SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
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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 Section 240.14a-11(c) or Section 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)
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Notes:
HORACE MANN EDUCATORS CORPORATION
1 HORACE MANN PLAZA
SPRINGFIELD, ILLINOIS 62715-0001
ANNUAL MEETING--JUNE 4, 1997
Dear Shareholders:
You are cordially invited to attend the Annual Meeting of your Corporation
to be held at 10:00 a.m. on Wednesday, June 4, 1997, 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
Ralph S. Saul
Chairman
Board of Directors
/s/ Paul J. Kardos
Paul J. Kardos
President and
Chief Executive Officer
April 30, 1997
HORACE MANN EDUCATORS CORPORATION
1 HORACE MANN PLAZA
SPRINGFIELD, ILLINOIS 62715-0001
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 4, 1997
NOTICE IS HEREBY GIVEN that the 1997 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 Wednesday, June 4, 1997, at 10:00 a.m., Central Daylight Savings Time, for
the following purposes:
1. To elect seven (7) Directors to hold office until the next Annual
Meeting of Shareholders and until their respective successors have been
duly elected and qualified;
2. To ratify the appointment of KPMG Peat Marwick LLP, independent
certified public accountants, as the Company's auditors for the year
ending December 31, 1997; 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 April 15, 1997 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,
/s/ Ann M. Caparros
Ann M. Caparros
Corporate Secretary
Springfield, Illinois
April 30, 1997
IMPORTANT: PLEASE MAIL YOUR PROXY PROMPTLY IN THE ENCLOSED ENVELOPE. THE
MEETING DATE IS JUNE 4, 1997.
PROXY STATEMENT
HORACE MANN EDUCATORS CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
JUNE 4, 1997
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 Wednesday, June 4, 1997, at 10:00 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 30, 1997.
The Board has fixed the close of business on April 15, 1997 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 23,221,272 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 seven (7) 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 ratify the appointment of KPMG Peat Marwick LLP,
independent certified public accountants, as the Company's auditors for the
year ending December 31, 1997.
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, 1996 were mailed to known
Shareholders on or about April 1, 1997.
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 oral or 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.
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 ratification of KPMG Peat Marwick LLP
as the Company's auditors for 1997.
Abstentions may not be specified with regard to the election of Directors.
However, abstentions may be specified on the proposal for the ratification of
KPMG Peat Marwick LLP as the Company's auditors for 1997. Such abstentions
will be counted as present for purposes of approving the ratification of KPMG
Peat Marwick LLP as the Company's auditors for 1997 and 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 fifteen Directors. The following nine persons currently are
serving as Directors of the Company: William W. Abbott, Leonard I. Green,
Donald G. Heth, Emita B. Hill, Paul J. Kardos, Jeffrey L. Morby, Shaun F.
O'Malley, Ralph S. Saul and William J. Schoen. The terms of the current
Directors expire at the 1997 Annual Meeting. The Company's Certificate of
Incorporation requires that any Director who is 72 or more years of age will
be required to retire following the completion of his or her then current term
in office; provided, however, that Messrs. Heth and Saul will be eligible to
continue to serve on the Board of Directors, if re-elected, until their
successors are duly elected and qualified at the 1997 and 1998 Annual Meetings
of Shareholders, respectively. Mr. Heth is no longer eligible to serve on the
Board and Mr. Green has elected to not stand for re-election as a Director at
the Annual Meeting. Their terms of service as Directors therefore will expire
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, Ms. Hill, Mr. Kardos, Mr. Morby, Mr.
O'Malley, Mr. Saul 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
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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.
NOMINEES
The following information, as of April 14, 1997, is provided with respect to
each Board Nominee:
WILLIAM W. ABBOTT, 65...... Mr. Abbott has been a Director of the Company
Member of the Compensation since September 1996. He is currently self-
Committee, Organization employed as a business consultant. In 1989, Mr.
Committee and Audit Abbott retired from 35 years of service at
Committee of the Board Procter & Gamble, as a Senior Vice President in
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 Fifth Third Bank of Naples, Florida
and Acorn Products, Inc., a member of the
Advisory Boards of Deloitte & Touche LLP and
Manco, a member of the Board of Overseers of the
Duke Cancer Center and an Executive in Residence
at Appalachian State University.
EMITA B. HILL, 60.......... Dr. Hill has been a Director of the Company since
Member of the Compensation September 1996. She is the Chancellor of Indiana
Committee, Organization University Kokomo, a position she has held for
Committee and Audit more than five years. She currently serves as a
Committee of the Board member of the Boards of Directors of the Kokomo
Branch of Key Bank, The Kokomo Symphonic Society,
Inc. and The Community Foundation of Howard
County and as a member of the Board of Trustees
of the Children's Museum in Indianapolis.
PAUL J. KARDOS, 60......... Mr. Kardos was named to his present position as
President and Chief President and CEO in 1979 and has been a Director
Executive of the Company since 1979. Mr. Kardos also is a
Officer; Member of the member of the Board of Directors of St. John's
Executive Committee, Hospital. Mr. Kardos has been with the Company
Organization Committee and for 22 years and has 35 years of experience in
Investment & Finance the insurance industry.
