made in the expiration date falls within a trading blackout applicable to the Participant). Upon exercisenumber of a SAR, the holder will receiveoutstanding shares of Common Stock or such shares are exchanged for a different class of stock of the Company or for shares of stock of any other corporation by reason of merger, consolidation, stock dividend, stock split or otherwise or an extraordinary cash dividend is paid in an amount equalrespect of the shares, the ESPP Committee will make appropriate adjustments in value(i) the number and class of shares or other securities that may be reserved for purchase, or purchased, under the ESPP, and (ii) the purchase price. All such adjustments will be made in the sole discretion of the ESPP Committee, and its decision will be binding and conclusive.
Termination; Amendment
The ESPP shall continue in effect through and including May 31, 2029, unless terminated sooner pursuant to the difference between the exercise priceterms of the SAR andESPP, or by the Fair Market ValueBoard, which shall have the right to terminate the ESPP at any time. The Board may at any time, or from time to time, amend the ESPP in any respect, except that, without approval of the Common Stock subject toshareholders, no amendment may (a) increase the SAR, although the Compensation Committee may provide for the alternative settlement in cash in lieuaggregate number of shares reserved under the ESPP, (b) materially increase the benefits accruing to participants or (c)materially modify the requirements as to eligibility for participation in the ESPP. The ESPP may not be amended in any way that will cause rights issued under the ESPP to fail to meet the requirements for employee stock purchase plans as defined in Section 423 of Common Stock.the Code or any successor thereto.
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| | Director CompensationProposal 4 |
New Plan Benefits
Performance ShareBecause the number of shares that may be purchased under the ESPP will depend on each employee’s voluntary election to participate and Performance Unit Awards
Performance share awards have an initialthe fair market value based onof the Fair Market Value of a share of Common Stock onat various future dates, the grant date. Performance unit awards have an initial value asactual number of shares that may be purchased by any individual cannot be determined by the Compensation Committee. Such awardsin advance. Approximately 8,100 eligible employees will be earned only if andentitled to the extent performance goals are met. The applicable performance goals and performance periods will be set forthenroll in the individual award agreementsESPP and may vary among Participants.
Other Stock-Based Awards
The Compensation Committee may grant equity-based or equity-related awards other than options, SARs, restricted stock, RSUs, performance shares or performance units. The terms and conditions of each such “other stock-based award” shall be determined by the Compensation Committee. Other stock-based awards may entail the issue of actualmake quarterly elections to purchase shares of Common Stock or payment in cash based on the value of shares of Common Stock and may be fully vested and non-forfeitable upon grant. Other stock-based awards include DSUs, which defer conversion of the award to Common Stock until the date of the Participant’s separation from service with the Company.
Non-Employee Director Awards
The Omnibus Plan provides for awards to non-employee directors of any type available under the Omnibus Plan other than ISOs, which may be granted only to employees. The type, amount and terms of awards to be granted to non-employee directors, and the decision to grant any discretionary awards, shall be determined from time to time by the Board in its discretion after considering the recommendation of the Compensation Committee, subject to the Participant Award Limits shown on page 53 above.
The following table shows the number of shares and the compensation values of the stock options and RSUs granted under the Omnibus Plan to executive officers and other employees on March 1, 2016, as well as DSUs expected to be granted to the Company’s non-employee directors on the day of the 2016 Annual Meeting. The terms of these types of awards are described in the Director Compensation section on page 8, the Compensation Discussion and Analysis section, under the heading Equity-Based Compensation on page 32, and in the footnotes and narrative discussions to the tables in the Executive Officer Compensation & Benefits section that begins on page 37.
The number of performance-based RSUs (PBRSUs) shown represent the shares that would vest if the performance goals were achieved at the “target” performance level.
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NEW PLAN BENEFITS |
2011 Omnibus Equity Plan |
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Name and Position | Award Type | Dollar Value ($)(1) |
| Number of Units (#)(1) |
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Joseph P. Lacher, Jr. | Stock Options | 666,667 |
| 96,235 |
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| PBRSUs | 1,333,333 |
| 48,118 |
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Frank J. Sodaro | Stock Options | 146,250 |
| 21,112 |
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| PBRSUs | 146,250 |
| 5,278 |
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John M. Boschelli | Stock Options | 130,000 |
| 18,766 |
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| PBRSUs
| 130,000 |
| 4,692 |
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Denise I. Lynch | Stock Options | — |
| — |
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| PBRSUs | — |
| — |
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Richard Roeske | Stock Options | 74,200 |
| 10,711 |
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| PBRSUs | 74,200 |
| 2,678 |
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Donald G. Southwell | Stock Options | — |
| — |
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| PBRSUs | — |
| — |
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Executive Group (includes NEOs listed above) | Stock Options | 1,197,117 |
| 172,809 |
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| PBRSUs
| 1,863,783 |
| 67,263 |
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Non-Executive Director Group | Stock Options | — |
| — |
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| DSUs (2) | 450,000 |
| 16,240 |
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Non-Executive Officer Employee Group | Stock Options | 886,776 |
| 128,018 |
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| PBRSUs | 1,417,155 |
| 51,172 |
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| Time-Based RSUs | 1,109,685 |
| 40,090 |
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(1) | The amounts in the Dollar Value column represent the compensation values of the shares of stock options and RSUs (Restricted Stock Units) shown in the Number of Units column that were granted on March 1, 2016, and the DSUs (Deferred Stock Units) the Company expects to grant to the non-employee directors on May 4, 2016. The compensation values are internal valuations used to determine the number of options/RSUs to be awarded to each employee annually. These valuations are different from the grant date fair values of equity awards determined under Accounting Standards Codification Topic 718 using Black-Scholes valuations for options and Monte-Carlo simulation to value performance-based RSUs. Based on internal valuations, stock options were valued at $6.93 (25% of $27.71, the closing price of a share of Common Stock on the grant date). Performance-based RSUs, time-based RSUs and DSUs were valued using the closing price of $27.71 of a share of Common Stock on the grant date. |
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(2) | The amounts shown for the Non-Executive Director Group represent the DSU awards that are currently expected to be granted on the date of the 2016 Annual Meeting under the non-employee director compensation program in effect for 2016. As discussed in the Director Compensation section under the heading Changes Made to Non-Employee Director Compensation for 2016 on page 9, the non-employee director compensation program approved by the Board for 2016 provides for an annual DSU award covering shares of Common Stock with a fixed compensation value of $75,000 to be |
granted to each non-employee director at the conclusion of the annual shareholder meeting each year. The amount shown in the Number of Units column is an estimate of the number of DSUs that will be granted at a total compensation value of $75,000 per director based on $27.71, the closing price of a share of Common Stock on March 1, 2016.
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Vesting and Forfeiture of Awards |
Award Agreements and Plan Provisions
In approving award agreements that establish the terms of particular awards, the Compensation Committee will determine the vesting terms for each award and how the award will be treated following termination of the Participant’s employment or service with the Company or its subsidiaries under specified circumstances and other events that might result in forfeiture or vesting of award benefits. Default provisions set forth in the Omnibus Plan determine the consequences of such termination and other events to the extent not specified in a particular award agreement.
Forfeiture and Clawbacks
The Compensation Committee has approved the inclusion of forfeiture and “clawback” provisions in all agreements for awards under the Omnibus Plan to effect the forfeiture, reduction or recoupment of the rights, payments and benefits otherwise payable under such awards upon the occurrence of specified events, whether required by applicable law, rule, regulation or Company policy as in effect from time to time. Such events may include, without limitation, an accounting restatement or other conduct determined by the Compensation Committee to be detrimental to the business or reputation of the Company or its subsidiaries.
Termination of a Participant’s Employment
The consequences of termination of the Participant’s employment or service with the Company or its subsidiaries as a result of death, disability, retirement, divestiture, or other reasons are determined in accordance with the agreement for the particular award. Suchplan terms will determine the extent to which unvested portions of the award will be forfeited and the time and extent to which options or SARs may remain exercisable. To the extent not specified in the award agreement, the consequences are determined by the default provisions in the Omnibus Plan. In general, such default provisions provide for the vesting of awards upon the termination of a Participant’s employment due to death or disability, and the determination regarding vesting or forfeiture of unvested awards in the event a Participant’s employment otherwise terminates for reasons other than death or disability will vary by the particular circumstances and type of award.
Consequences of a Change in Control
The Compensation Committee may approve provisions for inclusion in award agreements for particular awards that determine the consequences of a change in control of the Company as defined in the Omnibus Plan (“Change in Control”). Unless otherwise provided in an award agreement, in the event that an award Participant’s employment is terminated by the employer without “substantial cause” or by the Participant without “good reason” (as such terms are defined in the plan) in connection with a Change in Control involving an acquisition of beneficial ownership or change in Board composition under the circumstances specified in the Omnibus Plan, any outstanding award not subject to performance conditions will vest, and an option or SAR award will remain exercisable for the remainder of its term, and any outstanding award subject to performance conditions will be deemed earned based on the greater of “target” or actual performance for a truncated performance period ending on the date of the Change in Control.
In the event of a Change in Control involving the merger, consolidation, dissolution or liquidation of the Company, or the sale of substantially all of the Company’s assets, under the circumstances specified in the Omnibus Plan, the Omnibus Plan will terminate and the Board will provide for one or more of the following alternatives: immediate vesting of outstanding awards; assumption of or substitution of outstanding awards by the successor corporation; continuance of the plan by the successor corporation; or payment in cash or stock in lieu of and in satisfaction of outstanding awards.
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Plan Amendment and Termination |
The Board may at any time amend, suspend or terminate the Omnibus Plan, but no material amendment will be made without shareholder approval if required by law or stock exchange rule, and no such action may materially and adversely affect any outstanding grant without the written consent of the affected Participant.
Adjustments of Awards
Subject to certain limitations under the Omnibus Plan, the Compensation Committee may make adjustments in the terms, conditions and performance criteria applicable to grants in recognition of certain unusual or nonrecurring events affecting the Company or a Participant, or of changes in applicable laws, regulations or accounting principles, whenever the Compensation Committee determines that such adjustments are appropriate to prevent unintended dilution or enlargement of the benefits or potential benefits intended to be made available under the plan.
Non-transferability of Awards
Unless approved by the Compensation Committee and set forth in particular award agreements, awards may not be transferred other than by will or by the laws of descent and distribution, and stock options and SARs may be exercised only by the Participant during his or her lifetime.
Federal Income Tax Consequences
The following discussion summarizes certain federal income tax consequences of the issuance and receiptpurchase of awards of stock options, SARs, restricted stock, RSUs, or performance shares or performance units under the Omnibus Plan underESPP as of the law in effect on the date of this Proxy Statement. The summary does not purport to cover all federal employment tax or other federal tax consequences that may be associated with the Omnibus Plan,ESPP, nor does it cover state, local, or non-U.S. taxes. Tax laws are complex and subject to change and may vary depending on individual circumstances. The summary is not tax advice and a participant should rely on the advice of his or her legal and tax advisors.
