SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
HORACE MANN EDUCATORS CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
-----------------------------------------------------------------------
(4) Date Filed:
-----------------------------------------------------------------------
HORACE MANN EDUCATORS CORPORATION
1 HORACE MANN PLAZA
SPRINGFIELD, ILLINOIS 62715-0001
ANNUAL MEETING--MAY 22, 1998
DEAR SHAREHOLDERS:
You are cordially invited to attend the Annual Meeting of your Corporation
to be held at 9:00 a.m. on Friday, May 22, 1998, 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,
[SIGNATURE]
Ralph S. Saul
CHAIRMAN
BOARD OF DIRECTORS
[SIGNATURE]
Paul J. Kardos
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
April 17, 1998
HORACE MANN EDUCATORS CORPORATION
1 HORACE MANN PLAZA
SPRINGFIELD, ILLINOIS 62715-0001
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 22, 1998
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Shareholders of
HORACE MANN EDUCATORS CORPORATION (the "Company") will be held at the
Renaissance Springfield Hotel, 701 East Adams Street, Springfield, Illinois, on
Friday, May 22, 1998, at 9:00 a.m., Central Daylight Savings Time, for the
following purposes:
1. To elect nine (9) Directors to hold office until the next Annual Meeting
of Shareholders and until their respective successors have been duly
elected and qualified;
2. To approve an amendment to the Company's Certificate of Incorporation
provision which requires the retirement of any Director who is 72 or more
years of age following the completion of his or her then current term in
office. The amendment would permit Ralph S. Saul, currently serving as
Chairman of the Board of Directors, to be eligible for re-election to the
Board of Directors at the Annual Meeting and at the 1999 Annual Meeting;
3. To ratify the appointment of KPMG Peat Marwick LLP, independent
certified public accountants, as the Company's auditors for the year
ending December 31, 1998; and
4. To consider and take action with respect to such other matters as may
properly come before the Annual Meeting or any adjournment or
adjournments thereof.
The Board of Directors has fixed the close of business on March 31, 1998 as
the record date for the determination of Shareholders entitled to notice of, and
to vote at, the Annual Meeting.
All Shareholders are cordially invited to attend the Annual Meeting. Whether
or not you plan to attend the Annual Meeting, the Board of Directors urges you
to complete, date, sign and return the enclosed proxy card as soon as possible
in the enclosed business reply envelope, which requires no postage if mailed in
the United States. You may revoke your voted proxy at any time prior to its
exercise provided that you comply with the procedures set forth in the Proxy
Statement to which this Notice of Annual Meeting of Shareholders is attached. If
you attend the Annual Meeting, you may vote in person if you wish.
By order of the
Board of Directors,
[SIGNATURE]
Ann M. Caparros
Corporate Secretary
Springfield, Illinois
April 17, 1998
IMPORTANT: PLEASE MAIL YOUR PROXY PROMPTLY IN THE ENCLOSED ENVELOPE. THE MEETING
DATE IS MAY 22, 1998.
PROXY STATEMENT
HORACE MANN EDUCATORS CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
MAY 22, 1998
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors (the "Board") of Horace Mann Educators Corporation (the
"Company") of proxies from holders of the Company's common stock, par value
$.001 per share (the "Common Stock"). The proxies will be voted at the Annual
Meeting of Shareholders to be held on Friday, May 22, 1998, at 9:00 a.m.,
Central Daylight Savings Time, at the Renaissance Springfield Hotel, 701 East
Adams Street, Springfield, Illinois, and through any adjournment or adjournments
thereof (the "Annual Meeting").
The mailing address of the Company is 1 Horace Mann Plaza, Springfield,
Illinois 62715-0001 (telephone number (217) 789-2500). The Proxy Statement and
the accompanying proxy card are being first transmitted to Shareholders of the
Company on or about April 17, 1998.
The Board has fixed the close of business on March 31, 1998 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 44,044,744 shares of Common
Stock were issued and outstanding, each share entitling the holder thereof to
one vote on each matter to be voted upon at the Annual Meeting. The presence, in
person or by proxy, of the holders of a majority of such outstanding shares is
necessary to constitute a quorum for the transaction of business at the Annual
Meeting. Proxies will be solicited by mail. The Company also intends to make,
through bankers, brokers or other persons, a solicitation of beneficial owners
of Common Stock.
At the Annual Meeting, Shareholders of the Company will be asked (i) to
elect nine (9) Directors to hold office until the next Annual Meeting of
Shareholders and until their respective successors have been duly elected and
qualified, (ii) to approve an amendment to the Company's Certificate of
Incorporation provision which requires the retirement of any Director who is 72
or more years of age following the completion of his or her then current term in
office. The amendment would permit Ralph S. Saul, currently serving as Chairman
of the Board of Directors, to be eligible for re-election to the Board of
Directors at the Annual Meeting and at the 1999 Annual Meeting ("Amendment to
the Retirement Policy") and (iii) to ratify the appointment of KPMG Peat Marwick
LLP, independent certified public accountants, as the Company's auditors for the
year ending December 31, 1998.
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, 1997 were mailed to known
Shareholders on or about March 31, 1998.
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 approval of the Amendment to the Retirement Policy
and the ratification of KPMG Peat Marwick LLP as the Company's auditors for
1998.
Abstentions may not be specified with regard to the election of Directors.