Committee of the Board
JEFFREY L. MORBY, 59....... Mr. Morby has been a Director of the Company
Member of the Executive since September 1996. He is currently self-
Committee, Investment & employed as a business consultant and investor
Finance Committee and and Chairman, AMARNA Corporation. Mr. Morby
Audit retired on June 30, 1996 as Vice Chairman of
Committee of the Board Mellon Bank Corporation and Mellon 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.
SHAUN F. O'MALLEY, 61...... Mr. O'Malley has been a Director of the Company
Member of the Organization since September 1996. He is currently the
Committee, Investment & Chairman Emeritus of Price Waterhouse LLP, a
Finance Committee and position he has held since July 1995. Prior to
Audit that, he served as Chairman and Senior Partner of
Committee of the Board Price Waterhouse LLP. He currently serves as a
member of the Boards of Directors of the Finance
Company of Pennsylvania, Regulus Group, LLC and
The Philadelphia Contributionship, a member of
the Boards of Overseers of The Wharton School and
The Curtis Institute of Music and as the Chairman
of the Ethics Resource Center.
3
RALPH S. SAUL, 74.......... Mr. Saul has been a Director of the Company since
Chairman of the Executive June 1995. He currently serves as a Director of
Committee and Organization American Buildings Company, Commonwealth
Committee; and Member of Ventures, PH II, Inc., The Brookings Institution
the Investment & Finance and the Committee for Economic Development.
Committee of the Board During his career, in addition to the
aforementioned positions, he has served as
Director of the Division of Trading and Markets
of the United 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.
WILLIAM J. SCHOEN, 61...... Mr. Schoen has been a Director of the Company
Chairman of the Investment since September 1996. He is currently the
& Chairman of the Board, President and Chief
Finance Committee; Member Executive Officer of Health Management
of the Compensation Associates, Inc., positions he has held for more
Committee, Organization than five years. In addition to serving on the
Committee and Audit Board of Directors of Health Management
Committee of the Board Associates, he also serves on the Board of
Directors of First Union National Bank of
Florida.
DIRECTORS NOT SERVING ON THE BOARD FOLLOWING THE ANNUAL MEETING
The following information, as of April 14, 1997, is provided with respect to
each of the Company's current Directors not serving on the Board following the
Annual Meeting:
LEONARD I. GREEN, 62....... Mr. Green has been a Director of the Company
Chairman of the since August 1989. Mr. Green has been a partner
Compensation Committee; of Leonard Green & Partners, L.P., an investment
Member of the Executive banking firm specializing in management-led
Committee and the acquisitions, for more than five years. Mr. Green
Investment & Finance is also a member of the Boards of Directors of
Committee of the Board Big 5 Corporation, Carr-Gottstein Foods Co. and
Communications & Power Industries, Inc.
DONALD G. HETH, 74......... Mr. Heth, who is retired, has been a Director of
Chairman of the Audit the Company since 1972. He was the President and
Committee; Member of the Chief Executive Officer of the Insurance Company
Executive Committee and of North America from 1981 to 1983. He was also
the Chairman and Chief Executive Officer of INA Life
Compensation Committee of Insurance Company.
the Board
EXECUTIVE OFFICERS
Set forth below is certain information, as of April 14, 1997, with respect
to the executive officers of the Company and its subsidiaries who are not
Directors of the Company (Paul J. Kardos, President and Chief Executive
Officer, is discussed above):
LARRY K. BECKER, 48........ Mr. Becker was named Treasurer in April 1997,
Executive Vice President, Executive Vice President in February 1992 and
Chief Financial Officer Chief Financial Officer ("CFO") in January 1986.
& Treasurer Mr. Becker has been with the Company for 26
years.
EDWARD L. NAJIM, 53........
Executive Vice President Mr. Najim was named Executive Vice President in
February 1992 and has had responsibility for
marketing operations since September 1989. Mr.
Najim has been with the Company for 25 years.
4
GEORGE J. ZOCK, 46......... Mr. Zock was named Senior Vice President in
Senior Vice President February 1992. He also served as Treasurer from
September 1989 to April 1997. In January 1997,
Mr. Zock assumed responsibility for the
association relations and corporate
communications division of the Company. In
addition, in April 1997, Mr. Zock assumed
responsibility for all of the insurance
operations of the Company. Mr. Zock has been with
the Company for 23 years.
ANN M. CAPARROS, 44........ Ms. Caparros joined the Company in March 1994 as
Vice President, General Vice President, General Counsel and Corporate
Counsel and Corporate Secretary. From March 1989 through February 1994
Secretary she was associated with John Deere Insurance
Group and its affiliates and served as Assistant
Vice President, Vice President, General Counsel,
Corporate Secretary and Claims Manager. Ms.
Caparros has 19 years of experience in the
insurance industry.
ROGER W. FISHER, 44........ Mr. Fisher joined the Company in February 1990 as
Vice President and Vice President and Controller. Mr. Fisher also
Controller has 10 years of experience in public accounting
and two additional years of experience in private
accounting, in each case specializing in the
insurance industry.
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
1996.
