EXHIBIT 10.7
HORACE MANN INCENTIVE PLAN
SHORT TERM INCENTIVE PLAN
LONG TERM INCENTIVE PLAN
ANNUAL STOCK OPTION PLAN
HORACE MANN EDUCATORS CORPORATION
SHORT TERM INCENTIVE PLAN
PURPOSE
This Short Term Incentive Plan (the "Plan") is designed to reward all officers
(the "Officers") of Horace Mann Educators Corporation (the "Company") for
achieving corporate and operating unit or operating division short term
performance objectives. The Plan 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 Plan is also intended to secure the full deductibility
of annual incentive compensation payable to the Company's Chief Executive
Officer and the other four highest compensated executive officers (collectively
the "Covered Employees") whose compensation is required to be reported in the
Company's proxy statement and 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").
1. ELIGIBILITY AND PARTICIPATION
1.1 All Officers of the Company are eligible for and shall participate in the
Plan. Prior to or at the time performance objectives are established for a
"Performance Period," as defined below, the Committee designated under Section
6.1 (the "Committee") of the Company's Board of Directors (the "Board") will
designate in writing certain Officers of the Company that are participants for
such Performance Period.
2. PLAN YEAR, PERFORMANCE PERIODS AND PERFORMANCE OBJECTIVES
2.1 The fiscal year of the Plan (the "Plan Year") shall end on December 31.
The performance period (the "Performance Period") with respect to which annual
incentive compensation may be payable under the Plan shall generally be the Plan
Year, provided, however, that the Committee shall have the authority to
designate different Performance Periods under the Plan.
2.2 Within the first ninety (90) days of each Performance Period, other than
the 1996 Plan Year Performance Period, the Committee shall establish in writing,
with respect to such Performance Period, one or more performance goals, a
specific target objective or objectives with respect to such performance goals
and an objective formula or method for computing the amount of annual incentive
compensation payable to certain Officers under the Plan if the performance goals
are attained. Notwithstanding the foregoing sentence, for any Performance
Period, such goals, objectives and computation formulae or methods must be
established within that number of days, beginning on the first day of such
Performance Period, which is no more than twenty-five percent (25%) of the total
number of days in such Performance Period.
2.3 Performance goals shall be based upon one or more of the following business
criteria for the Company as a whole or any of its operating divisions or other
operating units, any of which may be measured either in absolute terms or as
compared to other companies: financial ratings of the Company, 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 the goal of providing for
deductibility under Section 162(m) of the Code, performance goals may be based
upon an Officer's attainment of personal objectives with respect to any of the
foregoing performance goals or implementing policies and plans, negotiating
transactions and sales, developing long-term business goals or exercising
managerial responsibility. Measurements of the Company's or an Officer's
performance against the performance goals established by the Committee shall be
objectively determinable and shall be determined according to generally accepted
accounting principles ("GAAP") as in existence on the date on which the
performance goals are established and without regard to any changes in such
principles after such date.
2.4 The Committee may also make additional annual incentive compensation awards
to Officers, other than Covered Employees, who have produced exceptional,
unanticipated results during the Performance Period.
3. DETERMINATION OF ANNUAL INCENTIVE COMPENSATION AWARDS
3.1 As soon as practicable after the end of each Performance Period, the
Committee shall certify in writing the extent to which the Company and the
Officers have achieved the performance goal or goals for such Performance
Period, including the specific target objective or objectives and the
satisfaction of any other material terms of the annual incentive compensation
award and the Committee shall calculate the amount of each Officer's annual
incentive compensation for such Performance Period based upon the performance
goals, objectives and computation formulae or methods for such Performance
Period. The Committee shall have no discretion to increase the amount of any
Covered Employee's annual incentive compensation as so determined.
3.2 No Officer's annual incentive compensation for any Performance Period shall
exceed 120% of the base annual salary of the Company's Chief Executive Officer
as of July 10, 1996 ($410,000).
4. PAYMENT OF AWARDS
4.1 Approved annual incentive compensation awards shall be payable by the
Company in cash to each Officer as soon as practicable after the end of each
Performance Period and after the Committee has certified in writing pursuant to
Section 3.1 that the relevant performance goals have been achieved. In the
event of an Officer's death, any such award shall be payable to his or her
beneficiary as designated pursuant to Section 4.3 or, absent such a designation,
to the Officer's estate.
4.2 If an Officer's employment by the Company shall terminate prior to the last
day of a Performance Period because of disability, retirement in accordance with
the Company's retirement policies, resignation pursuant to written agreement
with the Company, leave of absence or death, then the annual incentive
compensation award that would have been payable to the Officer absent such
termination shall be prorated based on the Officer's active service during the
Performance Period. If an Officer's employment by the Company shall terminate
prior to the last day of a Performance Period because of voluntary or
involuntary resignation or termination not pursuant to a written agreement with
the Company, no annual incentive compensation award shall be payable to such
Officer with respect to such Performance Award.
