A significant portion of compensation should be “at risk” based on the Company’s performance | | | | | | | Over 65% of the CEO’s target total pay is at risk and over 55% of target total pay for all other NEOs is at risk. | | | | Generally, over 65% of the CEO’s target total pay and over 55% of target total pay for all other NEOs (base salary plus target annual incentive plus target long-term incentive) is at risk, is variable from year to year, and demonstrates a strong link between pay and performance. To further enhance the pay-for-performance linkage, we incorporate performance relative to comparable companies into our long-term incentive measures. | | | | Over 65% of the CEO’s target total pay is at risk and over 55% of target total pay for all other NEOs is at risk.
|
Compensation levels should be market competitive The Committee believes a competitive compensation program is critical in attracting and retaining top executives. Consequently, when making compensation decisions, the Committee considers the compensation opportunities provided to similarly situated executives at comparable companies as well as how compensation is delivered (e.g., short-term vs. long-term and fixed vs. variable). Assessing Compensation Competitiveness | | | | | | | The Committee intends to set total direct compensation for the NEOs – salary and target annual and long-term incentive opportunities – within a reasonable range of the median of the competitive market, while providing the opportunity for additional compensation if warranted by performance. To determine competitive pay levels, we use comparable survey market data provided by our independent consultant, CAP, | and from published survey sources including Mercer LLC, LOMA and Towers Watson. The data from these surveys is scaled to our size by CAP based on revenues or asset ranges as provided by the various surveys. The NEOs are assessed against comparable functional matches in the insurance industry and the broader general industry, as appropriate. Every year, CAP provides the Committee with a comparison of the base salary, annual incentives and long-term incentives of the CEO with those of other chief executive officers based on survey data. Based on the data, CAP makes recommendations for CEO compensation for the Committee’s consideration. The Committee then deliberates in executive session to determine its recommendation for approval by the Board of Directors. | | | | 20132014 Consultant Survey Sources
• Mercer: Global Premium Executive Remuneration Database • Mercer: Insurance CompensationFinancial Services Survey
• Mercer: US Executive Remuneration Suite •LOMA: Executive Compensation Survey • Towers Watson: Top Management Compensation Survey •Towers Watson: Survey Report on TopInsurance Management Personnel Compensation | | |
For 2013,2014, the CAP analysis demonstrated that the average of 20132014 total direct compensation was consistent with target pay positioning at the median of the market. This is consistent with the Committee’s compensation philosophy. | | | 20142015 Proxy Statement • Compensation Discussion and Analysis | | 1723 |
Compensation Mix We structure our executive compensation program to deliver the majority of pay through incentives driving both operating results and long-term value and positioning more than half of each NEO’s pay at risk. The targeted compensation mix of total direct compensation for the NEOs at the beginning of 20132014 is illustrated below. The mix of 20132014 actual compensation varied as a result of actual incentives earned. ![LOGO](https://files.docoh.com/DEF 14A/0001193125-14-131433/g655194g06z92.jpg) ![LOGO](https://files.docoh.com/DEF 14A/0001193125-15-122569/g857569g44a81.jpg)
Base Salary Competitive base salaries are critical to attracting and retaining superiorhigh performing executive talent. The Committee seeks to pay salaries that approximate median industry salaries for executives of similar companies in like positions. In order to determine competitive positioning, the Committee requests CAP to assess compensation for the CEO and four other NEOs. CAP makes their comparisons based on industry norms, represented by survey compensation for comparable positions in the insurance industry and general industry, and this information is used as a reference point for the Committee. However, in recruiting new executives, these guidelines are sometimes exceeded to attract qualified candidates. There may also be instances where an existing executive’s compensation deviates from the median, either up or down, due to performance, responsibilities, compensation history, internal equity and/or retention risk with no pre-determined goals assigned to such considerations. Salaries for Executive Officers are reviewed every 12 months in connection with the review of financial results for the prior fiscal year. In addition to considering market data, the Committee reviews each executive’s performance, including the accomplishment of key corporate, strategic, operational, financial and management goals, and upholding our standards of ethical conduct. | Name | |
| 2012
Annualized Salary |
| | | 2013 Annualized Salary | | |
| Percent
of 2013 Increase |
| | Reason For Increase | |
| 2013
Annualized Salary |
| |
| 2014
Annualized Salary |
| | | Percent of 2014 Increase | | | Reason For Increase | Marita Zuraitis | | | NA | | | | $650,000 | | | | NA | | | New hire in 2013 | | | $650,000 | | | | $704,000 | | | | 8.31% | | | Merit increase based on strong performance | Peter H. Heckman | | | $650,000 | | | | $700,000 | | | | 7.69% | | | Merit increase based on strong performance | | Dwayne D. Hallman | | | $380,004 | | | | $430,008 | | | | 13.16% | | | Merit increase based on strong performance and to bring base salary closer to the median of the market | | | $430,008 | | | | $444,000 | | | | 3.25% | | | Merit increase based on strong performance | Stephen P. Cardinal | | | $403,704 | | | | $412,008 | | | | 2.06% | | | Merit increase based on strong performance | | | $412,008 | | | | $429,000 | | | | 4.12% | | | Merit increase based on strong performance | Thomas C. Wilkinson | | | $327,804 | | | | $338,004 | | | | 3.11% | | | Merit increase based on strong performance | | Matthew P. Sharpe | | | $300,000 | | | | $325,008 | | | | 8.34% | | | Merit increase based on strong performance and to bring base salary closer to the median of the market | | | $325,008 | | | | $364,000 | | | | 12.00% | | | Merit increase based on strong performance and to bring base salary closer to the median of the market | John P. McCarthy | | | | NA | | | | $300,000 | | | | NA | | | New hire in 2014 |
| | | 1824 | | 2014 Proxy Statement • Compensation Discussion and Analysis |
Annual Incentive Plan
Our Annual Incentive Plan (“AIP”) is designed to drive and reward strong performance over a one-year period. The annual incentive is a key part of our overall compensation structure and is directly linked to the Company’s annual business plan. Under the Company’s 2010 Comprehensive Executive Compensation Plan (“CECP”), the Committee establishes Company-wide and business unit/division performance objectives every March, as well as the related threshold, target and maximum bonus opportunities for each NEO. In setting these objectives and opportunities, the Committee considers, among other things, the strategic goals of the Company, corporate financial projections and the degree of difficulty in achieving the targets. It is the goal of the Committee to establish measurements and targets that are reasonable, but not easily achieved. As evidence of this, the AIP has generated awards ranging from approximately 102% to 172% of target over the past 5 years, with an average of approximately 133% for the five-year period. During this period, the Company has consistently maintained strong earnings, including record operating earnings per share in 2013, and dividend growth that has provided solid total shareholder returns. The variability and average level of the awards earned confirms the Committee’s practice of establishing reasonable yet aggressive goals for the Company’s AIP. The measures and targets are discussed with the CEO, other NEOs, other members of the Board and CAP before they are set. Each March, the Committee also certifies performance and determines annual incentive award payouts for the prior year.
![LOGO](https://files.docoh.com/DEF 14A/0001193125-14-131433/g655194g47e40.jpg)
Target incentive opportunities for the NEOs are intended to approximate the median of the bonus potential for similarly situated executives in comparable companies. Maximum incentive opportunities are set at 200% of target. Changes made to these opportunities, if any, generally take effect for the next fiscal year. Based on the 2013 performance of the Company relative to the Corporate Measures, the Committee approved the resulting award of 139.5% of target for Ms. Zuraitis and the other NEOs. The annual incentives paid to the NEOs are shown in the Non-Equity Incentive Plan Compensation column of the “Summary Compensation Table.” For 2013, the target annual incentive opportunities for the NEOs, the actual AIP paid (139.5% of target) along with the actual AIP expressed as a percentage of base salary as of December 31, 2013, were as follows:
| | | | | | | | | Name | | 2013 Target AIP Opportunity | | 2013 Actual
AIP Paid | | 2013 Actual AIP Paid
as a Percent of Salary | | | Marita Zuraitis | | 75% | | $500,063 | | 76.93% | | | Peter H. Heckman | | 90% | | $863,156 | | 123.31% | | | Dwayne D. Hallman | | 50% | | $281,540 | | 65.47% | | | Stephen P. Cardinal | | 50% | | $285,928 | | 69.40% | | | Thomas C. Wilkinson | | 50% | | $233,979 | | 69.22% | | | Matthew P. Sharpe | | 50% | | $222,332 | | 68.41% | | |
For 2013, 100% of the CEO’s and all other NEOs’ annual incentive opportunities were tied to Company-wide performance. For Ms. Zuraitis, the actual AIP paid was adjusted for length of service. The Committee believes that this provides appropriate alignment for an executive’s compensation as it recognizes that the Company as a whole must perform well in order to deliver value to our Shareholders.
| | | 2014 Proxy Statement • Compensation Discussion and Analysis | | 19 |
Annual Incentive Plan Targets
The Committee finalized targets for the 2013 corporate performance measures in its March 2013 meeting. The targets for the Operating Income and Insurance Revenues measures were based on a review of market conditions and expectations of other companies in the industry as well as our financial plan for 2013 (“Plan”). The financial plan was the basis of our 2013 earnings guidance, which was publicly disclosed in February 2013 in connection with our release of earnings for the year ended December 31, 2012. All measures are defined as absolute (meeting specific established internal goals, i.e., earnings, revenues and sales). For 2013, the corporate measures (“Corporate Measures”), bonus targets and results were as follow:
| | | | | | | | | | | Annual 2013 Corporate Measures (1) | | Measurement Weighting | | Target | | Results | | Actual Weighted Results | | Absolute vs. Relative | Adjusted Operating Income | | 50% | | $77.0 million | | $93.9 million | | 100.0% | | Absolute | Auto Renewal Ratio | | 15% | | 85.0 percent | | 84.8 percent | | 12.0% | | Absolute | Insurance Revenues | | | | | | | | | | | True New Auto Sales Units | | 10% | | 49,000 | | 47,700 | | 0.0% | | Absolute | Total Annuity Sales | | 10% | | $262.5 million | | $279.9 million | | 20.0% | | Absolute | Horace Mann Life Sales | | 15% | | $6.2 million | | $5.7 million | | 7.5% | | Absolute | Total | | 100% | | | | | | 139.5% | | |
(1) | The Corporate Measures, as defined by the AIP, include:
|
| • | | Adjusted operating income – GAAP net income after tax, excluding realized investment gains and losses, adjusted for P&C catastrophe costs different than Plan, Annuity & Life DAC unlocking / change in GMDB reserve due to capital gains and losses and market performance different than Plan, and the impact of share repurchases on investment income.
|
| • | | Auto Renewal Ratio – The percentage of auto policies remaining in force from the previous year’s policy in-force count.
|
| • | | True New Auto Sales Units – The number of new auto policies sold to first-time auto customers.
|
| • | | Total Annuity Sales – The amount of annuity new business sold during the year as measured by premiums and deposits to be collected over the 12 months following the sale of the new contract.
|
| • | | Horace Mann Life Sales – The amount of new Horace Mann life insurance products sold during the year as measured by premiums to be collected over the 12 months following the sale.
|
| | | 20 | | 20142015 Proxy Statement • Compensation Discussion and Analysis |
Long-term Incentive Plan The Company awards long-term incentives to NEOs and other executives who can have the greatest impact on the Company’s long-term success. Long-term incentives are intended to focus executives on driving operating performance as well as long-term value creation. They are also an effective vehicle for attracting and retaining executive talent. All long-term incentive grants are made under the Company’s 2010 Comprehensive Executive Compensation Plan. As discussed previously, the Company’s Long-term Incentive Plan is comprised of three vehicles, performance-based RSUs, service-based RSUs and stock options. ![LOGO](https://files.docoh.com/DEF 14A/0001193125-14-131433/g655194g05d43.jpg) ![LOGO](https://files.docoh.com/DEF 14A/0001193125-15-122569/g857569g56t25.jpg)
| (1) | Graph represents percent of target performance-based awards earned in the year the long-term incentive measurement period ended. Performance-based RSUs comprise 45-50% of the total long-term incentive opportunity. |
(2) | Due to the Company adopting a three-year performance period in 2013, the next performance period will end in 2015, and therefore no results are shown for 2014. |
In setting targets for performance-based RSUs under the Long-term Incentive Plan, the Committee considers, among other things, the external competitive and financial markets environment, the strategic goals of the Company, internal financial projections, and the difficulty of meeting those goals and projections. OverFor the last 5 years,five most recently completed performance periods, awards earned under the Long-term Incentive Plan have ranged from 0% to approximately 176% of target, with an annual average of 103.4% of target for the performance periods, as illustrated in the graph above. The variability and average level of the awards earned confirms the Committee’s practice of establishing reasonable yet aggressive goals for the Company’s Long-term Incentive Plan. The intent of the program is to focus executives on shareholder value and key strategic objectives, while promoting retention and recognizing the market trend to deliver long-term incentives through a mix of equity-based compensation vehicles. Further, in combination with the cash component of the AIP,Annual Incentive Plan (“AIP”), the compensation program provides a meaningful incentive without encouraging excessive risk taking. To ensure that our executives’ interests are aligned with those of our Shareholders, our executives are required to invest and defer earned and vested RSU awards until their stock ownership requirements are met. | | | 2014 Proxy Statement • Compensation Discussion and Analysis | | 21 |
Long-term Incentive Plan Design and Target Setting 2012-2013 Long-term Incentive Plan Grants and Awards
| | | | | | | The 2012 awards were 100% equity-based and were comprised of 50% performance-based RSUs, 20% service-based RSUs and 30% service-based stock options. The performance period for the 2012 awards began January 1, 2012 and ended December 31, 2013. The Committee believes that granting awards entirely in equity-based components appropriately drives long-term performance and creates alignment with Shareholders’ interests. The Long-term Incentive Plan measures and performance targets for the performance-based RSUs for the 2012-2013
| performance period were established at the Committee’s March 2012 meeting. Measures were weighted to reward performance based on achievement of the 2013 voluntary auto policy
| | | | Peer Companies for 2012-2013 Long-term Incentive Relative TSR Measure
| in-force goal (25%), the 2013 annuity contract deposit target (15%), a two-year operating income objective (30%) and total shareholder return (“TSR”) over the two-year period relative to a peer group of companies (30%). It is the Committee’s belief that all these measures impact shareholder value creation. Measures are defined as absolute (meeting specific established internal goals, i.e., earnings, revenues
| | | | •State Auto Financial
Corporation
•Mercury General Corporation
•The Progressive Corporation
•The Chubb Corporation
•Cincinnati Financial
Corporation
•Infinity Property and Casualty
Corporation
| | •The Hanover Insurance Group, Inc.
•The Allstate Corporation
•The Travelers Companies, Inc.
•American Financial Group, Inc.
•The Hartford Financial Services
Group, Inc.
•Kemper Corporation
| and sales) or relative (specified performance levels measured against a peer group of companies, i.e. TSR). Above target performance for the 2012-2013 period resulted in 175.8% of performance-based RSUs granted in 2012 being earned. The 2012-2013 performance period measures, targets and results were as follows:
|
| | | | | | | | | | | 2012-2013 Performance Measures (1) | | Measurement Weighting | | 2012-2013 Performance Period Targets | | 2012-2013 Performance Period Results | | Actual Weighted Results | | Absolute vs. Relative | 2013 Voluntary Auto Policies In Force | | 25% | | 473,400 policies | | 478,170 policies | | 43.9% | | Absolute | 2013 Annuity Contract Deposits | | 15% | | $432.3 million | | $423.0 million | | 11.9% | | Absolute | Operating Income (Cumulative 2 years) | | 30% | | $160.5 million | | $177.4 million | | 60.0% | | Absolute | Total Shareholder Return | | 30% | | Median of TSR peer group | | 100th percentile | | 60.0% | | Relative | Total | | 100% | | | | | | 175.8% | | |
| (1) | The Performance Measures, as defined under the Long-term Incentive Plan, include:
|
| • | | Voluntary Auto Policies in Force – The number of auto policies in force, excluding Commerce, Facilities and Assigned Risk, as of December 31, 2013.
|
| • | | Annuity Contract Deposits – Amounts received from customers on deposit-type annuity contracts.
|
| • | | Operating Income – GAAP net income after tax, excluding realized investment gains and losses, adjusted for P&C catastrophe costs different than Plan, Annuity & Life DAC unlocking / change in GMDB reserve due to capital gains and losses and market performance different than Plan, and the impact of share repurchases on investment income for the two-year period.
|
| • | | Total Shareholder Return – The total return on HMEC Common Stock to an investor, which combines share price appreciation/decline and dividends.
|
| | | 22 | | 2014 Proxy Statement • Compensation Discussion and Analysis |
2013-2015 Long-term Incentive Plan Grants and Awards The 2013 awards were 100% equity-based and were comprised of 50% performance-based RSUs, 20% service-based RSUs and 30% service-based stock options. All measures are defined as relative, specified performance levels measured against a peer group of companies. The peer group of companies is made up of all insurance companies included in the Russell 2000® Index, except for brokerage,brokerages, reinsurance, financial guarantee and health companies. The performance measures and targets for the performance-based RSUs are as follows: | | | | | | | 2013-2015 Performance Measures (1) | | Measurement Weighting | | 2013-2015 Performance Period Targets | | Absolute vs. Relative | Operating Earnings per Share Growth | | 30% | | 50th Percentile of Peer Group | | Relative | Operating Return on Equity | | 30% | | 50th Percentile of Peer Group | | Relative | Total Shareholder Return | | 40% | | 50th Percentile of Peer Group | | Relative | Total | | 100% | | | | |
| (1) | The Performance Measures, as defined under the Long-term Incentive Plan, include: |
| • | | Operating Earnings per Share Growth – Relates to the total percentage increase or decrease in Operating Earnings per share for the three yearthree-year period measured against a peer group of companies. |
| • | | Operating Return on Equity – Relates to the average annual Operating Income return on average equity for the three yearthree-year period measured against a peer group of companies. |
| • | | Total Shareholder Return – Relates to the Total Shareholder Return for the three yearthree-year period measured against a peer group of companies. |
| | | 2015 Proxy Statement • Compensation Discussion and Analysis | | 25 |
2014-2016 Long-term Incentive Plan Grants and Awards The 2014 awards were 100% equity-based and were comprised of 50% performance-based RSUs, 20% service-based RSUs and 30% service-based stock options. All measures are defined as relative, specified performance levels measured against a peer group of companies. The peer group of companies is made up of all insurance companies included in the Russell 2000® Index, except for brokerages, reinsurance, financial guarantee and health companies. The two relative performance measures for the 2014-2016 performance period – operating return on equity and total shareholder return – continue to support the objective of out-performing our peers as the Company focuses on investments needed in the next three years to allow for strategic growth. These two measures focus on the effective use of capital and delivering on growth objectives while retaining our strong alignment with Shareholder interests. The performance measures and targets for the performance-based RSUs are as follows: | | | | | | | 2014-2016 Performance Measures (1) | | Measurement Weighting | | 2014-2016 Performance Period Targets | | Absolute vs. Relative | Operating Return on Equity | | 50% | | 50th Percentile of Peer Group | | Relative | Total Shareholder Return | | 50% | | 50th Percentile of Peer Group | | Relative | Total | | 100% | | | | |
| (1) | The Performance Measures, as defined under the Long-term Incentive Plan, include: |
| • | | Operating Return on Equity – Relates to the average annual Operating Income return on average equity for the three-year period measured against a peer group of companies. |
| • | | Total Shareholder Return – Relates to the Total Shareholder Return for the three-year period measured against a peer group of companies. |
In setting the dollar valuevalues of the 2013 and 2014 long-term incentive opportunityopportunities for each NEO, the Committee targeted an amountamounts that would achieve the Company’s overall objective of positioning total compensation at approximately the market median. The 2013 and 2014 target grant values for the NEOs for the 2013-2015 and 2014-2016 performance periodperiods were as follows: | | | | | Name | | Long-term Incentive
Target in 2013 | | Long-term Incentive
Target in 2014 | Marita Zuraitis | | $800,000 | | $1,000,000(1) | Dwayne D. Hallman | | $500,000 | | $500,000 | Stephen P. Cardinal | | $500,000 | | $500,000 | Matthew P. Sharpe | | $300,000 | | $400,000 | John P. McCarthy | | N/A | | $300,000 |
| | | | | Name
| | (1) | Long-term Incentive
TargetMs. Zuraitis assumed the Chief Executive Officer position in 2013late 2013.
| | | Marita Zuraitis
| | $800,000 | | | Peter H. Heckman
| | $1,200,000 | | | Dwayne D. Hallman
| | $500,000 | | | Stephen P. Cardinal
| | $500,000 | | | Thomas C. Wilkinson
| | $350,000 | | | Matthew P. Sharpe
| | $300,000
| | |
Performance-Based RSUs We believe the RSUs are an effective vehicle for rewarding executives based on performance and have a high value in promoting executive retention. RSUs were granted on March 5, 2013 for the 2013-2015 performance period and March 5, 2014 for the 2014-2016 performance period. RSUs will be earned on December 31, 2015 and December 31, 2016, respectively, based on achievements relative to the three-year performance period targets. Participants can earn up to 200% of their target award of RSUs based on performance. UnderFor the 2013-2015 program, any RSUs earned at the end of 2015 are 100% vested on January 1, 2016 following the performance period. Under the 2014-2016 program, any RSUs earned at the end of 2016 are 100% vested on January 1, 2017 following the performance period. Once vested, the RSUs are subject to holding requirements until the executive’s stock ownership requirements are met. See “Stock Ownership and Holding Requirements.” From the date of grant, RSUs accrue dividends at the same rate as dividends paid to our Shareholders, but are only paid on the corresponding shares that are earned. If no shares are earned, the dividends are forfeited. Earned dividends are converted into additional RSUs. Target RSU opportunities for the 2013-2015 and 2014-2016 performance periodperiods for the NEOs were established as 50% of the total long-term incentive opportunity in March 2013.opportunities. On an annualized basis, the awards of RSUs ranged from approximately 46%44% to 86% of base salary. Maximum opportunities were set at 200% of target and threshold opportunities were set at 50% of target. The performance measures for the 2013-2015 performance period – operating earnings per share growth, operating return on equity, along with total shareholder return, each relative to a peer group of insurance companies – provide strong alignment with Shareholder interests. Each of the performance measures are required to be at or above the 25th percentile of peers to earn an award. At the 25th percentile, participants can earn 50% of their target award and at the peer group median participants can earn their target award. If the performance measure is at or above the 90th percentile of peers, 200% of the target award can be earned. The two relative performance measures for the 2014-2016 performance period – operating return on equity and total shareholder return – continue to support the objective of out-performing our peers as the Company focuses on investments needed in the next three years to allow for strategic growth. These two measures focus on the effective use of capital and delivering on growth objectives while retaining our strong alignment with Shareholder interests. Each of the performance measures are required to be at or above the 25th percentile of peers to earn an award. At the 25th percentile, participants can earn 50% of their target award and at the peer group median participants can earn their target award. If the performance measure is at or above the 90th percentile of peers, 200% of the target award can be earned. | | | 26 | | 2015 Proxy Statement • Compensation Discussion and Analysis |
Service-Based RSUs We believe service-based RSUs, like stock options, provide strong alignment with Shareholder interests and a long-term focus for our executives and assist in the retention of key executive talent. Service-based RSUs were granted on March 5, 20132014 and comprise 20% of the long-term incentive opportunity. Service-based RSUs vest 33% after the third year, vest an additional 33% after the fourth year and vest the final 34% after the fifth year. Once vested, the RSUs are subject to a holding requirement until the executive’s stock ownership requirements are met. See “Stock Ownership and Holding Requirements.” From the date of the grant, the RSUs accrue dividends at the same rate as dividends paid to our Shareholders. These dividends are converted into additional RSUs and vest when the underlying RSUs vest. Stock Options We believe that stock options provide strong alignment with Shareholder interests, as participants do not realize any value unless our stock price appreciates. Stock options granted under the Long-term Incentive Plan have an exercise price equal to the closing stock price on the date of grant, vest ratably over a four-year period and have a seven-yearten-year term. In determining the number of stock options granted on March 5, 2013,2014, we divided 30% of the total target long-term incentive opportunity by the Black-Scholes value of an option. For additional information | | | 2014 Proxy Statement • Compensation Discussion and Analysis | | 23 |
regarding assumptions used for these valuations, see the Company’s 20132014 Annual Report on Form 10-K “Notes to Consolidated Financial Statements – Note 1 – Summary of Significant Accounting Policies – Stock Based Compensation.” Beginning with the options granted March 9, 2011, upon exercise Executive Officers are required to hold shares equivalent to any proceeds (net of exercise price and related taxes and the costs of the exercise) for a minimum of twelve months. Timing of Equity Grants The Committee has granted long-term incentives only at its regularly scheduled Board meetings. The Company uses the closing stock price on the date of the grant to determine the exercise price for stock options. For regularly scheduled annual awards or for awards pursuant to the Long-term Incentive Plan, the grant effective date is the approval date of the applicable resolution or as otherwise specified in the duly authorized resolution. For other awards, the grant effective date is the first business day of the next securities trading window established by the Company following the approval date. Under no circumstances does the grant effective date precede the approval date of a given award. Stock Ownership and Holding Requirements Stock ownership requirements were established in 1998. Currently, our NEOs are required to satisfy meaningful stock ownership levels within five years of attaining their position. Stock ownership may be achieved by direct ownership or beneficial ownership through a spouse or child. The following types of beneficial ownership are considered in determining stock ownership: direct ownership of HMEC Common Stock, HMEC Common Stock held in the Company 401(k) Plan, HMEC deferred Common Stock equivalent units and RSUs (vested and unvested). Outstanding stock options are not used in determining stock ownership. Beginning with the 2010-2011 Long-term Incentive Plan,period, NEOs are required to defer receipt of their RSUs until the stock ownership requirements are met. The CEO is required to maintain beneficial stock ownership with a book value of at least 500% of base salary and all other NEOs are required to maintain beneficial stock ownership with a book value of at least 350% of base salary. As shown in the graph below, as of December 31, 2013,2014, all NEOs (withwith the exception of Mr. SharpeMcCarthy who has only been with the Company for two years)less than a year have exceeded their stock ownership requirements. Given the volatility of the stock market in recent years, we have migrated to an approach whereby the value of the shares required to be owned is based on the Company’s book value, not stock price, as we believe book value is closely aligned withless volatile than stock price but is less volatile.price. For this purpose, the Company’s book value per share is determined by dividing total shareholders’ equity, less the fair value adjustment for investments, by the number of outstanding shares of common stock. BeginningIn addition, beginning with the March 9, 2011 stock option grants, the NEOs are required to hold shares equivalent to any proceeds from a long-term incentive stock option exercise, net of exercise price and related taxes and the costs of the exercise, for a minimum of twelve months after the date of exercise.