BOARD OF DIRECTORS
There were nine members on the Company's Board of Directors as of January 1,
1997. The Board met six times during 1996. No Director of the Company other
than Leonard I. Green attended fewer than seventy-five percent of the meetings
held during the period of 1996 for which he or she has been a Director, nor
did any Director attend fewer than seventy-five percent of the meetings of
committees to which he or she was appointed held during the period of 1996 for
which he or she has been a Director.
The standing committees of the Board consist of the Executive Committee, the
Compensation Committee, the Organization Committee, the Investment & Finance
Committee and the Audit Committee. Each standing committee has a charter which
defines its role and power.
The Executive Committee exercises certain powers of the Board during
intervals between meetings of the Board. The current members of the Committee
are Mr. Saul (Chairman), Mr. Green, Mr. Heth, Mr. Kardos and Mr. Morby. The
Executive Committee did not meet during 1996.
The Compensation Committee reviews, approves and recommends the compensation
of officers and Directors of the Company. The current members of the Committee
are Mr. Green (Chairman), Mr. Abbott, Mr. Heth, Ms. Hill and Mr. Schoen. The
Compensation Committee met one time during 1996.
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, Ms. Hill, Mr. Kardos,
Mr. O'Malley and Mr. Schoen. The Organization Committee met one time during
1996.
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. Green, Mr. Kardos, Mr. Morby, Mr. O'Malley and Mr. Saul. The Committee met
three times during 1996.
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.
Heth (Chairman), Mr. Abbott, Ms. Hill, Mr. Morby, Mr. O'Malley and Mr. Schoen.
The Committee met three times during 1996.
5
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following tables set forth certain information regarding the Company's
Common Stock owned on April 14, 1997 by each person who is known by the
Company to own beneficially more than five percent (5%) of the Company's
Common Stock, and by each of the Company's Directors, Board Nominees, the
Company's CEO and the other four highest compensated executive officers
(collectively the "Named Executive Officers"), and by all Directors, Board
Nominees 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.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AMOUNT OF PERCENT
TITLE OF BENEFICIAL OF
CLASS BENEFICIAL OWNER OWNERSHIP CLASS
-------- ---------------- ---------- -------
SECURITY OWNERSHIP OF FIVE PERCENT BENEFICIAL OWNERS
Common Stock Chieftain Capital Management, Inc. (1)....... 2,791,275 12%
Common Stock Merrill Lynch & Co., Inc. (2)................ 1,525,000 7%
Common Stock Richard C. Blum & Associates et al. (3)...... 1,196,900 5%
SECURITY OWNERSHIP OF DIRECTORS, BOARD NOMINEES AND
EXECUTIVE OFFICERS
Common Stock William W. Abbott (4)........................ 1,982 *
Common Stock Leonard I. Green (5)......................... 101,021 *
Common Stock Donald G. Heth............................... 9,050 *
Common Stock Emita B. Hill (6)............................ 887 *
Common Stock Paul J. Kardos (7)........................... 756,528 3%
Common Stock Jeffrey L. Morby (8)......................... 1,182 *
Common Stock Shaun F. O'Malley (9)........................ 1,146 *
Common Stock Ralph S. Saul (10)........................... 5,308 *
Common Stock William J. Schoen (11)....................... 31,435 *
Common Stock Larry K. Becker (12)......................... 226,859 1%
Common Stock Edward L. Najim (13)......................... 140,959 1%
Common Stock George J. Zock (14).......................... 112,738 *
Common Stock Ann M. Caparros (15)......................... 25,000 *
Common Stock All Directors, Board Nominees and Executive
Officers as a group
(14 persons) (4), (5), (6), (7), (8), (9),
(10), (11), (12), (13), (14), (15), (16)..... 1,425,087 6%
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* Less than one percent.
(1) The address of Chieftain Capital Management, Inc. ("Chieftain") is 12
East 49th Street, New York, New York 10017. Chieftain has investment
discretion with respect to certain securities of the Company. Chieftain's
clients are the direct owners of such securities, and Chieftain does not
have any economic interest in such securities. Such clients have the sole
right to receive dividends from and the proceeds from the sale of, such
securities. No such client has an interest that relates to more than 5%
of the class. The foregoing is based on Amendment No. 2 to Schedule 13G
filed by Chieftain in February 1997.
(2) The beneficial owners consist of Merrill Lynch & Co., Inc. ("ML&Co."),
Merrill Lynch Group, Inc. ("ML Group"), Princeton Services, Inc. ("PSI"),
and Merrill Lynch Asset Management, L.P. ("MLAM"). ML&Co. and ML Group
have a principal place of business at World Financial Center, North
Tower, 250 Vesey Street, New York, NY 10281. PSI and MLAM have a
principal place of business at 800 Scudders Mill Road, Plainsboro, New
Jersey 08536. MLAM is an investment adviser registered under Section 203
of the Advisers Act and acts as an investment adviser to several
investment companies registered under Section 8 of the Investment Company
Act of 1940 and certain private accounts. With respect to securities held
by those investment companies and certain private accounts, several
persons have the right to receive, or the power to direct the receipt of
dividends from or the proceeds from the sale of such securities. PSI is
the general partner of MLAM
6
and PSI is a wholly-owned direct subsidiary of ML Group. ML Group is a
wholly-owned direct subsidiary of ML&Co. ML&Co., ML Group and PSI disclaim
beneficial ownership of the securities of the Company. The foregoing is
based on a Schedule 13G filed by ML&Co. in February 1997.
