<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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
/ / Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
KEMPER CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
KEMPER CORPORATION
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/ / $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/X/ $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11:(1)
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
/ / 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:
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(1) Set forth the amount on which the filing fee is calculated and state how
it was determined.
<PAGE> 2
PRELIMINARY COPY--
(LOGO)
KEMPER CORPORATION
Long Grove, Illinois 60049--Telephone (708) 320-4700
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS--MAY 11, 1994
April , 1994
To Our Stockholders:
You are cordially invited to attend the 1994 Annual Meeting of Stockholders of
Kemper Corporation (the "Company") at 10:30 a.m. on Wednesday, May 11, 1994, in
the Stockholders Meeting Room on the 57th floor of The First National Bank of
Chicago, One First National Plaza (intersection of Clark and Madison), Chicago,
Illinois. Please enter on the Clark Street side of the building. The meeting is
called for the purpose of considering and acting upon:
1. The election of directors.
2. The approval of the Kemper Corporation 1993 Senior Executive Long-Term
Incentive Plan.
3. The approval of the Company's Performance-Based Compensation Program.
4. The ratification of the appointment of KPMG Peat Marwick as independent
auditors for 1994.
5. The transaction of such other business as may properly come before the
meeting or any adjournment(s) or postponement(s) thereof.
The close of business on March 17, 1994 was fixed by your Board of Directors as
the record date for the determination of stockholders entitled to notice of the
annual meeting and having the right to vote at the meeting.
The Board of Directors appreciates the interest of the stockholders in the
Company's affairs and encourages those entitled to vote at this annual meeting
to take the time to do so. Consequently, regardless of whether you now expect to
be personally present at the meeting, please complete, date and sign the
enclosed WHITE proxy card and return it promptly. A self-addressed return
envelope, requiring no postage if mailed in the United States, is enclosed for
your use. You may revoke your proxy at any time before the authority granted by
it is exercised. If you attend the annual meeting, you may vote in person
although you have previously returned an executed proxy.
By Order of the Board of Directors
Kathleen A. Gallichio
Corporate Secretary
<PAGE> 3
PRELIMINARY COPY--
KEMPER CORPORATION
Long Grove, Illinois 60049--Telephone (708) 320-4700 (LOGO)
PROXY STATEMENT AND FORM OF PROXY DATED APRIL , 1994,
FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 11, 1994
GENERAL INFORMATION
This proxy statement is being used in connection with the solicitation of
proxies on behalf of the Board of Directors for use at the annual meeting of
stockholders of Kemper Corporation (the "Company") on May 11, 1994. Only the
holders of the Company's common shares are entitled to vote at the annual
meeting, and such stockholders are being asked to vote upon: (i) the election of
directors; (ii) the approval of the Kemper Corporation 1993 Senior Executive
Long-Term Incentive Plan; (iii) the approval of the Company's Performance-Based
Compensation Program; and (iv) the ratification of the appointment of KPMG Peat
Marwick as independent auditors for the Company for 1994. This proxy statement
and the accompanying WHITE proxy card are first being mailed to stockholders on
or about April , 1994.
Proxy cards properly executed and received prior to the time of the annual
meeting will be voted as directed. If no direction is made, the proxy will be
voted "FOR" any proposal for which no direction is indicated. Although a
stockholder may have submitted a proxy, such stockholder may vote in person at
the annual meeting if he or she desires. A stockholder voting by means of the
enclosed proxy card has the power to revoke it at any time before it is
exercised by delivering a written notice of revocation or a duly executed proxy
bearing a later date to the corporate secretary of the Company at the address of
the Company set forth above or by attending the annual meeting and voting in
person. Attendance at the annual meeting will not in and of itself constitute
revocation of a proxy.
As of the close of business on March 17, 1994, the record date for the
determination of stockholders entitled to vote at the annual meeting, there were
33,152,986 shares of Kemper Corporation $5.00 par value common stock issued and
outstanding. Each share of common stock issued and outstanding on the record
date entitles the holder to one vote on each matter to be acted upon at the
annual meeting. The presence in person or by proxy of a majority of the
outstanding shares of common stock will constitute a quorum for the transaction
of business at the annual meeting.
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As of March 15, 1994, the following were the only persons known to management
who may be deemed to beneficially own more than 5 percent of the Company's
outstanding voting securities:
<TABLE>
<CAPTION>
AMOUNT AND
NATURE
OF PERCENT
TITLE OF NAME AND ADDRESS BENEFICIAL OF
CLASS OF BENEFICIAL OWNER OWNERSHIP CLASS(a)
- ------------- ---------------------------------------- -------------- -----
<S> <C> <C> <C>
Common Stock Franklin Resources, Inc. 3,145,498(b) 9.5%
($5 par 777 Mariners Island Blvd.
value) P.O. Box 7777
San Mateo, CA 94403-7777
Common Stock Neuberger & Berman 1,658,310(c) 5.0%
($5 par 605 Third Avenue
value) New York, New York 10158-3698
Common Stock Southeastern Asset Management, Inc. 2,635,700(d) 8.0%
($5 par 860 Ridgelake Boulevard
value) Memphis, Tennessee 38120
</TABLE>
- ---------------
(a) Based on the number of shares of Kemper Corporation common stock outstanding
on March 17, 1994 and an assumption that share totals beneficially owned
have remained equal to those reported as held at year-end 1993 or, with
respect to Southeastern Asset Management, Inc., at March 15, 1994.
(b) Franklin Resources, Inc. has reported that it or its investment advisory
subsidiaries have sole voting power as to 2,797,998 shares, shared voting
power as to 347,500 shares, sole dispositive power as to no shares and
shared dispositive power as to 3,145,498 shares.
(c) Neuberger & Berman has reported that, on behalf of many unrelated clients
(no one of which holds an interest relating to 5 percent or more of the
Company's outstanding voting securities), it has the sole voting power as to
402,025 shares, shared voting power as to 325,000 shares, sole dispositive
power as to no shares and shared dispositive power as to 1,658,310 shares.
Neuberger & Berman has also reported that partners of the firm own 155,450
shares in their personal securities accounts. Neuberger & Berman disclaims
beneficial ownership of these partners' shares, noting such shares were
purchased with each partner's personal funds and each partner has exclusive
dispositive and voting power over the shares held in their respective
accounts.
(d) Southeastern Asset Management, Inc. has reported that, as an investment
advisor to various discretionary and non-discretionary accounts of its
clients, it has sole voting power as to 2,018,700 shares, shared voting
power as to 500,000 shares, no voting power as to 117,000 shares, sole
dispositive power as to 2,135,700 shares and shared dispositive power as to
500,000 shares.
2
<PAGE> 5
GECC'S UNSOLICITED PROPOSAL
On January 25, 1994, Gary Wendt, President and Chief Executive Officer of
General Electric Capital Corporation ("GECC"), a subsidiary of General Electric
Company ("GE"), telephoned David Mathis, Chairman of the Board and Chief
Executive Officer of the Company, and asked to meet the next day merely to get
acquainted. Mr. Mathis agreed to the meeting. On January 26, 1994, Mr. Wendt
arrived with Silas Cathcart, a GE director, and Paul Street, Senior Vice
President of GECC. Contrary to his stated reason for proposing the meeting, Mr.
Wendt informed Mr. Mathis and Stephen Timbers, President and Chief Operating
Officer of the Company, who also attended the meeting, that GECC was interested
in acquiring the Company on a friendly basis for $45 per share, but would need
to review the Company's real estate portfolio before doing so. Following the
meeting, Mr. Wendt and other GECC representatives communicated again with Mr.
Mathis and with representatives of the Company's financial advisor, Goldman,
Sachs & Co. ("Goldman Sachs"), in an effort to pursue an acquisition of the
Company.
At a special meeting of the Board of Directors held February 3, 1994, Mr. Mathis
and the Company's legal and financial advisors reviewed with the Board GECC's
expression of interest and related matters, including whether or not a sale of
the Company at this time was likely to be in the best interests of stockholders.
The next day Mr. Wendt again expressed GECC's interest in acquiring the Company
and sought to arrange a meeting between John Welch, Jr., Chairman of the Board
and Chief Executive Officer of GE, and Mr. Mathis. Mr. Mathis said that the
Company was not for sale at this time and declined. Mr. Wendt stated that GECC
would continue to pursue the matter.
In a letter dated March 2, 1994, Mr. Welch reaffirmed GECC's intention to
acquire the Company and made a firm proposal at a price of $55 per share, with
the possibility of a higher price based on limited due diligence of the Company,
particularly its real estate portfolio. In response, Mr. Mathis reiterated to
Mr. Welch the Company's position that a sale at this time was not in the best
interests of its stockholders, but that the proposal would be reviewed more
formally at the Board's next meeting. At that meeting, held March 17, 1994, the
Board reviewed the Company's financial performance and future prospects, Goldman
Sachs advised the Board, based on its review of such financial and other
information, that in its opinion the GECC offer of $55 per share was inadequate
and, after extensive discussions among the directors and with the Company's
representatives, the Board unanimously rejected GECC's proposal and determined
that the Company is not for sale at this time.
On March 24, 1994, GECC made a filing that indicated it would seek to elect to
the Board four former General Electric employees who are committed to a sale or
merger of the Company for a price of at least $55 per share.
ELECTION OF DIRECTORS
The Company's Second Restated Certificate of Incorporation, as amended, provides
that the Board of Directors shall be divided as nearly as possible among three
equal classes which are designated as Classes I, II and III, with each class
serving for a three-year term of office. Any person elected to fill a vacancy or
a newly-created directorship holds office for the remainder of the full term of
the class to which such person is elected.
On March 17, 1994, the Board of Directors nominated John T. Chain Jr., George D.
Kennedy, David B. Mathis and Kenneth A. Randall, the current Class II directors,
to stand for re-election at the annual meeting and, if elected, they shall hold
office until the 1997 annual meeting of stockholders of the Company.
The persons named on the enclosed proxy card (Peter B. Hamilton, George D.
Kennedy and David B. Mathis) have agreed to represent stockholders submitting
properly executed proxy cards and to vote for the election of the four nominees
listed herein, unless otherwise directed by the authority granted or withheld on
the proxy cards. Although the Board of Directors has no reason to believe that
any of the nominees will be unable to serve as directors, if any one or more of
the nominees shall not be available for election, the persons named on the proxy
card have agreed to vote for the election of such other nominees as may be
proposed by the Board of Directors. The names of the four nominees
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<PAGE> 6
for election at this annual meeting, the names of the directors whose terms
continue after the meeting and the principal occupations of all such persons
during the past five years are as follows:
<TABLE>
<S> <C>
NOMINEES TO BE ELECTED FOR TERMS EXPIRING AT THE 1997 ANNUAL MEETING (CLASS II):
John T. Chain Jr. Age 59
Executive Vice President, Burlington Northern Railroad Co., Director since 1991
Fort Worth, TX (railroad transportation) since January 1991;
prior thereto, Commander in Chief, Strategic Air Command, and
Director, Joint Strategic Target Planning Staff. Director of
Northrop Corporation, RJR Nabisco Holdings and various
subsidiaries of Burlington Northern Railroad Co.
George D. Kennedy Age 67
Chairman of Mallinckrodt Group Inc. (formerly, IMCERA Group, Director since 1982
Inc.), Mundelein, IL (mining, manufacturing). Director of
American National Can Company, Brunswick Corporation, Medical
Care America, Inc., Illinois Tool Works, Inc., Mallinckrodt
Group Inc., the Kemper National Insurance Companies, Scotsman
Industries, Inc. and Stone Container Corp.
David B. Mathis Age 55
Chairman of the Board and Chief Executive Officer of Kemper Director since 1989
Corporation since February 1992; prior thereto, President from
May 1990 to September 1992, and Chief Operating Officer from
May 1990 to February 1992; prior thereto, Executive Vice
President. Chairman of the Board and Chief Executive Officer of
Kemper Reinsurance Company until March 1990. Director of Kemper
Financial Companies, Inc. and several other Company
subsidiaries.
Kenneth A. Randall Age 66
Corporate Director. Director of Dominion Resources, Inc., Director since 1981
Dominion Energy, Inc. and Prime Retail, Inc., and trustee of
the principal Oppenheimer mutual funds.
DIRECTORS CONTINUING IN OFFICE WITH TERMS EXPIRING AT THE 1995 ANNUAL MEETING (CLASS I):
J. Reed Coleman Age 60
Chairman of the Board of Madison-Kipp Corporation, Madison, WI Director since 1968
(manufacturer of precision components serving automotive and
durable goods industries). Director of the Kemper National
Insurance Companies, Lunar Corp., Madison-Kipp Corporation,
NIBCO, Inc., Regal-Beloit Corporation and Xeruca Corporation.
Raymond F. Farley Age 69
Corporate Director. Prior to January 1990, President and Chief Director since 1983
Executive Officer of S.C. Johnson & Son, Inc., Racine, WI
(manufacturer of household and commercial cleaners, wax,
insecticides and personal care products). Director of Hartmarx
Corporation, Johnson International, Inc., Johnson Worldwide
Associates and Snap-On Tools Corp.
Joseph E. Luecke Age 67
Chairman of the Board and Chief Executive Officer of Kemper Director since 1979
Corporation until February 1992; President until May 1990.
Chairman of the Board of the Kemper National Insurance
Companies until February 1992. Director of Premark
International, Inc.
</TABLE>
4
<PAGE> 7
<TABLE>
<S> <C>
Richard D. Nordman Age 47
President and Chief Operating Officer of Lawter International, Director since 1989
Inc., Northbrook, IL (manufacturer of products for the graphic
arts, adhesive and coatings industries). Director of Lawter
International, Inc.
Stephen B. Timbers Age 49
President and Chief Operating Officer of Kemper Corporation Director since 1992
since September 1992; Chief Investment Officer of Kemper
Corporation from May 1991 until May 1993. Senior Executive Vice
President of Kemper Financial Services, Inc. ("KFS") from March
1990 until November 1993 and Chief Investment Officer of KFS
from March 1990 until November 1993; prior thereto, Executive
Vice President and Chief Investment Officer. Director of Kemper
Financial Companies, Inc., several other Company subsidiaries,
Gillett Holdings, Inc. and LTV Corporation.
DIRECTORS CONTINUING IN OFFICE WITH TERMS EXPIRING AT THE 1996 ANNUAL MEETING (CLASS III):
John H. Fitzpatrick Age 37
Executive Vice President and Chief Financial Officer of Kemper Director since 1990
Corporation from May 1993; prior thereto, Senior Vice President
and Chief Financial Officer from May 1990; prior thereto, Vice
President. Director of Kemper Financial Companies, Inc. and
several other Company subsidiaries.
Peter B. Hamilton Age 47
Vice President and Chief Financial Officer of Cummins Engine Director since 1992
Company, Inc., Columbus, IN (manufacturer of diesel engines and
related products). Director of various corporations that are
wholly-owned by Cummins Engine Company, Inc.
Charles M. Kierscht Age 54
Executive Vice President since May 1993. Chairman of the Board, Director since 1991
President and Chief Executive Officer of Kemper Financial
Companies, Inc. since July 1991; prior thereto, Executive Vice
President. Chairman, President and Chief Executive Officer of
KFS since July 1991; prior thereto, President and Chief
Operating Officer. President and director or trustee of all of
the registered investment companies which are managed by KFS.
Director of Kemper Financial Companies, Inc., several other
Company subsidiaries, Investors Fiduciary Trust Company, which
is indirectly 50 percent owned by the Company, and ICI Mutual
Insurance Company.
Daniel R. Toll Age 66
Corporate and civic director. Director of Brown Group, Inc., Director since 1986
A.P. Green Industries, Inc., Mallinckrodt Group Inc., the
Kemper National Insurance Companies, Lincoln National
Convertible Securities Fund, Inc., Lincoln National Income
Fund, Inc. and NICOR, Inc.