As of December 31, 2013, as shown below,indicated in the CEO andfollowing chart, all the NEOs (with the exception of Mr. Sharpe) have met or exceeded their stock ownership requirements. However, even thoughrequirements except for Mr. Sharpe joined the Company in 2012, he has already achieved 269% towards his 350% requirement andMcCarthy who is anticipatedon target to meet the remainder of this requirement within the next year.by his 2019 deadline. ![LOGO](https://files.docoh.com/DEF 14A/0001193125-14-131433/g655194g59c69.jpg) ![LOGO](https://files.docoh.com/DEF 14A/0001193125-15-122569/g857569g18k68.jpg)
| | | | | | | | | | | | | Name | | 2013 Stock Ownership | | | 2013 Value (1) | | | | Marita Zuraitis | | | 153,876 | | | $ | 3,666,865 | | | | Peter H. Heckman | | | 283,749 | | | $ | 6,761,739 | | | | Dwayne D. Hallman | | | 111,301 | | | $ | 2,652,303 | | | | Stephen P. Cardinal | | | 137,113 | | | $ | 3,267,403 | | | | Thomas C. Wilkinson | | | 118,681 | | | $ | 2,828,168 | | | | Matthew P. Sharpe | | | 36,730 | | | $ | 875,276 | |
| | | 2015 Proxy Statement • Compensation Discussion and Analysis | | 27 |
| | | | | | | | | | | | | Name | | 2014 Stock Ownership | | | 2014 Book Value (1) | | | | Marita Zuraitis | | | 183,573 | | | $ | 4,659,083 | | | | Dwayne D. Hallman | | | 137,158 | | | $ | 3,481,070 | | | | Stephen P. Cardinal | | | 154,330 | | | $ | 3,916,895 | | | | Matthew P. Sharpe | | | 54,757 | | | $ | 1,389,733 | | | | John P. McCarthy | | | 10,129 | | | $ | 257,074 | (2) |
| (1) | Based on the Company’s December 31, 20132014 book value per share excluding the fair value adjustment for investments of $23.83.$25.38. |
| (2) | Mr. McCarthy’s length of service with the Company is less than one year. |
Annual Incentive Plan Our Annual Incentive Plan (“AIP”) is designed to drive and reward strong performance over a one-year period. The annual incentive is a key part of our overall compensation structure and is directly linked to the Company’s annual business plan. Under the Company’s 2010 Comprehensive Executive Compensation Plan (“CECP”), the Committee establishes Company-wide and business unit/division performance objectives every March, as well as the related threshold, target and maximum bonus opportunities for each NEO. In setting these objectives and opportunities, the Committee considers, among other things, the strategic goals of the Company, corporate financial projections and the degree of difficulty in achieving the targets. It is the goal of the Committee to establish measurements and targets that are reasonable, but not easily achieved. As evidence of this, the AIP has generated awards ranging from approximately 102% to 172% of target over the past 5 years, with an average of approximately 139% for the five-year period. During this period, the Company has consistently maintained strong earnings, including record operating earnings per share in 2013, and dividend growth that has provided solid total shareholder returns. The variability and average level of the awards earned confirms the Committee’s practice of establishing reasonable yet aggressive goals for the Company’s AIP. The measures and targets are discussed with the CEO, other NEOs, other members of the Board and CAP before they are set. Each March, the Committee also certifies performance and determines annual incentive award payouts for the prior year. ![LOGO](https://files.docoh.com/DEF 14A/0001193125-15-122569/g857569g45z87.jpg)
Target incentive opportunities for the NEOs are intended to approximate the median of the target bonus potential for similarly situated executives in comparable companies. Maximum incentive opportunities are set at 200% of target. Changes made to these opportunities, if any, generally take effect for the next fiscal year. Based on the 2014 performance of the Company relative to the Corporate Measures described below, the Committee approved the resulting award of 149.5% of target for Ms. Zuraitis and the other NEOs. The annual incentives paid to the NEOs are shown in the Non-Equity Incentive Plan Compensation column of the “Summary Compensation Table.” For 2014, the target annual incentive opportunities for the NEOs, the actual AIP paid (149.5% of target) along with the actual AIP payment expressed as a percentage of base salary as of December 31, 2014, were as follows: | | | | | | | | | | | Name | | 2014 Target AIP Opportunity | | 2014 Actual AIP Paid | | | 2014 Actual AIP Paid as a Percent of Salary | | Marita Zuraitis | | 90% | | $ | 929,068 | | | | 131.97 | % | Dwayne D. Hallman | | 50% | | $ | 329,275 | | | | 74.16 | % | Stephen P. Cardinal | | 50% | | $ | 317,502 | | | | 74.01 | % | Matthew P. Sharpe | | 50% | | $ | 264,803 | | | | 72.75 | % | John P. McCarthy | | 40% | | $ | 118,335 | | | | 39.45 | % |
| | | 2428 | | 20142015 Proxy Statement • Compensation Discussion and Analysis |
For 2014, 100% of the CEO’s and all other NEOs’ annual incentive opportunities were tied to Company-wide performance. For Mr. McCarthy, the actual AIP paid was adjusted for length of service. The Committee believes that tying this incentive to Company performance provides appropriate alignment for an executive’s compensation as it recognizes that the Company as a whole must perform well in order to deliver value to our Shareholders. Annual Incentive Plan Targets The Committee finalized targets for the 2014 corporate performance measures in its March 2014 meeting. The targets for the Operating Income and Insurance Sales measures were based on a review of market conditions and expectations of other companies in the industry as well as our financial plan for 2014 (“Plan”). The financial plan was the basis of our 2014 earnings guidance, which was publicly disclosed in February 2014 in connection with our release of earnings for the year ended December 31, 2013. All measures are defined as absolute (meeting specific established internal goals, i.e., earnings, revenues and sales). For 2014, the corporate measures (“Corporate Measures”), bonus targets and results were as follows: | | | | | | | | | | | | | | | | | | | Annual 2014 Corporate Measures (1) | | Measurement Weighting | | | Target | | Results | | | Actual Weighted Results | | | Absolute vs. Relative | | Adjusted Operating Income | | | 50 | % | | $90.8 million | | $ | 95.6 million | | | | 75.11 | % | | | Absolute | | P&C Net Premium Written | | | 20 | % | | $590.0 million | | $ | 584.4 million | | | | 14.39 | % | | | Absolute | | Horace Mann Annuity Sales | | | 20 | % | | $318.4 million | | $ | 340.8 million | | | | 40.00 | % | | | Absolute | | Horace Mann Life Sales | | | 10 | % | | $9.1 million | | $ | 11.0 million | | | | 20.00 | % | | | Absolute | | Total | | | 100 | % | | | | | | | | | 149.50 | % | | | | |
(1) | The Corporate Measures, as defined by the AIP, include: |
Adjusted Operating Income—Operating income (GAAP net income after tax, excluding realized investment gains and losses) adjusted for Property & Casualty (“P&C”) catastrophe costs different than Plan, Annuity & Life deferred acquisition costs (“DAC”) unlocking / change in guaranteed minimum death benefit (“GMDB”) reserve due to capital gains and losses and market performance different than Plan, and the impact of share repurchases on investment income. P&C Net Premium Written (GAAP)—Amount charged for property and casualty policies issued during the year; portions of such amounts may be earned and included in financial reports over future periods. Annuity Sales—The amount of new business from the sales of Horace Mann annuity products, from Horace Mann and independent agents, as measured by premiums and deposits to be collected over the 12 months following the sale. Life Sales—The amount of new Horace Mann individual life insurance products sold during the year, as measured by premiums and deposits to be collected over the 12 months following the sale. Retirement Plans The NEOs participate in our Company-wide tax-qualified retirement plans and a supplemental defined contribution plan designed to provide benefits that cannot be provided under our tax-qualified defined contribution plan because of various limitations imposed by the Internal Revenue Code. Each of these plans includes a Company contribution and the amounts contributed for each NEO are included in the “Summary Compensation Table.” The Company’s intent is to provide plans that are customarily offered within our industry to enhance our ability to attract and retain employeeexecutive talent. No NEO participates in the Company’s defined benefit plan or supplemental defined benefit retirement plan because participation in those plans was limited to individuals hired prior to January 1, 1999. Deferred Compensation Prior to 2009, the Long-term Incentive Plan provided a performance-based cash component. To further encourage ownership of HMEC’s Common Stock, deferred compensation accounts were established that permitted executives to defer their long-term cash incentives into deferred Common Stock equivalent units. Deferred Common Stock equivalent units accrue dividends at the same rate as dividends paid to our Shareholders. These dividends are converted into additional deferred Common Stock equivalent units. No other investment options are provided. Perquisites and Personal Benefits As of April 1, 2014 we discontinued all executive perquisites with the exception of limited financial planning services. The Company does not offer perquisites or executive benefits that exceed $5,000 annually in the aggregate to any individual. The Company does offer executives membershippays an annual retainer to a private dining club in Springfield, Illinoisthird-party service provider of $10,000 and memberships to airline clubs (airport lounge facilities) as well as a corporate credit card membership, allan annual fee of which are provided to help facilitate meetings outside$14,000 for each executive participating. Please see the office and business related travel.“Summary Compensation Table” for further details. Tax Implications Favorable accounting and tax treatment of the various elements of the Company’s total compensation program is an important, not the sole, consideration in the design of the compensation program. Section 162(m) of the Internal Revenue Code generally disallows a tax deduction to public corporations for compensation over $1,000,000 paid for any fiscal year to the corporation’s Chief Executive Officer and three other most highly compensated Executive Officers (other than the CFO) as of the end of the fiscal year. However, the statute exempts qualifying performance-based compensation from the deduction limit if certain requirements are met. The Annual Incentive Plan and Long-term Incentive Plan are designed to permit full deductibility and the Committee expects all compensation to be fully deductible. However, the Committee believes that Shareholder interests are best served by not restricting the Committee’s discretion and flexibility in developing compensation programs, even though such programs may result in certain non-deductible compensation expenses. In order to satisfy the Section 162(m) qualification requirements, the Committee allocated an incentive pool equal to 4% of adjusted operating income | | | 2015 Proxy Statement • Compensation Discussion and Analysis | | 29 |
to certain individuals under the Company’s compensation program. Once the amount of the pool and the specific allocations are determined at the end of the year, the Committee can apply “negative discretion” to reduce (but not increase) the amount of any award payable from the incentive pool to individuals, as determined by the amount payable to each individual based on performance criteria and actual results. Executive Severance and CIC Plans To maintain market competitiveness and allow for the successful recruitment of key executives, the Company adopted the Horace Mann Service Corporation Executive Severance Plan and the Horace Mann Service Corporation Executive CIC Plan. The Executive Severance Plan provides benefits due to loss of position with or without a Change in Control. Currently, all NEOs participate in the Executive Severance Plan. The Executive CIC Plan provides for benefits only in the event of the loss of position following a “Change-in-Control” and only includes those positions that typically would be at risk in the event of a change of control or which are integral to negotiating a transaction. This plan does not have tax gross-up provisions. Currently, Ms. Zuraitis, Mr. Cardinal, Mr. Sharpe, and Mr. SharpeMcCarthy participate in the Executive CIC Plan. Those who participate in both the Executive Severance Plan and the Executive CIC Plan, or have individual CIC agreements, would not receive duplicate benefits. CEO Executive Transition Agreement
On November 14, 2012, the Company and Mr. Heckman entered into an executive transition agreement to assure Mr. Heckman’s continued employment through December 31, 2013. The executive transition agreement provided that Mr. Heckman continue service as CEO and provide transitional services to his successor and the Company, as needed. In consideration and compensation for Mr. Heckman’s CEO and transitional services, the Company continued the same compensation arrangement in effect prior to the signing of the executive transition agreement, including salary, cash and equity incentive opportunities. The executive transition agreement included acceleration of vesting of Mr. Heckman’s outstanding stock options, service-based equity awards and earned performance-based equity awards.
Effective September 17, 2013, Ms. Zuraitis was appointed to the position of President and Chief Executive Officer, following a successful four-month transition period. Consistent with the Transition Agreement, Mr. Heckman remained available to the Company on a consultative basis for the remainder of 2013.
Change in Control Agreements The Company does have an individual CIC agreement with Mr. Cardinal and a severance agreement with Mr. Hallman. These agreements wereThis agreement was entered into at the time of the executives’his employment or attainment of their current position and cannot be unilaterally changed. The agreements provideagreement provides payments, benefits and tax gross-up provisions only if both a change in control of the Company and the executive’sMr. Hallman’s actual or constructive termination of employment occur. The CIC agreement provisions areprovision is described in “Potential Payments upon Termination or Change in Control.” These agreements areThe agreement is intended to provide a level of security consistent with market practices, mitigate some of the conflicts an executive may be exposed to in a potential acquisition or merger situation and serve to insure a more stable transition if a corporate transaction were to occur. The Company determined that it will not provide individual CIC agreements for future hires or renew existing individual CIC agreements which have an expiration date. | | | 2014 Proxy Statement • Compensation Discussion and Analysis | | 25 |
Summary Compensation Table The following table sets forth information regarding compensation of the Company’s Chief Executive Officer, Chief Financial Officer and three other most highly compensated Executive Officers, the NEOs, during 2014, 2013, 2012, and 2011.2012. | Name | | Year | | Salary ($) (1) | | Bonus ($) (2) | | | Stock Awards ($) (3) | | | Option Awards ($) (4) | | Non-Equity Incentive Plan Compensation ($) (5) | | Change in Pension Value And Non- Qualified Deferred Compensation Earnings ($) | | | All Other Compensation ($) | | | Total ($) | | | Year | | | Salary ($) (1) | | | Bonus ($) (2) | | | Stock Awards ($) (3) | | | Option Awards ($) (4) | | | Non-Equity Incentive Plan Compensation ($) (5) | | | Change in Pension Value And Non- Qualified Deferred Compensation Earnings ($) | | | All Other Compensation ($) | | | Total ($) | | Marita Zuraitis | | | 2013 | | | | 413,750 | | | | 2,858,940 | | | | 560,000 | | | | 240,000 | | | | 500,063 | | | | 0 | | | | 192,174 | | | | 4,764,927 | | | | 2014 | | | | 690,500 | | | | 0 | | | | 700,000 | | | | 300,000 | | | | 929,068 | | | | 0 | | | | 45,609 | | | | 2,665,177 | | Peter H. Heckman | | | 2013 | | | | 687,500 | | | | 0 | | | | 840,000 | | | | 360,000 | | | | 863,156 | | | | 0 | | | | 44,107 | | | | 2,794,763 | | | | | | 2012 | | | | 637,500 | | | | 0 | | | | 840,000 | | | | 360,000 | | | | 820,367 | | | | 0 | | | | 41,319 | | | | 2,699,186 | | | | | | 2011 | | | | 587,500 | | | | 0 | | | | 715,000 | | | | 385,000 | | | | 420,339 | | | | 0 | | | | 38,395 | | | | 2,146,234 | | | | 2013 | | | | 413,750 | | | | 2,858,940 | | | | 560,000 | | | | 240,000 | | | | 500,063 | | | | 0 | | | | 192,174 | | | | 4,764,927 | | Dwayne D. Hallman | | | 2013 | | | | 403,642 | | | | 0 | | | | 350,000 | | | | 150,000 | | | | 281,540 | | | | 0 | | | | 29,797 | | | | 1,214,979 | | | | 2014 | | | | 440,502 | | | | 0 | | | | 350,000 | | | | 150,000 | | | | 329,275 | | | | 0 | | | | 30,200 | | | | 1,299,977 | | | | | 2012 | | | | 365,003 | | | | 0 | | | | 565,000 | | | | 135,000 | | | | 313,136 | | | | 0 | | | | 27,625 | | | | 1,405,764 | | | | 2013 | | | | 403,642 | | | | 0 | | | | 350,000 | | | | 150,000 | | | | 281,540 | | | | 0 | | | | 29,797 | | | | 1,214,979 | | | | | 2011 | | | | 320,000 | | | | 0 | | | | 227,500 | | | | 122,500 | | | | 163,536 | | | | 0 | | | | 24,645 | | | | 858,181 | | | | 2012 | | | | 365,003 | | | | 0 | | | | 565,000 | | | | 135,000 | | | | 313,136 | | | | 0 | | | | 27,625 | | | | 1,405,764 | | Stephen P. Cardinal | | | 2013 | | | | 409,932 | | | | 0 | | | | 350,000 | | | | 150,000 | | | | 285,928 | | | | 0 | | | | 28,472 | | | | 1,224,332 | | | | 2014 | | | | 424,752 | | | | 0 | | | | 350,000 | | | | 150,000 | | | | 317,502 | | | | 0 | | | | 29,038 | | | | 1,271,292 | | | | | 2012 | | | | 401,715 | | | | 0 | | | | 600,000 | | | | 150,000 | | | | 344,632 | | | | 0 | | | | 28,011 | | | | 1,524,358 | | | | 2013 | | | | 409,932 | | | | 0 | | | | 350,000 | | | | 150,000 | | | | 285,928 | | | | 0 | | | | 28,472 | | | | 1,224,332 | | | | | 2011 | | | | 393,812 | | | | 40,252 | | | | 325,000 | | | | 175,000 | | | | 201,258 | | | | 0 | | | | 27,891 | | | | 1,163,213 | | | | 2012 | | | | 401,715 | | | | 0 | | | | 600,000 | | | | 150,000 | | | | 344,632 | | | | 0 | | | | 28,011 | | | | 1,524,358 | | Thomas C. Wilkinson | | | 2013 | | | | 335,454 | | | | 0 | | | | 68,833 | | | | 19,688 | | | | 233,979 | | | | 0 | | | | 37,047 | | | | 695,001 | | | Matthew P. Sharpe | | | | 2014 | | | | 354,252 | | | | 0 | | | | 280,000 | | | | 120,000 | | | | 264,803 | | | | 0 | | | | 36,053 | | | | 1,055,108 | | | | | 2012 | | | | 326,190 | | | | 0 | | | | 495,000 | | | | 105,000 | | | | 223,871 | | | | 0 | | | | 24,735 | | | | 1,174,796 | | | | 2013 | | | | 318,756 | | | | 0 | | | | 210,000 | | | | 90,000 | | | | 222,332 | | | | 0 | | | | 25,528 | | | | 866,616 | | | | | 2011 | | | | 319,012 | | | | 0 | | | | 227,500 | | | | 122,500 | | | | 130,425 | | | | 0 | | | | 24,571 | | | | 824,008 | | | | 2012 | | | | 297,884 | | | | 25,000 | | | | 460,000 | | | | 90,000 | | | | 204,444 | | | | 0 | | | | 36,989 | | | | 1,114,317 | | Matthew P. Sharpe | | | 2013 | | | | 318,756 | | | | 0 | | | | 210,000 | | | | 90,000 | | | | 222,332 | | | | 0 | | | | 25,528 | | | | 866,616 | | | | | | 2012 | | | | 297,884 | | | | 25,000 | | | | 460,000 | | | | 90,000 | | | | 204,444 | | | | 0 | | | | 36,989 | | | | 1,114,317 | | | John P. McCarthy | | | | 2014 | | | | 197,884 | | | | 200,000 | | | | 186,228 | | | | 79,812 | | | | 118,335 | | | | 0 | | | | 82,401 | | | | 864,660 | |
(1) | Represents each NEO’s actual base salary paid for the years ended December 31, 2014, 2013 2012 and 2011,2012, respectively. Ms. Zuraitis was hired in 2013, and Mr. Sharpe was hired in 2012.2012, and Mr. McCarthy was hired in 2014. |
(2) | For 2013, this represents a sign-on award for Ms. Zuraitis. The Company recognized the need to provide a one-time special equity award for compensation forfeited in leaving her prior employment. For 2014 and 2012, this represents a sign-on awardawards for Mr. Sharpe. For 2011, this represents an additional award related toMcCarthy and Mr. Cardinal’s interim leadership of the Life and Annuity segments.Sharpe, respectively. |
(3) | Represents the grant date fair value of service-based and performance-based RSUs granted in each year. Performance-based RSUs are valued based on the probable performance of Target with the potential of 50% to 200% being earned based on performance results. For 2013,2014, this includes an additional sign-on award for Mr. Wilkinson’s performance-based grant was pro-rated for actual time spent in the position.McCarthy. For 2012, this includes an additional service-based award for Mr. Hallman, Mr. Cardinal, Mr. Wilkinson, and Mr. Sharpe. |
(4) | Represents the grant date fair value of $8.11$9.01 per share for stock options granted on March 5, 2013.2014. For 2013, Mr. Wilkinson’s stock option grant was pro-rated for actual time spent in the position. For Ms. Zuraitis,McCarthy, it represents the grant date fair value of $8.93$9.02 per share for stock options granted on May 22, 2013.21, 2014. |
(5) | Represents the cash payout for the AIP earned in each year. For Ms. Zuraitis,Mr. McCarthy, the payout was adjusted for length of service. |
| | | 30 | | 2015 Proxy Statement • Compensation Discussion and Analysis |
Detail of All Other Compensation The following table sets forth information regarding all other compensation paid to, or earned by, the NEOs during 2013.2014. | Name | | Perquisites & Other Personal Benefits ($) (1) (2) | | | Relocation | | | Company Contributions to Defined Contribution Plans ($) | | | Total ($) | | | Perquisites & Other Personal Benefits ($) (1) | | | Relocation | | | Company Contributions to Defined Contribution Plans ($) | | | Total ($) | | Marita Zuraitis | | | 1,315 | | | | 183,209 | | | | 7,650 | | | | 192,174 | | | | 14,342 | | | | 0 | | | | 31,267 | | | | 45,609 | | Peter H. Heckman | | | 2,082 | | | | 0 | | | | 42,025 | | | | 44,107 | | | Dwayne D. Hallman | | | 1,965 | | | | 0 | | | | 27,832 | | | | 29,797 | | | | 375 | | | | 0 | | | | 29,825 | | | | 30,200 | | Stephen P. Cardinal | | | 325 | | | | 0 | | | | 28,147 | | | | 28,472 | | | | 0 | | | | 0 | | | | 29,038 | | | | 29,038 | | Thomas C. Wilkinson | | | 12,625 | | | | 0 | | | | 24,422 | | | | 37,047 | | | Matthew P. Sharpe | | | 1,940 | | | | 0 | | | | 23,588 | | | | 25,528 | | | | 10,540 | | | | 0 | | | | 25,513 | | | | 36,053 | | John P. McCarthy | | | | 0 | | | | 76,464 | | | | 5,937 | | | | 82,401 | |
(1) | Includes a dining club membership, and various airline club memberships, which areis provided to help facilitate meetings conducted outside of the office. It also includes the prorated use of a financial planning service to help minimize distractions and help ensure appropriate focus on Company responsibilities. |
(2) | For Mr. Wilkinson, the amount also includes payment for his unused 2013 vacation.