4.3 An Officer may file with the Company a written designation of a beneficiary
or beneficiaries under the Plan and may from time to time revoke or change any
such designation of beneficiary. Any designation of beneficiary under the Plan
shall be controlling over any other disposition, testamentary or otherwise;
provided, however, that if the Committee shall be in doubt as to the entitlement
of any such beneficiary to any annual incentive compensation award hereunder,
the Committee may determine to recognize only the legal representative of such
Officer, in which case the Company, the Committee and the members thereof shall
not be under any further liability to anyone.
5. OTHER TERMS AND CONDITIONS
5.1 No annual incentive compensation awards shall be paid under the Plan unless
and until the material terms (within the meaning of Section 162(m)(4)(C) of the
Code) of the Plan, including the business criteria described in Section 2.3 of
the Plan, are disclosed to the Company's shareholders and are approved by the
shareholders by a majority of votes cast in person or by proxy (including
abstentions to the extent abstentions are counted as voting under applicable
state law).
5.2 No person shall have any legal claim to be granted an award under the Plan
and the Committee shall have no obligation to treat Officers uniformly. Except
as may be otherwise required by law, annual incentive compensation awards under
the Plan shall not be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, charge, garnishment, execution, or
levy of any kind, either voluntary or involuntary. Annual incentive
compensation awarded under the Plan shall be payable from the general assets of
the Company and no Officer shall have any claim with respect to any specific
assets of the Company.
5.3 Neither the Plan nor any action taken under the Plan shall confer upon any
Officer any right with respect to any continuance of employment by the Company
or to maintenance of the Officer's compensation at any level nor shall they
interfere in any way with the right of the Company to terminate his or her
employment at any time.
5.4 The Company may deduct from any award any applicable withholding taxes or
any amounts owed by the Officer to the Company.
6. ADMINISTRATION
6.1 All members of the Committee shall be persons who qualify as "outside
directors" as defined under Section 162(m) of the Code and Treasury Regulation
(S) 1.162-27, promulgated thereunder, or any successor thereto. Until changed
by the Board, the Compensation Committee of the Board shall constitute the
Committee hereunder.
6.2 The Committee shall have full power and authority to administer and
interpret the provisions of the Plan and to adopt such rules, regulations,
agreements, guidelines and instruments for the administration of the Plan and
for the conduct of its business as the Committee deems necessary or advisable.
6.3 Except with respect to matters which under Section 162(m)(4)(C) of the Code
are required to be determined in the sole and absolute discretion of the
Committee, the Committee shall have full power to delegate to any officer or
employee of the Company the authority to administer and interpret the procedural
aspects of the Plan, subject to the Plan's terms, including adopting and
enforcing rules to decide procedural and administrative issues.
6.4 The Committee may rely on opinions, reports or statements of officers or
employees of the Company and of Company counsel (inside or retained counsel),
public accountants and other professional or expert persons.
6.5 The Board reserves the right to amend or terminate the Plan in whole or in
part at any time. Unless otherwise prohibited by applicable law, any amendment
required to conform the Plan to the requirements of Section 162(m) of the Code
may be made by the Committee. No amendment may be made to the performance
criteria specified in Section 2.3 or the maximum annual incentive compensation
payable to any participant as specified in Section 3.2 without shareholder
approval unless shareholder approval is not required in order for annual
incentive compensation paid to Covered Employees to constitute qualified
performance-based compensation under Section 162(m) of the Code.
6.6 No member of the Committee shall be liable for any action taken or omitted
to be taken or for any determination made by him or her in good faith with
respect to the Plan, and the Company shall indemnify and hold harmless each
member of the Committee against any cost or expense (including counsel fees) or
liability (including any sum paid in settlement of a claim with the approval of
the Committee) arising out of any act or omission in connection with the
administration or interpretation of the Plan, unless arising out of such
person's own fraud or bad faith.
6.7 The place of administration of the Plan shall be in the State of Illinois,
and the validity, construction, interpretation, administration and effect of the
Plan and of its rules and regulations, and rights relating to the Plan, shall be
determined solely in accordance with the laws of the State of Illinois.
HORACE MANN EDUCATORS CORPORATION
LONG TERM INCENTIVE PLAN
PURPOSE
This Long Term Incentive Plan (the "Plan") is designed to reward certain
officers (the "Officers") of Horace Mann Educators Corporation (the "Company")
for achieving corporate and operating unit or departmental long term performance
objectives. The Plan is intended to provide an incentive for superior work and
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 Plan is also intended to secure the full deductibility
of incentive compensation payable to the Company's Chief Executive Officer and
the other four highest compensated executive officers (collectively the "Covered
Employees") whose compensation is required to be reported in the Company's proxy
statement and 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").
