UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
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Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
Horace Mann Educators Corporation
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
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Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
HORACE MANN EDUCATORS CORPORATION
1 Horace Mann Plaza
Springfield, Illinois 62715-0001
ANNUAL MEETING--May 18, 2001
Dear Shareholders:
You are cordially invited to attend the Annual Meeting of your Corporation
to be held at 9:00 a.m. on Friday, May 18, 2001, at the Renaissance
Springfield Hotel, 701 East Adams Street, Springfield, Illinois.
We will present a report on the current affairs of the Corporation at the
meeting and Shareholders will have an opportunity for questions and comments.
We request that you sign, date and mail your proxy card whether or not you
plan to attend the Annual Meeting.
Prompt return of your proxy card will reduce the cost of further mailings
and other follow-up work. You may revoke your voted proxy at any time prior to
the meeting or vote in person if you attend the meeting.
We look forward to seeing you at the meeting. If you do not plan to attend
and vote by proxy, let us know your feelings about the Corporation either by
letter or by comment on the proxy card.
Sincerely yours,
/s/ Ralph S. Saul /s/ Louis G. Lower II
Ralph S. Saul Louis G. Lower II
Chairman of the Board President and
Chief Executive Officer
Springfield, Illinois
April 02, 2001
HORACE MANN EDUCATORS CORPORATION
1 Horace Mann Plaza
Springfield, Illinois 62715-0001
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 18, 2001
NOTICE IS HEREBY GIVEN that the 2001 Annual Meeting of Shareholders of
HORACE MANN EDUCATORS CORPORATION (the "Company") will be held at the
Renaissance Springfield Hotel, 701 East Adams Street, Springfield, Illinois,
on Friday, May 18, 2001, at 9:00 a.m., Central Daylight Savings Time, for the
following purposes:
1. To elect nine Directors to hold office until the next Annual Meeting of
Shareholders and until their respective successors have been duly
elected and qualified;
2. To approve the Company's 2001 Stock Incentive Plan; and
3. To consider and take action with respect to such other matters as may
properly come before the Annual Meeting or any adjournment or
adjournments thereof.
The Board of Directors has fixed the close of business on March 19, 2001 as
the record date for the determination of Shareholders entitled to notice of,
and to vote at, the Annual Meeting.
All Shareholders are cordially invited to attend the Annual Meeting.
Whether or not you plan to attend the Annual Meeting, the Board of Directors
urges you to complete, date, sign and return the enclosed proxy card as soon
as possible in the enclosed business reply envelope, which requires no postage
if mailed in the United States. You may revoke your voted proxy at any time
prior to its exercise provided that you comply with the procedures set forth
in the Proxy Statement to which this Notice of Annual Meeting of Shareholders
is attached. If you attend the Annual Meeting, you may vote in person if you
wish.
By order of the
Board of Directors,
[Signature]
Ann M. Caparros
Corporate Secretary
Springfield, Illinois
April 02, 2001
IMPORTANT: PLEASE MAIL YOUR PROXY PROMPTLY IN THE ENCLOSED ENVELOPE. THE
MEETING DATE IS MAY 18, 2001.
PROXY STATEMENT
HORACE MANN EDUCATORS CORPORATION
Annual Meeting of Shareholders
May 18, 2001
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors (the "Board") of Horace Mann Educators Corporation (the
"Company") of proxies from holders of the Company's common stock, par value
$.001 per share (the "Common Stock"). The proxies will be voted at the Annual
Meeting of Shareholders to be held on Friday, May 18, 2001, at 9:00 a.m.,
Central Daylight Savings Time, at the Renaissance Springfield Hotel, 701 East
Adams Street, Springfield, Illinois, and through any adjournment or
adjournments thereof (the "Annual Meeting").
The mailing address of the Company is 1 Horace Mann Plaza, Springfield,
Illinois 62715-0001 (telephone number (217) 789-2500). The Proxy Statement and
the accompanying proxy card are being first transmitted to Shareholders of the
Company on or about April 6, 2001.
The Board has fixed the close of business on March 19, 2001 as the record
date (the "Record Date") for determining the Shareholders of the Company
entitled to receive notice of, and to vote at, the Annual Meeting. At the
close of business on the Record Date, an aggregate of 40,527,757 shares of
Common Stock were issued and outstanding, each share entitling the holder
thereof to one vote on each matter to be voted upon at the Annual Meeting. The
presence, in person or by proxy, of the holders of a majority of such
outstanding shares is necessary to constitute a quorum for the transaction of
business at the Annual Meeting. Proxies will be solicited by mail. The Company
also intends to make, through bankers, brokers or other persons, a
solicitation of beneficial owners of Common Stock.
At the Annual Meeting, Shareholders of the Company will be asked (i) to
elect nine Directors to hold office until the next Annual Meeting of
Shareholders and until their respective successors have been duly elected and
qualified and (ii) to approve the Company's 2001 Stock Incentive Plan (the
"2001 Stock Incentive Plan").
Shareholders may also be asked to consider and take action with respect to
such other matters as may properly come before the Annual Meeting or any
adjournment or adjournments thereof.
Copies of the Company's Annual Report to Shareholders and its Annual Report
on Form 10-K for the year ended December 31, 2000 were mailed to known
Shareholders on or about April 6, 2001.
SOLICITATION AND REVOCATION
PROXIES IN THE FORM ENCLOSED ARE SOLICITED BY AND ON BEHALF OF THE BOARD OF
DIRECTORS OF THE COMPANY. THE PERSONS NAMED IN THE FORM OF PROXY HAVE BEEN
DESIGNATED AS PROXIES BY THE BOARD OF DIRECTORS. SUCH PERSONS ARE DIRECTORS OF
THE COMPANY.
Shares of Common Stock represented at the Annual Meeting by a properly
executed and returned proxy will be voted at the Annual Meeting in accordance
with the instructions noted thereon, or if no instructions are noted, the
proxy will be voted in favor of the proposals set forth in the Notice of
Annual Meeting. A submitted proxy is revocable by a Shareholder at any time
prior to it being voted provided that such Shareholder gives written notice to
the Corporate Secretary at or prior to the Annual Meeting that such
Shareholder intends to vote in person or by submitting a subsequently dated
proxy. Attendance at the Annual Meeting by a Shareholder who has given a proxy
shall not in and of itself constitute a revocation of such proxy.
1
Proxies will be solicited initially by mail. Further solicitation may be
made by officers and other employees of the Company personally, by phone or
otherwise, but such persons will not be specifically compensated for such
services. Banks, brokers, nominees and other custodians and fiduciaries will
be reimbursed for their reasonable out-of-pocket expenses in forwarding
soliciting material to their principals, the beneficial owners of Common Stock
of the Company. The costs of soliciting proxies will be borne by the Company.
It is estimated these costs will be nominal.
Shareholder Approval
Shareholders are entitled to one vote per share on all matters submitted
for consideration at the Annual Meeting. The affirmative vote of a plurality
of the shares of Common Stock represented in person or by proxy at the Annual
Meeting is required for the election of Directors. The affirmative vote of a
majority of the shares of Common Stock represented in person or by proxy at
the Annual Meeting is required for the approval of the 2001 Stock Incentive
Plan.
Abstentions may not be specified with regard to the election of Directors.
However, abstentions may be specified on the proposal for the approval of the
2001 Stock Incentive Plan. Such abstentions will be counted as present for
purposes of approving the 2001 Stock Incentive Plan. Such abstentions will
have the effect of a negative vote.
Please note that under the rules of the New York Stock Exchange, Inc.,
brokers who hold shares in street name for customers have the authority to
vote on certain items when they have not received instructions from beneficial
owners.
Absence of Dissenters' or Appraisal Rights
Under Section 262 of the Delaware General Corporation Law, Shareholders of
the Company have the right to dissent from certain actions. In such cases,
dissenting Shareholders are entitled to have their shares appraised and to be
paid an amount equal to the fair value of their shares, provided that certain
procedures perfecting their rights are followed. In the opinion of counsel,
the proposals described in this Proxy Statement do not entitle a Shareholder
to exercise any such dissenters' or appraisal rights. Accordingly,
Shareholders who do not approve of any of the proposals contained in this
Proxy Statement will not be entitled to exercise any dissenters' or appraisal
rights.
Other Matters
Other than the matters set forth above, the Board knows of no matters to be
brought before the Annual Meeting. However, should any other matters properly
come before the meeting, the persons named in the accompanying Form of Proxy
will vote or refrain from voting thereon in their discretion.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The By-Laws of the Company provide for the Company to have not less than
five nor more than 15 Directors. The following eleven persons currently are
serving as Directors of the Company: William W. Abbott, Mary H. Futrell, Emita
B. Hill, Donald E. Kiernan, Louis G. Lower II, Joseph J. Melone, Jeffrey L.
Morby, Shaun F. O'Malley, Charles A. Parker, Ralph S. Saul and William J.
Schoen. The terms of the current Directors expire at the Annual Meeting. Dr.
Hill and Mr. Saul are retiring from the Board of Directors and therefore are
not standing for reelection to the Board at the Annual Meeting.
The proxies solicited by and on behalf of the Board of Directors will be
voted "FOR" the election of Mr. Abbott, Dr. Futrell, Mr. Kiernan, Mr. Lower,
Mr. Melone, Mr. Morby, Mr. O'Malley, Mr. Parker, and Mr. Schoen (the "Board
Nominees") unless such authority is withheld as provided in the proxy. The
Company has no reason to believe that any of the foregoing Board Nominees is
not available to serve or will not serve if elected, although in the
unexpected event that any such Board Nominees should become unavailable to
serve as a Director, full discretion is reserved to the persons named as
proxies to vote for such other persons as may be nominated. Each Director will
serve until the next Annual Meeting of Shareholders and until his or her
respective successor is duly elected and qualified.
2
Nominees
The following information, as of March 19, 2001, is provided with respect to
each Board Nominee:
William W. Abbott, 69...... Mr. Abbott has been a Director of the Company
Chairman of the since September 1996. He is currently self-
Compensation Committee; employed as a business consultant. In 1989,
Member of the Organization Mr. Abbott retired from 35 years of service at
Committee and Audit Procter & Gamble, as a Senior Vice President in
Committee of the Board charge of worldwide sales and other operations.
He served as a member of the Board of Directors
of Armstrong World Industries from 1982 to 1994.
He currently serves as a member of the Boards of
Directors of Millenium Ban Corp., Fifth Third
Bank of Naples, Florida and Acorn Products, Inc.,
(which he also serves as Chairman of the Board),
a member of the Advisory Board of Manco, a member
of the Board of Overseers of the Duke Cancer
Center, and an Executive Professor at Florida
Gulf Coast University.
Mary H. Futrell, 60........ Dr. Futrell has been a Director of the Company
Member of the Organization since February 2001. She is currently Dean of the
Committee, Audit Committee Graduate School of Education and Human
and Executive Committee of Development, and Director of the Institute for
the Board Curriculum, Standards and Technology, The George
Washington University, positions she has held for
more than 5 years. In addition, Dr. Futrell is
Professor, Department of Education Leadership, a
position she has held since 1999. Dr. Futrell is
also President, Education International and past
President, National Education Association and
Virginia Education Association.
Donald E. Kiernan, 60...... Mr. Kiernan has been a Director of the Company
Member of the Compensation since February 1998. He is currently the Senior
Committee, Investment & Executive Vice President and Chief Financial
Finance Committee and Officer of SBC Communications Inc., positions he
Audit Committee of the has held since 1999. From 1993 to 1999, Mr.
Board Kiernan served as Senior Vice President,
Treasurer and Chief Financial Officer of SBC
Communications Inc. He currently serves as a
member of the Boards of Directors of Pacific
Telesis Group, Pacific Bell, Southwestern Bell
Telephone Company, and BioNumerik
Pharmaceuticals, Inc.
Louis G. Lower II, 55...... Mr. Lower joined the Company as Director,
President and Chief President and Chief Executive Officer in February
Executive Officer; Member 2000. Prior to that, he served as Chief Executive
of the Executive Officer of Allstate Life Insurance Company, a
Committee, Organization position he held from January 1990 through
Committee and Investment & January 2000. He currently serves as a member of
Finance Committee of the the Boards of Directors of the Life Office
Board Management Association and Chicago Botanic
Garden. Mr. Lower has over 20 years experience in
the insurance industry.
Joseph J. Melone, 69....... Mr. Melone has been a Director of the Company
Member of the Investment & since February 2001. Prior to his retirement in
Finance Committee, 1998, he served as President and Chief Executive
Compensation Committee and Officer of The Equitable Companies Inc. (1996-
Organization Committee of 1998), Chairman and Chief Executive Officer of
the Board The Equitable Life Assurance Society (1994-1998),
and Chairman and Chief Executive Officer of The
Equitable Variable Life Insurance Company (1990-
1998). Prior to 1990, Mr. Melone served as
President of Prudential Insurance Company. He
currently serves as a member of the Boards of
Directors of Bysis, Inc. and Foster-Wheeler
Corporation.
Jeffrey L. Morby, 63....... Mr. Morby has been a Director of the Company
Member of the Executive since September 1996. He is currently self-
Committee, Compensation employed as a business consultant and investor.
Committee, Investment & Mr. Morby serves as a Director and Chairman of
Finance Committee and AMARNA Corporation, and a general partner of
Audit Committee of the AMARNA Partners. Mr. Morby retired on June 30,
Board 1996 as Vice Chairman of Mellon Bank Corporation
and Mellon
3
Bank, N.A., positions he had held for more than
five years. As Vice Chairman of Mellon Bank, he
served on the Boards of Directors of numerous
entities affiliated with Mellon Bank. In
addition, Mr. Morby serves on the Boards of
Directors of Alung Technologies, Inc., Duquesne
University, Pittsburgh Cultural Trust, Pittsburgh
City Theater Company, International Advisors of
the City of Wuhan, China and International
Council of the World Wildlife Fund. Mr. Morby
also serves as Chairman of China Center of the
Greater Pittsburgh Metropolitan Area.
Shaun F. O'Malley, 65...... Mr. O'Malley has been a Director of the Company
Chairman of the Audit since September 1996. He is currently Chairman
Committee, Member of the Emeritus of Price Waterhouse LLP, a title he has
Organization Committee and held since July 1995. Prior to that, he served as
Investment & Finance Chairman and Senior Partner of Price Waterhouse
Committee of the Board LLP. He currently serves as a member of the
Boards of Directors of the Finance Company of
Pennsylvania, Regulus Group, LLC, Vlasic Foods
International, and The Philadelphia
Contributionship, and as a member of the Board of
Trustees of the University of Pennsylvania and
The Curtis Institute of Music and the Board of
Overseers of the Wharton School.
Charles A. Parker, 66...... Mr. Parker has been a Director of the Company
Member of the Executive since September 1997. He retired in 1995 after 17
Committee, Organization years of service at The Continental Corporation,
Committee and Investment & including service as Executive Vice President,
Finance Committee of the Chief Investment Officer and Director. He
Board currently serves as a member of the Boards of
Directors of Amerindo Funds and T.C.W.
Convertible Fund, as a member of the Business
Advisory Council of the University of Colorado
School of Business and as a Governor of the
Burridge Center for Research in Security Prices
(University of Colorado School of Business).
William J. Schoen, 65...... Mr. Schoen has been a Director of the Company
Chairman of the Investment since September 1996. He is currently the
& Finance Committee, Chairman of the Board of Health Management
Member of the Compensation Associates, Inc., a position he has held for more
Committee, Organization than five years. He serves on the Board of
Committee and Audit Directors of Health Management Associates and
Committee of the Board many of its subsidiaries.