Nonqualified
The ESPP is intended to qualify as an “Employee Stock Options and SARs
NoPurchase Plan” under Section 423 of the Code. Under an employee stock purchase plan that qualifies under Section 423, no taxable income will be recognized by a participant, and no deductions will be allowable to the Company, upon either the grant or the exercise of the purchase rights. Taxable income will not be recognized until there is realized bya sale or other disposition of the Participantshares acquired under the ESPP or in the event the participant should die while still owning the purchased shares. No participant may purchase shares under the ESPP at a rate of more than $25,000 of shares in any calendar year as described above.
If the time a non-qualified optionparticipant sells or SAR is granted. Upon exercise,otherwise disposes of the Participant realizespurchased shares within two years after the start date of the offering period in which the shares were acquired or within one year after the actual purchase date of those shares, then the participant generally will recognize ordinary income in an amountthe year of sale or disposition equal to the difference betweenamount by which the fair market value and exercise price of the shares on the purchase date of exerciseexceeded the purchase price paid for those shares, and the Company iswill be entitled to aan income tax deduction, for the same amount. Upon a taxable year in which such disposition occurs equal in amount to such excess. The amount of this ordinary income will be added to the participant’s basis in the shares, appreciationand any resulting gain or depreciation afterloss recognized upon the date of exercise is treated assale or disposition will be a short-term or long-term capital gain or loss and will not result in any deduction for the Company.
Incentive Stock Options (“ISOs”)
In general, if certain holding periods are met, the Participant will not realize taxable income upon the grant or exercise of an ISO and no deduction is allowed to the Company. Instead, the Participant is taxed only at the time of sale of the shares received upon exercise.loss. If the shares have been held for at leastmore than one year since the date of purchase, the gain or loss will be long-term.
If the participant sells or disposes of the purchased shares more than two years after the start date of the offering period in which the shares were acquired and more than one year after the actual purchase date of exercise and at least two years fromthose shares, then the date of grant of the option, the Participantparticipant generally will be taxed on any appreciation in excess of the exercise price as long-term capital gain and any loss sustained will be a long-term capital loss. If the shares are disposed of before the expiration of the holding periods described above, the Participant would realizerecognize ordinary income in the year of sale or disposition in an amount equal to the excess (if any)lesser of (i) the amount by which the fair market value of the shares on the sale or disposition date exceeded the purchase price paid for those shares, or (ii) 15 percent of the fair market value of the shares at timeon the start date of exercise overthat offering period. Any additional gain upon the exercise price, and the Company would be entitled to deduct such amount. Any further gain realized woulddisposition will be taxed as a short-term or long-term capital gain and would not result in any deduction togain. Alternatively, if the Company.
Restricted Stock, RSUs and DSUs
Awards of restricted stock, RSUs and DSUs, under the terms of Awards granted by the Company, generally are not included in taxable income when granted, but instead are taxable at the time that they are converted into common sharesfair market value of the Company. Ifshares on the date of the sale or disposition is less than the purchase price, there will be no ordinary income and any loss recognized will be a long-term capital loss. The Company provides cash dividend equivalents on RSU and DSU Awards at the time that dividends are declared and paid by the Companywill not be entitled to an income tax deduction with respect to such disposition.
If the Company’s Common Stock, so that Participants receive cash payments equal toparticipant still owns the total cash dividend they would have received had the RSUs and DSUs been actualpurchased shares of Common Stock, such dividend equivalents are taxable as compensation to the Participants at the time of receipt. The Company would be entitled to a corresponding deduction atdeath, the time a Participant recognizes taxablelesser of (i) the amount by which the fair market value of the shares on the date of death exceeds the purchase price or (ii) 15 percent of the fair market value of the shares on the start date of the offering period in which those shares were acquired will constitute ordinary income on an Award or dividend equivalent payment.
59in the year of death.
The Board of Directors recommends that you vote “FOR” Proposal 4.
If a quorum is present, the material terms of the performance goals under the Company’s 2011 Omnibus Equity Plan will be approved by the affirmative vote of the majority of the votes cast, meaning the number of shares voted “FOR” the proposal exceeds the number of shares voted “AGAINST” plus, as required by the NYSE rules related to the approval of equity compensation plans, the number of shares voted “ABSTAIN.” Abstentions will have the same effect as a vote “AGAINST” this proposal. Broker non-votes will have no effect on the vote for this proposal.
In the event that this proposal is not approved by the shareholders, future awards to Covered Employees under the Omnibus Plan would not qualify as performance-based compensation and so may be subject to the $1 million limitation on federal tax deductions.
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Recommendation of the Board of Directors |
The Board of Directors recommends that you vote “FOR” Proposal 3.
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| | Ownership of Kemper Stock |
Ownership of Kemper Common Stock
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Directors and Executive Officers |
On March 11, 2016,7, 2019, there were approximately 51,133,25264,933,537 shares of the Company’s Common Stock outstanding. The following table shows the beneficial ownership of the Common Stock as of March 11, 20167, 2019 (unless otherwise indicated) by: (i)(a) each director; (ii)(b) each Named Executive Officer; and (iii)(c) all directors and executive officers as a group.
| | Name of Beneficial Owner | Common Shares at March 11, 2016 (1) |
| Stock Options Exercisable On or Before May 10, 2016 (2) |
| Total Shares Beneficially Owned |
| Percent of Class (3) |
| Common Shares at March 7, 2019 (1) |
| Stock Options Exercisable/RSUs Vesting Through May 6, 2019 (2) |
| Total Shares Beneficially Owned |
| Percent of Class (3) |
|
Directors: |
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Teresa A. Canida | | 10,910 |
| — |
| 10,910 |
| * |
|
George N. Cochran | 2,208 |
| 9,179 |
| 11,387 |
| * |
| 10,428 |
| 9,179 |
| 19,607 |
| * |
|
Kathleen M. Cronin | 500 |
| 8,000 |
| 8,500 |
| * |
| 7,220 |
| 8,000 |
| 15,220 |
| * |
|
Douglas G. Geoga | 9,330 |
| 41,965 |
| 51,295 |
| * |
| 17,833 |
| 29,965 |
| 47,798 |
| * |
|
Lacy M. Johnson | | 4,300 |
| — |
| 4,300 |
| * |
|
Robert J. Joyce | 3,500 |
| 17,179 |
| 20,679 |
| * |
| 10,220 |
| 17,179 |
| 27,399 |
| * |
|
Joseph P. Lacher, Jr., President and Chief Executive Officer | — |
| — |
| — |
| * |
| |
Joseph P. Lacher, Jr. | | 53,604 |
| 271,380 |
| 324,984 |
| * |
|
Christopher B. Sarofim | 1,500 |
| 16,000 |
| 17,500 |
| * |
| 8,220 |
| 16,000 |
| 24,220 |
| * |
|
David P. Storch | 6,500 |
| 29,179 |
| 35,679 |
| * |
| 18,220 |
| 29,179 |
| 47,399 |
| * |
|
Susan D. Whiting | | 2,420 |
| — |
| 2,420 |
| * |
|
NEOs (other than Mr. Lacher who is listed above): |
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Frank J. Sodaro, Senior Vice President and Chief Financial Officer | 11,886 |
| 25,000 |
| 36,886 |
| * |
| |
John M. Boschelli, Senior Vice President and Chief Investment Officer | 26,429 |
| 38,750 |
| 65,179 |
| * |
| |
Denise I. Lynch, Former Vice President (4) | 24,291 |
| 30,000 |
| 54,291 |
| * |
| |
Richard Roeske, Vice President and Chief Accounting Officer | 56,673 |
| 65,500 |
| 122,173 |
| * |
| |
Donald G. Southwell, Former Chairman, President and CEO | 49,704 |
| 220,000 |
| 269,704 |
| * |
| |
Directors, NEOs and Other Executive Officers as a Group (14 persons) | 220,496 |
| 522,877 |
| 743,373 |
| 1.5 | % | |
James J. McKinney | | 17,079 |
| 14,333 |
| 31,412 |
| * |
|
John M. Boschelli | | 27,621 |
| 8,000 |
| 35,621 |
| * |
|
Mark A. Green | | 10,398 |
| 49,104 |
| 59,502 |
| * |
|
Duane A. Sanders | | — |
| 14,933 |
| 14,933 |
| * |
|
Directors, NEOs and Executive Officers as a Group (19 persons) | | 317,694 |
| 578,057 |
| 887,542 |
| 1.4 | % |
(1) The shares shown for non-employee directors (i.e, the directors other than Mr. Lacher) include outstanding DSUs, and the numbers of shares for NEOs and other executive officers include any shares of Common Stock indirectly held in a trust or the Company’s 401(k) and Retirement Plan. The shares shown for the non-employee directors include 500the following numbers of DSUs for Mr.outstanding on March 7, 2019, which are all fully-vested: Johnson (4,300); Cochran and Ms. Cronin and 1,500 DSUs for Messrs.(7,220); Geoga, Joyce, Sarofim and Storch. RSUsStorch (8,220); and Whiting (1,420). For Mr. Geoga, the shares shown also include 8,900 shares he gifted to a family foundation that are deemed beneficially owned for purposes of this table under SEC Rule 13d-3 but not for purposes of his Form 4 reports under SEC Rule 16a-1(a)(2). The PSUs held by officers are not included in the amounts shown in this table because they are not deemed beneficially owned shares of Common Stock under SEC rules applicable to this table unless they will vest within 60 days. Accordingly, the shares shown in this table for the NEOs and the Executive Officers as a Group do not include the following performance-basedoutstanding PSUs: Lacher (73,111); McKinney (19,773); Boschelli (126,855); Green (17,668); Sanders (19,852); and for all NEOs and Executive Officers as a Group (193,145). In addition, the shares shown do not include the following outstanding RSUs held by Mr. McKinney that will not vest within 60 days: (5,334) or the NEOs: Lacher (48,118), Sodaro (13,278), Boschelli (10,692), Roeske (5,878) and Southwell (30,000).RSU shares held by Mr. McKinney referenced in footnote 2 below. To the Company’s knowledge, the beneficial owner has both sole voting and sole dispositive power with respect to the shares listed opposite his or her name, unless otherwise indicated.
(2) The shares shown include stock options, and for Mr. McKinney, 5,333 RSUs, outstanding as of March 11, 20167, 2019 that will be vested as of May 10, 2016.6, 2019. Mr. McKinney is the only Executive Officer with RSUs.
(3) The percentages shown for any individual and for the directors and executive officers as a group are based on the 51,133,25264,933,537 shares of the Company’s Common Stock outstanding on March 11, 2016, plus shares that the respective individual or the group has the right to acquire through outstanding DSU or RSU awards or the exercise of outstanding
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| | Ownership of Kemper Stock |
stock options that will be vested as of May 10, 2016.7, 2019. An asterisk in this column indicates a percentage of less than 1one percent.