However, abstentions may be specified on the proposal for the approval of the
Amendment to the Retirement Policy and the ratification of KPMG Peat Marwick LLP
as the Company's auditors for 1998. Such abstentions will be counted as present
for purposes of approving the Amendment to the Retirement Policy and the
ratification of KPMG Peat Marwick LLP as the Company's auditors for 1998 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, Emita B. Hill, Paul J.
Kardos, Donald E. Kiernan, Jeffrey L. Morby, Shaun F. O'Malley, Charles A.
Parker, Ralph S. Saul and William J. Schoen. The terms of the current Directors
expire at the Annual Meeting. 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. If
the Amendment to the Retirement Policy is not approved by Shareholders, Mr. Saul
will not be permitted to serve on the Board of Directors beyond the Annual
Meeting. However, if approved, the Amendment to the Retirement Policy provides
that Mr. Saul will be eligible for re-election to the Board of Directors for the
Annual Meeting and the 1999 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. Kiernan, Mr.
Morby, Mr. O'Malley, Mr. Parker and Mr. Schoen (the "Board Nominees") unless
such authority is withheld as provided in the proxy. If the Amendment to the
Retirement Policy is approved, the proxies
2
solicited by and on behalf of the Board of Directors will be voted "FOR" the
election of Mr. Saul unless such authority is withheld as provided in the proxy.
The Company has no reason to believe that any of the foregoing Board Nominees or
Mr. Saul is not available to serve or will not serve if elected, although in the
unexpected event that any such Board Nominees or Mr. Saul 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 March 31, 1998, is provided with respect to
each Board Nominee:
WILLIAM W. ABBOTT, 66 .................. Mr. Abbott has been a Director of the Company since September
Chairman of the Compensation Committee; 1996. He is currently self-employed as a business consultant. In
Member of the Organization Committee and 1989, Mr. Abbott retired from 35 years of service at Procter &
Audit Committee of the Board 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, 62 ...................... Dr. Hill has been a Director of the Company since September
Member of the Compensation Committee, 1996. She is the Chancellor of Indiana University Kokomo, a
Organization Committee and Audit position she has held for more than five years. She currently
Committee of the Board serves as a 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, 61 ..................... Mr. Kardos was named to his present position as President and
President and Chief Executive Officer; CEO in 1979 and has been a Director of the Company since 1979.
Member of the Executive Committee, Mr. Kardos also is a member of the Board of Directors of St.
Organization Committee and Investment & John's Hospital. Mr. Kardos has been with the Company for 23
Finance Committee of the Board years and has 36 years of experience in the insurance industry.
DONALD E. KIERNAN, 57 .................. Mr. Kiernan has been a Director of the Company since February
Member of the Compensation Committee, 1998. He is currently the Senior Vice President, Treasurer and
Investment & Finance Committee and Audit Chief Financial Officer of SBC Communications Inc., a position
Committee of the Board he has held since July 1993. Prior to that, he served as Senior
Vice-President--Finance and Treasurer of SBC Communications Inc.
He currently serves as a member of the Boards of Directors of
Pacific Telesis Group, Pacific Bell, Southwestern Bell Telephone
Company, Telefonos de Mexico, S.A., de C.V. (Telmex), BioNumerik
Pharmaceuticals, Inc. and St. Mary's University Business School.
3
JEFFREY L. MORBY, 60 ................... Mr. Morby has been a Director of the Company since September
Member of the Executive Committee, 1996. He is currently self-employed as a business consultant and
Compensation Committee, Investment & investor. Mr. Morby serves as a Director and Chairman of AMARNA
Finance Committee and Audit Committee of Corporation and a Director of ICMA Retirement Corporation. Mr.
the Board Morby retired on June 30, 1996 as Vice Chairman of 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. In addition, Mr. Morby serves on the Boards of
Directors of Duquesne University, Pittsburgh Cultural Trust,
Pittsburgh Historical Society and Pittsburgh City Theater
Company.
SHAUN F. O'MALLEY, 62 .................. Mr. O'Malley has been a Director of the Company since September
Chairman of the Audit Committee; Member 1996. He is currently the Chairman Emeritus of Price Waterhouse
of the Organization Committee and LLP, a title he has held since July 1995. Prior to that, he
Investment & Finance Committee of the served as Chairman and Senior Partner of Price Waterhouse LLP.
Board He currently serves as a member of the Boards of Directors of
the Finance Company of Pennsylvania, Regulus Group, LLC, Coty,
Inc., Vlasic Foods International 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.
CHARLES A. PARKER, 63 .................. Mr. Parker has been a Director of the Company since September
Member of the Executive Committee, 1997. He retired in 1995 after 17 years of service at The
Organization Committee and Investment & Continental Corporation, including service as Executive Vice
Finance Committee of the Board President, Chief Investment Officer and Director. He currently
serves as a member of the Boards of Directors of T.C.W.
Convertible Fund and Underwriters Re Group and is a member of
the Business Advisory Council of the University of Colorado
School of Business.