</TABLE>
Messrs. Chain, Coleman, Farley, Hamilton, Luecke, Nordman and Randall are
presently directors of Fidelity Life Association, a Company-affiliated mutual
life insurance company. If the policyholders of Fidelity Life Association elect
its nominated slate of directors at their May 10, 1994 annual meeting, such
persons will continue, and Messrs. Kennedy and Toll will commence, to serve as
directors of Fidelity Life Association.
5
<PAGE> 8
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table shows the shares of Kemper Corporation common stock
beneficially owned as of February 1, 1994 by the directors, nominees and other
persons within the group of five most highly-compensated executive officers, and
by all directors, nominees and the executive officers of the Company as a group:
<TABLE>
<CAPTION>
SHARES OF $5 PAR VALUE COMMON PERCENT
NAME OF BENEFICIAL OWNER STOCK BENEFICIALLY OWNED OF CLASS
------------------------------ ------------------------------ --------
<S> <C> <C>
John T. Chain Jr. 3,750(1) *
J. Reed Coleman 1,518,845(1)(3)(5)(6) 4.6%
Raymond F. Farley 5,250(1) *
John H. Fitzpatrick 86,386(2)(6) *
Peter B. Hamilton 2,250(1) *
George D. Kennedy 1,500,845(1)(5) 4.5%
Charles M. Kierscht 42,380(2)(7) *
Joseph E. Luecke 317,208(1)(2)(4) *
David B. Mathis 199,081(2) *
Richard D. Nordman 5,500(1) *
Kenneth A. Randall 6,267(1)(6) *
Stephen B. Timbers 35,500(2) *
Daniel R. Toll 1,501,845(1)(5) 4.5%
Kathleen A. Gallichio 52,915(2) *
Directors, nominees and executive
officers as a group (16
persons, including the above) 2,355,767(3)(5) 7.1%
</TABLE>
- -------------------------
* Less than 1%.
(1) Includes 4,500 shares which each of Messrs. Coleman, Farley, Kennedy,
Nordman, Randall and Toll, 2,750 shares which General Chain, 1,250 shares
which Mr. Hamilton, and 250 shares which Mr. Luecke, can acquire within 60
days of February 1, 1994 under stock options granted pursuant to the Kemper
Corporation Non-Management Director Stock Option Plan. The directors as a
group can thus presently acquire 31,250 shares under these stock options.
(2) Includes the following number of shares which the following persons or
group have the right to acquire within 60 days of February 1, 1994 pursuant
to stock options granted under the Kemper Corporation 1982 Incentive Stock
Option Plan, 1985 Amended Stock Option Plan or 1990 Stock Option Plan: Mr.
Fitzpatrick, 63,430 shares; Mr. Kierscht, 17,900 shares; Mr. Luecke,
220,965 shares; Mr. Mathis, 146,955 shares; Mr. Timbers, 12,500 shares; Ms.
Gallichio, 41,480 shares; and all directors and executive officers as a
group, 562,910 shares.
(3) Excludes 10,839 shares held in several trusts created by Lumbermens Mutual
Casualty Company ("Lumbermens"), principal company of the Kemper National
Insurance Companies, for the prospective retirement benefit of certain
Lumbermens officers. As a member of the distribution committee of these
trusts, Mr. Coleman presently shares voting and investment power over, but
disclaims beneficial ownership of, such shares.
(4) Includes 48,480 shares held in various trusts created by Mr. Luecke for the
benefit of his adult children.
(5) Includes 1,496,345 shares held by Lumbermens, the James S. Kemper
Foundation, American Manufacturers Mutual Insurance Company ("AMM"),
another of the Kemper National Insurance Companies, and several trusts
established for the benefit of Lumbermens' officers which certain of the
Company's directors, to the extent they are also members of Lumbermens' or
AMM's boards of directors, or trustees of the foundation, could be deemed
to control either through voting or dispositive power. Such directors
disclaim beneficial ownership of such shares.
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(6) Includes shares owned by or for the benefit of the spouse, minor children
or other relatives of the director, nominee or executive officer.
(7) Mr. Kierscht beneficially owns 42,759.65 shares of Class B Common Stock of
Kemper Financial Companies, Inc. ("KFC"), a publicly-reporting subsidiary
of the Company, which he: (i) can acquire within 60 days of February 1,
1994 upon the conversion of various presently convertible series of
Floating Rate Convertible Subordinated Debentures issued by KFC; or (ii)
can acquire within 60 days of February 1, 1994 pursuant to stock options
issued under KFC's 1986 and 1988 Stock Option Plans. KFC issued Debentures
to various officers and designated employees of its subsidiaries during a
period extending from 1986 through 1990. The Debentures were issued in
groups of five series (the series having staggered conversion and maturity
dates) and are convertible into shares of KFC Class B Common Stock based on
a formula price for such stock applicable when the particular series were
issued. Also see COMPENSATION OF EXECUTIVE OFFICERS later in this proxy
statement. Mr. Kierscht beneficially owns approximately 1.5 percent of all
series of KFC Floating Rate Convertible Subordinated Debentures outstanding
at February 1, 1994 and approximately 2 percent of the KFC Class B Common
Stock into which his Debentures are convertible at the same date, assuming
all of KFC's outstanding convertible securities and options had previously
been converted or exercised.
COMMITTEES OF THE BOARD OF DIRECTORS
Effective January 14, 1994, the configuration and membership of the various
committees of the Board of Directors were changed to rebalance and streamline
board committee participation to promote efficiencies. Also see COMPENSATION OF
DIRECTORS later in this proxy statement.
The Company has a five-member Executive Committee presently consisting of
Messrs. Mathis (chairman), Chain, Farley, Kennedy and Timbers. The function of
the committee is to exercise the authority of the Board of Directors in the
management of the business and the affairs of the Company as necessary and
appropriate during the interim between meetings of the full board.
The Company has an Audit Committee composed of three non-management directors.
(A non-management director is one other than a present officer of the Company or
of any affiliate thereof.) Members currently serving on the committee are
Messrs. Coleman (chairman), Hamilton and Nordman. This committee oversees the
selection and retention of an independent auditor and has responsibility for the
content and oversight of the Company's audit program, including review of the
effectiveness of corporate accounting and financial practices and the adequacy
of internal controls.
The Investment Committee of the Company (formerly the Finance Committee)
currently consists of Messrs. Randall (chairman), Farley and Toll. The function
of the committee is to exercise the authority of the Board of Directors
principally in connection with the supervision of investment policies and
performance of the Company's life insurance subsidiaries' portfolios, including
the related activities of KFS, investment adviser to the portfolios. Investments
made under the committee's general guidelines are approved by the respective
investment committees and boards of directors of the Company's life insurance
subsidiaries.
The Corporate Public Policy Committee of the Company presently consists of three
non-management directors: Messrs. Chain (chairman), Kennedy and Luecke. The
committee is responsible for review of corporate policies with respect to
corporate responsibility, legislative and regulatory matters and industry and
consumer relations. Commencing in 1994, the Corporate Public Policy Committee
maintains a regular subcommittee on Intercompany Conflicts, Accountability and
Relationships. The subcommittee will scrutinize, evaluate, avoid where possible
and resolve conflicts of interest among the Company or its subsidiaries and
those companies within the organization whose ownership constituencies and
interests are distinct from those of the Company and its stockholders; explore
the equities and ethical considerations applicable to intercompany dealings; and
review procedures and activities of management dealing with individual and
intercompany conflicts of interest. Mr. Kennedy
7
<PAGE> 10
will be the representative of the Company at subcommittee meetings, Mr. Luecke
will represent Fidelity Life Association, a mutual life insurance company, and
Mr. Kierscht will be the invited representative of Kemper Financial Companies,
Inc. While its functions will now be exercised as a subcommittee of the
Corporate Public Policy Committee, during 1993, the Company maintained a board
Committee on Intercompany Conflicts, Accountability and Relationships composed
of a chairman and board representatives for the Company, KFC and Fidelity Life
Association. During 1993, Mr. Luecke was the chairman of the committee, Mr.
Farley was the representative of the Company, Mr. Kierscht represented KFC and
Mr. Nordman represented Fidelity Life Association.
The Committee on Compensation and Organization is currently comprised of three
non-management directors: Messrs. Kennedy (chairman), Chain and Farley. The
committee is responsible for reviewing with management (1) the overall
objectives, structure, cost and administration of the Company's compensation and
benefit programs, (2) executive management's performance and (3) officer
succession plans.
The Nominating Committee of the Company is currently composed of all
non-management directors not standing for re-election within one year and not
serving on the Executive Committee, except for the chairman who is appointed by
the Board of Directors. Members currently serving on the committee are Messrs.
Toll (chairman), Coleman, Hamilton, Luecke and Nordman. The committee has the
responsibility of recommending nominees to the full board to fill directorships
which expire at the annual meeting of stockholders, board vacancies and
newly-created directorships. Any stockholder who wishes to have the committee
consider a candidate should submit in writing the name of the candidate along
with any biographical or other relevant information regarding the qualifications
of such individual and the written consent of the proposed candidate to serve if
nominated and elected. Such recommendations should be addressed to the Chairman
of the Nominating Committee, in care of the corporate secretary of the Company,
at the address appearing on the first page of this proxy statement.
During 1993, 11 Board meetings, 9 Executive Committee meetings, 6 Audit
Committee meetings, 4 Finance (now Investment) Committee meetings, 2 Corporate
Public Policy Committee meetings, 9 Committee on Compensation and Organization
meetings, 1 Nominating Committee meeting and 2 meetings of the Committee on
Intercompany Conflicts, Accountability and Relationships were held.
8
<PAGE> 11
EXECUTIVE OFFICERS OF KEMPER CORPORATION
AS OF DECEMBER 31, 1993
<TABLE>
<CAPTION>
KEMPER
CORPORATION PRINCIPAL BUSINESS EXPERIENCE
NAME, AGE AND POSITION OFFICER SINCE DURING PAST FIVE OR MORE YEARS(1)
- ------------------------------ ------------- -------------------------------------------------
<S> <C> <C>
David B. Mathis (55) 1989 Chairman of the Board and Chief Executive Officer
Chairman of the Board and from February 1992; prior thereto, President from
Chief Executive Officer May 1990 to February 1992 and Chief Operating
Officer from May 1990 until February 1992; prior
thereto, Executive Vice President. Chairman of
the Board and Chief Executive Officer of Kemper
Reinsurance Company until March 1990.
Stephen B. Timbers (49) 1991 President and Chief Operating Officer since
President, Chief Operating September 1992; Chief Investment Officer from May
Officer and Director 1991 until May 1993. Also Senior Executive Vice
President of KFS from March 1990 until November
1993 and Chief Investment Officer of KFS from
March 1990 until November 1993; prior thereto,
Executive Vice President and Chief Investment
Officer.
Charles M. Kierscht (54) 1993 Executive Vice President from May 1993. Also
Executive Vice President and Chairman of the Board, President and Chief
Director Executive Officer of KFC and KFS from July 1991;
prior thereto, Executive Vice President of KFC
and President and Chief Operating Officer of KFS.
John H. Fitzpatrick (37) 1986 Executive Vice President and Chief Financial
Executive Vice President, Officer from May 1993; prior thereto, Senior Vice
Chief Financial Officer and President and Chief Financial Officer from May
Director 1990; prior thereto, Vice President.
Alan J. Baltz (57) 1990 Senior Vice President from May 1990; prior
Senior Vice President thereto, Controller of Lumbermens.
Kathleen A. Gallichio (39) 1990 General Counsel and Corporate Secretary from May
General Counsel and Corporate 1991; prior thereto, Corporate Counsel and
Secretary Corporate Secretary from May 1990; prior thereto,
Assistant General Counsel of Lumbermens.
John W. Burns (42) 1986 Treasurer and principal accounting officer from
Treasurer (principal May 1990; prior thereto, Assistant Treasurer from
accounting officer) April 1989. Also Chief Accounting Officer of KFC
since January 1993. Treasurer of Lumbermens until
May 1990.
</TABLE>
- -------------------------
(1) All executive officers have similar business experience with various Kemper
Corporation subsidiaries. Where indicated as having had business experience
with Lumbermens, the executive officers also had similar business experience
with Lumbermens' subsidiaries and affiliates.
9
<PAGE> 12
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
AWARDS
ANNUAL COMPENSATION ----------------------
--------------------------------- STOCK
NAME OTHER RESTRICTED UNDERLYING
AND ANNUAL STOCK STOCK ALL OTHER
PRINCIPAL COMPEN- AWARDS OPTIONS COMPEN-
POSITION YEAR SALARY($) BONUS($) SATION($)(1) ($)(2) (#) SATION($)(3)
- ------------------------ ------ --------- -------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
David B. Mathis, 1993 $ 531,308 $960,000 $193,357 $ 560,625 45,000 $111,811
Chairman of the Board 1992 473,846 360,000 167,658 131,250 15,000 24,219
and Chief Executive 1991 400,000 480,000 164,503 253,750 25,000 53,329
Officer
Stephen B. Timbers, 1993 448,269 816,000 25,508 560,625 40,000 143,455
President and Chief 1992 412,500 500,000 7,706 110,250 10,000 106,789
Operating Officer 1991 360,000 307,200 6,744 119,625 10,000 57,344(4)
Charles M. Kierscht, 1993 440,000 412,000 17,980 149,500 15,000 188,398(4)
Executive Vice 1992 400,000 650,000 10,629 110,250 10,000 115,648
President 1991 387,500 300,000 13,415 119,625 10,000 190,466
John H. Fitzpatrick, 1993 240,462 360,000 21,117 373,750 25,000 59,675(5)
Executive Vice 1992 210,000 210,000 11,176 84,000 8,600 15,072(5)
President and Chief 1991 190,000 250,000 9,948 108,750 10,000 86,935(5)
Financial
Officer
Kathleen A. Gallichio, 1993 200,385 175,000 16,873 224,250 15,000 39,183
General Counsel and 1992 175,000 112,000 10,130 70,875 6,800 6,006
Corporate Secretary 1991 135,100 140,000 7,749 72,500 6,000 9,721
</TABLE>
- ---------------
(1) The amounts disclosed in this column include:
(a) Compensation income reported in 1993 of $145,625, in 1992 of $132,750,
and in 1991 of $127,000, for Mr. Mathis based upon the market value on
the vesting date of restricted stock awarded in 1988, 1987 and 1986,
respectively, under the Kemper Corporation Senior Executive Long-Term
Incentive Plan.
(b) Compensation amounts paid to each of the named executive officers as
non-preferential dividend equivalents on shares of restricted stock
awarded at various times.
(c) The cash value of shares of Company common stock when awarded under the
Kemper Corporation Anniversary Award Program. Employees of the Company
or participating subsidiaries are awarded shares on an increasing scale
beginning with their 10th year of employment and every 5 years
thereafter, with a pro rata award at retirement.
(d) The taxable benefit from personal use of an employer-provided
automobile, adjusted for the related tax expense.
(2) The values shown are based on the closing price for the Company's common
stock on the date any restricted stock was awarded applied to the number of
award shares. A five-year restriction period on transfers or other
dispositions applies to all awards of restricted stock made to date. If a
participant terminates service prior to the end of the five-year restriction
period for reasons other than death, permanent disability or retirement, the
shares and all associated rights are forfeited and returned to the Company.
Participants may settle their tax obligations on the vesting of restricted
shares by utilizing a portion of the award shares.
As of December 31, 1993, Mr. Mathis held a total 42,000 shares of
restricted stock, with an aggregate value (based on the closing price for
the Company's common stock as of the date each award was granted) of
$1,526,875; Mr. Timbers held a total 22,500 shares of restricted stock,
with an aggregate value of $790,500; Mr. Kierscht held a total 11,500
shares of restricted stock, with an aggregate value of $379,375; Mr.