(4) This number is based on information currently available to the Company.
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Ownership of Kemper Stock |
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Certain Beneficial Owners |
The following table sets forth information about persons, other than the Company’s directors and executive officers shown above, known by the Company to be the beneficial owner of more than five percent of the Company’s Common Stock. To the Company’s knowledge, the beneficial owner has sole voting and sole dispositive power with respect to the shares listed opposite the beneficial owner’s name, unless otherwise indicated.
| | Name and Address of Beneficial Owner(1) | Amount and Nature of Beneficial Ownership | Percent of Class (1) |
| Amount and Nature of Beneficial Ownership | Percent of Class (2) |
|
Singleton Group LLC | 8,334,520 |
| (2) | 16.3 | % | |
3419 Via Lido, #630 Newport Beach, California 92663 |
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BlackRock, Inc. | | 6,291,349 |
| (3) | 9.7 | % |
55 East 52nd Street New York, New York 10055 | |
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The Vanguard Group, Inc. | | 5,162,109 |
| (4) | 7.9 | % |
100 Vanguard Boulevard Malvern, Pennsylvania 19355 | |
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Dimensional Fund Advisors LP | 4,396,606 |
| (3) | 8.6 | % | 4,333,286 |
| (5) | 6.7 | % |
Building One 6300 Bee Cave Road Austin, Texas 78746 |
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BlackRock, Inc. | 3,919,443 |
| (4) | 7.7 | % | |
55 East 52nd Street New York, New York 10055 |
|
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T. Rowe Price Associates, Inc. | 3,378,577 |
| (5) | 6.6 | % | |
100 East Pratt Street Baltimore, Maryland 21202 |
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Fayez Sarofim and Fayez S. Sarofim & Co. | 3,370,534 |
| (6) | 6.6 | % | 3,500,012 |
| (6) | 5.4 | % |
Two Houston Center, Suite 2907 909 Fannin Street Houston, Texas 77010 |
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Vanguard | 2,825,565 |
| (7) | 5.5 | % | |
100 Vanguard Blvd. Malvern, Pennsylvania 19355 |
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(1) | The Singleton Group LLC (“Singleton Group”) was listed as Kemper’s largest shareholder in the beneficial ownership table of Kemper’s annual proxy statements each year since 2001. The Singleton Group is not listed this year because its assets, including Kemper Common Stock holdings, were distributed to the members of the Singleton Group in connection with the ultimate dissolution of the Singleton Group. The distribution occurred on March 4, 2019 and was reported in a Schedule 13D/A filed with the SEC by the Singleton Group on March 5, 2019. |
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(2) | The percentages shown are based on the 51,133,252 shares outstanding on March 11, 2016. |
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(2) | Based on information reported in a Schedule 13D/A filed jointly with the SEC on December 31, 2015, the Singleton Group LLC (“LLC”), William W. Singleton, Christina Singleton Mednick and Donald E. Rugg, as managers of the LLC, the LLC directly owns 8,334,520 shares of Common Stock. William W. Singleton, Christina Singleton Mednick and Donald E. Rugg, as managers of the LLC, share voting and dispositive power with respect to the shares of Common Stock held by the LLC, and so may be deemed beneficial owners of all such shares, and Donald E. Rugg has sole voting and dispositive power with respect to 412 shares of Common Stock. As a result of these shares beneficially owned outside of the LLC and his role as a manager of the LLC, Donald E. Rugg may be deemed a beneficial owner of 8,334,932 shares of Common Stock. In a Form 4 filed with the SEC on May 8, 2014, William W. Singleton and Christina Singleton Mednick reported having indirect interests in these shares as trustees and beneficiaries of certain trusts holding membership interests in the LLC and as managers of the LLC and disclaimed beneficial interest of the shares of Common Stock held by the LLC except to the extent of their respective pecuniary interests therein.7, 2019. |
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(3) | Based on information reported in a Schedule 13G/A filed with the SEC on February 9, 2016, Dimensional Fund Advisors LP6, 2019, BlackRock, Inc. (“Dimensional”BlackRock”) beneficially owns an aggregate of 4,396,6066,291,349 shares of Common Stock as of December 31, 2015,2018, as to which BlackRock has sole dispositive power and which includes 6,168,386 shares as to which it has sole voting power. BlackRock also reported that it was filing as the parent holding company or control person of certain subsidiaries listed in an exhibit to the Schedule 13G/A. |
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(4) | Based on information reported in a Schedule 13G/A filed with the SEC by The Vanguard Group, Inc. (“Vanguard”) on February 11, 2019, Vanguard may be deemed to be the beneficial owner of 5,162,109 shares of Common Stock as of December 31, 2018. Of such shares, Vanguard reported sole voting power as to 86,494 shares, sole dispositive power as to 5,074,065 shares, shared voting power as to 6,659 shares and shared dispositive power as to 88,044 shares. |
According to the Schedule 13G/A, Vanguard’s wholly-owned subsidiary, Vanguard Fiduciary Trust Company, is the beneficial owner of 81,385 shares of Common Stock as a result of its serving as the investment manager of collective trust accounts. Additionally, Vanguard’s wholly-owned subsidiary, Vanguard Investments Australia, Ltd. is the beneficial owner of 11,768 shares of Common Stock as a result of its serving as the investment manager of Australian investment offerings.
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(5) | Based on information reported in a Schedule 13G/A filed with the SEC on February 8, 2019, Dimensional Fund Advisors LP (“Dimensional”) beneficially owns an aggregate of 4,333,286 shares of Common Stock as of December 31, 2018, as to which Dimensional has sole dispositive power and which includes 4,349,3524,268,915 shares as to which it has sole voting power. According to the Schedule 13G/A, these shares are held by four investment companies to which Dimensional furnishes investment advice, and certain other commingled funds, group trusts and separate accounts for which Dimensional serves as investment manager or sub-adviser. Dimensional disclaimed beneficial ownership of these shares. |
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| | Ownership of Kemper Stock |
Dimensional serves as investment manager or sub-adviser. Dimensional disclaimed beneficial ownership of these shares.
(4) Based on information reported in a Schedule 13G/A filed with the SEC on January 26, 2016, BlackRock, Inc. (“BlackRock”) beneficially owns an aggregate of 3,919,443 shares of Common Stock as of December 31, 2015, as to which BlackRock has sole dispositive power and which includes 3,816,791 shares as to which it has sole voting power. BlackRock also reported that it was filing as the parent holding company or control person of certain subsidiaries listed in an exhibit to the Schedule 13G/A.
(5) Based on information reported in a Schedule 13G/A filed jointly with the SEC on February 11, 2016 by T. Rowe Price Associates, Inc. (“T. Rowe Price”) and T. Rowe Price Mid-Cap Value Fund, Inc., T. Rowe Price may be deemed to be the beneficial owner of 3,378,577 shares of Common Stock as of December 31, 2015 as to which T. Rowe Price has sole voting power as to 689,464 shares and sole dispositive power as to 3,378,577 shares. T. Rowe Mid-Cap Value Price Fund may be deemed to be the beneficial owner of 1,992,443 as of December 31, 2015 shares as to which it has sole voting power. According to information provided to the Company by T. Rowe Price, these shares are owned by various individual and institutional investors to which T. Rowe Price serves as an investment adviser with power to direct investments and/or sole power to vote the shares. T. Rowe Price disclaimed beneficial ownership of these shares.
(6) Based on information reported in a Schedule 13G/A filed jointly with the SEC on February 4, 2016 by Fayez Sarofim, Fayez Sarofim & Co., Sarofim Trust Co. and Sarofim International Management Co., Fayez Sarofim may be deemed to be the beneficial owner of 3,370,534 shares of Common Stock as of December 31, 2015. Of such shares, Fayez Sarofim reported sole voting and dispositive power as to 2,469,070 shares, shared voting power as to 890,342 shares and shared dispositive power as to 901,464 shares.
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(6) | Based on information reported in a Schedule 13G/A filed jointly with the SEC on February 5, 2019 by Fayez Sarofim, Fayez Sarofim & Co. and Sarofim International Management Co., Fayez Sarofim may be deemed to be the beneficial owner of 3,500,012 shares of Common Stock as of December 31, 2018. Of such shares, Fayez Sarofim reported sole voting and dispositive power as to 2,469,070 shares and shared voting power as to 1,024,440 shares and shared dispositive power as to 1,030,942 shares. |
Fayez Sarofim & Co. (of which Fayez Sarofim is the Chairman of the Board, Chief Executive Officer, a director, and the majority shareholder) may be deemed to be the beneficial owner of 901,4641,030,942 shares of Common Stock as of December 31, 20152018 as to which Fayez Sarofim & Co. has shared dispositive power,voting and which includes 890,342 shares as to which it has shared votingdispositive power. According to the Schedule 13G/A, 901,464305,922 shares are held in investment advisory accounts that are managed by Fayez Sarofim & Co. for numerous clients as to which Fayez Sarofim & Co. has full investment discretion. Fayez Sarofim & Co. maintains policies that preclude Fayez Sarofim from exercising voting and dispositive power with respect to Common Stock held in accounts managed by Fayez Sarofim & Co. and its subsidiaries.
Sarofim Trust Co., a wholly-owned subsidiary of Fayez Sarofim & Co., may be deemed to be the beneficial owner of 67,910 shares of Common Stock as of December 31, 2015 as to which it has shared voting and dispositive power. According to the Schedule 13G/A, all 67,910 shares are held in investment advisory accounts managed by Sarofim Trust & Co.
Sarofim International Management Co., a wholly-owned subsidiary of Fayez Sarofim & Co., directly owns 725,020 shares of Common Stock as of December 31, 20152018 as to which it has shared voting and dispositive power.
(7) Based on information reported in a Schedule 13G filed with the SEC by The Vanguard Group (“Vanguard”) on February 10, 2016, Vanguard may be deemed to be the beneficial owner of 2,825,565 shares of Common Stock as of December 31, 2015. Of such shares, Vanguard reported sole voting power as to 57,338 shares, sole dispositive power as to 2,767,727 shares, shared voting power as to 3,100 shares and shared dispositive power as to 57,838 shares.
According to the Schedule 13G, Vanguard’s wholly-owned subsidiary, Vanguard Fiduciary Trust Company, is the beneficial owner of 54,738 shares of Common Stock as a result of its serving as the investment manager of collective trust accounts. Additionally, Vanguard’s wholly-owned subsidiary, Vanguard Investments Australia, Ltd. is the beneficial owner of 5,700 shares of Common Stock as a result of its serving as an investment manager of Australian investment offerings.