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| | | 26 | | 2014 Proxy Statement • Compensation Discussion and Analysis |
Grants of Plan-Based Awards The following table sets forth information concerning the grant of the 20132014 Annual Incentive, the grant of the 20132014 Long-term Incentive for the 2013-20152014-2016 performance period, and the sign-on RSU and stock option grant made to Ms. Zuraitis.Mr. McCarthy. Actual payouts under the 20132014 AIP are included in the “Summary Compensation Table.” Payouts for the 20132014 Long-term Incentive grant and the determination of the actual RSUs earned will not occur until after the completion of the 2013-20152014-2016 performance period. | | | | | | | | | | | | | | | | | | | | | | | All Other Stock Awards: Number of Shares of Stock or Units (#) | | | All Other Option Awards: Number of Securities Underlying Options (#) (4) | | | Exercise or Base Price of Option Awards ($/Sh) | | | Grant Date Fair Value of Stock & Option Awards ($) (5) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | All Other Stock Awards: Number of Shares of Stock or Units (#) | | | All Other Option Awards: Number of Securities Underlying Options (#) (4) | | | Exercise or Base Price of Option Awards ($/Sh) | | | Grant Date Fair Value of Stock & Option Awards ($) (5) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name | | Grant Date | | | Incentive Plan (1) | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards (2) | | | | Estimated Future Payouts Under Equity Incentive Plan Awards (3) | | | | Grant Date | | | Incentive Plan (1) | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards (2) | | | | | Estimated Future Payouts Under Equity Incentive Plan Awards (3) | | | | | Threshold ($) | | Target ($) | | Maximum ($) | | Threshold (#) | | | Target (#) | | | Maximum (#) | | All Other Stock Awards: Number of Shares of Stock or Units (#) | All Other Option Awards: Number of Securities Underlying Options (#) (4) | | | Threshold ($) | | | Target ($) | | | Maximum ($) | | | | | Threshold (#) | | | Target (#) | | | Maximum (#) | | | All Other Stock Awards: Number of Shares of Stock or Units (#) | All Other Option Awards: Number of Securities Underlying Options (#) (4) | | Marita Zuraitis | | | AIP | | | | 307,500 | | | | 307,500 | | | | 615,000 | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | N/A | | | N/A | | | N/A | | | | | | AIP | | | | 310,725 | | | | 621,450 | | | | 1,242,900 | | | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | N/A | | | N/A | | | N/A | | | | | 5/22/2013 | | | | LTI | | | | N/A | | | | N/A | | | | N/A | | | | | | 8,815 | | | | 17,629 | | | | 35,258 | | | | N/A | | | N/A | | | td2.69 | | | 400,002 | | | | | | 5/22/2013 | | | | LTI | | | | N/A | | | | N/A | | | | N/A | | | | | | N/A | | | | 7,053 | | | | N/A | | | | N/A | | | N/A | | | td2.69 | | | 160,033 | | | | | | 5/22/2013 | | | | LTI | | | | N/A | | | | N/A | | | | N/A | | | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | 26,876 | | | td2.69 | | | 240,024 | | | | | | 5/22/2013 | | | | Service | | | | N/A | | | | N/A | | | | N/A | | | | | | N/A | | | | N/A | | | | N/A | | | | 126,000 | | | | N/A | | | | $22.69 | | | | 2,858,940 | | | Peter H. Heckman | | | | | AIP | | | | 309,375 | | | | 618,750 | | | | 1,237,500 | | | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | | | 3/5/2013 | | | | LTI | | | | N/A | | | | N/A | | | | N/A | | | | | | 14,564 | | | | 29,128 | | | | 58,256 | | | | N/A | | | | N/A | | | | $20.60 | | | | 600,037 | | | | 3/5/2014 | | | | LTI | | | | N/A | | | | N/A | | | | N/A | | | | 8,657 | | | | 17,314 | | | | 34,628 | | | | N/A | | | | N/A | | | | $28.88 | | | | 500,028 | | | | | 3/5/2013 | | | | LTI | | | | N/A | | | | N/A | | | | N/A | | | | | | N/A | | | | 11,652 | | | | N/A | | | | N/A | | | | N/A | | | | $20.60 | | | | 240,031 | | | | 3/5/2014 | | | | LTI | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | 6,927 | | | | N/A | | | | N/A | | | | N/A | | | | $28.88 | | | | 200,052 | | | | | 3/5/2013 | | | | LTI | | | | N/A | | | | N/A | | | | N/A | | | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | 44,392 | | | | $20.60 | | | | 359,937 | | | | 3/5/2014 | | | | LTI | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | 33,296 | | | | $28.88 | | | | 300,016 | | Dwayne D. Hallman | | | | | AIP | | | | 100,911 | | | | 201,821 | | | | 403,642 | | | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | AIP | | | | 110,126 | | | | 220,251 | | | | 440,502 | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | | 3/5/2013 | | | | LTI | | | | N/A | | | | N/A | | | | N/A | | | | | | 6,068 | | | | 12,136 | | | | 24,272 | | | | N/A | | | | N/A | | | | $20.60 | | | | 250,002 | | | | 3/5/2014 | | | | LTI | | | | N/A | | | | N/A | | | | N/A | | | | 4,329 | | | | 8,657 | | | | 17,314 | | | | N/A | | | | N/A | | | | $28.88 | | | | 250,014 | | | | | 3/5/2013 | | | | LTI | | | | N/A | | | | N/A | | | | N/A | | | | | | N/A | | | | 4,857 | | | | N/A | | | | N/A | | | | N/A | | | | $20.60 | | | | 100,054 | | | | 3/5/2014 | | | | LTI | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | 3,465 | | | | N/A | | | | N/A | | | | N/A | | | | $28.88 | | | | 100,069 | | | | | 3/5/2013 | | | | LTI | | | | N/A | | | | N/A | | | | N/A | | | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | 18,496 | | | | $20.60 | | | | 149,969 | | | | 3/5/2014 | | | | LTI | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | 16,648 | | | | $28.88 | | | | 150,008 | | Stephen P. Cardinal | | | | | AIP | | | | 102,483 | | | | 204,966 | | | | 409,932 | | | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | AIP | | | | 106,188 | | | | 212,376 | | | | 424,752 | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | | 3/5/2013 | | | | LTI | | | | N/A | | | | N/A | | | | N/A | | | | | | 6,068 | | | | 12,136 | | | | 24,272 | | | | N/A | | | | N/A | | | | $20.60 | | | | 250,002 | | | | 3/5/2014 | | | | LTI | | | | N/A | | | | N/A | | | | N/A | | | | 4,329 | | | | 8,657 | | | | 17,314 | | | | N/A | | | | N/A | | | | $28.88 | | | | 250,014 | | | | | 3/5/2013 | | | | LTI | | | | N/A | | | | N/A | | | | N/A | | | | | | N/A | | | | 4,857 | | | | N/A | | | | N/A | | | | N/A | | | | $20.60 | | | | 100,054 | | | | 3/5/2014 | | | | LTI | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | 3,465 | | | | N/A | | | | N/A | | | | N/A | | | | $28.88 | | | | 100,069 | | | | | 3/5/2013 | | | | LTI | | | | N/A | | | | N/A | | | | N/A | | | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | 18,496 | | | | $20.60 | | | | 149,969 | | | | 3/5/2014 | | | | LTI | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | 16,648 | | | | $28.88 | | | | 150,008 | | Thomas C. Wilkinson | | | | | AIP | | | | 83,864 | | | | 167,727 | | | | 335,454 | | | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | | | 3/5/2013 | | | | LTI | | | | N/A | | | | N/A | | | | N/A | | | | | | 4,248 | | | | 8,496 | | | | 16,992 | | | | N/A | | | | N/A | | | | $20.60 | | | | 175,018 | | | | | | 3/5/2013 | | | | LTI | | | | N/A | | | | N/A | | | | N/A | | | | | | N/A | | | | 3,399 | | | | N/A | | | | N/A | | | | N/A | | | | $20.60 | | | | 70,019 | | | | | | 3/5/2013 | | | | LTI | | | | N/A | | | | N/A | | | | N/A | | | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | 12,948 | | | | $20.60 | | | | 104,984 | | | Matthew P. Sharpe | | | | | AIP | | | | 79,689 | | | | 159,378 | | | | 318,756 | | | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | AIP | | | | 88,563 | | | | 177,126 | | | | 354,252 | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | | 3/5/2013 | | | | LTI | | | | N/A | | | | N/A | | | | N/A | | | | | | 3,641 | | | | 7,282 | | | | 14,564 | | | | N/A | | | | N/A | | | | $20.60 | | | | 150,009 | | | | 3/5/2014 | | | | LTI | | | | N/A | | | | N/A | | | | N/A | | | | 3,463 | | | | 6,926 | | | | 13,852 | | | | N/A | | | | N/A | | | | $28.88 | | | | 200,023 | | | | | 3/5/2013 | | | | LTI | | | | N/A | | | | N/A | | | | N/A | | | | | | N/A | | | | 2,913 | | | | N/A | | | | N/A | | | | N/A | | | | $20.60 | | | | 60,008 | | | | 3/5/2014 | | | | LTI | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | 2,772 | | | | N/A | | | | N/A | | | | N/A | | | | $28.88 | | | | 80,055 | | | | | 3/5/2013 | | | | LTI | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | 11,100 | | | | $20.60 | | | | 90,001 | | | | 3/5/2014 | | | | LTI | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | 13,320 | | | | $28.88 | | | | 120,021 | | John P. McCarthy | | | | AIP | | | | 39,577 | | | | 79,154 | | | | 158,308 | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | | | 5/21/2014 | | | | LTI | | | | N/A | | | | N/A | | | | N/A | | | | 2,301 | | | | 4,602 | | | | 9,204 | | | | N/A | | | | N/A | | | | $28.91 | | | | 133,044 | | | | | | 5/21/2014 | | | | LTI | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | 1,842 | | | | N/A | | | | N/A | | | | N/A | | | | $28.91 | | | | 53,252 | | | | | | 5/21/2014 | | | | LTI | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | 8,852 | | | | $28.91 | | | | 79,844 | | | | | | 5/21/2014 | | | | Service | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | 3,462 | | | | N/A | | | | N/A | | | | N/A | | | | $28.91 | | | | 100,086 | | | | | | 5/21/2014 | | | | Service | | | | N/A | | | | N/A | | | | N/A | | | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | 11,088 | | | | $28.91 | | | | 100,121 | |
N/A – Not applicable (1) | Service grant represents a sign-on award to Ms. Zuraitis.Mr. McCarthy. |
(2) | Represents performance-based 20132014 Annual Incentive. |
(3) | Represents performance-based and service-based RSU portions of the 20132014 Long-term Incentive grants. |
(4) | Represents the stock option portion of the 20132014 Long-term Incentive grant. |
(5) | Totals equate to each NEO’s 20132014 Long-term Incentive target amount and the service grant described in footnote (1). The fair value of stock options was determined using the Black-Scholes model. |
| | | 20142015 Proxy Statement • Compensation Discussion and Analysis | | 2731 |
Outstanding Equity Awards at Fiscal Year End The following table sets forth information regarding the exercisable and unexercisable stock options, as well as unvested RSUs held by each NEO at December 31, 2013.2014. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name | | Option Awards | | | | | Stock Awards (RSUs) | | | | Number of Securities Underlying Unexercised Options (#) Exercisable | | | Number of Securities Underlying Unexercised Options (#) Unexercisable (1) | | | Option Exercise Price ($) | | | Grant Date | | | Option Expiration Date | | | | | Number of Shares or Units of Stock that Have Not Vested (#) (2) | | | Market Value of Shares or Units of Stock that Have Not Vested ($) (3) | | | Equity Incentive Plan Awards: Number of Unearned Shares, Units, or Other Rights that Have Not Vested (#) (4) | | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units, or Other Rights that Have Not Vested ($) (3) | | | | Marita Zuraitis | | | 0 | | | | 26,876 | | | | 22.69 | | | | 05/22/13 | | | | 05/22/20 | | | | | | 135,874 | | | $ | 4,285,466 | | | | 18,003 | | | $ | 567,815 | | | | Peter H. Heckman | | | 0 | | | | 7,934 | | | | 13.83 | | | | 03/03/10 | | | | 03/03/17 | | | | | | | | | | | | | | | | | | | | | | | | | 31,050 | | | | 31,050 | | | | 17.01 | | | | 03/09/11 | | | | 03/09/18 | | | | | | | | | | | | | | | | | | | | | | | | | 14,976 | | | | 44,928 | | | | 17.32 | | | | 03/07/12 | | | | 03/07/19 | | | | | | | | | | | | | | | | | | | | | | | | | 0 | | | | 44,392 | | | | 20.60 | | | | 03/05/13 | | | | 03/05/20 | | | | | | 72,147 | | | $ | 2,275,516 | | | | 66,817 | | | $ | 2,107,408 | | | | Dwayne D. Hallman | | | 5,198 | | | | 3,022 | | | | 13.83 | | | | 03/03/10 | | | | 03/03/17 | | | | | | | | | | | | | | | | | | | | | | | | | 9,900 | | | | 9,900 | | | | 17.01 | | | | 03/09/11 | | | | 03/09/18 | | | | | | | | | | | | | | | | | | | | | | | | | 5,616 | | | | 16,848 | | | | 17.32 | | | | 03/07/12 | | | | 03/07/19 | | | | | | | | | | | | | | | | | | | | | | | | | 0 | | | | 18,496 | | | | 20.60 | | | | 03/05/13 | | | | 03/05/20 | | | | | | 39,142 | | | $ | 1,234,539 | | | | 26,307 | | | $ | 829,723 | | | | Stephen P. Cardinal | | | 0 | | | | 7,556 | | | | 13.83 | | | | 03/03/10 | | | | 03/03/17 | | | | | | | | | | | | | | | | | | | | | | | 14,100 | | | | 14,100 | | | | 17.01 | | | | 03/09/11 | | | | 03/09/18 | | | | | | | | | | | | | | | | | | | | | | | | | 6,240 | | | | 18,720 | | | | 17.32 | | | | 03/07/12 | | | | 03/07/19 | | | | | | | | | | | | | | | | | | | | | | | | | 0 | | | | 18,496 | | | | 20.60 | | | | 03/05/13 | | | | 03/05/20 | | | | | | 47,935 | | | $ | 1,511,870 | | | | 27,841 | | | $ | 878,105 | | | | Thomas C. Wilkinson | | | 0 | | | | 5,289 | | | | 13.83 | | | | 03/03/10 | | | | 03/03/17 | | | | | | | | | | | | | | | | | | | | | | | | | 9,900 | | | | 9,900 | | | | 17.01 | | | | 03/09/11 | | | | 03/09/18 | | | | | | | | | | | | | | | | | | | | | | | | | 4,368 | | | | 13,104 | | | | 17.32 | | | | 03/07/12 | | | | 03/07/19 | | | | | | | | | | | | | | | | | | | | | | | | | 0 | | | | 12,948 | | | | 20.60 | | | | 03/05/13 | | | | 03/05/20 | | | | | | 37,024 | | | $ | 1,167,737 | | | | 19,488 | | | $ | 614,652 | | | | Matthew P. Sharpe | | | 3,744 | | | | 11,232 | | | | 17.32 | | | | 03/07/12 | | | | 03/07/19 | | | | | | | | | | | | | | | | | | | | | | | | | 0 | | | | 11,100 | | | | 20.60 | | | | 03/05/13 | | | | 03/05/20 | | | | | | 20,024 | | | $ | 631,557 | | | | 16,705 | | | $ | 526,876 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name | | Option Awards | | | | | Stock Awards (RSUs) | | | | Number of Securities Underlying Unexercised Options (#) Exercisable | | | Number of Securities Underlying Unexercised Options (#) Unexercisable (1) | | | Option Exercise Price ($) | | | Grant Date | | | Option Expiration Date | | | | | Number of Shares or Units of Stock that Have Not Vested (#) (2) | | | Market Value of Shares or Units of Stock that Have Not Vested ($) (3) | | | Equity Incentive Plan Awards: Number of Unearned Shares, Units, or Other Rights that Have Not Vested (#) (4) | | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units, or Other Rights that Have Not Vested ($) (3) | | | | Marita Zuraitis | | | 6,719 | | | | 20,157 | | | | 22.69 | | | | 05/22/13 | | | | 05/22/20 | | | | | | | | | | | | | | | | | | | | | | | | | 0 | | | | 33,296 | | | | 28.88 | | | | 03/05/14 | | | | 03/05/24 | | | | | | 102,971 | | | $ | 3,416,578 | | | | 36,399 | | | $ | 1,207,719 | | | | Dwayne D. Hallman | | | 8,220 | | | | 0 | | | | 13.83 | | | | 03/03/10 | | | | 03/03/17 | | | | | | | | | | | | | | | | | | | | | | | | | 14,850 | | | | 4,950 | | | | 17.01 | | | | 03/09/11 | | | | 03/09/18 | | | | | | | | | | | | | | | | | | | | | | | | | 11,232 | | | | 11,232 | | | | 17.32 | | | | 03/07/12 | | | | 03/07/19 | | | | | | | | | | | | | | | | | | | | | | | | | 4,624 | | | | 13,872 | | | | 20.60 | | | | 03/05/13 | | | | 03/05/20 | | | | | | | | | | | | | | | | | | | | | | | | | 0 | | | | 16,648 | | | | 28.88 | | | | 03/05/14 | | | | 03/05/24 | | | | | | 44,590 | | | $ | 1,479,496 | | | | 21,815 | | | $ | 723,822 | | | | Stephen P. Cardinal | | | 7,556 | | | | 0 | | | | 13.83 | | | | 03/03/10 | | | | 03/03/17 | | | | | | | | | | | | | | | | | | | | | | | | | 21,150 | | | | 7,050 | | | | 17.01 | | | | 03/09/11 | | | | 03/09/18 | | | | | | | | | | | | | | | | | | | | | | | | | 12,480 | | | | 12,480 | | | | 17.32 | | | | 03/07/12 | | | | 03/07/19 | | | | | | | | | | | | | | | | | | | | | | | | | 4,624 | | | | 13,872 | | | | 20.60 | | | | 03/05/13 | | | | 03/05/20 | | | | | | | | | | | | | | | | | | | | | | | | | 0 | | | | 16,648 | | | | 28.88 | | | | 03/05/14 | | | | 03/05/24 | | | | | | 49,714 | | | $ | 1,649,511 | | | | 21,815 | | | $ | 723,822 | | | | Matthew P. Sharpe | | | 7,488 | | | | 7,488 | | | | 17.32 | | | | 03/07/12 | | | | 03/07/19 | | | | | | | | | | | | | | | | | | | | | | | | | 2,775 | | | | 8,325 | | | | 20.60 | | | | 03/05/13 | | | | 03/05/20 | | | | | | | | | | | | | | | | | | | | | | | | | 0 | | | | 13,320 | | | | 28.88 | | | | 03/05/14 | | | | 03/05/24 | | | | | | 31,689 | | | $ | 1,051,441 | | | | 14,874 | | | $ | 493,519 | | | | John P. McCarthy | | | 0 | | | | 19,940 | | | | 28.91 | | | | 05/21/14 | | | | 05/21/24 | | | | | | 5,423 | | | $ | 179,935 | | | | 4,706 | | | $ | 156,145 | |
(1) | Long-term Incentive stock option grants are service-based and all unexercisable options vest on each anniversary of the grant date at a rate of 25% of the original grant. |
(2) | Represents the unvested service-based RSUs granted in 2009, 2010, 2011, 2012, 2013 and 20132014 and a portion of the performance-based RSUs granted in 20112012 and earned at the end of 2012.2013. |
(3) | Represents the value of the RSUs based on the closing stock price of $31.54$33.18 at December 31, 2013.2014. |
(4) | The performance-based RSUs granted in 2012 were not earned until the end of the 2012-2013 performance period. RSUs earned at the end of the performance period will vest 50% in 2014 and 50% in 2015. The performance-based RSUs granted in 2013 will not be earned until the end of the 2013-2015 performance period. RSUs earned at the end of the performance period will vest 100% in 2016. The performance-based RSUs granted in 2014 will not be earned until the end of the 2014-2016 performance period. RSUs earned at the end of the performance period will vest 100% in 2017.
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| | | 2832 | | 20142015 Proxy Statement • Compensation Discussion and Analysis |
Option Exercises and Stock Vested The following table sets forth information regarding options exercised and stock awards acquired on vesting by the NEOs in 2013:2014: | | | | | | | | | | | | | | | | | | | | | | | | | Option Awards | | | | | Stock Awards (RSUs) | | | | Name | | Number of Shares Acquired on Exercise (#) (1) | | | Value Realized on Exercise ($) (2) | | | | | Number of Shares Acquired on Vesting (#) (3) | | | Value Realized on Vesting ($) (4) | | | | Marita Zuraitis | | | 0 | | | | 0 | | | | | | 0 | | | | 0 | | | | Peter H. Heckman | | | 133,774 | | | | 2,246,325 | | | | | | 2,725 | | | | 56,279 | | | | Dwayne D. Hallman | | | 37,500 | | | | 481,184 | | | | | | 0 | | | | 0 | | | | Stephen P. Cardinal | | | 277,276 | | | | 5,186,585 | | | | | | 11,760 | | | | 239,290 | | | | Thomas C. Wilkinson | | | 150,133 | | | | 1,516,598 | | | | | | 4,627 | | | | 95,309 | | | | Matthew P. Sharpe | | | 0 | | | | 0 | | | | | | 0 | | | | 0 | |
| | | | | | | | | | | | | | | | | | | | | | | | | Option Awards | | | | | Stock Awards (RSUs) | | | | Name | | Number of Shares Acquired on Exercise (#) | | | Value Realized on Exercise ($) | | | | | Number of Shares Acquired on Vesting (#) (1) | | | Value Realized on Vesting ($) (2) | | | | Marita Zuraitis | | | 0 | | | | 0 | | | | | | 0 | | | | 0 | | | | Dwayne D. Hallman | | | 0 | | | | 0 | | | | | | 0 | | | | 0 | | | | Stephen P. Cardinal | | | 0 | | | | 0 | | | | | | 27,353 | | | | 836,961 | | | | Matthew P. Sharpe | | | 0 | | | | 0 | | | | | | 0 | | | | 0 | | | | John P. McCarthy | | | 0 | | | | 0 | | | | | | 0 | | | | 0 | |
(1) | For Mr. Heckman, Mr. Hallman, Mr. Cardinal, and Mr. Wilkinson, it represents the number of options exercised. |
(2) | The value realized on exercise is determined by multiplying the number of options exercised by the difference between the stock price at exercise and the grant date stock price.
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(3) | For Mr. Heckman, it represents the number of shares vested and acquired as part of the 2010-2011 Long-term Incentive Plan. For Mr. Cardinal and Mr. Wilkinson, it represents the number of shares vested and acquired as part of the 2009-2010, 2010-2011, and 2010-20112011-2012 Long-term Incentive Plans.
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(4)(2) | The value realized on vesting of stock awards is determined by multiplying the number of shares vested by the closing stock price on the date of vesting. The actual amounts realized from vested stock awards will depend upon the sale price of the shares when they are actually sold. |
Pension Benefits The defined benefit plans (qualified and nonqualified) sponsored by the Company were amended to freeze participation to those who were hired prior to January 1, 1999. As all of the Company’s NEOs were hired subsequent to that date, they are not eligible to participate in the defined benefit plans. Nonqualified Defined Contribution and Other Nonqualified Deferred Compensation Plans The Company offered a nonqualified deferred compensation plan to executives, which allowed them to defer receipt of Long-term Incentive cash compensation prior to 2009 when cash was a component of the Long-term Incentive Plan. Executives were allowed to defer up to 100% of their earned long-term cash incentive into HMEC’s deferred Common Stock equivalent units. All the NEOs except Mr. Hallman were hired after 2009 and do not have an account in the plan. Contributions and earnings reported below are for the year ended December 31, 20132014 and the aggregate balance is as of December 31, 2013.2014. The Company also sponsors an unfunded excess pension plan, the Nonqualified Defined Contribution Plan (“NQDCP”), which covers only the base salary compensation in excess of the Section 415 limit, which in 20132014 was $250,000.$260,000. The NQDCP accounts are established for the executives at the time their compensation exceeds the Section 415 limit and the NEOs are credited with an amount equal to 5% of the excess. In addition, the NQDCP accounts are credited with the same rate of return as the qualified plan sponsored by the Company for all employees. The following table sets forth information regarding participation by the NEOs in the Company’s NQDCP and nonqualified deferred compensation plan as of December 31, 2013.2014. | | | | | | | | | | | | | | | | | | | | | | | Name | | Account | | Executive Contributions in Last FY ($) | | | Registrant Contributions in Last FY ($) (1) | | | Earnings in Last FY ($) (2) | | | Balance at Last FYE ($) | | | | Marita Zuraitis | | NQDCP Account | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | | Deferred Compensation Account | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | Peter H. Heckman | | NQDCP Account | | | 0 | | | | 21,625 | | | | 6,990 | | | | 236,992 | | | | | | Deferred Compensation Account | | | 0 | | | | 0 | | | | 456,616 | | | | 1,182,845 | | | | Dwayne D. Hallman | | NQDCP Account | | | 0 | | | | 7,432 | | | | 710 | | | | 28,783 | | | | | | Deferred Compensation Account | | | 0 | | | | 0 | | | | 82,184 | | | | 212,895 | | | | Stephen P. Cardinal | | NQDCP Account | | | 0 | | | | 7,747 | | | | 795 | | | | 31,643 | | | | | | Deferred Compensation Account | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | Thomas C. Wilkinson | | NQDCP Account | | | 0 | | | | 4,023 | | | | 595 | | | | 22,463 | | | | | | Deferred Compensation Account | | | 0 | | | | 0 | | | | 44,953 | | | | 116,449 | | | | Matthew P. Sharpe | | NQDCP Account | | | 0 | | | | 3,188 | | | | 8 | | | | 3,196 | | | | | | Deferred Compensation Account | | | 0 | | | | 0 | | | | 0 | | | | 0 | |
| | | | | | | | | | | | | | | | | | | | | | | Name | | Account | | Executive Contributions in Last FY ($) | | | Registrant Contributions in Last FY ($) (1) | | | Earnings in Last FY ($) (2) | | | Balance at Last FYE ($) | | | | Marita Zuraitis | | NQDCP Account | | | 0 | | | | 10,467 | | | | 44 | | | | 10,511 | | | | | | Deferred Compensation Account | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | Dwayne D. Hallman | | NQDCP Account | | | 0 | | | | 9,025 | | | | 973 | | | | 38,781 | | | | | | Deferred Compensation Account | | | 0 | | | | 0 | | | | 17,930 | | | | 230,825 | | | | Stephen P. Cardinal | | NQDCP Account | | | 0 | | | | 8,238 | | | | 1,057 | | | | 40,937 | | | | | | Deferred Compensation Account | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | Matthew P. Sharpe | | NQDCP Account | | | 0 | | | | 4,713 | | | | 119 | | | | 8,028 | | | | | | Deferred Compensation Account | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | John P. McCarthy | | NQDCP Account | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | | Deferred Compensation Account | | | 0 | | | | 0 | | | | 0 | | | | 0 | |
(1) | Represents the 20132014 NQDCP Company contributions. These contributions are included in the All Other Compensation column of the “Summary Compensation Table” for 2013.2014. |
(2) | Represents (a) the gains in the NQDCP in 20132014 and (b) the change in the deferred compensation account balance reflecting changes in the closing stock price of HMEC Common Stock from December 31, 20122013 to December 31, 2013,2014, each excluding contributions reflected in the first two columns. |
| | | 20142015 Proxy Statement • Compensation Discussion and Analysis | | 2933 |
Potential Payments upon Termination or Change in Control The NEOs are entitled to receive certain payments andon termination of employment in certain circumstances, including disability or death, involuntary termination other benefitsthan for termination due to: • | | Separation due to disability or death;
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• | | Voluntary termination of employment;
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• | | Separation due to retirement;
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• | | Involuntary termination of employment without cause; and
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• | | Separation due to a change in control of the Company.
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The NEOs’ payments and benefits for termination (other than change in control) are governed by the terms of the Executive Severance Plans, non-qualified plan documents, equity grant agreements and bonus plans. A NEO’s eligibility for payment and benefits in the event ofcause, or within a stated period after a change in control requires a termination of employment in addition to a change of control of the Company, before benefits under the Executive Severance Plans are triggered. This “double-trigger” applies whether the NEO has an individual agreement or is covered under the Executive Changeas discussed in Control Plan.
more detail below. An overview of benefits available under each scenario is provided below and should be read along with the footnotes accompanying the related table. These calculations are an estimate only for purposes of this Proxy Statement. Termination for Cause or Voluntary Resignation Generally, on a voluntary termination or a termination for cause, no amounts are paid other than salary earned through the date of termination, any annual incentive earned for the prior year that has not yet been paid, and other vested amounts (including equity) that are required to be paid or provided in those circumstances by law or under the Company’s plans and programs (“Minimum Benefit Obligations”). Unvested equity awards and unexercised options are generally forfeited, with some pro-rata vesting in the event of retirement. None of the NEOs was eligible for retirement as of December 31, 2014. Disability or Death Upon termination of employment for disability or death, NEOs do not receive any severance orpayments other non-performance related cash payments. Thethan the Minimum Benefit Obligations and a pro-rata annual incentive. Our equity plan gives the Committee discretion to address the treatment of AIP and long-term incentives isequity awards on death or disability. Currently the award agreements provide as follows: | • | | AIPStock Options – Any earned but unpaid cash bonus would be paid.All stock options vest immediately. In the case of a termination for disability, executives have the full remaining option term to exercise the stock options. In the case of termination on account of death, the executive’s estate may exercise the stock options for the lesser of two years after death or over the remaining option term.
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| • | | Stock OptionsService-based RSUs – All stock optionsservice-based RSUs vest immediately. With respect to disability, executivesimmediately, including performance-based RSUs that have been earned but remain unvested at the full option term to exercise the stock options. With respect to death, the executive’s estate has the shorter of two years or the remaining option term to exercise the stock options.termination date.
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| • | | Service-based RSUs – All service-based RSUs vest immediately.
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| • | | Performance-based RSUs – With respect toIn the case of termination on account of disability, RSUs stillthat remain subject to performance conditions will vest pro-rata at the end of the performance period, based on actual performance and earned but unvested RSUs vest immediately. With respect tothe portion of the performance period the executive was employed. In the case of termination by death, RSUs stillthat remain subject to performance conditions will vest pro-rata immediately at target, levelbased on the portion of the performance and earned but unvested RSUs vest immediately.period the executive was employed. |
Involuntary Termination other than for Cause or Voluntary Terminationand not under a Change in Control arrangement The NEOs would not receive any severance, AIP amounts, or other cash payments and would forfeit all unpaid and unvested equity awards. Involuntary Termination of Employment Without Cause
All NEOs would receive paymentsare covered under the Executive Severance Plan as follows:which provides the following benefits, in addition to the Minimum Benefit Obligations, in the event of an involuntary termination of employment initiated by the Company other than for cause, not due to disability or death, not under a Company mandatory retirement program, not covered by a change in control arrangement, and not where the executive is offered similar employment with an affiliate:
| • | | Applicable multiplePro-rata annual incentive for the fiscal year of base salary plus target AIP bonus;termination, based on actual performance and the portion of the fiscal year employed prior to termination, payable at the same time as employees receive their annual incentive for that fiscal year.
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| • | | Any earned and unpaid AIP bonus; andMultiple of the sum of salary plus target annual incentive, payable in the form of salary continuation, based on the following table:
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| • | | Applicable multiple of COBRA premium for the health plan for which they were enrolled prior to the termination event.
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| | | Name | | Executive Severance Plan Multiple | Marita Zuraitis | | 2.0 | Dwayne D. Hallman | | 1.5 | Stephen P. Cardinal | | 1.5 | Matthew P. Sharpe | | 1.5 |
John P. McCarthy | | | 30 | | 2014 Proxy Statement • Compensation Discussion and Analysis1.0 |
Separation due to a Change in Control of the Company
Ms. Zuraitis and Mr. Sharpe would receive multiples of base salary plus target AIP bonus payments as outlined under the Executive CIC Plan and are not eligible for “tax gross-ups” under that Plan. The Executive CIC Plan contains a modified cap provision, where the Company is able to determine whether to pay all change-in-control payments, or “scale back” the payments to the 280G limit, in order to not jeopardize tax deductibility of the payments nor “trigger” an excise tax. The multiples of cash payment for Mr. Hallman and Mr. Cardinal are contained in their individual agreements and do include provisions for “tax gross-ups.” Treatment of AIP and equity awards is as follows:
| • | | Payment of any earned and unpaid AIP bonus;Continued group health coverage under COBRA, if elected, at employee rates.