Fitzpatrick held a total 16,200 shares of restricted stock, with an
aggregate value of $556,500; and Ms. Gallichio held a total 10,700 shares
of restricted stock, with an aggregate value of $367,625. Dividend
equivalents, calculated based on the amount of the per share dividend
declared and paid on the Company's outstanding common stock, will be paid
as additional compensation income to the named individuals throughout the
applicable five-year vesting period when dividends are paid to the
Company's stockholders.
10
<PAGE> 13
Any remaining restriction period will terminate upon a "change of control"
of the Company, or a sale of a subsidiary employer of the participant if
such participant ceases to be an employee of the Company or one of its
subsidiaries as a result of such sale. If these "change of control"
provisions were presently triggered, each of the named executive officers
would vest in all of the shares described in the preceding paragraph. See
Section 7 of the plan document set forth in Annex A to this proxy statement
for a description of such "change of control" events.
(3) Except for the amounts otherwise described in footnote (5) below with
respect to Mr. Fitzpatrick, this column includes only the amounts of
employer contributions and forfeitures allocated to the accounts of the
named persons under profit sharing plans maintained by the Company, in the
case of Messrs. Mathis, Timbers and Fitzpatrick and Ms. Gallichio, or by KFS
in the case of Mr. Kierscht, or under supplemental plans maintained by both
employers to provide benefits in excess of applicable ERISA limitations.
The Company's profit sharing plan was contributory, with the Company
matching 50 percent of participant 401(k) contributions. Participants may
elect 401(k) contributions of up to 5 percent of annual compensation.
Discretionary profit sharing contributions are considered by the Board of
Directors annually. A discretionary contribution of $1.95 for each 401(k)
dollar contributed was approved for eligible participants in the Company's
plan for 1993.
Under the KFS profit sharing plan, the KFS board of directors approved a
1993 contribution to the accounts of eligible participants in the amount of
15 percent of annual compensation.
Under both the Company and the KFS profit sharing plans, annual compensation
which is attributable to restricted stock vesting or stock option exercise
is not taken into account for employer contributions.
In the event a "change of control" of the Company occurs, the Company's
supplemental plan provides for an accelerated lump sum distribution of
vested amounts credited to that plan which are attributable to the Company's
profit sharing plan. "Change of control" is defined under the supplemental
plan in the same manner as under the Company's existing stock option and
restricted stock plans. See Section 7 of the plan document set forth in
Annex A to this proxy statement.
Effective with the 1994 plan year, the Company and KFS adopted uniform
profit sharing provisions providing for a 50 percent match of the first 5
percent of participants' elective 401(k) contributions; a discretionary
year-end profit contribution of up to 7 1/2 percent of eligible annual
compensation based on the Company's level of attainment of profit
objectives; and a basic contribution of 5 percent of annual compensation (to
a separate money purchase pension plan account) for eligible employees who
continue employment through the end of each calendar year.
(4) Excludes a portion of Mr. Kierscht's bonuses earned in each of 1987 through
1989, $393,643 in the aggregate, and a portion of Mr. Timbers' bonuses
earned in the same years, $154,027 in the aggregate, deferred under a
mandatory contingent deferred plan maintained until December 31, 1990 by KFS
and paid in 1991.
(5) Includes $3,368, $3,368 and $61,135 paid to Mr. Fitzpatrick by the Company
in 1993, 1992 and 1991, respectively, to compensate him for the inability to
continue to accrue any potential additional value under the various
securities or options issued to him by KFC due to the mandatory redemption
or lapse of such securities or options when his employment with KFS
terminated in May 1990 upon commencement of his employment by the Company.
Mr. Timbers owned various KFC securities interests which became subject to
mandatory redemption or lapsed when his KFS employment terminated at
year-end 1992 upon commencement of his employment by the Company. During a
period extending to December 31, 2001, Mr. Timbers will, subject to
continued employment by the Company or one of its subsidiaries, be eligible
to elect to receive phantom compensation amounts from the Company based on
the future appreciation, if any, which may pertain to the interests in KFC
securities he previously owned. No such phantom compensation amounts were
paid during any of the years reported in the table.
11
<PAGE> 14
OPTION GRANTS IN 1993
<TABLE>
<CAPTION>
POTENTIAL
INDIVIDUAL GRANTS REALIZABLE VALUE OF
- ------------------------------------------------------------------------------- ASSUMED ANNUAL
NUMBER % OF TOTAL RATES OF STOCK PRICE
OF SHARES OPTIONS APPRECIATION
UNDERLYING GRANTED TO EXERCISE OR FOR OPTION TERM(4)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION ----------------------
NAME GRANTED(#)(1) FISCAL YEAR(2) ($/SH)(3) DATE 5%($) 10%($)
- ----------------------------- -------------- ----------- ------------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
David B.
Mathis 45,000 3.0% $38.375 April 30, 2003 $1,086,022 $2,752,194
Stephen B.
Timbers 40,000 2.7% $38.375 April 30, 2003 965,353 2,446,395
Charles M. 15,000 1.0% $38.375 April 30, 2003 362,007 917,398
Kierscht 5,867 .4% $41.75 September 1, 2003 154,045 390,382
John H.
Fitzpatrick 25,000 1.7% $38.375 April 30, 2003 603,346 1,528,997
Kathleen A.
Gallichio 15,000 1.0% $38.375 April 30, 2003 362,007 917,398
</TABLE>
- ---------------
(1) Except for Mr. Kierscht's 5,867 share option granted September 1, 1993, the
options described above first become exercisable for 25 percent of the
underlying shares on or after April 30, 1994, one year after the date of
grant, and for the total number of underlying shares on or after April 30,
1995. The options granted September 1, 1993, including Mr. Kierscht's, first
become exercisable for 20 percent of the total underlying shares on
September 1, 1994, the first anniversary of the date of grant, and for an
additional 20 percent of the underlying shares on each successive
anniversary of the date of grant until they become fully exercisable on
September 1, 1998, five years from the date granted.
(2) Based on 1,481,100 shares, the total number of shares granted under options
in 1993. This total includes 886,400 shares granted under options on
September 1, 1993 to employees of Kemper Securities, Inc. and subsidiary
employee holders of KFC Debentures under a special incentive award program.
Of the named executive officers, only Mr. Kierscht participated in this
award as a holder of KFC Debentures.
(3) The option exercise price assigned by the Committee was the last sale price
for Kemper Corporation common stock on the date of the respective grants.
(4) The assumed annual rates of stock price appreciation are prescribed in the
proxy rules and should not be construed to forecast any future appreciation
in the market price for the Company's common stock.
(5) These options contain a "reload" feature which entitles an optionee who,
within the first eight years after the date the option was granted, pays all
or any portion of the exercise price of an option with shares of Company
common stock to receive a new non-qualified stock option to purchase a
number of shares equal to the number of shares of common stock tendered in
payment. The new option will have an exercise price equal to the fair market
value of the common stock on the date of such exercise by payment in shares,
and is only exercisable as long as the optionee continues to hold the shares
issued on exercise of the initial option. The new option would vest in
installments identical to those first applying to the option exercised. In
no event, however, can any new option granted under the "reload" feature be
exercised beyond the ten-year term of the initial option exercised.
(6) The options disclosed in the table, if not fully exercisable, automatically
become fully exercisable upon a "change of control" of the Company, or a
sale of a subsidiary employer of the optionee if the optionee ceases to be
an employee of the Company or one of its subsidiaries as a result of such
sale, if the change of control or sale occurs at least one year from the
date the option was granted. See Section 7 of the plan document set forth in
Annex A to this proxy statement for a description of such "change of
control" events.
12
<PAGE> 15
AGGREGATED OPTION EXERCISES IN 1993
AND OPTION VALUES AT YEAR-END 1993
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS OPTIONS AT
AT FY-END(#) FY-END($)(1)
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE
- -------------------- --------------- ----------------- ---------------- --------------------
<S> <C> <C> <C> <C>
David B. Mathis -- -- 146,955/87,510(2) $ 1,086,402/$358,898(2)
Stephen B. Timbers -- -- 12,500/47,500 25,000/ 75,000
Charles M. Kierscht -- -- 17,900/17,500(2) 116,584/ 75,000(2)
John H. Fitzpatrick -- -- 63,430/47,710 425,068/ 193,710
Kathleen A.
Gallichio -- -- 41,480/31,360 287,443/ 141,148
</TABLE>
- ---------------
(1) Based on a value per share of $36.25 as of December 31, 1993 over the
exercise price, if less.
(2) Where needed, the figures are adjusted to reflect the 3-for-1 stock split in
June 1986.
13
<PAGE> 16
TERMINATION PROTECTION AGREEMENTS
The Company and 13 senior executives, including the named executive officers
(the "Executives"), have entered into agreements (the "Agreements") dated March
17, 1994 intended to encourage the Executives to remain with the Company during
periods of uncertainty with respect to the Company's ownership and to enhance
their abilities to act in the best interests of the Company and its stockholders
with respect to any offer for the Company, without being influenced by any
uncertainties surrounding their respective situations with the Company.
The Agreements may be unilaterally terminated by the Company upon at least one
year's advance notice. If effective on the date of a Change of Control of the
Company, the Agreements would remain in effect for three years or such longer
period as is necessary to give effect to their terms. Change of Control is
defined under the Agreements in the same manner as under the Company's existing
stock option and restricted stock plans. See Section 7 of the plan document set
forth in Annex A to this proxy statement.
Under the Agreements, an Executive would receive severance benefits if the
Company were to terminate his or her employment with the Company without Cause
(defined below) or if the Executive were to resign for Good Reason (defined
below) either within three years after a Change of Control or prior to a Change
of Control at the request of the acquiror. Such severance benefits would be: (i)
a payment equal to three times the sum of the Executive's base salary, target
bonus and target equity awards (i.e., the value of the Executive's target awards
of options and restricted stock under the Company's long-term stock award
program); (ii) a payment equal to three times the Executive's target profit
sharing contribution from the Company, reduced for each month of service after
the Change of Control; (iii) payment of a pro-rata portion of the Executive's
target bonus for the year of termination; (iv) continued welfare benefits for
three years (or, if shorter, until the Executive becomes covered under a new
employer's plan); (v) payment of any accrued but unpaid bonuses (for prior
years) and any deferred compensation; (vi) three years additional age and
service credit towards eligibility for post-retirement welfare benefits (offset
by additional age and participation actually credited after the Change of
Control); (vii) acceleration of vesting under the Company's supplemental
retirement plans, payment of the Executive's accrued benefit under these plans
and, to the extent the Executive is entitled to a benefit under the defined
benefit portion of any of these plans, three years additional age and service
credit towards eligibility for all purposes, including benefit accrual and
eligibility for early retirement (offset by additional age and service actually
credited after the Change of Control); and (viii) reimbursement for outplacement
counseling services. Any severance benefits payable are grossed-up to the extent
an Executive would be subject to an excise tax under Section 4999 of the
Internal Revenue Code due to the receipt thereof. The Agreements preserve any
applicable Change of Control provisions under other agreements or arrangements,
such as the Company's equity-based compensation programs. They also preserve the
Executive's indemnification rights, require the Company to maintain certain
directors' and officers' liability insurance coverage and impose certain
confidentiality obligations on the Executive.
Cause is defined generally as (i) willful malfeasance which has a material
adverse effect on the Company; or (ii) conviction of a felony. As to any
Executive, Good Reason is defined to be any of the following actions, without
the Executive's express prior written approval, other than due to the
Executive's permanent disability or death: (i) any diminution in the Executive's
titles, duties, responsibilities, status or reporting relationship from the
positions, duties, responsibilities, status or reporting relationship existing
immediately prior to the Change of Control; (ii) removal of the Executive from,
or any failure to re-elect the Executive to, any of the positions the Executive
holds immediately prior to the Change of Control; (iii) failure to pay the
Executive's base salary when due; (iv) any reduction of the Executive's base
salary, target bonus or target equity award; (v) a material reduction in the
Executive's employee or fringe benefits; (vi) a change of the Executive's
principal place of employment to a location more than 20 miles from the
Executive's principal place of employment immediately prior to the Change of
Control; or (vii) any material breach of any provision of the Agreement.
14
<PAGE> 17
RETIREMENT PLAN
The following table shows the estimated annual pension benefits payable to a
covered participant at normal retirement age under the final pay formula
contained in the Kemper Corporation Retirement Plan, a qualified defined benefit
plan, including any pension amounts which would be provided under the Company's
non-qualified supplemental retirement plan due to benefit limitations imposed by
ERISA. The Retirement Plan includes an alternative career average benefit
formula based on compensation earned during all years of plan participation
(1.85 percent of the participant's first $10,000 of eligible compensation for
each plan year and 2.40 percent of eligible compensation above $10,000), but the
Company estimates that the Retirement Plan's final pay formula will produce the
greater benefit to the persons identified in the SUMMARY COMPENSATION TABLE who
participate in the Retirement Plan.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
FIVE-YEAR YEARS OF PLAN PARTICIPATION
AVERAGE ------------------------------------------------------------
COMPENSATION 20 25 30 35 40
- ------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$ 200,000 $ 38,110 $ 47,638 $ 57,165 $ 66,693 $ 76,220
250,000 48,110 60,138 72,165 84,193 96,220
300,000 58,110 72,638 87,165 101,693 116,220
350,000 68,110 85,138 102,165 119,193 136,220
400,000 78,110 97,638 117,165 136,693 156,220
450,000 88,110 110,138 132,165 154,193 176,220
500,000 98,110 122,638 147,165 171,693 196,220
600,000 118,110 147,638 177,165 206,693 236,220
700,000 138,110 172,638 207,165 241,693 276,220
800,000 158,110 197,638 237,165 276,693 316,220
900,000 178,110 222,638 267,165 311,693 356,220
1,000,000 198,110 247,638 297,165 346,693 396,220
</TABLE>
A participant's remuneration covered by the Retirement Plan's final pay formula
is his or her average annual salary plus bonus as reported in the SUMMARY
COMPENSATION TABLE, plus the value of any award received under the Company's
Anniversary Stock Award Program (except that bonuses are covered in the year
they are paid rather than when they accrue for purposes of the Retirement Plan),
or the 60 months preceding a participant's retirement or, in the case of a
participant who has participated in the plan for less than 60 months, the period
of his or her participation. The estimated credited years of plan participation
at normal retirement age for the named executive officers participating in the
Retirement Plan as of December 31, 1993 are as follows: 42 years for Mr. Mathis,
17 years for Mr. Timbers, 37 years for Mr. Fitzpatrick and 31 years for Ms.
Gallichio. Actual years of participation for each individual are 33, 1, 10 and 5
years, respectively.
Benefits shown are computed as a straight life single annuity beginning at age
65, and are not subject to reduction for social security or other offset
amounts. Because KFS has not adopted the Retirement Plan, Mr. Kierscht is not
eligible to participate. Mr. Timbers, formerly a KFS employee, commenced
participation in the Retirement Plan effective January 1, 1993.
The Retirement Plan provides that, on the occurrence of a "change of control" of
the Company or certain other enumerated events such as plan termination or
merger, the following protections for plan participants become effective: (i)
participants become vested in all accrued benefits regardless of length of
service; (ii) plan assets are allocated to provide the benefits accrued as of
such date through the purchase of guaranteed annuities; and (iii) surplus
assets, if any, available after all accrued benefits have been provided for are
allocated to provide additional accrued benefits for participants under the
guaranteed annuities or, to the extent necessary, the non-qualified supplemental
15
<PAGE> 18
plan. Following a "change of control", benefits credited to the supplemental
plan which are attributable to the Retirement Plan are valued on an actuarially
equivalent lump sum basis and distributed.