RALPH S. SAUL, 75 ...................... Mr. Saul has been a Director of the Company since June 1995. He
Chairman of the Executive Committee and currently serves as a Director of American Buildings Company,
Organization Committee; and Member of Commonwealth Ventures, The Brookings Institution and the
the Investment & Finance Committee of Committee for Economic Development. During his career, in
the Board 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, 62 .................. Mr. Schoen has been a Director of the Company since September
Chairman of the Investment & Finance 1996. He is currently the Chairman of the Board and Chief
Committee; Member of the Compensation Executive Officer of Health Management Associates, Inc.,
Committee, Organization Committee and positions he has held for more than five years. He serves on the
Audit Committee of the Board Board of Directors of Health Management Associates and many of
its subsidiaries.
4
EXECUTIVE OFFICERS
Set forth below is certain information, as of March 31, 1998, 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, 49 ............ Mr. Becker was named Executive Vice President in February
Executive Vice President and 1992 and Chief Financial Officer ("CFO") in January 1986.
Chief Financial Officer Mr. Becker has been with the Company for 27 years.
EDWARD L. NAJIM, 54 ............ Mr. Najim was named Executive Vice President in February
Executive Vice President 1992 and has had responsibility for marketing operations
since September 1989. Mr. Najim has been with the Company
for 26 years. Mr. Najim has announced his intention to
retire from the Company.
GEORGE J. ZOCK, 47 ............. Mr. Zock was named Executive Vice President in September
Executive Vice President 1997. Mr. Zock is responsible for insurance operations. He
also served as Senior Vice President from February 1992 to
September 1997 and Treasurer from September 1989 to April
1997. Mr. Zock has been with the Company for 24 years.
ANN M. CAPARROS, 45 ............ Ms. Caparros joined the Company in March 1994 as Vice
Vice President, General Counsel President, General Counsel and Corporate Secretary. From
and Corporate Secretary March 1989 through February 1994 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 20 years of experience in the insurance
industry.
ROGER W. FISHER, 45 ............ Mr. Fisher joined the Company in February 1990 as Vice
Vice President and Controller President and Controller. Mr. Fisher has 20 years of
experience in the insurance industry including, 10 years
of experience in public accounting with Coopers & Lybrand
specializing in its insurance industry practice.
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
1997.
BOARD OF DIRECTORS
There were eight members on the Company's Board of Directors as of January
1, 1998. The Board met eight times during 1997. No Director of the Company
attended fewer than seventy-five percent of the meetings held during the period
of 1997 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 1997 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. Kardos, Mr. Morby and Mr. Parker. The Executive
Committee did not meet during 1997.
5
The Compensation Committee reviews, approves and recommends the compensation
of officers and Directors of the Company. The current members of the Committee
are Mr. Abbott (Chairman), Ms. Hill, Mr. Kiernan, Mr. Morby and Mr. Schoen. The
Compensation Committee met three times during 1997.
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, Mr. Parker and Mr. Schoen. The Organization Committee met three times
during 1997.
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.
Kardos, Mr. Kiernan, Mr. Morby, Mr. O'Malley, Mr. Parker and Mr. Saul. The
Committee met four times during 1997.
The Audit Committee oversees the financial reporting and internal operating
controls of the Company. It meets with both management and the Company's
independent public accountants. The current members of the Committee are Mr.
O'Malley (Chairman), Mr. Abbott, Ms. Hill, Mr. Kiernan, Mr. Morby and Mr.
Schoen. The Committee met four times during 1997.
6
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following tables set forth certain information regarding the Company's
Common Stock owned on March 31, 1998 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
BENEFICIAL PERCENT OF
TITLE OF CLASS BENEFICIAL OWNER OWNERSHIP+ CLASS
- --------------- -------------------------------------------------------------------------- ----------- -------------
SECURITY OWNERSHIP OF FIVE PERCENT BENEFICIAL OWNERS
Common Stock Chieftain Capital Management, Inc. (1).................................... 4,920,630 11%
Common Stock Princeton Services, Inc. (2).............................................. 3,014,400 7%
Common Stock Boston Partners (3)....................................................... 2,761,498 6%
SECURITY OWNERSHIP OF DIRECTORS, BOARD NOMINEES AND EXECUTIVE OFFICERS
Common Stock William W. Abbott (4)..................................................... 10,520 *
Common Stock Emita B. Hill (5)......................................................... 3,512 *
Common Stock Paul J. Kardos (6)........................................................ 1,514,616 3%
Common Stock Donald E. Kiernan (7)..................................................... 212 *
Common Stock Jeffrey L. Morby (8)...................................................... 4,610 *
Common Stock Shaun F. O'Malley (9)..................................................... 4,259 *
Common Stock Charles A. Parker (10).................................................... 454 *
Common Stock Ralph S. Saul (11)........................................................ 17,943 *
Common Stock William J. Schoen (12).................................................... 109,316 *
Common Stock Larry K. Becker (13)...................................................... 457,148 1%
Common Stock Edward L. Najim (14)...................................................... 182,600 *
Common Stock George J. Zock (15)....................................................... 139,024 *
Common Stock Ann M. Caparros (16)...................................................... 11,512 *
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), (17)................................................................ 2,456,974 5%
- ---------
+ All of the numbers indicating shares, stock options and/or Common Stock
Equivalent Units in the above table have been restated to reflect the stock
split of HMEC Common Stock on December 15, 1997.
* 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 and Amendment No. 3 to Schedule 13G filed by Chieftain in
February 1998.