Directors Retiring from the Board at the Annual Meeting
The following information, as of March 19, 2001, is provided with respect to
the Members retiring from the Board:
Emita B. Hill, 65... Member Dr. Hill has been a Director of the Company since
of the Compensation September 1996. She is currently the Chancellor
Committee, Organization Emeritus of Indiana University Kokomo, a title
Committee and Audit she has held since 1999. Prior to that, she
Committee of the Board served as Chancellor of Indiana University
Kokomo, a position she held for more than five
years.
Ralph S. Saul, 78.......... Mr. Saul has been a Director of the Company since
Chairman of the Board, June 1995. He currently serves as a Director of
Chairman of the The Brookings Institution, the Committee for
Organization Committee, Economic Development, as a member of the Advisory
Member of the Executive Board of Banc Funds, and as a member of the Panel
Committee and Investment & on Audit Effectiveness of the accounting
Finance Committee of the profession's Public Oversight Board. During his
Board career, in addition to the aforementioned
positions, he has served as Director of the
Division of Trading and Markets of the United
4
States Securities and Exchange Commission,
President of the American Stock Exchange, Chief
Executive Officer of INA Corporation, and Co-
Chief Executive Officer and Chairman of the Board
of CIGNA Corporation.
Executive Officers
Set forth below is certain information, as of March 19, 2001, with respect
to the Executive Officers of the Company and its subsidiaries who are not
Directors of the Company (Louis G. Lower II, President and Chief Executive
Officer, is discussed above):
Peter H. Heckman, 55....... Mr. Heckman was named Executive Vice President
Executive Vice President and Chief Financial Officer ("CFO") in May 2000.
and Chief Financial Prior to that, he served as Vice President of
Officer Allstate Life Insurance Company, a position he
held from 1988 through 1999. Mr. Heckman has over
25 years of experience in the insurance industry.
George J. Zock, 50......... Mr. Zock was named Executive Vice President in
Executive Vice President, September 1997. Mr. Zock is responsible for
Insurance Operations insurance operations. He also served as Senior
Vice President from February 1992 to September
1997 and Treasurer from September 1989 to April
1997. Mr. Zock has been with the Company for 27
years.
Thomas K. Manion, 54 ...... Mr. Manion was named Senior Vice President and
Senior Vice President and Controller in July 2000. He previously served as
Controller Vice President and Controller of Wausau Mutual
Insurance Companies, positions he held from
November 1996 through June 2000. Prior to that,
he served as Vice President, Treasurer and Chief
Financial Officer of Automobile Club Insurance
Company, a position he held from April 1990
through November 1996. Mr. Manion has over 25
years of experience in the insurance industry.
Ann M. Caparros, 48........ Ms. Caparros joined the Company in March 1994 as
General Counsel, Chief Vice President, General Counsel and Corporate
Compliance Officer and Secretary. Ms. Caparros has 23 years of
Corporate Secretary experience in the insurance industry.
J. Michael Henderson, 59... Mr. Henderson joined the Company in September
Vice President and 1997 as Vice President and Treasurer. From March
Treasurer 1985 through September 1997, Mr. Henderson was
associated with Bear Stearns and served as a
Managing Director.
Special Advisory Board
The Company maintains a special advisory board composed of leaders of
education associations. The Company meets with the special advisory board on a
regular basis. The educators and education association leaders serving on the
special advisory board receive a fee of $200 plus expenses for each special
advisory board meeting attended. The special advisory board met two times in
2000.
Board of Directors
There were eleven members on the Company's Board of Directors as of March
19, 2001. The Board met six times during 2000. No Director of the Company
attended fewer than 75% of the meetings held during the period of 2000 for
which he or she has been a Director, nor did any Director attend fewer than
75% of the meetings of committees to which he or she was appointed held during
the period of 2000 for which he or she has been a Director.
The standing committees of the Board consist of the Executive Committee,
Compensation Committee, Organization Committee, Investment & Finance Committee
and Audit Committee. Each standing committee has a charter which defines its
role and power.
5
The Executive Committee exercises certain powers of the Board during
intervals between meetings of the Board and, as requested by the Chief
Executive Officer, acts as a sounding board for discussing strategic and
operating issues between meetings of the Board. The current members of the
Committee are Mr. Saul (Chairman), Dr. Futrell, Mr. Lower, Mr. Morby and Mr.
Parker. The Executive Committee met once during 2000.
The Compensation Committee reviews, approves and recommends the
compensation of Officers and Directors of the Company. The current members of
the Committee are Mr. Abbott (Chairman), Dr. Hill, Mr. Kiernan, Mr. Melone,
Mr. Morby and Mr. Schoen. The Compensation Committee met four times during
2000.
The Organization Committee oversees planning relating to the Senior
Management of the Company and Chief Executive Officer succession issues and
also recommends nominees to the Board of Directors. The Organization Committee
will consider nominees recommended by Shareholders. Nominations may be
submitted in writing to Ann M. Caparros, Corporate Secretary. Current members
of the Committee are Mr. Saul (Chairman), Mr. Abbott, Dr. Futrell, Dr. Hill,
Mr. Lower, Mr. Melone, Mr. O'Malley, Mr. Parker and Mr. Schoen. The
Organization Committee met three times during 2000.
The Investment & Finance Committee approves investment strategies and
monitors the performance of investments made on behalf of the Company and its
subsidiaries and oversees issues and decisions relating to the Company's
capital structure. Current members of the Committee are Mr. Schoen (Chairman),
Mr. Kiernan, Mr. Lower, Mr. Melone, Mr. Morby, Mr. O'Malley, Mr. Parker and
Mr. Saul. The Committee met four times during 2000.
The Audit Committee oversees the financial reporting and internal operating
controls of the Company. It meets with both Management and the Company's
independent public accountants. The current members of the Committee are Mr.
O'Malley (Chairman), Mr. Abbott, Dr. Futrell, Dr. Hill, Mr. Kiernan, Mr. Morby
and Mr. Schoen. The Committee met ten times during 2000.
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The Audit Committee oversees the Company's financial reporting process on
behalf of the Board of Directors. The Audit Committee is composed of seven
directors, each of whom is independent as defined by the New York Stock
Exchange listing standards. Management has the primary responsibility for the
financial statements and the reporting process including the systems of
internal controls. In fulfilling its oversight responsibilities, the committee
reviewed the audited 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 the clarity of disclosures in the financial statements.
The Audit Committee has discussed with the independent auditors, who are
responsible for expressing an opinion on the conformity of those audited
financial statements with generally accepted accounting principles, their
judgements as to the quality, not just the acceptability, of the Company's
accounting principles and such other matters as required by Statement on
Auditing Standards No. 61 (Communication with Audit Committees). In addition,
the Audit Committee has received from the independent auditors the written
disclosures required by Independence Standards Board No. 1 (Independence
Discussions with Audit Committees) and discussed with them their independence
from the Company and its management.
The Audit Committee discussed with the Company's internal and independent
auditors the overall scope and plans for their respective audits. The Audit
Committee meets with the internal and the independent auditors, with and
without management present, to discuss the results of their examinations,
their evaluations of the Company's internal controls, and the overall quality
of the Company's financial reporting. The Audit Committee held ten meetings
during fiscal year 2000.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors (and the Board has approved)
that the audited financial statements be included in the Annual Report on Form
10-K for the year ended December 31, 2000 for filing with the Securities and
Exchange Commission.
6
The Board has adopted the Charter for the Audit Committee attached hereto
as Exhibit A.
AUDIT COMMITTEE
SHAUN F. O'MALLEY Chairman
WILLIAM W. ABBOTT, MARY H. FUTRELL, EMITA B. HILL, DONALD E. KIERNAN, JEFFREY
L. MORBY, and WILLIAM J. SCHOEN, Members
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following tables set forth certain information regarding the Company's
Common Stock owned on March 19, 2001 by each person who is known by the
Company to own beneficially more than 5% of the Company's Common Stock, and by
each of the Company's Directors, the Company's CEO and the other four highest
compensated Executive Officers (collectively the "Named Executive Officers"),
and by all Directors, and Executive Officers of the Company as a group. Except
as otherwise indicated, to the Company's knowledge, all shares are
beneficially owned and investment and voting power is held solely by the
persons named as owners.
Amount of
Title of Beneficial Percent
Class Beneficial Owner Ownership of Class
-------- ---------------- ---------- --------
Security Ownership of 5% Beneficial Owners
Common Stock Ariel Capital Management, Inc. (1)...... 6,582,775 16%
Common Stock First Pacific Advisors, Inc. (2)........ 2,597,200 6%
Security Ownership of Directors and Executive Officers
Common Stock William W. Abbott (3)................... 26,616 *
Common Stock Mary H. Futrell (4)..................... 628 *
Common Stock Emita B. Hill (5)....................... 12,779 *
Common Stock Donald E. Kiernan (6)................... 14,421 *
Common Stock Louis G. Lower II (7)................... 228,583 *
Common Stock Joseph J. Melone (8).................... 2,785 *
Common Stock Jeffrey L. Morby (9).................... 17,383 *
Common Stock Shaun F. O'Malley (10).................. 16,536 *
Common Stock Charles A. Parker (11).................. 12,624 *
Common Stock Ralph S. Saul (12)...................... 42,979 *
Common Stock William J. Schoen (13).................. 115,664 *
Common Stock Peter H. Heckman (14)................... 65,541 *
Common Stock George J. Zock (15)..................... 181,724 *
Common Stock Ann M. Caparros (16).................... 22,842 *
Common Stock J. Michael Henderson (17)............... 26,336 *
Common Stock All Directors and Executive Officers as
a group (16 persons) (3), (4), (5), (6),
(7), (8), (9), (10), (11), (12), (13),
(14), (15), (16), (17), (18)............ 793,813 2%
- --------
* Less than 1%.
(1) Ariel Capital Management, Inc. has a principal place of business at 200
East Randolph Drive, Suite 2900, Chicago, IL 60601 and is an investment
adviser registered under section 203 of the Investment Advisers Act of
1940. All securities reported are owned by investment advisory clients of
Ariel Capital Management, Inc., no one of which to the knowledge of Ariel
Capital Management, Inc. owns more than 5% of the class. The foregoing is
based on Amendment No. 4 to Schedule 13G filed by Ariel Capital
Management, Inc. in February 2001.
7
(2) First Pacific Advisors, Inc. has a principal place of business at 11400
West Olympic Boulevard, Suite 1200, Los Angeles, CA 90064 and is an
investment adviser. All securities reported were acquired in the ordinary
course of business and were not acquired for the purpose of and do not
have the effect of changing or influencing the control of the issuer of
such securities and were not acquired in connection with or as a
participant in any transaction having such purpose or effect. The
foregoing is based on the Schedule 13G filed by First Pacific Advisors,
Inc. in February 2001.
(3) Includes 13,338.496 Common Stock Equivalent Units pursuant to the
Director Stock Plan. Also includes options to purchase 4,400 shares of
Common Stock which are currently exercisable pursuant to the Option Plan,
and 1,778 shares which are owned by a trust as to which Mr. Abbott is a
trustee.
(4) Consists entirely of 627.888 Common Stock Equivalent Units pursuant to
the Director Stock Plan.
(5) Includes 8,379.383 Common Stock Equivalent Units pursuant to the Director
Stock Plan. Also includes options to purchase 4,400 shares of Common
Stock which are currently exercisable pursuant to the Option Plan.
(6) Includes 8,221.456 Common Stock Equivalent Units pursuant to the Director
Stock Plan. Also includes options to purchase 4,400 shares of Common
Stock which are currently exercisable pursuant to the Option Plan.
(7) Includes 6,082.949 Common Stock Equivalent Units pursuant to the Deferred
Compensation Plan. Also includes options to purchase 212,500 shares of
Common Stock which are currently exercisable pursuant to the Option Plan.
Does not include options to purchase 787,500 shares granted pursuant to
the Option Plan, 150,000 of which will vest on January 1, 2002, 62,500 of
which will vest on February 14, 2002, 150,000 of which will vest on
January 1, 2003, 62,500 of which will vest on February 14, 2003, 150,000
of which will vest on January 1, 2004, 62,500 of which will vest on
February 14, 2004 and 150,000 of which will vest on January 1, 2005.
(8) Includes 784.830 Common Stock Equivalent Units pursuant to the Director
Stock Plan.
(9) Includes 12,982.789 Common Stock Equivalent Units pursuant to the
Director Stock Plan. Also includes options to purchase 4,400 shares of
Common Stock which are currently exercisable pursuant to the Option Plan.
(10) Includes 11,735.545 Common Stock Equivalent Units pursuant to the
Director Stock Plan. Also includes options to purchase 4,400 shares of
Common Stock which are currently exercisable pursuant to the Option Plan.
(11) Includes 8,223.986 Common Stock Equivalent Units pursuant to the Director
Stock Plan. Also includes options to purchase 4,400 shares of Common
Stock which are currently exercisable pursuant to the Option Plan.
(12) Includes 28,379.275 Common Stock Equivalent Units pursuant to the
Director Stock Plan. Also includes options to purchase 8,600 shares of
Common Stock which are currently exercisable pursuant to the Option Plan
and 4,000 shares which are owned by a trust as to which Mr. Saul is a
trustee.
(13) Includes 14,064.417 Common Stock Equivalent Units pursuant to the
Director Stock Plan. Also includes options to purchase 4,400 shares of
Common Stock which are currently exercisable pursuant to the Option Plan
and 97,200 shares owned by trusts as to which Mr. Schoen is a trustee.
(14) Includes 3,041.475 Common Stock Equivalent Units pursuant to the Deferred
Compensation Plan. Also includes options to purchase 62,500 shares of
Common Stock which are currently exercisable pursuant to the Option Plan.
Does not include options to purchase 237,500 shares granted pursuant to
the Option Plan, 50,000 of which will vest on January 01, 2002, 12,500 of
which will vest on February 14, 2002, 50,000 of which will vest on
January 01, 2003, 12,500 of which will vest on February 14, 2003, 50,000
of which will vest on January 01, 2004, 12,500 of which will vest on
February 14, 2004 and 50,000 of which will vest on January 01, 2005.
(15) Includes options to purchase 42,650 shares of Common Stock which are
currently exercisable pursuant to the Option Plan. Does not include
options to purchase 32,550 shares granted pursuant to the Option Plan,
3,750 of which will vest on April 28, 2001, 8,750 of which will vest on
February 14, 2002, 2,550 of which will vest on February 23, 2002, 8,750
of which will vest on February 14, 2003 and 8,750 of which will vest on
February 14, 2004. Also includes 67,538 shares held by his wife, as to
which Mr. Zock shares voting and dispositive power.
(16) Includes 453.55 Common Stock Equivalent Units pursuant to the Deferred
Compensation Plan. Also includes options to purchase 22,375 shares of
Common Stock which are currently exercisable pursuant to the Option Plan.
Does not include options to purchase 5,925 shares granted pursuant to the
Option Plan, 750 of which
8
will vest on April 28, 2001, 1,425 of which will vest on February 14,
2002, 900 of which will vest on February 23, 2002, 1,425 of which will
vest on February 14, 2003 and 1,425 of which will vest on February 14,
2004.
(17) Includes 198.464 Common Stock Equivalent Units pursuant to the Deferred
Compensation Plan. Also includes options to purchase 26,137.5 shares of
Common Stock which are currently exercisable pursuant to the Option Plan.