"Change of control" is defined under the Retirement Plan and the supplemental
plan in the same manner as under the Company's existing stock option and
restricted stock plans. See Section 7 of the plan document set forth in Annex A
to this proxy statement.
16
<PAGE> 19
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, that might incorporate future filings,
including this proxy statement, in whole or in part, the following report and
the performance graph on page 20 shall not be incorporated by reference into any
such filings.
REPORT ON EXECUTIVE COMPENSATION OF THE COMMITTEE
ON COMPENSATION AND ORGANIZATION
COMPENSATION PHILOSOPHY
The Company's executive compensation program is founded on certain guiding
principles designed to align compensation with the Company's business strategy,
performance and realization of stockholder value. Its overall objectives are
designed to:
- - Attract and retain key executives critical to the long-term success of the
Company;
- - Reinforce a common direction among the Company's distinct business units;
- - Reward executives for long-term strategic management by delivering appropriate
ownership interests in the Company;
- - Support a performance-oriented environment that differentiates rewards based
on contributions to business results;
- - Integrate the compensation program with the Company's strategic planning and
performance measurement process; and
- - Provide competitive total compensation opportunities consistent with those of
other leading diversified financial organizations.
The Company has developed an overall compensation strategy and corresponding
compensation plans that tie a significant portion of executive compensation to
success in meeting specified performance goals as well as in building
stockholder value. As an executive's level of responsibility increases, a
greater portion of potential total compensation is based on performance
incentives and long-term equity awards and less on salary and employee benefits,
often causing greater variability in the individual's compensation level from
year to year.
In evaluating competitor practices, the Company's various operating subsidiaries
are compared with their specific industry peers while compensation elements for
executive officers of the Company are measured against those of diversified
financial companies. Each year the Company participates in several compensation
studies to determine the competitiveness of its executive compensation program.
The peer group used at the Company level consists of approximately twenty
selected diversified financial companies providing a cross-section of the
diversified financial services industry. The group evaluated provides a relevant
competitive frame of reference for the major segments of the Company's business
portfolio, including asset management, securities brokerage and life insurance.
Specific peer group companies are also selected on the basis of comparable asset
size, business portfolio and corporate strategy, and represent the Company's
most direct competitors for executive talent. Some of the companies comprising
either the Dow Jones Insurance (Full Line) Peer Group or the Dow Jones Financial
Services (Diversified) Peer Group are included within the industry peer group
analyzed for compensation purposes. While peer group financial performance is
not directly analyzed, the influence of results on industry compensation
practices generally will produce an indirect effect over time.
COMPENSATION VEHICLES
The key elements of the Company's executive compensation program are base
salary, annual incentive bonus and long-term equity awards.
17
<PAGE> 20
Base Salaries
Base salary levels for the Company's executive officers and subsidiary officers
are normally positioned somewhat below those for comparable positions in
competitor companies. In determining base salary levels and annual salary
adjustments for executive officers, the Committee considers market compensation
comparisons as well as the individual's performance and relative contribution to
the organization. In the case of a head of a functional or operating unit, that
unit's operating results are also generally considered.
Annual Incentive Bonus Awards
The Company's executives are eligible for an annual cash bonus. Goals are
established at the beginning of each year for the Company, and for each
functional and operating unit, to provide the basis for achieving bonus awards.
These include threshold, target and maximum performance goals which are clearly
linked with resultant bonus opportunities at each level.
Bonus award opportunities throughout the Company are generally positioned above
standard industry practices and are contingent upon business results. As such, a
greater portion of the executive's compensation is placed at risk and tied more
directly to operating performance. Bonus awards for executives in a functional
or operating unit reflect results of the particular unit whereas consolidated
results are the primary basis for bonuses for the Company's officers and staff.
Long-Term Equity Awards
Equity awards are designed to foster significant ownership interests in the
Company common stock for key executives, thereby promoting greater identity
between the Company's management and its stockholders. Two types of awards are
granted to executive officers of the Company and its major functional and
operating units as well as to other key employees:
Stock Options--a right to purchase shares of common stock over a ten-year period
at the fair market value per share as of the date the option is granted; and
Restricted Stock Awards--shares of common stock which the recipient cannot sell
or otherwise dispose of until a requisite employment period lapses.
The Company's practices in granting options and restricted stock are designed to
provide opportunities fully competitive with those offered by other diversified
financial companies. In establishing grant levels, the executive's
responsibilities, past contributions to the Company and attainment of corporate
and personal objectives, together with the practices of the same peer companies
utilized for all aspects of the compensation program (verified by external
surveys), are evaluated closely. The Committee considers the particular
executive's accomplishments, as measured against preset three-year goals focused
on creating longer term stockholder value, in determining the number of shares
to be awarded. The measurement goals are established for the Company as well as
for each executive officer and generally include important strategic initiatives
as measurement factors. Prior equity grants can influence the Committee's
determination of grant levels for a given period, particularly when evaluated
against attainment of long-term performance objectives over the multi-year cycle
of the overall compensation program.
Since 1991, the Company has granted options to approximately 300 key employees
annually and has awarded restricted stock to approximately 50 senior executives
under its executive compensation program.
COMPENSATION OF THE CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
The Committee increased Mr. Mathis' base salary effective February 1, 1993 from
$480,000 to $530,000 to recognize his achievements in repositioning the Company
for the future as a focused financial services organization dedicated to
producing higher and more consistent earnings for its stockholders.
Mr. Mathis' bonus for 1993 reflects the fact the Company met or exceeded each of
its 1993 performance targets established early in the year. Under Mr. Mathis'
leadership, the Company
18
<PAGE> 21
exceeded its target operating earnings goal and its objectives to increase the
market price of the Company's common stock, both on an absolute basis as well as
relative to the Standard & Poor's 500 Index. The Company also reduced its
exposure to real estate-related assets beyond the level the Committee set to
qualify for maximum performance-based compensation and, by divesting four major
subsidiary operations in the year, met its targeted restructuring goal. The
Committee recognized these excellent accomplishments in each of the measurement
areas in establishing the bonus awards for Mr. Mathis as well as the other named
executive officers.
The significant progress over the three-year compensation plan cycle in the
Company's restructuring efforts as well as in the various categories underlying
the above-described performance targets, together with the overall improvements
in the Company's financial position, were all considered by the Committee in
establishing awards of stock options and restricted stock to Mr. Mathis and each
of the other named executive officers.
COMMITTEE ON COMPENSATION AND ORGANIZATION
Kemper Corporation's Committee on Compensation and Organization is comprised of
the following non-management directors:
George D. Kennedy (Chairman)
John T. Chain Jr.
Raymond F. Farley
19
<PAGE> 22
KEMPER CORPORATION VERSUS SELECTED COMPOSITE INDICES
Until it divested its reinsurance operations, risk management subsidiary and two
property-casualty subsidiaries during 1993, the Company believed the most
appropriate peer group for purposes of the following comparisons was the Dow
Jones Insurance (Full Line) Peer Group. With such divestitures completed and the
Company's focus on the asset management, life insurance and securities brokerage
businesses confirmed, the Company believes comparison to the Dow Jones Financial
Services (Diversified) Peer Group is now more appropriate. Both comparisons are
set forth below but the Company expects comparison to only the diversified
financial services peer group will be presented in future periods.
FIVE-YEAR CUMULATIVE TOTAL RETURN
1988-1993
<TABLE>
<CAPTION>
DOW JONES
FINANCIAL
SERVICES DOW JONES
(DIVERSI- INSURANCE
MEASUREMENT PERIOD KEMPER COR- FIED) PEER G (FULL LINE)
(FISCAL YEAR COVERED) PORATION S&P 500 ROUP PEER GROUP
<S> <C> <C> <C> <C>
1988 100 100 100 100
1989 200 132 135 132
1990 104 128 110 99
1991 172 166 157 136
1992 138 179 183 162
1993 174 197 211 190
</TABLE>
Assumes $100 invested on December 31, 1988 in Kemper Corporation common stock,
S&P 500, Dow Jones Financial Services (Diversified) Peer Group and Dow Jones
Insurance (Full Line) Peer Group.
- ---------------
(1) Assumes reinvestment of dividends on a quarterly basis.
(2) Dow Jones Financial Services (Diversified) Peer Group consists of: Alexander
& Alexander Services Inc., American Express Company, Beneficial Corp.,
Dreyfus Corporation, Federal Home Loan Mortgage Corporation, Federal
National Mortgage Association, Household International, Inc., Marsh and
McLennan Companies Inc., The Travelers Corp. and Student Loan Marketing
Association.
(3) Dow Jones Insurance (Full Line) Peer Group consists of: Aetna Life &
Casualty Company, Aon Corporation, CIGNA Corporation, Kemper Corporation,
Lincoln National Corp., Transamerica Corporation and Unitrin Inc.
20
<PAGE> 23
COMPENSATION OF DIRECTORS
1993 COMPENSATION
During 1993, the Company paid all non-management directors an annual retainer of
$17,500. The Company paid the chairman of the Finance Committee an additional
annual retainer of $12,000 (earned and paid on a monthly basis) and the chairmen
of the Audit, Nominating and Corporate Public Policy Committees, and the
Committees on Compensation and Organization and Intercompany Conflicts,
Accountability and Relationships, an additional annual retainer of $7,500 each
(with these retainers paid semi-annually but earned 25 percent quarterly). The
Company also provided reimbursement for necessary travel and accommodation
expenses incurred for attendance at each meeting of the Board of Directors of
the Company or committee thereof, and paid the following meeting fees during
1993:
<TABLE>
<CAPTION>
MEETINGS 1993 COMPENSATION
- ------------------------------- ------------------------------------------------------------
<S> <C>
Board A fee of $1,000 for each meeting attended.
Executive Committee A fee of $1,500 for each meeting attended.
Audit Committee A fee of $750 for each meeting attended.
Corporate Public Policy A fee of $500 for each meeting attended.
Committee
Committee on A fee of $500 for each meeting attended.
Compensation and
Organization
Nominating Committee A fee of $1,000 for each meeting attended.
Finance Committee A fee of $500 for each meeting attended. The retainer paid
the chairman of the committee was in lieu of any meeting
fees.
</TABLE>
The Company paid a fee of $500 to its representative serving on the Committee on
Intercompany Conflicts, Accountability and Relationships for each meeting
attended during 1993.
1994 COMPENSATION
Effective January 14, 1994, the Board changed the membership and configuration
of its committees and the director compensation program. Such changes were
designed to rebalance and streamline board committee participation to promote
efficiencies; facilitate contemporaneous committee meetings to free additional
time for full board deliberations; de-emphasize meeting fees in favor of
standardized retainers to better equalize director compensation; and increase
total director compensation to better align with emerging standards for
financial services companies. The cash compensation program for non-management
directors was last amended in mid-1990.
As a result of these changes, effective January 1, 1994, all non-management
directors receive an annual retainer of $35,000 for Board service and an
additional $15,000 annual retainer for committee service, the latter amount
applying regardless of the number of committees on which a director serves.
These retainers are earned quarterly but paid semi-annually.
21
<PAGE> 24
The Company continues to provide reimbursement for necessary travel and
accommodation expenses incurred for attendance at each meeting of the Board of
Directors or committee thereof, and will pay the following meeting fees:
<TABLE>
<CAPTION>
MEETINGS 1994 COMPENSATION
- ------------------------------- ------------------------------------------------------------
<S> <C>
Board A fee of $500 for each meeting attended.
Executive Committee A fee of $250 for each meeting attended.
Audit Committee A fee of $500 for each meeting attended.
Corporate Public Policy A fee of $1,000 for each meeting attended.
Committee
Committee on A fee of $250 for each meeting attended.
Compensation and
Organization
Investment Committee A fee of $500 for each meeting attended.
Nominating Committee A fee of $2,000 for each meeting attended.
</TABLE>
Other than the above compensation, non-management directors receive no
additional cash remuneration from the Company. Directors who are salaried
employees of the Company or any of its subsidiaries do not receive any annual
retainer or meeting fees for service as a director or on any board committee.
DIRECTOR STOCK OPTIONS
Non-qualified stock options are automatically granted once each year under the
Kemper Corporation Non-Management Director Stock Option Plan (the "Director
Plan") to the Company's non-management directors. Two types of non-qualified
stock options are issuable under the Director Plan. An initial option to
purchase up to 5,000 shares of Kemper Corporation common stock was granted to
each of the Company's non-management directors elected or continuing in office
on May 16, 1990 and is granted to any new non-management director on the date of
the organizational board meeting (the board meeting immediately following the
annual stockholders' meeting) at which he or she first serves as a member of the
Company's Board of Directors.
Also, each non-management director annually receives a non-qualified stock
option to purchase 1,000 shares of Kemper Corporation common stock on the date
of the organizational board meeting next following the date on which such
director received an initial option and on the date of each succeeding
organizational board meeting during the period of such director's incumbency.
The option exercise price of each option granted under the Director Plan is
equal to the last sale price of the Company's common stock at the date of the
automatic grant. Shares purchased through the exercise of an option must be paid
for in full either in cash or with an amount of the Company's common stock
having a fair market value equal to the exercise price, or a combination of
both.
The Director Plan provides that each option granted thereunder has a ten-year
term and is not exercisable during the first year from the date the option was
granted. Thereafter, the director may purchase up to one-fourth of the shares
covered by the option in the second year after grant, up to an additional
one-fourth of the total shares in the third year after grant (one-half of the
total shares cumulatively), up to an additional one-fourth of the total shares
in the fourth year after grant (or cumulatively, for three-fourths) and become
fully exercisable in or after the fifth year following grant. Notwithstanding
these installment purchase provisions applicable to each of the options granted
under the Director Plan, such options become fully exercisable upon the
retirement of the director from the Company's board if such retirement occurs
after one year from the date the particular option was granted.
Any option granted under the Director Plan also becomes fully exercisable upon
the occurrence of one of certain enumerated events resulting in a "change of
control" of the Company, provided such change of control event occurs at least
one year after the date the option was granted to a director. See Section 7 of
the plan document set forth in Annex A to this proxy statement for a description
of
22
<PAGE> 25
such "change of control" events. The Director Plan contains standard
anti-dilution provisions. Subject to certain limitations, the Board of Directors
may amend or terminate the Director Plan at any time (although amendments may
not be adopted more frequently than once every six months), but such actions
cannot adversely affect any outstanding option.
OTHER DIRECTOR BENEFITS
Non-management directors may elect to participate in the Kemper Corporation
Director Deferred Compensation Plan prior to the commencement of any calendar
year in which director compensation is earned. A decision to defer compensation
is irrevocable once the relevant period begins. The deferred compensation and
any earnings credited thereon can be accumulated in an Income Account (credited
at the prime rate of interest), a phantom Stock Unit Account (credited with an
amount based on the market performance and dividend rate of Kemper Corporation
common stock) or a combination of both. All deferred compensation and any
accumulated credited earnings are payable to the director either in quarterly
payments, a single lump sum or partial lump sum payments, in each case
commencing with the first quarter following cessation of service as a director
or such later date(s) as earlier designated by the director. John C. Stetson
deferred fees under this plan until his retirement from the board in May, 1993.
The Kemper Corporation Director Retirement Plan provides that each
non-management director (who is not entitled to a benefit under any qualified
pension or profit sharing plan sponsored by the Company or any of its
subsidiaries) shall, upon the later of retirement or attaining age 72, receive a
retirement benefit payable quarterly for ten years or the number of plan
quarters in which the director served as a director of the Company, whichever is
less. Payments cease after the date of death of the director. The retirement
benefit presently accrues at $3,000 per quarter. The average of the accrual
rates for the last forty quarters of service (or the director's service period,
if less) determines the amount of the quarterly retirement benefit.