(2) The beneficial owners consist of Princeton Services, Inc. ("PSI") and
Merrill Lynch Asset Management, L.P. ("MLAM"). 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 investment companies registered
under Section 8 of the Investment Company Act and private accounts. With
respect to securities held by those investment companies and private
accounts, several persons have the right to
7
receive, or the power to direct the receipt of dividends from or the
proceeds from the sale of such securities. PSI is a parent holding company
in accordance with section 240.13d-1(b)(11)(G) of the 1934 Act and is the
managing general partner of MLAM. The foregoing is based on Amendment No. 1
to Schedule 13G filed by PSI in February 1998.
(3) The beneficial owners consist of Boston Partners Asset Management, L.P.
("BPAM") a Delaware limited partnership, Boston Partners, Inc. ("Boston
Partners") a Delaware corporation and Desmond John Heathwood. The address of
the principal business office of BPAM, Boston Partners and Mr. Heathwood is
One Financial Center, 43rd Floor, Boston, Massachusetts 02111. Each of the
listed beneficial owners may be deemed to own beneficially 2,761,498 shares
of Common Stock at December 31, 1997. BPAM owns of record 2,761,498 shares
of Common Stock. As sole general partner of BPAM, Boston Partners may be
deemed to own beneficially all of the shares of Common Stock that BPAM may
be deemed to own beneficially. As principal stockholder of Boston Partners,
Mr. Heathwood may be deemed to own beneficially all of the Common Stock that
Boston Partners may be deemed to own beneficially. Therefore, each of the
listed beneficial owners may be deemed to own beneficially 2,761,498 shares
of Common Stock. Pursuant to Rule 13d-4, each of Boston Partners and Mr.
Heathwood expressly disclaims beneficial ownership of any shares of Common
Stock. BPAM holds all of the above shares under management for its clients,
who have the right to direct the receipt of dividends, to receive dividends
from such shares and to receive the proceeds from the sale of such shares.
None of these clients holds more than five percent of the Common Stock. The
foregoing is based on a Schedule 13G filed by Boston Partners Asset
Management in February 1998.
(4) Includes 4,741.657 Common Stock Equivalent Units pursuant to the Director
Stock Plan. Also includes 600 shares held by his spouse to which Mr. Abbott
has shared voting and dispositive power.
(5) Consists entirely of 3,512.236 Common Stock Equivalent Units pursuant to the
Director Stock Plan.
(6) Includes options to purchase 507,500 shares of Common Stock which are
currently exercisable pursuant to the Option Plan. Does not include options
to purchase 22,500 shares granted pursuant to the Option Plan, 7,500 of
which will vest on April 28, 1998, 7,500 of which will vest on April 28,
1999 and 7,500 of which will vest on April 28, 2000. Five hundred thousand
(500,000) of such options expire on November 14, 2001. Thirty thousand
(30,000) of such options expire on April 28, 2007. Also includes 987,452
shares which Mr. Kardos holds as Trustee of a personal trust, 13,324 shares
held by his children and 6,340 shares held by his children as Trustees for
their respective trusts as to which Mr. Kardos shares voting and dispositive
power.
(7) Consists entirely of 211.529 Common Stock Equivalent Units pursuant to the
Director Stock Plan.
(8) Consists entirely of 4,609.797 Common Stock Equivalent Units pursuant to the
Director Stock Plan.
(9) Includes 3,858.510 Common Stock Equivalent Units pursuant to the Director
Stock Plan.
(10) Consists entirely of 453.800 Common Stock Equivalent Units pursuant to the
Director Stock Plan.
(11) Includes 11,943.313 Common Stock Equivalent Units pursuant to the Director
Stock Plan. Also includes 4,000 shares which Mr. Saul holds in a trust.
(12) Includes 5,115.502 Common Stock Equivalent Units pursuant to the Director
Stock Plan.
(13) Includes options to purchase 153,750 shares of Common Stock which are
currently exercisable pursuant to the Option Plan. Does not include options
to purchase 11,250 shares granted pursuant to the Option Plan, 3,750 of
which will vest on April 28, 1998, 3,750 of which will vest on April 28,
1999 and 3,750 of which will vest on April 28, 2000. One hundred fifty
thousand (150,000) of such options expire on November 14, 2001. Fifteen
thousand (15,000) of such options expire on April 28, 2007. Also includes
70,000 shares which Mr. Becker holds as Trustee for his wife's trust and
70,000 shares as Trustee for a personal trust.
(14) Includes options to purchase 3,750 shares of Common Stock which are
currently exercisable pursuant to the Option Plan. Does not include options
to purchase 11,250 shares granted pursuant to the Option Plan, 3,750 of
which will vest on April 28, 1998, 3,750 of which will vest on April 28,
1999 and 3,750 of which will vest on April 28, 2000. All such options expire
on April 28, 2007. Also includes 10,600 shares which are held by Mr. Najim's
child and 86,250 shares held by his wife, as to which Mr. Najim shares
voting and dispositive power.
8
(15) Includes options to purchase 3,750 shares of Common Stock which are
currently exercisable pursuant to the Option Plan. Does not include options
to purchase 11,250 shares granted pursuant to the Option Plan, 3,750 of
which will vest on April 28, 1998, 3,750 of which will vest on April 28,
1999 and 3,750 of which will vest on April 28, 2000. All such options expire
on April 28, 2007. Also includes 200 shares owned by Mr. Zock's son under
the Uniform Gift to Minors Act for which Mr. Zock is the custodian and
67,538 shares held by his wife, as to which Mr. Zock shares voting and
dispositive power.