(3) The beneficial owners consist of BK Capital Partners IV, L.P., a
California limited partnership ("BK IV"); and Stinson Capital Partners
L.P., a California limited partnership ("Stinson"); Insurance Company
Supported Organizations Pension Plan ("ICSOPP"); The Carpenters Pension
Trust for Southern California (the "Carpenters Trust"); Richard C. Blum &
Associates, L.P., a California limited partnership ("RCBA L.P."); Richard
C. Blum & Associates, Inc., a California corporation ("RCBA Inc."); and
Richard C. Blum, the Chairman and a substantial shareholder of RCBA Inc.
BK IV and Stinson, whose principal business is investing in securities,
have a principal office at 909 Montgomery Street, Suite 400, San
Francisco, California 94133. RCBA L.P. is the sole general partner of BK
IV and Stinson and an investment adviser to the Carpenters Trust and
ICSOPP. RCBA L.P., whose principal business is acting as general partner
for investment partnerships and providing investment advisory and
financial consulting services, is a registered investment adviser with
the Securities and Exchange Commission and with the State of California.
The sole general partner of RCBA L.P. is RCBA Inc. The principal business
office address of RCBA L.P. and RCBA Inc. is 909 Montgomery Street, Suite
400, San Francisco, California 94133. The Carpenters Trust is a trust,
governed by a board of trustees. Its principal office is located at 520
South Virgil Avenue, 4th Floor, Los Angeles, California 90020. ICSOPP is
a trust, governed by a board of trustees. The principal administrative
office of ICSOPP is located at 1130 Connecticut Avenue, N.W., Washington,
D.C. 20036. Because RCBA L.P. has voting and investment power with
respect to 150,800 shares that are legally owned by The Common Fund for
the account of its Equity Fund ("The Common Fund"), those shares are
reported as beneficially owned by RCBA L.P. The Common Fund is
principally engaged in the business of managing investments for
educational institutions. The principal administrative office of The
Common Fund is located at 450 Post Road East, Westport, Connecticut
06991-0909. The Common Fund disclaims membership in a group with any of
the listed beneficial owners, and disclaims beneficial ownership of any
shares held by the listed beneficial owners. Voting and investment power
concerning the above shares are held solely by RCBA L.P. The listed
beneficial owners therefore may be deemed to be members in a group, in
which case each listed beneficial owner would be deemed to have
beneficial ownership of an aggregate of 1,196,900 shares of the Common
Stock. As the sole general partner of RCBA L.P., RCBA Inc. is deemed the
beneficial owner of the securities over which RCBA L.P. has voting and
investment power. As Chairman, director and substantial shareholder of
RCBA Inc., Richard C. Blum might be deemed to be the beneficial owner of
the securities beneficially owned by RCBA, Inc. Mr. Blum and the other
shareholders, directors and executive officers of RCBA, Inc. disclaim
beneficial ownership of any of the securities that are beneficially owned
by RCBA, Inc. The listed beneficial owners acquired the Common Stock for
investment purposes. Depending upon market conditions and other factors,
the listed beneficial owners may acquire additional securities of the
Company, in the open market, in privately negotiated transactions or
otherwise. Alternatively, depending upon market conditions and other
factors, the listed beneficial owners may, from time to time, dispose of
some or all of the securities of the Company that they beneficially own.
The listed beneficial owners have no present plans or proposals that
relate to or would result in any of the consequences listed in paragraphs
(a)-(j) of Item 4 of Schedule 13D, or any agreement regarding such
matters, although they may in the future take actions that would have
such consequences. The foregoing is based on a Schedule 13D filed by RCBA
L.P. in June 1996.
(4) Includes 1,182.038 Common Stock Equivalent Units pursuant to the Director
Stock Plan.
(5) Includes 20,000 shares owned by a living trust for which Mr. Green is a
Trustee. Also includes 4,465 shares which Mr. Green holds in an IRA
account. In addition, 74,909 shares are owned by a trust for which Mr.
Green has shared voting and dispositive power. Also includes 1,112.155
Common Stock Equivalent Units pursuant to the Director Stock Plan.
(6) Consists entirely of 886.528 Common Stock Equivalent Units pursuant to
the Director Stock Plan.
(7) Includes options to purchase 250,000 shares of Common Stock which are
currently exercisable pursuant to the Option Plan. All such options
expire on November 14, 2001. Also includes 496,696 shares which Mr.
Kardos holds as Trustee of a personal trust, 6,662 shares held by his
children and 3,170 shares held by his children as Trustees for their
respective trusts as to which Mr. Kardos shares voting and dispositive
power.
7
(8) Consists entirely of 1,182.038 Common Stock Equivalent Units pursuant to
the Director Stock Plan.
(9) Includes 946.141 Common Stock Equivalent Units pursuant to the Director
Stock Plan.
(10) Includes 3,307.616 Common Stock Equivalent Units pursuant to the Director
Stock Plan.
(11) Includes 1,334.741 Common Stock Equivalent Units pursuant to the Director
Stock Plan.
