Exhibit 10.2(a)
Form of Employee Option Agreement
- Performance Accelerated ISO --
Under 2002 Incentive Compensation Plan
HORACE MANN EDUCATORS CORPORATION
2002 Incentive Compensation Plan
Stock Option Agreement
This Stock Option Agreement (the "Agreement") confirms the grant on
_________ __, ____ (the "Grant Date") by HORACE MANN EDUCATORS CORPORATION, a
Delaware corporation (the "Company"), to _______________ ("Employee") of an
incentive stock option (the "Option") to purchase shares of Common Stock, par
value $.001 per share (the "Shares"), as follows:
Shares purchasable: ________________ Shares
Exercise Price: $______________ per Share
Option vests and becomes exercisable: As to all of the Shares on
__________, ____; provided that portions of the Option will vest and
become cumulatively exercisable ("Accelerated Vesting") if and to the
extent that the performance goals set forth under the Company's
Long-Term Incentive Plan have been achieved for the specified
performance year. As specified on Attachment A hereto, for each year in
the period ____ - ____, a level of achievement of performance targets,
based __% on_________________ and __% on ____________________, will be
determined by the Committee. This level of achievement (the
"Achievement Level") will be expressed as a percentage of target level
performance (blending ____ and ____ performance), ranging from __% if
the "threshold" level of performance is achieved to ____% if the
"target" level of performance is achieved to ___% if the "maximum"
level is achieved or exceeded. If the calculated Achievement Level for
any year would be less than __%, the Achievement Level will be deemed
to be __, and no Accelerated Vesting will result for that year.
Straight-line interpolation will apply if the level of achievement of
________ or _______ is less than "target," based on the "threshold" and
"target" datapoints, or between "target" and "maximum" based on those
datapoints. The Committee will determine the Achievement Level
following the completion of the audit of the Company's financial
statements for the performance year, with any resulting Accelerated
Vesting effective at the date of such determination. Committee
determinations of the Achievement Level under the Long-Term Incentive
Plan and all other matters hereunder will be final. The portion of the
Option, expressed as a percentage of the total number of Shares
purchasable under the Option, subject to Accelerated Vesting in each
year will be as follows:
Portion of Option Subject
Performance Year to Accelerated Vesting
---------------- ----------------------
____ __% times the Achievement Level
____ __% times the Achievement Level
____ __% times the Achievement Level
provided, however, that the portion of the Option subject to
Accelerated Vesting in ____ in no event will exceed the then remaining
unvested portion of the Option. In addition to possible Accelerated
Vesting, the Option will become immediately vested and exercisable upon
the occurrence of certain events relating to Termination of Employment,
in accordance with Section 4 hereof. (Note: If the portion of this
Option and any previously granted incentive stock option which vests in
any one year has an aggregate exercise price in excess of $100,000,
that portion of this Option in excess of that $100,000 aggregate
vesting limit will not qualify as an incentive stock option but will be
treated as a vested non-qualified stock option.)
Expiration Date: _______ __, ____ (the "Stated Expiration Date") or,
in the event Employee's employment by the Company and its subsidiaries
terminates earlier, the date the Option ceases to
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be exercisable under Section 4 hereof.
The Option is subject to the terms and conditions of the 2002 Incentive
Compensation Plan (the "Plan") and this Agreement, including the Terms and
Conditions of Option Grant attached hereto and deemed a part hereof. The number
and kind of shares purchasable, the Exercise Price, and other terms and
conditions are subject to adjustment in accordance with Section 11(c) of the
Plan.
Employee acknowledges and agrees that (i) the Option is
nontransferable, except as provided in Section 6 hereof and Section 11(b) of the
Plan, (ii) the Option is subject to forfeiture in the event of Employee's
termination of employment in certain circumstances, as specified in Section 4
hereof, and (iii) sales of Shares will be subject to the Company's policies
regulating trading by employees.
IN WITNESS WHEREOF, HORACE MANN EDUCATORS CORPORATION has caused this
Agreement to be executed by its officer thereunto duly authorized.
HORACE MANN EDUCATORS
CORPORATION
By:_____________________
[Name]
[Title]
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TERMS AND CONDITIONS OF OPTION GRANT
The following Terms and Conditions apply to the Option granted to
Employee by HORACE MANN EDUCATORS CORPORATION (the "Company"), as specified on
the preceding page. Certain specific terms of the Option, including the number
of shares purchasable, vesting and Expiration Date, and Exercise Price, are set
forth on the preceding page.
1. General. The Option is granted to Employee under the Company's 2002
Incentive Compensation Plan (the "Plan"), which has been previously delivered to
Employee and/or is available upon request to the Corporate Benefits Department.