(16) Includes options to purchase 11,500 shares of Common Stock which are
currently exercisable pursuant to the Option Plan. Does not include options
to purchase 4,500 shares granted pursuant to the Option Plan, 1,500 of which
will vest on April 28, 1998, 1,500 of which will vest on April 28, 1999 and
1,500 of which will vest on April 28, 2000. Ten thousand (10,000) of such
options expire on March 7, 2005. Six thousand (6,000) of such options expire
on April 28, 2007.
(17) Includes options for the group of Directors and executive officers to
purchase 681,500 shares of Common Stock which are currently exercisable
pursuant to the Option Plan; does not include options to purchase 64,500
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 34,446.344 Common Stock Equivalent Units pursuant to the Director
Stock Plan.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company has established procedures in which executive officers and
Directors provide relevant information regarding transactions in Company stock
to a Company representative and the Company prepares and files the required
ownership reports. Based on a review of those reports and other written
representations, the Company believes that, with the following exceptions, there
was full compliance with the reporting requirements under Section 16(a). During
1997 prior to the stock split in December, Mr. Abbott's wife purchased 300
shares which was reported but not on a timely basis. Mr. Schoen purchased 100
shares which was reported but not on a timely basis. Ms. Caparros purchased 6
shares through the Company's Employee Monthly Stock Investment Plan (payroll
deduction) which was reported but not on a timely basis.
9
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following Summary Compensation Table sets forth all reportable
compensation awarded to, earned by, or paid to the Company's 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
SALARY BONUS COMPENSATION OPTIONS/SARS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) (2) ($) (#) (4) ($) (5)
- ------------------------------ ---- ------- ------- ------------- ------------ ------------
Paul J. Kardos................ 1997 414,169(1) 0 30,000 16,998(6)
President & Chief Executive 1996 400,008 400,000 0 0 15,078(6)
Officer 1995 393,756 393,756 416 0 15,037(6)
Larry K. Becker............... 1997 206,672 0 15,000 16,154(7)
Executive Vice President & 1996 197,504 121,465(3) 0 0 14,718(7)
Chief Financial Officer 1995 185,004 185,004 0 0 14,677(7)
Edward L. Najim............... 1997 206,672 0 15,000 16,586(8)
Executive Vice President-- 1996 197,504 112,182(3) 0 0 14,866(8)
Marketing 1995 185,004 185,004 0 0 14,845(8)
George J. Zock................ 1997 181,836 0 15,000 16,377(9)
Executive Vice President 1996 156,668 107,337(3) 0 0 14,677(9)
1995 145,008 145,008 0 0 14,597(9)
Ann M. Caparros............... 1997 148,788 0 6,000 13,006(10)
Vice President, Secretary & 1996 140,544 46,105 0 0 11,435(10)
General Counsel 1995 135,846 67,923 0 40,000 11,412(10)
- ---------
(1) The salary amount for 1997 includes a payment of $4,169 made in 1997 which
was earned in 1996 to adjust Mr. Kardos' salary to the amount agreed upon in
the contract discussed in Key Agreements with Employees.
(2) The Annual Compensation Bonus amounts are paid pursuant to the Horace Mann
Incentive Compensation Program. The Annual Compensation Bonus with regard to
1997 is expected to be paid on or about May 1, 1998.
(3) The Annual Compensation Bonus amount includes an additional payment made in
June 1997 reflecting an adjustment to the Named Executive Officer's award
after the date of the Proxy Statement for the 1997 Annual Meeting.
(4) All of the numbers indicating stock options in the above table are restated
to reflect the stock split of HMEC Common Stock on December 15, 1997.
(5) 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.
(6) For Mr. Kardos, $4,750 was contributed to the 401(k) Plan in 1997, $3,750 in
1996, and $3,750 in 1995. In addition, $11,200 was contributed to the MPP
Plan on behalf of Mr. Kardos in 1997, $10,500 in 1996, and $10,500 in 1995.
In 1997, $1,048 was attributed to group term life insurance premiums, $828
in 1996, and $787 in 1995.
(7) For Mr. Becker, $4,750 was contributed to the 401(k) Plan in 1997, $3,750 in
1996, and $3,750 in 1995. In addition, $11,200 was contributed to the MPP
Plan on behalf of Mr. Becker in 1997, $10,500 in 1996, and $10,500 in 1995.
In 1997, $204 was attributed to group term life insurance premiums, $468 in
1996, and $427 in 1995.
10
(8) For Mr. Najim, $4,750 was contributed to the 401(k) Plan in 1997, $3,750 in
1996, and $3,750 in 1995. In addition, $11,200 was contributed to the MPP
Plan on behalf of Mr. Najim in 1997, $10,500 in 1996, and $10,500 in 1995.
In 1997, $636 was attributed to group term life insurance premiums, $616 in
1996, and $595 in 1995.
(9) For Mr. Zock, $4,750 was contributed to the 401(k) Plan in 1997, $3,750 in
1996, and $3,750 in 1995. In addition, $11,200 was contributed to the MPP
Plan on behalf of Mr. Zock in 1997, $10,500 in 1996, and $10,500 in 1995. In
1997, $427 was attributed to group term life insurance premiums, $427 in
1996, and $347 in 1995.