(12) Includes options to purchase 75,000 shares of Common Stock which are
currently exercisable pursuant to the Option Plan. All such options
expire on November 14, 2001. Also includes 35,000 shares which Mr. Becker
holds as Trustee for his wife's trust and 35,000 shares as Trustee for a
personal trust.
(13) Includes 5,000 shares which are held by Mr. Najim's child and 65,492
shares held by his wife, as to which Mr. Najim shares voting and
dispositive power.
(14) Includes options to purchase 45,000 shares of Common Stock which are
currently exercisable pursuant to the Option Plan. All such options
expire on November 14, 2001. Also includes 200 shares owned by Mr. Zock's
children under the Uniform Gift to Minors Act for which Mr. Zock is the
custodian and 33,769 shares held by his wife, as to which Mr. Zock shares
voting and dispositive power.
(15) Consists entirely of options to purchase 25,000 shares of Common Stock
which are currently exercisable pursuant to the Option Plan. Does not
include options to purchase 5,000 shares granted pursuant to the Option
Plan which will vest on March 7, 1998. Ten thousand (10,000) of such
options expire on March 7, 2004. Twenty thousand (20,000) of such options
expire on March 7, 2005.
(16) Includes options for the group of Directors and executive officers to
purchase 405,000 shares of Common Stock which are currently exercisable
pursuant to the Option Plan; does not include options to purchase 5,000
shares which vest in the future. The grant dates and vesting schedules
vary; however, each award expires ten (10) years from the date of grant.
Also includes 9,951.257 Common Stock Equivalent Units pursuant to the
Director Stock Plan.
8
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 Chief Executive
Officer and four most highly compensated executive officers for services
rendered in the capacities described above.
LONG TERM
COMPENSATION
------------
ANNUAL
COMPENSATION AWARDS
---------------------------- ------------
OTHER
ANNUAL ALL OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION OPTIONS/SARS COMPENSATION
POSITION YEAR ($) ($)(2) ($) (#) ($)(3)
------------------ ---- ------- ------- ------------ ------------ ------------
Paul J. Kardos.......... 1996 400,008 400,000 0 15,000 15,078(4)
President & Chief
Executive 1995 393,756 393,756 416 0 15,037(4)
Officer 1994 375,000 475,000 2,208 0 15,037(4)
Larry K. Becker......... 1996 197,504 97,172 0 7,500 14,718(5)
Executive Vice
President, 1995 185,004 185,004 0 0 14,677(5)
Chief Financial Officer 1994 177,252 225,000 0 0 14,677(5)
Edward L. Najim......... 1996 197,504 89,746 0 7,500 14,866(6)
Executive Vice President 1995 185,004 185,004 0 0 14,845(6)
- --Marketing 1994 177,252 225,000 0 0 14,845(6)
George J. Zock.......... 1996 156,668 85,870 0 7,500 14,677(7)
Senior Vice President 1995 145,008 145,008 0 0 14,597(7)
1994 137,508 175,000 0 0 14,581(7)
Ann M. Caparros......... 1996 140,544 46,105 0 3,000 11,435(8)
Vice President,
Secretary & 1995 135,846 67,923 0 20,000 11,412(8)
General Counsel (1) 1994 106,413 60,000 0 10,000 21,548(8)
- --------
(1) Ms. Caparros joined the Company on March 7, 1994.
(2) The Bonus amounts were paid pursuant to the Horace Mann Incentive
Compensation Program.
(3) 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.
(4) For Mr. Kardos, $3,750 was contributed to the 401(k) Plan in 1996, $3,750
in 1995, and $3,750 in 1994. In addition, $10,500 was contributed to the
MPP Plan on behalf of Mr. Kardos in 1996, $10,500 in 1995, and $10,500 in
1994. In 1996, $828 was attributed to group term life insurance premiums,
$787 in 1995, and $787 in 1994.
(5) For Mr. Becker, $3,750 was contributed to the 401(k) Plan in 1996, $3,750
in 1995, and $3,750 in 1994. In addition, $10,500 was contributed to the
MPP Plan on behalf of Mr. Becker in 1996, $10,500 in 1995, and $10,500 in
1994. In 1996, $468 was attributed to group term life insurance premiums,
$427 in 1995, and $427 in 1994.
(6) For Mr. Najim, $3,750 was contributed to the 401(k) Plan in 1996, $3,750
in 1995, and $3,750 in 1994. In addition, $10,500 was contributed to the
MPP Plan on behalf of Mr. Najim in 1996, $10,500 in 1995, and $10,500 in
1994. In 1996, $616 was attributed to group term life insurance premiums,
$595 in 1995, and $595 in 1994.
(7) For Mr. Zock, $3,750 was contributed to the 401(k) Plan in 1996, $3,750 in
1995, and $3,750 in 1994. In addition, $10,500 was contributed to the MPP
Plan on behalf of Mr. Zock in 1996, $10,500 in 1995, and $10,500 in 1994.
In 1996, $427 was attributed to group term life insurance premiums, $347
in 1995, and $331 in 1994.