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| • | | All stock options vest immediately; and,Our equity plan gives the Committee discretion to address the treatment of equity awards in the award agreements or at the time of termination. Currently the award agreements provide as follows with respect to involuntary termination of employment (not for cause) prior to or more than one year after a change in control:
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| • | | Stock Options – Unexercised options terminate immediately, whether or not vested. |
| • | | Service-based RSUs – All unvested service-based RSUs vest immediately.are forfeited, including performance-based RSUs that have been earned but remain unvested at the termination date. |
| • | | Performance-based RSUs – All unvested RSUs that remain subject to performance conditions are forfeited. |
These payments and benefits are subject to potential cutback to the extent they trigger a “golden parachute” excise tax unless the executive would be better off, net after tax, receiving the full amount and paying the tax. | | | 34 | | 2015 Proxy Statement • Compensation Discussion and Analysis |
Payment of these severance amounts and provision of these benefits is subject to the executive’s entry into a customary waiver and release. The executives are also subject to restrictive covenants, including confidentiality, non-compete, non-solicitation, non-interference and non-disparagement provisions (“Restrictive Covenants”). Qualifying termination after a Change in Control of the Company The NEOs other than Mr. Hallman are covered under the Executive CIC Plan. Under the Executive CIC Plan, benefits are provided in the event of an involuntary termination (other than for cause, disability or death) or a constructive discharge (a “good reason” termination, as defined in the Executive CIC Plan) within one year following a change in control of the Company (as defined in the Executive CIC Plan) - a so-called “double trigger” arrangement. In addition to the Minimum Benefit Obligations, the following payments and benefits are provided: | • | | An amount equal to the target annual incentive for the fiscal year of termination, prorated for the time elapsed in the fiscal year prior to termination. |
| • | | The multiple of the sum of salary plus target annual incentive indicated in the following table, payable in a lump sum: |
| | | Name | | CIC Multiple | Marita Zuraitis | | 2.5 | Dwayne D. Hallman | | 2.0 | Stephen P. Cardinal | | 2.0 | Matthew P. Sharpe | | 2.0 | John P. McCarthy | | 2.01.0
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| • | | COBRA coverage under applicable group health plans at employee rates, if elected. |
| • | | Our equity plan generally gives the Committee discretion to address treatment of equity in the applicable award agreements. Currently the award agreements provide for the following treatment in the event of a change in control: |
| • | | Stock Options – If the acquiror assumes the options, then the event of an involuntary termination (not for cause) within one year after the change in control, all stock options vest immediately, and executives have the full remaining option term to exercise the stock options. If the acquiror does not assume the options, they vest immediately upon the change in control, and the executives have the full remaining option term to exercise the options. |
| • | | Service-based RSUs – All service-based RSUs vest immediately, including performance-based RSUs that have been earned but remain unvested at the termination date, if the grantee has an involuntary termination of employment (not for cause) within one year after the change in control. |
| • | | Performance-based RSUs – All performance-based RSUs vest immediately if the grantee has an involuntary termination of employment (not for cause) within one year after the change in control. |
There is no tax gross-up under the Executive CIC Plan. However, if the payments and benefits are such that the executive would become subject to the “golden parachute” tax, then, unless the executive would be better off, net after tax, receiving the entire amount of payments and benefits and paying the “golden parachute” tax (in which case the full amount will be paid or provided), the payments and benefits will be cut back to the highest level that does not trigger the “golden parachute” tax. There is no duplication of benefits with the Executive Severance Plan. Each covered NEO is also subject to Restrictive Covenants and, as a condition of receiving payment, would be required to enter into a customary waiver and release of claims against the Company. Mr. Hallman has an individual severance agreement under which he will become entitled to severance benefits only if he has an involuntary termination of employment by the Company (other than for cause) within three years following a change in control of the Company (as defined in the agreement). This is also a “double trigger” arrangement. Under his individual severance agreement, Mr. Hallman would be entitled to the payments and benefits listed below in addition to the Minimum Benefit Obligations: | • | | Two times the sum of his base salary plus his highest annual bonus in the 5 years preceding the year of his termination, payable in a lump sum, |
| • | | Two years continued coverage under disability, life, accident and health plans at employee rates, and |
| • | | Full vesting in any non-qualified supplemental pension. |
Mr. Hallman would also be entitled to a tax gross-up if the amount of his payments and benefits is such that he becomes subject to the 20% “golden parachute” tax. The tax gross-up would be in an amount sufficient to leave Mr. Hallman in the same after-tax position as if he had not been subject to the 20% “golden parachute” tax. Mr. Hallman would also be subject to Restrictive Covenants and would be required to enter into a customary waiver and release of claims against the Company. There is no duplication of benefits under the Executive Severance Plan. | | | 2015 Proxy Statement • Compensation Discussion and Analysis | | 35 |
Illustration of Potential Payments upon Termination or Change in Control The following table presents for each of the NEOs employed as of March 15, 2014, the estimated payments and benefits that would have been payable as of the end of 20132014 in the event of separation due to disability or death, cause, voluntary termination of employment, retirement, involuntary termination of employment without cause, and a change of control of the Company. Consistent with SEC requirements, these estimated amounts have been calculated as if the NEOs’ employment had been terminated as of December 31, 2013,2014, the last business day of 2013,2014, using the closing market price of our Common Stock on that date ($31.54)33.18). The amounts reported in the following table are hypothetical amounts based on the disclosure of compensation information about the NEOs. Actual payments will depend on the circumstances and timing of any termination of employment or other triggering event. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Estimated Payments ($) Assuming Termination as of December 31, 2013 (1) | | | | Name & Benefits | | Disability or Death | | | For Cause | | | Voluntary | | | Retirement | | | Involuntary Termination w/o Cause | | | Change in Control | | | | Marita Zuraitis | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash Severance | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 2,275,000 | | | | 2,843,750 | | | | AIP | | | 487,500 | | | | 0 | | | | 0 | | | | 0 | | | | 487,500 | | | | 487,500 | | | | Acceleration of Stock Options | | | 237,853 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 237,853 | | | | Acceleration of RSUs | | | 4,314,216 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 4,752,511 | | | | Health and Welfare | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 27,491 | | | | 34,363 | | | | Modified Cap Adjustment | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | (791,782 | ) | | | TOTAL | | | 5,039,569 | | | | 0 | | | | 0 | | | | 0 | | | | 2,789,991 | | | | 7,564,195 | | | | Dwayne D. Hallman | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash Severance | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 967,518 | | | | 1,433,555 | | | | AIP | | | 215,004 | | | | 0 | | | | 0 | | | | 0 | | | | 215,004 | | | | 215,004 | | | | Acceleration of Stock Options | | | 639,292 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 639,292 | | | | Acceleration of RSUs | | | 1,653,801 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 1,908,990 | | | | Health and Welfare | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 34,741 | | | | 46,321 | | | | Tax Gross-Up | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | 1,233,031 | | | | TOTAL | | | 2,508,097 | | | | 0 | | | | 0 | | | | 0 | | | | 1,217,263 | | | | 5,476,193 | | | | Stephen P. Cardinal | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash Severance | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 927,018 | | | | 1,293,617 | | | | AIP | | | 206,004 | | | | 0 | | | | 0 | | | | 0 | | | | 206,004 | | | | 206,004 | | | | Acceleration of Stock Options | | | 807,234 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 807,234 | | | | Acceleration of RSUs | | | 2,000,932 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 2,256,121 | | | | Health and Welfare | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 31,972 | | | | 31,972 | | | | Tax Gross-Up | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | 1,038,016 | | | | TOTAL | | | 3,014,170 | | | | 0 | | | | 0 | | | | 0 | | | | 1,164,994 | | | | 5,632,964 | | | | Matthew P. Sharpe | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash Severance | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 731,268 | | | | 975,024 | | | | AIP | | | 162,504 | | | | 0 | | | | 0 | | | | 0 | | | | 162,504 | | | | 162,504 | | | | Acceleration of Stock Options | | | 281,153 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 281,153 | | | | Acceleration of RSUs | | | 955,914 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 1,109,041 | | | | Health and Welfare | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 25,148 | | | | 33,530 | | | | Modified Cap Adjustment | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | (268,783 | ) | | | TOTAL | | | 1,399,571 | | | | 0 | | | | 0 | | | | 0 | | | | 918,920 | | | | 2,292,469 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | Estimated Payments ($) Assuming Termination as of December 31, 2014 (1) | | | | Name & Benefits | | Disability or Death | | | For Cause | | | Voluntary | | | Retirement | | | Involuntary Termination w/o Cause | | | Change in Control | | | | Marita Zuraitis | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash Severance | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 2,675,200 | | | | 3,344,000 | | | | AIP | | | 633,600 | | | | 0 | | | | 0 | | | | 0 | | | | 633,600 | | | | 633,600 | | | | Acceleration of Stock Options | | | 354,620 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 354,620 | | | | Acceleration of RSUs | | | 3,761,158 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 4,410,385 | | | | Health and Welfare | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 40,413 | | | | 50,516 | | | | Modified Cap Adjustment (2) | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | (999,211 | ) | | | TOTAL | | | 4,749,378 | | | | 0 | | | | 0 | | | | 0 | | | | 3,349,213 | | | | 7,793,910 | | | | Dwayne D. Hallman (3) | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash Severance | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 999,000 | | | | 1,546,550 | | | | AIP | | | 222,000 | | | | 0 | | | | 0 | | | | 0 | | | | 222,000 | | | | 222,000 | | | | Acceleration of Stock Options | | | 504,277 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 504,277 | | | | Acceleration of RSUs | | | 1,577,123 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 1,902,840 | | | | Health and Welfare | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 38,801 | | | | 51,735 | | | | Tax Gross-Up | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | 1,261,656 | | | | TOTAL | | | 2,303,400 | | | | 0 | | | | 0 | | | | 0 | | | | 1,259,801 | | | | 5,489,058 | | | | Stephen P. Cardinal | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash Severance | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 965,250 | | | | 1,287,000 | | | | AIP | | | 214,500 | | | | 0 | | | | 0 | | | | 0 | | | | 214,500 | | | | 214,500 | | | | Acceleration of Stock Options | | | 558,027 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 558,027 | | | | Acceleration of RSUs | | | 1,707,985 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 2,033,702 | | | | Health and Welfare | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 30,310 | | | | 40,413 | | | | Tax Gross-Up | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | TOTAL | | | 2,480,512 | | | | 0 | | | | 0 | | | | 0 | | | | 1,210,060 | | | | 4,133,642 | | | | Matthew P. Sharpe | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash Severance | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 819,000 | | | | 1,092,000 | | | | AIP | | | 182,000 | | | | 0 | | | | 0 | | | | 0 | | | | 182,000 | | | | 182,000 | | | | Acceleration of Stock Options | | | 280,764 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 280,764 | | | | Acceleration of RSUs | | | 1,111,044 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 1,344,785 | | | | Health and Welfare | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 40,479 | | | | 53,971 | | | | Modified Cap Adjustment (2) | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | (315,980 | ) | | | TOTAL | | | 1,573,808 | | | | 0 | | | | 0 | | | | 0 | | | | 1,041,479 | | | | 2,637,540 | | | | John P. McCarthy | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash Severance | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 420,000 | | | | 420,000 | | | | AIP | | | 120,000 | | | | 0 | | | | 0 | | | | 0 | | | | 120,000 | | | | 120,000 | | | | Acceleration of Stock Options | | | 85,144 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 85,144 | | | | Acceleration of RSUs | | | 209,431 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 328,681 | | | | Health and Welfare | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | Modified Cap Adjustment (2) | | | N/A | | | | N/A | | �� | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | TOTAL | | | 414,575 | | | | 0 | | | | 0 | | | | 0 | | | | 540,000 | | | | 953,825 | |
N/A – Not applicable | (1) | All AIP and LTI earned payouts are assumed to be at target. All equity-based awards are valued at |
| (2) | Benefit reduction to avoid the December 31, 2013 closing stock priceimposition of $31.54.a “golden parachute” tax. |
| (3) | Mr. Hallman is entitled to change in control benefits if his involuntary termination (without cause) is up to 3 years after the Change in Control. |
| | | 201436 | | 2015 Proxy Statement • Compensation Discussion and Analysis | | 31 |
Compensation Committee Report The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis contained in this Proxy Statement with management. Based on our review of, and the discussions with management with respect to, the Compensation Discussion and Analysis, we recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement. COMPENSATION COMMITTEE CHARLES R. WRIGHT,GABRIEL L. SHAHEEN,Chairman
MARY H. FUTRELL, STEPHEN J. HASENMILLER and GABRIEL L. SHAHEEN,ROBERT STRICKER,Members Equity Compensation Plan Information The following table provides information as of December 31, 20132014 regarding outstanding awards and shares remaining available for future issuance under the Company’s equity compensation plans (excluding the 401(k) plan): | | | | | | | | | | | | | | | | | Equity Compensation Plans | | Securities to be Issued Upon the Exercise of Outstanding Options, Warrants and Rights | | | Weighted Average Exercise Price of Outstanding Options, Warrants and Rights | | | Securities Available for Future Issuance Under Equity Compensation Plans (4) | | | | Plans Approved by Shareholders | | | | | | | | | | | | | | | Stock Incentive Plans (1) | | | | | | | | | | | | | | | Stock Options | | | 956,814 | | | | $17.49 | | | | N/A | | | | Restricted Stock Units (2) | | | 1,663,190 | | | | N/A | | | | N/A | | | | Subtotal | | | 2,620,004 | | | | N/A | | | | N/A | | | | Deferred Compensation (2)(3) | | | 230,043 | | | | N/A | | | | N/A | | | | Subtotal | | | 2,850,047 | | | | N/A | | | | 1,832,985 | | | | Plans Not Approved by Shareholders | | | N/A | | | | N/A | | | | N/A | | | | Total | | | 2,850,047 | | | | N/A | | | | 1,832,985 | |
| | | | | | | | | | | | | | | | | Equity Compensation Plans | | Securities to be Issued Upon the Exercise of Outstanding Options, Warrants and Rights | | | Weighted Average Exercise Price of Outstanding Options, Warrants and Rights | | | Securities Available for Future Issuance Under Equity Compensation Plans (4) | | | | Plans Approved by Shareholders | | | | | | | | | | | | | | | Stock Incentive Plans (1) | | | | | | | | | | | | | | | Stock Options | | | 634,437 | | | $ | 21.22 | | | | N/A | | | | Restricted Stock Units (2) | | | 1,590,138 | | | | N/A | | | | N/A | | | | Subtotal | | | 2,224,575 | | | | N/A | | | | N/A | | | | Deferred Compensation (2)(3) | | | 157,591 | | | | N/A | | | | N/A | | | | Subtotal | | | 2,382,166 | | | | N/A | | | | 1,208,404 | | | | Plans Not Approved by Shareholders | | | N/A | | | | N/A | | | | N/A | | | | Total | | | 2,382,166 | | | | N/A | | | | 1,208,404 | |
N/A – Not applicable | (1) | Includes grants under the HMEC 2010 Comprehensive Executive Compensation Plan, as amended, (“CECP”). |
| (2) | No exercise price is associated with the shares of Common Stock issuable under these rights. |
| (3) | The CECP permits Directors and participants in certain cash incentive programs to defer compensation in the form of Common Stock equivalent units, which can be settled in cash at the end of the specified deferral period. For purposes of the CECP, Common Stock equivalent units are valued at 100% of the fair market value of Common Stock on the date of crediting to the participant’s deferral account. There are 3548 senior executives of the Company currently eligible to participate in the CECP. The CECP does not reserve a specific number of shares for delivery in settlement of Common Stock equivalent units but instead provides that shares will be available to the extent needed for such settlements. Further information on the CECP appears in the “Compensation Discussion and Analysis”. |
| (4) | Excludes securities reflected in the Securities to be Issued column.column and represents shares remaining as part of a fungible share pool. The pool of shares is reduced by 2.5 shares for every “full-value” Award that is granted. |
| | | 32 | | 20142015 Proxy Statement • Proposals and Company Information | | 37 |
Executive Officers The following is certain information, as of March 15, 2014,2015, with respect to certainthe executive officers of the Company and its subsidiaries who are not Directors of the Company (together with Marita Zuraitis, President and Chief Executive Officer, who is discussed above under “Board Nominees”, the “Executive Officers”): Dwayne D. Hallman, 5152 Executive Vice President and Chief Financial Officer Mr. Hallman was appointed to his present position as Executive Vice President and Chief Financial Officer in October 2010. He joined the Company in January 2003 as Senior Vice President, Finance. From September 2000 to December 2002, he served as the Chief Financial Officer of Acceptance Insurance Companies, where he was responsible for financial reporting, investor relations, the treasury and investment management functions and property-casualty operations. From July 1995 to August 2000, Mr. Hallman served as Vice President, Finance and Treasurer at Highlands Insurance Group, where he was responsible for financial reporting, treasury, planning and office services. He served as Vice President and Controller of Ranger Insurance Company from 1988 to 1995. From 1984 to 1988, Mr. Hallman was associated with KPMG Peat Marwick, specializing in its insurance industry practice. Mr. Hallman has over 30 years of experience in the insurance industry. Stephen P. Cardinal, 4445 Executive Vice President Property & Casualtyand Chief Marketing Officer Mr. Cardinal was appointed tohas served as Executive Vice President and Chief Marketing Officer since joining the Company in December 2008, with the exception of his present positionservice as Executive Vice President, Property and Casualty infrom November 2013.2013 to October 2014. He joined the Company in December 2008 as Executive Vice President and Chief Marketing Officer. Mr. Cardinal previously served as Executive Vice President of personal lines distribution and President of Countrywide Insurance Service, a mortgage insurance firm, positions he held from April 2007 to November 2008. He was associated with Allstate Insurance Company from July 1995 through April 2007, including service as Regional Distribution Leader. Mr. Cardinal has over 20 years of experience in the insurance industry. Matthew P. Sharpe, 5253 Executive Vice President, Annuity and Life Mr. Sharpe joined the Company in January 2012 as Executive Vice President, Annuity and Life. Mr. Sharpe was previously with Genworth Financial, Inc. from 1999 to 2011 where he most recently served as Senior Vice President. Over the last 12 years in various positions with Genworth, Mr. Sharpe gained an extensive annuity and life background while leading a variety of successful growth, product development, strategic, marketing and sales initiatives. Mr. Sharpe has over 25 years of experience in the insurance industry. William J. Caldwell, 44 Senior Vice President, Property & Casualty Mr. Caldwell was appointed to his present position of Senior Vice President, Property and Casualty in October 2014. He joined the Company in November 2013 as Senior Vice President, Personal Lines. Mr. Caldwell previously served as Head of Property Products at QBE North America from June 2011 through November 2013, Senior Vice President of Bank of America from August 2007 to June 2011 and Vice President of Unitrin from June 2001 to August 2007. Mr. Caldwell has over 20 years of experience in the insurance industry. Bret A. Conklin, 5051 Senior Vice President and Controller Mr. Conklin joined the Company as Senior Vice President and Controller in January 2002. Mr. Conklin previously served as Vice President of Kemper Insurance from January 2000 through January 2002, where he was responsible for all corporate financial reporting and accounting operations; Vice President and Controller of the Company from July 1998 through January 2000; and Vice President and Controller of Pekin Insurance from September 1992 through June 1998. He has seven years of public accounting experience with KPMG Peat Marwick from 1985 to 1992, specializing in its insurance industry practice. Mr. Conklin has over 2530 years of experience in the insurance industry. Sandra L. Figurski, 51 Senior Vice President and Chief Information Officer Ms. Figurski was appointed to her present position as Senior Vice President and Chief Information Officer in November 2014. She joined the Company in September 2013 as Chief Technology Officer. Ms. Figurski was previously with Allstate Insurance Company from 1981 to 2013 where she most recently served as Vice President and Divisional Chief Information Officer. Ms. Figurski has over 30 years of experience in the insurance industry. John P. McCarthy, 59 Senior Vice President and Chief Human Resources Officer Mr. McCarthy joined the Company in May 2014 as Senior Vice President and Chief Human Resources Officer. Mr. McCarthy’s previous experience includes Guardian Life Insurance Company where he worked from December 2008 through March 2014, joining the company as Executive Vice President, Human Resources where he helped build a high-performing organization focusing on talent, leadership and culture. He was with Wachovia Corporation from December 1998 to December 2008, where he held multiple positions including Senior Managing Director. Mr. McCarthy has over 30 years of experience in the financial services and insurance industries. Ann M. Caparrós, 6162 General Counsel, Chief Compliance Officer and Corporate Secretary Ms. Caparrós joined the Company in March 1994 as Vice President, General Counsel and Corporate Secretary and the additional responsibilities of Chief Compliance Officer were formalized in 2000. Prior to March 1994, she was associated with John Deere Insurance Group from 1989 to 1994 as Vice President and General Counsel. She also was staff counsel for the Kellogg Company from 1988 to 1989 and United of Omaha Life Insurance Company from 1978 to 1988. Ms. Caparrós has over 35 years of experience in the insurance industry. | | | 201438 | | 2015 Proxy Statement • Proposals and Company Information | | 33 |
Security Ownership of Certain Beneficial Owners and Management The following table sets forth certain information regarding beneficial ownership of shares of Common Stock by each person who is known by the Company to own beneficially more than 5% of the issued and outstanding shares of Common Stock, and by each of the Company’s Directors, Board Nominees and the Company’s Chief Executive Officer, Former Chief Executive Officer, Chief Financial Officer and the other three highest compensated Executive Officers employed at the end of 20132014 (collectively the “Named Executive Officers”), and by all Directors and Executive Officers of the Company as a group. Information in the table is as of March 15, 2014,2015, except that the ownership information for the 5% beneficial owners is as of December 31, 20132014 based on information reported by such persons to the SEC. Except as otherwise indicated, to the Company’s knowledge all shares of Common Stock are beneficially owned, and investment and voting power is held solely by the persons named as owners. | | | | | | | | | | | Common Stock Ownership | | Beneficial Ownership Amount | | Percent of Class | | | | Security Ownership of 5% Beneficial Owners | | | | | | | | | BlackRock, Inc. (1) | | 3,803,764 | | | 9.4 | % | | | Dimensional Fund Advisors LP (2) | | 3,390,764 | | | 8.4 | % | | | The Vanguard Group, Inc (3) | | 2,444,160 | | | 6.1 | % | | | Donald Smith & Co., Inc. (4) | | 2,118,376 | | | 5.3 | % | | | Security Ownership of Directors and Executive Officers | | | | | | | | | Mary H. Futrell (5) | | 60,820 | | | * | | | | Stephen J. Hasenmiller | | 35,732 | | | * | | | | Ronald J. Helow (6) | | 19,967 | | | * | | | | Beverley J. McClure (7) | | 3,038 | | | * | | | | Gabriel L. Shaheen (8) | | 38,975 | | | * | | | | Roger J. Steinbecker (9) | | 47,502 | | | * | | | | Robert Stricker (10) | | 32,710 | | | * | | | | Steven O. Swyers | | 0 | | | 0.0 | % | | | Charles R. Wright (11) | | 44,979 | | | * | | | | Marita Zuraitis (12) | | 42,890 | | | * | | | | Peter H. Heckman (13) | | 355,541 | | | * | | | | Dwayne D. Hallman (14) | | 89,509 | | | * | | | | Stephen P. Cardinal (15) | | 108,777 | | | * | | | | Thomas C. Wilkinson (16) | | 101,968 | | | * | | | | Matthew P. Sharpe (17) | | 10,263 | | | * | | | | All Directors and Executive Officers as a group (16 persons) (18) | | 1,111,290 | | | 2.7 | % |
| | | | | | | | | | | Common Stock Ownership | | Beneficial Ownership Amount | | Percent of Class | | | | Security Ownership of 5% Beneficial Owners | | | | | | | | | BlackRock, Inc. (1) | | 3,629,567 | | | 8.7 | % | | | Dimensional Fund Advisors LP (2) | | 3,482,482 | | | 8.3 | % | | | Hotchkis and Wiley Capital Management, LLC (3) | | 2,871,489 | | | 6.9 | % | | | The Vanguard Group, Inc (4) | | 2,741,617 | | | 6.5 | % | | | Silvercrest Asset Management Group, LLC (5) | | 2,214,667 | | | 5.3 | % | | | Security Ownership of Directors and Executive Officers | | | | | | | | | Daniel A. Domenech | | 0 | | | 0.0 | % | | | Mary H. Futrell (6) | | 66,168 | | | * | | | | Stephen J. Hasenmiller | | 25,362 | | | * | | | | Ronald J. Helow (7) | | 24,289 | | | * | | | | Beverley J. McClure (8) | | 6,842 | | | * | | | | Gabriel L. Shaheen (9) | | 43,880 | | | * | | | | Roger J. Steinbecker (10) | | 34,419 | | | * | | | | Robert Stricker (11) | | 32,901 | | | * | | | | Steven O. Swyers | | 0 | | | 0.0 | % | | | Marita Zuraitis (12) | | 100,339 | | | * | | | | Dwayne D. Hallman (13) | | 133,593 | | | * | | | | Stephen P. Cardinal (14) | | 151,243 | | | * | | | | Matthew P. Sharpe (15) | | 29,558 | | | * | | | | John P. McCarthy | | 0 | | | 0.0 | % | | | All Directors and Executive Officers as a group (17 persons) (16) | | 783,524 | | | 1.9 | % |
(1) | BlackRock, Inc. (“BlackRock”) has a principal place of business at 4055 East 52nd Street, New York, New York 10022. BlackRock has sole voting power with respect to 3,641,1833,526,079 shares and sole investment power with respect to 3,803,7643,629,567 shares. The foregoing is based on Amendment No. 45 to Schedule 13G filed by BlackRock on January 29, 2014.22, 2015. |
(2) | Dimensional Fund Advisors LP (“Dimensional”) has a principal place of business at Palisades West, Building One, 6300 Bee Cave Road, Austin, Texas 78746. Dimensional has sole voting power with respect to 3,326,7843,362,111 shares and sole investment power with respect to 3,390,7643,482,482 shares. Dimensional disclaims beneficial ownership of such securities. The foregoing is based on Amendment No. 89 to Schedule 13G filed by Dimensional on February 10, 2014.5, 2015. |
(3) | Hotchkis and Wiley Capital Management, LLC (“Hotchkis and Wiley”) has a principal place of business at 725 South Figueroa Street, 39th Floor, Los Angeles, California 90017. Hotchkis and Wiley has sole voting power with respect to 2,397,889 shares and sole investment power with respect to 2,871,489 shares. Hotchkis and Wiley disclaims beneficial ownership of such securities. The foregoing is based on the Schedule 13G filed by Hotchkis and Wiley on February 13, 2015. |
(4) | The Vanguard Group, Inc. (“Vanguard”) has a principal place of business at 100 Vanguard Boulevard, Malvern, Pennsylvania 19355. Vanguard has sole voting power with respect to 61,05455,131 shares, sole investment power with respect to 2,386,8062,690,186 shares, and shared investment power with respect to 57,35451,431 shares. The foregoing is based on Amendment No. 23 to Schedule 13G filed by Vanguard on February 11, 2014.10, 2015. |
(4)(5) | Donald Smith & Co., Inc.Silvercrest Asset Management Group, LLC (“Donald Smith”Silvercrest”) has a principal place of business at 152 West 571330 Avenue of the Americas, 38th Street,Floor, New York, New York 10019. Donald SmithSilvercrest has soleshared voting power with respect to 1,502,341 shares and Donald Smith Long/Short Equities Fund, L.P. has sole voting power with respect to 7,646 shares. Donald Smith has sole investment power with respect to 2,118,3762,214,667 shares. The foregoing is based on theAmendment No. 1 to Schedule 13G filed by Donald SmithSilvercrest on February 10, 2014.
|
(5) | Includes 30,491 CSUs and 23,919 vested RSUs pursuant to the CECP.2015.
|
(6) | Consists entirely of 19,967Includes 32,796 CSUs and 28,362 vested RSUs pursuant to the CECP.
|
(7) | Consists entirely of 3,038 CSUs24,289 vested RSUs pursuant to the CECP. |
(8) | Consists entirely of 13,3853,131 CSUs and 25,5903,711 vested RSUs pursuant to the CECP. |
(9) | Includes 28,078Consists entirely of 13,795 CSUs and 11,30830,085 vested RSUs pursuant to the CECP.