(10) For Ms. Caparros, $4,750 was contributed to the 401(k) Plan in 1997, $3,750
in 1996, and $3,750 in 1995. In addition, $8,000 was contributed to the MPP
Plan on behalf of Ms. Caparros in 1997, $7,500 in 1996, and $7,500 in 1995.
In 1997, $256 was attributed to group term life insurance premiums, $185 in
1996, and $162 in 1995.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS (1) VALUE AT ASSUMED
- ------------------------------------------------------------------------------------------------- ANNUAL RATES OF STOCK
OPTIONS/SARS PRICE APPRECIATION
GRANTED TO FOR OPTION TERM (2)
OPTIONS/SARS EMPLOYEES IN EXERCISE OR ---------------------
GRANTED FISCAL YEAR BASE PRICE EXPIRATION 5% 10%
NAME (#) % OF TOTAL ($/SH) DATE ($) ($)
- ------------------------------------ ------------- ----------------- ----------- ------------ --------- ----------
Paul J. Kardos...................... 30,000 13 22.42 04/28/07 423,300 1,071,900
Larry K. Becker..................... 15,000 7 22.42 04/28/07 211,650 535,950
Edward L. Najim..................... 15,000 7 22.42 04/28/07 211,650 535,950
George J. Zock...................... 15,000 7 22.42 04/28/07 211,650 535,950
Ann M. Caparros..................... 6,000 3 22.42 04/28/07 84,660 214,380
- ---------
(1) For the grant of options shown, one-quarter vested on the date of grant,
with an additional one-quarter vesting on each of the next three
anniversaries of the date of grant.
(2) The actual value, if any, an executive may realize will depend on the future
performance of Common Stock and the excess of the stock price over the
exercise price on the date the option is exercised, so that there is no
assurance the value realized by an executive will be at or near the values
reflected in the above table. These amounts represent assumed rates of
appreciation from the date the option is awarded and may not be realized by
the executive.
All of the numbers indicating shares or options/SARs in the above table are
restated to reflect the stock split of HMEC Common Stock on December 15, 1997.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES ACQUIRED VALUE OPTIONS/SARS IN-THE-MONEY OPTIONS/SARS
ON EXERCISE REALIZED AT FY-END (#) AT FY-END ($)
NAME (#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ------------------------- --------------- --------- ------------------------- -------------------------
Paul J. Kardos........... 0 0 507,500/22,500 9,763,881/135,394
Larry K. Becker.......... 0 0 153,750/11,250 2,938,191/ 67,697
Edward L. Najim.......... 50,000 600,000 3,750/11,250 22,566/ 67,697
George J. Zock........... 90,000 1,323,036 3,750/11,250 22,566/ 67,697
Ann M. Caparros.......... 50,000 750,800 1,500/14,500 9,026/200,254
All of the numbers indicating shares or options/SARs in the above table are
restated to reflect the stock split of HMEC Common Stock on December 15, 1997.
11
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, 1997, Mr. Kardos has 30 years of credited service; Mr.
Becker has 22 years; Mr. Najim has 22 years; Mr. Zock has 22 years; and Ms.
Caparros has 3 years.
Compensation for purposes of the defined benefit plan includes only
compensation earned while participating in the defined benefit plan. In general,
eligible compensation for executive officers includes base salaries and cash
bonuses. Although compensation voluntarily deferred by an employee is not
considered as eligible earnings for pension purposes, there is a special
exception for employees who participate in the Company's defined contribution
(401(k)) plan. The employee's tax-deferred contributions to that plan are
eligible earnings under the defined benefit plan. In addition, any amount
selected pursuant to Section 125 of the Internal Revenue Code is also considered
eligible earnings under the defined benefit plan.
For participants hired prior to August 29, 1989, annual benefits would be
determined by multiplying an average of the 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.
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.
12
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.
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")
13
Executive Compensation Survey, specifically: (i) the LOMA Executive Compensation
Survey for U.S. Companies, which for 1997 included data on 149 insurance
companies, (ii) the LOMA Executive Compensation Survey for U.S. Companies with
Assets of Between $1.5 Billion and $5 Billion, which for 1997 included data on
25 insurance companies, and (iii) the NAII Executive Compensation Survey for
participating insurance companies which for 1997 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 18.
In determining salaries, the Compensation Committee strives to have the
salaries of the Company's Named Executive Officers be average or below 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 reflect a
change in the position or responsibilities of the executive and/or to encourage
the executive to join the Company and the length of the executive's industry
experience. Either one of these factors could result in a base salary above the
point determined by reference to the salaries of executives in similar positions
as indicated in the compensation surveys.
When the Compensation Committee reviews the base salary of Named Executive
Officers, which is done an average of 12 to 24 months after a prior increase, it
makes adjustments to base salary on the basis of its subjective evaluation of
five items. The first four items, all considered in roughly equal weight are:
(i) the officer's performance regarding planning, organizing and performing
assigned tasks; (ii) the officer's performance concerning managing costs; (iii)
the officer's performance concerning managing personnel who report to the
officer; and (iv) the officer's performance in encouraging an ethical work
environment, providing exemplary customer service, and providing a work
environment in which employees experience fair treatment and have an equal
opportunity for advancement. The fifth item is a review of the compensation
surveys to compare the CEO or Named Executive Officer's salary to the average
salaries for similar positions as reported in the compensation surveys. If the
CEO or Named Executive Officer is below the average survey salaries, a larger
salary increase may occur. If the CEO or Named Executive Officer is above the
average survey salaries, the officer may not receive as much of an increase as
the individual would have received as a result of the analysis of only the first
four items or the increase in base salary may be delayed. The fifth item is
considered only if the Compensation Committee determines that a base salary
increase is warranted after analyzing the first four items.