For their periods of incumbency, the non-management directors are each provided
life insurance coverage (without cash value) in the amount of $50,000, and
accidental death and dismemberment insurance coverage while traveling on Company
business (without cash value) in the amount of $250,000, in each case payable to
the beneficiaries designated from time to time by each such director. Such
coverages are reduced to the extent coverage is provided by an employee or
retiree benefit plan sponsored by the Company or any of its subsidiaries.
DIRECTOR EMERITUS
Mr. Stetson, who served as a director of the Company from 1973 to 1977 and again
from 1979 to 1993 (having served as Secretary of the United States Air Force
during the interim), retired from the Board effective with the May 12, 1993
annual meeting of stockholders and became director emeritus of the Company. As
director emeritus, Mr. Stetson may attend meetings of the board or any committee
on which he previously served prior to his retirement. He will be paid fees for
any meeting attended equal to those payable to directors and will continue to
receive the annual board retainer of $30,000. His participation in the Director
Deferred Compensation Plan and the Director Retirement Plan, as well as under
the insurance coverages afforded directors, terminated effective with the 1993
annual meeting. His outstanding stock options are exercisable in accordance with
their post-retirement exercise provisions.
23
<PAGE> 26
APPROVAL OF THE KEMPER CORPORATION 1993 SENIOR EXECUTIVE LONG-TERM INCENTIVE
PLAN
The Board of Directors requests stockholder action to approve the Kemper
Corporation 1993 Senior Executive Long-Term Incentive Plan (the "Plan") adopted
by the board on May 12, 1993. To be approved, the Plan must receive the
affirmative vote of a majority of the shares voting at the meeting, whether
present in person or represented by proxy.
THE PLAN
While the following summary attempts to include the material provisions of the
Plan, it is no substitute for a review of the Plan document which is attached
hereto as Annex A. Stockholders are encouraged to review the Plan document
carefully.
The Plan is a successor to the Company's Senior Executive Long-Term Incentive
Plan and 1989 Senior Executive Long-Term Incentive Plan and was adopted to the
extent the shares available under such earlier stockholder-approved plans had
been virtually exhausted by previous awards.
The Board believes the implementation of this Plan will (1) increase the
Company's ability to attract, motivate and retain capable management personnel;
(2) foster the identity of the participants' interests with the interests of
stockholders; and (3) increase the participants' stakes in the future growth and
prosperity of the Company.
Participation in the Plan is limited to those key executive officers of the
Company or its subsidiaries who have a significant opportunity to influence
long-term profit performance. Participants in the Plan will be chosen from time
to time by the Committee on Compensation and Organization (the "Committee"),
which administers the Plan. Members of the Committee, all of whom are non-
management directors, are not eligible to participate in the Plan. The Committee
determines, in its sole discretion, the participants, the date of award and the
number of shares to be awarded under the Plan. If the Committee retains its
prior practice in administering the Company's restricted stock plans,
approximately 50 senior executives are selected to receive restricted stock
awards each year.
An aggregate of 500,000 shares of Kemper Corporation common stock may be awarded
on or before May 13, 1998, from the treasury stock of the Company, to
participants pursuant to the Plan, subject to certain anti-dilution adjustments.
On March 17, 1994, upon recommendation of the Committee, the Board of Directors
amended the Plan to impose a 100,000 share maximum, subject to anti-dilution
adjustments, on the number of shares that may be granted to any single
participant under the Plan. This amendment was designed to preserve the tax
deductibility for the Company of any compensation expense arising on the vesting
of shares in accordance with Section 162(m) of the Internal Revenue Code. See
APPROVAL OF THE COMPANY'S PERFORMANCE-BASED COMPENSATION PROGRAM later in this
proxy statement.
Because the Committee exercises its sole discretion in awarding Plan shares, the
amount or value of Plan shares which may be awarded under the Plan to any
particular individual or group are not presently determinable. The following
table discloses the numbers and value of Plan shares awarded under the Plan on
May 13, 1993, subject to stockholder approval of the Plan, to the named
executive
24
<PAGE> 27
officers, the Company's executive officers as a group and to all employees,
including officers who are not executive officers, based on the closing price of
the Company's common stock on that date:
PLAN BENEFITS
<TABLE>
<CAPTION>
NUMBER OF
NAME DOLLAR VALUE(S) SHARES
- ----------------------------------------------------------------- --------------- ---------
<S> <C> <C>
David B. Mathis.................................................. $ 560,625 15,000
Stephen B. Timbers............................................... $ 560,625 15,000
Charles M. Kierscht.............................................. $ 149,500 4,000
John H. Fitzpatrick.............................................. $ 373,750 10,000
Kathleen A. Gallichio............................................ $ 224,250 6,000
Executive Officers, as a group (7 persons, including the
above)......................................................... $ 2,063,100 55,200
All officers and employees, as a group (41 persons, including the
above)......................................................... $ 4,369,138 116,900
</TABLE>
RESTRICTIONS
Shares awarded under the Plan bear restrictions limiting the ability of the
participant to sell or transfer the shares for a period of five years from the
date of grant unless a different period is set by the Committee at the time of
any award.
The Plan provides that if a participant terminates service prior to the end of
the restriction period for reasons other than death, permanent disability,
normal retirement or age 65, or a qualifying early retirement, the shares will
be returned to the Company for no consideration. Plan shares awarded will vest
in a participant upon an employment termination due to early retirement provided
the participant attains one of the following combinations of age and total years
of service with one or more of the Company and its subsidiaries: age 55 with at
least 20 full years of service; 56 with 19 years; 57 with 18 years; 58 with 17
years; 59 with 16 years; 60 with 15 years; 61 with 14 years; 62 with 13 years;
63 with 12 years or 64 with 11 years.
Any remaining restriction period will terminate upon a "change of control" of
the Company, or a sale of a subsidiary employer of a participant provided such
participant ceases to be an employee of the Company or one of its subsidiaries
as a result of such sale. Please refer to Section 7 of the Plan set forth in
Annex A to this proxy statement for a description of these "change of control"
and subsidiary sale provisions which can accelerate the vesting of Plan shares.
During the restriction period, the participant has the right to vote any shares
awarded and will receive additional compensation equal to the value of dividends
declared and paid thereon. At the expiration of the restriction period, the
participant receives full ownership rights to such stock, including the right to
thereafter sell or otherwise transfer the Plan shares.
TAX MATTERS
On the date the restriction period ends, or on the date within a restriction
period of a participant's death, permanent disability, normal or qualifying
early retirement, the participant or the participant's estate will be required
to make a payment to the Company of the amount of any taxes which are required
to be withheld due to the vesting of such shares. The Plan empowers the
Committee to adopt rules to allow participants to elect to have shares which
would otherwise vest due to the lapse of the restriction period, or as a result
of a participant's death, permanent disability or normal or qualifying early
retirement, withheld to satisfy the participant's tax liabilities.
The Committee has adopted procedures whereby participants can elect to have a
number of Plan shares withheld whose fair market value on the election date does
not exceed the participant's total estimated federal, state and local income and
any employment tax liabilities arising in connection with the vesting of such
shares. No election can be submitted within the first six months of the date on
25
<PAGE> 28
which the shares were awarded under the Plan (absent an intervening death,
permanent disability or normal or qualifying early retirement). Elections must
be submitted either (i) at least six months prior to the date on which the Plan
shares will vest; or (ii) if prior to the date the shares vest, during the
period beginning on the third business day and ending on the twelfth business
day following the Company's public release of its quarterly earnings
information. Shares withheld by the Company to comply with any participant's tax
withholding election will be restored to treasury stock status and may later be
awarded to participants under the Plan.
PLAN AMENDMENTS
The Committee may at any time and from time to time alter, amend, suspend or
terminate the Plan in whole or in part, unless such alterations or amendments
would materially increase the benefits accruing to participants pursuant to the
Plan (except for adjustments in the event of stock dividends or splits,
recapitalization or similar changes in the common stock), or materially modify
the requirements as to eligibility for participation in the Plan.
If the stockholders do not approve the Plan, the Plan will be terminated and any
Plan shares awarded on May 12, 1993 will be restored to the Company.
REASON FOR STOCKHOLDER APPROVAL
The Plan is being submitted for stockholder approval to obtain certain benefits
provided by Rule 16b-3 promulgated pursuant to the Securities Exchange Act of
1934 (the "Act"). If the Plan satisfies all of the Rule 16b-3 requirements,
participants will be partially exempt from statutory liability imposed under
Section 16(b) of the Act which provides, generally, for a right of recovery by a
public company for any profits realized by an executive officer of such company
in connection with a purchase and sale, or a sale and purchase, of any equity
security of the company within any period of less than six months.
If the stockholders approve the Plan and the exemptions apply, neither the grant
of restricted shares under the Plan nor the subsequent termination of the
restrictions will be deemed a "purchase" for purposes of Section 16(b). Also,
neither an election to have shares withheld to satisfy a participant's tax
liabilities nor the actual withholding of such shares will constitute a "sale"
of the shares withheld for purposes of Section 16(b). The exemption will not
apply to any subsequent sale or other disposition of Plan shares. In addition,
the exemption will not apply to any restricted shares awarded under the Plan to
an executive officer of the Company, including the executive officers named
above in the PLAN BENEFITS table, unless the shares were awarded at least six
months prior to any event accelerating the vesting of such shares, including a
"change of control" of the Company. The Board of Directors believes that the
limited exemptions sought will not negate the purposes of Section 16(b) which
are to eliminate the opportunities for unfair trading advantages and to allow
companies to recover short-swing statutory trading profits by corporate
insiders.
The persons named on the enclosed proxy card (Peter B. Hamilton, George D.
Kennedy and David B. Mathis) have agreed to represent stockholders submitting
properly executed proxy cards and to vote for the approval of the Plan unless
otherwise directed by the authority granted or withheld on the proxy cards.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE PLAN.
26
<PAGE> 29
APPROVAL OF THE COMPANY'S PERFORMANCE-BASED COMPENSATION PROGRAM
The Board of Directors requests stockholder action to approve the Company's
Performance-Based Compensation Program (the "Program"). To be approved, the
Program must receive the affirmative vote of a majority of the shares voting at
the meeting, whether present in person or represented by proxy.
REASON FOR STOCKHOLDER APPROVAL
During 1993, a new Section 162(m) of the Internal Revenue Code (the "Code") was
enacted which, commencing from January 1, 1994, inhibits the ability of public
companies to deduct compensation expense in excess of $1.0 million paid in any
taxable year to a public company's chief executive officer or any other person
included within the five named executive officers identified by such company as
among its highest paid executive officers for such year.
To preserve the continued deductibility of such compensation, Section 162(m),
together with proposed regulations thereunder issued by the Internal Revenue
Service late in 1993, establish various criteria for determining whether
compensation paid under an affected public company's cash or stock-based
compensation vehicles is sufficiently performance-based so as to continue to
qualify for deduction. Among these criteria is a requirement that the material
terms of a company's performance-based goals be approved by a majority of such
company's stockholders.
As is further described below, your Board of Directors, based on the concurrence
and advice of its Committee on Compensation and Organization (the "Committee"),
believes the Company's various compensation vehicles utilized to provide senior
management incentives should qualify as performance-based for purposes of these
tax provisions. The Company's compensation program is designed to encourage a
performance-oriented environment that differentiates rewards based on
contributions to the Company's success in attaining a level of financial
performance consistent with the interests of its stockholders.
In considering this item, stockholders are encouraged to carefully review the
REPORT ON EXECUTIVE COMPENSATION OF THE COMMITTEE ON COMPENSATION AND
ORGANIZATION (the "Report") earlier in this proxy statement. By outlining the
Company's Compensation Philosophy and various Compensation Vehicles, the Report
provides useful background information to the discussion below. As described in
the Report, the key elements of the Company's executive compensation program are
base salary, annual incentive bonus and long-term equity awards.
DESCRIPTION OF THE PROGRAM
The Program consists of two elements: an annual cash bonus portion and a
long-term equity award portion. Compensation provided under both elements has
been, and will continue to be, based on performance criteria established
annually by the Committee. Performance-based awards granted in the form of
annual bonuses are paid in cash by the Company. Equity awards are determined in
accordance with the criteria established under the Program but consist of grants
made pursuant to the Company's stockholder-approved restricted stock plans.
ELIGIBLE PARTICIPANTS
The Program covers Company executive officers as well as other officers and key
management personnel of the Company and its various functional or operating
units.
DESCRIPTION OF BUSINESS CRITERIA
Each year, as soon as practicable following the Company's development of its
multi-year corporate and strategic plan, the Committee reviews and approves a
number of performance-based goals, for each of the Company and its major
functional or operating units, drawn from the Company's overall
27
<PAGE> 30
corporate objectives. For those executive officers whose compensation the
Committee reasonably expects to be subject to Code Section 162(m), objective
performance-based goals are established in writing by the Committee while the
outcome is substantially uncertain. Such goals then become the basis on which
eligibility for the Company's annual incentive bonuses and prospective long-term
equity awards are established.
The performance-based goals are formulated utilizing minimum, target and maximum
numeric standards for each targeted objective (distinct objectives generally
apply for the Company and the various functional or operating units) and are
then assigned relative percentage weightings by the Committee. After formulation
by the Committee, the performance-based goals are presented to the Company's
full Board of Directors for review and ratification.
As indicated in the section of the Report describing Mr. Mathis' compensation
for 1993, a total of five performance objectives were established for the year
just ended: the level of operating earnings for the Company; changes in the
market price of the Company's common stock, both on an absolute basis as well as
relative to the Standard & Poor's 500 Index; the level of reduction in the
Company's exposure to real estate-related assets and the number of major
subsidiary operations divested in the Company's repositioning effort.
For 1994, the Committee has established four performance measurement categories
for the Company: the level of operating earnings for the Company, changes in the
market price of the Company's common stock, with a separate performance goal
related to changes in the stock price on an absolute basis versus a goal related
to changes relative to the S&P 500 Index, and a reduction in total operating
expenses of administrative areas.
If an executive officer is responsible for a particular functional or operating
unit, certain of the applicable performance goals will relate to his or her
specific area of responsibility for a portion of bonus or equity award
opportunity. The factors considered in setting performance-based goals for a
specific unit will consist of one or more of the following, as calculated for
that particular unit: operating earnings, investment performance, growth in
assets (including assets under management), sales, performance versus industry
peers or national norms, improvements in capital ratios, implementation of
system enhancements, cost control and reduction, growth in client or customer
bases, accomplishment of specific management goals and divestiture of assets. As
is the case for Company goals, any functional or operating unit's goals are each
weighted by category and prescribed with numeric levels within minimum, target
and maximum ranges. If, as is often the case, there are different levels of
achievement of the applicable performance measurement categories, annual
incentive bonuses will be paid based on the weighted blend of achievement
levels.
To protect the Company from competitive disadvantage, the Committee believes it
is appropriate to not disclose here the specific targets and relative weightings
established for each of the performance-based goals for the Company for 1994 to
the extent they are proprietary and highly confidential and their disclosure
would adversely affect the Company.
To maintain flexibility in designing performance-based goals each year which are
based on a timely assessment of the Company's highest priority strategic issues
from time to time, the Committee may, in future periods, select additional or
other categories of performance objectives or may eliminate certain categories
if determined to be less significant to achieving optimal financial performance
for the Company at that time. For example, while consummation of the
divestitures of various subsidiaries was quite meaningful when the Company was
undergoing its 1993 restructuring, this category has been dropped for 1994
performance measurement purposes as no longer particularly relevant to the
interests of the Company's stockholders.
MAXIMUM AWARDS UNDER THE PROGRAM
The tax provisions require a maximum level of award be established under the
Program to preserve deductibility of the related compensation expense. The
maximum annual incentive bonus which is payable to any single individual under
the Program is limited to $3.0 million. There is no present
28
<PAGE> 31
intention to award this level of bonus and, if anyone ultimately becomes
eligible to receive this annual incentive bonus amount, it is likely to only be
the chief executive officer.