|
(10) | Includes 9,05620,645 CSUs and 19,26611,480 vested RSUs pursuant to the CECP. |
(11) | Includes 23,181Consists entirely of 9,333 CSUs and 16,40823,568 vested RSUs pursuant to the CECP.
|
(12) | Consists entirely of 42,89015,043 vested stock options and 85,296 vested RSUs pursuant to the CECP. |
(13) | Includes 76,58558,278 vested stock options, 37,5036,957 CSUs and 227,52566,184 vested RSUs pursuant to the CECP. |
(14) | Includes 38,92667,886 vested stock options 6,750 CSUs and 41,8167,200 vested RSUs pursuant to the CECP. |
(15) | Includes 45,810Consists entirely of 20,112 vested stock options and 9,8179,446 vested RSUs pursuant to the CECP.
|
(16) | Includes 5,289206,848 vested stock options, 3,692107,592 CSUs and 59,906 vested RSUs pursuant to the CECP. |
(17) | Consists entirely of 10,263 vested stock options pursuant to the CECP.
|
(18) | Includes 208,020 vested stock options, 175,486 CSUs and 558,036354,236 vested RSUs pursuant to the CECP.
|
| | | 34 | | 20142015 Proxy Statement • Proposals and Company Information | | 39 |
Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Exchange Act requires the Company’s Executive Officers and Directors and other persons who beneficially own more than ten percent of HMEC’s outstanding Common Stock, whom the Company refers to collectively as the “Reporting Persons”, to file reports of ownership and changes in ownership with the SEC. The Company has established procedures by which Reporting Persons provide relevant information regarding transactions in Common Stock to a Company representative and the Company prepares and files the required ownership reports. Based on a review of those reports and other written representations, the Company believes that all such reports were timely filed in 2013.2014. PROPOSAL NO. 34 - RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The independent registered public accounting firm selected by the Audit Committee of the Board to serve as the Company’s auditors for the year ending December 31, 20142015 is KPMG LLP. KPMG LLP served in that capacity for the year ended December 31, 2013.2014. As a matter of good corporate governance, the Audit Committee submits its selection of the auditors to the Shareholders for ratification. If the selection of KPMG LLP is not ratified, the Audit Committee will review its future selection of an independent registered public accounting firm in light of the vote result. A representative from KPMG LLP is expected to be present at the Annual Meeting. The representative will be given an opportunity to make a statement to Shareholders and is expected to be available to respond to appropriate questions from Shareholders. The Board recommends that Shareholders vote FOR the ratification of KPMG LLP, an independent registered public accounting firm, as the Company’s auditors for the year ending December 31, 2014.2015. Report of the Audit Committee Acting under a written charter, the Audit Committee oversees the Company’s financial reporting process on behalf of the Board of Directors. The Audit Committee is comprised of four directors, each of whom is independent as defined by the New York Stock Exchange listing standards. Management has the primary responsibility for the Company’s financial statements and its reporting process, including the Company’s systems of internal controls. In fulfilling its oversight responsibilities, prior to the filing, the Audit Committee reviewed the audited consolidated financial statements in the Annual Report on Form 10-K with management, including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and clarity of disclosures in the financial statements. The Audit Committee has discussed with the Company’s independent registered public accounting firm, which is responsible for expressing an opinion on the conformity of those audited consolidated financial statements with United States generally accepted accounting principles, their judgments as to the quality, not just the acceptability, of the Company’s accounting principles and such other matters as are required by applicable requirements of the Public Company Accounting Oversight Board. In addition, the Audit Committee has received from the independent registered public accounting firm the written disclosures and the letter required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered public accounting firm’s communications with the Audit Committee concerning independence, and discussed with them their independence from the Company and its management taking into account the potential effect of any non-audit services provided by the independent registered public accounting firm. The Audit Committee discussed with the Company’s internal auditors and independent registered public accounting firm the overall scope and plans for their respective audits. The Audit Committee meets with the internal auditors and the independent registered public accounting firm, with and without management present, to discuss the results of their audits, their evaluations of the Company’s internal controls, and the overall quality of the Company’s financial reporting. The Audit Committee held twelve meetings during fiscal year 2013.2014. In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements be included in the Annual Report on Form 10-K for the year ended December 31, 20132014 for filing with the Securities and Exchange Commission. The Audit Committee approved the selection of the Company’s independent registered public accounting firm. AUDIT COMMITTEE ROGER J. STEINBECKER,Chairman STEPHENRONALD J. HASENMILLER,HELOW, BEVERLEY J. MCCLURE and ROBERT STRICKER,STEVEN O. SWYERS,Members
| | | 201440 | | 2015 Proxy Statement • Proposals and Company Information | | 35 |
The Company’s Independent Registered Public Accounting Firm The independent registered public accounting firm selected by the Audit Committee to serve as the Company’s auditors for the year ending December 31, 20142015 is KPMG LLP. KPMG LLP served in that capacity for the year ended December 31, 2013.2014. Fees of KPMG LLP The following were the fees of KPMG LLP for the years ended December 31, 20132014 and 2012.2013. | | | | | | | | | | | | | | | Fees | | 2013 | | | | | 2012 | | | | Audit (1) | | | $ 1,762,800 | | | | | | $ 1,591,900 | | | | Audit-Related (2) | | | $ 214,000 | | | | | | $ 222,000 | | | | Tax (3) | | | 0 | | | | | | 0 | | | | All Other (4) | | | 0 | | | | | | 0 | |
| | | | | | | | | | | | | | | Fees | | 2014 | | | | | 2013 | | | | Audit (1) | | | $ 1,918,400 | | | | | | $ 1,762,800 | | | | Audit-Related (2) | | | $ 226,300 | | | | | | $ 214,000 | | | | Tax (3) | | | 0 | | | | | | 0 | | | | All Other (4) | | | 0 | | | | | | 0 | |
| (1) | Represents the aggregate fees billed for professional services rendered by KPMG LLP for the audit of the Company’s annual financial statements for the years ended December 31, 20132014 and 2012,2013, the audit of the Company’s internal control over financial reporting as of December 31, 20132014 and 2012,2013, the reviews of the financial statements included in the Company’s quarterly reports on Forms 10-Q for the years ended December 31, 20132014 and 20122013 and services in connection with the Company’s statutory and regulatory filings for the years ended December 31, 20132014 and 2012.2013. |
| (2) | Represents the aggregate fees billed for assurance and related services rendered by KPMG LLP that are reasonably related to the audit and review of the Company’s financial statements for the years ended December 31, 20132014 and 2012,2013, exclusive of the fees disclosed under “Audit Fees”. In 20132014 and 2012,2013, KPMG LLP audited the Company’s employee benefits plans. Also in 20132014 and 2012,2013, KPMG LLP prepared SOC1 reports on the Company’s annuity operations. |
| (3) | Represents the aggregate fees billed for tax compliance, consulting and planning services rendered by KPMG LLP during the years ended December 31, 20132014 and 2012.2013. |
| (4) | Represents the aggregate fees billed for all other services, exclusive of the fees disclosed above relating to audit, audit-related and tax services, rendered by KPMG LLP during the years ended December 31, 20132014 and 2012.2013. |
Pre-Approval of Services Provided by the Independent Registered Public Accounting Firm The Audit Committee approves in advance any significant audit and all non-audit engagements or services between the Company and the independent registered public accounting firm. As a practice, the Audit Committee does not allow “prohibited non-auditing services” as defined by regulatory authorities to be performed by the same firm that audits the Company’s annual financial statements. The Audit Committee may delegate to one or more of its members the authority to approve in advance all significant audit and all non-audit services to be provided by the independent registered public accounting firm so long as it is presented to the full Audit Committee at the next regularly scheduled meeting. Pre-approval is not necessary for de minimis audit services as long as such services are presented to the full Audit Committee at the next regularly scheduled meeting. The Audit Committee approved all of the above listed expenses. KPMG LLP did not provide any non-audit related services during the years ended December 31, 20132014 and 2012.2013. | | | 36 | | 20142015 Proxy Statement • Proposals and Company Information | | 41 |
Other Matters Delivery of Proxy Materials Electronic Access to Proxy Materials and Annual Report As we did last year, we are delivering a Notice of Internet Availability of Proxy Materials to Shareholders in lieu of a paper copy of the Proxy Statement and related materials and the Company’s Annual Report to Shareholders and Form 10-K. If you received a Notice by mail, you will not receive a paper copy of the Proxy Materials unless you request one. Instead, the Notice will instruct you as to how you may access and review the Proxy Materials and cast your vote. If you received a Notice by mail and would like to receive a paper copy of our Proxy Materials, please follow the instructions included in the Notice. Shareholders also can elect to receive an email message that will provide a link to the Proxy Materials on the Internet. By opting to access your Proxy Materials via email, you will save the Company the cost of producing and mailing documents to you, reduce the amount of mail you receive and help preserve environmental resources. Shareholders who have enrolled previously in the electronic access service will receive their Proxy Materials via email this year. If you received a Notice by mail and would like to receive your Proxy Materials via email, please follow the instructions included in the Notice. Copies of Annual Report on Form 10-K | | | | | | | The Company will furnish, without charge, a copy of its most recent Annual Report on Form 10-K filed with the SEC to each person solicited hereunder who mails a written request to Investor Relations, Horace Mann Educators Corporation, 1 Horace Mann Plaza, C-120, Springfield, Illinois, 62715-0001. | | |
The Company also will furnish, upon request, a copy of all exhibits to the Annual Report on Form 10-K. In addition, the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statements and all amendments to those reports are available free of charge through the Company’s Internet website, www.horacemann.com, as soon as reasonably practicable after such reports are electronically filed with, or furnished to, the SEC. The EDGAR filings of such reports are also available at the SEC’s website, www.sec.gov. Eliminating Duplicative Proxy Materials If you are a beneficial owner, your bank or broker may deliver a single Proxy Statement and Annual Report, along with individual proxy cards, or individual Notices to any household at which two or more shareholders reside unless contrary instructions have been received from you. This procedure, referred to as householding, reduces the volume of duplicate materials shareholders receive and reduces mailing expenses. Shareholders may revoke their consent to future householding mailings or enroll in householding by contacting the Company’s facilitator for distribution of Proxy Materials, Broadridge Financial Solutions, Inc., at 1-800-542-1061, or by writing to Broadridge, Householding Department, 51 Mercedes Way, Edgewood, New York 11717. Alternatively, if you wish to receive a separate set of Proxy Materials for this year’s Annual Meeting, we will deliver them promptly upon request to Investor Relations, Horace Mann Educators Corporation, 1 Horace Mann Plaza, C-120, Springfield, Illinois, 62715-0001 or 217-789-2500. Submitting Shareholder Proposals for the 20152016 Annual Meeting of Shareholders Any proposals of Shareholders submitted under Rule 14a-8 of the Securities Exchange Act of 1934, as amended, for inclusion in the Company’s Proxy Statement and Form of Proxy for the next Annual Meeting of Shareholders scheduled to be held in 20152016 must be received in writing by Ann M. Caparrós,the Corporate Secretary, Horace Mann Educators Corporation, 1 Horace Mann Plaza, Springfield, Illinois, 62715-0001 not later than the close of business on December 5, 201410, 2015 in order for such proposal to be considered for inclusion in the Company’s Proxy Statement and Form of Proxy relating to the 20152016 Annual Meeting of Shareholders. In the event that a Shareholder intends to present any proposal at the 20152016 Annual Meeting of Shareholders other than in accordance with the procedures set forth in Rule 14a-8, the Shareholder must give written notice to the Corporate Secretary no less than 45 days prior to the date of the Annual Meeting setting forth the business to be brought before the meeting. Accordingly, proxies solicited by the Board for the 20152016 Annual Meeting will confer upon the proxy holders discretionary authority to vote on any matter so presented of which the Company does not have notice prior to April 5, 2015,10, 2016, which is 45 days prior to the anticipated Annual Meeting date of May 20, 2015.25, 2016. | | | 201442 | | 2015 Proxy Statement • Other Matters |
EXHIBIT 1 HORACE MANN EDUCATORS CORPORATION 2010 Comprehensive Executive Compensation Plan As Amended and Restated Effective May 20, 2015 TABLE OF CONTENTS | | | | | | | | | I. | | Background | | | 37E-3 | | | | | II. | | Purpose | | | E-3 | | | | | III. | | Definitions | | | E-3 | | | | | IV. | | Administration | | | E-7 | | | | | | | | 4.01 | | Authority of the Committee | | | E-7 | | | | 4.02 | | Manner of Exercise of Committee Authority | | | E-7 | | | | 4.03 | | Limitation of Liability | | | E-8 | | | | | V. | | Stock Subject to Plan | | | E-8 | | | | | | | | 5.01 | | Overall Number of Shares Available for Delivery | | | E-8 | | | | 5.02 | | Share Counting Rules | | | E-8 | | | | 5.03 | | Per Person Award Limits | | | E-8 | | | | 5.04 | | Preexisting Plans | | | E-9 | | | | | VI. | | Eligibility | | | E-9 | | | | | VII. | | Specific Terms of Certain Stock-Based Awards | | | E-9 | | | | | | | | 7.01 | | General | | | E-9 | | | | 7.02 | | Options | | | E-9 | | | | 7.03 | | Stock Appreciation Rights | | | E-9 | | | | 7.04 | | Restricted Stock | | | E-10 | | | | 7.05 | | Restricted Stock Units | | | E-10 | | | | 7.06 | | Bonus Stock and Awards in Lieu of Obligations | | | E-11 | | | | 7.07 | | Dividend Equivalents | | | E-11 | | | | 7.08 | | Other Awards | | | E-11 | | | | | VIII. | | Performance Awards, Including Annual Incentive Awards | | | E-11 | | | | | | | | 8.01 | | Performance Awards Generally | | | E-11 | | | | 8.02 | | Performance Awards and Code Section 162(m) | | | E-12 | | | | 8.03 | | Settlement of Performance Awards | | | E-13 | | | | 8.04 | | Written Determinations | | | E-13 | | | | | IX. | | Deferred Cash Sub-Plan | | | E-13 | | | | | | | | 9.01 | | Deferred Cash Sub-Plan | | | E-13 | | | | 9.02 | | Sub-Plan Definitions | | | E-13 | | | | 9.03 | | Sub-Plan Administration | | | E-14 | |
| | | 2015 Proxy Statement • Exhibit 1 | | E-1 |
| | | | | | | | | | | 9.04 | | Deferral Elections | | | E-14 | | | | 9.05 | | Timing of Deferral Elections | | | E-14 | | | | 9.06 | | Accounts | | | E-15 | | | | 9.07 | | Distributions | | | E-15 | | | | 9.08 | | Medium of Payment | | | E-16 | | | | 9.09 | | No Subsequent Elections as to Time and Form of Distribution | | | E-16 | | | | 9.10 | | Payment Upon the Deferred Cash Participant’s Death | | | E-16 | | | | 9.11 | | Unforeseeable Emergencies | | | E-16 | | | | 9.12 | | Claims Procedures | | | E-16 | | | | 9.13 | | Deferred Compensation Plan | | | E-17 | | | | | X. | | Certain Provisions Applicable to Awards | | | E-17 | | | | | | | | 10.01 | | Additional and Substitute Awards | | | E-17 | | | | 10.02 | | Interest | | | E-17 | | | | 10.03 | | Exemptions from Section 16(b) Liability | | | E-17 | | | | | XI. | | Change in Control | | | E-17 | | | | | | | | 11.01 | | Committee Discretion for Awards that are not 409A Compensation. | | | E-17 | | | | 11.02 | | Effect of Change in Control on 409A Compensation | | | E-17 | | | | 11.03 | | “Cause” | | | E-18 | | | | | XII. | | General Provisions | | | E-18 | | | | | | | | 12.01 | | Additional Award Forfeiture Provisions | | | E-18 | | | | 12.02 | | Compliance with Legal and Other Requirements | | | E-18 | | | | 12.03 | | Limits on Transferability; Beneficiaries | | | E-18 | | | | 12.04 | | Designation of Beneficiary | | | E-18 | | | | 12.05 | | Adjustments | | | E-18 | | | | 12.06 | | Tax Provisions | | | E-19 | | | | 12.07 | | Amendment and Termination of the Plan | | | E-19 | | | | 12.08 | | No Repricing | | | E-19 | | | | 12.09 | | Clawback; Right of Setoff. | | | E-19 | | | | 12.10 | | Nonexclusivity of the Plan | | | E-20 | | | | 12.11 | | Successors | | | E-20 | | | | 12.12 | | Nature of Payments | | | E-20 | | | | 12.13 | | Electronic Media | | | E-20 | | | | 12.14 | | Payments in the Event of Forfeitures; Fractional Shares | | | E-20 | | | | 12.15 | | Code Section 409A Considerations | | | E-20 | | | | 12.16 | | Governing Law | | | E-20 | | | | 12.17 | | Awards to Participants Outside the United States | | | E-20 | | | | 12.18 | | Limitation on Rights Conferred under Plan | | | E-20 | | | | 12.19 | | Severability; Entire Agreement | | | E-21 | | | | 12.20 | | Plan Term | | | E-21 | | | | 12.21 | | Gender and Number | | | E-21 | | | | 12.22 | | General Creditor Status | | | E-21 | |
| | | E-2 | | 2015 Proxy Statement • Exhibit 1 |
HORACE MANN EDUCATORS CORPORATION 2010 Comprehensive Executive Compensation Plan As Amended and Restated Effective May 20, 2015 I. Background 1.01Horace Mann Educators Corporation, a Delaware Corporation (the “Company”) formerly maintained the Horace Mann Educators Corporation 2002 Incentive Compensation Plan (the “2002 Incentive Plan”), the Horace Mann Educators Corporation Deferred Compensation Plan for Employees (“Employees’ Plan”), and the Horace Mann Educators Corporation Deferred Equity Plan for Directors (“Directors’ Plan”). 1.02The Company established the 2010 Comprehensive Executive Compensation Plan (the “Plan”) effective May 27, 2010 (the “Effective Date”) to consolidate the 2002 Incentive Plan, the Employees Deferred Compensation Plan and the Directors Deferred Equity Plan into a single document, which was approved by shareholders of the Company on May 27, 2010. 1.03The Company now desires to amend and restate the Plan effective May 20, 2015 (the “Restatement Effective Date”), subject to the approval of the shareholders of the Company with respect to shares of Stock that may be deliverable under the Plan and with respect to the requirements of Code Section 162(m). 1.04Unless the context requires otherwise, the terms and provisions of this Plan as amended and restated shall apply to awards granted after the Restatement Effective Date, as well as to outstanding awards granted under the Plan prior to the Restatement Effective Date, to outstanding awards granted prior to the Effective Date under the 2002 Incentive Plan, and to outstanding Accounts under the Employees’ Plan and the Directors’ Plan. II. Purpose The purpose of the Plan is to aid the Company in attracting, retaining, motivating and rewarding employees, Non-Employee Directors, and other persons who provide substantial services to the Company or its Affiliates, to provide for equitable and competitive compensation opportunities, including deferral opportunities, to encourage long-term service, to recognize individual contributions and reward achievement of Company goals, and promote the creation of long-term value for shareholders by closely aligning the interests of Participants with those of shareholders. The Plan authorizes stock-based and cash-based incentives for Participants. To the extent this Plan results in a deferral of income by employees for periods extending to the termination of employment or beyond, it is maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees. III. Definitions In addition to the terms defined in Article I above and elsewhere in the Plan, the following capitalized terms used in the Plan have the respective meanings set forth in this Section: 3.01“Affiliate” means any person with whom the Company would be considered a single employer under Code Sections 414(b) and 414(c), except that in applying Code Sections 1563(a)(1), (2) and (3) for purposes of determining a controlled group of corporations under Code Section 414(b), the language “at least 50 percent” shall be used instead of “at least 80 percent” in each place it appears in Code Sections 1563(a)(1), (2) and (3), and in applying Treas. Reg. §1.414(c)-2 for purposes of determining a controlled group of trades or businesses under Code Section 414(c), the language “at least 50 percent” shall be used instead of “at least 80 percent” in each place it appears in Treas. Reg. §1.414(c)-2. Notwithstanding the foregoing, where justified by legitimate business criteria as determined by the Committee in its sole discretion, “at least 20 percent” shall be substituted for “at least 50 percent” in the preceding sentence in determining whether a Participant has had a Separation from Service. 3.02“Annual Incentive Award” means a type of Performance Award granted to a Participant representing a conditional right to receive cash, Stock or other Awards or payments, as determined by the Committee, based on performance over a performance period of twelve months or less. 3.03“Award” means any Option, SAR, Restricted Stock, RSU, Stock granted as a bonus or in lieu of another award, Dividend Equivalent, Other Award, Performance Award or Cash Award, together with any related right or interest, granted to a Participant under the Plan. An Account (as defined in Section 9.02(c)) is not an Award. 3.04“Award Agreement” means the agreement setting forth the terms and conditions to which an Award is subject, to the extent not provided in the Plan, together with any additional documents (such as Beneficiary designations) relating to a specific Award. 3.05“Beneficiary” means the individual or entity designated by the Participant to receive the benefits specified under the Participant’s Award upon such Participant’s death. See Section 12.04. No Beneficiary shall have any rights under the Plan prior to the death of the Participant. 3.06“Beneficial Owner” has the meaning specified in Rule 13d-3 under the Exchange Act. 3.07“Board” means the Company’s Board of Directors. 3.08“Change in Control” means, unless otherwise defined in an Award Agreement, (a) for Awards granted prior to the Effective Date, any one or more of the following: (i) Approval by the shareholders of the Company of a merger, reorganization, consolidation, or similar transaction, in which the Company is not the continuing or the surviving corporation, or pursuant to which Shares would be converted into cash, securities or | | | 2015 Proxy Statement • Exhibit 1 | | E-3 |
other property, other than a merger of the Company in which no Company shareholder’s ownership percentage in the surviving corporation immediately after the merger is less than such shareholder’s ownership percentage in the Company immediately prior to such merger by ten percent (10%) or more (unless such change results from elimination of an odd lot that represented less than 0.1% of the outstanding of Stock); or (2) any sale, lease exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company; or (ii) The shareholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company which is part of a sale of assets, merger, or reorganization of the Company or other similar transaction; or (iii) Any “person”, as such term is defined in Sections 13(d) and 14(d) of the Exchange Act, is or becomes, directly or indirectly, the “beneficial owner” as defined in Rule 13d-3 under the Exchange Act, of securities of the Company that represent more than 50% of the combined voting power of the Company’s then outstanding securities entitled to vote generally in the election of Directors; or (iv) The Incumbent Directors (determined using the Effective Date as the baseline date) cease for any reason to constitute at least a majority of the Directors of the Company then serving; and (b) for Awards granted on and after the Effective Date, unless otherwise defined in the Award Agreement or excluded under subsection (d) below, any one or more of the following: (i) any one person or more than one person acting as a group acquires ownership of stock of the Company that, together with stock held by such person or group, constitutes more than fifty percent (50%) of the total fair market value or total voting power of the stock of the Company; (ii) any one person or more than one person acting as a group acquires (or has acquired during the twelve (12)-month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of the Company that, constitutes thirty percent (30%) or more of the total fair market value or total voting power of the stock of the Company; or (iii) a majority of members of the Company’s Board is replaced during any twelve (12)-month period by Directors whose appointment or election is not endorsed by a majority of the members of the Company’s Board before the date of the appointment or election. (c) for Awards granted on and after the Restatement Effective Date, unless otherwise defined in the Award Agreement or excluded under subsection (d) below, but in addition to the events in subsection (b) above, consummation of a sale or other disposition of all or substantially all the assets of the Company, provided that any one person or more than one person acting as a group acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition of assets by such person), assets of the Company that have a total gross fair market value equal to or more than forty percent (40%) of the total gross fair market value of all of the assets of the Company immediately before such acquisition or acquisitions. (d) Notwithstanding subsections (b) and (c) above, for awards granted on or after the Restatement Effective Date, (i) clauses (i) and (ii) of subsection (b) and subsection (c) shall not apply to an acquisition of stock or assets by the Company, any Affiliate of the Company, or any employee benefit plan of the Company or any Affiliate; (ii) clauses (i) and (ii) of subsection (b) and subsection (c) shall not apply to a merger, consolidation, or similar corporate transaction (including but not limited to a transaction to effect a recapitalization or change of jurisdiction of incorporation) following the consummation of which and of all related integrated transactions the record holders of the stock of the Company prior to such transaction or series of transactions have substantially the same proportionate ownership in a surviving entity that owns directly or indirectly all or substantially all of the assets that the Company owned directly or indirectly immediately before such transaction or series of transactions except for a change in proportionate ownership that results from elimination of one or more odd lots that represented less than 0.1% of the outstanding stock, and a majority of the members of the Company’s Board at any time during the 12-month period prior to such transaction on series of related integrated transactions constitute a majority of the members of the board of directors of the surviving entity immediately following the transaction or series of related integrated transactions; (iii) clauses (i) and (ii) of subsection (b) shall not apply to the acquisition by a person or more than one person acting as a group of stock or securities voluntarily issued directly by the Company to such person or group in connection with the Company raising capital or making an acquisition, provided that (A) such stock or securities do not constitute more than fifty percent (50%) of the total fair market value or total voting power of the stock and securities of the Company determined after the issuance of such stock or securities, (B) such person or group is in compliance with any agreement between the Company and such person or group relating to such issuance and acquisition of stock or securities, and (C) such stock or securities are not subsequently transferred by such person or group except as may be permitted by written agreement between the Company and such person or group made at the time such stock or securities are issued; and (iv) subsection (c) shall not apply to a transfer of assets (A) to a shareholder of the Company in exchange for or with respect to its stock, (B) to an entity fifty percent (50%) or more of the total value or voting power of which is owned directly or indirectly by the Company, (C) to a person, or more than one person acting as a group, that owns directly or indirectly fifty percent (50%) or more of the total value | | | E-4 | | 2015 Proxy Statement • Exhibit 1 |
or voting power of all of the outstanding stock of the Company, or (D) to an entity, at fifty percent (50%) of the total value or voting power of which is owned directly or indirectly by a person described in immediately preceding clause (C). 3.09“Code” means the Internal Revenue Code of 1986, as amended. References to any provision of the Code or regulation thereunder shall include any successor provisions and regulations, and other applicable guidance or pronouncement of the Department of the Treasury and Internal Revenue Service and applicable case law. 3.10“Committee” means the Compensation Committee of the Board of Directors, the composition and governance of which is established in the Committee’s Charter as approved from time to time by the Board and subject to Section 303A.05 of the Listed Company Manual of the New York Stock Exchange, and other corporate governance documents of the Company. No action of the Committee shall be void or deemed to be without authority due to the failure of any member, at the time the action was taken, to meet any qualification standard set forth in the Committee Charter or this Plan. The full Board may perform any function of the Committee hereunder except to the extent limited under Section 303A.05 of the Listed Company Manual, or the Company’s bylaws, in which case the term “Committee” shall refer to the Board. To the extent the Committee has delegated authority to another person or persons (including the Administrator as defined in Section 9.02) the term “Committee” shall refer to such other person or persons. 3.11“Company” is defined in Section 1.01. 3.12“Deferred Cash Sub-Plan” is defined in Section 9.01. 3.13“Director” means a member of the Board. 3.14“Dividend Equivalent” means a right granted to a Participant to receive cash, Stock, or other property equal in value to all or a specified portion of the dividends paid with respect to a specified number of shares of Stock in connection with dividend declarations, reclassifications, spin-offs, and the like. 3.15“Effective Date” is defined in Section 1.02. 3.16“Eligible Person” means an employee of the Company or any Affiliate, including any executive officer, a Non-Employee Director of the Company, a consultant or other person who provides substantial services to the Company or an Affiliate, and any person who has been offered employment by the Company or an Affiliate, provided that such prospective employee may not receive any payment or exercise any right relating to an Award until such person has commenced employment with the Company or an Affiliate. 3.17“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time and the rules and regulations thereunder. 3.18“Fair Market Value” means as of any applicable date the closing sale price of a share of Stock on the Composite Tape for New York Stock Exchange-Listed Stocks, or, if no sales were reported on such date, the closing sales price on the last preceding day on which a sale was reported; provided that if Stock is not quoted on the Composite Tape, the closing sales price on the New York Stock Exchange shall be used, or, if Stock is not listed on such Exchange, the closing sales price on the principal United States securities exchange registered under the Exchange Act on which Stock is listed shall be used, or, if Stock is not listed on any such exchange, the last closing bid quotation with respect to a share of Stock immediately preceding the time in question on the Nasdaq or any system then in use (or any other system of reporting or ascertaining quotations then available) shall be used, or if Stock is not so quoted, the fair market value on the applicable date of a share of Stock as determined by the Board in good faith. 3.19 “409A Change in Control” means a Change in Control that also qualifies, with respect to the Participant, as a change in the ownership or effective control of a corporation or a change in the ownership of a substantial portion of the assets of a corporation, within the meaning of Treas. Reg. §1.409A-3(i)(5). The determination of whether a Change in Control qualifies as a 409A Change in Control shall be made on a Participant-by-Participant basis. 3.20“409A Compensation” means an Award, an Account, or other compensation that is “nonqualified deferred compensation” subject to Code Section 409A, regardless of when granted or awarded. 3.21“Incentive Stock Option” or “ISO” means any Option intended to qualify as an incentive stock option within the meaning of Code Section 422, and qualifying thereunder. 3.22“Incumbent Directors” means, as of any specified baseline date, individuals then serving as members of the Board who were members of the Board as of the date immediately preceding such baseline date; provided that any subsequently-appointed or elected member of the Board whose election, or nomination for election by shareholders of the Company or the Surviving Corporation, as applicable, was approved by a vote or written consent of a majority of the Directors then comprising the Incumbent Directors shall also thereafter be considered an Incumbent Director, unless the initial assumption of office of such subsequently-elected or appointed Director was in connection with (i) an actual or threatened election contest, including a consent solicitation, relating to the election or removal of one or more members of the Board, (ii) a “tender offer” (as such term is used in Section 14(d) of the Exchange Act), or (iii) a proposed reorganization transaction. 3.23“Non-Employee Director” means a Director who is not an employee of the Company or an Affiliate. | | | 2015 Proxy Statement • Exhibit 1 | | E-5 |