(8) For Ms. Caparros, $3,750 was contributed to the 401(k) Plan in 1996,
$3,750 in 1995, and $2,438 in 1994. In addition, $7,500 was contributed to
the MPP Plan on behalf of Ms. Caparros in 1996, $7,500 in 1995, and $5,321
in 1994. In 1996, $185 was attributed to group term life insurance
premiums, $162 in 1995, and $119 in 1994.
9
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS/SARS
OPTIONS/SARS AT
SHARES ACQUIRED VALUE AT FY-END (#) FY-END ($)
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- --------------- ------------ ------------------------- -------------------------
Paul J. Kardos.......... 0 0 250,000 / 0 5,593,750 / 0
Larry K. Becker......... 0 0 75,000 / 0 1,678,125 / 0
Edward L. Najim......... 50,000 925,000 25,000 / 0 559,375 / 0
George J. Zock.......... 0 0 45,000 / 0 1,006,875 / 0
Ann M. Caparros......... 0 0 17,500 / 12,500 303,713 /222,138
PENSION AND EXCESS PENSION PLANS
The following pension table illustrates the total benefits available without
considering social security offsets.
YEARS OF COVERED SERVICE
COVERED REMUNERATION ($) 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, 1996, Mr. Kardos has 30 years of credited service; Mr.
Becker has 21 years; Mr. Najim has 21 years; Mr. Zock has 21 years; and
Ms. Caparros has 2 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 thirty six (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 thirty six (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.
10
DIRECTOR COMPENSATION
A Director, other than an employee or 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 $55,000 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.
AGREEMENTS WITH KEY EMPLOYEES
The Company has entered into an employment agreement with Paul J. Kardos.
That agreement has a three year term expiring on July 31, 1999, provides for
his employment as Chief Executive Officer of the Company, including the duty
of assisting the Board of Directors of the Company in searching for and
managing an orderly transition to a successor Chief Executive Officer of the
Company to succeed Mr. Kardos upon his anticipated retirement at the
conclusion of the term of the agreement, and provides for an annual salary of
$410,000 and an annual cash bonus to be determined by the Board of Directors
but not to be less than $400,000 in any year (except for the cash bonus
applicable to a partial year of employment, which will be pro-rated). The
agreement also provides that if Mr. Kardos' employment is terminated by the
Company without cause or by Mr. Kardos because of a material diminution in his
duties, he will be paid the full cash compensation due under his contract
through the remaining term of the agreement in an immediate lump sum payment
and he will be treated for purposes of pension and related plans as having
been employed by the Company through the end of the term of the agreement.
In addition, the Company has entered into agreements with certain key
employees, including each of Mr. Kardos, Mr. Becker, Mr. Najim, Mr. Zock and
Ms. Caparros, 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
non-qualified 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. The one-time cash
payment would be equal to 2.9 times the highest annual cash compensation
(salary 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, eleven months.
In addition, the Company has entered into agreements with certain key
employees, including each of Mr. Kardos, Mr. Becker, Mr. Najim, Mr. Zock and
Ms. Caparros, which provide that upon a change in control of the Company, the
foregoing Named Executive Officers will be entitled to receive an amount equal
to his 1993 salary plus bonus for his continuation of employment. For Ms.
Caparros, the amount for the continuation of her employment is $185,000. Such
agreements are subject to an evergreen annual renewal effective December 31.
If a change in control occurs during the term of the agreement and provided
that the employee's employment is not terminated either by the employee's
election or by the Company for cause prior to the sixty days following the
change in control, the employee shall be entitled to receive one half of the
amount on the date of the change in control and the remainder sixty days
later. If the employee is terminated by the Company without cause, any
payments pursuant to the agreement will become immediately due and owing by
the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
TRANSACTIONS
The Company has purchased through broker John N. Gurash of John Gurash & Co.
certain corporate insurance policies. John N. Gurash is the son of John T.
Gurash, Chairman Emeritus of the Board of the Company. John T. Gurash has no
financial or operational interest in his son's business. Total annual premiums
on the policies placed by John Gurash & Co. for the period August 29, 1995 to
August 29, 1996 were approximately $1,030,000, of which it
11
is estimated that John Gurash & Co. received commissions of approximately
$112,968 or 11% of total premiums. Effective April 1, 1996, John Gurash & Co.
merged with Bolton RGV Insurance Brokers ("Bolton"). The Company renewed these
policies for the period August 29, 1996 to August 29, 1997, with total annual
premiums of approximately $929,000, of which commissions received by Bolton
were approximately $99,153, or 11% of total premiums. The insurance carrier
determined the amount of commission to be paid to Bolton.
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 bonus) to be paid to the Chief Executive Officer ("CEO") and the
other Named Executive Officers of the Company. In addition, the Compensation
Committee grants stock options, stock appreciation rights and restricted stock
awards to employees of the Company. Currently, the components of compensation
for the CEO and each Named Executive Officer are base salary, short term
incentive compensation, long term incentive compensation and annual 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 are
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 1996 included data on 141 insurance companies,
(ii) the LOMA Executive Compensation Survey for U.S. Companies with Assets of
Between $1.5 Billion and $5 Billion, which for 1996 included data on 29
insurance companies, and (iii) the NAII Executive Compensation Survey for
participating insurance companies which for 1996 included data on 23 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 companies which
comprise the compensation surveys are not necessarily the same companies used
in calculating the S&P Insurance Composite Index reflected in the Stock Price
Performance Graph on page 16.