Does not include options to purchase 4,512.5 shares granted pursuant to
the Option Plan, 250 of which will vest on April 28, 2001, 925 of which
will vest on February 14, 2002, 1,487.5 of which will vest on February
23, 2002, 925 of which will vest on February 14, 2003 and 925 of which
will vest on February 14, 2004.
(18) Includes options for the group of Directors and Executive Officers to
purchase 411,512.5 shares of Common Stock which are currently exercisable
pursuant to the Option Plan. Does not include options to purchase
1,085,837.5 shares which vest in the future. The grant dates and vesting
schedules vary; however, each award expires 10 years from the date of
grant. Also includes 106,738.065 Common Stock Equivalent Units pursuant
to the Director Stock Plan and 10,197.39 Common Stock Equivalent Units
pursuant to the Deferred Compensation Plan.
Section 16(a) Beneficial Ownership Reporting Compliance
The Company has established procedures by which Executive Officers and
Directors provide relevant information regarding transactions in Company 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, with the following exception,
there was full compliance with the reporting requirements under Section 16(a).
In 2000, Mr. Manion was awarded stock options at the time of his hire which
were reported but not on a timely basis.
9
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following Summary Compensation Table sets forth all reportable
compensation awarded to, earned by or paid to the Company's former Chief
Executive Officer, current Chief Executive Officer and the other four most
highly compensated Executive Officers for services rendered in the capacities
described above.
Annual
Compensation Long-term Compensation
--------------- --------------------------
Awards Payouts
------------------ -------
Restricted LTIP All Other
Name and Principal Salary Bonus Stock Options Payouts Compensation
Position Year ($) ($)(4) Awards ($) (#)(5) ($)(6) ($)(7)
------------------ ---- ------- ------- ---------- ------- ------- ------------
Louis G. Lower II(1).... 2000 458,337 400,000 138,400 750,000 300,000 127,844(8)
President & Chief
Executive Officer 1999 0 0 0 250,000 0 0
Paul J. Kardos(2)....... 2000 170,835 0 0 0 23,915 2,324,436(9)
Former Chairman of the
Board, 1999 410,004 400,000 0 0 192,694 17,134(9)
President & Chief
Executive Officer 1998 410,004 400,000 0 50,400 383,887 17,134(9)
Peter H. Heckman(3)..... 2000 218,269 150,000 0 300,000 150,000 117,981(10)
Executive Vice
President &
Chief Financial Officer
George J. Zock.......... 2000 250,008 0 0 35,000 29,163 17,678(11)
Executive Vice
President-- 1999 239,588 0 0 0 93,835 16,510(11)
Insurance Operations 1998 225,000 69,863 0 25,200 175,556 16,510(11)
Ann M. Caparros......... 2000 172,188 0 0 5,700 10,043 15,650(12)
General Counsel & Chief 1999 164,719 0 0 0 32,256 14,750(12)
Compliance Officer 1998 158,501 16,246 0 3,600 61,835 13,150(12)
J. Michael Henderson.... 2000 167,836 0 0 3,700 9,789 13,674(13)
Vice President &
Treasurer 1999 161,250 0 0 0 31,577 12,862(13)
1998 150,000 57,186 0 6,950 58,519 11,089(13)
- --------
(1) Mr. Lower was hired effective February 1, 2000, pursuant to an employment
agreement executed in December 1999, which included the grant of stock
options in 1999.
(2) Mr. Kardos retired from the Company effective May 31, 2000.
(3) Mr. Heckman was hired effective April 10, 2000.
(4) The Annual Compensation Bonus amounts are paid pursuant to the Horace
Mann Educators Corporation Short-Term Incentive Plan.
(5) The Options are awarded pursuant to the Horace Mann Educators Corporation
1991 Stock Incentive Plan. The number of options shown for 1998, reflects
an award made in 1998 and an award made in 1999 based on 1998 performance
as discussed in the Report on Executive Compensation of the Compensation
Committee of the Board of Directors in the Proxy Statement for the 1999
Annual Shareholders meeting.
(6) The Long-term Compensation Payout amounts are paid pursuant to the Horace
Mann Educators Corporation Long-term Incentive Plan.
(7) Includes Company contributions to the Horace Mann Supplemental Retirement
and Savings ("401(k)") Plan and to the Horace Mann Money Purchase Pension
("MPP") Plan (both defined contribution plans) and Company contributions
attributable to group term life insurance premiums.
(8) For Mr. Lower, $5,100 was contributed to the 401(k) Plan in 2000. In
addition, $8,500 was contributed to the MPP Plan on behalf of Mr. Lower
in 2000. In 2000, $45 was attributed to group term life insurance
premiums. Also includes $114,199 for relocation expenses.
10
(9) For Mr. Kardos, $5,100 was contributed to the 401(k) Plan in 2000, $4,800
in 1999, and $4,800 in 1998. In addition, $11,900 was contributed to the
MPP Plan on behalf of Mr. Kardos in 2000, $11,200 in 1999, and $11,200 in
1998. In 2000, $378 was attributed to group term life insurance premiums,
$1,134 in 1999, and $1,134 in 1998. In connection with the Board's
decision to hire a new CEO, Mr. Kardos and the Board mutually agreed to
accelerate Mr. Kardos' employment contract and the payments therein as
described in Agreements with Key Employees. In 2000, Mr. Kardos received
$36,268 for unused vacation, an accelerated short-term bonus payment of
$633,333, a lump sum distribution from the nonqualified MPP Plan of
$517,906, seven monthly payments payable under the defined benefit
portion of the ESERP totaling $358,566, monthly benefit payments from the
Horace Mann Pension Plan totaling $66,042, a lump sum payment from the
MPP Plan totaling $154,172, additional one-time retirement compensation
and associated taxes of $23,479, the payment of FICA taxes for exercise
of stock options of $38,959 and an acceleration of salary payments of
$478,333.
(10) For Mr. Heckman, $5,100 was contributed to the 401(k) Plan in 2000. In
addition, $8,500 was contributed to the MPP Plan on behalf of Mr. Heckman
in 2000. In 2000, $33 was attributed to group term life insurance
premiums. Also includes $104,348 for relocation expenses.
(11) For Mr. Zock, $5,100 was contributed to the 401(k) Plan in 2000, $4,800
1999, and $4,800 in 1998. In addition, $11,900 was contributed to the MPP
Plan on behalf of Mr. Zock in 2000, $11,200 in 1999, and $11,200 in 1998.
In 2000, $678 was attributed to group term life insurance premiums, $510
in 1999 and $510 in 1998.
(12) For Ms. Caparros, $5,100 was contributed to the 401(k) Plan in 2000,
$4,800 in 1999, and $4,800 in 1998. In addition, $10,200 was contributed
to the MPP Plan on behalf of Ms. Caparros in 2000, $9,600 in 1999, and
$8,000 in 1998. In 2000, $350 was attributed to group term life premiums,
$350 in 1999 and $350 in 1998.
(13) For Mr. Henderson, $5,100 was contributed to the 401(k) Plan in 2000,
$4,800 in 1999, and $3,027 in 1998. In addition, $8,500 was contributed
to the MPP Plan on behalf of Mr. Henderson in 2000, $8,000 in 1999, and
$8,000 in 1998. In 2000, $74 was attributed to group term life premiums,
$62 in 1999 and $62 in 1998.
OPTION GRANTS IN LAST FISCAL YEAR
Grant
Date
Individual Grants Value
----------------------------------------- ------------
Options
Granted to
Employees Exercise
Options in Fiscal or Base Grant Date
Granted Year Price Expiration Present
Name (#) % of Total ($/Sh) Date Value ($)
---- ------- ---------- -------- ---------- ------------
Louis G. Lower II........ 500,000(1) 34.0 18.08 02/01/2010 4,945,919(2)
Peter H. Heckman......... 190,000(1) 12.9 17.11 04/10/2010 1,513,547(3)
Peter H. Heckman......... 60,000(1) 4.1 16.38 05/25/2010 488,495(4)
- --------
(1) These awards to Mr. Lower and Mr. Heckman were made pursuant to each of
their employment agreements as described in the section Agreements with
Key Employees. The options vest in five equal annual installments
beginning on January 1, 2001.
(2) The Bloomberg standard option valuation model for American options was
used to calculate the present value of the option on the grant date. The
valuation assumed an expected volatility rate of 65%, a risk-free rate of
return of 6.6%, a dividend yield of 2.2% and a delay in exercise based on
vesting. There were no adjustments made for non-transferability or risk of
forfeiture.
(3) The Bloomberg standard option valuation model for American options was
used to calculate the present value of the option on the grant date. The
valuation assumed an expected volatility rate of 50%, a risk-free rate of
return of 5.8%, a dividend yield of 2.5% and a delay in exercise based on
vesting. There were no adjustments made for non-transferability or risk of
forfeiture.
11
(4) The Bloomberg standard option valuation model for American options was
used to calculate the present value of the option on the grant date. The
valuation assumed an expected volatility rate of 57%, a risk-free rate of
return of 6.3%, a dividend yield of 2.0% and a delay in exercise based on
vesting. There were no adjustments made for non-transferability or risk of
forfeiture.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
Shares Number of Securities Value of Unexercised
Acquired Value Underlying Unexercised In-the-Money
On Exercise Realized Options at FY-END (#) Options at FY-END ($)
Name (#) ($) Exercisable/Unexercisable Exercisable/Unexercisable
---- ----------- --------- ------------------------- -------------------------
Louis G. Lower II....... 0 / 750,000 0 / 2,108,750
Paul J. Kardos.......... 500,000 2,647,884 67,800 / 12,600 0 / 0
Peter H. Heckman........ 0 / 250,000 0 / 1,110,050
George J. Zock.......... 31,350 / 8,850 0 / 0
Ann M. Caparros......... 20,050 / 2,550 0 / 0
J. Michael Henderson.... 23,725 / 3,225 0 / 0
LONG-TERM INCENTIVE PLANS--AWARDS IN LAST FISCAL YEAR
Estimated Future Payouts
Performance or Under Non-Stock Price-Based Plans(1)
Other Period Until -----------------------------------------
Maturation or Threshold Target Maximum
Name Payout (%) (%) (%)
---- ------------------ ------------- ------------ -------------
Louis G. Lower II(2).... 1999-2002 0 60.00 120.00
2000-2003 0 60.00 120.00
2001-2004 0 60.00 120.00
Paul J. Kardos.......... 1997-2000 0 60.00 120.00
Peter H. Heckman(2)..... 2000-2003 0 50.00 100.00
2001-2004 0 50.00 100.00
George J. Zock.......... 1998-2001 0 50.00 100.00
1999-2002 0 50.00 100.00
2000-2003 0 50.00 100.00
2001-2004 0 50.00 100.00
Ann M. Caparros......... 1998-2001 0 30.00 60.00
1999-2002 0 30.00 60.00
2000-2003 0 30.00 60.00
2001-2004 0 30.00 60.00
J. Michael Henderson.... 1998-2001 0 25.00 50.00
1999-2002 0 25.00 50.00
2000-2003 0 25.00 50.00
2001-2004 0 25.00 50.00
- --------
(1) The Threshold, Target and Maximum numbers are the percentage of the
individual's base salary at the final date of the applicable performance
period.
(2) For Mr. Lower and Mr. Heckman, the Long-term Incentive Plan amount payable
in 2001 is guaranteed as described in the section Agreements with Key
Employees.
12
PENSION AND EXCESS PENSION PLANS
The following pension table illustrates the total benefits available
without considering social security offsets.
Years of Covered Service
Covered Remuneration ($) 15 20 25 30 35
------------------------ ------- ------- ------- ------- -------
125,000 37,500 50,000 62,500 75,000 75,000
150,000 45,000 60,000 75,000 90,000 90,000
175,000 52,500 70,000 87,500 105,000 105,000
200,000 60,000 80,000 100,000 120,000 120,000
225,000 67,500 90,000 112,500 135,000 135,000
250,000 75,000 100,000 125,000 150,000 150,000
300,000 90,000 120,000 150,000 180,000 180,000
400,000 120,000 160,000 200,000 240,000 240,000
450,000 135,000 180,000 225,000 270,000 270,000
500,000 150,000 200,000 250,000 300,000 300,000
600,000 180,000 240,000 300,000 360,000 360,000
700,000 210,000 280,000 350,000 420,000 420,000
800,000 240,000 320,000 400,000 480,000 480,000
900,000 270,000 360,000 450,000 540,000 540,000
1,000,000 300,000 400,000 500,000 600,000 600,000
- --------
(1) Represents the maximum combined benefits payable from all qualified and
nonqualified pension plans based on the pre-August 29, 1989 formula, as
defined below, without regard to social security offsets.
(2) As of December 31, 2000, Mr. Lower has 0 years of credited service, Mr.
Heckman has 0 years; Mr. Zock has 25 years; Ms. Caparros has 6 years and
Mr. Henderson has 3 years.
Compensation for purposes of the defined benefit plan includes only
compensation earned while participating in the defined benefit plan. In
general, eligible compensation for Executive Officers includes base salaries
and cash bonuses. Although compensation voluntarily deferred by an employee is
not considered as eligible earnings for pension purposes, there is a special
exception for employees who participate in the Company's defined contribution
(401(k)) plan. The employee's tax-deferred contributions to that plan are
eligible earnings under the defined benefit plan. In addition, any amount
selected pursuant to Section 125 of the Internal Revenue Code is also
considered eligible earnings under the defined benefit plan.
For participants hired prior to August 29, 1989, annual benefits would be
determined by multiplying an average of the 36 highest consecutive months of
earnings by 2% times years of credited service minus 50% of the social
security income benefit earned while an employee. For participants hired after
August 29, 1989, benefits would be determined by multiplying an average of the
36 highest consecutive months of earnings by 1.6% times years of credited
service. Under the terms of the Plan, a maximum of 30 years is eligible for
credited service. The CEO's retirement benefits are described in the section
Agreement with Key Employees.
DIRECTOR COMPENSATION
A Director, other than an Officer of the Company, receives an annual
retainer of $25,000 and a fee of $1,000 plus expenses for attendance (whether
in person or by telephone) at each Board and Board Committee meeting. The
Chairman of each Committee receives an additional annual retainer of $2,500
for serving in such capacity. The Chairman of the Board receives an annual
retainer of $75,000 in addition to the other fees described above. Directors
have the option to take all or part of such fees in the form of Common Stock
of the Company, on a deferred compensation basis, with a 25% matching addition
to the sums listed above made by the Company pursuant to the Director Stock
Plan. In addition to the foregoing compensation, in May 2000 the Chairman of
the Board was granted 6,000 stock options and each Director was granted 1,800
stock options at market price pursuant to the Horace Mann Educators
Corporation 1991 Stock Incentive Plan.