The Compensation Committee noted that 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 1997, 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.
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").
14
On February 11, 1997, 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, 1997
through December 31, 1997. 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 1997 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 1997 would be paid
unless certain thresholds were met: (i) the A.M. Best Company ("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
Corporation ("Standard & Poor's") rating as of December 31, 1997 is A+ or
better, (iii) the Company's return on equity for 1997 is not less than 10% and
(iv) the Company's operating earnings per share for 1997 are not less than 90%
of the Company's budgeted operating earnings per share for 1997. 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.
For 1997, each of the threshold measures were met. Each performance goal was
weighted equally. Operating earnings per share from continuting operations
exceeded budget by %. Growth in operating earnings from continuing operations
was % and ranked in the th percentile as compared to Peers. Statutory
premiums were % of budget. Growth in statutory premiums was % and, as
compared to Peers, ranked in the th 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. The awards for the Named Executive Officers, including the CEO, under
the STIP were calculated on the basis of the foregoing performance goals,
provided however, the CEO's STIP award is contractually guaranteed to be at
least $400,000 as described in Key Agreements with Employees.
HORACE MANN EDUCATORS CORPORATION LONG-TERM INCENTIVE PLAN
The Company's Long-Term Incentive Plan ("LTIP") is designed to reward
certain officers of the Company for achieving corporate and operating division
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.
15
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.
Any LTIP bonus amount based on performance in 1996 and 1997 has not yet been
paid. Such bonus will be paid during 1998 and will be reported in the Proxy
Statement for the 1999 Annual Meeting of Shareholders.
HORACE MANN EDUCATORS CORPORATION DEFERRED COMPENSATION PLAN
Effective December 1, 1997, the Company established the Horace Mann
Educators Corporation Deferred Compensation Plan (the "Deferred Compensation
Plan" or "DCP") for those employees of the Company who are eligible for the LTIP
described above. The DCP provides the opportunity for certain employees to defer
receipt of all or a part of their STIP bonus compensation and/or their LTIP
bonus compensation on a pretax basis.
The DCP is an unfunded plan and is maintained by the Company primarily for
the purpose of providing deferred compensation for a select group of highly
compensated management employees. More particularly, the purposes of the DCP are
to align the interests of certain employees more closely with the interests of
other shareholders of the Company, to encourage the highest level of certain
employee performance by providing those employees with a direct interest in the
Company's attainment of its financial goals and to help attract and retain
certain qualified employees.
To the extent an investment or distribution of cash or Common Stock may be
made under the DCP, the DCP is intended to qualify for the exemption from short
swing profits liability under Section 16(b) of the Exchange Act, provided by
Rule 16b-3 of the Securities and Exchange Commission as now in effect or
hereafter amended.
HORACE MANN EDUCATORS CORPORATION 1991 STOCK INCENTIVE PLAN
In order to 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.
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 Compensation Committee
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.
Effective September 10, 1997, the Compensation Committee adjusted the
vesting provisions generally used in awarding stock options. If an employee
dies, any unvested stock options held by such employee will become fully vested
on the date of his or her death and may be exercised for a period of one year
thereafter or until the expiration date of the
16
stock options, whichever is less. The purpose of this adjustment is to provide a
philosophical consistency with the Company's other benefit plans.
In addition, if an employee retires, any unvested stock options held by such
employee will become fully vested one year after the employee's retirement date.
Such options may be exercised for a period of one year thereafter or until the
expiration date of the stock options, whichever is less. The Compensation
Committee believes that this action will cause an executive officer's financial
interest with regards to such incentive compensation to continue to parallel the
financial interests of the Shareholders.
The Compensation Committee awarded stock options in 1997 to certain
officers, including the Named Executive Officers. Prior to the award, the
Compensation Committee 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 the prior year, 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 30,000
stock options to the CEO and 51,000 stock options to the Named Executive
Officers, other than the CEO, as a group. The foregoing numbers of stock options
have been restated to reflect the stock split of HMEC Common Stock on December
15, 1997.
NOTE: The Report on Executive Compensation of the Compensation Committee and
the Stock Price Performance Graph on page 18 shall not be deemed to be
incorporated by reference, in whole or in part, by any general statement
incorporating by reference this Proxy Statement into any filing under the
Securities Act of 1933, as amended, or under the Securities Exchange Act of
1934, as amended.
COMPENSATION COMMITTEE
WILLIAM W. ABBOTT, CHAIRMAN
EMITA B. HILL, DONALD E. KIERNAN, JEFFREY L. MORBY and WILLIAM J. SCHOEN,
Members
17
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
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
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
Dec-97 $338 $368 $294
- ---------
* 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.