3.24“Nonstatutory Option” means an Option that is not an Incentive Stock Option. 3.25“Option” means a right, granted to a Participant, to purchase a number of shares of Stock, Restricted Stock, or fully vested RSUs at a specified price during a specified time period, and subject to such other terms and conditions as the Committee may determine. The term “Option” includes both an Incentive Stock Option and a Nonstatutory Option. 3.26“Other Awards” means cash or Stock-based Awards granted to an Eligible Person under Section 7.08. 3.27“Participant” means a person who has been granted an Award under the Plan which remains outstanding, including a person who is no longer an Eligible Person, and including any permitted transferee of such Award. Where appropriate in context, “Participant” includes a “Deferred Cash Participant”. 3.28“Performance Award” means a conditional right granted to an Eligible Person to receive cash, Stock or other Awards or payments, as determined by the Committee, based upon the degree of satisfaction of performance criteria specified by the Committee. Performance Awards include, but are not limited to Annual Incentive Awards. 3.29“Preexisting Plans” means the 1991 Stock Incentive Plan, the 2001 Stock Incentive Plan, the 2002 Incentive Plan, the Employees’ Plan and the Directors’ Plan. 3.30“Restricted Stock” means Stock granted to an Eligible Person under Section 7.04 which is subject to certain restrictions and to a substantial risk of forfeiture. 3.31“Restricted Stock Unit” or“RSU”means a bookkeeping entry representing a hypothetical share of Stock granted to an Eligible Person under Section 7.05 or credited to a Deferred Stock Equivalent Account pursuant to the Deferred Cash Sub-Plan under Article IX which, if so provided in an Award Agreement, is subject to certain restrictions and to a substantial risk of forfeiture. A Restricted Stock Unit shall have a nominal value on any date equal to the Fair Market Value of one share of Stock on that date. A Restricted Stock Unit may be settled for cash, property, or shares of Stock, and may be a Performance Award. Restricted Stock Units represent an unfunded and unsecured obligation of the Company. Fully vested RSUs credited pursuant to the Deferred Cash Sub-Plan under Article IX were referred to as “Common Stock Equivalent Units” or “CSUs” prior to the Restatement Effective Date. 3.32“Rule 16b-3” means Rule 16b-3, as from time to time in effect and applicable to Participants, promulgated by the Securities and Exchange Commission under Section 16 of the Exchange Act. 3.33“Separation from Service”means (a) in the case of an individual who is an employee of the Company or an Affiliate, the employee’s termination of employment with the Company and its Affiliates. Whether a termination of employment has occurred shall be determined based on whether the facts and circumstances indicate the individual and the employer reasonably anticipate that no further services will be performed by the individual for the Company and its Affiliates; provided, however, that an individual shall be deemed to have a Separation from Service if the level of services he or she would perform for the Company and its Affiliates after a certain date permanently decreases to no more than twenty percent (20%) of the average level of bona fide services performed for the Company and its Affiliates (whether as an employee or independent contractor) over the immediately preceding 36-month period (or the full period of services to the Company and its Affiliates if the Participant has been providing services for less than 36 months). For this purpose, a Participant is not treated as having a Separation from Service while he or she is on a military leave, sick leave, or other bona fide leave of absence, if the period of such leave does not exceed six months (90 days in the case of an Incentive Stock Option), or if longer, so long as the Participant has a right to reemployment with the Company or an Affiliate under an applicable statute or by contract; and (b) in the case of a Director, the individual ceases to be a Director of the Company and all Affiliates, unless immediately upon such cessation the individual has a relationship with the Company or an Affiliate such that such cessation would not be a separation from service under Code Section 409A, in which case a Separation from Service will occur upon the cessation of such relationship as provided in Code Section 409A. 3.34“Specified Employee” means an individual who, as of the date of his or her Separation from Service, is a key employee of the Company or any Affiliate whose stock is publicly traded. An individual is a key employee if he or she meets the requirements for being a “key employee” under the so-called top heavy rules of Code Section 416(i)(1)(A)(i), (ii), or (iii), applied by disregarding Code Section 416(i)(5), at any time during the 12-month period ending each December 31; provided that any individual who is a key employee on December 31 of any year (“Key Employee Identification Date”) shall be deemed to be a “Specified Employee” for the 12-month period beginning on April 1 of the following calendar year (“Specified Employee Effective Date”) and ending on March 31 of the next following calendar year. The Board may, consistent with the requirements of Code Section 409A, by separate action, given effect with respect to all non-qualified deferred compensation plans subject to Code Section 409A no earlier than 12 months after such action, change the December 31 date and the April 1 date in the foregoing portion of this definition, provided the new Specified Employee Effective Date is no later than the first day of the fourth month after the new Key Employee Identification Date. 3.35“Stock” means the Company’s common stock $0.001 par value, and any other equity securities of the Company that may be substituted or resubstituted for Stock. | | | E-6 | | 2015 Proxy Statement • Exhibit 1 |
3.36“Stock Appreciation Right” or “SAR” means a right granted to an Eligible Person under Section 7.03 to receive, upon exercise thereof, the excess of (A) the Fair Market Value of one share of Stock on the date of exercise over (B) the grant price of the SAR as determined by the Committee, which grant price shall be not less than the Fair Market Value of a share of Stock on the date of grant of such SAR, 3.37“Termination of employment” or “Termination of service” and words of similar import, unless the context clearly indicates otherwise, mean Separation from Service. IV. Administration 4.01 Authority of the Committee. The Plan shall be administered by the Committee, which shall have full and final authority, in its discretion, in each case subject to and consistent with the provisions of the Plan, (a) to determine which Eligible Persons shall be granted Awards; (b) to determine the type and size of Awards, the dates on which Awards may be granted, exercised or settled and on which the risk of forfeiture or any deferral period relating to Awards shall lapse or terminate, and the acceleration of any such dates; (c) to determine the expiration date of any Award; (d) to determine whether an Award will be granted on a standalone or tandem basis; (e) to determine whether, to what extent, and under what circumstances an Award may be settled, or the exercise price of an Award may be paid, in cash, Stock, other Awards, or other property; (f) to determine other terms and conditions of, and all other matters relating to, Awards; (g) to prescribe Award Agreements evidencing or setting terms of Awards (such Award Agreements need not be identical for each Participant); (h) to adopt amendments to Award Agreements and to establish rules and regulations for the administration of the Plan and amendments thereto; provided that, except as set forth herein or in the Award Agreement, the Committee shall not amend an Award Agreement in a manner that materially and adversely affects the Participant without the consent of the Participant (for this purpose, actions that alter the timing of federal income taxation of a Participant will not be deemed material unless such action results in an income tax penalty on the Participant); (i) to construe and interpret the Plan and Award Agreements and correct defects, supply omissions or reconcile inconsistencies therein; (j) to exercise the powers and duties of the Administrator (as defined in Section 9.02) as provided in the Sub-Plan; and (k) to make all other decisions and determinations (including factual determinations) in its discretion as the Committee may deem necessary or advisable for the administration of the Plan. Decisions of the Committee with respect to the administration and interpretation of the Plan and any Award Agreement shall be final, conclusive, and binding upon all persons interested in the Plan, including Participants, Beneficiaries, transferees under Section 12.03 and other persons claiming rights from or through a Participant, and shareholders. In exercising its discretion hereunder, the Committee shall have due regard for the accounting, tax, and disclosure requirements on the Company and the Participants. The foregoing notwithstanding, the Board shall perform the functions of the Committee for purposes of granting Awards under the Plan to Non-Employee Directors and shall have all the powers of the Committee with respect thereto (authority with respect to other aspects of Non-Employee Director awards is not exclusive to the Board, however). 4.02Manner of Exercise of Committee Authority. (a) The Committee may act through subcommittees, including for purposes of perfecting exemptions under Rule 16b-3 (in which case the members of the Committee who qualify as Non-Employee Directors shall act as the Committee), or qualifying Awards under Code Section 162(m) as performance-based compensation (in which case the members of the Committee who qualify as outside Directors under Code Section 162(m) shall act as the Committee). The express grant of any specific power to the Committee, and the taking of any action by the Committee or a subcommittee, shall not be construed as limiting any power or authority of the Committee. (b) The Committee may delegate to officers or managers of the Company or any Affiliate, or committees thereof, the authority, subject to such terms as the Committee shall determine, to perform such functions, including administrative functions, as the Committee may determine, to the fullest extent permitted under Section 157 and other applicable provisions of the Delaware General Corporation Law and the Company’s bylaws. Such delegation may be revoked at any time. (c) Except to the extent prohibited by applicable law, the Committee may delegate to one or more individuals the day-to-day administration of the Plan and any of the functions assigned to the Committee under the Plan. Such delegation may be revoked at any time. | | | 2015 Proxy Statement • Exhibit 1 | | E-7 |
4.03Limitation of Liability. The Committee and each member thereof, and any person acting pursuant to authority delegated by the Committee, shall be entitled, in good faith, to rely or act upon any report or other information furnished by any executive officer, other officer or employee of the Company or an Affiliate, the Company’s independent auditors, consultants or any other agents assisting in the administration of the Plan. Members of the Committee, any person acting pursuant to authority delegated by the Committee, and any officer or employee of the Company or an Affiliate acting at the direction or on behalf of the Committee or a delegate shall not be personally liable for any action or determination taken or made in good faith with respect to the Plan, and shall, to the extent permitted by law, be fully indemnified and protected by the Company with respect to any such action or determination. V. Stock Subject to Plan 5.01Overall Number of Shares Available for Delivery. Subject to adjustment as provided in Section 12.05, the total number of shares of Stock reserved and available for delivery in connection with Awards under the Plan shall be (a) 783,251 shares as of March 15, 2015 plus (b) the number of shares subject to awards under the Plan and Preexisting Plans which become available in accordance with Section 5.02 after the Restatement Effective Date (c) an additional 3,250,000 shares. Of these shares, 100% may be delivered in connection with any Award, including “full-value Awards,” meaning Awards other than Options, SARs, or Awards for which the Participant pays the intrinsic value, either directly or in exchange for (or by foregoing) a right to receive a cash payment from the Company equal to the intrinsic value of the Award; provided, however, that any shares granted under Options or SARs shall be counted against the share limit on a one-for-one basis and any shares granted as full-value Awards shall be counted against the share limit as two and one-half (2.5) shares for every one (1) share subject to such Award. In addition 100% of the shares may be granted with respect to ISOs. The Company shall at all times during the term of the Plan retain as authorized and unissued Stock or treasury Stock at least the number of shares of Stock from time to time required under the provisions of the Plan, or otherwise assure itself of its ability to perform its obligations hereunder. 5.02Share Counting Rules. The Committee may adopt reasonable counting procedures to ensure appropriate counting, avoid double counting (as, for example, in the case of tandem or substitute awards) and make adjustments if the number of shares of Stock actually delivered differs from the number of shares previously counted in connection with an Award. Shares of Stock subject to an Award or an award under a Preexisting Plan that is canceled, expired, forfeited, settled in cash or otherwise terminated or settled without delivery of the full number of shares of Stock subject to such Award to the Participant will again be available for Awards. In addition, in the case of any Award granted in substitution for an award of a company or business acquired by the Company or an Affiliate, shares delivered or to be delivered in connection with such substitute Award shall not be counted against the number of shares reserved under the Plan, but shall be available under the Plan by virtue of the Company’s assumption of the plan or arrangement of the acquired company or business. This Section 5.02 shall apply to the number of shares reserved and available for ISOs only to the extent consistent with applicable regulations relating to ISOs under the Code. Because shares will count against the number reserved in Section 5.01 upon delivery (or later vesting), and subject to the share counting rules under this Section 5.02, the Committee may determine that Awards may be outstanding that relate to more shares than the aggregate remaining available under the Plan, so long as Awards will not result in delivery and vesting of shares in excess of the number then available under the Plan. If for any reason Awards require delivery, at the same time or as a result of the same event, of Shares in excess of the number then available, there shall be paid out with respect to each affected Award a number of Shares bearing the same ratio to the number of Shares to be delivered under such Award as the number of Shares available bears to the number of Shares required under all affected Awards. In the discretion of the Committee, either the undelivered balance of the Shares required under the affected Awards shall be forfeited or shall be delivered when the shareholders approve an increase in the number of Shares available, or the Fair Market Value of the undelivered Shares shall be paid to the affected Participants in cash. Notwithstanding the foregoing, the following shares of Stock will not be added back (or with respect to awards under a Preexisting Plan, will not be added) to the aggregate number of shares of Stock available for issuance: (i) any shares of Stock that were subject to an SAR that was settled in stock (or a stock appreciation right granted under a Preexisting Plan that was settled in stock), (ii) shares of Stock delivered to or withheld by the Company to pay the exercise price of an Option (or an option granted under a Preexisting Plan), (iii) shares of Stock delivered to or withheld by the Company to pay the withholding taxes related to an Option or SAR (or an option or stock appreciation right granted under a Preexisting Plan), or (iv) shares of Stock repurchased on the open market with cash proceeds from exercise of an Option (or option granted under a Preexisting Plan). Any shares of Stock that again become available for grant (or with respect to awards under a Preexisting Plan, are added to the aggregate number of shares of Stock available for issuance) pursuant to this Section 5.02 shall be added back as one (1) share of Stock if such shares were subject to Options or SARs granted under the Plan or options or stock appreciation rights granted under a Preexisting Plan, and as two and one half (2.5) shares of Stock if such shares were subject to full-value Awards granted under the Plan or subject to awards other than options or stock appreciation rights granted under the Preexisting Plans. 5.03Per Person Award Limits. Subject to Section 12.05, the aggregate number of shares of Stock subject to Awards that are intended to qualify as “performance-based compensation” under Code Section 162(m) granted during any calendar year to any one Eligible Person (taking into account the maximum number payable based on performance exceeding target objectives) shall not exceed 500,000. The maximum amount payable as a cash Award for any performance period to an Eligible Person that is intended to satisfy the requirements for “performance-based compensation” under Code Section 162(m) shall be $2.5 million per calendar year. In the case of an award with a multi-year performance period, the 500,000 share and $2.5 million limit shall apply to each calendar year (or portion thereof) in the performance period. This limitation on cash Awards is | | | E-8 | | 2015 Proxy Statement • Exhibit 1 |
separate from and not affected by the limitation on Awards denominated in shares of Stock. RSUs and other Awards denominated in Shares that are granted to Non-Employee Directors (exclusive of Non-Employee Director elective fee deferrals under Section 9.04 below) shall not exceed $150,000 in Fair Market Value (determined as of the date of grant) for any Non-Employee Director in any calendar year. 5.04Preexisting Plans. No grants of Awards will be made under any Preexisting Plan after the Effective Date. VI. Eligibility Awards may be granted under the Plan only to Eligible Persons. An employee on leave of absence, including for a disability who has not had a Separation from Service may be considered as still in the employ of the Company or an Affiliate for purposes of eligibility for participation in the Plan. VII. Specific Terms of Certain Stock-Based Awards 7.01 General. Awards may be granted on the terms and conditions set forth in this Article VII. In addition, the Committee may impose on any Award or the exercise thereof, at the date of grant or thereafter (subject to Section 12.07), such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee shall determine, including terms requiring forfeiture of Awards in the event of termination of employment or service by the Participant and terms permitting a Participant to make elections relating to his or her Award. The Committee shall retain full power and discretion with respect to any term or condition of an Award that is not mandatory under the Plan. The Committee shall require the payment of lawful consideration for an Award to the extent necessary to satisfy the requirements of the Delaware General Corporation Law, and may otherwise require payment of consideration for an Award except as limited by the Plan. 7.02Options. The Committee is authorized to grant Options to Eligible Persons on the following terms and conditions: (a) Exercise Price. The exercise price per share of Stock purchasable under an Option (including both ISOs and Nonstatutory Options) shall be determined by the Committee, provided that such exercise price shall be not less than the Fair Market Value of a share of Stock on the date of grant of such Option. (b) Option Term; Time and Method of Exercise. The Committee shall determine the term of each Option, which in no event shall exceed a period of ten years from the date of grant. The Committee shall determine the time or times at which or the circumstances under which an Option may be exercised in whole or in part (including based on achievement of performance goals and/or future service requirements), the methods by which such exercise price may be paid or deemed to be paid and the form of such payment, including, without limitation, cash, Stock (including Stock deliverable upon exercise), Restricted Stock or other property that does not have a deferral feature, other Awards or awards granted under other plans of the Company or any Affiliate, or other property (including through “net exercise” or “cashless exercise” arrangements, to the extent permitted by applicable law), and the methods by or forms in which Stock will be delivered or deemed to be delivered in satisfaction of Options. (c) Incentive Stock Options. (i) Only employees (as determined in accordance with Section 3401(c) of the Code) of the Company or any of its subsidiaries may be granted Incentive Stock Options. For this purpose, “subsidiary” means any company (other than the Company) in an unbroken chain beginning with the Company; provided each company in the unbroken chain (other than the Company) owns, at the time of determination, stock possessing 50% or more of the total combined voting power of all classes of stock in one or the other companies in such chain. (ii) If and to the extent that the aggregate Fair Market Value of the Stock (determined as of the date of grant) with respect to which a Participant’s Incentive Stock Options are exercisable for the first time during any calendar year exceeds $100,000, such Options shall be treated as Nonstatutory Options. For purposes of applying this limitation, Incentive Stock Options shall be taken into account in the order in which they were granted. (iii) Unless otherwise provided in the Award Agreement, upon the Participant’s termination of employment for any reason, any outstanding Incentive Stock Option granted to such Participant, whether vested or unvested, to the extent not theretofore exercised, shall terminate immediately. (iv) No Incentive Stock Option shall be granted more than 10 years after the earlier of the adoption of the Plan or shareholder approval of the Plan; provided that after the initial adoption of the Plan, such 10-year period shall be measured from the earlier of a subsequent amendment of the Plan requiring shareholder approval or shareholder approval of the Plan as so subsequently amended. (v) Award Agreements evidencing Incentive Stock Options shall contain such other terms and conditions as may be necessary to comply with the applicable provisions of Section 422 of the Code. 7.03Stock Appreciation Rights. The Committee is authorized to grant SARs to Eligible Persons. The Committee shall determine the term of each SAR; provided that in no event shall the term of an SAR exceed a period of ten years from the date of grant. The Committee shall determine at the date of grant or thereafter, the time or times at which and the circumstances under which an SAR may be exercised in whole or in part (including based on achievement of performance goals and/or future service requirements), the method of exercise, method of settlement, form of consideration payable in settlement (whether cash, Stock, or other property), and the method by or forms in which Stock will be delivered or deemed to be delivered to Participants, whether or not an SAR shall be free-standing or in tandem or combination with any other Award. | | | 2015 Proxy Statement • Exhibit 1 | | E-9 |
7.04Restricted Stock. The Committee is authorized to grant Restricted Stock to Eligible Persons on the following terms and conditions: (a) Grant and Restrictions. Restricted Stock shall be subject to such restrictions on transferability, risk of forfeiture and other restrictions, if any, as the Committee may impose, which restrictions may lapse separately or in combination at such times, under such circumstances (including based on achievement of performance goals and/or future service requirements), in such installments or otherwise and under such other circumstances as the Committee may determine at the date of grant or thereafter. A Participant shall pay such consideration for the Restricted Stock as the Committee may require; provided that the minimum consideration for shares of Restricted Stock (other than treasury shares) shall be the par value of such shares of Stock. Except to the extent restricted under the terms of the Plan and any Award Agreement relating to the Restricted Stock, a Participant granted Restricted Stock shall have all of the rights of a shareholder, including the right to vote the Restricted Stock and the right to receive dividends thereon (subject to subsection (d) below). (b) Forfeiture. Except as otherwise determined by the Committee or provided in the Award Agreement, upon termination of employment or service during the applicable restriction period, Restricted Stock that is at that time subject to restrictions shall be forfeited and reacquired by the Company; provided that the Committee may provide, by rule or regulation or in any Award Agreement, or may determine in any individual case, that restrictions or forfeiture conditions relating to Restricted Stock will lapse in whole or in part, including in the event of terminations resulting from specified causes. (c) Evidence of Stock Ownership. Restricted Stock granted under the Plan may be evidenced in such manner as the Committee shall determine, including appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company. If certificates representing Restricted Stock are registered in the name of the Participant, the Committee may require that such certificates bear an appropriate legend referring to the terms, conditions and restrictions applicable to such Restricted Stock, that the Company retain physical possession of the certificates, and that the Participant deliver a stock power to the Company, endorsed in blank, relating to the Restricted Stock. (d) Dividends and Splits. As a condition to the grant of an Award of Restricted Stock, the Committee may require that any dividends paid on a share of Restricted Stock shall be either (A) paid with respect to such Restricted Stock at the dividend payment date in cash, in kind, or in a number of shares of unrestricted Stock having a Fair Market Value equal to the amount of such dividends, or (B) automatically reinvested in additional Restricted Stock or held in kind, which shall be subject to the same terms as applied to the original Restricted Stock to which it relates, or (C) deferred as to payment, either as a cash deferral or with the amount or value thereof automatically deemed reinvested in additional Restricted Stock, other Awards or other investment vehicles, subject to such terms as the Committee shall determine or permit a Participant to elect. Unless otherwise determined by the Committee, cash, Stock or other property distributed in connection with a Stock split or Stock dividend, and other property distributed as a dividend, shall be subject to restrictions and a risk of forfeiture to the same extent as the Restricted Stock with respect to which such Stock or other property has been distributed. 7.05Restricted Stock Units. The Committee is authorized to grant RSUs to Eligible Persons, subject to the following terms and conditions except as provided in subsection (e) below: (a) Award and Restrictions. RSUs shall be subject to restrictions constituting a substantial risk of forfeiture, which conditions may be time-based or performance-based. Unless deferred pursuant to subsection 7.05(d) below, settlement of RSUs by delivery of cash, Stock, or other property, as specified in the Award Agreement, shall occur upon the lapse of the substantial risk of forfeiture, but no later than March 15 of the year following the year in which the substantial risk of forfeiture lapses. In addition, RSUs shall be subject to such restrictions on transferability and other restrictions, if any, as the Committee may impose, which restrictions may lapse at the same time as the substantial risk of forfeiture or at earlier or later specified times, separately or in combination, in installments or otherwise, and under such other circumstances as the Committee may determine at the date of grant or thereafter. (b) Forfeiture. Except as otherwise determined by the Committee, upon termination of employment or service during the applicable deferral period or portion thereof to which forfeiture conditions apply (as provided in the Award Agreement evidencing the RSUs), all RSUs that are at that time subject to such forfeiture conditions shall be forfeited, together with any Dividend Equivalents that have accrued thereon; unless the Committee provides, by rule or regulation or in any Award Agreement, or may determine in any individual case, that restrictions or forfeiture conditions relating to RSUs will lapse in whole or in part, including in the event of terminations of employment or service resulting from specified causes. (c) Dividend Equivalents. Unless otherwise determined by the Committee, Dividend Equivalents on RSUs shall be either (A) paid with respect to such RSUs at the dividend payment date in cash or in shares of unrestricted Stock having a Fair Market Value equal to the amount of such dividends, or (B) deferred with respect to such RSUs, either as a cash deferral or with the amount or value thereof automatically deemed reinvested in RSUs, other Awards or other investment vehicles having a Fair Market Value equal to the amount of such dividends, as the Committee shall determine or permit a Participant to elect, and shall be paid when the RSUs to which they relate are settled. Notwithstanding the foregoing, Dividend Equivalents (whether in the form of RSUs or otherwise) on RSUs that are Performance Awards shall be forfeited if the RSUs to which they relate are forfeited or otherwise not earned. Unless otherwise determined by the Committee, cash, Stock or other property distributed in connection with a Stock split or Stock dividend, and other property distributed as a dividend, shall be subject to restrictions and a risk of forfeiture to the same extent as the Restricted Stock with respect to which such Stock or other property has been distributed. | | | E-10 | | 2015 Proxy Statement • Exhibit 1 |