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| | Ownership of Kemper Stock |
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Section 16(a) Beneficial Ownership Reporting Compliance |
Section 16(a) of the Exchange Act requires the Company’s directors and executive officers and persons who beneficially own more than 10 percent of the registered class of the Company’s equity securities to file with the SEC reports of ownership and reports of changes in ownership of such securities. Based on the Company’s knowledge of stock transactions, its review of copies of reports filed under Section 16(a) and written representations furnished to the Company, the Company believes that all filing requirements applicable to its directors, executive officers and more than ten10 percent beneficial owners were complied with for the fiscal year ended December 31, 2015,2018, with the exception of one gift transaction by Mr. Geoga that was reported late for Ms. Lynch and one lateafter the Form 4 filed for Mr. Evans to report three vesting transactions.5 filing deadline.
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| | Frequently Asked Questions |
Frequently Asked Questions
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Proxy and Proxy Statement |
What is a Proxy?
A proxy is your legal appointment of another person to vote the stock you own. That other person is called a proxy. If you appoint someone as your proxy in a written document, that document is also called a proxy or a proxy card. We have designated Joseph P. Lacher, Jr., our President and Chief Executive Officer,CEO, and C. Thomas Evans, Jr., our Senior Vice President, Secretary and General Counsel, to act as proxies for the Annual Meeting. You do not need to attend the Annual Meeting to vote your shares if you provide a proxy in the manner described in this Proxy Statement.
What is a Proxy Statement?
A Proxy Statement is a document that sets forth the information required by the federal securities laws and regulations administered by the SEC which is intended to allow you to vote on an informed basis at the Annual Meeting.
Who can vote at the Annual Meeting?
You are entitled to vote at the Annual Meeting if you owned Common Stock at the close of business on the Record Date.
How many votes do I have?
Each share of Common Stock that you owned on the Record Date entitles you to one vote. Your proxy card indicates the number of shares of Common Stock that you owned on the Record Date that may be voted at the Annual Meeting.
How many shares of Kemper stock are eligible to be voted at the Annual Meeting?
At the close of business on the Record Date, there were 51,133,25264,933,537 shares of Common Stock issued and outstanding. Accordingly, 51,133,25264,933,537 shares of Common Stock are eligible to be voted at the Annual Meeting. Kemper had no other voting securities outstanding on the Record Date.
What is a quorum?
To conduct business at the Annual Meeting, a quorum must be present; that is, a majority of the shares of Common Stock outstanding and entitled to vote as of the Record Date must be represented in person or by proxy at the Annual Meeting. If you properly submit a proxy, your shares covered by that proxy will be counted toward a quorum.
On what am I being asked to vote on?
Shareholders are being asked to vote on the following proposals at the Annual Meeting:
Proposal 1: Election of the director Nominees listed beginning on page 11;9;
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Proposal 2: | Advisory vote to ratify the selection of Deloitte & Touche LLP as the Company’s Independent Registered Public Accountant for 2019; |
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Proposal 3: | Advisory vote to approve the compensation of the Company’s Named Executive Officers, as disclosed in this Proxy Statement; and |
Proposal 2: Advisory proposal on the ratification of the selection of Deloitte & Touche LLP as the Company’s
Independent Registered Public Accountant for 2016; and
Proposal 3: Approval of the material terms of performance goals under4: Vote to approve the Company’s 2011 Omnibus Equity
Plan.2019 Employee Stock Purchase Plan
What is the difference between a shareholder that holds shares as a “registered shareholder” or in “street name”?
The shares of a registered shareholder are registered with the Company’s transfer agent, Computershare Trust Company, N.A. (“Computershare”Computershare”), in the shareholder’s own name. Shares held in street name are registered with Computershare in the name of the stock brokerage firm or other institution (or the name of its nominee), but not in the shareholder’s own name. In this case, the institution maintains its own internal records showing the shareholder as the actual beneficial owner of the shares.
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What are the different methods that I can use to vote my shares of Common Stock?
Shares held by registered shareholders:
If you hold your shares of Common Stock as a registered shareholder, you may give a proxy to vote your shares by one of the following methods:
Complete, sign and date your proxy card and return it no later than the commencement of the Annual Meeting in the postage-paid envelope provided;
Call the toll-free telephone number on your proxy card and follow the recorded instructions no later than 10:59 p.m. Central Daylight Time on Tuesday, May 3, 2016April 30, 2019;
Access the proxy voting website identified on your proxy card and follow the instructions no later than 10:59 p.m. Central Daylight Time on Tuesday, May 3, 2016April 30, 2019; or
Attend the Annual Meeting in person and deliver your proxy card or ballot to one of the ushers when requested to do so.
Sharesheld in street name:
If you hold your shares of Common Stock in street name, your broker (or other institution holding your shares of Common Stock in street name) generally will supply you with its own form of proxy card requesting you to provide your voting instructions in writing or, in some cases, by telephone or over the Internet. Following its receipt of your voting instructions, the institution will be authorized to provide a proxy to the Company to vote your shares in accordance with any instructions you provide.
Shares held through 401(k) and Retirement Plan:
If you hold your shares of Common Stock through the Company’s 401(k) and Retirement Plan, you may give a proxy to vote your shares by one of the following methods:
Complete, sign, date and datereturn your proxy card, and return itwhich must be received by 1:00 a.m. Central Daylight Time on Monday, May 2, 2016April 29, 2019 (“401(k) Deadline”), for your voting instructions to be effective;
Call the toll-free telephone number on your proxy card and follow the recorded instructions by by 1:00 a.m. Central Daylight Time on the 401(k) Deadline, for your voting instructions to be effective; or
Access the proxy voting website identified on your proxy card and follow the instructions by 1:00 a.m. Central Daylight Time on the 401(k) Deadline, for your voting instructions to be effective.
If you provide timely voting instructions for your 401(k) and Retirement Plan shares, the plan trustee will confidentially vote your shares in accordance with your voting instructions. In accordance with the terms of the 401(k) and Retirement Plan, if you do not vote your plan shares before the voting deadline, the plan trustee will vote your shares in the same proportion as all other shares were voted in accordance with timely voting instructions provided to the trustee by all other plan participants.
The telephone and Internet voting procedures are designed to authenticate shareholders’ identities, to allow shareholders to give their voting instructions, and to confirm that shareholders’ instructions have been recorded properly. Shareholders who wish to give proxy voting instructions over the Internet should be aware that there may be costs associated with electronic access, such as usage charges from Internet service providers and telephone companies. In addition, in choosing among the available alternatives for proxy voting, shareholders should be aware that there may be some risk that a vote either by telephone or over the Internet might not be properly recorded or counted because of an unanticipated electronic malfunction. As described above, please note that the ability of shareholders of record to submit voting instructions by telephone and over the Internet ends at 10:59 p.m. Central Daylight Time on the day before the Annual Meeting, and, for 401(k) and Retirement Plan shares, atby the 401(k) Deadline. The reason for this cut-off is to allow for the timely assembly and tabulation of voting instruction data.
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How do I vote my Common Stock in person?
If you owned Common Stock in your own name on the Record Date, your name will appear on the list of registered shareholders of the Company and, if you wish to attend in person, you will be admitted to the Annual Meeting and may
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vote by written ballot or by delivering a signed proxy card. However, note that: (i) Shares(a) shares held through the 401(k) and Retirement Plan must be voted by the 401(k) Deadline and, accordingly, may not be voted in person at the Annual Meeting; and (ii)(b) if your shares are held in the name of a broker, bank or other institution, you must present written evidence at the Annual Meeting from the institution indicating that you were the beneficial owner of the shares on the Record Date and that you have been authorized by that institution to vote your shares in person. This written evidence is generally called a “Legal Proxy” and should be submitted to the Company’s Secretary, C. Thomas Evans, Jr., prior to the commencement of the Annual Meeting.
If I plan to attend the Annual Meeting, should I give my proxy?
Regardless of whether you plan to attend the Annual Meeting, we urge you to give a proxy. Returning your proxy card or giving voting instructions by telephone or over the Internet will not affect your right to attend the Annual Meeting and vote in person. However, giving a proxy will ensure that your shares are represented at the Annual Meeting in the event that you are unable to attend.
How will my proxy be voted?
If you (or your broker or other institution holding your shares held in street name) properly sign and timely return your proxy card, or timely deliver your voting instruction by telephone or over the Internet, the individuals designated as proxies on the proxy card will vote your shares as you have directed. With respect to Proposal 1, you may choose to vote “FOR” or “AGAINST,”AGAINST” or to “ABSTAIN” from voting for each director Nominee. With respect to Proposals 2, 3 and 3,4, you may choose to vote “FOR” or “AGAINST,”AGAINST” or to “ABSTAIN” from voting. For specific information about the voting requirements for a particular proposal, please refer to the Required Votesection forof this Proxy Statement that pertains to such proposal.proposal as indicated in the Table of Contents.
For shares held as a registered shareholder, if you sign the proxy card but do not make specific choices, the designated proxies will vote your shares as recommended by the Company’s Board of Directors. For shares held in street name, you should contact your broker (or other institution) to determine the method by which your shares will be voted if you sign the proxy card but do not make specific choices. The Board of Directors recommends that you vote “FOR”“FOR” all of the director Nominees in Proposal 1 and “FOR”“FOR” Proposals 2, 3 and 3.4.
What does it mean if I receive more than one proxy card?
If your Kemper shares are held under different names or in more than one account, you will receive more than one proxy card. Each proxy card will indicate the number of shares you are entitled to vote on that particular proxy card.
What are broker non-votes and how might they affect voting?
The applicable NYSE rules allow a stockbroker holding securities in street name for its customer to exercise discretionary voting power for those securities with respect to some matters (called “discretionary” matters) but not others (called “non-discretionary” matters), depending on the subject matter of the proposal being voted on. Broker non-votes can occur when a stockbroker does not receive voting instructions from its customer on a non-discretionary matter. Under the current NYSE rules, director elections and all matters related to executive compensation are considered non-discretionary matters for which brokers cannot vote undirected shares. Any shares you hold in street name will not be voted with regard to Proposals 1, 3 and 34 unless you provide timely voting instructions to your broker. Under the NYSE rules, Proposal 2 is considered a discretionary matter for brokers, and a broker not receiving voting instructions from a customer will be free to cast a vote in its discretion as to this matter.
How will voting on any other business be conducted?
As of the date hereof, the Company’s management is aware of no business that will come before the Annual Meeting other than Proposals 1 through 34 as described in this Proxy Statement, and only the Board of Directors may introduce any additional business. However, if any other business should properly come before the Annual Meeting, your proxy card will authorize the persons designated as proxies to vote on any such matters in their discretion.
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Who will tabulate the votes, and how do I find out the voting results after the Annual Meeting?
Representatives of Broadridge Financial Solutions, Inc. will tabulate the votes and act as inspectors of election. The Company will report the voting results in a Current Report on Form 8-K that it will file with the SEC within four business days after the Annual Meeting.