13
AGREEMENTS WITH KEY EMPLOYEES
Effective February 1, 2000, the Company entered into an employment
agreement with Mr. Lower employing him as the Company's President and Chief
Executive Officer. That agreement is an exhibit to the Company's Annual Report
on Form 10-K for 2000. The term of that agreement expired on December 31, 2000
but is subject to an annual evergreen renewal which extends the agreement an
additional year on each September 1, so long as neither Mr. Lower or the
Company has, prior to September 1, notified the other that the agreement will
not so extend. Its current expiry date is December 31, 2001. The agreement
provides for an annual salary of $500,004 and for Mr. Lower to participate in
the Company's short and long-term bonus plans, with minimum guaranteed bonuses
under each of those plans for payments in 2001 ($400,000 and $300,000,
respectively). Mr. Lower received a stock grant of 10,000 shares of Common
Stock and options to purchase 750,000 shares of Common Stock, vesting 150,000
on January 1, 2001 and each successive January 1 through January 1, 2005 so
long as he is employed by the Company on each such date. The Company also
agreed to pay the following retirement benefits to Mr. Lower:
Last Date of Employment Annual Benefit
----------------------- --------------
On or prior to December 31, 2000........................... $ 0
January 1, 2001 to December 31, 2001....................... $ 45,000
January 1, 2002 to December 31, 2002....................... $ 90,000
January 1, 2003 to December 31, 2003....................... $135,000
January 1, 2004 or later................................... $180,000
The agreement contains provisions regarding reimbursement of Mr. Lower's
costs of moving to Springfield, Illinois, including under certain
circumstances covering any loss on sale of the house he has purchased in
Springfield and provisions relating to Mr. Lower's death, disability or other
termination of his employment. In addition, the agreement provides that if
there is a Change of Control, as defined therein, and Mr. Lower's employment
is within three years thereof actually or constructively terminated, Mr. Lower
will be paid a lump-sum cash amount equal to the sum of (i) three times the
greater of his highest annual cash compensation from the Company or $1,200,000
and (ii) the actuarially determined present value of Mr. Lower's retirement
benefits calculated as if he had been employed by the Company until the date
which is three years after the Change in Control. Mr. Lower's other benefits
are also continued for three years and there is an excise tax gross-up
provision.
Effective February 1, 2000, the Company amended its existing employment
agreement with Mr. Kardos, providing for his retirement from the Company on
May 31, 2000. That agreement is an exhibit to the Company's Annual Report on
Form 10-K for 2000. The amendment provided for Mr. Kardos to receive 5/12 of
the short and long-term bonuses he would have received for calendar year 2000
(less the $400,000 guaranteed short-term bonus for that period) and for him to
receive a lump sum payment on May 31, 2000 of $1,111,666.
The Company entered into an employment agreement with Mr. Heckman,
Executive Vice President & Chief Financial Officer, effective April 10, 2000.
That agreement is an exhibit to the Company's Annual Report on Form 10-K for
2000. The agreement provides for an annual salary of $300,000 and for Mr.
Heckman to participate in the Company's short and long-term bonus plans, with
minimum guaranteed bonuses under each of those plans for payments in 2001
($150,000 each). Mr. Heckman received a total grant of stock options to
purchase 250,000 shares of Common Stock, vesting 50,000 on January 1, 2001 and
each successive January 1 through January 1, 2005 so long as he is employed by
the Company on each such date.
In addition, the Company has entered into agreements with certain key
employees, including each of Mr. Heckman, Mr. Zock, Ms. Caparros and Mr.
Henderson, which provide that if, within three years after a change in control
of the Company, the employee is terminated from employment by the Company,
whether actually or constructively, for any reason other than cause, the
employee will receive (i) a one-time cash payment, (ii) continued insurance
coverage for a specified period, (iii) the present value of such employee's
accrued benefits as of the date of termination under the Company's
nonqualified supplemental pension plan(s) (which amount will be offset against
any amount payable under such plan) and (iv) a payment sufficient to negate
the effect on such employee of excise taxes attributable to the benefits
received by the employee under the agreement. For Mr. Heckman, Mr. Zock and
Ms. Caparros, the one-time cash payment would be equal to 2.9 times the
highest annual cash compensation (salary
14
and bonus) received by the employee in the five preceding years, and the
specified period during which such employee's insurance benefits would
continue is two years, 11 months. For Mr. Henderson, the one-time cash payment
would be equal to two times the highest annual cash compensation (salary and
bonus) received by the employee in the five preceding years, and the specified
period during which his insurance benefits would continue is two years.
REPORT ON EXECUTIVE COMPENSATION OF THE COMPENSATION COMMITTEE OF THE BOARD OF
DIRECTORS
The Compensation Committee of the Board of Directors (the "Compensation
Committee") reviews compensation of the Company's Named Executive Officers and
recommends actions to the Board regarding the cash compensation (base salary
and cash bonuses) to be paid to the Chief Executive Officer ("CEO") and the
other Named Executive Officers of the Company as well as grants of stock,
stock options, stock appreciation rights and restricted stock awards.
Currently, the components of compensation for the CEO and each Named Executive
Officer are base salary, short-term incentive compensation, long-term
incentive compensation, stock and stock options. Each of these components is
discussed in more detail below.
Base Salary
In determining the base salaries for the Named Executive Officers of the
Company, the primary information considered by the Compensation Committee is
data regarding salaries paid to Executives in similar positions at other
insurance companies. The Compensation Committee has obtained such data from
the Life Office Management Association ("LOMA") Executive Compensation Survey
and the National Association of Independent Insurers ("NAII") Executive
Compensation Survey, specifically: (i) the LOMA Executive Compensation Survey
for U.S. Companies, which for 2000 included data on 113 insurance companies,
(ii) the LOMA Executive Compensation Survey for U.S. Companies with Assets of
Between $1.5 Billion and $5 Billion, which for 2000 included data on 25
insurance companies and (iii) the NAII Executive Compensation Survey for
participating insurance companies which for 2000 included data on 25 insurance
companies (collectively referred to as the "compensation surveys"). The
compensation surveys are used without regard to an analysis of the performance
of the individual companies included in each survey.
The Compensation Committee strives to set salaries for the Company's Named
Executive Officers at average levels for like Executives as indicated in the
compensation surveys, while attempting to have total compensation be at or
above such average levels.
The Compensation Committee considers two additional factors in setting
salaries. Those factors are the possible need for an adjustment to reflect a
change in the position or responsibilities of the Executive and/or to
encourage the Executive to join the Company and the length of the Executive's
industry experience. Either one of these factors could result in a base salary
above the point determined by reference to the salaries of Executives in
similar positions as indicated in the compensation surveys.
When the Compensation Committee reviews the base salary of Named Executive
Officers, which is done an average of 12 to 24 months after a prior increase,
it makes adjustments to base salary on the basis of its subjective evaluation
of five items. The first four items, all considered in roughly equal weight
are: (i) the officer's performance regarding planning, organizing and
performing assigned tasks; (ii) the officer's performance concerning managing
costs; (iii) the officer's performance concerning managing personnel who
report to the officer; and (iv) the officer's performance in encouraging an
ethical work environment, providing exemplary customer service and providing a
work environment in which employees experience fair treatment and have an
equal opportunity for advancement. The fifth item is a review of the
compensation surveys to compare the CEO or Named Executive Officer's salary to
the average salaries for similar positions as reported in the compensation
surveys. If the CEO or Named Executive Officer is below the average survey
salaries, a larger salary increase may occur. If the CEO or Named Executive
Officer is above the average survey salaries, the Officer may not receive as
much of an increase as the individual would have received as a result of the
analysis of only the first four items or the increase in base salary may be
delayed. The fifth item is considered only if the Compensation Committee
determines that a base salary increase is warranted after analyzing the first
four items.
15
In 2000, the Compensation Committee set initial base salaries for a Named
Executive Officer as well as the CEO. In addition, the Compensation Committee
reviewed the base salaries of one other Named Executive Officer. The
Compensation Committee noted that the Company entered into an employment
agreement with the CEO effective February 1, 2000 which fixed his salary as
described in the section Agreements with Key Employees.
Horace Mann Educators Corporation Short-Term Incentive Plan
The Company's Short-Term Incentive Plan ("STIP") is designed to reward all
officers (the "Officers") of the Company for achieving corporate and operating
unit short-term performance objectives. The STIP is intended to provide an
incentive for superior work and to motivate Officers toward even higher
achievement and business results, to tie their goals and interests to those of
the Company and its Shareholders and to enable the Company to attract and
retain highly qualified employees. The STIP is also intended to secure the
full deductibility of annual incentive compensation payable to the Company's
Named Executive Officers whose compensation is required to be reported in the
Company's proxy statement. All compensation payable hereunder to such persons
is intended to qualify as "performance-based compensation" as described in
Section 162(m)(4)(C) of the Internal Revenue Code of 1986, as amended (the
"Code").
The STIP provides that awards to Named Executive Officers are to be tied to
performance goals based upon one or more of the following business criteria,
either applied to the Company as a whole or individual operating units, any of
which may be measured either in absolute terms or as compared to goals set by
the Compensation Committee or the performance of other companies: financial
ratings, return on equity, earnings, earnings growth, earnings per share,
growth in earnings per share, operating earnings, growth in operating
earnings, operating earnings per share, growth in operating earnings per
share, insurance premiums, growth in insurance premiums, total return to
Shareholders (stock price appreciation plus dividends), combined ratio,
expense ratio, number of agents and growth in number of agents. In addition,
to the extent consistent with deductibility of STIP payments under Section
162(m) of the Code, performance goals may be based upon individual attainment
of personal objectives set by the Chief Executive Officer or the Compensation
Committee including, but not limited to, implementing policies and plans,
negotiating transactions and sales, developing long-term business goals and
exercising managerial responsibility. Measurement of the Company's or an
Officer's performance against the performance goals established by the
Committee shall be objectively determinable, as defined in the STIP. The STIP
also provides that the effects of extraordinary events during a performance
period which have a material impact on the relevant performance measures may
be eliminated from the calculation of such performance at the discretion of
the Compensation Committee.
The Compensation Committee previously determined the basis on which Named
Executive Officers would be eligible to receive compensation under the STIP
with regard to the performance period of January 1, 2000 through December 31,
2000 by establishing performance goals and an objective method for computing
the amount of STIP payments to the Named Executive Officers if those goals
were attained. The Committee determined that no STIP awards with regard to
2000 would be paid unless the Company's return on equity for 2000 was equal to
or greater than the cost of capital at the beginning of 2000. The Committee
also determined that the corporate portion of each award would be determined
on the basis of two performance goals: operating earnings per share (40%
weighting) and statutory premiums (60% weighting) each as compared with
budget.
With regard to 2000, the Compensation Committee concluded that no STIP
awards were payable for the Named Executive Officers, except those which were
contractually guaranteed, including the CEO's, which in 2001 was contractually
guaranteed to be at least $400,000 as described in the above section
Agreements with Key Employees.
Horace Mann Educators Corporation Long-Term Incentive Plan
The Company's Long-Term Incentive Plan ("LTIP") is designed to reward
certain officers of the Company for achieving corporate and operating division
long-term performance objectives. The LTIP is intended to motivate
participating Officers toward even higher achievement and business results, to
tie their goals and interests to those of the Company and its Shareholders and
to enable the Company to attract and retain highly qualified executive
employees. The LTIP is also intended to secure the full deductibility of
incentive compensation payable to the
16
Company's Named Executive Officers whose compensation is required to be
reported in the Company's proxy statement. All compensation payable hereunder
to such persons is intended to qualify as "performance-based compensation" as
described in Section 162(m)(4)(C) of the Code.
The Compensation Committee previously determined that certain officers,
including all of the Named Executive Officers, are eligible to receive
compensation under the LTIP.
The Compensation Committee previously set the following performance goals,
to be weighted equally: average annual return on equity for 1997, 1998, 1999
and 2000 compared to a minimum goal exceeding 12% with a target goal of a 15%
return on equity; and total shareholder return from December 31, 1997 to
December 31, 2000 as compared with the S&P Insurance Composite Return for the
period.
The average annual return on equity for 1997, 1998, 1999 and 2000 was
13.4%. The total shareholder return from December 31, 1997 to December 31,
2000 was 12.6% as compared with the S&P Insurance Composite Return for the
period which was 116.9%.
With regard to the 1997-2000 performance period, the Compensation Committee
concluded that the awards for Named Executive Officers would be calculated on
the basis of the foregoing performance goals, except for those which were
contractually guaranteed, including the CEO's, which in 2001 was contractually
guaranteed to be at least $300,000 as described in the above section
Agreements with Key Employees.
Horace Mann Educators Corporation Deferred Compensation Plan
Effective December 1, 1997, the Company established the Horace Mann
Educators Corporation Deferred Compensation Plan (the "Deferred Compensation
Plan" or "DCP") whereby employees of the Company who are eligible for the LTIP
described above may defer receipt of all or a part of their STIP bonus
compensation and/or their LTIP bonus compensation on a pretax basis to common
stock equivalent units. The DCP is an unfunded plan and is maintained by the
Company primarily for the purpose of providing deferred compensation for a
select group of highly compensated management employees. More particularly,
the purposes of the DCP are to align the interests of certain employees more
closely with the interests of other Shareholders of the Company, to encourage
the highest level of certain employee performance by providing those employees
with a direct interest in the Company's attainment of its financial goals and
to help attract and retain certain qualified employees. In furtherance of the
foregoing, the Compensation Committee determined that a certain level of
common stock ownership by certain members of management is desirable. If a
certain level of stock ownership is not achieved (as measured at the end of
the year) then a portion of any LTIP award will be deferred into the DCP.
To the extent an investment or distribution of cash or Common Stock may be
made under the DCP, the DCP is intended to qualify for the exemption from
short swing profits liability under Section 16(b) of the Exchange Act,
provided by Rule 16b-3 of the Securities and Exchange Commission as now in
effect or hereafter amended.
Horace Mann Educators Corporation 1991 Stock Incentive Plan
In order to attract, retain and motivate employees, the Company maintains
the Horace Mann Educators Corporation 1991 Stock Incentive Plan (the "Option
Plan"). Under the Option Plan, Executive Officers, potential employees, other
employees and certain Directors are eligible to receive stock options, stock
appreciation rights and stock awards.
The Option Plan is administered by the Compensation Committee which is
comprised of independent Directors. Subject to the provisions of the Option
Plan, the Compensation Committee determines (and for Named Executive Officers,
recommends to the Board) the type of awards, when and to whom awards will be
granted, the vesting period of the awards and the number of shares covered by
each award.
17
Stock option awards are granted at the prevailing market value of the
Company's Common Stock and are exercisable for a period of up to 10 years from
the date of grant. Because awards are granted at market value, any realization
of compensation by employees is tied to subsequent increases in the market
price of the Company's Common Stock. The Compensation Committee believes that
this causes the recipient's financial interest with regard to such incentive
compensation to parallel the financial interests of the Shareholders.
The Compensation Committee previously determined that no stock options
would be granted in 2001 to the named Executive Officers (based on performance
in 2000) unless certain thresholds were met: (i) the Companys operating
earnings per share for 2000 were not less than 90% of the Company's budgeted
operating earnings per share for 2000 and (ii) the individual Officer
performed successfully during 2000 and is performing successfully at the time
the award is granted. Provided the thresholds are met, a percent of the
individual's salary will be calculated pursuant to a formula using the Black-
Sholes methodology. The Committee established 0%-120% as the range used to
calculate the CEO's stock award and also specified the ranges used to
calculate stock option awards to the other Named Executive Officers.
With regard to 2000 performance, the Compensation Committee concluded that
no stock options would be granted to the Named Executive Officers in 2001
based on achievement of operating earnings per share criteria in 2000.
However, the Compensation Committee determined that based on the strides the
Company made in 2000 towards key initiatives being developed and being
deployed to enhance future shareholder value, an award of stock options to the
Named Executive Officers, including the CEO, was appropriate. The CEO was
awarded 250,000 stock options.