(d) Deferral of RSUs. The Committee may permit an employee or Non-Employee Director who is granted RSUs to elect to defer settlement of the RSUs in accordance with this Section 7.05(d), subject to such additional terms and conditions as the Committee shall designate in its discretion. (i)Deferral Elections. An election to defer RSUs shall be made on or before December 31 of the calendar year preceding the calendar year in which the RSUs are granted, on a form (which may be electronic) authorized by the Committee, and shall not carry over from year to year unless the Committee timely provides otherwise. The RSU deferral election shall include (x) the portion of the RSU Award to be deferred, (y) the date on which settlement of the deferred RSUs shall be made or commence (which may be a fixed date, the grantee’s attainment of a particular age, the grantee’s Separation from Service for any reason, or such other dates or circumstances as may be required or permitted by the Committee); and (z) whether settlement shall be made on a single date or in installments over a period and subject to such terms and conditions as may be set by the Committee at the time of the deferral election. If there is no election as to form of settlement, then settlement shall be made no later than 90 days following the date designated in (y), in a lump sum in cash, Stock, or such other medium as the Committee may designate. (ii)New Grantees. Notwithstanding subsection (i) above, the Committee may permit an RSU deferral election to be made by a grantee who never previously received an RSU, and who never previously had an Account and never previously had deferred compensation under any other plan required by Code Section 409A to be aggregated with his or her RSUs. Such an individual’s RSU deferral election shall be made within 30 days of the grant of the RSUs and shall be effective only with respect to a fractional portion of the RSUs determined by multiplying (separately with respect to each applicable vesting date), the grant date value of the number of RSUs vesting on such vesting date by a fraction, the numerator of which is the number of calendar days between the date the deferral election is received by the Company and the date such RSUs vest, and the denominator of which is the total number of calendar days between the grant date and the vesting date. (iii)Dividend Equivalents on Deferred RSUs.During the deferral period, Dividend Equivalents shall be credited to deferred RSUs pursuant to subsection (c) subject to such terms and conditions as the Committee shall specify. (iv)Claims Procedure.To the extent RSUs are deferred to the termination of covered employment or beyond, they shall be subject to the claims procedure under Section 9.12, substituting “grantee” for “Deferred Cash Participant” and “settlement of deferred RSUs” for “distribution from an Account”. (e) Notwithstanding subsections (a) through (d) above, those subsections shall not apply to fully vested RSUs credited to an Account pursuant to the Deferred Cash Sub-Plan, which shall be subject to the terms and conditions set forth in Article IX. 7.06Bonus Stock and Awards in Lieu of Obligations. The Committee is authorized to grant Stock as a bonus, or to grant Stock or other Awards in lieu of obligations of the Company or an Affiliate to pay cash or deliver other property under the Plan or under other plans or compensatory arrangements, subject to such terms as shall be determined by the Committee. 7.07Dividend Equivalents. The Committee is authorized to grant Dividend Equivalents to a Participant, entitling the Participant to receive cash, Stock, other Awards, or other property equivalent to all or a portion of the dividends paid with respect to a specified number of shares of Stock. Dividend Equivalents may be awarded on a freestanding basis or in connection with another Award. The Committee may provide that Dividend Equivalents shall be paid or distributed when accrued or shall be deemed to have been reinvested in additional Stock, Awards, or other investment vehicles, and subject to restrictions on transferability, risks of forfeiture and such other terms as the Committee may specify with due regard to the applicability of Code Section 409A. Notwithstanding the foregoing, (a) Dividend Equivalents shall not be provided with respect to Options or Stock Appreciation Rights, and (b) any Dividend Equivalents associated with a Performance Award shall be forfeited to the extent the Performance Award is forfeited or otherwise not earned. 7.08Other Awards. The Committee is authorized, subject to limitations under applicable law, to grant to Eligible Persons other Awards that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, Stock or factors that may influence the value of Stock, including, without limitation, convertible or exchangeable debt securities, other rights convertible or exchangeable into Stock, purchase rights for Stock, Awards with value and payment contingent upon performance of the Company or business units thereof or any other factors designated by the Committee, and Awards valued by reference to the book value of Stock or the value of securities of or the performance of specified subsidiaries or affiliates or other business units. The Committee shall determine the terms and conditions of such Awards, which may include the right to elective deferral thereof, subject to such terms and conditions as the Committee may specify in its discretion. Stock delivered pursuant to an Award in the nature of a purchase right granted under this Section 7.08 shall be purchased for such consideration, paid for at such times, by such methods, and in such forms, including, without limitation, cash, Stock, other Awards, or other property, as the Committee shall determine. Cash awards, as an element of or supplement to any other Award under the Plan, may also be granted pursuant to this Section 7.08. VIII. Performance Awards, Including Annual Incentive Awards 8.01Performance Awards Generally. The Committee is authorized to grant Performance Awards to Eligible Persons, denominated in cash or in Stock or other property, in accordance with this Article VIII. Performance Awards may be denominated as a cash amount, number of shares of Stock, or specified number of other Awards or property (or a combination) which may be earned upon achievement or satisfaction of performance conditions specified by the Committee over a performance period established by the Committee. If the performance period is one year, then the Performance Award shall be deemed an Annual Incentive Award. In addition, the Committee may specify that any other Award shall constitute a Performance Award by conditioning the right of a Participant to exercise the Award or have it settled, and the timing thereof, upon achievement or | | | 2015 Proxy Statement • Exhibit 1 | | E-11 |
satisfaction of such performance conditions as may be specified by the Committee. The Committee may use such business criteria and other measures of performance as it may deem appropriate in establishing any performance conditions. After the end of each performance period, the Committee shall determine the amount, if any, of the Performance Award for that performance period payable to each Participant. The Committee may, in its discretion, determine that the amount payable to any Participant as a final Performance Award shall be reduced from the amount of his or her potential Performance Award, including a determination to make no final Award whatsoever, and may exercise its discretion to increase the amounts payable under any Performance Award, except as limited under Section 8.02 (relating to Performance Awards intended to qualify as “performance-based compensation” under Code Section 162(m)). The Committee shall specify the circumstances in which such Performance Awards shall be paid or forfeited in the event of termination of employment or service by the Participant or other event (including a Change in Control) prior to the end of a performance period or otherwise prior to settlement of such Performance Awards. Settlement of Performance Awards shall be in cash, Stock, other Awards or other property, at the discretion of the Committee. 8.02Performance Awards and Code Section 162(m). If the Committee determines in its discretion that a Performance Award (including an Annual Incentive Award) should qualify as “performance-based compensation” for purposes of Code Section 162(m), the grant, exercise and/or settlement of such Performance Award shall be contingent upon achievement of one or more preestablished performance goals based upon the criteria set out in subsection (b) and shall be subject to other terms set forth in this Section 8.02. The Committee shall not be required to structure an Award as “performance-based compensation” even if compliance with the requirements of Code Section 162(m) is feasible and failure to meet the requirements of Code Section 162(m) causes the loss of a tax deduction otherwise available to the Company. Unless the Award Agreement otherwise provides, if for any reason an Award intended to qualify as “performance-based compensation” is contingent on performance goals that have not been approved or re-approved by shareholders as required by Section 162(m) the Award shall be contingent on shareholder approval of the applicable performance goal. (a) Performance Goal Generally. The performance goal for Performance Awards intended to qualify as “performance-based compensation” for purposes of Code Section 162(m) shall consist of one or more of the business criteria listed in Section 8.02(b)(i), including or excluding the adjustments described in Section 8.02(b)(ii), and a targeted level or levels of performance with respect to each of such criteria, as specified by the Committee consistent with this Section 8.02. The Performance Award may also have threshold levels of performance (below which no Performance Award shall be paid) and maximum levels of Performance Award, regardless of the degree to which the actual performance exceeds the target level. The performance goal shall be objective. Any performance goal may be established for one performance period or averaged over time, as the Committee may deem appropriate. Performance may, but need not be, based on a change or an increase or positive result. Performance goals may differ for Performance Awards granted to any one Participant or to different Participants. The targeted level or levels of performance with respect to such business criteria may be established at such levels and in such terms as the Committee may determine, in its discretion, including in absolute terms, as a goal relative to performance in prior periods, or as a goal compared to the performance of one or more comparable companies or an index covering multiple companies, or any combination thereof. (b) Business Criteria; Inclusion and Exclusion of Certain Items. (i) Performance goals shall be based on one or more of the following business criteria for the Company, on a consolidated basis, pre-tax or after-tax, and/or for specified subsidiaries or affiliates, other business units, or lines of business, or for any individual shall be used by the Committee in establishing performance goals for such Performance Awards: (1) insurance premiums written, insurance premiums earned, contract deposits, contract charges earned, or policies or contracts in force; (2) increase in gross revenues; (3) income before realized investment gains and losses (operating income), before or after taxes, and income before or after interest, depreciation, amortization, or extraordinary, or, for accounting periods beginning after December 15, 2015, unusual or infrequently occurring or special items; (4) income before realized investment gains and losses (operating income) per common share (basic or diluted), and income before realized investment gains and losses (operating income) from continuing operations per common share (basic or diluted); (5) return on equity (including operating income return on average equity), return on assets (gross or net), return on investment, or return on capital; (6) market capitalization; (7) cash flow, free cash flow, cash flow return on investment (discounted or otherwise), net cash provided by operations, or cash flow in excess of cost of capital; (8) book value of Stock, including or excluding the effect of unrealized investment gains and losses (FAS 115 or any successor thereto); (9) net interest margin; (10) annuity accumulated value or annuity accumulated value persistency; (11) net investment income and realized investment gains or losses (including on a per share basis); (12) economic value created; (13) operating margin or profit margin; (14) expense ratios, claims ratios, or loss ratios; (15) stock price or total shareholder return; (16) shareholder equity or changes in shareholder equity; (17) dividends, including as a percentage of net income; (18) strategic business criteria, consisting of one or more objectives based on meeting specified market penetration or geographic business expansion goals, cost targets, market share, premium levels, surplus levels, customer satisfaction, employee satisfaction, management of employment practices and employee benefits, sales units, agent growth and goals relating to acquisitions, divestitures or joint ventures; (19) satisfaction of hiring goals; (20) financial or credit ratings; (21) results of objective customer satisfaction surveys; (22) satisfaction of diversity goals; (23) enterprise risk management; or (24) succession planning. (ii) The Committee may provide in any Performance Award that any evaluation of performance may include or exclude any of the following items: (1) unusually large catastrophe losses which aggregate (net of reinsurance) in excess of “planned” catastrophe losses; (2) asset write-downs; (3) litigation or claim judgments or settlements; (4) the effect of changes in tax laws, accounting principles, regulations, or other laws or regulations affecting reported results; (5) any reorganization and restructuring programs; (6) acquisitions or divestitures; (7) extraordinary, or, for accounting periods beginning after December 15, 2015, unusual or infrequently occurring items identified in the Company’s audited financial statements, including footnotes, (8) annual incentive payments, other bonuses or benefit plan charges; or (9) capital charges. | | | E-12 | | 2015 Proxy Statement • Exhibit 1 |
(c) Performance Period; Timing for Establishing Performance Goals; Per-Person Limit. Achievement of performance goals in respect of a Performance Award intended to qualify for the “performance-based compensation” exception under Code Section 162(m) shall be measured over a performance period specified by the Committee. A performance goal shall be established not later than the earlier of (A) 90 days after the beginning of any performance period applicable to such Performance Award or (B) the time 25% of such performance period has elapsed. The level of attainment of performance goals shall be “substantially uncertain” at the time such goals are established. In all cases, the maximum Performance Award of any Participant intended to qualify for the “performance-based compensation” exception under Code Section 162(m) shall be subject to the per-person limitation set forth in Section 5.03. (d) Performance Award Pool. The Committee may establish a Performance Award pool, which shall be an unfunded pool, for purposes of measuring performance in connection with Performance Awards. The amount of such Performance Award pool shall be based upon the achievement of one or more performance goals based on one or more of the business criteria set forth in Section 8.02(b) during the performance period, as specified by the Committee. The Committee may specify the amount of the Performance Award pool as a percentage of any of such business criteria, a percentage thereof in excess of a threshold amount, or as another amount which need not bear a strictly mathematical relationship to such business criteria. The maximum amount payable to any Participant shall be a stated percentage of the bonus pool; provided the sum of such percentages shall not exceed 100%. 8.03Settlement of Performance Awards. Prior to settlement of a Performance Award (including an Annual Incentive Award) intended to qualify as “performance-based compensation” for purposes of Code Section 162(m), the Committee shall certify the level of attainment of performance goals and the satisfaction of other material terms of the Award upon which settlement of the Award was conditioned. The Committee may not exercise discretion to increase the amount payable to a covered employee (as defined in Code Section 162(m)(3)) in respect of a Performance Award intended to qualify as “performance-based compensation” for purposes of Code Section 162(m). Any settlement which changes the form of payment from that originally specified shall be implemented in a manner such that the Performance Award and other related Awards intended to qualify for the “performance-based compensation” exception under Code Section 162(m) do not, solely for that reason, fail to qualify as “performance-based compensation” for purposes of Code Section 162(m). 8.04Written Determinations. Determinations by the Committee as to the establishment of performance goals, the amount potentially payable in respect of Performance Awards including Annual Incentive Awards, the level of actual achievement of the specified performance goals, and the amount of any final Performance Award or Annual Incentive Award shall be recorded in writing in the case of Performance Awards intended to qualify as “performance-based compensation” under Code Section 162(m). IX. Deferred Cash Sub-Plan 9.01Deferred Cash Sub-Plan. This Article IX providing for deferrals of certain amounts otherwise payable in cash shall constitute the Deferred Cash Sub-Plan (“Sub Plan”) within the Plan. To the extent the Sub-Plan results in deferral of income by employees to the termination of covered employment or beyond, the Sub-Plan is maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees. Except as otherwise provided, the terms and conditions of this Sub-Plan apply solely to the Sub-Plan. 9.02Sub-Plan Definitions. For purposes of this Sub-Plan, (a) “Administrator” means the persons designated by the Committee to administer the Accounts under this Sub-Plan, or, if no such persons have been designated, the Committee. The Administrator shall have the powers and duties of the Committee and such additional powers and duties as are set forth in Section 9.03. (b) “Deferred Cash Participant” means a Participant who is a current or former LTIP Employee or Non-Employee Director with an Account under the Sub-Plan. (c) “Deferred Stock Equivalent Account” or “Account” means the bookkeeping account established by the Company in respect to each Deferred Cash Participant, to which shall be credited the amounts deferred by such Participant and, in the case of a Non-Employee Director, Company matching deferrals, as provided in the Sub-Plan and converted into fully vested RSUs pursuant to the Sub-Plan. (d) “Distribution Date” means, with respect to any Subaccount, the date selected by the Deferred Cash Participant for distribution with respect to such Subaccount on an approved election form. The date selected may be a fixed date, the Deferred Cash Participant’s attainment of a particular age, the Deferred Cash Participant’s Separation from Service for any reason, or such other dates or circumstances as may be required or permitted by the Administrator with respect to a given deferral election. (e) “LTIP Employee” means an Employee of the Company or an Affiliate eligible for Long-Term Bonus Compensation. (f) “Long-Term Bonus Compensation” means the bonus payable under the Company’s long term incentive plan, as such plan shall exist from time to time. (g) “Payment Date” means the date on which the Company would have paid an amount of compensation to the Deferred Cash Participant but for the such Participant’s deferral election with respect thereto. | | | 2015 Proxy Statement • Exhibit 1 | | E-13 |
(h) “Subaccount” means each subaccount of a Deferred Cash Participant in the Employees Plan or the Directors Plan as of December 31, 2009, plus, for periods after December 31, 2009, each subaccount of a Deferred Cash Participant’s Deferred Stock Equivalent Account maintained by the Administrator, to which is credited (i) in the case of a Director, the fees deferred under the Plan for each separate calendar year and Company matching deferrals attributable to such fees, and (ii) in the case of an LTIP Employee, the Long-Term Bonus Compensation deferred with respect to each election period. Subaccounts may be commingled on the Administrator’s records to the extent they are subject to identical distribution provisions. (i) “Unforeseeable Emergency” is a severe financial hardship to the Deferred Cash Participant resulting from a sudden and unexpected illness or accident of the Deferred Cash Participant, the Deferred Cash Participant’s spouse, Beneficiary, or dependent (as defined in Code Section 152(a), without regard to subsections (b)(1), (b)(2) and (d)(1)(B)), the loss of the Deferred Cash Participant’s property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Deferred Cash Participant. 9.03Sub-Plan Administration. (a) The Sub-Plan shall be administered by the Administrator. The action of a majority of the committee shall be deemed to be the action of the Administrator; provided that no member of the committee shall vote on any discretionary action with respect to such member’s own Deferred Stock Equivalent Account or status or action as a Deferred Cash Participant. In addition to the powers and subject to the limitations contained elsewhere in the Plan and the Sub-Plan, the Administrator shall have the sole and complete authority: (a) to impose such limitations, restrictions and conditions as the Administrator shall deem appropriate, (b) to interpret the Sub-Plan and to adopt, amend and rescind administrative guidelines, forms, and other rules and regulations relating to the Sub-Plan, (c) to correct defects in the Sub-Plan, supply omissions and correct administrative errors, and (d) to make all other determinations and to take all other actions necessary or advisable for the implementation and administration of the Sub-Plan. Notwithstanding the foregoing, the Administrator shall have no authority, discretion or power to alter or amend any terms or conditions specified in the Sub-Plan. The Administrator’s determinations on matters within the Administrator’s authority shall be conclusive and binding upon the Company, the Deferred Cash Participants, Beneficiaries and all other persons. 9.04Deferral Elections. (a) LTIP Employees. An LTIP Employee may elect to defer receipt of all or a specified portion of any Long-Term Bonus Compensation otherwise payable in cash. (b) Non-Employee Directors. A Non-Employee Director may elect to defer receipt of all or a specified portion of the Non-Employee Director’s cash annual retainer, cash annual committee chair’s fee, cash annual Chairman of the Board’s fee, cash Board meeting fees, cash Committee meeting fees, or other Director compensation otherwise payable in cash. (c) Deferral Election. Deferral elections must be timely filed with the Company on forms (which may be electronic) approved by the Administrator. An LTIP Employee’s election shall include: the percentage or dollar amount of each applicable Long-Term Bonus Compensation payment to be deferred. A Non-Employee Director’s election shall include the percentage or dollar amount of cash fees to be deferred (which may be designated separately with respect to each type of cash fees). Each Deferred Cash Participant shall designate (i) the Distribution Date for such deferred payments and (ii) the form of distribution thereof. 9.05Timing of Deferral Elections. (a) Initial Elections. An election to defer Long-Term Bonus Compensation payments shall be made on or before December 31 of the calendar year preceding the first calendar year in the performance period during which the Long-Term Bonus Compensation is earned. An election to defer cash Non-Employee Directors fees must be filed no later than December 31 preceding the calendar year in which the fees to be deferred are to be earned. Unless otherwise provided by the Administrator, deferral elections do not carry over from year to year. A new deferral election must be made with respect to amounts earned in each calendar year (or where longer than one year, each performance period). (b) New LTIP Employees. Notwithstanding Section 9.05(a), with respect to an individual who first becomes an LTIP Employee during a calendar year, the LTIP Employee’s election must be made and filed within thirty (30) days of the date such individual first becomes an LTIP Employee; provided, however, that if the LTIP Employee has or ever had a Deferred Stock Equivalent Account under the Plan or has or ever had deferred compensation any other plan required by Code Section 409A to be aggregated with his or her Deferred Stock Equivalent Account, the preceding portion of this sentence shall not apply and the LTIP Employee may not make a deferral election with respect to Long-Term Bonus Compensation until the next calendar year, unless: (i) he or she was not eligible to make a deferral election under this Sub-Plan (or under any other plan required by Code Section 409A to be aggregated with this Sub-Plan) at any time during the twenty-four (24)-month period ending on the date he or she again becomes an LTIP Employee, or (ii) he or she was paid all nonqualified deferred compensation amounts previously due under the Sub-Plan (or under any other plan required by Code Section 409A to be aggregated with this Sub-Plan) and, on and before the date of the last such payment, was not eligible to continue to participate in this Sub-Plan (and any other plan required by Code Section 409A to be aggregated with this Sub-Plan) for periods after such payment. | | | E-14 | | 2015 Proxy Statement • Exhibit 1 |
A deferral election under this Section 9.05(b) will be effective only with respect to Long-Term Bonus Compensation paid for services performed after such election. For this purpose, the amount of the bonus payable to the LTIP Employee for services rendered subsequent to the LTIP Employee’s election will be determined by multiplying the bonus by a fraction, the numerator of which is the number of calendar days remaining in the performance period after the election and the denominator of which is the total number of calendar days in such performance period. For this purpose, the date the executed election form (which may be electronic) is received by the Company. (c) New Non-Employee Directors. Notwithstanding Section 9.05(a), with respect to the calendar year in which an individual first becomes a Non-Employee Director (either by election or appointment), the Non-Employee Director’s election must be made and filed: (i) with respect to the annual Director’s fee, the annual committee chair’s fee, the annual Chairman of the Board’s fee, or other fees paid on an annual basis, prior to the date the individual becomes a Director; and (ii) with respect to the Non-Employee Director’s meeting fees, within thirty (30) days after the date the individual becomes a Non-Employee Director (either by election or appointment), but only with respect to fees for meetings which occur after the date of such deferral election. An individual who was a Non-Employee Director, ceased being a Director, and again becomes a Non-Employee Director (either by election or appointment), shall be considered a new Non-Employee Director only if: (iii) he or she was not eligible to make deferral elections under this Sub-Plan (or any other plan or arrangement required by Code Section 409A to be aggregated with this Sub-Plan) at any time during the twenty-four (24)-month period ending on the date he or she again becomes a Non-Employee Director, or (iv) he or she was paid all nonqualified deferred compensation amounts previously due under the Sub-Plan (or under any other plan or arrangement required by Code Section 409A to be aggregated with the Sub-Plan) and, on and before the date of the last such payment, was not eligible to continue to participate in the Sub-Plan (or any other plan or arrangement required by Code Section 409A to be aggregated with the Sub-Plan) for periods after such payment. 9.06Accounts. (a)Deferred Stock Equivalent Accounts. A Deferred Stock Equivalent Account and related Subaccounts shall be established for each Deferred Cash Participant. Amounts deferred by a Deferred Cash Participant shall be converted into fully vested RSUs as of the applicable Payment Date in a number determined by dividing the amount deferred (net of any applicable withholding) by the Fair Market Value of a share of Stock on the applicable Payment Date (rounded to two decimal places), and shall be credited to the Deferred Stock Equivalent Account as of such date. The Deferred Stock Equivalent Account shall be credited with Dividend Equivalents as provided in Section 9.06(b) and shall be reduced by the amount of any distributions as of the date of distribution. (b) Dividend Equivalents. A Deferred Cash Participant’s Deferred Stock Equivalent Account shall be credited with Dividend Equivalents on the dividend distribution date with respect to each fully vested RSU credited to such Account on the applicable record date. Notwithstanding the foregoing, no Dividend Equivalents shall be credited to the Account of a Non-Employee Director Participant whose Separation from Service occurs prior to the applicable record date. (c) Fractional Shares. Fractional shares shall be credited to a Deferred Cash Participant’s Deferred Stock Equivalent Account cumulatively, but distribution of the Deferred Stock Equivalent Account shall be made in accordance with Section 9.08. 9.07Distributions. (a) Timing of Payment. Each Subaccount in a Deferred Cash Participant’s Deferred Stock Equivalent Account shall be distributed or shall commence to be distributed promptly upon and in no event more than ninety (90) days following the Distribution Date; provided that if the applicable Distribution Date is the Deferred Cash Participant’s Separation from Service and as of the date of such Separation from Service the Deferred Cash Participant is a Specified Employee, the Subaccount shall be distributed or shall commence to be distributed on the Delayed Distribution Date. If the Deferred Cash Participant did not make an affirmative election as to the Distribution Date of any Subaccount, he or she shall be deemed to have elected the Deferred Cash Participant’s Separation from Service as the Distribution Date. (b) Form of Payment. Each Subaccount in a Deferred Cash Participant’s Deferred Stock Equivalent Account shall be distributed in the form selected by the Deferred Cash Participant within the time period for making an initial deferral election with respect to such Subaccount, which shall be one of the following, subject to the remaining provisions of this Article IX. (i) a single lump sum; or (ii) installments over a period designated by the Deferred Cash Participant (not to exceed five (5) years). Except as otherwise provided in the Deferred Cash Participant’s deferral form, the first such installment shall be based on the number of fully vested RSUs credited to the Account on the first Distribution Date, divided by the number of installments. Subsequent installment payments shall be based on the same number of RSUs as the first installment (subject to adjustments as provided in Section 12.05), plus Dividend Equivalents | | | 2015 Proxy Statement • Exhibit 1 | | E-15 |
accumulated on such number of RSUs since payment of the prior installment. The last installment shall include all amounts not previously distributed. For purposes of this Sub-Plan and Code Section 409A, the entitlement to installment payments is treated as the entitlement to a single payment. If the Deferred Cash Participant does not make an affirmative election as to the form of election of any Subaccount, he or she shall be deemed to have elected distribution of such Subaccount in a lump sum. Notwithstanding the foregoing, for avoidance of doubt, Accounts are subject to the provisions of Article XI (regarding Change in Control). 9.08Medium of Payment. (a)Deferred Cash Participant Election. Distributions from a Deferred Cash Participant’s Deferred Stock Equivalent Account shall be made in shares of Stock (one share of Stock for each RSU subject to such distribution), or in cash in an amount equal to the number of RSUs subject to such distribution multiplied by the Fair Market Value of a share of Stock, as of the date of the distribution, as the Deferred Cash Participant may choose at such time and in such manner as may be permitted by the Administrator. (b) Cash is Default Election. If the Deferred Cash Participant does not make an affirmative election as to the medium of payment, the Deferred Cash Participant shall be deemed to have elected a distribution in cash. 9.09No Subsequent Elections as to Time and Form of Distribution. (a) Pre-2009 Subaccounts. Notwithstanding anything herein to the contrary, the Distribution Date and form of payment with respect to any Subaccount in existence as of January 1, 2009 shall be in accordance with the last election made or deemed made by the Deferred Cash Participant on or before December 31, 2008 with respect to such Subaccount. (b) No Subsequent Deferral Elections. After December 31, 2008, no Deferred Cash Participant may change his or her Distribution Date or form of payment with respect to any Subaccount at any time after he or she makes the initial election. 9.10 Payment Upon the Deferred Cash Participant’s Death. In the event a Deferred Cash Participant dies before his or her entire Deferred Stock Equivalent Account is distributed, all undistributed amounts remaining in such Account shall be distributed to the Deferred Cash Participant’s Beneficiary promptly and in no event more than ninety (90) days after the Deferred Cash Participant’s death in a lump sum cash payment or other manner permitted by the Administrator. 9.11Unforeseeable Emergencies. (a) Application for Distribution. In the event of an Unforeseeable Emergency, to the extent the Administrator determines that such action is necessary to alleviate the Unforeseeable Emergency, the Administrator may pay all or a part of a Deferred Cash Participant’s Account to the Deferred Cash Participant in cash, plus amounts necessary to pay federal, state or local income taxes and penalties reasonably anticipated to result from the distribution, after taking into account the extent to which such need is or may be relieved through reimbursement or compensation by insurance, by liquidation of the Deferred Cash Participant’s assets (to the extent the liquidation of such assets would not itself cause severe financial hardship), or by cessation of deferrals under the Sub-Plan or another plan required by Code Section 409A to be aggregated with the Sub-Plan. Such action shall be taken only if the Deferred Cash Participant (or the Deferred Cash Participant’s legal representative or successor) submits a signed application describing fully the circumstances which are deemed to justify the payment, together with an estimate of the amounts necessary to alleviate the Unforeseeable Emergency (together with taxes on the distribution), which application shall be approved or denied by the Administrator after making such inquiries as the Administrator deems necessary or appropriate. (b) Application for Cessation of Deferrals. In the event a Deferred Cash Participant requests a distribution due to an Unforeseeable Emergency, or the Deferred Cash Participant requests a cancellation of deferrals under the Plan in order to alleviate his or her Unforeseeable Emergency, and the Administrator determines that the Deferred Cash Participant’s Unforeseeable Emergency may be relieved through the cessation of some or all the Deferred Cash Participant’s deferral elections under the Plan for such calendar year, the Administrator shall permit cancellation of such deferral elections as appropriate to alleviate the Unforeseeable Emergency, shall be cancelled as soon as administratively practicable following such determination by the Administrator. 9.12Claims Procedures. Any Deferred Cash Participant or Beneficiary of a Deferred Cash Participant (“Applicant”) who believes he or she is entitled to a distribution from an Account or who desires to clarify his or her rights under this Sub-Plan may file a written claim for benefits with the Administrator. If a claim for benefits is denied, the Administrator shall furnish to the Applicant within 90 days after its receipt of such claim (or within 180 days after such receipt if special circumstances require an extension of time), a written notice which: (a) specifies the reasons for the denial, (b) refers to the pertinent provisions of the Sub-Plan on which the denial is based, (c) describes any additional material or information necessary for the perfection of the claim and explains why such material or information is necessary, and (d) explains the claim review procedures. Upon the written request of the Applicant submitted within 60 days after receipt of such written notice, the Administrator shall afford the Applicant a full and fair review of the decision denying the claim and, if so requested: (1) permit the Applicant to review any documents which are pertinent to the claim, (2) permit the Applicant to submit to the Administrator issues and comments in writing and (3) afford the Applicant an opportunity to meet with the Administrator as a part of the review procedure. Within 60 days after the Administrator’s receipt of a request for review (or within 120 days after such receipt if special circumstances, such as the need to hold a meeting, require an extension of time) the Administrator shall notify the Applicant in writing of the Administrator’s decision on appeal and the reasons for such decision, and shall refer the Applicant to the provisions of the Plan which form the basis for such decision. | | | E-16 | | 2015 Proxy Statement • Exhibit 1 |