1. ELIGIBILITY AND PARTICIPATION
1.1 Prior to or at the time performance objectives are established for a
"Performance Period," as defined below, the Committee designated under Section
6.1 (the "Committee") of the Company's Board of Directors (the "Board") will
designate in writing which Officers of the Company shall in fact be participants
for such Performance Period.
2. PLAN YEAR, PERFORMANCE PERIODS AND PERFORMANCE OBJECTIVES
2.1 The fiscal year of the Plan (the "Plan Year") shall end on December 31.
The performance period (the "Performance Period") with respect to which
incentive compensation may be payable under the Plan shall generally be more
than one Plan Year, with the number of Plan Years in each Performance Period
determined by the Committee, provided, however, that the Committee shall have
the authority to designate different Performance Periods under the Plan.
2.2 Within the first ninety (90) days of each Performance Period, other than
the 1996 Performance Period, the Committee shall establish in writing, with
respect to such Performance Period, one or more performance goals, a specific
target objective or objectives with respect to such performance goals and an
objective formula or method for computing the amount of incentive compensation
payable to each Officer under the Plan if the performance goals are attained.
Notwithstanding the foregoing sentence, for any Performance Period, such goals,
objectives and computation formulae or methods must be established within that
number of days, beginning on the first day of such Performance Period, which is
no more than twenty-five percent (25%) of the total number of days in such
Performance Period.
2.3 Performance goals shall be based upon one or more of the following business
criteria for the Company as a whole or any of its operating divisions or other
operating units, any of which may be measured either in absolute terms or as
compared to other companies: financial ratings of the Company, 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 the goal of providing for
deductibility under Section 162(m) of the Code, performance goals may be based
upon an Officer's attainment of personal objectives with respect to any of the
foregoing performance goals or implementing policies and plans, negotiating
transactions and sales, developing long-term business goals or exercising
managerial responsibility. Measurements of the Company's or an Officer's
performance against the performance goals established by the Committee shall be
objectively determinable and shall be determined according to generally accepted
accounting principles ("GAAP") as in existence on the date on which the
performance goals are established and without regard to any changes in such
principles after such date.
2.4 The Committee may also make additional incentive compensation awards to
Officers, other than Covered Employees, who have produced exceptional,
unanticipated results during the Performance Period.
3. DETERMINATION OF INCENTIVE COMPENSATION AWARDS
3.1 As soon as practicable after the end of each Performance Period, the
Committee shall certify in writing the extent to which the Company and the
Officers have achieved the performance goal or goals for such Performance
Period, including the specific target objective or objectives and the
satisfaction of any other material terms of the incentive compensation award and
the Committee shall calculate the amount of each Officer's incentive
compensation for such Performance Period based upon the performance goals,
objectives and computation formulae or methods for such Performance Period. The
Committee shall have no discretion to increase the amount of any Covered
Employee's annual incentive compensation as so determined.
3.2 No Officer's incentive compensation for any Performance Period shall exceed
240% of the base annual salary of the Company's Chief Executive Officer as of
July 10, 1996 ($410,000).
4. PAYMENT OF AWARDS
4.1 Approved incentive compensation awards shall be payable by the Company in
cash to each Officer as soon as practicable after the end of each Performance
Period and after the Committee has certified in writing pursuant to Section 3.1
that the relevant performance goals have been achieved. In the event of an
Officer's death, any such award shall be payable to his or her beneficiary as
designated pursuant to Section 4.3 or, absent such a designation, to the
Officer's estate.
4.2 If an Officer's employment by the Company shall terminate prior to the last
day of a Performance Period because of disability, retirement in accordance with
the Company's retirement policies, resignation pursuant to written agreement
with the Company, leave of absence or death, then the incentive compensation
award that would have been payable to the Officer absent such termination shall
be prorated based on the Officer's active service during the Performance Period.
If an Officer's employment by the Company shall terminate prior to the last day
of a Performance Period because of voluntary or involuntary resignation or
termination not pursuant to a written agreement with the Company, no incentive
compensation award shall be payable to such Officer with respect to such
Performance Award.
4.3 An Officer may file with the Company a written designation of a beneficiary
or beneficiaries under the Plan and may from time to time revoke or change any
such designation of beneficiary. Any designation of beneficiary under the Plan
shall be controlling over any other disposition, testamentary or otherwise;
provided, however, that if the Committee shall be in doubt as to the entitlement
of any such beneficiary to any incentive compensation award hereunder, the
Committee may determine to recognize only the legal representative of such
Officer, in which case the Company, the Committee and the members thereof shall
not be under any further liability to anyone.