Respecting the Company's restricted stock plan (see APPROVAL OF THE KEMPER
CORPORATION 1993 SENIOR EXECUTIVE LONG-TERM INCENTIVE PLAN later in this proxy
statement), the maximum number of shares which may be awarded to any participant
is 100,000 shares. Also, as described in the Report, an award of shares to the
chief executive officer or any other named executive officer is based on the
Committee's evaluation of the particular executive's prior achievement of the
applicable pre-established performance-based goals over the three-year cycle
utilized generally by the Company for compensation purposes. The five-year
vesting requirement generally employed in granting the Company's restricted
stock provides an additional benefit to the Company by promoting retention.
It should be noted that with respect to the Company's stock option plans, such
plans independently presently satisfy all pertinent requirements under the tax
laws to retain the tax deductibility of any compensation expense arising upon
the exercise of an option, and it is therefore not required at this time to
establish a maximum per individual grant limitation.
The Board of Directors and the Committee reserve the right to hereafter modify
any facet of the Program not requiring stockholder approval under Section 162(m)
of the Code.
The persons named on the enclosed proxy card (Peter B. Hamilton, George D.
Kennedy and David B. Mathis) have agreed to represent stockholders submitting
properly executed proxy cards and to vote for the approval of the Program unless
otherwise directed by the authority granted or withheld on the proxy cards.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE COMPANY'S
PERFORMANCE-BASED COMPENSATION PROGRAM.
29
<PAGE> 32
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Stockholder action at the annual meeting is also requested with respect to the
ratification of board action appointing KPMG Peat Marwick as independent
auditors for the Company for the calendar year ending December 31, 1994.
Representatives of KPMG Peat Marwick are expected to be present at the
stockholders' meeting, will have an opportunity to make a statement, if they so
desire, and will be available to respond to appropriate questions raised at the
meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE APPOINTMENT OF
KPMG PEAT MARWICK.
OTHER BUSINESS
It is intended that proxies solicited by the Board, unless otherwise specified
therein, will be voted in accordance with the recommendations of the Board of
Directors.
As of April , 1994, the Board of Directors does not know of any other business
to be acted upon at the meeting. However, if any matters other than those
referred to above properly come before the meeting, the persons named in the
proxy card intend to vote on such matters in accordance with their best
judgment.
VOTING PROCEDURES
With regard to the election of directors, votes may be cast in favor of or
withheld from each nominee; votes that are withheld will be excluded entirely
from the vote and will have no effect. Abstentions may be specified on all
proposals except the election of directors and will be counted as present for
purposes of determining the existence of a quorum regarding the item on which
the abstention is noted. Abstentions on the two plan proposals or the
ratification of appointment of independent auditors will have the effect of a
negative vote because such proposals require the affirmative vote of a majority
of shares present in person or by proxy and entitled to vote.
Under the rules of the New York Stock Exchange ("NYSE"), brokers who hold shares
in street name have the authority to vote on certain items when they have not
received instructions from beneficial owners. Brokers that do not receive
instructions are not entitled to vote on the election of directors in contested
elections. With respect to the two plan proposals, neither the Company's
broker-dealer affiliate nor any other broker may vote shares held for customers
without specific instructions from such customers. Under applicable Delaware
law, a broker non-vote will have no effect on the outcome of the election of
directors, the ratification of appointment of independent auditors or the two
plan proposals.
COST AND METHOD OF SOLICITATION
In addition to the solicitation of proxies by use of the mails, proxies may also
be solicited by the Company and its directors, officers and employees (who will
receive no compensation therefor in addition to their regular salaries) by
telephone, telegram, facsimile transmission and other electronic communication
methods or personal interview. The Company estimates that, in addition to its
directors and director-nominees, approximately officers and employees will be
engaged in the solicitation of proxies on behalf of the Company. The Company
will reimburse banks and brokers who hold shares of the Company's stock in their
name or custody, or in the name of nominees for others, for their out-of-pocket
expenses incurred in forwarding copies of the proxy materials to those persons
for whom they hold such shares.
The Company has retained Georgeson & Company Inc. ("Georgeson") to assist in the
solicitation of proxies. Pursuant to the Company's agreement with Georgeson,
they will provide various proxy advisory and solicitation services for the
Company at an estimated cost of $ , plus reasonable out-of-pocket expenses.
It is expected that Georgeson will use approximately 100 persons in such
solicitation.
30
<PAGE> 33
The Company has entered into a general engagement letter with Goldman Sachs to
act as its financial advisor to assist it in responding to any acquisition
proposals it may receive or any other attempts to acquire control of the Company
by way of a merger, tender offer, purchase of all or a substantial portion of
its stock or assets, any contested solicitation of proxies or otherwise.
Pursuant to the terms of the engagement letter, the Company has agreed to pay
Goldman Sachs a financial advisory fee of $150,000 per annum. The engagement
letter further provides that the above fee does not include any services Goldman
Sachs may render as financial advisor to the Company with respect to any
specific transaction of the type referred to above. Accordingly, the Company and
Goldman Sachs expect to enter into a separate mutually acceptable fee
arrangement with respect to the proxy solicitation by GECC and related matters.
The Company has also agreed to reimburse Goldman Sachs for its reasonable
out-of-pocket expenses and to indemnify Goldman Sachs against certain
liabilities, including liabilities under federal securities laws, arising in
connection with the provision of the above-described services. In connection
with Goldman Sachs' ongoing engagement as a financial advisor to the Company,
employees of Goldman Sachs may communicate in person, by telephone or otherwise,
with stockholders of the Company for the purpose of soliciting proxies on behalf
of the Company. Goldman Sachs will not receive any additional fee in connection
with any such solicitation activities. Goldman Sachs is familiar with the
Company, having acted as its financial advisor from time to time, including
acting as its financial advisor in connection with offerings of debt and equity
securities and the exchange by Lumbermens Mutual Casualty Company of the major
portion of its holdings of the Company's Common Stock for certain assets of the
Company. Goldman Sachs also has provided, and continues to provide, certain
financial advisory services to GE and its affiliates as to matters in existence
prior to the proxy solicitation and as to matters unrelated to such
solicitation.
Although no precise estimate can be made at this time, the Company estimates
that the aggregate amount to be spent by the Company in connection with the
solicitation of proxies by the Company will be approximately $ , of which
approximately $ has been incurred to date. This amount includes the fees
payable to Georgeson but excludes (i) the salaries and fees of regular officers,
directors and employees of the Company, (ii) the normal expenses of an
uncontested election, and (iii) the financial advisory fees payable to Goldman,
Sachs. The aggregate amount to be spent will vary depending on, among other
things, the nature and extent of litigation relating to the proxy contest.
CERTAIN INFORMATION CONCERNING PARTICIPANTS
The directors of the Company and the Company's nominees for director, certain
other officers and employees of the Company are, and certain others are or may
be considered to be, participants in the solicitation of proxies on behalf of
the Board of Directors of the Company. Certain information with respect to such
persons is set forth in Annex B and Annex C hereto.
CERTAIN LEGAL PROCEEDINGS
Since March 15, 1994, the Company and certain of its directors, including
directors who are also executive officers, have been named defendants in at
least five complaints filed in the Court of Chancery in the State of Delaware.
The complaints were brought by stockholders of the Company, individually and
purportedly as class actions on behalf of all other stockholders of the Company.
The complaints allege breaches of fiduciary duty by the Company and its
directors arising primarily from the unsolicited GECC proposal and the
defendants' alleged wrongful actions with respect thereto. The complaints seek
injunctive relief prohibiting the Company from, among other things, utilizing
certain defensive measures. The complaints also seek damages and other relief.
The Company intends to vigorously contest the actions.
STOCKHOLDER LIST
A certified list of stockholders entitled to be present and vote at the annual
meeting will be available at the office of the Company's corporate secretary,
Long Grove, Illinois, and at the office of the
31
<PAGE> 34
Company's transfer agent, Harris Trust and Savings Bank, 311 West Monroe Street,
11th floor, Chicago, Illinois, for inspection by any stockholder during normal
business hours from May 1, 1994 to one day prior to the date of the annual
meeting and at the annual meeting site on the day of the meeting.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the next annual meeting in
1995 should be directed to the corporate secretary of the Company and must be
received by the Company no later than December , 1994 for inclusion in the
proxy statement and proxy card relating to that meeting.
Kathleen A. Gallichio
Corporate Secretary
April , 1994
32
<PAGE> 35
ANNEX A
KEMPER CORPORATION 1993 SENIOR EXECUTIVE LONG-TERM INCENTIVE PLAN
SECTION 1. PURPOSES OF THE PLAN.
The purposes of the Kemper Corporation 1993 Senior Executive Long-Term Incentive
Plan (the "Plan") are to increase the Company's ability to attract, motivate and
retain capable management personnel; foster the identity of the participants'
interests with the interests of the Company's stockholders; and increase the
participants' stake in the future growth and prosperity of the Company.
SECTION 2. ADMINISTRATION OF THE PLAN.
The Plan shall be administered by the Committee on Compensation and Organization
of the Board of Directors of Kemper Corporation (the "Committee") consisting of
three non-management members of the Board of Directors who shall not be eligible
to participate in the Plan.
Subject to the provisions of the Plan, the Committee shall have the power to
select the key executive officers who will participate in the Plan (the
"Participants"), grant awards to the Participants, and do all other things
relating to the Plan (including interpretations thereof) that it deems necessary
or advisable. No member of the Committee shall be liable for any action or
determination made in good faith with respect to the Plan and awards made
hereunder.
SECTION 3. PARTICIPATION.
Participants in the Plan, both initially and after its inception, shall be
selected from key executive officers of Kemper Corporation (the "Company") or
its subsidiaries who have a significant opportunity to influence long-term
profit performance.
SECTION 4. GRANTS OF RESTRICTED SHARES.
An award made pursuant to this Plan shall be granted to a Participant in the
form of restricted shares of $5.00 par value Common Stock of the Company
("Shares").
The Shares awarded shall be issued in the name of the Participant and shall bear
a restrictive legend prohibiting sale, transfer, pledge or hypothecation of such
Shares until such time as the Shares are vested in the Participant. As a
condition of receiving such award, each Participant shall waive in writing any
right to make an election under Section 83(b) of the Internal Revenue Code of
1986, as amended, to report the value of the Shares on the date granted as
compensation income.
The Shares awarded shall be previously issued shares of Company Common Stock
which have been reacquired by the Company and are held as treasury stock. Such
awarded Shares shall be issued to the Participant without the payment of
consideration by such Participant. Upon the termination of service of the
Participant, other than by reason of death, disability or certain retirement
events (all as provided in Section 5 hereof), all of such Shares which are not
then vested shall thereupon be forfeited and automatically transferred to and
reacquired by the Company at no cost to the Company. The Committee may also
impose such other restrictions and conditions on any award of Shares as it deems
appropriate.
Upon issuance to the Participant of the Shares awarded, the Participant shall
have the right to vote such Shares and receive compensation income equal to the
value of the cash dividends from time to time paid with respect to such Shares.
The maximum number of Shares that may be awarded pursuant to the Plan shall not
exceed in the aggregate 500,000 Shares subject to adjustment as provided in
Section 6 hereof. The maximum number of Shares that may be awarded to any single
Participant under the Plan shall not exceed in the aggregate 100,000 Shares,
subject to adjustment as provided in Section 6 hereof. Shares forfeited
A-1
<PAGE> 36
pursuant to this Section 4 may be the subject of a new award made in any
subsequent year or years in which Shares are awarded under the Plan.
The Plan will operate over the ten Plan years commencing with the Plan year
ending December 31, 1993. Unless otherwise determined by the Committee at the
time any Shares are awarded hereunder and subject to the provisions of Section 7
hereof, the award period required for non-forfeiture (the "Award Period") shall
be five years in length.
SECTION 5. VESTING OF RESTRICTED SHARES.
Any Shares awarded to a Participant pursuant to the Plan shall be forfeited to
the Company unless the Participant continues to be an officer of the Company or
one of its subsidiaries at all times from the date of award of such Shares to
the earliest of the following dates: (a) the last day of the Award Period with
respect to such Shares; (b) the day the Participant dies; (c) the day the
Participant's service terminates on account of disability; (d) the normal
retirement date as defined in the tax-qualified retirement or profit sharing
plan, as the case may be, covering such Participant or age 65, whichever first
occurs; and (e) the date on which any Participant's employment terminates by
reason of an early retirement, provided such Participant shall have attained one
of the following combinations of age and total years of service with one or more
of the Company and its subsidiaries:
MINIMUM FULL
AGE YEARS OF SERVICE
--- ----------------
55 20
56 19
57 18
58 17
59 16
60 15
61 14
62 13
63 12
64 11
Termination of service on account of disability will occur when the Committee,
in the exercise of its sole judgment, determines that a Participant is under
such physical or mental disability that the Participant is no longer capable of
rendering satisfactory service to the Company or its subsidiaries in such
Participant's current position.
Upon completion of the period required for non-forfeiture pursuant to this
Section 5, full ownership of the Shares will vest in the Participant or the
Participant's designated beneficiary or personal representative, at which time
such Participant or the Participant's designated beneficiary or personal
representative will be required to make payment to the Company in the amount of
any taxes which are required to be withheld or accounted for with respect to the
vesting of such Shares.
SECTION 6. DILUTION AND OTHER ADJUSTMENTS.
In the event of any change in the outstanding shares of Common Stock of the
Company by reason of any stock dividend or split, recapitalization, combination
or exchange of shares or other similar changes in the Common Stock, the
Committee shall make appropriate adjustments in the Shares theretofore awarded
to any Participants and in the aggregate number of Shares which may be awarded
pursuant to the Plan. Such adjustments shall be conclusive and binding for all
Plan purposes.
Additional shares of Company Common Stock issued to a Participant as the result
of any such change in the outstanding shares of Common Stock of the Company
shall bear the same restrictions as the Shares owned by the Participant at the
time of the change.
A-2
<PAGE> 37
SECTION 7. ACCELERATED VESTING EVENTS.
Notwithstanding the provisions of Section 5 hereof, the Award Period required
for non-forfeiture of any Shares awarded to a Participant pursuant to the Plan
shall terminate and such Shares shall immediately vest in such Participant (a)
upon a "Change of Control" of the Company; or (b) upon a "Sale of a Subsidiary
Employer" if such Participant is employed by such Subsidiary Employer and
provided the Participant ceases to be an employee of the Company or one of its
subsidiaries as a result of such event.