9.13Deferred Compensation Plan. The Sub-Plan is a non-qualified plan of deferred compensation and Accounts represent 409A Compensation. No benefits under the Sub-Plan shall be subject to “grandfathering” treatment under Code Section 409A, even if such benefits were deferred and vested under the Employees’ Plan or the Directors’ Plan before January 1, 2005. The Company intends that amounts deferred under the Sub-Plan shall either be exempt from or comply with the restrictions of Section 409A of the Code, and the Plan (including the Sub-Plan) shall be administered, interpreted and construed at all times consistent with that intent. X. Certain Provisions Applicable to Awards 10.01Additional and Substitute Awards. Awards granted under the Plan may, in the discretion of the Committee, be granted either in addition to, or in substitution or exchange for, any other Award or any award granted under another plan of the Company, any Affiliate, or any business entity acquired or to be acquired by the Company or an Affiliate, or any other right of a Deferred Cash Participant to receive payment from the Company or any Affiliate. Awards granted in addition to other Awards or awards may be granted either as of the same time as or a different time from the grant of such other Awards or awards. 10.02Interest. Awards may include, without limitation, provisions for the payment or crediting of reasonable interest on installment or deferred payments or the granting or crediting of Dividend Equivalents or other amounts in respect of installment or deferred payments denominated in Stock. 10.03Exemptions from Section 16(b) Liability. With respect to a Participant who is then subject to the reporting requirements of Section 16(a) of the Exchange Act in respect of the Company, the Committee shall grant Awards under the Plan and otherwise administer the Plan in a manner so that the grant and exercise of each Award with respect to such a Participant may qualify for exemption from liability under Rule 16b-3 or otherwise not be subject to liability under Section 16(b), except that this provision shall not limit sales by such a Participant, and shall not limit a Participant’s ability to engage in other non-exempt transactions under the Plan. The Committee may authorize the Company to repurchase any Award or shares of Stock deliverable or delivered in connection with any Award in order to avoid a Participant who is subject to Section 16 of the Exchange Act incurring liability under Section 16(b). Unless otherwise specified by the Participant, equity securities or derivative securities acquired under the Plan which are disposed of by a Participant shall be deemed to be disposed of in the order acquired by the Participant. XI.Change in Control 11.01Committee Discretion for Awards that are not 409A Compensation. Unless otherwise provided in the Award Agreement, in the event there is any Change in Control, the Committee may, in its discretion, with respect to any Award or agreement that is not 409A Compensation, without the consent of the Participant, provide for any or all of the following to occur: (a) the assumption or substitution of, or adjustment to, such outstanding Award or agreement; (b) acceleration of the vesting of such Award and termination of any restrictions or performance conditions on such Award; or (c) the cancellation of such Award or agreement for a payment to the Participant in cash or other property. The Committee may provide for the preceding to occur immediately upon the Change in Control or upon the termination of employment or service of the Participant initiated by the Company or an Affiliate other than for Cause (as defined below) within a fixed time (not to exceed two years) following the Change in Control. In addition, with respect to any unexercised Option or SAR, the Committee may extend the period for exercising the vested portion thereof for the greater of three (3) months following such a termination of employment or service within such fixed time (but only during the stated term of the Option or SAR). 11.02Effect of Change in Control on 409A Compensation. (a)409A Change in Control. (i)Awards that are 409A Compensation.Unless otherwise provided at the time of grant of an Award providing for 409A Compensation, in the event there is a 409A Change in Control, and within the one-year period thereafter, an affected Participant has a termination of employment or service initiated by the Company or an Affiliate other than for Cause as defined below, then such Participant’s Award shall become fully vested, any restrictions or performance conditions on such Award shall thereupon lapse; and the Award shall be settled as promptly as practicable but no more than 90 days following such termination, subject to Section 12.12(b). (ii)Accounts.Unless otherwise provided at the time an election is made to defer cash compensation to an Account, if there is a 409A Change in Control, each affected Sub-Plan Participant shall receive, within ten (10) days of the date of such Change in Control, a lump sum distribution of his or her Deferred Stock Equivalent Account in cash. (b)Non-409A Change in Control.The occurrence of a Change in Control that is not a 409A Change in Control with respect to an affected Participant shall have no effectper se on any 409A Compensation of that Participant. | | | 2015 Proxy Statement • Exhibit 1 | | E-17 |
11.03“Cause”. For purposes of this Article XI, the term “Cause” shall mean, unless otherwise defined in an Award agreement or employment or Change-of-Control agreement between the Company or a subsidiary and the Participant then in effect: (a) A Participant’s conviction of any felony under federal law or the law of the state in which the act occurred; (b) Dishonesty by the Participant in the course of fulfilling his or her employment duties or service duties to the Company or a subsidiary; or (c) Willful and deliberate failure on the part of the Participant to perform his or her employment or service duties to the Company or a subsidiary in any material respect, after reasonable notice of the non-performance and opportunity to correct it. The existence of “Cause” shall be determined by the Committee or its delegate in its sole discretion. XII.General Provisions 12.01Additional Award Forfeiture Provisions. The Committee may condition a Participant’s right to receive a grant of an Award to be eligible to make a deferral under the Sub-Plan, to exercise an Award, to retain Stock, cash or other property acquired in connection with an Award or an Account, or to retain the profit or gain realized by a Participant in connection with an Award, including cash or other property received upon sale of Stock acquired in connection with an Award, upon compliance by the Participant with specified conditions relating to non-competition, confidentiality of information relating to the Company, non-solicitation of customers, suppliers, and employees of the Company, cooperation in litigation, non-disparagement of the Company and its officers, Directors and affiliates, and other requirements applicable to the Participant, as determined by the Committee, including during specified periods following termination of employment or service to the Company. 12.02Compliance with Legal and Other Requirements. The Company may, to the extent deemed necessary or advisable by the Committee, postpone the issuance or delivery of Stock or payment of other benefits under any Award until completion of such registration or qualification of such Stock or other required action under any federal or state law, rule or regulation, listing or other required action with respect to any stock exchange or automated quotation system upon which the Stock or other securities of the Company are listed or quoted, or compliance with any other obligation of the Company, as the Committee may consider appropriate, and may require any Participant to make such representations, furnish such information and comply with or be subject to such other conditions as it may consider appropriate in connection with the issuance or delivery of Stock or payment of other benefits in compliance with applicable laws, rules, and regulations, listing requirements, or other obligations. 12.03Limits on Transferability; Beneficiaries. The right of a Participant and his or her Beneficiary to receive payments or distributions hereunder, and Awards and other rights and interests of Participants and Beneficiaries shall not be subject in any manner to anticipation, alienation, sale, transfer (other than by will or the laws of descent and distribution or as provided below), assignment, pledge, hypothecation, encumbrance, attachment, lien, obligation or liability, or garnishment by creditors (collectively, “Assignment”) of a Participant or his or her Beneficiary (other than in favor of the Company or an Affiliate thereof). Any attempted Assignment shall be void. Awards or rights that may be exercisable shall be exercised during the lifetime of the Participant only by the Participant or his or her guardian or legal representative, except that Awards and other rights (other than ISOs and SARs in tandem therewith) may be transferred to one or more Permitted Transferees (as defined below) during the lifetime of the Participant, and may be exercised by such Permitted Transferees in accordance with the terms of such Award, but only if and to the extent such transfers are permitted by the Committee. “Permitted Transferee” shall mean, with respect to an employee who has transferred his or her award (but not in a transfer for value), any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships, any person sharing the employee’s household (other than a tenant or employee), a trust in which these persons have more than fifty percent of the beneficial interest, a foundation in which these persons (or the employee) control the management of assets, and any other entity in which these persons (or the employee) own more than fifty percent of the voting interests. A Beneficiary, Permitted Transferee, or other person claiming any rights under the Plan from or through any Participant shall be subject to all terms and conditions of the Plan and any Award Agreement applicable to such Participant, except as otherwise determined by the Committee, and to any additional terms and conditions deemed necessary or appropriate by the Committee. 12.04Designation of Beneficiary. Each Participant may file with the Committee a written designation of one or more persons or revocable trusts as the Beneficiary who shall be entitled to receive the amount, if any, payable hereunder after the Participant’s death or to exercise an Award or to receive settlement of an Award after the Participant’s death. A Participant may, from time to time, revoke or change his or her Beneficiary designation without the consent of any prior Beneficiary by filing a new designation with the Committee. The last such designation received by the Committee prior to the Participant’s death shall be controlling. If no such Beneficiary designation is in effect at the time of the Participant’s death, or if no designated Beneficiary survives the Participant, the Participant’s estate shall be deemed to have been designated his or her Beneficiary and the executor or administrator thereof shall receive the amount, if any, payable hereunder or exercise or receive settlement of an Award after the Participant’s death. If the Committee is in doubt as to the right of any person as Beneficiary, the Company may retain any amount in question until the rights thereto are determined, or the Company may pay such amount into any court of appropriate jurisdiction and such payment shall be a complete discharge of the liability of the Company therefor. 12.05Adjustments. In the event that any large, special and non-recurring dividend or other distribution (whether in the form of cash or property other than Stock), recapitalization, forward or reverse split, Stock dividend, reorganization, merger, consolidation, spin-off, combination, repurchase, share exchange, liquidation, dissolution or other similar corporate transaction or event affects the Stock such that an adjustment is appropriate, or, in the case of any outstanding Award, necessary, in order to prevent dilution or enlargement of the rights of the Participant, then the | | | E-18 | | 2015 Proxy Statement • Exhibit 1 |
Committee shall, in an equitable manner as determined by the Committee, adjust any or all of (i) the aggregate number and kind of shares of Stock which may be delivered in connection with Awards granted or Accounts established under the Plan, (ii) the number and kind of shares of Stock by which annual per person Award limitations are measured under Section 5.03, (iii) the number and kind of shares of Stock subject to or deliverable in respect of outstanding Awards or Accounts, (iv) the exercise price, grant price or purchase price relating to any Award or, if deemed appropriate, the Committee may make provision for a payment of cash or property to the holder of an outstanding Option, and (v) in the terms of RSUs under the Plan; provided that no such adjustment shall be authorized or made if and to the extent that the existence of such authority (i) would cause Options, SARs, or Performance Awards intended to qualify as “performance-based compensation” under Code Section 162(m) to otherwise fail to qualify as “performance-based compensation” under Code Section 162(m), or (ii) would cause the Committee to be deemed to have authority to change the targets, within the meaning of Treasury Regulation Section 1.162-27(e)(4)(vi), under the performance goals relating to Options or SARs intended to qualify as “performance-based compensation” under Code Section 162(m). 12.06Tax Provisions. (a) Withholding. The Company and any Affiliate is authorized to withhold, at the time of grant or settlement or other time as appropriate, from any Award or Account, any payment relating to an Award or Account, including from a distribution of Stock, or any payroll or other payment to a Participant, amounts of withholding and other taxes required to be withheld by the Company or Affiliate. This authority shall include authority to withhold or receive Stock or other property and to make cash payments in respect thereof in satisfaction of the Company’s (or an Affiliate’s) withholding obligations, either on a mandatory or elective basis in the discretion of the Committee. The Committee is specifically authorized to allow Participants to satisfy withholding tax amounts by electing to have the Company (or an Affiliate) withhold from the shares of Stock to be delivered upon exercise of an Option or vesting or settlement of a Stock Award or Account that number of shares of Stock having a Fair Market Value equal to the amount required to be withheld. (b) Required Consent to and Notification of Code Section 83(b) Election. No election under Code Section 83(b) (to include in gross income in the year of transfer the amounts specified in Code Section 83(b)) or under a similar provision of the laws of a jurisdiction outside the United States may be made unless expressly permitted by the terms of the Award Agreement or by action of the Committee in writing prior to the making of such election. In any case in which a Participant is permitted to make such an election in connection with an Award, the Participant shall notify the Committee of such election within ten days of filing notice of the election with the Internal Revenue Service or other governmental authority, in addition to any filing and notification required pursuant to regulations issued under Code Section 83(b) or other applicable provision. (c) Requirement of Notification Upon Disqualifying Disposition Under Code Section 421(b). If any Participant shall make any disposition of shares of Stock delivered pursuant to the exercise of an ISO under the circumstances described in Code Section 421(b) (relating to certain disqualifying dispositions), such Participant shall notify the Committee of such disposition within ten days thereof. (d) Payment of Tax Amount. Notwithstanding anything herein to the contrary, in the event the Internal Revenue Service should finally determine that part or all of the value of a Participant’s Account which has not actually been distributed or an Award that has not been settled is nevertheless required to be included in the Participant’s or Beneficiary’s gross income for federal income tax purposes, then an amount necessary to pay applicable federal, state or local income taxes on such includible value shall be distributed from the Account or with respect to the Award in a lump sum cash payment within sixty (60) days after such determination, without the requirement of separate approval by the Committee. A “final determination” of the Internal Revenue Service is a determination in writing ordering the payment of additional tax, reporting of additional gross income or otherwise requiring an Account or portion thereof to be included in gross income, which is not appealable or which the Participant or Beneficiary does not appeal within the time prescribed for appeals. For avoidance of doubt, this Section 12.06(d) applies to all Awards and Accounts both 409A Compensation and non-409A Compensation. 12.07Amendment and Termination of the Plan. The Company, acting through its Board on the recommendation of the Compensation Committee, may at any time terminate, and from time to time may amend or modify the Plan; provided, however, that no amendment or modification may become effective without approval of the amendment or modification by the shareholders if shareholder approval is required to enable the Plan to satisfy any applicable federal or state statutory or regulatory requirements; and provided further, that, without the consent of an affected Participant, no such Board action may materially and adversely affect the rights of such Participant under any Account or any outstanding Award (for this purpose, actions that alter the timing of federal income taxation of a Participant will not be deemed material unless such action results in an income tax penalty on the Participant). In no event may any amendment or termination of the Plan accelerate the date of payment or distribution of 409A Compensation, except as may be permitted under Code Section 409A. 12.08No Repricing. Without the approval of shareholders, the Committee will not amend or replace previously granted Options in a transaction that constitutes a “repricing,” as such term is used in Section 303A.08 of the Listed Company Manual of the New York Stock Exchange, including but not limited to by means of cashing out options that whose exercise price is above the current Fair Market Value of a share of Stock. 12.09Clawback; Right of Setoff. Awards and Accounts are subject to the Company’s policy on recoveries and such other terms and conditions as the Committee may impose in the event the Committee determines a participant’s own misconduct contributed materially to his or her receipt of unearned amounts of cash, Stock or other property. The Company or any Affiliate may, to the extent permitted by applicable law, deduct from and set off against any amounts the Company or an Affiliate may owe to the Participant from time to time, including amounts payable in connection with any Award, owed as wages, fringe benefits, or other compensation owed to the Participant, such amounts as may be owed by the Participant to the Company, although the Participant shall remain liable for any part of the Participant’s payment obligation not satisfied through such | | | 2015 Proxy Statement • Exhibit 1 | | E-19 |
deduction and setoff. By accepting any Award granted hereunder, the Participant agrees to any deduction or setoff under this Section 12.09. Any such setoff shall be subject to Section 12.12. Notwithstanding the foregoing, no setoff form 409A Compensation may be made if it results in acceleration or deferral of the permitted payment date under Code Section 409A. 12.10Nonexclusivity of the Plan. Neither the adoption of the Plan by the Board nor its submission to the shareholders of the Company for approval shall be construed as creating any limitations on the power of the Board or a committee thereof to adopt such other incentive arrangements, apart from the Plan, as it may deem desirable, including incentive arrangements and awards which do not qualify under Code Section 162(m), and such other arrangements may be either applicable generally or only in specific cases. 12.11Successors. All obligations of the Company under the Plan with respect to Awards granted hereunder shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise of all or substantially all of the business and/or assets of the Company. 12.12Nature of Payments. Unless otherwise specified in the Award Agreement, Awards shall be special incentive payments to the Participant and shall not be taken into account in computing the amount of salary or compensation of the Participant for purposes of determining any pension, retirement, death or other benefit under (a) any pension, retirement, profit-sharing, bonus, insurance or other employee benefit plan of the Company or any Affiliate, except as such plan shall otherwise expressly provide, or (b) any agreement between the Company or any Affiliate and the Participant, except as such agreement shall otherwise expressly provide. 12.13Electronic Media. Under procedures authorized or approved by the Committee, any form for any notice, election, designation, or similar communication required or permitted to be given to or received from a Participant under this Plan may be given or received in an electronic medium (including computer network, e-mail or voice response system) and any such communication to or from a Participant through such electronic media shall be fully effective under this Plan for such purposes as such procedures shall prescribe. Any record of such communication retrieved from such electronic medium under its normal storage and retrieval parameters shall be effective as a fully authentic executed writing for all purposes of this Plan absent manifest error in the storage or retrieval process. 12.14Payments in the Event of Forfeitures; Fractional Shares. Unless otherwise determined by the Committee, in the event of a forfeiture of an Award with respect to which a Participant paid cash consideration, the Participant shall be repaid the amount of such cash consideration, or if less, the Fair Market Value on the date of forfeiture of the shares of Stock for which the Participant paid. Distributions in Stock shall be made in whole shares only, with the value of any fractional share distributed in cash. 12.15Code Section 409A Considerations. (a) Construction in Compliance with Code Section 409A. The Company intends that none of the grant, exercise, settlement or amendment or termination of any Award under the Plan will cause the Participant to be liable for payment of interest or a tax penalty under Code Section 409A. The provisions of the Plan and any Award Agreement shall be construed consistent with that intent. (b) Six-Month Delay. Any distribution or settlement of 409A Compensation triggered by the Separation from Service of a Specified Employee that would otherwise be made prior to the Deferred Distribution Date (as defined below) shall not occur earlier than the Deferred Distribution Date. The “Deferred Distribution Date” is the day that is six (6) month and one (1) day after a Participant’s Separation from Service. (c) Certain Grandfathered Awards. Awards that are “grandfathered” under Code Section 409A and that, but for such grandfathered status, would be deemed to be subject to Code Section 409A shall be subject to the terms and conditions of the 2002 Incentive Plan as amended and restated at May 26, 2005 other than Sections 6(b)(ii) and 6(c)(ii) thereof, provided that if any provision adopted by amendment to the 2002 Incentive Plan or an Award Agreement after October 3, 2004, would constitute a material modification of such grandfathered Award, such provision will not be effective as to such Award unless so stated by the Committee in writing with specific reference to revoking such grandfathered status. Notwithstanding the foregoing, no Accounts shall be “grandfathered” under Code Section 409A. 12.16Governing Law. The Plan and all agreements and forms hereunder shall be construed in accordance with and governed by the laws of the State of Delaware without giving effect to principles of conflicts of laws, and applicable provisions of federal law. 12.17 Awards to Participants Outside the United States. The Committee may adopt rules and procedures relating to the operation and administration of the Plan to accommodate the specific requirements of local laws and procedures for a Participant or group of participants who are then resident or primarily employed outside of the United States. Without limiting the generality of the foregoing, the Committee is specifically authorized (A) to adopt the rules and procedures regarding the conversion of local currency, withholding procedures and handling of stock certificates which vary with local requirements and (B) to adopt sub-plans in addition to the Sub-Plan, and Plan addenda as the Committee deems desirable, to accommodate foreign laws, regulations and practice; and (C) to modify the terms of any Award under the Plan in any manner deemed by the Committee to be necessary or appropriate in order that such Award shall conform to laws, regulations, and customs of the country in which the Participant is then resident or primarily employed, or so that the value and other benefits of the Award to the Participant, as affected by foreign tax laws and other restrictions applicable as a result of the Participant’s residence or employment abroad shall be comparable to the value of such an Award to a Participant who is resident or primarily employed in the United States. 12.18Limitation on Rights Conferred under Plan. Neither the Plan nor any action taken hereunder shall be construed as (i) giving any Eligible Person or Participant the right to continue as an Eligible Person or Participant or in the employ or service of the Company or an Affiliate, | | | E-20 | | 2015 Proxy Statement • Exhibit 1 |
(ii) interfering in any way with the right of the Company or an Affiliate to terminate any Eligible Person’s or Participant’s employment or service at any time, (iii) giving an Eligible Person or Participant any claim to be granted any Award under the Plan or to be treated uniformly with other Participants and employees, or (iv) conferring on a Participant any of the rights of a shareholder of the Company unless and until the Participant is duly issued or transferred shares of Stock in accordance with the terms of an Award. Except as expressly provided in the Plan or an Award Agreement, neither the Plan nor any Award Agreement shall confer on any person other than the Company and the Participant any rights or remedies thereunder. 12.19 Severability; Entire Agreement. If any of the provisions of this Plan or any Award Agreement are finally held to be invalid, illegal or unenforceable (whether in whole or in part), such provision shall be deemed modified to the extent, but only to the extent, of such invalidity, illegality or unenforceability, and the remaining provisions shall not be affected thereby; provided, that, if any of such provisions is finally held to be invalid, illegal, or unenforceable because it exceeds the maximum scope determined to be acceptable to permit such provision to be enforceable, such provision shall be deemed to be modified to the minimum extent necessary to modify such scope in order to make such provision enforceable hereunder. The Plan and any Award Agreements contain the entire agreement of the parties with respect to the subject matter thereof and supersede all prior agreements, promises, covenants, arrangements, communications, representations and warranties between them, whether written or oral with respect to the subject matter thereof. 12.20Plan Term. Unless earlier terminated by action of the Board of Directors, the Plan will remain in effect until such time as no Stock remains available for delivery under the Plan, and the Company has no further rights or obligations under the Plan with respect to outstanding Awards under the Plan; subject to Section 7.02 regarding Incentive Stock Options. 12.21 Gender and Number. Except when otherwise indicated by the context, the masculine gender shall also include the feminine gender, and the definitions of any term herein in the singular shall also include the plural. 12.22 General Creditor Status. With respect to Awards and Accounts not denominated in Stock or Restricted Stock, each Participant and Beneficiary shall be and remain an unsecured general creditor of the Company with respect to any payments due and owing to such Participant or Beneficiary hereunder. All payments to persons entitled to benefits hereunder shall be made out of the general assets of the Company and shall be solely the obligation of the Company. To the extent the Plan is a promise by the Company to pay benefits in the future and it is the intention of the Company and Participants that the Plan be “unfunded” for tax purposes (and for the purposes of Title I of the Employee Retirement Income Security Act of 1974, as amended). | | | 2015 Proxy Statement • Exhibit 1 | | E-21 |
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HA-C00373HA-C00375 (Mar. 14)15)
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HORACE MANN EDUCATORS CORPORATION 1 HORACE MANN PLAZA SPRINGFIELD, IL 62715-0001 | | VOTE BY INTERNET - www.proxyvote.com | | Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. | | | ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS | | | If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. | | | | | VOTE BY PHONE -1-800-690-6903 | | | Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions. | | | | | VOTE BY MAIL | | | Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. | | | TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: | | KEEP THIS PORTION FOR YOUR RECORDS | DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ![LOGO](https://files.docoh.com/DEF 14A/0001193125-14-131433/g655194page_046b.jpg) ![LOGO](https://files.docoh.com/DEF 14A/0001193125-15-122569/g857569dsp_001b.jpg) | | The Board of Directors recommends you vote FOR the following: | | | | | | | | | | | | | | | | | | | | | | | | 1. | | Election of Directors | | For | | Against | | Abstain | | | | | | | | | | | | | | | | | | 1a Daniel A. Domenech 1b Mary H. Futrell 1b1c Stephen J. Hasenmiller
1c1d Ronald J. Helow
1d1e Beverley J. McClure
1e1f Gabriel L. Shaheen
1f Roger J. Steinbecker
1g Robert Stricker 1h Steven O. Swyers 1i Marita Zuraitis | | ¨ ¨ ¨ ¨ ¨ ¨ ¨ ¨ ¨ | | ¨ ¨ ¨ ¨ ¨ ¨ ¨ ¨ ¨ | | ¨ ¨ ¨ ¨ ¨ ¨ ¨ ¨ ¨ | | | | The Board of Directors recommends you vote FOR proposals 2, 3 and 3.4. | | | | | | | | | | | | | | | | | | | | | For | | Against | | Abstain | | | | | | | | | | 2 | | Approval of the advisory resolution to approve NamedHorace Mann Educators Corporation 2010 Comprehensive Executive Officers’ compensation.Compensation Plan as amended and restated. | | ¨ | | ¨ | | ¨ | | | | | | | | | | 3 | | Approval of the advisory resolution to approve Named Executive Officers’ compensation. | | ¨ | | ¨ | | ¨ | | | | | | | | | | 4 | | Ratification of the appointment of KPMG LLP, an independent registered public accounting firm, as the company’s auditors for the year ending December 31, 2014.2015. | | ¨ | | ¨ | | ¨ | | | | | | | | | | NOTE: Such other business as may properly come before the meeting or any adjournment thereof. | | | | | | | | | | | | | | | | Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. | | | | | | | | | | | | | | | | | | | Materials Election - Check this box if you want to receive a complete set of future proxy materials by mail, at no extra cost. If you do not take action you may receive only a Notice to inform you of the Internet availability of proxy materials. | | ¨ | | | | | | | | | | Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Signature [PLEASE SIGN WITHIN BOX] | | Date | | | | | | | | | | Signature (Joint Owners) | | | | Date | | | | | | |
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:The Notice & Proxy Statement, Form 10-K/Annual Report is/are available atwww.proxyvote.com. | | | ![LOGO](https://files.docoh.com/DEF 14A/0001193125-15-122569/g857569dsp_002.jpg)
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| | HORACE MANN EDUCATORS CORPORATION PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF SHAREHOLDERS MAY 21, 201420, 2015 The undersigned Shareholder of Horace Mann Educators Corporation (the “Company”) hereby appoints Gabriel L. Shaheen and Marita Zuraitis, or any of them, with full power of substitution, proxies to vote at the Annual Meeting of Shareholders of the Company (the “Meeting”), to be held on May 21, 2014,20, 2015, at 9:00 a.m. Central Daylight Saving Time, at the AbrahamHorace Mann Lincoln Presidential Library, 112 North Sixth Street,Auditorium, 1 Horace Mann Plaza, Springfield Illinois, and at any adjournment thereof and to vote all shares of Common Stock of the Company held or owned by the Undersigned as directed on the reverse side and in their discretion upon such other matters as may come before the Meeting. THIS PROXY CARD, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED. IF NO DIRECTION IS MADE BUT THE CARD IS SIGNED, THIS PROXY CARD WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES UNDER PROPOSAL 1, FOR PROPOSALS 2, 3 AND 3,4, AND IN THE DISCRETION OF THE PROXIES WITH RESPECT TO SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING. Continued and to be signed on reverse side |
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