NOTE: The Report of the Audit Committee of the Board of Directors, the
Report on Executive Compensation of the Compensation Committee and the Stock
Price Performance Graph shall not be deemed to be incorporated by reference,
in whole or in part, by any general statement incorporating by reference this
Proxy Statement into any filing under the Securities Act of 1933, as amended,
or under the Securities Exchange Act of 1934, as amended.
COMPENSATION COMMITTEE
WILLIAM W. ABBOTT, Chairman
EMITA B. HILL, DONALD E. KIERNAN, JOSEPH J. MELONE, JEFFREY L. MORBY and
WILLIAM J. SCHOEN, Members
18
STOCK PRICE PERFORMANCE GRAPH
The graph below compares cumulative total return* of Horace Mann Educators
Corporation, the S&P 500 Index and the S&P Insurance Composite Index. The
graph assumes $100 invested on December 31, 1995 in Horace Mann Educators
Corporation, S&P 500 Index and S&P Insurance Composite Index.
HORACE MANN EDUCATORS CORPORATION STOCK PRICE PERFORMANCE
[Performance Graph]
12/95 12/96 12/97 12/98 12/99 12/00
----- ----- ----- ----- ----- -----
HMEC.................................. $100 $131 $186 $189 $132 $147
S&P Insurance Composite............... $100 $124 $181 $187 $194 $268
S&P 500............................... $100 $123 $164 $211 $255 $232
19
The graph below compares cumulative total return* of Horace Mann Educators
Corporation, the S&P 500 Index and the S&P Insurance Composite Index. The
graph assumes $100 invested on November 18, 1991 (the date of the Company's
initial public offering of its Common Stock) in Horace Mann Educators
Corporation, S&P 500 Index and S&P Insurance Composite Index.
[Cumulative Total Return Graph]
11/91 12/91 12/92 12/93 12/94 12/95 12/96 12/97 12/98 12/99 12/00
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
HMEC.................... $100 $124 $160 $141 $122 $181 $238 $338 $343 $240 $268
S&P Insurance Composite. $100 $113 $133 $141 $141 $201 $252 $368 $381 $394 $547
S&P 500................. $100 $109 $117 $129 $130 $179 $220 $294 $378 $457 $416
- --------
* The S&P 500 Index, as published by Standard & Poor's ("S&P"), assumes
daily reinvestment of dividends in calculating total return. The S&P
Insurance Index assumes monthly dividend reinvestment. Horace Mann
Educators Corporation assumes reinvestment of dividends when paid.
20
PROPOSAL NO. 2
APPROVAL OF THE COMPANY'S 2001 STOCK INCENTIVE PLAN
The Board of Directors has unanimously approved, and recommends for the
approval by the Shareholders, the Company's 2001 Stock Incentive Plan. The
Company's 1991 Stock Incentive Plan has a ten year term; this means that no
grants may be made under that plan after it has been in existence for ten
years, which will occur during 2001. Therefore, the Board of Directors has
approved the Company's 2001 Stock Incentive Plan in order to provide for stock
incentive grants after the ten year term of the 1991 plan expires.
The Board of Directors believes that grants under a stock incentive plan
constitute an excellent tool to motivate employees of the Company and to align
their interests with those of the Shareholders, as is discussed in more detail
in the Report on Executive Compensation of the Compensation Committee of the
Board of Directors contained herein.
The full text of the plan is included in this proxy statement as Exhibit B.
The following is a summary of the provisions of the Company's 2001 Stock
Incentive Plan.
Shares Available Under 700,000 Common Shares are reserved for delivery
Plan to satisfy awards under the plan. (Sub-limits ap-
ply to different types of awards.)
. Unused shares from expired, unexercised and
cancelled awards are available for grant, as
are shares applied to tax withholding.
. Shares may be newly issued shares or treasury
shares.
Shareholder Approval Shareholders must approve the plan.
Individual Limit No individual may receive grants that could be
exercised for more than 500,000 shares in any
calendar year.
Persons Eligible Any employee (including any officer) or director
of the Company or any of its majority-owned sub-
sidiaries. Prospective employees and directors
may also receive grants under the plan.
Duration of Plan Until terminated by the Board or until all avail-
able shares have been delivered. However, no in-
centive stock options ("ISOs") can be awarded
more than 10 years after the date the plan is
adopted by the Board.
Types of Awards Stock options (including ISOs), restricted
shares, bonus shares, deferred shares, and stock
appreciation rights (SARs).
. Non-transferable, but may be designated by the
Committee as transferable to certain family
members.
Stock Options Rights to purchase shares, at a fixed price, at
any time during the term after vesting conditions
are satisfied.
. Vesting and option term: determined by the Com-
mittee upon grant; term up to 10 years.
Incentive Stock Options ISOs are subject to the following requirements:
. Exercise price must be no less than 100% of the
fair market value or, if granted to a 10% own-
er, 110% of the fair market value.
. No more than $100,000 worth (fair market value
of shares as of the date of grant) may vest in
any year. Amounts in excess of $100,000 will be
treated as nonqualified options.
21
. Employee has no income tax at time of exercise
if required holding periods are satisfied, but
the difference between exercise price and fair
market value of the shares at that time is a
tax preference item subject to alternative
minimum tax.
. If employee meets holding period requirements,
employee's gain is capital gain and the Company
will not be entitled to a deduction with
respect to the option benefit.
. Holding period is two years from grant, and one
year from exercise.
. Purported ISO grants that ultimately do not
qualify for ISO treatment will be treated as
nonqualified options.
Option Exercise Price . Generally, at least 100% of market value.
Exception: Company options (or other awards)
issued in connection with acquisition of another
corporation in exchange for that corporation's
options (or other awards) can have below-market
exercise price in order to preserve economic
value of the acquired corporation's options (or
other awards).
. Exercise price is payable by either of the
following: (i) cash, check or wire transfer, or
(ii) "cashless" exercise procedure through a
stockbroker.
Stock Appreciation Right to receive amount of appreciation in value
Rights (SARs) of Company stock between grant date and exercise
date; no exercise price is required.
. ""Strike price" must be at least 100% of market
value.
. Upon exercise, the "spread" can be paid in
either cash or stock or a combination.
. Quarterly charge to earnings (variable
accounting).
Shares sold at low or zero price, but subject to
forfeiture unless vesting requirements are
satisfied.
Restricted Shares . Vesting can be based on continued employment
and/or performance. Time vesting results in
charge to earnings based on grant date value
allocated over vesting period. Performance
vesting results in charge to earnings at fair
market value on the vesting date.
. Grantee has taxable income equal to the value
of shares as they vest, unless Grantee elects
to be taxed upon grant on the value of all
shares at the grant date. Employer has a
deduction at the same time and in the same amount
as Grantee has income.
Bonus Shares Bonus paid in the form of stock with no
restrictions.
. Amount can be determined pursuant to another
plan or on a case-by-case basis.
Deferred Shares Award denominated in shares, but the shares are
not delivered until the award is paid.
. Award can either be fully vested or subject to
vesting restrictions. Similar to restricted
stock.
. Grantee does not receive taxable income until
shares are delivered; vesting of award has no
tax consequences.
. Can be combined with options to allow Grantee
to elect to defer receipt of shares upon
current option exercise thereby deferring the
taxation of gain.
22
Tax Withholding Grantee can satisfy tax withholding obligations
Obligations by one or more of the following:
. Grantee payment of the withholding amount to
the Company or Subsidiary,
. Company or Subsidiary withholding from
compensation otherwise payable to Grantee, and
. Company or Subsidiary withholding of a portion
of the shares to be delivered upon exercise.
Tax Deductibility Under Under Code (S)162(m), compensation in excess of
Code (S)162(m) $1 million to the Company's CEO and its next 4
highest compensated officers is not deductible
unless it qualifies as "performance-based
compensation".
. The Plan is designed so that Awards could qual-
ify as "performance-based compensation," if all
conditions are satisfied.
. Among other things, Code (S)162(m) requires
that grants be made by a Committee composed
solely of outside directors.
Change of Control Effect: No immediate effect. Unless otherwise
provided in an award agreement, Options and SARs
become fully exercisable, restricted shares vest,
and deferred shares are vested and paid, upon a
termination of employment by the employer other
than for cause (as defined) within 1 year follow-
ing the Change of Control.
. ""Change of Control" generally includes: (A)
approval by stockholders of a merger,
reorganization, consolidation, or similar
transaction in which the Company is not the
surviving corporation or pursuant to which
stock would be converted to cash, securities or
other property, other than a merger in which
the ownership percentage of any stockholder is
not decreased by 10% or more, (B) stockholder
approval of a liquidation, dissolution or sale
of substantially all assets, (C) any "person"
becomes the owner, directly or indirectly, of
51% or more of the company; and (D) certain
changes of more than half of membership of the
current Board of Directors.
Plan Administration Board will administer until outside Board members
are appointed to the Committee. Thereafter, the
Committee of outside Board Members will adminis-
ter, with discretion (subject to the Plan) to:
. select Grantees,
. determine terms and conditions of awards,
. cancel (with Grantee's consent) and regrant
awards,
. accelerate exercisability or vesting of awards
and waive restrictions or conditions on awards,
. extend the term of outstanding awards, and
. interpret and administer the plan.
For the reasons set forth above, the Board of Directors urges the
Shareholders to approve the Company's 2001 Stock Incentive Plan. Proxies
solicited by and on behalf of the Board of Directors will be voted "FOR"
approval of the Company's 2001 Stock Incentive Plan.
23
OTHER MATTERS
Independent Public Accountants
The independent certified public accountants selected by the Board for the
Company's fiscal year ending December 31, 2001 are KPMG LLP. KPMG LLP served
in that capacity for the fiscal year ended December 31, 2000. A representative
from the firm is expected to be present at the Annual Meeting of the Company.
The representative will be given an opportunity to make a statement to the
Shareholders and he or she is expected to be available to respond to
appropriate questions from Shareholders of the Company.
Audit Fees
The aggregate fees billed for professional services rendered by KPMG LLP
for the audit of the Company's annual financial statements for the year ended
December 31, 2000, and the reviews of the condensed financial statements
included in the Company's quarterly reports on Forms 10-Q for the year ended
December 31, 2000, were $336,450.
Financial Information Systems Design and Implementation Fees
The aggregate fees billed for information technology services rendered by
KPMG LLP to the Company during the year ended December 31, 2000 were $0.
All Other Fees
The aggregate fees billed for all other services, exclusive of the fees
disclosed above relating to financial statement audit services rendered by
KPMG LLP during the year ended December 31, 2000, were $347,300 and included
$115,954 for consulting services related to the Company's disputed issue with
the Internal Revenue Service.
Consideration on Non-audit Services Provided by the Independent Accountant
The Audit Committee has considered whether the services provided under
other non-audit services are compatible with maintaining the auditor's
independence.
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 to the Securities and Exchange Commission to each person
solicited hereunder who mails a written request to the Investor Relations
Department, Horace Mann Educators Corporation, 1 Horace Mann Plaza,
Springfield, Illinois, 62715-0001. The Company also will furnish, upon payment
of a reasonable fee to cover reproduction and mailing expenses, a copy of all
exhibits to the Annual Report on Form 10-K.
Shareholder Proposals for 2002 Annual Meeting
Any proposals of Shareholders intended to be presented for inclusion in the
Company's Proxy Statement and Form of Proxy for the next Annual Meeting
scheduled to be held in 2002 must be received in writing by Ann M. Caparros,
Corporate Secretary, 1 Horace Mann Plaza, Springfield, Illinois, 62715-0001
not later than December 31, 2001 in order for such proposal to be considered
for inclusion in the Company's Proxy Statement and proxy relating to the 2002
Annual Meeting.
Shareholders are urged to complete, sign and date the accompanying proxy
card and return it in the enclosed envelope, to which no postage need be
affixed if mailed in the United States.
By order of the Board of Directors,
Ann M. Caparros
Corporate Secretary
Springfield, Illinois
April 02, 2001
Again, we call your attention to the enclosed proxy card. PLEASE VOTE,
DATE, SIGN AND RETURN IT PROMPTLY, regardless of whether you plan to attend
the meeting.
24
EXHIBIT A
HORACE MANN EDUCATORS CORPORATION
BOARD OF DIRECTORS AUDIT COMMITTEE CHARTER
Organization
This charter governs the operations of the Audit Committee. The committee
shall review and reassess the charter at least annually and obtain its
approval by the board of directors. The committee shall be appointed by the
board of directors and shall comprise at least three directors, each of whom
are independent of management and the Company. Members of the committee shall
be considered independent if they have no relationship that may interfere with
the exercise of their independence from management and the Company. All
committee members shall be financially literate, or shall become financially
literate within a reasonable period of time after appointment to the
committee, and at least one member shall have accounting or related financial
management expertise.
Statement of Policy
The Audit Committee shall provide assistance to the board of directors in
fulfilling its oversight responsibility to the shareholders, the investment
community, and others relating to the Company's financial statements and the
financial reporting process, the systems of internal accounting and financial
controls, the internal audit function, the annual independent audit of the
Company's financial statements, and the legal compliance and ethics programs
as established by management and the board. In so doing, it is the
responsibility of the committee to maintain free and open communication among
the committee, the independent auditors, the internal auditors and management
of the Company. In discharging its oversight role, the committee is empowered
to investigate any matter brought to its attention with full access to all
books, records, facilities, and personnel of the Company and the power to
retain outside counsel or other experts for this purpose.
Responsibilities and Processes
The primary responsibility of the Audit Committee is to oversee the
Company's financial reporting process on behalf of the board and report the
results of its activities to the board. Management is responsible for
preparing the Company's financial statements, and the independent auditors are
responsible for auditing those financial statements. The committee in carrying
out its responsibilities believes its policies and procedures should remain
flexible, in order to best react to changing conditions and circumstances. The
committee should take the appropriate actions to set the overall corporate
"tone" for quality financial reporting, sound business risk practices, and
ethical behavior.
The following shall be the principal recurring processes of the Audit
Committee in carrying out its oversight responsibilities. The processes are
set forth as a guide with the understanding that the committee may supplement
them as appropriate.
. The committee shall have a clear understanding with management and the
independent auditors that the independent auditors are ultimately
accountable to the Audit Committee and the Board of Directors who have
the authority and responsibility to select, evaluate, and, where
appropriate, replace the independent auditor.
. The committee shall discuss with the internal auditors and the
independent auditors the overall scope and plans for their respective
audits including the adequacy of staffing and compensation. Also, the
committee shall discuss with management, the internal auditors, and the
independent auditors the adequacy and effectiveness of the accounting and
financial controls, including the Company's system to monitor and manage
business risk, and legal and ethical compliance programs. The committee
shall also discuss with the independent auditors on an annual basis all
relationships they have with the Company that could impair their
independence. Further, the committee shall meet separately with the
internal auditors and the independent auditors, with and without
management present, to discuss the results of their examinations.
A-1
. The committee shall review the interim financial statements with
management and the independent auditors prior to the filing of the
Company's Quarterly Report on Form 10-Q. Also, the committee shall
discuss the results of the quarterly review and any other matters
required to be communicated to the committee by the independent auditors
under generally accepted auditing standards. The chair of the committee
may represent the entire committee for the purposes of this review.
. The committee shall review with management and the independent auditors
the financial statements to be included in the Company's Annual Report on
Form 10-K (or the annual report to shareholders if distributed prior to
the filing of Form 10-K), including their judgement about the quality,
not just acceptability, of accounting principles, the reasonableness of
significant judgments, and the clarity of the disclosures in the
financial statements. Also, the committee shall discuss the results of
the annual audit and any other matters required to be communicated to the
committee by the independent auditors under generally accepted auditing
standards.