18
PROPOSAL NO. 2
AMENDMENT TO BOARD OF DIRECTORS RETIREMENT POLICY
The Board of Directors has determined that the Amendment to the Retirement
Policy is in the best interests of the Company and its Shareholders and by
unanimous vote has recommended it to the Company's Shareholders for adoption.
The proxies solicited by and on behalf of the Board of Directors will be voted
"FOR" the Amendment to the Retirement Policy.
DESCRIPTION OF THE AMENDMENT TO THE RETIREMENT POLICY
Under the Retirement Policy, any Director who is 72 or more years of age
following the completion of his or her then current term in office is required
to retire. However if approved, Mr. Saul will be eligible for re-election to the
Board of Directors for the Annual Meeting and the 1999 Annual Meeting, provided
he will not be eligible for re-election at the 2000 Annual Meeting of
Shareholders.
PURPOSE AND EFFECT OF THE AMENDMENT TO THE RETIREMENT POLICY
The Board recommends that the Shareholders approve the Amendment to the
Retirement Policy for the following reasons: Mr. Saul has had a long
relationship with the Company, extending back to 1974, first as Chief Executive
Officer of Horace Mann's parent corporation and later as a director and as
Chairman of the Board of the Company. With the restructuring of the Board during
the past two years, adding seven new members to the Board, the Board believes it
is in the best interests of the Shareholders of the Company to retain the
continuity in experience and knowledge of Mr. Saul for an additional two years.
It is the intention of the Board that, at its organizational meeting following
the Annual Meeting, Paul J. Kardos, currently President and Chief Executive
Officer of the Company, will also be elected as the Company's Chairman of the
Board. Assuming that Proposal No. 2 is approved by the Shareholders at the
Annual Meeting, it is the intention of the Board to designate Mr. Saul as the
lead outside director of the Board.
PROPOSAL NO. 3
RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountants selected by the Board for the Company's
fiscal year ending December 31, 1998 are KPMG Peat Marwick LLP. KPMG Peat
Marwick LLP served in that capacity for the fiscal year ended December 31, 1997.
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. 4
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.
19
SHAREHOLDER PROPOSALS FOR 1999 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 1999 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, 1998 in order for such proposal to be
considered for inclusion in the Company's Proxy Statement and proxy relating to
the 1999 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,
[SIGNATURE]
Ann M. Caparros
Corporate Secretary
Springfield, Illinois
April 17, 1998
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.
20
[LOGO]
WWW.HORACEMANN.COM
HA-C00314
HORACE MANN EDUCATORS CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS
MAY 22, 1998
The undersigned Shareholder of Horace Mann Educators Corporation (the
"Company") hereby appoints Paul J. Kardos and William W. Abbott or any of
them, with full power of substitution, proxies to vote at the Annual Meeting
of Shareholders of the Company (the "Meeting"), to be held on May 22, 1998,
at 9:00 a.m. at the Renaissance Springfield Hotel, 701 East Adams Street,
Springfield, Illinois, and at any adjournment thereof and to vote all shares
of Common Stock of the Company held or owned by the Undersigned as directed
on the reverse side and in their discretion upon such other matters as may
come before the Meeting.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED FOR PROPOSALS 1 THROUGH 3,
IF NO INSTRUCTION TO THE CONTRARY IS INDICATED OR IF NO INSTRUCTION IS GIVEN
AND IN ACCORDANCE WITH THE DISCRETION OF THE PROXIES ON PROPOSAL 4.
(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
MAY 22, 1998
ARROW PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED ARROW
- --------------------------------------------------------------------------------
A /X/ PLEASE MARK YOUR |
VOTES AS IN THIS |
EXAMPLE. |_____
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election / / / / NOMINEE: William W. Abbott 2. To / / / / / /
of Emita B. Hill approve an amendment to
Directors Paul J. Kardos the Company's
Donald E. Kiernan Certificate of
For, except vote Jeffrey L. Morby Incorporation provision
withheld from Shaun F. O'Malley which requires the
the following Charles A. Parker retirement of any
nominee(s): Ralph S. Saul(1) Director who is 72 or
William J. Schoen more years of age
following the completion
of his or her then
current term in office.
The amendment would
permit Ralph S. Saul,
currently serving as
Chairman of the Board of
Directors, to be
eligible for re-election
to the Board of
Directors at the Annual
Meeting and at the 1999
Annual Meeting;
3. To / / / / / /
ratify the appointment
of KPMG Peat Marwick
LLP, independent
certified public
accountants, as the
Company's auditors for
the year ending December
31, 1998; and
4. To consider and take
action with respect to
such other matters as
may properly come before
the Annual Meeting or
any adjournment or
adjournments thereof.
PLEASE MARK, SIGN, DATE AND
RETURN THIS PROXY IN THE
ENCLOSED ENVELOPE PROVIDED
TO AMERICAN STOCK TRANSFER
& TRUST COMPANY, 40 ALL
STREET, 46TH FLOOR, NEW
YORK, N.Y. 10005
(1) If the Amendment to the
Retirement Policy is not
approved by Shareholders,
Mr. Saul will not be
permitted to serve on the
Board of Directors beyond
the Annual Meeting.
However, if approved, the
Amendment to the Retirement
Policy provides that Mr.
Saul will be eligible for
re-election to the Board of
Directors for the Annual
Meeting and the 1999 Annual
Meeting.
SIGNATURE(S): DATE 1998
----------------------------------------------- -----------
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.