(1) A "Change in Control" of the Company shall be deemed to have occurred on
the first to occur of any of the following dates:
(a) on the date the Board of Directors of the Company votes to approve and
recommends a stockholder vote to approve:
(i) any consolidation or merger of the Company in which the Company is
not the continuing or surviving corporation or pursuant to which
shares of the Company's Common Stock would be converted into cash,
securities or other property, other than any consolidation or
merger of the Company in which the holders of the Company's
Common Stock immediately prior to the consolidation or merger have
the same proportionate ownership of common stock of the surviving
corporation immediately after the consolidation or merger; or
(ii) any sale, lease, exchange or other transfer (in one transaction or
a series of related transactions) of all, or substantially all, of
the assets of the Company, other than any sale, lease, exchange or
other transfer to any corporation where the Company owns, directly
or indirectly, at least eighty percent (80%) of the outstanding
voting securities of such corporation after any such transfer; or
(iii) any plan or proposal for the liquidation or dissolution of the
Company; or
(b) on the date any person (as such term is used in Section 13(d) of the
Securities Exchange Act of 1934, hereinafter the "1934 Act"), other
than Lumbermens Mutual Casualty Company or one or more trusts
established by the Company for the benefit of employees of the Company
or its subsidiaries, shall become the beneficial owner (within the
meaning of Rule 13d-3 under the 1934 Act) of twenty percent (20%) or
more of the Company's outstanding Common Stock; or
(c) on the date the Board of Directors of the Company or any affiliate of
the Company (within the meaning of Rule 12b-2 under the 1934 Act)
authorizes and approves any transaction which has either a reasonable
likelihood or a purpose of causing, whether directly or indirectly:
(i) the Company's Common Stock to be held of record by less than 300
persons; or
(ii) the Company's Common Stock to be neither listed on any national
securities exchange nor authorized to be quoted on an inter-dealer
quotation system of any registered national securities
association; or
(d) on the date, during any period of twenty-four (24) consecutive months,
on which individuals who at the beginning of such period constitute the
entire Board of Directors of the Company shall cease for any reason to
constitute a majority thereof unless the election, or the nomination
for election by the Company's stockholders, of each new director
comprising the majority was approved by a vote of at least a majority
of the Continuing Directors, as hereinafter defined, in office on the
date of such election or nomination for election of the new director.
For purposes hereof, a "Continuing Director" shall mean:
(i) any member of the Board of Directors of the Company at the close of
business on May 16, 1990;
A-3
<PAGE> 38
(ii) any member of the Board of Directors of the Company who
succeeded any Continuing Director described in subparagraph (i)
above if such successor was elected, or nominated for election
by the Company's stockholders, by a majority of the Continuing
Directors then still in office; or
(iii) any director elected, or nominated for election by the
Company's stockholders, to fill any vacancy or newly-created
directorship on the Board of Directors of the Company by a
majority of the Continuing Directors then still in office.
(2) A "Sale of a Subsidiary Employer" shall be deemed to have occurred on the
date the Board of Directors of the Company authorizes or approves any
transaction with any person or persons other than the Company or one or
more of the Company's subsidiaries or affiliates (including, but not
limited to, any sale, exchange, transfer, merger, consolidation,
liquidation or other transaction) which, upon the consummation thereof,
will result in the Company owning, directly or indirectly, less than 50% of
the outstanding voting securities of such subsidiary.
SECTION 8. MISCELLANEOUS PROVISIONS.
A. A Participant's rights and interests in any Shares awarded pursuant to the
Plan may not be assigned or transferred except by will or by the laws of
descent and distribution.
B. Neither this Plan nor any action taken hereunder shall be construed as
giving any right to be retained as an officer of the Company or its
subsidiaries.
C. The Company shall have the right to deduct or account for any Federal, state
or local taxes required by law to be withheld or accounted for with respect
to any Plan distributions. The Committee may, in its discretion and subject
to such rules as it may adopt, permit a Participant to pay all or any
portion of the liability for taxes arising in connection with the vesting
of shares under the Plan by way of an election to have the Company withhold
Shares otherwise issuable upon such vesting which have a fair market value
equal to the amount of the tax liability to be satisfied in such manner.
D. Any fractional interest in Shares awarded pursuant to the Plan shall be
eliminated and no cash settlements shall be made with respect thereto.
E. The Committee may require a Participant to establish to its satisfaction
that all Shares acquired pursuant to the Plan will be held for investment
and not with a view towards distribution or resale in any transaction or
manner which would violate any applicable federal or state securities laws.
SECTION 9. AMENDMENT OF PLAN.
The Committee may at any time and from time to time alter, amend, suspend or
terminate the Plan in whole or in part, except as such alterations or amendments
would materially increase the benefits accruing to Participants pursuant to the
Plan, materially increase the number of securities which may be issued pursuant
to the Plan (except as provided in Section 6 hereof), or materially modify the
requirements as to eligibility for participation in the Plan. No termination or
amendment of the Plan may, without the consent of the Participant to whom any
award shall theretofore have been granted, adversely affect the rights of such
Participant concerning such award, except as such termination or amendment of
the Plan is required by applicable law or statute, or any rules or regulations
promulgated thereunder.
SECTION 10. EFFECTIVE DATE.
Subject to the approval of the Plan by the stockholders of the Company at the
Annual Meeting of the Stockholders to be held on May 11, 1994, the Plan shall be
effective as of May 12, 1993, and shall operate over a ten-year period, but no
awards of Shares shall be made after May 12, 1998.
A-4
<PAGE> 39
ANNEX B
INFORMATION CONCERNING THE COMPANY'S DIRECTORS
Certain information with respect to each director is set forth below.
<TABLE>
<CAPTION>
SHARES OF $5 PAR VALUE
COMMON STOCK
BENEFICIALLY
OWNED AS OF
NAME BUSINESS ADDRESS FEBRUARY 1, 1994
- ---------------------------------------- -------------------------------- ----------------------
<S> <C> <C>
John T. Chain Jr........................ Burlington Northern Railroad 3,750(1)
2680 Continental Plaza
777 Main Street
Fort Worth, Texas 76102
J. Reed Coleman......................... Madison-Kipp Corporation 1,518,845(1)(3)(5)(6)
201 Waubesa Street
Madison, Wisconsin 53704
Raymond F. Farley....................... 4061 North Main Street 5,250(1)
Racine, Wisconsin 53402
John H. Fitzpatrick..................... Kemper Corporation 86,386(2)(6)
One Kemper Drive
Long Grove, Illinois 60049
Peter B. Hamilton....................... Cummins Engine Company, Inc. 2,250(1)
Mail Code 60908, Box 3005
Columbus, Indiana 47202
George D. Kennedy....................... Mallinckrodt Group Inc. 1,500,845(1)(5)
Mundelein, Illinois 60060
Charles M. Kierscht..................... Kemper Corporation 42,380(2)(7)
One Kemper Drive
Long Grove, Illinois 60049
Joseph E. Luecke........................ 94 Otis Road 317,208(1)(2)(4)
Barrington, Illinois 60010
David B. Mathis......................... Kemper Corporation 199,081(2)
One Kemper Drive
Long Grove, Illinois 60049
Richard D. Nordman...................... Lawter International, Inc. 5,500(1)
990 Skokie Boulevard
Northbrook, Illinois 60062
Kenneth A. Randall...................... 6 Whittaker's Mill 6,267(1)(6)
Williamsburg, Virginia 23185
Stephen B. Timbers...................... Kemper Corporation 35,500(2)
One Kemper Drive
Long Grove, Illinois 60049
Daniel R. Toll.......................... 135 South LaSalle Street 1,501,845(1)(5)
Suite 1117
Chicago, Illinois 60603
</TABLE>
B-1
<PAGE> 40
- -------------------------
(1) Includes 4,500 shares which each of Messrs. Coleman, Farley, Kennedy,
Nordman, Randall and Toll, 2,750 shares which General Chain, 1,250 shares
which Mr. Hamilton, and 250 shares which Mr. Luecke, can acquire within 60
days of February 1, 1994 under stock options granted pursuant to the Kemper
Corporation Non-Management Director Stock Option Plan.
(2) Includes the following number of shares which the following persons or
group have the right to acquire within 60 days of February 1, 1994 pursuant
to stock options granted under the Kemper Corporation 1982 Incentive Stock
Option Plan, 1985 Amended Stock Option Plan or 1990 Stock Option Plan: Mr.
Fitzpatrick, 63,430 shares; Mr. Kierscht, 17,900 shares; Mr. Luecke,
220,965 shares; Mr. Mathis, 146,955 shares and Mr. Timbers, 12,500 shares.
(3) Excludes 10,839 shares held in several trusts created by Lumbermens Mutual
Casualty Company, principal member of the Kemper National Insurance
Companies ("Lumbermens") for the prospective retirement benefit of certain
Lumbermens officers. As a member of the distribution committee of these
trusts, Mr. Coleman presently shares voting and investment power over, but
disclaims beneficial ownership of, such shares.
(4) Includes 48,480 shares held in various trusts created by Mr. Luecke for the
benefit of his adult children.
(5) Includes 1,496,345 shares held by Lumbermens, the James S. Kemper
Foundation, American Manufacturers Mutual Insurance Company, another of the
Kemper National Insurance Companies ("AMM") and several trusts established
for the benefit of Lumbermens' officers which certain of the Company's
directors, to the extent they are also members of Lumbermens' or AMM's
boards of directors, or trustees of the foundation, could be deemed to
control either through voting or dispositive power. Such directors disclaim
beneficial ownership of such shares.
(6) Includes shares owned by or for the benefit of the spouse, minor children
or other relatives of the director.
(7) Mr. Kierscht beneficially owns 42,759.65 shares of Class B Common Stock of
Kemper Financial Companies, Inc. ("KFC"), a publicly-reporting subsidiary
of the Company, which he: (i) can acquire within 60 days of February 1,
1994 upon the conversion of various presently convertible series of
Floating Rate Convertible Subordinated Debentures issued by KFC; or (ii)
can acquire within 60 days of February 1, 1994 pursuant to stock options
issued under KFC's 1986 and 1988 Stock Option Plans. KFC issued Debentures
to various officers and designated employees of its subsidiaries during a
period extending from 1986 through 1990. The Debentures were issued in
groups of five series (the series having staggered conversion and maturity
dates) and are convertible into shares of KFC Class B Common Stock based on
a formula price for such stock applicable when the particular series were
issued.
None of the directors of the Company has purchased or sold securities of the
Company within the past two years except as follows:
General Chain acquired 1,000 shares of the Company's Common Stock on February 7,
1992.
Mr. Fitzpatrick acquired 3,200 shares of restricted stock on May 13, 1992 under
the Kemper Corporation 1989 Senior Executive Long-Term Incentive Plan (the "1989
Plan"), and 10,000 shares of restricted stock on May 13, 1993 under the Kemper
Corporation 1993 Senior Executive Long-Term Incentive Plan (the "1993 Plan").
Also during the past two years, Mr. Fitzpatrick has acquired shares of Common
Stock through regular payroll deduction purchases and dividend reinvestment
under the Kemper Corporation Dividend Reinvestment and Stock Purchase Plan (the
"Investment Plan"), and he also acquired 391 shares on behalf of custodial
accounts for two of his minor children on May 29, 1992 under the Investment
Plan.
Mr. Hamilton acquired 1,000 shares on , 1992.
B-2
<PAGE> 41
Mr. Kierscht acquired 4,200 shares of restricted stock on May 13, 1992 under the
1989 Plan, 4,000 shares of restricted stock on May 12, 1993 under the 1993 Plan,
and 6,000 shares of Common Stock on January 12, 1994 upon the exercise of an
incentive stock option granted to him by the Company in 1984.
Mr. Luecke acquired a 40 share pro-rata award under the Kemper Corporation
Anniversary Award Program on February 1, 1992, the date of his retirement as an
executive officer of the Company. Also on his February 1, 1992 retirement date,
Mr. Luecke transferred 16,490 shares of restricted stock back to the Company to
settle certain of his tax liabilities arising due to the vesting of restricted
shares awarded in earlier years under the 1989 Plan or the Kemper Corporation
Senior Executive Long-Term Incentive Plan. On December 23, 1993, Mr. Luecke
transferred 40,980 shares of Common Stock into various trusts maintained for the
benefit of his adult children.
Mr. Mathis acquired 5,000 shares of restricted stock on May 13, 1992 under the
1989 Plan and acquired 15,000 shares of restricted stock on May 12, 1993 under
the 1993 Plan. Also, during the past two years, Mr. Mathis has regularly
acquired shares through the reinvestment of dividends under the Investment Plan,
and he purchased 153 shares of Common Stock on March 31, 1992, 205 shares of
Common Stock on June 30, 1992 and 140 shares of Common Stock on December 16,
1993 through voluntary purchase transactions under the Investment Plan.
Mr. Randall has regularly acquired shares of Common Stock during the past two
years through the reinvestment of dividends under the Investment Plan.
Mr. Timbers acquired 4,200 shares of restricted stock on May 13, 1992 under the
1989 Plan and acquired 15,000 shares of restricted stock on May 12, 1993 under
the 1993 Plan.
B-3
<PAGE> 42
ANNEX C
ADDITIONAL PARTICIPANTS
The following persons are or may be considered to be participants in the
solicitation of proxies on behalf of the Board of Directors of the Company.
Unless otherwise indicated, all persons listed in the table below are employed
by Kemper Corporation, One Kemper Drive, Long Grove, Illinois 60049. Kemper
Corporation is a financial services holding company with principal subsidiaries
in asset management, life insurance and securities brokerage.
<TABLE>
<CAPTION>
KEMPER
CORPORATION
SECURITIES
NAME/POSITION WITH THE BENEFICIALLY
COMPANY, SUBSIDIARY OR OTHER OWNED(1)
--------------------------------- --------------
<S> <C>
John A. Effrein/Director of Investor Relations(2)(3)(4)(5)............... 5,577
Ira Nathanson/Vice President, Corporate Communications(2)(3)(4).......... 6,276
Janice R. Kalmar McDill/Communications Officer(2)(6)..................... 73
Steven A. Radis/Public Relations Officer(2)(7)........................... -0-
Goldman, Sachs & Co. (broker-dealer, investment advisor and banker)
85 Broad Street, New York,
New York 10004(8)(9)................................................... See note(10)
</TABLE>
- -------------------------
(1) Unless otherwise indicated, all numbers listed in this table and the
footnotes refer to shares of Common Stock, $5.00 par value, of the Company,
beneficially owned as of February 1, 1994.
(2) None of the Company employees named in the prior table have purchased or
sold securities of the Company within the past two years except for the
purchases and sales of shares of the Company's Common Stock as detailed
below. Unless stated otherwise, all of the stock purchases were made
pursuant to the Investment Plan.
(3) Includes 5,175 shares which Mr. Effrein, and 4,075 shares which Mr.
Nathanson, can acquire within 60 days of February 1, 1994 under stock
options granted pursuant to the Kemper Corporation 1990 Stock Option Plan.
(4) Includes a single share stock award from the Company in April 1993.
(5) Mr. Effrein acquired 200 shares of Common Stock on February 14, 1992 and
100 shares of Common Stock on May 21, 1992.
(6) Ms. McDill acquired approximately 39.6 shares of Common Stock in December
1992 through a voluntary purchase transaction under the Investment Plan.
(7) Mr. Radis sold 34 shares of Common Stock in December 1992, 10 shares of
Common Stock in April 1993 and 3.9 shares of Common Stock in September
1993.
(8) In addition to the fees to be received by Goldman Sachs in connection with
its engagement as financial advisor to the Company described in this proxy
statement under "Cost and Method of Solicitation", since January 1, 1992,
Goldman Sachs have performed a number of investment banking and financial
advisory services for the Company for which they received an aggregate of
approximately $10.9 million in fees. These include fees for acting as
financial advisor in connection with underwriting certain debt and equity
offerings, certain divestitures and other financial advisory services.
(9) Goldman Sachs disclaim that it or any of its directors, officers or
employees is a "participant", as defined in Rule 14a-11(b) promulgated
under the Securities Exchange Act of 1934 by the Securities and Exchange
Commission, in the solicitation to which this proxy statement relates or
that such Rule 14a-11 requires the disclosure in this proxy statement of
certain information concerning Goldman Sachs.
C-1
<PAGE> 43
(10) As of March 24, 1994, Goldman Sachs held the following shares:
Company Common Stock:
Discretionary accounts where salesperson has discretion: 12,080 shares.
Employee accounts: 13,850 shares. Of this amount 750 is discretionary
where a Private Client Services salesperson has discretion in a family
member's account.
Partners accounts: Limited Partners -- 4,400 shares; General Partners --
4,900 shares.
Firm accounts: Long position -- 2,300 shares; Short position -- 214,300
shares.
Options on Company Common Stock:
Employee accounts: Long 20 with an exercise price of $40 (April Calls);
Long 1 with an exercise price of $45 (July Call).