A-2
EXHIBIT B
HORACE MANN EDUCATORS
CORPORATION
2001 STOCK INCENTIVE PLAN
Table of Contents
Page
----
Article 1. Establishment, Objectives and Duration....................... 1
1.1. Establishment of the Plan.................................... 1
1.2. Objectives of the Plan....................................... 1
1.3. Duration of the Plan......................................... 1
Article 2. Definitions.................................................. 1
Article 3. Administration............................................... 4
3.1. Board and Committee.......................................... 4
3.2. Powers of the Board.......................................... 4
Article 4. Shares Subject to the Plan................................... 5
4.1. Number of Shares Available................................... 5
4.2. Adjustments in Authorized Shares............................. 6
4.3. Newly Issued Shares or Treasury Shares....................... 6
Article 5. Eligibility and General Conditions of Awards................. 6
5.1. Eligibility.................................................. 6
5.2. Grant Date................................................... 6
5.3. Maximum Term................................................. 6
5.4. Award Agreement.............................................. 6
5.5. Restrictions on Share Transferability........................ 6
5.6. Termination of Affiliation................................... 6
5.7. Nontransferability of Awards................................. 8
Article 6. Stock Options................................................ 8
6.1. Grant of Options............................................. 8
6.2. Award Agreement.............................................. 8
6.3. Option Price................................................. 8
6.4. Grant of Incentive Stock Options............................. 9
6.5. Exercise of Options.......................................... 10
Article 7. Stock Appreciation Rights.................................... 10
7.1. Grant of SARs................................................ 10
7.2. Exercise of SARs............................................. 10
7.3. Payment of SAR Benefit....................................... 10
Article 8. Restricted Shares............................................ 10
8.1. Grant of Restricted Shares................................... 10
8.2. Award Agreement.............................................. 10
8.3. Consideration................................................ 11
8.4. Effect of Forfeiture......................................... 11
8.5. Escrow; Legend............................................... 11
Article 9. Bonus Shares and Deferred Shares............................. 11
9.1. Bonus Shares................................................. 11
9.2. Deferred Shares.............................................. 11
Article 10. Beneficiary Designation...................................... 11
Article 11. Deferrals.................................................... 11
Article 12. Rights of Employees/Directors................................ 11
12.1. Employment................................................... 11
12.2. Participation................................................ 12
i
Page
----
Article 13. Amendment, Modification, and Termination..................... 12
13.1. Amendment, Modification, and Termination..................... 12
13.2. Adjustments Upon Certain Unusual or Nonrecurring Events...... 12
13.3. Awards Previously Granted.................................... 12
Article 14. Withholding.................................................. 12
14.1. Mandatory Tax Withholding.................................... 12
14.2. Notification under Code Section 83(b)........................ 12
Article 15. Additional Provisions........................................ 12
15.1. Successors .................................................. 12
15.2. Gender and Number............................................ 13
15.3. Severability................................................. 13
15.4. Requirements of Law.......................................... 13
15.5. Securities Law Compliance.................................... 13
15.6. No Rights as a Shareholder................................... 13
15.7. Nature of Payments........................................... 13
15.8. Governing Law................................................ 13
ii
Horace Mann Educators Corporation
2001 Stock Incentive Plan
Article 1. Establishment, Objectives and Duration
1.1. Establishment of the Plan. Horace Mann Educators Corporation, a
Delaware corporation (the "Company"), hereby establishes an incentive
compensation plan to be known as the Horace Mann Educators Corporation 2001
Stock Incentive Plan (the "Plan"). The Plan was adopted by the Board of
Directors of the Company (the "Board"), by unanimous written consent and was
thereafter approved by the shareholders of the Company on May 18, 2001. The
Plan is effective as of June 1, 2001 (the "Effective Date").
1.2. Objectives of the Plan. The Plan is intended to allow employees,
officers and directors (as well as prospective employees, officers and
directors) of the Company and its Subsidiaries to acquire or increase equity
ownership in the Company, or to be compensated under the Plan based on growth
in the Company's equity value, thereby strengthening their commitment to the
success of the Company and stimulating their efforts on behalf of the Company,
and to assist the Company and its Subsidiaries in attracting new employees and
directors and retaining existing employees and directors. The Plan is also
intended to optimize the profitability and growth of the Company through
incentives which are consistent with the Company's goals; to provide
incentives for excellence in individual performance; and to promote teamwork.
1.3. Duration of the Plan. The Plan shall commence on the Effective Date
and shall remain in effect, subject to the right of the Board to amend or
terminate the Plan at any time pursuant to Article 13 hereof, until all Shares
subject to it shall have been purchased or acquired according to the Plan's
provisions. However, in no event may an Incentive Stock Option be granted
under the Plan on or after the date ten (10) years following the earlier of
(a) the date the Plan was adopted and (b) the date the Plan was approved by
stockholders of the Company.
Article 2. Definitions
Whenever used in the Plan, the following terms shall have the meanings set
forth below:
2.1. "Article" means an Article of this Plan.
2.2. "Award" means Options (including Incentive Stock Options), SARs,
Restricted Shares, Bonus Shares, and Deferred Shares granted under the Plan.
2.3. "Award Agreement" means a written agreement by which an Award is
evidenced.
2.4. "Beneficial Owner" has the meaning specified in Rule l3d-3 of the SEC
under the Exchange Act.
2.5. "Board" has the meaning set forth in Section 1.1.
2.6. "Bonus Shares" means Shares that are awarded to a Grantee without cost
and without restrictions in recognition of past performance (whether
determined by reference to another employee benefit plan of the Company or
otherwise) or as an incentive to become an employee or director of the Company
or a Subsidiary.
2.7 "Cause" means, unless otherwise defined in an Award Agreement,
(a) a Grantee's conviction of any felony under federal law or the law of
the state in which the act occurred;
(b) dishonesty by the Grantee in the course of fulfilling his or her
employment duties; or
(c) willful and deliberate failure on the part of the Grantee to perform
his or her employment duties in any material respect.
1
2.8. "Change of Control" means, unless otherwise defined in an Award
Agreement, any one or more of the following:
(a) (1) 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 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; 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;
(b) 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
(c) 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 l3d-3 under the Exchange Act, of securities of
the Company that represent 51% or more of the combined Voting Power of the
Company's then outstanding securities; or
(d) 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.
2.9. "Change of Control Value" means the Fair Market Value of a Share on
the date of a Change of Control.
2.10. "Code" means the Internal Revenue Code of 1986, as amended from time
to time, and regulations and rulings thereunder. References to a particular
section of the Code include references to successor provisions of the Code or
any successor statute.
2.11. "Committee" has the meaning set forth in Article 3.
2.12. "Company" has the meaning set forth in Section 1.1.
2.13. "Deferred Shares" means Shares that are awarded to a Grantee on a
deferred basis pursuant to Section 10.2.
2.14. "Disability" means a permanent and total disability, within the
meaning of Code Section 22(e)(3), as determined by the Committee in good
faith, upon receipt of medical advice from one or more individuals, selected
by the Committee, who are qualified to give professional medical advice.
2.15. "Effective Date" has the meaning set forth in Section 1.1.
2.16. "Eligible Person" means (a) any employee (including any officer) or
prospective employee of the Company or any Subsidiary, including any such
employee who is on an approved leave of absence or has been subject to a
disability which does not qualify as a Disability and (b) any director or
prospective director of the Company or any Subsidiary.
2.17. "Exchange Act" means the Securities Exchange Act of 1934, as amended.
References to a particular section of the Exchange Act include references to
successor provisions.
2.18. "Fair Market Value" means (a) with respect to any property other than
Shares, the fair market value of such property determined by such methods or
procedures as shall be established from time to time by the Committee, and (b)
with respect to Shares, unless otherwise determined by the Committee, as of
any date, (1) the mean between the highest and lowest trading prices of the
Shares on such date on the New York Stock Exchange Composite Transactions Tape
(or, if no sale of Shares was reported for such date, on the next preceding
date on which a sale of Shares was reported) or (2) if the Shares are not
listed on the New York Stock Exchange, the mean of the highest and lowest
trading prices of the Shares on such other national exchange on which the
Shares are principally traded or as reported by the National Market System, or
other similar organization; or (3) in the event that there shall be no public
market for the Shares, the fair market value of the Shares as determined by
the Committee.
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2.19. "Grant Date" has the meaning set forth in Section 5.2.
2.20. "Grantee" means an individual who has been granted an Award.
2.21. "Incentive Stock Option" means an Option that is intended to meet the
requirements of Section 422 of the Code or any successor provisions thereto.
2.22. "including" or "includes" mean "including, without limitation," or
"includes, without limitation", respectively.
2.23. "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 (a) an actual or threatened election contest, including a consent
solicitation, relating to the election or removal of one or more members of
the Board, (b) a "tender offer" (as such term is used in Section 14(d) of the
Exchange Act), or (c) a proposed Reorganization Transaction.
2.24. "Mature Shares" means Shares for which the holder thereof has good
title, free and clear of all liens and encumbrances, and which such holder
either (a) has held for at least six (6) months or (b) has purchased on the
open market.
2.25. "0ption" means an option granted under Article 6 of the Plan,
including an Incentive Stock Option.
2.26. "Option Price" means the price at which a Share may be purchased by a
Grantee pursuant to an Option.
2.27. "Option Term" means the period beginning on the Grant Date of an
Option and ending on the expiration date of such Option, as specified in the
Award Agreement for such Option and as may, consistent with the provisions of
the Plan, be extended from time to time by the Board prior to the expiration
date of such Option then in effect.
2.28. "Outside Director" means a member of the Board who is not an employee
of the Company or any Subsidiary.
2.29. "Period of Restriction" means the period during which the transfer of
Restricted Shares is limited in some way (based on the passage of time, the
achievement of performance goals, or upon the occurrence of other events as
determined by the Board) or the Shares are subject to a substantial risk of
forfeiture, as provided in Article 8.
2.30. "Person" shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof,
including a "group" as defined in Section 13(d) thereof.
2.31. "Plan" has the meaning set forth in Section 1.1.
2.32. "Required Withholding" has the meaning set forth in Article 14.
2.33. "Restricted Shares" means Shares that are subject to transfer
restrictions and are subject to forfeiture if conditions specified in the
Award Agreement applicable to such Shares are not satisfied.
2.34. "Retirement" means retirement from active employment with the Company
or Subsidiary pursuant to the early or normal retirement provisions of the
Company's or Subsidiary's qualified retirement plan.
3
2.35. "Rule 16b-3" means Rule 16b-3 promulgated by the SEC under the
Exchange Act, together with any successor rule, as in effect from time to
time.
2.36. "SAR" means a stock appreciation right granted under Article 7 of the
Plan.
2.37. "SEC" means the United States Securities and Exchange Commission, or
any successor thereto.
2.38. "Section" means, unless the context otherwise requires, a Section of
the Plan.
2.39. "Section 16 Person" means a person who is subject to obligations
under Section 16 of the Exchange Act with respect to transactions involving
equity securities of the Company.
2.40. "Share" means a common share, $0.001 par value, of the Company.
2.41. "Strike Price" of any SAR shall equal 100% of the Fair Market Value
of a Share on the Grant Date of such SAR; provided that the Board may specify
a higher Strike Price in the Award Agreement.
2.42. "Subsidiary" means, for purposes of grants of Incentive Stock
Options, a corporation as defined in Section 424(f) of the Code (with the
Company being treated as the employer corporation for purposes of this
definition) and, for all other purposes, a United States or foreign
corporation with respect to which the Company owns, directly or indirectly,
50% (or such lesser percentage as the Committee may specify, which percentage
may be changed from time to time and may be different for different entities)
or more of the Voting Power of such corporation.
2.43. "Termination of Affiliation" occurs on the first day on which an
individual is for any reason no longer providing services to the Company or
any Subsidiary in the capacity of an employee or director, or with respect to
an individual who is an employee or director of a Subsidiary, the first day on
which such entity ceases to be a Subsidiary.
2.44. "Voting Power" means the combined voting power of the then-
outstanding securities of a corporation entitled to vote generally in the
election of directors.
Article 3. Administration
3.1. Board and Committee. Subject to Article 13, and to Section 3.2, the
Plan shall be administered by the Board, or a committee of the Board appointed
by the Board to administer the Plan ("Plan Committee"). To the extent the
Board considers it desirable for compensation delivered pursuant to Awards to
be eligible to comply with or qualify under Rule 16b-3 or qualify for an
exemption from the limit on tax deductibility of compensation under Section
162(m) of the Code, the Plan Committee shall consist of two or more directors
of the Company, all of whom are Outside Directors. The number of members of
the Plan Committee shall from time to time be increased or decreased, and
shall be subject to such conditions, including, but not limited to having
exclusive authority to make certain grants of Awards or to perform such other
acts, in each case as the Board deems appropriate to permit transactions in
Shares pursuant to the Plan to satisfy such conditions of Rule 16b-3 or Code
Section 162(m) as then in effect.
Any references herein to "Board" are, except as the context requires
otherwise, references to the Board or the Plan Committee, as applicable.
3.2. Powers of the Board. Subject to the express provisions of the Plan,
the Board has full and final authority and sole discretion as follows:
(a) taking into consideration the reasonable recommendations of
management, to determine when, to whom and in what types and amounts Awards
should be granted and the terms and conditions applicable to each Award,
including the Option Price, the Option Term, the benefit payable under any
SAR, and whether or not specific Awards shall be granted in connection with
other specific Awards, and if so whether they shall be exercisable
cumulatively with, or alternatively to, such other specific Awards;
(b) to determine the amount, if any, that a Grantee shall pay for
Restricted Shares, whether and on what terms to permit or require the
payment of cash dividends thereon to be deferred, when Restricted Shares
4
(including Restricted Shares acquired upon the exercise of an Option) shall
be forfeited and whether such shares shall be held in escrow;
(c) to construe and interpret the Plan and to make all determinations
necessary or advisable for the administration of the Plan;
(d) to make, amend, and rescind rules relating to the Plan, including
rules with respect to the exercisability and nonforfeitability of Awards
upon the Termination of Affiliation of a Grantee;
(e) to determine the terms and conditions of all Award Agreements (which
need not be identical) and, with the consent of the Grantee, to amend any
such Award Agreement at any time, among other things, to permit transfers
of such Awards to the extent permitted by the Plan; provided that the
consent of the Grantee shall not be required for any amendment which (1)
does not adversely affect the rights of the Grantee, or (2) is necessary or
advisable (as determined by the Board) to carry out the purpose of the
Award as a result of any new or change in existing applicable law;
(f) to cancel, with the consent of the Grantee, outstanding Awards and
to grant new Awards in substitution therefor;
(g) to accelerate the exercisability (including exercisability within a
period of less than six (6) months after the Grant Date) of, and to
accelerate or waive any or all of the terms and conditions applicable to,
any Award or any group of Awards for any reason and at any time, including
in connection with a Termination of Affiliation;
(h) subject to Sections 1.3 and 5.3, to extend the time during which any
Award or group of Awards may be exercised;
(i) to make such adjustments or modifications to Awards to Grantees who
are working outside the United States as are advisable to fulfill the
purposes of the Plan or to comply with applicable local law;
(j) to delegate to officers, employees or independent contractors of the
Company matters involving the routine administration of the Plan and which
are not specifically required by any provision of this Plan to be performed
by the Board of Directors of the Company;
(k) to impose such additional terms and conditions upon the grant,
exercise or retention of Awards as the Board may, before or concurrently
with the grant thereof, deem appropriate, including limiting the percentage
of Awards which may from time to time be exercised by a Grantee; and
(1) to take any other action with respect to any matters relating to the
Plan for which it is responsible.