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May I revoke my proxy or change my voting instructions?
Shares held as a registered shareholder:
You may revoke your proxy or change your voting instructions for registered shares as follows:
Deliver another signed proxy card with a later date anytimeany time prior to the commencement of the Annual Meeting;
Notify Kemper’sthe Company’s Secretary, C. Thomas Evans, Jr., in writing prior the commencement of the Annual Meeting that you have revoked your proxy;
Call the toll-free telephone number, or access the proxy voting website, identified on the proxy card and re-vote any time prior to 10:59 p.m. Central Daylight Time on Tuesday, May 3, 2016April 30, 2019; or
Attend the Annual Meeting in person and deliver a new, signed proxy card or ballot to one of the ushers when requested to do so.
Shares held through the 401(k) and Retirement Plan:
You may revoke your proxy or change your voting instructions for shares held through the 401(k) and Retirement Plan by completing any of the following:
Deliver another signed proxy card with a later date prior to the 401(k) Deadline; or
Call the toll-free telephone number, or access the proxy voting website, identified on the proxy card and re-vote anytime prior to the 401(k) Deadline.
Shares held in street name:
You should contact your stockbroker (or other institution holding your shares) to determine the procedures, if any, for revoking or changing your voting instructions for shares held in street name.
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Shareholder Proposals, Nominations and Communications |
May a shareholder nominate someone at the 2016 Annual Meeting to be a director of Kemper or bring any other business before the 20162019 Annual Meeting?
The Company’s Bylaws require advance notice to the Company if a shareholder intends to attend an annual meeting of shareholders in person and to nominate someone for election as a director or to bring other business before the meeting. Such a notice may be made only by a shareholder of record who meets the requirements set forth in Section 14 of the Company’s Bylaws and provides the required information in the notice within the time period described therein. Each year’s proxy statement states the applicable time period for providing such a notice for the next year’s annual meeting. The deadline for notices in relation to the 20162019 Annual Meeting has expired, and the Company did not receive any such notices that complied with the Bylaws requirements during the prescribed notice period. Accordingly, no such director nominations or other business proposed by shareholders from the floor of the 20162019 Annual Meeting will be in order. The procedures for shareholders to nominate directors or make other proposals relating to the 20172020 Annual Meeting are summarized below in the answers to the following two questions.
How may a shareholder nominate someone to be a director of Kemper or bring any other business before the 20172019 Annual Meeting?
In accordance with the advance notice requirements of the Bylaws described above, if a shareholder of record wishes to nominate one or more directors or bring other business to be considered by shareholders at the 20172020 Annual Meeting,
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such proposals must be made in writing to the Company no earlier than February 3, 20172020 and no later than March 6, 2017.2, 2020. However, if the date of the 20172020 Annual Meeting is advanced by more than 30 days or delayed by more than 60 days from the anniversary of the 20162019 Annual Meeting date (i.e., May 4, 2016)1, 2019), then such nominations and proposals must be delivered in writing to the Company no earlier than 90 days prior to the 20172020 Annual Meeting and no later than the close of business on the later of (i)(a) the 60thday prior to the 20172020 Annual Meeting, or (ii)(b) the 10th day following the day on which public announcement of the date of the 20172020 Annual Meeting is first made.
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All shareholder proposals and notices should be submitted to the Secretary of Kemper Corporation, at One200 East Wacker Drive,Randolph Street, Suite 3300, Chicago, Illinois 60601.
Please note that these requirements relate only to matters intended to be proposed from the floor of the 20172020 Annual Meeting. They are separate from certain SEC requirements that must be met to have shareholder proposals included in the Company’s Proxy Statement, as described immediately below.
When are shareholder proposals due so that they may be included in Kemper’s Proxy Statement for the 20172019 Annual Meeting?
Pursuant to the regulations of the SEC that are currently in effect, shareholders who intend to submit proposals for inclusion in the Company’s proxy materials for the 20172020 Annual Meeting must do so no later than November 25, 2016.21, 2019. Certain other SEC requirements must also be met to have a shareholder proposal included in the Company’s Proxy Statement. These requirements are independent of the advance notice requirements of the Company’s Bylaws described immediately above. Under SEC rules in effect on the date of this Proxy Statement, shareholder nominations of persons for election to the Board of Directors are not eligible for inclusion in the Company’s proxy materials. All shareholder proposals and notices should be submitted to the Secretary of Kemper Corporation, at One200 East Wacker Drive,Randolph Street, Suite 3300, Chicago, Illinois 60601.
How may a shareholder or other interested party communicate with the Board of Directors?
Shareholders and other interested parties may communicate with the Board of Directors, or with the non-management directors as a group, by calling the Kemper Corporate Responsibility Hotline at 866.398.0010888.695.3359 or by submitting a report or inquiry online at listenupreports.comMyComplianceReport.com (enter access code KEMP).
The hotline and the online reporting function are managed by an independent company, and reports can be made anonymously or confidentially. Communications will be directed to the Chair of the Nominating & Corporate GovernanceNCG Committee if addressed to the non-management or independent directors as a group.
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Cost of Proxy Solicitation |
What are the costs of soliciting these proxies and who pays them?
The Company has retained the services of Innisfree M&A Incorporated (“Innisfree”) to aid in the solicitation of proxies and will pay Innisfree a base fee of $12,500$15,000 for these services, plus its related costs and expenses. The Company will bear the total expense of the solicitation that will include, in addition to the amounts paid to Innisfree, amounts paid for printing and postage and to reimburse banks, brokerage firms and others for their expenses in forwarding proxy solicitation material. Although the principal distribution of proxy materials will be through the Internet, solicitation of proxies will also be made by mail. Additional proxy solicitation may be made by telephone or other direct communication with certain shareholders or their representatives by directors, officers and employees of the Company and its subsidiaries, who will receive no additional compensation for such solicitation.
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Additional Information about Kemper and Householding Requests |
Where can I find more information about Kemper?
The Company’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments thereto are accessible free of charge through its website, kemper.com, as soon as reasonably practicable after such materials are filed with or furnished to the SEC. You may also obtain at no charge a copy of the Company’s most recent Annual Report on Form 10-K, other materials filed with the SEC and additional information regarding Kemper as follows:
Contact Kemper Investor Relations by telephone at 312.661.4930, or by e-mail at investors@kemper.com; or
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Write to Kemper at One200 East Wacker Drive,Randolph Street, Suite 3300, Chicago, Illinois 60601, Attention: Investor Relations.
How may shareholders with the same address request delivery of either single or multiple copies of the Company’s Proxy Statement?
If you and another shareholder who shares your address received multiple copies of this Proxy Statement, you may contact the Company as described above and request that a single copy be sent to your address for future deliveries of Company
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communications. This is commonly referred to as “householding.” If your proxy statement was “householded” but you prefer to receive separate copies, you may contact the Company as described above to request separate copies now or for future deliveries of Company communications.
Incorporation by Reference
Notwithstanding any general statement to the contrary set forth in any of the Company’s previous or future filings under the Securities Act of 1933, as amended, or the Exchange Act that might incorporate this Proxy Statement into such filings, the Audit Committee Report and the Compensation Committee Report contained in this Proxy Statement are not to be incorporated by reference into any such filings, nor are they to be deemed soliciting material or deemed to be filed under such Acts.
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This Proxy Statement and the form of proxy are being mailed and delivered to the Company’s shareholders by the authority of the Board of Directors.
C. Thomas Evans, Jr.
Secretary
Supplement to Compensation Discussion and Analysis
TheThe information in this Appendix A supplements the disclosures in the Compensation Discussion and Analysis section of the Company’s Proxy StatementStatement.
The following table supplements the information in the table captioned 2018 versus 2017 Performance Comparisons under the heading Performance2018 Annual Incentive PlanProgram, beginning on page 28.29:
The following tables provide additional information about the Company Performance Criteria for the 2015 PIP Award payouts to the NEOs that are discussed in the above-referenced section of the Company’s Proxy Statement.
2015 Annual PIP Awards
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Company Performance Criteria under 2015 Annual PIP Awards to Messrs. Sodaro, Roeske and Southwell: |
Performance Criteria | | Definition of Key Terms |
Annual Kemper Consolidated Earned Premium Revenue Growth (weighted 40%) | | Annual Kemper Earned Premium Revenue Growth is defined as the percentage change in consolidated Earned Premium Revenues in 2015 from such revenues in 2014.
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Annual Kemper Consolidated Operating Profit Margin (weighted 60%) | | Annual Kemper Operating Profit Margin is defined as (i) Consolidated Net Operating Income, a non-GAAP financial measure as reported, defined and reconciled to GAAP in the Company’s Annual Report on Form 10-K, and as further adjusted for a Catastrophe Loss Collar as described below divided by (ii) Earned Premium Revenues.
The Catastrophe Loss Collar shall be computed as follows:
(i) If Catastrophe Losses and Loss Adjustment Expenses (“LAE”) (including Catastrophe reserve development) reported by the Property & Casualty Insurance segment (“Reported Catastrophe Losses and LAE”) are greater than 1.5 times the planned catastrophe losses and LAE for the Property & Casualty Insurance segment (“Maximum Catastrophe Losses and LAE”), Consolidated Net Operating Income shall be increased by an amount equal to the difference between the Reported Catastrophe Losses and LAE and the Maximum Catastrophe Losses and LAE;
(ii) If Reported Catastrophe Losses and LAE are less than 0.5 times the planned catastrophe losses and LAE for the Property & Casualty Insurance segment (“Minimum Catastrophe Losses and LAE”), Consolidated Net Operating Income shall be reduced by an amount equal to the difference between the Minimum Catastrophe Losses and LAE and the Reported Catastrophe Losses and LAE; or
(iii) If Reported Catastrophe Losses and LAE are less than the Maximum Catastrophe Losses and LAE and greater than the Minimum Catastrophe Loss and LAE, no adjustment shall be made to Consolidated Net Operating Income.