In determining salaries, the Compensation Committee strives to have the
salaries of the Company's Named Executive Officers be at or below the average
for executives in similar positions as indicated in the compensation surveys.
While base salaries paid by the Company have tended to be lower than the
average base salaries for similar positions as indicated in the compensation
surveys, bonus incentive awards calculated as described below tend to be
higher than the average bonus incentive awards as indicated in the
compensation surveys. The Compensation Committee has intentionally sought this
result, so that overall compensation over a two year period including annual
stock options to the Company's Named Executive Officers results in higher than
the average compensation for executives in similar positions as indicated in
the compensation surveys.
The Compensation Committee may consider two additional factors in setting
salaries. Those factors are the possible need for an incentive to encourage
the executive to change positions or 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 to the
average salaries for similar positions as reported in the compensation
surveys. If the CEO or Named Executive Officer is below
12
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.
The Compensation Committee noted that the CEO received a salary increase in
April 1995 and did not adjust the CEO's base salary in 1996. As discussed in
the section Agreements with Key Employees, the Company entered into an
employment agreement with the CEO in July 1996 which fixed his salary for the
three year term of that agreement. In 1996, the Compensation Committee did not
set any initial base salaries for Named Executive Officers but did review the
base salaries of all Named Executive Officers other than the CEO. In 1996, the
Compensation Committee adjusted the salary of all four Named Executive
Officers other than the CEO, each of which had not received adjustments in
their salaries for periods ranging from 18 to 20 months. As a result of the
analysis described above, Named Executive Officers salaries were increased
ranging from 8.0% to 9.6%.
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 or operating division 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 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").
On July 10, 1996, pursuant to the terms of the STIP, the Compensation
Committee determined that the Named Executive Officers were eligible to
receive compensation under the STIP with the performance period being January
1, 1996 through December 31, 1996. In addition, the Compensation Committee
established the performance goals, the specific target objectives with respect
to such performance goals and an objective method for computing the amount of
annual incentive compensation payable to certain Officers, including the Named
Executive Officers under the STIP if the performance goals were attained. The
Committee determined that the effect of any one time event in 1996 which had a
material effect on the relevant corporate measures would be eliminated from
the calculation of such measures.
Under the terms of the STIP, 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 (a predetermined
group of peer companies ("Peers")): 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.
The Compensation Committee determined that no awards for 1996 would be paid
unless certain thresholds were met: (i) the A.M. Best Company ("A.M. Best")
rating of each of the Corporation's principal insurance operating subsidiaries
as of December 31, 1996 is A or better, (ii) the Corporation's Standard &
Poor's Corporation ("Standard & Poor's") rating as of December 31, 1996 is A+
or better, (iii) the Corporation's return on equity for 1996 is not less than
10% and (iv) the Corporation's operating earnings per share for 1996 are not
less than 90% of the
13
Corporation's budgeted operating earnings per share for 1996. The corporate
portion of each award would be determined on the basis of the following
performance goals: operating earnings per share as compared with budget,
growth in operating earnings per share as compared with Peers, statutory
premiums as compared with budget and growth in statutory premiums as compared
with Peers
On April 28, 1997, the Compensation Committee concluded that each of the
threshold measures had been met. The Compensation Committee next certified the
following results of the corporate performance goals. Each performance goal
was weighted equally. Operating earnings per share from continuing operations,
excluding Hurricane Fran, exceeded budget by 3.4%. Growth in operating
earnings from continuing operations was 17.8% and ranked in the 70th
percentile as compared to Peers. Statutory premiums were 99.6% of budget.
Growth in statutory premiums was 8.6% and, as compared to Peers, ranked in the
45th percentile.
For the Named Executive Officers, other than the CEO and the CFO, the
Compensation Committee also considered the results of his or her operating
division.
Pursuant to the employment agreement with the CEO, discussed in the section
Agreements with Key Employees, the Company guaranteed that the CEO's annual
cash bonus would not be less than $400,000. Based on the foregoing analysis,
the award under the STIP would have been less than $400,000; therefore, the
CEO was awarded the contractually guaranteed amount of $400,000.
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
or departmental long term performance objectives. The LTIP 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 LTIP
is also intended to secure the full deductibility of incentive compensation
payable to the Company's Named Executive Officers 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 Code.
On July 10, 1996, the Compensation Committee determined that certain
officers, including all of the Named Executive Officers are eligible to
receive compensation under the LTIP. In addition, the Compensation Committee
set the performance goals and the performance period for January 1, 1996
through December 31, 1997.
The Compensation Committee determined that no awards for the 1996-1997
performance period would be paid unless certain thresholds were met: (i) the
A.M. Best rating of each of the Company's principal insurance operating
subsidiaries as of December 31, 1997 is A or better, (ii) the Company's
Standard & Poor's rating as of December 31, 1997 is A+ or better, (iii) the
Company's average annual return on equity for 1996 and 1997 is not less than
10%, and (iv) the Company's average annual growth in statutory premiums for
1996 as compared to 1995 and for 1997 as compared to 1995 is not less than 5%.