All determinations on any matter relating to the Plan or any Award
Agreement may be made in the sole and absolute discretion of the Board, and
all such determinations of the Board shall be final, conclusive and binding on
all Persons. No member of the Board shall be liable for any action or
determination made with respect to the Plan or any Award.
Article 4. Shares Subject to the Plan
4.1. Number of Shares Available.
(a) Plan Limit. Subject to Section 4.3 and to adjustment as provided in
Section 4.2, the number of Shares hereby reserved for delivery under the Plan
is 700,000. If any Shares subject to an Award granted hereunder are forfeited
or an Award or any portion thereof otherwise terminates or is settled without
the issuance of Shares, or in the case of SARs, without the payment of cash,
the Shares subject to such Award, to the extent of any such forfeiture,
termination or settlement, shall again be available for grant under the Plan.
If any Shares are withheld for the payment of taxes related to an Award, such
Shares, to the extent of any such withholding, shall again be available or
shall increase the number of Shares available, as applicable, for grant under
the Plan. The Board may from time to time determine the appropriate
methodology for calculating the number of Shares issued pursuant to the Plan.
5
(b) Individual Limit. No Grantee may be granted Options, Restricted Shares,
Bonus Stock or Deferred Shares, or any combination thereof, in an aggregate
number of Shares under the Plan that exceeds 500,000 shares in any calendar
year.
4.2. Adjustments in Authorized Shares. In the event that the Board
determines that any dividend or other distribution (whether in the form of
cash, Shares, other securities, or other property), recapitalization, share
split, reverse share split, subdivision, consolidation or reduction of
capital, reorganization, merger, scheme of arrangement, split-up, spin-off or
combination involving the Company or repurchase or exchange of Shares or other
rights to purchase Shares or other securities of the Company, or other similar
corporate transaction or event affects the Shares such that any adjustment is
determined by the Board to be appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made
available under the Plan, then the Committee shall, in such manner as it may
deem equitable, adjust any or all of (a) the number and type of Shares (or
other securities or property) with respect to which Awards may be granted, (b)
the number and type of Shares (or other securities or property) subject to
outstanding Awards, and (c) the grant or exercise price with respect to any
Award or, if deemed appropriate, make provision for a cash payment to the
holder of an outstanding Award or the substitution of other property for
Shares subject to an outstanding Award; provided, in each case that with
respect to Awards of Incentive Stock Options no such adjustment shall be
authorized to the extent that such adjustment would cause the Plan to violate
Section 422(b)(1) of the Code or any successor provision thereto; and provided
further, that the number of Shares subject to any Award denominated in Shares
shall always be a whole number.
4.3. Newly Issued Shares or Treasury Shares. Shares delivered in connection
with Awards may be newly issued or may be treasury shares.
Article 5. Eligibility and General Conditions of Awards
5.1. Eligibility. The Board may grant Awards to any Eligible Person,
whether or not he or she has previously received an Award.
5.2. Grant Date. The Grant Date of an Award shall be the date on which the
Board grants the Award or such later date as specified by the Board in the
Award Agreement.
5.3. Maximum Term. The Option Term or other period during which an Award
may be outstanding shall not extend more than ten (10) years after the Grant
Date, and shall be subject to earlier termination as herein specified;
provided, however, that any deferral of a cash payment or of the delivery of
Shares that is permitted or required by the Board pursuant to Article 11 may,
if so permitted or required by the Board, extend more than ten (10) years
after the Grant Date of the Award to which the deferral relates.
5.4. Award Agreement. To the extent not set forth in the Plan, the terms
and conditions of each Award (which need not be the same for each grant or for
each Grantee) shall be set forth in an Award Agreement.
5.5. Restrictions on Share Transferability. The Board may include in the
Award Agreement such restrictions on any Shares acquired pursuant to the
exercise or vesting of an Award as it may deem advisable, including
restrictions under applicable federal securities laws.
5.6. Termination of Affiliation. Except as otherwise provided in an Award
Agreement, and subject to the provisions of Section 13.1, the extent to which
the Grantee shall have the right to exercise, vest in, or receive payment in
respect of an Award following Termination of Affiliation shall be determined
in accordance with the following provisions of this Section 5.6.
(a) For Cause. If a Grantee has a Termination of Affiliation for Cause:
(1) the Grantee's Restricted Shares and Deferred Shares that are
forfeitable immediately before such Termination of Affiliation shall
automatically be forfeited on such date, subject in the case of
Restricted Shares to the provisions of Section 8.4 regarding repayment
of certain amounts to the Grantee;
6
(2) the Grantee's Deferred Shares that were vested immediately
before such Termination of Affiliation shall promptly be settled by
delivery to such Grantee of a number of unrestricted Shares equal to
the aggregate number of such vested Deferred Shares, and
(3) any unexercised Option or SAR shall terminate effective
immediately upon such Termination of Affiliation.
(b) On Account of Death or Disability. If a Grantee has a Termination
of Affiliation on account of death or Disability,
(1) the Grantee's Restricted Shares that were forfeitable
immediately before such Termination of Affiliation shall thereupon
become nonforfeitable;
(2) the Grantee's Deferred Shares that were forfeitable immediately
before such Termination of Affiliation shall thereupon become
nonforfeitable and the Company shall, unless otherwise provided in an
Award Agreement, promptly settle all Deferred Shares, whether or not
forfeitable, by delivery to the Grantee (or, after his or her death, to
his or her personal representative or beneficiary designated in
accordance with Article 10) of a number of unrestricted Shares equal to
the aggregate number of the Grantee's Deferred Shares; and
(3) any unexercised Option or SAR, whether or not exercisable
immediately before such Termination of Affiliation, shall be fully
exercisable and may be exercised, in whole or in part, at any time up
to one (1) year after such Termination of Affiliation (but only during
the Option Term) by the Grantee or, after his or her death, by (i) his
or her personal representative or the person to whom the Option or SAR,
as applicable, is transferred by will or the applicable laws of descent
and distribution, or (ii) the Grantee's beneficiary designated in
accordance with Article 10.
(c) On Account of Retirement. If a Grantee has a Termination of
Affiliation on account of Retirement:
(1) the Grantee's Restricted Shares that were forfeitable
immediately before such Termination of Affiliation shall thereupon
become nonforfeitable;
(2) the Grantee's Deferred Shares that were forfeitable immediately
before such Termination of Affiliation shall thereupon become
nonforfeitable and the Company shall, unless otherwise provided in an
Award Agreement, promptly settle all Deferred Shares, whether or not
forfeitable, by delivery to the Grantee (or, after his or her death, to
his or her personal representative or beneficiary designated in
accordance with Article 10) of a number of unrestricted Shares equal to
the aggregate number of the Grantee's Deferred Shares; and
(3) any unexercised Option or SAR, whether or not exercisable
immediately before such Termination of Affiliation, shall be fully
exercisable and may be exercised, in whole or in part, at any time up
to three (3) months after such Termination of Affiliation (but only
during the Option Term by the Grantee or, after his or her death, by
(i) his or her personal representative or the person to whom the Option
or SAR, as applicable, is transferred by will or the applicable laws of
descent and distribution, or (ii) the Grantee's beneficiary designated
in accordance with Article 10.
(d) Change of Control Period. If a Grantee has a Termination of
Affiliation during the period commencing on a Change of Control and ending
on the first anniversary of the Change of Control ("Change of Control
Period"), which Termination of Affiliation is initiated by the Company or a
Subsidiary other than for Cause, then:
(1) the Grantee's Restricted Shares that were forfeitable shall
thereupon become nonforfeitable;
(2) the Grantee's Deferred Shares that were forfeitable shall
thereupon become nonforfeitable and the Company shall immediately
settle all Deferred Shares, whether or not previously forfeitable, by
delivery to such Grantee of a number of unrestricted Shares equal to
the aggregate number of the Grantee's Deferred Shares; and
7
(3) any unexercised Option or SAR, whether or not exercisable on the
date of such Termination of Affiliation, shall thereupon be fully
exercisable and may be exercised, in whole or in part for three (3)
months following such Termination of Affiliation (but only during the
Option Term) by the Grantee or, after his or her death, by (i) his or
her personal representative or the person to whom the Option or SAR, as
applicable, is transferred by will or the applicable laws of descent
and distribution, or (ii) the Grantee's beneficiary designated in
accordance with Article 10.
(e) Any Other Reason. If a Grantee has a Termination of Affiliation for
any reason not specified in Sections 5.6(a), (b), (c) or (d), then;
(1) the Grantee's Restricted Shares and Deferred Shares, to the
extent forfeitable immediately before such Termination of Affiliation,
shall thereupon automatically be forfeited, subject in the case of
Restricted Shares to the provisions of Section 8.4 regarding repayment
of certain amounts to the Grantee; and
(2) any unexercised Option or SAR, to the extent exercisable
immediately before such Termination of Affiliation, shall remain
exercisable in whole or in part for three (3) months after such
Termination of Affiliation (but only during the Option Term) by the
Grantee or, after his or her death, by (i) his or her personal
representative or the person to whom the Option or SAR, as applicable,
is transferred by will or the applicable laws of descent and
distribution, or (ii) the Grantee's beneficiary designated in
accordance with Article 10.
5.7. Nontransferability of Awards.
(a) Except as provided in Section 5.7(c) below, each Award, and each
right under any Award, shall be exercisable only by the Grantee during the
Grantee's lifetime, or, if permissible under applicable law, by the
Grantee's guardian or legal representative.
(b) Except as provided in Section 5.7(c) below, no Award (prior to the
time, if applicable, Shares are issued in respect of such Award), and no
right under any Award, may be assigned, alienated, pledged, attached, sold
or otherwise transferred or encumbered by a Grantee otherwise than by will
or by the laws of descent and distribution (or in the case of Restricted
Shares, to the Company) and any such purported assignment, alienation,
pledge, attachment, sale, transfer or encumbrance shall be void and
unenforceable against the Company or any Subsidiary; provided, that the
designation of a beneficiary shall not constitute an assignment,
alienation, pledge, attachment, sale, transfer or encumbrance.
(c) To the extent and in the manner permitted by the Board, and subject
to such terms and conditions as may be prescribed by the Board, a Grantee
may transfer an Award to (1) a spouse, sibling, parent, child or grandchild
(including adoptive relationships) (any of which, an "Immediate Family
Member") of the Grantee; (2) a trust, the primary beneficiaries of which
consist exclusively of the Grantee or Immediate Family Members of the
Grantee; or (3) a corporation, partnership or similar entity, the owners of
which consist exclusively of the Grantee or Immediate Family Members of the
Grantee.
Article 6. Stock Options
6.1. Grant of Options. Subject to the terms and provisions of the Plan,
Options may be granted to any Eligible Person in such number, and upon such
terms, and at any time and from time to time as shall be determined by the
Board. Without limiting the generality of the foregoing, the Board may grant
to any Eligible Person, or permit any Eligible Person to elect to receive, an
Option in lieu of or in substitution for any other compensation (whether
payable currently or on a deferred basis, and whether payable under this Plan
or otherwise) which such Eligible Person may be eligible to receive from the
Company or a Subsidiary.
6.2. Award Agreement. Each Option grant shall be evidenced by an Award
Agreement that shall specify the Option Price, the Option Term, the number of
shares to which the Option pertains, the time or times at which such Option
shall be exercisable and such other provisions as the Board shall determine.
6.3. Option Price. The Option Price of an Option under this Plan shall be
determined by the Board, and shall be no less than 100% of the Fair Market
Value of a Share on the Grant Date; provided, however, that any Option
8
("Substitute Option") that is (a) granted to a Grantee in connection with the
acquisition ("Acquisition"), however effected, by the Company of another
corporation or entity ("Acquired Entity") or the assets thereof, (b)
associated with an option to purchase shares of stock or other equity interest
of the Acquired Entity or an affiliate thereof ("Acquired Entity Option") held
by such Grantee immediately prior to such Acquisition, and (c) intended to
preserve for the Grantee the economic value of all or a portion of such
Acquired Entity Option, may, to the extent necessary to achieve such
preservation of economic value, be granted with such Option Price as the Board
determines.
6.4. Grant of Incentive Stock Options. At the time of the grant of any
Option to an Eligible Person who is an employee of the Company or a
Subsidiary, the Board may designate that such Option shall be made subject to
additional restrictions to permit it to qualify as an Incentive Stock Option
under the requirements of Section 422 of the Code. Any Option designated as an
Incentive Stock Option shall:
(a) if granted to a 10% Owner, have an Option Price not less than 110%
of the Fair Market Value of a Share on its Grant Date;
(b) be exercisable for a period of not more than ten (10) years (five
(5) years in the case of an Incentive Stock Option granted to a 10% Owner)
from its Grant Date, and be subject to earlier termination as provided
herein or in the applicable Award Agreement;
(c) not have an aggregate Fair Market Value (determined for each
Incentive Stock Option at its Grant Date) of Shares with respect to which
Incentive Stock Options are exercisable for the first time by such Grantee
during any calendar year (under the Plan and any other employee stock
option plan of the Grantee's employer or any parent or Subsidiary thereof
("Other Plans")), determined in accordance with the provisions of Section
422 of the Code, which exceeds $100,000 (the "$100,000 Limit");
(d) If the aggregate Fair Market Value of a Share (determined on the
Grant Date) with respect to the portion of such grant which is exercisable
for the first time during any calendar year ("Current Grant") and all
incentive stock options previously granted under the Plan and any Other
Plans which are exercisable for the first time during a calendar year
("Prior Grants") would exceed the $100,000 Limit, be exercisable as
follows:
(1) the portion of the Current Grant which would, when added to any
Prior Grants, be exercisable with respect to Shares which would have an
aggregate Fair Market Value (determined as of the respective Grant Date
for such options) in excess of the $100,000 Limit shall,
notwithstanding the terms of the Current Grant, be exercisable for the
first time by the Grantee in the first subsequent calendar year or
years in which it could be exercisable for the first time by the
Grantee when added to all Prior Grants without exceeding the $100,000
Limit; and
(2) if, viewed as of the date of the Current Grant, any portion of a
Current Grant could not be exercised under the preceding provisions of
this Subsection (d) during any calendar year commencing with the
calendar year in which it is first exercisable through and including
the last calendar year in which it may by its terms be exercised, such
portion of the Current Grant shall not be an incentive stock option,
but shall be exercisable as a separate Option at such date or dates as
are provided in the Current Grant;
(e) be granted within ten (10) years from the earlier of the date the
Plan is adopted or the date the Plan is approved by the shareholders of the
Company;
(f) shall require the Grantee to notify the Board of any disposition of
any Shares issued pursuant to the exercise of the Incentive Stock Option
under the circumstances described in Section 421(b) of the Code (relating
to certain disqualifying dispositions), within ten (10) days of such
disposition; and
(g) shall by its terms not be assignable or transferable other than by
will or the laws of descent and distribution and may be exercised, during
the Grantee's lifetime, only by the Grantee; provided, however, that the
Grantee may, to the extent provided in the Plan in any manner specified by
the Board, designate in writing a beneficiary to exercise his Incentive
Stock Option after the Grantee's death.
Notwithstanding the foregoing, the Board may, without the consent of the
Grantee, at any time before the exercise of an option (whether or not an
incentive stock option), take any action necessary to prevent such option from
being treated as an incentive stock option.