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| Non-GAAP Reconciliation ($ in Millions) |
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| | 2018 Actual | | 2017 Actual |
| | | Net Income | | ROE | | Net Income | | ROE |
| Reported | | $ | 190.1 |
| | 7.4% |
| | $ | 120.9 |
| | 5.9 | % |
| Adjustments, After-tax | | | | | | | | |
| Exclude AOCI on Fixed Maturity Securities | | — |
| | 0.5 | % | | — |
| | 0.7 | % |
| Normalize Catastrophe Losses and LAE including Development, from Reported to Expected | | 23.1 |
| | 0.9 | % | | 79.3 |
| | 4.1 | % |
| Normalize Realized Gains and Losses on Sales of Investments and Other-than-temporary Impairment Losses, from Reported to Expected | | (15.6 | ) | | (0.6 | )% | | (20.9 | ) | | (1.1 | )% |
| Change in Fair Value of Equity and Convertible Securities | | 50.8 |
| | 2.1 | % | | — |
| | — |
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| Purchase Accounting Related Adjustments | | 60.1 |
| | 2.3 | % | | — |
| | — |
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| Acquisition Related Transaction, Integration and Other Costs | | 36.5 |
| | 1.4 | % | | — |
| | — |
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| Partial Satisfaction of Arbitration Award | | (28.2 | ) | | (1.1 | )% | | — |
| | — |
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| Impact of Tax Reform | | (26.4 | ) | | (1.0 | )% | | (7.4 | ) | | (0.4 | )% |
| Total Adjustments, After-tax | | 100.3 |
| | 4.6 | % | | 51.0 |
| | 3.3 | % |
| Adjusted | | $ | 290.4 |
| | 11.9 | % | | $ | 171.9 |
| | 9.2 | % |
A-1
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Company Performance Criteria under 2015 Annual PIP Award to Mr. Boschelli: |
Performance Criteria | | Definition of Key Terms |
Annual Excess Return from Corporate Investments (weighted 20%). | | Annual Excess Return from Corporate Investments is determined by comparing the actual “Kemper 12 Month Total Investment Return” performance of Kemper’s Investment Portfolio to the results of a “Weighted Average Peer Return” (“WAPR”) for the Performance Period. Excess Return is expressed in basis points.
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Annual Excess Return from Pension Investments (weighted 5%). | | Annual Excess Return from Pension Investments is determined by comparing the actual “Kemper 12 Month Total Pension Return” for Kemper’s Pension Portfolio to the “Strategic Portfolio Return for Pension Investments” benchmark for the Performance Period. Excess Return is expressed in basis points.
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Annual Pre-Tax Equivalent Net Investment Income Yield (weighted 50%). | | Annual Pre-Tax Equivalent Net Investment Income Yield shall be computed by dividing:
(i) Pre-Tax Equivalent Net Investment Income by
(ii) the average of Total Investments at the beginning of the Performance Period and Total Investments at the end of the Performance Period.
Pre-Tax Equivalent Net Investment Income shall be computed by dividing:
(i) Net Investment Income on an after-tax basis taking into
consideration tax deductions for tax-preferenced net investment income by
(ii) the sum of 100% minus Kemper's federal income tax rate.
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Annual Kemper Consolidated Earned Premium Revenue Growth (40%); and Annual Kemper Consolidated Operating Profit Margin (60%) (collectively weighted 25%). | | See Definition of Key Terms under 2015 Annual PIP Awards to Messrs. Sodaro, Roeske and Southwell described on page A-1.B |
KEMPER CORPORATION
2019 EMPLOYEE STOCK PURCHASE PLAN
Article I
Purpose and Scope of the Plan
A-21.1Purpose. The purpose of the Kemper Corporation 2019 Employee Stock Purchase Plan as set herein is to assist eligible Employees of Kemper Corporation, a Delaware corporation (the “Company”) and its Affiliates, in acquiring a stock ownership interest in the Company pursuant to a plan intended to qualify as an “employee stock purchase plan” within the meaning of Section 423(b) of the Code.
The Plan is intended to benefit the Company’s shareholders by means of (i) providing eligible Employees with a convenient means of acquiring an equity interest through payroll deductions, (ii) enhancing such Employees’ sense of participation in the Company, and (iii) aligning the interest of Employees with those of the Company’s shareholders through increased stock ownership.
1.2Definitions. Unless the context clearly indicates otherwise, the following terms have the meaning set forth below:
“Affiliate” means any Subsidiary Corporation which the Committee or the Chief Executive Officer of the Company authorizes to participate in the Plan.
“Agent” means such agent as may be appointed pursuant to Section 6.5 of the Plan.
“Board of Directors” or “Board” shall mean the Board of Directors of the Company.
“Code” shall mean the Internal Revenue Code of 1986, as amended from time to time, together with any applicable regulations issued thereunder.
“Committee” shall mean the Board, or a committee designated by the Board to administer the Plan, which Committee shall administer the Plan as provided in Article VI hereof.
“Company” shall mean Kemper Corporation, a Delaware corporation, and its successors by operation of law.
“Compensation” shall mean the fixed salary, base hourly wage, or commissions (with respect to an employee whose regular or basic rate of compensation is commissions (a “Commissioned Employee”)) paid by the Company or an Affiliate to an Employee as reported by the Company or an Affiliate to the United States government for income tax purposes, including an Employee’s portion of salary deferral contributions pursuant to Section 401(k) of the Code and any amount excludable pursuant to Section 125 of the Code, but excluding any bonus, fee, overtime pay, severance pay, expenses, stock option or other equity incentive income, commissions (other than with respect to a Commissioned Employee) or other special payment or any credit or benefit under any employee plan maintained by the Company.
“Employee” shall mean any individual classified by the Company or an Affiliate on its payroll records as a full-time or part-time employee of the Company or an Affiliate who customarily works for the Company or an Affiliate, as the case may be, for a minimum of twenty (20) hours per week. For the avoidance of doubt, “Employee” shall not include non-employee directors and independent contractors, each of which is ineligible to participate in the Plan. Notwithstanding any provision of the Plan to the contrary, any individual who is not classified by the Company or an Affiliate on its payroll records as an employee (including, but not limited to, an individual classified by the Company or an Affiliate as an independent contractor or a non-employee consultant, an individual who is
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Company Performance Criteria and Target Multiplier under 2015 Annual PIP Award to Ms. Lynch: |
Performance Criteria | | Definition of Key Terms |
Annual Consolidated Earned Premium Revenue Growth for the Kemper P&C Group (weighted 40%)
| | Annual Consolidated Earned Premium Revenue Growth for the Kemper P&C Group is defined as the percentage change in Consolidated Earned Premium Revenues in 2015 from such revenues in 2014 for the Kemper P&C Group.
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Annual GAAP Combined Ratio for the Kemper P&C Group (weighted 30%) | | Annual GAAP Combined Ratio for the Kemper P&C Group shall be computed by dividing the sum of Total Losses & LAE, as adjusted for a Catastrophe Loss Collar, and Total Underwriting Expenses for the Property & Casualty Insurance segment by Earned Premium Revenues for the Property & Casualty Insurance segment.
The Catastrophe Loss Collar shall be computed as follows:
(i) If Reported Catastrophe Losses and LAE are greater than the Maximum Catastrophe Losses and LAE, Total Losses and LAE for the Property & Casualty Insurance segment Income shall be decreased by an amount equal to the difference between the Reported Catastrophe Losses and LAE and the Maximum Catastrophe Losses and LAE;
(ii) If Reported Catastrophe Losses and LAE are less than the Minimum Catastrophe Losses and LAE, Total Losses and LAE for the Property & Casualty Insurance segment shall be increased by an amount equal to the difference between the Minimum Catastrophe Losses and LAE and the Reported Catastrophe Losses and LAE; or
(iii) If Reported Catastrophe Losses and LAE are less than the Maximum Catastrophe Losses and LAE and greater than the Minimum Catastrophe Loss and LAE, no adjustment shall be made to Total Losses and LAE for the Property & Casualty Insurance segment.
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Annual GAAP Underlying Combined Ratio for the Kemper P&C Group (weighted 30%) | | Annual GAAP Underlying Combined Ratio for the Kemper P&C Group is defined as the sum of Total Underlying Losses & LAE and Total Underwriting Expenses divided by Earned Premium Revenues for the Property & Casualty Insurance segment.
Total Underlying Losses & LAE is defined as Total Losses and Loss Adjustment Expenses excluding Catastrophe Losses and prior year development for the Property & Casualty Insurance segment. B |
2015 Multi-Year PIP Awards
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Company Performance Criteria under 2015 Multi-Year PIP Awards to Messrs. Sodaro, Roeske and Southwell: |
performing services for the Company or an Affiliate through a leasing or employment agency, or an employee of an entity other than the Company or an Affiliate) shall not be eligible to participate in the Plan, even if such classification is determined to be erroneous, or is retroactively revised by a governmental agency, by court order or as a result of litigation, or otherwise.The “Performance CriteriaEntry Date” shall mean each January 1, April 1, July 1 and October 1 (or, if such date is not a Trading Day, the first Trading Day immediately following such date).
“Fair Market Value” of a Share means the fair market value of such Share determined by such methods or procedures as shall be established from time to time by the Committee. Unless otherwise determined by the Committee in good faith, the Fair Market Value per Share as of a particular date shall mean the closing price per Share on the national securities exchange on which the Shares are principally traded on such date.
“Offering Period” shall mean such duration (not to exceed twenty-seven (27) months or such lesser period as is required under Section 423(b)(7) of the three-year average of Kemper’s consolidated (1) Revenue Growth (weighted 60%); and (2) Return on Equity (weighted 60%),Code) as defined below. The Performance Criteria are subjectshall be determined by the Committee prior to the Catastrophe Loss Collar (as definedbeginning of such Offering Period. Unless the Committee determines otherwise before the beginning of the Offering Period, Offering Periods shall commence at three (3)-month intervals on page A-1, but with Net Income substitutedeach Entry Date over the term of the Plan, and each Offering Period shall last for Consolidated Net Operating Income whereno more than three (3) months and end on the Purchase Date for such termOffering Period. Accordingly, unless the Committee determines otherwise, four separate Offering Periods shall commence in each calendar year during which the Plan remains in existence.
“Open Enrollment Period” means the period of time prior to the start of each Offering Period during which Employees may elect to participate in the Plan as may be established by the Committee or Plan Manager from time to time.
“Participant” shall mean any Employee who (i) is used)eligible to participate in the Plan under Section 2.1 hereof and (ii) elects to participate.
“Plan” shall mean the Company’s 2019 Employee Stock Purchase Plan, as the same may be amended from time to time.
“PlanAccount” or “Account” shall mean a non-interest bearing account established and maintained in the name of each Participant.
“Plan Manager” shall mean any one or more Employees appointed pursuant to Section 6.3 hereof.
“Purchase Date” shall mean the last day of each Offering Period (i.e., March 31, June 30, September 30 and December 31, as applicable, or if such date is not a Trading Day, the last Trading Day immediately preceding such date).
“Purchase Price” shall mean the purchase price of a Share hereunder as provided in Section 3.1 hereof.
Revenue Growth“Subsidiary Corporation” shall have the meaning set forth in Section 424(f) of the Code.
“Share(s)” means a share of the common stock of the Company.
“Trading Day” means a day on which the New York Stock Exchange is defined asopen for trading.