5. OTHER TERMS AND CONDITIONS
5.1 No incentive compensation awards shall be paid under the Plan unless and
until the material terms (within the meaning of Section 162(m)(4)(C) of the
Code) of the Plan, including the business criteria described in Section 2.3 of
the Plan, are disclosed to the Company's shareholders and are approved by the
shareholders by a majority of votes cast in person or by proxy (including
abstentions to the extent abstentions are counted as voting under applicable
state law).
5.2 No person shall have any legal claim to be granted an award under the Plan
and the Committee shall have no obligation to treat Officers uniformly. Except
as may be otherwise required by law, incentive compensation awards under the
Plan shall not be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, charge, garnishment, execution, or
levy of any kind, either voluntary or involuntary. Incentive compensation
awarded under the Plan shall be payable from the general assets of the Company
and no Officer shall have any claim with respect to any specific assets of the
Company.
5.3 Neither the Plan nor any action taken under the Plan shall confer upon any
Officer any right with respect to any continuance of employment by the Company
or to maintenance of the Officer's compensation at any level nor shall they
interfere in any way with the right of the Company to terminate his or her
employment at any time.
5.4 The Company may deduct from any award any applicable withholding taxes or
any amounts owed by the Officer to the Company.
6. ADMINISTRATION
6.1 All members of the Committee shall be persons who qualify as "outside
directors" as defined under Section 162(m) of the Code and Treasury Regulation
(S) 1.162-27, promulgated thereunder, or any successor thereto. Until changed
by the Board, the Compensation Committee of the Board shall constitute the
Committee hereunder.
6.2 The Committee shall have full power and authority to administer and
interpret the provisions of the Plan and to adopt such rules, regulations,
agreements, guidelines and instruments for the administration of the Plan and
for the conduct of its business as the Committee deems necessary or advisable.
6.3 Except with respect to matters which under Section 162(m)(4)(C) of the Code
are required to be determined in the sole and absolute discretion of the
Committee, the Committee shall have full power to delegate to any officer or
employee of the Company the authority to administer and interpret the procedural
aspects of the Plan, subject to the Plan's terms, including adopting and
enforcing rules to decide procedural and administrative issues.
6.4 The Committee may rely on opinions, reports or statements of officers or
employees of the Company and of Company counsel (inside or retained counsel),
public accountants and other professional or expert persons.
6.5 The Board reserves the right to amend or terminate the Plan in whole or in
part at any time. Unless otherwise prohibited by applicable law, any amendment
required to conform the Plan to the requirements of Section 162(m) of the Code
may be made by the Committee. No amendment may be made to the performance
criteria specified in Section 2.3 or the maximum incentive compensation payable
to any participant as specified in Section 3.2 without shareholder approval
unless shareholder approval is not required in order for incentive compensation
paid to Covered Employees to constitute qualified performance-based compensation
under Section 162(m) of the Code.
6.6 No member of the Committee shall be liable for any action taken or omitted
to be taken or for any determination made by him or her in good faith with
respect to the Plan, and the Company shall indemnify and hold harmless each
member of the Committee against any cost or expense (including counsel fees) or
liability (including any sum paid in settlement of a claim with the approval of
the Committee) arising out of any act or omission in connection with the
administration or interpretation of the Plan, unless arising out of such
person's own fraud or bad faith.
6.7 The place of administration of the Plan shall be in the State of Illinois,
and the validity, construction, interpretation, administration and effect of the
Plan and of its rules and regulations, and rights relating to the Plan, shall be
determined solely in accordance with the laws of the State of Illinois.
HORACE MANN EDUCATORS CORPORATION
ANNUAL STOCK OPTION GRANT PLAN
In conjunction with Short Term Incentive Plan and the Long Term Incentive Plan,
it is the intention of the Board of Directors (the "Board") that stock options
be granted annually to individual officers of Horace Mann Educators Corporation
(the "Company") pursuant to the Horace Mann Educators Corporation 1991 Stock
Incentive Plan (the "Plan"), as amended.
The Committee, as defined in the Plan, will designate prior to or at the time
performance objectives are established for annual cash incentive plan under the
Short Term Incentive Plan, which officers of the Company shall be eligible to
receive such options and the number of stock options within a specified range.
The number of stock options granted within a specified range shall be a function
of the Committee's assessment of each individual officer's performance during
the prior year, the importance to the Corporation of retaining the individual
and that individual's potential for future contributions to the Corporation.
Annual stock option grants will be made at the time the Committee certifies in
writing the extent to which the terms and conditions of the applicable annual
cash incentive plan have been achieved.
Stock options, pursuant to the Plan, will be granted at fair market value on the
date of grant, will have ten year terms and will vest in accord with the Plan.