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6.5. Exercise of Options. Options granted under this Article 6 shall be
exercised by the delivery of a written notice of exercise to the Company,
setting forth the number of Shares with respect to which the Option is to be
exercised, accompanied by full payment for the Shares made by any one or more
of the following means subject to the approval of the Committee:
(a) cash, personal check or wire transfer;
(b) Mature Shares, valued at their Fair Market Value on the date of
exercise;
(c) Restricted Shares held by the Grantee for at least six (6) months
prior to the exercise of the Option, each such Share valued at the Fair
Market Value of a Share on the date of exercise; or
(d) subject to applicable law, pursuant to procedures approved by the
Committee, through the sale of the Shares acquired on exercise of the
Option through a brokerdealer to whom the Grantee has submitted an
irrevocable notice of exercise and irrevocable instructions to deliver
promptly to the Company the amount of sale or loan proceeds sufficient to
pay for such Shares, together with, if requested by the Company, the amount
of federal, state, local or foreign withholding taxes payable by Grantee by
reason of such exercise.
If any Restricted Shares ("Tendered Restricted Shares") are used to pay the
Option Price, a number of Shares acquired on exercise of the Option equal to
the number of Tendered Restricted Shares shall be subject to the same
restrictions as the Tendered Restricted Shares, determined as of the date of
exercise of the Option.
Article 7. Stock Appreciation Rights
7.1. Grant of SARs. Subject to the terms and conditions of the Plan, SARs
may be granted to any Eligible Person at any time and from time to time as
shall be determined by the Board. Each grant of an SAR shall be evidenced by
an Award Agreement, which shall specify the number of SARs granted to each
Grantee (subject to Article 4), the Strike Price thereof, and, consistent with
the other provisions of this Article 7 and of the Plan, such other terms and
conditions pertaining to such SARs as the Board may determine.
7.2. Exercise of SARs. SARs shall be exercised by the delivery of a written
notice of exercise to the Company, setting forth the number of Shares over
which the SAR is to be exercised.
7.3. Payment of SAR Benefit. Upon exercise of an SAR, the Grantee shall be
entitled to receive payment from the Company in an amount determined by
multiplying:
(a) the excess of the Fair Market Value of a Share on the date of
exercise over the Strike Price; by
(b) the number of Shares with respect to which the SAR is exercised;
provided that the Board may provide in the Award Agreement that the benefit
payable on exercise of an SAR shall not exceed such percentage of the Fair
Market Value of a Share on the Grant Date as the Board shall specify. As
determined by the Board, the payment upon SAR exercise may be in cash, in
Shares which have an aggregate Fair Market Value (as of the date of exercise
of the SAR) equal to the amount of the payment, or in some combination
thereof, as set forth in the Award Agreement.
Article 8. Restricted Shares
8.1. Grant of Restricted Shares. Subject to the terms and provisions of the
Plan, the Board, at any time and from time to time, may grant Restricted
Shares to any Eligible Person in such amounts as the Board shall determine.
8.2. Award Agreement. Each grant of Restricted Shares shall be evidenced by
an Award Agreement, which shall specify the Period(s) of Restriction, the
number of Restricted Shares granted, and such other provisions as the Board
shall determine. The Board may impose such conditions or restrictions on any
Restricted Shares as it may deem advisable, including restrictions based upon
the achievement of specific performance goals (Company-wide, divisional,
Subsidiary or individual), time-based restrictions on vesting or restrictions
under applicable securities laws.
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8.3. Consideration. The Board shall determine the amount, if any, that a
Grantee shall pay for Restricted Shares. Such payment shall be made in full by
the Grantee before the delivery of the Shares and in any event no later than
ten (10) business days after the Grant Date for such Shares.
8.4. Effect of Forfeiture. If Restricted Shares are forfeited, and if the
Grantee was required to pay for such Shares or acquired such Restricted Shares
upon the exercise of an Option, the Grantee shall be deemed to have resold
such Restricted Shares to the Company at a price equal to the lesser of (a)
the amount paid by the Grantee for such Restricted Shares, or (b) the Fair
Market Value of a Share on the date of such forfeiture. The Company shall pay
to the Grantee the required amount as soon as is administratively practical.
Such Restricted Shares shall cease to be outstanding, and shall no longer
confer on the Grantee thereof any rights as a shareholder of the Company, from
and after the date of the event causing the forfeiture, whether or not the
Grantee accepts the Company's tender of payment for such Restricted Shares.
8.5. Escrow; Legend. The Board may provide that the certificates for any
Restricted Shares (a) shall be held (together with a stock power executed in
blank by the Grantee) in escrow by the Secretary of the Company until such
Restricted Shares become nonforfeitable or are forfeited or (b) shall bear an
appropriate legend restricting the transfer of such Restricted Shares. If any
Restricted Shares become non-forfeitable, the Company shall cause certificates
for such shares to be issued without such legend.
Article 9. Bonus Shares and Deferred Shares
9.1. Bonus Shares. Subject to the terms of the Plan, the Board may grant
Bonus Shares to any Eligible Person, in such amount and upon such terms and at
any time and from time to time as shall be determined by the Board.
9.2. Deferred Shares. Subject to the terms and provisions of the Plan,
Deferred Shares may be granted to any Eligible Person in such amounts and upon
such terms, and at any time and from time to time, as shall be determined by
the Board. The Board may impose such conditions or restrictions on any
Deferred Shares as it may deem advisable, including time-vesting restrictions
and deferred payment features. The Board may cause the Company to establish a
grantor trust to hold Shares subject to Deferred Share Awards. Without
limiting the generality of the foregoing, the Board may grant to any Eligible
Person, or permit any Eligible Person to elect to receive, Deferred Shares in
lieu of or in substitution for any other compensation (whether payable
currently or on a deferred basis, and whether payable under this Plan or
otherwise) which such Eligible Person may be eligible to receive from the
Company or a Subsidiary.
Article 10. Beneficiary Designation
Each Grantee under the Plan may, from time to time, name any beneficiary or
beneficiaries (who may be named contingently or successively) to whom any
benefit under the Plan is to be paid in case of the Grantee's death before he
or she receives any or all of such benefit. Each such designation shall revoke
all prior designations by the same Grantee, shall be in a form prescribed by
the Company, and will be effective only when filed by the Grantee in writing
with the Company during the Grantee's lifetime. In the absence of any such
designation, benefits remaining unpaid at the Grantee's death shall be paid to
the Grantee's estate.
Article 11. Deferrals
The Board may permit or require a Grantee to defer receipt of the payment
of cash or the delivery of Shares that would otherwise be due by virtue of the
exercise of an Option or SAR, the lapse or waiver of restrictions with respect
to Restricted Shares, the grant of Bonus Shares or the expiration of the
deferral period for Deferred Shares. If any such deferral is required or
permitted, the Board shall establish rules and procedures for such deferrals.
Article 12. Rights of Employees/Directors
12.1. Employment. Nothing in the Plan shall interfere with or limit in any
way the right of the Company to terminate any Grantee's employment or
directorship at any time, nor confer upon any Grantee the right to continue in
the employ or as a director of the Company.
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12.2. Participation. No employee shall have the right to be selected to
receive an Award, or, having been so selected, to be selected to receive a
future Award.
Article 13. Amendment, Modification, and Termination
13.1. Amendment, Modification, and Termination. Subject to the terms of the
Plan, the Board of Directors of the Company may at any time and from time to
time, alter, amend, suspend or terminate the Plan in whole or in part without
the approval of the Company's shareholders, except to the extent the Board of
Directors of the Company determines it is desirable to obtain approval of the
Company's shareholders, to retain eligibility for exemption from the
limitations of Code Section 162(m), to have available the ability for Options
to qualify as Incentive Stock Options, to comply with the requirements for
listing on any exchange where the Company's Shares are listed, or for any
other purpose the Board of Directors of the Company deems appropriate.
13.2. Adjustments Upon Certain Unusual or Nonrecurring Events. The Board
may make adjustments in the terms and conditions of Awards in recognition of
unusual or nonrecurring events (including the events described in Section 4.2)
affecting the Company or the financial statements of the Company or of changes
in applicable laws, regulations, or accounting principles, whenever the Board
determines that such adjustments are appropriate in order to prevent dilution
or enlargement of the benefits or potential benefits intended to be made
available under the Plan.
13.3. Awards Previously Granted. Notwithstanding any other provision of the
Plan to the contrary, no termination, amendment or modification of the Plan
shall adversely affect in any material way any Award previously granted under
the Plan, without the written consent of the Grantee of such Award.
Article 14. Withholding
14.1. Mandatory Tax Withholding.
(a) Whenever under the Plan, Shares are to be delivered upon exercise or
payment of an Award or upon Restricted Shares becoming nonforfeitable, or any
other event with respect to rights and benefits hereunder, the Company shall
be entitled to require (1) that the Grantee remit an amount in cash, or if
determined by the Committee, Mature Shares, sufficient to satisfy all federal,
state, local and foreign tax withholding requirements related thereto
("Required Withholding"), (2) the withholding of such Required Withholding
from compensation otherwise due to the Grantee or from any Shares or other
payment due to the Grantee under the Plan or (3) any combination of the
foregoing.
(b) Any Grantee who makes a Disqualifying Disposition or an election under
Section 83(b) of the Code shall remit to the Company an amount sufficient to
satisfy all resulting Required Withholding; provided that, in lieu of or in
addition to the foregoing, the Company shall have the right to withhold such
Required Withholding from compensation otherwise due to the Grantee or from
any Shares or other payment due to the Grantee under the Plan.
14.2. Notification under Code Section 83(b). If the Grantee, in connection
with the exercise of any Option, or the grant of Restricted Shares, makes the
election permitted under Section 83(b) of the Code to include in such
Grantee's gross income in the year of transfer the amounts specified in
Section 83(b) of the Code, then such Grantee shall notify the Company of such
election within ten (10) days of filing the notice of the election with the
Internal Revenue Service, in addition to any filing and notification required
pursuant to regulations issued under Section 83(b) of the Code. The Board may,
in connection with the grant of an Award or at any time thereafter prior to
such an election being made, prohibit a Grantee from making the election
described above.
Article 15. Additional Provisions
15.1. Successors. 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 or assets of the Company.
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15.2. Gender and Number. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine; the plural
shall include the singular and the singular shall include the plural.
15.3. Severability. If any part of the Plan is declared by any court or
governmental authority to be unlawful or invalid, such unlawfulness or
invalidity shall not invalidate any other part of the Plan. Any Section or
part of a Section so declared to be unlawful or invalid shall, if possible, be
construed in a manner which will give effect to the terms of such Section or
part of a Section to the fullest extent possible while remaining lawful and
valid.
15.4. Requirements of Law. The granting of Awards and the issuance of
Shares under the Plan shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or stock
exchanges as may be required. Notwithstanding any provision of the Plan or any
Award, Grantees shall not be entitled to exercise, or receive benefits under,
any Award, and the Company shall not be obligated to deliver any Shares or
other benefits to a Grantee, if such exercise or delivery would constitute a
violation by the Grantee or the Company of any applicable law or regulation.
15.5. Securities Law Compliance.
(a) If the Board deems it necessary to comply with any applicable
securities law, or the requirements of any stock exchange upon which Shares
may be listed, the Board may impose any restriction on Shares acquired
pursuant to Awards under the Plan as it may deem advisable. All certificates
for Shares delivered under the Plan pursuant to any Award or the exercise
thereof shall be subject to such stop transfer orders and other restrictions
as the Board may deem advisable under the rules, regulations and other
requirements of the SEC, any stock exchange upon which Shares are then listed,
any applicable securities law, and the Board may cause a legend or legends to
be placed on any such certificates to refer to such restrictions. If so
requested by the Company, the Grantee shall represent to the Company in
writing that he or she will not sell or offer to sell any Shares unless a
registration statement shall be in effect with respect to such Shares under
the Securities Act of 1933 or unless he or she shall have furnished to the
Company evidence satisfactory to the Company that such registration is not
required.
(b) If the Board determines that the exercise of, or delivery of benefits
pursuant to, any Award would violate any applicable provision of securities
laws or the listing requirements of any stock exchange upon which any of the
Company's equity securities are then listed, then the Board may postpone any
such exercise or delivery, as applicable, but the Company shall use all
reasonable efforts to cause such exercise or delivery to comply with all such
provisions at the earliest practicable date.
15.6. No Rights as a Shareholder. A Grantee shall not have any rights as a
shareholder with respect to the Shares (other than Restricted Shares) which
may be deliverable upon exercise or payment of such Award until such shares
have been delivered to him or her. Restricted Shares, whether held by a
Grantee or in escrow by the Secretary of the Company, shall confer on the
Grantee all rights of a shareholder of the Company, except as otherwise
provided in the Plan or Award Agreement. Unless otherwise determined by the
Board at the time of a grant of Restricted Shares, any cash dividends that
become payable on Restricted Shares shall be deferred and, if the Board so
determines, reinvested in additional Restricted Shares. Except as otherwise
provided in an Award Agreement, any share dividends and deferred cash
dividends issued with respect to Restricted Shares shall be subject to the
same restrictions and other terms as apply to the Restricted Shares with
respect to which such dividends are issued. The Board may provide for payment
of interest on deferred cash dividends.
15.7. Nature of Payments. Awards shall be special incentive payments to the
Grantee and shall not be taken into account in computing the amount of salary
or compensation of the Grantee 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
Subsidiary or (b) any agreement between the Company or any Subsidiary and the
Grantee, except as such plan or agreement shall otherwise expressly provide.
15.8. Governing Law. The Plan shall be construed in accordance with and
governed by the laws of the State of Delaware other than its laws respecting
choice of law.
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Please date, sign and mail your
proxy card back as soon as possible!
Annual Meeting of Shareholders
HORACE MANN EDUCATORS CORPORATION
May 18, 2001
Please Detach and Mail in the Envelope Provided
A [X] Please mark your votes as in this example.
1. Election of Directors For [ ] Withheld [ ]
For, except vote withheld from the following nominee(s):
- --------------------------------------------------------
Nominee: William W. Abbott
Mary H. Futrell
Donald E. Kiernan
Louis G. Lower II
Joseph J. Melone
Jeffrey L. Morby
Shaun F. O'Malley
Charles A. Parker
William J. Schoen
2. To approve the Company's 2001 Stock Incentive Plan; and
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. To consider and take action with respect to such other matters as may
properly come before the Annual Meeting or any adjournment or adjournments
thereof.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY IN THE ENCLOSED ENVELOPE PROVIDED
TO AMERICAN STOCK TRANSFER & TRUST COMPANY, 59 MAIDEN LANE, NEW YORK, N.Y.
10636.
SIGNATURE(S) ______________________________________________ DATE _______, 2001
NOTE: Please sign exactly as your name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
8888
HORACE MANN EDUCATORS CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS
MAY 18, 2001
The undersigned Shareholder of Horace Mann Educators Corporation (the
"Company") hereby appoints Ralph S. Saul and Louis G. Lower II 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 18, 2001 at 9:00
a.m. at the Renaissance Springfield Hotel, 701 East Adams Street, 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.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED FOR PROPOSALS 1 AND 2 IF NO
INSTRUCTION TO THE CONTRARY IS INDICATED OR IF NO INSTRUCTION IS GIVEN AND IN
ACCORDANCE WITH THE DISCRETION OF THE PROXIES ON PROPOSAL 3.
(TO BE SIGNED ON THE OTHER SIDE.)