All of the applicable terms, conditions and other provisions of the Plan are
incorporated by reference herein. Capitalized terms used in this Agreement but
not defined herein shall have the same meanings as in the Plan. If there is any
conflict between the provisions of this document and mandatory provisions of the
Plan, the provisions of the Plan govern. By accepting the grant of the Option,
Employee agrees to be bound by all of the terms and provisions of the Plan (as
presently in effect or later amended), the rules and regulations under the Plan
adopted from time to time, and the decisions and determinations of the
Compensation Committee of the Company's Board of Directors (the "Committee")
made from time to time. The Option is an incentive stock option as defined under
Section 422 of the Internal Revenue Code of 1986, as amended, to the maximum
extent possible, and any portion that does not so qualify is a non-qualified
stock option.
2. Right to Exercise Option. Subject to all applicable laws, rules,
regulations and the terms of the Plan and this Agreement, Employee may exercise
the Option only after the time and to the extent the Option has become vested
and exercisable and prior to the Expiration Date of the Option.
3. Method of Exercise. To exercise the Option, Employee must (a) give
written notice to the Vice President, Corporate Benefits of the Company, which
notice shall specifically refer to this Agreement, state the number of Shares as
to which the Option is being exercised, the name in which he or she wishes the
Shares to be issued, and be signed by Employee, and (b) pay in full to the
Company the Exercise Price of the Option for the number of Shares being
purchased either (i) in cash (including by check), payable in United States
dollars, (ii), by delivery of Shares already owned by Employee (which Shares
must have been held for at least six months if they were acquired under a
Company plan and are not considered to be "mature" shares for accounting
purposes) having a fair market value, determined as of the date the Option is
exercised, equal to all or the part of the aggregate Exercise Price being paid
in this way, or (iii) in any other manner then permitted by the Committee. Once
Employee gives notice of exercise, such notice may not be revoked. When Employee
exercises the Option, or part thereof, the Company will transfer Shares (or make
a non-certificated credit) to Employee's brokerage account at a designated
securities brokerage firm or otherwise deliver Shares to Employee. No Employee
or Beneficiary shall have at any time any rights with respect to Shares covered
by this Agreement prior to the valid exercise and full payment for the Shares as
specified herein, and no adjustment shall be made for dividends or other rights
for which the record date is prior to such valid exercise and payment.
4. Termination Provisions. The following provisions will govern the
vesting, exercisability and expiration of the Option in the event of termination
of Employee's employment, unless the Committee determines to provide more
favorable terms; provided, however, that the vesting, exercisability and
expiration of the Option provided under Section 9(a)(iii) of the Plan, relating
to certain Terminations following a Change of Control, shall apply to the extent
that the provisions of Section 9(a)(iii) would be more favorable to Employee,
except as limited under Subsection (h) below:
(a) Death. In the event of Employee's Termination of
Employment due to death, the Option, to the extent then outstanding,
will vest and become immediately exercisable in full, and will remain
exercisable, in accordance with Section 11(b) of the Plan, until the
earlier of one year after such death or the Stated Expiration Date.
(Note: Exercise of the option more than three months after Termination
would not qualify for favorable incentive stock option tax treatment.)
(b) Disability. In the event of Employee's Termination of
Employment due to Disability (as defined below), the Option, to the
extent then outstanding, will vest and become immediately exercisable
in full, and will remain exercisable until the earlier of one year
after such Termination of Employment or the Stated Expiration Date.
(Note: Certain Disabilities under the Plan may not
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qualify as a "disability" under incentive stock option tax rules, so that
exercise of the option more than three months after Termination would not
qualify for favorable incentive stock option tax treatment.)
(c) Retirement. In the event of Employee's Termination of Employment
due to Retirement (as defined below), the Option, to the extent then
outstanding, will vest and become immediately exercisable in full, and will
remain exercisable until the earlier of five years after such Termination
of Employment or the Stated Expiration Date. (Note: Exercise of the option
more than three months after Termination would not qualify for favorable
incentive stock option tax treatment.)
(d) Termination by the Company Without Cause. In the event of
Employee's Termination of Employment by the Company without Cause, the
portion of the then-outstanding Option not vested and exercisable at the
date of termination will be forfeited, and any portion of the
then-outstanding Option that is vested and exercisable at the date of
termination will expire at the earlier of three months after Termination of
Employment or the Stated Expiration Date.
(e) Termination by the Company for Cause. In the event of Employee's
Termination of Employment by the Company for Cause (as defined below), the
Option, whether or not then vested and exercisable, immediately will be
forfeited and will expire.
(f) Termination by the Employee Voluntarily. In the event of
Employee's voluntary Termination of Employment, the portion of the
then-outstanding Option not vested and exercisable at the date of
termination will be forfeited, and any vested portion of the
then-outstanding Option will expire immediately at the date of Termination
of Employment.