Company Series E Convertible Preferred Stock:
Firm account: 270,683 shares.
Discretionary accounts where salesperson has discretion: 1,500 shares.
Goldman Sachs are principally engaged as a partnership in furnishing a full
range of investment banking and brokerage services for institutional and
individual clients. The Goldman Sachs Group L.P. ("GS Group"), a holding
partnership that engages (directly or indirectly through subsidiaries or
affiliated companies or both) in the business of buying and selling securities,
and in making investments on behalf of its partners, is a general partner of
Goldman Sachs. The general partners of GS Group consist of the general partners
of Goldman Sachs other than GS Group. The general partners of Goldman Sachs and
of GS Group have delegated to their respective Management Committees the power
to act on their behalf with respect to the management of Goldman Sachs and GS
Group, respectively. The Management Committees of Goldman Sachs and of GS Group
consist of the same members. The names and business addresses of the members of
the Goldman Sachs Management Committee (the "Management Committee Partners") and
the present principal occupation or employment and the name, principal
businesses and address of any corporation or other organization in which such
employment is carried on with respect to each such Management Committee Partner
are set forth below:
<TABLE>
<CAPTION>
ORGANIZATION AND PRINCIPAL CURRENT
NAME ADDRESS BUSINESS POSITION
- ---------------------------- --------------------- ------------------- -----------------
<S> <C> <C> <C>
Stephen Friedman............ Goldman, Sachs & Co. Investment Banking General Partner
85 Broad Street
New York, NY 10004
Roy J. Zuckerberg........... Goldman, Sachs & Co. Investment Banking General Partner
85 Broad Street
New York, NY 10004
David M. Silfen............. Goldman, Sachs & Co. Investment Banking General Partner
85 Broad Street
New York, NY 10004
Jon S. Corzine.............. Goldman, Sachs & Co. Investment Banking General Partner
85 Broad Street
New York, NY 10004
Eugene V. Fife.............. Goldman, Sachs & Co. Investment Banking General Partner
Peterborough Court
133 Fleet Street
London EC4A-2BB
England
</TABLE>
C-2
<PAGE> 44
<TABLE>
<CAPTION>
ORGANIZATION AND PRINCIPAL CURRENT
NAME ADDRESS BUSINESS POSITION
- ---------------------------- --------------------- ------------------- -----------------
<S> <C> <C> <C>
Robert J. Hurst............. Goldman, Sachs & Co. Investment Banking General Partner
85 Broad Street
New York, NY 10004
David A. George............. Goldman, Sachs & Co. Investment Banking General Partner
85 Broad Street
New York, NY 10004
Willard J. Overlock, Jr..... Goldman, Sachs & Co. Investment Banking General Partner
85 Broad Street
New York, NY 10004
Henry M. Paulson, Jr. ...... Goldman, Sachs & Co. Investment Banking General Partner
4900 Sears Tower
Chicago, IL 60606
Mark O. Winkelman........... Goldman, Sachs & Co. Investment Banking General Partner
85 Broad Street
New York, NY 10004
Robert J. Katz.............. Goldman, Sachs & Co. Investment Banking General Partner
85 Broad Street
New York, NY 10004
</TABLE>
The following partners and employees (the "Individuals") of Goldman Sachs may
engage in solicitation activities in connection with the solicitation to which
this proxy statement relates:
<TABLE>
<CAPTION>
NAME POSITION
- ----------------------------------------------------- ----------------
<S> <C>
Howard A. Silverstein................................ General Partner
Willard J. Overlock, Jr.............................. General Partner
John A. Golden....................................... General Partner
Andrew M. Alper...................................... General Partner
Donald G. Kane II.................................... Vice President
Celeste A. Guth...................................... Vice President
</TABLE>
Each of the Individuals is engaged in business at the New York or Chicago
address of Goldman Sachs set forth above and is either a general partner or is
employed by Goldman Sachs in the capacity listed beside his or her name.
No Individuals nor Management Committee Partners owned any of the above
securities at March 24, 1994. In the normal course of their business, Goldman
Sachs regularly buy and sell securities, including the Company's securities, for
their own account and for the accounts of their customers. It is impracticable,
however, owing to the volume of such transactions, to list each such transaction
involving the Company's securities for the past two years for the purpose of
this proxy statement. None of the Management Committee Partners or the
Individuals purchased or sold for their own account securities of any class of
the Company within the past two years.
In the normal course of their business, Goldman Sachs finance the securities
positions of Goldman Sachs by bank and other borrowings and repurchase and
securities borrowing transactions. To the knowledge of the Company, none of such
borrowings were intended specifically for the purpose of purchasing securities
of the Company.
C-3
<PAGE> 45
Except as disclosed herein and elsewhere in this proxy statement, to the
knowledge of the Company, none of the foregoing persons owns of record any
securities of the Company which are not also beneficially owned by them nor do
they beneficially own, directly or indirectly, any securities of any parent or
subsidiary of the Company. Except for the information disclosed herein and
elsewhere in this proxy statement, and except for customary arrangements with
respect to securities of the Company held by Goldman Sachs for the accounts of
its customers, to the knowledge of the Company, none of the foregoing persons
nor any associate of such persons is or has been, within the past year, a party
to any contract, arrangement or understanding with any person with respect to
any securities of the Company, including, but not limited to, joint ventures,
loan or option arrangements, puts or calls, guarantees against loss or
guarantees of profit, division of losses or profits, or the giving or
withholding of proxies. Except for information disclosed herein and elsewhere in
this proxy statement, to the knowledge of the Company, none of the foregoing
persons nor any associate of such persons has any arrangement or understanding
with any person with respect to any future employment by the Company or its
affiliates or any future transactions to which the Company or any of its
affiliates will or may be a party, nor any material interest, direct or
indirect, in any transaction which has occurred since January 1, 1993 or any
currently proposed transaction, or series of similar transactions, to which the
Company or any of its affiliates was or is to be a party and in which the amount
involved exceeds $60,000.
C-4
<PAGE> 46
PRELIMINARY COPY--
NOTICE OF
ANNUAL MEETING
OF STOCKHOLDERS
MAY 11, 1994
AND
PROXY STATEMENT
KEMPER CORPORATION
LONG GROVE, ILLINOIS 60049
(LOGO)
<PAGE> 47
PRELIMINARY COPY--
- --------------------------------------------------------------------------------
NOTE: PLEASE MARK, DATE, SIGN AND RETURN PROMPTLY IN THE ENVELOPE PROVIDED.
KEMPER CORPORATION PROXY The undersigned hereby appoints Peter
KEMPER CENTER, LONG GROVE, B. Hamilton, George D. Kennedy and
ILLINOIS 60049 David B. Mathis, or any one of them,
true and lawful proxy and attorney in
fact for the undersigned, with power in
each to appoint a substitute, to vote all
shares of Kemper Corporation which the
undersigned is entitled to vote at the
1994 Annual Meeting of Stockholders to
be held in the stockholders meeting room
on the 57th floor of The First National
THIS PROXY IS SOLICITED ON Bank of Chicago, One First National Plaza,
BEHALF OF THE BOARD OF Chicago, Illinois, on May 11, 1994 at
DIRECTORS WHICH RECOMMENDS A 10:30 a.m., and at any adjournment(s) or
VOTE FOR ITEMS 1, 2, 3 AND 4. postponement(s) thereof, as follows:
<TABLE>
<S> <C> <C>
1. ELECTION OF DIRECTORS / / FOR all nominees listed below / / WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for all nominees listed
below
</TABLE>
John T. Chain, Jr., George D. Kennedy, David B. Mathis and Kenneth A. Randall
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE, WRITE THAT NOMINEE'S NAME BELOW.)
--------------------------------------------
2. THE APPROVAL OF THE KEMPER CORPORATION 1993 SENIOR EXECUTIVE
LONG-TERM INCENTIVE PLAN.
/ / FOR / / AGAINST / / ABSTAIN
3. THE APPROVAL OF THE COMPANY'S PERFORMANCE-BASED COMPENSATION
PROGRAM.
/ / FOR / / AGAINST / / ABSTAIN
4. THE RATIFICATION OF THE APPOINTMENT OF KPMG PEAT MARWICK AS
INDEPENDENT AUDITORS FOR THE YEAR 1994.
/ / FOR / / AGAINST / / ABSTAIN
5. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON
SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR
ANY ADJOURNMENT(S) OR POSTPONEMENT(S) THEREOF.
(CONTINUED ON OTHER SIDE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(CONTINUED FROM OTHER SIDE)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2, 3 AND 4.
Dated: , 1994
---------------------------
---------------------------
Signature of Stockholder(s)
NOTE: PLEASE DATE, SIGN YOUR NAME AS IT APPEARS HEREON AND RETURN
PROMPTLY. WHEN SHARES ARE HELD BY JOINT TENANTS, BOTH SHOULD
SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE
OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF A CORPORATION,
PLEASE SIGN IN FULL CORPORATE NAME BY PRESIDENT OR OTHER
AUTHORIZED OFFICER. IF A PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP
NAME BY AUTHORIZED PERSON.
- --------------------------------------------------------------------------------
<PAGE> 48
ATTACHMENT A
PERFORMANCE-BASED COMPENSATION PROGRAM
OF
KEMPER CORPORATION
SECTION 1 -- PURPOSE
1.1 The Performance-Based Compensation Program of Kemper Corporation (the
"Plan") is designed to attract and retain the services of executive officers of
the Corporation as well as other officers and key management personnel of the
Corporation and its Subsidiaries. The Plan shall become effective as of January
1, 1994, subject to approval by stockholders in the manner required by Section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code").
SECTION 2 -- DEFINITIONS
2.1 For purposes of this Plan, the following terms shall have the following
meanings:
(a) "Award" means a grant made to a Participant pursuant to Section 4
of this Plan.
(b) "Board of Directors" means the Board of Directors of the
Corporation.
(c) "Compensation Committee" or "Committee" means the Committee on
Compensation and Organization of the Board of Directors.
(d) "Corporation" means Kemper Corporation.
(e) "Covered Employees" means Participants who the Committee
anticipates will be "covered employees" for purposes of Code Section 162(m)
for the applicable Plan Year.
(f) "Participant" means an employee of the Corporation or of a
Subsidiary who has been designated by the Committee as eligible to receive
an Award pursuant to the Plan for the Plan Year.
(g) "Plan Year" means the calendar year.
(h) "Subsidiary" means (i) any corporation, domestic or foreign, more
than 50 percent of the voting stock of which is owned or controlled,
directly or indirectly, by the Corporation; or (ii) any partnership, more
than 50 percent of the profits interest or capital interest of which is
owned or controlled, directly or indirectly, by the Corporation; or (iii)
any other legal entity, more than 50 percent of the ownership interest,
such interest to be determined by the Committee, of which is owned or
controlled, directly or indirectly, by the Corporation.
SECTION 3 -- PARTICIPATION
3.1 The Committee shall designate Participants for each Plan Year from among the
executive officers of the Corporation and other officers and key management
personnel of the Corporation and its Subsidiaries.
SECTION 4 -- AWARDS
4.1 For each Plan Year, the Committee shall approve performance-based goals for
each of the Corporation and its Subsidiaries, or units thereof. Based upon such
goals, the Committee shall grant annual incentive bonuses and long-term stock
awards (collectively, the "Awards") to Participants. The Committee may, subject
to the provisions of Section 4.2 hereof, impose additional conditions on such
Awards and may, in its discretion, vary the amount to be paid pursuant to such
Awards at any time in its sole discretion.
<PAGE> 49
4.2 With respect to Covered Employees:
(a) the Committee shall base Awards solely on one or more objective
performance goals which are established in writing by the Committee, unless
otherwise permitted under Reg. Section 1.162-27(h), while the outcome is
substantially uncertain;
(b) the performance goals which must be attained in order for payments
to be made under the Plan shall be based upon business criteria which have
been disclosed to the Corporation's stockholders;
(c) no payments may be made under the Plan until the Committee has
certified in writing (e.g., in its minutes) that the performance goals upon
which Awards are based have been attained;
(d) the annual incentive bonus payable to a Covered Employee for a
Plan Year may not exceed $3,000,000 and the maximum number of shares of
Corporation stock which may be granted to a Covered Employee hereunder is
100,000 shares;
(e) the Committee, to the extent consistent with the requirements of
Code Section 162(m), may make adjustments to Awards to reflect
extraordinary gains or losses of the Corporation or its Subsidiaries, or
similar events; and
(f) the Committee may, in its sole discretion, reduce the amount
otherwise payable to a Covered Employee at any time prior to the payment of
the Award to the Covered Employee.
SECTION 5 -- ELIGIBILITY FOR PAYMENT OF AWARDS
5.1 A Participant shall receive payment of an Award if he or she remains
employed by the Corporation or its Subsidiaries through the end of the
applicable Plan Year, or such other date the Committee may prescribe.
SECTION 6 -- FORM AND TIMING OF PAYMENT OF AWARDS
6.1 Awards may be paid, in whole or in part, in cash, in the form of grants of
stock-based awards made under the Corporation's 1993 Senior Executive Long-Term
Incentive Plan, as amended from time to time, or any successor plan, or in any
other form prescribed by the Committee, and may be subject to such additional
restrictions as the Committee, in its sole discretion, shall impose.
6.2 Awards shall be paid at such time as the Committee may determine.
SECTION 7 -- ADMINISTRATION
7.1 The Plan shall be administered by the Compensation Committee.
7.2 Subject to the provisions of the Plan, the Committee shall have exclusive
power to determine the amounts that shall be available for Awards each Plan Year
and to establish the guidelines under which the Awards payable to each
Participant shall be determined.
7.3 The Committee's interpretation of the Plan, grant of any Award pursuant to
the Plan, and all actions taken within the scope of its authority under the
Plan, shall be final and binding on all Participants (or former Participants)
and their executors.
7.4 The Committee shall have the authority to establish, adopt or revise such
rules or regulations relating to the Plan as it may deem necessary or advisable
for the administration of the Plan.
<PAGE> 50
SECTION 8 -- AMENDMENT AND TERMINATION
8.1 The Board of Directors may amend any provision of the Plan at any time;
provided that no amendment which requires stockholder approval in order for
Awards to be paid pursuant to the Plan to be deductible under Section 162(m) of
the Code may be made without the approval of the stockholders of the
Corporation. The Board of Directors shall also have the right to terminate the
Plan at any time.
SECTION 9 -- MISCELLANEOUS
9.1 The fact that an employee has been designated a Participant shall not confer
on the Participant any right to be retained in the employ of the Corporation or
one or more of its Subsidiaries, or to be designated a Participant in any
subsequent Plan Year.
9.2 No Award under this Plan shall be taken into account in determining a
Participant's compensation for the purpose of any group life insurance or other
employee benefit plan unless so provided in such benefit plan.
9.3 This Plan shall not be deemed the exclusive method of providing incentive
compensation for an employee of the Corporation and its Subsidiaries, nor shall
it preclude the Committee or the Board of Directors from authorizing or
approving other forms of incentive compensation.
9.4 All expenses and costs in connection with the operation of the Plan shall be
borne by the Corporation and its Subsidiaries.
9.5 The Corporation or any Subsidiary making a payment under this Plan shall
withhold therefrom such amounts as may be required by federal, state or local
law, and the amount payable under the Plan to the person entitled thereto shall
be reduced by the amount so withheld.
9.6 The Plan and the rights of all persons under the Plan shall be construed and
administered in accordance with the laws of the State of Illinois to the extent
not superseded by federal law.
9.7 A Participant's rights and interests in any Awards may not be assigned or
transferred except by will or by the laws of descent and distribution. In the
event of the death of a Participant, any payment due under this Plan shall be
made to his or her estate.