1.3Effective Date of Plan. The Plan shall become effective on June 1, 2019 if, prior to that date, the three-year compound annual growth rate, calculated as [(A/B)^(1/3)-1], where A = Total Revenues excluding Net Realized Investment Gains (Losses)Plan (i) has been adopted by the Board of Directors of the Company, (ii) the Company has registered the Shares on Salesa Form S-8, and (iii) has been approved by an affirmative vote of Investments and Net Impairment Losses Recognizeda majority of the Shares present, in Earnings as reported in the Company’s 2017 Annual Report on Form 10-K and B = Total Revenues excluding Net Realized Investment Gains (Losses) on Sales of Investments and Net Impairment Losses Recognized in Earnings as reported in the Company’s 2015 Annual Report.person or by
Return on Equity is defined as the return on average shareholders’ equity, which shall be computed by dividing the sum of GAAP Net Income, subject to the Catastrophe Loss Collar, as reported in the Company’s Annual Reports for each of the three years in the Performance Period by the sum of the Average Shareholders’ Equity for each of the three years.
Average Shareholders’ Equity is defined as the simple average of Total Shareholders’ Equity as reported in the Company’s Annual Reports for the beginning and end of year for each year.
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Definitions of Company Performance Criteria under 2015 Multi-Year PIP Award for Mr. Boschelli: |
The Target Multiplier applicable to the 2014 Multi-Year PIP Award to Mr. Boschelli will be determined by computing a weighted average of the Target Multipliers derived for the following four performance criteria for the Performance Period ending December 31, 2017:
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Performance Criterion 1 | 3-Year Excess Return from Corporate Investments (v. WAPR) (weighted 20%). This is determined by comparing the 3-year Kemper Total Investment Return to the 3-year WAPR. A simple average is calculated of the return for each year in the Performance Period. |
Performance Criterion 2 | 3-Year Excess Return from Pension Investments (v. Benchmark) (weighted 5%). This is determined by comparing the 3-year Kemper Total Pension Return for Kemper’s Pension Portfolio to the 3-Year Strategic Portfolio Return for the Performance Period. A simple average is calculated of the return for each year in the Performance Period. |
Performance Criterion 3 | 3-Year Pre-Tax Equivalent Net Investment Income Yield (weighted 50%). All aspects of the calculation for the Pre-Tax Equivalent Net Investment Income Yield, for the Multi-Year PIP Award would follow the same method as that of the Annual PIP Award for the 3-year Performance Period. |
Performance Criterion 4 | 3-Year Kemper Consolidated Revenue Growth (40%) and Return on Equity (60%) (collectively weighted 25%). See definitions of key performance criteria under 2015 Multi-Year PIP Awards for Messrs. Sodaro, Roeske and Southwell.B |
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Definitions of Company Performance Criteria under 2015 Multi-Year PIP Award for Ms. Lynch: |
The Company Performance Criteria forproxy and entitled to vote on the Kemper P&C Group are Earned Premium Revenue Growth (weighted 40%) and Return on Allocated Equity (weighted 60%)proposal, at a meeting at which a quorum is present; provided, as defined below, and calculatedhowever, that such shareholder approval occurs on a consolidated basis fordate no later than twelve (12) months following the Kemper P&C Group, as described below.
date the Plan is so adopted.
Premium Revenue Growth1.4Termination of Plan. The Plan shall continue in effect through and including May 31, 2029, unless terminated prior thereto pursuant to Section 4.3 is defined ashereof, or by the three-year compound annual growth rate, calculated as [(A/B)^(1/3)-1],Board of Directors, which shall have the right to terminate the Plan at any time. Upon any such termination, the balance, if any, in each Participant’s Account shall be refunded to him or her, or otherwise disposed of in accordance with the policies and procedures prescribed by the Committee in cases where A = Total Earned Premiums as reportedsuch a refund may not be possible.
Article II
Participation
2.1Eligibility. Participation in the December 2017 Management Reports and B = Total Earned Premiums reportedPlan is limited to Employees who meet the requirements of this Section 2.1. Each Employee may become a Participant by completing the enrollment procedures prescribed by the Committee or Plan Manager, as revised from time to time, during the Open Enrollment Period. No Employee may participate in the December 2015 Management Reports.
Return on Allocated Equity is defined asPlan if such Employee, immediately after the simple averageend of an Offering Period, would be deemed for purposes of Section 423(b)(3) of the three annual Returns on Allocated Equity,Code to possess five percent (5%) or more of the total combined voting power or value of all classes of stock of the Company or any Subsidiary Corporation. The Committee may, prior to the commencement of an Offering Period, exclude from participation any Employee who, at the time of the commencement of the Offering Period, is a highly compensated employee (within the meaning of Section 414(q) of the Code) who is subject to the reporting requirements of Section 16(a) of the Securities Exchange Act of 1934; provided that such exclusion is applied in an identical manner to all such highly compensated employees of the Company and each Affiliate whose employees are Participants under the Plan.
2.2Payroll Deductions. Payment for Shares purchased hereunder shall be made by authorized payroll deductions from each payment of Compensation in accordance with instructions received from a Participant. Such deductions shall be expressed as a whole number percentage which shall be computedat least one percent (1%) but not more than ten percent (10%). A Participant may not increase the deduction during an Offering Period; provided that no more than once per Offering Period, a Participant may decrease the deduction. Notwithstanding the foregoing, a Participant may change the percentage deduction for any subsequent Offering Period by dividingfiling notice thereof with the sumCompany prior to the date on which such Offering Period commences. Any amount remaining in a Participant’s Account after the purchase of Net Operating Income forShares shall be refunded without interest; provided that any amounts remaining in a Participant’s Account that were insufficient to acquire a full Share shall be carried forward to the Property & Casualty Insurance segment as reported in the Company’s Annual Reports, as adjustednext Offering Period. Any Participant who discontinues payroll deductions during an Offering Period may again become a Participant for a Catastrophe Loss Collar, for eachsubsequent Offering Period upon completion of the three years in the Performance Periodenrollment procedures prescribed by the sumPlan Manager, as revised from time to time. Amounts deducted from a Participant’s Compensation pursuant to this Section 2.2 shall be credited to such Participant’s Account. No interest shall be credited to a Participant’s Account and a Participant may not make any additional payments into such Account.
Article III
Purchase of Shares
3.1Purchase Price. Unless the Average Allocated Equity forCommittee determines otherwise prior to the Property & Casualty Insurance segment for eachbeginning of an Offering Period, the three years. ForPurchase Price per Share sold to Participants hereunder shall be the numerator and denominatorproduct of this calculation, Reported Catastrophe Losses and LAE for each yeareighty-five percent (85%) multiplied by the Fair Market Value of such share on the Purchase Date with respect to an Offering Period; provided, however, that in no event shall not exceed 1.5 times orthe Purchase Price per share be less than 0.5 times the planned catastrophe losses and LAE for the Property & Casualty Insurance segment for such year.par value of a Share.
Average Allocated Equity3.2Purchase of Shares. is defined as the simple average of total Allocated Equity as determined for the beginning and end of year forOn each year in the Performance Period, wherein Allocated Equity is defined asPurchase Date, the amount in a Participant’s Account shall be charged with the aggregate Purchase Price of equity determined tothe largest number of whole Shares that can be attributable to a given Company reporting unit or segment using the Allocated Equity Model.purchased with such amount.
Allocated Equity Model is defined as the risk-based method developed to allocate equity to the Company’s reporting units or segments. The risk-adjusted share of all investments and the associated tax balances are allocated using AM Best’s Capital Adequacy Ratio (“BCAR”) and internally developed risk capital measures. This method achieves the goal of fully allocating investment capital and net investment income to the operating business segments with the exception of any excess based on a BCAR % above target levels.
AdjustmentsUnless otherwise provided by the Plan Manager, the number of Shares purchased by each Participant on the Purchase Date shall be deposited into an account established in the Participant’s name with the stock brokerage or other financial services firm designated by the Committee. Any amount remaining in a Participant’s Account after the purchase of Shares shall be refunded without interest; provided that any amounts remaining in a Participant’s Account that were insufficient to Net Operating Income:acquire a full Share shall be carried forward to the next Offering Period.
3.3Limitations on Purchase.
3.3.1 Notwithstanding any provisions of the Plan to the contrary, but subject to the requirements of Section 3.3.2, an Employee may not purchase Shares in any Offering Period which exceed that number of Shares which is equal to $25,000 divided by the Fair Market Value of a Share for such Offering Period reduced by the number of any Shares that were purchased by the Employee in a prior Offering Period in the same calendar year. The Fair Market Value of a Share for each Offering Period shall be the Fair Market Value of a Share on the Entry Date for such Offering Period.
3.3.2 No right under the Plan may be granted to a Participant that would permit the Participant to purchase stock under all employee stock purchase plans maintained by the Company or its Affiliates in an amount which, in the aggregate, exceeds $25,000 of Fair Market Value (determined as of the date such right is granted) for each calendar year in which the right is outstanding at any time. For purposes of this Section 3.3.2:
(a) The right to purchase Shares accrues when the right (or any portion thereof) first becomes exercisable during the calendar year;
(b) A Catastrophe Loss Collarright to purchase Shares that has accrued under one grant of rights under the Plan may not be carried over to any other grant of rights under the Plan or any other plan; and
(c) The Company’s 2011 Omnibus Equity Plan and any similar plan under which stock options may be granted that is hereafter adopted by the Company or an Affiliate shall not be deemed to be an employee stock purchase plan for purposes of this Section 3.3.2.
3.3.3 To the extent necessary to comply with Section 423(b)(8) of the Code, a Participant’s payroll deductions may be decreased to zero percent (0%) during any Offering Period which is scheduled to end during any calendar year, such that the aggregate of all payroll deductions accumulated with respect to such Offering Period and any other Offering Period ending within the same calendar year is no greater than twenty-five thousand dollars ($25,000). Payroll deductions shall re-commence at the rate provided for by the Participant’s prior election at the beginning of the first Offering Period which is scheduled to end in the following calendar year, unless suspended by the Participant pursuant to Section 2.2 of the Plan.
3.4Transferability of Rights. Rights to purchase shares hereunder shall be exercisable only by the Participant. Such rights shall not be transferable.
Article IV
Provisions Relation to Common Stock
4.1Shares Reserved; Delivery of Shares. A maximum of 1,300,000 Shares may be purchased under the Plan, subject to adjustment in accordance with Section 4.2 hereof. Subject to the limitation in the preceding sentence, as determined by the Committee in its sole discretion, any Shares purchased under the Plan may be either newly issued shares, existing treasury shares, or new purchases in the open market.