Each award will be determined on the basis of the following performance goals:
average annual return on equity for 1996 and 1997 as compared with Peers;
compound annual growth rate in statutory premiums from 1995 to 1997 as
compared with Peers; total shareholder return from December 31, 1995 to
December 31, 1997 as compared with S&P Insurance Composite Companies as of
December 31, 1997.
Since the performance period is not yet complete, awards will not be payable
until 1998 under the LTIP.
HORACE MANN EDUCATORS CORPORATION 1991 STOCK INCENTIVE PLAN
In order to 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, other employees and certain
directors are eligible to receive stock options, stock appreciation rights and
restricted stock awards.
14
The Option Plan is administered by the Compensation Committee which is
comprised of independent Directors, none of whom is eligible to receive
awards. Subject to the provisions of the Option Plan, the
CompensationCommittee determines 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.
Generally 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 ten 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 an executive officer's financial interest with
regard to such incentive compensation to parallel the financial interests of
the Shareholders.
On July 10, 1996, the Compensation Committee decided that it intended to
award stock options during the first half of 1997 to certain officers,
including the Named Executive Officers. At that time, the Compensation
Committee also specified certain ranges for such awards. The number of stock
options granted to each Named Executive Officer within each specified range is
a function of the Compensation Committee's subjective assessment of each Named
Executive Officer's performance during 1996, the importance to the Company of
retaining the individual and that individual's potential for future
contributions to the Company.
Based on its analysis, the Compensation Committee decided to award 15,000
stock options to the CEO and 25,500 stock options to the Named Executive
Officers other than the CEO as a group.
NOTE: The Report on Executive Compensation of the Compensation Committee
and the Stock Price Performance Graph on page 16 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
LEONARD I. GREEN, Chairman
WILLIAM W. ABBOTT, DONALD G. HETH, EMITA B. HILL and WILLIAM J. SCHOEN,
Members
15
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 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.
HORACE MANN EDUCATORS CORPORATION STOCK PRICE PERFORMANCE
[GRAPH APPEARS HERE]
HMEC S&P Insurance Composite S&P 500
Nov-91 $100 $100 $100
Dec-91 $124 $113 $109
Dec-92 $160 $133 $117
Dec-93 $141 $141 $129
Dec-94 $122 $141 $130
Dec-95 $181 $201 $179
Dec-96 $238 $252 $220
- --------
* 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.
16
PROPOSAL NO. 2
RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountants selected by the Board for the Company's
fiscal year ending December 31, 1997 are KPMG Peat Marwick LLP. KPMG Peat
Marwick LLP served in that capacity for the fiscal year ended December 31,
1996. A representative of that 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.
PROPOSAL NO. 3
ALL OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THIS MEETING
As of the date of this Proxy Statement, management of the Company knows of
no business that will be presented for consideration at the Annual Meeting
other than that which has been referred to above. As to other business, if
any, that may properly come before the meeting, it is intended that proxies in
the enclosed form will be voted in respect thereof in accordance with the
judgment of the person or persons voting the proxies.
OTHER MATTERS
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 1998 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 1998 must be received in writing by the Corporate
Secretary, Ann M. Caparros, 1 Horace Mann Plaza, Springfield, Illinois, 62715-
0001 not later than December 31, 1997 in order for such proposal to be
considered for inclusion in the Company's Proxy Statement and proxy relating
to the 1998 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,
/s/ Ann M. Caparros
Ann M. Caparros
Corporate Secretary
Springfield, Illinois
April 30, 1997
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.
17
[LOGO HORACE MANN(R)]
(HA-C00304)
HORACE MANN EDUCATORS CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS
JUNE 4, 1997
The undersigned Shareholder of Horace Mann Educators Corporation (the
"Company") hereby appoints Paul J. Kardos and Ralph S. Saul 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 June 4, 1997, at 10:00
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 THROUGH 2.
IF NO INSTRUCTION TO THE CONTRARY IS INDICATED OR IF NO INSTRUCTION IS GIVEN AND
IN ACCORDANCE WITH THE DISCRETION OF PROXIES ON PROPOSAL 3.
(TO BE SIGNED ON OTHER SIDE)
Please date, sign and mail your
proxy card back as soon as possible!
Annual Meeting of Shareholders
HORACE MANN EDUCATORS CORPORATION
June 4, 1997
. Please Detach and Mail in the Envelope Provided .
[X] Please mark your
votes as in this
example.
FOR WITHHELD
1. Election of [_] [_]
Directors.
For, except vote withheld from the following nominee(s):
- -------------------------------------------------------
Nominees: William W. Abbott
Emita B. Hill
Paul J. Kardos
Jeffrey L. Morby
Shaun F. O'Malley
Ralph S. Saul
William J. Schoen
FOR AGAINST ABSTAIN
2. To ratify the appointment of KPMG [_] [_] [_]
Peat Marwick LLP, independent
certified public accountants, as the
Company's auditors for the year ending December 31, 1997;
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.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY IN THE ENCLOSED
ENVELOPE TO AMERICAN STOCK TRANSFER & TRUST CO., 40 WALL
STREET, 40TH FLOOR, NEW YORK, NEW YORK 10005.
SIGNATURE(S)_____________________________________________DATE_____________, 1997
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.