(g) Certain Definitions. The following definitions apply for purposes
of this Agreement:
(i) "Cause" means (A) the willful and continued failure by
Employee to perform substantially his duties with the Company (other
than any such failure resulting from Employee's incapacity due to
physical or mental illness) after a written demand for substantial
performance is delivered to Employee which specifically identifies the
manner in which Employee has not substantially performed his duties,
(B) the willful engagement by Employee in conduct which is not
authorized by the Board of Directors of the Company or within the
normal course of Employee's business decisions and is known by
Employee to be materially detrimental to the best interests of the
Company or any of its subsidiaries, or (C) the willful engagement by
Employee in illegal conduct or any act of serious dishonesty which
adversely affects, or, in the reasonable estimation of the Board of
Directors of the Company, could in the future adversely affect, the
value, reliability or performance of Employee to the Company in a
material manner. Any act, or failure to act, based upon authority
given pursuant to a resolution duly adopted by the Board of Directors
of the Company or based upon the advice of counsel for the Company
shall be conclusively presumed to be done, or omitted to be done, by
Employee in good faith and in the best interests of the Company. The
foregoing notwithstanding, in any case governed by Section 9 of the
Plan (following a Change of Control), the definition set forth in
Section 9(c) of the Plan shall govern.
(ii) "Disability" means a disability entitling the Employee to
long-term disability benefits under the Company's long-term disability
policy as in effect at the date of Employee's Termination of
Employment.
(iii) "Retirement" means retirement from active employment with
the Company or a subsidiary pursuant to the early or normal retirement
provisions of the Company's or the subsidiary's qualified retirement
plan.
(iv) "Termination of Employment" means the earliest time at
which Employee is not employed by the Company or a subsidiary of the
Company and is not serving as a
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non-employee director of the Company or a subsidiary of the Company.
(h) Limitation on Acceleration of Certain Options Upon Termination
Following a Change of Control. In the event of a Termination of
Employment of Employee following a Change of Control, if Section
9(a)(iii) of the Plan or any other provision (an "Enhancement Provision")
would apply so as to accelerate vesting of the Option or otherwise
enhance the rights of Employee with respect to the exercise or expiration
of the Option, and if Employee will be subject to a golden parachute
excise tax under Section 4999 of the Internal Revenue Code (regardless of
any rights to a gross-up payment from the Company or any other party),
and if the amount of "parachute payments" resulting from the Enhancement
Provision exceeds the intrinsic value of the Option (i.e., the "spread")
at the date parachute payments would be measured for purposes of Section
4999, then the Enhancement Provision shall not apply to the Option except
to the extent (if any) possible without Employee becoming subject to the
golden parachute excise tax under Section 4999.
5. Employee Representations and Warranties Upon Exercise. As a condition
to the exercise of the Option, the Company may require Employee to make any
representation or warranty to the Company as may be required under any
applicable law or regulation.
6. Nontransferability. Employee may not transfer the Option or any
rights thereunder to any third party other than by will or the laws of descent
and distribution, and, during Employee's lifetime, only Employee or his or her
duly appointed guardian or legal representative may exercise the Option, except
for transfers to a Beneficiary in the event of death or as otherwise permitted
and subject to the conditions under Section 11(b) of the Plan (note: these
exceptions do not apply to portions of the Option that are incentive stock
options).
7. Miscellaneous.
(a) Binding Agreement; Written Amendments. This Agreement shall be
binding upon the heirs, executors, administrators and successors of the
parties. This Agreement constitutes the entire agreement between the
parties with respect to the Option, and supersedes any prior agreements
or documents with respect to the Option. No amendment or alteration of
this Agreement which may impose any additional obligation upon the
Company shall be valid unless expressed in a written instrument duly
executed in the name of the Company, and no amendment, alteration,
suspension or termination of this Agreement which may materially impair
the rights of Employee with respect to the Option shall be valid unless
expressed in a written instrument executed by Employee.
(b) No Promise of Employment. The Option and the granting thereof
shall not constitute or be evidence of any agreement or understanding,
express or implied, that Employee has a right to continue as an officer
or employee of the Company for any period of time, or at any particular
rate of compensation.
(c) Governing Law. The validity, construction, and effect of this
agreement shall be determined in accordance with the laws (including
those governing contracts) of the state of Delaware, without giving
effect to principles of conflicts of laws, and applicable federal law.
(d) Notices. Any notice to be given the Company under this Agreement
shall be addressed to the Company at its principal executive offices, in
care of the Vice President, Corporate Benefits, and any notice to the
Employee shall be addressed to the Employee at Employee's address as then
appearing in the records of the Company.
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Attachment A
CORPORATE PERFORMANCE MEASURES
FOR THE LONG TERM INCENTIVE PLAN
Measure Weight ____ (__% Vesting) ____ (___% Vesting) ____ (_0% Vesting)
- ----------------------------------------------------------------------------------------------------------------
Thres. Target Max. Thres. Target Max. Thres. Target Max.
------------------------------------------------------------------------------
- ----------------- --% $---- $---- $---- $---- $---- $---- $---- $---- $----
- ----------------- --% ----% ----% ----% ----% ----% ----% ----% ----% ----%
Note: Threshold payout is at __%. Target payout is at ___%. Maximum is at____%.
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