4.2Adjustment for Changes in Shares. In the event that adjustments are made in the number of outstanding Shares or such Shares are exchanged for a different class of stock of the Company or for shares of stock of any other corporation by reason of merger, consolidation, stock dividend, stock split or otherwise or an extraordinary cash dividend is paid in respect of the Shares, the Committee shall make appropriate adjustments in (i) the number and class of shares or other securities that may be reserved for purchase, or purchased, hereunder, and (ii) the Purchase Price. All such adjustments shall be made in the sole discretion of the Committee, and its decision shall be binding and conclusive. The existence of the Plan and any options granted hereunder shall not affect in any way the right or power of the Board of Directors or the shareholders of the Company to make or authorize any adjustment, recapitalization, reorganization or other change in the Company’s capital structure or its business, any merger or consolidation of the Company or a subsidiary, any issue of debt, preferred or prior preference stock ahead of or affecting Shares, the authorization or issuance of additional Shares, the dissolution or liquidation of the Company or any subsidiary, any sale or transfer of all or part of the Company’s or a subsidiary’s assets or business or any other corporate act or proceeding. The Board of Directors may at any time terminate an Offering Period then in progress and provide, in its discretion, that Participants’ then outstanding Account balances shall be used to adjust Net Operating Incomepurchase shares pursuant to Article III or returned to the applicable Participants.
4.3Insufficient Shares. If the aggregate funds available for the Property & Casualty Insurance segmentpurchase of Shares on any Purchase Date would cause an issuance of Shares in excess of the number provided for in Section 4.1 hereof, (i) the Committee shall proportionately reduce the number of Shares which would otherwise be purchased by each Participant in order to eliminate such excess and (ii) the Plan shall automatically terminate immediately after such Purchase Date.
4.4Confirmation. Confirmation of each purchase of Shares hereunder shall be made available to the Participant in either written or electronic format. A record of purchases shall be maintained by appropriate entries on the books of the Company. Unless otherwise determined by the Committee, Shares delivered to a Participant hereunder may not be assigned, transferred, pledged or otherwise disposed of in any way by the Participant during the one (1) year period following such delivery to the Participant (“Period of Restriction”) (other than by will or the laws of descent and distribution).
4.5Form of Shares. Subject to the provisions of applicable laws, rules and regulations and stock exchange requirements, Shares purchased under the Plan shall be issued in book entry or similar non-certificated form, or, at the request of a Participant following completion of the Period of Restriction, in the performance periodform of a stock certificate or by “DWAC” or similar electronic transfer to a brokerage or other account of the Participant.
4.6Rights as Shareholders. The Shares purchased by a Participant on a Purchase Date shall, for all purposes, be deemed to have been issued and sold by the Company as of the close of business on such Purchase Date. Prior to that time, none of the rights or privileges of a shareholder of the Company shall exist with respect to such shares.
Article V
Termination of Eligibility
5.1Termination of Eligibility. If a Participant ceases to be eligible to participate in a manner similarthe Plan under Section 2.1 hereof for any reason, the balance in such Accountwill be refunded or distributed to the methodParticipant without interest.
5.2Death of Participant. Upon the death of a Participant, the balance in the Participant’s Account shall be distributed without interest to the Participant’s designated beneficiary or estate, or otherwise disposed of in accordance with policies and procedures prescribed by the Committee or its delegate in cases where such a distribution may not be possible.
Article VI
Administration
6.1Plan Administration. The Committee shall administer the Plan. For purposes of administration of the Plan, a majority of the members of the Committee (but not less than two) shall constitute a quorum, and any action taken by a majority of such members of the Committee present at any meeting at which a quorum is present, or any action approved in writing by all members of the Committee, shall be the action of the Committee.
6.2Interpretation. The interpretation and construction by the Committee of any provisions or any right granted under it shall be final. Subject to the express provisions of the Plan, the Committee shall have full discretionary authority to interpret the Plan, to issue rules for administering the Plan, to change, alter, amend or rescind such rules, and to make all other determinations necessary or appropriate for the administration of the Plan.
6.3Delegation. The Committee shall have full discretionary authority to delegate administrative decisions and operations to the management of one or more of the Employees of the Company or an Affiliate, including appointment of a Plan Manager.
6.4Indemnification. No member of the Board or the Committee or any Employee to whom authority under the Plan is delegated under Section 6.3 shall be liable for any action, determination or omission taken or made in good faith with respect to the Plan or any right granted under it. The Company shall indemnify each member of the Board, the Committee and any Employee to whom authority under the Plan is delegated under Section 6.3 to the fullest extent permitted by law with respect to any claim, loss, damage or expense (including counsel fees) arising in connection with their responsibilities under the Plan.
6.5Appointment of Agent. TheCommittee or its delegate under Section 6.3 may engage an agent to perform administrative, custodial and record keeping functions for the Plan, including, but not limited to, enrolling Participants in the Plan, purchasing or issuing Shares, holding record title to the Participants’ Shares and providing periodic account status reports to such Participants. If no such agent is engaged by the Committee or its delegate, the Committee or its delegate shall serve as the agent.
Article VII
General Provisions
7.1Notices. Any notice which a Participant files pursuant to the Plan shall be made on forms prescribed by the Committee or the Plan Manager and shall be effective only when received by the Company.
7.2Condition of Employment. Neither the creation of the Plan nor participation therein shall be deemed to create any right of continued employment or in any way affect the right of the Company or an Affiliate to terminate an Employee.
7.3Withholding of Taxes. Each Participant shall, no later than the date as of which the value of an option under the Plan and/or Shares first becomes includible in the income of the Participant for income tax purposes, pay to the Company, or make arrangements satisfactory to the Committee regarding payment of, any taxes of any kind required by law to be withheld with respect to such option or Shares. The obligations of the Company under the Plan shall be conditioned upon the making of such payments or arrangements, and the Company shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the Participant. In particular, to the extent a Participant is subject to taxation under U.S. Federal income tax law, if the Participant makes a disposition, within the meaning of Section 424(c) of the Code of any Shares issued to the Participant pursuant to the Participant’s exercise of an option, and such disposition occurs within
the two-year period commencing on the day after the first date of the Offering Period or within the one-year period commencing on the day after the Purchase Date, the Participant shall, within ten (10) days of such disposition, notify the Company thereof and thereafter immediately deliver to the Company any amount of Federal, state or local income taxes and other amounts which the Company informs the Participant the Company may be required to withhold.
7.4Amendment of the Plan. The Board of Directors may at any time, or from time to time, amend the Plan in any respect, except that, without approval of the shareholders, no amendment may (a) increase the aggregate number of shares reserved under the Plan other than as provided in Section 4.2 hereof, (b) materially increase the benefits accruing to Participants or (c) materially modify the requirements as to eligibility for participation in the Plan. Any amendment of the Plan must be made in accordance with applicable provisions of the Code and/or any regulations issued thereunder, any other applicable law or regulations, and the requirements of the principal exchange upon which the Shares are listed. The Plan may not be amended in any way that will cause rights issued under the Plan to fail to meet the requirements for employee stock purchase plans as defined in Section 423 of the Code or any successor thereto. To the extent necessary to comply with Rule 16b-3 under the Securities Exchange Act of 1934, as amended, Section 423 of the Code, or any other applicable law or regulation, the Company shall obtain shareholder approval of any such amendment.
7.5Application of Funds. All funds received by the Company by reason of purchases of Shares hereunder may be used for any corporate purpose.
7.6Legal Restrictions. The Company shall not be obligated to adjustsell Shares hereunder if counsel to the 2015 Annual PIP awardsCompany determines that such sale would violate any applicable law or regulation.
7.7Conditions Upon Issuance of Shares.
7.7.1 If at any time the Committee shall determine, in its discretion, that the listing, registration and/or qualification of Shares upon any securities exchange or under any state or Federal law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, the sale or purchase of Shares hereunder, no option may be exercised or paid in whole or in part unless and until such listing, registration, qualification, consent and/or approval shall have been effected or obtained, or otherwise provided for, Messrs. Sodaro, Roeskefree of any conditions not acceptable to the Committee.
7.7.2 If at any time counsel to the Company shall be of the opinion that any sale or delivery of Shares pursuant to an option is or may be in the circumstances unlawful, contravene the requirements of any stock exchange, or result in the imposition of excise taxes on the Company or any subsidiary under the statutes, rules or regulations of any applicable jurisdiction, the Company shall have no obligation to make such sale or delivery, or to make any application or to effect or to maintain any qualification or registration under the Securities Act of 1933, as amended, or otherwise with respect to Shares or options and Southwell described above.the right to exercise any option shall be suspended until, in the opinion of such counsel, such sale or delivery shall be lawful or will not result in the imposition of excise taxes on the Company or any subsidiary.
7.7.3 The Committee, in its absolute discretion, may impose such restrictions on the ownership and transferability of the Shares purchasable or otherwise receivable by any person under any option as it deems appropriate. The certificates evidencing such Shares may include any legend that the Committee deems appropriate to reflect any such restrictions.
7.8Governing Law. The Plan and all rights and obligations thereunder shall be constructed and enforced in accordance with the laws of the State of Delaware and any applicable provisions of the Code and the related regulations.
7.9Jurisdiction: Waiver of Jury Trial. Any suit, action or proceeding with respect to the Plan or any agreement, or any judgment entered by any court of competent jurisdiction in respect of any thereof, shall be resolved only in the courts of the State of Delaware or State of Illinois or the United States District Court for the State of Delaware or State of Illinois, Northern District, and the appellate courts having jurisdiction of appeals in such courts, unless otherwise provided by applicable law. In that context, and without limiting the generality of the foregoing, the Company and each eligible Employee shall irrevocably and unconditionally (a) submit in any proceeding relating to the Plan or any agreement, or for the recognition and enforcement of any judgment in respect thereof (a “Proceeding”), to the exclusive jurisdiction of the courts of the State of Illinois, the court of the United States of America for the State of Illinois, and appellate courts having jurisdiction of appeals from any of the foregoing, and agree that all claims in respect of any such Proceeding shall be heard and determined in such Illinois state court or, to the extent permitted by law, in such federal court, (b) consent that any such Proceeding may and shall be brought in such courts and waives any objection that the Company and each eligible Employee may now or thereafter have to the venue or jurisdiction of any such Proceeding in any such court or that such Proceeding was brought in an inconvenient court and agree not to plead or claim the same, (c) WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY PROCEEDING (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THE PLAN OR ANY AGREEMENT, (d) agree that service of process in any such Proceeding may be effected by mailing a copy of such process by registered or certified mail (or any substantially similar form of mail), postage prepaid, to such party, in the case of an eligible Employee, at the eligible Employee’s address shown in the books and records of the Company or, in the case of the Company, at the Company’s principal offices, attention General Counsel, and (e) agree that nothing in the Plan shall affect the right to effect service of process in any other manner permitted by the laws of the State of Illinois. Notwithstanding the foregoing, the Committee may, as a condition to participation in the Plan, require that a Participant agree in writing to submit all disputes or claims arising out of or relating to such participation to binding arbitration in accordance with such terms as the Committee shall prescribe.
7.10Unfunded Status of Plan. The Plan shall be an unfunded plan. The Committee may authorize the creation of trusts or other arrangements to meet the obligations created under the Plan to deliver Shares or make payments, provided that the existence of such trusts or other arrangements is consistent with the unfunded status of the Plan.
Kemper Corporation
Notice of 20162019 Annual Meeting and Proxy Statement
kemper.com